<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to _____
Commission File Number 000-21091
ADVANCED RADIO TELECOM CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1869023
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
(Address of principal executive offices)
(425) 688-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [_].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 26,572,203 shares of common
stock, $.001 par value, at August 13, 1998.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 3,741,291 $ 7,135,427
Short-term investments..................... 3,005,547 18,210,220
Pledged securities......................... 18,795,289 18,517,640
Restricted cash............................ 32,060 1,032,060
Accounts receivable........................ 194,014 199,316
Prepaid expenses and other current assets.. 88,596 112,825
------------ ------------
Total current assets..................... 25,856,797 45,207,488
Pledged securities......................... 17,463,350 25,842,275
Property and equipment, net................ 25,799,020 25,294,946
FCC licenses, net.......................... 192,389,722 131,210,102
Deferred financing costs, net.............. 4,367,944 4,502,330
Other assets............................... 446,943 502,608
------------ ------------
Total assets............................. $266,323,776 $232,559,749
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable..................... $ 1,570,684 $ 3,067,984
Accrued compensation and benefits.......... 1,679,115 1,775,646
Book overdraft............................. 3,055,759
Other accrued liabilities.................. 1,966,061 3,109,631
Accrued interest payable................... 7,035,719 7,113,391
Current portion of long-term debt.......... 283,960 1,476,256
------------ ------------
Total current liabilities................ 12,535,539 19,598,667
Long-term debt, net of current portion...... 107,182,470 106,823,103
Deferred income tax liability............... 42,231,751 29,880,916
------------- ------------
Total liabilities........................ 161,949,760 156,302,686
Commitments and contingencies
Stockholders' equity:
Serial preferred stock, $.001 par value,
10,000,000 shares authorized,
none issued and outstanding...............
Common stock, $.001 par value, 100,000,000
shares authorized, 26,700,623
and 21,429,485 shares issued and
outstanding............................... 26,701 21,429
Additional paid-in capital................. 222,142,123 172,892,420
Note receivable from stockholder........... (887,500) (887,500)
Accumulated deficit........................ (116,907,308) (95,769,286)
------------ -------------
Total stockholders' equity............... 104,374,016 76,257,063
------------ -------------
Total liabilities and stockholders'
equity............................... $ 266,323,776 $232,559,749
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Service revenue....................................... $ 205,770 $ 186,088 $ 442,327 $ 328,223
Equipment sales and construction revenue.............. 356,970
------------ ------------ ------------ ------------
Total revenue....................................... 205,770 186,088 442,327 685,193
Costs and expenses:
Technical and network operations.................... 1,573,663 1,240,278 3,184,915 2,621,878
Cost of equipment sales and construction............ 214,399
Sales and marketing................................. 1,380,791 3,786,175 2,892,869 6,241,797
General and administrative.......................... 2,802,001 3,401,285 5,200,089 6,383,433
Research and development............................ 73,923 69,170 213,397 128,715
Depreciation and amortization....................... 1,539,953 1,407,301 2,968,921 2,361,275
------------ ------------ ------------ ------------
Total operating costs and expenses................. 7,370,331 9,904,209 14,460,191 17,951,497
Income (loss) from operations......................... (7,164,561) (9,718,121) (14,017,864) (17,266,304)
Interest and other:
Interest expense..................................... 5,100,148 5,084,734 10,221,849 8,616,576
Financing commitment expense......................... 2,699,881
Other................................................ 406,740 406,740
Interest income...................................... (892,788) (1,496,825) (1,715,208) (2,559,574)
------------ ------------ ------------ ------------
Income (loss) before income taxes................... (11,778,661) (13,306,030) (22,931,245) (26,023,187)
Deferred income tax benefit........................... 1,464,053 609,616 1,793,223 864,797
------------ ------------ ------------ ------------
Net income (loss) $(10,314,608) $(12,696,414) $(21,138,022) $(25,158,390)
============ ============ ============ ============
Basic and diluted net income (loss) per common share.. $ (0.42) $ (0.65) $ (0.92) $ (1.42)
Weighted average common shares........................ 24,332,349 19,624,874 23,041,744 17,735,974
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- PAID-IN FROM ACCUMULATED
SHARES PAR VALUE CAPITAL STOCKHOLDER DEFICIT TOTAL
---------- --------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 21,429,485 $21,429 $172,892,420 $(887,500) $ (95,769,286) $ 76,257,063
Common stock issued in exchange
for certain FCC licenses 4,529,519 4,530 48,343,268 48,347,798
Shares issued in connection with note
receivable from stockholder 100,000 100 (100)
Warrants exercised 626,151 626 19,063 19,689
Options exercised 15,468 16 92,258 92,274
Accrued stock compensation 795,214 795,214
Net income (loss) (21,138,022) (21,138,022)
---------- ------- ------------ --------- ------------- ------------
