EXHIBIT 10.7
CHANGE-IN-CONTROL AGREEMENT
Dear _________________:
CommNet Cellular Inc. (the "Corporation") recognizes that your involvement in
the operation and management of the Corporation will be instrumental to the
growth and success of the Corporation, and your continued employment with the
Corporation is very important. As is the case with many publicly held
corporations, the possibility of a change in control of the Corporation might
exist. If such an event were threatened or were to actually occur, management
might be faced with conflicting issues and concerns, some of which might result
in harm to the Corporation and its shareholders through the departure or
distraction of management personnel.
The Board of Directors of the Corporation (the "Board") has determined that
appropriate steps should be taken to enable the members of the Corporation's
management, including yourself, to evaluate objectively the issues associated
with a change in control and to assure the Corporation of the continued
employment of management.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you will receive the severance benefits set forth in
this letter agreement ("Agreement") in the event your employment with the
Corporation is terminated subsequent to a "Change in Control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below:
1. Term of Agreement. This Agreement will commence on the date hereof and
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will continue in effect until December 31, 1995; provided, however, that
commencing on January 1, 1996 and each January 1 thereafter, the term of
this Agreement will automatically be extended for one additional year
unless, prior to October 1 of the preceding year, the Corporation gives
notice to the Employee that the Agreement will not be
extended. In addition, if a Change in Control of the Corporation occurs
during the original or extended term of this Agreement, this Agreement will
continue in effect for a period of twenty-four (24) months beyond the month
in which such Change in Control of the Corporation occurs.
2. Change in Control of the Corporation. No benefits are payable hereunder
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unless a Change in Control of the Corporation, as set forth below, occurs.
For purposes of this Agreement, a "Change in Control of the Corporation"
will be deemed to have occurred if:
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the Exchange Act)) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing thirty percent (30%) or more of the combined
voting power of the Corporation's then outstanding securities;
(ii) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other
than a merger or consolidation which results in the voting securities
of the Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least seventy percent
(70%) of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Corporation
approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all the Corporation's assets; or
(iii) during any period of two (2) consecutive years (not including
any period prior to the execution of this Agreement) there ceases
to be a majority of the Board comprised as follows: individuals who at
the beginning of such period constitute the Board and any new
director(s) whose election by the Board or nomination for election by
the Corporation's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved.
3. Termination Following a Change in Control of the Corporation. If any of
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the events described in Section 2 hereof constituting a Change in Control
of the Corporation occurs, you will be entitled to the benefits provided in
Subsection 4(d) hereof upon the termination of your employment during the
term of this Agreement unless such termination is (i) because of your
death, Disability, or Retirement, (ii) by the Corporation for Cause or
(iii) by you other than for Good Reason.
(a) Disability; Retirement. Disability means a permanent and total
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disability, within the meaning of the Internal Revenue Code (the
Code) Section 22(e)(3), as determined by the Board in good faith,
upon the receipt of sufficient competent medical advice from one or
more individuals, selected by the Board, who are qualified to give
professional medical advice. Termination by the Corporation or you
of your employment by reason of "Retirement" means termination on or
after attainment of age 65.
(b) Cause. Termination by the Corporation of your employment for
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"Cause" means termination upon (i) the willful and continued failure
by you to substantially perform your duties with the Corporation
(other than any such failure resulting from termination by you for
Good Reason), after a demand for substantial performance is delivered
to you that specifically identifies the manner in which the
Corporation believes that you have not substantially performed your
duties, and you have failed to resume
substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise or (iii) your
conviction of a felony which impairs your ability substantially to
perform your duties with the Corporation. For purposes of this
Subsection, no act, or failure to act, on your part will be deemed
"willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was
in the best interest of the Corporation.
(c) Good Reason. You will be entitled to terminate your employment
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for Good Reason. For purposes of this Agreement, "Good Reason"
means, without your express written consent, the occurrence within 24
months following a Change in Control of the Corporation of any one or
more of the following:
(i) the assignment to you of any duties inconsistent in any
respect with your position (including status, offices, titles, and
reporting requirements), authorities, duties, or other
responsibilities or any other action of the Company which results
in a substantial change in such position, or its authority,
duties, or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Company promptly after
receipt of notice thereof given by you;
(ii) a significant reduction (15% or more) by the Corporation in
your base salary level as of the effective date of the Change in
Control, or as increased subsequent to such date;
(iii) the Corporation's requirement that you be based at a
location in excess of fifty (50) miles from the location of your
principal office at that time;
(iv) the failure by the Corporation to continue in effect, to the
extent to which they exist immediately prior to the Change in
Control, the Corporation's annual bonus plan, long-term incentive
plan, investment plan for employees, or any other of the
Corporation's employee benefit plans, policies, practices or
arrangements in which you participate or the failure by the
Corporation to continue your participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as existed as of the date hereof;
(v) the failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and
agree to perform this Agreement, as contemplated in Section 5
hereof; and
(vi) any purported termination by the Corporation of your
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Subsection (d) below,
and for purposes of this Agreement, no such purported termination
will be effective.
Your right to terminate your employment pursuant to this Subsection
will not be affected by your incapacity due to physical or mental
illness. Your continued employment will not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
(d) Notice of Termination. Any termination by the Corporation for
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Cause or by you for Good Reason must be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" means a written notice indicating the
specific termination provision in this Agreement relied
upon and setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" means the date
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specified in the Notice of Termination where required or in any other
case upon ceasing to perform services to the Corporation; provided that
if within thirty (30) days after any Notice of Termination one party
notifies the other party that a dispute exists concerning the
termination, the Date of Termination will be the date finally
determined to be the Date of Termination, either by mutual written
agreement of the parties or by a binding and final arbitration award.
