<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
- - --- Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994
Commission File Number 1-12342
AIRTOUCH COMMUNICATIONS
A California Corporation
I.R.S. Employer Number 94-2952076
425 Market Street
San Francisco, CA 94105
(415) 658-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
On July 31, 1994, 493,513,654 shares of common stock were outstanding.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Income . . . . . . . 3
Condensed Consolidated Balance Sheets . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows . . . . . 7
Notes to Condensed Consolidated Financial Statements . . 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 15
Report of Independent Accountants . . . . . . . . . . . 26
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 30
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the 3 Months For the 6 Months
Ended Ended
June 30, June 30,
---------------- ----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Operating Revenues
Wireless services and other revenues $278.7 $257.6 $535.3 $495.7
Cellular and paging equipment sales 21.5 18.3 41.1 32.6
Cost of cellular and paging equipment
sales (21.0) (16.4) (39.9) (29.7)
------ ------ ------ ------
Net Operating Revenues 279.2 259.5 536.5 498.6
------ ------ ------ ------
Operating Expenses
Cost of revenues 38.1 37.9 71.9 74.2
Selling, general, administrative, and
other expenses 162.5 135.7 306.6 267.6
Depreciation and amortization 50.0 43.5 95.5 86.2
------ ------ ------ ------
Total Operating Expenses 250.6 217.1 474.0 428.0
------ ------ ------ ------
Operating Income 28.6 42.4 62.5 70.6
Interest expense (1.6) (6.8) (3.2) (17.4)
Minority interests in net income of
consolidated partnerships and
corporations (7.0) (17.1) (13.3) (29.1)
Equity in net income (loss) of unconsolidated
partnerships and corporations:
Domestic 36.6 16.4 63.0 25.6
International (2.2) (9.1) (6.2) (17.3)
Interest income 12.5 2.7 25.3 5.9
Gain on sale of telecommunications interests -- 3.3 -- 3.3
Miscellaneous expense (0.2) (3.9) (4.7) (6.9)
------ ------ ------ ------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 66.7 27.9 123.4 34.7
Income taxes 33.6 15.4 62.8 24.5
------ ------ ------ ------
Income Before Cumulative Effect of
Accounting Change 33.1 12.5 60.6 10.2
Cumulative effect of accounting change for
other postretirement benefits (net of
income taxes of $3.5) (Note B) -- -- -- (5.6)
------ ------ ------ ------
Net Income $ 33.1 $ 12.5 $ 60.6 $ 4.6
====== ====== ====== ======
</TABLE>
(Continued next page)
3
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Dollars in millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Per Share Amounts:
Income before cumulative effect of
accounting change $0.07 $0.03 $0.12 $ 0.02
Cumulative effect of accounting change for
other postretirement benefits
(net of income taxes) -- -- -- $(0.01)
----- ----- ----- ------
Net income $0.07 $0.03 $0.12 $ 0.01
===== ===== ===== ======
Weighted average shares outstanding
(in millions) 493.3 424.0 492.9 424.0
===== ===== ===== ======
</TABLE>
The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.
4
<PAGE> 5
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 490.6 $ 646.7
Accounts receivable, net of allowance for
uncollectibles of $10.8 in 1994
and $9.2 in 1993 143.1 132.7
Held-to-maturity investments 804.6 814.0
Available-for-sale securities 59.2 --
Other receivables 16.7 15.1
Due from affiliates 4.4 7.0
Other current assets 63.1 45.3
-------- --------
Total current assets 1,581.7 1,660.8
-------- --------
Property, plant, and equipment 1,336.2 1,175.5
Less: accumulated depreciation 506.5 433.4
-------- --------
Net property, plant, and equipment 829.7 742.1
Investments in unconsolidated partnerships and corporations 1,262.1 1,154.5
Intangible assets, net 421.4 413.2
Deferred charges and other noncurrent assets 85.6 106.1
-------- --------
Total Assets $4,180.5 $4,076.7
======== ========
Liabilities and Shareholders' Equity:
Accounts payable $ 135.6 $ 149.2
Due to affiliates -- 40.7
Other current liabilities 154.9 124.1
-------- --------
Total current liabilities 290.5 314.0
Long-term debt 70.2 68.6
Deferred income taxes 213.8 197.6
Deferred credits 60.5 54.1
-------- --------
Total Liabilities 635.0 634.3
-------- --------
Commitments and contingencies.
Minority interests in consolidated
partnerships and corporations 141.7 105.1
-------- --------
</TABLE>
(Continued on Next Page)
5
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in millions, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
Shareholders' Equity:
Preferred stock ($.0l par value; 50,000,000
shares authorized; no shares issued or
outstanding) -- --
Common stock ($.0l par value; 1,100,000,000
shares authorized; 493,500,485 shares issued and
493,377,525 shares outstanding at June 30, 1994;
492,622,960 shares issued and 492,500,000 shares
outstanding at December 31, 1993) 4.9 4.9
Additional paid-in capital 3,721.9 3,719.5
Accumulated deficit (327.3) (387.9)
Currency translation adjustment 2.6 0.8
Other 1.7 --
-------- --------
Total Shareholders' Equity 3,403.8 3,337.3
-------- --------
Total Liabilities and Shareholders' Equity $4,180.5 $4,076.7
======== ========
</TABLE>
The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.