Balance, June 30, 1998 26,700,623 $26,701 $222,142,123 $(887,500) $(116,907,308) $104,374,016
========== ======= ============ ========= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ (21,138,022) $(25,158,390)
Adjustment to reconcile net loss to net cash used in operating
activities:
Non-cash compensation expense................................... 795,214 449,313
Depreciation and amortization................................... 2,968,921 2,361,275
Non-cash interest expense....................................... 777,209 824,263
Financing commitment expense.................................... 2,699,881
Deferred income tax benefit..................................... (1,793,223) (864,797)
Changes in operating assets and liabilities:
Accrued interest payable...................................... (77,672) 7,491,060
Accounts receivable........................................... 5,302 1,371,290
Accrued interest on securities
and investments.............................................. (1,308,390) (1,261,232)
Accounts payable and accrued liabilities...................... (2,022,783) (1,674,200)
Prepaid expenses and other current assets..................... 24,229 (78,474)
Other assets.................................................. 55,665 (198,774)
------------ -------------
Net cash used in operating activities (21,713,550) (14,038,785)
Cash flows from investing activities:
Purchases of property and equipment............................. (2,760,412) (15,571,289)
Additions to FCC licenses....................................... (423,004) (5,398,269)
Purchases of pledged securities................................. (51,778,066)
Purchases of short-term investments............................. (5,127,663) (19,671,556)
Proceeds from sale of short-term investments.................... 20,562,000
Proceeds from maturities of pledged securities.................. 9,180,000
Proceeds from restricted cash................................... 1,000,000
------------ -------------
Net cash provided by (used in) investing activities........... 22,430,921 (92,419,180)
Cash flows from financing activities:
Proceeds from issuance of Senior Notes and warrants............. 135,000,000
Warrant issuance costs.......................................... (1,254,697)
Book overdraft.................................................. (3,055,759)
Proceeds from option and warrant exercises...................... 111,963 308,646
Principal payments of long-term debt............................ (1,167,711) (1,121,997)
Additions to deferred financing costs........................... (3,984,428)
------------ -------------
Net cash (used in) provided by financing activities........... (4,111,507) 128,947,524
------------ -------------
Net (decrease) increase in cash and cash equivalents.............. (3,394,136) 22,489,559
Cash and cash equivalents, beginning of period.................... 7,135,427 1,974,407
------------ -------------
Cash and cash equivalents, end of period.......................... $ 3,741,291 $ 24,463,966
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY AND BASIS OF PRESENTATION:
Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART" or
the "Company") intends to provide broadband data services to business customers
without fiber connectivity. The Company is building a packet-switched
broadband data network.
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company. The financial 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
consolidated financial position of the Company as of June 30, 1998, the
consolidated results of its operations for the three and six months ended June
30, 1998 and 1997 and its cash flows for the six months ended June 30, 1998 and
1997.
The Company will require significant additional capital to fund its
operations and business plan. ART currently estimates that it will require in
excess of $1 billion over the next five years for capital expenditures, working
capital and funding of operations. In July 1998, the Company and Lucent
Technologies, Inc. ("Lucent") entered into a commitment letter (the "Working
Capital Commitment") for Lucent to provide the Company with up to $25 million of
unsecured revolving loans for working capital purposes. The availability of $15
million of the total commitment is subject to the achievement of certain
milestones by ART. Loans made pursuant to the Working Capital Commitment are
due June 30, 1999, unless extended by Lucent for up to one year from the
effectiveness of definitive documentation of the financing to be provided under
the Lucent Commitment Letter (defined below). Upon ART's raising of at least
$50 million of debt or equity capital, any loans under the Working Capital
Commitment must be repaid, and the Working Capital Commitment will terminate.
The Working Capital Commitment requires that ART initially issue warrants to
purchase up to 1% of ART's common stock and up to an additional 2.3% of ART's
common stock as the facility is utilized. ART became obligated to issue the
first .5% of these warrants to Lucent upon execution of the Working Capital
Commitment. The first 1% of the warrants will have an exercise price of $.01
per share, and the remaining 2.3% will have an exercise price equal to the
market price of ART common stock at the time of effectiveness of definitive
documentation of the financing to be provided under the Lucent Commitment
Letter. Consummation of the Working Capital Commitment is subject to various
conditions, including execution of definitive financing agreements, compliance
with financial covenants, completion of due diligence and the absence of any
material adverse change in the Company.
