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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 10-K/A
(AMENDMENT NO. 2)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM________ TO_________
FOR THE YEAR ENDED DECEMBER 31, 1997 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 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 108TH AVENUE NE
SUITE 2600
BELLEVUE, WASHINGTON 98004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(425) 688-8700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
_____________
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS: COMMON STOCK ($.001 PAR VALUE)
- -------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the securities exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [_] .
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation s-k is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
The aggregate market value of the registrant's voting stock held by non-
affiliates was approximately $324 million on May 1, 1998, Based on the closing
sales price of the registrant's common stock ("Common Stock") as reported on the
NASDAQ National Market as of such date.
The number of shares outstanding of each of the registrant's classes of Common
Stock as of May 1, 1998 was as follows:
Common Stock, $.001 par value: 22,237,843
DOCUMENTS INCORPORATED BY REFERENCE
None. Advanced Radio Telecom Corp. ("ART" or the "Company") hereby amends its
Annual Report on Form 10-K for the year ended December 31, 1997, filed with the
Commission on March 30, 1998, by amending and restating certain information
required by 11 and 12 and Exhibit 99.
Exhibit Index is on page 11
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ITEM 11. 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 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"):
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>
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(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. Mr. Fotheringham will continue to serve as a director of
the Company.
(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.
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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 OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE 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>
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(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 January 14, 2000.
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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>
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(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
annually in advance to receive 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.
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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 continue 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 his base salary and target bonus in effect for 2000 for twelve months.
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 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
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Mr. Grina as a result of 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 with the Company in April
1998, and his employment with the Company will terminate in May 1998. He will
continue to serve as a director of the Company. 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.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of May 1, 1998 by (i) 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) 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>
Advent International Corporation (1).. 1,321,511 5.9%
Columbia Capital Corporation (2)...... 1,338,278 6.0%
Commco, L.L.C. (3).................... 2,831,677 12.7%
Landover Holdings Corporation (4)..... 2,966,774 13.3%
James C. Cook (5)..................... 58,569 *
Mark C. Demetree (6).................. 386,942 1.7%
Andrew I. Fillat (7).................. 5,728 *
Vernon L. Fotheringham................ 974,870 4.4%
Thomas A. Grina (8)................... 70,455 *
Henry C. Hirsch....................... 100,000 *
James D. Miller (9)................... 35,001 *
James B. Murray, Jr. (10)............. 227,643 *
Alan Z. Senter (11)................... 7,151 *
Richard A. Shields, Jr.(12)........... 13,636 *
Thomas M. Walker(13).................. 16,350 *
WinStar Communications, Inc.(14)...... 3,313,864 14.9%
Laurence S. Zimmerman (4)............. 2,966,774 13.3%
All executive officers and directors
as a group (15)..................... 1,896,345 8.5%
</TABLE>
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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%.
(1) Includes 1,189,673 shares, 1,149 shares and 58,143 shares of Common Stock,
and 69,107 shares, 58 shares and 3,381 shares of Common Stock issuable upon
exercise of warrants, respectively, owned by Global Private Equity II, L.P.,
Advent International Investors II Limited Partnership and Advent Partners
Limited Partnership (collectively, the "Advent Partnerships"), each a
limited partnership whose general partner is controlled by Advent
International Corporation ("Advent"). Mr. Fillat is an officer of Advent.
The address of Advent and each of the Advent Partnerships is 101 Federal
Street, Boston, Massachusetts 02110.
(2) Includes 62,173 shares of Common Stock issuable upon exercise of warrants
owned by Columbia Capital Corporation ("Columbia Capital") and 357,166
shares, 116,826 shares and 802,113 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
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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.
(3) 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.
(4) All of such securities are held in the Landover Voting Trust (as defined
below). Does not include 36,364 shares of Common Stock beneficially owned
by the wife of and 36,364 shares of Common Stock beneficially owned by a
family trust of Laurence S. Zimmerman, of which shares Landover Holdings
Corporation ("LHC") and Mr. Zimmerman disclaim beneficial ownership. LHC is
controlled by Mr. Zimmerman. See "--Voting Trust Agreement." On April 24,
1998 LHC entered into an agreement with WinStar Communications, Inc.
("WinStar") and certain of its subsidiaries pursuant to which LHC agreed to
sell 2,758,864 shares of Common Stock to WinStar. The consummation of this
transaction is subject to the fulfillment or waiver of certain conditions.
