<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
___
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ X ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ADVANCED RADIO TELECOM CORP.
----------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
<PAGE>
ADVANCED RADIO TELECOM CORP.
500 108TH AVENUE NE, SUITE 2600
BELLEVUE, WASHINGTON 98004
---------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 28, 1998
---------------------------------------
The Annual Meeting of Stockholders of Advanced Radio Telecom Corp. will be
held on July 28, 1998 at 10:00 a.m. (local time) at The Bellevue Hilton,
100 112th Avenue NE, Bellevue, Washington 98004 for the following purposes:
1. To elect two Class II directors; and
2. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only stockholders of record at the close of business on June 15, 1998 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
A list of such stockholders will be available to stockholders at the time and
place of the meeting and during normal business hours during the ten days prior
to the date of the meeting at the executive offices of Advanced Radio Telecom
Corp.
By Order of the Board of Directors
/s/ Thomas M. Walker
Thomas M. Walker,
Secretary
Bellevue, Washington
June 29, 1998
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
ADVANCED RADIO TELECOM CORP.
----------------------------
ANNUAL MEETING OF STOCKHOLDERS
July 28, 1998
----------------------------
PROXY STATEMENT
----------------------------
The enclosed proxy is solicited on behalf of the Board of Directors of
Advanced Radio Telecom Corp. (the "Company") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on July 28, 1998, at 10:00 a.m. at The
Bellevue Hilton, 100 112th Avenue NE, Bellevue, Washington 98004 and at any
adjournment thereof.
In the absence of contrary instructions, the persons named as proxies will
vote for the election as director of each of the nominees named below. To be
voted, proxies must be delivered to the Secretary of the Company prior to
voting. A proxy may be revoked by a stockholder at any time before it is voted
by (i) delivering to the Company another properly signed proxy relating to the
same shares and bearing a later date, (ii) otherwise delivering a written notice
to the Secretary of the Company, bearing a date later than the date of the
proxy, stating the proxy is revoked or (iii) attending the Meeting or any
adjournment thereof and voting the shares covered by the proxy in person
(although attendance at the Meeting will not, by itself, revoke a proxy).
The Annual Report of the Company, including consolidated financial
statements for the year ended December 31, 1997, is being mailed to the
Company's stockholders with this Proxy Statement. This Proxy Statement and the
enclosed proxy were first mailed to stockholders on the date of the Notice of
Annual Meeting of Stockholders.
The cost of soliciting proxies will be borne by the Company. In addition
to the solicitation of proxies by use of the mails, the Company may use the
services of its officers and employees (who will receive no compensation
therefor in addition to their regular salaries) to solicit proxies from
brokerage houses and other stockholders. The Company will also reimburse
brokers and other persons for their reasonable charges and expenses in
forwarding soliciting materials to their principals.
Only holders of record of shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), on June 15, 1998 are entitled to receive
notice of and to vote at the Meeting. As of that date, the Company had issued
and outstanding 26,706,786 shares of Common Stock. Each such share of Common
Stock is entitled to one vote on each matter to come before the Meeting.
<PAGE>
ELECTION OF DIRECTORS
Under the terms of the Company's Amended and Restated Certificate of
Incorporation and by-laws, the Board of Directors is composed of three classes
of similar size, each to be elected in a different year, so that only one class
will be elected each year, in each case for a three-year term and until their
respective successors are duly elected and qualified. The Board of Directors
currently consists of seven members.
Unless otherwise instructed, the persons named in the enclosed proxy intend
to vote each share of Common Stock as to which a proxy has been properly
executed, returned and not revoked in favor of the election of the two nominees
named below as Class II directors for three-year terms that expire in 2001. It
is expected that each nominee will be able to serve, but if any nominee is
unable to serve, all proxies may be voted for a substitute nominee designated by
the Board of Directors, as determined by the persons named in the enclosed proxy
in their discretion.
Set forth below is certain information concerning each of the nominees and
the other incumbent directors:
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
TERM EXPIRES 2001
PRINCIPAL DIRECTOR
NAME AGE OCCUPATION SINCE
- ---------------------- --- -------------------------------------------------------- --------
<S> <C> <C> <C>
James C. Cook 38 Senior Vice President of First Union Capital Partners, 1996
Inc., a private equity investment affiliate of First
Union Corporation, since 1995 and a Vice President of
First Union Capital Partners, Inc. from 1989 to 1995.
Thomas J. Wynne 58 Retired. President and Chief Operating Officer of LCI 1998
International, Inc., a long distance telecommunications
company, from 1991 to 1998.
<CAPTION>
INCUMBENT CLASS III DIRECTORS
TERM EXPIRES 1999
PRINCIPAL DIRECTOR
NAME AGE OCCUPATION SINCE
- ---------------------- --- -------------------------------------------------------- --------
<S> <C> <C> <C>
Mark C. Demetree 41 President of U.S. Salt Corporation since 1998; 1995
President of North American Salt Company from 1993
to 1998; Director of J.C. Nichols Company.
