Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8608
NYNEX Corporation
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 13-3180909
1095 Avenue of the Americas, New York, New York 10036
Telephone Number (212) 395-2121
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
At July 31, 1994, 420,546,657 common shares were outstanding.
<PAGE>
Form 10-Q Part I PART I - FINANCIAL INFORMATION
<TABLE>
NYNEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In millions, except per share amounts) (Unaudited)
<CAPTION>
Three Months Six Months
For the Period Ended June 30, 1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,658.5 $1,618.0 $3,288.4 $3,202.3
Long distance 269.7 281.3 550.7 560.6
Network access 844.8 846.0 1,709.0 1,698.0
Other 538.6 619.0 1,036.8 1,223.6
Total operating revenues 3,311.6 3,364.3 6,584.9 6,684.5
OPERATING EXPENSES
Maintenance and support 744.8 743.5 1,514.1 1,463.3
Depreciation and amortization 663.9 624.5 1,315.9 1,239.7
Marketing and customer services 359.2 345.4 699.4 663.6
Taxes other than income 255.9 258.8 504.9 530.2
Selling, general and administrative 839.1 533.3 1,324.5 1,061.2
Other 205.5 190.7 387.4 389.5
Total operating expenses 3,068.4 2,696.2 5,746.2 5,347.5
Operating income 243.2 668.1 838.7 1,337.0
Other income (expense) - net 7.5 (4.6) (1.6) (11.4)
Interest expense 162.1 164.0 321.7 333.4
Earnings before income taxes and
cumulative effect of change in accounting
principle 88.6 499.5 515.4 992.2
Income taxes
Federal (13.8) 137.4 99.6 272.8
State, local and other 27.7 21.9 50.5 48.1
Total income taxes 13.9 159.3 150.1 320.9
Earnings before cumulative effect of
change in accounting principle 74.7 340.2 365.3 671.3
Cumulative effect of change in accounting
for postemployment benefits,
net of taxes - - - (123.5)*
NET INCOME $ 74.7 $ 340.2 $ 365.3 $ 547.8 *
Earnings per share before cumulative
effect of change in
accounting principle $ .18 $ .82 $ .88 $ 1.62
Cumulative effect per share of change
in accounting principle - - - (.30)*
Earnings per share $ .18 $ .82 $ .88 $ 1.32
Weighted average number of
shares outstanding 418.9 412.4 417.2 412.6
Dividends declared per share $ .59 $ .59 $ 1.18 $ 1.18
Retained earnings
Beginning of period $2,437.4 $3,925.6* $2,388.3 $3,958.7
Net income 74.7 340.2 365.3 547.8 *
Dividends declared (247.9) (243.4) (494.2) (486.4)
Other 9.8 1.8 14.6 4.1
End of period $2,274.0 $4,024.2* $2,274.0 $4,024.2 *
* Restated to reflect the adoption of Statement of Financial Accounting Standards
No. 112 in the fourth quarter of 1993 retroactive to January 1, 1993.
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
Form 10-Q Part I
<TABLE>
NYNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
<CAPTION>
June 30, December 31,
1994 1993
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and temporary cash investments $ 133.4 $ 157.8
Receivables (net of allowance of $213.1
and $210.2, respectively) 2,441.8 2,439.1
Inventories 150.4 169.2
Prepaid expenses 378.5 306.2
Deferred charges and other current assets 631.7 849.4
Total current assets 3,735.8 3,921.7
Property, plant and equipment - at cost 34,933.8 33,969.4
Less: accumulated depreciation (14,577.4) (13,719.4)
20,356.4 20,250.0
Deferred charges and other assets 5,325.3 5,286.7
Total Assets $29,417.5 $29,458.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,377.1 $ 2,853.3
Short-term debt 3,036.6 3,190.1
Other current liabilities 739.0 763.3
Total current liabilities 6,152.7 6,806.7
Long-term debt 6,995.7 6,937.8
Deferred income taxes 3,316.1 3,545.0
Unamortized investment tax credits 333.0 360.3
Other long-term liabilities and deferred credits 4,106.6 3,393.1
Total liabilities 20,904.1 21,042.9
Commitments and contingencies [Notes (d) and (e)]
Stockholders' equity:
Preferred stock - $1 par value - -
shares authorized: 70,000,000
shares issued: None
Preferred stock - Series A Junior Participating - -
- $1 par value
shares authorized: 5,000,000
shares issued: None
Common stock - $1 par value 436.5 431.1
shares authorized: 750,000,000
shares issued:
at June 30, 1994 - 436,450,858
at December 31, 1993 - 431,080,155
Additional paid-in capital 6,821.1 6,624.5
Retained earnings 2,274.0 2,388.3
Treasury stock (16,173,699 and 16,215,353
shares, respectively, at cost) (646.4) (648.1)
Deferred compensation - LESOP Trust (371.8) (380.3)
Total stockholders' equity 8,513.4 8,415.5
Total Liabilities and Stockholders' Equity $29,417.5 $29,458.4
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 365.3 $ 547.8 *
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,315.9 1,239.7
Amortization of unearned lease income-net (43.6) (40.3)
Allowance for funds used during construction-
equity component (14.0) (15.6)
Changes in operating assets and liabilities:
Receivables (2.7) 22.1
Inventories 18.7 (19.6)
Prepaid expenses (72.3) (34.1)
Deferred charges and other current assets 217.7 (97.6)
Accounts payable (479.4) (216.3)*
Other current liabilities (24.3) (168.4)
Deferred income taxes and Unamortized
investment tax credits (256.2) 109.3 *
Other long-term liabilities and deferred credits 586.6 185.4 *
Other-net (62.4) 74.6
Total adjustments 1,184.0 1,039.2
Net cash provided by operating activities 1,549.3 1,587.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,376.3) (1,091.6)
Investment in leased assets (14.4) (144.9)
Cash received from leasing activities 34.9 33.9
Other investing activities-net 63.0 (78.2)
Net cash used in investing activities (1,292.8) (1,280.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of commercial paper and short-term debt 10,421.7 5,340.4
Repayment of commercial paper and short-term debt (11,166.6) (5,016.7)
Issuance of long-term debt 718.0 893.6
Repayment of long-term debt and capital leases (80.2) (115.2)
Debt refinancings and call premiums - (859.5)
Issuance of common stock 142.4 27.1
Purchase of treasury stock - (92.3)
Dividends paid (438.6) (483.0)
Minority interest 122.4 -
Net cash used in financing activities (280.9) (305.6)
Net (decrease) increase in Cash and temporary
cash investments (24.4) 0.6
Cash and temporary cash investments at
beginning of period 157.8 88.9
Cash and temporary cash investments at
end of period $ 133.4 $ 89.5
* Restated to reflect the adoption of Statement of Financial Accounting
Standards No. 112 in the fourth quarter of 1993 retroactive to January 1,
1993.
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) BASIS OF PRESENTATION - The consolidated financial statements have been
prepared by NYNEX Corporation ("NYNEX") pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC") and, in the opinion of
Management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial information
for each period shown. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules and regulations. Management believes that the
disclosures made are adequate to make the information presented not
misleading. Certain information in the consolidated financial statements for
1993 has been reclassified to conform to the current year's presentation.
The results for interim periods are not necessarily indicative of the results
for the full year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
incorporated by reference in the NYNEX 1993 Annual Report on Form 10-K and
the current year's previously issued Quarterly Report on Form 10-Q.
(b) CASH AND TEMPORARY CASH INVESTMENTS - NYNEX's cash management policy is
to make funds available in banks when checks are presented. At June 30, 1994,
NYNEX had recorded in Accounts payable checks outstanding but not yet
presented for payment of $174.6 million.
(c) ADOPTION OF FINANCIAL ACCOUNTING STANDARDS - Effective January 1, 1994,
NYNEX adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
("Statement No. 115"). The effect of implementing Statement No. 115 on
NYNEX's results of operations and financial position was not significant.
(d) REVENUES SUBJECT TO POSSIBLE REFUND - Several state and federal
regulatory matters, including affiliate transaction issues in New York
Telephone Company's ("New York Telephone") 1990 intrastate rate case and
overearnings complaints by interstate access customers, may possibly require
the refund of a portion of the revenues collected in the current and prior
periods. As of June 30, 1994, the aggregate amount of such revenues that was
estimated to be subject to possible refund was approximately $203 million,
plus related interest. The outcome of each pending matter, as well as the
time frame within which each will be resolved, is not presently determinable.
(e) LITIGATION AND OTHER CONTINGENCIES - It is probable that various local
tax claims aggregating approximately $210 million in tax and $137 million in
associated interest will be asserted against New York Telephone for the
period 1983 through the second quarter of 1994. The claims relate to the
taxability of New York Telephone's interstate and intrastate network access
revenues. The current status is that these matters have been identified as
possible audit adjustments by the taxing authority, and New York Telephone is
presenting its arguments against those adjustments. While New York
Telephone's counsel cannot give assurance as to the outcome, counsel believes
that New York Telephone has strong legal positions in these matters.
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(Unaudited)
(e) LITIGATION AND OTHER CONTINGENCIES (CONT'D)
Various other legal actions and regulatory proceedings are pending that may
affect NYNEX, including matters involving Racketeer Influenced and Corrupt
Organizations Act, antitrust, tort, contract and tax deficiency claims. While
counsel cannot give assurance as to the outcome of any of these matters, in
the opinion of Management based upon the advice of counsel, the ultimate
resolution of these matters in future periods is not expected to have a
material effect on NYNEX's financial position or annual operating results but
could have a material effect on quarterly operating results.
<TABLE>
(f) SUPPLEMENTAL INFORMATION - The following information is provided in
accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows":
<CAPTION>
For the
Six Months Ended
June 30,
(In millions) 1994 1993
<S> <C> <C>
Income tax payments $260.8 $326.5
Interest payments $281.8 $361.3
Additions to property, plant and
equipment under capital lease obligations $ 10.3 $ -
Common Stock issued for Dividend Reinvestment and
Stock Purchase Plan and stock compensation plans $ 61.1 $ 3.6
</TABLE>
(g) SEGMENT INFORMATION - The following table sets forth summary financial
information by business segment. Information regarding operating revenues by
business segment is presented in Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 11-13 and 16-18.
Total intersegment sales for the second quarter of 1994 and 1993 were $98.7
and $85.3 million, respectively, and for the six months ended June 30, 1994
and 1993 were $195.7 and $168.0 million, respectively, principally in the
telecommunications segment. The financial services segment had total
outstanding debt of $679.7 and $603.8 million at June 30, 1994 and 1993,
respectively.
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(In millions) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING INCOME:
Telecommunications $259.3 $704.4 $871.7 $1,397.7
Cellular 13.1 18.7 23.1 31.4
Publishing 25.7 15.3 41.0 34.9
Financial services 17.5 18.6 38.9 35.0
Other diversified operations (32.8) (16.8) (53.0) (33.0)
Total operating income by segment 282.8 740.2 921.7 1,466.0
Adjustments/Eliminations 0.4 4.5 (2.1) 4.7
Corporate expenses (40.0) (76.6) (80.9) (133.7)
Operating Income $243.2 $668.1 $838.7 $1,337.0
</TABLE>
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(Unaudited)
(g) SEGMENT INFORMATION (CONT'D)
Cellular operating income includes certain amounts that are subsequently paid
out to minority shareholders. Minority interest expense for the cellular
segment for the second quarter of 1994 and 1993 was $12.5 and $12.0 million,
respectively, and for the six months ended June 30, 1994 and 1993 was $26.1
and $21.2 million, respectively.
<TABLE>
<CAPTION>
June 30, June 30,
(In millions) 1994 1993
<S> <C> <C>
IDENTIFIABLE ASSETS:
Telecommunications $24,740.2 $24,316.1
Cellular 751.0 562.8
Publishing 550.0 522.5
Financial services 1,505.8 1,368.3
Other diversified operations 1,868.8 1,833.2
Total identifiable assets by segment 29,415.8 28,602.9
Adjustments/Eliminations (1,429.4) (918.1)
Investment in unconsolidated subsidiary 29.5 29.7
Corporate assets 1,401.6 207.2
Total Assets $29,417.5 $27,921.7
</TABLE>
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATE REGULATORY MATTERS
As previously reported (see NYNEX's Annual Report on Form 10-K for the year
ended December 31, 1993), on February 4, 1993, the New York State Public
Service Commission ("NYSPSC") issued an order with respect to the Second and
Third Stages, permitting New York Telephone to retain 1993 earnings above a
return on equity of 11.7% and up to 12.7%, depending on its attainment of
specified service quality criteria, with earnings above 12.7% return on
equity to be held for the ratepayers' benefit. New York Telephone has
submitted a report to the NYSPSC showing 1993 earnings below 11.7%. The
NYSPSC staff is currently reviewing New York Telephone's submission.
As previously reported (see NYNEX's Annual Report on Form 10-K for the year
ended December 31, 1993), in the first phase of the incentive regulation
proceeding, the NYSPSC issued Orders on December 24, 1993 and January 28,
1994 for a reduction in New York Telephone's rates of $170 million annually,
effective January 1, 1994, and required that an additional $153 million of
current revenues be made available "for the ultimate benefit of customers and
the Company's competitive position through earnings incentives for short-term
service improvements and a longer term plan for performance-based earning
incentives and network improvements." That incentive regulatory plan is
currently being pursued in a second phase of the proceeding. The
$170 million rate reduction was intended to reduce intrastate revenues by
approximately $141 million annually. As ordered by the NYSPSC, $31 million
of the $153 million has been designated by New York Telephone as an incentive
to improve overall service quality in the Brooklyn-Queens-Bronx service area.
As previously reported (see NYNEX's Annual Report on Form 10-K for the year
ended December 31, 1993), the NYSPSC has issued an Opinion and Order which
would require New York Telephone to provide IntraLATA Presubscription ("ILP")
within 18 months of a bona fide request from a carrier. ILP would give a
customer the option of designating, in advance, a carrier that would carry
the customer's intraLATA toll calls. On April 4, 1994, the NYSPSC issued an
opinion which confirmed the 18 month requirement, provided that Interexchange
Carriers should pay the cost of ILP implementation, and ruled that New York
Telephone should be compensated for contribution losses resulting from ILP.
In its decision, the NYSPSC suggested that certain issues relating to ILP,
including scheduling, would be made the subject of negotiations and a
"collaborative effort" between the parties to the incentive regulation
proceeding.
On April 14, 1994, New England Telephone and Telegraph Company ("New England
Telephone") filed comprehensive tariff provisions with the Massachusetts
Department of Public Utilities ("MDPU") as part of an Alternative Regulatory
Plan ("Plan") to govern New England Telephone's Massachusetts intrastate
operations. The Plan proposes the following: (1) regulation of New England
Telephone for a period of ten years from the date of MDPU approval under a
price framework; (2) pricing rules that limit New England Telephone's ability
to increase both overall average prices and specific rate elements,
-8-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATE REGULATORY MATTERS (CONT'D)
including a ceiling on the weighted average price of all tariffed services
based on a formula of inflation minus a productivity factor plus or minus
exogenous changes; (3) no earnings restriction; (4) a cap on the monthly
rates for residence services until August 2001; (5) an increase of
$2.50 monthly in the credit on exchange services for Lifeline customers;
(6) investment commitments for the public telecommunications network,
including commencing the deployment of a broadband network in Massachusetts;
(7) quality of service commitments; (8) rate reductions for switched access
services; and (9) a new streamlined standard of regulation governing the
review of tariff filings. On May 24, 1994, the MDPU ruled that New England
Telephone's filing would be treated as a petition for alternative regulation
and, consequently, the MDPU's review is not subject to the statutory
suspension period. Hearings concerning New England Telephone's filing
commenced on July 11, 1994.
As previously reported (see NYNEX's Annual Report on Form 10-K for the year
ended December 31, 1993), New England Telephone filed a petition for a price
regulation plan with the Vermont Public Service Board ("VPSB") on October 5,
1993. In a related proceeding, on December 1, 1993, the Vermont Department
of Public Service ("VDPS") filed a petition seeking to examine New England
Telephone's rates and to ensure that rates are at appropriate levels prior to
the initiation of a price regulation plan. On May 27, 1994, New England
Telephone and the VDPS submitted to the VPSB a proposed agreement to resolve
the major issues in New England Telephone's Price Regulation Plan
proceeding. The agreement would afford New England Telephone pricing and
marketing flexibility and would not restrict New England Telephone's
earnings. In connection with the proposed agreement, the VDPS has reduced
its allegation of New England Telephone overearnings from $27.5 million to
$17.1 million on an annual basis. Hearings before the VPSB concluded on July
21, 1994, and a decision with respect to the agreement is expected in October.
On June 30, 1994, the New Hampshire Public Utilities Commission ("NHPUC")
approved New England Telephone's proposed toll rate reduction targeted at
small and medium volume usage customers, effective August 5, 1994. The
annual revenue effect of the toll rate reduction is estimated to be
approximately $7.1 million. The NHPUC previously approved, effective
January 31, 1994, a New England Telephone-requested toll rate reduction
targeted at high and medium volume usage customers, with an annual revenue
effect of $3.5 million.
FEDERAL REGULATORY MATTERS
On July 1, 1994, New York Telephone and New England Telephone (collectively,
the "telephone subsidiaries") implemented the fourth annual update to the
price cap rates. These tariffs will result in a net reduction in the
telephone subsidiaries' annual interstate access rates of approximately
$9.4 million during the tariff period from July 1, 1994 to June 30, 1995.
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS RESTRUCTURING
Second quarter 1994 results include approximately $335 million of pretax
charges ($217 million after-tax) for pension enhancements, primarily in the
telecommunications segment, for approximately 2,100 management and 1,900
nonmanagement employees who elected during the quarter to leave NYNEX under
retirement incentives. A portion of the year-end 1993 accrual for severance
was utilized on a per employee basis, and the incremental costs of the
pension enhancements were recorded. The retirement incentives are intended
to provide a voluntary means to implement a portion of the planned work force
reductions of approximately 16,800 by the end of 1996. The components of the
$335 million pretax charges are: $172 million ($112 million after-tax) for
pension enhancements, and $163 million ($105 million after-tax) for
associated postretirement medical benefits.
As previously reported (see NYNEX's Annual Report on Form 10-K for the year
ended December 31, 1993), NYNEX recorded pretax charges of approximately
$2.1 billion ($1.4 billion after-tax) in the fourth quarter of 1993 for
business restructuring, of which approximately $586 million was for employee
severance payments and $520 million was for the medical curtailment loss
recognized as a result of the planned decrease in the work force. The second
quarter charges are the first step in an anticipated additional $2.0 billion
in pretax charges ($1.3 billion after-tax) for pension enhancements to be
recorded as employees leave NYNEX through December 31, 1996 under the
retirement incentives; the amount to be recorded in each year is not
presently determinable because the charges are dependent on the number of
employees accepting the incentives. The retirement incentives credit
employees with an additional six years toward both their age and their length
of service for the purpose of determining pension eligibility and benefits.
Much of the cost of the incentives will be funded by NYNEX's pension plans.
These incentives also resulted in more individuals qualifying for lifetime
medical coverage than under the severance plan. The pension enhancement to
the NYNEX management pension plan was announced in February 1994 and will be
offered at different times through 1996 according to local force
requirements. NYNEX's agreements with the Communications Workers of America
and with the International Brotherhood of Electrical Workers ("IBEW") in New
York, which extend the existing labor agreements to August 1998, provide a
retirement incentive. On August 5, 1994, a similar agreement with the IBEW
in New England was tentatively reached subject to ratification by the union
membership (see OTHER MATTERS).
The restructuring reserve balance for the 1993 business restructuring charges
at June 30, 1994 was approximately $1.2 billion, excluding the liability
recorded at year-end for postretirement medical benefits associated with
employees leaving NYNEX under the business restructuring. In December 1993,
NYNEX utilized $181 million of the restructuring reserves primarily relating
to the sale or discontinuance of its information products and services
businesses. In the first six months of 1994, NYNEX reduced 1993
restructuring reserves by $255 million as follows: $130 million of
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS RESTRUCTURING (CONT'D)
reserves established for severance were transferred to the pension liability
on a per employee basis as a result of employees' leaving under the pension
enhancements as opposed to severance provisions as previously accrued for;
$15 million was utilized for other retiree costs; $40 million was utilized
for the exit from the information products and services business; $18 million
was utilized for developing a single "NYNEX" brand identity; $29 million was
utilized for systems re-engineering; $12 million was utilized for other costs
related to various re-engineering initiatives in the telecommunications
segment; $5 million was reversed due to the actual loss on disposal of United
Publishers Corporation ("UPC") being less than the estimated amount accrued
in the publishing segment in December 1993 under the assumption that UPC
would be shut down; and $6 million was utilized for nontelephone
restructuring. Additionally, $40 million of reserves established in 1991 for
severance costs were transferred to the pension liability as a result of the
pension enhancements.
There were no significant cost savings as a result of business restructuring
in the first six months of 1994. Since most of the employees that left NYNEX
under the terms of the enhanced pension offering left in late June, the
expense savings associated with this force reduction have not yet been
realized. NYNEX expects to reduce its work force by a total of approximately
6,000 employees by the end of 1994 as re-engineering initiatives are
implemented and as retirement incentives are offered to eligible employees.
SECOND QUARTER OF 1994 AS COMPARED TO SECOND QUARTER OF 1993
OPERATING REVENUES
Operating revenues for the quarter ended June 30, 1994 decreased
$52.7 million, or 1.6%, from the same period last year. A summary of
revenues by segment is as follows:
<TABLE>
UNAFFILIATED REVENUES BY SEGMENT:
(In millions)
<CAPTION>
For the Three Months Ended
June 30, June 30,
1994 1993
<S> <C> <C>
Telecommunications $2,859.4 $2,880.7
Cellular 177.8 105.9
Publishing 229.5 216.4
Financial services 22.8 24.8
Other diversified operations 22.1 136.5
Total Consolidated Operating Revenues $3,311.6 $3,364.3
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<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECOND QUARTER OF 1994 AS COMPARED TO SECOND QUARTER OF 1993 (CONT'D)
OPERATING REVENUES (CONT'D)
Telecommunications
Telecommunications revenues for the second quarter of 1994 decreased
$21.3 million from the second quarter of 1993.
Local service revenues increased $40.5 million, or 2.5%, primarily due to:
(1) a net $64 million increase resulting from increased demand as evidenced
by growth in access lines and growth in sales of calling features, (2) a
$6 million increase in local service rates at New England Telephone primarily
attributable to the implementation of the third transitional filing of a
restructuring of Massachusetts rates effective April 14, 1994 and (3) a
$3 million increase in local directory assistance revenues at New England
Telephone resulting from the reversal of previously deferred revenues
pursuant to a regulatory agreement with the State of Massachusetts to offset
expenses to enhance E911 systems. These increases were partially offset by a
$34 million revenue reduction at New York Telephone pursuant to an NYSPSC
order (see STATE REGULATORY MATTERS above).
Long distance revenues decreased $11.6 million, or 4.1%, primarily due to
decreased demand for private line services and wide area telecommunications
services as a result of increased competition and customer shifts to lower
priced services offered by the telephone subsidiaries, and a $4 million
revenue reduction at New York Telephone pursuant to an NYSPSC order (see
STATE REGULATORY MATTERS above). In addition, there was an $8 million
decrease in long distance rates at New England Telephone primarily
attributable to the implementation of the third transitional filing of a
restructuring of Massachusetts rates effective April 14, 1994. These
decreases were partially offset by increased demand for message toll
services, and a $2 million increase in long distance directory assistance
revenues at New England Telephone resulting from the reversal of previously
deferred revenues pursuant to a regulatory agreement with the State of
Massachusetts to offset expenses to enhance E911 systems.
Network access revenues decreased $1.2 million. Special access revenues
decreased $9 million primarily due to a reduction in rates, increased
competition and customer shifts to lower priced services offered by the
telephone subsidiaries. Switched access revenues increased $9 million as a
result of increased usage, partially offset by a reduction in interstate
rates, which included the phase-out of the equal access cost recovery charge,
and by a $3 million revenue reduction at New York Telephone pursuant to an
NYSPSC order (see STATE REGULATORY MATTERS above).
-12-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECOND QUARTER OF 1994 AS COMPARED TO SECOND QUARTER OF 1993 (CONT'D)
OPERATING REVENUES (CONT'D)
Other revenues decreased $49.0 million primarily due to the following at
New York Telephone: (1) a $38 million reduction in revenues as ordered by the
NYSPSC representing the second quarter deferral of the $153 million (see
STATE REGULATORY MATTERS above), and (2) a $7 million decrease due to the
1994 cessation of imputed revenues for procurement costs.
Cellular
Cellular revenues for the second quarter of 1994 increased $71.9 million, or
67.9%, over the second quarter of 1993. The segment's customer base for
mobile telecommunications services continued to expand, increasing 65% as
compared to the second quarter of 1993, including customers associated with
the acquisition of a cellular property. This growth was spread across all
cellular markets; however, customer growth was partially offset by a decline
in average minutes of use per customer. Second quarter revenues include
$11.1 million as a result of the restructuring of the New York partnership.
Publishing
Publishing revenues for the second quarter of 1994 increased $13.1 million,
or 6.1%, over the second quarter of 1993 primarily due to the publication of
directories in the Czech Republic. In addition, Yellow Pages advertising
revenues in the New England market increased as a result of higher prices.
These increases were partially offset by decreased revenues due to the sale
of UPC in April 1994 as part of the 1993 business restructuring.
Financial Services
Financial services revenues for the second quarter of 1994 decreased
$2.0 million, or 8.1%, from the second quarter of 1993 principally due to a
temporary lag in the growth of new investments in the leased asset portfolio.
Other Diversified Operations
Other diversified operations revenues for the second quarter of 1994
decreased $114.4 million, or 83.8%, from the second quarter of 1993 primarily
attributable to NYNEX's exit from the information products and services
business. The BIS Group Limited ("BIS") and AGS Computers, Inc. ("AGS") were
sold in July 1993 and January 1994, respectively, and had contributed $123.5
million in revenues in the second quarter of 1993. These decreases were
partially offset by growth in the customer base for international cable
television and telephone operations.
-13-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECOND QUARTER OF 1994 AS COMPARED TO SECOND QUARTER OF 1993 (CONT'D)
OPERATING EXPENSES
Operating expenses for the second quarter of 1994 were $3.1 billion, an
increase of $372.2 million, or 13.8%, over the second quarter of 1993.
Operating expenses excluding Depreciation and amortization and Taxes other
than income increased $404.1 million at the telephone subsidiaries and
Telesector Resources Group, Inc. (collectively, the "telecommunications
group"), principally due to a $335.1 million pretax charge for pension
enhancements and associated postretirement medical benefits. Operating
expenses excluding Depreciation and amortization and Taxes other than income
decreased $68.4 million at NYNEX's subsidiaries other than the
telecommunications group principally due to the sale of BIS and AGS, which
had operating expenses of $127.4 million in the second quarter of 1993, and
the transfer of Corporate employees into the telecommunications group as part
of the single enterprise reorganization. The decrease was partially offset
by increased costs associated with the continued expansion of the customer
base for mobile telecommunications services, increased expenses related to
the growth in the customer base for international cable television and
telephone operations, and business development costs in other international
operations.
At the telecommunications group, employee costs, consisting primarily of
wages, payroll taxes, and employee benefits, increased $24.6 million. Wages
and payroll taxes increased $20 million due to increases in salary and wage
rates, additional labor costs due to ongoing service quality improvement
initiatives, and a $5 million increase resulting from the transfer of
Corporate employees into the telecommunications group as part of the single
enterprise reorganization, partially offset by a reduction in the work force
as a result of force reduction plans. In addition, benefit expenses
increased $5 million due primarily to increased medical costs.
At the telecommunications group, all other operating expenses, which consist
primarily of contracted and centralized services, rent and other general and
administrative costs, increased $44.4 million. The increase was due
primarily to a $29 million increase in contracted and centralized services,
which included a $13 million increase resulting from the transfer of
Corporate employees into the telecommunications group as part of the single
enterprise reorganization, a $14 million increase in bad debt expense
recognized pursuant to provisions of the billing and collection contract
primarily with AT&T, and a $9 million increase in the provision for
uncollectible revenues, partially offset by a $9 million decrease due to the
completion of equal access amortization in 1993.
Depreciation and amortization increased $39.4 million, or 6.3%, principally
at the telecommunications group. There was a $21 million increase due to
increased plant investment and a $16 million increase due to revised
intrastate depreciation rates in Massachusetts effective July 1993.
-14-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECOND QUARTER OF 1994 AS COMPARED TO SECOND QUARTER OF 1993 (CONT'D)
OPERATING EXPENSES (CONT'D)
Taxes other than income decreased $2.9 million, or 1.1%, principally due to a
$4 million decrease in property taxes at New York Telephone resulting
primarily from lower assessments of property value.
OTHER INCOME (EXPENSE) - NET
Other income (expense) - net for the second quarter of 1994 increased
$12.1 million over the second quarter of 1993. The increase was principally
due to dividends received from Viacom Inc., a one-time payment to NYNEX
Mobile Communications Company ("NYNEX Mobile") from its New York partners
related to restructure of the New York partnership, and higher expenses in
the second quarter of 1993 for the interstate portion of call premiums and
other charges associated with the refinancings of long-term debt. These
increases were partially offset by increased minority interest expense and
partnership losses in connection with investments in international ventures.
INTEREST EXPENSE
Interest expense for the second quarter of 1994 decreased $1.9 million, or
1.2%, from the second quarter of 1993. This decrease was principally due to a
decline in average interest rates resulting from long-term debt refinancings
in 1993 and increased average debt levels and higher expenses in the second
quarter of 1993 for interest on customer overbillings.
INCOME TAXES
Income taxes for the second quarter of 1994 decreased $145.4 million, or
91.3%, from the same period last year. The decrease was principally due to a
decrease in pretax income and a $21 million reduction in the deferred tax
valuation allowance as a result of expected future capital gains arising from
the planned disposition of certain cellular partnership interests as a result
of the planned joint venture between NYNEX and Bell Atlantic Corporation
("Bell Atlantic") which would permit NYNEX to utilize capital losses
generated by the exit from the information products and services business
(see OTHER MATTERS below).
-15-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993
OPERATING REVENUES
Operating revenues for the six months ended June 30, 1994 decreased
$99.6 million, or 1.5%, from the same period last year. A summary of
revenues by segment is as follows:
</TABLE>
<TABLE>
<CAPTION>
UNAFFILIATED REVENUES BY SEGMENT:
(In millions) For the Six Months Ended
June 30, June 30,
1994 1993
<S> <C> <C>
Telecommunications $5,728.5 $5,740.6
Cellular 318.1 196.5
Publishing 444.6 431.1
Financial services 50.6 46.5
Other diversified operations 43.1 269.8
Total Consolidated Operating Revenues $6,584.9 $6,684.5
</TABLE>
Telecommunications
Telecommunications revenues for the first six months of 1994 decreased
$12.1 million from the first six months of 1993.
Local service revenues increased $86.1 million, or 2.7%, primarily due to
(1) a net $128 million increase resulting from increased demand as evidenced
by growth in access lines, growth in sales of calling features and higher
usage associated with the severe winter storms, (2) an $8 million increase in
local service rates at New England Telephone primarily attributable to the
implementation of the third transitional filing of a restructuring of
Massachusetts rates effective April 14, 1994, (3) a $5 million increase due
to a 1993 reduction in revenues associated with the reversal of a 1990
deferral of private line revenues at New York Telephone, (4) a $6 million
increase primarily attributable to the 1994 reversal of revenues deferred in
1993 that were in excess of amounts required to be refunded to Rhode Island
customers for 1993 overearnings pursuant to the Rhode Island price regulation
trial at New England Telephone, and (5) a $5 million increase in local
directory assistance revenues at New England Telephone resulting from the
reversal of previously deferred revenues pursuant to a regulatory agreement
with the State of Massachusetts to offset expenses to enhance E911 systems.
These increases were partially offset by a $67 million revenue reduction at
New York Telephone pursuant to an NYSPSC order (see STATE REGULATORY MATTERS
above).
-16-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993
OPERATING REVENUES (CONT'D)
Long distance revenues decreased $9.9 million, or 1.8%, primarily due to
decreased demand for private line services and wide area telecommunications
services as a result of increased competition and customer shifts to lower
priced services offered by the telephone subsidiaries, a $7 million revenue
reduction at New York Telephone pursuant to an NYSPSC order (see STATE
REGULATORY MATTERS above), and a $12 million decrease in long distance rates
at New England Telephone primarily attributable to the implementation of the
third transitional filing of a restructuring of Massachusetts rates effective
April 14, 1994. These decreases were partially offset by increased demand
for message toll services, and a $5 million increase in long distance
directory assistance revenues at New England Telephone resulting from the
reversal of previously deferred revenues pursuant to a regulatory agreement
with the State of Massachusetts to offset expenses to enhance E911 systems.
Network access revenues increased $11.0 million principally due to a
$33 million increase in switched access revenues as a result of increased
usage, partially offset by a reduction in interstate rates, which included
the phase-out of the equal access cost recovery charge, and by a $6 million
revenue reduction at New York Telephone pursuant to an NYSPSC order (see
STATE REGULATORY MATTERS above). Special access revenues declined
$18 million primarily due to a reduction in rates, increased competition and
customer shifts to lower priced services offered by the telephone
subsidiaries.
Other revenues decreased $99.3 million, primarily due to the following at New
York Telephone: (1) a $77 million reduction in revenues as ordered by the
NYSPSC representing the first and second quarter deferrals of the
$153 million (see STATE REGULATORY MATTERS above), (2) a $24 million decrease
attributable to the 1993 reversal of previously recorded reductions in
revenues in connection with the phase out of ad valorem taxes on central
office equipment, (3) a $7 million decrease due to the 1994 cessation of
imputed revenues for procurement costs, and (4) a $10 million increase
associated with the 1993 reversal of a 1992 deferral of revenues for
concession service.
Cellular
Cellular revenues for the first six months of 1994 increased $121.6 million,
or 61.9%, over the first six months of 1993. The segment's customer base for
mobile telecommunications services continued to expand, increasing 65% as
compared to the first six months of 1993, including customers associated with
the acquisition of a cellular property. This growth was spread across all
cellular markets; however, customer growth was partially offset by a decline
in average minutes of use per customer. Revenues for the first six months of
1994 include $11.1 million as a result of the restructuring of the New York
partnership.
-17-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (CONT'D)
OPERATING REVENUES (CONT'D)
Publishing
Publishing revenues for the first six months of 1994 increased $13.5 million,
or 3.1%, over the first six months of 1993 primarily due to the publication
of directories in the Czech Republic. In addition, Yellow Pages advertising
revenues in the New England market increased as a result of higher prices.
These increases were partially offset by decreased revenues due to the sale
of UPC in April 1994 as part of the 1993 business restructuring.
Financial Services
Financial services revenues for the first six months of 1994 increased
$4.1 million, or 8.8%, over the first six months of 1993, principally due to
continued growth in the leased asset portfolio.
Other Diversified Operations
Other diversified operations revenues for the first six months of 1994
decreased $226.7 million, or 84.0%, from the first six months of 1993,
primarily attributable to NYNEX's exit from the information products and
services business. BIS and AGS were sold in July 1993 and January 1994,
respectively, and had contributed $240.5 million in revenues in the first six
months of 1993. These decreases were partially offset by growth in the
customer base for international cable television and telephone operations.
OPERATING EXPENSES
Operating expenses for the first six months of 1994 were $5.7 billion, an
increase of $398.7 million, or 7.5%, over the first six months of 1993.
Operating expenses excluding Depreciation and amortization and Taxes other
than income increased $496.5 million at the telecommunications group,
principally due to a $335.1 million pretax charge for pension enhancements
and associated postretirement medical benefits. Operating expenses excluding
Depreciation and amortization and Taxes other than income decreased
$148.7 million at NYNEX's subsidiaries other than the telecommunications
group principally due to the sale of BIS and AGS, which had operating
expenses of $249.7 million in the first six months of 1993, and the transfer
of Corporate employees into the telecommunications group as part of the
single enterprise reorganization. The decrease was partially offset by
increased costs associated with the continued expansion of the customer base
for mobile telecommunications services, increased expenses related to the
growth in the customer base for international cable television and telephone
operations, and business development costs in other international operations.
