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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ADVANCED RADIO TELECOM CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[Logo of Advanced Radio Telecom Corp. Appears Here]
500 108th Avenue NE, Suite 2600
Bellevue, Washington 98004
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Notice of Annual Meeting of Stockholders
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June 14, 2000
Our 2000 annual meeting is being held at the Woodmark Hotel, 1200 Carillon
Point, Kirkland, Washington 98033, on June 14, 2000 at 9:00 a.m. PDT. The
purposes of the annual meeting are to:
1. Approve the issuance of shares in payment for licenses and other assets
of BroadStream Communications Corporation and affiliates.
2. Elect two Class I directors.
3. Attend to any other business properly presented at the annual meeting.
Only stockholders of record at the close of business on May 5, 2000 can vote
at the meeting. To grant a proxy to vote your shares, you must complete and
return the enclosed proxy card.
The board of directors recommends that you vote in favor of Proposal 1 and
for the election of the nominees for director.
By Order of the Board of Directors
Thomas M. Walker
/s/ Thomas M. Walker
Secretary
Bellevue, Washington
May 9, 2000
Please vote your shares promptly. Whether or not you plan to attend the
annual meeting in person, please complete, sign and return the enclosed proxy
card. If stockholders do not return proxies in sufficient numbers, we will have
to incur the expense of follow-up solicitations.
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Advanced Radio Telecom Corp.
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Proxy Statement
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Information About the Annual Meeting and Voting
Time and Place of Meeting
The annual meeting of stockholders will be held on June 14, 2000, at 9:00
a.m. PDT at the Woodmark Hotel, 1200 Carillon Point, Kirkland, Washington 98033
and at any adjournment.
Voting Rights and Votes Required
Our stockholders who hold their shares of record as of the close of business
on May 5, 2000 are entitled to vote at the annual meeting. On the record date
there were approximately 29,178,863 shares of our common stock outstanding
entitled to vote at the annual meeting and 2,234,607 shares of our Series A
voting preferred stock outstanding and entitled to vote at the annual meeting.
Each share of our Series A voting preferred stock entitles its holder to ten
(10) votes per share, which represents the number of shares of common stock
into which it is convertible.
The proposal to approve the issuance of shares in payment for licenses and
other assets of BroadStream Communications Corporation and its affiliates, or
the BroadStream proposal, must be approved by a majority of the votes cast on
that proposal. The nominees who receive the greatest number of votes properly
cast for the election of directors will be elected directors.
Voting Your Shares and Changing Your Vote
To be voted, your proxy must be completed, signed and returned to us prior
to voting at the annual meeting. If you are a registered stockholder (that is,
if you hold your stock in your own name), you may also vote by proxy by
telephone or electronically through the Internet by following the instructions
included with your proxy card. If you hold your shares in "street name," the
materials sent to you by your broker will tell you if you are able to vote by
telephone or electronically. You may revoke a proxy at any time before it is
voted by:
. delivering to us another properly signed proxy relating to the same
shares dated a later date,
. casting another proxy vote relating to the same shares by telephone or
the internet at a later date,
. otherwise delivering a written notice to our secretary, dated a later
date, stating that the proxy is revoked, or
. attending the annual meeting or any adjournment and voting the shares
covered by the proxy in person. Attendance at the annual meeting will
not, by itself, revoke your proxy.
At the meeting, we will vote all proxies received in time and not revoked.
Unless you instruct us otherwise, we will vote your proxy to:
. approve the BroadStream proposal, and
. elect the nominees for Class I director.
How Proxies Are Counted
Our election inspector will count votes cast by proxy or in person. The
election inspector will count shares represented by proxies that reflect
abstentions and so-called broker non-votes as shares that are present and
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entitled to vote on the matter for purposes of determining the presence of a
quorum. Broker non-votes are shares represented at the meeting held by brokers
or nominees as to which (a) instructions have not been received from the
beneficial owners or persons entitled to vote, and (b) the broker or nominee
does not have the discretionary voting power on a particular matter.
Abstentions and broker non-votes will have no effect on the outcome of voting
on the BroadStream proposal or on the election of directors.
Cost of Solicitation
We will bear the cost of soliciting proxies. We will solicit proxies by
mail, telephone, facsimile or otherwise, and some of our officers and employees
may assist in the solicitation without additional compensation. We will
reimburse brokers for their reasonable charges and expenses in forwarding
solicitation materials to beneficial owners.
Where You Can Find More Information
The Securities Exchange Act of 1934 requires us to file reports, proxy
statements and other information with the SEC. You may inspect and copy such
reports, proxy statements and other information at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the regional offices of the SEC located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain
more information about the public reference facilities by calling the SEC at 1-
800-SEC-0330. In addition, you may access such reports, proxy statements and
other information electronically by means of the SEC's web site at
http://www.sec.gov. Our common stock is quoted on the Nasdaq National Market
under the symbol "ARTT," and you may also inspect copies of any documents filed
with the SEC at the offices of Nasdaq, 1735 K Street, Washington, D.C. 20006.
Incorporation by Reference
The Exchange Act allows us to "incorporate by reference" information into
this proxy statement. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. This
proxy statement incorporates by reference the following documents that we have
previously filed with the SEC:
. Items 7, 7A, 8 and 9 of ART's Annual Report on Form 10-K for the year
ended December 31, 1999, filed March 30, 2000.
This proxy statement also incorporates by reference additional documents
that we may file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act between the date of this proxy statement and the annual meeting to the
extent that such additional documents update information incorporated by
reference.
Obtaining Copies From ART
You may obtain copies of documents incorporated by reference in this proxy
statement (except exhibits to those documents which are not specifically
incorporated by reference into a publicly filed document), without charge, upon
written or oral request to Advanced Radio Telecom Corp., 500 108th Avenue, NE,
Suite 2600, Bellevue, WA 98004, Attention: Investor Relations (telephone number
(425) 688-8700).
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Note Regarding Forward-looking Statements
Some statements about us and our industry under the captions "Questions and
Answers" and "Approval of the Issuance of Common Stock in Connection with the
BroadStream Transaction" and elsewhere in this proxy statement are "forward-
looking statements." There are also forward-looking statements in the
information incorporated by reference. These forward-looking statements include
statements about our plans, objectives, expectations, intentions and
assumptions and other statements that are not historical facts. When we use the
words "estimate," "project," "believe," "anticipate," "intend," "plan,"
"expect" and similar expressions in this document and in the incorporated
documents, we generally intend to identify forward-looking statements. Because
these forward-looking statements involve risks and uncertainties, including
those in the risk factors identified in ART's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 and other documents filed with the SEC,
actual results could differ materially from those expressed or implied by the
forward-looking statements. We do not undertake any obligation to publicly
update forward-looking statements to reflect new information or future events
or otherwise.
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Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Information About the Annual Meeting and Voting.......................... i
Where You Can Find More Information...................................... ii
Note Regarding Forward-looking Statements................................ iii
Questions and Answers.................................................... 1
Proposal 1: Approval of the Issuance of Common Stock in Connection With
the BroadStream Transaction............................................. 4
Election of Directors.................................................... 12
Compensation and Related Matters......................................... 15
Security Ownership of Certain Beneficial Owners and Management........... 21
Description of Capital Stock............................................. 25
Stockholder Proposals.................................................... 28
Other Business........................................................... 29
</TABLE>
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Questions and Answers
The following questions and answers are designed to help you understand the
BroadStream proposal and the proxy voting process. These questions and answers
only highlight information in this proxy statement. We strongly encourage you
to read the full text of this proxy statement and the documents which we have
filed with the SEC. For information on how to obtain these documents, see
"Where You Can Find More Information" on page ii.
Q.What licenses and other assets will you acquire from BroadStream and
affiliates?
A.Under our agreement with BroadStream Communications Corporation and several
of its affiliates, or the sellers:
. we agreed to acquire from the sellers 266 39 GHz licenses, or the first
licenses, granted by the Federal Communications Commission and
BroadStream's trade names and marks;
. we have an option to acquire, and the sellers have the right to require
us to buy, up to an additional 102 39 GHz licenses, or the future
licenses, if the sellers receive final orders of renewal from the FCC;
. we have also agreed to loan BroadStream up to $30 million to finance
network construction and other expenses, which they must repay no later
than 90 days after closing of the sale of the first licenses; and
. the sellers have also agreed to sell to us any licenses which they or
their affiliates are granted or acquire or which they have a right to
acquire during the two-year period ending April 14, 2002, or the option
licenses.
We refer to these transactions throughout this proxy statement together as
the BroadStream transaction.
Q.How much stock will be issued?
A.The number of shares of common stock issued in the BroadStream transaction
will be determined by a formula based on 1.25 times the total population
covered by the licenses acquired divided by 36.00. The maximum number of
shares of stock that will be issued if we acquire all first licenses is
7,575,898 and if we acquire all future licenses is 2,168,550. We will pay an
additional 416,667 shares for the first licenses on the 91st day after the
closing if the sellers are not in breach of any material obligation under the
agreement or related documents. We refer to the 10,161,115 shares issuable for
the first and future licenses throughout this proxy statement as the
consideration.
Since we do not know which, if any, licenses the sellers will be granted or
will acquire in the next two years or whether we will elect to purchase any of
those licenses, we cannot predict how many shares, if any, will be required
for any option licenses.
Q.What percentage ownership interest will the sellers acquire?
A.If we purchase all of the first licenses and future licenses we will issue
to the sellers approximately 14.4% of our common stock on a fully diluted
basis.
Q.Why are you proposing this acquisition?
A.Consolidating 39 GHz spectrum licenses and increasing spectrum depth in our
key markets are important strategic goals of ART. Over two-thirds of the
BroadStream licenses expire in 2006 or later, supporting our long-term growth
opportunities in both our top 40 markets and secondary markets. BroadStream
has a
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significant national footprint of 39 GHz spectrum. If we acquire all of the
first licenses and future licenses, the number of licenses we own will grow
from 351 to 719, substantially increasing the depth and breadth of our
nationwide spectrum. The BroadStream licenses include 49 licenses in the top 50
markets in the United States, supplementing our existing 74 licenses in those
markets. The additional spectrum depth will allow ART to build higher margin
and higher bandwidth products, including gigabyte Ethernet 1000 Mbps metro
networks and dedicated OC-12 links that provide customers with connectivity at
speeds up to 622 Mbps. This acquisition would also enhance the breadth of our
spectrum coverage, expanding ART's long-term development of nationwide IP
broadband metro networks in secondary markets.
Q.Is the acquisition fair from a financial point of view?
A.Our directors think so. Our board received a written opinion of Chase
Securities Inc. dated April 11, 2000 to the effect that, as of that date, and
based on the assumptions made, matters considered and limits of review set
forth in its opinion, the consideration to be paid by ART under the BroadStream
transaction was fair, from a financial point of view, to ART.
Q.Why are you seeking stockholder approval?
A.The rules of the National Association of Securities Dealers require a Nasdaq
National Market company like ART to receive stockholder approval before issuing
common stock that represents 20% or more of the company's outstanding common
stock as consideration for an acquisition. Because the maximum number of shares
of common stock which may be issued in the BroadStream transaction is more than
20% of our outstanding common stock, we must obtain the approval of our
stockholders.
Q.What has to happen in order for the acquisition to occur?
