<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMMNET CELLULAR INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
COMMNET CELLULAR INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
COMMNET CELLULAR INC.
_____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 16, 1998
_____________________
The Annual Meeting of Stockholders of CommNet Cellular Inc., a Colorado
corporation (the "Company"), will be held on Wednesday, September 16, 1998, at
9:00 A.M., local time, at the Hyatt Regency Tech Center, Englewood, Colorado,
for the following purposes:
1. To amend the Articles of Incorporation of the Company to eliminate the
requirement that, when the number of Directors is six or more, Directors must be
elected in classes and replace that requirement with a provision requiring
annual election of all directors.
2. To elect Directors of the Company.
3. To ratify selection of new independent auditors.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
All stockholders are cordially invited to attend the meeting, although only
stockholders of record at the close of business on August 13, 1998 will be
entitled to notice of and to vote at the meeting.
Shares can only be voted at the meeting if the holder is present or
represented by proxy. If you do not expect to attend the meeting, you are urged
to date and sign the enclosed proxy and return it in the accompanying envelope
promptly, so that your shares may be voted in accordance with your wishes and
the presence of a quorum may be assured. The prompt return of your signed
proxy, regardless of the number of shares you hold, will aid the Company in
reducing the expense of additional proxy solicitation. The giving of such proxy
does not affect your right to vote in person in the event you attend the
meeting.
The Company's Annual Report for the fiscal year ended September 30, 1997 is
enclosed.
James C. Everson
Secretary
Englewood, Colorado
August 24, 1998
<PAGE>
PROXY STATEMENT
COMMNET CELLULAR INC.
8350 East Crescent Parkway, Suite 400
Englewood, Colorado 80111
This statement is furnished in connection with the solicitation of proxies
by CommNet Cellular Inc., a Colorado corporation (the "Company"), for use at the
Annual Meeting of Stockholders of the Company to be held on September 16, 1998,
and at any and all adjournments of such meeting.
August 13, 1998 has been fixed as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting or any
adjournments thereof. At the close of business on that date 22,644,690 shares
of Common Stock, par value $.001 per share, of the Company were issued and
outstanding. Each share of Common Stock is entitled to one vote on any matter
which properly comes before the meeting. Cumulative voting is not permitted
with respect to the election of directors. The presence in person or by proxy
of the holders of at least a majority of the shares of Common Stock entitled to
be voted at the meeting will constitute a quorum.
This proxy statement and the accompanying proxy card are being mailed to
stockholders commencing on or about August 24, 1998.
Stockholders who execute proxies retain the right to revoke them at any
time by giving written notice of revocation to the Secretary of the Company.
Unless so revoked, the shares represented by the proxies solicited by the
Company will be voted in accordance with the directions given therein by the
stockholder. Any proxy not specifying to the contrary will be voted FOR the
proposal in Item 1, FOR the election of the Board of Directors' nominees as
director referred to in Item 2, and FOR the ratification of auditors in Item 3.
So far as the Company's management is aware, such matters are the only matters
to be acted on at the meeting. As to any other matter which may properly come
before the meeting or any adjournments thereof, the persons named in the
accompanying proxy card will vote thereon in accordance with their best
judgment.
1
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
(Proxy Card Item 1)
The Company's Articles of Incorporation currently provide for a classified
Board of Directors consisting of three classes, each class to be as nearly equal
in number as possible, if the total number of directors is six or more. The
members of each class are elected to a three-year term and one class is elected
at each annual meeting. The amendment would change this provision and require
all directors to be elected annually.
This proposal will give shareholders greater control over the composition
of the Board of Directors.
The Board of Directors recommends a vote FOR this proposal.
ELECTION OF DIRECTORS
(Proxy Card Item 2)
The persons named in the accompanying proxy will vote for the election of
directors with a term of office to continue until the 1999 Annual Meeting of
Stockholders or until their successors shall have been duly elected and
qualified, unless authority to vote is withheld. However, if the proposed
amendment to the Articles of Incorporation of the Company set forth in Item 1 of
the Proxy Card is not approved by the Stockholders, then the Directors below
will be divided into three classes of three directors each as noted in
parentheses below with terms to expire in the year indicated in parentheses
below. The nominees for election as directors of the Company are listed below
and the Company is informed that these nominees are willing to serve as
directors. However, if such nominees should decline or become unable to serve
as directors for any reason, votes will be cast for a substitute nominee, if
any, designated by the Board of Directors, or, if none is so designated prior to
the election, votes will be cast according to the judgment in such matters of
the person or persons voting the proxy. Each nominee for election as a director
of the Company is incumbent.