-18-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (CONT'D)
OPERATING EXPENSES (CONT'D)
At the telecommunications group, employee costs, consisting primarily of
wages, payroll taxes, and employee benefits, increased $85.4 million. Wages
and payroll taxes increased $67 million due to increases in salary and wage
rates, additional labor costs due to ongoing service quality improvement
initiatives, and an $11 million increase resulting from the transfer of
Corporate employees into the telecommunications group as part of the single
enterprise reorganization, partially offset by a reduction in the work force
as a result of force reduction plans. In addition, benefit expenses
increased $18 million due primarily to increased medical costs.
At the telecommunications group, all other operating expenses, which consist
primarily of contracted and centralized services, rent and other general and
administrative costs, increased $76.1 million. The increase was due
primarily to a $48 million increase in contracted and centralized services,
which included a $23 million increase resulting from the transfer of
Corporate employees into the telecommunications group as part of the single
enterprise reorganization, a $23 million increase in bad debt expense
recognized pursuant to provisions of the billing and collection contract
primarily with AT&T, a $15 million increase in the provision for
uncollectible revenues, a $10 million increase in material and supply
expenses, and a $7 million increase at New England Telephone resulting from
capitalization in 1993 of certain 1992 engineering charges. Partially
offsetting these increases was an $18 million decrease due to the completion
of equal access amortization in 1993 and a $9 million decrease attributable
to the reversal in 1993 of deferred inside wire expense recorded in 1991 and
1992 at New York Telephone.
Depreciation and amortization increased $76.2 million, or 6.1%, principally
at the telecommunications group where there was a $38 million increase due to
increased plant investment and a $33 million increase due to revised
intrastate depreciation rates in Massachusetts effective July 1993.
Taxes other than income decreased $25.3 million, or 4.8%, principally due to
a $28 million decrease in property taxes at New York Telephone resulting
primarily from lower assessments of property value and an $8 million decrease
in property taxes at New England Telephone primarily attributable to a
reversal of a 1993 accrual as a result of unasserted municipal assessments.
Partially offsetting these decreases were a $2 million increase in
Massachusetts property taxes and a $2 million increase in New York State
capital stock tax.
-19-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (CONT'D)
OTHER INCOME (EXPENSE) - NET
Other income (expense) - net for the first six months of 1994 increased
$9.8 million over the first six months of 1993. This increase was
principally due to dividends received from Viacom Inc., a one-time payment to
NYNEX Mobile from its New York partners related to restructure of the
New York partnership, and higher expenses in the first six months of 1993 for
the interstate portion of call premiums and other charges associated with the
refinancings of long-term debt. These increases were partially offset by
increased minority interest expense and partnership losses in connection with
investments in international ventures.
INTEREST EXPENSE
Interest expense for the first six months of 1994 decreased $11.7 million, or
3.5%, from the first six months of 1993. This decrease was principally due
to a decline in average interest rates resulting from long-term debt
refinancings in 1993 and increased average debt levels and higher expenses in
the first six months of 1993 for interest on customer overbillings.
INCOME TAXES
Income taxes for the first six months of 1994 decreased $170.8 million, or
53.2%, from the same period last year. The decrease was principally due to a
decrease in pretax income and a $33 million reduction in the deferred tax
valuation allowance as a result of the development of tax planning strategies
to utilize capital losses generated by the exit from the information products
and services business, including expected future capital gains arising from
the planned disposition of certain cellular partnership interests as a result
of the planned joint venture between NYNEX and Bell Atlantic (see OTHER
MATTERS below). These increases were partially offset by the enactment of
the Revenue Reconciliation Act of 1993 on August 10, 1993, which increased
the statutory corporate federal income tax rate from 34 percent to 35 percent
retroactive to January 1, 1993.
CAPITAL RESOURCES AND LIQUIDITY
Capital expenditures increased $284.7 million, or 26.1%, over the first six
months of 1993. During the first six months of 1994, NYNEX continued its
capital expenditure program designed to meet the expanding needs for
telecommunications services by upgrading the existing telecommunications
network, including new construction, optical fiber and modernization at the
telephone subsidiaries. The telephone subsidiaries funded their capital
expenditures of $1.1 billion primarily through cash generated from
operations, and it is expected that they will continue to do so. Capital
expenditures in the first six months of 1994 also included the construction
of cable television and telephone networks in the United Kingdom and the
addition of 65 mobile cell sites.
-20-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (CONT'D)
CAPITAL RESOURCES AND LIQUIDITY (CONT'D)
The pace of new investments in leased assets in the first six months of 1994
as compared to the first six months of 1993 declined at NYNEX Credit Company
due to the timing of market opportunities in leveraged leases. Other
investing activities for the first six months of 1994 included the receipt of
proceeds from the exit from the information products and services business,
the purchase of cellular properties, and continued investment in
international ventures.
During the first six months of 1994, the net decrease in cash flows from
issuances and repayments of commercial paper and short-term debt was due
primarily to the issuance of long-term debt at New York Telephone. New York
Telephone had cash flows from debt issuances of $593.5 million, primarily due
to refinancings to obtain lower interest rates.
NYNEX Capital Funding Company had cash flows from the issuance of medium term
notes of $124.5 million. The proceeds will be used to provide financing for
NYNEX and the nontelephone subsidiaries. Repayment of long-term debt and
capital leases includes $55.5 million at NYNEX Credit Company for debt
repayment, $17.6 million at NYNEX for the debt related to the leveraged
employee stock ownership plan, and $5.4 million at other NYNEX subsidiaries
for capital lease payments. At June 30, 1994, New England Telephone and New
York Telephone had $500 million and $250 million, respectively, of unissued,
unsecured debt securities registered with the SEC.
NYNEX issued new shares of common stock and reissued treasury stock for
employee savings plans, the Dividend Reinvestment and Stock Purchase Plan,
stock option plans, and stock compensation plans, which increased equity by
approximately $204 million and provided cash flows of $142 million in the
first six months of 1994. NYNEX expects to continue issuing new shares and
treasury shares for these plans as required.
Financing cash flows in 1994 included net funds of $122.4 million provided by
a minority partner in the partnership formed in December 1993 for the network
construction program in the United Kingdom. NYNEX expects to continue
seeking funds for this network construction program through the formation of
partnerships.
Pursuant to the indentures for certain of its debentures, New York Telephone
has covenanted that it will not issue additional funded debt securities
ranking equally with or prior to such debentures unless it has maintained an
earnings coverage of 1.75 for interest charges for a period of any 12
consecutive months out of the 15 month period prior to the date of the
proposed issuance. As a result of the 1993 business restructuring charges and
the 1994 pension enhancements, New York Telephone does not currently meet the
earnings coverage requirement.
-21-
<PAGE>
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1994 AS COMPARED TO FIRST SIX MONTHS OF 1993 (CONT'D)
CAPITAL RESOURCES AND LIQUIDITY (CONT'D)
NYNEX has filed a registration statement with the SEC for the issuance of up
to $900 million of debt and equity securities. The proceeds from the sale of
securities would be used to provide funds to NYNEX and/or NYNEX's
subsidiaries other than the telecommunications group for their respective
general corporate purposes.
OTHER MATTERS
On June 30, 1994, NYNEX and Bell Atlantic announced the formation of a joint
venture that will combine NYNEX's and Bell Atlantic's domestic cellular
services properties and will bid in the Federal Communications Commission's
auction of licenses for personal communications services ("PCS"). Initially,
Bell Atlantic will own 62.35 percent of the joint venture and NYNEX will own
37.65 percent. NYNEX has the right to increase its share to 40 percent by
contributing an additional $500 million to the joint venture. The
transaction is expected to close in the second quarter of 1995. The joint
venture will be controlled equally by both companies.
On March 24, 1994, NYNEX reached agreements with the Communications Workers
of America and Local 2213 of the IBEW in New York to extend through August 8,
1998 the collective bargaining agreements that were to expire on August 5,
1995. The agreements were ratified in May 1994. On August 5, 1994, NYNEX
tentatively reached a similar agreement with Locals of the IBEW in New
England, subject to ratification by the union membership. Under the terms of
the new agreements, there will be basic wage increases of 10.5% during the
life of the agreements. Wages will increase 4.0% on August 6, 1995, 3.5% on
August 4, 1996 and 3.0% on August 3, 1997. In 1997 there may also be a
cost-of-living adjustment. The agreements also provide for retirement
incentives, a commitment to no layoffs or loss of wages as a result of
company-initiated "process change", an enhanced educational program and
incentives to improve service quality.
The telephone subsidiaries currently account for the economic effects of
regulation in accordance with the provisions of Statement of Financial
Accounting Standards No. 71 ("Statement No. 71"). Statement No. 71 would no
longer apply in the event that the recoverability of operating costs through
rates becomes unlikely or uncertain, whether resulting from competitive
effects or specific regulatory actions. NYNEX continuously assesses its
position and the recoverability of its telecommunications assets with respect
to Statement No. 71 and believes that Statement No. 71 still applies.
However, it is possible that events in the industry and the markets in which
NYNEX operates could change NYNEX's position in the near future. The impact
of such a change would result in a material non-cash charge and would be
reported as an extraordinary item. This charge would include: (1) the
write-off of previously established regulatory assets and liabilities and (2)
an adjustment to the carrying value of telephone plant if it is determined,
using a projected cash flow approach, that impairment exists. It is not
practicable to estimate the charge at this time due to the effect of possible
regulatory settlements that would affect the recovery of asset balances
should subsequent events require discontinuance of Statement No. 71.
-22-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On May 20, 1994, the United States Court of Appeals for the Second
Circuit affirmed the dismissal of a lawsuit filed by Wegoland Ltd.
and Howard Weiner against NYNEX Corporation ("NYNEX"), certain of
its subsidiaries and certain present and former officers of those
companies.
On August 8, 1994, NYNEX and Bell Atlantic Corporation ("Bell
Atlantic") filed an antitrust lawsuit against American Telephone
and Telegraph Company ("AT&T") and McCaw Cellular Communications
Inc. ("McCaw"), seeking to enjoin the proposed merger of AT&T and
McCaw. The lawsuit, filed in the United States District Court for
the Eastern District of New York, alleges, among other things,
that the merger would violate provisions of the Clayton Act and
would give AT&T the incentive to use its power as a manufacturer
to limit competition in the cellular industry.
See also Part II, ITEM 1 in NYNEX's Quarterly Report on Form 10-Q
for the period ended March 31, 1994.
<TABLE>
ITEM 4. Submission of Matters to a Vote of Security Holders
<CAPTION>
The Annual Meeting of Share Owners of NYNEX was held on May 4, 1994.
The following Directors were re-elected to the Board by the indicated
votes:
For % * Withheld % *
<S> <C> <C> <C> <C>
John Brademas 332,935,613 96.97% 10,407,592 3.03%
William C. Ferguson 331,439,436 96.53% 11,903,769 3.47%
Elizabeth T. Kennan 333,306,636 97.08% 10,036,569 2.92%
Frederic V. Salerno 332,245,307 96.77% 11,097,898 3.23%
John R. Stafford 333,590,908 97.16% 9,752,297 2.84%
* % of shares voted
</TABLE>
The following Directors had terms of office as Directors continuing
after the date of the Annual Meeting:
Stanley P. Goldstein John J. Creedon Walter V. Shipley
Edward E. Phillips Helene L. Kaplan Randolph W. Bromery
Ivan G. Seidenberg
-23-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
<TABLE>
ITEM 4. Submission of Matters to a Vote of Security Holders (Cont'd)
<CAPTION>
The appointment of the firm of Coopers & Lybrand as independent auditors
was ratified by the indicated vote:
% of Shares Voted
<S> <C> <C>
For: 334,195,759 shares 97.33%
Against: 6,141,841 shares 1.79%
Abstain: 3,005,605 shares 0.88%
The NYNEX 1995 Long Term Incentive Plan was ratified by the indicated
vote:
% of Shares Voted
For: 266,525,755 shares 77.63%
Against: 70,189,659 shares 20.44%
Abstain: 6,627,791 shares 1.93%
In addition, the following matters were submitted to a vote of Share
Owners and the votes tabulated as indicated:
</TABLE>
<TABLE>
Share Owner Proposals
<CAPTION>
1. To require the repeal of Board Classification
% of Shares Voted
<S> <C> <C>
For: 108,848,530 shares 35.34%
Against: 190,804,694 shares 61.95%
Abstain: 8,334,766 shares 2.71%
Non-Vote: 35,355,215 shares
</TABLE>
-24-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
<TABLE>
ITEM 4. Submission of Matters to a Vote of Security Holders (Cont'd)
<CAPTION>
2. To require a listing of corporate contributions in the Annual Report
% of Shares Voted
<S> <C> <C>
For: 48,338,616 shares 15.69%
Against: 249,686,739 shares 81.07%
Abstain: 9,962,635 shares 3.24%
Non-Vote: 35,355,215 shares
3. To require that the number of director nominees be increased
For: 32,793,024 shares 10.65%
Against: 267,459,970 shares 86.84%
Abstain: 7,734,996 shares 2.51%
Non-Vote: 35,355,215 shares
4. To require the formation of a Board health care committee
For: 28,952,914 shares 9.40%
Against: 267,421,328 shares 86.83%
Abstain: 11,613,748 shares 3.77%
Non-Vote: 35,355,215 shares
5. To require the formation of a facilities closure committee
For: 34,192,244 shares 11.10%
Against: 261,473,565 shares 84.90%
Abstain: 12,322,181 shares 4.00%
Non-Vote: 35,355,215 shares
</TABLE>
-25-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
ITEM 5. Other Information
State Regulatory Matters
Maine. The Maine Public Utilities Commission ("MPUC") has
commenced an investigation into alternative forms of regulation,
in lieu of traditional rate of return regulation, for New England
Telephone and Telegraph Company ("New England Telephone"). The
MPUC has also initiated, on a parallel track, a proceeding with
regard to competition, interconnection and the unbundling of
tariffed services.
Rhode Island. On June 15, 1994, the Rhode Island Public Utilities
Commission approved a 1993 shared earnings credit of $485,000
pursuant to the Rhode Island price regulation trial. In July
1994, New England Telephone issued the 1993 shared earnings credit
to Rhode Island customers.
Federal Regulatory Matters
In June 1994, the Federal Communications Commission ("FCC")
completed a review of the performance of local exchange carriers
("LECs") during the initial period of price cap regulation.
New England Telephone and New York Telephone Company
(collectively, the "telephone subsidiaries") filed comments
advocating price cap and access reform to keep pace with the
intensifying competitive environment. Among other things, the
telephone subsidiaries recommended increased pricing flexibility,
elimination of sharing and low end adjustment mechanisms, and
reduction of the productivity factor. An FCC decision is pending.
On June 10, 1994, the United States Court of Appeals for the
District of Columbia Circuit (the "Court of Appeals") overturned
the FCC's requirement that LECs allow collocation, on a physical
or "virtual" basis, of third parties' transmission equipment in
the LECs' central offices. On July 14, 1994, the FCC, on remand
from the Court of Appeals, modified its virtual collocation
requirement and directed the LECs to file compliance tariffs by
September 1, 1994, to be effective December 15, 1994.
On July 8, 1994, New England Telephone requested FCC authority to
provide commercial video dialtone service in communities in
Massachusetts and Rhode Island, and to construct the necessary
video facilities.
-26-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
ITEM 5. Other Information (Cont'd)
Federal Regulatory Matters (Cont'd)
On July 12, 1994, the Court of Appeals reversed the FCC's order
that had denied price cap LECs, including the telephone
subsidiaries, recovery in interstate rates of increased costs of
other postretirement employee benefits, resulting from the
implementation of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions". The Court remanded the matter to the FCC for
further proceedings.
See, also, discussion of STATE REGULATORY MATTERS and FEDERAL
REGULATORY MATTERS in Part I, Management's Discussion and Analysis
of Financial Condition and Results of Operations, which are
incorporated herein by reference.
Operations under the Modification of Final Judgment ("MFJ")
On July 6, 1994, NYNEX, Bell Atlantic, BellSouth Corporation and
Southwestern Bell Corporation filed a motion in the United States
District Court for the District of Columbia to vacate the MFJ.
-27-
<PAGE>
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number
(10) Joint venture formation agreement dated as of June 29, 1994,
between NYNEX and Bell Atlantic.
(b) Reports on Form 8-K.
No Report on Form 8-K was filed by the registrant during the
quarter for which this report is filed.
-28-
<PAGE>
Form 10-Q
NYNEX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NYNEX CORPORATION
s/P. M. Ciccone
P. M. Ciccone
Vice President and Comptroller
(Principal Accounting Officer)
August 10, 1994
-29-
CONFORMED COPY
________________________________________________
JOINT VENTURE FORMATION AGREEMENT
by and between
BELL ATLANTIC CORPORATION
and
NYNEX CORPORATION
Dated as of June 29, 1994
________________________________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS. . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE TRANSACTIONS. . . . . . . . . . . . . . 6
2.1 Formation of the Partnerships . . . . . . . . . . . . . . . . . . 6
2.2 Liabilities Assumed by Cellco . . . . . . . . . . . . . . . . . . 8
2.3 NYNEX Buy-up Option . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 The Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Reasonable Efforts to Proceed Promptly. . . . . . . . . . . . . . 9
2.6 Effect of Closing . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Instruments of Transfer, Etc. . . . . . . . . . . . . . . . . . . 9
2.8 After-Acquired Entities . . . . . . . . . . . . . . . . . . . . . 9
2.9 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Systems Licensed in the Same Markets. . . . . . . . . . . . . . . 10
2.11 Failure to Contribute Systems . . . . . . . . . . . . . . . . . . 11
2.12 True-Up.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.13 Balance Sheet Adjustment and Accounts Receivable
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Interim Management. . . . . . . . . . . . . . . . . . . . . . . . 13
2.15 Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.16 The Corporate General Partner.. . . . . . . . . . . . . . . . . . 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NYNEX AND BELL ATLANTIC . . . 14
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Interests in Systems. . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Financial Information . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV
ADDITIONAL INDEMNITY REPRESENTATIONS. . . . . . . . . 17
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Consents; No Violation. . . . . . . . . . . . . . . . . . . . . . 20
4.4 Financial Information; Undisclosed Liabilities. . . . . . . . . . 21
4.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . 21
4.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Finders; Investment Bankers . . . . . . . . . . . . . . . . . . . 22
4.11 INTENTIONALLY OMITTED.. . . . . . . . . . . . . . . . . . . . . . 23
4.12 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . 23
4.13 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 23
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.15 MFJ Activities. . . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 27
4.17 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.19 Acquired Entities . . . . . . . . . . . . . . . . . . . . . . . . 28
4.20 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . 28
4.21 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.22 Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V
PRE-CELLULAR CLOSING COVENANTS . . . . . . . . . . 29
5.1 Interim Operations. . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 MFJ Activities. . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4 Business Relationships with Affiliates. . . . . . . . . . . . . . 33
5.5 Creation of Employee Body and Benefits Plans. . . . . . . . . . . 34
5.6 NYSMSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7 Non-Managed Systems . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI
ADDITIONAL COVENANTS. . . . . . . . . . . . . 35
6.1 Further Assurances; Cooperation . . . . . . . . . . . . . . . . . 35
6.2 Access to Properties and Records. . . . . . . . . . . . . . . . . 36
ARTICLE VII
CONDITIONS . . . . . . . . . . . . . . . 37
7.1 Conditions to the Obligations of NYNEX and Bell
Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Conditions to the Obligations of NYNEX. . . . . . . . . . . . . . 37
7.3 Conditions to the Obligations of Bell Atlantic. . . . . . . . . . 38
ARTICLE VIII
INDEMNIFICATION. . . . . . . . . . . . . . 38
8.1 Indemnification by Bell Atlantic. . . . . . . . . . . . . . . . . 38
8.2 Indemnification by NYNEX. . . . . . . . . . . . . . . . . . . . . 39
8.3 Notice and Defense of Third Party Claims. . . . . . . . . . . . . 40
8.4 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX
TERMINATION. . . . . . . . . . . . . . . 42
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . 43
10.1 Survival of Representations, Warranties and Agreements. . . . . . 43
10.2 Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . 43
10.3 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.8 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . 45
10.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.10 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . 45
10.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
EXHIBITS
Exhibit A - Form of Partnership Agreement
<PAGE>
JOINT VENTURE FORMATION AGREEMENT
This Joint Venture Formation Agreement ("Agreement") is
dated as of June 29, 1994 by and between BELL ATLANTIC
CORPORATION, a Delaware corporation, on behalf of itself and its
Affiliates (as defined herein) which, from time to time, from the
date of this Agreement to the Cellular Closing Date (as
hereinafter defined) hold interests, directly or indirectly, in
Contributions (as defined herein) ("Bell Atlantic"), and NYNEX
CORPORATION, a Delaware corporation, on behalf of itself and its
Affiliates (as defined herein) which, from time to time, from the
date of this Agreement to the Cellular Closing Date hold
interests, directly or indirectly, in Contributions ("NYNEX").
NYNEX and Bell Atlantic are sometimes herein collectively
referred to as the "Parties" and individually as a "Party."
W I T N E S S E T H:
WHEREAS, Bell Atlantic and NYNEX are the direct and/or
indirect owners of interests in certain wireless
telecommunications systems in the United States set forth on
Schedule 3.2 to this Agreement (the "Systems"); and
WHEREAS, the Parties have concluded that it will be in
their best interests, and the best interests of the public, to
enter into a general partnership ("Cellco") for the purposes set
forth in the form of partnership agreement attached hereto as
Exhibit A; and
WHEREAS, the Parties have concluded that it will be in
their best interests, and the best interests of the public, to
enter into a general partnership ("PCSCO") for the purposes set
forth in the form of partnership agreement attached hereto as
Exhibit A.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, the sufficiency of
which is hereby acknowledged, each of the parties hereby agrees
as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth
below:
(a) "Acquired Entity" shall have the meaning set forth
in Section 2.8 hereof.
<PAGE>
(b) "Adverse Proceedings" shall have the meaning set
forth in Section 6.1(b) hereof.
(c) "Affiliate" of a person shall mean any person
directly or indirectly controlling, controlled by, or under
common control with, such other person; "person" shall mean an
individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof; and "control" shall mean
(i) the ownership of more than 50% of the voting securities or
other voting interests of another person, or (ii) the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether
through the ownership of voting shares, by contract or otherwise;
provided, however, that neither of the Partnerships are
affiliates of NYNEX.
(d) "BOC" shall have the meaning set forth in Section
5.2(b) hereof.
(e) "Business Condition" shall have the meaning set
forth in Section 4.6 hereof.
(f) "Cellco" shall have the meaning set forth in the
second recital clause hereof.
(g) "Cellco Assumed Liabilities" shall mean Permitted
Liabilities which relate to Cellular Assets.
(h) "Cellco Partnership Agreement" shall mean a
partnership agreement substantially in the form of Exhibit A
hereto utilizing the variations indicated therein for Cellco.
(i) "Cellco Partner Subsidiary" shall have the meaning
set forth in Section 2.1(b) hereof.
(j) "Cellular Assets" shall have the meaning set forth
in Section 2.1(d) hereof.
(k) "Cellular Business" shall mean the business of
acquiring, developing, owning and operating businesses engaged in
the provision of public cellular radio telecommunications service
pursuant to a license or licenses issued under Subparts G and K
of Part 22 of the FCC's rules.
(l) "Cellular Closing" and "Cellular Closing Date"
shall have the respective meanings set forth in Section 2.4(b)
hereof.
(m) "Cellular Transactions" shall mean the formation
of Cellco and the contributions to Cellco by NYNEX and its
<PAGE>
Affiliates, on the one hand, and by Bell Atlantic and its
Affiliates on the other hand, of the Contributed Partnerships,
Contributed Subsidiaries and Cellular Assets described in Section
2.1(d).
(n) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time (or any corresponding
provisions of succeeding law).
(o) "Contributed Partnerships" shall mean those
partnerships, or partnership interests in partnerships, which
hold interests in Systems listed on Schedule 3.2 hereto which are
actually included in the Cellular Contributions.
(p) "Contributed Subsidiaries" shall mean those
corporations holding interests in Systems or Cellular Assets
listed on Schedule 3.2 hereto, the capital stock of which is
actually included in the Cellular Contributions.
(q) "Contributions" shall mean, collectively, the
Cellular Contributions and the PCS Contributions of a Party;
"Cellular Contributions" shall have the meaning set forth in
Section 2.1(d) hereof and "PCS Contributions" shall have the
meaning set forth in Section 2.1(a) hereof.
(r) "Corporate General Partner" shall mean a
corporation organized jointly by the Parties to hold a general
partnership interest in Cellco.
(s) "Employees" shall have the meaning set forth in
Section 4.17 hereof.
(t) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and "Plans", "Employment
Agreements", "ERISA Plans", and "Controlled Group" shall have the
respective meanings set forth in Section 4.13 hereof.
(u) "FCC" shall mean the United States Federal
Communications Commission.
(v) "Financial Statements" shall have the meaning set
forth in Section 3.5(a) hereof.
(w) "Governmental Approvals" shall have the meaning
set forth in Section 7.1(b) hereof.
(x) "Governmental Entity" shall have the meaning set
forth in Section 3.4 hereof.
(y) "HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
<PAGE>
(z) "Intangible Property" shall have the meaning set
forth in Section 4.2(d) hereof.
(aa) "Interest Rate" shall mean that rate of interest
described under the caption "Interest Rate" on Schedule 1(av).
(ab) "Letter Agreement" means the letter of the
Parties of even date herewith referring to this Agreement.
(ac) "Licenses" shall mean permits, licenses, waivers
and authorizations (including, without limitation, licenses from
the FCC and licenses, authorizations and certificates of public
convenience and necessity from the state regulatory commissions
listed on Schedule 3.4 hereto).
(ad) "Lien" shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, security interest, claim, equity,
encumbrance, exception, restriction, reservation, condition,
limitation or interest of any kind, or any similar right of any
third party in respect of such asset. For purposes of this
Agreement, an asset shall also be deemed to be subject to a Lien
if such asset is subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other like
title retention agreement relating to such asset.
(ae) "Managed Cellular Business" shall mean that
portion of a Party's Cellular Contributions as to which the Party
has management authority for the conduct of its business
operations.
(af) "Managed System" shall mean any System for which
a Party has management authority over the conduct of its business
operations either as a result of a management agreement or
similar provisions, or because of its position as a controlling
shareholder or general partner when the System has no general
management arrangements with a third party.
(ag) "Me Too Waiver" shall have the meaning set forth
in Section 5.2(b) hereof.
(ah) "MFJ" shall have the meaning ascribed thereto in
the Partnership Agreements; "Decree Court" shall mean the court
having original jurisdiction over the MFJ; and "MFJ Approvals"
and "MFJ Transactions" shall have the meanings set forth in
Sections 3.4 and 5.2(a) hereof, respectively.
(ai) "MSA" shall mean Metropolitan Statistical Area,
"NECMA" shall mean New England County Metropolitan Statistical
Area "RSA" shall mean Rural Service Area, "BTA" shall mean Basic
Trading Area and "MTA" shall mean Major Trading Area, in each
case as such term is defined and modified by the FCC for
licensing purposes.
<PAGE>
(aj) "MOC" shall have the meaning set forth in Section
2.14 hereof.
(ak) "NYSMSA" shall mean New York SMSA Limited
Partnership.
(al) "Owned POPs" with respect to a System shall mean
POPs multiplied by the percentage interest held, directly or
indirectly, by a Party as specified on Schedule 3.2.
(am) "Partner" shall mean individually any partner in
either of the Partnerships and collectively all of such Partners.
(an) "Partnership Agreements" shall mean the Cellco
Partnership Agreement and the PCSCO Partnership Agreement.
(ao) "Partnerships" shall mean Cellco and PCSCO.
(ap) "Partner Subsidiary" shall mean any direct or
indirect wholly owned subsidiary or partnership of a Party which
directly holds a partnership interest in a Partnership.
(aq) "Party" and "Parties" shall have the meaning set
forth in the Preamble to the Agreement.
(ar) "PCS Closing" and "PCS Closing Date" shall have
the respective meanings set forth in Section 2.4 hereof.
(as) "PCS Partner Subsidiary" shall have the meaning
set forth in Section 2.1(a) hereof.
(at) "PCS Transactions" shall mean the formation of
PCSCO and the contributions to PCSCO by NYNEX and its Affiliates
on the one hand, and by Bell Atlantic and its Affiliates, on the
other hand, as described in Section 2.1(a).
(au) "PCSCO Partnership Agreement" shall mean a
partnership agreement substantially in the form of Exhibit A
hereto utilizing the variations indicated therein for PCSCO.
(av) "Permitted Liabilities" shall mean (i) accounts
payable by a Party's Cellular Business invoiced within 30 days
prior to the Cellular Closing Date, (ii) liabilities under
contracts of the Cellular Business incurred in the ordinary
course of business which either arise on or after the Cellular
Closing Date or are contemplated to be transferred to Cellco
pursuant to Section 2.13, (iii) $87,000,000 of debt used to
refinance debt originally incurred in connection with the
acquisition of a portion of Bell Atlantic's Cellular Business,
which shall be on terms described in Schedule 1(av) (iv) debt,
which shall be on the terms described in Schedule 1(av), incurred
or assumed by Cellco pursuant to paragraph 2(e) of the Letter
<PAGE>
Agreement or Section 2.12 hereof and (v) liabilities assumed by
Cellco pursuant to Section 2.8 hereof.
(aw) "POPs" with respect to a System shall mean the
population of the service area as set forth on Schedule 3.2.
(ax) "Regulatory Approvals" shall have the meaning set
forth in Section 3.4 hereof.
(ay) "Saleable Systems" shall have the meaning set
forth in Section 2.10.
(az) "System Assets" shall have the meaning set forth
in Section 2.1(d) hereof.
(ba) "Systems" shall have the meaning set forth in the
first recital hereof and each of the Systems is specifically
named on Schedule 3.2 hereto.
(bb) "Tax Returns" shall have the meaning set forth in
Section 4.14 hereof.
(bc) "Taxes" shall have the meaning set forth in
Section 4.14 hereof.
(bd) "Transactions" shall mean the Cellular
Transactions and the PCS Transactions, collectively.
In addition to the defined terms set forth above in this
Article I, certain other capitalized terms used herein are
defined in the Exhibit and Schedules attached hereto and such
definitions are incorporated herein by reference to the extent
not inconsistent with the definitions included herein. All
accounting terms not otherwise defined herein shall have the
meanings assigned under generally accepted accounting principles
from time to time in effect.
ARTICLE II
THE TRANSACTIONS
2.1 Formation of the Partnerships. (a) At the PCS
Closing (as hereinafter defined), each of the Parties shall cause
one or more of its direct or indirect wholly owned subsidiaries
or partnerships (collectively, its "PCS Partner Subsidiary") to
execute and deliver the PCSCO Partnership Agreement and shall
contribute or cause to be contributed to PCSCO nominal amounts of
cash in proportion to their respective Percentage Interests in
PCSCO (collectively, the "PCS Contributions").
<PAGE>
(b) At the Cellular Closing (as hereinafter defined),
each of the Parties shall cause one or more of its direct or
indirect wholly owned subsidiaries or partnerships (collectively,
its "Cellco Partner Subsidiary") and the Corporate General
Partner to execute and deliver the Cellco Partnership Agreement
and shall contribute or cause to be contributed to Cellco such
Party's Cellular Contribution (as described in Section 2.1(d))
and shall cause the Corporate General Partner to contribute to
Cellco $10,000,000 and its note for the balance of the amount
necessary to cause its contributions to the capital of Cellco to
equal 1% of the aggregate contributions of all Partners to the
capital of Cellco.
(c) It is the agreement and intention of the Parties
that, subject to adjustment pursuant to the provisions of this
Agreement, the initial Percentage Interests and the initial ratio
of the Specified Account Values of Bell Atlantic and NYNEX, held
through their respective PCS Partner Subsidiary, Cellco Partner
Subsidiary or indirectly through the Corporate General Partner,
in each of PCSCO on the PCS Closing Date and Cellco on the
Cellular Closing Date shall be in the ratio of 62.35:37.65.
(d) With respect to each Party, "Cellular
Contributions" shall consist of all of such Party's right, title
and interest in (A) the Systems listed under such Party's name on
Schedule 3.2 and the FCC Licenses with respect thereto, whether
held directly ("System Assets") or indirectly through such
Party's Contributed Subsidiaries and Contributed Partnerships,
and (B) all other assets, rights, properties and business of such
Party or its Affiliates constituting part of, or used primarily
in connection with, such Party's Cellular Business and any and
all claims which such Party or its Affiliates may have against
any person, firm, corporation or other entity arising out of the
conduct of the Cellular Business, all of the foregoing assets
described in this clause (B), together with the System Assets,
collectively the "Cellular Assets."
Anything herein to the contrary notwithstanding, the
following assets of the Parties shall not be included in the
Contributions: (i) the stock of, or partnership interest in, the
PCS Partner Subsidiary and the Cellco Partner Subsidiary of each
of the Parties and such Party's ownership interest in the
Corporate General Partner and the corporate seals, minute books,
charter documents, corporate stock record books, and such other
books and records as pertain to the organization, existence or
share capitalization of each of the aforementioned corporations
or partnerships, (ii) any cash accounts which would otherwise be
included in the Cellular Assets, (iii) interests in Saleable
Systems (iv) the Springwich Interests (as defined in Section 2.10
hereof) or (v) any FCC paging licenses held by Bell Atlantic or
any of its Affiliates.
<PAGE>
(e) The transfer by a Party of interests in the
Systems listed on Schedule 3.2 pursuant to this Agreement is
conditioned upon the inapplicability of such rights of first
refusal as may exist with respect to such Systems. In the event
that, absent this condition, this Agreement would constitute or
be held or deemed to constitute a sale, offer, transfer, or
expression of intent triggering such rights of first refusal, the
Parties agree that the interests in the Systems that would be the
subject of such rights of first refusal shall not be transferred
or affected in any way by this Agreement and the provisions of
Sections 2.11 and 9.1(c) shall be applicable.
(f) Except in the case of rights of first refusal
governed by Section 2.1(e), to the extent that the rights of a
Party or its Affiliates under any agreement, contract,
commitment, lease, authorization or other Cellular Asset to be
assigned to Cellco hereunder may not be assigned without the
consent of another person which has not been obtained, this
Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be
unlawful. If any such required consent shall not be obtained or
if any attempted assignment would be ineffective or would impair
such Party's, its Affiliates' or Cellco's rights under the
Cellular Asset in question so that Cellco would not in effect
acquire the benefit of all such rights, Cellco, to the maximum
extent permitted by law and the terms of the Cellular Asset,
shall act after the Cellular Closing as the agent of such Party
or its Affiliate in order to obtain for Cellco the benefits
thereunder and such Party or its Affiliate, at its expense, shall
cooperate with Cellco, to the maximum extent permitted by law and
the terms of the Cellular Asset, in any other reasonable
arrangement designed to provide such benefits to Cellco.
2.2 Liabilities Assumed by Cellco. At the Cellular
Closing, Cellco shall assume, by execution and delivery of
appropriate instruments of assumption, the Cellco Assumed
Liabilities.
2.3 NYNEX Buy-up Option. NYNEX shall have the right
to increase its Percentage Interest in both Cellco and PCSCO to
up to 40.00% (taking into account the Percentage Interest held
indirectly by NYNEX through the Corporate General Partner) in
accordance with the procedures set forth in the Letter Agreement.