6
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
For the 6 Months Ended
June 30,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Cash From (Used For) Operating Activities:
Net income $ 60.6 $ 4.6
Adjustments to reconcile net income for items
currently not affecting operating cash flows:
Depreciation and amortization 95.5 86.2
Deferred income taxes 10.5 10.0
Minority interests in net income of
consolidated partnerships and corporations 13.3 29.1
Equity in net income of unconsolidated
partnerships and corporations (56.8) (8.3)
Gain on sale of telecommunications interests -- (3.3)
Distributions received from equity investments 40.8 13.2
Loss on sale of property, plant, and equipment 0.3 1.9
Cumulative effect of accounting change
for postretirement costs -- 9.1
Changes in assets and liabilities:
Accounts receivable, net (5.6) (3.9)
Other current assets and receivables (14.5) (21.8)
Deferred charges and other noncurrent assets (24.9) 0.4
Accounts payable and other current liabilities (11.0) (52.1)
Deferred credits and other liabilities 0.4 9.1
------ ------
Cash From Operating Activities 108.6 74.2
------ ------
Cash From (Used For) Investing Activities:
Additions to property, plant, and equipment (168.8) (109.1)
Proceeds from sale of property, plant, and equipment 4.5 4.5
Proceeds from sale of telecommunications interests -- 3.8
Capital contributions to unconsolidated
partnerships and corporations (39.2) (79.4)
Cost of acquiring telecommunications interests in:
Cellular Communications, Inc. (22.8) (4.9)
Globalstar (12.5) --
Other (0.6) --
Maturities of held-to-maturity investments 9.4 --
Purchase of available-for-sale securities (59.2) --
Other investing activities (7.4) (12.2)
------ ------
Cash Used For Investing Activities (296.6) (197.3)
------ ------
</TABLE>
(Continued on next page)
7
<PAGE> 8
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
For the 6 Months Ended
June 30,
------------------------
1994 1993
------ ------
<S> <C> <C>
Cash From (Used For) Financing Activities:
Retirement of notes and obligations payable (7.9) (0.3)
Retirement of long-term debt from affiliate -- (185.0)
Distributions to minority interests in
consolidated partnerships and corporations (12.2) (18.7)
Contributions from minority interests in
consolidated partnerships and corporations 34.3 3.8
Dividends paid to parent -- (31.8)
Decrease in short-term borrowings from affiliates (0.3) (634.1)
Proceeds from issuing long-term debt 9.0 0.6
Equity infusion by parent -- 948.3
Loan repayments from affiliate -- 40.2
Other financing activities 9.0 2.3
------ ------
Cash From Financing Activities 31.9 125.3
------ ------
(Decrease) Increase In Cash and Cash Equivalents (156.1) 2.2
Beginning Cash and Cash Equivalents 646.7 17.1
------ ------
Ending Cash and Cash Equivalents $490.6 $19.3
====== ======
</TABLE>
The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.
8
<PAGE> 9
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
Prior to April 1, 1994, AirTouch Communications (the "Company") was an
86.1% owned subsidiary of Pacific Telesis Group ("Telesis"). On
April 1, 1994, Telesis separated the Company's operations from
Telesis' other businesses by distributing all of the common stock of
the Company owned by Telesis to the Telesis shareholders.
The Condensed Consolidated Financial Statements include the accounts
of the Company, its subsidiaries and partnerships for which the
Company has controlling interests. All significant intercompany
balances and transactions have been eliminated. Certain prior period
items have been reclassified to conform with the 1994 format; however,
these reclassifications did not affect previously reported net income
or accumulated deficit.
The Condensed Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles and are
presented in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC") applicable to interim
financial information. Accordingly, certain footnote disclosures have
been condensed or omitted. The Company recommends that these interim
financial statements be read in conjunction with its 1993 financial
statements included with the 1993 Annual Report on Form 10-K.
In the Company's opinion, the Condensed Consolidated Financial
Statements include all adjustments necessary to present fairly the
financial position and results of operations for each interim period
presented. All such adjustments are normal recurring adjustments.
The Condensed Consolidated Financial Statements have been reviewed by
Coopers & Lybrand, independent accountants, and their report is
included herein.
B. ACCOUNTING CHANGES
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers'
Accounting for Postemployment Benefits," and SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities."
SFAS 112 establishes accounting standards for employers who provide
benefits to former or inactive employees after employment but before
retirement ("postemployment benefits"). SFAS 112 requires the
Company to use the accrual method of accounting for the estimated
costs of postemployment benefits. Implementation of SFAS 112 did not
materially impact the Company's results of operations or its financial
condition.