LHC's address is 156 W. 56th Street, Suite 2000, New York, New York 10019.
(5) 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 May 1, 1998.
(6) Includes 3,201 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 1, 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.
(7) Includes 3,201 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 1, 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.
(8) Includes 70,455 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 1, 1998.
(9) Includes 35,001 shares of Common Stock issuable upon exercise of an option
exercisable within 60 days of May 1, 1998.
(10) Includes 1,734 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 1, 1998 Mr. Murray is a Managing Director
of Columbia Capital Corporation. Excludes shares held by Columbia Capital,
CCC Millimeter and Millimeter. See Footnote 2. Mr. Murray's address is c/o
Columbia Capital Corporation, 0 Court Square, P.O. Box 1465,
Charlottesville, VA 22902.
(11) Includes 7,151 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 1, 1998.
(12) Includes 13,636 shares of Common Stock issuable upon conversion of stock
options exercisable within 60 days of May 1, 1998.
(13) Includes 16,250 shares of Common Stock issuable upon conversion of stock
options exercisable within 60 days of May 1, 1998.
(14) On April 24, 1998 WinStar and certain subsidiaries entered into an
agreement with LHC pursuant to which WinStar agreed to purchase 2,758,864
shares of Common Stock from LHC. Also on April 24, 1998, WinStar entered
into an agreement with another shareholder of the Company pursuant to which
WinStar agreed to purchase an additional 555,000 shares of Common Stock.
The consummation of these transactions is subject to the fulfillment or
waiver of certain conditions. WinStar's address is 230 Park Ave. Suite
2700, New York, NY 10169.
(15) Includes 153,830 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 May 1, 1998. Does not include 2,966,774
shares of Common Stock held in the Landover Voting Trust by trustees, all
of whom are directors of the Company and do not have beneficial ownership
of such shares. See "--Voting Trust Agreement."
VOTING TRUST AGREEMENT
Pursuant to a Voting Trust Agreement dated November 5, 1996, LHC and the
wife of and a trust for the benefit of the family of Laurence S. Zimmerman
deposited all of their shares of Common Stock in trust (the "Landover Voting
Trust") with Messrs. Demetree, Fillat and Fotheringham as trustees with
irrevocable instructions to vote such shares on all matters submitted to a vote
of the stockholders of the Company in proportion to, or in certain cases,
consistent with the majority of, the vote of other stockholders of the Company.
The voting trust will expire on November 5, 2006, but is subject to early
termination in the event of (i) a business combination in which the Company
stockholders own less than 50%, and the Company directors constitute less than
50% of the Board of Directors, of the combined entity and LHC owns less than 5%
of the voting power of such entity, (ii) the death of Mr. Zimmerman or (iii) the
sale by LHC of such shares to unaffiliated parties. The
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<PAGE>
trustees of the trust will be indemnified by the Company. LHC retains the right
to pledge or dispose of the Common Stock to third parties. Any such shares of
Common Stock transferred to an affiliate of LHC will remain subject to the terms
of the Landover Voting Trust. Any such shares of Common Stock transferred to
parties not affiliated with LHC will be released from the Landover Voting Trust.
LHC has agreed to sell 2,758,864 shares of Common Stock to WinStar, and LHC and
the beneficiaries under the Landover Voting Trust have agreed to sell the
remaining shares and warrants to other parties, whereupon the Landover Voting
Trust will terminate.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THIS 20TH DAY OF MAY
1998.
Advanced Radio Telecom Corp.
