<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
REGISTRATION NO. 333-04388
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANCED RADIO TELECOM CORP.
(Currently Advanced Radio Technologies Corporation)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 52-1348016
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>
<TABLE>
<S> <C>
VERNON L. FOTHERINGHAM
CHIEF EXECUTIVE OFFICER
ADVANCED RADIO TELECOM CORP. ADVANCED RADIO TELECOM CORP.
500 108TH AVENUE, N.E., SUITE 500 108TH AVENUE, N.E.,
2600 SUITE 2600
BELLEVUE, WASHINGTON 98004 BELLEVUE, WASHINGTON 98004
(206) 688-8700 (206) 688-8700
(Address, Including Zip Code, (Name, Address, Including
and Telephone Number, Zip Code, and Telephone
Including Area Code, of Number, Including Area Code,
Registrant's Principal of Agent for Service)
Executive Offices)
</TABLE>
<TABLE>
<S> <C> <C>
COPIES TO:
JAMES KARDON, ESQ. JOHN D. WATSON, JR., ESQ. W. THEODORE
HAHN & HESSEN LLP LATHAM & WATKINS PIERSON, JR.,
350 FIFTH AVENUE 1001 PENNSYLVANIA AVE., N.W. ESQ.
NEW YORK, NEW YORK 10118 WASHINGTON, D.C. 20004 PIERSON &
(212) 736-1000 (202) 637-2200 BURNETT, LLP
1667 K. STREET,
N.W., SUITE 801
WASHINGTON, D.C.
20006
(202) 466-3044
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED PER SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value................... 8,625,000 Shares (1) $ (2) $77,625,000 $26,767(3)
</TABLE>
(1) Includes 1,125,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Proposed maximum offering price per share to be supplied by amendment.
Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act.
(3) Includes $13,793 previously paid and an increased filing fee of $12,974,
which is being paid concurrently with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADVANCED RADIO TELECOM CORP.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus; Risk Factors;
Underwriting
6. Dilution............................................. Dilution; Shares Eligible for Future Sale
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Capital Stock; Shares
Eligible for Future Sale
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; The Company;
Dividend Policy; Capitalization; Selected Historical
Combined and Pro Forma Financial Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal Stockholders; Certain Transactions;
Description of Capital Stock; Description of Certain
Indebtedness; Financial Statements.
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable.
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
7,500,000 SHARES
[LOGO]
COMMON STOCK
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY ADVANCED
RADIO TELECOM CORP. ("ART" OR THE "COMPANY"). PRIOR TO THIS OFFERING, THERE HAS
BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $8.00 AND
$10.00 PER SHARE. SEE "UNDERWRITING" FOR A DISCUSSION OF THE FACTORS TO BE
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE. THE COMMON STOCK
HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"ARTT."
CONCURRENTLY WITH THE OFFERING OF THE SHARES OF COMMON STOCK (THE "COMMON
STOCK OFFERING"), THE COMPANY IS OFFERING, PURSUANT TO A SEPARATE PROSPECTUS,
UNITS (THE "UNITS"), EACH CONSISTING OF $1,000 PRINCIPAL AMOUNT AT MATURITY
OF SENIOR DISCOUNT NOTES DUE 2006 (THE "NOTES") AND WARRANTS
(COLLECTIVELY, THE "WARRANTS") TO PURCHASE SHARES OF COMMON STOCK,
SUFFICIENT TO GENERATE GROSS PROCEEDS OF $175,000,000 (THE "UNIT OFFERING" AND,
TOGETHER WITH THE COMMON STOCK OFFERING, THE "OFFERINGS"). THE COMMON STOCK
OFFERING IS CONDITIONED UPON THE CONSUMMATION OF THE UNIT OFFERING.
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE COMMON STOCK.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
PER SHARE............................. $ $ $
TOTAL (3)............................. $ $ $
</TABLE>
(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF THE
UNDERWRITERS AND OTHER MATTERS.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO 1,125,000 ADDITIONAL SHARES OF COMMON STOCK SOLELY TO COVER
OVER-ALLOTMENTS, IF ANY. IF THE UNDERWRITERS EXERCISE THIS OPTION IN FULL,
THE PRICE TO PUBLIC WILL TOTAL $ , THE UNDERWRITING DISCOUNT WILL
TOTAL $ AND THE PROCEEDS TO COMPANY WILL TOTAL $ . SEE
"UNDERWRITING."
THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO
REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING SUCH SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT
THE OFFICE OF MONTGOMERY SECURITIES ON OR ABOUT , 1996.
-------------------
MONTGOMERY SECURITIES
MERRILL LYNCH & CO.
DEUTSCHE MORGAN GRENFELL
, 1996
<PAGE>
[INSIDE FRONT COVER GATE FOLD]
38 GHz TECHNOLOGY PROVIDES SUPERIOR
BANDWIDTH PER CHANNEL WHICH ALLOWS SIGNIFICANTLY
FASTER DATA TRANSFER RATES.
[GRAPHIC DISPLAYING BANDWIDTH PER CHANNEL
OF FREQUENCIES BETWEEN 530 KHz AND 38 GHz.]
<PAGE>
[GRAPHIC DISPLAYING 38 GHz LINKS
BETWEEN METROPOLITAN FIBER RING,
OFF-FIBER NET BUILDINGS AND ON-FIBER NET BUILDINGS.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND
THE HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS AND THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES (I) THE COMPLETION OF THE PROPOSED MERGER
(THE "MERGER"), AS A CONDITION OF THE OFFERINGS, OF A WHOLLY-OWNED SUBSIDIARY OF
ADVANCED RADIO TECHNOLOGIES CORPORATION ("ART") WITH AND INTO ADVANCED RADIO
TELECOM CORP. ("TELECOM"), (II) THE CONVERSION (THE "CONVERSION") OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK OF TELECOM INTO SHARES OF COMMON STOCK OF
TELECOM PRIOR TO THE MERGER, (III) THE AMENDMENT OF ART'S CERTIFICATE OF
INCORPORATION TO CHANGE ITS NAME TO "ADVANCED RADIO TELECOM CORP.," (IV) THE
29,450.16 FOR ONE SPLIT OF THE COMMON STOCK EFFECTED IN JUNE 1996 AND (V) NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE COMMON STOCK
OFFERING. FOLLOWING THE MERGER, TELECOM WILL BE A WHOLLY-OWNED SUBSIDIARY OF
ART. AS USED IN THIS PROSPECTUS, THE TERMS "ART" OR THE "COMPANY" REFER EITHER
TO ART ON A STAND-ALONE BASIS OR ON A COMBINED BASIS WITH TELECOM AS THE CONTEXT
MAY REQUIRE. SEE "THE COMPANY." SEE "GLOSSARY" FOR THE DEFINITIONS OF CERTAIN
TERMS AND ACRONYMS USED HEREIN.
THE COMPANY
Advanced Radio Telecom Corp. ("ART" or the "Company") provides wireless
broadband telecommunications services using point-to-point microwave
transmissions in the 37.0 to 40.0 gigahertz portion of the radio spectrum ("38
GHz"). The Company is seeking to address the growing demand for high speed, high
capacity digital telecommunications services on the part of business and
government end users who require cost effective, high bandwidth local access to
voice, video, data and Internet services. Upon completion of its pending
acquisition of 129 38 GHz wireless broadband authorizations (the "CommcoCCC
Assets") from CommcoCCC, Inc. ("CommcoCCC"), the Company will own or manage a
total of 237 authorizations granted by the Federal Communications Commission
("FCC") covering an aggregate population of approximately 143 million in 169
U.S. markets. ART's footprint will allow it to provide 38 GHz wireless broadband
services in 47 of the top 50 markets and 82 of the top 100 markets. Presently,
the Company owns or manages 108 authorizations (exclusive of the CommcoCCC
Assets) that allow it to provide 38 GHz wireless broadband services in 89
markets. See "Risk Factors -- Risk of Non-Consummation of CommcoCCC
Acquisition," "Business -- 38 GHz Wireless Broadband Licenses and
Authorizations" and "-- Agreements Relating to Licenses and Authorizations --
CommcoCCC Acquisition."
The ability to access and distribute information quickly has become critical
to business and government users of telecommunications services. The
proliferation of local area networks ("LANs"), rapid growth of Internet
services, rising demand for video teleconferencing and other demand factors are
significantly increasing the volume of broadband telecommunications traffic. The
inability of the existing infrastructure to meet this demand is creating a "last
mile" bottleneck in the copper wire networks of the incumbent local exchange
carriers ("LECs"). This increasing demand, together with changes in the
regulatory environment, are creating an opportunity to offer cost effective,
high capacity last mile access using both wireline and wireless solutions. See
"Business -- Telecommunications Industry Overview."
38 GHZ TECHNOLOGY
The Company is positioned to solve the need for broadband last mile access,
linking end users to competitive access providers ("CAPs"), inter-exchange
carriers ("IXCs"), cellular and mobile radio service providers and Internet
service providers ("ISPs") using 38 GHz technology. The Company's wireless
broadband services are engineered to provide 99.999% availability, with better
than a 10-13 (unfaded) bit error rate. This level of availability exceeds the
performance of copper based networks and is a viable alternative to fiber optic
based networks. See "Business -- The ART Solution." In addition, the Company
believes that ART's last mile solution is competitively priced with most
broadband wireline solutions. See "Business -- 38 GHz Technology" and "--The ART
Solution." The 38 GHz band provides for the following additional advantages as
compared to other spectrum bands and wireline alternatives:
3
<PAGE>
- HIGH DATA TRANSFER RATES. The total amount of bandwidth for each 38 GHz
channel is 100 MHz, which exceeds the bandwidth of any other present
terrestrial wireless channel allotment and supports full broadband
capability. For example, one 38 GHz DS-3 link at 45 Mbps today can transfer
data at a rate which is over 1,500 times the rate of the fastest dial-up
modem currently in use (28.8 Kbps) and over 350 times the rate of the
fastest integrated services digital network ("ISDN") line currently in use
(128 Kbps). In addition to accommodating standard voice and data
requirements, 45 Mbps data transmission rates allow end users to receive
real time, full motion video and 3-D graphics at their workstations and to
utilize highly interactive applications on the Internet and other networks.
- SIGNIFICANT CHANNEL CAPACITY. Because 38 GHz radio emissions have a narrow
beam width, a relatively short range and in many instances the capability
to intersect without creating interference, 38 GHz service providers can
efficiently reuse their bandwidth within a licensed area, thereby
increasing the number of customers to which such services can be provided.
Management believes that by using technology currently employed by the
Company it can serve virtually all of the immediately addressable market in
its market areas.
- RAPID DEPLOYMENT. 38 GHz technology can be deployed considerably more
rapidly than wireline and other wireless technologies, generally within 72
hours after obtaining access to customer premises. In contrast to the
relative ease of installing a 38 GHz transmission link, extending fiber or
copper-based networks to reach new customers requires significant time and
expense. In addition, unlike providers of point-to-point microwave service
in other spectrum bands, a 38 GHz license holder can install and operate as
many transmission links as it can engineer in the licensed area without
obtaining additional approvals from the FCC. This is a substantial
advantage over other portions of the microwave radio spectrum that must be
licensed on a link-by-link basis following frequency coordination, which in
total can take from three to five months.
- EASE OF INSTALLATION. The equipment used for point-to-point applications
in 38 GHz (i.e., antennae, transceivers and digital interface units) is
smaller, less obtrusive and less expensive than that used for microwave
equipment applications at lower frequencies, making it less susceptible to
zoning restrictions. In addition, 38 GHz equipment can be easily redeployed
to meet changing customer requirements.
- ADDITIONAL ADVANTAGES OVER OTHER PORTIONS OF RADIO SPECTRUM. At
frequencies above 38 GHz, point-to-point applications become less practical
because attenuation increases and the maximum distance between transceivers
accordingly decreases. Additionally, the FCC has specified the use of many
portions of the spectrum for applications other than point-to-point, such
as satellite and wireless cable services, and, accordingly, these portions
of the radio spectrum often are not available for point-to-point
applications. Finally, 38 GHz has characteristics which provide better
signal quality and performance in inclement weather than those offered in
other portions of the radio spectrum.
BUSINESS STRATEGY
ART began providing 38 GHz wireless broadband services in the fourth quarter
of 1995 and has generated only nominal revenues from such services to date. The
Company is seeking to capitalize on its broad footprint of 38 GHz authorizations
to become a leading provider of wireless broadband solutions to a diverse group
of traditional and emerging telecommunications service providers and end users
of telecommunications services. See "Business -- Business Strategy." The Company
plans to implement the following strategic initiatives to achieve this
objective:
- EXPLOIT SPECTRUM POSITION IN KEY MARKETS. Upon completion of its pending
acquisition of the CommcoCCC Assets, the Company will own or manage a total
of 237 authorizations that will allow it to provide 38 GHz wireless
broadband services in 169 U.S. markets. The Company currently owns or
manages 108 authorizations (exclusive of the CommcoCCC Assets) that allow
it to provide 38 GHz wireless broadband services in 89 markets, 73 of which
are owned by the Company and the remaining 35 of which are managed by the
Company through the Company's
4
<PAGE>
interests in or arrangements with other companies. The Company has agreed
to acquire all of the authorizations which it currently manages but does
not own. These spectrum assets provide the Company with the foundation on
which to create a large scale commercial system of 38 GHz wireless
broadband operations. As of June 28, 1996, the Company was operating
revenue-generating, wireless broadband links in 15 cities. The Company
plans to continue to build out its infrastructure and to intensify its
marketing effort in its market areas in order to exploit the value inherent
in its spectrum assets. The Company may seek to acquire additional spectrum
rights in new and existing markets in order to expand its geographic
footprint or enhance its services. See "Business -- Agreements Relating to
Licenses and Authorizations."
- MARKET INITIALLY AS A CARRIER'S CARRIER. The Company's initial target
customers include CAPs, IXCs, cellular and mobile radio service providers
and ISPs. The Company's wireless broadband services enable CAPs to extend
their broadband services to locations where it is either not cost-efficient
or too difficult to extend their fiber optic network due to physical
limitations, franchise fees or other restrictions. The Company's services
may also be attractive to certain LECs, which generally do not currently
have broadband networks capable of reaching the majority of their
customers. The Company has entered into a strategic distribution agreement
(the "Ameritech Strategic Distribution Agreement") with Ameritech Corp.
("Ameritech") for delivery of the Company's wireless broadband services
throughout Ameritech's midwest operating region and for certain large
customers located outside its region. The Company currently provides
services to Ameritech, Bell Atlantic NYNEX Mobile, UUNet, Electric
Lightwave, NEXTLINK, American Personal Communications, American Show
Management, Capital Area Internet Service, Brooks Fiber Communications and
Western Wireless, among others. See "Business -- Customers and
Applications." As regulatory and competitive conditions permit and as the
Company's customer base and market presence develop, the Company expects
that its market focus will expand from a wholesale "carrier's carrier" to
include provision of services directly to commercial end users.
- PURSUE OPPORTUNITIES TO PROVIDE VALUE-ADDED SERVICES. The Company has
identified and plans to pursue additional market niches with immediate
needs for reliable, high bandwidth last mile access services. For example,
the market for Internet services urgently requires broadband "pipes" to
facilitate high speed access for corporate users, and the Company is
pursuing agreements to package its 38 GHz solutions with the services of
leading ISPs. Other potential value-added uses include desktop
videoconferencing, high resolution imaging for healthcare and law
enforcement applications and video on demand. The Company may also decide
to offer switched-based services to end users who desire a single source
telecommunications solution.
- MAINTAIN TECHNOLOGY LEADERSHIP IN SPECTRUM MANAGEMENT. The Company is
currently developing proprietary site selection and network design software
which it believes will provide for faster site development at a lower cost.
In addition, through the Company's internal technology development efforts,
as well as on-going participation in equipment manufacturers' research and
development activities, the Company is seeking to achieve a competitive
advantage through proprietary methods designed to increase the capacity and
quality of its networks.
- ESTABLISH AND EXPAND KEY STRATEGIC ALLIANCES. The Company has established
and will seek to continue to establish key strategic alliances with major
service providers, equipment manufacturers, systems integrators and
enhanced service providers. Ameritech owns a 5.5% beneficial equity
interest in the Company as of June 28, 1996 (4.3% after giving effect to
the Common Stock Offering) and entered into the Ameritech Strategic
Distribution Agreement in April 1996. The Company also has agreements with
Harris Corporation, Farinon Division ("Harris") for marketing ART's 38 GHz
services to PCS providers and with GTE Corporation for installation, field
servicing and network monitoring. In addition, the Company is seeking to
develop relationships with a number of equipment manufacturers focusing on
38 GHz technology development, wireless broadband standards and joint sales
efforts. The Company plans to utilize these strategic alliances to bundle
its services with those of its partners, to provide for alternative
distribution channels and to gain access to technological advancements. See
"Business -- Strategic Alliances."
5
<PAGE>
THE COMMON STOCK OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 7,500,000 shares
Common Stock outstanding after the
offering.................................... 37,586,498 shares (1)
Use of proceeds.............................. To fund capital expenditures, including the
purchase of equipment and the acquisition of
certain spectrum rights, to repay outstanding
indebtedness and for general corporate
purposes, including the funding of operating
cash flow shortfalls, technology development
and the acquisition of additional spectrum
rights and, potentially, related businesses.
Nasdaq National Market symbol................ ARTT
</TABLE>
- ------------------------------
(1) Assumes completion of the Merger and the Conversion. Excludes (i) 877,136
shares of Common Stock subject to the Ameritech Warrant (as defined), (ii)
1,100,000 shares of Common Stock subject to the Bridge Warrants (as
defined), (iii) 325,000 shares of Common Stock subject to the Indemnity
Warrants (as defined), (iv) 1,664,732 shares of Common Stock subject to
outstanding options under the Equity Incentive Plan (as defined), (v) 28,000
shares of Common Stock anticipated to be subject to outstanding options
under the Directors Plan (as defined) upon consummation of the Offerings,
(vi) 50,000 shares subject to the CommcoCCC Warrants (as defined) and (vii)
16,500,000 shares issuable upon the consummation of the CommcoCCC
Acquisition (as defined). As of June 28, 1996, an additional 835,268 shares
of Common Stock were available for issuance under the Equity Incentive Plan.
As of the date of this Prospectus, an additional 172,000 shares of Common
Stock were available for issuance under the Directors Plan. See "Certain
Transactions" and "Management -- Stock Option Plans." In addition, does not
give effect to the exercise of (i) the over-allotment option granted to the
Underwriters by the Company in the Common Stock Offering and (ii) the
Warrants. See "Underwriting."
CONCURRENT OFFERING
Concurrently with the Common Stock Offering, the Company is offering,
pursuant to a separate prospectus, Units, each consisting of $1,000 principal
amount at maturity of Notes and
Warrants to purchase shares of Common Stock of the Company, sufficient to
generate gross proceeds of $175,000,000 (the "Unit Offering" and, together with
the Common Stock Offering, the "Offerings"). The Warrants, when exercised, would
entitle the holders thereof to purchase shares of Common Stock representing %
of the Common Stock of the Company on a fully diluted basis after giving effect
to the Offerings. The Common Stock Offering is conditioned upon the consummation
of the Unit Offering. See "Description of Certain Indebtedness."
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. See "Risk Factors" beginning on page 9 for a discussion of certain factors
which should be considered by prospective investors in evaluating an investment
in the Common Stock.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------- --------------------------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
COMBINED (2) PRO FORMA (3) AS ADJUSTED (4) COMBINED (2) PRO FORMA (3) AS ADJUSTED (4)
------------- ---------------- ----------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating revenue.... $ 5,793 $ 5,793 $ 5,793 $ 9,620 $ 9,620 $ 9,620
Non-cash compensation
expense............. 1,089,605 1,089,605 1,089,605 7,221,000 7,221,000 7,221,000
Depreciation and
amortization........ 15,684 15,684 5,418,452 89,279 89,279 1,439,971
Interest, net........ 121,986 1,974,275 23,931,008 151,145 528,739 5,989,300
Net loss............. 3,234,843 5,087,132 30,609,692 10,694,588 11,092,182 17,444,199
Pro forma net loss
per share of Common
Stock (5)........... -- $ 0.16 $ 0.55 -- $ 0.35 $ 0.31
Pro forma weighted
average number of
shares of Common
Stock outstanding
(5)................. -- 31,651,605 55,651,605 -- 31,651,605 55,651,605
OTHER FINANCIAL DATA:
EBITDA (6)........... $(1,936,141) $ (1,936,141) $ (1,936,141) $(2,156,893) $ (2,156,893) $ (2,156,893)
Capital
expenditures........ 3,585,144 3,585,144 3,585,144 2,861,241 2,861,241 2,861,241
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1995 AS OF MARCH 31, 1996
------------------ --------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA
COMBINED (2) COMBINED (2) PRO FORMA (3) AS ADJUSTED (4)
------------------ ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital surplus (deficit)........ $ (3,008,510) $(1,128,130) $ 1,116,870 $ 214,516,870
Property and equipment, net.............. 3,581,561 6,380,895 6,380,895 6,380,895
FCC licenses............................. 4,235,734 4,235,734 4,235,734 216,110,734
Total assets............................. 9,876,559 15,036,337 20,432,236 448,589,961
Short-term debt.......................... -- -- 2,975,000 --
Long-term debt, including current
portion................................. 6,450,000 5,483,082 7,394,521 163,211,439
Total stockholders' equity (deficit)..... (312,860) 5,339,738 5,849,198 230,675,005
</TABLE>
- ------------------------------
(1) The unaudited summary historical and pro forma financial data were derived
from, and should be read in conjunction with, the audited financial
statements of ART and Telecom and the notes thereto, the unaudited interim
condensed financial statements of ART and Telecom and the notes thereto, and
the unaudited pro forma condensed financial statements of the Company and
the notes thereto, included elsewhere in this Prospectus. The pro forma and
pro forma as adjusted financial data are not necessarily indicative of what
the actual financial position and results of operations of the Company would
have been as of and for the three months ended March 31, 1996 and for the
year ended December 31, 1995, nor do they purport to represent the Company's
future financial position and results of operations.
(2) The unaudited summary financial data under the caption "Historical Combined"
are presented as if the historical financial statements of ART and Telecom
had been combined and reflect (i) the elimination of transactions and
balances between ART and Telecom and (ii) the elimination of ART's
investment in Telecom and Telecom's investment in ART.
(3) The unaudited summary financial data under the caption "Pro Forma" are
presented as if the following transactions had occurred as of the beginning
of the respective periods for the Statement of Operations Data and Other
Financial Data and as of the balance sheet date for the Balance Sheet Data:
(i) the March 8, 1996 issuance of the Bridge Notes (as defined) in
connection with the Bridge Financing (as defined); (ii) the receipt of $2.2
million in cash proceeds from the issuance of the Equipment Note (as
defined) and Indemnity Warrants in connection with the Equipment Financing
(as defined), after deducting related fees and expenses of $225,000, (iii)
the receipt of $3.0 million in cash proceeds from the CommcoCCC Notes (as
defined) and CommcoCCC Warrants in connection with the CommcoCCC Financing
(as defined); (iv) the Conversion; and (v) the Merger, including the
issuance of Common Stock to Telecom stockholders and the cancellation of all
outstanding Telecom common stock. See "Certain Transactions."
(4) The unaudited summary financial data under the caption "Pro Forma As
Adjusted" are presented as if the transactions referred to in (3) above and
the following transactions had occurred as of the beginning of the
respective periods for the Statement of Operations Data and Other Financial
Data and as of the balance sheet date for the Balance Sheet Data: (i) the
7
<PAGE>
sale by the Company of 7,500,000 shares of Common Stock offered in the
Common Stock Offering based on an assumed initial public offering price of
$9.00 per share and the Units offered in the Unit Offering assuming, $175.0
million of gross proceeds, and, in each case, after deducting the estimated
underwriting discount and offering expenses, (ii) the receipt and
application of the net proceeds therefrom to repay the Bridge Notes and the
CommcoCCC Notes and to acquire the 50% ownership interest of ART West (as
defined) held by Extended (as defined) for $6.0 million in cash and the DCT
Assets (as defined) for $3.6 million in cash and (iii) the issuance of
16,500,000 shares of Common Stock based upon an assumed value of $9.00 per
share in connection with the CommcoCCC Acquisition (as defined). See "Use of
Proceeds."
(5) Pro forma net loss per share is computed based on the loss for the period
divided by the weighted average number of shares of Common Stock outstanding
during the period, including the Conversion, the Merger and the issuance of
potentially dilutive instruments issued within one year prior to the
Offerings at exercise prices below the assumed initial public offering price
of $9.00 per share. Pro forma as adjusted net loss per share include the
items above noted plus the issuance of 7,500,000 shares of Common Stock in
the Common Stock Offering and the issuance of 16,500,000 shares of Common
Stock in connection with the CommcoCCC Acquisition. In measuring the
dilutive effect, the treasury stock method was used.
(6) EBITDA means loss before interest expense, income tax expense, depreciation
and amortization expense, non-cash compensation expense and non-cash market
development expense. Information with respect to EBITDA is included herein
because a similar measure will be used in the Indenture (as defined) with
respect to the computation of certain covenants. EBITDA is not intended to
represent cash flows from operating activities, as determined in accordance
with generally accepted accounting principles, nor has it been presented as
an alternative to operating income as an indicator of operating performance
and should not be considered as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
8
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
BUSINESS AND REGULATORY RISKS
LIMITED OPERATIONS; HISTORY OF NET LOSSES
Although the Company's business commenced in 1993, the Company has generated
only nominal revenues from operations to date. The Company's primary activities
have focused on the acquisition of wireless authorizations, the hiring of
management and other key personnel, the raising of capital, the acquisition of
equipment and the development of operating systems. As of June 28, 1996, the
Company was operating revenue-generating, wireless broadband links in 15 cities
using 38 GHz technology. Prospective investors have limited operating and
financial data about the Company upon which to base an evaluation of the
Company's performance and an investment in the Common Stock offered hereby. The
Company's ability to provide commercial service on a widespread basis and to
generate positive operating cash flow will depend on its ability to, among other
things, (i) deploy its 38 GHz technology on a market-by-market basis, (ii)
attract and retain an adequate customer base, (iii) develop its operational and
support systems and (iv) acquire appropriate sites for its operations. See
"Business -- Business Strategy." Given the Company's limited operating history,
there can be no assurance that it will be able to achieve these goals, to
develop a sufficiently large revenue-generating customer base, to service its
indebtedness or to compete successfully in the telecommunications industry.
The development of the Company's business and the deployment of its services
and systems will require significant capital expenditures, a substantial portion
of which will need to be incurred before the realization of significant
revenues. Together with the associated start-up operating expenses, these
capital expenditures will result in negative cash flow until an adequate revenue
generating customer base is established. On a historical combined basis for the
year ended December 31, 1995 and the three-month period ended March 31, 1996,
the Company reported net losses of $3.2 million and $10.7 million, respectively.
On a combined historical basis, from inception through March 31, 1996, the
Company reported net losses of $14.1 million. The financial statements of the
Company included in this Prospectus have been prepared on a going concern basis.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Through 1997, the Company currently expects to incur capital
expenditures of approximately $100.0 million as the development and expansion of
its wireless broadband business continues. The Company expects to generate
significant operating losses for at least the next several years. There can be
no assurance that the Company will develop a revenue-generating customer base or
will achieve or sustain profitability in the future.
EMERGING MARKET; UNCERTAIN ACCEPTANCE OF 38 GHZ SERVICES
The Company has only recently begun to market its wireless broadband
services to potential customers and has generated only nominal revenues to date.
The provision of wireless broadband services on 38 GHz frequencies represents an
emerging sector of the telecommunications industry, and the demand for such
services is uncertain. Market acceptance may be adversely affected by historical
perceptions of the unreliability and lack of security of previous microwave
technologies using frequencies other than 38 GHz. See "Business -- 38 GHz
Technology." There can be no assurance that substantial markets will develop for
38 GHz wireless broadband services, or, if such markets were to develop, that
the Company would be able to attract and maintain a sufficient
revenue-generating customer base or operate profitably.
The Company's success in providing wireless broadband services is subject to
certain factors beyond the Company's control. These factors include, without
limitation, changes in general and local economic conditions, availability of
equipment, changes in telecommunications service rates charged by other service
providers, changes in the supply and demand for wireless broadband services,
competition from
9
<PAGE>
wireline and wireless operators in the same market area, changes in the federal
and state regulatory schemes affecting the operation of wireless broadband
systems (including the enactment of new statutes and the promulgation of changes
in the interpretation or enforcement of existing or new rules and regulations)
and changes in technology that have the potential of rendering obsolete the
Company's wireless broadband equipment. In addition, the extent of the potential
demand for wireless broadband services in the Company's market areas cannot be
estimated with certainty. There can be no assurance that one or more of these
factors will not have an adverse effect on the Company's financial condition and
results of operations.
RISK OF NON-CONSUMMATION OF COMMCOCCC ACQUISITION
On July 3, 1996, the Company entered into an agreement (the "CommcoCCC
Agreement") to acquire the CommcoCCC Assets from CommcoCCC (the "CommcoCCC
Acquisition") in exchange for 16,500,000 shares of Common Stock. See "Business
- -- Agreements Relating to Licenses and Authorizations -- CommcoCCC Acquisition."
The CommcoCCC Acquisition is subject to various conditions including receipt of
FCC and other approvals, receipt by CommcoCCC of an opinion as to the tax-free
nature of the transaction, consummation of the Offerings on terms reasonably
satisfactory to CommcoCCC, minimum population coverage requirements for the
authorizations of ART and CommcoCCC, accuracy of representations and warranties
except for breaches that do not have in the aggregate a material adverse effect,
no pending or threatened material litigation and other customary closing
conditions. There can be no assurance that all such conditions will be
satisfied. See "Business -- Agreements Relating to Licenses and Authorizations
- -- CommcoCCC Acquisition." In particular, to obtain FCC approval, the Company
will need to make certain "anti-trafficking" showings and may need certain
waivers or consents from the FCC. The FCC may be unwilling to grant its approval
or may grant its approval subject to conditions that may be adverse to the
Company. There can be no assurance that the FCC will grant such waivers or that
there would not be substantial delays in its doing so. If the Company were
unable to complete the CommcoCCC Acquisition for any reason, the Company's
footprint would be considerably smaller than planned and the Company's growth
could be limited.
COMPETITION
The telecommunications services industry is highly competitive. The Company
has only recently begun to market its wireless broadband services to potential
customers and is currently providing services on a limited basis. In each market
area in which the Company is authorized to provide services, the Company
competes or will compete with several other service providers and technologies.
The Company expects to compete primarily on the basis of wireless broadband
service features, quality, price, reliability, customer service and rapid
response to customer needs. The Company faces significant competition from other
38 GHz providers and incumbent LECs, such as the Regional Bell Operating
Companies ("RBOCs"). The Company may also compete with CAPs, cable television
operators, electric utilities, LECs operating outside their current local
service areas and IXCs. There can be no assurance that the Company will be able
to compete effectively in any of its market areas. See "Business --
Competition."
COMPETITION FROM 38 GHZ SERVICE PROVIDERS. The Company faces competition
from other 38 GHz service providers, such as WinStar Communications, Inc.
("WinStar") and BizTel Communications, Inc. ("BizTel"), within its market areas.
In many cases, one or both of these service providers hold licenses to operate
in other portions of the 38 GHz band in geographic areas which encompass or
overlap the Company's market areas. In certain of the Company's market areas,
other 38 GHz service providers may have a longer history of operations, a larger
geographic footprint or substantially greater financial resources than the
Company. WinStar commenced its 38 GHz operations approximately one year prior to
the Company, has raised significant capital and has the competitive advantages
inherent in being the first to market 38 GHz services. In addition to WinStar
and BizTel, at least one other substantial entity, Milliwave L.P. ("Milliwave"),
and several dozen smaller ones have been granted 38 GHz authorizations in
geographic regions in which the Company plans to operate. WinStar has recently
entered into a
10
<PAGE>
definitive agreement with Milliwave to acquire Milliwave's 38 GHz licenses,
subject to FCC approval, and has agreed to manage such licenses pending the
consummation of such acquisition. Due to the relative ease and speed of
deployment of 38 GHz technology, the Company could face intense price
competition and competition for customers (including other telecommunications
service providers) from other 38 GHz service providers.
The Company also faces potential competition from new entrants to the 38 GHz
market, including LECs and other leading telecommunications companies. The NPRM
(as defined) contemplates an auction of certain spectrum assets, including the
lower fourteen proposed 100 MHz channels (which are similar to those used by the
Company) and four proposed 50 MHz channels in the 38 GHz spectrum band, which
have not been previously available for commercial use. See "-- Government
Regulation." The grant of additional authorizations by the FCC in the 38 GHz
band, or other portions of the spectrum with similar characteristics, could
result in increased competition. The Company believes that, assuming that
additional channels are made available as proposed by the NPRM, additional
entities having greater resources than the Company could acquire authorizations
to provide 38 GHz services. See "Business -- Government Regulation -- Federal
Regulation -- FCC Rulemaking."
COMPETITION FROM INCUMBENT LECS. The Company also faces significant
competition from incumbent LECs, irrespective of whether they provide 38 GHz
services. Incumbent LECs have long-standing relationships with their customers,
generally own significant PCS or cellular assets, have the potential to
subsidize competitive services with revenues from a variety of businesses and
benefit from favorable federal and state policies and regulations. Regulatory
decisions and recent legislation, such as the Telecommunications Act of 1996
(the "Telecommunications Act"), have partially deregulated the
telecommunications industry and reduced barriers to entry into new segments of
the industry. In particular, the Telecommunications Act, among other things, (i)
enhances local exchange competition by preempting laws prohibiting competition
in the local exchange market, by requiring LECs to provide fair and equal
standards for interconnection and by requiring incumbent LECs to provide
unbundling of services and (ii) permits an RBOC to compete in the interLATA long
distance service market once certain competitive characteristics emerge in such
RBOC's service area. The Company believes that this trend towards greater
competition will continue to provide opportunities for broader entrance into the
local exchange markets. However, as LECs face increased competition, regulatory
decisions are likely to provide them with increased pricing flexibility, which
in turn may result in increased price competition. There can be no assurance
that such increased price competition will not have a material adverse effect on
the Company's results of operations.
OTHER COMPETITORS. The Company may compete with CAPs for the provision of
last mile access and additional services in most of its market areas. However,
the Company believes that many CAPs may utilize 38 GHz transmission links to
augment their own service offerings to IXCs and end users, and that the Company
is well positioned to provide such 38 GHz services to CAPs. However, there can
be no assurance that CAPs will utilize the Company's 38 GHz services or that
CAPs will not seek to acquire their own 38 GHz licenses or use the 38 GHz
licenses of other licensees. Furthermore, the ability of CAPs to compete in the
local exchange market is limited by regulations relating to number portability,
dialing parity and reasonable interconnection. The Telecommunications Act
requires the FCC and the states to implement regulations that place CAPs on a
more equal competitive footing with LECs. To the extent these changes are
implemented, CAPs may be able to compete more effectively with LECs. However,
there can be no assurance that CAPs or 38 GHz service providers, such as the
Company, will be able to compete effectively for the provision of last mile
access and other services.
The Company may also face competition from cable television operators
deploying cable modems, which provide high speed data capability over installed
coaxial cable television networks. Although cable modems are not widely
available currently, the Company believes that the cable industry may support
the deployment of cable modems to residential cable customers through methods
such as price subsidies. Notwithstanding the cable industry's interest in rapid
deployment of cable modems, the Company
11
<PAGE>
believes that in order to provide broadband capacity to a significant number of
business and government users cable operators will be required to spend
significant time and capital in order to upgrade their existing networks to the
next generation of hybrid fiber coaxial network architecture. However, there can
be no assurance that cable television operators will not emerge as a source of
competition to the Company.
The Company may also face competition from electric utilities, LECs
operating outside their current local service areas, IXCs and other providers.
These entities provide transmission services using technologies which may enjoy
a greater degree of market acceptance than 38 GHz wireless broadband technology
in the provision of last mile broadband services. In addition, the Company may
face competition from new market entrants using wireless, fiber optic and
enhanced copper based networks to provide local service and from wireless cable
providers and other service providers operating in frequencies other than 38
GHz.
Many of the Company's competitors have long-standing relationships with
customers and suppliers, greater name recognition and greater financial,
technical and marketing resources than the Company. As a result, these
competitors may be able to more quickly develop and exploit new or emerging
technologies, adapt to changes in customer requirements, or devote greater
resources to the marketing of their services than the Company. The consolidation
of telecommunications companies and the formation of strategic alliances and
cooperative relationships in the telecommunications and related industry, as
well as the development of new technologies, could give rise to significant new
competitors to the Company. In such case, there can be no assurance as to the
degree to which the Company will be able to compete effectively.
GOVERNMENT REGULATION
The telecommunications services offered by the Company are subject to
regulation by federal, state and local government agencies. At the federal
level, the FCC has jurisdiction over the use of the electromagnetic spectrum
(I.E., wireless services) and has exclusive jurisdiction over all interstate
telecommunications services, that is, those that originate in one state and
terminate in another state. State regulatory commissions have jurisdiction over
intrastate communications, that is, those that originate and terminate in the
same state. Municipalities may regulate limited aspects of the Company's
business by, for example, imposing zoning requirements and requiring
installation permits. See "Business -- Government Regulation."
The Company is licensed by the FCC as a common carrier provider of
facilities-based local telecommunications services. For many of its intrastate
services, the Company will need to seek authorizations from the states and, in
most cases, file tariffs. The Company is in the process of filing tariffs for
some of its services with the FCC and with certain state authorities on an
ongoing basis. Certain of its proposed services have not yet been permitted in
most states. Although the Telecommunications Act requires the states to open up
all of the Company's services to competition, there can be no assurance that
this will occur on a timely basis. Challenges to its applications for
authorizations or its tariffs by third parties could cause the Company to incur
substantial legal and administrative expenses and time delay in implementing its
business plan. Although many of the Company's applications for FCC
authorizations were subject to challenge, the Company nonetheless was granted
authorizations for a majority of its applications. The Company's remaining
applications were either dismissed, voluntarily or involuntarily, or are
currently pending before the FCC. Some of these pending applications are in
conflict with applications filed by third parties and could not, in any event,
be granted unless the conflicts were eliminated. Elimination of the conflicts
generally would require dismissal of a majority of the applications as part of a
settlement. All of the pending applications are subject to the freeze on the
grant of additional authorizations pending completion of the NPRM, which
proposes dismissal of all such applications. The Company's business plans do not
assume that any of these pending applications will be granted. The Company does
not believe that a failure to grant these applications will impair its ability
to operate. See "Business -- Government Regulation."
12
<PAGE>
In its provision of local wireless broadband services, the Company currently
is not subject to rate regulation by the FCC, but is subject to regulation by
most states. Additionally, the Company is required to comply with all applicable
local zoning and other laws governing the installation and operation of its
wireless broadband services.
Changes in existing laws and regulations, including those relating to the
provision of wireless local telecommunications services via 38 GHz licenses, or
any failure or significant delay in obtaining necessary regulatory approvals,
could have a material adverse effect on the Company. On November 13, 1995, the
FCC released an order barring the acceptance of new applications for 38 GHz
authorizations. On December 15, 1995, the FCC announced the issuance of a notice
of proposed rulemaking (the "NPRM"), pursuant to which it proposed to amend its
current rules to provide for, among other things, (i) the adoption of an auction
procedure for the issuance of authorizations in the 38 GHz band, including a
possible auction of the lower fourteen 100 MHz channels (which are similar to
those used by the Company) and the lower four 50 MHz channels in the 38 GHz band
that have not been previously available for commercial use, (ii) the
continuation of the 100 MHz-based channeling plan and licensing rules for
point-to-point microwave operations in the lower 14 channels, (iii) licensing
frequencies using predefined geographic service areas ("Basic Trading Areas"),
(iv) the imposition of substantially stricter construction requirements for
authorizations that are not received pursuant to auctions as a condition to the
retention of such authorizations and (v) the implementation of certain technical
rules designed to avoid radio frequency interference among licensees. In
addition, the FCC ordered that those applications subject to mutual exclusivity
with other applicants or placed on public notice by the FCC after September 13,
1995 would be held in abeyance pending the outcome of the NPRM and might then be
dismissed. Final rules issued in connection with the NPRM may require that 38
GHz service providers share other yet-to-be licensed portions of the 38 GHz band
with other telecommunications service providers. The implementation of such a
measure could materially affect the Company's ability to provide services to its
customers by imposing power and other limitations upon existing operations.
There can be no assurance that the final rules (if any) issued in connection
with the NPRM will resemble the rules proposed in the NPRM. There also can be no
assurance that any proposed or final rules will not have a material adverse
effect on the Company. Statutes and regulations which may become applicable to
the Company as it expands could require the Company to alter methods of
operations at costs which could be substantial or otherwise limit the types of
services offered by the Company.
The Company manages the systems of ART West, DCT, Telecom One and CommcoCCC
pursuant to management agreements (during the pendency of certain acquisitions).
See "Business -- Agreements Relating to Licenses and Authorizations." The
Company believes that the provisions of these management agreements comply with
the FCC's policies concerning licensee control of FCC-licensed facilities.
Because the 38 GHz service is a new service, however, there is no FCC precedent
addressing the limits of such management arrangements for this service. No
assurance can be given that the management arrangements or proposed acquisitions
will, if challenged, be found to satisfy the FCC's policies or what
modifications may need to be made to satisfy those policies. If the FCC were to
void or require modifications of the management arrangements, the operations of
the Company could be adversely affected.
RISK OF FORFEITURE, NON-RENEWAL AND FLUCTUATION IN VALUE OF FCC LICENSES
Upon completion of the CommcoCCC Acquisition, the Company will own or manage
a total of 237 authorizations that will allow it to provide 38 GHz wireless
broadband services in 169 U.S. markets. The Company currently owns or manages
108 authorizations (exclusive of the CommcoCCC Assets) that allow it to provide
38 GHz wireless broadband services in 89 markets, 73 of which are owned by the
Company and the remaining 35 of which are managed by the Company through the
Company's interests in or arrangements with other companies. Under the current
FCC rules, the recipient of an authorization for 38 GHz microwave facilities is
required to complete construction of such facilities within 18 months of the
date of grant of the authorization (authorizations for facilities that are not
constructed are referred to in this Prospectus as "construction permits" and
authorizations for facilities
13
<PAGE>
that are constructed are referred to in this Prospectus as "licenses"). Upon
completion of construction, the licensee is required to certify that the station
is operational and ready to provide service to the public. Although under
current FCC regulations, the term "operational" is not defined, the industry
custom is to establish at least one link between two transceivers in each market
area for which it holds a construction permit. In the event that the recipient
fails to comply with the construction deadline, the construction permit is
subject to forfeiture, absent an extension of the deadline. Of the 108
authorizations that the Company owns or manages (exclusive of the CommcoCCC
Assets), 77 are licenses. Under the terms of its remaining 31 construction
permits, the Company must complete construction of facilities for the majority
of such construction permits between mid-August and mid-September 1996. Under
the terms of the CommcoCCC authorizations and the Company's management agreement
with CommcoCCC, the Company must complete construction of facilities for eight
construction permits by mid-September 1996, 39 construction permits by December
1996 and the remaining 82 construction permits between mid-April and mid-August
1997. The Company believes that, in light of current FCC practice, extensions of
construction periods are highly unlikely. Although the Company believes that it
can complete the construction of all of its own and CommcoCCC's facilities using
the proceeds of the Offerings within respective time limits, there can be no
assurance that it will be able to do so or that the Company will be able to
comply with whatever more stringent construction requirements the FCC ultimately
adopts as a result of the NPRM. As a result, some of the Company's construction
permits could be subject to forfeiture, which could have a material adverse
effect on the Company's development and results of operations. See "Business --
Government Regulation" and "-- 38 GHz Wireless Broadband Licenses and
Authorizations."
The FCC's current policy is to align the expiration dates of all 38 GHz
licenses held by a particular licensee such that all such licenses mature
concurrently and then to require renewal of all such licenses for a matching
ten-year period. All of the 38 GHz licenses owned or to be acquired by the
Company will expire in February 2001. Although the Company currently anticipates
that its licenses will be renewed based upon the FCC's custom and practice in
connection with other services which have established a presumption in favor of
licensees that have complied with regulatory obligations during the initial
license period, there can be no assurance that all or any of the licenses will
be renewed upon expiration of their initial terms. In the event that the FCC
does not renew one or more of the licenses, the Company's business and results
of operations could be materially adversely affected.
The Company plans to use its authorizations to develop wireless broadband
systems in all of its market areas. In addition, a limited secondary market
exists for 38 GHz authorizations, and the Company may from time to time purchase
such authorizations. The value of authorizations held or acquired hereafter by
the Company will depend upon the success of the Company's wireless broadband
operations, fluctuations in the level of supply and demand for such
authorizations and the telecommunications industry's response to the
availability and efficacy of wireless broadband systems. In addition, federal
and state regulations limit the ability of licensees to sell their
authorizations. Assignments of authorizations and changes of control involving
entities holding authorizations require prior FCC and, in some instances, state
regulatory approval and are subject to restrictions and limitations on the
identity and status of the assignee or successor. These regulatory restrictions
on transfer of authorizations may adversely affect the value of the Company's
authorizations.
MANAGEMENT OF GROWTH
The Company is currently experiencing a period of rapid growth and is
pursuing a business plan that, if successfully implemented, will result in
expansion of its operations and the provision of 38 GHz services on a widespread
basis over the next two to five years. The Company's success will depend on its
ability to manage growth effectively, to enhance its operational and financial
control and information systems and to attract, assimilate and retain additional
qualified personnel. Failure by the Company to meet the demands of customers and
to manage the expansion of its business and operations could have a material
adverse effect on the Company's development and results of operations.
14
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LINE OF SIGHT; ROOF RIGHTS; OTHER LIMITATIONS
Wireless broadband services over 38 GHz frequencies require a direct line of
sight between two transceivers comprising a link and are subject to distance and
rain attenuation. The maximum length of a single link is generally limited to
three to five miles, and, as a result, intermediate links (or "repeaters") are
required to permit wireless broadband transmission to extend beyond this limit.
In the absence of a direct line of sight, repeaters may be required to
circumvent obstacles, such as buildings in urban areas or hills in rural areas.
In addition, in areas of heavy rainfall, the intensity of rainfall and the size
of raindrops can affect the transmission quality of 38 GHz services.
Transmission links in these areas are engineered for shorter distances and
greater power to maintain transmission quality. The use of intermediate links to
overcome obstructions or rain fade increases the cost of service. While these
increased costs may not be significant in all cases, such costs may render
wireless broadband services uneconomical in certain circumstances.
Due to line of sight limitations, the Company currently installs its
transceivers and antennas on the rooftops of buildings and on other tall
structures. In order to obtain the necessary access, the Company generally must
secure roof rights from the owners of each building or other structure on which
its equipment is installed. Line of sight and distance limitations generally do
not present problems in urban areas due to the ability of the licensee to select
unobstructed structures from which to transmit and the concentration of
customers within a limited area although the Company may have to install
intermediate links. Line of sight and distance limitations in non-urban areas
can arise due to lack of structures with sufficient height to clear local
obstructions. Although the Company has been able to construct intermediary links
in some instances to solve line of sight limitations in urban or non-urban
areas, line of sight limitations can adversely impact sales to certain potential
customers. Failure to obtain roof rights in a timely fashion may cause potential
customers to use alternative providers of 38 GHz services or to refrain from
using 38 GHz services altogether. There can be no assurance that the Company
will succeed in obtaining the roof rights necessary to establish wireless
broadband services to all potential customers in its market areas on favorable
terms, if at all, or that delays in obtaining such rights will not have a
material adverse effect on the Company's development and results of operations.
The relative significance of the size of a market area served depends on the
concentration within that area of potential customers. The Company's market
areas were defined by the Company in preparing its FCC applications for 38 GHz
licenses. The definitions of these areas were based on the Company's analysis of
the then existing local demographic characteristics in each market, such as
concentrations of employees and income levels. In certain of the Company's
market areas, other 38 GHz service providers have larger geographic footprints
or greater bandwidth. To the extent the Company's authorizations do not track
the appropriate growth and development patterns of potential customers within
its market areas or other 38 GHz providers have greater geographic coverage or
more bandwidth, the Company may have a competitive disadvantage.
RELIANCE ON EQUIPMENT SUPPLIERS; LACK OF INDUSTRY STANDARDS
The Company currently purchases the majority of its telecommunications
equipment pursuant to an agreement with P-Com, Inc. ("P-Com") and recently
entered into an equipment purchase agreement with Harris. Any reduction or
interruption in supply from either supplier could have a disruptive effect on
the Company. Although six manufacturers currently produce or are developing
equipment that will meet the Company's current and anticipated requirements, no
industry standard or uniform protocol currently exists for 38 GHz equipment.
Consequently, a single manufacturer's equipment must be used in establishing a
link and generally will be used across an entire market area. As a result, the
failure of the Company to procure sufficient equipment produced by a single
manufacturer for service in a particular market area could adversely affect the
Company's results of operations. See "Business -- Strategic Alliances."
15
<PAGE>
DEPENDENCE ON THIRD PARTIES FOR MARKETING AND SERVICE
The Company is partly dependent upon third parties for marketing its
services and maintaining its operational systems. The Company recently entered
into the Ameritech Strategic Distribution Agreement, which allows Ameritech to
resell the Company's 38 GHz services to customers within Ameritech's midwestern
region and to major Ameritech customers nationwide. The Company also has
agreements with subsidiaries of GTE to provide field service and network
monitoring and a joint marketing agreement with Harris. The failure of any of
these third parties to perform or the loss of any of these agreements could have
a material adverse effect on the Company's results of operations or its ability
to service its customers. The Company plans to enter into sales and marketing
agreements with other companies, and the failure to successfully implement these
agreements could have an adverse effect on the Company's development and results
of operations. See "Business -- Strategic Alliances."
ACQUISITION OF ADDITIONAL BANDWIDTH IN SELECTED AREAS
Although the Company believes the 38 GHz authorizations it owns, manages or
has agreed to acquire are sufficient in each of its markets to implement its
current business strategy, the Company may seek to acquire or lease additional
authorizations to expand its geographic footprint or to enhance its ability to
provide service to its current target market or customers it may target in the
future. The FCC has suspended granting additional licenses, subject to
resolution of the NPRM. See "Business -- Government Regulation." However, the
Company believes that additional channels may become available by virtue of (i)
the obligations of other 38 GHz service providers as common carriers to make
their services available and (ii) FCC auctions of and adoption of other
licensing procedures for additional 38 GHz authorizations. Nevertheless, there
can be no assurance that access to additional 38 GHz authorizations will be
acquired on favorable terms, if at all. See "Business -- Business Strategy," "--
38 GHz Wireless Broadband Licenses and Authorizations" and "-- Government
Regulation."
NEW SERVICES; TECHNOLOGICAL CHANGE
The telecommunications industry has been characterized by rapid
technological advances, changes in end user requirements, frequent new service
introductions, evolving industry standards and decreases in the cost of
equipment. The Company expects these changes to continue, and believes that its
long-term success will increasingly depend on its ability to exploit advanced
technologies and anticipate or adapt to evolving industry standards. There can
be no assurance that (i) the Company's wireless broadband services will not be
outmoded by technology or services now existing or developed and implemented in
the future, (ii) the Company will have sufficient resources to develop or
acquire new technologies or to introduce new services capable of competing with
future technologies or service offerings, (iii) the Company's inventory of
equipment will not be rendered obsolete or (iv) the cost of 38 GHz equipment
will decline as rapidly as that of competitive alternatives. See "Business."
DEPENDENCE ON KEY EMPLOYEES
The success of the Company is dependent, in part, on its ability to attract
and retain qualified technical, marketing, sales and management personnel,
especially the Company's executive officers. Competition for such personnel is
intense, and the Company's inability to attract and retain additional key
employees or the loss of one or more of its current key employees could have a
material adverse affect on the Company's business and results of operations. The
Company has employment agreements with each of its officers. See "Management."
FINANCIAL RISKS
SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
Management anticipates that, based on its current plan of development,
assuming that no material new acquisitions are consummated, the net proceeds of
the Offerings, after the use of approximately $8.0 million to repay existing
indebtedness and $9.6 million to complete pending acquisitions of certain
spectrum rights, will be sufficient to fund the operations and capital
requirements of the Company for at
16
<PAGE>
least the next two years. See "Use of Proceeds." Management also believes that
the Company's future capital needs will continue to be significant and that it
will be necessary for the Company to seek additional sources of financing. The
Company expects to incur capital expenditures of approximately $100.0 million
through 1997 as the development and expansion of its wireless broadband business
continues. The Company expects to generate significant operating losses for at
least the next several years. The Company will require substantial investment
capital for the continued development and expansion of its wireless broadband
operations, the continued funding of related operating losses, and the possible
acquisition of additional licenses, other assets or other businesses. On a
historical combined basis, from its inception through March 31, 1996, the
Company reported a net loss of $14.1 million. In addition, if (i) the Company's
plan of development or projections change or prove to be inaccurate, (ii) the
proceeds of the Offerings, together with other existing financial resources,
prove to be insufficient to fund the Company for at least the next two years or
(iii) the Company completes any material acquisitions not now under contract,
the Company may be required to seek additional financing sooner than currently
anticipated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." There can be no assurance that the Company will be
able to obtain any additional financing, or, if such financing is available,
that the Company will be able to obtain it on acceptable terms. In the event
that the Company fails to obtain additional financing, such failure could result
in the modification, delay or abandonment of some or all of the Company's
development and expansion plans. Any such modification, delay or abandonment is
likely to have a material adverse effect on the Company's business, which could
adversely affect the value of the Common Stock, the Notes and the Warrants and
may limit the Company's ability to make principal and interest payments on its
indebtedness.
HIGH LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
Following the Offerings, the Company will be highly leveraged and will have
certain restrictions on its operations. As of March 31, 1996, on a pro forma
basis after giving effect to the Equipment Financing, the CommcoCCC Financing,
the Conversion, the Merger, the Offerings and use of the proceeds therefrom and
completion of the CommcoCCC Acquisition, all as if they had occurred on that
date, the Company would have had approximately $163.2 million of total
indebtedness and stockholders' equity of approximately $230.7 million. In
addition, the accretion of the principal amount of the Notes over time (based on
an assumed rate of accretion of 13.5%) will result in an increase in the total
indebtedness represented by the Notes of approximately $161.3 million by
, 2001. After giving effect to such transactions as if they had
occurred at the beginning of the respective periods, the Company's pro forma
earnings for the three months ended March 31, 1996 and the year ended December
31, 1995 would have been insufficient to cover fixed charges by approximately
$17.9 million and $32.4 million, respectively.
The indebtedness expected to be incurred as a result of the Unit Offering
will have several important consequences to the holders of the Company's
securities, including, but not limited to, the following: (i) a substantial
portion of the Company's cash flow from operations will ultimately be required
to be dedicated to the payment of interest with respect to the Notes; (ii) the
Company's flexibility may be limited in responding to changes in the industry
and economic conditions generally; (iii) the Indenture relating to the Notes
(the "Indenture") will contain numerous financial and other restrictive
covenants, the failure to comply with which may result in an event of default,
which, if not cured or waived, could have a material adverse effect on the
Company; (iv) the ability of the Company to satisfy its obligations pursuant to
such indebtedness will be dependent upon its future performance which, in turn,
will be subject to management, financial, business and other factors affecting
the business and operations of the Company; (v) the Company's ability to obtain
any necessary financing in the future may be limited; (vi) the Company will be
more highly leveraged than many of its competitors, which may put it at a
competitive disadvantage and (vii) the Company's high leverage may make it more
vulnerable in the event of an economic downturn or if the Company's cash flow
does not significantly increase. Some of these factors are beyond the control of
the Company. See "Unaudited Pro Forma
17
<PAGE>
Condensed Financial Statements," "Selected Historical and Pro Forma Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." In addition, although the Indenture will limit the
ability of the Company and its subsidiaries to incur additional indebtedness,
the Indenture will permit the Company to incur substantial additional
indebtedness, which may or may not be secured, during the next few years to
finance the construction of networks, the purchase of equipment and the
introduction of new services. Additional indebtedness of the Company may rank
PARI PASSU in right of payment with the Notes in certain circumstances. See
"Description of Certain Indebtedness -- The Notes" and "-- Credit Facility." Any
such indebtedness may contain covenants that may limit the Company's flexibility
in responding to changes in industry and economic conditions generally. The debt
service requirements of any additional indebtedness could make it more difficult
for the Company to make principal and interest payments on the Notes and could
exacerbate any of the foregoing consequences.
There can be no assurance that the Company will be able to generate
sufficient cash flow to meet required interest and principal payments associated
with the Notes and its other indebtedness. If the Company is unable to generate
sufficient cash flow to meet its debt obligations, the Company may be required
to renegotiate the payment terms or to refinance all or a portion of its
indebtedness, to sell assets or to obtain additional financing. If the Company
is unable to refinance such indebtedness, substantially all of the Company's
long-term debt would be in default and could be declared immediately due and
payable. Furthermore, the Indenture contains numerous financial and operating
covenants, including, among others, covenants restricting the ability of the
Company and its subsidiaries to incur indebtedness or to create or suffer to
exist certain liens. In the event the Company fails to comply with these various
covenants, it could be in default under the Indenture. In the event of such
default, substantially all of the Company's long-term debt could be declared
immediately due and payable. See "Description of Certain Indebtedness -- The
Notes."
LEGAL AND TRADING RISKS
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Common Stock Offering, there has been no public market for the
Company's Common Stock. While the Common Stock has been approved for quotation
on the Nasdaq National Market, there can be no assurance that an active public
trading market will develop or be sustained after the Offerings or that the
initial public offering price will correspond to the price at which the Common
Stock will trade in the public market thereafter. The initial public offering
price will be determined solely by negotiations between the Company and the
Representatives. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company
believes that factors, such as (i) announcements of developments related to the
Company's business, (ii) announcements of new services by the Company or its
competitors, (iii) developments in the Company's relationships with its
suppliers or customers, (iv) fluctuations in the Company's results of
operations, (v) a shortfall in revenues or earnings compared to analysts'
expectations and changes in analysts' recommendations or projections, (vi) sales
of substantial amounts of securities of the Company into the marketplace, (vii)
regulatory developments affecting the telecommunications industry or 38 GHz
services or (viii) general conditions in the telecommunications industry or the
worldwide economy, could cause the price of the Common Stock to fluctuate,
perhaps substantially.
CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Upon consummation of the Offerings, the Company's executive officers,
directors and their affiliates, as a group, will beneficially own approximately
28.4% of the Company's outstanding Common Stock (27.6% if the Underwriters'
over-allotment option is exercised in full and 19.5% upon consummation of the
CommcoCCC Acquisition). In addition, upon completion of the CommcoCCC
Acquisition, Columbia Capital Corporation, as general partner of two of the
stockholders of CommcoCCC, and Commco, L.L.C., the remaining stockholder of
CommoCCC, will beneficially own approximately 16.3%
18
<PAGE>
and 14.2%, respectively of the Company's outstanding Common Stock (15.9% and
13.9% if the Underwriters' over-allotment option is exercised in full), and the
Company has agreed to nominate one individual designated by the CommcoCCC
stockholders and acceptable to the Company as a director of the Company after
the CommcoCCC Acquisition. As a result, these stockholders will have the ability
to exercise significant influence over the Company and the election of its
directors, the appointment of new management and the approval of any action
requiring the approval of the holders of the Company's voting stock, including
adopting certain amendments to the Company's Certificate of Incorporation and
approving mergers or sales of substantially all of the Company's assets. The
directors elected by these stockholders will have the authority to effect
decisions affecting the capital structure of the Company, including the issuance
of additional capital stock, the implementation of stock repurchase programs and
the declaration of dividends. See "Principal Stockholders."
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company has not paid and does not anticipate paying any cash dividends
on its Common Stock in the foreseeable future. The Company intends to retain its
earnings, if any, for use in the Company's growth and ongoing operations. In
addition, the terms of the Indenture will restrict the ability of the Company to
pay dividends on the Common Stock. See "Description of Certain Indebtedness --
The Notes."
ANTITAKEOVER PROVISIONS; POSSIBLE FUTURE ISSUANCES OF PREFERRED STOCK
The Company's Certificate of Incorporation and Bylaws and the provisions of
the Delaware General Corporation Law (the "Delaware GCL") contain certain
provisions which may have the effect of discouraging, delaying or making more
difficult a change in control of the Company or preventing the removal of
incumbent directors. The existence of these provisions may have a negative
impact on the price of the Common Stock, the Units, the Notes and the Warrants,
may discourage third party bidders from making a bid for the Company or may
reduce any premiums paid to stockholders for their Common Stock. Furthermore,
the Company is subject to Section 203 of the Delaware GCL, which could have the
effect of delaying or preventing a change in control of the Company. See
"Description of Capital Stock -- Change in Control Provisions."
The Company's Certificate of Incorporation also allows the Board of
Directors to issue up to 10,000,000 shares of Preferred Stock and to fix the
rights, privileges and preferences of such shares without any further vote or
action by the stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. While the Company has no
present intention to issue shares of Preferred Stock, any such issuance could be
used to discourage, delay or make more difficult a change in control of the
Company. See "Description of Capital Stock -- Preferred Stock."
DILUTION
Purchasers of shares of Common Stock in the Common Stock Offering will
experience immediate dilution of $7.19 in net tangible book value per share,
assuming an initial public offering price of $9.00 per share. To the extent
outstanding options and warrants (including the Warrants issued in the Unit
Offering) are exercised, there will be further dilution. Assuming the issuance
of 16,500,000 shares of Common Stock in connection with the CommcoCCC
Acquisition as of the date of this Prospectus, the purchasers of shares of
Common Stock in the Common Stock Offering will experience immediate dilution of
$8.73 in net tangible book value per share. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following the Offerings could adversely affect the market price of the Common
Stock. Upon consummation of the Offerings, the Company will have outstanding
37,586,498 shares of Common Stock, assuming no exercise of outstanding options,
warrants, rights or other convertible securities, 30,086,498 of which will be
subject to resale restrictions. Beginning 90 days after the date of this
Prospectus, approximately 10,013,055 of the restricted shares of Common Stock
will become available for sale in the public market
19
<PAGE>
pursuant to Rule 144 under the Securities Act, subject in certain cases to
volume and other resale limitations under Rule 144. All of the restricted shares
are subject to lock-up agreements with Montgomery Securities which expire 180
days after the date of this Prospectus or such earlier time as Montgomery
Securities may, in its sole discretion determine. See "Underwriting." The
balance of the outstanding restricted shares of Common Stock (20,073,443 shares)
will become available for sale in the public market under Rule 144 approximately
two years after the date of this Prospectus. Upon the closing of the CommcoCCC
Acquisition, 16,500,000 shares will be issued for the CommcoCCC Assets, which
shares will become available for sale in the public market under Rule 144 two
years after the date of consummation of the CommcoCCC Acquisition. Under a
proposal currently pending before the Securities and Exchange Commission (the
"Commission"), the date on which such shares of Common Stock will become
available for sale under Rule 144 may be accelerated to one year after the date
of this Prospectus (or one year after the date of the closing of the CommcoCCC
Acquisition in the case of the 16,500,000 shares issued for the CommcoCCC
Assets). Holders of 30,086,498 shares (46,586,498 shares upon consummation of
the CommcoCCC Acquisition) of Common Stock and warrants to purchase 1,475,000
shares of Common Stock have contractual rights to have those shares registered
with the Commission for resale to the public. See "Shares Eligible For Future
Sale."
20
<PAGE>
THE COMPANY
Advanced Radio Telecom Corp. provides wireless broadband telecommunications
services using point-to-point microwave transmissions in the 37.0 to 40.0
gigahertz portion of the radio spectrum ("38 GHz"). The Company is seeking to
address the growing demand for high speed, high capacity digital
telecommunications services on the part of business and government end users who
require cost effective, high bandwidth local access to voice, video, data and
Internet services. The Company's last mile services are a complement and a
viable alternative to fiber optic networks and offer rapidly deployable coverage
throughout the 89 markets in which the Company is currently authorized by the
FCC to provide services.
The business of the Company is comprised of (i) the business of Advanced
Radio Technologies Corporation ("ART" or the "Company"), a company organized by
Vernon L. Fotheringham and W. Theodore Pierson, Jr. in 1993 for the purpose of
acquiring 38 GHz licenses, and (ii) the business of Advanced Radio Telecom Corp.
("Telecom"), a corporation organized in Delaware in March 1995 under the name
Advanced Radio Technology, Ltd. for the purposes of acquiring additional 38 GHz
licenses and developing and operating the business of ART and Telecom on a joint
basis. In April 1995, ART entered into the ART West Joint Venture Agreement (as
defined) to apply for, acquire and develop 38 GHz operations in 13 states in the
western United States. In November 1995, the Company completed the EMI
Acquisition (as defined), pursuant to which it acquired thirty-two 38 GHz
licenses and certain related assets in the northeast United States. In July
1996, the Company entered into the CommcoCCC Agreement to acquire the CommcoCCC
Assets and other agreements to acquire authorizations it currently manages. Upon
completion of these pending acquisitions, the Company will own or manage a total
of 237 authorizations to provide 38 GHz wireless broadband services in 169 U.S.
markets. See "Risk Factors -- Risk of Non-Consummation of CommcoCCC
Acquisition," "Business -- Agreements Relating to Licenses and Authorizations --
ART West Joint Venture," "-- EMI Acquisition" and " -- CommcoCCC Acquisition."
To date, the business of the Company has been operated and managed
(including all FCC licenses and construction permits held by ART and Telecom)
pursuant to a services agreement. On June 26, 1996, ART and Telecom entered into
the Merger Agreement (as defined), pursuant to which a subsidiary of ART will
merge with and into Telecom. In June 1996, the FCC indicated that it will
approve the Merger. Upon completion of the Merger, Telecom will become a wholly
owned subsidiary of ART and change its name to "ART Licenses Corporation," and
ART will change its name to "Advanced Radio Telecom Corp." See "Business --
Proposed Merger" and "Certain Transactions -- Merger." Prior to completion of
the Merger, Telecom will manage the combined businesses of the Company in
accordance with the terms of the existing services agreement. See "Business --
Agreements Relating to Licenses and Authorizations -- ART Services Agreement."
DIGIWAVE, ART, OZ BOX and ADVANCED RADIO TELECOM are service marks of the
Company. The Company's principal executive offices are located at 500 108th
Avenue, N.E., Suite 2600, Bellevue, Washington 98004 and its telephone number is
(206) 688-8700.
21
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $231.0 million in the aggregate, giving effect to the sale by the
Company of 7,500,000 shares of Common Stock offered in the Common Stock
Offering, based on an assumed initial public offering price of $9.00 per share,
and the Units offered in the Unit Offering, assuming $175.0 million of gross
proceeds, and, in each case, after deducting the estimated underwriting discount
and offering expenses.
Of the net proceeds, approximately $100.0 million is expected to be used for
capital expenditures through December 31, 1997 and an additional $9.6 million
will be used for the acquisition of certain spectrum rights from ART West and
DCT. See "Business -- Agreements Relating to Licenses and Authorizations -- ART
West Joint Venture" and " -- DCT System Purchase Agreements." Approximately $8.0
million will be used for the repayment of indebtedness, consisting of the Bridge
Notes, which were issued on March 8, 1996 and which bear interest at 10% per
annum, and the CommcoCCC Notes, which were issued on June 27 and July 3, 1996
and which bear interest at the prime rate. See "Certain Transactions,"
"Description of Certain Indebtedness -- Bridge Notes" and "-- CommcoCCC
Financing." The expected amount of capital expenditures includes estimated
construction costs under service agreements with CommcoCCC, ART West, DCT and
Telecom One. See "Business -- Agreements Relating to Licenses and
Authorizations." Such amount also includes the cost to complete construction of
initial transmission facilities estimated at less than $5.0 million.
The remainder of the net proceeds will be used for general corporate
purposes, including the funding of operating cash flow shortfalls, technology
development and acquisitions of additional spectrum rights and, potentially,
related businesses. Although the Company considers potential acquisitions from
time to time, no agreement, agreement in principle, understanding or other
arrangement, other than the Extended Agreement (as defined), the DCT Agreements
(as defined), the Telecom One Agreements (as defined) and the CommcoCCC
Agreement, has been reached with respect to any acquisition. Although the
Company may fund research and development activities and acquire or invest in
related businesses from time to time, no material agreement, agreement in
principle, understanding or other arrangement, other than the letters of intent
with American Wireless (as defined), QuestTV (as defined) and Helioss (as
defined) has been entered into with respect to any such funding, acquisition or
investment. Management anticipates that, based on its current plan of
development and assuming that no material new acquisitions or investments are
consummated, the remaining net proceeds of the Offerings will be sufficient to
fund the operations of the Company for the next two years. See "Risk Factors --
Significant Capital Requirements; Uncertainty of Additional Financing."
DIVIDEND POLICY
The Company has not paid and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. The Company intends to retain its
earnings, if any, for use in the Company's growth and ongoing operations. In
addition, the terms of the Indenture will restrict the ability of the Company to
pay dividends on the Common Stock. See "Description of Certain Indebtedness --
The Notes."
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on a historical combined basis, giving effect to the elimination of
balances between ART and Telecom and the elimination of ART's investment in
Telecom and Telecom's investment in ART, (ii) on a pro forma basis, giving
effect to the Conversion, the Merger and certain other financing transactions
occurring subsequent to March 31, 1996 as specified in Note 1 hereto and (iii)
on a pro forma as adjusted basis, giving effect to (A) the sale by the Company
of 7,500,000 shares of Common Stock offered in the Common Stock Offering based
on an assumed initial public offering price of $9.00 per share and the Units
offered in the Unit Offering assuming $175.0 million of gross proceeds, and, in
each case, after deducting the estimated underwriting discount and offering
expenses, (B) the receipt and application of the net proceeds therefrom to repay
the Bridge Notes and the CommcoCCC Notes and to acquire certain spectrum rights
from ART West and DCT (see "Use of Proceeds") and (C) the issuance of 16,500,000
shares of Common Stock based upon an assumed value of $9.00 per share in
connection with the CommcoCCC Acquisition. The capitalization information set
forth in the table below is qualified by the more detailed information contained
in, and should be read in conjunction with, the audited financial statements of
ART and Telecom and the notes thereto, the unaudited interim condensed financial
statements of ART and Telecom and the notes thereto and the unaudited pro forma
condensed financial statements of the Company and the notes thereto, all
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------------------------------------
HISTORICAL PRO FORMA
COMBINED PRO FORMA (1) AS ADJUSTED
--------------- ------------------ ----------------
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 3,024,161 $ 8,244,161 $ 218,669,161
--------------- ------------------ ----------------
--------------- ------------------ ----------------
Short-term debt:
CommcoCCC Notes......................................... $ -- $ 2,975,000 $ --
--------------- ------------------ ----------------
--------------- ------------------ ----------------
Long-term debt:
Note payable to EMI..................................... $ 1,500,000 $ 1,500,000 $ 1,500,000
Bridge Notes............................................ 3,983,082 3,983,082 --
Equipment Note.......................................... -- 1,911,439 1,911,439
Senior Discount Notes offered concurrently (2).......... -- -- 159,800,000
--------------- ------------------ ----------------
Total long-term debt.................................. 5,483,082 7,394,521 163,211,439
--------------- ------------------ ----------------
Stockholders' equity:
Telecom convertible serial preferred stock (3).......... 921 -- --
Common Stock (4)........................................ 10,013 30,086 54,086
Telecom common stock (5)................................ 18,114 -- --
Additional paid-in capital.............................. 19,375,335 19,883,757 245,727,482
Deficit accumulated during the development stage........ (14,064,645) (14,064,645) (15,106,563)
--------------- ------------------ ----------------
Total stockholders' equity............................ 5,339,738 5,849,198 230,675,005
--------------- ------------------ ----------------
Total capitalization................................ $ 10,822,820 $ 13,243,719 $ 393,886,444
--------------- ------------------ ----------------
--------------- ------------------ ----------------
</TABLE>
- ------------------------
(1) Reflects pro forma adjustments for the following transactions as if they
had occurred as of March 31, 1996: (i) the receipt of $2.2 million in cash
proceeds from the issuance of the Equipment Note and Indemnity Warrants in
connection with the Equipment Financing, after deducting related expenses
of $225,000; (ii) the receipt of $3.0 million in cash proceeds from the
issuance of the CommcoCCC Notes and CommcoCCC Warrants in connection with
the CommcoCCC Financing; (iii) the Conversion and (iv) the Merger,
including the issuance of Common Stock to Telecom's stockholders and
cancellation of all outstanding Telecom common stock. See "Certain
Transactions."
(2) The Company anticipates gross proceeds from the Unit Offering of $175.0
million. The estimated value of the Warrants ($15.2 million) has been
reflected both as a debt discount and an element of additional paid-in
capital.
(3) Consists of Telecom convertible serial preferred stock, $.001 par value per
share: 10,000,000 shares authorized; historical combined -- 455,550 shares
of Series A, 114,679 shares of Series B, 7,363 shares of Series C, 61,640
shares of Series D, 232,826 shares of Series E and 48,893 shares of Series
F issued and outstanding; pro forma and pro forma as adjusted -- no shares
issued and outstanding.
(4) Consists of Common Stock, $.001 par value per share: 100,000,000 shares
authorized; historical combined -- 10,013,055 shares issued and
outstanding; pro forma -- 30,086,498 shares issued and outstanding; pro
forma as adjusted -- 54,086,498 issued and outstanding.
(5) Consists of Telecom common stock, $.001 par value per share: 60,000,000
shares authorized; historical combined -- 18,114,135 shares issued and
outstanding; pro forma and pro forma as adjusted -- no shares issued and
outstanding.
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<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was $5,673,585, or $0.19 per share of Common Stock, after giving effect to the
Equipment Financing, the Conversion, the CommcoCCC Financing, the Merger
(including the issuance of Common Stock to Telecom's stockholders and
cancellation of all Telecom common stock) and the issuance of the Units in the
Unit Offering and the use of the net proceeds therefrom for the repayment of
certain indebtedness and completion of certain pending acquisitions of spectrum
rights. "Pro forma net tangible book value per share" represents the amount of
the Company's total tangible assets comprised of cash and cash equivalents,
other current assets, net property and equipment, and equipment and other
deposits, less total liabilities (net of deferred finance costs) divided by the
pro forma number of shares of Common Stock outstanding. Without taking into
account any other changes in the net tangible book value after March 31, 1996,
other than to give effect to the receipt by the Company of net proceeds of
approximately $62.4 million from the sale of 7,500,000 shares of Common Stock
offered by the Common Stock Offering based on an assumed initial public offering
price of $9.00 per share, after deducting the estimated underwriting discount
and offering expenses, the pro forma net tangible book value of the Company as
of March 31, 1996 would have been approximately $68.0 million, or $1.81 per
share of Common Stock. This represents an immediate increase in pro forma net
tangible book value of $1.62 per share to existing stockholders and an immediate
dilution of $7.19 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $ 9.00
Pro forma net tangible book value per share as of March 31, 1996
before giving effect to the Common Stock Offering.............. $ 0.19
Increase in pro forma net tangible book value per share
attributable to new investors.................................. 1.62
---------
Pro forma net tangible book value per share as of March 31, 1996,
as adjusted for the Common Stock Offering........................ 1.81
---------
Dilution in pro forma net tangible book value per share to new
investors........................................................ $ 7.19
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1996, after giving effect to
the Offerings, the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company and the average price per share paid
by the existing stockholders and by new investors purchasing Common Stock in the
Common Stock Offering. In the Common Stock Offering, based on an assumed initial
public offering price of $9.00 per share before deducting the estimated
underwriting discount and offering expenses, the number of shares of Common
Stock purchased from the Company is 7,500,000, the total consideration paid to
the Company is $67,500,000, the average price per share paid by the existing
stockholders is $0.32 and the price per share paid by new investors is $9.00.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- --------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 30,086,498 80.0% $ 9,622,156 12.5% $ 0.32
New investors...................... 7,500,000 20.0 67,500,000 87.5 9.00
------------- --------- -------------- -----------
Total.......................... 37,586,498 100.0% $ 77,122,156 100.0%
------------- --------- -------------- -----------
------------- --------- -------------- -----------
</TABLE>
The foregoing computations do not give effect to the exercise of any of the
following as of March 31, 1996: (i) 877,136 shares of Common Stock subject to
the Ameritech Warrant; (ii) 1,100,000 shares of Common Stock subject to the
Bridge Warrants; (iii) 325,000 shares of Common Stock subject to the Indemnity
Warrants; (iv) 50,000 shares of Common Stock subject to the CommcoCCC Warrants;
(v) 1,664,732 shares of Common Stock subject to outstanding options under the
Equity Incentive Plan; and (vi) 28,000 shares of Common Stock anticipated to be
subject to outstanding options under the Directors Plan upon the date of the
Offerings. As of June 28, 1996, an additional 835,268 shares of Common Stock
were available for issuance under the Equity Incentive Plan and an additional
172,000 shares of Common Stock were available for issuance under the Directors
Plan. See "Certain Transactions" and "Management -- Stock Option Plans." The
computations also do not give effect to the issuance of 16,500,000 shares of
Common Stock in connection with the CommcoCCC Acquisition which, at an assumed
value of $9.00 per share, would result in a decrease in the pro forma net
tangible book value of $53.5 million or $1.54 per share. In addition, the above
does not give effect to the exercise of (i) the over-allotment option granted to
the Underwriters by the Company in the Common Stock Offering and (ii) the
Warrants. See "Underwriting." To the extent that any outstanding options or
warrants are exercised, there will be further dilution to new investors. See
"Risk Factors -- Dilution."
24
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
THE COMPANY -- HISTORICAL COMBINED AND PRO FORMA DATA
The unaudited selected historical combined and pro forma financial data
presented below as of and for the three months ended March 31, 1996 and for the
year ended December 31, 1995 and the unaudited historical combined financial
data presented below as of December 31, 1995 were derived from the unaudited pro
forma condensed financial statements of the Company included elsewhere in this
Prospectus. For definitions of certain terms and more information about the
transactions cited in the notes thereto, see "Certain Transactions."
The unaudited selected historical combined and pro forma financial data
should be read in conjunction with the audited financial statements of ART and
Telecom, and the notes thereto, the unaudited condensed interim financial
statements of ART and Telecom, and the notes thereto, and the unaudited pro
forma condensed financial statements of the Company, and the notes thereto,
included elsewhere in the Prospectus. The unaudited selected historical
combined, pro forma and pro forma as adjusted financial data are not necessarily
indicative of what the actual financial position and results of operations of
the Company would have been as of and for the three months ended March 31, 1996
and as of and for the year ended December 31, 1995, nor do they purport to
represent the Company's future financial position and results of operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 THREE MONTHS ENDED MARCH 31, 1996
--------------------------------------------- ---------------------------------------------
HISTORICAL PRO FORMA AS HISTORICAL PRO FORMA AS
COMBINED (1) PRO FORMA (2) ADJUSTED (3) COMBINED (1) PRO FORMA (2) ADJUSTED (3)
------------- ------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............... $ 5,793 $ 5,793 $ 5,793 $ 9,620 $ 9,620 $ 9,620
Non-cash compensation expense... 1,089,605 1,089,605 1,089,605 7,221,000 7,221,000 7,221,000
Depreciation and amortization... 15,684 15,684 5,418,452 89,279 89,279 1,439,971
Interest, net................... 121,986 1,974,275 23,931,008 151,145 528,739 5,989,300
Net loss........................ 3,234,843 5,087,132 30,609,692 10,694,588 11,092,182 17,444,199
Pro forma net loss per share of
Common Stock (4)............... -- $ 0.16 $ 0.55 -- $ 0.35 $ 0.31
Pro forma weighted average
number of shares of Common
Stock outstanding (4).......... -- 31,651,605 55,651,605 -- 31,651,605 55,651,605
OTHER FINANCIAL DATA:
EBITDA (5)...................... $ (1,936,141 ) $ (1,936,141 ) $ (1,936,141 ) $ (2,156,893 ) $ (2,156,893 ) $ (2,156,893 )
Capital expenditures............ 3,585,144 3,585,144 3,585,144 2,861,241 2,861,241 2,861,241
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1995 AS OF MARCH 31, 1996
------------- --------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA AS
COMBINED (1) COMBINED (1) PRO FORMA (2) ADJUSTED (3)
------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital surplus (deficit)............ $(3,008,510) $(1,128,130) $ 1,116,870 $ 214,516,870
Property and equipment, net.................. 3,581,561 6,380,895 6,380,895 6,380,895
FCC licenses................................. 4,235,734 4,235,734 4,235,734 216,110,734
Total assets................................. 9,876,559 15,036,337 20,432,236 448,589,961
Short-term debt.............................. -- -- 2,975,000 --
Long-term debt, including current portion.... 6,450,000 5,483,082 7,394,521 163,211,439
Deficit accumulated during the development
stage....................................... (3,370,057) (14,064,645) (14,064,645) (15,106,563)
Total stockholders' equity (deficit)......... (312,860) 5,339,738 5,849,198 230,675,005
</TABLE>
25
<PAGE>
ART -- HISTORICAL FINANCIAL DATA
The selected historical financial data of ART below as of and for the years
ended December 31, 1995 and 1994, and for the period from August 23, 1993 (date
of inception) to December 31, 1993 were derived from and should be read in
conjunction with the audited financial statements of ART and the related notes
thereto included elsewhere in this Prospectus. The selected financial data of
ART below as of March 31, 1996 and for the three months ended March 31, 1996 and
1995 were derived from and should be read in conjunction with the unaudited
condensed interim financial statements of ART and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AUGUST 23, 1993
(DATE OF INCEPTION) YEAR ENDED THREE MONTHS ENDED
TO -------------------------------------- --------------------------------
DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1995 MARCH 31, 1996
------------------- ------------------ ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenue......... $ -- $ 137,489 $ -- $ -- $ --
Depreciation and
amortization............. 688 8,281 10,378 -- 2,595
Net loss.................. $ 6,594 $ 128,620 $ 1,267,655 $ 41,753 $ 3,654,775
Pro forma net loss per
share of Common Stock
(4)...................... -- -- $ 0.04 -- $ 0.12
Pro forma weighted average
number of shares of
Common Stock outstanding
(4)...................... -- -- 31,651,605 -- 31,651,605
OTHER FINANCIAL DATA:
Capital expenditures...... $ -- $ 5,175 $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------------------------------------- ---------------
1993 1994 1995 1996
------------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital surplus (deficit)......... $ 13,958 $ (76,556) $ (976,563) $ (494,630)
Property and equipment, net............... -- 3,448 1,723 1,292
FCC licenses.............................. -- -- 8,913 8,913
Total assets.............................. 74,513 42,611 5,784,624 3,281,788
Long-term debt, including current
portion.................................. -- -- 4,950,000 --
Redeemable Preferred Stock................ -- -- 44,930 44,930
Deficit accumulated during the development
stage.................................... (6,594) (135,214) (1,402,869) (5,057,644)
Total stockholders' equity (deficit)...... 54,542 (39,078) (404,481) 2,736,258
</TABLE>
26
<PAGE>
TELECOM -- HISTORICAL FINANCIAL DATA
The selected historical financial data of Telecom below as of December 31,
1995 and for the period from March 28, 1995 (date of inception) to December 31,
1995 were derived from and should be read in conjunction with the audited
financial statements of Telecom and the related notes thereto included elsewhere
in this Prospectus. The selected financial data of Telecom below as of and for
the three months ended March 31, 1996 were derived from and should be read in
conjunction with the unaudited condensed interim financial statements of Telecom
and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 28, 1995
(DATE OF
INCEPTION) THREE MONTHS
TO ENDED
DECEMBER 31, 1995 MARCH 31, 1996
------------------ ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue............................................................ $ 5,793 $ 9,620
Non-cash compensation expense................................................ 1,089,605 7,221,000
Depreciation and amortization................................................ 5,306 86,684
Net loss..................................................................... $ 2,981,073 $ 10,666,383
OTHER FINANCIAL DATA:
Capital expenditures......................................................... $ 3,585,144 $ 2,861,241
<CAPTION>
AS OF AS OF
DECEMBER 31, MARCH 31,
1995 1996
------------------ ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital surplus (deficit)............................................ $ (2,031,947) $ (633,500)
Property and equipment, net.................................................. 3,579,838 6,379,603
FCC licenses................................................................. 4,226,821 4,226,821
Total assets................................................................. 9,830,615 15,254,980
Long-term debt............................................................... 6,500,000 5,483,082
Deficit accumulated during the development stage............................. (2,981,073) (13,647,456)
Total stockholders' equity (deficit)......................................... (119,922) 5,560,881
</TABLE>
- ------------------------------
(1) The unaudited selected financial data under the caption "Historical
Combined" are presented as if the historical financial statements of ART
and Telecom had been combined and reflect (i) the elimination of
transactions and balances between ART and Telecom and (ii) the elimination
of ART's investment in Telecom and Telecom's investment in ART.
(2) The unaudited selected financial data under the caption "Pro Forma" are
presented as if the following transactions had occurred as of the beginning
of the respective periods for the Statement of Operations Data and Other
Financial Data and as of the balance sheet date for the Balance Sheet Data:
(i) the March 8, 1996 issuance of the Bridge Notes in connection with the
Bridge Financing; (ii) the receipt of $2.2 million in cash proceeds from
the issuance of the Equipment Note and Indemnity Warrants in connection
with the Equipment Financing, after deducting related fees and expenses of
$225,000; (iii) the receipt of $3.0 million in cash proceeds from the
issuance of the CommcoCCC Notes and CommcoCCC Warrants in connection with
the CommcoCCC Financing; (iv) the Conversion and (v) the Merger, including
the issuance of ART Common Stock to Telecom stockholders and the
cancellation of all outstanding Telecom common stock. See "Certain
Transactions."
(3) The unaudited selected financial data under the caption "Pro Forma As
Adjusted" are presented as if the transactions referred to in (2) above and
the following transactions had occurred as of the beginning of the
respective periods for the Statement of Operations Data and Other Financial
Data and as of the balance sheet date for the Balance Sheet Data: (i) the
sale by the Company of 7,500,000 shares of Common Stock offered in the
Common Stock Offering based on an assumed initial public offering price of
$9.00 per share and the Units offered in the Unit Offering assuming $175.0
million of gross proceeds, and, in each case, after deducting the estimated
underwriting discount and offering expenses; (ii) the receipt and
application of the net proceeds therefrom to repay the Bridge Notes and the
CommcoCCC Notes and to acquire the 50% ownership interest of ART West held
by Extended for $6.0 million in cash and the DCT Assets for $3.6 million in
cash and (iii) the issuance of 16,500,000 shares of Common Stock based upon
an assumed value of $9.00 per share in connection with the CommcoCCC
Acquisition. See "Use of Proceeds."
(4) Pro forma net loss per share is computed based on the loss for the period
divided by the weighted average number of shares of Common Stock
outstanding during the period including the Conversion, the Merger and the
issuance of potentially dilutive instruments issued within one year prior
to the Offerings at exercise prices below the assumed initial public
offering price of $9.00 per share. In measuring the dilutive effect, the
treasury stock method was used.
(5) EBITDA means loss before interest expense, income tax expense, depreciation
and amortization expense, non-cash compensation expense and non-cash market
development expense. Information with respect to EBITDA is included herein
because a similar measure will be used in the Indenture with respect to the
computation of certain covenants. EBITDA is not intended to represent cash
flows from operating activities, as determined in accordance with generally
accepted accounting principles, nor has it been presented as an alternative
to operating income as an indicator of operating performance and should not
be considered as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company provides wireless broadband telecommunications services using
point-to-point microwave transmissions in the 38 GHz portion of the radio
spectrum. The Company is seeking to address the growing demand for high speed,
high capacity digital telecommunications services on the part of business and
government end users who require cost effective, high bandwidth local access to
voice, video, data and Internet services.
To facilitate a meaningful comparison, the following discussion and analysis
is based on the historical combined financial information of Advanced Radio
Technologies Corporation ("ART") and Advanced Radio Telecom Corp. ("Telecom") as
of all dates and for all periods ending after March 28, 1995, the date of
Telecom's inception, and the historical financial statements of ART as of all
dates and for all the periods ended prior to March 28, 1995. All of the above
financial statements appear elsewhere in this Prospectus. The historical
combined financial statements include the elimination of transactions and
balances between the two entities as well as ART's investment in Telecom and
Telecom's investment in ART.
The following discussion includes certain forward-looking statements. For a
discussion of important factors, including, but not limited to, continued
development of the Company's business, actions of regulatory authorities and
competitors, and other factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."
OVERVIEW
The Company's business commenced in 1993, and the Company has generated only
nominal revenues from operations to date. The Company's primary activities have
focused on the acquisition of wireless construction permits (authorizations for
facilities that are not constructed) and licenses (authorizations for facilities
that are constructed), the hiring of management and other key personnel, the
raising of capital, the acquisition of equipment and the development of its
operating and support systems and infrastructure. The Company has obtained radio
spectrum rights under FCC issued licenses and construction permits throughout
the United States by applying to the FCC directly and through the purchase of
such rights held by others. The Company's ability to provide commercial services
on a widespread basis and to generate positive operating cash flow will depend
on its ability, among other things, to (i) deploy its 38 GHz technology on a
market-by-market basis, (ii) attract and retain an adequate customer base, (iii)
successfully develop and deploy its operational and support systems and (iv)
acquire appropriate sites for its operations. Proper management of the Company's
anticipated growth and quality of its service will require the Company to expand
its technical, accounting and internal management systems at a pace consistent
with the Company's planned business roll-out. This roll-out will require
substantial capital expenditures. See "Liquidity and Capital Resources" and
"Risk Factors."
The Company has experienced significant operating and net losses and
negative operating cash flow in connection with the development and deployment
of its wireless broadband services and systems and expects to continue to
experience net losses and negative operating cash flow until such time as it
develops a revenue-generating customer base sufficient to fund operating
expenses attributable to the Company's wireless broadband operations. See "Risk
Factors." The Company expects to achieve positive operating margins over time by
(i) increasing the number of revenue generating customers and responding to
growing demand for capacity among its customers without significantly increasing
related hardware and roof rights costs and (ii) inducing other
telecommunications service providers to utilize and market the Company's
wireless broadband services as part of their own services, thereby reducing the
Company's related marketing costs. The Company anticipates that operating
revenues will increase in 1996; however, the Company also expects that net
losses and negative operating cash flow will increase as the Company implements
its growth strategy and that, under its current business plan,
28
<PAGE>
net losses and negative operating cash flow will continue for at least the next
several years. Accordingly, the Company will be dependent on various financing
sources to fund its growth as well as continued losses from operations. See
"Liquidity and Capital Resources."
ACQUISITIONS, BUSINESS DEVELOPMENT AND CAPITAL EXPENDITURES
From inception through March 31, 1996, the Company has invested an aggregate
of $4.2 million to obtain interests in FCC authorizations and licenses,
including those acquired from EMI, and invested $285,000 in the ART West Joint
Venture. From inception, expenditures for property and equipment have totalled
$6.5 million. In addition, the Company has incurred significant other costs and
expenses in the development of its business and has recorded cumulative losses
from inception through March 31, 1996 of approximately $14.1 million, including
$9.4 million of non-cash compensation and marketing expenses, and used cash in
operating activities of approximately $3.1 million. The Company has agreed to
acquire, subject to FCC approval and other conditions, additional FCC
authorizations and licenses for an aggregate purchase price of $9.6 million in
cash and 16.5 million shares of the Company's Common Stock. The Company may,
when and if the opportunity arises, acquire other spectrum rights and,
potentially, related businesses, incur expenses in the development of new
technologies and expand its wireless broadband services into new market areas.
The recoverability of property and equipment and intangible assets
representing FCC authorizations is dependent upon the successful development of
systems in each of the respective markets, or through sale of such assets.
Management estimates that it will recover the carrying amounts of those assets
from cash flow generated by the systems once they have been developed. However,
it is possible that such estimate will change as a result of any failure by the
Company to develop its FCC authorizations on a timely basis, or technological,
regulatory or other changes.
The Company is exploring the possibilities of providing its wireless
broadband services in other countries including Canada and in Europe. The
Company has entered into agreements with certain consultants and potential
partners to identify foreign opportunities and expects to file application for
licenses or to acquire 38 GHz licenses in several European countries. There can
be no assurance that the Company can acquire such licenses or develop and
operate such systems.
The Company entered into a management consulting agreement in November 1995
with Landover Holdings Corporation ("LHC") to provide strategic planning,
corporate development and general management services. Under the agreement,
which terminates on the date of this Prospectus, the Company pays LHC $35,000
per month for an initial one year term. In 1995 the Company paid $140,000 to LHC
for consulting services and $391,750 for expenses in connection with the $7.0
million investment made under the LHC Purchase Agreement. See "Certain
Transactions."
RESULTS OF OPERATIONS
The Company has generated nominal revenue from operations to date. From
inception through March 31, 1996, the Company has incurred aggregate expenses of
approximately $14.2 million, including $9.4 million of non-cash compensation and
marketing expenses. The remaining expenses consist of compensation and benefits,
sales and marketing expenses, consulting and legal fees, facilities expenses,
systems development costs, management consulting expenses and net interest
expenses related to building the Company's business infrastructure and marketing
its wireless broadband services. The Company expects to generate increased
revenues beginning in 1996; however, there can be no assurance that this
objective will be achieved. The Company expects that it will not achieve
profitable operations at least through fiscal 1998. See "Risk Factors -- Limited
Operations; History of Net Losses."
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO MARCH 31, 1995
Revenue for the three months ended March 31, 1996 was $9,620 compared to no
revenue in 1995. The increase in revenues was due to operating revenues earned
from wireless broadband telecommunications services provided by the Company.
29
<PAGE>
Operating expenses other than interest were $10.6 million for the three
months ended March 31, 1996 compared to $40,878 in 1995. The increase was
primarily due to $7.2 million of non-cash compensation expense, including $6.8
million arising from the termination of the Escrow Share Arrangement (as
defined) and subsequent release of shares to certain employees in connection
with the February 1996 Reorganization (as defined), as well as higher general
and administrative, increased market development, and research and development
expenses. See "Certain Transactions." Excluding the non-cash compensation
expense, general and administrative expenses increased primarily due to higher
payroll and consulting costs relating to the ramp-up in operations of the
Company. Market development expenses increased primarily due to a non-cash
marketing expense of $1.1 million related to the Ameritech Strategic
Distribution Agreement. Research and development costs were incurred as the
Company initiated its research and development of microwave radio technology.
The Company expects cash expenses for general and administrative, marketing and
research and development to increase substantially in future periods as the
development and deployment of the Company's business continues.
Interest expense was $174,416 for the three months ended March 31, 1996
compared to $875 in 1995. The increase in interest expense was primarily due to
interest on the EMI Note and the Bridge Notes. Interest expense in the second
quarter of 1996 will increase primarily due to a full quarter of interest
expense on the Bridge Notes and also due to the Equipment Note executed in April
1996, and the issuance of the Notes will cause interest expense to increase
substantially in future periods. The write-off of unamortized offering discount
and deferred finance costs associated with the Bridge Notes is expected to
result in a non-cash extraordinary loss of approximately $1.0 million upon
repayment at the closing of the Offerings.
FISCAL 1995 COMPARED TO FISCAL 1994
ART was formed in 1993, and, accordingly, the Company's historical financial
statements for 1994 reflect ART's activities in applying for 38 GHz licenses and
building operating systems.
The Company had $137,489 in consulting services income for engineering and
management services related to filing of applications for 38 GHz licenses on
behalf of others, including Extended, in 1994 and $5,793 in operating revenue in
1995 derived from customers for wireless broadband services attributable to the
markets for which licenses were acquired from EMI in November 1995. See
"Business -- Agreements Relating to Licenses and Authorizations -- EMI
Acquisition."
Total expenses other than interest increased from $261,734 in 1994 to $3.1
million in 1995 due to the expansion of the business and the recognition of
non-cash compensation expenses associated with employee stock options of
$287,603 and certain Escrow Shares (as defined) of $802,002 associated with the
release to certain employees of the Company as a result of meeting certain
performance objectives for an aggregate of $1.1 million of non-cash compensation
expenses. See "Certain Transactions -- LHC Purchase Agreement -- February 1996
Reorganization." General and administrative expenses, including these non-cash
compensation expenses, increased to $2.9 million for fiscal 1995, from $253,453
for 1994. Market development expenses increased to $191,693 in 1995 from $0 in
1994. Net interest expenses increased to $121,986 in 1995 from $4,375 in 1994.
As a result, the net loss for 1995 was $3.2 million, as compared to a net loss
of $128,620 in 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
The Company had $137,489 in consulting services income in 1994 compared to
no revenue in 1993. The increase in 1994 was primarily due to consulting
services related to 38 GHz license applications.
Total expenses other than interest expense increased to $261,734 in 1994
from $6,594 in 1993. The increases were due primarily to consulting and legal
fees related to the initial operations of the Company.
30
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have required substantial capital investment for
the acquisition of FCC authorizations and related assets, the purchase of
telecommunications equipment, staffing, and the development and expansion of the
Company's infrastructure to support anticipated growth. From inception through
March 31, 1996, the Company used $3.1 million of cash in its operating
activities and $7.3 million of cash in its investing activities. These cash
outflows were financed primarily through private equity and debt placements,
including the issuance of convertible notes payable to the Advent Partnerships
which were converted into equity in February 1996. At December 31, 1995 the
Company had a working capital deficit of $3.0 million and cash of $633,654, as
compared to a working capital deficit of $76,556 and cash of $5,133 at December
31, 1994. The Company had a working capital deficit of $1.1 million and cash of
$3.0 million at March 31, 1996. Subsequent to March 31, 1996, the Company raised
$2.2 million in cash (net of expenses) from the Equipment Financing and $3.0
million in cash from the CommcoCCC Financing. See "Certain Transactions."
The Company's total assets increased from $42,611 as of December 31, 1994 to
$9.9 million at December 31, 1995 and $15.0 million at March 31, 1996. Property
and equipment, net of accumulated depreciation, comprised $3.6 million of total
assets at December 31, 1995 and $6.4 million at March 31, 1996. FCC licenses and
the investment in the ART West Joint Venture increased to $4.5 million at
December 31, 1995 and March 31, 1996, as compared to $0.0 at December 31, 1994.
Cash used in operating activities increased by $1.4 million to $1.5 million
in 1995 over 1994. The increase in cash used in operating activities resulted
primarily from the increase in net loss to $3.2 million, partially offset by
non-cash compensation expenses of $1.1 million and increased payables in 1995.
Cash used in investing activities increased by $4.2 million in 1995 compared
to minimal amounts in 1994. The increase was primarily due to $3.0 million paid
for the EMI acquisition, and approximately $900,000 used for property and
equipment additions in 1995.
Cash provided by financing activities increased by $6.2 million in 1995 over
1994. The increase was primarily due to the issuances of the Advent/ART
Securities of $5.0 million and of Telecom serial preferred stock, net of
redemptions of $2.0 million issued in 1995, partially offset by the use of cash
for stock and debt issuance costs.
Capital expenditures, including deposits on equipment for fiscal 1995 and
1994, were $3.9 million and $5,175, respectively. The Company currently
purchases the majority of its wireless transmission equipment from a single
vendor, P-Com, Inc., under an equipment purchase agreement which expires at the
end of 1998. The Company is committed to purchase a total of $13.3 million of
equipment under this agreement. The Company has also entered into an equipment
purchase agreement, expiring in 1997, with Harris, providing for the purchase of
wireless transmission equipment.
Cash used in operating activities increased to $1.5 million for the three
months ended March 31, 1996 compared to $49,212 for the three months ended March
31, 1995. The increase was primarily due to higher operating costs. Cash used in
investing activities was approximately $3.1 million for the three months ended
March 31, 1996 compared to $0.0 for the three months ended March 31, 1995. The
increase was due to additions to property and equipment. Cash provided by
financing activities increased to $6.9 million in the three months ended March
31, 1996 compared to $44,334 for the three months ended March 31, 1995. The
increase was primarily due to the private equity placement with Ameritech and
the Bridge Notes.
The Company does not currently manufacture, nor does it have or plan to
develop the capability to manufacture, any of the wireless transmission
equipment necessary to provide its services. Although there are a limited number
of manufacturers who have, or are developing, equipment that would meet the
Company's requirements, there can be no assurance that such equipment would be
available to the
31
<PAGE>
Company on comparable terms or on terms more favorable than those included in
its current arrangements in the event that such arrangements are terminated.
Moreover, a change in vendors could cause a delay in the Company's ability to
provide its services, which would affect future operating results adversely.
The Company has entered into an agreement with American Wireless to fund
$700,000 to $1.0 million of research and development costs related to wireless
transmission equipment. Vernon L. Fotheringham, the Chairman of the Company, is
a director and a 6% shareholder of American Wireless. The Company will receive a
first right of refusal on production capacity and a license fee in exchange for
its funding. The Company has also entered into a letter of intent with Helioss
Communications Corporation ("Helioss") for the development of advanced 38 GHz
radios. Under the letter of intent, which is subject to definitive
documentation, the Company will fund up to $1.0 million of Helioss' research and
development expenses. The Company will have a right of first refusal on
production capacity of the radios and will receive a royalty on the sale of a
certain number of radios to customers other than the Company. The Company has
also entered into a letter of intent to invest $1.5 million in QuestTV (as
defined), a provider of video and data transmission and storage services. See
"Certain Transactions -- American Wireless Development Agreement" and "--
QuestTV Investment." Although the Company does not have any other material
commitments to fund research and development, it expects to incur additional
expenses for research and development.
The Company currently expects that its capital expenditures (excluding the
acquisition of certain spectrum rights) will aggregate approximately $100.0
million through December 31, 1997. The Company currently expects capital
expenditures through December 31, 1997 to consist of approximately $65.0 million
for wireless transmission equipment, approximately $20.0 million for network
design and development and related equipment and approximately $15.0 million for
computer equipment and other related capital. Included in these amounts are the
costs of initial construction of all owned and managed authorizations, estimated
to be less than $5.0 million, including wireless transmission equipment. The
Company expects that capital expenditures for wireless transmission equipment
will be largely variable with market demand, increasing over the remainder of
1996 and the next several years as demand for the Company's 38 GHz services
increases in the targeted geographic markets and industry segments. In addition,
the Company has agreed to acquire authorizations and licenses for $9.6 million
from DCT and ART West. The Company has entered into an agreement to acquire 129
38 GHz authorizations from CommcoCCC in exchange for 16,500,000 shares of Common
Stock. CommcoCCC has entered into a management agreement with the Company under
which the Company will construct, manage and operate the authorizations to be
acquired pending consummation of the CommcoCCC Acquisition. If the Company does
not consummate the CommcoCCC Acquisition, the Company expects that approximately
25% of its expected capital expenditures through 1997 would be deferred until
later years and incurred in the Company's other markets. See "Business --
Agreements Relating to Licenses and Authorizations -- CommcoCCC Acquisition."
The Company is obliged to pay all costs and expenses of construction,
operation and management of the authorizations managed by the Company. The
Company is also obligated under the terms of the service agreements covering
such authorizations to pay fees to the current holders of those authorizations
approximating 10% to 15% of the revenue generated from such assets. See
"Business -- Agreements Relating to Licenses and Authorizations."
The Company expects that it will continue to have substantial capital
requirements in connection with (i) the acquisition of appropriate sites for its
operations, (ii) deployment of its 38 GHz technology on a market-by-market
basis, (iii) capturing and retaining an adequate revenue generating customer
base and (iv) developing and deploying its operational and support systems. The
Company believes it has an opportunity to expand its wireless broadband services
business significantly and that access to capital will enable it to expand more
quickly and effectively.
The Company has incurred significant operating and net losses and negative
operating cash flow attributable to the development of its wireless broadband
services and anticipates that such losses and
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negative operating cash flow will increase as the Company implements its growth
strategy. Accordingly, the Company will be dependent on additional capital to
fund its growth, as well as to fund continued losses from operations.
Management anticipates that, based on current plans of development, assuming
that no new material acquisitions (other than those currently under contract)
are consummated, the net proceeds of the Offerings after the use of $8.0 million
to repay existing indebtedness and $9.6 million to complete pending
acquisitions, and the proceeds of the Credit Facility (as defined), if
consummated, will be sufficient to fund the operations of the Company for at
least the next two years. See "Description of Certain Indebtedness." Management
believes that the Company's future capital needs will continue to be significant
and that thereafter it will be necessary for the Company to seek additional
sources of financing. In addition, if (i) the Company's plan of development or
projections change or prove to be inaccurate, (ii) the proceeds of the
Offerings, together with other existing financial resources, prove to be
insufficient to fund the Company for at least the next two years, (iii) the
Company fails to consummate the Credit Facility or (iv) the Company completes
any material acquisitions, other than those now under contract or buys spectrum
at auction, the Company may be required to seek additional financing sooner than
currently anticipated. There can be no assurance that the Company will be able
to obtain any additional financing, or, if such financing is available, that the
Company will be able to obtain it on acceptable terms. In the event that the
Company fails to obtain additional financing, such failure could result in the
modification, delay or abandonment of some or all of the Company's development
and expansion plans. Any such modification, delay or abandonment is likely to
have a material adverse effect on the Company's business, which could adversely
affect the value of the Common Stock, the Notes and the Warrants and may limit
the Company's ability to make principal and interest payments on its
indebtedness.
NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." This Statement encourages, but does not require, accounting for
stock compensation awards granted to employees based on their fair value at the
date the awards are granted. Companies may elect to continue to apply current
accounting requirements for employee stock compensation awards, which generally
will result in no compensation cost for most fixed stock option plans, such as
the Company's Equity Incentive Plan. The expense measurement provisions of the
Statement apply to all equity instruments issued for goods and services provided
by persons other than employees. All companies are required to comply with the
disclosure requirements of the Statement. The Company expects to continue
accounting for employee stock compensation awards using current accounting
requirements.
INFLATION
Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy.
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BUSINESS
Advanced Radio Telecom Corp. ("ART" or the "Company") provides wireless
broadband telecommunications services using point-to-point microwave
transmissions in the 37.0 to 40.0 gigahertz portion of the radio spectrum ("38
GHz"). The Company is seeking to address the growing demand for high speed, high
capacity digital telecommunications services on the part of business and
government end users who require cost effective, high bandwidth local access to
voice, video, data and Internet services. Upon completion of its pending
acquisition of 129 38 GHz wireless broadband authorizations (the "CommcoCCC
Assets") from CommcoCCC, Inc. ("CommcoCCC"), the Company will own or manage a
total of 237 authorizations granted by the Federal Communications Commission
("FCC") covering an aggregate population of approximately 143 million in 169
U.S. markets.
TELECOMMUNICATIONS INDUSTRY OVERVIEW
The current telecommunications landscape is being reshaped by the
convergence of three major trends: (i) the accelerating growth in demand for
high speed, high capacity digital telecommunications services, (ii) the
deregulation of telecommunications markets and (iii) the rapid advances in
wireless technologies. The growth in demand for high speed digital
telecommunications services is being driven by the revolution in microprocessor
power and advances in new multimedia and on-line applications such as the
Internet. The ability to access and distribute information quickly has become
critical to business and government users of telecommunications services. The
proliferation of local area networks ("LANs"), rapid growth of Internet
services, rising demand for video teleconferencing and other demand factors are
significantly increasing the volume of broadband telecommunications traffic. The
inability of the existing infrastructure to meet this demand is creating a "last
mile" bottleneck in the copper wire networks of the incumbent local exchange
carriers ("LECs"). This increasing demand, together with changes in the
regulatory environment, are creating an opportunity to offer cost effective,
high capacity last mile access using both wireline and wireless solutions.
The present structure of the U.S. telecommunications industry was shaped
principally by the 1984 court-directed divestiture of the Bell System (the
"Divestiture"). As part of the Divestiture, seven Regional Bell Operating
Companies ("RBOCs") were created and separated from the long distance service
provider, AT&T, resulting in two distinct telecommunications industries: local
exchange and inter-exchange (commonly known as long distance). Local exchange
services typically involve the carriage of telecommunications within FCC-defined
local access and transport areas ("LATAs"), and the provision of access, or
connections, between LECs and inter-exchange carriers ("IXCs") for the
completion of long distance calls.
Since the Divestiture, the local exchange segment of the telecommunications
market has remained the domain of LECs. Recently, however, regulatory policy has
shifted away from monopoly protection of the LECs. U.S. court decisions, FCC
actions and most recently the Telecommunications Act have dramatically changed
the regulatory environment. These changes have permitted increased competition
in the local exchange market and created opportunities for new companies, such
as competitive access providers ("CAPs").
Beginning in the late 1980s, CAPs emerged to compete with LECs by providing
dedicated private line transmission and access services. CAP networks typically
consist of fiber optic facilities connecting IXC points of presence ("POPs")
with customer locations and LEC switches within a limited metropolitan area.
Initially, demand for alternative local access was driven by access charges of
approximately 40% to 45% of the cost of a long distance call levied by LECs on
the IXCs. In addition to providing lower access charges, CAP fiber optic
services, where available, have generally been considered to provide superior
quality and higher capacity services than those available from LECs' legacy
copper wire networks. A leading research company estimates that in 1994 CAPs
captured approximately $1.3 billion, or 1.3%, of the $97.1 billion in revenues
generated by the local exchange market. Such research company also projects
that, as a result of increased competition and the growth of enhanced services,
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CAPs' revenues will grow in excess of 150% per year over the next two years. In
addition to CAPs, a wide range of alternative access providers, including cable
television operators, wireless local loop service providers and others, are
expected to emerge.
Continued growth in the quality and number of competitors in the local
telecommunications market will be driven principally by (i) the growing interest
among business customers for an alternative to the LEC networks in order to
obtain higher capacity and better pricing, (ii) the increases in data
applications and capacity requirements for local and wide area network
connections, high speed Internet access and videoconferencing, (iii) the LECs'
inability to upgrade their copper networks quickly, (iv) the preference of
competing telecommunications providers to control the points of connection to
their customers and prevent LECs from obtaining confidential marketing
information and (v) new state and federal legislation mandating interconnection
and competition in the local exchange market.
Wireless broadband telecommunications services are developing rapidly to
handle these growing needs for alternative access. In particular, the successful
deployment of 38 GHz links by European cellular service providers and recent
advances in 38 GHz technology, coupled with metropolitan-wide footprint
licensing, has enabled the provision of greater capacity and reliability at a
lower cost per customer than traditional copper wire networks. Furthermore, 38
GHz facilities can be installed, deinstalled and reinstalled elsewhere with
minimal time and cost compared to both fiber optic and copper wire facilities.
38 GHZ TECHNOLOGY
The FCC has allocated fourteen 100 MHz channels between 38.6 GHz and 40.0
GHz for wireless broadband transmissions and has allocated the 37.0 - 38.5 GHz
band to wireless broadband transmissions (the 37.0 - 38.5 GHz band and the 38.6
- -40.0 GHz band are collectively referred to as "38 GHz"), which enable the
licensee to provide point-to-point services within a specified geographic
footprint usually of up to a 50-mile radius.
38 GHz technology was first widely deployed in Europe by cellular telephone
service providers for the interconnection of cell sites with switches. In the
early 1990s, technological advances resulted in a substantial reduction in the
cost and size of millimetric microwave components with a simultaneous increase
in reliability and quality, allowing for the provision of wireless broadband
telecommunication links at competitive prices. By 1993, advances in 38 GHz
technology, combined with its growing use in Europe and Central America, led to
increasing awareness of and interest in the potential uses of 38 GHz in the
United States. EMI Communications Corporation ("EMI") (whose licenses,
authorizations and related assets ART purchased in November 1995) was one of the
first companies to undertake commercial exploitation of 38 GHz services on a
regional basis.
The 38 GHz band provides for the following additional advantages as compared
to other spectrum bands and wireline alternatives:
- HIGHER DATA TRANSFER RATES. The total amount of bandwidth for each 38 GHz
channel is 100 MHz, which exceeds the bandwidth of any other present
terrestrial wireless channel allotment and supports full broadband
capability. For example, one 38 GHz DS-3 link at 45 megabits per second
("Mbps") today can transfer data at a rate which is over 1,500 times the
rate of the fastest dial-up modem currently in use (28.8 Kbps) and over
350 times the rate of the fastest integrated services digital network
("ISDN") line currently in use (128 Kbps). In addition to accommodating
standard voice and data requirements, 45 Mbps data transmission rates
allow end users to receive real time full motion video and 3-D graphics at
their workstations and to utilize highly interactive applications on the
Internet and other networks.
- SIGNIFICANT CHANNEL CAPACITY. Because 38 GHz radio emissions have a
narrow beam width, a relatively short range and in most instances the
capability to intersect without creating interference, 38 GHz service
providers can efficiently reuse their bandwidth within a licensed area,
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thereby increasing the number of customers to which such services can be
provided. Management believes that by using technology currently employed
by the Company it can serve virtually all of the immediately addressable
market in its market areas.
- RAPID DEPLOYMENT. 38 GHz technology can be deployed considerably more
rapidly than wireline and other wireless technologies, generally within 72
hours after obtaining access to customer premises. In contrast to the
relative ease of installing a 38 GHz transmission link, extending fiber or
copper-based networks to reach new customers requires significant time and
expense. In addition, unlike providers of point-to-point microwave service
in other spectrum bands, a 38 GHz license holder can install and operate
as many transmission links as it can engineer in the licensed area without
obtaining additional approvals from the FCC. This is a substantial
advantage over other portions of the microwave radio spectrum that must be
licensed on a link-by-link basis following frequency coordination, which
in total can take from three to five months.
- EASE OF INSTALLATION. The equipment used for point-to-point applications
in 38 GHz (I.E., antennae, transceivers and digital interface units) is
smaller, less obtrusive and less expensive than that used for microwave
equipment applications at lower frequencies, making it less susceptible to
zoning restrictions. In addition, 38 GHz equipment can be easily
redeployed to meet changing customer requirements.
- ADDITIONAL ADVANTAGES OVER OTHER PORTIONS OF RADIO SPECTRUM. At
frequencies above 38 GHz, point-to-point applications become less
practical because attenuation increases and the maximum distance between
transceivers accordingly decreases. Additionally, the FCC has specified
the use of many portions of the spectrum for applications other than
point-to-point, such as satellite and wireless cable services, and,
accordingly, these portions of the radio spectrum often are not available
for point-to-point applications. Finally, 38 GHz has characteristics which
provide better signal quality and performance in inclement weather than
those offered in other portions of the radio spectrum.
THE ART SOLUTION
The Company is positioned to solve the need for broadband last mile access,
linking end users to fiber optic based facilities of CAPs and other
telecommunications service providers without the need to deploy fiber all the
way to end users' premises. The Company provides point-to-point wireless digital
circuits ranging in capacity from DS-1 (capable of carrying 24 simultaneous
voice conversations at 1.544 Mbps) to DS-3 (capable of carrying 672 simultaneous
voice conversations at 45 Mbps). The Company's wireless broadband services are
engineered to provide 99.999% availability, with better than a 10-13 (unfaded)
bit error rate. This level of availability exceeds the performance of copper
based networks and is a viable alternative to fiber based networks. When
measured as the total amount of time "out of service" over a year, 99.999%
availability under conditions of no path fading equates to less than six minutes
of down-time compared to a range of four hours to 44 hours of historical
performance of similar copper-based LEC circuits. In addition, the Company
believes that ART's last mile solution is competitively priced with most
broadband wireline solutions.
The Company's initial target customers include CAPs, IXCs, cellular and
mobile radio service providers and ISPs. The Company's services may also be
attractive to certain LECs which do not currently have broadband networks that
reach the majority of their customers. The Company has entered into a strategic
distribution agreement with Ameritech for delivery of the Company's wireless
broadband services throughout Ameritech's midwest operating region and for
certain large customers located outside its region. See "-- Strategic Alliances
- -- Ameritech Strategic Distribution Agreement."
The Company believes that the following factors provide it with certain
significant competitive advantages in offering broadband last mile access,
including:
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- The characteristics of 38 GHz technology (high data transfer rates,
significant channel capacity, rapid deployment, easy installation and
efficient network design) are ideal for the provision of last mile access.
- The Company minimizes its initial capital expenditures because of the
installation-to-meet-demand and redeployable nature of the Company's
wireless broadband equipment, as compared to the significant cost and
expense of installation of fiber based networks.
- As one of the first 38 GHz service providers, the Company is
well-positioned to capture a large percentage of early adopters, which are
generally among the heaviest users.
- The Company's industry relationships should enable it to forge strategic
alliances with other carriers, equipment vendors and technology
development companies, thus gaining access to important channels of
distribution and early deployment of advanced technologies.
- The scope of the Company's market area enables it to offer wireless
broadband services targeting much of the United States's addressable
business market.
As regulatory and competitive conditions permit, the Company's market focus
will evolve from a wholesale "carrier's carrier" orientation to the retail
provision of services directly to government and commercial end-user customers
of telecommunications services. The Company will focus on its initial wholesale
"carrier's carrier" strategy at least through the first half of 1997. At that
time, the Company anticipates it will have developed its customer base and
market presence to a level that will enable the Company to expand its direct
sales efforts. At the same time, the Company anticipates it will commence the
development of switched services to expand the Company's service offerings both
geographically and demographically, to business and residential customers,
offering a wider array of voice, data, Internet and multimedia services,
depending on further advances in wireless technology.
BUSINESS STRATEGY
ART began providing 38 GHz wireless broadband services in the fourth quarter
of 1995 and has generated only nominal revenues from such services to date. The
Company is seeking to capitalize on its broad footprint of 38 GHz authorizations
to become a leading provider of wireless broadband solutions to a diverse group
of traditional and emerging telecommunications service providers and end users
of telecommunications services. The Company plans to implement the following
strategic initiatives to achieve this objective:
- EXPLOIT SPECTRUM POSITION IN KEY MARKETS. Upon completion of its pending
acquisition of the CommcoCCC Assets, the Company will own or manage a total
of 237 authorizations that will allow it to provide 38 GHz wireless
broadband services in 169 U.S. markets. The Company currently owns or
manages 108 authorizations (exclusive of the CommcoCCC Assets) that allow
it to provide 38 GHz wireless broadband services in 89 markets, 73 of which
are owned by the Company and the remaining 35 of which are managed by the
Company through the Company's interests in or arrangements with other
companies. The Company has agreed to acquire all of the authorizations
which it currently manages but does not own. These spectrum assets provide
the Company with the foundation on which to create a large scale commercial
system of 38 GHz wireless broadband operations. As of June 28, 1996, the
Company was operating revenue-generating, wireless broadband links in 15
cities. The Company plans to continue to build out its infrastructure and
to intensify its marketing effort in its market areas in order to exploit
the value inherent in its spectrum assets. See " -- Agreements Relating to
Licenses and Authorizations." The Company may seek to acquire additional
spectrum rights in new and existing markets in order to expand its
geographic footprint or enhance its services.
- MARKET INITIALLY AS A CARRIER'S CARRIER. The Company's initial target
customers include CAPs, IXCs, cellular and mobile radio service providers
and ISPs. The Company's wireless broadband services enable CAPs to extend
their broadband services to locations where it is either not cost-efficient
or too difficult to extend their fiber optic network due to physical
limitations, franchise
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fees or other restrictions. The Company's services may also be attractive
to certain LECs, which generally do not currently have broadband networks
capable of reaching the majority of their customers. All telecommunications
service providers can use the Company's services as alternate or redundant
routes to increase network reliability. The Company has entered into a
strategic distribution agreement (the "Ameritech Strategic Distribution
Agreement") with Ameritech Corp. ("Ameritech") for delivery of the
Company's wireless broadband services throughout Ameritech's midwest
operating region and for certain large customers located outside its
region. The Company currently provides services to Ameritech, Bell Atlantic
NYNEX Mobile, UUNet, Electric Lightwave, NEXTLINK, American Personal
Communications, American Show Management, Capital Area Internet Service,
Brooks Fiber Communications and Western Wireless, among others. See " --
Customers and Applications." As regulatory and competitive conditions
permit and as the Company's customer base and market presence develop, the
Company expects that its market focus will expand from a wholesale
"carrier's carrier" to include provision of services directly to commercial
end users.
- PURSUE OPPORTUNITIES TO PROVIDE VALUE-ADDED SERVICES. The Company has
identified and plans to pursue additional market niches with immediate
needs for reliable, high bandwidth last mile access services. For example,
the market for Internet services urgently requires broadband "pipes" to
facilitate high speed access for corporate users. The amount of time it
takes to download graphics and images from the Internet to personal
computers over dial-up copper circuits hinders demand for the Internet. For
example, a 38 GHz DS-1 circuit (1.544 Mbps), linking a corporate user to an
ISP's POP, is approximately 53 times faster than a 28.8 kbps dial-up modem
and 12 times faster than the fastest ISDN connection (128 Kbps).
Alternatively, one 38 GHz DS-3 link at 45 Mbps can currently transfer data
at a rate that is over 1,500 times the rate of the fastest dial-up modem
currently in use (28.8 Kbps) and over 350 times the rate of the fastest
ISDN line currently in use (128 Kbps). Each of the Company's DS-3 links can
support 28 DS-1 circuits per channel. The Company is pursuing agreements to
package its 38 GHz solutions with the services of leading ISPs. Other
potential value-added uses include desktop videoconferencing, high
resolution imaging for healthcare and law enforcement applications and
video on demand. The Company may also decide to offer switched-based
services to end users who desire a single source telecommunications
solution.
- MAINTAIN TECHNOLOGY LEADERSHIP IN SPECTRUM MANAGEMENT. The Company is
currently developing proprietary site selection and network design software
which it believes will provide for faster site development at a lower cost.
In addition, through the Company's internal technology development efforts,
as well as on-going participation in equipment manufacturers' research and
development activities, the Company is seeking to achieve a competitive
advantage through proprietary methods designed to increase the capacity and
quality of its networks.
- ESTABLISH AND EXPAND KEY STRATEGIC ALLIANCES. The Company has and will
seek to continue to establish key strategic alliances with major service
providers, equipment manufacturers, systems integrators and enhanced
service providers. Ameritech Development Corp. owns a 5.5% beneficial
equity interest in the Company as of June 28, 1996 (4.3% after giving
effect to the Common Stock Offering) and entered into the Ameritech
Strategic Distribution Agreement in April 1996. The Company also has
agreements with Harris Corporation, Farinon Division ("Harris") for
marketing ART's 38 GHz services to PCS providers and with GTE Corporation
for installation, field servicing and network monitoring. In addition, the
Company is seeking to develop relationships with a number of equipment
manufacturers focusing on 38 GHz technology development, wireless broadband
standards and joint sales efforts. The Company plans to utilize strategic
alliances to bundle its services with those of its partners to provide for
alternative distribution channels and to gain access to technological
advancements. See "-- Strategic Alliances."
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WIRELESS BROADBAND SERVICES
The Company's wireless broadband links deliver high quality voice and data
transmissions at a level of performance which exceeds the performance of copper
based networks and is a viable alternative to fiber optic based networks. The
Company provides point-to-point wireless digital circuits ranging in capacity
from DS-1 (capable of carrying 24 simultaneous voice conversations at 1.544
Mbps) to DS-3 (capable of carrying 672 simultaneous voice conversations at 45
Mbps). The Company believes that it generally owns or manages sufficient 38 GHz
bandwidth to satisfy the anticipated service requirements of its target
customers in each of the Company's existing markets and the additional 78
markets to be acquired under the CommcoCCC Agreement.
Significant features of the Company's wireless broadband services include
(i) sufficient bandwidth and flexibility in each channel for most present day
applications, (ii) minimal channel interference from other sources, resulting
from dedicated spectrum, (iii) range of up to five miles between transmission
links (depending upon moisture conditions), (iv) performance engineered to
provide a minimum of 99.999% availability, (v) transmission accuracy engineered
to provide bit error rates of better than 10-13 (unfaded), (vi) optional forward
error correction for even higher data reliability, insuring the integrity of
transmitted data over wireless broadband paths, (vii) rapid deployment (where
roof rights have been previously obtained), (viii) 24-hour, seven-days-a-week
network monitoring by the Company's network management control center, (ix)
available nationwide four-hour emergency restoral time from GTE in most
circumstances and (x) optional "hot" standby links that remain powered up and
switch "on line" if the primary link fails.
