<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1997.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to _____
Commission File Number 000-21091
ADVANCED RADIO TELECOM CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1869023
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 108th Avenue NE, Suite 2600
Bellevue, Washington 98004
(Address of principal executive offices)
(425) 688-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [_].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 19,839,671 shares of common
stock, $.001 par value, at October 30, 1997.
<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, December 31,
ASSETS 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,550,018 $ 1,974,407
Short-term investments 19,942,128
Pledged securities 18,209,163
Accounts receivable 265,188 1,819,593
Prepaid and other current assets 137,584 196,791
------------ ------------
Total current assets 52,104,081 3,990,791
Restricted cash 1,032,060 1,032,060
Pledged securities 25,621,436
Property and equipment, net of accumulated
depreciation and amortization of
$2,629,214 and $917,921 28,450,264 19,303,849
FCC licenses, net of accumulated amortization of
$2,098,921 and $106,011 131,001,350 4,330,906
Deferred financing costs, net 4,361,204 3,255,688
Other assets 506,939 4,735,407
------------ ------------
Total assets $243,077,334 $ 36,648,701
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 426,527 $ 9,425,834
Accrued compensation and benefits 2,295,213 1,350,894
Accrued interest payable 2,349,555 17,159
Other accrued liabilities 939,815 927,648
Current portion of long-term debt 1,660,869 1,893,161
------------ ------------
Total current liabilities 7,671,979 13,614,696
Long-term debt, net of current portion 106,734,326 3,084,085
Deferred income tax liability 29,776,142
------------ ------------
Total liabilities 144,182,447 16,698,781
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000
shares authorized, 19,834,580 and 13,559,420
shares issued and outstanding 19,834 13,559
Additional paid-in capital 171,069,464 53,976,721
Accumulated deficit (72,194,411) (34,040,360)
------------ ------------
Total stockholders' equity 98,894,887 19,949,920
------------ ------------
Total liabilities and stockholders'
equity $243,077,334 $ 36,648,701
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Service revenue $ 190,300 $ 63,493 $ 518,523 $ 125,013
Equipment sales and construction
revenue 356,970
------------- ----------- ------------ ------------
Total revenue 190,300 63,493 875,493 125,013
------------- ----------- ------------ ------------
Costs and expenses:
Technical and network operations 1,135,368 986,395 3,757,246 2,294,173
Cost of equipment sales and
construction 214,399
Sales and marketing 4,091,949 1,399,199 10,333,746 3,892,481
General and administrative 2,397,031 1,254,660 8,780,463 10,560,398
Research and development 84,562 145,000 213,277 666,406
Depreciation and amortization 2,039,959 226,087 4,401,234 504,462
------------- ----------- ------------ ------------
Total operating costs and expenses 9,748,869 4,011,341 27,700,365 17,917,920
------------- ----------- ------------ ------------
Loss from operations (9,558,569) (3,947,848) (26,824,872) (17,792,907)
------------- ----------- ------------ ------------
Interest expense 5,318,927 778,249 13,935,503 1,396,943
Financing commitment expense 2,699,881
Interest income (1,286,608) (19,584) (3,846,182) (59,473)
Other 1,248,000
------------ ----------- ------------ ------------
Loss before income taxes (13,590,888) (4,706,513) (39,614,074) (20,378,377)
------------- ----------- ------------ ------------
Deferred income tax benefit 595,226 1,460,023
------------- ----------- ------------ ------------
Net loss ($12,995,662) $(4,706,513) $(38,154,051) $(20,378,377)
============= =========== ============ ============
Pro forma net loss per share of
common stock $(.50) $(2.15)
=========== ============
Pro forma weighted average shares
of common stock 9,470,545 9,470,545
=========== ============
Net loss per share of common stock $(.66) $(.71) $(2.07) $(3.10)
============= =========== ============ ============
Weighted average shares of
common stock 19,818,850 6,586,958 18,437,896 6,580,627
============= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
for the nine months ended September 30, 1997
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-In Accumulated
Shares Par Value Capital Deficit Total
---------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 13,559,420 $13,559 $ 53,976,721 $(34,040,360) $ 19,949,920
Common stock issued in connection
with the acquisition of the
CommcoCCC, Inc. licenses 6,000,000 6,000 87,744,000 87,750,000
Value ascribed to warrants issued
with Senior Notes 29,707,509 29,707,509
Warrant issuance costs (1,254,697) (1,254,697)
Accrued stock option compensation 449,313 449,313
Stock options exercised 275,160 275 446,618 446,893
Net loss (38,154,051) (38,154,051)
---------- ------- ------------ ------------ ------------
Balance, September 30, 1997 19,834,580 $19,834 $171,069,464 $(72,194,411) $ 98,894,887
========== ======= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(38,154,051) $(20,378,377)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Non-cash compensation expense 449,313 7,504,452
Non-cash marketing expense 1,053,000
Depreciation and amortization 4,401,234 504,462
Non-cash financing commitment expense 2,699,881
Write-off of deferred financing costs 1,248,000
Non-cash interest expense 1,309,648 632,994
Changes in assets and liabilities:
Accrued interest payable 2,332,396
Accounts receivable 1,554,405 (78,645)
Accrued interest on pledged securities
and short-term investments (2,268,903)
Accounts payable and accrued liabilities (1,297,340) 805,179
Deferred income taxes (1,460,023)
Deposits and other assets (39,545) (179,024)
Prepaid expenses and other
current assets 59,207 (87,902)
------------ ------------
Net cash used in operating activities (30,413,778) (8,975,861)
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (19,528,597) (4,241,470)
Additions to FCC licenses (5,409,177) (112,131)
Additions to short-term investments (39,066,051) (165,185)
Proceeds from sale of short-term investments 19,675,060
Investment in restricted cash (1,000,000)
Investment in pledged securities (51,778,066)
Proceeds from maturities of pledged securities 9,665,233
------------ ------------
Net cash used in investing activities (86,441,598) (5,518,786)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of
Senior Notes and warrants 135,000,000
Proceeds from exercise of stock options 446,893
Proceeds from issuance of preferred stock 2,500,000
Proceeds from bridge financings 10,450,000
Proceeds from issuance of
equipment financing note 2,445,000
Stock issuance costs (150,000)
Warrant issuance costs (1,254,697)
Principal payments on loan
and long-term debt (1,570,190) (437,407)
Additions to deferred financing costs (4,191,019) (194,232)
------------ ------------
Net cash provided by financing activities 128,430,987 14,613,361
------------ ------------
Net increase in cash 11,575,611 118,714
Cash, beginning of period 1,974,407 633,654
------------ ------------
Cash, end of period $ 13,550,018 $ 752,368
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. The Company and Basis of Presentation:
Advanced Radio Telecom Corp. (collectively with its subsidiaries "ART" or the
"Company") provides wireless broadband telecommunications services using point-
to-point microwave transmissions in the 38 GHz band of the radio spectrum
throughout the United States.
The unaudited condensed consolidated financial statements included herein have
been prepared by the Company. The financial statements contain all adjustments,
consisting only of normal recurring adjustments which are, in the opinion of the
Company's management, necessary to present fairly the consolidated financial
position of the Company as of September 30, 1997, the consolidated results of
its operations for the three and nine months ended September 30, 1997 and 1996,
and its cash flows for the nine months ended September 30, 1997 and 1996. The
consolidated statements of operations for the three and nine months ended
September 30, 1996, and cash flows for the nine months ended September 30, 1996,
have been restated to reflect a merger in October 1996.
The Company will require significant capital in 1998 to fund its operations and
business plan. Based on its current business plan, the Company will require
significant additional capital over the next few years for the continued
development and expansion of its wireless broadband operations. Because the
Company generally deploys radio equipment in response to customer orders, a
substantial portion of its capital requirements is dependent on customer demand.
Accordingly, the Company's capital requirements may increase or decrease
depending largely upon the cost and amount of equipment acquired, the number of
networks installed, the number of markets served and the prices charged for its
services as well as other factors. In addition, if, among other things, the
assumptions underlying the Company's business plan change or prove to be
inaccurate or the Company changes its business plan, the Company's capital
requirements may change. In the event the Company fails to obtain such
financing when required, such failure could result in the modification, delay or
abandonment of some or all of the Company's development and expansion plans
which could have a material adverse effect on the Company.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The year-end condensed consolidated
balance sheet was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles. The
unaudited condensed consolidated financial statements should be read in
conjunction with the Company's December 31, 1996, audited consolidated financial
statements and notes thereto contained in the 1996 Form 10-K on file with the
Securities and Exchange Commission.
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<PAGE>
2. Summary of Significant Accounting Policies:
Short-Term Investments
Short-term investments are comprised of commercial paper and other similar
investments purchased with a term to maturity of more than three months. The
amount reported in the balance sheet at September 30, 1997, approximates fair
value.
Property and Equipment
As of September 30, 1997, approximately $10.4 million out of a total of $26.4
million of wireless transmission equipment had been placed in service.
Reclassifications
Certain reclassifications have been made to the 1996 condensed consolidated
financial statements in order to conform to the 1997 presentation. Such
reclassifications had no effect on the net loss, financial position or cash
flows as previously reported.
3. FCC Licenses
In September 1997, the Company entered into an agreement with Columbia Capital
Corporation and Columbia Millimeter Communications, L.P. to acquire 23 38 GHz
licenses in exchange for 1,335,750 shares of common stock. A portion of such
licenses is being transferred to ART to satisfy obligations of such entities to
ART in connection with the CommcoCCC Acquisition (defined below). The
consummation of the transaction is subject to certain closing conditions,
including FCC approval.
In February 1997, the Company completed the acquisition (the "CommcoCCC
Acquisition") of 129 38 GHz licenses from CommcoCCC, Inc. ("CommcoCCC") in
exchange for six million shares of the Company's common stock. The total
acquisition cost was approximately $122.2 million, comprised of the fair value
of the six million shares of common stock issued of approximately $87.8 million,
direct costs incurred of approximately $3.2 million and the related deferred tax
liability of approximately $31.2 million.
In connection with the CommcoCCC Acquisition, the Company granted Commco, L.L.C.
("Commco"), a stockholder of CommcoCCC, an option to acquire 12 38 GHz
licenses. Commco exercised its option in June 1997, with closing subject to FCC
approval. The purchase price will be paid by a non-recourse secured note and
will be determined by a formula based on the sales price of the Company's common
stock on the day the option was exercised and the population covered by the
twelve licenses. The Company has the right to be a reseller with respect to
these licenses for a term of five years at market rates.
In February 1997, the Company completed its acquisition from Extended
Communications, Inc. of the remaining 50% interest in ART West for $6 million in
cash, of which $3 million was paid in November 1996, the total cost of which has
been included in FCC licenses.
-7-
<PAGE>
4. Senior Notes:
In February 1997, the Company received $135 million of gross proceeds from a
public offering of $135 million of 14% Senior Notes (the "Senior Notes") and
warrants to purchase an aggregate of 2,731,725 shares of the Company's common
stock for $0.01 per share, approximately $52 million of which proceeds were used
to purchase a portfolio of U.S. Treasury securities that will provide for
interest payments on the Senior Notes through February 2000. The aggregate
value ascribed to the warrants of approximately $29.7 million, was reflected as
both a debt discount and an increase in additional paid-in capital. The debt
discount is accounted for as a component of interest expense using the effective
interest rate method. The Senior Notes are considered to have "significant
original issue discount" under Federal tax rules and the Company is not able to
deduct the accretion of the debt discount for Federal income tax purposes.
5. Income Taxes:
Deferred income tax liabilities at September 30, 1997, consisted of
approximately $44.2 million of deferred tax liabilities, principally arising
from the CommcoCCC Acquisition, partially offset by approximately $14.3 million
of deferred tax assets. Deferred tax assets consisted primarily of $24.2
million of net operating loss carryforwards, partially offset by a valuation
allowance of approximately $10.6 million. In February 1997, the Company
reversed approximately $12.8 million of its deferred tax asset valuation
allowance as a result of recording deferred taxes arising from the CommcoCCC
Acquisition. The valuation allowance is based on management's determination
that the recognition criteria for a portion of the deferred tax assets has not
been met.
The effective tax rate is based on an estimate of the annualized tax rate and
differs from the Federal statutory rate principally due to the provision for the
net deferred tax asset valuation allowance.
6. Supplemental Cash Flow Information:
Supplemental disclosure of cash flow information is summarized below for the
nine months ended September 30:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Non-cash financing and investing activities:
Additions to property and equipment $4,040,806
Value ascribed to warrants $29,707,509 509,937
Issuance of shares for licenses 87,500,000
Value ascribed to the strategic distribution
agreement 1,053,000
Accrued deferred financing costs 967,491
Exchange of notes for Series E preferred stock,
net of deferred financing costs 4,673,186
Release of escrow shares 6,795,514
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
Termination of software license agreement
and related obligations 1,774,087
Interest paid 10,293,459 74,538
</TABLE>
7. Subsequent Events
In October 1997, the Company entered into an employment agreement with a newly
hired chief executive officer. Pursuant to the employment agreement, among
other things, the Company granted the executive options to purchase 800,000
shares of common stock (545,000 shares of which are subject to shareholder
approval of certain amendments to the Company's Restated Equity Incentive Plan)
at prices equal to or greater than the fair market value at the date of grant,
granted 100,000 shares of deferred common stock, deliverable on January 2, 2001,
at no cost and sold 100,000 shares of common stock at a price equal to the then
fair market value in exchange for a recourse note collateralized by the shares.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
From its inception in 1993 to the fourth quarter of 1996, the Company
primarily focused on acquiring licenses, hiring management and other key
personnel, raising capital, acquiring equipment and roof rights and developing
its operating and support systems and infrastructure. In the fourth quarter of
1996, the Company started commercial operations.
Results of Operations
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Revenue for the nine months ended September 30, 1997, was $875,493 compared to
$125,013 for the same period in 1996. The revenue for the first nine months of
1997 included approximately $357,000 of non-recurring equipment sales and
construction revenue.
Operating costs and expenses were approximately $27.7 million for the nine
months ended September 30, 1997, compared to approximately $17.9 million for the
same period in 1996. General and administrative expenses in the 1996 period
included a $6.8 million charge related to release of escrowed shares to
executive officers. Cost of equipment sales and construction of $214,399
incurred in the 1997 period relate to non-recurring revenue. Sales and
marketing expenses in the 1996 period included a $1.1 million charge relating to
a distribution agreement. Excluding non-cash and non-recurring items, operating
costs and expenses for the nine months ended September 30, 1997, were
approximately $22.6 million compared to approximately $8.9 million for the same
period in 1996.