The following lists the nominees for election as directors of the Company
including the age of each person as of August 13, 1998, the positions with the
Company or principal occupations of each person, certain other directorships
held and the year each person became a director of the Company. The number of
shares of Common Stock of the Company owned beneficially by each such person as
of August 13, 1998 is set forth in "Voting Securities and Principal Holders
Thereof."
NOMINEES FOR ELECTION AS DIRECTORS
Arnold C. Pohs; age 70; Chairman of the Board, President,
and Chief Executive Officer of the Company;
Director since 1985 (class 1, 1999)
Daniel P. Dwyer, age 39; Chief Financial Officer, Treasurer
and Executive Vice President of the Company;
Director since 1990 (class 2, 2000)
Marc A. Bodnick, age 29; Associate of The Blackstone Group L.P.
Director since May 1998 (class 1, 1999)
Mark T. Gallogly, age 41; Senior Managing Director of The Blackstone Group L.P.
Director since February 1998 (class 3, 2001)
2
<PAGE>
Lawrence H. Guffey, age 30; Vice President of The Blackstone Group L.P.
Director since February 1998 (class 1, 1999)
Glenn H. Hutchins, age 42; Senior Managing Director of The Blackstone Group L.P.
Director since May 1998 (class 2, 2000)
Simon P. Lonergan, age 30; Associate of The Blackstone Group L.P.
Director since February 1998 (class 3, 2001)
William J. Ryan, age 66; former CEO of Price Communications Wireless
and former CEO of Palmer Wireless, Inc.
Director since May 1998 (class 2, 2000)
John P. Scully, age 51; former Vice President External Relations & Colorado
of US WEST Communications
DIRECTOR SINCE MAY 1998 (CLASS 3, 2001)
The Board of Directors recommends a vote FOR each of these Directors.
--- ----- -- --------- ---------- - ---- --- ---- -- ----- ----------
RATIFICATION OF AUDITORS
(PROXY CARD ITEM 3)
During the year Company management reviewed proposals from two accounting firms
and determined on the basis of such proposals that the Auditors for the Company
should be Deloitte and Touche LLP.
The Board of Directors recommends a vote FOR this proposal.
--- ----- -- --------- ---------- - ---- --- ---- ---------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At August 13, 1998 there were 22,644,690 shares of Common Stock of the
Company issued and outstanding. As of such date options to purchase 1,721,975
shares were outstanding. Each holder of Common Stock, but not unexercised
options, is entitled to one vote per share on each matter which may be presented
at a meeting of stockholders. Cumulative voting is not allowed. The Company's
Common Stock is traded on the Nasdaq National Market under the symbol CELS.
The following table sets forth information regarding ownership of the
Company's Common Stock at August 13, 1998 by each person who is known by
management of the Company to own beneficially more than 5% of the Common Stock,
by each director of the Company and by all directors and executive officers of
the Company as a group. Shares issuable on exercise of options are deemed to be
outstanding for the purpose of computing the percentage ownership of persons
beneficially owning such options, but have not been deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. Insofar
as is known to the Company, the persons indicated below have sole voting and
investment power with respect to the shares indicated as owned by them except as
otherwise stated in the notes to the table.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
<S> <C> <C>
Arnold C. Pohs 933,150 (1) 3.96%
8350 East Crescent Parkway
Englewood, CO 80111
Daniel P. Dwyer 328,370 (2) 1.43%
8350 East Crescent Parkway
Englewood, CO 80111
Blackstone CCI Capital Partners L.P.* 13,181,215 58.21%
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Blackstone CCI Offshore Capital 3,887,175 17.17%
Partners L.P. *
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Blackstone Family Investment 1,309,810 5.78%
Partnership II L.P. *
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, NY 10154
Chase Equity Associates L.P. 1,109,305 (3) 4.90%
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, NY 10017
All executive officers and directors 1,466,735 (4) 6.08%
(10 persons)
</TABLE>
__________
(1) Includes options to purchase 933,150 shares of Common Stock.
(2) Includes options to purchase 328,370 shares of Common Stock.