SFAS 115 establishes accounting standards for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities. SFAS 115 requires the Company to
classify certain investments in debt and equity securities into one of
three categories: held-to-maturity, available-for-sale or trading.
SFAS 115 also requires the Company to recognize unrealized holding
gains and losses associated with available-for-sale securities as a
separate component of shareholders' equity. Implementation of SFAS
115 did not materially impact the Company's financial condition or its
results of operations. Implementation of SFAS 115, however, did
change the classification and carrying value of certain noncurrent
investments in marketable equity securities. See Note E for further
discussion. In accordance with SFAS 115, prior years' financial
statements have not been restated.
Effective January 1, 1993, the Company adopted the provisions of SFAS
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions". SFAS 106 required the Company to change its method of
accounting for postretirement benefits from a cash basis to an accrual
basis. The implementation of SFAS 106 required the Company to record
a one-time after-tax transition obligation of $5.6 million ($9.1
million pre-tax) in the first quarter of 1993.
9
<PAGE> 10
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
C. EARNINGS PER SHARE
Earnings per share were computed using weighted average common shares
outstanding totaling 493,265,000 for the 3 months ended June 30, 1994,
492,897,000 for the 6 months ended June 30, 1994 and 424,000,000 for
the 3 and the 6 months ended June 30, 1993.
D. INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS AND CORPORATIONS
The equity method of accounting is used for all unconsolidated entities
in which the Company has significant influence. Two of these
investments, New Par and Mannesmann Mobilfunk GmbH ("MMO"), meet the
criteria for "significant subsidiaries" as defined by the SEC.
Condensed operating results for New Par and MMO are as follows:
<TABLE>
<CAPTION>
For the 3 Months For the 6 Months
Ended Ended
June 30, June 30,
---------------- ----------------
1994 1993 1994 1993
------ ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C>
NEW PAR
Net operating revenues $117.1 $111.0 $215.9 $191.9
Operating income $ 37.3 $ 30.3 $ 58.6 $ 45.7
Net income $ 35.3 $ 30.4 $ 56.9 $ 46.0
MMO
Net operating revenues $208.8 $ 89.9 $379.9 $155.7
Operating income (loss) $ 18.2 $(26.1) $ 15.3 $(73.8)
Net income (loss) $ 5.1 $ (0.3) $ 0.8 $(25.5)
</TABLE>
E. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Company's held-to-maturity investment portfolio consists
principally of highly liquid debt instruments with contractual
maturities in excess of three months but less than one year.
Auction rate reset type securities are shares in variable rate
preferred municipal funds with contractual reset periods greater
than 90 days. The portfolio, carried at amortized cost which
approximates fair value, is summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
(Dollars in millions)
(Unaudited)
<S> <C> <C>
United States government treasury bonds $653.5 $661.3
State governmental municipal bonds 24.2 58.5
Local governmental municipal bonds 9.7 54.6
Miscellaneous commercial paper
and auction rate reset type securities 102.2 26.7
------ ------
789.6 801.1
Accrued interest 15.0 12.9
------ ------
$804.6 $814.0
====== ======
</TABLE>
10
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company's available-for-sale securities of $59.2 million consist
of United States government securities with a carrying value which
approximates market.
The Company also owns 400,000 shares of common stock in Qualcomm, a
publicly held developer of digital mobile communications technology.
Prior to January 1, 1994, the Company carried its investment in
Qualcomm at cost. To comply with the provisions of SFAS 115, the
Company was required to reclassify its investment in Qualcomm to an
available-for-sale security effective January 1, 1994. Accordingly,
the Company increased its carrying value of the investment in Qualcomm
to reflect fair value and created a corresponding unrealized holding
gain as a separate component of shareholders' equity. The investment
in Qualcomm is included in "Deferred charges and other noncurrent
assets" in the Condensed Consolidated Balance Sheet. At June 30,
1994, the Company carried its investment in Qualcomm at $6.4 million,
which reflected market value, compared to a net cost of $2.0 million.