Each of ART's wireless broadband links consists of paired millimeter wave
radio transceivers installed at a distance of up to five miles from one another
within a direct line of sight. The transceivers currently used by the Company
are supplied principally by P-Com, Inc. ("P-Com") and are installed primarily on
rooftops and on other tall structures. In order to deploy its links quickly, the
Company plans to obtain roof rights on buildings with fiber optic points of
termination for transceiver sites. To accomplish this objective, the Company is
developing proprietary site selection and network design software which will
significantly reduce the amount of time necessary to select optimal network
sites. In coordination with its marketing plans, the Company will dispatch site
acquisition specialists to such locations to obtain renewable options. The
Company intends to use a combination of its own employees and independent
contractors for site acquisition.
CUSTOMERS AND APPLICATIONS
The Company introduced its wireless broadband services in November 1995 and
began marketing its services in January 1996. The Company has generated only
nominal revenues from its operations to date. Currently, the Company is
providing or has received orders to provide carrier's carrier wireless broadband
services to CAPs, a LEC, ISPs, cellular and mobile carriers and several IXCs,
and is in the process of becoming a qualified vendor to all the major IXCs. The
Company currently provides services to Ameritech, Bell Atlantic NYNEX Mobile,
UUNet, Electric Lightwave, NEXTLINK, American Personal Communications, American
Show Management, Capital Area Internet Service, Brooks Fiber Communications and
Western Wireless, among others. As of June 28, 1996, the Company was operating
revenue-generating wireless broadband links in 15 cities.
The Company currently provides, or anticipates providing, wireless broadband
services to the following types of customers, among others:
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COMPETITIVE ACCESS PROVIDERS AND LOCAL EXCHANGE CARRIERS. Currently, CAPs
compete with LECs by installing fiber optic cable rings in the highest density
business locations to connect with long distance carriers and for intra-ring
transmissions. Due to the high cost inherent in building fiber networks, CAPs
generally target densely populated areas with high concentrations of large
end-users. In order to reach "off-net" customers, CAPs must either lease or
purchase facilities and services from LECs or alternative suppliers until such
time as it becomes economical to extend the CAP fiber networks to these
customers.
CAPs face certain implementation obstacles that the Company's wireless
broadband services can assist in solving. CAPs need to reach new customers that
are off-net quickly and inexpensively, and are expected to prefer to obtain
additional network facilities from (and share proprietary information with)
someone other than a direct competitor, such as a LEC. CAPs can utilize the
Company's wireless broadband services as an alternative to copper, fiber-based
or other such network facilities provided to the CAPs by LECs (see diagram
below), to extend their own networks to reach areas where such extension is
neither cost-efficient nor feasible, because of rights-of-way or other
restrictions, or to provide redundant and back-up capacity to their existing
networks.
The Company anticipates that LECs will encounter many of the same obstacles
CAPs are encountering in seeking to enhance their networks to deliver broadband
services. The Company also believes that LECs will seek to utilize 38 GHz
technology to expand the range of their service offerings to match those offered
by CAPs. Further, as LECs are permitted to provide inter-LATA long distance
services, they may seek to use 38 GHz technology to bypass other LECs outside of
their region. See "-- Strategic Alliances -- Ameritech Strategic Distribution
Agreement."
[GRAPHIC]
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INTERNET SERVICE PROVIDERS. The expanding demand for Internet access, the
growing importance of audio, video and graphic Internet applications to both
business and consumers and the lack of high capacity access through local
telephone company facilities has created a growing market for ART's wireless
broadband services. The Company offers Internet service providers timely,
reliable and affordable access at the required high speed data rates -- both 45
Mbps and 1.544 Mbps -- allowing ISPs to keep pace with their customer growth.
The Company provides wireless broadband links between customers and their ISP
providers and between ISP POPs and the Internet backbone. A single 38 GHz DS-1
circuit linking a corporate user to an ISP's POP is approximately 53 times
faster than a 28.8 Kbps dial-up modem and 12 times faster than the fastest ISDN
connection. Each of the Company's 38 GHz DS-3 links can support 28 DS-1 circuits
per channel or one DS-3 circuit per channel, which can transfer data at a rate
which is over 1,500 times the rate of the fastest dial-up modems currently in
use (28 Kbps) and over 350 times the rate of the fastest ISDN lines currently in
use (128 Kbps).
[GRAPHIC]
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MOBILE COMMUNICATIONS SERVICE PROVIDERS. ART's wireless broadband services
can help cellular, wireless dispatch and emerging PCS carriers compete in
expanding domestic mobile communications markets by providing cost-effective
backbone network connections between cell sites, base stations and wireline
networks, regardless of location. Similar 38 GHz mobile communications
connections have been proven effective in Europe, and ART's easily installed,
economical wireless broadband links can give domestic mobile carriers a
competitive edge in building or expanding their networks through reduced
construction time and installation costs.
[GRAPHIC]
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INTER-EXCHANGE CARRIERS. To minimize costly LEC access charges and to gain
more direct contact with the consumer, IXCs can utilize the Company's wireless
broadband services to connect call origination or termination points either
directly to the IXCs' POPs or by way of CAP intermediate fiber rings. These
providers can also use 38 GHz services to connect two or more of their
respective POPs in a single market area. By utilizing the Company's wireless
broadband services, IXCs can avoid the capacity barriers inherent in copper wire
connections, which have typically prevented them from providing their customers
with the end-to-end, high bandwidth, full digital services available from a
fiber optic or wireless-based system. Wireless broadband services also may be
utilized to provide carriers with viable, cost-efficient physical diversity
routes (I.E., back-up capacity) for traffic in situations when primary routes
become incapacitated or network reliability concerns demand alternate
telecommunications paths.
[GRAPHIC]
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PRIVATE USER NETWORKS. ART's wireless broadband services enable business,
government and other heavy usage customers to create efficient, high speed, high
capacity private voice, data and video communications networks within and among
their local facilities and buildings. These customers include universities,
hospitals, hotels, shopping centers and multi-location manufacturing, business
and governmental institutions. Working directly with ART or through ART
resellers, customers will be able to access cost-effective alternatives to LEC
copper networks.
Providing high speed data transmission and real time communications services
by linking customer computers in local, metropolitan and wide area
configurations will be an important part of ART's private networking business.
The ability to send large amounts of data quickly and efficiently and to
interconnect personal computers both within and among buildings in campus
settings is a growing customer need. ART's wireless broadband services are
designed to serve this rapidly expanding market.
[GRAPHIC]
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INTERACTIVE VIDEO SERVICES USERS. ART's wireless broadband services provide
high speed, high capacity access to communications networks for customers who
require reliable videoconferencing, video on demand, and Internet video
services. The Company believes the increasing popularity and use of these
services, particularly by large business and government customers, provide a
promising market for ART's wireless links. Videoconferencing requires high speed
communications both to and from the participants. The Company's services meet
this requirement for high bandwidth, full duplex communications.
[GRAPHIC]
MARKETING PLANS
In January 1996, the Company commenced implementation of its marketing
program. The Company is addressing its initial target markets as a carrier's
carrier, while building the internal capability to expand its marketing efforts
to include direct sales to end users of its services. The Company is augmenting
its marketing and sales channels through resale agreements with strategic
marketing partners and through alliances with selected CAPs, LECs, ISPs, IXCs,
interconnect providers (PBX suppliers), LAN, MAN and WAN systems integrators and
other telecommunications equipment manufacturers and service providers.
The Company's internal salesforce is currently marketing the Company's
wireless broadband services by (i) performing field demonstrations of 38 GHz
service, (ii) making presentations at industry trade shows, (iii) providing an
interactive Internet home page, (iv) running promotional advertisements in
selected trade media and (v) conducting extensive one-on-one presentations and
demonstrations through its direct sales force with major telecommunications
service providers and end users of telecommunications services.
The Company currently expects to price its services on a monthly flat-rate
non-distance sensitive basis. As a non-dominant carrier, ART does not have to
cost-justify its rates to regulatory bodies and usually has a wide latitude in
changing customer-specific rates. As a result, ART expects to enter into
customer and service specific arrangements, which include volume, capacity and
term discounts and customized billing and payment options. The services offered
by ART are expected to be competitively
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priced with those of the incumbent LECs. The Company also intends to charge for
installation and network monitoring services where appropriate. The Company also
anticipates offering metered services to various end users at an appropriate
point in the future.
38 GHZ WIRELESS BROADBAND LICENSES AND AUTHORIZATIONS
The Company was granted the first of its authorizations to construct and
operate 38 GHz wireless broadband facilities in February 1995. Authorizations
for facilities that are not constructed are referred to in this Prospectus as
"construction permits"; authorizations for facilities that are constructed are
referred to in this Prospectus as "licenses". Upon completion of the CommcoCCC
Acquisition, the Company will own or manage a total of 237 authorizations that
will allow it to provide 38 GHz wireless broadband services in 169 U.S. markets.
The Company currently owns or manages 108 authorizations (exclusive of the
CommcoCCC Assets) that allow it to provide 38 GHz wireless broadband services in
89 markets, 73 of which are owned by the Company and the remaining 35 of which
are managed by the Company through the Company's interests in or arrangements
with other companies.
The table below lists, for the top 100 U.S. markets, the amount of bandwidth
covered by authorizations which the Company owns, manages or has a definitive
agreement to acquire in the top 100 U.S. markets, in descending order of size
based on the estimated population of the market:
<TABLE>
<CAPTION>
BANDWIDTH COVERED BY AUTHORIZATIONS (MHZ)
--------------------------------------------------------
UNDER
DEFINITIVE
AGREEMENT TO
MARKET OWNED MANAGED (1) ACQUIRE TOTAL
- ----------------------------------------- ----------- --------------- ------------- -----
<S> <C> <C> <C> <C>
300 MHZ OR MORE MARKETS
New York, NY 300 -- -- 300
Washington, D.C. 300 -- -- 300
Boston, MA 200 -- 100 300
Baltimore, MD 200 100 -- 300
Cincinnati, OH 100 -- 200 300
Portland, OR -- 100 200 300
Norfolk/Virginia Beach, VA -- 100 300 400
Columbus, OH -- 100 200 300
Providence, RI/Fall River, MA 200 -- 200 400
Memphis, TN 100 -- 200 300
Oklahoma City, OK -- 100 200 300
Birmingham, AL 100 -- 200 300
Buffalo/Niagara Falls, NY 300 -- 100 400
Dayton/Springfield, OH 100 100 100 300
Richmond/Petersburg, VA 100 -- 200 300
Rochester, NY 300 -- 200 500
Hartford, CT 200 100 200 500
Albany/Schenectady, NY 300 -- 200 500
Knoxville, TN 100 -- 200 300
New Haven/Waterbury, CT 200 -- 100 300
Syracuse, NY 200 -- 100 300
Harrisburg, PA 200 -- 100 300
Scranton/Wilkes-Barre, PA 300 -- 100 400
Springfield/Holyoke, MA 200 -- 200 400
Jackson, MS 100 -- 200 300
Shreveport, LA 100 -- 200 300
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BANDWIDTH COVERED BY AUTHORIZATIONS (MHZ)
--------------------------------------------------------
UNDER
DEFINITIVE
AGREEMENT TO
MARKET OWNED MANAGED (1) ACQUIRE TOTAL
- ----------------------------------------- ----------- --------------- ------------- -----
<S> <C> <C> <C> <C>
200 MHZ MARKETS
Philadelphia, PA/Trenton, NJ 200 -- -- 200
Miami/Fort Lauderdale, FL 100 -- 100 200
Cleveland/Akron, OH 100 -- 100 200
Seattle/Tacoma, WA -- 100 100 200
St. Louis, MO 100 -- 100 200
Pittsburgh, PA 200 -- -- 200
Charlotte/Gastonia, NC -- -- 200 200
Nashville, TN 100 -- 100 200
Indianapolis, IN 100 -- 100 200
Louisville, KY 100 -- 100 200
Greensboro/Winston-Salem, NC -- 100 100 200
Las Vegas, NV -- 100 100 200
Austin, TX -- 100 100 200
Grand Rapids, MI -- 100 100 200
Omaha, NE -- -- 200 200
Honolulu, HI -- 100 100 200
Albuquerque, NM -- 100 100 200
Des Moines, IA 100 -- 100 200
Tucson, AZ -- 100 100 200
El Paso, TX -- -- 200 200
Worcester, MA 200 -- -- 200
Allentown/Bethlehem, PA 200 -- -- 200
Baton Rouge, LA 100 -- 100 200
Charleston, SC 100 100 -- 200
Mobile, AL 100 100 -- 200
100 MHZ MARKETS
Chicago, IL 100 -- -- 100
Detroit, MI -- -- 100 100
Dallas/Fort Worth, TX 100 -- -- 100
Houston, TX 100 -- -- 100
Atlanta, GA 100 -- -- 100
Minneapolis, MN 100 -- -- 100
Phoenix, AZ -- 100 -- 100
San Diego, CA -- 100 -- 100
Tampa-St. Petersburg, FL -- -- 100 100
Denver, CO -- 100 -- 100
Kansas City, MO 100 -- -- 100
Sacramento, CA -- 100 -- 100
Milwaukee, WI -- -- 100 100
San Antonio, TX 100 -- -- 100
Salt Lake City, UT -- 100 -- 100
Orlando, FL -- -- 100 100
New Orleans, LA 100 -- -- 100
Raleigh-Durham, NC -- -- 100 100
Little Rock, AR -- -- 100 100
Tulsa, OK -- -- 100 100
Greenville/Spartanburg, SC -- -- 100 100
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
BANDWIDTH COVERED BY AUTHORIZATIONS (MHZ)
--------------------------------------------------------
UNDER
DEFINITIVE
AGREEMENT TO
MARKET OWNED MANAGED (1) ACQUIRE TOTAL
- ----------------------------------------- ----------- --------------- ------------- -----
<S> <C> <C> <C> <C>
Toledo, OH -- -- 100 100
Spokane, WA -- 100 -- 100
Kingsport, TN/Bristol, VA -- -- 100 100
Fort Wayne, IN -- -- 100 100
Madison, WI 100 -- -- 100
Wichita, KS 100 -- -- 100
Springfield, MO -- -- 100 100
Sarasota/Bradenton, FL -- -- 100 100
Corpus Christi, TX -- -- 100 100
Chattanooga, TN -- -- 100 100
</TABLE>
- ------------------------------
(1) Includes authorizations (i) held by ART West, (ii) managed by ART under the
DCT services agreement and (iii) managed under the Telecom One services
agreement pursuant to a revenue-sharing arrangement. Does not include
authorizations included in the CommcoCCC Assets which are managed by the
Company on a short-term basis, pending the CommcoCCC Acquisition. The
Company recently has entered into definitive agreements to acquire all
outstanding interests in the authorizations held by ART West, DCT and
Telecom One. See "Business -- Agreements Relating to Licenses and
Authorizations."
In addition to the above authorizations, the Company has 71 applications
pending before the FCC for additional authorizations. However, due to the
"freeze" imposed by the NPRM and the conflicts with other applicants in same
markets, there can be no assurance that it or any other company will receive
additional authorizations with respect to any pending applications. See "Risk
Factors -- Government Regulation" and "-- Government Regulation."
Excluding the CommcoCCC Assets, the Company presently owns or manages
between 100 and 300 MHz of transmission capacity within each of its markets.
Because 38 GHz paths are very narrow and because certain microwave paths can
intersect each other without creating interference, each market area can
accommodate thousands of paths. The Company believes it generally owns or
manages sufficient 38 GHz bandwidth to satisfy the anticipated service
requirements of its target customers in each of the Company's existing markets
and the additional 80 markets to be acquired under the CommcoCCC Agreement.
Consistent with the Company's growth strategy, the Company may seek to obtain
additional spectrum by either leasing excess capacity from other 38 GHz
licensees, entering into management agreements or acquiring interests in other
38 GHz authorizations. See "Risk Factors -- Acquisition of Additional Bandwidth
in Selected Areas."
Under the terms of its 31 construction permits (exclusive of the CommcoCCC
Assets), the Company must complete construction of facilities for the majority
of such construction permits between mid-August and mid-September 1996. Under
the terms of the CommcoCCC authorizations and the Company's management agreement
with CommcoCCC, the Company must complete construction of facilities for eight
construction permits by mid-September 1996, 39 construction permits by December
1996 and the remaining 82 construction permits between mid-April and mid-August
1997. The Company has begun installing the number of links required to complete
construction and currently expects it will meet the FCC deadlines. However, the
FCC may impose more stringent construction requirements, as it has proposed to
do in the NPRM, which may jeopardize the status of the Company's authorizations.
All of the 38 GHz licenses owned or to be acquired by the Company are due to
expire in February 2001. The Company believes that, in keeping with common FCC
practices, the licenses will be renewed for successive 10-year periods upon
expiration.
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<PAGE>
AGREEMENTS RELATING TO LICENSES AND AUTHORIZATIONS
COMMCOCCC ACQUISITION. On July 3, 1996, the Company entered into an
agreement (the "CommcoCCC Agreement") to acquire 129 38 GHz wireless broadband
authorizations (the "CommcoCCC Assets") from CommcoCCC, Inc. (the "CommcoCCC
Acquisition") in exchange for 16,500,000 shares of Common Stock. CommcoCCC was
formed in a transaction arranged by Columbia Capital Corporation to acquire, own
and operate the 38 GHz authorizations owned by Columbia Capital Corporation and
its affiliates and those owned by Commco, L.L.C. The CommcoCCC Acquisition is
subject to various conditions including receipt of FCC and other approvals,
receipt by CommcoCCC of an opinion as to the tax-free nature of the transaction,
consummation of the Offerings on terms reasonably satisfactory to CommcoCCC,
minimum population coverage requirements for the authorizations of the Company
and CommcoCCC, accuracy of representations and warranties except for breaches
that do not have in the aggregate a material adverse effect, no pending or
threatened material litigation and other customary closing conditions. There can
be no assurance that all such conditions will be satisfied. In particular, to
obtain FCC approval, the Company will need to make certain "anti-trafficking"
showings and may need certain waivers or consents from the FCC. The FCC may be
unwilling to grant its approval or may grant its approval subject to conditions
that may be adverse to the Company. The CommcoCCC Agreement may be terminated by
either party if the Offerings are not completed within 90 days of the date of
the CommcoCCC Agreement or if the CommcoCCC Acquisition is not consummated
within one year of the date of the CommcoCCC Agreement. See "Risk Factors --
Risk of Non-Consummation of CommcoCCC Acquisition."
In the CommcoCCC Agreement, the Company and Telecom have each agreed that,
prior to the consummation of the transaction, except in certain circumstances or
with the consent of CommcoCCC, they will not issue equity, incur debt, acquire
spectrum, make investments, consolidate, merge or sell all or substantially all
of its assets. CommcoCCC has entered into a management agreement with the
Company pursuant to which the Company bears the responsibility during the
pendency of the CommcoCCC Acquisition to construct, manage and operate the
CommcoCCC Assets, consistent with FCC rules. Under the management agreement,
CommcoCCC is obligated to reimburse ART for up to $100,000 of operating
expenses, which obligation will be cancelled if the CommcoCCC Acquisition is
consummated. In the event the management agreement is terminated other than as a
result of the consummation of the CommcoCCC Acquisition, CommcoCCC is obligated
to purchase and ART is obligated to sell at the Company's original cost the
equipment purchased by ART necessary to meet the FCC construction requirements
for the CommcoCCC authorizations.
The stockholders of CommcoCCC loaned the Company $3.0 million payable
September 30, 1996 pursuant to a subordinated bridge financing facility (the
"CommcoCCC Financing") and, in connection therewith, received three-year
warrants to purchase 50,000 shares of Common Stock at a price of $15.00 per
share (the "CommcoCCC Warrants"). The CommcoCCC Financing is secured by a
security interest in all of the assets of the Company, including a pledge of the
Company's stock in Telecom. If the CommcoCCC Financing is not paid in full when
due, the unpaid principal and interest could be converted into Common Stock on a
formula basis at the option of the holders. The CommcoCCC Financing will be
repaid with the proceeds of the Offerings.
The Company has given Commco, L.L.C., a stockholder of CommcoCCC, an option
(the "Commco Option") to purchase one authorization in each of 12 specified
market areas in which the Company will have more than one authorization, which
authorizations cover in the aggregate approximately 19 million people. The
Commco Option will be exercisable only if (i) the CommcoCCC Acquisition is
consummated and (ii) Commco, L.L.C. obtains authorizations pursuant to certain
pending applications frozen under the NPRM in market areas covering an aggregate
population of at least 40 million people, and will terminate on the date nine
months after the consummation of the Common Stock Offering. The purchase price
for any authorizations acquired under the Commco Option is determined by a
formula based upon the fair market value at the time the Commco Option is
exercised of up to approximately 2,600,000 shares of Common Stock depending upon
the number of authorizations
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<PAGE>
purchased. The purchase price is payable in cash or, if the Commco Option is
exercised within the later of 120 days after the closing of the CommcoCCC
Acquisition or the date of grant by the FCC of the authorizations necessary to
exercise the Commco Option, with a two-year note secured by shares of Common
Stock having a value on the date of exercise equal to two times the principal
amount of the note.
In arranging the CommcoCCC Acquisition, Columbia Capital Corporation agreed
not to compete with the Company in the provision of wireless broadband
telecommunication services in the 38 GHz band of the radio spectrum and has
granted the Company a right of first offer to acquire any 38 GHz authorizations
that Columbia Capital Corporation or its affiliates may acquire in the future
with respect to their pending applications.
Promptly upon closing of the CommcoCCC Acquisition, the Company has agreed
to nominate one individual designated by CommcoCCC's stockholders and acceptable
to the Company as a director of the Company.
In late 1994 and 1995, Columbia Capital Corporation and certain of its
affiliates ("Columbia") entered into several letter agreements (the "Letter
Agreements") with Video/Phone Systems, Inc. ("Video/Phone"). In consideration
for services to be rendered under the Letter Agreements, Columbia granted or
agreed to grant to Video/Phone options to purchase minority equity interests in
entities formed or to be formed to apply for 38 GHz licenses. Columbia agreed
not to assign these licenses to any person controlling, controlled by or under
common control with Columbia unless such transferee granted to Video/Phone an
equivalent option. The CommcoCCC Assets include 67 authorizations transferred by
Columbia to CommcoCCC, subject to FCC approval. Columbia and Video/Phone are in
a dispute with respect to the performance and obligations of the parties under
the Letter Agreements. Columbia has agreed to indemnify and hold harmless the
Company with respect to any loss or damage resulting from the Letter Agreements.
EMI ACQUISITION. On April 4, 1995, ART entered into an agreement with EMI
Communications Corporation ("EMI") to acquire EMI's thirty two 38 GHz wireless
broadband licenses and related assets in the northeastern United States (the
"EMI Assets") in exchange for $3.0 million in cash and a $1.5 million three-year
non-negotiable and non-transferable promissory note (the "EMI Note"). In
November 1995, ART assigned all of its rights and obligations under the purchase
agreement to Telecom. The FCC subsequently approved the transfer of the EMI
Assets to Telecom, and the EMI Assets were acquired by Telecom in November 1995.
ART has also agreed to provide wireless broadband services to certain of EMI's
customers on behalf of EMI for the terms provided in such EMI service agreements
for a period of five years from the date of the agreement and EMI agreed to
provide certain services to Telecom for an initial period of one year from the
date of the agreement. See "Description of Certain Indebtedness -- EMI Note."
ART WEST JOINT VENTURE. On April 4, 1995, ART and Extended Communications,
Inc. ("Extended") entered into a joint venture agreement (the "ART West
Agreement") resulting in the formation of ART West Joint Venture ("ART West"), a
Delaware partnership equally owned by ART and Extended. Under the terms of the
ART West Agreement, ART and Extended agreed to transfer to ART West all of their
respective interests in all of their 38 GHz authorizations (currently, 12
authorizations) in Alaska, Arizona, California, Colorado, Hawaii, Idaho,
Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming (the "ART West
Markets"), subject to FCC approval. Under a separate management agreement
between ART and ART West, ART is obligated to bear all costs and expenses
relating to construction, operation and management of the ART West Markets and
has agreed to utilize the ART West authorizations before other authorizations
owned or managed by ART in the ART West Markets. As compensation, ART receives
90% of the recurring revenues of ART West, with ART West receiving the remaining
10%. See "Certain Transactions -- ART West Joint Venture."
In June 1996, the Company entered into an agreement (the "Extended
Agreement") to acquire Extended's interest in ART West for an aggregate of $6.0
million in cash, subject to adjustment and
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<PAGE>
subject to closing conditions including final FCC approval. Of the $6.0 million
purchase price, $3.0 million is payable upon consummation of the Offerings as a
non-refundable deposit (the "ART West Deposit") and the balance is payable upon
consummation of the transaction. Under this agreement, upon payment by ART of
the ART West Deposit, Extended has agreed to surrender its rights under the ART
West Agreement (i) to participate in the acquisition of additional licenses or
authorizations in certain of the ART West Markets through ART West and (ii) to
prohibit the acquisition by ART of additional licenses or authorizations in
certain other ART West Markets.
DCT SYSTEM PURCHASE AGREEMENTS. On July 1, 1996 the Company entered into a
definitive agreement (the "DCT Agreement") with DCT to acquire DCT's interest in
certain 38 GHz licenses (the "DCT Systems") in exchange for $3.6 million in
cash, subject to closing conditions including FCC approval. ART has entered into
an exclusive services agreement with DCT pursuant to which ART bears the
responsibility for the construction, operation and management of the DCT
Systems. The agreement expires on December 31, 1998 and may be terminated
earlier by DCT if the DCT Agreement terminates. Under the terms of the services
agreement, ART is obligated to bear all costs and expenses relating to
construction, operation and management of the DCT Systems. As compensation, ART
is entitled to receive all of the revenues generated by the DCT Systems until
December 31, 1996. From January 1, 1997 until the later of January 1, 1998 and
the termination of the DCT Agreement, a license fee equal to 15% of the gross
revenue generated by the DCT Systems will be paid to DCT, and thereafter a
license fee based on the number and types of circuits operated by ART over the
DCT Systems will be paid to DCT. After December 31, 1997, DCT has the right to
market to third parties utilizing the DCT Systems. The services agreement
terminates with respect to each DCT 38 GHz license upon the acquisition by ART
of such license. The Company is currently completing the initial construction
requirements of the DCT Systems and expects such construction to be completed in
the third quarter of 1996.
TELECOM ONE SERVICES AGREEMENT. On April 24, 1996, the Company and Telecom
One, Inc. ("Telecom One") entered into a services agreement (the "Telecom One
Services Agreement") pursuant to which the Company agreed to construct, operate
and manage all 38 GHz wireless broadband licenses and related telecommunications
systems owned by Telecom One that are granted by the FCC. At present Telecom One
has been granted two authorizations. Under the Telecom One Services Agreement,
the Company is obligated to pay all costs and expenses related to construction,
operation and management of the systems. As compensation, the Company receives
90% of the net revenues generated by the systems and Telecom One receives the
remaining 10% for ten years.
TELECOM ONE PURCHASE AGREEMENT. On June 27, 1996, the Company and Telecom
One entered into an agreement pursuant to which the Company will acquire,
subject to FCC approval, from Telecom One the two currently granted
authorizations that are the subject of the Telecom One Services Agreement for
approximately $111,000 in cash. In addition, the Company will have a right of
first refusal on all future grants of 38 GHz authorizations to Telecom One.
STRATEGIC ALLIANCES
AMERITECH STRATEGIC DISTRIBUTION AGREEMENT. On April 29, 1996, the Company
and Ameritech entered into a three-year strategic distribution agreement (the
"Ameritech Strategic Distribution Agreement") pursuant to which the Company
provides 38 GHz services to Ameritech, who will in turn market the Company's
services under the Ameritech name. Ameritech has agreed to be the primary
provider of the Company's services in the midwest. Under the agreement,
Ameritech is targeting certain sales objectives and will spend internally up to
$7.0 million on its sales and marketing of the Company's services. The Company
believes that Ameritech's sales and marketing expertise and its access to
extensive distribution channels within its region will accelerate the rollout of
the Company's business plan. The Ameritech Strategic Distribution Agreement is
subject to termination at any time by either party on 90 days' notice. See "Risk
Factors -- Dependence on Third Parties for Marketing and Service."
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<PAGE>
GTE SERVICES AGREEMENT. On April 25, 1996, the Company entered into a
two-year agreement with GTE Government Systems Corporation, a subsidiary of GTE
Corporation ("GTE"). GTE will provide equipment staging and outfitting, site
preparation, equipment installation and maintenance for the Company's wireless
broadband services. Under the agreement, it is anticipated that GTE will perform
at least 75% of the Company's installations. The Company will pay a fee equal to
$1,550 for the installation of each link and a maintenance fee equal to $85 per
hour. The aggregate amount of the fee will depend on the Company's rate of
growth. The Company believes that GTE's nationwide presence and experience will
provide the Company with efficient, quality installation and maintenance for its
nationwide services. See "Risk Factors -- Dependence on Third Parties for
Marketing and Service."
GTE SOFTWARE LICENSE AGREEMENT. On March 29, 1996, the Company entered into
a software license agreement with GTE's Network Management Organization. Under
this agreement, the Company will purchase software and centralize its network
management functions to reduce costs and increase reliability. GTE's "Integrated
Network Management Products" enable the Company to quickly identify service
interruptions and to simultaneously alert the field service teams, who are able
to restore services in a timely manner. The Company will pay a license fee of
approximately $2.4 million and an annual maintenance support fee of
approximately $300,000. The license fee will be paid in monthly installments
commencing January 1, 1997 of $67,000 per month, including interest. After the
first year, fees are subject to renegotiation based on market prices and
conditions. See "Risk Factors -- Dependence on Third Parties for Marketing and
Service."
HARRIS AGREEMENTS. On April 26, 1996, the Company and Harris Corporation,
Farinon Division ("Harris") entered into a one-year PCS marketing agreement (the
"Harris Marketing Agreement") pursuant to which the Company granted to Harris
the right to use its 38 GHz authorizations, including associated coordination
services, installation and network monitoring and field services. Pursuant to
the Harris Marketing Agreement, Harris agreed to market the Company's services
in the emerging PCS market. The Harris Marketing Agreement is automatically
renewable for successive one-year terms unless either party delivers notice of
non-renewal at least 60 days prior to the end of the initial term or any
successive term. The agreement is also subject to termination at any time by
either party on 90 days' notice.
Concurrently with the Harris Marketing Agreement, the parties entered into a
one-year purchase agreement (the "Harris Purchase Agreement") pursuant to which
the Company agreed to purchase certain microwave transmission equipment,
software and services relating thereto (the "Harris Products"). The agreement
sets minimum purchase goals for the purchase by the Company of Harris Products.
If either the Harris Purchase Agreement or the Harris Marketing Agreement shall
terminate, the other shall also terminate.
TECHNOLOGY DEVELOPMENT AGREEMENTS. The Company has had discussions with
several microwave equipment or technology development companies for development
of technologies owned by such companies, for advanced 38 GHz radios, highspeed
converters, innovative telecommunications platforms and other technologies. The
Company will continue to monitor new developments in technology and may elect to
fund research and development activity in such new technology. The Company has
also entered into a letter of intent with American Wireless Corporation
("American Wireless") providing for the funding by the Company of $700,000 to
$1.0 million for research and development. In consideration of such funding, the
Company will have a first right to purchase American Wireless' production
capacity of the new radios and will receive a per-unit fee on radios sold by
American Wireless to third parties. See "Certain Transactions -- American
Wireless Development Agreement." This arrangement is subject to definitive
documentation. The Company has entered into a non-binding arrangement with
QuestTV providing for an investment of $1.5 million in the development of a
nationwide network of franchises offering retail access to sophisticated video
data transmission and storage technology. See "Certain Transactions -- QuestTV
Investment."
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The Company has also entered into a letter of intent with Helioss
Communications Corporation ("Helioss") for the development of advanced 38 GHz
radios. Under the letter of intent which is subject to definitive documentation,
the Company will fund up to $1.0 million of Helioss' research and development
expenses. The Company will have a right of first refusal on production capacity
of the radios, and will receive a royalty on the sale of a certain number of
radios to customers other than the Company.
Through June 15, 1996, the Company has incurred approximately $600,000 of
research and development expenses under such arrangements with several equipment
suppliers. There can be no assurance that the Company can complete definitive
agreements with any of such suppliers or that such suppliers can develop
technologies with commercial value for the Company.
FOREIGN MARKETS
The Company is exploring the possibilities of providing its wireless
broadband services in other countries including Canada and in Europe. The
Company has entered into agreements with certain consultants and potential
partners to identify foreign opportunities and expects to file applications for
licenses or to acquire 38 GHz licenses in several European countries. There can
be no assurance that the Company can acquire such licenses or develop and
operate such systems.
COMPETITION
The telecommunications services industry is highly competitive. The Company
has only recently begun to market its wireless broadband services to potential
customers and is currently providing services on a limited basis. In each market
area in which the Company is authorized to provide services, the Company
competes or will compete with several other service providers and technologies.
The Company expects to compete primarily on the basis of wireless broadband
service features, quality, price, reliability, customer service and response to
customer needs. The Company faces significant competition from other 38 GHz
providers and incumbent LECs, such as the RBOCs. The Company may also compete
with CAPs, cable television operators, electric utilities, LECs operating
outside their current local service areas and IXCs. There can be no assurance
that the Company will be able to compete effectively in any of its market areas.
COMPETITION FROM 38 GHZ SERVICE PROVIDERS. The Company faces competition
from other 38 GHz service providers, such as WinStar and BizTel, within its
market areas. In many cases, one or both of these service providers hold
licenses to operate in other portions of the 38 GHz band in geographic areas
which encompass or overlap the Company's market areas. In certain of the
Company's market areas, other 38 GHz service providers may have a longer history
of operations, a larger geographic footprint or substantially greater financial
resources than the Company. WinStar commenced its 38 GHz operations
approximately one year prior to the Company, has raised significant capital and
has the competitive advantages inherent in being the first to market 38 GHz
services. In addition to WinStar and BizTel, at least one other substantial
entity, Milliwave, L.P. ("Milliwave"), and several dozen smaller ones have been
granted 38 GHz authorizations in geographic regions in which the Company plans
to operate. Winstar has recently entered into a definitive agreement with
Milliwave to acquire Milliwave's 38 GHz licenses, subject to FCC approval, and
has agreed to manage such licenses pending the consummation of such acquisition.
Due to the relative ease and speed of deployment of 38 GHz technology, the
Company could face intense price competition and competition for customers
(including other telecommunications service providers) from other 38 GHz service
providers.
The Company also faces potential competition from new entrants to the 38 GHz
market, including LECs and other leading telecommunications companies. The NPRM
contemplates an auction of certain spectrum assets, including fourteen proposed
100 MHz channels (which are similar to those used by the Company) and four
proposed 50 MHz channels in the 38 GHz spectrum band, which have not been
previously available for commercial use. See "Risk Factors -- Government
Regulation." The grant of additional authorizations by the FCC in the 38 GHz
band, or other portions of the spectrum with similar
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characteristics, could result in increased competition. The Company believes
that, assuming that additional channels are made available as proposed by the
NPRM, additional entities having greater resources than the Company could
acquire authorizations to provide 38 GHz services.
COMPETITION FROM INCUMBENT LECS. The Company also faces significant
competition from incumbent LECs, irrespective of whether they provide 38 GHz
services. Incumbent LECs have long-standing relationships with their customers,
generally own significant PCS or cellular assets, have the potential to
subsidize competitive services with revenues from a variety of businesses and
benefit from favorable federal and state policies and regulations. Regulatory
decisions and recent legislation, such as the Telecommunications Act, have
partially deregulated the telecommunications industry and reduced barriers to
entry into new segments of the industry. In particular, the Telecommunications
Act, among other things, (i) enhances local exchange competition by preempting
laws prohibiting competition in the local exchange market, by requiring LECs to
provide fair and equal standards for interconnection and by requiring incumbent
LECs to provide unbundling of services and (ii) permits an RBOC to compete in
the interLATA long distance service market once certain competitive
characteristics emerge in such RBOC's service area. The Company believes that
this trend towards greater competition will continue to provide opportunities
for broader entrance into the local exchange markets. However, as LECs face
increased competition, regulatory decisions are likely to provide them with
increased pricing flexibility, which in turn may result in increased price
competition. There can be no assurance that such increased price competition
will not have a material adverse effect on the Company's results of operations.
OTHER COMPETITORS. The Company may compete with CAPs for the provision of
last mile access and additional services in most of its market areas. However,
the Company believes that many CAPs may utilize 38 GHz transmission links to
augment their own service offerings to IXCs and end users, and that the Company
is well positioned to provide such 38 GHz services to CAPs. However, there can
be no assurance that CAPs will utilize the Company's 38 GHz services or that
CAPs will not seek to acquire their own 38 GHz licenses or use the 38 GHz
licenses of other licensees. Furthermore, the ability of CAPs to compete in the
local exchange market is limited by regulations relating to number portability,
dialing parity and reasonable interconnection. The Telecommunications Act
requires the FCC and the states to implement regulations that place CAPs on a
more equal competitive footing with LECs. To the extent these changes are
implemented, CAPs may be able to compete more effectively with LECs. However,
there can be no assurance that CAPs or 38 GHz service providers, such as the
Company, will be able to compete effectively for the provision of last mile
access and other services.
The Company may also face competition from cable television operators
deploying cable modems, which provide high speed data capability over installed
coaxial cable television networks. Although cable modems are not widely
available currently, the Company believes that the cable industry may support
the deployment of cable modems to residential cable customers through methods
such as price subsidies. Notwithstanding the cable industry's interest in rapid
deployment of cable modems, the Company believes that in order to provide
broadband capacity to a significant number of business and government users
cable operators will be required to spend significant time and capital in order
to upgrade their existing networks to the next generation of hybrid fiber
coaxial network architecture. However, there can be no assurance that cable
television operators will not emerge as a source of competition to the Company.
The Company may also face competition from electric utilities, LECs
operating outside their current local service areas, IXCs and other providers.
These entities provide transmission services using technologies which may enjoy
a greater degree of market acceptance than 38 GHz wireless broadband technology
in the provision of last mile broadband services. In addition, the Company may
face competition from new market entrants using wireless, fiber optic and
enhanced copper based networks to provide local service and from wireless cable
providers and other service providers operating in frequencies other than 38
GHz.
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Many of the Company's competitors have long-standing relationships with
customers and suppliers, greater name recognition and greater financial,
technical and marketing resources than the Company. As a result, these
competitors may be able to more quickly develop and exploit new or emerging
technologies, adapt to changes in customer requirements, or devote greater
resources to the marketing of their services than the Company. The consolidation
of telecommunications companies and the formation of strategic alliances and
cooperative relationships in the telecommunications and related industry, as
well as the development of new technologies, could give rise to significant new
competitors to the Company. In such case, there can be no assurance as to the
degree to which the Company will be able to compete effectively.
GOVERNMENT REGULATION
The Company's wireless broadband services are subject to regulation by
federal, state and local governmental agencies. The Company believes that it is
in substantial compliance with all material laws, rules and regulations
governing its operations and has obtained, or is in the process of obtaining,
all authorizations, tariffs and approvals necessary and appropriate to conduct
its operations. Nevertheless, changes in existing laws and regulations,
including those relating to the provision of wireless local telecommunications
services via 38 GHz and/or the future granting of 38 GHz authorizations, or any
failure or significant delay in obtaining necessary regulatory approvals, could
have a material adverse effect on the Company.
FEDERAL REGULATION
At the federal level, the FCC has jurisdiction over the use of the
electromagnetic spectrum (I.E., wireless services) and has exclusive
jurisdiction over all interstate telecommunications services, that is, those
that originate in one state and terminate in another state. State regulatory
commissions have jurisdiction over intrastate communications, that is, those
that originate and terminate in the same state. Municipalities may regulate
limited aspects of the Company's business by, for example, imposing zoning
requirements and requiring installation permits. The Company also is subject to
taxation at the federal and state levels and may be subject to varying taxes and
fees from local jurisdictions.
FCC LICENSING. The Communications Act of 1934 (the "Communications Act")
imposes certain requirements relating to licensing, common carrier obligations,
reporting and treatment of competition. Under current FCC rules, the recipient
of an authorization for 38 GHz microwave facilities is required to complete
construction of such facilities within 18 months of the date of grant of the
authorization (authorizations for facilities that are not constructed are
referred to in this Prospectus as "construction permits" and authorizations for
facilities that are constructed are referred to in this Prospectus as
"licenses"). Upon completion of construction, the licensee is required to
certify that the station is operational and ready to provide services to the
public. Although, under current FCC regulations, the term "operational" is not
defined, the industry custom is to establish at least one link between two
transceivers in each market area for which it holds a construction permit. In
the event that the recipient fails to comply with the construction deadline, the
construction permit is subject to forfeiture, absent an extension of the
deadline. Effective August 1, 1996, the Company will not be required to file a
form with the FCC certifying that its station is operational (i.e. that
construction is completed); however, the licensee will still be required to
complete construction within 18 months of the date of grant of the
authorization. In addition, effective August 1, 1996, a station will be
operational when construction is complete and the station is capable of
providing service. Upon completion of the CommcoCCC Acquisition, the Company
will own or manage a total of 237 authorizations that will allow it to provide
38 GHz wireless broadband services in 169 U.S. markets. The Company currently
owns or manages 108 authorizations (exclusive of the CommcoCCC Assets) that
allow it to provide 38 GHz wireless broadband services in 89 markets to
construct and operate 38 GHz wireless broadband facilities, 73 of which are
owned by the Company and the remaining 35 of which are managed by the Company
through the Company's interests in or arrangements with other companies. Of the
108 authorizations (exclusive of the CommcoCCC Assets) which the Company owns or
manages, 77 are licenses. Under the
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terms of its remaining 31 construction permits, the Company must complete
construction of facilities for the majority of such authorizations between
mid-August and mid-September 1996, but it expects to complete construction of
all such construction permits by the beginning of August 1996. Under the terms
of the CommcoCCC authorizations and the Company's management agreement with
CommcoCCC, the Company must complete construction of facilities for eight
construction permits by mid-September 1996, 39 construction permits by December
1996 and the remaining 82 between mid-April and August 1997. The Company
believes that, in light of current FCC practice, extensions of construction
periods are highly unlikely. See "Risk Factors -- Risk of Forfeiture,
Non-Renewal and Fluctuation in Value of FCC Licenses."
COMMON CARRIER REGULATION. Under the terms of its licenses, the Company is
classified as a common carrier, and as such is required to offer service on a
non-discriminatory basis at just and reasonable rates to anyone reasonably
requesting such service. Although the Communications Act prohibits the Company
from discriminating among its customers, the Communications Act, as currently
interpreted by the FCC, does permit the Company substantial discretion in
classifying its customers and discriminating among such classifications. The
Company generally is obligated to furnish service to its competitors and might
be obligated to allow other 38 GHz providers to install links within one of the
Company's market areas for a non-discriminatory fee. Under the FCC's streamlined
regulation of non-dominant carriers, the Company, as a non-dominant carrier,
must file tariffs with the FCC for certain interstate services on an ongoing
basis. The Company is in the process of filing tariffs with the FCC, to the
extent required, with respect to its provision of interstate service. The FCC
has recently initiated a rulemaking proceeding to eliminate the tariff filing
requirement pursuant to new forbearance authority contained in the
Telecommunications Act. The Company, as a non-dominant carrier, is not currently
subject to rate regulation, and it may install and operate non-radio facilities
for the transmission of interstate communications without prior FCC or state
authorization.
The Company manages the systems of ART West, DCT, Telecom One and CommcoCCC
(during the pendency of the acquisition of certain acquisitions) pursuant to
management agreements. See "Business -- Agreements Relating to Licenses and
Authorizations." The Company believes that the provisions of these management
agreements comply with the FCC's policies concerning licensee control of
FCC-licensed facilities. Because the 38 GHz service is a new service, however,
there is no FCC precedent addressing the limits of such management arrangements
for these services. No assurance can be given that the arrangements or proposed
acquisitions will, if challenged, be found to satisfy the FCC's policies or what
modifications, if any, may need to be made to satisfy those policies. If the FCC
were to void or require modifications of the management arrangements, the
Company's operating results would be adversely affected.
FCC REPORTING. The Company, as an operator of millimeter wave radio
facilities, is subject to the FCC's semiannual reporting requirements with
respect to the deployment of wireless local telecommunications services in its
licensed areas. The Company believes that it has fully complied with its
reporting obligation. Effective August 1, 1996, the FCC rules will not require
semiannual reporting.
COMPETITION. Over the last several years, the FCC has issued a series of
decisions and Congress has recently enacted legislation making the interstate
access services market more competitive by requiring reasonable and fair
interconnection by LECs. Concomitant with its decision to require such
interconnection, the FCC has provided LECs with a greater degree of increased
pricing flexibility between services (such as the ability to reduce local access
charges paid by long distance carriers utilizing LECs' local networks) and
between geographic markets (such as cross-subsidizing price cuts across
geographic markets). The Company anticipates that this pricing flexibility will
result in LECs lowering their prices in high density zones. To the extent that
LECs choose to take advantage of increased pricing flexibility to lower their
rates, the ability of the Company and CAP customers of the Company to compete
for certain markets and services and the Company's operating results may be
adversely affected.
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THE TELECOMMUNICATIONS ACT. The Telecommunications Act substantially
departs from prior legislation in the telecommunications industry by
establishing local exchange competition as a national policy through the removal
of state regulatory barriers to competition and the preemption of laws
restricting competition in the local exchange market. The Telecommunications
Act, among other things, mandates that LECs (i) permit resale of their services
and facilities on reasonable and nondiscriminatory terms and at wholesale rates,
(ii) allow customers to retain the same telephone number ("number portability")
when they switch carriers, (iii) permit interconnection by competitors to a
LEC's network at any technically feasible point on the same terms as LEC charges
for its own services, (iv) unbundle their network services and facilities by
permitting competitors and others to use some but not all of their facilities at
cost-based and nondiscriminatory rates and (v) ensure that the end user does not
have to dial any more digits to reach local competitors than to reach the LEC to
the extent technically feasible ("dialing parity"). The Telecommunications Act
also allows RBOCs to provide interLATA services once certain competitive
characteristics emerge in their local exchange markets. The provisions of the
Telecommunications Act are designed to ensure that RBOCs take affirmative steps
to level the playing field for their competitors so that CAPs and others can
compete effectively. The FCC, with advice from the United States Department of
Justice, and the states are given jurisdiction to enforce these requirements.
There can be no assurance, however, that the states and the FCC will implement
the Telecommunications Act in a manner favorable to the Company and its
customers.
FCC RULEMAKING. On November 13, 1995, the FCC released an order barring the
acceptance of new applications for 38 GHz authorizations. On December 15, 1995,
the FCC announced the issuance of the NPRM, pursuant to which it proposed to
amend its current rules to provide for, among other things, (i) the adoption of
an auction procedure for the issuance of authorizations in the 38 GHz band,
including a possible auction of the lower fourteen 100 MHz channels (which are
similar to those used by the Company) and the lower four 50 MHz channels in the
38 GHz band that have not been previously available for commercial use, (ii) the
continuation of the 100 MHz-based channeling plan and licensing rules for
point-to-point microwave operations in the lower 14 channels, (iii) licensing
frequencies using predefined geographic service areas ("Basic Trading Areas"),
(iv) the imposition of substantially stricter construction requirements for
authorizations that are not received pursuant to auctions as a condition to the
retention of such authorizations and (v) the implementation of certain technical
rules designed to avoid radio frequency interference among licensees. In
addition, the FCC ordered that those applications subject to mutual exclusivity
with other applicants or placed on public notice by the FCC after September 13,
1995 would be held in abeyance pending the outcome of the NPRM and might then be
dismissed. Final rules issued in connection with the NPRM may require that 38
GHz service providers share other yet-to-be licensed portions of the 38 GHz band
with other telecommunications service providers. The implementation of such a
measure could materially affect the Company's ability to provide services to its
customers by imposing power or other limitations upon its existing operations.
The NPRM proposes substantial strengthening of the current rules concerning the
steps that a grantee of a 38 GHz authorization must take to satisfy the FCC's
construction requirements. At present, the holder of a construction permit is
only required to certify that it is operational. Although under current FCC
regulations the term "operational" is not defined, the industry custom is to
install one link, which may be only temporary and may not be producing revenue
for the operator. The NPRM expresses concern that this lenient standard might
allow the warehousing of 38 GHz spectrum. As a consequence, the NPRM proposes
much more stringent construction requirements for authorizations other than
those received pursuant to an auction. There can be no assurance that the final
rules (if any) issued in connection with the NPRM will resemble the rules
proposed in the NPRM. There also can be no assurance that any proposed or final
rules will not have a material adverse effect on the Company. Statutes and
regulations which may become applicable to the Company as it expands could
require the Company to alter methods of operations at costs which could be
substantial or otherwise limit the types of services offered by the Company.
The NPRM also proposes that 38 GHz authorizations be awarded by auction. The
NPRM would specify the geographic areas that could be licensed instead of
continuing to allow the applicants to
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design the geographic circumferences of the licenses. The Company has not
determined whether to seek additional licenses in the event of an auction. The
Company believes that the FCC is likely to award 38 GHz authorizations by
auction, but there can be no assurance that this will occur.
STATE REGULATION
Many of the Company's services, either now or in the future, may be
classified as intrastate and therefore may be subject to state regulation. The
Company is in the process of obtaining state authorizations deemed to be
sufficient to conduct most, if not all, of its proposed business in the
near-term, but there can be no assurance that some portion of the Company's
proposed transmissions might not be considered to be subject to state
jurisdiction in a state in which the Company does not have appropriate
authority. The Company expects that as its business and product lines expand and
the requirements of the Telecommunications Act favoring competition in the
provision of local communications services are implemented, it will offer an
increased number and type of intrastate services. The Company is implementing a
program to expand the scope of its intrastate certifications in various state
jurisdictions as its product line expands and as the Telecommunications Act is
implemented.
Under current state regulatory schemes, entities can compete with LECs in
the provision of (i) local access services, (ii) dedicated access services,
(iii) private network services, including WAN services, for businesses and other
entities and (iv) long distance toll services. The remaining local
telecommunications services, including switched local exchange services
encompassing calls originating and terminating within a single LATA, are not
currently subject to competition in most states. The Telecommunication Act
requires each of these states to remove these barriers to competition. No
assurance can be given as to how quickly and how effectively each state will act
to implement the new legislation.
INTELLECTUAL PROPERTY RIGHTS
The Company has filed for protection for four service marks: DigiWave (the
Company's wireless broadband trademark), OZ Box (the Company's proprietary
network management interface), ART and Advanced Radio Telecom. These first
filings are block mark applications, which if allowed by the Patent and
Trademark Office, would protect future variations. The Company will seek the
maximum protection for its future service marks. There can be no assurance that
the service marks applied for will be granted nor that the Company's future
efforts will be successful. Although the Company is developing various
proprietary processes, software products and databases and intends to protect
its rights vigorously and to continue to develop such proprietary systems and
databases, there can be no assurance that these measures will be successful in
establishing its proprietary rights in such assets.
EMPLOYEES
As of June 15, 1996, the Company had a total of 70 employees, including 20
in engineering and field services, 25 in sales and marketing, 13 in
administration and finance, 8 in operations and 4 in corporate development and
advanced services. None of the Company's employees is represented by a
collective bargaining agreement. The Company has never experienced a work
stoppage and believes that its employee relations are good.
PROPERTIES
The Company leases approximately 22,000 square feet of office, technical
operations and engineering field services depot space in Bellevue, Washington.
The Company's corporate headquarters, network operations center and western
regional sales office occupy approximately 15,000 square feet under a sublease
expiring in January 2000. The Company's engineering department leases
approximately 5,000 square feet and 2,000 square feet for technical operations
and an engineering field services depot, respectively, pursuant to leases
expiring in May 1997. In addition the Company leases 1,100 square feet of office
space in Portland, Oregon for sales and marketing personnel pursuant to a lease
expiring in March 1998. The Company also leases temporary office space in
Washington, D.C. under a sub-lease from Pierson & Burnett, L.L.P. See "Certain
Transactions -- Pierson & Burnett Transactions."
LITIGATION
The Company is not a party to any litigation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and certain other key officers of the
Company, their ages and their positions are as follows (after giving effect to
the Merger):
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Vernon L. Fotheringham (1)(2)(3)............ 48 Chairman of the Board of Directors and Chief Executive
Officer
Steven D. Comrie............................ 40 President, Chief Operating Officer and Director
Thomas A. Grina............................. 38 Executive Vice President and Chief Financial Officer
W. Theodore Pierson, Jr..................... 59 Executive Vice President, Secretary and General Counsel
James D. Miller............................. 53 Senior Vice President, Sales and Marketing
James C. Cook (6)(7)(8)..................... 36 Director Designate
J.C. Demetree, Jr. (3)(4)(5)................ 37 Director
Mark C. Demetree (1)(2)..................... 39 Director
Andrew I. Fillat (2)(3)(4).................. 48 Director
Matthew C. Gove (2)(4)(5)................... 31 Director
T. Allan McArtor (6)(8)(9).................. 53 Director Designate
Laurence S. Zimmerman (1)(3)(5)............. 36 Director
</TABLE>
- ------------------------------
(1) Member of Option Committee.
(2) Member of Compensation Committee.
(3) Member of Finance Committee.
(4) Member of Audit Committee.
(5) These directors will resign effective on the date of this Prospectus, and
James C. Cook and T. Allan McArtor will be elected to the Board of
Directors. See " -- Board Composition."
(6) These directors have been elected effective on the date of this Prospectus.
See "-- Board Composition."
(7) Member of Option Committee effective on the date of this Prospectus.
(8) Member of Audit Committee effective on the date of this Prospectus.
(9) Member of Compensation Committee effective on the date of this Prospectus.
VERNON L. FOTHERINGHAM has served as Chairman of the Board of Directors,
Chief Executive Officer of the Company and Telecom since inception. From 1993 to
1995, Mr. Fotheringham served as president and chief executive officer of Norcom
Networks Corporation, a nationwide provider of mobile satellite services. In
1992, Mr. Fotheringham co-founded Digital Satellite Broadcasting Corporation
("DSBC"), a development stage company planning to provide satellite radio
services nationwide, served as its chairman from 1992 to 1993 and currently
serves as one of its directors. From 1988 to 1994, Mr. Fotheringham served as
senior vice president of The Walter Group, Inc. ("TWG"), a wireless
telecommunications consulting and project management firm. From 1983 to 1986,
Mr. Fotheringham served as vice president of marketing of Omninet Corporation,
which was the original developer of the current Qualcomm Omni TRACS network.
Over the last ten years, Mr. Fotheringham has advised several businesses in the
telecommunications industry, including American Mobile Satellite Corporation,
ClairCom Communications ("ClairCom") and McCaw Cellular Communications, Inc.
STEVEN D. COMRIE has served as President, Chief Operating Officer and a
director of the Company since July 1995. From 1992 to 1995, Mr. Comrie served as
vice president and general manager of
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Cypress Broadcasting Inc., a California-based television subsidiary of Ackerley
Communications Inc., a diversified media company based in Seattle, Washington.
From 1990 to 1992, Mr. Comrie served as president of First Communication Media
Inc. and as an investor, advisor and manager of satellite, broadcast and
telecommunications businesses in the United States and Canada. In 1986, Mr.
Comrie co-founded Netlink, the first commercial direct broadcast satellite
service operating in the U.S. which was subsequently acquired by
Tele-Communications Inc. ("TCI"). Previously, Mr. Comrie served in a variety of
management positions with cable and media companies.
THOMAS A. GRINA has served as Executive Vice President and Chief Financial
Officer of the Company since April 1996. From June 1989 to April 1996, Mr. Grina
was Executive Vice President, Finance and Chief Financial Officer of DialPage,
Inc. and Executive Vice President of its wholly-owned subsidiary, Dial Call
Communications, Inc., a wireless communications company operating in the
southeastern U.S.
W. THEODORE PIERSON, JR. has served as Executive Vice President and General
Counsel of the Company and Telecom since inception. He has served as a director
of the Company since its inception and will resign upon completion of the
Merger. For more than five years, Mr. Pierson has been a partner of the firm of
Pierson & Burnett, L.L.P. (and its predecessor firms) in Washington, D.C., which
specializes in telecommunications law. As such, Mr. Pierson has advised a number
of start-up telecommunications companies, including Home Box Office, Satellite
Business Services, Omninet Corporation and DSBC. Mr. Pierson currently serves as
a director of DSBC. Mr. Pierson has also been counsel to the Competitive
Telecommunications Association (the largest association of long distance
carriers) and the Association for Local Telecommunications Services for several
years.
JAMES D. MILLER has served as Senior Vice President, Sales and Marketing of
the Company since December 1995. From 1993 to 1995, Mr. Miller was vice
president and general manager of U.S. Intelco Wireless. Mr. Miller served as
executive vice president of Atlas Telecom from 1987 to 1993 and as national
sales manager of Sidereal Corporation from 1977 to 1987.
JAMES C. COOK will become a director of the Company upon the date of this
Prospectus. Mr. Cook is currently senior vice president of First Union Capital
Partners, Inc. ("FUCPI"), the private equity investment affiliate of First Union
Corporation, where he has been employed since 1989. Prior to joining FUCPI, Mr.
Cook served in various capacities at The Bank of New York from 1982 to 1987 and
at Kidder, Peabody & Co. Inc. in 1988.
J.C. DEMETREE, JR. has served as a director of the Company since May 1995.
Since 1987, Mr. Demetree has served as president of Demetree Brothers, Inc., a
real estate service company. Since 1980, he has been a partner and trustee of
Pentagon Properties, a privately-held trust with investments in commercial real
estate and other operating businesses including banking and chemical. Mr.
Demetree has served since 1987 as a director of Community First Bank and since
1995 as a director and officer of CFB Bancorp.
MARK C. DEMETREE has served as a director of the Company since May 1995.
Since 1993, Mr. Demetree has been president of North American Salt Company, the
second largest salt producer in North America. From 1991 through 1993, Mr.
Demetree served as president of Trona Railway Company, a shortline railroad
division of North American Chemical Company. Mr. Demetree currently is a
director of J.C. Nichols Company, a real estate company, and serves on the Board
of Governors of the Canadian Chamber of Maritime Commerce for the Great
Lakes/St. Lawrence Seaway and is the current chairman of the CEO Council of the
Salt Institute.
ANDREW I. FILLAT has served as a director of the Company since November
1995. Mr. Fillat has been employed since 1989 by Advent International
Corporation ("Advent"), a global venture capital and private equity management
firm and currently serves as senior vice president. Prior to 1989, Mr. Fillat
was a partner at Fletcher and Company, a consulting firm specializing in
assisting venture-backed enterprises, and was an operating executive with
Fidelity Investments. Mr. Fillat is also a director of:
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Interlink Computer Sciences, a systems management and communications software
company; Lightbridge, Inc., a company providing customer acquisition and
marketing related services for cellular and PCS carriers; Voxware, Inc., a
software company providing advanced voice compression and processing; and
several private companies in the Advent portfolio.
MATTHEW C. GOVE has served as a director of the Company since May 1995.
Since 1994, Mr. Gove has been, through Hedgerow Corporation of Maine
("Hedgerow"), a consultant to LHC, specializing in domestic and international
telecommunications transactions. From 1991 through 1993, he attended the
Columbia University Graduate School of Business and worked as an independent
consultant specializing in spreadsheet modeling and financial analysis. Prior to
1991, he was custodial manager of foreign currency derivative funds at The
Boston Company.
T. ALLAN MCARTOR will become a director of the Company upon the date of this
Prospectus. Since 1995, Mr. McArtor has been chairman and chief executive
officer of Quest Computer Television Company, LLC, an interactive publicly
programmable information network. Since 1994, Mr. McArtor has also served as
chairman and chief executive officer of Contrails, LLC, an aviation consulting
firm. From 1992 to 1994, Mr. McArtor served as president of FedEx Aeronautics
Corporation, a wholly-owned subsidiary of Federal Express Corporation ("FedEx").
From 1982 to 1987, he served as senior vice president of the FedEx
Telecommunications Division and from 1989 to 1992 as senior vice president of
air operations at FedEx. From 1987 to 1989, Mr. McArtor was Administrator of the
Federal Aviation Administration. Mr. McArtor currently serves on the board of
directors of Pilkington Aerospace, Inc., a manufacturer of aviation
transparencies for fighter aircraft canopies, aircraft windshields and windows.
LAURENCE S. ZIMMERMAN has served as a director of the Company since May
1995. Since 1985, Mr. Zimmerman has been President of Landover Holdings
Corporation ("LHC"), of which he is the founder and beneficial owner. LHC is a
private investment firm with interests in wireless cable, wireless telephone,
cellular and managed healthcare and specialty retail companies as well as other
investments in the United States and abroad. From 1989 to 1990, Mr. Zimmerman
was a managing director of
Renaissance Capital Group Inc., a leveraged buyout firm which concentrated on
emerging market and middle market telecommunications and healthcare
opportunities. In 1993, Mr. Zimmerman was a founder of, and provided the seed
capital for, National Wireless Holdings Inc., a wireless cable company serving
markets in Southern Florida. On February 1, 1995, Mr. Zimmerman consented to the
entry of an order of the Securities and Exchange Commission, without admitting
or denying the matters referred to therein, barring him from association with
any broker, dealer, municipal securities dealer, investment company or
investment adviser during the period February 1, 1995 to February 1, 1996 and
requiring him not to violate certain provisions of the Federal securities laws.
The order relates to alleged violations arising out of alleged conduct by Mr.
Zimmerman in 1986 as a broker for Breuer Capital, in connection with trading and
selling shares of Balchem Corporation. See "Principal Stockholders -- Voting
Trust Agreement."
BOARD COMPOSITION
Under the terms of the Stockholders Agreement (as described in "Certain
Transactions -- February 1996 Reorganization"), the Landover Stockholders (as
defined in the Stockholders Agreement) have the right to designate four members
of the Board of Directors of the Company and have designated Messrs. Mark C.
Demetree, J.C. Demetree, Jr., Gove and Zimmerman as directors. In addition,
pursuant to the terms of the Stockholders Agreement, the Advent Partnerships (as
defined in the Stockholders Agreement) and Ameritech, as holders of Telecom's
Series E and F preferred stock respectively, have the right to designate one
member of the Board of Directors of the Company and have designated Mr. Fillat
as a director. Pursuant to the Stockholders Agreement, the right of the Advent
Partnerships to designate a director terminates at such time as the Advent
Partnerships cease to own at least 50% of the aggregate amount of equity
securities of the Company currently owned by them. See "Certain Transactions --
LHC Purchase Agreement -- Advent Private Placement." The Stockholders Agreement
will terminate upon consummation of the Offerings.
61
<PAGE>
All directors hold office until their successors have been elected and
qualified. Effective as of the date of this Prospectus, Messrs. J.C. Demetree,
Jr., Gove and Zimmerman will resign as directors, and James C. Cook and T. Allan
McArtor, each of whom is unaffiliated with the Company's present management,
will be elected to the Board. After consummation of the Offerings, Mr. Zimmerman
may attend meetings of the Board of Directors as an observer, at the invitation
of the Board of Directors. In addition, upon consummation of the Offerings, the
Company's Board of Directors will be divided into three classes, with each class
of directors to serve three-year staggered terms (after their initial terms).
Messrs. Comrie and McArtor will be elected as Class I directors for an initial
one-year term expiring in 1997. Messrs. Cook and Fotheringham will be elected as
Class II directors for an initial two-year term expiring in 1998. Messrs. Mark
C. Demetree and Fillat will be elected as Class III directors for an initial
three-year term expiring in 1999.
Promptly after closing of the CommcoCCC Acquisition, the Company has agreed
to nominate one individual designated by the Commco CCC stockholders and
acceptable to the Company as a director of the Company.
DIRECTOR COMPENSATION
Upon consummation of the Offerings, directors who are not employees of the
Company will receive $4,000 per year for services rendered as a director and
$500 for attending each meeting of the Board of Directors or one of its
Committees. In addition, directors may be reimbursed for certain expenses
incurred in connection with attendance at any meeting of the Board of Directors
or Committees. Other than reimbursement of expenses, directors who are employees
of the Company receive no additional compensation for service as a director.
In April 1996, the Company adopted the Directors Plan (as defined) which
provides for automatic grants of options to purchase an aggregate of 200,000
shares of Common Stock to non-employee directors of the Company. See "-- Stock
Option Plans." Upon consummation of the Offerings, options to purchase an
aggregate of 28,000 shares at an exercise price equal to the initial offering
price of the Common Stock are anticipated to be granted to non-employee
directors under the Directors Plan.
BOARD COMMITTEES
The Company's bylaws, as amended (the "Bylaws"), provide that the Board of
Directors may establish committees to exercise certain powers delegated by the
Board of Directors. Pursuant to that authority, the Board of Directors has
established an Option Committee, Compensation Committee, Finance Committee and
Audit Committee.
The Option Committee reviews, interprets and administers the Equity
Incentive Plan (as defined), prescribes rules and regulations relating thereto
and determines the stock options to be granted by the Company to its employees.
Messrs. Mark C. Demetree, Fotheringham and Zimmerman currently serve on the
Option Committee. Upon consummation of the Offerings, Messrs. Mark C. Demetree
and Fillat will serve on the Option Committee.
The Compensation Committee has responsibility for reviewing and
administering the Company's program with respect to the compensation of its
officers, employees and consultants and reviewing transactions with its
officers, directors and affiliates. As a policy, the Compensation Committee pays
officers, directors and affiliates of the Company for services rendered outside
the scope of their respective obligations to the Company, in accordance with
industry standards for such services, which may include introducing major
transactions or providing legal services to the Company. Messrs. Mark C.
Demetree, Fillat, Fotheringham and Gove currently serve on the Compensation
Committee. Upon consummation of the Offerings, Messrs. Mark C. Demetree, Fillat,
Fotheringham and McArtor will serve on the Compensation Committee.
62
<PAGE>
The Finance Committee has responsibility for reviewing and negotiating
financing proposals for the Company and submitting such proposals to the Board
of Directors for approval. Messrs. J.C. Demetree, Jr., Fillat, Fotheringham and
Zimmerman currently serve on the Finance Committee. Upon consummation of the
Offerings, the Finance Committee will be disbanded.
The Audit Committee recommends the engagement of independent accountants to
audit the Company's financial statements and perform services related to the
audit, reviews the scope and results of the audit with the accountants, reviews
with management and the independent accountants the Company's year-end operating
results, and considers the adequacy of internal accounting procedures. Messrs.
J.C. Demetree, Jr., Fillat and Gove currently serve on the Audit Committee. Upon
consummation of the Offerings, Messrs. Cook, Fillat and McArtor will serve on
the Audit Committee.
RELATED PARTY TRANSACTIONS
On February 2, 1996, the Company adopted a policy that all transactions,
including compensation, between the Company and its officers, directors and
affiliates will be on terms no less favorable to the Company than could be
obtained from unrelated third parties and shall be approved by a majority of the
disinterested members of the Compensation Committee or by a majority of the
disinterested members of the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received by (i) the
Company's Chief Executive Officer and (ii) each person serving as an executive
officer of the Company whose salary and bonus exceeded $100,000 (collectively,
the "Named Executive Officers"), for services rendered to the Company in all
capacities during the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------------------------------- -------------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Vernon L. Fotheringham, Chief Executive Officer $ 97,167 -- -- $ 9,600(1)
Steven D. Comrie, President and Chief Operating
Officer(2) 77,000 -- 756,691 33,200(1)(3)
W. Theodore Pierson, Jr., Executive Vice President 77,500 -- -- 219,600(1)(4)
James D. Miller, Senior Vice President, Sales and
Marketing (2) -- -- 50,000 --
</TABLE>
- ------------------------------
(1) Automobile reimbursement benefits equal to $9,600 in the case of Messrs.
Fotheringham and Pierson, $3,200 in the case of Mr. Comrie and $1,200 in
the case of Mr. Menatti.
(2) Reflects compensation for a partial year. See "-- Employment and Consulting
Agreements."
(3) Represents the forgiveness of a loan on January 1, 1996 that has been
accounted for as compensation expense on the 1995 statement of operations
of the Company.
(4) The Company paid Pierson & Burnett, L.L.P., of which Mr. Pierson is a
partner, $210,000 for services rendered to the Company through December 31,
1995.
63
<PAGE>
OPTION GRANTS. The following table sets forth certain information
regarding stock option grants made to the Named Executive Officers in fiscal
year 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (2)
---------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM (1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ----------------------------- ------------ --------------- --------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Comrie 756,691 71.9% $ 0.5907 6/17/05 $ 179,428 $ 427,102
James D. Miller 50,000 4.8% 1.652 12/29/00 -- 14,031
</TABLE>
- ------------------------------
(1) The potential realizable value is calculated based on the term of the
option at its time of grant (five years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate, compounded annually for the entire term of the option. The actual
realizable value of the options based on the price to public in the Common
Stock Offering will substantially exceed the potential realizable value
shown in the table. The option price is based upon an estimate of the fair
market value of the Company's equity securities as determined by the Option
Committee at the time of grant.
(2) See "-- Stock Option Plans -- Equity Incentive Plan -- Grants."
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES. The following table sets forth the number and value as of
December 31, 1995 of shares underlying unexercised options held by each of the
Named Executive Officers. As of December 31, 1995, no stock options had been
exercised by any Named Executive Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Steven D. Comrie 417,693 338,998 $ 254,500 $ 206,552
James D. Miller 10,000 40,000 -- --
</TABLE>
- ------------------------------
(1) Based on the estimated fair market value of the Company's Common Stock as
of December 31, 1995 of $1.20 per share, less the exercise price payable
upon exercise of such options. Such estimated fair market value as of
December 31, 1995 is substantially lower than the price to the public in
the Common Stock Offering.
STOCK OPTION PLANS
EQUITY INCENTIVE PLAN.
The Equity Incentive Plan was adopted by the Company on May 30, 1996 and
approved by the stockholders on June 25, 1996.
The Equity Incentive Plan is designed to advance the Company's interests by
enhancing its ability to attract and retain employees and others in a position
to make significant contributions to the success of the Company through
ownership of shares of Common Stock. The Equity Incentive Plan provides for the
grant of incentive stock options ("ISOs"), non-statutory stock options
("NQSOs"), stock appreciation rights ("SARs"), restricted stock, unrestricted
stock, deferred stock grants, and performance awards, loans to participants in
connection with awards, supplemental grants and combinations of the above. A
total of 2,500,000 shares of common stock are reserved for issuance under the
Equity Incentive Plan. The maximum number of shares as to which options or SARs
may be granted to any participant is
64
<PAGE>
800,000. The shares of Common Stock issuable under the Equity Incentive Plan are
subject to adjustment for stock dividends and similar events. Awards under the
Equity Incentive Plan may also include provision for payment of dividend
equivalents with respect to the shares subject to the award.
The Equity Incentive Plan is administered by the Option Committee of the
Board of Directors (the "Option Committee"). The Option Committee shall consist
of at least two directors. If the Common Stock is registered under the
Securities Exchange Act of 1934, all members of the Option Committee shall be
"outside directors" as defiined. All employees of the Company and any of its
subsidiaries and other persons or entities (including non-employee directors of
the Company and its subsidiaries) who, in the opinion of the Option Committee,
are in a position to make a significant contribution to the success of the
Company or its subsidiaries are eligible to participate in the Equity Incentive
Plan.
STOCK OPTIONS. The exercise price of an ISO granted under the Equity
Incentive Plan may not be less than 100% (110% in the case of 10% shareholders)
of the fair market value of the Common Stock at the time of grant. The exercise
price of a nonstatutory option granted under the Equity Incentive Plan is
determined by the Option Committee. The term of each option may be set by the
Option Committee but cannot exceed ten years from grant (five years from grant
in the case of an incentive stock option granted to a 10% shareholder), and each
option will be exercisable at such time or times as the Option Committee
specifies. The option price may be paid in cash or check acceptable to the
Company or, if permitted by the Option Committee and subject to certain
additional limitations, by tendering shares of Common Stock, by using a
promissory note, by delivering to the Company an undertaking by a broker
promptly to deliver sufficient funds to pay the exercise price, or a combination
of the foregoing.
STOCK APPRECIATION RIGHTS. SARs may be granted either alone or in tandem
with stock option grants. Each SAR entitles the participant, in general, to
receive upon exercise the excess of a share's fair market value in cash or
common stock at the date of exercise over the share's fair market value on the
date the SAR was granted. The Option Committee may also grant SARs which provide
that following a change in control of the Company as determined by the Option
Committee, the holder of such right will be entitled to receive an amount
measured by specified values or averages of values prior to the change in
control. If an SAR is granted in tandem with an option, the SAR will be
exercisable only to the extent the option is exercisable. To the extent the
option is exercised, the accompanying SAR will cease to be exercisable, and vice
versa. An SAR granted in tandem with an ISO may be exercised only when the
market price of common stock subject to the option exceeds the exercise price of
such option. SARs not granted in tandem shall be exercisable at such time as the
Option Committee may specify.
STOCK AWARDS. The Equity Incentive Plan provides for awards of
nontransferable shares of restricted Common Stock subject to forfeiture as well
as of unrestricted shares of Common Stock. Awards may provide for acquisition of
restricted and unrestricted Common Stock for a purchase price specified by the
Option Committee, but in no event less than par value. Restricted Common Stock
is subject to repurchase by the Company at the original purchase price or to
forfeiture if no cash was paid by the participant if the participant ceases to
be an employee before the restrictions lapse. Other awards under the Equity
Incentive Plan may also be settled with restricted Common Stock. Restricted
securities shall become freely transferable upon the completion of the
Restricted Period including the passage of any applicable period of time and
satisfaction of any conditions to vesting. The Option Committee, in its sole
discretion, may waive all or part of the restrictions and conditions at any
time.
The Equity Incentive Plan also provides for deferred grants entitling the
recipient to receive shares of Common Stock in the future at such times and on
such conditions as the Option Committee may specify, and performance awards
entitling the recipient to receive cash or Common Stock following the attainment
of performance goals determined by the Option Committee. Performance conditions
and provisions for deferred stock may also be attached to other awards under the
Equity Incentive Plan.
A loan may be made under the Equity Incentive Plan either in connection with
the purchase of Common Stock under an award or with the payment of any federal,
state and local tax with respect to income recognized as a result of an award.
The Option Committee will determine the terms of any loan,
65
<PAGE>
including the interest rate (which may be zero). No loan may have a term
exceeding ten years in duration. In connection with any award, the Option
Committee may also provide for and grant a cash award to offset federal, state
and local income taxes or to make a participant whole for certain taxes.
Except as otherwise provided by the Option Committee, if a participant dies,
options and SARs exercisable immediately prior to death may be exercised by the
participant's executor, administrator or transferee during a period of one year
following such death (or for the remainder of their original term, if less).
Except as otherwise determined by the Option Committee, options and SARs not
exercisable at a participant's death terminate. Outstanding awards of restricted
Common Stock must be transferred to the Company upon a participant's death and,
similarly, deferred Common Stock grants, performance awards and supplemental
awards to which a participant was not irrevocably entitled prior to death will
be forfeited, except as otherwise provided.
In the case of termination of a participant's association with the Company
for reasons other than death, options and SARs remain exercisable, to the extent
they were exercisable immediately prior to termination, for three months (or for
the remainder of their original term, if less), shares of restricted Common
Stock must be resold to the Company, and other awards to which the participant
was not irrevocably entitled prior to termination will be forfeited, unless
otherwise provided. If any such association is terminated due to the
participant's discharge for cause which, in the opinion of the Option Committee,
casts such discredit on the participant as to justify immediate termination of
any award under the Equity Incentive Plan, such participant's options and SARs
may be terminated immediately.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
of the Company's outstanding Common Stock by a single person or entity or by a
group of persons and/or entities acting in concert or in the event of the sale
or transfer of substantially all of the Company's assets, the Option Committee
may determine that (i) each outstanding option and SAR will become immediately
exercisable unless otherwise provided at the time of grant, (ii) each
outstanding share of restricted Common Stock will immediately become free of all
restrictions and conditions, (iii) all conditions on deferred grants,
performance awards and supplemental grants which relate only to the passage of
time and continued employment will be removed and (iv) all loans under the
Equity Incentive Plan will be forgiven. The Committee may also arrange to have
the surviving or acquiring corporation or affiliate assume any award held by a
participant or grant a replacement award. If the optionee is terminated after a
change in control by the Company without cause, or in the case of certain
officers designated from time to time by the Option Committee resigns under
certain circumstances, within two years following the change in control, all
unvested options will vest and all options will be exercisable for the shorter
of four years or their original duration and all other awards will vest. If the
option committee makes no such determination, outstanding awards to the extent
not fully vested will be forfeited.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion, which is
based on the law as in effect on June 1, 1996, summarizes certain federal income
tax consequences of participation in the Equity Incentive Plan. The summary does
not purport to cover federal employment tax or other federal tax consequences
that may be associated with the plans, nor does it cover state, local or
non-U.S. taxes.
In general, an optionee realizes no taxable income upon the grant or
exercise of an ISO. However, the exercise of an ISO may result in an alternative
minimum tax liability to the optionee. With certain exceptions, a disposition of
shares purchased under an ISO within two years from the date of grant or within
one year after exercise produces ordinary income to the optionee (and a
corresponding deduction is available to the company) equal to the value of the
shares at the time of exercise less the exercise price. Any additional gain
recognized in the disposition is treated as a capital gain for which the Company
is not entitled to a deduction. If the optionee does not dispose of the shares
until after the expiration of these one- and two-year holding periods, any gain
or loss recognized upon a subsequent sale is treated as a long-term capital gain
or loss for which the Company is not entitled to a deduction.
66
<PAGE>
In general, in the case of a nonstatutory option the optionee has no taxable
income at the time of grant but realizes income in connection with exercise of
the option in an amount equal to the excess (at the time of exercise) of the
fair market value of the shares acquired upon exercise over the exercise price,
a corresponding deduction is available to the Company, and upon a subsequent
sale or exchange of the shares, appreciation or depreciation after the date of
exercise is treated as capital gain or loss for which the Company is not
entitled to a deduction. In general, an ISO that is exercised more than three
months after termination of employment (other than termination by reason of
death) is treated as a nonstatutory option. ISOs granted after 1986 are also
treated as nonstatutory options to the extent they first become exercisable by
an individual in any calendar year for shares having a fair market value
(determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Internal Revenue
Code, the vesting or accelerated exercisability of awards in connection with a
change in control of the Company may be required to be valued and taken into
account in determining whether participants have received compensatory payments,
contingent on the change in control, in excess of certain limits. If these
limits are exceeded, a substantial portion of amounts payable to the
participant, including income recognized by reason of the grant, vesting or
exercise of awards under the Equity Incentive Plan, may be subject to an
additional 20% federal tax and may be nondeductible to the Company.
GRANTS. Mr. Comrie has been granted NQSOs expiring on various dates through
June 17, 2005 to purchase 756,691 shares of Common Stock at a price of $0.5907
per share. Of the NQSOs, 417,693 are currently exercisable, and 111,990 will
become exercisable on July 17, 1997 and up to an additional 227,008 shares (the
"Additional Shares") will become exercisable on June 17, 2000. The vesting of
NQSOs to purchase 56,752 Additional Shares will be accelerated in each year
based upon the attainment of certain performance goals as determined by the
Board of Directors. Each of Mr. Comrie's options are exercisable for a period of
five years from the date of vesting.
Mr. Grina has been granted NQSOs expiring on various dates through April 26,
2003 to purchase 300,000 shares of Common Stock at a price of $6.25 per share.
The NQSOs are subject to vesting over a three-year period, of which 100,000 are
fully vested and currently exercisable. NQSOs to purchase 200,000 shares will
become exercisable on April 26, 1999; however, the vesting of 100,000 of such
shares will be accelerated on each of the first and second anniversary of the
date of grant based upon attainment of certain performance goals as determined
by the Board of Directors. Each of Mr. Grina's options are exercisable for a
period of five years from the date of vesting. Mr. Grina's options will be fully
vested, notwithstanding the attainment of performance goals, on April 26, 1999.
In addition, all of his options become immediately exercisable, without regard
to the vesting period, upon a Change of Control (as defined in the Equity
Incentive Plan) and upon other corporate changes described in the agreement
evidencing his options.
Mr. Miller has been granted NQSOs expiring December 29, 2000 to purchase
50,000 shares of Common Stock at a price of $1.652 per share. The NQSOs vest at
a rate of 20% on each anniversary of the date of grant.
THE DIRECTORS PLAN.
On May 30, 1996, the Company adopted the 1996 Non-Employee Directors
Automatic Stock Option Plan (the "Directors Plan"), which provides for the
automatic grant of stock options to non-employee directors to purchase up to an
aggregate of 200,000 shares. Under the Directors Plan, options to acquire 6,000
shares of Common Stock are automatically granted to each non-employee director
who is a director on January 1 of each year. In addition, each non-employee
director serving on the Board of Directors effective on the date of the Common
Stock Offering will receive, and in the future each newly elected non-employee
director on the date of his or her first appointment or election to the Board of
Directors will receive, an automatic grant of options to acquire 7,000 shares of
Common Stock.
Although grants of the options under the Directors Plan are automatic, and
the Directors Plan is intended to be largely self-administering, the Directors
Plan will be administered by either the Board of
67
<PAGE>
Directors or a committee designated by the Board of Directors, which will, to
the extent necessary, administer and interpret the Directors Plan (the "Plan
Administrator"). Stock options awarded under the Directors Plan are priced
automatically at an exercise price equal to the market price of the Common Stock
on the date of grant. If at any time no public market for the Common Stock
exists, the Plan Administrator is empowered to determine the fair market value.
Under the Directors Plan, initial option grants vest over a three-year period
and are exercisable for a period of 10 years from the date of grant. On the date
of this Prospectus, options to purchase an aggregate of 28,000 shares at an
exercise price equal to the initial offering price of the Common Stock will be
granted to non-employee directors under the Directors Plan.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into a three-year employment agreement with Mr.
Fotheringham providing for full-time employment at an annualized base salary of
$250,000 for 1996, $275,000 for 1997 and $300,000 for 1998. In addition, Mr.
Fotheringham is entitled to receive an annual bonus of up to $100,000 depending
on the achievement of specified annual link installation goals. The goal for
each year will be established based on the operating budget approved by the
Board of Directors. The agreement precludes Mr. Fotheringham from competing with
the Company for one year after the cessation of his employment, regardless of
the reason for such cessation.
The Company has entered into a three-year employment agreement with Mr.
Comrie providing for full time employment at an annualized base salary of
$160,000 through December 31, 1995, $200,000 from January 1, 1996 to July 16,
1997 and $240,000 from July 17, 1997 to July 16, 1998. Mr. Comrie is entitled to
receive an annual bonus of up to $100,000 depending on the achievement of
specified annual link installation goals. The goal for each year will be
established based on the operating budget approved by the Board of Directors. As
part of the employment agreement, the Company provided Mr. Comrie an
interest-free loan in the amount of $30,000 and forgave payment of such loan on
January 1, 1996. The forgiveness of such loan has been accounted for as
compensation expense on the 1995 statement of operations of the Company. The
agreement also precludes Mr. Comrie from competing with the Company for one year
after the cessation of employment, regardless of the reason for such cessation.
The agreement may be terminated at any time by either party and provides that,
if the Company terminates Mr. Comrie without cause or Mr. Comrie's employment is
terminated due to his disability or death, Mr. Comrie will be entitled to
continue to receive the full amount of his base salary and any other benefits to
which he would have otherwise been entitled for a period of one year from the
date of such termination. See "-- Stock Option Plans" regarding stock options
granted to Mr. Comrie pursuant to his employment agreement.
The Company has entered into an employment agreement with Mr. Grina,
providing for full time employment on an at will basis at an annualized base
salary of $190,000 through April 30, 1997. In addition, Mr. Grina is entitled to
receive an annual bonus of up to $100,000 depending upon the achievement of
specified annual link installation goals. The goal for each year will be
established based on the operating budget approved by the Board of Directors.
The agreement precludes Mr. Grina from competing with the Company for one year
after the cessation of his employment, regardless of the reason for such
cessation. The agreement may be terminated at any time by either party and
provides that, if the Company terminates Mr. Grina without cause or Mr. Grina's
employment is terminated due to his disability or death, Mr. Grina will be
entitled to continue to receive the full amount of his base salary and any other
benefits to which he would have otherwise been entitled for a period of six
months from the date of such termination. See "-- Stock Option Plans" regarding
stock options granted to Mr. Grina pursuant to his employment agreement.
The Company has also entered into an employment agreement with Mr. Miller,
providing for full time employment at an annual base salary equal to $150,000.
His employment agreement provides for the payment by the Company of an annual
bonus in designated amounts based upon the achievement of specified performance
goals. The agreement has a term of three years and precludes him from competing
with the Company for one year after the cessation of employment, regardless of
the reason for such
68
<PAGE>
cessation. See "-- Stock Option Plans" regarding stock options granted to Mr.
Miller pursuant to his employment agreement. The employment agreement may be
terminated at any time by the Company or Mr. Miller and provides that, if the
Company terminates Mr. Miller's employment without cause or his employment is
terminated due to his disability or death, Mr. Miller may continue to receive
the full amount of his base salary and any other benefits to which he would have
otherwise been entitled for a period of six months from the date of such
termination.
The Company has entered into a three-year consulting agreement with Mr.
Pierson on May 8, 1995, providing for base fees of $80,000 for 1995, $140,000
for 1996 and $80,000 for 1997, subject to extension at the option of the
Company. The agreement also precludes Mr. Pierson from competing with the
Company for one year after termination of the agreement, regardless of the
reason for such termination. The agreement may be terminated at any time by
either party and provides that, if the Company terminates Mr. Pierson without
cause or Mr. Pierson terminates his consulting agreement for "good reason" (as
specified in the agreement), Mr. Pierson will be entitled to continue to receive
the full amount of his base fees and any other benefits to which he would have
otherwise been entitled for a period of one year from the date of such
termination. See "Certain Transactions -- Pierson & Burnett Transactions."
69
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of June 19, 1996,
regarding the beneficial ownership of the Company's Common Stock by (i) the
directors and executive officers of the Company, (ii) each person known by the
Company to own beneficially more than five percent of the outstanding shares of
the Company's Common Stock and (iii) all executive officers and directors as a
group assuming, in each case, that the Merger has been completed and the
Landover Partnerships have been dissolved.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP AFTER
PRIOR TO OFFERINGS OFFERINGS
------------------------- ----------------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------------- ------------- ---------- -------------------- ------------
<S> <C> <C> <C> <C>
Vernon L. Fotheringham (1)............................... 3,545,063 11.8% 3,545,063 9.4%
W. Theodore Pierson, Jr. (2)............................. 2,455,407 8.2 2,455,407 6.5
High Sky Inc. (3)........................................ 1,748,604 5.8 1,748,604 4.7
Landover Holdings Corporation (4)........................ 8,268,582 27.4 8,268,582 22.0
Advent International Corporation (5)..................... 3,186,238 10.5 3,186,238 8.4
Ameritech Development Corp. (6).......................... 1,677,745 5.5 1,677,745 4.3
Steven D. Comrie (7)..................................... 302,676 1.0 302,676 *
James C. Cook (8)........................................ 133,830 * 140,830(14) *
J.C. Demetree, Jr. (9)................................... 1,055,288 3.5 1,055,288 2.8
Mark C. Demetree (10).................................... 1,104,038 3.7 1,111,038(14) 2.9
Andrew I. Fillat (5)..................................... 3,186,238 10.5 3,193,238(14) 8.4
Matthew C. Gove (11)..................................... 441,753 1.5 441,753 1.2
T. Allan McArtor......................................... 0 * 7,000(14) *
Laurence S. Zimmerman (4)................................ 8,268,582 27.4 8,268,582 22.0
Thomas A. Grina (12)..................................... 100,000 * 100,000 *
James D. Miller (13)..................................... 10,000 * 10,000 *
All executive officers and directors as a group
(1)(2)(4)(5)(7)(8)(9)(10)(11)(12)(13)(14)............... 20,476,045 66.6% 10,872,252(8)(15) 28.4%
</TABLE>
- ------------------------
Unless otherwise indicated, the business address of each director and executive
officer named above is c/o Advanced Radio Telecom Corp., 500 108th Avenue N.E.,
Suite 2600, Bellevue, Washington 98004.
* Less than 1.0%.
(1) Includes 104,273 shares of Common Stock subject to an option owned by SERP.
See "Certain Transactions -- SERP Agreement."
(2) Includes 2,455,407 shares of Common Stock issuable upon completion of the
Merger. Also includes 44,694 shares subject to an option owned by SERP. See
"Certain Transactions -- SERP Agreement." Mr. Pierson's address is c/o
Pierson & Burnett L.L.P., 1667 K. Street, N.W., Washington, D.C. 20006.
(3) High Sky Inc. is the general partner of High Sky and High Sky II and may be
deemed the beneficial owner of all shares held by such partnerships.
Includes 1,398,883 and 349,721 shares of Common Stock issuable upon
completion of the Merger to High Sky and High Sky II, respectively. Also
includes 119,171 and 29,796 shares held by High Sky and High Sky II,
respectively, subject to an option owned by SERP. See "Certain Transactions
-- SERP Agreement." High Sky Inc.'s address is c/o Frank S. Phillips
Company, 6106 MacArthur Blvd., Bethesda, Maryland 20816.
(4) Includes 37,500 shares issuable upon exercise of Indemnity Warrants. Does
not include 294,489 shares, 1,375,699 shares, 5,276,440 shares and 95,719
shares issuable upon the Merger held by E1, E2, E2-2 and E2-3, respectively,
each a limited partnership whose general partner is controlled by LHC. Upon
the effectiveness of the Merger, these partnerships will dissolve. Including
the shares owned by such partnerships, LHC beneficially owns 15,310,929
shares of Common Stock constituting 50.9% of the Company's outstanding
securities prior to the Offerings. LHC is controlled by Laurence S.
Zimmerman. LHC's address is 667 Madison Avenue, New York, New York 10021.
See "-- Voting Trust Agreement."
(5) Includes 2,882,659 shares, 3,029 shares and 141,050 shares issuable upon
the Merger and 151,908 shares, 160 shares and 7,432 shares issuable upon
exercise of Bridge Warrants, respectively owned by Global Private Equity II,
L.P., Advent International II, L.P. and Advent Partners, L.P. (collectively,
the "Advent Partnerships"), each a limited partnership whose general partner
is controlled by Advent International Corp. ("Advent"). Mr. Fillat is a
director, officer and stockholder of Advent. The address of Advent and each
of the Advent Partnerships is 101 Federal Street, Boston, Massachusetts
02110.
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(6) Includes 635,609 shares issuable upon the Merger and 877,136 shares and
165,000 shares issuable upon exercise of the Ameritech Warrant and Bridge
Warrants, respectively. The address of Ameritech is 30 South Wacker Drive,
Chicago, Illinois 60601. See "Certain Transactions -- Ameritech Financing;
Ameritech Strategic Distribution Agreement."
(7) Includes 302,676 shares currently issuable upon exercise of options. Does
not include 454,015 issuable upon exercise of the non-vested portion of
options. See "Management -- Stock Option Plans."
(8) Includes 140,830 shares beneficially owned by James C. Cook including
22,000 shares issuable upon exercise of Bridge Warrants and 73,542 shares
and 38,288 shares issuable upon the Merger as a limited partner in E-2 and
E2-3, respectively. Mr. Cook will become a director of the Company upon the
date of this Prospectus.
(9) Does not include 154,000 shares issuable upon exercise of Bridge Warrants,
162,500 shares issuable upon exercise of Indemnity Warrants or 4,221,152
shares issuable upon the Merger held in each case by members of Mr.
Demetree's family (or a trust for their benefit), of which he disclaims
beneficial ownership. J.C. Demetree, Jr.'s address is c/o Demetree Brothers,
3740 Beach Boulevard, Suite 300, Jacksonville, Florida 32207.
(10) Includes 48,750 shares issuable upon exercise of Indemnity Warrants. Does
not include 154,000 shares issuable upon exercise of Bridge Warrants,
113,750 shares issuable upon exercise of Indemnity Warrants or 4,221,152
shares issuable upon the Merger held in each case by members of Mr.
Demetree's family (or a trust for their benefit), of which he disclaims
beneficial ownership. Mark C. Demetree's address is c/o North American Salt
Co., 8300 College Boulevard, Overland Park, Kansas 66210.
(11) Includes 441,753 shares issuable upon the Merger owned by Hedgerow
Corporation of Maine ("Hedgerow"), which is controlled by Mr. Gove. Does not
include shares owned beneficially by LHC, of which Mr. Gove disclaims
beneficial ownership. Hedgerow from time to time acts as a consultant to
LHC. Mr. Gove's address is 215 West 84th Street, New York, New York 10024.
(12) Includes 100,000 shares currently issuable upon exercise of an option.
(13) Includes 10,000 shares currently issuable upon exercise of an option.
(14) Includes 7,000 shares issuable upon exercise of options anticipated to be
granted under the Directors Plan upon the consummation of the Offerings.
(15) Reflects the resignations of Messrs. J.C. Demetree, Jr., Gove and Zimmerman
and the elections as directors of Messrs. Cook and McArtor upon the date of
this Prospectus. Does not include 8,268,582 shares beneficially owned by LHC
and held in trust by trustees, all of whom are directors of the Company,
pursuant to a Voting Trust Agreement, of which such trustees disclaim
beneficial ownership. See "-- Voting Trust Agreement." Includes 7,000 shares
beneficially owned by each of Messrs. Mark C. Demetree, Fillat, Cook and
McArtor issuable upon exercise of options to be granted under the Directors
Plan upon the consummation of the Offerings.
Upon completion of the CommcoCCC Acquisition, Columbia Capital Corporation,
as general partner of two of the stockholders of CommcoCCC, and Commco, L.L.C.,
the remaining stockholder of CommcoCCC, will beneficially own 8,842,154 and
7,707,846 shares, respectively, of Common Stock, including 26,715 and 23,285
shares, respectively, issuable upon exercise of the CommcoCCC Warrants,
constituting 16.3% and 14.2%, respectively, of the Company's Common Stock after
the Offerings (assuming the Underwriters' over-allotment option is not
exercised). Assuming the consummation of the Offerings and the CommcoCCC
Acquisition as of the date of this Prospectus, the Company would have 54,086,498
shares of Common Stock outstanding.
VOTING TRUST AGREEMENT
Pursuant to a proposed Voting Trust and Irrevocable Proxy Agreement,
effective on the date of this Prospectus, LHC will deposit all of its shares of
ART Common Stock in trust with Messrs. Mark C. Demetree, Andrew I. Fillat and
Vernon L. Fotheringham with irrevocable instructions to vote such shares on all
matters submitted to a vote of the stockholders of the Company in proportion to
the vote of other stockholders of the Company. The voting trust will expire on
the tenth anniversary of the date of this Prospectus, but is subject to early
termination in the event of (i) the death of Laurence S. Zimmerman or (ii) the
sale by LHC of such shares to unaffiliated parties. The trustees of the trust
will be indemnified by the Company.
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CERTAIN TRANSACTIONS
FORMATION OF ART
The Company was organized in August 1993 by Vernon L. Fotheringham and W.
Theodore Pierson, Jr., for the purpose of obtaining 38 GHz licenses from the
FCC. The initial stockholders, including Messrs. Fotheringham and Pierson,
purchased for $.01 per share ART Common Stock in a private placement which, net
of certain subsequent transfers, currently constitute an aggregate of 6,000,470
shares of Common Stock.
HIGH SKY PRIVATE PLACEMENTS
In November 1993 and March 1994, ART raised $60,000 and $30,000 through the
sale of its common stock (which, net of sales and acquisitions of additional
shares, now constitute an aggregate of 1,398,883 shares and 349,721 shares of
Common Stock, respectively) to High Sky Limited Partnership and High Sky II
Limited Partnership ("High Sky II" and, collectively, the "High Sky
Partnerships"). In March 1994, ART borrowed $70,000 from High Sky II. The loan
was evidenced by a promissory note executed by ART and payable to High Sky II
(the "High Sky Note"). Pursuant to an Agreement dated March 1, 1995, High Sky II
sold the High Sky Note to Vernon L. Fotheringham and W. Theodore Pierson, Jr. in
exchange for two new promissory notes, bearing interest at 7.5% per annum,
executed by Messrs. Fotheringham and Pierson in the principal amounts of $52,675
and $22,575, respectively (the "Fotheringham/Pierson Notes"), with payment
secured by pledges of shares of Common Stock owned by them. The terms of the
notes were as favorable as could be negotiated with unrelated third parties.
After the assignment and exchange, Messrs. Fotheringham and Pierson transferred
the High Sky Note to the Company as a capital contribution. The
Fotheringham/Pierson Notes, which are due in August 1997 and which are now
unsecured, are currently held by LHC (as defined below).
ART WEST JOINT VENTURE
The Company is party to the ART West Management Agreement, pursuant to which
it manages the business and assets of ART West, a joint venture between ART and
Extended. Mark T. Marinkovich, Vice President and General Manager, Western
Region of the Company is also the President and a stockholder of Extended. See
"Business -- Agreements Relating to Licenses and Authorizations -- ART West
Joint Venture" and "Principal Stockholders." In connection with the ART West
Joint Venture, ART issued to Extended 368,127 shares of Common Stock. Of these
368,127 shares, 15,678 shares are subject to an option owned by Southeast
Research Partners. See "-- SERP Agreement." In June 1996, the Company agreed to
acquire Extended's interest in ART West for $6,000,000 in cash, subject to FCC
approval.
ORGANIZATION OF TELECOM
ART and Landover Holdings Corporation ("LHC") organized Advanced Radio
Telecom Corp. ("Telecom") on March 28, 1995, and purchased for $.001 per share
340,000 shares of Class A common stock and 640,000 shares of Class B common
stock of Telecom, respectively, which, after giving effect to anti-dilution
adjustments resulting from issuances of preferred stock as described in "-- LHC
Purchase Agreement," certain transfers and the transactions described in "--
February 1996 Reorganization" and "-- Merger," currently are equivalent to
10,013,055 shares and 7,512,076, shares respectively, after giving effect to the
November 1995 redemption of shares of Common Stock. In addition, Hedgerow
Corporation of Maine ("Hedgerow") and Toro Financial Corp. ("Toro") purchased
for $.001 per share 15,000 shares and 5,000 shares, respectively, of Telecom
Class A common stock which, after such anti-dilution adjustments and the Merger,
currently are equivalent to 441,753 shares and 147,251 shares of Common Stock,
respectively. LHC is controlled by Laurence S. Zimmerman. Hedgerow is controlled
by Matthew C. Gove, a director of the Company. Hedgerow and Toro are consultants
to LHC.
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LHC PURCHASE AGREEMENT
GENERAL. Pursuant to a Purchase Agreement, dated April 21, 1995 (the "LHC
Purchase Agreement") among ART, LHC and Telecom, LHC, on behalf of itself and
its designees, agreed to purchase additional securities of Telecom (the "LHC
Stock") for an aggregate purchase price of $7,000,000 (the "Purchase Price"),
which additional securities would dilute only LHC's interest in the Company. In
addition, ART and Telecom entered into the ART Services Agreement. Moreover, ART
and its stockholders agreed with Telecom and its stockholders to enter into a
revised stockholders agreement (the "May 1995 Stockholders Agreement"), a
registration rights agreement and a merger agreement. Messrs. Fotheringham and
Pierson deposited 2,017,704 and 1,816,559 shares of Common Stock, respectively
(the "Escrow Shares"), under such agreement to be released upon achievement by
the Company of certain performance goals (the "Escrow Arrangement"). The Escrow
Shares were released to Messrs. Fotheringham and Pierson in part on November 13,
1995 as a result of the EMI Asset Acquisition, and the balance was released on
February 2, 1996 in connection with the February 1996 Reorganization (as
defined).
Upon the first closing under the LHC Purchase Agreement, on May 8, 1995,
Telecom received $700,000 from E2-2 Holdings, L.P. ("E2-2") and E2 Holdings,
L.P. ("E2"). In addition, E2-2 committed to subscribe for up to 50.0% of the
Purchase Price, matching other investors under the LHC Purchase Agreement with
protection from dilution to the extent such matching funds were not required.
The general partner of E2-2 and E2 is controlled by LHC. E2-2's limited partners
include J.C. Demetree, Jr. and Mark C. Demetree, directors of the Company, and
their affiliates. In addition, E2-2 granted to LHC an option to purchase from
E2-2 35,873 shares of Series A preferred stock (which convert into 466,349
shares of Common Stock prior to the Offerings). This option was exercised in
November 1995. See "Principal Stockholders."
The additional payments on the Purchase Price were made by the Landover
Partnerships (as defined below) as follows: $700,000 on August 22, 1995 and
$600,000 on October 19, 1995. On November 13, 1995, the Advent Partnerships (as
described below) paid the $5.0 million balance of the Purchase Price and the
Company paid LHC an aggregate of $391,750 for expenses. Also, on November 13,
1995, Telecom, ART and LHC agreed that the LHC Purchase Agreement was
substantially completed.
ART SERVICES AGREEMENT. Pursuant to the LHC Purchase Agreement, ART and
Telecom entered into a Services Agreement, dated May 8, 1995 (the "ART Services
Agreement") pursuant to which, for a 20-year term, Telecom provides management
services for, and receives 75.0% of the cash flow from operations after
deducting certain related direct expenses under wireless licenses held by ART.
LANDOVER PARTNERSHIPS. Between May 8, 1995 and November 13, 1995, the LHC
Stock was diluted by purchases of series of Telecom preferred stock by E2-2, E2,
E1 Holdings L.P. ("E1") and E2-3 Holdings, L.P. ("E2-3" and collectively with
E1, E2 and E2-2, the "Landover Partnerships"), each a limited partnership whose
general partner is controlled by LHC, in separate private placements. E2-2,
which committed to purchase up to $3.5 million of Telecom preferred stock
matching other investors under the LHC Purchase Agreement, purchased 405,880
shares of Telecom Series A preferred stock (which will convert into 5,276,440
shares of Common Stock prior to the Offerings) for an aggregate of $946,600, and
LHC purchased 35,873 shares of such Series A preferred stock from E2-2 for $1.1
million pursuant to an option. E2 purchased an aggregate of 105,823 shares of
Telecom Series B preferred stock (which converts into 1,375,699 shares of Common
Stock prior to the Offerings) for an aggregate of $842,400. E1 purchased 13,797
shares of Telecom Series A preferred stock (which converts into 179,361 shares
of Common Stock prior to the Offerings) for an aggregate of $60,000 and 8,856
shares of Telecom Series B preferred stock (which converts into 115,128 shares
of Common Stock prior to the Offerings) for an aggregate of $38,300. E2-3
purchased an aggregate of 7,363 shares of Telecom Series C preferred stock
(which converts into 95,719 shares of Common Stock prior to the Offerings) for
an aggregate of $112,700. All of the Landover Partnerships will liquidate upon
effectiveness of the Merger. See "Principal Stockholders."
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ADVENT PRIVATE PLACEMENT. On November 13, 1995, ART sold, for an aggregate
of $5.0 million, $4.95 million principal amount of 10% notes due May 13, 1997
(the "Advent Notes") and $50,000 stated amount of ART Series A Preferred Stock
(collectively, with the Advent Notes, the "Advent/ART Securities") to Global
Private Equity II, L.P., Advent International Investors II, L.P. and Advent
Limited Partnership (collectively the "Advent Partnerships"), each a limited
partnership whose general partner is controlled by Advent International Corp.
("Advent") pursuant to a Securities Purchase Agreement, dated November 13, 1995,
among the Advent Partnerships, ART, Telecom, Vernon L. Fotheringham and W.
Theodore Pierson, Jr. (the "Advent Agreement"). The Advent Agreement provided
among other things that the Advent/ART Securities were convertible into, and in
the February 1996 Reorganization described below, were converted into, 232,826
shares of Telecom Series E preferred stock (which convert into 3,026,738 shares
of Common Stock prior to the Offerings). The Telecom Series E preferred stock
provides, among other things, that the holders thereof have a right to designate
a director of Telecom (and, after the Merger, the Company), which director's
term was extended to an initial term of three years pursuant to the Stockholders
Agreement, as described below.
LHC AGREEMENTS
Pursuant to the LHC Purchase Agreement, LHC and Telecom entered into a
strategic and financial consulting agreement, dated May 8, 1995, under which LHC
agreed to provide financial and strategic planning and other advisory and
management services to the Company for a fee of $10,000 per month. The strategic
and financial consulting agreement was terminated on November 13, 1995, and
Telecom entered into a management consulting agreement with LHC, dated November
13, 1995, for an initial term of one year under which the Company will pay LHC
$420,000 per year and may pay a fee in the event LHC provides other services,
such as merger and acquisition advisory services to the Company. Upon the date
of this Prospectus, this agreement will be terminated and LHC will receive
amounts otherwise due under this agreement through November 13, 1996.
SERP AGREEMENT
Pursuant to a letter agreement, dated July 12, 1995, among Southeast
Research Partners ("SERP") ART, Vernon L. Fotheringham, W. Theodore Pierson,
Jr., High Sky Limited Partnership, High Sky II Limited Partnership and Extended
(the "SERP Agreement"), SERP agreed to procure additional capitalization or
financial assistance on behalf of ART. Under the SERP Agreement, SERP received
options from the other parties to such agreement to purchase, for an aggregate
consideration of $210,000, 313,612 shares of Common Stock after giving effect to
the Merger and $245,000 in cash as a fee for introducing LHC to ART.
SERIES D PREFERRED STOCK ISSUANCE
On November 9, 1995, Telecom sold 61,640 shares of Telecom Series D
preferred stock (which convert into 801,320 shares of Common Stock prior to the
Offerings) for $2.0 million in a private placement. Telecom simultaneously
redeemed 807,924 shares of Telecom common stock from LHC for $2.0 million. In
connection with the February 1996 Reorganization described below, LHC granted to
the holders of such Series D preferred stock a contingent option to purchase
400,634 shares of Telecom common stock owned by LHC at a nominal price. This
option will expire unexercised upon consummation of the Offerings.
FEBRUARY 1996 REORGANIZATION
On February 2, 1996, Telecom, ART and their respective stockholders agreed
(the "February 1996 Reorganization") to an amendment and restatement of the May
1995 Stockholders Agreement (as amended, the "Stockholders Agreement") providing
for (i) termination effective on consummation of the Offerings, (ii)
reorganization of the capital structure of Telecom, including providing for the
conversion of Telecom Class A and Class B common stock into Telecom common
stock, the revision of the terms and conversion into Telecom common stock (upon
consummation of the Offerings) of the
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Telecom Series A, B, C, D, E and F preferred stock and a 13 for 1 stock split,
(iii) the exchange of the Advent/ART Securities for Telecom Series E preferred
stock, (iv) revision of provisions for election of directors, (v) amendment and
restatement of the Company's registration rights agreement, including waiver of
registration rights relating to this offering, (vi) release of the remaining
Escrow Shares to the original owners thereof, (vii) the change of name of
Telecom to Advanced Radio Telecom Corp. and (viii) approval of a revised merger
agreement (the "Old Merger Agreement") providing for the merger of ART into
Telecom (the "Old Merger").
AMERITECH FINANCING; AMERITECH STRATEGIC DISTRIBUTION AGREEMENT
On February 2, 1996, Ameritech Development Corp. ("Ameritech") purchased for
an aggregate of $2.5 million 48,893 shares of Telecom Series F preferred stock,
par value $0.001 per share, (the "Ameritech Financing") convertible into 635,609
shares of Common Stock prior to the Offerings. In addition, Telecom entered into
a letter of intent with Ameritech Corp., the parent of Ameritech, to enter into
the Ameritech Strategic Distribution Agreement and in connection therewith
granted to Ameritech a ten-year warrant to purchase 877,136 shares of Common
Stock of the Company exercisable at a price of $.01 per share (the "Ameritech
Warrant"). On April 29, 1996, Telecom entered into the Ameritech Strategic
Distribution Agreement. The Company has a call on the Telecom Series F preferred
stock and the Ameritech Warrant in the event Ameritech terminates such agreement
in the first year or two years, respectively, of its term. See "Business --
Strategic Alliances -- Ameritech Strategic Distribution Agreement."
BRIDGE FINANCING
On March 8, 1996, Telecom entered into a financing (the "Bridge Financing")
pursuant to which it issued $5.0 million of 10% unsecured notes due in 1998 (the
"Bridge Notes") and five-year warrants to purchase up to an aggregate of
1,100,000 shares of Telecom common stock at a price of $6.25 per share (the
"Bridge Warrants") to private investors including (i) affiliates of J.C.
Demetree, Jr. and Mark C. Demetree, directors of the Company, (ii) the Advent
Partnerships and (iii) Ameritech, who invested $700,000, $725,000 and $750,000,
respectively, in the Bridge Notes and Bridge Warrants. See "Principal
Stockholders."
EQUIPMENT FINANCING
On April 1, 1996 CRA, Inc. ("CRA") provided the Company with $2,445,000 in
equipment financing (the "Equipment Financing") for the purchase from P-Com of
38 GHz radio equipment secured by the equipment, the Company's $1.0 million
letter of credit and a $500,000 letter of credit provided by J.C. Demetree, Jr.
and Mark C. Demetree, directors of the Company, and LHC, a principal stockholder
of the Company (the "Indemnitors"). To evidence its obligations under the
Equipment Financing the Company executed in favor of CRA its $2,445,000
Promissory Note (the "Equipment Note") which note is payable in 24 monthly
installments of $92,694 with a final payment of $624,305 due April 1, 1998. The
Indemnitors also agreed to provide the Company with funds and support for up to
$2.0 million of its obligations in the event of default on the Equipment Note or
draw against the Company's letter of credit. Pursuant to an arrangement approved
by the Company's disinterested directors on February 16, 1996, the Company paid
to the Indemnitors, or their designees an aggregate of $225,000 in cash and
five-year warrants to purchase an aggregate of 325,000 shares of Common Stock
(the "Indemnity Warrants") on terms substantially similar to the Bridge Warrants
as compensation for such indemnity. LHC has assigned Indemnity Warrants to
purchase 125,000 shares of Common Stock to a consultant to LHC.
PIERSON & BURNETT TRANSACTIONS
W. Theodore Pierson, Jr., Executive Vice President, General Counsel and
Secretary of the Company is a principal in the law firm of Pierson & Burnett,
L.L.P., which regularly provides legal services to the Company. During the year
ended December 31, 1995, the Company paid Pierson & Burnett, L.L.P. $210,000 for
such services. The Company believes that the terms of its relationship with
Pierson & Burnett, L.L.P. are at least as favorable to the Company as could be
obtained from an unaffiliated party.
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See "Management -- Executive Compensation" and "Principal Stockholders" for a
description of Mr. Pierson's consulting agreement with the Company and for
information regarding his share ownership. The Company subleases office space
for its regional office in Washington, D.C. from Pierson & Burnett, L.L.P. The
Company believes that the terms of its sublease are at least as favorable to the
Company as could be obtained from an unaffiliated party. See "Business --
Properties."
AMERICAN WIRELESS DEVELOPMENT AGREEMENT
The Company is party to a letter of intent with American Wireless pursuant
to which the Company will fund, subject to definitive documentation, $700,000 to
$1.0 million for research and development in exchange for a first right to
purchase American Wireless' production capacity of the new radios and will
receive a per-unit fee on radios sold by American Wireless to third parties.
Vernon L. Fotheringham, the Chairman of the Company, is a director and a 6.0%
stockholder of American Wireless. Mr. Fotheringham has recused himself in all
negotiations regarding agreements between the Company and American Wireless.
QUESTTV INVESTMENT
The Company has a non-binding arrangement with Quest Computer Television
Company, L.L.C. ("QuestTV") pursuant to which the Company would purchase,
subject to, among other things, definitive documentation and consummation of the
Offerings, equity interests of QuestTV for $1.5 million. QuestTV is seeking to
develop a nationwide network of franchises offering retail access to
sophisticated video and data transmission and storage technology. T. Allan
McArtor, who will become a director of the Company upon the date of this
Prospectus, is the president and chief executive officer of QuestTV.
COMMCOCCC ACQUISITION
On July , 1996, the Company entered into the CommcoCCC Agreement with
CommcoCCC which provides for the acquisition, subject to FCC approval, of 129 38
GHz wireless broadband authorizations in exchange for 16,500,000 shares of
Common Stock, or 30.5% of the Company on a fully diluted basis after giving
effect to the Offerings. The stockholders of CommcoCCC simultaneously loaned
$3.0 million to the Company, bearing interest at the prime rate and payable on
September 30, 1996, and received three-year warrants to purchase up to an
aggregate of 50,000 shares of Common Stock at a price of $15.00 per share. The
CommcoCCC Financing is secured by a security interest in all of the assets of
the Company, including a pledge of the Company's stock in Telecom. After closing
of the CommcoCCC Acquisition, the Company has agreed to nominate one individual
designated by CommcoCCC's stockholders and acceptable to the Company as a
director of the Company.
MERGER
On June 26, 1996, Telecom, ART and a wholly-owned subsidiary of ART ("Merger
Sub") entered into a revised merger agreement, superseding the Old Merger
Agreement (the "Merger Agreement"), which provides for the Merger of Merger Sub
into Telecom. Upon completion of the Merger, the stockholders of Telecom will
receive 20,073,443 shares of Common Stock, and Telecom will become a
wholly-owned subsidiary of ART and change its name to "ART Licensing Corp." The
consummation of the Merger is contingent on receipt of FCC approval therefor,
approval of the holders of Telecom capital stock and all ART stockholders and
receipt of a tax opinion. The FCC has indicated that it will approve the Merger,
and the Company expects to complete it shortly prior to the date of this
Prospectus. The Merger Agreement further provides that if the Merger is not
approved by the FCC by May 13, 1997, the shares of Telecom common stock owned by
ART will be surrendered to Telecom for nominal consideration, and the ART
Services Agreement will be amended to provide that (i) the term thereof will be
extended to 40 years, (ii) ART will receive, in the event of any dividends paid
by Telecom to its stockholders, an amount equal to the percentage share of
Telecom on the date that the ART stockholders would have received in the Merger
of such aggregate dividends, (iii) ART would have a right of co-sale, subject to
FCC approval, in accordance with such percentage share in the event of any
merger or sale of substantial assets by Telecom and (iv) in the event ART agrees
to merge into another entity or to sell substantially all its assets to another
entity, Telecom shall, upon the request of the Company, use its best efforts,
subject to FCC approval, to merge into such entity or sell substantially all its
assets to such entity for aggregate consideration equal to the percentage share
of the aggregate consideration to be paid for ART and Telecom in such
transaction.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company currently consists of
100,000,000 shares of Common Stock, $0.001 par value, and 10,000,000 shares of
Serial Preferred Stock, $0.001 par value (the "Preferred Stock").
COMMON STOCK
As of June 28, 1996, there were 10,013,055 shares of Common Stock
outstanding held of record by 11 stockholders (without giving effect to the
Merger or any exercise of outstanding warrants or options). The holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
the stockholders. Subject to preferences that may be applicable to the
outstanding share of Preferred Stock, the holders of Common Stock are entitled
to receive ratably such dividends as may be declared from time to time by the
Board of Directors out of funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior liquidation rights of Preferred Stock then
outstanding. The Common Stock has no preemptive conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable, and the shares of Common Stock to be outstanding upon
consummation of the Common Stock Offering will be fully paid and non-assessable.
PREFERRED STOCK
As of June 28, 1996, there was one share of ART Series A Preferred Stock
outstanding held of record by Telecom. Upon the completion of the Merger, such
Preferred Stock will automatically be surrendered. See "Certain Transactions --
Merger." The Board of Directors will have the authority to issue Preferred Stock
in one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued shares of Preferred
Stock and to fix the number of shares constituting any series in the
designations of such series, without any further vote or action by the
stockholders. The Board of Directors, without stockholder approval, can issue
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of Common Stock. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company. The Company does not presently intend to issue Preferred Stock. In
addition, the terms of the Indenture will restrict the ability of the Company to
issue Preferred Stock. See "Description of Certain Indebtedness -- The Notes."
CHANGE IN CONTROL PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of preventing, discouraging or delaying any change in the
control of the Company any may maintain the incumbency of the Board of Directors
and management. The authorization of Preferred Stock makes it possible for the
Board of Directors to issue Preferred Stock with voting or other rights or
preferences that could impede the success of any attempt to effect a change in
control of the Company. In addition, on the effectiveness of the Offerings,
certain provisions of the Certificate of Incorporation will create three classes
of directors serving for staggered three-year terms and prevent any amendment to
such provisions without the consent of holders of at least two-thirds of the
then outstanding shares of Common Stock. These provisions could also impede the
success of any attempt to effect a change in control of the Company.
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approves either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in
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the stockholder becoming an interested stockholder, the interested stockholder
owns at least 85% of the outstanding voting stock (excluding certain shares held
by persons who are both directors and officers of the corporation and certain
employee stock plans), or (iii) on or after the consummation date, the business
combination is approved by the board of directors and by the affirmative vote of
at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder. For purposes of Section 203, a "business combination"
includes, among other things, a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is generally a person who, together with affiliates and
associates, owns (or within three years, owned) 15% or more of the corporation's
voting stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
LISTING
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "ARTT."
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SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon consummation of the Common Stock Offering, the Company will have
outstanding 37,586,498 shares of Common Stock (assuming no exercise of the
Underwriters' over-allotment option and options or warrants after June 28,
1996). Of these shares, the 7,500,000 shares being sold in the Common Stock
Offering will be freely tradable without restriction under the Securities Act,
unless purchased by "affiliates" of the Company.
The remaining 30,086,498 shares of Common Stock held by existing
stockholders are "restricted" shares under the Securities Act (the "Restricted
Shares"), all of which are also subject to certain lock-up agreements between
certain stockholders and the Representatives (as defined). Beginning 90 days
after the date of this Prospectus, 10,013,055 shares will become available for
immediate sale to the public market subject to certain volume and other resale
restrictions pursuant to Rule 144 promulgated under the Securities Act, as
described below, unless such shares are registered. See "Registration Rights."
Upon the closing of the CommcoCCC Acquisition, 16,500,000 shares will be issued
for the CommcoCCC Assets, which shares will become available for sale in the
public market under Rule 144 two years after the date of consummation of the
CommcoCCC Acquisition. In addition, under a proposal currently pending before
the Securities and Exchange Commission, the date on which shares of Common Stock
become available for sale under Rule 144 may be significantly accelerated.
As of June 28, 1996, an aggregate of 4,044,868 shares of Common Stock will
be subject to outstanding options and warrants and an aggregate of 1,007,268
shares are reserved for future issuance pursuant to the Company's Equity
Incentive Plan and Directors Plan (collectively, the "Plans"). As of June 28,
1996, 639,302 of such shares were vested, and, 180 days following the date of
this Prospectus, an additional 59,109 of such shares will be vested. The Company
intends to file a Registration Statement on Form S-8 to register the shares of
Common Stock to be issued and issuable pursuant to the Plans. Thereafter, shares
of Common Stock issued under the Plans will be available for sale in the public
market upon vesting of such shares, subject, with respect to affiliates of the
Company, to certain volume limitations under Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Effective Date, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least two years, will be entitled to
sell in any three-month period a number of shares that does not exceed the
greater of (i) 1% of the number of shares of Common Stock then outstanding
(approximately 375,865 shares immediately after the Common Stock Offering
assuming no exercise of the Underwriters' over-allotment option) and (ii) the
average weekly trading volume of the Company's Common Stock in the Nasdaq
National Market during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission.
Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not deemed to
have been an affiliate of the Company at any time during the 90 days immediately
preceding the sale and who has beneficially owned Restricted Shares for at least
three years is entitled to sell such shares pursuant to Rule 144(k) without
regard to the limitations and requirements described above.
All holders of the Company's Common Stock, as well as all holders of
warrants or options to purchase Common Stock, have agreed not to sell, offer to
sell, contract to sell or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of Common Stock, any options or warrants to
purchase Common Stock, or any securities convertible or exchangeable for Common
Stock, owned directly by such holders or with respect to which they have power
of disposition for a period of 180 days after the date of this Prospectus
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to these lock-up agreements. In
addition, the Company has agreed not to sell, offer to sell, contract to sell or
otherwise sell or dispose of any shares of Common Stock or any rights to acquire
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Common Stock, other than pursuant to the Restated Equity Incentive Plan, upon
exercise of outstanding warrants and options or pursuant to the CommcoCCC
Agreement for a period of 180 days after the date of this Prospectus without the
prior consent of Montgomery Securities. See "Underwriting."
Prior to the Common Stock Offering, there has been no public market for the
Common Stock and there can be no assurance that a significant public market for
the Common Stock will develop or be sustained after the Common Stock Offering.
Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities.
REGISTRATION RIGHTS
Under the terms of an amended and restated registration rights agreement,
dated as of July , 1996, among the Company, Telecom, their respective
stockholders and the holders of the Bridge Warrants, Indemnity Warrants and
CommcoCCC Warrants (as amended, the "Registration Rights Agreement"), following
the consummation of the Offerings, such stockholders and the holders of the
Bridge Warrants, Indemnity Warrants and CommcoCCC Warrants, who are the holders
of an aggregate 31,561,498 shares of Common Stock on a fully-diluted basis (the
"Registrable Securities"), will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. Under the Registration
Rights Agreement, if the Company proposes to register any of its securities
under the Securities Act, either for its own account or the account of other
security holders, the holders of Registrable Securities are entitled to notice
of such registration and are entitled to include their Registrable Securities in
any such registration; provided, however, among other things, that the
underwriters have the right, subject to certain limitations, to limit the number
of such shares included therein.
Upon the consummation of the CommcoCCC Acquisition, the 16,500,000 shares to
be issued in connection therewith will also be subject to the Registration
Rights Agreement.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
THE NOTES
Concurrently with the Common Stock Offering, the Company is offering,
pursuant to a separate prospectus, Units, each consisting of $1,000
principal amount at maturity of the Notes and Warrants to purchase shares
of Common Stock of the Company, sufficient to generate gross proceeds of
$175,000,000 in the Unit Offering. The Warrants, when exercised, would entitle
the holders thereof to purchase shares of Common Stock representing 5% of the
Common Stock of the Company on a fully diluted basis after giving effect to the
Offerings. The Common Stock Offering is conditioned upon the successful
consummation of the Unit Offering. The yield-to-maturity of the Notes will be
% (computed on a semiannual bond basis) calculated from , 1996.
Cash interest will not accrue on the Notes prior to , 2001,
however the principal amount of the Notes will accrete from the original
principal amount at issuance at a rate of % per annum until ,
2001. Thereafter, cash interest will accrue at a rate of % per annum, payable
semiannually in arrears. The Notes will be redeemable at the option of the
Company on or after , 2001, and the holders of the Notes will have
the right to require the Company to repurchase all or part of such holders'
Notes in the event of certain events involving a change of control with respect
to, or certain sales of assets by, the Company and its subsidiaries.
Subject to certain exceptions and qualifications, the Indenture will, among
other things, restrict the ability of the Company and its subsidiaries to (i)
incur indebtedness, (ii) pay dividends and make distributions in respect of the
Company's capital stock or make certain other restricted payments, (iii) create
certain liens, (iv) enter into certain transactions with affiliates or related
persons, (v) conduct businesses other than those permitted by the Indenture or
(vi) sell certain assets. In addition, the Indenture will limit the ability of
the Company to consolidate, merge or sell all or substantially all of its
assets.
EMI NOTE
In connection with the acquisition by Telecom of the EMI Assets, Telecom
issued to EMI a $1.5 million principal amount non-negotiable and
non-transferable, unsecured promissory note (the "EMI Note"). Interest on the
EMI Note accrues at a rate equal to the prime rate plus 2%. The Company is
obligated to make quarterly principal repayments of $187,500, commencing January
1, 1997. The EMI Note matures on November 14, 1998. See "Business -- Agreements
Relating to Licenses and Acquisitions -- EMI Acquisition."