In April 1998, the Company and Lucent entered into a commitment letter (the
"Lucent Commitment Letter") setting forth the terms and conditions under which
Lucent will provide purchase money financing in an aggregate amount of up to
$200 million, to be used to finance the purchase of the Company's data network
from Lucent. Under the Lucent Commitment Letter, Lucent made $10 million in
initial purchase money loans (the "Initial Purchase Money Loans") immediately
available to ART. As of June 30, 1998, the Company had not drawn on the Initial
Purchase Money Loans. The Initial Purchase Money Loans will be due March 31,
1999, unless extended by Lucent for up to one year from the effectiveness of
definitive documentation of the financing to be provided under the Lucent
Commitment Letter. Subject to other conditions, upon ART's raising at least $50
million of debt or equity capital, Lucent will make available purchase money
loans equal to 200% of the aggregate capital raised, not to exceed $200 million,
including the Initial Purchase Money Loans. Other than the Initial Purchase
Money Loans already available, consummation of the Lucent Commitment Letter is
subject to the same conditions as the Working Capital Commitment and to the
Company's raising at least $50 million of debt or equity capital. There can be
no assurance that the financing contemplated by the Lucent Commitment Letter
will be consummated.
The Company expects to seek substantial additional capital, including
financing sufficient to satisfy the additional capital requirements under the
Lucent Commitment Letter. The Company believes that its existing capital,
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<PAGE>
together with funds initially available under the Working Capital Commitment and
the Initial Purchase Money Loans, is sufficient to fund its operations at
current levels at least through the end of 1998 and to meet its capital
commitments at June 30, 1998. However, without additional capital, the Company
will not be able to fully implement its business plan. There can be no
assurance that the Company will be able to obtain such additional capital when
required, or, if available, that the Company will be able to obtain it on
acceptable terms. If the Company fails to obtain additional capital when
required, such failure could result in the modification, delay of abandonment of
some or all of the Company's development and expansion plans and could
materially adversely affect the Company.
Certain information and disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The year-end condensed consolidated
balance sheet was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles. The
unaudited condensed consolidated financial statements should be read in
conjunction with the Company's December 31, 1997, audited consolidated financial
statements and notes thereto contained in the Company's 1997 Form 10-K on file
with the Securities and Exchange Commission.
PROPERTY AND EQUIPMENT
As of June 30, 1998, approximately $6.7 million out of a total of $23.8
million of wireless transmission equipment had been placed in service.
As of June 30,1998, the Company had outstanding purchase commitments for
approximately $1.8 million of wireless transmission equipment.
FCC LICENSES
In May 1998, the Company acquired from Columbia Capital Corporation and one
of its affiliates ("Columbia") 23 38 Ghz licenses for 1,335,750 shares of common
stock. The acquisition was a tax free exchange for Federal income tax purposes
and was accounted for as a purchase business combination for financial reporting
purposes. The total acquisition cost was approximately $15.7 million, comprised
of the fair value of the 1,335,750 shares of common stock issued of
approximately $12.0 million, direct costs incurred of approximately $80,000 and
the related deferred tax liability of approximately $3.6 million. The
operations of Columbia were minimal through the date of acquisition, and the
total acquisition cost was allocated to FCC licenses.
In May 1998, the Company acquired DCT Communications Inc. ("DCT"), which
held 49 38 Ghz licenses, in exchange for 3,124,875 shares of the Company's
common stock. The acquisition was a tax free exchange for Federal income tax
purposes and was accounted for as a purchase business combination for financial
reporting purposes. The total acquisition cost was approximately $45.9 million,
comprised of the fair value of the 3,124,875 shares of common stock issued of
approximately $35.2 million, direct costs incurred of approximately $182,000 and
the related deferred tax liability of approximately $10.5 million. The
operations of DCT were minimal through the date of acquisition, and the total
acquisition cost was allocated to FCC licenses.
In March 1998, the Company acquired a certain 38 Ghz license in exchange
for 68,895 shares of the Company's common stock. The total acquisition cost was
approximately $1.2 million, which consisted of the aggregate market value of the
shares issued and direct costs.
In the third quarter of 1998, the Company entered into definitive
agreements to acquire certain licenses in southern California, including Los
Angeles, for a purchase price of $4.3 million in cash and certain other licenses
for 154,114 shares of common stock. The consummation of the acquisitions is
subject to various conditions including FCC approval.
-7-
<PAGE>
FINANCING COSTS
Direct costs associated with obtaining financing are deferred and charged
to interest expense using the effective interest rate method over the term of
the debt or, in the case of equity, charged to additional paid-in capital.
Deferred costs associated with unsuccessful financings are charged to expense.
The Company charged approximately $407,000 to expense during the six months
ended June 30, 1998 associated with its unsuccessful debt offering.
2. INCOME TAXES:
Deferred tax assets and liabilities at June 30, 1998 and December 31, 1997, were
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....... $ 37,005,000 $ 28,385,000
Accrued compensation and benefits...... 1,264,000 755,000
Equipment depreciation and impairment.. 1,672,000 3,071,000
Valuation allowance.................... (16,737,751) (18,833,916)
------------ ------------
23,203,249 13,377,084
Deferred tax liabilities:
FCC licenses........................... (65,435,000) (43,258,000)
------------ ------------
Net deferred tax liability............. $(42,231,751) $(29,880,916)
============ ============
</TABLE>
Differences between the tax bases of assets and liabilities and their
financial statement amounts are reflected as deferred income taxes based on
enacted tax rates. In May 1998, the Company reversed approximately $8.5 million
of its deferred tax asset valuation allowance as a result of recording deferred
taxes arising from the Columbia and DCT acquisitions. The remaining net
deferred tax assets at June 30, 1998, have been reduced by a valuation allowance
based on management's determination that the recognition criteria for
realization of a portion of the deferred tax assets has not been met.