Thomas A. Grina
By: /s/ Thomas A. Grina
--------------------
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE PAGE
- ----------- ----- ----
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation.(11)
3.2 Restated and Amended Bylaws of Registrant.(11)
4.1 Specimen of Common Stock Certificate.(3)
4.2 Indenture relating to the Company's 14% Senior Notes
due 2007.(10)
4.3 Specimen of Note (included in Exhibit 4.2).(10)
4.4 Collateral Pledge and Security Agreement relating to the Notes.(10)
4.5 Form of Warrant Agreement in connection with offering of Notes.(10)
4.6 Specimen of Warrant Certificate in connection with offering of Notes
of Notes (included in Exhibit 4.5).(10)
4.7 Shareholders Rights Agreement.(12)
4.8 Form of Rights Certificate.(12)
9.1 Voting Trust Agreement dated November 5, 1996.(9)
9.2 Form of Trustee Indemnification Agreement.(3)
10.1 Employment Agreement between the Company and Vernon L. Fotheringham,
dated December 16, 1995.(1)
10.2 Amendment No. 1 dated October 17, 1997 to Employment Agreement between the
Company and Vernon L. Fotheringham.(13)
10.3 Employment Agreement between the Company and Thomas A. Grina dated
April 26, 1996.(8)
10.4 Employment Agreement between the Company and Henry C. Hirsch dated
October 17, 1997.(13)
10.5 Change of Control Agreement between the Company and Henry C. Hirsch
dated October 17, 1997.(13)
10.6 Form of Director Indemnification Agreement.(1)
10.7 Company's Restated Equity Incentive Plan, as amended.(14)
10.8 Company's 1997 Equity Incentive Plan for Non-Employee Directors.(14)
10.9 Company's 1996 Non-Employee Directors Incentive Stock Option Plan.(1)
10.10 Second Restated and Amended Registration Rights Agreement dated July 3,
1996 with ART Licensing and the stockholders of each of ART Licensing
and the Company.(2)
10.11 Amendment No. 1 to Registration Rights Agreement dated as of October 16,
1996.(9)
10.12 Form of Indemnity Warrant.(1)
10.13 Form of Subscription Agreement dated March 8, 1996, including Forms
of Bridge Note and Bridge Warrant.(2)
10.14 Option Agreement dated July 3, 1996 with Commco, L.L.C.(2)
10.15 Form of September Bridge Warrant.(9)
10.16 Form of CIBC Warrants.(7)
21 Subsidiaries of the Company.(2)
23 Consent of Independent Accountants.(14)
27 Financial Data Schedule.(14)
99 Risk Factors. 1
</TABLE>
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(1) Previously filed with the Company's Registration Statement on Form S-1,
effective November 5, 1996 (SEC Reg. No. 333-04388) and incorporated by
reference herein.
(2) Previously filed with Amendment 1 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(3) Previously filed with Amendment 2 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(4) Previously filed with Amendment 4 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(5) Previously filed with Amendment 6 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(6) Previously filed with Amendment 7 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(7) Previously filed with Amendment 8 to the Company's Registration Statement
on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
incorporated by reference herein.
(8) Previously filed with the Company's Registration statement on Form S-1,
filed May 15, 1996 (SEC Reg. No. 333-03735) and incorporated by reference
herein.
(9) Previously filed with the Company's Registration Statement Form S-1,
effective February 3, 1997 (SEC Reg. No. 333-19295) and incorporated by
reference herein.
(10) Previously filed with Amendment 2 to the company's Registration Statement
on Form S-1, effective February 3, 1997 (SEC Reg. No. 333-19295) and
incorporated by reference herein.
(11) Previously filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and incorporated by reference herein.
(12) Previously filed with the Company's Registration Statement on Form 8-A,
filed on July 10, 1997 (SEC Reg. No. 000-21091) and incorporated by
reference herein.
(13) Previously filed with the Company's Quarterly Report on Form 10-Q, dated
November 14, 1997. (SEC Reg. No. 000-21091) and incorporated by reference
herein.
(14) Previously filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated by reference herein.
