SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1997
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 No. 0-19363
CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3221852
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 East 59th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 906-8480
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
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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. [ X ] Yes [ ] No
Indicate by check mark whether disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates at March 20, 1998, valued by reference to the closing sale price
for the registrant's Common Stock on the Nasdaq Stock Market's National Market,
was approximately $609,730,000.
Number of shares of Common Stock outstanding as at March 20, 1998: 11,024,868
(16,537,302 as adjusted for the three-for-two stock split by way of stock
dividend, to be paid on April 14, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of 10-K in which
Incorporated
Definitive proxy statement for the Part III
1998 Annual Meeting of the Stockholders
of Cellular Communications International, Inc.
"SAFE-HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
All statements other than statements of historical fact contained in this Form
10-K, including without limitation certain statements in Business, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations concerning the company's financial position and liquidity, results of
operations and other matters, are forward-looking statements. Forward-looking
statements in this Form 10-K generally are accompanied by words such as
"anticipate," "believe," "estimate" or "expect" or similar statements. Although
the Registrant believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove correct. Factors that could cause the company's results to differ
materially from the results discussed in such forward-looking statements include
but are not limited to OPI's ability to continue to design network routes,
install facilities, obtain and maintain any required governmental licenses or
approvals and finance construction and development, all in a timely manner, at
reasonable costs and on satisfactory terms and conditions, as well as
assumptions about customer acceptance, churn rates, overall market penetration
and competition from providers of alternative services. All forward-looking
statements in this Form 10-K are expressly qualified in their entirety by the
cautionary statements in this paragraph.
In this Report on Form 10-K, references to "lire" or "lira" are to the lawful
currency of Italy and references to "U.S. dollars," "dollars," or "$" are to the
lawful currency of the United States. Solely for the convenience of the reader,
this Report on Form 10-K contains translations of certain lire amounts into
U.S. dollars. These translations should not be construed as representations that
the lire amounts actually represent such U.S. dollar amounts or could have been
or could be or will be converted into U.S. dollars at the rate indicated or at
any other rate. Unless otherwise indicated, the translations of lire into
U.S. dollars have been made at 1,805.00 lire per U.S. dollar, the noon buying
rate in The City of New York for cable transfers in lire as certified for
customs purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate") on March 20, 1998.
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TABLE OF CONTENTS
Page
PART I
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Item 1 Business ......................................................... 1
Item 2 Properties ....................................................... 21
Item 3 Legal Proceedings ................................................ 21
Item 4 Submission of Matters to a Vote of Stockholders .................. 21
PART II
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Item 5 Market for the Registrant's Common Stock and
Related Stockholder Matters ...................................... 22
Item 6 Selected Financial Data .......................................... 23
Item 7 Management's Discussion and Analysis of Results
of Operations and Financial Condition ............................ 24
Item 7A Quantitative and Qualitative Disclosures About Market Risk ....... 28
Item 8 Financial Statements and Supplementary Data ...................... 28
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .............................. 28
PART III
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Items 10, 11, 12 and 13 .................................................. 28
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ...................................................... 28
Exhibit Index ............................................................ 29
Signatures ............................................................... 31
Index to Financial Statements ............................................ F-1
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PART I
ITEM 1. BUSINESS.
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GENERAL
Cellular Communications International, Inc. ("CCII" or the "Company") was
incorporated in Delaware in 1984 to own and operate cellular telephone systems
in various markets. Beginning in 1988, the Company entered into joint ventures
to pursue opportunities in wireless communications businesses outside of the
United States. The Company currently holds a 14.667% interest in Omnitel Sistemi
Radiocellulari Italiani S.p.A. ("Omnitel"), a strategic joint venture which
holds a 70% interest in and directs the management of Omnitel-Pronto Italia
("OPI"), a strategic joint venture which has been awarded one of two national
cellular telephone licenses for Italy using the GSM technology, the digital
technology for cellular telephone systems that all European Union countries have
agreed to adopt as a common standard. The Company through its 14.667% interest
in Omnitel, holds an approximate 10.267% interest in OPI.
In March 1994, the Italian Government announced that OPI was selected by
the Italian Government as the licensee of Italy's second GSM cellular telephone
license (the "License"). The other joint venturers in Omnitel are OliMan Holding
B.V. ("OliMan"), a joint venture currently owned 75% by Ing. C. Olivetti & C.,
S.p.A. ("Olivetti") and 25% by Mannesmann A.G., Bell Atlantic International,
Inc. ("Bell Atlantic") and Telia International AB ("Telia") (collectively, the
"Omnitel Corporate Partners"). Pronto Italia, which holds a 30% interest in OPI,
consists of AirTouch, Mannesmann and several smaller partners (together with the
Omnitel Corporate Partners, the "Corporate Partners"). To date, several of the
Corporate Partners have separately participated in the design, construction and
operation of GSM cellular networks in over 10 countries and have built GSM
networks which now serve several million subscribers.
The Company believes that OPI's launch as Italy's second mobile
telecommunications operator has been one of the most successful in wireless
history. Since the start-up of its GSM system in December 1995, OPI has not only
achieved comparable coverage with its much larger and longer established
competitor, but has attracted over 2.5 million subscribers. As of December 31,
1997, the Company believes that OPI had approximately 30% of the GSM market and
21% of the total cellular market in Italy, with its cellular network covering
over 95% of the Italian population. In the quarter ending June 30, 1997, OPI
generated positive EBITDA for the first time.
The Company continues to review telecommunications opportunities in Europe
from time to time.
OMNITEL AND OPI
GENERAL. In February 1994, Omnitel and Pronto Italia entered into an
agreement to jointly form OPI as their combined applicant for the second GSM
license in Italy. The License is for a period of 15 years, ending January 2010.
OPI and Telecom Italia Mobile ("TIM") are currently the only licensed GSM
cellular network operators in Italy. A third mobile communications license will
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reportedly be awarded by May 1998, although it has not yet been decided whether
the license will be exclusively DCS-1800 or whether it may include some GSM-900
spectrum.
OPI has entered into a license agreement with the Ministry of Posts and
Telecommunications (now known as the Ministry of Communications) (the "MOC")
which defines the rights and obligations of OPI relating to the License. The
License grants OPI access to 10.8 MHz, corresponding to 27 two-way 200 KHz radio
channels, and authorizes OPI to provide digital cellular telephone service as
well as other related value added services, such as voice mail, weather and
sports reports. OPI subsequently received 14 more two-way 200 KHz channels (5.6
MHz of spectrum). Pursuant to the License, OPI was required to activate cellular
telephone service to cover at least 40% of Italian territory and all Italian
regional capitals within 18 months of the License grant, and 70% of Italian
territory and 90% of the Italian population within five years of the License
grant. The License also sets forth service quality standards, such as requiring
that OPI's failure rate for attempted calls over its network be 5% or less, that
OPI route its international traffic through the switching centers of the Italian
PSTN (prior to January 1, 1998) and that OPI pay established fees for local and
international wireline service.
OPI paid a fee of 750 billion lire (approximately $415.5 million) to the
Italian government following the grant of the License, although in response to
EU pressure to encourage a fair and competitive communications market, OPI has
since received 60 billion lire from TIM. See "Business--Government
Regulation--European Union Telecommunications Law." Throughout the term of the
License, OPI is required to pay a royalty fee to the Italian government equal to
3.5% of OPI's annual sales, net of amounts paid to public wireline telephone
operators for their services. OPI agreed to pay royalties to the MOC in amounts
that are not less than 1.7 billion lire for 1995 ($0.9 million); 8.2 billion
lire for 1996 ($4.5 million); 25.4 billion lire for 1997 ($14.1 million); 51
billion lire for 1998 ($28.3 million) and 77.1 billion lire for 1999 ($42.7
million), subject in each year to reduction only due to any proportionate
reduction of the royalty percentage to less than 3.5%, and has made such
payments for 1995 and 1996.
As a result of the License award, the Company has made capital
contributions of 152.5 billion lire (an aggregate of $96.8 million at the
exchange rates in effect at the time of each contribution) to Omnitel in order
to fund the Company's 10.267% share of the capital requirements of OPI. It is
expected that no further capital contributions will be required under the
currently approved business plan, except for the subordinated credit facility of
70 billion lire that the Omnitel board of directors agreed to make available to
OPI under certain circumstances.
MARKET OVERVIEW. Italy is the largest and fastest growing cellular market
in Europe with 11.7 million subscribers at year end 1997. The number of Italian
cellular subscribers has grown rapidly since a predecessor to TIM commenced full
900 MHz analog cellular service in 1990. TIM commenced limited operation of a
GSM system late in 1992 and launched full marketing of its GSM system in April
1995, with OPI following in December 1995.
The growth in demand for cellular telecommunications, spurred by declining
cellular telephone equipment and service prices, an increased awareness of the
benefits of cellular communications, distribution through widespread channels
and expanded network coverage and capacity, has been accompanied by transition
to digital systems and development of advanced
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wireless communications technologies. Complementing such technological
developments, the Italian telecommunications market has undergone a process of
deregulation and liberalization and has become an increasingly competitive
market. OPI has capitalized on this rapid growth and developed and executed a
business plan that resulted in one of the most rapid wireless start-ups in
history. In developing its market plan, OPI viewed current market conditions in
Italy as characterized by mediocre calling quality, relatively high access costs
and poor customer service. OPI's business plan successfully addressed these
major weaknesses.
The Company believes Italy represents an attractive environment for the
provision of wireless communications services due to the following factors:
- Italy's population of 58 million, concentrated in over 13 metropolitan
areas, is the fourth largest in Europe;
- Italy has the third largest economy in Europe in terms of GDP, behind
only Germany and France, while ahead of the U.K.;
- Italy's favorable demographic characteristics which include a per
capita income of over $18,000;
- The Italian economy is characterized by large numbers of small and
medium size businesses which, in the United States, have been heavy
users of cellular services;
- Cellular service currently being provided in Italy has been rapidly
accepted by both business and residential customers; and
- Favorable EU and Italian regulations and oversight resulting from the
EU mandate to encourage a fair and competitive telecommunications
market.
The Company believes OPI is well-positioned versus TIM in providing
wireless communications services due to the following factors:
- The Corporate Partners' experience in the management of cellular
systems;
- The quality of OPI's network, which has been designed for handheld
telephone coverage; and
- OPI's business strategy, a core part of which is to provide superior
levels of customer service.
ITALIAN TELECOMMUNICATIONS INDUSTRY
OVERVIEW. Until recent years, most telecommunications services in Italy
were provided by the previously government-owned Telecom Italia and its
predecessors. Telecom Italia, privatized in October 1997, continues to be the
dominant provider of fixed telephony services in Italy. TIM, approximately 60%
owned by Telecom Italia, manages and operates the cellular phone service as
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well as the paging and public radio mobile communications formerly operated by
Telecom Italia.
ITALIAN CELLULAR TELEPHONE INDUSTRY. The cellular telephone industry in
Italy initially developed at a slower pace than other European cellular markets.
However, Italy was the fastest growing market in Europe in 1997 and mobile
telephone penetration in Italy has now surpassed the European average, having
exceeded the penetration levels in the United Kingdom, France and Germany. As of
December 31, 1997, the Italian penetration rate for cellular telephones was
approximately 20.6%, with approximately 11.7 million subscribers. Of these
subscribers, approximately 3.4 million used analog-based cellular phones and
approximately 8.3 million used GSM phones. The sole cellular operator in Italy
for five years prior to OPI entry into the market in December 1995 was TIM. OPI
launched commercial services in December 1995. As of December 31, 1997, OPI had
approximately 2.5 million subscribers, representing 21% of the total cellular
market. Italy again added the most cellular subscribers in Europe in 1997.
The following table indicates the growth in the number of analog and GSM
cellular subscribers in Italy from 1992 to 1997.
TIM OPI
YEAR ------------------------------ ----------
ENDED DEC. 31, ANALOG (EST.) GSM (EST.) GSM TOTAL
1992 780,800 0 0 780,800
1993 1,200,800 6,200 0 1,207,000
1994 2,164,400 75,300 0 2,239,700
1995 3,396,000 467,000 54,000 3,917,000
1996 3,795,300 1,910,000 713,000 6,418,300
1997 3,400,000 5,800,000 2,460,000 11,660,000
LOCAL TELEPHONE SERVICE. Telecom Italia is currently the dominant provider
of local telephone service in Italy. Local telephone service provides the
subscriber with a base dial tone and interconnections between local and long
distance service.
BUSINESS STRATEGY
OPI's principal objective is to continue to capitalize on the opportunities
it believes are available in the growing and evolving cellular market in Italy.
To establish itself as a leading provider of high quality cellular services in
Italy, OPI is pursuing the following business strategy:
OFFER SERVICES TAILORED TO SPECIFIC MARKETS. OPI offers services tailored
to the specific needs of several segments in the voice services market,
including personal users, small and medium-sized businesses, and large
corporations. The products offered to each segment contain various options,
services and prices that are designed to meet the specific needs identified
within each segment. By more effectively tailoring the package of services
offered to customers' actual needs, OPI believes that customers perceive a
higher value being delivered in relation to the cost, are more inclined to use
cellular services and have higher levels of product satisfaction.
CONSTRUCT A HIGH CAPACITY, FLEXIBLE NETWORK. By building a high capacity,
technologically advanced cellular network, OPI commenced operations with an
infrastructure that
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was capable of handling rapid growth in activations and could readily
accommodate the implementation of new voice and data products as they were
developed. In designing the network, OPI utilized its Corporate Partners'
significant experience in designing and building cellular networks to construct
a network that can provide efficient and dependable service with a minimum of
interruptions. The OPI network was built to take advantage of current digital
technology and to provide high quality service. Compared to analog systems, GSM
systems provide users with improved sound quality and enhanced security
features, as well as Pan-European roaming.
BUILD CUSTOMER LOYALTY THROUGH SUPERIOR CUSTOMER SERVICE. OPI offers
subscribers access to 24-hour, seven days a week customer service providing
information regarding territorial coverage, distribution channels, product
features and technical troubleshooting. By employing the "best practices" used
by OPI's Corporate Partners in their businesses, OPI has raised the quality of
customer service offered to the highest levels found elsewhere in Europe and the
United States and has differentiated itself from the competition and generated a
high degree of customer loyalty.
INTEGRATION OF TELECOMMUNICATIONS SERVICES. OPI's business plan anticipates
the gradual integration in Italy of the wireless and wireline telecommunications
markets. OPI has introduced new pricing plans for its GSM service that provide
competitive rates with those provided by TIM. In addition, OPI anticipates that
this convergence will also result in some integration of the wireless and
wireline telecommunications networks that provide services to customers.
SERVICES OFFERED BY OPI
VOICE SERVICES. OPI offers various tariff plans and service packages
targeting individual market segments and tailored to address different usage
patterns. Each package includes certain standard functions and offers a variety
of optional services. In addition, OPI may offer installment payment plans for
purchasing cellular telephones for business customers. OPI is continually
developing a wider range of value added service features, which management
believes will stimulate subscriber usage and provide additional sources of
revenue. Services currently offered to subscribers include international
roaming, voice mail, call waiting, call on hold, call forwarding, and
short-messaging services.
Subscribers are charged, depending upon the plan, a one-time connection
fee, a monthly basic charge and traffic fees per minute. The rates OPI may
charge for cellular services are not subject to government tariffs establishing
minimum or maximum prices.
In October 1997, OPI introduced "Rete Aziendale Mobile" (RAM), a virtual
private network service using its intelligent network platform, allowing it to
offer corporate users special low rates for calls within predefined closed user
groups, as well as quick four digit dialing within these groups (as on a PBX).
TELEPHONE EQUIPMENT AND TERMINALS. OPI and its distribution channels offer
customers GSM cellular telephones with a broad range of optional features.
Business customers may purchase GSM telephones through OPI on an installment
plan.
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MARKETING STRATEGY
OPI's marketing strategies are designed to build upon its competitive
strengths in order to increase OPI's market share and revenues by expanding its
subscriber base, maximizing usage and revenue per subscriber and minimizing
churn. OPI's marketing objective continues to be to create demand for cellular
voice and data transmission services and to attract subscribers by targeting the
needs of various market segments and providing superior service and reliability,
rather than competing principally on the basis of price. OPI generates demand
through innovative pricing and features, distribution, advertising and marketing
of cellular telephone service and by introducing significant improvements in the
quality of customer service and the cellular telephone network.
DISTRIBUTION. OPI's objective is to maintain a cost-effective distribution
network that maximizes its ability to distribute products and services to each
of the voice and data market segments it has identified. OPI uses both indirect
channels (such as existing third-party sales or distributorship organizations)
and direct channels (such as large account direct sales teams, proprietary
stores under franchising agreements and cellular "promoters" who are independent
agents affiliated with OPI).
OPI has arrangements with over 2,000 independent dealers who target both
small businesses and the personal market segment. OPI's large accounts teams
target the top companies in Italy and contact the potential high usage customers
within these organizations. OPI's cellular promoters target small to
medium-sized businesses and, in certain circumstances, larger organizations.
Cellular promoters include individuals and organizations that are already active
in marketing business communications products. Finally OPI's network of 42
franchised stores serves both business and retail/consumer markets.
ADVERTISING. OPI uses a combination of direct marketing, trade advertising
and retail advertising, along with promotional campaigns aimed at OPI's
distributors, to promote OPI's services. OPI advertises in newspapers and
periodicals as well as on television and maintains retail points of presence in
important shopping areas and in airports. Through its advertising efforts, OPI
seeks to promote a recognizable image of OPI's services with consumers,
emphasizing OPI's proximity to the customer in every aspect of the services
provided and demonstrating the opportunities and advantages that GSM cellular
service can offer in both their business and personal lives.
CUSTOMER SERVICE
The Company believes that superior customer service is vital to achieving
its objective of becoming a leading cellular telephone and data transmission
service provider in Italy. OPI attracts and retains customers by providing a
high level of service in the key areas of customer assistance and maintenance,
billing and fraud prevention. OPI's customer service operations utilize state of
the art technology and are operated by well trained staff. OPI continually
expands the capacity of its customer service operations to keep pace with
subscriber growth.
CUSTOMER ASSISTANCE AND MAINTENANCE. OPI provides a full range of customer
services from the point of sale onward, including customer inquiry helplines,
regional service centers and
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on-line assistance to customers with respect to billing and technical
difficulties, service inquiries, the use and repair of equipment and other
aspects of OPI's network operations. OPI provides its customers with a universal
number to permit dialing from any location in Italy to call a customer service
center that provides 24-hour service. This provides customers with quick,
"one-stop" service and a single contact point for help in solving their cellular
telephone and data transmission problems.
BILLING. OPI provides its subscription customers with easy to read bills
that are sent out bi-monthly. For customers who require detailed bills, OPI
offers several billing options.
PREPAID SERVICES. The majority of OPI's subscribers do not receive bills
because they are prepaid subscribers. These subscribers purchase "airtime" in
advance in the form of cards with unique codes. These codes, when input into
OPI's customer friendly user-interface, increase a subscriber's balance, which
is then continuously displayed on the telephone's LCD screen. In 1997, OPI
introduced the first rechargeable GSM card that can be used to make
international calls from Italy and can be used abroad.
CELLULAR TELEPHONE TECHNOLOGY
GSM AND DCS-1800. GSM is a digital technology for cellular telephone
systems that all European Union ("EU") countries (and many countries outside the
EU) have agreed to adopt as a common standard. Commercial launch in several
European countries commenced in 1992 and by the end of 1997 there were
approximately 41.2 million GSM (900 MHz) subscribers in Western Europe, an
increase of 100% over 20.6 million subscribers at the end of 1996. Because of
the popularity of the GSM standard and the recent rapid growth in GSM
subscribers, the Company believes that GSM telephones will continue to decline
rapidly in price. The GSM system is designed to allow subscribers to use their
cellular telephones and automatically receive calls throughout Europe and, in
theory, wherever GSM technology has been adopted. Over 100 countries, including
virtually all countries in Western Europe, have issued or propose to issue GSM
licenses. The GSM standard has also been adapted to the 1,800 MHz range and many
European countries have issued or will issue one or more of these so-called
"DCS-1800" licenses. DCS-1800, because of its technical characteristics, is
better suited for an urban setting.