James B. Murray, Jr. 51 Managing Director of Columbia Capital Corporation 1997
since March 1989; President of Randolph Cellular
Corp., a cellular communications company, from 1990
to 1993; Director of Saville Systems PLC.
</TABLE>
-2-
<PAGE>
INCUMBENT CLASS I DIRECTORS
TERM EXPIRES 2000
<TABLE>
<CAPTION>
PRINCIPAL DIRECTOR
NAME AGE OCCUPATION SINCE
- ---------------------- --- -------------------------------------------------------- --------
<S> <C> <C> <C>
Andrew I. Fillat 50 Managing Director of Advent International Corpora- 1995
tion, a global venture capital and private equity
management firm since 1995 and Vice President of
Advent International Corporation from 1989 to 1995;
Director of Interlink Computer Sciences, Lightbridge,
Inc. and Voxware, Inc.
Henry C. Hirsch 56 Chairman of the Board of Directors, President and 1997
Chief Executive officer of the Company since
November 1997; Vice Chairman and Chief Executive
Officer of Williams Communications Group, a wholly-
owned subsidiary of the Williams Companies that
provides businesses with enterprise network solutions,
services and advanced multimedia applications from
1996 to 1997; President and Chief Operating officer of
Williams Telecommunications Systems ("WilTel"), a
nationwide systems integration company from 1992 to
1996.
Alan Z. Senter 56 Chairman of Senter Associates, a financial advisory 1996
firm since 1996 and from 1993 to 1994; Executive
Vice President and Chief Financial Officer of NYNEX
Corporation from 1994 to 1996; Executive Vice
President and Chief Financial Officer of GAF/ISP
Corporation from 1992 to 1993. Director of Exec Ltd.
and InterVu Inc.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors of the
Company held 15 meetings. During such year, each director attended at least 75%
of the meetings of the Board held during the period he was a director and at
least 75% of the meetings of each Committee on which he served held during the
period he served.
The Board of Directors currently has two standing committees: the Audit
Committee and the Compensation Committee. The Company does not have a standing
Nominating 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. The Compensation Committee also reviews,
interprets and administers the Company's Restated Equity Incentive Plan,
prescribes rules and regulations relating thereto and determines the stock
options and other equity incentives to be granted by the Company to its
employees. As a policy, the Compensation Committee directs the Company to pay
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. Demetree and
Murray
-3-
<PAGE>
currently serve on the Compensation Committee. Mr. Fillat served on the
Compensation Committee until February 1997. Mr. Fotheringham served on the
Compensation Committee until October 1997. The Compensation Committee held five
meetings in 1997.
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.
Cook, Fillat and Senter currently serve on the Audit Committee. The Audit
Committee held two meetings in 1997.
COMMON STOCK OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of June 15, 1998 by (i) the
Chief Executive Officer and each of the four other most highly paid executive
officers of the Company who were serving as executive officers on December 31,
1997 and one other individual who would have been one of the four most highly
paid executive officers of the Company but for the fact that he was not serving
as an executive officer on December 31, 1997 (the "Named Executive Officers"),
(ii) each director of the Company, (iii) all executive officers and directors of
the Company as a group and (iv) each person (including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act of 1934 (the "Exchange Act"))
known to the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock. Except as noted below, each of the persons listed has
sole investment and voting power with respect to the shares indicated:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------
NAME NUMBER PERCENT
- ---- --------- --------
<S> <C> <C>
Columbia Capital Corporation (1)...... 2,658,828 10.0%
Commco, L.L.C. (2).................... 2,831,677 10.6%
James C. Cook (3)..................... 58,569 *
Mark C. Demetree (4).................. 386,942 1.4%
Andrew I. Fillat (5).................. 5,728 *
Vernon L. Fotheringham................ 974,870 3.7%
Thomas A. Grina (6)................... 70,455 *
Henry C. Hirsch....................... 100,000 *
James D. Miller (7)................... 35,001 *
James B. Murray, Jr. (8).............. 227,643 *
Alan Z. Senter (9).................... 7,151 *
Richard A. Shields, Jr.(10)........... 13,636 *
Thomas M. Walker(11).................. 16,350 *
WinStar Communications, Inc........... 3,313,864 12.4%
Thomas J. Wynne....................... 0 *
All executive officers and directors
as a group (12)..................... 907,839 3.4%
</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 NE,
Suite 2600, Bellevue, Washington 98004.
* Less than 1.0%.
-4-
<PAGE>
(1) Includes 62,173 shares of Common Stock issuable upon exercise of warrants
owned by Columbia Capital Corporation ("Columbia Capital") and 357,166
shares, 655,203 shares and 1,584,286 shares owned by CCC Millimeter L.P.