EQUIPMENT FINANCING
On April 1, 1996, CRA, Inc. ("CRA") entered into secured Equipment Financing
with the Company for the purchase from P-Com of 38 GHz radio equipment. To
evidence its obligations under the Equipment Financing, the Company issued in
favor of CRA a $2,445,000 Equipment Note, payable in twenty four monthly
installments of $92,694 with a final payment equal to $642,305 due April 1,
1998.
BRIDGE FINANCING
On March 8, 1996, the Company issued $5.0 million principal amount of Bridge
Notes in connection with the Bridge Financing. See "Certain Transactions --
Bridge Financing." The Bridge Notes are subordinated in right of payment to the
EMI Note and will be repaid with proceeds from the Offerings. See "Use of
Proceeds."
COMMCOCCC FINANCING
On June 27 and July , 1996, the Company issued to stockholders of
CommcoCCC, in connection with the CommcoCCC Agreement $3.0 million principal
amount of subordinated bridge notes (the "CommcoCCC Notes"), bearing interest at
the prime rate and payable 90 days after the date of the CommcoCCC Agreement.
The CommcoCCC Notes are secured by a security interest in all of the assets
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of the Company, including a pledge of the Company's stock in Telecom. See
"Certain Transactions -- CommcoCCC Acquisition." The CommcoCCC Notes are
subordinated in right of payment to the EMI and the Bridge Notes and will be
repaid with proceeds from the Offerings. See "Use of Proceeds."
CREDIT FACILITY
Canadian Imperial Bank of Commerce ("CIBC") has provided the Company a
Summary of Terms and Conditions on which it and other banks might extend credit
pursuant to a Senior Secured Revolving Credit Facility converting to an
Amortizing Term Loan (the "Credit Facility"). Under the Credit Facility, up to
$100,000,000 in revolving loans would be available based on incurrence
provisions which will be determined but would include measures of total debt to
operating cash flow, numbers of links, numbers of links per pop or market and
amount of revenue per link. The proceeds could be used to finance the
construction of the Company's systems, capital expenditures, permitted
acquisitions, operating losses and working capital. The Credit Facility would be
secured by all of the assets of the Company and its subsidiaries including a
pledge of stock of subsidiaries, and would be guaranteed by all subsidiaries,
excluding unrestricted subsidiaries to be determined. The interest rate would
initially be at 2.50% over the bank's base rate or 3.50% over LIBOR subject to
reduction. Mandatory prepayment will be required with respect to a percentage of
excess cash flow and proceeds of equity offerings. The revolving credit facility
will convert to a term loan after a period, for a term and with an amortization
to be determined.
In addition, the Credit Facility will include financial covenants to be
determined relating to ratios of total debt to annualized operating cash flow,
operating cash flow to cash interest expense, cash flow available for debt
service to pro forma fixed charges and total debt per total links as well as to
minimum revenues, operating cash flow (or maximum loss), minimum revenue per
link and minimum number of links. The Credit Facility will prohibit the Company
from making restricted payments and acquisitions other than permitted
acquisitions, from incurring indebtedness except with certain limitations or
liens, or merging and will limit investments and assets sales. The Credit
Facility will contain a provision relating to change of control of the Company.
The Credit Facility will also contain customary events of default, including but
not limited to nonpayment of principal or interest when due, violations of
covenants, falsity of representations and warranties in any material respect,
actual or asserted invalidity of security documents and security interests and
the occurrence of certain events with respect to the Company or any subsidiary
including cross-default and cross-acceleration, bankruptcy, material judgments,
ERISA violations, change in control and loss or material impairment of FCC
licenses.
The Company will be required to pay a structuring fee which has not yet been
determined, a facility fee of 3.5% payable at closing and a commitment fee of
0.5% per annum on the unused portion of the facility. Execution of the Credit
Facility will be dependent upon, among other things, satisfactory due diligence
review by the banks, consummation of the Offerings on terms satisfactory to the
banks and negotiation and execution of mutually satisfactory documentation.
There is no assurance that the Credit Facility will be executed, what the terms
of the Credit Facility will be, or if executed, that the Company will be able to
borrow under the Credit Facility.
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UNDERWRITING
The underwriters named below (the "Underwriters"), represented by Montgomery
Securities, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (together, the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company the number
of shares of Common Stock indicated below opposite their respective names at the
initial public offering price less the underwriting discount set forth on the
cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain terms and conditions
precedent and that the Underwriters are committed to purchase all of such
shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
---------
<S> <C>
Montgomery Securities............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
Deutsche Morgan Grenfell/C. J. Lawrence Inc......................
---------
Total.............................................. 7,500,000
---------
---------
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may allow,
and any such dealers may reallow, a concession of not more than $ per
share to certain other dealers. After the initial public offering, the price and
concessions and reallowances to dealers may be changed by the Representatives.
The Common Stock is offered subject to receipt and acceptance by the
Underwriters and to certain other conditions, including the right to reject
orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 1,125,000 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial 7,500,000 shares to be purchased by
the Underwriters. To the extent the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table.
The Underwriting Agreement contains certain covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liability under the Securities Act of 1933, as amended (the "Securities Act").
Concurrently with the Common Stock Offering, the Company is offering,
pursuant to a separate prospectus, Units in the Unit Offering. Montgomery
Securities and Merrill Lynch are acting as underwriters in the Unit Offering and
will receive customary compensation in connection therewith. In connection with
the CommcoCCC Acquisition, Montgomery Securities has been retained by the
Company as its financial advisor for which it will receive fees of up to
approximately $2.7 million and the reimbursement of reasonable out-of-pocket
expenses incurred in connection therewith.
All holders of the Company's Common Stock prior to this offering, as well as
all holders of options, warrants or other rights to purchase Common Stock, have
agreed not to sell, offer to sell, contract to sell or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of Common Stock,
any options or warrants to purchase Common Stock, or any securities convertible
or exchangeable for Common Stock, owned directly by such holders or with respect
to which they have power of disposition for a period of 180 days after the date
of this Prospectus without the prior written consent of Montgomery Securities.
Montgomery Securities may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to these lock-up
agreements. In addition, the
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Company has agreed not to sell, offer to sell, contract to sell or otherwise
sell or dispose of any shares of Common Stock or any rights to acquire Common
Stock, other than pursuant to the Equity Incentive Plan, upon exercise of
outstanding options and warrants or pursuant to the CommcoCCC Agreement, for a
period of 180 days after the Effective Date without the prior consent of
Montgomery Securities.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
Prior to the Common Stock Offering, there has been no public market for the
Common Stock of the Company. Consequently, the initial public offering price
will be determined through negotiations among the Company and the
Representatives. Among the factors to be considered in such negotiations will be
the history of, and prospects for, the Company and the industry in which it
competes, an assessment of the Company's management, the present state of the
Company's development, the prospects for future earnings of the Company, the
prevailing market conditions at the time of the Common Stock Offering, market
valuations of publicly traded companies that the Company and the Representatives
believe to be comparable to the Company, and other factors deemed relevant. See
"Risk Factors -- Absence of Public Market; Possible Volatility of Stock Price."
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Hahn & Hessen LLP, New York, New York. Certain
legal matters in connection with the Common Stock Offering will be passed upon
for the Underwriters by Latham & Watkins, Washington, D.C. As of the date of
this Prospectus, a member of Hahn & Hessen LLP owns $25,000 of the Bridge Notes
and 5,500 Bridge Warrants and beneficially owns 13,627 shares of Common Stock.
Latham & Watkins, Washington, D.C., currently represents the Company with
respect to certain FCC matters.
EXPERTS
The historical financial statements of Advanced Radio Technologies
Corporation as of December 31, 1995 and 1994, for the years then ended, and for
the period from August 23, 1993 (date of inception) to December 31, 1993 and of
Advanced Radio Telecom Corp. as of December 31, 1995 and for the period from
March 28, 1995 (date of inception) to December 31, 1995 included in this
Prospectus, have been included herein in reliance on the reports, each of which
includes an explanatory paragraph regarding the substantial doubt which exists
about the respective entity's ability to continue as a going concern, of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and to the schedules and exhibits filed therewith.
Statements contained in this Prospectus as to the contents of certain documents
are not necessarily complete, and, in each instance, reference is made to the
copy of the document filed as an exhibit to the Registration Statement. The
Registration Statement, including the exhibits and schedules thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the
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Commission: New York Regional Office, 7 World Trade Center, New York, New York
10007; and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained from the Commission at prescribed rates through its Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
Immediately following the Offerings, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
reports and other information with the Commission. Such reports may be inspected
and copied at the public reference facilities at the addresses set forth above
and at the Public Reference Section of the Commission at the address set forth
above.
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GLOSSARY
ACCESS CHARGES -- The fees paid by long distance carriers to LECs for
originating and terminating long distance calls on their local networks.
BANDWIDTH -- At any given level of compression, the amount of information
transportable over a link per unit of time. A DS-1, or Digital Service 1,
circuit will carry up to 1,544,000 bits (or 1.544 megabits) per second.
BPS -- Bits per second. A bit is the basic unit of information, yes-or-no,
on-or-off, 1-or-0 in the binary (base 2) system which is the basis of digital
computing. In contrast, a voice telephone signal over a copper wire is analog,
reflecting a continuous range of vocal tone (frequency) and volume (amplitude).
BROADBAND -- Data streams of at least 1.544 megabits per second. Broadband
communications systems can transmit large quantities of voice, data and video by
way of digital or analog signals. Examples of broadband communication systems
include DS-3 systems, which can transmit 672 simultaneous voice conversations,
or a broadcast television station signal that transmits high resolution audio
and video signals into the home. Broadband connectivity is an essential element
for interactive multimedia applications.
BTA (BASIC TRADING AREA) -- An area erected by Rand McNally based upon
various business demographics to establish a contiguous urban area, without
reference to political or similar boundaries. The FCC has proposed to use BTAs
to auction 38 GHz authorizations.
CAP (COMPETITIVE ACCESS PROVIDER) -- A company that provides its customers
with an alternative to the local telephone company for local and interstate
transport of private line, special access and switched access telecommunications
services. CAPs are also referred to in the industry as competitive local
exchange carriers (CLECs), alternative local telecommunications service
providers (ALTs) and metropolitan area network providers (MANs) and were
formerly referred to as alternative access vendors (AAVs).
CELLULAR -- Characterized by "cells," the area accessible by transceiver(s)
typically located at one site. A cellular phone connects to the transceiver in
its current cell, then the connection is handed-off as and when the user moves
to any other cell.
COMPRESSION -- Any process that transforms a signal to a more compact form
(fewer bits) for easier transfer, and then restores the signal after transfer.
CMRS -- Commercial mobile radio services.
COPPER WIRE -- A shorthand reference to traditional telephone lines using
electric current to carry signals over copper wire.
DIGITAL -- A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary code digits 0 and 1. Digital transmission and switching technologies
employ a sequence of these pulses to represent infomation as opposed to the
continously variable analog signal. Digital transmission and switching
technologies offer a threefold improvement in speed and capacity over analog
techniques, allowing much more efficient and cost-effective transmission of
voice, video, and data.
DIALING PARITY -- Dialing parity is one of the changes, intended to level
the competitive playing field, that are required by the Telecommunication Act.
Dialing parity when implemented will enable customers to have dial only 1+ or 0+
service no matter which local or long distance carrier they choose.
DS-0, DS-1, DS-3 -- Standard telecommunications industry digital signal
formats, which are distinguishable by bit rate (the number of binary digits (0
and 1) transmitted per second). DS-0 service has a bit rate of 64 kilobits per
second. DS-1 service has a bit rate of 1.544 megabits per second and DS-3
service has a bit rate of 45 megabits per second.
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ESMR (ENHANCED SPECIALIZED MOBILE RADIO) -- A recent mobile radio services
category involving technical and service enhancements to traditional "push to
talk" dispatch services.
FCC -- Federal Communications Commission.
FIBER OPTICS -- Fiber optic cable largely immune to electrical interference
and environmental factors that affect copper wiring and satellite transmission.
Fiber optic technology involves sending laser light pulses across glass strands
in order to transmit digital information.
GHZ (GIGAHERTZ) -- Billions of cycles or hertz per second. A hertz is one
full cycle (an s-shaped sine curve with one peak and one valley).
INTER-LATA LONG DISTANCE -- Inter-LATA long distance calls are calls that
pass from one LATA to another. Typically, these calls are simply referred to as
"long distance" calls although intra-LATA calls can also be long distance calls.
INTERNET -- An array of interconnected networks using a common set of
protocols defining the information coding and processing requirements that can
communicate across hardware platforms and over many links now operated by a
consortium of telecommunications service providers and others.
ISP -- Internet service provider.
ITC (INDEPENDENT TELEPHONE COMPANY) -- A telephone company not associated or
formerly associated with the Bell Telephone system.
IXC (INTER-EXCHANGE CARRIERS) -- Usually referred to as long distance
providers. There are many facilities-based IXCs, including AT&T, MCI, WorldCom,
Sprint and Frontier.
KILOBIT -- One thousand bits of information. The information-carrying
capacity (i.e., bandwidth of a circuit may be measured in "kilobits per
second").
KBPS -- Kilobits per second.
LANS (LOCAL AREA NETWORKS) -- The interconnection of computers for the
purpose of sharing files, programs and various devices such as work stations,
printers and high-speed modems. LANs may include dedicated computers or file
servers that provide a centralized source of shared files and programs. Most
office computer networks use a LAN to share files, printers, modems and other
items. Where computers are separated by greater distances, a Metropolitan Area
Net (MAN) or other Wide Area Net (WAN) may be used.
LAST MILE -- A shorthand reference to the last section of a
telecommunications path to the ultimate end user which may be less than or
greater than a mile.
LATAS (LOCAL ACCESS AND TRANSPORT AREAS) -- The geographically defined areas
in which RBOCs were authorized by the MFJ to provide local exchange services.
These LATAs roughly reflect the population density of their respective states
(California has 11 LATAs while Wyoming has only one). There are 164 LATAs in the
United States. LATAs have one or more area codes and may cross state lines.
LEC (LOCAL EXCHANGE CARRIER) -- A company providing local exchange services.
The traditional local telephone companies (also known as incumbent local
exchange carriers), such as the RBOCs, which until recently were monopolies.
LINE OF SIGHT -- An unobstructed view between two transceivers comprising a
link.
LINK -- A transmission link between two transceivers.
MAN -- Metropolitan Area Network.
MARKET -- The potential and actual customers within the boundaries of a
wireless license. For simplicity, the definition of the market in this
Prospectus has been based on Basic Trading Areas, though each application as
granted defines its own actual boundaries.
87
<PAGE>
MEGABIT -- One million bits of information. The information-carrying
capacity (i.e., bandwidth) of a circuit may be measured in "megabits per
second."
MFJ (MODIFIED FINAL JUDGMENT) -- The MFJ was an agreement made in 1982
between AT&T and the Department of Justice which forced the breakup of the old
Bell System. This judgment, also known as the Divestiture of AT&T, established
seven separate RBOCs and enhanced the establishment of two distinct segments of
telecommunications service: local and long distance. This laid the groundwork
for intense competition in the long distance industry. The MFJ has been
superseded by the Telecommunications Act of 1996.
MICROWAVE -- A portion of the radio spectrum having radio waves that are
physically very short, ranging in length between about 30 cm and 0.3 cm and
generally used to refer to frequencies above 2 GHz.
MILLIMETRIC MICROWAVE OR MILLIMETER WAVE -- Those portions of the microwave
radio spectrum having wave lengths measured in millimeter lengths and generally
used to refer to frequencies above 20 GHz. A shorter wave length means a higher
frequency and vice versa.
MHZ (MEGAHERTZ) -- Millions of cycles or hertz per second.
MBPS -- Megabits per second.
NARROWBAND -- Data streams less than 64 kilobits per second.
NPRM (NOTICE OF PROPOSED RULEMAKING) -- A term used in governmental,
principally FCC, rulemaking proceedings to refer to initiation of the process.
NUMBER PORTABILITY -- The ability of an end user to change local exchange
carriers while retaining the same telephone number. If number portability does
not exist, customers will have to change phone numbers when they change local
exchange carriers.
OFF-NET CUSTOMERS -- A customer that is not physically connected to a CAP's
network but who is accessed through interconnection with a LEC network or an
alternative provider such as a 30 GHz licensee.
ON-NET CUSTOMERS -- A customer that is physically connected to a CAP's
network.
PCS (PERSONAL COMMUNICATIONS SERVICE) -- Cellular-like services provided at
the 2 GHz band of the radio spectrum rather than 800 MHz. A type of wireless
telephone system that uses light, inexpensive handheld sets and communicates via
low power antennas.
PIPE -- A generic term for telecommunications transmission media, whether
wired or wireless, used to carry signals between the signal generating unit and
the user.
POPS (POINTS OF PRESENCE) -- Locations where a carrier has installed
transmission equipment in a service area that serves as, or relays calls to, a
network switching center of that carrier.
PSTN (PUBLIC SWITCHED TELECOMMUNICATIONS NETWORK) -- The traditional LEC
networks that switch calls between different customers.
RBOCS (REGIONAL BELL OPERATING COMPANIES) -- The holding companies owning
LEC affiliates of the old AT&T or Bell system.
REPEATER -- An intermediate transceiver between two transceivers connected
to end users and established to circumvent obstacles in the line of sight
between communication ports, such as buildings in urban areas and hills in rural
areas.
RESELLERS -- Companies which purchase telecommunications services wholesale
from underlying carriers and resell them to end users at retail rates.
ROOF RIGHTS -- The legal right to locate, maintain and operate equipment
(most commonly transceivers) on the roofs of buildings, on special towers or
even on utility poles or pylons.
88
<PAGE>
WIDEBAND -- Data streams between 64 kilobits and 1.544 megabits per second.
10-13 BIT ERROR RATE -- The measurement of a transmission path's ability to
pass data in an uncorrupted format. Bit error rate ("BER") is defined as the
number of erroneous bits ("errors"), divided by the number of bits over a
stipulated period of time. In the example of a BER of 10-13, a BER tester (a
test and measurement instrument), placed in line to measure the transmission
path (in real time) would have to measure, and analyze, ten trillion bits of
data before it detected one bit of erroneous data.
89
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Advanced Radio Technologies Corporation
Unaudited Pro Forma:
Unaudited Pro Forma Condensed Balance Sheets as of December 31, 1995 and March 31, 1996............... F-3
Unaudited Pro Forma Condensed Balance Sheets -- Supplementary Combining Balance Sheet Data as of
December 31, 1995 and March 31, 1996................................................................. F-4
Unaudited Pro Forma Condensed Statement of Operations for the three months ended March 31, 1996 and
for the year ended December 31, 1995................................................................. F-5
Notes to Unaudited Pro Forma Condensed Financial Statements........................................... F-6
Historical:
Report of Independent Accountants..................................................................... F-8
Balance Sheets as of December 31, 1995 and 1994....................................................... F-9
Statements of Operations for the years ended December 31, 1995 and 1994, for the period from August
23, 1993 (date of inception) to December 31, 1993 and cumulative for the period from August 23, 1993
(date of inception) to December 31, 1995............................................................. F-10
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1995 and 1994, for the
period from August 23, 1993 (date of inception) to December 31, 1993 and cumulative for the period
from August 23, 1993 (date of inception) to December 31, 1995........................................ F-11
Statements of Cash Flows for the years ended December 31, 1995 and 1994, for the period from August
23, 1993 (date of inception) to December 31, 1993 and cumulative for the period from August 23, 1993
(date of inception) to December 31, 1995............................................................. F-12
Notes to Financial Statements......................................................................... F-13
Unaudited Interim Condensed Balance Sheets as of March 31, 1996 and 1995.............................. F-24
Unaudited Interim Condensed Statements of Operations for the three months ended March 31, 1996 and
1995................................................................................................. F-25
Unaudited Interim Condensed Statements of Cash Flows for the three months ended March 31, 1996 and
1995................................................................................................. F-26
Notes to Unaudited Interim Condensed Financial Statements............................................. F-27
Advanced Radio Telecom Corp.
Historical:
Report of Independent Accountants..................................................................... F-30
Balance Sheet as of December 31, 1995................................................................. F-31
Statement of Operations for the period from March 28, 1995 (date of inception) to December 31, 1995... F-32
Statement of Stockholders' Deficit for the period from March 28, 1995 (date of inception) to December
31, 1995............................................................................................. F-33
Statement of Cash Flows for the period from March 28, 1995 (date of inception) to December 31, 1995... F-34
Notes to Financial Statements......................................................................... F-35
Unaudited Interim Condensed Balance Sheet as of March 31, 1996........................................ F-47
Unaudited Interim Condensed Statement of Operations for the three months ended March 31, 1996......... F-48
Unaudited Interim Condensed Statement of Stockholders' Equity (Deficit) for the three months ended
March 31, 1996....................................................................................... F-49
Unaudited Interim Condensed Statement of Cash Flows for the three months ended March 31, 1996......... F-50
Notes to Unaudited Interim Condensed Financial Statements............................................. F-51
</TABLE>
F-1
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are
presented as if all of the following transactions had occurred: (i) the March 8,
1996 issuance of the Bridge Notes in connection with the Bridge Financing; (ii)
the receipt of $2,220,000 in cash proceeds from the issuance of the Equipment
Note and Indemnity Warrants in connection with the Equipment Financing, after
deducting related expenses of $225,000; (iii) the receipt of $3,000,000 in cash
proceeds from the issuance of the CommcoCCC Notes and the CommcoCCC Warrants in
connection with the CommcoCCC Financing; (iv) the Conversion; and (v) the
Merger, including the issuance of ART Common Stock to Telecom stockholders and
the cancellation of all outstanding Telecom common stock.
The following unaudited pro forma as adjusted condensed financial statements
reflect further adjustments assuming (i) the sale by the Company of 7,500,000
shares of Common Stock offered in the Common Stock Offering based on an assumed
initial public offering price of $9.00 per share and the Units offered in the
Unit Offering assuming $175,000,000 in gross proceeds, in each case, after
deducting the estimated underwriting discount and offering expenses; (ii) the
receipt and application of the net proceeds therefrom to repay the Bridge Notes
and the CommcoCCC Notes and to acquire the 50% ownership interest of ART West
held by Extended for $6.0 million in cash and the DCT Assets for $3.6 million in
cash; and (iii) the consummation of the acquisition by the Company of the
CommcoCCC Assets in exchange for 16,500,000 shares of Common Stock at an assumed
value of $9.00 per share.
All such transactions are reflected as if they had occurred as of the
beginning of the respective periods for the unaudited pro forma condensed
statements of operations and at the respective balance sheet date for the
unaudited pro forma condensed balance sheet.
These unaudited pro forma condensed financial statements were derived from
and should be read in conjunction with the audited and unaudited interim
condensed financial statements of ART and Telecom and the related notes thereto,
included elsewhere herein. In management's opinion, all adjustments necessary to
reflect the foregoing and related transactions have been made.
The unaudited pro forma condensed financial statements are not necessarily
indicative of what the actual financial position or results of operations would
have been assuming that the transactions described in the preceding paragraphs
had occurred on the dates indicated, nor does it purport to represent the future
financial position or results of operations of the Company.
F-2
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF MARCH
1995 31, 1996
------------ ------------
HISTORICAL HISTORICAL
COMBINED (A) COMBINED (A)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash
equivalents...... $ 633,654 $ 3,024,161
Other current
assets........... 52,325 61,226
------------ ------------
Total current
assets......... 685,979 3,085,387
Property and
equipment, net..... 3,581,561 6,380,895
Equity
investments........ 285,000 285,000
FCC licenses........ 4,235,734 4,235,734
Deferred financing
costs.............. 778,897 681,692
Equipment and other
deposits........... 284,012 344,417
Other assets........ 25,376 23,212
------------ ------------
$9,876,559 $15,036,337
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
and accrued
liabilities...... $3,694,489 $ 4,213,517
CommcoCCC Notes... --
------------ ------------
Total current
liabilities.... 3,694,489 4,213,517
Convertible notes
payable............ 4,950,000
Note payable to
EMI................ 1,500,000 1,500,000
Bridge notes
payable............ -- 3,983,082
Equipment financing
note payable....... -- --
Senior discount
notes.............. -- --
Deferred tax
liability.......... -- --
------------ ------------
Total
liabilities.... 10,144,489 9,696,599
------------ ------------
Redeemable Preferred
Stock.............. 44,930 --
------------ ------------
Stockholders'
equity:
Preferred stock,
par.............. 488 921
Common stock,
par.............. 25,304 28,127
Additional paid-in
capital.......... 3,031,405 19,375,335
Accumulated
deficit.......... (3,370,057 ) (14,064,645)
------------ ------------
Total
stockholders'
equity......... (312,860 ) 5,339,738
------------ ------------
$9,876,559 $15,036,337
------------ ------------
------------ ------------
<CAPTION>
PRO FORMA OFFERING PRO FORMA
ADJUSTMENTS (B) PRO FORMA ADJUSTMENTS (C) AS ADJUSTED
--------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents...... $3,000,000(2)
$2,220,000(3) $ 8,244,161 62,35$7,474(1)
168,667,526(2)
(8,000,000)(3)
(6,000,000)(5)
(3,600,000)(6)
(3,000,000)(4) 218$,669,161
Other current
assets........... 61,226 61,226
--------------- ------------ ------------- -----------
Total current
assets......... 5,220,000 8,305,387 210,425,000 218,730,387
Property and
equipment, net..... 6,380,895 6,380,895
Equity
investments........ 285,000 (285,000)(5) --
FCC licenses........ 4,235,734 201,990,000(4)
6,285,000(5)
3,600,000(6) 216,110,734
Deferred financing
costs.............. 175,899(3) 857,591 (189,749)(1)
6,332,474(2) 7,000,316
Equipment and other
deposits........... 344,417 344,417
Other assets........ 23,212 23,212
--------------- ------------ ------------- -----------
$5,395,899 $ 20,432,236 428,1$57,725 448$,589,961
--------------- ------------ ------------- -----------
--------------- ------------ ------------- -----------
LIABILITIES AN
Current liabilities:
Accounts payable
and accrued
liabilities...... $ $ 4,213,517 $ 4$,213,517
CommcoCCC Notes... 2,975,000(2) 2,975,000 (2,975,000)(3) --
--------------- ------------ ------------- -----------
Total current
liabilities.... 2,975,000 7,188,517 (2,975,000) 4,213,517
Convertible notes
payable............ -- -- --
Note payable to
EMI................ 1,500,000 1,500,000
Bridge notes
payable............ 3,983,082 (3,983,082)(3)
Equipment financing
note payable....... 1,911,439(3) 1,911,439 1,911,439
Senior discount
notes.............. -- 159,800,000(2) 159,800,000
Deferred tax
liability.......... 50,490,000(4) 50,490,000
--------------- ------------ ------------- -----------
Total
liabilities.... 4,886,439 14,583,038 203,331,918 217,914,956
--------------- ------------ ------------- -----------
Redeemable Preferred
Stock.............. -- -- --
--------------- ------------ ------------- -----------
Stockholders'
equity:
Preferred stock,
par.............. (921)(1) --
Common stock,
par.............. 1,959(1) 30,086 7,500(1) --
16,500(4) 54,086
Additional paid-in
capital.......... (1,038)(1)
25,000(2)
484,460(3) 19,883,757 62,160,225(1)
15,200,000(2)
148,483,500(4) 245,727,482
Accumulated
deficit.......... (14,064,645) (1,041,918)(3) (15,106,563)
--------------- ------------ ------------- -----------
Total
stockholders'
equity......... 509,460 5,849,198 224,825,807 230,675,005
--------------- ------------ ------------- -----------
$5,395,899 $ 20,432,236 428,1$57,725 448$,589,961
--------------- ------------ ------------- -----------
--------------- ------------ ------------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
F-3
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
SUPPLEMENTARY COMBINING BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
-----------------------------------------------------------------
HISTORICAL
-----------------------------------------------------------------
ADVANCED RADIO ADVANCED RADIO
TECHNOLOGIES TELECOM HISTORICAL
CORPORATION (D) CORP. (E) ELIMINATIONS (F) COMBINED
-------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents...... $ 6,069 $ 627,585 $ 633,654
Due from ART...... -- 738,680 $ (738,680) --
Other current
assets........... -- 52,325 52,325
-------------- -------------- ---------------- ------------
Total current
assets......... 6,069 1,418,590 (738,680) 685,979
Note receivable from
Telecom............ 5,000,000 -- (5,000,000) --
Property and
equipment, net..... 1,723 3,579,838 3,581,561
Equity investments.. 285,000 -- 285,000
FCC licenses........ 8,913 4,226,821 4,235,734
Deferred financing
costs, net......... 457,543 321,354 778,897
Equipment and other
deposits........... -- 284,012 284,012
Investment in ART... -- -- --
Other assets........ 25,376 -- 25,376
-------------- -------------- ---------------- ------------
$ 5,784,624 $ 9,830,615 $(5,738,680) $ 9,876,559
-------------- -------------- ---------------- ------------
-------------- -------------- ---------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
and accrued
liabilities...... $ 243,952 $ 3,450,537 $ 3,694,489
Due to Telecom.... 738,680 -- $ (738,680) --
Commco Notes...... -- -- --
-------------- -------------- ---------------- ------------
Total current
liabilities.... 982,632 3,450,537 (738,680) 3,694,489
Convertible notes
payable............ 4,950,000 -- 4,950,000
Losses in excess of
equity investment.. 211,543 -- (211,543) --
Note payable to
ART................ -- 5,000,000 (5,000,000) --
Note payable to
EMI................ -- 1,500,000 1,500,000
Bridge notes
payable............ -- -- --
Equipment financing
note payable....... -- -- --
Senior discount
notes.............. -- -- --
-------------- -------------- ---------------- ------------
Total
liabilities.... 6,144,175 9,950,537 (5,950,223) 10,144,489
-------------- -------------- ---------------- ------------
Redeemable Preferred
Stock.............. 44,930 -- 44,930
-------------- -------------- ---------------- ------------
Stockholders'
equity:
Preferred stock,
par.............. -- 488 488
Common stock,
par.............. 10,013 15,291 25,304
Additional paid-in
capital.......... 988,375 2,845,372 (802,002)
(340) 3,031,405
Accumulated
deficit.......... (1,402,869) (2,981,073) 1,013,885 (3,370,057)
-------------- -------------- ---------------- ------------
Total
stockholders'
equity
(deficit)...... (404,481) (119,922) 211,543 (312,860)
-------------- -------------- ---------------- ------------
$ 5,784,624 $ 9,830,615 $(5,738,680) $ 9,876,559
-------------- -------------- ---------------- ------------
-------------- -------------- ---------------- ------------
<CAPTION>
AS OF MARCH 31, 1996
-------------------------------------------------------------
HISTORICAL
-------------------------------------------------------------
ADVANCED
ADVANCED RADIO RADIO
TECHNOLOGIES TELECOM HISTORICAL
CORPORATION (D) CORP. (E) ELIMINATIONS (F) COMBINED
--------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents...... $ 5,970 $3,018,191 3$,024,161
Due from ART...... -- 498,100 (49$8,100) --
Other current
assets........... -- 61,226 61,226
--------------- ------------ --------------- -----------
Total current
assets......... 5,970 3,577,517 (498,100) 3,085,387
Note receivable from
Telecom............ -- -- --
Property and
equipment, net..... 1,292 6,379,603 6,380,895
Equity investments.. 3,242,401 -- (2,957,401) 285,000
FCC licenses........ 8,913 4,226,821 4,235,734
Deferred financing
costs, net......... -- 681,692 681,692
Equipment and other
deposits........... -- 344,417 344,417
Investment in ART... -- 44,930 (44,930) --
Other assets........ 23,212 -- 23,212
--------------- ------------ --------------- -----------
$3,281,788 $15,254,980 (3,50$0,431) 15$,036,337
--------------- ------------ --------------- -----------
--------------- ------------ --------------- -----------
Current liabilities:
Accounts payable
and accrued
liabilities...... 2,500 $4,211,017 4$,213,517
Due to Telecom.... 498,100 -- (49$8,100) --
Commco Notes...... -- -- --
--------------- ------------ --------------- -----------
Total current
liabilities.... 500,600 4,211,017 (498,100) 4,213,517
Convertible notes
payable............ -- -- --
Losses in excess of
equity investment.. -- --
Note payable to
ART................ -- --
Note payable to
EMI................ -- 1,500,000 1,500,000
Bridge notes
payable............ -- 3,983,082 3,983,082
Equipment financing
note payable....... -- -- --
Senior discount
notes.............. -- -- --
--------------- ------------ --------------- -----------
Total
liabilities.... 500,600 9,694,099 (498,100) 9,696,599
--------------- ------------ --------------- -----------
Redeemable Preferred
Stock.............. 44,930 -- (44,930) --
--------------- ------------ --------------- -----------
Stockholders'
equity:
Preferred stock,
par.............. -- 921 921
Common stock,
par.............. 10,013 18,114 28,127
Additional paid-in
capital.......... 7,783,889 19,189,302 (7,597,856) 19,375,335
Accumulated
deficit.......... (5,057,644) (13,647,456 ) 4,640,455 (14,064,645)
--------------- ------------ --------------- -----------
Total
stockholders'
equity
(deficit)...... 2,736,258 5,560,881 (2,957,401) 5,339,738
--------------- ------------ --------------- -----------
$3,281,788 $15,254,980 (3,50$0,431) 15$,036,337
--------------- ------------ --------------- -----------
--------------- ------------ --------------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
F-4
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
--------------------------------------------------------------------------------------------
HISTORICAL
--------------------------------------------------------------
ADVANCED RADIO ADVANCED RADIO
TECHNOLOGIES TELECOM PRO FORMA
CORPORATION (D) CORP. (E) ELIMINATIONS (F) COMBINED ADJUSTMENTS (B) PRO FORMA
---------------- -------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue...... $ $ 9,620 $ 9,620 $ 9,620
---------------- -------------- ----------- -----------
Expenses:
General and
administrative
(H)................. 24,939 8,889,364 8,914,303 8,914,303
Market development
(I)................. -- 1,150,063 1,150,063 1,150,063
Research &
development......... -- 419,418 419,418 419,418
Depreciation and
amortization.......... 2,595 86,684 89,279 89,279
Interest, net........ 671 130,474 131,145 $ 198,425(4)
157,316(5)
86,360(6)
(44,507)(7) 528,739
---------------- -------------- ----------- --------------- -----------
Total expenses..... 28,205 10,676,003 10,704,208 397,594 11,101,802
Equity loss in
Telecom............... 3,626,570 -- $(3,626,570) -- --
---------------- -------------- --------------- ----------- --------------- -----------
Pretax loss............ 3,654,775 10,666,383 (3,626,570) 10,694,588 397,594 11,092,182
Deferred tax benefit... -- -- -- --
---------------- -------------- --------------- ----------- --------------- -----------
Net loss......... $ 3,654,775 $ 10,666,383 ($3,626,570) $10,694,588 $ 397,594 $11,092,182
---------------- -------------- --------------- ----------- --------------- -----------
---------------- -------------- --------------- ----------- --------------- -----------
Pro forma net loss per
share of common stock
(G)................... $ 0.12 $ 0.35
---------------- -----------
---------------- -----------
Pro forma weighted
average number of
shares of Common Stock
outstanding (G)....... 31,651,605 31,651,605
---------------- -----------
---------------- -----------
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS (C) AS ADJUSTED
---------------- ------------
<S> <C> <C>
Operating revenue...... $ 9,620
------------
Expenses:
General and
administrative
(H)................. 8,914,303
Market development
(I)................. 1,150,063
Research &
development......... 419,418
Depreciation and
amortization.......... $ 1,350,692(8) 1,439,971
Interest, net........
(264,658)(3)
(86,360)(3)
5,811,579(7) 5,989,300
---------------- ------------
Total expenses..... 6,811,253 17,913,055
Equity loss in
Telecom............... --
---------------- ------------
Pretax loss............ 6,811,253 17,903,435
Deferred tax benefit... (459,236)(8) (459,236)
---------------- ------------
Net loss......... $ 6,352,017 $17,444,199
---------------- ------------
---------------- ------------
Pro forma net loss per
share of common stock
(G)................... $ 0.31
------------
------------
Pro forma weighted
average number of
shares of Common Stock
outstanding (G)....... 55,651,605
------------
------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
HISTORICAL
--------------------------------------------------------------
ADVANCED RADIO ADVANCED
TECHNOLOGIES RADIO TELECOM
CORPORATION (D) CORP. (E) ELIMINATIONS (F) COMBINED
-------------- ------------- ---------------- ----------
<S> <C> <C> <C> <C>
Operating revenue... $ -- $ 5,793 $ 5,793
-------------- ------------- ----------
Expenses:
General and
administrative
(G).............. 204,937 2,706,336 2,911,273
Market
development...... -- 191,693 191,693
Depreciation and
amortization..... 10,378 5,306 15,684
Interest, net..... 38,455 83,531 121,986
-------------- ------------- ----------
Total
expenses....... 253,770 2,986,866 3,240,636
Equity loss in
Telecom............ 1,013,885 $(1,013,885) --
-------------- ------------- ---------------- ----------
Pretax Loss......... 1,267,655 2,981,073 (1,013,885) 3,234,843
Deferred tax
benefit............ -- -- --
-------------- ------------- ---------------- ----------
Net loss...... $1,267,655 $ 2,981,073 $(1,013,885) $3,234,843
-------------- ------------- ---------------- ----------
-------------- ------------- ---------------- ----------
Pro forma net loss
per share of Common
Stock (G).......... $ 0.04
--------------
--------------
Pro forma weighted
average number of
shares of Common
Stock outstanding
(G)................ 31,651,605
--------------
--------------
<CAPTION>
PRO FORMA OFFERING PRO FORMA
ADJUSTMENTS (B) PRO FORMA ADJUSTMENTS (C) AS ADJUSTED
--------------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Operating revenue... $ 5,793 $ $5,793
---------- --------------- -----------
Expenses:
General and
administrative
(G).............. 2,911,273 2,911,273
Market
development...... 191,693 191,693
Depreciation and
amortization..... 15,684 5,402,768(8) 5,418,452
Interest, net..... $1,019,145(4)
673,534(5)
270,438(6)
(110,828)(7) 1,974,275 (1,019,145)(3)
(270,438)(3)
23,246,316(7) 23,931,008
--------------- ---------- --------------- -----------
Total
expenses....... 1,852,289 5,092,925 27,359,501 32,452,426
Equity loss in
Telecom............ -- --
--------------- ---------- --------------- -----------
Pretax Loss......... 1,852,289 5,087,132 27,359,501 32,446,633
Deferred tax
benefit............ -- (1,836,941)(8) (1,836,941)
--------------- ---------- --------------- -----------
Net loss...... $1,852,289 $5,087,132 25,5$22,560 30$,609,692
--------------- ---------- --------------- -----------
--------------- ---------- --------------- -----------
Pro forma net loss
per share of Common
Stock (G).......... $ 0.16 $ 0.55
---------- -----------
---------- -----------
Pro forma weighted
average number of
shares of Common
Stock outstanding
(G)................ 31,651,605 55,651,605
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
F-5
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(A) Represents the historical combined balance sheets of ART and Telecom. See
supplementary combining balance sheet data on page F-4.
(B) Pro forma adjustments:
(1) Conversion of Telecom serial preferred stock into Telecom common stock,
issuance of ART Common Stock to Telecom stockholders, and cancellation of
the outstanding Telecom common stock and the ART Redeemable Preferred
Stock in connection with the Merger.
(2) Proceeds of $3,000,000 in cash from the CommcoCCC Financing in exchange
for the CommcoCCC Notes and CommcoCCC Warrants. The value ascribed to the
CommcoCCC Warrants totaled $25,000.
(3) Proceeds of $2,220,000 in cash from the Equipment Financing and issuance
of the Indemnity Warrants, net of the related financing costs of
$225,000. The value ascribed to the Indemnity Warrants totaled $484,460.
(4) Interest expense from the Bridge Financing provided by stockholders of
Telecom at the effective interest rate after giving effect to the value
ascribed to the Bridge Warrants, as if the Bridge Notes were issued as of
the beginning of the respective periods.
(5) Interest expense from the Equipment Financing at the effective interest
rate after giving effect to the value ascribed to the Indemnity Warrants,
as if the Equipment Notes were issued as of the beginning of the
respective periods.
(6) Interest expense from the CommcoCCC Financing, at the effective interest
rate after giving effect to the value ascribed to the CommcoCCC Warrants,
as if the CommcoCCC Notes were issued as of the beginning of the
respective periods.
(7) Elimination of interest expense from the Advent Notes that were
converted into shares of Telecom stock on February 2, 1996.
(C) Offering adjustments:
(1) Issuance of 7,500,000 shares of Common Stock offered in the Common Stock
Offering based on an assumed initial public offering price of $9.00 per
share, after deducting the estimated offering discount and related
expenses of $5,332,275.
(2) Assumed gross proceeds of $175,000,000 from the issuance of the Notes
and Warrants in the Unit Offering, and related estimated offering
discount and related expenses of $6,824,417. The value ascribed to the
Unit Warrants totaled $15,200,000.
(3) Repayment of the Bridge Financing and CommcoCCC Financing out of the net
proceeds from the Offerings and the reversal of the related interest
expense. The unamortized offering discount and deferred finance costs
associated with the Bridge Financing and CommcoCCC Financing will result
in an extraordinary loss of approximately $1,000,000 which has been
excluded from the pro forma as adjusted presentation.
(4) The acquisition of the CommcoCCC Assets in exchange for 16,500,000
shares of Common Stock of the Company based on an assumed value of $9.00
per share, the related deferred tax liabilities and the estimated related
expenses of $3,000,000.
(5) The acquisition of the 50% ownership interest of ART West held by
Extended for $6 million in cash, to be paid out of the net proceeds from
the Offerings..
(6) The acquisition of the DCT assets for $3.6 million in cash, to be paid
out of the net proceeds from the Offerings.
(7) Interest expense on the Notes, at an assumed coupon rate of 13.5%
(resulting in an effective interest rate of 15.2% on the Notes, including
the amortization of debt issuance costs and original issue discount), as
if the Notes were issued as of the beginning of the respective periods.
If the interest rate on the Notes changed by 0.5%, interest expense would
change by approximately $765,000 and $191,250 for the year ended December
31, 1995 and three months ended March 31, 1996, respectively.
F-6
<PAGE>
(8) Depreciation and amortization expense related to the acquisition of the
CommcoCCC Assets, the 50% ownership interest in ART West, the DCT Assets
and the related deferred taxes.
(D) Represents the historical amounts of ART as of and for the three months
ended March 31, 1996 and as of and for the year ended December 31, 1995.
(E) Represents the historical amounts of Telecom as of and for the three months
ended March 31, 1996, as of December 31, 1995 and for the period from March
28, 1995 (date of inception) to December 31, 1995.
(F) Represents the elimination of inter-entity transactions and balances
consisting of (i) receivables and payables, (ii) ART's investment in
Telecom, Telecom's corresponding stockholder equity amounts and the
recognition by ART of its equity in losses of Telecom and (iii) Telecom's
investment in ART Redeemable Preferred Stock.
(G) Pro forma net loss per share and the weighted average number of shares of
Common Stock reflect (i) the conversion of all shares of Telecom serial
preferred stock to Telecom common stock; (ii) issuance of ART Common Stock
to Telecom stockholders, (iii) the cancellation of the outstanding Telecom
common stock and the ART Series A Redeemable Preferred Stock; and (iv) the
issuance of potentially dilutive instruments issued within one year prior to
a proposed initial public offering at exercise prices below the assumed
initial public offering price of $9.00 per share as if they were outstanding
as of the beginning of the respective periods.
<TABLE>
<S> <C>
Pro Forma:
Weighted average number of shares of Common Stock outstanding for
primary computation.............................................. 10,013,055(1)
Issuances of shares of Telecom serial preferred stock as converted
into shares of ART Common Stock.................................. 10,916,807
Issuances of shares of Telecom common stock as converted into
shares of ART Common Stock....................................... 8,100,807(2)
Options and warrants issued and outstanding....................... 2,620,936
--------------
Pro forma weighted average number of shares of Common Stock....... 31,651,605(3)
--------------
--------------
Pro Forma As Adjusted:
Pro forma weighted average number of shares of Common Stock....... 31,651,605
Common Stock issued in connection with the Common Stock Offering
and the acquisition of the CommcoCCC Assets...................... 24,000,000
--------------
Pro forma as adjusted weighted average number of shares of Common
Stock............................................................ 55,651,605(3)
--------------
--------------
</TABLE>
(1) The weighted average number of shares of Common Stock for primary
computation exclude all common stock equivalents, which are
anti-dilutive.
(2) Excludes shares of Telecom common stock owned by ART.
(3) The Securities and Exchange Commission requires that potentially
dilutive instruments issued within one year prior to a proposed initial
public offering at exercise prices below the expected initial public
offering price be treated as outstanding for the entire period presented.
The weighted average number of shares of Common Stock on a pro forma and
a pro forma as adjusted basis reflects those potentially dilutive
instruments assuming the sale of shares of Common Stock offered in the
Common Stock Offering based on an assumed initial public offering price
of $10.00 per share. In measuring the dilutive effect, the treasury stock
method was used.
(H) General and administrative expense includes a non-recurring, non-cash
compensation expense of $802,002 and $6,795,514 for the year ended December
31, 1995 and for the three months ended March 31, 1996, respectively,
associated with the release of Escrow Shares in 1995 and the termination of
the Escrow Shares arrangement in 1996.
(I) Market development expense for the three months ended March 31, 1996
includes $1,053,000, representing the value ascribed to the Strategic
Distribution Agreement in connection with the February 1996 investment in
Telecom by Ameritech.
F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Advanced Radio Technologies Corporation:
We have audited the accompanying balance sheets of Advanced Radio
Technologies Corporation (a development stage company) as of December 31, 1995
and 1994, and the related statements of operations, stockholders' deficit and
cash flows for the years ended December 31, 1995 and 1994, for the period from
August 23, 1993 (date of inception) to December 31, 1993 and for the cumulative
period from August 23, 1993 (date of inception) to December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Radio Technologies
Corporation as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years ended December 31, 1995 and 1994, and for the
period from August 23, 1993 (date of inception) to December 31, 1993, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared on the going
concern basis of accounting, which contemplates realization of assets and
liquidation of liabilities in the ordinary course of business. As described in
Note 1, the Company has a substantial working capital deficit at December 31,
1995, has incurred operating losses since inception and does not expect to
generate significant operating revenues until fiscal 1996. The Company estimates
that revenues in 1996 will not be sufficient to fund its initial capital
requirements, operating expenses and other working capital needs. In addition,
as set forth in Notes 5, 7, 8, and 11, the Company has significant financial
commitments. The Company's continued funding of its initial capital
requirements, operating expenses, working capital needs and contractual
commitments is dependent upon its ability to raise additional financing.
Management's plans in this regard are discussed in Note 1. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
COOPERS & LYBRAND L.L.P.
New York, New York
April 26, 1996, except for Note 2C, Note 5B and
the second paragraph of Note 9
as to which the date is June 26, 1996
F-8
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................................. $ 6,069 $ 5,133
-------------- ------------
Total current assets.......................................................... 6,069 5,133
Note receivable from Telecom (Note 4)............................................... 5,000,000
Equity investments (Note 5)......................................................... 285,000
Deferred financing costs, net....................................................... 457,543
FCC licenses........................................................................ 8,913
Property and equipment, net......................................................... 1,723 3,448
Other assets........................................................................ 25,376 34,030
-------------- ------------
Total assets.................................................................. $ 5,784,624 $ 42,611
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.......................................... $ 243,952 $ 11,689
Due to Telecom (Note 11).......................................................... 738,680
Note payable to related party (Note 11)........................................... 70,000
-------------- ------------
Total current liabilities..................................................... 982,632 81,689
Equity loss in excess of investment (Note 5)........................................ 211,543
Convertible note payable (Note 4)................................................... 4,950,000
-------------- ------------
Total liabilities............................................................. 6,144,175 81,689
-------------- ------------
Redeemable Preferred Stock, $.01 par value; 1,000 shares authorized; 1 share issued
and outstanding at December 31,
1995 (Note 4)...................................................................... 44,930
-------------- ------------
Commitments and contingencies (Notes 1, 5, 7, 8, 11 and 12).........................
Stockholders' deficit (Note 9):
Common Stock, $.001 par value; 58,900,320 shares authorized; 10,013,055 and
5,890,032 shares issued and outstanding.......................................... 10,013 5,890
Additional paid-in capital........................................................ 988,375 90,246
Deficit accumulated during the development stage.................................. (1,402,869) (135,214)
-------------- ------------
Total stockholders' deficit................................................... (404,481) (39,078)
-------------- ------------
Total liabilities and stockholders' deficit................................. $ 5,784,624 $ 42,611
-------------- ------------
-------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
FOR THE PERIOD FROM AUGUST 23, 1993 (DATE OF INCEPTION)
TO DECEMBER 31, 1993 AND CUMULATIVE FOR THE PERIOD
FROM AUGUST 23, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM AUGUST
AUGUST 23, 23, 1993
YEARS ENDED 1993 (DATE OF (DATE OF
DECEMBER 31, INCEPTION) TO INCEPTION) TO
-------------------------- DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Consulting income......................................... $ -- $ 137,489 $ -- $ 137,489
------------- ----------- ------------- -------------
Expenses:
General and administrative expenses..................... 204,937 253,453 5,906 464,296
Depreciation and amortization........................... 10,378 8,281 688 19,347
Interest expense, net (Note 11)......................... 38,455 4,375 42,830
------------- ----------- ------------- -------------
Total expenses...................................... 253,770 266,109 6,594 526,473
Equity loss on investment in Telecom (Note 5)............. 1,013,885 1,013,885
------------- ----------- ------------- -------------
Net loss............................................ $ 1,267,655 $ 128,620 $ 6,594 $ 1,402,869
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
Pro forma net loss per share (unaudited).................. $ 0.04
-------------
-------------
Pro forma weighted average number of shares of Common
Stock outstanding (unaudited)............................ 31,651,605
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
FOR THE PERIOD FROM AUGUST 23, 1993 (DATE OF INCEPTION)
TO DECEMBER 31, 1993 AND CUMULATIVE FOR THE PERIOD
FROM AUGUST 23, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
--------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Net issuance of 2,945,016 shares of Common Stock for cash... $ 2,945 $ 58,191 $ 61,136
Net loss.................................................... $ (6,594) (6,594)
--------- ----------- -------------- --------------
Balance, December 31, 1993.................................. 2,945 58,191 (6,594) 54,542
Issuance of 2,945,016 shares of Common Stock for cash....... 2,945 32,055 35,000
Net loss.................................................... (128,620) (128,620)
--------- ----------- -------------- --------------
Balance, December 31, 1994.................................. 5,890 90,246 (135,214) (39,078)
Issuance of 73,625 shares of Common Stock to ART West....... 74 24,926 25,000
Issuance of 4,049,398 shares of Common Stock to existing
shareholders............................................... 4,049 (4,049)
Conversion of note payable and interest to paid-in
capital.................................................... 75,250 75,250
Investment in Telecom as a result of the release of escrow
shares..................................................... 802,002 802,002
Net loss.................................................... (1,267,655) (1,267,655)
--------- ----------- -------------- --------------
Balance, December 31, 1995.................................. $ 10,013 $ 988,375 $ (1,402,869) $ (404,481)
--------- ----------- -------------- --------------
--------- ----------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
FOR THE PERIOD FROM AUGUST 23, 1993 (DATE OF INCEPTION)
TO DECEMBER 31, 1993 AND CUMULATIVE FOR THE PERIOD
FROM AUGUST 23, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
AUGUST 23, FROM AUGUST
YEARS ENDED 1993 (DATE OF 23, 1993 (DATE
DECEMBER 31, INCEPTION) TO OF INCEPTION)
----------------------------- DECEMBER 31, TO DECEMBER
1995 1994 1993 31, 1995
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (1,267,655) $ (128,620) $ (6,594) $ (1,402,869)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash interest expense............................. 110,828 110,828
Depreciation and amortization......................... 10,378 8,281 688 19,347
Equity loss on investment in Telecom.................. 1,013,885 1,013,885
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities.............. (3,939) (8,282) 19,971 7,750
-------------- ------------- ------------- --------------
Net cash (used in) provided by operating
activities......................................... (136,503) (128,621) 14,065 (251,059)
-------------- ------------- ------------- --------------
Cash flows from investing activities:
Additions to property and equipment..................... (5,175) (5,175)
Investment in ART West and Telecom...................... (255,340) (255,340)
Note receivable from Telecom............................ (5,000,000) (5,000,000)
Acquisition of FCC Licenses............................. (13,912) (13,912)
Increase in other assets................................ (41,272) (41,272)
-------------- ------------- ------------- --------------
Net cash used in investing activities............... (5,269,252) (5,175) (41,272) (5,315,699)
-------------- ------------- ------------- --------------
Cash flows from financing activities:
Proceeds from issuance of Common Stock.................. 35,000 61,136 96,136
Proceeds from loan and note payable..................... 8,500 70,000 78,500
Proceeds from issuance of Preferred Stock............... 50,000 50,000
Preferred Stock issuance costs.......................... (5,070) (5,070)
Repayment of loan....................................... (8,500) (8,500)
Proceeds from convertible note payable.................. 4,950,000 4,950,000
Deferred financing costs................................ (326,919) (326,919)
Due to Telecom.......................................... 738,680 738,680
-------------- ------------- ------------- --------------
Net cash provided by financing activities........... 5,406,691 105,000 61,136 5,572,827
-------------- ------------- ------------- --------------
Net increase (decrease) in cash..................... 936 (28,796) 33,929 6,069
Cash, beginning of period................................. 5,133 33,929
-------------- ------------- ------------- --------------
Cash, end of period....................................... $ 6,069 $ 5,133 $ 33,929 $ 6,069
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
Supplemental cash flow information:
Non-cash investing and financing activities:
Release of escrow shares and increase in the investment
in Telecom............................................. $ 802,002 $ 802,002
Issuance of stock and contribution of licenses to ART
West................................................... $ 30,000 $ 30,000
Conversion of note payable and interest to Common
Stock.................................................. $ 75,250 $ 75,250
Accrued deferred financing costs........................ $ 175,000 $ 175,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. FORMATION OF THE COMPANY AND BASIS OF PRESENTATION:
THE COMPANY
Advanced Radio Technologies Corporation ("ART" or the "Company") was
organized as a Delaware corporation on August 23, 1993, to provide broadband
wireless digital telecommunications services to the domestic telecommunications
market. The Company's operations to date include the application for and
acquisition of certain 38 GHz licenses granted by the Federal Communications
Commission ("FCC") and costs incurred for the deployment of such services.
During 1995, The Company established a strategic alliance with Extended
Communications, Inc. ("Extended") to form the ART West joint venture. ART West
was formed on April 4, 1995 to develop and expand the Company's wireless digital
telecommunications services in various markets throughout the western United
States (see Note 5).
During 1995, Advanced Radio Telecom Corp. ("Telecom") was organized by the
Company and Landover Holdings Corporation ("Landover") with one of its initial
objectives to acquire certain 38 GHz licenses in the northeastern United States
from EMI Communications, Corp. ("EMI"). Under the terms of a purchase agreement
between the Company, Landover, and Telecom dated April 21, 1995, (the "Purchase
Agreement") Landover was obligated to purchase $7,000,000 of securities of
Telecom. Pursuant to the Purchase Agreement and a stockholders' agreement
between the Company, Telecom and their respective shareholders dated May 8, 1995
(the "Stockholders' Agreement"), the Company and Telecom were to merge once
approval from the FCC had been granted. (See Note 2).
INITIAL CAPITALIZATION
The Company was formed on August 23, 1993 by two of its executives (the
"Founding Stockholders") by issuing 2,945,016 shares of Common Stock in exchange
for $1,136. During November 1993, ART redeemed 1,178,006 shares of Common Stock
from the Founding Stockholders and through a private placement issued 1,178,006
shares of Common Stock to High Sky Limited Partnership ("High Sky") in exchange
for $60,000. During March 1994, High Sky II Limited Partnership ("High Sky II"),
an affiliate of High Sky (collectively referred to as the "High Sky
Partnerships") contributed $100,000 to the Company in exchange for 589,003
shares of Common Stock and a $70,000 Promissory Note. In connection with the
High Sky II financing, ART issued an additional aggregate of 2,356,013 shares to
the Founding Stockholders and High Sky whereby the Founding Stockholders and the
High Sky Partnerships would each own a 50% interest in ART. Additionally, during
1994, one of the Founding Stockholders contributed an additional $5,000 for
which contribution there were no shares issued.
Pursuant to an agreement dated March 1, 1995, High Sky II agreed to assign
the $70,000 Promissory Note, plus accrued interest, to the Founding Stockholders
in exchange for two new promissory notes executed by the Founding Stockholders.
Concurrent with the exchange of the promissory notes, the Founding Stockholders
contributed the $70,000 Promissory Note plus accrued interest of $5,250 to the
Company, for which contribution there were no additional shares issued.
BASIS OF PRESENTATION
The financial statements have been prepared on the going concern basis of
accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has a substantial
working capital deficit, has incurred operating losses since inception and does
not expect to recognize significant operating revenues until the commencement of
its commercial services, which is anticipated to occur in fiscal 1996. The
Company estimates that revenues in 1996 will not be sufficient to fund its
initial operating expenses and other working capital needs, including
F-13
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. FORMATION OF THE COMPANY AND BASIS OF PRESENTATION, CONTINUED:
consulting, service and purchase commitments set forth in Notes 5, 7, 8 and 11.
The Company's continued funding of its initial operating expenses, working
capital needs and contractual commitments is dependent upon its ability to raise
additional financing. The Company and Telecom have engaged various investment
bankers to assist them in raising financing through a public equity and debt
offering. There can be no assurance that the Company and Telecom will be
successful in their effort to raise additional financing through these offerings
or, if available, that the Company and Telecom will be able to obtain it on
acceptable terms. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
2. PURCHASE AGREEMENT:
A -- INITIAL CAPITALIZATION OF TELECOM
Pursuant to the Purchase Agreement, as its initial capitalization, an
aggregate of 8,580,000 shares of Class B and Class A common stock were issued by
Telecom to Landover and consultants to Landover, respectively, for an aggregate
cash consideration of $1,020. Such shares of Class B and Class A common stock
represented 64% and 2%, respectively, of the total number shares of capital
stock of Telecom then outstanding. Concurrently, the Company received 4,420,000
shares of Class A common stock, representing 34% of the total number of shares
of capital stock of Telecom then outstanding in exchange for $340. All of the
above references to shares of common stock of Telecom have been adjusted to
reflect a 13 for 1 stock split which occurred in February 1996, but are prior to
the issuance of anti-dilutive shares described below.
Under the Purchase Agreement, Landover agreed to invest or cause to be
invested $7,000,000 in ART, Telecom and their affiliates (the "Landover Funding
Commitment"). In consideration for this $7,000,000 investment, Telecom agreed to
issue preferred stock, the number of shares of which would be designated by
Landover. Under the anti-dilution provisions of the Class A common stock, in
respect of each such preferred stock issuance, Telecom agreed to issue, for no
consideration, additional shares of Class A common stock in number necessary to
maintain the 36% ownership interest in Telecom of the holders of Class A common
stock.
Under the Purchase Agreement, the individual shareholders of the Company
were required to place 5,153,778 shares of Common Stock in the Company in escrow
(the "Escrow Shares") to be released upon the completion of the then pending EMI
Asset acquisition (see Note 8), Telecom's attainment of specific operating
income levels for the years 1997 through 1999 and the acquisition of interests
in a specified number of FCC license authorizations by April 30, 2000. As a
result of the consummation of the EMI Asset acquisition, in November 1995,
1,873,030 of the Escrow Shares of ART were released. The fair value of the
Escrow Shares released in 1995, amounting to $802,002, has been accounted for as
an equity investment in Telecom, the effect of which has been recognized as
additional paid-in capital in the Company. Pursuant to the February 2, 1996
Reorganization, the Escrow Shares arrangement was terminated and all of the
remaining Escrow Shares were released to the stockholders of the Company. The
fair value of the remaining Escrow Shares released, in the amount of
approximately $6.8 million, will be accounted for in the same manner during
1996.
B -- MERGER
Under the terms of the Purchase Agreement, the Company and Telecom intend to
operate both companies as a single enterprise and are committed to merge if and
when permitted by the FCC.
F-14
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. PURCHASE AGREEMENT, CONTINUED:
Concurrent with the Purchase Agreement, the Company and Telecom entered into an
exclusive 20-year services agreement (the "Services Agreement") for the
construction, development and operation of systems in the Company's markets (see
Note 6).
On February 2, 1996, the Company, Telecom and their respective shareholders
agreed to an amendment and restatement of the Stockholders' Agreement providing
for (i) termination effective on the closing of a public share offering, (ii)
amendment and restatement of the Certificate of Incorporation and reorganization
of the capital structure of Telecom; (iii) the exchange of the Advent Notes and
one share of ART Series A Redeemable Preferred Stock for shares of Series E
preferred stock of Telecom (see Note 4); (iv) revision of provisions for
election of directors; (v) amendment and restatement of ART's registration
rights agreements; (vi) release of shares escrowed in connection with the
original Stockholders' Agreement; and (vii) approval of a definitive agreement
to merge the Company and Telecom (the "Reorganization").
C -- AMENDED MERGER
The definitive merger agreement, as entered into on February 2, 1996 and
subsequently restated and amended on June 26, 1996, (the "Merger Agreement")
provides for the merger of a newly-formed wholly owned subsidiary of the Company
("Merger Sub") into Telecom (the "Merger") subject to certain conditions,
including the receipt of FCC approval. Prior to the Merger, each outstanding
share of Telecom's serial preferred stock will be converted into 13 shares of
Telecom's common stock. In the Merger, each outstanding share of common stock of
Telecom will be exchanged for the right to receive an equal number of shares of
Common Stock of the Company. As a result, Telecom will become a wholly owned
subsidiary of the Company. The Merger Agreement provides that if the Merger is
not consummated by May 13, 1997, the shares of Telecom's common stock owned by
the Company will be surrendered to Telecom, and the Services Agreements is to be
revised to, among other revisions, extend the term to 40 years and provide for a
proportionate participation by the Company's stockholders in any dividends paid
by Telecom or the proceeds from any sale of Telecom. The Merger Agreement also
provides for the assignment of Telecom's interests in all of its agreements,
including the various services agreements, employment agreements, equipment
purchase agreements and purchase option agreements, to the Company. Further,
upon the Merger, the holders of warrants to purchase an aggregate of 2,302,136
shares of Telecom common stock will be entitled to purchase an equivalent number
of shares of Common Stock on the same terms. Employee stock options to purchase
1,664,732 shares of Telecom's common stock will be converted into similar stock
options of the Company.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEVELOPMENT STAGE ENTERPRISE
The Company is a development stage enterprise as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." The financial statements have been prepared on the going
concern basis of accounting.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of three
years.
F-15
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INVESTMENTS
The Company accounts for its 50% interest in the ART West joint venture and
its 34% interest in Telecom under the equity method.
FCC LICENSES
The Company has obtained radio spectrum rights under FCC issued
authorizations and licenses throughout the United States by petitioning the FCC
directly and through the purchase of such rights held by others. Such licenses
are issued for an initial term of six years and are renewable subject to review
by the FCC. The costs associated with the acquisition of such licenses are
capitalized and amortized on a straight-line basis over a 40-year period
beginning upon commencement of operations in the related market. The 40-year
period is based upon management's license renewal expectations.
RECOVERABILITY OF LONG-LIVED ASSETS
The recoverability of property and equipment and capitalized FCC
authorizations and licenses is dependent upon the successful development of
systems in each of the respective markets, or through sale of such assets.
Management estimates that it will recover the carrying amount of those costs
from cash flow generated by the systems once they have been developed. However,
it is reasonably possible that such estimate will change as a result of the
failure to develop the FCC authorizations on a timely basis, or technological,
regulatory or other changes.
The Company's policy is to assess annually any impairment in value based
upon a comparison of projected operating cash flows from each market over its
expected period of operation, on an undiscounted basis, to the carrying amount
of the property and equipment, licenses and other capitalized costs related to
the market.
FINANCING COSTS
Direct costs associated with obtaining debt financing are deferred and
charged to interest expense using the effective interest rate method over the
term of the debt. Direct costs associated with obtaining equity financing are
deferred and charged to additional paid-in capital as the related funds are
raised. Deferred costs associated with unsuccessful financings are charged to
expense.
Accumulated amortization of deferred financing costs totaled $44,376 at
December 31, 1995.
REVENUE RECOGNITION
Revenue from telecommunications services are recognized ratably over the
period such services are provided.
During 1994, the Company recognized income from consulting fees associated
with the application of FCC licenses on behalf of third parties, including
consulting fees of approximately $80,000 from Extended.
INCOME TAXES
The Company accounts for income taxes under the liability method of
accounting. Under the liability method, deferred taxes are determined based on
the differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amounts expected to be realized.
F-16
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NET LOSS PER SHARE
Historical net loss per share is computed based on the loss for the period
divided by the weighted average number of shares of Common Stock outstanding
during the period. Historical net loss per share and the weighted average number
of shares of Common Stock outstanding are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED FROM AUGUST 23,
DECEMBER 31, 1993 (DATE OF
----------------------------- INCEPTION) TO
1995 1994 DECEMBER 31, 1993
-------------- ------------- ------------------
<S> <C> <C> <C>
Net loss per share.................................. $ 0.13 $ 0.01 $ --
-------------- ------------- ------------------
-------------- ------------- ------------------
Weighted average number shares of Common Stock
outstanding........................................ 10,013,055 9,178,633 5,006,527
-------------- ------------- ------------------
-------------- ------------- ------------------
</TABLE>
The Securities and Exchange Commission requires that potentially dilutive
instruments issued within one year prior to a proposed initial public offering
at exercise prices below the expected initial public offering price be treated
as outstanding for all periods presented. Accordingly, an additional 21,638,550
shares are reflected in the weighted average number of shares of Common Stock
outstanding in computing the unaudited pro forma net loss per share for the year
ended December 31, 1995.
USE OF 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 as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. NOTE RECEIVABLE FROM TELECOM AND CONVERTIBLE NOTES PAYABLE TO ADVENT:
The Company, Telecom and several entities affiliated with Advent
International Corp. (collectively, "Advent"), entered into a securities purchase
agreement (the "Advent Purchase Agreement") dated November 13, 1995 under which
Advent agreed to acquire a 10% interest in the combined entities of the Company,
Telecom and certain specified affiliates. Pending the merger of these entities
(see Note 2), the Company issued promissory notes (the "Advent Notes") with an
aggregate principal amount of $4,950,000 and one share of the Company's Series A
Redeemable Preferred Stock in exchange for $5,000,000 in cash.
The Advent Notes carried interest at a rate of 10% per annum and were
payable on demand at any time on or after May 13, 1997. The Advent Notes were
collateralized by certain assets of the Company and Telecom. The Advent Notes
were convertible into that number of shares of preferred stock which represented
in the aggregate at least 10% of the fully diluted capital stock of the combined
entities described above, as defined in the Advent Purchase Agreement. The
Advent Notes were convertible either (i) immediately prior to an initial public
offering with aggregate gross proceeds of at least $10,000,000 or (ii) at
Advent's election.
At December 31, 1995, the Company accrued interest expense of $66,542 on the
Advent Notes, which has been included in accounts payable and accrued
liabilities.
On November 13, 1995, the gross proceeds of $5,000,000 received by the
Company from Advent were transferred to Telecom in exchange for a note with
terms equivalent to the terms of the Advent Notes. On February 2, 1996, the
Company, Telecom and Advent entered into an exchange agreement
F-17
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. NOTE RECEIVABLE FROM TELECOM AND CONVERTIBLE NOTES PAYABLE TO
ADVENT, CONTINUED:
under which the Advent Notes, including accrued interest, and the one share of
ART Series A Redeemable Preferred Stock held by Advent were exchanged for
232,826 shares of Series E preferred stock of Telecom, and the note was
canceled. As a result, the Advent Notes were canceled and Telecom became the
owner of the one share of the ART Series A Redeemable Preferred Stock.
5. EQUITY INVESTMENTS:
A -- INVESTMENT IN ART WEST JOINT VENTURE
On April 4, 1995, the Company entered into an agreement with Extended to
form ART West, a jointly controlled general partnership established to acquire,
develop, and operate radio systems using 38 GHz licenses in certain western
states of the U.S. The ART West joint venture will continue until December 31,
2055, unless terminated earlier. The Company's initial capital contribution
consisted of $255,000 in cash, FCC licenses and related assets with a carrying
value of approximately $5,000, and 73,625 shares of Common Stock of ART.
Extended's initial capital contribution consisted of $5,000 in cash and FCC
licenses. The combined systems are collectively referred to as the ART West
Systems. Additionally, Extended received distributions of $250,000 in cash and
the 73,625 shares of Common Stock contributed by the Company to ART West. As a
result of these contributions and distributions, the Company and Extended share
equally in the partnership interests of ART West. The Company recorded its
investment in ART West in the amount of $285,000. The excess of the Company's
share of the underlying net assets of ART West over the Company's recorded
investment will be amortized over the life of the ART West Systems.
On October 1, 1994, ART entered into an exclusive services agreement with
Extended, whereby ART is responsible for the construction, operation and
management of Extended's telecommunications systems. The term of the Agreement
is for five years. In connection with the formation of ART West, Extended
assigned its interest in the services agreement to ART West. Under the terms of
the services agreement, ART will incur all costs and expenses related to
construction, operation and management of the systems. As compensation, ART will
receive all revenues generated by the systems after deducting certain related
direct expenses, less 45% which is to be paid to ART West. ART's interest in
this service agreement was subsequently assigned to Telecom (Note 6). An officer
of ART is also the President and a shareholder of Extended.
B -- ART WEST JOINT VENTURE ACQUISITION AND MANAGEMENT AGREEMENTS
In June 1996, the Company agreed to acquire Extended's 50% ownership
interest in ART West for $6,000,000 in cash upon consummation of public equity
and debt offerings with aggregate net proceeds of $125.0 million to the Company
and receipt of FCC approval. In addition, the Company entered into a ten-year
management agreement which, effective June 1, 1996, replaces the services
agreement referred to above with an arrangement whereby the Company agrees to
construct, operate and manage the ART West Systems in exchange for a license fee
equal to 10% of recurring operating revenues.
C -- INVESTMENT IN TELECOM
The Company acquired 4,420,000 shares of Class A common stock of Telecom, or
34% of the outstanding and issued shares, for cash of $340 (see Note 2). The
Company also recorded $802,002 as an investment in Telecom based upon the fair
value of Escrow Shares released in 1995 (see Note 2). The excess of the
Company's share of the underlying net assets of Telecom over the Company's
recorded investment will be amortized over the estimated useful life of
Telecom's FCC licenses.
F-18
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. EQUITY INVESTMENTS, CONTINUED:
The Company recognizes its proportionate share of the losses of Telecom in
excess of its investment to the extent of its funding and financial commitments.
During 1995, the Company recognized its proportionate share of Telecom's loss in
the amount of $1,013,885. Summarized financial information for Telecom as of
December 31, 1995 and for the period from March 28, 1995 (date of inception) to
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
---------------
<S> <C>
Total current assets................................................................... $ 1,418,590
Property and equipment, net............................................................ 3,579,838
FCC licenses........................................................................... 4,226,821
Other assets........................................................................... 605,366
---------------
Total assets......................................................................... $ 9,830,615
---------------
---------------
Total current liabilities.............................................................. $ 3,450,537
Note payable to EMI.................................................................... 1,500,000
Note payable to ART.................................................................... 5,000,000
Total stockholders' deficit............................................................ (119,922)
---------------
Total liabilities and stockholders' deficit.......................................... $ 9,830,615
---------------
---------------
<CAPTION>
MARCH 28, 1995
(DATE OF
INCEPTION) TO
DECEMBER 31,
1995
---------------
<S> <C>
Operating revenue...................................................................... $ 5,793
Expenses............................................................................... 2,986,866
---------------
Net loss............................................................................... $ 2,981,073
---------------
---------------
</TABLE>
6. TELECOM SERVICES AGREEMENT:
The Company entered into an exclusive Services Agreement with Telecom, for
the construction, operation and management of the FCC licenses and related
telecommunications systems that are owned by ART or for which ART has existing
services agreements. Under the Services Agreement, Telecom will incur all costs
and expenses related to construction, operation and management of the systems.
As compensation, Telecom will receive all revenues generated by the systems
after deducting certain related direct expenses, less 25% which is to be paid to
the Company. The Services Agreement is for a period of 20 years.
Through this Services Agreement, the Company has assigned its interests in
other similar services agreements with ART West (see Note 5) and DCT (see Note
7). There have been no services provided through December 31, 1995 on any of the
services agreements.
7. DCT AGREEMENTS:
SYSTEM PURCHASE AGREEMENT
On September 1, 1994, the Company entered into an agreement with DCT
Communications, Inc. ("DCT"), in which the Company obtained the option to
purchase certain FCC licenses (the "Systems") from DCT for $500,000 and shares
of ART Common Stock that represent 5% of its fully diluted equity as of the date
of transfer. The option is exercisable at any time after December 31, 1995 and
up to the date
F-19
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. DCT AGREEMENTS, CONTINUED:
that is three years after the FCC issues DCT's first license. At any time after
December 31, 1995, DCT may require that the Company purchase the Systems for
$50,000, plus reimbursement of certain costs defined in the agreement.
SERVICES AGREEMENT
On September 1, 1994, the Company entered into an exclusive services
agreement with DCT whereby the Company is responsible for the construction,
operation and management of DCT's Systems. The term of the Agreement is for five
years. Under the terms of the services agreement, the Company will incur all
costs and expenses related to construction, operation and management of the
systems. As compensation, the Company will receive all revenues generated by the
systems after deducting certain related direct expenses, less 45% which is to be
paid to DCT.
CONSULTING AND LOAN AGREEMENT
On March 13, 1995, the Company entered into a consulting and loan agreement
(the "Consulting and Loan Agreement"). Under the terms of the Consulting and
Loan Agreement, DCT agreed to loan the Company $8,500, bearing interest at 9%
per annum. The loan, including interest of $431, was due and paid on August 31,
1995.
DCT PRELIMINARY AGREEMENT
On April 25, 1996, the Company and Telecom entered into a preliminary
agreement with DCT to acquire DCT's interest in certain FCC authorizations and
licenses in exchange for $3.6 million in cash, subject to the completion of a
definitive purchase agreement and services agreement. The definitive purchase
agreement will supersede and replace all other existing agreements between DCT
and the Company. The definitive purchase agreement must be signed by June 28,
1996 and the closing of the transaction is subject to FCC approval.
8. COMMITMENTS:
ACQUISITION OF ASSETS OF EMI
On April 4, 1995, the Company entered into a purchase option agreement with
EMI to acquire EMI's interest in certain 38 GHz radio spectrum licenses and
related assets in the northeastern United States (the "EMI Assets") in exchange
for $3,000,000 in cash and a three year non-negotiable promissory note in the
amount of $1,500,000. Pursuant to the Purchase Agreement (see Note 1), in
November, 1995, the Company assigned its rights and obligations under the
purchase option agreement to Telecom. The FCC subsequently approved the transfer
of the EMI licenses and Telecom directly acquired the EMI Assets in November
1995. The Company has also issued a guarantee to EMI of the obligations of
Telecom under the promissory note.
TELECOM ONE OPTION
On May 25, 1995, the Company entered into an agreement with TeleCom One
Incorporated ("TeleCom One") whereby the Company agreed to assist TeleCom One in
its applications for certain FCC licenses (the "TeleCom One Agreement"). Under
the terms of the TeleCom One Agreement, in exchange for its services, the
Company acquired options to purchase a 49% interest in each of the FCC licenses
obtained by TeleCom One at a purchase price of $.0133 per person covered by the
geographic license area. The term of the TeleCom One Agreement is five years.
The Company has not exercised any of its options.
F-20
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. COMMITMENTS, CONTINUED:
EMPLOYMENT AND CONSULTING AGREEMENTS
On May 8, 1995, the Company and Telecom jointly entered into consulting
agreements with two executive officers of the Company and Telecom, effective as
of January 1, 1995 and continuing for a term of three years, with minimum
payments aggregating approximately $170,000 annually. The costs associated with
these contracts have been recorded by Telecom and no amounts have been charged
to the Company.
On December 16, 1995, one of the executive officers of the Company and
Telecom, previously a party to one of the consulting agreements described above,
entered into a full-time employment agreement. The employment agreement is for a
three-year term with an annual salary of $250,000 in the first year, $275,000 in
the second year and $300,000 in the third year. In addition, the agreement
provides for a cash bonus of up to $100,000 for each year based upon achievement
of specific performance objectives. The costs associated with this contract have
been recorded by Telecom and no amounts have been charged to the Company.
On July 11, 1995, the Company and Telecom entered into an employment
agreement, as amended January 8, 1996, with an officer of the Company and
Telecom. The term of the agreement is three years at an annual salary of
$160,000 in the first year, $200,000 in the second year and $240,000 in the
third year. Options to purchase shares of Telecom common stock were awarded to
this officer equivalent to 2.5% of the outstanding capital stock of Telecom. The
agreement also provides for an engagement bonus of $17,000 upon execution of the
agreement and a cash bonus of up to $100,000 for each year based upon
achievement of specific performance objectives. The costs associated with this
contract have been recorded by Telecom and no amounts have been charged to the
Company.
The Company and Telecom have also entered into employment agreements with
other executives that provide for annual base salaries and cash bonuses based on
achievement of specific performance goals. These contracts may be terminated at
any time by management.
FINANCING AGREEMENT
During 1994, the Company entered into an agreement with Southeast Research
Partners ("SERP"), a subsidiary of Josephthal, Lyons & Ross, a Florida broker
dealer, to procure additional financing for the Company in exchange for cash and
options to purchase capital stock of the Company. Pursuant to a letter agreement
dated July 12, 1995, the Company and Telecom paid SERP $245,000 and the
shareholders of the Company granted SERP options to purchase 313,644 shares of
the Company's Common Stock directly from the Founding Stockholders for an
aggregate consideration of $210,000.
As of December 31, 1995, the Company and Telecom have accounted for the fee
of $245,000 as part of the financing provided by Landover and, accordingly,
$175,000 has been recorded as deferred financing costs related to the issuance
of the Advent Notes (See Note 4) and the balance of $70,000 has been recognized
as an offset against the proceeds from the issuance of the serial preferred
stock of Telecom.
9. COMMON STOCK:
On April 5, 1994, the Board of Directors authorized a 5 for 1 stock split.
Subsequently, on April 5, 1995, the Board of Directors authorized a 1 for 5
reverse stock split and simultaneously issued an additional 4,049,398 shares of
Common Stock.
On May 30, 1996, the Board of Directors authorized a 29,450.16 for 1 stock
split, increased the number of authorized shares of Preferred Stock and Common
Stock to 10,000,000 and 100,000,000,
F-21
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. COMMON STOCK, CONTINUED:
respectively, and changed the par value per share from $.01 to $.001. All
references to the number of shares and per share amounts of the Company's Common
Stock in the accompanying financial statements have been restated to reflect the
five for one stock split, the one for five reverse stock split and the 29,450.16
for 1 stock split, unless otherwise indicated. All par value amounts have been
restated to reflect the change in par value to $.001 per share.
10. INCOME TAXES:
As of December 31, 1995 and 1994, the Company has net operating loss
carry-forwards for income tax purposes of approximately $390,000 and $134,000,
respectively, which will expire between 2008 and 2010. Deferred tax assets of
approximately $130,000 and $46,000 at December 31, 1995 and 1994, respectively,
principally comprised of such net operating tax loss carry-forwards, have been
offset in full by a valuation allowance.
11. RELATED PARTY TRANSACTIONS:
On May 8, 1995, the Company and Telecom entered into a consulting agreement
with Landover as a strategic and financial consultant. Telecom paid Landover
$70,000 for services under this agreement during 1995. The consulting agreement
was terminated on November 13, 1995.
On November 13, 1995, the Company and Telecom entered into a management
consulting agreement with Landover to provide strategic planning, corporate
development and general management. Under the agreement, the Company and Telecom
will pay Landover $35,000 per month for an initial one year term, renewable by
the Company and Telecom for two additional one year terms. The aggregate expense
recognized by Telecom under this agreement during 1995 amounted to $70,000.
These expenses have been recorded by Telecom and no portion of such costs have
been charged to the Company. The agreement also provides that in the event
Landover arranges financing, acquisitions or certain other transactions for the
Company and Telecom, Landover will be paid a fee in accordance with industry
standards.
Pursuant to the Purchase Agreement, the Company and Telecom paid Landover
$391,750 for expenses in connection with the Landover Funding Commitment, of
which $250,000 has been capitalized as deferred financing costs by the Company
and the balance of $141,750 has been charged to paid-in capital of Telecom.
Telecom has funded certain expenses and investments of the Company,
including the Company's investment in ART West and payments of financing and
other operating costs. The amounts funded by Telecom to date totaling $805,803,
offset by accrued interest income of $67,123 related to the note receivable from
Telecom (see Note 4) have been included in the amount due to Telecom.
In 1994, the Company shared office space with a law firm in which a
principal of the law firm was also one of the Founding Stockholders. The Company
paid rent in the amount of $6,353 to the law firm for the use of their office
space. The law firm also regularly provides legal services to the Company.
During 1995 and 1994, the Company incurred fees of $34,770 and $74,550,
respectively, for such services.
F-22
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments
at December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------- --------------------
CARRYING CARRYING FAIR
AMOUNT FAIR VALUE AMOUNT VALUE
------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Note receivable from Telecom................................ $ 5,000,000 $ 5,000,000 -- --
Notes payable............................................... 4,950,000 4,950,000 $ 70,000 $ 70,000
</TABLE>
Note receivable from Telecom: The carrying amounts reported in the balance
sheet are a reasonable estimate of fair values.
Notes payable: The carrying amounts reported in the balance sheet
approximate fair values based upon interest rates that are currently available
to the Company for issuance of similar debt with similar terms and maturities.
F-23
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED BALANCE SHEETS
AS OF MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................................. $ 5,970 $ 255
-------------- ------------
Total current assets.......................................................... 5,970 255
Equity investments.................................................................. 3,242,401
FCC licenses........................................................................ 8,913
Property and equipment, net......................................................... 1,292 3,448
Other assets........................................................................ 23,212 34,030
-------------- ------------
Total assets.................................................................. $ 3,281,788 $ 37,733
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities.......................................... $ 2,500 $ 4,230
Due to Telecom.................................................................... 498,100
Notes payable..................................................................... 114,334
-------------- ------------
Total current liabilities..................................................... 500,600 118,564
Redeemable Preferred Stock, $.01 par value; 1,000 shares authorized; 1 share issued
and outstanding at March 31, 1996.................................................. 44,930
-------------- ------------
Commitments and contingencies
Stockholders' equity (deficit):
Common Stock, $.001 par value; 58,900,320 shares authorized; 10,013,055 and
5,890,032 shares issued and outstanding.......................................... 10,013 5,890
Additional paid-in capital........................................................ 7,783,889 90,246
Deficit accumulated during the development stage.................................. (5,057,644) (176,967)
-------------- ------------
Total stockholders' equity (deficit).......................................... 2,736,258 (80,831)
-------------- ------------
Total liabilities and stockholders' equity (deficit)........................ $ 3,281,788 $ 37,733
-------------- ------------
-------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- ---------
<S> <C> <C>
Expenses:
General and administrative............................................................. $ 24,939 $ 40,878
Depreciation and amortization.......................................................... 2,595
Interest expense, net.................................................................. 671 875
------------- ---------
Total expenses..................................................................... 28,205 41,753
Equity loss on investment in Telecom..................................................... 3,626,570
------------- ---------
Net loss........................................................................... $ 3,654,775 $ 41,753
------------- ---------
------------- ---------
Pro forma net loss per share............................................................. $ 0.12
-------------
-------------
Pro forma weighted average number of shares of Common Stock outstanding (unaudited)...... 31,651,605
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................... $ (3,654,775) $ (41,753)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense............................................................ 69,347
Depreciation and amortization........................................................ 2,595
Equity loss on investment in Telecom................................................. 3,626,570
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities............................................. (43,836) (7,459)
-------------- ----------
Net cash used in operating activities.............................................. (99) (49,212)
-------------- ----------
Cash flows from financing activities:
Proceeds from loan and note payable.................................................... 44,334
-------------- ----------
Net cash provided by financing activities.......................................... -- 44,334
-------------- ----------
Net decrease in cash............................................................... (99) (4,878)
Cash, beginning of period................................................................ 6,069 5,133
-------------- ----------
Cash, end of period...................................................................... $ 5,970 $ 255
-------------- ----------
-------------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
1. FORMATION OF THE COMPANY AND BASIS OF PRESENTATION:
THE COMPANY
Advanced Radio Technologies Corporation ("ART" or the "Company") was
organized as a Delaware corporation on August 23, 1993, to provide broadband
wireless digital telecommunications services to the domestic telecommunications
market.
BASIS OF PRESENTATION
The unaudited interim condensed financial statements included herein have
been prepared by the Company. The foregoing statements contain all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
the Company's management, necessary to present fairly the financial position of
the Company as of March 31, 1996 and 1995, and the results of its operations and
its cash flows for the three months ended March 31, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These condensed financial statements
should be read in conjunction with the Company's December 31, 1995 audited
financial statements and notes thereto.
The financial statements have been prepared on the going concern basis of
accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has limited
financial resources, incurred operating losses since inception and does not
expect to recognize material operating revenues until the commencement of its
commercial services, which is anticipated to occur in fiscal 1996. The Company
estimates that revenues in 1996 will not be sufficient to fund its initial
operating expenses and other working capital needs, including consulting,
service and purchase commitments. The Company's continued funding of its initial
operating expenses, working capital needs and contractual commitments is
dependent upon its ability to raise additional financing. The Company and
Advanced Radio Telecom Corp. ("Telecom") (see Note 2) have engaged various
investment bankers to assist them in raising financing through a public equity
and debt offering. There can be no assurance that the Company and Telecom will
be successful in their effort to raise additional financing through this public
offering or, if available, that the Company and Telecom will be able to obtain
it on acceptable terms. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
2. STOCKHOLDERS' AGREEMENT:
On February 2, 1996, the Company, Telecom and their respective shareholders
agreed to an amendment and restatement of the Stockholders' Agreement providing
for (i) termination effective on the closing of a public share offering, (ii)
amendment and restatement of the Certificate of Incorporation and reorganization
of the capital structure of Telecom; (iii) the exchange of the Advent Notes and
one share of ART Series A Redeemable Preferred Stock for shares of Series E
preferred stock of Telecom; (iv) revision of provisions for election of
directors; (v) amendment and restatement of ART's registration rights
agreements; (vi) release of shares escrowed in connection with the original
Stockholders' Agreement; and (vii) approval of the definitive merger agreement.
The definitive merger agreement, as entered into on February 2, 1996 and
subsequently restated and amended on June 26, 1996 (the "Merger Agreement"),
provides for the merger of a newly-formed wholly owned subsidiary of the Company
("Merger Sub") into Telecom (the "Merger") subject to certain conditions,
including the receipt of FCC approval. Prior to the Merger, each outstanding
share of
F-27
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS, CONTINUED
2. STOCKHOLDERS' AGREEMENT: CONTINUED:
Telecom's serial preferred stock will be converted into 13 shares of Telecom's
common stock. In the Merger each outstanding share of common stock of Telecom
will be exchanged for the right to receive an equal number of shares of Common
Stock of the Company. As a result, Telecom will become a wholly owned subsidiary
of the Company. The Merger Agreement provides that if the Merger is not
consummated by May 13, 1997, the shares of Telecom's common stock owned by the
Company will be surrendered to Telecom and the Services Agreement is to be
revised to, among other revisions, extend the term to 40 years and provide for a
proportionate participation by the Company's stockholders in any dividends paid
by Telecom or the proceeds from any sale of Telecom. The Merger Agreement also
provides for the assignment of Telecom's interests in all of its agreements,
including the various services agreements, employment agreements, equipment
purchase agreements and purchase option agreements, to the Company. Further,
upon the Merger, the holders of warrants to purchase an aggregate of 2,302,136
shares of Telecom common stock will be entitled to purchase an equivalent number
of shares of Common Stock on the same terms. Employee stock options to purchase
1,664,732 shares of Telecom's common stock will be converted into similar stock
options of the Company.
3. NET LOSS PER SHARE
Historical net loss per share is computed based on the loss for the period
divided by the weighted average number of shares of Common Stock outstanding
during the period. Historical net loss per share and the weighted average number
of shares of Common Stock outstanding are as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Net loss per share.............................................. $ .37 $ --
------------- -------------
------------- -------------
Weighted average number shares of Common Stock outstanding...... 10,013,055 10,013,055
------------- -------------
------------- -------------
</TABLE>
The Securities and Exchange Commission requires that potentially dilutive
instruments issued within one year prior to a proposed initial public offering
at exercise prices below the expected initial public offering price be treated
as outstanding for all periods presented. Accordingly, an additional 21,638,550
shares are reflected in the weighted average number of shares of Common Stock
outstanding in computing the unaudited pro forma net loss per share for the
three months ended March 31, 1996.
4. NOTES RECEIVABLE FROM TELECOM AND CONVERTIBLE NOTE PAYABLE TO ADVENT:
On February 2, 1996, the Company, Telecom and Advent entered into an
exchange agreement under which the Advent Notes, including accrued interest, and
the one share of ART's Series A Redeemable Preferred Stock held by Advent were
exchanged for 232,826 shares of Series E preferred stock of Telecom, and the
notes payable by the Company to Advent and by Telecom to the Company were
canceled, the related interest forgiven, and Telecom became the owner of the one
share of ART Series A Redeemable Preferred Stock.
5. INVESTMENTS:
The Company accounts for its 50% interest in the ART West joint venture and
its 34% interest in Telecom under the equity method.
In June 1996, the Company agreed to acquire Extended's 50% ownership
interest in ART West for $6 million in cash upon consummation of public equity
and debt offerings with aggregate net proceeds of $125 million to the Company
and receipt of FCC approval. In addition, the Company entered into a
F-28
<PAGE>
ADVANCED RADIO TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS, CONTINUED
5. INVESTMENTS: CONTINUED:
ten-year management agreement which, effective June 1, 1996, replaced the
services agreement with ART West with an arrangement whereby the Company agrees
to construct, operate, and manage the ART West systems in exchange for a license
fee equal to 10% of recurring operating revenues.
During 1995, the Company recorded $802,002 as an investment in Telecom based
upon the fair value of Escrow Shares released in 1995, the effect of which was
recognized as additional paid-in capital in the Company. On February 2, 1996,
the Company recorded an additional $6,795,514 based on the fair value of the
remaining Escrow Shares released, which was accounted for in the same manner.
The Company recognizes its proportionate share of the losses of Telecom to
the extent of its investment, funding and financial commitments. During 1996,
the Company has recognized its proportionate share of the losses of Telecom in
the amount of $3,626,570.
6. COMMCOCCC ASSET ACQUISITION
During July 1996, the Company entered into an agreement with CommcoCCC, Inc.
("CommcoCCC") to acquire CommcoCCC's interests in certain 38 GHz FCC
authorizations (the "CommcoCCC Assets") in exchange for 16.5 million shares of
Common Stock. The acquisition of the CommcoCCC Assets is subject to various
conditions including (i) minimum population coverage of the authorizations of
the Company and CommcoCCC, (ii) receipt of final FCC and other approvals, (iii)
receipt by CommcoCCC of an opinion as to the tax-free nature of the transaction
(iv) the accuracy of representations and warranties except for breaches that do
not have in the aggregate a material adverse effect, (v) no pending or
threatened material litigation, (vi) consummation of public equity and debt
offerings on terms reasonably satisfactory to CommcoCCC and (vii) other
customary closing conditions. Pending the completion of the acquisition, the
Company has agreed to construct, manage and operate the CommcoCCC Assets.
The Company has given a stockholder ("Commco LLC") of CommcoCCC an option
(the "Option") to purchase FCC authorizations in specified market areas in which
the Company will have more than one authorization. The Option is exercisable
only in the event that the CommcoCCC Acquisition is consummated and Commco LLC
receives authorizations pursuant to pending applications covering a minimum
specified population and expires nine months after the consummation of the
Common Stock Offering. The price of authorizations to be purchased under the
Option is based upon a formula that considers the market price of Common Stock
on the date of exercise.
In connection with the agreement to acquire the CommcoCCC Assets, certain
stockholders of CommcoCCC loaned the Company $3 million in cash in exchange for
notes due September 30, 1996 (the "CommcoCCC Notes") with interest at the prime
rate and received three year warrants to purchase 50,000 shares of Common Stock
at a price of $15 per share. The CommcoCCC Notes are collateralized by all of
the assets of the Company and, if not paid in full when due, the unpaid balance
is convertible into Common Stock, at the option of each holder, at stipulated
per share prices based upon the timing of exercise.
7. RELATED PARTY TRANSACTIONS
Telecom has funded the payment of certain expenses of the Company, including
financing costs. The amounts funded by Telecom during the quarter ended March
31, 1996 totaled $175,000. The balance resulting from the funding activities,
offset by the net effect of the conversion of the Advent Notes and the
cancellation of the note receivable from Telecom (Note 3), is shown as due to
Telecom in the accompanying balance sheet.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Advanced Radio Telecom Corp.:
We have audited the accompanying balance sheet of Advanced Radio Telecom
Corp. (a development stage company) as of December 31, 1995, and the related
statements of operations, stockholders' deficit and cash flows for the period
from March 28, 1995 (date of inception) to December 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Radio Telecom Corp.
as of December 31, 1995, and the results of its operations and its cash flows
for the period from March 28, 1995 (date of inception) to December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared on the going
concern basis of accounting, which contemplates realization of assets and
liquidation of liabilities in the ordinary course of business. As described in
Note 1, the Company has a substantial working capital deficit at December 31,
1995, has incurred operating losses since inception and does not expect to
generate significant operating revenues until fiscal 1996. The Company estimates
that revenues in 1996 will not be sufficient to fund its initial capital
requirements, operating expenses and other working capital needs. In addition,
as set forth in Notes 8 and 2, the Company has significant financial
commitments. The Company's continued funding of its initial capital
requirements, operating expenses, working capital needs and contractual
commitments is dependent upon its ability to raise additional financing.
Management's plans in this regard are discussed in Note 1. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
COOPERS & LYBRAND L.L.P.
New York, New York
April 26, 1996, except for Note 2B
as to which the date is June 26, 1996
F-30
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents.................................................... $ 627,585
Due from ART (Note 12)....................................................... 738,680
Other current assets......................................................... 52,325
-----------
Total current assets....................................................... 1,418,590
Property and equipment, net (Note 5)........................................... 3,579,838
FCC licenses (Note 4).......................................................... 4,226,821
Equipment and other deposits (Note 8).......................................... 284,012
Deferred financing costs....................................................... 321,354
-----------
Total assets............................................................. $ 9,830,615
-----------
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities (Note 6)............................ $ 3,450,537
-----------
Total current liabilities................................................ 3,450,537
Note payable to ART (Note 7)................................................... 5,000,000
Note payable to EMI (Note 4)................................................... 1,500,000
-----------
Total liabilities........................................................ 9,950,537
-----------
Commitments and contingencies (Notes 1, 8, 12 and 14)
Stockholders' deficit (Note 9):
Serial preferred stock, $.001 par value, 488,492 shares issued and
outstanding................................................................. 488
Class A common stock, $.001 par value, 7,779,135 shares issued and
outstanding................................................................. 7,779
Class B common stock, $.001 par value, 7,512,076 shares issued and
outstanding................................................................. 7,512
Additional paid-in capital................................................... 2,845,372
Deficit accumulated during the development stage............................. (2,981,073)
-----------
Total stockholders' deficit.............................................. (119,922)
-----------
Total liabilities and stockholders' deficit............................ $ 9,830,615
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 28, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Operating revenue.............................................................. $ 5,793
<S> <C>
----------
Expenses:
General and administrative expenses (Notes 8, 9 and 10)...................... 2,706,336
Market development expenses.................................................. 191,693
Depreciation and amortization................................................ 5,306
Interest expense, net (Notes 4 and 7)........................................ 83,531
----------
Total expenses............................................................. 2,986,866
----------
Net loss................................................................. $2,981,073
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MARCH 28, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------- -------------------------------------------------------------
SHARES CLASS A CLASS B SERIES A SERIES B SERIES C SERIES D TOTAL
- ---------------------------------- --------- --------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock to ART
for cash......................... 4,420,000
Issuance of common stock to
Landover and affiliates for
cash............................. 260,000 8,320,000
Issuance of preferred stock to
limited partnerships affiliated
with Landover for cash:
Series A........................ 332,091 332,091
Series B........................ 82,318 82,318
Series C........................ 5,402 5,402
Issuance of Series D preferred
stock for cash................... 61,640 61,640
Shares issued to reflect
anti-dilution adjustments........ 3,099,135 2,852 4,189 7,041
Redemption of common stock from
Landover......................... (807,924)
--------- --------- ----------- ----------- ----- ----------- ---------
Balance at December 31, 1995...... 7,779,135 7,512,076 334,943 86,507 5,402 61,640 488,492
--------- --------- ----------- ----------- ----- ----------- ---------
--------- --------- ----------- ----------- ----- ----------- ---------
<CAPTION>
SHARES
- ----------------------------------
<S> <C> <C> <C>
Issuance of common stock to ART
for cash.........................
Issuance of common stock to
Landover and affiliates for
cash.............................
Issuance of preferred stock to
limited partnerships affiliated
with Landover for cash:
Series A........................
Series B........................
Series C........................
Issuance of Series D preferred
stock for cash...................
Shares issued to reflect
anti-dilution adjustments........
Redemption of common stock from
Landover.........................
Balance at December 31, 1995......
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
-----------------------------------------------------------------------------------------------
COMMON STOCK PREFERRED STOCK
------------------------ ---------------------------------------------------------------------
AMOUNTS CLASS A CLASS B SERIES A SERIES B SERIES C SERIES D TOTAL
- ---------------------------------- ----------- ----------- ----------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock to ART
for cash......................... $ 4,420
Issuance of common stock to
Landover and affiliates for
cash............................. 260 $ 8,320
Issuance of preferred stock to
limited partnerships affiliated
with Landover for cash:
Series A........................ $ 332 $ 332
Series B........................ $ 82 82
Series C........................ $ 5 5
Issuance of Series D preferred
stock for cash................... $ 62 62
Shares issued to reflect
anti-dilution adjustments........ 3,099 3 4 7
Serial preferred stock issuance
costs............................
Redemption of common stock from
Landover......................... (808)
Investment by ART as a result of
the release of escrow shares.....
Accrued stock option
compensation.....................
Net loss..........................
--
----------- ----------- ----- --- --- -----
Balance at December 31, 1995...... $ 7,779 $ 7,512 $ 335 $ 86 $ 5 $ 62 $ 488
--
--
----------- ----------- ----- --- --- -----
----------- ----------- ----- --- --- -----
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
AMOUNTS CAPITAL DEFICIT TOTAL
- ---------------------------------- ----------- ------------- -----------
<S> <C> <C> <C>
Issuance of common stock to ART
for cash......................... $ (4,080) $ 340
Issuance of common stock to
Landover and affiliates for
cash............................. (7,560) 1,020
Issuance of preferred stock to
limited partnerships affiliated
with Landover for cash:
Series A........................ 1,006,268 1,006,600
Series B........................ 880,618 880,700
Series C........................ 112,695 112,700
Issuance of Series D preferred
stock for cash................... 1,999,938 2,000,000
Shares issued to reflect
anti-dilution adjustments........ (3,106)
Serial preferred stock issuance
costs............................ (229,814) (229,814)
Redemption of common stock from
Landover......................... (1,999,192) (2,000,000)
Investment by ART as a result of
the release of escrow shares..... 802,002 802,002
Accrued stock option
compensation..................... 287,603 287,603
Net loss.......................... $(2,981,073) (2,981,073)
----------- ------------- -----------
Balance at December 31, 1995...... $ 2,845,372 $(2,981,073) $ (119,922)
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 28, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss..................................................................... $(2,981,073)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................................. 5,306
Non-cash compensation expense.............................................. 1,089,605
Changes in operating assets and liabilities:
Deposits................................................................. (4,012)
Accounts payable and accrued liabilities................................. 567,290
Other current assets..................................................... (52,325)
-----------
Net cash used in operating activities.................................. (1,375,209)
-----------
Cash flows from investing activities:
Acquisition of EMI licenses and property and equipment....................... (3,023,971)
Additions to property and equipment.......................................... (621,364)
Advances to ART.............................................................. (738,680)
Deposits on equipment........................................................ (280,000)
-----------
Net cash used in investing activities.................................. (4,664,015)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock....................................... 1,360
Proceeds from issuance of serial preferred stock............................. 4,000,000
Stock issuance costs......................................................... (208,814)
Proceeds from issuance of note payable to ART................................ 5,000,000
Advances from Landover and affiliates........................................ 175,000
Payments on advances from Landover and affiliates............................ (175,000)
Redemption of common stock................................................... (2,000,000)
Additions to deferred financing costs........................................ (125,737)
-----------
Net cash provided by financing activities.............................. 6,666,809
-----------
Net increase in cash and cash equivalents and balance at end of
period.............................................................. $ 627,585
-----------
-----------
Supplemental cash flow information:
Non-cash financing and investing activities:
Additions to property and equipment........................................ $ 2,666,630
Issuance of promissory note payable to EMI................................. 1,500,000
Accrued stock issuance costs............................................... 21,000
Accrued deferred financing costs........................................... 195,617
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. FORMATION OF THE COMPANY AND BASIS OF PRESENTATION:
THE COMPANY
Advanced Radio Telecom Corp. ("Telecom"), formerly named Advanced Radio
Technology Ltd., was incorporated in Delaware as a subsidiary of Advanced Radio
Technologies Corporation ("ART") on March 28, 1995, to develop, market and
deliver broadband telecommunication and information services throughout the
United States. The Company's business objective is to organize and finance local
operating facilities, establish strategic alliances with other businesses,
acquire new wireless telecommunications technologies, and market broadband
wireless services to telecommunications service providers and end users.
Telecom was organized by ART and Landover Holdings Corporation ("Landover")
with one of its initial objectives to acquire certain 38 GHz licenses in the
Northeastern United States from EMI Communications Corp. ("EMI") (see Note 4).
Under the terms of a purchase agreement between Telecom, Landover and ART dated
April 21, 1995 (the "Purchase Agreement"), Landover was obligated to purchase
$7.0 million of securities of Telecom. Pursuant to the Purchase Agreement and a
stockholders' agreement between Telecom, ART and their respective shareholders
dated May 8, 1995 (the "Stockholders' Agreement"), Telecom and ART will merge
once approval from the Federal Communications Commission (the "FCC") has been
granted. On February 2, 1996, Telecom and ART entered into a definitive merger
agreement (the "Merger Agreement") providing for a merger of Telecom and ART
(the "Merger"). (See Note 2).
INITIAL CAPITALIZATION
As its initial capitalization, Telecom issued 8,320,000 shares of Class B
common stock to Landover and 260,000 shares of Class A common stock to
consultants to Landover, for aggregate cash consideration of $1,020. Such shares
of Class B common stock and Class A common stock represented 64% and 2%,
respectively, of the total number of shares of capital stock of Telecom then
outstanding. Concurrently, Telecom issued 4,420,000 shares of Class A common
stock, representing 34% of the total number of shares of capital stock, to ART
for $340. The number of shares of Class A and Class B common stock issued at the
initial capitalization of Telecom shown above give effect to the 13 for 1 stock
split but are prior to the issuance of anti-dilutive shares (see Note 9). All
references to number of shares of common stock and per share amounts in the
accompanying financial statements and footnotes have been restated to reflect
the 13 for 1 stock split unless otherwise indicated.
Under the Purchase Agreement, Landover agreed to invest or cause to be
invested $7.0 million in Telecom and its affiliates (the "Landover Funding
Commitment"). In consideration for this $7.0 million investment, Telecom agreed
to issue serial preferred stock, the number of shares of which would be
designated by Landover.
BASIS OF PRESENTATION
The financial statements have been prepared on the going concern basis of
accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. Telecom has limited financial
resources, has incurred operating losses since inception and does not expect to
generate significant operating revenues until the commencement of its commercial
services, which is anticipated to occur in fiscal 1996. Telecom estimates that
revenues in 1996 will not be sufficient to fund its initial operating expenses
and other working capital needs, including consulting, service and purchase
commitments set forth in Notes 8 and 2. Telecom's funding of its initial
operating expenses, working capital needs and contractual commitments is
dependent upon its ability to raise additional
F-35
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. FORMATION OF THE COMPANY AND BASIS OF PRESENTATION, CONTINUED:
financing. Telecom and ART have engaged various investment bankers to assist
them in raising financing through a public equity and debt offering of ART.
There can be no assurance that Telecom and ART will be successful in its effort
to raise additional financing through these offerings or, if available, that
Telecom and ART will be able to obtain it on acceptable terms. These conditions
raise substantial doubt about Telecom's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
2. REORGANIZATION AND PENDING MERGER WITH ART:
A -- MERGER
Under the terms of the Purchase Agreement, Telecom and ART intend to operate
both companies as a single enterprise and were committed to merge if and when
permitted by the FCC. Concurrent with the Purchase Agreement, Telecom and ART
entered into an exclusive 20-year services agreement (the "Services Agreement")
for the construction, development and operation of systems in ART markets (see
Note 8).
On February 2, 1996, Telecom, ART and their respective shareholders agreed
to an amendment and restatement of the Stockholders' Agreement providing for (i)
termination effective on the closing of a public share offering; (ii) amendment
and restatement of the Certificate of Incorporation and reorganization of the
capital structure of Telecom (see Note 9); (iii) the exchange of the Advent
Notes and one share of ART Series A Redeemable Preferred Stock for Series E
preferred stock of Telecom (see Note 7); (iv) revision of provisions for
election of directors; (v) amendment and restatement of Telecom's registration
rights agreements; (vi) release of shares escrowed in connection with the
original Stockholders' Agreement (see Note 9); and (vii) approval of a
definitive agreement to merge ART and Telecom (the "Reorganization").
B -- AMENDED MERGER
The definitive merger agreement, as entered into on February 2, 1996 and
subsequently restated and amended on June 26, 1996, (the "Merger Agreement")
provides for the merger of a newly-formed wholly owned subsidiary of ART
("Merger Sub") into Telecom (the "Merger") subject to certain conditions,
including the receipt of FCC approval. Prior to the Merger, each outstanding
share of Telecom's serial preferred stock will be converted into 13 shares of
Telecom's common stock. In the Merger, each outstanding share of common stock of
Telecom will be exchanged for the right to receive an equal number of shares of
Common Stock of ART. As a result, Telecom will become a wholly owned subsidiary
of ART. The Merger Agreement provides that if the Merger is not consummated by
May 13, 1997, the shares of Telecom's common stock owned by ART will be
surrendered to Telecom and the Services Agreement is to be revised to, among
other revisions, extend the term to 40 years and provide for a proportionate
participation by ART's stockholders in any dividends paid by Telecom or the
proceeds from any sale of Telecom. The Merger Agreement also provides for the
assignment of Telecom's interests in all of its agreements, including the
various services agreements, employment agreements, equipment purchase
agreements and purchase option agreements, to ART. Further, upon the Merger, the
holders of warrants to purchase an aggregate of 2,302,136 shares of Telecom
common stock will be entitled to purchase an equivalent number of shares of ART
Common Stock on the same terms. Employee stock options to purchase 1,664,732
shares of Telecom's common stock will be converted into similar stock options of
ART.
F-36
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. SIGNIFICANT ACCOUNTING POLICIES:
DEVELOPMENT STAGE ENTERPRISE
Telecom is a development stage enterprise as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." The financial statements have been prepared on the going
concern basis of accounting.
CASH AND CASH EQUIVALENTS
Telecom considers all highly liquid investments purchased with remaining
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
related assets as follows: wireless transmission equipment - 5 years; office
furniture and equipment - 3 years.
FCC LICENSES
Telecom has obtained radio spectrum rights under FCC issued licenses
throughout the United States through the purchase of such rights held by others
and by petitioning the FCC directly. Such licenses are issued for an initial
term of six years and are renewable subject to review by the FCC. The costs
associated with the acquisition of such licenses are capitalized and amortized
on a straight-line basis over a 40-year period beginning upon commencement of
operations in the related market. The 40-year period is based upon management's
license renewal expectations.
RECOVERABILITY OF LONG-LIVED ASSETS
The recoverability of property and equipment and capitalized FCC
authorizations and licenses is dependent upon the successful development of
systems in each of the respective markets, or through sale of such assets.
Management estimates that it will recover the carrying amounts of those assets
from cash flow generated by the systems once they have been developed. However,
it is reasonably possible that such estimate will change as a result of the
failure to develop the FCC authorizations on a timely basis, technological,
regulatory or other changes.
Telecom's policy is to assess annually any impairment in value based upon a
comparison of projected operating cash flows from each market over its expected
period of operation, on an undiscounted basis, to the carrying amount of the
property and equipment, FCC licenses and other capitalized costs related to the
market.
FINANCING COSTS
Direct costs associated with obtaining equity financing are deferred and
charged to additional paid-in capital as the related funds are raised. Direct
costs associated with obtaining debt financing are deferred and amortized using
the effective interest rate method commencing when the related funds are raised.
Deferred costs associated with unsuccessful financings are charged to expense.
REVENUE RECOGNITION
Revenue from telecommunications services are recognized ratably over the
period such services are provided.
F-37
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES
Telecom accounts for income taxes under the liability method of accounting.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amounts expected to be realized.
NET LOSS PER SHARE
Net loss per share of $0.19 is computed based on the loss for the period
from March 28, 1995 (date of inception) to December 31, 1995 divided by the
weighted average number of shares of common stock outstanding of 15,919,596.
USE OF 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 as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISKS
Telecom places its temporary cash investments with major financial
institutions. At December 31, 1995, the Company's temporary cash investments are
principally placed in one entity. Other financial instruments which expose
Telecom to potential credit risk include the amount due from ART (Note 12) and
deposits on equipment (Note 8).
4. ACQUISITION OF ASSETS OF EMI:
On April 4, 1995, ART entered into a purchase option agreement with EMI to
acquire EMI's interest in certain 38 GHz radio spectrum licenses and related
assets in the Northeastern United States (the "EMI Assets") in exchange for $3.0
million in cash and a three year non-negotiable promissory note in the amount of
$1.5 million. Pursuant to the terms of the Purchase Agreement, in November 1995,
ART assigned its rights and obligations under the EMI purchase option agreement
to Telecom. The FCC subsequently approved the transfer of the EMI licenses and
Telecom directly purchased the EMI Assets in November 1995. The total purchase
price, including expenses, was allocated to the acquired assets as follows:
<TABLE>
<S> <C>
Property and equipment......................................... $ 297,150
FCC licenses................................................... 4,226,821
----------
$4,523,971
----------
----------
</TABLE>
The promissory note issued by Telecom, with a guarantee by ART, is payable
in quarterly installments of principal of $187,500 beginning January 1, 1997.
Interest is payable quarterly at a major commercial bank's prime rate plus 2.0%,
or 10.5% as of December 31, 1995.
On November 8, 1995 Landover advanced $175,000 to Telecom to fund a portion
of the initial payment to EMI. Telecom repaid such advance later in the same
month.
F-38
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. PROPERTY AND EQUIPMENT:
PROPERTY AND EQUIPMENT COMPRISE:
<TABLE>
<S> <C>
Wireless transmission equipment................................ $3,496,905
Office furniture and equipment................................. 88,239
----------
3,585,144
Accumulated depreciation....................................... (5,306)
----------
$3,579,838
----------
----------
</TABLE>
As of December 31, 1995, excluding the property and equipment acquired from
EMI (Note 4), the wireless transmission equipment acquired to date has not been
placed into service.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES COMPRISE:
<TABLE>
<S> <C>
Accrued interest payable....................................... $ 20,712
Salaries and other employee related costs...................... 267,091
Trade accounts payable......................................... 496,104
Wireless transmission equipment payable........................ 2,666,630
----------
$3,450,537
----------
----------
</TABLE>
7. NOTE PAYABLE TO ART:
ART, Telecom and several entities referred to as the Advent Group
("Advent"), entered into a securities purchase agreement (the "Advent Purchase
Agreement") dated November 13, 1995 under which Advent agreed to acquire a 10%
interest in the combined entities of ART, Telecom and certain specified
affiliates. Pending the merger of these entities (see Note 2), ART issued
promissory notes (the "Advent Notes") with an aggregate principal amount of
$4,950,000 and one share of ART's Series A Redeemable Preferred Stock in
exchange for $5.0 million in cash.
The Advent Notes carried interest at a rate of 10% per annum and were
payable on demand at any time on or after May 13, 1997. The Advent Notes were
collateralized by certain assets of ART and Telecom. The Advent Notes were
convertible into that number of shares of preferred stock which represented in
the aggregate at least 10% of the fully diluted capital stock of the combined
entities described above, as defined in the Advent Purchase Agreement. The
Advent Notes were convertible either (i) immediately prior to an initial public
offering with aggregate gross proceeds of at least $10.0 million or (ii) at
Advent's election.
On November 13, 1995, the gross proceeds of $5.0 million received by ART
from Advent were transferred to Telecom in exchange for a note with terms
equivalent to the terms of the Advent Notes. In connection with the
Reorganization on February 2, 1996, ART, Telecom and Advent entered into an
exchange agreement under which the Advent Notes, including accrued interest, and
the one share of ART's Series A Redeemable Preferred Stock held by Advent were
exchanged for 232,826 shares of Series E preferred stock of Telecom, the note
was canceled, and Telecom became the owner of the one share of ART Series A
Redeemable Preferred Stock.
F-39
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. COMMITMENTS:
EQUIPMENT PURCHASE AGREEMENT
On August 11, 1995, Telecom entered into an agreement to purchase wireless
transmission equipment from a vendor. Under the terms of the agreement, Telecom
is obligated to purchase a specified number of wireless transmission units
between August 11, 1995 and December 31, 1998, subject to termination upon 90
days advance notice by either party. Telecom's initial non-cancelable purchase
order amounts to $13,260,000. Through December 31, 1995, Telecom has purchased
and paid for $522,812 of equipment under this contract. In addition, Telecom has
made a $280,000 deposit under this agreement which is to be applied against
future purchases after Telecom has purchased a specified amount of equipment,
which is expected to occur in 1996.
Telecom currently purchases the majority of its wireless transmission
equipment from this vendor. Any reduction or interruption in supply from this
vendor could have a material adverse effect on Telecom until alternative supply
sources are established. Telecom does not manufacture, nor does it have the
capability to manufacture, any of the wireless transmission equipment necessary
to provide its services. Although there are a limited number of other
manufacturers who have, or are developing, equipment that would meet Telecom's
requirements, there can be no assurance that such equipment would be available
to Telecom on comparable terms or on terms more favorable to those included in
its current arrangements. Moreover, a change in vendors could cause a delay in
Telecom's ability to provide its services, which would affect future operating
results adversely.
SERVICES AGREEMENTS
Under the Services Agreement, Telecom has agreed to construct, operate and
manage the FCC licenses and related telecommunications systems that are owned by
ART or for which ART has existing services agreements. Under the Services
Agreement, Telecom will incur all costs and expenses related to construction,
operation and management of the systems. As compensation, Telecom will receive
all revenues generated by the systems after deducting certain related direct
expenses, less 25% which is to be paid to ART.
Telecom, through its Services Agreement with ART, has two other exclusive
services agreements, one with ART West, a joint venture in which ART has a 50%
ownership interest, and one with DCT Communications, Inc. ("DCT"). The terms of
these two services agreements are substantially identical to the terms in the
Services Agreement between ART and Telecom, except that the services agreements
are for five years and compensation to the Company is based on all revenues
generated by the systems after deducting certain related direct expenses, less
45% which is paid to ART West and DCT. There have been no services provided
under these agreements through December 31, 1995. One of the officers of Telecom
is the President and a shareholder of ART's joint venture partner in ART West.
On April 24, 1996, Telecom entered into a services agreement with TeleCom
One on terms substantially identical to the terms of the Services Agreement
between ART and Telecom, except that compensation to Telecom is equal to all
revenues generated by the systems, after deducting certain expenses, less 10%
which is paid to TeleCom One.
Under the services agreements described above, title to the system assets
purchased by Telecom and used to provide services in the respective markets
remains with Telecom upon termination of the services agreements.
F-40
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. COMMITMENTS, CONTINUED:
EMPLOYMENT AND CONSULTING AGREEMENTS
On May 8, 1995, Telecom and ART jointly entered into consulting agreements
with two executive officers of Telecom, effective as of January 1, 1995 and
continuing for a term of three years, with minimum payments aggregating
approximately $170,000 annually. The aggregate expense incurred by Telecom under
these consulting agreements through December 31, 1995 amounted to $166,750.
On December 16, 1995, one of the executive officers of Telecom, previously a
party to one of the consulting agreements described above, entered into a
full-time employment agreement. The employment agreement is for a three-year
term with an annual salary of $250,000 in the first year, $275,000 in the second
year and $300,000 in the third year. In addition, the agreement provides for a
cash bonus of up to $100,000 for each year based upon achievement of specific
performance objectives.
On July 11, 1995, Telecom entered into an employment agreement, as amended
February 2, 1996, with an officer of Telecom. The term of the agreement is for
three years at an annual salary of $160,000 in the first year, $200,000 in the
second year and $240,000 in the third year. Options to purchase shares of common
stock were awarded to this officer equivalent to 2.5% of the outstanding capital
stock of Telecom (see Note 10). The agreement also provides for an engagement
bonus of $17,000 upon execution of the agreement and a cash bonus of up to
$100,000 for each year based upon achievement of specific performance
objectives.
Telecom has entered into employment agreements with other executives that
provide for annual base salaries and cash bonuses based on achievement of
specific performance goals. These contracts may be terminated at any time by
management.
FINANCING AGREEMENT
During 1994, ART entered into an agreement with Southeast Research Partners
("SERP"), a subsidiary of Joesephthal, Lyons & Ross, a Florida broker dealer, to
procure additional financing for ART in exchange for cash and options to
purchase capital stock of ART. Pursuant to a letter agreement dated July 12,
1995, ART and Telecom paid SERP $245,000 and the shareholders of ART granted
SERP options to purchase 313,644 shares of ART Common Stock directly from the
shareholders of ART for an aggregate consideration of approximately $210,000.
As of December 31, 1995, ART and Telecom have accounted for the fee of
$245,000 as part of the financing provided by Landover and, accordingly, $70,000
has been recognized as an offset against the proceeds from the issuance of the
Serial preferred stock of Telecom (see Note 9) and the balance as part of the
deferred financing costs recorded by ART in connection with the issuance of the
Advent Notes (See Note 7).
F-41
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. COMMITMENTS, CONTINUED:
LEASES
Telecom and ART have entered into operating leases for office space and
antenna sites which expire between 1997 and 2001. Lease expense amounted to
$16,044 for 1995. The costs associated with these leases have been recorded by
Telecom and no amounts have been charged to ART. Future annual minimum lease
payments as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996........................................................... $ 363,079
1997........................................................... 352,480
1998........................................................... 302,727
1999........................................................... 297,417
2000 and thereafter............................................ 25,825
----------
$1,341,528
----------
----------
</TABLE>
9. STOCKHOLDERS' DEFICIT:
At December 31, 1995, the Certificate of Incorporation authorized the
issuance of 20,000,000 shares of stock of all classes, divided into (i)
10,000,000 shares of common stock, $0.001 par value per share, of which
7,000,000 shares are designated as Class A common stock and 3,000,000 shares are
designated as Class B common stock and (ii) 10,000,000 shares of preferred
stock, $0.001 par value per share of which 451,513 shares are designated as
Series A preferred stock, 113,663 shares are designated as Series B preferred
stock, 7,297 shares are designated as Series C preferred stock and 61,640 shares
are designated as Series D preferred stock, before giving effect to the 13 for 1
stock split discussed below. Pursuant to the Reorganization (see Note 2), the
Certificate of Incorporation was amended and restated on February 2, 1996 to (i)
convert each share of Class A common stock and Class B common stock into one
share of common stock, par value $0.001 per share, (ii) change the authorized
capital stock of the Corporation to 70,000,000 shares of stock of all classes,
(iii) change the authorized common stock to 60,000,000 shares, (iv) amend the
terms of the preferred stock and each series thereof, (v) provide for two new
series of preferred stock designated as "Series E preferred stock" and "Series F
preferred stock", and (vi) effect a 13 for 1 stock split of each share of common
stock issued and outstanding.
The holders of Class A common stock had anti-dilution protection, but in all
other respects such shares were identical to the Class B common stock. Under the
anti-dilution provisions, additional shares of Class A common stock were issued,
for no consideration, to the holders of the Class A common stock upon the
issuance of serial preferred stock, so that the holders of Class A common stock
maintained their 36% ownership interest through the $7.0 million Landover
Funding Commitment as set forth in the Purchase Agreement.
Under the Purchase Agreement, the individual shareholders of ART were
required to place 5,153,778 shares of Common Stock in ART in escrow (the "Escrow
Shares") to be released upon the completion of the pending EMI Asset acquisition
(see Note 4), Telecom's attainment of specific operating income levels for the
years 1997 through 1999 and the acquisition of interests in a specified number
of FCC license authorizations by April 30, 2000. As a result of the consummation
of the EMI Asset acquisition, in November 1995, 1,873,030 shares of the Escrow
Shares of ART were released. The related compensation of $802,002, based on the
then current fair value of the Escrow Shares, has been recognized as
compensation expense in 1995, the offset of which has been accounted for as an
investment by ART. Pursuant to the February 2, 1996 Reorganization, the Escrow
Shares arrangement was
F-42
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. STOCKHOLDERS' DEFICIT, CONTINUED:
terminated and all of the remaining Escrow Shares were released to the
stockholders of ART. The related compensation expense of approximately $6.8
million, based upon the fair value of the remaining Escrow Shares will be
recognized in 1996.
Each issuance of serial preferred stock pursuant to the Landover Funding
Commitment is a separate class and, as a class, has a liquidation preference
equal to the aggregate price paid for such class and an ownership interest
designated by Landover at issuance. The ownership interest of each outstanding
class of serial preferred stock was not to be diluted by subsequent issuances of
shares of other classes of serial preferred stock through the satisfaction of
the Landover Funding Commitment. As a result, additional shares of serial
preferred stock were issued to the existing holders upon the issuance of such
other shares so that each outstanding class maintained its designated aggregate
liquidation preference and aggregate ownership interest.
Each share of serial preferred stock outstanding at December 31, 1995 is
convertible into 13 shares of common stock, subject to certain anti-dilution
adjustments. The holders of serial preferred stock have a vote, and receive
dividends or distributions, equivalent to the votes and amounts which would be
obtainable by them upon conversion of their shares into common stock.
In partial satisfaction of the Landover Funding Commitment, during 1995,
Telecom issued 332,091 shares of Series A preferred stock, 82,318 shares of
Series B preferred stock and 5,402 shares of Series C preferred stock to three
separate limited partnerships of which an affiliate of Landover is the general
partner, for aggregate cash consideration of $2.0 million.
On November 9, 1995, Telecom issued 61,640 shares of Series D preferred
stock for cash of $2.0 million. The Series D preferred stock purchase agreement
provided that in the event that Telecom and ART on a combined basis, did not
achieve an equity valuation of $225.0 million, as defined, on or before November
1, 1997, the holders of the Series D preferred stock had the option to purchase
additional shares of serial preferred stock for $0.001 per share up to a maximum
of 1.33% of the then outstanding capital stock of Telecom. The Series D
preferred stock purchase agreement was amended February 2, 1996 whereby the
option to purchase additional serial preferred stock was replaced with an option
to purchase 400,634 shares of Telecom common stock directly from Landover for
$0.001 per share in the event Telecom does not attain certain equity valuation
objectives.
