<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ADVANCED RADIO TELECOM CORP.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ADVANCED RADIO TELECOM CORP.
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
February 19, 1998
---------------------
The Special Meeting of Stockholders of Advanced Radio Telecom Corp. will be
held on February 19, 1998 at 10:00 a.m. (local time) at 411 108th Avenue NE,
Bellevue, Washington 98004 for the following purposes:
1. To approve certain amendments to the Restated Equity Incentive Plan.
2. To approve the 1997 Equity Incentive Plan for Non-Employee Directors
3. To consider and act upon such other matters as may properly come before
the meeting.
Only stockholders of record at the close of business on January 13, 1998
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
By Order of the Board of Directors
Thomas M. Walker
Secretary
Bellevue, Washington
January 20, 1998
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
ADVANCED RADIO TELECOM CORP.
-------------
SPECIAL MEETING OF STOCKHOLDERS
February 19, 1998
-------------
PROXY STATEMENT
-------------
The enclosed proxy is solicited on behalf of the Board of Directors of
Advanced Radio Telecom Corp. (the "Company") for use at the Special Meeting of
Stockholders (the "Meeting") to be held on February 19, 1998, at 10:00 a.m. at
411 108th Avenue NE, Bellevue, Washington 98004 and at any adjournment thereof.
In the absence of contrary instructions, the persons named as proxies will
vote in favor of the proposals to amend the Restated Equity Incentive Plan and
to approve the 1997 Equity Incentive Plan for Non-Employee Directors. To be
voted, proxies must be delivered to the Secretary of the Company prior to
voting. A proxy may be revoked by a stockholder at any time before it is voted
by (i) delivering to the Company another properly signed proxy relating to the
same shares and bearing a later date, (ii) otherwise delivering a written notice
to the Secretary of the Company, bearing a date later than the date of the
proxy, stating the proxy is revoked or (iii) attending the Meeting or any
adjournment thereof and voting the shares covered by the proxy in person
(although attendance at the meeting will not, by itself, revoke a proxy).
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, the Company may use the
services of its officers and employees (who will receive no compensation
therefor in addition to their regular salaries) to solicit proxies personally
and by mail, telephone and telegram from brokerage houses and other
stockholders. The Company will also reimburse brokers and other persons for
their reasonable charges and expenses in forwarding soliciting materials to
their principals.
Only holders of record of shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), on January 13, 1998 are entitled to
receive notice of and to vote at the Meeting. As of that date, the Company had
issued and outstanding _______ shares of Common Stock. Each such share of Common
Stock is entitled to one vote on each matter to come before the Meeting.
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<PAGE>
APPROVAL OF AMENDMENTS TO THE RESTATED EQUITY INCENTIVE PLAN
Proposal
The Board of Directors of the Company has adopted and is submitting to the
shareholders for their approval amendments (the "Amendments") to the Restated
Equity Incentive Plan (the "Equity Incentive Plan") which would increase the
number of shares of Common Stock issuable under the Equity Incentive Plan from
1,400,000 shares to 4,000,000 shares and would increase the maximum number of
shares as to which options or stock appreciation rights ("SARs") may be granted
to any participant in a calendar year from 300,000 shares to 800,000 shares.
The Company believes that the Equity Incentive Plan is serving its purpose
in helping to attract, retain and reward persons who can make significant
contributions to the success of the Company, and in strengthening the
commonality of interest between these persons and the shareholders. To continue
to meet these objectives, the Company believes that it needs to have additional
shares available for awards under the plan. In addition, the Company has found
that in the competitive telecommunications market, the Company must grant more
than 300,000 options to induce experienced executives to join the Company.
Of the 2,100,000 additional shares proposed to be made available for awards
under the amended Equity Incentive Plan, five-year options to purchase 545,000
shares were granted to Henry C. Hirsch, the Company's new Chief Executive
Officer, in October 1997, subject to shareholder approval of the Amendments. Of
those options, 345,000 will be exercisable at $8.875 per share, the fair market
value on the date of the grant, and 200,000 will be exercisable at $12.50 per
share. In addition, in December 1997 five-year options to purchase 500,000
shares were granted to William J. Maxwell, the Company's new Executive Vice
President, Strategic Planning, Marketing & Sales, subject to shareholder
approval of the Amendments. Of these options, 300,000 will be exercisable at
$9.25, the fair market value on the date of grant, 100,000 will be exercisable
at $12.25 and 100,000 will be exercisable at $15.00 per share. In addition, in
December 1997 five-year options to purchase 200,000 shares were granted to
George R. Olexa, the Company's new Senior Vice President and Chief Technology
Officer, subject to shareholder approval of the Amendments. Of these options,
100,000 will be exercisable at $8.125, the fair market value on the date of the
grant, and 100,000 will be exercisable at $15.00 per share. In the event that
the shareholders do not approve the Amendments, these options granted to Mr.
Hirsch, Mr. Maxwell and Mr. Olexa will be void. On _________, 1998, the closing
price quoted on the Nasdaq National Market of a share of the Company's Common
Stock was $____.
Except as described with respect to Mr. Hirsch, Mr. Maxwell and Mr. Olexa,
no determination has been made (i) as to which individuals may in the future
receive options or rights under the amended Equity Incentive Plan, (ii) as to
the number of shares to be covered by any such options or rights granted to any
single individual, or (iii) as to the number of individuals to whom such options
or rights will be granted. The proceeds received by the Company from the sale of
stock pursuant to the Equity Incentive Plan will be used for the general
purposes of the Company, or in the case of the receipt of payment in shares of
Common Stock, as the Board of Directors may determine, including redelivery of
the shares received upon exercise of options.
Summary of the Equity Incentive Plan
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<PAGE>
The Equity Incentive Plan provides for the grant of incentive stock options
("ISOs"), non-qualified stock options ("NQSOs"), SARs, restricted stock,
unrestricted stock, deferred stock grants, and performance awards, loans to
participants in connection with awards, supplemental grants and combinations of
the above. The shares of Common Stock issuable under the Equity Incentive Plan
may also include provision for payment of dividend equivalents with respect to
the shares subject to the award.
Unless the Board of Directors otherwise determines, the Equity Incentive
Plan must be administered by a committee of the board consisting of at least two
directors (the "Committee"). The Equity Incentive Plan is currently administered
by the Compensation Committee of the Board of Directors. All employees of the
Company and any of its subsidiaries and other persons or entities (including
non-employee directors of the Company and its subsidiaries) who, in the opinion
of the Committee, are in a position to make a significant contribution to the
success of the Company or its subsidiaries, are eligible to participant in the
Equity Incentive Plan. As of January , 1998, the Company employed approximately
___ people.
Stock Options. The exercise price of an ISO granted under the Equity
Incentive Plan may not be less than 100% (110% in the case of 10% shareholders)
of the fair market value of the Common Stock at the time of grant. The exercise
price of a NQSO granted under the Equity Incentive Plan is determined by the
Committee. The term of each option may be set by the Committee but cannot exceed
ten years from grant (five years from grant in the case of an ISO granted to a
10% shareholder), and each option will be exercisable at such time or times as
the Committee specifies. The option price may be paid in cash or check
acceptable to the Company or, if permitted by the Committee and subject to
certain additional limitations, by tendering shares of Common Stock, by using a
promissory note, by delivering to the Company an unconditional and irrevocable
undertaking by a broker promptly to deliver sufficient funds to pay the exercise
price, or by a combination of the foregoing. At the request of an option holder,
if the market price of the shares of Common Stock subject to an option exceeds
the exercise price of the option at the time of exercise, the Committee may, in
its sole discretion, cancel the option and cause the Company to pay to the
person exercising the option in cash or Common Stock an amount equal to the
difference between the fair market value of the stock which would have been
purchased pursuant to the option and the aggregate exercise price which would
have been paid.