The Company incurred non-recurring employee severance and office closure costs
of approximately $565,000 in the quarter ended September 30, 1997 in connection
with certain management initiated restructuring activities intended to align the
Company's organization more closely with its current marketing and business
development plans. In future periods the Company expects increases in cash
expenses for sales and marketing and network operations as the development and
deployment of the Company's business continues. The Company also expects
depreciation and amortization to increase substantially in future periods as a
result of deployment of its wireless transmission equipment. In connection with
employment arrangements with its new Chairman, the Company will incur a non-
recurring non-cash charge of $887,500 in the fourth quarter of 1997 with respect
to a stock grant as well as other expenses in excess of $300,000.
Net interest and other expenses were approximately $12.8 million for the nine
months ended September 30, 1997, compared to approximately $2.6 million for the
same period in 1996. Included in net interest and other expenses for the 1996
period was approximately $1.2 million relating to an unsuccessful debt offering
in July 1996. Included in net interest and other expenses for the 1997 period
was approximately $2.7 million relating to a terminated financing commitment.
Interest expense will increase in future periods due to the amortization of the
original issue discount on Senior Notes that were issued in February 1997.
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<PAGE>
Liquidity and Capital Resources
The Company has generated negative cash flow and net losses each year since
its inception and expects such negative cash flow and net losses to continue at
least for the next few years. Accordingly, the Company will be dependent on
various financing sources to fund its growth as well as its continued losses
from operations. To date, funding for acquisitions, capital expenditures and net
operating losses has been provided from private placements of equity and bridge
financings in 1994 through 1996, the Company's initial public offering in
November 1996 and the Company's public offering of its Senior Notes in February
1997. Approximately $52 million of the approximately $130 million net proceeds
from the sale of the Senior Notes was used to purchase a portfolio of U.S.
Treasury securities that will provide for interest payments on the Senior Notes
through February 2000. Because the Senior Notes have "significant original issue
discount" for tax purposes, the Company is not able to deduct the interest
expense related to the accretion of this original issue discount for tax
purposes.
As of September 30, 1997, the Company had outstanding capital commitments of
approximately $6 million. The Company will require significant additional
capital in 1998 to fund its operations and business plan. Based on its current
business plan, ART estimates that it will require several hundred million
dollars over the next few years for the continued development and expansion of
its wireless broadband operations, including the funding of operating losses.
Because the Company generally deploys radio equipment in response to customer
orders, a substantial portion of its capital requirements is dependent on
customer demand. Accordingly, the Company's capital requirements may increase
or decrease depending largely upon the cost and amount of equipment acquired,
the number of networks installed, the number of markets served and the prices
charged for its services as well as other factors.
In addition, if, among other things, the assumptions underlying the Company's
business plan change or prove to be inaccurate or the Company changes its
business plan, the Company's capital requirements may change. There can be no
assurance that the Company will be able to obtain any financing when required,
or, if available, that the Company will be able to obtain it on acceptable
terms. If the Company fails to obtain additional financing when required, such
failure could result in the modification, delay or abandonment of some or all of
the Company's development and expansion plans. Any such modification, delay or
abandonment could have a material adverse effect on the Company.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 128, "Earnings per Share." This statement,
effective for the year ending December 31, 1997, specifies the computation,
presentation and disclosure requirements for earnings per share ("EPS"). The
statement will replace "primary" EPS with "basic" EPS, the principal difference
being the exclusion of common stock equivalents in the computation of basic EPS
and the required dual presentation of basic and diluted EPS on the face of the
consolidated statement of operations. Due to the Company's net losses, basic and
diluted EPS
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<PAGE>
computed pursuant to this statement are not expected to be materially different
from the historical net losses per share previously presented.
In June 1997, the FASB issued Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." This statement establishes requirements for
disclosure of comprehensive income and becomes effective for the Company for the
year ending December 31, 1998. Comprehensive income includes such items as
foreign currency translation adjustments and unrealized holding gains and losses
on certain investments that are reported by the Company as a component of
stockholders' equity. The Company does not expect this pronouncement to
materially affect the Company's results of operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 10.1 Employment Agreement dated as of August 21, 1997 between
Thomas A. Grina and the Company.
10.2 Change of Control Agreement made as of October 17, 1997
between Henry C. Hirsch and the Company
10.3 Employment Agreement dated as of October 17, 1997 between
Henry C. Hirsch and the Company.
10.4 Amendment No. 1 dated October 17, 1997 to the Employment
Agreement between the Company and Vernon L. Fotheringham
dated December 16, 1995.
10.5 Amended and Restated Asset Purchase Agreement dated as of
September 29, 1997 among Columbia Capital Corporation,
Columbia Millimeter Communications, L.P. and the Company
10.6 The Company's Restated Equity Incentive Plan.
27. Financial Data Schedule
(b) Reports on Form 8-K: The Company filed a report on Form 8-K on July 10,
1997 reporting the declaration by the Company of dividends of rights to
purchase the Company's junior preferred stock.
-12-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Title Page
- ------- ----- ----
<C> <S> <C>
10.1 Employment Agreement dated as of August 21, 1997
between Thomas A. Grina and the Company.
10.2 Change of Control Agreement made as of October 17,
1997 between Henry C. Hirsch and the Company
10.3 Employment Agreement dated as of October 17, 1997
between Henry C. Hirsch and the Company.
10.4 Amendment No. 1 dated October 17, 1997 to the
Employment Agreement between the Company and
Vernon L. Fotheringham dated December 16, 1995.
10.5 Amended and Restated Asset Purchase Agreement dated
as of September 29, 1997 among Columbia Capital
Corporation, Columbia Millimeter Communications, L.P.
and the Company.
10.6 The Company's Restated Equity Incentive Plan.
27 Financial Data Schedule.
</TABLE>
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 13th day of
November 1997.
ADVANCED RADIO TELECOM CORP.
By: /s/ Thomas A. Grina
--------------------------------------
Thomas A. Grina
Executive Vice President, Chief
Operating Officer and Chief Financial
Officer (Duly Authorized Officer and
Principal Financial and Accounting
Officer)
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<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 21, 1997 between THOMAS A. GRINA of 16233
223rd Ave NE, Woodinville WA 98072 ("Executive") and Advanced Radio Telecom
Corp. (the "Company"), a Delaware corporation whose principal office is located
at 500 108th Ave NE, Suite 2600, Bellevue, WA 98004.
RECITALS
--------
Executive has been employed by the Company as its Executive Vice President
and Chief Operating Officer. The Company and Executive intend that Executive
should continue to serve the Company on the terms set forth below and, to that
end, deem it desirable and appropriate to enter into this Agreement.
AGREEMENT
---------
The parties hereto, in consideration of the mutual agreements hereinafter
contained, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall become effective
---------------------------------
as of August 21, 1997 (the "Effective Date") and, as of that date, shall
supersede the employment agreement between the Executive and the Company dated
as of April 26, 1996. Executive's employment shall continue on the terms
provided herein until August 20, 1999, subject to earlier termination as
provided herein (such period of employment hereinafter called the "Employment
Period").
2. SCOPE OF EMPLOYMENT.
-------------------
a. Nature of Services. During the Employment Period, Executive shall be
------------------
elected and serve as Executive Vice President and Chief Operating Officer of the
Company and shall have and diligently perform the duties and the
responsibilities of such offices and such additional executive duties and
responsibilities consistent with such offices as shall from time to time be
assigned to him by the Board of Directors ("Board").
b. Extent of Services. Except for illnesses and vacation periods,
------------------
Executive shall devote substantially all his working time and attention and his
best efforts to the performance of his duties and responsibilities under this
Agreement. However, Executive may (i) make any passive investments where he is
not obligated or required to, and shall not in fact, devote any managerial
efforts, (ii) participate in charitable or community activities or in trade or
professional organizations, or (iii) subject to Board approval (which approval
shall not be unreasonably withheld or withdrawn), hold directorships in public
companies, provided that the Board shall
<PAGE>
have the right to limit such investments, participation and services whenever
the Board shall reasonably believe that the time spent on such activities
infringes in any material respect upon the time required by Executive for the
performance of his duties under this Agreement or is otherwise incompatible in
any material regard with those duties.
3. COMPENSATION AND BENEFITS.
-------------------------
a. Base Salary. Executive shall be paid a base salary at the annualized
-----------
rates hereinafter specified, or in each case such other annualized rate (not
less than the annualized rates provided below) as the Board may determine ("Base
Salary"), such Base Salary to be paid in the same manner and at the same times
as the Company shall pay base salary to other executive employees. Executive's
Base Salary shall be at the annualized rate of Two Hundred and Ten Thousand
Dollars ($210,000.00) per annum during the period from the Effective Date to
December 31, 1997, Two Hundred and Thirty-Five Thousand Dollars ($235,000.00)
per annum for the period from January 1, 1998 to December 31, 1998, and Two
Hundred and Fifty-Eight Thousand Dollars ($258,000.00) per annum from January 1,
1999 to August 20, 1999.
b. Bonus Compensation. Executive will be eligible for an incentive
------------------
bonus with respect to each fiscal year or portion thereof during the Employment
Period pursuant to such bonus or incentive compensation plan as is then
available to executives of the Company generally, or if there is no such plan or
such bonus, as the Board may determine. Executive's target incentive bonus for
each fiscal year shall be not less than 50% of his Base Salary in effect with
respect to such fiscal year. If Executive's employment terminates before the
end of any fiscal year for any reason other than Cause (as defined below),
Executive's incentive bonus for such fiscal year shall be prorated to the date
of termination, and the determination of whether Executive has earned any
incentive bonus and the amount thereof shall be made by the Board in its
reasonable judgment. Notwithstanding the foregoing, if Executive's employment
is terminated by the Company other than for Cause or this Agreement terminates
by reason of death, Disability or Constructive Termination (as defined below),
(i) Executive shall be paid an incentive bonus not less than an amount equal to
his target incentive bonus in effect at the time of termination multiplied by a
fraction the numerator of which is the number of days in the year prior to
termination and the denominator of which is 365 and (ii) if Executive has not
been paid an incentive bonus with respect to the fiscal year prior to the year
during which the Executive's employment terminates (except where the Board has
determined that no bonuses were to paid to executives generally with respect to
such year), Executive shall also be paid an incentive bonus not less than an
amount equal to his target incentive bonus for such fiscal year.
c. Policies and Fringe Benefits. Executive shall be subject to Company
----------------------------
policies applicable to its executives generally and shall be entitled to receive
all such fringe benefits as the Company shall from time to time make available
to other executives generally (subject to the terms of any applicable fringe
benefit plan), including an automobile allowance of not less than Eight Hundred
Dollars ($800.00) per month and vacation of not less than three weeks per year.
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<PAGE>
4. TERMINATION OF EMPLOYMENT.
--------------------------
a. The Company shall have the right to terminate Executive's employment
at any time and for any reason, with or without Cause. Executive may resign for
any reason on three month's notice and upon Constructive Termination (as defined
below).
b. The Employment Period shall terminate when Executive dies or becomes
Disabled. In addition, if by reason of Incapacity Executive is unable to
perform his duties for at least six continuous months, the Employment Period may
be terminated by the Company for Incapacity upon written notice by the Company
to Executive. "Disability" and "Disabled" shall have the meaning given in the
Company's long-term disability plan. Executive's employment shall be deemed to
be terminated for Disability on the date on which Executive is entitled to
receive long-term disability compensation pursuant to such long-term disability
plan. "Incapacity" shall mean a disability (other than Disability) or other
impairment of health that renders Executive unable to perform his duties to the
reasonable satisfaction of the Board.
c. Whenever the Employment Period shall terminate, Executive shall resign
all offices or other positions he holds with the Company and any affiliated
entities.
5. BENEFITS UPON TERMINATION OF EMPLOYMENT OR UPON EXPIRATION OF
-------------------------------------------------------------
THE AGREEMENT.
-------------
a. Certain Terminations Prior to August 20, 1999. If the Employment
---------------------------------------------
Period shall terminate prior to August 20, 1999 by reason of (i) death,
Disability or Incapacity of Executive, (ii) termination by the Company for any
reason other than Cause or (iii) termination by Executive in the event that
either (A) Executive shall be removed from or fail to be reelected to the
offices of Chief Operating Officer and Executive Vice President, or (B)
Executive is relocated more than 40 miles from the current corporate
headquarters of the Company, in either case without his prior written consent (a
"Constructive Termination"), Executive shall be entitled to the following
severance benefits:
(i) The Company shall pay to Executive or his legal representative an
amount equal to twelve months of his Base Salary at the rate in effect at
termination of employment, plus an amount equal to his target incentive
bonus for the fiscal year in which the termination occurs, provided that if
Executive is eligible for long-term disability compensation benefits under
any Company long-term disability plan, the amount payable under this clause
shall be reduced by the long-term disability compensation benefits under
such plan for which Executive is eligible with respect to the twelve month
period following termination.
(ii) For a period of twelve months following termination and subject
to such minimum coverage-continuation requirements as may be required by
law, the Company
-3-
<PAGE>
will continue Executive's automobile allowance and will provide (except to
the extent that Executive shall obtain the same from another employer) such
medical and hospital insurance, long-term disability insurance and term
life insurance for Executive and his family, comparable to the insurance
provided for executives generally, as the Company shall determine, and upon
the same terms and conditions as the same shall be provided for other
Company executives generally; provided, however, that in no event shall
such benefits or the terms and conditions thereof be less favorable to
Executive than those afforded to him as of the date of termination. To the
extent it is impossible or impracticable to provide any such benefits to
Executive under the Company's then existing employee benefit plans or
arrangements, the Company shall arrange for alternative comparable coverage
or, if such alternative coverage is not available, shall pay to Executive
the cost of such coverage, as reasonably determined by the Committee.
(iii) All of Executive's previously granted stock options
("Options") then outstanding, to the extent not already vested, shall be
immediately vested and shall remain exercisable for a period of three years
or, if less, the remainder of the original option term, and shall then
terminate.
b. Terminations after August 20, 1999. Unless earlier terminated or
----------------------------------
except as otherwise mutually agreed by Executive and the Company, Executive's
employment with the Company shall terminate on August 20, 1999. Unless the
Company in connection with such termination shall offer Executive continued
service as Executive Vice President and Chief Operating Officer or in such other
position, if any, as may be acceptable to Executive and upon substantially the
same terms as provided herein and at reasonable compensation, Executive shall be
entitled upon such termination to receive such severance benefits as are
provided in Section 5(a) above. If Executive declines such service, he shall be
treated for all purposes of this Agreement as having terminated his employment
voluntarily on August 20, 1999.
c. Voluntary Termination of Employment. If Executive terminates his
-----------------------------------
employment voluntarily (other than a Constructive Termination), Executive or his
legal representative shall not be entitled to any severance benefits.
d. Termination for Cause. If the Company should terminate Executive's
---------------------
employment for Cause, Executive or his legal representative shall not be
entitled to any severance benefits, and all Options shall immediately terminate.