3. COMMON STOCK:
During 1998, the Company entered into an agreement with one of its officers
to issue 35,000 shares of common stock deliverable in 2001 that has been
reflected as a non-cash compensation charge of approximately $507,000.
4. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosure of cash flow information is summarized below for the six
months ended June 30:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Non-cash financing and investing activities:
Issuance of shares for licenses..................... $48,347,798 $87,500,000
Value ascribed to warrants.......................... 29,707,509
Additions to property & equipment................... 829,217
Interest paid......................................... 9,526,224 287,716
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
From its inception in 1993 to the fourth quarter of 1996, the Company
primarily focused on acquiring licenses, hiring management and other key
personnel, raising capital, acquiring equipment and roof rights and developing
its operating and support systems and infrastructure. In the fourth quarter of
1996, the Company started commercial operations primarily selling connectivity
to various telecommunications companies as a wholesale carriers' carrier.
Recognizing the opportunity in the data services market, the Company altered its
strategy in the first quarter of 1998 to sell a variety of broadband data
services to end user customers and to deploy a broadband data network.
Accordingly, the results of the Company in 1997 reflect a business no longer
being pursued by the Company.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997:
Revenue for the six months ended March 31, 1998, was $442,327 compared to
$685,193 for the same period in 1997. The revenue for the first six months of
1997 included $356,970 of non-recurring equipment sales and construction revenue
associated with radio links installed for a third party. The Company does not
expect to routinely sell equipment and install radio links for third parties in
the future.
Operating costs and expenses were approximately $14.5 million for the six
months ended June 30, 1998, compared to approximately $18.0 million for the six
months ended June 30, 1997. Cost of equipment sales and construction of
$214,399 incurred in the 1997 period related to non-recurring revenue. The
Company initiated certain restructuring activities in the third and fourth
quarter of 1997 intended to align the Company's organization more closely with
its current marketing and business development plans and to conserve capital
resources. While such restructuring has reduced expenses, in future periods the
Company expects increases in cash expenses for network operations and sales and
marketing as the Company implements its business plan. Depreciation and
amortization was approximately $3.0 million for the six months ended June 30,
1998, compared to approximately $2.4 million for the six months ended June 30,
1997. The increase was primarily due to amortization of additional FCC
licenses. Excluding these non-cash and non-recurring items, operating costs and
expenses for the six months ended June 30, 1998 were approximately $11.5 million
compared to approximately $15.4 million for the six months ended June 30, 1997.
Net interest and other expenses were approximately $8.9 million for the six
months ended June 30, 1998 compared to approximately $8.8 million for the six
months ended June 30, 1997. Included in net interest and other expenses for
1998 was a charge for $406,740 related to an unsuccessful debt offering.
Included in net interest and other expenses for 1997 was approximately $2.7
million related to a financing commitment which was terminated in 1997 upon the
sale of the Company's 14% Senior Notes due 2007 (the "Senior Notes"). The
issuance of the Senior Notes in February 1997 will continue to cause interest
expense to increase in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Through June 30, 1998, funding for the Company's acquisitions, capital
expenditures and net operating losses has been provided from private placements
of equity and bridge financings in 1994 through 1996, the Company's initial
public offering in November 1996 and the Company's public offering of units
consisting of its Senior Notes and warrants in February 1997. Approximately $51
million of the approximately $130 million net proceeds from the sale of the
units was used to purchase a portfolio of U.S. Treasury securities that will
provide for interest payments on the Senior Notes through February 2000.
Because the Senior Notes have "significant original issue discount" for tax
purposes, the Company will not be able to deduct the interest expense related to
the accretion of this original issue discount for tax purposes.
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<PAGE>
As of June 30, 1998, the Company had outstanding capital commitments of
approximately $1.8 million. During the six months ended June 30, 1998, the
Company issued 4,529,519 shares of common stock to acquire certain FCC licenses.
In addition, the Company has entered into definitive agreements to acquire
additional licenses for $4.3 million in cash and 154,114 shares of ART's common
stock. The consummation of such acquisitions is subject to various conditions
including FCC approval. The Company may continue to acquire additional licenses
in exchange for common stock or cash.
The Company will require significant additional capital to fund its operations
and business plan. ART currently estimates that it will require in excess of $1
billion over the next five years for capital expenditures, working capital and
funding of operations. In July 1998, the Company and Lucent Technologies, Inc.