Stock Appreciation Rights. SARs may be granted either alone or in tandem
with stock option grants. Each SAR entitles the participant, in general, to
receive upon exercise, in cash or Common Stock, the excess of a share's fair
market value at the date of exercise over the share's fair market value on the
date the SAR was granted. The Committee may also grant SARs 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 an amount measured by specified
values or averages of values of the Common Stock prior to the change in control.
If a SAR is granted in tandem with an option, the SAR will be exercisable only
to the extent the option is exercisable. To the extent the option is exercised,
the accompanying SAR will cease to be exercisable, and vice versa. A SAR granted
in tandem with an ISO may be exercised only when the market price of Common
Stock subject to the option exceeds the exercise price of such option. SARs not
granted in tandem will be exercisable at such time, and on such conditions, as
the Committee may specify.
Stock Awards. The Equity Incentive Plan provides for awards of
nontransferable shares of restricted Common Stock subject to forfeiture as well
as of unrestricted shares of Common Stock. Awards may provide for acquisition of
restricted or unrestricted Common Stock for a purchase price specified by the
Committee, but in no event less than par value. Restricted Common Stock is
subject to repurchase by
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<PAGE>
the Company at the original purchase price or to forfeiture if no cash was paid
by the participant if the participant ceases to be an employee before the
restrictions lapse. Other awards under the Equity Incentive Plan may also be
settled with restricted Common Stock. Restricted securities will become freely
transferable upon the completion of the restricted period including the passage
of any applicable period of time and satisfaction of any conditions to vesting.
The Committee, in its sole discretion, may waive all or part of the restrictions
and conditions at any time.
The Equity Incentive Plan also provides for deferred grants entitling the
recipient to receive shares of Common Stock in the future, at such times and on
such conditions as the Committee may specify, and performance awards entitling
the recipient to receive cash or Common Stock following the attainment of
performance goals determined by the Committee. Performance conditions and
provisions for deferred stock may also be attached to other awards under the
Equity Incentive Plan.
A loan may be made under the Equity Incentive Plan either in connection
with the purchase of Common Stock under an award or with the payment of any
federal, state and local tax with respect to income recognized as a result of an
award. The Committee will determine the terms of any loan, including the
interest rate (which may be zero). No loan may have a term exceeding ten years
in duration. In connection with any award, the Committee may also provide for
and grant a cash award to offset federal, state and local income taxes or to
make a participant whole for certain taxes.
Except as otherwise provided by the Committee, if a participant dies,
options and SARs held by such participant immediately prior to death, to the
extent then exercisable, may be exercised by the participant's executor,
administrator or transferee during a period of one year following such death (or
for the remainder of their original term, if less). Except as otherwise
determined by the Committee, options and SARs not exercisable at a participant's
death terminate. Outstanding awards of restricted Common Stock must be
transferred to the Company upon a participant's death and, similarly, deferred
Common Stock grants, performance awards and supplemental awards to which a
participant was not irrevocably entitled prior to death will be forfeited,
except as otherwise determined by the Committee.
In the case of a termination of a participant's association with the
Company for reasons other than death, except as otherwise determined by the
Committee, options and SARs remain exercisable, to the extent they were
exercisable immediately prior to termination, for three months (or for the
remainder of their original term, if less), options and SARs not exercisable
immediately prior to termination will terminate, shares of restricted Common
Stock must be resold to the Company, and other awards to which the participant
was not irrevocably entitled prior to termination will be forfeited. If any such
association is terminated due to the participant's discharge for cause which, in
the opinion of the Committee, casts such discredit on the participant as to
justify immediate termination of any award under the Equity Incentive Plan, such
participant's options and SARs may be terminated immediately.
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 of the
Company's outstanding Common 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 of the Company's assets, (i) each outstanding
option and SAR will become immediately exercisable, (ii) each outstanding share
of restricted Common Stock will immediately become free of all restrictions and
conditions, (iii) all conditions on deferred grants, performance awards,
supplemental grants and other awards will be removed and (iv) all loans under
the Equity Incentive Plan will be forgiven. The Committee
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<PAGE>
may instead arrange to have the surviving or acquiring corporation or affiliate
assume any award held by a participant or grant a replacement award. If the
optionee is terminated after a change in control by the Company without cause,
or in the case of certain optionees designated from time to time by the
Committee who resign under certain circumstances within two years following a
change in control, all unvested options will vest, all options will be
exercisable for the shorter of four years or their original duration and all
other awards will vest.
Certain Federal Income Tax Consequences
The following discussion, which is based on the law as in effect on
November 1, 1997, summarizes certain federal income tax consequences associated
with stock option awards under the Equity Incentive Plan. This summary does not
purport to cover federal employment tax or other federal tax consequences, or
state, local or non-U.S. tax consequences, that may be associated with such
awards nor does it address the tax consequences associated with other awards
under the Equity Incentive Plan.
In general, an optionee will realize no taxable income and the Company will
not be entitled to claim a deduction upon the grant of a stock option under the
Equity Incentive Plan. The tax consequences associated with the exercise of a
stock option or the disposition of shares acquired upon exercise will depend in
part on whether the stock option is an ISO or an NQSO. In general, the exercise
of an ISO will not result in taxable income for regular income tax purposes or
in a deduction to the Company. If the optionee does not dispose of the shares
within two years from the date of grant or within one year after exercise, the
optionee will realize a long-term capital gain or loss upon a subsequent sale,
and the Company will not be entitled to a deduction. If an optionee disposes of
shares purchased under an ISO within these one- and two-year holding periods,
the optionee will realize ordinary income equal, in general, to the option
spread at time of exercise, and a corresponding deduction will be available to
the Company.
In general, on the exercise of an NQSO an optionee will realize ordinary
income equal to the option spread (subject to withholding, in the case of an
NQSO awarded to an employee), and a corresponding deduction will be available to
the Company. Any gain or loss recognized upon a subsequent sale of the shares
will be a capital gain or loss for which the Company will not be entitled to a
deduction. In general, an ISO that is exercised more than three months after
termination of employment will be treated as an NQSO, as will ISOs to the extent
they first become exercisable by an individual in any calendar year for shares
having a fair market value (determined as of the date of grant) in excess of
$100,000.
Special tax rules may defer the recognition or measurement of income
associated with the exercise of stock options under the Equity Incentive Plan,
or the disposition of shares acquired upon exercise, in those cases where the
shares are subject to a substantial risk of forfeiture.
Under Section 162(m) of the Internal Revenue Code, the Company may not
deduct more than $1 million for remuneration paid to any of its five highest
paid executive officers. Some types of remuneration are not subject to this
limit, including certain performance-based compensation. It is intended that
ISOs and NQSOs awarded under the Equity Incentive Plan, if granted with an
exercise price at least equal to the fair market value of the Common Stock on
the date of grant, will qualify for the performance-based exception from the $1
million deduction limitation.