("CCC Millimeter"), Columbia Millimeter Communications, L.P. ("Millimeter")
and Columbia Capital, respectively. Columbia Capital, as the sole general
partner of CCC Millimeter and Millimeter, has the power to vote and dispose
of the Common Stock held by CCC Millimeter and Millimeter. Robert Blow,
Mark J. Kington, David P. Mixer, James B. Murray and Mark R. Warner share
investment control of the shares held by such entities and may be deemed to
beneficially own such shares. Each of Messrs. Blow, Kington, Mixer, Murray
and Warner disclaims beneficial ownership of the shares held by such
entities, except to the extent of such individual's interest in such
entities. The address of each of Columbia Capital, CCC Millimeter and
Millimeter is 0 Court Square, P.O. Box 1465, Charlottesville, VA 22902.
(2) Includes 54,191 shares of Common Stock issuable upon exercise of warrants.
The address of Commco, L.L.C. is 4513 Pin Oak Court, Sioux Falls, SD 57103.
(3) Includes 8,000 shares of Common Stock issuable upon exercise of warrants
and 3,201 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998.
(4) Includes 3,201 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998. Does not include 117,999
shares of Common Stock issuable upon exercise of warrants or 1,534,964
shares of Common Stock beneficially owned in each case by members of
Mr. Demetree's family or a trust for their benefit, of which he disclaims
beneficial ownership. Mr. Demetree's address is 3740 Beach Blvd.,
Suite 306, Jacksonville, FL 32207.
(5) Includes 3,201 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998. Does not include shares of
Common Stock and shares of Common Stock issuable upon exercise of warrants
held by the Advent Partnerships, of which Mr. Fillat disclaims beneficial
ownership, except for 2,495 shares of Common Stock and 32 shares issuable
upon exercise of warrants.
(6) Includes 70,455 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998.
(7) Includes 35,001 shares of Common Stock issuable upon exercise of an option
exercisable within 60 days of June 15, 1998.
(8) Includes 1,734 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998 Mr. Murray is a Managing
Director of Columbia Capital Corporation. Excludes shares held by Columbia
Capital, CCC Millimeter and Millimeter. See Footnote 1. Mr. Murray's
address is c/o Columbia Capital Corporation, 0 Court Square, P.O. Box 1465,
Charlottesville, VA 22902.
(9) Includes 7,151 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of June 15, 1998.
(10) Includes 13,636 shares of Common Stock issuable upon conversion of stock
options exercisable within 60 days of June 15, 1998.
(11) Includes 16,250 shares of Common Stock issuable upon conversion of stock
options exercisable within 60 days of June 15, 1998.
(12) Includes 140,194 shares of Common Stock issuable upon exercise of options
and 10,527 shares of Common Stock issuable upon exercise of warrants
exercisable within 60 days of June 15, 1998.
-5-
<PAGE>
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation
paid to or accrued in each of the last three completed fiscal years, if
applicable, on behalf of the Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS AWARDS OPTIONS(#)(1) COMPENSATION
------------------- ----------- ------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Hirsch (2)............... 1997 $ 54,168(3) $54,167 100,000 800,000 $300,113(4)
Chairman, President and Chief 1996 __ __ __ __ __
Executive Officer 1995 __ __ __ __ __
Vernon L. Fotheringham (5)........ 1997 $274,992 $50,000 __ __ $ 44(6)
Vice Chairman 1996 $250,000 __ __ __ __
1995 $ 90,000 __ __ __ __
Thomas A. Grina................... 1997 $210,600 __ __ 228,666 $ 26(6)
Executive Vice President and 1996 $122,190(3) __ __ 181,818 $ 25,000(7)
Chief Financial Officer 1995 __ __ __ __ __
James D. Miller,.................. 1997 $157,500 __ __ 36,364 $ 113(6)
Senior Vice President 1996 $135,000(3) __ __ 36,364 __
Sales and Marketing 1995 __ __ __ 18,182 __
Richard A. Shields, Jr.(8)........ 1997 $153,750 __ __ 54,545 $ 26(6)
Senior Vice President 1996 $ 93,777(3) __ __ 14,545 __
Technical Operations 1995 __ __ __ __ __
Thomas M. Walker.................. 1997 $120,625 __ __ 35,000 $ 10(6)
Vice President 1996 $ 49,482(3) $10,625 __ 7,272 $ 2,943(7)
General Counsel 1995 __ __ __ __ __
- ------------
</TABLE>
(1) On July 31, 1997, the Board of Directors canceled certain options granted
under the Company's Restated Equity Incentive Plan (the "Equity Incentive
Plan") and issued new options in lieu thereof with a lower exercise price of
$7.875, the fair market value of the Common Stock on that date.
(2) Mr. Hirsch joined the Company in November 1997.
(3) Reflects compensation for a partial year. See "--Employment Agreements."
(4) Reflects payment of term life insurance premiums and moving expenses.