2.4 The Closings. (a) The closing of the PCS
Transactions (the "PCS Closing") shall take place at a time and
place to be agreed upon by the Parties on the later of the date
the PCSCO business plan is agreed to as contemplated by Section
2.14(b) hereof, or the fifth business day prior to the first date
on which persons intending to bid in an FCC auction for a
Designated MTA/BTA (as defined in the Partnership Agreement) must
file and qualify under rules promulgated by the FCC from time to
<PAGE>
time, or on such other date as NYNEX and Bell Atlantic shall
agree upon in writing (the actual date of the PCS Closing being
herein referred to as the "PCS Closing Date").
(b) The closing of the Cellular Transactions (the
"Cellular Closing") shall take place at 10:00 A.M., local time,
at a time and place to be agreed upon by the Parties on the fifth
business day after all of the conditions set forth in Article VII
hereof have been fulfilled or waived or on such other date as
NYNEX and Bell Atlantic shall agree upon in writing (the actual
date of the Cellular Closing being herein referred to as the
"Cellular Closing Date").
2.5 Reasonable Efforts to Proceed Promptly. Each of
NYNEX and Bell Atlantic agree to use their respective reasonable
efforts to take all such action as may be necessary or
appropriate in order to effectuate the Transactions as promptly
as possible.
2.6 Effect of Closing. All transactions entered into
on the PCS Closing Date and the Cellular Closing Date,
respectively, pursuant hereto, and all documents delivered at
each of such respective Closings, shall be deemed to have
occurred and to have been delivered simultaneously as of the
close of business on such applicable Closing Date.
2.7 Instruments of Transfer, Etc. At or prior to the
Cellular Closing, the Parties shall deliver, or cause to be
delivered, to Cellco, all such general warranty deeds, bills of
sale, assignments and other instruments of transfer and
conveyance as shall be necessary or appropriate to transfer to
and vest in Cellco all of such transferor's right, title and
interest in and to the assets transferred at such Closing. At or
promptly after such Closing, each Party shall put Cellco in
possession of all contracts, commitments, books, records, files
and other data to be transferred to Cellco hereunder at such
Closing and shall take such steps as may be necessary to put
Cellco in actual possession and operating control of the
respective Cellular Contributions.
2.8 After-Acquired Entities. In the event that either
Party or any of its Affiliates acquires an interest in a Cellular
Business after the date of this Agreement (other than the
interests of the Party or its Affiliates listed on Schedule 3.2)
which acquisition is either (i) listed on Schedule 2.8 or (ii) is
approved by the other Party in writing prior to the Cellular
Closing, provided in each case that such acquisition is
consummated substantially in accordance with such Schedule or
approval (an "Acquired Entity"), such Acquired Entity shall be
contributed to Cellco as part of the acquiring Party's Cellular
Contribution and Cellco shall assume all liabilities of the Party
and its Affiliates with respect to such Acquired Entity
<PAGE>
(including without limitation all liabilities related to, and are
a part of, the purchase price for such entity). The Party
contributing an Acquired Entity shall also assign to Cellco all
rights of indemnification under the acquisition agreement
relating to such Acquired Entity. For each Party, the aggregate
amount of cash and the fair value of any other property
(excluding obligations assumed by Cellco) paid or delivered by
such Party or its Affiliates in respect of the purchase price of
Acquired Entities and out-of-pocket expenses directly related to
such acquisitions shall be called its "Section 2.8 Amount."
2.9 Capital Expenditures. During the period from the
date hereof until the Cellular Closing either Party or any of its
Affiliates may make capital expenditures in respect of the
Systems or Acquired Entities being contributed to Cellco by such
Party to the extent such capital expenditures are included in the
Contributions and (i) are included in the amounts set forth on
Schedule 2.9, (ii) are approved by the other Party or (iii)
amount to less than $2,000,000 in any one instance or $10,000,000
in the case of NYNEX, and $15,000,000 in the case of Bell
Atlantic in the aggregate. For each Party, the aggregate net
book value as of the Cellular Closing Date of all capital assets
included in the Cellular Contribution of such Party and its
Affiliates which represent capital expenditures permitted by this
Section 2.9 shall be called its "Section 2.9 Amount."
2.10 Systems Licensed in the Same Markets.
Immediately after the execution of this Agreement, the MOC (as
hereinafter defined) will determine which of the Systems listed
in Schedule 2.10 will be disposed of in order to comply with FCC
rules ("Saleable Systems"). In addition, the Parties agree that
NYNEX will dispose of its direct and indirect interests in
Springwich Cellular Limited Partnership (the "Springwich
Interests") prior to the Cellular Closing Date. The Parties will
use their reasonable efforts to cause such Saleable Systems and
the Springwich Interests to be marketed as a single transaction
or in such other manner as the Parties determine will be in the
best interests of Cellco and will be most tax-efficient. With
respect to each of the Saleable Systems, the Party which is the
current licensee of such Saleable System (i) shall, in
conjunction with the other Party, take all reasonable and
necessary steps to conclude a binding agreement to sell such
Saleable System as promptly as practicable at a reasonable price,
(ii) shall file the necessary applications for all Governmental
Approvals required to consummate such sale, and (iii) shall
prosecute those applications diligently and in good faith.
Closing on the sale of each of the Saleable Systems shall take
place no later than the Cellular Closing Date. Upon consummation
of the sale of each Saleable System, the selling Party shall
determine in good faith the Net Proceeds from such sale. The
"Net Proceeds" means the sale price, less the directly related
out-of-pocket expenses of selling the Saleable System, less any
<PAGE>
federal, state or local income taxes that the selling Party (or
any of its Affiliates) would be required to pay as a result of
such sale if it were subject to an effective tax rate of 40%.
For each Party, the aggregate Net Proceeds from all sales of
Saleable Systems by such Party and its Affiliates shall be called
its "Section 2.10 Amount." The amount to be contributed by NYNEX
pursuant to paragraph 1 of the Letter Agreement shall be included
in NYNEX's Section 2.10 Amount. In the event the Parties
determine that an exchange of a Saleable System is in their
mutual best interest, the Parties will negotiate the terms of the
exchange and the treatment of the property received in such
exchange with a view to preserving the intended after tax
economics that apply in respect of Saleable Systems.
2.11 Failure to Contribute Systems. To the extent
that either or both of the Parties is unable to contribute any of
its interests in Systems listed on Schedule 3.2 (or, in the case
of interests in Systems that are so listed on Schedule 3.2 as
under contract but not owned, substantially equivalent POPs) on
or before the Cellular Closing Date due to regulatory or
contractual prohibitions or failure to consummate the acquisition
of such interests (a "Shortfall Party"), the Shortfall Party
shall determine the amount of cash equal to the number of its
Owned POPs in the Systems it is unable to contribute times the
POP Value set forth on Schedule 2.11 opposite the name of such
Shortfall Party (a "Failed Contribution Amount"). The Shortfall
party at its option shall then either (x) treat the Failed
Contribution Amount as part of its Section 2.11 Amount (as
defined below) or (y) suffer a reduction in its Percentage
Interest and Specified Account Value in Cellco to reflect its
failure to contribute such POPs (and suffer a corresponding
reduction in its Percentage Interest and Specified Account Value
in PCSCO effected through a distribution of cash by PCSCO to the
PCSCO Partner Subsidiary of the Shortfall Party). If the
Shortfall Party elects to suffer a reduction, its Percentage
Interest and the ratio of its Cellco Partner Subsidiary's
Specified Account Value to the Specified Account Value of all of
the Cellco Partners shall be reduced to an amount equal to (A)
the total of such Party's Owned POPs as set forth on Schedule 3.2
(whether or not such Owned POPs are included in the Cellular
Contributions) times the "Other POP Value" set forth for such
Party on Schedule 2.11 or, as to such Party's Owned POPs in
NYSMSA, the NYSMSA POP Value set forth on Schedule 2.11 less its
Failed Contribution Amount over (B) the total of (i) all Parties'
Owned POPs as set forth on Schedule 3.2 (whether or not such
Owned POPs are included in the Cellular Contributions) times the
"Other POP Value" set forth for each Party on Schedule 2.11 or,
as to such Party's Owned POPs in NYSMSA, the NYSMSA POP Value set
forth on Schedule 2.11 less (ii) the Failed Contribution Amounts
of all Partners not included in any Partner's Section 2.11
Amount. This Section 2.11 shall not apply in the case of any
failure to contribute interests in one or more of the Saleable
<PAGE>
Systems or the Springwich Interests and shall be inoperative in
the event that either Party exercises any right to terminate
pursuant to Section 9.1 hereof. To the extent that any of the
Systems in which NYNEX's interest is indicated on Schedule 3.2 as
held or to be held at the Cellular Closing Date through Upstate
Cellular Network, a general partnership in which NYNEX is a 50%
partner, is included in such Party's Cellular Contributions but
is not the subject of an affiliation agreement meeting all of the
Affiliation Standards listed on Schedule 2.14 hereto, such Party
shall be deemed to be a Shortfall Party having an additional
Failed Contribution Amount with respect to such interest,
provided that (i) the Failed Contribution Amount with respect to
such interest shall be calculated by multiplying the number of
Owned POPs in such System by the percentage discount applicable
to such System calculated pursuant to Schedule 2.14, and (ii) the
aggregate of all such discounts with respect to any System shall
be limited to 30%. For each Party, the aggregate Failed
Contribution Amounts of such Party or its Affiliates shall be
called its "Section 2.11 Amount."
2.12 True-Up. Immediately prior to the Cellular
Closing, the Parties shall determine their respective Section
2.12 Amounts. The Section 2.12 Amount for each Party shall be
the sum of its Section 2.8 Amounts and Section 2.9 Amounts less
the sum of its Section 2.10 Amounts and Section 2.11 Amounts.
If either of the Section 2.12 Amount is positive, the Party whose
percentage of the total positive Section 2.12 Amount is less than
its Percentage Interest in Cellco shall cause its Cellco Partner
Subsidiary to make a contribution, in the form of a note in an
amount which will eliminate (i) the negative Section 2.12 Amount
of such Party, if any, and (ii) the percentage shortfall of such
Party with respect to the total positive Section 2.12 Amounts.
If both Section 2.12 Amounts are negative, the Party whose
percentage of the aggregate negative Section 2.12 Amount is
greater than its Percentage Interest in Cellco shall cause its
Cellco Partner Subsidiary to contribute to Cellco, in the form of
a note, the amount necessary to eliminate such percentage excess.
In lieu of the Partner Subsidiary of any Party being
required to contribute a note pursuant to this Section 2.12, the
other Party may, in its sole discretion, cause its Partner
Subsidiary to transfer additional liabilities to Cellco that
relate to its Cellular Contributions such that the ratio of each
Partner Subsidiary's Specified Account Value to the Specified
Account Values of all of the Cellco Partners shall equal their
respective Percentage Interests.
Any note issued pursuant to this Section 2.12 shall
bear interest at the Interest Rate and be on such other terms and
conditions as the Parties shall agree.
<PAGE>
2.13 Balance Sheet Adjustment and Accounts Receivable
Guarantee. (a) Prior to the Cellular Closing, the Parties will
adjust the balance sheets of the Cellular Business of NYNEX and
its Affiliates and the Cellular Business of Bell Atlantic and its
Affiliates in accordance with the accounting principles,
practices and methods set forth on Schedule 2.13 hereto.
(b) Within 200 days following the Cellular Closing
Date, Cellco shall advise each Party in writing of the collection
experience of accounts receivable included as part of such
Party's Cellular Contributions and of the extent to which such
accounts receivable that remained uncollected as of the 180th day
after the Cellular Closing Date exceeded, or were exceeded by,
the sum of (i) reserves for uncollectible accounts receivable and
(ii) reserves for fraud, in each case included on the books of
such Party's Cellular Contributions on the Cellular Closing Date,
as adjusted pursuant to Section 2.13(a). Within ten days
following receipt of such notice, (x) to the extent that a
Party's uncollected accounts receivable exceeded such reserves,
such Party shall pay to Cellco the amount of such excess and (y)
to the extent that the aforementioned reserves exceeded such
uncollected accounts receivable, the amount of any excess
reserves shall be returned in cash to such Party.
2.14 Interim Management. (a) The Parties hereby
constitute and appoint a Management Organization Committee (the
"MOC") which shall have the responsibilities and membership set
forth on Schedule 2.14 hereto.
(b) The Parties agree that they shall cooperate in the
preparation of initial business plans and budgets for PCSCO and
Cellco and to use their reasonable efforts to cause such business
plans and budgets to be submitted to the MOC by August 1, 1994 in
the case of the PCSCO business plan and budget and by September
1, 1994, in the case of the Cellco business plan and budget.
(c) The terms of any affiliation agreement to be
entered into by Cellco or PCSCO and any System or Acquired Entity
shall be substantially in accordance with the provisions of
Schedule 2.14 or as otherwise determined by the MOC.
(d) For the period from the date hereof until the
Cellular Closing, any expenses which are both (i) incurred by the
Parties in connection with the formation of Cellco and (ii)
specifically approved by the MOC, shall be borne ratably by the
Parties in accordance with their Percentage Interests in Cellco
on the Cellular Closing Date.
2.15 Restructuring. Prior to the Cellular Closing,
each of the Parties shall use their reasonable efforts to effect
a restructuring to make available to Cellco its Cellular
Contributions in the form of direct ownership of assets or
<PAGE>
partnership interests rather than shares of capital stock of
corporations.
2.16 The Corporate General Partner. (a) It is the
intention of the Parties that they will own interests in Cellco
and PCSCO through direct or indirect wholly-owned subsidiary
entities or, in the case of Cellco, as above and indirectly
through the Corporate General Partner, a corporation to be
incorporated in Delaware, the outstanding common equity of which
will be held by all of the Partners.
(b) The Corporate General Partner will hold 1% of the
equity interests in Cellco. The equity interests of the
Corporate General Partner will initially be held by the Parties
in the same proportion as their initial Percentage Interests set
forth in Section 2.1(c), as such initial Percentage Interests may
be adjusted as a result of the NYNEX Election (as defined in the
Letter Agreement). The Corporate General Partner will have an
initial capitalization of $10 million, which amount will be paid
by the Parties ratably in accordance with their respective
percentage equity interests in the Corporate General Partner.
(c) The management and corporate governance principles
and procedures for the Corporate General Partner shall be
substantially identical to those applicable to PCSCO, as set
forth in Section 5.1 of the PCSCO Partnership Agreement, and the
provisions of such Section 5.1 shall be set forth, as nearly as
practicable under applicable laws, in the Certificate of
Incorporation and By-Laws of the Corporate General Partner and in
an agreement among shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NYNEX AND BELL ATLANTIC
Bell Atlantic represents and warrants to NYNEX, and
NYNEX represents and warrants to Bell Atlantic, that with respect
to itself, the following statements are true and correct as of
the date hereof and will be true and correct as of the date of
the Cellular Closing as if made on and as of such date.
3.1 Organization. Such Party is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has the requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being
conducted.
3.2 Interests in Systems. Schedule 3.2 accurately
sets forth for each System in which such Party or its Affiliates
have an interest (i) the name of the market, (ii) the name of the
<PAGE>
entity holding the FCC License covering the provision of cellular
service in such market, (iii) the number of POPs in such market,
(iv) the direct or indirect percentage interest of the Party or
its Affiliates in the entity holding such FCC License, indicating
which interests are not currently owned but are subject to a
binding agreement giving the Party or its Affiliates the right to
acquire such interest, and (v) the Owned POPs in such market.
3.3 Authority. Such Party has the requisite power and
authority to execute and deliver this Agreement and to consummate
the Transactions, and such execution, delivery and consummation
have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by such Party
and constitutes the valid and binding obligation thereof,
enforceable against such Party in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency and similar federal and
state laws generally affecting the rights and remedies of
creditors and general principles of equity, whether considered in
a proceeding at law or in equity.
3.4 Consents. Neither the execution and delivery of
this Agreement by such Party nor the consummation of the
Transactions will require any consent, approval, or authorization
of, waiver by, notification to, or filing with, any court,
governmental agency or regulatory or administrative authority
(each, a "Governmental Entity") on the part of such Party or any
of its Affiliates (including, without limitation, any of its
Contributed Subsidiaries, or any of its Contributed Partnerships)
other than (i) the filing of certificates and other documents
with respect to the Transactions in accordance with the
partnership laws of the states in which the such Contributed
Partnerships are organized; (ii) approvals required by the FCC
and the state regulatory commissions listed on Schedule 3.4
hereto necessary to effectuate the Transactions (the foregoing
being hereinafter referred to as the "Regulatory Approvals");
(iii) approvals required by the Decree Court with respect to the
MFJ necessary to effectuate the Transactions (the foregoing being
hereinafter referred to as the "MFJ Approvals"); and (iv) filings
with respect to the Transactions under the HSR Act.
3.5 Financial Information. (a) Such Party has
delivered to the other Party complete and correct copies of the
following financial statements of such Party's Cellular Business:
(x) unaudited balance sheets as of December 31, 1992 and 1993
and related statements of income and cash flows for each of the
fiscal years then ended, (y) interim statements of income and
cash flows for the three month periods ended March 31, 1993 and
1994 and the interim balance sheets as of such dates. The year-
end and interim financial statements being delivered by NYNEX and
Bell Atlantic are collectively referred to herein as the
"Financial Statements".
<PAGE>
(b) All of such Party's Financial Statements are in
accordance with the books and records of such Party's Cellular
Business, present fairly the financial position, results of
operations and cash flows of such Party's Cellular Business as of
the dates and for the periods indicated, subject in the case of
the Financial Statements at and for the periods ended March 31,
1993 and 1994, to normal year-end adjustments. The Financial
Statements of such Party have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods specified, except for the lack of
explanatory footnote disclosures required by generally accepted
accounting principles. Such Party and its Cellular Business have
in place a system of financial controls designed and adequate for
the purpose of giving substantial protection against fraud,
misstatement of financial position or results of operations or
loss of cash or assets.
3.6 Compliance with Laws. Neither such Party nor any
of its Affiliates is in violation of any decree, order, judgment,
statute, rule or regulation so as to materially adversely affect,
individually or in the aggregate, the Business Condition (as
defined in Section 4.6 below) of such Party's Cellular Business,
or the ability of such Party to consummate the Transactions or
the ability to conduct its Cellular Business as it is currently
being conducted.
3.7 Licenses. Except as set forth on Schedule 3.7,
such Party's Cellular Business has Licenses which are necessary
for it to conduct its respective wireless operations in the
manner in which they are presently being conducted, other than
any Licenses, the failure of which to hold would not, singly or
in the aggregate, have an adverse effect on the Business
Condition of such Party's Cellular Business. Except as set forth
on Schedule 3.7, all of the FCC and state Licenses held by such
Party's Cellular Business are valid and in full force and effect.
Except as set forth on Schedule 3.7, no event has occurred with
respect to the Licenses which is likely to result in, or after
notice or lapse of time or both would be likely to result in,
revocation, termination or non-renewal thereof or would result in
any other material impairment of the rights of the holder of any
of the Licenses, which would result in a material adverse effect
on the Business Condition of such Party's Cellular Business.
Except as set forth on Schedule 3.7, there are no facts which
would prevent the Licenses from being renewed in accordance with
FCC rules and regulations or constructed and put into commercial
service within the applicable time period. As used in this
Section 3.7, the term Licenses does not include waivers of the
MFJ. Following the Cellular Closing, Cellco will have the right
and ability to conduct the business of such Party's Cellular
Business in the same manner in all material respects in which it
is operated prior to the Cellular Closing. The provisions of
this Section are qualified in their entirety by the understanding
<PAGE>
of the Parties that the Saleable Systems and the Springwich
Interests will not be included in the Cellular Contributions of
the Parties and that the Licenses in respect thereof would not be
assignable to Cellco because of the overlaps that exist between
the Saleable Systems and the Springwich Interests, on the one
hand, and other properties of the Partners to be included in the
Cellular Contributions on the other.
3.8 Assets. Other than Saleable Systems and the
Springwich Interests and assets whose non-contribution is
addressed pursuant to Section 2.11 hereof, such Party's
Contributions include all rights and property necessary to the
conduct of such Party's Cellular Business by Cellco in the manner
in which it is presently conducted by such Party and no property
excluded from such Party's Contribution under the last paragraph
of Section 2.1(d) hereof constitutes property or rights material
to such Party's Cellular Business.
ARTICLE IV
ADDITIONAL INDEMNITY REPRESENTATIONS
If the Cellular Closing is consummated, Bell Atlantic
agrees to indemnify NYNEX and Cellco, and NYNEX agrees to
indemnify Bell Atlantic and Cellco, pursuant to Article VIII
hereof to the extent that the following statements are not true
and correct as of the Cellular Closing Date with respect to
itself and its Cellular Contributions as if made on and as of the
Cellular Closing Date.
4.1 Organization. (a) Each of such Party, its
Partner Subsidiary (if a corporation) and its Contributed
Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation, and has the requisite corporate power and
authority to own, lease and operate its properties and to carry
on its business as it is now being conducted. Each of such
Party, its Partner Subsidiary (if a corporation) and its
Contributed Subsidiaries is duly qualified or licensed to do
business and is in good standing as a foreign corporation in the
jurisdictions in which such corporations own or lease any real
property or conduct any business, so as to require such
qualification or licensing. Each of such Party's Partner
Subsidiary and Contributed Subsidiaries is a wholly-owned, direct
or indirect subsidiary of such Party. All of the issued shares
of capital stock of each of such Party's Contributed Subsidiaries
are outstanding and are validly issued, fully paid, nonassessable
and free of pre-emptive rights.
(b) Each of such Party's Cellco Partner Subsidiary (if
a partnership) and Contributed Partnerships is duly organized,
validly existing and in good standing under the jurisdiction of
<PAGE>
its organization, and has the requisite power and authority to
own, lease and operate its properties and to carry on its
business as it is now being conducted. The partnership
agreements and each of the other agreements among the partners in
such Cellco Partner Subsidiary (if a partnership) and Contributed
Partnership (including but not limited to loan agreements, pledge
agreements, management agreements and reseller agreements, as
amended to date), are in full force and effect.
(c) The minute books of each of such Party's Cellco
Partner Subsidiary, Contributed Subsidiaries and Contributed
Partnerships contain accurate records of all meetings and
consents in lieu of meetings of the Board of Directors or similar
body and any committee of the Board of Directors or similar body
purporting to take formal corporate or partnership action in lieu
of action by the Board of Directors, and of the stockholders or
partners thereof, through the Cellular Closing Date and
accurately reflect all transactions and other matters which are
required to be passed upon by the Board of Directors or similar
body, any committees thereof or the stockholders or partners
thereof.
(d) There are no outstanding options, warrants,
rights, calls, subscriptions, commitments or agreements of any
character whatsoever relating to, or calling for the issuance,
transfer, sale or other disposition of, or the repurchase or
other acquisition of, any shares, issued or unissued, of capital
stock or other voting interests of any of such Party's Cellco
Partner Subsidiary or Contributed Subsidiaries or of such Party's
direct or indirect interest in any of the Contributed
Partnerships or any securities convertible or exchangeable into
or for any of the foregoing, to which such Party or any Affiliate
thereof or any of the Contributed Partnerships is a party or by
which any of them is bound.
(e) None of such Party's Cellco Partner Subsidiary or
any of its Contributed Subsidiaries or Contributed Partnerships
has any subsidiaries or owns any interests in any other person
except as expressly set forth in this Agreement and the Schedules
hereto and none of such entities engages in any business other
than the ownership of interests in, and the operation of, the
Systems listed under the name of such Party on Schedule 3.2
hereto.
4.2 Ownership. (a) Such Party directly or indirectly
owns all of the interests in Systems listed under its name on
Schedule 3.2 hereto, subject to the provisions of Section 2.11.
(b) Each piece of real property (i) owned by each of
the Contributed Subsidiaries and each of the Contributed
Partnerships of such Party, or by such Party or an Affiliate in
the case of real property which is a Cellular Asset or
<PAGE>
(ii) occupied by or leased to any of such Contributed
Subsidiaries or Contributed Partnerships or to such Party or an
Affiliate in the case of leased real property which is a Cellular
Asset under any lease, sublease or other arrangement, and all
buildings and other structures located on such real property (for
purposes of this Section 4.2(b), collectively "Real Property")
has all material permits necessary to conduct the activity
conducted at such Real Property on the date hereof. Each of such
Party, its Affiliates, its Contributed Subsidiaries and
Contributed Partnerships has title as represented in current
title insurance policies for all Real Property owned by it, which
policies do not contain any exceptions the effect of which would
materially detract from the value of such Real Property to Cellco
or the System to which it relates. Such Party or one of its
Affiliates, Contributed Subsidiaries or Contributed Partnerships
holds the rights in and to all easements or other rights
reasonably necessary for access to all Real Property unless
otherwise indicated in such title policies. There is no
unrecorded defect in title which would materially adversely
affect the use or value of any of the Real Property for the
maintenance and operation of a cellular system or a
communications facility related thereto. All leases, subleases
and other arrangements relating to Real Property are in full
force and effect. Neither such Party, its Affiliates nor any of
its Contributed Subsidiaries or Contributed Partnerships has
given or received notice to the effect that there exists (i) any
default or event of default by such Party or any of its
Affiliates, Contributed Subsidiaries or Contributed Partnerships
under any of such instruments, or (ii) any event or condition
which with notice or lapse of time or both would constitute an
event of default thereunder by such Party or any of its
Affiliates, Contributed Subsidiaries or Contributed Partnership.
(c) Good and marketable title to all tangible personal
property used in connection with the Systems included in such
Party's Cellular Contribution is being transferred to Cellco, or
such tangible personal property is used or held subject to
leases, conditional sale contracts, franchises or licenses which
are in good standing and are valid and in full force and effect
and there are no facts which would interfere with Cellco's
ability to use such tangible personal property in connection with
such Party's Cellular Contribution. During the past three years
there has not been any significant interruption of the operations
of any System in which such Party is contributing an interest due
to breakdown or inadequate maintenance of its tangible personal
property.
(d) All trade names, registered and unregistered
trademarks and service marks and all patents and copyrights
("Intangible Property") will be transferred or licensed to Cellco
and will be usable by Cellco in the conduct of its business on
the same terms as such Intangible Property is currently being
<PAGE>
used by such Party and its Affiliates in the conduct of its
Cellular Business. Neither such Party nor any of its Affiliates,
Contributed Subsidiaries or Contributed Partnerships has, during
the period commencing three years prior to the Cellular Closing
Date, been charged with any infringement with respect to any of
the Intangible Property or been notified or advised of any claim
of any other person relating to any of the Intangible Property or
any confidential information of any of such Party, its
Affiliates, its Contributed Subsidiaries or its Contributed
Partnerships relating to its Cellular Business, and there are not
any facts that are likely to give rise to any charge or claim
that would adversely affect the right of Cellco to use any
Intangible Property. Such Party's Cellular Business is the
licensee or the sole and exclusive owner of such Intangible
Property of all patents and registered trade names, trademarks
and service marks included in Intangible Property and does not
use any Intangible Property by consent of any other person (other
than licensors pursuant to valid written license agreements).
4.3 Consents; No Violation. Neither the execution and
delivery of this Agreement by such Party nor the consummation of
the Transactions will (a) conflict with, or result in any breach
or violation of, any provision of the certificate of
incorporation or bylaws of such Party or any of its Contributed
Subsidiaries or of any partnership agreement of any of its
Contributed Partnerships; (b) except as set forth on Schedule 3.4
and assuming the expiration of all applicable waiting periods
under the HSR Act, constitute, with or without notice or the
passage of time or both, a breach, violation or default, create a
Lien, or give rise to any right of termination, modification,
cancellation, prepayment or acceleration, under any order, writ,
injunction, decree, law, statute, rule or regulation,
governmental permit or license, or any mortgage, indenture,
lease, agreement or other instrument of such Party or of any of
its Contributed Subsidiaries or Contributed Partnerships or to
which such Party, any of its Contributed Subsidiaries or any of
its Contributed Partnerships or any of their respective
properties is subject; (c) require any consent, approval, or
authorization of, waiver by, notification to, or filing with, any
Governmental Entity on the part of such Party, any of its
Contributed Subsidiaries, or any of its Contributed Partnerships
other than (i) the filing of certificates and other documents
with respect to the Transactions in accordance with the
partnership laws of the states in which the such Contributed
Partnerships are organized; (ii) Regulatory Approvals; (iii) MFJ
Approvals; and (iv) filings with respect to the Transactions
under the HSR Act. The representation and warranty set forth in
this Section 4.3 will not be violated by the existence of any
inhibition to the contribution of an interest in Systems which
failure to contribute is resolved pursuant to Section 2.11.
<PAGE>
4.4 Financial Information; Undisclosed Liabilities.
(a) Such Party's Cellular Business does not have any liabilities
or obligations of any nature (due or to become due, absolute,
accrued, contingent or otherwise), except for Permitted
Liabilities.
(b) There is no roaming subsidy of such Party's
Cellular Business that has not been expensed prior to the
Cellular Closing Date.
4.5 Authority. Such Party has the requisite power and
authority to execute and deliver this Agreement and to consummate
the Transactions, and such execution, delivery and consummation
have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by such Party
and constitutes the valid and binding obligation thereof,
enforceable against such Party in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency and similar federal and
state laws generally affecting the rights and remedies of
creditors and general principles of equity, whether considered in
a proceeding at law or in equity.
4.6 Absence of Certain Changes. Since March 31, 1994,
except as expressly contemplated by this Agreement or the
Transactions, and except for changes resulting from general
cellular industry conditions or as a result of a regulatory
development affecting the cellular industry generally, (a) such
Party's Cellular Business, Contributed Subsidiaries and
Contributed Partnerships and the Systems in which such entities
have an interest have conducted business only in the ordinary and
usual course and consistent with past practices, strategies and
programs; and (b) none of such Cellular Business, Contributed
Subsidiaries, Partnerships or Systems have undergone or suffered
any change in their business, financial condition, assets,
liabilities or results of operations ("Business Condition") which
has been, individually or in the aggregate, materially adverse to
any of such Cellular Business, Contributed Subsidiaries,
Contributed Partnerships and Systems, or the ability of such
Party to consummate the Transactions or the ability of each of
such Cellular Business, Contributed Subsidiaries, Contributed
Partnerships and Systems to conduct its respective business as it
is currently being conducted.
4.7 Compliance with Laws. Neither such Party nor any
of its Affiliates is in violation of any decree, order, judgment,
statute, rule or regulation so as to materially adversely affect,
individually or in the aggregate, the Business Condition of any
of such Party's Cellular Business or the ability of such Party to
consummate the Transactions or the ability to conduct such
Party's Cellular Business as it is currently being conducted.
<PAGE>
4.8 Legal Proceedings. There is no litigation,
proceeding or governmental investigation pending or, to the best
of such Party's knowledge, threatened, against such Party, any of
its Contributed Subsidiaries or Contributed Partnerships or any
of their respective properties or businesses or any of their
respective assets which, if decided adversely, would have a
material adverse effect on the Business Condition of any of such
Party's Cellular Business, Contributed Subsidiaries or
Contributed Partnerships or any of the Systems in which such
Party is contributing an interest or on the ability of any of
such Cellular Business, Contributed Subsidiaries, Contributed
Partnerships and Systems to conduct their businesses in the same
manner in all material respects in which they are operated prior
to the Cellular Closing or on the ability of such Party to
consummate the Transactions.
4.9 Licenses. Except as set forth on Schedule 3.7,
such Party's Cellular Business has Licenses which are necessary
for it to conduct its respective wireless operations in the
manner in which they are presently being conducted, other than
any Licenses, the failure of which to hold would not, singly or
in the aggregate, have an adverse effect on the Business
Condition of such Party's Cellular Business. Except as set forth
on Schedule 3.7, all of the FCC and state Licenses held by such
Party's Cellular Business are valid and in full force and effect.
Except as set forth on Schedule 3.7, no event has occurred with
respect to the Licenses which is likely to result in, or after
notice or lapse of time or both would be likely to result in,
revocation, termination or non-renewal thereof or would result in
any other material impairment of the rights of the holder of any
of the Licenses, which would result in a material adverse effect
on the Business Condition of such Party's Cellular Business.
Except as set forth on Schedule 3.7, there are no facts which
would prevent the Licenses from being renewed in accordance with
FCC rules and regulations or constructed and put into commercial
service within the applicable time period. As used in this
Section 4.9, the term Licenses does not include waivers of the
MFJ. Following the Cellular Closing, Cellco will have the right
and ability to conduct the business of such Party's Cellular
Business in the same manner in all material respects in which it
is operated prior to the Cellular Closing. The provisions of
this Section are qualified in their entirety by the understanding
of the Parties that the Saleable Systems and the Springwich
Interests will not be included in the Cellular Contributions of
the Parties and that the Licenses in respect thereof would not be
assignable to Cellco because of the overlaps that exist between
the Saleable Systems and the Springwich Interests, on the one
hand, and other properties of the Partners to be included in the
Cellular Contributions on the other.
4.10 Finders; Investment Bankers. None of such Party
or any of its Affiliates, or any of their respective officers or
<PAGE>
directors, has employed any broker, finder or investment banker
or incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the Transactions which would be
a liability of any of PCSCO, Cellco, the Contributed Subsidiaries
or the Contributed Partnerships.
4.11 INTENTIONALLY OMITTED.
4.12 Material Contracts. All contracts to which any
of such Party's Contributed Subsidiaries or any of its
Contributed Partnerships is a party or which constitute Cellular
Assets which are material to any of such Contributed Subsidiaries
or Contributed Partnerships or the Cellular Business or any of
the Systems in which an interest is being contributed by such
Party, including all agency agreements, roaming agreements,
agreements with other cellular carriers with respect to national
accounts and price and billing agreements to which any of such
entities are a party are valid and binding in accordance with
their terms. Neither such Party nor any of its Affiliates,
Contributed Subsidiaries or Contributed Partnerships has given or
received notice that there exists (i) any default or event of
default by any of such entities under any of such contracts or
(ii) any event or condition which with notice or lapse of time or
both would constitute an event of default under any of such
contracts, and, none of such contracts will be materially
adversely affected by the execution and delivery of this
Agreement or the consummation of the Transactions.
4.13 Employee Benefit Plans. (a) Each material
"employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA and each material "employee welfare benefit
plan," as that term is defined in Section 3(1) of ERISA is
hereinafter referred to as an "ERISA Plan" and collectively as
"ERISA Plans", and all other material retirement, pension,
profit-sharing, money purchase, deferred compensation, incentive
compensation, bonus, stock option, stock purchase, severance pay,
unemployment benefit, vacation pay, savings, medical, dental,
post-retirement medical, accident, disability, weekly income,
salary continuation, health, life or other insurance, fringe
benefit, or other material employee benefit plans, programs,
agreements, or arrangements, whether or not subject to ERISA,
whether oral or written, under which any Employee (as defined in
Section 4.17) has any present or future right to benefits or
under which any of the Contributed Subsidiaries or any of the
Partnerships has any present or future liability together with
the ERISA Plans, are referred to hereinafter as the "Plans".
Material employment, severance, termination or similar-type
agreements covering any Employee are referred to as the
"Employment Agreements" and also as "Plans".
(b) The execution and delivery of this Agreement by
each Party and the performance of this Agreement by such Party
<PAGE>
and its Affiliates, including the Transactions, will not, by
itself, result now or at any time in the future in the payment by
PCSCO or Cellco to any Employee of any severance, termination or
similar type payments or benefits (other than benefits under Code
Section 4980B).
(c) Each Plan may be terminated without material
liability to PCSCO or Cellco (other than those liabilities (i)
for which specific assets have been set aside in a trust or other
funding vehicle or (ii) disclosed on the Financial Statements to
the extent required by Section 4.4 hereof).
(d) (i) No Party or any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or
administrator thereof, or any other party, has engaged in any
transaction as a result of which any of the Contributed
Subsidiaries, any of the Partnerships or either Party could
reasonably be expected to be subject to any liability pursuant to
Section 409 of ERISA or either to a civil penalty assessed
pursuant to Section 502(i) of ERISA or to a tax imposed pursuant
to Code Section 4975.