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<PAGE>
EXHIBIT 99
RISK FACTORS
From time to time the Company has made, and may in the future make,
forward-looking statements, based on its then-current expectations, including
statements made in Securities and Exchange Commission filings, in press releases
and oral statements. These forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
All forward-looking statements involve risks and uncertainties, and actual
results could differ materially from those expressed or implied in the forward-
looking statements for a variety of reasons. These reasons include, but are not
limited to, factors outlined below. 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 therein
will not be realized.
Limited Operations; History of Net Losses. The Company has a limited
operating history. It commenced commercial operations in November 1996 as a
provider of wireless broadband capacity to communications providers on a
wholesale "carriers'-carrier" basis. In March 1998, ART adopted a new business
strategy of providing wireless broadband data services to business customers
without fiber connectivity. The Company has generated only nominal revenues
from operations to date, has generated operating and net losses since its
inception and expects to generate significant operating and net losses for at
least the next several years. The Company had 1997 net losses of $61.7 million
in 1997 and an accumulated deficit of $95.8 million at the end of 1997.
In light of the Company's brief operating history and change of strategy,
there is limited data about the Company upon which to evaluate its future
performance. There can be no assurance that the Company will develop a
successful business or achieve or sustain profitability in the future. The
Company's ability to provide commercial service on a widespread basis and to
generate positive operating cash flow will depend on its ability to, among other
things, acquire adequate access rights for its network, deploy and commercialize
its network, attract and retain experienced and talented personnel, raise
adequate additional capital when required, attract and retain an adequate
customer base and establish strategic business relationships.
Significant Capital Requirements; Need for Additional Financing.
Significant additional capital will be required to finance the Company's
completion of its network roll-out and operations over the next five years. The
Company currently estimates that it will require in excess of $1 billion over
the next five years for capital expenditures, working capital and funding
operating losses. An increase in the rate at which ART deploys its network
would require the Company to raise additional capital at earlier dates. ART's
actual capital requirements also will be affected, possibly materially, by
various factors including the cost and amount of equipment acquired, customer
acceptance and demand and the prices charged for services, completion and
technological change. Failure to access capital in the future could have a
material adverse effect on the Company, its ability to implement its business
plan, and its financial condition and results of operations.
There can be no assurance that the Company will be able to obtain any
financing when required, or, if such financing is available, that the Company
will be able to obtain it on acceptable terms. In the event that the Company
fails to obtain additional financing when required, such failure could result in
the modification, delay or abandonment of some or all of the Company's business
plan. Any such modification, delay or abandonment is likely to have a material
adverse effect on the Company.
Risks Related to Strategy. The Company is pursuing a strategy to become
the leading provider of broadband data services to business customers without
fiber connectivity. The Company has limited experience in providing these
services, and there can be no assurance that it will successfully implement its
strategy. The Company has limited experience in deploying, operating and
maintaining a broadband data network. There can be no assurance that the
Company will effectively deploy, operate or maintain such facilities. Further,
there can be no assurance that the broadband data network deployed by the
Company will provide the expected functionality. Furthermore, the Company's
strategy is subject to risks relating to the negotiation and implementation of
necessary
<PAGE>
strategic business relationships with Lucent and other third parties, the
development of value-added products and services, the ability of Lucent and the
Company to design, provision and deploy the Company's network on schedule, the
recruitment of experienced and talented personnel in a timely manner, the
Company's ability to attract and retain customers, and the Company's ability to
manage the rapid implementation of its plan in multiple markets. In addition,
the Company is subject to the risk or unforseen problems inherent in being a new
entrant in a rapidly evolving industry.
There is significant risk relating to the market's acceptance of the
Company's broadband data-focused wireless services. The Company and other
providers have only recently begun to market fixed wireless services, and the
Company believes it is currently the only fixed wireless broadband provider
focusing on providing data services rather than voice telephony. The provision
of such services represents an emerging sector of the telecommunications
industry, and the demand for such services is uncertain. Demand may be
adversely affected by various factors including historical perceptions of the
unreliability of previous wireless technologies, concerns about the security of
transmissions over wireless networks, the lack of market history of operational
fixed wireless services and the possible desire of customers to acquire
telecommunications services from a single provider. The Company anticipates
that a substantial investment in sales and marketing will be required to reach
its target customers and to create demand for the Company's wireless broadband
date services. There can be no assurance that a substantial market will develop
for fixed wireless broadband data services, that sufficient customers will be
willing to purchase such services, or, if such market were to develop, that the
Company will be able to attract and maintain a sufficient revenue-generating
customer base, generate sufficient cash flow to service its indebtedness, or
operate profitably.
