EXHIBIT 10.2
ADVANCED RADIO TELECOM CORP.
Change of Control Agreement
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AGREEMENT, made this 17th day of October, 1997, by and between XXXXX X.
XXXXXX ("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 two times: (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.
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(d) Executive, together with his dependents, will continue following such
termination of employment to participate fully in the life and medical
insurance plans 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) if the fair market value of the shares of the Company's common stock
pledged to secure the promissory note dated October __, 1997 given by
Executive to the Company ("Note") (calculated on the basis of the
closing price of a share of the Company's common stock on the Nasdaq
National Market on the day preceding the date of termination) is less
than the outstanding principal plus accrued interest on such Note at the
date of termination, Executive may no later than 30 days after such
termination notify the Company that he elects to return such stock to
the Company in full satisfaction of outstanding indebtedness under the
Note and all indebtedness outstanding thereunder shall as of the date of
such notice be forgiven; and
(g) 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
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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
----------------------------------------------------
(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.
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(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 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
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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, 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
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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 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
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable
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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.
"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
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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 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
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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:
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If to Executive: Xxxxx X. Xxxxxx
---------------
0000 Xxxxxxxx Xxx
Xxxxxxx, XX 00000
If to the Company: Advanced Radio Telecom Corp.
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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.
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: /s/ Xxxxxx X. Xxxxxxxxxxxx
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/s/ Xxxxx X. Xxxxxx
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Executive
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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 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
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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.
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