(ii) Since the effective date of ERISA, no liability
under Title IV of ERISA has been incurred or is reasonably
expected to be incurred by any Contributed Subsidiary or any
Partnership (other than liability for premiums due to the PBGC),
either directly or by reason of its affiliation with any member
of its controlled group (defined as any organization which is a
member of a controlled group of organizations within the meaning
of Code Section 414) ("Controlled Group"), unless, where
permitted by law, such liability is reserved for or otherwise
reflected on the Financial Statements or unless such liability
has been satisfied in full.
(iii) All contributions required to be made to the
Plans prior to the Cellular Closing Date under the terms of any
Plan, the Code, ERISA or other applicable law have been or will
be timely made.
(e) Except with respect to those ERISA Plans which are
"multiemployer plans":
(i) no member of such Party's Controlled Group has
engaged in a transaction which could subject it to liability
under ERISA Section 4069;
(ii) as of the Cellular Closing Date, each member of
such Party's Controlled Group has made or will have made all
required premium payments when due to the PBGC;
<PAGE>
(iii) no member of such Party's Controlled Group has
incurred an "accumulated funding deficiency" (as defined in ERISA
Section 302 and Code Section 412), whether or not waived;
(iv) no event or condition exists (other than the
transactions contemplated by this Agreement) which could
reasonably be deemed a reportable event within the meaning of
ERISA Section 4043 which could reasonably be expected to result
in a liability to any member of such Party's Controlled Group and
no condition exists which could reasonably be expected to subject
any such member of such Party's Controlled Group to a fine under
ERISA Section 4071;
(v) each Plan has been established and administered in
all material respects in accordance with its provisions, and with
all applicable laws; and
(vi) each Plan (to the extent such Plan or the assets
and liabilities thereof will be transferred to PCSCO or Cellco)
that is intended to be "qualified" within the meaning of Code
Section 401(a), and to the extent applicable, Code
Section 401(k), is so qualified, has been determined by the
Internal Revenue Service to be so qualified, and nothing has
occurred, whether by action or failure to act, that would
adversely affect the qualified status of any such Plans.
(f) With respect to any ERISA Plans which are
multiemployer plans (as that term is defined in ERISA
Section 4001(a)(3)) to which any member of such Party's
Controlled Group has any liability or contributes (or has at any
time contributed or had an obligation to contribute):
(i) each member of such Party's Controlled Group has
or will have, as of the Cellular Closing Date, made all required
contributions to each such multiemployer plan,
(ii) no member of such Party's Controlled Group has
incurred a "complete withdrawal" or a "partial withdrawal," as
such terms are respectively defined in ERISA Sections 4203 and
4205, nor would any member of such Party's Controlled Group be
subject to any liability under Title IV of ERISA, if, as of the
Cellular Closing Date, any of such Party's Controlled Group were
to engage in such a complete or partial withdrawal from any such
multiemployer plan;
(iii) no such multiemployer plan is in reorganization
or insolvent (as those terms are defined in ERISA Sections 4241
and 4245, respectively); and
(iv) no member of such Party's Controlled Group has
engaged in a transaction which could subject it to liability
under ERISA Section 4212(c).
<PAGE>
4.14 Taxes. Each of the Parties and the Partners (and
their respective Affiliates) has duly filed, or has obtained a
filing extension from the appropriate federal, state, local and
foreign governments or governmental agencies with respect to, all
returns and reports required to be filed by such person on or
prior to the Cellular Closing Date ("Tax Returns") for all Taxes
which if unpaid might result in a lien (or similar encumbrance)
upon any of the Contributions or upon Cellco. For purposes of
this Agreement, the term "Tax" or "Taxes" shall mean federal,
state, local or foreign income, capital gains, profits, gross
receipts, payroll, capital stock, franchise, employment,
withholding, social security, unemployment, disability, real
property, personal property, stamp, excise, occupation, sales,
use, transfer, mining, value added, investment credit recapture,
alternative or add-on minimum, severance, environmental,
estimated or other taxes, duties or assessments of any kind,
including any interest, penalty and additions imposed with
respect to such amounts. Payment in full for the payment of all
Taxes shown to be due on such Tax Returns, which if unpaid might
result in a lien or similar encumbrance upon any of the
Contributions or upon Cellco, has been made. All written
assessments of Taxes due and payable by, on behalf of or with
respect to any of the Parties and the Partners (or any of their
respective Affiliates) or their respective Contributions, which
if unpaid might result in a lien or similar encumbrance upon any
of the Contributions or upon Cellco, have been paid by such
Party, or are being contested in good faith by appropriate
proceedings, in which case all amounts owing after such contest
shall be promptly paid by such person. There are no tax liens on
any Contributions of any Partner that arose in connection with
any failure (or alleged failure) to pay any Tax, except for liens
for current taxes not yet due and payable. All amounts required
to be withheld by each of the Parties or the Partners (or any of
their respective Affiliates) from their respective employees for
income taxes, social security and other payroll taxes have been
collected and withheld, and have either been paid to the
respective governmental agencies, set aside in accounts for such
purpose, or accrued, reserved against and entered upon the books
and records of the employer by such person. Each Party shall
cause all tax sharing agreements between Contributed Subsidiaries
and the Partners or their Affiliates to terminate upon the
Cellular Closing Date and no further payments shall be made under
or in respect of such agreements; provided, however, that if the
tax sharing agreement between a Party (or any Affiliate) and a
Contributed Subsidiary did not provide for payments made on a
quarterly basis with respect to estimated income taxes (or if
there is no such agreement), then such Contributed Subsidiary
shall make a payment to or receive payment from its related Party
equal to the amount with respect to the taxable period ending on
the Cellular Closing Date which would have been paid by or to
such Contributed Subsidiary had there been a tax sharing
agreement that provided for such quarterly estimated payments.
<PAGE>
4.15 MFJ Activities. Neither Party has any activities
which any of such Party's Contributed Subsidiaries or Contributed
Partnerships, or any of the Systems in which an interest is being
contributed by such Party, directly or indirectly engages or
participates in, alone or with any individual or entity, whether
as a principal, agent, reseller, representative, consultant or
independent contractor, activities which are prohibited by the
MFJ.
4.16 Environmental Matters. Each of such Party's
Cellular Business, Contributed Subsidiaries and Contributed
Partnerships and each of the Systems operated by any of them is
in material compliance with all applicable laws and regulations
related to the environment, health and safety, all required
permits from Governmental Entities have been obtained and are in
effect, and no on-site storage, treatment or disposal of
hazardous waste or material has been made (except in compliance
with applicable laws and regulations) in connection with any of
such Systems. There are no pending actions, proceedings, or
notices of potential action and there are no facts that would
reasonably be expected to lead to actions, proceedings, or
notices of potential action from any governmental agency
regarding the condition of any of such Systems under
environmental, health or safety laws. Such Party's Cellular
Business has lawfully disposed of the waste generated by the
businesses associated with its Systems and no pending or
threatened proceedings exist concerning disposal of waste
generated by the businesses associated with any of such Systems.
There are no underground storage tanks, PCBs, asbestos, radon
gas, harmful nuclear radiation, or hazardous wastes present on
the properties of such Party's Cellular Business.
4.17 Employees. (a) Employees employed with respect
to the Cellular Businesses shall be hereinafter referred to as
the "Employees". For purposes of the preceding sentence,
Employees shall include employees on worker's compensation,
military leave, other approved leaves of absence, short-term and
long-term disability, non-occupational disability and employees
on layoff with recall rights. Except as set forth in Schedule
4.17, none of the Contributed Subsidiaries or Contributed
Partnerships of such Party has any outstanding commitment or
agreement to effect any general wage or salary increase which
covers all of the Employees for, or to modify in any material
respect the conditions or terms of employment of, any grade,
class or group of its employees, consultants or agents. There
are no controversies pending or, to the knowledge of such Party
or any of the Contributed Subsidiaries or Contributed
Partnerships of such Party, threatened, between any of the
Contributed Subsidiaries or the Contributed Partnerships of such
Party and any of the Employees which individually or in the
aggregate may have a material adverse effect on such entity.
Except as set forth on Schedule 4.17 hereto, none of the
<PAGE>
Contributed Subsidiaries or the Contributed Partnerships of such
Party is a party to any collective bargaining agreement or other
labor union contract applicable to any of the Employees, nor does
any such entity know of any activities or proceedings of any
labor union to organize any of the Employees.
(b) There exists no employment, consulting, severance
or indemnification agreement between any of such Contributed
Subsidiaries or Contributed Partnerships and any current or past
director, officer or Employee thereof.
4.18 Insurance. The properties and the conduct of the
respective businesses of such Party's Cellular Business are
adequately insured (in the manner and to the extent customary for
businesses engaged in the same or similar business) by
financially sound and reputable insurers, all of which are
unaffiliated with such Party or are self-insured by such Party.
4.19 Acquired Entities. To the extent that either
Party includes Acquired Entities as part of its Cellular
Contribution, such Party agrees that the statements made by such
Party in this Article IV with respect to such Party's Contributed
Subsidiaries and Contributed Partnerships are made by such Party
with respect to its Acquired Entities, as appropriate, subject to
the following provisions:
(i) the statements shall be deemed made
as of the Cellular Closing Date and shall not
be deemed untrue as a result of events
occurring before or states of fact existing
on, the date such Party acquired such
Acquired Entity; and
(ii) any schedules or other information
relating to such Acquired Entity recited in
this Agreement as having been delivered on or
before the date of this Agreement shall be
delivered by such Party on the earlier of (x)
the 30th day following the acquisition of the
Acquired Entity or (y) the Cellular Closing
Date.
4.20 INTENTIONALLY OMITTED.
4.21 Assets. Other than Saleable Systems, the
Springwich Interests and assets whose non-contribution is
addressed pursuant to Section 2.11 hereof, such Party's
Contributions include all rights and property necessary to the
conduct of such Party's Cellular Business by Cellco in the manner
in which it is presently conducted by such Party and no property
excluded from such Party's Contribution under the last paragraph
<PAGE>
of Section 2.1(d) hereof constitutes property or rights material
to such Party's Cellular Business.
4.22 Restrictions. Neither such Party nor its
Contributed Partnerships and Contributed Subsidiaries is a party
to any indenture, agreement, contract, commitment, lease, plan,
license, permit, authorization or other instrument, document or
understanding, oral or written, or subject to any charter or
other corporate restriction or any judgment, order, writ,
injunction, decree or award (other than the MFJ and any
partnership agreement of a non-wholly-owned partnership) which
materially adversely affects or materially restricts or, so far
as such Party can now reasonably foresee, may in the future
materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial
or otherwise) of such Party's Cellular Business after
consummation of the transactions contemplated hereby.
ARTICLE V
PRE-CELLULAR CLOSING COVENANTS
5.1 Interim Operations. During the period from the
date hereof to the Cellular Closing, except as specifically
contemplated by this Agreement including, without limitation,
Sections 2.8, 2.9, 2.10, 2.11, 2.13 and 2.15 or as may be
required to comply with applicable fiduciary obligations to
holders of interests in Contributed Partnerships or obligations
under partnership agreements or law or as otherwise approved in
writing by the other Party hereto, which approval shall not be
unreasonably withheld, each Party hereby covenants as follows:
(a) Conduct of Business. Such Party will cause the
business of its Managed Cellular Business to be conducted in all
material respects only in the ordinary course and consistent with
past practice and the parties' current business plans.
(b) Capital Structure. Except as may be necessary for
either Party to effect its Cellular Contribution, such Party will
cause its Cellco Partnership Subsidiary, and its Managed Cellular
Business not to (i) issue, pledge or sell any of their capital
stock or partnership interests, as the case may be, (ii) enter
into any contract, understanding or arrangement with respect to
the issuance of capital stock, debt or partnership interests, as
the case may be, (iii) enter into any arrangement or contract
with respect to the purchase or voting of its capital stock or
partnership interests, as the case may be, or (iv) make any other
changes in its capital structure; provided, however, that any
such transactions which are solely among Affiliates may be
entered into unless such transactions would have a material
adverse effect on Cellco or the other Party or its Affiliates.
<PAGE>
(c) Relationships. Such Party will use reasonable
efforts to preserve intact the business organization and
clientele of its Managed Cellular Business, and to preserve the
goodwill of those having business relationships with its Managed
Cellular Business.
(d) Assets. Such Party will cause its Affiliates and
itself not to encumber, sell, lease or otherwise dispose of any
interest which they own in such Party's Managed Cellular Business
other than in the ordinary course of business.
(e) Reports. Such Party will furnish to the other
Party the following reports: (i) as soon as available and in any
event within ninety (90) days after the last day of each fiscal
year the following financial statements (audited to the extent
that such Party's prior practice has been to prepare audited
financial statements of an entity) of such Party's Contributed
Subsidiaries, Contributed Partnerships and that portion of such
Party's Cellular Business as is not conducted through Contributed
Subsidiaries and Contributed Partnerships: (a) balance sheets as
of the end of the fiscal year then ended and related statements
of income and cash flows for the fiscal years then ended, in the
case of audited financial statements, with reports thereon of
certified public accountants and (ii) as soon as available but in
no event later than sixty (60) days after the end of each
quarterly period of each fiscal year of each of the above-
referenced entities, interim statements of income and cash flows
for the interim period then ended and the interim balance sheets
as of the last day of such interim period. Notwithstanding the
foregoing, a Party need only deliver unaudited and interim
financial statements of Contributed Subsidiaries in which such
Party owns a minority interest as and when such financial
statements are made available to Party. All the financial
statements delivered pursuant to this Section 5.1(e) shall be in
accordance with the books and records of the above-referenced
entities, present fairly the financial position, results of
operations and cash flows of such entities as of the dates and
for the periods indicated, subject in the case of the interim
financial statements to normal year-end adjustments. The
financial statements shall be prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods specified, except for the lack of
explanatory footnote disclosures required by generally accepted
accounting principles.
(f) Employee Plans, Compensation, etc. Except for
normal changes (or, with respect to (iii) below, grants) in the
ordinary course of business that are consistent with past
practice and that, in the aggregate, do not result in a material
increase in benefits or compensation expense to such Party's
Cellular Contributions relative to the level in effect prior to
such changes and except as required by law or agreement existing
<PAGE>
on the date hereof, such Party will not, and will cause its
Managed Cellular Business not to (without the consent of the
other party hereto) take any of the following actions with
respect to employees who are to become Cellco Employees (as
defined below) if such arrangement would continue after the
Cellular Closing and would become an obligation of Cellco:
(i) adopt, enter into, amend or terminate any bonus,
profit sharing, compensation, severance, termination,
pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any individual, to
the extent that any such action would affect those employees
who are to become Cellco Employees;
(ii) increase in any manner the compensation or
fringe benefits of those employees who are to become Cellco
Employees or pay any benefit to those employees who are to
become Cellco Employees other than pursuant to an existing
plan or arrangement; or
(iii) grant any awards to those employees who are to
become Cellco Employees under any bonus, incentive,
performance or other compensation plan or arrangement
(including, without limitation, the granting of stock
options, stock appreciation rights, stock-based or stock-
related awards, performance units or restricted stock, or
the removal of existing restrictions in any benefit plans or
agreements or awards made thereunder).
Except as required by law, such Party will not, and
will cause the members of its Controlled Group not to, take
any action to segregate assets for, or in any other way
secure, the payment of compensation or benefits to those
employees who are to become Cellco Employees under any
employee plan, agreement, contract or arrangement or adopt,
enter into or amend any contract, agreement, commitment or
arrangement to do any of the acts described in this
Section 5.1(f).
(g) Such Party agrees to use reasonable efforts
(except that such efforts need not include monetary expense) to
keep available the services of those employees who are to become
Cellco Employees in order that such employees' services shall
become available at the Cellular Closing to Cellco. During the
one-year period following the Cellular Closing, neither such
Party nor any of its Affiliates shall solicit for hire or hire
any of the Cellco Employees without the prior written consent of
the other Party and Cellco, which consent shall not be
unreasonably withheld.
<PAGE>
5.2 MFJ Activities. (a) Within sixty (60) days
after the date hereof, NYNEX and Bell Atlantic shall agree on the
changes that are required to be made or the waivers that must be
obtained in order to cause the businesses and operations of
Cellco at the Cellular Closing Date to be in compliance with the
rules and regulations of the MFJ (the "MFJ Transactions"). Such
Agreement shall not be deemed a waiver by either Party of any
non-compliance with Section 4.15 hereof which is not addressed
by, or would not be cured by, completion by the other Party of
its MFJ Transactions. Each of the Parties shall promptly take
all actions requested by the other Party in such other Party's
good faith judgment in order to implement such changes. The
direct labor costs and reasonable out-of-pocket expenses incurred
in connection with any MFJ Transactions shall be borne by the
Party effecting such MFJ Transactions, except for Me Too Waivers
which are provided for below.
(b) NYNEX and Bell Atlantic agree that each shall be
obliged to request a waiver for the benefit of Cellco or such
Party, as appropriate, if the waiver (a "Me Too Waiver") is: (i)
to permit Cellco or such Party, as appropriate, to offer the same
services as those set forth in any waiver request which such
Party or an Affiliate has pending or which such Party, any of its
Affiliates, or any Bell Operating Company ("BOC") within the
meaning of the MFJ has obtained for its cellular or paging
businesses, including businesses incidental thereto; (ii) based
on relevant facts which are comparable to those set forth in any
such waiver which such Party, an Affiliate thereof or a BOC has
pending or has obtained, as the case may be; and (iii) with
respect to Cellco, within the scope of the Cellco Business (as
defined in the Cellco Partnership Agreement). Except for a Me
Too Waiver, neither Party shall be obligated to request any
waiver for the benefit of Cellco or such Party, as appropriate,
if such Party believes in good faith that the business practice
or transaction is in compliance with the MFJ or that requesting
such a waiver would prejudice the consideration of MFJ waivers
which such Party or any of its Affiliates is seeking or then
intends to seek at a future date. If either Party declines to
request a waiver on its good faith belief that its interests
would be prejudiced, Cellco or the other Party shall have the
right to seek such an MFJ waiver on its own behalf; provided,
however, that Cellco or such other Party shall not, if waiver
requests of the kind contemplated to be filed are customarily
filed by the other Party or any of its Affiliates with the
Department of Justice prior to their submission to the Decree
Court, file any motion for a waiver of the MFJ with the Decree
Court until the Department of Justice has indicated that the
Department of Justice will not oppose the waiver. If any such
request for a waiver filed by Cellco with the Decree Court is not
opposed on the merits by the Department of Justice but is
rejected by the Decree Court on the grounds that Cellco is an
inappropriate party to have requested such waiver, then each of
<PAGE>
the Parties agrees that it or one of its Affiliates will file
such waiver request with the Decree Court for the benefit of
Cellco. If any such request is rejected by the Department of
Justice on the grounds that Cellco is an inappropriate party to
have requested such waiver, and, as a result, is not filed with
the Decree Court, then each of the Parties agrees that it or one
of its Affiliates will submit such request to the Department of
Justice for the benefit of the Partnership and, if the Department
of Justice indicates it will not oppose such request, then file
the waiver request with the Decree Court. In the event Cellco
does seek a waiver of the MFJ on its own behalf, each of the
Parties shall have the right to express its own view on the
requested waiver to the Department of Justice and to the Decree
Court. Neither Party nor any of its Affiliates shall oppose any
waiver request by Cellco or the other Party that is the same as,
or that is based on facts which are comparable to those set forth
in, any waiver that either Party has pending or which either
Party or a BOC has obtained. The direct labor costs and
reasonable out-of-pocket expenses incurred in connection with any
Me Too Waivers shall be borne by Cellco.
NYNEX and Bell Atlantic shall cooperate with each other
in the preparation, filing and prosecution of requests for such
waiver and each Party shall bear its own expenses in connection
therewith. An initial listing of the waiver requests to be made
by the Parties will be delivered by the Parties within 30 days of
the execution of this Agreement.
5.3 Expenses. Other than as provided in Sections 2.8,
2.10, 2.14(d) and 5.2, each Party shall bear its own legal,
accounting and other costs, charges and expenses in connection
with the negotiation and preparation of this Agreement, the
Partnership Agreements and any related instruments or agreements
and the performance of its obligations hereunder. Each Party and
its Affiliates shall bear all costs and expenses, including,
without limitation, any sales taxes, transfer taxes, recording
fees and attorneys' or accountants' fees incurred in
transferring, or causing its Affiliates to transfer, its Cellular
Contribution to Cellco and its PCS Contribution to PCSCO, and any
expenses, fees and costs necessary for any Regulatory Approvals
shall be paid by the Party seeking such Regulatory Approval.
5.4 Business Relationships with Affiliates. No later
than thirty (30) days prior to the Cellular Closing Date, NYNEX
and Bell Atlantic shall provide each other with written schedules
describing all contracts and other business dealings (including
the material terms thereof) between each of them and their
Affiliates, on the one hand, and the businesses of each of their
respective Cellular Contributions on the other. At any time
prior to the Cellular Closing Date, each Party shall have the
option, upon written notice to the other, to cancel any contract
or other business dealing described on the other Party's
<PAGE>
schedule, which contract is cancelable without penalty or the
parties to which contract are wholly-owned by such Party, such
cancellation to became effective no later than six months after
the Cellular Closing Date.
5.5 Creation of Employee Body and Benefits Plans.
(a) Within one hundred eighty (180) days after the
execution of this Agreement, the MOC, shall develop and propose a
compensation program, and benefit plans and personnel policies,
including a form of retirement plan, to be offered by Cellco to
its employees (the "Cellco Employees"). To assist in the
creation of such compensation program, benefits plans and
personnel policies, NYNEX and Bell Atlantic shall provide the MOC
with comprehensive written summaries of the compensation and
benefits provided by each of them to their respective employees
employed in connection with their respective Cellular
Contributions. For those employees seeking employment with
Cellco, NYNEX and Bell Atlantic shall supply the name, title,
date of most recent commencement of service and with the consent
of the employee, aggregate compensation (including salary or
wages, commissions and bonuses) paid during the 1992, 1993 and
1994 calendar years, accrued holiday, vacation, sick leave, long-
service entitlement (if any) and permitted time off due as
compensation for additional time worked and performance
evaluation for the 1992, 1993 and 1994 calendar years for each
such employee.
(b) In order that Cellco may become the employer of
those employees employed by NYNEX, Bell Atlantic or any of their
respective Affiliates in connection with their respective
Cellular Contributions in sales, marketing, engineering, customer
service, administrative, maintenance, accounting, installation
and operations needed for the operation of the Systems as
contemplated herein, the MOC shall, prior to the Cellular
Closing, use its reasonable efforts to agree on those employees
of both Parties who shall become employees of Cellco. Employee
costs incurred after the Cellular Closing, including, without
limitation, severance costs, shall be borne by Cellco unless the
Parties agree otherwise.
(c) All proposals and determinations by the MOC with
respect to labor and employee policies shall be rendered as
advice to Cellco. Cellco shall itself make all determinations
with respect to its labor and employment policies.
5.6 NYSMSA. The Parties will use their reasonable
efforts to arrive at a mutually satisfactory agreement for
including NYNEX's current interest in NYSMSA (as listed in
Schedule 3.2) in the NYNEX Contributions or otherwise providing
the Parties with substantially equivalent benefits as would
result from the inclusion of such interest in Cellco. If the
<PAGE>
Parties are unable to agree on such a method by December 31,
1995, the provisions of Section 9.1(f) will become operative.
5.7 Non-Managed Systems. Each Party will use its
reasonable efforts, including voting its equity interest, to
cause Systems other than Managed Systems to perform the covenants
set forth in this Article V.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Further Assurances; Cooperation. Each of the
Parties hereto shall perform its obligations under this Agreement
and shall take or cause to be taken and do or cause to be done
all reasonable things necessary, proper or advisable under
applicable law to obtain all necessary Regulatory Approvals and
waivers and all other necessary consents and satisfy all
conditions to the obligations of the Parties under this Agreement
and to cause the Transactions to be carried out promptly in
accordance with the terms hereof and shall cooperate fully with
one another and their respective officers, directors, employees,
agents, counsel, accountants and other representatives in
connection with any steps required to be taken as a part of their
respective obligations under this Agreement, provided that
neither Party shall be required to agree to the imposition of
material conditions or limitations that are materially adverse to
such Party (including, without limitation, material limitations
on a party's right to hold or manage its interests in Cellco).
Subject to the foregoing, upon the execution of this Agreement
and thereafter, each Party shall do such things as may be
reasonably requested by the other Party in order more effectively
to consummate the Transactions (including, but not limited to,
promptly delivering to the other information necessary to prepare
and pursue all necessary regulatory filings, approvals and
waivers), in each case including, without limitation:
(a) Subject to the terms and conditions herein
provided, NYNEX and Bell Atlantic shall promptly make such
filings and submissions and shall take, or cause to be taken, all
reasonable actions and do, or cause to be done, all reasonable
things necessary, proper or advisable under applicable laws and
regulations to (i) obtain the consents, approvals, authorizations
and waivers described in Schedule 3.4, (ii) comply with the
provisions of the MFJ, and (iii) obtain any other required
approval of any Governmental Entity with jurisdiction over the
Transactions and obtain any other necessary consents, and, in the
event any change in the Transactions is required in order to
accomplish the foregoing, except as provided elsewhere in this
Agreement, take all reasonable steps necessary to accommodate
such change to the extent it would not materially adversely
<PAGE>
affect the Parties' rights or obligations hereunder; provided
that in any such event, Bell Atlantic and NYNEX shall negotiate
in good faith to appropriately compensate the other to the extent
adversely affected by such change. Each of the Parties hereto
agrees to cooperate in the preparation of, and to provide all
information required for the prompt filing of, all applications,
approvals and waivers required for the approval and consummation
of the Transactions.
(b) In the event any claim, action, suit,
investigation or other proceeding by any Governmental Entity or
other person is commenced which questions the validity or
legality of the Transactions or seeks damages in connection
therewith (collectively, "Adverse Proceedings"), and, if an
injunction or other order is issued in any such Adverse
Proceeding, to use reasonable efforts to have such injunction or
other order dissolved, and to cooperate reasonably regarding the
removal of any other impediment to the consummation of the
Transactions.
(c) Bell Atlantic shall give prompt written notice to
NYNEX and NYNEX shall give prompt written notice to Bell
Atlantic, to the extent known by the chief executive officer or
the chief financial officer of the Cellular Business of the Party
giving notice, of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any
representation or warranty of the notifying party contained in
this Agreement to be untrue or inaccurate in any material respect
individually or in the aggregate with other such events at any
time from the date hereof to the Cellular Closing or which will
or may result in the failure to satisfy any of the conditions
specified in Article VII hereof, or (ii) any failure of the
notifying party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder.
6.2 Access to Properties and Records. Each Party
shall afford to the other Party and the other Party's
accountants, counsel and representatives full access during
normal business hours throughout the period prior to the Cellular
Closing Date to all of the properties, books, contracts,
commitments and records (including but not limited to financial
and accounting records and tax returns) of its Cellular Business
and, during such period, shall make available promptly to the
other Party all information concerning the business, properties
and personnel of its Cellular Business as the other Party may
reasonably request, provided that no investigation pursuant to
this Section 6.2 shall affect any representations or warranties
or the conditions to the obligations of the parties hereto to
consummate the Transactions. In the case of Systems which are
not Managed Systems, such Party will use its reasonable efforts
to provide such information and access.
<PAGE>
ARTICLE VII
CONDITIONS
7.1 Conditions to the Obligations of NYNEX and Bell
Atlantic. The obligations of NYNEX and Bell Atlantic to
consummate the Transactions at the Cellular Closing are subject
to the satisfaction or waiver, at or before the Cellular Closing,
of each of the following conditions:
(a) The Department of Justice shall have approved and
the Decree Court shall have granted the parties' requests for the
waivers contemplated by Section 5.2 hereof and any other waivers
they subsequently deem necessary for the operation of Cellco as
contemplated in this Agreement and in the Cellco Partnership
Agreement and no Governmental Entity or other person shall have
enjoined the consummation of the Transactions, or appealed the
Decree Court's order granting such requests, or the time to
appeal shall have expired, or such order shall have become final.
(b) All Regulatory Approvals, and the expiration of
waiting periods under the HSR Act ("Governmental Approvals")
other than those authorizations, orders, grants, consents,
permissions and approvals the failure of which to receive would
not, singly or in the aggregate, have a material adverse effect
on the Business Condition of Cellco or of Bell Atlantic or of
NYNEX, shall have been received and shall remain in effect,
provided that none of such Governmental Approvals (i) impose
material limitations on the ability of Cellco effectively to
acquire or hold, or requiring Cellco or either of the Parties or
such Party's respective Cellco Partner Subsidiary to dispose of
or hold separate, any material portion in the aggregate of its
Cellular Contributions, other than Saleable Systems treated in
accordance with Section 2.11 hereof and the Springwich Interests,
or (ii) impose material limitations on the ability or right
either of Bell Atlantic or NYNEX or their respective Affiliates
effectively to acquire or hold, or requiring either of Bell
Atlantic or NYNEX or any of their respective Affiliates to
dispose of or hold separate, any material interest in Cellco.
(c) The initial budgets and business plans of Cellco
as contemplated by Section 2.14(b) of this Agreement shall have
been developed and agreed upon by the Parties and the MOC.
7.2 Conditions to the Obligations of NYNEX. The
obligations of NYNEX to consummate the Transactions at the
Cellular Closing are subject to the satisfaction or waiver, at or
before the Cellular Closing, of the following conditions:
(a) The representations and warranties of Bell
Atlantic set forth in Article III shall have been true and
correct in all material respects when made and unless made as of
<PAGE>
a specified date shall be true and correct in all material
respects as if made as of the Cellular Closing Date.
(b) On terms reasonably satisfactory to NYNEX, Bell
Atlantic has made the changes determined by NYNEX to be required
to cause the businesses and operations of the Bell Atlantic
Cellular Contribution to be in compliance with the MFJ as set
forth in Section 4.15 hereof.
(c) There shall not exist a state of facts which
creates a right of NYNEX to terminate this Agreement pursuant to
Section 9.1(c), (d)(ii), (e) or (f).
7.3 Conditions to the Obligations of Bell Atlantic. The
obligations of Bell Atlantic to consummate the Transactions at
the Cellular Closing are subject to the satisfaction or waiver,
at or before the Cellular Closing, of each of the following
conditions:
(a) The representations and warranties of NYNEX set
forth in Article III shall have been true and correct in all
material respects when made and (unless made as of a specified
date) shall be true and correct in all material respects as if
made as of the Cellular Closing Date.
(b) On terms reasonably satisfactory to Bell Atlantic,
NYNEX has made the changes determined by Bell Atlantic to be
required to cause the businesses and operations of the NYNEX
Cellular Contribution to be in compliance with the MFJ as set
forth in Section 4.15 hereof.
(c) There shall not exist a state of facts which
creates a right of Bell Atlantic to terminate this Agreement
pursuant to Section 9.1(c), (d)(i), (e) or (f).
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Bell Atlantic. Except as
otherwise expressly provided in this Article VIII, Bell Atlantic
shall defend, indemnify and hold harmless Cellco, PCSCO and each
of Cellco's and PCSCO's officers, directors, employees, agents,
successors and assigns (Cellco and such persons hereinafter,
collectively the "Indemnified Persons"), and shall reimburse the
Indemnified Persons for, from and against each and every demand,
claim, loss, liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses") imposed on or
<PAGE>
incurred by the Indemnified Persons, directly or indirectly
(including without limitation diminution in value of an equity
interest), relating to, resulting from or arising out of
(a) subject to the limitations period set forth in Section 10.1,
any inaccuracy in any respect in any representation or warranty
of Bell Atlantic herein (other than the representations and
warranties contained in Section 4.14) or in any certificate or
other document delivered or to be delivered pursuant hereto,
whether or not the Indemnified Person relied thereon, except to
the extent that the Loss arises out of the failure to contribute
a Saleable System or the Springwich Interests in accordance with
Section 2.10 or a non-Contributed System in accordance with
Section 2.11; or (b) any liability or obligation of any nature
(known or unknown, absolute, accrued, contingent or otherwise)
related to Bell Atlantic's Cellular Contributions and PCS
Contributions and attributable to periods prior to the Cellular
Closing and the PCS Closing, respectively (excluding Cellco
Assumed Liabilities and contractual obligations of Bell
Atlantic's Cellular Contributions under all contracts entered
into in the ordinary course of business but related to periods
subsequent to the Cellular Closing Date), including without
limitation (i) claims such as business torts, breach of contract
claims, product liability claims and personal injury or fraud;
provided, however, that Bell Atlantic shall have no liability
under this Section 8.1 (other than liability for Bell Atlantic's
breach of any representation and warranty herein as to title to
Bell Atlantic's Cellular Contributions and PCSCO Contributions)
unless and until the aggregate of all Losses recoverable by the
Indemnified Persons exceeds $15,000,000 ("Bell Atlantic's Minimum
Amount"), in which event Bell Atlantic shall be liable for all
such Losses in excess of Bell Atlantic's Minimum Amount.
8.2 Indemnification by NYNEX. Except as otherwise
expressly provided in this Article VIII, NYNEX shall defend,
indemnify and hold harmless the Indemnified Persons, and shall
reimburse the Indemnified Persons for, from and against all
Losses imposed on or incurred by the Indemnified Persons,
directly or indirectly (including without limitation diminution
in value of an equity interest), relating to, resulting from or
arising out of (a) Subject to the limitations period set forth in
Section 10.1, any inaccuracy in any respect in any representation
or warranty of NYNEX herein (other than the representations and
warranties contained in Section 4.14) or in any certificate or
other document delivered or to be delivered pursuant hereto,
whether or not the Indemnified Persons relied thereon; or (b) any
liability or obligation of any nature (known or unknown,
absolute, accrued, contingent or otherwise) related to NYNEX's
Cellular Contributions and PCS Contributions and attributable to
periods prior to the Cellular Closing and the PCS Closing,
respectively (excluding Cellco Assumed Liabilities and
contractual obligations of NYNEX's Cellular Contributions under
all contracts entered into in the ordinary course of business but
<PAGE>
related to periods subsequent to the Cellular Closing Date),
including without limitation (i) claims such as business torts,
breach of contract claims, product liability claims and personal
injury or fraud; provided, however, that NYNEX shall have no
liability under this Section 8.2 (other than liability for
NYNEX's breach of any representation and warranty herein as to
title to NYNEX's Cellular Contributions or PCS Contributions)
unless and until the aggregate of all Losses recoverable by the
Indemnified Persons exceeds $10,000,000 ("NYNEX's Minimum
Amount"), in which event NYNEX shall be liable for all such
Losses in excess of NYNEX's Minimum Amount.
8.3 Notice and Defense of Third Party Claims. If any
action, claim or proceeding shall be brought or asserted under
this Article VIII against any Indemnified Person in respect of
which from an indemnifying person or any successor thereto (the
"Indemnifying Person") is liable under this Article VIII, the
Indemnified Person shall give prompt written notice of such
action or claim to the Indemnifying Person who shall assume the
defense thereof, and the payment of all expenses; except that any
delay or failure to so notify the Indemnifying Person shall
relieve the Indemnifying Person of its obligations hereunder only
to the extent, if at all, that it is prejudiced by reason of such
delay or failure. The Indemnified Person shall have the right to
employ one separate counsel per jurisdiction in any of the
foregoing actions, claims or proceedings and to participate in,
but not control, the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Indemnified Person
unless both the Indemnified Person and the Indemnifying Person
are named as parties and the Indemnified Person shall in good
faith determine that representation by the same counsel is
inappropriate. In the event that the Indemnifying Person, within
ten (10) days after notice of any such action or claim, fails to
assume the defense thereof, the Indemnified Person shall have the
right to undertake the defense, compromise or settlement of such
action, claim or proceeding for the account of the Indemnifying
Person, subject to the right of the Indemnifying Person, if the
Indemnifying Party has acknowledged its liability or has been
determined to be liable hereunder, to assume the defense of such
action, claim or proceeding with counsel reasonably satisfactory
to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Anything in this
Article VIII to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior written
consent, settle or compromise any action or claim or consent to
the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the
Indemnifying Person. If the Indemnifying Party has acknowledged
its liability or has been determined to be liable hereunder, the
Indemnifying Person may, without the Indemnified Person's prior
written consent, settle or compromise any such action, claim or
proceeding or consent to entry of any judgment with respect to
<PAGE>
any such action or claim that requires solely the payment of
money damages by the Indemnifying Person and that includes as an
unconditional term thereof the release by the claimant or the
plaintiff of the Indemnified Person from all liability in respect
of such action, claim or proceeding. As a condition to asserting
any rights under this Article VIII, each of Indemnified Persons
must appoint NYNEX as its sole agent for all matters relating to
any claim for indemnity from NYNEX and Bell Atlantic as its sole
agent for all matters relating to any claim for indemnity from
Bell Atlantic.
