<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 September 30, 1999
[ ] 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: 27,483,533 shares of common
stock, $.001 par value, at November 8, 1999.
<PAGE>
ADVANCED RADIO TELECOM CORP.
INDEX
PART 1. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and use of Proceeds 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
-2-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................................................... $ 197,315 $ 11,864
Pledged securities.............................................................................. 9,269 18,504
Accounts receivable............................................................................. 211 126
Prepaid expenses and other current assets....................................................... 67 714
--------- ---------
Total current assets......................................................................... 206,862 31,208
Pledged securities................................................................................. 8,854
Property and equipment, net........................................................................ 26,959 33,202
FCC licenses, net.................................................................................. 181,980 186,514
Deferred financing costs, net...................................................................... 8,464 5,503
Other assets....................................................................................... 494 440
--------- ---------
Total assets............................................................................. $ 424,759 $ 265,721
========= =========
Current liabilities:
Working capital facility........................................................................ $ 16,229
Trade accounts payable.......................................................................... $ 4,458 2,534
Accrued compensation and benefits............................................................... 3,513 2,936
Other accrued liabilities....................................................................... 6,418 4,760
Accrued interest payable........................................................................ 2,350 7,154
Current portion of long-term debt............................................................... 383 525
--------- ---------
Total current liabilities..................................................................... 17,122 34,138
Long-term debt, net of current portion............................................................. 108,808 117,846
Deferred income tax liabilities.................................................................... 30,000 31,382
--------- ---------
Total liabilities............................................................................. 155,930 183,366
--------- ---------
Commitments and contingencies
Convertible Preferred Stock:
Series A convertible preferred stock, $.001 par value, 2,234,607 shares
authorized, issued and outstanding............................................................ 192,809
Series B convertible preferred stock, $.001 par value, 902,893 shares
authorized, issued and outstanding............................................................ 50,877
---------
Total convertible preferred stock............................................................ 243,686
---------
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
27,337,325 and 26,707,036 shares issued and outstanding...................................... 27 27
Additional paid-in capital..................................................................... 229,810 225,967
Note receivable from stockholder............................................................... (887) (887)
Accumulated deficit............................................................................ (203,807) (142,752)
--------- ---------
Total stockholders' equity................................................................... 25,143 82,355
--------- ---------
Total liabilities, convertible preferred stock and stockholders' equity.................. $ 424,759 $ 265,721
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(as restated) (as restated)
<S> <C> <C> <C> <C>
Revenue................................ $ 359 $ 187 $ 924 $ 629
-------- -------- -------- --------
Costs and expenses:
Technical and network operations...... 4,222 1,442 12,078 4,627
Sales and marketing................... 1,402 1,741 4,320 4,484
General and administrative............ 3,604 2,873 9,697 8,437
Equipment impairment and other........ 2,683 6,376 2,683
Depreciation and amortization......... 3,949 1,921 10,733 4,889
-------- -------- -------- --------
Total costs and expenses............ 13,177 10,660 43,204 25,120
-------- -------- -------- --------
Loss from operations................... (12,818) (10,473) (42,280) (24,491)
-------- -------- -------- --------
Interest and other income (expense):
Interest expense...................... (7,323) (5,206) (22,096) (15,427)
Financing commitment expense.......... (411) (1,305) (411)
Other................................. 147 (12) 697 (419)
Interest income....................... 1,508 458 2,428 2,173
-------- -------- -------- --------
Total interest and other income
(expense).......................... (5,668) ( 5,171) (20,276) (14,084)
-------- -------- -------- --------
Loss before income taxes............... (18,486) (15,644) (62,556) (38,575)
Deferred income tax benefit............ 439 1,937 1,501 6,196
-------- -------- -------- --------
Net loss.............................. $(18,047) $(13,707) $(61,055) $(32,379)
======== ======== ======== ========
Basic net loss per common share,
including $3.99 and $4.00 loss per
share relating to deemed preferred
dividend in 1999...................... $ (4.65) $ (0.51) $ (6.25) $ (1.33)
======== ======== ======== ========
Weighted average common shares......... 27,307 26,701 27,185 24,275
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
(unaudited)
(in thousands, except share data)
<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, 1998 26,707 $ 27 $ 225,967 $ (887) $ (142,752) $ 82,355
Common stock issued in exchange
for certain FCC licenses 154 848 848
Value ascribed to warrants
issued in connection with the
working capital facility 1,242 1,242
Warrants exercised 332 3 3
Stock options exercised 116 740 740
Stock compensation expense 774 774
Common stock issued under
employment agreements 28 236 236
Value ascribed to beneficial
conversion feature of Series A 108,862 108,862
Preferred Stock
Deemed dividend of beneficial
conversion feature of Series A (108,862) (108,862)
Preferred Stock
Net loss (61,055) (61,055)
------ --------- ----------- ----------- ------------ ---------
Balance, September 30, 1999 27,337 $ 27 $ 229,810 $ (887) $ (203,807) $ 25,143
====== ========= =========== =========== ============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
------------- -------------
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................... $(61,055) $(32,379)
Adjustment to reconcile net loss to net cash used in operating activities
Gain on sale of FCC licenses............................................... (744)
Non-cash compensation expense.............................................. 774 1,258
Non-cash equipment impairment charges...................................... 6,376 2,683
Depreciation and amortization.............................................. 10,733 4,889
Non-cash interest and financing commitment expense......................... 5,140 1,386
Deferred income tax benefit................................................ (1,501) (6,196)
Changes in operating assets and liabilities:
Accrued interest payable.................................................. (4,804) (4,762)
Accrued interest on pledged securities.................................... (811) (1,544)
Accounts payable and accrued liabilities.................................. 4,395 (1,449)
Other.................................................................... 454 177
-------- --------
Net cash used in operating activities..................................... (41,043) (35,937)
-------- --------
Cash flows from investing activities:
Capital expenditures for property and equipment............................ (8,148) (2,948)
Proceeds from sale of FCC licenses......................................... 6,872
Proceeds from sales of property and equipment.............................. 1,148
Additions to FCC licenses.................................................. (4,311) (495)
Purchases of short-term investments........................................ (5,127)
Proceeds from sale of short-term investments............................... 23,612
Proceeds from maturities of pledged securities............................. 18,900 18,630
Proceeds from restricted cash.............................................. 1,000
-------- --------
Net cash provided by investing activities................................. 14,461 34,672
-------- --------
Cash flows from financing activities:
Proceeds from Preferred Stock, including bridge financing.................. 251,000
Preferred stock issuance costs............................................. (7,314)
Proceeds from (repayments of) working capital facility borrowings.......... (17,500) 10,000
Repayments of purchase money facility borrowings........................... (10,000)
Decrease in book overdraft................................................. (3,056)
Proceeds from stock option and warrant exercises........................... 743 114
Principal payments of long-term debt....................................... (407) (1,617)
Additions to deferred financing costs...................................... (4,489) (544)
-------- --------
Net cash provided by financing activities................................. 212,033 4,897
-------- --------
Net increase in cash and cash equivalents.................................... 185,451 3,632
Cash and cash equivalents, beginning of period............................... 11,864 7,135
-------- --------
Cash and cash equivalents, end of period..................................... $197,315 $ 10,767
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The Company and Basis of Presentation
Advanced Radio Telecom Corp. ("ART" or the "Company") is a provider of broadband
wireless telecommunications services to businesses. ART has a nationwide
footprint of 38 GHz spectrum licenses in the United States, and owns 26GHz
and/or 38GHz spectrum licenses in the United Kingdom and several Scandinavian
countries. During 1998, ART began offering internet services in the Seattle,
Washington, Portland, Oregon and Phoenix, Arizona markets, and in September 1999
introduced 100 Mbps and related services to businesses in the San Jose,
California area. Revenues to date have not been material.
The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network build-out and business plan.
The Company currently estimates that it may require in excess of $500 million
over the next several years to fund capital expenditures, working capital and
operations. In September 1999, the Company raised $251 million gross proceeds
from the sale of its preferred stock (described below as the "Investment").
However, the Company will need to raise substantial additional capital to fully
implement its business plan. While the Company has raised substantial capital
in the past, there can be no assurance that the Company will be able to obtain
additional financing, or, if available, that it will be able to obtain such
additional financing on acceptable terms. 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.
Interim financial statements
Certain information and footnote disclosures normally included in interim
financial statements have been condensed or omitted pursuant to rules and
regulations of the Securities and Exchange Commission. The accompanying
interim condensed consolidated financial statements are unaudited. In the
opinion of Company management, these financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to a fair
statement of results for interim periods presented. The unaudited condensed
consolidated financial statements should be read in conjunction with the
Company's December 31, 1998, audited consolidated financial statements and notes
thereto contained in the Company's 1998 Annual Report on Form 10-K.
As disclosed in the Company's 1998 Annual Report on Form 10-K, the Company
restated its financial statements for the three and nine months ended September
30, 1998 as a result of a change in Federal income tax law. The effect of
restatement increased deferred income tax benefits and decreased net loss by
approximately $1.1 million and $3.6 million for the three and nine months ended
September 30, 1998, respectively.
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the financial statement date and reported amounts
of revenues and expenses during reporting periods. Among the more significant
estimates made by management include estimated useful lives of network equipment
and the recoverability of recorded values of long-lived assets. Actual results
could differ from those estimates.
Recoverability of Long-Lived Assets
Recoverability of property and equipment and capitalized FCC licenses is
dependent on, among other things, the
-7-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The Company and Basis of Presentation (continued)
successful deployment of networks in each of the respective markets, or sale of
such assets. Management estimates that the Company will recover the carrying
amount of those costs from undiscounted cash flows generated by the networks
once they have been deployed. However, it is reasonably possible that such
estimates will change in the near term as a result of technological, regulatory
or other changes. The Company periodically reviews the carrying value of its
capitalized assets for impairment and recoverability.
Net Loss Per Share
The net loss per share for the three and nine months ended September 30, 1999,
reflects deemed preferred stock dividend of $108.9 million representing the
beneficial conversion feature of Series A preferred stock. Calculations of loss
per share exclude the dilutive effect of convertible preferred stock, options
and warrants since inclusion in such calculations would have been antidilutive.
Net loss applicable to common stockholders utilized in the calculations of loss
per share is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $ (18,047) $ (13,707) $ (61,055) $ (32,379)
Deemed preferred dividend (108,862) (108,862)
--------- --------- --------- ---------
Net loss applicable to
Common stockholders $(126,909) $ (13,707) $(169,917) $ (32,379)
========= ========= ========= =========
</TABLE>
Note 2 - Property and Equipment
During the nine months ended September 30, 1999 and 1998, the Company recorded
equipment impairment charges of approximately $6.4 million and $2.7 million,
respectively, to write down the carrying value of certain equipment that
management determined would be disposed of and not used in the future buildout
of the Company's broadband data network.
During 1999, the Company disposed of certain wireless equipment receiving cash
proceeds of approximately $1.1 million which approximated its carrying value.
At September 30, 1999 the carrying value of wireless equipment to be disposed of
approximated $900,000.
At September 30, 1999, substantially all of the Company's property and
equipment, excluding assets to be disposed, had been placed in service.
Note 3 - FCC Licenses
During 1999, the Company consummated acquisitions of certain 38 GHz licenses for
$4.3 million in cash and certain other licenses for 154,114 shares of common
stock, which such shares were valued at approximately $848,000.
In June 1997, one of the Company's shareholders exercised an option to purchase
from the Company certain 38 GHz FCC licenses in specified markets, in which the
Company has more than one license. In May 1999, the Company closed this
transaction, selling 11 licenses for approximately $6.9 million, resulting in a
gain included in other income of approximately $700,000.
-8-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 4 - Working Capital Facility
During 1999, the Company borrowed remaining funds available on the working
capital facility under which Lucent agreed to provide the Company with $25
million in revolving loans, and in conjunction with such borrowings, issued
warrants to purchase 191,988 shares of Company common stock. The estimated fair
value ascribed to the warrants was approximately $1.2 million.
In May 1999, the working capital facility was amended to extend the maturity
date of related borrowings to the earlier of October 29, 1999 or date of final
vote of Company stockholders on the Investment. The Company obtained waivers
from Lucent for certain debt covenants relating to the working capital facility
and a purchase money facility with Lucent, and at times during 1999 would have
been in violation of such covenants had waivers not been obtained. In September
1999, the Company repaid all $25 million working capital facility borrowings and
the facility terminated.
Note 5 - Long-term Debt, Purchase Money Facility and Other Financings
Senior Notes
In July 1999, the Company, with the consent of the holders of its senior notes,
amended certain covenants of the indenture relating to the senior notes to
provide the Company with greater flexibility to implement its business plan.
The amendments were a condition to the Investment and became operative upon
closing of the Investment. The Company paid to senior note holders a consent
fee of approximately $4 million in the aggregate. Consent fees and other
financing costs associated with obtaining consents of approximately $500,000
were deferred and charged to interest expense using the effective interest rate
method over the debt term.
Purchase Money Facility
Subsequent to closing the Investment, in September 1999 the Company repaid all
of the $10 million of borrowings under its purchase money facility with Lucent
and the facility terminated.
Bridge Notes
In June 1999, the Company borrowed $50 million pursuant to terms of 11% senior
bridge notes, which matured and was repaid with preferred stock upon closing of
the Investment.
Financing Costs
Included in interest and other expense for the nine months ended September 30,
1998 is approximately $419,000 related to an unsuccessful high-yield debt
offering and $411,000 of amortization of deferred financing costs related to the
financing commitment under the working capital facility.
Note 6 - Capital Stock
Preferred Stock
In September 1999, pursuant to terms of a stock purchase agreement entered into
with a group of investors, the Company sold 2,234,607 shares of Series A
convertible preferred stock and 902,893 shares of Series B non-voting
convertible preferred stock, each at $80 per share, to the investors in exchange
for an aggregate of $251 million (the "Investment"). At the closing of the
Investment, the Company designated 2,234,607 shares of Series A Preferred Stock,
902,893 shares of
-9-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 6 - Capital Stock (continued)
Series B Preferred Stock and 902,893 shares of Series C Preferred Stock. Except
as otherwise noted, shares of Series A preferred stock and Series B preferred
stock are identical and entitle holders thereof to the same rights and
privileges. The Series C preferred stock ranks on a parity with Company common
stock. Series A preferred stock and Series B preferred stock are collectively
referred to as the "Preferred Stock".
Series A preferred shares vote on an as-converted basis with the common stock
and represent approximately 45% of the Company's outstanding common stock.
Holders of the Series A preferred stock may convert Series A shares at any time
into ten shares of common stock. The conversion ratio may be increased or
decreased as a result of stock splits, dividends, recapitalizations and similar
events. Series A preferred stock automatically converts into common stock if
(i) the Company sells stock yielding net proceeds of at least $75 million at a
price of not less than $18 per share, (ii) Company common stock trades at not
less than $18 for 30 of 40 consecutive trading days at any time after June 2001,
(iii) two-thirds of the then-outstanding preferred stock converts into common
stock, or (iv) 75% of the preferred stock originally issued in the Investment
has converted into common stock.
Series B preferred stock will not vote on matters generally submitted to
stockholders, however, will be entitled to vote as a class on matters that
adversely affects it as a class. Series B preferred stock will automatically
convert on a 1-for-1 basis into Series A preferred stock whenever the voting
power of the investors falls below 45% (as defined) of the Company's outstanding
voting stock. The conversion rate is subject to proportional adjustment for
stock splits, stock dividends, combinations and recapitalizations. In addition,
any outstanding Series B preferred stock will automatically convert on a 1-for-1
basis into Series C preferred stock if the Series A preferred stock
automatically converts into common stock.
The holders of Preferred Stock are entitled to an initial liquidation preference
of $80 per share, subject to adjustments, plus any declared and unpaid
dividends. On liquidation, after payment of the initial $80 preference amount,
the Preferred Stock also participates on a pro rata basis with common stock and
Series C preferred stock until each share of Preferred Stock has received a
total liquidation amount of $160. The Company may not pay any cash dividend on
common stock or Series C preferred stock unless in that year a cash dividend of
$80 per share on the Preferred Stock has been paid.
One share of Series C preferred stock has the same rights as ten shares of
common stock, except that the Series C preferred stock is non-voting. Series C
preferred stock will not vote on matters generally submitted to stockholders,
however, will be entitled to vote as a class on matters that adversely affects
it as a class. Series C preferred stock automatically converts into common
stock on a 10-for-1 basis whenever the voting power of the investors falls below
45% (as defined) of the Company's outstanding voting stock. The conversion rate
is subject to proportional adjustment for stock splits, stock dividends,
combinations and recapitalizations.
Shares of preferred stock are subject to mandatory redemption requirements under
certain limited circumstances as defined in the certificate of designation,
preferences and rights of preferred stock. Those circumstances include a
consolidation, merger or sale of all or substantially all the assets of the
Company in which the stockholders of the Company immediately prior to such
consolidation, merger, or sale do not own, directly, or indirectly, a majority
of the outstanding voting power of the surviving corporation or acquiring
entity, as the case may be, immediately after such merger or sale, and the
holders of a majority of the then-outstanding shares of Series A preferred stock
elect not to treat any of the foregoing events as a liquidation, dissolution or
winding up by giving written notice thereof to the Company. If such holders do
not exercise their right to treat a consolidation, merger or sale as a non-
liquidating event, the holders of preferred stock shall be entitled to receive
out of the consideration paid in such conveyance the amount payable to such
holders in a manner similar to that for a liquidation. Due to the mandatory
redemption feature, preferred stock is classified outside of stockholders'
equity.
The investors include U.S. Telesource, Inc. ("UST"), a subsidiary of Qwest
Communications International Inc.("Qwest"), investment funds led by Oak
Investment Partners ("Oak"), and investment funds of two of the Company's
existing major
-10-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 6 - Capital Stock (continued)
stockholders. The investors have entered into a stockholders agreement to which
the Company is not a party. All of the investors have agreed to, among other
things, vote shares acquired in the Investment in favor of the election as
directors of the designees of UST and Oak, and vote as agreed by UST and Oak on
all other matters to come before stockholders. The Company also agreed to take
certain further actions and entered into additional agreements with the
investors, including agreeing to entitle each of UST and Oak to designate
nominees to be a Company director. Additionally, in the event the Company
raises capital through the issuance of equity securities (other than public and
certain other offerings), the Company has agreed to let investors participate in
the purchase of such securities in proportion to their stock holdings. The
Company has also entered into registration rights and standstill agreements with
the investors.
The Company recorded the issuance of Series A and B preferred stock by
allocating net proceeds of approximately $243.7 million to Series A and B shares
based on their estimated relative fair values at the date of the Stock Purchase
Agreement, resulting in $192.8 million assigned to Series A shares and $50.9
million assigned to Series B shares. Based on the closing price of Company
common stock on the date of stockholder approval of the Investment, the
estimated fair value of Series A preferred stock on an as-converted to common
stock basis exceeded the amount assigned to the Series A shares by approximately
$108.9 million. The Company recorded the $108.9 million excess, representing
the estimated fair value of the beneficial conversion feature, as an increase in
additional paid-in-capital and a decrease in Series A preferred stock. The
beneficial conversion feature is recognized as a deemed dividend to the
preferred stock over the minimum period in which preferred stockholders realize
their return. Because Series A shares are immediately convertible, the
estimated fair value of the Series A beneficial conversion feature was
realizable upon closing of the Investment. Accordingly, a $108.9 million deemed
dividend as of the closing of the Investment was recognized as a charge to
additional paid-in capital and net loss applicable to common stockholders, and
an increase in the carrying value of Series A preferred stock. The remaining
balance of the beneficial conversion feature of approximately $50.9 million,
which is not realizable until and unless Series B shares are converted, has not
been recognized and would be recognized upon conversion.
Costs incurred in connection with the Investment, including investment advisory,
legal, regulatory filing and other fees, approximated $7.3 million and are
recorded as a reduction of amounts assigned to preferred stock.
Note 7 - Commitments and Contingencies
Purchase Commitments
In 1999, the Company and Lucent amended the purchase agreement under which
Lucent agreed to design, engineer and construct the Company's wireless broadband
data network to eliminate the Company's minimum purchase obligation.
Employment Agreements
The Company has entered into various employment agreements, as amended, with
certain executives that provide for, among other things, annual base salaries
and cash bonuses based on achievement of specific performance goals.
Additionally, the Company has entered into change of control agreements, as
amended, with certain executives that provide for, among other things, cash
payments and immediate vesting of any stock, stock option or other awards
granted to such executive. The Investment qualifies as a change of control
under the change of control agreements, entitling them to various benefits if
they are terminated or resign with good reason within 24 months of the
Investment. During the quarter ended September 30, 1999, the Company recorded
severance expense of approximately $750,000, which is included in general and
administrative expenses, relating to an announced executive resignation.
-11-
<PAGE>
Advanced Radio Telecom Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 7 - Commitments and Contingencies (continued)
In addition, the Investment is a change of control under the Company's equity
incentive plans whereby if certain officers or directors are terminated or
resign (with good reason in the case of executives) within 24 months of the
Investment, all unvested options or awards held by such officer or director will
vest.
During the quarter ended September 30, 1999, pursuant to terms of the
aforementioned change of control agreements and equity incentive plans,
approximately 723,000 shares of Company common stock were immediately vested.
Contingencies
The Company is party to certain claims and makes routine filings with the FCC
and state regulatory authorities. Management believes that resolution of any
such claims or matters arising from such filings, if any, will not have a
material adverse impact on the Company's consolidated financial position,
results of operations or cash flows.
Note 8 - Supplemental Cash Flow Information:
Supplemental disclosure of non-cash financing and investing activities and other
cash flow information for the nine months ended September 30 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Non-cash financing and investing activities:
Value ascribed and deemed dividend of
beneficial conversion feature of Series A preferred stock.. $108,862
Issuance of shares for FCC licenses........................ 848 $48,348
Value ascribed to warrants................................. 1,242 2,448
Additions to property and equipment........................ 128 3,817
Interest paid................................................ $ 20,570 $19,015
</TABLE>
Note 9 - Subsequent Event:
On October 29, 1999, the Company announced that its chairman and chief executive
officer will retire effective November 1, 1999. Pursuant to terms of employment
and change of control agreements as described in Note 7, during the quarter
ending December 31, 1999, the Company will record severance expense for the
chief executive officer and other executive officers.
In November 1999, the Company entered into a purchase agreement, with no minimum
purchase obligation, with Cisco Systems Inc. ("Cisco"), which agreement, among
other things, sets forth terms and conditions for the Company's purchase of
networking equipment from Cisco. Additionally, the Company entered into a
commitment letter, subject to various conditions, with Cisco Systems Capital
Corporation for multi-year vendor financing to be used to fund the Company's
purchase of Cisco networking hardware and for other costs associated with the
network installation and integration of such hardware. Funding potentially
available under this commitment is subject to usual and customary covenants,
terms and conditions, and increases from approximately $14 million at initial
closing to $175 million.
-12-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Overview
Advanced Radio Telecom Corp. ("ART" or the "Company") is a provider of broadband
wireless telecommunications services to businesses. ART has a nationwide
footprint of 38 GHz spectrum licenses in the United States, and owns 26GHz
and/or 38GHz spectrum licenses in the United Kingdom and several Scandinavian
countries.
The Company's initial business was selling connectivity to various
telecommunications companies as a wholesale carriers' carrier, which the Company
commenced in 1996. Following the establishment of a new core management team,
the Company altered its strategy in 1998 and focused on selling a variety of
broadband internet services to end-user customers and deploying a broadband data
network. During 1998, ART began offering internet services in the Seattle,
Washington, Portland, Oregon and Phoenix, Arizona markets, and in September 1999
introduced 100 Mbps and related services to businesses in the San Jose,
California area. Revenues to date have not been material.
Results of Operations
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Revenue for the nine months ended September 30, 1999, was approximately $924,000
compared to $629,000 for the same period in 1998, and was comprised of $515,000
from the Company's remaining carriers' carrier operations and $409,000 from
internet services operations. As a result of having recently commenced offering
internet services, revenues from internet services have increased during each
quarter in 1999. Revenues from the remaining carriers' carrier operations have
decreased during each quarter of 1999. Revenue for the nine months ended
September 30, 1998 was from the Company's remaining carriers' carrier
operations.
Operating costs and expenses were approximately $43.2 million for the nine
months ended September 30, 1999, compared to approximately $25.1 million in the
comparative 1998 period. Technical and network operations costs increased
approximately $7.5 million to $12.1 million for the nine months ended September
30, 1999 over the comparative 1998 period due to expanded operations. In future
periods the Company expects increases in expenses for network operations and
sales and marketing as the Company implements its business plan.
During the nine months ended September 30, 1999, in connection with employment
and change of control agreements the Company recorded approximately $750,000 of
severance expense, which is included in general and administrative expenses,
related to the announced resignation of a senior executive. The Company has
various employment and change of control agreements with certain other
executives. The September 1999 preferred stock transaction is a change of
control under the change of control agreements, entitling executives to various
benefits if they are terminated or resign with good reason within 24 months of
the event. The Company will record severance expense during the quarter ending
December 31, 1999 relating to certain executive officers.
During the nine months ended September 30, 1998, the Company recorded
approximately $650,000 of severance expenses related to the resignation of
certain executives and, in connection with the employment arrangements with
certain Company executives, also recorded non-cash charges of approximately
$658,000 with respect to stock grants.
During the nine months ended September 30 1999 and 1998, the Company recorded
equipment impairment charges of approximately $6.4 million and $2.7 million,
respectively, to write down the carrying value of certain equipment that
management determined would be disposed of and not used in the future buildout
of the Company's broadband data network. Depreciation and amortization was
approximately $10.7 million for the nine months ended September 30, 1999,
-13-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Results of Operations (continued)
compared to approximately $4.9 million in the 1998 period. The increase was
primarily due to increased depreciation resulting from the deployment of network
equipment and the acquisition of certain FCC licenses during 1998.
Excluding the aforementioned severance and non-cash depreciation, amortization
expense, impairment charges and charges with respect to stock-based
compensation, operating costs and expenses for the nine months ended September
30, 1999 were approximately $25.3 million compared to approximately $16.2
million during the same period in 1998. The increase was primarily due to the
increase in technical and network operating expenses, which were attributable to
the Company's buildout of its broadband data network, and the commencement of
operations in Seattle, Portland, Phoenix and San Jose.
Net interest and other expenses were approximately $20.3 million for the nine
months ended September 30, 1999 compared to approximately $14.1 million in the
comparative 1998 period. The increase was primarily due to amortization of the
value ascribed to warrants issued in conjunction with borrowings under the
financings obtained during 1998, as well as interest on increased principal
amounts of these borrowings. Included in interest and other expense for the
nine months ended September 30, 1998 is approximately $419,000 related to an
unsuccessful high-yield debt offering and $411,000 of amortization of deferred
financing costs related to the financing commitment under the Working Capital
Facility.
Deferred income tax benefits approximated $1.5 million and $6.2 million for the
nine months ended September 30, 1999 and 1998, respectively. The higher
effective rate of tax benefit in 1998 results from a change in tax law effective
in 1998, which increased the net operating loss carryforward period from 15 to
20 years.
The net loss for the nine months ended September 30, 1999 and 1998 approximated
$61.1 million and $32.4 million, respectively. The basis net loss per share
applicable to common stockholders, including $4.00 loss per share relating to
the deemed preferred dividend as described in Note 6 to the accompanying
financial statements, was $6.25 and $1.33 for the nine months ended September
30, 1999 and 1998, respectively.
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
Revenue for the three months ended September 30, 1999, was approximately
$359,000 compared to $187,000 for the same period in 1998, and was comprised of
$165,000 from the Company's remaining carriers' carrier operations and $194,000
from internet services operations. Revenue for the three months ended September
30, 1998 was from the Company's remaining carriers' carrier operations.
Operating costs and expenses were approximately $13.2 million for the three
months ended September 30, 1999, compared to approximately $10.7 million in the
comparative 1998 period. Technical and network operations costs increased
approximately $2.8 million to $4.2 million for the three months ended September
30, 1999 over the comparative 1998 period due to expanded operations.
During the three months ended September 30, 1999, in connection with employment
and change of control agreements the Company recorded approximately $750,000 of
severance expense related to the announced resignation of a senior executive.
During the three months ended September 30, 1998, the Company recorded
approximately $650,000 of severance expenses related to the resignation of
certain executives and in connection with the employment arrangements with
certain Company executives, also recorded non-cash charges of approximately
$658,000 with respect to stock grants.
-14-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Results of Operations (continued)
During the three months ended September 30 1998, the Company recorded an
equipment impairment charge of approximately $2.7 million to write down the
carrying value of certain equipment that management determined would be disposed
of and not used in the future buildout of the Company's broadband data network.
Depreciation and amortization was approximately $3.9 million for the three
months ended September 30, 1999, compared to approximately $1.9 million in 1998.