A.Our stockholders must approve the BroadStream proposal, and the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act must expire or be
terminated. The FCC must issue final orders approving the transfer of the first
licenses, and several other regulatory agencies must also grant approvals. In
the case of the future licenses, the FCC must have issued final orders renewing
those licenses. There are a number of other customary closing conditions.
Q.Can either party choose not to complete the sale?
A.We or the sellers, individually or as a group, may terminate the agreement
only:
. if we mutually agree;
. if the other party has not satisfied its closing conditions by June 14,
2001, which can be extended for 45 days if we are waiting for an order
of the FCC to become final;
. if the other party breaches any representation, warranty, covenant or
agreement which cannot be cured before closing and which would result in
failure to satisfy one or more conditions to closing; or
. if ART's stockholders do not approve the BroadStream proposal.
Q.What will happen if the stockholders do not approve the acquisition proposal?
A.Because we cannot issue shares of stock without stockholder approval, we will
have to terminate the agreement if our stockholders do not approve the
BroadStream proposal. In addition, we will be required to forgive amounts
loaned to BroadStream under the bridge loan.
Q.What do I need to do now?
A.Indicate on your proxy card how you want to vote and sign, date and mail it
in the enclosed envelope as soon as possible, so that your shares will be
represented at the annual meeting.
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Q.May I vote in person?
AYes. You may attend the meeting and vote your shares in person rather than
signing and mailing your proxy card.
Q.May I change my vote after I have voted my proxy?
A.Yes. You may change your vote at any time before your proxy is voted at the
annual meeting by following the instructions as detailed in "Voting Your Shares
and Changing Your Vote" on page i. Before your proxy is voted, you may submit a
new proxy or you may attend the meeting and vote in person.
Q.If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A.Your broker will vote your shares of common stock only if you provide
instructions on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides. If you do not provide
instructions to your broker, your shares will not be voted.
Q.How does the board of directors recommend that I vote?
A.The board of directors has carefully considered the BroadStream proposal, has
determined that it is in the best interests of ART and its stockholders and
unanimously recommends that you vote for the BroadStream proposal and the
election of the nominees as directors.
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Proposal 1: Approval of the Issuance of
Common Stock in Connection With the BroadStream Transaction
You are being asked to vote on a proposal to approve the issuance of common
stock as consideration for the transactions contemplated by the asset purchase
agreement entered into by ART and BroadStream Corporation, BroadStream
Communications Corporation, Commco, LLC, Commco Partners, LLC and Scott Reardon
on April 14, 2000.
Description of the BroadStream Transaction
Asset Purchase Agreement
First Licenses. We have agreed to acquire from the sellers 266 39GHz
licenses, or the first licenses, granted by the Federal Communications
Commission and BroadStream's trade names and marks. If we acquire all of the
first licenses, we will issue to the sellers a total of 7,575,898 shares of
common stock. The number of shares of common stock issued will be determined by
a formula based on 1.25 times the total population covered by the first
licenses acquired divided by 36.00. We will issue the sellers an additional
416,667 shares of our common stock 91 days after the closing if the sellers
remain in compliance with the material terms of the transaction documents.
Future Licenses. We have an option to acquire, and the sellers have the
right to require us to buy, up to an additional 102 39 GHz licenses, or the
future licenses, if the sellers receive final orders of renewal from the FCC.
If we acquire all of the future licenses, we will issue to the sellers a total
of 2,168,550 shares of common stock. The number of shares of common stock
issued will be determined using the same formula as the first licenses.
Options. As part of the agreement, we will also have the right to purchase
any 39 GHz licenses obtained by Scott Reardon and his affiliates during the
two-year period ending April 14, 2002. Scott Reardon controls, directly or
indirectly, all of the seller companies. The number of shares of common stock
issued as consideration for these option licenses will be determined by a
formula based on 1.25 times the total population covered by the option licenses
divided by 36.00. This is the same formula used to determine the purchase price
of the first licenses and the future licenses.
Representations and Warranties. In the asset purchase agreement, the sellers
make a number of representations to us about themselves and their qualification
to perform their obligations under the agreement. In addition, we make a number
of representations and warranties to the investors that are standard in
contracts of this type. Our representations and warranties are statements about
ART and its business, including descriptions of our current corporate structure
and our qualification to perform our obligations under the asset purchase
agreement.
Circumstances Under Which The Sellers or ART Can Terminate the Agreement. We
can agree with the sellers to terminate the agreement at any time. In addition,
either party may terminate the agreement without the agreement of the other
party:
. if the other party has not satisfied its closing conditions by June 14,
2001, which can be extended for 45 days if we are waiting for an order
of the FCC to become final;
. if the other party breaches any representation, warranty, covenant or
agreement which cannot be cured before closing and which would result in
failure to satisfy one or more conditions to closing; or
. if ART's stockholders do not approve the BroadStream proposal.
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Closing Conditions. The asset purchase agreement contains a number of
conditions that must be met before either ART or the sellers will be obligated
to close the acquisition, including the following:
. ART must receive the approval of at least a majority of the votes cast
on the BroadStream proposal at the annual meeting;
. the representations and warranties of each party must be true and
correct in all material respects as of the closing date;
. each party must have performed its obligations under the agreement in
all material respects and obtained all consents and permits that are
required to be obtained by closing;
. ART and BroadStream must give information and materials to the Federal
Trade Commission and the Department of Justice as required by the Hart-
Scott-Rodino Act, and all applicable waiting periods under the act must
be satisfied (the requirements of the act are more fully described under
"Regulatory Approvals" on page 7);
. as a condition to ART's obligation to close, the FCC must have
authorized the transfer to ART of the first and future licenses that are
to be transferred at the first closing; and
. as a condition to the sellers' obligation to close, ART must have
provided a tax representation certificate and a signed registration
rights agreement and delivered the consideration.
Standstill Agreement and Transfer Restrictions. The sellers have agreed that
from April 14, 2000 until the three year anniversary of the closing date, they
and their affiliates will not acquire additional shares of our capital stock or
otherwise take actions to influence or control ART. During the term of the
standstill agreement, the sellers may not transfer any of our equity securities
except for transfers:
. among the sellers and their affiliates, if the transfers are in
accordance with any applicable federal and state securities laws and if
the transferee agrees to be bound by any transfer restrictions on the
shares;
. that are permitted by the registration rights agreement described above
and in accordance with that agreement, provided that no individual holds
more than 5% of ART's outstanding common stock as the result of such a
transfer;
. pursuant to a merger involving ART;
. in connection with a tender offer approved by our board of directors;
. to the public under Rule 144 under the Securities Act of 1933;
. to financial institutions, provided that no one financial institution
holds more than 5% of ART's outstanding common stock as the result of
such a transfer; or
. to Bear Stearns & Co., its affiliates and other broker-dealers that we
approve, provided that the transferee agrees not to make any further
transfers except those that would otherwise be permitted under the
agreement.
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Bridge Loan
We will loan BroadStream up to $30 million for the construction of networks
and other expenditures. The bridge loan will be due and payable no later than
90 days after the closing of the asset acquisition and will be guaranteed by
Commco Partners, LLC and Scott Reardon. The bridge loan will be secured
initially by the stock of BroadStream Communications Corporation and its
wholly-owned subsidiary, BroadStream Corporation. After closing, the bridge
loan will be secured by a pledge of our common stock issued to the sellers in
the BroadStream transaction in an initial amount equal to three times the then
outstanding amount of the bridge loan. If the fair market value of the pledged
stock is, at any time, less than two times the amount of the then outstanding
amount of the bridge loan, the sellers will increase the number of shares
pledged to meet the required amount. If our stockholders do not approve the
BroadStream transaction and the asset purchase agreement is terminated, we must
forgive all amounts then outstanding under the bridge loan.
Stock Pledge Agreements
BroadStream's obligations under the loan and the guarantee by Commco
Partners, LLC of those obligations are secured by a pledge of the stock of
BroadStream Communications Corporation and BroadStream Corporation. Under the
pledge agreement between ART and BroadStream, BroadStream has granted to ART a
security interest in all of the stock of BroadStream Corporation, its wholly-
owned subsidiary. Under the pledge agreement between ART and Commco Partners,
LLC, Commco Partners, LLC has granted to ART a security interest in all of the
stock of BroadStream, a wholly-owned subsidiary of Commco Partners, LLC.
ART and the sellers have also agreed to enter into additional pledge
agreements at the time of the closing of the acquisition. These additional
pledge agreements will provide for the pledge by the sellers of shares of our
common stock issued in the transaction to secure the continuing obligations of
BroadStream under the loan, in an initial amount equal to three times the
outstanding amount of the loan.
Registration Rights Agreement
We have agreed to enter into a registration rights agreement with the
sellers at the closing of the acquisition. The registration rights agreement
will entitle the holders of a majority of the shares issued in this acquisition
at any time after the closing until the fifth anniversary of the closing, to
require that we register those shares, under the Securities Act of 1933, so
long as the market value of the shares registered at that time is at least $25
million. The holders may not request more than one registration during any
twelve-month period following the closing, and we are not obligated to file
more than one registration in any six-month period. Additionally, during the
first twelve-month period following the closing, we are not obligated to
register shares with a market value of more than $100 million. We also may,
once in each twelve-month period, postpone the filing or the effectiveness of
such a registration if our board of directors determines in good faith that
such registration is likely to have an adverse effect on the Company.
The holders of the securities to be issued in the BroadStream transaction
are also entitled to include their shares of our common stock in any registered
offering we complete either on our behalf or on behalf of other holders of our
securities, subject to certain restrictions. This agreement terminates when all
securities to which it applies have been registered or five years from the
closing of the acquisition, whichever is earlier.
Management Agreement
ART has entered into a management agreement with each of the sellers that
currently owns or has the right to acquire licenses for 39 GHz radio systems.
Under the management agreement, ART will operate and manage the radio systems
in a manner consistent with the sellers' obligations in connection with the
licenses, and under federal and state laws. Whenever ART acquires a license,
the management agreement terminates with respect to that particular license.
Additionally, either party can terminate the management agreement if the asset
purchase agreement is terminated.
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Reasons for Engaging in the BroadStream Transaction
Consolidating 39 GHz spectrum licenses and increasing spectrum depth in our
key markets are important strategic goals of ART. Over two-thirds of the
BroadStream licenses expire in 2006 or later, supporting our long-term growth
opportunities in both our top 40 markets and secondary markets. BroadStream has
a significant national footprint of 39 GHz spectrum licenses. If we acquire all
of the first licenses and future licenses, the number of licenses we own will
increase from 351 to 719, substantially increasing the depth and breadth of our
nationwide spectrum. These BroadStream licenses include 49 licenses in the top
50 markets in the United States, supplementing our existing 74 licenses in
those markets. The additional spectrum depth will allow ART to build higher
margin and higher bandwidth products, including larger Fast Ethernet 100 Mbps
metro networks and dedicated OC-3 links that provide customers with
connectivity at speeds up to 155 Mbps. This acquisition would also enhance the
breadth of our spectrum coverage, expanding ART's long-term development of
nationwide IP broadband metro networks in secondary markets.
Vote Required for Approval of the BroadStream Proposal
The BroadStream proposal must be approved by a majority of the votes cast
with regard to this acquisition.