8.4 Tax Indemnification (a) Each of the Parties and
the Partners shall be individually responsible for, will pay or
cause to be paid, and will individually indemnify and hold
harmless Cellco, PCSCO and/or the other Party and the other
Partners from and against any and all Taxes arising from each of
the following:
(i) any and all Taxes with respect to any taxable
period of any Contributed Subsidiary or Contributed
Partnership (or any predecessor) ending on or before the
Cellular Closing Date;
(ii) any and all Taxes with respect to any taxable
period ending on or before the Cellular Closing Date
resulting from any Contributed Subsidiary having been (or
ceasing to be) included in any consolidated, combined or
unitary Tax Return that included such Contributed Subsidiary
(or any predecessor) for any such period (including any
liability for taxes resulting from a "deferred intercompany
transaction," within the meaning of Treasury Regulation
Section 1.1502-13(a)(2) (or any analogous or similar
provision under state, local or foreign law or regulation);
(iii) any and all Taxes arising from any member of a
consolidated, combined or unitary group of which the
Contributed Subsidiary (or any predecessor) is or was a
member on or prior to the Cellular Closing Date for which
the Controlled Subsidiary is liable pursuant to Treasury
Regulation Section 1.1502-6(a) or any analogous or similar
provision under state, local or foreign law or regulation;
(iv) any breach by such Party of any representation
or warranty of matters in Section 4.14.
(b) There shall be no limitations period with respect
to any indemnity in this Section 8.4.
<PAGE>
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated
and the Transactions may be abandoned at any time prior to the
Cellular Closing without liability on the part of either Party,
other than as provided in Section 9.1(d):
(a) By the mutual written consent of each of the
Parties;
(b) By either NYNEX or Bell Atlantic if the Cellular
Closing has not occurred prior to December 31, 1995, provided
that the right to terminate this Agreement under this Section
9.1(b) shall not be available to a Party whose failure to fulfill
any obligation under this Agreement has been the cause of, or
results in, the failure of the Cellular Closing to have occurred
within such period;
(c) By either NYNEX or Bell Atlantic if the other
Party is (i) unable to contribute interests in Systems (or in the
case of Systems that are under contract but not owned,
substantially equivalent POPs) at the Cellular Closing having a
number of POPs equal to or greater than 90% of the POPs
represented by all Systems (other than Saleable Systems and the
Springwich Interests) listed under such Party's name on Schedule
3.2 or (ii) prohibited by an order or injunction (other than an
order or injunction on a temporary or preliminary basis) of a
court of competent jurisdiction from making such contribution
(including orders of the FCC denying the renewal of licenses for
operation) and all means of appeal and all appeals from such
order or injunction have been finally exhausted;
(d) By either of NYNEX or Bell Atlantic if on the
Cellular Closing Date or at any time prior thereto, (i) the
aggregate amount which NYNEX would reasonably be expected to be
required to pay pursuant to Sections 8.2 and/or 8.4 would exceed
$400,000,000 or (ii) the aggregate amount which Bell Atlantic
would reasonably be expected to be required to pay pursuant to
Sections 8.1 and/or 8.4 would exceed $600,000,000; provided,
however, that if this Agreement is terminated pursuant to this
Section 9.1(d) by the Party whose liability exceeds the specified
amount, such Party shall pay the other Party the sum of
$20,000,000.
(e) By either NYNEX or Bell Atlantic if at the
Cellular Closing the other Party's Contribution includes
interests in Systems held by Contributed Subsidiaries, which
Systems represent more than 20% of the Owned POPs of such Party
and its Affiliates set forth on Schedule 3.2.
<PAGE>
(f) By either NYNEX or Bell Atlantic if, at December
31, 1995, the agreement described in Section 5.6 shall not have
been reached.
9.2 Effect of Termination. If termination of this
Agreement pursuant to Section 9.1(b) results from the failure to
satisfy the condition set forth in either Section 7.2(a) or
7.3(a), the Party whose representations and warranties were
untrue shall not be relieved of any liability. Each Party's
right to terminate this Agreement and its obligation to perform
hereunder is limited to the specific circumstances described in
Section 9.1. In addition to the above, if this Agreement is
terminated under any of the circumstances described in
Section 9.1 at any time after the PCS Closing Date, PCSCO shall
distribute the PCS licenses in accordance with the PCS
Partnership Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations, Warranties and
Agreements. The representations and warranties and agreements
contained herein shall survive for two (2) years after the
Cellular Closing Date; provided, however, that the
representations and warranties set forth in Section 4.1, 4.2(a),
4.5, 4.9, 4.14 and 4.16 shall survive beyond such period.
10.2 Waiver and Amendment. This Agreement may be
amended or supplemented, and any provision of this Agreement may
be waived by the Party which is entitled to the benefits hereof,
at any time. No waiver, amendment or supplement shall be
effective unless in writing and signed by the Party or Parties
sought to be bound thereby. The Parties expressly agree and
acknowledge that they shall not rely on any purported oral
change, waiver, discharge, modification or termination and they
hereby request that any court disregard (to the fullest extent
permitted by law) any evidence sought to be introduced by either
Party as to the terms of any such oral change, waiver, discharge,
modification or termination.
10.3 APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
10.4 Interpretation. The descriptive headings
contained in this Agreement are for convenience and reference
only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
10.5 Notices. Each Party shall promptly give written
notice to the other Party upon becoming aware of the occurrence
or, to its knowledge, a pending or threatened occurrence, of any
event which would cause or constitute a breach of any of its
representations, warranties or covenants contained or referenced
in this Agreement and will use its reasonable efforts to prevent
or promptly remedy the same. All notices and other
communications hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, sent
by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telex or other electronic
transmission service to the appropriate address or number as set
forth below, addressed as follows:
If to NYNEX:
NYNEX Mobile Communications Company
2000 Corporate Drive
Orangeburg, New York 10962
Attn.: Alfred F. Boschulte, President
Telecopy No.: (914) 365-9046
with a copy to:
NYNEX Network Systems Company
4 West Red Oak Lane
White Plains, New York 10604
Attn.: Senior Vice President and General Counsel
Telecopy No.: (914) 644-7966
If to Bell Atlantic:
Bell Atlantic Corporation
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attn.: Lawrence T. Babbio, Jr.
Executive Vice President and Chief Operating
Officer
Telecopy No.: (215) 557-7214
with a copy to:
Bell Atlantic Corporation
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attn.: Stephen B. Heimann
Telecopy No.: (215) 561-9568
or to such other address as any party may have furnished to the
other parties in writing in accordance with this Section 10.5.
<PAGE>
10.6 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one
agreement.
10.7 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
10.8 Parties in Interest; Assignment. Except as
otherwise specifically set forth in this Agreement, this
Agreement is binding upon and is solely for the benefit of the
Parties and their respective successors, legal representatives
and permitted assigns. Bell Atlantic and NYNEX shall have the
right to assign any of their respective rights or delegate any of
their respective obligations to a wholly-owned Affiliate thereof;
provided, however, that the assigning party shall remain liable
for the performance thereof by such Affiliate. Any purported
assignment not permitted by this Section 10.8 shall be null, void
and of no effect.
10.9 Publicity. So long as this Agreement is in
effect, each of NYNEX and Bell Atlantic agree to consult with the
other in issuing any press release or otherwise making any public
statement with respect to the Transactions or the other Party;
and neither Bell Atlantic nor NYNEX will issue any press release
or make any such public statement prior to such consultation and
giving the other a reasonable opportunity to review and comment
on any such proposed press release or public statement, except as
may be required by law.
10.10 No Third Party Beneficiaries. Nothing
contained in this Agreement is intended to or shall confer upon
any person other than the Parties, PCSCO, Cellco and any
Indemnified Person any rights or remedies hereunder.
<PAGE>
10.11 Confidentiality. The Parties acknowledge that
information supplied to one another in connection with the
consummation of the transactions contemplated hereby is subject
to the terms and provisions of the Confidentiality Agreement
dated May 11, 1994 between the Parties.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
BELL ATLANTIC CORPORATION
By: /s/ Lawrence T. Babbio, Jr.
_______________________________
Name: Lawrence T. Babbio, Jr.
_______________________________
Title: Executive Vice President
& Chief Operating Officer
_______________________________
NYNEX CORPORATION
By: /s/ Frederic V. Salerno
___________________________________
Name: Frederic V. Salerno
___________________________________
Title: Vice Chairman,
Finance & Business Development
___________________________________
EXHIBIT A
to Joint Venture
Formation Agreement
Language in { . . .} in PCS Agreement only
Language in < . . .> in Cellco Agreement only
________________________________________________
PARTNERSHIP AGREEMENT
OF
{PCSCO PARTNERSHIP}
<CELLCO PARTNERSHIP>
Dated as of , 1994
________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.
DEFINITIONS . . . . . . . . . . . . . . 1
1.1. Act. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Adjusted Capital Account . . . . . . . . . . . . . . 1
1.3. Adjusted Capital Account Deficit . . . . . . . . . . 1
1.4. Adjustment Amount. . . . . . . . . . . . . . . . . . 1
1.5. Affiliate . . . . . . . . . . . . . . . . . . . . . 1
1.6. Affiliated Entity. . . . . . . . . . . . . . . . . . 2
1.7. Agreed Value . . . . . . . . . . . . . . . . . . . . 2
1.8. Agreement. . . . . . . . . . . . . . . . . . . . . . 4
{1.9. Bid Price . . . . . . . . . . . . . . . . . . . . . 4
1.10. Bell Atlantic . . . . . . . . . . . . . . . . . . . 4
1.11. Business Plan . . . . . . . . . . . . . . . . . . . 4
1.12. Capital Accounts. . . . . . . . . . . . . . . . . . 4
1.13. Capital Call. . . . . . . . . . . . . . . . . . . . 4
1.14. Cellular Business . . . . . . . . . . . . . . . . . 4
1.15. Change of Control . . . . . . . . . . . . . . . . . 4
1.16. Code. . . . . . . . . . . . . . . . . . . . . . . . 4
1.17. Delinquent Partner. . . . . . . . . . . . . . . . . 4
1.18. Depreciation. . . . . . . . . . . . . . . . . . . . 4
1.19. Designated MTAs/BTAs. . . . . . . . . . . . . . . . 5
1.20. Dissolution Event . . . . . . . . . . . . . . . . . 5
1.21. Event of Bankruptcy . . . . . . . . . . . . . . . . 5
1.22. Executive Committee . . . . . . . . . . . . . . . . 5
1.23. FCC . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24. Formation Agreement . . . . . . . . . . . . . . . . 5
1.25. GAAP. . . . . . . . . . . . . . . . . . . . . . . . 5
1.26. Default Interest Rate . . . . . . . . . . . . . . . 5
1.27. Liquidating Partner . . . . . . . . . . . . . . . . 5
1.28. Majority Vote . . . . . . . . . . . . . . . . . . . 6
<1.29. Management Co. . . . . . . . . . . . . . . . . . . 6
1.30. MFJ . . . . . . . . . . . . . . . . . . . . . . . . 6
{1.31. MTA. . . . . . . . . . . . . . . . . . . . . . . . 6
1.32. Nondeductible Expenditure . . . . . . . . . . . . . 6
1.33. Nondelinquent Partner . . . . . . . . . . . . . . . 6
1.34. Nonrecourse Deductions. . . . . . . . . . . . . . . 6
1.35. NYNEX . . . . . . . . . . . . . . . . . . . . . . . 6
1.36. Other Partnership . . . . . . . . . . . . . . . . . 6
1.37. Paging Business . . . . . . . . . . . . . . . . . . 6
1.38. Partner . . . . . . . . . . . . . . . . . . . . . . 6
1.39. Partner Candidate . . . . . . . . . . . . . . . . . 6
1.40. Partner Nonrecourse Debt Minimum Gain . . . . . . . 6
1.41. Partner Nonrecourse Debt. . . . . . . . . . . . . . 6
1.42. Partner Nonrecourse Deductions. . . . . . . . . . . 7
1.43. Partner Note. . . . . . . . . . . . . . . . . . . . 7
1.44. Partnership . . . . . . . . . . . . . . . . . . . . 7
1.45. Partnership Interest. . . . . . . . . . . . . . . . 7
1.46. Partnership Minimum Gain. . . . . . . . . . . . . . 7
<PAGE>
1.47. PCS Business. . . . . . . . . . . . . . . . . . . . 7
1.48. PCS License . . . . . . . . . . . . . . . . . . . . 7
1.49. Percentage Interest . . . . . . . . . . . . . . . . 7
1.50. Profits and Losses. . . . . . . . . . . . . . . . . 7
1.51. Regulations . . . . . . . . . . . . . . . . . . . . 9
1.52. Specified Account Value . . . . . . . . . . . . . . 9
1.53. Supermajority Vote. . . . . . . . . . . . . . . . . 9
1.54. Tax Matters Partner . . . . . . . . . . . . . . . . 9
1.55. Taxes . . . . . . . . . . . . . . . . . . . . . . . 9
1.56. Transfer. . . . . . . . . . . . . . . . . . . . . . 9
1.57. Wireless Business . . . . . . . . . . . . . . . . . 9
ARTICLE 2.
ORGANIZATION . . . . . . . . . . . . . . 9
2.1. Formation. . . . . . . . . . . . . . . . . . . . . . 9
2.2. Name.. . . . . . . . . . . . . . . . . . . . . . . . 9
2.3. Purpose. . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Place of Business. . . . . . . . . . . . . . . . . . 10
2.5. Term.. . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. Nature of Partners' Interests. . . . . . . . . . . . 11
2.7. Partition. . . . . . . . . . . . . . . . . . . . . . 11
2.8. Capacity of the Partners.. . . . . . . . . . . . . . 11
ARTICLE 3.
PARTNERSHIP OPPORTUNITIES;
NON-COMPETITION{; ACQUISITION OF LICENSES}. . . . . . . 11
3.1. Acquisition of Wireless Properties by
Partners. . . . . . . . . . . . . . . . . . . . . . . . 11
3.1.1. Non-10 MHz PCS Licenses . . . . . . . . . . 11
3.1.2. 10 MHz PCS Licenses . . . . . . . . . . . . 13
3.2. Agreement Not to Compete.. . . . . . . . . . . . . . 13
3.3. Enforceability and Enforcement.. . . . . . . . . . . 13
3.4. Exceptions to Sections 3.1 and 3.2.. . . . . . . . . 14
3.5. Activities of the Partners . . . . . . . . . . . . . 17
3.6. Provision of Services to Telephone
Companies.. . . . . . . . . . . . . . . . . . . . . . . 17
3.7. Termination of Formation Agreement . . . . . . . . . 17
{3.8. Determination of Designated MTAs/BTAs.. . . . . . . 17
ARTICLE 4.
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS . . . . . . . 17
4.1. Initial Capital Contributions. . . . . . . . . . . . 17
4.2. Additional Capital Calls.. . . . . . . . . . . . . . 17
4.3. Failure to Pay a Capital Call. . . . . . . . . . . . 18
4.4. Capital Accounts.. . . . . . . . . . . . . . . . . . 19
ARTICLE 5.
MANAGEMENT OF THE PARTNERSHIP. . . . . . . . . . 21
5.1. Executive Committee. . . . . . . . . . . . . . . . . 21
5.1.1. Powers. . . . . . . . . . . . . . . . . . 21
5.1.2. Number and Term of Office.. . . . . . . . 21
5.1.3. Resignations. . . . . . . . . . . . . . . 21
5.1.4. Place of Meeting. . . . . . . . . . . . . 22
<PAGE>
5.1.5. Regular Meetings. . . . . . . . . . . . . 22
5.1.6. Special Meetings. . . . . . . . . . . . . 22
5.1.7. Voting. . . . . . . . . . . . . . . . . . 22
5.1.8. Manner of Acting and
Adjournment. . . . . . . . . . . . . . . . . . . 23
5.1.9. Actions Requiring Supermajority
Vote.. . . . . . . . . . . . . . . . . . . . . . 23
5.1.10. Affiliated Transactions. . . . . . . . . 24
5.1.11. Other Actions Requiring
Executive Committee Approval.. . . . . . . . . . 24
5.1.12. Business Plan. . . . . . . . . . . . . . 25
5.1.13. Deadlocks. . . . . . . . . . . . . . . . 26
5.1.14. Action Without Meeting.. . . . . . . . . 27
5.2. Effect of Section 1509 of the Act. . . . . . . . . . 27
5.3. Indemnification of Partners, Executive
Committee, Officers and Others. . . . . . . . . . . . . 27
5.3.1. In General. . . . . . . . . . . . . . . . 27
5.3.2. Reliance on Provisions. . . . . . . . . . 28
5.3.3. Insurance.. . . . . . . . . . . . . . . . 28
5.4. Partner Compensation; Reimbursement.. . . . . . . . 29
5.5. Taxes and Charges; Governmental Rules.. . . . . . . 29
5.6. Further Assurances. . . . . . . . . . . . . . . . . 29
5.7. Partnership Services to Partners.. . . . . . . . . . 29
5.7.1. Support for International Operations . . . . . . . 29
5.7.2. Costs . . . . . . . . . . . . . . . . . . . 30
5.7.3. Confidentiality . . . . . . . . . . . . . . 30
5.7.4. Conflicts . . . . . . . . . . . . . . . . . 31
ARTICLE 6.
ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS . . . . . 31
6.1. General Allocation Rule. . . . . . . . . . . . . . . 31
6.2. Special Allocations. . . . . . . . . . . . . . . . . 31
6.2.1. Minimum Gain Chargeback . . . . . . . . . 31
6.2.2. Partner Minimum Gain
Chargeback . . . . . . . . . . . . . . . . . . . 32
6.2.3. Qualified Income Offset.. . . . . . . . . 32
6.2.4. Nonrecourse Deductions. . . . . . . . . . 32
6.2.5. Partner Nonrecourse Deductions. . . . . . 32
6.2.6. Certain Section 754
Adjustments. . . . . . . . . . . . . . . . . . . 33
6.2.7. Indemnity Payments. . . . . . . . . . . . 33
6.3. Curative Allocations . . . . . . . . . . . . . . . . 34
6.4. Other Allocation Rules. . . . . . . . . . . . . . . 34
6.4.1. Allocations When Percentage
Interests Change. . . . . . . . . . . . . . . . 34
6.4.2. Allocation of Particular Items. . . . . . 34
6.4.3. Tax Reporting . . . . . . . . . . . . . . 35
6.4.4. Profit Shares . . . . . . . . . . . . . . 35
6.4.5. Book Items Used in Special
Allocations. . . . . . . . . . . . . . . . . . . 35
6.5. Tax Allocations; Code Section 704(c). . . . . . . . 36
6.5.1. Generally.. . . . . . . . . . . . . . . . 36
<PAGE>
6.5.2. Contributed Property. . . . . . . . . . . 36
6.5.3. Adjustments to Agreed Value . . . . . . . 36
6.5.4. Elections . . . . . . . . . . . . . . . . 36
6.6. Distributions. . . . . . . . . . . . . . . . . . . . 37
6.6.1. In General. . . . . . . . . . . . . . . . 37
6.6.2. Partner Loans.. . . . . . . . . . . . . . 37
6.6.3. Liquidating Distributions.. . . . . . . . 37
6.6.4. Amounts Withheld. . . . . . . . . . . . . 37
ARTICLE 7.
BOOKS AND RECORDS. . . . . . . . . . . . . 37
7.1. Accounting.. . . . . . . . . . . . . . . . . . . . . 37
7.2. Fiscal Year. . . . . . . . . . . . . . . . . . . . . 38
7.3. Statements and Reports.. . . . . . . . . . . . . . . 38
7.4. Inspection.. . . . . . . . . . . . . . . . . . . . . 38
7.5. Certain Tax Matters. . . . . . . . . . . . . . . . . 39
7.5.1. Preparation of Tax Returns. . . . . . . . 39
7.5.2. Tax Elections.. . . . . . . . . . . . . . 39
7.5.3. Tax Controversies.. . . . . . . . . . . . 39
7.6. Bank Accounts. . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8.
TRANSFER OF PARTNERSHIP INTERESTS; CHANGE OF
CONTROL; ADDITIONAL PARTNERS; CONVERSION TO CORPORATE FORM. . . 40
8.1. Restrictions on Transfer of Interests. . . . . . . . 40
8.2. Permitted Transfers. . . . . . . . . . . . . . . . . 40
8.3. Right of First Refusal.. . . . . . . . . . . . . . . 40
8.4. Effective Transfer.. . . . . . . . . . . . . . . . . 42
8.5. Changes of Control.. . . . . . . . . . . . . . . . . 43
8.6. Additional Partners. . . . . . . . . . . . . . . . . 46
8.7. Conversion to Corporate Form.. . . . . . . . . . . . 47
8.8. Covenant Not to Withdraw or Dissolve . . . . . . . . 49
8.9. Consequences of Breaches of Covenant.. . . . . . . . 49
8.9.1. Breach Payments.. . . . . . . . . . . . . . 50
8.9.2. No Bonding. . . . . . . . . . . . . . . . . 51
ARTICLE 9.
CONFIDENTIALITY . . . . . . . . . . . . . 51
9.1. Maintenance of Confidentiality.. . . . . . . . . . . 51
9.2. Permitted Disclosures. . . . . . . . . . . . . . . . 51
ARTICLE 10.
DISSOLUTION AND LIQUIDATION . . . . . . . . . . 52
10.1. Dissolution Generally.. . . . . . . . . . . . . . . 52
10.2. Liquidation . . . . . . . . . . . . . . . . . . . . 52
10.3. Distribution in Trust . . . . . . . . . . . . . . . 54
10.4. Rights of Partners. . . . . . . . . . . . . . . . . 55
10.5. Compliance with Timing Requirements of
Regulations. . . . . . . . . . . . . . . . . . . . . . 55
10.6. Non-Dissolving Code Section 708(b)
Terminations. . . . . . . . . . . . . . . . . . . . . . 55
<PAGE>
10.7. Allocations during the Period of
Liquidation . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 11.
MISCELLANEOUS PROVISIONS . . . . . . . . . . . 56
11.1. Further Assurances. . . . . . . . . . . . . . . . . 56
11.2. Assignment. . . . . . . . . . . . . . . . . . . . . 56
11.3. Breach; Equitable Relief. . . . . . . . . . . . . . 56
11.4. Amendment.. . . . . . . . . . . . . . . . . . . . . 56
11.5. Waiver. . . . . . . . . . . . . . . . . . . . . . . 57
11.6. Severability. . . . . . . . . . . . . . . . . . . . 57
11.7. Construction. . . . . . . . . . . . . . . . . . . . 57
11.8. Governing Law.. . . . . . . . . . . . . . . . . . . 57
11.9. Attorneys' Fees.. . . . . . . . . . . . . . . . . . 57
11.10. Modification of Final Judgment . . . . . . . . . . 58
11.11. Availability of Documents. . . . . . . . . . . . . 59
11.12. Notices. . . . . . . . . . . . . . . . . . . . . . 59
11.13. Headings and Section References. . . . . . . . . . 60
11.14. Entire Agreement.. . . . . . . . . . . . . . . . . 60
11.15. Disclaimer of Agency, etc. . . . . . . . . . . . . 60
11.16. Publicity. . . . . . . . . . . . . . . . . . . . . 61
11.17. Tax Matters Partner. . . . . . . . . . . . . . . . 61
11.18. Counterparts . . . . . . . . . . . . . . . . . . . 61
<PAGE>
Language in { . . .} in PCS Agreement only
Language in < . . .> in Cellco Agreement only
PARTNERSHIP AGREEMENT
OF
{PCSCO PARTNERSHIP}
CELLCO PARTNERSHIP
This Partnership Agreement dated as of ___________, 1994, is
made between [a direct or indirect wholly-owned subsidiary or
partnership of Bell Atlantic Corporation] (Bell Atlantic), {and}
[a direct or indirect wholly-owned subsidiary or partnership of
NYNEX Corporation] (NYNEX), <and CELLCO MANAGEMENT CORPORATION, a
Delaware corporation (Management Co.),> pursuant to the
provisions of the Delaware Uniform Partnership Law.
In consideration of the mutual agreements hereinafter set
forth, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
The following terms when used in this Agreement will have the
respective meanings set forth below:
1.1. Act means the Delaware Uniform Partnership Law, 6 Del.
Code Section 1501 et seq.
1.2. Adjusted Capital Account means, with respect to a
Partner, an account with a balance (which may be a deficit
balance) equal to the balance in such Partner's Capital Account
as of the end of the relevant fiscal year, after giving effect to
the following adjustments: (i) credit to such Capital Account
any amounts which such Partner is obligated to restore pursuant
to any provision of this Agreement or is deemed to be obligated
to restore to the Partnership pursuant to Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such Capital
Account such Partner's share of items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing
definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
1.3. Adjusted Capital Account Deficit means, with respect to
a Partner, the deficit balance, if any, in such Partner's
Adjusted Capital Account.
1.4. Adjustment Amount has the meaning specified in the
definition of Specified Account Value below.
<PAGE>
1.5. Affiliate of a person shall mean any person directly or
indirectly controlling, controlled by, or under common control
with, such other person; person shall mean an individual, a
corporation, a limited or an unlimited liability company, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof; and control shall mean (i)
the ownership of 50% or more, or in the case of references to
Affiliates in Article 8 hereof more than 50%, of the voting
securities or other voting interests of another person, or (ii)
the possession, directly or indirectly, of the power to direct,
or cause the direction of the management and policies of such
person, whether through the ownership of voting shares, by
contract or otherwise. The foregoing notwithstanding, the
Partnership is not an Affiliate of NYNEX.
1.6. Affiliated Entity means with respect to a Partner, the
person in the Other Partnership which is an Affiliate of such
Partner and which has the same Percentage Interest.
1.7. Agreed Value means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(a) The initial Agreed Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market
value of such asset;
(b) The Agreed Values of all Partnership assets shall be
adjusted to equal their respective gross fair market
values (taking Code Section 7701(g) into account) as of
the following times: (i) the acquisition of an
additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis
capital contribution; (ii) the distribution by the
Partnership to a Partner of more than a de minimis amount
of Partnership property as consideration for an interest
in the Partnership; (iii) the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); and (iv) at such other times as the
Tax Matters Partner shall reasonably determine necessary
or advisable in order to comply with Regulations Sections
1.704-1(b) and 1.704-2; provided that the adjustments
described in clauses (i) and (ii) of this paragraph shall
be made only if the Tax Matters Partner reasonably
determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of
the Partners in the Partnership;
(c) The Agreed Value of any Partnership asset distributed to
any Partner shall be the gross fair market value (taking
Code Section 7701(g) into account) of such asset on the
date of distribution; and
<PAGE>
(d) The Agreed Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code
Section 732(d), Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are
taken into account in determining capital accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Agreed Values shall not be
adjusted pursuant to this clause (d) to the extent that
an adjustment pursuant to clause (b) hereof is made in
connection with a transaction that would otherwise result
in an adjustment pursuant to this clause (d).
The Agreed Value of any interest in another partnership held
by the Partnership shall be determined as provided above, except
that (i) at any time at which such Agreed Value is determined
pursuant to clause (a), (b) or (c) above, it shall be increased
by the Partnership's share of the liabilities of such other
partnership under Code Section 752 at such time and (ii) Agreed
Value shall be increased or decreased to reflect subsequent
increases or decreases in the Partnership's share of such
liabilities or increases in the Partnership's individual
liabilities by reason of its assumption of liabilities of such
other partnership or decreases in the Partnership's individual
liabilities by reason of such other partnership's assumption
thereof to the same extent and at the same time that it would be
so increased or decreased if it were actually the federal income
tax basis of the Partnership's interest in such other
partnership.
If the Agreed Value of an asset has been determined or
adjusted pursuant to this definition of Agreed Value, such Agreed
Value shall thereafter be adjusted by the Depreciation with
respect to such asset taken into account in computing Profits and
Losses.
Determinations of gross fair market value for purposes of this
definition of Agreed Value shall be made as follows: (i) in
situations described in paragraphs (a), (b)(i), (b)(ii) and (c)
above by agreement between the Tax Matters Partner and the
Partner making the contribution or receiving the distribution as
the case may be, provided, however that if the Tax Matters
Partner (or any Affiliate of the Tax Matters Partner) is the
contributor or the distributee, such determination shall require
agreement between the contributor or the distributor and the
Executive Committee; and (ii) in other situations by the
Executive Committee. <Notwithstanding the foregoing, the sum of
each Partner's Adjustment Amount and the initial Agreed Value of
the assets contributed by such Partner pursuant to Section 4.1
hereof shall be in the ratios (after taking into account the
amount of any liabilities assumed by the Partnership or which are
secured by any property contributed by such Partner to the
<PAGE>
Partnership) of their initial Percentage Interests as set forth
in Section 4.1.>
1.8. Agreement means this Partnership Agreement, as it may be
amended or restated from time to time.
{1.9. Bid Price means the amount of any payment made, or
offered to be made, to the FCC or other governmental agency as a
condition to or in connection with the application for or award
of a PCS License.}
1.10. Bell Atlantic has the meaning set forth in the
introductory section of this Agreement.
1.11. Business Plan has the meaning set forth in Section
5.1.12.
1.12. Capital Accounts mean the capital accounts maintained
with respect to Partnership Interests pursuant to Section 4.4
1.13. Capital Call means a request for additional
contributions of capital to the Partnership.
1.14. Cellular Business means the provision of any commercial
mobile radio services permitted pursuant to a license or licenses
issued under Subpart K of Part 22 of the FCC's rules, including
without limitation, public cellular radio telecommunications
service.
1.15. Change of Control has the meaning set forth in Section
8.5.
1.16. Code means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of
succeeding law).
1.17. Delinquent Partner with respect to a Capital Call means
a Partner who fails to pay its portion of such Capital Call at
the time and in the amount required under this Agreement.
1.18. Depreciation means, for each fiscal year or other
relevant period, an amount equal to the depreciation,
amortization or other cost recovery deduction allowable with
respect to an asset for such year or other relevant period,
except that if the Agreed Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning
of such year, Depreciation shall be an amount which bears the
same ratio to such beginning Agreed Value as the federal income
tax depreciation, amortization or other cost recovery deduction
for such year bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation,
amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such
<PAGE>
beginning Agreed Value using any reasonable method selected by
the Tax Matters Partner.
1.19. Designated MTAs/BTAs means the MTAs and BTAs designated
by the Executive Committee for development of the PCS Business.
1.20. Dissolution Event has the meaning set forth in Section
10.1.
1.21. Event of Bankruptcy means, with respect to any Partner
or the Partnership, any of the following:
(a) filing a voluntary petition in bankruptcy or for
reorganization or for the adoption of an arrangement
under the Bankruptcy Code as now or in the future
amended) or an admission seeking the relief therein
provided;
(b) making a general assignment for the benefit of creditors;
(c) consenting to the appointment of a receiver for all or a
substantial part of such person's property;
(d) in the case of the filing of an involuntary petition in
bankruptcy, an entry of an order for relief;
(e) the entry of a court order appointing a receiver or
trustee for all or a substantial part of such Person's
property without his consent; or
(f) the assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of
such Person's property.
1.22. Executive Committee means the Executive Committee of
the Partnership formed and acting pursuant to Section 5.1.
1.23. FCC means the United States Federal Communications
Commission.
1.24. Formation Agreement means the Joint Venture Formation
Agreement, dated as of June 29, 1994, between Bell Atlantic
Corporation and NYNEX Corporation.
1.25. GAAP means the generally accepted accounting principles
in the United States of America in effect from time to time.
1.26. Default Interest Rate means a rate of interest
comparable to that which is, at the time of issuance of the debt
security, charged on debt of comparable term to maturity to
issuers of comparable creditworthiness to the Partnership, plus
3%.
<PAGE>
1.27. Liquidating Partner has the meaning set forth in
Section 10.2.
1.28. Majority Vote has the meaning set forth in Section
5.1.8.
<1.29. Management Co. has the meaning set forth in the
introductory section of this Agreement.>
1.30. MFJ has the meaning set forth in Section 11.10.
{1.31. MTA means a Major Trading Area and BTA means a Basic
Trading Area, each as defined in FCC rules to be codified at 47
C.F.R. Section 24.13.}
1.32. Nondeductible Expenditure has the meaning specified
under the definition of Profits below.
1.33. Nondelinquent Partner means any Partner who is not a
Delinquent Partner.
1.34. Nonrecourse Deductions has the meaning set forth in
Regulations Section 1.704-2(b)(1). The amount and items of
Nonrecourse Deductions shall be determined in accordance with
Regulations Sections 1.704-2(c) and 1.704-2(j)(1).
1.35. NYNEX has the meaning set forth in the introductory
section of this Agreement.
1.36. Other Partnership means the general partnership (and
its successor entities) formed pursuant to the Partnership
Agreement entered into or to be entered into to form <PCSCO>
{CELLCO} as defined in the Formation Agreement.
1.37. Paging Business means the provision of any commercial
mobile radio services permitted pursuant to a license or licenses
issued under subpart G of Part 22 of the FCC's rules, including
without limitation public land mobile services and improved
mobile telephone services.
1.38. Partner means each of Bell Atlantic and NYNEX <and
Management Co.> and any other Person admitted as a Partner
pursuant to the terms of this Agreement.
1.39. Partner Candidate means any of the companies listed in
the initial Business Plan, and any wholly-owned person of any
such company. Any reference to Cellular Businesses of a Partner
Candidate shall mean Cellular Businesses (or interests therein)
owned, directly or indirectly, by the ultimate parent entity of
such Partner Candidate.
1.40. Partner Nonrecourse Debt Minimum Gain has the meaning
set forth in Regulations Section 1.704-2(i).
<PAGE>
1.41. Partner Nonrecourse Debt has the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.42. Partner Nonrecourse Deductions has the meaning set
forth in Regulations Section 1.704-2(i).
1.43. Partner Note has the meaning set forth in Section 4.4
hereof.
1.44. Partnership means the partnership established pursuant
to this Agreement.
1.45. Partnership Interest means the entire ownership
interest of a Partner in the Partnership.
1.46. Partnership Minimum Gain has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
1.47. PCS Business means the provision of commercial mobile
radio service as contemplated by 47 CFR Section 20.9 pursuant to one or
more PCS Licenses.
1.48. PCS License means any license issued by the FCC
pursuant to Subparts D and E of Part 24 of the FCC's rules. A 10
MHz PCS License shall mean a PCS License with respect to no more
than 10 MHz.
1.49. Percentage Interest means initially, with respect to
any Partner, the Percentage Interest ascribed to such Partner in
Section 4.1 hereof. If an event described in clause (b)(i) or
(ii) of the definition of Agreed Value occurs, the Percentage
Interests shall be recalculated such that the Percentage Interest
of each Partner shall be equal to the ratio of such Partner's
Specified Account Value to the aggregate Specified Account Value
of all of the Partners, such Specified Account Values to be
determined after giving effect to the event or circumstance
giving rise to the recalculation and all contributions,
distributions, and allocations for all periods ending on or prior
to the date of recalculation; provided that if any Partner's
Specified Account Value is zero or less, the Percentage Interests
shall be recalculated by the Executive Committee based upon the
relative economic interests of the Partners immediately after
such event. In the event of any transfer of an interest by a
Partner in accordance with the provisions of this Agreement, the
transferee of such interest shall succeed to the Percentage
Interest of his transferor to the extent it relates to the
transferred interest.