(3) Excludes potential beneficial ownership attributable to rights to purchase
an aggregate of 279,585 shares of Common Stock under a warrant issued by the
three Blackstone entities designated by an * and listed above. If these
were included total percent of class would be 6.13%
(4) Represents options to purchase 1,466,735 shares of Common Stock held by
executive officers of the Company.
4
<PAGE>
CONCERNING MANAGEMENT, DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Arnold C. Pohs 70 Chairman of the Board, President, Chief Executive Officer and
Director
Daniel P. Dwyer 39 Executive Vice President, Treasurer, Chief Financial Officer
and Director
Timothy C. Morrisey 45 Executive Vice President - Sales Operations
Andrew J. Gardner 43 Senior Vice President and Controller
David S. Lynn 41 Senior Vice President - Network Operations
James C. Everson 47 Vice President, Secretary and General Counsel
Marc A. Bodnick (1) 29 Director
Mark T. Gallogly (2) 41 Director
Lawrence H. Guffey (2) 30 Director
Glenn H. Hutchins 42 Director
Simon P. Lonergan 30 Director
William J. Ryan (1)(2) 66 Director
John P. Scully (1)(2) 51 Director
</TABLE>
__________
(1) Member Audit Committee.
(2) Member Compensation Committee.
5
<PAGE>
Arnold C. Pohs has been Chairman of the Board of the Company since February
1991, President and Chief Executive Officer since August 1989 and a director
since September 1985. Mr. Pohs served as Executive Vice President of the Company
from January 1986 through August 1989. Mr. Pohs was designated Chief Operating
Officer of the Company in August 1987, prior to which time he was the Chief
Financial Officer of the Company. Mr. Pohs is Chairman Emeritus of the Board of
Directors of the Cellular Telecommunications Industry Association and currently
serves as a director and a member of the Executive Committee of the CTIA Board.
He is a member of the board and past Chairman of the CTIA Foundation for
Wireless Telecommunications.
Daniel P. Dwyer has been Executive Vice President of the Company since
November 1992, a director of the Company since March 1990, and Chief Financial
Officer since August 1988 and Treasurer since August 1987. He was Vice
President - Finance of the Company from November 1989 until November 1992,
Secretary from August 1987 until March 1990, Assistant Secretary from January
1987 until August 1987, Controller from May 1986 until November 1988 and
accounting manager for the Company from March 1986 until May 1986. He is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants and the Colorado Society of Certified Public Accountants.
Timothy C. Morrisey was named Executive Vice President - Sales Operations
of the Company in November 1996. He was Senior Vice President-Sales Operations
from February 1995 until November 1996 and General Sales Manager of the
Company's Midwest Region from July 1993 until February 1995.
Andrew J. Gardner was named Senior Vice President of the Company in July
1994. He was Vice President and Controller from November 1992 to July 1994 and
Assistant Vice President - Accounting and Tax from July 1990 to October 1992.
David S. Lynn was named Senior Vice President-Network Operations of the
Company in July 1994. He was Vice President-Network Operations from March 1993
until July 1994, Vice President-Network Development from February 1992 until
March 1993, Assistant Vice President-Finance from June 1990 until February 1992,
Controller from November 1988 until June 1990 and Manager, Financial Reporting
from August 1988 until November 1988.
James C. Everson was named General Counsel and Secretary of the Company in
March 1998. He was Vice President - Legal Affairs from March 1996 to March 1998
and has been legal counsel to the Company since March 1992.
Marc A. Bodnick was designated a director of the Company in May 1998. Mr.
Bodnick is an Associate of The Blackstone Group L.P. and has been involved in
the firm's principal activities since 1995. Prior to 1995, he was a Director in
the Crisis Management Group at Kroll Associates.
Mark T. Gallogly was designated a director of the Company in February 1998.
He is a member of the limited liability company which acts as the general
partner of the Blackstone Entities. He is a Senior Managing Director of The
Blackstone Group L.P. and has been with Blackstone since 1989. Mr. Gallogly is a
member of the boards of directors of InterMedia VI Cable TV, and Time Warner-
Fanch Co.
Lawrence H. Guffey was designated a director of the Company in February
1998. Mr. Guffey is a Vice President of The Blackstone Group L.P., with which he
has been associated since 1991. He is a member of the board of directors of TW
Fanch-One Co.