("Lucent") entered into a commitment letter (the "Working Capital Commitment")
for Lucent to provide the Company with up to $25 million of unsecured revolving
loans for working capital purposes. The availability of $15 million of the
total commitment is subject to the achievement of certain milestones by ART.
Loans made pursuant to the Working Capital Commitment are due June 30, 1999,
unless extended by Lucent for up to one year from the effectiveness of
definitive documentation of the financing to be provided under the Lucent
Commitment Letter (defined below). Upon ART's raising of at least $50 million
of debt or equity capital, any loans under the Working Capital Commitment must
be repaid, and the Working Capital Commitment will terminate. The Working
Capital Commitment requires that ART initially issue warrants to purchase up to
1% of ART's common stock and up to an additional 2.3% of ART's common stock as
the facility is utilized. ART became obligated to issue the first .5% of these
warrants to Lucent upon execution of the Working Capital Commitment. The first
1% of the warrants will have an exercise price of $.01 per share, and the
remaining 2.3% will have an exercise price equal to the market price of ART
common stock at the time of effectiveness of definitive documentation of the
financing to be provided under the Lucent Commitment Letter. Consummation of the
Working Capital Commitment is subject to various conditions, including execution
of definitive financing agreements, compliance with financial covenants,
completion of due diligence and the absence of any material adverse change in
the Company.
In April 1998, the Company and Lucent entered into a commitment letter (the
"Lucent Commitment Letter") setting forth the terms and conditions under which
Lucent will provide purchase money financing in an aggregate amount of up to
$200 million, to be used to finance the purchase of the Company's data network
from Lucent. Under the Lucent Commitment Letter, Lucent made $10 million in
initial purchase money loans (the "Initial Purchase Money Loans") immediately
available to ART. As of June 30, 1998, the Company had not drawn on the Initial
Purchase Money Loans. The Initial Purchase Money Loans will be due March 31,
1999, unless extended by Lucent for up to one year from the effectiveness of
definitive documentation of the financing to be provided under the Lucent
Commitment Letter. Subject to other conditions, upon ART's raising at least $50
million of debt or equity capital, Lucent will make available purchase money
loans equal to 200% of the aggregate capital raised, not to exceed $200 million,
including the Initial Purchase Money Loans. Other than the Initial Purchase
Money Loans already available, consummation of the Lucent Commitment Letter is
subject to the same conditions as the Working Capital Commitment and to the
Company's raising at least $50 million of debt or equity capital. There can be
no assurance that the financing contemplated by the Lucent Commitment Letter
will be consummated.
In August 1998, ART and Lucent entered into a definitive purchase agreement
(the "Lucent Purchase Agreement"), which amended and restated the Company's
purchase agreement with Lucent entered into in April 1998, under which Lucent
will design, engineer and construct the Company's wireless broadband data
network. The Company's purchase commitment under the Lucent Purchase Agreement
is initially $240 million upon the availability from Lucent of $200 million of
purchase money loans under the Lucent Commitment Letter, and increases to $1.2
billion if Lucent agrees to increase the amount of ART's purchase money loans to
$600 million on terms that are acceptable to ART. The Company's commitment is
subject to various other terms and conditions, including the availability of
additional financing on terms that are acceptable to ART.
The Company expects to seek substantial additional capital, including
financing sufficient to satisfy the additional capital requirements under the
Lucent Commitment Letter. The Company believes that its existing capital,
together
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<PAGE>
with funds initially available under the Working Capital Commitment and the
Initial Purchase Money Loans, is sufficient to fund its operations at current
levels at least through the end of 1998 and to meet its capital commitments at
June 30, 1998. However, without additional capital, the Company will not be able
to fully implement its business plan. There can be no assurance that the Company
will be able to obtain such additional capital when required, or, if available,
that the Company will be able to obtain it on acceptable terms. If the Company
fails to obtain additional capital when required, such failure could result in
the modification, delay of abandonment of some or all of the Company's
development and expansion plans and could materially adversely affect the
Company.
ART's actual capital requirements will be affected, possibly materially, by
various factors including the speed of the Company's build-out, the cost and
amount of equipment acquired, the number of markets served and the penetration
of those markets, customer acceptance and demand and the prices charged for
services, competition and technological change. The Company expects to be able
to adjust its capital requirements in part in response to customer demand by
changing the rate at which it adds new markets and builds out existing markets.
YEAR 2000 ISSUES
The Company has implemented a program to identify and resolve the effect of
Year 2000 software issues on the integrity and reliability of its financial and
operational systems. In addition, the Company is communicating with its
principal vendors and service providers to coordinate Year 2000 conversion.
Although the Company cannot yet assess the cost of year 2000 issues, the Company
does not expect the costs of achieving Year 2000 compliance to have a material
impact on the Company's business, operations or its financial condition.