1.50. Profits and Losses means, for each fiscal year or other
relevant period, an amount equal to the Partnership's taxable
income or loss for such year or other relevant period, determined
in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated
<PAGE>
separately pursuant to Code Section 703(a)(1) shall be included
in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition
shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i) (Nondeductible Expenditures), and
not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be subtracted
from such taxable income or loss;
(c) If the Agreed Value of any Partnership asset is adjusted
pursuant to clause (b) or clause (c) of the definition of
Agreed Value hereunder, the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing
Profits or Losses;
(d) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss
is recognized for federal income tax purposes shall be
computed by reference to the Agreed Value of the property
disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Agreed Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other relevant
period;
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) is
required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's
interest in the Partnership, the amount of such
adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for
purposes of computing Profits or Losses; and
(g) Notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to
Section 6.2 or Section 6.3 hereof shall not be taken into
account in computing Profits or Losses.
<PAGE>
1.51. Regulations means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of
succeeding regulations).
1.52. Specified Account Value means with respect to any
Partner at any given time, its Capital Account balance at such
time, as such Account would be increased if all Partner Notes
were paid in full immediately prior to such determination and
further increased by an amount (the Adjustment Amount) for
Saleable Systems (as defined in the Formation Agreement) of such
Partner equal to the difference between (x) the number of Owned
POPs (as defined in the Formation Agreement) in such Saleable
System multiplied by the "Other POP Values" set forth for such
Party on Schedule 2.11 to the Formation Agreement and (y) the Net
Proceeds (as defined in the Formation Agreement) in respect of
such Saleable Systems. The Adjustment Amount for the Springwich
Systems (as defined in the Formation Agreement) shall be as set
forth in the Letter Agreement (as defined in the Formation
Agreement).
1.53. Supermajority Vote has the meaning set forth in Section
5.1.9.
1.54. Tax Matters Partner has the meaning set forth in
Section 6231 of the Code.
1.55. Taxes has the meaning set forth in Section 4.14 of the
Formation Agreement.
1.56. Transfer has the meaning set forth in Section 8.1.
1.57. Wireless Business means the PCS Business, the Paging
Business and the Cellular Business, each conducted in the United
States of America, including without limitation all territories
and possessions thereof, but not including the delivery of video
or providing satellite or broadband microwave transmission
services.
1.58. As used in this Agreement, the terms listed on Annex A
shall have the respective meanings specified in the Sections
indicated therein.
ARTICLE 2.
ORGANIZATION
2.1. Formation. The Partners agree to, and hereby do, form a
general partnership pursuant to the provisions of the Act. The
Partnership Interests of the Partners in the Partnership, and the
rights and obligations of the Partners with respect thereto, are
subject to all of the terms and conditions of the Act except as
otherwise expressly set forth in this Agreement.
<PAGE>
2.2. Name. The business of the Partnership shall be carried
on under the name of <Cellco Partnership> {PCSCO Partnership} or
under such other name as the Partners may from time to time
designate. Such name shall be the exclusive property of the
Partnership, and no Partner shall have any right to use, and each
Partner agrees not to use, such name other than on behalf of the
Partnership except as may be permitted from time to time by the
Executive Committee.
2.3. Purpose. The purpose of the Partnership is to undertake
the following activities:
{(a) To acquire PCS Licenses in Designated MTAs/BTAs, and
potentially in other areas, that are complementary to the
Cellular Business currently conducted by the Partners
through their cellular subsidiaries, in accordance with
the eligibility and other requirements of FCC rules;
(b) If the Partnership acquires one or more PCS Licenses, to
build, own and operate a PCS network in such manner as
the Partnership may deem appropriate from time to time,
which may include, without limitation, through management
contracts and other relationships, with a view toward
operating such PCS Business and the Other Partnership's
Cellular Business and Paging Business network in a
unified Wireless Business presenting to network users a
seamless system of wireless communications services; and}
<(a) To acquire certain assets from the Partners in accordance
with the Formation Agreement, and from then forward to
own, build and operate such assets as a Cellular Business
and Paging Business network in such manner as the
Partnership may deem appropriate from time to time, which
may include, without limitation, through management
contracts and other relationships, with a view toward
operating Cellular Business and Paging Business with the
other Partnership's PCS network in a unified Wireless
Business presenting to network users a seamless system of
wireless communications services; and>
<(b)> {(c)} To conduct its business activities and operation
and to develop and implement its strategies in
cooperation with the Other Partnership.
2.4. Place of Business. The Partnership's principal place of
business will be at such location as the Executive Committee may
from time to time designate. The Partnership may have such other
or additional places of business or headquarters within or
outside the State of Delaware as the Executive Committee may from
time to time designate.
<PAGE>
2.5. Term. The term of the Partnership will commence as of
the date of this Agreement and will continue until the
Partnership is dissolved pursuant to Article 10.
2.6. Nature of Partners' Interests. The interests of the
Partners in the Partnership will be personal property for all
purposes. All property owned by the Partnership, whether real or
personal, tangible or intangible, will be owned by the
Partnership as an entity, and no Partner, individually, will have
any ownership of such property.
2.7. Partition. No Partner, nor any successor-in-interest to
such Partner, shall have the right, while this Agreement remains
in effect, to have the property of the Partnership partitioned,
or to file a complaint or institute any proceeding at law or in
equity to have the property of the Partnership partitioned, and
each Partner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
2.8. Capacity of the Partners. No Partner shall have any
authority to act for, or to assume any obligation or
responsibility on behalf of, any other Partner or the
Partnership, except as expressly provided in this Agreement or as
authorized by the Executive Committee.
ARTICLE 3.
PARTNERSHIP OPPORTUNITIES;
NON-COMPETITION{; ACQUISITION OF LICENSES}
3.1. Acquisition of Wireless Properties by Partners. No
Partner (or its Affiliate) shall bid on, acquire, or, directly or
indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or
financing of, or be connected as a partner, principal, agent,
representative, consultant or otherwise with, or use or permit
its name to be used in connection with, any business or
enterprise which engages in the bidding for or acquisition of,
any PCS License or Wireless Business except (i) through the
Partnership or (ii) in accordance with the provisions of Section
3.1.1 or 3.1.2.
3.1.1. Non-10 MHz PCS Licenses.
(a) No Partner nor any of its Affiliates shall bid, in the
FCC auctions for PCS Licenses, on any PCS License to use
more than 10 MHz in any license area unless either (i)
the Partnership has not determined to bid on a PCS
License for such area, or (ii) the Partnership has
entered a bid or bids for such License, but a third-party
bid has been entered which equals or exceeds the maximum
amount that the Partnership has determined to bid for
such License. In the circumstances described in clause
<PAGE>
(i), a Partner or its Affiliate may bid on such License
only if the representatives of such Partner voted in
favor of the Partnership's bidding in such area, and in
the circumstances described in clause (ii), a Partner or
its Affiliate may enter a higher bid only if the
representatives of such Partner voted in favor of the
Partnership's bidding at a higher level than the
established maximum bid. If the Partner or Affiliate
acquires such License, it shall comply with Section
3.1.1(c).
(b) If any Partner or its Affiliate wishes to acquire any
interest in any Wireless Business (including, without
limitation, any license to operate a Wireless Business
but excluding a 10 MHz PCS License), other than the
acquisition of PCS Licenses in the FCC Auctions, then
such Partner shall first propose to the Partnership that
the Partnership make such acquisition, and shall present
to the Partnership any opportunity that may have been
offered to such Partner or its Affiliate to make such
acquisition. If the Executive Committee by Majority Vote
does not approve the making of such acquisition by the
Partnership not later than 30 days after the Partner has
given notice to the Partnership of the opportunity and
the proposed material terms of the acquisition, and if
the representatives of such Partner voted in favor of
making such acquisition by the Partnership, then such
Partner or its Affiliate shall be free to make such
acquisition on terms no more favorable to the Partner or
its Affiliate than those described in the notice to the
Partnership, provided (i) that the Partner or its
Affiliate enters into a definitive agreement (subject
solely to obtaining the requisite regulatory approvals)
with respect thereto within 150 days after the Partner
gave notice to the Partnership of the opportunity and
(ii) that such Partner complies with Section 3.1.1(c).
(c) It shall be a condition to any acquisition by a Partner
or its Affiliate of any PCS License (other than a 10 MHz
PCS License) or other interest in any Wireless Business
that such Wireless Business shall offer to enter into an
affiliation agreement with the Partnership on terms and
conditions comparable to those which the Partnership
offers to other affiliated Wireless Businesses in similar
situations (or if no such agreement then exists, such
terms and conditions as are approved by the Executive
Committee by Majority Vote which terms and conditions
shall include a "most-favored nation" provision), under
which such Wireless Business will provide its services to
the public as an affiliate of the Partnership's business
(an Affiliation Agreement). The Partnership may waive
compliance with all or any part of this Section 3.1.1(c)
with respect to any transaction by majority vote of the
<PAGE>
Executive Committee (excluding the vote of the
representatives of the acquiring Partner) pursuant to
Section 5.1.10.
3.1.2. 10 MHz PCS Licenses. No Affiliate shall bid on or
acquire in the FCC auctions for PCS Licenses any PCS License to
use a 10 MHz PCS License unless the Affiliate is a landline
communications carrier (including without limitation a landline
cable company) and either (i) the Partnership has not determined
to bid on a 10 MHz PCS License for such area at least 30 days
before the date upon which prospective bidders are required to
register with the FCC to bid on such PCS License (the
Qualification Date), or (ii) the Partnership determined to bid on
a 10 MHz PCS License for an area at least 30 days before the
Qualification Date and has entered a bid or bids for such License
in such area, but a third-party bid has been entered which equals
or exceeds the maximum amount that the Partnership has determined
to bid for such License. Unless the Partnership has determined
to bid on a 10 MHz PCS License at least 30 days before the
Qualification Date therefor, the Partnership shall not bid on
such 10 MHz PCS License in the FCC auctions. In the event that
any acquisition by the Partnership of a 10 MHz PCS License from
third parties after the FCC auction for such license is not
approved by the Executive Committee by Majority Vote not later
than 30 days after the Partner has given notice to the
Partnership of the opportunity and the material terms of the
acquisition, then any one or more Affiliates of the Partner which
is a landline communications carrier (including without
limitation landline cable companies), may acquire such 10 MHz PCS
License on terms no more favorable to the Partner or its
Affiliate than those described in the notice to the Partnership,
provided that the Affiliate enters into a definitive agreement
(subject solely to obtaining the requisite regulatory approvals)
with respect thereto within 150 days after the Partner gave
notice to the Partnership of the opportunity.
3.2. Agreement Not to Compete. Each Partner agrees that for
so long as it holds any Partnership Interest and until the second
anniversary of the first date on which such Partner no longer
holds any Partnership Interest, neither such Partner nor any of
its Affiliates shall, without the prior written consent of the
Executive Committee by Majority Vote (excluding the competing
Partner) pursuant to Section 5.1.10, directly or indirectly, own,
manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be
connected as a partner, principal, agent, representative,
consultant or otherwise with, or use or permit its name or the
name of any of its Affiliates to be used in connection with, any
business or enterprise engaged in any Wireless Business.
<PAGE>
3.3. Enforceability and Enforcement.
(a) The Partners acknowledge and agree that the time, scope,
geographic area and other provisions of Sections 3.1 and
3.2 have been specifically negotiated by sophisticated
parties and specifically agree that such time, scope,
geographic area, and other provisions are reasonable
under the circumstances. The Partners agree that if,
despite this express agreement of the Partners, a court
should hold any portion of Section 3.1 or 3.2 to be
unenforceable for any reason, the maximum restrictions of
time, scope and geographic area reasonable under the
circumstances, as determined by the court, will be
substituted for the restrictions held to be
unenforceable.
(b) Each Partner agrees that the Partnership shall be
entitled to preliminary and permanent injunctive relief,
without the necessity of proving actual damages or
posting any bond or other security, as well as an
equitable accounting of all earnings, profits and other
benefits arising from any violation of Sections 3.1 and
3.2, which rights shall be cumulative and in addition to
any other rights or remedies to which the Partnership may
be entitled.
3.4. Exceptions to Sections 3.1 and 3.2. The restrictions
set forth in Sections 3.1 and 3.2 on the activities described
therein (Competitive Activity) shall not be construed to
prohibit:
(a) the acquisition or ownership of not more than five
percent of the aggregate voting power of the outstanding
capital stock of any corporation having a class of
securities registered pursuant to the Securities Exchange
Act of 1934;
(b) the acquisition (through merger, consolidation, purchase
of stock or assets, or otherwise) of a person or
business, or an interest in a person or business, which
engages (directly or indirectly through an Affiliate that
is controlled by such person) in any Competitive Activity
so long as the Competitive Activity accounts for less
than 40% of both (1) the revenues of such person or
business as set forth in the most recent available
audited financial statements of such person or business
as of the date of execution of the definitive agreement
providing for such acquisition, and (2) the value of such
person or business (as determined in good faith by the
acquiring Partner or Affiliate). The Partner and its
Affiliates acquiring such person or business may conduct
the acquired business; provided, however, that (i) the
business shall not engage in Competitive Activity in any
<PAGE>
geographic area in which it was not conducting such
Competitive Activity immediately prior to the date of
execution of the definitive agreement providing for such
acquisition, and (ii) such person or business shall offer
to enter into an Affiliation Agreement with the
Partnership. If the Competitive Activity accounts for
more than 30% of the revenues or value of such person or
business as described in the first sentence of this
paragraph (b), and if the Partnership and such person or
business have not entered into or agreed to enter into an
affiliation agreement, the Partner and its Affiliates
shall enter into a definitive agreement to sell the
Competitive Activity to a third person not later than the
consummation of the acquisition by the Partner or its
Affiliates of the person or business and shall consummate
such sale of the Competitive Activity not later than 180
days after consummation of such acquisition;
(c) the obtaining of the right to nominate or cause the
election of less than 20% of the members of the Board of
Directors of a corporation and any committee thereof,
provided that no employee of the Partner or its
Affiliates serves as an officer of such corporation;
(d) any activity of an Affiliate that is a landline
communications carrier (including without limitation
landline cable companies) in its service territory
required in accordance with all applicable laws,
regulations or orders, or any agreement with a regulatory
authority which agreement is existing as of the date
hereof.
(e) the limited use of radio spectrum by a landline
communications carrier (including without limitation
landline cable companies) for provision of "wireless
tails" or other similar services ancillary to land line
communications;
(f) the conduct of a Paging Business by a landline
communications carrier (including without limitation a
landline cable company) in its service area pursuant to
licenses issued under subpart G of Part 22 of the FCC's
rules and held by such carrier on the date hereof or, in
the case of such carriers subsequently acquired by the
Partner or its Affiliates, held by such carrier on the
date the acquisition of such carrier by the Partner or
its Affiliates is consummated.
(g) the provision of services to a holder of a PCS License or
a person conducting a Wireless Business;
(h) the acquisition, retention and disposition, in the
ordinary course of business, of debt obligations or
<PAGE>
engaging in equipment financing and sale-leaseback
arrangements, provided that such debt obligations or
financing arrangements entitle the holder or financier to
receive only interest or other returns that are fixed, or
vary by reference to an index or formula that is not
based on the value or results of operations of such
entity;
(i) the provision of improved mobile telephone services by a
landline communications carrier (including without
limitation a landline cable company) pursuant to Subpart
G of Part 22 of the FCC's rules;
(j) the acquisition of a PCS License or other interest in a
Wireless Business and the conduct of a Wireless Business
in the territory in which such business was in operation
at the time of acquisition by the Partner or its
Affiliate if the procedures set forth in Sections 3.1.1
or 3.1.2, as applicable, have been complied with;
(k) the purchase by a landline communications carrier
(including without limitation a landline cable company)
from any person of any services of the type provided by a
Wireless Business and the resale thereof in all or any
portion of the service territory of such carrier;
(l) the ownership of partnership interests in the Other
Partnership and all activities related thereto;
(m) the ownership and operation of the Systems and interests
in Wireless Businesses acquired after the date of
execution of the Formation Agreement but not treated as
an Acquired Entity subject to Section 2.8 of the
Formation Agreement which are not contributed to the
{Other} Partnership in accordance with the Formation
Agreement, provided that the non-contributing Partner or
its Affiliate shall comply with Section 3.1.1(c) as to
each such System and interest in a Wireless Business
which is a Managed System (as defined in the Formation
Agreement);
(n) the holding of an equity interest in a person that
engages in a Competitive Activity if the Partner or its
Affiliate has no responsibility or control over the
conduct of such Competitive Activity, does not permit its
name to be used in connection with such Competitive
Activity, and uses all reasonable efforts, including
voting its equity interest, to cause such person to cease
such Competitive Activity;
(o) the holding by NYNEX or an Affiliate of an equity
interest of not more than 50% in Upstate Cellular Network
provided that NYNEX or such Affiliate had no greater
<PAGE>
management authority with respect to such Network than it
has on the date of this Agreement;
(p) the provision by a Partner or any of its Affiliates of
limited two-way data communications ancillary to paging
services of the type widely available as of the date of
this Agreement;
{(q) the ownership and operation of the Systems and the
Acquired Entities prior to consummation of the Cellular
Closing under the Formation Agreement.}
3.5. Activities of the Partners. Except as expressly
provided in Section 3.1 and 3.2 hereof, each Partner and its
Affiliates may engage in or hold an interest in other business
ventures and activities of any nature, including, without
limitation, ventures and activities similar to those of the
Partnership, and neither the Partnership nor the other Partners
shall, by virtue of this Agreement, have any interest or rights
in or to such other ventures or business or any liability or
obligation with respect thereto.
3.6. Provision of Services to Telephone Companies. Subject
to existing partnership agreements and regulatory requirements,
the Partnership shall provide to any Affiliate of a Partner which
is a landline communications carrier (including landline cable
companies), such services provided by its Wireless Business
as such Affiliate (whether acting as a wholesaler or a retailer)
may request at the lowest rates made available from time to time
by the Partnership to other retailers of such services.
3.7. Termination of Formation Agreement. The provisions of
Article 3 shall cease to be of any effect if the Formation
Agreement is terminated without the Cellular Closing having
occurred.
{3.8. Determination of Designated MTAs/BTAs. The Partners
shall attempt to reach a consensus on designation of the
Designated MTAs/BTAs for which the Partnership will seek to
acquire PCS Licenses, and on the Bid Prices to be bid for, or
other acquisition prices to be paid for, such PCS Licenses. If
the Partners are unable to reach consensus, the Executive
Committee shall designate Designated MTAs/BTAs by Majority Vote.}
ARTICLE 4.
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
4.1. Initial Capital Contributions. Contemporaneously with
the execution hereof, the Partners have contributed to the
capital of the Partnership the cash and assets described in the
Formation Agreement, receipt of which is hereby acknowledged.
The Partners and the Partnership agree and acknowledge that
<PAGE>
immediately after the foregoing contribution, the initial
Percentage Interests of the Partners and the initial ratio of the
Specified Account Value of a Partner to all Partners shall be
{62.35%} <61.7265%> in the case of Bell Atlantic, and {37.65%}
<37.2735%> in the case of NYNEX <, and 1% in the case of
Management Co.>, in each case subject to adjustment in accordance
with the Formation Agreement prior to the Cellular Closing
thereunder.
4.2. Additional Capital Calls. The Partnership may, from
time to time, issue Capital Calls, requiring the Partners to make
additional contributions of capital to the Partnership in
proportion to their respective Percentage Interests. Capital
Calls specifically referred to in any annual budget included in
any Business Plan may be made by the chief executive officer of
the Partnership. Any Capital Call not so provided for must be
approved by the Executive Committee by Majority Vote.
4.3. Failure to Pay a Capital Call.
(a) If any Partner fails to make payment when due of all or
any portion of its share of a Capital Call, the secretary
of the Partnership shall give written notice of the
failure to such Partner, with a copy to all other
Partners. If the Partner fails to pay the amount due
within 10 days following receipt of notice, the secretary
shall promptly give notice of such failure to the other
Partners. At any time within 15 days following receipt
of such notice, then, unless the Nondelinquent Partners
elect to make capital contributions in accordance with
Section 4.3(b) hereof, (i) the amount contributed by each
Nondelinquent Partner pursuant to the Capital Call shall
be treated as a loan to the Partnership for a term to be
specified by such Non-Delinquent Partner, bearing
interest payable quarterly at the Default Interest Rate
and (ii) each Nondelinquent Partner may make an
additional loan to the Partnership for a term to be
specified by such Non-Delinquent Partner, also bearing
interest payable quarterly at the Default Interest Rate,
in an amount equal to all or any portion of the unpaid
contribution. If two or more Partners desire to provide
funds under clause (ii) of the preceding sentence, the
total amount of funds provided shall be allocated among
such Partners in proportion to their then current
relative Percentage Interests or in such other manner as
they may agree.
(b) If both (i) a majority in number of the Nondelinquent
Partners and (ii) Nondelinquent Partners whose Percentage
Interests represent more than 50% of the Percentage
Interests of all of the Nondelinquent Partners so elect
(for purposes of such calculations, any Partner that is
an Affiliate of a Delinquent Partner shall be treated as
<PAGE>
a Delinquent Partner, and all Partners which are
Affiliates of each other shall be deemed to be a single
Partner), then in lieu of making loans to the Partnership
in accordance with Section 4.3(a) hereof, (A) the amount
contributed by each Nondelinquent Partner pursuant to the
Capital Call shall be treated as a contribution to the
capital of the Partnership in exchange for an additional
interest in the Partnership and (B) each Nondelinquent
Partner may make an additional contribution of capital to
the Partnership in exchange for an additional interest in
the Partnership in an amount equal to all or any portion
of the unpaid contribution. If two or more Partners
desire to make capital contributions under clause (B) of
the preceding sentence, the total amount of capital to be
contributed shall be allocated among such Partners in
proportion to their then current relative Percentage
Interests or in such other manner as they may agree.
(c) The amounts contributed pursuant to Section 4.3(b) hereof
shall increase the Capital Accounts of the contributing
Partners in accordance with the terms of this Agreement.
In addition, the Percentage Interests shall be
recalculated (and such recalculated Percentage Interests
shall thereafter apply for all purposes of this Agreement
and the Other Partnership) such that the Percentage
Interest of each Partner shall equal the ratio of the
aggregate of its and its Affiliated Entity's Specified
Account Values in both Partnerships over the aggregate
Specified Account Values of (x) the Partners in the
Partnership and (y) the partners in the Other
Partnership, calculated as if the amounts contributed
pursuant to Section 4.3(b) were 125% of the amounts
actually contributed. The Percentage Interests in the
Other Partnership shall be simultaneously adjusted such
that the Percentage Interest of each Partner's Affiliated
Entity in the Other Partnership shall be the same as the
Partner's Percentage Interest in the Partnership. Once
an adjustment is made pursuant to this Section 4.3(c),
any future calculations of Percentage Interests in the
Partnership or the Other Partnership shall be calculated
on an aggregate basis using the methodology (including
the 125% weighting) specified above.
(d) Any Partner who becomes a Delinquent Partner hereby
agrees to cause each of its Affiliated Entities to agree
to the terms of this Section 4.3..
4.4. Capital Accounts. The Partnership shall maintain for
each Partner a single Capital Account with respect to the
Partner's Partnership Interest in accordance with the regulations
issued pursuant to Section 704 of the Code. The Capital Account
of each Partner shall be maintained for such Partner in
accordance with the following provisions:
<PAGE>
(a) To each Partner's Capital Account there shall be credited
the amount of cash and the Agreed Value of any assets
contributed to the capital of the Partnership by such
Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Profits and any items in
the nature of income or gain which are specially
allocated pursuant to Section 6.2 or Section 6.3 or
Section 6.4.5, and the amount of any Partnership
liabilities which are assumed by such Partner or which
are secured by any Partnership property distributed to
such Partner.
(b) To each Partner's Capital Account there shall be debited
the amount of cash and the Agreed Value of any
Partnership property distributed to such Partner pursuant
to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature
of expenses or losses which are specially allocated
pursuant to Section 6.2 or Section 6.3 or Section 6.4.5,
and the amount of any liabilities of such Partner which
are assumed by the Partnership or which are secured by
any property contributed by such Partner to the
Partnership, and the amount of any liabilities of any
other partnership, interests in which were contributed to
the Partnership, to the extent such liabilities are
included in the Agreed Value of such contributed
partnership interests.
(c) In the event that all or a portion of a Partnership
Interest is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent that it
relates to the transferred interest.
(d) In determining the amount of any liability for purposes
of paragraphs (a) and (b) hereof, there shall be taken
into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The principal amount of a promissory note which is not readily
traded on an established securities market and which is
contributed to the Partnership by the maker of the note (or by a
person related to the maker of the note within the meaning of
Regulation Sections 1.704-1(b)(2)(ii)(c)) shall not be included
in the Capital Account of any Partner until the Partnership makes
a taxable disposition of the note or until (and to the extent)
principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2) (any such note being
referred to as a Partner Note).
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Sections 1.704-1(b) and
<PAGE>
1.704-2, and shall be interpreted and applied in a manner
consistent with such Regulations. To the extent that such
Regulations require that adjustments other than those set out
above or in Section 6.2.6 be made to the Capital Accounts of the
Partners, such adjustments shall be made.
ARTICLE 5.
MANAGEMENT OF THE PARTNERSHIP
[IN THE CASE OF CELLCO, THE PROVISIONS CONTAINED IN
SECTION 5.1 HEREOF SHALL BE SET FORTH IN THE
CERTIFICATE OF INCORPORATION, BY-LAWS AND
STOCKHOLDERS AGREEMENT OF THE MANAGEMENT CO. AND THE
MANAGEMENT CO. WILL HAVE EXCLUSIVE RIGHTS TO MANAGE
CELLCO. APPROPRIATE MODIFICATIONS WILL BE
MADE IN THIS AGREEMENT TO REFLECT THAT ARRANGEMENT.]
5.1. Executive Committee.
5.1.1. Powers. The business and affairs of the
Partnership shall be managed under the direction of the
Executive Committee; and all powers of the Partnership, except
those specifically reserved or granted to the Partners by
statute or this Agreement, are hereby granted to and vested in
the Executive Committee. The Executive Committee shall have
the power to delegate authority to such officers, employees,
agents and representatives of the Partnership as it may from
time to time deem appropriate. Any delegation of authority to
take any action must be approved in the same manner as would
be required for the Executive Committee to directly approve
such action. No Partner shall take any action in the name of
or on behalf of the Partnership, including without limitation
assuming any obligation or responsibility on behalf of the
Partnership, unless such action, and the taking thereof by
such Partner, shall have been expressly authorized by the
Executive Committee or shall be expressly and specifically
authorized by this Agreement.
5.1.2. Number and Term of Office. Each of the Partners
shall have the right to designate two members of the Executive
Committee by written notice to the secretary of the
Partnership and to each other Partner. Members of the
Executive Committee shall hold office at the pleasure of the
Partner that designated them. Any Partner may at any time,
and from time to time, remove or replace any or all of the
members designated by such Partner, and shall give written
notice to the secretary of the Partnership and to each other
Partner of any such removal or replacement. Each Partner
shall cause the same persons serving as its representatives on
the Executive Committee of the Partnership to serve as its
representatives on the Executive Committee of the Other
Partnership.
<PAGE>
5.1.3. Resignations. Any member of the Executive
Committee may resign at any time by giving written notice to
the Partner that appointed such member and to the secretary of
the Partnership. Such resignation shall take effect on the
date shown on or specified in such notice or, if such notice
is not dated, at the date of the receipt of such notice by the
secretary of the Partnership. No acceptance of such
resignation shall be necessary to make it effective. The
Partner that appointed such resigning member shall be entitled
to appoint a member to fill the vacancy created by such
resignation by written notice to the secretary of the Company
and to each other Partner.
5.1.4. Place of Meeting. The Executive Committee may
hold its meetings at such place or places within or outside
the State of Delaware as the Executive Committee may from time
to time determine or as may be designated in the notice
calling the meeting. If a meeting place is not so designated,
the meeting shall be held at the Partnership's principal
office.
5.1.5. Regular Meetings. Regular meetings of the
Executive Committee may be held without notice at such time
and place as shall be designated from time to time by
resolution of the Executive Committee, but such meetings shall
be held at least once each calendar month unless otherwise
specified by the Executive Committee by Majority Vote. If the
date fixed for any such regular meeting is a Saturday, Sunday
or legal holiday under the laws of the state where such
meeting is to be held, then the meeting shall be held on the
next succeeding business day or at such other time as may be
determined by resolution of the Executive Committee. At such
meetings the members of the Executive Committee shall transact
such business as may properly be brought before the meeting.
5.1.6. Special Meetings. Special meetings of the
Executive Committee may be called by any member of the
Executive Committee or by the chief executive officer of the
Partnership. Notice of each such meeting shall be given to
each member of the Executive Committee by telephone, telecopy,
telegram or similar method (in which case notice shall be
given at least 48 hours before the time of the meeting) or
sent by first-class mail (in which case notice shall be given
at least five days before the meeting), unless otherwise
specified by the Executive Committee by Majority Vote. Each
such notice shall state the time, place and purpose of the
meeting to be so held.
5.1.7. Voting. The member or members of the Executive
Committee appointed by each Partner who are present (in person
or by written proxy) at any meeting of the Executive Committee
(or who are acting by written consent in lieu of a meeting)
shall together have voting power equal to such Partner's
<PAGE>
Percentage Interest at the time of such meeting. If only one
member appointed by a given Partner is present at a meeting,
such member shall be entitled to vote the entire voting power
held by all members appointed by such Partner. If more than
one member appointed by a given Partner is present at a
meeting, such members shall vote such Partner's entire voting
power as a single unit. In the event of a disagreement at a
meeting among members appointed by a single Partner as to how
to vote on any matter, the vote of the member designated by
such Partner as its senior representative shall be controlling
and the vote of the other member or members representing such
Partner shall be disregarded with respect to such matter.
5.1.8. Manner of Acting and Adjournment. Any action of
the Executive Committee shall require the affirmative vote of
members of the Executive Committee representing both (a)
Partners then holding Percentage Interests aggregating more
than 50%, and (b) a majority in number of all Partners (a
Majority Vote), except for actions requiring a different vote
as provided in Section 5.1.9 or 5.1.10 or as may be otherwise
specifically provided by this Agreement. The presence at a
duly called meeting of the Executive Committee of members
representing both (a) Partners then holding Percentage
Interests aggregating more than 50%, and (b) a majority in
number of all Partners shall constitute a quorum. If a quorum
shall not be present at any meeting of the Executive
Committee, the members of the Executive Committee present
thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum
shall be present. For all purposes of this Section 5.1.8, all
Partners which are Affiliates of each other shall be deemed to
be a single Partner.
5.1.9. Actions Requiring Supermajority Vote. The
following actions shall require the affirmative vote of
members of the Executive Committee representing Partners then
holding Percentage Interests aggregating 90% or more (a
Supermajority Vote):
(a) Admission as a partner in the Partnership of any
person other than a Partner Candidate, or admission
of a Partner Candidate upon terms other than those
set forth in Section 8.6(a);
(b) Engaging, directly or indirectly, in any business
other than the Wireless Business;
(c) Any amendment of this Agreement; provided, however,
that any amendment that would affect the rights or
obligations of one or more Partners without
affecting the rights or obligations of other
Partners in the same manner shall require the
<PAGE>
affirmative vote of such affected Partners'
representatives on the Executive Committee;
(d) Voluntary dissolution or winding-up of the
Partnership, or voluntary initiation by and with
respect to the Partnership of bankruptcy or similar
proceedings;
(e) Acquisitions or dispositions of assets or property
(in one or a series of related transactions) with a
fair market value (as determined in good faith by
the Executive Committee by Majority Vote) of twenty-
five percent (25%) or more of the total fair market
value of all the assets of the Partnership;
(f) A change in form of legal organization of the
Partnership, except for a change in form submitted
in connection with a plan for a public offering of
securities (including without limitation pursuant to
Section 8.7 hereof) on or after the third
anniversary of the date of this Agreement, which
change in form shall require approval only by
Majority Vote of the Executive Committee;
(g) A public offering of equity interests in the
Partnership (or its successor entity) at any time
prior to the third anniversary of the date of this
Agreement.
5.1.10. Affiliated Transactions. In addition to any
other approval by the Executive Committee hereunder, any
proposed transaction between the Partnership and any Partner
or its Affiliate (including a grant by the Partnership to the
Partner of a waiver of any provision hereof or consent
hereunder, but not including transactions described in Section
3.6 or 5.7) shall also require the affirmative vote of members
of the Executive Committee representing Partners who then hold
a majority of the then outstanding Percentage Interests of all
Partners excluding the Percentage Interest of such Partner.
In lieu of any other approval by the Executive Committee
hereunder, any claim or proceeding or similar action may be
brought or made in the name of the Partnership against a
Partner or any of its Affiliates (including without limitation
any claim for indemnity under the Formation Agreement or
hereunder), and elections to exercise rights under Section 8.5
hereof may be made, upon the affirmative vote of members of
the Executive Committee representing Partners who then hold a
majority of the then outstanding Percentage Interests of all
Partners excluding the Percentage Interest of the Partner
against whom or whose Affiliate the action is brought or who
is the Change of Control Partner.
<PAGE>
5.1.11. Other Actions Requiring Executive Committee
Approval. The following actions shall require a Majority Vote
of the Executive Committee:
(a) Public issuance of equity interests in the
Partnership (or its successor entity) on or after
the third anniversary of the date of this Agreement;
(b) Approval of a Business Plan, or a material
modification to a Business Plan;
(c) Making of any Capital Call other than a Capital Call
provided for in any annual budget included in any
Business Plan;
(d) Entry into any material transaction outside the
scope or contemplation of the Business Plan, or any
other material deviation from the Business Plan;
(e) Admission of a Partner Candidate as a partner in the
Partnership upon the terms set forth in Section
8.6(a);
(f) Appointment, removal, and compensation of the Chief
Executive Officer, the Chief Operating Officer and
the Chief Financial Officer of the Partnership;
(g) Any determination to make no distribution, or less
than the full distribution contemplated by Section
6.6.1, of cash for any one or more fiscal quarters,
or to make cash distributions in addition to those
contemplated by Section 6.6.1;
(h) Approval of the terms of the standard Affiliation
Agreement to be entered into between the Partnership
and third-party owners of Wireless Businesses;
(i) Approval of the terms of any Affiliation Agreement
between the Partnership and a Partner or its
Affiliate with respect to an affiliated Wireless
Business permitted under Sections 3.1 or 3.4(b), or
the waiver of any such requirement;
(j) Appointment of and any change in the auditors of the
Partnership.
The enumeration of actions in this Section is not intended,
and shall not be construed, as limiting the matters which
shall require approval by the Executive Committee by Majority
Vote.
5.1.12. Business Plan. The Partners have prepared and
delivered to each other and to the Partnership concurrently
<PAGE>
with the execution of the Agreement the initial one-year and
five-year business plan for the Partnership <or, if such one-
year plan is not then agreed upon, the then-current business
plan for the businesses contributed to the Partnership
pursuant to Section 4.1 hereof>. Such business plan, and each
subsequent business plan prepared for the Partnership and
approved by the Executive Committee by Majority Vote, are
referred to herein as a Business Plan. Not less than one
month after completion of the initial PCS auctions for
Designated MTA/BTAs, and not less than three months prior to
the start of each subsequent fiscal year of the Partnership,
the Chief Executive Officer of the Partnership shall submit to
the Executive Committee a proposed Business Plan including an
operating budget for such fiscal year, a financial commitment
for the five-year period beginning with such fiscal year, and
a financial view for the ten-year period beginning with such
fiscal year. If the Executive Committee fails to approve a
Business Plan prior to the beginning of any fiscal year, then
the Partnership shall be operated on the basis of the Business
Plan in effect for the prior year until a new Business Plan is
approved, provided, however, that no Capital Calls or
borrowings provided for in the annual budget for such prior
year shall be repeated in such new year unless specifically
approved for such new year by Majority Vote.