6
<PAGE>
Glenn H. Hutchins was designated a director of the Company in May 1998. He
is a member of the limited liability company which acts as the general partner
of the Blackstone Entities. He is a Senior Managing Director of The Blackstone
Group L.P. and has been with Blackstone since 1994. Previously, he was a
Managing Director of Thomas H. Lee Co. ("THL") from 1987 until 1994. Mr Hutchins
is a member of the boards of directors of Clark Refining & Marketing, Inc.,
Clark USA, Inc. American Axle and Manufacturing Holdings, Inc., American Axle
and Manufacturing, Inc., Corp Banca (Argentina) S.A., Corp Group C.V., and
Haynes International, Inc.
Simon P. Lonergan was designated a director of the Company in February
1998. Mr. Lonergan is an Associate of The Blackstone Group L.P., which he joined
in 1996. Prior to joining Blackstone, Mr. Lonergan was an Associate at Bain
Capital, Inc. and a Consultant at Bain and Co. He currently serves on the
Advisory Committees of Intermedia Partners VI and Graham Packaging Company.
William J. Ryan was designated a director of the Company in May 1998. Mr.
Ryan was named CEO of Price Communications Wireless, a subsidiary of Price
Communications Corporation ("Price"), in October 1997 following the purchase of
Palmer Wireless, Inc. by Price. From 1995 to October 1997, Mr. Ryan was
President & CEO of Palmer Wireless, Inc. Prior thereto, he was President & CEO
of Palmer Communications Incorporated. Mr. Ryan is currently Trustee, Naples
Community Hospital; Vice Chairman, Naples Philharmonic Center for the Arts;
Director, Florida Council on Economic Education; Member CATV Pioneers, Broadcast
Pioneers, and the International Radio & Television Society.
John P. Scully was designated a director of the Company in May 1998. From
May 1992 until April 1998, Mr. Scully was Vice President of External Relations
& Colorado for U S WEST Communications. In March 1997, external relations
responsibilities were added. Mr. Scully serves on the boards of the Greater
Denver Chamber of Commerce (past chairman), the Metro Denver Board of Governors,
the Public Education and Business Coalition (past chairman), the Denver Center
for the Performing Arts, the State Board of Agriculture, the Urban League of
Metro Denver and the National Exchange Carrier Association.
BOARD COMPENSATION.
Board members other than John P. Scully and William J. Ryan are not paid for
service on the Board. Messrs. Ryan and Scully are paid an annual retainer of
$15,000 plus $1,000 for special meetings and will receive a stock grant annually
of 1,500 shares of the common stock of the Company.
7
<PAGE>
EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the named
Executive Officers for each of the three years ended September 30, 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------- ----------------
Name and Principal Position Year Salary ($) Bonus ($) All Others ($)(1) Options (#) All Others ($)(2)
- --------------------------------- ---- ---------- --------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Arnold C. Pohs................... 1997 400,000 234,944 10,778 - 9,750
Chairman of the Board, 1996 350,000 149,306 11,473 100,000 10,125
President and Chief 1995 300,000 126,455 10,861 200,000 8,625
Executive Officer
Daniel P. Dwyer.................. 1997 300,000 140,966 4,242 - 9,750
Executive Vice President, 1996 250,000 83,598 2,880 50,000 10,125
Treasurer and Chief 1995 200,000 66,203 3,734 100,000 8,625
Financial Officer
Homer Hoe........................ 1997 210,000 96,156 2,061 - 9,750
Executive Vice President and 1996 200,000 63,878 2,259 20,000 8,112
Chief Information Officer 1995 170,000 55,253 2,206 35,000 975
Timothy C. Morrisey.............. 1997 158,000 72,978 11,463 - 9,750
Executive Vice President - 1996 132,000 36,753 - 20,000 10,125
Sales Operations 1995 115,000 23,820 - 20,000 8,625
David S. Lynn.................... 1997 148,000 51,950 - - 9,650
Senior Vice President - 1996 132,000 35,103 - 20,000 10,125
Network Operations 1995 120,000 33,095 - 20,000 8,625
</TABLE>
__________
(1) The amounts shown represent premiums paid on supplemental health benefits
for certain named executives.
(2) The amounts shown represent contributions by the Company to defined
contribution plans.
REPORT OF COMPENSATION COMMITTEE.