The Company's unrealized holding gain in Qualcomm, net of tax, is $2.6
million at June 30, 1994. At December 31, 1993, the Company's net
investment in Qualcomm was $2.0 million compared to a market value of
$10.6 million. The following table summarizes the changes in
unrealized holding gains, net of tax:
<TABLE>
<CAPTION>
For the 6 Months
Ended June 30, 1994
-------------------
(Dollars in millions)
<S> <C>
Balance at beginning of period --
Unrealized holding gains, net of tax $2.6
----
Balance at end of period $2.6
====
</TABLE>
F. REVOLVING LINE OF CREDIT
In March 1994, the Company signed a definitive bank loan agreement for
a $600 million non-amortizing revolving line of credit (the
"Facility"). The Facility provides the Company with funding for
general corporate purposes and with standby letters of credit to
support its obligations to purchase shares in Cellular Communications,
Inc. The Facility is available in the form of committed advances or
standby letters of credit and expires in March 1997. Interest on
advances accrues at a rate equal to an index selected by the Company
plus a margin which is based upon the Company's long-term senior
unsecured debt rating. Interest on outstanding but undrawn standby
letters of credit accrues at a margin which is based upon the
Company's long-term senior unsecured debt rating. The Company also
has the option to pledge United States Treasury securities in exchange
for a significantly reduced margin. As of June 30, 1994, the Company
had voluntarily pledged approximately $600 million of securities
classified as held-to-maturity and available-for-sale. Provided the
Company is not in default of the Facility, these securities are
immediately, without restriction, available for redemption by the
Company.
G. CELLULAR COMMUNICATIONS, INC.
Under the terms of a merger agreement with Cellular Communications,
Inc. ("CCI"), the Company is obligated to purchase up to 10.04 million
CCI shares in October 1995 at $60 per share. To support this
obligation, the Company has issued a $600 million irrevocable letter
of credit under the Facility for the benefit of CCI. This letter of
credit expires in 1996. As of June 30, 1994, there have been no draws
against the letter of credit.
11
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In connection with the merger agreement, the Company is required to
pledge to CCI certain CCI shares owned by the Company. As of June 30,
1994, collateral pledged to CCI carried a net investment of $195.6
million and had a market value of $261.4 million. The pledged
investment represents approximately 11% of CCI's fully diluted
shares. The Company will continue to pledge any additional CCI shares
it acquires up to 15% of CCI's fully diluted shares.
H. INCOME TAX EXPENSE
The Company's estimated annualized effective tax rate for 1994 is
approximately 50.9%, a decline of approximately 11.9 percentage
points from the 62.8% effective tax rate for the year ended
December 31, 1993. The decline in the estimated annualized effective
tax rate for 1994 was primarily caused by: tax-exempt interest income
earned in 1994; a decline in equity losses of unconsolidated
partnerships and corporations as a percentage of operating revenues;
and eliminating in 1994 the tax effects of changing deferred taxes
for increasing the corporate tax rate from 34% to 35% in 1993.
I. COMMITMENTS AND CONTINGENCIES
Garabedian dba Western Mobile Telephone Company v. LASMSA Limited
Partnership, et al.
A class action complaint has been filed naming the Company as general
partner for Los Angeles SMSA Limited Partnership. The plaintiff
alleges that Los Angeles Cellular Telephone Company and the Company
conspired to fix the price of wholesale and retail cellular service in
the Los Angeles market. The plaintiff alleges damages for the class
"in a sum in excess of $100 million." On January 31, 1994, the Company
filed a demurrer to the complaint. The Company intends to defend
itself vigorously. Two other antitrust cases brought by individual
plaintiffs against the Company have been coordinated for discovery
with this case. The Company does not anticipate that these
proceedings will have a material adverse effect on the Company's
financial position.
Other
The Company has various letters of responsibility and letters of
support for performance guarantees, refundable security deposits and
credit facilities of certain subsidiaries and affiliates. These
letters of responsibility and letters of support do not provide for
recourse to the Company. Separately, as of June 30, 1994, the Company
guaranteed approximately $10.4 million owed by a third party. The
Company believes that the likelihood of having to pay under the
guarantee is remote.
A subsidiary of the Company guarantees the liabilities of a third
party, for which the subsidiary is indemnified by minority
shareholders unaffiliated with the Company. The Company believes it
is remote that it will be required to pay under this guarantee.
Additionally, in August 1993, the Company provided a letter supporting
the commercial paper program entered into by Telecel Comunicacoes
Pessoais, S.A. in which the Company may be liable for its
proportionate share of the loans issued under the program if certain
loan covenants are not met. As of June 30, 1994, the potential
liability is approximately $7.0 million. The Company believes that
the likelihood of having to pay under the letter is remote.
12
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AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
J. 1993 LONG TERM STOCK INCENTIVE PLAN
Under the 1993 Long Term Stock Incentive Plan (the "Plan"), the
Company has reserved 24.0 million shares of common stock to be granted
to eligible employees in the form of stock options, stock appreciation
rights ("SARs"), restricted shares and stock units. In connection
with the spin-off of the Company by Telesis on April 1, 1994, the
Company replaced 1.3 million Telesis options and SARs with 3.3 million
options and SARs of the Company. An additional 2.4 million options
were granted to certain key employees.
Through June 30, 1994, 0.7 million restricted shares of the Company's
common stock with a fair market value of $15.5 million were issued
under the Plan to eligible employees. Upon vesting, the restrictions
will be removed. Vesting occurs primarily upon doubling the Company's
IPO share value of $23 for a specified period of time or a change in
control of the Company. The remaining deferred compensation at June
30, 1994 (approximately $15.0 million) is a reduction to Additional
Paid in Capital. Compensation expense is amortized to the Income
Statement over the vesting period ranging from 3 to 10 years. Upon
vesting, the remaining deferred compensation will be recognized
immediately.