Furthermore, acceptance of the Company's services may be affected by
various factors beyond the Company's control, including the availability and
pricing of alternative broadband and narrowband data services, general and local
economic conditions, changes in products and technology, and the potential
impact of government regulation on the Company's services. The extent of the
potential demand for the Company's broadband wireless data services cannot be
estimated with certainty. Insufficient acceptance of the Company's services due
to one or more of these factors, or from other factors, would have a negative
impact on the Company's results of operations and its financial condition.
Substantial Leverage; Ability to Service Indebtedness. The Company is
highly leveraged. It will be further leveraged upon the consummation of the
anticipated Lucent Financing (see "--Reliance on Lucent; Lucent Agreement) and
upon the incurrence of additional indebtedness by the Company. The Company
expects to incur substantial additional debt to finance its business plan.
Accordingly, (i) a substantial portion of the Company's cash flow from
operations will be required to pay interest with respect to its outstanding 14%
Senior Notes due 2007 (the "Senior Notes") commencing in August 2000, with
respect to the anticipated Lucent Financing commencing in June 2002 and with
respect to any additional indebtedness incurred by the Company, (ii) the
Company's flexibility may be limited in responding to changes in the industry
and economic conditions generally; (iii) the failure to comply with the numerous
financial and other restrictive covenants of such debt may result in an event of
default, which, if not cured or waived, could have a material adverse effect on
the Company; (iv) the ability of the Company to satisfy its obligations pursuant
to such indebtedness is dependent upon its future performance which, in turn, is
subject to management, financial, business and other factors affecting the
business and operations of the Company; (v) the Company's ability to obtain any
necessary financing in the future may be limited; (vi) the Company may be more
highly leveraged than many of its competitors, which may put it at a competitive
disadvantage; and (vii) the Company's leverage may make it more vulnerable in
the event of an economic downturn. The Company's ability to make principal and
interest payments on its indebtedness, will be dependent upon, among other
things, the Company's future operating performance and anticipated cash flow and
its ability to obtain additional debt or equity financing on acceptable terms,
which are themselves dependent on a number of factors, many of which are out of
the Company's control. These factors include prevailing economic, financial,
competitive and regulatory conditions and other factors affecting the Company's
business and operations including the ability of the Company to implement its
network on a timely and cost effective basis. There can be no assurance that
these factors will not
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<PAGE>
have a material adverse effect on the Company or that the Company will be able
to generate sufficient cash flow to meet required interest and principal
payments associated with its indebtedness. If the Company is unable to generate
sufficient cash flow to meet its debt obligations, the Company may be required
to renegotiate the payment terms or to refinance all or a portion of its
indebtedness, to sell assets or to obtain additional financing. There is no
assurance that the Company would be able to do so. Any failure to meet required
interest and principal payments would materially and adversely affect the
Company's business and results of operations.
Reliance on Lucent; Lucent Agreements. The Company and Lucent have entered
into an interim purchase agreement (the "Lucent Purchase Agreement") under which
Lucent will provide a nationwide integrated network and will deploy its
personnel to deploy and maintain ART's network. Pursuant to the Lucent
Agreements, the Company has engaged Lucent to design, engineer, equip, install,
construct, test and service the Company's nationwide network. Any failure or
inability by Lucent to perform these functions could cause delays or additional
costs in providing services to customers and building out the Company's network
in specific markets. Any such failure could materially and adversely affect the
Company's business and results of operations.
The Company and Lucent have agreed to negotiate in good faith to provide
various additional terms to the Lucent Purchase Agreement. If the Lucent
Purchase Agreement is not amended and restated to add these terms by June 15,
1998, either party may terminate the Lucent Purchase Agreement. There can be no
assurance that the parties will reach agreement on such terms and that the
Lucent Purchase Agreement will not be terminated on or after June 15, 1998.