Because of the digital nature of the technology, GSM technology offers
significantly increased capacity, better voice quality and improved privacy than
existing analog systems. In addition, GSM data is contained on a subscriber
identity module card ("SIM Card" or "Smart Card") which can be transferred from
one cellular telephone to another. This feature greatly increases the
possibilities for distributing GSM services by eliminating the need for all
distribution points to stock telephones. GSM also provides for such advanced
value-added features as short messaging service (which provides an alphanumeric
display of short messages), caller ID (which displays the calling number) and
other data services. An example of the innovative usage of these features to
increase penetration has been OPI's use of the short messaging service to
provide its prepaid subscribers with a real time account balance.
GSM has also been designed to offer various technical solutions to prevent
fraud and misuse, such as authentication, together with anonymity and encryption
(the transformation of
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information from a readily recognizable system of coding to an encoded or
enciphered system of coding, or vice versa) of the signal so that conversations
cannot be easily intercepted.
OPERATING CHARACTERISTICS. The cellular telephone industry is typically
characterized by high fixed costs and low variable costs. Until technological
limitations on total capacity are approached, additional cellular telephone
system capacity can normally be added in increments that closely match demand
and at less than the proportionate cost of the initial capacity. The industry
has also recently experienced decreasing equipment prices. The amount of profit,
if any, under such circumstances is dependent on, among other things, prices and
variable marketing costs, which in turn are affected by the amount and extent of
competition.
NETWORK DESIGN, CONSTRUCTION AND PERFORMANCE
Quality and geographic coverage of the network are key factors in the
distribution of cellular telephone service. OPI has constructed a high capacity,
technologically advanced cellular network. The irregular topography, including
many tunnels and mountains, near some of Italy's most important cities requires
OPI to implement special network designs to avoid interruptions of calls.
NETWORK DESIGN. The basic element of OPI's GSM network are its base
stations, the interface between the user's telephone and the network. The base
stations house radio transmission and reception equipment and perform signal
processing activities when interfacing with the signal. Each base station has
substantial fixed costs which include the cost of purchasing or leasing land,
constructing the facility, installing adequate power supply, installing adequate
security systems and constructing and maintaining the equipment, towers,
cabling, antennae or other related equipment. As of December 31, 1997,
approximately 2,400 base stations had been installed. OPI plans to install an
additional 1,300 base stations in 1998.
Cellular traffic is collected from a number of base stations and routed to
a Base Station Controller ("BSC"). The BSCs allocate radio channels among base
stations, manage intra-BSC handoffs among the base stations and interface with
the Mobile Switching Centers ("MSC"). The MSCs will provide the connection
between OPI's GSM network and Telecom Italia's fixed network. MSCs are located
near Telecom Italia's switching centers to reduce the costs of accessing the
PSTN. Interconnection of the various elements of OPI's network has generally
been accomplished using lines leased from Telecom Italia. However, where
appropriate and cost effective, OPI intends to develop its own transmission
capabilities or utilize third party links.
In 1997, OPI installed an Intelligent Network Platform, which allows for
the rapid creation and implementation of advanced network features (such as
closed user group four digit dialing).
BASE STATION CONSTRUCTION. The process of obtaining appropriate sites
requires that OPI personnel coordinate, among other things, site-specific
requirements for engineering and design, leasing of the required space,
obtaining all necessary governmental permits, construction of the facility and
equipment installation. OPI has utilized software systems developed by its
Corporate Partners to assess the feasibility of various new sites so that
network design and site development are coordinated to the maximum extent
possible.
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PERFORMANCE OBJECTIVES. The network is designed to perform with less than
2% of calls interrupted during peak periods, including less than 1% of
interruptions in the connection between MSCs and the fixed network, and with
system availability of 99.94% during daytime hours. OPI selects appropriate cell
sites and alternative cell sites so as to reduce voice alteration and call
interruption resulting from signal attenuation or interference due to Italy's
irregular topography.
OPI awarded Nokia Telecommunications ("Nokia") a contract for the initial
and secondary phases of construction of its GSM network.
ROAMING AGREEMENTS. Roaming allows OPI's customers to receive and make
international, local and long distance calls while traveling outside of Italy.
OPI has negotiated roaming agreements with over 70 operators in more than 50
countries, enabling subscribers to make and receive calls abroad.
PERFORMANCE BOND. OPI has provided an approximate 219 billion lire ($121.3
million) performance bond to the Italian government linked to OPI's meeting
certain performance goals relating to territory coverage, investment, employment
and payment of license fees. Specifically, OPI was required to (i) cover 50% of
Italian territory with its cellular network by May 1996 and 98% by May 1998,
(ii) invest 969 billion lire ($536.8 million) by May 1996 and 1,552 billion lire
($859.8 million) by May 1998, (iii) employ 1,163 people by May 1996 and 2,686
people by May 1998, (iv) pay royalties to the MOC in amounts that are not less
than 1.7 billion lire for 1995 ($0.9 million); 8.2 billion lire for 1996 ($4.5
million); 25.4 billion lire for 1997 ($14.1 million); 51 billion lire for 1998
($28.3 million) and 77.1 billion lire for 1999 ($42.7 million), subject in each
year to reduction only due to any proportionate reduction of the royalty
percentage to less than 3.5% and (v) maintain the declared stockholding majority
of OPI until February 1, 2000. OPI is subject to monetary penalties for failing
to achieve such goals. Performance goals have been achieved to date, and
although no assurance can be given, the Company believes the future performance
goals are achievable. The maximum liability of the Company under the performance
bond would be approximately 22.5 billion lire ($12.5 million), reflecting its
proportionate interest in OPI. In addition, the failure of OPI to meet the
standards of service (meaning proper use of frequencies, meeting coverage goals,
maintaining and interconnecting the networks, and prompt payment of license
fees) prescribed in the License and the performance bond could result in loss of
the License and have a material adverse effect on OPI and the Company.
ARRANGEMENTS WITH TELECOM ITALIA
FEES AND PRICING WITH TELECOM ITALIA. Pursuant to the License, OPI connects
its mobile cellular telephone network to the PSTN. Although Telecom Italia
grants OPI discounts on two Mbps leased lines, OPI is negotiating costs for 34
and 155 Mbps leased lines, which will further reduce OPI's interconnection
expense. Telecom Italia charges equivalent access fees and provides equivalent
access to and pricing of leased lines to each of OPI and TIM. Following a
reduction in 1997, OPI's access charges when interconnecting to the PSTN
(originally set at 200 lire per minute for all calls) are currently set at 200
lire per minute for inbound calls and 80 lire per minute for outbound calls.
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OPI'S CORPORATE PARTNERS
The Corporate Partners are on the leading edge of cellular technology
worldwide. Certain Corporate Partners are involved in standardizing and revising
technological specifications of cellular systems in their respective markets and
also possess expertise in other international technological areas such as the
European Telecommunications Standards Institute, the Universal Mobile
Telecommunications System and the International Telecommunications Union. The
Corporate Partners include OliMan (75% owned by Olivetti and 25% by Mannesman),
Bell Atlantic, AirTouch, Mannesmann and Telia. Olivetti is one of Italy's
largest companies and has been involved in the private voice and data
communications network industry for over ten years. Bell Atlantic Mobile
operates in more than fifteen U.S. states making it one of the largest suppliers
of cellular services in the United States. AirTouch is one of the world's
largest wireless telecommunications operators. Mannesmann is a subsidiary of
Mannesmann AG, one of Germany's ten largest industrial conglomerates and owner
of the largest interest in Germany's D2 Private GSM system. Telia was a pioneer
in European cellular communications and an initiator of the GSM system. Telia is
at present participating in the development of cellular systems in almost 20
different countries, either directly or in collaboration with national telephone
operators. None of the Corporate Partners has any obligations with respect to
the Notes or (except as otherwise set forth herein) to provide services or
financial support to OPI.
COMPETITION
OPI competes with wireline telephone service offered by Telecom Italia, and
the cellular telephone service offered by TIM, as well as with at least one
additional wireless license to be granted in 1998 and at least partially with
Telecom Italia's recently launched low mobility DECT service. TIM has a
significant advantage over OPI in the Italian cellular telephone market, with
approximately 9.2 million analog and GSM subscribers as of January 1, 1998. TIM
has certain advantages over OPI such as a larger customer base, more operating
spectrum and the use of the Telecom Italia name. Many high usage business
customers were already TIM cellular customers by late 1995 and remain TIM
subscribers. Moreover, OPI may also face significant potential competition from
other communications technologies that are being or may be developed or
perfected in the future.
GOVERNMENT REGULATION
OVERVIEW. The legal framework for the regulation of the telecommunications
sector in Italy has been extensively revised in recent years. This revision has
included the liberalization of substantially all telecommunications services,
the formation of the Communications Authority, the independent agency to
regulate the communications industry, the implementation of the Framework Law,
and the adoption of the Telecommunications Regulations by the Italian Government
pursuant to Law No. 650 of December 23, 1996 ("Law 650") and Law No. 189 of July
1, 1997 ("Law 189") to implement a number of EU directives in the
telecommunications sector. Effective August 1, 1997, the former Ministry of
Posts and Telecommunications changed its name to the Ministry of Communications.
The Telecommunications Regulations became effective on October 7, 1997.
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The Framework Law in general aims at (i) ensuring the improvement of
competition and efficiency in the telecommunications sector; (ii) establishing
adequate quality standards; (iii) ensuring access to telecommunications services
in a homogeneous manner throughout Italy; (iv) defining a clear and transparent
tariff system based on the "price cap" method which will apply to Telecom
Italia's fixed public voice telephony services for up to two years from August
1, 1997 and (v) protecting consumers' and users' interests.
The Telecommunications Regulations contain provisions concerning (i) the
granting of general authorizations or individual licenses to provide
telecommunications services; (ii) universal service obligations and their
financing; (iii) access contributions; (iv) special obligations imposed on
operators having significant market power, including the determination of
interconnection charges using principles of cost orientation; (v) numbering and
number portability; (vi) rights of way; and (vii) the essential requirements
that must be complied with in the provision of services and when interconnecting
between public telecommunications networks. The Communications Authority is
expected to establish detailed regulations governing the telecommunications
sector and will monitor their application, while the Ministry of Communications
will retain the responsibility for defining telecommunications policy in Italy,
and will have the power and authority to grant authorizations and licenses.
The activities of OPI and TIM are also subject to the terms and conditions
of their public operating concessions (the "Public Concessions").
Other significant telecommunications measures include Law No. 58 of January
29, 1992 ("Law 58"), implementing regulations and the Ministry of Communications
decrees principally promulgated with respect to tariffs, and Regulation No. 197
of May 8, 1997, concerning telephone service and subscriptions contracts.
THE COMMUNICATIONS AUTHORITY. The Communications Authority will consist of
a President appointed by the Italian Government through a Presidential decree, a
Committee for Infrastructures and Networks, a Committee for Products and
Services and the Council. Each of the Committees' members will be selected by
the Italian Parliament (four by the Senate and four by the Chamber of Deputies)
and appointed through a Presidential decree. Each of the Committees and the
Council will be responsible for establishing regulations for their specific
areas.
The Committee for Infrastructures and Networks will be responsible for,
among other things, guidelines for allocating radio frequencies relating to
telecommunications services; defining objective and transparent criteria for
establishing tariffs for interconnection and network access; regulating
relationships among telecommunications companies; settling disputes regarding
interconnection; and defining the scope of the universal service obligation and
the operators subject to it, together with criteria for calculating and sharing
its costs.
The Committee for Products and Services will be responsible for, among
other things, issuing guidelines for regulating product quality and conformity
with EU directives governing the relationship between companies controlling
fixed or mobile telecommunications networks and telecommunications service
providers.
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The Council will be responsible for, among other things, adopting
regulations establishing criteria for issuing licenses for the
telecommunications sector and for TV and radio activities (including cable and
satellite broadcasting) pursuant to Presidential Decree No. 318/97.
The Communications Authority will have investigative powers, as well as the
authority to impose sanctions on operators who do not comply with their
directives and resolutions. In addition, the Communications Authority will be
entitled to propose to the Ministry of Communications the revocation and/or
suspension of general authorizations and individual licenses in the event of
repeated violations by the holder.
PUBLIC CONCESSIONS. The Public Concessions of OPI and TIM are embodied in
conventions setting out their obligations relating to the provision of public
services (the "Conventions"). Pursuant to these Public Concessions, OPI and TIM
were each granted non-exclusive rights for the installation and operation of a
mobile telecommunications network for the provision of telecommunications
services. The Public Concessions will expire in 2010. OPI and TIM are subject to
parallel rules and regulations concerning the provision of GSM services. The
services must be rendered in accordance with the terms and conditions set forth
in the Conventions, which address, among other matters, radio frequency
allocation, commencement of operations, price controls and service requirements.
TIM's GSM service commenced operations in April 1995. OPI's service commenced
operations on December 7, 1995.
Specifically, the GSM concessions require each of OPI and TIM:
- to cover 70% of the Italian national territory and 90% of the
population within five years and to provide service in major towns and
cities in each of the 20 regions of Italy;
- to meet certain technical requirements concerning the provision of GSM
cellular services to end users;
- to sign interconnection agreements with Telecom Italia, as the owner
of the fixed public network, which were entered into in April 1995;
- to pay access charges to Telecom Italia for the use of the connected
wireline telephone network at an average of 200 lire per minute
(reduced to 140 lire per minute for all calls as of June 6, 1997 and,
as of August 1, 1997, 200 lire per minute for calls incoming to the
mobile network from the fixed network and 80 lire per minute for calls
incoming to the fixed network from the mobile network); and
- to deliver to the MOC, upon request, data and information on their
business operations, as well as copies of their audited financial
statements and to observe certain criteria of accounting separation in
relation to the GSM services performed.
The duration of the GSM concessions is 15 years, commencing on February 1,
1995.
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As set forth by the Conventions, each licensee's corporate purpose shall be
exclusively the research, design, realization and operation of radiomobile
networks and related services, including rental and sale of telephone software,
equipment and appliances, provided that such ancillary activities do not
interfere with the provision of GSM service and the sound management of the
licensee. Each of the licensees is required by the relevant Convention to
maintain its registered office, and technical and administrative headquarters in
Italy.
The OPI Convention further provides that at least 60% of the OPI share
capital as declared at the time the license was granted be maintained in its
entirety by the relevant shareholders for at least five years as from the date
of granting of the License.
The Conventions expressly state that the licenses cannot be transferred or
assigned, in whole or in part, for any reason whatsoever, unless the MOC has
granted its prior consent. Moreover, upon occurrence of certain material
breaches by the licensees, the MOC may revoke the licenses.
The settlement of any controversy arising from the construction, validity
and performance of the Conventions, to the extent an amicable settlement cannot
be reached within 30 days from the date on which one of the parties has invited
the other to negotiate, shall be remitted to the exclusive jurisdiction of an
arbitration tribunal consisting of five members, two of whom shall be appointed
by the MOC, two of whom shall be appointed by the relevant licensee and the
remaining member shall be appointed by the State Council. The arbitration
tribunal shall sit in Rome and shall decide at law on the basis of Italian
substantive and procedural laws.
The OPI Convention calls for the issuance by OPI of a performance bond
linked to OPI's meeting certain performance and investment goals. OPI would be
subject to monetary penalties for falling to achieve such goals.
OPI and TIM have licenses to provide mobile telecommunications services
using the advanced DCS-1800 digital technology, subject to the MOC granting
access rights to the required frequencies for the provision of such services.
Pursuant to Law 189, the MOC is expected to grant such frequencies to the GSM
operators during 1998 and to license a third operator to provide such service in
1998. At least two consortia, Picienne Italia S.p.A. (the joint venture among
Mediaset S.p.A., British Telecommunications, Italgas S.p.A., ENI S.p.A., Banca
Nazionale del Lavoro S.p.A. and Telenor) and Wind Telecomunicazioni S.p.A. (a
consortium including Deutsche Telekom A.G., France Telecom and ENEL S.p.A.),
have separately indicated their intention to bid for the third DCS-1800 license.
The Telecommunications Regulations provide that by January 1, 1999 the
existing Public Concessions will have to be modified in conformity with the new
regulatory framework.
TARIFF AND PRICING POLICY. GSM prices are established autonomously by each
of OPI and TIM, taking into account, among other factors, structure and levels
of prices/tariffs for interchangeable services (analog mobile services and basic
telephony services) and the policies of the main European operators, subject
only to the obligation to give the MOC or the Communications Authority, as
applicable, 30 days' notice of changes in prices. The licensees may
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not apply discriminatory contractual conditions to the various end consumers,
except that the right to apply special conditions to particular categories of
customers may be granted by the MOC.
EUROPEAN UNION TELECOMMUNICATIONS LAW. Italy is a member of the EU and, as
such, is required to implement the directives issued by the EU. Although
directives must be incorporated into domestic legislation to be fully effective,
a directive or certain provisions of a directive may take effect automatically
in a member state (a "Member State") on the prescribed deadline if it is
sufficiently clear and specific, even if it is not formally adopted by such
member State by the prescribed deadline. If a directive is not formally
implemented by the prescribed deadline, the only remedy available for an
interested party is to seek damages against the Member State. Italy is also the
addressee of various EU resolutions, recommendations and communications, which
are not legally binding, although politically important.
In June 1990, the European Commission adopted a Directive on Competition in
the Markets for Telecommunications Services ("EU Directive 90/388"), which
opened to competition telecommunications services other than fixed public voice
telephony services. In particular, EU Directive 90/388 required the
liberalization of circuit and packet switched data transmission, in accordance
with regulations promulgated by each national regulatory authority. When
initially issued, EU Directive 90/388 did not apply to radio mobile services or
to satellite services. As discussed below, subsequent amendments to EU Directive
90/388 extended its terms to cover such services. EU Directive 90/388 was
formally implemented in Italy by Decree 103.
On January 16, 1996, the European Commission adopted EU Directive 96/2,
liberalizing mobile telecommunications services within the EU (the "Mobile
Telecommunications Directive"). The most important elements of the Mobile
Telecommunications Directive implemented by Law 189 are the following:
- Mobile telecommunications operators are authorized to construct their
own infrastructure for the mobile network or to utilize infrastructure
owned by third parties.
- Direct interconnection among mobile networks is to be guaranteed.
- The number of licenses for mobile telecommunications systems may only
be limited on the basis of essential requirements and in case adequate
frequencies are not available.
- The conditions for granting licenses for access to frequencies and for
interconnection to the fixed public telephony network shall be
regulated with transparency, proportionality and non-discrimination.
The EU competition rules have the force of law in the Member States and are
therefore applicable to OPI's operations in the telecommunications market. The
main principles of the EU competition rules are stipulated in Article 85 of the
EC Treaty. Article 85 prohibits collusive behavior between competitors which may
effect trade between Member States and which restricts, or is intended to
restrict, competition within the EU. These rules are enforced by the European
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Commission in cooperation with the national competition authorities, including
the Italian Antitrust Authority. In addition, the national courts have
jurisdiction to litigate violations of EU competition law.
In a decision dated October 4, 1995, the European Commission antitrust
bureau found that the fact that OPI was required to pay the 750 billion lire
($415.3 million) license fee was unfair and discriminatory and undermined the
capability of OPI to effectively compete with Telecom Italia, which was not
asked for any money contribution in connection to the granting of its license
from the MOC. As a result, the European Commission antitrust bureau's 1995
decision stipulated that TIM must compensate OPI in the amount of 60 billion
lire. In October 1997, following a letter by Mr. Karel Van Miert, the chief of
the European Commission antitrust bureau, to the Italian Telecommunications
Minister expressing concern over the delay in implementing the package of
corrective measures regarding mobile telephony in Italy, TIM made a compensation
payment to OPI of approximately 60 billion lire. However, TIM is disputing the
basis for such payments and has recently filed an action seeking to have the 60
billion compensation payment nullified.
THE OMNITEL AGREEMENT
The Company, OliMan, Bell Atlantic and Telia have entered into an agreement
(the "Omnitel Agreement"), that contains provisions governing the relationship
between them, including, but not limited to, provisions relating to the
governance and financing of Omnitel.
CAPITALIZATION. Any new capital calls must be unanimously agreed to by the
Omnitel board of directors. Unless a coventurer otherwise consents, its
financial liability with respect to a capital call or any other commitment to
provide funds to Omnitel shall be limited to its pro rata ownership interest
therein.
