EXHIBIT 10.4
ADVANCED RADIO TELECOM CORP.
Change of Control Agreement
---------------------------
AGREEMENT, made this 1st day of February by and between XXXXXX X. XXXXX
("Executive") and ADVANCED RADIO TELECOM CORP. (the "Company");
RECITALS:
A. The Board of Directors of the Company (the "Board") recognizes that
the possibility of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among management personnel, may
result in the departure or distraction of management personnel to the detriment
of the Company and its stockholders;
B. The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including Executive, to their duties, to assisting the
Board in assessing proposals with respect to a change in control and to advising
the Board as to the best interests of the Company and its shareholders with
respect to such potential change in control, without distraction and conflict
arising from the possibility of a change in control;
C. The Board wishes to induce Executive to join the Company as an
employee and thereafter to remain in the employ of the Company and to assure him
of fair severance should his employment terminate in specified circumstances
following a change of control of the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If within 24 months following a Change of Control (as defined in
Exhibit A) (the "Post Change of Control Period") Executive's employment with the
Company is terminated (i) by the Company for any reason (other than for "Cause"
or "Disability" (as defined paragraph 4 below) or as a result of Executive's
death), or (ii) Executive terminates such employment for Good Reason (as defined
in paragraph 4 below):
(a) The Company will pay to Executive within five business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) Executive's annual base salary ("Base Salary") at the time of
termination through the date of such termination of employment to the
extent not theretofore paid, (ii) a prorated portion of Executive's
maximum incentive bonus for the fiscal year in which such termination
shall occur, calculated by multiplying (A) such incentive compensation
times (B) a fraction, the numerator of which is the number of days in
the fiscal year through the date of termination of employment, and the
denominator of which is
365, (iii) if Executive has not been paid incentive compensation with
respect to the fiscal year prior to the year in which such termination
occurs (except where prior to the Change of Control the Board had
determined that no such incentive compensation was to be paid to
Executive with respect to such prior year), an amount equal to
Executive's maximum incentive bonus for such prior fiscal year,
(provided that if any target incentive compensation under (ii) or
(iii) was expressed in shares of common stock rather than cash, the
Company will pay the cash equivalent of such compensation based on the
closing price per share as reported in the Wall Street Journal
(Eastern Edition), in the case of the Company's common stock as of the
date prior to the date of the Change of Control), and (iv) any accrued
and unpaid vacation pay through the date of termination; and
(b) Any stock, stock option or other awards granted to Executive by the
Company shall immediately vest and, if applicable, become exercisable
in full, notwithstanding any provision to the contrary, and shall
remain exercisable, if applicable, until the earlier of the fourth
anniversary of such termination of employment or the latest date on
which such grant could have been exercised, any restrictions on any
restricted stock, deferred stock or other awards shall immediately
terminate and all such awards shall immediately be vested in full, and
any certificates for any deferred stock shall be delivered to
Executive no later than five business days following such termination;
(c) The Company will pay to Executive within five business days of such
termination of employment a lump-sum cash payment equal to the greater
of (i) an amount equal to Executive's aggregate Base Salary and
maximum incentive compensation for the period from the date of
termination through December 31, 2000 determined as if he had been
employed through December 31, 2000 (but without duplication of amounts
paid pursuant to Section 1(a) above) or (ii) an amount equal to: (A)
the amount of Executive's Base Salary at the rate in effect
immediately prior to the date of termination or at the rate in effect
immediately prior to the Change of Control, whichever is higher, and
(B) the amount of Executive's maximum incentive compensation for the
fiscal year during which the termination of employment occurs or the
amount of Executive's maximum incentive compensation in effect
immediately prior to the Change of Control, whichever is higher
(provided that if any such incentive compensation is expressed or was
paid in shares of common stock rather than cash, the calculation will
be based on, and the Company will pay the cash equivalent of, such
compensation based on the closing price per share as reported in the
Wall Street Journal (Eastern Edition) in the case of a share of the
Company's common stock determined on the date prior to the date of the
Change of Control.