The increase was primarily due to increased depreciation resulting from the
deployment of network equipment and the acquisition of certain FCC licenses
during 1998.
Excluding the aforementioned severance and non-cash depreciation and
amortization expense, impairment charges, and non-cash charges with respect to
stock-based compensation, operating costs and expenses for the three months
ended September 30, 1999 were approximately $8.5 million compared to
approximately $4.7 million during the same period in 1998. The increase was
primarily due to the increase in technical and network operating expenses, which
were attributable to the Company's build-out of its broadband data network, and
the commencement of operations in Seattle, Portland, Phoenix and San Jose.
Net interest and other expenses were approximately $5.7 million for the three
months ended September 30, 1999 compared to $5.2 million in 1998. The increase
was primarily due to amortization of the value ascribed to warrants issued in
conjunction with borrowings under the financings obtained during 1998, as well
as interest on increased principal amounts of these borrowings.
Deferred income tax benefits approximated $439,000 and $1.9 million for the
three months ended September 30, 1999 and 1998, respectively. The higher
effective rate of tax benefit in 1998 results from a change in tax law effective
in 1998, which increased the net operating loss carryforward period from 15 to
20 years.
The net loss for the three months ended September 30, 1999 and 1998 approximated
$18.0 million and $13.7 million, respectively. The basis net loss per share
applicable to common stockholders, including $3.99 loss per share relating to
the deemed preferred dividend as described in Note 6 to the accompanying
financial statements, was $4.65 and $0.51 for the three months ended September
30, 1999 and 1998, respectively.
Liquidity and Capital Resources
During the nine months ended September 30, 1999, operating activities used
approximately $41.0 million as compared to $35.9 million used by operating
activities during the comparative prior year period. Cash used by operating
activities resulted primarily from the Company's net loss.
Investing activities provided cash of approximately $14.5 million and $34.7
million during the nine months ended September 30, 1999 and 1998, respectively.
Investing activities provided cash from maturities of pledged securities of
approximately $18.9 million and $18.6 million for the nine months ended
September 30, 1999 and 1998, respectively, and in the 1998 period also provided
cash of $23.6 million from the sale of short-term investments. During the nine
months ended September 30, 1999, investing activities provided cash of
approximately $6.9 million from the sale of 11 FCC licenses, as well as used
cash of approximately $4.3 million for acquisitions of certain FCC licenses.
Investing activities used cash for capital expenditures of approximately $8.1
million and $2.9 million during the nine months ended September 30, 1999 and
1998 respectively. In 1999, the Company and Lucent amended the purchase
agreement under which Lucent agreed to design, engineer and construct the
Company's wireless broadband data network to eliminate the Company's minimum
purchase obligation.
-15-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
Financing activities provided cash of approximately $4.9 million during the nine
months ended September 30, 1998, primarily the result of $10 million of
borrowings under its working capital facility with Lucent offset by other debt
repayments. Financing activities provided cash of approximately $212.0 million
during the nine months ended September 30, 1999. In September 1999, the Company
sold preferred stock in exchange for an aggregate of $251 million. The Company
incurred certain costs in connection with the Investment, including financial
advisor fees of approximately $6.3 million, legal and other professional fees in
excess of $1 million, and consent solicitation fees and related costs of $4.5
million. In September 1999, the Company repaid all $25 million working capital
facility borrowings and the facility terminated. Additionally, the Company
repaid all of the $10 million of borrowings under its purchase money facility
with Lucent and the facility terminated.
Since inception, the Company has raised cash to fund its operations, capital
expenditures and acquisitions from sales of debt and equity securities,
including private placements of equity and bridge financings in 1994 through
1996, its $34 million initial public offering in November 1996, the $135 million
public offering of units consisting of senior notes and warrants in February
1997 (approximately $51 million of which purchased a portfolio of U.S. Treasury
securities to fund senior note interest through February 2000), borrowings from
Lucent, and most recently the $251 million preferred stock Investment and
related bridge note financing.
In November 1999, the Company entered into a purchase agreement, with no minimum
purchase obligation, with Cisco Systems Inc. ("Cisco"), which agreement, among
other things, sets forth terms and conditions for the Company's purchase of
networking equipment from Cisco. Additionally, the Company entered into a
commitment letter, subject to various conditions, with Cisco Systems Capital
Corporation for multi-year vendor financing to be used to fund the Company's
purchase of Cisco networking hardware and for other costs associated with the
network installation and integration of such hardware. Funding potentially
available under this commitment is subject to usual and customary covenants,
terms and conditions, and increases from approximately $14 million at initial
closing to $175 million.
The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network build-out and business plan.
The Company currently estimates that it may require in excess of $500 million
over the next several years to fund capital expenditures, working capital and
operations. Proceeds from the Investment are expected to be used to accelerate
implementation of the Company's business plan. However, the Company needs to
raise substantial additional capital to fully implement its business plan.
While the Company has raised substantial capital in the past, there can be no
assurance that the Company will be able to obtain additional financing, or, if
available, that it will be able to obtain such additional financing on
acceptable terms. 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.
Inflation
Management believes that its business has not been affected by inflation to a
significantly different extent than has the general economy.
Year 2000 Disclosure
Many existing computer programs use only two digits, rather than four, to
represent a year. Date-sensitive software or hardware written or developed in
this fashion may not be able to distinguish between 1900 and 2000, and programs
written in this manner that perform arithmetic operations, comparisons or
sorting of date fields may yield incorrect results when processing a Year 2000
date. This Year 2000 problem could potentially cause system failures or
miscalculations that could disrupt operations.
-16-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Year 2000 Disclosure (continued)
The Company's State of Readiness
The Company has implemented a survey to identify Year 2000 issues in three
areas: (i) financial and information technology systems (ii) non-IT network
equipment and (iii) third-party vendors and suppliers. The Company believes its
financial and information technology systems and its non-IT equipment will be
Year 2000 compliant by the end of 1999.
The Company completed its survey of financial and information technology systems
in the first quarter of 1999. As a result of the survey, the Company does not
believe there are any material noncompliant systems. However, the Company is
conducting detailed verification testing for business critical systems to
confirm the results of its survey. If Year 2000 issues are discovered, the
Company will evaluate and prioritize the problems. The Company expects to
coordinate any Year 2000 problems with vendors that supplied noncompliant
systems. The Company expects that any remediation efforts would continue through
November 1999 to ensure that recently introduced technology is fully compliant
across the network. However, there can be no assurance that the Company's survey
will identify all Year 2000 problems in these systems or that necessary
corrective actions will be completed in a timely manner.
The Company has received warranties from its network equipment suppliers and
integrators, that the Company's non-IT network equipment is Year 2000 compliant.
In addition, such tests conducted by the Company before accepting delivery of
network equipment are designed to confirm whether such equipment is Year 2000
compliant. Based on these warranties and acceptance tests, the Company does not
plan to take further action to ascertain whether its network equipment is Year
2000 compliant. However, there can be no assurance that this equipment will be
Year 2000 compliant as warranted or that the acceptance tests will identify all
Year 2000 problems. In addition, Year 2000 warranties that the Company has
received limit damages recoverable if such systems were not Year 2000 compliant.
The Company is also reviewing Year 2000 compatibility of its network management
software. If the Company discovers that this software is not Year 2000
compliant, it expects to coordinate its remediation efforts with the software
provider. The Company expects that these remediation efforts, if any, will
continue through November 1999 to ensure that recently introduced network
management software is fully compliant.
The Company is also assessing its vulnerability to Year 2000 problems of third-
party service suppliers and is communicating with suppliers regarding the
matter. The Company relies on third-party suppliers to deliver, among others,
fiber telecommunications links, internet access, network equipment, banking
services and payroll services. The Company also intends to develop new
relationships with several providers of fiber-optic telecommunications service,
internet service providers, telecommunications resellers and other companies in
the telecommunications industry. The Company intends to continuously identify
and prioritize critical suppliers and communicate with them about their plans
and progress in addressing Year 2000 issues. Although the Company is
communicating with its suppliers regarding Year 2000 matters, the Company does
not know whether these suppliers' systems will be Year 2000 compliant in a
timely manner. Like most telecommunications providers, the Company's ability to
provide service is dependent on key suppliers and equipment vendors. If one or
more significant suppliers are not Year 2000 compliant, this could have a
material adverse effect on the Company's results of operations, financial
position or cash flow.
The Company's Year 2000 Risk
Based on the efforts described above, Company management expects remaining
remediation efforts to be completed in November 1999 and believes that systems
will be Year 2000 compliant in a timely manner. However, there can be no
assurance that all Year 2000 problems will be successfully identified, or that
the necessary corrective actions will be completed in a timely manner. Failure
to successfully identify and remediate such Year 2000 problems in a timely
manner could have a material adverse effect on the Company's results of
operations, financial position or cash flow.
-17-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Year 2000 Disclosure (continued)
The Company's Contingency Plans
The Company has not created a formal contingency plan for Year 2000 problems.
The Company intends to take appropriate actions to mitigate the effects, if any,
of third parties' failures to remediate their Year 2000 issues and for
unexpected failures in its own systems. Such actions may include having
arrangements for alternate suppliers and using manual intervention where
necessary. If it becomes necessary for the Company to take these corrective
actions, it is uncertain whether this would result in significant interruptions
in service or delays in business operations or whether it would have a material
adverse effect on the Company's results of operations, financial position or
cash flow.
Costs of Year 2000 Remediation
The Company has not incurred material costs relating to Year 2000 matters, and
does not expect to in the future. The Company has not deferred, and does not
expect to defer, other information technology projects due to Year 2000
expenses. However, there can be no assurance that costs associated with Year
2000 matters will not be greater than anticipated.
Readers are cautioned that forward-looking statements contained throughout this
Item should be read in conjunction with the Company's disclosures under the
heading: "Cautionary Statement" included elsewhere in this report.
-18-
<PAGE>
Advanced Radio Telecom Corp.
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
Cautionary Statement
This quarterly report includes "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,
regarding the Company's financial and business prospects, the deployment of the
Company's network, capital requirements and Year 2000 issues. The Company
cautions investors that any such statements are not guarantees of future
performance and that known and unknown risks, uncertainties and other factors
may cause actual results to differ materially from those in the forward-looking
statements. These risks include, without limitation, ability to raise additional
capital, ability to achieve the benefits contemplated by the Investment and the
commercial agreements, effect of the Qwest-U S WEST merger, and capital
requirements and other financial risks, customer demand, technological risks,
management of growth, ability to achieve Year 2000 compliance, competition and
government regulation, as described in Exhibit 99 to the Company's Report on
Form 10-K for the year ended December 31, 1998. 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 2. Changes in Securities and Use of Proceeds
Recent sales of unregistered securities during the quarter ended September 30,
1999
On September 9, 1999, the Company sold 2,234,607 shares of Series A convertible
preferred stock and 902,893 shares of Series B convertible preferred stock to a
group of investors in exchange for cash of $251 million. There were no
underwriters with respect to this issuance of preferred stock. The investors
listed below or investments funds associated with the investors listed below
comprised the group of investors to whom the securities were sold.
U.S. Telesource, Inc. (a wholly-owned subsidiary of Qwest)
Oak Capital Partners
MeriTech Capital Partners
Advent International Corporation
Columbia Capital Corporation
Accel Partners
Brentwood Venture Capital
Worldview Technology Partners
Bessemer Venture Partners
Cove Ventures, LLC
Adams Capital Management
The Company relied upon the exemption from registration pursuant to Section 4(2)
of the Securities Act as a transaction by an issuer not involving a public
offering.
Item 4. Submission of Matters to a Vote of Securityholders.
The Company held its annual meeting of the stockholders (the "Annual Meeting")
on September 8, 1999. Matters submitted to a vote of Company stockholders and
voting results were as follows:
-19-
<PAGE>
(i) Stockholders approved the investment contemplated by the preferred
stock purchase agreement among ART and the investors, which among
other things, provided for the sale of preferred stock to the
investors in exchange for $251 million. Shares cast at the Annual
Meeting with respect to this matter included 12,978,690 voted in favor
of the approval of the $251 million equity investment in ART, 92,154
shares voted against the approval of the $251 million equity
investment in ART and 31,550 shares abstained.
(ii) Stockholders approved an amendment to the Company's restated equity
incentive plan increasing the number of shares of common stock
issuable under the plan from 4 million shares to 8 million shares.
Shares cast at the Annual Meeting with respect to this matter included
10,228,754 shares voted in favor of the approval of the amendment to
the Restated Equity Incentive Plan, 2,666,527 shares voted against the
approval of the amendment to the Restated Equity Incentive Plan and
52,113 shares abstained.(ii)
(iii) Stockholders elected James B. Murray, Jr. and Andrew I. Fillat as
directors of the Company. Shares cast at the Annual Meeting with
respect to this matter included 21,744,029 shares voted in favor of
the election of James Murray, Jr. and 797,240 shares voted to withhold
authority for the election of James B. Murray, Jr. Shares cast at the
Annual Meeting included 21,743,674 shares voted in favor of the
election of Andrew Fillat, and 797,595 shares voted to withhold
authority for the election of Andrew Fillat.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Designation
3.2 Restated and Amended Bylaws of the Company, as amended
through May 28, 1999.
4.1 First Supplemental Indenture dated as of July 23, 1999
between the Company and the Bank of New York as trustee.
10.1 Amendment to Amended and Restated Change of Control
Agreement dated May 14, 1999 between the Company and Henry
C. Hirsch.
10.2 Amendment to Amended and Restated Change of Control
Agreement dated May 14, 1999 between the Company and William
J. Maxwell
10.3 Amendment to Amended and Restated Change of Control
Agreement dated May 14, 1999 between the Company and Robert
S. McCambridge
10.4 Amendment to Amended and Restated Change of Control
Agreement dated May 14, 1999 between the Company and Thomas
Boyhan
10.5 Amendment to Amended and Restated Change of Control
Agreement dated May 14, 1999 between the Company and G. Ron
Olexa
10.6 Restated Equity Incentive Plan, as amended through May 26,
1999.
10.7 1996 Non-Employee Directors Automatic Stock Option Plan, as
Amended through May 14, 1999.
10.8 1997 Equity Incentive Plan for Non-Employee Directors as
Amended through May 14, 1999.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
The Company did not file a Form 8-K during the quarter ended September 30, 1999.
-20-
<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 15th day of
November, 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ R. S. McCambridge
--------------------------------
R. S. McCambridge
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
-21-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title
- ------- -----
3.1 Certificate of Designation
3.2 Restated and Amended Bylaws of the Company, as amended through May 28,
1999.
4.1 First Supplemental Indenture dated as of July 23, 1999 between the Company
and the Bank of New York as trustee.
10.1 Amendment to Amended and Restated Change of Control Agreement dated
May 14, 1999 between the Company and Henry C. Hirsch.
10.2 Amendment to Amended and Restated Change of Control Agreement dated
May 14, 1999 between the Company and William J. Maxwell.
10.3 Amendment to Amended and Restated Change of Control Agreement dated
May 14, 1999 between the Company and Robert S. McCambridge.
10.4 Amendment to Amended and Restated Change of Control Agreement dated
May 14, 1999 between the Company and Thomas Boyhan.
10.5 Amendment to Amended and Restated Change of Control Agreement dated
May 14, 1999 between the Company and G. Ron Olexa.
10.6 Restated Equity Incentive Plan, as amended through May 26, 1999.
10.7 1996 Non-Employee Directors Automatic Stock Option Plan, as Amended
through May 14, 1999.
10.8 1997 Equity Incentive Plan for Non-Employee Directors as Amended
through May 14, 1999.
27.1 Financial Data Schedule
-22-
<PAGE>
EXHIBIT 3.1
CORRECTED
CERTIFICATE OF DESIGNATION
of the
SERIES A CONVERTIBLE PREFERRED STOCK
the
SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK
and the
SERIES C JUNIOR PREFERRED STOCK
of
ADVANCED RADIO TELECOM CORP.
Pursuant to Section 103(f) of the General Corporation Law of the State of
Delaware, it is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Advanced Radio Telecom Corp.
2. The Certificate of Designation of the Series A Convertible Preferred
Stock, the Series B Non-Voting Convertible Preferred Stock and the Series C
Junior Preferred Stock of the corporation, which was filed by the Secretary of
State of Delaware on September 8, 1999, is hereby corrected.
3. The inaccuracy to be corrected in said instrument is as follows:
i. The number of shares of Series B Non-Voting Convertible
Preferred Stock authorized for creation and issuance by the
corporation's Board of Directors was 902,893, not 510,000 as
indicated in the Certificate of Incorporation.
ii. The number of shares of Series C Junior Preferred Stock
authorized for creation and issuance by the corporation's
board of directors was 902,893, not 510,000 as indicated in
the Certificate of Incorporation.
<PAGE>
4. The entire instrument in corrected form is as follows:
CORRECTED
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of the
SERIES A CONVERTIBLE PREFERRED STOCK
the
SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK
and the
SERIES C JUNIOR PREFERRED STOCK
OF
ADVANCED RADIO TELECOM CORP.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
We, Henry C. Hirsch, Chairman, and Thomas M. Walker, Secretary, of Advanced
Radio Telecom Corp. (the "Corporation"), a corporation organized and existing
under the laws of the State of Delaware, in accordance with Section 151 of the
Delaware General Corporation Law, certify:
FIRST: The Certificate of Incorporation of the Corporation authorizes the
issuance of up to 10,000,000 shares of preferred stock, par value $.001 per
share, in one or more series, with such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations, or restrictions thereof, as may be stated and expressed in a
resolution or resolutions providing for the issuance of any such series adopted
by the Board of Directors of the Corporation, pursuant to authority expressly
vested in the Board of Directors by the Certificate of Incorporation of the
Corporation.
SECOND: The Board of Directors of the Corporation duly adopted the
following resolution (i) authorizing the creation of a new series of such
preferred stock, to be known as "Series A Convertible Preferred Stock," stating
that 3,250,000 shares of the authorized and unissued preferred stock shall
constitute such series, and setting forth a statement of the voting powers,
designation,
-2-
<PAGE>
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof as follows, (ii)
authorizing the creation of a new series of such preferred stock, to be known as
"Series B Non-Voting Convertible Preferred Stock," stating that 902,893 shares
of the authorized and unissued preferred stock shall constitute such series and
(iii) authorizing the creation of a new series of such preferred stock, to be
known as "Series C Junior Preferred Stock," stating that 902,893 shares of the
authorized and unissued preferred stock shall constitute such series, and
setting forth a statement of the voting powers, designation, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof as follows:
BE IT RESOLVED, that the terms of the Series A Convertible Preferred Stock,
of the Series B Non-Voting Convertible Preferred Stock and of the Series C
Junior Preferred Stock shall be as follows:
1. Designation of Preferred Stock. The rights, preferences, privileges and
------------------------------
restrictions granted to and imposed on the Series A Convertible Preferred Stock,
$0.001 par value (the "Series A Preferred Stock"), the rights, preferences,
privileges and restrictions granted to and imposed on the Series B Non-Voting
Convertible Preferred Stock (the "Series B Preferred Stock") and the rights,
preferences, privileges and restrictions granted to and imposed on the Series C
Junior Preferred Stock are set forth below. The number of shares of Series A
Preferred Stock shall initially be 3,250,000, the number of shares of Series B
Preferred Stock shall initially be 902,893, and the number of shares of Series C
Junior Preferred Stock shall initially be 902,893, subject in each case to
decrease (but not below the number of shares thereof (i) required to be issued
under the Stock Purchase Agreement or (ii) in the case of the Series A Preferred
Stock, required to be issued upon conversion of the Series B Preferred Stock as
provided in this Certificate or (iii) in the case of the Series C Junior
Preferred Stock, required to be issued upon conversion of the Series B Preferred
Stock as provided in this Certificate or (iv) then outstanding) from time to
time by action of the Board of Directors. Except as otherwise provided herein,
all shares of Series A Preferred Stock and Series B Preferred Stock will be
identical and will entitle holders thereof to the same rights and privileges.
The Series C Junior Preferred Stock shall rank on a parity with the Common
Stock, but shall be non-voting. The Series A Preferred Stock and Series B
Preferred Stock are collectively referred to as the "Preferred Stock".
2. Dividends and Distributions. No cash dividend or distribution may be
---------------------------
paid in any calendar year on the Common Stock, the Series C Junior Preferred
Stock or any other class or series of preferred stock ranking junior in rights
and preferences to the Preferred Stock (together with the Common Stock, "Junior
Stock"), unless a dividend shall have been declared and paid to the holders of
record of the Preferred Stock during such calendar year in an amount equal to
10% of the then Preference Amount. In the event any dividend or distribution,
including without limitation any distribution of securities or purchase rights,
but not including a dividend or distribution payable solely in cash or shares of
Junior Stock is declared and paid on any class of Junior Stock (a "Non-Common
Distribution"), a dividend or distribution, respectively, on each outstanding
share of Preferred Stock shall be concurrently declared and paid to holders of
record of the Preferred Stock
-3-
<PAGE>
on the record date for the determination of holders of Junior Stock entitled to
receive such Non-Common Distribution. Such dividend or distribution shall be in
an amount equal to the aggregate amount of any such dividend or distribution
payable (on an as-converted basis in the case of Junior Stock other than Common
Stock) with respect to one share of Common Stock multiplied by the number of
shares of Common Stock into which such share of Preferred Stock may be converted
pursuant to the provisions of Sections 5 and 6 on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution.
3. Liquidation, Dissolution or Winding Up.
--------------------------------------
a. Liquidation Preference. In the event of any liquidation, dissolution
----------------------
or winding up of the Corporation, either voluntary or involuntary, distributions
to the holders of the Preferred Stock shall be made in the following manner:
i. Each holder of Preferred Stock shall first be entitled to receive,
after distribution of any of the assets of the Corporation to the holders of any
other series of preferred stock ranking senior to the Preferred Stock with
respect to the liquidation, and prior and in preference to any distribution of
any of the assets of the Corporation to the holders of any Junior Stock and to
the holders of the Common Stock by reason of their ownership of such stock, an
amount in cash per share of Preferred Stock held by such holder equal to the
Preference Amount (which amount shall be subject in each case to equitable
adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Preferred Stock) plus all
declared but unpaid dividends on the date of such liquidation, dissolution or
winding up (the "Liquidation Amount"). If after distribution of any of the
assets of the Corporation to the holders of any other series of preferred stock
ranking senior to the Preferred Stock, the assets and funds of the Corporation
shall be insufficient to permit the payment in full to any holders of any class
of stock ranking on parity with the Preferred Stock with respect to the
liquidation ("Parity Stock") of its liquidation preference and to such holders
of Preferred Stock of the full Liquidation Amount, then the entire remaining
assets of the Corporation legally available for distribution shall be
distributed ratably among the holders of Preferred Stock and Parity Stock, to
the exclusion of any junior stock, in accordance with the respective amounts
which would be payable in respect of the shares held by each of them upon such
distribution if all amounts payable on or in respect of such shares were paid in
full.
ii. After payment has been made to the holders of Preferred Stock of the
full amount to which they are entitled pursuant to Section 3.1.1, and after
payment in full of amounts to which holders of preferred stock ranking junior to
the Preferred Stock with respect to liquidation by reason of their ownership of
such stock (but not including for this purpose the Series C Junior Preferred
Stock), the holders of the Preferred Stock shall be entitled to share ratably
with the holders of the Common Stock and the Series C Junior Preferred Stock in
the remaining assets, based on the number of shares of Common Stock held by them
(assuming conversion of all of the shares of Preferred Stock and Series C Junior
Preferred Stock into Common Stock pursuant to Section 5), until the holders of
Preferred Stock have received a cumulative amount under Section 3.1.1 and
Section 3.1.2 equal to two times the Preference Amount.
-4-
<PAGE>
iii. After payment has been made to the holders of Preferred Stock of the
full amount to which they are entitled pursuant to Sections 3.1.1 and 3.1.2, the
holders of Preferred Stock shall not be entitled to any further distribution of
the assets of the Corporation upon any such liquidation, dissolution or winding
up.
b. Merger, Sale, etc. A consolidation, merger, or sale of all or
------------------
substantially all the assets of the Corporation in which the stockholders of the
Corporation immediately prior to such consolidation, merger, or sale do not own,
directly, or indirectly, a majority of the outstanding voting power of the
surviving corporation or acquiring entity, as the case may be, immediately after
such merger, or sale shall be deemed a liquidation, dissolution or winding-up of
the Corporation for purposes of this Section 3 unless the holders of a majority
of the then- outstanding shares of Series A Preferred Stock elect not to treat
any of the foregoing events as a liquidation, dissolution or winding up by
giving written notice thereof to the Corporation. If such holders do not
exercise their right to treat a consolidation, merger or sale as a non-
liquidating event, the holders of Preferred Stock shall be entitled to receive
out of the consideration paid in such conveyance the amount payable to such
holders pursuant to Sections 3.1.1 and 3.1.2 above, which amount shall satisfy
the Corporation's obligations pursuant to such sections.
c. Distribution Other Than Cash. Whenever the distribution provided for
----------------------------
in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation.