On November 5, 1997 the then members of the Compensation Committee of the
Company prepared a draft Compensation Committee report. All of the directors
comprising the members of this committee resigned as directors effective as of
February 10, 1998, the effective time of the merger between the Company and AV
Acquisition Corporation pursuant to the Merger Agreement dated May 27, 1997 (the
"Merger"). The current directors who comprise the current Compensation Committee
of the Company have not yet met. The current Board of Directors of the Company
has adopted the November 5, 1997 draft report, as amended for inclusion in this
Proxy Statement as follows:
8
<PAGE>
General. The Compensation Committee of the Board of Directors is responsible
for establishing the executive compensation program for the Company. The
Committee monitors and recommends changes in the compensation levels of
executive management and administers the Company's incentive compensation
programs as well as determining the grants under the Company's Employee Stock
Ownership Plan. All of the Committee members are non-employee directors of the
Company. The Company has periodically retained the services of a nationally
recognized executive compensation consulting firm to assist the Company in
compensation matters.
Compensation Philosophy. The Company's compensation program is designed to
attract and retain high quality executive management, to give management
incentives that motivate superior performance on behalf of the Company and to
align the interests of management with those of the Company's shareholders. The
Committee believes that the Company's base salaries should approximate the
average of base salaries paid to executives with similar responsibilities in
similar cellular companies. Executive compensation should also be correlated to
the Company's performance and shareholder return. In determining executive
compensation, the Committee considers compensation from Company subsidiaries and
affiliates received by executive officers in their capacity as Board members of
such entities.
The companies used for compensation comparison purposes are not all of the
same companies contained in the Nasdaq telecommunications industry group
comparison of total shareholder return in the Stockholder Performance Return
Graph. The companies used for compensation purposes are those companies which
are similarly sized and are in the cellular industry.
Components of Compensation.
Salary: The salary of the Chief Executive Officer and the other executive
------
officers of the Company are based on a subjective evaluation of an individual
officer's responsibility and a comparison of salaries for similar positions in
comparable companies.
During 1997 the salary increases for the executive officers, other than
Arnold C. Pohs, the Chief Executive Officer, ranged between 5% and 20%. Mr.
Pohs' base salary was increased by 14%. The basis for Mr. Pohs' salary increase
was twofold. First, the increase recognizes the performance of the Company in
terms of operating cash flow achievements. Second, Mr. Pohs' salary was
adjusted after an evaluation of comparative industry information to approximate
the Company's compensation objective of paying at the average.
Short-Term Incentive Plan Bonuses: The Company maintains an annual bonus
---------------------------------
plan which is based on meeting certain operational targets. The bonus
opportunities are established based on the average opportunities provided to
executives in similar positions at similar companies.
Actual annual bonuses for the executive officers were determined based on the
Company's performance relative to corporate operating targets and on each
individual's performance relative to officer specific individual goals. The
weightings of corporate and individual performance vary by position and
responsibilities and range from a weighting of 70% corporate/30% individual to
80% corporate/20% individual, which is the weighting applied to Mr. Pohs' award.
The corporate operating targets were based on the following measures which
represent the key business indicators of performance within the cellular
industry: Net managed market subscriber additions (50%) and Consolidated
operating cash flow (50%).
During fiscal 1997, the Company's weighted average performance results were
109.3% of the operating targets as described above and bonuses were paid
9
<PAGE>
accordingly after a subjective evaluation of individual performance. The
corporate performance results represent excellent performance against aggressive
operating plan targets.
Mr. Pohs' award was 50% of base salary and was based 80% on the weighted
performance results of 109.3% of the operating targets and 20% on individual
performance. The Committee determined that the individual portion of Mr. Pohs'
award should be based on a maximum individual performance rating. Specifically,
the Committee considered the following: the Company added 63,467 managed market
customers, a 30% increase, bringing the total to 274,745 at September 30, 1997,
and consolidated EBITDA increased to $57.4 million which represented a 50%
increase over the $38.2 million reported in the prior fiscal year.
Long-Term Incentive Compensation: The Company provides long-term incentive
--------------------------------
compensation to its executives through stock option grants under the Omnibus
Stock and Incentive Plan which are intended to align the interest of executives
with those of shareholders. This plan was approved by the Company's
shareholders by proxy vote during fiscal 1991 and was amended in 1993 and 1995.
As of November 5, 1997, Mr. Pohs owned 85,944 shares of the Company's common
stock and held options to purchase an additional 740,000 shares. The committee
believes that the equity interests held by the named executives represent a
significant incentive to continue to increase shareholder value.