The Company does not waive any rights it may have for damages or for injunctive
relief. "Cause" shall mean dishonesty by Executive in the performance of his
duties, conviction of a felony (other than a conviction arising solely under a
statutory provision imposing criminal liability upon Executive on a per se basis
due to the Company offices held by Executive, so long as any act or omission of
Executive with respect to such matter was not taken or omitted in contravention
of any applicable policy or directive of the Board), gross neglect of duties
(other than as a result of Disability, Incapacity or death), conflict of
interest which conflict shall continue for 30 days after the Company gives
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<PAGE>
written notice to Executive requesting the cessation of such conflict, or
material breach by the Executive of any of the restrictive covenants contained
in Section 6 hereof.
6. AGREEMENT NOT TO SOLICIT OR COMPETE; CONFIDENTIALITY.
----------------------------------------------------
a. Nonsolicitation. For a period of two years after the termination of
---------------
his employment, Executive shall not under any circumstances employ, solicit the
employment of, accept unsolicited the services of or assist any other entity in
employing or soliciting the employment of, any Protected Person (as defined
below), recommend the employment of any Protected Person to any other business
or encourage any Protected Person to terminate his or her employment
relationship with the Company. A "Protected Person" shall mean a person who is
both (i) employed by the Company or its subsidiaries prior to the termination of
Executive's employment and (ii) employed by the Company or its subsidiaries
during the six months prior to the commencement of conversations with Executive
with respect to employment.
b. Noncompetition. During the course of his employment, Executive has
--------------
and will learn trade secrets of the Company and has and will have access to
Confidential Information (as hereinafter defined) and business plans of the
Company. Therefore, during the Employment Period, upon automatic termination
of the Employment Period on August 20, 1999, if Executive should terminate his
employment voluntarily at any time, or if the Company should terminate
Executive's employment at any time, then for a period of one year thereafter,
Executive will not, directly or indirectly, engage in, become associated in any
manner with, lend his name to or have any financial interest in any Competitive
Business (as defined below) anywhere in the world, whether as contractor,
consultant, agent, partner, principal, investor, employee, owner, manager or
otherwise. Without limiting the generality of the foregoing, Executive agrees
during such period that he shall not, directly or indirectly, solicit or
encourage any customer or vendor of the Company to terminate or diminish its
relationship with the Company or to conduct with himself or with any other
person, organization or other entity any business or activity which such
customer or vendor conducts or could conduct with the Company. "Competitive
Business" shall mean a business engaged in the provision of wireless broadband
services. Nothing herein shall prevent Executive from owning not in excess of
one percent of any security issued and outstanding listed on a national
securities exchange or traded on the NASDAQ National Market.
c. Confidentiality. Executive acknowledges that during his employment,
---------------
he may develop Confidential Information for the Company and may learn
Confidential Information developed or owned by the Company or entrusted to it by
others. Executive agrees that he will not, during the term of this Agreement or
at any time thereafter, use other than as required in furtherance of his
employment with the Company or disclose any Confidential Information.
"Confidential Information" means any and all information of the Company that is
not generally available to the public. Confidential Information includes but is
not limited to (i) the Company's development, research and marketing activities,
(ii) the Company's products and services, (iii) the Company's costs, sources of
supply and strategic plans, (iv) the identity and requirements of the Company's
customers, prices charged and services provided and (v) the people and
-5-
<PAGE>
organizations with whom the Company has business relationships and those
relationships. Confidential Information also includes such information as the
Company may receive or has received belonging to customers or others who do
business with it.
d. Return of Confidential Information. All Confidential Information
----------------------------------
created by Executive or to which Executive has access and all documents, records
and files, in any media of whatever kind and description, relating to the
business, present or otherwise, of the Company or containing, based on or
reflecting Confidential Information, (the "Documents"), whether or not prepared
by Executive, shall be the sole and exclusive property of the Company.
Executive shall return to the Company immediately after the termination of this
Agreement, and at such other times as may be specified by the Company, all
Documents and all other property of the Company then in his possession or
control.
7. ENFORCEMENT. The parties desire that the provisions of this Agreement
-----------
shall be enforced to the fullest extent permissible under the laws and public
policies applied to the jurisdiction whose laws govern this Agreement.
Accordingly, to the extent that a restriction contained in this Agreement is
more restrictive than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, and in the event that any
restriction shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time too large a
geographic area or too great a range of activities the terms of such
restriction, for the purpose only of the operation of such restriction in such
jurisdiction, shall be the maximum restriction allowed by the laws of such
jurisdiction and such restriction shall be deemed to have been revised
accordingly.
8. REMEDIES. Executive acknowledges that he has carefully read and
--------
considered all the terms and conditions of this Agreement, including the
restraints imposed upon him pursuant to Section 6 hereof. Executive agrees that
said restraints are necessary for the reasonable and proper protection of the
Company and that each and every one of the restraints is reasonable in respect
to a core subject matter, length of time and geographic area. Executive
acknowledges that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be accurately compensated for in damages by an
action at law, and that, were he to breach any of the covenants contained in
Section 6 hereof, the damage to the Company would be irreparable. The Executive
therefore agrees that the Company, in addition to any other remedies available
to it, shall be entitled to preliminary and permanent injunctive relief against
any breach or threatened breach by the Executive of any of said covenants,
without having to post bond.
9. ASSIGNMENT. The rights and obligations of the Company shall enure to the
----------
benefit of and shall be binding upon the successors and assigns of the Company.
The rights and obligations of Executive are not assignable except only that
payments payable to him after his death shall be made by devise or descent.
-6-
<PAGE>
10. NOTICES. All notices and other communications required hereunder shall
-------
be in writing and shall be given by mailing the same by certified or registered
mail, return receipt requested, postage prepaid. If sent to the Company the
same shall be mailed to the Company at 500 108th Avenue, N.E., Suite 2600,
Bellevue, WA 98004, Attention: Chairman of the Board, or other such address as
the Company may hereafter designate by notice to Executive; and if sent to the
Executive, the same shall be mailed to Executive at the address set forth on the
first page hereof or at such other address as Executive may hereafter designate
by notice to the Company.
11. WITHHOLDING. Anything to the contrary notwithstanding, all payments
-----------
required to be made by the Company hereunder to executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by the laws of the State of Washington.
13. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which Executive is
a party or is bound and that the Executive is not now subject to any covenants
against competition or similar covenants that would affect the performance of
his obligations hereunder. Executive will not disclose to or use on behalf of
the Company any proprietary information of a third party without such party's
consent.
14. SEVERABILITY. If any portion or provision of this Agreement shall to any
------------
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. The parties agree to substitute a provision
that effects the intent of the invalidated provision as nearly as possible.
15. WAIVER:AMENDMENT. No waiver of any provision hereof shall be effective
----------------
unless made in writing and signed by the waiving party. The failure of either
party to require the performance of any term or obligation of this Agreement, or
the waiver by either party of any breach of this Agreement, shall not prevent
any subsequent enforcement of such term or obligation or be deemed a waiver of
any subsequent breach. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly or authorized
representative of the Company.
16. HEADINGS; COUNTERPARTS. The headings and captions in this Agreement are
----------------------
for convenience only and in no way define or describe the scope or content of
any provision of this Agreement.
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<PAGE>
17. ENTIRE AGREEMENT. This Agreement represents the entire agreement between
----------------
the parties relating to the terms of Executive's employment by the Company and
supersedes all prior written or oral agreements between them.
/s/ Thomas A. Grina
---------------------------------
Executive
ADVANCED RADIO TELECOM CORP.
By /s/ Vernon L. Fotherngham
------------------------------
Vernon L. Fotheringham
Chairman & C.E.O.
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<PAGE>
EXHIBIT 10.2
ADVANCED RADIO TELECOM CORP.
Change of Control Agreement
---------------------------
AGREEMENT, made this 17th day of October, 1997, by and between HENRY C.
HIRSCH ("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)
<PAGE>
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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<PAGE>
(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
-3-
<PAGE>
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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<PAGE>
(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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<PAGE>
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
-6-
<PAGE>
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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<PAGE>
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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<PAGE>
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
--------
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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<PAGE>
If to Executive: Henry C. Hirsch
---------------
2702 Carolina Way
Houston, TX 77005
If to the Company: Advanced Radio Telecom Corp.
-----------------
500 108th Avenue, N.E.
Suite 2600
Bellevue, WA 98004
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/ Vernon L. Fotheringham
-----------------------------
/s/ Henry C. Hirsch
-----------------------------
Executive
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<PAGE>
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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<PAGE>
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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<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT dated as of October 17, 1997 between Henry C. Hirsch
("Executive") and Advanced Radio Telecom Corp. (the "Company"), a Delaware
corporation the principal office of which is located at 500 108th Ave NE, Suite
2600, Bellevue, WA 98004.
RECITALS
--------
Executive seeks to be employed by the Company, and the Company seeks to
employ Executive as its Chairman of the Board, President and Chief Executive
Officer. The Company and Executive intend that Executive shall serve the
Company on the terms set forth below and, to that end, deem it desirable and
appropriate to enter into this Agreement.
AGREEMENT
---------
The parties hereto, in consideration of the mutual agreements hereinafter
contained, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall become effective
---------------------------------
as of November 3, 1997 (the "Effective Date"). Executive's employment shall
continue on the terms provided herein until December 31, 2000, subject to
earlier termination as provided herein (such period of employment hereinafter
called the "Employment Period").
2. SCOPE OF EMPLOYMENT.
-------------------
a. Nature of Services. During the Employment Period, Executive shall be
------------------
elected and serve as Chairman, President and Chief Executive Officer of the
Company and shall have and diligently perform the duties and the
responsibilities of such offices and such additional executive duties and
responsibilities consistent with such offices as shall from time to time be
assigned to him by the Board of Directors ("Board"). During the Employment
Period, Executive shall be elected and serve as a member of the Board.
b. Extent of Services. Except for illnesses and vacation periods,
------------------
Executive shall devote substantially all his working time and attention and his
best efforts to the performance of his duties and responsibilities under this
Agreement. However, Executive may (i) make any passive investments where he is
not obligated or required to, and shall not in fact, devote any managerial
efforts, (ii) participate in charitable or community activities or in trade or
professional organizations, or (iii) subject to Board approval (which approval
shall not be unreasonably withheld or withdrawn), hold directorships in public
companies, provided that the Board shall have the right to limit such
investments, participation and services whenever
<PAGE>
the Board shall reasonably believe that the time spent on such activities
infringes in any material respect upon the time required by Executive for the
performance of his duties under this Agreement or is otherwise incompatible in
any material regard with those duties. All of the foregoing notwithstanding,
Executive shall be allowed to continue in his role as Chairman of the Board to
HLMB Ventures, LLC and Infinitec Communications, Inc., and as a shareholder,
adviser and representative of Infinitec Communications, Inc., provided such
activities do not materially interfere with his service to the Company.
3. COMPENSATION AND BENEFITS.
-------------------------
a. Base Salary. Executive shall be paid a base salary at the annualized
-----------
rates hereinafter specified, or in each case such other annualized rate (not
less than the annualized rates provided below) as the Board may determine ("Base
Salary"), such Base Salary to be paid in the same manner and at the same times
as the Company shall pay base salary to other executive employees. Executive's
Base Salary shall be at the annualized rate of Three Hundred Twenty-Five
Thousand Dollars ($325,000.00) per annum, pro rated, during the period from the
Effective Date to December 31, 1997, Three Hundred Twenty-Five Thousand Dollars
($325,000.00) per annum during the period from January 1, 1998 to December 31,
1998, Three Hundred Fifty Thousand Dollars ($350,000.00) per annum during the
period from January 1, 1999 to December 31, 1999, and Four Hundred Thousand
Dollars ($400,000.00) per annum during the period from January 1, 2000 to
December 31, 2000.
b. Bonus Compensation. Executive will be eligible for an incentive
------------------
bonus with respect to each fiscal year or portion thereof during the Employment
Period pursuant to such bonus or incentive compensation plan as is then
available to executives of the Company generally, or if there is no such plan,
as the Board may determine based on performance criteria set annually. The
determination of the level of target incentive bonuses for each year and whether
Executive has earned any incentive bonus and the amount thereof shall be made by
the Board in its reasonable judgment. Notwithstanding the foregoing, for the
period from the Effective Date to December 31, 1997, the amount of such
incentive bonus shall be guaranteed at Fifty-Four Thousand One Hundred Sixty-
Seven Dollars ($54,167.00); for the period from the January 1, 1998 to December
31, 1998, the amount of such incentive bonus shall be guaranteed at Three
Hundred Twenty-Five Thousand Dollars ($325,000.00) and for the period from
January 1, 1999 to December 31, 1999, the amount of such incentive bonus shall
be guaranteed at not less than Eighty-Seven Thousand Five Hundred Dollars
($87,500.00). For each fiscal year (other than 1997 and 1998), Executive's
target incentive bonus shall be not less than 50% of his Base Salary in effect
with respect to such fiscal year and his maximum incentive bonus shall be 100%
of his Base Salary in effect with respect to such fiscal year.
c. Policies and Fringe Benefits. Executive shall be subject to Company
----------------------------
policies applicable to its executives generally and shall be entitled to receive
all such fringe benefits as the Company shall from time to time make available
to other executives generally (subject to
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<PAGE>
the terms of any applicable fringe benefit plan), including an automobile
allowance and vacation of four weeks per year, in accordance with and subject to
prevailing Company policies.
d. Awards under Equity Incentive Plan. Executive shall be awarded stock
----------------------------------
options under the Company's Restated Equity Incentive Plan ("Plan") for an
aggregate of 800,000 shares of Common Stock, in each case having a five (5) year
term, as follows:
(i) Options to purchase 255,000 shares of Common Stock of the
Company, 33,801 of such Options to be granted as incentive stock
options, at fair market value on the date of grant;
(ii) Options to purchase an additional 345,000 shares of Common
Stock of the Company at fair market value on the date of grant, to be
subject to Company stockholder approval of such grant and of certain
amendments to the Plan; and
(iii) Options to purchase an additional 200,000 shares of Common
Stock of the Company at an exercise price of $12.50 per share, to be
subject to Company stockholder approval of such grant and of certain
amendments to the Plan.