4. Voting Rights.
-------------
a. Series A Preferred Stock. Except as otherwise provided herein or
------------------------
required by law, the holders of Series A Preferred Stock shall vote together
with the holders of Common Stock (and any other shares of the Corporation's
stock which, by their terms, are entitled to vote together with the Common Stock
as a single class) as a single class on any matter submitted to the holders of
Common Stock. Each holder of Series A Preferred Stock shall have, on any matter
submitted to the holders of Common Stock, the number of votes in respect of its
shares of Series A Preferred Stock equal to the number of shares of Common Stock
into which shares of Series A Preferred Stock held by such holder may be
converted pursuant to Section 5 hereof on the record date for such vote or, if
no such record date is established, at the date such vote is taken or the date
of any written consent of stockholders. Record holders of Series A Preferred
Stock shall be entitled to notice of any stockholders' meeting or solicitation
of stockholders' consents to the same extent as the holders of Common Stock.
b. Series B Preferred Stock. Except as set forth herein or as otherwise
------------------------
required by law, each outstanding share of Series B Preferred Stock shall not be
entitled to vote on any matter and shares of Series B Preferred Stock shall not
be included in determining the number of shares voting or entitled to vote on
any matter. On any matter on which the holders of shares of Series B Preferred
Stock are entitled to vote, all classes of Preferred Stock entitled to vote
shall vote together as a single
-5-
<PAGE>
class and each holder of shares of Series B Preferred Stock entitled to vote
shall be entitled to a number of votes in respect of its shares of Series B
Preferred Stock equal to the number of shares of Common Stock into which the
shares of Series A Preferred Stock into which shares Series B Preferred Stock
held by such holder would ultimately be converted pursuant to Sections 5 and 6
hereof on the record date for such vote if actually converted (assuming for this
purpose that such Series B Preferred Stock was fully convertible at such time)
or, if no such record date is established, at the date such vote is taken or the
date of any written consent of stockholders; provided that, notwithstanding the
foregoing, holders of shares of Series B Preferred Stock shall be entitled to
vote as a separate class on any amendment to this subparagraph 4.2.
c. Series C Junior Preferred Stock. Except as set forth herein or as
-------------------------------
otherwise required by law, each outstanding share of Series C Junior Preferred
Stock shall not be entitled to vote on any matter and shares of Series C Junior
Preferred Stock shall not be included in determining the number of shares voting
or entitled to vote on any matter. On any matter on which the holders of shares
of Series C Junior Preferred Stock are entitled to vote, all Shares of Common
Stock entitled to vote shall vote together as a single class and each holder of
shares of Series C Junior Preferred Stock entitled to vote shall be entitled to
a number of votes in respect of its shares of Series C Junior Preferred Stock
equal to the number of shares of Common Stock into which the shares of Series C
Junior Preferred Stock held by such holder would be converted pursuant to
Section 6 hereof on the record date for such vote if actually converted
(assuming for this purpose that such Series C Junior Preferred Stock was fully
convertible at such time) or, if no such record date is established, at the date
such vote is taken or the date of any written consent of stockholders; provided
that, notwithstanding the foregoing, holders of shares of Series C Junior
Preferred Stock shall be entitled to vote as a separate class on any amendment
to this subparagraph 4.3.
d. Election of Directors. Except as otherwise provided by law, the
---------------------
holders of Preferred Stock are entitled as a group, voting together as a
separate class with each share entitled to one vote (i) so long as such holders
hold not less than two-sevenths of the outstanding voting securities of the
Corporation on an as-converted basis, to elect one member of the class of
directors whose term initially terminated in July 1997 ("Class I") and one
member of the class of directors whose term initially terminated in July 1998
("Class II") at each annual election of directors of such classes and (ii) so
long as such holders hold not less than one-seventh of the outstanding voting
securities of the Corporation on an as-converted basis, to elect one Class I
member of the Board of Directors of the Corporation at each annual election of
directors of such Class; provided, that, if not sooner terminated in accordance
--------
with the foregoing provisions, the class voting right contained in this
subparagraph 4.4 shall terminate (x) as to one director in the event that the
Company is no longer obligated to use its best efforts to nominate and present
to stockholders the proposed election of both the Telesource Nominee and Oak
Nominee (as such terms are defined in the Stock Purchase Agreement) and (y) as
to both directors in the event the Company is no longer obligated to use its
best efforts to nominate and present to stockholders the proposed election of
either of the Telesource Nominee or the Oak Nominee
-6-
<PAGE>
5. Conversion Rights. The holders of Series A Preferred Stock shall have the
-----------------
following rights with respect to the conversion of the Series A Preferred Stock
into shares of Common Stock:
a. General. Subject to and in compliance with the provisions of this
-------
Section 5, shares of Series A Preferred Stock may, at the option of the holder,
be converted at any time into the number of shares of fully-paid and non-
assessable shares of Common Stock equal to the product obtained by multiplying
the Applicable Conversion Rate (determined as provided in Section 5.2) by the
number of shares of Series A Preferred Stock held by such holder being
converted.
b. Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time for the Series A Preferred Stock (the "Applicable Conversion Rate") shall
be the quotient obtained by dividing the Preference Amount by the Applicable
Conversion Value, calculated as provided in Section 5.3.
c. Applicable Conversion Value. The Applicable Conversion Value shall
---------------------------
initially be $8.00 per share and shall be adjusted from time to time in
accordance with Section 5.4 hereof (as so adjusted, the "Applicable Conversion
Value").
d. Adjustments to Applicable Conversion Value. In the event of (A) a
------------------------------------------
subdivision of outstanding shares of Common Stock into a greater number of
shares of Common Stock, (B) a combination of outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (C) the issuance of shares
of Common Stock for no consideration by way of a stock dividend or other
distribution (any of the foregoing being referred to as an "Extraordinary Common
Stock Event"), the Applicable Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the then effective Applicable Common Conversion Value by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Common Stock Event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value. The Applicable Conversion Value,
as so adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
e. Reclassification. If the Common Stock issuable upon the
----------------
conversion of the Series A Preferred Stock shall be changed into the same or
different number of shares of any class or classes of stock, whether by
reclassification, consolidation, merger or otherwise (other than any event as to
which either Section 3.2 applies or that is otherwise provided for elsewhere in
this Section 5), then and in each such event, the holder of each share of Series
A Preferred Stock shall have the right thereafter to convert the shares of
Series A Preferred Stock into the kind and amount of shares of stock and other
securities and property receivable upon such reclassification or other change by
holders of the number of shares of Common Stock into which such shares of Series
A Preferred Stock might have been converted immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
-7-
<PAGE>
f. Good Faith. If any event occurs as to which in the reasonable opinion
----------
of the Board of Directors of the Corporation, in good faith, the other
provisions of this Section 5 are not strictly applicable but the lack of any
adjustment in the Applicable Conversion Rate would not in the opinion of the
Board of Directors of the Corporation fairly protect the conversion rights of
the holders of the Series A Preferred Stock in accordance with the basic intent
and principles of such provisions, or if strictly applicable would not fairly
protect the conversions rights of the holders of the Series A Preferred Stock in
accordance with the basic intent and principles of such provisions, then the
Board of Directors of the Corporation shall effect an appropriate adjustment to
the Applicable Conversion Rate, on a basis consistent with the basic intent and
principles of this Section 5, necessary in their good faith judgment to
preserve, without dilution, the exercise rights of all the registered holders of
the Series A Preferred Stock.
g. Exercise of Conversion Privilege. To exercise its conversion
--------------------------------
privilege, a holder of Series A Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Corporation at
its principal office or, if the Corporation has appointed an agent and provided
the holders of Series A Preferred Stock notice thereof, at any agent designated
by the Corporation for such purpose, and shall give written notice to the
Corporation at that office that such holder elects to convert such shares, or if
fewer than all the shares represented by a single share certificate are to be
converted, the number of shares represented thereby to be converted. The
certificate or certificates for shares of Series A Preferred Stock surrendered
for conversion shall be accompanied by proper assignment thereof to the
Corporation or in blank. Each conversion of Series A Preferred Stock shall be
deemed to have been effected as of the close of business on the effective date
of such conversion specified in the written notice (the "Conversion Date");
provided, however, that the Conversion Date shall not be a date earlier than the
date such notice is received by the Corporation (or its designated agent), and
if such notice does not specify a conversion date, the Conversion Date shall be
deemed to be the date such notice is received by the Corporation (or its
designated agent). On the Conversion Date, the rights of the holder of such
Series A Preferred Stock as such holder (including the right to receive
dividends in cash) shall cease and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
As promptly as practicable after the later of (x) the Conversion Date and
(y) the date the holder has delivered its notice and the certificates evidencing
the shares of Series A Preferred Stock converted into shares of Common Stock in
accordance herewith, the Corporation shall deliver to the converting holder at
the address set forth in the conversion notice:
(1) a certificate or certificates representing, in the aggregate, the
number of shares of Common Stock issued upon such conversion, in the same name
or names as the certificates representing the converted shares and in such
denomination or denominations as the converting holder shall specify and a check
for cash with respect to any fractional interest in a share of Common Stock as
provided in Section 5.8; and
-8-
<PAGE>
(2) a certificate representing any shares of Series A Preferred Stock that
were represented by the certificate or certificates delivered to the Corporation
in connection with such conversion but that were not converted.
The issuance of certificates for shares of Common Stock upon the conversion
of Series A Preferred Stock shall be made without charge to the holders of such
Series A Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock.
h. Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Corporation shall pay to the holder of the
converted shares of Series A Preferred Stock cash in respect to such fractional
shares in an amount equal to the same fraction of the market price per share of
Common Stock (as determined in a reasonable manner prescribed by the Board of
Directors).
i. Automatic Conversion. Each share of Series A Preferred Stock shall be
--------------------
automatically converted into fully-paid and non-assessable shares of Common
Stock in accordance with the terms of this Section 5: (i) upon the closing of a
firm commitment underwritten public equity offering of the Corporation yielding
aggregate net proceeds to the Corporation of at least $75,000,000 at a price per
share of Common Stock of at least $18.00 (as appropriately adjusted for stock
dividends, stock combinations, stock splits and recapitalization and the like),
(ii) at the close of business on the first day after June 1, 2001, on which the
Closing Price (as defined in Section 10) of the Common Stock has exceeded $18.00
per share (as appropriately adjusted for stock dividends, stock combinations,
stock splits, recapitalizations and the like) for at least 30 of 40 consecutive
Trading Days (as defined in Section 10), (iii) upon the approval of the holders
of two-thirds of the then-outstanding Series A Preferred Stock, voting together
as a single class or (iv) upon the conversion into either Common Stock or Series
C Junior Preferred Stock of seventy-five percent of the Preferred Stock issued
pursuant to the Stock Purchase Agreement.
Upon the occurrence of the conversion specified in this Section 5.9, the
holders of the Series A Preferred Stock shall, upon notice from the Corporation,
surrender the certificates representing such shares at the office of the
Corporation or of its transfer agent for the Common Stock. The number of shares
of Common Stock to which each holder of Series A Preferred Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
Applicable Conversion Rate (determined as provided in Section 5.2) by the number
of shares of Series A Preferred Stock held by such holder being converted. As
promptly as practicable after such conversion, upon surrender by such holder of
certificates representing its shares of Series A Preferred Stock, the
Corporation shall issue and deliver to such holder a certificate or certificates
for the number of whole shares of Common Stock to which such holder is entitled,
together with any cash payment in lieu of fractional shares to which such holder
may be entitled pursuant to this Section 5. The Corporation shall not be
obligated to issue such certificates unless certificates evidencing such shares
of the Series A
-9-
<PAGE>
Preferred Stock being converted are either delivered to the Corporation or any
such transfer agent, or the holder notifies the Corporation or any such transfer
agent that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith.
j. Record Dates and Dividends. Holders of shares of Series A Preferred
--------------------------
Stock at the close of business on a record date for any Non-Common Distribution
will be entitled to receive the dividend or distribution, respectively, payable
on such shares of Series A Preferred Stock pursuant to Section 2 on the
corresponding payment date for such Non-Common Distribution notwithstanding the
conversion of such shares of Series A Preferred Stock following such record date
and prior to such payment date.
6. Special Conversion of Non-Voting Stock.
--------------------------------------
a. Automatic Conversion of Series B Preferred Stock and Series C Junior
--------------------------------------------------------------------
Preferred Stock Upon Transfer to Stockholder other than a Restricted
- --------------------------------------------------------------------
Stockholder. Notwithstanding any other provision of this Section 6, if any
- -----------
shares of Series B Preferred Stock or Series C Junior Preferred Stock shall at
any time be properly transferred to a record holder which is not, and would not
immediately after such transfer be, a Restricted Stockholder, each such share
shall be immediately and automatically converted into either (i) the number of
shares of Series A Preferred Stock determined by multiplying the Applicable
Series B Conversion Rate (defined below) by the number of shares of Series B
Preferred Stock being converted or (ii) a number of shares of Common Stock
determined by multiplying the Applicable Series C Conversion Rate (defined
below) by the number of shares of Series C Junior Preferred Stock being
converted, as applicable.
b. Automatic Conversion of Series B Preferred Stock or Series C Junior
-------------------------------------------------------------------
Preferred Stock Upon Additional Equity Issuance. In the event that at any time,
- -----------------------------------------------
from time to time after the effective date of this Certificate of Designation,
the Corporation issues additional shares of Common Stock or other voting equity
securities to any person other than a Restricted Stockholder or any Restricted
Stockholder transfers in accordance with the transfer provisions contained
herein or in the Standstill Agreement, shares of Series A Preferred Stock to an
entity that would not, after giving effect to such transfer constitute a
Restricted Stockholder, such that the quotient, expressed as a percentage,
obtained by dividing (x) the aggregate number of votes which the Restricted
--------
Stockholders are entitled to vote generally with the holders of Common Stock as
a result of all shares of Series A Preferred Stock and all shares of Common
Stock issuable upon conversion of Series A Preferred Stock or other voting
securities held by the Restricted Stockholders, minus the number of votes which
the Restricted Stockholders are entitled to vote as a result of all Unrestricted
Shares held by Restricted Stockholders by (y) the number of votes which all
--
holders of the Corporation's equity securities (including the Restricted
Stockholders) are entitled to vote generally with the holders of Common Stock
with regard to the election of directors is less than forty-five percent (45%),
an aggregate number of shares of Series B Preferred Stock required to cause the
solution to the foregoing equation to equal forty-five percent (45%) shall be
automatically converted to a number of shares of Series A Preferred Stock
determined by multiplying the Applicable Series B Conversion Rate (defined
below) by the number of shares of Series B Preferred Stock being converted. To
the extent that no shares of Series B Preferred Stock remain outstanding, then a
number of shares of Series C Junior Preferred Stock held by the Restricted
Holders equal to the number of shares required to cause the equation in the
foregoing sentence to yield a result equal to forty-five percent (45%) shall be
converted, pro rata among the Holders thereof, into a number of shares of Common
Stock determined by multiplying the Applicable Series C Conversion Rate (defined
below) by the number
-10-
<PAGE>
of shares of Series C Junior Preferred Stock being converted.
c. Applicable Series B Conversion Rate. The conversion rate in effect
-----------------------------------
at any time for the Series B Preferred Stock (the "Applicable Series B
Conversion Rate") shall be the quotient obtained by dividing the Preference
Amount by the Applicable Series B Conversion Value, calculated as provided in
Section 6.4.
d. Applicable Series B Conversion Value. The Applicable Series B
------------------------------------
Conversion Value shall initially be $80.00 per share and shall be adjusted from
time to time in accordance with Section 6.5 hereof (as so adjusted, the
"Applicable Series B Conversion Value").
e. Adjustments to Applicable Series B Conversion Value. In the event of
---------------------------------------------------
(A) a subdivision of outstanding shares of Series A Preferred Stock into a
greater number of shares of Series A Preferred Stock, (B) a combination of
outstanding shares of Series A Preferred Stock into a smaller number of shares
of Series A Preferred Stock, or (C) the issuance of shares of Series A Preferred
Stock for no consideration by way of a stock dividend or other distribution (any
of the foregoing being referred to as an "Extraordinary Series A Preferred Stock
Event"), the Applicable Series B Conversion Value shall, simultaneously with the
happening of such Extraordinary Series A Preferred Stock Event, be adjusted by
multiplying the then effective Applicable Series B Conversion Value by a
fraction, the numerator of which shall be the number of shares of Series A
Preferred Stock outstanding immediately prior to such Extraordinary Series A
Preferred Stock Event and the denominator of which shall be the number of shares
of Series A Preferred Stock outstanding immediately after such Extraordinary
Series A Preferred Stock Event, and the product so obtained shall thereafter be
the Applicable Series B Conversion Value. The Applicable Series B Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Series A Preferred Stock Event or Events.
f. Mechanics of Automatic Conversion of Series B Preferred Stock. Upon
-------------------------------------------------------------
the occurrence of an event specified in Sections 6.1 or 6.2, the Series B
Preferred Stock shall be converted automatically without any further action by
the holder of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Series A Preferred Stock issuable upon such conversion
unless certificates evidencing such shares of the Series B Preferred Stock being
converted are either delivered to the Corporation or its transfer agent. Upon
the automatic conversion of the Series B Preferred Stock, the holder of such
Series B Preferred Stock shall surrender the certificates representing such
shares at the office of the Corporation or of its transfer agent. Thereupon,
there shall be issued and delivered to such holder,
-11-
<PAGE>
promptly at such office and in such holder's name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
shares of Series A Preferred Stock into which the shares of Series B Preferred
Stock surrendered were convertible on the date on which such automatic
conversion occurred. From and after the date of the event that causes the
automatic conversion pursuant to Sections 6.1 and 6.2, all rights of the holder
with respect to the Series B Preferred Stock so converted shall terminate,
except only the right of such holder, upon the surrender of such holder's
certificate or certificates therefor, to receive certificates for the number of
shares of Series A Preferred Stock issuable upon conversion thereof.
g. Automatic Conversion into Series C Junior Preferred Stock. Each share
---------------------------------------------------------
of Series B Preferred Stock shall be automatically converted into fully-paid and
non-assessable shares of Series C Junior Preferred Stock in accordance with the
terms of this Section 6.7: (i) upon the closing of a firm commitment
underwritten public equity offering of the Corporation yielding aggregate net
proceeds to the Corporation of at least $75,000,000 at a price per share of
Common Stock of at least $18.00 (as appropriately adjusted for stock dividends,
stock combinations, stock splits and recapitalization and the like), (ii) at
the close of business on the first day after June __, 2001, on which the Closing
Price (as defined in Section 10) of the Common Stock has exceeded $18.00 per
share (as appropriately adjusted for stock dividends, stock combinations, stock
splits, recapitalizations and the like) for at least 30 of 40 consecutive
Trading Days (as defined in Section 10), (iii) upon the approval of the holders
of two-thirds of the then-outstanding Series B Preferred Stock, voting together
as a single class or (iv) upon the conversion into either Common Stock or Series
C Junior Preferred Stock of seventy-five percent of the Preferred Stock issued
pursuant to the Stock Purchase Agreement.
Upon the occurrence of the conversion specified in this Section 6.7, the
holders of the Series B Preferred Stock shall, upon notice from the Corporation,
surrender the certificates representing such shares at the office of the
Corporation or of its transfer agent for the Series C Junior Preferred Stock.
The number of shares of Series C Junior Preferred Stock to which each holder of
Series B Preferred Stock shall be entitled upon conversion shall be the product
obtained by multiplying the Applicable Series B Conversion Rate (determined as
provided in Section 6.3) by the number of shares of Series B Preferred Stock
held by such holder being converted. As promptly as practicable after such
conversion, upon surrender by such holder of certificates representing its
shares of Series B Preferred Stock, the Corporation shall issue and deliver to
such holder a certificate or certificates for the number of whole shares of
Series C Junior Preferred Stock to which such holder is entitled, together with
any cash payment in lieu of fractional shares to which such holder may be
entitled pursuant to this Section 6. The Corporation shall not be obligated to
issue such certificates unless certificates evidencing such shares of the Series
B Preferred Stock being converted are either delivered to the Corporation or any
such transfer agent, or the holder notifies the Corporation or any such transfer
agent that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith.
-12-
<PAGE>
h. Applicable Series C Conversion Rate. The Applicable Series C
-----------------------------------
Conversion Rate shall at all times equal the Applicable Conversion Rate,
calculated in accordance with Section 5 hereof.
7. Capital Stock.
-------------
a. No Reissuance of Preferred Stock. No share or shares of Preferred
--------------------------------
Stock acquired by the Corporation by reason of purchase, conversion or otherwise
shall be reissued, and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue. The
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of the Preferred Stock
accordingly.
b. Reservation of Stock.
--------------------
(a) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock (or out of its authorized
shares of Common Stock held in the treasury of the Corporation), for the purpose
of effecting the conversion of the Series A Preferred Stock and the Series C
Junior Preferred Stock, the full number of shares of Common Stock then issuable
upon the conversion pursuant to Section 5 of all outstanding shares of Series A
Preferred Stock (including for this purpose shares of Series B Preferred Stock
convertible into Series A Preferred Stock) and the conversion pursuant to
Section 6 of all outstanding shares of Series C Junior Preferred Stock.
(b) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Series A Preferred Stock (or out of its
authorized shares of Series A Preferred Stock held in the treasury of the
Corporation), for the purpose of effecting the conversion of the Series B
Preferred Stock, the full number of shares of Series A Preferred Stock then
issuable upon the conversion pursuant to Section 6 of all outstanding shares of
Series B Preferred Stock.
(c) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Series C Junior Preferred Stock (or out
of its authorized shares of Series C Junior Preferred Stock held in the treasury
of the Corporation), for the purpose of effecting the conversion of the Series B
Preferred Stock, the full number of shares of Series C Junior Preferred Stock
then issuable upon the conversion pursuant to Section 6 of all outstanding
shares of Series B Preferred Stock.
8. Notices of Record Date. In the event of the proposed sale of all or
----------------------
substantially all of the assets of the Corporation or merger or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall use reasonable efforts to mail or cause to be mailed to each
holder of record of Preferred Stock a notice (at least twenty (20) days in
advance of the following) specifying (i) the date on which any such sole,
merger, dissolution, liquidation or winding up is expected to become effective
and (ii) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their share
-13-
<PAGE>
of Common Stock (or other securities) for securities or other property
deliverable upon such dissolution, liquidation or winding up. Except as set
forth above in this Section 8, in the event the Corporation provides any notice
or mailing to the holders of Common Stock, such notice shall be provided, at
substantially the same time and in substantially the same manner, to the holders
of Preferred Stock.
9. Amendments. The provisions of the terms of the Preferred Stock may not be
----------
amended, modified or waived without the written consent or affirmative vote of
the holders of a majority of the then outstanding shares of Preferred Stock.
10. Definitions.
-----------
a. "Closing Price" for any date shall mean, so long as the Common
Stock is quoted on The Nasdaq Stock Market (or its successor), the last bid
price of the Common Stock on that date, or if the Common Stock is no longer
quoted on The Nasdaq Stock Market and is then listed on any national securities
exchange, the last sale price of the Corporation's Common Stock on such exchange
on that date.
b. "Preference Amount" shall mean $80.00.
c. "Restricted Stockholder" shall mean (i) any party (other than the
Corporation) to the Stock Purchase Agreement and their respective "affiliates"
or "associates" (as each such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934); and (ii) any person or entity that acquires shares of
Preferred Stock or any securities, including Common Stock, that were issued upon
conversion of the Preferred Stock, from a party to or an affiliate or associate
of any party (other than the Corporation) to the Stock Purchase Agreement unless
such shares were acquired either (x) in a sale to the public pursuant to Rule
144 under the Securities Act of 1933, or an offering registered under such Act
or (y) in a transfer not prohibited by that certain Standstill Agreement dated
June 1, 1999 among the Corporation and certain of the Corporation's
stockholders, (the "Standstill Agreement"), if following such transfer the
transferee is not (i) bound by the terms of such agreement, nor (ii) an
affiliate or associate of any entity so bound (other than solely an affiliate or
associate of the Corporation) nor (iii) an affiliate or associate of a
Restricted Stockholder.
d. "Stock Purchase Agreement" shall mean that certain Preferred Stock
Purchase Agreement among the Corporation and the initial purchasers of the
Preferred Stock, dated June 1, 1999, as amended and in effect from time to time.
e. "Trading Days" shall mean any date on which The Nasdaq Stock Market is
open for the quotation of securities or, if the Common Stock is no longer quoted
on The Nasdaq Stock Market and is then listed on any national securities
exchange, any date such exchange is open for the trading of securities.
-14-
<PAGE>
f. "Unrestricted Shares" means (i) any shares of voting capital stock of
the Corporation owned by Columbia Capital, L.L.C. and Advent International
Corporation and their respective affiliates (the "Existing Holders") other than
shares of Preferred Stock acquired by Existing Holders pursuant to the Purchase
Agreement (or the conversion or further conversion of such shares pursuant to
the terms hereof), or (ii) any shares of voting capital stock of the Corporation
acquired by Existing Holders upon exercise of the Existing Holders' rights in
Section 4.16 of the Purchase Agreement (or the exercise, conversion or exchange
of securities acquired on exercise of such rights), in each case, so long as
such shares are not held by any Restricted Stockholder other than an Existing
Holder.
ADVANCED RADIO TELECOM CORP. has caused this Corrected Certificate of
Designation to be signed by Robert S. McCambridge, its Chief Executive Officer,
and attested by Thomas M. Walker, its Secretary, this 12th day of November,
1999.
/s/ R. S. McCambridge
_____________________________________
R. S. McCambridge
Interim Chief Executive Officer
ATTEST,
/s/ Thomas M. Walker
________________________________
Secretary, Thomas M. Walker
-15-
<PAGE>
EXHIBIT 3.2
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 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
<PAGE>
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.
(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)
-2-
<PAGE>
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 any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the Corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the
-3-
<PAGE>
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
------------------------
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of 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.
--------------------
(a) 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.
(b) 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.
(c) 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.
(d) 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
-4-
<PAGE>
to be taken at such annual meeting) state the purpose or purposes. The notice of
a special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the Corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. No business shall be
conducted at an annual meeting except in accordance with this procedure. The
Chairman of an annual meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this section, and if so determined, shall
declare to the meeting that any such business not properly brought before the
meeting and in accordance with the provisions of this section, and if so
determined, shall declare to the meeting that any such business not properly
brought 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.
(e) NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
----------------------------------------------
(1) Annual Meetings of Stockholders. (A) Nominations of persons
-------------------------------
for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders only (i) pursuant to the
Corporation's notice of meeting (or any supplement thereto), (ii) by
or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record of the
Corporation at the time the notice provided for in this Section 7(e)
is delivered to the Secretary of the Corporation, who is entitled to
vote at the meeting and who complies with the notice procedures set
forth in this Section 7(e).
(B) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause
(iii) of paragraph
-5-
<PAGE>
(1)(A) of this Section 7(e), the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation, and
such other business must otherwise be a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the
Secretary of the Corporation, and such other business must otherwise
be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the
close of business on the ninetieth day nor earlier than the close of
business on the one hundred twentieth day prior to the first
anniversary of the preceding year's annual meeting (provided, however,
-------- -------
that in the event that the date of the annual meeting is more than
thirty days before or more than seventy days after such anniversary
date, notice by the stockholder must be so delivered not earlier than
the close of business on the one hundred twentieth day prior to such
annual meeting and not later than the close of business on the later
of (i) the ninetieth day prior to such annual meeting or (ii) the
tenth day following the day on which public announcement of the date
of such meeting is first made by the Corporation). In no event shall
the public announcement of an adjournment or postponement of an annual
meeting commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth: (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors in
an election contest, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (and such
person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the
meeting, the text of the proposal or business (including the text of
any resolutions proposed for consideration and in the event that such
business includes a proposal to amend the By-laws of the Corporation,
the language of the proposed amendment), the reasons for conducting
such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (a) the name and address of such
stockholder and beneficial owner, as they appear on the Corporation's
books (b) the class and number of shares of capital stock of the
Corporation that are owned beneficially and of record by such
stockholder and beneficial owner, (c) a representation that the
stockholder is a holder of record of stock of the Corporation entitled
to vote as such meeting and intends to appear in person or by proxy at
the meeting to propose such business or nomination, and (d) a
representation whether the stockholder or the beneficial owner, if
any, intends
-6-
<PAGE>
or is part of a group which intends to (1) deliver a proxy statement
or form of proxy to holders of at least the percentage of the
Corporation's outstanding capital stock required to approve or adopt
the proposal or elect the nominee, or (2) otherwise solicit proxies
from stockholders in support of such proposal or nomination. The
Corporation may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility
of such proposed nominee to serve as a director of the Corporation.
(C) Notwithstanding anything in the second sentence of
paragraph (1)(B) of this Section 7(e) to the contrary, in the event
that the number of directors to be elected to the Board of Directors
of the Corporation at an annual meeting is increased and there is no
public announcement by the Corporation naming all of the directors or
nominees for director on such increased Board of Directors or
specifying the size of the increased Board of Directors at least one
hundred days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Section 7(e)
shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered
to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth day following the
day on which such public announcement is first made by the
Corporation.
(2) Special Meetings of Stockholders. Only such business shall
--------------------------------
be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (A)
by or at the direction of the Board of Directors or (B) provided that
the Board of Directors has determined that directors shall be elected
at such meeting, by any stockholder of the Corporation who is a
stockholder of record at the time the notice provided for in this
Section 7(e) is delivered to the Secretary of the Corporation, who
shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this Section 7(e). In the event the
Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such
stockholder entitled to vote in such election of directors may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting, if
the stockholders' notice required by paragraph (1)(B) of this Section
7(e) is delivered to the Secretary at the principal executive offices
of the Corporation not earlier than the close of business on the one
hundred twentieth day prior to such special meeting and not later than
the close of business on the later of (i) the ninetieth day prior to
such special meeting or (ii) the tenth day following the
-7-
<PAGE>
day on which public announcement is first made of the date of such
special meeting. In no event shall the public announcement of an
adjournment or postponement of a special meeting commence a new time
period (or extend any time period) for the giving of a stockholder's
notice as described above.
(3) General. (A) Except as otherwise provided by law, the
-------
chairman of the meeting shall have the power and duty to (i) determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with
the procedures set forth in this Section 7(e) and (ii) if any proposed
nomination or business is not in compliance with this Section 7(e) to
declare that such defective nomination shall be disregarded or that
such proposed business shall not be transacted.
(B) For purposes of this Section 7(e), "public
announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news
service, as posted on the Corporation's Web site or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act").
(C) Notwithstanding the foregoing provisions of this
Section 7(e), a stockholder must also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 7(e).
Nothing in this Section 7(e) shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(f) STOCKHOLDER LIST. The officer who has charge of the stock ledger
----------------
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
-8-
<PAGE>
(g) 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.
(h) 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.
(i) 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.
(j) QUORUM. The holders of a majority of votes of the outstanding
------
shares of stock entitled to vote at a meeting of the stockholders shall
constitute a quorum at such
-9-
<PAGE>
meeting of stockholders for the transaction of any business. The stockholders
present may adjourn the meeting despite the absence of a quorum.
(k) VOTING. Each share of stock shall entitle the holder thereof to
------
one vote except to the extent provided in the General Corporation Law or the
Certificate of Incorporation of the Corporation (including, without limitation,
any certificate of designation). Each Director 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 such director. 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. QALIFICATIONS 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
-10-
<PAGE>
Board of Directors, the number of directors shall be fixed by resolution of the
Board of Directors and may be increased at any time or from time to time by the
directors by vote of a majority of the directors then in office but not to a
greater number than nine without action by the stockholders. The number of
directors may be decreased to any number permitted by the foregoing at any time
by the directors by vote of a majority of the directors then in office, but only
to eliminate vacancies existing by reason of the death, resignation or removal
of one or more directors.
3. ELECTION AND TERM. All members of the Board of Directors shall be
-----------------
classified, with respect to the time for which they each hold office, into three
classes. One class shall originally be elected for an initial one year term
expiring at the annual meeting of stockholders to be held in 1997, another class
shall be originally elected for an initial two year term expiring at the annual
meeting of stockholders to be held in 1998, and another class shall be
originally elected for an initial three year term expiring at the annual meeting
of stockholders to be held in 1999, with each member of each class to hold
office until a successor is elected and qualified or until his earlier
resignation or removal. Thereafter, at each annual meeting of stockholders, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a three year term until their successors are elected
and qualified or until their earlier resignation or removal.