Policy with Respect to the $1 Million Limit: Section 162(m) of the Internal
--------------------------------------------
Revenue Code generally limits to $1,000,000 the tax deductible compensation paid
to the Chief Executive Officer and the four highest-paid executive officers who
are employed as executive officers on the last day of the year. However, the
limitation does not apply to performance-based compensation provided certain
conditions are satisfied.
None of the Company's compensation payments for fiscal 1997 exceeded the tax
deductibility limit set forth in Section 162(m) nor is it expected that
compensation to be paid in fiscal 1998 will exceed the limit. The committee
will continue to monitor the Company's executive compensation program with the
impact of Section 162(m) and will seek to minimize the impact of Section 162(m)
where appropriate and consistent with the Company's compensation philosophy.
Arnold C. Pohs Daniel P. Dwyer Marc A. Bodnick
Mark T. Gallogly Lawrence H. Guffey Glenn H. Hutchins
Simon P. Lonergan William J. Ryan John P. Scully
OTHER MATTERS REGARDING EXECUTIVE COMPENSATION.
- -----------------------------------------------
Change in Control Agreements.
In July 1993, the Board of Directors approved change in control agreements
with Messrs. Pohs and Dwyer. In October 1994, the Board authorized a comparable
agreement with Mr. Hoe, the Company's then Chief Information Officer. In
November 1995, the Board authorized comparable agreements with Messrs. Gardner,
Lynn and Morrisey, the Company's Senior Vice President and Controller, Senior
Vice President - Network Operations, and Executive Vice President - Sales
Operations, respectively, and Ms. Shapiro, the Company's then Senior Vice
President and General Counsel. The purpose of these agreements is to reinforce
and encourage the officers to maintain objectivity and a high level of attention
10
<PAGE>
to their duties without distraction from the possibility of a change in control
of the Company. These agreements provide that in the event of a change in
control of the Company, as that term is defined in the agreements, each officer
is entitled to receive certain severance benefits upon the subsequent
termination or constructive termination of employment, unless (i) the
termination is due to death, disability or voluntary retirement; (ii) the
termination is by the Company for cause (as defined in the agreements), or (iii)
the termination is by the officer for other than good reason (as defined in the
agreements).
The severance benefits include the payment of the officer's full base
salary through the date of termination. The severance benefits also include a
lump sum payment equal to 2.99 times the sum of (i) the officer's annual base
salary in effect immediately prior to the circumstances giving rise to
termination, and (ii)
the actual bonus earned by the officer in the year prior to the year in which
termination occurs. In addition, each officer will be provided with life and
health benefits and a continuation of all other employee benefits for 12 months
following the date of termination. In addition, the officers will be fully
vested in all benefit plans to the extent not otherwise entitled to 100% of all
contributions made by the Company on their behalf.
On February 10, 1998, the date of the Merger, Messrs. Pohs, Dwyer, Gardner,
Lynn and Morrisey executed an amendment to their change in control agreements.
Under the amendment, each officer is entitled to receive certain severance
benefits upon termination or constructive termination of employment subject to
the same conditions as the original agreements, but only if termination occurs
prior to February 10, 2000. In addition, the amendment causes the agreements to
expire on February 10, 2001. Mr. Hoe and Ms. Shapiro did not execute an
amendment to their agreements. Both Mr. Hoe and Ms. Shapiro have asserted that
they are entitled to receive severance benefits under their change in control
agreements, however the Company believes that no such benefits are owed by the
Company.
On March 30, 1997, CommNet and Mr. Pohs entered into a Retirement and
Consulting Agreement (the "Consulting Agreement") pursuant to which Mr. Pohs
will receive the following upon his retirement from the Company: (i) a payment
equal in amount to the additional employment contributions and matching
contributions under the CommNet Cellular Inc. Retirement Savings Plan and the
ESOP to which Mr. Pohs would have been entitled had such contributions been
determined without regard to the statutory limits applicable to such
contributions under the Code for the five year period ending on Mr. Pohs'
retirement date; (ii) a payment equal to the present value of five times the
annual premium cost with respect to Mr. Pohs' coverage level and plan option of
the Company's health plan and the Exec-U-Care Medical Reimbursement Insurance;
and (iii) a grant of 50,000 shares of restricted stock under the CommNet
Cellular Inc. Omnibus Stock and Incentive Plan (which shares will vest upon
death, disability, the end of the consulting period described below or a change
of control). The Consulting Agreement also provides that the Company will
retain Mr. Pohs as a consultant for a period of six years following his
retirement in exchange for a consulting fee equal to 50% of Mr. Pohs' final
annualized base salary plus his final year's annualized bonus per year. In the
event of a change in control of the Company, as defined in the Consulting
Agreement, (i) if Mr. Pohs has not yet retired, he may elect to receive the
benefits set forth in his change of control agreement, as described above, or to
receive the benefits provided for in the Consulting Agreement, and (ii) if Mr.