All stock options granted hereunder shall vest and become exercisable at the
rate of Thirty-Three and One Third Percent (33 1/3%) on each of the first three
anniversaries of the date of the grant.
e. Deferred Stock. On January 2, 2001, pursuant to the Plan and provided
--------------
that Executive's employment has not earlier been terminated by the Company for
Cause under Section 5(c) below, the Company shall deliver to Executive 100,000
shares of Common Stock of the Company (the "Shares"), subject to payment by
Executive of any required withholding taxes. The number of Shares to be
delivered under this paragraph shall be appropriately adjusted by the Company
for any stock splits, stock dividends, or recapitalizations for which the record
date precedes January 2, 2001. Executive shall not be treated as the owner of
the Shares for any purposes until and unless they have been delivered in
accordance with this paragraph. The award of deferred Shares described herein
is intended as an unfunded and unsecured promise to pay property in the future
within the meaning of Treas. Regs. (S) 1.83-3(e) and shall be construed
accordingly. Shares delivered pursuant to this paragraph may be original issue
shares or shares held in treasury.
f. Purchase of Shares. Pursuant to the Plan, Executive shall purchase
------------------
100,000 shares of Common Stock of the Company (the "Purchased Shares") at a per
share price equal to the closing price of a share of the Company's common stock
on the Nasdaq National Market
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<PAGE>
on the business day immediately preceding the date of execution of this
Agreement. Subject to the provisions of this paragraph, the purchase price for
the Purchased Shares shall be paid by delivery of Executive's promissory note
made payable to the order of the Company (the "Note"). The Note shall have a
term of five years and shall bear interest at a rate equal to the minimum
applicable Federal rate determined under the Internal Revenue Code. Interest and
principal on the Note shall be payable in full in cash at the term of the Note
or, if earlier, upon (i) termination of Executive's employment for Cause under
Section 5(c) below, (ii) voluntary termination of employment (other than a
Constructive Termination), or (iii) a breach by Executive of Section 6 below. In
all instances where an event shall occur rendering the Note payable prior to the
expiration of its term, Executive shall have a period not to exceed ninety (90)
days in which to effect such payment. Except as provided under the Change in
Control Agreement of even date herewith between the Company and Executive, the
Note shall be a full recourse note and shall be secured by a pledge of the
Purchased Shares. The Note shall contain such other terms as the Company may
reasonably determine and as are customary and consistent with the foregoing.
g. Transitional Living and Travel and Relocation Expenses. The Company
------------------------------------------------------
will pay transitional living and travel expenses associated with Executive's
relocation to Bellevue, Washington, consistent with the terms of its
reimbursement policy. The Company will also pay deductible relocation expenses
up to an aggregate amount not to exceed Three Hundred Thousand Dollars
($300,000.00). To the extent such deductible relocation expenses are less than
$300,000.00, the Company will pay Executive the difference between the expenses
paid by the Company and $300,000.00 within 15 days after the expenses are
claimed by Executive.
4. TERMINATION OF EMPLOYMENT.
-------------------------
a. The Company shall have the right to terminate Executive's employment
at any time and for any reason, with or without Cause. Executive may resign for
any reason on thirty (30) days notice and upon Constructive Termination (as
defined below).
b. The Employment Period shall terminate when Executive dies or becomes
Disabled. In addition, if by reason of Incapacity Executive is unable to
perform his duties for at least six continuous months, the Employment Period may
be terminated by the Company for Incapacity upon written notice by the Company
to Executive. "Disability" and "Disabled" shall have the meaning given in the
Company's long-term disability plan. Executive's employment shall be deemed to
be terminated for Disability on the date on which Executive is entitled to
receive long-term disability compensation pursuant to such long-term disability
plan. "Incapacity" shall mean a disability (other than Disability) or other
impairment of health that renders Executive unable to perform his duties to the
reasonable satisfaction of the Board.
c. Whenever the Employment Period shall terminate, Executive shall resign
all offices or other positions he holds with the Company and any affiliated
entities.
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<PAGE>
5. BENEFITS UPON TERMINATION OF EMPLOYMENT OR UPON EXPIRATION OF
-------------------------------------------------------------
THE AGREEMENT.
-------------
a. Certain Terminations Prior to December 31, 2000. If the Employment
-----------------------------------------------
Period shall terminate prior to December 31, 2000 by reason of (i) death,
Disability or Incapacity of Executive, (ii) termination by the Company for any
reason other than Cause or (iii) termination by Executive in the event that
either (A) Executive shall be removed from or fail to be reelected to the
offices of Chairman of the Board, President and Chief Executive Officer or a
director of the Company, or (B) Executive is relocated more than 40 miles from
the current corporate headquarters of the Company, in either case without his
prior written consent (a "Constructive Termination"), Executive shall be
entitled to the following severance benefits:
(i) The Company shall continue for the remainder of the
Employment Term to pay to Executive or his legal representative his
Base Salary as provided herein and incentive bonuses at the guaranteed
amounts for 1997 and 1998, if applicable, and at the target amounts
for periods thereafter, but in the event of termination after December
31, 1999, Executive or his legal representative shall be paid his Base
Salary and target incentive bonus at the rate in effect for 2000 for a
period of twelve (12) months from the date of termination, provided
that if Executive is eligible for long-term disability compensation
benefits under any Company long-term disability plan, the amount
payable under this clause shall be reduced by the long-term disability
compensation benefits under such plan for which Executive is eligible
with respect to the period following termination.
(ii) For the remainder of the Employment Period, but in no event
for less than twelve (12) months or more than eighteen (18) months
following termination, and subject to such minimum coverage-
continuation requirements as may be required by law, the Company will
provide (except to the extent that Executive shall obtain the same
from another employer) such medical and hospital insurance and term
life insurance for Executive and his family, comparable to the
insurance provided for executives generally, as the Company shall
determine, and upon the same terms and conditions as the same shall be
provided for other Company executives generally; provided, however,
that in no event shall such benefits or the terms and conditions
thereof be less favorable to Executive than those afforded to him as
of the date of termination. To the extent it is impossible or
impracticable to provide any such benefits to Executive under the
Company's then existing employee benefit plans or arrangements, the
Company shall arrange for alternative comparable coverage or, if such
alternative coverage is not available, shall pay to Executive the cost
of such coverage, as reasonably determined by the Committee.
-5-
<PAGE>
(iii) All of Executive's previously granted stock options
("Options") then outstanding, to the extent not already vested, shall
be immediately vested and shall remain exercisable for a period of one
year or, if less, the remainder of the original option term, and shall
then terminate.
(iv) It is agreed and understood that all payments and benefits
provided to Executive hereunder shall be expressly conditioned on the
execution by Executive or his legal representative of a general
release and waiver of claims in favor of the Company and its
directors, officers, affiliates, and representatives.
b. Voluntary Termination of Employment. If Executive terminates his
-----------------------------------
employment voluntarily (other than a Constructive Termination), Executive or his
legal representative shall not be entitled to any severance or other benefits
under this Agreement, except as provided in Sections 3(e) and 3(f) hereof.
c. Termination for Cause. If the Company should terminate Executive's
---------------------
employment for Cause, Executive or his legal representative shall not be
entitled to any severance or other benefits under this Agreement, all Options
shall immediately terminate, and Executive shall immediately forfeit any and all
rights to the future delivery of the Shares pursuant to Section 3(e). The
Company does not waive any rights it may have for damages or for injunctive
relief. "Cause" shall mean dishonesty by Executive in the performance of his
duties, conviction of a felony (other than a conviction arising solely under a
statutory provision imposing criminal liability upon Executive on a per se basis
due to the Company offices held by Executive, so long as any act or omission of
Executive with respect to such matter was not taken or omitted in contravention
of any applicable policy or directive of the Board), gross neglect of duties
(other than as a result of Disability, Incapacity or death) rising to the level
of deliberate dereliction, conflict of interest which conflict shall continue
for 30 days after the Company gives written notice to Executive requesting the
cessation of such conflict, or material breach by Executive of any of the
restrictive covenants contained in Sections 6(a) and 6(b) hereof.
6. AGREEMENT NOT TO SOLICIT OR COMPETE; CONFIDENTIALITY.
----------------------------------------------------
a. Nonsolicitation. For (i) a period of two years after the termination
---------------
of his employment, or (ii) if Executive's employment is terminated by the
Company without Cause, a period equal to the length of Executive's employment
from the Effective Date to the date of termination up to a maximum of two years,
Executive shall not under any circumstances employ, solicit the employment of,
accept unsolicited the services of or assist any other entity in employing or
soliciting the employment of, any Protected Person (as defined below), recommend
the employment of any Protected Person to any other business or encourage any
Protected Person to terminate his or her employment relationship with the
Company. A "Protected Person" shall mean any person who was employed by the
Company or its subsidiaries prior to the termination of Executive's employment
and is, or during the three
-6-
<PAGE>
months prior to the commencement of conversations with Executive with respect to
employment was, employed by the Company or its subsidiaries.
b. Noncompetition. During the course of his employment, Executive will
--------------
learn trade secrets of the Company and will have access to Confidential
Information (as hereinafter defined) and business plans of the Company.
Therefore, (i) during the Employment Period, (ii) upon automatic termination of
the Employment Period on December 31, 2000, if Executive should terminate his
employment voluntarily at any time, or Executive's employment is terminated for
Disability or Incapacity, then for a period of two years after the termination
of his employment, or (iii) if Executive's employment is terminated by the
Company without Cause, a period equal to the length of Executive's employment
from the Effective Date to the date of termination up to a maximum of two years,
Executive will not, directly or indirectly, engage in, become associated in any
manner with, lend his name to or have any financial interest in any Competitive
Business (as defined below) anywhere in the world, whether as a contractor,
consultant, agent, partner, principal, investor, employee, owner, manager or
otherwise. Without limiting the generality of the foregoing, Executive agrees
during such period that he shall not, directly or indirectly, solicit or
encourage any customer or vendor of the Company to terminate or diminish its
relationship with the Company or to conduct with himself or with any other
person, organization or other entity any business or activity which such
customer or vendor conducts or could conduct with the Company. "Competitive
Business" shall mean any line of business in which the Company is at the time
engaged or for which the management or the Board of Directors of the Company is
at the time actively planning to become engaged. Nothing herein shall prevent
Executive from owning not in excess of one percent of any security issued and
outstanding listed on a national securities exchange or traded on the Nasdaq
National Market. It is agreed and understood that the post-employment
noncompetition period prescribed herein shall be tolled, and shall not run,
during any period of time in which Executive is in breach of the provisions of
this Section 6(b).
c. Confidentiality. Executive acknowledges that during his employment,
---------------
he may develop Confidential Information for the Company and may learn
Confidential Information developed or owned by the Company or entrusted to it by
others. Executive agrees that he will not, during the term of this Agreement or
at any time thereafter, other than as required in furthering the best interests
of the Company, use or disclose any Confidential Information. "Confidential
Information" means any and all information of the Company that is not generally
available to the public. Confidential Information includes but is not limited
to (i) the Company's development, research and marketing activities, (ii) the
Company's products and services, (iii) the Company's costs, sources of supply
and strategic plans, (iv) the identity and requirements of the Company's
customers, prices charged and services provided and (v) the people and
organizations with whom the Company has business relationships and those
relationships. Confidential Information also includes such information as the
Company may receive or has received belonging to customers or others who do
business with it, but shall not include information which is either generally
known to the public and/or is required to be disclosed publicly by operation of
law or regulation.
-7-
<PAGE>
d. Return of Confidential Information. All Confidential Information
----------------------------------
created by Executive or to which Executive has access and all documents, records
and files, in any media of whatever kind and description, relating to the
business, present or otherwise, of the Company or containing, based on or
reflecting Confidential Information (the "Documents"), whether or not prepared
by Executive, shall be the sole and exclusive property of the Company.
Executive shall return to the Company immediately after the termination of this
Agreement, and at such other times as may be specified by the Company, all
Documents and all other property of the Company then in his possession or
control.
7. ENFORCEMENT. The parties desire that the provisions of this Agreement
-----------
shall be enforced to the fullest extent permissible under the laws and public
policies applied to the jurisdiction whose laws govern this Agreement.
Accordingly, to the extent that a restriction contained in this Agreement is
more restrictive than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, and in the event that any
restriction shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large a
geographic area or too great a range of activities, the terms of such
restriction, for the purpose only of the operation of such restriction in such
jurisdiction, shall be the maximum restriction allowed by the laws of such
jurisdiction and such restriction shall be deemed to have been revised
accordingly.
8. REMEDIES. Executive acknowledges that he has carefully read and
--------
considered all the terms and conditions of this Agreement, including the
restraints imposed upon him pursuant to Section 6 hereof. Executive agrees that
said restraints are necessary for the reasonable and proper protection of the
Company and that each and every one of the restraints is reasonable in respect
to its core subject matter, length of time and geographic area. Executive
acknowledges that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be accurately compensated for in damages by an
action at law, and that, were he to breach any of the covenants contained in
Section 6 hereof, the damage to the Company would be irreparable. The Executive
therefore agrees that the Company, in addition to any other remedies available
to it, shall be entitled to preliminary and permanent injunctive relief against
any breach or threatened breach by the Executive of any of said covenants,
without having to post bond, and shall be further entitled to recover from
Executive its reasonable attorney's fees and expenses incurred in connection
with the enforcement of its rights hereunder should the Company prevail.
9. ASSIGNMENT. The rights and obligations of the Company shall inure to the
----------
benefit of and shall be binding upon the successors and assigns of the Company.
The rights and obligations of Executive are not assignable except only that
payments payable to him after his death shall be made by devise or descent.
10. NOTICES. All notices and other communications required hereunder shall
-------
be in writing and shall be given by mailing the same by certified or registered
mail, return receipt
-8-
<PAGE>
requested, postage prepaid. If sent to the Company, the same shall be mailed to
the Company at 500 108th Avenue, N.E., Suite 2600, Bellevue, WA 98004,
Attention: General Counsel, or other such address as the Company may hereafter
designate by notice to Executive; and if sent to Executive, the same shall be
mailed to Executive at 2702 Carolina Way, Houston, TX 77005 or such other
address as Executive may hereafter designate by notice to the Company.
11. WITHHOLDING. Anything to the contrary notwithstanding, all payments
-----------
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by the laws of the State of Washington.
13. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which Executive is
a party or is bound and that the Executive is not now subject to any covenants
against competition or similar covenants that would affect the performance of
his obligations hereunder. Executive will not disclose to or use on behalf of
the Company any proprietary information of a third party without such party's
consent.
14. SEVERABILITY. If any portion or provision of this Agreement shall to any
------------
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. The parties agree to substitute a provision
that effects the intent of the invalidated provision as nearly as possible.
15. WAIVER; AMENDMENT. No waiver of any provision hereof shall be effective
-----------------
unless made in writing and signed by the waiving party. The failure of either
party to require the performance of any term or obligation of this Agreement, or
the waiver by either party of any breach of this Agreement, shall not prevent
any subsequent enforcement of such term or obligation or be deemed a waiver of
any subsequent breach. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly or authorized
representative of the Company.
16. HEADINGS; COUNTERPARTS. The headings and captions in this Agreement are
----------------------
for convenience only and in no way define or describe the scope or content of
any provision of this Agreement.
17. ENTIRE AGREEMENT. This Agreement represents the entire agreement between
----------------
the
-9-
<PAGE>
parties relating to the terms of Executive's employment by the Company and
supersedes all prior written or oral agreements between them.
/s/ Henry C. Hirsch
---------------------------------
Henry C. Hirsch
ADVANCED RADIO TELECOM CORP.
By /s/ Thomas A. Grina
-------------------------------
-10-
<PAGE>
EXHIBIT 10.4
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
---------------------------------------
Amendment No. 1 dated as of October 17, 1997 to the Employment Agreement by
and between Advanced Radio Telecom Corp. and Vernon L. Fotheringham dated
December 16, 1995 (the "Employment Agreement")
1. Section 3, Paragraph 1 of the Employment Agreement is hereby amended,
effective November 3, 1997, as follows:
"3. Position, Title and Duties. The Employee's title shall be Vice
--------------------------
Chairman. During the Employment Period, the Employee shall perform such
assignments and have such duties not inconsistent with such title as may be
assigned or delegated to him from time to time by the Employer's Chairman."
2. Section 4.1.2 shall be amended to provide that Employee shall receive a
guaranteed bonus for 1997 of $50,000.
3. The Employment Agreement is in all other respects ratified and
confirmed.
IN WITNESS WHEREOF, the parties have duly executed this Amendment to the
Employment Agreement on the date first written above.
/s/ Vernon L. Forheringham
-----------------------------------
Vernon L. Fotheringham
Advanced Radio Telecom Corp.
By: /s/ Thomas A. Grina
--------------------------------
<PAGE>
EXHIBIT 10.5
EXECUTION COPY
ADVANCED RADIO TELECOM CORP.
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This Amended and Restated Asset Purchase Agreement, made as of September
29, 1997 (the "Agreement") among Advanced Radio Telecom Corp., a Delaware
corporation ("ART"), Columbia Capital Corporation, a Virginia corporation
("Columbia") and Columbia Millimeter Communications, L.P. a Delaware limited
partnership ("Millimeter" and, together with Columbia, the "Sellers"), restates
and amends in its entirety the Asset Purchase Agreement among ART, Columbia and
Millimeter dated as of September 29, 1997.
WHEREAS, on February 25, 1997, ART acquired from CommcoCCC, Inc., a
Delaware corporation ("CommcoCCC"), substantially all of CommcoCCC's assets,
including 38 GHz authorizations covering approximately 117,750,000 Pops (such
term as used throughout this Agreement as defined in the Acquisition Agreement)
pursuant to that certain asset Acquisition Agreement and Plan of Reorganization
dated July 3, 1996, amended as of October 15, 1996 (the "Acquisition Agreement")
by and among ART, ART Licensing Corp., CommcoCCC, Inc., Columbia, Millimeter,
CCC Millimeter L.P. and Commco, LLC, a Delaware limited liability company.
WHEREAS, in order to induce ART to enter into the Acquisition Agreement,
Columbia and Millimeter granted to ART pursuant to that certain Right of First
Offer Agreement dated July 3, 1996 (the "First Offer Agreement") a right of
first offer on any 38 GHz authorizations granted to Columbia or Millimeter with
respect to any pending applications owned by them.
WHEREAS, Columbia and Millimeter have been granted certain 38 GHz
authorizations with respect to their pending applications subject to the First
Offer Agreement, and pursuant to the First Offer Agreement, Columbia and
Millimeter have notified ART of their desire to transfer such new
authorizations. In response to such notification, ART has indicated its desire
to purchase those new authorizations listed on Schedule 1.1 hereto, in exchange
for that number of shares of ART's common stock, $.001 par value per share (the
"Common Stock"), set forth in Section 1.3 hereof (the "Transaction").
WHEREAS, Columbia and Millimeter are further obligated, pursuant to Section
7.21 of the Acquisition Agreement and based on the grant of pending applications
owned by the ART Companies as of the Additional Contribution Date (as such term
is defined in the Acquisition Agreement) covering 6,754,137 Pops, to contribute
to ART additional licenses with respect to Pending Applications (as such term is
defined in the Acquisition Agreement) owned by the Sellers covering 1,231,661
Pops;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the respective
covenants and representations and warranties herein contained, the parties
hereto agree as follows:
1. Sale and Transfer of Assets.
---------------------------
1.1. Sale and Transfer of Assets. Subject to and upon the terms and
---------------------------
conditions of this Agreement, Sellers agree to sell and transfer to ART and ART
agrees to acquire from Sellers, free and clear of any pledge, lien, options,
warrants, security interest, mortgage claim, charge, liability, right of first
refusal, lease, management agreement, contractual restriction on transfer or
other encumbrance of any kind whatsoever (the "Liens"), at the Closing (defined
below) all of Sellers' right, title and interest in, to and under the following
assets (the "Assets"):
(a) the 38 GHz radio authorizations granted by the Federal
Communications Commission (the "FCC") listed on Schedule 1.1 hereto (the
"Authorizations") and all other licenses, permits, authorizations and
approvals from all Federal, state, municipal, county, local and any other
governmental or quasi governmental department, commission, board, bureau,
agency, court or other instrumentality (collectively, the "Governmental
Authorities") with respect to such Authorizations.
The Parties acknowledge and agree that of the 22,381,038 Pops covered by the
Authorizations, (i) Authorizations covering 21,149,377 Pops in return for the
Consideration (as hereinafter defined) and (ii) 1,231,661 Pops are in
satisfaction of Sellers' obligations under section 7.21 of the Acquisition
Agreement.
1.2. No Assumption of any Liabilities. Except as set forth in that certain
--------------------------------
Management Agreement (the "Management Agreement") entered into by Sellers and
ART on the date hereof, ART will not assume, satisfy or perform any of the
debts, liabilities, obligations or commitments of Sellers. Sellers will retain
all such debts, liabilities, obligations and commitments.
1.3. Consideration. Subject to and upon the terms and conditions of this
-------------
Agreement, in consideration of sale and transfer of the Assets to ART, ART will
issue to the Sellers 1,335,750 shares of its Common Stock (the "Consideration")
at the Closing.
1.4. Reimbursement. If for any reason, any one or more Authorizations are
-------------
not transferred to ART pursuant to this Agreement, Sellers agree to pay ART
$26,000 for each Authorization not transferred to ART as payment for
construction services pursuant to the Management Agreement (as hereinafter
defined), provided that such payment shall only be made for those Authorizations
-------------
for which ART has constructed one radio link consisting of a 4 x DS1 radio pair
(IDU, ODU, antenna).
-2-
<PAGE>
1.5. Contingent Licenses.
-------------------
(a) With respect to the Little Rock, AR authorization listed on
Schedule 1.5 hereto (together with the Sata Cruz, CA authorization, the
"Contingent Authorizations"), if at or prior to the date that is 150 days
from the date hereof the Sellers (i) have acquired title to channel 13A
from Ronna Saurro, and (ii) have the right to transfer channel 13A and 13B
free of all Liens, then Sellers and ART shall enter into an asset purchase
agreement substantially similar to this Agreement pursuant to which Sellers
shall sell and ART shall acquire such Little Rock, AR authorization for
39,833 shares of Common Stock; and
(b) With respect to the Santa Cruz, CA authorization listed on
Schedule 1.5, if prior to the date which is the later of (i) the Closing
and (ii) July 31, 1998, the Sellers have acquired the right to transfer
such authorization free of all Liens and claims, including any claims or
issues with respect to the authorization raised by Spectrum Comm., L.C.,
or the FCC, then Sellers and ART shall enter into an asset purchase
agreement substantially similar to this Agreement pursuant to which Sellers
shall sell and ART shall acquire such Santa Cruz, CA Contingent
Authorization for 18,459 shares of Common Stock
1.6. Future Licenses. ART hereby grants to Sellers, and Sellers hereby
---------------
grant to ART the following rights with respect to any future 38 GHz
authorizations granted after September 25, 1997 (the "Future Licenses") granted
by the FCC to either of the Sellers:
(a) Subject to the terms of this Section 1.6, ART hereby grants the
Sellers an option (the "Sell Option") to require ART to buy from the
Sellers any Future Licenses resulting from the pending applications (the
"Pending Applications") listed on Schedule 1.6 (the "Scheduled Future
Licenses") hereto. Such Sell Option may be exercised only with respect to
any Scheduled Future License by written notice to ART by either Seller
after the grant of such Scheduled Future License, whether or not such grant
of the Scheduled Future License has become a Final Order and before March
29, 1998.
(b) Subject to the terms of this Section 1.6, Sellers hereby grant
ART an option (the "Buy Option") to buy from Sellers any Schedule Future
License. Such Buy Option may be exercised with respect to any Scheduled
Future License by written notice to either Seller by ART at any time after
the grant of such Scheduled Future License, whether or not such Scheduled
Future License has become a Final Order and before March 29, 1998.
(c) In the event of the exercise of the Sell Option or the Buy
Option, the purchase and sale of the relevant Scheduled Future License
shall be made pursuant to one or more agreements in substantially the form
of this Agreement, which the parties agree to execute within thirty (30)
days of the exercise of the respective option, provided that under the Sell
-------- ----
Option and the Buy Option the term, "Consideration" shall be that number
-3-
<PAGE>
of shares of Common Stock equal to the product of 0.03368 multiplied by the
number of Pops covered by such Future Licenses (without regard for the
number of Pops listed on Schedule 1.6). Any obligations by either party
with respect to the Second Sell Option and the Buy Option (including any
obligation with respect to Future Licenses under the Sell Option or Buy
Option previously exercised) shall expire at the termination, if any, of
this Agreement pursuant to Section 11 hereof.
(d) Sellers hereby grant ART the following right of first offer (the
"Right of First Offer") with respect to any or all Future Licenses which
are not transferred pursuant to Sections 1.6(a) to (c) above (the "Post
Option Grants") for six months from the grant by Final Order of each such
Future License, respectively. The Sellers shall notify ART in writing (the
"Offer Notice") prior to entering into any binding agreement with any
person, other than an Affiliate (as hereinafter defined) to Transfer (as
hereinafter defined) any Post Option Grant. The Offer Notice shall set
forth all Post Option Grants which the Sellers wish to Transfer. ART may
offer to purchase any or all of the Post Option Grants by delivery of one
or more written offers (each an "Offer") to either Seller (i) within thirty
(30) days after delivery of the Offer Notice or (ii) any time within the
six month period if no Offer Notice has been given. The Offer shall specify
the price and other material terms on which ART proposes to purchase the
specified Post Option Grants. After receipt of the Offer, the Sellers may
elect to enter into a binding agreement to transfer the Post Option Grants
set forth in the Offer either (i) with ART at the price and other terms set
forth in the Offer, or (ii) with any other person at a price greater and
terms more favorable to Sellers than set forth in the Offer, free and clear
of the terms of this Section; provided however, if such binding agreement
----------------
for the Transfer is terminated for any reason, then such Post Option Grants
shall be subject once again to the provisions of this Right of First Offer
for the remainder of the six month period. In the event the price is
payable in property, the value of the property shall be determined by a
mutually acceptable investment banking company.
(e) For the purposes of this Agreement, "Affiliate" shall mean any
person in which a Seller owns more than 50% of the voting securities or
other equity interest. For the purposes of this Agreement, a Transfer shall
mean (i) the sale, transfer, assignment or other disposition (whether by
merger, operation of law or otherwise) of any Future License or (ii) the
management or lease of any Future License that gives any person other than
an Affiliate more than 50% of the net profit derived from the Future
License for a period longer than five (5) years.
2. Closing.
-------
2.1. Time: Place. The closing of the Transaction (the "Closing") shall
-----------
take place on such date and at such time within 30 days of the satisfaction of
the conditions contained in Sections 9 and 10 as mutually agreed by the parties
(the "Closing Date") (i) at the offices of Ropes
-4-
<PAGE>
& Gray, One International Place, Boston, Massachusetts 02110 or (ii) at such
other place and time as the parties agree.
2.2. Deliveries by the Sellers at Closing. At Closing, the Sellers shall
------------------------------------
deliver to ART:
(a) any bills of sale or other instruments of assignment reasonably
required or requested by ART to transfer, convey and assign the Assets to
ART;
(b) certified copies of appropriate corporate resolutions of
Columbia authorizing Columbia, and certified copies of appropriate consents
of partners of Millimeter authorizing Millimeter, to enter into and perform
its obligations under this Agreement;
(c) copies of the charter documents of Sellers certified by the
appropriate public official and copies of the by-laws and partnership
agreement, as appropriate, of Sellers certified by its respective
Secretary; and
(d) all such other documents and instruments as ART or its counsel
shall reasonably request to consummate or evidence the transactions
contemplated hereby;
2.3. Deliveries by ART at Closing. At Closing, ART shall deliver to
----------------------------
Sellers one or more stock certificates, without legends except to comply with
applicable law, representing the Consideration registered in the name of the
Sellers and such documents and instruments as Sellers or its counsel shall
reasonably request to consummate or evidence the transactions contemplated
hereby.
2.4. Certifications; Opinions. At Closing, ART and Sellers shall deliver
------------------------
the certificates, opinion of counsel and other documents described in Section 9
and 10 hereof, respectively, unless waived.
2.5. Consents. At Closing, Sellers shall deliver evidence satisfactory to
--------
ART that the Final Order required pursuant to Section 9.3 has been granted by
the FCC.
2.6. Form of Documents and Instruments. All of the documents and
---------------------------------
instruments delivered at Closing shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to the parties'
respective counsel.