(5) Mr. Fotheringham resigned his position as Chairman, President and Chief
Executive Officer and was elected Vice Chairman of the Company effective
November 1997. He resigned his position as Vice Chairman of the Company
effective May 1998. He resigned his position as director effective June
1998.
(6) Reflects payment of term life insurance premiums.
(7) Reflects the reimbursement of moving expenses.
(8) Mr. Shields ceased being an executive officer of the Company in December
1997, and his employment with the Company terminated effective January 15,
1998.
-6-
<PAGE>
OPTION GRANTS
The following table sets forth certain information regarding stock option
grants made to the Named Executive Officers during the fiscal year ended
December 31, 1997. No grants were made during 1997 to Mr. Fotheringham.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (1)
--------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZATION VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
----------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Hirsch 600,000 25.9% $8.875 10/17/02 $1,471,199 $3,250,966
200,000 8.6% 12.50 10/17/02 0 358,655
Thomas A. Grina 46,848 2.0% 7.125 8/21/02 92,221 203,783
181,818 7.8% 7.875 7/30/02 395,585 874,138
James D. Miller 36,364 1.6% 7.875 7/30/02 79,118 174,830
Richard A. Shields, Jr. (3) 54,545 2.4% 7.875 7/30/02 118,675 262,240
Thomas M. Walker 35,000 1.5% 7.875 7/30/02 76,150 168,272
</TABLE>
- ------------
(1) On July 31, 1997, the Board of Directors canceled certain options granted
under the Equity Incentive Plan and issued new options in lieu thereof with
a lower exercise price of $7.875, the fair market value of the Common Stock
on that date.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant. 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.
(3) In connection with the termination of Mr. Shields employment, 36,545 of
these options terminated on January 15, 1998 and the remaining 18,000 will
remain exercisable until on January 14, 2000.
-7-
<PAGE>
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, 1997
of shares underlying unexercised options held by each of the Named Executive
Officers. As of December 31, 1997, Mr. Fotheringham held no options, and no
stock options had been exercised by any of the 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>
Henry C. Hirsch -- 800,000 -- $ 0
Thomas A. Grina 45,455 183,211 $ 5,682 $58,037
James D. Miller 20,001 34,545 $38,852 $28,548
Richard A. Shields 13,636 40,908 $ 1,705 $ 5,114
Thomas M. Walker 8,750 26,250 $ 1,094 $ 3,281
</TABLE>
- ------------
(1) Based on the last sales price of the Company's Common Stock reported on the
Nasdaq National Market on December 31,1997 of $8.00 per share, less the
exercise price payable upon exercise of such options.
DIRECTOR COMPENSATION
Each director who is not a full-time employee of the Company or one of its
subsidiaries receives $4,000 per year for services rendered as a director, $500
for each board meeting attended and $500 for each committee meeting attended
("Director Fees").
Also, non-employee directors are eligible to participate in the 1997 Equity
Incentive Plan for Non-Employee Directors (the "1997 Directors Plan"). The 1997
Directors Plan provides for automatic and discretionary grants of stock options
to directors who are not employees of the Company or one of its subsidiaries and
gives non-employee directors the ability to elect to receive Common Stock in
lieu of their Director Fees.
Under the 1997 Directors Plan, each eligible director received an initial
grant of options to purchase 20,000 shares of Common Stock, and each newly
elected non-employee director will receive a similar grant upon his or her first
appointment or election to the Board of Directors. In addition, each non-
employee director will be granted options to purchase 7,000 shares of Common
Stock at each annual meeting at which such director is reelected or is
continuing as a director. These options have an exercise price equal to the
fair market value of the Common Stock on the date of the grant, expire five
years after the date of grant, and become exercisable on the day before each of
the first, second and third annual stockholders meeting following the date of
grant.
The 1997 Directors Plan also allows each eligible director to elect to
receive annually in advance Director Fees in the form of deferred grants of
Common Stock, rather than cash, payable on the earlier of (i) the first business
day of the third January following the date of grant, (ii) a change of control
of the Company or (iii) the date the eligible director ceases to be a director
of the Company.