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<PAGE>
Under the so-called "golden parachute" provisions of the Internal Revenue
Code, the vesting or accelerated exercisability of stock options in connection
with a change in control of the Company may be required to be valued and taken
into account in determining whether participants have received compensatory
payments, contingent on the change in control, in excess of certain limits. If
these limits are exceeded, a substantial portion of amounts payable to the
participant, including payments taken into account by reason of the grant,
vesting or exercise of options under the Equity Incentive Plan, may be subject
to additional federal tax and may be nondeductible to the Company.
Grants Under the Amended Equity Incentive Plan
The following table sets forth information with respect to the stock
options granted to date under the Equity Incentive Plan as proposed to be
amended, subject to shareholder approval of the Amendments.
<TABLE>
<CAPTION>
Equity Incentive Plan as Proposed to be Amended
Name and Position Number of Provisional Options
- ----------------- -----------------------------
<S> <C>
Henry C. Hirsch.................................................................... 545,000
Chief Executive Officer
William J. Maxwell................................................................. 500,000
Executive Vice President, Strategic Planning, Marketing & Sales
George R. Olexa.................................................................... 200,000
Senior Vice President, Chief Technology Officer
Executive Officer Group (3 persons)................................................ 1,245,000
</TABLE>
The Board of Directors Recommends a Vote "FOR" the approval of the Amendments to
the Restated Equity Incentive Plan
APPROVAL OF 1997 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
Proposal
The Board of Directors has adopted and is submitting to shareholders for
their approval the 1997 Equity Incentive Plan for Non-Employee Directors (the
"1997 Directors Plan"). The 1997 Directors Plan is designed to advance the
Company's interest by enhancing its ability to attract and retain non-employee
directors who are in a position to make significant contributions to the success
of the Company and to align the interest of those directors more closely with
stockholders. The 1997 Directors Plan will replace the 1996 Non-Employee
Directors Incentive Stock Option Plan ("1996 Directors Plan"). The Board of
Directors adopted the 1997 Directors Plan to align the equity compensation of
the board with that of comparable companies, to permit each eligible director to
elect to receive his or her directors fees in stock instead of cash and to take
advantage of additional flexibility provided by revised federal regulation.
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<PAGE>
Of the 500,000 shares to be authorized for issuance under the 1997
Directors Plan, initial options of 20,000 shares at $8.875 were granted to each
of the Company's five non-employee directors subject to shareholder approval of
the 1997 Directors Plan. In addition, ___ directors elected to receive stock in
lieu of fees for 1998 under the 1997 Directors Plan also subject to shareholder
approval.
Material Differences from 1996 Directors Plan
The material differences between the 1997 Directors Plan and the 1996
Directors Plan are that (i) the 1997 Directors Plan gives eligible directors
initial grants of options to purchase 20,000 shares where the 1996 Directors
Plan gave initial grants of options to purchase 2,600 shares; (ii) the 1997
Directors Plan gives eligible directors annual grants of options to purchase
7,000 shares where the 1996 Directors Plan gave annual grants of options to
purchase 2,200 shares; (iii) the 1997 Directors Plan gives the Directors
Committee (as defined below) the ability to grant additional Discretionary
Options (as defined below); (iv) the 1997 Directors Plan gives eligible
directors the option to take their fees as deferred stock rather than cash; (v)
the 1997 Directors Plan may be amended by the Directors Committee in any way
permitted by law that does not adversely affect a person's rights under the
plan, and (vi) the 1997 Directors Plan limits the total number of shares that
can be issued under the plan to 500,000 shares, rather than 75,000 under the
1996 Directors Plan.
Description of the 1997 Directors Plan
The following summary is qualified in its entirety by the full text of the
1997 Directors Plan that appears as Exhibit A to this Proxy Statement. The 1997
Directors Plan will be administered by the compensation committee or other
committee of the Board of Directors designated by the board for that purpose
(the "Directors Committee"). Pursuant to the 1997 Directors Plan, each currently
eligible director automatically has been granted an initial option to purchase
20,000 shares of Common Stock, subject to shareholder approval of the 1997
Directors Plan. Each eligible director elected thereafter to the Board of
Directors will be granted an initial option of 20,000 shares on the day he or
she is first elected a director. At each annual meeting at which an eligible
director is reelected or is continuing as a director, he or she will be granted
an option to purchase 7,000 shares of Common Stock. The options described in
this paragraph are referred to as "Formula Options." These Formula Options shall
have an exercise price of 100% of the fair market value of the Common Stock on
the date of the grant. The Formula Options will expire five years after the date
of grant and will become exercisable to the extent of one-third of the shares
covered thereby on the day before each of the first, second and third annual
stockholders meeting following the date of grant. Eligible directors are those
directors who are not employees of the Company and currently include all
directors except Henry C. Hirsch and Vernon L. Fotheringham.
In addition to Formula Options, the Directors Committee also has the
authority to award options to eligible directors in such amounts and on such
terms as it determines. These options are referred to as "Discretionary
Options." The exercise price of the Discretionary Options will be set by the
Directors Committee and will become exercisable and expire as the Directors
Committee determines (but no options shall expire later than 10 years from the
date of grant).
The exercise price of any option granted under the 1997 Directors Plan may
be paid in cash or check, bank draft or money order, by tendering shares of
Common Stock having a fair market value equal
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to the exercise price, by delivering an undertaking by a broker to deliver
promptly sufficient funds to pay the exercise price or by any combination of the
foregoing. At the request of an option holder, and if the market price of the
shares of Common Stock subject to an option exceeds the exercise price of the
option at the time of exercise, the Directors Committee may, in its sole
discretion, cancel the option and cause the Company to pay to the person
exercising the option in cash or Common Stock an amount equal to the difference
between the fair market value of the stock which would have been purchased
pursuant to the option and the aggregate exercise price which would have been
paid. Each option will be non-transferable except to the eligible director's
immediate family members and by will or the laws of descent and distribution.
If a director dies, or otherwise ceases to be a director, all options not
then exercisable will immediately terminate, unless the Board of Directors
otherwise determines. Any exercisable options will remain exercisable for a
period of one year following death or three months following other termination
of the individual's status as a director, but in no event beyond the fifth
anniversary of the date of grant in the case of Formula Options and beyond the
tenth anniversary of the date of the grant in the case of Discretionary Options.
Upon a merger or consolidation of the Company, or series of transactions of
which such a merger or consolidation is a part, which results in the
stockholders of the Company immediately prior to such transaction or series of
transactions beneficially owning less than a majority of the outstanding voting
securities of the surviving entity immediately following such transaction or
series of transactions or which results in a single person or entity or group of
persons or entities acting in concert owning at least a majority of the
outstanding voting securities of the surviving entity immediately following such
transaction or series of transactions, a sale, transfer, lease or other
conveyance of all or substantially all of the Company's assets in a transaction
or series of transactions, or a dissolution or liquidation of the Company, all
options not at the time exercisable will become exercisable, and then all
unexercised options will terminate upon the consummation of the transaction.
However, in lieu of termination, the Board of Directors may cause the acquiring
or surviving corporation to assume all options outstanding under the 1997
Directors Plan or provide replacement options for such options on substantially
the same terms as are provided by the 1997 Directors Plan, with any necessary
adjustments.