On November 13, 1995, the Advent Group executed a securities purchase
agreement with ART and Telecom. As a result of the exchange agreement dated
February 2, 1996, Advent received 232,826 shares of Series E preferred stock of
Telecom (see Note 7).
The serial preferred stock transactions described above satisfied the
Landover Funding Commitment. As a result, the anti-dilution protection for the
Class A common stock and serial preferred stock terminated. As the actual cash
proceeds received were in excess of Landover's $7.0 million commitment, on
November 13, 1995, Telecom used the proceeds from the sale of Series D preferred
stock to redeem 807,924 shares of Class B common stock held by Landover.
The Series E and F preferred stock (see Note 14) are senior in liquidation
preference to the Series A, B, C and D preferred stock. The Series D preferred
stock is senior in liquidation preference to the Series A, B and C preferred
stock. At any time on or after November 13, 2000, the Series E and F preferred
stock may be redeemed at the option of the holders of such stock at a price
equal to the liquidation amount plus all accrued and unpaid dividends.
F-43
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. STOCK OPTION PLANS:
On July 22, 1995, Telecom adopted the 1995 Stock Option Plan (the "Plan")
that provides for option grants to employees, directors and independent
consultants of Telecom. Telecom has reserved 2,500,000 shares of common stock
for issuance under the Plan. Options granted to employees may be designated as
incentive stock options ("ISO's") or non-qualified stock options ("NQSO's"), as
defined by the Internal Revenue Service. Options granted to independent
consultants and other non-employees may only be designated NQSO's.
The exercise price of options granted under the Plan may not be less than
100% of the fair market value of the common stock on the grant date. Generally,
options will be exercisable for a term that will not exceed ten years from the
date of grant.
Under the Plan, options to purchase an aggregate of 817,232 and 235,000
shares of common stock were granted to employees of Telecom on July 22, 1995 and
December 29, 1995, respectively, at an option price of $.5907 and $1.652 per
share, respectively. The difference between the exercise price of the options
issued at $.5907 and the deemed fair value of common stock of $1.20 per share as
determined on the measurement date, is recognized as compensation expense over
the respective vesting period. The options vest at various dates during a 5-year
period. At December 31, 1995, 361,785 options were vested and Telecom has
recognized compensation expense of $287,603 during 1995. At December 31, 1995,
unearned stock option compensation expense amounted to $210,339. There were no
options exercised or canceled during 1995.
On February 15, 1996, options to purchase an aggregate of 145,000 shares of
common stock were granted to employees of Telecom under the Plan at an option
price of $3.94 per share.
On April 24, 1996, Telecom adopted the 1996 Non-Employee Directors Automatic
Stock Option Plan (the "Directors Plan"), subject to shareholder approval, which
provides for the automatic grant of stock options to non-employee directors to
purchase up to an aggregate of 200,000 shares. Under the Directors Plan, options
to acquire 6,000 shares of common stock are automatically granted to each non-
employee director who is a director on January 1 of each year. In addition, each
non-employee director serving on the Board of Directors effective on the date of
an initial public offering, and in the future each newly elected non-employee
director on the date of his or her first appointment or election to the Board of
Directors will receive an automatic grant of options to acquire 7,000 shares of
common stock.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". This Statement encourages, but does not require, accounting for
stock compensation awards granted to employees based on their fair value at the
date the awards are granted. Companies may elect to continue to apply current
accounting requirements for employee stock compensation awards, which generally
will result in no compensation cost for most fixed stock option plans, such as
Telecom's Plan. The expense measurement provisions of the Statement apply to all
equity instruments issued for goods and services provided by persons other than
employees. All companies are required to comply with the disclosure requirements
of the Statement. Telecom expects to continue accounting for employee stock
compensation awards using current accounting requirements.
11. INCOME TAXES:
As of December 31, 1995, Telecom has net operating loss carryforwards of
approximately $1.9 million to offset future taxable income for Federal income
tax purposes which will expire in 2010. Deferred tax assets of approximately
$741,000, principally comprised of such net operating tax loss carry-forwards
and temporary differences arising from compensation expense related to the stock
option plans have been offset in full by a valuation allowance.
F-44
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. RELATED PARTY TRANSACTIONS:
On May 8, 1995, Telecom and ART entered into a consulting agreement with
Landover as a strategic and financial consultant. Telecom paid Landover $70,000
for services under this agreement during 1995. The consulting agreement was
terminated on November 13, 1995.
On November 13, 1995, Telecom and ART entered into a management consulting
agreement with Landover to provide strategic planning, corporate development and
general management. Under the agreement, Telecom will pay Landover $35,000 per
month for an initial one year term, renewable by Telecom and ART for two
additional one year terms. The aggregate expense under this agreement during
1995 amounted to $70,000, which amount is payable as of December 31, 1995. The
agreement also provides that in the event Landover arranges financing,
acquisitions or certain other transactions for Telecom, it will be paid a fee by
Telecom in accordance with industry standards.
Pursuant to the Purchase Agreement, Telecom and ART paid Landover $391,750
for expenses in connection with the Landover Funding Commitment, of which
$141,750 has been charged to paid-in capital by Telecom and $250,000 has been
capitalized as deferred financing costs by ART.
An executive and shareholder of ART is a principal in a law firm that
regularly provides legal services to Telecom. During the period from March 28,
1995 through December 31, 1995, Telecom incurred $237,538 for such services.
Telecom has funded certain expenses and investments of ART, including ART's
investment in ART West and payments of financing and other operating costs. The
amounts funded by Telecom to date totalling $805,803, offset by accrued interest
of $67,123 related to the note payable to ART (see Note 7) have been included in
the amount due from ART.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The carrying amount and fair values of Telecom's financial instruments at
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------- -------------
<S> <C> <C>
Cash and cash equivalents................................................. $ 627,585 $ 627,585
Long-term notes payable................................................... 6,500,000 6,500,000
</TABLE>
Cash and cash equivalents: The carrying amount reported in the balance sheet
approximates fair value.
Long-term notes payable: The carrying amount approximates fair value based
upon interest rates that are currently available to Telecom for issuance of debt
with similar terms and maturity.
14. SUBSEQUENT EVENTS:
- -- AMERITECH FINANCING
On February 2, 1996, Telecom sold 48,893 shares of Series F preferred stock
for an aggregate purchase price of $2.5 million to Ameritech Development
Corporation ("Ameritech"). In addition, Telecom entered into a strategic
distribution agreement with Ameritech Corp., the parent of Ameritech, and, as
partial consideration, granted warrants to Ameritech to purchase up to 877,136
shares of common stock from Telecom at a price of $0.01 per share, exercisable
on February 2, 1996 through February 2, 2006. The Series F preferred stock and
warrants are collectively referred to as the Ameritech Securities. The strategic
distribution agreement provides for Ameritech to be the principal distributor of
Telecom's services within five midwestern states. Telecom incurred fees of
$150,000 in connection with this transaction.
F-45
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
14. SUBSEQUENT EVENTS, CONTINUED:
Under the terms of the securities purchase agreement with Ameritech,
Ameritech is entitled to a put option to require Telecom to repurchase the
Ameritech Securities if the Department of Justice finds that this investment is
in violation of restrictions under the Modification of Final Judgement in the
United States vs. AT&T Civil Action 82-0192 ("MFJ"). Telecom would be required
to repurchase the Ameritech Securities at a purchase price equal to the fair
market value on the date it is determined that the investment is in violation of
the MFJ.
- -- BRIDGE FINANCING
On March 8, 1996, Telecom issued in a private placement of $5.0 million of
two year, 10% notes (the "Bridge Notes") and five year warrants to purchase up
to an aggregate of 1,100,000 shares of common stock at a price of $6.25 per
share (the "Bridge Warrants") to certain holders of serial preferred stock. The
Bridge Warrants are exercisable on March 8, 1996 through March 8, 2001.
- -- EQUIPMENT FINANCING
On April 24, 1996, the Board of Directors approved the adoption of
resolutions necessary to complete a $2,445,000 equipment financing for the
purchase of wireless transmission equipment.
- -- RESEARCH AND DEVELOPMENT ARRANGEMENTS
On January 26, 1996, Telecom entered into a preliminary agreement to invest
from $700,000 to $1.0 million in an entity in which an executive of Telecom is a
director and a shareholder. The preliminary agreement provides for the entity to
perform research and development of wireless transmission equipment in which
Telecom will receive a right of first refusal on production capacity and a
license fee in exchange for its investment.
On March 13, 1996, Telecom issued a letter of intent to a third party to
provide Telecom with specific technology consulting in connection with the
development of wireless transmission equipment. The aggregate amount to be paid
pursuant to the letter of intent totals $90,000. The letter of intent was
executed in connection with an agreement currently under negotiations for the
development and manufacture of wireless transmission equipment.
- -- SOFTWARE LICENSE AGREEMENT
On March 29, 1996, Telecom entered into a software license agreement (the
"Software License Agreement"). The terms of the Software License Agreement
provide for licensed software and hardware for Telecom's network management and
maintenance support services. The Software License Agreement provides for an
initial software license fee of approximately $2,000,000 and an annual
maintenance support fee of approximately $300,000 per year. An initial payment
of $250,000 for the software license fee was payable upon execution of the
agreement with the balance payable in monthly installments of principal and
interest commencing January 1, 1997.
- -- DCT PRELIMINARY AGREEMENT
On April 25, 1996, Telecom and ART entered into a preliminary agreement with
DCT (the "DCT Preliminary Agreement") to acquire DCT's interest in certain FCC
authorizations and licenses in exchange for $3.6 million in cash. The DCT
Preliminary Agreement is subject to the completion of a definitive purchase
agreement and services agreement (see Note 8). The definitive purchase agreement
will supersede and replace all other existing agreements between Telecom, ART,
ART's shareholders and DCT. The definitive purchase agreement must be signed by
June 28, 1996 and the closing of the transaction is subject to FCC approval.
F-46
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents................................................... $ 3,018,191
Due from ART................................................................ 498,100
Other current assets........................................................ 61,226
------------
Total current assets...................................................... 3,577,517
Property and equipment, net................................................... 6,379,603
FCC licenses.................................................................. 4,226,821
Equipment and other deposits.................................................. 344,417
Investment in ART............................................................. 44,930
Deferred financing costs...................................................... 681,692
------------
Total assets............................................................ $ 15,254,980
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................................... $ 4,211,017
------------
Total current liabilities............................................... 4,211,017
Bridge Notes.................................................................. 3,983,082
Note payable to EMI........................................................... 1,500,000
------------
Total liabilities....................................................... 9,694,099
------------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock, $.001 par value, 920,951 shares issued and
outstanding................................................................ 921
Class A common stock, $.001 par value, 18,114,135 shares issued and
outstanding................................................................ 18,114
Additional paid-in capital.................................................. 19,189,302
Deficit accumulated during the development stage............................ (13,647,456)
------------
Total stockholders' equity.............................................. 5,560,881
------------
Total liabilities and stockholders' equity............................ $ 15,254,980
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-47
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Operating revenue............................................................. $ 9,620
<S> <C>
-----------
Expenses:
General and administrative.................................................. 8,889,364
Market development.......................................................... 1,150,063
Research and development.................................................... 419,418
Depreciation and amortization............................................... 86,684
Interest expense, net....................................................... 130,474
-----------
Total expenses............................................................ 10,676,003
-----------
Net loss................................................................ $10,666,383
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-48
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PREFERRED STOCK
COMMON ---------------------------------------------------------------------------------------
SHARES STOCK SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F TOTAL
- ------------------------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... 15,291,211 334,943 86,507 5,402 61,640 488,492
Issuance of Series E
preferred stock......... 232,826 232,826
Shares issued to reflect
anti-dilution
adjustments............. 2,822,924 120,607 28,172 1,961 150,740
Issuance of Series F
preferred stock......... 48,893 48,893
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
Balance of March 31,
1996.................... 18,114,135 455,550 114,679 7,363 61,640 232,826 48,893 920,951
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
<CAPTION>
PAR VALUE
---------------------------------------------------------------------------------------------------
PREFERRED STOCK
COMMON ---------------------------------------------------------------------------------------
AMOUNTS STOCK SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F TOTAL
- ------------------------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... $ 15,291 $ 335 $ 86 $ 5 $ 62 $ 488
Issuance of Series E
preferred stock......... $ 233 233
Shares issued to reflect
anti-dilution
adjustments............. 2,823 121 28 2 151
Issuance of Series F
preferred stock and
warrants in exchange for
cash and the Strategic
Distribution Agreement
net of expenses of
$150,000................ $ 49 49
Value ascribed to the
Bridge Warrants.........
Investment by ART as a
result of the release of
escrow shares...........
Accrued stock option
compensation............
Net loss.................
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
Balance at March 31,
1996.................... $ 18,114 $ 456 $ 114 $ 7 $ 62 $ 233 $ 49 $ 921
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
---------- ----------- ----------- ----- ----------- ----------- ----------- ---------
<CAPTION>
SHARES
- -------------------------
<S> <C> <C> <C>
Balance at December 31,
1995....................
Issuance of Series E
preferred stock.........
Shares issued to reflect
anti-dilution
adjustments.............
Issuance of Series F
preferred stock.........
Balance of March 31,
1996....................
ADDITIONAL
PAID-IN ACCUMULATED
AMOUNTS CAPITAL DEFICIT TOTAL
- ------------------------- ----------- ------------- -----------
<S> <C> <C> <C>
Balance at December 31,
1995.................... $ 2,845,372 $(2,981,073) $ (119,922)
Issuance of Series E
preferred stock......... 4,672,953 4,673,186
Shares issued to reflect
anti-dilution
adjustments............. (2,974)
Issuance of Series F
preferred stock and
warrants in exchange for
cash and the Strategic
Distribution Agreement
net of expenses of
$150,000................ 3,402,951 3,403,000
Value ascribed to the
Bridge Warrants......... 1,050,000 1,050,000
Investment by ART as a
result of the release of
escrow shares........... 6,795,514 6,795,514
Accrued stock option
compensation............ 425,486 425,486
Net loss................. (10,666,383) (10,666,383)
----------- ------------- -----------
Balance at March 31,
1996.................... $19,189,302 $(13,647,456) $ 5,560,881
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-49
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED INTERIM CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss.................................................................... $(10,666,383)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................. 86,684
Non-cash interest expense................................................. 34,726
Non-cash compensation expenses............................................ 7,221,000
Non-cash market development expense....................................... 1,053,000
Changes in operating assets and liabilities:
Deposits................................................................ (8,901)
Accounts payable and accrued liabilities................................ 881,492
Other current assets.................................................... (60,405)
------------
Net cash used in operating activities................................. (1,458,787)
------------
Cash flows from investing activities:
Additions to property and equipment......................................... (3,050,607)
------------
Net cash used in investing activities................................. (3,050,607)
------------
Cash flows from financing activities:
Proceeds from issuance of serial preferred stock............................ 2,500,000
Preferred stock issuance costs.............................................. (150,000)
Proceeds from issuance of Bridge Notes and Bridge Warrants.................. 5,000,000
Payments of ART deferred finance costs...................................... (175,000)
Additions to deferred financing costs....................................... (275,000)
------------
Net cash provided by financing activities............................. 6,900,000
------------
Net increase in cash and cash equivalents........................... $ 2,390,606
Cash and cash equivalents, beginning of period...................... 627,585
------------
Cash and cash equivalents, end of period............................ $ 3,018,191
------------
------------
Supplemental cash flow information:
Non-cash financing and investing activities:
Additions to property and equipment....................................... $ 2,477,264
Value ascribed to the Ameritech Strategic Distribution Agreement reflected
as paid-in capital....................................................... 1,053,000
Accrued deferred financing costs.......................................... 85,338
Exchange of Advent Notes and ART Notes for Series E preferred stock, net
of deferred financing costs.............................................. 4,673,186
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-50
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
1. THE COMPANY AND BASIS OF PRESENTATION:
THE COMPANY
Advanced Radio Telecom Corp. ("Telecom"), formerly named Advanced Radio
Technology Ltd., was incorporated in Delaware as a subsidiary of Advanced Radio
Technologies Corporation ("ART") on March 28, 1995, to develop, market and
deliver broadband telecommunication and information services throughout the
United States.
BASIS OF PRESENTATION
The condensed financial statements included herein have been prepared by
Telecom. The foregoing statements contain all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
to present fairly the financial position of Telecom as of March 31, 1996 and the
results of its operations and its cash flows for the three months ended March
31, 1996.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These condensed financial statements
should be read in conjunction with Telecom's audited financial statements and
notes thereto included elsewhere herein.
The financial statements have been prepared on the going concern basis of
accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. Telecom has limited financial
resources, has incurred operating losses since inception and does not expect to
generate material operating revenues until the commencement of its commercial
services, which is anticipated to occur in fiscal 1996. Telecom estimates that
revenues in 1996 will not be sufficient to fund its initial operating expenses
and other working capital needs, including consulting, service and purchase
commitments. Telecom's funding of its initial operating expenses, working
capital needs and contractual commitments is dependent upon its ability to raise
additional financing. Telecom and ART have engaged various investment bankers to
assist it in raising financing through a public equity and debt offering. There
can be no assurance that Telecom will be successful in its effort to raise
additional financing through this public offering or, if available, that Telecom
will be able to obtain it on acceptable terms. These conditions raise
substantial doubt about Telecom's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
2. REORGANIZATION AND PENDING MERGER WITH ART:
On February 2, 1996, Telecom, ART and their respective shareholders agreed
to an amendment and restatement of the Stockholders' Agreement providing for (i)
termination effective on the closing of a public share offering; (ii) amendment
and restatement of the Certificate of Incorporation and reorganization of the
capital structure of Telecom; (iii) the exchange of the Advent Notes and one
share of ART Series A Redeemable Preferred Stock for Series E preferred stock of
Telecom; (iv) revision of provisions for election of directors; (v) amendment
and restatement of Telecom's registration rights agreements; (vi) release of
shares escrowed in connection with the original Stockholders' Agreement; and
(vii) approval of a definitive agreement to merge ART and Telecom (the
"Reorganization").
The definitive merger agreement, as entered into on February 2, 1996 and
subsequently restated and amended on June 26, 1996, (the "Merger Agreement")
provides for the merger of a newly-formed wholly owned subsidiary of ART
("Merger Sub") into Telecom (the "Merger") subject to certain conditions,
including the receipt of FCC approval. Upon the Merger, each outstanding share
of Telecom's serial preferred stock will be converted into 13 shares of
Telecom's common stock and each outstanding
F-51
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS, CONTINUTED
2. REORGANIZATION AND PENDING MERGER WITH ART: CONTINUED:
share of common stock of Telecom will be exchanged for the right to receive an
equal number of shares of Common Stock of ART. As a result, Telecom will become
a wholly owned subsidiary of ART. The Merger Agreement provides that if the
Merger is not consummated by May 13, 1997, the shares of Telecom's common stock
owned by ART will be surrendered to Telecom for nominal consideration, and the
Services Agreement is to be revised to, among other revisions, extend the term
to 40 years and provide for a proportionate participation by ART's stockholders
in any dividends paid by Telecom or the proceeds from any sale of Telecom. The
Merger Agreement also provides for the assignment of Telecom's interests in all
of its agreements, including the various services agreements, employment
agreements, equipment purchase agreements and purchase option agreements, to
ART. Further, upon the Merger, the holders of warrants to purchase an aggregate
of 2,302,136 shares of Telecom common stock will be entitled to purchase an
equivalent number of shares of ART Common Stock on the same terms. Employee
stock options to purchase 1,664,732 shares of Telecom's common stock will be
converted into similar stock options of ART.
3. NET LOSS PER SHARE:
Net loss per share of $0.59 is computed based on the loss for the three
months ended March 31, 1996 divided by the weighted average number of shares of
common stock outstanding of 18,114,135.
4. AMERITECH FINANCING:
On February 2, 1996, Telecom sold 48,893 shares of Series F preferred stock
for an aggregate purchase price of $2.5 million to Ameritech Development
Corporation ("Ameritech"). In addition, Telecom entered into a strategic
distribution agreement with Ameritech Corp., the parent of Ameritech, and, as
partial consideration, granted warrants to Ameritech to purchase up to 877,136
shares of common stock from Telecom at a price of $0.01 per share, exercisable
on February 2, 1996 through February 2, 2006. Telecom has recorded the value of
$1,053,000 ascribed to the strategic distribution agreement as market
development expense in the first quarter of 1996. Telecom incurred fees of
$150,000 in connection with this transaction.
5. NOTE PAYABLE TO ART:
In connection with the Reorganization on February 2, 1996, ART, Telecom and
Advent entered into an exchange agreement under which the Advent Notes,
including accrued interest, and the one share of ART's Series A Redeemable
Preferred Stock held by Advent were exchanged for 232,826 shares of Series E
preferred stock of Telecom, the notes payable by ART to Advent and by Telecom to
ART were canceled, the related interest forgiven, and Telecom became the owner
of the one share of ART Series A Redeemable Preferred Stock.
6. COMMITMENTS:
DCT PRELIMINARY AGREEMENT
On April 26, 1996, Telecom and ART entered into a preliminary agreement with
DCT (the "DCT Preliminary Agreement") to acquire DCT's interest in certain FCC
authorizations and licenses in exchange for $3.6 million in cash. The DCT
Preliminary Agreement is subject to the completion of a definitive purchase
agreement and services agreement. The definitive purchase agreement will
supersede and replace all other existing agreements between Telecom, ART, ART's
shareholders and DCT. The definitive purchase agreement must be signed by June
28, 1996 and the closing of the transaction is subject to FCC approval.
F-52
<PAGE>
ADVANCED RADIO TELECOM CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS, CONTINUTED
7. FINANCINGS:
BRIDGE FINANCING
On March 8, 1996, Telecom issued in a private placement $5,000,000 of two
year, 10% notes (the "Bridge Notes") and five year warrants to purchase up to an
aggregate of 1,100,000 shares of common stock at a price of $6.25 per share (the
"Bridge Warrants") to certain holders of serial preferred stock. The Bridge
Warrants are exercisable on March 8, 1996 through March 8, 2001.
EQUIPMENT FINANCING
On April 29, 1996, Telecom completed a $2,445,000 equipment financing for
the purchase of wireless transmission equipment. Telecom issued a $2,445,000
promissary note, payable in 24 monthly installments of $92,694 with a final
payment of $642,305 due April 29, 1998. In connection with the equipment
financing, Telecom issued five year warrants to purchase up to an aggregate of
325,000 shares of common stock of Telecom. Telecom paid $225,000 in fees to
stockholders of Telecom to guarantee the equipment financing.
8. ESCROW SHARES:
Pursuant to the February 2, 1996 Reorganization, the terms of the Escrow
Shares arrangement were terminated and all of the remaining Escrow Shares were
released to the stockholders of ART. The related compensation expense of
$6,795,514, based upon the then estimated fair value of the Escrow Shares was
recognized, the offset of which was accounted for as an investment in Telecom by
ART.
9. COMMCOCCC ASSET ACQUISITION
During July 1996, ART entered into an agreement with CommcoCCC, Inc.
("CommcoCCC") to acquire CommcoCCC's interests in certain 38 GHz FCC
authorizations (the "CommcoCCC Assets") in exchange for 16.5 million shares of
ART Common Stock. The acquisition of the CommcoCCC Assets is subject to various
conditions including (i) minimum population coverage of the authorizations of
ART and CommcoCCC, (ii) receipt of final FCC and other approvals, (iii) receipt
by CommcoCCC of an opinion as to the tax-free nature of the transaction (iv) the
accuracy of representations and warranties except for breaches that do not have
in the aggregate a material adverse effect, (v) pending or threatened material
litigation, (vi) consummation of public equity and debt offerings on terms
reasonably satisfactory to CommcoCCC and (vii) other customary closing
conditions. Pending the completion of the acquisition, ART has agreed to
construct, manage and operate the CommcoCCC Assets.
At the closing of the acquisition, ART will give a stockholder ("Commco
LLC") of CommcoCCC an option (the "Option") to purchase FCC authorizations in
specified market areas in which ART will have more than one authorization. The
Option is exercisable only in the event that the CommcoCCC Acquisition is
consummated and Commco LLC receives authorizations pursuant to pending
applications covering a minimum specified population and expires nine months
after the consummation of the Common Stock Offering. The price of authorizations
to be purchased under the Option is based upon a formula that considers the
market price of ART Common Stock on the date of exercise.
In connection with the agreement to acquire the CommcoCCC Assets, certain
stockholders of CommcoCCC loaned ART $3 million in cash in exchange for notes
due September 30, 1996 (the "CommcoCCC Notes") with interest at the prime rate
and received three year warrants to purchase 50,000 shares of ART Common Stock
at a price of $15 per share. The CommcoCCC Notes are collateralized by all of
the assets of ART and, if not paid in full when due, the unpaid balance is
convertible into ART Common Stock, at the option of each holder, stipulated per
share prices based upon the timing of exercise.
F-53
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY............................. 3
RISK FACTORS................................... 9
THE COMPANY.................................... 21
USE OF PROCEEDS................................ 22
DIVIDEND POLICY................................ 22
CAPITALIZATION................................. 23
DILUTION....................................... 24
SELECTED HISTORICAL AND PRO FORMA FINANCIAL
DATA.......................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 28
BUSINESS....................................... 34
MANAGEMENT..................................... 59
PRINCIPAL STOCKHOLDERS......................... 70
CERTAIN TRANSACTIONS........................... 72
DESCRIPTION OF CAPITAL STOCK................... 77
SHARES ELIGIBLE FOR FUTURE SALE................ 79
DESCRIPTION OF CERTAIN INDEBTEDNESS............ 81
UNDERWRITING................................... 83
LEGAL MATTERS.................................. 84
EXPERTS........................................ 84
AVAILABLE INFORMATION.......................... 84
GLOSSARY....................................... 86
INDEX TO FINANCIAL STATEMENTS.................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
7,500,000 SHARES
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
MONTGOMERY SECURITIES
MERRILL LYNCH & CO.
DEUTSCHE MORGAN GRENFELL
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, not including the
Representative's non-accountable expense allowance. Except for the SEC
registration fee, the NASD filing fee and the Nasdaq listing fee, all of the
amounts in the table below are estimated.
<TABLE>
<CAPTION>
Securities and Exchange Commission registration fee................... $ 26,767
<S> <C> <C>
NASD filing fee.......................................................
Nasdaq listing fee.................................................... $ 50,000
Accounting fees and expenses.......................................... *
Printing.............................................................. *
Blue Sky fees and expenses (including counsel fees)................... 20,000
Legal fees and expenses............................................... *
Transfer Agent and Registrar fees and expenses........................ *
Miscellaneous expenses................................................ *
---------
TOTAL (estimated)..................................................... $
---------
---------
</TABLE>
- ------------------------
*To be completed by amendment.
II-1
<PAGE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party be reason of such position. If such person shall have acted in good
faith and in a manner he reasonable believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Reference is made to Article Ninth of the Certificate of Incorporation of
the Registrant, Section 6.4 of the By-laws and each of the Indemnification
Agreements filed as Exhibits 10-5, 10-6, 10-7 and 10-8, respectively, to this
Registration Statement for information regarding indemnification of directors
and officers under certain circumstances.
The Registrant has agreed to indemnify the Underwriters and their
controlling persons, and the Underwriters have agreed to indemnify the
Registrant and its controlling persons, against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Act"). Reference
is made to the Underwriting Agreement filed as part of Exhibit 1-1 hereto.
For information regarding the Registrant's undertaking to submit to
adjudication the issue of indemnification for violation of the Act, see Item 17
hereof.
The Registrant's Certificate of Incorporation provides that every director,
officer or agent of the Company shall be entitled to be indemnified out of the
assets of the Company against all losses or liabilities which he or she may
sustain or incur in or about the execution of the duties of his or her office or
otherwise in relation thereto, including any liability incurred by him or her in
defending any proceedings, whether civil or criminal, in which judgment is given
in his or her favor or in which he or she is acquitted, and no director or other
officer shall be liable for any loss, damage or misfortune which may happen to
or be incurred by the Company in the execution of the duties of his or her
office or in relation thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
TELECOM CLASS A AND B COMMON STOCK PRIVATE PLACEMENT
In April 1995, the Company and Landover Holdings Corporation ("LHC")
subscribed 340,000 shares of Telecom Class A common stock and 640,000 shares of
Telecom Class B common stock, respectively, for $0.001 per share, which, after
giving effect to anti-dilution adjustments and the February 1996 Reorganization,
currently are equivalent upon conversion prior to the Offerings to 10,013,055
shares and 7,512,076 shares, respectively, of Common Stock. In addition,
Hedgerow Corporation of Maine ("Hedgerow") and Toro Financial Corp. ("Toro")
subscribed 15,000 shares and 5,000 shares, respectively, of Telecom Class A
common stock at the price of $0.001 per share, which, after giving effect to
anti-dilution adjustments and the February 1996 Reorganization currently are
equivalent upon conversion prior to the Offerings to 441,753 shares and 147,251
shares of the Common Stock, respectively. The securities issued in the above
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Act. The recipients made certain
representations as to the nature of their investments and had adequacy of access
to information about the Registrant.
PREFERRED STOCK PRIVATE PLACEMENTS
Between May 8, 1995 and November 13, 1995, the LHC Stock was diluted by
purchases of series of Telecom preferred stock by E2-2, E2, E1 Holdings L.P.
("E1") and E2-3 Holdings, L.P. ("E2-3" and collectively with E1, E2 and E2-2,
the "Landover Partnerships"), each a limited partnership whose general partner
is controlled by LHC, in separate private placements. E2-2, which committed to
II-2
<PAGE>
purchase up to $3,500,000 of Telecom preferred stock matching other investors
under the LHC Purchase Agreement, purchased 405,880 shares of Telecom Series A
preferred stock (which converts into 5,276,440 shares of Common Stock upon
completion of this offering) for an aggregate of $946,600, and LHC purchased
35,873 shares of such Telecom Series A preferred stock from E2-2 for $1,050,000
pursuant to an option. E2 purchased an aggregate of 105,823 shares of Telecom
Series B preferred stock (which converts into 1,375,699 shares of Common Stock
upon completion of this offering) for an aggregate of $842,400. E1 purchased
13,797 shares of Telecom Series A preferred stock (which converts into 179,361
shares of Common Stock upon completion of this offering) for an aggregate of
$60,000 and 8,856 shares of Telecom Series B preferred stock (which converts
into 115,128 shares of Common Stock upon completion of this offering) for an
aggregate of $38,300. E2-3 purchased an aggregate of 7,363 shares of Telecom
Series C preferred stock (which converts into 95,719 shares of Common Stock upon
completion of this offering) for an aggregate of $112,700. All of the Landover
Partnerships will liquidate upon completion of this offering. The securities
issued in each of the foregoing transactions were offered and sold in reliance
on an exemption from registration under Regulation D promulgated under the Act.
On November 9, 1995, Telecom sold 61,640 shares of Telecom Series D
preferred stock (which convert into 801,320 shares of Common Stock upon
completion of this offering) for $2,000,000 in a private placement. Telecom
simultaneously redeemed 807,924 shares of Telecom common stock from LHC for
$2,000,000. In connection with the February 1996 Reorganization described below,
LHC granted to the holders of Telecom Series D preferred stock a contingent
option to purchase 400,634 shares of Telecom common stock at a nominal price
(the "Series D/LHC Option"), which option expires upon completion of this
offering.
On November 13, 1995, Global Private Equity II, L.P., Advent Partners
Limited Partnership and Advent International Investors II L.P. each a limited
partnership controlled by Advent International Corporation, (collectively,
"Advent") purchased for an aggregate of $5,000,000, (i) one share of ART's
Series A Redeemable Preferred Stock for a purchase price of $50,000 and (ii) the
Company's 10% Secured Convertible Demand Promissory Notes in the aggregate
principal amount of $4,950,000. In connection with the February 1996
Reorganization, Advent exchanged such Preferred Stock and Note for 232,826
shares of Telecom Series E preferred stock (which converts into 3,026,738 shares
of Common Stock upon completion of this offering), $0.001 par value per share.
The securities issued in each of the foregoing transactions were offered and
sold in reliance on an exemption from registration under Regulation D
promulgated under the Act. Advent made certain representations as to the nature
of its investment and had adequate access to information about the Registrant.
On February 2, 1996, Ameritech Development Corp. ("Ameritech") purchased for
an aggregate of $2,500,000 48,893 shares of Telecom Series F preferred stock,
par value $0.001 per share, (the "Ameritech Financing") convertible into 635,609
shares of Common Stock upon completion of this offering. In addition, Telecom
entered into the Ameritech Strategic Distribution Agreement and in connection
therewith granted to Ameritech a ten-year warrant to purchase 877,136 shares of
Telecom common stock exercisable at a price of $.01 per share (the "Ameritech
Warrant"). The securities issued in each of the foregoing transactions were
offered and sold in reliance on an exemption from registration under Regulation
D promulgated under the Act. Ameritech made certain representations as to the
nature of its investment and had adequate access to information about the
Registrant.
BRIDGE NOTES
On March 8, 1996, Telecom issued in a private placement $5,000,000 principal
amount of two year, 10% unsecured notes (the "Bridge Notes") and five-year
warrants to purchase up to an aggregate of 1,100,000 shares of Telecom common
stock at a price of $6.25 per share (the "Bridge Warrants") to investors
including: (i) affiliates of J.C. Demetree, Jr. and Mark Demetree, directors of
the Company; (ii) the Advent Partnerships; and (iii) Ameritech, who invested
$700,000, $725,000 and $750,000 in the Bridge Notes and Bridge Warrants,
respectively.
II-3
<PAGE>
EQUIPMENT FINANCING
On April 1, 1996, CRA, Inc. ("CRA") entered into a secured equipment
financing with Telecom (the "Equipment Financing") for the purchase from P-Com
of 38 GHz radio equipment. To evidence its obligations and the Equipment
Financing, Telecom issued in favor of CRA a $2,445,000 promissory note, payable
in 24 monthly installments of $92,694 with a final payment equal to $642,305 due
April 1, 1998. The securities issued in the foregoing transaction were offered
and sold in reliance on an exemption from registration under Regulation D
promulgated under the Act.
COMMCOCCC ACQUISITION
On July 3, 1996, the Company entered into the CommcoCCC Agreement to acquire
129 38 GHz wireless broadband authorizations from CommcoCCC, Inc. in exchange
for 16,500,000 shares of Common Stock. The stockholders of CommcoCCC
simultaneously loaned $3.0 million on a secured, subordinated basis bearing
interest at the prime rate and payable on September 30, 1996 and issued
three-year warrants to acquire 50,000 shares of Common Stock at $15 per share.
The securities to be issued in the foregoing transaction will be offered and
sold in reliance on a exemption from registration under Regulation D promulgated
under the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits were delivered with this Registration Statement, or
will be delivered by amendment, for filing:
<TABLE>
<C> <S> <C>
1-1 Underwriting Agreement.
2-1 (a) Amended and Restated Certificate of Incorporation and Bylaws of Registrant.
(b) Amendment to Amended and Restated Certificate of Incorporation.
(c) Amended and Restated Certificate of Incorporation (to be effective prior to
the consummation of the Offerings) and Restated and Amended Bylaws (effective
on the date of the Prospectus) of Registrant.
4-1 Specimen of Common Stock Certificate.*
4-2 (a) Indenture.(2)
(b) Specimen of Senior Discount Note. (See Exhibit 4-2(a)).
4-3 Form of Lock-Up Agreement.
4-4 Form of Warrant Agreement.(2)
5-1 Opinion and Consent of Hahn & Hessen LLP, counsel for the Registrant, with
respect to the Registrant's Common Stock and the Notes.*
9-1 (a) Voting Trust Agreement.*
(b) Form of Trustee Indemnification Agreement.*
(c) Voting Agreement.*
(d) Confidentiality Agreement.*
10-1 Employment and Consulting Agreements.
(a) Vernon L. Fotheringham, dated December 16, 1995.**
(b) Steven D. Comrie, dated February 2, 1996.**
(c) W. Theodore Pierson, Jr., dated May 8, 1995 and effective January 1,
1995.**
(d) I. Don Brown, dated February 16, 1996.**
(e) Charles Menatti, dated March 8, 1996.**
(f) James D. Miller, dated February 1, 1996.**
(g) Thomas A. Grina, dated April 26, 1996.(1)
10-2 (a) Second Amended and Restated Certificate of Incorporation and By-laws of
Telecom (filed as Exhibit 2-1 to the Registration Statement on Form S-1 of the
Company dated May 2, 1996).**
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
(b) Certificate of Incorporation of ART Merger Corporation (to become the
Certificate of Incorporation of Telecom upon the completion of the Merger).
10-3 Form of Director Indemnification Agreement.**
10-4 (a) Registrant's Equity Incentive Plan, as amended.
(b) Form of Stock Option Agreement.*
10-5 (a) Registrant's 1996 Non-Employee Directors Automatic Stock Option Plan.**
(b) Form of Non-Employee Directors Stock Option Agreement.
10-6 Stock Option Agreements.
(a) Comrie Non-Qualified Stock Option Agreement.**
(b) Comrie Incentive Stock Option Agreement.**
10-7 Management Consulting Agreement with Landover Holdings Corporation, dated
November 13, 1995.**
10-8 (a)ART West Joint Venture Agreement dated April 4, 1995, with Extended
Communications, Inc.**
(b)Put/Call Agreement dated October 1, 1994, with Extended Communications,
Inc.**
(c)Services Agreement dated October 1, 1994, with Extended Communications,
Inc.**
(d)Amendment dated April 4, 1995 to the Put/Call Agreement dated October 1,
1994, with Extended Communications, Inc.**
(e)Asset Purchase Agreement dated June 24, 1996 with Extended Communications,
Inc.
(f) Management Agreement dated June 1, 1996 with ART West Partnership.
10-9 (a)Put/Call Agreement dated September 1, 1994 with DCT Communications, Inc.**
(b)Services Agreement dated September 1, 1994 with DCT Communications, Inc.**
(c)Term Sheet dated April 26, 1996 with DCT.**
(d) Purchase Agreement with DCT dated July 1, 1996.*
(e) Amendment to Services Agreement dated June 1996 with DCT.
10-10 (a)Asset Purchase Agreement dated April 4, 1995 with EMI Communications
Corporation.**
(b)$1,500,000 Nonnegotiable and Nontransferable Promissory Note.**
(c)Maintenance Agreement dated November 14, 1995 with EMI Communications
Corporation.**
(d)Agreement dated November 14, 1995 with EMI Communications Corporations.**
10-11 38 GHz Radio Links Purchase Agreement dated August 11, 1995 with P-Com, Inc.+**
10-12 (a)Agreement dated May 25, 1995 with Telecom One.+**
(b) Services Agreement dated April 24, 1996 with Telecom One.**
(c) Asset Purchase Agreement and Management Agreement with Telecom One dated
June 27, 1996.
10-13 Agreement dated April 25, 1996 with GTE.**
10-14 Software License Agreement dated March 29, 1996 with GTE.**
10-15 Agreement dated July 12, 1995 with Southeast Research Partners, Inc.**
10-16 Agreement dated March 1, 1995 with High Sky Limited Partnership, High Sky II
Limited Partnership, Vernon L. Fotheringham, W. Theodore Pierson, Jr., and F.
Thomas Tuttle.**
10-17 Stock Purchase Agreement dated May 8, 1995 with Vernon L. Fotheringham, W.
Theodore Pierson, Jr., High Sky Limited Partnership, High Sky II Limited
Partnership, and Extended Communications, Inc.**
10-18 (a)Purchase Agreement dated April 21, 1995 with Landover Holdings
Corporation.**
(b)Letter Agreement dated May 8, 1995 with the Demetrees, Telecom and Landover
Holdings Corporation.**
(c)Letter Agreement dated November 13, 1995 with Telecom, E2-2 Holdings, L.P.
and the Demetrees.**
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S> <C>
10-19 Restated and Amended Stockholders' Agreement dated February 2, 1996 with
Telecom and the stockholders of each of Telecom and the Company.**
10-20 Second Restated and Amended Registration Rights Agreement dated July 3, 1996
with Telecom and the stockholders of each of Telecom and the Company.
10-21 Services Agreement dated May 8, 1995 with Telecom.**
10-22 Option Agreement dated February 2, 1996 with Telecom.**
10-23 (a)Securities Purchase Agreement dated November 13, 1995 with Telecom, Vernon
Fotheringham, W. Theodore Pierson, Jr., the stockholders of Telecom named
therein and the Advent Partnerships.**
(b)Exchange Agreement dated February 2, 1996 with Telecom and the Advent
Partnerships.**
10-24 (a)Securities Purchase Agreement dated February 2, 1996 with Telecom and
Ameritech Development Corporation ("Ameritech"), including letter of
intent.**
(b)Warrant issued on February 2, 1996 to Ameritech.**
(c)Put/Call Agreement dated February 2, 1996 with Ameritech.**
10-25 Strategic Distribution Agreement dated April 29, 1996 with Ameritech.**
10-26 Restated and Amended Merger Agreement and Plan of Reorganization dated June 26,
1996 between the Company and Telecom.
10-27 (a)$2,445,000 Promissory Note in favor of CRA, Inc. ("CRA").**
(b)Security Agreement with CRA (including UCC-1 Financing Statement).**
(c)Indemnity Agreement.**
(d) Form of Indemnity Warrant.**
10-28 Memorandum of Terms of Development and Procurement Agreement with American
Wireless with Extension Agreement dated April 25, 1996.**
10-29 (a)Purchase Agreement dated April 26, 1996 with Harris Corporation Farinon
Division ("Harris") (confidential treatment requested for certain terms).(1)
(b)PCS Marketing Agreement dated April 26, 1996 with Harris (confidential
treatment requested for certain terms).(1)
10-30 Form of Subscription Agreement dated March 8, 1996, including Forms of Bridge
Note and Bridge Warrant.
10-31 (a) Asset Acquisition Agreement and Plan of Reorganization dated July 3, 1996
with CommcoCCC, Inc.
(b) Form of Note issued to Commco, L.L.C.
(c) Form of Note issued to Columbia Capital Corporation.
(d) Form of Warrant issued to Commco, L.L.C.
(e) Form of Warrant issued to Columbia Capital Corporation.
(f) Option Agreement dated July 3, 1996 with Commco, L.L.C.
(g) Security Agreement dated June 27, 1996 with Columbia Capital Corporation.
(h) Form of Noncompetition Agreement with CommcoCCC.
(i) CommcoCCC Management Agreement dated July 3, 1996.
(j) Right of First Offer Agreement dated July 3, 1996.
(k) Engagement Letter with Montgomery Securities dated May 23, 1996.
10-32 Letter of Intent dated April 29, 1996 with Helioss Communications Inc.
11 Computation of Pro Forma Net Loss Per Share of Common Stock.
21 Subsidiaries of the Registrant.
23(a) Consent of the Registrant's Independent Accountants.
23(b) Consent of the Registrant's Counsel will be contained in the Opinion of
Counsel.*
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested for the deleted portions of this document.
(1) Filed with the Registration Statement on Form S-1 of the Company dated May
15, 1996 (SEC Reg. No. 333-03735) ("Unit Registration Statement").
(2) Filed with Amendment No. 1 to Unit Registration Statement.
II-6
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities under the Act may be permitted to
directors, officers and controlling person of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on July 2, 1996.
Advanced Radio Technologies
Corporation
By: /s/ VERNON L. FOTHERINGHAM
-----------------------------------
Vernon L. Fotheringham
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
<TABLE>
<C> <S> <C>
SIGNATURES TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
/s/ VERNON L. FOTHERINGHAM
------------------------------------------- Chairman, Chief Executive Officer and July 2, 1996
Vernon L. Fotheringham Director
/s/ W. THEODORE PIERSON, JR.
------------------------------------------- Executive Vice President, General Counsel July 2, 1996
W. Theodore Pierson, Jr. and Director
/s/ MATTHEW C. GOVE
------------------------------------------- Director July 2, 1996
Matthew C. Gove
/s/ THOMAS A. GRINA
------------------------------------------- Executive Vice President and Chief July 2, 1996
Thomas A. Grina Financial Officer
</TABLE>
II-8
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Vernon L. Fotheringham and
Thomas A. Grina, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, including one or more registration statements that
may be filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, and to file the same, with all exhibits hereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done in virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURES TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
/s/ VERNON L. FOTHERINGHAM
------------------------------------------- Chairman, Chief Executive Officer and July 2, 1996
Vernon L. Fotheringham Director
/s/ W. THEODORE PIERSON, JR.
------------------------------------------- Executive Vice President, General Counsel July 2, 1996
W. Theodore Pierson, Jr. and Director
/s/ MATTHEW C. GOVE
------------------------------------------- Director July 2, 1996
Matthew C. Gove
</TABLE>
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1-1 Underwriting Agreement.
2-1 (a) Amended and Restated Certificate of Incorporation and Bylaws of Registrant.
(b) Amendment to Amended and Restated Certificate of Incorporation.
(c) Amended and Restated Certificate of Incorporation (to be effective prior to the
consummation of the Offerings) and Restated and Amended Bylaws (effective on the date
of the Prospectus) of Registrant.
4-1 Specimen of Common Stock Certificate.*
4-2 (a) Indenture.(2)
(b) Specimen of Senior Discount Note. (See Exhibit 4-2(a)).
4-3 Form of Lock-Up Agreement.
4-4 Form of Warrant Agreement.(2)
5-1 Opinion and Consent of Hahn & Hessen LLP, counsel for the Registrant, with respect to
the Registrant's Common Stock and the Notes.*
9-1 (a) Voting Trust Agreement.*
(b) Form of Trustee Indemnification Agreement.*
(c) Voting Agreement.*
(d) Confidentiality Agreement.*
10-1 Employment and Consulting Agreements.
(a) Vernon L. Fotheringham, dated December 16, 1995.**
(b) Steven D. Comrie, dated February 2, 1996.**
(c) W. Theodore Pierson, Jr., dated May 8, 1995 and effective January 1, 1995.**
(d) I. Don Brown, dated February 16, 1996.**
(e) Charles Menatti, dated March 8, 1996.**
(f) James D. Miller, dated February 1, 1996.**
(g) Thomas A. Grina, dated April 26, 1996.(1)
10-2 (a) Second Amended and Restated Certificate of Incorporation and By-laws of Telecom
(filed as Exhibit 2-1 to the Registration Statement on Form S-1 of the Company dated
May 2, 1996).**
(b) Certificate of Incorporation of ART Merger Corporation (to become the Certificate of
Incorporation of Telecom upon the completion of the Merger).
10-3 Form of Director Indemnification Agreement.**
10-4 (a) Registrant's Equity Incentive Plan, as amended.
(b) Form of Stock Option Agreement.*
10-5 (a) Registrant's 1996 Non-Employee Directors Automatic Stock Option Plan.**
(b) Form of Non-Employee Directors Stock Option Agreement.
10-6 Stock Option Agreements.
(a) Comrie Non-Qualified Stock Option Agreement.**
(b) Comrie Incentive Stock Option Agreement.**
10-7 Management Consulting Agreement with Landover Holdings Corporation, dated November 13,
1995.**
10-8 (a)ART West Joint Venture Agreement dated April 4, 1995, with Extended Communications,
Inc.**
(b)Put/Call Agreement dated October 1, 1994, with Extended Communications, Inc.**
(c)Services Agreement dated October 1, 1994, with Extended Communications, Inc.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- ---------
(d)Amendment dated April 4, 1995 to the Put/Call Agreement dated October 1, 1994, with
Extended Communications, Inc.**
<C> <S> <C>
(e)Asset Purchase Agreement dated June 24, 1996 with Extended Communications, Inc.
(f) Management Agreement dated June 1, 1996 with ART West Partnership.
10-9 (a)Put/Call Agreement dated September 1, 1994 with DCT Communications, Inc.**
(b)Services Agreement dated September 1, 1994 with DCT Communications, Inc.**
(c)Term Sheet dated April 26, 1996 with DCT.**
(d) Purchase Agreement with DCT dated July 1, 1996.*
10-10 (a)Asset Purchase Agreement dated April 4, 1995 with EMI Communications Corporation.**
(b)$1,500,000 Nonnegotiable and Nontransferable Promissory Note.**
(c)Maintenance Agreement dated November 14, 1995 with EMI Communications Corporation.**
(d)Agreement dated November 14, 1995 with EMI Communications Corporations.**
(e) Amendment to Services Agreement dated June 1996 with DCT.
10-11 38 GHz Radio Links Purchase Agreement dated August 11, 1995 with P-Com, Inc.+**
10-12 (a)Agreement dated May 25, 1995 with Telecom One.+**
(b) Services Agreement dated April 24, 1996 with Telecom One.**
(c) Asset Purchase Agreement and Management Agreement with Telecom One dated June 27,
1996.
10-13 Agreement dated April 25, 1996 with GTE.**
10-14 Software License Agreement dated March 29, 1996 with GTE.**
10-15 Agreement dated July 12, 1995 with Southeast Research Partners, Inc.**
10-16 Agreement dated March 1, 1995 with High Sky Limited Partnership, High Sky II Limited
Partnership, Vernon L. Fotheringham, W. Theodore Pierson, Jr., and F. Thomas Tuttle.**
10-17 Stock Purchase Agreement dated May 8, 1995 with Vernon L. Fotheringham, W. Theodore
Pierson, Jr., High Sky Limited Partnership, High Sky II Limited Partnership, and
Extended Communications, Inc.**
10-18 (a)Purchase Agreement dated April 21, 1995 with Landover Holdings Corporation.**
(b)Letter Agreement dated May 8, 1995 with the Demetrees, Telecom and Landover Holdings
Corporation.**
(c)Letter Agreement dated November 13, 1995 with Telecom, E2-2 Holdings, L.P. and the
Demetrees.**
10-19 Restated and Amended Stockholders' Agreement dated February 2, 1996 with Telecom and the
stockholders of each of Telecom and the Company.**
10-20 Second Restated and Amended Registration Rights Agreement dated July 3, 1996 with
Telecom and the stockholders of each of Telecom and the Company.
10-21 Services Agreement dated May 8, 1995 with Telecom.**
10-22 Option Agreement dated February 2, 1996 with Telecom.**
10-23 (a)Securities Purchase Agreement dated November 13, 1995 with Telecom, Vernon
Fotheringham, W. Theodore Pierson, Jr., the stockholders of Telecom named therein and
the Advent Partnerships.**
(b)Exchange Agreement dated February 2, 1996 with Telecom and the Advent Partnerships.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- ---------
10-24 (a)Securities Purchase Agreement dated February 2, 1996 with Telecom and Ameritech
Development Corporation ("Ameritech"), including letter of intent.**
<C> <S> <C>
(b)Warrant issued on February 2, 1996 to Ameritech.**
(c)Put/Call Agreement dated February 2, 1996 with Ameritech.**
10-25 Strategic Distribution Agreement dated April 29, 1996 with Ameritech.**
10-26 Restated and Amended Merger Agreement and Plan of Reorganization dated June 26, 1996
between the Company and Telecom.
10-27 (a)$2,445,000 Promissory Note in favor of CRA, Inc. ("CRA").**
(b)Security Agreement with CRA (including UCC-1 Financing Statement).**
(c)Indemnity Agreement.**
(d) Form of Indemnity Warrant.**
10-28 Memorandum of Terms of Development and Procurement Agreement with American Wireless with
Extension Agreement dated April 25, 1996.**
10-29 (a)Purchase Agreement dated April 26, 1996 with Harris Corporation Farinon Division
("Harris") (confidential treatment requested for certain terms).(1)
(b)PCS Marketing Agreement dated April 26, 1996 with Harris (confidential treatment
requested for certain terms).(1)
10-30 Form of Subscription Agreement dated March 8, 1996, including Forms of Bridge Note and
Bridge Warrant.
10-31 (a) Asset Acquisition Agreement and Plan of Reorganization dated July 3, 1996 with
CommcoCCC, Inc.
(b) Form of Note issued to Commco, L.L.C.
(c) Form of Note issued to Columbia Capital Corporation.
(d) Form of Warrant issued to Commco, L.L.C.
(e) Form of Warrant issued to Columbia Capital Corporation.
(f) Option Agreement dated July 3, 1996 with Commco, L.L.C.
(g) Security Agreement dated June 27, 1996 with Columbia Capital Corporation.
(h) Form of Noncompetition Agreement with CommcoCCC.
(i) CommcoCCC Management Agreement dated July 3, 1996.
(j) Right of First Offer Agreement dated July 3, 1996.
(k) Engagement Letter with Montgomery Securities dated May 23, 1996.
10-32 Letter of Intent dated April 29, 1996 with Helioss Communications Inc.
11 Computation of Pro Forma Net Loss Per Share of Common Stock.
21 Subsidiaries of the Registrant.
23(a) Consent of the Registrant's Independent Accountants.
23(b) Consent of the Registrant's Counsel will be contained in the Opinion of Counsel.*
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested for the deleted portions of this document.
(1) Filed with the Registration Statement on Form S-1 of the Company dated May
15, 1996 (SEC Reg. No. 333-03735) ("Unit Registration Statement").
(2) Filed with Amendment No. 1 to Unit Registration Statement.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ADVANCED RADIO TELECOM CORP.
__________ Shares of Common Stock
UNDERWRITING AGREEMENT
Dated as of _____________, 1996
MONTGOMERY SECURITIES
DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
_______________ SHARES
ADVANCED RADIO TELECOM CORP.
COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1996
MONTGOMERY SECURITIES
DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. INTRODUCTORY. Advanced Radio Telecom Corp., f/k/a Advanced
Radio Technologies Corporation, a Delaware corporation (the "COMPANY"), proposes
to issue and sell __________ shares of its authorized but unissued common stock,
par value $.001 per share (the "COMMON STOCK"), to the several underwriters
named in Schedule A annexed hereto (the "UNDERWRITERS"), for whom you are acting
as representatives (the "REPRESENTATIVES"). Said aggregate of __________ shares
are herein called the "FIRM COMMON SHARES." In addition, the Company proposes
to grant to the Underwriters an option to purchase up to __________ additional
shares of Common Stock (the "OPTIONAL COMMON SHARES"), as provided in Section 4
hereof. The Firm Common Shares and, to the extent such option is exercised, the
Optional Common Shares are hereinafter collectively referred to as the "COMMON
SHARES." This Agreement, the Price Determination Agreement attached hereto as
Exhibit B and the Lock-Up Agreement (as defined) are herein collectively
referred to as the "OPERATIVE DOCUMENTS."
You have advised the Company that the Underwriters propose to make a public
offering of their respective portions of the Common Shares (the "OFFERING") on
the effective date of the registration statement hereinafter referred to, or as
soon thereafter as in your judgment is advisable. Concurrently with the
Offering, the Company is offering, pursuant to a separate prospectus, units
consisting of Senior Discount Notes due 2006 and warrants to purchase Common
Stock (the "UNIT OFFERING" and, together with the Offering, the "OFFERINGS").
In addition, prior to consummation of the Offerings, (i) Advanced Radio Telecom
Corp. ("ART") will merge with and into ART Merger Corporation, a subsidiary of
the Company, (ii) the Company will amend its certificate of incorporation to
change its name to "Advanced Radio Telecom Corp." and (iii) ART Merger
Corporation will amend its certificate of incorporation to
1
<PAGE>
change its name to ART Licenses Corporation ("ART LICENSES") (the "MERGER" and,
together with the Offerings, the "TRANSACTIONS"). Unless the context otherwise
requires, the "Company" shall refer to the Company after giving effect to the
Merger. References to "subsidiaries" of the Company shall be deemed to include
ART.
The Company hereby confirms its agreements with respect to the purchase of
the Common Shares by the Underwriters as follows:
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-4388) with respect
to the Common Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "ACT"), and the
rules and regulations (the "RULES AND REGULATIONS") of the Securities and
Exchange Commission (the "COMMISSION") thereunder, and has been filed with the
Commission. The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you three signed copies of
such registration statement and amendments, together with three copies of each
exhibit filed therewith. Conformed copies of such registration statement and
amendments (but without exhibits) and of the related preliminary prospectus have
been delivered to you in such reasonable quantities as you have requested for
each of the Underwriters. The Company will next file with the Commission one of
the following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations
or (iii) a term sheet (the "TERM SHEET") as described in and in accordance with
Rules 434 and 424(b) of the Rules and Regulations. As filed, the final
prospectus, if one is used, or the Term Sheet and Preliminary Prospectus, if a
final prospectus is not used, shall include all Rule 430A Information and,
except to the extent that you shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to the date and
time that this Agreement was executed and delivered by the parties hereto, or,
to the extent not completed at such date and time, shall contain only such
specific additional information and other changes (beyond that contained in the
latest preliminary prospectus) as the Company shall have previously advised you
in writing would be included or made therein.
The term "REGISTRATION STATEMENT" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any post-effective amendment thereto becomes effective prior
to the First Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended; PROVIDED, HOWEVER, that such term shall
also include (i) all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A of the Rules and Regulations and (ii) any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations relating to
the Common Shares. The term "PRELIMINARY PROSPECTUS" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes effective that
omits Rule 430A Information. The term "PROSPECTUS" as used in this Agreement
shall mean either (i) the prospectus relating to the Common Shares in the form
in which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, (ii) if a Term Sheet is not used and no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, shall mean the
form of final prospectus included in the Registration Statement at the time such
registration statement becomes effective or (iii) if a Term Sheet is used, the
Term Sheet in the form in which it is
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first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, together with the Preliminary Prospectus included in the
Registration Statement at the time it becomes effective. The term "RULE 430A
INFORMATION" means information with respect to the Common Shares and the
Offering permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the Rules and Regulations.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed
in all material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement becomes
effective, and at all times subsequent thereto up to and including each Closing
Date hereinafter mentioned, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, no representation or warranty contained in this Section 2(b)
shall be applicable to information contained in or omitted from any Preliminary
Prospectus, the Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof.
(c) No action has been taken and no local, state or Federal law, statute,
ordinance, rules, regulation, requirement, judgment or court decree has been
enacted, adopted or issued by any governmental agency that prevents the issuance
of the Common Shares or prevents or suspends the use of the Prospectus; no
jurisdiction, restraining order or order of any nature by a Federal or state
court of competent jurisdiction has been issued that prevents the issuance of
the Common Shares or prevents or suspends the sale of the Common Shares in any
jurisdiction referred to in Section 5(f) hereof; and every request of any
securities authority or agency of any jurisdiction for additional information
has been complied with in all material respects.
(d) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations which have not been
described or filed as required. The contracts so described in the Prospectus
are accurate and complete, and all such contracts are in full force and effect
on the date hereof. Neither the Company nor any of its subsidiaries or, to the
best of the Company's knowledge, any other party is in breach of or default
under any such contract.
(e) Each of the Company and its subsidiaries has been duly formed as a
corporation and is validly existing in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus. Each of the Company and its subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have, either individually or in the aggregate, a material
adverse effect on the assets, properties, business, management, earnings, net
worth, results of operations, condition (financial or otherwise) or business
prospects of the Company and its subsidiaries, taken as a whole. No proceeding
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has been instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(f) ART Licenses is the only subsidiary of the Company. The Company owns
all of the outstanding capital stock of ART Licenses; all such capital stock has
been duly authorized and validly issued and is fully paid and nonassessable,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature; and all of such capital stock was not issued in
violation of any preemptive or similar rights. There are no outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any such shares of
capital stock or other equity interest of ART Licenses.
(g) The Company and its subsidiaries do not have any ownership interest in
any joint venture, other than the Company's 50% ownership interest in ART West
Joint Venture, a Delaware partnership owned by the Company and Extended
Communications, Inc. ("ART WEST").
(h) Prior to consummation of the Transactions, the Company and ART have
authorized and outstanding capital stock as set forth in Exhibit A hereto. All
such issued and outstanding shares of capital stock of the Company and ART have
been duly authorized and validly issued, are fully paid and non-assessable and
were not issued in violation of any preemptive or similar rights. The shares of
capital stock of ART owned by the Company prior to completion of the Merger are
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature. Upon consummation of the Transactions, the Company will
have authorized and outstanding capital stock as set forth in Exhibit B hereto
and an authorized and outstanding capitalization as set forth in the Prospectus
under the caption "Capitalization." All such issued and outstanding shares of
capital stock of the Company will have been duly authorized and validly issued,
will be fully paid and non-assessable and will not have been issued in violation
of any preemptive or similar rights. Except as disclosed in the Prospectus,
there are, and there will be, no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments convertible
into or exchangeable for, any capital stock of the Company or ART The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(i) The Company has all requisite corporate power and authority to enter
into the Operative Documents and to perform the transactions contemplated hereby
and thereby. Each of the Operative Documents has been duly authorized, executed
and delivered by the Company and constitutes a legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. No approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required for the execution and
delivery of this Agreement by the Company or the consummation of the
transactions contemplated by this Agreement, except such as have been obtained
and are in full force and effect under the Act and such as may be required under
applicable Blue Sky laws in connection with the purchase and distribution of the
Common Shares by the Underwriters and the clearance of such offering with the
NASD.
(j) The Common Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in the manner set forth in this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or purchase
exist with respect to the
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issuance and sale of the Common Shares by the Company pursuant to this
Agreement. No stockholder of the Company has any right which has not been
waived to require the Company to register the sale of any shares owned by such
stockholder under the Act in the Offering contemplated by this Agreement. No
further approval or authority of the stockholders or the board of directors of
the Company (the "BOARD OF DIRECTORS") will be required for the issuance and
sale of the Common Shares to be sold by the Company as contemplated herein.
(k) None of the execution, delivery and performance of the Operative
Documents by the Company, the compliance by the Company with all of the
provisions hereof and thereof, the issuance and sale of the Common Shares, the
consummation by the Company and its subsidiaries of the Transactions and the
transactions contemplated hereby and thereby (i) require any consent, approval,
authorization or other order of or filing, registration, qualification, license
or permit of or with, any court, regulatory body, administrative agency or other
governmental body (including, without limitation, the Federal Communications
Commission (the "FCC")), other than those that have been obtained and are in
full force and effect, or (ii) violate, conflict with, or constitute a breach of
any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on any
properties of the Company and its subsidiaries pursuant to (A) the charter or
bylaws of the Company or any of its subsidiaries, (B) any bond, debenture, note,
mortgage, deed of trust or other agreement, indenture or other instrument to
which or by which any of them is a party or by which any of them or any of their
respective property is or may be bound, (C) any local, state or Federal law,
statute, ordinance, rule, regulation or requirement (including, without
limitation, the Communications Act of 1934, as amended by the Telecommunications
Act of 1996 (the "TELECOMMUNICATIONS ACT"), the rules and regulations of the FCC
and the environmental laws, statutes, ordinances, rules or regulations)
applicable to the Company, any of its subsidiaries or any of their respective
assets or properties or (D) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Company, any of
its subsidiaries or any of their assets or properties, that, in the case of
clauses (B), (C) and (D), (x) would reasonably be expected, either individually
or in the aggregate, to result in a material adverse effect on the assets,
properties, business, management, earnings, net worth, results of operations,
condition (financial or otherwise) or business prospects of the Company and its
subsidiaries, taken as a whole, (y) would materially interfere with or adversely
affect the issuance of the Common Shares or the consummation of the Transactions
or (z) in any manner draw into question the validity of any of the Operative
Documents (any of the events set forth in clauses (x), (y) or (z), a "MATERIAL
ADVERSE EFFECT").
(l) Neither the Company nor any of its subsidiaries is or, after giving
effect to the Transactions, will be (i) in violation of its charter or bylaws,
(ii) in default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument material to the
conduct of the business of the Company and its subsidiaries, taken as a whole,
to which any of them is a party, or by which any of their respective properties
is bound or (iii) in violation of any local, state or Federal law, statute,
ordinance, rule, regulation, requirement, judgment or court decree (including,
without limitation, the Telecommunications Act and the rules and regulations of
the FCC and environmental laws, statutes, ordinances, rules, regulations,
judgments or court decrees) applicable to any of them or any of their respective
assets or properties (whether owned or leased), other than, in the case of
clauses (ii) and (iii), any default or violation that could not reasonably be
expected to have a Material Adverse Effect. There exists no condition that,
with notice, the passage of time or otherwise, would constitute a default under
any such document or instrument that could be expected to have a Material
Adverse Effect.
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(m) There is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental agency, body or official, domestic or foreign, now
pending or threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of any of
them is subject, (ii) no local, state or Federal law, statute, ordinance, rule,
regulation, requirement, judgment or court decree (including, without
limitation, the Telecommunications Act and the rules and regulations of the FCC)
or order has been enacted, adopted or issued by any governmental agency or, to
the best of the Company's knowledge, that has been proposed by any governmental
body or (iii) no injunction, restraining order or order of any nature by a
Federal or state court or foreign court of competent jurisdiction to which the
Company, any of its subsidiaries or their business, assets, or property are, or
could reasonably be expected to be, subject.
(n) Each of the Company and its subsidiaries has (i) good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions,
except for liens for taxes not yet due and payable and other liens not material
to the business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, to all property and assets
described in the Registration Statement as currently being owned by each of the
Company and its subsidiaries and (ii) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made all
declarations and filings with, all Federal, state and local authorities
(including, without limitation, the FCC), all self-regulatory authorities and
all courts and other tribunals (each an "AUTHORIZATION") necessary to engage in
the business as presently and to be conducted by either of them in the manner
described in the Prospectus, except as described in the Prospectus. All such
Authorizations are valid and in full force and effect and each of the Company
and its subsidiaries is in compliance with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory authorities
having jurisdictions with respect thereto. All leases to which the Company or
any of its subsidiaries is a party are valid and binding, and no default has
occurred or is continuing thereunder which could reasonably be expected to
result in a Material Adverse Effect. Each of the Company and its subsidiaries
enjoys peaceful and undisturbed possession under all such Leases to which it is
a party as lessee or as assignee of lessee with such exceptions as do not
materially interfere with the use made by the Company or its subsidiaries.
(o) Each of the Company and its subsidiaries has such permits, licenses,
franchises, trademarks and authorizations of governmental or regulatory
authorities ("PERMITS") as are necessary to own, lease and operate their
respective properties and to conduct their respective business in the manner
described in the Prospectus. Each of the Company and its subsidiaries has
fulfilled and performed all of its material obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permit, except for any such
impairments which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as described in the Prospectus, such Permits contain no
restrictions that are materially burdensome to the Company and its subsidiaries,
taken as a whole.
(p) Except as described in the Prospectus, (i) the Company and its
subsidiaries own, possess or have the right to employ or have applied for all
such Permits, licenses (including all FCC, state, local or other jurisdictional
regulatory licenses, franchises, trademarks and authorizations of governmental
or regulatory authorities ("LICENSES")), patents, patent rights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, software, systems or procedures), inventions,
technical data and information (collectively with Licenses, the "INTELLECTUAL
PROPERTY") as are necessary to own, lease and operate their respective
properties and to conduct their respective business in the manner described in
the Prospectus, (ii) each of the Company and its subsidiaries has fulfilled and
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performed all of its material obligations with respect to such Licenses and
other Intellectual Property and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or result
in any other material impairment of the rights of the holder of any such
Intellectual Property, (iii) such Intellectual Property contain no restrictions
that are materially burdensome to the Company and its subsidiaries, taken as a
whole, and (iv) the use of the Intellectual Property in connection with the
business and operations of the Company and its subsidiaries does not infringe on
the rights of any person, except where such infringement would not have a
Material Adverse Effect.
(q) The Company and its subsidiaries have timely filed all renewal
applications with respect to all Licenses possessed by any of them. No protests
or competing applications have been filed with respect to such renewal
applications, and nothing has come to the Company's or any of its subsidiaries'
attention that would lead them to conclude that such renewal applications will
not be granted by the appropriate regulatory agency or body in the ordinary
course. The Company and its subsidiaries are authorized under the
Telecommunications Act, and the rules and regulations promulgated thereunder, to
continue to provide the services which are the subject of such renewal
applications during the pendency thereof.
(r) The development, implementation and operation of the 38 GHz wireless
broadband telecommunications services network as described, and in the markets
described, in the Prospectus will not (i) result in any violation of the
provisions of the charter or bylaws of the Company or any of its subsidiaries,
(ii) result in any violation of any applicable law, administrative regulation or
administrative or court decree (including, without limitation, the
Telecommunication Act, and the rules and regulations of the FCC and
environmental laws) or (iii) conflict with or constitute a breach or violation
of, or constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of its subsidiaries
is a party or by which any of them may be bound, or to which any of their
property is subject, except, in the case of clauses (ii) and (iii) above, any
such violations, conflicts or breaches that would not individually or in the
aggregate, have a Material Adverse Effect.
(s) The business and operations conducted and proposed to be conducted by
the Company and its subsidiaries as described in the Prospectus are not
regulated by any public service or public utility commissions in the States in
which the Company and its subsidiaries conduct or propose to conduct such
business and operations as described in the Prospectus; and, subject to the
provisions of Section 332(c)(3) of the Telecommunications Act, neither the
Company nor any of its subsidiaries is or will be required to obtain any License
from any public service or public utility commission in any such State.
(t) None of the execution, delivery and performance of the Operative
Documents by the Company, the compliance by the Company with all of the
provisions hereof and thereof, the issuance and sale of the Common Shares, the
consummation by the Company and its subsidiaries of the Transactions and the
transactions contemplated hereby and thereby (i) require any consent, approval,
authorization or other order of or filing, registration, qualification, license
or permit of or with, the FCC, other than those that have been obtained and are
in full force and effect, or (ii) violate, conflict with, or constitute a breach
of any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on any
properties of the Company or any of its subsidiaries pursuant to (A) the
Telecommunications Act or the rules and regulations of the FCC applicable to the
Company, any of its subsidiaries or any of their respective assets or properties
or (B) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company, any of its subsidiaries
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or any of their assets or properties, that, in the case of clauses (A) and (B),
would reasonably be expected, either individually or in the aggregate, to result
in a Material Adverse Effect.
(u) Neither the Company nor any of its subsidiaries is or, after giving
effect to the Transactions, will be in violation of the Telecommunications Act
and the rules and regulations of the FCC applicable to the Company, any of its
subsidiaries or any of their respective assets or properties (whether owned or
leased), other than any violation that could not reasonably be expected to have
a Material Adverse Effect.
(v) Other than rulemaking procedures of general applicability to the
wireless broadband telecommunications industry, there is (i) no action, suit or
proceeding before or by the FCC, now pending or threatened or contemplated to
which the Company or any of its subsidiaries is or may be a party or to which
the business or property of the Company or any of its subsidiaries is subject,
or (ii) no amendment or change to the Telecommunications Act and the rules and
regulations of the FCC has been enacted, adopted or issued by the FCC or, to the
best of such counsel's knowledge, that has been proposed by the FCC.
(w) Each of the Company and its subsidiaries has filed all reports
required to be filed with the FCC.
(x) Neither the Company nor any of its subsidiaries has violated any
foreign, Federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants, except where any such violations would not,
individually or in the aggregate, have a Material Adverse Effect.
(y) All tax returns required to be filed by the Company or any of its
subsidiaries in any jurisdiction have been so filed. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due or claimed to be due from such entities or that are due and payable have
been paid, other than those being contested in good faith and for which adequate
reserves have been provided for those currently payable without penalty or
interest. There are no proposed additional taxes assessments against the
Company or its subsidiaries, and neither the Company nor any of its subsidiaries
has any knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or any of its subsidiaries which could have a
Material Adverse Effect.
(z) Each of the Company and its subsidiaries maintains adequate insurance
covering its properties, operations, personnel and business. Such insurance
insures against such losses and risks as are adequate in accordance with
customary industry practice to protect the Company, its subsidiaries and their
respective businesses. All such insurance is outstanding and duly in force on
the date hereof.
(aa) None of the Company, its subsidiaries or any of their respective
officers, directors, partners, employees, agents or affiliates or any other
person acting on behalf of the Company or any of its subsidiaries, as the case
may be, has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to consumers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, official or employee of any governmental agency (domestic or
foreign), instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is or may be in a position to help or hinder the business of the
Company or its subsidiaries (or assist the Company or any of its subsidiaries in
connection with any actual or proposed transaction ) which (i) might subject the
Company, any of its subsidiaries or any other individual or entity to any damage
or penalty in any civil,
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criminal or governmental litigation or proceeding (domestic or foreign) or (ii)
could reasonably be expected to have a Material Adverse Effect.
(ab) Coopers & Lybrand, L.L.P., who have expressed their opinion with
respect to the financial statements and schedules filed with the Commission as
part of the Registration Statement and included in the Prospectus and in the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.
(ac) The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any amendment
or supplement thereto), present fairly the individual and consolidated financial
positions, results of operations and changes in financial position of the
Company, its subsidiaries and ART on the basis stated in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) at the
respective dates or for the respective periods to which they apply. Such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied through the
periods involved, except as disclosed therein. The other financial and
statistical information and data set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) is, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company, its subsidiaries
and ART, as applicable. The pro forma financial information and other financial
information included in the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission's rules and
regulations with respect to pro forma financial information, have been properly
compiled on the pro forma basis described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein. No other financial statements or schedules
are required to be included in the Registration Statement. The selected
financial data set forth in the Prospectus under the captions "Capitalization"
and "Selected Historical and Pro Forma Financial Data" fairly present the
information set forth therein on the basis stated in the Registration Statement.
(ad) Each of the Company and its subsidiaries maintains a system or
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect thereto.
(ae) Subsequent to the respective dates as of which information is given in
the Prospectus and except as set forth in the Prospectus, (i) neither the
Company nor any of its subsidiaries has incurred any liabilities or obligations,
direct or contingent, which are material, individually or in the aggregate, to
the Company and its subsidiaries, taken as a whole, nor entered into any
transaction not in the ordinary course of business, (ii) neither the Company nor
any of its subsidiaries has sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance, (iii) there has not been,
individually or in the aggregate, any change or development which could
reasonably be expected to result in a Material Adverse Effect and (iv) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or any of its subsidiaries on any class of capital stock.
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(af) The Company does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay such debts as they mature. The present
fair saleable value of the assets of the Company on a consolidated basis exceeds
the amount that will be required to be paid on or in respect of the existing
debts and other liabilities (including contingent liabilities) of the Company on
a consolidated basis as they become absolute and matured. The assets of the
Company on a consolidated basis do not constitute unreasonably small capital to
carry out the business of the Company and its subsidiaries, taken as a whole, as
conducted or as proposed to be conducted.
(ag) Neither the Company nor any of its subsidiaries is (i) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or (ii) a "holding company"
or a "subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(ah) The Company has not distributed, and will not distribute prior to the
First Closing Date, any offering material in connection with the offering and
sale of the Common Shares other than the Prospectus, the Registration Statement
and the other materials permitted by the Act.
(ai) Neither the Company nor any of its subsidiaries has (i) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Common
Shares or (ii) since the date of the Prospectus (A) sold, bid for, purchased or
paid any person any compensation for soliciting purchases of, the Common Shares
or (B) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(aj) Except pursuant to this Agreement, there are no contracts, agreements
or understandings between the Company or any of its subsidiaries and any other
person that would give rise to a valid claim against the Company, any of its
subsidiaries or any of the Underwriters for a brokerage commission, finder's fee
or like payment in connection with the issuance, purchase and sale of the Common
Shares.
(ak) Each of the Company and its subsidiaries has complied with all
provisions of Section 517.075, Florida Statutes.
(al) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed therein
pursuant to Item 404 of Regulation S-K of the Commission.
Each certificate signed by any officer of the Company and delivered to the
Underwriters or counsel to the Underwriters pursuant to this Agreement shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
The Company acknowledges that each of the Underwriters and, for purposes of
the opinions to be delivered to the Underwriters pursuant to Section 7 hereof,
counsel to the Company and counsel to the Underwriters, will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. The
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of the Offering and (ii) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration
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Statement and the Prospectus and is correct in all material respects. The
Representatives represent and warrant that they have been authorized by each of
the other Underwriters, as the Representatives, to enter into this Agreement on
its behalf and to act for it in the manner herein provided.
SECTION 4. PURCHASE, SALE AND DELIVERY OF COMMON SHARES. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell to the Underwriters __________ of the Firm Common Shares. The Underwriters
agree, severally and not jointly, to purchase from the Company the number of
Firm Common Shares described below. The purchase price per share to be paid by
the several Underwriters to the Company shall be $___ per share.
The obligation of each Underwriter to the Company shall be to purchase from
the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to __________ the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by the
Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), after 4:30 P.M., Washington, D.C. time, the
fourth) full business day following the first date that any of the Common Shares
are released by you for sale to the public, as you shall designate by at least
48 hours prior notice to the Company (or at such other time and date, not later
than one week after such third full business day as may be agreed upon by the
Company and the Representatives) (the "FIRST CLOSING DATE"); PROVIDED, HOWEVER,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third or fourth, as the case may be, full business day following the first
date that any of the Common Shares are released by you for sale to the public or
the date that is 48 hours after the date that the Prospectus has been so
recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or on
behalf of the Company to you, for the respective accounts of the Underwriters
against payment by you, for the accounts of the several Underwriters, of the
purchase price therefor by fed funds to the order of the Company. The
certificates for the Firm Common Shares shall be registered in such names and
denominations as you shall have requested at least two full business days prior
to the First Closing Date, and shall be made available for checking and
packaging on the business day preceding the First Closing Date at a location in
New York, New York, as may be designated by you. Time shall be of the essence,
and delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of __________ Optional Common
Shares at the purchase price per share to be paid for the Firm Common Shares,
for use solely in covering any over-allotments made by you for the account of
the Underwriters in the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
within 30 days after the first date that any of the Common Shares are released
by you for sale to the public, upon notice by you to the Company setting forth
the aggregate number of Optional Common
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Shares as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "SECOND CLOSING DATE," shall be determined by you, but if at
any time other than the First Closing Date shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
The number of Optional Common Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Optional Common Shares to be sold by
the Company pursuant to such notice of exercise by a fraction, the numerator of
which is the number of Firm Common Shares to be purchased by such Underwriter as
set forth opposite its name in Schedule A and the denominator of which is
__________ (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Certificates for the Optional
Common Shares will be made available for checking and packaging on the business
day preceding the Second Closing Date at a location in New York, New York, as
may be designated by you. The manner of payment for and delivery of the
Optional Common Shares shall be the same as for the Firm Common Shares purchased
from the Company as specified in the two preceding paragraphs. At any time
before lapse of the option, you may cancel such option by giving written notice
of such cancellation to the Company. If the option is cancelled or expires
unexercised in whole or in part, the Company will deregister under the Act the
number of Option Shares as to which the option has not been exercised.
You have advised the Company that each Underwriter has authorized you to
accept delivery of its Common Shares, to make payment and to accept receipt
therefor. You, individually and not as the Representatives of the Underwriters,
may (but shall not be obligated to) make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by you by
the First Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose to
make a public offering of their respective portions of the Common Shares as soon
after the effective date of the Registration Statement as in the judgment of the
Representatives is advisable and at the public offering price set forth on the
cover page of, and on the terms set forth in, the final prospectus, if one is
used, or on the first page of the Term Sheet, if one is used.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or after
it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such
stop order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will not
file any amendment or supplement to the Registration Statement (either
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before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a reasonable time
prior to such filing or to which you reasonably object or which is not in
compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or the
Prospectus which in your judgment may be necessary or advisable to enable the
several Underwriters to continue the distribution of the Common Shares and will
use its best efforts to cause the same to become effective as promptly as
possible. The Company will fully and completely comply with the provisions of
Rule 430A of the Rules and Regulations with respect to information omitted from
the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would include an untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
(d) As soon as practicable, but not later than 45 days after the end of
the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the Registration
Statement which will satisfy the provisions of the last paragraph of Section
11(a) of the Act.
(e) During such period as a prospectus is required by law to be delivered
in connection with sales by an Underwriter or dealer, the Company, at its
expense, but only for the nine-month period referred to in Section 10(a)(3) of
the Act, will furnish to you or mail to your order copies of the Registration
Statement, the Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents, in each case, as soon as available and in
such quantities as you may request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering,
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sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and, in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will furnish to
the Representatives and, upon request of the Representatives, to each of the
other Underwriters (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants, (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the National Association of
Securities Dealers, Inc. (the "NASD") or any securities exchange and (iii) as
soon as available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock.
(h) During the period of 180 days after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of Montgomery Securities (which consent may be withheld at the
sole discretion of Montgomery Securities), the Company will not, other than
pursuant to outstanding stock options and warrants disclosed in the Prospectus,
issue, offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable with its Common Stock or other equity security. The Company will
enter into an agreement (the "LOCK-UP AGREEMENT") to the foregoing effect.
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the Company's
Common Stock in California), will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.
(k) The Company will use its best efforts to designate the Common Stock
for quotation as a national market system security on the Nasdaq National
Market.
You, on behalf of the Underwriters, may, in your sole discretion, waive in
writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
SECTION 6. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including, without limiting the
generality of the foregoing, (i) all expenses incident to the issuance and
delivery of the Common Shares (including all printing and engraving costs), (ii)
all fees and expenses of the registrar and transfer agent of the Common Stock,
(iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Common Shares to the Underwriters, (iv) all fees and
expenses of the Company's counsel and the Company's independent accountants, (v)
all costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement, each
Preliminary Prospectus and the Prospectus (including all exhibits and financial
statements) and all amendments and
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supplements provided for herein, the Operative Agreements, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the Blue Sky laws, (vii) the filing fee of the NASD, and (viii)
all other fees, costs and expenses referred to in Item 13 of the Registration
Statement. Except as provided in this Section 6 and Sections 8 and 10 hereof,
the Underwriters shall pay all of their own expenses, including the fees and
disbursements of their counsel (excluding those relating to qualification,
registration or exemption under the Blue Sky laws and the Blue Sky memorandum
referred to above).
SECTION 7. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company herein set forth as of the date hereof and
as of the First Closing Date or the Second Closing Date, as the case may be, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 P.M. (or, in the case of a registration statement filed pursuant to Rule
462(b) of the Rules and Regulations relating to the Common Shares, not later
than 10:00 P.M.), Washington, D.C. Time, on the date of this Agreement, or at
such later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company or you, shall be contemplated by the Commission; and any request of
the Commission for inclusion of additional information in the Registration
Statement, or otherwise, shall have been complied with to your satisfaction.
(b) You shall be satisfied that, since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock, other than pursuant to the
exercise of outstanding options and warrants disclosed in the Prospectus, of the
Company or any of its subsidiaries or any material change in the indebtedness
(other than in the ordinary course of business) of the Company or any of its
subsidiaries, (ii) except as set forth or contemplated by the Registration
Statement or the Prospectus, no material verbal or written agreement or other
transaction shall have been entered into by the Company or any of its
subsidiaries, which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company or any of
its subsidiaries, (iii) no loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries shall have been sustained
which could reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect, (iv) no legal or governmental action,
suit or proceeding affecting the Company or any of its subsidiaries which is
material to the Company and its subsidiaries or which affects or may affect the
transactions contemplated by this Agreement shall have been instituted or
threatened, and (v) there shall not have been any Material Adverse Effect which
makes it impractical or inadvisable in the judgment of the Representatives to
proceed with the public offering or purchase the Common Shares as contemplated
hereby.
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(c) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance satisfactory to you
except as otherwise expressly provided below:
(i) An opinion of Hahn & Hessen LLP, counsel to the Company,
addressed to the Underwriters and dated the First Closing Date or the
Second Closing Date, as the case may be, with respect to the matters set
forth in Exhibit C.
(ii) An opinion of Pierson, Burnett & Hanley, special regulatory
counsel to the Company, addressed to the Underwriters and dated the First
Closing Date or the Second Closing Date, as the case may be, with respect
to the matters set forth in Exhibit D.
(iii) Such opinion or opinions of Latham & Watkins, counsel to the
Underwriters dated the First Closing Date or the Second Closing Date, as
the case may be, with respect to the incorporation of the Company, the
sufficiency of all corporate proceedings and other legal matters relating
to this Agreement, the validity of the Common Shares, the Registration
Statement and the Prospectus and other related matters as you may
reasonably require, and the Company shall have furnished to such counsel
such documents and shall have exhibited to them such papers and records as
they may reasonably request for the purpose of enabling them to pass upon
such matters. In connection with such opinions, such counsel may rely on
representations or certificates of officers of the Company and governmental
officials.
(iv) A certificate of the Company executed by the Chairman of the
Board or President and the chief financial or accounting officer of the
Company, dated the First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of the
date of this Agreement and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and, to the best of the
knowledge of the respective signers, no proceedings for that purpose
have been instituted or are pending or contemplated under the Act;
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus; in
his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements thereto
contain all statements required to be stated therein regarding the
Company; and neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto includes any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction or
event has occurred which should have been set
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forth in an amendment to the Registration Statement or in a supplement
to or amendment of any prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as
disclosed in or contemplated by the Prospectus, there has not been any
Material Adverse Effect or a development involving a Material Adverse
Effect; and no legal or governmental action, suit or proceeding is
pending or threatened against the Company which is material to the
Company, whether or not arising from transactions in the ordinary
course of business, or which may adversely affect the transactions
contemplated by this Agreement; since such dates and except as so
disclosed, none of the Company or any of its subsidiaries has entered
into any verbal or written agreement or other transaction which is not
in the ordinary course of business or which could result in a material
reduction in the future earnings of the Company or incurred any
material liability or obligation, direct, contingent or indirect, made
any change in its capital stock, made any material change in its
short-term debt or funded debt or repurchased or otherwise acquired
any of the Company's capital stock; and neither the Company nor any of
its subsidiaries has declared or paid any dividend, or made any other
distribution, upon its outstanding capital stock payable to
stockholders of record on a date prior to the First Closing Date or
Second Closing Date; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as
disclosed in or contemplated by the Prospectus, the Company has not
sustained a material loss or damage by strike, fire, flood, windstorm,
accident or other calamity (whether or not insured).
(v) On the date before this Agreement is executed and also on the
First Closing Date and the Second Closing Date a letter addressed to you,
as Representatives of the Underwriters, from Coopers & Lybrand L.L.P.,
independent accountants, the first one to be dated the day before the date
of this Agreement, the second one to be dated the First Closing Date and
the third one (in the event of a Second Closing) to be dated the Second
Closing Date, in form and substance satisfactory to you.
(vi) On or before the First Closing Date, letters from each holder of
the Company's Common Stock and ART's common stock, each holder of options,
warrants or other rights convertible or exchangeable into Common Stock or
ART common stock, and each director and officer of the Company, in form and
substance satisfactory to you, confirming that for a period of 180 days
after the date of the final prospectus for the Offering, such person will
not directly or indirectly sell or offer to sell or otherwise dispose of
any shares of Common Stock or any right to acquire such shares without the
prior written consent of Montgomery Securities, which consent may be
withheld at the sole discretion of Montgomery Securities.
(vii) On or before the First Closing Date, executed copies of the
Lock-Up Agreement.
(d) Prior to the date hereof, the Merger shall have been completed.
(e) On or before the First Closing Date, the Unit Offering shall have been
consummated.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Latham & Watkins, counsel to the Underwriters. The
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Company shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you request. Any certificate
signed by any officer of the Company and delivered to the Representatives or to
counsel to the Underwriters shall be deemed to be a representation and warranty
by the Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification by you as Representatives to the
Company without liability on the part of any Underwriter or the Company except
for the expenses to be paid or reimbursed by the Company pursuant to Sections 6
and 8 hereof and except to the extent provided in Section 10 hereof.
SECTION 8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. Notwithstanding
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Section 7 hereof, or if the sale to the Underwriters of the Common
Shares at the First Closing is not consummated because of any refusal, inability
or failure on the part of the Company to perform any agreement herein or to
comply with any provision hereof, the Company agrees to reimburse you and the
other Underwriters upon demand for all out-of-pocket expenses that shall have
been reasonably incurred by you and them in connection with the proposed
purchase and the sale of the Common Shares, including but not limited to fees
and disbursements of counsel, printing expenses, travel expenses, postage,
telegraph charges and telephone charges relating directly to the Offering
contemplated by the Prospectus. Any such termination shall be without liability
of any party to any other party except that the provisions of this Section 8 and
Sections 6 and 10 shall at all times be effective and shall apply.
SECTION 9. EFFECTIVENESS OF REGISTRATION STATEMENT. You and the
Company will use your and its best efforts to cause the Registration Statement
to become effective, to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
SECTION 10. INDEMNIFICATION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the Act against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act, the Exchange Act, or other
Federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements
in any of them not misleading, or arise out of or are based in whole or in part
on any inaccuracy in the representations and warranties of the Company contained
herein or any failure of the Company to perform its obligations hereunder or
under law; and will reimburse each Underwriter and each such controlling person
for any legal and other expenses as such expenses are reasonably incurred by
such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; PROVIDED, HOWEVER, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to
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Section 3 hereof. In addition to its other obligations under this Section
10(a), the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company herein or
failure to perform its obligations hereunder, all as described in this Section
10(a), it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse each Underwriter for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "PRIME RATE"). Any
such interim reimbursement payments which are not made to an Underwriter within
30 days of a request for reimbursement, shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages, liabilities or expenses to
which the Company, or any such director, officer or controlling person may
become subject, under the Act, the Exchange Act, or other Federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with the information furnished to the Company pursuant to Section 3
hereof; and will reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. In addition to its other obligations
under this Section 10(b), each Underwriter severally agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(b) which relates to
information furnished to the Company pursuant to Section 3 hereof, it will
reimburse the Company (and, to the extent applicable, each officer, director,
controlling person on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director, controlling person) shall promptly
return it to the Underwriters together
19
<PAGE>
with interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments which are not made to the Company within 30
days of a request for reimbursement, shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a),
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 10 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Underwriters from the offering of the Common Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions or inaccuracies
in the representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion, in
the case of the Company as the total price paid to the Company for the Common
Shares sold by it to the Underwriters (net of underwriting commissions but
before deducting expenses) bears to the total price to the public set forth on
the cover
20
<PAGE>
of the Prospectus, and in the case of the Underwriters as the underwriting
commissions received by them bears to the total price to the public set forth
on the cover of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact or the inaccurate or the alleged
inaccurate representation and/or warranty relates to information supplied by
the Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed
to include, subject to the limitations set forth in subparagraph (c) of this
Section 10, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in subparagraph (c) of this Section 10 with respect to
notice of commencement of any action shall apply if a claim for contribution
is to be made under this subparagraph (d); PROVIDED, HOWEVER, that no
additional notice shall be required with respect to any action for which
notice has been given under subparagraph (c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined solely
by pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 10, no
Underwriter shall be required to contribute any amount in excess of the
amount of the total underwriting commissions received by such Underwriter in
connection with the Common Shares underwritten by it and distributed to the
public. No person guilty of fraudulent misrepresentation (within the meaning
of Section 10(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 10 are
several in proportion to their respective underwriting commitments and not
joint.
(e) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Sections 10(a) and 10(b) hereof,
including theamounts of any requested reimbursement payments and the method of
determining such amounts, shall be settled by arbitration conducted under the
provisions of the Constitution and Rules of the Board of Governors of the New
York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of
the NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to said demand or notice is authorized to do so. Such an
arbitration would be limited to the operation of the interim reimbursement
provisions contained in Sections 10(a) and 10(b) hereof and would not resolve
the ultimate propriety or enforceability of the obligation to reimburse expenses
which is created by the provisions of such Sections 10(a) and 10(b) hereof.
SECTION 11. DEFAULT OF UNDERWRITERS. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares in the
manner as described herein, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all the Common
Shares agreed to be purchased by such Underwriter hereunder upon tender to the
Representatives of all such shares in accordance with the terms hereof. If any
Underwriter or Underwriters default in their obligations to purchase Common
Shares hereunder on either the First or Second Closing Date and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed to purchase on such Closing Date does not exceed 10% of the total
number of Common Shares which the Underwriters are obligated to purchase on such
Closing Date, the non-defaulting Underwriters shall be obligated
21
<PAGE>
severally, in proportion to their respective commitments hereunder, to purchase
the Common Shares which such defaulting Underwriters agreed but failed to
purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company except for the expenses to be paid by the Company pursuant to Section 6
hereof and except to the extent provided in Section 10 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 12. EFFECTIVE DATE. This Agreement shall become effective
immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 12, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering,
or (ii) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 13. TERMINATION. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you or by
you by notice to the Company at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall be
without liability on the part of the Company to any Underwriter (except for the
expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8
hereof and except to the extent provided in Section 10 hereof) or of any
Underwriter to the Company (except to the extent provided in Section 10 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange, on the American
Stock Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such Exchange or in the
over the counter market by the NASD, or a general banking moratorium shall have
been established by Federal, New York or California authorities, (ii) if an
outbreak of major hostilities or other national or international calamity or any
substantial change in political,
22
<PAGE>
financial or economic conditions shall have occurred or shall have accelerated
or escalated to such an extent, as, in the judgment of the Representatives, to
affect adversely the marketability of the Common Shares, (iii) if any adverse
event shall have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the Registration
Statement or Prospectus or which is not reflected in the Registration Statement
or Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv) if
there shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall without liability on the part of any Underwriter to
the Company or on the part of the Company to any Underwriter (except for
expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8
hereof and except to the extent provided in Section 10 hereof.
(c) This Agreement shall also terminate at 5:00 P.M., California time, on
the tenth full business day after the Registration Statement shall have become
effective if the initial public offering price of the Common Shares shall not
then as yet have been determined as provided in Section 4 hereof. Any
termination pursuant to this subsection (c) shall without liability on the part
of any Underwriter to the Company or on the part of the Company to any
Underwriter (except for expenses to be paid or reimbursed by the Company
pursuant to Sections 6 and 8 hereof and except to the extent provided in
Section 10 hereof.
SECTION 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.
SECTION 15. NOTICES. All communications hereunder shall be in writing
and, if sent to the Representatives shall be mailed, delivered or telegraphed
and confirmed to you at 600 Montgomery Street, San Francisco, California 94111,
attention: David Baylor, Esq., with a copy to Latham & Watkins, 1001
Pennsylvania Ave. N.W., Suite 1300, Washington, D.C. 20004-2505, attention:
John D. Watson, Jr., Esq.; and if sent to the Company shall be mailed, delivered
or telegraphed and confirmed to the Company at 500 108th Avenue, N.E., Suite
2600, Bellevue, WA 98004 with a copy to Hahn & Hessen LLP at 350 Fifth Avenue,
New York, NY 10118, attention: James Kardon, Esq. The Company or you may change
the address for receipt of communications hereunder by giving notice to the
others.
SECTION 16. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 11 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
23
<PAGE>
SECTION 17. REPRESENTATION OF UNDERWRITERS. You will act as
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representatives, will be binding upon
all the Underwriters.
SECTION 18. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 19. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 20. GENERAL. This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
24
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon it will
become a binding agreement between the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
ADVANCED RADIO TELECOM CORP.
By: __________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
MONTGOMERY SECURITIES
By:
Name:
Title:
DEUTSCHE MORGAN GRENFELL/C.J. LAWRENCE INC.
By:
Name:
Title:
25
<PAGE>
SCHEDULE A
Number of Firm
Common Shares to be
Name of Underwriter Purchased
- ------------------- --------
Montgomery Securities. . . . . . . . . . . . . . . . . . . . . .
Deutsche Morgan Grenfell/C. J. Lawrence Inc. . . . . . . . . . .
--------------
Total
--------------
--------------
26
<PAGE>
SCHEDULE B
__________, 1996
PRICE DETERMINATION AGREEMENT
Referring to Section 4 of the Underwriting Agreement dated __________,
1996, between the Company and the Underwriters as therein defined with respect
to the purchase and sale of the Common Shares, we hereby confirm our agreement
that the initial public offering price of the Common Shares shall be $_____ per
share; that the underwriting discount shall be $_____ per share; and that the
purchase price to be paid by the several Underwriters for the Common Shares to
be purchased from the Company shall be $_____ per share.
This Agreement may be executed in various counterparts which together shall
constitute one and the same Agreement.
MONTGOMERY SECURITIES
DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
Acting on behalf of the several Underwriters
named in Schedule A to the Underwriting Agreement
MONTGOMERY SECURITIES
By:
Name:
Title:
DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
By:
Name:
Title:
ADVANCED RADIO TELECOM CORP.
By:
Name:
Title:
27
<PAGE>
EXHIBIT A
PRE-TRANSACTIONS CAPITALIZATION OF THE COMPANY AND ART
A-1
<PAGE>
EXHIBIT B
POST-TRANSACTIONS CAPITALIZATION OF THE COMPANY AND ART
B-1
<PAGE>
EXHIBIT C
FORM OF OPINION OF HAHN & HESSEN LLP
(a) Each of the Company and its subsidiaries has been duly formed as a
corporation and is validly existing in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus. Each of the Company and its subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have, either individually or in the aggregate, a material
adverse effect on the assets, properties, business, management, earnings, net
worth, results of operations, condition (financial or otherwise) or business
prospects of the Company and its subsidiaries, taken as a whole. No proceeding
has been instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(b) ART Licenses is the only subsidiary of the Company. The Company owns
all of the outstanding capital stock of ART Licenses; all such capital stock has
been duly authorized and validly issued and is fully paid and nonassessable,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature; and all of such capital stock was not issued in
violation of any preemptive or similar rights. There are no outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any such shares of
capital stock or other equity interest of ART Licenses.
(c) The Company and its subsidiaries do not have any ownership interest in
any joint venture, other than the Company's 50% ownership interest in ART West.
(d) Prior to consummation of the Transactions, the Company and ART have
authorized and outstanding capital stock as set forth in Exhibit A hereto. All
such issued and outstanding shares of capital stock of the Company and ART have
been duly authorized and validly issued, are fully paid and non-assessable and
were not issued in violation of any preemptive or similar rights. The shares of
capital stock of ART owned by the Company prior to completion of the Merger are
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature. Upon consummation of the Transactions, the Company will
have authorized and outstanding capital stock as set forth in Exhibit B hereto
and an authorized and outstanding capitalization as set forth in the Prospectus
under the caption "Capitalization." All such issued and outstanding shares of
capital stock of the Company will have been duly authorized and validly issued,
will be fully paid and non-assessable and will not have been issued in violation
of any preemptive or similar rights. Except as disclosed in the Prospectus,
there are, and there will be, no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments convertible
into or exchangeable for, any capital stock of the Company or ART The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(e) The certificates evidencing the Common Shares to be delivered
hereunder are in due and proper form under Delaware law, and when duly
countersigned by the Company's transfer agent and registrar, and delivered to
you or upon your order against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement, the Common Shares represented
thereby will be
C-1
<PAGE>
duly authorized and validly issued, fully paid and nonassessable, will not have
been issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities and will conform in all respects to the
description thereof contained in the Prospectus. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and sale
of the Common Shares by the Company pursuant to this Agreement. No stockholder
of the Company has any right which has not been waived to require the Company to
register the sale of any shares owned by such stockholder under the Act in the
Offering contemplated by this Agreement. No further approval or authority of
the stockholders or the Board of Directors will be required for the issuance and
sale of the Common Shares to be sold by the Company as contemplated herein.
(f) (i) The Registration Statement has become effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission; any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b) of the
Rules and Regulations has been made in the manner and within the time period
required by such Rule 424(b); (ii) the Registration Statement, the Prospectus
and each amendment or supplement thereto (except for the financial statements
and schedules included therein as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the Act and
the Rules and Regulations; (iii) there are no franchises, leases, contracts,
agreements or documents of a character required to be disclosed in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not disclosed or filed, as required; (iv) there
are no legal or governmental actions, suits or proceedings pending or threatened
against the Company which are required to be described in the Prospectus which
are not described as required; and (v) such counsel has no reason to believe
that any of such documents (except for any financial statements and schedules
included in such documents as to which such counsel need express no opinion),
when read together and with the other information in the Registration Statement
or Prospectus as of the date of such Registration Statement or Prospectus
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made not misleading.
(g) The Company has all requisite corporate power and authority to enter
into the Operative Documents and to perform the transactions contemplated hereby
and thereby. Each of the Operative Documents has been duly authorized, executed
and delivered by the Company and constitutes a legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. No approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required for the execution and
delivery of this Agreement by the Company or the consummation of the
transactions contemplated by this Agreement, except such as have been obtained
and are in full force and effect under the Act and such as may be required under
applicable Blue Sky laws in connection with the purchase and distribution of the
Common Shares by the Underwriters and the clearance of such offering with the
NASD.
(h) None of the execution, delivery and performance of the Operative
Documents by the Company, the compliance by the Company with all of the
provisions hereof and thereof, the issuance and sale of the Common Shares, the
consummation by the Company and its subsidiaries of the Transactions and the
transactions contemplated hereby and thereby (i) require any consent, approval,
authorization or other order of or filing, registration, qualification, license
or permit of or with, any court, regulatory body, administrative agency or other
governmental body (including, without limitation, the FCC), other than those
that have been obtained and are in full force and effect, or (ii) violate,
conflict with, or constitute a breach of any of the terms or provisions of, or a
default under (or an event that with notice
C-2
<PAGE>
or the lapse of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any properties of
the Company and its subsidiaries pursuant to (A) the charter or bylaws of the
Company or any of its subsidiaries, (B) any bond, debenture, note, mortgage,
deed of trust or other agreement, indenture or other instrument to which or by
which any of them is a party or by which any of them or any of their respective
property is or may be bound, (C) any local, state or Federal law, statute,
ordinance, rule, regulation or requirement (including, without limitation, the
Telecommunications Act, the rules and regulations of the FCC and the
environmental laws, statutes, ordinances, rules or regulations) applicable to
the Company, any of its subsidiaries or any of their respective assets or
properties or (D) any judgment, order or decree of any court or governmental
agency or authority having jurisdiction over the Company, any of its
subsidiaries or any of their assets or properties, that, in the case of clauses
(B), (C) and (D), would reasonably be expected, either individually or in the
aggregate, to result in a Material Adverse Effect.
(i) Neither the Company nor any of its subsidiaries is or, after giving
effect to the Transactions, will be (i) in violation of its charter or bylaws,
(ii) in default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument material to the
conduct of the business of the Company and its subsidiaries, taken as a whole,
to which any of them is a party, or by which any of them or any of their
respective properties is bound or (iii) in violation of any local, state or
Federal law, statute, ordinance, rule, regulation, requirement, judgment or
court decree (including, without limitation, the Telecommunications Act and the
rules and regulations of the FCC and environmental laws, statutes, ordinances,
rules, regulations, judgments or court decrees) applicable to any of them or any
of their respective assets or properties (whether owned or leased), other than,
in the case of clauses (ii) and (iii), any default or violation that could not
reasonably be expected to have a Material Adverse Effect. There exists no
condition that, with notice, the passage of time or otherwise, would constitute
a default under any such document or instrument that could be expected to have a
Material Adverse Effect.
(j) There is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental agency, body or official, domestic or foreign, now
pending or threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of any of
them is subject, (ii) no local, state or Federal law, statute, ordinance, rule,
regulation, requirement, judgment or court decree (including, without
limitation, the Telecommunications Act and the rules and regulations of the FCC)
or order has been enacted, adopted or issued by any governmental agency or, to
the best of such counsel's knowledge, that has been proposed by any governmental
body or (iii) no injunction, restraining order or order of any nature by a
Federal or state court or foreign court of competent jurisdiction to which the
Company, any of its subsidiaries or their business, assets, or property are, or
could reasonably be expected to be subject.
(k) The statements under the captions "Capitalization," "Description of
Capital Stock," "Description of Certain Indebtedness," "Shares Eligible for
Future Sale" and "Underwriting" in the Prospectus and Items 14 and 15 of Part II
of the Registration Statement, insofar as such statements constitute a summary
of legal matters, documents or proceedings referred to therein, fairly and
accurately present the information called for with respect to such legal
matters, documents and proceedings.
(l) Neither the Company nor any of its subsidiaries is (i) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or (ii) a "holding company"
or a "subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
C-3
<PAGE>
In rendering such opinion, such counsel may rely as to matters of local
law, on opinions of local counsel, and as to matters of fact, on certificates of
officers of the Company and of governmental officials, in which case their
opinion is to state that they are so doing and that the Underwriters are
justified in relying on such opinions or certificates and copies of said
opinions or certificates are to be attached to the opinion. Such counsel shall
also include a statement to the effect that nothing has come to such counsel's
attention that would lead such counsel to believe that either at the effective
date of the Registration Statement or at the applicable Closing Date the
Registration Statement or the Prospectus, or any such amendment or supplement,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
C-4
<PAGE>
EXHIBIT D
FORM OF OPINION OF PIERSON & BURNETT LLP
(a) Each of the Company and its subsidiaries has such Permits as are
necessary to own, lease and operate their respective properties and to conduct
their respective business in the manner described in the Prospectus. Each of
the Company and its subsidiaries has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred which allows,
or after notice or lapse of time would allow, revocation or termination thereof
or result in any other material impairment of the rights of the holder of any
such Permit, except for any such impairments which would not, individually or in
the aggregate, have a Material Adverse Effect. Except as described in the
Prospectus, such Permits contain no restrictions that are materially burdensome
to the Company and its subsidiaries, taken as a whole.
(b) Except as described in the Prospectus, (i) the Company and its
subsidiaries own, possess or have the right to employ or have applied for all
such Permits, Licenses and Intellectual Property as are necessary to own, lease
and operate their respective properties and to conduct their respective business
in the manner described in the Prospectus; (ii) each of the Company and its
subsidiaries has fulfilled and performed all of its material obligations with
respect to such Licenses and other Intellectual Property and no event has
occurred which allows, or after notice or lapse of time would allow, revocation
or termination thereof or result in any other material impairment of the rights
of the holder of any such Intellectual Property; (iii) such Intellectual
Property contain no restrictions that are materially burdensome to the Company
and its subsidiaries, taken as a whole; and (iv) the use of the Intellectual
Property in connection with the business and operations of the Company and its
subsidiaries does not infringe on the rights of any person, except where such
infringement would not have a Material Adverse Effect.
(c) The Company and its subsidiaries have timely filed all renewal
applications with respect to all Licenses possessed by any of them. No protests
or competing applications have been filed with respect to such renewal
applications, and nothing has come to the Company's or any of its subsidiaries'
attention that would lead them to conclude that such renewal applications will
not be granted by the appropriate regulatory agency or body in the ordinary
course. The Company and its subsidiaries are authorized under the
Telecommunications Act, and the rules and regulations promulgated thereunder, to
continue to provide the services which are the subject of such renewal
applications during the pendency thereof.
(d) The development, implementation and operation of the 38 GHz wireless
broadband telecommunications services network as described, and in the markets
described, in the Prospectus will not (i) result in any violation of the
provisions of the charter or bylaws of the Company or any of its subsidiaries,
(ii) result in any violation of any applicable law, administrative regulation or
administrative or court decree (including, without limitation, the
Telecommunication Act, and the rules and regulations of the FCC and
environmental laws), or (iii) conflict with or constitute a breach or violation
of, or constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of its subsidiaries
is a party or by which any of them may be bound, or to which any of their
property is subject, except, in the case of clauses (ii) and (iii) above, any
such violations, conflicts or breaches that would not, individually or in the
aggregate, have a Material Adverse Effect.
D-1
<PAGE>
(e) The business and operations conducted and proposed to be conducted by
the Company and its subsidiaries as described in the Prospectus are not
regulated by any public service or public utility commissions in the States in
which the Company and its subsidiaries conduct or propose to conduct such
business and operations as described in the Prospectus; and, subject to the
provisions of Section 332(c)(3) of the Telecommunications Act, neither the
Company nor any of its subsidiaries is or will be required to obtain any License
from any public service or public utility commission in any such State.
(f) None of the execution, delivery and performance of the Operative
Documents by the Company, the compliance by the Company with all of the
provisions hereof and thereof, the issuance and sale of the Common Shares, the
consummation by the Company and its subsidiaries of the Transactions and the
transactions contemplated hereby and thereby (i) require any consent, approval,
authorization or other order of or filing, registration, qualification, license
or permit of or with, the FCC, other than those that have been obtained and are
in full force and effect, or (ii) violate, conflict with, or constitute a breach
of any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on any
properties of the Company or any of its subsidiaries pursuant to (A) the
Telecommunications Act or the rules and regulations of the FCC applicable to the
Company, any of its subsidiaries or any of their respective assets or properties
or (B) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company, any of its subsidiaries or any
of their assets or properties, that, in the case of clauses (A) and (B), would
reasonably be expected, either individually or in the aggregate, to result in a
Material Adverse Effect.
(g) Neither the Company nor any of its subsidiaries is or, after giving
effect to the Transactions, will be in violation of the Telecommunications Act
and the rules and regulations of the FCC applicable to the Company, any of its
subsidiaries or any of their respective assets or properties (whether owned or
leased), other than any violation that could not reasonably be expected to have
a Material Adverse Effect.
(h) Other than rulemaking procedures of general applicability to the
wireless broadband telecommunications industry, there is (i) no action, suit or
proceeding before or by the FCC, now pending or threatened or contemplated to
which the Company or any of its subsidiaries is or may be a party or to which
the business or property of the Company or any of its subsidiaries is subject,
or (ii) no amendment or change to the Telecommunications Act and the rules and
regulations of the FCC has been enacted, adopted or issued by the FCC or, to the
best of such counsel's knowledge, that has been proposed by the FCC.
(i) Each of the Company and its subsidiaries has filed all reports
required to be filed with the FCC.
D-2
<PAGE>
RESTATED AND AMENDED CERTIFICATE OF INCORPORATION
OF
ADVANCED RADIO TECHNOLOGY, LTD.
Advanced Radio Technology, Ltd., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation ("Corporation") is Advanced Radio
Technology, Ltd. and its Certificate of Incorporation was filed with the
Secretary of State on March 28, 1995.
2. This Restated and Amended Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation by increasing the number of authorized shares of the Corporation.
3. The text of the Certificate of Incorporation is hereby amended to read
as herein set forth in full:
FIRST: The name of the Corporation is Advanced Radio Technology, Ltd.
SECOND: The address, including street, number, city and county, of the
registered office of the corporation in the State of Delaware is 9 East
Loockerman Street, City of Dover 19901, County of Kent; and the name of the
registered agent of the corporation in the State of Delaware at such address
is National Corporate Research, Ltd.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is twenty million (20,000,000),
which are divided into ten million (10,000,000) shares of Common Stock of a
par value of $0.001 per share and ten million (10,000,000) shares of
Preferred Stock of a par value of $0.001 per share.
(a) Seven million (7,000,000) of the shares of Common Stock shall be
designated as Class A Common Stock and three million (3,000,000) of the shares
of Common Stock shall be designated as Class B Common Stock.
(b) The shares of Preferred Stock may be issued from time
1
<PAGE>
to time in one or more series as set forth in the resolution or resolutions
providing for the issuance of such shares adopted by the Board of Directors.
Shares in each such series shall be identical to the Common Stock in all
respects, except that with respect to the liquidation preference for the
Preferred Stock, which shall be equal to the aggregate consideration paid for
such series, and not each share of the Preferred Stock in such series, as
shall be stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority hereby
vested in it. The number of shares of any such series so set forth in such
resolution or resolutions may be increased (but not above the total number of
shares of the series) or decreased (but not below the number of shares
thereof then outstanding) by further resolution or resolutions adopted by the
Board of Directors pursuant to authority hereby vested in it.
(c) Shares of the Corporation's Common Stock and Preferred Stock may
entitle the holder thereof to preemptive rights upon such terms and with such
limitations as may be set forth in an agreement between the Corporation and
shareholders of the Corporation owning all of the issued and outstanding
shares of Common Stock and Preferred Stock of the Corporation.
FIFTH: The corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of creditors
and/or of the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three fourths in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this corporation, as the
case may be, and also on this corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further
2
<PAGE>
definition, limitation, and the regulation of the powers of the corporation
and of its directors and of its stockholders or any class thereof, as the case
may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the corporation would have
if there were no vacancies. No election of directors need be by written
ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the corporation may
be exercised by the Board of Directors of the corporation; provided, however,
that any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of SECTION 141
of the General Corporation Law of the State of Delaware shall be set forth in
an initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote
of the corporation, unless provisions for such classification shall be set
forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the
corporation shall Be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of the certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of Section 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided,
that no share of any such class which is otherwise denied voting power shall
entitle the holder thereof to vote upon the increase or decrease in the number
of authorized shares of said class.
EIGHTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented.
NINTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law
3
<PAGE>
of the State of Delaware, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under
said section from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such officer, and shall continue as to a person who has ceased
to be a director, office, employee, or agent and shall inure to the benefit
of the heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and the provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of
this Article TENTH.
4. This Restated and Amended Certificate of Incorporation was duly adopted
by written consent of the stockholders in accordance with Sections 228, 242 and
245 of the General Corporate Law of the State of Delaware and written notice
of the adoption of this Restated and Amended Certificate of Incorporation has
been given pursuant to Section 228 of the General Corporation Law of the
State of Delaware to each and every stockholder entitled to such notice.
IN WITNESS WHEREOF, the Corporation has caused this Restated and Amended
Certificate of Incorporation to be signed and attested to by its duly
authorized officers on this day of April 1995.
-----------------------
By: Matt Gove, Director,
Vice President
ATTEST:
- ----------------------------
By: Dan Gulick, Director, Secretary
4
<PAGE>
EXHIBIT 2.1(a)
AMENDED
CERTIFICATE OF DESIGNATION AND PREFERENCES
OF
SERIES A PREFERRED STOCK
$0.001 PAR VALUE
OF
ADVANCED RADIO TECHNOLOGY, LTD
------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------
ADVANCED RADIO TECHNOLOGY, LTD., a corporation organized and existing
under and by virtue of the provisions of the General Corporation Law of the
State of Delaware (the "Corporation") DOES HEREBY CERTIFY:
1. That no shares of Series A Preferred Stock, $.001 par value per
share, (the "Series A Preferred Stock" or the "Series"), have been issued; and
2. That pursuant to authority conferred upon the Board of Directors of
the Corporation (the "Board") by the Certificate of Incorporation of the
Corporation, the Board, by a Unanimous Written Consent dated May 1, 1995,
adopted the following resolution authorizing the creation and issuance of a
series of 36,056 shares of Series A Preferred Stock, which resolution is as
follows:
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors by the Certificate of Incorporation, as amended, of
the Corporation, the Board hereby creates a series of 36,056 shares of Series
A Preferred Stock, $0.001 par value per share, of the Corporation and
authorizes the issuance thereof, and hereby fixes the designation thereof,
and the voting powers, preferences and relative, participating, optional and
other special limitations or restrictions thereon (in addition to the
designations, preferences and relative, participating and other special
rights, and the qualifications, limitations or restrictions thereof, set
forth in the Certificate of Incorporation, as amended, of the Corporation,
which are applicable to the preferred stock of all series) as follows:
1 DESIGNATION. The shares of the Series shall be designated "Series A
Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock").
The number of shares constituting the Series shall be 36,056, $0.001 par
value per share, and this series shall represent 3.2 percent of the issued
<PAGE>
and outstanding capital stock of all classes, both Common and Preferred, of
the Corporation. Upon issuance of the 36,056 shares of Series A
Preferred Stock (and shares of Series B Preferred Stock representing four
percent of the issued and outstanding shares of capital stock of the
Corporation), the issued and outstanding shares of Class A Common Stock and
the Class B Common Stock shall constitute 36 percent and 56.8 percent,
respectively, of the issued and outstanding shares of capital stock of the
Corporation. The designation, rights and preferences of the shares of Series
A Preferred Stock shall be identical to the Common Stock of the Corporation
except with respect to the liquidation preference set forth in Section 3.
The number of authorized shares of the Series mat be reduced to the
extent any shares are not issued and outstanding by further resolution duly
adopted by the Board of Directors of the Corporation and by filing amendments
to the Certificate of Designations pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such reduction has been
so authorized, but the number of authorized shares of this Series shall not
be increased.
1 DIVIDENDS. The Holders of the Series A Preferred Stock ("Holders")
shall be entitled to receive dividends on each share of Preferred Stock on
the same basis and in the same amounts as the holders of the Corporation's
Common Stock are entitled to receive on each share of Common Stock when and
if such dividends are declared by the Board and paid by the Corporation.
2 LIQUIDATION.
1 PREFERENCE OF SERIES A PREFERRED STOCK.
(i) Upon any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, and after provision for the payment of
creditors, the Holders shall be entitled to be paid an aggregate of $375,000,
the amount equal to the aggregate consideration paid to the Corporation for
all of the then issued and outstanding shares of the Series A Preferred
Stock, before any distribution or payment is made upon any shares of Common
Stock and any other series of stock junior to the Series A Preferred Stock
but subject to the prior preferences of any series or class of stock of the
Corporation senior to the Series A Preferred Stock. The Series A Preferred
Stock shall be deemed to be on a parity with any other series of Preferred
Stock with respect to the preference of the shares of such series of
Preferred Stock upon liquidation of the Corporation.
(ii) If upon any liquidation, dissolution or
2
<PAGE>
winding up of the Corporation, the net assets of the Corporation to be
distributed among the Holders shall be insufficient to permit payment in full
to the Holders of such Series A Preferred Stock and any other series of
Preferred Stock deemed to be on parity with the Preferred Stock, then all
remaining net assets of the Corporation after the provision for the payment
of the Corporation's debts and distribution to any senior stockholders shall
be distributed ratably in proportion to the full amounts to which they would
otherwise be entitled to receive.
(iii) The sale, lease or exchange of all or substantially all of the
Corporation's assets or the merger or consolidation of the Corporation which
results in the holders of Common Stock of the Corporation receiving in
exchange for such Common Stock cash, notes, debentures or other evidences of
indebtedness or obligations to pay cash, or preferred stock of the surviving
entity which ranks on a parity with or senior to the Series A Preferred Stock
as to dividends or upon liquidation, dissolution or winding up shall be
deemed to be a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this paragraph iii of Section A. In the
case of mergers or consolidations of the Corporation where holders of Common
Stock of the Corporation receive, in exchange for such Common Stock, common
stock or preferred stock in the surviving entity (whether or not the
surviving entity is the Corporation) of such merger or consolidation, or
common stock or preferred stock of another entity, which is junior as to
dividends and upon liquidation, dissolution or winding up to the Series A
Preferred Stock, the merger agreement or consolidation agreement shall
expressly provide that the Series A Preferred Stock shall become preferred
stock of such surviving entity or other entity, as the case may be, with the
equivalent rights to the rights set forth herein. In the event of a merger or
consolidation of the Corporation where the consideration received by the
holders of common stock consists of two or more types of the consideration
set forth above, the holders of the Series A Preferred Stock shall be
entitled to receive either cash or securities based upon the foregoing in the
same proportion as the holders of Common Stock of the Corporation are
receiving cash or debt securities, or equity securities in the surviving
entity or other entity.
3. VOTING RIGHTS. The Holders shall vote with the holders of the Common
Stock, shall have one vote per share of Series A Preferred Stock and shall be
entitled to such notice of any meeting as the holders of the Corporation's
Common Stock.
4. COVENANTS. In addition to any other rights provided
3
<PAGE>
by law, so long as any Series A Preferred Stock is outstanding, the
Corporation, without first obtaining the affirmative vote or written consent
of the holders of not less than a majority of such outstanding shares of
Series A Preferred Stock, will not:
1 amend or repeal any provision of, or add any provision to, the
Corporation's Certificate of Incorporation or By-Laws if such action would
alter adversely the liquidation preferences, of, or the restrictions provided
for the benefit of, any Series A Preferred Stock;
2 authorize or issue shares of any class or series of stock not
expressly authorized herein having any preference or priority as to dividends
or assets or other rights superior to any such preference or priority of the
Series A Preferred Stock, or authorize or issue shares of stock of any class
or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock of
the Corporation having any preference or priority as to liquidation superior
to any such preference or priority of the Series A Preferred Stock; or
3 reclassify any class or series of any stock junior in liquidation
rights to the Series A Preferred Stock ("Junior Stock") into stock senior to
the Series A Preferred Stock with respect to any liquidation preference
superior to any such preference or priority of the Series A Preferred Stock.
The authorization and issuance of shares of Preferred Stock with a
liquidation preference on a parity to the liquidation preference of the
Series A Preferred Stock shall not require the approval of the holders of the
outstanding shares of Series A Preferred Stock.
5 ADJUSTMENT IN NUMBER OF SHARES. If the Corporation shall (i)
subdivide or reclassify the outstanding shares of Common Stock into a greater
number of shares, or (ii) combine or reclassify the outstanding Common Stock
into a smaller number of shares, the number of shares of Series A Preferred
Stock held by each holder on the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted. Successive
adjustments shall be made whenever any event specified above shall occur.
6 EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or
4
<PAGE>
other special rights, other than a preference regarding liquidation as
specifically set forth in this resolution and in the Corporation's
Certificate of Incorporation.
7 HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
8 SEVERABILITY OF PROVISIONS. If any right, preference or limitation of
the Series A Preferred Stock set forth in this Certificate (as such
Certificate may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy,
all other rights, preferences and limitations set forth in this Certificate
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set
forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
9 STATUS OF REACQUIRED SHARES. Shares of Series A Preferred Stock which
have been issued and reacquired in any manner shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status
of authorized and unissued shares of Preferred Stock issuable in series
undesignated as to series and may be redesignated and reissued.
11. AMENDMENT OF CERTIFICATE OF DESIGNATIONS. This Certificate of
Designation may be amended by action of the Board of Directors of the
Corporation without the vote of the Holders or any other stockholders of the
Corporation to implement the provisions of the purchase agreement dated April
21, 1995 between Landover Holdings Corporation and Advanced Radio Technologies
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed in its name and on its behalf by its President and attested to this
th day of May, 1995.
ADVANCED RADIO TECHNOLOGY, LTD.
By: ____________________________
Matt Gove, Vice President
5
<PAGE>
ATTESTED
____________________________________
Dan Gulick, Secretary
6
<PAGE>
Exhibit 2-1(b)
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCED RADIO TECHNOLOGIES CORPORATION
Advanced Radio Technologies Corporation, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation (the "Corporation") is Advanced Radio
Technologies Corporation and its original Certificate of Incorporation was filed
with the Secretary of State on August 23, 1993.
SECOND: The Certificate of Incorporation currently authorizes the
issuance of 3,000 shares of all classes, which are divided into (i) 2,000 shares
of common stock, $.01 par value, of which 340 shares are outstanding and (ii)
1,000 shares of Preferred Stock, of which one (1) share is designated as Series
A Redeemable Preferred Stock, $0.01 par value.
THIRD: The Corporation hereby amends its Amended and Restated Certificate
of Incorporation as follows:
Paragraph 4A of the Amended and Restated Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"4A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is one hundred ten million
(110,000,000), which are divided into one hundred million (100,000,000)
shares of Common Stock of a par value of $0.001 per share ("Common Stock")
and ten million (10,000,000) shares of Preferred Stock of a par value of
$0.001 per share ("Preferred Stock"). Upon the effectiveness of this
Certificate of Amendment to Amended and Restated Certificate of
Incorporation, each share of Common Stock issued and outstanding prior to
the filing date of this Certificate of Amendment of Amended and Restated
Certificate of Incorporation shall be converted into 29,450.16 fully paid
and nonassessable shares of Common Stock, par value $0.001 per share,
without further action by any holder of Common Stock. To reflect said
conversion, each certificate representing shares of Common Stock heretofore
issued and outstanding shall represent, upon surrender of the certificate
or certificates representing the shares being converted hereunder to the
Corporation at its principal office, a like number of shares of Common
Stock issued and outstanding after such conversion; and the holder of
record of each such certificate shall receive a new certificate
representing a number of shares of Common Stock of the kind authorized by
this Certificate of Amendment of Amended and Restated Certificate of
Incorporation, equal to the number of shares represented by said
certificate for heretofore issued and outstanding shares, so that upon the
filing
<PAGE>
of this Certificate of Amendment of Amended and Restated Certificate of
Incorporation each holder of Common Stock will have or be entitled to
certificates representing in the aggregate 29,450.16 shares of Common Stock
for each share of Common Stock held prior to the filing of this Certificate
of Amendment of Amended and Restated Certificate of Incorporation."