MANAGEMENT OF OMNITEL. The Omnitel board of directors consists of nine
members, with one member designated by each of the Company and Telia, two
members designated by Bell Atlantic and five members initially designated by
OliMan, with OliMan designating the chairman of the board of directors. The
presence and unanimous affirmative vote of at least two of the members of the
board of directors designated by OliMan and of all the other members of the
Board is required for any actions, decisions or determinations relating to the
following, among others:
(i) the formation of any subsidiary company or entering into any joint
venture or other similar arrangement;
(ii) the issuance or redemption of any shares, bonds or other securities of
Omnitel;
(iii) the acquisition of shares of or any interest in any corporation or
the creation of any partnership, consortium or other legal entity of
which Omnitel is or will be a partner, member or similar participant;
(iv) the adoption or amendment of Omnitel's annual budget or future
business plan;
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(v) any merger, consolidation or amalgamation with or into any other
company or corporation or the sale or disposition of certain
franchises or licenses;
(vi) the engagement in certain businesses outside the scope of Omnitel's
"object";
(vii) the declaration or payment of dividends or the making of any other
distribution to shareholders;
(viii) the voluntary liquidation, dissolution or termination of Omnitel;
(ix) the amendment of Omnitel's by-laws;
(x) the initial appointment of the independent auditors, and of the
outside counsel to Omnitel; and
(xi) the increase or decrease of the number of members of the Omnitel
Board.
The presence of at least two members of the Board designated by OliMan and
at least all but one of the other members of the Board and the affirmative vote
of at least two of the members of the Board designated by OliMan and at least
all but one of the other members of the Board are required for any actions,
decisions, or determinations of the Omnitel Board (including, without
limitation, a determination to present such matters or proposals to the
shareholders of Omnitel) relating to any of the following matters or proposals:
(i) except as specifically provided for in the annual budget and
future business plan, the lease, acquisition or disposition of any assets
in a transaction or in a series of related transactions having a value in
excess of 300 million lire ($166,000);
(ii) the appointment, granting of powers, dismissal and determination
of the remuneration of the Chairman, the Managing Director or the principal
executive officers of Omnitel;
(iii) any change in the independent auditors, and of the outside
counsel to Omnitel;
(iv) subjection of the property or assets of Omnitel to any mortgage,
lien, pledge, claim or judgment except in the ordinary course of business;
(v) the extension of loans or guarantees to or on behalf of third
parties except in the ordinary course of business in amounts not to exceed
in the aggregate 300 million lire ($166,000) or individually 100 million
lire ($55,000) annually,
(vi) the incurring of indebtedness for borrowed money except in the
ordinary course of business in amounts not to exceed in the aggregate 1.0
billion lire ($554,000), or individually 500 million lire ($277,000)
annually;
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(vii) enter into, amend or terminate any transaction with any venturer
or affiliate of any venturer in Which the value of the goods and/or
services to be purchased, sold or leased (including compensation or
reimbursement for employees made available to the venturer) would exceed 25
million lire ($14,000) in a transaction or a series of related
transactions; and
(viii) the acceptance of any terms and conditions necessary to obtain
and/or renew a license.
For any actions, decisions or determinations of the Board which require the
unanimous decision of the Board, the Omnitel venturers, as shareholders of
Omnitel, agreed to vote in conformance with the Board's determination whenever a
resolution of the Shareholders' Meeting is also required. The venturers also
agreed, as shareholders of Omnitel, not to vote in support of any action or
decision which requires a unanimous or supermajority decision of the Board as
described above, unless the Board has first considered such action or decision
and the required affirmative vote of the members of the Board for such action or
decision has been obtained.
The By-laws of Omnitel require only the affirmative vote of 75% of the
members of the Board of Directors to approve the actions described above as
unanimous actions. If such an action were approved by 75% of the Board of
Directors, but not consented to by the Company as required by the Omnitel
Agreement, the Company might not be able to obtain injunctive relief under
Italian law.
CERTAIN TRANSFER OF OMNITEL STOCK. A co-venturer may, without the consent
of the other co-venturers, transfer its Omnitel stock to its affiliates, other
co-venturers or the affiliates of other co-venturers. A co-venturer may not,
however, sell, assign, transfer, pledge, encumber or otherwise dispose of any of
its Omnitel stock to a party who is not an affiliate, a co-venturer or an
affiliate of a co-venturer, without prior written consent of all the other
co-venturers. All transfers of Omnitel stock other than to affiliates, other
co-venturers or affiliates of other co-venturers are subject to a right of first
refusal by the other co-venturers. If more than one co-venturer exercises the
right of first refusal, each of the co-venturers may purchase a pro rata portion
of such Omnitel stock (based upon the total number of shares owned by all
co-venturers exercising the right of first refusal). Such rights of first
refusal may be exercised at the price indicated by the transferring co-venturer
in a notice that must be sent by the transferring co-venturer to the remaining
co-venturers prior to effecting a transfer that gives rise to a right of first
refusal.
CHANGE IN CONTROL OF A CO-VENTURER; RIGHTS OF FIRST REFUSAL. If more than
50 percent of the shares of voting securities of a co-venturer (the "Selling
Co-Venturer") are transferred to a third party (or parties) that is not an
affiliate of the Selling Co-Venturer (an "Omnitel Change in Control"), each
co-venturer (a "Buying Co-Venturer") shall have the non-assignable right to
purchase all or a pro rata portion (based upon the total number of shares owned
by co-venturers exercising such right to purchase) of the Selling Co-Venturer's
shares of Omnitel stock at a price indicated by the Selling Co-Venturer. In the
event a Buying Co-Venturer objects to the price so indicated, it shall be
settled by arbitration. The acquisition of control of any parent company of a
co-venturer which owns or operates substantial other businesses or entities in
addition to the venture is not deemed to constitute an Omnitel Change in
Control.
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REQUIRED SALE UPON DEFAULT IN REQUIRED CAPITAL CONTRIBUTION. If a
co-venturer willfully fails to make required capital contributions, the other
co-venturers shall have the non-assignable option to purchase such co-venturer's
Omnitel stock for a cash price equal to the paid-in-capital represented by such
stock.
ADDITIONAL REQUIRED SALES. The following may also give rise to the granting
of a non-assignable option to purchase co-venturer's Omnitel stock at the cash
price equal to the paid-in-capital represented by such stock: (i) the failure by
a co-venturer to perform any material obligation under the Omnitel Agreement;
(ii) the filing of a bankruptcy petition by a co-venturer, or (iii) a willful
violation or breach by a co-venturer of any of the covenants in the Omnitel
Agreement. If the non-assignable option to purchase a defaulting co-venturer's
Omnitel stock were triggered and the defaulting party refused to sell its
Omnitel stock, thereby breaching the relevant provisions of the Omnitel
Agreement, under Italian law, the Company may face difficulty in becoming the
record owner of the Omnitel stock and could thus be forced to bring an action
for damages against the co-venturer refusing to comply with such provisions.
COVENANT NOT TO COMPETE. The co-venturers have agreed that, at all times
during which they own Omnitel stock and for two years following the disposition
to an unaffiliated third party thereof, they will not engage in the business of
building, owning or operating a cellular mobile telephone network or providing
mobile telecommunications services (a "Competing Business") in Italy without the
consent of Olivetti and at least all but one of the other co-venturers, which
consent is not to be unreasonably withheld; provided, however, that a
co-venturer may own less than 10 percent of a Competing Business if the
co-venturer is not represented on the board and has no active role in the
management of the Competing Business. Each of the co-venturers and their
affiliates may, however, engage in or possess an interest in any other business
in Italy or any Competing Business outside of Italy.
THE OPI AGREEMENT
Omnitel and Pronto Italia have entered into an agreement (the "OPI
Agreement"), that contains provisions governing the relationship between them,
including, but not limited to, provisions relating to the governance and
financing of OPI.
CAPITALIZATION. Each of Omnitel and Pronto Italia had originally committed
to contribute, pro rata to its holdings, to the capital of OPI an aggregate
total not exceeding l,000 billion lire ($554 million) (the "Mandatory Capital
Calls"). Such amount has been subsequently increased to 1,450 billion lire ($803
million). In the event that the capital requirements of OPI exceed the Mandatory
Capital Calls, Omnitel and Pronto Italia are entitled to subscribe to such
additional capital calls but are not obligated to do so.
SHARE TRANSFERS. Omnitel and Pronto Italia have agreed for a period of five
years from the award of the License to be bound by the restrictions on share
transfers as required by the License terms. Each of Omnitel and Pronto Italia
has undertaken not to transfer any of the shares it holds at any time in OPI
except to another party to the OPI Agreement. To the extent that under the terms
of the License or any applicable law or regulation the sale of OPI shares is or
becomes permitted only in part, the obligation not to transfer OPI shares shall
terminate in the first instance in respect of the shares of Pronto Italia in
OPI, and shall expire in respect of the
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shares held by Omnitel only when the amount of shares that can be transferred
exceeds 30% of the capital of OPI. Prior to the grant of the License, the
shareholders of Omnitel have offered in a letter to the MOC to collectively
maintain at least 86% of the share ownership of Omnitel for the first five years
of the License.
MANAGEMENT OF OPI. The OPI board of directors includes the non-executive
Chairman designated by Pronto Italia, the Managing Director and Chief Financial
Officer designated by Omnitel and the Chief Technical Officer designated jointly
by Bell Atlantic and AirTouch or in the event of their failure to reach
agreement in such designation by OliMan. A decision of a Special Majority (which
requires the favorable vote of at least one director designated by Pronto
Italia) of the Board of Directors is required for the following matters, among
others: (i) certain agreements between OPI and any subsidiary of its
shareholders or any company in which any shareholder has a direct or indirect
voting interest of 25% or more; (ii) adoption by OPI of annual budgets and
business plans and material amendments thereto; (iii) investments by OPI in
assets in excess in the aggregate of 5 billion lire ($2.8 million); (iv)
incurrence by OPI of indebtedness (excluding ordinary bank loans) exceeding 5
billion lire ($2.8 million); (v) granting of loans exceeding 5 billion lire
($2.8 million) to any single party; and (vi) recommendations in respect of the
distribution of dividends.
COVENANTS NOT TO COMPETE. Omnitel and Pronto Italia have agreed that, at
all times the OPI Agreement remains in effect and for two years following the
termination thereof or until any party ceases to be a party whenever such event
may occur, they nor any company directly or indirectly controlled by either of
them, or any company which directly or indirectly controls either of them, will
not involve themselves or itself, as the case may be, in any way, through
participation in excess of 15%, or of 5% as regards quoted companies, in
wireless activities in Italy (other than the supply of goods and services to
cellular telephone systems) regarding cellular telephony systems which fall
within the "object" of OPI. Each of Omnitel and Pronto Italia and their
shareholders may, however, engage in any activity (with the exception of PCN
services) to which the parties decide not to extend OPI's mission, if their
engaging in such activity will not distract resources and commitment from the
mission of OPI.
OTHER CONSIDERATIONS
RISKS INHERENT IN FOREIGN INVESTMENT
The Company has invested substantially all of its resources outside of the
United States and intends to continue to review possible international
investments in the future. Risks inherent in foreign operations include loss of
revenue, property and equipment from expropriation, nationalization, war,
insurrection, terrorism and other political risks, risks of increases in taxes
and governmental royalties and fees and involuntary renegotiation of contracts
with foreign governments. Only a portion of such risks may be insured. The
Company currently does not have political risk insurance in Italy. The Company
is also exposed to risks of change in foreign and domestic laws and policies
that govern operations of foreign-based companies.
There can be no assurance that the laws or administrative practice relating
to taxation, foreign exchange or other matters in Italy will not change, and any
such change could have a material
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adverse effect on the financial affairs of OPI or the Company. The value of the
Company's interest in OPI may also be affected by changes in tax and other laws
and other political, economic, socioeconomic or diplomatic developments in or
affecting Italy.
PASSIVE FOREIGN INVESTMENT COMPANY
Special U.S. tax rules apply to U.S. taxpayers that own stock in a passive
foreign investment company (a "PFIC"). In general, a non-U.S. corporation will
be treated as a PFIC if at least 75 percent of its income is "passive income" or
if at least 50 percent of its assets are held for the production of "passive
income." A non-U.S. corporation that owns 25 percent or more of the stock of a
non-U.S. subsidiary is treated as receiving a proportionate share of the income
of, and as owning a proportionate share of the assets of, such subsidiary.
It is possible that Omnitel is a PFIC. Generally, except to the extent the
Company makes an election to treat a PFIC in which it owns stock as a "qualified
electing fund" (a "QEF") in the first taxable year in which the Company owns the
PFIC's stock, (i) the Company would be required to allocate gain recognized upon
the disposition of stock in the PFIC and income recognized upon receiving
certain dividends ratably over the Company's holding period for the stock in the
PFIC, (ii) the amount allocated to each year other than the year of the
disposition or dividend payment would be taxable at the highest U.S. tax rate
applicable to corporations, and an interest charge for the deemed deferral
benefit would be imposed with respect to the tax attributable to each year, and
(iii) gain recognized upon disposition of PFIC shares would be taxable as
ordinary income. The Company acquired shares in Omnitel in 1990. The regular
deadline for making a QEF election for 1990 was in 1991. In December 1997, new
temporary regulations were issued by the Treasury Department, pursuant to which
the Company intends to seek a ruling from the Internal Revenue Service that
would allow the Company to retroactively make the QEF election as described
above. No assurance can be given that the Internal Revenue Service will grant
such ruling request. If the Company cannot make the QEF election retroactively,
on a sale of its Omnitel shares or the receipt of certain dividends from
Omnitel, the Company would be subject to U.S. federal income tax and to an
interest charge on that tax over its holding period commencing in 1990, as
described above.
If the Company were to make the QEF election, as described above, the
Company would be required in each year that the PFIC qualification tests are met
to include its pro rata share of the QEF's earnings as ordinary income and its
pro rata share of the QEF's net capital gain as long-term capital gain, whether
or not such amounts are actually distributed. The Company has not made any QEF
election with respect to Omnitel.
EMPLOYEES
CCII has 15 full and part time employees.
PATENTS, COPYRIGHTS AND LICENSES
Neither CCII, OPI nor Omnitel has any material patents or copyrights in
their businesses. CCII does not believe patents or copyrights play a material
role in its business or any potential business of OPI or Omnitel. OPI has a
license to provide cellular service from the appropriate
20
<PAGE>
governmental authorities.
ITEM 2. PROPERTIES.
- ------------------
CCII leases office space, which is adequate to meet its needs at present
from one of its former affiliates, NTL Incorporated, and is charged for its
share of the rent by NTL.
ITEM 3. LEGAL PROCEEDINGS.
- -------------------------
OPI is engaged in ordinary legal disputes and court proceedings that have
arisen in the course of its operations, none of which is expected to have a
material adverse effect on its operations. OPI and TIM have each filed lawsuits
in Italy against each other involving various competitive matters. In addition,
in a currently pending matter, TIM has claimed that OPI had not satisfied a
requirement that its network cover at least 40% of the Italian territory at the
time of the launch of its commercial services in December 1995, and OPI has
counterclaimed seeking damages for TIM's delay in permitting national roaming.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
- -------------------------------------------------------
There were no matters that were submitted to a vote of CCII's stockholders
during the quarter ended December 31, 1997.
21
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
- ------------------------------------------------------------------------
CCII's Common Stock trades on the Nasdaq Stock Market's National Market
under the symbol "CCIL". The following table sets forth for the periods
indicated the high and low last sales prices as reported on the Nasdaq Stock
Market's National Market (before giving retroactive effect to the three-for-two
stock split by way of stock dividend in April 1998).
LAST SALE PRICE
HIGH LOW
--------------------------------------
1996
----
First Quarter $40.25 $31.25
Second Quarter 37.00 31.75
Third Quarter 35.75 24.75
Fourth Quarter 34.00 25.50
1997
----
First Quarter 32.75 26.75
Second Quarter 34.25 24.13
Third Quarter 41.50 32.50
Fourth Quarter 47.50 39.13
1998
----
First Quarter (through March 20) 59.75 45.88
On March 20, 1998, the closing price for the Common Stock, as reported on
the Nasdaq Stock Market's National Market, was $59.75. As of March 20, 1998,
there were approximately 320 record holders of the Common Stock. This figure
does not reflect beneficial ownership of shares held in nominee names.
CCII has never paid cash dividends on its Common Stock and does not intend
to pay cash dividends in the foreseeable future on shares of its Common Stock.
22
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
- -------------------------------
The following table sets forth certain financial data for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993. This information should be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 (1) 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue $ - $ - $ - $ - $ -
Income (loss) before extraordinary item (31,349) (50,968) 6,815 (8,509) (875)
Net income (loss) (31,349) (50,968) 5,341 (8,509) (875)
Income (loss) before extraordinary item
per common share: (2)
Basic (1.94) (3.23) .45 (.56) (.06)
Diluted (1.94) (3.23) .38 (.56) (.06)
Net income (loss) per common share: (2)
Basic (1.94) (3.23) .35 (.56) (.06)
Diluted (1.94) (3.23) .30 (.56) (.06)
Denominator for income (loss) per share
calculation:
Basic 16,177 15,764 15,346 15,141 14,984
Diluted 16,177 15,764 17,713 15,141 14,984
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 (3) 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency) $ 81,992 $ 79,392 $ 75,840 $ (24,575) $ 11,417
Total assets 140,714 146,307 175,290 38,301 13,545
Bank loan payable - - - 29,980 -
Long-term debt 197,327 172,052 149,869 - -
Shareholders' (deficiency) equity (58,769) (28,561) 21,167 6,774 13,148
</TABLE>
(1) 1995 includes a gain on sale of investment in joint venture of $25,286,000,
net of tax of $13,615,000 ($1.43 per common share) and a charge of
$1,474,000, net of income tax benefit of $794,000, from early
extinguishment of debt (($.08) per common share).
(2) After giving retroactive effect to the 3-for-2 stock split by way of a
stock dividend, which was paid on May 13, 1994 and the 3-for-2 stock split
by way of stock dividend, to be paid on April 14, 1998.
(3) In 1995, CCII issued $281,571,000 aggregate principal amount of 13-1/4%
Senior Discount Notes due 2000 at a price to the public of 52.783% or
$148,622,000.
CCII did not declare or pay any cash dividends during the years indicated.
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
Years Ended December 31, 1997 and 1996
- --------------------------------------
Equity in net loss of Omnitel decreased to $5,521,000 from $29,850,000
because of the decrease in the net loss of Omnitel. The decrease is due to a
change in Omnitel's share of OPI's net loss to $37,071,000 from $201,622,000.
OPI's net loss decreased to $54,004,000 from $284,557,000 as a result of a 144%
increase in operating revenues with only a 42% increase in operating expenses
(percentage changes are calculated based on the results of operations in Italian
lire).
General and administrative expenses decreased to $2,997,000 from $3,397,000
primarily because CCII reduced its efforts to obtain new licenses.
Interest income and other, net decreased to $4,500,000 from $5,125,000
primarily because of a decrease in funds available for investment.
Interest expense increased to $26,625,000 from $23,330,000 due to an
increase in the accretion of original issue discount on the Senior Discount
Notes.
The income tax benefit in 1996 of $1,200,000 is the result of applying net
operating loss carrybacks to 1995.
Years Ended December 31, 1996 and 1995
- --------------------------------------
Equity in net loss of Omnitel increased to $29,850,000 from $14,636,000
because of the increase in the net loss of Omnitel. The increase is due to an
increase in Omnitel's share of OPI's net loss to $201,622,000 from $98,428,000.
OPI's net loss increased to $284,557,000 from $138,168,000 as a result of the
increase in all costs due to the commencement of operations in December 1995.
OPI began depreciation and amortization of certain previously capitalized costs
in December 1995 upon the commencement of operations.
General and administrative expenses decreased to $3,397,000 from $3,805,000
primarily because, as of December 1995, CCII no longer participated in an entity
that owns one of the two GSM cellular licenses for Delhi, India, and CCII
reduced its efforts to obtain new cellular licenses.
Amortization of investments in joint ventures increased to $691,000 from
$537,000 as a result of the amortization of additional costs capitalized in
connection with the investment in Omnitel.
Interest and other income increased to $5,125,000 from $1,963,000 primarily
because of an increase in funds available for investment.
24
<PAGE>
Interest expense increased to $23,330,000 from $7,230,000 primarily due to
the interest on the Senior Discount Notes. Interest expense in 1995 does not
include interest of $5,571,000 which was capitalized during the year ended
December 31, 1995. The Company discontinued interest capitalization in December
1995 upon the commencement of OPI's operations.
The fees to the Company's former parent company, Cellular Communications,
Inc. ("CCI"), in connection with the bank loan decreased to zero from $101,000
as a result of the termination of the CCI guarantee in July 1995. This expense
does not include fees to CCI of $1,220,000 which were capitalized during the
year ended December 31, 1995.