Except as otherwise provided in or fixed by or pursuant to the
Corporation's Certificate of Incorporation, nominations for the election of
directors may be made by the Board of Directors or by any stockholder of record
entitled to vote in the election of directors generally. However, any such
stockholders may nominate one or more persons for election as director or
directors at a stockholders' meeting only if written notice of intent to make
such nomination or nominations has been given either by personal delivery or by
mail to the Secretary of the Corporation not less than 30 days before the
meeting of stockholders at which such election is held. Each such notice shall
state (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or 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.
-11-
<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.
-12-
<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 filled only by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Stockholders shall have no power to fill any vacancies
or newly created directorships. When one or more directors shall resign from the
board, effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirement of law or of the
certificate of incorporation or of these by-laws as to the number of directors
required for a quorum or for any vote or other action.
-13-
<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 writings are filed with the minutes of
proceedings of the Board or committee.
9. INTERESTED DIRECTORS AND OFFICERS.
---------------------------------
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the board
of directors or the committee, and the board or committee in good
faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
-14-
<PAGE>
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE III
-----------
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.
-15-
<PAGE>
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER 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, that 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 and 6; or this Article VI, such amendment, alteration or repeal must be
approved by stockholders holding at least 75% of the shares outstanding and
entitled to vote.
-16-
<PAGE>
EXHIBIT 4.1
================================================================================
Advanced Radio Telecom Corp.
$135,000,000 Aggregate Principal Amount of
14% Senior Notes due 2007 and
FIRST SUPPLEMENTAL INDENTURE
to Indenture dated as of February 6, 1997
Dated as of July 23, 1999
The Bank of New York
Trustee
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture"), dated
as of July 23, 1999, between Advanced Radio Telecom Corp., a Delaware
corporation (the "Company"), and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
RECITALS
WHEREAS, the Company has executed and delivered to the Trustee an
Indenture, dated as of February 6, 1997 (the "Original Indenture" and, as
amended by this First Supplemental Indenture, is referred to herein as the
"Indenture"), providing for the issuance of an aggregate principal amount of
$135,000,000 of 14% Senior Notes due 2007 (the "Notes");
WHEREAS, the Company has solicited the consents of the Holders of the Notes
to amend the Original Indenture pursuant to a Consent Solicitation Statement
dated June 28, 1999 (the "Consent Solicitation Statement");
WHEREAS, pursuant to Section 9.02 of the Original Indenture, the Company
and the Trustee may amend or supplement the Original Indenture with the written
consent of the Holders of Notes of not less than a majority in aggregate
principal amount of the outstanding Notes and, with respect to any amendments
that make a change to Section 4.11 or Section 4.15 of the Original Indenture,
the Holders of at least 66 2/3% in principal amount of the outstanding Notes;
WHEREAS, the Company has received the requisite consents of the Holders to
the amendments of the Original Indenture set forth in this First Supplemental
Indenture, and all other requirements and conditions set forth in Article 9 of
the Original Indenture have been satisfied;
WHEREAS, following the execution of this First Supplemental Indenture, the
amendments set forth herein will become operative upon the receipt by the
Company of at least $200 million from the sale of Qualified Capital Stock (as
defined in the Indenture) of the Company pursuant to the Stock Purchase
Agreement, dated as of June 1, 1999, among the Company and the purchasers
identified therein (the "Investment Condition" and, the date on which the
Investment Condition is satisfied is referred to herein as the "Operative
Date"); and
WHEREAS, the terms of this First Supplemental Indenture shall be null and
void if the Company terminates the solicitation of consents of the Holders of
the Notes pursuant to the Consent Solicitation Statement prior to the Operative
Date, or if the Operative Date does not occur;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and of the covenants contained in
the Original Indenture and herein, the Company and the Trustee have mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of
the Notes, as follows:
<PAGE>
Section 1. Amendments to the Original Indenture. Subject to the provisions
------------------------------------
of Section 2 of this First Supplemental Indenture, Articles 1, 4, 5 and 6 of the
Original Indenture are amended by replacing such articles with the following
Articles 1, 4, 5 and 6, respectively:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
"Accounts Receivable Subsidiary" means any Restricted Subsidiary of the
Company that is, directly or indirectly, wholly owned by the Company (other than
directors' qualifying shares) and organized for the purpose of and engaged in
(i) purchasing, financing, and collecting accounts receivable obligations of
customers of the Company or its Restricted Subsidiaries, (ii) the sale or
financing of such accounts receivable or interests therein and (iii) other
activities incident thereto.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with the
acquisition of assets from such Person and not incurred by such Person in
connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such acquisition of assets.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves) except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles (other than licenses issued by the FCC), all as set forth on the
quarterly or annual consolidated balance sheet of the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP and most recently filed with the
Commission pursuant to the terms of this Indenture; provided that the value of
any licenses issued by the FCC shall, in the event of an auction for similar
licenses, be equal to the Fair Market Value ascribed thereto as evidenced by a
resolution of the Board. As used herein, references to financial statements of
the Company and its Restricted Subsidiaries shall be adjusted to exclude
Unrestricted Subsidiaries if the context requires.
"Affiliate" means, as to any Person, any other Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies of such Person (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise); provided
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control for purposes of Section 4.12 hereof.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a Person solely by reason of his or her being an officer or director (or
equivalent) of such Person.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale and leaseback transaction) in one
transaction or a series of related transactions by the
-2-
<PAGE>
Company or any of its Restricted Subsidiaries to any Person other than the
Company or any of its Restricted Subsidiaries of (i) all or any of the Capital
Stock of any Restricted Subsidiary, (ii) all or substantially all of the
property and assets of an operating unit or business of the Company or any of
its Restricted Subsidiaries or (iii) any other property or assets of the Company
or any of its Restricted Subsidiaries outside the ordinary course of business of
the Company or such Restricted Subsidiary; provided that the following shall not
be included within the meaning of "Asset Sale":
(A) sales or other dispositions of inventory, receivables and other
current assets;
(B) sales or other dispositions of equipment that has become worn
out, obsolete, damaged or otherwise unsuitable or undesirable for use in
connection with the business of the Company or its Restricted Subsidiaries;
(C) Permitted Asset Swaps;
(D) sales, transfers or other dispositions otherwise constituting
Asset Sales in an aggregate amount not to exceed $1.0 million during any
twelve-month period;
(E) any Permitted Investment or Restricted Payment permitted by
Section 4.07 hereof;
(F) any Lien permitted to be Incurred by Section 4.13 hereof;
(G) any transaction that is governed by the provisions of Article 5
hereof;
(H) any sale, transfer or other disposition of the Capital Stock of
an Unrestricted Subsidiary;
(I) any disposition as a result of the Option Agreement, dated as of
July 3, 1996, between the Company and Commco, L.L.C.;
(J) sales of Eligible Cash Equivalents; and
(K) the sale, conveyance, transfer or other disposition of accounts
receivable to an Accounts Receivable Subsidiary or to Persons in the
ordinary course of business, including in connection with financing
transactions.
"Attributable Indebtedness" means, with respect to an operating lease
included in any Sale and Leaseback Transaction at the time of determination, the
present value (discounted at the interest rate implicit in the lease or, if not
known, at the Company's incremental borrowing rate as determined in good faith
by the Board) of the obligations of the lessee of the property subject to such
lease for rental payments during the remaining term of the lease included in
such transaction, including any period for which such lease has been extended or
may, at the option of the lessor, be extended, or until the earliest date on
which the lessee may terminate such lease without penalty or upon payment of
penalty (in which case the rental payments shall include such penalty), after
excluding from such rental payments all amounts required to be paid on account
of maintenance and repairs, insurance, taxes, assessments, water, utilities and
similar charges.
-3-
<PAGE>
"Average Life" means, as of any date, with respect to any Indebtedness, the
quotient obtained by dividing (i) the sum of the products of (A) the number of
years from such date to the dates of each scheduled principal payment (including
any sinking fund or mandatory redemption payment requirements) of such
Indebtedness multiplied in each case by (B) the amount of such principal payment
by (ii) the sum of all such principal payments.
"Board" means the Board of Directors of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in the Borough of Manhattan, The
City of New York are authorized or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Indebtedness arrangement
conveying the right to use) real or personal property of such Person that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than Indebtedness securities convertible
into an equity interest), warrants or options to acquire an equity interest in
such Person.
"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing more than 50% of the total voting power of the Voting
Stock of the Company on a fully diluted basis, (ii) individuals who on the Issue
Date constitute the Board (together with any new directors whose election by the
Board or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board then in
office who either were members of the Board on the Issue Date or whose election
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board then in office or (iii) the
merger or consolidation of the Company with or into another corporation, or the
merger or consolidation of another corporation with and into the Company, with
the effect that, immediately after such transaction, the stockholders of the
Company immediately prior to such transaction hold less then 50% of the Voting
Stock of the Person surviving such merger or consolidation.
"Closing Price" means the last sale price of a security at the end of a
Trading Day on a securities exchange or automated quotation system.
"Collateral" means, for so long as held pursuant to the Pledge Agreement,
(a) all of the Pledgor's (as defined in the Pledge Agreement) now owned and
existing and hereafter arising or acquired right, title and interest in and to
the investment property (as defined in the Pledge Agreement) consisting of the
Pledged Securities and the Pledge Account, (b) all book-entry interests in the
Pledged Securities and any certificates or other evidences of ownership
representing any Pledged Securities or the Pledge Account and (c) all proceeds
of any of the foregoing investment property, including, without limitation, all
dividends, interest, principal payments, cash, options, warrants, rights,
instruments, investment property (as defined
-4-
<PAGE>
in the Pledge Agreement), subscriptions and other property or proceeds from time
to time received, receivable or otherwise distributed or distributable in
respect of or in exchange for any or all of the Pledged Securities.
"Collateral Agent" means the party named as collateral agent under the
Pledge Agreement, or its successor.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to the Company, the Common Stock, par
value $.001 per share, or any similar common stock of the Company.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication (a) the sum of (i) the aggregate amount of cash and
non-cash interest (including capitalized interest) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including, without limitation,
(A) any amortization of debt discount, (B) net costs associated with Interest
Swap Obligations (including any amortization of discounts), (C) the interest
portion of any deferred payment obligation, (D) all accrued interest, and (E)
all commissions, discounts and other fees and charges owed with respect to
letters of credit, bankers' acceptances or similar facilities) paid or accrued,
or scheduled to be paid or accrued, during such period; (ii) cash dividends on
preferred stock or preferred equity interests of such Person and of its
Restricted Subsidiaries (if paid to a Person other than such Person or its
Restricted Subsidiaries) declared and payable in cash; (iii) the portion of any
rental obligation of such Person or its Restricted Subsidiaries in respect of
any Capital Lease Obligation allocable to interest expense in accordance with
GAAP; and (iv) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Sale and Leaseback Transaction
allocable to interest expense (determined as if such were treated as a Capital
Lease Obligation); less (b) to the extent included in (a) above, amortization or
write-off of deferred financing costs of such Person and its Restricted
Subsidiaries during such period and any charge related to any premium or penalty
in connection with redeeming or retiring any Indebtedness of such Person and its
Restricted Subsidiaries prior to its stated maturity; in the case of both (a)
and (b) above, after elimination of intercompany accounts among such Person and
its Restricted Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis determined in accordance
with GAAP; provided that there shall be excluded therefrom, without duplication
(a) all items classified as extraordinary, (b) any net income or loss of any
Person other than such Person and its Restricted Subsidiaries, except with
respect to net income to the extent of the amount of dividends or other
distributions actually paid in cash to such Person or its Restricted
Subsidiaries by such other Person during such period, (c) the net income or loss
of any Person acquired by such Person or any of its Restricted Subsidiaries in a
pooling-of-interests transaction for any period prior to the date of such
acquisition, (d) gains or losses in respect of any sale, transfer or disposition
of assets other than in the ordinary course of business by such Person or its
Restricted Subsidiaries, (e) the net income or loss of any Restricted Subsidiary
of such Person to the extent that the payment of dividends or other
distributions to such Person at the time is restricted by the terms of its
charter or any agreement, instrument, contract, judgment, order, decree,
statute, rule, governmental regulation or otherwise, except for any dividends or
distributions actually paid or that could have been paid by such Restricted
Subsidiary to such Person in compliance with
-5-
<PAGE>
such restrictions, (f) any non-cash, nonrecurring charges, (g) any non-cash
compensation charge arising from any grant of stock options, (h) any gain or
loss, net of taxes, realized on the termination of an employee pension benefit
plan and (i) the net income of the Company in respect of the Pledged Securities.
"Consolidated Net Worth" of a Person means the consolidated stockholders'
equity of such Person and its Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less amounts attributable to Redeemable Capital
Stock of such Person.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Currency Hedge Obligations" means the obligations of any Person, whether
or not incurred in the ordinary course of business, pursuant to any foreign
currency exchange agreement, option or futures contract or other similar
agreement or arrangement.
"Debt to Annualized EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis as at the date of determination
to (ii) the aggregate amount of EBITDA of the Company and its Restricted
Subsidiaries for the two preceding fiscal quarters for which financial
information is available immediately prior to the date of determination
multiplied by two; provided that, if the transaction giving rise to the need to
calculate the Debt to Annualized EBITDA Ratio would have the effect of
increasing or decreasing Indebtedness or EBITDA in the future, Indebtedness or
EBITDA shall be calculated on a pro forma basis as if such transaction had
occurred on the first day of such two fiscal quarter period preceding the date
of determination, and (A) if during such two fiscal quarter period, the Company
or any of its Restricted Subsidiaries shall have engaged in any Asset Sale of
any company, entity or business, EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive), or increased by an amount equal to the
EBITDA (if negative), directly attributable to the company, entity or business
that is the subject of such Asset Sale and any related retirement of
Indebtedness as if such Asset Sale and related retirement of Indebtedness had
occurred on the first day of such period, or (B) if during such two fiscal
quarter period the Company or any of its Restricted Subsidiaries shall have
acquired any company, entity or business, EBITDA shall be calculated on a pro
forma basis as if such acquisition and any related financing had occurred on the
first day of such period.
"Debt to Total Market Capitalization Ratio" means, at any date of
determination, the ratio of (i) the aggregate amount of Indebtedness of the
Company and its Restricted Subsidiaries on a consolidated basis outstanding to
(ii) the Total Market Capitalization of the Company.
"Default" means any events, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.01 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Directed Investment" means any Investment in a Telecommunications Business
that is made by investing the non-cash proceeds of the issuance of Qualified
Capital Stock by the Company (or options,
-6-
<PAGE>
warrants or other rights to purchase such Qualified Capital Stock) after the
Issue Date; provided that such Investment shall be made with such proceeds in
the form received by the Company; and provided further that such Investment is
made within 180 days of such issuance of Qualified Capital Stock; and provided
further that such proceeds shall not have been used to Incur Indebtedness
pursuant to clause (x) of Section 4.09(b) hereof.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the Board who has no material direct or
indirect financial interest in or with respect to such transaction or series of
related transactions. For purposes of this definition, no Person would be
deemed not to be a Disinterested Director solely because such Person or an
Affiliate of such Person holds Capital Stock of the Company.
"EBITDA" means, with respect to any Person for any period, the sum for such
Person for such period of Consolidated Net Income plus, to the extent reflected
in the income statement of such Person for such period from which Consolidated
Net Income is determined, without duplication, (i) Consolidated Interest
Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization
expense including without limitation, amortization of goodwill and other
intangibles, (v) any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness prior to its stated maturity and
(vi) any non-cash charges reducing Consolidated Net Income less any non-cash
charges increasing Consolidated Net Income (excluding, in each case, any such
non-cash charge that requires an accrual of or reserve for cash charges for any
future period), provided that, if any Restricted Subsidiary is not wholly owned,
EBITDA shall be reduced (to the extent not otherwise reduced in accordance with
GAAP) by an amount equal to (a) the amount of Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (b) the quotient of (1)
the number of shares of outstanding Common Stock of such Restricted Subsidiary
not owned on the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding Common
Stock of such Restricted Subsidiary on the last day of such period.
"Equity Offering" means any public or private offering or flotation of
Common Stock of the Company; provided that any such offering or flotation shall
result in Net Cash Proceeds to the Company of at least $30.0 million.
"Eligible Cash Equivalents" means any of the following:
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
having maturities of not more than one year and one day from the date of
acquisition;
(iii) certificates of deposit and Eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States or in any member of the Organization for Economic Cooperation and
Development having capital and surplus in excess of $500 million and a
Keefe Bank Watch Rating of "B" or better;
-7-
<PAGE>
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications
specified in clause (iii) above;
(v) commercial paper rated no lower than P-2 or the equivalent
thereof by Moody's Investors Service, Inc. or no lower than A-2 or the
equivalent thereof by Standard & Poor's Rating Services or corporate notes,
bonds or medium term notes rated no lower than A-2 or the equivalent
thereof by Moody's Investors Service, Inc. or no lower than A or the
equivalent thereof by Standard & Poor's Ratings Services, and in each case
maturing within one year and one day after the date of acquisition;
(vi) direct obligations issued by any state of the United States or
any political subdivision of any such state or political instrumentality
thereof maturing, or subject to tender at the option of the holder thereof,
within 90 days after the date of acquisition, having a rating of A from
Standard & Poor's Ratings Services or A-2 from Moody's Investors Service,
Inc.;
(vii) asset-backed securities with an Average Life equal to or less
than one year and one day from the time of acquisition and rated no lower
than AAA or the equivalent thereof by Moody's Investors Service, Inc. or
AAA or the equivalent thereof by Standard & Poor's Ratings Services; and
(viii) investments in money market funds substantially all of whose
assets comprise securities of the types described in clauses (i) through
(vii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations thereunder.
"Fair Market Value" means, with respect to any asset or property, the sale
value that could be obtained in an arm's-length transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under pressure or
compulsion to complete the transaction. Unless otherwise specified in this
Indenture, Fair Market Value shall be determined by the Board acting in good
faith and as of the date on which such determination is made.
"FCC" means the United States Federal Communications Commission and any
state or local telecommunications authority, department, commission or agency
(and any successors thereto).
"Foreign Subsidiary" means any Subsidiary of the Company that is presently
conducting, or is intended to conduct, its primary business operations in a
jurisdiction outside of the United States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained herein shall be
computed in conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of the
covenants and
-8-
<PAGE>
with other provisions hereof shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the offering of the
Notes or the First Supplemental Indenture and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Guarantee" means, as applied to any obligation of another Person, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation, (ii) any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the effect of guaranteeing the
obligations of any other Person in any manner and (iii) an agreement of a
Person, direct or indirect, contingent or otherwise, the practical effect of
which is to assure in any way the payment or performance (or payment of damages
in the event of non-performance) of all or any part of such obligation of
another Person (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have
meanings correlative to the foregoing).
"Holder" means a Person in whose name a Note is registered.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person;
provided that neither the accrual of interest or dividends nor the accretion of
original issue discount shall be considered an incurrence of Indebtedness (and
"incurrence", "incurred", "incurrable" and "incurring" shall have meanings
correlative to the foregoing); and provided further that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
Indebtedness otherwise incurred by a Person before it becomes a Restricted
Subsidiary of the Company shall be deemed to have been incurred at the time at
which it becomes a Restricted Subsidiary.
"Indebtedness" means at any time (without duplication), with respect to any
Person, and whether or not contingent,
(i) any obligation of such Person for money borrowed;
(ii) any obligation of such Person evidenced by bonds, debentures,
notes, Guarantees or other similar instruments, including, without
limitation, any such obligations incurred in connection with the
acquisition of property, assets or businesses;
(iii) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person;
(iv) any obligation to such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business
that in either case are not more than 90 days overdue or are being
contested in good faith), which purchase price is due more than six months
after the date of placing such property in service or taking delivery and
title thereto or the completion of such service, except for escrows,
holdbacks and comparable arrangements to secure obligations under purchase
agreements relating thereto;
-9-
<PAGE>
(v) any Capital Lease Obligation of such Person;
(vi) the maximum fixed redemption or repurchase price of Redeemable
Capital Stock of such Person at the date of determination to the extent
payable prior to the Stated Maturity of the Notes;
(vii) to the extent not otherwise included in this definition of
"Indebtedness", any Interest Swap Obligations or Currency Hedge Obligations
of such Person at the date of determination;
(viii) Attributable Indebtedness of such Person with respect to any
Sale and Leaseback Transaction to which such Person is a party;
(ix) the maximum fixed redemption or repurchase price of preferred
stock of a Restricted Subsidiary of such Person; and
(x) to the extent not otherwise included in this definition of
"Indebtedness", any obligation of the type referred to in clauses (i)
through (ix) of this definition of another Person and all dividends and
distributions of another Person to the extent that the payment of which, in
either case, such Person has Guaranteed, or the payment of which is secured
by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien upon or with respect to
property or assets owned by such Person, provided that, if the obligations
secured by a Lien (other than a Permitted Lien not securing any liability
that would itself constitute Indebtedness) on any assets or property have
not been assumed by such Person in full or are not such Person's legal
liability in full, the amount of such Indebtedness for purposes of this
definition shall be limited to the lesser of the amount of Indebtedness
secured by such Lien or the fair market value of the property subject to
such Lien.
For purposes of this definition of Indebtedness, the maximum fixed
repurchase price of any preferred stock or Redeemable Capital Stock that does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such preferred stock or Redeemable Capital Stock as if such preferred
stock or Redeemable Capital Stock were repurchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture;
provided that, if such preferred stock or Redeemable Capital Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such preferred stock or Redeemable Capital Stock.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations that are included in any of
clauses (i) through (viii) above, the maximum liability upon the occurrence of
the contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness, less the remaining unamortized portion
of the original issue discount (other than original issue discount attributable
to the issuance of warrants or other equity securities in connection with the
Incurrence of such Indebtedness) of such Indebtedness of such date, (B) that
Indebtedness shall not include any liability for federal, state, local or other
taxes and (C) that the amount of Indebtedness shall be reduced by an amount
equal to 100% of the fair market value of the Pledged Securities that are
Government Securities and 80% of the fair market
-10-
<PAGE>
value of the Pledged Securities that are other Eligible Cash Equivalents, in
each case then held by the collateral agent, as determined in good faith by an
officer of the Company.
"Indenture" means the Original Indenture, as amended or supplemented from
time to time, including by the First Supplemental Indenture.
"Interest Swap Obligations" means, with respect to any Person, the
obligations of such Person pursuant to any interest rate swap agreement,
interest rate cap, collar or floor agreement or other similar agreement or
arrangement.
"Invested Capital" means the sum of (a) the aggregate net cash proceeds
received by the Company from the issuance of (or capital contributions with
respect to) any Qualified Capital Stock subsequent to the Issue Date, other than
the issuance of Qualified Capital Stock to a Restricted Subsidiary of the
Company, and (b) all net cash proceeds from the sales of Redeemable Capital
Stock of the Company or Indebtedness securities of the Company convertible into
Qualified Capital Stock of the Company, in each case upon exchange or conversion
thereof into Qualified Capital Stock.
"Investment" by any Person means any direct or indirect loan, advance (or
other extension of credit, including any Guarantee) or capital contribution to
(by means of any transfer of cash or other property to others or any other
payments for property or services for the account or use of others), the
purchase or acquisition of any Capital Stock, bonds, notes, debentures or other
securities of, the acquisition, by purchase or otherwise, of stock or other
evidence of beneficial ownership of, any Person or making of any Investment in
any Person. Investments shall include the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary and the retention of the Capital Stock
(or any other Investment) by the Company or any of its Restricted Subsidiaries,
of (or in) any Person that has ceased to be a Restricted Subsidiary.
Investments shall exclude accounts receivable and other extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and prepaid expenses and advances to suppliers in the ordinary course
of business.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Original Indenture.
"Lien" means, with respect to any property or other asset, any mortgage or
deed of trust, pledge, hypothecation, deposit arrangement, security interest,
lien (statutory or other), charge, easement or other encumbrance on or with
respect to such property or other asset (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Lucent Financing" means the Purchase Money Credit Agreement, dated as of
September 17, 1998, between Lucent Technologies, Inc. and the Company, and the
Working Capital Credit Agreement, dated as of September 17, 1998, between Lucent
Technologies, Inc. and the Company, as such agreements may be amended, modified,
supplemented, refunded, refinanced, restructured, renewed, repaid or replaced
from time to time (whether in whole or in part, whether with the original agent
or lenders or other agents or lenders or otherwise).
"Maturity" means, when used with respect to a Note, the date on which the
principal of such Note becomes due and payable as provided therein or in this
Indenture, whether at the Stated Maturity, on the
-11-
<PAGE>
purchase date established pursuant to the terms of this Indenture with regard to
a Change of Control Offer or an Asset Sale Offer, as applicable, or by
declaration of acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means, (a) with respect to Asset Sales of any property
or other assets by a Person or its Restricted Subsidiaries, cash and cash
equivalents received net of (i) all reasonable out-of-pocket expenses of such
Person or such Restricted Subsidiary incurred in connection with such sale,
including, without limitation, all legal, title and recording tax expenses,
commissions and other fees and expenses incurred and all federal, state, foreign
and local taxes arising in connection with such an Asset Sale that are paid or
required to be accrued as a liability under GAAP by such Person or its
Restricted Subsidiaries, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Indebtedness that is secured by such properties or other
assets in accordance with the terms of any Lien upon or with respect to such
properties or other assets or that must, by the terms of such Indebtedness or in
order to obtain a necessary consent to such transaction or by applicable law, be
repaid in connection with such Asset Sale, (iii) all contractually required
distributions and other payments made to minority interest holders in Restricted
Subsidiaries of such Person as a result of such transaction, and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
of the Company as a reserve against any liabilities associated with such Asset
sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, shall as
determined in accordance with GAAP; provided that, in the event that any
consideration for a transaction (which would otherwise constitute Net Cash
Proceeds) is required to be held in escrow pending determination of whether a
purchase price adjustment will be made or is reserved pursuant to clause (iv)
above, such consideration (or any portion thereof) shall become Net Cash
Proceeds only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow or ceases to be reserved, and (b) with respect to any
issuance or sale of Capital Stock, the proceeds of such issuance or sale in the
form of cash or cash equivalents, including payments in respect of deferred
payment obligations (to the extent corresponding to the principal, but not
interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary of the Company) and
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of attorney's fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees incurred
in connection with such issuance or sale and net of taxes paid or payable as a
result thereof. For purposes of the preceding clause (b), the value of the
aggregate Net Cash Proceeds received by the Company upon the issuance of Capital
Stock, either upon the conversion of convertible Indebtedness or Redeemable
Capital Stock, will be the Net Cash Proceeds received upon the issuance of such
Indebtedness or Redeemable Capital Stock, plus the incremental amount received
by the Company upon the conversion, exchange or exercise thereof.
"Offer to Purchase" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(ii) the purchase price and the date to purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
-12-
<PAGE>
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Payment Date, the Company shall (A) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase, (B)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted and (C) deliver, or cause to be delivered,
to the Trustee all Notes or portions thereof so accepted together with an
Officers' Certificate (with a copy of the same to the Paying Agent) specifying
the Notes or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of an Offer to Purchase
as soon as practicable after the Payment Date. The Trustee is hereby appointed
by the Company to, and shall act as, the Paying Agent for an Offer to Purchase.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee, which certificate shall comply with this Indenture.
"Opinion of Counsel" means an opinion (a) from legal counsel, who may be an
employee or counsel to the Company or any Subsidiary of the Company, and (b)
which complies with Sections 10.04 and 10.05 hereof.
-13-
<PAGE>
"Permitted Asset Swap" means any disposition by the Company or any of its
Restricted Subsidiaries of Telecommunications Assets or a majority of the Voting
Stock of a Restricted Subsidiary in exchange for Telecommunications Assets or a
majority of the Voting Stock of a Restricted Subsidiary; provided that the Board
shall have approved such disposition and exchange and determined the Fair Market
Value of the assets subject to such transactions as evidenced by a resolution of
the Board, or such Fair Market Value has been determined by a written opinion of
an investment banking firm of national standing or other recognized independent
expert with experience appraising the terms and conditions of the type of
transaction contemplated thereby.