FOURTH: The amendment effected herein was authorized by the consent in
writing, setting forth the action so taken, of the holders of a majority of the
outstanding shares entitled to vote thereon pursuant to Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this amendment to the
Amended and Restated Certificate of Incorporation to be signed and attested to
by its duly authorized officers on this 21 day of June, 1996.
By:
-------------------------------
Name: W. Theodore Pierson, Jr.
Title: Executive Vice President
and General Counsel
By:
---------------------------------
James Kardon
Assistant Secretary
<PAGE>
Exhibit 2-1(c)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCED RADIO TECHNOLOGIES CORPORATION
Advanced Radio Technologies Corporation, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation (the "Corporation") is Advanced Radio
Technologies Corporation and its original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on August 23, 1993.
2. This Amended and Restated Certificate of Incorporation of the
Corporation restates and integrates and further amends the Certificate of
Incorporation of the Corporation, as the same heretofore has been amended,
supplemented or restated (the "Certificate of Incorporation").
3. The text of the Certificate of Incorporation is hereby further
amended and restated to read in full as herein set forth:
"FIRST: The name of the Corporation is Advanced Radio Telecom Corp.
SECOND: The address of its registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, Delaware, 19805, County of New Castle.
The name of the registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which Corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH:
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is one hundred ten million
(110,000,000), which are divided into one hundred million (100,000,000) shares
of Common Stock of a par value of $0.001 per share ("Common Stock") and ten
million (10,000,000) shares of Preferred Stock of a par value of $0.001 per
share ("Preferred Stock").
(b) The Board of Directors of the Corporation is expressly authorized
at any time, and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the Board
of Directors.
FIFTH: The Corporation is to have perpetual existence.
<PAGE>
SIXTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
SEVENTH: For the management of the business and for the conduct of
the affairs of the Corporation, and in further definition, limitation, and the
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. NUMBER OF DIRECTORS. The management of the business and the
conduct of the affairs of the Corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board
of Directors shall be fixed by, or in the manner provided in, the Bylaws.
The phrase "whole Board" and the phrase "total number of directors" shall
be deemed to have the same meaning, to wit, the total number of directors
which the Corporation would have if there were no vacancies. No election
of directors need be by written ballot.
2. TERMS OF DIRECTORS. Except as otherwise provided in or fixed by
or pursuant to the provisions of Article FOURTH hereof relating to the
rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation or to elect
directors under specified circumstances, the directors shall be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, as shall be provided in the
manner specified in the By-Laws of the Corporation. One class shall be
originally elected for a term expiring at the annual meeting of
stockholders to be held in 1997, another class shall be originally elected
for a term expiring at the annual meeting of stockholders to be held in
1998, and another class shall be originally elected for a term expiring at
the annual meeting of stockholders to be held in 1999, with each member of
each class to hold office until a successor is elected and qualified. At
each annual meeting of stockholders of the Corporation and except as
otherwise provided in or fixed by or pursuant to the provisions of Article
FOURTH hereof relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as
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<PAGE>
to dividends or upon liquidation to elect directors under specified
circumstances, the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term of three years.
3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as otherwise
required by law and except as otherwise provided in or fixed by or pursuant
to the provisions of Article FOURTH hereof relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect directors under
specified circumstances: (i) newly created directorships resulting from
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Board of Directors; (ii) any director elected in accordance with the
preceding clause (i) shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been
elected and qualified; and (iii) no decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
4. REMOVAL. Except as otherwise provided in or fixed by or pursuant
to the provisions of Article FOURTH hereof relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect directors under
specified circumstances, any director may be removed from office only for
cause by the affirmative vote of the holders of at least a majority of the
combined voting power of the then outstanding shares of the Corporation's
stock entitled to vote generally, voting together as a single class.
Whenever in this Article SEVENTH hereof, the phrase, "the then outstanding
shares of the Corporation's stock entitled to vote generally" is used, such
phrase shall mean each then outstanding share of any class or series of the
Corporation's stock that is entitled to vote generally in the election of
the Corporation's directors.
5. AMENDMENT OR REPEAL OF THIS ARTICLE. Notwithstanding any other
provisions of this Article SEVENTH or any other Article hereof or of the
By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified from time to time by law, this Article SEVENTH,
any other Article hereof, or the By-Laws of the Corporation), the
provisions of this Article SEVENTH may not be altered, amended or repealed
in any respect, nor may any provision inconsistent therewith be adopted,
unless such alteration, amendment, repeal or adoption is approved by the
affirmative vote of at least 75% of the combined voting power of the then
outstanding shares of the Corporation's capital stock entitled to vote
generally, voting together as a single class.
6. AMENDMENT OF BYLAWS. After the original or other Bylaws of the
Corporation have been adopted, amended, or repealed, as the case may be, in
accordance with the provisions of Section 109 of the General Corporation
Law of the State of Delaware, and, after the Corporation has received any
payment for any of its stock, the power to
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<PAGE>
adopt, amend, or repeal the Bylaws of the Corporation may be exercised by
the Board of Directors of the Corporation, unless otherwise provided in the
Bylaws.
7. VOTING POWER. Whenever the Corporation shall be authorized to
issue only one class of stock, each outstanding share shall entitle the
holder thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the Corporation shall be authorized to issue more
than one class of stock, no outstanding share of any class of stock which
is denied voting power under the provisions of the Certificate of
Incorporation shall entitle the holder thereof to the right to vote at any
meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of Section 242 of the General Corporation Law of the State
of Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized
shares of said class.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented. No amendment or
repeal of this Article EIGHTH shall apply to or have any effect on the liability
or alleged liability of any director of this Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify, and upon
request advance expenses to, any and all persons who is or was a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was or has agreed to
be a director or officer of this Corporation or while a director or officer is
or was serving at the request of this Corporation as a director, officer,
partner, trustee, employee or agent of any corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section (including without
limitation attorneys fees and expenses); PROVIDED, HOWEVER, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person other than solely to enforce rights
under this ARTICLE NINTH. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person. Any
person seeking indemnification under this Article NINTH shall be deemed to have
met the standard of conduct required for such indemnification unless the
contrary shall be established by a court of competent jurisdiction. Any repeal
or modification of the foregoing provisions of this Article NINTH shall not
adversely affect any
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<PAGE>
right or protection of a director or officer of the Corporation with respect to
any acts or omissions of such director or officer occurring prior to such repeal
or modification.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and the provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article TENTH.
ELEVENTH: The Corporation hereby elects to be governed by Section 203
of the Delaware General Corporation Law.
TWELFTH: If at any time the Corporation shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of 1934,
for so long as such class is so registered, any action by the stockholders of
such class must be taken at an annual or special meeting of stockholders and may
not be taken by written consent.
THIRTEENTH: The Board of Directors of the Corporation, when
evaluating any offer of another party (a) to make a tender or exchange offer for
any equity security of the Corporation or (b) to effect a business combination,
shall, in connection with the exercise of its judgment in determining what is in
the best interests of the Corporation as a whole, be authorized to give due
consideration to any such factors as the Board of Directors determines to be
relevant, including, without limitation:
a. the interests of the Corporation's stockholders;
b. whether the proposed transaction might violate federal or
state laws;
c. not only the consideration being offered in the proposed
transaction, in relation to the then current market price
for the outstanding capital stock of this Corporation, but
also to the market price for the capital stock of the
Corporation over a period of years, the estimated price that
might be achieved in a negotiated sale of the Corporation as
a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other
corporations in similar transactions, current political,
economic and other factors bearing on securities prices and
the Corporation's financial condition and future prospects;
and
d. the social, legal and economic effects upon employees,
suppliers, customers and others having similar relationships
with the Corporation, and the communities in which the
Corporation conducts its business.
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<PAGE>
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
FOURTEENTH: Notwithstanding any other provisions of this Certificate
of Incorporation or the Bylaws (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
Bylaws of this Corporation), the affirmative vote of 75% of the total number of
votes of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal, or to adopt any provision
inconsistent with the purpose or intent of ARTICLES SEVENTH, EIGHTH, NINTH,
TENTH, ELEVENTH, TWELFTH, THIRTEENTH and this ARTICLE FOURTEENTH. Notice of any
such proposed amendment, repeal or adoption, shall be contained in the notice of
the meeting at which it is to be considered. Subject to the provisions set
forth herein, this Corporation reserves the right to amend, alter, repeal or
rescind any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law.
4. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware and written notice of the adoption of
this Amended and Restated Certificate of Incorporation has been given
pursuant to Section 228 of the General Corporation Law of the State of Delaware
to each and every stockholder entitled to such notice.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed and attested to by its duly
authorized officers on this ___ day of __________, 1996.
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By:
-----------------------------
ATTEST:
By:
---------------------------------
Secretary
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<PAGE>
RESTATED AND AMENDED
BYLAWS
OF
Advanced Radio Technologies Corporation
(a Delaware corporation)
Effective ______ __, 1996
-------------------------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
Corporation shall be signed by, or in the name of, the Corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General
Corporation Law, the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the Corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
Corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE>
3. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be
required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash fair value of fractions of
a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the Corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the Corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS.
(a) Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, transfers or registration
of transfers of shares of stock of the Corporation shall be made only on the
stock ledger of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation or with a transfer agent or a registrar, if
any, and, in the case of shares represented by certificates, on surrender of the
certificate or certificates for such shares of stock properly endorsed and the
payment of all taxes due thereon.
(b) No shares of stock of any class or series outstanding at any time
shall be owned of record or beneficially by a person whose ownership thereof
would constitute a violation of Section 310 of the Communications Act of 1934,
as amended, or any similar or successor federal statutes.
(c) The Corporation may, in its sole discretion, redeem any
outstanding shares of stock of any class or series which are owned in violation
of Section 4.1(b) above. Shares redeemed by the Corporation under this
subparagraph (c) may be redeemed for cash, property or rights, including
securities of the Corporation or another corporation, at their fair market value
at the time of the redemption. The Board of Directors of the Corporation shall
have sole discretion to determine whether shares are owned in violation of
Section 4.1(b) hereof, the fair market value of any shares to be redeemed, and
the value of any non-cash consideration to be provided for such shares in any
such redemption.
(d) The Corporation will furnish to any stockholder, upon request and
without charge, copies of the certificate of incorporation, by-laws, and any
applicable resolutions of the Board of Directors of the Corporation adopted for
the purpose of ensuring the control of the Corporation remains with loyal
citizens of the United States as required by the Communications Act of 1934, as
amended.
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<PAGE>
5. RECORD DATE FOR STOCKHOLDERS. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the Corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of
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<PAGE>
incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the certificate of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder, provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors. A special meeting shall be held on
the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the Corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by a majority of
the directors or by any officer instructed by a majority of the directors to
call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the Corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. No business shall be
conducted at an annual meeting except in accordance with this procedure. The
Chairman of an annual meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this section, and if so determined, shall
declare to the meeting that any such business not properly bought before the
meeting shall not be transacted. If a meeting is adjourned to another time, not
more than thirty days hence, and/or to another place, and if an announcement of
the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless
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<PAGE>
the directors, after adjournment, fix a new record date for the adjourned
meeting. Notice need not be given to any stockholder who submits a written
waiver of notice signed by him before or after the time stated therein.
Attendance of a stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, bur if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails
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to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspectors at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots, or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them. Except as
otherwise required by subsection (e) of Section 231 of the General Corporation
Law, the provisions of that Section shall not apply to the Corporation.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one vote.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. Any other action shall be authorized by a majority of the
votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted; provided that if at any time the Corporation shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of 1934,
for so long as such class is so registered, any action by the stockholders of
such class must be taken at an annual or special meeting of stockholders and may
not be taken by written consent. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing. Action taken pursuant
to this paragraph shall be subject to the provisions of Section 228 of the
General Corporation Law.
ARTICLE II
DIRECTORS
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1. FUNCTIONS AND DEFINITION. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors of the
Corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the Corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of seven persons. Thereafter the number
of directors constituting the whole board shall be at least five. Subject to the
foregoing limitation and except for the first Board of Directors, the number of
directors shall be fixed by resolution of the Board of Directors and may be
increased at any time or from time to time by the directors by vote of a
majority of the directors then in office but not to a greater number than nine
without action by the stockholders. The number of directors may be decreased to
any number permitted by the foregoing at any time by the directors by vote of a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation or removal of one or more
directors.
3. ELECTION AND TERM. All members of the Board of Directors shall be
classified, with respect to the time for which they each hold office, into three
classes. One class shall originally be elected for an initial one year term
expiring at the annual meeting of stockholders to be held in 1997, another class
shall be originally elected for an initial two year term expiring at the annual
meeting of stockholders to be held in 1998, and another class shall be
originally elected for an initial three year term expiring at the annual meeting
of stockholders to be held in 1999, with each member of each class to hold
office until a successor is elected and qualified or until his earlier
resignation or removal. Thereafter, at each annual meeting of stockholders, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a three year term until their successors are elected
and qualified or until their earlier resignation or removal.
Except as otherwise provided in or fixed by or pursuant to the
Corporation's Certificate of Incorporation, nominations for the election of
directors may be made by the Board of Directors or by any stockholder of record
entitled to vote in the election of directors generally. However, any such
stockholders may nominate one or more persons for election as director or
directors at a stockholders' meeting only if written notice of intent to make
such nomination or nominations has been given either by personal delivery or by
mail to the Secretary of the Corporation not less than 30 days before the
meeting of stockholders at which such election is held. Each such notice shall
state (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or
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<PAGE>
intended to be nominated, by the Board of Directors; and (d) the consent of each
nominee to serve as a director of the Corporation if so elected, and shall be
accompanied by a petition in support of such nomination signed by at least 50
holders of record of stock entitled to vote in the election of directors holding
in the aggregate not less than 5% of such stock. The chairman of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called: by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, or the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
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Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may resign at any
time by delivering his resignation in writing to the chairman of the board, if
any, the president, or the secretary or to a meeting of the board of directors.
Such resignation shall be effective upon receipt unless specified to be
effective at some other time, and without in either case the necessity of it
being accepted unless the resignation shall so state. Except as otherwise
provided in the certificate of incorporation or these by-laws relating to the
rights of the holders of any class or series of preferred stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, but only for
cause and only by the affirmative vote, at any regular meeting or special
meeting of the stockholders, of not less than 50% of the total number of votes
of the then outstanding shares of capital stock of the corporation entitled to
vote generally in the election of directors, voting together as a single class,
but only if notice of such proposal was contained in the notice of such meeting.
Any vacancy in the board of directors resulting from any such removal shall be
filled only by vote of a majority of the directors then in office, although less
than a quorum, and any director or directors so chosen shall hold office until
the next election of the class for which such directors shall have been chosen
and until their successors shall be elected and qualified or until their earlier
death, resignation or removal. No director resigning and (except where a right
to receive compensation shall be expressly provided in a duly authorized written
agreement with the corporation) no director removed shall have any right to any
compensation as such director for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless, in the case of
a resignation, the directors, or, in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6. VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors shall be filled only by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Stockholders shall have no power to fill any vacancies
or newly created directorships. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have resigned, shall have power to fill such vacancy
or vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have
and may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirement of law or of the
certificate of incorporation or of these by-laws as to the number of directors
required for a quorum or for any vote or other actions.
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7. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the Corporation to be
affixed to all papers which may require it.
8. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
9. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to
the board of directors or the committee, and the board or committee in
good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by
the Board of Directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE III
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OFFICERS
The officers of the Corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, one or more
Executive Vice Presidents, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the Corporation shall have such authority and perform such
duties in the management and operation of the Corporation as shall be prescribed
in the resolutions of the Board of Directors designating and choosing such
officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the Corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VI
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CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders except that the power to amend, alter or repeal Article
II Sections 2 and 3 may be exercised only by the stockholders acting by at least
75% vote of the outstanding voting shares.
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LOCK UP AGREEMENT
Montgomery Securities
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Re: Advanced Radio Technologies Corporation (name to be changed to Advanced
Radio Telecom Corp. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Common Stock Offering") for which you
will act as the representatives (the "Representatives") of the underwriters.
The undersigned recognizes that the Common Stock Offering will be of benefit to
the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you
and the other underwriters are relying on the representations and agreements of
the undersigned contained in this letter in carrying out the Common Stock
Offering and in entering into underwriting arrangements with the Company with
respect to the Common Stock Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of Montgomery Securities
(which consent may be withheld in its sole discretion), directly or indirectly,
sell, offer, contract or grant any option to sell (including without limitation
any short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either or record or beneficially (as defined in
Rule 13d-3 under the Exchange Act) by the undersigned, or publicly announce the
undersigned's intention to do any of the foregoing, for a period commencing on
the date hereof and continuing to a date 180 days after the date of the final
prospectus for the Common Stock Offering. The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent and registrar against the transfer of shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock held by the
undersigned except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
Dated: _______________, 1996
___________________________________________
Printed Name of Holder
By:________________________________________
Signature
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ART MERGER CORPORATION
* * * *
FIRST: The name of the Corporation is ART Merger Corporation.
SECOND: The address of its registered office in the State of Delaware is
1013 Centre Road, City of Wilmington, Delaware, 19805, County of New Castle.
The name of the registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall be authorized to issue shall be One Thousand (1000) shares
Common Stock at $.001 par value per share (the "Common Stock"). Holders of
capital stock shall have no pre-emptive rights with respect to any authorized
but unissued shares of Common Stock.
FIFTH: The name and mailing address of the incorporator is as follows:
Todd A. Matthias
Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
SIXTH: The Board of Directors is expressly authorized to make, alter or
repeal the By-Laws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
EIGHTH: The Corporation is to have perpetual existence.
NINTH: The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the By-
Laws of the Corporation.
TENTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented. No amendment or
repeal of this Article TENTH shall apply to or have any effect on the liability
or alleged liability of any director of this Corporation for or
<PAGE>
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
ELEVENTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify, and upon
request advance expenses to, any and all persons who is or was a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was or has agreed to
be a director or officer of this Corporation or while a director or officer is
or was serving at the request of this Corporation as a director, officer,
partner, trustee, employee or agent of any corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section (including without
limitation attorneys fees and expenses); PROVIDED, HOWEVER, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person other than solely to enforce rights
under this ARTICLE ELEVENTH. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person. Any person seeking indemnification under this Article ELEVENTH shall be
deemed to have met the standard of conduct required for such indemnification
unless the contrary shall be established by a court of competent jurisdiction.
Any repeal or modification of the foregoing provisions of this Article ELEVENTH
shall not adversely affect any right or protection of a director or officer of
the Corporation with respect to any acts or omissions of such director or
officer occurring prior to such repeal or modification.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, for the purposes of forming a corporation pursuant to the General
Corporation Law of Delaware, does make this certificate, hereby declaring and
certifying that it is his act and deed and that the facts herein stated are
true, and accordingly has set his hand this ____ day of June, 1996.
_____________________________
Todd A. Matthias
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ADVANCED RADIO TELECOM CORP.
RESTATED EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Restated Equity Incentive Plan (the "Plan") is to
advance the interests of Advanced Radio Telecom Corp. (the "Company") by
enhancing its ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock ("Stock").
The Plan was adopted by the Company on July 22, 1996 under the name "Stock
Option Plan", and adopted by stockholders on February 2, 1996. The Plan was
amended on April 24, April 26 and May 20, 1996. In order to incorporate the
amendments including broadening of the Plan to include additional equity
incentives, the Plan was restated and amended by the Company on May 30, 1996 and
renamed the "Restated Equity Incentive Plan".
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members. During such times as the Stock is registered under the
Securities Exchange Act of 1934 (the "1934 Act"), all members of the Committee
shall be disinterested persons within the meaning of Rule 16b-3 under the 1934
Act and "outside directors" within the meaning of Section 162(m)(4)(C)(i) of the
Internal Revenue Code of 1986, as amended (the "Code").
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an award is canceled, grant another Award in its place on
such terms and conditions as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with
<PAGE>
respect to such Award if such action would adversely affect the rights of such
holder; (g) prescribe the form or forms of instruments that are required or
deemed appropriate under the Plan, including any written notices and elections
required of Participants (as defined below), and change such forms from time to
time; (h) adopt, amend and rescind rules and regulations for the administration
of the Plan; and (i) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee to make
adjustments under Section 7.3 or Section 8.6.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. No Award may be granted under the Plan ten years
following the date of stockholder approval, but Awards previously granted may
extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
2,500,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options and Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 800,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Internal Revenue
Code.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each person in the employ of the Company or any of its subsidiaries (an
"Employee") and each other person or entity (including without limitation
non-Employee directors of the Company or a subsidiary of the Company) who, in
the opinion of the Committee, is in a position to make a significant
contribution to the success of the Company or its subsidiaries will be eligible
to receive Awards under the Plan (each such Employee,
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person or entity receiving an Award, a "Participant"). A "subsidiary" for
purposes of the Plan will be a corporation in which the Company owns, directly
or indirectly, stock possessing 50 % or more of the total combined voting power
of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) NATURE OF OPTIONS. An Option is an Award giving the recipient the
right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue of 1986, as amended (the "Code") (any Option intended to qualify as an
incentive stock option being hereinafter referred to as an "ISO"), and Options
that are not incentive stock options, may be granted under the Plan. ISOs shall
be awarded only to Employees. Any Option not identified at the time of grant as
being either an ISO or a non-incentive stock option shall be a non-incentive
stock option.
(b) EXERCISE PRICE. The exercise price of an Option will be determined by
the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100%
(110% in the case of an ISO granted to a ten-percent stockholder) of
the fair market value of the Stock subject to the Option, determined
as of the time the Option is granted. A "ten percent stockholder" is
any person who at the time of grant owns, directly or indirectly, or
is deemed to own by reason of the attribution rules of section 424(d)
of the Code, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of its
subsidiaries.
(2) In no case may the exercise price paid for Stock which is
part of an original issue of authorized Stock be less than the par
value per share of the Stock.
(3) The Committee may reduce the exercise price of an Option at
any time after the time of grant, but in the case of an Option
originally awarded as an ISO, only with the consent of the
Participant.
(c) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(d) EXERCISE OF OPTIONS. An Option will become exercisable at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any
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time and from time to time accelerate the time at which all or any part of the
Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option (with the consent of the optionee
of an ISO if permitted after the grant) or by the instrument evidencing the
Option, (i) through the delivery of shares of Stock which have been outstanding
for at least six months (unless the Committee approves a shorter period) and
which have a fair market value equal to the exercise price, (ii) by delivery of
a promissory note of the person exercising the Option to the Company, payable on
such terms as are specified by the Committee, (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iv) by any combination
of the foregoing permissible forms of payment.
(f) DISCRETIONARY PAYMENTS. If (i) the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (at a price per share equal to the fair market value per share)
to the person exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been purchased pursuant to
the exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an
Award entitling the holder on exercise to receive an amount in cash or Stock or
a combination thereof (such form to be determined by the Committee) determined
in whole or in part by reference to appreciation in the fair market value of a
share of Stock on the date of grant as compared to its fair market value on the
date of exercise or any performance standard selected or established by the
Committee.
(b) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted. The Committee may also grant Stock Appreciation Rights
which provide that following a change in control of
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the Company, as determined by the Committee, the holder of such Right will be
entitled to receive, with respect to each share of Stock subject to the Right,
an amount equal to the excess of a specified value (which may include an average
of values) for a share of Stock during a period preceding such change in control
over the fair market value of a share of Stock on the date the Right was
granted.
(c) RULES APPLICABLE TO TANDEM AWARDS. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at
such time or times, and to the extent, that the related Option is
exercisable and will be exercisable in accordance with the procedure
required for exercise of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option,
except that a Stock Appreciation Right granted with respect to less
than the full number of shares covered by an Option will not be
reduced until the number of shares as to which the related Option has
been exercised or has terminated exceeds the number of shares not
covered by the Stock Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon
the exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with
the related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may
be exercised only when the market price of the Stock subject to the
Option exceeds the exercise price of such option.
(d) EXERCISE OF INDEPENDENT STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right not granted in tandem with an Option will become exercisable
at such time or times, and on such conditions, as the Committee may specify.
The Committee may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock in such amounts and upon such terms and conditions as the
Committee shall determine subject to the restrictions described below.
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(b) RESTRICTED STOCK AGREEMENT. The Committee may require, as a condition
to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(c) TRANSFERABILITY AND OTHER RESTRICTIONS. Except as otherwise provided
in this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
Except as the Committee may otherwise determine, if a Participant ceases to be
an Employee or otherwise suffers a Status Change (as defined at Section 7.2(a)
below) for any reason during the Restricted Period, the Company may purchase the
shares of Restricted Stock subject to such restrictions and conditions for the
amount of cash paid by the Participant for such shares, or such shares of
Restricted Stock shall be forfeited to the Company if no cash was paid by the
Participant.
The Company shall also have the right to retain the certificates
representing shares of Restricted Stock in the Company's possession during the
Restricted Period.
(d) REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Section
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become freely transferable by the Participant upon completion of the Restricted
Period including the passage of any applicable period of time and satisfaction
of any conditions to vesting. However, unless otherwise provided by the
Committee, the Committee, in its sole discretion, shall have the right to
immediately waive all or part of the restrictions and conditions with regard to
all or part of the shares held by any Participant at any time.
(e) VOTING RIGHTS, DIVIDENDS AND OTHER DISTRIBUTIONS. During the
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock including any dividends
and distributions paid in shares shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
(f) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
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(g) UNRESTRICTED STOCK. The Committee may, in its sole discretion, sell
to any Participant shares of Stock free of restrictions under the Plan for a
price which is not less than the par value of the Stock.
(h) NOTICE OF SECTION 83(B) ELECTION. Any Participant making an election
under Section 83(b) of the Code with respect to Restricted Stock must provide a
copy thereof to the Company within 10 days of filing such election with the
Internal Revenue Service.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance established by the Committee. The Committee will
determine the performance goals, the period or periods during which performance
is to be measured and all other terms and conditions applicable to the Award.
(b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITION. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. LOANS AND SUPPLEMENTAL GRANTS.
(a) LOANS. The Company may make a loan to a Participant ("Loan"), either
on the date of or after the grant of any Award to the Participant. A Loan may
be made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
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(b) SUPPLEMENTAL GRANTS. In connection with any Award, the Committee may
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any Federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3(d) above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the time
of death, unless otherwise determined the Committee.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
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(a) Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the Committee may determine), and shall thereupon
terminate, unless the Award provides by its terms for immediate termination in
the event of a Status Change (unless otherwise determined by the Committee) or
unless the Status Change results from a discharge for cause which in the opinion
of the Committee casts such discredit on the Participant as to justify immediate
termination of the Award (unless otherwise determined by the Committee). In no
event, however, shall an Option or Stock Appreciation Right remain exercisable
beyond the latest date on which it could have been exercised without regard to
this Section 7. For purposes of this paragraph, in the case of a Participant
who is an Employee, a Status Change shall not be deemed to have resulted by
reason of (i) a sick leave or other bona fide leave of absence approved for
purposes of the Plan by the Committee, so long as the Employee's right to
reemployment is guaranteed either by statute or by contract, or (ii) a transfer
of employment between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary corporation of
such corporation) issuing or assuming an option in a transaction to which
section 424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
(c) above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award cancelled as
of the date of such Status Change unless otherwise determined by the Committee.
7.3. CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of grant, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), the following rules shall
apply:
(a) Subject to paragraph (b) below, all outstanding Awards requiring
exercise will cease to be exercisable, and all other Awards to the extent not
fully vested (including Awards subject to conditions not yet satisfied or
determined) will be forfeited, as of the effective time of the covered
transaction, provided that the Committee may in its sole discretion, on or prior
to the effective date of the covered transaction, (1) make any outstanding
Option and Stock Appreciation Right exercisable in full, (2) remove the
restrictions from any Restricted Stock, (3) cause the Company to make any
payment and
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provide any benefit under any Deferred Stock Award, Performance Award, or
Supplemental Grant, (4) remove any performance or other conditions or
restrictions on any Award, and (5) forgive all or any portion of the principal
of or interest on a Loan; or
(b) With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in the
covered transaction or an affiliate of such a corporation, the Committee may at
or prior to the effective time of the covered transaction, in its sole
discretion and in lieu of the action described in paragraph (a) above, arrange
to have such surviving or acquiring corporation or affiliate assume any Award
held by such participant outstanding hereunder or grant a replacement award
which, in the judgment of the Committee, is substantially equivalent to any
Award being replaced.
7.4. TERMINATION FOLLOWING CHANGE OF CONTROL.
Notwithstanding any other provision of this Plan, if the Participant's
employment terminates because of a "Qualified Termination" as defined in Exhibit
A, all unvested Options and Stock Appreciation Rights then held by such person
shall immediately become fully vested, all Options and Stock Appreciation Rights
then held by such person shall remain exercisable until the earlier of (i) the
fourth anniversary of such Qualified Termination and (ii) the latest date on
which such Option or Right could have been exercised without regard to Section
7.1 and Section 7.2, and all other Awards shall immediately become fully vested
and all restrictions, conditions and performance goals with respect to such
Awards shall be deemed satisfied and shall no longer be applicable.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
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8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable Federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The Nasdaq National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such Award is made
to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5. NONTRANSFERABILITY OF AWARDS.
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Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution, and
during a Participant's lifetime an Award requiring exercise may be exercised
only by the Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's behalf).
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends,
after the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
(c) In the case of ISOs or for purposes of the limits set forth in the
second paragraph of Section 4, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code (in the case of the limits in Section 4).
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
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Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code,
for the award of performance-based compensation under Section 162(m) of the Code
or under Rule 16b-3 promulgated under Section 16 of the 1934 Act.
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EXHIBIT A
For purposes of Section 7.4 of the Plan, the following terms have the
following meanings:
"Base Salary" means Participant's annual base salary, exclusive of any
bonus or other benefits the Participant may receive.
"Cause" means the following, determined by the Committee in its reasonable
judgment:
(i) willful failure to perform, or gross negligence in the
performance of, Participant's duties and responsibilities to
the Company and its subsidiaries; or
(ii) fraud, embezzlement or other material dishonesty with respect
to the Company or any of its subsidiaries; or
(iii) conviction of, or plea of nolo contendere to, a felony or other
crime involving moral turpitude; or
(iv) other conduct by Participant that is materially harmful to the
business, interests or reputation of the Company or any of its
subsidiaries.
"Change of Control" means such time as:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing more than 50 % of the total voting
power of the Voting Stock of the Company on a fully diluted
basis,
(ii) individuals who on the May 30, 1996 constitute the Board
(together with any new directors whose election by the Board or
whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the
Board then in office who either were members of the Board on
May 30, 1996 or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the members of the Board then in office and
(iii) the merger or consolidation of the Company with or into another
corporation; or the merger or consolidation of another
corporation with and into the Company, with the effect that,
immediately after such transaction, the Voting Stock of the
entity surviving such
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<PAGE>
merger or consolidation received in such transaction by the
stockholders of the Company immediately prior to such
transaction represents the ultimate beneficial ownership of
less than 50% of Voting Stock of the entity surviving such
merger or consolidation.
"Disability" has the meaning given it in any long-term disability plan of
the Company in which Participant participates. Participant's employment shall be
deemed terminated for Disability when Participant is entitled to receive
long-term disability compensation pursuant to such long-term disability plan.
If the Company does not maintain such a plan, Participant shall be deemed
terminated for Disability if the Company terminates his employment due to
illness, injury, accident or condition of either a physical or psychological
nature as a result of which Participant is unable to perform substantially the
duties and responsibilities of his position for 180 days during a period of 365
consecutive calendar days.
"Good Reason" means the voluntary termination by Participant of his or her
employment after the occurrence, without Participant's express written consent,
of any of the following events:
(i) assignment to Participant of duties materially inconsistent
with his or her positions, duties, responsibilities, or
reporting requirements with the Company (or a subsidiary)
immediately prior to a Change of Control or a material adverse
alteration in Participant's status or the nature of his or her
responsibilities with the Company immediately prior to a Change
in Control; or
(ii) reduction in Participant's rate of Base Salary to less than 100
percent of the rate of Base Salary paid to the Participant
immediately preceding the Change of Control, or reduction in
Participant's total cash compensation opportunities, including
salary, incentives and other benefits, for any fiscal year to
less than 100 percent of the total cash compensation
opportunities made available to the Participant immediately
preceding the Change of Control (for this purpose, such
opportunities shall be deemed reduced if the objective
standards by which Participant's incentive compensation is
measured become materially more stringent or if the amount of
such compensation is materially reduced on a discretionary
basis from the amount that would be payable solely by reference
to the objective standards).
"Qualified Termination" means the termination of Participant's employment
during a Standstill Period (1) by the Company other than for Cause, death or
Disability, and (2) in the case of a Participant who at the time of the Change
of Control holds an office specifically designated by the Committee in its sole
discretion to have such right, by Participant for Good Reason.
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<PAGE>
"Standstill Period" is the period commencing on the date of a Change of
Control and continuing until the close of business on the last business day of
the 24th calendar month following such Change of Control.
"Voting Stock" means the capital stock of any class or kind ordinarily
having the power to vote for the election of directors, managers or other voting
members of the governing body of such Person.
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<PAGE>
ADVANCED RADIO TELECOM CORP.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
(Initial Option Grant)
THIS AGREEMENT, made and entered into as of the ____ day of
___________, 199_ between ADVANCED RADIO TELECOM CORP., a Delaware corporation
(herein called the "Corporation"), and _____________ (herein called the
"Optionee").
W I T N E S S E T H:
WHEREAS, on the date hereof Optionee was elected a director of the
Corporation and qualifies as an Eligible Person under the Corporation's 1996
Non-Employee Directors Automatic Stock Option Plan (the "Plan"); and
WHEREAS, under the terms and conditions hereinafter stated, the Corporation
hereby grants to the Optionee on the date hereof (the "Grant Date") pursuant to
the Plan options (the "Options") to purchase 7,000 shares of the Corporation's
common stock, $.001 par value per share ("Common Stock") at an exercise price of
$_____ per share, subject to adjustment as provided in the Plan (the "option
price").
NOW, THEREFORE, the Corporation and the Optionee agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Plan.
2. TERM. The term of each Option shall commence on the Grant Date and
shall terminate at 5:00 P.M., P.S.T., on the fifth anniversary of the Grant Date
(the "Expiration Date").
3. EXERCISE. Each Option may be exercised in whole or in part in
accordance with the following schedule: up to 2,334 shares upon and after the
Grant Date, and up to an additional 2,333 shares upon and after the first and
second anniversary of the Grant Date, for an aggregate of 7,000 shares. The
method for exercise described in this Paragraph shall be the sole method of such
exercise. The Optionee may exercise the Options by delivery to the Corporation
of written notice accompanied by payment of the Option Price as provided in the
Plan. The Options shall be considered exercised on the date the notice and
payment are delivered to the President of the Corporation or deposited in the
mail, as the case may be.
4. TRANSFERABILITY OF OPTIONS. The Options shall not be transferable by
the Optionee otherwise than by will or under the laws of descent and
distribution. The Options shall be exercisable during the lifetime of the
Optionee only by the Optionee, the Optionee's guardian or the Optionee's legal
representative.
<PAGE>
5. TERMINATION OF AFFILIATION. If Optionee's service as a Board member
ceases prior to the Expiration Date for any reason while an Option remains
outstanding and unexercised, then the Option term shall immediately terminate
and the Option shall cease to be outstanding in accordance with the Plan. In no
event, however, may any Option be exercised after the Expiration Date of such
Option.
6. REQUIREMENTS OF LAW. The Corporation shall not be required to sell or
issue Common Stock under the Options if the issuance of such Common Stock would
constitute a violation by the Optionee or the Corporation of any provisions of
any state or federal law, rule or regulation. In addition, in connection with
the Securities Act of 1933 (as now in effect or hereafter amended), upon
exercise of the Options, the Corporation shall not be required to issue such
Common Stock unless the Corporation has received evidence satisfactory to it to
the effect that the Optionee will not transfer such shares except pursuant to a
registration statement in effect under such Act, or unless an opinion of counsel
to the Corporation has been received by the Corporation to the effect that such
registration is not required. Any determination in this connection by the
Corporation shall be final, binding and conclusive. In the event the shares
issuable on exercise of the Options are not registered under the Securities Act
of 1933, the Corporation may imprint the following legend or any other legend
which counsel for the Corporation considers necessary or advisable to comply
with the Securities Act of 1933:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be sold or transferred except upon such registration
or upon receipt by the Corporation of an opinion of counsel satisfactory to
the Corporation, in form and substance satisfactory to the Corporation,
that registration is not required for such sale or transfer."
The Corporation may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended); and in the event any shares are so registered
the Corporation may remove any legend on certificates representing such shares.
The Corporation shall not be obligated to take any other affirmative action in
order to cause the exercise of the Options or the issuance of shares pursuant
thereto to comply with any state or federal law, rule or regulation.
7. NO RIGHTS AS STOCKHOLDER. Except as otherwise provided in the Plan, the
Optionee shall have no rights as a stockholder with respect to Common Stock
covered by the Options until the date of issuance to the Optionee of a stock
certificate for such Common Stock.
8. EMPLOYMENT OBLIGATION. The granting of the Options shall not impose
upon the Corporation any obligation to employ or become affiliated with or
continue to employ or
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<PAGE>
be affiliated with the Optionee. The right of the Corporation to terminate the
employment of or its affiliation with the Optionee or any other person shall not
be diminished or affected by reason of the fact that the Options has been
granted to the Optionee.
9. WITHHOLDING AND REPORTING. The Corporation's obligation to deliver
shares of Common Stock or to make any payment upon the exercise of the Options
shall be subject to applicable federal, state and local tax withholding and
reporting requirements.
10. SUBJECT TO PLAN. The Options are subject to all the terms,
conditions, limitations and restrictions contained in the Plan, as amended from
time, which shall be controlling in the event of any conflicting or inconsistent
provisions.
11. INTERPRETATION OF AGREEMENT; GOVERNING LAW. The Options granted
pursuant hereto are intended to be "incentive stock options" within the meaning
of the Internal Revenue Code of 1986, as amended. This Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Washington.
ADVANCED RADIO TELECOM CORP.
By:______________________________
Name:____________________________
Title:___________________________
The optionee hereby acknowledges that he has received and reviewed a copy
of the Plan and accepts and agrees to be bound by all terms and conditions
hereof and thereof.
___________________________________
[OPTIONEE]
Date: ___________________________
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<PAGE>
ADVANCED RADIO TELECOM CORP.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
(Annual Option Grants)
THIS AGREEMENT, made and entered into as of the 1st day of January,
199_ between ADVANCED RADIO TELECOM CORP., a Delaware corporation (herein called
the "Corporation"), and _____________ (herein called the "Optionee").
W I T N E S S E T H:
WHEREAS, Optionee is a director of the Corporation and qualifies as an
Eligible Person under the Corporation's 1996 Non-Employee Directors Automatic
Stock Option Plan (the "Plan"); and
WHEREAS, under the terms and conditions hereinafter stated, the Corporation
hereby grants to the Optionee on the date hereof (the "Grant Date") pursuant to
the Plan options (the "Options") to purchase 6,000 shares of the Corporation's
common stock, $.001 par value per share ("Common Stock") at an exercise price of
$_____ per share, subject to adjustment as provided in the Plan (the "option
price").
NOW, THEREFORE, the Corporation and the Optionee agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Plan.
2. TERM. The term of each Option shall commence on the Grant Date of such
option and shall terminate at 5:00 P.M., P.S.T., on the fifth anniversary of the
Grant Date (the "Expiration Date").
3. EXERCISE. Each Option may be exercised in whole or in part in
accordance with the following schedule: up to 2,000 shares upon and after the
Grant Date, and up to an additional 2,000 shares upon and after the first and
second anniversary of the Grant Date, for an aggregate of 6,000 shares. The
method for exercise described in this Paragraph shall be the sole method of such
exercise. The Optionee may exercise the Options by delivery to the Corporation
of written notice accompanied by payment of the Option Price as provided in the
Plan. The Options shall be considered exercised on the date the notice and
payment are delivered to the President of the Corporation or deposited in the
mail, as the case may be.
4. TRANSFERABILITY OF OPTIONS. The Options shall not be transferable by
the Optionee otherwise than by will or under the laws of descent and
distribution. The Options shall be exercisable during the lifetime of the
Optionee only by the Optionee, the Optionee's guardian or the Optionee's legal
representative.
5. TERMINATION OF AFFILIATION. If Optionee's service as a Board member
ceases prior to the Expiration Date for any reason
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<PAGE>
while an Option remains outstanding and unexercised, then the Option term shall
immediately terminate and the Option shall cease to be outstanding in accordance
with the Plan. In no event, however, may any Option be exercised after the
Expiration Date of such Option.
6. REQUIREMENTS OF LAW. The Corporation shall not be required to sell or
issue Common Stock under the Options if the issuance of such Common Stock would
constitute a violation by the Optionee or the Corporation of any provisions of
any state or federal law, rule or regulation. In addition, in connection with
the Securities Act of 1933 (as now in effect or hereafter amended), upon
exercise of the Options, the Corporation shall not be required to issue such
Common Stock unless the Corporation has received evidence satisfactory to it to
the effect that the Optionee will not transfer such shares except pursuant to a
registration statement in effect under such Act, or unless an opinion of counsel
to the Corporation has been received by the Corporation to the effect that such
registration is not required. Any determination in this connection by the
Corporation shall be final, binding and conclusive. In the event the shares
issuable on exercise of the Options are not registered under the Securities Act
of 1933, the Corporation may imprint the following legend or any other legend
which counsel for the Corporation considers necessary or advisable to comply
with the Securities Act of 1933:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be sold or transferred except upon such registration
or upon receipt by the Corporation of an opinion of counsel satisfactory to
the Corporation, in form and substance satisfactory to the Corporation,
that registration is not required for such sale or transfer."
The Corporation may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended); and in the event any shares are so registered
the Corporation may remove any legend on certificates representing such shares.
The Corporation shall not be obligated to take any other affirmative action in
order to cause the exercise of the Options or the issuance of shares pursuant
thereto to comply with any state or federal law, rule or regulation.
7. NO RIGHTS AS STOCKHOLDER. Except as otherwise provided in the Plan, the
Optionee shall have no rights as a stockholder with respect to Common Stock
covered by the Options until the date of issuance to the Optionee of a stock
certificate for such Common Stock.
8. EMPLOYMENT OBLIGATION. The granting of the Options shall not impose
upon the Corporation any obligation to employ or become affiliated with or
continue to employ or be affiliated with the Optionee. The right of the
Corporation to terminate the
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<PAGE>
employment of or its affiliation with the Optionee or any other person shall not
be diminished or affected by reason of the fact that the Options has been
granted to the Optionee.
9. WITHHOLDING AND REPORTING. The Corporation's obligation to deliver
shares of Common Stock or to make any payment upon the exercise of the Options
shall be subject to applicable federal, state and local tax withholding and
reporting requirements.
10. SUBJECT TO PLAN. The Options are subject to all the terms,
conditions, limitations and restrictions contained in the Plan, as amended from
time, which shall be controlling in the event of any conflicting or inconsistent
provisions.
11. INTERPRETATION OF AGREEMENT; GOVERNING LAW. The Options granted
pursuant hereto are intended to be "incentive stock options" within the meaning
of the Internal Revenue Code of 1986, as amended. This Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Washington.
ADVANCED RADIO TELECOM CORP.
By:______________________________
Name:____________________________
Title:___________________________
The optionee hereby acknowledges that he has received and reviewed a copy
of the Plan accepts and agrees to be bound by all terms and conditions hereof
and thereof.
___________________________________
[OPTIONEE]
Date: ___________________________
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<PAGE>
EXHIBIT 10-8(c)
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement made as of June __, 1996 (the "Agreement")
among Advanced Radio Technologies Corporation, a Delaware corporation, ("ART"),
Extended Communications, Inc., a Washington corporation ("Extended"), and Thomas
A. Marinkovich, Teresa E. Marinkovich, Mark T. Marinkovich and James A.
Marinkovich (collectively, the "Selling Stockholders"" and each a "Selling
Stockholder" and together with Extended, the "Sellers").
WHEREAS, ART and Extended entered into a Joint Venture Agreement dated
April 4, 1995 (the "Joint Venture Agreement") pursuant to which ART and Extended
formed a general partnership (the "Partnership") with each of ART and Extended
owning a fifty percent (50%) interest in the Partnership (each such fifty
percent interest being referred to herein as a "Partnership Interest");
WHEREAS, ART wishes to purchase, and Extended wishes to sell, certain
assets, property and rights of Extended, listed in Section 1.1 hereof, and
defined as the "Assets" therein, in exchange for the consideration described in
Section 1.3 hereof (the "Transaction").
WHEREAS, the Selling Stockholders collectively own 100% of the outstanding
capital stock of Extended;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and representations and warranties herein contained, the parties
hereto agree as follows:
1. SALE OF ASSETS.
1.1. SALE OF ASSETS. Subject to and upon the terms and conditions of this
Agreement, Extended agrees to sell and transfer to ART and ART agrees to acquire
from Extended, free and clear of any pledge, lien, options, warrants, security
interest, mortgage claim, charge, liability or other encumbrance of any kind
whatsoever (the "Liens"), at the Closing all of Extended's right, title and
interest in, to and under the assets, properties and rights described in the
following Paragraphs (a) and (b):
(a) all governmental permits, certificates, approvals, variances,
waivers, consents, grants, filings and other authorizations, and
applications for any of the foregoing, including any grants or applications
(including those contributed by Extended to the Partnership) including all
38 GHz radio authorizations granted by the Federal Communications
Commission ("FCC") in all of the various places in the United States (the
"Authorizations"), including those listed on Schedule 1.1(a); and
(b) Extended's Partnership Interest.
<PAGE>
All of the foregoing, including the Authorizations and the Partnership
Interest, are sometimes hereinafter collectively referred to as the "Assets".
1.2. NO ASSUMPTION OF ANY LIABILITIES. ART will not assume, satisfy or
perform any of the debts, liabilities, obligations or commitments of Extended.
Extended will retain all such debts, liabilities, obligations and commitments.
1.3. DETERMINATION OF THE CONSIDERATION. The Purchase Price that ART
shall pay for the Assets and the other agreements of the Sellers herein is six
million dollars ($6,000,000), subject to adjustment as provided in Section 1.4
hereof (with such adjustments, if any, the "Purchase Price").
1.4. ADJUSTMENTS DUE TO TRANSFER OF LESS THAN ALL OF THE AUTHORIZATIONS.
Without limiting any rights, if any, of ART for breach of contract, in the event
that the FCC denies the transfer by Extended to ART of less than all of the
Authorizations but does approve the transfer of one or more of the
Authorizations, the Purchase Price shall be the sum of (i) Three Million Dollars
($3,000,000) and (ii) the product of Three Million Dollars ($3,000,000)
multiplied by the fraction in which the numerator is the number of POPs
contained in all of the granted 38 GHz authorizations held by the Partnership
that have been approved by the FCC for transfer as listed on Exhibit 1.4, and
the denominator is the total number of POPs contained in all of the granted 38
GHz authorizations held by the Partnership as listed on Exhibit 1.4 (for
purposes of this Section, "authorizations held by the Partnership" shall include
authorizations required to be contributed to the Partnership by either ART or
Extended pursuant to the Joint Venture Agreement). "POPs" shall mean the
population of the geographic area of a Authorization (as defined herein) as
calculated according to the latest official statistics from the United States
Bureau of the Census available as of the date of the Closing (as defined below).
1.5. DEPOSIT. ART shall pay to Extended, if and only if, a sale of
securities that satisfies the condition of Section 9.10 hereof is consummated
three million dollars ($3,000,000) as a deposit under this Agreement (the
"Deposit") within five business days of the consummation of such sale. If the
Closing occurs, the Deposit shall be credited against the Purchase Price, as
adjusted. If the Closing does not occur, Extended shall retain the Deposit.
2. CLOSING.
2.1. The closing of the Transaction (the "Closing") shall take place on
such date and at such time within 30 days of the satisfaction of the conditions
contained in Sections 9 and 10 as mutually agreed by the parties (the "Closing
Date") (i) at the offices of Ropes & Gray, One International Place, Boston,
Massachusetts 02110 or (ii) at such other place and time as the parties agree.
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<PAGE>
2.2. DELIVERIES BY THE COMPANY AT CLOSING. At Closing, the Sellers shall
deliver to ART:
(a) any Bills of Sale or other instruments of assignment reasonably
required or requested by ART to transfer, convey and assign the Assets to
ART;
(b) updated Schedules to this Agreement;
(c) certified copies of resolutions of the shareholders and the board
of directors of Extended authorizing Extended to enter into and perform its
obligations under this Agreement;
(d) a copy of the charter documents of Extended certified by the
appropriate public official and a copy of the by-laws of Extended certified
by its Secretary;
(e) all such other documents and instruments as ART or its counsel
shall reasonably request to consummate or evidence the transactions
contemplated hereby; and
(f) any tax clearance certificates or other similar certificates.
2.3. DELIVERIES BY ART AT CLOSING. At Closing, ART shall deliver to
Extended the Purchase Price in cash or by certified check or wire transfer; and
such documents and instruments as Extended or its counsel shall reasonably
request to consummate or evidence the transactions contemplated hereby.
2.4. CERTIFICATIONS; OPINIONS. At Closing ART and Extended shall deliver
the certificates, opinion of counsel and other documents described in Sections 9
and 10 hereof unless waived.
2.5. CONSENTS. At Closing, Extended shall deliver evidence satisfactory
to ART that the Final Order required pursuant to Section 9.3 has been granted by
the FCC.
2.6. FORM OF DOCUMENTS AND INSTRUMENTS. All of the documents and
instruments delivered at Closing shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to the parties'
respective counsel.
3. REPRESENTATIONS AND WARRANTIES OF EXTENDED AND THE SELLING STOCKHOLDERS
Extended and each Selling Stockholder jointly and severally represent and
warrant to ART as follows:
3.1. ENTITY STATUS. Extended is a corporation duly organized, validly
existing and in good standing in the state of Washington. Extended has full
power and authority to carry on
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<PAGE>
its business as and where now conducted, and to own or lease and to operate
its properties and assets where such properties and assets are now owned,
leased or operated by it and where such business is now conducted by it.
Extended is qualified to do business and is in good standing in each of the
jurisdictions in which the nature of its business or the property owned or
leased by it make such qualification necessary. Extended has delivered to ART
complete and correct copies of any organizational, by-laws or charter
documents applicable to it, each as amended and in effect on the date hereof.
The Selling Stockholders own 100% of the outstanding capital stock of
Extended, and there are no outstanding subscriptions, options, warrants or
other rights convertible into or exercisable for, or any agreements to issue,
capital stock of Extended.
3.2. AUTHORITY FOR AGREEMENT; CONFLICTS.
(a) Each of Extended and the Selling Stockholders has all necessary
power and authority, corporate or otherwise, to enter into, execute and
deliver this Agreement and the other documents to be delivered by Sellers
at the Closing (and such other documents are collectively the "Seller
Documents") and to perform fully his or its obligations hereunder and the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the applicable Seller Documents by
Extended has been duly authorized by all necessary corporate action.
(b) This Agreement has been, and the Seller Documents, at the
Closing, will have been, duly and validly executed and delivered by
Extended and each Selling Stockholder and this Agreement constitutes, and
the Seller Documents will constitute, the legal, valid and binding
obligation of Extended and each Selling Stockholder and this Agreement is,
and the Seller Documents will be, enforceable by and against Extended and
each Selling Stockholder in accordance with their terms, except as
enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether such
enforceability is considered in equity or at law.
(c) The execution and delivery of this Agreement and the Seller
Documents by Extended and each Selling Stockholder and the consummation of
the transactions contemplated hereby and thereby will not conflict with or
result in any violations of or defaults under: (i) any statute, regulation,
order, judgment or decree of any federal, state or local governmental body
or regulatory authority applicable to Extended, any Selling Stockholder or
any of the Assets; (ii) any other statute, regulation, order, judgment or
decree applicable to Extended, any Selling Stockholder or any of the Assets
under or in any other applicable jurisdiction; (iii) any mortgage,
indenture, lease, agreement, instrument or other obligation to which
Extended or any Selling Stockholder is a party or by which any of the
Assets are bound; or (iv) any permit, concession, grant, franchise,
license, of or applicable to Extended or any Selling
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<PAGE>
Stockholder. Such execution, delivery and consummation will not result in
the creation of any lien, charge, encumbrance or security interest upon
any of the Assets.
3.3. SUBSIDIARIES. Extended does not have, and never has had, any
subsidiary. Except for the Partnership, Extended does not presently own, of
record or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity. Except for the Partnership,
Extended is not, directly or indirectly a participant in and has no involvement
in any joint venture, partnership or other noncorporate entity.
3.4. CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for the
consent of the FCC to the transfer or change of control of the Authorizations,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority is required to be made or
obtained by Extended or any Selling Stockholder in connection with its execution
and delivery of and performance of its or his obligations under, this Agreement.
3.5. FCC REGULATORY MATTERS.
(a) Each of the Sellers is in compliance with the Federal
Communications Act of 1934, as amended (the "Communications Act"), and the
rules, regulations and policies of the FCC promulgated thereunder
applicable to Extended in connection with the Assets, and each of the
Sellers is in compliance with all other federal, state and local laws,
rules, regulations and ordinances applicable to Extended and is not in
default under any order, writ, injunction or decree of any court or
governmental agency or instrumentality applicable to Extended.
(b) SHARING AGREEMENTS. None of the Sellers have entered into any
agreement for the shared use of facilities, trunk lines, airspace, radio
frequencies or other assets used in connection with the Assets.
(c) FCC AUTHORIZATIONS. Schedule 1.1(a) sets forth a true and
complete list of each Authorization that is being transferred to ART
hereunder (including every Authorization held by Extended or contributed to
the Partnership by Extended). Extended has provided to ART true and
correct copies of the Authorizations received by it from the FCC. To the
knowledge of the Sellers, except as set forth on Schedule 3.5, none of such
Authorizations are subject to any purchase, sale, option or right of first
refusal agreements. Extended or the Partnership owns all of the right,
title and interest in, to and under such Authorizations. Extended is
qualified under all laws, rules and regulations to hold the Authorizations
held by it and its Partnership Interest.
(d) AUTHORIZATION COMPLIANCE. The Authorizations are valid and in
full force and effect without materially adverse conditions except for such
conditions as are
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<PAGE>
generally applicable to FCC Authorizations or holders of FCC
Authorizations. No event has occurred and is continuing that could:
(i) result in the revocation, termination or adverse modification of any
Authorization listed on Schedule 1.1(a); or (ii) materially and adversely
affect any rights of Extended or, to the knowledge of the Sellers, the
Partnership thereunder prior to Closing or of ART after Closing. Extended
has no reason to believe that the Authorizations will not be renewed by the
FCC in the ordinary course.
(e) REPORTS. Any and all reports and filings filed with the FCC by
Extended with respect to the Authorizations were accurate and complete in
all material respects on the date thereof.
(f) DISCLOSURE. Extended knows of no facts pertaining to its
qualifications to be a licensee which would cause the FCC not to issue its
approval with respect to, or otherwise prevent, the transfer to ART
pursuant to this Agreement of the Authorizations.
3.6. TITLE TO THE TRANSFERRED ASSETS; LIENS. Extended or, to the
knowledge of the Sellers, the Partnership has good, indefeasible and
transferable title to all of the Assets, free and clear of all Liens.
3.7. OTHER ASSETS. Extended owns no assets other than the Assets, capital
stock of ART and cash that are material either individually or in the aggregate.
3.8. CONTRACTS. Except for this Agreement and the Joint Venture
Agreement, and except as disclosed on Schedule 3.8, Extended is not a party to
any contract, commitment or similar agreement or arrangement, whether written or
oral, by which it or any of the Assets is bound. Extended has no liabilities or
obligations of any kind, whether accrued, absolute, secured or unsecured,
contingent or otherwise which are material either individually or in the
aggregate.
3.9. LITIGATION. There are no actions, claims, proceedings, suits and
investigations pending, or, to the best knowledge of each of Extended and the
Selling Stockholders threatened against any of Extended, the Assets or any of
its properties, assets or rights before any court, arbitrator or administrative
or governmental body: (i) relating to the Assets or which seek to revoke,
rescind, cancel, modify or refuse to renew any Authorization or; (ii) in
connection with the transactions contemplated hereby, nor is there any basis for
any such action. There is no judgment, order or decree affecting the Assets or
the transactions contemplated hereby.
3.10. DISCLOSURE. Neither this Agreement nor any exhibit or schedule
hereto nor any statement, list or certificate delivered to ART at or prior to
the Closing pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact
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necessary in order to make the statement contained herein and therein in the
context in which they were made not misleading. Except as otherwise
disclosed herein, none of Extended or the Selling Stockholders know of any
information or fact that has or would have a material adverse effect, or that
might in the future have a material adverse effect, on the Assets or the
financial condition of the business of Extended that has not been disclosed
to ART in writing.
3.11. TAXES. Extended has timely filed all requisite federal, state and
local tax and information returns which are required to be filed by it and has
paid, or made adequate provision for the payment of, all taxes which may have or
may become due and there are no assessments or any basis therefor. There are no
examinations in progress or claims against Extended for federal or other taxes
(including penalties and interest) for any period and no notice of any claim,
whether pending or threatened, for taxes has been received.
3.12. BROKERAGE. There are no claims for brokerage commissions or finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Extended or any Selling Stockholder.
4. REPRESENTATIONS AND WARRANTIES BY ART. ART represents and warrants as
follows:
4.1. CORPORATE STATUS; AUTHORITY.
(a) ART is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate
power and authority to carry on its business as now conducted and to own or
lease and operate its properties as and in the places where such business
is now conducted and as such properties are now owned, leased or operated.
(b) ART has all necessary corporate power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly authorized by the Board of
Directors of ART. This Agreement constitutes the valid and legally binding
obligation of ART and is enforceable against it in accordance with its
terms, except as enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other laws affecting creditors'
rights generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or at law. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, will not conflict with or result in any violation of
or default under any provision of the charter documents or by- laws of ART
or any material mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to it or any of its
respective properties.
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4.2. LITIGATION. There are no judicial or administrative actions, suits,
proceedings or investigations pending, or to the knowledge of ART threatened,
that question the validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement, nor
does ART know of any basis for any such action, suit, proceeding or
investigation.
4.3. CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
approval by the FCC of the transfer or change of control, as applicable, of the
Authorizations and except as set forth on Schedule 4.3 hereto, no consent,
approval or authorization of, or declaration, filing or registration with any
court or governmental or regulatory authority is required to be made or obtained
by ART in connection with its execution, delivery and performance of this
Agreement.
4.4. BROKERAGE. There are no claims for brokerage commissions or finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
ART.
5. EXPENSES. Each party to this Agreement shall assume and bear all of its
own respective expenses, costs and fees incurred or assumed by each in the
preparation and execution of this Agreement and compliance herewith, whether or
not the transaction herein provided for shall be consummated.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements of each of Extended, the Selling Stockholders and ART
contained herein (including all schedules and exhibits hereto) or in any
document, statement, certificate or other instrument referred to herein or
delivered at the Closing in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, any investigation by
ART of the Sellers or the Assets, the Closing and the consummation of the
transactions contemplated by this Agreement for two years from the Closing Date.
7. INDEMNITIES.
7.1. INDEMNIFICATION BY THE SELLERS.
The Sellers shall jointly and severally indemnify ART and its successors
and assigns for any and all damages, claims, losses, liabilities, and expenses,
including without limitation reasonable legal and accounting expenses
(collectively, "Losses"), which may arise out of: (i) any breach of any
Sellers' covenants and agreements hereunder; (ii) any inaccuracy or
misrepresentation in any representation or warranty of any Seller hereunder, in
each case as such representation or warranty would read if all materiality and
knowledge standards and disclosure schedules were deleted from it, or any
inaccuracy or misrepresentation in any certificate or document delivered in
accordance with the terms of this Agreement by any
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Seller; (iii) any liabilities of Extended; or (iv) any claim or action
asserted by any third party arising out of or in connection with any event,
act or omission relating to any of the Assets occurring prior to the Closing
Date. The aggregate liability of the Selling Stockholders under this
Section 7 shall not exceed the Purchase Price.
7.2. INDEMNIFICATION BY ART. ART shall indemnify and hold harmless the
Sellers from and against any and all Losses which may arise out of: (i) ART's
breach of any of the covenants and agreements made in this Agreement by ART; or
(ii) any inaccuracy or misrepresentation in any representation or warranty of
ART hereunder, in each case as such representation or warranty would read if all
materiality and knowledge standards and disclosure schedules were deleted from
it, or any inaccuracy or misrepresentation in any certificate or document
delivered in conjunction with this Agreement.
7.3. TIME LIMIT ON INDEMNIFICATION. No claim may be brought under this
Section 7 by either party more than two years after the Closing Date.
8. COVENANTS.
8.1. PREPARATION FOR CLOSING. Extended, the Selling Stockholders and ART
agree to use their best efforts to maintain the accuracy of their respective
representations and warranties contained in this Agreement until the Closing.
8.2. FCC AND OTHER APPROVAL. The Sellers and ART will use their best
efforts to join in and submit as quickly as possible one or more applications
(the "Applications") to the FCC requesting the FCC's written consent to the
change in control or the transfer, as the case may be, of the Authorizations to
ART or designees of ART.
8.3. FURTHER ASSURANCES. At any time and from time to time at or after
the Closing, at the request of ART and without further consideration, except as
stated below, the Sellers will execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation and take such action as
ART may reasonably determine is necessary to transfer, convey and assign to ART,
and to confirm ART's title to or interest in the Assets to put ART in actual
possession and operating control of the Assets and to assist ART in exercising
all rights with respect thereto.
8.4. PUBLIC ANNOUNCEMENTS. Neither Extended or any of the Selling
Stockholders will, at any time, without the prior written consent of ART, make
any announcement, issue any press release or make any statement to any third
party with respect to this Agreement any of the specific matters discussed
between the parties.
8.5. NO SOLICITATION BY THE SELLERS. The Sellers each undertake and agree
that between the date of the execution of this Agreement and the Closing or
termination of this Agreement, none of the Sellers or their respective officers,
directors, partners, representatives
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and agents will indirectly or directly solicit, encourage or initiate the
submission of proposals or offers from, or provide any confidential
information to, or participate in discussions or negotiations or enter into
any agreement or understanding with, any corporation, partnership, person or
other entity or group (other than ART or their respective officers,
employees, directors, representatives and agents) concerning the sale of
shares of capital stock of Extended, or any merger, combination, sale of
assets, or similar transactions with respect to Extended or the Assets. The
Sellers each agree to immediately cease any discussions or communications
with any parties conducted prior hereto with respect to any of the foregoing.
The Sellers each will promptly notify ART if any of them receive any written
proposals, offers or invitations to discuss any of the foregoing.
8.6. AGREEMENT RELATING TO JOINT VENTURE AGREEMENT. Notwithstanding any
other provision of this Agreement, Extended transfers to ART all of its rights
under Section 1.8(b) and (c) of the Joint Venture Agreement; except that
applications to the FCC for new 38 GHz authorizations in Designated States (as
defined by the Joint Venture Agreement) or modifications to existing
authorizations held by the Partnership shall be made by the Partnership and not
by the Partners. For this purpose, applications for authorizations to be
awarded by competitive bidding are to be treated as acquisitions of Systems (as
defined in the Joint Venture Agreement) and not as applications. In that
regard, Extended agrees that the provisions of Section 1.8(b) and (c) of the
Joint Venture Agreement (except as aforesaid) with respect to acquisitions of
Systems (as defined in the Joint Venture Agreement) committed to, now or
hereafter, by ART or ART's affiliates including, without limitation, the
prohibition on acquisitions of Systems in any Existing Market System (as defined
in the Joint Venture Agreement) and the requirement to comply with the
provisions of 1.8(c) with respect to acquisition of interests in Open Systems
(as defined in the Joint Venture Agreement) shall no longer be enforceable by
Extended unless and until this Agreement has terminated without payment of the
Deposit to Extended. Extended will execute such documents requested by ART to
further reflect the agreement of Extended in this Section 8.6.
8.7. CONDUCT OF BUSINESS BY SELLERS. Sellers covenant that until the
Closing:
(a) Sellers will each take all necessary steps requested by ART to
maintain the Authorizations in good standing with the FCC and will maintain
its qualifications under all laws, rules and regulations to hold the
Authorizations and the Partnership Interest;
(b) Sellers will comply with all statutes, laws, ordinances, rules
and regulations applicable to its business;
(c) Extended will not enter into or assume any agreement, contract or
commitment of any kind, which relates to or affects in any way the Assets
or the Seller's ability to consummate the transactions contemplated hereby;
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(d) Extended will not merge or consolidate with, or agree to merge or
consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any business or any corporation, partnership, association
or other business organization or division thereof;
(e) Extended will not dispose of any of the Assets, or incur, or
permit to be incurred, any Liens with respect to any of the Assets;
(f) Sellers will not permit any change to be made in Extended's
charter documents or by-laws, which relates to or affects in any way the
Assets or the Seller's ability to consummate the transactions contemplated
hereby;
(g) Sellers will not enter into any agreements or commitments for any
of 8.7(c) through 8.7(f).
9. CONDITIONS PRECEDENT TO ART'S OBLIGATIONS. All obligations of ART under
this Agreement are subject to the fulfillment to the reasonable satisfaction of
ART prior to or at the Closing of each of the following conditions, any of which
may be waived by ART in its sole discretion:
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Sellers (excluding Sections 3.3, 3.7 and 3.8) in this Agreement
(including all exhibits and schedules hereto), shall be true and correct in all
material respects when made and shall be repeated and shall be true and correct
in all material respects at and as of the Closing Date, and ART shall have
received a certificate dated the date of the Closing signed by the chief
executive officer of Extended to the foregoing effect.
9.2. CONSENTS. All filings with and consents from all federal, state and
local governmental agencies required to consummate the transactions contemplated
by this Agreement shall have been made or received, as applicable.
9.3. FCC AUTHORIZATIONS. Without limiting the generality of Section 9.2,
the FCC shall have authorized the transfer or change of control, as applicable,
of all of the Authorizations by a Final Order (as defined below), without any
conditions or restrictions that materially affect the value of the
Authorizations or operations pursuant to the Authorizations or any conditions or
restrictions materially different than the normal authorizations issued by the
FCC to other 38 GHz license holders at the date of this Agreement. In the event
that any FCC order approving the transfer of the Authorizations to ART imposes
such conditions, this condition shall not be satisfied until such conditions are
removed or eliminated, and Sellers shall fully cooperate in obtaining the
removal or elimination of such restrictions. "Final Order" means an action by
the FCC granting its consent to the assignment of a Authorization, with respect
to which no request for stay, petition for rehearing, reconsideration or appeal
is pending, and as to which the time for filing any petition for rehearing,
reconsideration or appeal has expired and with respect to which the time for
agency reconsideration or review taken on its own motion has expired, or in the
event of the filing of such
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request, petition or appeal, an action which shall have been reaffirmed or
upheld and with respect to which the time for seeking further administrative
or judicial review shall have expired.
9.4. PERFORMANCE BY EXTENDED; CERTIFICATE. Extended shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing, and the chief
executive officer of Extended shall deliver to ART a certificate dated the
Closing Date, to such effect.
9.5. ABSENCE OF ERRORS AND OMISSIONS. ART shall not have discovered any
material error, misstatement or omission in any of the representations or
warranties, or any material failure to perform or satisfy any covenants or
conditions required by this Agreement to be performed or satisfied by the
Sellers on or prior to the date of Closing.
9.6. OPINIONS OF COUNSEL FOR EXTENDED. ART shall have received a
favorable opinion addressed to it and dated the Closing Date of counsel for
Extended in form and substance acceptable to ART and its counsel.
9.7. ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the result of which could prevent or make illegal the consummation of
such transactions or which could be materially adverse to the Assets.
9.8. UCC SEARCHES. ART shall have obtained Uniform Commercial Code
(including fixture filings) and state and federal tax and judgment lien searches
against Extended all dated within 5 days of the Closing Date.
9.9. RELEASE OF LIENS. All of the Assets shall be free and clear of all
Liens and ART shall have received evidence of the release of all liens and the
termination of all financing statements, if any, as may be reasonably requested
by ART.
9.10. EQUITY SALE. ART shall have consummated a sale of equity securities
with aggregate net proceeds to ART of at least $30 million.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. All obligations of
the Sellers under this Agreement are subject to the fulfillment to the
reasonable satisfaction of Extended, prior to or at the Closing, of each of the
following conditions, any of which may be waived by Extended in its sole
discretion:
10.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by ART in this Agreement shall be true and correct in all material respects
when made and shall be repeated and shall be true and correct in all material
respects at and as of the Closing Date, except as specifically provided for
herein, and the Sellers shall have received a certificate dated the date of
Closing signed by an officer of ART, to the foregoing effect.
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10.2. GOVERNMENT CONSENTS. All filings with and consents from all
federal, state and local governmental agencies required to consummate the
transactions contemplated hereby shall have been obtained at or prior to the
Closing.
10.3. PERFORMANCE OF ART. ART shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing and an officer of ART shall deliver a
certificate or certificates to the Sellers to such effect.
10.4. ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the result of which could prevent or make illegal the consummation of
such transactions.
10.5. PURCHASE PRICE. The Purchase Price shall have been delivered to
Extended.
11. TERMINATION. This Agreement may be terminated by the parties as set forth
in this Section 11:
(a) at any time by the mutual written consent of Extended and ART;
(b) by ART at any time after June 30, 1997, if the conditions set
forth in Section 9 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated by
the Sellers by such time;
(c) by the Sellers at any time after June 30, 1997 (the "Seller
Date"), if the conditions set forth in Section 10 hereof shall not have
been complied with or performed and such noncompliance or nonperformance
shall not have been cured or eliminated by ART by such time; provided that
if prior to the Seller Date, the FCC has issued an order approving the
transfer or change in control, as applicable, of the Authorizations, which
is not a Final Order, to ART, ART may extend the Seller Date until June 30,
1998 by notice to Extended;
(d) by the Sellers on the one hand, or by ART, on the other, if there
shall have been a breach of any material representation, warranty, covenant
or agreement on the part of the others set forth or contemplated by this
Agreement, which breach cannot be cured prior to the Closing;
(e) by the Sellers at any time after December 31, 1996, if the sale
of securities that would satisfy the condition set forth in Section 9.11 is
not consummated prior to December 31, 1996.
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provided, however, that the terminating party may not terminate its obligations
under this Agreement if such terminating party has breached this Agreement in
any material respect.
Notwithstanding any termination of this Agreement pursuant to this
Section 11, the provisions of Section 7, and, in consideration of the payment of
the Deposit to Extended, if paid, the provisions of Section 8.6 hereof, shall
remain in full force and effect. The parties agree that the payment of the
non-refundable Deposit does not constitute a penalty or damages.
12. ENTIRE AGREEMENT; ASSIGNABILITY. This Agreement, together with the
schedules and exhibits hereto, constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein. This Agreement
may not be assigned by any of the Sellers without the prior written consent of
ART and any such attempted assignment shall be null and void.
13. AMENDMENT. This Agreement may be amended by the parties hereto at any
time, but only by an instrument in writing duly executed and delivered on behalf
of each of the parties hereto.
14. HEADINGS. Section headings are not to be considered part of this Agreement
and are included solely for convenience and are not intended to be full or
accurate descriptions of the contents thereof. References to Sections are to
portions of this Agreement unless the context requires otherwise.
15. EXHIBITS, ETC. Exhibits, schedules and other documents referred to in this
Agreement are an integral part of this Agreement.
16. SUCCESSORS AND ASSIGNS. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and assigns.
17. NOTICES, ETC. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given on the
date of delivery if delivered or mailed, first-class postage prepaid,
(a) if to Extended, to:
Extended Communications, Inc.
22904 Northeast 19th Drive
Redmond, Washington, 98053
Attention: Thomas A. Marinkovich
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(b) if to ART to:
Advanced Radio Technologies Corporation
500 108th Avenue, N.E., Suite 2600
Bellevue, Washington, 98004
Attention: W. Theodore Pierson, Jr. and
Thomas A. Grina
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts, 02110-2624
Attention: Mary E. Weber, Esq.
18. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto arising out of this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to the
internal conflict of law provisions thereof.
19. SEVERABILITY. The provisions of this Agreement are severable, and if any
one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
20. COUNTERPARTS. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EXTENDED COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By: ________________________________
Name:
Title:
SELLING STOCKHOLDERS
____________________________________
Name: Thomas A. Marinkovich
____________________________________
Name: Teresa E. Marinkovich
____________________________________
Name: Mark T. Marinkovich
____________________________________
Name: James A. Marinkovich
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EXHIBIT 10-8(f)
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") between ART West Partnership ("Art
West," or "Licensee"), a general partnership formed pursuant to the laws of the
State of Delaware and Advanced Radio Technologies Corporation ("ART" or
"Manager"), a Delaware corporation, is entered into as of the dates set forth
next to the signatures below and is effective as of June 1, 1996.
WHEREAS, Licensee has acquired, or has the right to acquire, certain
Federal Communications Commission ("FCC") licenses and construction permits
(collectively with any other licenses and permits which may be held by Licensee
in the future, the "Licenses") for 38 GHz frequency radio systems (collectively
with any other 38 GHz frequency radio systems for which Licensee may be licensed
or permitted in the future, the "Systems") in various locations ("Markets"); and
WHEREAS, Licensee and Manager desire to enter into an exclusive agreement
for the construction, operation, and management by Manager of the Systems,
including without limitation those listed in Exhibit A hereto, consistent with
Licensee's obligations in connection with the Licenses under all of the Federal
and state laws, rules, and regulations;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1. TERM OF AGREEMENT AND TERMINATION.
(a) This Agreement becomes effective on the date set forth above.
Unless it is terminated earlier pursuant to the provisions of this Section,
the term of this Agreement ("Term") shall extend for ten years and shall
renew for additional ten year terms, if agreed to by the parties.
(b) This Agreement shall terminate thirty days after notification
of a material breach of the Agreement by the non-breaching party to the
breaching party, if such breach is not cured within the thirty-day period
following notification, provided that if the default or breach shall be of
such nature that it cannot reasonably be cured with due diligence within said
thirty-day period, the time in which to cure the same shall be extended for
such period as may be necessary to cure the same with due diligence. If
Manager materially discriminates against licenses held by Licensee in favor
of licenses in Manager's own name or managed by Manager with respect to
operations or marketing, then this Agreement shall terminate thirty days
after Licensee reasonably determines that Manager has so discriminated and so
notifies Manager, if such discrimination is not cured within the thirty-day
period following such notification, provided that if such discrimination
shall be of such nature that it cannot reasonably be cured
<PAGE>
with due diligence within said thirty-day period, the time in which to cure
the same shall be extended for such period as may be necessary to cure the
same with due diligence.
(c) This Agreement shall terminate with respect to any License
acquired by ART.
2. SYSTEM CONSTRUCTION AND MANAGEMENT; EQUIPMENT LEASE. Licensee
hereby grants Manager the exclusive right to manage the Systems under the
following terms and conditions; provided that, Licensee may solicit and
contract with customers for the Systems. Subject to Licensee's supervision
and control, Manager will use its reasonable best efforts to undertake the
design, construction, installation, marketing, sales and operations of the
Systems. Subject to the general authority of the Licensee and Manager's
obligation not to discriminate against Licensee and in favor of licenses
issued in its name in its marketing, sales, purchases or operations, these
efforts will include, but are not limited to, the following:
(a) The preparation of the design for the Systems and the planning
and design thereof;
(b) The leasing of assets or rights to use assets (collectively
the "Equipment") necessary for the planning design, construction and
operation of the Systems, including any expansion, modification or reduction
thereof.
(c) Hiring and supervision of the personnel necessary to construct
and operate the Systems;
(d) Creating services (including prices for such services at fair
market rates) for the Systems;
(e) The construction of the Systems (all rights with respect to
the product of such construction shall be included within the definition of
"Equipment");
(f) The development and implementation of marketing programs;
(g) Making reasonable efforts consistent with usual industry
practices to obtain sales and otherwise provide for loading of the Systems;
(h) The billing and collection of fees, charges or other
compensation due to the Systems, and the payment of all expenses and fees
incurred or payable by the Systems;
(i) The maintenance of the Systems according to standards
consistent with FCC rules and regulations, and the provision of necessary
repairs and replacements;
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(j) In conjunction with Subsection (k) below and applicable FCC
rules and regulations, coordinating with Licensee the preparation, execution,
delivery and filing of applications and other instruments to comply with
rules, regulations and orders of any Federal, state, county, municipal or
other governmental authority having jurisdiction over Licensee or the Systems;
(k) Appropriate office record keeping, bookkeeping and internal
accounting services and arranging for and overseeing outside accounting
services;
(l) In the event Systems construction proves unfeasible, promptly
identifying any License modifications which would permit Systems
construction, including, but not limited to, site changes, and preparation
and submission to Licensee of any associated FCC documentation to Licensee
for its review. Licensee agrees it will complete its review and promptly
submit any requests for modifications of its License which may be needed to
make construction feasible, or any filings or appeals which are necessary to
extend the period for construction under the FCC's rules. Such requests
would include, but not be limited to, applications to the FCC for special
temporary authority; and
(m) Generally, managing the day-to-day operations of the Systems
and doing or assisting with any and all other acts or executing such other
agreements, documents or instruments, as are consistent with FCC rules and
regulations and, in the good faith judgment of Manager, are necessary to
carry out the development, construction and operation of the Systems, whether
or not specifically enumerated herein.
(n) All Equipment shall be acquired and constructed by Manager and
shall be the property of Manager. The Equipment shall be leased to Licensee
for the consideration described in Section 4 hereof during the term of this
Agreement. Such lease shall terminate simultaneously with the termination of
this Agreement for any reason. Upon such termination, the Equipment shall
remain the property of the Manager, and Manager may take immediate possession
thereof.
3. REGULATORY COMPLIANCE. The parties agree that Licensee is in sole
control of the Licenses and that it is required by FCC regulations to be in
sole control so long as it is the Licensee. The Manager acknowledges and
agrees that Licensee has ultimate control over all decisions affecting
System, notwithstanding any other provision of this Agreement. The parties
agree to cooperate with each other in complying with all applicable Federal,
state and local regulations. This cooperation includes, but is not limited
to, the following:
(a) Each System customer will be advised that service is provided
over facilities controlled by Licensee;
(b) Manager agrees to use its reasonable best efforts to comply
with all FCC timetables concerning construction and operation and to take
such steps as may be needed to
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preserve any licenses that may be granted by the FCC. Manager expressly
acknowledges that the Systems must be constructed by dates to be determined
by FCC;
(c) Neither Manager nor Licensee shall represent themselves as the
legal agents or one another; and
(d) Licensee shall, with the cooperation and assistance of
Manager, fully comply with all regulations necessary to keep the License in
full force and effect. Licensee shall prepare and submit to the FCC and any
other relevant Federal, state or local agency all reports, applications,
renewals, or other filings or documents that may be required to do this,
provided that Manager shall timely advise Licensee of all such requirements
and shall provide any assistance required by Licensee in fulfilling this
obligation.
4. LICENSE FEES. During the term of this Agreement, Manager shall pay
Licensee ten percent (10%) of all Recurring Revenue (as defined below)
relating to the operation of any of the Licenses (each such payment made from
time to time is referred to as a "Licensee Payment"). As Manager's
compensation for managing the Systems pursuant hereto and as lease payments
for the Equipment pursuant to Section 2(b) hereof, Manager shall retain all
revenue relating to the Licenses other than the Licensee Payments. Each
Licensee Payment, for each calendar quarter, shall be distributed to Licensee
within sixty days of the end of such quarter. "Recurring Revenue" shall mean
all recurring revenue from customers for the use of the Licenses, including
revenue received from customers relating to equipment provided, leased or
sold by Manager to customers and used by customers in connection with
Licenses, but excluding reasonable installation and other one-time charges.
5. NOTICE. All notices and other communications shall be in writing
and shall be deemed given the same day if delivered personally or sent by
telecopy or the next business day if sent by express mail or courier
(overnight delivery), or five (5) business days later if sent by registered
mail or certified mail, return receipt requested, postage prepaid, to the
parties at the following addresses or at such other address for a party as
shall be specified by like notice, provided that notice of change of address
shall be effective only upon receipt thereof:
(a) If to Licensee, to:
Art West Partnership
500 108th Avenue, N.E. Suite 2600
Bellevue, Washington 98004
Attn: Thomas A. Grina
Tom Marinkovich
With a copy to:
W. Theodore Pierson, Jr.
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<PAGE>
Executive Vice President and General Counsel
1200 Nineteenth St., N.W., Suite 607
Washington, D.C. 20036
(b) If to Manager, to
Advanced Radio Technologies Corporation
500 108th Avenue, N.E., Suite 2600
Bellevue, Washington 98004
Attn: Thomas A. Grina
With a copy to:
W. Theodore Pierson, Jr.
Executive Vice President and General Counsel
1200 Nineteenth St., N.W., Suite 607
Washington, D.C. 20036
6. REPRESENTATIONS AND WARRANTIES.
(a) Licensee represents and warrants that it is either (i) the
licensee or permit holder with respect to the Licenses listed in Exhibit A or
(ii) has the right to acquire the Licenses listed in Exhibit A without any
conditions other than the necessary FCC approvals, and Licensee represents
and warrants that it is duly qualified under all laws, rules and regulations
to hold such Licenses. Licensee further represents and warrants that it is
the sole owner and real party in interest in the Licenses and that no other
party has an interest of any kind. Licensee further represents that it has
the requisite authority and/or capacity, as applicable, to perform its
undertakings pursuant to this Agreement.
(b) Licensee represents and warrants that it will take all
necessary steps, to maintain the Licenses with the FCC in good standing.
(c) Each of the parties hereto represents and warrants that each
shall take such steps and execute such documents as may be necessary from
time to time to effectuate the terms and conditions of this Agreement.
(d) Manager represents and warrants that it is a corporation duly
authorized and in good standing under the laws of the State of Delaware and
has the requisite authority to perform its undertakings pursuant to this
Agreement.
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<PAGE>
(e) Manager represents and warrants that it is familiar with the
applicable rules and regulations of the FCC and that it is aware of no
impediment to the performance of its undertakings hereunder. Manager
represents and warrants that it will assist Licensee in taking all necessary
steps to maintain the license in good standing.
(f) Manager represents and warrants that it will exercise its best
efforts to perform its duties according to industry standards and practices.
(g) Manager represents and warrants that it will use its
reasonable best efforts to complete construction of Systems within the
construction period specified by the FCC and will assist the Licensee in
timely filing FCC Form 404 or its replacement, and all other papers necessary
to obtain a coverage license for Systems.
(h) Manager represents and warrants that it will utilize Licenses
held by Licensee managed hereunder before any other license which Manager may
own or manage in the same market as Licenses of Licensee.
7. INDEMNIFICATION AND INSURANCE.
(a) Manager agrees to indemnify and hold harmless Licensee
harmless from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, but not limited
to, reasonable attorney's fees and costs), imposed upon or incurred by, or
asserted against Licensee, that arise as a result of the negligence or
misconduct of Manager or Manager's employees or agents.
(b) Licensee agrees to indemnify and hold harmless Manager from
and against all liabilities, obligations, claims, damages, penalties, causes
of action, costs and expenses (including, without limitation, reasonable
attorney's fees and costs), imposed upon or incurred by or asserted against
Manager that arise as a result of the gross negligence or willful misconduct
of Licensee or Licensee's employees or agents.
(c) Liability insurance for the Systems shall be maintained by
Manager as follows:
(i) Comprehensive general liability policies of insurance in
standard form protecting Manager and Licensee and their agents against any
liability occasioned by accident or disaster in connection with the operation
of the Systems contemplated this Agreement. The minimum limits of such
liability insurance shall be one million dollars ($1,000,000) for injury or
death for one or more persons or with respect to damage to property; and.
(ii) Such other insurance as Manager and Licensee deem
necessary with respect to the operation of the Systems.
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<PAGE>
8. ASSIGNABILITY; SUCCESSORS AND ASSIGNS.
(a) Subject to the prior consent of the Manager, which consent
shall not be unreasonably withheld or delayed, and provided it does not
violate any of the other terms and conditions of this Agreement or any
applicable rule and/or regulations of the FCC, Licensee may only assign this
Agreement to a purchaser of the Systems, provided such purchaser expressly
assumes in a writing reasonably acceptable to Manager all of the obligations
of the Licensee hereunder and otherwise agrees to comply with the terms and
conditions of this Agreement. Such assignment shall be effective only upon
thirty days notification from the Licensee, satisfaction of the above said
conditions and, to the extent applicable, consent of the FCC to the transfer
of the Licenses. Any such assignment shall not relieve the Licensee of its
obligations hereunder.
(b) Manager may assign its right to manage the Systems hereunder
to another party, provided such assignee of Manager has experience in the
management of 38 GHz systems or other telecommunications facilities or,
alternatively, is an affiliate of the Manager or employs either personnel of
the Manager or other persons who have experience in the management of 38 GHz
systems or other telecommunications facilities. Manager may assign its
rights to a wholly-owned subsidiary. Such assignment shall be effective only
upon thirty days notice to the Licensee by the Manager. Manager may employ
such subcontractors or agents as it deems necessary in the performance of its
duties hereunder.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto, and their respective heirs, representatives, successor
and permissible assigns.
9. SEVERABILITY. In the event that any provision herein is held to
invalid, void, or illegal by any Federal, state or local court, or any
regulatory agency, the remaining provisions of the Agreement shall remain in
full force and effect and this Agreement shall be reasonably construed so as
to preserve the original intent of the parties hereto insofar as practicable.
In the event that any provision herein is deemed to be invalid, void, in
violation of any agency rules, or otherwise unlawful, the parties shall use
their respective best efforts to amend the offending provisions to bring them
into legal compliance with minimum disruption to the expectations of the
parties as set forth in this Agreement.
10. COUNTERPARTS. This agreement may be executed in any number of
counterparts with the same as if the signature of each counterpart were in
the same instrument.
11. NO WAIVER OF RIGHTS; AMENDMENT. The failure of either party to
insist, in any one or more instances, upon the performance of any of the
terms, covenants or conditions herein, or to exercise any right hereunder,
shall not be construed as a waiver or relinquishment of the future
performance of any such term, covenant or condition, or the future exercise
of such right, but the obligation of the other party with respect to such
future
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<PAGE>
performance shall continue in full force and effect. This Agreement may only
be amended, modified or changed by a writing signed by all parties hereto.
12. WARRANTY. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, RESPECTING THIS AGREEMENT OR THE SERVICE PROVIDED
HEREUNDER.
13. ENTIRE AGREEMENT. This Agreement supersedes any other agreements
between the parties, including the Services Agreement ("Services Agreement")
effective as of October 1, 1994 between the parties hereto, whether oral or
written, relating to the matter contemplated herein, and constitutes the
entire agreement by and between the parties, there being no other agreements
or understandings between the parties as expressly set forth herein. The
parties agree the Services Agreement is hereby terminated and will be of no
further force or effect.
14. GOVERNING LAW/PROCEDURE. This Agreement will be governed by the
laws of the State of Delaware; provided that any dispute under this Agreement
will be resolved by arbitration under the Commercial Arbitration rules of the
American Arbitration Association, using one arbitrator.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MANAGER: LICENSEE:
Advanced Radio Technologies ART West Partnership
Corporation By: Extended Communications, Inc.,
a partner of ART West Partnership
By:____________________________ By:_____________________________
Printed Name:___________________ Printed Name:____________________
Title:___________________________ Title:___________________________
Dated:__________________________ Dated:__________________________
By: Advanced Radio Technologies Corporation,
a partner of ART West Partnership
By:__________________________________
Printed Name:__________________________
Title:_________________________________
Date:_________________________________
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<PAGE>
EXHIBIT 10-9(e)
AMENDMENT TO
SERVICES AGREEMENT
THIS AMENDMENT TO SERVICES AGREEMENT (this "AMENDMENT"), is entered into
this day of June, 1996, by and between DCT COMMUNICATIONS, INC., a
California corporation ("DCT"), and ADVANCED RADIO TECHNOLOGIES CORPORATION,
a Delaware corporation ("ART").
In consideration of the premises and mutual representations, warranties,
covenants and promises herein contained, the parties hereto agree as follows:
1. AMENDMENT TO SERVICES AGREEMENT. The Services Agreement (the
"SERVICES AGREEMENT"), effective as of September 1, 1994, between DCT and ART
is amended as follows:
a. In Section 1(a) the phrase "five years" is changed to "through
December 31, 1998."
b. A new section (c) is added to Section 1 as follows:
"(c) This Agreement shall terminate with respect to any
Authorization upon the acquisition of such Authorization by
Manager."
c. A new Section (d) is added to Section 1 as follows:
"(d) This Agreement may be terminated by Licensee upon 180 days'
prior written notice to Manager at any time after the termination
pursuant to its terms of the Asset Purchase Agreement (the
"Acquisition Agreement") dated as of the date hereof between the
parties hereto."
d. In Section 2 (i) the word "Appendix" in the first sentence is
changed to "Exhibit" and (ii) the third sentence (beginning "In
order to avoid the appearance of conflict...") is deleted.
e. In subsection (g) of Section 3, the number "5" is substituted for
the number "10."
f. A new Section 4A is added after Section 4 as follows:
"4A At any time after December 31, 1997, Licensee may, with
prior written notice to Manager, elect to market to third-
parties, and to construct and operate systems for such purpose;
provided that if Licensee so elects, Manager shall not be
obligated in any way to
<PAGE>
construct, but may construct, additional
systems. Licensee and Manager will coordinate all construction
after such election to ensure neither party constructs systems
that interfere with then existing systems. After any such
election, Manager will continue to maintain sufficient
construction links and traffic levels to satisfy the FCC
construction requirements in effect at the time of such election
except for any customer of ART that becomes a customer of DCT.
g. In Section 6, the number "45" is changed to "15" and the
parenthetical phrase beginning with "calculated" and ending with
"equipment" is deleted.
h. In Section 15, everything after "District of Columbia" is
deleted.
i. Three new sentences are added to the end of Section 6 as follows:
"Beginning with the later of January 1, 1998 and the first full
month following the termination of the Acquisition Agreement
pursuant to its terms, in lieu of the cash gross revenue sharing
arrangement described in the preceding sentence, ART shall be
entitled to keep all of the revenue generated with respect to the
Systems except for the "Licensee Fee," which will be paid to
Licensee every calendar quarter within thirty days of the end of
such quarter. The "Licensee Fee" for each month in a quarter
shall be the sum of (a) $25 multiplied by the number of DS-1
circuits operated by Manager utilizing the Authorizations during
such month and (b) $200 multiplied by the number of DS-3 circuits
operated by Manager utilizing the Authorizations during such
month; provided that the Licensee Fee shall not in any event be
less than the Licensee Fee for the first month following the
termination of the Acquisition Agreement. Notwithstanding the
provisions of this Section 6, Licensee will not be entitled to
any portion of gross revenue or any Licensee Fee for the period
beginning July 1, 1996 and ending December 31, 1996.
i. In Exhibit A, markets 4, 5, 6, 10, 12, 15 and 20 are deleted and
the markets of Charleston, SC, Dayton, OH and Mobile, AL are
added.
2. RATIFICATION OF SERVICES AGREEMENT; ENTIRE AGREEMENT. The Services
Agreement, as amended hereby, is ratified but no existing breach thereof, if
any, is waived or excused. The Services Agreement, as amended hereby,
constitutes the entire agreement among the parties relating to the subject
matter hereof and supersedes all other prior agreements and understandings, oral
or written, of the parties including without limitation the Superseded
Agreements (as defined in the Acquisition Agreement).
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed on the day and year first above written.
DCT COMMUNICATIONS, INC.
By:
------------------------------
Name: Martin A. Rubin
Title: President
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By:
--------------------------------
Name: W. Theodore Pierson, Jr.
Title: Executive Vice President
Title:
-----------------------------
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<PAGE>
EXHIBIT 10-12(c)
TELECOM ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement made as of June __, 1996 (the "Agreement")
among Advanced Radio Technologies Corporation, a Delaware corporation, ("ART"),
Telecom One, Inc. a Delaware corporation ("Telecom"), William Rodi, Gordon
Hutchins, Jr. (Mr. Rodi and Mr. Hutchins are referred to herein as the "Selling
Stockholders" and together with Telecom, the "Sellers").
WHEREAS, ART wishes to purchase, and Telecom wishes to sell, certain
assets, property and rights of Telecom, listed in Section 1.1 hereof, and
defined as the "Assets" therein, in exchange for the consideration described in
Section 1.4 hereof (the "Transaction").
NOW, THEREFORE, in consideration of the premises and the respective
covenants and representations and warranties herein contained, the parties
hereto agree as follows:
1. SALE OF ASSETS.
1.1. SALE OF ASSETS. Subject to and upon the terms and conditions of
this Agreement, Telecom agrees to sell and transfer to ART and ART agrees to
acquire from Telecom, free and clear of any pledge, lien, options, warrants,
security interest, mortgage claim, charge, liability, right of first refusal or
other encumbrance of any kind whatsoever (the "Liens"), at the Closing (defined
below) all of Telecom's right, title and interest in, to and under the following
assets (the "Assets"):
all rights and incidents of interest in and to the 38 GHz radio
authorizations granted by the FCC listed on Schedule 1.1 hereto (the
"Authorizations") and all other licenses, permits, authorizations and
approvals from all Federal, state, municipal, county, local and any
other governmental or quasi governmental department, commission,
board, bureau, agency, court or other instrumentality (collectively,
the "Governmental Authorities") with respect to the foregoing.
1.2. NO ASSUMPTION OF ANY LIABILITIES. ART will not assume, satisfy or
perform any of the debts, liabilities, obligations or commitments of Telecom.
Telecom will retain all such debts, liabilities, obligations and commitments.
1.3. ADVANCE PAYMENT. ART shall pay to Telecom, upon the execution of
this Agreement by each party, twenty-two thousand three hundred and
forty-seven dollars ($22,347) as an advance payment under this Agreement
(together with accrued interest, the "Advance Payment"). If the Closing
occurs, the Advance Payment shall become the exclusive property of Telecom and
the amount of the Advance Payment shall be credited against the Closing Payment
(as hereinafter defined). If the Closing does not occur because of ART's
breach of its obligations herein, Telecom shall retain the Advance Payment as
complete
<PAGE>
satisfaction of any damages hereunder. If the Closing does not occur for any
other reason, the Advance Payment shall be retained by Telecom and offset
payments owed from time to time by ART to Telecom under the Management Agreement
(as herein defined) up to $22,347.
1.4. DETERMINATION OF THE CONSIDERATION. The Purchase Price that ART
shall pay for the Assets and the other agreements of the Sellers herein is one
hundred eleven thousand seven hundred thirty-five dollars ($111,735.00) (the
"Purchase Price").
1.5. RIGHT OF FIRST REFUSAL. In addition to its purchase of the
Authorization hereunder, ART shall have a right of first refusal with resect to
any and all future 38 GHz authorizations granted by the FCC to Telecom or any of
the Selling Stockholders, (the "Future Licenses") including without limitation
the pending applications filed in the name of Telecom and listed on Schedule 1.5
("Pending Applications") whether issued in the name of Telecom or any of its
present or future affiliates. Should Telecom at any time after the date hereof,
receive a bona fide offer to purchase, manage or lease Telecom's interest, or
any portion thereof, directly or indirectly, in and to the Future Licenses, on
terms and conditions acceptable to Telecom, Telecom shall refrain from accepting
such offer until Telecom has given ART written notice of such offer, together
with a true, correct and complete copy of such offer, and has afforded ART
twenty-one business days following ART's receipt of such notice in which to
review and consider the same. ART shall have a right of first refusal as to the
purchase, management or lease of Telecom's interest in and to the Future
Licenses on substantially identical terms and conditions stated in such offer,
except as otherwise provided below, and except that, if the proposed price to be
paid by such other party consist of assets, services or rights, the purchase
price shall be the fair market value of the assets, services or rights offered.
Such right may be exercised by ART by delivering to Telecom, prior to the
twenty-first business day following ART's receipt of Telecom's notice of said
bona fide offer, unequivocal written notice of ART's election to exercise such
right to purchase, manage or lease. The closing of the transaction resulting
from ART's exercise of ART's right of first refusal shall take place at a
location mutually satisfactory to Telecom and ART at no earlier than thirty days
following ART's exercise of this right of first refusal, subject to the receipt
of a Final Order and as soon as practicable thereafter. If ART fails or
declines to exercise ART's right of first refusal herein provided, then Telecom
may sell or lease the Future Licenses on the terms of said bona fide offer.
2. CLOSING.
2.1. The closing of the Transaction (the "Closing") shall take place on
such date and at such time within 30 days of the satisfaction of the conditions
contained in Sections 9 and 10 as mutually agreed by the parties (the "Closing
Date") (i) at the offices of Ropes & Gray, One International Place, Boston,
Massachusetts 02110 or (ii) at such other place and time as the parties agree.
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<PAGE>
2.2. DELIVERIES BY THE COMPANY AT CLOSING. At Closing, the Sellers shall
deliver to ART:
(a) any Bills of Sale or other instruments of assignment reasonably
required or requested by ART to transfer, convey and assign the Assets to
ART;
(b) updated Schedules to this Agreement;
(c) certified copies of resolutions of the shareholders and the
board of directors of Telecom authorizing Telecom to enter into and
perform its obligations under this Agreement;
(d) a copy of the charter documents of Telecom certified by the
appropriate public official and a copy of the by-laws of Telecom certified
by its Secretary;
(e) all such other documents and instruments as ART or its counsel
shall reasonably request to consummate or evidence the transactions
contemplated hereby; and
(f) any tax clearance certificates or other similar certificates.
2.3. DELIVERIES BY ART AT CLOSING. At Closing, ART shall deliver to
Telecom the Purchase Price in cash or by certified check or wire transfer; and
such documents and instruments as Telecom or its counsel shall reasonably
request to consummate or evidence the transactions contemplated hereby.
2.4. CERTIFICATIONS; OPINIONS. At Closing ART and Telecom shall deliver
the certificates, opinion of counsel and other documents described in Sections 9
and 10 hereof unless waived.
2.5. CONSENTS. At Closing, Telecom shall deliver evidence satisfactory
to ART that the Final Order required pursuant to Section 9.3 has been granted by
the FCC.
2.6. FORM OF DOCUMENTS AND INSTRUMENTS. All of the documents and
instruments delivered at Closing shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to the parties'
respective counsel.
3. REPRESENTATIONS AND WARRANTIES OF TELECOM AND THE SELLING STOCKHOLDERS
Telecom and each Selling Stockholder jointly and severally represent and warrant
to ART as follows:
3.1. ENTITY STATUS. Telecom is a corporation duly organized, validly
existing and in good standing in the state of Delaware. Telecom has full power
and authority to carry on its business as and where now conducted, and to own or
lease and to operate its properties and
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<PAGE>
assets where such properties and assets are now owned, leased or operated by
it and where such business is now conducted by it. Telecom is qualified to
do business and is in good standing in each of the jurisdictions in which the
nature of its business or the property owned or leased by it make such
qualification necessary. Telecom has delivered to ART complete and correct
copies of any organizational, by-laws or charter documents applicable to it,
each as amended and in effect on the date hereof. The Selling Stockholders
own 100% of the outstanding capital stock of Telecom, and there are no
outstanding subscriptions, options, warrants or other rights convertible into
or exercisable for, or any agreements to issue, capital stock of Telecom.
3.2. AUTHORITY FOR AGREEMENT; CONFLICTS.
(a) Telecom and each of the Selling Stockholders have all necessary
power and authority, corporate or otherwise, to enter into, execute and
deliver this Agreement, the Telecom Management Agreement (the "Management
Agreement") entered into between ART and Telecom dated the date hereof and
the other documents to be delivered by Sellers at the Closing (the
Management Agreement and such other documents are collectively the "Seller
Documents") and to perform fully his or its obligations hereunder and the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the applicable Seller Documents by
Telecom has been duly authorized by all necessary corporate action.
(b) Each of this Agreement and the Management Agreement has been,
and the other Seller Documents, at the Closing, will have been, duly and
validly executed and delivered by Telecom and each Selling Stockholder and
each of this Agreement and the Management Agreement constitutes, and the
other Seller Documents will constitute, the legal, valid and binding
obligation of Telecom and each Selling Stockholder and each of this
Agreement and the Management Agreement is, and the other Seller Documents
will be, enforceable by and against Telecom and each Selling Stockholder in
accordance with its respective terms, except as enforceability thereof may
be limited by applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity
or at law.
(c) The execution and delivery of this Agreement and the Seller
Documents by Telecom and each Selling Stockholder and the consummation of
the transactions contemplated hereby and thereby will not conflict with or
result in any violations of or defaults under: (i) any statute, regulation,
order, judgment or decree of any federal, state or local governmental body
or regulatory authority applicable to Telecom, any Selling Stockholder or
any of the Assets; (ii) any other statute, regulation, order, judgment or
decree applicable to Telecom, any Selling Stockholder or any of the Assets
under or in any other applicable jurisdiction; (iii) any mortgage,
indenture, lease, agreement, instrument or other obligation to which
Telecom or any Selling Stockholder
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is a party or by which any of the Assets are bound; or (iv) any permit,
concession, grant, franchise, license, of or applicable to Telecom or any
Selling Stockholder. Such execution, delivery and consummation will not
result in the creation of any lien, charge, encumbrance or security
interest upon any of the Assets.
3.3. CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for the
consent of the FCC to the transfer or change of control of the Authorizations,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority is required to be made or
obtained by Telecom or any Selling Stockholder in connection with its execution
and delivery of and performance of its or his obligations under, this Agreement.
3.4. FCC REGULATORY MATTERS.
(a) Each of the Sellers is in compliance with the Federal
Communications Act of 1934, as amended (the "Communications Act"), and the
rules, regulations and policies of the FCC promulgated thereunder
applicable to either Telecom or the Assets, and each of the Sellers is in
compliance with all other federal, state and local laws, rules, regulations
and ordinances applicable to either Telecom or the Assets and is not in
default under any order, writ, injunction or decree of any court or
governmental agency or instrumentality applicable to either Telecom or the
Assets.
(b) SHARING AGREEMENTS. No agreement exists for the shared use of
facilities, trunk lines, airspace, radio frequencies or other assets used
in connection with the Assets or the Pending Applications.
(c) FCC AUTHORIZATIONS. Schedule 1.1 sets forth a true and
complete list of each Authorization that is being transferred to ART
hereunder, the name of the licensee or permit holder, the call sign, the
Authorization expiration date, and the status of any applications for
assignment, transfer or waiver of FCC rules filed (or to be filed) with the
FCC and a true and complete list of each Pending Application. Telecom has
provided to ART true and correct copies of the Authorizations received by
it from the FCC. Except for the Superseded Agreements, none of such
Authorizations or Pending Applications are subject to any purchase, sale,
option or right of first refusal agreements, and Telecom owns all of the
right, title and interest in, to and under such Authorizations and Pending
Applications. Telecom is qualified under all laws, rules and regulations
to hold the Authorizations held by it.
(d) FEES. All franchise, license or other fees and charges that
have become due and payable with respect to the Assets pursuant to any
applications, filings, recordings and registrations with, and all
validations or exemptions, approvals, orders or authorizations, consents,
Authorizations, certificates and permits from, the FCC, any
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<PAGE>
state public utility commission and any other federal, state or local
regulatory or governmental bodies or authorities, including any
subdivision thereof, have been paid.
(e) AUTHORIZATION COMPLIANCE. The Authorizations are valid and in
full force and effect without materially adverse conditions except for such
conditions as are generally applicable to FCC Authorizations or holders of
FCC Authorizations. No event has occurred and is continuing that could:
(i) result in the revocation, termination or adverse modification of any
Authorization listed on Schedule 1.1; or (ii) materially and adversely
affect any rights of Telecom thereunder prior to Closing or of ART after
Closing. Telecom has no reason to believe that the Authorizations will not
be renewed by the FCC in the ordinary course. The current ownership and
operation by Telecom, as applicable, of the Authorizations comply in all
material respects with all the regulations and policies of the FCC.
(f) REPORTS. Any and all reports and filings required to be filed
with the FCC by Telecom with respect to the Authorizations have been filed
and Telecom has provided true and correct copies of all such reports and
filings to ART. All such reports and filings were accurate and complete in
all material respects on the date thereof. From the date hereof through
the Closing, all such required reports and filings will be filed by Telecom
on a timely basis.
(g) DISCLOSURE. Telecom knows of no facts pertaining to its
qualifications to be a licensee which would cause the FCC not to issue its
approval with respect to, or otherwise prevent, the transfer to ART
pursuant to this Agreement of the Authorizations.
3.5. TITLE TO THE TRANSFERRED ASSETS; LIENS; OTHER ASSETS. Telecom has
good, indefeasible and transferable title to all of the Assets, free and clear
of all Liens.
3.6. CONTRACTS. Except for this Agreement, and except as disclosed on
Schedule 3.6, Telecom is not a party to any contract, commitment or similar
agreement or arrangement, whether written or oral, by which any of the Assets is
bound or affected.
3.7. LITIGATION. There are no actions, claims, proceedings, suits and
investigations pending, or, to the best knowledge of each of Telecom and the
Selling Stockholders threatened against any of Telecom, the Assets or any of its
properties, assets or rights before any court, arbitrator or administrative or
governmental body: (i) relating to the Assets or which seek to revoke, rescind,
cancel, modify or refuse to renew any Authorization or; (ii) in connection with
the transactions contemplated hereby, nor is there any basis for any such
action. There is no judgment, order or decree affecting the Assets or the
transactions contemplated hereby.
3.8. DISCLOSURE. Neither this Agreement nor any exhibit or schedule
hereto nor any statement, list or certificate delivered to ART at or prior to
the Closing pursuant to this
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Agreement contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statement contained herein and
therein in the context in which they were made not misleading. Except as
otherwise disclosed herein, none of Telecom or the Selling Stockholders know
of any information or fact that has or would have a material adverse effect,
or that might in the future have a material adverse effect, on the Assets.
3.9. TAXES. Telecom has timely filed all requisite federal, state and
local tax and information returns which are required to be filed by it and has
paid, or made adequate provision for the payment of, all taxes which may have or
may become due and there are no assessments or any basis therefor. There are no
examinations in progress or claims against Telecom for federal or other taxes
(including penalties and interest) for any period and no notice of any claim,
whether pending or threatened, for taxes has been received.
3.10. BROKERAGE. There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Telecom or any Selling Stockholder.
4. REPRESENTATIONS AND WARRANTIES BY ART. ART represents and warrants as
follows:
4.1. CORPORATE STATUS; AUTHORITY.
(a) ART is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full
corporate power and authority to carry on its business as now conducted
and to own or lease and operate its properties as and in the places where
such business is now conducted and as such properties are now owned,
leased or operated.
(b) ART has all necessary corporate power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. At
the Closing Date, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
authorized by the Board of Directors of ART. This Agreement constitutes
the valid and legally binding obligation of ART and is enforceable against
it in accordance with its terms, except as enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at
law. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, will not conflict with or result in
any violation of or default under any provision of the charter documents or
by-laws of ART or any material mortgage, indenture, lease, agreement or
other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to it
or any of its respective properties.
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4.2. LITIGATION. There are no judicial or administrative actions, suits,
proceedings or investigations pending, or to the knowledge of ART threatened,
that question the validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement, nor
does ART know of any basis for any such action, suit, proceeding or
investigation.
4.3. CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
approval by the FCC of the transfer or change of control, as applicable, of the
Authorizations and except as set forth on Schedule 4.3 hereto, no consent,
approval or authorization of, or declaration, filing or registration with any
court or governmental or regulatory authority is required to be made or obtained
by ART in connection with its execution, delivery and performance of this
Agreement.
4.4. BROKERAGE. There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of ART.
5. EXPENSES. Each party to this Agreement shall assume and bear all of its
own respective expenses, costs and fees incurred or assumed by each in the
preparation and execution of this Agreement and compliance herewith, whether or
not the transaction herein provided for shall be consummated.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements of each of Telecom, the Selling Stockholders and ART
contained herein (including all schedules and exhibits hereto) or in any
document, statement, certificate or other instrument referred to herein or
delivered at the Closing in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, any investigation by
ART of the Sellers or the Assets, the Closing and the consummation of the
transactions contemplated by this Agreement.
7. INDEMNITIES.
7.1. INDEMNIFICATION BY THE SELLERS. The Sellers shall jointly and
severally indemnify ART and its successors and assigns for any and all damages,
claims, losses, liabilities, and expenses, including without limitation
reasonable legal and accounting expenses (collectively, "Losses"), which may
arise out of: (i) any breach of any Sellers' covenants and agreements
hereunder; (ii) any inaccuracy or misrepresentation in any representation or
warranty of any Seller hereunder, in each case as such representation or
warranty would read if all materiality and knowledge standards and disclosure
schedules were deleted from it, or any inaccuracy or misrepresentation in any
certificate or document delivered in accordance with the terms of this Agreement
by any Seller; (iii) any liabilities of Telecom; or (iv) any claim or action
asserted
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by any third party arising out of or in connection with any event, act or
omission relating to any of the Assets occurring prior to the Closing Date.
7.2. INDEMNIFICATION BY ART. ART shall indemnify and hold harmless the
Sellers from and against any and all Losses which may arise out of: (i) ART's
breach of any of the covenants and agreements made in this Agreement by ART; or
(ii) any inaccuracy or misrepresentation in any representation or warranty of
ART hereunder, in each case as such representation or warranty would read if all
materiality and knowledge standards and disclosure schedules were deleted from
it, or any inaccuracy or misrepresentation in any certificate or document
delivered in conjunction with this Agreement.
8. COVENANTS.
8.1. PREPARATION FOR CLOSING. Telecom, the Selling Stockholders and ART
agree to use their best efforts to maintain the accuracy of their respective
representations and warranties contained in this Agreement until the Closing.
8.2. FCC AND OTHER APPROVAL.
(a) The Sellers and ART will use their best efforts to join in and
submit as quickly as possible one or more applications (the "Applications")
to the FCC requesting the FCC's written consent to the change in control or
the transfer, as the case may be, of the Authorizations to ART or designees
of ART.
(b) Except as otherwise provided herein, each party shall bear its
own expenses in connection with the preparation and prosecution of the
Applications. ART and the Sellers shall equally share in any application,
consent or other fees charged by the FCC in connection with the
Applications, and the cost of publishing any public notices in connection
therewith.
8.3. FURTHER ASSURANCES. At any time and from time to time at or after
the Closing, at the request of ART and without further consideration, the
Sellers will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as ART may
reasonably determine is necessary to transfer, convey and assign to ART, and to
confirm ART's title to or interest in the Assets to put ART in actual possession
and operating control of the Assets and to assist ART in exercising all rights
with respect thereto.
8.4. PUBLIC ANNOUNCEMENTS. Neither ART, Telecom or any of the Selling
Stockholders will, at any time, without the prior written consent of the other
party, make any announcement, issue any press release or make any statement to
any third party with respect to this Agreement any of the specific matters
discussed between the parties; provided that ART
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may make any disclosures it deems appropriate in any documents filed with the
Securities Exchange Commission.
8.5. INFORMATION AND ACCESS; COMPLIANCE. During the period from the date
of this Agreement and continuing until the Closing Date or until the termination
of this Agreement pursuant to Section 11 hereof, Telecom shall afford to the
officers, independent certified public accountants, counsel and other
representatives of ART, reasonable access to the properties, books, records and
personnel of Telecom used in or relating to the Assets. Telecom's provisions of
access pursuant to this Section 8.5 shall in no way affect or otherwise obviate
or diminish any representations and warranties of Telecom. Telecom shall take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on Telecom with respect to this Agreement and the
transactions contemplated hereby (including furnishing all information required
by the FCC in connection with transfer of the Authorizations and Pending
Applications) and shall take all reasonable actions necessary to cooperate
promptly with and furnish information to ART in connection with any such
requirements imposed upon ART in connection with this Agreement and the
transactions contemplated hereby. Telecom shall not take or reasonably fail to
take any action which it believes would cause its disqualification as an
assignor of the Authorizations.
8.6. CONFIDENTIALITY. Telecom acknowledges that ART is considering a
public and/or private sale of stock and debt and has filed material with the
Securities and Exchange Commission. Telecom further acknowledges that,
accordingly, it is important that no public communications of any kind and no
communications to any third parties including without limitation to any
investment bankers, investment analysts, journalists or reporters of any aspects
or facts relating to this Agreement and the transactions related hereto be made
by Telecom or any of its advisers, consultants or agents. Telecom shall take
all steps reasonably necessary to ensure that its employees, officers,
directors, advisers, attorneys, financial technical and other consultants,
investment bankers and agents are informed and agree to abide by all of the
relevant provisions of this Section 8.6. Telecom understands that ART may not
have an adequate remedy at law for a beach or threatened breach by such party of
the terms of this Section 8.6, and Telecom therefore agrees that, if there is
any such breach or threatened breach, ART may, in addition to any other legal or
equitable remedies available to it, obtain an injunction or restraining order to
enjoin Telecom from the breach or threatened breach of this Section 8.6.
8.7. CONDUCT OF BUSINESS BY SELLERS. Sellers covenant that the Seller
shall not:
(a) sell, transfer, convey or otherwise dispose of any of the
Assets or, except in accordance with the provisions of this Agreement, any
of the Pending Applications or any right thereto or interest therein,
(b) encumber, or agree to encumber, in any way, or enter into any
consensual restriction with respect to, any of the Assets or, except in
accordance with the
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provisions of this Agreement, the Pending Applications or any right
thereto or interest therein, or
(c) enter into any contract, agreements or understanding with
respect to any of the Assets or, except in accordance with the provisions
of this Agreement, the Pending Applications.
(d) enter into any agreements or commitments for any of 8.7(a)
through 8.7(c).
9. CONDITIONS PRECEDENT TO ART'S OBLIGATIONS. All obligations of ART under
this Agreement are subject to the fulfillment to the reasonable satisfaction of
ART prior to or at the Closing of each of the following conditions, any of which
may be waived by ART in its sole discretion:
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Sellers in this Agreement (including all exhibits and schedules
hereto), shall be true and correct in all material respects when made and shall
be repeated and shall be true and correct in all material respects at and as of
the Closing Date, and ART shall have received a certificate dated the date of
the Closing signed by the chief executive officer of Telecom to the foregoing
effect.
9.2. CONSENTS. All filings with and consents from all federal, state and
local governmental agencies required to consummate the transactions contemplated
by this Agreement shall have been made or received, as applicable.
9.3. FCC AUTHORIZATIONS. Without limiting the generality of Section 9.2,
the FCC shall have authorized the transfer or change of control, as applicable,
of all of the Authorizations by a Final Order (as defined below), without any
conditions or restrictions that materially affect the value of the
Authorizations or operations pursuant to the Authorizations or any conditions or
restrictions materially different than the normal authorizations issued by the
FCC to other 38 GHz license holders at the date of this Agreement. In the event
that any FCC order approving the transfer of the Authorizations to ART imposes
such conditions, this condition shall not be satisfied until such conditions are
removed or eliminated, and Sellers shall fully cooperate in obtaining the
removal or elimination of such restrictions. "Final Order" means an action by
the FCC granting its consent to the assignment of a Authorization, with respect
to which no request for stay, petition for rehearing, reconsideration or appeal
is pending, and as to which the time for filing any petition for rehearing,
reconsideration or appeal has expired and with respect to which the time for
agency reconsideration or review taken on its own motion has expired, or in the
event of the filing of such request, petition or appeal, an action which shall
have been reaffirmed or upheld and with respect to which the time for seeking
further administrative or judicial review shall have expired.
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9.4. PERFORMANCE BY TELECOM; CERTIFICATE. Telecom shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by them prior to or at the Closing, and the chief
executive officer of Telecom shall deliver to ART a certificate dated the
Closing Date, to such effect.
9.5. ABSENCE OF ERRORS AND OMISSIONS. ART shall not have discovered
any material error, misstatement or omission in any of the representations or
warranties, or any material failure to perform or satisfy any covenants or
conditions required by this Agreement to be performed or satisfied by the
Sellers on or prior to the date of Closing.
9.6. OPINIONS OF COUNSEL FOR TELECOM. ART shall have received favorable
opinions addressed to it and dated the Closing Date of Fleischman & Walsh LLP,
counsel and FCC counsel for Telecom in form and substance acceptable to ART and
its counsel.
9.7. ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the result of which could prevent or make illegal the consummation of
such transactions or which could be materially adverse to the Assets.
9.8. UCC SEARCHES. ART shall have obtained Uniform Commercial Code
(including fixture filings) and state and federal tax and judgment lien
searches against Telecom all dated within 5 days of the Closing Date.
9.9. RELEASE OF LIENS. All of the Assets shall be free and clear of all
liens and ART shall have received evidence of the release of all liens and the
termination of all financing statements, if any, as may be reasonably requested
by ART.
9.10. CORPORATE APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors of ART.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The obligations of
the Sellers to consummate the transactions contemplated hereby shall be subject
to the fulfillment by ART, prior to or at the Closing, of each of the following
conditions:
10.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by ART in this Agreement shall be true and correct in all material respects
when made and shall be repeated and shall be true and correct in all material
respects at and as of the Closing Date, except as specifically provided for
herein, and Telecom shall have received a certificate dated the date of Closing
signed by an officer of ART, to the foregoing effect.
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10.2. GOVERNMENT CONSENTS. All filings with and consents from all
federal, state and local governmental agencies required to consummate the
transactions contemplated hereby shall have been obtained at or prior to the
Closing.
10.3. PERFORMANCE OF ART. ART shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing and an officer of ART shall deliver a
certificate or certificates to Telecom to such effect.
10.4. ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the result of which could prevent or make illegal the consummation of
such transactions.
10.5. PURCHASE PRICE. The Purchase Price shall have been delivered to
Telecom.
11. TERMINATION. This Agreement may be terminated by the parties as set forth
in this Section 11:
(a) at any time by the mutual written consent of Telecom and ART;
(b) by ART at any time after July 1, 1997, if the conditions set
forth in Section 9 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated by
the Sellers by such time;
(c) by Telecom at any time after July 1, 1997 (the "Seller Date"),
if the conditions set forth in Section 10 hereof shall not have been
complied with or performed and such noncompliance or nonperformance shall
not have been cured or eliminated by ART by such time; provided that if
prior to the Seller Date, the FCC has issued an order, that is not yet a
Final Order, approving the transfer or change in control, as applicable, of
the Authorizations, to ART, ART may extend the Seller Date until July 1,
1998 by notice to Telecom.
(d) by the Sellers on the one hand, or by ART, on the other, if
there shall have been a breach of any material representation, warranty,
covenant or agreement on the part of the others set forth or contemplated
by this Agreement, which breach cannot be cured prior to the Closing.
provided, however, that the terminating party may not terminate its obligations
under this Agreement if such terminating party has breached this Agreement in
any material respect.
Notwithstanding any termination of this Agreement pursuant to this Section
11, the provisions of Sections 7, 8.4, 8.6 and 12.1 hereof shall remain in full
force and effect.
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12. POST CLOSING COVENANTS.
12.1. DISCLOSURE OF INFORMATION. From and after the Closing, the Sellers
shall not use or disclose to any person any proprietary information of ART for
any reason or purpose whatsoever, nor shall it make use of any such information
for its own purposes or for the benefit of any person except ART or any
affiliate thereof. The restrictions on use and disclosure of information
contained in this Section 12.1 do not extend to any item of information that (A)
is publicly known at the time of its disclosure, (B) is lawfully received from a
third party not bound in a confidential relationship to ART, (C) is published or
otherwise made known to the public by ART, or (D) is required to be disclosed
pursuant to a court order, provided that, upon receiving notice such disclosure
is required, the Sellers shall promptly give ART notice thereof, and the Sellers
shall cooperate with ART's efforts, if any, to contest the applicability of such
order.
12.2. NON-COMPETITION/NON-INTERFERENCE/NON-SOLICITATION. The Sellers
recognize and acknowledge the highly competitive nature of 38 Ghz operations and
that ART would be irreparably harmed if Sellers were to compete with ART in the
geographic areas covered by the Authorizations. Accordingly, in consideration
of the premises contained herein, the consideration to be received hereunder and
in consideration of and as an inducement to the transactions contemplated
hereby, neither the Sellers nor any of their affiliates shall, from and after
the date hereof until the fifth anniversary of the Closing Date: (i) apply for,
manage, or acquire all or any part of any 38 Ghz authorizations in any area
covered in whole or in any part by any of the 38 Ghz Authorizations being
transferred pursuant hereto; (ii) interfere with, disrupt or attempt to disrupt
the relationship, contractual or otherwise, between ART and any third party,
including, without limitation, any customer, supplier or employee of ART, or
(iii) solicit any employee of ART for employment by the sellers or any of their
affiliates.
12.3. INJUNCTIVE RELIEF. The parties recognize and acknowledge that a
breach of sections 12.1 or 12.2 by the Sellers may cause irreparable and
material loss and damage to ART as to which ART may not have an adequate remedy
at law or in damages. Accordingly, the Seller acknowledge and agree that, in
addition to which ART may be entitled, the issuances of an injunction or other
equitable remedy is an appropriate remedy for any such breach. It is the desire
and intent of Sellers and ART that the provisions of sections 12.1 and 12.2
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of any of said subsections shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made.
13. ENTIRE AGREEMENT; ASSIGNABILITY. This Agreement, together with the
schedules and exhibits hereto, constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements,
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understandings, negotiations and discussions, whether oral or written, of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein. This Agreement may not be assigned by any of
the Sellers without the prior written consent of ART and any such attempted
assignment shall be null and void.
14. AMENDMENT. This Agreement may be amended by the parties hereto at any
time, but only by an instrument in writing duly executed and delivered on behalf
of each of the parties hereto.
15. HEADINGS. Section headings are not to be considered part of this Agreement
and are included solely for convenience and are not intended to be full or
accurate descriptions of the contents thereof. References to Sections are to
portions of this Agreement unless the context requires otherwise.
16. EXHIBITS, ETC. Exhibits, schedules and other documents referred to in this
Agreement are an integral part of this Agreement.
17. SUCCESSORS AND ASSIGNS. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and assigns.
18. NOTICES, ETC. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given on the
date of delivery if delivered or mailed, first-class postage prepaid,
(a) if to Telecom, to:
Telecom One, Inc.
1004 Woburn Court, Suite 100
McLean, Virginia 22102
Attention: Gordon Hutchins, Jr.
with a copy to:
Fleischman & Walsh, LLP
1400 16th Street, N.W.
Washington, D.C. 20036
Attention: Mitchell F. Brecher
(b) if to ART to:
Advanced Radio Technologies Corporation
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500 108th Avenue, N.E., Suite 2600
Bellevue, Washington, 98004
Attention: W. Theodore Pierson, Jr. and
Thomas A. Grina
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts, 02110-2624
Attention: Mary E. Weber, Esq.
19. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto arising out of this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to the
internal conflict of law provisions thereof.
20. SEVERABILITY. The provisions of this Agreement are severable, and if any
one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
21. COUNTERPARTS. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
TELECOM ONE. INC.
By: ________________________________
Name:
Title:
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By: ________________________________
Name:
Title:
SELLING STOCKHOLDERS
____________________________________
Name: William Rodi
____________________________________
Name: Gordon Hutchins, Jr.
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TELECOM MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") between Telecom One, Inc.
("Licensee"), a Delaware corporation, and Advanced Radio Technologies
Corporation ("ART"), a Delaware corporation, is entered into as of the dates set
forth next to the signatures below and is effective as of June __, 1996.