-8-
<PAGE>
EMPLOYMENT AGREEMENTS
On October 17, 1997, the Company entered into an employment agreement with
Henry C. Hirsch, providing for full-time employment as Chairman, President and
Chief Executive Officer through December 31, 2000 at a salary at the annual rate
of $325,000 for 1997 and 1998, $350,00 for 1999 and $400,000 for 2000. Under
the agreement, Mr. Hirsch is guaranteed an annual bonus of at least $54,167 for
1997, $325,000 for 1998 and $87,500 for 1999. The agreement further provides
that Mr. Hirsch's annual targeted bonus for years other than 1997 and 1998 will
be not less than 50% of his base salary, and that his maximum incentive bonus
will be 100% of his base salary, pursuant to such bonus or incentive
compensation plan as is available to executives of the Company generally or, if
there is no such plan, as determined by the Board or Directors based on
performance criteria set annually. Pursuant to the agreement, Mr. Hirsch was
granted five-year stock options under the Equity Incentive Plan for an aggregate
of 800,000 shares of Common Stock, of which 600,000 will be exercisable at
$8.875 per share, the fair market value on the day of the grant, and 200,000
will be exercisable at $12.50 per share. The Company also granted Mr. Hirsch
100,000 shares of deferred stock deliverable on January 2, 2001. The Company
also loaned Mr. Hirsch $887,500 to purchase 100,000 shares of Company Common
Stock at $8.875 per share with interest at the minimum applicable federal rate,
payable over five years and secured by the shares purchased. The Company has
also agreed to pay Mr. Hirsch $300,000 for relocation expenses. The agreement
precludes Mr. Hirsch from competing with the Company for two years after the
cessation of his employment, or a period equal to the length of his employment
up to two years, if he is terminated without cause. The agreement may be
terminated at any time by either party and provides that, if the Company
terminates Mr. Hirsch without cause, Mr. Hirsch's employment is terminated due
to his disability or death, or Mr. Hirsch terminates his employment as a result
of constructive termination, Mr. Hirsch will be entitled to receive the full
amount of his base salary and bonus (at the guaranteed amount for 1997 and 1998
and at the target amounts for 1999 and 2000) for the remainder of the agreement
term or, if Mr. Hirsch is terminated after December 31, 1999, to be paid for
twelve months his base salary and target bonus in effect for the year 2000.
Upon such termination, Mr. Hirsch will also be entitled to receive medical and
term life insurance for the remainder of the employment term, but no less than
twelve months and no more than eighteen months following termination. In
addition, all options granted to Mr. Hirsch not yet vested will vest and remain
exercisable for the lesser of one year or their original term.
On October 17, 1997, the Company also entered into a Change of Control
Agreement with Mr. Hirsch entitling him to certain benefits if his employment
with the Company is terminated, other than for cause or his disability or death,
or if he resigns for good reason within 24 months of any change of control of
the Company. Upon such a termination, the agreement provides that: (i) the
Company will pay Mr. Hirsch a cash payment equal to his annual base salary at
the time of termination, to the extent not theretofore paid for the year, plus a
prorated portion of his maximum incentive bonus for the year and any accrued and
unpaid vacation pay; (ii) any stock, stock option or other awards granted to Mr.
Hirsch by the Company will immediately vest and become exercisable in full and
shall remain exercisable for the lesser of four years or their original term;
(iii) the Company will pay to Mr. Hirsch a cash payment equal to the greater of
(a) Mr. Hirsch's aggregate base salary plus maximum incentive compensation for
the period from termination through December 31, 2000 and (b) two times his
annual base salary rate at the date of termination plus either his maximum
incentive compensation for the year in which termination occurs or his maximum
incentive compensation in effect immediately prior to the change of control,
whichever is higher; (iv) the Company will continue to insure Mr. Hirsch and
his dependents in the Company's life and medical insurance plans for up to two
years after termination; and (v) Mr. Hirsch will be entitled to return the
100,000 shares of Common Stock pledged to secure the promissory note described
above in full satisfaction of the promissory note if the fair market value of
the Common Stock is less than the amount due on the note.
On August 21, 1997, the Company entered into a two-year employment
agreement with Thomas A. Grina, providing for full-time employment as executive
vice president and Chief Operating Officer at an annualized base salary of
$210,000 for 1997, $235,000 for 1998 and $258,000 for 1999. Under the Agreement,
Mr. Grina is eligible for an annual target incentive bonus of not less than 50%
of his annual salary. The agreement precludes Mr. Grina from competing with the
Company for one year after the cessation of his employment. The agreement may be
terminated by either party and provides that, if Mr. Grina's employment is
terminated by the Company other than for cause or by Mr. Grina as a result of
-9-
<PAGE>
constructive termination, Mr. Grina will be entitled to receive an amount equal
to twelve months of his base salary and bonus in effect at his termination and
continuation of benefits to which he would have otherwise been entitled for a
period of twelve months from the date of such termination, and all options
granted to Mr. Grina will vest and remain exercisable for three years.
The Company's employment agreement with Mr. Fotheringham provided for his
full-time employment as Vice Chairman at an annualized base salary of $275,000
for 1997 and $300,000 for 1998. Under an October 1997 amendment to his
employment agreement, Mr. Fotheringham received a guaranteed bonus of $50,000
for 1997. Mr. Fotheringham resigned his position effective as of May 1998. He
resigned his position as director of the Company effective as of June 1998. The
agreement precludes Mr. Fotheringham from competing with the Company for one
year after the cessation of his employment.
The Company's employment agreement with James D. Miller provides for full-
time employment at an annual base salary of $150,000 and an annual bonus in
designated amounts based upon the achievement of specified performance goals.