In addition to the option grants, the 1997 Directors Plan allows each
eligible director to elect annually in advance to receive his or her fees in the
form of deferred grants of Common Stock, rather than cash, payable on the
earlier of (i) the first business day of the third January following the date of
grant, (ii) a change of control of the Company or (iii) the date the eligible
director ceases to be a director of the Company. Each eligible director shall
receive a deferred stock award in lieu of any annual retainer fee to which such
eligible director is entitled (an "Annual Fee") and a deferred stock award in
lieu of any fees to which such eligible director is entitled with respect to any
meeting of the Board of Directors or any committee thereof (a "Meeting Fees").
The number of shares of Common Stock subject to a Deferred Stock Award shall be
that number of shares of Common Stock the fair market value of which is equal,
in the case of the Annual Fee, to the amount of such Annual Fee on the first
business day of the calendar year for which such Annual Fee is payable, and in
the case of a Meeting Fee, to the amount of such Meeting Fee on the date of
meeting for which such Meeting Fee is payable. See "Compensation -- Director
Compensation" for a description of fees.
A total of 500,000 shares of Common Stock has been reserved for issuance
under the 1997 Directors Plan, subject to adjustment for stock splits and
similar events.
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Certain Federal Income Tax Consequences
For federal income tax purposes, options under the 1997 Directors Plan are
treated as NQSOs. The tax consequences associated with the grant and exercise of
such options are similar to those described above for NQSOs under "Approval of
Amendments to the Restated Equity Incentive Plan -- Certain Federal Income Tax
Consequences."
1997 Directors Plan Benefits
The table below sets forth information with respect to the stock options
and deferred stock granted to date pursuant to the 1997 Directors Plan, subject
to shareholder approval:
<TABLE>
<CAPTION>
1997 Directors Plan
Name and Position Number of Provisional Options
- ----------------- -----------------------------
<S> <C>
Non-Executive Officer, Non Employee Director Group (5 persons) 100,000
</TABLE>
The Board of Directors Recommends a Vote "FOR" Approval of the 1997 Directors
Plan.
COMPENSATION
Executive Compensation
The following table sets forth information with respect to compensation
paid to or accrued in each of the last three completed fiscal years, if
applicable, on behalf of the Chief Executive Officer and each of the four other
most highly paid executive officers of the Company who were serving as executive
officers on December 31, 1997 and one other individual who would have been one
of the four most highly paid executive officers of the Company but for the fact
that he was not serving as an executive officer on December 31, 1997 (each a
"Named Executive Officer"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
---------------------------
Annual Compensation Securities
--------------------------- Underlying All Other
Year Salary Bonus Options(#) Compensation
---- ------ ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Henry C. Hirsch (1)
Chairman, President and Chief
Executive Officer 1997 800,000 $300,000(2)
1996 -- -- -- --
1985 -- -- -- --
Vernon L. Fotheringham (3)
Vice Chairman 1997 -- --
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 $250,000 -- -- --
1995 $90,000 -- -- --
Thomas A. Grina
Chief Operating Officer,
Executive Vice President and
Chief Financial Officer 1997 181,818
1996 $122,190(4) -- 181,818 $25,000(5)
1995 -- -- -- --
James D. Miller
Senior Vice President, 1997 36,364
Sales and Marketing 1996 $135,000 -- 36,364 --
1995 -- -- 18,182 --
Richard A. Shields Jr.(6)
Senior Vice President,
Technical Operations 1997 72,545
1996 $93,777(4) -- -- --
1995 -- -- -- --
Thomas M. Walker
Vice President,
General Counsel 1997 35,000
1996 $44,736(4) $10,625 7,273 $2,943(7)
1995 -- -- -- --
</TABLE>
- -------------------
(1) Mr. Hirsch joined the Company in November 1997.
(2) Reflects relocation expenses.
(3) Mr. Fotheringham resigned his position as Chairman, President and Chief
Executive Officer and was elected Vice Chairman of the Company effective
November 1997.
(4) Reflects compensation for a partial year. See "--Employment Agreements."
(5) Reflects the reimbursement of moving expenses.
(6) Mr. Shields ceased being an executive officer of the Company in December
1997 and his employment with the Company terminated effective January 15,
1998.
(7) Reflects the reimbursement of moving expenses.
COMMON STOCK OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of December 17, 1997 by (i)
the Named Executive Officers, (ii) each director of the Company, (iii) all
executive officers and directors of the Company as a group and (iv) each person
(including any "group" as that term is used in Section 13(d)(3) of the Exchange
Act) known to the Company to be the beneficial owner of more than five percent
of the outstanding Common Stock. Except as noted below, each of the persons
listed has sole investment and voting power with respect to the shares
indicated:
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Name and Position Number Percent
----------------- ------ -------
<S> <C> <C>
Advent International Corporation (1)............. 1,321,511 6.2%
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C> <C>
Columbia Capital Corporation (2)................. 2,719,978 12.7%
Commco, L.L.C. (3)............................... 2,848,577 13.3%
Landover Holdings Corporation (4)................ 1,736,674 8.1%
James C. Cook (5)................................ 56,969 *
Mark C. Demetree (6)............................. 386,942 1.8%
Andrew I. Fillat (7)............................. 5,728 *
Vernon L. Fotheringham........................... 1,289,114 6.0%
Thomas A. Grina (8).............................. 72,728 *
Henry C. Hirsch.................................. 100,000 *
James D. Miller (9).............................. 16,364 *
James B. Murray, Jr. (10)........................ 62,523 *
Alan Z. Senter (11).............................. 3,734 *
Richard A. Shields, Jr.(12)...................... 13,637 *
Thomas M. Walker(13)............................. 8,750 *
Laurence S. Zimmerman (4)........................ 1,736,674 8.1%
All executive officers and directors
as a group (14)............................... 1,500,593 7.0%
</TABLE>
- -------------------
Unless otherwise indicated, the business address of each director and executive
officer named above is c/o Advanced Radio Telecom Corp., 500 108th Avenue NE,
Suite 2600, Bellevue, Washington 98004.
*Less than 1.0%.
(1) Includes 1,189,673 shares, 1,149 shares and 58,143 shares of Common Stock
and 69,107 shares, 58 shares and 3,381 shares of Common Stock issuable upon
exercise of warrants, respectively, owned by Global Private Equity II,
L.P., Advent International Investors II Limited Partnership and Advent
Partners Limited Partnership (collectively, the "Advent Partnerships"),
each a limited partnership whose general partner is controlled by Advent
International Corporation ("Advent"). Mr. Fillat is an officer of Advent.
The address of Advent and each of the Advent Partnerships is 101 Federal
Street, Boston, Massachusetts 02110.
(2) Includes 62,173 shares of Common Stock issuable upon exercise of warrants
owned by Columbia Capital Corporation ("Columbia Capital") and includes
2,350,310 shares, 171,060 shares and 136,435 shares owned by CCC Millimeter
L.P. ("CCC Millimeter"), Columbia Millimeter Communications, L.P.
("Millimeter") and Columbia Capital, respectively. Columbia Capital, as the
sole general partner of CCC Millimeter and Millimeter, has the power to
vote and dispose of the Common Stock held by CCC Millimeter and Millimeter.
Robert Blow, Mark J. Kington, David P. Mixer, James B. Murray and Mark R.