WHEREAS, Licensee is the licensee for the Federal Communications Commission
("FCC") authorizations (collectively, the "Authorizations") for 38 GHz frequency
radio systems (the "Systems") in various locations ("Markets"); and
WHEREAS, Licensee and ART desire to enter into an exclusive agreement for
the construction, operation, and management by ART of the Systems, including
without limitation those listed in Exhibit A hereto, consistent with Licensee's
obligations in connection with the Authorizations under all of the Federal and
state laws, rules, and regulations;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1. TERM OF AGREEMENT AND TERMINATION.
(a) This Agreement becomes effective on the date set forth above.
Unless it is terminated earlier pursuant to the provisions of this Section, the
term of this Agreement ("Term") shall extend for ten years and shall renew
automatically for additional ten year terms, unless either party terminates this
Agreement as of the end of any such ten year term on at least 365 days' written
notice prior to the end of any such term;
(b) This Agreement shall terminate with respect to any of the
Authorizations, upon the acquisition of any such Authorization by ART pursuant
to FCC consent
(c) At any time after the termination, pursuant to its terms, of the
Asset Purchase Agreement between the parties hereto, dated the date hereof,
either party may terminate this Agreement with up to 180 days' prior written
notice to the other party.
2. SYSTEM CONSTRUCTION AND MANAGEMENT; EQUIPMENT LEASE. Licensee hereby
grants ART the exclusive right to manage the Systems under the following terms
and conditions. Licensee agrees that it shall not grant any other party the
right to manage its Systems and Authorizations, provided, however, that Telecom
One, Inc. retains the right to construct and operate its Systems, provided that
License agrees to coordinate the construction of all Systems with ART. Subject
to Licensee's supervision and control, ART will use its reasonable efforts
<PAGE>
to undertake the planning, design, construction, installation, marketing, sales
and operations of the Systems.
In particular, the parties agree as follows:
(a) ART shall propose a schedule of construction to Licensee that will
identify the proposed date for each System to become operational in a manner
designed to satisfy all FCC and other regulatory requirements. Licensee shall
have ten business days in which to approve or reject such proposed schedule, not
to be unreasonably withheld.
(b) Once the schedule has been approved, ART shall use its reasonable
efforts to construct the Systems in accordance with such schedule.
(c) ART shall acquire, lease, or otherwise obtain the right to use all
assets (collectively, the "Equipment"), necessary for the operation of the
Systems, including any expansion, modification or reduction thereof.
(d) On behalf of Licensee, ART shall bill and collect, from the users
of the Systems, all fees, charges, or other compensation arising from such use,
and shall pay all expenses and fees incurred or payable by the Systems.
(e) Subject to Licensee's ultimate supervision and control, ART shall
generally manage the day-to-day operations of the Systems and do or assist with
any and all other acts and shall execute such other agreements, documents or
instruments, as are consistent with FCC rules and regulations and, in the good
faith judgment of ART, are necessary to carry out the development, construction
and operation of the Systems, whether or not specifically enumerated herein.
(f) All Equipment shall be acquired and constructed by ART and shall
be the property of ART. The Equipment shall be leased to Licensee for the
consideration described in Section 4 hereof during the term of this Agreement
and solely for the purposes described herein. During the term of such lease,
Licensee shall have full and unfettered access to all the Equipment used in
Licensee's System. Such lease shall terminate simultaneously with the
termination of this Agreement for any reason. Upon such termination, the
Equipment shall remain the property of the ART, and ART may take immediate
possession thereof.
3. REGULATORY COMPLIANCE. The parties agree that Licensee is in sole
control of the Authorizations and that it is required by FCC regulations to be
in sole control of the licensed facilities so long as it is the Licensee. ART
acknowledges and agrees that Licensee has ultimate control over all decisions
affecting System, notwithstanding any other provision of this Agreement. ART
will assist Licensee in complying with all applicable Federal, state and local
regulations. This assistance includes, but is not limited to, the following:
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(a) Each System customer will be advised that service is provided
over facilities licensed to and subject to the ultimate control by Licensee;
(b) ART agrees to use its reasonable efforts to comply with all FCC
timetables concerning construction and operation and to take such steps as may
be needed to preserve any Authorizations that may be granted by the FCC,
including discontinuing operations if so directed by Licensee to avoid any
violations of FCC rules or regulations; ART will provide Licensee with advance
written notice if it comes into possession of facts indicating that it will be
unable to render a System operational within the timetable specified by the
terms of the applicable authorization;
(c) Neither ART nor Licensee shall represent themselves as the legal
agents or one another;
(d) Licensee shall, with the cooperation and assistance of ART, fully
comply with the applicable requirements of the Communications Act of 1934, as
amended (the "Act"), and all regulations necessary to keep the Authorization in
full force and effect, including FCC regulations. Licensee shall prepare and
submit to the FCC and any other relevant Federal, state or local agency all
reports, applications, renewals, or other filings or documents that may be
required for this purpose, provided that ART shall provide any assistance
required by Licensee in fulfilling this obligation; and
(e) In the event that ART determines that any modification to any
System Authorization are necessary or desirable, ART will submit to Licensee a
description of such proposed modifications for Licensee's review and approval,
which shall not be unreasonably withheld. Upon approval, Licensee shall
promptly file with the FCC any requests for modifications of the relevant
Authorization submitted to such Licensee by ART which may be needed to make
construction feasible, or any filings or appeals which are necessary to extend
the period for construction under the FCC's rules. Such requests may include,
but not be limited to, applications to the FCC for special temporary authority.
(f) Each party has determined in good faith that this Agreement is
consistent with the Act and the FCC's rules. In the event that the FCC
determines that this Agreement is inconsistent with Licensee's obligations under
the Act or it is otherwise contrary to FCC policies, rules and regulations, the
parties agree to modify this Agreement in any reasonable way to maintain
consistency with the Act and the FCC's rules, preserving to the maximum extent
possible the essential business terms and conditions contained herein.
4. LICENSE FEES. During the term of this Agreement, Licensee shall pay
ART fifteen percent (15%) of all Gross Revenue (as defined below) as lease
payments for the Equipment pursuant to Section 2(f) hereof (each such payment
made from time to time is referred to as a "Lease Payment"), and Licensee shall
pay ART seventy-five percent (75%) of all Gross Revenue as ART's compensation
for managing the Systems pursuant hereto (each payment
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made from time to time is referred to as a "Management Payment"). ART shall
remit all revenue relating to the Authorizations other than the Lease
Payments and Management Payments. Such revenue to be remitted to Licensee,
for each calendar quarter, shall be distributed to Licensee within sixty days
of the end of such quarter. "Gross Revenue" shall mean all revenue derived
from the operation of the Systems less expenses paid to third parties in
respect of equipment and facilities directly related to the provision of
services.
5. NOTICE. All notices and other communications shall be in writing and
shall be deemed given the same day if delivered personally or sent by telecopy
or the next business day if sent by express mail or courier (overnight
delivery), or five (5) business days later if sent by registered mail or
certified mail, return receipt requested, postage prepaid, to the parties at the
following addresses or at such other address for a party as shall be specified
by like notice, provided that notice of change of address shall be effective
only upon receipt thereof:
(a) If to Licensee, to:
Telecom One, Inc.
1004 Woburn Ct., Suite 100
McLean, Virginia 22102
Attn: Gordon Hutchins, Jr.
With a copy to:
Fleischman & Walsh LLP
1400 16th St., N.W.
Washington, DC 20036
Attn: Mitchell Brecher
(b) If to ART, to
Advanced Radio Technologies Corporation
500 108th Avenue, N.E., Suite 2600
Bellevue, Washington 98004
Attn: Thomas A. Grina
With a copy to:
W. Theodore Pierson, Jr.
Executive Vice President and General Counsel
1200 Nineteenth St., N.W., Suite 607
Washington, D.C. 20036
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<PAGE>
6. REPRESENTATIONS AND WARRANTIES.
(a) Licensee represents and warrants that it is the licensee or
permit holder with respect to the Authorizations listed in Exhibit A and that it
is duly qualified under all laws, rules and regulations to hold such
Authorizations. Licensee further represents and warrants that it is the sole
holder of the Authorization and is the real party in interest with respect to
the Authorizations and that no other party has an interest of any kind.
Licensee further represents that it has the requisite authority and/or capacity,
as applicable, to perform its undertakings pursuant to this Agreement.
(b) Licensee represents and warrants that it will take all necessary
steps, to maintain the Authorizations with the FCC in good standing.
(c) Each of the parties hereto represents and warrants that each
shall take such steps and execute such documents as may be necessary from time
to time to effectuate the terms and conditions of this Agreement.
(d) ART represents and warrants that it is a corporation duly
authorized and in good standing under the laws of the State of Delaware and has
the requisite authority to perform its undertakings pursuant to this Agreement.
(e) ART represents and warrants that it is familiar with the
applicable rules and regulations of the FCC and that it is aware of no
impediment to the performance of its undertakings hereunder.
7. INDEMNIFICATION.
(a) Licensee agrees to indemnify and hold harmless ART from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorney's
fees and costs), imposed upon or incurred by or asserted against ART that arise
as a result of the negligence or misconduct of Licensee or Licensee's employees
or agents.
(b) ART agrees to indemnify and hold harmless Licensee from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorney's
fees and costs), imposed upon or incurred by or asserted against Licensee that
arise as a result of the negligence or misconduct of ART or ART's employees or
agents, including but not limited, to conduct in violation of the Act, the rules
and regulations of the FCC and the terms and conditions of the Authorization.
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8. ASSIGNABILITY; SUCCESSORS AND ASSIGNS.
(a) Licensee may not assign this Agreement without ART's prior written
consent, which consent shall not be unreasonably withheld. Any assignment in
violation of this Section 8 shall be null and void.
(b) ART may assign its right to manage the Systems hereunder, with
Licensee's prior written consent not to be unreasonably withheld, to another
party, provided such assignee of ART has experience in the management of 38 GHz
systems or other telecommunications facilities or, alternatively, employs either
personnel of ART or other persons who have experience in the management of 38
GHz systems or other telecommunications facilities. Notwithstanding the
foregoing, ART may assign its rights hereunder to a corporate affiliate. ART
may employ such subcontractors or agents as it deems necessary in the
performance of its duties hereunder.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective heirs, representatives, successor and
permissible assigns.
9. SEVERABILITY. In the event that any provision herein is held to
invalid, void, or illegal by any Federal, state or local court, or any
regulatory agency, the remaining provisions of the Agreement shall remain in
full force and effect and this Agreement shall be reasonably construed so as to
preserve the original intent of the parties hereto insofar as practicable. In
the event that any provision herein is deemed to be invalid, void, in violation
of any agency rules, or otherwise unlawful, the parties shall use their
respective best efforts to amend the offending provisions to bring them into
legal compliance with minimum disruption to the expectations of the parties as
set forth in this Agreement.
10. COUNTERPARTS. This agreement may be executed in any number of
counterparts with the same as if the signature of each counterpart were in the
same instrument.
11. NO WAIVER OF RIGHTS; AMENDMENT. The failure of either party to
insist, in any one or more instances, upon the performance of any of the terms,
covenants or conditions herein, or to exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition, or the future exercise of such right, but the
obligation of the other party with respect to such future performance shall
continue in full force and effect. This Agreement may only be amended, modified
or changed by a writing signed by all parties hereto.
12. WARRANTY. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, RESPECTING THIS AGREEMENT OR THE SERVICE PROVIDED HEREUNDER.
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13. ENTIRE AGREEMENT. This Agreement supersedes any other agreements
between the parties, whether oral or written, including but not limited to the
Services Agreement entered into April 24, 1996 between Telecom One, Inc. and
Advanced Radio Telecom Corp., with respect to the Authorizations, relating to
the matter contemplated herein, and constitutes the entire agreement by and
between the parties, there being no other agreements or understandings between
the parties as expressly set forth herein.
14. GOVERNING LAW/PROCEDURE. This Agreement will be governed by the laws
of the State of Delaware; provided that any dispute under this Agreement will be
resolved by arbitration under the Commercial Arbitration rules of the American
Arbitration Association, using one arbitrator.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ART: LICENSEE:
Advanced Radio Technologies Telecom One, Inc.
Corporation
By:____________________________ By:____________________________
Printed Name:__________________ Printed Name:__________________
Title:_________________________ Title:_________________________
Dated:_________________________ Dated:_________________________
Advanced Radio Telecom Corp.
(for purposes of Section 13 hereof only)
By:____________________________
Printed Name:__________________
Title:_________________________
Dated:_________________________
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<PAGE>
EXHIBIT 10-20
SECOND RESTATED AND AMENDED
REGISTRATION RIGHTS AGREEMENT
among
Advanced Radio Telecom Corp.
Advanced Radio Technologies Corporation
the stockholders and warrantholders of Advanced Radio Telecom Corp.
and the
stockholders and warrantholders of Advanced Radio Technologies Corporation
July 3, 1996
<PAGE>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2. Piggyback Registration. . . . . . . . . . . . . . . . . . .6
SECTION 4. Holdback Agreement. . . . . . . . . . . . . . . . . . . . .9
SECTION 5. Preparation and Filing. . . . . . . . . . . . . . . . . . .9
SECTION 6. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 7. Indemnification . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8. Underwriting Agreement. . . . . . . . . . . . . . . . . . 14
SECTION 9. Information by Holder . . . . . . . . . . . . . . . . . . 14
SECTION 10. Exchange Act Compliance . . . . . . . . . . . . . . . . . 14
SECTION 11. No Conflict of Rights . . . . . . . . . . . . . . . . . . 14
SECTION 12. Restriction on Transfer . . . . . . . . . . . . . . . . . 15
SECTION 13. Termination . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 14. Successors and Assigns. . . . . . . . . . . . . . . . . . 16
SECTION 15. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 16. Entire Agreement. . . . . . . . . . . . . . . . . . . . . 16
SECTION 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 18. Modifications; Amendments; Waivers. . . . . . . . . . . . 17
SECTION 19. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 20. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 21. Severability. . . . . . . . . . . . . . . . . . . . . . . 18
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SECTION 22. Acknowledgment. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 23. Governing Law . . . . . . . . . . . . . . . . . . . . . . 19
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SECOND RESTATED AND AMENDED REGISTRATION RIGHTS AGREEMENT, dated July 3, 1996
(the "Restated Registration Agreement") among (i) ADVANCED RADIO TELECOM CORP.
(formerly Advanced Radio Technology, Ltd., a Delaware corporation (the "Company"
or "Telecom") (ii) ADVANCED RADIO TECHNOLOGIES CORPORATION, a Delaware
corporation ("ART"), (iii) the existing stockholders of the Company listed under
Part I(a) of Schedule I (the "Existing Landover Stockholders"), (iv) the
stockholders of ART listed under Part II(a) of Schedule I (the "Existing ART
Stockholders"), (v) the stockholders of the Company listed under Part I(b) of
Schedule I (the "New Landover Stockholders"), (vi) the stockholders of the
Company listed under Part 1(c) of Schedule I (the "New Unaffiliated
Stockholders" and, collectively with the Existing Landover Stockholders and the
New Landover Stockholders, the "Investor Telecom Stockholders"), (vii) the
stockholders of ART listed under Part II(b) of Schedule I (the "New ART
Stockholders" and collectively with the Existing ART Stockholders, the "ART
Stockholders"), (viii) the holders of Bridge Warrants listed under Part III(A)
of Schedule I (the "Bridge Warrant Holders"), (ix) the holders of New Bridge
Warrants listed under Part III(c) of Schedule I (the "New Bridge Warrant
Holders") and (x) CommcoCCC, Inc. The Existing Landover Stockholders and the
Existing ART Stockholders are collectively referred to as the "Existing
Stockholders" and the New Landover Stockholders, the New Unaffiliated
Stockholders and the New ART Stockholders are collectively referred to as the
"New Stockholders".
Background:
ART, Telecom, the New Stockholders, the Existing Stockholders and the
Bridge Warrant Holders are parties to a Restated Registration Rights Agreement
dated February 2, 1996, as amended, (the "First Restated Registration
Agreement") and wish to amend and restate the First Restated Registration
Agreement in order to admit the New Stockholders and Telecom as parties and to
effect certain amendments.
Since the Company cannot complete a Public Offering until it completes the
Merger, this Agreement is effective only after the Merger.
The following provisions amend, restate and supersede all the provisions of
the First Restated Registration Agreement.
The parties agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Acquisition Holders" means persons who acquire shares of Common Stock
pursuant to the Asset Acquisition Agreement and Plan of Reorganization dated the
date hereof, by and among CommcoCCC, Inc., CCC Millimeter, L.P., Columbia
Millimeter Communications, L.P., Commco, L.L.C., Columbia Capital Corporation,
ART and Telecom.
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<PAGE>
"Advent" means Advent International Corporation, a Delaware corporation.
"Advent Group" means Advent and persons controlled by Advent.
"Affiliate" means as to any Person, any other Person that, directly or
indirectly, alone or through others, controls, is controlled by or is under
common control with such Person. For purposes of this definition "controls"
(including with correlative meanings, the terms "controlled by" and "under
common control with" as applied to any Person) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contracts or otherwise.
"Ameritech" means Ameritech Development Corporation, a Delaware
corporation.
"Bridge Warrants" means the warrants to purchase an aggregate of 1,100,000
shares of Telecom Common Stock issued on March 8, 1996.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $.001 par value, of Telecom and its
successors.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder, all as the same shall be
in effect from time to time.
"Indemnity Warrants" means the warrants to purchase an aggregate of 325,000
shares of Telecom Common Stock issued on April 19, 1996.
"Investor ART Stockholders" means, collectively, Sintra Fund, Ltd., Stephen
Osman PFG Corp and Telecom Partners, L.P.
"Landover" means Landover Holdings Corporation.
"Merger" is defined in the Stockholders Agreement.
"New Bridge Warrant" means the warrants to purchase an aggregate of 50,000
shares of Common Stock issued on the date hereof.
"Other Shares" means at any time those shares of Common Stock which do not
constitute Primary Shares or Registrable Shares.
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<PAGE>
"Party" shall mean any of the Stockholders, Telecom Warrant Holders,
Acquisition Holders or New Bridge Warrant Holders.
"Person" means any individual, partnership, corporation, trust,
unincorporated organization, limited liability company, association, joint
venture or other entity or a government, agency, political subdivision,
instrumentality or division thereof.
"Primary Shares" means at any time the authorized but unissued shares of
Common Stock or shares of Common Stock held by the Company in its treasury.
"Registrable Shares" means at any time, with respect to any Party, the
shares of Common Stock, or any other securities which by their terms are
exercisable and exchangeable for or convertible into Common Stock and any
securities received in respect thereof, held by such Party which constitute
Restricted Shares.
"Registration Date" means the date upon which the registration statement
pursuant to which the Company shall have initially registered shares of Common
Stock under the Securities Act for sale to the public shall have been declared
effective.
"Restricted Shares" means at any time, with respect to any Stockholder, the
shares of Common Stock, any other securities which by their terms are
exercisable or exchangeable for or convertible into Common Stock and any
securities received in respect thereof, which are held by such Stockholder and
which have not previously been sold to the public pursuant to a registration
statement under the Securities Act.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Stockholders" is defined in the Stockholders Agreement.
"Stockholders Agreement" means the Restated and Amended Stockholders
Agreement dated February 2, 1996, as amended from time to time, among the
parties to this Agreement.
"Transfer" means any disposition of any Restricted Shares or of any
interest therein which constitutes a sale within the meaning of the Securities
Act, other than any disposition pursuant to an effective registration statement
under the Securities Act and complying with all applicable state securities and
"blue sky" laws.
SECTION 2. PIGGYBACK REGISTRATION. If the Company at any time proposes
for any reason to register shares of Common Stock under the Securities Act
(other than in an initial
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<PAGE>
Public Offering of Primary Shares or on Form S-4 or Form S-8 promulgated under
the Securities Act or any successor forms thereto), including any registrations
requested pursuant to Section 3(b) hereof, it shall promptly give written notice
to each Stockholder, Telecom Warrant Holder, New Bridge Warrant Holder and
Acquisition Holder of its intention and, upon the written request, given within
30 days after delivery of any such notice by the Company, of any Telecom Warrant
Holder, New Bridge Warrant Holder, Investor Telecom Stockholder, Acquisition
Holder or Telecom Stockholder to include in such registration Registrable Shares
(which request shall specify the number of Registrable Shares proposed to be
included in such registration), the Company shall use its best efforts to cause
all such Registrable Shares to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; PROVIDED, HOWEVER, that if (i) the managing underwriter advises
the Company that the inclusion of all shares of Common Stock proposed to be
included in such registration would interfere with the successful marketing
(including pricing) of the offering or (ii) the number of such shares exceeds
the limitations imposed by Section 3(a) below, then the number of shares of
Common Stock proposed to be included in such registration shall be included in
the following order:
(a) FIRST, the Primary Shares;
(b) SECOND, the Registrable Shares held by the Warrant Holders pro rata
based on the number of Registrable Shares issuable upon exercise of Telecom
Warrants owned of record (except in the case of Landover, beneficially owned) by
each such Warrant Holder;
(c) THIRD, the Registrable Shares held by the New Bridge Warrant Holders,
Investor Telecom Stockholders and Acquisition Holders pro rata based on the
number of Registrable Shares owned of record (except in the case of Landover,
beneficially owned) by each such New Bridge Warrant Holder, Investor Telecom
Stockholder and Acquisition Holder;
(d) FOURTH, the Registrable Shares held by the New ART Stockholders pro
rata based on the number of Registrable Shares owned of record held by each such
Investor ART Stockholder; and
(e) FIFTH, the Registrable Shares held by the Existing ART Stockholders
pro rata based on the number of Registrable Shares held by each such Existing
ART Stockholder.
SECTION 3. DEMAND REGISTRATION; LIMITATIONS. (a) REGISTRATION ON FORM
S-3. At such time as the Company shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, each of (1)
one or more Investor Telecom Stockholders, New Bridge Warrantholders or
Acquisition Holders who own beneficially in the aggregate Registrable Shares
consisting of at least 6% of the outstanding shares of the Common Stock
(collectively the "Demand Holders") and (2) one or more Telecom Warrant Holders
who own beneficially in the aggregate at least 40% of the Telecom Warrants (or
shares issued upon exercise thereof) shall have the right to request in writing
an unlimited
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<PAGE>
number of registrations on Form S-3 (or any successor form) of Registrable
Shares, which request or requests shall (i) specify the number of Registrable
Shares intended to be sold or disposed of, (ii) state the intended method of
disposition of such Registrable Shares, and (iii) relate to Registrable Shares
having an anticipated aggregate offering price of at least $5,000,000; PROVIDED,
THAT, if the Company is then involved in (x) a primary registration of its
shares of Common Stock under the Securities Act, (y) an acquisition of another
entity which requires registration of securities to be issued in connection
therewith or (z) a registered repurchase or acquisition of its shares of Common
Stock, then, at the request of the Company, the respective rights of the Demand
Holders and the Telecom Warrant Holders to registration pursuant to this Section
3 shall be deferred until the conditions set forth in clause (x), (y) or (z) no
longer apply except that notwithstanding such deferral, the Company shall be
obliged to complete such a registration at least once in each fiscal year;
PROVIDED, FURTHER, that the Demand Holders or Telecom Warrant Holders at the
time of such request own at least in the aggregate 50% of the securities of the
Company which they respectively owned on the date they acquired such securities;
AND PROVIDED FURTHER THAT upon the request of investors or the placement agent
in any private placement in which the Company shall receive proceeds of at least
$20,000,000 from sale of its securities, whether in a private placement for cash
or in an acquisition of assets or another Company, the Demand Holders and
Telecom Warrant Holders shall subordinate their rights under this Section 3 to
the rights of such investors or placement agent.
(b) LANDOVER REGISTRATION. Commencing six months after the effective date
of a registered initial Public Offering of Primary Shares, Landover shall have
the right to request in writing an aggregate of three registrations of
Registrable Shares (of which two shall be at the expense of the Company as
provided in Section 6 below and one at Landover's expense), which request or
requests shall (i) specify the number of Registrable Shares intended to be sold
or disposed of, (ii) state the intended method of disposition of such
Registrable Shares, and (iii) relate to Registrable Shares having an anticipated
aggregate offering price of at least $5,000,000; PROVIDED, THAT, if the Company
is then involved in (x) a primary registration of its shares of Common Stock
under the Securities Act, (y) an acquisition of another entity which requires
registration of securities to be issued in connection therewith or (z) a
registered repurchase or acquisition of its shares of Common Stock, then at the
request of the Company, the rights of Landover to registration pursuant to this
Section 3A shall be deferred until the conditions set forth in clause (x), (y)
or (z) no longer apply except that notwithstanding such deferral, the Company
shall be obliged to complete such a registration at least once in each fiscal
year; AND PROVIDED FURTHER THAT upon the request of investors or the placement
agent in any private placement in which the Company shall receive proceeds of at
least $20,000,000 from sale of its securities, whether in a private placement
for cash or in an acquisition of assets, the Landover shall subordinate their
rights under this Section 3 to the rights of such investors or placement agent.
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<PAGE>
(c) CERTAIN LIMITATIONS. Notwithstanding any other provisions of this
Agreement, in the event that the Company is requested to file any registration
statement covering Registrable Securities pursuant to Sections 2 or 3:
(i) the Company shall not be obligated to effect the filing of such
registration statement in any calendar year for Registrable Securities
constituting in the aggregate more than 10% of the capital stock of the Company
outstanding at the end of such year;
(ii) the Company shall not be obligated to effect the filing of such
registration statement during the 180 days following the effective date of any
other registration statement pertaining to an underwritten Public Offering of
Primary Shares; and
(iii) if, in the good faith judgment of the Company, it would not be in
the best interests of the Company and its stockholders generally for such
registration statement to be filed, the Company shall have the right to defer
such filing for a period of not more than 180 days after receipt of the request
of the relevant Demand Holders or Telecom Warrant Holders; PROVIDED, HOWEVER,
that the Company may not utilize the right set forth in this Section 3(c) more
than once in any 12-month period.
SECTION 4. HOLDBACK AGREEMENT.
(a) If the Company at any time shall register shares of Common Stock under
the Securities Act (including any registration pursuant to Section 2 or 3) for
sale to the public, no Party shall sell, make any short sale of, grant any
option for the purchase of, or otherwise dispose of any Restricted Shares (other
than those shares of Common Stock included in such registration) without the
prior written consent of the Company for a period designated by the Company in
writing to the Parties, which period shall not begin more than 10 days prior to
the effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 120 days after the effective
date of such registration statement; provided that neither Ameritech nor any
member of the Advent Group shall be bound by Section 4(a) if such Stockholder
did not participate in the offering of the Company's securities which gives rise
to the limitations set forth in Section 4(a)
(b) In furtherance and not in limitation of Section 4(a) above, in the
event of a registered initial public offering in the Company, each Party,
including without limitation Ameritech and the Advent Group, shall enter into a
lock-up agreement with the underwriter(s) of such offering for a reasonable
period in form agreed upon by the Company and such underwriter(s).
SECTION 5. PREPARATION AND FILING. If and whenever the Company is under
an obligation pursuant to the provisions of this Agreement to use its best
efforts to effect the registration of any Registrable Shares, the Company shall,
as expeditiously as practicable:
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(a) use its best efforts to cause a registration statement that registers
such Registrable Shares to become and remain effective for a period of 90 days
or until all of such Registrable Shares have been disposed of (if earlier):
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Shares, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or
prospectus, to one counsel selected by the holders of a majority of such
Registrable Shares (the "Selling Stockholders' Counsel"), copies of all such
documents proposed to be filed (it being understood that such five-business-day
period need not apply to successive drafts of the same document proposed to be
filed so long as such successive drafts are supplied to such counsel in advance
of the proposed filing by a period of time that is customary and reasonable
under the circumstances);
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for at least a
period of 90 days or until all of such Registrable Shares have been disposed of
(if earlier) to comply with the provisions of the Securities Act with respect to
the sale or other disposition of such Registrable Shares:
(d) notify in writing the Selling Stockholders' Counsel promptly (i) of
the receipt by the Company of any notification with respect to any comments by
the Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) or the receipt by the Company of any notification with respect to
the issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Company of any notification with respect to the suspension of
the qualification of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable Shares
under such other securities or blue sky laws of such jurisdictions as any seller
of Registrable Shares reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller of
Registrable Shares to consummate the disposition in such jurisdictions of the
Registrable Shares owned by such seller; PROVIDED, HOWEVER, that the Company
will not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any jurisdiction
where it would not otherwise be required so to do but for this paragraph (e);
(f) furnish to each seller of such Registrable Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus in conformity with the requirements of the Securities Act, and such
other documents as such seller of
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Registrable Shares may reasonably request in order to facilitate the public sale
or other disposition of such Registrable Shares.
(g) use its best efforts to cause such Registrable Shares to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Shares;
(h) notify on a timely basis each seller of such Registrable Shares at any
time when a prospectus relating to such Registrable Shares is required to be
delivered under the Securities Act within the appropriate period mentioned in
paragraph (a) of this Section, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of such seller prepare and furnish to such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(i) make available for inspection by any seller of such Registrable
Shares, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company collectively, the "Records"), as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information (together with the
Records, the "Information") reasonably requested by any such Inspector in
connection with such registration statement. Any of the Information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (iii) such Information has been made generally
available to the public. The seller of Registrable Shares agrees that it will,
upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent disclosure of the
Information deemed confidential.
(j) use its best efforts to obtain from its independent certified public
accountants "cold comfort" letters in customary form and at customary times and
covering matters of the type customarily covered by cold comfort letters;
-11-
<PAGE>
(k) use its best efforts to obtain from its counsel an opinion or opinions
in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may be the Company) for such Registrable Shares;
(m) issue to any underwriter to which any seller of Registrable Shares may
sell shares on such offering certificates evidencing such Registrable Shares;
(n) register such Registrable Shares on any national securities exchange
on which any shares of the Common Stock are listed or, if the Common Stock is
not listed on a national securities exchange, use its best efforts to qualify
such Registrable Shares for inclusion on the automated quotation system of the
National Association of Securities Dealers, Inc. (the "NASD") or such national
securities exchange as the holders of a majority of such Registrable Shares
shall request;
(o) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months beginning within three months after the effective
date of the registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps necessary to effect the
registration of such Registrable Shares contemplated hereby.
SECTION 6. EXPENSES. All expenses incurred by the Company in complying
with Section 5, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees and
expenses of the Company's counsel and accountants and fees and expenses of the
Selling Stockholders' Counsel, shall be paid by the Company; PROVIDED, HOWEVER,
that all underwriting discounts and selling commissions applicable to the
Registrable Shares shall be borne by the seller or sellers thereof, in
proportion to the number of Registrable Shares sold by such seller or sellers.
SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Shares, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated
-12-
<PAGE>
therein or necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by such holder expressly for use therein or by such
holders failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Company has furnished such
holder with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company shall indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Shares.
(b) In connection with any registration statement in which a holder of
Registrable Shares is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from he sale of
Registrable Shares pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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<PAGE>
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested by any
indemnified party for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
SECTION 8. UNDERWRITING AGREEMENT. No Person may participate in any
registration hereunder which is underwritten unless such Person (i) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements; provided that no holder of
Registrable Shares included in any underwritten registration shall be required
to make any representations or warranties to the Company or the underwriters
(other than representations and warranties regarding such holder and such
holder's intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except as
otherwise provided in Section 7 above.
SECTION 9. INFORMATION BY HOLDER. Each holder of Registrable Shares to be
included in any registration shall furnish to the Company such written
information regarding such holder and the distribution proposed by such holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
SECTION 10. EXCHANGE ACT COMPLIANCE. From and after the Registration Date
or such earlier date as a registration statement filed by the Company pursuant
to the Exchange Act relating to any class of the Company's securities shall have
become effective, the Company shall comply with all of the reporting
requirements of the Exchange Act and with all other public information reporting
requirements of the Commission which are conditions to the availability of Rule
144 for the sale of the Common Stock. The Company shall cooperate with each
Stockholder in supplying such information as may be necessary for such
Stockholder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of Rule
144.
SECTION 11. NO CONFLICT OF RIGHTS. The Company represents and warrants to
the Stockholders that the registration rights granted to the Stockholders hereby
do not conflict with any other registration rights granted by the Company. The
Company shall not, after the date hereof, grant any registration rights which
conflict with or impair the registration rights granted hereby.
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<PAGE>
SECTION 12. RESTRICTION ON TRANSFER. (a) The Restricted Shares shall not
be transferable except upon the conditions specified in this Section, which
conditions are intended to insure compliance with the provisions of the
Securities Act.
(b) Each certificate representing Restricted Shares shall (unless
otherwise permitted by the provisions of paragraph (c) and (d) below) be stamped
or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN (i)
SECTION 12 OF THE REGISTRATION RIGHTS AGREEMENT DATED [THE DATE OF THIS
AGREEMENT], AMONG ADVANCED RADIO TELECOM CORP. ADVANCED RADIO TECHNOLOGIES
CORPORATION AND CERTAIN OTHER SIGNATORIES THERETO AND (ii) THE RESTATED AND
AMENDED STOCKHOLDERS AGREEMENT DATED [DATE OF AGREEMENT] AMONG ADVANCED
RADIO TELECOM CORP. ADVANCED RADIO TECHNOLOGIES CORPORATION AND CERTAIN
OTHER SIGNATORIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED UPON THE
FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, ADVANCED RADIO TELECOM CORP.,
AND ADVANCED RADIO TECHNOLOGIES CORPORATION HAVE AGREED TO DELIVER TO THE
HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF SUCH HOLDER. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ADVANCED RADIO
TECHNOLOGIES CORPORATION."
(c) The holder of any Restricted Shares agrees, prior to any Transfer of
any Restricted Shares, to give written notice to the Company of such holder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section. Each such notice shall describe the manner and
circumstances of the proposed Transfer. Upon request by the Company, the holder
delivering such notice shall deliver a written opinion, addressed to the
Company, of counsel for the holder of Restricted Shares, stating that in the
opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Company) such proposed Transfer does not involve a
transaction requiring registration or qualification of such Restricted Shares
under the Securities Act or the securities or "blue sky" laws of any state of
the United States. Such holder of Restricted Shares shall be entitled to
Transfer such
-15-
<PAGE>
Restricted Shares in accordance with the terms of the notice delivered to the
Company, if the Company does not reasonably object to such Transfer and request
such opinion within five days after delivery of such notice, or, if it requests
such opinion, does not reasonably object to such Transfer within five days after
delivery of such opinion. Each certificate or other instrument evidencing the
securities issued upon the Transfer of any Restricted Shares (and cash
certificate or other instrument evidencing any untransferred balance of such
Registered Shares) shall bear the legend set forth in paragraph (b) above unless
(i) in such opinion of counsel registration of any future Transfer is not
required by the applicable provisions of the Securities Act or (ii) the Company
shall have waived the requirement of such legends.
(a) Notwithstanding the foregoing provisions of this Section, the
restrictions imposed by this Section upon the transferability of any Restricted
Shares shall cease and terminate when (i) any such Restricted Shares are sold or
otherwise disposed of (A) pursuant to an effective registration statement under
the Securities Act or (B) in a transaction contemplated by paragraph (c) above
which does not require that the Restricted Shares so transferred bear the legend
set forth in paragraph (b) hereof, or (ii) the Company has completed a
registered public offering of its securities and the holder of such Restricted
Shares has met the requirements for Transfer of such Restricted Shares under
Rule 144(k). Whenever the restrictions imposed by this Section shall terminate,
the holder of any Restricted Shares as to which such restrictions have
terminated shall be entitled to receive from the Company, without expense, a new
certificate not bearing the restrictive legend set forth in paragraph (b) above
and not containing any other reference to the restrictions imposed by this
Section.
SECTION 13. TERMINATION. This Agreement shall terminate and be of no
further use or effect when there shall not be any Restricted Shares.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the Company and the Stockholders and, subject to Section 15
their respective successors and assigns.
SECTION 15. ASSIGNMENT. This Agreement, and the rights and obligations of
each Party may be assigned by such Party (i) to any Affiliate of such Party or
(ii) to any person or entity to which Registrable Shares representing at least
10% of the Company's issued and outstanding capital stock are transferred by
such Party; PROVIDED, HOWEVER, that such transferee shall, as a condition to the
effectiveness of such assignment, be required to exercise a counterpart to this
Agreement agreeing to be treated like the transferring Party, whereupon such
transferee shall have the benefits of, and shall be subject to the restrictions
contained in, this Agreement. Any attempted transfer or assignment not in
compliance with the foregoing sentence of this Section 15 shall be invalid.
SECTION 16. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior arrangements or understandings with respect hereto.
-16-
<PAGE>
SECTION 17. NOTICES. All notices, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered in
person, by telecopy, by nationally-recognized overnight courier, or by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor:
(i) If to the Company, to:
Advanced Radio Telecom Corp.
500 108th Ave., N.E. Suite 1910
Bellevue, WA 98004
Attention: Vernon L. Fotheringham, Chairman
Fax: (206) 646-6570
with a copy to:
Pierson, Burnett & Hanley
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: W. Theodore Pierson, Jr.
Fax: (202) 466-3055
and
Hahn & Hessen LLP
350 Fifth Avenue
New York, NY 10118
Attention: James Kardon, Esq.
Fax: (212) 594-7167
(ii) to any Stockholder, at his or its address set forth on
Schedule I.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier on the next business day, and (c) in the case of mailing, on
the third business day following such mailing.
SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS. This Agreement may not be
modified, or amended, except by an instrument in writing signed (i) before the
Merger by (A) the Company, (B) ART, (C) the holders of at least 85% of the
outstanding voting shares of ART owned by the ART Stockholders, and (D) the
holders of at least 85% of the outstanding
-17-
<PAGE>
voting shares owned by the Investor Telecom Stockholders, including the holders
of at least 50% of the shares of Series E Preferred Stock if any such shares are
outstanding, and (ii) after the Merger by (A) the Company and (B) the holders of
at least 85% of the outstanding voting shares owned by the Stockholders,
including the holders of at least 50% of the shares of Series E Preferred Stock
if any such shares are outstanding; PROVIDED, HOWEVER, that (x) no modification
or amendment shall discriminate against any Stockholder without the consent of
such Stockholder, and (y) any modification or amendment to this Agreement the
effect of which is solely to waive the rights of any or all of the parties
hereto may be effected (i) before the Merger by (A) the Company, (B) ART,
(C) the holders of at least 67% of the oustanding voting shares of ART owned by
the ART Stockholders, and (D) the holders of at least 67% of the outstanding
voting shares owned by the Investor Telecom Stockholders, and (ii) after the
Merger by (A) the Company, and (B) the holders of at least 67% of the oustanding
voting shares owned by the Stockholders. This Section may only be amended with
the consent of all parties to this Agreement.
SECTION 19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 20. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 21. SEVERABILITY. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 22. ACKNOWLEDGMENT. Each of the Stockholders acknowledges that
such Stockholder has reviewed and understands, and has had an opportunity to ask
questions and has received adequate answers of management and counsel of ART and
the Company concerning, the documents embodying the transactions, actions and
amendments set forth in this Agreement.
-18-
<PAGE>
SECTION 23. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles governing conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
ADVANCED RADIO TELECOM CORP.
By: _______________________________
Name:
Title:
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By: _______________________________
Name:
Title:
LANDOVER HOLDINGS
CORPORATION
By: ______________________________
Name:
Title:
HEDGEROW CORPORATION OF
MAINE
By:_______________________________
Name:
Title:
-19-
<PAGE>
TORO FINANCIAL CORP.
By: _______________________________
Name: Dan Gulick
Title: President
E2 HOLDINGS, L.P.
By: AVR MANAGEMENT, INC.
General Partner
By: _______________________________
Laurence Zimmerman
President
E2-2 HOLDINGS, L.P.
By: AVR MANAGEMENT, INC.
General Partner
By: _______________________________
Laurence Zimmerman
President
E1 HOLDINGS, L.P.
By: AVR MANAGEMENT, INC.
General Partner
By: _______________________________
Laurence Zimmerman
President
-20-
<PAGE>
E2-3 HOLDINGS, L.P.
By: AVR-3, INC.
General Partner
By: _______________________________
Laurence Zimmerman
President
______________________________
CAROLYN CUNNINGHAM
______________________________
SAMUEL B. KELLETT
______________________________
BRUCE PINKNEY
______________________________
LESLIE R. PARTEE
______________________________
PAUL WITHINGTON
KELLETT INVESTMENT
CORPORATION
By: __________________________
Name:
Title:
______________________________
Vernon L. Fotheringham
-21-
<PAGE>
_____________________________
W. Theodore Pierson, Jr.
HIGH SKY LIMITED PARTNERSHIP
By: HIGH SKY, INC., its General
Partner
By: _____________________________
Name: Leland H. Phillips
Title: President
HIGH SKY II LIMITED PARTNERSHIP
By: HIGH SKY, INC., its General
Partner
By: _____________________________
Name:
Title: President
EXTENDED COMMUNICATIONS,
INC.
By: _____________________________
Name:
Title:
SINTRA FUND, LTD.
By: _____________________________
Name:
Title:
-22-
<PAGE>
GLOBAL PRIVATE EQUITY
II, L.P.
By: ADVENT INTERNATIONAL
its General Partner
By: _____________________________
Name:
Title:
ADVENT LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL
CORPORATION, its
General Partner
By: _____________________________
Name:
Title:
ADVENT INTERNATIONAL
INVESTORS II LIMITED
PARTNERSHIP
By: ADVENT INTERNATIONAL
CORPORATION, its
General Partner
By: _____________________________
Name:
Title:
-23-
<PAGE>
PFG CORP.
By: _____________________________
Name:
Title:
TELECOM PARTNERS, L.P.
By: _____________________________
James J. Pinto,
General Partner
_____________________________
Steven Osman
_____________________________
William Weinstein
AMERITECH DEVELOPMENT
CORPORATION
By: ________________________
Name:
Title:
-24-
<PAGE>
COMMCOCCC, INC.
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
COLUMBIA CAPITAL CORPORATION
By: ________________________
Name:
Title:
COMMCO, L.L.C.
By: ________________________
Name:
Title:
-25-
<PAGE>
SCHEDULE I
STOCKHOLDERS
NAME AND ADDRESS
PART 1(a) - EXISTING LANDOVER STOCKHOLDERS
Landover Holdings Corporation
Hedgerow Corp.
Toro Financial Corp.
E2 Holdings, L.P.
E2-2 Holdings, L.P.
667 Madison Avenue
New York, New York 10021
PART 1(b) - NEW LANDOVER STOCKHOLDERS
E1 Holdings, L.P.
E2-3 Holdings, L.P.
667 Madison Avenue
New York, New York 10021
PART 1(c) - NEW UNAFFILIATED STOCKHOLDERS
Carolyn Cunningham
Samuel B. Keller
Bruce Pinkney
Leslie R. Partee
Paul Withington
Kellett Investment Corporation
c/o Kellett Investment Corporation
200 Galleria Parkway
Suite 1800
Atlanta, GA 30339
Attention: John Cunningham
With a copy to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 6200
Attention: Hazen Dempster, Esq.
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<PAGE>
Global Private Equity II L.P.
Advent Limited Partnership
Advent International Investors II Limited Partnership
c/o Advent International Corp.
101 Federal Street
Boston, MA 02110
Attention: Andrew Fillat
With a copy to:
Hutchins, Wheeler & Dittmar, P.C.
101 Federal Street
Boston, MA 02110
Attention: Anthony Medaglia, Esq.
Ameritech Development Corporation
30 South Wacker Drive
Chicago, IL 60606
Attention: Greg Smitherman and Kenneth Dunn, Esq.
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Mark B. Tresnowski, Esq.
PART II(a) - EXISTING ART STOCKHOLDERS
Vernon I. Fotheringham
Advanced Radio Telecom Corp.
500 108th Ave., N.E., Suite 1910
Bellevue, WA 98004
W. Theodore Pierson, Jr.
Pierson, Burnett & Hanley
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
High Sky Limited Partnership
c/o Frank S. Phillips Company
6106 MacArthur Blvd.
Bethesda, MD 20816
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High Sky II Limited Partnership
c/o Frank S. Phillips Company
6106 MacArthur Blvd.
Bethesda, MD 20816
Extended Communications, Inc.
22904 NE 19th Drive
Redmond, VA 98053
PART II(b) - NEW ART STOCKHOLDERS:
Sintra Fund, Ltd.
c/o Sintra Capital Corp.
515 Madison Avenue
New York, New York 10021
Stephen Osman
57 West Hill Road
Stamford, CT 06902
PFG Corp.
c/o James Pinto
Resource Holdings
520 Madison Avenue
New York, New York 10022
Telecom Partners, L.P.
c/o James Pinto
Resource Holdings
520 Madison Avenue
New York, New York 10022
William Weinstein
c/o Feltman & Company
1800 First Union Plaza
999 Peachtree Street, N.E.
Atlanta, GA 30309
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PART III(A) - HOLDERS OF BRIDGE WARRANTS
Ameritech Development Corp.
30 South Wacker Drive
37th Floor
Chicago, Illinois 60606
Global Private Equity II L.P.
Advent Int'l Investors II L.P.
Advent Partners L.P.
c/o Advent International Corp.
101 Federal Street
Boston, MA 02110
Charles H. Abraham
Charles Department Store
1314 Washington Street
Vicksburg, Mississippi 39180
Blue Ridge Associates
4425 Corporation Lane
Suite 400
Virginia Beach, VA 23462
Betty Demetree
3740 Beach Boulevard
Suite 300
Jacksonville, Florida 32207
Jack C. Demetree, Sr.
3740 Beach Boulevard
Suite 300
Jacksonville, Florida 32207
William C. Demetree, as Trustee
3221 Ardsley Drive
Orlando, Florida 32804
W.W. Gay
W.W. Gay Mechanical Contractors, Inc.
524 Stockton Street
Jacksonville, Florida 32204
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<PAGE>
Ron Helinger
19 Paradise Lane
Treasure Island, Florida 33706
John Lupo
6655 Epping Forest Way North
Jacksonville, Florida 32217
Marc Associates
4425 Corporation Lane
Ste. 400
Virginia Beach, VA 23462
W.A. McRae, Jr.
1725 Memorial Park Drive
Jacksonville, Florida 32204
CL Investment Partnership III
(Ammon/Mait Partnership)
3 East 54th Street
New York, New York 10022
Edward B. Salem
7002 Epping Forest Ter.
Jacksonville, Florida 32217
Jack L. Scott
1725 Memorial Park Drive
Jacksonville, Florida 32204
Dr. Ralph Simon
1320 Park Avenue
Clinton, Oklahoma 73601
Terry Family Partners, Ltd.
C. Herman Terry, President of
CHT Corporation
1301 Riverplace Boulevard
Suite 2216
Jacksonville, Florida 32207
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<PAGE>
Gerald Murphy
10205 Mission Road
Leawood, Kansas 66206
James C. Cook
4837 Water Oak Road, #12
Charlotte, NC 28211
Steven Wolf
8300 College Boulevard
Overland Park, Kansas 66210
James Kardon
74 Brewster Road
Scarsdale, New York 10583
The Barkett Partnership
120 South Lynwood
Wichita, Kansas 67218
F& H Investments
c/o Fred Schramm, Jr.
3740 Beach Boulevard
Suite 300
Jacksonville, Florida 32207
Matthews, Jackson, Warnock Joint Venture
3740 Beach Boulevard
Suite 300
Jacksonville, Florida 32207
David H. Levin
c/o Levin, Middlebrooks, Mabie, Thomas, Mays & Mitchell, P.A.
316 S. Baylen Street
Pensacola, Florida 32501
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<PAGE>
PART III(b) - HOLDERS OF INDEMNITY WARRANTS
ALJN Demetree Trust
Jack C. Demetree
Demetree Brothers
3740 Beach Boulevard, Suite 300
Jacksonville, Florida 32207
Mark C. Demetree
c/o North American Salt Co.
8300 College Boulevard
Overland Park, KS 66210
Christopher C. Demetree
Landover Holdings Corporation
667 Madison Avenue
New York, New York 10021
Pecunia Capital Management, Inc.
PART III(c) - HOLDERS OF NEW BRIDGE WARRANTS
Columbia Capital Corporation
201 North Union Street, Suite 300
Alexandria, VA 22314
Commco, L.L.C.
4513 Pin Oak Court
Sioux Falls, SD 57103
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EXHIBIT 10-26
RESTATED AND AMENDED MERGER AGREEMENT AND PLAN OF
REORGANIZATION, dated June 26, 1996, among ADVANCED
RADIO TELECOM CORP. (formerly known as ADVANCED RADIO
TECHNOLOGY, LTD.), a Delaware corporation ("TELECOM"),
ADVANCED RADIO TECHNOLOGIES CORPORATION, a Delaware
corporation ("ART") and ART MERGER CORPORATION, a
Delaware corporation ("Merger Sub").
TELECOM and ART entered into a Merger Agreement and Plan of Reorganization,
dated February 2, 1996 (the "Old Merger Agreement") and have determined to amend
and restate the Old Merger Agreement and revise the merger and plan of
reorganization contemplated therein. ART has formed a wholly owned subsidiary,
Merger Sub, which has and will not carry out any business and which has and will
not take any action other than entering into this Agreement. The parties agree
that the Old Merger Agreement is amended and restated in its entirety by this
Agreement.
The respective Boards of Directors of TELECOM, ART and Merger Sub deem it
advisable and in the best interests of such corporations and their respective
stockholders that Merger Sub be merged with and into TELECOM on the terms and
conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
DEFINITIONS. As used in this Agreement and in any amendments thereto, the
following terms shall have the following meanings respectively:
(a) "Closing" shall refer to the closing under this Agreement as described
in Section 6.
(b) "Effective Time" shall mean the date and time when the Merger becomes
effective pursuant to the General Corporation Law of the State of Delaware
("GCL").
(c) "Merger" shall refer to the merger of Merger Sub into and with TELECOM
as provided in Section 1.
(d) "ART Common Stock" shall refer to the Common Stock, $0.001 par value
per share, of ART.
(e) "TELECOM Common Stock" shall refer to the Common Stock, $0.001 par
value per share, of TELECOM.
<PAGE>
1. THE MERGER. Merger Sub shall be merged into and with TELECOM upon the
terms set forth in this Agreement in a transaction intended to qualify as a
reorganization described in Section 36B(a)(1)(B) of the Internal Revenue Code.
2. CERTIFICATE OF MERGER. After satisfaction or waiver of all conditions
established herein to the obligations of the parties, TELECOM shall file with
the Secretary of State of the State of Delaware a duly executed Certificate of
Merger in the form of ANNEX I (the "Certificate of Merger"). The parties shall
use their best efforts to cause such conditions to be fulfilled as soon as
possible.
3. EFFECT OF MERGER. The effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger and the GCL. At the Effective Time:
(a) TELECOM shall be the surviving corporation in the Merger (in such
capacity, the "Surviving Corporation");
(b) the certificate of incorporation of the Surviving Corporation
shall be as set forth on EXHIBIT A to ANNEX I hereto, so that as amended,
in its entirety it shall be substantially identical to the Certificate of
Incorporation of Merger Sub as restated and amended immediately prior to
the Effective Time;
(c) the Bylaws of the Surviving Corporation shall be as set forth on
ANNEX II hereto, so that, as amended, in their entirety they shall be
substantially identical to the Bylaws of Merger Sub, as amended immediately
prior to the Effective Time;
(d) the initial directors of the Surviving Corporation shall be those
persons who immediately prior to the Effective Time were serving as the
directors of Merger Sub to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation until their
successors are duly elected or appointed;
(e) the initial officers of the Surviving Corporation shall be those
persons who immediately prior to the Effective Time were serving as the
officers of Merger Sub until their successors are duly elected or
appointed;
(f) the corporate existence, franchises and rights of TELECOM, with
its purposes, powers and objects, shall continue unaffected and unimpaired
by the Merger, and TELECOM shall succeed to and be fully vested insofar as
permitted by law and not otherwise expressly provided herein, with the
corporate
<PAGE>
existence, identity and all rights, franchises, assets, liabilities and
obligations of Merger Sub, all as set forth in and subject to Section 259
of the GCL;
(g) the name of the Surviving Corporation shall be changed to "ART
Licensing Corporation"; and
(h) the separate existence and corporate organization of Merger Sub
shall cease.
4. TREATMENT OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any stockholder of ART, TELECOM, Merger
Sub or their stockholders:
(a) each share of Common Stock, $.01 par value per share, of Merger
Sub outstanding immediately prior to the Effective Time shall be converted
into one share of TELECOM Common Stock;
(b) each issued share of TELECOM Common Stock (excluding any shares
to be cancelled pursuant to section 4(f)) outstanding immediately prior to
the Effective Time shall be converted into the right to receive one share
of ART Common Stock;
(c) the sole outstanding share of ART Series A Preferred Stock, $.001
par value per share, held by TELECOM, shall be cancelled;
(d) each outstanding option to purchase TELECOM Common Stock issued
pursuant to TELECOM's Restated Equity Incentive Plan, shall be replaced by
an option of similar tenor under ART's Equity Incentive Plan in accordance
with the terms thereof;
(e) no fractional shares of ART Common Stock will be issued as a
result of the Merger, either at the Closing or at the time of issuance of
certificates in the names of the TELECOM stockholders. In lieu of the
issuance of fractional shares, each holder of TELECOM Common Stock who
otherwise would be entitled to receive a fractional share of ART shall
receive one share of ART Common Stock; and
(f) Each outstanding share of TELECOM Common Stock held in treasury
of TELECOM or owned by ART immediately prior to Effective Time, shall by
virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
5. FURTHER ASSURANCES. If at any time after the Effective Time, TELECOM
shall consider or be advised that any
<PAGE>
further assignments or assurances in law or any other things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in TELECOM the
title to any property or right of TELECOM acquired or to be acquired by reason
of or as a result of the Merger, the officers of Merger Sub in office
immediately prior to the Effective Time shall in the name and on behalf of
Merger Sub have and may exercise power and authority to execute and deliver all
such proper deeds, assignments and assurances in law and do all things necessary
and proper to vest, perfect or confirm title to such property or rights in
TELECOM and otherwise to carry out the purposes of this Agreement, and the
proper officers and directors of TELECOM are hereby additionally authorized in
the name of Merger Sub or otherwise to take any and all such action.
6. CLOSING AND EXCHANGE OF STOCK CERTIFICATES.
(a) The Closing (provided that the Effective Time shall already have
arrived) will take place at 10:00 A.M. New York time on the date of the
Effective Time, or at such other time as the parties to this Agreement, acting
through their Boards of Directors or the Executive Committees thereof, may
mutually agree. The place of Closing will be at the offices of Hahn & Hessen
LLP, 350 Fifth Avenue, New York, New York or at such other place as may be
mutually agreed upon by the parties.
(b) As soon as practicable after the Effective Time, each holder of
shares of TELECOM Common Stock outstanding immediately prior to the Effective
Time (excluding shares to be cancelled pursuant to 4(f)) shall surrender the
certificate or certificates representing such shares to ART and shall receive in
exchange therefor a certificate or certificates representing the number of whole
shares of ART Common Stock which such holders shall be entitled to receive as
provided in Section 4. The certificate or certificates so surrendered shall be
duly endorsed as ART may require. Subject to the following provisions of this
Section 6(b), after the Effective Time each certificate which represented
outstanding shares of TELECOM Common Stock prior to the Effective Time shall be
deemed for all corporate purposes to evidence the ownership of the shares of ART
Common Stock provided in Section 4. No dividend or other distribution payable
with respect to the ART Common Stock shall be paid to any holder of any
certificate representing shares of TELECOM Common Stock issued and outstanding
immediately prior to the Effective Time until such holder surrenders such
certificate for exchange as provided in this Section 6(b).
(c) All shares of ART Common Stock for and into which shares of
TELECOM Common Stock shall have been exchanged and converted pursuant to this
Agreement shall be deemed to have been issued in full satisfaction of all rights
pertaining to such exchanged and converted shares. Except for such rights and
except as provided in Section 6(b), the holder of certificate(s) representing
shares of TELECOM Common Stock issued and
<PAGE>
outstanding immediately prior to the Effective Time shall have no rights with
respect to such shares other than to surrender such certificate or certificates
pursuant to Section 6(b).
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ART. ART represents,
warrants and agrees as follows:
(a) ART is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware with corporate power and
authority to carry on the business in which it is engaged, to own, lease, and
operate its properties, to execute and deliver this Agreement and to perform its
obligations under this Agreement;
(b) The authorized capital stock of ART consists of 100,000,000
shares of ART Common Stock, $.001 par value per share, of which 10,013,055
shares are issued and outstanding on the date of this Agreement, and 10,000,000
shares of serial preferred stock, $.001 par value per share, of which 1 share of
Series A Preferred Stock (the "Series A Preferred Stock") is issued and
outstanding on the date of this Agreement. ART does not hold any shares of its
authorized capital stock in its treasury. All of the issued and outstanding
shares of such capital stock are duly and validly issued and outstanding and are
fully paid and nonassessable.
(c) Except with the prior written approval of TELECOM, between the
date of this Agreement and the Effective Time, there will be no change in the
Certificate of Incorporation or By-Laws or in the authorized or issued capital
stock of ART.
(d) Except with the prior written approval of TELECOM, between the
date of this Agreement and the Effective Time, ART will not (i) issue any
additional capital stock or other security, (ii) declare, set aside or pay any
dividend or make any other distribution in respect to its capital, (iii)
directly or indirectly redeem, purchase or otherwise acquire any shares of its
capital stock, or (iv) issue to any person options, warrants or other rights to
acquire any securities of ART.
(e) From the date of this Agreement up to and including the Effective
Time, except with the prior written approval of TELECOM, the business of ART
will be conducted in the usual, regular and ordinary manner, and ART will not
make any material change in its methods of management, distribution, marketing,
accounting or operations.
(f) In the event the Merger is not effective for any reason by May
13, 1997, in addition to its obligations under Section 12 hereof, ART agrees to
surrender all of the shares of TELECOM Common Stock held by ART to TELECOM
without any additional consideration.
<PAGE>
8. REPRESENTATIONS, WARRANTIES AND COVENANT OF ART, MERGER SUB AND
TELECOM. Each of ART, Merger Sub and TELECOM will use its respective best
efforts to cause all of the conditions set forth in Sections 9 through 13 that
are within its control to be satisfied as soon as practicable after the date
hereof.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MERGER SUB.
(a) Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with power and
authority to carry on its business, to own its properties, and to execute and
deliver this Agreement and perform its obligations hereunder.
(b) Between the date of this Agreement and the Effective Time, there
will be no change in the Certificate of Incorporation or By-Laws or in the
authorized or issued capital stock of Merger Sub.
(c) Except as otherwise provided herein, between the date of this
Agreement and the Effective Time, Merger Sub will not (i) issue any additional
capital stock or other security, (ii) declare, set aside or pay any dividend or
make any other distribution in respect to its capital, (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital
stock, or (iv) issue to any person options, warrants or other rights to acquire
any securities of Merger Sub.
(d) From the date of this Agreement up to and including the Effective
Time, except with the prior written approval of TELECOM, Merger Sub will not
engage in any business or incur any indebtedness.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TELECOM. TELECOM
represents, warrants and agrees as follows:
(a) TELECOM is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with power and authority
to carry on its business, to own its properties, and to execute and deliver this
Agreement and perform its obligations hereunder.
(b) TELECOM shall not issue or sell any Series A Preferred Stock of
ART held by TELECOM.
(c) TELECOM waives any rights to dividends on the Series A Preferred
Stock of ART held by TELECOM.
11. CONDITIONS PRECEDENT TO THE OBLIGATION OF TELECOM. The obligations
of TELECOM under this Agreement and the Certificate of Merger are subject to the
fulfillment prior to or on the Effective Time of the following conditions:
<PAGE>
(a) This Agreement and the Merger shall have been approved by the
affirmative vote of the holders of all of the shares of ART Common Stock
entitled to vote thereon;
(b) The Merger shall have been approved by the Federal Communication
Commission; and
(c) TELECOM shall have received an opinion of its counsel to the
effect that the Merger will be a reorganization described in Section
368(a)(1)(B) of the Internal Revenue Code.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF ART. The obligations of ART
under this Agreement are subject to the fulfillment prior to or on the Effective
Time of the following conditions:
(a) This Agreement and the Merger shall have been approved by the
affirmative vote of the holders of TELECOM capital stock entitled to vote
thereon;
(b) The Merger shall have been approved by the Federal Communication
Commission; and
(c) ART shall have received an opinion of its counsel to the effect
that the Merger will be a reorganization described in Section 368(a)(1)(B)
of the Internal Revenue Code.
13. CONDITIONS PRECEDENT TO OBLIGATIONS OF MERGER SUB. The obligations of
Merger Sub under this Agreement are subject to the fulfillment prior to or on
the Effective Time of the following conditions:
(a) This Agreement and the Merger shall have been approved by the
affirmative vote of the holders of TELECOM capital stock entitled to vote
thereon; and
(b) The Merger shall have been approved by the Federal Communication
Commission.
14. EFFECT OF FAILURE TO CONSUMMATE MERGER. In the event the Merger is
not effective for any reason by May 13, 1997, ART shall surrender all of its
shares of TELECOM Common Stock to TELECOM, and TELECOM and ART shall revise the
terms of that certain Services Agreement, dated May 8, 1995, to provide that (i)
the term thereof will be extended to 40 years, (ii) ART will receive, in the
event of any dividends paid by TELECOM to its stockholders, an amount equal to
the percentage share (the "Percentage Share") that the ART stockholders would
have owned of the combined corporations after giving effect to the Merger
(without taking into account any issuances of stock by ART or TELECOM after the
date hereof) of such aggregate dividends, (iii)
<PAGE>
ART will have a right of co-sale, subject to FCC approval, in accordance with
its Percentage Share of the aggregate consideration payable to TELECOM and ART
in such transaction in the event of any merger or sale of substantial assets by
TELECOM and (iv), in the event TELECOM agrees to merge into another entity or to
sell substantially all its assets to another entity, ART shall, upon the request
of TELECOM, use its best efforts, subject to FCC approval, to merge into such
entity or sell substantially all its assets to such entity for aggregate
consideration equal to the Percentage Share of the aggregate consideration to be
paid for ART and TELECOM in such transaction.
15. MODIFICATION AND TERMINATION. To the fullest extent permitted under
the GCL, TELECOM, Merger Sub and ART, by mutual consent of their respective
Boards of Directors, may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing at any time before the Closing.
TELECOM, Merger Sub and ART may at any time, by mutual consent of their Boards
of Directors, terminate this Agreement.
16. MISCELLANEOUS.
(a) PARTIES IN INTEREST. This Agreement shall only bind and inure to
the benefit of the parties and their respective successors and assigns.
(b) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(c) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute only one
agreement.
(d) HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the Board of Directors of each of the parties hereto
first having duly adopted and approved the same, this Restated and Amended
Merger Agreement and Plan of Reorganization has been executed and delivered on
the date first above written.
Attest: ADVANCED RADIO TELECOM CORP.
(formerly Advanced Radio
Technology, Ltd.)
- --------------------
Name:
Title: By:
---------------------------
Name:
Title:
Attest: ADVANCED RADIO TECHNOLOGIES
CORPORATION
- --------------------
Name: By:
Title: ---------------------------
Name:
Title:
Attest: ART MERGER CORPORATION
By:
- -------------------- ---------------------------
Name: Name:
Title: Title:
<PAGE>
ANNEX I
TO RESTATED AND AMENDED MERGER
AGREEMENT AND PLAN OF REORGANIZATION
CERTIFICATE OF MERGER
OF
ART MERGER CORPORATION
WITH AND INTO
ADVANCED RADIO TELECOM CORP.
The undersigned corporation, organized and existing under the General
Corporation Law of the State of Delaware (the "General Corporation Law"), DOES
HEREBY CERTIFY:
FIRST: The name and state of incorporation of each of the constituent
corporations in the merger are as follows:
Name State of Incorporation
---- ----------------------
ADVANCED RADIO TELECOM CORP.
(formerly known as Advanced
Radio Technology, Ltd.) Delaware
ART MERGER CORPORATION Delaware
SECOND: A Restated and Amended Merger Agreement and Plan of Reorganization
dated June 20, 1996 (the "Merger Agreement") has been approved, adopted,
certified, executed, and acknowledged by each constituent corporation in
accordance with Section 251 of the General Corporation Law of the State of
Delaware.
THIRD: The name of the surviving corporation shall be ART LICENSING CORP.
FOURTH: Such amendments or changes to the certificate of incorporation of
the surviving corporation as are desired to be effected by the merger are set
forth on Exhibit A attached hereto and incorporated herein by reference, which
sets forth such certificate of incorporation, as so amended, in its entirety.
FIFTH: The executed Merger Agreement is on file at the principal place of
business of the surviving corporation at 500 - 108th Avenue NE, Bellevue,
Washington 98004.
SIXTH: A copy of the Merger Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Merger has been executed and
acknowledged this __ day of June, 1996.
ADVANCED RADIO TELECOM CORP.
By:
---------------------------
Name:
Title:
ACKNOWLEDGED:
- ------------------------------
Name:
Title:
<PAGE>
- --------------------------------------------------------------------------------
ADVANCED RADIO TELECOM CORP.
SUBSCRIPTION BOOKLET
- --------------------------------------------------------------------------------
SUBSCRIBER: ________________
<PAGE>
NOTICES
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS HEREOF (THE "OFFERING MATERIALS") OR
ANY COMMUNICATION FROM ADVANCED RADIO TELECOM CORP. (THE "COMPANY") AS LEGAL,
TAX OR ACCOUNTING ADVICE. EACH INVESTOR SHOULD SEEK HIS OWN LEGAL, TAX AND
ACCOUNTING ADVICE. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS SUBSCRIPTION
BOOKLET. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ATTORNEY
GENERAL OF THE STATE OF NEW YORK DOES NOT PASS UPON OR ENDORSE THE MERITS OF ANY
PRIVATE OFFERING. NO OFFERING DOCUMENT HAS BEEN FILED WITH OR OTHERWISE APPROVED
BY THE BUREAU OF INVESTOR PROTECTION AND SECURITIES OF THE DEPARTMENT OF LAW OF
THE STATE OF NEW YORK. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE
OR OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED.
IN ADDITION, THE OFFERING MATERIALS CONSTITUTE AN OFFER ONLY TO THE INVESTOR
NAMED ON THE COVER PAGE OF THIS SUBSCRIPTION BOOKLET. ANY FURTHER DISTRIBUTION
OR REPRODUCTION OF THE OFFERING MATERIALS, IN WHOLE OR IN PART, OR THE
DISCLOSURE OF ANY OF THEIR CONTENTS, IS PROHIBITED.
NO OFFERING LITERATURE OR ADVERTISING IN ANY FORM MAY BE EMPLOYED IN THE
OFFERING OTHER THAN THE OFFERING MATERIALS AND THE INFORMATION AUTHORIZED IN
WRITING BY THE COMPANY. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THE OFFERING MATERIALS OR AUTHORIZED IN
WRITING BY THE COMPANY IN CONNECTION WITH THE MATTERS DESCRIBED HEREIN OR
THEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON. HOWEVER,
<PAGE>
NOTHING HEREIN CONTAINED SHALL LIMIT THE OPPORTUNITY OF ANY INVESTOR OR HIS
REPRESENTATIVES TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY
CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING OR TO OBTAIN ADDITIONAL
INFORMATION NECESSARY TO VERIFY THE ACCURACY OF ANY OF THE INFORMATION CONTAINED
IN THE OFFERING MATERIALS OR IN ANY DOCUMENT REFERRED TO HEREIN.
The following legends apply to an investment in the Notes and Warrants:
FOR FLORIDA RESIDENTS:
PURSUANT TO SECTION 517.061(11)(a)(5) OF THE FLORIDA SECURITIES ACT, WHERE
SALES ARE MADE TO FIVE OR MORE PERSONS, FLORIDA INVESTORS HAVE A THREE-DAY RIGHT
OF WITHDRAWAL OF ACCEPTANCE. IF YOU HAVE EXECUTED THE SUBSCRIPTION AGREEMENT,
YOU MAY ELECT, WITHIN THREE BUSINESS DAYS AFTER SIGNING THE AGREEMENT, TO
WITHDRAW FROM YOUR AGREEMENT AND RECEIVE A FULL REFUND OF ANY MONEY PAID BY YOU.
YOUR WITHDRAWAL WILL BE WITHOUT FURTHER LIABILITY TO ANY PERSON. TO ACCOMPLISH
SUCH WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM TO ADVANCED RADIO
TELECOM CORP., C/O HAHN & HESSEN LLP, 350 FIFTH AVENUE, NEW YORK, NEW YORK
10188, ATTENTION: JAMES KARDON, INDICATING YOUR INTENTION TO WITHDRAW. SUCH
LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY. IF YOU ARE SENDING A LETTER, IT IS PRUDENT
TO SEND IT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT IS MAILED. SHOULD YOU MAKE THIS
REQUEST ORALLY, YOU MUST ALSO ASK FOR WRITTEN CONFIRMATION THAT YOUR REQUEST HAS
BEEN RECEIVED. THE FLORIDA DEPARTMENT OF BANKING AND FINANCE HAS NOT REVIEWED
THE OFFERING OR THE DISCLOSURE DOCUMENTS AND THE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE FLORIDA SECURITIES ACT. UNLESS THE SECURITIES ARE
REGISTERED, THEY MAY NOT BE SOLD OR TRANSFERRED IN FLORIDA EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SAID ACT.
FOR NEW YORK RESIDENTS:
THIS SUBSCRIPTION AGREEMENT HAS NOT BEEN FILED WITH OR REVIEWED BY THE
ATTORNEY GENERAL OF THE STATE OF NEW YORK PRIOR TO ITS ISSUANCE AND USE. THE
ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-3-
<PAGE>
FOR NORTH CAROLINA RESIDENTS:
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
FOR PENNSYLVANIA RESIDENTS:
PURSUANT TO SECTION 207(m)(2) OF PENNSYLVANIA SECURITIES ACT OF 1972, AS
AMENDED, PENNSYLVANIA INVESTORS HAVE A TWO-DAY RIGHT OF WITHDRAWAL OF
ACCEPTANCE. IF YOU HAVE EXECUTED THE SUBSCRIPTION AGREEMENT, YOU MAY ELECT,
WITHIN TWO BUSINESS DAYS AFTER SIGNING THE AGREEMENT, TO WITHDRAW FROM YOUR
AGREEMENT AND RECEIVE A FULL REFUND OF ANY MONEY PAID BY YOU. YOUR WITHDRAWAL
WILL BE WITHOUT FURTHER LIABILITY TO ANY PERSON. TO ACCOMPLISH SUCH WITHDRAWAL,
YOU NEED ONLY SEND A LETTER OR TELEGRAM TO ADVANCED RADIO TELECOM CORP., C/O
HAHN & HESSEN LLP, 350 FIFTH AVENUE, NEW YORK, NEW YORK 10188, ATTENTION: JAMES
KARDON, INDICATING YOUR INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IF YOU ARE SENDING A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME
WHEN IT IS MAILED. SHOULD YOU MAKE THIS REQUEST ORALLY, YOU MUST ALSO ASK FOR
WRITTEN CONFIRMATION THAT YOUR REQUEST HAS BEEN RECEIVED. THE PENNSYLVANIA
SECURITIES COMMISSION HAS NOT REVIEWED THE SUBSCRIPTION AGREEMENT AND THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE PENNSYLVANIA SECURITIES ACT OF
1972, AS AMENDED.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD FOR A PERIOD OF TWELVE (12) MONTHS AFTER
THE DATE OF THE PURCHASE EXCEPT IN ACCORDANCE WITH SECTION 203(d) OF THE
PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED AND SECTIONS 203.041 AND 204.011
OF PENNSYLVANIA CODE, AS AMENDED.
-4-
<PAGE>
ADVANCED RADIO TELECOM CORP.
SUBSCRIPTION AGREEMENT
Advanced Radio Telecom Corp.
500 108th Ave., N.E., Suite 1910
Bellevue, WA 98004
Attention: Steven D. Comrie, President
Gentlemen:
This will evidence the agreement of the undersigned to subscribe for and
purchase from Advanced Radio Telecom Corp., a Delaware corporation (the
"Company") unit(s) (the "Unit(s)") at a purchase price of $100,000.00 per Unit,
each Unit consisting of (i) a note (the "Note") in the original principal amount
of $100,000.00, in the form annexed hereto as EXHIBIT A and (ii) a Common Stock
Purchase Warrant (the "Warrant") to purchase 22,000 shares (the "Shares") of the
Company's Common Stock, par value $.001 per share, (the "Common Stock"), in the
form annexed hereto as EXHIBIT B. The Units, Notes, Warrants and any shares of
Common Stock issued or issuable upon exercise of the Warrant are collectively
referred to as the "Securities".
1. SUBSCRIPTION. The undersigned hereby agrees to purchase and herewith
delivers the full purchase price for the Unit(s) subscribed for as set forth on
the signature page hereof to the Company, and the Company hereby acknowledges
receipt thereof.
2. RELATED AGREEMENTS AND AMERITECH AGREEMENT.
(a) If the undersigned is not already a party thereto, the
undersigned hereby agrees to enter into and hereby executes and delivers (i) the
Restated and Amended Registration Rights Agreement, dated February 2, 1996, by
and among the Company, Advanced Radio Technologies Corporation ("ART") and the
parties thereto (the "Registration Rights Agreement"); and (ii) the Amended and
Restated Stockholders' Agreement, dated February 2, 1996, among the Company, ART
and the stockholders of each of the Company and ART named therein (collectively,
the "Related Agreements") in each case as a New Unaffiliated Stockholder, as
defined therein, with all the obligations and benefits of a New Unaffiliated
Stockholder under the Related Agreements.
(b) The undersigned acknowledges receipt of a copy of the Securities
Purchase Agreement, dated February 2, 1996, by and among the Company, ART and
Ameritech Development Corporation, including all Exhibits and Schedules thereto
(the "Ameritech Agreement").
-1-
<PAGE>
3. REPRESENTATIONS. A) The Company represents and warrants that the
representations and warranties made in the Ameritech Agreement were true and
correct in all material respects as of the date thereof.
B) The undersigned represents and warrants to and
agrees with the Company and its officers, directors, stockholders, agents,
employees, representatives and counsel (collectively, the "Representatives") as
follows:
(a) The Securities are being purchased by the undersigned for its own
account, for investment and without any view to the distribution,
assignment or resale to others or fractionalization in whole or in part.
The undersigned agrees not to assign or in any way transfer the
undersigned's rights to the Securities or any interest therein and
acknowledges that the Company will not recognize any purported assignment
or transfer. No other person has or will have a direct or indirect
beneficial interest in the Securities. The undersigned agrees not to sell,
hypothecate or otherwise transfer the undersigned's Securities unless the
Securities are registered under Federal and applicable state securities
laws or unless, in the opinion of counsel satisfactory to the Company, an
exemption from such laws is available.
(b) All of the information that the undersigned has heretofore
furnished to the Company and the Representatives or which is set forth
herein with respect to the undersigned's financial position and business
experience, is correct, complete and not misleading as of the date hereof
and the undersigned will advise the Company immediately in writing of any
change in any response hereto. The undersigned understands that this
investment is suitable for and is available only to "Accredited Investors",
as that term is defined in Regulation D ("Regulation D") promulgated under
the Securities Act of 1933, as amended (the "Act"), and that the
undersigned satisfies at least one of the categories enumerated below as an
Accredited Investor.
Accordingly, the undersigned acknowledges that the information
set forth herein is not intended to be exhaustive and is provided only as a
guide to assist each potential investor in making an independent
investigation of the Company and the Securities being offered.
(c) The undersigned meets the requirements of one of the
subparagraphs listed below (please insert your initials in the appropriate
place beneath the description applicable to you):
i) A natural person who had individual income of more than U.S.
$200,000 in each of the most recent two years or joint income with that person's
spouse in excess of U.S. $300,000 in each of the most recent two years and who
reasonably expects to reach that same income level for the current year. For
this purpose, individual income means adjusted gross income, as reported for
federal income tax purposes less any income
-2-
<PAGE>
attributable to a spouse or to property owned by a spouse, (A) increased by the
individual's share (and not a spouse's share) of: (w) the amount of any tax
exempt interest income received, (x) amounts contributed to an IRA or Keogh
retirement plan, (y) alimony paid, and (z) the excluded portion of any long-term
capital gains, and (B) adjusted, plus or minus, for any non-cash gain or loss,
respectively, reported for federal income tax purposes;
----------
initial
ii) A natural person whose individual net worth, or joint net
worth with that person's spouse, is in excess of U.S. $1,000,000. For this
purpose, "net worth" means the excess of total assets at fair market value,
including home and personal property, over total liabilities, provided, however,
for the purpose of determining a person's net worth, the principal residence
owned by an individual shall be valued at cost, including the cost of
improvements, net of current encumbrances upon the property or valued on the
basis of a written appraisal used by an institutional lender making a loan
secured by the property. For the purposes of this provision, "institutional
lender" means a bank, savings and loan company, industrial loan company, credit
union, or personal property broker or a company whose principal business is a
lender upon loans secured by real property and which has such loans receivable
in the amount of U.S. $200,000,000 or more;
----------
initial
iii) A natural person whose total purchase is U.S. $250,000 or
more and the purchase price does not exceed 20% of the undersigned's net worth
at the time of sale, or joint net worth with the undersigned's spouse;
----------
initial
iv) A trust, with total assets in excess of U.S. $5,000,000,
which is not formed for the purpose of acquiring the Units offered hereby and
whose purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the risks and
merits of an investment in the Units;
----------
initial
v) A bank as defined in Section 3(a)(2) of the Securities Act or
a savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance
-3-
<PAGE>
company as defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of the Investment Company of 1940; a
small business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, or an agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of U.S. $500,000,000; or an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
the Employee Retirement Income Security Act of 1974, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of U.S.
$5,000,000, or if the employee benefit plan is a self-directed plan and the
investment decision is made solely by persons who are accredited investors;
----------
initial
vi) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act in 1940;
----------
initial
vii) An organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, a corporation, Massachusetts or
similar business trust, or partnership not formed for the specific purpose of
acquiring the Shares, with total assets in excess of U.S. $5,000,000; or
----------
initial
viii) An entity in which all of the equity owners are accredited
investors.
----------
initial
(d) The undersigned has the right, power and capacity to enter into
this Agreement and to carry out the transactions contemplated hereunder. If
the undersigned is an entity, this Agreement has been duly authorized and
executed and
-4-
<PAGE>
delivered by or on behalf of the undersigned and constitutes the valid and
binding obligation of the undersigned enforceable in accordance with its
terms.
(e) The undersigned, either individually or together with the
representative on which the undersigned has relied, has such knowledge and
experience in financial and business matters that the undersigned is
capable of evaluating the merits and risks of an investment in the
Securities.
(f) The undersigned has carefully read and is familiar with this
Agreement, the Related Agreements and the Ameritech Agreement, has
evaluated the merits and risks of the undersigned's investment in the
Securities, and has determined that the Securities are a suitable
investment. The undersigned understands that this Agreement does not
contain all of the information that would normally be contained in a
prospectus used in a public offering or in an offering memorandum used in a
private offering made to non-accredited investors. Therefore, the
undersigned has availed himself of the opportunity to ask questions of the
Company concerning the terms and conditions of this offering and obtained
such additional information as the undersigned may deem necessary. The
Company has answered all inquiries concerning the terms and conditions of
this offering and has afforded the undersigned the opportunity to obtain
any additional information (to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense)
necessary to verify the accuracy of the information. The undersigned
acknowledges that all documents, instruments, records and books pertaining
to the Company and this investment have been made available and that the
same will be available upon reasonable notice for inspection during
reasonable business hours at the offices of the Company.
(g) In evaluating the suitability of an investment in Securities, the
undersigned has not relied upon any representation or other information
(whether oral or written) from the Company, the Representatives, any
selling agent or other third party; any advertisement, notice or other
communication contained in any newspaper, magazine or similar publication
or broadcast on television or radio; or any seminar or meeting relating to
this investment. The undersigned has undertaken an independent
investigation and has relied, to the extent the undersigned believed
advisable, on the undersigned's professional legal, tax and financial
advisers.
(h) The undersigned has had an opportunity to discuss the Company,
business, management and financial affairs with the Company's management
and has received (or had made available to it) any financial and business
documents requested by it.
(i) The undersigned understands that the Securities are a highly
speculative investment which involve a high risk of loss. The undersigned
can afford to hold the
-5-
<PAGE>
unregistered Securities being offered for an indefinite period of time and
to sustain a complete loss of the amount for which the undersigned hereby
offers to subscribe and has adequate means for providing for the
undersigned's current needs and possible contingencies and has no need for
liquidity of the undersigned's investment in Securities. The undersigned's
commitment to all similar illiquid investments is reasonable in
relationship to its net worth. The undersigned understands all of the risk
factors relating to the purchase of the Securities.
(j) The undersigned acknowledges that the Securities have not been
filed, registered with, approved or disapproved by the United States
Securities and Exchange Commission ("SEC") nor by the securities regulatory
authority of any state and no such filing or registration will take place.
Neither the SEC nor any state authority has passed upon or endorsed the
merits of the offering of the Securities, nor is it intended that any of
the above will do so. Any representation contrary to the foregoing may be a
criminal offense.
(k) Except as set forth in the Registration Rights Agreement, the
undersigned understands that the Company is under no obligation to register
the Securities on behalf of the undersigned or to assist the undersigned in
complying with any exemption from registration. There is no public market
for the Securities and no such public market is expected to develop. There
can be no assurance that the undersigned will be able to sell or dispose of
the Securities.
(l) All contacts and contracts between the undersigned and the
Company regarding the offer and sale of the Securities have been made
within the state of the undersigned's residence, and the undersigned has no
permanent residence other than the residence address indicated on the
signature page of this Agreement and has no present intention of becoming a
permanent resident elsewhere.
(m) The undersigned certifies that the undersigned is not subject to
backup withholding.
(n) The undersigned understands and acknowledges that investment in
the Units involves significant risks, including those set forth in the RISK
FACTORS attached hereto as EXHIBIT C.
(o) Omitted.
(p) The undersigned does hereby indemnify and hold harmless the
Company and the Representatives against and from any and all loss,
liability, claim, damage and expense (including, without limitation,
attorneys' fees and disbursements) incurred as a result of a
misrepresentation, or breach of an agreement or warranty, made by the
undersigned to the Company or the Representatives. The undersigned
-6-
<PAGE>
acknowledges that this obligation will survive the purchase of the
Securities hereunder.
4. ACCEPTANCE OR REJECTION OF SUBSCRIPTION.
(a) This subscription shall not be binding on the Company unless (i)
the undersigned satisfies the conditions of Section 2(a) above and (ii) it
is accepted on behalf of the Company, such acceptance to be indicated by
the execution of this Agreement on behalf of the Company at the place
provided at the foot hereof.
(b) The undersigned acknowledges that the Company has the right to
accept or reject this subscription, in whole or in part, for any reason
whatsoever.
5. LIMITATIONS ON TRANSFER. The undersigned recognizes (a) that the
Securities have not been registered under applicable federal and state
securities laws (the "Securities Laws") and, accordingly, the undersigned must
bear the economic risk of an investment in the Securities for an indefinite
period of time; (b) that neither this Subscription Agreement nor the Securities
may be assigned, pledged, encumbered or otherwise transferred by him without
registration under such Securities Laws, unless exempt therefrom, and unless, in
the opinion of his counsel satisfactory to the Company, such transfer would be
in compliance with the Securities Laws; (c) that the undersigned is not and will
not be entitled to make any transfers of the Securities pursuant to the
exemption afforded by Regulation D under the Securities Act unless the
undersigned has received the written approval of the Company and that any
certificate or other document evidencing the Securities will bear a legend
stating that the Securities have not been registered under the Securities Laws
and referring to the foregoing restrictions on their transferability and sale;
and (d) that the transfer of the Warrants is limited under the Related
Agreements.
6. DEFAULT ON NOTES. In the event of a default on the Note, the Company
shall grant to the holder of each $100,000 principal amount thereof a five year
warrant, having the same terms and in substantially the same form as the
Warrants issued on the date hereof, exercisable to purchase 11,000 shares of
Common Stock.
7. NOTICES. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given only if (a) deposited, postage prepaid, in the
United States mail, registered or certified mail, return receipt requested,
addressed to such address as may be given herein, (b) delivered personally or by
telefax at such address or (c) transmitted by nationally recognized overnight
delivery service.
8. MISCELLANEOUS. Neither this Agreement nor any provision hereof may be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any of the same is sought. This Agreement shall
be binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and permitted
-7-
<PAGE>
assigns and shall inure to the benefit of the Company, its successors and
assigns. The subscription made hereby is irrevocable and may not be transferred
or assigned by the undersigned. In the event that any provision of this
Agreement is deemed invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict herewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereto which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision thereof. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and may be amended
only by a writing executed by all of the parties.
9. GOVERNING LAW. Notwithstanding the place where this Agreement may be
executed by any of the parties, the parties expressly agree that all the terms
and provisions hereof shall be construed in accordance with and governed by the
internal laws of the State of Delaware, without giving effect to conflicts of
law.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement and, if
required pursuant to Section 2(a) above, each of the Related Agreements.
____________________________________ ____________________________________
Print Name of Purchaser Date
X___________________________________ Number of Units subscribed
Signature for at $100,000 per Unit: ______
____________________________________ Aggregate Purchase
Print Name and Title (if applicable) Price: $_______
____________________________________ ____________________________________
Address of Legal Residence City, State, Zip Code
____________________________________ ____________________________________
Mailing Address (if different) City, State, Zip Code
____________________________________ ____________________________________
Telephone (include area code) Telefax (include area code)
-8-
<PAGE>
____________________________________ ___________________________________
Additional Contact Information
(if applicable)
Subscription accepted as of
March 8, 1996:
ADVANCED RADIO TELECOM CORP.
By:_________________________
Name:
Title:
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<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS AND NEITHER
THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, IS AVAILABLE. THIS NOTE MAY BE SUBJECT TO ORIGINAL ISSUE DISCOUNT.
PROMISSORY NOTE
Due: March 8, 1998
$_________________ March 8, 1996
FOR VALUE RECEIVED, ADVANCED RADIO TELECOM CORP., a Delaware corporation
(the "Maker") having an office at 500 108th Avenue, N.E., Bellevue, Washington
98004 hereby promises to pay in cash on March 8, 1998 to the order of
_________________ (the "Payee") the principal sum of ________________________
($___________) DOLLARS together with interest in cash at the rate of ten (10%)
percent per annum, based on the actual number of days elapsed over a 360-day
year, as provided herein, with interest payable semi-annually in arrears, on
March 8 and September 8 of each year. Notwithstanding the foregoing, the
outstanding principal sum together with interest thereon shall be due and
payable upon the consummation of an initial public offering or private placement
of the Maker's securities that results in gross proceeds to the Maker of at
least $25,000,000.
This Note is one of the Notes (the "Notes") of like tenor issued on the
date hereof in the aggregate principal amount of $5,000,000.
In consideration for the indebtedness evidenced by this Note, Maker shall
issue warrants exercisable to purchase certain shares of Common Stock of Maker
(the "Warrants") as more particularly described in that certain Common Stock
Purchase Warrant executed by Maker in favor of Payee on the date hereof.
The following shall be deemed events of default hereunder:
1. If any payment shall not be made within ten (10) days when the
same shall become due and payable;
2. If the Maker shall (i) apply for or consent to the appointment of
a receiver, trustee or liquidator of a substantial part of its assets or
property; (ii) make a general assignment for the benefit of creditors;
(iii) be adjudicated a bankrupt; (iv) file a voluntary petition in
bankruptcy or petition or an answer seeking reorganization,
<PAGE>
or make a plan with creditors or take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute now or hereafter in effect or an answer
admitting the material allegations of any petition filed against it in any
proceeding under any such law or statute; or (v) admit in writing the
Maker's inability to pay the Maker's debts as they become due;
3. If any proceeding against the Maker seeking reorganization,
arrangement, composition, adjustment, liquidation, dissolution or similar
relief under the present or any future Federal Bankruptcy Act or other
applicable Federal or state statute, law or regulation shall remain
undismissed or continue unstayed and in effect for any period of sixty (60)
days; or
4. If a court of competent jurisdiction shall enter an order,
judgment or decree appointing a receiver for a substantial part of the
assets or properties of the Maker and such order, judgment or decree shall
continue unvacated or unstayed and in effect for a period of sixty (60)
days.
Unless the Payee otherwise elects, in the Payee's sole discretion, this
Note shall automatically become immediately due and payable, without further
notice or demand, upon the occurrence of any event of default hereinabove
described. Upon the acceleration of the entire or any portion of the unpaid
balance of this Note, the holder, without prejudice to any other rights, is
authorized to proceed against Maker and shall not be required to have recourse
to any security given for payment of this Note.
In the event of a default on the Notes, Maker shall grant to the holder of
each $100,000 principal amount of Notes, an additional Warrant, having the same
term and in substantially the same form as the Warrants, exercisable to purchase
11,000 shares of Common Stock of Maker.
This Note shall be unsecured and shall rank senior to all other
indebtedness of Maker incurred after the date hereof or currently existing and
not by its terms senior to other indebtedness, except that this Note shall rank
junior to any existing secured indebtedness of the Company to the extent of the
collateral securing such indebtedness and PARI PASSU with indebtedness owed to
EMI Communications Corporation pursuant to a note dated November 13, 1995, in
the initial principal amount of $1,500,000; provided that, with the written
consent of holders of at least 70% of the outstanding principal amount of Notes
outstanding, Maker may incur additional indebtedness either senior or PARI PASSU
with this Note.
At the option of the Maker, the unpaid balance of this Note may be prepaid
in whole or in part, from time to time, without penalty or premium.
Except as otherwise expressly provided herein, Maker, sureties, guarantors
and endorsers of this Note hereby severally waive presentment, demand for
payment, dishonor,
2
<PAGE>
notice of dishonor, protest and notice of protest, and any and all other
requirements necessary to hold them liable as Maker.
The liability of Maker hereunder shall be unconditional. No act, failure or
delay by the holder hereof to declare a default as set forth herein or to
exercise any right or remedy it may have hereunder, or otherwise, shall
constitute a waiver of its rights to declare such default or to exercise any
such right or remedy at such time as it shall determine in its sole discretion.
Each Maker, surety, guarantor and endorser further agrees, jointly and
severally, to pay all costs of collection, including a reasonable attorney's fee
and all costs of levy or appellate proceedings or review, or both, in case the
principal or any interest thereon is not paid at the respective maturity
thereof, or in case it becomes necessary to protect the security hereof, whether
suit be brought or not.
Any and all notices or other communications required or permitted to be
given under this Note shall be in writing and shall be deemed to have been duly
given upon personal delivery or the mailing thereof by certified or registered
mail (a) if to the Maker, addressed to it at its address set forth above; and
(b) if to Payee, addressed to it or at such other address any person or entity
entitled to receive notices may specify by written notice given as aforesaid.
This Note may not be changed or terminated orally.
This Note shall be binding upon Maker, its legal representatives,
successors or assigns and shall inure to the benefit of Payee and its
successors, endorsers, assigns or holder(s) in due course.
This Note shall be governed by and construed in accordance with the laws of
the State of Delaware, without giving effect to principles of conflicts of law.
By signing below, the Maker hereby irrevocably submits to the jurisdiction of
such state and to service of process by certified or registered mail at the
Maker's last known address. No provision of this Note may be changed unless in
writing signed by the Payee.
3
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its
duly authorized representative as of the date and year first above written.
ADVANCED RADIO TELECOM CORP.
By:_________________________
Name:
Title:
The undersigned hereby guarantees payment of this Note.
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By:_________________________
Name:
Title:
4
<PAGE>
EXHIBIT B
Void after March __, 2001
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS
WARRANT AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. THIS
WARRANT AND SUCH SHARES MAY NOT BE TRANSFERRED EXCEPT UPON THE
CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE SUBSCRIPTION
AGREEMENT, DATED AS OF THE DATE HEREOF (AS AMENDED AND MODIFIED FROM
TIME TO TIME), AND NO TRANSFER OF THIS WARRANT OR SUCH SHARES SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN
COMPLIED WITH.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN (I) SECTION 12 OF THE REGISTRATION RIGHTS
AGREEMENT DATED FEBRUARY 2, 1996, (THE "REGISTRATION RIGHTS
AGREEMENT") AMONG ADVANCED RADIO TELECOM CORP., ADVANCED RADIO
TECHNOLOGIES CORPORATION AND CERTAIN OTHER SIGNATORIES THERETO AND
(II) THE RESTATED AND AMENDED STOCKHOLDERS AGREEMENT DATED FEBRUARY 2,
1996, (THE "STOCKHOLDERS AGREEMENT") AMONG ADVANCED RADIO TELECOM
CORP., ADVANCED RADIO TECHNOLOGIES CORPORATION AND CERTAIN OTHER
SIGNATORIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UPON
THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, ADVANCED RADIO TELECOM
CORP., AND ADVANCED RADIO TECHNOLOGIES CORPORATION HAVE AGREED TO
DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS
LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME
OF SUCH HOLDER. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF ADVANCED RADIO TECHNOLOGIES CORPORATION.
ADVANCED RADIO TELECOM CORP.
COMMON STOCK PURCHASE WARRANT
ADVANCED RADIO TELECOM CORP. (the "Company"), having its principal office
at 500 108th Ave., N.E., Bellevue, WA 98004 hereby certifies that, for value
received, ____________________, or assigns, is entitled, subject to the terms
set forth below, to purchase from the
<PAGE>
Company at any time on or from time to time after March 8, 1996 and before 5:00
P.M., New York City time, on March __, 2001 (the "Expiration Date") _______
fully paid and non-assessable shares of Common Stock of the Company, at the
price per share (the "Purchase Price") of $6.25. The number and character of
such shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of the Common Stock Purchase Warrants (the "Warrants")
originally issued as of the Original Issue Date (as defined below) and
evidencing the right to purchase an aggregate of 1,100,000 shares of Common
Stock of the Company, subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" means the Common Stock, $.001 par
value, of the Company and its successors.
(c) The "Original Issue Date" is March __, 1996, the date as of
which the Warrants were first issued.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 6 or otherwise.
(e) The term "Purchase Price" shall be the then applicable
exercise price for one share of Common Stock.
(f) The terms "registered" and "registration" refer to a
registration effected by filing a registration statement in compliance with the
Securities Act, to permit the disposition of Common Stock (or Other Securities)
issued or issuable upon the exercise of Warrants, and any post-effective
amendments and supplements filed or required to be filed to permit any such
disposition.
(g) The term "Securities Act" means the Securities Act of 1933
as the same shall be in effect at the time.
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<PAGE>
1. REGISTRATION, ETC. The Company shall have the same obligations to the
holder of the Warrant as it has to the Investor Telecom Stockholders of the
Company as set forth in that certain Registration Rights Agreement by and among
the Company, the stockholders of the Company named therein, Advanced Radio
Technologies Corporation ("ART") and the stockholders of ART named therein.
2. SALE OR EXERCISE WITHOUT REGISTRATION. If, at the time of any
exercise, transfer or surrender for exchange of a Warrant or of Common Stock (or
Other Securities) previously issued upon the exercise of Warrants, such Warrant
or Common Stock (or Other Securities) shall not be registered under the
Securities Act, the Company may require, as a condition of allowing such
exercise, transfer or exchange, that the holder or transferee of such Warrant or
Common Stock (or Other Securities), as the case may be, furnish to the Company a
satisfactory opinion of counsel to the effect that such exercise, transfer or
exchange may be made without registration under the Securities Act, provided
that the disposition thereof shall be in compliance with the provisions of the
Stockholders Agreement, and provided further that nothing contained in this
Section 2 shall relieve the Company from complying with any request for
registration pursuant to Section 1 hereof.
3. EXERCISE OF WARRANT; PARTIAL EXERCISE; CASHLESS EXERCISE.
3.1. EXERCISE IN FULL. Subject to the provisions hereof, this Warrant
may be exercised in full by the holder hereof by surrender of this Warrant, with
the form of subscription attached hereto as SCHEDULE I duly executed by such
holder, to the Company at its principal office accompanied by payment, in cash
or by certified or official bank check payable to the order of the Company, in
the amount obtained by multiplying the number of shares of Common Stock called
for on the face of this Warrant (without giving effect to any adjustment
therein) by the Purchase Price.
3.2. PARTIAL EXERCISE. Subject to the provisions hereof, this Warrant
may be exercised in part by surrender of this Warrant in the manner and at the
place provided in Section 3.1 except that the amount payable by the holder upon
any partial exercise shall be the amount obtained by multiplying (a) the number
of shares of Common Stock (without giving effect to any adjustment therein)
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price. Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares designated by the holder in the subscription at the end
hereof.
3.3. EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in Sections 3.1 and 3.2 and in lieu of any cash payment
required thereunder, the
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holder(s) of the Warrants shall have the right at any time and from time to time
to exercise the Warrants in full or in part by surrendering the Warrant
Certificate in the manner specified in Section 3.1 as payment of the aggregate
Purchase Price. The number of Warrants to be surrendered in payment of the
aggregate Exercise Price for the Warrants to be exercised shall be determined by
multiplying the number of Warrants to be exercised by the Purchase Price, and
then dividing the product thereof by an amount equal to the Market Price (as
defined below). Solely for the purposes of this paragraph, Market Price shall
be calculated as the average of the Market Prices for each of the ten (10)
trading days preceding the date which the form of election attached hereto is
deemed to have been sent to the Company ("Notice Date").
3.4. DEFINITION OF MARKET PRICE. As used herein, the phrase "Market
Price" at any date shall be deemed to be (i) if the principal trading market for
such securities is an exchange, the last reported sale price, or, in case no
such reported sale takes place on such date, the average of the last reported
sale prices for the last three (3) trading days, in either case as officially
reported on any consolidated tape, (ii) if the principal market for such
securities is the over-the-counter market, the high bid price on such date as
set forth by Nasdaq or, if the security is not quoted on Nasdaq, the high bid
price as set forth in the National Quotation Bureau sheet listing such
securities for such day. Notwithstanding the foregoing, if there is no reported
closing price or high bid price, as the case may be, on the date next preceding
the event requiring an adjustment hereunder, then the Market Price shall be
determined as of the latest date prior to such day for which such closing price
or high bid price is available, or if the securities are not quoted on Nasdaq,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
3.5. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time
of any exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder any
rights (including, without limitation, any right to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant, PROVIDED that if the holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford such holder any such rights.
4. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of full paid and non-assessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled upon such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 5
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or otherwise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time after the
Original Issue Date the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash paid or payable (including, without limitation, by
way of dividend), except out of earned surplus of the Company, or
(c) other or additional (or less) stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
then, and in each such case, the holder of this Warrant, upon the exercise
hereof as provided in Section 3, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in subdivisions (b) and (c) of this Section 5 which such holder would hold on
the date of such exercise if on the Original Issue Date he had been the holder
of record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the Original Issue Date to
and including the date of such exercise, retained such shares and all such other
or additional (or less) stock and other securities and property (including cash
in the cases referred to in subdivisions (b) and (c) of this Section 5)
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Sections 6 and 7 hereof.
6. REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case the Company after the Original Issue Date shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the holder of this Warrant, upon the exercise
hereof as provided in Section 3 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall be entitled to receive (and the Company
shall be entitled to deliver), in lieu of the Common Stock (or Other Securities)
issuable upon such exercise prior to such consummation or such effective date,
the stock and other securities and property (including cash) to which such
holder would have been entitled upon such consummation or in connection with
such dissolution, as the case may be, if such holder had so exercised this
Warrant immediately prior thereto, all subject to further adjustment thereafter
as provided in Sections 5 and 7 hereof.
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7. OTHER ADJUSTMENTS.
7.1. GENERAL. In any case to which Sections 5 and 6 hereof are not
applicable, where the Company shall issue or sell shares of its Common Stock
after the Original Issue Date without consideration or for a consideration per
share less than the Purchase Price in effect pursuant to the terms of this
Warrant at the time of issuance or sale of such additional shares, except where
such shares are issued or sold pursuant to the exercise of any warrant or option
or issued prior to the date of this Warrant, then the Purchase Price in effect
hereunder shall simultaneously with such issuance or sale be reduced to a price
determined by dividing (1) an amount equal to (a) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale multiplied
by the Purchase Price in effect hereunder at the time of such issuance or sale,
plus (b) the consideration, if any, received by the Company upon such issuance
or sale, by (2) the total number of shares of Common Stock outstanding
immediately after issuance or sale of such additional shares, and the number of
shares of Common Stock which may be purchased upon exercise of this Warrant
shall be increased so that the aggregate amount to be paid upon full exercise of
this Warrant, after giving effect to each reduction in the Purchase Price, shall
not be reduced.
7.2. CONVERTIBLE SECURITIES. In case the Company shall issue or sell
any securities convertible into Common Stock of the Company ("Convertible
Securities") after the date hereof, there shall be determined the price per
share for which Common Stock is issuable upon the conversion or exchange
thereof, such determination to be made by dividing (a) the total amount received
or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (b) the maximum number of shares of Common Stock of the Company
issuable upon the conversion or exchange of all of such Convertible Securities.
If the price per share so determined shall be less than the
applicable Purchase Price, then such issue or sale shall be deemed to be an
issue or sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of shares of Common Stock at the price per
share so determined, provided that, if such Convertible Securities shall by
their terms provide for an increase or increases, with the passage of time, in
the amount of additional consideration, if any, to the Company, or in the rate
of exchange, upon the conversion or exchange thereof, the adjusted Purchase
Price shall, forthwith upon any such increase becoming effective, be readjusted
to reflect the same, and provided further, that upon the expiration of such
rights of conversion or exchange of such Convertible Securities, if any thereof
shall not have been exercised, the adjusted Purchase Price shall forthwith be
readjusted and thereafter be the price which it would have been had an
adjustment been made on the basis that the only shares of Common Stock so issued
or sold were issued or sold upon the conversion or exchange of such Convertible
securities, and that they were issued or sold for the consideration actually
received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or sale of
all of such Convertible Securities
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which shall have been converted or exchanged.
7.3. RIGHTS AND OPTIONS. In case the Company shall grant any rights
or options to subscribe for, purchase or otherwise acquire Common Stock, there
shall be determined the price per share for which Common Stock is issuable upon
the exercise of such rights or options, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of such rights or options, by (b) the maximum number of shares of
Common Stock of the Company issuable upon the exercise of such rights or
options.
If the price per share so determined shall be less than the
applicable Purchase Price, then the granting of such rights or options shall be
deemed to be an issue or sale for cash (as of the date of the granting of such
rights or options) of such maximum number of shares of Common Stock at the price
per share so determined, provided that, if such rights or options shall be their
terms provide for an increase or increases, with the passage of time, in the
amount of additional consideration payable to the Company upon the exercise
thereof, the adjusted purchase price per share shall, forthwith upon any such
increase becoming effective, be readjusted to reflect the same, and provided,
further, that upon the expiration of such rights or options, if any thereof
shall not have been exercised, the adjusted Purchase Price shall forthwith be
readjusted and thereafter be the price which it would have been had an
adjustment been made on the basis that the only shares of Common Stock so issued
or sold were those issued or sold upon the exercise of such rights or options
and that they were issued or sold for the consideration actually received by the
Company upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
8. FURTHER ASSURANCES. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of all Warrants
from time to time outstanding.
9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly cause the Company's regularly retained auditor to compute such
adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based, and the
number of shares of Common Stock outstanding or deemed to be outstanding. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant.
10. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled
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to receive any dividend (other than a cash dividend payable out of earned
surplus of the Company) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issue of Common Stock on the
exercise of the Warrants), then and in each such event the Company will
mail or cause to be mailed to each holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up,
and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or granted,
the date of such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant is to be offered or made.
Such notice shall be mailed at least 20 days prior to the date therein
specified.
11. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of the Warrants.
12. LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at any
time shall list any Common Stock on any national securities exchange and shall
register such Common Stock under the Securities Exchange Act of 1934 (as then in
effect, or any similar statute then in effect), the Company will, at its
expense, simultaneously list on such exchange, upon official
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notice of issuance upon the exercise of the Warrants, and maintain such listing
of all shares of Common Stock from time to time issuable upon the exercise of
the Warrants; and the Company will so list on any national securities exchange,
will so register and will maintain such listing of, any Other Securities if and
at the time that any securities of like class or similar type shall be listed on
such national securities exchange by the Company.
13. EXCHANGE OF WARRANTS. Subject to the provisions of Section 2 hereof,
upon surrender for exchange of any Warrant, properly endorsed, to the Company,
the Company at its own expense will issue and deliver to or upon the order of
the holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
14. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
15. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in New York, New York, for the
purpose of issuing Common Stock (or Other Securities) upon the exercise of the
Warrants pursuant to Section 3, exchanging Warrants pursuant to Section 13, and
replacing Warrants pursuant to Section 14, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
16. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
17. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) subject to the provisions hereof, title to this Warrant may
be transferred by endorsement (by the holder hereof executing the form of
assignment attached hereto as SCHEDULE II) and delivery in the same manner
as in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) subject to the foregoing, any person in possession of this
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Warrant properly endorsed is authorized to represent himself as absolute
owner hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bona fide purchaser and each
such bona fide purchaser shall acquire absolute title hereto and to all
rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
18. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder, or, until an address is so furnished, to
and at the address of the last holder of this Warrant who has so furnished an
address to the Company.
19. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall
be construed and enforced in accordance with and governed by the laws of such
State. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.
20. ASSIGNABILITY. Subject to the transfer conditions referred to in the
legend endorsed hereon, this Warrant is fully assignable at any time upon
surrender of this Warrant with a properly executed Assignment (in the form of
SCHEDULE II hereto) at the principal office of the Company.
Dated: March __, 1996
ADVANCED RADIO TELECOM CORP.
By
---------------------------------
[Corporate Seal]
Attest:
- -----------------------------
Secretary
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SCHEDULE I
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ADVANCED RADIO TELECOM CORP.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, * shares of Common Stock of ADVANCED RADIO TELECOM
CORP., and herewith makes payment of
$ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, , whose address is
Dated:
-----------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
------------------------------------
(Address)
- ------------------------
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
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SCHEDULE II
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto the right
represented by the within Warrant to purchase shares of Common
Stock of [_____________] to which the within Warrant relates, and appoints
Attorney to transfer such right on the books of
[_________________] with full power of substitution in the premises. The
Warrant being transferred hereby is one of an aggregate of [___________] Common
Stock Purchase Warrants issued by [______________] as of [_______________], 19__
Dated:
-----------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
------------------------------------
(Address)
- ------------------------
Signature guaranteed by a Bank
or Trust Company having its
principal office in New York City
or by a Member Firm of the New
York or American Stock Exchange
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EXHIBIT C
RISK FACTORS
AN INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED WHEN EVALUATING AN INVESTMENT IN THE
SECURITIES.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES; ANTICIPATED FUTURE OPERATING
LOSSES
Since its inception in 1993, the Company has received only minimal revenues
and has experienced a history of net losses. Although the Company has initiated
efforts to develop a network using 38 GHz technology and market its 38 GHz
services to potential customers, the Company currently provides its services
only on a limited basis in five cities. The Company's primary activities to
date have focused on the acquisition of wireless licenses, the hiring of
management and other key personnel and the acquisition of the equipment
necessary to provide 38 GHz services. The Company has made significant
expenditures related to the development of its wireless telecommunications
services and expects to incur significant additional expenses and operating
losses as the development and expansion of its telecommunications business
continues. The Company's limited operating history makes the prediction of
future operating results difficult or impossible, and there can be no assurance
that the Company will establish a significant customer base or achieve or
sustain profitable operations.
ABILITY TO SERVICE INDEBTEDNESS
Although the proceeds from sale of the Notes, expected to be approximately
$5,000,000 prior to expenses, are expected to enhance liquidity and improve the
Company's financial flexibility in the near term, the Company's total
indebtedness and total interest expense will be significantly increased as a
result of the issuance of the Notes.
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including the following: (i) the debt service
requirements of any additional indebtedness could make it more difficult for the
Company to make payments on the notes; (ii) the ability of the Company to obtain
any necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes may be limited; (iii) a substantial
portion of the company's cash flow from operations, if any, must be dedicated to
the payment of principal and interest on its indebtedness and other obligations
and will not be available for other purposes; (iv) the Company's level of
indebtedness could limit its flexibility in planning for, or reacting to changes
in, its business; (v) the Company is more highly leveraged than some of its
competitors, which may place it at a competitive disadvantage; and (vi) the
Company's high degree of indebtedness could make it more vulnerable in the event
of a downturn in its business.
If the Company is unable to obtain additional financing sufficient to meet
its obligations or fund its operations, the Company could face substantial
liquidity problems and could cause defaults under other indebtedness of the
Company. Such defaults could result in a default on the Notes and
<PAGE>
could delay or preclude payment of principal of, or interest on, the Notes.
NEED FOR ADDITIONAL FINANCING
The Company will require substantial investment capital for the development
and expansion of its wireless telecommunications operations, the continued
funding of related operating expenses, and for the possible acquisition of
additional licenses or other assets or businesses. Based on its current plan of
development, management anticipates that the net proceeds of this offering and
existing financial resources will be sufficient to fund the Company for the next
seven months. Management believes that the Company's capital needs at the end
of this seven month period will continue to be significant and that it may be
necessary for the Company to continue to seek additional sources of financing.
In addition, if the Company's plan of development or projections change or prove
to be inaccurate, or the proceeds of this Offering, together with other existing
financial resources, prove to be insufficient to fund the Company for the next
four months, or if the Company completes any acquisitions, the Company may be
required to seek additional financing sooner than currently anticipated. Such
additional financing may take the form of public and private equity or debt
offerings, sales of assets and other financing arrangements. There can be no
assurance that the Company will be able to obtain any additional financing, or,
if such financing is available, that the Company will be able to obtain it on
acceptable terms. In the event that the Company fails to obtain additional
financing, such failure could result in the modification, delay or abandonment
of some or all of the Company's development and expansion plans. Any such
modification, delay or abandonment is likely to have a material adverse effect
on the Company's business, which could adversely affect the value of the Common
Stock and the Company's ability to make principal and interest payments related
to the Notes.
GOVERNMENT REGULATION; FCC LICENSES
The telecommunication services offered by the Company are subject to
varying degrees of federal, state and local regulation. The Federal
Communications Commission ("FCC") exercises jurisdiction over all
telecommunications services providers to the extent such services involve the
provision of jurisdictionally interstate or international telecommunications,
including the resale of long distance services and the provision of local access
services necessary to connect callers to long distance carriers. The state
regulatory commissions retain jurisdiction over services to the extent such
services involve the provision of jurisdictionally intrastate
telecommunications. The Company, as a provider of facilities-based local
telecommunications services, files tariffs with the FCC and for some services
with state authorities for domestic service on an ongoing basis. Failure to
obtain state authorizations could prevent the Company from offering some of its
services or delay such offerings. Challenges to these tariffs by third parties
could cause the Company to incur substantial legal and administrative expenses.
Additionally, the Company expects that, as its business and product lines expand
as regulatory initiatives favoring competition in the provision of local
telecommunications services are adopted and implemented, it will offer increased
intrastate services which will be subject to state regulation. In its provision
of local telecommunications services, the Company currently is not subject to
price-cap or rate-of-return regulation by the
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FCC. The Company is, however, required to comply with all applicable local
zoning and other ordinances governing the installation and operation of its
wireless telecommunications services.
Although the Company believes that it is in substantial compliance with all
material laws, rules and regulations governing its operations and has obtained,
or is in the process of obtaining, all authorizations, tariffs and approvals
necessary and appropriate to conduct its operations, changes in existing laws
and regulations, including those relating to the provision of wireless local
telecommunications services via 38 GHz and/or the future granting of 38 GHz
authorizations, or any failure or significant delay in obtaining necessary
regulatory approvals, could have a material adverse effect on the Company. In
recent periods, the FCC has increasingly looked for opportunities to raise funds
for the government by auctioning portions of the radio spectrum. In addition,
the FCC is considering the possibility of allocating additional portions of the
radio spectrum (above and below 38 GHz) for commercial use. The FCC recently
issued an order that prohibits any additional 38 GHz applications, pending
conclusion of a proposed rulemaking. The Company believes that the FCC will
continue to propose and/or adopt rules to auction portions of the radio spectrum
available for commercial use, which may include pending or proposed applications
in 38 GHz and other portions of the radio spectrum. The FCC might at the same
time limit operations under existing licenses or might dismiss all pending 38
GHz applications, in order to auction the spectrum which the applicants seek.
In the event that an auction procedure is proposed, which the Company believes
is currently being considered, or adopted by the FCC for granting additional
authorizations in 38 GHz or other portions of the radio spectrum, changes to the
existing regulations governing 38 GHz, such as stricter construction
requirements, might be adopted, which could have an impact on the scope of the
Company's authorizations and the operations of present and future licensees,
including the Company. The Company is unable to predict the impact upon its
proposed operations should some or all of these events occur, except that the
failure of the Commission to grant some or all of its pending applications or
actions of the FCC to restrict operations under the Company's licenses could
have a material adverse effect upon the Company.
Many of the Company's licenses will expire in March 2001. Although the
Company currently anticipates that the licenses will be renewed based upon the
Commission's custom and practice establishing a presumption in favor of
licensees that have complied with regulatory obligations during the initial
license period, there can be no assurance that all or any of the Company's
licenses will be renewed upon expiration of their initial terms. In the event
that the FCC does not renew one or more of the Company's licenses, the Company's
business and results of operations are likely to be materially adversely
affected.
Legislation to substantially revise the Communications Act was recently
enacted. The legislation establishes local exchange competition as a national
policy by allowing the FCC to preempt laws that prohibit competition in the
local exchange and by the establishment of uniform and fair requirements and
standards for interconnection and unbundling of services. To the extent this
legislation, and its successful implementation by the FCC, establish fair, cost-
based, enforceable national standards of interconnection and unbundling for
local exchange services, it
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could significantly enhance the Company's ability and the ability of the
Company's customers to improve their competitive position in local exchange
markets. The proposed legislation could also permit a Regional Bell Operating
Company ("RBOC") to compete in the provision of inter-Local Access and Transport
Area ("inter-LATA") long distance services once certain time periods have
elapsed or certain competitive characteristics emerge in such RBOC's service
area. There can be no assurance that any legislation or regulation will
broaden the opportunities available to the Company or will not have a material
adverse effect upon the Company and its operations.
The value of the licenses held or acquired hereafter by the Company will
depend significantly upon the success of the Company's wireless
telecommunications operations and the future direction of the wireless
telecommunications segment of the telecommunications industry. The value of the
licenses may also be affected by fluctuations in the level of supply and demand
for such licenses. Any assignment of a license or transfer of control by an
entity holding a license is subject to certain restrictions and limitations
relating to the identity and status of the transferee and requires prior FCC
and/or state regulatory approval. These restrictions and limitations, and the
regulatory approval requirements, may serve to adversely affect the value of the
Company's licenses.
EMERGING MARKET; UNCERTAIN ACCEPTANCE OF 38 GHZ SERVICES
The Company has only recently initiated efforts to market its DigiWave
Access Link services to potential customers, and has received only insignificant
revenues to date. The provision of wireless local telecommunications services
over 38 GHz represents an emerging sector of the telecommunications industry and
the demand for and acceptance of such services are uncertain. There can be no
assurance that substantial markets will develop for wireless local
telecommunications services delivered over 38 GHz, or that, even if such markets
develop, that the Company will be able to succeed in its efforts to attract and
maintain a sufficient customer base, or that it will be able to operate
profitably given the price competition that is common in the market for
telecommunications services.
NEW SERVICES AND TECHNOLOGICAL CHANGE
The telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. The Company expects these changes to continue, and believes that its
future success will depend on its ability to anticipate or adapt to such changes
and to offer new services or enhancements to existing services that meet these
evolving industry standards. There can be no assurance that existing or proposed
technology or service introductions, or technology or services developed and
implemented in the future, will not render 38 GHz-based telecommunications
services less profitable or obsolete. There can be no assurance that the
Company will have sufficient resources to develop or acquire new technologies or
to introduce new services that could compete with future technologies or service
offerings or that equipment held by the Company in inventory will not be
rendered less valuable or obsolete.
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COMPETITION
The market for telecommunications services is characterized by substantial
competition. Although the Company was formed in 1993, it has just recently
begun to market its wireless telecommunications services to potential customers
and is currently providing wireless services to a very limited number of
customers. Many of the Company's competitors have long-standing relationships
with customers and suppliers, industries, greater name recognition and
significantly greater financial, technical and marketing resources than the
Company. As a result, these competitors may be able to more quickly develop and
exploit new or emerging technologies, adapt to changes in customer requirements,
or devote greater resources to the marketing of their services than the Company.
Furthermore, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address the telecommunications needs of the Company's existing
and prospective customers. In each area in which the Company is authorized or
may be authorized under the licenses to provide services, the Company's services
compete with those offered by the LECs, such as the Regional Bell Operating
Companies. The LECs have long-standing relationships with their customers, have
the potential to subsidize competitive services with revenues from a variety of
businesses, and benefit from existing state and federal policies and regulations
that currently favor the LECs over the Company in certain respects.
While certain regulatory decisions have provided increased business
opportunities for CAPs and other telecommunications providers such as the
Company, these same decisions have given the LECs flexibility to decrease prices
of their competitive services such as local access charges paid by long distance
carriers utilizing the LECs' local networks. Regulatory decisions affording the
LECs increased pricing flexibility or other regulatory relief or benefits also
could have a material adverse effect on the Company. Further, as competition
increases in the local telecommunications market, pricing competition and
pressures could significantly increase. In September 1995, the FCC announced
proposals that, if adopted, would significantly lessen the regulation of LECs
that are subject to competition in their service areas and would provide such
LECs with greater pricing flexibility. If the LECs lower their rates, CAPs and
other telecommunications providers such as the Company may be forced by market
conditions to charge less for their services in order to compete. Any such price
reduction could have a material adverse effect on the Company's results of
operations.
In addition to competition from the LECs, the Company also faces
competition from at least one fiber optic-based CAP in most of the markets in
which it offers services. The Company also may face competition from new market
entrants, including CAPs which deliver services over fiber optic- and copper-
based networks, as well as competitors offering wireless telecommunications
services, including leading telecommunications companies and other entities
which hold or have applied for licenses in the 38 GHz band in many larger
metropolitan areas or which may purchase such licenses from others. The
granting of additional licenses by the FCC in the 38 GHz band, or other portions
of the spectrum which have characteristics that would allow the provision of
services similar to those provided by the Company, would result in increased
competition. The Company
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also may face competition from cable television companies, electric utilities,
LECs operating outside their current local service areas and long distance
carriers in the provision of local telecommunications services. The great
majority of these entities provide transmission services primarily over fiber
optic-, copper-based or microwave networks, which, unlike the Company's DigiWave
Access Link services, enjoy proven market acceptance for the carriage of
telecommunications traffic. The consolidation of telecommunications companies
and the formation of strategic alliances within the telecommunications industry,
as well as the development of new technologies, could give rise to significant
new competitors to the Company. There can be no assurance that the Company will
be able to compete effectively in any of its markets.
RELIANCE ON SUPPLIERS AND EQUIPMENT PERFORMANCE
The Company currently purchases all of its 38 GHz wireless
telecommunications equipment from a single supplier. Any reduction or
interruption in supply from this supplier could have a material adverse effect
on the Company until alternative supply sources are established. To date, the
Company has not experienced any delays in obtaining the necessary equipment. The
Company does not manufacture, nor does it have the capability to manufacture,
any of the telecommunications equipment necessary to provide its wireless
telecommunications services. Although there are several other manufacturers who
have, or are developing, equipment that would meet the Company's requirements,
there can be no assurance that such equipment would be available to the Company
on terms similar or more favorable to those included in its arrangements with
its current supplier.
TECHNOLOGICAL LIMITATIONS: LINE OF SIGHT; ROOF RIGHTS; RAIN ATTENUATION
Wireless telecommunications services over 38 GHz require a line of sight
between two transceivers comprising a link, with a maximum distance between any
two corresponding transceivers generally of five miles or less (depending on
weather conditions). This line of sight condition generally can be met by
careful network engineering, some locations may require intermediate
transceivers, which will increase the cost of the service and might make a
particular path uneconomical to provide. Similarly, the distance limitation
generally will not affect a local distribution service and can be overcome by
adding intermediate links or using lower frequencies. However, use of lower
frequency microwave for longer paths might create delays of several months in
providing services. Wireless links at 38 GHz also are subject to outages in
severe rain conditions. The length and severity of these outages can be reduced,
and in many cases eliminated, by the use of shorter paths, route diversity or
"hot standby" equipment. Each of these solutions, however, increases the cost
of the providing of the service and might make the providing of service in a
given instance uneconomical. The establishment of wireless services also
generally requires access to roofs or other structures to allow the Company to
install its transceivers and antennas. In order to obtain the necessary access
the Company generally must secure "roof rights" from the owners of each building
or other structure upon which its equipment will be placed. There can be no
assurance that the Company will be successful in obtaining the roof rights
necessary to establish its DigiWave Access Link services in its potential
markets, or that delays in
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obtaining such rights would not have a material adverse effect on the Company's
development of a wireless network.
MANAGEMENT OF GROWTH
The Company is currently pursuing and experiencing a period of rapid growth
that has placed, and may continue to place, a significant strain on its
managerial, operational and financial resources. The Company's success will
depend on its ability to manage growth effectively and to enhance its
operational and financial control and information systems, and on its ability to
attract, assimilate and retain additional qualified personnel necessitated by
the Company's growth. Failure by the Company to meet the demands of and to
manage expansion of its business and operations could have a material adverse
effect on the Company's business.
DEPENDENCE ON KEY EMPLOYEES
The Company's success is substantially dependent on Vernon Fotheringham and
Steven Comrie, its Chairman and President, the loss of one or more of whom could
have a material adverse effect on the Company. The future success of the Company
will also depend in large part on its ability to attract and retain talented and
qualified employees. Competition in the recruitment of highly-qualified
personnel in the telecommunications industry is intense. There can be no
assurance that the Company can retain its key employees or that it can attract,
assimilate and retain qualified personnel in the future.
CONCENTRATION OF SHARE OWNERSHIP; CONTROL BY LANDOVER HOLDINGS CORPORATION;
STOCKHOLDERS AGREEMENT
Landover Holdings Corporation and its affiliates, as a group, will
beneficially own approximately 50.1% of the Company's outstanding Common Stock,
and, under the terms of the Stockholders Agreement, can designate a majority of
the directors of the Company. As a result, these stockholders will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. In addition, this concentration of ownership may have the effect
of delaying or preventing a change in control of the Company. On February 1,
1995, Laurence Zimmerman, who controls Landover Holdings Corporation, consented
to entry of an order of the SEC, without admitting or denying the matters
referred to therein, providing that he was barred through February 1, 1996 from
association with any broker, dealer, municipal securities dealer, investment
company or investment adviser. The order relates to alleged violations of
Section 17(a) of the Securities Act, Section 10(b) and 15 (c)(1) of the
Securities Exchange Act of 1934 and Rules 10b-5 and 15c1-2 thereunder arising
out of actions allegedly done by Mr. Zimmerman in 1986, when he was 26 years old
and a broker for Breuer Capital, in connection with trading and selling shares
of Balchem Corporation.
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LACK OF PUBLIC TRADING MARKET; DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for the Company's
Securities. The exercise price of the Warrants has been determined solely by
the Board of Directors of the Company.
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS
As of February 9, 1996, there are outstanding options, warrants, rights and
other convertible securities with respect to an aggregate of 1,929,368 shares of
Common Stock at per-share exercise prices ranging from $.001 to $1.652. The
exercise of outstanding stock options, warrants, rights and other convertible
securities will dilute the percentage ownership of the holders of the Company's
Common Stock.
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company has not paid and does not anticipate paying any cash dividends
on its Common Stock in the foreseeable future, but instead intends to retain its
capital for use in the Company's growth and ongoing operations.