"Permitted Investments" means:
(a) Investments in an aggregate amount not to exceed the sum of (i)
Invested Capital, except to the extent the Net Cash Proceeds are used to
Incur Indebtedness pursuant to clause (x) of Section 4.09(b) hereof or to
make a Restricted Payment pursuant to clause (ii)(B) of Section 4.07(a)
hereof or clause (ii) of Section 4.07(b) hereof, and (ii) an amount equal
to the lesser of the cash proceeds received by the Company with respect to
any disposition or repayment of any Investment made pursuant to clause (g)
of this definition of Permitted Investments after the Issue Date (including
by redesignation of an Unrestricted Subsidiary of the Company to a
Restricted Subsidiary of the Company), and the initial amount of such
Investment, in either case, less the cost of the disposition of such
Investment;
(b) an Investment in the Company or in a Restricted Subsidiary or a
Person which shall, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into or transfer or convey
all or substantially all its assets to, the Company or a Restricted
Subsidiary;
(c) Eligible Cash Equivalents;
(d) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
(e) loans or advances to employees in an aggregate principal amount
not to exceed $10.0 million at any time outstanding;
(f) stock, obligations or securities received in satisfaction of
judgments;
(g) Investments, to the extent that the consideration provided by the
Company or any of its Restricted Subsidiaries consists of Qualified Capital
Stock of the Company, except to the extent the consideration is used to
Incur Indebtedness pursuant to clause (x) of Section 4.09(b) hereof;
(h) Investments in an aggregate amount not to exceed $20.0 million at
any time outstanding;
(i) Investments in an aggregate amount not to exceed $10.0 million at
any time outstanding in Unrestricted Subsidiaries that are Foreign
Subsidiaries;
-14-
<PAGE>
(j) Investments in entities that own licenses granted by the FCC,
provided that (A) such Investment is made and used for the purpose of
effecting, and does not exceed the amount reasonably required to effect,
the minimum build-out with respect to such licenses that is required by the
FCC as a prerequisite to the transfer of a majority equity interest in such
entity to the Company or one of its Restricted Subsidiaries, as determined
in good faith by the Board, and (B) the Company, at the time such
Investment is made, had a contractual right to, and intends to (subject in
all cases to compliance with applicable FCC rules and regulations) acquire
such majority equity interest;
(k) Investments existing on the date of the First Supplemental
Indenture and any extension, modification or renewal of any such Investment
that does not increase the amount of such Investment;
(l) Directed Investments;
(m) Investments in trade receivables, prepaid expenses, negotiable
instruments held for collection and lease, utility and workers'
compensation, performance and similar deposits;
(n) Interest Swap Obligations and Currency Hedge Obligations;
(o) bonds, notes, debentures or other securities received as a result
of Asset Sales permitted under Section 4.11 hereof;
(p) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments
of such other Person received as payment for ordinary course of business
trade receivables;
(q) Investments deemed to have been made as a result of the
acquisition of a Person that, at the time of such acquisition, held
instruments constituting Investments that were not acquired in
contemplation of, or in connection with, the acquisition of such Person;
and
(r) Investments, to the extent that the consideration provided by the
Company or any of its Restricted Subsidiaries consists of assets held by,
or the Capital Stock of, any Unrestricted Subsidiary.
For purposes of determining compliance with, and any particular amount of
an Investment under, this definition of "Permitted Investments" or Section 4.07
hereof, (i) the amount of any Investment deemed to have been made by designating
a Subsidiary that is a Restricted Subsidiary as an Unrestricted Subsidiary shall
be equal to the Fair Market Value of the assets (net of liabilities) at the time
that such Restricted Subsidiary is designated as an Unrestricted Subsidiary and
(ii) any property transferred to an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer.
For purposes of determining compliance with Section 4.07 hereof, in the
event that an Investment meets the criteria of more than one of the types of
Investments described in this definition of "Permitted Investments", the
Company, in its sole discretion, shall classify portions of such Investment from
time to time and only be required to include any portion of such Investment in
one of such clauses.
-15-
<PAGE>
"Permitted Liens" means:
(a) Liens securing Indebtedness incurred in compliance with clause
(i) of Section 4.09(b) hereof;
(b) Liens on assets and property acquired with the proceeds of
Telecommunications Assets Indebtedness securing Telecommunications Assets
Indebtedness and other Permitted Indebtedness provided by the lender of
such Telecommunications Assets Indebtedness;
(c) Liens securing Permitted Indebtedness in an aggregate amount not
to exceed 80% of the consolidated book value of the accounts receivable of
the Company and its Restricted Subsidiaries determined in accordance with
GAAP (determined as of the end of the most recently ended fiscal quarter
for which reports have been filed with the Commission or provided to the
Trustee);
(d) Liens on property of a Person existing at the time such Person is
merged with or into, or consolidated with, the Company or becomes a
Restricted Subsidiary of the Company (and not incurred in anticipation of
such transaction); provided that such Liens are not extended to the
property and assets of the Company and its Restricted Subsidiaries, other
than the acquired Restricted Subsidiary;
(e) Liens existing as of the Issue Date;
(f) Liens on property, assets or Capital Stock acquired by the
Company or any of its Restricted Subsidiaries, provided that such Liens
were not incurred in connection with, or in contemplation of such
acquisition and do not extend to any other property, assets or Capital
Stock;
(g) Liens in respect of Interest Swap Obligations and Currency Hedge
Obligations permitted under this Indenture;
(h) Liens in favor of the Company or any of its Restricted
Subsidiaries;
(i) Liens securing the Notes or any Guarantees thereof;
(j) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation or operating lease;
(k) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(l) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business;
(m) Liens on the property or assets or Capital Stock of Accounts
Receivable Subsidiaries and Liens arising out of any sale of accounts
receivable in the ordinary course
-16-
<PAGE>
(including in connection with a financing transaction) to or by an Accounts
Receivable Subsidiary or to Persons that are not Affiliates of the Company;
(n) any extension, renewal, refinancing, refunding or replacement of
any Permitted Lien (or any arrangement to which such Permitted Lien
relates), to the extent that such new Lien, pledge or deposit is limited to
the property or assets that secured (or under the arrangement under which
the original Permitted Lien arose, could secure) the obligations to which
such Liens relate;
(o) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, workers'
compensation, unemployment insurance and other types of social security,
customs duties, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money) and a bank's unexercised
right of set-off with respect to deposits made in the ordinary course; and
(p) Liens not otherwise included in this definition of "Permitted
Liens" securing other Indebtedness in an aggregate amount not to exceed
$250,000 at any one time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability corporation or government or any agency or political subdivision
thereof.
"Pledge Account" means a securities account (as defined in the Pledge
Agreement) established in the name of the Collateral Agent pursuant to the terms
of the Pledge Agreement for the deposit of the Pledged Securities purchased by
the Company with a portion of the net proceeds from the sale of the Notes and
held by the Collateral Agent for its benefit and the ratable benefit of the
Holders of the Notes.
"Pledge Agreement" means the Collateral Pledge and Security Agreement,
dated as of February 6, 1997, by and between The Bank of New York and the
Company, among other things, governing the disbursement of funds from the Pledge
Account.
"Pledged Securities" means securities or security entitlements constituting
Government Securities purchased by the Company with a portion of the net
proceeds from the sale of the Notes and deposited in the Pledge Account,
together with any securities substituted therefor pursuant to the Pledge
Agreement.
"Proportionate Interest" means, in any issuance of Capital Stock of a
Restricted Subsidiary, a ratio (i) the numerator of which is the aggregate
amount of all Investments in Capital Stock of such Restricted Subsidiary by the
Company and (ii) the denominator of which is the aggregate amount of all
Investments in Capital Stock of such Restricted Subsidiary by all Persons.
"Qualified Capital Stock" of any Person means a class of Capital Stock
other than Redeemable Capital Stock.
"Redeemable Capital Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), is required to be redeemed or is redeemable at the
-17-
<PAGE>
option of the holder thereof, in whole or in part (including by operation of a
sinking fund), or is exchangeable for Indebtedness (other than at the option of
such Person), in whole or in part, at any time prior to the Stated Maturity of
the Notes (unless the redemption price is, at the Company's option, without
conditions precedent, payable solely in Qualified Capital Stock of the Company),
provided that any Capital Stock that would not constitute Redeemable Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the Stated Maturity of the Notes
shall not constitute Redeemable Capital Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in Sections 4.11
and 4.15 hereof and such Capital Stock specifically provides that such Person
will not repurchase or redeem any such stock pursuant to such provisions prior
to the Company's repurchase of such Notes as are required to be repurchased
pursuant to Sections 4.11 and 4.15 hereof.
"Replacement Assets" means, with respect to any Asset Sale, properties or
assets that, as determined by the Board, as evidenced by a resolution of the
Board, are used or will be used in the Telecommunications Business of the
Company or a Restricted Subsidiary of the Company.
"Responsible Officer" means, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Restricted Subsidiary" of any Person means any Subsidiary other than an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which property is sold or transferred
by such Person or a Restricted Subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Restricted Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor act), and the rules and regulations thereunder.
"Significant Restricted Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the
Securities Act.
"Stated Maturity" means, when used with respect to a Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation more
than 50% of the outstanding shares of Voting Stock of which is owned, directly
or indirectly, by such Person, or by one or more other Subsidiaries of such
Person, or by such Person and one or more other Subsidiaries of such Person,
(ii) any general partnership, joint venture or similar entity, more than 50% of
the outstanding
-18-
<PAGE>
partnership or similar interests of which are owned, directly or indirectly, by
such Person, or by one or more other Subsidiaries of such Person, or by such
Person and one or more other Subsidiaries of such Person and (iii) any limited
partnership of which such Person or any Subsidiary of such Person is a general
partner.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or useful in
connection with a Telecommunications Business.
"Telecommunications Assets Indebtedness" means any Indebtedness to finance
the cost of the acquisition, construction, development, expansion, exploitation
or transportation of equipment, inventory, other tangible assets and licenses
(including by way of the acquisition of (i) leasehold improvements and capital
leases and (ii) the Capital Stock of any Person that becomes a Restricted
Subsidiary to the extent of the Fair Market Value of such assets acquired by way
of such acquisition of Capital Stock, provided, however, that not more than $250
million of Telecommunications Assets Indebtedness at any one time outstanding
may be incurred to finance the acquisition of Capital Stock), including without
limitation accreted original issue discount or deferred interest with respect to
such Indebtedness.
"Telecommunications Business" means, when used in reference to any Person,
that such Person is engaged primarily in the business of (i) transmitting or
providing products or services relating to the transmission of voice, video or
data, including all Internet related products, services or applications, (ii)
creating, developing or marketing communications related services and network
equipment, software and other devices for use in a Telecommunications Business
or (iii) evaluating, participating in or pursuing any other activity or
opportunity that is related to those identified in (i) or (ii) above, provided
that the determination of what constitutes a Telecommunications Business shall
be made conclusively by the Board.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA, except as provided in Section 9.03 hereof.
"Total Market Capitalization" of any Person means, as of the date of
determination, the sum of (a) the consolidated Indebtedness of such Person and
its Restricted Subsidiaries on such date, plus (b) the product of (i) the
aggregate number of outstanding shares of common stock of such Person on such
date (which shall not include any options or warrants on, or securities
convertible or exchangeable into, shares of common stock of such Person) and
(ii) the average Closing Price of such common stock over the 10 consecutive
Trading Days ending not earlier than 10 Trading Days immediately prior to such
date of determination, plus (c) for each outstanding series of preferred stock
of such Person, the greater of (A) if convertible, the number of shares of
common stock into which the outstanding shares of such series of preferred stock
is convertible on such date without additional consideration multiplied by the
average determined in clause (b)(ii) above and (B) the liquidation value of the
outstanding shares of preferred stock of such series on such date. If no such
Closing Price exists with respect to any shares of any such class, the value of
such shares for purposes of clause (b) of the preceding sentence shall be
determined by the Board of the Company in good faith and evidenced by a
resolution of the Board filed with the Trustee. Notwithstanding the foregoing,
unless the Company's Common Stock is listed on any national securities exchange
or on the Nasdaq National Market, the "Total Market Capitalization" of the
Company shall mean, as of any date of determination, the enterprise value
(without duplication) of the Company and its Restricted Subsidiaries (including
the fair market value of their debt and equity, but excluding the enterprise
value of the Company's Unrestricted Subsidiaries), as determined by an
independent banking firm of national standing with experience in such valuations
and evidenced by a written opinion in
-19-
<PAGE>
customary form filed with the Trustee; provided that, for purposes of any such
determination, the enterprise value of the Company shall be calculated as if the
Company were a publicly held corporation without a controlling stockholder. For
purposes of any such determination, such banking firm's written opinion may
state that such fair market value is no less than a specified amount and such
opinion may be as of a date no earlier than 90 days prior to such date of
determination.
"Trading Day" means, with respect to a securities exchange or automated
quotation system, a day on which such exchange or system is open for a full day
of trading.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"U.S. Government Obligations" means (A) securities that are (i) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which securities, in either case under clause (i) or (ii)
above, are not callable or redeemable at the option of the issuer thereof, and
(B) depository receipts issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation that
is specified in clause (x) above and held by such bank for the account of the
holder of such depository receipt, or with respect to any specific payment of
principal or interests on any U.S. Government Obligation that is so specified
and held, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal or interest of
the U.S. Government Obligation evidenced by such depository receipt.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company (a) that
at the time of determination shall be an Unrestricted Subsidiary (as designated
by the Board, as provided below), and (b) all Indebtedness of which shall be
non-recourse to the Company and its Subsidiaries other than its Unrestricted
Subsidiaries and (ii) any Subsidiary of an Unrestricted Subsidiary, provided
that, notwithstanding clause (i)(b) above, the Company or a Restricted
Subsidiary of the Company may Guarantee, endorse, agree to provide funds for the
payment or maintenance of, or otherwise become directly or indirectly liable
with respect to, Indebtedness of an Unrestricted Subsidiary, but only to the
extent that the Company or such Restricted Subsidiary could make an Investment
in such Unrestricted Subsidiary pursuant to Section 4.07 hereof, and any such
Guarantee, endorsement or agreement shall be deemed an incurrence of
Indebtedness by the Company for purposes of Section 4.09 hereof. The Board may
designate any newly acquired or newly formed Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company that is not an
Unrestricted Subsidiary (other than a Subsidiary of the type referred to in
clause (ii) above) or such designation would be prohibited under Section 4.07
hereof. Any such designation by the Board shall be evidenced to the Trustee by
filing with the Trustee a certified copy of a resolution of the Board giving
effect to such designation and an Officer's Certificate certifying that such
designation complied with the foregoing conditions. Each Foreign Subsidiary in
existence on the date of the First Supplemental Indenture shall be an
Unrestricted Subsidiary until otherwise designated in accordance with the
following sentence. The Board may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary, provided that, immediately after giving effect to such
designation, no Default or
-20-
<PAGE>
Event of Default shall have occurred and be continuing, including, without
limitation, under Sections 4.09 and 4.13 hereof, assuming the incurrence by the
Company and its Restricted Subsidiaries at the time of such designation of all
existing Indebtedness and Liens of the Unrestricted Subsidiary to be so
designated as a Restricted Subsidiary of the Company.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or at the times that such class of Capital Stock has
voting power by reason of the happening of any contingency) to vote in the
election of members of the board of directors or comparable body of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Asset Sale Offer"........................... 4.11
"Asset Sale Payment Date".................... 4.11
"Bankruptcy Law"............................. 4.01
"Change of Control Offer".................... 4.15
"Change of Control Payment Date"............. 4.15
"Covenant Defeasance"........................ 8.04
"DTC"........................................ 2.01
"Event of Default"........................... 6.01
"Excess Proceeds"............................ 4.11
"Legal Defeasance"........................... 8.03
"Paying Agent"............................... 2.03
"Permitted Indebtedness"..................... 4.09
"Purchase Price"............................. 4.15
"Registrar".................................. 2.03
"Restricted Payment"......................... 4.07
"Warrant Endorsement"........................ 2.02
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon the
Notes.
-21-
<PAGE>
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Paying Agent, Registrar or co-
registrar) where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall
-22-
<PAGE>
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the Securities
and Exchange Commission, so long as any Notes are outstanding, the Company shall
furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations", and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission shall not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request. The Company shall also comply with the provisions of TIA Section
314(a).
(b) The Company shall provide the Trustee with a sufficient number of
copies of all Commission reports that the Trustee may be required to deliver to
the Holders of the Notes under this Section 4.03.
(c) Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates).
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officer's Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing officers with a view to
determining whether the Company has kept, observed, performed and fulfilled, and
has caused each of its Subsidiaries to keep, observe, perform and fulfill, its
obligations under this Indenture, and further stating, as to each such officer
signing such certificate, that to the best of his or her knowledge the Company
has
-23-
<PAGE>
kept, observed, performed and fulfilled, and has caused each of its Subsidiaries
to keep, observe, perform and fulfill, each and every covenant contained in this
Indenture and no such Person is in default in the performance or observance of
any of the terms, provisions and conditions of this Indenture to be performed or
observed by it (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action each is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of,
premium, if any, or interest, if any, on the Notes are prohibited or if such
event has occurred, a description of the event and what action each is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof insofar as they relate to
accounting matters, or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any officer becoming aware of (i) any Default or
Event of Default or (ii) any default under any Indebtedness referred to in
Section 6.01(e) hereof, an Officer's Certificate specifying such Default, Event
of Default or default and what action the Company is taking or proposes to take
with respect thereto.
(d) At the time of any Restricted Payment, the Company and its Subsidiaries
shall deliver to the Trustees an Officer's Certificate required by this Section.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies,
except as contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
-24-
<PAGE>
Section 4.07. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or
other distribution on the Capital Stock of the Company or to the Company's
stockholders (in their capacity as such), or declare or pay any dividend or
other distribution to any Person other than the Company or a Restricted
Subsidiary of the Company on the Capital Stock of any Restricted Subsidiary of
the Company, in each case, other than dividends, distributions or payments made
solely in Qualified Capital Stock of the Company (and other than pro rata
dividends or distributions on Qualified Capital Stock of such Restricted
Subsidiaries), (ii) purchase, redeem, acquire or retire any Capital Stock of the
Company or of a Restricted Subsidiary of the Company held by any Person other
than the Company or any Restricted Subsidiary of the Company, (iii) redeem,
repurchase, defease (including an in-substance or legal defeasance) or otherwise
acquire or retire for value, prior to any scheduled maturity, scheduled sinking
fund or mandatory redemption payment, any Subordinated Indebtedness of the
Company, or (iv) make any Investment in any Person, including an Unrestricted
Subsidiary, other than a Permitted Investment, provided that, for calculation
purposes, upon any Person becoming a Restricted Subsidiary of the Company, no
Investments in that Person shall be considered to be Restricted Payments (such
payments or any other actions described in clauses (i) through (iv) above being
collectively "Restricted Payments"), if, at the time of, and after giving effect
to, the proposed Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or shall be in existence immediately after making such
Restricted Payment;
(ii) after giving effect to the incurrence of any Indebtedness the
net proceeds of which are used to finance such Restricted Payment, the
Company could not incur at least $1.00 of additional Indebtedness pursuant
to paragraph (a) of Section 4.09 hereof; or
(iii) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive) made after the Issue
Date exceeds the sum of
(A) cumulative EBITDA of the Company and its Restricted
Subsidiaries (or, if the cumulative EBITDA is negative, minus 100% of
such negative amount) less 1.5 times cumulative Consolidated Interest
Expense of the Company and its Restricted Subsidiaries in each case
for the period (treated as one accounting period) beginning on the
first day of the Company's fiscal quarter after which the Issue Date
occurs, and ending on the last day of the Company's fiscal quarter for
which financial statements are available immediately preceding such
proposed Restricted Payment,
(B) the aggregate Net Cash Proceeds received by the Company
subsequent to the Issue Date either (x) as capital contributions to
the Company in the form of or with respect to Common Stock of the
Company or (y) from the issuance or sale (other than to a Restricted
Subsidiary of the Company) of Qualified Capital Stock of the Company
(including Qualified Capital Stock issued upon conversion of
convertible Indebtedness or convertible Redeemable Capital Stock) or
any options, warrants or rights to purchase such Qualified Capital
Stock of the Company, less 50% of Indebtedness outstanding pursuant to
clause (x) of Section 4.09(b) hereof and minus the actual amount of
Net Cash Proceeds
-25-
<PAGE>
used to make Investments pursuant to clause (a) of the definition of
"Permitted Investments," and
(C) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date (including
by redesignation of an Unrestricted Subsidiary of the Company to a
Restricted Subsidiary of the Company), an amount equal to the lesser
of the return of capital with respect to such Investment and the
initial amount of such Investment, in either case, less the cost of
the disposition of such Investment.
(b) The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend or similar distribution on the
Capital Stock of the Company or any of its Restricted Subsidiaries at any
time within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would have complied with the foregoing
paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or Subordinated Indebtedness of the Company in exchange
for, or out of the Net Cash Proceeds of, a substantially concurrent
issuance of Capital Stock;
(iii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness of the Company in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in which cash is paid in lieu of fractional
shares or scrip), or out of the Net Cash Proceeds of a substantially
concurrent incurrence (other than to a Restricted Subsidiary of the
Company) of, new Subordinated Indebtedness of the Company so long as (A)
the principal or accreted amount of such new Subordinated Indebtedness, as
the case may be, does not exceed the principal or accreted amount (plus the
amount of any unamortized original issue discount resulting from the
issuance by the borrower of other consideration together with the
Indebtedness being refinanced) (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal or accreted
amount thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness, as the case may be, being so purchased,
redeemed, defeased, acquired or retired, plus the lesser of the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced or
the amount of any premium reasonably determined by the Company as necessary
to accomplish such refinancing, plus, in either case, the amount of
expenses of the Company incurred in connection with such refinancing, (B)
such new Subordinated Indebtedness is subordinated to the Notes at least to
the same extent as such Subordinated Indebtedness so purchased, redeemed,
defeased, acquired or retired, and (C) such new Subordinated Indebtedness
has an Average Life longer than the Average Life of the Subordinated
Indebtedness being refinanced and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Subordinated
Indebtedness being refinanced;
(iv) any purchase or defeasance of Subordinated Indebtedness to the
extent required upon a change of control or asset sale (as defined therein)
by the indenture or other agreement or instrument pursuant to which such
Subordinated Indebtedness was issued, but only if the Company
-26-
<PAGE>
(A) in the case of a Change of Control, has complied with its obligations
under Section 4.15 hereof or (B) in the case of an Asset Sale, has applied
the Net Cash Proceeds for such Asset Sale to the extent required by, and in
accordance with, the provisions of Section 4.11 hereof;
(v) the repurchase of shares of, or options to purchase shares of,
the Company's Capital Stock from employees of the Company in connection
with the termination of their employment, provided that (A) the aggregate
price paid for all such repurchased shares of Capital Stock made in any
year shall not exceed $500,000, plus the aggregate cash proceeds received
by the Company during such year from any reissuance of such Capital Stock
by the Company to employees of the Company and its Restricted Subsidiaries
and (B) no Default shall have occurred and be continuing immediately after
such transaction, provided that the Company may carry forward the unused
portion of the $500,000 in any year to the next year;
(vi) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company to the
extent necessary, in the judgment of the Board, to prevent the loss or
secure the removal or reinstatement of any license held by the Company or
any Restricted Subsidiary from any governmental agency as a result of laws
limiting foreign ownership of the Company's Capital Stock;
(vii) the payment of cash in lieu of the issuance of fractional
shares of Common Stock upon exercise or conversion of securities
exercisable or convertible into Common Stock;
(viii) payments or distributions, in the nature of satisfaction of
dissenters' rights, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with Article 5 hereof;
(ix) any purchase or acquisition from, or withholding on issuances
to, any employee of the Company's Capital Stock in order to satisfy any
purchase price;
(x) any purchase or acquisition from, or withholding on issuances
to, any employee of the Company's Capital Stock in order to satisfy
applicable federal, state or local tax payments in respect of the receipt
of shares of the Company's Capital Stock;
(xi) payments and distributions pursuant to any tax sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group, in each case, for federal income tax purposes; or
(xii) the issuance of shares of Common Stock upon exercise of
warrants to purchase shares of Common Stock of ART Licensing Corp. existing
on the Issue Date, including any contribution of such shares of Common
Stock to ART Licensing Corp., any payment by ART Licensing Corp. to the
Company in consideration thereof and any contribution by the Company to ART
Licensing Corp. in respect thereof.
(c) Each Restricted Payment made pursuant to paragraph (b) of this Section
4.07 (other than an exchange of Capital Stock for Capital Stock or Indebtedness
referred to in clause (ii) thereof and the Restricted Payments referred to in
clauses (iii), (iv), (ix) and (xii) thereof) shall reduce the amount that
-27-
<PAGE>
would otherwise be available for Restricted Payments under clause (iii) of
paragraph (a) of this Section 4.07; provided that any Permitted Investments made
pursuant to clause (a) of the definition of "Permitted Investments" will be
deemed to be Restricted Payments for the purposes of clause (iii) of paragraph
(a) of this Section 4.07.
(d) For purposes of this covenant, if a particular Restricted Payment
involves a non-cash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be an amount equal to the cash portion of
such Restricted Payment if any, plus an amount equal to the Fair Market Value of
the non-cash portion of such Restricted Payment as determined by the Board whose
good faith determination shall be conclusive and evidenced by a resolution of
the Board.
Section 4.08. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (i) pay dividends or make any other
distributions on any Capital Stock or pay any Indebtedness owed to the Company
or any other Restricted Subsidiary of the Company that owns, directly or
indirectly, any Capital Stock of such Restricted Subsidiary; (ii) make loans or
advances to the Company or any Restricted Subsidiary of the Company that owns,
directly or indirectly, any Capital Stock of such Restricted Subsidiary; (iii)
transfer any of its property or assets to the Company or any other Restricted
Subsidiary; or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary of the Company that owns, directly or indirectly,
any Capital Stock of such Restricted Subsidiary.
(b) The foregoing provisions shall not restrict:
(i) any encumbrance or restriction pursuant to an agreement in
effect at the Issue Date or any amendment, restatement, renewal or
replacement of such agreement, so long as the encumbrances and restrictions
are not materially more restrictive than those in the agreement in effect
on, the Issue Date;
(ii) any encumbrance or restriction pursuant to an agreement relating
to an acquisition of property, so long as the encumbrances and restrictions
in any such agreement relate solely to the property so acquired;
(iii) any encumbrance or restriction relating to any Restricted
Subsidiary of the Company at the date on which such Restricted Subsidiary
was acquired by the Company or any Restricted Subsidiary of the Company
(and are not or were not created in anticipation of or in connection with
the acquisition thereof);
(iv) any encumbrance or restriction contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was
issued if
(A) the encumbrance or restriction applies only in the event of
a payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement,
-28-
<PAGE>
(B) the encumbrance or restriction is not materially more
disadvantageous to the Holders than is customary in comparable
financings (as determined by the Company) and
(C) the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes;
(v) customary provisions restricting subletting or assignment of
any lease, license or similar contract of the Company or any Restricted
Subsidiary of the Company or provisions in agreements that restrict the
assignment of such agreement of any rights thereunder;
(vi) any encumbrance or restriction arising out of any sale of
accounts receivable in the ordinary course (including in connection with a
financing transaction) to or by (A) an Accounts Receivable Subsidiary or
(B) to Persons that are not Affiliates of the Company or any Subsidiary of
the Company;
(vii) any encumbrance or restriction on the sale or other
disposition of assets or property securing Indebtedness as a result of a
Permitted Lien on such assets or property;
(viii) any encumbrance or restriction contained in contracts for
sales of assets permitted by Section 4.11 hereof with respect to the assets
to be sold pursuant to such contract;
(ix) any encumbrance or restriction existing under or by reason of
applicable law;
(x) in the case of clause (iii) of paragraph (a) of this Section
4.08, any encumbrances or restrictions (A) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited hereby, or (B) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do
not, individual or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner material
to the Company or any Restricted Subsidiary;
(xi) any encumbrance or restriction imposed pursuant to an
agreement that has been entered into for the sale or disposition of Capital
Stock of, or property or assets of, the Company or a Restricted Subsidiary;
provided that such encumbrance or restriction shall only remain in force
during the pendency of such acquisition or disposition; and
(xii) any encumbrance or restriction contained in the terms of
refinancing Indebtedness, provided that the encumbrances or restrictions in
any such refinancings are not, in the aggregate, materially more
restrictive than the encumbrances or restrictions contained in the
Indebtedness being refinanced.
(c) Nothing contained in this Section 4.08 shall prevent the Company or
any of its Restricted Subsidiaries from creating, incurring, assuming or
suffering to exist (i) any Liens otherwise permitted under Section 4.13 hereof
or (ii) restrictions on the sale or other disposition of property or assets of
the
-29-
<PAGE>
Company or any of its Restricted Subsidiaries to the extent that such property
or assets secure Indebtedness of the Company or any of its Restricted
Subsidiaries not incurred or secured in violation of this Indenture.
Section 4.09. Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided that the Company may Incur
Indebtedness if, after giving pro forma effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the Debt
to Annualized EBITDA Ratio would be greater than zero and less than 6 to 1.