Pohs has retired, he will be entitled to receive a lump-sum payment of all
consulting fees due for the remaining portion of the consulting arrangement, and
all restrictions on the shares granted pursuant to the Consulting Agreement will
lapse.
In the event any payment or benefit to be received pursuant to the change
in control or consulting agreements would be subject to the federal excise tax,
the amount of the benefits payable under the agreement will be increased such
that the net amount retained by the officer after deduction of any excise tax on
such payment and any federal, state and local tax and excise tax upon such
additional payment shall be equal to the full severance benefits contemplated by
the agreement.
11
<PAGE>
1997 AGGREGATED OPTION EXERCISES
AND YEAR-END OPTION VALUES
The following table provides information on the value of unexercised
options held by the Named Executive Officers at September 30, 1997, using a per
share value of $35 1/16th, the closing price of the Company's common stock on
that date.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options at In-the-Money Options
Fiscal Year End (#) at Fiscal Year End
----------------------------------------- -----------------------------------------
Name Vested Unvested Vested Unvested
- ------------------------- ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Arnold C. Pohs 740,000 (1) - $8,327,000 (1) $ -
Daniel P. Dwyer 397,500 (1) - 4,789,000 (1) -
Homer Hoe 80,000 (2) - 682,000 -
Timothy C. Morrisey 51,250 - 418,000 -
David S. Lynn 93,500 - 1,127,000 -
</TABLE>
_________
(1) Excludes options to purchase 250,000 and 150,000 shares of TVX, Inc. held
by Arnold C. Pohs and Daniel P. Dwyer, respectively, which were forfeited
upon the sale of TVX, Inc. during fiscal 1998.
(2) Mr. Hoe is no longer with the Company.
During the third fiscal quarter of 1998, the Company and certain option
holders, including each of the Named Executive Officers other than Mr. Hoe,
negotiated certain changes to the terms of option agreements affecting most, but
not all of the outstanding options. The expiration date of options was extended
from ten years after date of grant to February 5, 2008. However, any
appreciation in the value of an option due to increases in the value of Common
Stock over $36 per share (the value of a share of Common Stock on February 10,
1998, the date of the Merger) became subjected to vesting over six years, with a
limit on vesting of 75% of such appreciation until a liquidation event as
defined in the replacement stock option agreements. In addition, the number of
options and exercise prices were reduced such that the value of unexercised
options on February 10, 1998 remained constant and the number of shares subject
to all options held by participants bore the same relationship to the total
number of shares of common stock outstanding on a fully-diluted basis after the
Merger.
In addition to the negotiated changes to the option agreements, the Company
issued a four-for-one common stock dividend in the third fiscal quarter of 1998
and adjusted the options accordingly. This action had the effect of increasing
the shares subject to outstanding options by a factor of five and decreasing
their exercise prices by a factor of five.
12
<PAGE>
STOCKHOLDER PERFORMANCE RETURN GRAPH.
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock with that of the
cumulative total return of the Nasdaq Stock Market US Index ("NASDAQ STOCK MRKT
US") and the Nasdaq Telecommunications Index ("NASDAQ TELECOM") for the five-
year period ended on September 30, 1997. The information below is based on an
investment of $100, on September 30, 1992, in the Company's Common Stock, the
NASDAQ STOCK MRKT US and the NASDAQ TELECOM, with dividends reinvested.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/92 9/93 9/94 9/95 9/96 9/97
CommNet Cellular Inc. $100 $142 $188 $239 $238 $289
NASDAQ Stock Market (U.S.) $100 $131 $132 $182 $216 $297
NASDAQ Telecommunications $100 $177 $164 $195 $202 $274
</TABLE>
COMMITTEES.
The Company has no standing nominating committee of the Board of Directors.