K. SUBSEQUENT EVENTS
U S WEST Joint Venture
On July 25, 1994, the Company and U S WEST, Inc. ("U S WEST")
announced an agreement to combine their domestic cellular properties.
The initial phase involves the formation of a partnership known as WMC
Partners, L.P. ("WMC"), in which the Company and U S WEST will hold
initial equity interests of approximately 70 percent and 30 percent,
respectively. The closing of this initial phase (the "Closing"),
which is conditioned on certain federal and state regulatory
approvals, is expected to occur in the second quarter of 1995. After
the Closing, WMC will provide services to the partners and domestic
cellular properties of the partners. During this phase, the cellular
properties of the parties will continue to be owned by the individual
partners.
Simultaneous with the formation of WMC, the parties formed an equally
owned partnership to pursue new Personal Communications Services
("PCS") opportunities. The PCS partnership will construct and operate
PCS systems in areas where the partners currently do not have cellular
operations. WMC will also provide services to the PCS partnership.
In the next phase, the partners will contribute their domestic
cellular properties to WMC. This contribution is expected to occur
upon the lifting of certain restrictions imposed by the Modification
of Final Judgment (the "MFJ"), or earlier, at the Company's option,
but will occur in any event no later than July 25, 1998. The PCS
partnership also will be merged into WMC, either at the time the
cellular properties are contributed or three years after it acquires
its PCS license, whichever is later.
U S WEST has the right, which is exercisable after full relief from
the MFJ has been obtained but which expires on July 25, 2004, to
exchange its interest in WMC for up to 19.9% of the Company's common
stock outstanding at the time of the exchange. Any such exchange
will be made at a ratio reflecting the appraised private market value
of U S WEST's interest in WMC and the appraised public market value
of the shares of the Company's common stock to be acquired by U S
WEST in the exchange. In the event that the value of U S WEST's
interest in WMC is determined by such appraisals to exceed 19.9% of
the Company's then outstanding common stock, U S WEST is entitled
to receive the excess in the form of non-voting preferred stock.
U S WEST also has the right, exercisable between July 25, 1999, and
July 25, 2009, to exchange its interest in WMC for common stock of
the Company to be held by a trust for purposes of systematic sale to
the public. Any such exchange will be made at a ratio reflecting the
appraised private market value of U S WEST's interest in WMC and an
averaged trading price of the Company's common stock during a period
prior to U S WEST's exercise of the right.
13
<PAGE> 14
AIRTOUCH COMMUNICATIONS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The parties have agreed to make certain adjustments to the equity ownership of
WMC based on the projected business plans of the parties' domestic cellular
properties. Additionally, at the Closing, the parties have agreed to make cash
contributions, if necessary, to WMC based on the projected balance sheets.
Separately, depending upon any variances from projections, the parties have
agreed to certain cash true-up provisions under which the parties may be
required to contribute cash to WMC at the time thedomestic cellular properties
are merged. The Company currently cannot estimate the amount of cash, if any,
that might be needed as contributions.
California Public Utilities Commission Actions
In December 1993, the California Public Utilities Commission (the "CPUC")
issued an Order Instituting Investigation ("OII") into the regulation of mobile
telephone service and wireless communications. In an interim decision issued
on August 3, 1994, the CPUC stated its intent to exercise its option under
federal law to file a petition with the Federal Communications Commission
("FCC") to retain regulatory authority over the rates and entry of cellular
carriers for an interim period of 18 months beginning September 1, 1994.
The CPUC made the filing with the FCC on August 9, 1994. The FCC has twelve
months to rule on the petition. Pending the FCC's decision, the CPUC will
continue its current authority in California.
In its August 3, 1994 decision, the CPUC decided to retain the existing pricing
guidelines. In addition, the CPUC stated it was adopting, as an interim
measure, the unbundling of wholesale network elements from other service
functions. This limited measure requires no cost-of-service determination as
it continues to allow cellular carriers to charge market rates for these
unbundled services, the sum of which can not exceed the current wholesale
rates. Based on the Company's interpretation of the CPUC's interim order, the
Company does not anticipate any material adverse effect on its financial
position or results of operations. The Company is, however, considering its
legal alternatives, including an appeal of the CPUC's interim order.
The CPUC deferred to later phases of its ongoing investigation into the mobile
telephone service industry any other issues not decided in its August 3, 1994
order. At this time, the Company is unable to predict the financial effects of
this ongoing investigation.