Tax Consequences
The acquisition is intended to qualify as a tax free reorganization under
the Internal Revenue Code. Accordingly, no gain or loss will generally be
recognized by ART or the sellers as a result of the acquisition, and the tax
basis of the assets acquired will remain unchanged.
Regulatory Approvals
The acquisition will require approval from the FCC for transfer of the
licenses. ART and the sellers have agreed to make required filings with the FCC
and to obtain all other necessary consents and approvals.
Under the Hart-Scott-Rodino Act, ART and the sellers must give information
and materials to the Federal Trade Commission, or FTC, and the Department of
Justice, as required by the Hart-Scott-Rodino Act and a required waiting period
must either expire or be terminated by the FTC. The FTC has the authority to
challenge the acquisition on antitrust grounds by seeking a federal court order
enjoining the transaction pending an administrative hearing.
Reason for Seeking Stockholder Approval
Our common stock trades on the Nasdaq National Market. The rules of the
National Association of Securities Dealers require a Nasdaq National Market
company like ART to receive stockholder approval before selling or issuing
common stock or stock convertible into common stock that represents 20% or more
of the company's outstanding common stock. Because the maximum number of shares
of common stock which may be issued in the acquisition is more than 20% of our
outstanding common stock, we must obtain the approval of our stockholders.
Assuming the conversion into common stock of all outstanding shares of our
Series A and Series B preferred stock, the maximum number of shares of common
stock which may be issued in the acquisition would represent approximately
14.4% of our outstanding shares of common stock.
Opinion of Chase Securities
In April 2000, ART retained Chase Securities to act as ART's financial
advisor for the purpose of delivering an opinion in connection with the
proposed acquisition of assets from BroadStream Communications Corporation. At
the April 11, 2000 meeting of ART's board of directors, Chase Securities
delivered its oral opinion, subsequently confirmed in writing, to ART's board
of directors, to the effect that, as of that date and
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based upon the assumptions made, matters considered and limits of review set
forth in its opinion, the consideration to be paid by ART under the BroadStream
transaction was fair, from a financial point of view, to ART.
The full text of Chase Securities' written opinion, which sets forth the
assumptions made, matters considered and certain limitations on the scope of
review undertaken by Chase Securities, is attached as Attachment A to this
proxy statement. Stockholders are urged to read this opinion in its entirety.
Chase Securities' opinion was provided for the use and benefit of ART's board
of directors in its evaluation of the consideration, was directed only to the
fairness to ART of the consideration to be paid by ART from a financial point
of view, and does not constitute a recommendation as to how any stockholder
should vote with respect to the issuance of ART common stock or any other
related matters. This summary of Chase Securities' opinion is qualified in its
entirety by reference to the full text of its opinion, which is attached to
this proxy statement as Attachment A.
In arriving at its opinion, Chase Securities, among other things:
. reviewed a draft dated April 7, 2000 of the asset purchase agreement and
related agreements;
. reviewed certain publicly available business and financial information
Chase Securities deemed relevant relating to ART and the industry in
which it operates and certain publicly available business information
Chase Securities deemed relevant relating to the first licenses and the
future licenses and ART's licenses and the markets served by such first
licenses and future licenses and ART's licenses;
. reviewed certain internal non-public financial and operating data and
forecasts provided to Chase Securities by the management of ART relating
to its business as well as the amount and timing of the revenue and cash
flow enhancements expected to result from the BroadStream transaction,
which are referred to as the revenue enhancements, furnished to Chase
Securities by ART;
. discussed, with members of the senior management of ART, ART's
operations, historical financial statements and future prospects, before
and after giving effect to the BroadStream transaction and the revenue
enhancements;
. compared the financial and operating performance of ART with publicly
available information concerning certain other companies Chase
Securities deemed comparable and reviewed the relevant historical stock
prices of ART's common stock and certain publicly traded securities of
such other companies;
. compared the proposed financial terms of the BroadStream transaction
with the financial terms of certain recent acquisition transactions it
deemed reasonably comparable to the transaction and otherwise relevant
to Chase Securities' inquiry; and
. made such other analyses and examinations as Chase Securities deemed
necessary or appropriate.
In rendering its opinion, Chase Securities assumed and relied upon, without
assuming any responsibility for verification, the accuracy and completeness of
all of the financial and other information provided to, discussed with or
reviewed by or for Chase Securities, or publicly available, for purposes of its
opinion, including information furnished to Chase Securities by management of
ART as to the number of pops covered by the first licenses and the future
licenses and the number of channel pops associated with the first licenses and
future licenses, and further relied upon the assurance of the management of ART
that they were not aware of any facts that would make such information
inaccurate or misleading. Chase Securities has neither made nor obtained any
independent evaluations or appraisals of the assets or liabilities of ART or of
the Licenses, nor did
8
<PAGE>
Chase Securities conduct a physical inspection of the properties or facilities
of ART. Chase Securities assumed that the financial forecasts and the revenue
enhancements provided to or discussed with Chase Securities by ART had been
reasonably determined on bases reflecting the best currently available
estimates and judgments of the management of ART as to the future financial
performance of ART and the revenue enhancements. Chase Securities expressed no
view as to such forecast or projection information or the assumptions on which
they were based.
For purposes of rendering its opinion, Chase Securities assumed that, in all
respects material to its analysis, the representations and warranties of each
party contained in the agreement were true and correct, that each party would
perform all of the covenants and agreements required to be performed by it
under the asset purchase agreement and that all conditions to the consummation
of the BroadStream transaction would be satisfied without waiver thereof. Chase
Securities further assumed that all material governmental, regulatory or other
consents and approvals would be obtained and that in the course of obtaining
any necessary governmental, regulatory or other consents and approvals, or any
amendments, modifications or waivers to any documents to which any of ART or
the sellers is a party, as contemplated by the asset purchase agreement, no
restrictions would be imposed or amendments, modifications or waivers made that
would have any material adverse effect on the contemplated benefits of the
BroadStream transaction. Chase Securities further assumed that the definitive
asset purchase agreement and related agreements would not differ in any
material respects from the draft thereof furnished to it.
Chase Securities' opinion was necessarily based on market, economic and
other conditions as they existed and could be evaluated on the date of its
opinion. Chase Securities' opinion was limited to the fairness, from a
financial point of view, to ART of the consideration, and Chase Securities
expressed no opinion as to the merits of the underlying decision by ART to
engage in the BroadStream transaction. Chase Securities expressed no opinion as
to the prices at which ART's common stock will trade following the announcement
or the consummation of the BroadStream transaction.
Chase Securities was engaged by ART for purposes of delivering its opinion
and did not participate in the structuring or negotiation of the terms of the
BroadStream transaction or the consideration.
The following is a summary of certain financial and comparative analyses
performed by Chase Securities in arriving at its opinion.
Comparable Transactions Analysis. Chase Securities reviewed certain publicly
available information regarding NEXTLINK Communications, Inc.'s acquisitions of
WNP Communications Inc. and NEXTBAND Communications Inc., which were both
announced in January 1999.
In examining these acquisitions, Chase Securities reviewed the purchase
price paid in each transaction and calculated the implied price paid per
covered pop, meaning the number of pops in the markets served by the licenses
purchased in the transaction, which ranged from $2.62 to $6.10, and the implied
price paid per megahertz adjusted covered pop, meaning the number of covered
pops adjusted for the amount of spectrum in the markets served by those
licenses, which ranged from $7.44 to $7.55. Based upon this analysis, the
estimated value of the first licenses and the future licenses ranged from
approximately $458.5 million to $1,067.5 million using the implied price paid
per covered pop in the comparable transactions, and ranged from approximately
$1,302.0 million to $1,321.3 million using the implied price paid per megahertz
adjusted covered pop in the comparable transactions.
Discounted Cash Flow Analysis. Chase Securities performed a discounted cash
flow analysis, which is referred to as DCF, of the incremental cash flows
projected to result from the first licenses and the future licenses using
financial forecasts for the fiscal years ending December 31, 2000 through
December 31, 2009 provided by management of ART. Utilizing this information,
Chase calculated a range of values based upon the discounted present value of
the sum of the projected stream of unlevered free cash flows to ART from
December 31, 2000 through December 31, 2009, and the projected terminal value
of such incremental cash
9
<PAGE>
flows at December 31, 2009 based upon a range of multiples applied to projected
earnings before interest, depreciation and amortization, which is referred to
as EBITDA. The DCF was calculated assuming discount rates ranging from 12.5% to
14.5%, and terminal multiples of EBITDA in the fiscal year 2009 ranging from
10.0x to 12.0x. Based upon this analysis, the estimated value of the Licenses
ranged from approximately $447.8 million to $583.9 million.
Comparable Public Companies Analysis. Using publicly available information,
Chase Securities compared certain financial and operating information and
ratios for the first licenses and the future licenses projected by management
of ART with corresponding financial and operating information and ratios for
ART and three other companies in lines of business believed to be generally
comparable, as follows:
. Teligent, Inc.
. Winstar Communications, Inc.
. NEXTLINK Communications, Inc.
In examining ART and the other comparable companies, Chase Securities
calculated the enterprise value, defined as the total market value of equity on
a diluted basis plus outstanding debt, preferred stock and minority interest
less cash and cash equivalents, of each company as a multiple of its respective
estimated calendar year 2002 revenues, total covered pops and total channel
pops.
The analysis yielded the following multiples:
<TABLE>
<CAPTION>
Comparable
Public
Companies
Implied
Multiples
----------------
Low High Mean
--- ----- ----
<S> <C> <C> <C>
Enterprise value as a multiple of year 2002 estimated
revenues............................................... 4.9x 15.8x 9.6x
Enterprise value as a multiple of total covered pops.... 6.1x 120.9x 19.4x
Enterprise value as a multiple of total channel pops.... 4.7x 12.7x 9.1x
</TABLE>
Based upon this analysis, the estimated value of the Licenses ranged from
approximately $858.2 million to $1,287.3 million using the implied enterprise
value multiples of covered pops, and ranged from approximately $1,056.9 million
to $1,585.3 million using the implied enterprise value multiples of channel
pops.
Summary Valuation. Using the methodologies described above, Chase Securities
calculated the following implied ranges for the first licenses and the future
licenses. Stockholders are urged to read the following table in conjunction
with the descriptions of the different methodologies set forth above.
<TABLE>
<CAPTION>
Estimated Value
Range
-----------------
Methodology Low High
----------- -------- --------
(Millions of
dollars)
<S> <C> <C>
Comparable transactions analysis (Covered pops).......... $ 458.5 $1,067.5
Comparable transactions analysis (Megahertz adjusted
covered pops)........................................... $1,302.0 $1,321.3
Discounted cash flow analysis............................ $ 447.8 $ 583.9
Comparable public companies analysis (covered pops)...... $ 858.2 $1,287.3
Comparable public companies analysis (channel pops)...... $1,056.9 $1,585.3
</TABLE>
Pro Forma Analysis. Chase Securities also analyzed certain pro forma effects
resulting from the BroadStream transaction, including the potential impact of
the transaction on projected revenues and EBITDA per share of ART's common
stock, based upon forecasts provided by management of ART. This analysis
indicated that the BroadStream transaction would be accretive to both projected
revenues and EBITDA for the period 2000 through 2004.