The income tax benefit in 1996 of $1,200,000 is the result of applying net
operating loss carrybacks to 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily based upon the agreements
and requirements of the joint ventures in which it is now or may become a
participant. The Company also requires capital to pay for corporate overhead
expenses, personnel costs, interest and taxes, as well as capital to explore
other opportunities that may arise. The Company has no material commitments for
capital expenditures, except as described below. The Company expects that cash,
cash equivalents and marketable securities on hand will be sufficient to meet
all obligations of the Company at least through the next twelve months. Italian
lire have been translated solely for the convenience of the reader at an
exchange rate of 1,805.00 lire per U.S. dollar, the Noon Buying Rate on March
20, 1998.
As a result of the award of Italy's second GSM cellular license to OPI, OPI
required capital to construct its cellular system and to fund its operations.
OPI has received capital contributions of 1,450 billion lire ($803 million) from
its partners - 1,015 billion lire ($562 million) from Omnitel and 435 billion
lire ($241 million) from Pronto Italia. Omnitel funded its share of OPI capital
contributions plus its own capital needs through capital contributions from its
shareholders of 1,040 billion lire ($576 million). The Company's total
cumulative contribution to Omnitel is approximately 152.5 billion lire ($96.8
million at the exchange rates in effect at the time of each contribution). In
addition, OPI originally arranged a syndicated bank loan facility for 1,800
billion lire ($997 million). On August 29, 1997, OPI signed an Amended and
Restated Facility Agreement which, among other things, provides for an increase
in the facility of 1,000 billion lire ($554 million) from 1,800 billion lire to
2,800 billion lire ($1.6 billion). OPI also has a number of other credit and
subordinated debt facilities totaling approximately 1,000 billion lire. As of
December 31, 1997, OPI had approximately 1,600 billion lire ($886 million)
available under its facilities.
On October 2, 1997, the Board of Directors of Omnitel approved a proposal
to make available to OPI a subordinated credit facility of 70 billion lire ($39
million) as soon as OPI's indebtedness amounts to 2,200 billion lire ($1.2
billion) or in the event of default by OPI under the facility.
OPI has provided an approximate 219 billion lire ($121 million) performance
bond that requires payments to the Italian government if OPI fails to meet
certain operational targets. There
25
<PAGE>
can be no assurance that OPI will be able to achieve all of its performance bond
goals. The Company's maximum liability under the performance bond is
approximately 22.5 billion lire ($12 million), reflecting its proportionate
interest in OPI.
The Company has not been successful in obtaining any new cellular licenses
since there is more competition for licenses and the costs of obtaining them has
increased. This has occurred because more companies recognize the potential
value of cellular licenses and governments increasingly realize they can extract
some part of this value from license applicants. There can be no assurance that
the Company will be successful in obtaining new cellular licenses or in
developing other opportunities in the future.
In August 1995, the Company issued $281,571,000 aggregate principal amount
at maturity of 13-1/4% Senior Discount Notes due 2000 (the "Old Notes") and
422,356 warrants to purchase 475,573 shares of common stock. The Old Notes were
issued at a price to the public of 52.783% or $148,622,000. The original issue
discount accretes at a rate of 13 1/4%, compounded semiannually, to an aggregate
principal amount of $281,501,000 by August 15, 2000 (after reduction for the
repurchase of $70,000 principal amount of Old Notes in January 1997.)
In March 1998, the Company issued ECU 235,000,000 ($258,030,000) aggregate
principal amount of 9-1/2% Senior Discount Notes due 2005 and $75,000,000
aggregate principal amount of 6% Convertible Subordinated Notes due 2005. The
Senior Discount Notes were issued at a price to the public of 62.455% or ECU
146,769,000 ($161,152,000). The Company received net proceeds of ECU 142,366,000
($156,318,000) and $72,563,000, after discounts and commissions, from the
issuance of the Senior Discount Notes and the Convertible Subordinated Notes,
respectively.
In February 1998, the Company offered to purchase for cash all of the
outstanding Old Notes at the accreted value of $869.12 per $1,000 principal
amount. In March 1998, upon the expiration of the offer, $232,469,000 principal
amount of Old Notes were tendered and the Company paid approximately
$202,043,000 using the proceeds from the Senior Discount Notes and the
Convertible Subordinated Notes. In March 1998, the Company recorded an
extraordinary loss from the early extinguishment of debt of approximately
$40,000,000 as a result of this transaction.
To the extent that the Company obtains financing in U.S. dollars and the
Company's future commitments to Omnitel are in Italian lire, it will encounter
currency exchange rate risks. OPI's revenues are received in Italian lire and
currently there are no foreign exchange controls in Italy. There can be no
assurance that foreign exchange restrictions will not be introduced in the
future.
The Company is primarily a holding company with limited business operations
of its own. The Company's assets consist primarily of cash, cash equivalents and
marketable securities and its ownership interest in Omnitel. The Company does
not hold, nor is it likely that the Company will hold, a majority interest in
any operating systems. The Company's minority voting position in Omnitel
currently precludes it from controlling Omnitel or OPI, even though the Company
is involved in the management of Omnitel and intends to participate in the
future only in operating companies in which it can be involved in management.
Thus, the Company may be unable to cause the implementation of strategies that
it favors and, in the event of a disagreement between the
26
<PAGE>
Company and one or more of its partners, the strategies adopted and actions
taken by an affiliated company may in some cases be contrary to the Company's
preferred strategies and actions. In addition, the Company may be unable to
access the cash flow of affiliated companies since (i) it does not have the
requisite control to cause such entities to pay dividends, (ii) substantially
all of such entities are expected to be parties to credit or other borrowing
agreements that severely restrict or prohibit the payment of dividends, and such
entities are likely to continue to be subject to such restrictions and
prohibitions for the foreseeable future and (iii) some countries tax payment and
repatriation of dividends. As a result, the Company does not expect to receive
significant cash through dividends or other distributions from an affiliate in
the foreseeable future.
Because the Company does not currently have any cash flow and does not
expect any cash flow for the foreseeable future, its ability to repay the
remaining Old Notes, the Senior Discount Notes and the Convertible Subordinated
Notes at maturity will be dependent on developing one or more sources of cash at
or prior to maturity. The Company may (i) seek to refinance all or a portion of
the Notes at maturity through sales of additional debt or equity securities of
the Company, (ii) if possible and subject to the appropriate consents and
approvals and certain other limitations set forth in the OPI Agreement and the
Omnitel Agreement, seek to sell all or a portion of its interest in Omnitel,
(iii) negotiate with its partners to permit any cash produced by OPI to be
distributed to equity holders rather than invested in the business and/or (iv)
seek to invest in companies that will make substantial cash distributions on or
before the maturity of the Notes. There can be no assurance that (i) there will
be a market for the debt or equity securities of the Company in the future, (ii)
the Company will be permitted to sell particular assets or be able to sell
assets in a timely manner or on commercially acceptable terms or in an amount
that (giving effect to the substantial corporate income taxes which could be due
in the event of such a sale) will be sufficient to repay the Notes when due,
(iii) the Company will be able to persuade its partners that cash generated by
the operations of its affiliated entities should be distributed to equity
holders (in fact, the Company expects that Omnitel and OPI will utilize all of
their respective cash flow for debt repayment or internal development
opportunities for the foreseeable future) or (iv) the Company will be able to
locate and invest in companies that will be mature enough to make substantial
cash distributions to investors prior to the maturity of the Notes.
Cash provided by operating activities was $34,000 in 1997 and cash used in
operating activities was $2,282,000 in 1996. This change is primarily due to a
decrease in income taxes paid to zero in 1997 from $1,242,000 in 1996 and the
collection of a federal income tax refund of $868,000 in 1997. Cash provided by
investing activities was $11,366,000 in 1997 as a result of proceeds from sales
of marketable securities, net of purchases. Redemption of Old Notes of $44,000
in 1997 is the result of the Company's offer to repurchase up to $38,900,000
accreted value of the Old Notes using the excess proceeds from the waiver and
release of the Company's claim to participate in an entity that owns one of the
two GSM cellular licenses for Delhi, India in December 1995 in exchange for cash
of approximately $40,000,000.
27
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
CCII is required to provide these disclosures in its Annual Report on Form
10-K for the year ending December 31, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ---------------------------------------------------
The financial statements are included herein commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
- -----------------------------------------------------------------------
Not applicable.
PART III
--------
ITEMS 10, 11, 12, AND 13.
- ------------------------
The information required by PART III (Items 10, 11, 12 and 13) is
incorporated by reference from the Company's definitive proxy statement
involving the election of directors which the Company expects to file, pursuant
to Regulation 14A, within 120 days following the end of its fiscal year.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
- ------------------------------------------------------------------------
(a)(1) Financial Statements - See list of Financial Statements on page F-1.
(2) Financial Statement Schedules - See list of Financial Statements on
page F-1.
(3) Exhibits - See Exhibit Index on page 29.
(b) During the quarter ended December 31, 1997, there were no Current
Reports on Form 8-K filed by CCII.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - See list of Financial Statements on
page F-1.
28
<PAGE>
EXHIBIT INDEX
Exhibit No.
- ----------
3.1 Restated Certificate of Incorporation (Incorporated by reference to
Exhibit 3.1, 1991 Form 10-K, File No. 0-19363)
3.1(a) Certificate of Designation of Series A Junior Participating Preferred
Stock (Incorporated by reference to Exhibit 3.1(a), 1991 Form 10-K,
File No. 0-19363)
3.1(c) Certificate of Designation of Series B Preferred Stock (Incorporated
by reference to Exhibit 3.1(c), File No. 33-90980)
3.2 Amended By-Laws (Incorporated by reference to Exhibit 3.2, File No.
33-38398)
4.1 Specimen of Common Stock Certificate (Incorporated by reference to
Exhibit 4.1, 1991 Form 10-K, File No. 0-19363)
4.2 Rights Agreement, dated as of December 19, 1990, between CCII and
Continental Stock Transfer Trust Company as the Rights Agent
(Incorporated by reference to Exhibit 4.2, File No. 33-38398)
4.3 Warrant, dated July 25, 1994, between CCII and Cellular
Communications, Inc. (Incorporated by reference to Exhibit 4.3, 1994
Form 10-K, File No. 0-19363)
4.4 Indenture, dated as of August 22, 1995, between CCII and Chemical Bank
as Trustee (Incorporated by reference to Exhibit 4.2, File
No.33-90980)
4.4(a) First Supplemental Indenture, dated as of February 23, 1998, to
Indenture dated as of August 22, 1995
10.1 Description of Omnitel Joint Venture Agreement (Incorporated by
reference to Exhibit 10.1, 1996 Form 10-K, File No. 0-19363)
10.2 Compensation Plan Agreements, as amended and restated effective June
3, 1997
10.3 Warrant Agreement between the Company and CCII Funding, Inc.
(Incorporated by reference to Exhibit 10.10, File No. 33-90980).
11 Statement re computation of per share earnings
23 Consent of Ernst & Young LLP
27.1 Financial Data Schedule, for the year ended December 31, 1997
29
<PAGE>
27.2 Restated Financial Data Schedule, for the quarter ended September 30,
1997
27.3 Restated Financial Data Schedule, for the quarter ended June 30, 1997
27.4 Restated Financial Data Schedule, for the quarter ended March 31, 1997
27.5 Restated Financial Data Schedule, for the year ended December 31, 1996
27.6 Restated Financial Data Schedule, for the quarter ended September 30,
1996
27.7 Restated Financial Data Schedule, for the quarter ended June 30, 1996
27.8 Restated Financial Data Schedule, for the quarter ended March 31, 1996
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CELLULAR COMMUNICATIONS
INTERNATIONAL, INC.
Dated: March 30, 1998
By: /s/ William B. Ginsberg
------------------------------------
William B. Ginsberg
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/William B. Ginsberg President, Chairman of the |
- -------------------------- Board, Chief Executive Officer |
William B. Ginsberg and Director (Principal Executive |
Officer) |
|
|
/s/ J. Barclay Knapp Executive Vice President |
- -------------------------- and Director |
J. Barclay Knapp |
|
|
/s/ Gregg Gorelick Vice President-Controller |
- -------------------------- (Principal Accounting Officer) | March 30, 1998
Gregg Gorelick |
|
|
/s/ Stanton N. Williams Vice President and Chief Financial |
- -------------------------- Officer (Principal Financial Officer) |
Stanton N. Williams |
|
|
/s/ Sidney R. Knafel Director |
- -------------------------- |
Sidney R. Knafel |
31
<PAGE>
/s/ Del Mintz Director |
- -------------------------- |
Del Mintz |
|
|
/s/ Alan J. Patricof Director | March 30, 1998
- -------------------------- |
Alan J. Patricof |
|
|
/s/ Warren Potash Director |
- -------------------------- |
Warren Potash |
</TABLE>
32
<PAGE>
Form 10-K - Item 14(a)(1) and (2)
Cellular Communications International, Inc. and Subsidiaries
Index to Consolidated Financial Statements
The following consolidated financial statements of Cellular Communications
International, Inc. and Subsidiaries are included in Item 8:
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets - December 31, 1997 and 1996.................. F-4
Consolidated Statements of Operations - Years Ended
December 31, 1997, 1996 and 1995....................................... F-5
Consolidated Statement of Shareholders' (Deficiency) - Years Ended
December 31, 1997, 1996 and 1995....................................... F-6
Consolidated Statements of Cash Flows - Years Ended
December 31, 1997, 1996 and 1995....................................... F-7
Notes to Consolidated Financial Statements................................ F-9
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Cellular Communications International, Inc.
We have audited the consolidated balance sheets of Cellular Communications
International, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' (deficiency) and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. The financial statements of Omnitel Sistemi Radiocellulari
Italiani S.p.A. ("Omnitel") (a corporation in which the Company has a 14.667%
interest) have been audited by other auditors whose report has been furnished to
us; insofar as our opinion on the consolidated financial statements relates to
data included for Omnitel, it is based solely on their report.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Cellular
Communications International, Inc. and Subsidiaries at December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
March 25, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Omnitel Sistemi Radiocellulari Italiani S.p.A.
We have audited the accompanying balance sheets of Omnitel Sistemi
Radiocellulari Italiani S.p.A. (the "Company") as of December 31, 1997 and 1996
and the related statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Omnitel Sistemi Radiocellulari
Italiani S.p.A. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with accounting principles generally accepted in
the United States of America.
COOPERS & LYBRAND S.p.A.
Milan, Italy
March 25, 1998
F-3
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 59,256,000 $ 46,759,000
Marketable securities 24,871,000 34,404,000
Other 21,000 1,045,000
-----------------------------
Total current assets 84,148,000 82,208,000
Investment in Omnitel 52,151,000 58,363,000
Equipment, net of accumulated depreciation of
$40,000 (1997) and $50,000 (1996) 1,000 19,000
Deferred financing costs, net of accumulated amortization
of $2,828,000 (1997) and $1,525,000 (1996) 4,414,000 5,717,000
-----------------------------
$ 140,714,000 $ 146,307,000
=============================
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable 126,000 $ 156,000
Accrued expenses 509,000 630,000
Taxes payable 1,452,000 1,444,000
Due to NTL Incorporated 69,000 586,000
-----------------------------
Total current liabilities 2,156,000 2,816,000
Long-term debt, less unamortized discount of $3,768,000
(1997) and $4,881,000 (1996) 197,327,000 172,052,000
Commitments and contingent liabilities
Shareholders' (deficiency):
Series preferred stock - $.01 par value; authorized
2,500,000 shares, outstanding none - -
Common stock - $.01 par value; authorized 25,000,000
shares; issued and outstanding 16,359,000 (1997)
and 10,708,000 (1996) shares 164,000 107,000
Additional paid-in capital 29,821,000 28,737,000
(Deficit) (88,754,000) (57,405,000)
-----------------------------
(58,769,000) (28,561,000)
-----------------------------
$ 140,714,000 $ 146,307,000
=============================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Equity in net loss of Omnitel $ 5,521,000 $ 29,850,000 $ 14,636,000
General and administrative expenses 2,997,000 3,397,000 3,805,000
Write-off of investments in joint venture - - 602,000
Write-off of deferred costs - - 1,167,000
Depreciation expense 15,000 25,000 28,000
Amortization of investments in joint ventures 691,000 691,000 537,000
-----------------------------------------------------
Operating (loss) (9,224,000) (33,963,000) (20,775,000)
Other income (expense):
Interest income and other, net 4,500,000 5,125,000 1,963,000
Interest expense (26,625,000) (23,330,000) (7,230,000)
Cellular Communications, Inc. fees in connection
with the bank loan - - (101,000)
Gain on sale of investment in joint venture - - 38,901,000
-----------------------------------------------------
Income (loss) before income taxes and extraordinary item (31,349,000) (52,168,000) 12,758,000
Income tax benefit (provision) - 1,200,000 (5,943,000)
-----------------------------------------------------
Income (loss) before extraordinary item (31,349,000) (50,968,000) 6,815,000
Loss from early extinguishment of debt, net of income
tax benefit of $794,000 - - (1,474,000)
-----------------------------------------------------
Net income (loss) $ (31,349,000) $ (50,968,000) $ 5,341,000
=====================================================
Net income (loss) per common share:
Income (loss) before extraordinary item $(1.94) $ (3.23) $ .45
Extraordinary item - - (.10)
-----------------------------------------------------
Net income (loss) $(1.94) $ (3.23) $ .35
=====================================================
Net income (loss) per common share - assuming dilution:
Income (loss) before extraordinary item $(1.94) $ (3.23) $ .38
Extraordinary item - - (.08)
-----------------------------------------------------
Net income (loss) $(1.94) $ (3.23) $ .30
=====================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Consolidated Statement of Shareholders' (Deficiency)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------------- PAID-IN
SHARES AMOUNT CAPITAL (DEFICIT)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 10,182,000 $ 102,000 $ 18,450,000 $ (11,778,000)
Exercise of stock options 162,000 1,000 1,024,000
Issuance of warrants 6,182,000
Costs incurred in connection with the
issuance of warrants (312,000)
Income tax benefit from the exercise of
stock options 2,157,000
Net income for the year ended December 31, 1995 5,341,000
----------------------------------------------------------------
Balance at December 31, 1995 10,344,000 103,000 27,501,000 (6,437,000)
Exercise of stock options 364,000 4,000 1,238,000
Costs incurred in connection with the 1995
issuance of warrants (2,000)
Net (loss) for the year ended December 31, 1996 (50,968,000)
----------------------------------------------------------------
Balance at December 31, 1996 10,708,000 107,000 28,737,000 (57,405,000)
Exercise of stock options 198,000 2,000 1,139,000
Stock split 5,453,000 55,000 (55,000)
Net (loss) for the year ended December 31, 1997 (31,349,000)
----------------------------------------------------------------
Balance at December 31, 1997 16,359,000 $ 164,000 $ 29,821,000 $ (88,754,000)
================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (31,349,000) $ (50,968,000) $ 5,341,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in net loss of Omnitel 5,521,000 29,850,000 14,636,000
Depreciation and amortization expense 706,000 716,000 565,000
Write-off of deferred costs and investments
in joint venture - - 1,769,000
Loss from early extinguishment of debt - - 2,268,000
Loss on disposal of equipment 3,000 7,000 -
Gain on sale of investment in joint venture - - (38,901,000)
Accretion of original issue discount 24,206,000 21,214,000 5,263,000
Accretion of interest on marketable securities (1,833,000) (2,224,000) -
Interest on cash held in escrow - (562,000) (932,000)
Amortization of deferred financing costs charged to
interest expense 1,303,000 1,138,000 1,523,000
Amortization of debt discount 1,113,000 969,000 264,000
Changes in operating assets and liabilities:
Other current assets 1,024,000 (984,000) (338,000)
Accounts payable (30,000) (46,000) 39,000
Accrued expenses (121,000) (242,000) 468,000
Taxes payable 8,000 (1,632,000) 5,166,000
Interest payable - - (58,000)
Due to Cellular Communications, Inc. - (81,000) (954,000)
Due to NTL Incorporated (517,000) 563,000 23,000
-----------------------------------------------------
Net cash provided by (used in) operating activities 34,000 (2,282,000) (3,858,000)
-----------------------------------------------------
INVESTING ACTIVITIES
Purchase of equipment - - (52,000)
Purchase of marketable securities (122,155,000) (140,222,000) (38,080,000)
Proceeds from sale of marketable securities 133,521,000 125,110,000 23,503,000
Cash held in escrow - - (51,800,000)
Proceeds from sale of investment in joint venture - - 40,097,000
Additional investments in joint ventures - - (19,779,000)
Deferred costs incurred - - (981,000)
-----------------------------------------------------
Net cash provided by (used in) investing activities 11,366,000 (15,112,000) (47,092,000)
-----------------------------------------------------
</TABLE>
F-7
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from warrants and borrowings, net of
financing costs $ - $ - $ 204,429,000
Redemption of Senior Discount Notes (44,000) - -
Principal payments - - (95,911,000)
Payment of financing costs - (54,000) -
Exercise of stock options 1,141,000 1,242,000 1,025,000
------------------------------------------------------------
Net cash provided by financing activities 1,097,000 1,188,000 109,543,000
------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 12,497,000 (16,206,000) 58,593,000
Cash and cash equivalents at beginning of year 46,759,000 62,965,000 4,372,000
------------------------------------------------------------
Cash and cash equivalents at end of year $ 59,256,000 $ 46,759,000 $ 62,965,000
============================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive
of $3,411,000 (1995) capitalized $ - $ - $ 1,112,000
Income taxes paid - 1,242,000 -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Cash held in escrow used for capital contributions
to Omnitel $ - $ 44,178,000 $ 9,116,000
Interest expense capitalized as investment in Omnitel
- - 3,380,000
</TABLE>
See accompanying notes.