Nationwide Narrowband Personal Communications Services License
On July 29, 1994, the Company was a successful bidder in the FCC auction of
narrowband Personal Communications Services ("PCS") licenses, spending
$47.0 million for a nationwide 50/12.5 KHz license. The license will allow
the Company to offer advanced paging communication services.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion is intended to facilitate the understanding and
assessment of significant changes and trends related to the results of
operations and financial condition of AirTouch Communications (the "Company").
This discussion and analysis should be read in conjunction with the Company's
condensed consolidated financial statements and notes.
CONSOLIDATION VS. EQUITY METHOD OF ACCOUNTING. For financial statement
reporting purposes, the Company consolidates each subsidiary and partnership in
which it has a controlling interest. Therefore, in addition to the Company's
wholly owned cellular systems in San Diego and Atlanta, the Company
consolidates the entities that hold the licenses for cellular systems operating
in Los Angeles and Sacramento. Prior to the formation of the partnership with
McCaw Cellular Communications, Inc. ("CMT Partners") in September 1993, the
Company consolidated the partnership that operated a cellular system in the San
Francisco and San Jose markets. Subsequent to the formation of CMT Partners,
the Company has used the equity method to account for CMT Partners. The use of
the equity method to account for CMT Partners subsequent to its formation has
reduced the growth of the Company's reported revenues and expenses. In
addition, the Company consolidates its domestic paging operations, all of which
are wholly owned; AirTouch Teletrac ("Teletrac"), a 51%-owned joint venture
offering vehicle location service in six markets in the United States;
NordicTel Holdings AB ("NordicTel"), a 51%-owned joint venture that owns and
operates a cellular network in Sweden; its paging subsidiaries in Thailand; and
the Korean subsidiary providing credit card verification system sale and
support. Revenues, expenses, assets, and liabilities of consolidated entities
are reflected in the corresponding line items in the Company's condensed
consolidated financial statements.
The equity method of accounting is generally used to account for the operating
results of entities over which the Company has significant influence but in
which it does not have a controlling interest. These entities primarily
include the partnership ("New Par") with Cellular Communications, Inc. ("CCI"),
CMT Partners (commencing in September 1993) and certain international
interests, including Mannesmann Mobilfunk GmbH ("MMO") and Telecel Comunicacoes
Pessoais, S.A. ("Telecel"). With respect to the entities accounted for under
the equity method, the Company recognizes its proportionate share of the net
income (loss) of each such entity in the line item entitled "Equity in net
income (loss) of unconsolidated partnerships and corporations." The revenues
and expenses of such entities are not otherwise reflected in the Company's
condensed consolidated financial statements.
PROPORTIONATE ACCOUNTING. Because significant assets of the Company are not
consolidated and because of the substantial effect of the formation of certain
joint ventures on the year-to-year comparability of the Company's consolidated
financial results, the Company believes that proportionate operating data
facilitates the understanding and assessment of its condensed consolidated
financial statements. Unlike consolidation accounting, proportionate
accounting is not in accordance with generally accepted accounting principles
("GAAP") for the cellular industry. Proportionate accounting reflects the
relative weight of the Company's ownership interests in its domestic and
international operations.
For example, under GAAP, 100% of the operating revenues and expenses of the
Los Angeles Metropolitan Statistical Area would be included in the respective
line items in the Company's condensed consolidated financial statements with
16% of the net income from the system included in the line item entitled
"Minority interests in net income of consolidated partnerships and
corporations." By contrast, under proportionate accounting, only 84% of such
system's revenues and expenses would be included. In addition, under
proportionate accounting, the Company includes its share of revenues and
expenses of equity investments in which it shares control. For example, 50% of
the revenues and expenses of New Par, as well as an additional interest
reflecting the Company's ownership of equity in CCI, would be included. A
discussion of the Company's domestic cellular results of operations on a
proportionate basis is set forth below under "Proportionate Results of
Operations."
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
U S WEST JOINT VENTURE
On July 25, 1994, the Company and U S WEST, Inc. ("U S WEST") announced an
agreement to combine their domestic cellular properties. (See Note K in the
Notes to Condensed Consolidated Financial Statements.) As a result of this
transaction, one of management's priorities will be to mitigate potential
near-term dilutive effects that this transaction may have on domestic cellular
earnings.
RESULTS OF OPERATIONS
The following discussions and data compare both the three-month and six-month
periods ended June 30, 1994 to the corresponding periods in 1993. Results for
the first six months of 1994 may not be indicative of results for the full
year. The discussions below do not assess the impact of the U S WEST joint
venture on future operating results, future financial condition, or future
liquidity. See "U S WEST Joint Venture" above and in Note K in the Notes to
Condensed Consolidated Financial Statements.
