EXHIBIT 10.1
ADVANCED RADIO TELECOM CORP.
Change of Control Agreement
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AGREEMENT, made as of the 31/st/ day of August, 1998, by and between XXXXXX
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: (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 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,
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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
(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
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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 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
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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,
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
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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 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
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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.
"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.
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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 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.
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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
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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 Xxxxxx
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0000 Xxxxx Xxx Xxxxxx
Xxxxx Xxxx, 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.
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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:______________________________
Xxxxx X. Xxxxxx
Chairman, CEO & President
________________________________
Executive
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