The agreement has a term of three years expiring January 1999 and precludes him
from competing with the Company for one year after the cessation of employment.
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 will 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's employment agreement with Richard A. Shields provided for
full-time employment at an annual base salary of $110,000 and an annual bonus in
designated amounts based on the achievement of specified performance goals. The
agreement precludes him from competing with the Company for one year after the
cessation of employment. Mr. Shields' employment with the Company terminated
effective January 15, 1998. Mr. Shields is entitled to salary and benefit
continuation for three months from the date of termination. In connection with
the termination, 36,545 of Mr. Shields' options terminated on January 15, 1998
and the remaining 18,000 will terminate on January 14, 2000.
REPRICING OF OPTIONS
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
On July 31, 1997, the Board of Directors canceled certain options granted
under the Equity Incentive Plan and issued new options in lieu thereof with a
lower exercise price of $7.875, the fair market value of the Company's common
stock on that date. The option cancellation and re-issue did not increase the
number of outstanding employee stock options, as re-issued options replace
earlier options that were canceled. The Compensation Committee of the Board of
Directors (the "Compensation Committee") recommended this action because it
believed it was necessary to maintain a competitive employee compensation
program. Most employee options outstanding at the time of the repricing were
granted above the Company's initial public offering price, and there had been a
downward trend in the price of the Company's stock since that offering.
The Company's option plan is an integral part of the Company's overall
employee compensation and benefit program providing for participation by
employees key to the overall strategic goals of the Company. The option policy
has encouraged a long-term focus by employees, helped align employees' interests
with those of the shareholders of the Company, provided incentive to employees
to maximize revenue and profit growth, and helped maintain compensation levels
which are comparable to those at other telecommunications companies. The
aggressive environment in the telecommunications industry makes it essential
that the Company have a competitive stock option program in order to attract,
retain and motivate high-quality personnel. Furthermore, the Company's stock
option program enables the Company to compensate employees competitively while
conserving cash for execution of its business plan.
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<PAGE>
The Compensation Committee believes that option cancellation and reissue
should be used sparingly so as not to contradict the fundamental incentive and
motivating nature of employee stock options. Nonetheless, the Compensation
Committee believes that the Company properly considered option cancellation and
re-issue (and the potential compensation involved) in light of competitive
industry standards and what was in the best overall interest of the Company and
its stockholders. Furthermore, for these reasons, among other things, the
Compensation Committee believes it was reasonable to lengthen the vesting
requirements of the re-issued options as compared with the outstanding options
that were canceled.
The Compensation Committee believes that it would have been detrimental to
the Company and its future performance, particularly at this critical juncture
in the growth of the telecommunications market, to have an employee workforce
that was not fully motivated. Furthermore, the Compensation Committee believes
that in the tight telecommunications job market it was important to maintain a
competitive compensation program in order to prevent the loss of valuable
employees. Therefore, the Compensation Committee believes that the cancellation
and reissue of the options was a reasonable course of action designed to
eliminate such adverse factors on the Company's future performance.
COMPENSATION COMMITTEE
Mark C. Demetree
James B. Murray, Jr.
OPTION REPRICING SINCE INCEPTION
The Company has had one option repricing since its inception. The
following table sets forth certain information regarding the repricing of
options held by the Company's Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE EXERCISE EXPIRATION
UNDERLYING OF STOCK PRICE AT NEW DATE OF
REPRICED AT TIME OF TIME OF EXERCISE REPLACED
NAME DATE OPTIONS REPRICING REPRICING PRICE OPTIONS
- -------------------- ----------- --------- --------- ---------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Grina 7/31/98 181,818 $7.875 $17.1875 $7.875 7/30/02
James D. Miller 7/31/98 36,364 7.875 17.1875 7.875 7/30/02
Richard A. Shields 7/31/98 12,727 7.875 10.835 7.875 7/30/02(1)
7/31/98 41,818 7.875 17.1875 7.875 7/30/02
Thomas M. Walker 7/31/98 7,272 7.875 17.1875 7.875 7/30/02
</TABLE>
- ------------
(1) In connection with the termination of Mr. Shields employment, 36,545 of
these options terminated on January 15, 1998 and the remaining 18,000 will
terminate on January 14, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------
The Company's executive compensation program is designed to reward and retain
executives who are capable of leading the Company in achieving its strategic and
financial objectives in the competitive and rapidly evolving telecommunications
industry.
The Company relies on three compensation components: salary, incentive cash
bonuses and stock-based incentive compensation. Each of the Company's executive
officers has an annual base salary, established by an employment
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<PAGE>
agreement or otherwise, at a level the Company believes is competitive for
comparable companies in its industry and geographic area and allows it to
attract and retain experienced executives capable of managing its growth. The
Committee relies in part on annual industry salary surveys and has occasionally
commissioned independent surveys.