(d) Executive, together with his dependents, will continue following such
termination of employment to participate fully in the life and medical
insurance plans
-2-
maintained or sponsored by the Company immediately prior to the Change
of Control on the same basis they participated prior to the Change in
Control until the earlier of (i) the second anniversary of such
termination or any longer period as may be provided by the terms of
such plan or (ii) the date Executive becomes re-employed with another
employer and is eligible to receive substantially equivalent life and
medical benefits under another employer provided plan, provided that
if the continued participation of Executive and his dependents is not
possible under the terms of any of such Company plans, the Company
shall instead either arrange to provide Executive and his dependents
with substantially equivalent benefits or pay to Executive (within
five days of the date of termination) an amount equal to the full
value thereof in cash; and
(e) to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to
receive under any plan, program, policy, practice, contract or
agreement of the Company ("Other Benefits"); and
(f) the Company will promptly reimburse Executive for any and all legal
fees and expenses (including, without limitation, stenographer fees
and printing costs) incurred by him as a result of such termination of
employment, including without limitation all fees and expenses
incurred to enforce the provisions of this Agreement or contest or
dispute that the termination of his employment is for Cause or other
than for Good Reason (regardless of the outcome thereof).
Notwithstanding anything herein to the contrary, (i) to the extent that any
payment or benefit provided for herein is required to be paid or vested on any
earlier date under the terms of any plan, agreement or arrangement, such plan,
agreement or arrangement shall control; and (ii) if a Change of Control occurs
and if Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Change of Control
occurs, and Executive reasonably demonstrates that such termination of
employment (x) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (y) otherwise arose in
connection with or in anticipation of a Change of Control, then for all purposes
of this Agreement, Executive shall be entitled to the benefits provides in
Section 1 above.
If Executive receives any benefit, amount or payment other than under this
Agreement upon the termination of his employment with the Company, the amount of
such payments shall be deducted from the amount paid under this Agreement and
the benefits to be provided hereunder shall be provided only to the extent
additional to the benefits to be provided other than under this Agreement. To
avert a duplication of benefits, neither this paragraph nor the provisions of
any other agreement shall be interpreted to reduce the amount payable to
Executive below the amount that would otherwise have been payable under this
Agreement.
2. Death, Disability, Cause, Other Than For Good Reason
-3-
(a) If Executive's employment shall terminate during the Post Change
of Control Period by reason of Executive's death, this Agreement
shall terminate without further obligations to Executive's legal
representatives under this Agreement, other than the timely
payment or provision of Other Benefits.
(b) If Executive's employment is terminated during the Post Change of
Control Period by reason of Executive's Disability, this
Agreement shall terminate without further obligations to
Executive other than the timely payment or provision of Other
Benefits. For purposes of this Agreement, "Disability" shall
mean the absence of Executive from Executive's duties with the
Company on a full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by
the Company or its insurers and reasonably acceptable to
Executive or Executive's legal representative. If the Company
determines in good faith that the Disability of Executive has
occurred during the Post Change of Control Period, it may give
Executive written notice of its intention to terminate
Executive's employment. In such event, Executive's employment
with the Company shall terminate effective on the 30th day after
receipt of such notice by Executive, provided that, within the 30
days of such receipt, Executive shall not have returned to full-
time performance of Executive's duties.
(c) If Executive's employment shall be terminated for Cause (as
defined in Section 4 below) during the Post Change of Control
Period, this Agreement shall terminate without further
obligations to Executive other than the obligation to pay
Executive (A) his Base Salary through the date of termination and
(B) Other Benefits, in each case to the extent theretofore
unpaid.
(d) If Executive voluntarily terminates employment during the Post
Change of Control Period, excluding a termination for Good
Reason, this Agreement shall terminate without further
obligations to Executive other than the timely payment or
provision of Other Benefits.