10
<PAGE>
The summary set forth above does not purport to be a complete description of
the analyses performed by Chase Securities in arriving at its opinion. Arriving
at a fairness opinion is a complex process not necessarily susceptible to
partial analysis or summary description. Chase Securities believes that its
analyses must be considered as a whole and that selecting portions of analyses
and of the factors considered by it, without considering all such factors and
analyses, could create a misleading view of the processes underlying its
opinion. Chase Securities did not assign relative weights to any of its
analyses in preparing its opinion. The matters considered by Chase Securities
in its analyses were based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond ART's control and
involve the application of complex methodologies and educated judgment. Any
estimates incorporated in the analyses performed by Chase Securities are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty. None of the comparable companies used in the
comparable public companies analysis described above is identical to ART, and
none of the comparable transactions used in the comparable transactions
analysis described above is identical to the BroadStream transaction.
Accordingly, an analysis of publicly traded comparable companies and
transactions is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
About Chase Securities. ART's board of directors selected Chase Securities
to act as its financial advisor on the basis of the reputation of Chase
Securities as an internationally recognized investment banking firm with
substantial expertise in transactions similar to the BroadStream transaction
and because it is familiar with ART and its business. As part of its financial
advisory business, Chase Securities is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions and
valuations for estate, corporate and other purposes. Chase Securities has acted
as financial advisor to the board of directors in connection with the delivery
of its opinion and received a fee upon delivery of the opinion. In the ordinary
course of business, Chase Securities or its affiliates may trade in the debt
and equity securities of ART for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
The terms of the engagement of Chase Securities by the board of directors
are set forth in a letter dated April 7, 2000. Pursuant to the terms of the
letter agreement, ART paid to Chase Securities a fee of $500,000 upon delivery
of its opinion. In addition to this compensation, ART has also agreed to
reimburse Chase Securities for its reasonable out-of-pocket expenses (including
the fees of its legal counsel) and to indemnify Chase Securities and certain
related persons from and against certain liabilities in connection with its
engagement, including certain liabilities under the federal securities laws,
arising out of its engagement.
Name and Address of Sellers
The address and telephone number of BroadStream Communications Corporation
and its affiliates is: 4513 Pin Oak Court, Sioux Falls, South Dakota 57103,
Attention: Scott Reardon (telephone (605) 338-3632).
About ART
We provide broadband Internet protocol access services to businesses. We
currently own and operate broadband wireless metropolitan networks in San Jose,
Seattle, Portland, Oregon and Phoenix. We plan to expand to forty (40) markets
over the next three years. We have a nationwide footprint of 39 GHz spectrum
licenses in the United States and own 26 GHz and/or 39 GHz spectrum licenses in
the United Kingdom and several Scandinavian countries. Our executive offices
are located at 500 108th Avenue NE, Suite 2600, Bellevue, Washington 98004. Our
telephone number is (425) 688-8700.
Recommendation
Our board of directors unanimously recommends a vote "FOR" the approval of
the issuance of common stock as consideration for the acquisition
11
<PAGE>
Election of Directors
Under the terms of our amended and restated certificate of incorporation and
restated and amended by-laws, the board of directors is composed of three
classes of similar size. Each class is elected in a different year, so that
only one class will be elected each year. All directors serve for a three-year
term and until their respective successors are duly elected and qualified. The
board of directors currently consists of seven members.
Unless otherwise instructed, the persons named in the enclosed proxy intend
to vote each share of common stock as to which a proxy has been properly
executed, returned and not revoked in favor of the election of the two nominees
named below as Class I directors for three-year terms that expire in 2003. We
expect that each nominee will be able to serve. If any nominee is unable to
serve, all proxies may be voted for a substitute nominee designated by our
board of directors, as determined by the persons named in the enclosed proxy in
their discretion.
Set forth below is information concerning each of the nominees and the other
incumbent directors:
Nominees and Members of the board of directors
Nominees for Class I Directors
Term Expires 2003
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
<C> <C> <S> <C>
Marc B. Weisberg 42 Senior Vice President of Corporate 1999
Development at Qwest Communications
International, Inc. since 1997; with
Weisberg & Company, an investment
banking and advisory firm, prior to
1997.
Alan Z. Senter 57 Chairman of Senter Associates, a 1996
financial advisory firm, since 1996;
Executive Vice President and Chief
Financial Officer of NYNEX Corporation
from 1994 to 1996; Director of XL Ltd.
Incumbent Class II Directors
Term Expires 2001
<CAPTION>
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
<C> <C> <S> <C>
Bandel Carano 38 General Partner of Oak Investment 1999
Partners since 1985; Director of the
Investment Advisory Board for the
Stanford Engineering Venture Fund;
Director of Wireless Facilities, Inc.,
Virata Corporation and Metawave
Communications Corp.
Richard T. Liebhaber 64 Consulting Managing Director at Vernois, 2000
Suhler and Associates, a New York media
merchant banking firm; Executive Vice
President of MCI Communications Corp. and
a Member of its Management Committee and
board of directors from 1985 to 1995;
Director of KPN/Qwest, AVICI Systems,
Inc., Internet Communications
Corporation, Rare Medium Group, and
Alcatel USA, Inc.
</TABLE>
12
<PAGE>
Incumbent Class III Directors
Term Expires 2002
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
<C> <C> <S> <C>
James B. Murray, Jr. 52 Managing Director of Columbia Capital 1997
Corporation since 1989; President of
Randolph Cellular Corp., a cellular
communications company, from 1990 to
1993; Director of Seville Systems P.C.
Andrew I. Fillat 51 Managing Director of Advent 1995
International Corporation since 1995 and
Vice President of Advent International
Corporation from 1989 to 1995.
Robert S. McCambridge 41 President and Chief Operating Officer of 2000
ART since 1999; Executive Vice President
and Chief Financial Officer of ART from
1998 to 1999; Executive Vice President
and Chief Financial Officer of One Comm,
formerly Cable Plus Holding Company,
from 1996 to 1998; President of the
Robert S. McCambridge Company from 1995
to 1996; Senior Vice President and
Director of Pacific Northwest Corporate
Finance of Dain Bosworth Inc. from 1994
to 1995.
</TABLE>
Board of Directors and Committees
During the year ended December 31, 1999, our board of directors held 20
meetings. During 1999, each director attended at least 75% of the meetings of
the board held and at least 75% of the meetings of each committee on which he
served.
Our board of directors currently has two standing committees: the audit
committee and the compensation committee. We do not have a standing nominating
committee.
The compensation committee has responsibility for reviewing and
administering our program with respect to the compensation of its officers,
employees and consultants, and it reviews transactions with our officers,
directors and affiliates. The compensation committee also reviews, interprets
and administers our restated equity incentive plan, prescribes rules and
regulations relating to the plan and determines the stock options and other
equity incentives that we grant to our employees. As a policy, the compensation
committee directs us to pay our officers, directors and affiliates for services
rendered outside the scope of their ordinary respective obligations in
accordance with industry standards for such services. Such services may include
introducing major transactions or providing legal services. In 1999 Mr. Murray
and two former directors served on our compensation committee until their
resignations. Mr. Carano, Mr. Murray and Mr. Senter have served on our
compensation committee since December 1999. The compensation committee held 2
meetings in 1999.
The audit committee recommends the engagement of independent accountants to
audit our financial statements and perform services related to the audit. The
audit committee also reviews the scope and results of the audit with the
accountants, reviews our year-end operating results with management and the
accountants, and considers the adequacy of internal accounting procedures. Mr.
Fillat, Mr. Liebhaber, Mr. Senter and Mr. Weisberg currently serve on the audit
committee. The audit committee held 2 meetings in 1999.
A subsidiary of Qwest Communications International Inc., is entitled to
designate a nominee to be a Class II director for so long as it and its
affiliates own at least one-quarter of the shares it purchased from us. Oak
Investment Partners is entitled to designate a nominee to be a Class I director
for so long as it and some other investors own at least one-quarter of the
shares they purchased from us. We have agreed to use our best efforts to ensure
that our board nominates and presents to our stockholders the proposed election
of those designees. We have agreed to include one of their nominees on each
board committee.
13
<PAGE>
A subsidiary of Qwest, investment funds associated with Oak and investment
funds associated with Advent and Columbia have entered into a Stockholders
Agreement under which they have agreed to vote their shares to elect the
nominees of each of Qwest and Oak. Shares acquired by Advent and Columbia prior
to the date of the Stockholders Agreement are not subject to the agreement.
Mr. Carano is the designee of Oak, and Mr. Weisberg is the designee of
Qwest.
Recommendation:
Our board of directors recommends a vote "FOR" the election of each nominee.
14
<PAGE>
Compensation and Related Matters
Executive Compensation
The following table sets forth information with respect to compensation for
each of the last three completed fiscal years of our President and Chief
Operating Officer, our sole executive officer at December 31, 1999, and two
other individuals who would have been executive officers of the Company, but
for the fact that they were not serving as executive officers on December 31,
1999. We refer to these individuals as the named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------------- -----------------------
Restricted Securities
Stock Underlying All Other
Name and Position Year Salary Bonus Awards Options Compensation
- ----------------- ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. McCambridge.... 1999 $195,209 $250,000(1) -- 300,000 $ 306(2)
President, 1998(3) 24,848 32,083 -- 200,000 144(2)
Chief Operating Officer 1997 -- -- -- -- --
and Chief Financial
Officer
Henry C. Hirsch(4)....... 1999 332,127 292,466 -- -- 1,701,927(4)
Chairman, President and
Chief 1998 325,000 325,000 -- 800,000 304,755(5)
Executive Officer 1997(3) 54,168 54,167 100,000(6) 800,000 113(2)
William J. Maxwell(7).... 1999 260,072 260,000 -- -- 868,920(7)
President & Chief 1998 259,992 260,000 35,000(6) 550,000 78,376(8)
Operating Officer 1997(3) 5,999 -- -- 550,000 --
</TABLE>
- --------
(1) Paid one-half in cash and one-half in a grant of 5,209 shares.
(2) Reflects payment of term life insurance premiums.
(3) Reflects compensation for a partial year.
(4) Mr. Hirsch resigned as Chairman, President and Chief Executive Officer
effective November 1999. Reflects $1,700,577 in severance and $1,350 for
payment of term life insurance premiums.
(5) Reflects payment of $1,350 in term life insurance, $1,437 in health medical
benefits and $301,968 for relocation.
(6) Reflects deferred shares.
(7) Mr. Maxwell resigned as President and Chief Operating Officer effective
September 1999. Reflects $867,570 in severance and relocation costs and
$1,350 for payment of term insurance premiums.
(8) Reflects $77,026 for relocation and $1,350 for payment of term life
insurance premiums.
15
<PAGE>
Option Grants
The following table sets forth certain information regarding stock option
grants made to our named executive officers during 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------- Potential Realization Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to for Option Term(1)
Options Employees in Exercise Price Expiration ---------------------------
Name Granted Fiscal Year per Share Date 5% 10%
- ---- ---------- ------------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Hirsch......... 100,000(2) 6.6% $ 7.063 2/11/2009 $ 444,188 $ 1,125,660
William J. Maxwell...... 75,000(2) 5.0% 7.063 2/11/2009 $ 333,141 $ 844,245
Robert S. McCambridge... 50,000(3) 3.3% 7.063 2/11/2009 $ 221,094 $ 562,830
300,000 19.9% 13.625 12/2/2009 $ 2,570,606 $ 6,514,421
</TABLE>
- --------
(1) The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option.