CAUTIONARY STATEMENT
This Item and other Items in this Report include "forward-looking"
information, as that term is defined in the Private Securities Litigation Reform
Act of 1995 or by the Securities and Exchange Commission in its rules,
regulations and releases, about the Company's financing, strategy, network
deployment, operations and third party services. The Company cautions investors
that any such statements made by the Company are not guarantees of future
performance. Known and unknown risks, uncertainties, and other factors,
including without limitation, availability of additional financial resources and
capital requirements, customer demand, technological risks, need for definitive
agreements, the ability to meet financing conditions, management of growth,
competition and government regulation may cause actual results to differ
materially from the future results implied or expressed in the forward looking
statements. Additional information about the most significant of such factors
is identified in Exhibit 99 to the Company's Report on Form 10-K for the year
ended December 31, 1997. The Company does not undertake to update or revise its
forward-looking statements publicly even if experience or future changes make it
clear that any projected results expressed or implied herein will not be
realized.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Restated and Amended Bylaws of the Company.
10.1 Working Capital Commitment dated as of July 17, 1998 between the
Company and Lucent Technologies, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
The Company filed a Form 8-K on May 5, 1998 reporting the execution of
the Lucent Commitment Letter dated April 27, 1998 between the Company and
Lucent Technologies, Inc.
-11-
<PAGE>
The Company filed a Form 8-K on May 15, 1998 reporting the
Company's issuance of a press release announcing its plans to offer units
consisting of Senior Subordinated Notes and Warrants to purchase Common
Stock through a Rule 144A offering, which offering was subsequently
withdrawn.
-12-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 14th day of
August 1998.
ADVANCED RADIO TELECOM CORP.
By: /s/Thomas A. Grina
--------------------
Thomas A. Grina
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
-13-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Index Title Page
- --------- ------- ----
<S> <C> <C>
3.1 Restated and Amended Bylaws of the Company. 1
10.1 Working Capital Commitment dated as of July 17, 1998 between the Company and 14
Lucent Technologies, Inc.
27 Financial Data Schedule. 21
</TABLE>
-14-
<PAGE>
EXHIBIT 3.1
RESTATED AND AMENDED
BYLAWS
OF
ADVANCED RADIO TELECOM CORP.
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
<PAGE>
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.
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.
-2-
<PAGE>
(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 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.
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
-3-
<PAGE>
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 wavier 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 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.
-4-
<PAGE>
- 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 nor 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 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
-5-
<PAGE>
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, but 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 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.
-6-
<PAGE>
- 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 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
---------
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
-7-
<PAGE>
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 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.
-8-
<PAGE>
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.
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.
-9-
<PAGE>
- 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 filed 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.
-10-
<PAGE>
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 committees thereof may be taken without
a meeting if all members of the Board of committee, as the case may be, consent
thereto in writing, and the writing or writing 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.
-11-
<PAGE>
ARTICLE III
-----------
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.
-12-
<PAGE>
ARTICLE VI
----------
AMENDMENT OF BYLAWS
-------------------
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, either the Board of Directors or the
stockholders of the Corporation shall have the power to amend, alter or repeal
these Bylaws and to adopt new Bylaws; provided, however, for stockholders of the
Corporation to amend, alter or repeal any of Article I, Section 7, "Time,"
"Place,""Call,""Quorum" or "Voting" or Section 8; Article II, Sections 2, 3, 5
or 6; or this Article VI, such amendment, attention or repeal must be approved
by stockholders holding at least 75% of the shares outstanding and entitled to
vote.
-13-
<PAGE>
EXHIBIT 10.1
[LETTERHEAD OF LUCENT TECHNOLOGIES]
July 17, 1998
Mr. Henry C. Hirsch
CEO, President and Chairman
Advanced Radio Telecom Corp.
500-108th Avenue N.E., Suite 2600
Bellevue, WA 98004
Re: Working Capital Financing and Amendments to Vendor Financing
------------------------------------------------------------
Dear Mr. Hirsch:
Reference is made to the Commitment Letter dated April 27, 1998 (the "Existing
Commitment Letter"), between Advanced Radio Telecom Corp. ("ART", the "Borrower"
or you) and Lucent Technologies Inc. ("Lucent", the "Vendor" or we). Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Existing Commitment Letter.
You have advised Lucent that the Borrower has need for temporary working capital
financing in the amount of up to $25,000,000. You have requested that Lucent
provide such working capital financing (the "Working Capital Facility"), and
Lucent is hereby pleased to provide you with a commitment in respect of the
Working Capital Facility. Attached hereto as Exhibit A to this letter are
---------
Supplemental Terms and Conditions (the "Supplemental Term Sheet") setting forth
the principal terms and conditions agreed to by you and us, pursuant and subject
to which the Vendor is willing to make the Working Capital Facility available
and the Borrower is willing to incur and repay the financing described therein.
You have also requested that Lucent amend certain of the terms and conditions
under which Lucent proposes to provide Purchase Money Loans as provided in the
Term Sheet. Lucent is hereby pleased to amend the Term Sheet in the manner set
forth in the Supplemental Term Sheet.