NET OPERATING REVENUES. The components of the Company's net operating revenues
are shown below:
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
------ ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Operating Revenues
Wireless services and other revenues:
Cellular service $216.0 $208.6 $415.0 $402.6
Paging service 46.5 36.6 89.6 69.8
Vehicle location service 1.2 0.9 2.8 1.7
Other revenues 15.0 11.5 27.9 21.6
------ ------ ------ ------
278.7 257.6 535.3 495.7
------ ------ ------ ------
Net cellular and paging equipment sales:
Revenues 21.5 18.3 41.1 32.6
Cost of equipment sold (21.0) (16.4) (39.9) (29.7)
------ ------ ------ ------
0.5 1.9 1.2 2.9
------ ------ ------ ------
Net operating revenues $279.2 $259.5 $536.5 $498.6
====== ====== ====== ======
</TABLE>
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
CELLULAR SERVICE. Cellular service revenues primarily consist of air time,
access fees, and in-bound roaming charges. Consolidated cellular service
revenues for the 1994 periods are not comparable to those for the 1993 periods
because the San Francisco/San Jose cellular system was consolidated until the
formation of CMT Partners on September 1, 1993. If the revenues from such
system are not included in the 1993 amounts, the Company's second quarter and
year to date revenues increased 35.2% and 34.5%, respectively. Second quarter
and year to date comparisons hereafter are based on 1993 amounts as adjusted to
give retroactive effect to the adoption of equity accounting for CMT Partners
(the "CMT Adjustment"). Second quarter and year to date revenue increases were
driven primarily by continued domestic subscriber growth. Average domestic
subscribers, giving effect to the CMT Adjustment, grew 42% in the second
quarter of 1994 compared to the same period in 1993. Total domestic
subscribers, giving effect to the CMT Adjustment, grew 41% from June 30, 1993
to June 30, 1994. Domestic subscribers are customers in the Company's six
managed markets which include Los Angeles, Atlanta, Sacramento, San Diego,
Wichita, and Topeka. Domestic revenue gains from subscriber growth were
partially offset by continued declining average revenue per subscriber caused
by lower usage from new subscribers and rate reductions made in 1993 to meet
competitive pressures. The Company expects that average revenue per domestic
subscriber will continue to decline as it adds new domestic subscribers and
responds to further competitive pressures. Second quarter and year to date
revenue increases were also attributable to the international revenues of
NordicTel, which accounted for 10.3% of the second quarter increase and 9.1% of
the year to date increase. The Company acquired a 51% interest in NordicTel
in October 1993 and consolidates its operations.
PAGING SERVICE. Paging service revenues consist primarily of paging service
charges and rentals of paging units in the United States and, to a lesser
extent, Thailand. Revenues from paging services increased 27% in the second
quarter of 1994 reflecting the Company's continued penetration in existing
markets primarily through successful retail and reseller pager sales programs.
Year to date revenue from paging services improved 28% primarily due to a 35%
increase in the number of domestic paging units in service, the establishment
of new paging operations, and an acquisition. Year to date revenues were
partially offset by an 8.5% decline in average revenue per domestic unit. The
Company expects revenue per domestic unit to continue to decline, consistent
with industry trends, as it responds to competitive market pressures.
VEHICLE LOCATION SERVICE. Vehicle location service revenues from Teletrac
consist primarily of charges for corporate fleet tracking and stolen vehicle
tracking services. Teletrac's vehicle location business is in the start-up
phase and its services have not yet achieved a significant degree of commercial
acceptance. Teletrac initiated operations in Los Angeles, Chicago, Detroit,
and Dallas/Fort Worth in 1991 and in Miami and Houston in 1992. The
improvement in vehicle location service revenues is directly attributable to an
increased number of units placed in service. Units in service increased 59%
from June 30, 1993 to June 30, 1994.
OTHER REVENUES. Other revenues consist of cellular equipment rental and
installation charges, pager replacement program revenues, paging voice
retrieval revenues, paging activation charges, vehicle location unit sales and
revenues related to credit card verification terminal sales and maintenance.
Other revenues increased 30% in the second quarter of 1994 and 31% year to
date, principally due to higher revenues from domestic paging activation fees,
which increased 142% year to date, and higher revenues from domestic paging
voice retrieval charges which increased 57% year to date. The Company is
actively marketing its domestic voice messaging service and expects other
paging revenues to continue to increase. In addition, other revenues improved
year to date in 1994 due to increasing unit sales of credit card verification
terminals in Korea.
NET PAGING AND CELLULAR EQUIPMENT SALES. Equipment sales consist of cellular
telephone sales and paging unit sales. Equipment sales are not a primary part
of the Company's cellular and paging businesses. The Company generally sells
cellular telephones at or below cost, except in the California markets which
have generally been pricing new equipment above cost in compliance with
California law since January 1994, and paging units approximately at cost.
Cost of equipment sales increased 28% in the second quarter while sales revenue
increased only 17%, and year to date cost of equipment sales increased 34%
while sales revenues increased only 26%. The Company expects contribution
margins of equipment sales to continue to decline as it responds to competitive
market pressures.