PUT/CALL
Ameritech Development Corporation has the right, commencing February 2,
1997, to put its Series F Preferred Stock to the Company for $2,500,000 in the
event the Company fails to enter into a proposed strategic distribution
agreement with Ameritech Corp. by May 3, 1996. Exercise of such put may
adversely affect the Company's ability to repay the Notes.
ANTITAKEOVER PROVISIONS; POSSIBLE FUTURE ISSUANCES OF PREFERRED STOCK
The Certificate of Incorporation of the Company allows the Board of
Directors to issue up to 10,000,000 shares of Preferred Stock and fix the
rights, privileges and preferences of those shares without any further vote or
action by the shareholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. While the Company has no
present intention to issue additional shares of Preferred Stock, any such
issuance could be used to discourage, delay or make more difficult a change in
control of the Company.
RANKING OF NOTES AS UNSECURED OBLIGATIONS
The Notes are not secured by any of the assets of the Company and are
general unsecured obligations of the Company. The Company and its subsidiaries
are permitted to incur a substantial amount of secured indebtedness. In the
event of any distribution or payment of the assets of the Company in any
foreclosure, dissolution, winding-up, liquidation or reorganization, holders of
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secured indebtedness will have a secured prior claim to the assets of the
Company which constitute their collateral. In the event of a bankruptcy,
liquidation or reorganization of the Company, holders of the Notes will
participate ratably with all holders of indebtedness of the Company which is
unsecured and all other general creditors of the Company, based upon the
respective amounts owed to each holder or creditor in the remaining assets of
the Company, and there may not be sufficient assets to pay amounts due on the
Notes.
ORIGINAL ISSUE DISCOUNT
The Notes will be issued in a Unit with Warrants which may result in a
deemed original issue discount on the Notes from their principal amount at
maturity. Consequently, purchasers of Notes may be required to include amounts
in gross income for federal income tax purposes in advance of receipt of the
cash payments to which the income is attributable.
MERGER
The Company and ART Corp. plan to merge, subject only to FCC approval of the
Merger; however, while management believes that such approval will be obtained,
there can be no assurance that the Merger will be approved. Until the Merger is
approved, the Company will continue to be able to operate its business, using
the wireless licenses owned by ART Corp., under the Services Agreement. If the
Merger is not approved by May 13, 1997, ART Corp. will surrender all its shares
of Company Common Stock to the Company, and the Company and ART Corp. will
revise the terms of the Services Agreement to provide that (i) the term thereof
will be extended to 40 years, (ii) ART Corp. will receive, in the event of any
dividends paid by the Company to its stockholders, an amount equal to the
percentage share of the Company on that date that the ART Corp. stockholders
would have received in the Merger of such aggregate dividends, (iii) ART Corp.
would have a right of co-sale, subject to FCC approval, in accordance with such
percentage share in the event of any merger or sale of substantial assets by the
Company and (iv) in the event the Company agrees to merge into another entity or
to sell substantially all its assets to another entity, ART Corp. shall, upon
the request of the Company, use its best efforts, subject to FCC approval, to
merge into such entity or sell substantially all its assets to such entity for
aggregate consideration equal to such percentage share of the aggregate
consideration to be paid for ART Corp. and the Company in such transaction.
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ASSET ACQUISITION AGREEMENT
AND PLAN OF REORGANIZATION
Dated as of July 3, 1996
By and Among
COMMCOCCC, INC.
CCC MILLIMETER, L.P.
COLUMBIA MILLIMETER COMMUNICATIONS, L.P.
COLUMBIA CAPITAL CORPORATION
COMMCO, L.L.C.
ADVANCED RADIO TECHNOLOGIES CORPORATION
and
ADVANCED RADIO TELECOM CORP.
-------------------------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRANSFER AND ACQUISITION . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.1 Transfer and Acquisition. . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.2 No Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1 Deliveries to Tech . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2 Deliveries to CommcoCCC . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
REPRESENTATIONS OF COMMCOCCC ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5 Representations with respect to CommcoCCC Entities . . . . . . . . . 9
Section 5.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3 Enforceability, etc. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.5 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . 10
Section 5.6 Consents, Approvals and Non-Contravention . . . . . . . . . . . . . . 10
Section 5.7 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . 11
Section 5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.12 38 GHz Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.14 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.15 Brokers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.16 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 5.17 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.18 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.19 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.20 FCC and Other Governmental Reports . . . . . . . . . . . . . . . . . 14
Section 5.21 Accredited Investors . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.22 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons. . . . 15
ARTICLE VI
REPRESENTATIONS OF ART COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6 Representations with respect to the ART Companies . . . . . . . . . . 15
Section 6.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.3 Enforceability, etc. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.5 Telecom, Subsidiaries and Investments . . . . . . . . . . . . . . . . 17
Section 6.6 Consents, Approvals and Non-Contravention . . . . . . . . . . . . . . 17
Section 6.7 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . 18
Section 6.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . 18
Section 6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.12 Other Relationships . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.13 38 GHz Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.15 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.16 Brokers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.17 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.19 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons . . . 21
ARTICLE VII
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.1 Conduct of Business of CommcoCCC and the ART Companies . . . . . . . 22
Section 7.2 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.3 Application for Commission Consent . . . . . . . . . . . . . . . . . 22
Section 7.4 Other Governmental Consents . . . . . . . . . . . . . . . . . . . . . 22
Section 7.5 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.6 Restrictive Agreements Prohibited . . . . . . . . . . . . . . . . . . 23
Section 7.7 Dividends and Distributions; Acquisition of Capital Stock . . . . . . 23
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Section 7.8 Additional Negative Covenants of CommcoCCC . . . . . . . . . . . . . 23
Section 7.9 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.10 Additional Affirmative Covenants . . . . . . . . . . . . . . . . . . 24
Section 7.11 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.12 Review of Tech and CommcoCCC . . . . . . . . . . . . . . . . . . . . 24
Section 7.13 Disclosure to Parties . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.14 CommcoCCC Obligation to Provide Information . . . . . . . . . . . . . 24
Section 7.15 Financial Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.16 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.17 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.18 Distribution of Tech Securities Pursuant to Plan of Reorganization . 26
Section 7.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.20 Negative Covenants of the ART Companies . . . . . . . . . . . . . . . 26
Section 7.22 Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII
CONDITIONS TO TECH'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8 Conditions to Tech's Obligations . . . . . . . . . . . . . . . . . . 28
Section 8.1 Truth of Representations and Warranties . . . . . . . . . . . . . . . 28
Section 8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.3 No Litigation Threatened . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.4 Commission Consent . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.5 Governmental Approvals; Consents . . . . . . . . . . . . . . . . . . 29
Section 8.6 Opinion of CommcoCCC's Counsel . . . . . . . . . . . . . . . . . . . 29
Section 8.7 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.8 CommcoCCC Coverage Pops . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.9 NASDAQ Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.10 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX
CONDITIONS TO COMMCOCCC's OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9 Conditions to the CommcoCCC's Obligations . . . . . . . . . . . . . . 30
Section 9.1 Truth of Representations and Warranties . . . . . . . . . . . . . . . 30
Section 9.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . 30
Section 9.4 No Litigation Threatened . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.5 Commission Consent . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.6 Governmental Approvals; Consents . . . . . . . . . . . . . . . . . . 30
Section 9.7 Tax Opinions of CommcoCCC's Counsel . . . . . . . . . . . . . . . . . 31
Section 9.8 Other Opinions of Tech's Counsel . . . . . . . . . . . . . . . . . . 31
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Section 9.9 Equity and Debt Offerings . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.10 ART Coverage Pops . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.11 CLC Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.12 Tech Board Representation . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.13 NASDAQ Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.14 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 10.1 Indemnification by the CommcoCCC Entities . . . . . . . . . . . . . . 31
Section 10.2 Threshold for Indemnification . . . . . . . . . . . . . . . . . . . . 33
Section 10.3 Indemnification by the ART Companies. . . . . . . . . . . . . . . . . 34
Section 10.4 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.5 Notice of Direct Claims . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 36
Section 11 No Survival of Representations and Warranties . . . . . . . . . . . . 36
ARTICLE XII
OFFER, SALE AND RESALE OF TECH SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.1 Limitations on Disposition . . . . . . . . . . . . . . . . . . . . . 36
Section 12.2 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.3 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.5 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.9 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.10 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE>
EXHIBITS
Exhibit A Bridge Notes
Exhibit B CLC Option Agreement
Exhibit C CLC Right of First Offer Agreement
Exhibit D Columbia Right of First Offer Agreement
Exhibit E Coverage Pops
Exhibit F Management Agreement
Exhibit G Noncompetition Agreement
Exhibit H Registration Rights Agreement
Exhibit I Security Agreement
Exhibit J Warrants
Exhibit K Tax Opinion of CommcoCCC's Counsel
SCHEDULES
Schedule 5.4 Capitalization
Schedule 5.6 Consents, Approvals and Non-Continuation
Schedule 5.7 Balance Sheet
Schedule 5.8 Material Adverse Change
Schedule 5.9 Absence of Undisclosed Liabilities
Schedule 5.10 Taxes
Schedule 5.11 Litigation
Schedule 5.12 38 GHz Authorization
Schedule 5.15 Brokers
Schedule 5.17 Contracts and Commitments
Schedule 6.6 Consents, Approvals and Non-Contravention
Schedule 6.8 Material Adverse Change
Schedule 6.10 Taxes
Schedule 6.13 38 GHz Authorizations
Schedule 6.16 Brokers
Schedule 6.17 Contracts and Commitments
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<PAGE>
ASSET ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ASSET ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (the
"AGREEMENT"), dated as of July 3, 1996, by and among COMMCOCCC, INC., a Delaware
corporation ("COMMCOCCC"), CCC MILLIMETER, L.P., a Delaware limited partnership
("CCC"), COLUMBIA MILLIMETER COMMUNICATIONS, L.P., a Delaware limited
partnership ("CMC"), COMMCO, L.L.C., a Delaware limited liability company
("CLC"), COLUMBIA CAPITAL CORPORATION, a Virginia corporation ("COLUMBIA"),
ADVANCED RADIO TECHNOLOGIES CORPORATION, a Delaware corporation ("TECH"), and
ADVANCED RADIO TELECOM CORP., a Delaware corporation ("TELECOM") (Tech and
Telecom are sometimes collectively hereinafter referred to as the "ART
COMPANIES").
RECITALS:
1. CommcoCCC owns, or has the right to acquire and at the closing will
own, 38 GHz Authorizations covering approximately 90,000,000 Coverage Pops, and
intends to transfer these 38 GHz Authorizations and its other assets to Tech on
the terms and conditions and for the consideration described in this Agreement.
2. Tech and Telecom, either directly or through joint ventures or
partnerships which they control, own, or have the right to acquire and at the
Closing will own or lease, 38 GHz Authorizations covering approximately
93,000,000 Coverage Pops, and Tech intends to acquire the CommcoCCC Assets on
the terms and conditions and for the consideration described in this Agreement.
3. CommcoCCC, Tech and Telecom desire to combine their ownership of 38
GHz Authorizations and construct and operate 38 GHz telecommunication networks
as a single Business.
4. In order to combine their Businesses, CommcoCCC, Tech and Telecom
intend to consummate the following series of transactions (the "TRANSACTIONS"):
a. The ART Reorganization;
b. The issuance by Tech of Tech Common Stock to the public in the
Equity Offering;
c. The issuance to the public by Tech of units consisting of its
senior discount notes and warrants to purchase Tech Common Stock
in the Debt Offering; and
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d. The Acquisition.
The ART Reorganization is a condition to the closing of the Equity Offering and
the Debt Offering, which in turn are conditions to the Asset Acquisition. The
FCC Consent is a condition to the Asset Acquisition.
5. It is intended that the ART Reorganization qualify as a reorganization
described in Section 368(a)(1)(B) of the Code, that the Asset Acquisition
qualify as a reorganization described in Section 368(a)(1)(C) of the Code, and
that the ART Reorganization, the Equity Offering and the Asset Acquisition
together qualify as transfer to a controlled corporation, Tech, under Section
351 of the Code, with the result that neither the shareholders of CommcoCCC nor
Telecom shall recognize income or gain under the Code as a result of combining
the Businesses of Tech, Telecom and CommcoCCC into a single Business.
6. The purpose of this Agreement is to set forth the terms and conditions
of the Asset Acquisition and to constitute an agreement and plan of
reorganization with respect to the foregoing transactions.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
"ACQUISITION" means the acquisition of the CommcoCCC Assets in exchange for
the Tech Securities pursuant to this Agreement.
"AFFILIATES" means as to any Person, any other Person that, directly or
indirectly, alone or through others, controls, is controlled by or is under
common control with such Person. For purposes of this definition "controls"
(including with correlative meanings, the terms "controlled by" and "under
common control with" as applied to any Person) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" means this Asset Acquisition Agreement and Plan of
Reorganization.
"ART COMPANIES" mean Tech and Telecom.
"ART FINANCIAL STATEMENTS" means the financial statements contained in the
ART Registration Statements.
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"ART REGISTRATION STATEMENTS" mean the Equity Registration Statement and
the Debt Registration Statement.
"ART REORGANIZATION" means the transaction pursuant to which a wholly-owned
subsidiary of Tech shall be merged with and into Telecom with Telecom's existing
shareholders (other than Tech) receiving shares of Tech Common Stock as
disclosed in the Preliminary ART Registration Statements.
"ART WEST" means ART West Joint Venture, a general partnership governed by
Delaware law, between Tech and Extended Communications, Inc.
"ASSIGNMENT APPLICATION" means the application or applications requesting
the Commission's written consent to the assignment of the 38 GHz Authorizations
listed on SCHEDULE 5.12 from Columbia, CMC and CLC, respectively, to CommcoCCC
and the subsequent assignment of such 38 GHz Authorizations by CommcoCCC to
Tech.
"BRIDGE NOTES" means the Bridge Notes due September 30, 1996 issued by Tech
to each of Columbia and CLC, substantially in the form attached hereto as
EXHIBIT A.
"BUSINESS" means the provision of wireless broadband telecommunications
services using point-to-point microwave transmissions in the 37.0 to 40.0
gigahertz portion of the radio spectrum.
"CCC" means CCC Millimeter, L.P., a Delaware limited partnership.
"CLC" means Commco, L.L.C., a Delaware limited liability company.
"CMC" means Columbia Millimeter Communications, L.P., a Delaware limited
partnership.
"CLC OPTION AGREEMENT" means the Option Agreement dated as of the date
hereof among Tech, Telecom and CLC attached hereto as EXHIBIT B.
"CLOSING" means the consummation of the transactions as provided in
Articles II and IV hereof.
"CLOSING DATE" means the date on which the Closing takes place.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLUMBIA" means Columbia Capital Corporation, a Virginia corporation.
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"COLUMBIA RIGHT OF FIRST OFFER AGREEMENT" means the Right of First Offer
Agreement dated as of the date hereof among Columbia, CMC and Tech attached
hereto as EXHIBIT D.
"COMMCOCCC" means CommcoCCC, Inc., a Delaware corporation.
"COMMCOCCC ASSETS" means all assets of CommcoCCC tangible and intangible,
real, personal or mixed and wherever located, including but not limited to all
of the 38 GHz Authorizations in the name of CommcoCCC or any of the CommcoCCC
Entities' identified on SCHEDULE 5.12, all Real Estate of CommcoCCC and all cash
and cash equivalents, excluding all agreements, contracts, commitments and
understandings.
"COMMCOCCC BALANCE SHEET" means the unaudited balance sheet of CommcoCCC as
of June 7, 1996.
"COMMCOCCC COMMON STOCK" means common stock, par value $.01 per share, of
CommcoCCC.
"COMMCOCCC ENTITIES" shall mean collectively CommcoCCC, CCC, CMC, CLC and
Columbia.
"COMMISSION" or "FCC" means the Federal Communications Commission.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"COVERAGE POPS" means (i) 100% of the human beings resident within the
coverage areas of all 38 GHz Authorizations owned by the referenced Person, plus
(ii) 60% of the human beings resident within the coverage areas of all 38 GHz
Authorizations which are managed or leased by such Person under agreements
giving exclusive rights to such Person (together with the licensees) to utilize
such 38 Ghz Authorizations for at least a five year term and entitling such
Person at least 80% of the gross revenue or a substantially equivalent financial
arrangement with respect to such leased or managed Authorizations, plus (iii)
80% of the human beings within the coverage areas of all 38 GHz Authorizations
owned by Art West, with the number of human beings determined in each case based
upon the methodology set forth on EXHIBIT E hereto, and in the case of 38 GHz
Authorizations with overlapping coverage areas duplicate coverage of the same
human beings shall be ignored.
"DGCL" means the Delaware General Corporation Law.
"DCT" means DCT Communications, Inc., a California corporation.
"DEBT REGISTRATION STATEMENT" means the Registration Statement on Form S-1
(No. 333-03735) of Tech filed with the SEC, as amended, with respect to the
Senior Discount Notes due 2006 and Warrants to purchase Tech Common Stock.
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<PAGE>
"DEBT OFFERING" means the issuance and sale of the Senior Discount Notes
due 2006 and Warrants to purchase Tech Common Stock as contemplated by the Debt
Registration Statement.
"DEBT PROSPECTUS" means the prospectus of Tech which is part of the Debt
Registration Statement.
"EMPLOYEE BENEFIT PLANS" means all employee benefit plans within the
meaning of Section 3(3) of ERISA whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA.
"EQUITY REGISTRATION STATEMENT" means the Registration Statement of Tech on
Form S-1 (No. 333-4388) filed with the SEC, as amended, with respect to the
initial public offering of Tech Common Stock.
"EQUITY OFFERING" means the initial public offering of Tech Common Stock as
contemplated by the Equity Registration Statement.
"EQUITY PROSPECTUS" means the prospectus of Tech which is part of the
Equity Registration Statement, as supplemented.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FCC CONSENT" means the Commission's grant of consent to the Assignment
Application.
"FCC RULES" means the rules, regulations and policies of the Commission.
"FINAL AMENDMENT DATE" means the date on which the ART Companies file the
last pre-effective amendment to the ART Registration Statements.
"FINAL ORDER" means an action by the FCC, state regulatory authority or a
court of competent jurisdiction as to which (i) no request for stay by the FCC,
state regulatory authority or a court of competent jurisdiction, as applicable,
is pending, no such stay is in effect, and, if any deadline for filing any such
request is designated by statute or regulation, such deadline has passed; (ii)
no petition for rehearing or reconsideration or application for review of the
action is pending before the FCC, state regulatory authority or court of
competent jurisdiction, as applicable, and the time for filing any such petition
has passed; (iii) the FCC, state regulatory authority or court of competent
jurisdiction, as applicable, does not have the action under reconsideration on
its own motion and the time for such reconsideration has passed; and (iv) no
appeal to a court of competent jurisdiction, or request for stay by a court of
competent jurisdiction, of the FCC's, the state regulatory authority's or the
court's action, as applicable, is pending or in effect and, if any deadline for
filing any such appeal or request is designated by statute or rule, such
deadline has passed.
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<PAGE>
"GAAP" means generally accepted accounting principles in the United States
of America, consistently applied throughout the indicated periods.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"INTEREST" means any equity ownership of any kind of any Person, including
without limitation, equity ownership represented by common stock, preferred
stock, securities convertible into or exercisable for the purchase or other
acquisition of common stock (including convertible debentures, warrants and
options), trust certificates, general or limited partnership interests or
limited liability company member interests.
"INVESTMENT" means any purchase or other acquisition of (i) any Interest
in any Person, (ii) any radio frequency spectrum, (iii) any capital contribution
to such Person or (iv) any other investment in such Person.
"LIENS" means liens, claims, charges and other encumbrances.
"LOAN DOCUMENTS" means the Bridge Notes, the Security Agreement and the
Warrants.
"MANAGEMENT AGREEMENT" means the Management Agreement dated as of the date
hereof among Tech and the CommcoCCC Entities attached hereto as EXHIBIT F.
"MATERIAL ADVERSE CHANGE" with respect to any Person means a material
adverse change in the financial condition, business, assets, results of
operations or prospects of such Person, other than as a result of adverse
changes to the wireless telecommunications industry in general.
"MATERIAL ADVERSE EFFECT" with respect to any Person means a material
adverse effect on the financial condition, business, assets, results of
operations or prospects of such Person, other than as a result of adverse
changes to the wireless telecommunications industry in general.
"NONCOMPETITION AGREEMENT" means the Noncompetition Agreement dated as of
the Closing Date among CCC, CMC, Columbia and Tech, relating to the limitations
on CCC, CMC and Columbia from engaging in the Business, substantially in the
form attached hereto as EXHIBIT G.
"NPRM" shall mean the notice of proposed rulemaking issued by the FCC on
December 15, 1995, 61 FR 2465, Proposed Rules, Federal Communications Commission
(FCC), 47 CFR Parts 1, 2, 21 and 94 [FCC 95-500], Fixed Point-to-Point Microwave
Service, Friday, January 26, 1996, Action: Proposed Rule, Federal Register Vol.
61 No. 18.
"PENDING APPLICATION" means an application that was filed with the FCC
prior to November 13, 1995, to obtain a 38 GHz Authorization, which as of the
date hereof has not been
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<PAGE>
granted or dismissed by the FCC, and which was placed on public notice by the
FCC and held in abeyance pursuant to the NPRM.
"PERMITS" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings under all federal,
state, local or foreign laws with governmental or regulatory bodies, except for
the 38 GHz Authorizations and the Pending Applications.
"PERSON" means any individual, partnership, corporation, trust,
unincorporated organization, limited liability company, association, joint
venture or other entity or a government, agency, political subdivision,
instrumentality or division thereof.
"POPS" mean the aggregate number of human beings resident within a
particular geographic area determined based upon methodology set forth on
EXHIBIT E hereto.
"PRELIMINARY ART REGISTRATION STATEMENTS" means Amendment No. 1 to the
Equity Registration Statement and Amendment No. 1 to the Debt Registration
Statement as filed with the SEC on July 3, 1996 and July 3, 1996, respectively.
"REAL ESTATE" means real property, including roof tops, and improvements,
whether owned or leased.
"REGISTRATION RIGHTS AGREEMENT" means the Second Restated and Amended
Registration Rights Agreement dated the date hereof among the ART Companies and
certain of their stockholders named therein attached hereto as EXHIBIT H.
"SEC" means the Securities and Exchange Commission.
"SECURITY AGREEMENT" means the Security Agreement dated as of the date
hereof between Tech, as debtor, and Columbia, as collateral agent for the
benefit of Columbia and CLC under the Bridge Notes, pursuant to which the debtor
will grant security interests in the assets of Tech to secure the repayment of
the Bridge Notes, substantially in the form attached hereto as EXHIBIT I.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SUBSIDIARY" of any Person means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the Board of Directors or other Persons performing similar functions
are at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person.
"TECH" means Advanced Radio Technologies Corporation, a Delaware
corporation.
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"TECH COMMON STOCK" means common stock, par value $.001 per share, of Tech.
"TECH SECURITIES" means 16,500,000 shares of Tech Common Stock (after
giving effect to the ART Reorganization and related stock split) issued in
exchange for the CommcoCCC Assets pursuant to Article II of this Agreement,
adjusted to reflect the effect of any other subsequent stock split, reverse
split, stock dividend, reorganization, recapitalization or other like change
with respect to the Tech Common Stock.
"TELECOM" means Advanced Radio Telecom Corp., a Delaware corporation.
"TELECOM ONE" means Telecom One, Inc.
"TELECOM WARRANTS" means Warrants outstanding as of the date hereof to
purchase in the aggregate 2,302,136 shares of Common Stock of Telecom.
"TRANSACTION DOCUMENTS" means the agreements and instruments to be executed
and delivered in connection herewith.
"38 GHZ AUTHORIZATIONS" means construction permits and licenses granted by
the FCC for the construction and operation of millimetric microwave
telecommunications systems on specific 100 MHz channels between 37.0 GHz and
40.0 GHz on the radio frequency spectrum within specified geographic footprints.
"WARRANTS" mean the Common Stock Purchase Warrants to purchase an aggregate
of 50,000 shares of Tech Common Stock (after giving effect to the ART
Reorganizations and related stock split), substantially in the form attached
hereto as EXHIBIT J.
ARTICLE II
TRANSFER AND ACQUISITION
Section 2.1 TRANSFER AND ACQUISITION. Subject to the terms and
conditions hereof, CommcoCCC hereby agrees to transfer, and Tech hereby agrees
to acquire all of the CommcoCCC Assets. Tech will issue the Tech Securities in
exchange for all of the CommcoCCC Assets, free and clear of all Liens and the
other agreements of the CommcoCCC Entities hereunder.
Section 2.2 NO ASSUMPTION OF LIABILITIES. Tech shall not assume any
obligations, debts, liabilities or commitments of any nature whatsoever, whether
matured or unmatured or whether fixed or contingent. CommcoCCC agrees that it
shall retain and remain unconditionally liable for all of its obligations,
debts, liabilities and commitments.
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ARTICLE III
CLOSING
Section 3.1 CLOSING. Subject to the provisions of Articles VIII and IX,
the closing of the transactions contemplated by this Agreement shall take place
on such date and at such time as the parties shall mutually agree at the offices
of Nelson Mullins Riley & Scarborough, L.L.P., NationsBank Corporate Center,
Suite 3350, 100 North Tryon Street, Charlotte, NC 28202 no later than thirty
(30) business days after the satisfaction or waiver of the conditions precedent
described in Articles VIII and IX or at such other time and place as the parties
shall agree.
ARTICLE IV
DELIVERIES
Section 4.1 DELIVERIES TO TECH. At the Closing, the CommcoCCC Entities
shall deliver to Tech: (i) a bill of sale conveying the CommcoCCC Assets, (ii)
the documents required to be delivered by CommcoCCC pursuant to Article VIII
hereof, and (iii) such other documents and instruments as Tech may reasonably
request.
Section 4.2 DELIVERIES TO COMMCOCCC. At the Closing, Tech shall deliver
to CommcoCCC: (i) certificates representing the Tech Securities issued in such
names and amounts as CommcoCCC may direct, (ii) the documents required to be
delivered by Tech pursuant to Article IX hereof, and (iii) such other documents
and instruments as CommcoCCC may reasonably request.
ARTICLE V
REPRESENTATIONS OF COMMCOCCC ENTITIES
Section 5 REPRESENTATIONS WITH RESPECT TO COMMCOCCC ENTITIES. Each of
the CommcoCCC Entities represents and warrants, jointly and severally, as
follows:
Section 5.1 CORPORATE EXISTENCE. Each of the CommcoCCC Entities, if a
corporation, has been duly incorporated, and, if not a corporation, has been
duly organized, is validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or use of its assets or properties, or the conduct or nature of its business,
makes such qualification necessary (except for jurisdictions in which the
failure to so qualify or be in good standing would not be reasonably likely to
have a Material Adverse Effect). Each of the CommcoCCC Entities has all
requisite corporate power and authority to conduct its business and own its
properties as now conducted and owned. The CommcoCCC Entities have provided
Tech
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<PAGE>
with true and correct copies of each of the CommcoCCC Entities' organizational
documents as in effect on the date hereof and its by-laws as in effect on the
date hereof.
Section 5.2 POWER AND AUTHORITY. Each of the Commco Entities has all
requisite corporate power and authority, and as of the Closing Date will have
taken all required corporate and other action necessary, to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby.
Section 5.3 ENFORCEABILITY, ETC. This Agreement and all Transaction
Documents to be executed and delivered in connection herewith by any of the
CommcoCCC Entities have been, or will be as of the Closing Date, duly executed
and delivered by the applicable CommcoCCC Entity and, assuming that this
Agreement and the Transaction Documents, as applicable, are or will be as of the
Closing Date, duly executed and delivered by, and are within the power and
authority of each of the other parties thereto, constitute, or will constitute,
the legal, valid and binding obligation of each of the CommcoCCC Entities, as
applicable, enforceable against it in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
Section 5.4 CAPITALIZATION. Set forth on SCHEDULE 5.4 hereof (the
"COMMCOCCC CAPITALIZATION SCHEDULE") is a true and complete statement of the
capitalization of CommcoCCC, including a list of all holders of Interests of or
in CommcoCCC (and the amount and type of such Interests). Except as set forth
on the CommcoCCC Capitalization Schedule, CommcoCCC has not issued any Interests
in CommcoCCC, nor are any Interests in CommcoCCC (or any rights to acquire or
purchase any Interests in CommcoCCC) outstanding. The CommcoCCC Capitalization
Schedule also sets forth a true and complete description, in reasonable detail,
of all indebtedness owing to CommcoCCC.
Section 5.5 SUBSIDIARIES AND INVESTMENTS. CommcoCCC does not own,
directly or indirectly, of record or beneficially, any capital stock or other
Interest in any Person.
Section 5.6 CONSENTS, APPROVALS AND NON-CONTRAVENTION. Except for the
FCC Consent, any consents required under the HSR Act and as set forth on
SCHEDULE 5.6 hereof, neither the execution, delivery and performance of this
Agreement by any of the CommcoCCC Entities, nor the consummation of any
transaction contemplated hereunder, will:
(a) require any consent or approval of, filing or taking of
any other action with, or notice to, any Person;
(b) result in a breach or constitute a default under any
contract, agreement, instrument or other arrangement to
which any of the
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CommcoCCC Entities is a party or by which any of them
or any of the CommcoCCC Assets is bound;
(c) result in the creation of any Lien on any of the
CommcoCCC Assets;
(d) violate (i) any order, writ, judgment, injunction or
decree or (ii) any statute, law, rule or regulation of
any court, tribunal or governmental entity or
authority, applicable to or bearing upon CommcoCCC or
any of its assets or business; or
(e) violate any of the CommcoCCC 38 GHz Authorizations;
except as to (a), (b) and (d) above, as would not have a Material Adverse Effect
on CommcoCCC Assets.
Section 5.7 BALANCE SHEET. Set forth on SCHEDULE 5.7 hereof is a true,
correct and complete copy of the CommcoCCC Balance Sheet. The CommcoCCC Balance
Sheet has been prepared in accordance with GAAP applied on a consistent basis
(except that the CommcoCCC Balance Sheet does not contain any notes thereto) and
presents fairly the financial position of CommcoCCC at the date thereof.
Section 5.8 MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE
5.8 hereof, since June 7, 1996, there has been no Material Adverse Change with
respect to the CommcoCCC Assets, taken as a whole.
Section 5.9 ABSENCE OF UNDISCLOSED LIABILITIES. Since the date of the
CommcoCCC Balance Sheet, CommcoCCC had no material liabilities (matured or
unmatured, fixed or contingent), which are not fully reflected or provided for
on the CommcoCCC Balance Sheet, or any material loss contingency (as defined in
Statement of Financial Accounting Standards No. 5) whether or not required by
GAAP to be shown on the CommcoCCC Balance Sheet, except (i) obligations to
perform under commitments incurred in the ordinary course of business, (ii) tax
and related liabilities which have been disclosed pursuant to Section 5.10
below and (iii) other liabilities as set forth on SCHEDULE 5.9 hereof.
Section 5.10 TAXES. Except as set forth on SCHEDULE 5.10 hereof,
CommcoCCC has accurately completed and filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
Internal Revenue Service, the Commonwealth of Virginia, any other states or
governmental subdivisions and all foreign countries except where the failure
to file would not have a Material Adverse Effect; has paid all taxes,
interest, penalties, assessments or deficiencies shown to be due (or, to the
knowledge of CommcoCCC, claimed by such authority or jurisdiction to be due)
on or in respect of such tax returns and reports; and has established
reserves, to the knowledge of
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the CommcoCCC Entities, adequate for all taxes accrued but not yet payable.
CommcoCCC knows of (i) no other federal, state, county, municipal or foreign
taxes (or other liabilities in respect thereof) which are due and payable by
CommcoCCC which have not been so paid, (ii) no other federal, Delaware, state,
county, municipal or foreign tax returns or reports which are required to be
filed which have not been so filed, (iii) no other unpaid assessment for, or any
fact which would constitute grounds for the assessment of, additional taxes or
penalties for any fiscal period or any basis, thereof and (iv) no material tax
lien, whether imposed by any federal, state, county, municipal or foreign taxing
authority, outstanding against the assets or business of CommcoCCC. Neither the
federal nor state income tax returns of CommcoCCC have been audited.
Section 5.11 LITIGATION. As of the date hereof, except as set forth on
SCHEDULE 5.11, there are no actions, suits, proceedings, orders, investigations
or claims pending or, to the best of CommcoCCC Entities' knowledge, threatened
against or affecting any of the CommcoCCC Entities, the CommcoCCC Assets or any
other of its assets, its business or any of its directors or employees, at law
or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality (i) which could
have a Material Adverse Effect on the CommcoCCC Assets or (ii) in connection
with the Acquisition hereby. None of the CommcoCCC Entities is in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, except where such default will not have a Material Adverse
Effect on CommcoCCC before the Closing Date or on Tech after the Closing Date,
and there are no unsatisfied judgments against any of the CommcoCCC Entities
other than any as to which the time for payment has not elapsed, including by
reason of any appeal.
Section 5.12 38 GHZ AUTHORIZATIONS. Set forth on SCHEDULE 5.12 hereof
are all 38 GHz Authorizations owned by CommcoCCC or that CommcoCCC has rights to
acquire and manage exclusively as of the date hereof, including the city and
population covered by the geographic footprint of each 38 GHz Authorization (the
"COMMCOCCC 38 GHZ AUTHORIZATIONS"). The statements made to the FCC in the
applications for the CommcoCCC 38 GHz Authorizations were true and correct at
the time made and at the time the FCC issued the relevant CommcoCCC 38 GHz
Authorizations. The CommcoCCC 38 GHz Authorizations were duly issued by the
FCC, are in full force and effect, and contain all the conditions placed upon
the entire authorization for each market, except as are found in the FCC Rules.
The CommcoCCC 38 GHz Authorizations permit Columbia, CMC, CLC or CommcoCCC to
operate within the service area and on the channels specified. Columbia, CMC or
CLC has good and marketable title to the CommcoCCC 38 GHz Authorizations
(subject to FCC Rules on transfers of ownership) free and clear of any Liens,
management or service agreements, whether oral or written, other than the rights
of CommcoCCC under the stock purchase agreement and related assignment
agreements and construction and management agreements entered into by Columbia,
CMC, CLC and CommcoCCC on June 7, 1996, in connection with the initial
capitalization of CommcoCCC. Columbia, CMC, CLC and CommcoCCC will, have fully
complied with the terms of the CommcoCCC 38 GHz Authorizations, representations
made to the FCC and the FCC Rules, except to the extent such failure to comply
with the foregoing would not be likely to have a
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Material Adverse Effect on any of the CommcoCCC 38 GHz Authorizations. There
are no pending petitions for reconsideration or judicial review of the grants of
the CommcoCCC 38 GHz Authorizations and the grants of the CommcoCCC 38 GHz
Authorizations have become Final Orders, no longer subject to reconsideration by
the FCC on its own motion or to judicial review. None of the CommcoCCC Entities
has been notified of any unresolved protest to the grants of the CommcoCCC 38
GHz Authorizations or objections by the FCC or has any reason to believe that
the grants of the CommcoCCC 38 GHz Authorizations will be rescinded or, except
for the NPRM, in any way modified. Except for filings, if any, required
pursuant to Section 21.711 of the FCC Rules, each of Columbia, CMC, CLC or
CommcoCCC has timely made all filings, reports, paid any fees, and otherwise met
all FCC applicable requirements concerning the CommcoCCC 38 GHz Authorizations,
except to the extent such failure to comply with the foregoing would be likely
to have a Material Adverse Effect on any of the CommcoCCC 38 GHz Authorizations.
None of the CommcoCCC Entities has taken any action or failed to take any action
and there are no formal or other proceedings pending against any of them with
respect to any of the CommcoCCC 38 GHz Authorizations that could reasonably be
expected to lead to the revocation, cancellation, forfeiture or failure to renew
any license issued to Columbia, CMC, CLC or CommcoCCC. There are no outstanding
notices of apparent liability against Columbia, CMC, CLC or CommcoCCC. None of
the CommcoCCC Entities knows of any facts relating to it or its Affiliates that
could reasonably be expected to cause the FCC to deny its approval of the
Assignment Application or revoke or restrict any of the CommcoCCC 38 GHz
Authorizations or deny its approval of or place restrictions on the consummation
of the Acquisition, and should any such facts come to the attention of any of
the CommcoCCC Entities, its officers or directors, they will promptly notify the
ART Companies and take all reasonable measures to remove any such impediments to
consent. Each of the CommcoCCC Entities is fully qualified to be an FCC
licensee and does not violate FCC requirements pertaining to the CommcoCCC 38
GHz Authorizations, including without limitation, rules restricting alien
ownership of FCC licenses.
Section 5.13 COMPLIANCE WITH LAWS. The CommcoCCC Entities and the
conduct of their respective businesses is in compliance with all applicable
laws, statutes, ordinances, rules, regulations and orders of any federal,
foreign, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or governmental
agency, department or authority except where the failure to comply would not
have a Material Adverse Effect on the CommcoCCC Assets.
Section 5.14 INVESTMENT COMPANY ACT. CommcoCCC is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
Section 5.15 BROKERS, ETC. Except as set forth on SCHEDULE 5.15 hereof,
none of the CommcoCCC Entities is obligated to pay any fee or commission in
connection with, any broker, finder or other similar Person in connection with
any of the transactions contemplated by this Agreement.
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Section 5.16 DISCLOSURE. This Agreement and the exhibits, schedules,
attachments, written statements, documents, certificates and other items
delivered in connection with this Agreement do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact which CommcoCCC has not
disclosed to the ART Companies in writing and of which any of its officers,
directors or executive employees is aware (other than general economic
conditions and the NPRM) and which has had or would reasonably be expected to
have a Material Adverse Effect upon the existing or expected financial
condition, operating results, assets, customer or supplier relations, employee
relations or business prospects of CommcoCCC.
Section 5.17 CONTRACTS AND COMMITMENTS. Except as expressly contemplated
by this Agreement or set forth on SCHEDULE 5.17 hereof, CommcoCCC is not a party
to, or otherwise bound by, any material written or oral contract or instrument
or other restriction or any other written or oral contract or instrument or
other restriction affecting the CommcoCCC Assets.
Section 5.18 CUSTOMERS AND SUPPLIERS. As of the date hereof, there are
no customers or suppliers of CommcoCCC.
Section 5.19 PROPERTIES. CommcoCCC has good and marketable title to,
free and clear of any liens, claims, pledges, mortgages, charges, options or
other encumbrances, and the right to possession of, all of the CommcoCCC Assets.
Section 5.20 FCC AND OTHER GOVERNMENTAL REPORTS. All reports required to
be filed with the FCC by CommcoCCC, Columbia, CMC or CLC with respect to the
business of CommcoCCC have been timely filed and are accurate and complete in
all material respects. All material reports required to be filed with all other
governmental or administrative authorities, federal, state and local, by
CommcoCCC with respect to the business of CommcoCCC have been timely filed and
are accurate and complete in all material respects.
Section 5.21 ACCREDITED INVESTORS.
(a) Each of the CommcoCCC Entities is an "accredited
investor" within the meaning of Rule 501 under the
Securities Act and was not organized for the specific
purpose of acquiring the Tech Securities;
(b) each of the CommcoCCC Entities has sufficient knowledge
and experience in investing in companies similar to
Tech in terms of Tech's stage of development so as to
be able to evaluate the risks and merits of its
investment in Tech and it is able financially to bear
the risks thereof;
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(c) each of the CommcoCCC Entities has had an opportunity
to discuss the business, management and financial
affairs of Tech with Tech's management and has received
(or had made available to it) any financial and
business documents requested by it;
(d) the Tech Securities being acquired by each of the
CommcoCCC Entities are being acquired for its own
account and not with a view to or for sale in
connection with any unregistered distribution thereof
in violation of the Securities Act or any state
securities act;
(e) each of the CommcoCCC Entities understands that (i) the
Tech Securities must be held indefinitely unless a
subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration,
(ii) Tech will make a notation on its transfer books to
such effect and (iii) the Tech Securities will bear a
legend to such effect;
(f) none of the CommcoCCC Entities has any contract,
arrangement or understanding with any broker, finder or
similar agent with respect to the transactions
contemplated by this Agreement; and
(g) none of the CommcoCCC Entities will violate FCC
requirements, including without limitation, rules
restricting alien ownership of FCC licenses, in a
manner that affects Tech.
Section 5.22 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. CommcoCCC has not guaranteed, endorsed or otherwise become directly or
contingently liable on any indebtedness of any other Person (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor, or otherwise to assure the creditor against loss), except guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business.
ARTICLE VI
REPRESENTATIONS OF ART COMPANIES
Section 6 REPRESENTATIONS WITH RESPECT TO THE ART COMPANIES. Each of
the ART Companies, jointly and severally, represents and warrants as follows:
Section 6.1 CORPORATE EXISTENCE. Each of the ART Companies is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and is duly qualified to do
business as a foreign corporation and is in good standing
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in each jurisdiction in which the ownership or use of its assets or
properties, or the conduct or nature of its business, makes such
qualification necessary (except for jurisdictions in which the failure to so
qualify or be in good standing would not be reasonably likely to have a
Material Adverse Effect). The ART Companies have all requisite corporate
power and authority to own their properties and to conduct the Business.
True and complete copy of the Bylaws and the Certificate of Incorporation, as
in effect and as on file with the Secretary of State of the jurisdiction of
incorporation, of Tech and the Bylaws and Certificate of Incorporation of
Tech in the form proposed to be amended have previously been delivered to
CommcoCCC.
Section 6.2 POWER AND AUTHORITY. Each of the ART Companies has all
requisite corporate power and authority, and as of the Closing Date will have
taken all required corporate and other action necessary, to execute, deliver and
perform this Agreement and the Transaction Documents and consummate the
transactions contemplated hereby and thereby.
Section 6.3 ENFORCEABILITY, ETC. This Agreement and all the Transaction
Documents to be executed and delivered in connection herewith by either of the
ART Companies have been, or will be as of the Closing Date, duly executed and
delivered and, assuming that this Agreement and the Transaction Documents, as
applicable, are, or as of the Closing Date will be, duly executed and delivered
by, and are within the power and authority of, the other parties thereto,
constitute, or will constitute, the legal, valid and binding obligations of each
of the ART Companies enforceable against each of them in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and subject to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
Section 6.4 CAPITALIZATION. As of June 19, 1996, (a) Tech had
outstanding 340 shares of Common Stock, $.01 par value, one share of Series A
Preferred Stock, $.01 par value, and no options or warrants; (b) Telecom had
outstanding 18,114,135 shares of Common Stock, $.001 par value, 445,550 shares
of Series A Preferred Stock, $.001 par value, 114,679 shares of Series B
Preferred Stock, $.001 par value, 7,363 shares of Series C Preferred Stock,
$.001 par value, 61,640 shares of Series D Preferred Stock, $.001 par value,
232,826 shares of Series E Preferred Stock, $.001 par value, 48,893 shares of
Series F Preferred Stock, $.001 par value, options to acquire 1,664,732 shares
of Common Stock and warrants to acquire 2,302,136 shares of Common Stock; and
(c) on a pro forma basis assuming consummation of the ART Reorganization, Tech
would have outstanding 30,086,498 shares of Common Stock, $.001 par value (of
which 20,073,443 shares would have been issued in the ART Reorganization to
existing shareholders of Telecom in respect of Telecom Stock), options to
acquire 1,664,732 shares of Common Stock, and Telecom would have outstanding
1,000 shares of Common Stock, all of which will be held by Tech, and warrants to
acquire 2,302,136 shares of Tech Common Stock. As of the date hereof, assuming
consummation of the 29,450.16 to 1 stock split, owners of Telecom Stock hold an
aggregate of 276,095 shares of Tech Common Stock. As of the date hereof, there
are no other outstanding Interests in Tech or Telecom. The Tech Securities have
been duly authorized and will as of the Closing Date be validly issued, fully
paid and non-assessable and will be delivered to
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CommcoCCC as of the Closing Date, free and clear of any Liens, preemptive
rights, escrows, options, rights of first refusal or other agreements, or any
other restrictions affecting rights and other incidents of record and beneficial
ownership, other than (i) as set forth herein and (ii) restrictions on
transferability imposed generally under the Securities Act and under the
securities laws of the several states and the rules and regulations issued in
respect thereto (such state laws, rules and regulations being, collectively,
"BLUE SKY LAWS"). Assuming the accuracy of the representations and warranties
and the compliance with the covenants made by CommcoCCC herein, the issuance and
delivery of the shares of Tech Securities is exempt from the registration
requirements of the Securities Act and the Blue Sky Laws or have been qualified
as may be necessary.
Section 6.5 TELECOM, SUBSIDIARIES AND INVESTMENTS. Upon consummation of
the ART Reorganization, Tech will own all the outstanding shares of capital
stock and all other Interests of Telecom other than the Telecom Warrants. All
outstanding shares of capital stock of Telecom have been duly authorized and
validly issued and are fully paid and nonassessable. Except as disclosed in the
Preliminary ART Registration Statements, as of the date hereof, Tech does not
own, directly or indirectly, of record or beneficially any capital stock or
other Interest in any Person.
Section 6.6 CONSENTS, APPROVALS AND NON-CONTRAVENTION. Except for the
FCC Consent, any consents required under the HSR Act and as set forth on
SCHEDULE 6.6 hereof, the execution, delivery and performance of this Agreement
by each of the ART Companies, nor the consummation of any transaction
contemplated hereby, do not and will not:
(a) require any consent or approval of, filing or taking of any other
action with, or notice to, any Person;
(b) violate any provision of the Certificate of Incorporation or
ByLaws of Tech or either of the ART Companies;
(c) result in a breach of or constitute a default under any contract,
agreement or instrument to which either of the ART Companies is a party or by
which either is bound;
(d) result in the creation of any Lien, on any assets of the ART
Companies under any agreement to which either is a party;
(e) violate (x) any order, writ, judgment, injunction or decree known
to Tech, or (y) any statute, law, rule or regulation of any court, tribunal or
governmental entity or authority, applicable to either of the ART Companies or
any of their respective properties or assets; or
(f) violate any of the ART 38 GHz Authorizations;
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except, as to (a) through (e) above, as would not have a Material Adverse Effect
on the ART Companies, taken as a whole.
Section 6.7 SEC FILINGS; FINANCIAL STATEMENTS. (a) As of the date
hereof, the Preliminary ART Registration Statements conform, and as of their
respective dates, the ART Registration Statements will conform, in all material
respects with the requirements of the Securities Act and as of the date hereof
the Preliminary ART Registration Statement does not, and as of their respective
dates the ART Registration Statements will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein,
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the ART Financial Statements (including, in each case,
any related notes thereto) has been prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto and except that the quarterly financial statements do not
contain all of the footnote disclosures required to be contained in audited
financial statements prepared in accordance with GAAP), and each presents fairly
the consolidated financial position of Tech and Telecom, respectively, at the
respective dates thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated, except that the unaudited
interim financial statements are subject to normal and recurring year-end
adjustments which are not expected to be material in amount.
Section 6.8 MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE
6.8 hereof or disclosed in the Preliminary ART Registration Statements, since
December 31, 1995, there has been no Material Adverse Change with respect to the
ART Companies taken as a whole.
Section 6.9 ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof,
neither of the ART Companies has any liabilities of a type required in
accordance with GAAP to be reflected or reserved against (matured or unmatured,
fixed or contingent), which are not fully reflected or provided for on the ART
Financial Statements dated as of March 31, 1995 or otherwise set forth in the
Preliminary ART Registration Statements, except obligations incurred in the
ordinary course of business since March 31, 1995 or as disclosed in the
Preliminary ART Registration Statements.
Section 6.10 TAXES. Except as set forth on SCHEDULE 6.10 hereof, the ART
Companies have accurately completed and filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
Internal Revenue Service, the State of Delaware, any other states or
governmental subdivisions and all foreign countries except, where the failure to
file would not have a Material Adverse Effect; has paid all taxes, interest,
penalties, assessments or deficiencies shown to be due (or, to the knowledge of
the ART Companies, claimed by such authority or jurisdiction to be due) on or in
respect of such tax returns and reports; and has established reserves, to the
knowledge of the ART Companies, adequate for all taxes accrued but not yet
payable. Neither of the ART
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Companies knows of (i) any other federal, state, county, municipal or foreign
taxes (or other liabilities in respect thereof) that are due and payable by the
ART Companies which have not been so paid, (ii) any other federal, Delaware,
state, county, municipal or foreign tax returns or reports which are required to
be filed which have not been so filed, (iii) any other unpaid assessment for, or
any fact which would constitute grounds for the assessment of, additional taxes
or penalties for any fiscal period or (iv) any material tax lien, whether
imposed by any federal, state, county, municipal or foreign taxing authority,
outstanding against the assets or business of the ART Companies. Neither the
federal nor state income tax returns of the ART Companies have been audited.
Neither of the ART Companies has made any election under Section 341(f) of the
Code.
Section 6.11 LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the best of the ART Companies'
knowledge, threatened against or specifically identifying either of the ART
Companies or their respective assets or business or any of their directors or
employees, at law or in equity, before any court, arbitration panel, tribunal or
governmental department, commission, board, bureau, agency or instrumentality
(i) which could have a Material Adverse Effect or (ii) in connection with the
transactions contemplated hereby. None of the ART Companies is in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, except where such default will not have a Material Adverse
Effect, and there are no unsatisfied judgments against the ART Companies other
than any as to which the time for payment has not elapsed, including by reason
of any appeal.
Section 6.12 OTHER RELATIONSHIPS. All transactions known to either of
the ART Companies of a type required to be disclosed pursuant to Rule 404(a) of
Regulation S-K pursuant to the Securities Act have been described in the
Preliminary ART Registration Statements.
Section 6.13 38 GHZ AUTHORIZATIONS. Set forth on SCHEDULE 6.13 hereof
are all 38 GHz Authorizations owned by Tech, Telecom and ART West, and all 38
GHz Authorizations owned by DCT and Telecom One on the date hereof, including
the city and population covered by the geographic footprint of each 38 GHz
Authorization (the "ART 38 GHz AUTHORIZATIONS"). Tech, Telecom or ART West
owns, manages exclusively or has the right to acquire all of the ART 38 GHz
Authorizations. The statements made to the FCC by the owners listed on SCHEDULE
6.13 in the applications for the ART 38 GHz Authorizations were true and correct
at the time made and at the time the FCC issued the relevant ART 38 GHz
Authorizations. The ART 38 GHz Authorizations were duly issued by the FCC, are
in full force and effect, and contain all the conditions placed upon the entire
authorization for each market, except as are found in the FCC Rules. The ART 38
GHz Authorizations permit the owners listed on SCHEDULE 6.13 to operate within
the service area and on the channels specified. The owners listed on SCHEDULE
6.13 have good and marketable title to the ART 38 GHz Authorizations (subject to
FCC Rules on transfers of ownership) free and clear of any Lien or management or
service agreement, whether oral or written, except for any of the foregoing in
favor of Tech, Telecom or ART West. The owners listed on SCHEDULE 6.13 have
fully complied with the terms of all ART 38 GHz Authorizations, the
representations made to the FCC and the FCC Rules, except to the extent such
failure to
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comply with the foregoing would be likely to have a Material Adverse Effect on
any of the ART 38 GHz Authorizations. There are no pending petitions for
reconsideration or judicial review of the grants of the ART 38 GHz
Authorizations and the grants of the ART 38 GHz Authorizations have become Final
Orders, no longer subject to reconsideration by the FCC on its own motion or to
judicial review. None of the owners listed on SCHEDULE 6.13 has been notified
of any unresolved protest to the grants of the ART 38 GHz Authorizations or
objections by the FCC and, except for the NPRM, have no reason to believe that
the grants of the ART 38 GHz Authorizations will be rescinded or in any way
modified. Except for filings, if any, required pursuant to Section 21.711 of
the FCC Rules, each of the owners listed on SCHEDULE 6.13 has timely made all
filings, reports, paid any fees, and otherwise met all FCC applicable
requirements concerning the ART 38 GHz Authorizations, except to the extent such
failure to comply with the foregoing would be likely to have a Material Adverse
Effect on any of the ART 38 GHz Authorizations. None of the owners listed on
SCHEDULE 6.13 has taken any action or failed to take any action and there are no
formal or other proceedings pending against the owners listed on SCHEDULE 6.13
with respect to any of the ART 38 GHz Authorizations that could reasonably be
expected to lead to the revocation, cancellation, forfeiture or failure to renew
any license issued to the owners listed on SCHEDULE 6.13. There are no
outstanding notices of apparent liability against the owners listed on SCHEDULE
6.13. Tech does not know of any facts relating to the owners listed on SCHEDULE
6.13 or any of their respective Affiliates that could reasonably be expected to
cause the FCC to deny its approval of the Assignment Application or revoke or
restrict any of the ART 38 GHz Authorizations or deny its approval of or place
restrictions on the consummation of the ART Reorganization or the Acquisition,
and should any such facts come to the attention of any of the Tech, their
officers or directors, Tech will promptly notify CommcoCCC and take all
reasonable measures to remove any such impediments to consent. Each of the
owners listed on SCHEDULE 6.13 are fully qualified to be an FCC licensee and
have not violated FCC requirements pertaining to the ART 38 GHz Authorizations,
including without limitation, rules restricting alien ownership of FCC licenses.
Section 6.14 COMPLIANCE WITH LAWS. The ART Companies and the conduct of
their respective businesses are in compliance with all applicable laws,
statutes, ordinances, rules, regulations and orders of any federal, foreign,
state or local government and any other governmental department or agency, and
any judgment, decision, decree or order of any court or governmental agency,
department or authority, except where the failure to comply would not have a
Material Adverse Effect on the ART Companies taken as a whole.
Section 6.15 INVESTMENT COMPANY ACT. Neither of the ART Companies is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
Section 6.16 BROKERS, ETC. Except as set forth on SCHEDULE 6.16 hereof,
neither of the ART Companies is obligated to pay any fee or commission in
connection with, any broker, finder or other similar Person in connection with
any of the transactions contemplated by this Agreement.
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Section 6.17 CONTRACTS AND COMMITMENTS. (a) Except as expressly
contemplated by this Agreement or as set forth or disclosed in the Preliminary
ART Registration Statements or on SCHEDULE 6.17 hereof, as of the date hereof,
neither of the ART Companies is a party to, or otherwise bound by any agreement
of a nature required to be disclosed in the Registration Statements pursuant to
Item 601 of Regulation S-K under the Securities Act.
(b) Except as set forth in SCHEDULE 6.17 hereof, as of the date
hereof, (a) all of the contracts, agreements and instruments set forth or
described in the Preliminary ART Registration Statements or on SCHEDULE 6.17
hereof are valid, binding and enforceable against the applicable ART Company in
accordance with their respective terms; (b) the applicable ART Company has
performed all material obligations required to be performed by it under such
contracts, agreements and instruments; (c) the applicable ART Company is not, in
any material respect, in default under or in breach of, nor in receipt of any
claim of default or breach, in any material respect, of any such contract,
agreement or instrument to which any applicable ART Company or Subsidiary is
subject; (d) no event has occurred which with the passage of time or the giving
of notice or both would result in a material default, breach or event of
noncompliance under any such contract, agreement or instrument; and (e) none of
the ART Companies has any knowledge of any breach or anticipated breach by the
other parties to any such contract or agreement.
Section 6.18 PROPERTIES. Except as disclosed in the Preliminary ART
Registration Statements, as of the date hereof, ART Companies and their
Subsidiaries have good and marketable title to, free and clear of any Liens, and
the right to possession of their respective material tangible and intangible
property reflected in the ART Financial Statements (except for properties and
assets which have been sold or disposed of in the ordinary course of business
since March 31, 1995) or properties, and all such properties and assets acquired
(and not disposed of) since March 31, 1995, as is requisite to the conduct of
the Business.
Section 6.19 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. As of the date hereof, except as disclosed in the Preliminary ART
Registration Statements, neither of the ART Companies has guaranteed, endorsed
or otherwise become directly or contingently liable on any indebtedness of any
other Person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to assure the creditor
against loss), except guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
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ARTICLE VII
COVENANTS
Section 7.1 CONDUCT OF BUSINESS OF COMMCOCCC AND THE ART COMPANIES.
During the period from the date of this Agreement to the Closing Date or the
termination of this Agreement, whichever first occurs, each of CommcoCCC and the
ART Companies shall conduct their respective operations and business according
to its ordinary and usual course of business and use its reasonable best efforts
to preserve intact its business organizations and maintain satisfactory
relationships with licensors, suppliers, distributors, clients and others having
material business relationships with it. Each of the CommcoCCC Entities and the
ART Companies shall promptly notify (but in any event within five (5) business
days) the other party of any Material Adverse Change (or event or occurrence
reasonably expected to result in a Material Adverse Change) affecting such party
or parties (including, without limitation, governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or adjudicatory proceedings involving any of the parties, their
businesses or any of their material assets).
Section 7.2 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date or termination of this Agreement,
the CommcoCCC Entities shall not and shall cause their respective officers,
directors, employees, agents or advisors or other representatives or consultants
not to, directly or indirectly, encourage, solicit, initiate, participate in or
otherwise be a party to any discussions or negotiations with any Person
concerning any Interest in CommcoCCC, the CommcoCCC Assets, the Acquisition, or
any transaction involving the sale of the business or assets of CommcoCCC.
Promptly upon receiving any (or any information about any) such inquiry,
expression of interest, request or proposal from or contract by any Person with
respect to the transaction, the CommcoCCC Entity shall notify Tech as promptly
as practicable of such inquiry, request, proposal or contact and provide Tech
with all relevant information. If in writing, the CommcoCCC Entity shall
deliver to Tech a copy.
Section 7.3 APPLICATION FOR COMMISSION CONSENT. Within ten (10)
business days after the date of this Agreement, CommcoCCC shall cause its FCC
counsel, Covington & Burling, to prepare the Assignment Application. Such FCC
counsel for CommcoCCC and the ART Companies shall jointly agree upon, the
Assignment Application, CommcoCCC and Tech shall join in and file such
Assignment Application at such time as jointly determined by such FCC counsel,
and they will diligently take all steps necessary or desirable to prosecute
expeditiously the Assignment Application and to obtain the Commission's
determination that approval of the Assignment Application will serve the public
interest, convenience and necessity. The failure of the parties to timely file
or diligently prosecute its portion of the Assignment Application, or to
cooperate fully with the other party with respect thereto, shall be deemed a
material breach of this Agreement.
Section 7.4 OTHER GOVERNMENTAL CONSENTS. Promptly following the
execution of this
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Agreement but in no event later than thirty (30) business days after the date of
this Agreement, CommcoCCC and the Tech shall proceed to prepare and file with
the appropriate governmental authorities (other than the Commission) such
requests, if any, for approval or waiver as may be required from such
governmental authorities in connection with the transactions contemplated by
this Agreement, including any requests for approvals under the HSR Act.
CommcoCCC and Tech shall jointly, diligently and expeditiously prosecute, and
shall cooperate fully with each other in the prosecution of, such requests for
approval or waiver in all proceedings necessary to secure such approvals and
waivers.
Section 7.5 THIRD PARTY CONSENTS. CommcoCCC will use all reasonable
efforts to obtain the consents set forth on SCHEDULE 5.6. Tech will use all
reasonable efforts to obtain the consents set forth on SCHEDULE 6.6.
Section 7.6 RESTRICTIVE AGREEMENTS PROHIBITED. None of the parties
hereto shall become a party to any agreement which by its terms restricts such
party's performance of this Agreement or the consummation of the transactions
contemplated hereunder.
Section 7.7 DIVIDENDS AND DISTRIBUTIONS; ACQUISITION OF CAPITAL STOCK.
Except as contemplated by the ART Reorganization and the Preliminary ART
Registration Statements, neither CommcoCCC nor either of the ART Companies shall
declare, pay or make any dividend or distribution with respect to, or purchase,
redeem, retire, decease or otherwise acquire for value any Interest in any of
CommcoCCC or the ART Companies, as the case may be.
Section 7.8 ADDITIONAL NEGATIVE COVENANTS OF COMMCOCCC. From the date
hereof until the Closing Date, CommcoCCC covenants and agrees that it shall not:
(a) amend, modify, terminate, waive or otherwise alter any material
contracts, nor breach the terms of any such contracts;
(b) knowingly take any action or omit to take any action which would
result in the material violation by CommcoCCC of any law or cause a breach in
any material respect by CommcoCCC of any of the representations and warranties
of CommcoCCC set forth in this Agreement;
(c) take any other action which would reasonably be expected to cause
a material decrease in the value of the CommcoCCC Assets;
(d) consolidate or merge into or with or sell or transfer any of its
assets or otherwise combine with any Person; or
(e) make or allow any changes or modifications to be made to its
capital structure as set forth in Section 5.4 hereto.
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Section 7.9 CORPORATE EXISTENCE. Each of CommcoCCC and the ART
Companies shall maintain their respective corporate existence, rights and
franchises in full force and effect.
Section 7.10 ADDITIONAL AFFIRMATIVE COVENANTS. Each of the CommcoCCC
Entities and the ART Companies shall use all reasonable efforts to maintain the
accuracy of their respective representations and warranties contained in this
Agreement through and including the Closing Date.
Section 7.11 REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement.
Section 7.12 REVIEW OF TECH AND COMMCOCCC. Upon reasonable notice, each
of CommcoCCC and the ART Companies may, prior to the Final Amendment Date,
through their respective representatives, review the properties, books and
records of the ART Companies or CommcoCCC, as the case may be, and their
financial and legal condition as each of CommcoCCC and the ART Companies deem
necessary or advisable to familiarize themselves with such properties and other
matters. Upon reasonable notice, each of CommcoCCC and Tech shall afford the
others' officers, employees, counsel, accountants and other authorized
representatives access, during reasonable business hours throughout the period
prior to the Closing Date, to its premises, properties, books and records for
the purpose of conducting a complete and thorough investigation and review of
the businesses of the ART Companies or CommcoCCC, as the case may be.
Section 7.13 DISCLOSURE TO PARTIES. CommcoCCC and the ART Companies
covenant and agree that if any party should become aware, prior to Closing, that
any of its representations, warranties or covenants is inaccurate or incapable
of being performed in any material respect, written notice of such inaccuracy or
incapability shall be promptly given to the other party. Nothing contained in
this Section 7.13 shall relieve the party bound by such representation,
warranty or covenant from complying with all terms and conditions of this
Agreement applicable to it.
Section 7.14 COMMCOCCC OBLIGATION TO PROVIDE INFORMATION. CommcoCCC
covenants and agrees to furnish to Tech written information necessary to prepare
and file the Preliminary ART Registration Statement and any amendments or
supplements thereto, with regard to the CommcoCCC Assets and each of the
CommcoCCC Entities (the "COMMCOCCC INFORMATION"). The CommcoCCC Information
that is supplied to Tech specifically for inclusion in the Preliminary ART
Registration Statements shall not contain any untrue statement of a material
fact, omit to state any material fact required to be stated therein, or omit any
material fact necessary in order to make the statements therein not misleading.
If at any time prior to the Closing Date any event or circumstance should be
discovered by any of the CommcoCCC Entities with respect to CommcoCCC
Information which is required to be set forth in an amendment or supplement to
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the ART Registration Statements, the CommcoCCC Entities shall immediately notify
Tech and shall use all reasonable efforts to assist Tech in appropriately
amending or supplementing the ART Registration Statements.
Section 7.15 FINANCIAL REPORTS. Prior to the Closing Date, Tech shall
furnish to CommcoCCC, within five (5) days after transmission thereof, copies of
all financial statements, reports and any other general written communications
which Tech sends to its stockholders and copies of all registration statements
and all regular, special or periodic reports which it files, or any of its
officers or directors file with respect to Tech, with the SEC or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by Tech to
the public concerning material developments in the businesses of Tech.
Section 7.16 PUBLIC ANNOUNCEMENTS. CommcoCCC and the ART Companies will
mutually agree as to timing, form and content before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated herein and shall not issue any such press release or make any such
public statement prior to reaching such mutual agreement, except as may be
required by law or by obligations pursuant to any listing agreement with any
securities exchange on which their shares are traded.
Section 7.17 CONFIDENTIALITY. Whether or not the transactions
contemplated hereby are consummated, each of the parties hereto agrees to keep
confidential any and all information with respect to the other party which it
has received as a result of any investigation made in connection with this
Agreement, and not to disclose or use it for any purpose except in connection
with the transactions contemplated hereby. Notwithstanding the foregoing,
however, each of CommcoCCC and the ART Companies shall be entitled to disclose
any such information (a) to their respective existing or prospective lenders or
investors in connection with obtaining the financing or consents required in
order to consummate the transactions contemplated hereby; (b) to the extent
required by applicable law, (c) as is necessary to obtain consents to the
consummation of the transactions contemplated hereby, (d) as is necessary in
connection with filings, approvals or rulings to be obtained from any government
agency, including, but not limited to, the Federal Trade Commission, the
Department of Justice, the SEC, and the Internal Revenue Service, and (e) during
the course of or in connection with any litigation, arbitration or other
proceeding based upon or in connection with the subject matter of this
Agreement, including, without limitation, the failure of the transactions
contemplated hereby to be consummated. This obligation shall not extend to
information that (i) was in the possession of the receiving party at the time of
disclosure; (ii) prior to or after the time of disclosure becomes generally
available to the public, not as a result of any breach of this Agreement by the
receiving party or its employees, directors, officers, attorneys, lenders,
advisors or agents; or (iii) is lawfully acquired by the receiving party from
sources other than the other party and not known by the receiving party to be
subject to a confidentiality agreement by which either party is bound; or (iv)
is approved by the disclosing party in writing for release. In the event that
the transactions contemplated hereunder are not consummated, the parties shall
return all information received
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from the other parties upon such parties' request.
Section 7.18 DISTRIBUTION OF TECH SECURITIES PURSUANT TO PLAN OF
REORGANIZATION. This Agreement shall constitute a plan of reorganization to
which Tech and CommcoCCC are parties. Promptly, and in any event within 12
months, following receipt of the Tech Securities in exchange for the CommcoCCC
Assets, CommcoCCC shall distribute pursuant to this Agreement all of the Tech
Securities received and any other assets of CommcoCCC to the shareholders of
CommcoCCC in exchange for all of the issued and outstanding shares of capital
stock of CommcoCCC, and following the closing and until such distributions are
made CommcoCCC shall not engage in the active conduct of any trade or business
except to the extent necessary to wind up its affairs.
Section 7.19 TAXES. It is intended that the ART Reorganization qualify
as a reorganization described in Section 368 (a)(1)(B) of the Code, that the
Acquisition qualify as a reorganization described in Section 368(a)(1)(C) of
the Code, and that the ART Reorganization, the Equity Offering and the
Acquisition together qualify as transfers to a controlled corporation, Tech,
under Section 351. The parties hereto shall not file any tax return, issue any
document or take any position in any administrative or judicial proceeding with
respect to any tax return or document in a manner inconsistent with the
preceding sentence or otherwise take any action that would prevent the intention
expressed in the preceding sentence from being fulfilled.
Section 7.20 NEGATIVE COVENANTS OF THE ART COMPANIES. Without the prior
written consent of CommcoCCC (which shall not be unreasonably withheld or
delayed after the consummation of the Debt Offering and the Equity Offering),
from the date hereof until the Closing Date, each of the ART Companies will
engage in the business described in the Preliminary ART Registration Statements,
will carry on such business in the ordinary course and will not (and will not
permit any of their Subsidiaries to):
(a) issue any of its capital stock or any other Interest, except (i)
in connection with the ART Reorganization, as disclosed in Section 6.4 hereof,
(ii) as disclosed in the Preliminary ART Registration Statements, (iii) in a
transaction the purpose of which is to create a holding company, (iv) issuance
of options and other awards pursuant to Tech's Equity Incentive Plan and Tech's
or Telecom's Director's Stock Option Plan, (v) upon the exercise or conversion
of any Interest outstanding as of the date hereof for Tech Common Stock or (vi)
with respect to any Investment permitted by Section 7.20(d);
(b) consolidate or merge into or with, sell or transfer all or
substantially all of its assets or otherwise combine with any Person (whether by
operation of law or otherwise), except as contemplated by the Preliminary ART
Registration Statement, in a transaction the purpose of which is to create a
holding company or in a transaction in which the survivor of the consolidation
or merger becomes a subsidiary;
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(c) create, incur or assume any indebtedness for borrowed money in
excess of $25 million in aggregate principal amount at any time outstanding,
except (i) purchase money indebtedness, the net proceeds of which are used to
purchase equipment, software or systems in connection with Business of the ART
Companies; provided such indebtedness is not secured by any assets or property
of the ART Companies other than the equipment so acquired, (ii) without
duplication of clause (d) below, indebtedness in an aggregate amount not to
exceed $20 million of either of the ART Companies incurred primarily in
connection with the acquisition of (A) 38 GHz Authorizations or (B) other
licenses or authorizations of other spectrum approved for microwave point-to-
point transmissions or (iii) indebtedness represented by the Notes issued in the
Debt Offering; or
(d) make any Investment in any Person which is not a Subsidiary,
except (i) without duplication of clause (c) above, Investments in an aggregate
amount not to exceed $20 million in connection with the acquisition of (A) 38
GHz Authorizations or (B) other licenses or authorizations of other spectrum
approved for microwave point-to-point transmissions, or (ii) without duplication
of clause (c) above, after the consummation of the Debt Offering and the Equity
Offering, Investments (other than contemplated by (i) above) in connection with
the operation of the Business; provided that the obligations incurred in
connection with such Investments do not in the aggregate exceed $4 million.
The ART Companies shall give CommcoCCC written notice prior to taking any action
prohibited by this Section 7.20, and CommcoCCC covenants to advise the ART
Companies in writing as soon as practicable but in no event later than ten
business days after receipt of such notice (i) whether or not CommcoCCC consents
to such action, and (ii) if it does not consent, whether it will terminate this
Agreement pursuant to Section 13.10 hereof if such action is taken. If
CommcoCCC has not advised the ART Companies within ten business days, CommcoCCC
shall be deemed to have consented to such action.
Section 7.21 POST CLOSING CAPITAL CONTRIBUTION REQUIRED. In the event
that on the date that is six (6) months after the Closing Date (the "ADDITIONAL
CONTRIBUTION DATE") any Pending Applications owned by the ART Companies have
been granted, then as soon as reasonably possible thereafter Columbia, CMC and
CLC shall contribute to the capital of Tech, for no additional consideration,
Pending Applications owned by them that have been granted determined based upon
the following formula:
(a) determine the number of Pops covered by Pending Application owned
by the ART Companies that have been granted as of such date;
(b) multiply the number determined in (a) above by .3413;
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(c) Columbia and CMC shall be obligated jointly to contribute 38 GHz
Authorizations with respect to Pending Applications owned by them that have been
granted that cover an amount of Pops equal to 53.43% of the amount determined in
(b) above, and CLC shall be obligated to contribute 38 GHz Authorizations with
respect to Pending Applications owned by it that have been granted that cover an
amount of Pops equal to 46.57% of the amount determined in (b) above; provided
that neither Columbia, CMC nor CLC shall have any obligation to contribute more
38 GHz Authorizations resulting from Pending Applications that are owned by it
on the Additional Contribution Date.
Columbia, CMC and CLC shall select the 38 GHz Authorizations to be contributed,
which selected 38 GHz Authorizations shall cover no less than the number of Pops
described in clause (c) above. Columbia and CMC shall make no transfer of any
38 GHz Authorizations resulting from a Pending Application prior to the
Additional Contribution Date unless after giving effect to such transfer
Columbia and CMC continue to own 38 GHz Authorizations resulting from Pending
Applications covering at least 1,068,600 Pops. CLC shall make no transfer of
any 38 GHz Authorization resulting from a Pending Application prior to the
Additional Contribution Date unless after giving effect to such transfer CLC
shall continue to own 38 GHz Authorization resulting from Pending Applications
covering at least 931,400 Pops.
Section 7.22 TAX CERTIFICATES. The Company shall provide to CommcoCCC
the officers' certificates contemplated in the opinion provided for in Section
9.7, which shall be true and correct in all material respects.
ARTICLE VIII
CONDITIONS TO TECH'S OBLIGATIONS
Section 8 CONDITIONS TO TECH'S OBLIGATIONS. The obligations of Tech
to consummate the Acquisition in accordance with this Agreement shall be subject
to the satisfaction, at or before the Closing Date, of each of the following
conditions any one or more of which may be waived by Tech:
Section 8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the CommcoCCC Entities contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date (other than those representations and
warranties of the CommcoCCC Entities made as of a certain date, which shall be
true and correct only as of such date), except for changes after the date hereof
which are contemplated or expressly permitted by this Agreement and further,
except to the extent that any breach thereof does not in the aggregate have a
Material Adverse Effect on the CommcoCCC Assets.
Section 8.2 PERFORMANCE. Each and all of the agreements, obligations,
covenants, or conditions required by this Agreement to be performed or complied
with by the CommcoCCC
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Entities, on or before the Closing Date pursuant to the terms hereof shall have
been duly performed or complied with in all material respects.
Section 8.3 NO LITIGATION THREATENED. No action or proceedings shall
have been instituted and continuing or, to the knowledge of the CommcoCCC
Entities, shall have been threatened before a court or other government body or
by any public authority to restrain or prohibit any of the transactions
contemplated hereby or which, if determined adversely, would have a Material
Adverse Effect on the CommcoCCC Assets.
Section 8.4 COMMISSION CONSENT. The FCC Consent shall have become a
Final Order and shall be in full force and effect on the Closing Date, and shall
not impose any unusual or onerous conditions other than the NPRM or any other
condition applicable to the owners or operators of 38 GHz Authorizations
generally.
Section 8.5 GOVERNMENTAL APPROVALS; CONSENTS. The waiting period
applicable to the consummation of the Acquisition under the HSR Act shall have
expired or been terminated and, all filings set forth on SCHEDULE 5.6 required
to be made prior to the Closing Date by CommcoCCC shall have been made, and all
consents, approvals and authorizations set forth on SCHEDULE 5.6, shall have
been obtained.
Section 8.6 OPINION OF COMMCOCCC'S COUNSEL. CommcoCCC shall have
furnished Tech with opinions, dated the Closing Date, of Nelson Mullins Riley &
Scarborough, L.L.P. with respect to corporate and general commercial law matters
and of Covington and Burling with respect to FCC matters, each in form and
substance reasonably acceptable to Tech.
Section 8.7 NONCOMPETITION AGREEMENT. CCC, CMC and Columbia shall have
executed and delivered the Noncompetition Agreement.
Section 8.8 COMMCOCCC COVERAGE POPS. The Coverage Pops represented by
the 38 GHz Authorizations conveyed to Tech on the Closing Date shall be not less
than 87 million.
Section 8.9 NASDAQ LISTING. The Tech Securities shall have been listed
or approved for listing upon notice of issuance by the NASDAQ.
Section 8.10 CERTIFICATE. The President or the Executive Vice
President of CommcoCCC shall have executed and delivered a certificate
certifying that the conditions set forth in Section 8.1, Section 8.2, and
Section 8.8 have been satisfied.
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EXHIBIT 10-31(b)
BOTH BY ACQUIRING THIS NOTE AND BY CONVERTING THIS NOTE, THE HOLDER SHALL BE
DEEMED TO REPRESENT AND WARRANT TO THE BORROWER AND TO ANY AND EVERY PRIOR
HOLDER OF THIS NOTE THAT (i) THE HOLDER IS ACQUIRING THE SECURITIES SO ACQUIRED
FOR THE HOLDER'S OWN ACCOUNT, FOR INVESTMENT, AND NOT WITH A VIEW TO THE RESALE
OR OTHER TRANSFER THEREOF IN A DISTRIBUTION, HAVING NO PARTICIPATION IN ANY SUCH
UNDERTAKING AND NO PARTICIPATION IN THE UNDERWRITING THEREOF, (ii) THE HOLDER
CAN AFFORD TO LOSE THE ENTIRETY OF THE HOLDER'S INVESTMENT IN SUCH SECURITIES
AND (iii) THE HOLDER IS AN ACCREDITED INVESTOR AS DEFINED IN RULE 501(A) UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS SUCH KNOWLEDGE AND EXPERIENCE IN
FINANCIAL AND BUSINESS MATTERS AS TO BE CAPABLE OF EVALUATING THE MERITS AND
RISKS OF ACQUIRING SUCH SECURITIES. BOTH BY ACQUIRING THIS NOTE AND BY
CONVERTING THIS NOTE, THE HOLDER SHALL BE DEEMED TO COVENANT WITH THE BORROWER
AND WITH ANY AND EVERY PRIOR HOLDER OF THIS NOTE THAT THE HOLDER WILL NOT
RESELL, PLEDGE OR OTHERWISE TRANSFER ANY OR ALL OF THE SECURITIES SO ACQUIRED
UNLESS AND UNTIL EITHER SUCH SECURITIES ARE REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS
OR ELSE THE BORROWER HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE
BORROWER, IN FORM REASONABLY ACCEPTABLE TO THE BORROWER, TO THE EFFECT THAT THE
PROPOSED TRANSFER DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT OR UNDER
APPLICABLE STATE SECURITIES LAWS.
Date of Issuance: July 3, 1996 $1,397,100
ADVANCED RADIO TECHNOLOGIES CORPORATION
BRIDGE NOTE DUE SEPTEMBER 30, 1996
Advanced Radio Technologies Corporation, a Delaware corporation (the
"BORROWER"), for value received, hereby promises to pay to Commco, L.L.C., a
Delaware limited liability company (together with its successors and permitted
transferees and assigns, the "HOLDER"), and its successors and permitted
transferees and assigns, subject to the terms and conditions of this Note, the
aggregate principal amount of ONE MILLION THREE HUNDRED NINETY-SEVEN THOUSAND
ONE HUNDRED DOLLARS (the "COMMITMENT"), at a bank in the United States specified
by the Holder (the "BANK ACCOUNT"), by transfer of same day funds to the
Holder's account no later than 11:00 A.M. (Washington, D.C. time) on or before
September 30, 1996 (the "MATURITY DATE"), and to pay interest at the Prime Rate
as announced from time to time on such principal amount remaining unpaid
hereunder from time to time outstanding from the Date of Issuance until said
principal amount is paid in full, payable in full upon any prepayment of the
entire Commitment and otherwise at the Maturity Date.
This Note and the Bridge Notes Due September 30, 1996 in the original
aggregate principal amount of $1,602,900 issued by the Borrower on the date
hereof to Columbia Capital Corporation, a Virginia corporation ("COLUMBIA") (the
"COLUMBIA NOTE") have been issued in connection with the transactions
contemplated by the Asset Acquisition Agreement and Plan of Reorganization dated
July 3, 1996 (the "ASSET ACQUISITION AGREEMENT") among the Borrower, Advanced
Radio Telecom Corp., CommcoCCC, Inc., a Delaware corporation ("COMMCOCCC"), CCC
Millimeter, L.P., a Delaware limited partnership,
<PAGE>
Columbia Millimeter Communications, L.P., a Delaware limited partnership, the
Holder and Columbia. In order to induce each of the parties to enter into the
Asset Acquisition Agreement and to consummate the transactions contemplated
thereby, the Holder has agreed to provide the Commitment evidenced by this
Note for the benefit of the Borrower. The execution and delivery of this
Note is required pursuant to the terms of the Asset Acquisition Agreement.
Payment of the principal of and interest on this Note is secured by the terms
and conditions of a certain Security Agreement of even date herewith among
the Borrower and Columbia, as Collateral Agent (the "SECURITY AGREEMENT").
This Note is transferrable or assignable to one or more purchasers,
PROVIDED that such transfer or assignment is made in accordance with Section 8.3
hereof. The Borrower agrees to issue from time to time a replacement Note or
Notes in substantially the form hereof, with changes herein to reflect transfer
or assignment, and in such denominations as the Holder may request to facilitate
such transfers and assignments. In addition, the Borrower agrees to issue a
replacement Note if this Note has been lost, stolen, mutilated or destroyed.
The Borrower shall keep a register (the "REGISTER") in which shall be
entered the name and address of the registered holder of this Note and
particulars of this Note and of any transfer of this Note. References to the
"Holders" shall mean the persons listed in the Registers as the payees of the
Notes unless any payee shall have presented a Note to the Borrower for transfer
and the transferee shall have been entered in the Register as a subsequent
holder, in which case the term shall mean such subsequent holder. Ownership of
this Note shall be proven by the Register.
Article 1. DEFINITIONS.
The following terms (except as otherwise expressly provided or unless the
context otherwise clearly requires) for all purposes of this Note shall have the
respective meanings specified below. All accounting terms used herein and not
expressly defined shall have the meanings given to them in accordance with U.S.
generally accepted accounting principles, and the terms "GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES" and "GAAP" shall mean such accounting principles which
are generally accepted in effect from time to time. Other terms defined
elsewhere in this Agreement shall have the meanings ascribed thereto herein.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"BOARD OF DIRECTORS" means the board of directors of the Borrower or a duly
authorized committee thereof.
"BUSINESS DAY" means any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in Washington, D.C. are authorized by law
to be closed.
"CLOSING PRICE" means the last reported sales price on a Trading Day
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular
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way, in either case on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if the Common Stock is not listed or admitted to trading
on any national securities exchange or quoted on such Nasdaq National Market,
the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected from
time to time by the Borrower for that purpose.
"COMMISSION" means the Securities and Exchange Commission as from time to
time constituted, created under the Exchange Act.
"COMMON STOCK" means the Common Stock, par value $0.001 per share, of the
Borrower.
"CONVERSION PRICE" means the price per share of Common Stock at which the
principal of and interest on this Note shall be convertible, at the Holder's
option, into Common Stock, which price shall be the lesser of (i) the Scheduled
Price and (ii) 80% of the Current Market Price on the date immediately prior to
the conversion date of this Note, in each case subject to adjustment as and to
the extent provided in this Note.
"CURRENT MARKET PRICE" on any date means the average of the daily Closing
Prices for the ten consecutive Trading Days preceding such date.
"DEFAULT" means any condition or event that constitutes an Event of Default
or that, with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"EVENT OF DEFAULT" means any event or condition specified as such in
Section 4.1 that shall have continued for the period of time, if any, therein
designated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take or pay or to maintain financial
statement conditions, or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation for the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"INDEBTEDNESS" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto), except
letters of credit or other similar instruments issued to secure payment of Trade
Payables, (iv) all obligations of such Person to pay the deferred purchase price
of property or services, except Trade Payables, (v) all obligations of such
Person
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as lessee under capital leases, (vi) all Indebtedness of others secured by a
lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, and (vii) all Indebtedness of others Guaranteed by such
Person.
"LOAN DOCUMENTS" means this Note and the Security Agreement.
"NOTES" means this Note and any and all other promissory notes with
substantially the same terms and conditions, which other notes may be issued by
the Issuers to replace this Note as contemplated by the introductory statements
in this Note.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PRIME RATE" means the rate of interest announced publicly by NationsBank,
N.A. (Carolinas) from time to time as its "prime rate."
"SCHEDULED PRICE" means the price per share of Common Stock set forth below
opposite the date this Note is converted as provided herein:
PAYMENT DATE
MATURITY DATE THROUGH SCHEDULED RATE
October 1, 1996 through $8.00
October 31, 1996
November 1, 1996 through $7.00
November 30, 1996
December 1, 1996 through $6.00
December 31, 1996
January 1, 1997 through $5.00
January 31, 1997
February 1, 1997 through $4.00
February 28, 1997
March 1, 1997 through $3.00
March 31, 1997
April 1, 1997 through $2.00
April 30, 1997
May 1, 1997 $1.00
On or after May 31, 1997 $0.01
in each case subject to adjustment as and to the extent provided in this
Note.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means (i) an aggregate principal amount of $5,000.000
plus interest thereon pursuant to the 10% Promissory Notes dated March 8, 1996
issued by Advanced Radio Telecom Corp. and (ii) the principal sum of $1,500,000
plus interest pursuant to the Nonnegotiable and Nontransferable
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Promissory Note issued by Borrower to EMI Communications Corp. pursuant to
the Asset Purchase Agreement dated April 4, 1995.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"TRADE PAYABLES" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed in the ordinary
course of business in connection with the obtaining of materials, equipment or
services.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are generally not traded on the
applicable national securities exchange or over-the- counter.
"WARRANTS" means Common Stock Purchase Warrants issued by the Borrower as
of the date hereof and bearing Certificate Nos. W-1 through W-2, together with
any other such warrants hereafter issued in replacement or substitution
therefor.
Article 2. PAYMENT AND PREPAYMENT.
Section 2.1 OPTIONAL PREPAYMENTS. The Borrower may, upon at least 2
Business Days' notice to the Holder, prepay this Note in whole or in part, with
interest accrued to the date of such prepayment on the amount prepaid, provided
that each partial prepayment shall be in a principal amount not less than
$100,000. No amounts so repaid may be reborrowed hereunder.
Section 2.2 COMPUTATIONS. Each payment under this Note shall be made in
same day funds not later than 11:00 A.M. (Washington, D.C. time) on the day when
due in lawful money of the United States of America. All computations of
interest under this Note shall be made by the Holder on the basis of a year of
365 or 366 days, as the case may be, for the actual number of days elapsed
(including the first day but excluding the last day). Each change in the Prime
Rate shall take effect immediately upon the occurrence thereof with respect to
the entire principal amount hereof at the time outstanding.
Section 2.3 PAYMENT OF PRINCIPAL AND INTEREST. No provision of this
Note shall alter or impair the obligations of each Issuer, which are absolute
and unconditional, to pay the principal of and interest on this Note at the
place, times and rate, and in the currency, herein prescribed. The obligations
of the Issuers on this Note are joint and several.
Article 3. COVENANTS OF THE ISSUERS.
Section 3.1 INFORMATION. The Borrower covenants with the Holder that it
will deliver to the Holder, at its address set forth in the Register, all such
registration statements and prospectuses, and amendments and supplements
thereto, and all such other information, reports and other documents, as re
either filed or required to be filed with the Commission, in each case no more
than two Business Days after the same is either filed or required to be filed
with the Commission.
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Section 3.2 SUBORDINATION OF OTHER INDEBTEDNESS. The Borrower covenants
with the Holder that it will not (nor will it permit any of its subsidiaries to)
incur or assume any Indebtedness other than Indebtedness evidenced by this Note
and the Columbia Note, unless such Indebtedness by its terms is subordinate in
right of payment to this Note and does not in the aggregate exceed $2.5 million
in aggregate principal amount outstanding at any one time; provided such
Indebtedness is not secured by any assets or property of the Borrower (or any of
its subsidiaries) other than equipment, software and systems (if any) purchased
with the proceeds of such Indebtedness.
Section 3.3 BORROWER MAY MERGE, CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS. The Borrower covenants with the Holder that neither it nor any of its
subsidiaries will consolidate with or merge with or into any other Person or
sell, assign, convey, transfer or lease its properties and assets substantially
as an entirety to any Person in any transaction or series of related
transactions, and that it will not permit any Person to consolidate with or
merge into the Borrower (or subsidiary), unless:
(a) in case the Borrower or its subsidiary shall consolidate with or
merge into another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person in any transaction or series of
related transactions, the Person formed by such consolidation or into which the
Borrower or its subsidiary is merged or the Person that acquires by conveyance,
transfer or lease the properties and assets of the Borrower or its subsidiary
substantially as an entirety shall expressly assume in writing all obligations
of the Borrower under this Note, by an instrument in form satisfactory to the
Holder, the due and punctual payment of the principal of and interest on this
Note and the performance or observance of every covenant herein on the part of
the Borrower to be performed or observed and the Borrower and such person shall
have otherwise complied with the provisions of Article 7;
(b) such consolidation, merger, conveyance, transfer or lease will
not adversely affect the validity or enforceability of this Note; and
(c) immediately after giving effect to such transaction or series of
related transactions, no Default or Event of Default shall have occurred and be
continuing.
Section 3.3 STATEMENT BY OFFICERS AS TO DEFAULT. The Borrower shall
deliver to the Holder, as promptly as practicable and in any event no later than
five Business Days after the Borrower becomes aware of the occurrence of an
Event of Default, a certificate signed by its Chief Executive Officer or Chief
Financial Officer setting forth the details of such Default or Event of Default
and the action that the Issuer proposes to take with respect thereto.
Article 4. SUBORDINATION
Section 4.1 SENIOR INDEBTEDNESS. The Indebtedness evidenced by this
Note is hereby expressly subordinated, to the extent and in the manner hereafter
set forth, in right of payment to the prior payment in full of all the Senior
Indebtedness. Any and all claims arising under this Note are and shall be at
all times subject and subordinate to the Senior Indebtedness.
Section 4.2 INSOLVENCY. Upon any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, reorganization or arrangements with
creditors (whether or not pursuant to bankruptcy or other insolvency laws),
dissolution, liquidation, or other marshalling of the assets and liabilities of
the Borrower (i) no amount shall be paid by the Borrower in respect of the
principal of or
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interest on this Note at the time outstanding, unless and until the Senior
Indebtedness then outstanding shall be paid in full, and (ii) no claim or
proof of claim shall be filed with the Borrower by or on behalf of the Holder
of this Note which shall assert any right to receive any payments in respect
of principal of and interest on this Note except subject to the payment in
full of the Senior Indebtedness then outstanding.
Section 4.3 DEFAULT ON SENIOR INDEBTEDNESS. In the instance of an event
of default which has been declared in writing with respect to any Senior
Indebtedness which results in the acceleration of such Senior Indebtedness,
then, unless and until such event of default shall have been cured or waived or
shall have ceased to exist, or all Senior Indebtedness shall have been paid in
full, no payment shall be made in respect of the principal of or interest on
this Note; provided, however, that nothing contained in this Article 4 shall
prohibit the holder from exercising its rights pursuant to Article 7 hereof upon
an Event of Default.
Section 4.4 Should any payment or distribution or security, or the
proceeds of any thereof, be collected or received by the Holder of this Note
which is prohibited under the terms of Article 4 of this Note or which is
required to be paid to the holders of Senior Indebtedness by this Article 4, the
Holder of this Note will forthwith, upon notice from any holder of Senior
Indebtedness, deliver the same to the holders of the Senior Indebtedness in
precisely the form received (except for the indorsement without recourse or the
assignment without recourse of the Holder of this Note where necessary) and,
until so delivered, the same shall be held in trust by the Holder of this Note
as the property of the holders of the Senior Indebtedness.
Article 5. EVENTS OF DEFAULT AND REMEDIES.
Section 5.1 "EVENT OF DEFAULT" DEFINED; RIGHTS AND REMEDIES; WAIVER OF
DEFAULT. In case one or more of the following events (each, an "EVENT OF
DEFAULT") shall have occurred and be continuing (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay on or before September 30, 1996 any part of the
principal of, or any interest on, the Note or the Columbia Note; or
(b) failure on the part of the Borrower or any of its subsidiaries
duly to observe or perform any of the covenants or agreements on the part of the
Borrower or any of its subsidiaries contained in the Notes (other than those
covered by clause (a) above) for a period of 2 Business Days after the date on
which written notice specifying such failure, stating that such notice is a
"Notice of Default" hereunder and demanding that the Issuer remedy the same,
shall have been given by registered or certified mail, return receipt requested,
to the Issuer; or
(c) the Borrower or any of its subsidiaries shall fail to make any
payment at maturity in respect of any Indebtedness of the Borrower or any
subsidiary of an Issuer (other than the Notes) due or within any applicable
grace period; or
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(d) any event or condition shall occur that results in the
acceleration of the maturity of any Indebtedness of the Borrower or any of its
subsidiaries or enables (or, with the giving of notice or lapse of time or both,
would enable) the holder or holders of such Indebtedness or any Person acting on
such holders' behalf to accelerate the maturity thereof; or
(e) a court having jurisdiction in the premises shall enter a decree
or order (i) for relief in respect of the Borrower or any of its subsidiaries in
an involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; (ii) adjudging the Borrower or any of its
subsidiaries a bankrupt or insolvent or approving a petition seeking
reorganization, arrangement or composition in respect of the Borrower or any of
its subsidiaries under any applicable bankruptcy, insolvency or other similar
law; (iii) appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Issuer or for any substantial part of
the property of the Issuer; or (iv) ordering the winding-up or liquidation of
the affairs of the Borrower or any of its subsidiaries; or
(f) the Borrower or any of its subsidiaries shall (i) commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in affect or any other case or proceeding to be adjudicated a
bankrupt or insolvent; (ii) shall consent to the entry of an order for relief in
any involuntary case under any such law; (iii) shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of an Issuer or for any substantial part of
the property of such Issuer; or (iv) shall make any general assignment for the
benefit of creditors; or
(g) any material representation or warranty made by the Borrower or
any of its subsidiaries in the Acquisition Agreement, the Security Agreement or
the Warrants, or in any certificate, financial statement or other document
delivered pursuant to any of them, shall prove to have been incorrect or in any
material respect when made; or
(h) the Borrower shall fail to convert any Note as provided in
Article 7; then, and in each and every such case (other than an Event of Default
specified in Section 5.1(e) or (f) hereof), the Holder, by notice in writing to
the Borrower, may declare the entire principal amount of this Note and the
interest accrued hereon to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable; PROVIDED that, if
an Event of Default specified in Section 5.1(e) or (f) occurs, then the
principal of and the accrued interest on this Note shall become and be
immediately due and payable without any declaration or other act on the part of
the Holder; and PROVIDED FURTHER that, in the case of an Event of Default
specified in Section 5.1(a) hereof, the Holder, by notice in writing to the
Borrower, may exercise the conversion rights specified in Article 7.
Section 5.2 POWERS AND REMEDIES GENERALLY CUMULATIVE; DELAY OR OMISSION
NOT A WAIVER. No right or remedy conferred upon or reserved to the Holder herein
or in the Security Agreement is intended to be exclusive of any other right or
remedy, except that the conversion rights specified in Article 7 are an
exclusive remedy. With that exception, every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. No delay or omission of the Holder to exercise any
right or power accruing upon any Event of
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Default occurring and continuing as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and every power and remedy given by this Note or by law
may be exercised from time to time, and as often as shall be deemed
expedient, by the Holder.
Section 5.3 WAIVER OF PAST DEFAULTS. The Holder may waive, in
accordance with Section 8.2, any past Default or Event of Default hereunder and
its consequences. In the case of any such waiver, the Issuer and the Holders
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon. Upon any such waiver, such Default shall cease to
exist and be deemed to have been cured and not to have occurred, and any Event
of Default arising therefrom shall be deemed to have been cured and not to have
occurred for every purpose of this Note; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
Article 6. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS.
The Borrower hereby represents and warrants to the Holder as follows:
Section 6.1 DUE ORGANIZATION. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted.
Section 6.2 DUE AUTHORIZATION. The execution, delivery and performance
by the Borrower of this Note and the Security Agreement (together, the "LOAN
DOCUMENTS") (a) are within the Borrower's corporate powers, (b) have been duly
authorized by all necessary corporate action, (c) do not contravene (i) the
Borrower's charter or bylaws or (ii) law or any contractual restriction binding
on or affecting the Borrower and (d) do not result in the creation of any lien,
security interest or other charge or encumbrance (other than pursuant to the
Loan Documents) upon or with respect to any of its properties.
Section 6.3 GOVERNMENTAL APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of this Note.
Section 6.4 ENFORCEABILITY. Each Loan Document is the legal, valid and
binding obligation of such Issuer enforceable against such Issuer in accordance
with its terms.
Article 7. CONVERSION OF THE NOTE.
Section 7.1 RIGHT TO CONVERT UPON EVENT OF DEFAULT. The Holder shall
have the right, upon the occurrence and during the continuance of an Event of
Default under Section 5.1(a), to convert all or any portion of the principal
amount of and interest accrued on this Note into that number of fully paid and
non-assessable shares of Common Stock equal to that portion of the principal
amount and accrued interest to be converted divided by the Conversion Price (or
at the then-current adjusted Conversion Price if an adjustment has been made as
provided herein). Such right may be exercised by the delivery of written notice
to the Borrower that the holder hereof elects to convert this Note. This Note
shall be deemed to have been converted pursuant to this Section immediately upon
receipt by the Borrower of such notice, which may be transmitted by telecopier,
by reliable overnight courier, by mail or by hand; and at such time
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the rights of the Holder of this Note as Holder shall cease, and the Person
entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder of such Common Stock as and
after such time. The Holder agrees to surrender this Note to the Borrower
for cancellation promptly following any exercise of its conversion right. As
promptly as practicable on or after the conversion date, the Borrower shall
issue and deliver a certificate or certificates for the number of full shares
of Common Stock issuable upon conversion, together with payment in lieu of
any fraction of a share, as provided in Section 7.2. If this Note is
converted in part only, upon such conversion the Borrower shall execute to
the Holder, at the expense of the Borrower, a new Note in the aggregate
principal amount equal to the unconverted principal amount hereof.
Section 7.2 FRACTIONS OF SHARES. No fractional shares of Common Stock
shall be issued upon conversion of this Note. Instead of any fractional share
of Common Stock that would otherwise be issuable upon conversion of the Note,
the Borrower shall pay a cash adjustment in respect of such fractional share in
an amount equal to such fraction multiplied by the Closing Price (as defined
herein) at the close of business on the day of conversion (or, if such day is
not a Trading Day (as defined herein), on the Trading Day immediately preceding
such day) or, if the Closing Price cannot be determined, the then current market
value.
Section 7.3 ADJUSTMENT OF CONVERSION PRICE. (a) In order to prevent
dilution of the conversion rights evidenced by this Note, the Conversion Price
shall be subject to adjustment from time to time as provided in this Section,
and the number of shares of Common Stock underlying this Note shall be subject
to adjustment from time to time as provided in this Section.
(b) If the Borrower at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, then the Conversion
Price in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock underlying this Note shall be
proportionately increased. If the Borrower at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, then the Conversion Price in
effect immediately prior to such combination shall be proportionately increased
and the number of shares of Common Stock underlying this Note shall be
proportionately decreased.
(c) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Borrower's assets
or other transaction, in each case effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, other securities or other assets with respect to or in exchange for
Common Stock, is referred to herein as an "ORGANIC CHANGE." Prior to the
consummation of any Organic Change, the Borrower shall make appropriate
provision (in form and substance satisfactory to the Holder) to ensure that the
Holder shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore underlying this Note, such shares of stock, other securities or
other assets as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore underlying this Note
had such Organic Change not occurred. In any such case, the Borrower shall make
appropriate provision (in form and substance satisfactory to the Holder) with
respect to the Holder's rights and interests to ensure that the provisions of
this subsection and subsections (f) and (g) hereof shall thereafter be
applicable to the Note (including, in the case of any such consolidation, merger
or sale in which the successor or purchaser is other than the Borrower and in
which the value for the Common Stock reflected by the terms of such
consolidation, merger or sale is less than
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the Conversion Price in effect immediately prior to such consolidation,
merger or sale, an immediate adjustment of the Conversion Price to the
product of such Conversion Price immediately prior to such consolidation,
merger or sale multiplied by the ratio of such value of the Common Stock
divided by the Conversion Price in effect immediately prior to such
consolidation, merger or sale and a corresponding immediate adjustment in the
number of shares of Common Stock underlying this Note). The Borrower shall
not effect any such consolidation, merger or sale unless, prior to the
consummation thereof, the successor (if other than the Borrower) resulting
from consolidation or merger or the purchaser of such assets (as the case may
be) assumes by written instrument (in form and substance satisfactory to the
Holder) the obligation to deliver to the Holder such shares of stock, other
securities or other assets as, in accordance with the foregoing provisions,
the Holder may be entitled to acquire.
(d) If any event occurs of the nature contemplated by the provisions
of this Section but not expressly provided for by such provisions, then the
Board of Directors shall make an appropriate adjustment in the Conversion Price
and the number of shares of Common Stock underlying this Note so as to protect
the rights of the holder of the Note, provided that no such adjustment shall
increase the Conversion Price or decrease the number of shares of Common Stock
underlying this Warrant as otherwise determined pursuant to this Section.
(e) Each adjustment to the Conversion Price shall be made to the
nearest .001 of a cent. Immediately upon any adjustment of the Conversion Price,
the Borrower shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment. In
addition, the Borrower shall give written notice to the Holder at least 20 days
prior to the date on which the Borrower takes any action contemplated by
subsection (b), (c) or (d) above.
(f) If the Borrower declares or pays a dividend upon the Common Stock
payable otherwise than in cash (except for a stock dividend payable in shares of
Common Stock) out of earnings or earned surplus, determined in accordance with
GAAP consistently applied (a "LIQUIDATING DIVIDEND"), then the Borrower shall
pay to the Holder of this Note at the time of payment thereof the Liquidating
Dividend that would have been paid to such Holder on the Common Stock had this
Note been fully exercised immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividend are to be
determined.
(g) If at any time the Borrower grants, issues or sells any Options,
Convertible Securities or rights to purchase Capital Stock, Convertible
Securities, Options, other securities or other property pro rata to the record
holders of any class or series of Capital Stock (the "PURCHASE RIGHTS"), then
the Holder of this Note shall be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights that such holder could
have acquired had such holder held the number of shares of Common Stock
underlying this Note immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issuance or sale of such Purchase Rights. For the
purposes of this subsection: "CAPITAL STOCK" means common stock, preferred
stock or any other class or series of security representing an equity interest
in a corporation; "CONVERTIBLE SECURITIES" means any Capital Stock or other
securities directly or indirectly convertible into or exchangeable for Capital
Stock; and "OPTIONS" means any options, warrants or other rights to subscribe
for or purchase Capital Stock or Convertible Securities.
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(h) Notwithstanding anything to the contrary contained in this Note,
including this Section 7.3, no adjustment shall be made to the Conversion Price
as a result of the proposed 29,450.16 for 1 Stock Split.
Section 7.4 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided, the Borrower shall compute the
adjusted Conversion Price and shall prepare a certificate signed by the
Treasurer, any Assistant Treasurer or the Chief Financial Officer of the
Borrower setting forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be delivered to the Holder at its address set forth in the Register.
Section 7.5 NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Borrower shall declare a dividend or other distribution on
its Common Stock; or
(b) the Borrower shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights (excluding shares of capital
stock or options for capital stock issued pursuant to a benefit plan or
agreement for one or more employees, officers or directors of the Borrower); or
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Borrower is a party and for
which approval of any shareholders of the Borrower is required, or of the sale
or transfer of all or substantially all of the assets of the Borrower; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Borrower;
then the Borrower shall cause to be delivered to the Holder at its address set
forth in the Register, at least 20 days (or 10 days in any case specified in
clause (a), (b) or (c) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record who will be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up. Neither the
failure to give any such notice nor any defect therein shall affect the legality
or validity of any action described in clauses (a) through (d) of this Section.
Section 7.6 BORROWER TO RESERVE COMMON STOCK. The Borrower shall at all
times reserve and keep available, free from preemptive rights, out of the
authorized but unissued Common Stock or out of the Common Stock held in
treasury, for the purpose of effecting the conversion of this Note, the full
number of shares of Common Stock then issuable upon the conversion of all
outstanding Notes.
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Section 7.7 TAXES ON CONVERSIONS. The Borrower will pay any and all
original issuance, transfer, stamp and other similar taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on conversion of
this Note pursuant hereto. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
this Note to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Borrower the amount
of any such tax or has established to the satisfaction of the Borrower that such
tax has been paid.
Section 7.8 COVENANT AS TO COMMON STOCK. The Borrower covenants with
the Holder that all shares of Common Stock that may be issued upon conversion of
this Note will, upon issue, be validly issued, fully paid and nonassessable.
Section 7.9 PROVISIONS AS TO CONSOLIDATION, MERGER OR SALE OF ASSETS.
In case of any consolidation of the Borrower with, or merger of the Borrower
into, any other Person, any merger of another Person into the Borrower (other
than a merger that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock) or any sale or transfer
of all or substantially all of the assets of the Borrower, the Person formed by
such consolidation or resulting from such merger or that acquires such assets,
as the case may be, shall execute and deliver to the Holder a supplemental
instrument providing that the Holder of this Note shall have the right
thereafter to convert such Note only into the kind and amount of securities,
cash and other property, if any, receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
this Note might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Stock (i) is not a
Person with which the Borrower consolidated or into which the Borrower merged or
that merged into the Borrower or to which such sale or transfer was made, as the
case may be (a "CONSTITUENT PERSON"), or an Affiliate of a Constituent Person
and (ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer; PROVIDED that, if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer is not the same for each share of Common Stock held immediately
prior to such consolidation, merger, sale or transfer by other than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("NONELECTING SHARE"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares. Such supplemental instrument
shall provide for adjustments, which, for events subsequent to the effective
date of such supplemental instrument, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive consolidations,
mergers, sales or transfers.
Article 8. MISCELLANEOUS.
Section 8.1 GOVERNING LAW. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE, EXCEPT AS MAY OTHERWISE BE REQUIRED
BY MANDATORY PROVISIONS OF LAW. THE PARTIES HERETO HEREBY WAIVE PRESENTMENT,
DEMAND, NOTICE, PROTEST AND ALL OTHER DEMANDS AND NOTICES IN CONNECTION WITH THE
DELIVERY, ACCEPTANCE, PERFORMANCE AND ENFORCEMENT OF THIS NOTE, EXCEPT AS
SPECIFICALLY PROVIDED HEREIN. THE
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HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE PROVISIONS
OF THE NOTE WHICH ARE EXPRESSLY BINDING ON THE HOLDER. THE SECTION HEADINGS
HEREIN ARE FOR CONVENIENCE ONLY AND SHALL NOT AFFECT THE CONSTRUCTION HEREOF.
Section 8.2 AMENDMENT OR MODIFICATION. Any provision of this Note may
be amended or, subject to Section 5.3, waived with the written consent of the
Issuers and the Holder.
Section 8.3 TRANSFERS AND ASSIGNMENTS. This Note and any securities
issued upon conversion of this Note may not be sold, transferred, pledged,
hypothecated or otherwise disposed of unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement and all applicable
state securities laws; or
(ii) (A) The transferor shall have notified the Borrower of the
proposed disposition and shall have furnished the Borrower with a statement
of the circumstances surrounding the proposed disposition, and with an
opinion of counsel, reasonably satisfactory to the Borrower, that such
disposition will not require registration of the Note, or such securities
under the Securities Act and that all requisite action has been or will, on
a timely basis, be taken under any applicable state securities laws in
connection with such disposition; and
(iii) The proposed transferee shall have agreed in writing to be
bound by the terms and provisions of this Section 8.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for transfers
pursuant to Rule 144 (k) promulgated under the Securities Act.
IN WITNESS WHEREOF, each of the Issuers and the Holder has caused this Note
to be duly executed under its corporate seal.
Dated: July 3, 1996
[Seal] ADVANCED RADIO TECHNOLOGIES CORPORATION
By:
___________________________________________________
Name:
Title:
[Seal] COMMCO, L.L.C.
By:
___________________________________________________
Name:
Title:
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EXHIBIT 10-31(c)
BOTH BY ACQUIRING THIS NOTE AND BY CONVERTING THIS NOTE, THE HOLDER SHALL BE
DEEMED TO REPRESENT AND WARRANT TO THE BORROWER AND TO ANY AND EVERY PRIOR
HOLDER OF THIS NOTE THAT (i) THE HOLDER IS ACQUIRING THE SECURITIES SO ACQUIRED
FOR THE HOLDER'S OWN ACCOUNT, FOR INVESTMENT, AND NOT WITH A VIEW TO THE RESALE
OR OTHER TRANSFER THEREOF IN A DISTRIBUTION, HAVING NO PARTICIPATION IN ANY SUCH
UNDERTAKING AND NO PARTICIPATION IN THE UNDERWRITING THEREOF, (ii) THE HOLDER
CAN AFFORD TO LOSE THE ENTIRETY OF THE HOLDER'S INVESTMENT IN SUCH SECURITIES
AND (iii) THE HOLDER IS AN ACCREDITED INVESTOR AS DEFINED IN RULE 501(A) UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS SUCH KNOWLEDGE AND EXPERIENCE IN
FINANCIAL AND BUSINESS MATTERS AS TO BE CAPABLE OF EVALUATING THE MERITS AND
RISKS OF ACQUIRING SUCH SECURITIES. BOTH BY ACQUIRING THIS NOTE AND BY
CONVERTING THIS NOTE, THE HOLDER SHALL BE DEEMED TO COVENANT WITH THE BORROWER
AND WITH ANY AND EVERY PRIOR HOLDER OF THIS NOTE THAT THE HOLDER WILL NOT
RESELL, PLEDGE OR OTHERWISE TRANSFER ANY OR ALL OF THE SECURITIES SO ACQUIRED
UNLESS AND UNTIL EITHER SUCH SECURITIES ARE REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS
OR ELSE THE BORROWER HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE
BORROWER, IN FORM REASONABLY ACCEPTABLE TO THE BORROWER, TO THE EFFECT THAT THE
PROPOSED TRANSFER DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT OR UNDER
APPLICABLE STATE SECURITIES LAWS.
Date of Issuance: June 27, 1996 $1,000,000
ADVANCED RADIO TECHNOLOGIES CORPORATION
BRIDGE NOTE DUE SEPTEMBER 30, 1996
Advanced Radio Technologies Corporation, a Delaware corporation (the
"BORROWER"), for value received, hereby promises to pay to Columbia Capital
Corporation, a Virginia corporation (together with its successors and permitted
transferees and assigns, the "HOLDER"), and its successors and permitted
transferees and assigns, subject to the terms and conditions of this Note, the
aggregate principal amount of ONE MILLION DOLLARS (the "COMMITMENT"), at a bank
in the United States specified by the Holder (the "BANK ACCOUNT"), by transfer
of same day funds to the Holder's account no later than 11:00 A.M. (Washington,
D.C. time) on or before September 30, 1996 (the "MATURITY DATE"), and to pay
interest at the Prime Rate as announced from time to time on such principal
amount remaining unpaid hereunder from time to time outstanding from the Date of
Issuance until said principal amount is paid in full, payable in full upon any
prepayment of the entire Commitment and otherwise at the Maturity Date.
This Note and the Bridge Note Due September 30, 1996 in the original
principal amount of $1,397,100 issued by the Borrower to Commco, L.L.C., a
Delaware limited liability company ("CLC") (the "CLC NOTE") have been issued in
connection with the transactions contemplated by the Asset Acquisition Agreement
and Plan of Reorganization dated July 3, 1996 (the "ASSET ACQUISITION
AGREEMENT") among the Borrower, Advanced Radio Telecom Corp., CommcoCCC, Inc., a
Delaware corporation ("COMMCOCCC"), CCC Millimeter, L.P., a Delaware limited
partnership, Columbia Millimeter Communications, L.P., a Delaware limited
partnership, the Holder, and CLC. In order to induce each
<PAGE>
of the parties to enter into the Asset Acquisition Agreement and to consummate
the transactions contemplated thereby, the Holder has agreed to provide the
Commitment evidenced by this Note for the benefit of the Borrower. The
execution and delivery of this Note is required pursuant to the terms of the
Asset Acquisition Agreement. Payment of the principal of and interest on this
Note is secured by the terms and conditions of a certain Security Agreement of
even date herewith among the Borrower and the Holder, as Collateral Agent (the
"SECURITY AGREEMENT").
This Note is transferrable or assignable to one or more purchasers,
PROVIDED that such transfer or assignment is made in accordance with Section 8.3
hereof. The Borrower agrees to issue from time to time a replacement Note or
Notes in substantially the form hereof, with changes herein to reflect transfer
or assignment, and in such denominations as the Holder may request to facilitate
such transfers and assignments. In addition, the Borrower agrees to issue a
replacement Note if this Note has been lost, stolen, mutilated or destroyed.
The Borrower shall keep a register (the "REGISTER") in which shall be
entered the name and address of the registered holder of this Note and
particulars of this Note and of any transfer of this Note. References to the
"Holders" shall mean the persons listed in the Registers as the payees of the
Notes unless any payee shall have presented a Note to the Borrower for transfer
and the transferee shall have been entered in the Register as a subsequent
holder, in which case the term shall mean such subsequent holder. Ownership of
this Note shall be proven by the Register.
Article 1. DEFINITIONS.
The following terms (except as otherwise expressly provided or unless the
context otherwise clearly requires) for all purposes of this Note shall have the
respective meanings specified below. All accounting terms used herein and not
expressly defined shall have the meanings given to them in accordance with U.S.
generally accepted accounting principles, and the terms "GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES" and "GAAP" shall mean such accounting principles which
are generally accepted in effect from time to time. Other terms defined
elsewhere in this Agreement shall have the meanings ascribed thereto herein.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"BOARD OF DIRECTORS" means the board of directors of the Borrower or a duly
authorized committee thereof.
"BUSINESS DAY" means any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in Washington, D.C. are authorized by law
to be closed.
"CLOSING PRICE" means the last reported sales price on a Trading Day
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the
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Nasdaq National Market or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on such Nasdaq National
Market, the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected from
time to time by the Borrower for that purpose.
"COMMISSION" means the Securities and Exchange Commission as from time to
time constituted, created under the Exchange Act.
"COMMON STOCK" means the Common Stock, par value $0.001 per share, of the
Borrower.
"CONVERSION PRICE" means the price per share of Common Stock at which the
principal of and interest on this Note shall be convertible, at the Holder's
option, into Common Stock, which price shall be the lesser of (i) the Scheduled
Price and (ii) 80% of the Current Market Price on the date immediately prior to
the conversion date of this Note, in each case subject to adjustment as and to
the extent provided in this Note.
"CURRENT MARKET PRICE" on any date means the average of the daily Closing
Prices for the ten consecutive Trading Days preceding such date.
"DEFAULT" means any condition or event that constitutes an Event of Default
or that, with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"EVENT OF DEFAULT" means any event or condition specified as such in
Section 4.1 that shall have
continued for the period of time, if any, therein designated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take or pay or to maintain financial
statement conditions, or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation for the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"INDEBTEDNESS" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto), except
letters of credit or other similar instruments issued to secure payment of Trade
Payables, (iv) all obligations of such Person to pay the deferred purchase price
of property or services, except Trade Payables, (v) all obligations of such
Person as lessee under capital leases, (vi) all Indebtedness of others secured
by a lien on any asset of such Person,
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<PAGE>
whether or not such Indebtedness is assumed by such Person, and (vii) all
Indebtedness of others Guaranteed by such Person.
"LOAN DOCUMENTS" means this Note and the Security Agreement.
"NOTES" means this Note and any and all other promissory notes with
substantially the same terms and conditions, which other notes may be issued by
the Issuers to replace this Note as contemplated by the introductory statements
in this Note.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PRIME RATE" means the rate of interest announced publicly by NationsBank,
N.A. (Carolinas) from time to time as its "prime rate."
"SCHEDULED PRICE" means the price per share of Common Stock set forth below
opposite the date this Note is converted as provided herein:
Payment Date
Maturity Date through Scheduled Rate
--------------------- --------------
October 31, 1996 $8.00
October 31, 1996 through
November 30, 1996 $7.00
November 30, 1996 through
December 31, 1996 $6.00
December 31, 1996 through
January 31, 1997 $5.00
January 31, 1997 through
February 28, 1997 $4.00
February 28, 1997 through
March 31, 1997 $3.00
March 31, 1997 through
April 30, 1997 $2.00
April 30, 1997 through
May 31, 1997 $1.00
On or after May 31, 1997 $0.01
in each case subject to adjustment as and to the extent provided in this
Note.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means (i) an aggregate principal amount of $5,000.000
plus interest thereon pursuant to the 10% Promissory Notes dated March 8, 1996
issued by Advanced Radio Telecom Corp. and (ii) the principal sum of $1,500,000
plus interest pursuant to the Nonnegotiable and Nontransferable Promissory Note
issued by Borrower to EMI Communications Corp. pursuant to the Asset Purchase
Agreement dated April 4, 1995.
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"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"TRADE PAYABLES" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed in the ordinary
course of business in connection with the obtaining of materials, equipment or
services.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are generally not traded on the
applicable national securities exchange or over-the- counter.
"WARRANTS" means Common Stock Purchase Warrants issued by the Borrower as
of the date hereof and bearing Certificate Nos. W-1 through W-2, together with
any other such warrants hereafter issued in replacement or substitution
therefor.
Article 2. PAYMENT AND PREPAYMENT.
Section 2.1 OPTIONAL PREPAYMENTS. The Borrower may, upon at least 2
Business Days' notice to the Holder, prepay this Note in whole or in part, with
interest accrued to the date of such prepayment on the amount prepaid, provided
that each partial prepayment shall be in a principal amount not less than
$100,000. No amounts so repaid may be reborrowed hereunder.
Section 2.2 COMPUTATIONS. Each payment under this Note shall be made in
same day funds not later than 11:00 A.M. (Washington, D.C. time) on the day when
due in lawful money of the United States of America. All computations of
interest under this Note shall be made by the Holder on the basis of a year of
365 or 366 days, as the case may be, for the actual number of days elapsed
(including the first day but excluding the last day). Each change in the Prime
Rate shall take effect immediately upon the occurrence thereof with respect to
the entire principal amount hereof at the time outstanding.
Section 2.3 PAYMENT OF PRINCIPAL AND INTEREST. No provision of this
Note shall alter or impair the obligations of each Issuer, which are absolute
and unconditional, to pay the principal of and interest on this Note at the
place, times and rate, and in the currency, herein prescribed. The obligations
of the Issuers on this Note are joint and several.
Article 3. COVENANTS OF THE ISSUERS.
Section 3.1 INFORMATION. The Borrower covenants with the Holder that it
will deliver to the Holder, at its address set forth in the Register, all such
registration statements and prospectuses, and amendments and supplements
thereto, and all such other information, reports and other documents, as re
either filed or required to be filed with the Commission, in each case no more
than two Business Days after the same is either filed or required to be filed
with the Commission.
Section 3.2 SUBORDINATION OF OTHER INDEBTEDNESS. The Borrower covenants
with the Holder that it will not (nor will it permit any of its subsidiaries to)
incur or assume any Indebtedness other than Indebtedness evidenced by this Note
and the CLC Note, unless such Indebtedness by its terms is
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<PAGE>
subordinate in right of payment to this Note and does not in the aggregate
exceed $2.5 million in aggregate principal amount outstanding at any one time;
provided such Indebtedness is not secured by any assets or property of the
Borrower (or any of its subsidiaries) other than equipment, software and systems
(if any) purchased with the proceeds of such Indebtedness.
Section 3.3 BORROWER MAY MERGE, CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS. The Borrower covenants with the Holder that neither it nor any of its
subsidiaries will consolidate with or merge with or into any other Person or
sell, assign, convey, transfer or lease its properties and assets substantially
as an entirety to any Person in any transaction or series of related
transactions, and that it will not permit any Person to consolidate with or
merge into the Borrower (or subsidiary), unless:
(a) in case the Borrower or its subsidiary shall consolidate with or
merge into another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person in any transaction or series of
related transactions, the Person formed by such consolidation or into which the
Borrower or its subsidiary is merged or the Person that acquires by conveyance,
transfer or lease the properties and assets of the Borrower or its subsidiary
substantially as an entirety shall expressly assume in writing all obligations
of the Borrower under this Note, by an instrument in form satisfactory to the
Holder, the due and punctual payment of the principal of and interest on this
Note and the performance or observance of every covenant herein on the part of
the Borrower to be performed or observed and the Borrower and such person shall
have otherwise complied with the provisions of Article 7;
(b) such consolidation, merger, conveyance, transfer or lease will
not adversely affect the validity or enforceability of this Note; and
(c) immediately after giving effect to such transaction or series of
related transactions, no Default or Event of Default shall have occurred and be
continuing.
Section 3.3 STATEMENT BY OFFICERS AS TO DEFAULT. The Borrower shall
deliver to the Holder, as promptly as practicable and in any event no later than
five Business Days after the Borrower becomes aware of the occurrence of an
Event of Default, a certificate signed by its Chief Executive Officer or Chief
Financial Officer setting forth the details of such Default or Event of Default
and the action that the Issuer proposes to take with respect thereto.
Article 4. SUBORDINATION
Section 4.1 SENIOR INDEBTEDNESS. The Indebtedness evidenced by this
Note is hereby expressly subordinated, to the extent and in the manner hereafter
set forth, in right of payment to the prior payment in full of all the Senior
Indebtedness. Any and all claims arising under this Note are and shall be at
all times subject and subordinate to the Senior Indebtedness.
Section 4.2 INSOLVENCY. Upon any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, reorganization or arrangements with
creditors (whether or not pursuant to bankruptcy or other insolvency laws),
dissolution, liquidation, or other marshalling of the assets and liabilities of
the Borrower (i) no amount shall be paid by the Borrower in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the Senior Indebtedness then outstanding shall be paid in full, and (ii) no
claim or proof of claim shall be filed with the Borrower by or on behalf of the
Holder of this Note which shall assert any right to receive any payments in
respect of principal of and
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<PAGE>
interest on this Note except subject to the payment in full of the Senior
Indebtedness then outstanding.
Section 4.3 DEFAULT ON SENIOR INDEBTEDNESS. In the instance of an event
of default which has been declared in writing with respect to any Senior
Indebtedness which results in the acceleration of such Senior Indebtedness,
then, unless and until such event of default shall have been cured or waived or
shall have ceased to exist, or all Senior Indebtedness shall have been paid in
full, no payment shall be made in respect of the principal of or interest on
this Note; provided, however, that nothing contained in this Article 4 shall
prohibit the holder from exercising its rights pursuant to Article 7 hereof upon
an Event of Default under Section 5.1(a) hereof.
Section 4.4 Should any payment or distribution or security, or the
proceeds of any thereof, be collected or received by the Holder of this Note
which is prohibited under the terms of Article 4 of this Note or which is
required to be paid to the holders of Senior Indebtedness by this Article 4, the
Holder of this Note will forthwith, upon notice from any holder of Senior
Indebtedness, deliver the same to the holders of the Senior Indebtedness in
precisely the form received (except for the indorsement without recourse or the
assignment without recourse of the Holder of this Note where necessary) and,
until so delivered, the same shall be held in trust by the Holder of this Note
as the property of the holders of the Senior Indebtedness.
Article 5. EVENTS OF DEFAULT AND REMEDIES.
Section 5.1 "EVENT OF DEFAULT" DEFINED; RIGHTS AND REMEDIES; WAIVER OF
DEFAULT. In case one or more of the following events (each, an "EVENT OF
DEFAULT") shall have occurred and be continuing (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay on or before September 30 1996 any part of the
principal of, or any interest on, the Note or failure to pay on or before
September 30, 1996 any part of the principal of, or any interest on, the CLC
Note; or
(b) failure on the part of the Borrower or any of its subsidiaries
duly to observe or perform any of the covenants or agreements on the part of the
Borrower or any of its subsidiaries contained in the Notes (other than those
covered by clause (a) above) for a period of 2 Business Days after the date on
which written notice specifying such failure, stating that such notice is a
"Notice of Default" hereunder and demanding that the Issuer remedy the same,
shall have been given by registered or certified mail, return receipt requested,
to the Issuer; or
(c) the Borrower or any of its subsidiaries shall fail to make any
payment at maturity in respect of any Indebtedness of the Borrower or any
subsidiary of an Issuer (other than the Notes) due or within any applicable
grace period; or
(d) any event or condition shall occur that results in the
acceleration of the maturity of any Indebtedness of the Borrower or any of its
subsidiaries or enables (or, with the giving of notice or lapse of time or both,
would enable) the holder or holders of such Indebtedness or any Person acting on
such holders' behalf to accelerate the maturity thereof; or
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(e) a court having jurisdiction in the premises shall enter a decree
or order (i) for relief in respect of the Borrower or any of its subsidiaries in
an involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; (ii) adjudging the Borrower or any of its
subsidiaries a bankrupt or insolvent or approving a petition seeking
reorganization, arrangement or composition in respect of the Borrower or any of
its subsidiaries under any applicable bankruptcy, insolvency or other similar
law; (iii) appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Issuer or for any substantial part of
the property of the Issuer; or (iv) ordering the winding-up or liquidation of
the affairs of the Borrower or any of its subsidiaries; or
(f) the Borrower or any of its subsidiaries shall (i) commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in affect or any other case or proceeding to be adjudicated a
bankrupt or insolvent; (ii) shall consent to the entry of an order for relief in
any involuntary case under any such law; (iii) shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of an Issuer or for any substantial part of
the property of such Issuer; or (iv) shall make any general assignment for the
benefit of creditors; or
(g) any material representation or warranty made by the Borrower or
any of its subsidiaries in the Acquisition Agreement, the Security Agreement or
the Warrants, or in any certificate, financial statement or other document
delivered pursuant to any of them, shall prove to have been incorrect or in any
material respect when made; or
(h) the Borrower shall fail to convert any Note as provided in
Article 7; then, and in each and every such case (other than an Event of Default
specified in Section 5.1(e) or (f) hereof), the Holder, by notice in writing to
the Borrower, may declare the entire principal amount of this Note and the
interest accrued hereon to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable; PROVIDED that, if
an Event of Default specified in Section 5.1(e) or (f) occurs, then the
principal of and the accrued interest on this Note shall become and be
immediately due and payable without any declaration or other act on the part of
the Holder; and PROVIDED FURTHER that, in the case of an Event of Default
specified in Section 5.1(a) hereof, the Holder, by notice in writing to the
Borrower, may exercise the conversion rights specified in Article 7.