Warner share investment control of the shares held by such entities and may
be deemed to beneficially own such shares. Each of Messrs. Blow, Kington,
Mixer, Murray and Warner disclaims beneficial ownership of the shares held
by such entities, except to the extent of such individual's interest in
such entities. The address of each of Columbia Capital, CCC Millimeter and
Millimeter is 0 Court Square, P.O. Box 1465, Charlottesville, VA 22902
(3) Includes 54,191 shares of Common Stock issuable upon exercise of warrants.
The address of Commco, L.L.C. is 4513 Pin Oak Court, Sioux Falls, SD 57103.
(4) All of such securities are held in the Landover Voting Trust (as defined
below). Includes 15,672 shares of Common Stock issuable upon exercise of
warrants. Does not include 36,364 shares of Common Stock beneficially owned
by the wife of and 36,364 shares of Common Stock beneficially owned by a
family trust of Laurence S. Zimmerman, of which shares Landover Holdings
Corporation ("LHC") and Mr. Zimmerman disclaim beneficial ownership. LHC is
controlled by Mr. Zimmerman. LHC's address is 156 W. 56th Street, Suite
2000, New York, New York 10019. See "--Voting Trust Agreement."
(5) Includes 8,000 shares of Common Stock issuable upon exercise of
warrants and 1,601 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of January 1, 1998.
(6) Includes 3,201 shares of Common Stock beneficially issuable upon exercise
of options exercisable within 60 days of January 1, 1998. Does not include
117,999 shares of Common Stock issuable upon exercise of warrants or
1,534,964 shares of Common Stock beneficially owned in each case by members
of Mr. Demetree's family or a trust for their benefit, of which he
disclaims beneficial ownership. Mr. Demetree's address is 3740 Beach Blvd.,
Suite 306, Jacksonville, FL 32207.
-13-
<PAGE>
(7) Includes 1,601 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of January 1, 1998. Does not include shares of
Common Stock and shares of Common Stock issuable upon exercise of warrants
held by the Advent Partnerships, of which Mr. Fillat disclaims beneficial
ownership, except for 2,495 shares of Common Stock and 32 shares issuable
upon exercise of warrants.
(8) Includes 45,455 shares of Common Stock issuable upon exercise of
options exercisable within 60 days of January 1, 1998.
(9) Includes 16,364 shares of Common Stock issuable upon exercise of an option
exercisable within 60 days of January 1, 1998.
(10) Includes 1,734 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of January 1, 1998 Mr. Murray is a Managing
Director of Columbia Capital Corporation. Excludes shares held by Columbia
Capital, CCC Millimeter and Millimeter. See Footnote 2. Mr. Murray's
address is c/o Columbia Capital Corporation, 0 Court Square, P.O. Box 1465,
Charlottesville, VA 22902.
(11) Includes 5,684 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of January 1, 1998.
(12) Includes 3,637 shares of Common Stock issuable upon conversion of stock
options exercisable within 60 days of January 1, 1998.
(13) Includes 8,750 shares of Common Stock issuable upon conversion of
stock options exercisable within 60 days of January 1, 1998.
(14) Includes 74,206 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of January 1, 1998. Does not include 2,894,046
shares of Common Stock held in the Landover Voting Trust by trustees, all
of whom are directors of the Company and do not have beneficial ownership
of such shares. See "--Voting Trust Agreement."
Voting Trust Agreement
Pursuant to a Voting Trust Agreement dated November 5, 1996, LHC and the
wife of and a trust for the benefit of the family of Laurence S. Zimmerman
deposited all of their shares of Common Stock in trust (the "Landover Voting
Trust") with Messrs. Demetree, Fillat and Fotheringham as trustees with
irrevocable instructions to vote such shares on all matters submitted to a vote
of the stockholders of the Company in proportion to, or in certain cases,
consistent with the majority of, the vote of other stockholders of the Company.
The voting trust will expire on November 5, 2006, but is subject to early
termination in the event of (i) a business combination in which the Company
stockholders own less than 50%, and the Company directors constitute less than
50% of the Board of Directors, of the combined entity and LHC owns less than 5%
of the voting power of such entity, (ii) the death of Mr. Zimmerman or (iii) the
sale by LHC of such shares to unaffiliated parties. The trustees of the trust
will be indemnified by the Company. LHC retains the right to pledge or dispose
of the Common Stock to third parties. Any such shares of Common Stock
transferred to an affiliate of LHC will remain subject to the terms of the
Landover Voting Trust. Any such shares of Common Stock transferred to parties
not affiliated with LHC will be released from the Landover Voting Trust.
-14-
<PAGE>
Option Grants.
The following table sets forth certain information regarding stock
option grants made to the Named Executive Officers during the fiscal year ended
December 31, 1997. No grants were made during 1997 to Mr. Fotheringham.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
---------------------------------------------- Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation for
Underlying Granted to Option Term (1)
Options Employees in Exercise Price Expiration --------------------
Name Granted Fiscal Year per Share (2) Date 5% 10%
----- ------- ------------ -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Hirsch 600,000 $8.825 10/17/02 $1,462,991 $3,295,000
200,000 12.50 10/17/02 $0 $342,550
Thomas A. Grina 46,848 7.125 8/21/02 $92,221 $203,783
181,818 7.875 7/30/02 $395,584 $874,138
James D. Miller 36,364 7.875 7/30/02 $79,118 $174,830
Richard A. Shields, Jr.(3) 54,545 7.875 7/30/02 $118,674 $262,240
Thomas M. Walker 35,000 7.875 7/30/02 $76,150 $168,272
</TABLE>
- --------------------
(1) The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option.
(2) On July 31, 1997, the Board of Directors canceled certain options granted
under the Equity Incentive Plan and issued new options in lieu thereof with
a lower exercise price of $7.875, the fair market value of the Common Stock
on that date.
(3) Of these options, 36,545 will terminate on January 15, 1998 and 18,000 will
terminate January 15, 2000.
Aggregate Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.
The following table sets forth the number and value as of December 31, 1997
of shares underlying unexercised options held by each of the Named Executive
Officers. As of December 31, 1997, Mr. Fotheringham held no options and no stock
options had been exercised by any of the Named Executive Officers.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at In-the-Money-Options at
Fiscal Year End Fiscal Year End(1)
--------------------------------------- -----------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Henry C. Hirsch 800,000
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C> <C>
Thomas A. Grina 45,455 183,211
James D. Miller 16,364 38,182
Richard A. Shields 13,637 40,908
Thomas M. Walker 8,750 26,250
</TABLE>
- ----------------
(1) Based on the last sales price of the Company's Common Stock reported on the
Nasdaq National Market on December 31, 1997 of $_________ per share, less
the exercise price payable upon exercise of such options.
Director Compensation
Each director who is not a full-time employee of the Company or one of its
subsidiaries receives $4,000 per year for services rendered as a director, $500
for each board meeting attended and $500 for each committee meeting attended.
In addition to cash fees for services rendered and attendance at board
meetings, non-employee directors have been eligible to participate in the 1996
Directors Plan and, if approved by the shareholders at the Meeting, will be
eligible instead to participate in the 1997 Directors Plan. See "Approval of
1997 Equity Incentive Plan for Non-Employee Directors" for a description of such
plans.