(b) Notwithstanding the foregoing, the Company and any Restricted
Subsidiary of the Company (except as specified below) may Incur each and all of
the following ("Permitted Indebtedness"):
(i) Indebtedness outstanding at any time in an aggregate principal
amount not to exceed $200.0 million;
(ii) Telecommunications Assets Indebtedness;
(iii) Indebtedness under Interest Swap Obligations designed to protect
against or manage the Company's or any of its Subsidiaries' exposure to
fluctuations in interest rates, provided that such obligations are related
to payment obligations on other Permitted Indebtedness, and Currency
Hedging Obligations entered into in the ordinary course of business and
designed to protect against or manage the Company's or any of its
Subsidiaries' exposure to fluctuations in foreign currency exchange rates;
(iv) Indebtedness of the Company to any of its Restricted
Subsidiaries or Indebtedness of a Restricted Subsidiary of the Company to
the Company or to another Restricted Subsidiaries (but only so long as such
Indebtedness is held by a Person who is the Company or such a Restricted
Subsidiary);
(v) Indebtedness in respect of (A) letters of credit, bankers'
acceptances or other similar instruments or obligations, issued in
connection with liabilities incurred in the ordinary course of business
(including those issued to governmental entities in connection with self-
insurance under applicable workers' compensation statutes) or (B) surety,
judgment, appeal, performance and other similar bonds, instruments or
obligations provided in the ordinary course of business;
(vi) Indebtedness represented by the Notes, any Guarantees in respect
thereof, and any Indebtedness arising by reason of any Lien granted to
secure the Notes or any Guarantees in respect thereof;
(vii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees, or letters of credit, surety bonds or performance bonds
securing any obligations of the company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company, in a principal amount not to exceed the
-30-
<PAGE>
gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition;
(viii) Indebtedness in existence on the Issue Date;
(ix) Indebtedness arising from the honoring of a check, draft or
similar instrument of a Person drawn against insufficient funds, provided
that such Indebtedness is extinguished within five Business Days of its
incurrence;
(x) Indebtedness of the Company (and refinancing of such
Indebtedness) not to exceed, at any one time outstanding, two times the sum
of (A) the aggregate Net Cash Proceeds received by the Company after the
Issue Date from the issuance and sale of its Qualified Capital Stock to a
Person that is not a Subsidiary of the Company to the extent that such Net
Cash Proceeds have not been used to make a Permitted Investment pursuant to
clause (a) of the definition of "Permitted Investments," or to make a
Restricted Payment pursuant to clause (ii)(B) of Section 4.07(a) hereof or
clause (ii) of Section 4.07(b) hereof, plus (B) 80% of the fair market
value of property (other than Net Cash Proceeds) received by the Company
after the Issue Date from the issuance and sale of its Qualified Capital
Stock to a Person that is not a Subsidiary of the Company to the extent
that such sale of Qualified Capital Stock has not been used to make a
Permitted Investment pursuant to clause (g) or clause (l) of the definition
of "Permitted Investments" or to make a Restricted Payment pursuant to
clause (ii)(B) of Section 4.07(a) hereof or clause (ii) of Section 4.07(b)
hereof, provided that such Indebtedness incurred pursuant to this clause
(x) does not mature prior to the Stated Maturity of the Notes and has an
Average Life longer than the Notes;
(xi) any Indebtedness incurred in connection with or given in exchange
for the renewal, extension, substitution, refunding, defeasance,
refinancing or replacement of any Indebtedness referred to in paragraph (a)
of this Section 4.09 or in clauses (ii), (vi), (viii), (x), (xii) and (xv)
of this paragraph (b) of this Section 4.09 and not incurred in violation of
this Indenture ("Refinancing Indebtedness"), provided that (A) the
principal or accreted amount of such Refinancing Indebtedness, as the case
may be, shall not exceed the principal or accreted amount (plus the amount
of any unamortized original issue discount resulting from the issuance by
the borrower of other consideration together with the Indebtedness being
refinanced), as the case may be, of the Indebtedness so renewed, extended,
substituted, refunded, defeased, refinanced or replaced (plus the premiums,
accrued interest and the fees and expenses incurred in connection
therewith), (B) with respect to Refinancing Indebtedness of any
Indebtedness, if the Average Life of the Indebtedness being renewed,
extended, substituted, refunded, defeased, refinanced or replaced is equal
to or greater than the Average Life of the Notes, the Refinancing
Indebtedness shall have an Average Life equal to or greater than the
Average Life of the Notes and shall not mature prior to the Stated Maturity
of the Notes, and (C) with respect to Refinancing Indebtedness of any
Indebtedness, such Refinancing Indebtedness shall rank no more senior
(including as a result of structural subordination of the Notes), and shall
be at least as subordinated, in right of payment to the Notes, as the
Indebtedness being renewed, extended, substituted, refunded, defeased,
refinanced or replaced
(xii) Indebtedness incurred in connection with a prepayment or
redemption of the Notes pursuant to a Change of Control, provided, that the
principal amount of such Indebtedness does not exceed 101% of the principal
amount at Stated Maturity or the Notes or the principal amount
-31-
<PAGE>
at Stated Maturity of the Notes prepaid, plus accrued and unpaid interest,
if any (plus the amount of reasonable expenses incurred in connection
therewith), and that such Indebtedness (A) has an Average Life to stated
maturity equal to or greater than the remaining Average Life to Stated
Maturity of the Notes and (B) does not mature prior to the Stated Maturity
of the Notes;
(xiii) Indebtedness of the Company or any of its Restricted
Subsidiaries arising by reason of the recharacterization of the sale of
accounts receivable to an Accounts Receivable Subsidiary;
(xiv) revolving credit Indebtedness of any Restricted Subsidiary
incurred pursuant to a credit facility in an aggregate amount not to
exceed, at any time outstanding, the greater of 62.5% and such greater
percentage permitted pursuant to such credit facility of the accounts
receivable net of reserves and allowances for doubtful accounts, determined
in accordance with GAAP, of such Restricted Subsidiary and its Restricted
Subsidiaries (without duplication), provided that such Indebtedness is not
Guaranteed by the Company or any of its other Restricted Subsidiaries;
(xv) Acquired Indebtedness; and
(xvi) the Guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness that the Company or such Restricted
Subsidiary, as the case may be, otherwise could have Incurred.
(c) For purposes of determining compliance with, and any particular amount
of Indebtedness under, this Section 4.09, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness shall be disregarded (x) if
otherwise included in the determination of such particular amount, or (y) if
incurred by the obligor on such Indebtedness, to the extent that any such
Guarantee, Lien or letter of credit secures the principal amount of such
Indebtedness. For purposes of determining compliance with this Section 4.09, in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in paragraph (a) or (b) of this Section
4.09, the Company, in its sole discretion, shall classify, and from time to time
may reclassify, portions of such item of Indebtedness and only be required to
include any portion of such Indebtedness in one of such clauses.
(d) For purposes of determining compliance with any Dollar-denominated
restriction on the incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was incurred, in the case of term
debt, or first committed, in the case of revolving credit debt, provided that
(x) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on the relevant currency exchange
rate in effect on the Issue Date and (y) if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. The principal amount of any Indebtedness incurred to refinance other
Indebtedness, if incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
-32-
<PAGE>
Section 4.10. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.
The Company (a) will not permit any of its Restricted Subsidiaries to issue
any Capital Stock (other than to the Company or a Restricted Subsidiary of the
Company) unless the Company or such Restricted Subsidiary acquires at the same
time not less than its Proportionate Interest in such issuance of Capital Stock
and (b) will not permit any Person (other than the Company or a Restricted
Subsidiary of the Company) to own any Capital Stock in any Restricted Subsidiary
of the Company; provided that this Section 4.10 shall not prohibit:
(i) the sale or other disposition of all, but not less than all, of
the issued and outstanding Capital Stock in any Restricted Subsidiary owned
by the Company or any Restricted Subsidiary of the Company in compliance
with the other provisions of this Indenture,
(ii) the ownership of Capital Stock issued as permitted by clause
(a) above,
(iii) the ownership by directors of directors' qualifying shares or
the ownership by foreign nations of Capital Stock in any Restricted
Subsidiary of the Company, to the extent mandated by applicable law,
(iv) the ownership of Capital Stock of a Restricted Subsidiary
issued and outstanding (A) prior to the time that such Person becomes a
Restricted Subsidiary of the Company so long as such Capital Stock was not
issued in contemplation of such Person's becoming a Restricted Subsidiary
of the Company or otherwise being acquired by the Company or (B) at the
time such Person becomes a Restricted Subsidiary so long as the Company
owns at least a majority of the Capital Stock of such Restricted Subsidiary
immediately thereafter,
(v) the issuance or sale of Capital Stock of a Restricted
Subsidiary of the Company in a transaction that complies with Section 4.11
hereof, and
(vi) the ownership of Qualified Capital Stock of a Restricted
Subsidiary issued in exchange for, or the proceeds of which are used to
refinance, Capital Stock of a Restricted Subsidiary owned by a Person other
than the Company or a Restricted Subsidiary as permitted by clause (iv),
provided that (A) the liquidation value of such Qualified Capital Stock so
issued that is preferred stock shall not exceed the liquidation value of
the Capital Stock so exchanged or refinanced and (B) the Qualified Capital
Stock so issued that is preferred stock (I) shall not have a Stated
Maturity earlier than the Stated Maturity of the Capital Stock being
exchanged or refinanced and (II) shall not have an Average Life less than
the remaining Average Life of the Capital Stock being exchanged or
refinanced.
Section 4.11. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate any Asset Sale unless (i) the consideration received
by the Company or such Restricted Subsidiary is at least equal to the Fair
Market Value of the assets sold or otherwise disposed of, (ii) at least 75% of
the consideration received consists of cash or Eligible Cash Equivalents or the
assumption of Indebtedness of the Company or any Restricted Subsidiary of the
Company (other than Indebtedness to the Company or any Restricted Subsidiary of
the Company), provided that the Company or such Restricted
-33-
<PAGE>
Subsidiary of the Company is irrevocably and unconditionally released from all
liability under such Indebtedness and (iii) the Company or such Restricted
Subsidiary of the Company, as the case may be, uses the Net Cash Proceeds in the
manner set forth in the next paragraph; provided that for purposes of this
covenant, "cash" shall include (A) the amount of any liabilities (other than
liabilities that are by their terms subordinated to the Notes) of the Company or
such Restricted Subsidiary (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) that are assumed
by the transferee of any such assets or other property in such Asset Sale or are
no longer the liability of the Company or any Restricted Subsidiary (and
excluding any liabilities that are incurred in connection with or in
anticipation of such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the Company or
any of its Restricted Subsidiaries with respect to such liabilities, and (B) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary in connection with such Asset Sale that are converted by
the Company or such Restricted Subsidiary into cash within 60 days of receipt.
(b) In the event and to the extent that the Net Cash Proceeds received by
the Company or its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Issue Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission or provided to the Trustee), then the Company shall, or
shall cause the relevant Restricted Subsidiary to:
(i) within 360 days after receipt of such excess Net Cash Proceeds
(A) reinvest an amount equal to such excess Net Cash Proceeds (or
any portion thereof) from such disposition in Replacement Assets (or
enter into a definitive agreement committing to so invest within six
months after the date of such agreement), provided that, if such
Investment is in a project authorized by the Board that will take
longer than such 360 day period to complete, the Company shall be
entitled to utilize 90 additional days to apply such excess Net Cash
Proceeds, and/or
(B) apply an amount equal to such excess Net Cash Proceeds (or
such remaining excess Net Cash Proceeds) to the permanent reduction of
any Indebtedness of the Company not ranking junior to the Notes
(including the Notes) or Indebtedness of any Restricted Subsidiary of
the Company.
(ii) apply (no later than the end of the 360-day period referred to in
clause (i) above) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (i) above) as provided in paragraph (c) of this Section
4.11.
Any such excess Net Cash Proceeds from any Asset Sale that are not used to
reinvest in Replacement Assets and/or repay any such Indebtedness of the Company
or Indebtedness of its Restricted Subsidiaries as set forth in clause (i) above
shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15.0 million,
the Company shall, as soon as practicable, but in any event within 20 Business
Days, make an offer to the extent of the Excess Proceeds to purchase (an "Asset
Sale Offer"), on a pro rata basis, the Notes and the other Indebtedness
described in the next sentence, at a price in cash for the Notes equal to 100%
of the principal amount
-34-
<PAGE>
thereof on any Asset Sale Purchase Date, plus accrued and unpaid interest, if
any, to such Asset Sale Purchase Date. Within 20 Business Days following the
date on which Excess Proceeds exceed $15.0 million, the Company will mail a
notice to each Holder and to the Trustee stating, among other things, (i) that
an Asset Sale Offer is being made as described in this Section 4.11, (ii) the
purchase price for the Notes and the date of purchase, which will be no earlier
than 30 days and no later than 60 days after the date such notice is mailed (the
"Asset Sale Payment Date"), and (iii) that, unless the Company defaults in
making such purchases, any Note accepted for payment pursuant to the Asset Sale
Offer will cease to accrue interest after the Asset Sale Payment Date. Any Asset
Sale Offer will include a pro rata offer under similar circumstances to purchase
all other unsecured Indebtedness of the Company ranking pair passu with the
Notes, which Indebtedness contains similar provisions requiring the Company to
purchase such Indebtedness. To the extent that any amount of Excess Proceeds
remains after completion of such offer to purchase, the Company or such
Restricted Subsidiary of the Company may use such remaining amount for general
corporate purposes and the amount of Excess Proceeds shall be reset to zero.
(d) Notwithstanding paragraphs (a) through (c) of this Section 4.11, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the event that (i) at least 75%
of the consideration for such Asset Sale consists of Telecommunications Assets
and (ii) such Asset Sale is for Fair Market Value; provided that any such
acquisition of Telecommunications Assets that is an Investment is made in
compliance with Section 4.07 hereof or constitutes a Permitted Investment, other
than pursuant to clause (o) of the definition thereof, and any Net Cash Proceeds
received by the Company or any of its Restricted Subsidiaries in connection with
any such Asset Sale shall be subject to the provisions of paragraphs (a) through
(c) of this Section 4.11
(e) The Company will comply with any applicable tender offer rules
(including, without limitation, any applicable requirements of Rule 14e-1 under
the Exchange Act) in connection with any Asset Sale Offer.
Section 4.12. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets or the rendering of any service) with any
Affiliate of the Company or any Restricted Subsidiary of the Company, except
upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's length
transaction with a Person that is not an Affiliate.
(b) The foregoing limitation does not limit, and shall not apply to:
(i) any transaction (A) approved by a majority of Disinterested
Directors or (B) for which the Company or a Restricted Subsidiary, as
applicable, delivers to the Trustee a written opinion of a nationally
recognized investment banking firm or a nationally recognized firm having
expertise in the specific area which is the subject of such determination
stating that the transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view.
-35-
<PAGE>
(ii) any transaction entered into by or among the Company or one of
its Restricted Subsidiaries with one or more Restricted Subsidiaries of the
Company,
(iii) any Restricted Payment not prohibited by Section 4.07 hereof,
or any Permitted Investment,
(iv) the payment of reasonable fees to directors of the Company and
its Restricted Subsidiaries who are not employees of the Company or its
Subsidiaries,
(v) loans or advances made to directors, officers or employees of
the Company or any Restricted Subsidiary, or Guarantees in respect thereof
or otherwise made on their behalf (including any payments under such
Guarantees), in respect of travel, entertainment or moving-related expenses
incurred in the ordinary course of business,
(vi) the granting and performance of registration rights for shares
of Capital Stock of the Company,
(vii) transactions with Affiliates existing on the date of the First
Supplemental Indenture, and as such agreements or arrangements may be
amended from time to time in a manner no less favorable to the holders of
the Notes,
(viii) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business of the
Company or such Restricted Subsidiary and
(ix) the adoption of employee benefit plans in the ordinary course
of business and payments and other transactions thereunder, provided that
any such adoption, payment or other transaction shall have been approved by
a majority of the Disinterested Directors, or in the event there is only
one Disinterested Director, by such Disinterested Director.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by paragraph (a) of this Section 4.12 and not covered by clauses (ii)
through (ix) of this paragraph (b) of Section 4.12, the aggregate amount of
which exceeds $3 million in value, must be approved or determined to be fair in
the manner provided for in clause (i)(A) or (i)(B) of this paragraph (b) of
Section 4.12.
Section 4.13. Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
(other than Permitted Liens) on or with respect to any of its property or
assets, including any shares of stock or Indebtedness of any Restricted
Subsidiary of the Company, whether owned at the Issue Date or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, where such Lien, assignment or
conveyance secures Indebtedness, unless (a) in the case of any Lien securing
Subordinated Indebtedness, the Notes are secured by a Lien on such property,
assets or income, profits or proceeds that is senior in priority to such Lien,
and (b) in the case of any other Lien, the Notes are equally and ratably secured
with the obligation or liability secured by such Lien. Any such Lien thereby
created in favor of the Notes will be automatically and unconditionally released
and discharged upon (i) the release and discharge of the Lien or Liens to which
it relates, or (ii) any sale, exchange or transfer to any Person of the property
or assets
-36-
<PAGE>
secured by such Lien or Liens, or of all of the capital Stock held by the
Company or any of its Restricted Subsidiaries in, or all or substantially all
the assets of, any Restricted Subsidiary creating such Lien or Liens.
Section 4.14. Existence.
Subject to Article 5 of this Indenture, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence as a corporation, and the corporate, partnership or other existence of
any Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and the rights (whether pursuant to the charter, partnership
certificate, agreement, statute or otherwise), licenses and franchises of the
Company and its Restricted Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Restricted Subsidiaries
if the Board shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Repurchase of Notes upon a Change of Control.
(a) The Company must commence, within 30 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest (if any) to the Payment Date. The Company will not be
required to make an Offer to Purchase pursuant to this Section 4.15 if a third
party makes an Offer to Purchase in compliance with this Section and repurchases
all Notes validly tendered and not withdrawn under such Offer to Purchase.
Section 4.16. Business Activities of the Company and Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in (a) any business other than the Telecommunications Business and such
business activities as are incidental or related thereto and (b) any business,
activities or services in which the Company and its Restricted Subsidiaries were
engaged on the Operative Date.
Section 4.17. Pledge Agreement; Security.
(a) The Company (i) has entered into the Pledge Agreement (in the form
attached to the Original Indenture as Exhibit B) and has complied with the terms
and provisions thereof and (ii) has used a portion of the net proceeds of the
sale of the Notes to purchase the Pledged Securities to be pledged to the
Collateral Agent for its benefit and the ratable benefit of the Holders of the
Notes in an amount sufficient upon receipt of scheduled interest and principal
payments, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
six scheduled interest payments on the Notes when and as due. The Pledged
Securities shall be pledged by the Company to the Collateral Agent for its
benefit and the ratable benefit of the Holders of the Notes and shall be held by
the Collateral Agent in the Pledge Account pending disbursement pursuant to the
Pledge Agreement.
-37-
<PAGE>
(b) Each Holder, by its acceptance of a Note, consents and agrees to the
terms of the Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of Collateral), as the same may be in
effect or may be amended from time to time in accordance with its terms, and
authorizes and directs the Collateral Agent to enter into the Pledge Agreement
to which it is a party and to perform its respective obligations and exercise
its respective rights thereunder in accordance therewith. The Company shall do
or cause to be done all such acts and things as may be necessary or proper, or
as may be required by the provisions of the Pledge Agreement, to assure and
confirm to the Collateral Agent the security interest in the Collateral
contemplated hereby, by the Pledge Agreement or any part thereof, as from time
to time constituted, so as to render the same available for the security and
benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein expressed. The Company shall take, or shall cause to
be taken, upon request of the Collateral Agent, any and all actions reasonably
required to cause the Pledge Agreement to create and maintain, as security for
the obligations of the Company under this Indenture and the Notes, a valid and
enforceable first priority perfected security interest in and to all of the
Collateral, in favor of the Collateral Agent, superior to and prior to the
rights of all third Persons and subject to no Liens other than as provided
herein.
(c) The release of any Collateral pursuant to the Pledge Agreement shall
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released pursuant
to this Indenture and the Pledge Agreement. To the extent applicable, the
Company shall cause TIA Section 314(d) relating to the release of property or
securities from the Lien and security interest of the Pledge Agreement and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Collateral Agent in the exercise of reasonable care.
(d) The Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien of the Pledge Agreement, to be complied with. The
Company shall furnish to the Trustee prior to each proposed release of
Collateral pursuant to the Pledge Agreement (i) all documents required by TIA
Section 314(d) and (ii) an opinion of the counsel to the effect that such
accompanying documents constitute all documents required by TIA Section 314(d).
The Collateral Agent may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
(e) The Collateral Agent may, in its sole discretion and without the
consent of the Holders, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (i) enforce any of the terms of the Pledge
Agreement and (ii) collect and receive any and all amounts payable in respect of
the obligations of the Company hereunder. The Collateral Agent shall have power
to institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any acts that may be unlawful or
in violation of the Pledge Agreement or this Indenture, and such suits and
proceedings as the Collateral Agent may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral Agent
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Holders or of the Collateral Agent).
-38-
<PAGE>
ARTICLE 5
SUCCESSORS
Section 5.01. When Company May Merge.
(a) The Company will not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets as an entirety or substantially as an entirety in a
transaction or a series of related transactions to any Person or permit any
Person to merge with or into the Company unless:
(i) the Company will be the continuing Person, or the Person, if
other than the Company, formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of
the Company will be a corporation organized and validly existing under the
laws of the United States of America or any of its jurisdictions and
expressly assumes, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on all of the Notes and
under the Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any person becoming the successor obligor on
the Notes will have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis, the Company or any person becoming the successor obligor of
the Notes, as the case may be, could incur at least $1.00 of Indebtedness
under paragraph (a) of Section 4.09 hereof; provided, however, that this
clause (iv) will not apply to:
(A) a consolidation, merger or sale of all or substantially all
of the assets of the Company if all Liens and Indebtedness of the
Company or any person becoming the successor obligor on the Notes, as
the case may be, and its Restricted Subsidiaries outstanding
immediately after such transaction would be permitted to be incurred,
and all such Liens and Indebtedness of the Company and its Restricted
Subsidiaries outstanding immediately prior to the transaction will be
deemed to have been incurred for all purposes of this Indenture, or
(B) a consolidation, merger or sale of all or substantially all
of the assets of the Company if immediately after giving effect to
such transaction on a pro forma basis, the Company or any person
becoming the successor obligor of the Notes will have a Debt to
Annualized EBITDA Ratio equal to or less than the Debt to Annualized
EBITDA Ratio of the Company immediately prior to such transaction; and
(v) the Company delivers to the Trustee an Officer's Certificate
and opinion of counsel, in each case stating that such consolidation,
merger or transfer and such supplemental
-39-
<PAGE>
indenture comply with this Section 5.01 and that all conditions precedent
provided for in the Indenture relating to such transaction have been
complied with.
(b) Clauses (iii) and (iv) of paragraph (a) of this Section 5.01 do not
apply if, in the good faith determination of the Board, the principal purpose of
such transaction is to change the state of incorporation of the Company,
provided that any such transaction will not have as one of its purposes the
evasion of these limitations.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with the foregoing paragraph, the successor corporation formed by
such consolidation or into or with which the Company is merged or to which such
sale, lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, conveyance or other disposition, the provisions of this Indenture
referring to the Company shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor Person has been named
as the Company herein; and when a successor corporation duly assumes all of the
obligations and covenants of the Company pursuant to this Indenture and the
Notes, except in the case of a lease, the predecessor Company shall be relieved
of all such obligations.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
The following events will be defined as "Events of Default" in this
Indenture:
(a) default in the payment of interest on the Notes when it becomes
due and payable as to any interest payment date on or prior to February 15,
2000, and continuance of such default for a period of five days or more; or
default in the payment of interest on the Notes when it becomes due and
payable as to any interest payment date after February 15, 2000, and
continuance of such default for a period of 30 days or more; or
(b) default in the payment of principal of, or premium, if any, on the
Notes when due; or
(c) default in the performance, or breach, of any covenant described
under Article 5 hereof; or
(d) default in the performance, or breach, of any covenant in this
Indenture (other than defaults specified in clause (a), (b) or (c) above),
and the continuance of such default or breach for a period of 60 days or
more after written notice to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount of the then
-40-
<PAGE>
outstanding Notes (in each case, when such notice is deemed received in
accordance with this Indenture); or
(e) with respect to any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is Guaranteed by the Company or any
of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now
exists or is created after the Issue Date,
(i) any default that has caused the holder of such Indebtedness
to declare such Indebtedness to be due and payable prior to its
express maturity and such Indebtedness has not been discharged in full
or such acceleration has not been rescinded or annulled within 30 days
of such acceleration or
(ii) any default that is caused by a failure to make a principal
payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended within
30 days of such payment default,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been such a payment default, or the maturity of which has been so
accelerated, aggregates $10.0 million or more; or
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5.0 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharges against all such Persons to exceed $5.0 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Company or any Significant
Restricted Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
(ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any Significant
Subsidiary or for all substantially all of the property and assets of the
Company or any Significant Subsidiary or (iii) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(h) the Company or any Significant Subsidiary (i) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (ii) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or
-41-
<PAGE>
substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) above with respect to the Company) occurs and is continuing, then the
Trustee or the holders of at least 25% in principal amount of outstanding Notes
may, by written notice, and the Trustee upon the request of the holders of not
less than 25% in principal amount of the then outstanding Notes shall, declare
the principal of, and any accrued and unpaid interest on, all outstanding Notes
to be immediately due and payable and upon any such declaration such amounts
shall become immediately due and payable. If an Event of Default specified in
clause (g) or (h) above with respect to the Company occurs and is continuing,
then all outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Notes may, by notice to the Trustee, rescind
such declaration of acceleration if all existing Events of Default, other than
nonpayment of the principal of, and any accrued and unpaid interest on, the
Notes that has become due solely as a result of such acceleration, have been
cured or waived and if the rescission of acceleration would not conflict with
any judgment or decree. The holders of a majority in principal amount of the
then outstanding Notes also have the right to waive past defaults under this
Indenture, except a default in the payment of the principal of, or any interest
on, any outstanding Note, or in respect of a covenant or a provision that cannot
be modified or amended without the consent of all holders of Notes.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by written notice to the Trustee may, on behalf of the
Holders of all of the Notes, waive an existing Default or Event of Default and
its consequences, except a continuing Default or Event of Default in the payment
of the principal of, premium, if any, or interest on, the Notes. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
-42-
<PAGE>
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with the law or this Indenture or that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if, (a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default, (b) the Holders of at least 25% in principal
amount of the then outstanding Notes make a written request to the Trustee to
pursue the remedy, (c) such Holder of a Note or Holders of Notes offer and, if
required, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense; (d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer and, if requested, the
provision of indemnity, and (e) during such 60-day period, the Holders of a
majority in principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder of
the Note.
Section 6.08. Collection Suit by Trustee.
Subject to Section 6.02 hereof, if an Event of Default specified in Section
6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount of principal of, premium, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), the Company's creditors or the Company's
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder of
a Note to make
-43-
<PAGE>
such payments to the Trustee, and in the event that the Trustee shall consent to
the making of such payments directly to the Holders of the Notes, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07. To the extent that the payment of
any such compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07 out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders of the Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing contained herein shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder of a Note any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder of a Note thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder of a Note in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: (i) first to Holders of Notes, for amounts due and unpaid on such
Notes for principal, premium, if any, and interest, ratably, without preference
or priority of any kind according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively, and (ii) second, to
the extent any other monies are available, to Holders of all Notes for amounts
due and unpaid on all such Notes for principal, premium, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
Section 6.11. Undertaking For Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by its as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
-44-
<PAGE>
Section 2. Effectiveness of First Supplemental Indenture and Operation of
--------------------------------------------------------------
Amendments.
- ----------
(a) The provisions of this First Supplemental Indenture will become
effective and binding upon the Company, the Trustee and the Holders immediately
upon execution by the parties hereto.
(b) The amendments set forth in Section 1 of this First Supplemental will
become operative on the Operative Date; provided, however, that if the Company
terminates the solicitation of consents of the Holders of the Notes pursuant to
the Consent Solicitation Statement prior to the Operative Date, or if the
Operative Date does not occur on or prior to the date that is 180 days following
the date of execution of this First Supplemental Indenture, then the terms of
this First Supplemental Indenture shall be null and void and the Original
Indenture shall continue in full force and effect.
Section 3. Miscellaneous.
-------------
(a) This First Supplemental Indenture is an indenture supplemental to and
in implementation of the Original Indenture, and the Original Indenture and this
First Supplemental Indenture shall be read together.
(b) The Original Indenture, as amended and supplemented by this First
Supplemental Indenture, is in all respects confirmed and preserved.
(c) This First Supplemental Indenture may be executed in any number of
counterparts, all of which shall together constitute one and the same
instrument.
(d) The internal law of the State of New York shall govern and be used to
construe this First Supplemental Indenture.
(e) This First Supplemental Indenture is subject to the provisions of the
Trust Indenture Act that are required to be part of the Indenture and shall, to
the extent applicable, be governed by such provisions.
[Signatures on following page]
-45-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be executed as of the date and year first written above.
Advanced Radio Telecom Corp.
By: /s/ R. S. McCambridge
---------------------------------
Name: R. S. McCambridge
Title: EVP & Chief Financial Officer
The Bank of New York, as Trustee
By: /s/ Mary LaGumina
---------------------------------
Name: Mary LaGumina
Title: Assistant VP
-46-
<PAGE>
EXHIBIT 10.1
ADVANCED RADIO TELECOM CORP.