The agreements, commitment and amendments to the Term Sheet set forth in this
letter are subject to the conditions, and the continued effectiveness of all of
the agreements, representations, covenants and indemnities, set forth in the
<PAGE>
-2-
Mr. Hirsch July 17, 1998
Existing Commitment Letter. The terms and conditions of the Working Capital
Facility are not limited to those set forth herein and in the Existing
Commitment Letter and the Supplemental Term Sheet, and matters not covered by
the provisions hereof and of the Existing Commitment Letter and the Supplemental
Term Sheet are subject to the reasonable approval and agreement of Lucent and
ART.
This letter shall not be assignable by you or us without the other party's prior
written consent (and any purported assignment without such consent shall be null
and void), is intended to be solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto. This letter may not be amended or waived
except by an instrument in writing signed by you and us. This letter may be
executed in any number of counterparts, each of which shall be an original, and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed signature page of this letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof. This letter
shall be governed by, and construed in accordance with, the laws of the State of
New York.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Supplemental Term Sheet by returning
to us executed counterparts hereof, not later than 5:00 p.m., New York City
time, on July 21, 1998, failing which Lucent's commitment and agreements herein
will expire at such time.
We are pleased to have been given the opportunity to assist you in connection
with this important financing.
Very truly yours,
LUCENT TECHNOLOGIES INC.
By: /s/ Leslie L. Rogers
--------------------------
Name: Leslie L. Rogers
Title: Managing Director
Accepted and agreed to as of
the date first written above by:
ADVANCED RADIO TELECOM CORP.
By: /s/ H.C. Hirsch
-----------------------
Name: H.C. Hirsch
Title: Chairman, President & CEO
<PAGE>
EXHIBIT A
ADVANCED RADIO TELECOM CORP.
Supplemental Terms and Conditions
---------------------------------
This Term Sheet supplements the Term Sheet attached as Exhibit A (the
"Original Term Sheet") to the Commitment Letter dated April 27, 1998 (the
-------------------
"Commitment Letter") between Lucent Technologies Inc. and Advanced Radio Telecom
-----------------
Corp. Capitalized terms used and not otherwise defined herein are used with the
meanings specified in the Commitment Letter and the Original Term Sheet. This
Term Sheet summarizes the terms and conditions under which Lucent proposes to
provide working capital loans ("Working Capital Loans") to the Borrower in
addition to loans (the "Purchase Money Loans") under the Facility contemplated
by the Original Term Sheet and amends certain of the terms and conditions under
which Lucent proposes to provide Purchase Money Loans.
Borrower: ART
Lender(s): Initially Lucent, subject to
Lucent's right to make assignments
as set forth in the Original Term
Sheet.
Facility: Working Capital Loans would be
available on a revolving basis in
an aggregate principal amount at
any time outstanding not to exceed
$25,000,000. Availability of the
Working Capital Loans would be
subject to satisfaction of all
conditions precedent to closing
referred to herein and in the
Original Term Sheet (including
execution and delivery of
definitive documentation in respect
of the Purchase Money Loans), other
than receipt of the Initial
Capital.
Documentation and
Security: The Working Capital Loans would be
documented pursuant to loan
documentation separate from the
<PAGE>
Facility for the Purchase Money Loans. The Working
Capital Loans will be unsecured.
Interest Rate: At the option of ART, one month Adjusted LIBOR plus
5.00%, or Base Rate plus 4.00%. The interest rate
applicable to Working Capital Loans will increase
by 50 basis points per annum effective on the last
day of each calendar month after December 31, 1998,
until all Working Capital Loans have been fully
repaid and all lending commitments in respect
thereof have terminated.
Interest Payments: Interest on Working Capital Loans will be payable
in cash on each applicable Interest Payment Date
and will not be subject to deferral.
Maturity: June 30, 1999. At ART's request, the maturity date
may be extended by Lucent in its sole discretion
for one month increments to a date not later than
the date that is the first anniversary of the
Closing Date. In addition, the initial $10,000,000
of Purchase Money Loans (the "Initial Purchase
Money Loans") will mature on March 31, 1999, unless
(a) the conditions precedent to closing referred to
in the Original Term Sheet (including receipt of
the Initial Capital) have been fulfilled, in which
case the outstanding Initial Purchase Money Loans
will remain outstanding as Purchase Money Loans, or
(b) the Initial Purchase Money Loans are extended
by Lucent in its sole discretion for one month
increments to a date not later than the date that
is the first anniversary of the Closing Date.
Availability of
<PAGE>
3
Purchase Money Loans: The Commitments to make Purchase Money Loans will become
available after the Borrower has received net cash
proceeds from Initial Capital which total at least
$50,000,000 and will be available in an amount equal to
the lesser of (a) an amount equal to 200% of such net
cash proceeds and (b) $200,000,000, subject to increase
as provided in the Original Term Sheet under the heading
"Facility Increase."