The Company and Lucent have also entered into a commitment letter (the
"Lucent Commitment Letter" and, together with the Lucent Purchase Agreement, the
"Lucent Agreements"). The Lucent Agreements are contingent upon various
conditions, including the execution of a definitive financing agreement,
amendment and restatement of the Lucent Purchase Agreement, compliance with
financial covenants, raising additional capital, completion of due diligence and
the absence of any material adverse change in the Company. There can be no
assurance that a definitive agreement will be executed with respect to the
financing contemplated by the Lucent Commitment Letter or that the financing
contemplated by the Lucent Commitment Letter will be consummated. Any failure to
consummate the financing contemplated by the Lucent Commitment Letter could
materially and adversely effect the Company's business and results of
operations.
Competition. The industry and markets in which the Company plans to
provide services are highly competitive. The Company competes with other
providers of telecommunications services using a variety of telecommunications
technologies, now existing and under development, including copper, fiber,
cable, mobile and fixed wireless and satellite networks, and the Company expects
to compete with technologies not yet introduced. These other technologies may
offer advantages over the Company's services. In addition, many of the other
wireline and wireless services providers have longer operating histories, longer
standing relationships with customers, and suppliers, greater name recognition,
better geographic footprints and greater financial, technical and marketing
resources than the Company. As a result, these competitors, among other things,
may be able to develop and exploit new technologies, adapt to changes in
customer requirements more quickly, devote greater resources to the marketing
and sale of their services or more rapidly deploy and build-out a network than
the Company.
While the Company does not believe that any other competitor is focusing
exclusively on offering broadband data services to business customers without
fiber connectivity, ART faces significant competition from other entities and
technologies that currently, or could in the future, deliver data services to
ART's potential customers over copper wire, fiber, wireless or other
technologies. These current or potential competitors include local exchange
carriers ("LECs"), fiber and wireless service providers and cable television
operators. The Company's competitors also include providers of services which
are in competition with the Company's product offerings, such as Internet
service providers ("ISPs"). Moreover, the recent and pending auctions of
spectrum capable of supporting comparable services may facilitate the
introduction or expansion of competition from other
-3-
<PAGE>
competitors. There can be no assurance that the Company will be able to compete
effectively with these other technologies and service providers in any of its
markets.
The Company has only recently begun to introduce its broadband data
services and has only recently begun to pursue customers with the goal of
becoming the leading provider of broadband data services to businesses without
fiber connectivity. To date, the Company does not have significant market share
in any of the markets in which it holds licenses. Given the intense competition
in the market for broadband data services, there can be no assurance that the
Company will achieve significant market share in any market.
Management of Growth. The Company is pursuing a business plan that, if
successfully implemented, will result in rapid growth, expansion of operations
and provision of broadband data services on a widespread basis over the next two
to five years. Rapid expansion of the Company's operations may place a
significant strain on the Company's management financial and other resources.
If this growth is achieved, the Company's success will depend on its ability to
manage this growth effectively, enhance its operational and financial controls
and information systems, and attract, assimilate and retain qualified and key
personnel. In addition, if the Company expands its business, it will require
additional facilities for its growing operation. There can be no assurance that
the Company will successfully implement and maintain such operational and
financial systems or successfully obtain, integrate and utilize the employees
and management, operational and financial resources necessary to manage a
developing and expanding business in the evolving, increasingly competitive
broadband data communications market. Failure to successfully manage expansion
could materially adversely affect the Company's business, financial condition
and results of operations.
The billing, provisioning, customer service, network management and other
"back office" systems with the functionality that the Company plans to offer do
not currently exist in a form which can be readily adopted by the Company.
Significant development work by the Company or a third-party provider will be
required to develop such systems for the Company. Delays in developing and
implementing such systems may have a negative impact on the Company's ability to
offer the efficiency and functionality expected to be provided by these systems
and accordingly on the implementation of the Company's business plan.