F-8
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. ORGANIZATION
Cellular Communications International, Inc. ("CCII" or the "Company") was
incorporated on May 30, 1984 to own and operate telephone systems in various
markets. Prior to July 31, 1991, CCII was a wholly-owned subsidiary of Cellular
Communications, Inc. ("CCI"). On July 25, 1990, CCI entered into a Merger and
Joint Venture Agreement, as amended as of December 14, 1990 with AirTouch
Communications, Inc. ("AirTouch") whereby CCII was distributed to CCI's
shareholders on July 31, 1991 (the "Distribution"). CCII's principal line of
business is its participation in Omnitel Sistemi Radiocellulari Italiani S.p.A
("Omnitel"), a joint venture that owns 70% of Omnitel Pronto Italia S.p.A.
("OPI"), the consortium that owns and operates one of the two national cellular
telephone licenses for Italy using Global System for Mobile Communications
("GSM") technology, the digital technology for cellular telephone systems that
European Union countries have agreed to adopt as a common standard.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CCII and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $58,908,000 and
$46,418,000 at December 31, 1997 and 1996, respectively. At December 31, 1997
and 1996, cash equivalents consisted of money market instruments.
MARKETABLE SECURITIES
Marketable securities are classified as available-for-sale, which are carried at
fair value. Unrealized holding gains and losses on securities, net of tax, are
carried as a separate component of shareholders' (deficiency). The amortized
cost of debt securities is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in interest income.
Realized gains and losses and declines in value judged to be other than
temporary will be included in interest income. The cost of securities sold or
matured is based on the specific identification method. Interest on securities
is included in interest income.
F-9
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Marketable securities at December 31, 1997 consist of U.S. corporate debt
securities. Marketable securities at December 31, 1996 consist of U.S. Treasury
securities, obligations of U.S. government agencies and U.S. corporate debt
securities. During the years ended December 31, 1997 and 1996, there were no
realized gains or losses on sales of securities. All of the marketable
securities as of December 31, 1997 had a contractual maturity of less than one
year.
INVESTMENTS IN JOINT VENTURES
Capital contributions and costs directly incurred in connection with investments
in joint ventures to acquire licenses are capitalized. Costs applicable to
unsuccessful joint ventures are charged to expense at such time as CCII
determines that the joint venture will be denied a license or the joint venture
decides not to pursue its license application. Additional costs applicable to
successful joint ventures, once a license is awarded or operations commence, are
charged to expense. For joint ventures that are awarded a license, the
difference between CCII's investment in the joint venture and CCII's underlying
equity in the joint venture's net assets, which is primarily the capitalized
costs directly incurred by CCII in connection with its participation in the
joint venture, are amortized over the life of the license from the date of
commencement of operations (OPI license - 15 years). Investments in joint
ventures in which the Company exercises significant influence but does not have
control through majority ownership are accounted for using the equity method of
accounting. The Company reviews its investments in joint ventures for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
CAPITALIZED INTEREST
Interest was capitalized as a component of the cost of the investment in Omnitel
through the start of OPI's operations in December 1995. Interest of $5,571,000
and fees to CCI in connection with the bank loan of $1,220,000 were capitalized
in 1995.
EQUIPMENT
Equipment is stated at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
range from three to five years. Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
DEFERRED FINANCING COSTS
Deferred financing costs represent costs incurred for the issuance of debt and
are amortized over the term of the related debt.
F-10
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED COSTS
Costs incurred in connection with potential new licenses are capitalized. Costs
applicable to successful new licenses will be amortized over the estimated life
of the license from the date of commencement of operations. When CCII determines
that it will not be successful in obtaining a license, the related capitalized
costs are charged to expense.
NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the SFAS No. 128 requirements.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its plans.
3. RECENT ACCOUNTING PRONOUNCEMENTS
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
SFAS No. 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. The Company will adopt SFAS No. 130 in the first interim
period for its fiscal year ending December 31, 1998.
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and
F-11
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SEGMENT REPORTING (CONTINUED)
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997. The Company will adopt
SFAS No. 131 for its fiscal year ending December 31, 1998.
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
RISKS INHERENT IN FOREIGN INVESTMENT
There can be no assurance that the laws or administrative practice relating to
taxation, foreign exchange or other matters in Italy will not change. The value
of CCII's interest in Omnitel or Omnitel's interest in OPI may also be affected
by changes in tax and other laws and other political, economic, socioeconomic or
diplomatic developments in or affecting Italy.
CURRENCY RISKS
To the extent that CCII obtains financing in U.S. dollars and CCII's commitments
to Omnitel and Omnitel's commitments to OPI are in Italian lire, a currency
exchange rate risk exists. OPI's revenues are received in Italian lire and
currently there are no foreign exchange controls in Italy. There can be no
assurance that foreign exchange restrictions will not be introduced in the
future.
LICENSE CONDITIONS
OPI must comply with the standards of service, territorial coverage goals and
other conditions contained in its Italian cellular license. The failure to meet
these requirements could result in the loss of the license.
COMPETITION FOR CELLULAR LICENSES
CCII has not recently been successful in obtaining any new cellular licenses
since there is more competition for licenses and the costs of obtaining them has
increased. There can be no assurance that CCII will be successful in obtaining
new cellular licenses or in developing other opportunities in the future.
F-12
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. INVESTMENT IN OMNITEL
The investment in Omnitel consists of the following:
DECEMBER 31
1997 1996
-------------------------------
Capital contributions $ 96,805,000 $ 96,805,000
Capitalized costs including interest 9,725,000 9,725,000
Equity in accumulated net loss (52,428,000) (46,907,000)
-------------------------------
54,102,000 59,623,000
Accumulated amortization (1,951,000) (1,260,000)
-------------------------------
$ 52,151,000 $ 58,363,000
===============================
In March 1994, the OPI consortium in which Omnitel holds a 70% interest was
selected as the second GSM cellular telephone licensee in Italy. CCII, through
its 14.667% ownership interest in Omnitel, holds an indirect 10.267% interest in
OPI.
The following financial information of Omnitel and OPI is prepared in accordance
with U.S. generally accepted accounting principles and is reflected in U.S.
dollars; the balance sheet information has been translated at the exchange rate
on the balance sheet date and the statement of operations information has been
translated at the average exchange rate for the period.
The following summarizes the assets, liabilities and stockholders' equity of
Omnitel:
DECEMBER 31
1997 1996
--------------------------------
ASSETS
Current assets $ 7,137,000 $ 9,542,000
Investment in OPI 257,971,000 341,842,000
--------------------------------
$ 265,108,000 $ 351,384,000
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 677,000 $ 1,341,000
Other liabilities 51,000 59,000
Stockholders' equity 264,380,000 349,984,000
--------------------------------
$ 265,108,000 $ 351,384,000
================================
F-13
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. INVESTMENT IN OMNITEL (CONTINUED)
The following summarizes the results of operations of Omnitel:
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------------
Revenues $ - $ - $ -
Costs and expenses (1,038,000) (784,000) (862,000)
Equity in net loss of OPI (37,071,000) (201,622,000) (98,428,000)
------------------------------------------------
Operating loss (38,109,000) (202,406,000) (99,290,000)
Interest income, net 460,000 543,000 859,000
------------------------------------------------
Net loss $(37,649,000) $(201,863,000) $(98,431,000)
================================================
The following summarizes the assets, liabilities and stockholders' equity of
OPI:
DECEMBER 31
1997 1996
----------------------------------
ASSETS
Current assets $ 522,188,000 $ 299,576,000
Property, plant and equipment, net 782,129,000 697,069,000
Intangible assets, net 472,918,000 566,804,000
Deferred tax asset 32,088,000 129,644,000
Other 37,158,000 14,925,000
----------------------------------
$ 1,846,481,000 $ 1,708,018,000
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 605,919,000 $ 559,905,000
Long term debt 855,134,000 647,806,000
Other liabilities 16,898,000 11,961,000
Stockholders' equity 368,530,000 488,346,000
----------------------------------
$ 1,846,481,000 $ 1,708,018,000
==================================
F-14
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. INVESTMENT IN OMNITEL (CONTINUED)
The following summarizes the results of operations of OPI:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 1,077,665,000 $ 488,472,000 $ 30,092,000
Costs and expenses 901,144,000 707,098,000 150,550,000
Depreciation and amortization 179,241,000 131,888,000 22,020,000
--------------------------------------------------------
1,080,385,000 838,986,000 172,570,000
--------------------------------------------------------
Operating loss (2,720,000) (350,514,000) (142,478,000)
Interest income (expense), net (59,446,000) (61,616,000) 4,310,000
Income tax benefit 8,162,000 127,573,000 -
--------------------------------------------------------
Net loss $ (54,004,000) $ (284,557,000) $ (138,168,000)
========================================================
</TABLE>
OPI recorded an income tax benefit in 1997 and 1996, as management has
determined that it is more likely than not that a portion of OPI's deferred tax
assets will be realized.
6. GAIN ON SALE OF INVESTMENT IN JOINT VENTURE
In March 1992, CCII entered into an agreement to create a joint venture called
Sterling Cellular Ltd. ("Sterling") for the purpose of developing new wireless
communication business opportunities in India. In 1993, Sterling was selected as
one of the two GSM cellular licensees for the city of Delhi, India and was
awarded the license in December 1994. In December 1995, CCII waived and released
its claim to participate in Sterling in exchange for approximately $40,000,000
in cash. CCII recorded a gain on this transaction of $38,901,000.
F-15
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income
(loss) per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Income (loss) before extraordinary item $ (31,349,000) $ (50,968,000) $ 6,815,000
Extraordinary item - - (1,474,000)
-----------------------------------------------------------
Net income (loss) $ (31,349,000) $ (50,968,000) $ 5,341,000
-----------------------------------------------------------
Denominator for basic net income (loss) per
common share 16,177,000 15,764,000 15,346,000
-----------------------------------------------------------
Effective of dilutive securities:
Warrants - - 377,000
Stock options - - 1,990,000
-----------------------------------------------------------
Denominator for diluted net income (loss)
per common share 16,177,000 15,764,000 17,713,000
-----------------------------------------------------------
Basic net income (loss) per common share:
Income (loss) before extraordinary item $ (1.94) $ (3.23) $ .45
Extraordinary item - - (.10)
-----------------------------------------------------------
Net income (loss) $ (1.94) $ (3.23) $ .35
===========================================================
Diluted net income (loss) per common share:
Income (loss) before extraordinary item $ (1.94) $ (3.23) $ .38
Extraordinary item - - (.08)
---------------------------------------------------------
Net income (loss) $ (1.94) $ (3.23) $ .30
==========================================================
</TABLE>
Stock options and warrants are excluded from the calculation of net loss per
common share as their effect would be antidilutive.
F-16
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. BANK LOAN PAYABLE AND CREDIT AGREEMENT
CCII obtained a $60,000,000 line of credit in July 1994. The terms of the line
of credit included interest, at CCII's election, either at the bank's prime rate
or LIBOR plus .75%. The terms also included an unused commitment fee of .25% per
annum and a one-time facility fee of $120,000. This line of credit expired, and
amounts borrowed plus unpaid interest and fees were paid on July 17, 1995.
On June 9, 1995, the Company entered into an agreement (the "Bridge Agreement")
with an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ
Bridge"), which provided for the purchase of up to $80,000,000 in the aggregate
principal amount of senior unsecured notes (the "Bridge Notes"). The Bridge
Notes were scheduled to mature no later than June 12, 1996. DLJ Bridge purchased
$50,000,000 of Bridge Notes on July 17, 1995, the proceeds of which were used to
repay the bank loan and related fees to CCI (see Note 10) of approximately
$48,750,000 and to pay fees incurred in connection with the Bridge Notes of
approximately $1,250,000. The Company incurred costs of $1,293,000 in connection
with the Bridge Agreement.
9. LONG-TERM DEBT
In August 1995, the Company issued $281,571,000 aggregate principal amount of
13-1/4% Senior Discount Notes due 2000 (the "Notes") and 423,000 warrants to
purchase 476,000 shares of common stock. The Notes were issued at a price to the
public of 52.783% or $148,622,000. The Company incurred $7,554,000 in fees and
expenses in connection with the issuance of the Notes and warrants, of which
$7,242,000 is included in deferred financing costs and $312,000 reduced paid-in
capital.
Proceeds from the issuance of the Notes and warrants of $50,000,000 were used to
repay the Bridge Notes. In connection with the repayment of the Bridge Notes,
the Company recorded as an extraordinary loss the write-off of $2,268,000
($1,474,000 net of income tax benefit) consisting of unamortized deferred
financing costs and debt discount.
The original issue discount accretes at a rate of 13-1/4%, compounded
semiannually, to an aggregate principal amount of $281,571,000 by August 15,
2000. In 1997, 1996 and 1995, $24,206,000, $21,214,000 and $7,097,000,
respectively, of the original issue discount was added to principal. The fair
value of the Notes based on the quoted market price was $228,073,000 and
$188,653,000 as of December 31, 1997 and 1996, respectively.
The warrants were valued at $14.64 each, resulting in deferred debt discount and
a corresponding addition to paid-in capital of $6,182,000. In 1997, 1996 and
1995, $1,113,000, $969,000 and $332,000, respectively, of the deferred discount
was amortized.
F-17
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. LONG-TERM DEBT (CONTINUED)
In February 1998, the Company offered to purchase for cash all of the
outstanding Notes at the accreted value of $869.12 per $1,000 principal amount.
In March 1998, upon the expiration of the offer, $232,469,000 principal amount
of Notes were tendered and the Company paid approximately $202,043,000. In March
1998, the Company recorded an extraordinary loss from the early extinguishment
of debt of approximately $40,000,000 as a result of this transaction.
The Notes indenture required that $51,800,000 of the proceeds be placed in an
escrow account until it was needed to finance the Company's additional capital
contribution obligations to Omnitel. In 1996 and 1995, cash of $44,178,000 and
$9,116,000, respectively, was used for additional contributions to Omnitel. The
remaining $420,000 in the escrow account was released to the Company in 1996.
Pursuant to the Notes indenture, any net proceeds from an asset sale that are
not applied within 12 months after such asset sale to an investment in a related
business will be deemed excess proceeds. When the aggregate amount of excess
proceeds exceeds $5,000,000, the Company is required to make an offer to
purchase the maximum principal amount of Notes that may be purchased using the
excess proceeds, at an offer price in cash equal to 100% of the accreted value
of the Notes. As a result of the Company's waiver and release of its claim to
participate in Sterling in December 1995 in exchange for cash of approximately
$40,000,000, the Company had approximately $38,900,000 of excess proceeds in
December 1996. The Company made an offer to purchase Notes at the accreted value
of $635.65 per $1,000 Note. In January 1997, upon the expiration of the offer,
$70,000 principal amount of Notes were tendered and the Company paid
approximately $44,000.
In March 1998, the Company issued ECU 235,000,000 ($258,030,000) aggregate
principal amount of 9-1/2% Senior Discount Notes due 2005 and $75,000,000
aggregate principal amount of 6% Convertible Subordinated Notes due 2005. The
Senior Discount Notes were issued at a price to the public of 62.455% or ECU
146,769,000 ($161,152,000). The Company received net proceeds of ECU 142,366,000
($156,318,000) and $72,563,000, after discounts and commissions, from the
issuance of the Senior Discount Notes and the Convertible Subordinated Notes,
respectively. The Company used most of the proceeds to repurchase approximately
82% of its 13-1/4% Senior Discount Notes.
The original issue discount of the Senior Discount Notes accretes at a rate of
9-1/2% compounded semiannually, to an aggregate principal amount of ECU
235,000,000 ($258,030,000) by April 1, 2003. Interest will thereafter accrue at
9-1/2% per annum, payable semiannually beginning on October 1, 2003. The Senior
Discount Notes are unsecured obligations of the Company and are effectively
subordinated to all existing and future indebtedness and other liabilities of
the Company and the Company's subsidiaries. The Senior Discount Notes may be
redeemed at the Company's option, in whole or in part, at any time on or after
April 1, 2002 at a redemption price of 104.75% that declines annually to 100% in
2005,
F-18
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. LONG-TERM DEBT (CONTINUED)
plus accrued and unpaid interest to the date of redemption. The Indenture
governing the Senior Discount Notes contains restrictions relating to, among
other things: (i) incurrence of additional indebtedness and the issuance of
preferred stock, (ii) dividend and other payment restrictions and (iii) mergers,
consolidations and sales of assets.
Interest payments on the Convertible Subordinated Notes begin on October 1, 1998
and interest is payable every six months thereafter. The Convertible
Subordinated Notes mature on April 1, 2005. The Convertible Subordinated Notes
are unsecured obligations convertible into shares of common stock prior to
maturity at a conversion price of $39.95 per share, subject to adjustment. There
are approximately 1,878,000 shares of common stock reserved for issuance upon
conversion of the Convertible Subordinated Notes. The Convertible Subordinated
Notes are redeemable, in whole or in part, at the option of the Company at any
time on or after April 4, 2001 at a redemption price of 103.429% that declines
annually to 100% in 2005, in each case together with accrued and unpaid interest
to the redemption date.
10. RELATED PARTY TRANSACTIONS
CCI provided management, financial, legal and technical services to CCII.
Amounts charged to CCII consist of salaries directly attributable to CCII, and
indirect costs allocated utilizing direct labor hours as reported by the common
officers and employees of CCI and CCII. For the years ended December 31, 1996
and 1995, CCI charged CCII $232,000 and $896,000, respectively, which is
included in general and administrative expenses. In August 1996, upon the merger
of CCI with AirTouch, NTL Incorporated ("NTL") commenced providing management,
financial, legal and technical services to CCII. Amounts charged to CCII consist
of salaries directly attributable to CCII, and indirect costs allocated
utilizing direct labor hours as reported by the common officers and employees of
NTL and CCII. In 1996, NTL charged CCII $351,000, which is included in general
and administrative expenses.
In January 1997, CCII and NTL agreed to a change in NTL's fee for the provision
of management, financial, legal and technical services to CCII. NTL charges CCII
for direct costs where identifiable and a fixed percentage of its corporate
overhead. In 1997, NTL charged CCII $871,000, which is included in general and
administrative expenses. It is not practicable to determine the amounts of these
expenses that would have been incurred had CCII operated as an unaffiliated
entity. However, in the opinion of management of CCII, the allocation method is
reasonable.
F-19
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
In connection with the Distribution, CCI was obligated to guarantee certain CCII
indebtedness through July 31, 1994 if requested by CCII. In June 1994, CCII
reached an agreement with CCI for an extension of CCI's guarantee of up to
$60,000,000 of CCII indebtedness until July 1995. This agreement provided for
the payment of a guarantee fee to CCI on the amount drawn down under the
guarantee, the reimbursement to CCI of a portion of the unused commitment fee
that CCI paid to its banks, and the issuance to CCI of common stock warrants to
purchase 200,000 shares of CCII common stock at fair market value on the
effective date of the agreement. The fees to CCI of $2,094,000 were paid in July
1995.
