Item 5.02. Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 7, 2020, Shentel Management
Company (the “Company”), an affiliate of Shenandoah Telecommunications Company, entered into severance agreements,
each of which is in substantially the same form (the “Severance Agreement”), with Christopher E. French, David L Heimbach,
William L. Pirtle and Thomas A. Whitaker (each, the “Executive” under his respective Severance Agreement), which provide
for certain payments to the Executive in the event of certain terminations of the Executive’s employment.
The Severance Agreement has an initial term
ending on December 31, 2021, which will be extended automatically by additional one-year periods unless the Company or the Executive
gives written notice that it or he does not wish to extend the Severance Agreement (the “Term”). In addition, in the
event that a Control Change Date (as defined below) occurs during the Term, the Term will be extended until the date that is 18
months after such Control Change Date (or, if more than one Control Change Date occurs during the Term, the last Control Change
Date).
In addition to the Standard Termination
Benefits (as defined in the Severance Agreement) that the Executive is entitled to receive upon a termination of the Executive’s
employment with the Company and its affiliates for any reason, in the event of a Covered Termination (as defined below) of the
Executive, the Executive is entitled to receive (a) if a Control Change Date has not occurred before the date of the Executive’s
Covered Termination, (i) an amount equal to one times the Executive’s annual base salary as in effect on the date the Executive’s
employment ends (but disregarding any reduction in base salary that constitutes Good Reason (as defined in the Severance Agreement)),
payable in installments in accordance with the Company’s regular payroll policy, and (ii) if the Executive elects to continue
coverage under the Company’s health insurance plan under COBRA, reimbursement in an amount equal to the monthly premium that
the Company pays for active employees for the same type and level of such coverage for up to 12 months, unless such obligation
terminates earlier in accordance with the terms of the Severance Agreement, payable in the month after the month in which the Executive
paid the COBRA premium, or (b) if a Control Change Date has occurred on or before the date of the Executive’s Covered Termination,
(1) the benefits described in clauses (a)(i) and (ii) of this paragraph and (2) an amount equal to one times the Executive’s
“target” annual incentive bonus for the year in which the Executive’s employment ends (the benefits described
this paragraph, the “Severance Benefits”).
The Severance Benefits will be provided
to the Executive only if (a) the Executive remains continuously employed by the Company or its affiliates until the date of the
Executive’s Covered Termination; (b) the date of the Executive’s Covered Termination is during the Term; (c) the Executive
provides the Company the general release and waiver of claims contemplated by the Severance Agreement; and (d) the Executive complies
with the Executive’s covenants in the Severance Agreement, including with respect to non-competition, non-solicitation, confidentiality
and non-disparagement. No further Severance Benefits will be provided to the Executive after the date that the Executive becomes
employed by, or provides services to, a Buyer (as defined below). In the event that the Executive breaches certain covenants in
the Severance Agreement, the Executive is obligated to repay to the Company the Severance Benefits previously paid to the Executive
on or after the date of the Executive’s breach.
If the benefits or payments payable under
the Severance Agreement would subject the Executive to tax under Section 4999 of the Internal Revenue Code, such payments will
be reduced as provided in, and to the extent required by, Section 14.04 of the Shenandoah Telecommunications Company 2014 Equity
Incentive Plan. If any provision of the Severance Agreement is found not to comply with, or otherwise not be exempt from, Section
409A of the Internal Revenue Code, such provision shall be modified, in the sole discretion of the Company, to comply with, or
to effectuate an exemption from, Section 409A of the Internal Revenue Code.
The following definitions apply to the Severance
Agreement:
“Buyer” means the purchaser
or acquirer in a Transaction.
“Change in Control” has the
same meaning as such term is defined in Section 1.04 of the Shenandoah Telecommunications Company 2014 Equity Incentive Plan except
that for purposes of Section 1.04(4) therein, the phrase “at least sixty percent (60%) of the Company’s assets”
shall be substituted for “all or substantially all of the Company’s assets.” For the avoidance of doubt, more
than one Change in Control may occur during the Term, e.g., if a Change in Control occurs on account of the sale of at least
sixty percent (60%), but less than all, of Shenandoah Telecommunications Company’s assets, a subsequent sale of at least
sixty percent (60%) of the remaining assets of Shenandoah Telecommunications Company also shall be a Change in Control.
“Control Change Date” means
the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the “Control
Change Date” is the date of the last of such transactions.
“Covered Termination” means,
except as provided in the two following sentences, an involuntary termination of the Executive’s employment with the Company
and its affiliates by the Company for a reason other than Cause (as defined in the Severance Agreement) or, on or after a Control
Change Date, the Executive’s resignation from employment with the Company and its affiliates with Good Reason. A cessation
of the Executive’s employment with the Company and its affiliates on account of the Executive’s death or disability
is not a Covered Termination. A cessation of the Executive’s employment with the Company and its affiliates is not a Covered
Termination if (i) such employment ends in connection with, or related to, a Transaction and (ii) the Executive accepts an offer
of employment or becomes an employee or otherwise provides services to the Buyer.
“Transaction” means a disposition,
merger, spinoff or sale of the assets or similar transaction by, or involving, the Company or any affiliate, subsidiary, division
or business segment of the Company or its affiliate for which the Executive is employed by, or providing services to, on the date
of such transaction, regardless of whether such transaction constitutes a Change in Control.
The foregoing description of the Severance
Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Severance
Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.