Amendment
to
Amended and Restated Change of Control Agreement
This amendment, made this 14th day of May 1999 by and between Henry C.
Hirsch ("Executive") and Advanced Radio Telecom Corp. (the "Company") amends the
Amended and Restated Change of Control Agreement between Executive and the
Company dated as of 3rd day of February, 1999 (the "Agreement").
Whereas, the Company and Executive entered into the Agreement to induce
Executive to advise the Board of Directors as to the best interests of the
Company regarding a potential change of control and to induce the retention of
Executive and assure Executive of fair severance in the event of such a change
of control; and
Whereas the Board believes that certain transactions contemplated by the
Company present the same considerations with respect to ensuring retention,
attention, dedication and sound advice with respect to management;
Now, therefore, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration the parties hereto
agree as follows:
The Agreement shall be amended in the following respects:
1. Section 1 shall be amended by (i) deleting the word "and" from the end of
subsection 1(f), (ii) replacing the period in subsection 1(g) with "; and", and
(iii) inserting a new subsection 1(h) (immediately following Section 1(g)) as
follows:
(h) The Company will reimburse Executive for expenses of relocation of
Executive and of his wife and any dependent children to any location
in the continental United States of America, provided that (i) such
relocation occurs within 12 months of the termination of Executive's
employment and (ii) such expenses are reasonably documented; provided,
however, that any amounts payable by the Company to Executive for
reimbursement of expenses of relocation shall be reduced by any
amounts paid by a subsequent employer to reimburse Executive for
expenses of such relocation. Such reimbursement shall be payable by
the Company to Executive within 10 days of receipt of documentation of
expenses.
2. The definition of Change of Control on Exhibit A shall be amended by (i)
replacing the period in subsection (d) with ";or" and adding a subsection (e) as
follows:
<PAGE>
(e) The closing of the sale by the Company of preferred stock pursuant to
a stock purchase agreement to be entered into in May or June, 1999, as
amended from time to time, among the Company and the purchasers named
therein.
3. All other provisions of the Agreement shall remain unamended and be in full
force and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this amendment as of
14th of May 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ William J. Maxwell
--------------------------
William J. Maxwell
President and COO
By: /s/ Henry C. Hirsch
--------------------------
Henry C. Hirsch
-2-
<PAGE>
EXHIBIT 10.2
ADVANCED RADIO TELECOM CORP.
Amendment
to
Amended and Restated Change of Control Agreement
This amendment, made this 14th day of May 1999 by and between William J.
Maxwell ("Executive") and Advanced Radio Telecom Corp. (the "Company") amends
the Amended and Restated Change of Control Agreement between Executive and the
Company dated as of 3rd of February, 1999 (the "Agreement").
Whereas, the Company and Executive entered into the Agreement to induce
Executive to advise the Board of Directors as to the best interests of the
Company regarding a potential change of control and to induce the retention of
Executive and assure Executive of fair severance in the event of such a change
of control; and
Whereas the Board believes that certain transactions contemplated by the
Company present the same considerations with respect to ensuring retention,
attention, dedication and sound advice with respect to management;
Now, therefore, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration the parties hereto
agree as follows:
The Agreement shall be amended in the following respects:
1. Section 1 shall be amended by (i) deleting the word "and" from the end of
subsection 1(d), (ii) replacing the period in subsection 1(e) with "; and", and
(iii) inserting a new subsection 1(f) (immediately following Section 1(e)) as
follows:
(f) The Company will reimburse Executive for expenses of relocation of
Executive and of his wife and any dependent children to any location
in the continental United States of America, provided that (i) such
relocation occurs within 12 months of the termination of Executive's
employment and (ii) such expenses are reasonably documented; provided,
however, that any amounts payable by the Company to Executive for
reimbursement of expenses of relocation shall be reduced by any
amounts paid by a subsequent employer to reimburse Executive for
expenses of such relocation. Such reimbursement shall be payable by
the Company to Executive within 10 days of receipt of documentation of
expenses.
2. The definition of Change of Control on Exhibit A shall be amended by (i)
replacing the period in subsection (d) with ";or" and adding a subsection (e) as
follows:
<PAGE>
(e) The closing of the sale by the Company of its preferred stock pursuant
to a stock purchase agreement to be entered into in May or June, 1999,
as amended from time to time, among the Company and the purchasers
named therein.
3. All other provisions of the Agreement shall remain unamended and be in full
force and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this amendment as of
14th of May 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ Henry C. Hirsch
--------------------------
Henry C. Hirsch
Chairman and CEO
By: /s/ William J. Maxwell
---------------------------
William J. Maxwell
-2-
<PAGE>
EXHIBIT 10.3
ADVANCED RADIO TELECOM CORP.
Amendment
to
Amended and Restated Change of Control Agreement
This amendment, made this 14th day of May 1999 by and between Robert S.
McCambridge ("Executive") and Advanced Radio Telecom Corp. (the "Company")
amends the Amended and Restated Change of Control Agreement between Executive
and the Company dated as of 3rd of February, 1999 (the "Agreement").
Whereas, the Company and Executive entered into the Agreement to induce
Executive to advise the Board of Directors as to the best interests of the
Company regarding a potential change of control and to induce the retention of
Executive and assure Executive of fair severance in the event of such a change
of control; and
Whereas the Board believes that certain transactions contemplated by the
Company present the same considerations with respect to ensuring retention,
attention, dedication and sound advice with respect to management;
Now, therefore, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration the parties hereto
agree as follows:
The Agreement shall be amended in the following respects:
1. The definition of Change of Control on Exhibit A shall be amended by (i)
replacing the period in subsection (d) with ";or" and adding a subsection (e) as
follows:
(e) The closing of the sale by the Company of its preferred stock pursuant
to a stock purchase agreement to be entered into in May or June, 1999,
as amended from time to time, among the Company and the purchasers
named therein.
2. All other provisions of the Agreement shall remain unamended and be in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this amendment as of
14th of May 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ Henry C. Hirsch
---------------------------
Henry C. Hirsch
Chairman and CEO
By: /s/ Robert S. McCambridge
---------------------------
Robert S. McCambridge
-2-
<PAGE>
EXHIBIT 10.4
ADVANCED RADIO TELECOM CORP.
Amendment
to
Amended and Restated Change of Control Agreement
This amendment, made this 14th day of May 1999 by and between Thomas Boyhan
("Executive") and Advanced Radio Telecom Corp. (the "Company") amends the
Amended and Restated Change of Control Agreement between Executive and the
Company dated as of 3rd of February, 1999 (the "Agreement").
Whereas, the Company and Executive entered into the Agreement to induce
Executive to advise the Board of Directors as to the best interests of the
Company regarding a potential change of control and to induce the retention of
Executive and assure Executive of fair severance in the event of such a change
of control; and
Whereas the Board believes that certain transactions contemplated by the
Company present the same considerations with respect to ensuring retention,
attention, dedication and sound advice with respect to management;
Now, therefore, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration the parties hereto
agree as follows:
The Agreement shall be amended in the following respects:
1. The definition of Change of Control on Exhibit A shall be amended by (i)
replacing the period in subsection (d) with ";or" and adding a subsection (e) as
follows:
(e) The closing of the sale by the Company of its preferred stock pursuant
to a stock purchase agreement to be entered into in May or June, 1999,
as amended from time to time, among the Company and the purchasers
named therein.
2. All other provisions of the Agreement shall remain unamended and be in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this amendment as of
14th of May 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ Henry C. Hirsch
---------------------------
Henry C. Hirsch
Chairman and CEO
By: /s/ Thomas Boyhan
---------------------------
Thomas Boyhan
-2-
<PAGE>
EXHIBIT 10.5
ADVANCED RADIO TELECOM CORP.
Amendment
to
Amended and Restated Change of Control Agreement
This amendment, made this 14th day of May 1999 by and between George R.
Olexa ("Executive") and Advanced Radio Telecom Corp. (the "Company") amends the
Amended and Restated Change of Control Agreement between Executive and the
Company dated as of 3rd of February, 1999 (the "Agreement").
Whereas, the Company and Executive entered into the Agreement to induce
Executive to advise the Board of Directors as to the best interests of the
Company regarding a potential change of control and to induce the retention of
Executive and assure Executive of fair severance in the event of such a change
of control; and
Whereas the Board believes that certain transactions contemplated by the
Company present the same considerations with respect to ensuring retention,
attention, dedication and sound advice with respect to management;
Now, therefore, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration the parties hereto
agree as follows:
The Agreement shall be amended in the following respects:
1. Section 1 shall be amended by (i) deleting the word "and" from the end of
subsection 1(d), (ii) replacing the period in subsection 1(e) with "; and", and
(iii) inserting a new subsection 1(f) (immediately following Section 1(e)) as
follows:
(f) The Company will reimburse Executive for expenses of relocation of
Executive and of his wife and any dependent children to any location
in the continental United States of America, provided that (i) such
relocation occurs within 12 months of the termination of Executive's
employment and (ii) such expenses are reasonably documented; provided,
however, that any amounts payable by the Company to Executive for
reimbursement of expenses of relocation shall be reduced by any
amounts paid by a subsequent employer to reimburse Executive for
expenses of such relocation. Such reimbursement shall be payable by
the Company to Executive within 10 days of receipt of documentation of
expenses.
2. The definition of Change of Control on Exhibit A shall be amended by (i)
replacing the period in subsection (d) with ";or" and adding a subsection (e) as
follows:
<PAGE>
(e) The closing of the sale by the Company of its preferred stock pursuant
to a stock purchase agreement to be entered into in May or June, 1999,
as amended from time to time, among the Company and the purchasers
named therein.
3. All other provisions of the Agreement shall remain unamended and be in full
force and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this amendment as of
14th of May 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ Henry C. Hirsch
---------------------------
Henry C. Hirsch
Chairman and CEO
By: /s/ George R. Olexa
---------------------------
George R. Olexa
-2-
<PAGE>
EXHIBIT 10.6
Amended through May 26, 1999
ADVANCED RADIO TELECOM CORP.
RESTATED EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Restated Equity Incentive Plan (the "Plan") is to
advance the interests of Advanced Radio Telecom Corp. (the "Company") by
enhancing its ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by one or more Committees of the Board
designated for such purpose consisting of one or more members (each, a
"Committee"). If a Committee shall have more than two members, a majority of the
members of any such Committee shall constitute a quorum, and all determinations
of any such Committee shall be made by a majority of its members. Any
determination of a Committee under the Plan may be made without notice or
meeting of such Committee by a writing signed by all members if the Committee
shall have one or two members or by a majority of such Committee members if the
Committee shall have more than two members.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an award is canceled, grant another Award in its place on
such terms and conditions as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as defined below),
and change such forms from time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and
<PAGE>
disputes that may arise in connection with the Plan. Such determinations and
actions of the Committee, and all other determinations and actions of the
Committee made or taken under authority granted by any provision of the Plan,
will be conclusive and will bind all parties. Nothing in this paragraph shall be
construed as limiting the power of the Committee to make adjustments under
Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. No Award may be granted under the Plan ten years
following the date of stockholder approval, but Awards previously granted may
extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
8,000,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options and Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 800,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Internal Revenue
Code.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each person in the employ of the Company or any of its subsidiaries (an
"Employee") and each other person or entity (including without limitation non-
Employee directors of the Company or a subsidiary of the Company) who, in the
opinion of the Committee, is in a position to make a significant contribution to
the success of the Company or its subsidiaries will be eligible to receive
Awards under the Plan (each such Employee, person or entity receiving an Award,
"a Participant"). A "subsidiary" for purposes of the Plan will be a corporation
in which the Company owns, directly or indirectly, stock possessing 50% or more
of the total combined voting power of all classes of stock.
-2-
<PAGE>
6. TYPES OF AWARDS
6.1. Options
(iv Nature of Options. An Option is an Award giving the recipient the
-----------------
right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue of 1986, as amended (the "Code") (any Option intended to qualify as an
incentive stock option being hereinafter referred to as an "ISO"), and Options
that are not incentive stock options, may be granted under the Plan. ISOs shall
be awarded only to Employees. Any Option not identified at the time of grant as
being either an ISO or a non-incentive stock option shall be a non-incentive
stock option.
(iv Exercise Price. The exercise price of an Option will be determined by
--------------
the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent stockholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent stockholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Committee may reduce the exercise price of an Option at any
time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(iv Duration of Options. The latest date on which an Option may be
-------------------
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(iv Exercise of Options. An Option will become exercisable at such time
-------------------
or times, and on such conditions, as the Committee may specify. The Committee
may at any time and from time to time accelerate the time at which all or any
part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person and
delivered or mailed to the Company, accompanied by (1) any documents required by
the Committee and (2)
-3-
<PAGE>
payment in full in accordance with paragraph (e) below for the number of shares
for which the Option is exercised.
(iv Payment for Stock. Stock purchased on exercise of an Option must be
-----------------
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option (with the consent of the optionee
of an ISO if permitted after the grant) or by the instrument evidencing the
Option, (i) through the delivery of shares of Stock which have been outstanding
for at least six months (unless the Committee approves a shorter period) and
which have a fair market value equal to the exercise price, (ii) by delivery of
a promissory note of the person exercising the Option to the Company, payable on
such terms as are specified by the Committee, (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iv) by any combination
of the foregoing permissible forms of payment.
(iv Discretionary Payments. If (i) the market price of shares of Stock
----------------------
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (at a price per share equal to the fair market value per share)
to the person exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been purchased pursuant to
the exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2. Stock Appreciation Rights.
(iv Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the holder on exercise to receive an amount in cash or Stock or
a combination thereof (such form to be determined by the Committee) determined
in whole or in part by reference to appreciation in the fair market value of a
share of Stock on the date of grant as compared to its fair market value on the
date of exercise or any performance standard selected or established by the
Committee.
(iv Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
----------------------------------
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted. The Committee may also grant Stock Appreciation Rights
which provide that following a change in control of the Company, as determined
by the Committee, the holder of such Right will be entitled to receive, with
respect to each share of Stock subject to the Right, an amount equal to the
excess of a specified value
-4-
<PAGE>
(which may include an average of values) for a share of Stock during a period
preceding such change in control over the fair market value of a share of Stock
on the date the Right was granted.
(iv Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
---------------------------------
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such
time or times, and to the extent, that the related Option is exercisable
and will be exercisable in accordance with the procedure required for
exercise of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(iv Exercise of Independent Stock Appreciation Rights. A Stock
-------------------------------------------------
Appreciation Right not granted in tandem with an Option will become exercisable
at such time or times, and on such conditions, as the Committee may specify.
The Committee may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. Restricted and Unrestricted Stock.
(iv Grant of Restricted Stock. Subject to the terms and provisions of the
-------------------------
Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock in such amounts and upon such terms and conditions as the
Committee shall determine subject to the restrictions described below.
-5-
<PAGE>
(iv Restricted Stock Agreement. The Committee may require, as a condition
--------------------------
to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(iv Transferability and Other Restrictions. Except as otherwise provided
--------------------------------------
in this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
Except as the Committee may otherwise determine, if a Participant ceases to be
an Employee or otherwise suffers a Status Change (as defined at Section 7.2(a)
below) for any reason during the Restricted Period, the Company may purchase the
shares of Restricted Stock subject to such restrictions and conditions for the
amount of cash paid by the Participant for such shares, or such shares of
Restricted Stock shall be forfeited to the Company if no cash was paid by the
Participant.
The Company shall also have the right to retain the certificates
representing shares of Restricted Stock in the Company's possession during the
Restricted Period.
(iv Removal of Restrictions. Except as otherwise provided in this Section
-----------------------
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become freely transferable by the Participant upon completion of the Restricted
Period including the passage of any applicable period of time and satisfaction
of any conditions to vesting. However, unless otherwise provided by the
Committee, the Committee, in its sole discretion, shall have the right to
immediately waive all or part of the restrictions and conditions with regard to
all or part of the shares held by any Participant at any time.
(iv Voting Rights, Dividends and Other Distributions. During the
------------------------------------------------
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock including any dividends
and distributions paid in shares shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
(iv Other Awards Settled with Restricted Stock. The Committee may, at the
------------------------------------------
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
-6-
<PAGE>
(iv Unrestricted Stock. The Committee may, in its sole discretion, sell
------------------
to any Participant shares of Stock free of restrictions under the Plan for a
price which is not less than the par value of the Stock.
(iv Notice of Section 83(b) Election. Any Participant making an election
--------------------------------
under Section 83(b) of the Code with respect to Restricted Stock must provide a
copy thereof to the Company within 10 days of filing such election with the
Internal Revenue Service.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(iv Nature of Performance Awards. A Performance Award entitles the
----------------------------
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance established by the Committee. The Committee will
determine the performance goals, the period or periods during which performance
is to be measured and all other terms and conditions applicable to the Award.
(iv Other Awards Subject to Performance Condition. The Committee may, at
---------------------------------------------
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(iv Loans. The Company may make a loan to a Participant ("Loan"), either
-----
on the date of or after the grant of any Award to the Participant. A Loan may
be made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero),
-7-
<PAGE>
whether the Loan is to be secured or unsecured or with or without recourse
against the borrower, the terms on which the Loan is to be repaid and the
conditions, if any, under which it may be forgiven. However, no Loan may have a
term (including extensions) exceeding ten years in duration.
(iv Supplemental Grants. In connection with any Award, the Committee may
-------------------
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any Federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(iv All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(iv Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3(d) above.
(iv Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the time
of death, unless otherwise determined the Committee.
-8-
<PAGE>
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a non-
Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
(iv Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the Committee may determine), and shall thereupon
terminate, unless the Award provides by its terms for immediate termination in
the event of a Status Change (unless otherwise determined by the Committee) or
unless the Status Change results from a discharge for cause which in the opinion
of the Committee casts such discredit on the Participant as to justify immediate
termination of the Award (unless otherwise determined by the Committee). In no
event, however, shall an Option or Stock Appreciation Right remain exercisable
beyond the latest date on which it could have been exercised without regard to
this Section 7. For purposes of this paragraph, in the case of a Participant who
is an Employee, a Status Change shall not be deemed to have resulted by reason
of (i) a sick leave or other bona fide leave of absence approved for purposes of
the Plan by the Committee, so long as the Employee's right to reemployment is
guaranteed either by statute or by contract, or (ii) a transfer of employment
between the Company and a subsidiary or between subsidiaries, or to the
employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which section
424(a) of the Code applies.
(iv Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
(c) above.
(iv Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award canceled as
of the date of such Status Change unless otherwise determined by the Committee.
7.3. Certain Corporate Transactions.
Except as otherwise provided by the Committee at the time of grant, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which
-9-
<PAGE>
results in the acquisition of substantially all the Company's outstanding Stock
by a single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of substantially all the
Company's assets or a dissolution or liquidation of the Company (a 'covered
transaction'), the following rules shall apply:
(a) Subject to paragraph (b) below, immediately prior to the effective
date of the covered transaction or such earlier time as the Committee may in its
sole discretion determine, (1) any outstanding Option and Stock Appreciation
Right shall be exercisable in full, (2) all restrictions on any Restricted Stock
shall be deemed to be satisfied and no longer applicable, (3) the Company shall
make any payments of and provide any benefits under any Deferred Stock Award,
Performance Award or Supplemental Grant, (4) any performance or other conditions
or restrictions on any Award shall be deemed to be satisfied and no longer
applicable, and (5) unless otherwise provided by the Committee at the terms of
the Loan, all principal of and interest on a Loan shall be forgiven; and upon
the effectiveness of such covered transaction, all outstanding Option and Stock
Appreciation Rights shall cease to be exercisable and all Deferred Stock and
Performance Awards and Supplemental Grants shall terminate.
(b) Notwithstanding the foregoing, with respect to an outstanding Award
held by a participant who, following the covered transaction, will be employed
by, or otherwise providing services of a similar nature to those provided to the
Company, to a corporation which is a surviving or acquiring corporation in the
covered transaction or an affiliate of such corporation, the Committee may at or
prior to the effective time of the covered transaction, in its sole discretion
and in lieu of the action described in paragraph (a) above, arrange to have such
surviving or acquiring corporation or affiliate assume any Award held by such
participant outstanding hereunder or grant a replacement award which, in the
judgment of the Committee, is substantially equivalent to any Award being
replaced which awards must in the case of incentive stock options satisfy the
requirements of the Code.
7.4. Termination Following Change of Control.
Notwithstanding any other provision of this Plan, if the Participant's
employment terminates because of a "Qualified Termination" as defined in Exhibit
A, all unvested Options and Stock Appreciation Rights then held by such person
shall immediately become fully vested, all Options and Stock Appreciation Rights
then held by such person shall remain exercisable until the earlier of (i) the
fourth anniversary of such Qualified Termination and (ii) the latest date on
which such Option or Right could have been exercised without regard to Section
7.1 and Section 7.2, and all other Awards shall immediately become fully vested
and all restrictions, conditions and performance goals with respect to such
Awards shall be deemed satisfied and shall no longer be applicable.
-10-
<PAGE>
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable Federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The Nasdaq National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
-11-
<PAGE>
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such Award is made
to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5. Nontransferability of Awards.
Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution, and
during a Participant's lifetime an Award requiring exercise may be exercised
only by the Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's behalf).
8.6. Adjustments in the Event of Certain Transactions.
(iv In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends,
after the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under Section 4 above.
-12-
<PAGE>
(iv In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
(iv In the case of ISOs or for purposes of the limits set forth in the
second paragraph of Section 4, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code (in the case of the limits in Section 4).
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. Deferral of Payments.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
-13-
<PAGE>
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.
-14-
<PAGE>
EXHIBIT A
---------
For purposes of Section 7.4 of the Plan, the following terms have the
following meanings:
"Base Salary" means Participant's annual base salary, exclusive of any
bonus or other benefits the Participant may receive.
"Cause" means the following, determined by the Committee in its reasonable
judgment:
(i) willful failure to perform, or gross negligence in the
performance of, Participant's duties and responsibilities to the
Company and its subsidiaries; or
(ii) fraud, embezzlement or other material dishonesty with respect to
the Company or any of its subsidiaries; or
(iii) conviction of, or plea of nolo contendere to, a felony or other
crime involving moral turpitude; or
(iv) other conduct by Participant that is materially harmful to the
business, interests or reputation of the Company or any of its
subsidiaries.
"Change of Control" means such time as:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing more than 50% of the total voting
power of the Voting Stock of the Company on a fully diluted
basis,
(ii) individuals who on May 30, 1996 constitute the Board (together
with any new directors whose election by the Board or whose
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the
Board then in office who either were members of the Board on the
May 30, 1996 or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the members of the Board then in office,
(iii) the merger or consolidation of the Company with or into another
corporation, or the merger or consolidation of another
corporation with
-15-
<PAGE>
and into the Company, with the effect that, immediately after
such transaction, the Voting Stock of the entity surviving such
merger or consolidation received in such transaction by the
stockholders of the Company immediately prior to such
transaction represents the ultimate beneficial ownership of less
than 50% of Voting Stock of the entity surviving such merger or
consolidation and
(iv) there is a closing of the sale by the Company of its preferred
stock pursuant to a stock purchase agreement to be entered into
in May or June, 1999, as amended from time to time, among the
Company and the purchasers named therein.
"Disability" has the meaning given it in any long-term disability plan of
the Company in which Participant participates. Participant's employment shall be
deemed terminated for Disability when Participant is entitled to receive long-
term disability compensation pursuant to such long-term disability plan. If the
Company does not maintain such a plan, Participant shall be deemed terminated
for Disability if the Company terminates his employment due to illness, injury,
accident or condition of either a physical or psychological nature as a result
of which Participant is unable to perform substantially the duties and
responsibilities of his position for 180 days during a period of 365 consecutive
calendar days.
"Good Reason" means the voluntary termination by Participant of his or her
employment after the occurrence, without Participant's express written consent,
of any of the following events:
(i) assignment to Participant of duties materially inconsistent with
his or her positions, duties, responsibilities, or reporting
requirements with the Company (or a subsidiary) immediately prior
to a Change of Control or a material adverse alteration in
Participant's status or the nature of his or her responsibilities
with the Company immediately prior to a Change in Control; or
(ii) reduction in Participant's rate of Base Salary to less than 100
percent of the rate of Base Salary paid to the Participant
immediately preceding the Change of Control, or reduction in
Participant's total cash compensation opportunities, including
salary, incentives and other benefits, for any fiscal year to
less than 100 percent of the total cash compensation
opportunities made available to the Participant immediately
preceding the Change of Control (for this purpose, such
opportunities shall be deemed reduced if the objective standards
by which Participant's incentive compensation is measured become
materially more stringent or if the amount of such compensation
is materially reduced on a discretionary
-16-
<PAGE>
basis from the amount that would be payable solely by reference
to the objective standards).
"Qualified Termination" means the termination of Participant's employment
during a Standstill Period (1) by the Company other than for Cause, death or
Disability, and (2) in the case of a Participant who at the time of the Change
of Control holds an office specifically designated by the Committee in its sole
discretion to have such right, by Participant for Good Reason.
"Standstill Period" is the period commencing on the date of a Change of
Control and continuing until the close of business on the last business day of
the 24th calendar month following such Change of Control.
"Voting Stock" means the capital stock of any class or kind ordinarily
having the power to vote for the election of directors, managers or other voting
members of the governing body of such Person.
-17-
<PAGE>
EXHIBIT 10.7
AMENDED MAY 14, 1999
ADVANCED RADIO TELECOM CORP.
1996 NON-EMPLOYEE DIRECTORS AUTOMATIC STOCK OPTION PLAN
ARTICLE I
General
1.1 Purpose of the Plan
(a) Adoption. On April 24, 1996, the Board of Directors (the "Board")
of Advanced Radio Telecom Corp., a Delaware corporation (the "Corporation")
adopted the 1996 Non-Employee Directors Automatic Stock Option Plan (the
"Plan").
(b) Purpose. The Plan is intended to promote the interests of the
Corporation by providing non-employee members of the Corporation's Board of
Directors (the "Board") the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation and an
increased personal interest in continued success and progress. Such purpose
shall be accomplished by providing for the automatic grant of options to acquire
the Corporation's Stock ("Options").
(c) Effective Date. The Plan shall become effective upon the
completion of an initial public offering of the Corporation's equity securities.
Such date is hereby designated as the Effective Date of the Plan.
(d) Termination of Plan. The Plan shall terminate upon the earlier of
(i) the tenth anniversary of the Effective Date or (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
the exercise of Options granted under the Plan. If the date of termination is
determined under clause (i) above, then all Option grants outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants or issuances.
1.2 Eligible Persons under the Plan. The persons eligible to
participate in the Plan shall be limited to non-employee Board members
("Eligible Persons"). Persons who are eligible under the Plan may also be
eligible to receive option grants or direct stock issuances under other plans of
the Corporation.
1.3 Stock Subject to the Plan.
(a) Available Shares. The Stock subject to the provisions of the Plan
and issuable upon the grant of Options are shares of the Corporation's common
stock (the "Stock") and shall be drawn from either the Corporation's authorized
but unissued shares of Stock or from reacquired shares of Stock, including
shares repurchased by the Corporation on the open
1
<PAGE>
market. The maximum number of shares of Stock which may be issued over the term
of the Plan shall not exceed 200,000 shares, subject to adjustment from time to
time in accordance with the provisions of this Section 1.3.
-----------
(b) Adjustments for Issuances. Should one or more outstanding Options
under this Plan expire or terminate for any reason prior to exercise in full,
then the shares subject to the portion of each option not so exercised shall be
available for subsequent option grant under the Plan. Shares of Stock tendered
by an Optionholder as payment for shares issued upon exercise of an Option shall
become available for issuance under the Plan. Should shares of Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
Option under the Plan, then the number of shares of Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
Option is exercised, and not by the net number of shares of Stock actually
issued to the Optionholder.
(c) Adjustments for Organic Changes. Should any change be made to the
Stock issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, and (ii) the number
and/or class of securities and price per share in effect under each Option
outstanding. Such adjustments to the outstanding Options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such Options. The adjustments determined by the Board shall be final,
binding and conclusive. The amount of Options granted automatically shall not be
adjusted regardless of any organic changes made to the Stock issuable under the
Plan.
ARTICLE II
Automatic Option Grants
2.1 Terms and Conditions of Automatic Option Grants.
(a) Amount and Date of Grant. During the term of this Plan, Automatic
Option Grants shall be made to each Eligible Person ("Optionholder") as follows:
(i) Annual Grants. Each year on January I (the "Annual Grant
Date") an Option to acquire 6,000 shares of Stock shall be granted to each
Eligible Person for so long as there are shares of Stock available under Section
-------
1.3 hereof. Notwithstanding the foregoing, (1) any Eligible Person whose term
- ---
ended on the Annual Grant Date shall not be eligible to receive any automatic
option grants on that Annual Grant Date and (2) any Eligible Person who has
received an Automatic Option Grant pursuant to Sections 2.1(a)(ii) or (iii) on
----------------------------
the same date as the Annual Grant Date or within 30 days prior thereto, shall
not be eligible to receive an Automatic Option Grant on that Annual Grant Date.