11. INCOME TAXES
The 1997 and 1996 income tax benefit differs from the statutory rate because no
deferred tax benefit was recorded for the Company's net operating loss
carryforwards and deductible temporary differences. The 1996 income tax benefit
primarily represents the carryback of 1996 federal tax loss to 1995. The 1995
income tax provision differs from the statutory rate principally because no
deferred tax benefit was recorded for the Company's deductible temporary
differences. The provision for income taxes in 1995 consists of current federal
income taxes. In 1995, the Company recorded an income tax benefit to additional
paid-in capital of $2,157,000 attributable to the exercise of stock options
including a portion of its income tax loss carryforward attributable to stock
options.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
CCII's deferred tax assets and liabilities are as follows:
DECEMBER 31
1997 1996
-------------------------------
Deferred tax assets:
Equity in net loss of Omnitel $ 15,920,000 $ 13,650,000
Net operating loss carryforward 15,586,000 5,978,000
Other 390,000 122,000
-------------------------------
Total deferred tax assets 31,896,000 19,750,000
Valuation allowance for deferred
tax assets (31,896,000) (19,750,000)
-------------------------------
Net deferred tax assets - -
Deferred tax liabilities - -
-------------------------------
Net deferred taxes $ - $ -
===============================
At December 31, 1997, the Company had a net operating loss carryforward of
approximately $44,500,000 for U.S. federal income tax purposes that expires as
follows: $25,100,000 in 2012 and $19,400,000 in 2011.
F-20
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. SHAREHOLDERS' (DEFICIENCY)
STOCK SPLIT
On March 19, 1998, the Company declared a 3-for-2 stock split by way of stock
dividend, to be paid on April 14, 1998. All common stock data in the
Consolidated Financial Statements gives retroactive effect to the stock split.
SHAREHOLDER RIGHTS PLAN
On November 8, 1990, the Board of Directors adopted a Rights Agreement which
provides that one Right will be issued with each share of common stock. The
Rights are not exercisable until the occurrence of certain potential takeover
events and will expire on July 31, 2001 unless previously redeemed by CCII. When
exercisable, each Right entitles the owner to purchase from CCII one
one-hundredth of a share of Series A Junior Participating Preferred Stock
("Series A Preferred Stock") at a purchase price of $59.
The Series A Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share and will be entitled to an
aggregate dividend of 100 times the dividend, if any, declared per share of
common stock. In the event of liquidation, the holders of Series A Preferred
Stock will be entitled to a minimum preferential liquidation payment of $1 per
share and will be entitled to an aggregate payment of 100 times the payment made
per share of common stock. Each share of Series A Preferred Stock will have 100
votes and will vote together with the common stock. In the event of any merger,
consolidation or other transactions in which shares of common stock are changed
or exchanged, each share of Series A Preferred Stock will be entitled to receive
100 times the amount received per share of common stock. The rights are
protected by customary antidilution provisions.
There are 1,000,000 shares of Series A Preferred Stock designated from the
2,500,000 authorized shares of Series Preferred Stock. No shares of Series A
Preferred Stock are issued or outstanding.
WARRANTS
In August 1995, 423,000 warrants to purchase 476,000 shares of common stock at
$24.67 per share were issued in connection with the 13-1/4% Senior Discount
Notes. The warrants expire in August 2003. Warrants to purchase 200,000 shares
of common stock at $20.17 per share were issued to CCI in July 1994 in
connection with the bank loan. These warrants expire in July 1999.
STOCK OPTIONS
There are 3,592,000 shares of common stock reserved for issuance under the 1991
Stock Option Plan (the "Plan"). The Plan provides that incentive stock options
be granted at fair market value of CCII's common stock on the date of grant, and
nonqualified stock options be granted at not less than 85% of the fair market
value of CCII's common stock on the date of grant. Options are
F-21
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. SHAREHOLDERS' (DEFICIENCY) (CONTINUED)
exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on each
January 1 thereafter, while the optionee remains an employee of CCII. Options
will expire ten years after the date of the grant.
There are 225,000 shares of CCII common stock reserved for issuance to members
of the Board of Directors who are not CCII employees under the Non-Employee
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan provides
that all options be granted at the fair market value of CCII's common stock on
the date of grant. Options are exercisable as to 20% of the shares subject
thereto on the date of grant and become exercisable as to an additional 20% of
the shares subject thereto on each anniversary of the grant date, while the
optionee remains a director of CCII. Options will expire ten years after the
date of the grant.
Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1996 and 1995: risk-free interest rates of 5.89%, 6.56%
and 6.61%, respectively, dividend yield of 0%, volatility factor of the expected
market price of the Company's common stock of .363, .388 and .388, respectively,
and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Following is the
Company's pro forma information:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Pro forma net income (loss) $ (33,784,000) $ (52,933,000) $ 3,957,000
Pro forma net income (loss) per share:
Basic $(2.09) $ (3.36) $.26
Diluted $(2.09) $ (3.36) $.22
</TABLE>
F-22
<PAGE>
Cellular Communications International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. SHAREHOLDERS' DEFICIENCY (CONTINUED)
A summary of the Company's stock option activity and related information for the
years ended December 31, follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 2,494,000 $10.21 2,831,000 $ 7.80 2,672,000 $ 4.52
Granted 215,000 18.46 209,000 22.17 401,000 27.48
Exercised (297,000) 3.83 (546,000) 2.28 (242,000) 4.23
Forfeited (16,000) 27.60 0 0.00 0 0.00
========= ========= =========
Outstanding-end of year 2,396,000 $11.63 2,494,000 $10.21 2,831,000 $ 7.80
========= ========= =========
Exercisable at end of year 1,807,000 $ 8.84 1,741,000 $ 6.66 1,921,000 $ 4.06
========= ========= =========
</TABLE>
Weighted-average fair value of options, calculated using the Black-Scholes
option pricing model, granted during 1997, 1996 and 1995 is $10.95, $13.89 and
$17.25, respectively.
The following table summarizes the status of the stock options outstanding and
exercisable at December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
- --------------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.13 to $0.61 272,000 3.6 Years $ 0.363 272,000 $ 0.363
$0.69 to $1.28 335,000 3.6 Years $ 1.163 335,000 $ 1.163
$1.45 to $2.83 384,000 4.3 Years $ 2.027 384,000 $ 2.027
$8.95 to $11.55 549,000 6.2 Years $11.463 420,000 $11.459
$17.67 to $25.50 527,000 8.5 Years $21.152 198,000 $22.239
$27.83 329,000 7.4 Years $27.833 198,000 $27.833
- --------------------------------------------------------------------------------------------------
Total 2,396,000 1,807,000
==================================================================================================
</TABLE>
F-23
EXHIBIT 4.4(a)
- --------------------------------------------------------------------------------
CELLULAR COMMUNICATIONS INTERNATIONAL, INC.,
and
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank),
as Trustee
------------------------------------
First Supplemental Indenture
Dated as of February 23, 1998
to Indenture
Dated as of August 22, 1995
------------------------------------
13-1/4% Senior Discount Notes due 2000
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of February 23, 1998 (the "First
Supplemental Indenture"), to the Indenture, dated as of August 22, 1995 (as
amended, modified or supplemented from time to time in accordance therewith, the
"Indenture"), between CELLULAR COMMUNICATIONS INTERNATIONAL, INC., a Delaware
corporation (the "Company"), and THE CHASE MANHATTAN BANK (formerly known as
Chemical Bank)(the "Trustee").
RECITALS
WHEREAS, the Company has heretofore executed and delivered to the Trustee
the Indenture, providing for, among other things, the creation and issuance by
the Company of its 13-1/4% Senior Discount Notes due 2000 (the "Securities");
and
WHEREAS, Section 9.02 of the Indenture provides that the Company, when
authorized by a Board Resolution, and the Trustee, with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities outstanding, may amend the Indenture, subject to certain exceptions
specified in Section 9.02 of the Indenture; and
WHEREAS, the parties hereto are entering into this First Supplemental
Indenture to eliminate or amend certain of the covenants and other provisions
contained in Article 4, Article 5, Article 6 and Article 9 of the Indenture
(collectively, the "Proposals"); and
WHEREAS, the Holders of at least a majority in aggregate principal amount
of the Securities outstanding have duly consented to the Proposals; and
WHEREAS, the conditions set forth in the Indenture for the execution and
delivery of this First Supplemental Indenture have been complied with; and
WHEREAS, all things necessary to make this First Supplemental Indenture a
valid agreement of the Company and the Trustee, in accordance with its terms,
and a valid amendment of, and supplement to, the Indenture have been done;
NOW THEREFORE:
<PAGE>
In consideration of the premises, the parties have executed and delivered
this First Supplemental Indenture, and the Company hereby covenants and agrees
with the Trustee, for the equal and proportionate benefit of all Holders of the
Securities, that the Indenture is supplemented and amended, to the extent and
for the purposes expressed herein, as follows:
SECTION 1. Definitions. (a) For all purposes of this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires, terms used herein shall have the meanings assigned to them
in the Indenture.
(b) Any defined terms and any references thereto which are used solely in
the sections, subsections or provisions of the Indenture deleted by operation of
Sections 2, 3, 4 and 5 of this First Supplemental Indenture are hereby deleted
in their entireties from Section 1.01 of the Indenture.
SECTION 2. Elimination of Certain Provisions of Article 4 and Article 6 of
the Indenture. Sections 4.03, 4.04, 4.05, 4.07, 4.08 4.09, 4.11, 4.12, 4.13,
4.16, 4.19 and 4.20 and subsection 6.01(b) of the Indenture are hereby deleted
in their entireties together with any references thereto in the Indenture.
SECTION 3. Amendment of Section 4.18 of the Indenture. Section 4.18 of the
Indenture is hereby amended to read in its entirety as follows:
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company, Restricted Affiliate or Restricted Subsidiary of a Restricted
Affiliate to, enter into any Sale/Leaseback Transaction with respect to any
property unless the Company or such Restricted Subsidiary or Restricted
Affiliate applies the proceeds of such transaction in compliance with Section
4.10 hereof.
SECTION 4. Amendment of Section 5.01 of the Indenture. Section 5.01 of the
Indenture is hereby amended to read in its entirety as follows:
The Company shall not consolidate or merge with or into another
corporation, Person or entity (whether or
2
<PAGE>
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of its assets as an entirety or virtually as an
entirety in one or more related transactions, unless (i) the Company is the
surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which a sale,
assignment, transfer, lease conveyance or other disposition of the assets as an
entirety or virtually as an entirety shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; and (ii) the entity or Person formed by or surviving
any such consolidation or merger (if other than the Company) or the entity or
Person to which a sale, assignment, transfer, lease, conveyance or other
disposition of the assets as an entirety or virtually as an entirety shall have
been made assumes all the obligations of the Company pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under this Indenture
and the Notes.
SECTION 5. Amendment of Section 9.04 of the Indenture. Section 9.04 of the
Indenture is hereby amended to read in its entirety as follows:
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder of a Security
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder of a Security
or (subject to Section 2.12 hereof) subsequent Holder of a Security may revoke
the consent as to its Security if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder. Notwithstanding anything to
the contrary in this Section 9.04, no consent to any amendment, supplement or
waiver delivered by a Holder of a Security (or any transferee or proxy thereof)
in connection with the Offer to Purchase and Consent Solicitation of the
Company, dated February 6, 1998, and the Solicitation (as defined therein) may
be revoked by such Holder (or any transferee or proxy thereof).
3
<PAGE>
SECTION 6. Operation of Proposed Amendments. Upon the execution and
delivery of this First Supplemental Indenture by the Trustee and the Company,
this First Supplemental Indenture will become operative but the Proposals will
not become effective until the Securities validly tendered pursuant to the
Company's offer to purchase and consent solicitation contained in the Company's
Offer to Purchase and Consent Solicitation Statement dated February 6, 1998 and
the related Consent and Letter of Transmittal (in each case, as the same may be
amended, modified or supplemented from time to time in accordance therewith) are
accepted for purchase by the Company in accordance with the terms and conditions
set forth therein; provided, however, that the amendment of Section 9.04 of the
Indenture pursuant to Section 5 hereof will be effective immediately upon
execution of this First Supplemental Indenture.
SECTION 7. Recitals. The recitals of fact contained herein shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representations as to the
validity or adequacy of this First Supplemental Indenture or the due execution
hereof by the Company.
SECTION 8. Ratification and Confirmation of Indenture. Except as hereby
expressly amended, the Indenture is in all respects ratified and confirmed and
all the terms, provisions and conditions thereof shall be and remain in full
force and effect.
SECTION 9. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS FIRST SUPPLEMENTAL INDENTURE.
SECTION 10. Successors. All agreements of the Company in this First
Supplemental Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this First Supplemental Indenture shall bind its
successors.
SECTION 11. Duplicate Originals. The parties may sign any number of copies
of this Indenture. Each signed copy shall be an original, but all such executed
copies together represent the same agreement.
4
<PAGE>
SECTION 12. Separability. In case any provision of this First Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
SECTION 13. Headings. The headings of the sections of this First
Supplemental Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof and shall in no way modify or restrict any of
the terms or provisions hereof.
SECTION 14. Trust Indenture Act Controls. If any provision of this First
Supplemental Indenture limits, qualifies or conflicts with the duties imposed by
TIA Sections 310-317 by operation of TIA Section 318(c), the imposed duties
shall control.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the day and year first above written.
CELLULAR COMMUNICATIONS
INTERNATIONAL, INC.
By: /s/ Richard J. Lubasch
-----------------------------------
Name: Richard J. Lubasch
Title: Senior Vice President-
General Counsel
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Andrew M. Deck
-----------------------------------
Name: Andrew M. Deck
Title: Vice President
6
EXHIBIT 10.2
CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
1991 STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE JUNE 3, 1997)
1. PURPOSE; CONSTRUCTION.
This Cellular Communications International, Inc. 1991 Stock Option Plan, as
amended and restated effective June 3, 1997 (the "Plan"), is intended to
encourage stock ownership by employees of Cellular Communications International,
Inc. (the "Corporation") and its divisions and subsidiary corporations, so that
they may acquire or increase their proprietary interest in the Corporation, and
to encourage such employees to remain in the employ of the Corporation and to
put forth maximum efforts for the success of the business. It is further
intended that options granted by the Committee pursuant to Section 6 of this
Plan shall constitute "incentive stock options" ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and the regulations issued thereunder (the "Code") , and options
granted by the Committee pursuant to Section 7 of this Plan shall constitute
"nonqualified stock options" ("Nonqualified Stock Options")
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than twelve (12)
months.
(b) "FAIR MARKET VALUE" per share as of a particular date shall mean (i) if
the shares of common stock, par value $.0l per share, of the Corporation
("Common Stock") are then traded on an over-the-counter market, the average of
the closing bid and asked prices for the shares of Common Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Common Stock in such market, (ii) if the shares of Common Stock are then
listed on the Nasdaq Stock Market's National Market or other national securities
exchange, the closing sales price per share on the date of grant or on the last
preceding dare on which there was a sale of such Common Stock on such exchange,
or (iii) if the shares of Common Stock are not then traded in an
over-the-counter market or listed on Nasdaq or a national securities exchange,
such value as the Committee in its discretion may determine.
<PAGE>
(c) "PARENT CORPORATION" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the employer
corporation if, at the time of granting an Option, each of the corporations
other than the employer corporation owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(d) "SUBSIDIARY CORPORATION" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the employer
corporation if, at the time of granting an Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(e) "TEN PERCENT STOCKHOLDER" shall mean an Optionee who, at the time an
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or of its Parent or Subsidiary Corporations.
3. ADMINISTRATION.
The Plan shall be administered by the Compensation and Option Committee of
the Corporation's Board of Directors or such other committee appointed either by
the Board of Directors of the Corporation (the "Board") or by such Compensation
and Option Committee (the "Committee") ; provided, however, to the extent
determined necessary to satisfy the requirements for exemption from Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
with respect to the acquisition or disposition of securities hereunder, action
by the Committee may be by a subcommittee of a committee of the Board composed
solely of two or more "non-employee directors," within the meaning of Rule 16b-3
as promulgated under Section 16(b) of the Exchange Act, appointed by the Board
or by the Compensation and Option Committee of the Board, or by a committee
composed solely of two or more "non-employee directors," within the meaning of
Rule 16b- 3, as a result of the recusal of those members who do not qualify as
non-employee directors; and, provided further, to the extent determined
necessary to satisfy the requirements for the exception for qualified
performance-based compensation under Section 162(m) of the Code and the treasury
regulations thereunder, action by the Committee may be by a committee comprised
solely of two or more "outside directors," within the meaning of Section 162(m)
of the Code and the treasury regulations thereunder, appointed by the Board or
by the Compensation and Option Committee. Notwithstanding anything in the Plan
to the contrary, and to the extent determined to be necessary to satisfy
2
<PAGE>
an exemption under Rule 16b-3 with respect to a grant hereunder (and, as
applicable, with respect to the disposition to the Corporation of a security
hereunder), or as otherwise determined advisable by the Committee, the terms of
such grant and disposition under the Plan shall be subject to the prior approval
of the Board. Any prior approval of the Board, as provided in the preceding
sentence, shall not otherwise limit or restrict the authority of the Committee
to make grants under the Plan, including, but not limited to, the authority of
the Committee to make grants qualifying for the performance-based compensation
exception under Section 162(m) of the Code and the treasury regulations
thereunder.
The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options; to determine
which Options shall constitute Incentive Stock Options and which Options shall
constitute Nonqualified Stock Options; to determine the purchase price of the
shares of Common Stock covered by each Option (the "Option Price") ; to
determine the persons to whom, and the time or times at which, Options shall be
granted; to determine the number of shares to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Option
Agreements (which need not be identical) entered into in connection with Options
granted under the Plan; and to make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such administrative duties as it
may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. One
member of the Committee may be selected by the Board as chairman. The Committee
shall hold its meetings at such times and places as it shall deem advisable. All
determinations of the Committee shall be made by a majority of its members
either present in person or participating by conference telephone at any meeting
or by written consent. The Committee may appoint a secretary and make such rules
and regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any
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action taken or determination made in good faith with respect to the Plan or any
Option granted hereunder.
4. ELIGIBILITY.
Options may be granted (i) to employees (including, without limitation,
officers and directors who are employees) of the Corporation, its present or
future divisions and Subsidiary Corporations and Parent Corporations and (ii) in
the case of Nonqualified Stock Options, also to employees of an affiliated
entity of the Corporation (an "Affiliated Entity") which is designated by the
Board to participate in the Plan. In determining the persons to whom Options
shall be granted and the number of shares to be covered by each Option, the
Committee shall take into account the duties of the respective persons, their
present and potential contributions to the success of the Corporation and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan. A person to whom an option has been
granted hereunder is sometimes referred to herein as an "Optionee."
An Optionee shall be eligible to receive more than one grant of an Option
during the term of the Plan, but only on the terms and subject to the
restrictions hereinafter set forth.
Effective with respect to grants made on or after June 2, 1994, no
individual shall be eligible to receive, in any given calendar year (or in the
case of 1994, the period beginning June 2, 1994 and ending December 31, 1994),
an option or options to purchase an amount of shares of Common Stock in excess
of 100,000, which number shall be subject to adjustment for transactions
described in Section 8(i) in a manner consistent with Section 8(i).
5. STOCK.
The stock subject to Options hereunder shall be shares of the Corporation's
Common Stock. Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or that may be reacquired by the
Corporation. The aggregate number of shares of Common Stock as to which Options
may be granted from time to time under the Plan shall not exceed 2,394,000. The
limitation established by the preceding sentence shall be subject to adjustment
as provided in Section 8(i) hereof.
In the event that any outstanding Option under the Plan for any reason
expires, or is canceled, surrendered or otherwise terminated without having been
exercised in full, the shares of Common Stock allocable to such expired,
canceled, surrendered or terminated portion of such Option shall (unless the
Plan shall have been terminated) become available for subsequent grants of
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Options under the Plan. Notwithstanding the foregoing, the expiration,
cancellation, surrender or termination of an Option, to the extent consistent
with Section 162(m) of the Code and the treasury regulations thereunder, shall
not be disregarded for purposes of applying the individual limit on the maximum
number of shares, as provided in Section 4, that may be purchased in connection
with Options granted under the Plan with respect to any individual.
6. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
8 hereof.
(a) VALUE OF SHARES. Any Options granted as Incentive Stock Options shall
be treated as Nonqualified Stock Options to the extent that the aggregate Fair
Market Value (determined as of the date the Incentive Stock Option is granted)
of the shares of Common Stock with respect to which such Options granted under
this Plan and all other option plans of the Corporation and any Subsidiary
Corporation become exercisable for the first time by an Optionee during any
calendar year exceeds $100,000.