3. "Cause" means only: (a) commission of a felony or gross neglect of
duty by Executive rising to the level of deliberate dereliction, (b) conviction
of a crime involving moral turpitude, or (c) willful failure by Executive in the
performance of his duties to the Company which failure is deliberate on
Executive's part, results in material injury to the Company, and continues for
more than 30 days after written notice given to Executive pursuant to a two-
thirds
-4-
vote of all of the members of the Board at a meeting called and held for such
purpose (after reasonable notice to Executive) and at which meeting Executive
and his counsel were given an opportunity to be heard, such vote to set forth in
reasonable detail the nature of the failure. For purposes of this definition of
Cause, no act or omission shall be considered to have been "willful" unless it
was not in good faith and Executive had knowledge at the time that the act or
omission was not in the best interest of the Company. Any act or failure to act
based on authority given pursuant to a resolution duly adopted by the Board or
based on the advice of counsel of the Company shall be conclusively presumed to
be done, or omitted to be done, by Executive in good faith and in the best
interest of the Company. Cause shall not include willful failure due to
incapacity resulting from physical or mental illness or any actual or
anticipated failure after Notice of Termination for Good Reason.
4. Executive shall be deemed to have voluntarily terminated his
employment for Good Reason if Executive leaves the employ of the Company for any
reason following:
(a) The assignment to Executive of any duties inconsistent in any
respect with Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities immediately prior to the Change of Control; or
the diminution or adverse alteration in any material adverse
respect of such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by
Executive;
(b) Any reduction in Executive's rate of Base Salary for any fiscal
year to less than 100% of the rate of Base Salary payable for the
fiscal year immediately preceding the Change of Control or of the
Base Salary provided for such fiscal year in any agreement
between Executive and the Company, or reduction in Executive's
total cash and stock compensation opportunities, including Base
Salary and incentives, for any fiscal year to less than 100% of
the total cash and stock compensation opportunities made
available to him immediately preceding the Change of Control for
the then current fiscal year or of the total cash and stock
compensation opportunities which were to be made available to him
for the fiscal year pursuant to any agreement between Executive
and the Company (for this purpose, such opportunities shall be
deemed reduced if the objective standards by which Executive's
incentive compensation measured becomes more stringent, the
target or maximum amounts of such incentive compensation are
reduced, or the amount of such incentive compensation is reduced
on a discretionary basis from the amount that would be payable
solely by reference to the objectives); or
(c) Failure of the Company to continue in effect any retirement,
life, medical,
-5-
dental, disability accidental death or travel insurance plan or
other benefit plan or practice, in which Executive was
participating immediately prior to the Change of Control unless
the Company provides Executive with a plan or plans or practices
that provide substantially similar benefits, or the taking of any
action by the Company that would adversely affect Executive's
participation in or materially reduce Executive's benefits under
any of such plans or practices or deprive Executive of any
material fringe benefit enjoyed by Executive immediately prior to
the Change of Control other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by Executive; or
(d) The Company requires Executive to be based at any office or
location further than 40 miles from the City of Bellevue, or the
Company requires Executive to travel on Company business to a
substantially greater extent than required immediately prior to
the date of the Change of Control; or
(e) Any failure by the Company to comply with and satisfy Section 6
of this Agreement.
Executive's right to terminate his employment pursuant to this section
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstances constituting Good Reason hereunder.
5. In the case of any dispute under this Agreement, Executive may
initiate binding arbitration in Seattle, Washington before the American
Arbitration Association by serving a notice to arbitrate upon the Company or, at
Executive's election, institute judicial proceedings. The Company shall not
have the right to initiate binding arbitration, and agrees that upon the
initiation of binding arbitration by Executive pursuant to this paragraph 5 the
Company shall cause to be dismissed any judicial proceedings it has brought
against Executive relating to this Agreement. The Company authorizes Executive
from time to time to retain counsel of his choice to represent Executive in
connection with any and all actions, proceedings, and/or arbitration, whether by
or against the Company or any director, officer, shareholder, or other person
affiliated with the Company, which may affect Executive's rights under this
Agreement. The Company agrees to (i) pay the fees and expenses of such counsel,
(ii) to pay the cost of such arbitration and/or judicial proceeding, and (iii)
pay interest to Executive on all amounts owed to Executive under this Agreement
during any period of time that such amounts are withheld pending arbitration
and/or judicial proceedings. Such interest will be at the base rate as
announced from time to time by Canadian Imperial Bank of Commerce.
In addition, notwithstanding any existing or prior attorney-client
relationship between the Company and counsel retained by Executive, the Company
irrevocably consents to Executive
-6-
entering into an attorney-client relationship with such counsel and agrees that
a confidential relationship shall exist between Executive and such counsel.