(2) The options of Mr. Hirsch and Mr. Maxwell are vested and exercisable until
2003.
(3) Mr. McCambridge's options provide for accelerated vesting of 50,000 shares
upon achievement of price objectives.
Aggregate Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number and value as of December 31, 1999
of shares underlying unexercised options held by the named executive officers.
As of December 31, 1999, none of them had exercised any stock options.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year End(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Henry C. Hirsch............. 900,000 0 $16,618,706 $ 0
William J. Maxwell.......... 575,000 0 10,440,587 0
Robert S. McCambridge....... 250,000 300,000 4,628,100 3,112,500
</TABLE>
- --------
(1) Based on the last sales price of our common stock reported on the Nasdaq
National Market on December 31, 1999 of $24.00 per share, less the exercise
price payable upon exercise of such options.
Director Compensation
Each director who is not a full-time employee of the Company receives
$10,000 per year for services rendered as a director, $500 for each board
meeting attended in person, and $500 for each committee meeting attended in
person.
Also, non-employee directors are eligible to participate in our equity
incentive plan for non- employee directors. Under this plan, we give each
eligible director an initial grant of options to purchase 20,000 shares of
common stock, and each newly elected non-employee director receives a similar
grant upon his or her first appointment or election to our board of directors.
In addition, under this plan, we grant each non-employee director options to
purchase 7,000 shares of common stock at each annual meeting at which such
director is reelected or is otherwise continuing as a director. These options
have an exercise price equal to the fair market value of our common stock on
the date of the grant, expire five years after the date of grant, and become
16
<PAGE>
exercisable on the day before each of the first, second and third annual
stockholders meeting following the date of grant. Also, each eligible director
may elect annually in advance to receive their fees for being a director and
attending meetings in the form of deferred grants of common stock, rather than
cash. The deferred grants of common stock are payable on the earlier of (a) the
first business day of the third January following the date of grant, (b) a
change of control or (c) the date the eligible director ceases to be our
director. On February 11, 1999, we granted each of our non-employee directors
an option to purchase 10,000 shares, fully exercisable on the date of grant, at
an exercise price of $7.06, the fair market value on the date of grant.
Employee Agreements
Our employment agreement with Robert S. McCambridge provides for his full-
time employment through December 31, 2000 at an annual salary of not less than
$175,000 with a maximum incentive bonus of 100% of his base salary. The
agreement precludes Mr. McCambridge from competing with us for one year after
the cessation of his employment. If we terminate Mr. McCambridge without cause
or if his employment is terminated due to his disability or death, or if he
terminates his employment as a result of a constructive termination, Mr.
McCambridge will be entitled to continue to receive the full amount of his base
salary, target bonus and medical and term life insurance for 12 months. In
addition, all options granted to Mr. McCambridge which have not yet vested will
vest and remain exercisable for the lesser of one year or their original term.
We also have a change of control agreement with Mr. McCambridge entitling
him to various benefits if his employment with us is terminated, other than for
cause or his disability or death, or if he resigns for good reason within 24
months of any change of control. Upon such a termination, the agreement
provides that we will pay Mr. McCambridge a prorated portion of his maximum
incentive bonus for the year of termination; a cash payment equal to his base
salary and his maximum incentive compensation; his stock options and other
awards will immediately vest and remain exercisable for the lesser of four
years or their original term; and we will continue Mr. McCambridge's life and
medical insurance plans for up to two years. If any payment or benefit provided
by us under the agreement will be subject to an excise tax under the Internal
Revenue Code, we will provide Mr. McCambridge with a payment to cover such tax.
Compensation Committee Report on Executive Compensation
Our executive compensation program is designed to reward and retain
executives who are capable of leading the Company in achieving its strategic
and financial objectives in the competitive and rapidly evolving
telecommunications industry.
We rely on three compensation components: salary, incentive cash bonuses and
stock-based incentive compensation. Each of our executive officers has an
annual base salary, established by an employment agreement or otherwise, at a
level we believe is competitive for comparable companies in its industry and
geographic area and allows it to attract and retain experienced executives
capable of managing its growth. The compensation committee relies in part on
annual industry salary surveys and has occasionally commissioned independent
surveys.
We have developed an incentive bonus program under which our executives are
eligible to receive incentive cash bonuses as determined by our board of
directors for each fiscal year. Generally, bonuses are intended to reward
executives when we achieve our business objectives.
The compensation committee believes that long-term stock price appreciation
will reflect our achievement of our strategic goals and objectives.
Accordingly, we seek to create long-term performance incentives for our
employees and directors by aligning their economic interest with the interests
of our long-term stockholders through our stock-based incentive compensation
program. Stock options have generally been granted at a price equal to the fair
market value of our common stock on the date of grant, and as a result, receipt
of value by the employee is dependent upon an increase in the fair market value
of our common stock. Awards are based on the anticipated contributions by such
employees in helping us achieve our strategic goals and objectives.
17
<PAGE>
In adopting and administering executive compensation plans and arrangements,
the compensation committee will consider whether the deductibility of such
compensation will be limited under Section 162(m) of the Internal Revenue Code
and, in appropriate cases, may serve to structure arrangements so that any such
limitation will not apply.
Mr. Hirsch's salary for 1999 was determined by his employment agreement. The
bonus paid for 1999 was determined by his change of control agreement. Both
agreements were negotiated on an arms-length basis prior to his joining ART.
Mr. McCambridge's salary was increased to reflect the additional
responsibilities he assumed as chief operating officer and acting chief
executive officer on the resignation of Mr. Hirsch and Mr. Maxwell. Mr.
McCambridge's bonus was determined by the compensation committee based on its
assessment of his excellent performance in that transition. It was paid one-
half in stock at Mr. McCambridge's request.
With respect to the above matters, the compensation committee submits this
report.
COMPENSATION COMMITTEE
Bandel Carano
James B. Murray, Jr.
Alan Z. Senter
18
<PAGE>
Certain Transactions
The following information regarding certain transactions with directors,
officers and holders of record or beneficially of more than five percent of our
common stock does not include information for any period during which such
person or entity, as the case may be, was not an officer, director or five
percent holder.
Investment by Columbia Capital Corporation and Advent International Corporation
in the Company
In September 1999, we sold our Class A and Class B convertible preferred
stock to a group of investors in exchange for $251 million. The group of
investors included investment funds affiliated with Columbia Capital
Corporation, of which James B. Murray is a managing director, and which at the
time of the investment held greater than five percent of our outstanding common
stock. The group of investors also included funds affiliated with Advent
International Corporation, of which Andrew I. Fillat is a managing director. As
part of the investment group, each of Columbia and Advent invested $20 million
in the Company in return for 250,000 shares of preferred stock. Under the
preferred stock purchase agreement between the Company and the investors signed
in June 1999, the investors loaned us $50 million as a bridge loan bearing
interest at a rate of 11%, which we repaid in September 1999 at the closing of
the investment.
Qwest Operating Agreements
In June 1999, we entered into a private line agreement, a co-location
license agreement, a broadband services agreement and a coordinated marketing
agreement with Qwest, which beneficially owns greater than five percent of our
outstanding voting stock. In these contracts, we agreed to (i) integrate our
broadband wireless networks with Qwest's fiber-optic network using Qwest as our
exclusive provider of fiber-optic backbone, (ii) co-locate equipment with Qwest
where desirable, and (iii) jointly market our products with Qwest where
desirable.
Loan to Mr. Hirsch
In November 1997, we loaned Mr. Hirsch, our former Chairman of the board of
directors and Chief Executive Officer, $887,500 to purchase 100,000 shares of
common stock at $8.875 per share, the fair market value of the stock on the
date of the loan. The loan accrued interest at the applicable federal rate, was
payable in 2003, and was secured by the shares purchased. Mr. Hirsch repaid the
debt following his resignation.
Agreement with Triton Network Systems Inc.
In December 1999, we entered into a supply agreement with Triton Network
Systems Inc. under which we are obligated to purchase and Triton is obligated
to supply their products under the terms and conditions described in the
agreement. Bandel Carano, one of our directors, beneficially owns more than 10%
of Triton, as a general partner of Oak Investment Partners VII, Limited
Partnership and a related entity. During 1999, we paid approximately $693,000
to Triton.
Wireless Facilities Inc.
Wireless Facilities Inc. provides us with network deployment services.
Bandel Carano, one of our directors, beneficially owns more than 10% of
Wireless Facilities, as a general partner of Oak Investment Partners VIII,
Limited Partnership and a related entity. During 1999, we paid approximately
$1,651,000 to Wireless Facilities.
19
<PAGE>
Performance Graph
The following stock price performance graph compares the cumulative total
return on our common stock with the cumulative total return of the Standard &
Poor's Composite 500 Index and of the CRSP Nasdaq Telecommunications Peer Group
Index from November 5, 1996, the date of our initial public offering, through
December 31, 1999 assuming a $100 initial investment in each case. The stock
price performance on the graph below is not necessarily indicative of future
price performance.
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C>
November 5, December 31, December 31, December 31, December 31,
1996 1996 1997 1998 1999
Advanced Radio Telecom
Corp. $100.00 $ 75.00 $ 53.33 $ 50.00 $160.00
S&P 500 $100.00 $103.72 $135.89 $179.08 $215.67
CRSP NASDAQ $100.00 $101.02 $149.55 $244.27 $423.55
Telecommunications Peer
Group Index
</TABLE>
Independent Auditors
Our board of directors selected the firm of PricewaterhouseCoopers L.L.P. to
audit our financial statements for the fiscal year ended December 31, 1999 and
to report on the results of their audit. A representative of
PricewaterhouseCoopers L.L.P. is expected to be present at the annual meeting
with the opportunity to make a statement if he or she desires and to respond to
appropriate questions.
20
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of shares of the Company's common stock as of March 21,
2000 by (i) the named executive officers, (ii) each of the Company's directors,
(iii) all of the Company's executive officers and directors as a group and (iv)
each person (including any "group" as that term is used in Section 13(d)(3) of
the Exchange Act) known to the Company to be the beneficial owner of more than
five percent of the outstanding common stock. Unless otherwise indicated, the
business address of each director and executive officer named below is c/o
Advanced Radio Telecom Corp., 500 108th Avenue NE, Suite 2600, Bellevue,
Washington 98004. Except as noted below, each of the persons listed has sole
investment and voting power with respect to the shares indicated:
<TABLE>
<CAPTION>
Beneficial
Ownership
------------------
Name Number Percent
---- ---------- -------
<S> <C> <C>
Robert S. McCambridge(1)................................ 291,667 *
Bandel L. Carano(2)..................................... 23,874,282 45.0%
Andrew I. Fillat(3)..................................... 41,801 *
Richard T. Liebhaber(4)................................. 23,874,282 45.0%
James B. Murray, Jr.(5)................................. 39,601 *
Alan Z. Senter(6)....................................... 51,451 *
Marc Weisberg(7)........................................ 23,874,282 45.0%
Henry C. Hirsch(8)...................................... 900,000 3.1%
William J. Maxwell(9)................................... 625,000 2.2%
Accel VI L.P. and affiliated entities(10)............... 25,873,615 45.0%
Adams Capital Management, L.P.(11) ..................... 23,873,615 45.0%
Advent International Corporation and affiliated
entities(12) .......................................... 25,914,346 48.9%
Bessimer Venture partners IV L.P. and affiliated
entities(13)........................................... 23,873,615 45.0%
Brentwood Associates IX, L.P and affiliated
entities(14)........................................... 23,873,615 45.0%
Columbia ARTT Investors, LLC and affiliated
entities(15)........................................... 23,873,615 45.0%
Cove Ventures LLC(16)................................... 23,873,615 45.0%
GBU, Inc. and affiliated entities(17)................... 2,880,864 10.0%
Meritech Capital Partners L.P. and affiliated
entities(18)........................................... 23,873,615 45.0%
Oak Investment Partners VIII, Limited Partnership and
affiliated entities(19)................................ 23,873,615 45.0%
Qwest Communications International Inc. and affiliated
entities(20)........................................... 23,873,615 45.0%
Worldview Capital II, L.P. and affiliated entities(21).. 23,873,615 45.0%
All executive officers and directors as a group(22)..... 24,318,136 45.5%
</TABLE>
- --------
* Less than 1.0%.