Section 5.2 POWERS AND REMEDIES GENERALLY CUMULATIVE; DELAY OR OMISSION
NOT A WAIVER. No right or remedy conferred upon or reserved to the Holder herein
or in the Security Agreement is intended to be exclusive of any other right or
remedy, except that the conversion rights specified in Article 7 are an
exclusive remedy. With that exception, every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. No delay or omission of the Holder to exercise any
right or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and every power
and remedy given by this Note or by law may be exercised from time to time, and
as often as shall be deemed expedient, by the Holder.
Section 5.3 WAIVER OF PAST DEFAULTS. The Holder may waive, in
accordance with Section 8.2, any past Default or Event of Default hereunder and
its consequences. In the case of any such waiver, the
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Issuer and the Holders shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon. Upon any such waiver, such
Default shall cease to exist and be deemed to have been cured and not to have
occurred, and any Event of Default arising therefrom shall be deemed to have
been cured and not to have occurred for every purpose of this Note; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
Article 6. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS.
The Borrower hereby represents and warrants to the Holder as follows:
Section 6.1 DUE ORGANIZATION. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted.
Section 6.2 DUE AUTHORIZATION. The execution, delivery and performance
by the Borrower of this Note and the Security Agreement (together, the "LOAN
DOCUMENTS") (a) are within the Borrower's corporate powers, (b) have been duly
authorized by all necessary corporate action, (c) do not contravene (i) the
Borrower's charter or bylaws or (ii) law or any contractual restriction binding
on or affecting the Borrower and (d) do not result in the creation of any lien,
security interest or other charge or encumbrance (other than pursuant to the
Loan Documents) upon or with respect to any of its properties.
Section 6.3 GOVERNMENTAL APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of this Note.
Section 6.4 ENFORCEABILITY. Each Loan Document is the legal, valid and
binding obligation of such Issuer enforceable against such Issuer in accordance
with its terms.
Article 7. CONVERSION OF THE NOTE.
Section 7.1 RIGHT TO CONVERT UPON EVENT OF DEFAULT. The Holder shall
have the right, upon the occurrence and during the continuance of an Event of
Default under Section 5.1(a) hereof, to convert all or any portion of the
principal amount of and interest accrued on this Note into that number of fully
paid and non-assessable shares of Common Stock equal to that portion of the
principal amount and accrued interest to be converted divided by the Conversion
Price (or at the then-current adjusted Conversion Price if an adjustment has
been made as provided herein). Such right may be exercised by the delivery of
written notice to the Borrower that the holder hereof elects to convert this
Note. This Note shall be deemed to have been converted pursuant to this Section
immediately upon receipt by the Borrower of such notice, which may be
transmitted by telecopier, by reliable overnight courier, by mail or by hand;
and at such time the rights of the Holder of this Note as Holder shall cease,
and the Person entitled to receive the Common Stock issuable upon conversion
shall be treated for all purposes as the record holder of such Common Stock as
and after such time. The Holder agrees to surrender this Note to the Borrower
for cancellation promptly following any exercise of its conversion right. As
promptly as practicable on or after the conversion date, the Borrower shall
issue and deliver a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 7.2. If this Note is converted in
part only, upon such conversion the
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Borrower shall execute to the Holder, at the expense of the Borrower, a new Note
in the aggregate principal amount equal to the unconverted principal amount
hereof.
Section 7.2 FRACTIONS OF SHARES. No fractional shares of Common Stock
shall be issued upon conversion of this Note. Instead of any fractional share
of Common Stock that would otherwise be issuable upon conversion of the Note,
the Borrower shall pay a cash adjustment in respect of such fractional share in
an amount equal to such fraction multiplied by the Closing Price (as defined
herein) at the close of business on the day of conversion (or, if such day is
not a Trading Day (as defined herein), on the Trading Day immediately preceding
such day) or, if the Closing Price cannot be determined, the then current market
value.
Section 7.3 ADJUSTMENT OF CONVERSION PRICE. (a) In order to prevent
dilution of the conversion rights evidenced by this Note, the Conversion Price
shall be subject to adjustment from time to time as provided in this Section,
and the number of shares of Common Stock underlying this Note shall be subject
to adjustment from time to time as provided in this Section.
(b) If the Borrower at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, then the Conversion
Price in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock underlying this Note shall be
proportionately increased. If the Borrower at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, then the Conversion Price in
effect immediately prior to such combination shall be proportionately increased
and the number of shares of Common Stock underlying this Note shall be
proportionately decreased.
(c) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Borrower's assets
or other transaction, in each case effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, other securities or other assets with respect to or in exchange for
Common Stock, is referred to herein as an "ORGANIC CHANGE." Prior to the
consummation of any Organic Change, the Borrower shall make appropriate
provision (in form and substance satisfactory to the Holder) to ensure that the
Holder shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore underlying this Note, such shares of stock, other securities or
other assets as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore underlying this Note
had such Organic Change not occurred. In any such case, the Borrower shall make
appropriate provision (in form and substance satisfactory to the Holder) with
respect to the Holder's rights and interests to ensure that the provisions of
this subsection and subsections (f) and (g) hereof shall thereafter be
applicable to the Note (including, in the case of any such consolidation, merger
or sale in which the successor or purchaser is other than the Borrower and in
which the value for the Common Stock reflected by the terms of such
consolidation, merger or sale is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale, an immediate adjustment
of the Conversion Price to the product of such Conversion Price immediately
prior to such consolidation, merger or sale multiplied by the ratio of such
value of the Common Stock divided by the Conversion Price in effect immediately
prior to such consolidation, merger or sale and a corresponding immediate
adjustment in the number of shares of Common Stock underlying this Note). The
Borrower shall not effect any such consolidation, merger or sale unless, prior
to the consummation thereof, the successor (if other than the Borrower)
resulting from consolidation or merger or the purchaser of such
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assets (as the case may be) assumes by written instrument (in form and substance
satisfactory to the Holder) the obligation to deliver to the Holder such shares
of stock, other securities or other assets as, in accordance with the foregoing
provisions, the Holder may be entitled to acquire.
(d) If any event occurs of the nature contemplated by the provisions
of this Section but not expressly provided for by such provisions, then the
Board of Directors shall make an appropriate adjustment in the Conversion Price
and the number of shares of Common Stock underlying this Note so as to protect
the rights of the holder of the Note, provided that no such adjustment shall
increase the Conversion Price or decrease the number of shares of Common Stock
underlying this Warrant as otherwise determined pursuant to this Section.
(e) Each adjustment to the Conversion Price shall be made to the
nearest .001 of a cent. Immediately upon any adjustment of the Conversion Price,
the Borrower shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment. In
addition, the Borrower shall give written notice to the Holder at least 20 days
prior to the date on which the Borrower takes any action contemplated by
subsection (b), (c) or (d) above.
(f) If the Borrower declares or pays a dividend upon the Common Stock
payable otherwise than in cash (except for a stock dividend payable in shares of
Common Stock) out of earnings or earned surplus, determined in accordance with
GAAP consistently applied (a "LIQUIDATING DIVIDEND"), then the Borrower shall
pay to the Holder of this Note at the time of payment thereof the Liquidating
Dividend that would have been paid to such Holder on the Common Stock had this
Note been fully exercised immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividend are to be
determined.
(g) If at any time the Borrower grants, issues or sells any Options,
Convertible Securities or rights to purchase Capital Stock, Convertible
Securities, Options, other securities or other property pro rata to the record
holders of any class or series of Capital Stock (the "PURCHASE RIGHTS"), then
the Holder of this Note shall be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights that such holder could
have acquired had such holder held the number of shares of Common Stock
underlying this Note immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issuance or sale of such Purchase Rights. For the
purposes of this subsection: "CAPITAL STOCK" means common stock, preferred
stock or any other class or series of security representing an equity interest
in a corporation; "CONVERTIBLE SECURITIES" means any Capital Stock or other
securities directly or indirectly convertible into or exchangeable for Capital
Stock; and "OPTIONS" means any options, warrants or other rights to subscribe
for or purchase Capital Stock or Convertible Securities.
(h) Notwithstanding anything to the contrary contained in this Note,
including this Section 7.3, no adjustment shall be made to the Conversion Price
as a result of the proposed 29,450.16 for 1 Stock Split.
Section 7.4 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided, the Borrower shall compute the
adjusted Conversion Price and shall prepare a certificate signed by the
Treasurer, any Assistant Treasurer or the Chief Financial Officer of the
Borrower setting forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which
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such adjustment is based, and such certificate shall forthwith be delivered to
the Holder at its address set forth in the Register.
Section 7.5 NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Borrower shall declare a dividend or other distribution on
its Common Stock; or
(b) the Borrower shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights (excluding shares of capital
stock or options for capital stock issued pursuant to a benefit plan or
agreement for one or more employees, officers or directors of the Borrower); or
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Borrower is a party and for
which approval of any shareholders of the Borrower is required, or of the sale
or transfer of all or substantially all of the assets of the Borrower; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Borrower;
then the Borrower shall cause to be delivered to the Holder at its address set
forth in the Register, at least 20 days (or 10 days in any case specified in
clause (a), (b) or (c) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record who will be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up. Neither the
failure to give any such notice nor any defect therein shall affect the legality
or validity of any action described in clauses (a) through (d) of this Section.
Section 7.6 BORROWER TO RESERVE COMMON STOCK. The Borrower shall at all
times reserve and keep available, free from preemptive rights, out of the
authorized but unissued Common Stock or out of the Common Stock held in
treasury, for the purpose of effecting the conversion of this Note, the full
number of shares of Common Stock then issuable upon the conversion of all
outstanding Notes.
Section 7.7 TAXES ON CONVERSIONS. The Borrower will pay any and all
original issuance, transfer, stamp and other similar taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on conversion of
this Note pursuant hereto. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
this Note to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Borrower the amount
of any such tax or has established to the satisfaction of the Borrower that such
tax has been paid.
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Section 7.8 COVENANT AS TO COMMON STOCK. The Borrower covenants with
the Holder that all shares of Common Stock that may be issued upon conversion of
this Note will, upon issue, be validly issued, fully paid and nonassessable.
Section 7.9 PROVISIONS AS TO CONSOLIDATION, MERGER OR SALE OF ASSETS.
In case of any consolidation of the Borrower with, or merger of the Borrower
into, any other Person, any merger of another Person into the Borrower (other
than a merger that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock) or any sale or transfer
of all or substantially all of the assets of the Borrower, the Person formed by
such consolidation or resulting from such merger or that acquires such assets,
as the case may be, shall execute and deliver to the Holder a supplemental
instrument providing that the Holder of this Note shall have the right
thereafter to convert such Note only into the kind and amount of securities,
cash and other property, if any, receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
this Note might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Stock (i) is not a
Person with which the Borrower consolidated or into which the Borrower merged or
that merged into the Borrower or to which such sale or transfer was made, as the
case may be (a "CONSTITUENT PERSON"), or an Affiliate of a Constituent Person
and (ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer; PROVIDED that, if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer is not the same for each share of Common Stock held immediately
prior to such consolidation, merger, sale or transfer by other than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("NONELECTING SHARE"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares. Such supplemental instrument
shall provide for adjustments, which, for events subsequent to the effective
date of such supplemental instrument, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive consolidations,
mergers, sales or transfers.
Article 8. MISCELLANEOUS.
Section 8.1 GOVERNING LAW. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE, EXCEPT AS MAY OTHERWISE BE REQUIRED
BY MANDATORY PROVISIONS OF LAW. THE PARTIES HERETO HEREBY WAIVE PRESENTMENT,
DEMAND, NOTICE, PROTEST AND ALL OTHER DEMANDS AND NOTICES IN CONNECTION WITH THE
DELIVERY, ACCEPTANCE, PERFORMANCE AND ENFORCEMENT OF THIS NOTE, EXCEPT AS
SPECIFICALLY PROVIDED HEREIN. THE HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF
AGREES TO BE BOUND BY THE PROVISIONS OF THE NOTE WHICH ARE EXPRESSLY BINDING ON
THE HOLDER. THE SECTION HEADINGS HEREIN ARE FOR CONVENIENCE ONLY AND SHALL NOT
AFFECT THE CONSTRUCTION HEREOF.
Section 8.2 AMENDMENT OR MODIFICATION. Any provision of this Note may
be amended or, subject to Section 5.3, waived with the written consent of the
Issuers and the Holder.
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Section 8.3 TRANSFERS AND ASSIGNMENTS. This Note and any securities
issued upon conversion of this Note may not be sold, transferred, pledged,
hypothecated or otherwise disposed of unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement and all applicable
state securities laws; or
(ii) (A) The transferor shall have notified the Borrower of the
proposed disposition and shall have furnished the Borrower with a statement
of the circumstances surrounding the proposed disposition, and with an
opinion of counsel, reasonably satisfactory to the Borrower, that such
disposition will not require registration of the Note, or such securities
under the Securities Act and that all requisite action has been or will, on
a timely basis, be taken under any applicable state securities laws in
connection with such disposition; and
(iii) The proposed transferee shall have agreed in writing to be
bound by the terms and provisions of this Section 8.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for transfers
pursuant to Rule 144 (k) promulgated under the Securities Act.
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IN WITNESS WHEREOF, each of the Borrower and the Holder has caused this
Note to be duly executed under its corporate seal.
Dated: June 27, 1996
[Seal] ADVANCED RADIO TECHNOLOGIES CORPORATION
By:
------------------------------------
Name:
Title:
[Seal] COLUMBIA CAPITAL CORPORATION
By:
------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT 10-31(d)
Void after July 3, 1999
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of
1933. This Warrant and such shares may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act. This Warrant and such shares may not
be transferred except upon the conditions specified in this
Warrant and no transfer of this Warrant or such shares shall be
valid or effective unless and until such conditions shall have
been complied with.
The Securities represented by this Certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. These Securities may not be sold or transferred in
the absence of such Registration or an exemption therefrom under
such Act. Additionally, the transfer of these Securities is
subject to the conditions specified in Section 12 of the Second
Amended and Restated Registration Rights Agreement dated the date
hereof (the "Registration Rights Agreement") among Advanced Radio
Telecom Corp., Advanced Radio Technologies Corporation and
certain other signatories thereto and no transfer of these
Securities shall be valid or effective until such conditions have
been fulfilled. Upon the fulfillment of certain of such
conditions, Advanced Radio Telecom Corp. and Advanced Radio
Technologies Corporation have agreed to deliver to the holder
hereof a new certificate, not bearing this legend, for the
Securities represented hereby registered in the name of such
holder. Copies of such Agreement may be obtained at no cost by
written request made by the holder of record of this Certificate
to the Secretary of Advanced Radio Technologies Corporation.
ADVANCED RADIO TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANT
ADVANCED RADIO TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Company"), having its principal office at 500 108th Ave., N.E., Bellevue, WA
98004, hereby certifies that, for value received, Commco, L.L.C., a Delaware
limited liability company, or assigns, is entitled, subject to the terms set
forth below, to purchase from the Company at any time on or from time to time
after July 3, 1999 and before 5:00 P.M., New York City time, on July 3, 1999
(the "Expiration Date") 23,285 fully paid and non-assessable shares of Common
Stock of the Company, at the price per share (the "Purchase Price") of $15.00.
The number and character of such shares of Common Stock and the Purchase Price
are subject to adjustment as provided herein.
<PAGE>
This Warrant was originally issued by the Company in connection with the
transactions contemplated by the Asset Acquisition Agreement and Plan of
Reorganization dated the date hereof among the Company, CommcoCCC, Inc.,
Columbia Capital Corporation, CCC Millimeter, L.P., Columbia Millimeter
Communications, L.P., Commco, L.L.C. and Advanced Radio Telecom Corp. (the
"Asset Acquisition Agreement"). In order to induce the holder hereof to provide
the commitment set forth in the Bridge Note Due September __, 1996, the Company
has agreed to grant the holder the rights set forth in this Warrant. This
Warrant shall continue in full force and effect regardless of any termination or
breach of the Asset Acquisition Agreement.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" includes any corporation which shall succeed
to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" means the Common Stock, $.001 par value
per share, of the Company and its successors, assuming the proposed 29,450.16
for 1 stock split (the "Proposed Stock Split") of the Company's Common Stock has
been effected; provided that until the Proposed Stock Split is effected, this
Warrant may be exercised to purchase the number of shares of Common Stock equal
to the number of shares set forth in this in the first paragraph hereof divided
by 29,450.16 and the Purchase Price shall be $441,752.40, subject to adjustment
as provided herein.
(c) The "Original Issue Date" is July 3, 1996, the date as of which
the Warrants were first issued.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 6 or otherwise.
(e) The term "Purchase Price" shall be the then applicable exercise
price for one share of Common Stock.
(f) The terms "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the Securities
Act, to permit the disposition of Common Stock (or Other Securities) issued or
issuable upon the exercise of Warrants, and any post-effective amendments and
supplements filed or required to be filed to permit any such disposition.
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(g) The term "Securities Act" means the Securities Act of 1933 as the
same shall be in effect at the time.
1. REGISTRATION, ETC. The Company shall have the same obligations to the
holder of the Warrant as it has to the Investor Telecom Stockholders and
Acquisition Holders of the Company as set forth in that certain Second Restated
and Amended Registration Rights Agreement by and among the Company, the
stockholders of the Company named therein, Advanced Radio Telecom Corp.
("Telecom") and the stockholders of Telecom named therein.
2. SALE OR EXERCISE WITHOUT REGISTRATION. If, at the time of any
exercise, transfer or surrender for exchange of a Warrant or of Common Stock (or
Other Securities) previously issued upon the exercise of Warrants, such Warrant
or Common Stock (or Other Securities) shall not be registered under the
Securities Act, the Company may require, as a condition of allowing such
exercise, transfer or exchange, that the holder or transferee of such Warrant or
Common Stock (or Other Securities), as the case may be, furnish to the Company a
satisfactory opinion of counsel to the effect that such exercise, transfer or
exchange may be made without registration under the Securities Act, provided
that the disposition thereof shall be in compliance with the provisions of the
Stockholders Agreement, and provided further that nothing contained in this
Section 2 shall relieve the Company from complying with any request for
registration pursuant to Section 1 hereof.
3. EXERCISE OF WARRANT; PARTIAL EXERCISE; CASHLESS EXERCISE.
3.1 EXERCISE IN FULL. Subject to the provisions hereof, this Warrant
may be exercised in full by the holder hereof by surrender of this Warrant, with
the form of subscription attached hereto as SCHEDULE I duly executed by such
holder, to the Company at its principal office accompanied by payment, in cash
or by certified or official bank check payable to the order of the Company, in
the amount obtained by multiplying the number of shares of Common Stock called
for on the face of this Warrant (without giving effect to any adjustment
therein) by the Purchase Price.
3.2 PARTIAL EXERCISE. Subject to the provisions hereof, this Warrant
may be exercised in part by surrender of this Warrant in the manner and at the
place provided in Section 3.1 except that the amount payable by the holder upon
any partial exercise shall be the amount obtained by multiplying (a) the number
of shares of Common Stock (without giving effect to any adjustment therein)
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price. Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares designated by the holder in the subscription at the end
hereof.
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<PAGE>
3.3 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in Sections 3.1 and 3.2 and in lieu of any cash payment
required thereunder, the holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 as
payment of the aggregate Purchase Price. The number of Warrants to be
surrendered in payment of the aggregate Exercise Price for the Warrants to be
exercised shall be determined by multiplying the number of Warrants to be
exercised by the Purchase Price, and then dividing the product thereof by an
amount equal to the Market Price (as defined below). Solely for the purposes of
this paragraph, Market Price shall be calculated as the average of the Market
Prices for each of the ten (10) trading days preceding the date which the form
of election attached hereto is deemed to have been sent to the Company ("Notice
Date").
3.4 DEFINITION OF MARKET PRICE. As used herein, the phrase "Market
Price" at any date shall be deemed to be (i) if the principal trading market for
such securities is an exchange, the last reported sale price, or, in case no
such reported sale takes place on such date, the average of the last reported
sale prices for the last three (3) trading days, in either case as officially
reported on any consolidated tape, (ii) if the principal market for such
securities is the over-the-counter market, the high bid price on such date as
set forth by Nasdaq or, if the security is not quoted on Nasdaq, the high bid
price as set forth in the National Quotation Bureau sheet listing such
securities for such day. Notwithstanding the foregoing, if there is no reported
closing price or high bid price, as the case may be, on the date next preceding
the event requiring an adjustment hereunder, then the Market Price shall be
determined as of the latest date prior to such day for which such closing price
or high bid price is available, or if the securities are not quoted on Nasdaq,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
3.5 COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time
of any exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder any
rights (including, without limitation, any right to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant, PROVIDED that if the holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford such holder any such rights.
4. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock (or Other
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<PAGE>
Securities) to which such holder shall be entitled upon such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current market value of one
full share, together with any other stock or other securities and property
(including cash, where applicable) to which such holder is entitled upon such
exercise pursuant to Section 5 or otherwise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time after the
Original Issue Date the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash paid or payable (including, without limitation, by
way of dividend), except out of earned surplus of the Company, or
(c) other or additional (or less) stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
then, and in each such case, the holder of this Warrant, upon the exercise
hereof as provided in Section 3, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in subdivisions (b) and (c) of this Section 5 which such holder would hold on
the date of such exercise if on the Original Issue Date he had been the holder
of record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the Original Issue Date to
and including the date of such exercise, retained such shares and all such other
or additional (or less) stock and other securities and property (including cash
in the cases referred to in subdivisions (b) and (c) of this Section 5)
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 6. Notwithstanding
anything to the contrary contained in this Warrant, including this Section 5, no
adjustment shall be made to the number of shares of Common Stock recited in the
first paragraph hereof issuable upon exercise hereof as a result of the Proposed
Stock Split.
6. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
the Original Issue Date shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
holder of this Warrant, upon the exercise hereof as provided in Section 3 at any
time after the consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall be entitled to
receive (and the
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<PAGE>
Company shall be entitled to deliver), in lieu of the Common Stock (or Other
Securities) issuable upon such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 5 hereof.
7. CERTAIN EVENTS. If any event occurs of the nature contemplated by the
provisions of Sections 5 or 6 hereof but not expressly provided for by such
provisions, then the Company's board of directors shall make an appropriate
adjustment in the amount of stock or other securities to which the holder hereof
shall be entitled to receive upon exercise hereof so as to protect the rights of
the holder.
8. FURTHER ASSURANCES. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of all Warrants
from time to time outstanding.
9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly cause the Company's regularly retained auditor to compute such
adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based, and the
number of shares of Common Stock outstanding or deemed to be outstanding. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant.
10. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend payable
out of earned surplus of the Company) or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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<PAGE>
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issue of Common Stock on the
exercise of the Warrants), then and in each such event the Company will
mail or cause to be mailed to each holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up,
and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or granted,
the date of such proposed issue or grant [and the persons or class of
persons to whom such proposed issue or grant] and the persons or class of
persons to whom such proposed issue or grant is to be offered or made.
Such notice shall be mailed at least 20 days prior to the date therein
specified.
11. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of the Warrants.
12. LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at any
time shall list any Common Stock on any national securities exchange and shall
register such Common Stock under the Securities Exchange Act of 1934 (as then in
effect, or any similar statute then in effect), the Company will, at its
expense, simultaneously list on such exchange, upon official notice of issuance
upon the exercise of the Warrants, and maintain such listing of all shares of
Common Stock from time to time issuable upon the exercise of the Warrants; and
the Company will so list on any national securities exchange, will so register
and will maintain such listing of, any Other Securities if and at the time that
any securities of like class or similar type shall be listed on such national
securities exchange by the Company.
13. EXCHANGE OF WARRANTS. Subject to the provisions of Section 2 hereof,
upon surrender for exchange of any Warrant, properly endorsed, to the Company,
the Company at its own expense will issue and deliver to or upon the order of
the holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
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<PAGE>
14. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
15. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in New York, New York, for the
purpose of issuing Common Stock (or Other Securities) upon the exercise of the
Warrants pursuant to Section 3, exchanging Warrants pursuant to Section 13, and
replacing Warrants pursuant to Section 14, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
16. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
17. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) subject to the provisions hereof, title to this Warrant may
be transferred by endorsement (by the holder hereof executing the form of
assignment attached hereto as SCHEDULE II) and delivery in the same manner
as in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) subject to the foregoing, any person in possession of this
Warrant properly endorsed is authorized to represent himself as absolute
owner hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bona fide purchaser and each
such bona fide purchaser shall acquire absolute title hereto and to all
rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
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<PAGE>
18. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder, or, until an address is so furnished, to
and at the address of the last holder of this Warrant who has so furnished an
address to the Company.
19. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall
be construed and enforced in accordance with and governed by the laws of such
State. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.
20. ASSIGNABILITY. Subject to the transfer conditions referred to in the
legend endorsed hereon, this Warrant is fully assignable at any time upon
surrender of this Warrant with a properly executed Assignment (in the form of
SCHEDULE II hereto) at the principal office of the Company.
ADVANCED RADIO TECHNOLOGIES
CORPORATION
Dated: By:
-------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
- -------------------------
Secretary
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<PAGE>
SCHEDULE I
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ADVANCED RADIO TECHNOLOGIES CORPORATION
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, * shares of Common Stock of ADVANCED RADIO TECHNOLOGIES
CORPORATION, and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to,
, whose address is
Dated:
---------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
---------------------------------------------
(Address)
- ---------------------------------------------
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
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<PAGE>
SCHEDULE II
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto
the right represented by the within
Warrant to purchase shares of Common Stock of [____________________] to which
the within Warrant relates, and appoints
Attorney to transfer such right on the books of [_________________] with full
power of substitution in the premises. The Warrant being transferred hereby is
one of an aggregate of [______________] Common Stock Purchase Warrants issued by
[________________________] as of [_______________], 19__.
Dated:
---------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
---------------------------------------------
(Address)
- ---------------------------------------------
Signature guaranteed by a Bank or
Trust Company having its principal
office in New York City or by a
Member Firm of the New York or
+American Stock Exchange
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<PAGE>
EXHIBIT 10-31(e)
Void after July 3, 1999
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of
1933. This Warrant and such shares may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act. This Warrant and such shares may not
be transferred except upon the conditions specified in this
Warrant and no transfer of this Warrant or such shares shall be
valid or effective unless and until such conditions shall have
been complied with.
The Securities represented by this Certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. These Securities may not be sold or transferred in
the absence of such Registration or an exemption therefrom under
such Act. Additionally, the transfer of these Securities is
subject to the conditions specified in Section 12 of the Second
Amended and Restated Registration Rights Agreement dated the date
hereof (the "Registration Rights Agreement") among Advanced Radio
Telecom Corp., Advanced Radio Technologies Corporation and
certain other signatories thereto and no transfer of these
Securities shall be valid or effective until such conditions have
been fulfilled. Upon the fulfillment of certain of such
conditions, Advanced Radio Telecom Corp. and Advanced Radio
Technologies Corporation have agreed to deliver to the holder
hereof a new certificate, not bearing this legend, for the
Securities represented hereby registered in the name of such
holder. Copies of such Agreement may be obtained at no cost by
written request made by the holder of record of this Certificate
to the Secretary of Advanced Radio Technologies Corporation.
ADVANCED RADIO TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANT
ADVANCED RADIO TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Company"), having its principal office at 500 108th Ave., N.E., Bellevue, WA
98004, hereby certifies that, for value received, Columbia Capital Corporation,
a Virginia corporation, or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time on or from time to time after
July 3, 1996 and before 5:00 P.M., New York City time, on July 3, 1999 (the
"Expiration Date") 26,715 fully paid and non-assessable shares of Common Stock
of the Company, at the price per share (the "Purchase Price") of $15.00. The
number and character of such shares of Common Stock and the Purchase Price are
subject to adjustment as provided herein.
<PAGE>
This Warrant was originally issued by the Company in connection with the
transactions contemplated by the Asset Acquisition Agreement and Plan of
Reorganization dated the date hereof among the Company, CommcoCCC, Inc.,
Columbia Capital Corporation, CCC Millimeter, L.P., Columbia Millimeter
Communications, L.P., Commco, L.L.C. and Advanced Radio Telecom Corp. (the
"Asset Acquisition Agreement"). In order to induce the holder hereof to provide
the commitment set forth in the Bridge Note Due September 30, 1996, the Company
has agreed to grant the holder the rights set forth in this Warrant. This
Warrant shall continue in full force and effect regardless of any termination or
breach of the Asset Acquisition Agreement.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" means the Common Stock, $.001 par
value per share, of the Company and its successors, assuming the proposed
29,450.16 for 1 stock split (the "Proposed Stock Split") of the Company's Common
Stock has been effected; provided that until the Proposed Stock Split is
effected, this Warrant may be exercised to purchase the number of shares of
Common Stock equal to the number of shares set forth in this in the first
paragraph hereof divided by 29,450.16 and the Purchase Price shall be
$441,752.40, subject to adjustment as provided herein.
(c) The "Original Issue Date" is July 3, 1996, the date as of
which the Warrants were first issued.
(d) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 6 or otherwise.
(e) The term "Purchase Price" shall be the then applicable
exercise price for one share of Common Stock.
(f) The terms "registered" and "registration" refer to a
registration effected by filing a registration statement in compliance with the
Securities Act, to permit the disposition of Common Stock (or Other Securities)
issued or issuable upon the exercise of Warrants, and any post-effective
amendments and supplements filed or required to be filed to permit any such
disposition.
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<PAGE>
(g) The term "Securities Act" means the Securities Act of 1933 as
the same shall be in effect at the time.
1. REGISTRATION, ETC. The Company shall have the same obligations to the
holder of the Warrant as it has to the Investor Telecom Stockholders and
Acquisition Holders of the Company as set forth in that certain Second Restated
and Amended Registration Rights Agreement by and among the Company, the
stockholders of the Company named therein, Advanced Radio Telecom Corp.
("Telecom") and the stockholders of Telecom named therein.
2. SALE OR EXERCISE WITHOUT REGISTRATION. If, at the time of any
exercise, transfer or surrender for exchange of a Warrant or of Common Stock (or
Other Securities) previously issued upon the exercise of Warrants, such Warrant
or Common Stock (or Other Securities) shall not be registered under the
Securities Act, the Company may require, as a condition of allowing such
exercise, transfer or exchange, that the holder or transferee of such Warrant or
Common Stock (or Other Securities), as the case may be, furnish to the Company a
satisfactory opinion of counsel to the effect that such exercise, transfer or
exchange may be made without registration under the Securities Act, provided
that the disposition thereof shall be in compliance with the provisions of the
Stockholders Agreement, and provided further that nothing contained in this
Section 2 shall relieve the Company from complying with any request for
registration pursuant to Section 1 hereof.
3. EXERCISE OF WARRANT; PARTIAL EXERCISE; CASHLESS EXERCISE.
3.1. EXERCISE IN FULL. Subject to the provisions hereof, this
Warrant may be exercised in full by the holder hereof by surrender of this
Warrant, with the form of subscription attached hereto as SCHEDULE I duly
executed by such holder, to the Company at its principal office accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock called for on the face of this Warrant (without giving effect to
any adjustment therein) by the Purchase Price.
3.2. PARTIAL EXERCISE. Subject to the provisions hereof, this
Warrant may be exercised in part by surrender of this Warrant in the manner and
at the place provided in Section 3.1 except that the amount payable by the
holder upon any partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock (without giving effect to any adjustment
therein) designated by the holder in the subscription at the end hereof by (b)
the Purchase Price. Upon any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares designated by the holder in the subscription at the end
hereof.
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<PAGE>
3.3. EXERCISE BY SURRENDER OF WARRANT. In addition to the method
of payment set forth in Sections 3.1 and 3.2 and in lieu of any cash payment
required thereunder, the holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 as
payment of the aggregate Purchase Price. The number of Warrants to be
surrendered in payment of the aggregate Exercise Price for the Warrants to be
exercised shall be determined by multiplying the number of Warrants to be
exercised by the Purchase Price, and then dividing the product thereof by an
amount equal to the Market Price (as defined below). Solely for the purposes of
this paragraph, Market Price shall be calculated as the average of the Market
Prices for each of the ten (10) trading days preceding the date which the form
of election attached hereto is deemed to have been sent to the Company ("Notice
Date").
3.4. DEFINITION OF MARKET PRICE. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) if the principal trading
market for such securities is an exchange, the last reported sale price, or, in
case no such reported sale takes place on such date, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported on any consolidated tape, (ii) if the principal market for
such securities is the over-the-counter market, the high bid price on such date
as set forth by Nasdaq or, if the security is not quoted on Nasdaq, the high bid
price as set forth in the National Quotation Bureau sheet listing such
securities for such day. Notwithstanding the foregoing, if there is no reported
closing price or high bid price, as the case may be, on the date next preceding
the event requiring an adjustment hereunder, then the Market Price shall be
determined as of the latest date prior to such day for which such closing price
or high bid price is available, or if the securities are not quoted on Nasdaq,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
3.5. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the
time of any exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder any
rights (including, without limitation, any right to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant, PROVIDED that if the holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford such holder any such rights.
4. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock (or Other
-4-
<PAGE>
Securities) to which such holder shall be entitled upon such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current market value of one
full share, together with any other stock or other securities and property
(including cash, where applicable) to which such holder is entitled upon such
exercise pursuant to Section 5 or otherwise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time after the
Original Issue Date the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash paid or payable (including, without
limitation, by way of dividend), except out of earned surplus of the
Company, or
(c) other or additional (or less) stock or other securities
or property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
then, and in each such case, the holder of this Warrant, upon the exercise
hereof as provided in Section 3, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in subdivisions (b) and (c) of this Section 5 which such holder would hold on
the date of such exercise if on the Original Issue Date he had been the holder
of record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the Original Issue Date to
and including the date of such exercise, retained such shares and all such other
or additional (or less) stock and other securities and property (including cash
in the cases referred to in subdivisions (b) and (c) of this Section 5)
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 6. Notwithstanding
anything to the contrary contained in this Warrant, including this Section 5, no
adjustment shall be made to the number of shares of Common Stock recited in the
first paragraph hereof issuable upon exercise hereof as a result of the Proposed
Stock Split.
6. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
the Original Issue Date shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
holder of this Warrant, upon the exercise hereof as provided in Section 3 at any
time after the consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall be entitled to
receive (and the
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<PAGE>
Company shall be entitled to deliver), in lieu of the Common Stock (or Other
Securities) issuable upon such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 5 hereof.
7. CERTAIN EVENTS. If any event occurs of the nature contemplated by the
provisions of Sections 5 or 6 hereof but not expressly provided for by such
provisions, then the Company's board of directors shall make an appropriate
adjustment in the amount of stock or other securities to which the holder hereof
shall be entitled to receive upon exercise hereof so as to protect the rights of
the holder.
8. FURTHER ASSURANCES. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of all Warrants
from time to time outstanding.
9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly cause the Company's regularly retained auditor to compute such
adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based, and the
number of shares of Common Stock outstanding or deemed to be outstanding. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant.
10. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus of the Company) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company, or
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<PAGE>
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities (other than the issue of Common Stock
on the exercise of the Warrants), then and in each such event the Company
will mail or cause to be mailed to each holder of a Warrant a notice
specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up,
and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or granted,
the date of such proposed issue or grant [and the persons or class of
persons to whom such proposed issue or grant] and the persons or class of
persons to whom such proposed issue or grant is to be offered or made.
Such notice shall be mailed at least 20 days prior to the date therein
specified.
11. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of the Warrants.
12. LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at any
time shall list any Common Stock on any national securities exchange and shall
register such Common Stock under the Securities Exchange Act of 1934 (as then in
effect, or any similar statute then in effect), the Company will, at its
expense, simultaneously list on such exchange, upon official notice of issuance
upon the exercise of the Warrants, and maintain such listing of all shares of
Common Stock from time to time issuable upon the exercise of the Warrants; and
the Company will so list on any national securities exchange, will so register
and will maintain such listing of, any Other Securities if and at the time that
any securities of like class or similar type shall be listed on such national
securities exchange by the Company.
13. EXCHANGE OF WARRANTS. Subject to the provisions of Section 2 hereof,
upon surrender for exchange of any Warrant, properly endorsed, to the Company,
the Company at its own expense will issue and deliver to or upon the order of
the holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
-7-
<PAGE>
14. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
15. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in New York, New York, for the
purpose of issuing Common Stock (or Other Securities) upon the exercise of the
Warrants pursuant to Section 3, exchanging Warrants pursuant to Section 13, and
replacing Warrants pursuant to Section 14, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
16. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
17. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) subject to the provisions hereof, title to this Warrant
may be transferred by endorsement (by the holder hereof executing the form
of assignment attached hereto as SCHEDULE II) and delivery in the same
manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) subject to the foregoing, any person in possession of
this Warrant properly endorsed is authorized to represent himself as
absolute owner hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bona fide purchaser and each
such bona fide purchaser shall acquire absolute title hereto and to all
rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
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<PAGE>
18. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder, or, until an address is so furnished, to
and at the address of the last holder of this Warrant who has so furnished an
address to the Company.
19. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall
be construed and enforced in accordance with and governed by the laws of such
State. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.
20. ASSIGNABILITY. Subject to the transfer conditions referred to in the
legend endorsed hereon, this Warrant is fully assignable at any time upon
surrender of this Warrant with a properly executed Assignment (in the form of
SCHEDULE II hereto) at the principal office of the Company.
ADVANCED RADIO TECHNOLOGIES
CORPORATION
Dated: By:
-------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
- ----------------------------------------
Secretary
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<PAGE>
SCHEDULE I
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ADVANCED RADIO TECHNOLOGIES CORPORATION
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, * shares of Common Stock of ADVANCED RADIO TECHNOLOGIES
CORPORATION, and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to,
, whose address is
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
----------------------------------------
(Address)
- ----------------------------------------
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
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<PAGE>
SCHEDULE II
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto the right represented by the within
Warrant to purchase shares of Common Stock of [____________________] to which
the within Warrant relates, and appoints
Attorney to transfer such right on the books of [_________________] with full
power of substitution in the premises. The Warrant being transferred hereby is
one of an aggregate of [______________] Common Stock Purchase Warrants issued by
[________________________] as of [_______________], 19__.
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
----------------------------------------
(Address)
- ----------------------------------------
Signature guaranteed by a Bank or
Trust Company having its principal
office in New York City or by a
Member Firm of the New York or
+American Stock Exchange
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<PAGE>
EXHIBIT 10-31(f)
OPTION AGREEMENT
AGREEMENT made this 3rd day of July, 1996 by and between COMMCO, L.L.C., a
Delaware limited liability company ("CLC") and ADVANCED RADIO TECHNOLOGIES
CORPORATION, a Delaware corporation ("TECH").
WHEREAS, Tech has agreed to acquire from CommcoCCC, Inc., a Delaware
("COMMCOCCC") substantially all of the assets of CommcoCCC, including 38 GHz
Authorizations covering approximately 117,750,000 Pops pursuant to an Asset
Acquisition Agreement and Plan of Reorganization (the "ASSET AGREEMENT") dated
the date hereof by and among Tech, Advanced Radio Telecomm Corp., CLC,
CommcoCCC, Columbia Millimeter Communications, L.P. ("CMC") and CCC Millimeter,
L.P. ("CCC"); and
WHEREAS, in order to induce CLC to enter into the Asset Agreement, Tech
desires to grant CLC the option to purchase certain 38 GHz Authorizations on the
terms and conditions set forth below, if and only if, CLC is granted by the FCC
New Authorizations covering at least 40 million Pops.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged by each of the parties hereto, the parties
hereto do hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings set forth below.
1.1. "CLOSING DATE" means the Closing Date under the Asset
Agreement.
1.2. "FAIR MARKET VALUE" means with respect to a share of Tech
Common Stock (i) if the principal trading market for such securities
is an exchange, the last reported sale price, or, in case no such
reported sale takes place on such date, the average of the last
reported sale prices for the last three (3) trading days, in either
case as officially reported on any consolidated tape, (ii) if the
principal market for such securities is the over-the-counter market,
the last reported sale on such date as reported by Nasdaq or, if the
security is not quoted on Nasdaq, the last reported sale as set forth
in the National Quotation Bureau sheet listing such securities for
such day. Notwithstanding the foregoing, if there is no reported
closing price on the date next preceding the event requiring
determination hereunder, then the Fair Market Value shall be
determined as of the latest date prior to such day for which such
closing price is available, or if the securities are not quoted on
Nasdaq, as determined in good faith by resolution of the Board of
Directors of Tech based on the best
<PAGE>
information available to it.
1.3. "FINAL ORDER" means an action by the FCC, state regulatory
authority or a court of competent jurisdiction as to which (i) no
request for stay by the FCC, state regulatory authority or a court of
competent jurisdiction, as applicable, is pending, no such stay is in
effect, and, if any deadline for filing any such request is designated
by statute or regulation, such deadline has passed; (ii) no petition
for rehearing or reconsideration or application for review of the
action is pending before the FCC, state regulatory authority or court
of competent jurisdiction, as applicable, and the time for filing any
such petition has passed; (iii) the FCC, state regulatory authority or
court of competent jurisdiction, as applicable, does not have the
action under reconsideration on its own motion and the time for such
reconsideration has passed; and (iv) no appeal to a court of competent
jurisdiction, or request for stay by a court of competent
jurisdiction, of the FCC's, the state regulatory authority's or the
court's action, as applicable, is pending or in effect and, if any
deadline for filing any such appeal or request is designated by
statute or rule, such deadline has passed.
1.4. "FINANCING OPTION" means the option, at the sole discretion of
CLC, whereby Tech finances the purchase pursuant to the exercise of
the Option by CLC on the terms and conditions described in Section
3.3.
1.5. "NEW AUTHORIZATIONS" shall mean any 38 GHz Authorizations
granted to CLC with respect to any Pending Applications owned by CLC.
1.6. "OPTION CLOSING" means the date of the purchase and sale of 38
GHz Authorizations as provided herein.
1.7. "OPTION PERIOD" means the period commencing on the Closing
Date and terminating nine (9) months after the consummation of the
initial public offering of Tech Common Stock.
1.8. "OPTION PRICE" means the amount determined by (a) dividing the
number of Pops covered by the Eligible Authorizations to be purchased
by the Pops Per Share Factor and (b) multiplying the result by the
Fair Market Value of a share of Tech Common Stock on the date on which
the Option is exercised.
1.9. "PENDING APPLICATION" means an application that was filed with
the FCC prior to November 13, 1995, to obtain a 38 GHz Authorization,
which as of the date hereof has not been granted or dismissed by the
FCC, and which was placed on public notice by the FCC and held in
abeyance pursuant to the NPRM.
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<PAGE>
1.10. "POPS" means the number of human beings resident within a
particular geographic area determined pursuant to EXHIBIT E to the
Asset Agreement.
1.11. "POPS PER SHARE FACTOR" means 117,752,241 (representing the
Pops covered by the 38 GHz Authorizations to be acquired by Tech from
CommcoCCC) divided by 16.5 million (representing the number of shares
to be issued by Tech to CommcoCCC for its assets), which number of
shares shall be adjusted for stock splits stock dividends, and similar
events described in Section 5 of the Warrants (other than the
29,450.16 to 1 stock split in connection with the ART Reorganization).
1.12. "ELIGIBLE AUTHORIZATIONS" means one 38 GHz Authorization
covering each of the cities listed on EXHIBIT A.
1.13. "38 GHZ AUTHORIZATIONS" means construction permits granted by
the FCC for the construction and operation of millimetric microwave
telecommunications systems on specific 100 MHZ channels between 37.0
GHz and 40.0 GHz on the radio frequency spectrum within specified
geographic footprints each with up to a 50-mile radius.
1.14. "TECH COMMON STOCK" means common stock, par value $.001 per
share, of Tech.
2. REPRESENTATIONS.
2.1. CLC. CLC represents and warrants to Tech that it has full
power and authority to enter into this Agreement and that this
Agreement does not conflict with any other Agreement to which it is a
party or by which it is or shall be bound at the time of the Option
Closing.
2.2. TECH. Tech represents and warrants to CLC that it has full
power and authority to enter into this Agreement and that this
Agreement does not conflict with any other Agreement to which it is a
party or by which it is or shall be bound at the time of the Option
Closing.
3. THE OPTION.
3.1. GRANT. In the event that CLC is granted by the FCC New
Authorizations covering at least 40 million Pops prior to the end of
the Option Period, Tech hereby grants to CLC an irrevocable option
(the "OPTION") to elect to purchase all or any one or more of the
Eligible Authorizations during the Option Period for the Option Price.
-3-
<PAGE>
3.2. TIME AND MANNER OF EXERCISE. CLC may exercise the Option at
any time but not more than once, during the Option Period.
3.3. PAYMENT OF OPTION PRICE. At the closing of the purchase
pursuant to the exercise of the Option (the "CLOSING"), CLC shall pay
the Option Price by wire transfer, or certified or bank check to Tech.
Provided, however, if CLC exercises its Option within 120 days
following the later of the Closing Date or the date of grant by the
FCC of New Authorizations covering more than 40 million Pops, then CLC
shall have the option to pay the Option Price by delivery to Tech of
CLC's nonrecourse promissory note for the Option Price, which note
shall bear interest at prime + 1% per annum and be due in two (2)
years with interest thereon payable quarterly in arrears and shall be
secured solely by a pledge of Tech Common Stock received by CLC upon
the closing of the Asset Agreement. The number of shares of Tech
Common Stock to be pledged shall be the amount required to
collateralize (2.0) times the outstanding principal balance of the
promissory note based upon the Fair Market Value of the Tech Common
Stock on the date of the Option exercise. Such number of shares
pledged shall be increased, as necessary, to continue to collateralize
1.25 times the promissory note amount based upon the Fair Market Value
of the shares as redetermined from time to time. The promissory note
and stock pledge agreement shall be in such form as is reasonably
acceptable to CLC and Tech.
3.4. OPTION CLOSING. The Option Closing shall take place at the
offices of Tech at 3:00 p.m. on the later of (a) the date which shall
be the first business day after the thirtieth (30th) day after the
exercise of the Option, or (b) if FCC consent for the Option Closing
is required, Tech agrees to file within ten (10) business days of the
exercise of the option and diligently prosecute all appropriate
application for FCC consent to the transfer of the Eligible
Authorizations subject to the exercise, and the Option Closing shall
be held on the first business day after the fifth (5th) day after an
order for the FCC consenting to the transaction has become a Final
Order. However, CLC has the right to waive finality.
4. MISCELLANEOUS.
4.1. OBLIGATION TO PURCHASE EQUIPMENT. In the event CLC exercises
its Option hereunder, CLC shall purchase for cash at original cost
equipment previously purchased by Tech and reasonably required in
order to perfect the 38 GHz Authorization purchased by CLC hereunder.
4.2. TECH'S RESELLER RIGHTS. Tech shall have the right to be a
reseller, and to enter into a reseller agreement with CLC with respect
to any 38 GHz
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<PAGE>
Authorization purchased by CLC hereunder for a term of 5 years at
market rates, or elect to move its customers utilizing the 38 GHz
Authorizations within 6 months after the Closing.
4.3. ASSIGNMENT. Neither party hereto may assign its rights or
obligations hereunder without the prior written consent of the other
party.
4.4. AMENDMENTS; WAIVERS. The terms of this Agreement may not be
waived, amended, modified, terminated or discharged unless in a
writing signed by the parties hereto.
4.5. NOTICES. All notices or other communications provided for
under this Agreement shall be in writing (including facsimile) and
mailed, hand delivered, sent by overnight courier or by telecopier to
the parties effective when received at the addresses specified:
If to Tech: Advanced Radio Technologies Corporation
500 108th Street, N.E., Suite 2600
Bellevue, Washington 98004
Attn: Chief Executive Officer
with a copy to: Pierson & Burnett, LLP
1667 K Street, N.W.
Suite 801
Washington, D.C. 20036
Attn: W. Theodore Pierson, Jr., Esq.
If to CLC: Commco, L.L.C.
4513 Pin Oak Court
Sioux Falls, SD 57103
Attn: Scott Reardon
with a copy to: David Knudson, Esq.
Davenport, Evans, Hurwitz & Smith,
L.L.P.
513 South Main Avenue
Sioux Falls, South Dakota 57104-6813
Fax: (605) 335-3639
4.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
-5-
<PAGE>
4.7. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
4.8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior
agreement and understandings between the parties with respect to the
subject matter.
4.9. SECTION HEADINGS. Section headings in this Agreement are for
convenience only and shall not form a part of this Agreement.
4.10. SEVERABILITY. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or
unenforceable, the parties waive such provision to the extent that it
is found to be invalid or unenforceable. Such provision shall, to the
maximum extent allowable by law, be modified by such court so that it
becomes enforceable and, as modified, shall be enforced as any other
provision hereof, all the other provisions hereof continuing in full
force and effect.
IN WITNESS WHEREOF, this Agreement has been duly exercised by the parties
hereto as of the day and year first above written.
ADVANCED RADIO TECHNOLOGIES CORPORATION
By:
-------------------------------------
COMMCO, L.L.C.
By:
-------------------------------------
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<PAGE>
EXHIBIT A
Boston
Portland
Charlotte
Norfolk
Richmond
Rochester
Memphis
Greensboro
Buffalo
Long Island, NY
St. Louis, MO
Knoxville, TN
-7-
<PAGE>
EXHIBIT 10-31(g)
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") dated June 27, 1996, made by
Advanced Radio Technologies Corporation, a Delaware corporation with an office
at 500 108th Street, N.E., Suite 2600, Bellevue, Washington 98004 (the
"BORROWER" or the "GRANTOR"), to Columbia Capital Corporation, a Virginia
corporation ("COLUMBIA"), as collateral agent for the benefit of the Secured
Parties.
RECITALS
The registered holders (the "SECURED PARTIES") of the Bridge Note due
September 30, 1996 in the original principal amount of $1,000,000, the Bridge
Note due September 30, 1996 in the original principal amount of $602,900 and the
Bridge Note due September 30, 1996 in the original principal amount of
$1,397,100 (said Notes, as they may hereafter be amended or otherwise modified
from time to time, being the "Notes," the terms defined therein and not
otherwise defined herein being used herein as therein defined) issued by the
Grantor. The Notes have been issued in connection with the transactions
contemplated by the Asset Acquisition Agreement and Plan of Reorganization dated
July 3, 1996 (the "ASSET ACQUISITION AGREEMENT") among the Grantor, Advanced
Radio Telecom Corp. ("Telecom"), a Delaware corporation, CommcoCCC, Inc., a
Delaware corporation ("COMMCOCCC"), CCC Millimeter, L.P., a Delaware limited
partnership ("CCC"), Columbia Millimeter Communications, L.P., a Delaware
limited partnership ("CMC"), Columbia and Commco, L.L.C. ("CLC") which provides
for the purchase by the Borrower of substantially all of the assets of CommcoCCC
in exchange for the Tech Securities (as defined in the Asset Acquisition
Agreement). In order to induce the Secured Parties to make the commitment set
forth in the Notes, the Grantor has agreed to grant to the Secured Parties a
security interest in its assets pursuant to this Agreement. The execution and
delivery of this Agreement is a condition precedent to CommcoCCC's obligation to
execute and deliver the Asset Acquisition Agreement and to consummate the
transactions contemplated thereby.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Secured Parties to make the advances under the Notes, the Grantor
hereby agrees as follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms for all purposes
of this Agreement shall have the respective meanings specified below.
"ART 38 GHZ AUTHORIZATIONS" refers to all 38 GHz Authorizations of the
Grantor, including a list containing latitude and longitude of the rectangular
service area, date granted and channels authorized.
"ART PENDING APPLICATIONS" refers to the Pending Applications of the
Grantor, including latitude and longitude of the requested rectangular service
area, channels requested, date filed, public notice dates and amendments.
<PAGE>
"ART PERMITS" refers to all material Permits which are necessary or
required for the conduct of the business of the Grantor and its subsidiaries as
currently conducted and as contemplated to be conducted.
"ART INTELLECTUAL PROPERTY" refers to all material patents, patent
rights, trademarks, service marks, trade names, copyrights, rights or licenses
to use the same, and any and all applications therefor, presently owned or held
by the Grantor or any of its subsidiaries or of which such Issuer or any of its
subsidiaries is a licensor or licensee or in which such Grantor or any of its
subsidiaries has any right.
"COLUMBIA" means Columbia Capital Corporation, a Virginia corporation.
"CLC" means Commco, L.L.C., a Delaware limited liability partnership.
"CMC" means Columbia Millimeter Communications, L.P., a Delaware
limited partnership.
"COMMCOCCC 38 GHZ AUTHORIZATIONS" refers to all 38 GHz Authorizations
of Columbia, CMC and CLC, including latitude and longitude of the rectangular
service area, date granted and channels authorized.
"COMMCOCCC PENDING APPLICATIONS" refers to the Pending Applications of
Columbia, CMC and CLC, including latitude and longitude of the requested
rectangular service area, channels requested, date filed, public notice dates
and amendments.
"COMMCOCCC PERMITS" refers to all material Permits which are necessary
or required for the conduct of the business of CommcoCCC as currently conducted
and as contemplated to be conducted.
"COMMCOCCC INTELLECTUAL PROPERTY" refers to all material patents,
patent rights, trademarks, service marks, trade names, copyrights, rights or
licenses to use the same, and any and all applications therefor, presently owned
or held by CommcoCCC or of which CommcoCCC is a licensor or licensee or in which
CommcoCCC has any right.
"DISTRIBUTION" means (a) the declaration or payment of any dividend or
distribution on or in respect of any shares of capital stock, other than
dividends payable solely in shares of common stock, (b) the purchase or other
retirement of any shares of capital stock or (c) any other distribution on or in
respect of any shares of capital stock.
"EVENT OF DEFAULT" means an Event of Default as defined in the Notes.
"FCC" means the Federal Communications Commission.
-2-
<PAGE>
"PENDING APPLICATION" means an application that was filed with the FCC
prior to November 13, 1995, to obtain a 38 GHz Authorization, which as of the
date hereof has not been granted or dismissed by the FCC, and which was placed
on public notice by the FCC and held in abeyance pursuant to the notice of
proposed rulemaking issued by the FCC on December 15, 1995 pursuant to which it
proposed to amend its current rules to provide for, among other things, (i) the
adoption of an auction procedure for the issuance of licenses in the 38 GHz
band, including a possible auction of the lower 16 channels in the 38 GHz band
that have not been previously available for commercial use, (ii) the
continuation of the 100 MHZ-based channeling plan and licensing rules for point-
to-point microwave operations in the lower 16 channels, (iii) licensing
frequencies using predefined geographic service areas, (iv) the imposition of
minimum construction requirements for new authorizations and existing 38 GHz
licenses as a condition to the retention of existing authorizations and (v) the
implementation of certain technical rules designed to avoid radio frequency
interference among licensees.
"PERMITS" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings under all federal,
state, local or foreign laws with governmental or regulatory bodies, except for
the 38 GHz Authorizations and the Pending Applications.
"38 GHZ AUTHORIZATIONS" means construction permits granted by the FCC
for the construction and operation of millimetric microwave telecommunications
systems on specific 100 MHZ channels between 37.0 GHz and 40.0 GHz on the radio
frequency spectrum each within a specified geographic footprint with up to a 50-
mile radius.
Unless otherwise defined herein, terms used in Article 9 of the Uniform
Commercial Code (the "CODE) as in effect in the State of Delaware are used
herein as therein defined.
SECTION 2. GRANT OF SECURITY. The Grantor hereby assigns and pledges
to Columbia, as collateral agent for the benefit of the Securities Parties, and
hereby grants to Columbia, as collateral agent for the benefit of the Secured
Parties a security interest in, to the extent permitted by law, all of the
Grantor's right, title and interest in and to the following, whether now owned
or hereafter acquired (the "COLLATERAL"):
(a) the ART 38 GHZ Authorizations, the ART Pending Applications, the
ART Permits, the ART Intellectual Property, the CommcoCCC 38 GHz Authorizations,
the CommcoCCC Pending Applications, the CommcoCCC Permits and the CommcoCCC
Intellectual Property, to the extent a security interest therein is permitted by
applicable law;
(b) all equipment in all of its forms, wherever located, now or
hereafter existing, and all parts thereof and all accessions thereto (any and
all such equipment, parts and accessions being the "EQUIPMENT");
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<PAGE>
(c) all inventory in all of its forms, wherever located, now or
hereafter existing (including, but not limited to, (i) all finished goods and
raw materials and work in process, and materials used or consumed in the
manufacture or production thereof, (ii) goods in which the Grantor has an
interest in mass or a joint or other interest or right of any kind (including,
without limitation, goods in which the Grantor has an interest or right as
consignee) and (iii) goods that are returned to or repossessed by the Grantor,
and all accessions thereto and products thereof and documents therefor (any and
all such inventory, accessions, products and documents being the "INVENTORY");
(d) 10,013,055 shares of Common Stock, $.001 par value in Telecom
(the "PLEDGED STOCK"), representing all shares of capital stock in Telecom owned
by the Grantor on the date hereof;
(e) all accounts, contract rights, chattel paper, instruments,
general intangibles and other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or hereafter existing
in and to all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles and obligations (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being the "RECEIVABLES," and any and all such leases, security agreements and
other contracts being the "RELATED CONTRACTS"); and
(f) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the types
described in clauses (a), (b), (c) and (d) of this Section and, to the extent
not otherwise included, all payments under insurance (whether or not the Secured
Party is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of all obligations of the Grantor now or hereafter existing under the
Notes, whether for principal, interest, fees, expenses or otherwise, and all
obligations of the Grantor now or hereafter existing under this Agreement (all
such obligations of the Grantor being the "OBLIGATIONS").
SECTION 4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Columbia of any of the
rights hereunder shall not release the Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Secured Parties shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this Agreement,
nor shall the Secured Parties be obligated to perform
-4-
<PAGE>
any of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants to the Secured Parties as follows:
(a) The chief place of business and chief executive office of the
Grantor and the office where the Grantor keeps its records concerning the
Receivables, and all originals of all chattel paper that evidence
Receivables, have been delivered to the Secured Parties. None of the
Receivables is evidenced by a promissory note or other instrument.
(b) All shares of Pledged Stock are and shall be at all times duly
authorized, validly issued, fully paid and nonassessable. The Grantor will
deliver to Columbia certificates representing the Pledged Stock, registered,
if Columbia so requests, in the name of Columbia or its nominee, as pledgee,
or accompanied by a stock transfer power executed in blank and, if Columbia
so requests, in the name of Columbia or its nominee, as pledgee, or
accompanied by a stock transfer power executed in blank and, if Columbia so
requests, with the signature guaranteed, all in form and manner satisfactory
to Columbia.
(c) The Grantor owns the Collateral to this Agreement free and
clear of any lien, security interest, charge or encumbrance, except for the
security interest created by this Agreement and the security interest of CRA,
Inc. pursuant to the Security Agreement dated April 1, 1996 between Advanced
Radio Telecom Corp. and CRA, Inc. (the "CRA Security Interest"). No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of the Secured Parties relating to this Agreement or
such relating to the CRA Security Interest. The Grantor has no trade name.
(d) Each Receivable and Related Contract is a bona fide, valid and
legally enforceable property right of the Grantor and, so far as the Grantor
knows, is enforceable against any other party thereto in respect thereof, except
for Receivables and Related Contracts that do not, in the aggregate, materially
and adversely affect the value of the Collateral taken as a whole. All consents,
licenses, approvals and authorizations of, and declarations with, any
governmental authority required to be obtained, effected or given in connection
with the execution, delivery and performance of each Receivable and Related
Contract by the Grantor have been or will be duly obtained, effected or given
and are or will be in full force and effect, except where the failure to do so
does not materially and adversely affect the value of the Collateral taken as a
whole.
(e) The Grantor has exclusive possession and control of the Equipment
and Inventory.
(f) With respect to each Receivable, neither the Grantor nor, so far
as the Grantor knows, any other party to such Receivable is in default in the
performance or observance
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<PAGE>
of any of the terms thereof and the Grantor has fully performed in all
material respects all its material obligations under each Receivable as of
the date such performance is due; and, to the best of the Grantor's
knowledge, the right, title and interest of the Grantor in and to any
Receivable is not subject to any defense, offset, counterclaim or claim
(except as otherwise explicitly provided therein), nor have any of the
foregoing been asserted or, to the best of the Grantor's knowledge,
threatened against the Grantor as to any Receivable, except for such
defaults, defenses, offsets, counterclaims and claims as do not materially
and adversely affect the value of the Collateral taken as a whole.
(g) This Agreement creates a valid and perfected security interest in
all of the Collateral other than the ART 38 GHz Authorizations, the ART Pending
Applications, the CommcoCCC 38 GHz Authorizations and the CommcoCCC Pending
Applications, securing the payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.
(h) This Agreement creates a valid security interest in the
Collateral, other than the ART 38 GHZ Authorizations, the ART Pending
Applications, the CommcoCCC 38 GHz Authorizations and the CommcoCCC Pending
Applications, in favor of the Secured Parties; upon the filing of the financing
statements and the payment of applicable filing fees, such security interest
will be prior to all other liens, claims, security interests, encumbrances and
rights of others, except the CRA Security Interest; such security interest is
enforceable, except as it relates to the ART 38 GHz Authorizations, the ART
Pending Applications, the CommcoCCC 38 GHz Authorizations and the CommcoCCC
Pending Applications, as such as against creditors of and purchasers from the
Grantor and as against any owner of the real property where any of the Equipment
is located and as against any purchaser of real property and any present or
future creditor obtaining a lien on such real property; and all action necessary
to protect and perfect such security interest in each item of the Collateral
will have been duly taken prior to the initial Advance.
(i) The amount represented by the Grantor to the Secured Parties from
time to time as owing by each account debtor or by all account debtors in
respect of the Receivables of the Grantor will at such time be the correct
amount actually and, to the best of the Grantor's knowledge, unconditionally
owing by such account debtors thereunder.
(j) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the grant by the Grantor of the security interest granted hereby or for
the execution, delivery or performance of this Agreement by the Grantor or (ii)
for the perfection of or the exercise by the Secured Parties of its rights and
remedies hereunder.
SECTION 6. FURTHER ASSURANCES. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that
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Columbia may request, in order to perfect and protect the security interest
granted hereby or to enable Columbia, on behalf of the Secured Parties to
exercise and enforce its rights and remedies hereunder with respect to the
Collateral. Without limiting the generality of the foregoing, the Grantor
will: (i) mark conspicuously each document included in its Inventory and each
chattel paper included in its Receivables and each of its Related Contracts
and, at the request of Columbia, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to Columbia,
indicating that such document, chattel paper, Related Contract or Collateral
is subject to the security interest granted hereby; (ii) if any of its
Receivables shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to Columbia on behalf of the Secured
Parties hereunder such note, instrument or chattel paper duly indorsed and
accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to Columbia; (iii) execute and deliver any
and all such further chattel paper and instruments and take such further
action as Columbia may reasonably request to obtain the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Code in effect in any jurisdiction with respect to the security interest
granted hereby; and (iv) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or desirable, or as Columbia may request, in order to
perfect and preserve the security interests granted hereby. Upon entering
into any material contract hereafter, the Grantor will use its best efforts
to obtain a collateral assignment of such contract hereunder, by a writing in
form and substance reasonably satisfactory to Columbia, if and to the extent
requested by the Secured Parties.
(b) The Grantor hereby authorizes Columbia to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of its Collateral without the signature of the Grantor where permitted
by law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) The Grantor will furnish to Columbia from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Columbia may reasonably request,
all in reasonable detail.
SECTION 7. AS TO EQUIPMENT AND INVENTORY. The Grantor shall:
(a) cause its Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall forthwith,
or in the case of any loss or damage to any of its Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith that are necessary
or desirable to such end; and the Grantor shall promptly furnish to Columbia a
statement respecting any loss or damage to any of its Equipment; and
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(b) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and Inventory,
except to the extent the validity thereof is being contested in good faith.
SECTION 8. INSURANCE. The Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers as shall be reasonably
satisfactory to Columbia from time to time. The Grantor shall, if so requested
by Columbia, deliver to Columbia the original or duplicate policies of such
insurance and, as often as Columbia may reasonably request, a report of a
reputable insurance broker with respect to such insurance. The Grantor shall,
at the request of Columbia, duly execute and deliver instruments of assignment
of such insurance policies to comply with the requirements of Section 6 and
cause the respective insurers to acknowledge notice of such assignment.
SECTION 9. AS TO RECEIVABLES AND RELATED CONTRACTS. (a) The Grantor
shall keep its chief place of business and chief executive office and the office
where it keeps its records concerning its Receivables, and all originals of all
chattel paper that evidence its Receivables, at the location therefore specified
in Section 5(a) or, upon 30 days' prior written notice to Columbia, at such
other location in a jurisdiction where all action required by Section 6 shall
have been taken with respect to its Receivables. The Grantor will hold and
preserve such records and chattel paper and will permit representatives of
Columbia at any time during normal business hours to inspect and make abstracts
from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to such Grantor under its Receivables. In connection with such collections, the
Grantor may take (and, at the Secured Party's direction, shall take) such action
as the Grantor or Columbia reasonably may deem necessary or advisable to enforce
collection of its Receivables.
(c) The Grantor will not (i) amend, modify, terminate or waive any
provision of any material Receivable in any manner that could be reasonably
anticipated to materially and adversely affect the value of such Receivable as
Collateral or that materially and adversely affects the rights granted to
Columbia, for the benefit of the Secured Parties thereunder, including, without
limitation, provisions regarding notices of default, (ii) fail to exercise
promptly and diligently each and every material right that it may have under
each material Receivable (other than any right of termination) or (iii) fail to
deliver to Columbia a copy of each material demand, notice or other document
received by it relating in any way to any material Receivable.
SECTION 10. AS TO PLEDGED STOCK. (a) Until an Event of
Default shall occur, the Grantor shall be entitled to receive all Distributions
on or with respect to the Pledged Stock. If an Event of Default shall have
occurred, all Distributions on or with respect to the Pledged Stock shall be
retained by Columbia (or if received by the Grantor shall be held by the Grantor
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in trust and shall be immediately delivered by the Grantor to Columbia in the
original form received, endorsed in blank) and held by Columbia as part of the
Collateral.
(b) Until an Event of Default shall occur, the Grantor shall be
entitled to vote or consent with respect to the Pledged Stock in any manner not
inconsistent with the terms of the Notes, and Columbia will, if so requested,
execute appropriate revocable proxies therefor. If an Event of Default shall
have occurred, if and to the extent that Columbia shall so notify the Grantor in
writing, only Columbia shall be entitled to vote or consent or take any other
action with respect to the Pledged Stock (and the Grantor will, if so requested,
execute or cause to be executed appropriate proxies therefor).
SECTION 11. TRANSFERS AND OTHER LIENS. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course of
business; or
(b) create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person, except for (i) the security interest created by this
Agreement and (ii) the CRA Security Interest.
SECTION 12. COLUMBIA APPOINTED ATTORNEY-IN-FACT. The Grantor
hereby irrevocably appoints Columbia such Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor,
Columbia or otherwise, from time to time in Columbia's discretion, to take any
action and to execute any instrument that Columbia may deem necessary or
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Grantor under Section 9), including, without limitation:
(i) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
(ii) to receive, indorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i) above,
(iii) to file any claims or take any action or institute any
proceedings that Columbia may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Columbia with
respect to any of the Collateral and
(iv) to file any application, petition or other request with the FCC
or any other governmental authority for the purpose of obtaining any consent or
approval from or satisfying any filing or notice requirement of such
governmental authority in order to effect a sale or transfer of any or all of
the Collateral or a change in control of the Grantor.
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SECTION 13. COLUMBIA MAY PERFORM. If the Grantor fails to
perform any agreement contained herein, then Columbia may itself perform, or
cause performance of, such agreement, and the expenses of Columbia incurred in
connection therewith shall be payable by the Grantor under Section 16(b).
SECTION 14. THE SECURED PARTIES. The powers conferred on
Columbia hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Columbia shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 15. REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Columbia may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or in the Note or otherwise
available to it, all the rights and remedies of a Secured Party on default under
the Code, whether or not the Code applies to the affected Collateral, and also
may (i) require the Grantor to, and the Grantor hereby agrees that it will at
its expense and upon request of Columbia forthwith, assemble all or part of the
Collateral as directed by Columbia and make it available to Columbia at a place
to be designated by Columbia that is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Secured
Parties's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Columbia may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to the Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Columbia shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Columbia may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by Columbia in respect of any sale of,
collection from or other realization upon all or any part of the Collateral may,
in the discretion of Columbia, be held by Columbia as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts payable to
Columbia pursuant to Section 16) in whole or in part by Columbia against, all or
any part of the Obligations in such order as Columbia shall elect. Any surplus
of such cash or cash proceeds held by Columbia and remaining after payment in
full of all the Obligations shall be paid over to the Grantors or to whomsoever
may be lawfully entitled to receive such surplus. The Grantors also agree to
execute, in order to effectuate any sale provided for in subsection (a) of this
Section, any endorsements, assignments or other instruments of conveyance or
transfer with respect to any or all of the Collateral.
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Notwithstanding any other provision of this Agreement, the exercise of the
Secured Parties' rights and remedies under this Agreement shall in all events be
subject to obtaining any necessary FCC approval.
SECTION 16. INDEMNITY AND EXPENSES. (a) The Grantor agrees
to indemnify Columbia from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from Columbia's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to Columbia the amount of any
and all reasonable expenses, including the reasonable fees and disbursements of
its counsel and of any experts and agents, that Columbia may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights of
the Secured Parties hereunder or (iv) the failure by the Grantor to perform or
observe any of the provisions hereof.
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of the
Secured Parties and security interests hereunder, and all obligations of the
Grantors hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Asset Acquisition
Agreement, the Note or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or waiver of
or any consent to any departure from the Asset Acquisition Agreement or the
Note;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or
(iv) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third party grantor of a
security interest.
SECTION 18. FURTHER INDEMNIFICATION. The Grantor agrees to
pay, and to save Columbia and the Secured Parties harmless from and against, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all excise, sales or other taxes (other than any gross receipt tax that is
in the nature of a net income tax, any franchise tax and any tax measured by net
income) that may be payable or determined to be payable by the Grantor with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
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SECTION 19. FCC NOTIFICATION. In the event that the
requirements of 47 C.F.R. Section 22.917, or any successor regulation, are or
become applicable to this Agreement, Columbia agrees, to the extent required to
do so, to notify the Grantor and the FCC in writing at least ten days prior to
repossession, in accordance with this Agreement, of all or any part of the
Collateral that is subject to said regulation.
SECTION 20. APPOINTMENT OF RECEIVER. It is further agreed
that, upon acceleration of the Note following the occurrence of an Event of
Default, Columbia shall be entitled to the appointment of a receiver of the
Collateral as a matter of absolute right and without notice and to collect the
rents, issues and profits of the Collateral due and coming due without regard to
the value of the Collateral or the solvency of any person or persons liable for
payment of the Note. This provision for the appointment of a receiver is an
express condition upon which the Advances hereby secured are made. The
reasonable expenses incurred by Columbia pursuant to the powers herein contained
shall be an Obligation secured by this Agreement.
SECTION 21. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall together constitute one and the same agreement.
SECTION 22. AMENDMENTS, WAIVERS, ETC. No amendment or waiver
of any provision of this Agreement nor consent to any departure by the Grantor
herefrom shall in any event be effective unless the same shall be in writing and
signed by Columbia, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 23. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (which may be a
facsimile transmission) and, if to the Grantor, mailed or telegraphed or
delivered to it, addressed to it at 500 108th Ave., N.E. Suite 2600, Bellevue,
WA 98004, Attention of Thomas A. Grina, telecopier number (206) 990-1642; if to
Columbia, mailed or delivered to it, addressed to it at 201 North Union Street,
Suite 300, Alexandria, Virginia 22314, Attention of James B. Fleming, telecopier
number (703) 519-3904; or, as to either party, at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms of this Section. All such notices and other
communications shall, when mailed or telecopied, respectively, be effective when
deposited in the mails or delivered by telecopier, addressed as aforesaid.
SECTION 24. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE.
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until payment in full of the
Obligations, (ii) be binding upon the Grantor, its successors and assigns and
(iii) inure to the benefit of the Secured Parties and their successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (iii), each of the Secured Parties may assign or otherwise transfer the
Note held by it to any other person, and such other person
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shall thereupon become vested with all the benefits in respect thereof
granted to each of the Secured Parties herein or otherwise. Upon the payment
in full of the Obligations, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the Grantor. Upon
such termination, Columbia will, at the Grantor's expense, execute and
deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
SECTION 25. GOVERNING LAWS. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, except to
the extent that the validity or perfection of the security interests thereunder,
or remedies hereunder, in respect of any particular Collateral are governed by
the laws of a jurisdiction other than the State of Delaware.
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IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.
ADVANCED RADIO TECHNOLOGIES
CORPORATION
By:______________________________
Name:
Title:
COLUMBIA CAPITAL CORPORATION,
as Collateral Agent for the Benefit
of the Secured Parties
By:______________________________
Its:
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EXHIBIT 10-31(h)
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "AGREEMENT") is made and entered into as
of this day of , 1996, by and among Advanced Radio Technologies
Corporation, a Delaware corporation ("ACQUIROR"), Advanced Radio Telecom Corp.,
a Delaware corporation ("TELECOM") (Acquiror and Telecom are collectively
referred to as the "ART COMPANIES"), CCC Millimeter, L.P., a Delaware limited
partnership ("CLP"), Columbia Millimeter Communications, L.P., a Delaware
limited partnership ("CMC"), and Columbia Capital Corporation, a Virginia
corporation ("COLUMBIA") (CLP, CMC and Columbia are collectively referred to as
"CCC").
R E C I T A L S
This Agreement is entered into in connection with the consummation of the
transactions contemplated by the Asset Acquisition Agreement and Plan of
Reorganization dated July 3 , 1996 (the "ASSET ACQUISITION AGREEMENT") among the
ART Companies, CCC and CommcoCCC, Inc., a Delaware corporation ("COMMCOCCC"),
which provides for the acquisition by Acquiror of the CommoCCC Assets (as
defined in the Asset Acquisition Agreement) from CommoCCC in exchange for the
Tech Securities (as defined in the Asset Acquisition Agreement). In order to
induce the ART Companies to enter into the Asset Acquisition Agreement and to
consummate the Asset Acquisition, CCC, jointly and severally, has agreed not to
compete with the business of the ART Companies as provided in this Agreement.
The execution and delivery of this Agreement is a condition to the ART
Companies' obligations to consummate the transactions contemplated by the Asset
Acquisition Agreement.
The parties agree as follows:
1. DEFINITIONS.
(a) "AFFILIATE" shall mean any Person who, Directly or Indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with the referenced party. For purposes of this definition
"controls" (including with correlative meanings, the terms "controlled by"
and "under common control with" as applied to any Person) means the
possession, Directly or Indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through
the ownership of voting securities or other equity interests or by contract
or otherwise.
(b) "BUSINESS" shall mean (i) the provision of wireless broadband
telecommunications services using point-to-point microwave transmissions in
the 37.0 to 40.0 gigahertz portion of the radio spectrum ("38 GHz") or (ii)
the application, management or acquisition of all or any part of any 38 GHz
Authorizations.
<PAGE>
(c) "CLOSING DATE" shall mean the date of the closing under the Asset
Acquisition Agreement.
(d) "COMPETE" shall mean Directly or Indirectly to engage or assist
any Person to engage in the Business.
(e) "DIRECTLY or INDIRECTLY" shall mean (i) acting as an agent,
representative, consultant, manager or independent contractor of any Person
engaged in the Business, or (ii) being an owner, partner, limited partner,
member, joint venturer, creditor or stockholder of any Person engaged in
the Business (except as a stockholder holding less than a five percent (5%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market).
(f) "FCC" shall mean the Federal Communications Commission.
(g) "NONCOMPETE PERIOD" shall mean the period beginning at the
Closing Date and ending on the fifth (5th) anniversary of the Closing Date.
(h) "NPRM" shall mean the notice of proposed rulemaking issued by the
FCC and defined in the Asset Acquisition Agreement.
(i) "PENDING APPLICATIONS" shall mean the applications filed by CCC
or CMC with the FCC for the 38 GHz authorizations set forth on EXHIBIT A
attached hereto which were placed on public notice by the FCC and which
have been held in abeyance pending the outcome of the NPRM.
(j) "PERSON" shall mean any individual, corporation, partnership,
limited liability company, association, trust, or other entity or
organization, including a government or political subdivision or any agency
or instrumentality thereof.
(k) "TERRITORY" shall mean the United States of America and all of
its possessions and territories.
2. NONCOMPETITION. CCC, jointly and severally, covenants and agrees
that, during the Noncompete Period, neither it nor any of its Affiliates will
Compete within the Territory with the ART Companies or its Affiliates or any of
their permitted assigns or successors.
3. BUSINESS WITH RESPECT TO THE PENDING APPLICATIONS. Notwithstanding
anything contained in this Agreement to the contrary, neither CCC nor any of its
Affiliates shall be deemed to Compete with the ART Companies under this
Agreement due to (i) the ownership of Pending Applications or authorizations
(including construction permits and licenses) granted by the FCC in connection
therewith, (ii) the construction of microwave facilities in order to meet
construction deadlines set forth in the construction permits granted by the FCC
with respect to the Pending
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Applications, (iii) the sale, transfer, assignment or other disposition, by
operation of law or otherwise, of the Pending Applications or the
authorizations (including construction permits and licenses) granted by the
FCC in connection therewith to any other Person, (iv) engaging in the
Business utilizing the radio frequencies covered by the Pending Applications
and any subsequent grant by the FCC of authorizations or licenses with
respect thereto, or (v) the ownership of less than 50% of the voting
securities or other equity interests in any Person acquired in exchange for
the Pending Applications or the authorizations (including construction
permits and licenses) granted by the FCC in connection therewith and any
related assets.
4. EQUITABLE RELIEF. CCC acknowledges that a breach by it or any of its
Affiliates of the provisions of this Agreement cannot reasonably or adequately
be compensated in damages in an action at law and that a breach of any of the
provisions contained in this Agreement may cause the ART Companies irreparable
injury and damage. CCC further acknowledges that CCC possesses unique skills,
knowledge and ability and that competition in violation of this Agreement or any
other breach of the provisions of this Agreement could be extremely detrimental
to the ART Companies. By reason thereof, CCC agrees that the ART Companies
shall be entitled, in addition to any other remedies it may have under this
Agreement or otherwise, to seek preliminary and permanent injunctive and other
equitable relief to prevent or curtail any breach of this Agreement, and in such
case CCC shall not assert that the ART Companies have an adequate remedy at law;
provided, however, that no specification in this Agreement of a specific legal
or equitable remedy shall be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such a breach. In
the event that the ART Companies must enforce any of the rights herein granted
to it through an attorney, CCC shall be liable for any and all reasonable
attorneys fees, expenses and court costs incurred in connection with the
enforcement of the ART Companies' rights hereunder.
5. SEVERABILITY. In the event that any provision of this Agreement or
any word, phrase, clause, sentence or other portion thereof (including, without
limitation, the geographical and temporal restrictions contained herein) should
be held to be unenforceable or invalid for any reason, such provision or portion
thereof shall be modified or deleted in such a manner so as to make this
Agreement as modified legal and enforceable to the fullest extent permitted
under applicable laws. CCC further acknowledges that the period and geographic
area of restriction imposed by Section 2 is fair and reasonable and is
reasonably required for the protection of the ART Companies.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective Affiliates,
and their respective successors and assigns, and shall survive any merger or
consolidation of any of such parties, or any of their Affiliates, with or into
any other Person. This Agreement is nonassignable except that the ART
Companies' rights, duties and obligations under this Agreement may be assigned
to its acquirer in the event the ART Companies is merged, acquired, or sells
substantially all of its assets to any other entity.
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7. INTEGRATED AGREEMENT AND CONSIDERATION. This Agreement constitutes
the entire Agreement among the parties hereto with regard to the subject matter
hereof, and there are no agreements, understandings, restrictions, warranties or
representations relating to said subject matter among the parties other than
those set forth herein or herein provided for. CCC hereby acknowledges that
the Asset Acquisition (as defined in the Asset Acquisition Agreement) is good
and valuable consideration received by CCC for the covenants and undertakings as
described in this Agreement.
8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which need not contain the signatures of more than one
party, but such counterparts taken together shall constitute one and the same
Agreement.
9. GOVERNING LAW. The terms of this Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
10. MODIFICATIONS. This Agreement shall not be amended or modified except
by an instrument in writing signed by each party to be bound thereby, and
reciting that the parties thereby intend to so amend or modify this Agreement.
11. WAIVER. Failure of any party to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part thereof or the right of any party thereafter to enforce each and every
provision. Neither party hereto shall be deemed to have waived any rights or
remedies hereunder unless such waiver is by an instrument in writing signed by
each party to be bound thereby. No waiver of any breach or noncompliance of
this Agreement shall be held to be a waiver of any other or subsequent breach or
noncompliance.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first above written.
ADVANCED RADIO TECHNOLOGIES CORPORATION
By:
---------------------------------------------------
Its:
---------------------------------------------
ADVANCED RADIO TELECOM CORP.
By:
---------------------------------------------------
Its:
---------------------------------------------
CCC MILLIMETER, L.P.
By: Columbia Capital Corporation
Its: General Partner
By:
----------------------------------------------
Its:
----------------------------------------
COLUMBIA MILLIMETER COMMUNICATIONS, L.P.
By: Columbia Capital Corporation
Its: General Partner
By:
-----------------------------------------------
Its:
-----------------------------------------
COLUMBIA CAPITAL CORPORATION
By:
-----------------------------------------------
Its:
-----------------------------------------
-5-
<PAGE>
EXHIBIT 10-31(i)
COMMCOCCC MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") among CommcoCCC, Inc., a Delaware
corporation ("CommcoCCC"), Columbia Millimeter Communications, L.P., a Delaware
limited partnership, ("CMC"), Commco, L.L.C., a Delaware limited liability
company ("CLC") and Columbia Capital Corporation ("Columbia") (CommcoCCC, CMC,
CLC, and Columbia are collectively the "Licensees" and individually a
"Licensee") and Advanced Radio Technologies Corporation ("ART"), a Delaware
corporation, is entered into as of the dates set forth next to the signatures
below and is effective as of July 3, 1996.
WHEREAS, CommcoCCC has acquired, or has the right to acquire and manage,
certain Federal Communications Commission ("FCC") authorizations listed on
Exhibit A hereto, each granted in the name of one of the Licensees (the
"Authorizations"), for 38 GHz frequency radio systems (collectively the
"Systems") in various locations ("Markets"); and
WHEREAS, Licensees and ART desire to enter into an agreement for the
construction, operation, and management by ART of the Systems, consistent with
Licensees' obligations in connection with the Authorizations under all of the
Federal and state laws, rules, and regulations;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1. TERM OF AGREEMENT AND TERMINATION.
(a) This Agreement becomes effective on the date set forth above.
Unless it is terminated earlier pursuant to the provisions of this Section, the
term of this Agreement ("Term") shall extend for one year and shall renew
automatically for thirty-day terms, unless (i) subject to Section 7 hereof, with
respect to any Licensee, such Licensee terminates this Agreement with respect to
such Licensee and Authorizations then in the name of such Licensee on at least
30 days' prior written notice to ART after the first one year term or (ii)
subject to Section 7 hereof, ART terminates this Agreement at any time after the
end of the first one year term on at least 30 days' prior written notice to
CommcoCCC.
(b) This Agreement shall terminate immediately on the consummation,
pursuant to the Asset Acquisition Agreement and Plan of Reorganization (the
"Acquisition Agreement") dated as of the date hereof among the parties hereto,
of the Acquisition (as defined in the Acquisition Agreement).
(c) Subject to Section 7 hereof, if the Acquisition Agreement is
terminated pursuant to the terms of the Acquisition Agreement, this Agreement
may be terminated on
<PAGE>
thirty days' written notice by (i) ART to CommcoCCC or (ii) any Licensee to
ART with respect to Authorizations then in the name of such Licensee.
2. SYSTEM CONSTRUCTION AND MANAGEMENT; EQUIPMENT LEASE. Each Licensee
hereby grants ART the right to manage such Licensee's Systems under the
following terms and conditions. Licensee agrees that it shall not grant any
other party the right to manage its Systems and Authorizations, provided,
however, that each Licensee retains the right to construct and operate its
Systems. The parties agree to coordinate the construction of all Systems.
Subject to such Licensee's supervision and control, ART will use its reasonable
efforts to undertake the planning, design, construction, installation,
marketing, sales and operations of such Licensee's Systems.
In particular, the parties agree as follows:
(a) ART shall propose a schedule of construction to each Licensee
that will identify the proposed date for each System to become operational in a
manner designed to satisfy all FCC and other regulatory requirements. Licensee
shall have ten business days in which to approve or reject such proposed
schedule.
(b) Once the schedule has been approved, ART shall use its reasonable
efforts to construct the Systems in accordance with such schedule.
(c) ART shall acquire, lease, or otherwise obtain the right to use
all assets (collectively, the "Equipment"), necessary for the operation of the
Systems, including any expansion, modification or reduction thereof.
(d) On behalf of each Licensee, ART shall bill and collect, from the
users of such Systems, all fees, charges, or other compensation arising from
such use, and shall pay all expenses and fees incurred or payable by such
Systems.
(e) ART shall generally manage the day-to-day operations of such
Systems and do or assist with any and all other acts and shall execute such
other agreements, documents or instruments, as are consistent with FCC rules and
regulations and, in the good faith judgment of ART, are necessary to carry out
the development, construction and operation of the Systems, whether or not
specifically enumerated herein.
(f) All Equipment shall be acquired and constructed by ART and shall
be the property of ART. The Equipment with respect to each Licensee's
Authorization shall be leased to such Licensee for the consideration described
in Section 4 hereof during the term of this Agreement and solely for the
purposes described herein. During the term of such lease, Licensee shall have
full and unfettered access to all the Equipment used in Licensee's System. Such
lease shall terminate simultaneously with the termination of this Agreement for
any
-2-
<PAGE>
reason. Upon such termination, the Equipment shall remain the property of
the ART, and ART may take immediate possession thereof.
3. REGULATORY COMPLIANCE. The parties agree that each Licensee is in sole
control of the Authorizations granted in the name of such Licensee and that it
is required by FCC regulations to be in sole control so long as it is the
Licensee. ART acknowledges and agrees that each Licensee has ultimate control
over all decisions affecting the Systems, notwithstanding any other provision of
this Agreement. ART will assist each Licensee in complying with all applicable
Federal, state and local regulations. This assistance includes, but is not
limited to, the following:
(a) Each System customer will be advised that service is provided
over facilities controlled by the applicable Licensee;
(b) ART agrees to use its reasonable efforts to comply with all FCC
timetables concerning construction and operation and to take such steps as may
be needed to preserve any Authorizations that may be granted by the FCC,
including discontinuing operations if so directed by the applicable Licensee to
avoid any violations of FCC rules or regulations; ART will provide Licensee with
advance written notice if it comes into possession of facts indicating that it
will be unable to render a System operational within the timetable specified by
the terms of the applicable authorization;
(c) Neither ART nor the applicable Licensee shall represent
themselves as the legal agents of one another;
(d) The applicable Licensee shall, with the cooperation and
assistance of ART, fully comply with all regulations necessary to keep the
Authorization in full force and effect. Each Licensee shall prepare and submit
to the FCC and any other relevant Federal, state or local agency all reports,
applications, renewals, or other filings or documents that may be required for
this purpose, provided that ART shall provide any assistance required by such
Licensee in fulfilling this obligation;
(e) In the event that ART determines that any modification to any
System Authorization are necessary or desirable, ART will submit to Licensee a
description of such proposed modifications for Licensee's review and approval,
which shall not be unreasonably withheld. Upon approval, Licensee shall
promptly submit any requests for modifications of the relevant Authorization
submitted to such Licensee by ART which may be needed to make construction
feasible, or any filings or appeals which are necessary to extend the period for
construction under the FCC's rules. Such requests would include, but are not
limited to, applications to the FCC for special temporary authority; and
(f) Each party has determined in good faith that this Agreement is in
compliance with the FCC's rules. In the event that the FCC determines that this
Agreement is
-3-
<PAGE>
inconsistent with Licensee's obligations or it is otherwise contrary to FCC
policies, rules and regulations, the parties agree to modify this Agreement
in any reasonable way to maintain compliance with the FCC's rules, preserving
to the maximum extent possible the essential business terms and conditions
contained herein.
4. LEASE; MANAGEMENT FEES; EXPENSES. During the term of this Agreement,
each Licensee shall pay ART ten percent (10%) of all gross revenue relating to
the operation of such Licensee's Authorizations as lease payments for the
Equipment pursuant to Section 2(a) hereof (each such payment made from time to
time is referred to as a "Lease Payment") and twenty-five percent (25%) of all
gross revenue relating to the operation of such Licensee's Authorizations as
ART's compensation for managing the Systems pursuant hereto (each such payment
made from time to time is referred to as a "Management Payment"). ART shall
remit to each Licensee all revenue relating to the Authorizations other than the
Lease Payments and Management Payments. The amount of the Management Payment
will be renegotiated every three months to an amount no less than twenty-five
percent (25%) of gross revenue. ART will invoice each Licensee for all
operating expenses relating to ART's operation of such Licensee's
Authorizations, which invoices will not be payable if the Acquisition is
consummated; provided, however, that in no event shall the Licensees be
obligated to reimburse ART for operating expenses in an aggregate greater than
$100,000.
5. NOTICE. All notices and other communications shall be in writing and
shall be deemed given the same day if delivered personally or sent by telecopy
or the next business day if sent by express mail or courier (overnight
delivery), or five (5) business days later if sent by registered mail or
certified mail, return receipt requested, postage prepaid, to the parties at the
following addresses or at such other address for a party as shall be specified
by like notice, provided that notice of change of address shall be effective
only upon receipt thereof:
(a) If to CommcoCCC, Columbia, CMC or CLC:
Commco, L.L.C.
4513 Pin Oak Court
Sioux Falls, SD 57103
Attn: Scott Reardon
Fax: (203) 656-4620 and
(605) 335-5504
- and -
Columbia Capital Corporation
201 North Union Street
Alexandra, Virginia 22314
Attn: James B. Fleming
Fax: (703) 519-3904
-4-
<PAGE>
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
100 North Tryon Street
NationsBank Corporate Center
Suite 3350
Charlotte, North Carolina 28202
Attn: H. Bryan Ives III, Esq.
Fax: (704) 377-4814
- and -
David Knudson, Esq.
Davenport, Evans, Hurwitz & Smith, L.L.P.
513 South Main Avenue
Sioux Falls, South Dakota 57104-6813
Fax: (605) 335-3639
(b) If to ART, to
Advanced Radio Technologies Corporation
500 108th Avenue, N.E., Suite 2600
Bellevue, Washington 98004
Attn: Thomas A. Grina
With a copy to:
W. Theodore Pierson, Jr.
Executive Vice President and General Counsel
1200 Nineteenth St., N.W., Suite 607
Washington, D.C. 20036
6. REPRESENTATIONS AND WARRANTIES.
(a) Each Licensee represents and warrants that it is the licensee or
permit holder with respect to the Authorizations listed in Exhibit A in the name
of such Licensee and that it is duly qualified under all laws, rules and
regulations to hold such Authorizations. Each Licensee further represents and
warrants that it is the sole owner and real party in interest in the
Authorizations and that no other party (other than CommcoCCC) has an interest of
any kind. Licensee further represents that it has the requisite authority
and/or capacity, as applicable, to perform its undertakings pursuant to this
Agreement.
-5-
<PAGE>
(b) Each of the parties hereto represents and warrants that each
shall take such steps and execute such documents as may be necessary from time
to time to effectuate the terms and conditions of this Agreement.
(c) ART represents and warrants that it is a corporation duly
authorized and in good standing under the laws of the State of Delaware and has
the requisite authority to perform its undertakings pursuant to this Agreement.
(d) ART represents and warrants that it is familiar with the
applicable rules and regulations of the FCC and that it is aware of no
impediment to the performance of its undertakings hereunder.
7. EFFECTS OF TERMINATION. In the event of any termination pursuant to
Sections 1(a) or 1(c) hereof, the following provisions will apply.
(a) ART will sell to the applicable Licensee, and each Licensee will
purchase from ART, any Equipment operated on the Authorizations then in the name
of such Licensee, to the extent such Equipment is necessary to meet the FCC
construction requirements with respect to such Authorizations. In addition, ART
may sell additional Equipment to Licensee. The purchase price to be paid for
such Equipment shall be payable in cash and shall be equal to the original cost
of such Equipment to ART. On payment of such purchase price to ART, ART shall
transfer such Equipment free and clear of any liens and encumbrances and shall
execute a bill of sale evidencing such transfer.
(b) The provision of this Section 7 shall survive any termination
of this Agreement pursuant to Sections 1(a) and 1(c) hereof.
8. ASSIGNABILITY; SUCCESSORS AND ASSIGNS.
(a) Subject to the prior consent of the ART, which consent shall not
be unreasonably withheld or delayed, and provided it does not violate any of the
other terms and conditions of this Agreement or any applicable rule and/or
regulations of the FCC, Licensee may only assign this Agreement to a purchaser
of the Systems. Further, such purchaser must expressly assume in a writing
reasonably acceptable to ART all of the obligations of the Licensee hereunder
and otherwise agrees to comply with the terms and conditions of this Agreement.
Such assignment shall be effective only upon thirty days notification from the
Licensee, satisfaction of the above said conditions and, to the extent
applicable, consent of the FCC to the transfer of the Authorizations. Any such
assignment shall not relieve the Licensee of its obligations hereunder. Any
assignment in violation of this Section 8 shall be null and void.
(b) ART may assign its right to manage the Systems hereunder to
another party, provided such assignee of ART has experience in the management of
38 GHz systems
-6-
<PAGE>
or other telecommunications facilities or subject to Licensees consent, not
to be unreasonably withheld, alternatively, is an affiliate of the ART or
employs either personnel of the ART or other persons who have experience in
the management of 38 GHz systems or other telecommunications facilities. ART
may employ such subcontractors or agents as it deems necessary in the
performance of its duties hereunder.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective heirs, representatives, successor and
permissible assigns.
9. SEVERABILITY. In the event that any provision herein is held to
invalid, void, or illegal by any Federal, state or local court, or any
regulatory agency, the remaining provisions of the Agreement shall remain in
full force and effect and this Agreement shall be reasonably construed so as to
preserve the original intent of the parties hereto insofar as practicable. In
the event that any provision herein is deemed to be invalid, void, in violation
of any agency rules, or otherwise unlawful, the parties shall use their
respective best efforts to amend the offending provisions to bring them into
legal compliance with minimum disruption to the expectations of the parties as
set forth in this Agreement.
10. COUNTERPARTS. This agreement may be executed in any number of
counterparts with the same as if the signature of each counterpart were in the
same instrument.
11. NO WAIVER OF RIGHTS; AMENDMENT. The failure of either party to
insist, in any one or more instances, upon the performance of any of the terms,
covenants or conditions herein, or to exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition, or the future exercise of such right, but the
obligation of the other party with respect to such future performance shall
continue in full force and effect. This Agreement may only be amended, modified
or changed by a writing signed by all parties hereto.
12. WARRANTY. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, RESPECTING THIS AGREEMENT OR THE SERVICE PROVIDED HEREUNDER.
13. ENTIRE AGREEMENT. This Agreement supersedes any other agreements
between the parties, whether oral or written, relating to the matter
contemplated herein, and constitutes the entire agreement by and between the
parties, there being no other agreements or understandings between the parties
as expressly set forth herein.
14. GOVERNING LAW/PROCEDURE. This Agreement will be governed by the laws
of the State of Delaware; provided that any dispute under this Agreement will be
resolved by arbitration under the Commercial Arbitration rules of the American
Arbitration Association, using one arbitrator.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ART: LICENSEES:
Advanced Radio Technologies CommcoCCC, Inc.
Corporation
By:____________________________ By:________________________________
Printed Name:__________________ Printed Name:______________________
Title:_________________________ Title:_____________________________
Dated:_________________________ Dated:_____________________________
By:________________________________
Printed Name:______________________
Title:_____________________________
Dated:_____________________________
CCC Millimeter Communications, L.P.
By:________________________________
Printed Name:______________________
Title:_____________________________
Dated:_____________________________
-8-
<PAGE>
Columbia Millimeter Communications, L.P.
________________________________________
Printed Name:___________________________
Title:__________________________________
Dated:__________________________________
Commco, L.L.C.
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
Dated:__________________________________
Columbia Capital Corporation
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
Dated:__________________________________
-9-
<PAGE>
EXHIBIT 10-31(j)
RIGHT OF FIRST OFFER AGREEMENT
AGREEMENT made this 3rd day of July, 1996 by and among COLUMBIA MILLIMETER
COMMUNICATIONS, L.P., a Delaware limited partnership ("CMC"), COLUMBIA CAPITAL
CORPORATION, a Virginia corporation ("CCC") (CMC and CCC are collectively
referred to as "COLUMBIA") and ADVANCED RADIO TECHNOLOGIES CORPORATION, a
Delaware corporation ("TECH").
WHEREAS, Tech has agreed to purchase from CommcoCCC, Inc., a Delaware
corporation ("COMMCOCCC"), substantially all of its assets, including 38 Ghz
Authorizations covering approximately 117,750,000 Pops (the "38 GHZ
AUTHORIZATIONS") pursuant to an Asset Acquisition Agreement and Plan of
Reorganization (the "ACQUISITION AGREEMENT") dated the date hereof by and among
Tech, Advanced Radio Telecom Corp., CommcoCCC, Columbia, and Commco, L.L.C., a
Delaware limited liability company. Capitalized terms used in this Agreement
and not otherwise defined shall have the meanings set forth in the Acquisition
Agreement.
WHEREAS, in order to induce Tech to enter into the Acquisition Agreement,
Columbia desires to grant Tech a right of first offer on any 38 Ghz
Authorizations granted to Columbia with respect to any Pending Applications
owned by Columbia and listed on EXHIBIT A attached hereto (the "NEW
AUTHORIZATIONS") on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged by each of the parties hereto, the parties
hereto do hereby agree as follows:
1. RIGHT OF THE FIRST OFFER. Columbia shall notify Tech in writing (the
"OFFER NOTICE") prior to entering into any binding agreement with any Person,
other than an Affiliate of Columbia in which Columbia owns more than 50% of the
voting securities or other equity interests, with respect to (i) the sale,
transfer, assignment or other disposition (whether by merger, operation of law
or otherwise) of any New Authorization or (ii) the management or lease of any
New Authorization that gives such Person more than 50% of the net profit derived
from the New Authorization for a period longer than five (5) years ((i) and (ii)
above are referred to collectively as a "TRANSFER"). The Offer Notice shall set
forth all New Authorizations which Columbia wishes to Transfer. Tech may offer
to purchase all (but not less than all) of the New Authorizations specified in
the Offer Notice by delivery of a written offer (the "OFFER") to Columbia
within thirty (30) days after delivery of the Offer Notice. The Offer shall
specify the price and other terms on which Tech proposes to purchase the New
Authorizations. After receipt of the Offer, Columbia may elect to enter into a
binding agreement for the transfer of the New Authorizations set forth in the
Offer Notice either (i)
<PAGE>
with Tech at the price and other terms set forth in the Offer or (ii) with
any other Person at a price greater than set forth in the Offer, free and
clear of the terms of this Agreement; PROVIDED, HOWEVER, if (i) Columbia has
not entered into a binding agreement for the Transfer of such New
Authorizations with any other Person within ninety (90) days after receipt of
the Offer, if any, or (ii) such binding agreement for the Transfer is
terminated for any reason, then such New Authorizations shall be subject once
again to the provisions of this Agreement In the event the price is payable
in property, the value of the property shall be determined by a mutually
acceptable investment banking company.
2. TERM. This Agreement shall continue in full force and effect until
the earlier of (i) the termination of the Acquisition Agreement pursuant to its
terms and (ii) six (6) months after the date on which the first New
Authorization is granted to Columbia by the FCC.
3. MISCELLANEOUS.
3.1 ASSIGNMENT; SUCCESSORS. Neither party hereto may assign its
rights or obligations hereunder without the prior written consent of
the other party. In the event Columbia Transfers any New
Authorizations to an Affiliate of Columbia in which Columbia owns more
than 50% of the voting securities or other equity interests, as a
condition to such Transfer such Affiliate shall assume and be bound by
the provisions of this Agreement with respect to such New
Authorizations.
3.2 AMENDMENTS; WAIVERS. The terms of this Agreement may not be
waived, amended, modified, terminated or discharged unless in a
writing signed by the parties hereto.
3.3 NOTICES. All notices or other communications provided for under
this Agreement shall be in writing (including facsimile) and mailed,
hand delivered, sent by overnight courier or by telecopier to the
parties effective when received at the addresses specified:
If to Tech: Advanced Radio Technologies Corporation
500 108th Street, N.E., Suite 2600
Bellevue, Washington 98004
Attn: Chief Executive Officer
with a copy to: Pierson & Burnett, LLP
1667 K Street, N.W.
Suite 801
Washington, D.C. 20036
Attn: W. Theodore Pierson, Jr., Esq.
-2-
<PAGE>
If to Columbia: Columbia Capital Corporation
201 North Union Street
Alexandria, Virginia
Attn: James B. Fleming
with a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
100 North Tryon Street, Suite 3350
Charlotte, North Carolina 28202
Attn: H. Bryan Ives, III, Esq.
3.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
3.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
3.6 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior
agreement and understandings between the parties with respect to the
subject matter.
3.7 SECTION HEADINGS. Section headings in this Agreement are for
convenience only and shall not form a part of this Agreement.
3.8 SEVERABILITY. If any provision of this Agreement shall be found
by any court of competent jurisdiction to be invalid or unenforceable,
the parties waive such provision to the extent that it is found to be
invalid or unenforceable. Such provision shall, to the maximum extent
allowable by law, be modified by such court so that it becomes
enforceable and, as modified, shall be enforced as any other provision
hereof, all the other provisions hereof continuing in full force and
effect.
-3-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly exercised by the parties
hereto as of the day and year first above written.
ADVANCED RADIO TECHNOLOGIES CORPORATION
By: ___________________________________
Its: _________________________________
COLUMBIA CAPITAL CORPORATION
By: ____________________________________
Its: _________________________________
COLUMBIA MILLIMETER COMMUNICATIONS, L.P.
By: Columbia Capital Corporation
Its: General Partner
By: _______________________________
Its: ____________________________
-4-
<PAGE>
Exhibit 10.31(h)
Montgomery
PERSONAL AND CONFIDENTIAL
May 23, 1996
Advanced Radio Telecom Corp.
500 108th Avenue, N.E., Suite 2600
Bellevue, WA 98004
Attn: Vernon L. Fotheringham, Chief Executive Officer
Dear Vernon:
We are pleased to have been selected to assist you in the acquisition
you are contemplating. This letter will confirm the understanding and agreement
between Montgomery Securities ("us" or "Montgomery") and Advanced Radio Telecom
Corp. ("you" or the "Company").
We will serve as your exclusive representative and financial advisor
for the purpose of advising you concerning the possible acquisition (the
"Acquisition") of 38 GHz licenses and related assets (the "Licenses") owned
directly or indirectly by Columbia Capital Corporation and CommCo LLC and their
subsidiaries or other affiliated entities (the "Licenses"). For purposes of this
agreement, the Acquisition shall mean any transaction or related series or
combination of transactions whereby, directly or indirectly, control of any
Licenses or all or substantially all of the business or assets of any Licensee
is acquired by you or any of your subsidiaries or other affiliates in a sale or
exchange of stock, merger or consolidation, sale of assets or other similar
transaction.
<PAGE>
Advanced Radio Telecom Corp.
May 23, 1996 Montgomery
Page 2
We will render to you whatever services are mutually agreeable in order
to assist you in accomplishing the Acquisition. In particular, we will consult
with and advise you concerning the Acquisition and, if you request, participate
on your behalf in negotiations concerning the Acquisition. We will consult with
you with respect to the financial aspects of any transaction as described in the
agreements effecting the transaction. We will assist you in conducting your
business investigation of the Licenses and/or Licensees and assist you in the
administration of the closing of any transaction.
If requested by you, we will render to your board of directors our
opinion with respect to the fairness from a financial point of view to you of
the consideration to be paid by you in the Acquisition, as of the date of the
opinion (the "Opinion"). We will render the Opinion as of the date of the
meeting of your board of directors to approve the transaction.
In order for us to advise you effectively, it is necessary that you
make available to us all pertinent information which we reasonably request in
connection with the performance of our services hereunder, including information
concerning the business, assets, operations, or financial condition of the
Company. You agree that we may rely upon the accuracy and completeness of such
information without independent verification and are authorized to make
appropriate use of such information.
In addition, you agree to conduct each transaction in a manner which
will comply in all respects with the applicable provisions of the Securities Act
of 1933, the Securities Exchange Act of 1934 and all other applicable federal
and state statutes, rules and regulations. You will also be responsible for the
completeness, accuracy and format of all information furnished to the Licensees
and their shareholders and furnish to them any appropriate information which may
be required by them in order to make a sale decision.
The term of our engagement hereunder will extend from the date hereof
until May 31, 1997. However, subject to the provisions on fees, either of us may
terminate our engagement hereunder at any time upon 30 days' written notice.
<PAGE>
Advanced Radio Telecom Corp.
May 23, 1996 Montgomery
Page 3
As compensation for our services hereunder, you will pay us a retainer
fee of $100,000, such fee to be payable upon consummation of the Company's
initial public offering of equity or debt securities ("IPO"). The retainer will
be credited against any compensation due to us upon consummation of the
Acquisition.
An additional fee of $500,000 shall be payable upon the later to occur
of: (i) the execution by you of a definitive agreement for the Acquisition; or
(ii) the consummation of the IPO, and will also be credited against any
compensation due us upon consummation of the Acquisition.
If a definitive agreement for the Acquisition is executed at any time
during this engagement or within eighteen months from the termination of this
engagement, you will pay us a fee of $2,000,000 payable in cash at the time the
Acquisition is consummated; provided that, if the number of shares to be issued
in the Acquisition exceeds 37% of the outstanding shares of the common stock of
the Company (calculated on a fully diluted basis as of the date hereof and after
giving effect to the issuance of such shares), such fee shall be $1,500,000, and
if the number of shares to be so issued represents less than 35%, of the
outstanding shares of common stock of the Company (calculated on the same
basis), such fees shall be $2,000,000 plus an additional $300,000 (or fraction
thereof) for each percentage point (or fraction thereof) that the number of
shares to be issued is less than 35% of the outstanding shares of common stock
of the Company. Our compensation is to be free and clear of any obligation that
you may have to any other party.
In addition to the foregoing fees, you agree to reimburse us for all
reasonable out-of-pocket costs and expenses (including counsel fees) incurred by
us in connection with the services to be rendered by us hereunder, whether or
not a transaction is consummated or our services are terminated or completed.
These expenses shall be billed by us and payable by you quarterly. In addition,
in the event we are requested to appear at a judicial or administrative hearing
in connection with this engagement, ,you will pay us a per diem fee of $2,000
per person per day and reimburse our reasonable out-of-pocket expenses in
connection with such appearance.
<PAGE>
Advanced Radio Telecom Corp.
May 23, 1996 Montgomery
Page 4
As we will be acting on your behalf, it is our practice to obtain an
indemnification and contribution agreement from you. That agreement is attached
and incorporated by reference. The obligations contained in that agreement will
remain operative regardless of any termination or completion of our scrviccs
hereunder.
You have advised us that the transaction will not require any vote or
other approval by the shareholders of the Company. Accordingly, you have not
requested that the Opinion be disclosed in any public document. The Opinion will
not be used or referred to by you, quoted or disclosed to any person
(other than your directors, executive officers and attorneys) in any manner
without our express prior written consent.
This engagement agreement, together with the agreement on
indemnification and contribution, contains our entire agreement concerning the
proposed transaction and supersedes any prior understandings and agreements.
This engagement agreement is made and shall be construed under and in accordance
with the laws of the State of California (without reference to any principle of
the conflict of laws). Any waiver of any right or obligation set forth in this
agreement must be in writing signed by the party against whom enforcement would
be sought.
If the foregoing correctly sets forth our understanding and agreement,
please sign below and return to us. We thank you for the opportunity to share in
your business endeavors and are looking forward to a successful and mutually
beneficial relationship.
Very truly yours,
MONTGOMERY SECURITIES
By: SEWEL Investments, Inc., a General Partner
By: /s/ Joseph M. Schell
----------------------------------------
Joseph M. Schell, President
<PAGE>
Advanced Radio Telecom Corp.
May 23, 1996 Montgomery
Page 5
Accepted and Agreed to on this ___ day of May, 1996
ADVANCED RADIO TELECOM CORP.
By: /s/Vernon L. Fotheringham
----------------------------------------------
Vernon L. Fotheringham, Chief Executive Officer
<PAGE>
INDEMNIFICATION AND CONTRIBUTION AGREEMENT
In consideration of the agreement of Montgomery Securities
("Montgomery") to act on behalf of ADVANCED RADIO TELECOM CORP. (the
"Company") pursuant to the attached Engagement Letter, dated MAY 23, 1996
the Company agrees to indemnify and hold harmless Montgomery, its affiliates,
and each of their respective partners, directors, officers, agents, consultants,
employees and controlling persons (within the meaning of the Securities Act of
1933) (Montgomery and each such other person or entity are hereinafter referred
to as an "Indemnified Person"), from and against any losses, claims, damages,
expenses and liabilities or actions in respect thereof (collectively, "Losses"),
as they may be incurred (including all legal fees and other expenses incurred in
connection with investigating, preparing, defending, paying, settling or
compromising any Losses, whether or not in connection with any pending or
threatened litigation in which any Indemnified Person is a named party) to which
any of them may become subject (including in any settlement effected with the
Company's consent) and which are related to or arise out of any act, omission,
transaction or event contemplated by the Engagement Letter. The Company will
not, however, be responsible under the foregoing provisions with respect to any
Losses to the extent that a court of competent jurisdiction shall have
determined by a final judgement that such Losses resulted primarily from actions
taken or omitted to be taken by an Indemnified Person due to his gross
negligence, bad faith or willful misconduct. If multiple claims are brought
against MONTGOMERY in an arbitration, with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
agreement, any arbitration award shall be conclusively deemed to be based on
claims as to which indemnification is permitted and provided for, except to the
extent the arbitration award expressly states that the award, or any portion
thereof, is based solely on a claim as to which indemnification is not
available.
If the indemnity referred to in this agreement should be, for any
reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold
each Indemnified Person harmless, the Company shall pay to or on behalf of each
Indemnified Person contributions for Losses so that each Indemnified Person
ultimately bears only a portion of such Losses as is appropriate to reflect the
relative benefits received by and the relative fault of each such Indemnified
Person, respectively, on the one hand and the Company on the other hand in
connection with the transaction: provided, however, that in no event shall the
aggregate contribution of all Indemnified Persons to all Losses in connection
with any transaction exceed the amount of the fee actually received by
Montgomery pursuant to the Engagement Letter. The relative fault of each
Indemnified Person and the Company shall be determined by reference to among
other things, whether the actions or omissions to act were by such Indemnified
Person or the Company and the parties relative intent, knowledge, access to
information and opportunity to correct or prevent such action or omission to
act.
The Company also agrees that no Indemnified Person shall have any
liability to the Company or its affiliates, directors, officers, employees,
agents or shareholders, directly or indirectly, related to or arising out of the
Engagement Letter, except Losses incurred by the Company which a court of
competent jurisdiction shall have determined by a final judgement to have
resulted primarily from actions taken or omitted to be taken by such Indemnified
Person due to its gross negligence, bad faith or willful misconduct. In no
event, regardless of the legal theory advanced, shall any Indemnified Person be
liable for any consequential, indirect, incidental or special damages of any
nature. The Company agrees that without Montgomery's prior written consent it
shall not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding related to the
Engagement Letter unless the settlement, compromise or consent also includes an
express unconditional release of all Indemnified Persons from all liability and
obligations arising therefrom.
If an agreement for the sale of the Company is entered into and the
obligations of the Company referred to above are not assumed, satisfactory to
Montgomery, by operation of law or by contract by the acquiring entity, the
Company agrees to arrange alternative means of providing for such obligations
prior to consummation of such agreement, including providing insurance or
creating an escrow, in each case in an amount and upon terms and conditions
satisfactory to Montgomery.
The obligations of the Company referred to above shall be in addition
to any rights that any Indemnified Person may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs, and
personal representatives of any Indemnified Person and the Company. It is
understood that the obligations of the Company will remain operative regardless
of any terminations or completion of Montgomery's services.
MONTGOMERY SECURITIES ADVANCED RADIO TELECOM CORP.
BY: SEWEL Investments Inc. BY: /s/Vernon L. Fotheringham
---------------------- -----------------------------
BY: /s/Joseph M. Schell NAME: Vernon L. Fotheringham
----------------------- ----------------------
Joseph M. Schell, President TITLE: Chief Executive Officer
<PAGE>
April 29, 1996
Mr. Thomas Cheatham
Ossipee/Helicomm
391 Totten Pond Road, Suite 303
Waltham, MA 02154
Subject: Terms for OC-3 SONET Development and Purchase, Version III
Dear Thomas:
Now that we have cleared up most of the issues with the SAND product I would
like to do the same for the OC-3 radio. As we discussed in our phone
conversation today, the availability of a low cost OC-3 radio is vital to
ART's aggressive business plan for the coming years.
I have reviewed your prior proposal and discussed it with the principals here
at ART. On behalf of ART, I am proposing the following terms for the OC-3
Development and Purchase Agreement with HCI. These terms assume a June 1,
1996 project start:
1) NRE FUNDING - Advanced Radio Telecom, Ltd. will pay to HCI $1MM
toward the $3MM estimated total NRE for the OC-3 SONET radio. The ART
payment will be divided into milestone segments as agreed by ART and
HCI. HCI will secure the balance of the NRE funding from other sources.
2) ART REQUIREMENTS - The OC-3 SONET radio will be built to ART's Design
Standards and Network Architecture Requirements.
3) INTELLECTUAL PROPERTY TRANSFER - Should HCI substantially fail, after
normal remedy opportunities are depleted, to complete the development
of the OC-3 SONET radio for any reason other than causes originating
with ART or force majeure, and HCI fails to repay all funds paid by
ART for the development within (90) days of ART's notification of
failure, then HCI would transfer to ART a non-exclusive, transferable,
perpetual license to manufacture and sell the OC-3 SONET radio by
whatever means necessary to service ART's market.
4) EXCLUSIVE PURCHASE - At ART's options, ART will have the unrestricted
right to purchase 100% of HCI's OC-3 radio pair production capacity
for a period starting from delivery of the first production radio and
lasting for (3) years. Exclusivity is predicated on ART's maintenance
of sequential orders equivalent to 100% of HCI's production capacity.
ART and HCI will agree on methods for assessing HCI's OC-3 capacity.
5) PRICING - OC-3 SONET radio pairs delivered to ART will be priced at
$20,000 per pair or less based on ART's consumption at a rate
equivalent to (800) radio pairs per year or HCI's production capacity,
whichever is less. At ART's option this volume and price level can be
renewed on the yearly anniversary date of delivery of the first
production radio pair. If the above arrangement is renewed, then the
only year-over-year price increases
<PAGE>
will be per an established index calculation method mutually agreeable
to ART and HCI.
The price for the first (25) OC-3 radio pairs will be determined by
their special short-run production costs, but will not exceed $30,000.
In all cases the OC-3 SONET radio pairs sold by HCI to ART will be at
HCI's most favorable sales price.
6) BEST PRICE ROYALTY - Best price to ART will be assured by way of
royalty payments from HCI equal to 5% of actual purchase price on the
first (1500) radio pairs delivered to HCI customers other than ART.
7) PILOT PRODUCTION DELIVERY - HCI commits to deliver (25) production
specification OC-3 radio pairs to ART not later than January 30, 1998.
Delivery of these (25) radio pairs will be considered the last
milestone of the OC-3 development program and will release the final
installment of the agreed NRE funding. For any reason attributable to
HCI and other than force majeure, failure to deliver the entire lot of
(25) radio pairs by January 30, 1998, will result in a price reduction
of 25% for each of the (25) original radio pairs delivered after that
date.
8) PRODUCTION RAMP-UP - By February 28, 1998, HCI will deliver to ART
(35) additional OC-3 radio pairs. Failure on the part of HCI to deliver
all or part of the (35) radio pairs will result in price discounts
on the undelivered radio pairs as described in Item 7.
For the months of March and April 1998, HCI will deliver to ART an
additional (50) and (75) radio pairs per month, with the same
penalty conditions as Item [7].
9) NORMAL PRODUCTION RATE - ART and HCI will negotiate a normal OC-3
monthly production rate sufficient to meet ART's requirements, but
in any event no less than (100) radio pairs, starting with the month
of May 1998 and for each month thereafter. The penalty for HCI's
failure to deliver the agreed volume under normal production
circumstances will be a 7.5% reduction in price for radio pairs
delivered late on a month-by-month basis.
10) ADDITIONAL NRE FUNDING - HCI's ability to fund the $2MM non-ART
portion of the OC-3 radio project is critical to the development
schedule. In the event that HCI cannot procure commitments for
this funding by August 1, 1996, and upon mutual agreement of ART
and HCI, then ART may choose to offer additional funding under one
of the following scenarios:
a) for an additional $1MM payment by ART in NRE (new ART total:
$2MM), ART will acquire 20% equity interest in HCI. In the event
that ART contributes an additional $2MM (ART total: $3MM), ART
will acquire a 33% equity interest in HCI.
b) in return for additional ART NRE funding, ART will receive from
HCI an additional 5% discount from HCI's best price radio pair
cost for each $1MM contribution over the initial $1MM described in
Item 1. This condition would be left in place for whatever period
required for ART to recover the additional amount + 75% in savings
resulting from the discount.
c) in return for the first additional $1MM NRE payment, ART will
receive an additional 3% Best Price Royalty (new total: 8%) on all
non-ART radio pairs sold by HCI, calculated against the first
(1500) non-ART radio pairs delivered. If the
<PAGE>
above option were exercised, and an additional $1MM NRE payment
were required on top of the first additional $1MM (ART total
NRE $3MM), then ART will acquire a 20% equity interest in HCI.
Tom, please feel free to call me at any time in regard to these proposed terms.
The OC-3 SONET radio is strategically important for ART and I am at your
disposal for the process of finalizing the term sheet and the definitive
Development and Sale Agreement.
Regards,
/s/ Ric Shields /s/ Thomas P. Cheatham
Ric Shields Thomas P. Cheatham
V.P. Technology Development President and CEO
HeliOss Communications Inc.
cc: V. Fotheringham
C. Comrie
<PAGE>
EXHIBIT 11
ADVANCED RADIO TECHNOLOGIES CORPORATION
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
---------------
<S> <C>
Net loss applicable to Common Stock............................................................................. $ 1,267,655
---------------
---------------
Shares:
Weighted average number of shares of Common Stock outstanding for primary computation....................... 10,013,055(1)
---------------
---------------
Net loss per share of Common Stock.............................................................................. $ 0.13
---------------
---------------
Pro Forma:
Shares:
Weighted average number of shares of Common Stock outstanding for primary computation....................... 10,013,055
Issuances of shares of Telecom serial preferred stock as converted into shares of ART Common Stock.......... 10,916,807
Issuance of Telecom common stock as converted into shares of ART Common Stock............................... 8,100,807(2)
Options and warrants issued and outstanding ................................................................ 2,620,936
---------------
Pro forma weighted average number of shares of Common Stock................................................... 31,651,605(3)
---------------
---------------
Pro forma net loss per share of Common Stock.................................................................... $ 0.04
---------------
---------------
Pro Forma As Adjusted
Shares:
Pro forma weighted average number of shares of Common Stock................................................. 31,651,605
Common Stock issued in connection with the Common Stock Offering and the acquisition of the CommcoCCC
Assets..................................................................................................... 24,000,000
---------------
Pro forma as adjusted weighted average number of shares of Common Stock....................................... 55,651,605(3)
---------------
---------------
Pro forma as adjusted net loss per share of Common Stock........................................................ $ 0.02
---------------
---------------
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, 1996
---------------
<S> <C>
Net loss applicable to Common Stock............................................................................. $ 3,654,775
---------------
---------------
Shares:
Weighted average number of shares of Common Stock outstanding for primary computation....................... 10,013,055(1)
---------------
---------------
Net loss per share of Common Stock.............................................................................. $ 0.37
---------------
---------------
Pro Forma:
Shares:
Weighted average number of shares of Common Stock outstanding for primary computation....................... 10,013,055
Issuances of shares of Telecom serial preferred stock as converted into shares of ART Common Stock.......... 10,916,807
Issuance of Telecom common stock as converted into shares of ART Common Stock............................... 8,100,807(2)
Options and warrants issued and outstanding ................................................................ 2,620,936
---------------
Pro forma weighted average number of shares of Common Stock................................................... 31,651,605(3)
---------------
---------------
Pro forma net loss per share of Common Stock.................................................................... $ 0.12
---------------
---------------
Pro Forma As Adjusted
Shares:
Pro forma weighted average number of shares of Common Stock................................................. 31,651,605
Common Stock issued in connection with the Common Stock Offering and the acquisition of the CommcoCCC
Assets..................................................................................................... 24,000,000
---------------
Pro forma as adjusted weighted average number of shares of Common Stock....................................... 55,651,605(3)
---------------
---------------
Pro forma as adjusted net loss per share of Common Stock........................................................ $ 0.07
---------------
---------------
</TABLE>
(1) The weighted average number of shares of Common Stock for primary
computation exclude all common stock equivalents, which are anti-dilutive.
(2) Excludes shares of Telecom common stock owned by ART.
(3) The Securities and Exchange Commission requires that potentially dilutive
instruments issued within one year prior to a proposed initial public
offering at exercise prices below the expected initial public offering price
be treated as outstanding for the entire period presented. The weighted
average number of shares of Common Stock on a pro forma and on a pro forma
as adjusted basis reflect those potentially dilutive instruments assuming
the sale of shares of Common Stock offered in the Common Stock Offering
based on an assumed initial public offering price of $10.00 per share. In
measuring the dilutive effect, the treasury stock method was used.
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated April 26, 1996, except for Note 2C, Note 5B and the second
paragraph of Note 9, as to which the date is June 26, 1996, on our audit of the
financial statements of Advanced Radio Technologies Corporation as of December
31, 1995 and 1994, for the years then ended, and for the period from August 23,
1993 (date of inception) to December 31, 1993 and of our report dated April 26,
1996, except for Note 2B, as to which the date is June 26, 1996, on our audit of
the financial statements of Advanced Radio Telecom Corp. as of December 31, 1995
and for the period from March 28, 1995 (date of inception) to December 31, 1995.
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
New York, New York
July 2, 1996