Employment Agreements
On October 17, 1997, the Company entered into an employment agreement with
Henry C. Hirsch, providing for full-time employment as Chairman, President and
Chief Executive Officer through December 31, 2000 at a salary at the annual rate
of $325,000 for 1997 and 1998, $350,00 for 1999 and $400,000 for 2000. Under the
agreement, Mr. Hirsch is guaranteed an annual bonus of at least $54,167 for
1997, $325,000 for 1998 and $87,500 for 1999. The agreement further provides
that Mr. Hirsch's annual targeted bonus for years other than 1997 and 1998 will
be not less than 50% of his base salary, and that his maximum incentive bonus
will be 100% of his base salary, pursuant to such bonus or incentive
compensation plan as is available to executives of the Company generally or, if
there is no such plan, as determined by the Board or Directors based on
performance criteria set annually. Pursuant to the agreement, Mr. Hirsch was
granted five-year stock options under the Equity Incentive Plan for an aggregate
of 800,000 shares of Common Stock, of which 600,000 will be exercisable at
$8.875 per share, the fair market value on the day of the grant, and 200,000
will be exercisable at $12.50 per share. Mr. Hirsch was also granted 100,000
shares of deferred Stock deliverable on January 2, 2001. The Company also loaned
Mr. Hirsch $887,500 to purchase 100,000 shares of Company Common Stock at $8.875
per share with interest at the minimum applicable federal rate, payable over
five years and secured by the shares purchased. The Company has also agreed to
pay Mr. Hirsch $300,000 for relocation expenses. The agreement precludes Mr.
Hirsch from competing with the Company for two years after the cessation of his
employment or a period equal to the length of his employment up to two years if
he is terminated without cause. The agreement may be terminated at any time by
either party and provides that, if the Company terminates Mr. Hirsch without
cause, Mr. Hirsch's employment is terminated due to his disability or death, or
Mr. Hirsch terminates his employment as a result of constructive termination,
Mr. Hirsch will be entitled to continue to receive the full amount of his base
salary and bonus (at the guaranteed amount for 1997 and 1998 and at the target
amounts for 1999 and 2000) for the remainder of the agreement term
-16-
<PAGE>
or, if Mr. Hirsch is terminated after December 31, 1999, to be paid his base
salary and target bonus in effect for 2000 for twelve months. Upon such
termination, Mr. Hirsch will also be entitled to receive for the remainder of
the employment term, but no less than twelve months and no more than eighteen
months following termination, medical and term life insurance. In addition, all
options granted to Mr. Hirsch not yet vested will vest and remain exercisable
for the lesser of one year or their original term.
On October 17, 1997, the Company also entered into a Change of Control
Agreement with Mr. Hirsch entitling him to certain benefits if his employment
with the Company is terminated, other than for cause or his disability or death,
or if he resigns for good reason within 24 months of any change of control of
the Company. Upon such a termination, the agreement provides that: (i) the
Company will pay Mr. Hirsch a cash payment equal to his annual base salary at
the time of termination, to the extent not theretofore paid for the year, plus a
prorated portion of his maximum incentive bonus for the year and any accrued and
unpaid vacation pay; (ii) any stock, stock option or other awards granted to Mr.
Hirsch by the Company will immediately vest and become exercisable in full and
shall remain exercisable for the lesser of four years or their original term;
(iii) the Company will pay to Mr. Hirsch a cash payment equal to the greater of
(a) Mr. Hirsch's aggregate base salary plus maximum incentive compensation for
the period from termination through December 31, 2000 and (b) two times his base
salary rate at the date of termination plus either his maximum incentive
compensation for the year in which termination occurs or his maximum incentive
compensation in effect immediately prior to the change of control (whichever is
higher); (iv) the Company will continue to insure Mr. Hirsch and his dependents
in the Company's life and medical insurance plans for up to two years after
termination; and (v) Mr. Hirsch will be entitled to return the 100,000 shares of
Common Stock pledged to secure the promissory note described above in full
satisfaction of the promissory note if the fair market value of the Common Stock
is less than the amount due on the note.
The Company's employment agreement with Mr. Fotheringham provides for his
full-time employment as Vice Chairman at an annualized base salary of $275,000
for 1997 and $300,000 for 1998. Under the agreement, Mr. Fotheringham is
entitled to receive an annual bonus of up to $100,000 depending on the
achievement of specified annual link installation goals to be established based
on the operating budget approved by the Board of Directors. Under an October
1997 amendment to his employment agreement, Mr. Fotheringham shall receive a
guaranteed bonus of $50,000 for 1997. The agreement precludes Mr. Fotheringham
from competing with the Company for one year after the cessation of his
employment, regardless of the reason for such cessation.
On August 21, 1997, the Company entered into a two-year employment
agreement with Thomas A. Grina, providing for full-time employment as Executive
Vice President and Chief Operating Officer at an annualized base salary of
$210,000 for 1997, $235,000 for 1998 and $258,000 for 1999. Under the Agreement,
Mr. Grina is eligible for an annual target incentive bonus of not less than 50%
of his annual salary. The agreement precludes Mr. Grina from competing with the
Company for one year after the cessation of his employment. The agreement may be
terminated by either party and provides that, if Mr. Grina's employment is
terminated by the Company other than for cause or by Mr. Grina as a result of
constructive termination, Mr. Grina will be entitled to receive an amount equal
to twelve months of his base salary and bonus in effect at his termination and
continuation of benefits to which he would have otherwise been entitled for a
period of twelve months from the date of such termination, and all options
granted to Mr. Grina shall vest and remain exercisable for three years.
-17-
<PAGE>
The Company's employment agreement with James D. Miller provides for
full-time employment at an annual base salary of $150,000 and an annual bonus in
designated amounts based upon the achievement of specified performance goals.
The agreement has a term of three years expiring January 1999 and precludes him
from competing with the Company for one year after the cessation of employment.
The employment agreement may be terminated at any time by the Company or Mr.
Miller and provides that, if the Company terminates Mr. Miller's employment
without cause or his employment is terminated due to his disability or death,
Mr. Miller will receive the full amount of his base salary and any other
benefits to which he would have otherwise been entitled for a period of six
months from the date of such termination.
The Company's employment agreement with Richard A. Shields provided for
full-time employment at an annual base salary of $110,000 and an annual bonus in
designated amounts based on the achievement of specified performance goals. The
agreement precludes him from competing with the Company for one year after the
cessation of employment. The Company has terminated the agreement effective
January 15, 1998. Mr. Shields is entitled to salary and benefit continuation for
three months from the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Demetree, Murray and Fotheringham served on the Compensation
Committee during 1997. Mr. Fotheringham is an executive officer and employee of
the Company.
QUORUM, REQUIRED VOTES AND
METHOD OF TABULATION
Consistent with Delaware law and under the Company's by-laws, a majority of
the shares entitled to vote on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Meeting will be counted by an election inspector
appointed by the Company for the meeting. The affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote and
present at the meeting in person or by proxy is necessary to approve each of the
Amendments and the 1997 Directors Plan. The election inspector will count shares
represented by proxies that reflect abstentions and "broker non-votes" (i.e.,
shares represented at the meeting held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a quorum, but
broker non-votes will not have any effect on the outcome of the voting, and
abstentions will be counted as votes against approval of the Amendments and the
1997 Directors Plan.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the
Meeting which is not referred to in the accompanying Notice of Special Meeting
of Stockholders. However, should any such matters be presented, the persons
named in the enclosed proxy will have discretionary authority to take such
action in regard to such matters as in their judgment seems advisable.
-18-
<PAGE>
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 filed with the Securities and Exchange Commission is available
without charge by writing to the Company at: Advanced Radio Telecom Corp.; 500
108th Avenue, NE; Suite 2600; Bellevue, Washington, 98004; Attn: Shareholder
Relations.