(1) Includes 291,667 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000.
(2) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Oak Investment Partners VIII,
Limited Partnership and Oak VIII Affiliates Fund, Limited Partnership and
other investors share voting power pursuant to a stockholders agreement.
Of those shares, Mr. Carano has dispositive power over 3,804,670 shares of
common stock issuable on conversion of shares of Series A preferred stock
held by Oak Investment Partners VIII, Limited Partnership and Oak VIII
Affiliates Fund, Limited Partnership. Mr. Carano is a managing partner of
the general partners of these Oak entities and is a director of the
Company. Mr. Carano disclaims beneficial ownership of the shares held by
the Oak entities except to the extent of his proportionate partnership
interest therein. Also includes 6,667 shares of common stock issuable upon
exercise of options exercisable within 60 days of May 5, 2000.
(3) Includes 41,801 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000. Mr. Fillat is an officer of
Advent International Corporation and is a director of the
21
<PAGE>
Company. Does not include shares of Series A Preferred Stock, shares of
Common Stock and shares of Common Stock issuable upon exercise of warrants
held by various entities which Advent International Corporation controls,
of which Mr. Fillat disclaims beneficial ownership.
(4) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which U.S. Telesource, Inc.
and other investors share voting power pursuant to a stockholders
agreement. Of those shares, Mr. Liebhaber has dispositive power over
8,560,504 shares of common stock issuable on conversion of shares of
Series A preferred stock held by U.S. Telesource, Inc. Mr. Liebhaber is a
director of Qwest Communications International Inc., the ultimate parent
of U.S. Telesource, and is a director of the Company. Mr. Liebhaber
disclaims beneficial ownership of the shares held by U.S. Telesource.
Also includes 6,667 shares of Common Stock issuable upon exercise of
options exercisable within 60 days of May 5, 2000.
(5) Includes 39,601 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000. Mr. Murray is the managing
director of Columbia Capital Corporation. Does not include shares of
common stock held by various entities which Columbia Capital Corporation
controls, of which Mr. Murray disclaims beneficial ownership.
(6) Includes 51,451 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000.
(7) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which U.S. Telesource, Inc.
and other investors share voting power pursuant to a stockholders
agreement. Of those shares, Mr. Weisberg has dispositive power over
8,560,504 shares of common stock issuable on conversion of shares of
Series A preferred stock held by U.S. Telesource, Inc. Mr. Weisberg is
president and chief executive officer of U.S. Telesource Inc., which is a
wholly-owned subsidiary of Qwest Communications International Inc., and
is a director of the Company. Mr. Weisberg disclaims beneficial ownership
of the shares held by U.S. Telesource. Also includes 6,667 shares of
common stock issuable upon exercise of options exercisable within 60 days
of May 5, 2000.
(8) Includes 516,100 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000.
(9) Includes 525,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000.
(10) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which Accel VI, L.P. and other
investors share voting power pursuant to a stockholders agreement. Accel
VI, L.P. and its affiliated entities, Accel VI, L.P., Accel Internet Fund
II L.P., Accel Keiretsu VI L.P. and Accel Investors '98 L.P., have sole
dispositive power over an aggregate of 1,426,736 shares of common stock
issuable on conversion of shares of Series A preferred stock. Arthur C.
Patterson, James R. Swartz, James W. Breyer, H. Peter Wagner and G.
Carter Sednaoui are control persons of Accel IV L.P., Accel Internet Fund
II L.P., Accel Keiretsu VI L.P. and Accel Investors '98 L.P. ACP Family
Partnership L.P., Swartz Family Partnership L.P. and The Breyer 1995
Trust dated 10/4/95, are control persons of Accel IV L.P. The Swartz
Family Partnership L.P. and Accel Internet Fund II Associates L.L.C. are
control persons of Accel Internet Fund II L.P. Accel Keiretsu VI
Associates L.L.C. is a control person of Accel Keiretsu VI L.P. The
address of the Accel entities and their control persons is c/o Accel
Partners, 428 University Avenue, Palo Alto, CA 94301.
(11) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which Adams Capital
Management, L.P. and other investors share voting power pursuant to a
stockholders agreement. Adams Capital Management, L.P. has sole
dispositive power over 285,345 shares of common stock issuable on
conversion of shares of Series A preferred stock. Joel P. Adams, William
C. Hulley, Jerry S. Sullivan and William A. Frezza are control persons of
Adams Capital Management, L.P. The address of Adams Capital Management,
L.P. is 518 Broad Street, Sewickley, PA 15143.
(12) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which partnerships controlled
by Advent International Corporation and other investors share voting
power pursuant to a stockholders agreement. Advent International
Corporation has sole dispositive power over an aggregate of 1,902,351
shares of common stock issuable on conversion of
22
<PAGE>
shares of the Company's Series A preferred stock held by Global Private
Equity II-Europe Limited Partnership, Global Private Equity II-PGGM Limited
Partnership, Digital Media & Communications II Limited Partnership,
Oakstone Ventures Limited Partnership, Advent Crown Fund II C.V., Adwest
Limited Partnership, Advent Global GECC Limited Partnership and Advent
Partners Limited Partnership. Also includes 2,040,731 shares of common
stock, held by Advent Partners Limited Partnership, Advent International
Investors II Limited Partnership, Advent International Limited Partnership,
Global Private Equity II Europe Limited Partnership, Global Private Equity
PGGM Limited Partnership, Digital Media and Communications II Limited
Partnership, Oakstone Ventures Limited Partnership, Advent Crown Fund
Limited Partnership, Adwest Limited Partnership, and Advent Global GECC
Limited Partnership, of which an aggregate of 42,546 are issuable upon
exercise of warrants exercisable within 60 days of May 5, 2000. Advent
International Corporation is the general partner or indirectly controls all
of the entities listed above in this footnote. Peter A. Brook, Douglas R.
Brown, Thomas H. Lauer, Mark Hoffman, Frank Savage, David W. Watson are
control persons of Advent International Corporation and its affiliated
entities. The address of Advent entities and their control persons is 75
State Street, Boston, MA 02109.
(13) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Bessemer Venture partners IV
L.P. and other investors share voting power pursuant to a stockholders
agreement. Bessemer Venture partners IV L.P. and its affiliated entities,
Bessemer Venture Partners IV L.P. and Bessec Ventures IV L.P., have sole
dispositive power over an aggregate of 445,140 shares of common stock
issuable on conversion of shares of Series A preferred stock. Deer IV &
Co. LLC is the general partner of Bessemer Venture Partners IV L.P. and
Bessec Ventures IV L.P. William T. Burgin, Robert H. Buescher, David J.
Cowan, G. Felda Hardymon, Christopher F.O. Garbieli, Robi L. Soni and
Robert P. Goodman are control persons of Bessemer Venture Partners IV L.P.
The address of Bessemer Venture Partners IV L.P., its related parties and
control persons is 1400 Old Country Road, Suite 407, Westbury, NY 11590.
(14) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Brentwood Associates IX, L.P
and other investors share voting power pursuant to a stockholders
agreement. Brentwood Associates IX, L.P and its affiliated entities,
Brentwood Associates IX, L.P. and Brentwood Affiliates Fund III, L.P.,
have sole dispositive power over an aggregate of 1,426,736 shares of
common stock issuable on conversion of shares of Series A preferred stock.
Brentwood IX Ventures, LLC is the general partner of both Brentwood
Associates IV, L.P. and Brentwood Affiliates Fund III, L.P. Jeffrey D.
Brody, John L. Walecka, Brian G. Atwood, William J. Link, Ross A. Jaffe
and G. Bradford Jones are control persons of Brentwood IX Ventures, L.L.C.
The mailing address of the Brentwood entities and their control persons is
300 Sand Hill Road, Building 1, Suite 260, Menlo Park,
(15) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Columbia ARTT Investors, LLC
and other investors share voting power pursuant to a stockholders
agreement. Columbia ARTT Investors, LLC and its affiliated entities,
Columbia ARTT Investors and LLC and Columbia ARTT Partners, LLC, have sole
dispositive power over an aggregate of 1,902,351 shares of common stock
issuable on conversion of shares of Series A preferred stock. James B.
Fleming, R. Philip Herget, III and Henry F. Hooper, III are control
persons of Columbia ARTT Investors, LLC and Columbia ARTT Partners, LLC.
Donald A. Doering is a control person of Columbia ARTT Investors, LLC.
Columbia Capital, L.L.C. is a control person of Columbia ARTT Partners,
LLC. The address of Columbia ARTT Investors, LLC and its related entities
and control persons is 201 North Union Street, Alexandria, VA 22314.
(16) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Cove Ventures, LLC and other
investors share voting power pursuant to a stockholders agreement. Cove
Ventures, LLC has sole dispositive power over 285,345 shares of common
stock issuable on conversion of shares of Series A preferred stock. Cove
Road Associates, LLC is the managing member of Cove Ventures, LLC. Robert
P. Goodman is a control person of Cove Ventures, LLC. The address of Cove
Ventures, LLC and Mr. Goodman is 1013 Cove Road, Mamaroneck, NY 10543.
23
<PAGE>
(17) Includes 6,700 shares of common stock beneficially owned by GEM Capital,
Inc., 159,000 shares of common stock beneficially owned by Woodbury
Capital Management, LLC, and 61,000 shares held by GEM Capital profit
sharing trust. Gerald B. Untesman is a control person of each of GBU,
Inc., GEM Capital, Inc., Woodbury Capital, LLC and the GEM Capital profit
sharing trust. The address of the GBU entities and their control persons
is 70 East 55th Street, 12th Floor, New York, NY 10022.
(18) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which MeriTech Capital Partners,
L.P. and other investors share voting power pursuant to a stockholders
agreement. MeriTech Capital Partners, L.P. and its affiliated entities,
MeriTech Capital Partners, L.P. and MeriTech Capital Affiliates L.P., have
sole dispositive power over an aggregate of 2,377,238 shares of common
stock issuable on conversion of shares of Series A preferred stock.
MeriTech Capital Associates LLC is the general partner of both MeriTech
Capital Partners L.P. and MeriTech Capital Affiliates L.P. Paul S. Madera
and Michael B. Gordon are control persons of both MeriTech Capital
Partners L.P. and MeriTech Capital Affiliates L.P. The address of the
MeriTech entities and their control persons is 428 University Avenue, Palo
Alto, CA 94301.