6. If the Company is at any time before or after a Change of Control
merged or consolidated into or with any other corporation or other entity
(whether or not the Company is the surviving entity), or if substantially all of
the assets thereof are transferred to another corporation or other entity, the
provisions of this Agreement will be binding upon and inure to the benefit of
the corporation or other entity resulting from such merger or consolidation or
the acquirer of such assets (the "Successor Entity"), and this paragraph 6 will
apply in the event of any subsequent merger or consolidation or transfer of
assets. The Company will require any such Successor Entity to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such transaction had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any Successor Entity which assumes and agrees to
perform this Agreement by operation of law or otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise limit
Executive's right to or privilege of participation in any stock option or
purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may be
or become applicable to executives of the corporation resulting from such merger
or consolidation or the corporation acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such merger or
consolidation or the acquiror of such assets of the Company.
7. Any termination by the Company for Cause, or by Executive for Good
Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with the last paragraph of Section 13 of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
that (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or the
Company, respectively, hereunder or preclude Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing Executive's
or the Company's rights hereunder.
-7-
"Date of Termination" means (i) if Executive's employment is terminated by
the Company for Cause, or by Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies Executive of such termination and (iii) if Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of Executive or the effective date of the
Disability, as the case may be.
8. All payments required to be made by the Company hereunder to Executive
or his dependents, beneficiaries, or estate will be subject to the withholding
of such amounts relating to tax and/or other payroll deductions as may be
required by law.
9. There shall be no requirement on the part of Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under this
Agreement, and the amount of such payments and benefits shall not be reduced by
any compensation or benefits received by Executive from other employment other
than with respect to certain welfare benefits as provided in the first proviso
to Section 1(d).
10. Nothing contained in this Agreement shall be construed as a contract
of employment between the Company and Executive, or as a right of Executive to
continue in the employ of the Company, or as a limitation of the right of the
Company to discharge Executive with or without Cause; provided that Executive
shall have the right to receive upon termination of his employment the payments
and benefits provided in this Agreement and shall not be deemed to have waived
any rights he may have either at law or in equity in respect of such discharge.
11. No amendment, change, or modification of this Agreement may be made
except in writing, signed by both parties.
12. This Agreement shall terminate on December 31, 2000, provided,
however, that commencing on December 31, 1998 and on each annual anniversary of
such date (each such date hereinafter referred to as a "Renewal Date"), unless
previously terminated, the term of this Agreement shall be automatically
extended so as to terminate three years from such Renewal Date, unless at least
sixty days prior to the Renewal Date the Company shall give notice to Executive
that the term of this Agreement shall not be so extended. This Agreement shall
not apply to a Change of Control which takes place after the termination of this
Agreement.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal representatives
and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be
governed by the laws of the State of Washington. Any ambiguities in this
Agreement shall be construed in favor of
-8-
Executive.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by
Executive; provided, however, that this provision shall not preclude him from
--------
designating one or more beneficiaries to receive any amount that may be payable
after his death and shall not preclude the legal representative of his estate
from assigning any right hereunder to the person or persons entitled thereto
under his will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate. The term
"beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary has
been so designated, the legal representative of Executive's estate.
No right, benefit, or interest hereunder, shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation or set-
off in respect of any claim, debt or obligation, or to execution, attachment,
levy or similar process, or assignment by operation of law. Any attempt,
voluntary or involuntary, to effect any action specified in the immediately
preceding sentence shall, to the full extent permitted by law, be null, void,
and of no effect.
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to Executive: Xxxxxx X. Xxxxx
---------------
If to the Company: Advanced Radio Telecom Corp.
-----------------
000 000xx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
-9-
IN WITNESS WHEREOF, the Company and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
ADVANCED RADIO TELECOM CORP.
By:______________________________
________________________________
Executive
-10-
EXHIBIT A
Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any person, corporation, partnership, limited
liability company or other entity (a "Person", which term shall
include a group within the meaning of section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly of
30% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any such acquisition directly from the
Company, (ii) any such acquisition by the Company, (iii) any such
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any such acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Exhibit A; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election, by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company in one or a series of transactions (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
-11-
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, immediately following
such Business Combination more than 50% of, respectively, the
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
-12-