3. Representations and Warranties of Sellers. Sellers jointly and severally
-----------------------------------------
represent and warrant to ART as follows:
3.1. Entity Status. Columbia is a corporation duly organized, validly
-------------
existing and in good standing in the Commonwealth of Virginia and Millimeter is
a limited partnership duly organized, validly existing and in good standing in
the state of Delaware. Each Seller has full power and authority to carry on its
business as and where now conducted, and to own or lease and
-5-
<PAGE>
to operate its properties and assets where such properties and assets are now
owned, leased or operated by it and where such business is now conducted by it
except where failure to do so would not have a Material Adverse Effect (defined
below). Each Seller is qualified to do business and is in good standing in each
of the jurisdictions in which the nature of its business or the property owned
or leased by it make such qualification necessary except where failure to do so
would not have a Material Adverse Effect (defined below). Each Seller has
delivered to ART complete and correct copies of any organizational documents,
partnership agreements, by-laws or charter documents applicable to it, each as
amended and in effect on the date hereof. "Material Adverse Effect" means a
material adverse effect on (a) the nature, extent, value or utility of the
Assets, other than as a result of adverse changes in the wireless
telecommunications industry in general, or (b) on the ability of either party to
consummate the transaction.
3.2. Authority for Agreement; Conflicts.
----------------------------------
(a) Each Seller has all necessary power and authority, corporate,
partnership or otherwise, to enter into, execute and deliver this
Agreement, the Management Agreement and the other documents to be delivered
by Sellers at the Closing (the Management Agreement and such other
documents are collectively the "Seller Documents") and to perform fully its
respective obligations hereunder and thereunder and the transactions
contemplated hereby and thereby. The execution, delivery and performance of
this Agreement and the applicable Seller Documents by Seller has been duly
authorized by all necessary corporate or partnership action.
(b) Each of this Agreement and the Management Agreement has been,
and the other Seller Documents, at the Closing, will have been, duly and
validly executed and delivered by each Seller and each of this Agreement
and the Management Agreement constitutes, and the other Seller Documents
will constitute, the legal, valid and binding obligation of each Seller and
each of this Agreement and the Management Agreement is, and the other
Seller Documents will be, enforceable by and against each Seller in
accordance with its respective terms, except as enforceability thereof may
be limited by applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity
or at law.
(c) The execution and delivery of this Agreement and the Seller
Documents by each Seller and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violations of or defaults under: (i) any statute, regulation, order,
judgment or decree of any federal, state or local governmental body or
regulatory authority applicable to either Seller or any of the Assets; (ii)
any other statute, regulation, order, judgment or decree applicable to
either Seller or any of the Assets under or in any other applicable
jurisdiction; (iii) any mortgage, indenture, lease, agreement, instrument
or other obligation to which either Seller is a party or by which any of
the Assets are bound; or (iv) any permit, concession, grant, franchise,
license, of or applicable to either
-6-
<PAGE>
Seller, except to the extent any such conflict, violation or default would
not have a Material Adverse Effect. Such execution, delivery and
consummation will not result in the creation of any Lien upon any of the
Assets.
3.3 Consents and Approvals of Governmental Authorities. Except for the
--------------------------------------------------
consent of the FCC to the transfer or change of control of the Authorizations,
no consent, approval or filing with any governmental or regulatory authority is
required to be made or obtained by either Seller in connection with its
execution and delivery of and performance of its obligations under, this
Agreement.
3.4 FCC Regulatory Matters.
----------------------
(a) FCC Authorizations. Schedule 1.1 sets forth a true and complete
------------------
list of each Authorization, the name of the licensee or permit holder, the
call sign, the Authorization expiration date, the geographic area covered
by such Authorization and the status of any applications for assignment,
transfer or waiver of FCC rules filed (or to be filed) with the FCC. Seller
has provided to ART true and correct copies of the Authorizations received
by it from the FCC. None of such Authorizations are subject to any Lien,
and Sellers own all of the right, title and interest in, to and under such
Authorizations. Each Seller is qualified under all laws, rules and
regulations to hold the Authorizations held by it.
(b) Fees. All franchise, license or other fees and charges that have
----
become due and payable with respect to the Assets pursuant to any
applications, filings, recordings and registrations with, and all
validations or exemptions, approvals, orders or authorizations, consents,
Authorizations, certificates and permits from, the FCC, any state public
utility commission and any other federal, state or local regulatory or
governmental bodies or authorities, including any subdivision thereof, have
been paid.
(c) Authorization Compliance. The Authorizations are valid and in
------------------------
full force and effect without materially adverse conditions except for such
conditions as are generally applicable to FCC 38 GHz authorizations or
holders of FCC 38 GHz authorizations. To Sellers' best knowledge no event
has occurred and is continuing that could: (i) result in the revocation,
termination prior to expiration in accordance with its terms or adverse
modification of any Authorization listed on Schedule 1.1; or (ii)
materially and adversely affect any rights of Sellers thereunder prior to
Closing or of ART after Closing. Neither Seller has any reason to believe
that the Authorizations will not be renewed by the FCC in the ordinary
course. The current ownership and operation by each Seller, as applicable,
of the Authorizations comply in all material respects with the Federal
Communications Act of 1934, as amended (the "Communications Act"), the
rules, regulations and policies of the FCC promulgated thereunder, and all
other federal, state and local laws, rules, regulations and ordinances
applicable to the Assets and is not in default or violation of any
-7-
<PAGE>
order, writ, injunction or decree of any court of governmental agency or
instrumentality applicable to either the Seller or the Assets.
(d) Reports. Any and all reports and filings required to be filed
-------
with the FCC by each Seller with respect to the Authorizations have been
filed and each Seller has provided true and correct copies of all such
reports and filings to ART. All such reports and filings were accurate and
complete in all material respects on the date of such reports or required
filings. From the date hereof through the Closing, all such required
reports and filings will be filed by Seller on a timely basis.
(e) Disclosure. Neither Seller knows of any facts pertaining to its
----------
qualifications to be a licensee which would cause the FCC not to issue its
approval with respect to, or otherwise prevent, the transfer to ART
pursuant to this Agreement of the Authorizations.
3.5. Title to the Transferred Assets; Liens; Other Assets. Sellers have
----------------------------------------------------
good, indefeasible and transferable title (subject to FCC consent) to all of the
Assets, free and clear of all Liens.
3.6. Contracts. Except for this Agreement, the Management Agreement,
---------
neither Seller is a party to, or is aware of, any contract, commitment or
similar agreement or arrangement, whether written or oral, by which any of the
Assets is bound or affected.
3.7. Litigation. Except as set forth on Schedule 3.7, there are no
----------
actions, claims, proceedings, suits and investigations pending, or, to the best
knowledge of each Seller threatened against any Seller, the Assets or any of its
properties, assets or rights before any court, arbitrator or administrative or
governmental body: (i) relating to the Assets or which seek to revoke, rescind,
cancel, modify or refuse to renew any Authorization or; (ii) relating to the
transactions contemplated hereby, nor is there any basis for any such action.
There is no judgment, order or decree affecting the Assets or the transactions
contemplated hereby.
3.8. Disclosure. Neither this Agreement nor any exhibit or schedule
----------
hereto nor any statement, list or certificate delivered to ART at or prior to
the Closing pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statement contained herein and therein in the context in which they were made
not misleading. Except as otherwise disclosed herein, neither Seller know of any
information or fact that has or could have a Material Adverse Effect.
3.9. Brokerage. There are no claims for brokerage commissions or
---------
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of either Seller.
3.10. Sophistication. Each of the Sellers has knowledge and experience in
--------------
financial and business matters and investments in general and is capable of
evaluating the merits and risks of
-8-
<PAGE>
the acquisition of the Common Stock issued as the Consideration in exchange for
the Assets. Each of the Sellers is an "accredited investor" as such term is
defined in the rules promulgated under the Securities Act of 1933, as amended
(the "Act").
4. Representations and Warranties by ART. ART represents and warrants as
-------------------------------------
follows:
4.1. Corporate Status; Authority.
---------------------------
(a) ART is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate
power and authority to carry on its business as now conducted and to own or
lease and operate its properties as and in the places where such business
is now conducted and as such properties are now owned, leased or operated.
(b) ART has all necessary corporate power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. At
the Closing Date, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
authorized by the Board of Directors of ART. This Agreement constitutes the
valid and legally binding obligation of ART and is enforceable against it
in accordance with its terms, except as enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at
law. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, will not conflict with or result in
any violation of or default under any provision of the charter documents or
by-laws of ART or any material mortgage, indenture,lease, agreement or
other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to it
or any of its respective properties.
4.2. Litigation. There are no judicial or administrative actions, suits,
---------
proceedings or investigations pending, or to the knowledge of ART threatened,
that question the validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement, nor
does ART know of any basis for any such action, suit, proceeding or
investigation.
4.3. Consents and Approvals of Government Authorities. Except for the
------------------------------------------------
approval by the FCC of the transfer of the Authorizations and except for any
consent, approval of filing which will have been made or obtained prior to
Closing, no consent, approval or filing with any court or governmental or
regulatory authority is required to be made or obtained by ART in connection
with its execution, delivery and performance of this Agreement. ART knows of no
facts pertaining to its qualifications to be a licensee which would cause the
FCC not to issue its
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<PAGE>
approval with respect to, or otherwise prevent, the transfer of the
Authorizations to ART pursuant to this Agreement.
4.4 Prospectus. ART has furnished each of the Sellers a copy of ART's
----------
Prospectus dated August 19, 1997 (the "Prospectus"), which is part of the
Registration Statement (File No. 333-33689) on Form S-4 (the "Registration
Statement") filed with Securities and Exchange Commission (the "SEC) under the
Act, covering the issuance of the Consideration to the Seller. Such Registration
Statement and Prospectus, as of the date thereof, do not, and as supplemented
and amended as of the date of the Closing, will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4.5. Stock. All of the Consideration will be issued pursuant to the
-----
Registration Statement. The Registration Statement is effective, and to ART's
knowledge, there is no stop order pending, threatened or in effect with respect
to the Registration Statement. The Common Stock issued as the Consideration,
when issued hereunder, will, be duly authorized, validly issued, fully paid and
nonassessable.
4.6. Brokerage. There are no claims for brokerage commissions or finder's
---------
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
ART.
5. Expenses. Each party to this Agreement shall assume and bear all of its own
--------
respective expenses, costs and fees incurred or assumed by each in the
preparation and execution of this Agreement and compliance herewith, whether or
not the transaction herein provided for shall be consummated.
6. Survival or Representations and Warranties: Exclusive Remedy. All
------------------------------------------------------------
representations, warranties and agreements of each of Seller and ART contained
herein (including all schedules and exhibits hereto) or in any document,
statement, certificate or other instrument referred to herein or delivered at
the Closing in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, any investigation by ART
of the Sellers or the Assets, the Closing and the consummation of the
transactions contemplated by this Agreement. Subject to the provisions of
Section 7 below, each and every representation and warranty contained in this
Agreement shall expire with, and be terminated and extinguished on the earlier
of (a) 18 months after the Closing (expect as to representations and warranties
with respect to which there are any claims pending) or (b) termination of this
Agreement pursuant to Section 11(a) below, and thereafter, except to the extent
expressly provided in Section 7 hereof, neither ART nor Columbia, nor any
partner, officer, director or representative thereof, shall be under any
liability whatsoever with respect to any representation and warranty contained
in this Agreement.
7. Indemnities.
-----------
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<PAGE>
7.1. Indemnification by the Sellers. From and after the Closing, the
------------------------------
Sellers shall jointly and severally indemnify ART and its successors and assigns
for any and all damages, claims, losses, liabilities, and expenses, including
without limitation reasonable legal and accounting expenses (collectively,
"Losses"), which may arise out of: (i) any breach of any Sellers' covenants and
agreements hereunder; (ii) any inaccuracy or misrepresentation in any
representation or warranty of any Seller hereunder, in each case as such
representation or warranty would read if all materiality standards and
disclosure schedules were deleted from it, or any inaccuracy or
misrepresentation in any certificate or document delivered in accordance with
the terms of this Agreement by any Seller; (iii) any liabilities of Seller; or
(iv) any claim or action asserted by any third party arising out of or in
connection with any event, act or omission relating to any of the Assets
occurring prior to the Closing Date. Sellers shall not be liable for
indemnification claims under this Section 7.1 unless Sellers are given notice of
the claim by ART within 18 months following the Closing.
7.2. Indemnification by ART. From and after the Closing, Art shall
----------------------
indemnify and hold harmless the Sellers from and against any and all Losses
which may arise out of: (i) ART's breach of any of the covenants and agreements
made in this Agreement by ART; or (ii) any inaccuracy or misrepresentation in
any representation or warranty of ART hereunder, in each case as such
representation or warranty would read if all materiality standards and
disclosure schedules were deleted from it, or any inaccurracy or
misrepresentation in any certificate or document delivered in conjunction with
this Agreement. ART shall not be liable for indemnification claims under this
Section 7.1 unless ART are given notice of the claim by Sellers within 18 months
following the Closing
7.3 Special Indemnification Provisions. ART and Columbia agree that
----------------------------------
certain Letter Agreement dated July 3, 1996, between ART, Columbia and others
pursuant to which Columbia agreed to indemnify ART with respect to Indemnifiable
Damages (as defined in the Acquisition Agreement) resulting from, relating to,
or arising out of the agreements described therein with Video/Phone Systems,
Inc. shall continue to apply with respect to the Assets that are the subject of
this Agreement as fully and completely as if those Assets were subject of the
Acquisition Agreement .
7.4. Limits on Liability. Columbia shall not have any liability under
-------------------
Section 7.1 unless and until the aggregate amount which ART shall be entitled to
otherwise receive from Columbia pursuant to Section 7.1 exceeds $50,000, in
which case Columbia shall be liable for indemnification under Section 7.1 for
the amount in excess of $50,000. ART shall not have any liability under Section
7.2 hereof unless and until the aggregate amount which Columbia shall be
entitled to otherwise receive from ART pursuant to Section 7.2 exceeds $50,000,
in which case ART shall be liable for indemnification under Section 7.2 for the
amount in excess of $50,000.
8. Covenants.
---------
8.1 FCC and Other Approval.
----------------------
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<PAGE>
(a) The Sellers and ART will use their reasonable efforts to join in
and submit as quickly as possible one or more applications (the
"Applications") to the FCC as deemed by ART to be appropriate requesting
the FCC'S written consent to the transfer of the Authorizations to ART or
designees of ART.