4. Compensation Upon Termination or During Disability. Following a Change in
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Control of the Corporation, as defined in Section 2 hereof, upon
termination of your employment during the term of this Agreement or during
a period of disability during the term of this Agreement you will be
entitled to the following benefits:
(a) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to physical or
mental illness, you will continue to receive your base salary at the
rate in effect at the commencement of any such period, until your
employment is terminated pursuant to Subsection 3(a) hereof.
Thereafter, your benefits will be determined in accordance with the
Corporation's retirement, insurance, and other applicable programs and
plans then in effect.
(b) If your employment is terminated by the Corporation for Cause, or
by you other than for Good Reason, the Corporation will pay you your
full base salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given or on the Date of
Termination if no Notice of Termination is required
hereunder, plus all other amounts to which you are entitled under any
compensation plan of the Corporation at the time such payments are
due, and the Corporation will have no further obligations to you under
this Agreement.
(c) If your employment terminates by reason of your Retirement, or by
reason of your death, your benefits will be determined in accordance
with the Corporation's insurance and other applicable programs and
plans then in effect.
(d) If your employment by the Corporation is terminated (i) by the
Corporation other than for Cause, Retirement, or Disability, or (ii)
by you for Good Reason, you will be entitled to the benefits (the
"Severance Payments") provided below:
(A) the Corporation will pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice
of Termination is given, or the Date of Termination where no
Notice of Termination is required hereunder;
(B) the Corporation will pay as severance benefits to you, no
later than the fifteenth day following the Date of Termination
(unless as specified in (f) below), a lump sum severance payment
equal to 2.99 times the sum of (i) your annual base salary in
effect immediately prior to the occurrence of the circumstances
giving rise to such termination, and (ii) your actual bonus
earned in the year prior to the year in which the termination
occurs;
(C) for a twelve (12) month period after such termination, the
Corporation will arrange to provide you at the Corporation's
expense with benefits under the Corporation's health and life
insurance plans, or benefits substantially
similar to the benefits you were receiving immediately prior to
the Notice of Termination or date of termination when no notice
of termination is required under the named plans; but benefits
otherwise receivable by you pursuant to this Subsection (C) will
be reduced to the extent comparable benefits are actually
received by you during the twelve (12) month period following
your termination, and any such benefits actually received by you
must be reported to the Corporation;
(D) in addition to the benefits to which you are entitled under
the Investment Plan for Employees of CommNet Cellular, Inc. or
any successor plans thereto, the Corporation will credit you with
a number of additional years of credited service sufficient to
entitle you to 100 percent of all contributions made by the
Corporation on your behalf and any income earned on such
contributions;
(E) for a twelve (12) month period after such termination, a
continuation at the same benefit level of all other Employee
Benefits.
(e) In the event that you become entitled to the Severance Payments,
if any of the Severance Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any similar tax
that may hereafter be imposed), the Corporation shall pay to you in
cash an additional amount (the "Gross-Up Payment") such that the net
amount retained by you after deduction of any Excise Tax on the
Severance Payment and any Federal, state and local income tax and
Excise Tax upon the Gross-Up Payment provided for by this Section
4(e), shall be equal to the Severance Payment.
(f) The payments provided for in Subsections (d) and (e) above will
be made no later than the fifteenth day following the Date of
Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation
will pay to you on such day an estimate as determined in good faith by
the Corporation of the minimum amount of such payments and will pay
the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth day
after the Date of Termination.
In the event that the amount of the estimated payment exceeds the
amount subsequently determined to have been due, such excess will
constitute a loan by the Corporation to you payable on the fifteenth
day after demand by the Corporation (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
(g) The Corporation will also pay to you all legal fees and expenses
incurred by you as a result of such termination of employment
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(h) You will not be required to mitigate the amount of any payment
provided for in this Section 4, except as provided in Section 4(d)(C),
by seeking other employment or otherwise, nor will the amount of any
payment provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer after
the Date of Termination.
(i) In the event the Company enters into bankruptcy proceedings or
the Company's independent auditors issue a going concern
opinion with respect to the Company's most recent audited financial
statements, the Company will have the authority to restrict or
terminate any benefits or payments due you upon such terms as the
Board, in its sole discretion, deems appropriate.
5. Successors; Binding Agreements.
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(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Corporation to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required
to perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession will be a breach of this
Agreement and will entitle you to compensation from the Corporation in
the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any
such succession becomes effective will be deemed the Date of
Termination.
(b) This Agreement will inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If you
should die while any amount would still be payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
herein, will be paid in accordance with the terms of this Agreement,
to your devisee, legatee or other designee or, if there is no such
designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
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communications provided for in the Agreement must be in writing and will be
deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addressees set forth on the first page of this
Agreement.
7. Miscellaneous. No provision of this Agreement may be modified, waived or
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discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically
designated by the Board. The validity, interpretation, construction, and
performance of this Agreement will be governed by the laws of the State of
Colorado.
8. Validity. The invalidity or unenforceability of any provision of this
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Agreement will not affect the validity or enforceability of any other
provision of this Agreement, which will remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
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of which will be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection
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with this Agreement will be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you will be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
11. Effective Date. This Agreement will become effective as of the date set
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forth above. If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
CommNet Cellular, Inc.
By______________________
Xxxxxx X. Xxxx
President
Agreed to this ___ day
of _________________
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