The Compensation Committee makes recommendations to the Board of Directors
concerning the Compensation of the Company's officers. The Compensation
Committee currently consists of Messrs. Gallogly, Ryan, Scully and Guffey.
13
<PAGE>
OTHER INFORMATION
The Audit Committee makes recommendations to the Board of Directors
concerning the selection of the Company's auditors and the scope of auditing and
accounting matters. The Audit Committee currently consists of Messrs. Scully,
Ryan and Bodnick.
MEETINGS OF THE BOARD.
The Board of Directors held five meetings during the fiscal year ended
September 30, 1997. Each incumbent director seeking reelection attended 100% of
the total number of meetings of the Board and committees thereof on which such
director served during that period.
SUBMISSION OF STOCKHOLDER PROPOSALS.
Stockholder proposals intended for presentation at the Company's next
annual meeting must be received by the Company at its principal offices in
Englewood, Colorado, not later than September 30, 1998.
OTHER MATTERS.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited by directors, officers and
employees of the Company by personal interview, telephone or telegram.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward the solicitation material to the beneficial
owners of common stock held of record by such persons and the Company may
reimburse them for reasonable out-of-pocket and clerical expenses incurred by
them in connection therewith.
A COPY OF THE COMPANY'S FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, EXCLUDING EXHIBITS, MAY BE OBTAINED BY STOCKHOLDERS WITHOUT CHARGE
BY WRITTEN REQUEST ADDRESSED TO STOCKHOLDER RELATIONS, COMMNET CELLULAR INC.,
8350 E. CRESCENT PARKWAY, SUITE 400, ENGLEWOOD, COLORADO 80111.
Englewood, Colorado
August 24, 1998
CEIMC-PS-98
14
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<C> <S>
- -------------------------------
COMMNET CELLULAR INC. 1. To Amend Article VIII of the Articles of Incorporation
- ------------------------------- of the Company to read as follows:
ARTICLE VIII
The business and affairs of the Corporation shall be
managed by the Board of Directors. The number of directors
constituting the Board of Directors shall be fixed in the
Mark box at right if an manner provided in the Bylaws of the Corporation, subject
address change or comment to the limitation that the number of directors of the
has been noted on the reverse Corporation shall be not fewer than three unless the
side of this card. [_] outstanding shares of the Corporation are held of record by
fewer than three shareholders, in which event there need be
only as many directors as there are shareholders.
Directors shall continue to hold office until the next
meeting of shareholders when Directors are elected.
For With- Abstain
RECORD DATE SHARES: hold
[_] [_] [_]
2. Election of Directors Nominees For With- For All
to serve as Directors until the hold Except
next annual meeting: [_] [_] [_]
Arnold C. Pohs, Daniel P. Dwyer,
Marc A. Bodnick, Mark T. Gallogly,
Lawrence H. Guffey, Glenn H.
Hutchins, Simon P. Lonergan,
William J. Ryan, John P. Scully
Note: If you not wish your shares noted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name(s)
of the nominee(s). Your shares will be voted for the remaining nominee(s).
3. Ratify the selection of For With- Abstain
Deloitte & Touche LLP as hold
Independent Auditors for the Company [_] [_] [_]
4. Such other matters as may properly come before the
meeting.
Please be sure to sign and
date this Proxy. Date _________________________________________________
</TABLE>
Stockholder sign here Co-owner sign here
------------------ -------------------
DETACH CARD DETACH CARD
<PAGE>
COMMNET CELLULAR INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 16, 1998
The undersigned holder of shares of Common Stock of CommNet Cellular Inc. (the
"Company") hereby appoints Arnold C. Pohs and Daniel P. Dwyer, and each of them,
as proxies of the undersigned, with full power of substitution, to act and to
vote for and in the name, place and stead of the undersigned at the Annual
Meeting of Stockholders of the Company to be held on September 16, 1998 at 9:00
a.m. at Hyatt Regency/Tech Center, 7800 E. Tufts Avenue, Denver, Colorado,
80237, and at any and all adjournments thereof, according to the number of votes
and as fully as the undersigned would be entitled to vote if personally present
at such meeting, and particularly with respect to the proposals listed on the
reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED FOR ITEMS 1, 2 and 3.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE
AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the reverse side. Joint
owners should each sign personally. Trustees and others signing in a
representative capacity should indicate the capacity in which they sign.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
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