(b) Except as otherwise provided herein, each party shall bear its
own expenses in connection with the preparation and prosecution of the
Applications. ART and the Sellers shall equally share in any application,
consent or other fees charged by the FCC in connection with the
Applications, and the cost of publishing any public notices in connection
therewith.
8.2. Further Assurances. At any time and from time to time at or after the
------------------
Closing, at the request of ART and without further consideration, the Sellers
will execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as ART may reasonably determine
is necessary to transfer, convey and assign to ART, and to confirm ART's title
to or interest in the Assets to put ART in actual possession and operating
control of the Assets and to assist ART in exercising all rights with respect
thereto.
8.3. Public Announcements. The Sellers will not, at any time, without the
--------------------
prior written consent of ART, make any public announcement, issue any press
release or make any statement to any third party (other than its partners,
shareholders, officers, directors, employees, attorneys, accountants and
investment bankers) with respect to this Agreement any of the specific matters
discussed between the parties.
8.4 Information and Access: Compliance. During the period from the date of
----------------------
this Agreement and continuing until the Closing Date or until the termination
of this Agreement pursuant to Section 11 hereof, Sellers shall afford to the
officers, independent certified public accountants, counsel and other
representatives of ART, access to the properties, books, records and personnel
of Seller used in or relating to the Assets during normal business hours upon
reasonable prior notice. Sellers' provisions of access pursuant to this Section
8.4 shall in no way affect or otherwise obviate or diminish any representations
and warranties of each Seller. Each party shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to this Agreement and the transactions contemplated
hereby (including furnishing all information required by the FCC in connection
with transfer of the Authorizations) and shall take all reasonable actions
necessary to cooperate promptly with and furnish information in connection with
any such requirements in connection with this Agreement and the transactions
contemplated hereby. Sellers shall not take any action which, or reasonably fail
to take any action the failure of which,would cause its disqualification as an
assignor of the Authorizations or would materially adversely affect the Assets
or ART's rights with respect thereto. ART shall not take any action which, or
reasonably fail to take any action the failure of which, would cause its
disqualification as an assignee of the Authorizations.
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<PAGE>
8.5. Conduct of Business by Sellers. Sellers covenant that the Sellers
------------------------------
shall not:
(a) except pursuant to this Agreement, sell, transfer, convey or
otherwise dispose of (i) any of the Assets prior to the Closing or
termination of this Agreement or (ii) any of the Future Licenses or any
right thereto or interest therein except in compliance with the provisions
of Section 1.6 of this Agreement or after termination of this Agreement,
(b) except pursuant to this Agreement, encumber, or agree to
encumber, in any way, or enter into any consensual restriction with respect
to (i) any of the Assets prior to the Closing or termination of this
Agreement or (ii) or any of the Future Licenses or any right thereto or
interest therein except in compliance with the provisions of Section 1.6 of
this Agreement or after termination of this Agreement, or
(c) except pursuant to this Agreement, enter into any contract,
agreements or understanding with respect to any of the (i) Assets prior to
the Closing or termination of this Agreement or (ii) any of the Future
Licenses except in compliance with the provisions of Section 1.6 of this
agreement or after termination of this Agreement,
(d) enter into any agreements or commitments for any of 8.5(a)
through 8.5(c).
9. Conditions Precedent to ART's Obligations. All obligations of ART under
-----------------------------------------
this Agreement are subject to the fulfillment to the reasonable satisfaction of
ART prior to or at the Closing of each of the following conditions, any of which
may be waived by ART in its sole discretion:
9.1. Representations and Warranties. The representations and warranties
------------------------------
made by the Sellers in this Agreement (including all exhibits and schedules
hereto), shall be true and correct in all material respects when made and shall
be repeated and shall be true and correct in all material respects at and as of
the Closing Date, and ART shall have received a certificate dated the date of
the Closing signed by the chief executive officers of Sellers to the foregoing
effect.
9.2. Consents. All filings with and consents from all federal, state and
--------
local governmental agencies required to consummate the transactions contemplated
by this Agreement shall have been made or received, as applicable.
9.3. FCC Authorizations. Without limiting the generality of Section 9.2,
------------------
the FCC shall have authorized the transfer of all of the Authorizations by a
Final Order (as defined below), without any conditions or restrictions that
materially affect the value of the Authorizations or operations pursuant to the
Authorizations or any conditions or restrictions materially different than the
normal authorizations issued by the FCC to other 38 GHz license holders at the
date of this Agreement. In the event that any FCC order approving the transfer
of the Authorizations to ART imposes such conditions, this condition shall not
be satisfied until such conditions are removed or eliminated, and Sellers shall
fully cooperate in obtaining the removal or elimination of such
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<PAGE>
restrictions provided that such removal or elimination can be obtained at
reasonable cost to the Sellers. "Final Order" means an action by the FCC
granting its consent to the assignment of a Authorization, with respect to which
no request for stay, petition for rehearing, reconsideration or appeal is
pending, and as to which the time for filing any petition for rehearing,
reconsideration or appeal has expired and with respect to which the time for
agency reconsideration or review taken on its own motion has expired, or in the
event of the filing of such request, petition or appeal, an action which shall
have been reaffirmed or upheld and with respect to which the time for seeking
further administrative of judicial review shall have expired.
9.4 Performance by Sellers: Certificate. Sellers shall have performed and
-----------------------------------
complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing, and the chief
executive officers of Sellers shall deliver to ART a certificate dated the
Closing Date to such effect.
9.5 Absence of Errors and Omissions. ART shall not have discovered any
-------------------------------
material error, misstatement or omission in any of the representations or
warranties, or any material failure to perform or satisfy any covenants or
conditions required by this Agreement to be performed or satisfied by the
Sellers on or prior to the date of Closing.
9.6 Opinions of Counsel for Sellers. ART shall have received favorable
-------------------------------
opinions addressed to it and dated the Closing Date of counsel and FCC counsel
for Sellers, reasonably satisfactory to ART, in form and substance acceptable to
ART and its counsel.
9.7. Absence of Litigation. No action or proceeding shall have been
---------------------
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the result of which could prevent or make illegal the consummation of
such transactions or which could be materially adverse to the Assets.
9.8. Release of Liens. All of the Assets shall be free and clear of all
----------------
liens and ART shall have received evidence of the release of all Liens and the
termination of all financing statements, if any, as may be reasonably requested
by ART.
9.9. Registration Statement. The Registration Statement shall be
----------------------
effective, and no stop order shall be pending or in effect with respect to the
Registration Statement.
9.10. No Default. An Event of Default (as such term is defined in the Trust
----------
Indenture dated February 6, 1997 between ART and the Bank of New York, as
Trustee (the "Indenture") under the Indenture shall not have occurred and be
continuing.
10. Conditions Precedent to the Obligations of the Sellers. The obligations of
------------------------------------------------------
the Sellers to consummate the transactions contemplated hereby shall be subject
to the fulfillment by ART, prior to or at the Closing, of each of the following
conditions:
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<PAGE>
10.1 Representations and Warranties. The representations and warranties
------------------------------
made by ART in this Agreement shall be true and correct in all material respects
when made and shall be repeated and shall be true and correct in all material
respects at and as of the Closing Date, except as specifically provided for
herein, and Sellers shall have received a certificate dated the date of Closing
signed by an officer of ART to the foregoing effect.
10.2 Government Consents. All filings with the consents from all federal,
-------------------
state and local governmental agencies required to consummate the transactions
contemplated hereby shall have been obtained at or prior to the Closing.
10.3 Performance of ART. ART shall have performed and complied with all
------------------
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing and an officer of ART shall deliver a
certificate or certificates to Sellers to such effect.
10.4 Absence of Litigation. No action or proceeding shall have been
---------------------
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated
hereby, the results of which could prevent or make illegal the consummation of
such transactions.
10.5 Consideration. The Consideration shall have been delivered to
-------------
Sellers.
11. Termination. This Agreement may be terminated by the parties as set forth
-----------
in this Section 11:
(a) at any time by the mutual written consent of each Seller and
ART;
(b) by ART at any time after September 30, 1998, (the "Seller Date")
if the conditions set forth in Section 9 shall not have been complied with
or performed and such noncompliance or nonperformance shall not have been
cured or eliminated by the Sellers by such time; provided that if prior to
the Seller Date, the FCC has issued an order, that is not yet a Final
Order, approving the transfer of the Authorization to ART, Sellers may
extend the Seller Date until December 31, 1998 by notice to ART;
(c) by Sellers at any time after the Seller Date, if the conditions
set forth in Section 10 hereof shall not have been complied with or
performed and such noncompliance or nonperformance shall not have been
cured or eliminated by ART by such time; provided that if prior to the
Seller Date, the FCC has issued an order, that is not yet a Final Order,
approving the transfer of the Authorizations, to ART, ART may extend the
Seller Date until December 31, 1998 by notice to Seller; or
(d) by the Sellers on the one hand, or by ART on the other, if there
shall have been a breach of any material representation, warranty, covenant
or agreement on the part
-15-
<PAGE>
of the other set forth or contemplated by this Agreement, which breach
cannot be cured prior to the Closing;
provided, however, that the terminating party may not terminate its obligations
under this Agreement if such terminating party has breached this Agreement in
any material respect.
Notwithstanding any termination of this Agreement pursuant to this Section
11, the provisions of Sections 7 and 8.3 hereof shall remain in full force and
effect. No termination of this Agreement pursuant to Section 11(b), (c) or (d)
shall relieve a breaching party of any liability hereunder for any such breach
occurring prior to termination.
12. Miscellaneous. As an inducement to the Seller contributing to ART licenses
-------------
with respect to Pending Applications covering 1,231,661 Pops, ART represents and
warrants to Sellers that as of the Additional Contribution Date (as such term is
defined in the Acquisition Agreement) Pending Applications owned by the ART
Companies covering at least 6,754,137 Pops had been granted.
13. Specific Performance. The parties hereto agree that irreparable damage
--------------------
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties will be entitled to
specific performance of the terms hereof without posting bond, in addition to
any other remedy at law or in equity.
14. Entire Agreement: Assignability. This Agreement, together with the
-------------------------------
Management Agreement and the schedules and exhibits hereto, constitutes the
entire agreement between the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, including
but not limited to the Asset Purchase Agreement between the parties dated as of
September 29, 1997, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein. This Agreement shall not be assignable
by any of the parties hereto without the prior written consent of the other
parties, except that this Agreement may be transferred by ART in connection with
the sale of at least substantially all ART's assets.
15. Amendment. This Agreement may be amended by the parties hereto at any
---------
time, but only by an instrument in writing duly executed and delivered on behalf
of each of the parties hereto.
16. Headings. Section headings are not to be considered part of this Agreement
--------
and are included solely for convenience and are not intended to be full or
accurate descriptions of the contents thereof. References to Sections are to
portions of this Agreement unless the context requires otherwise.
17. Exhibits, etc. Exhibits, schedules and other documents referred to in
-------------
this Agreement are an integral part of this Agreement.
-16-
<PAGE>
18. Successors and Assigns. All of the terms and provisions of this Agreement
----------------------
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective permitted transferees, successors and assigns.
19. Notices, etc. All notices, requests demands and other communications
------------
hereunder shall be in writing and shall be deemed to have been duly given on the
date of delivery if delivered or mailed, first-class postage prepaid,
(a) if to Sellers, to:
Columbia Capital Corporation
201 North Union Street
Alexandria, Virginia 22314
Attn: James B. Fleming
Fax: (703) 519-3904
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
100 North Tryon Street
NationsBank Corporate Center
Suite 2600
Charlotte, North Carolina 28202
Attn: H. Bryan Ives III, Esq.
Fax: (704) 377-4814
(b) if to ART to:
Advanced Radio Telecom Corp.
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
Attention: Thomas M. Walker, Esq.
with copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: Mary E. Weber, Esq.
20. Governing Law. This Agreement and the rights and obligations of the
-------------
parties hereto arising out of this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to the
internal conflict of law provisions thereof.
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<PAGE>
21. Severability. The provisions of this Agreement are severable, and if any
------------
one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
22. Counterparts. This Agreement may be executed simultaneously in any number
------------
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Section 351 Treatment. It is agreed that ART and Columbia shall treat the
---------------------
sale and issuance of the Common Stock in exchange for the Authorizations
pursuant to this Agreement, together with (a) the issuance of ART Common Stock
pursuant to the Acquisition Agreement, (b) the issuance of the ART Common Stock
in connection with its initial public equity offering, and (c) the exchange by
the shareholders of ART Licensing Corp. of their shares in ART Licensing Corp.
for shares of ART in the ART Reorganization (as defined in the Acquisition
Agreement) as transfers to a controlled corporation described in section 351(a)
of the Internal Revenue Code of 1986, as amended. Without the consent of the
other, the parties hereto shall not file any tax return, issue any document or
take any position in any administrative or judicial proceeding with respect to
any tax return or document in any manner inconsistent with the preceding
sentence or otherwise take any action that would prevent the intention expressed
in the preceding sentence from being fulfilled. In addition, ART shall attach
such information as may be required by Code Section 351 to its calendar year
1997 federal income tax return as may be necessary to reflect the foregoing.
24. Pre-existing Obligations. The parties hereto acknowledge and agree that,
------------------------
should the transfer of licenses contemplated hereby not be consummated, the
Sellers shall remain obligated pursuant to Section 7.21 of the Acquisition
Agreement to contribute 38 GHz Authorizations (as defined in the Acquisition
Agreement).
[The remainder of this page has been intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
ADVANCED RADIO TELECOM CORP.
By:___________________________
Name:
Title:
COLUMBIA CAPITAL CORPORATION
By:___________________________
Name:
Title:
COLUMBIA MILLIMETER COMMUNICATIONS, L.P.
By:___________________________
Name:
Title: General Partner
-19-
<PAGE>
EXHIBIT 10.6
ADVANCED RADIO TELECOM CORP.
RESTATED EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Restated Equity Incentive Plan (the "Plan") is to
advance the interests of Advanced Radio Telecom Corp. (the "Company") by
enhancing its ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members. During such times as the Stock is registered under the
Securities Exchange Act of 1934 (the "1934 Act"), all members of the Committee
shall be non-employee directors within the meaning of Rule 16b-3 under the 1934
Act and "outside directors" within the meaning of Section 162(m)(4)(C)(i) of the
Internal Revenue Code of 1986, as amended (the "Code").