5.1.13. Deadlocks. Upon the occurrence of a Deadlock
Event, the Partners shall first use their good faith efforts
to resolve such matter in a mutually satisfactory manner. If,
after such efforts have continued for 20 days (or, if shorter,
until ten days before the vote or action on such matter must
be taken, provided that the Partners shall have used their
mutual good faith efforts to secure all possible extensions of
time for such vote or action), no mutually satisfactory
solution has been reached, the parties shall resolve the
Deadlock Event as provided herein:
(a) Each Partner shall first refer the matter to the chief
executive officer of the corporate Affiliate of such
Partner having primary responsibility for the Partnership
for resolution.
(b) If such officers, after a good faith effort, are unable
to resolve the dispute, they shall (at the instance of
either of them, but in no event later than 20 days after
the matter has been referred to them) refer the matter to
the Chairmen of their respective ultimate parent
corporations for resolution.
(c) Should the Chairmen of the ultimate parent corporations
of the Partners necessary to cast the deciding vote on
the Deadlock Event fail to resolve the matter within ten
(10) business days, each Partner shall prepare a brief (a
Brief) which includes a summary of the issue, its
<PAGE>
proposed resolution of the issue and considerations in
support of such proposed resolution. Not later than ten
(10) business days following the failure of the Chairmen
to resolve such dispute, such Briefs shall be submitted
to such reputable and experienced mediation service as is
selected by the Executive Committee by Majority Vote or,
failing such selection, by the Chief Executive Officer of
the Partnership (the Mediator). During a period of 20
business days, the Mediator and the Partners shall
attempt to reach a resolution of the Deadlock Event.
(d) In the event that after such 20 business day period the
Partners are still unable to reach resolution of the
Deadlock Event, the Mediator shall select within the
following 10 business days a proposed resolution
contained in one of the Briefs and such resolution shall
be implemented promptly by the Partnership.
(e) Deadlock Event shall be deemed to have occurred if
(i) after failing to approve a Business Plan for one
fiscal year, the Executive Committee fails to approve a
one-year Business Plan not less than 90 days prior to the
commencement of the next succeeding fiscal year, (ii) the
position of Chief Executive Officer of the Partnership is
vacant for a period of more than 30 days after one of the
Partners have proposed a candidate to fill such vacancy,
(iii) either the Chief Executive Officer or the Executive
Committee by Majority Vote has determined in good faith
that the Executive Committee has considered but has
failed to approve a proposal and the inaction created by
such failure to approve such proposal or an alternate
proposal poses an imminent and material threat to the
Partnership's ability to profitably pursue the Wireless
Business.
5.1.14. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Executive
Committee may be taken without a meeting upon the unanimous
written consent of all members of the Executive Committee then
in office.
5.2. Effect of Section 1509 of the Act. Notwithstanding
Section 1509 of the Act, the Partners hereby agree that this
Agreement shall govern the manner by which any actions (including
those described in such Section) may be taken by the Partnership,
even though this Agreement does not require the authorization of
all of the Partners.
5.3. Indemnification of Partners, Executive Committee,
Officers and Others.
5.3.1. In General. The Partnership, to the maximum
extent permitted by law, shall indemnify and hold harmless
<PAGE>
each Partner, its Affiliates and each of its and their
respective officers, directors or management committee
members, as the case may be, and each of the members of the
Executive Committee (Mandatory Indemnitees) and may indemnify
and hold harmless each of the officers, employees or agents of
the Partnership (Permitted Indemnitees), from and against any
and all judgments, interest on such judgments, fines,
penalties, charges, costs, amounts paid in settlement,
expenses and reasonable attorneys' fees incurred in connection
with any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before
any court or governmental, administrative or other regulatory
agency, body or commission, whether pending or threatened, and
whether or not an Indemnitee is or may be a party thereto,
which arise out of the business or affairs of the Partnership
or their activities with respect thereto (Indemnified
Damages), except for any such Indemnified Damages that are
Taxes imposed on or against any Partner or that have resulted
primarily from gross negligence, fraud, bad faith or willful
misconduct of or knowing violation of law by the person (or
any of its Affiliates) seeking indemnification. The
Partnership shall pay for or reimburse the reasonable expenses
incurred by any Mandatory Indemnitee, and may pay for and
reimburse the reasonable expenses incurred by any Permitted
Indemnitee, in any such proceeding in advance of the final
disposition of the proceeding if the person sets forth in
writing (a) the person's good faith belief that the person is
entitled to indemnification under this provision and (b) the
person's agreement to repay all advances if it is ultimately
determined that the person is not entitled to indemnification
under this Section 5.3.1. Any repeal or modification of any
portion of the foregoing provisions of this Section 5.3.1 or
the adoption of any provision of this Agreement inconsistent
with any portion of the foregoing provisions of this Section
5.3.1 shall not adversely affect any right or protection of
any person indemnified under this Section 5.3.1 for any act or
omission occurring, or any cause of action, suit, claim or
other matter arising or accruing, prior to the later of
(y) the effective date of such repeal, modification or
adoption or (z) the date notice of the amendment is given to
the person. This Section 5.3.1 shall not be deemed exclusive
of any other provisions for indemnification or advancement of
expenses of directors, officers, employees, agents and
fiduciaries that may be included in any statute, any
agreement, any general or specific action of the Executive
Committee, any vote of Partners or other document or
arrangement.
5.3.2. Reliance on Provisions. Each person who shall
act as a member of the Executive Committee of the Partnership
shall be deemed to be doing so in reliance upon the rights of
indemnification and advancement of expenses provided by this
Article.
<PAGE>
5.3.3. Insurance. The Partnership may purchase and
maintain insurance on behalf of any person who is or was a
member of the Executive Committee or an officer of the
Partnership against any liability asserted against such person
and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the
Partnership would have the power to indemnify such person
against such liability under the provisions of this Section
5.3.3 or otherwise.
5.4. Partner Compensation; Reimbursement.
(a) The Partners shall receive no compensation for performing
their duties under this Agreement; provided that this
provision shall not affect (i) any Partner's right to
receive its allocation of Profits and Losses or
distributions as set forth in Article 6, (ii) the right
of any Partner or its Affiliates to receive such
compensation as may be expressly approved by the
Executive Committee, (iii) any Partner's right to be
reimbursed for payment of Partnership obligations as
provided in subsection (b) of this Section 5.4 or
(iv) the right of a Partner to be repaid the amount of
any loans to the Partnership by a Partner.
(b) Each of the Partners shall be entitled to receive, out of
Partnership funds available therefor, reimbursement of
all amounts expended by such Partner in payment of
properly incurred Partnership obligations paid by such
Partner out of its own funds.
5.5. Taxes and Charges; Governmental Rules. Each Partner
shall (i) promptly pay all applicable Taxes and other
governmental charge imposed on or against such Partner, except to
the extent (x) the failure to promptly pay such Taxes or other
governmental charges will not have a material adverse effect on
the Partnership or its assets or (y) any such Taxes or other
governmental charges are being contested in good faith by
appropriate proceedings, and (ii) comply with all applicable
governmental rules, except to the extent that such noncompliance
will not have a material adverse effect on the Partnership.
5.6. Further Assurances. Following execution and delivery of
this Agreement by all of the Partners, each Partner shall, at its
own cost, do, execute and perform all such other acts, deeds and
documents as the other Partner or the Partnership may from time
to time reasonably require in order to carry out fully the
intents and purposes of this Agreement or to comply with any
applicable governmental rules.
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5.7. Partnership Services to Partners.
5.7.1. Support for International Operations. In the
event that any Affiliate of a Partner which is engaged, in
whole or in part, in the business of offering any type of
mobile radio services outside the United States and its
territories and possessions (an "International Affiliate"),
requests support for its international wireless business, the
Partnership shall provide the International Affiliate with any
and all support and assistance that it reasonably requests,
provided that the Partnership shall not be required to provide
any support if the provision of such support, in the opinion
of the Chief Executive Officer of the Partnership, would cause
a significant hardship for the Partnership. Without limiting
the generality of the foregoing, the Partnership shall provide
the International Affiliate with:
(a) access to all of the Partnership's facilities during
normal business hours, provided that such access
does not cause undue disruption to the conduct of
the Partnership's business activities, for the
purpose, among other things, of providing facility
tours and product demonstrations for employees of
the International Affiliate and for third parties
who are actual or potential customers or business
partners of the International Affiliate;
(b) personnel resources that are required by the
International Affiliate for such matters as bid
preparation, site surveys, consultations (for both
the International Affiliate and for third parties
that have contracts or other agreements with the
International Affiliate), contract negotiations and
operations support, unless the provision of such
resources causes undue disruption of the conduct of
the Partnership's business activities;
(c) personnel to be seconded to the International
Affiliate or to a third party or joint venture, for
which the International Affiliate has by agreement
committed to second personnel, unless the provision
of such personnel by the Partnership causes undue
disruption of the conduct of the Partnership's
business activities;
(d) software which the International Affiliate has by
agreement committed to provide to a third Party or
joint venture and which the Partnership possesses
and has the right to license, pursuant to a license
agreement in form reasonably satisfactory to the
Partnership which provides for the payment of
royalties on a "most-favored nation" basis.
<PAGE>
5.7.2. Costs. The Partnership shall provide the services
requested by the International Affiliate, including personnel and
seconded personnel, at 105% of fully loaded cost.
5.7.3. Confidentiality. The Partnership shall require those
of its employees who provide any type of support for an
International Affiliate to sign an appropriate non-disclosure
agreement regarding disclosure to third parties, including
without limitation the other Partners or their International
Affiliates, of information concerning the nature and type of work
performed by an International Affiliate and any information about
the International Affiliate and its requirements.
5.7.4. Conflicts. In the event that two or more of the
Partners' International Affiliates request support from the
Partnership at the same time, the Chief Executive Officer of the
Partnership shall attempt to allocate the Partnership resources
to ensure substantial equality of support for each Partner's
International Affiliate. The Chief Executive Officer of the
Partnership shall also organize the personnel resources who are
providing support to International Affiliates in such a manner to
seek to ensure the confidentiality of the work efforts for each
International Affiliate.
ARTICLE 6.
ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS
6.1. General Allocation Rule. After giving effect to the
special allocations set forth in Sections 6.2 and 6.3 hereof:
(A) subject to clause (B), Profits and Losses for any fiscal
year (or any shorter period if during any fiscal year there is
a change in Percentage Interests) shall be allocated among the
Partners in proportion to their respective Percentage
Interests and
(B) (x) in the year of liquidation of the Partnership (other
than a liquidation described in Section 10.6), Profits
(whether from operations or dispositions of assets) equal to
the aggregate Adjustment Amounts of the Partners shall be
allocated to the Partners in proportion to their Adjustment
Amounts and (y) Losses (whether from operations or
dispositions of assets) in the year of liquidation of the
Partnership shall be first allocated to cause the Partners'
Capital Account balances to be in the proportion of their
Percentage Interests immediately prior to such allocation.
<PAGE>
6.2. Special Allocations. The following special allocations
shall be made in the following order:
6.2.1. Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(f) of the Regulations,
notwithstanding any other provision of this Article 6, if
there is a net decrease in Partnership Minimum Gain during any
Partnership fiscal year, each Partner shall be specially
allocated items of Partnership income and gain for such fiscal
year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partnership
Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section 6.2.1 is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2(f)
of the Regulations and shall be interpreted consistently
therewith.
6.2.2. Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the
Regulations, notwithstanding any other provision of this
Article 6, if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to a Partner Nonrecourse Debt
during any fiscal year, each Partner who has a share of the
Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Partnership income and gain for such fiscal
year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 6.2.2 is intended to comply with
the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
6.2.3. Qualified Income Offset. If any Partner
unexpectedly receives any adjustment, allocation or
distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and
gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by
the Regulations, any resulting Adjusted Capital Account
<PAGE>
Deficit of such Partner as quickly as possible; provided,
however,that an allocation pursuant to this Section 6.2.3
shall be made if and only to the extent that such Partner
would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Article 6 have been
tentatively made as if this Section 6.2.3 were not in this
Agreement.
6.2.4. Nonrecourse Deductions. Nonrecourse Deductions
for any fiscal year shall be allocated among the Partners in
proportion to their respective Percentage Interests.
6.2.5. Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any fiscal year shall be allocated
to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
6.2.6. Certain Section 754 Adjustments. To the extent
an adjustment to the adjusted tax basis of any Partnership
asset pursuant to Code Section 743(b), Code Section 732(d) or
Code Section 734(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts as the result of a distribution
to a Partner in complete liquidation of its interest in the
Partnership, the amount of such adjustment to Capital Accounts
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially
allocated to the Partners in accordance with their interests
in the Partnership as determined under Regulations Section
1.704-1(b)(3) in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
6.2.7. Indemnity Payments. If any Partner makes a
payment to the Partnership under Article VIII of the Formation
Agreement that is properly characterizable as a capital
contribution for purposes of determining the Capital Account
of such Partner, then there shall be specially allocated to
such Partner (A) any deduction or Nondeductible Expenditure
resulting from the Partnership's payment of the item to which
the indemnity relates and (B) any depreciation, amortization,
or other cost recovery allowances in respect of any increase
in the basis of the Partnership's property resulting from the
payment of the item to which the indemnity relates. It is the
intention of the Partners that any payments made by a Partner
pursuant to Article VIII of the Formation Agreement shall
constitute a capital contribution for purposes of determining
Capital Accounts of the Partners, and tax returns and books of
the Partnership shall be prepared on that basis. If, however,
<PAGE>
any Partner makes a payment to the Partnership under Article
VIII of the Formation Agreement that is determined by the
Internal Revenue Service to be not properly characterizable as
a capital contribution for purposes of determining the Capital
Account of such Partner and such payment is either an
indemnity for the payment by the Partnership of any item that
is deductible for income tax purposes or results in the
increase in the basis of any of the Partnership's property
that is depreciable, amortizable, or subject to cost recovery
allowance, any such deduction, depreciation, amortization or
cost recovery allowance shall not be taken into account in
determining Profits, Losses or other items of deduction or
losses allocable pursuant to this Article 6, but shall be
specially allocated to such Partner for income tax purposes,
and such special allocation shall not affect the Capital
Account of any Partner. Notwithstanding anything to the
contrary in this Agreement, any amounts paid to the
Partnership under Article VIII of the Formation Agreement and
any deduction, Nondeductible Expenditure, depreciation,
amortization or other cost recovery allowance resulting from
such payment shall not be taken into account in determining
Percentage Interests.
6.3. Curative Allocations. The allocations set forth in
Sections 6.2.1 through 6.2.6 hereof (Regulatory Allocations) are
intended to comply with certain requirements of the Regulations
and Internal Revenue Service advance ruling requirements. It is
the intent of the parties to this Agreement that, to the extent
possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other
items of income, gain, loss or deduction pursuant to this Section
6.3. Therefore, notwithstanding any other provision of this
Article 6 (other than the Regulatory Allocations and the
following sentence), the Tax Matters Partner shall make such
offsetting special allocations of Partnership income, gain, loss
or deduction in whatever manner it determines in reasonable good
faith is appropriate so that, after such offsetting allocations
are made, each Partner's Capital Account balance is, to the
extent possible, equal to the Capital Account balance which such
Partner would have had if the Regulatory Allocations were not
part of this Agreement and all Partnership items were allocated
pursuant to Section 6.1 hereof. In exercising its discretion
under this Section 6.3, the Tax Matters Partner shall take into
account Regulatory Allocations under Sections 6.2.1 and 6.2.2
that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 6.2.4 and
6.2.5.
6.4. Other Allocation Rules.
6.4.1. Allocations When Percentage Interests Change.
For purposes of determining the Profits, Losses or any other
items allocable to any period, Profits, Losses and any such
<PAGE>
other items shall be determined on a daily, monthly, or other
basis, as determined by the Tax Matters Partner using any
permissible method under Code Section 706 and the Regulations
thereunder; provided, however, that any adjustments to the
Agreed Value of a Partnership asset treated as gain or loss
under paragraph (c) of the definition of "Profits" and
"Losses" or under paragraph (c) of Section 6.4.5 hereof, shall
be allocated only to those persons who were Partners
immediately before the event giving rise to such adjustment.
6.4.2. Allocation of Particular Items. Except as
otherwise provided in this Agreement, all items of Partnership
income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in
the same proportions as they share Profits or Losses, as the
case may be, for the fiscal year or other relevant period.
6.4.3. Tax Reporting. The Partners are aware of the
income tax consequences of the allocations made by this
Article 6 and hereby agree to be bound by the provisions of
this Article 6 in reporting their shares of Partnership income
and loss for income tax purposes.
6.4.4. Profit Shares. Solely for purposes of
determining a Partner's proportionate share of the
Partnership's "excess nonrecourse liabilities," as defined in
Regulations Section 1.752-3(a), the Partners' interests in
Partnership profits shall be deemed to be in proportion to
their respective shares of Profits set forth in Section 6.1.
6.4.5. Book Items Used in Special Allocations. For
purposes of determining the Partnership's items of income,
gain, loss or deduction for any fiscal year or other relevant
period available to be allocated pursuant to Sections 6.2 and
6.3 hereof, the following rules shall be applied:
(a) Exempt Items. Any income of the Partnership that is
exempt from federal income tax shall be taken into
account as an item of income;
(b) Nondeductible Expenditures. Any Nondeductible
Expenditure of the Partnership shall be taken into
account as an item of deduction;
(c) Adjustments to Agreed Values. In the event the
Agreed Value of any Partnership asset is adjusted
pursuant to paragraph (b) or paragraph (c) under the
definition herein of "Agreed Value," the amount of
such adjustment shall be taken into account as gain
or loss from the disposition of such asset;
(d) Certain Dispositions. Gain or loss resulting from
any disposition of Partnership property with respect
<PAGE>
to which gain or loss is recognized for federal
income tax purposes shall be computed by reference
to the Agreed Value of the property disposed of,
notwithstanding that the adjusted tax basis of such
property differs from its Agreed Value;
(e) Depreciation. In lieu of the depreciation,
amortization and other cost recovery deductions
taken into account in computing the Partnership's
taxable income or loss there shall be taken into
account Depreciation for such fiscal year or
relevant period; and
(f) Certain Section 734(b) Adjustments. To the extent
an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) is
required, pursuant to Regulations Section
1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a
distribution other than in liquidation of a
Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis)
from the disposition of such asset.
6.5. Tax Allocations; Code Section 704(c).
6.5.1. Generally. A Partner's allocable share of the
Partnership's items of income (including income exempt from
tax), gain, deduction, loss and Nondeductible Expenditure for
tax purposes shall be determined under the foregoing
provisions of this Article 6 except as provided in this
Section 6.5.
6.5.2. Contributed Property. In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain,
loss and deduction with respect to any property contributed to
the capital of the Partnership shall, solely for tax purposes,
be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial
Agreed Value, determined in accordance with the definition of
Agreed Value hereunder.
6.5.3. Adjustments to Agreed Value. If the Agreed Value
of any Partnership asset is adjusted pursuant to the
definition of Agreed Value hereunder, subsequent allocations
of income, gain, loss and deduction with respect to such asset
for tax purposes shall take account of any variation between
the adjusted basis of such asset for federal income tax
purposes and its Agreed Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.
<PAGE>
6.5.4. Elections. Any elections or other decisions
relating to allocations pursuant to this Section 6.5 shall be
made by the Tax Matters Partner in any manner that reasonably
reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 6.5 are solely for
purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Profits, Losses, other
items or distributions pursuant to any provision of this
Agreement.
6.6. Distributions.
6.6.1. In General. Unless otherwise determined by
Majority Vote of the Executive Committee, the Partnership
shall distribute to the Partners in proportion to their
respective Percentage Interests, on a fiscal quarterly basis
as promptly as practicable after the end of each quarter, all
gross cash receipts of the Partnership reduced by cash
disbursements and such reserves as may be established in the
Business Plan or otherwise by the Executive Committee,
including without limitation reserves for contingencies,
working capital requirements, repairs, improvements, expenses
and the payment of Partnership obligations.
6.6.2. Partner Loans. For so long as any loans made
pursuant to Section 4.3(b) remain outstanding, any amounts
that would otherwise be distributed pursuant to Section 6.6.1
shall instead be used to repay such loans. Amounts paid
pursuant to this Section 6.6.2 shall be apportioned among the
holders of such loans in proportion to the relevant amounts
owing under each loan.
6.6.3. Liquidating Distributions. Notwithstanding
Section 6.6.1 to the contrary, following the dissolution of
the Partnership, distributions to the Partners shall be made
in accordance with the provisions of Article 10.
6.6.4. Amounts Withheld. All amounts withheld pursuant
to the Code or any provision of any state or local tax law
with respect to any payment or distribution to the Partnership
or the Partners shall be treated as amounts distributed to the
Partners pursuant to this Section 6.6 for all purposes under
this Agreement. The Tax Matters Partner is authorized to
withhold from distributions, or with respect to allocations,
to the Partners and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to
the Code or any other provision of federal, state or local law
and shall allocate any such amounts to the Partners with
respect to which such amounts were withheld.
<PAGE>
ARTICLE 7.
BOOKS AND RECORDS
7.1. Accounting. Except as may be otherwise agreed to by
Supermajority Vote, the Partnership will maintain books and
records for tax purposes in accordance with federal income tax
accounting principles utilizing the accrual method of accounting,
and for accounting purposes in accordance with GAAP. In
addition, the Partnership shall cause to be prepared with respect
to each fiscal year of the Partnership financial statements based
on GAAP. Appropriate records will be kept so that upon each
closing of the Partnership books it is possible to determine,
among other items defined in this Agreement, (i) the amount of
capital actually contributed by each Partner; (ii) the amount of
cash or other property distributed to each Partner; (iii) the
effect of all Partnership items of Profit, Loss, income, gain,
loss, deduction or credit on each Partner's Capital Account; and
(iv) all pertinent expenses and cash disbursement accounts.
7.2. Fiscal Year. Except as may be otherwise determined by
Majority Vote, the fiscal year of the Partnership shall be the
twelve months ending December 31 of each year. Notwithstanding
the foregoing, the taxable year of the Partnership shall be
determined in accordance with Code Section 706(b).
7.3. Statements and Reports. Except as may be otherwise
determined by Supermajority Vote, as soon as practicable, but in
no event later than 60 days after the close of each fiscal year
of the Partnership, the Partnership will cause to be prepared and
will have furnished to each of the Partners, with respect to such
period, (i) a profit and loss statement, (ii) a statement of cash
flows, (iii) a Partnership balance sheet as of the close of such
period, and (iv) such other statements showing in reasonable
detail each Partner's interest in each of the items described in
Section 7.1. The foregoing statements will be prepared in
accordance with GAAP, consistently applied, and audited by an
independent certified public accounting firm of national
reputation which shall be designated by the Executive Committee,
and the cost of preparing the statements and of each such audit
will be paid for by the Partnership. In addition, unaudited
quarterly financial reports and updates with respect to the
Partnership's business shall be prepared and furnished to each
Partner as soon as practicable after the end of each fiscal
quarter, but in no event later than 30 days following the close
of each fiscal quarter.
7.4. Inspection. The Partnership shall maintain or cause to
be maintained complete and accurate books and records with
respect to its business. All books of account and all other
records of the Partnership (including an executed counterpart of
this Agreement and all amendments hereto) will at all times be
kept at the Partnership's principal place of business. Any
Partner and its representatives or designees may, during regular
<PAGE>
business hours, inspect the books and records of the Partnership,
and each Partner and its auditors may, during regular business
hours, conduct an audit of such books and records at its own
expense. The Partnership shall provide access to the facilities,
systems and books and records of the Partnership to the extent
reasonably considered necessary by the auditors and internal
audit departments of the inspecting Partner in the performance of
the audits of the inspecting Partner. Whenever any such audit is
conducted by any Partner and its auditors, such Partner shall
advise the other Partners and permit the other Partners and their
auditors to be present during such audit.
7.5. Certain Tax Matters.
7.5.1. Preparation of Tax Returns. The Tax Matters
Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, losses, deductions,
credits, and other items necessary for federal and state
income tax purposes, shall provide copies of draft tax returns
to all of the Partners at least fifteen days prior to filing
the returns and shall use reasonable good faith efforts to
furnish to the Partners within ninety days after the close of
each taxable year of the Partnership the tax information
reasonably required for federal, state and local income tax
reporting purposes. The Tax Matters Partner shall use good
faith efforts to supply each Partner with the information
necessary to determine estimated tax payments or any other
information related to taxes reasonably requested by each
Partner. The classification, realization, and recognition of
income, gains, losses, deductions, credits, and other items
shall be on the accrual method of accounting for federal
income tax purposes. The Tax Matters Partner shall not change
from the accrual method of accounting initially elected by the
Partnership (except if required to do so by law) without the
prior written consent of the Executive Committee.
7.5.2. Tax Elections. Except as provided in Sections
7.5.1, and 11.17 the Tax Matters Partner shall, in its sole
discretion, determine whether to make any election available
under the Code or any other applicable taxing statute.
7.5.3. Tax Controversies. The Partner with the largest
initial Percentage Interest is designated to act as the Tax
Matters Partner and in any other similar capacity under state
or local law and is authorized and required to represent the
Partnership (at the Partnership's expense) in connection with
all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional
services and costs associated therewith. Each of the Partners
agrees to cooperate with the Tax Matters Partner and to do or
refrain from doing any and all things reasonably required by
the Tax Matters Partner to conduct such proceedings. The
<PAGE>
Partner designated as the Tax Matters Partner shall serve in
such role until the earlier of (i) its resignation or (ii) a
determination by the Executive Committee that a different
Partner should serve as the Tax Matters Partner, and in either
such case, unless a different Partner is designated by the
Executive Committee, the Partner with the then largest
Percentage Interest shall become the new Tax Matters Partner.
7.6. Bank Accounts. The Partnership shall maintain
appropriate accounts at one or more financial institutions for
all funds of the Partnership. Such accounts shall be used solely
for the business of the Partnership. Withdrawal from such
accounts shall be made only upon the signature of those persons
authorized by the Executive Committee.
ARTICLE 8.
TRANSFER OF PARTNERSHIP INTERESTS; CHANGE OF
CONTROL; ADDITIONAL PARTNERS; CONVERSION TO CORPORATE FORM
8.1. Restrictions on Transfer of Interests. Except as
otherwise expressly permitted by this Agreement, no Partner or
its Affiliates shall, directly or indirectly, voluntarily,
involuntarily or by operation of law, Transfer all or any part of
its Partnership Interest or all or any part of its equity
interest in a Holding Company (hereinafter defined) ("Equity
Interest"), unless the Partner has both (i) obtained the prior
approval of the Executive Committee pursuant to Section 5.1.10
hereof if such Transfer occurs prior to the third anniversary of
the Cellular Closing Date, and (ii) complied with the right of
first refusal set forth in Section 8.3 hereof. The term
Transfer, when used in this Article 8 with respect to a
Partnership Interest or an Equity Interest, includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange, merger or any other disposition. A Holding Company
shall mean any person of which the Partnership Interest or the
direct or indirect ownership thereof comprises all or
substantially all of its value in the reasonable judgment of the
Executive Committee. Any Transfer or purported Transfer of any
Equity Interest or Partnership Interest not made in accordance
with this Article 8 shall be null and void.
8.2. Permitted Transfers. Subject to the conditions and
restrictions set forth in Section 8.4 hereof, (a) upon compliance
with the right of first refusal contained in Section 8.3 hereof,
but without the consent of the Executive Committee, a Partner or
its Affiliates may at any time Transfer all but not less than all
of its Partnership Interest or Equity Interest to any other
Partner or any Affiliate of another Partner, (b) a Partner or its
Affiliates may at any time Transfer all or any portion of its
Partnership Interest or Equity Interest to any Affiliate of the
transferor without either the consent of the Executive Committee
or the compliance with the right of first refusal contained in
<PAGE>
Section 8.3 hereof if such Affiliate agrees in writing to be
bound by the terms and conditions of this Agreement applicable to
the transferor as if it had been a signatory hereto, and (c)
after the third anniversary of the Cellular Closing Date, without
either the consent of the Executive Committee or the compliance
with the right of first refusal contained in Section 8.3 hereof,
a Partner or its Affiliates may effect a spin-off, distribution
or dividend of Equity Interests to the shareholders of the
ultimate parent entity of the Partner or Affiliate.
8.3. Right of First Refusal. If any Partner or its
Affiliates (the Selling Partner) wishes to Transfer all but not
less than all of its Partnership Interest or Equity Interest (the
Offered Interest) to any person which is not an Affiliate of the
Selling Partner, such Partner or its Affiliate shall first obtain
a Bona Fide Offer (as defined in subsection (g) below) for the
Offered Interest, and shall then give notice in writing to the
secretary of the Partnership and to each other Partner of its
intention to transfer the Offered Interest pursuant to such Bona
Fide Offer, which notice shall be accompanied by a copy of such
Bona Fide Offer.
(a) Within 15 days of the date of such notice from the
Selling Partner, the Partnership, by vote of the
Executive Committee pursuant to Section 5.1.10, may elect
to purchase all or any part of the Offered Interest at
the price and upon the terms contained in the Bona Fide
Offer.
(b) If the Partnership does not elect to purchase all of the
Offered Interest in accordance with subsection (a) above,
the Partners other than the Selling Partner (the Non-
Selling Partners) shall have the right to purchase any
remaining Offered Interest (the Remaining Offered
Interest) at the price and upon the terms contained in
the Bona Fide Offer. In such event, the secretary of the
Partnership shall give each Non-Selling Partner notice of
the Selling Partner's notice, the terms of the Bona Fide
Offer, and the amount of the Remaining Offered Interest.
(c) Within 15 days of the date of such notice from the
secretary, any Non-Selling Partner shall have the right
to acquire that part of the Remaining Offered Interest
which is equal to such Non-Selling Partner's pro rata
share of the Remaining Offered Interest (its Pro Rata
Fraction). Each Non-Selling Partner's Pro Rata Fraction
shall be equal to the proportion that each Partner's
Percentage Interest bears to the aggregate Percentage
Interests of all Non-Selling Partners. In the event that
a Non-Selling Partner shall elect to purchase all or part
of the Remaining Offered Interest (an Electing Partner)
it shall deliver to the secretary of the Partnership a
<PAGE>
written election to purchase a specified amount of the
Remaining Offered Interest.
(d) Within five days after the end of such 15-day period, the
secretary of the Partnership shall notify each Electing
Partner of the amount of the Offered Interest as to which
its election was effective and the amount of the Offered
Interest, if any, remaining available for purchase.
(e) In the event that a portion of the Offered Interest
remains available for purchase, each Non-Selling Partner
shall have the right to purchase, on a pro rata basis
with any other Electing Partners who so elect, any
Remaining Offered Interest which remains available for
purchase after the elections delivered under paragraph
(c), by delivering to the secretary of the Partnership,
within seven days of such notice from the secretary, its
written election to purchase a specified amount of such
Remaining Offered Interest.
(f) If, upon the expiration of the seven-day notice period
provided for in subsection (e) above, the Partnership and
the Non-Selling Partners shall not have made elections to
purchase the entire Offered Interest, the right of first
refusal shall expire as to that particular Bona Fide
Offer, but shall remain in full force and effect with
respect to all material modifications of that Bona Fide
Offer and all future offers. In such event, the Selling
Partner shall have the right to sell all (but not part)
of the Offered Interest pursuant to the terms of the Bona
Fide Offer and in accordance with the terms of a
definitive agreement (subject solely to requisite
regulatory approvals) entered into not later than 90 days
after the expiration of the seven-day period provided for
in subsection (e) above.
(g) For the purposes of this Agreement, a Bona Fide Offer
shall mean a written offer not subject to a material
financing contingency made by an individual or entity not
affiliated with the Selling Partner to purchase the
shares specified in the offer on the terms stated
therein, which offer sets forth (i) the name and address
of the offeror, (ii) a description of the Offered
Interest subject to the offer, and (iii) the price and
other material terms of the offers and (iv) a description
of any financing arrangements related to the transaction.
8.4. Effective Transfer.
(a) Prior to the date of any Transfer of a Partnership
Interest, the transferor and transferee shall furnish the
Partnership with the transferee's taxpayer identification
number, sufficient information to determine the
<PAGE>
transferee's initial tax basis in the Partnership
Interest transferred, and any other information
reasonably necessary to permit the Partnership to file
all required federal, state and local tax returns and
other legally required information statements or returns.
Without limiting the generality of the foregoing, the
Partnership shall not be required to make any
distribution otherwise provided for in this Agreement
with respect to any transferred Partnership Interest
until it has received such information.
(b) In addition to all other requirements contained herein,
no Transfer of a Partnership Interest and no transfer of
a Partnership Interest to an Affiliate of the transferor
shall be effective until and unless the transferee
provides the following:
(i) Execution by the transferee of an amendment of this
Agreement or a counterpart to the signature page of
this Agreement which shall provide, "The undersigned
hereby accepts and agrees to be bound by all of the
terms and provisions of this Agreement and shall
become a substitute Partner under this Agreement.";
(ii) If the transferee is a corporation, it shall have
provided the Partnership with evidence satisfactory
to the Partnership of its authority to become a
Partner and to be bound by the terms of this
Agreement;
(iii) An opinion of counsel to the Partnership that the
admission of the transferee does not (a) violate the
then applicable federal or state securities laws or
rules and regulations of the Securities and Exchange
Commission or any successor thereto, any state
securities commission and any other government
agencies with jurisdiction over such Transfer; (b)
subject the Partnership to any federal, state or
local rule, regulation or law that materially
adversely affects the business or financial
condition of the Partnership; or (c) materially
adversely affects the Partnership's existence or
qualification under the Act; and
(iv) Any necessary prior consents have been obtained from
any regulatory authorities.
(c) It is the intention of the Partners that they will own
interests, direct or, in the case of the {Other}
Partnership, indirect through Management Co. (the
outstanding common equity of which is held by all
Partners), in the Partnership and the Other Partnership
in the same proportions. Consequently, no Partner may
<PAGE>
effect a Transfer without transferring a Partnership
Interest (and common equity, in the case of an indirect
interest in the Partnership through Management Co.),
representing the same Percentage Interest in the Other
Partnership, and any such attempted transfer shall be
null and void and of no effect.
8.5. Changes of Control. In the event of a Change of Control
of any Partner (such Partner, the Change of Control Partner), the
Partnership and the other Partners shall have the right to
purchase the Partnership Interest of such Partner on the terms
set forth in this Section 8.5. As used herein, Change of Control
means the acquisition by any person or group of persons acting in
concert which does not, as of the date such Partner first became
a Partner, have such control, of the power to direct or to cause
the direction of the management and policies of any Partner or of
any company which, directly or indirectly, controls such Partner,
whether such transaction is voluntary, involuntary or the result
of any merger, amalgamation or consolidation or similar
transaction, but shall not include any such acquisition of
control of a Partner by another Partner or its Affiliate or by a
person or group of persons controlled by such Partner or its
Affiliate.
(a) Any Change of Control Partner shall notify the
Partnership promptly upon learning of such Change of
Control. Upon the occurrence of any Change of Control,
the Partnership shall have the right to purchase all or
any part of the Change of Control Partner's Partnership
Interest for an amount equal to the Fair Market Value (as
defined in subsection (iv) below) thereof as determined
in accordance with the following procedures:
(i) Not later than 10 days after the Change of Control
Partner notifies the Partnership of the Change of
Control, the Change of Control Partner and the
Partnership shall attempt to reach agreement on the
Fair Market Value of the Change of Control Partner's
Partnership Interest.