(19) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Oak Investment Partners VIII,
Limited Partnership and other investors share voting power pursuant to a
stockholders agreement. Oak Investment Partners VIII, Limited Partnership
and its affiliated entities, Oak Investment Partners VIII, Limited
Partnership and Oak VIII Affiliates Fund, Limited Partnership, have sole
dispositive power over an aggregate of 3,804,670 shares of common stock
issuable on conversion of shares of Series A preferred stock. Frederick W.
Harmon, Bandel L. Carano, Edward F. Glassmeyer, Ann Lamont and Gerald
Gallagher are control persons of each of Oak Investment Partners VII,
Limited Partnerships and Oak VIII Affiliate Fund, Limited Partnership. The
address of the Oak entities and their control persons is 525 University
Avenue, Suite 1300, Palo Alto, CA 94301.
(20) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which U.S. Telesource, Inc., an
indirect wholly-owned subsidiary of Qwest Communications International
Inc., and other investors share voting power pursuant to a stockholders
agreement. Of those shares, Qwest Communications International has sole
dispositive power over 8,560,504 shares of common stock issuable on
conversion of shares of Series A preferred Stock held by U.S. Telesource.
U.S. Telesource is the direct, wholly-owned subsidiary of Qwest
Communications Corporation, which is the direct, wholly-owned subsidiary
of Qwest Corporation, which is the direct, wholly-owned subsidiary of
Qwest Communications International Inc. Joseph P. Naccio, Drake S.
Tempest, Robert S. Woodruff, Stephen H. Shoemaker, Yash A. Rana are
control persons of U.S. Telesource, Inc., Qwest Corporation, Qwest
Communications Corporation and Qwest Communications International Inc.
Jeff VonDeylen, Marc B. Weisberg and Kelly S. Carter are control persons
of U.S. Telesource, Inc. Craig Slater, Marc B. Weisberg and Afshin Mohebbi
are control persons of Qwest Communications Corporation. Craig Slater,
Kelly S. Carter, Marc B. Weisberg and Jeff VonDeylen are control persons
of Qwest Corporation. Philip Anschutz, Jordon Haines, Jerry Davis, Cannon
Y. Harvey, Douglas M. Karp, Vinod Khosla, Richard T. Liebhaber, Douglas L.
Polson, Craig D. Slater and W. Thomas Stephens are control persons of
Qwest Communications International Inc. Anschutz Corporation is the
beneficial owner of approximately 39% of the outstanding shares of Qwest
Communications International, Inc. Philip F. Anschutz is the beneficial
owner of 100% of the capital stock of and is the president and chief
executive of Anschutz Corporation and is also chairman of the board of
directors of Qwest Communications International Inc. The address of Qwest
Communications International Inc., its affiliated entities and control
persons is 555 17th Street, Denver, CO 80202.
(21) Includes 23,873,615 shares of common stock issuable upon conversion of the
Company's Series A preferred stock for which Worldview Technology Partners
II, L.P. and other investors share voting power pursuant to a stockholders
agreement. Worldview Technology Partners II, L.P. and affiliated entities,
Worldview Technology Partners II, L.P., Worldview Technology International
II, L.P. and Worldview Strategic Partners II, L.P., have sole dispositive
power over an aggregate of 1,426,757 shares of common stock issuable on
conversion of shares of Series A preferred stock. Worldview Capital II,
L.P. is the general partner of Worldview Technology Partners II, L.P.,
Worldview Technology International II, L.P.
24
<PAGE>
and Worldview Strategic Partners II, L.P. James Wei, Michael Orsak, John
Boyle, Susumu Tanaka are control persons of Worldview Capital II, L.P. The
address of the Worldview partnerships and control persons is 435 Tasso,
Suite 120, Palo Alto, CA 94301.
(22) Includes 23,873,615 shares of common stock issuable upon conversion of
the Company's Series A preferred stock for which entities controlled by
Mr. Carano, Mr. Weisberg and Mr. Liebhaber share voting power pursuant to
a stockholders agreement. See footnotes 2, 4 and 7 above. Also includes
444,521 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 5, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
To our knowledge, based solely on a review of the copies of the reports
furnished to us and written representations that no other reports were
required, during the year ended December 31, 1999, all Section 16 (a) filing
requirements applicable to our officers, directors and greater-than-10%
stockholders were satisfied, except for the failure of each of Robert S.
McCambridge and Alan Z. Senter to file a Form 5 with respect to the stock
options granted to each of them by us during 1999.
Description of Capital Stock
Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.001 per share, and 10,000,000 shares of preferred stock,
par value $0.001, of which: 3,250,000 shares are Series A preferred stock;
902,893 shares are Series B preferred stock; and 902,893 shares are Series C
preferred stock.
The following summary description of our capital stock is not intended to
be complete and is qualified by reference to the provisions of applicable law
and to our certificate of incorporation and by- laws, filed as exhibits to our
filings with the SEC. See "Where You Can Find More Information" on page ii.
Common Stock
Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Directors are elected by a plurality of the
votes of the shares present in person or by proxy at the stockholders'
meeting. The holders of common stock are entitled to receive ratably such
lawful dividends as may be declared by the board of directors. However, such
dividends are subject to preferences that may be applicable to the holders of
outstanding shares of preferred stock. In the event of a liquidation,
dissolution or winding up of our affairs, whether voluntarily or
involuntarily, the holders of common stock will be entitled to receive pro
rata all of our remaining assets available for distribution after payment of
any liquidation preferences of the outstanding shares of preferred stock. The
common stock has no preemptive, redemption, conversion or subscription rights.
All outstanding shares of common stock are fully paid and non assessable. The
rights, powers, preferences and privileges of holders of common stock are
subject to, and may be adversely affected by, the rights of the holders of the
existing series of preferred stock and any series of preferred stock that ART
may designate and issue in the future.
Preferred Stock
The board of directors is authorized without further stockholder approval,
subject to any limitations prescribed by Delaware law, to issue from time to
time up to an aggregate of 10,000,000 shares of preferred stock, in one or
more series. The board of directors is also authorized, subject to the
limitations prescribed by Delaware law, to establish the number of shares to
be included in each series and fix the voting powers, preferences,
qualifications and special or relative rights or privileges of each series.
The board of directors is authorized to issue preferred stock with voting,
conversion and other rights and preferences that could adversely affect the
voting power or other rights of the holders of common stock. The issuance of
preferred
25
<PAGE>
stock or rights to purchase preferred stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of our outstanding common stock.
Series A Preferred Stock
Voting. The Series A preferred stock votes on an as-converted basis with the
common stock. This means that each share of Series A preferred stock will have
ten votes. By its terms, the Series A preferred stock cannot represent more
than 45% of our total outstanding voting stock.
Dividends. In any year, we may not pay any cash dividend on common stock or
the Series C preferred stock described below unless in that year we have paid a
cash dividend of $80.00 per share on the Series A preferred stock.
Liquidation Preference. The holders of the Series A 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, Series A preferred stock also
participates on a pro rata basis with the common stock and the Series C
preferred stock until each share of Series A preferred stock has received a
total liquidation amount of $160.
No Redemption. We are not required to redeem the Series A preferred stock.
Conversion. Holders of the Series A preferred stock may convert their Series
A preferred stock at any time into ten shares of common stock. The conversion
ratio may be increased or decreased as a result of stock spits, dividends,
recapitalizations and similar events. The Series A preferred stock
automatically converts into common stock if:
. we sell stock yielding net proceeds of at least $75,000,000 at a price
of not less than $18 per share;
. our common stock trades at not less than $18 for 30 of 40 consecutive
trading days at any time after June 1, 2001;
. two-thirds of the then-outstanding preferred stock agree to convert into
common stock; or
. 75% of the preferred stock originally issued has converted into common
stock.
Series B Non-Voting Preferred Stock
The Series B non-voting preferred stock is like the Series A preferred stock
except that it is non-voting and has different conversion rights.
Voting. The Series B preferred stock will not vote on matters generally
submitted to the stockholders. However, under Delaware law, the Series B
preferred stock is entitled to vote as a class on matters that adversely
affects it as a class.
Conversion. Series B preferred stock will automatically convert on a 1-for-1
basis into Series A preferred stock whenever the voting power of the original
investors in the Series A falls below 45% of our outstanding voting stock.
Common stock held by Advent and Columbia is not included in the voting power of
the investors for this purpose. 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 non-voting junior
preferred stock if the Series A preferred stock automatically converts into
common stock.
26
<PAGE>
Series C Non-Voting Junior Preferred Stock
One share of Series C non-voting junior preferred stock has the same rights
as ten shares of common stock, except that the Series C preferred stock is non-
voting.
Voting. The Series C preferred stock will not vote on matters generally
submitted to the stockholders. However, under Delaware law, the Series C
preferred stock is entitled to vote as a class on matters that adversely
affects it as a class.
Conversion. Series C preferred stock automatically converts into common
stock on a 10-for-1 basis whenever the voting power of the original investors
in the Series A falls below 45% of our outstanding voting stock. The common
stock held by Advent and Columbia is not included in the voting power of the
investors for this purpose. The conversion rate is subject to proportional
adjustment for stock splits, stock dividends, combinations and
recapitalizations.
Anti-Takeover Effects of Provisions of ART's Certificate of Incorporation, By-
Laws and Delaware Law
Provisions of our amended and restated certificate of incorporation and by-
laws, which are summarized in the following paragraphs, may have an anti-
takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that some stockholders might consider in their best interest, including
those attempts that might result in a premium over the market price for shares
held by stockholders.
Classified Board of Directors
Our board of directors is divided into three classes of directors serving
staggered three-year terms. Upon expiration of the term of a class of
directors, the directors in that class will be elected for three-year terms at
the annual meeting of stockholders in the year in which their term expires.
With respect to each class, a director's term is subject to the election and
qualification of their successors, or their earlier death, resignation or
removal for cause. These provisions, when coupled with the provision of our
amended and restated certificate of incorporation authorizing the board of
directors to fill vacant directorships or increase the size of the board of
directors, may delay a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
Cumulative Voting
Our amended and restated certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.
Stockholder Action; Special Meeting of Stockholders
Our amended and restated certificate of incorporation eliminates the ability
of stockholders to act by written consent. Our restated and amended by-laws
provide that special meetings of our stockholders may be called only by our
board of directors or any officer instructed to call such meeting by our board
of directors.
Advance Notice Requirements for Stockholder Proposals and Directors Nominations
Our restated and amended by-laws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates
for election as directors at an annual meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
received at our principal executive offices not less than 90 days nor more than
120 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders. In the event that the annual meeting is called for a
date that is not within 30 days before or 70 days after the anniversary date,
in order to be timely, notice from the stockholder must be received no later
than the tenth day following the date on which notice of the annual meeting was
mailed to stockholders or made public, whichever occurred earlier. In the case
of a
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special meeting of stockholders called for the purpose of electing directors,
notice by the stockholder in order to be timely must be received no later than
90 days nor more than 120 days prior to the special meeting. If notice of the
special meeting was mailed or the first public disclosure of the annual meeting
was made less than 100 days prior to the date of the special meeting, notice by
a stockholder in order to be timely must be received no later than the close of
business on the tenth day following the day on which notice was mailed or
public disclosure of the date of the special meeting was made, whichever first
occurs. Our restated and amended by-laws also specify requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
Authorized But Unissued Shares
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
Amendments; Supermajority Vote Requirements
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. Our amended and restated certificate of
incorporation imposes supermajority vote requirements in connection with the
amendment of provisions of our certificate of incorporation and restated and
amended by-laws, including those provisions relating to the classified board of
directors and the ability of stockholders to call special meetings.