Need for Technological Development. Although the Company is initially
deploying its network utilizing fixed wireless point-to-point technology which
has been commercially deployed for a period of time, the Company plans to
utilize point-to-multipoint technology in its networks as soon as it becomes
commercially available. The principal advantages of point-to-multipoint
architecture over traditional point-to-point installation include lower costs
per customer installation and higher flexibility in how bandwidth is allocated.
Point-to-multipoint also makes it possible to support many more subscribers than
otherwise would be possible in a point-to-point environment. This technology has
not been deployed on a commercial basis, and it is unclear whether the
technology will perform as expected, integrate as expected with the Asynchronous
Transfer Mode ("ATM") switching gear and other components of the Company's
network, or provide the advantages expected by the Company. Unanticipated
difficulties or delays in deploying point-to-multipoint technology or failure of
point-to-multipoint technology to yield the expected benefits could adversely
affect the Company's network costs, profitability and results of operations.
Fixed Wireless Limitations. The Company's wireless broadband services
require a direct line of sight between two transceivers and are subject to
distance and rain attenuation. In certain markets which experience heavy
rainfall, transmission links must be engineered for shorter distances and
greater power to maintain transmission quality. Such engineering changes may
increase the cost of providing service.
The Company primarily installs its transceivers and antennas on rooftops of
building and on other tall structures. The Company generally must secure
building access rights, access to conduits and wiring from building owners, and
may require construction, zoning, franchises or other governmental permits.
There can be no assurance that the Company will succeed in obtaining roof access
and other rights necessary to provide wireless broadband
-4-
<PAGE>
services to potential customers in its market areas on favorable terms, if at
all, or that delays in obtaining such rights will not have a material adverse
effect on the Company's development and results of operations. Moreover, there
may be a limited number of available buildings which provide a clear line of
sight to targeted buildings, and therefore there may be some circumstances where
installation is impracticable or uneconomical. In such cases, the Company may
decide to provide services that are uneconomical in the short term and seek
alternative methods of transmission to provide services on a more economical
basis, or decide not to provide services to potential customers in locations
with such limitations. There can be no assurance that line of sight limitations
will not have a material adverse effect on the Company's future development and
results of operations.
Equipment Failure and Interruption of Service. The Company's operations
will require that its network, including leased fiber-optic connections,
operates on a continuous basis. It is not unusual for networks including
switching facilities to experience periodic service interruption and equipment
failures. It is therefore possible that the network and facilities utilized by
the Company may from time to time experience service interruptions or equipment
failures, which would adversely affect consumer confidence as well as the
Company's business operations and reputation.
Dependence on Key Employees; Need to Attract and Retain Qualified
Personnel. The success of the Company will be dependent, in large part, on its
ability to attract and retain qualified technical, marketing, sales and
management personnel. The loss of the services of key personnel could have a
material adverse effect upon the business, financial condition and results of
operations of the Company. The Company's ability to implement its business plan
will require the addition of significant number of qualified personnel.
Competition for such personnel is intense, particularly those experienced in
information technology, and there can be no assurance of the Company's ability
to attract and retain additional key employees and retain its current key
employees at a reasonable cost, if at all. The failure to attract and retain
such personnel at reasonable costs could have a material adverse effect on the
business.
Importance of Third-Party Relationships. In addition to its relationship
with Lucent, the Company intends to enter into relationships with third-parties
to assist it in providing services, extending its network and penetrating
markets. There can be no assurance that the Company will be able to enter into
such relationships on a time line that is consistent with the Company's
strategy, if at all. Failure to enter into such relationships, the failure of
third parties to perform once such relationships are entered into, or the loss
of third-party relationships once entered into could cause delays in providing
services, limit the Company's reach in marketing its product, increase costs for
the Company to extend its reach and penetrate markets, and/or impede the
Company's ability to offer certain service packages to certain customers. Such
failures could have a material adverse effect on the Company's development and
results of operations.