The Company has developed an incentive bonus program under which its
executives are eligible to receive incentive cash bonuses as determined by the
Board of Directors for each fiscal year. One of the Company's executive
officers is entitled under his employment agreement to a minimum bonus, but
generally bonuses are intended to reward executives when the Company achieves
its business objectives.
The Compensation Committee believes that long-term stock price appreciation
will reflect the Company's achievement of its strategic goals and objectives.
Accordingly, the Company seeks to create long-term performance incentives for
its employees and directors by aligning their economic interest with the
interests of the Company's long-term shareholders through the Company's stock-
based incentive compensation program. Stock options have generally been granted
at a price equal to the fair market value of the Company's Common Stock on the
date of grant, and as a result, receipt of value by the employee is dependent
upon an increase in the fair market value of the Company's Common Stock. Awards
are based on the anticipated contributions by such employees in helping the
Company achieve its strategic goals and objectives.
Mr. Hirsch's base salary and bonus for 1997 was determined pursuant to an
employment agreement entered into between the Company and Mr. Hirsch in November
1997. To induce Mr. Hirsch to enter into that employment contract, the Company
also granted Mr. Hirsch five-year stock options for an aggregate of 800,000
shares of Common Stock, of which 600,000 is exercisable at $8.875 per share, the
fair market value on the day of the grant, and 200,000 are exercisable at $12.50
per share. The Company also granted Mr. Hirsch 100,000 shares of deferred
Common Stock deliverable on January 2, 2001. The Company also loaned Mr. Hirsch
$887,500 to purchase 100,000 shares of Company Common Stock at $8.875 per share
with interest at the minimum applicable federal rate, payable over five years
and secured by the shares purchased. The Compensation Committee believes that
these stock awards were appropriate because the long-term appreciation of these
awards will reflect the achievement of the Company's strategic goals and
objectives.
In adopting and administering executive compensation plans and arrangements,
the Compensation Committee will consider whether the deductibility of such
compensation will be limited under Section 162(m) of the Internal Revenue Code,
as amended, and, in appropriate cases, may serve to structure arrangements so
that any such limitation will not apply.
With respect to the above matters, the Compensation Committee submits this
report.
COMPENSATION COMMITTEE
Mark C. Demetree
James B. Murray, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Demetree, Murray, Fillat and Fotheringham served on the
Compensation Committee during 1997. Mr. Fillat served on the Compensation
Committee until February 1997. Mr. Fotheringham served on the Compensation
Committee until October 1997. Mr. Fotheringham was an executive officer and
employee of the Company until May 1998.
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<PAGE>
CERTAIN TRANSACTIONS
The following information regarding certain transactions with
directors, officers and holders of record or beneficially of more than five
percent of the Company's Common Stock does not include information for any
period during which such person or entity, as the case may be, was not an
officer, director or five percent holder.
In May 1998, the Company acquired certain 38 GHz authorizations from
Columbia Capital and one of its affiliates in exchange for 1,335,750 shares of
Common Stock. Upon the occurrence of certain contingencies, the Company may
also be required to purchase additional 38 GHz authorizations in exchange for an
additional 58,292 shares of Common Stock. The Company also has an option to buy
from Columbia Capital, and Columbia Capital has an option to sell to the
Company, certain additional authorizations in exchange for approximately 180,274
additional shares of Common Stock. In addition, the Company has a right of
first offer for all 38 GHz authorizations that the FCC may grant Columbia
Capital in the future.
In connection with the acquisition of certain 38 GHz licenses from
CommcoCCC, Inc. ("CommcoCCC") in February 1997, the Company gave Commco, L.L.C.,
a stockholder of CommcoCCC, an option to acquire twelve 38 GHz FCC licenses in
specified markets, in which the Company has more than one license. Such option
was exercised in June 1997, with closing subject to FCC approval. The purchase
price will be paid by a non-recourse note secured by a pledge of Common Stock
and will be determined based on the sales price of Common Stock on the day the
option was exercised and the population covered by the twelve licenses. The
Company has the right to be a reseller with respect to these licenses for a term
of five years at market rates.
During the year ended December 31, 1997, the Company paid Pierson &
Burnett, L.L.P., a law firm of which W. Theodore Pierson, Jr.,an executive
officer of the Company until March 1997, is a principal, approximately $666,695
for legal services.
Pursuant to his employment agreement, in November 1997, the Company
loaned Mr. Hirsch, the Chairman of the Board of Directors and Chief Executive
Officer of the Company, $887,500 to purchase 100,000 shares of Common Stock at
$8.875 per share, the fair market value of the stock on the date of the loan.
The loan bears interest at the minimum applicable federal rate, is payable over
five years and is secured by the shares purchased. As of June 15, 1998, all of
the debt was outstanding.
As a condition to an acquisition of assets, the Board of Directors
elected Mr. Murray as a director.