(ii) If the Change of Control Partner and the Partnership
are unable to reach agreement on such Fair Market
Value within such 10 day period, within 5 days they
shall each select an appraiser (which may or may not
be a Qualified Investment Banking Firm) and shall
give the other notice of such selection. Each of
such appraisers (the Original Appraisers) shall
determine the Fair Market Value of the Change of
Control Partner's Partnership Interest at the time
it renders its written appraisal. Each Original
Appraiser shall deliver its written appraisal to the
party retaining such Original Appraiser within 60
days following the date of the selection of the
<PAGE>
Original Appraisers. Such written appraisals shall
be exchanged with the other parties hereto at the
offices of the Partnership at 10:00 a.m. local time
on the 61st day following the date of the selection
of the Original Appraisers. In the event that the
Original Appraisers agree on the Fair Market Value,
the purchase price for the subject Partnership
Interest shall be such agreed-upon Fair Market
Value. In the event that the Original Appraisers do
not agree on such Fair Market Value, (i) if the
higher of the two valuations is not more than 110%
of the lower valuation of the Original Appraisers,
the purchase price for the Partnership Interest
shall be the mean of the two valuations, and (ii) if
the higher of the two valuations is greater than
110% of the lower valuation, the Original Appraisers
shall select a Qualified Investment Banking Firm who
will calculate the Fair Market Value independently
within 60 days of such election. If the Original
Appraisers cannot agree upon a third appraiser
within 30 days following the end of the 60-day
period referred to above, then the third appraiser
shall be a Qualified Investment Banking Firm
appointed by the American Arbitration Association.
Neither the Change of Control Partner, the
Partnership nor any other Partner or Party nor
either of the Original Appraisers shall provide the
third appraiser, directly or indirectly, with a copy
of the written appraisal of either of the Original
Appraisers, an oral or written summary thereof, or
the valuation determined by either of the Original
Appraisers, orally or in writing. The valuation of
the third appraiser will be arithmetically averaged
with the two valuations of the Original Appraisers,
and the valuation farthest from the average of the
three valuations will be disregarded. The Fair
Market Value shall be the mean of the two remaining
valuations.
(iii) The Partnership shall give to the Original
Appraisers and the third appraiser free and full
access to and the right to inspect, during normal
business hours, all of the premises, properties,
assets, records, contracts and other documents
relating to the Partnership and shall permit them to
consult with the officers, employees, accountants,
counsel and agents of the Partnership for the
purpose of making such investigation of the
Partnership as they shall desire to make.
Furthermore, the Partnership shall furnish to the
Original Appraisers and the third appraiser all such
documents and copies of documents and records and
information with respect to the affairs of the
<PAGE>
Partnership and copies of any working papers
relating thereto as they shall from time to time
reasonably request.
(iv) Fair Market Value shall mean the fair market value
of the Change of Control Partner's Partnership
Interest determined as of the date of which the
written appraisal is delivered.
(v) Qualified Investment Banking Firm means any firm
engaged in providing corporate finance, merger and
acquisition, and business valuation services and
deriving revenues therefrom of at least $100 million
during its last completed fiscal year, but
excluding, however, any firms which received more
than $250,000 in fees during the preceding 24
calendar months from the Partnership or any of the
Partners or their respective Affiliates (excluding
fees derived from underwriting discounts or
placement agent fees from offerings of debt
securities registered under the Securities Act of
1933).
(vi) The costs of the Fair Market Value appraisal shall
be borne by the Change of Control Partner.
(b) If the Partnership does not elect to exercise such
purchase right within 120 days of the determination of
the Fair Market Value of the Change of Control Partner's
Partnership Interest, or declines to exercise such
purchase right as to all or any part of such Partnership
Interest, then the remaining Partners for an additional
period of 30 days shall have the right to purchase all or
any part of the remaining amount of such Partnership
Interest for such same price (or the applicable
proportion of such price), in the same manner as set
forth in Section 8.3(c), (d) and (e).
(c) If neither the Partnership nor the Partners elect to
purchase such Partnership Interest within the periods
described in (b), the right to purchase contained in this
Section 8.5 shall terminate as to such Change of Control.
8.6. Additional Partners. Additional partners may be
admitted to the Partnership as follows:
(a) Any Partner Candidate may be admitted if approved by a
Majority Vote, provided that such admission involves the
contribution to the {Other} Partnership of all or
substantially all of such Partner Candidate's United
States Cellular Business and a contribution of cash to
the [OTHER] Partnership in exchange for Partnership
Interests in the Partnership and the Other Partnership
<PAGE>
that is within the range (relative to the combined
Partnership Interests of Bell Atlantic and NYNEX) set
forth next to such Partner Candidate's name on the then
current Business Plan for the Partnership.
(b) Admission of any person other than a Partner Candidate,
or admission of a Partner Candidate upon terms other than
those set forth in Section 8.6(a), shall require approval
by Supermajority Vote of the Executive Committee.
(c) The additional partner (admitted to the Partnership
pursuant to Section 8.6(a) or Section 8.6(b)) (the
Additional Partner) shall become a Partner in the
Partnership and shall be bound by this Agreement upon the
completion of the following:
(i) Execution by the Additional Partner of an amendment
of this Agreement or a counterpart to the signature
page of this Agreement which shall provide, "The
undersigned hereby accepts and agrees to be bound by
all of the terms and provisions of this Agreement.";
(ii) If the Additional Partner is a corporation, it shall
have provided the Partnership with evidence
satisfactory to the Partnership of its authority to
become a Partner and to be bound by the terms of
this Agreement;
(iii) An opinion of counsel to the Partnership that the
admission of the Additional Partner does not (a)
violate the then applicable federal or state
securities laws or rules and regulations of the
Securities and Exchange Commission or any successor
thereto, any state securities commissions and any
other government agencies with jurisdiction over
such Transfer; (b) subject the Partnership to
greater regulation or restriction under the MFJ than
existed immediately prior to such Transfer; (c)
subject the Partnership to any federal, state or
local rule, regulation or law that materially
adversely affects the business or financial
condition of the Partnership; or (d) materially
adversely affects the Partnership's existence or
qualification under the Act; and
(iv) Any necessary prior consents have been obtained from
any regulatory authorities.
8.7. Conversion to Corporate Form.
(a) In the event that the Executive Committee shall determine
that it is desirable or helpful for the business of the
Partnership to be conducted in a corporate rather than in
<PAGE>
a partnership form, the Executive Committee shall have
the power to incorporate the Partnership or take such
other action as it may deem advisable in light of such
changed conditions, including, without limitation,
dissolving the Partnership, creating one or more
subsidiaries of the newly formed corporation and
transferring to such subsidiaries any or all of the
assets of the Partnership. In connection with any such
incorporation of the Partnership, the Partners shall
receive, in exchange for their Partnership Interests,
shares of capital stock of such corporation or its
subsidiaries having the same relative economic interest
in the Partnership as is set forth in this Agreement or
the Formation Agreement, as among the holder of interests
in the Partnership, subject in each case to (i) any
modifications required solely as a result of the
conversion to corporate form and (ii) to modifications to
the provisions of Section 5.1 to conform to the
provisions relating to actions of shareholders and a
board of directors set forth in the Delaware General
Corporation Law. At the time of such conversion, the
Partners shall enter into a shareholders agreement
providing for (i) rights of first refusal and other
restrictions on transfer set forth in Sections 8.1
through 8.3 hereof; provided that such restrictions shall
not apply to sales in broadly disseminated public
offerings pursuant to paragraph (c) or sales in
accordance with Rule 144 under the Securities Act of
1933, as amended (the 1933 Act), and (ii) agreeing to
vote all shares of capital stock held by them to elect to
the Board of Directors of the new corporation one
representative of each of the Partners who own more than
10% of the outstanding capital stock of the Company.
(b) Prior to taking such action to incorporate the
Partnership, the Executive Committee shall submit to the
Partners the proposed forms of a certificate or articles
of incorporation, by-laws, stockholders' agreement and
any other governing documents proposed to be established
for such corporation and its subsidiaries, if any.
(c) Upon conversion to corporate form, the corporate
successor to the Partnership shall grant to each of the
Partners the following rights to require such successor
to register under the 1933 Act the shares of capital
stock received by the Partners in exchange for their
Partnership Interests (the Registrable Securities): (i)
one right to require the Company to register under the
1933 Act the Registrable Securities which will be
exercisable commencing on the 90th day following the
consummation of the Company's initial public offering of
equity securities registered under the 1933 Act or, if
later, the end of any "lock-up" period required by the
<PAGE>
underwriters with respect to such initial public offering
(the Demand Right), and (ii) one right to include the
Registrable Securities in a Registration Statement filed
by the successor with respect to an offering (other than
the initial public offering of equity securities by such
successor) by the successor of equity securities (the
Piggy-back Right). Such registration rights shall be
subject to customary requirements and limitations,
including without limitation (i) the right of the Company
to delay the exercise of a Demand Right for a period of
up to 90 days, provided that such right to delay may not
be exercised more than once in any 12 month period; (ii)
the right of the Company, in accordance with the advice
of the managing underwriter, to limit the number of
shares requested to be sold by the Partner upon the
exercise of a Piggy-back Right; and (iii) the right to
require the Partner to join in an underwriting agreement
in the public offering with respect to which the Partner
has exercised its Piggy-back Right. The Partner shall
bear and reimburse the Company for all reasonable costs
incurred in connection with the registration required by
the exercise of the Demand Right.
8.8. Covenant Not to Withdraw or Dissolve. Notwithstanding
any provision of the Act, each Partner hereby covenants and
agrees that the Partners have entered into this Agreement based
on their mutual expectation that, except as otherwise expressly
required or permitted hereby, no Partner shall withdraw or retire
from the Partnership, be entitled to demand or receive a return
of such Partner's contributions or profits (or a bond or other
security for the return of such contributions or profits), or
exercise any power under the Act to dissolve the Partnership
without the approval of the Executive Committee by Supermajority
Vote.
8.9. Consequences of Breaches of Covenant. Notwithstanding
anything to the contrary in the Act, if a Partner (Breaching
Partner) (i) attempts to Transfer his Partnership Interest or
Equity Interest in breach of Section 8.1, (ii) attempts to cause
a partition in breach of Section 2.7, (iii) attempts to withdraw
from the Partnership or dissolve the Partnership in breach of
Section 8.8, or (iv) suffers an Event of Bankruptcy, the
Partnership shall continue and such Breaching Partner shall be
subject to this Section 8.9 and in such event, the following
shall occur:
(a) the Breaching Partner shall immediately cease to be a
Partner and shall have no further power to act for or
bind the Partnership;
(b) the other Partners shall continue to have the right to
possess the Partnership's property and goodwill and to
conduct its business and affairs;
<PAGE>
(c) the Breaching Partner shall be liable in damages, without
requirement of a prior accounting, to the Partnership for
all costs and liabilities that the Partnership or any
Partner may incur as the result of such breach;
(d) the Partnership shall have no obligation to pay to the
Breaching Partner his contributions, capital, or profits,
but may, by notice to the Breaching Partner within 30
days of his withdrawal, elect to make Breach Payments (as
hereinafter defined) to the Breaching Partner in complete
satisfaction of the Breaching Partner's interest in the
Partnership;
(e) if the Partnership does not elect to make Breach Payments
pursuant to Section 8.9(d) hereof, the Partnership shall
treat the Breaching Partner as if he were an unadmitted
assignee of the interest of the Breaching Partner and
shall make distributions and allocations to the Breaching
Partner only of those amounts and items otherwise payable
or allocable with respect to such interest hereunder;
(f) the Partnership may apply any distributions otherwise
payable with respect to such interest (including Breach
Payments) to satisfy any claims it may have against the
Breaching Partner;
(g) the Breaching Partner shall have no right to inspect the
Partnership's books or records or obtain other
information concerning the Partnership's operations; and
(h) the Breaching Partner shall continue to be liable to the
Partnership for any unpaid capital contributions required
hereunder with respect to such interest and to be jointly
and severally liable with the other Partners for any
debts and liabilities (whether actual or contingent,
known or unknown) of the Partnership existing at the time
the Breaching Partner withdraws or dissolves.
8.9.1. Breach Payments. For purposes hereof, Breach Payments
shall be made in five installments, each equal to 20% of the
Breach Amount, payable on the next five consecutive anniversaries
of the breach by the Breaching Partner, with simple interest
accrued from the date of such breach through the date each such
installment is paid on the unpaid balance of such Breach Amount
at the lowest rate per annum necessary to avoid imputed interest
on such payments under the Code. The Breach Amount shall be an
amount equal to 90% of the greater of (i) 100 dollars or (ii) the
Capital Account balance (calculated on the assumption that
Partner Notes then outstanding are not repaid) of the Breaching
Partner as of the last day of the month preceding the month
during which such breach occurred, less any Partnership
distributions to the Breaching Partner after such day. In
addition, any Partner Note of the Breaching Partner shall be
<PAGE>
cancelled, but without the necessity of making any payment in
respect thereof. The Breach Amount as so determined shall be
final and binding on the Partnership and the Breaching Partner.
The Partnership may, at its sole election, prepay all or any
portion of the Breach Payments or interest accrued thereon at any
time without penalty.
8.9.2. No Bonding. Notwithstanding anything to the contrary
in the Act, if, under Section 8.9(e) hereof, the Partnership
treats a Breaching Partner as an unadmitted assignee of an
interest in the Partnership, the Partnership shall not be
obligated to secure the value of the Breaching Partner's interest
by bond or otherwise; provided, however, that if a court of
competent jurisdiction determines that, in order to continue the
business of the Partnership such value must be so secured, the
Partnership may provide such security. If the Partnership
provides such security, the Breaching Partner shall not have any
right to participate in Partnership profits or distributions
during the term of the Partnership, or to receive any interest on
the value of such interest. For this purpose, the value of the
interest of the Breaching Partner shall be an amount equal to 90%
of the greater of (i) 100 dollars or (ii) the Capital Account
balance (calculated on the assumption that Partner Notes then
outstanding are not repaid) of such interest as of the last day
of the month preceding the month during which the breach by the
Breaching Partner occurs.
ARTICLE 9.
CONFIDENTIALITY
9.1. Maintenance of Confidentiality. Each of the Partners
shall, during the term of this Agreement and at all times
thereafter, maintain in confidence all confidential and
proprietary information and data of the Partnership and the other
Partner or its Affiliates disclosed to it (the Confidential
Information). Each of the Partners further agrees that it shall
not use the Confidential Information during the term of this
Agreement or at any time thereafter for any purpose other than
the performance of its obligations or the exercise of its rights
under this Agreement. The Partnership and each Partner shall
take all reasonable measures necessary to prevent any
unauthorized disclosure of the Confidential Information by any of
their employees, agents or consultants.
9.2. Permitted Disclosures. Nothing herein shall prevent the
Partnership, any Partner, or any employee, agent or consultant of
the Partnership or any Partner (the receiving party) from using,
disclosing, or authorizing the disclosure of any information it
receives in the course of the business of the Partnership which:
(a) becomes publicly available without default hereunder by
the receiving party;
<PAGE>
(b) is lawfully acquired by the receiving party from a source
not under any obligation to the disclosing party
regarding disclosure of such information;
(c) is in the possession of the receiving party in written or
other recorded form at the time of its disclosure
hereunder;
(d) is non-confidentially disclosed to any third party by or
with the permission of the disclosing party; or
(e) the receiving party believes in good faith to be required
by law or by the terms of any listing agreement with a
securities exchange, provided that the receiving party
consults with the other Partners prior to making such
disclosure.
ARTICLE 10.
DISSOLUTION AND LIQUIDATION
10.1. Dissolution Generally. The Partnership will be
dissolved on the earliest of (i) an affirmative Supermajority
Vote of the Executive Committee; {(ii) the date of termination of
the Formation Agreement if the Cellular Partnership has not then
been formed pursuant to the terms of the Formation Agreement (a
Non-Formation Event)} or (ii{i}) 12:00 midnight on December 31,
2099; provided, however, that the Partnership shall not terminate
until its affairs have been wound up and its assets distributed
as provided herein (a Dissolution Event).
10.2. Liquidation.
{(a)} Upon dissolution of the Partnership, the Partner
selected by the Executive Committee, shall be the
liquidator of the Partnership (the Liquidating Partner).
The Liquidating Partner shall be entitled to receive such
compensation for its services as may be approved by the
Executive Committee. The Liquidating Partner shall not
resign at any time without fifteen days' prior written
notice and may be removed only by a decision of the
Executive Committee. Upon dissolution, resignation, or
removal of the Liquidating Partner, a successor and
substitute Liquidating Partner (who shall have and
succeed to all rights, powers, and obligations of the
original Liquidating Partner) shall, within thirty days
thereafter, be approved by the Executive Committee.
Except as expressly provided in this Article 10, the
Liquidating Partner approved in the manner provided
herein shall have and may exercise, without further
authorization or approval of the Executive Committee or
any Partner, all of the powers conferred upon the Tax
Matters Partner under the terms of this Agreement (but
<PAGE>
subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers) to the
extent appropriate or necessary in the good faith
judgment of the Liquidating Partner to carry out the
duties and functions of the Liquidating Partner hereunder
for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidating
Partner to complete the winding-up and liquidation of the
Partnership as provided for herein. The Liquidating
Partner shall, subject to providing adequate reserves for
the payment of amounts payable under Section 10.2(a)(i)
hereof, distribute any assets among the Partners as may
be agreed upon by Majority Vote (with the Agreed Value
being debited against such Partner's Capital Account
balance), provided that no Partner may receive an amount
in excess of its positive Capital Account balance. If
any assets still remain in the Partnership, the
Liquidating Partner shall liquidate such assets and apply
and distribute the proceeds of such liquidation in the
following order and priority, to the maximum extent
permitted by law:
(i) First, to creditors of the Partnership (including
Partners to the extent permitted by law) in
satisfaction of the Partnership's known debts and
liabilities (whether by payment or the making of
provision for the known amount thereof); and
(ii) Second, to the Partners, in proportion to and to the
extent of the positive balances in their respective
Capital Accounts adjusted pursuant to Article 6 to
reflect (i) their respective distributive shares of
the income, gain, loss, and deduction of the
Partnership for the taxable year of the Partnership
in which the distribution in liquidation occurs up
through and including the date of distribution and
(ii) all distributions (including distributions
pursuant to this Section 10.2(a) made to the
Partners during such taxable year up to and
including such date.
{(b) Upon the occurrence of a Non-Formation Event, the
Partners shall attempt to reach agreement on the Agreed
Value and distribution among the Partners of each of the
PCS Licenses and the assets and liabilities related
thereto, subject always to distributions being made in
accordance with Capital Accounts as provided in Section
10.2(a)(ii), with such distributed assets being valued at
their Agreed Value. To the extent that the Partners are
unable to reach agreement on the Agreed Value and
distribution among the Partners of certain of such PCS
Licenses, assets and liabilities, each Partner shall be
entitled to submit a proposal specifying an Agreed Value
<PAGE>
for each such PCS License and its related assets and
liabilities. Such proposal shall be in writing and shall
be delivered to the secretary of the Executive Committee
not later than 20 days after the occurrence of the Non-
Formation Event. The secretary shall open such proposals
simultaneously and the highest value submitted by any
Partner for each PCS License, asset and liability shall
constitute its Agreed Value. The Partnership shall
thereafter pay any amounts referred to in Section
10.2(a)(i) (except to the extent any such liabilities are
to be assumed by any Partner), and the PCS Licenses,
assets and liabilities valued pursuant to the previous
sentence shall be distributed to the Partner who
specified the highest Agreed Value therefor (and shall be
debited against its Capital Account balance), and the
remaining PCS Licenses, assets and liabilities shall be
distributed in the manner agreed upon by the Partners;
provided that if the distributions pursuant to this
sentence would result in any Partner receiving more than
its positive Capital Account balance (an "Excess
Distribution"), assets with an Agreed Value equal to the
Excess Distribution shall instead be distributed among
the other Partners in accordance with Capital Account
balances (such assets as selected by such other Partners)
and immediately thereafter sold for cash to the Partner
who would have otherwise received the Excess Distribution
in the absence of this proviso, which cash shall be paid
simultaneously with the liquidating distributions.
10.3. Distribution in Trust. Notwithstanding the provisions
of Section 10.2 requiring the liquidation of the assets of the
Partnership, but subject to the order of priorities set forth
therein, in the discretion of the Executive Committee, a pro rata
portion of the distributions that would otherwise be made to the
Partners pursuant to Section 10.2(a)(ii) hereof may be:
(a) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the Partners arising
out of or in connection with the Partnership. The assets
of any such trust shall be distributed to the Partners
from time to time, in the reasonable discretion of the
Executive Committee, in the same proportions as the
amount distributed to such trust by the Partnership would
otherwise have been distributed to the Partners pursuant
to this Agreement; or
(b) withheld to provide a reasonable reserve of Partnership
liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to
the Partnership, provided that such withheld amounts
<PAGE>
shall be distributed to the Partners as soon as
practicable.
In exercising its rights under this Section 10.3, the
Executive Committee must comply with the liquidating distribution
timing requirements of Section 10.5 hereof. By way of
clarification, for purposes of determining the Partners'
respective shares of income, gain, loss, and deduction of the
Partnership for the taxable year of the Partnership in which the
distribution in liquidation occurs and of adjusting the Capital
Accounts of the Partners therefor in accordance with Section 10.2
and Article 6, the definitions herein of "Agreed Value" and
"Profits" and "Losses" require that Partnership assets to be
distributed to the trust referred to in clause (a) above or to
the Partners in accordance with Section 10.2 hereof shall be
considered to have been first sold at their fair market values
(taking Code Section 7701(g) into account) and the Profits or
Losses deemed realized therefrom shall be allocated among the
Partners as if an actual sale had occurred, and the Capital
Accounts of the Partners shall be adjusted to reflect such
allocation in accordance with Article 6. The fair market value
of any property distributed to such trust shall be the value
determined by the Executive Committee.
10.4. Rights of Partners. Except as otherwise provided in
this Agreement, each Partner shall look solely to the assets of
the Partnership for the return of its capital contributions and
shall have no right or power to demand or receive property other
than cash from the Partnership. No Partner shall have priority
over any other Partner as to the return of his capital
contributions, distributions, or allocations except as provided
in this Agreement.
10.5. Compliance with Timing Requirements of Regulations. In
the event that the Partnership is liquidated within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), then distributions
shall be made pursuant to Section 10.2 to the Partners who have
positive Capital Accounts in compliance with the timing
requirements of Regulations Section 1.704-1(b)(2)(ii)(b)(2). If
any Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such
liquidation occurs), such Partner shall contribute to the capital
of the Partnership the amount necessary to restore such deficit
balance to zero in compliance with Regulations Section 1.704-
1(b)(2)(ii)(b)(3).
10.6. Non-Dissolving Code Section 708(b) Terminations.
Notwithstanding any other provision of this Article 10, in the
event that the Partnership is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event
has occurred, the Partnership's assets shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged,
<PAGE>
and the Partnership's affairs shall not be wound up. Instead,
the Partnership shall be deemed to have distributed the assets of
the Partnership in kind to the Partners, who shall be deemed to
have assumed and taken subject to all Partnership liabilities,
all in accordance with their Capital Accounts and if any
Partner's Capital Account has a deficit balance (after giving
effect to all contributions, distributions, and allocations for
all fiscal years, including the fiscal year during which such
liquidation occurs), such Partner shall contribute to the capital
of the Partnership the amount necessary to restore such deficit
balance to zero in compliance with Regulation Section 1.704-
1(b)(2(ii)(b)(3). Immediately thereafter the Partners shall be
deemed to have recontributed such assets in kind to the
Partnership, which shall be deemed to have assumed and taken
subject to all such liabilities.
10.7. Allocations during the Period of Liquidation. Until
the date on which all of the assets of the Partnership have been
distributed to the Partners pursuant to Section 10.2 hereof, the
Partners shall continue to share Profits, Losses and other items
of Partnership income, gain, deduction and loss as provided in
Article 6 hereof.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1. Further Assurances. From and after the date of
execution and delivery of this Agreement, the Partners shall
execute and deliver such further documents and instruments and
shall do such further acts and things as any Partner may
reasonably request in order to effectuate the transactions
contemplated by this Agreement. The Partners shall cooperate and
assist one another in the performance of the provisions of this
Agreement and shall take such steps as are reasonably necessary
to allow another party to this Agreement to discharge its
obligations under this Agreement.
11.2. Assignment. No Partner may assign or otherwise
transfer, including, without limitation, by operation of law,
this Agreement or any of its rights or obligations hereunder
except in accordance with the provisions of Articles 8 and 10.
Subject to the foregoing, this Agreement shall be binding upon
the Partners, their legal representatives, successors and
assigns.
11.3. Breach; Equitable Relief. The Partners acknowledge
that the rights of the Partners described in this Agreement are
unique and that money damages alone for breach of this Agreement
would not constitute an adequate remedy. Any Partner aggrieved
by a breach of the provisions hereof may bring an action at law
or suit in equity to obtain redress, including without limitation
specific performance, injunctive relief or any other available
<PAGE>
equitable remedy. Time and strict performance are of the essence
in this Agreement.
11.4. Amendment. No amendment to this Agreement shall be
valid unless such amendment is in writing and is signed by
authorized representatives of the parties approving such
amendment in accordance with Section 5.1.9 hereof.
11.5. Waiver. Any of the terms and conditions of this
Agreement may be waived at any time and from time to time in
writing by the party entitled to the benefit thereof, but a
waiver in one instance shall not be deemed to constitute a waiver
in any other instance. A failure to enforce any provision of
this Agreement shall not operate as a waiver of such provision or
of any other provision hereof.
11.6. Severability. In the event that any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
circumstance, the remaining provisions shall nevertheless remain
in full force and effect and shall be construed as if the
unenforceable portion or portions were deleted.
11.7. Construction. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any third party.
No third party, including without limitation any creditor or
employee of the Partnership, shall have any rights against the
Partners or any of their Affiliates, successors or assigns by
reason of or under this Agreement.
11.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
Each of the parties to this Agreement hereby irrevocably and
unconditionally (i) consents to submit to the exclusive
jurisdiction of the federal or state courts located in the State
of Delaware for any proceeding arising in connection with this
Agreement (and each such party agrees not to commence any such
proceeding, except in such courts), (ii) to the extent such party
is not a resident of the State of Delaware, agrees to appoint an
agent in the State of Delaware as such party's agent for
acceptance of legal process in any such proceeding against such
party with the same legal force and validity as if served upon
such party personally within the State of Delaware, and to notify
promptly each other party hereto of the name and address of such
agent, (iii) waives any objection to the laying of venue of any
such proceeding in the federal or state courts located in the
State of Delaware, and (iv) waives, and agrees not to plead or to
make, any claim that any such proceeding brought in any federal
or state court located in the State of Delaware has been brought
in an improper or otherwise inconvenient forum.
11.9. Attorneys' Fees. If suit or action is filed by any
Partner to enforce the provisions of this Agreement, or otherwise
<PAGE>
with respect to the subject matter of this Agreement, the
prevailing party shall be entitled to recover reasonable
attorneys' fees as fixed by the trial court and, if any appeal is
taken from the decision of the trial court, reasonable attorneys'
fees as fixed by the appellate court. For purposes of this
Agreement, the term prevailing party shall be deemed to include a
Partner that successfully opposes a petition for review filed
with an appellate court.
11.10. Modification of Final Judgment.
(a) The Partners acknowledge that by virtue of Bell
Atlantic's and NYNEX's investment in the Partnership, the
Partnership will be subject to the Modification of Final
Judgment agreed to by the American Telephone and
Telegraph Company and the United States Department of
Justice and approved by the United States District Court
for the District of Columbia on August 24, 1982, and any
subsequent orders or amendments issued in connection
therewith (the MFJ). The MFJ may prohibit the
Partnership from engaging in certain lines of businesses
and activities not currently conducted by Bell Atlantic
or NYNEX. The Partnership shall fully inform Bell
Atlantic and NYNEX on a quarterly basis as to any
business plans or activities which it undertakes, or of
any modifications in such existing plans or activities.
The Partners hereby covenant to cause the Partnership to
comply with the MFJ and not to engage in any line of
business or activity which, in the sole judgment of Bell
Atlantic or NYNEX communicated in writing to the
Partnership, might result in a violation of the MFJ.
(b) In the event of (i) an occurrence which in the sole
judgment of Bell Atlantic or NYNEX might result in a
violation of the MFJ, or (ii) a change in the MFJ, or
(iii) a planned or proposed activity of the Partnership
which in the sole judgment of Bell Atlantic or NYNEX
might cause the Partnership to be in violation thereof,
the Partners agree to eliminate the risk of violation and
bring the Partnership into conformance with the
provisions of the MFJ, in the judgment of both Bell
Atlantic and NYNEX, as expeditiously as possible. If the
Partnership takes any action which Bell Atlantic or NYNEX
determines, in its sole judgment, causes it, or which may
cause it, to be in violation of the MFJ, Bell Atlantic
and NYNEX, or either of them, may require the Partnership
immediately to purchase their respective Partnership
Interests at a price equal to the greater of Bell
Atlantic's and NYNEX's respective Capital Balances, the
book value of such Partnership Interest, or the fair
market value of such Partnership Interest as determined
by an independent appraiser mutually acceptable to Bell
Atlantic and NYNEX, as applicable, and the Partnership.
<PAGE>
(c) The Partnership shall make the Partnership's management
aware of the terms of the MFJ and of what types or
categories of businesses or activities might constitute a
breach thereof. The Partnership shall cause all managers
having significant responsibility for matters addressed
in the MFJ to sign, on an annual basis, a certificate in
such form as Bell Atlantic or NYNEX may reasonably
require from time to time. Bell Atlantic and NYNEX shall
provide, or shall cause to be provided, such instruction
on the MFJ for the Partnership's Executive Committee
members, officers and employees as the Partnership shall
reasonably request and/or as Bell Atlantic and NYNEX or
either of them shall designate in order to satisfy its
obligations set forth in the preceding two sentences, and
shall respond promptly to Partnership inquiries in
respect of particular activities, lines of business or
transactions. Bell Atlantic and NYNEX, or either of
them, may conduct an MFJ audit of the Partnership's
activities on an annual basis.
11.11. Availability of Documents. The Partners and their
Parents will make available to the Partnership true and complete
copies of any and all documents necessary for the Partnership to
fulfill its responsibilities under this Agreement or applicable
law.
11.12. Notices. Any notice or notification required,
permitted or contemplated hereunder shall be in writing, shall be
addressed to the party to be notified at the address set forth
below, or at such other address as each party may designate for
itself from time to time by notice hereunder, and, unless
otherwise specifically stated herein, shall be deemed to have
been validly served, given or delivered (i) three days following
deposit in the United States mail, with proper first-class
postage prepaid, (ii) the next business day after such notice was
delivered to a regularly scheduled overnight delivery carrier
with delivery fees either prepaid or an arrangement, satisfactory
to such carrier, made for the payment of such fees, or (iii) upon
receipt of notice given by telecopy, mailgram, telegram, or
personal delivery if such receipt is during normal business
hours, or if not received during normal business hours, on the
next business day following receipt:
If to Bell Atlantic:
Bell Atlantic Corporation
1717 Arch Street, 29th Floor
Philadelphia, PA 19103
Attention: Lawrence T. Babbio, Jr.
<PAGE>
With a copy to:
Bell Atlantic Corporation
1717 Arch Street, 32nd Floor
Philadelphia, PA 19103
Attention: Stephen B. Heimann
Telecopy No.: (215) 561-9568
If to NYNEX:
NYNEX Mobile Communications Company
2000 Corporate Drive
Orangeburg, New York 10962
Attn.: Alfred F. Boschulte, President
Telecopy No.: (914) 365-9046
with a copy to:
NYNEX Network Systems Company
4 West Red Oak Lane
White Plains, New York 10604
Attn.: Senior Vice President and General
Counsel
Telecopy No.: (914) 644-7966
If to the Partnership:
__________________________________
__________________________________
__________________________________
Attention:________________________
11.13. Headings and Section References. The headings of the
Articles and Sections herein are inserted for convenience of
reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. All references
herein to articles, sections, schedules and exhibits, unless
otherwise specified, are references to articles and sections of,
and schedules and exhibits to, this Agreement.
11.14. Entire Agreement. This Agreement supersedes all prior
agreements and all contemporaneous agreements not required hereby
or expressly referred to herein and all representations,
warranties, undertakings and understandings of and among the
parties with respect to the same subject and, with the other
agreements required hereby or expressly referred to herein, is
the entire agreement of the parties as to such subject. All
exhibits and schedules referred to herein, and all attachments to
such exhibits or schedules, and any other attachments to this
Agreement, are hereby incorporated into this Agreement and are
hereby made a part hereof as if set out in full in this
Agreement.
<PAGE>
11.15. Disclaimer of Agency, etc. This Agreement does not
create any partnership beyond the scope set forth herein, and
except as otherwise expressly provided herein and under mandatory
provisions of applicable law, this Agreement shall not constitute
any Partner the legal representative or agent of any other, nor
shall either Partner have the right or authority to assume,
create or incur any liability or obligation, express or implied,
against, in the name of or on behalf of any other Partner.
11.16. Publicity. No press release or other public
announcement related to this Agreement or the Partnership or the
transactions contemplated hereby shall be issued by any Partner
without the prior approval of the Executive Committee, except
that any Partner may make such public disclosure which it
believes in good faith to be required by law or by the terms of
any listing agreement with a securities exchange (in which case
such Partner shall consult with the Executive Committee prior to
making such disclosure).
11.17. Tax Matters Partner. Notwithstanding any other
provision of this Agreement, in any case where responsibility is
granted to the Tax Matters Partner to make any election or
determination or to take any other action which in the reasonable
judgment of the Tax Matters Partner could have a material adverse
economic impact on any other Partner, the Tax Matters Partner
shall notify such other Partners within fifteen days preceding
the time such action is to be taken. If any of the other
Partners disagree with the proposed action, responsibility for
the matter shall be given to the Executive Committee.
11.18. Counterparts. This Agreement may be executed in two
or more counterparts, and all such counterparts shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Partners have executed this Agreement
the day and year first above written.
<BELL ATLANTIC CELLCO ENTITY>
ATTEST: {BELL ATLANTIC PCSCO ENTITY
_________________________ By:_______________________________
Title: Name:
Title:
[Corporate Seal]
<PAGE>
ATTEST: NYNEX ENTITY PARTNERSHIP
_________________________ By:_______________________________
Title: Name:
Title:
[Corporate Seal]
<PAGE>
ANNEX A
TABLE OF DEFINED TERMS
Term Page
10 MHz PCS License . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Account Balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Additional Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Adjusted Capital Account Deficit . . . . . . . . . . . . . . . . . . . . 1
Adjusted Capital Account . . . . . . . . . . . . . . . . . . . . . . . . 1
Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliated Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliation Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Agreed Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bell Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bid Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bona Fide Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Breaching Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
BTA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Business Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Cellular Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change of Control Partner. . . . . . . . . . . . . . . . . . . . . . . . 43
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Competitive Activity . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . 51
control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Deadlock Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Default Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Delinquent Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Demand Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Designated MTAs/BTAs . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dissolution Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Electing Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Event of Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Formation Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Holding Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnified Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Liquidating Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
Majority Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mandatory Indemnitees. . . . . . . . . . . . . . . . . . . . . . . . . . 27
Mediator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MFJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MTA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Non-Formation Event. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Non-Selling Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Nondeductible Expenditure. . . . . . . . . . . . . . . . . . . . . . . . 6
Nondeductible Expenditures . . . . . . . . . . . . . . . . . . . . . . . 8
Nondelinquent Partner. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . . . . . . 6
NYNEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Offered Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Original Appraisers. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Other Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Paging Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Partner Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Partner Nonrecourse Debt Minimum Gain. . . . . . . . . . . . . . . . . . 6
Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Partner Candidate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Partner Nonrecourse Debt . . . . . . . . . . . . . . . . . . . . . . . . 6
Partner Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Partner Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . . 7
Partnership Minimum Gain . . . . . . . . . . . . . . . . . . . . . . . . 7
Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PCS License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PCS Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Percentage Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Permitted Indemnitees. . . . . . . . . . . . . . . . . . . . . . . . . . 27
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Piggy-back Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Pro Rata Fraction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Qualification Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Qualified Investment Banking Firm. . . . . . . . . . . . . . . . . . . . 45
receiving party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . . . 48
Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 34
Remaining Offered Interest . . . . . . . . . . . . . . . . . . . . . . . 41
Selling Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Specified Account Value. . . . . . . . . . . . . . . . . . . . . . . . . 9
Supermajority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Wireless Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