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an award is canceled, grant another Award in its place on
such terms and conditions as
<PAGE>
the Committee shall specify), except that the Committee may not, without the
consent of the holder of an Award, take any action under this clause with
respect to such Award if such action would adversely affect the rights of such
holder; (g) prescribe the form or forms of instruments that are required or
deemed appropriate under the Plan, including any written notices and elections
required of Participants (as defined below), and change such forms from time to
time; (h) adopt, amend and rescind rules and regulations for the administration
of the Plan; and (i) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee to make
adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. No Award may be granted under the Plan ten years
following the date of stockholder approval, but Awards previously granted may
extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
3,500,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options and Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 800,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Internal Revenue
Code.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each person in the employ of the Company or any of its subsidiaries (an
"Employee") and each other person or entity (including without limitation non-
Employee directors of the Company or a subsidiary of the Company) who, in the
opinion of the Committee,
-2-
<PAGE>
is in a position to make a significant contribution to the success of the
Company or its subsidiaries will be eligible to receive Awards under the Plan
(each such Employee, person or entity receiving an Award, "a Participant"). A
"subsidiary" for purposes of the Plan will be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. TYPES OF AWARDS
6.1 OPTIONS
(a) Nature of Options. An Option is an Award giving the recipient the
-----------------
right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue of 1986, as amended (the "Code") (any Option intended to qualify as an
incentive stock option being hereinafter referred to as an "ISO"), and Options
that are not incentive stock options, may be granted under the Plan. ISOs shall
be awarded only to Employees. Any Option not identified at the time of grant as
being either an ISO or a non-incentive stock option shall be a non-incentive
stock option.
(b) Exercise Price. The exercise price of an Option will be determined by
--------------
the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent stockholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent stockholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Committee may reduce the exercise price of an Option at any
time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be
-------------------
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
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(d) Exercise of Options. An Option will become exercisable at such time or
-------------------
times, and on such conditions, as the Committee may specify. The Committee may
at any time and from time to time accelerate the time at which all or any part
of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
-----------------
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option (with the consent of the optionee
of an ISO if permitted after the grant) or by the instrument evidencing the
Option, (i) through the delivery of shares of Stock which have been outstanding
for at least six months (unless the Committee approves a shorter period) and
which have a fair market value equal to the exercise price, (ii) by delivery of
a promissory note of the person exercising the Option to the Company, payable on
such terms as are specified by the Committee, (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iv) by any combination
of the foregoing permissible forms of payment.
(f) Discretionary Payments. If (i) the market price of shares of Stock
----------------------
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (at a price per share equal to the fair market value per share)
to the person exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been purchased pursuant to
the exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2 STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the holder on exercise to receive an amount in cash or Stock or
a combination thereof (such form to be determined by the Committee) determined
in whole or in part by reference to appreciation in the fair market value of a
share of Stock on the date of grant as compared to its fair market value on the
date of exercise or any performance standard selected or established by the
Committee.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
----------------------------------
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation
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Right granted in tandem with an Option which is not an ISO may be granted either
at or after the time the Option is granted. A Stock Appreciation Right granted
in tandem with an ISO may be granted only at the time the Option is granted. The
Committee may also grant Stock Appreciation Rights which provide that following
a change in control of the Company, as determined by the Committee, the holder
of such Right will be entitled to receive, with respect to each share of Stock
subject to the Right, an amount equal to the excess of a specified value (which
may include an average of values) for a share of Stock during a period preceding
such change in control over the fair market value of a share of Stock on the
date the Right was granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
---------------------------------
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock
-------------------------------------------------
Appreciation Right not granted in tandem with an Option will become exercisable
at such time or times, and on such conditions, as the Committee may specify.
The Committee may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
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6.3 RESTRICTED AND UNRESTRICTED STOCK.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the
-------------------------
Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock in such amounts and upon such terms and conditions as the
Committee shall determine subject to the restrictions described below.
(b) Restricted Stock Agreement. The Committee may require, as a condition
--------------------------
to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(c) Transferability and Other Restrictions. Except as otherwise provided
--------------------------------------
in this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
Except as the Committee may otherwise determine, if a Participant ceases to be
an Employee or otherwise suffers a Status Change (as defined at Section 7.2(a)
below) for any reason during the Restricted Period, the Company may purchase the
shares of Restricted Stock subject to such restrictions and conditions for the
amount of cash paid by the Participant for such shares, or such shares of
Restricted Stock shall be forfeited to the Company if no cash was paid by the
Participant.
The Company shall also have the right to retain the certificates
representing shares of Restricted Stock in the Company's possession during the
Restricted Period.
(d) Removal of Restrictions. Except as otherwise provided in this Section
-----------------------
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become freely transferable by the Participant upon completion of the Restricted
Period including the passage of any applicable period of time and satisfaction
of any conditions to vesting. However, unless otherwise provided by the
Committee, the Committee, in its sole discretion, shall have the right to
immediately waive all or part of the restrictions and conditions with regard to
all or part of the shares held by any Participant at any time.
(e) Voting Rights, Dividends and Other Distributions. During the
------------------------------------------------
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock including any
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dividends and distributions paid in shares shall be subject to the same
restrictions and conditions as the shares of Restricted Stock with respect to
which they were paid.
(f) Other Awards Settled with Restricted Stock. The Committee may, at the
------------------------------------------
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Committee may, in its sole discretion, sell to
------------------
any Participant shares of Stock free of restrictions under the Plan for a price
which is not less than the par value of the Stock.
(h) Notice of Section 83(b) Election. Any Participant making an election
--------------------------------
under Section 83(b) of the Code with respect to Restricted Stock must provide a
copy thereof to the Company within 10 days of filing such election with the
Internal Revenue Service.
6.4 DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5 PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) Nature of Performance Awards. A Performance Award entitles the
----------------------------
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance established by the Committee. The Committee will
determine the performance goals, the period or periods during which performance
is to be measured and all other terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Committee may, at
---------------------------------------------
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
-7-
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6.6 LOANS AND SUPPLEMENTAL GRANTS.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either
-----
on the date of or after the grant of any Award to the Participant. A Loan may
be made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) Supplemental Grants. In connection with any Award, the Committee may
-------------------
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any Federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1 DEATH.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so
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transferred without any further action by the Participant) in accordance with
Section 6.3(d) above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to death will be forfeited and the Award canceled as of the time of death,
unless otherwise determined the Committee.
7.2 TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a non-
Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
(a) Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the Committee may determine), and shall thereupon
terminate, unless the Award provides by its terms for immediate termination in
the event of a Status Change (unless otherwise determined by the Committee) or
unless the Status Change results from a discharge for cause which in the opinion
of the Committee casts such discredit on the Participant as to justify immediate
termination of the Award (unless otherwise determined by the Committee). In no
event, however, shall an Option or Stock Appreciation Right remain exercisable
beyond the latest date on which it could have been exercised without regard to
this Section 7. For purposes of this paragraph, in the case of a Participant
who is an Employee, a Status Change shall not be deemed to have resulted by
reason of (i) a sick leave or other bona fide leave of absence approved for
purposes of the Plan by the Committee, so long as the Employee's right to
reemployment is guaranteed either by statute or by contract, or (ii) a transfer
of employment between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary corporation of
such corporation) issuing or assuming an option in a transaction to which
section 424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
(c) above.
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<PAGE>
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to the Status Change will be forfeited and the Award canceled as of the
date of such Status Change unless otherwise determined by the Committee.
7.3 CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of grant, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a 'covered transaction'), the following rules shall
apply:
(a) Subject to paragraph (b) below, immediately prior to the effective date
of the covered transaction or such earlier time as the Committee may in its sole
discretion determine, (1) any outstanding Option and Stock Appreciation Right
shall be exercisable in full, (2) all restrictions on any Restricted Stock shall
be deemed to be satisfied and no longer applicable, (3) the Company shall make
any payments of and provide any benefits under any Deferred Stock Award,
Performance Award or Supplemental Grant, (4) any performance or other conditions
or restrictions on any Award shall be deemed to be satisfied and no longer
applicable, and (5) unless otherwise provided by the Committee at the terms of
the Loan, all principal of and interest on a Loan shall be forgiven; and upon
the effectiveness of such covered transaction, all outstanding Option and Stock
Appreciation Rights shall cease to be exercisable and all Deferred Stock and
Performance Awards and Supplemental Grants shall terminate.
(b) Notwithstanding the foregoing, with respect to an outstanding Award
held by a participant who, following the covered transaction, will be employed
by, or otherwise providing services of a similar nature to those provided to the
Company, to a corporation which is a surviving or acquiring corporation in the
covered transaction or an affiliate of such corporation, the Committee may at or
prior to the effective time of the covered transaction, in its sole discretion
and in lieu of the action described in paragraph (a) above, arrange to have such
surviving or acquiring corporation or affiliate assume any Award held by such
participant outstanding hereunder or grant a replacement award which, in the
judgment of the Committee, is substantially equivalent to any Award being
replaced which awards must in the case of incentive stock options satisfy the
requirements of the Code.
7.4 TERMINATION FOLLOWING CHANGE OF CONTROL.
Notwithstanding any other provision of this Plan, if the Participant's
employment terminates because of a "Qualified Termination" as defined in Exhibit
A, all unvested Options and Stock Appreciation Rights then held by such person
shall immediately become fully
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vested, all Options and Stock Appreciation Rights then held by such person shall
remain exercisable until the earlier of (i) the fourth anniversary of such
Qualified Termination and (ii) the latest date on which such Option or Right
could have been exercised without regard to Section 7.1 and Section 7.2, and all
other Awards shall immediately become fully vested and all restrictions,
conditions and performance goals with respect to such Awards shall be deemed
satisfied and shall no longer be applicable.
8. GENERAL PROVISIONS
8.1 DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2 RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3 CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable Federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The Nasdaq National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
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violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4 TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such Award is made
to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5 NONTRANSFERABILITY OF AWARDS.
Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution, and
during a Participant's lifetime an Award requiring exercise may be exercised
only by the Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's behalf).
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8.6 ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
(c) In the case of ISOs or for purposes of the limits set forth in the
second paragraph of Section 4, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code (in the case of the limits in Section 4).
8.7 EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8 DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9 PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
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9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.
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EXHIBIT A
---------
For purposes of Section 7.4 of the Plan, the following terms have the
following meanings:
"Base Salary" means Participant's annual base salary, exclusive of any
bonus or other benefits the Participant may receive.
"Cause" means the following, determined by the Committee in its reasonable
judgment:
(i) willful failure to perform, or gross negligence in the
performance of, Participant's duties and responsibilities to
the Company and its subsidiaries; or
(ii) fraud, embezzlement or other material dishonesty with respect
to the Company or any of its subsidiaries; or
(iii) conviction of, or plea of nolo contendere to, a felony or
other crime involving moral turpitude; or
(iv) other conduct by Participant that is materially harmful to the
business, interests or reputation of the Company or any of its
subsidiaries.
"Change of Control" means such time as:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing more than 50% of the total voting
power of the Voting Stock of the Company on a fully diluted
basis,
(ii) individuals who on May 30, 1996 constitute the Board (together
with any new directors whose election by the Board or whose
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the
Board then in office who either were members of the Board on
the May 30, 1996 or whose election or nomination for election
was previously so approved) cease for any reason to
constitute a majority of the members of the Board then in
office and
(iii) the merger or consolidation of the Company with or into another
corporation, or the merger or consolidation of another
corporation with
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and into the Company, with the effect that, immediately after
such transaction, the Voting Stock of the entity surviving such
merger or consolidation received in such transaction by the
stockholders of the Company immediately prior to such
transaction represents the ultimate beneficial ownership of
less than 50% of Voting Stock of the entity surviving such
merger or consolidation.
"Disability" has the meaning given it in any long-term disability plan of
the Company in which Participant participates. Participant's employment shall
be deemed terminated for Disability when Participant is entitled to receive
long-term disability compensation pursuant to such long-term disability plan.
If the Company does not maintain such a plan, Participant shall be deemed
terminated for Disability if the Company terminates his employment due to
illness, injury, accident or condition of either a physical or psychological
nature as a result of which Participant is unable to perform substantially the
duties and responsibilities of his position for 180 days during a period of 365
consecutive calendar days.
"Good Reason" means the voluntary termination by Participant of his or her
employment after the occurrence, without Participant's express written consent,
of any of the following events:
(i) assignment to Participant of duties materially inconsistent with
his or her positions, duties, responsibilities, or reporting
requirements with the Company (or a subsidiary) immediately
prior to a Change of Control or a material adverse alteration in
Participant's status or the nature of his or her
responsibilities with the Company immediately prior to a Change
in Control; or
(ii) reduction in Participant's rate of Base Salary to less than 100
percent of the rate of Base Salary paid to the Participant
immediately preceding the Change of Control, or reduction in
Participant's total cash compensation opportunities, including
salary, incentives and other benefits, for any fiscal year to
less than 100 percent of the total cash compensation
opportunities made available to the Participant immediately
preceding the Change of Control (for this purpose, such
opportunities shall be deemed reduced if the objective standards
by which Participant's incentive compensation is measured become
materially more stringent or if the amount of such compensation
is materially reduced on a discretionary basis from the amount
that would be payable solely by reference to the objective
standards).
"Qualified Termination" means the termination of Participant's employment
during a Standstill Period (1) by the Company other than for Cause, death or
Disability, and (2) in the case of a Participant who at the time of the Change
of Control holds an office specifically
-16-
<PAGE>
designated by the Committee in its sole discretion to have such right, by
Participant for Good Reason.
"Standstill Period" is the period commencing on the date of a Change of
Control and continuing until the close of business on the last business day of
the 24th calendar month following such Change of Control.
"Voting Stock" means the capital stock of any class or kind ordinarily
having the power to vote for the election of directors, managers or other voting
members of the governing body of such Person.
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,550,018
<SECURITIES> 19,942,128
<RECEIVABLES> 265,188
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,104,081
<PP&E> 31,079,478
<DEPRECIATION> (2,629,214)
<TOTAL-ASSETS> 243,077,334
<CURRENT-LIABILITIES> 7,671,979
<BONDS> 106,734,326
0
0
<COMMON> 19,834
<OTHER-SE> 98,875,053
<TOTAL-LIABILITY-AND-EQUITY> 243,077,334
<SALES> 356,970
<TOTAL-REVENUES> 875,493
<CGS> 214,399
<TOTAL-COSTS> 27,700,365
<OTHER-EXPENSES> 2,699,881
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,935,503
<INCOME-PRETAX> (39,614,074)
<INCOME-TAX> 1,460,023
<INCOME-CONTINUING> (38,154,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,154,051)
<EPS-PRIMARY> (2.07)
<EPS-DILUTED> (2.07)
</TABLE>