Mandatory Repayment: All Working Capital Loans must be repaid and all lending
commitments in respect thereof will terminate upon the
consummation by ART of any debt or equity financing,
other than the borrowing of Initial Purchase Money Loans
and other financings aggregating less than $50,000,000.
Optional Prepayment: Same as for Purchase Money Loans.
Use of Proceeds: Working capital purposes, including payment of accrued
interest on Working Capital Loans but excluding the
purchase of equipment or services from any vendor or
supplier other than Lucent if such equipment or services
are available from Lucent.
Conditions Precedent
to Each Loan: Same as for Purchase Money Loans, other than receipt of
the Initial Capital. Additionally, availability of
Working Capital Loans in excess of $10,000,000 will be
subject to certain additional conditions to be agreed,
relating to the achievement of certain milestones
subsequent to September 30, 1998.
<PAGE>
4
Representations,
Covenants, Events of
Default, Etc.: Substantially the same as those applicable to Purchase
Money Loans, with more limited baskets and exceptions
appropriate to the period during which Working Capital
Loans are to be outstanding.
Warrants: On the date of execution of the letter agreement between
Lucent and ART to which this Term Sheet is attached,
Lucent will be deemed to have fully earned warrants to
purchase shares of common stock of ART representing 0.5%
of ART's outstanding common stock on a fully diluted
basis (and ART agrees to execute such warrants promptly
following preparation thereof before any other
definitive documentation for the Working Capital
Facility is prepared or negotiated). On the Closing
Date, Lucent will receive warrants (together with the
warrants referred to in the preceding sentence, the
"Initial Warrants") to purchase shares of common stock
of ART representing an additional 0.5% of ART's
outstanding common stock on a fully diluted basis. The
Initial Warrants will have an initial exercise price of
one cent ($0.01) per share (subject to adjustment
pursuant to anti-dilution provisions). Additionally,
Lucent will receive warrants (the "Additional Warrants"
and, together with the Initial Warrants, the "Warrants")
to purchase an additional 0.23% of ART's common stock on
a fully diluted basis for each $2,500,000 of Working
Capital Loans actually drawn. The Additional Warrants
<PAGE>
5
will have an initial exercise price per share equal to
the market price per share of ART's common stock as of
the Closing Date (determined based on the average of the
closing prices quoted in The Wall Street Journal for the
15 most recent trading days prior to the Closing Date).
All the Warrants will be transferable, will have a term
of ten years and will have anti-dilution provisions
satisfactory to Lucent. ART will enter into a
registration rights agreement pursuant to which the
holders of the Warrants (and any common stock issued
upon exercise thereof) will be entitled to one demand
shelf registration right and unlimited "piggyback"
registration rights, at ART's expense; provided that
--------
(i) such registration rights shall not conflict with or
impair the registration rights granted by ART under its
Second Restated and Amended Registration Rights
Agreement dated July 3, 1996 and (ii) such demand
registration right may not be exercised with respect to
any securities that the holder is entitled to sell
pursuant to Rule 144(k) under the Securities Act of
1933.
Expenses: The Borrower shall pay all of the costs and expenses
incurred by Lucent (including the fees and expenses of
legal counsel to Lucent) in connection with the
preparation, execution and delivery of documentation
relating to the facilities for both the Working Capital
Loans and Purchase Money Loans (including the
Warrants). The Borrower shall not be required to pay
such fees and expenses if definitive documentation is
not
<PAGE>
6
executed and delivered by the Borrower in respect
of either of such credit facilities, but will be
required to pay all such costs and expenses if any
definitive documentation is executed and delivered
by the Borrower in respect of either such credit
facility. Further, the limitations set forth in the
letter from Cravath, Swaine & Moore dated April 22,
1998, shall not apply to fees related to
documentation in respect of the Working Capital
Loans and Warrants.
Governing Law: New York.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998 AND THE RELATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,741,291
<SECURITIES> 3,005,547
<RECEIVABLES> 194,014
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,856,797
<PP&E> 29,000,445
<DEPRECIATION> (3,201,425)
<TOTAL-ASSETS> 266,323,776
<CURRENT-LIABILITIES> 12,535,539
<BONDS> 107,182,470
0
0
<COMMON> 26,701
<OTHER-SE> 104,347,316
<TOTAL-LIABILITY-AND-EQUITY> 266,323,776
<SALES> 0
<TOTAL-REVENUES> 442,327
<CGS> 0
<TOTAL-COSTS> 14,460,191
<OTHER-EXPENSES> 406,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,506,641<F1>
<INCOME-PRETAX> (22,931,245)
<INCOME-TAX> 1,793,223
<INCOME-CONTINUING> (21,138,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,138,022)
<EPS-PRIMARY> (0.92)
<EPS-DILUTED> (0.92)
<FN>
<F1>Net of interest income of $1,715,208
</FN>
</TABLE>