(b) TEN PERCENT STOCKHOLDER. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of the shares of
Common Stock of the Corporation on the date of grant of such Incentive Stock
Option, and (ii) the exercise period shall not exceed five (5) years from the
date of grant of such Incentive Stock Option.
7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 8 hereof.
8. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a written
Option Agreement (an "Option Agreement") between the Corporation and the
Optionee, which agreement shall comply with and be subject to the following
terms and conditions:
(a) NUMBER OF SHARES. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) TYPE OF OPTION. Each Option Agreement shall
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specifically identify the portion, if any, of the Option which constitutes an
Incentive Stock Option and the portion, if any, which constitutes a Nonqualified
Stock Option.
(c) OPTION PRICE. Each Option Agreement shall state the Option Price,
which, in the case of Incentive Stock Options, shall be not less than one
hundred percent (100%) of the Fair Market Value of the shares of Common Stock of
the Corporation on the date of grant of the Option, and which, in the case of
Nonqualified Stock Options, shall in no event be less than eighty-five percent
(85%) of the Fair Market Value of the shares of Common Stock of the Corporation
on the date of grant of the Option. The Option Price shall be subject to
adjustment as provided in Section 8(i) hereof. The date on which the Committee
adopts a resolution expressly granting an Option shall be considered the day on
which such Option is granted.
(d) MEDIUM AND TIME OF PAYMENT. Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Corporation specifying the number of shares to be purchased, accompanied
by payment of the purchase price. Payment of the purchase price shall be made in
such manner as the Committee may provide in the Option Agreement, which may
include cash (including cash equivalents, such as by certified or bank check
payable to the Corporation) delivery of unrestricted shares of Common Stock that
have been owned by the Optionee or, as applicable, a permissible transferee (as
provided in Section 8(h)) for at least six months, any other manner permitted by
law as determined by the Committee, or any combination of the foregoing.
(e) TERM AND EXERCISE OF OPTIONS. Options shall be exercisable over the
exercise period as and at the times and upon the conditions that the Committee
may determine, as reflected in the Option Agreement; provided, however, that the
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its sole
discretion, deems appropriate; and further provided, however, that such exercise
period shall not exceed ten (10) years from the date of grant of such Option.
The exercise period shall be subject to earlier termination as provided in
Sections 8(f) and 8(g) hereof. An Option may be exercised, as to any or all full
shares of Common Stock as to which the Option has become exercisable, by giving
written notice of such exercise to the Committee or to such individual(s) as the
Committee may from time to time designate.
(f) TERMINATION. Except as provided in this Section 8(f) and in Section
8(g) hereof, an Option may not be exercised by the Optionee to whom it was
granted or by a transferee to whom such Option was transferred (as provided in
Section 8 (h)) unless the Optionee is then in the employ of the Corporation or a
division
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or any corporation which was, at the time of grant of such Option, a Subsidiary
Corporation or Parent Corporation thereof (or a corporation or a Parent or
Subsidiary Corporation of such corporation issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies) or an Affiliated
Entity, and unless the Optionee has remained continuously so employed since the
date of grant of the Option. In the event that the employment of an Optionee
shall terminate (other than by reason of death, Disability or, in the case of
Nonqualified Stock Options, retirement) , all Options granted to such Optionee
or transferred by such Optionee (as provided in Section 8 (h) ) that are
exercisable at the time of such termination may, unless earlier terminated in
accordance with their terms, be exercised by the Optionee or by a transferee
within three (3) months after such termination; provided, however, that if the
employment of an Optionee shall terminate for cause, all Options theretofore
granted to such Optionee or transferred by such Optionee (as provided in Section
8 (h) ) shall, to the extent not theretofore exercised, terminate forthwith.
Nothing in the Plan or in any Option granted pursuant hereto shall confer upon
an individual any right to continue in the employ of the Corporation or any of
its divisions, Subsidiary Corporations or Affiliated Entities or interfere in
any way with the right of the Corporation or any such division, Subsidiary
Corporation or Affiliated Entity to terminate such employment.
(g) DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee shall die
while employed by the Corporation or a division or any corporation which was, at
the time of grant of such Option, a Subsidiary Corporation or Parent Corporation
thereof (or a corporation or a Parent or Subsidiary Corporation of such
corporation issuing or assuming the Option in a transaction to which Section
424(a) of the Code applies) or an Affiliated Entity, or within three (3) months
after the termination of such Optionee' s employment, other than for cause, or
if the Optionee's employment shall terminate by reason of Disability or, in the
case of Nonqualified Stock Options, retirement, all Options theretofore granted
to such Optionee or transferred by such Optionee (as provided in Section 8 (h) )
, to the extent otherwise exercisable at the time of death or termination of
employment, may, unless earlier terminated in accordance with their terms, be
exercised by the Optionee or by the Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of death or Disability of the Optionee, or by a transferee
(as provided under Section 8 (h)) , at any time within one year after the date
of death, Disability or retirement of the Optionee.
(h) NONTRANSFERABILITY OF OPTIONS. Except as provided in this Section 8(h),
no Option granted hereunder shall be transferable by the Optionee to whom
granted, other than by will
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or the laws of descent and distribution, and the Option may be exercised during
the lifetime of such Optionee only by the Optionee or such Optionee's guardian
or legal representative. To the extent the Option Agreement so provides, and
subject to such conditions as the Committee may prescribe, an Optionee may, upon
providing written notice to the General Counsel of the Corporation, elect to
transfer the Nonqualified Stock Options granted to such Optionee pursuant to
such agreement, without consideration therefor, to members of his or her
"immediate family" (as defined below), to a trust or trusts maintained solely
for the benefit of the Optionee and/or the members of his or her immediate
family, or to a partnership or partnerships whose only partners are the Optionee
and/or the members of his or her immediate family. Any purported assignment,
alienation, pledge, attachment, sale, transfer, or encumbrance that does not
qualify as a permissible transfer under this Section 8 (h) shall be void and
unenforceable against the Plan and the Corporation. For purposes of this Section
8 (h) , the term "immediate family" shall mean, with respect to a particular
Optionee, the Optionee's spouse, children or grandchildren, and such other
persons as may be determined by the Committee. The terms of any such Option and
the Plan shall be binding upon a permissible transferee, and the beneficiaries,
executors, administrators, heirs and successors of the Optionee and, as
applicable, a permissible transferee.
(i) EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of Common Stock
through the declaration of stock or cash dividends, or recapitalization
resulting in stock splits, or combinations or exchanges of such shares, the
aggregate number of shares of Common Stock available for Options, the
aggregate number of shares of Common Stock available for distribution under
the Plan to any single individual with respect to Options granted
hereunder, the number of such shares covered by outstanding Options, and
the exercise price per share of such Options shall be proportionately
adjusted by the Committee to reflect any increase or decrease in the number
of issued shares of Common Stock; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated. In the event of
any other extraordinary corporate transaction, including, but not limited
to, distributions of cash or other property to the Corporation's
shareholders, the Committee may equitably adjust outstanding Options as it
deems appropriate.
(2) In the event of the proposed dissolution or liquidation of the
Corporation, in the event of any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off, or in the
event of a merger or consolidation of the Corporation with another
corporation, the Committee may provide that the holder of
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<PAGE>
each Option then exercisable shall have the right to exercise such Option
(at its then Option Price) solely for the kind and amount of shares of
stock and other securities, property, cash or any combination thereof
receivable upon such dissolution, liquidation, or corporate separation or
division, or merger or consolidation by a holder of the number of shares of
Common Stock for which such Option might have been exercised immediately
prior to such dissolution, liquidation, or corporate separation or
division, or merger or consolidation; or the Committee may provide, in the
alternative, that each Option granted under the Plan shall terminate as of
a date to be fixed by the Committee; provided, however, that not less than
thirty (30) days' written notice of the date so fixed shall be given to
each Optionee, who shall have the right, during the period of thirty (30)
days preceding such termination, to exercise the Options (unless earlier
terminated in accordance with their terms) as to all or any part of the
shares of Common Stock covered thereby, including shares as to which such
Options would not otherwise be exercisable; provided, further, that failure
to provide such notice shall not invalidate or affect the action with
respect to which such notice was required.
(3) If while unexercised Options remain outstanding under the Plan -
(i) any corporation, person or other entity (other than the
Corporation) makes a tender or exchange offer for shares of the Common
Stock pursuant to which purchases are made ("Offer"), or
(ii) the stockholders of the Corporation approve a definitive
agreement to merge or consolidate the Corporation with or into another
corporation or to sell or otherwise dispose of all or substantially
all of its assets, or adopt a plan of liquidation, or
(iii) the "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act) of securities representing more than 15% of the
combined voting power of the Corporation is acquired by any "person"
as defined in Sections 13(d) and 14(d) of the Exchange Act, or
(iv) during any period of two consecutive years, individuals who
at the beginning of such period were members of the Board cease for
any reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the Corporation's
stockholders, of each new director was approved by a vote of at least
two-thirds of the
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directors then still in office who were directors at the beginning of
such period),
then from and after the date of the first purchase of Common Stock pursuant
to such Offer, or the date of any such stockholder approval or adoption, or
the date on which public announcement of the acquisition of such percentage
shall have been made, or the date on which the change in the composition of
the Board set forth above shall have occurred, whichever is applicable (the
applicable date being referred to hereinafter as the "Acceleration Date") ,
all Options shall be exercisable in full, whether or not otherwise
exercisable. Following the Acceleration Date, the Committee shall, in the
case of a merger, consolidation or sale or disposition of assets, promptly
make an appropriate adjustment to the number and class of shares of Common
Stock available for Options, and to the amount and kind of shares or other
securities or property receivable upon exercise of any outstanding Options
after the effective date of such transaction, and the price thereof.
(4) Paragraphs (2) and (3) of this Section 8(i) shall not apply to a
merger or consolidation in which the Company is the surviving corporation
and shares of Common Stock are not converted into or exchanged for stock,
securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or
merger of another corporation into the Corporation in which the Corporation
is the surviving corporation and in which there is a reclassification or
change (including a change to the right to receive cash or other property)
of the shares of Common Stock (other than a change in par value, or from
par value to no par value, or as a result of a subdivision or combination,
but including any change in such shares into two or more classes or series
of shares), the Committee may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the
kind and amount of shares of stock and other securities (including those of
any new direct or indirect parent of the Corporation), property, cash or
any combination thereof receivable upon such reclassification, change,
consolidation or merger by the holder of the number of shares of Common
Stock for which such Option might have been exercised.
(5) In the event of a change in the Common Stock of the Corporation as
presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
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(6) To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to
this Plan shall not be adjusted in a manner that causes such Option to fail
to continue to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
(7) Except as hereinbefore expressly provided in this Section 8(i),
the Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class or by reason of any dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation; and
any issue by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to the Option. The grant of an
Option pursuant to the Plan shall not affect in any way the right or power
of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structures or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all or part of
its business or assets.
(j) RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an Option shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a stock certificate to him for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 8(i) hereof.
(k) OTHER PROVISIONS. The Option Agreements authorized under the Plan shall
contain such other provisions, including, without limitation, (i) the imposition
of restrictions upon the exercise of an Option, and (ii) in the case of an
Incentive Stock Option, the inclusion of any condition not inconsistent with
such Option qualifying as an Incentive Stock Option, as the Committee shall deem
advisable.
9. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES.
If the Committee shall so require, as a condition of exercise, each
Optionee shall agree that-
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(a) no later than the date of exercise of any Option granted hereunder, the
Optionee will pay to the Corporation or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Option, and
(b) the Corporation shall, to the extent permitted or required by law, have
the right to deduct federal, state and local taxes of any kind required by law
to be withheld upon the exercise of such Option from any payment of any kind
otherwise due to the Optionee.
10. TERM OF PLAN.
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board, or the
date the Plan is approved by the stockholders of the Corporation, whichever is
earlier.
11. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that no amendment that requires
stockholder approval under Delaware law, under the rules or regulations of any
securities exchange or regulating agency, or in order for the Plan to continue
to comply with Rule 16b-3 (as promulgated under Section 16(b) of the Exchange
Act) or, if applicable, to comply with the exception for qualified
performance-based compensation under Code Section 162 (in), or in order for
Options intended to constitute Incentive Stock Options to satisfy the
requirements of Section 422 of the Code shall be effective unless the same shall
be approved by the requisite vote of the stockholders of the Corporation. Except
as provided in Section 8 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option previously granted, unless
the written consent of the Optionee or, as applicable, a permissible transferee
(as provided in Section 8(h)) is obtained.
12. INTERPRETATION.
The Plan is designed and intended to comply with Rule 16b-3 under the
Exchange Act and, to the extent applicable, Sections 162(m) and 422 of the Code,
and all provisions hereof shall be construed in a manner to so comply.
13. APPROVAL AND RATIFICATION BY STOCKHOLDERS.
The Plan shall take effect as set forth in Section 16 hereof upon its
adoption by the Board, but shall be subject to its approval and ratification by
the holders of a majority of the
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issued and outstanding shares of Common Stock of the Corporation, which approval
and ratification must occur within twelve months after the date that the Plan is
adopted by the Board.
14. EFFECT OF HEADINGS.
The section and subsection headings contained herein are for convenience
only and shall not affect the construction hereof.
15. GOVERNING LAW.
The Plan shall be governed by the laws of the State of Delaware.
16. EFFECTIVE DATE OF PLAN.
The effective date of the Plan is the date the Plan is adopted by the
Board.
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CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE MAY 1, 1997)
1. PURPOSE; CONSTRUCTION.
The purpose of this Cellular Communications International, Inc.
Non-Employee Directors Stock Option Plan, as amended and restated effective May
1, 1997 (the "Plan") , is to encourage stock ownership by non-employee directors
of Cellular Communications International, Inc. (the "Corporation") in order to
increase their identification with the interests of the Corporation's
shareholders, and to encourage such directors to remain in the service of the
Corporation and to put forth maximum efforts for the success of the business.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "BOARD" shall mean the Board of Directors of the Corporation.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the common stock, par value ~.O1 per share,
of the Corporation.
(d) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than twelve (12)
months.
(e) "FAIR MARKET VALUE" per share as of a particular date shall mean (i) if
the Common Stock is then traded on an over-the-counter market, the average of
the closing bid and asked prices for the Common Stock in such over-the-counter
market on such date or on the last preceding date on which there was a sale of
such Common Stock in such market, (ii) if the Common Stock is then admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other comparable quotation system and has been designated
as a National Market System ("NMS") security, or if the Common Stock is then
listed on a national securities exchange, the closing sales price per share on
such date or on the last preceding date on which
<PAGE>
there was a sale of such Common Stock on such exchange, or (iii) if the Common
Stock is not then traded in an over-the-counter market, admitted to quotation on
NASDAQ or other comparable quotation system, or listed on a national securities
exchange, such value as the Committee in its discretion may determine.
(f) "OPTION" shall mean a stock option granted pursuant to the Plan.
(g) "OPTIONEE" shall mean a person to whom an Option has been granted under
the Plan.
3. ADMINISTRATION.
The Plan shall be administered by the Compensation and Option Committee
(the "Committee") established by the Board.
The Committee shall have the powers vested in it by the terms of the Plan,
such powers to include the authority to prescribe the form of the agreements
embodying awards of Options made under the Plan. The Committee shall, subject to
and not inconsistent with the express provisions of the Plan, have the authority
to administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
prescribe, amend and rescind rules and regulations relating to the Plan; and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. One
member of the Committee may be selected by the Board as chairman. The Committee
shall hold its meetings at such times and places as it shall deem advisable. All
determinations of the Committee shall be made by a majority of its members
either present or in person or participating by conference telephone at any
meeting or by written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
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No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.
4. ELIGIBILITY.
Each member of the Board who is not an employee of the Corporation or any
of its affiliates (a "Non-Employee Director") shall be granted Options in
accordance with Section 6 hereof. The adoption of this Plan shall not be deemed
to give any director any right to be granted an Option to purchase shares of
Common Stock, other than in accordance with the terms of this Plan.
5. STOCK.
The stock subject to Options granted hereunder shall be shares of the
Corporation's Common Stock. Such shares may, in whole or in part, be authorized
but unissued shares or shares that shall have been or that may be reacquired by
the Corporation. The aggregate number of shares of Common Stock as to which
Options may be granted from time to time under the Plan shall not exceed
150,000. The limitation established by the preceding sentence shall be subject
to adjustment as provided in Section 6(k) hereof.
In the event that any outstanding Option under the Plan for any reason
expires or is canceled, surrendered or otherwise terminated without having been
exercised in full, the shares of Common Stock allocable to the unexercised
portion of such Option shall (unless the Plan shall have been terminated) become
available for subsequent grants of Options under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a written
agreement between the Corporation and the Optionee in such form as the Committee
shall prescribe from time to time, which agreement shall comply with and be
subject to the following terms and conditions:
(a) INITIAL GRANTS. On the first business day in February 1993 (the
"Initial Grant Date") , each Non-Employee Director as of such date (a "Current
Director") shall be granted automatically, without action by the Committee, an
Option to purchase 1,500 shares of Common Stock.
(b) GRANTS TO NEW NON-EMPLOYEE DIRECTORS. Each Non-Employee Director (a
"New Director") who, after the Initial Grant Date, is elected to the Board for
the first time by the stockholders of the Corporation at any special or annual
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meeting of stockholders, will, at the time such director is elected and duly
qualified, be granted automatically, without any action by the Committee, an
Option to purchase 1,500 shares of Common Stock.
(c) GRANTS TO CONTINUING DIRECTORS. On the first business day in February
1994, each continuing Current Director will be granted automatically, without
action by the Committee, an Option to purchase 1,500 shares of Common Stock and
on the date of the annual meeting of stockholders in 1995, 1996 and 1997, each
Current Director will be granted automatically, without action by the Committee,
an Option to purchase 7,500 shares of Common Stock. In addition, on the first
business day in February subsequent to the election of any New Director, such
New Director will, if he or she is a continuing director on such date, be
granted automatically, without action by the Committee, an Option to purchase
1,500 shares of Common Stock and on the date of the second, third and fourth
annual meetings of stockholders subsequent to the election of any New Director,
such New Director will, if he or she is a continuing director on such date, be
granted automatically, without action by the Committee, an Option to purchase
7,500 shares of Common Stock.
(d) TYPE OF OPTION. Each Option granted under the Plan shall be a stock
option which is not intended to qualify as an "incentive stock option" under
Section 422 of the Code.
(e) OPTION PRICE. The Option Price of each Option granted under the Plan
shall be equal to one hundred percent (100%) of the Fair Market Value of the
shares of Common Stock subject to such Option on the date of grant thereof. The
Option Price shall be subject to adjustment as provided in Section 6(k) hereof.
(f) MEDIUM AND TIME OF PAYMENT. Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
specifying the number of shares to be purchased, accompanied by payment of the
purchase price. Payment of the purchase price may be made in cash (including
cash equivalents, such as by certified or bank check payable to the Corporation)
, by delivery of unrestricted shares of Common Stock that have been owned by the
Optionee or, as applicable, a permissible transferee (as provided in Section
6(j)) for at least six months, or in any combination of the foregoing.
(g) TERM AND EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable as to twenty percent
4
<PAGE>
(20%) of the shares subject thereto on the date of grant thereof and shall
become exercisable as to an additional twenty percent (20%) of the shares
subject thereto on each of the first, second, third and fourth anniversaries of
the date of grant thereof. An option shall be exercisable for a period of ten
(10) years from the date of grant of such Option; provided, however, that,
except as provided in this Section 6(g), the exercise period shall be subject to
earlier termination as provided in Sections 6(h) and 6(i) hereof. An Option may
be exercised, as to any or all full shares of Common Stock as to which the
Option has become exercisable, by giving written notice of such exercise to the
Committee or to such individual(s) as the Committee may from time to time
designate. Notwithstanding anything in the Plan to the contrary, in the case of
the termination of service of an Optionee as a director, the Committee or, to
the extent determined necessary to satisfy the requirements for an exemption
from Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") , the Board, in its sole discretion, may determine that all or a
portion of the Options that are then held by the Optionee (or, as applicable, by
a permissible transferee of such Options (as provided in Section 6(j)) shall, to
the extent not then exercisable, become exercisable in accordance with the first
sentence of this Section 6(g) or as provided in Section 6(k) and that all or a
portion of the Options held by the Optionee or by a transferee at the time of
the Optionee's termination of service may be exercised by the Optionee or, as
applicable, by a transferee (or, as applicable, by their beneficiaries,
executors, administrators, heirs and successors) during such period as
determined by the Committee (or, as applicable, the Board) provided that such
period shall terminate no earlier than the end of the exercise period that
otherwise would apply under Section 6(h) or Section 6(i) following such
termination of service under the Plan and no later than the end of the
applicable Option term.