-19-
<PAGE>
EXHIBIT A
ADVANCED RADIO TELECOM CORP.
1998 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1998 Equity Incentive Plan for Non-Employee Directors
(the "Plan") is to advance the interests of Advanced Radio Telecom Corp. (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant contributions
to the success of the Company and to align the interests of those directors more
closely with those of the stockholders.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan shall be administered by the Compensation Committee of the
Board or such other committee of the Board designated by the Board for that
purpose (the "Committee"). If the Board shall determine that the Plan shall be
administered by the entire Board, the references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan, (b) to prescribe the form or forms of instruments
evidencing options and any other instruments required under the Plan and to
change such forms from time to time; (c) to adopt, amend and rescind rules and
regulations for the administration of the Plan; and (d) to interpret the Plan
and to decide any questions and settle all controversies and disputes that may
arise in connection with the Plan. Such determinations of the Committee shall be
conclusive and shall bind all parties.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective on October 16, 1997, the date on which the
Plan was approved by the Board of Directors of the Company, subject to approval
by the stockholders of the Company. After October 16, 2007, no option shall be
granted under the Plan, but options previously granted may extend beyond that
date. No elections may be made, and no Deferred Stock Awards shall be granted,
pursuant to Section 7 with respect to Fees for services rendered after December
31, 2007.
4. SHARES SUBJECT TO THE PLAN
a. Number of Shares. Subject to adjustment as provided in Section 4(c), the
aggregate number of shares of Common Stock of the Company ("Stock") that may be
delivered upon the exercise of options or pursuant to Deferred Stock Awards
granted under the Plan shall be 500,000. If any option granted under the Plan
terminates without having been exercised in full, the number of shares of Stock
as to which such option was not exercised shall be available for future grants
within the limits set forth in this Section 4(a).
b. Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
-20-
<PAGE>
c. Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock occurring after the effective date of the Plan, the number and kind of
shares of stock or securities of the Company subject to options then outstanding
or subsequently granted under the Plan, the maximum number of shares or
securities that may be delivered under the Plan, the exercise price, and other
relevant provisions shall be appropriately adjusted by the Committee, whose
determination shall be binding on all persons.
The Committee may also adjust the number of shares subject to outstanding
awards and the exercise price and the terms of outstanding awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, consolidations or mergers (except those described in
Section 6(j)), acquisitions or dispositions of stock or property or any other
event if it is determined by the Board that such adjustment is appropriate to
avoid distortion in the operation of the Plan.
5. ELIGIBILITY FOR THE PLAN
Directors who are not employees of the Company or any subsidiary of the
Company ("Eligible Directors") shall be eligible to receive options and Deferred
Stock Awards under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
a. Formula Options. On October 16, 1997, each Eligible Director shall be
granted an initial option to purchase 20,000 shares of Stock, subject to
approval of this Plan by the stockholders, and each Eligible Director elected to
the Board thereafter shall be granted an initial option to purchase 20,000
shares of Stock on the day on which he or she is first elected a Director. At
each annual meeting subsequent to the date on which the initial grant was made
to an Eligible Director and at which such Eligible Director is reelected or is
continuing as a director, he or she shall be granted an additional option to
purchase 7,000 shares of Stock. The options awarded under this paragraph (a) are
referred to as "Formula Options." The grant of Formula Options shall not require
any action by the Committee.
b. Discretionary Options. The Committee shall also have the authority under
this Plan to award options to purchase Stock to Eligible Directors in such
amounts and on such terms not inconsistent with this Plan as it shall determine
at the time of the award. The Options awarded under this paragraph (b) are
referred to herein as "Discretionary Options."
c. Exercise Price. The exercise price of each Formula Option shall be 100%
of the Fair Market Value (as defined below) per share of the Stock on the date
the option is granted. The exercise price of each Discretionary Options shall be
set by the Committee. In no event, however, shall the option price of any option
be less, in the case of an original issue of authorized stock, than par value
per share. For purposes of this paragraph, (A) the "Fair Market Value" of a
share of Stock on any date shall be the Closing Price or, if there was no
Closing Price on such day, the latest day prior thereto on which there was a
Closing Price; and (B) the "Closing Price" of the Stock on any business day will
be the last sale price as reported on the principal market on which the Stock is
traded or, if no last sale is reported, then the mean between the highest bid
and lowest asked prices on that day.
d. Duration of Options. The latest date on which an option may be exercised
(the "Final Exercise Date") shall be (i) in the case of Formula Options, the
date which is five years from the date the Option
-21-
<PAGE>
was granted and (ii) in the case of Discretionary Options, such date as the
Committee may determine, but in no event later than ten years from the date the
Option was granted.
e. Exercise of Options.
i. Each Formula Option shall become exercisable to the extent of
one-third of the shares covered thereby on the day before each of the
first, second and third annual meeting of stockholders following the date
of grant Each Discretionary Option shall become exercisable at such time or
times as the Committee shall determine.
ii. Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by (i)
any documentation required by the Committee and (ii) payment in full for
the number of shares for which the option is exercised.
iii. If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will, the applicable laws of descent and
distribution or pursuant to Section 6(g) below, the Company shall be under
no obligation to deliver Stock pursuant to such exercise until the Company
is satisfied as to the authority of the person or persons exercising the
option.
f. Payment for and Delivery of Stock. Stock purchased upon exercise of
options under the Plan shall be paid for as follows: (i) 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; (ii)
through the delivery of shares of Stock (which, in the case of shares of Stock
acquired from the Company, have been outstanding for at least six months) having
a fair market value on the last business day preceding the date of exercise
equal to the exercise price; (iii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the purchase price; or (iv) by any combination of the
foregoing permissible forms of payment; provided, that if the Stock delivered
upon exercise of the option is an original issue of authorized Stock, at least
so much of the exercise price as represents the par value of such Stock shall be
paid other than with a personal check of the option holder.
g. Discretionary Payments. If (i) the market price of shares of Stock
subject to an option 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 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.
h. Death. Except as otherwise determined by the Board, upon the death of
any Eligible Director, all options not then exercisable shall terminate. All
options held by the director that are exercisable immediately prior to death may
be exercised by his or her executor or administrator, or by the person or
persons to whom the option is transferred by will or the applicable laws of
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descent and distribution or pursuant to Section 6(g), at any time within one
year after the director's death (subject, however, to the limitations of Section
6(c) regarding the maximum exercise period for such option). After completion of
that one-year period, such options shall terminate to the extent not previously
exercised.
i. Other Termination of Status of Director. If a director's service with
the Company terminates for any reason other than death, all options held by the
director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)). After completion of that
three-month period, such options shall terminate to the extent not previously
exercised, expired or terminated.
j. Mergers, etc. In the event of a merger or consolidation of the Company,
or series of transactions of which such a merger or consolidation is a part,
which results in the stockholders of the Company immediately prior to such
transaction or series of transactions beneficially owning less than a majority
of the outstanding voting securities of the surviving entity immediately
following such transaction or series of transactions or which results in a
single person or entity or group of persons or entities acting in concert owning
at least a majority of the outstanding voting securities of the surviving entity
immediately following such transaction or series of transactions, a sale,
transfer, lease or other conveyance of all or substantially all of the Company's
assets in a transaction or series of transactions, or a dissolution or
liquidation of the Company, all options hereunder will terminate; provided, that
immediately prior to the consummation of any such transaction described above,
all options outstanding hereunder that are not otherwise exercisable shall
become immediately exercisable, and provided, further, that in lieu of
termination, the Board may cause the acquiring or surviving corporation to
assume all Options outstanding under this Plan, or provide replacement options
for such options on substantially the same terms as are provided by this Plan,
with such adjustments to the number of shares covered by such Options and the
exercise price thereof as may be necessary to reflect the exchange ratio
provided for in the merger or consolidation and with such other changes as are
necessary to permit the options to remain exercisable and outstanding after the
effective date of such merger or consolidation despite the termination of the
Eligible Director's service as a director of the Company.