2
<PAGE>
(ii) Initial New Director Grants. On the Initial Grant Date,
every new member of the Board who is an Eligible Person and has not previously
been a member of the Board shall be granted an Option to acquire 7,000 shares of
Stock ("Optioned Shares") as long as there are shares of Stock available under
Section 1.3 hereof. The "Initial Grant Date" shall be the date that an Eligible
- -----------
Person is first appointed or elected to the Board.
(iii) Initial Existing Director Grants. On the Effective Date of
this Plan, each Eligible Person shall be granted an Option to acquire 7,000
shares of Stock.
(b) Exercise Price. The exercise price per share of Stock subject to
each Automatic Option Grant shall be equal to 100% of the fair market value per
share of the Stock on the date the Option was granted as determined in
accordance with the valuation provisions of Section 2.2 hereof (the "Option
-----------
Price").
(c) Vesting. Each Automatic Option Grant made pursuant to Section
----------
2.1(a) (i) or 2.1(a)(ii) shall become exercisable and vest in a series of three
- ---------- ----------
equal and successive yearly installments, with the first such installment to
become exercisable on the Initial Grant Date and each successive installment to
become exercisable every 12 months thereafter. Each Automatic Option Grant made
pursuant to Section 2.1(a)(iii) shall become exercisable and vest in a series of
-------------------
three equal and successive yearly installments, with the first such installment
to become exercisable on the Effective Date and each successive installment to
become exercisable every 12 months thereafter. Each installment of an Option
shall only vest and become exercisable if the Optionholder has not ceased
serving as a Board member as of such installment date.
(d) Method of Exercise. In order to exercise an Option with respect
to any vested Optioned Shares, an Optionholder (or in the case of an exercise
after an Optionholder's death, such Optionholder's executor, administrator, heir
or legatee, as the case may be) must take the following action:
(i) execute and deliver to the Secretary of the Corporation
a written notice of exercise signed in writing by the person
exercising the Option specifying the number of shares of Stock with
respect to which the Option is being exercised;
(ii) pay the aggregate Option Price in one of the alternate
forms as set forth in Section 2.1(e) below; and
--------------
(iii) furnish appropriate documentation that the person or
persons exercising the Option (if other than the Optionholder) has the
right to exercise such Option.
3
<PAGE>
As soon after the Exercise Date, as practical, the Corporation shall mail or
deliver to or on behalf of the Optionholder (or any other person or persons
exercising this Option in accordance herewith) a certificate or certificates
representing the Stock for which the Option has been exercised in accordance
with the provisions of this Plan. In no event may any Option be exercised for
any fractional shares.
(e) Payment Price. The aggregate Option Price shall be payable in one
of the alternative forms specified below:
(i) full payment in cash or check made payable to the
Corporation's order; or
(ii) full payment in shares of Stock held for the requisite
period necessary to avoid a charge to the Corporation's reported
earnings and valued at fair market value on the Exercise Date (as
determined in accordance with Section 2.2 hereof); or
-----------
(iii) if a cashless exercise program has been implemented by
the Board, full payment through a sale and remittance procedure
pursuant to which the Optionholder (A) shall provide irrevocable
written instructions to a designated brokerage firm to effect the
immediate sale of the Optioned Shares to be purchased and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the Optioned Shares to be purchased and (B) shall concurrently
provide written directives to the Corporation to deliver the
certificates for the Optioned Shares to be purchased directly to such
brokerage firm in order to complete the sale transaction.
(f) Term of Option. Each Option shall expire on the fifth anniversary
of the date on which an Automatic Option Grant was made ("Expiration Date").
Except as provided in Section 2.4 hereof, should an Optionholder's service as a
------------------
Board member cease prior to the Expiration date for any reason while an Option
remains outstanding and unexercised, then the Option term shall immediately
terminate and the Option shall cease to be outstanding in accordance with the
following provisions:
(i) The Option shall immediately terminate and cease to be
outstanding for any shares of Stock which were not vested at the time
of Optionholder's cessation of Board service.
(ii) Should an Optionholder cease, for any reason other than
death, to serve as a member of the Board, then the Optionholder shall
have a three-month period measured from the date of such cessation of
Board service in which to exercise the Options which vested prior to
the time of such cessation
4
<PAGE>
of Board service. In no event, however, may any Option be exercised
after the Expiration Date of such Option.
(iii) Should an Optionholder die while serving as a Board
member or within three months after cessation of Board service, then
the personal representative of the Optionholder's estate (or the
person or persons to whom the Option is transferred pursuant to the
Optionholder's will or in accordance with the laws of descent and
distribution) shall have a one year period measured from the date of
the Optionholder's cessation of Board service. In no event, however,
may any Option be exercised after the Expiration Date of such Option.
(g) Limited Transferability. Each Option shall be exercisable only by
Optionholder during Optionholder's lifetime and shall be neither transferable
nor assignable, other than by will or by the laws of descent and distribution
following Optionholder's death.
2.2 Fair Market Value. The fair market value per share of Stock shall
be determined in accordance with the following provisions:
(a) If the Stock is at the time listed or admitted to trading on any
national stock exchange, then the fair market value shall be the most recent
closing selling price per share prior to the date in question on the exchange
determined by the Board to be the primary market for the Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(b) If the Stock is not at the time listed or admitted to trading on
any national stock exchange but is traded on the National Market System
("Nasdaq"), the fair market value shall be the most recent closing selling price
per share prior to the date in question, as such price is reported by the Nasdaq
or any successor system. If there is no reported closing selling price for the
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of fair
market value.
(c) If the Stock is not at the time listed or admitted to trading on
either a national stock exchange or Nasdaq, the fair market value shall be
determined by the Board of Directors or a committee of disinterested directors
appointed by the Board.
2.3 Corporate Transaction. In the event of stockholder approval of a
Corporate Transaction, all unvested options shall automatically accelerate and
immediately vest so that each outstanding Option shall, one week prior to the
specified effective date for
5
<PAGE>
the Corporate Transaction, become fully exercisable for all of the Optioned
Shares. Upon the consummation of the Corporate Transaction, all Options shall,
to the extent not previously exercised, terminate and cease to be outstanding.
2.4 Change in Control. In the event of a Change in Control, all
unvested Options shall automatically accelerate and immediately vest so that
each outstanding Option shall, immediately prior to the effective date of such
Change in Control, become fully exercisable for all of the Optioned Shares.
Thereafter, each Option shall remain exercisable until the Expiration Date of
such Option.
2.5 Preferred Stock Sale. If any director shall cease to be a
director at any time during the period beginning on the day before, and ending
the 24 month anniversary of the date of, the consummation of the sale of the
preferred stock contemplated by the Preferred Stock Purchase Agreement to be
entered into in May or June 1999, as amended from time to time, between the
Corporation, U.S. Telesource, Inc., funds affiliated with Oak Investment
Partners and certain other investment funds named therein each Option granted
hereunder then held by such director shall vest and become immediately
exercisable on the date on which such director shall cease to be a director and
shall remain exercisable until the earlier of (i) the fourth anniversary of such
date and (ii) the latest date on which such Option could have been exercised
without regard to this Section 2.5.
-----------
ARTICLE III
Miscellaneous
3.1 Amendment of the Plan and Awards.
(a) Board Authority. The Board has complete and exclusive power and
authority to amend or modify the Plan (or any component thereof) in any or all
respects whatsoever. However, no such amendment or modification shall adversely
affect rights and obligations with respect to the Optionholder at the time
outstanding under the Plan, unless the Optionholder consents to such amendment.
In addition, the Board may not, without the approval of the Corporation's
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan, except for permissible adjustments under Section
-------
3.1 or extend the term of the Plan, (ii) materially modify the eligibility
- ---
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
(b) Options Issued Prior to Stockholder Approval. Options which
incorporate Plan amendments may be granted prior to any required stockholder
approval of such amendments as long as any shares of stock actually issued under
the Plan are held in escrow until the requisite stockholder approval is
obtained. If such stockholder approval is not obtained within 12 months of the
meeting of the Board approving the amendments, then (i) any Options
incorporating Plan amendments which were not approved shall terminate and cease
to
6
<PAGE>
be exercisable and (ii) the Corporation shall promptly refund the purchase
price paid for any Optioned Shares actually issued under the Plan and held in
escrow, together with interest for the period the shares were held in escrow.
(c) Rule 16b-3 Plan. With respect to persons subject to Section 16 of
the Securities and Exchange Act of 1934, as amended (the "1934 Act") the Plan is
intended to comply with all applicable conditions of Rule 16b-3 (and all
subsequent revisions thereof) promulgated under the 1934 Act. The Board may
amend the Plan from time to time as it deems necessary in order to meet the
requirements of any amendments to Rule 16b-3 without the consent of the
shareholders of the Corporation.
3.2 Tax Withholding.
(a) General. The Corporation's obligation to deliver Stock upon the
exercise of Options under the Plan shall be subject to the satisfaction of all
applicable federal, state and local income tax withholding requirements.
(b) Shares to Pay for Withholding. The Board may, in its discretion
and in accordance with the provisions of this Section 3.2(b) and such
--------------
supplemental rules as it may from time to time adopt (including the applicable
safe-harbor provisions of SEC Rule 16b-3), provide any or all Optionholders with
the right to use shares of Stock in satisfaction of all or part of the federal,
state and local income tax liabilities incurred by such Optionholders in
connection with the exercise of their Options ("Taxes"). Such right may be
provided to any such Optionholder in either or both of the following formats:
(i) Stock Withholding. The Optionholder of an option may be
provided with the election to have the Corporation withhold, from the
Stock otherwise issuable upon the exercise of such Option, a portion
of those shares of Stock with an aggregate fair market value equal to
the percentage of the applicable Taxes (not to exceed 100 percent)
designated by the Optionholder.
(ii) Stock Delivery. The Board may, in its discretion, provide
the Optionholder with the election to deliver to the Corporation, at
the time the option is exercised, one or more shares of Stock
previously acquired by such individual (other than pursuant to the
transaction triggering the Taxes) with an aggregate fair market value
equal to the percentage of the taxes incurred in connection with such
Option exercise (not to exceed 100 percent) designated by the
Optionholder.
7
<PAGE>
3.3 Use of Proceeds. Any cash proceeds received by the Corporation
from the sale of Stock pursuant to Options under the Plan shall be used for
general corporate purposes.
3.4 Regulatory Approvals. The implementation of the Plan, the
granting of any Option and the issuance of Stock upon the exercise or surrender
of the Options made hereunder shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Options granted under it, and the Stock issued
pursuant to it.
3.5 Securities Registration. No shares of Stock or other assets
shall be issued or delivered under this Plan unless and until there shall have
been compliance with all applicable requirements of federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Stock issuable under the Plan, and all applicable
listing requirements of any securities exchange on which stock of the same class
is then listed.
3.6 Corporation Rights. The grants of Options shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
3.7 Privilege of Stock Ownership. An Optionholder shall not have any
of the rights of a stockholder with respect to Optioned Shares until such
individual shall have exercised the Option and paid the Option Price for the
Optioned Shares.
3.8 Assignment. The right to acquire Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any
Optionholder except as specifically provided herein. The provisions of the Plan
shall inure to the benefit of, and be binding upon, the Corporation and its
successors or assigns, and the Optionholders, the legal representatives of their
respective estates, their respective heirs or legatees and their permitted
assignees.
3.9 Plan Not Exclusive. This Plan is not intended to be the
exclusive means by which the Corporation may issue options or warrants to
acquire its shares of Stock. To the extent permitted by applicable law, any
such other options, warrants, or stock awards may be issued by the Corporation,
other than pursuant to this Plan, without shareholder approval.
ARTICLE IV
Definitions
The following capitalized terms used in this Plan shall have the
meaning described below:
8
<PAGE>
"Annual Grant Date" shall mean January 1 of each year.
"Automatic Option Grant" shall mean those automatic option grants made
on the Annual Grant Date, on the Initial Grant Date, and on the Effective Date.
"Board" shall mean the Board of Directors of the Corporation.
"Change in Control" shall mean (a) a person or related group of
persons, other than the Corporation or a person that directly or indirectly
controls, is controlled by, or under common control with the Corporation,
acquires ownership of 40 percent of the Corporation's outstanding Common Stock
pursuant to a tender or exchange offer which the Board recommends that the
Corporation's stockholders not accept or (b) a change in the composition of the
Board of Directors such that those individuals who were elected to the Board at
the last stockholders' meeting at which there was not a contested election for
Board membership subsequently ceased to comprise a majority of the Board by
reason of a contested election.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Corporation" shall mean Advanced Radio Telecom Corp., a Delaware
corporation.
"Corporate Transaction" shall mean (a) a merger or consolidation in
which the Corporation is not the surviving entity, except for a transaction the
principal purposes of which is to change the state in which the Corporation is
incorporated; (b) the sale, transfer of or other disposition of all or
substantially all of the assets of the Corporation and complete liquidation or
dissolution of the Corporation, or (c) any reverse merger in which the
Corporation is the surviving entity but in which the securities possessing more
than 50 percent of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from
those who held such securities immediately prior to such merger.
"Effective Date" shall mean the date this Plan is approved by the
Stockholders of the Corporation.
"Eligible Persons" shall mean non-employee Board members as limited by
Section 1.2 hereof.
- -----------
"Exercise Date" shall be the date on which written notice of the
exercise of an Option is delivered to the Corporation in accordance with Section
-------
2.1(d) hereof.
- ------
"Expiration Date" shall be the 10-year anniversary of the date on
which an Automatic Option Grant was made.
9
<PAGE>
"Initial Grant Date" shall mean the date that the Optionholder was
first appointed or elected to the Board.
"Otionholder" shall mean an Eligible Person to whom Options have been
granted.
"Optioned Shares" shall be those shares of Stock which can be acquired
by an Eligible Person.
"Option Price" shall mean 100 percent of the fair market value per
share of the Stock on the date any Option was granted, as determined in
accordance with the valuation provisions of Section 2.2 hereof.
-----------
"Option" shall mean options granted under the Plan to acquire Stock.
"Plan" shall mean this Stock Option Plan for the Corporation.
"Stock" shall mean shares of the Corporation's Common Stock, par value
$.001 per share, which may be unissued or treasury shares as the Board from time
to time determines.
10
<PAGE>
EXHIBIT 10.8
ADVANCED RADIO TELECOM CORP.
1997 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1997 Equity Incentive Plan for Non-Employee Directors
(the "Plan") is to advance the interests of Advanced Radio Telecom Corp. (the
"Company") by enhancing the ability of the Company to attract and retain non-
employee directors who are in a position to make significant contributions to
the success of the Company and to align the interests of those directors more
closely with those of the stockholders.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan shall be administered by the Compensation Committee of the
Board or such other committee of the Board designated by the Board for that
purpose (the "Committee"). If the Board shall determine that the Plan shall be
administered by the entire Board, the references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan, (b) to prescribe the form or forms of instruments
evidencing options and any other instruments required under the Plan and to
change such forms from time to time; (c) to adopt, amend and rescind rules and
regulations for the administration of the Plan; and (d) to interpret the Plan
and to decide any questions and settle all controversies and disputes that may
arise in connection with the Plan. Such determinations of the Committee shall be
conclusive and shall bind all parties.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective on October 16, 1997, the date on which the
Plan was approved by the Board of Directors of the Company, subject to approval
by the stockholders of the Company. After October 16, 2007, no option shall be
granted under the Plan, but options previously granted may extend beyond that
date. No elections may be made, and no Deferred Stock Awards shall be granted,
pursuant to Section 7 with respect to Fees for services rendered after December
31, 2007.
4. SHARES SUBJECT TO THE PLAN
a. Number of Shares. Subject to adjustment as provided in Section 4(c),
the aggregate number of shares of Common Stock of the Company ("Stock") that may
be delivered upon the exercise of options or pursuant to Deferred Stock Awards
granted under the Plan shall be 500,000. If any option granted under the Plan
terminates without having been exercised in full, the number of shares of Stock
as to which such option was not exercised shall be available for future grants
within the limits set forth in this Section 4(a).
b. Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
<PAGE>
c. Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock occurring after the effective date of the Plan, the number and kind of
shares of stock or securities of the Company subject to options then outstanding
or subsequently granted under the Plan, the maximum number of shares or
securities that may be delivered under the Plan, the exercise price, and other
relevant provisions shall be appropriately adjusted by the Committee, whose
determination shall be binding on all persons.
The Committee may also adjust the number of shares subject to outstanding
awards and the exercise price and the terms of outstanding awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, consolidations or mergers (except those described in
Section 6(j)), acquisitions or dispositions of stock or property or any other
event if it is determined by the Board that such adjustment is appropriate to
avoid distortion in the operation of the Plan.
5. ELIGIBILITY FOR THE PLAN
Directors who are not employees of the Company or any subsidiary of the
Company ("Eligible Directors") shall be eligible to receive options and Deferred
Stock Awards under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
a. Formula Options. On October 16, 1997, each Eligible Director shall be
granted an initial option to purchase 20,000 shares of Stock, subject to
approval of this Plan by the stockholders, and each Eligible Director elected to
the Board thereafter shall be granted an initial option to purchase 20,000
shares of Stock on the day on which he or she is first elected a Director. At
each annual meeting subsequent to the date on which the initial grant was made
to an Eligible Director and at which such Eligible Director is reelected or is
continuing as a director, he or she shall be granted an additional option to
purchase 7,000 shares of Stock. The options awarded under this paragraph (a) are
referred to as "Formula Options." The grant of Formula Options shall not require
any action by the Committee.
b. Discretionary Options. The Committee shall also have the authority
under this Plan to award options to purchase Stock to Eligible Directors in such
amounts and on such terms not inconsistent with this Plan as it shall determine
at the time of the award. The Options awarded under this paragraph (b) are
referred to herein as "Discretionary Options."
c. Exercise Price. The exercise price of each Formula Option shall be 100%
of the Fair Market Value (as defined below) per share of the Stock on the date
the option is granted. The exercise price of each Discretionary Options shall be
set by the Committee. In no event, however, shall the option price of any option
be less, in the case of an original issue of authorized stock, than par value
per share. For purposes of this paragraph, (i) the "Fair Market Value" of a
share of Stock on any date shall be the Closing Price or, if there was no
Closing Price on such day, the latest day prior thereto on which there was a
Closing Price; and (ii) the "Closing Price" of the Stock on any business day
will be the last sale price as reported on the principal market on which the
Stock is traded or, if no last sale is reported, then the mean between the
highest bid and lowest asked prices on that day.
d. Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be (i) in the case of Formula
Options, the date which is five years from the date the
-2-
<PAGE>
Option was granted and (ii) in the case of Discretionary Options, such date as
the Committee may determine, but in no event later than ten years from the date
the Option was granted.
e. Exercise of Options.
i. Each Formula Option shall become exercisable to the extent of
one-third of the shares covered thereby on the day before each of the
first, second and third annual meeting of stockholders following the date
of grant Each Discretionary Option shall become exercisable at such time or
times as the Committee shall determine.
ii. Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by (i)
any documentation required by the Committee and (ii) payment in full for
the number of shares for which the option is exercised.
iii. If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution or pursuant to Section 6(g) below, the Company shall be under
no obligation to deliver Stock pursuant to such exercise until the Company
is satisfied as to the authority of the person or persons exercising the
option.
f. Payment for and Delivery of Stock. Stock purchased upon exercise of
options under the Plan shall be paid for as follows: (i) in cash or by check
(acceptable to the Company in accordance with guidelines established for this
purpose), bank draft or money order payable to the order of the Company; (ii)
through the delivery of shares of Stock (which, in the case of shares of Stock
acquired from the Company, have been outstanding for at least six months) having
a fair market value on the last business day preceding the date of exercise
equal to the exercise price; (iii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the purchase price; or (iv) by any combination of the
foregoing permissible forms of payment; provided, that if the Stock delivered
upon exercise of the option is an original issue of authorized Stock, at least
so much of the exercise price as represents the par value of such Stock shall be
paid other than with a personal check of the option holder.
g. Discretionary Payments. If (i) the market price of shares of Stock
subject to an option exceeds the exercise price of the option at the time of its
exercise, and (ii) the person exercising the option so requests the Committee in
writing, the Committee may in its sole discretion cancel the option and cause
the Company to pay in cash or in shares of Stock (at a price per share equal to
the fair market value per share) to the person exercising the option an amount
equal to the difference between the fair market value of the Stock which would
have been purchased pursuant to the exercise (determined on the date the option
is canceled) and the aggregate exercise price which would have been paid.
h. Death. Except as otherwise determined by the Board, upon the death of
any Eligible Director, all options not then exercisable shall terminate. All
options held by the director that are exercisable immediately prior to death may
be exercised by his or her executor or administrator, or by the person or
persons to whom the option is transferred by will or the applicable laws of
descent
-3-
<PAGE>
and distribution or pursuant to Section 6(g), at any time within one year after
the director's death (subject, however, to the limitations of Section 6(c)
regarding the maximum exercise period for such option). After completion of that
one-year period, such options shall terminate to the extent not previously
exercised.
i. Other Termination of Status of Director. If a director's service with
the Company terminates for any reason other than death, all options held by the
director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)). After completion of that
three-month period, such options shall terminate to the extent not previously
exercised, expired or terminated.
j. Mergers, etc. In the event of a merger or consolidation of the
Company, or series of transactions of which such a merger or consolidation is a
part, which results in the stockholders of the Company immediately prior to such
transaction or series of transactions beneficially owning less than a majority
of the outstanding voting securities of the surviving entity immediately
following such transaction or series of transactions or which results in a
single person or entity or group of persons or entities acting in concert owning
at least a majority of the outstanding voting securities of the surviving entity
immediately following such transaction or series of transactions, a sale,
transfer, lease or other conveyance of all or substantially all of the Company's
assets in a transaction or series of transactions, or a dissolution or
liquidation of the Company, all options hereunder will terminate; provided, that
immediately prior to the consummation of any such transaction described above,
all options outstanding hereunder that are not otherwise exercisable shall
become immediately exercisable, and provided, further, that in lieu of
termination, the Board may cause the acquiring or surviving corporation to
assume all Options outstanding under this Plan, or provide replacement options
for such options on substantially the same terms as are provided by this Plan,
with such adjustments to the number of shares covered by such Options and the
exercise price thereof as may be necessary to reflect the exchange ratio
provided for in the merger or consolidation and with such other changes as are
necessary to permit the options to remain exercisable and outstanding after the
effective date of such merger or consolidation despite the termination of the
Eligible Director's service as a director of the Company.
k. In the event that any director shall cease to be on the Board at any
time during the period beginning on the day before, and ending 12 months from
the date of, the closing of the sale by the Company of its preferred stock
pursuant to a stock purchase agreement to be entered into in May or June, 1999,
as amended from time to time, among the Company and the purchasers named
therein, all options hereunder then held by any such director shall vest and
become immediately exercisable on the date on which such director shall cease to
be on the Board and shall remain exercisable until the earlier of (i) the fourth
anniversary of such date and (ii) the latest date on which such option could
have been exercised without regard to Section 6(h) or Section 6(i).
-4-
<PAGE>
7. DEFERRED STOCK GRANT IN LIEU OF FEES
a. Deferred Stock Grants. Each Eligible Director who shall have so
elected (pursuant to the procedures below) shall be granted irrevocable rights
to receive shares of Stock to be delivered in the future ("Deferred Stock
Awards") in lieu of the cash fees that would otherwise be payable to such
Eligible Director. Each Eligible Director shall receive a Deferred Stock Award
in lieu of any annual retainer fee to which such Eligible Director is entitled
("Annual Fee") and a Deferred Stock Award in lieu of any fees to which such
Eligible Director is entitled with respect to any meeting of the Board or any
committee thereof ("Meeting Fees"). The number of shares of Stock subject to a
Deferred Stock Award shall be that number of shares of Stock the Fair Market
Value of which is equal, in the case of the Annual Fee, to the amount of such
Annual Fee on the first business day of the calendar year for which such Annual
Fee is payable, and in the case of a Meeting Fee, to the amount of such Meeting
Fee on the date of meeting for which such Meeting Fee is payable. The grant of
Deferred Stock Awards shall not require any action by the Committee.
b. Issuance of Deferred Stock. Stock issuable pursuant to a Deferred
Stock Award granted under this Plan shall be issued by the Company to the
Eligible Director on the earliest of (i) the first business day of the third
January following such Deferred Stock Award, (ii) the date of an event described
in Section 6(j) of this Plan or (iii) the date on which such Eligible Director
shall cease to be a Director of the Company, and certificates therefore shall be
delivered by the Company promptly after such date.
c. Notice Procedures. Prior to the beginning of any calendar year, an
Eligible Director may notify the Company in writing of his or her election to be
granted Deferred Stock Awards in lieu of fees for the calendar year succeeding
the year in which the election is made and unless and until any subsequent
notice is given, as provided below, each calendar year thereafter (a "Deferred
Stock Election"). By making a Deferred Stock Election, such Eligible Director
agrees to forego any cash payment of the Annual Fees and Meeting Fees paid in
the form of Deferred Stock Awards. Any Deferred Stock Election shall be
irrevocable as to each calendar year once that year begins, except that in the
event the stockholders should fail to approve this Plan, all Deferred Stock
Elections shall be immediately revoked and the director promptly paid any
previous fees withheld pursuant to such agreement. Any Deferred Stock Election
shall continue in effect from year to year, until revoked, which revocation
shall be effective as to all years subsequent to the year in which the notice of
revocation is given, unless and until such Eligible Director makes a subsequent
Deferred Stock Election.
8. GENERAL PROVISIONS
a. Effect of Lack of Shares. In the event that on any date on which
options or Deferred Stock Awards are to be granted hereunder, there is not a
sufficient number of shares of Stock
-5-
<PAGE>
available to implement fully the shares issuable thereunder, then each such
director entitled to an option grant or a Deferred Stock Award at such time
shall receive a pro rata portion of the option and/or Deferred Stock Award
contemplated by this Plan to the maximum extent. In addition, if an Deferred
Stock Award cannot be implemented due to a lack of shares, then the director's
agreement to forgo Fees shall be deemed automatically revoked to the same extent
unless with the Director's consent the Board is seeking authorization for
additional shares.
b. Non-Plan Issuances. Neither adoption of the Plan nor the grant of
options or Deferred Stock Grants to an Eligible Director shall affect the
Company's right to grant to such director options that are not subject to the
Plan, to issue to such director Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued to directors.
c. No Rights as Stockholder. A holder of an option or Deferred Stock
Award shall not have the rights of a stockholder with respect to shares issuable
with respect to such option or award.
d. Fulfillment of Legal Obligations. The Company shall not be obligated
to deliver any shares of Stock (i) until, in the opinion of the Company's
counsel, all applicable federal and state laws and regulations have been
complied with, and (ii) if the outstanding Stock is at the time listed on any
stock exchange or market, until the shares to be delivered have been listed or
authorized to be listed on such exchange or market upon official notice of
issuance, and (iii) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
e. Nontransferability of Options and Awards. No option or Deferred Stock
Award may be transferred other than by will, by the laws of descent and
distribution or by assignment to a member of his or her immediate family; during
an Eligible Director's lifetime, an option may be exercised only by him or her
or by such member of his or her immediate family to whom the option was
assigned; and during a director's lifetime, a Deferred Stock Award may be paid
only to the Eligible Director or to such member of his or her immediate family
to whom the award was assigned.
f. Termination & Amendment. The Board may at any time terminate the Plan
as to any further grants of options or Deferred Stock Awards. The Committee may
at any time or times, amend the Plan for any purpose which may at the time be
permitted by law, but (without the person's consent) no such amendment shall
adversely affect the rights of any person with respect to a previously granted
option or Deferred Stock Award.
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 197,315
<SECURITIES> 0
<RECEIVABLES> 271
<ALLOWANCES> (60)
<INVENTORY> 0
<CURRENT-ASSETS> 206,862
<PP&E> 38,805
<DEPRECIATION> (11,846)
<TOTAL-ASSETS> 424,759
<CURRENT-LIABILITIES> 17,122
<BONDS> 108,808
243,686
0
<COMMON> 27
<OTHER-SE> 25,116
<TOTAL-LIABILITY-AND-EQUITY> 424,759
<SALES> 924
<TOTAL-REVENUES> 924
<CGS> 0
<TOTAL-COSTS> 43,204
<OTHER-EXPENSES> 608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,668
<INCOME-PRETAX> (62,556)
<INCOME-TAX> 1,501
<INCOME-CONTINUING> (61,055)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,055)
<EPS-BASIC> (6.25)
<EPS-DILUTED> (6.25)
</TABLE>