(h) TERMINATION. Except as provided in this Section 6(h) and in Section
6(i) hereof, an Option may not be exercised by the Optionee to whom it was
granted or by a transferee to whom such Option was transferred (as provided in
Section 6(j)) unless the Optionee is then in service as a director of the
Corporation and unless the Optionee has remained continuously in the
Corporation's service as a director since the date of grant of the Option. In
the event that the service of an Optionee as a director shall terminate (other
than by reason of death, disability or retirement) , all Options granted to such
Optionee or transferred by such Optionee (as provided in Section 6(j)) that are
exercisable at the time of such termination may,
5
<PAGE>
unless earlier terminated in accordance with their terms, be exercised by the
Optionee or by a transferee within three (3) months after such termination;
provided, however, that if the service of an Optionee as a director of the
Corporation shall terminate for cause, all Options theretofore granted to such
Optionee or transferred by such Optionee (as provided in Section 6(j)), shall,
to the extent not theretofore exercised, terminate forthwith. Nothing in the
Plan or in any Option granted pursuant hereto shall confer upon an individual
any right to continue in service as a director of the Corporation or interfere
in any way with the right of the Corporation to terminate such service.
(i) DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee shall die
while in service as a director of the Corporation or within three (3) months
after the termination of such Optionee's service, other than for cause, or if
the Optionee s service as a director shall terminate by reason of Disability or
retirement, all Options theretofore granted to such Optionee or transferred by
such Optionee (as provided in Section 6(j)), to the extent otherwise exercisable
at the time of death or termination of service, may, unless earlier terminated
in accordance with their terms, be exercised by the Optionee or by the
Optionee's estate or by a person who acquired the right to exercise such Option
by bequest or inheritance or otherwise by reason of the death or Disability of
the Optionee or by a transferee at any time within one year after the date of
death, Disability or retirement of the Optionee.
(j) NONTRANSFERABILITY OF OPTIONS. Except as provided in this Section 6(j),
no Option granted hereunder shall be transferable by the Optionee to whom
granted, other than by will or the laws of descent and distribution, and the
Option may be exercised during the lifetime of such Optionee only by the
Optionee or such Optionee's guardian or legal representative. Subject to such
conditions as the Committee may prescribe (provided such prescription of
conditions does not cause the acquisition or disposition of securities hereunder
to fail to qualify for an exemption under Section 16(b) of the Exchange Act), an
Optionee may, upon providing written notice to the General Counsel of the
Corporation, elect to transfer the stock options granted to such Optionee
pursuant to such agreement, without consideration therefor, to members of his or
her "immediate family" (as defined below), to a trust or trusts maintained
solely for the benefit of the Optionee and/or the members of his or her
immediate family, or to a partnership or partnerships whose only partners are
the Optionee and/or the members of his or her immediate family. Any purported
assignment, alienation,
6
<PAGE>
pledge, attachment, sale, transfer, or encumbrance that does not qualify as a
permissible transfer under this Section 6(j), shall be void and unenforceable
against the Plan and the Corporation. For purposes of this Section 6(j), the
term "immediate family" shall mean, with respect to a particular Optionee, the
Optionee's spouse, children or grandchildren, and such other persons as may be
determined by the Committee. The terms of any such Option and the Plan shall be
binding upon a permissible transferee, and the beneficiaries, executors,
administrators, heirs and successors of the Optionee and, as applicable, a
permissible transferee.
(k) EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of Common Stock
through the declaration of stock or cash dividends, or recapitalization
resulting in stock splits, or combinations or exchanges of such shares, the
aggregate number of shares of Common Stock available for Options, the
number of such shares covered by outstanding Options, and the exercise
price per share of such Options shall be proportionately adjusted by the
Committee to reflect any increase or decrease in the number of issued
shares of Common Stock; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. In the event of any
other extraordinary corporate transaction, including, but not limited to,
distributions of cash or other property to the Corporation's shareholders,
the Committee shall equitably adjust outstanding Options to preserve, but
not increase, the benefits of such Options.
(2) In the event of the proposed dissolution or liquidation of the
Corporation, in the event of any corporate separation or division,
including, but not limited to, split-up or spin-off, or in the event of a
merger or consolidation of the Corporation with another corporation, the
Committee shall provide that the holder of each Option then exercisable
shall have the right to exercise such Option (at its then Option price)
solely for the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such dissolution,
liquidation, or corporate separation or division, or merger or
consolidation by a holder of the number of shares of Common Stock for which
such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, or merger or
consolidation.
7
<PAGE>
(3) If while unexercised Options remain outstanding under the Plan --
(i) any corporation, person or other entity (other than the
Corporation) makes a tender or exchange offer for shares of Common
Stock pursuant to which purchases are made ("Offer"), or
(ii) the stockholders of the Corporation approve a definitive
agreement to merge or consolidate the Corporation with or into another
corporation or to sell or otherwise dispose of all or substantially
all of its assets, or adopt a plan of liquidation, or
(iii) the "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act) of securities representing more than 15% of the
combined voting power of the Corporation is acquired by any "person"
as defined in sections 13(d) and 14(d) of the Exchange Act, or
(iv) during any period of two consecutive years, individuals who
at the beginning of such period were members of the Board cease for
any reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the Corporation's
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period),
then from and after the date of the first purchase of Common Stock pursuant
to such Offer, or the date of any such stockholder approval or adoption, or
the date on which public announcement of the acquisition of such percentage
shall have been made, or the date on which the change in the composition of
the Board set forth above shall have occurred, whichever is applicable (the
applicable date being referred to hereinafter as the "Acceleration Date"),
all Options shall be exercisable in full, whether or not otherwise
exercisable. Following the Acceleration Date, the Committee shall, in the
case of a merger, consolidation or sale or disposition of assets, promptly
make an appropriate adjustment to the number and class of shares of Common
Stock available for Options, and to the amount and kind of shares or other
securities or property receivable upon exercise of any outstanding Options
after the effective date of such transaction, and the price thereof.
(4) Paragraphs (2) and (3) of this Section 6(k) shall not apply to a
merger or consolidation in which the Company
8
<PAGE>
is the surviving corporation and shares of Common Stock are not converted
into or exchanged for stock, securities of any other corporation, cash or
any other thing of value. Notwithstanding the preceding sentence, in case
of any consolidation or merger of another corporation into the Corporation
in which the Corporation is the surviving corporation and in which there is
a reclassification or change (including a change to the right to receive
cash or other property) of the shares of Common Stock (other than a change
in par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares into
two or more classes or series of shares), the Committee shall provide that
the holder of each Option then exercisable shall have the right to exercise
such Option solely for the kind and amount of shares of stock and other
securities (including those of any new direct or indirect parent of the
Corporation), property, cash or any combination thereof receivable upon
such reclassification, change, consolidation or merger by the holder of the
number of shares of Common Stock for which such Option might have been
exercised.
(5) In the event of a change in the Common Stock of the Corporation as
presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
(6) To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
(7) Except as hereinbefore expressly provided in this Section 6(k),
the Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class or by reason of any dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation; and
any issue by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to the Option. The grant of an
Option pursuant to the Plan shall not affect in any way the right or power
of the Corporation to make adjustments, reclassifications, reorganizations
or changes
9
<PAGE>
of its capital or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all of part of its business or
assets.
(l) RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an Option shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a stock certificate to him or her for such
shares. No adjustment shall be made for the dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution of
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 6(k) hereof.
(m) OTHER PROVISIONS. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, the
imposition of restrictions upon the exercise of an Option, unless the inclusion
of such provisions would cause the acquisition or disposition of shares of
Common Stock in connection with such Option Agreements to fail to qualify for an
exemption from Section 16(b) of the Exchange Act.
7. TERM OF PLAN.
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board, or the
date the Plan is approved by the stockholders of the Corporation, whichever is
earlier.
8. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that no amendment that requires
stockholder approval under applicable Delaware law, under the rules or
regulations of any securities exchange or regulatory agency, or in order for the
Plan to continue to comply with Rule 16b-3 (as promulgated under Section 16(b)
of the Exchange Act) shall be effective unless the same shall be approved by the
requisite vote of the stockholders of the Corporation. Except as provided in
Section 6 hereof, no suspension, termination, modification or amendment of the
Plan may adversely affect any Option previously granted, unless the written
consent of the Optionee or, as applicable, a permissible transferee (as provided
in Section 6(j)) is obtained.
9. APPROVAL AND RATIFICATION BY STOCKHOLDERS.
The Plan shall take effect as set forth in Section 12 upon its adoption by
the Board, but shall be subject to its
10
<PAGE>
approval and ratification by the holders of a majority of the issued and
outstanding shares of Common Stock of the Corporation, which approval and
ratification must occur within twelve months after the date that the Plan is
adopted by the Board.
10. EFFECT OF HEADINGS.
The section and subsection headings contained herein are for convenience
only and shall not affect the construction hereof.
11. GOVERNING LAW.
The Plan shall be governed by the laws of the State of Delaware
12. EFFECTIVE DATE OF PLAN.
The effective date of the Plan is the date the Plan is adopted by the
Committee.
11
EXHIBIT 11
CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
CALCULATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Weighted Average Number of Shares
----------------------------------------------------------
Date Total Year Ended Year Ended Year Ended
Issued Description of Issuance Outstanding 31-Dec-97 31-Dec-96 31-Dec-95
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/31/94 Common Stock 15,273,932 15,273,932 15,273,932 15,273,932
01/06/95 Common Stock 1,125 1,125 1,125 1,107
01/12/95 Common Stock 338 338 338 327
01/30/95 Common Stock 939 939 939 863
02/02/95 Common Stock 3,501 3,501 3,501 3,185
02/23/95 Common Stock 939 939 939 800
04/17/95 Common Stock 2,100 2,100 2,100 1,485
08/04/95 Common Stock 338 338 338 138
08/07/95 Common Stock 2,250 2,250 2,250 900
08/21/95 Common Stock 624 624 624 225
08/23/95 Common Stock 10,125 10,125 10,125 3,606
09/12/95 Common Stock 158,400 158,400 158,400 47,738
09/28/95 Common Stock 11,250 11,250 11,250 2,898
10/10/95 Common Stock 31,500 31,500 31,500 7,077
11/07/95 Common Stock 1,950 1,950 1,950 288
11/22/95 Common Stock 1,688 1,688 1,688 180
12/06/95 Common Stock 150 150 150 11
12/11/95 Common Stock 6,750 6,750 6,750 1,476
12/13/95 Common Stock 2,550 2,550 2,550 126
12/18/95 Common Stock 1,313 1,313 1,313 47
12/29/95 Common Stock 4,500 4,500 4,500 24
01/11/96 Common Stock 900 900 873
02/13/96 Common Stock 3,752 3,752 3,300
03/06/96 Common Stock 564 564 462
03/08/96 Common Stock 3,000 3,000 2,442
03/12/96 Common Stock 10,001 10,001 8,033
05/16/96 Common Stock 6,563 6,563 4,106
06/13/96 Common Stock 182,250 182,250 100,088
06/14/96 Common Stock 169,875 169,875 92,828
06/17/96 Common Stock 64,796 64,796 34,877
11/06/96 Common Stock 75 75 12
11/25/96 Common Stock 2,252 2,252 222
11/26/96 Common Stock 3,750 3,750 359
12/31/96 Common Stock 97,875 97,875
01/15/97 Common Stock 1,800 1,727
01/17/97 Common Stock 1,502 1,431
01/21/97 Common Stock 2,250 2,121
01/24/97 Common Stock 900 842
05/05/97 Common Stock 31,500 20,712
06/30/97 Common Stock 4,500 2,268
08/01/97 Common Stock 23,252 9,683
08/05/97 Common Stock 7,500 3,041
08/06/97 Common Stock 90,000 36,246
08/18/97 Common Stock 91,316 33,774
10/15/97 Common Stock 13,908 2,934
12/10/97 Common Stock 2,739 158
12/18/97 Common Stock 450 17
12/19/97 Common Stock 4,500 149
12/26/97 Common Stock 3,377 47
12/30/97 Common Stock 6,750 18
01/02/98 Common Stock 11,250 0
----------------------------------------------------------
Weighted average number of
common shares 16,359,402 16,177,074 15,763,859 15,346,430
----------------------------------------------------------
Net effect of dilutive
stock options 1,990,088
Net effect of dilutive
stock warrants 376,700
----------------------------------------------------------
Total 16,359,402 16,177,074 15,763,859 17,713,217
==========================================================
</TABLE>
<PAGE>
CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
CALCULATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
31-Dec-97 31-Dec-96 31-Dec-95
--------------------------------------------
<S> <C> <C> <C>
Income (loss) before extraordinary item ($31,349,000) ($50,968,000) $6,815,000
Loss from early extinguishment of debt 0 0 (1,474,000)
--------------------------------------------
Net income (loss) ($31,349,000) ($50,968,000) $5,341,000
============================================
Net income (loss) per common share:
Income (loss) before extraordinary item ($1.94) ($3.23) $0.44
Extraordinary item 0.00 0.00 (0.10)
--------------------------------------------
Net income (loss) ($1.94) ($3.23) $0.34
============================================
Net income (loss) per common share-assuming dilution:
Income (loss) before extraordinary item ($1.94) ($3.23) $0.38
Extraordinary item 0.00 0.00 (0.08)
--------------------------------------------
Net income (loss) ($1.94) ($3.23) $0.30
============================================
</TABLE>
- ----------------------------------------------------------------------------
Note: Adjusted to give retroactive effect to the 3-for-2 stock split by way
of a stock dividend paid on April 14, 1998.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the (i) Registration Statements
(Forms S-8 No. 33-41528, No. 33-78846, No. 33-55442, No. 33-89368, No. 33-55440,
No. 333-44761, No. 33-78840, No. 33-89370 and No. 33-89366) of Cellular
Communications International, Inc. (the "Company") and (ii) Registration
Statements (Forms S-3 No. 33-90980 and 33-97396) of the Company and in the
related Prospectus of our report dated March 25, 1998, with respect to the
consolidated financial statements of the Company included in the Annual Report
(Form 10-K) for the year ended December 31, 1997.
ERNST & YOUNG LLP
New York, New York
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1997 ANNUAL FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 59,256,000
<SECURITIES> 24,871,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,000
<PP&E> 41,000
<DEPRECIATION> (40,000)
<TOTAL-ASSETS> 140,714,000
<CURRENT-LIABILITIES> 2,156,000
<BONDS> 197,327,000
0
0
<COMMON> 164,000<F1>
<OTHER-SE> (58,605,000)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 140,714,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,521,000
<OTHER-EXPENSES> 2,997,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,625,000
<INCOME-PRETAX> (31,349,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,349,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,349,000)
<EPS-PRIMARY> (1.94)<F1>
<EPS-DILUTED> (1.94)<F1>
<FN>
<F1>TAKES INTO ACCOUNT A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID
ON APRIL 14, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1997 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 59,971,000
<SECURITIES> 23,083,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 103,000
<PP&E> 41,000
<DEPRECIATION> (39,000)
<TOTAL-ASSETS> 138,133,000
<CURRENT-LIABILITIES> 2,053,000
<BONDS> 190,690,000
0
0
<COMMON> 109,000
<OTHER-SE> (54,719,000)
<TOTAL-LIABILITY-AND-EQUITY> 138,133,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,628,000
<OTHER-EXPENSES> 2,473,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,644,000
<INCOME-PRETAX> (26,970,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,970,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,970,000)
<EPS-PRIMARY> (1.67)<F1><F2>
<EPS-DILUTED> (1.67)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1997 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 65,818,000
<SECURITIES> 15,732,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 206,000
<PP&E> 69,000
<DEPRECIATION> (60,000)
<TOTAL-ASSETS> 136,259,000
<CURRENT-LIABILITIES> 1,990,000
<BONDS> 184,259,000
0
0
<COMMON> 107,000
<OTHER-SE> (50,097,000)
<TOTAL-LIABILITY-AND-EQUITY> 136,259,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,612,000
<OTHER-EXPENSES> 1,847,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,881,000
<INCOME-PRETAX> (21,511,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,511,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,511,000)
<EPS-PRIMARY> (1.34)<F1><F2>
<EPS-DILUTED> (1.34)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1997 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 28,365,000
<SECURITIES> 52,678,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,255,000
<PP&E> 69,000
<DEPRECIATION> (55,000)
<TOTAL-ASSETS> 138,774,000
<CURRENT-LIABILITIES> 3,005,000
<BONDS> 178,034,000
0
0
<COMMON> 107,000
<OTHER-SE> (42,372,000)
<TOTAL-LIABILITY-AND-EQUITY> 138,774,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,137,000
<OTHER-EXPENSES> 1,094,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,336,000
<INCOME-PRETAX> (13,734,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,734,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,734,000)
<EPS-PRIMARY> (0.85)<F1><F2>
<EPS-DILUTED> (0.85)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1996 ANNUAL FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 46,759,000
<SECURITIES> 34,404,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,045,000
<PP&E> 69,000
<DEPRECIATION> (50,000)
<TOTAL-ASSETS> 146,307,000
<CURRENT-LIABILITIES> 2,816,000
<BONDS> 172,052,000
0
0
<COMMON> 107,000
<OTHER-SE> (28,668,000)
<TOTAL-LIABILITY-AND-EQUITY> 146,307,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 29,850,000
<OTHER-EXPENSES> 3,397,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,330,000
<INCOME-PRETAX> (52,168,000)
<INCOME-TAX> 1,200,000
<INCOME-CONTINUING> (50,968,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,968,000)
<EPS-PRIMARY> (3.23)<F1><F2>
<EPS-DILUTED> (3.23)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1996 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 20,697,000
<SECURITIES> 58,178,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,311,000
<PP&E> 69,000
<DEPRECIATION> (45,000)
<TOTAL-ASSETS> 141,939,000
<CURRENT-LIABILITIES> 2,150,000
<BONDS> 166,214,000
0
0
<COMMON> 106,000
<OTHER-SE> (26,531,000)
<TOTAL-LIABILITY-AND-EQUITY> 141,939,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 33,673,000
<OTHER-EXPENSES> 2,382,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,191,000
<INCOME-PRETAX> (49,777,000)
<INCOME-TAX> 1,200,000
<INCOME-CONTINUING> (48,577,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,577,000)
<EPS-PRIMARY> (3.09)<F1><F2>
<EPS-DILUTED> (3.09)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1996 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,555,000
<SECURITIES> 64,576,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 440,000
<PP&E> 94,000
<DEPRECIATION> (57,000)
<TOTAL-ASSETS> 152,930,000
<CURRENT-LIABILITIES> 1,459,000
<BONDS> 160,558,000
0
0
<COMMON> 106,000
<OTHER-SE> (9,193,000)
<TOTAL-LIABILITY-AND-EQUITY> 152,930,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 20,785,000
<OTHER-EXPENSES> 1,562,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,242,000
<INCOME-PRETAX> (31,239,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,239,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,239,000)
<EPS-PRIMARY> (2.01)<F1><F2>
<EPS-DILUTED> (2.01)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE
1996 INTERIM FINANCIAL STATEMENTS OF CELLULAR COMMUNICATIONS INTERNATIONAL, INC.
THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,437,000
<SECURITIES> 57,307,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 304,000
<PP&E> 94,000
<DEPRECIATION> (50,000)
<TOTAL-ASSETS> 164,401,000
<CURRENT-LIABILITIES> 2,044,000
<BONDS> 155,083,000
0
0
<COMMON> 104,000
<OTHER-SE> 7,170,000
<TOTAL-LIABILITY-AND-EQUITY> 164,401,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,929,000
<OTHER-EXPENSES> 737,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,486,000
<INCOME-PRETAX> (13,920,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,920,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,920,000)
<EPS-PRIMARY> (0.90)<F1><F2>
<EPS-DILUTED> (0.90)<F1><F2>
<FN>
<F1>RESTATED FOR A 3-FOR-2 STOCK SPLIT BY WAY OF STOCK DIVIDEND TO BE PAID ON
APRIL 14, 1998.
<F2>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO.128, "EARNINGS PER SHARE"
</FN>
</TABLE>