7. DEFERRED STOCK GRANT IN LIEU OF FEES
a. Deferred Stock Grants. Each Eligible Director who shall have so elected
(pursuant to the procedures below) shall be granted irrevocable rights to
receive shares of Stock to be delivered in the future ("Deferred Stock Awards")
in lieu of the cash fees that would otherwise be payable to such Eligible
Director. Each Eligible Director shall receive a Deferred Stock Award in lieu of
any annual retainer fee to which such Eligible Director is entitled ("Annual
Fee") and a Deferred Stock Award in lieu of any fees to which such Eligible
Director is entitled with respect to any meeting of the Board or any committee
thereof ("Meeting Fees"). The number of shares of Stock
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subject to a Deferred Stock Award shall be that number of shares of Stock the
Fair Market Value of which is equal, in the case of the Annual Fee, to the
amount of such Annual Fee on the first business day of the calendar year for
which such Annual Fee is payable, and in the case of a Meeting Fee, to the
amount of such Meeting Fee on the date of meeting for which such Meeting Fee is
payable. The grant of Deferred Stock Awards shall not require any action by the
Committee.
b. Issuance of Deferred Stock. Stock issuable pursuant to a Deferred Stock
Award granted under this Plan shall be issued by the Company to the Eligible
Director on the earliest of (i) the first business day of the third January
following such Deferred Stock Award, (ii) the date of an event described in
Section 6(j) of this Plan or (iii) the date on which such Eligible Director
shall cease to be a Director of the Company, and certificates therefore shall be
delivered by the Company promptly after such date.
c. Notice Procedures. Prior to the beginning of any calendar year, an
Eligible Director may notify the Company in writing of his or her election to be
granted Deferred Stock Awards in lieu of fees for the calendar year succeeding
the year in which the election is made and unless and until any subsequent
notice is given, as provided below, each calendar year thereafter (a "Deferred
Stock Election"). By making a Deferred Stock Election, such Eligible Director
agrees to forego any cash payment of the Annual Fees and Meeting Fees paid in
the form of Deferred Stock Awards. Any Deferred Stock Election shall be
irrevocable as to each calendar year once that year begins, except that in the
event the stockholders should fail to approve this Plan, all Deferred Stock
Elections shall be immediately revoked and the director promptly paid any
previous fees withheld pursuant to such agreement. Any Deferred Stock Election
shall continue in effect from year to year, until revoked, which revocation
shall be effective as to all years subsequent to the year in which the notice of
revocation is given, unless and until such Eligible Director makes a subsequent
Deferred Stock Election.
8. GENERAL PROVISIONS
a. Effect of Lack of Shares. In the event that on any date on which options
or Deferred Stock Awards are to be granted hereunder, there is not a sufficient
number of shares of Stock available to implement fully the shares issuable
thereunder, then each such director entitled to an option grant or a Deferred
Stock Award at such time shall receive a pro rata portion of the option and/or
Deferred Stock Award contemplated by this Plan to the maximum extent. In
addition, if an Deferred Stock Award cannot be implemented due to a lack of
shares, then the director's agreement to forgo Fees shall be deemed
automatically revoked to the same extent unless with the Director's consent the
Board is seeking authorization for additional shares.
b. Non-Plan Issuances. Neither adoption of the Plan nor the grant of
options or Deferred Stock Grants to an Eligible Director shall affect the
Company's right to grant to such director options that are not subject to the
Plan, to issue to such director Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued to directors.
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<PAGE>
c. No Rights as Stockholder. A holder of an option or Deferred Stock Award
shall not have the rights of a stockholder with respect to shares issuable with
respect to such option or award.
d. Fulfillment of Legal Obligations. The Company shall not be obligated to
deliver any shares of Stock (a) until, in the opinion of the Company's counsel,
all applicable federal and state laws and regulations have been complied with,
and (b) if the outstanding Stock is at the time listed on any stock exchange or
market, until the shares to be delivered have been listed or authorized to be
listed on such exchange or market upon official notice of issuance, and (c)
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 option, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
e. Nontransferability of Options and Awards. No option or Deferred Stock
Award may be transferred other than by will, by the laws of descent and
distribution or by assignment to a member of his or her immediate family, during
a director's lifetime, an option may be exercised only by him or her or by such
member of his or her immediate family to whom the option was assigned and during
a director's lifetime, a Deferred Stock Award may be paid only by him or her or
to such member of his or her immediate family to whom the award was assigned.
f. Termination & Amendment. The Board may at any time terminate the Plan as
to any further grants of options or Deferred Stock Awards. The Committee may at
any time or times, amend the Plan for any purpose which may at the time be
permitted by law, but (without the person's consent) no such amendment shall
adversely affect the rights of any person with respect to a previously granted
option or Deferred Stock Award.
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ADVANCED RADIO TELECOM CORP.
500 108th Ave., NE - Suite 2600 - Bellevue, Washington 98004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Henry C. Hirsch, Thomas A. Grina and Thomas
M. Walker, and each of them, each with power to appoint his substitute, as
proxies to vote and act at the Special Meeting of Stockholders of Advanced Radio
Telecom Corp. to be held on February 19, 1998, 10:00 a.m. (local time) at 411
108th Avenue NE, Bellevue, Washington 98004, or any adjournment thereof (the
"Meeting") with respect to the number of shares of Common Stock of Advanced
Radio Telecom Corp. as to which the undersigned may be entitled to vote or act.
The undersigned instructs such proxies to vote as designated below on the
proposal specified below, as described in the accompanying Notice of Meeting and
Proxy Statement, receipt of which is acknowledged. All proxies heretofore given
by the undersigned in respect of the Meeting are hereby revoked.
APPROVAL OF THE AMENDMENTS TO THE RESTATED EQUITY INCENTIVE PLAN:
FOR approval of the Amendments [_] AGAINST approval of the Amendments [_]
ABSTENTION [_]
APPROVAL OF THE 1997 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS:
FOR approval of the plan [_] AGAINST approval of the plan [_]
ABSTENTION [_]
(continued and to be signed on reverse side)
Unless otherwise specified in the boxes on the reverse side hereof, this proxy
will be voted FOR approval of the proposed amendments to the Restated Equity
Incentive Plan and FOR approval of the 1997 Equity Incentive Plan for Non-
Employee Directors and in the discretion of the named proxies as seems in their
judgment advisable as to any other matter that may come before the Meeting or
any adjournment thereof.
Date: _______________________________________,1998
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Signature
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Signature
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title. If a corporation,
please sign in full corporate name by president or
other authorized officer. If a partnership, please sign
in partnership name by authorized person.
Please mark, sign, date and return the proxy card promptly, using the enclosed
envelope.