Indemnification of Directors and Officers and Limitation of Director Liability
Our amended and restated certificate of incorporation contains provisions
that eliminate the personal liability of our directors to the fullest extent
permitted by the Delaware General Corporate Law for monetary damages resulting
from breaches of their fiduciary duty. The certificate of incorporation also
contains provisions requiring the indemnification of our directors and officers
to the fullest extent permitted by the Delaware General Corporation Law against
liabilities which arise out of their service as director of officer. We
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the other party became an interested stockholder, unless
the stockholder attained such status with the approval of its board of
directors or unless the business combination is approved in a prescribed
manner. A "business combination" includes mergers, asset sales or other
transactions resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is generally a person who, together with affiliates
and associates, owns, or owned within the past three years, 15% or more of the
corporation's voting stock. We approved the investment by Qwest and the group
created by the stockholders agreement for purposes of Section 203.
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Listing
Our common stock is quoted on the Nasdaq Stock Market under the symbol"ARTT"
Stockholder Proposals
In order for us to consider stockholder proposals for inclusion in the proxy
material for our 2001 annual meeting, we must received them on or before
January 8, 2001. We suggest that proponents submit their proposals by certified
mail, return receipt requested, addressed to the Secretary at our principal
executive offices, Advanced Radio Telecom Corp., 500 108th Avenue NE, Suite
2600, Bellevue, WA 98004.
Under our by-laws, stockholders who wish to make a proposal at the 2001
annual meeting, other than one that will be included in our proxy materials,
must notify us no earlier than February 14, 2001 and no later than March 16,
2001. If a stockholder who wishes to present a proposal fails to notify us by
March 16, 2001, the proxies that management solicits for the meeting will
confer discretionary authority to vote on the stockholder's proposal if it is
properly brought before the meeting.
Other Business
Our board of directors knows of no business to be brought before the annual
meeting which is not referred to in the accompanying notice of annual meeting
of stockholders. However, should any such matters be presented, the persons
named in the enclosed proxy will have discretionary authority to take such
action in regard to such matters as in their judgment seems advisable.
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ATTACHMENT A
------------
[LETTERHEAD OF CHASE SECURITIES INC.]
April 11, 2000
Board of Directors
Advanced Radio Telecom Corp.
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
Members of the Board:
You have informed us that Advanced Radio Telecom Corp. (the "Company")
proposes to enter into an Asset Purchase Agreement (the "Agreement") with
BroadStream Corporation ("Broadstream"), BroadStream Communications Corporation
("BCC"), Commco, LLC ("Commco", and collectively with Broadstream and BCC, the
"Holders")), Commco Partners, LLC (the "Parent") and Scott Reardon ("Reardon",
and collectively with Holders and the Parent, the "Sellers") which provides,
among other things, that, in exchange for the Consideration (as defined below),
the Company will acquire certain licenses from the Holders (the "First
Licenses"), and have the option to acquire and the Sellers with have the option
to require the Company to acquire certain additional licenses (the "Future
Licenses", and collectively with the First Licenses, the "Licenses") from the
Sellers and their affiliates (collectively, the "Transaction").
For purposes of this letter, the term "Consideration" means that number of
shares of common stock, par value $.001 per share, of the Company (the "Company
Common Stock") equal to the sum of (i) the quotient of (a) the product of (1)
the aggregate number of channel pops as set forth on Schedule 1 to the Agreement
for the First Licenses acquired by the Company multiplied by (2) $1.25, divided
by $36.00, (ii) if, and only if, the Sellers are not in breach of any material
obligation under any of the Seller Documents (as defined in the Agreement), on
the first business day ninety-one days after the closing, an additional number
of shares equal to the quotient of (a) $15,000,000 divided by (b) $36.00, and
(iii) with respect to the Future Licenses acquired by the Company, an additional
number of shares equal to the quotient of (a) the product of (1) the aggregate
number of channel pops as set forth on Schedule 1(b) to the Agreement for the
Future Licenses multiplied by (2) $1.25, divided by $36.00.
<PAGE>
You have asked us whether, in our opinion, the Consideration to be paid by
the Company pursuant to the Transaction is fair, from a financial point of view,
to the Company.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed a draft dated April 7, 2000 of the Agreement and related
documents;
(b) reviewed certain publicly available business and financial information
we deemed relevant relating to the Company and the industry in which
it operates and certain publicly available business information we
deemed relevant relating to the Licenses and the Company's licenses
and the markets served by such Licenses and the Company's licenses;
(c) reviewed certain internal non-public financial and operating data and
forecasts provided to us by the management of the Company relating to
its business as well as the amount and timing of the revenue and cash
flow enhancements expected to result from the Transaction (the
"Revenue Enhancements") furnished to us by the Company;
(d) discussed, with members of the senior management of the Company, the
Company's operations, historical financial statements and future
prospects, before and after giving effect to the Transaction and the
Revenue Enhancements;
(e) compared the financial and operating performance of the Company with
publicly available information concerning certain other companies we
deemed comparable and reviewed the relevant historical stock prices of
the Company Common Stock and certain publicly traded securities of
such other companies;
(f) compared the proposed financial terms of the Transaction with the
financial terms of certain recent acquisition transactions we deemed
reasonably comparable to the Transaction and otherwise relevant to our
inquiry; and
(g) made such other analyses and examinations as we have deemed necessary
or appropriate.
2
<PAGE>
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with or reviewed by or for us, or publicly
available, for purposes of this opinion, including information furnished to us
by management of the Company as to the number of pops covered by the Licenses
and the number of channel pops associated with the Licenses, and have further
relied upon the assurance of the management of the Company that they are not
aware of any facts that would make such information inaccurate or misleading.
We have neither made nor obtained any independent evaluations or appraisals of
the assets or liabilities of the Company or of the Licenses, nor have we
conducted a physical inspection of the properties or facilities of the Company.
We have assumed that the financial forecasts and the Revenue Enhancements
provided to or discussed with us by the Company have been reasonably determined
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company
and the Revenue Enhancements. We express no view as to such forecast or
projection information or the assumptions on which they were based.
For purposes of rendering our opinion, we have assumed that, in all
respects material to our analysis, the representations and warranties of each
party contained in the Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it under
the Agreement and that all conditions to the consummation of the Transaction
will be satisfied without waiver thereof. We have further assumed that all
material governmental, regulatory or other consents and approvals will be
obtained and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which any of the Company or the Sellers are a party,
as contemplated by the Agreement, no restrictions will be imposed or amendments,
modifications or waivers made that would have any material adverse effect on the
contemplated benefits of the Transaction. We have further assumed that the
definitive Agreement and related documents will not differ in any material
respects from the drafts thereof furnished to us.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to the
Company of the Consideration and we express no opinion as to the merits of the
underlying decision by the Company to engage in the Transaction. This opinion
does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote with respect to the issuance of the Company Common
Stock or any other matters relating to the Transaction. In addition, we express
no opinion as to the prices at which the Company Common Stock will trade
following the announcement or the consummation of the Transaction.
3
<PAGE>
As you are aware, we were engaged by the Company for purposes of delivering
this opinion and we did not participate in the structuring or negotiation of the
terms of the Transaction or the Consideration.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to the Company in
connection with this opinion and will receive a fee for our services payable
upon delivery of this opinion. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of our engagement. In the ordinary
course of business, we or our affiliates may trade in the debt and equity
securities of the Company for our own accounts and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration to be paid by the Company pursuant to the
Transaction is fair, from a financial point of view, to the Company.
This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Transaction and shall not be used for any other
purpose without the prior written consent of Chase Securities Inc. Except as
otherwise provided in our engagement letter with the Company dated as of April
7, 2000, this opinion shall not be reproduced, disseminated, quoted, summarized
or referred to at any time, in any manner or for any purpose, nor shall any
public references to Chase Securities Inc. be made by the Company, without the
prior written consent of Chase Securities Inc.
Very truly yours,
CHASE SECURITIES INC.
4
<PAGE>
DETACH HERE
PROXY
ADVANCED RADIO TELECOM CORP.
500 108TH AVE., NE - SUITE 2600 - BELLEVUE, WASHINGTON 98004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert S. McCambridge and Thomas M. Walker,
and each of them, each with power to appoint his substitute, as proxies to vote
and act at the Annual Meeting of Stockholders of Advanced Radio Telecom Corp. to
be held on June 14, 2000, 9:00 a.m., (local time) at the Woodmark Hotel, 1200
Carillon Point, Kirkland, Washington 98033, or any adjournment thereof with
respect to the number of shares of common stock of Advanced Radio Telecom Corp.
as to which the undersigned may be entitled to vote or act. The undersigned
instructs such proxies to vote as designated below on the matter specified
below, as described in the accompanying Notice of Annual Meeting and Proxy
Statement, receipt of which is acknowledged. All proxies heretofore given by the
undersigned in respect of the Annual Meeting are hereby revoked.
UNLESS OTHERWISE SPECIFIED IN THE BOXES ON THE REVERSE SIDE HEREOF OR BY
NOTING THE EXCEPTION NOMINEE, THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE
ACQUISITION AND ISSUANCE OF SHARES DESCRIBED IN THE PROXY STATEMENT AND THE
ELECTION OF BOTH NOMINEES FOR DIRECTORS AND IN THE DISCRETION OF THE NAMED
PROXIES AS SEEMS IN THEIR JUDGMENT ADVISABLE AS TO ANY OTHER MATTER THAT MAY
COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- --------------------------------------------- ---------------------------------------------
<S> <C>
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed
1-877-PRX-VOTE (1-877-779-8693). and posted.
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY 1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD. STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8693). FOR HTTP://WWW.EPROXYVOTE.COM/ARTT
SHAREHOLDERS RESIDING OUTSIDE THE UNITED
STATES CALL COLLECT ON A TOUCH-TONE PHONE 3. ENTER YOUR 14-DIGIT VOTER CONTROL
1-201-536-8073. NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
4. FOLLOW THE RECORDED INSTRUCTIONS.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to HTTP://WWW.EPROXYVOTE.COM/ARTT
anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
</TABLE>
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Approval of the acquisition [_] [_] [_] 2. Election of Directors.
and issuance of shares Nominees: (01) Marc Weisberg and (02) Alan Z. Senter
described in the proxy statement.
FOR WITHHELD
BOTH NOMINEES [_] [_] FROM BOTH
NOMINEES
[_] ________________________________________
For both nominees except as noted above
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
Please sign exactly as your name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian,
please give full title. If a corporation, please sign in full
corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
Signature:_______________________________ Date:________ Signature:____________________________ Date:__________
</TABLE>
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD APPEARS HERE]
Report of Independent Accountants
To the Board of Directors and Stockholders of
Advanced Radio Telecom Corp.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
Advanced Radio Telecom Corp. and Subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Seattle, Washington
February 15, 2000