Government Regulation. The telecommunications services offered by the
Company are subject to regulation by federal, state and local government
agencies. Changes in existing laws and regulations applicable to the provisions
of wireless data services via the Company's licenses or to the regulations
governing competitive or potentially competitive providers, or any failure or
significant delay in obtaining or maintaining any regulatory approvals which may
be required, could have a material adverse effect on the Company.
Risk of Forfeiture, Non-Renewal and Fluctuation in Value of FCC Licenses.
The Company must comply with FCC rules relating, among other things, to its
licenses. Failure to comply with FCC rules could subject licenses to automatic
forfeiture or, depending on the violation, to other FCC sanctions.
The Company is required to demonstrate at license renewal that it is
providing substantial service within the authorized area covered by that
license. There can be no assurance that the Company will be able to make this
showing for any or all of its licenses. In the event that the FCC does not
renew one or more of the licenses, the Company's business and results of
operations could be materially adversely affected.
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<PAGE>
The Company's wireless licenses are integral assets of the Company, the
value of which will depend significantly upon the success of the Company's
wireless data services operations and the future direction of the wireless
segment of the telecommunications industry. The value of licenses to provide
wireless services also may be affected by fluctuations in supply and demand for
such licenses and by valuations placed on such licenses in any current or future
auctions of spectrum, such as the FCC's recently-completed auction of spectrum
in the 28 GHz band. In addition, federal and state regulations may limit the
ability of licensees to sell their licenses. Assignment of licenses and changes
of control involving entities holding licenses require prior consent of the FCC
and, in some instances, state and municipal regulatory approval, and are subject
to restrictions and limitations on the identity, background, legal and financial
qualification, among other things, of the assignee or successor. These
regulatory restrictions on transfer of licenses may adversely affect the ability
of the Company to acquire or dispose of further licenses or the value of the
Company's licenses.
Licenses Pending Approval for Transfer. The Company has entered into
agreements to acquire licenses from other parties to enter new markets or
strengthen the Company's position in existing markets. Failure to consummate
the transfer of these licenses could affect the Company's ability to offer
broadband data services in certain markets where the Company intends to
commercialize its services. The acquisition of these licenses is subject, among
other conditions, to the approval of the FCC to the assignment of, or change of
control of the entity holding, the licenses, as the case may be. There can be
no certainty that the Company will receive the requisite approval to acquire
these licenses and thereby be able to implement its strategy with respect to the
markets covered by such licenses.
Acquisition of Additional Bandwidth in Selected Areas. The Company
believes the licenses it owns, manages, or has the right to acquire or use are
sufficient to fully implement its business plan. However, the Company may seek
to acquire or manage additional licenses to expand its geographic footprint or
to enhance its ability to provide service to its current target market or
customers it may target in the future. There can be no assurance that the
Company will be able to acquire additional radio spectrum on favorable terms or
at all.
Changes in Technology, Services and Industry Standards. The
telecommunications industry and market for data services has been characterized
by rapid technological advances, changes in end-user requirements, frequent new
service introductions, evolving industry standards and decreases in the cost of
equipment. The Company expects these changes to continue, and believes that its
long-term success will increasingly depend on its ability to offer value-added
broadband data services that exploit advanced technologies and anticipate or
adapt to evolving industry standards. The Company believes that to remain
competitive, retain the customer base it establishes and maintain the margins of
the retail market it is pursuing, its integrated package of high-speed,
broadband data services must continue to evolve to keep pace with developments
in the market. There can be no assurance that (i) the Company will be able to
arrange to offer the new services required by its customers, (ii) the Company's
services will not be economically or technically outmoded by current or future
technologies which may compete in the data market, (iii) the Company will have
sufficient resources to develop or acquire new technologies or introduce new
services capable of competing with future technologies or service offerings (iv)
the Company's inventory of equipment will not be rendered obsolete, or (v) the
cost of the Company's equipment and network will decline as rapidly as that of
competitive alternatives. Moreover, there can be no assurance that the
Company's ability to offer the broadband wireless data access with which it will
deliver its value-added services will not become technically or economically
outmoded as new equipment, technologies and advances in competing alternatives
become available.
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