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<PAGE>
PERFORMANCE GRAPH
The following stock price performance graph compares the cumulative
total return on the Common Stock with the cumulative total return of the
Standard & Poor's Composite 500 Index and of the CRSP Nasdaq Telecommunications
Peer Group Index from November 5, 1996, the date of the Company's initial public
offering, through December 31, 1997 assuming a $100 initial investment in each
case. The stock price performance on the graph below is not necessarily
indicative of future price performance.
[GRAPH]
<TABLE>
<CAPTION>
November 5, 1996 December 31, 1996 December 31, 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advanced Radio Telecom Corp. $100 $ 75.00 $ 53.33
- ----------------------------------------------------------------------------------------
S&P 500 $100 $103.72 $135.89
- ----------------------------------------------------------------------------------------
CRSP Nasdaq Telecommunications $100 $101.02 $149.55
Peer Group Index
- ----------------------------------------------------------------------------------------
</TABLE>
INDEPENDENT AUDITORS
The Board of Directors selected the firm of Coopers & Lybrand L.L.P.
to audit the financial statements of the Company for the fiscal year ended
December 31, 1998 and to report on the results of their audit. A representative
of Coopers & Lybrand L.L.P. is expected to be present at the Meeting with the
opportunity to make a statement if he or she desires and to respond to
appropriate questions.
QUORUM, REQUIRED VOTES AND
METHOD OF TABULATION
Consistent with Delaware law and under the Company's by-laws, a
majority of the shares entitled to vote on a particular matter, present in
person or represented by proxy, constitutes a quorum as to such matter. Votes
cast by proxy or in person at the Meeting will be counted by an election
inspector appointed by the Company for the meeting. The nominees who receive the
greatest number of votes properly cast for the election of directors will be
elected directors. The election inspector will count shares represented by
proxies that reflect abstentions and "broker non-votes" (i.e., shares
represented at the meeting held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
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<PAGE>
voting power on a particular matter) only as shares that are present and
entitled to vote on the matter for purposes of determining the presence of a
quorum, but neither abstentions nor broker non-votes will have any effect on the
outcome of voting on the election of directors.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be considered at the Company's
1999 annual meeting of stockholders must be received by the Company not later
than February 29, 1999 at its principal executive offices, 500 108th Avenue NE,
Suite 2600, Bellevue, WA 98004 to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that annual meeting.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the
Meeting which is not referred to in the accompanying Notice of Annual Meeting of
Stockholders. However, should any such matters be presented, the persons named
in the enclosed proxy will have discretionary authority to take such action in
regard to such matters as in their judgment seems advisable.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE
WITHOUT CHARGE BY WRITING TO THE COMPANY AT: ADVANCED RADIO TELECOM CORP., 500
108TH AVENUE NE, SUITE 2600, BELLEVUE, WASHINGTON, 98004, ATTN: SHAREHOLDER
RELATIONS.
-15-
<PAGE>
PROXY
ADVANCED RADIO TELECOM CORP.
500 108th Ave., NE - Suite 2600 - Bellevue, Washington 98004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Henry C. Hirsch, Thomas A. Grina and Thomas
M. Walker, and each of them, each with power to appoint his substitute, as
proxies to vote and act at the Annual Meeting of Stockholders of Advanced Radio
Telecom Corp. to be held on July 28, 1998, 10:00 A.M. (local time) at the
Bellevue Hilton, 100 112th Avenue NE, Bellevue, WA 98004, or any adjournment
thereof (the "Meeting") with respect to the number of shares of Common Stock of
Advanced Radio Telecom Corp. as to which the undersigned is entitled to vote or
act. The undersigned instructs such proxies to vote as designated below for the
nominees specified below, as described in the accompanying Notice of Meeting and
Proxy Statement, receipt of which is acknowledged. All proxies heretofore
given by the undersigned in respect of the Meeting are hereby revoked.
- ---------- CONTINUED AND TO BE SIGNED ON REVERSE SIDE -----------
SEE REVERSE SEE REVERSE
SIDE SIDE
- ---------- -----------
<PAGE>
Please mark
[ X ] votes as in -------
this example. |
|
|
Unless otherwise specified, this proxy will be voted FOR the election of
all nominees for directors and in the discretion of the named proxies as
seems in their judgment advisable as to any other matter that may come
before the Meeting or any adjournment thereof.
1. ELECTION OF DIRECTORS:
Nominees: James C. Cook and Thomas J. Wynne
FOR WITHHELD
BOTH FOR BOTH
NOMINEES NOMINEES
[_] [_]
[_]
---------------------------------------
(instruction: to withhold authority to
vote for either nominee, write that
nominee's name on the line above.)
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title. If a corporation,
please sign in full corporate name by president or
other authorized officer. If a partnership, please sign
in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature: Date: Signature: Date:
--------------- ------- ---------------- -------