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING EXPENSES. The following table sets forth the components of the
Company's operating expenses:
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
------ ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Operating Expenses
Cost of revenues $ 38.1 $ 37.9 $ 71.9 $ 74.2
Selling and customer operations expenses 84.5 73.4 156.5 142.2
General, administrative, and other expenses 78.0 62.3 150.1 125.4
Depreciation and amortization 50.0 43.5 95.5 86.2
------ ------ ------ ------
Total operating expenses $250.6 $217.1 $474.0 $428.0
====== ====== ====== ======
</TABLE>
COST OF REVENUES. Cost of revenues primarily consists of charges for
interconnections of the Company's cellular and paging operations with wireline
telephone companies and other related network expenses. Cost of revenues,
giving effect to the CMT Adjustment, declined from 14.8% of net operating
revenues to 13.6% for the second quarter of 1994 and from 15.2% to 13.4% for
year to date 1994. The declines were primarily the result of economies of
scale as more domestic subscribers are added to the existing network, effective
cost management, the reassessment of property taxes related to domestic
cellular network assets, and technical efficiencies. The declines were
partially offset by costs related to paging system capacity expansion and the
addition of NordicTel.
SELLING AND CUSTOMER OPERATIONS EXPENSES. Selling and customer operations
expenses primarily consist of compensation to sales channels, salaries, wages,
and related benefits for sales and customer service personnel, and billing,
advertising, and promotional expenses. These expenses, giving effect to the
CMT Adjustment, increased from 28.9% of net operating revenues to 30.3% for the
second quarter and remained relatively constant at 29.2% for the year to date.
Second quarter increases include additional expenditures associated with an
expanded customer base including agent commissions, corporate identity
advertising costs of $5.8 million associated with changing the corporate name
to AirTouch Communications, and expenses of $5.6 million for NordicTel (which
was acquired in October 1993). Although year to date amounts remained
relatively constant, the Company expects selling and customer operations
expenses during the remainder of the year to increase as a percentage of net
operating revenues due to costs associated with plans to accelerate customer
growth.
GENERAL, ADMINISTRATIVE, AND OTHER EXPENSES. General, administrative, and
other expenses primarily consist of salaries and wages and related benefits for
general and administrative personnel, bad debt, international license
application costs and investments in new technologies. These expenses, giving
effect to the CMT Adjustment, increased from 27.4% of net operating revenues to
27.9% for the second quarter and decreased from 28.8% to 28.0% for the year to
date. Increases in the second quarter reflect the impact of absorbing certain
corporate functions previously provided to the Company by Pacific Telesis
Group. The Company estimates that incremental expenses associated with these
functions will be approximately $15 million in 1994. General, administrative,
and other expenses may continue to increase as the Company incurs incremental
costs associated with its anticipated growth and investment in new
technologies, such as wireless data services. Second quarter increases also
include $4.4 million related to NordicTel and an increase of $3.2 million for
bad debt expenses associated with aggressive growth strategies in selected
domestic cellular markets. Second quarter increases were partially offset by
the capitalization of $5.6 million in international license application costs
which had been previously expensed. These license application costs are
related to the successful acquisition of a cellular license in South Korea by
an international joint venture in which the Company is the lead foreign
partner. Second quarter increases were also partially offset by cost
containment efforts at Teletrac where staff was reduced by 30% to approximately
200 employees in February of 1994.
18
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
DEPRECIATION AND AMORTIZATION. Depreciation and amortization primarily consist
of depreciation expense on the Company's domestic cellular and paging networks,
as well as amortization of intangibles such as FCC license costs and goodwill.
Depreciation and amortization, giving effect to the CMT Adjustment, increased
$11.7 million during the second quarter of 1994 and $19.3 million year to date
1994 primarily as a result of the Company's increased capital investment in its
domestic cellular networks and depreciation and amortization associated with
the acquisition of NordicTel. NordicTel depreciation and amortization totaled
$4.4 million in the second quarter and $7.7 million year to date.
NON-OPERATING INCOME (EXPENSE). The following table sets forth the components
of the Company's non-operating income (expense):
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
----- ----- ----- ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Interest expense $ 1.6 $ 6.8 $ 3.2 $ 17.4
===== ===== ===== ======
Minority interests in net income of consolidated
partnerships and corporations $ 7.0 $17.1 $13.3 $ 29.1
===== ===== ===== ======
Equity in net income (loss) of unconsolidated
partnerships and corporations:
Domestic $36.6 $16.4 $63.0 $ 25.6
International (2.2) (9.1) (6.2) (17.3)
----- ----- ----- ------
$34.4 $ 7.3 $56.8 $ 8.3
===== ===== ===== ======
Interest income $12.5 $ 2.7 $25.3 $ 5.9
===== ===== ===== ======
Gain on sale of telecommunications interest - $ 3.3 - $3.3
===== ===== ===== ======
Miscellaneous expense $ 0.2 $ 3.9 $ 4.7 $ 6.9
===== ===== ===== ======
</TABLE>
INTEREST EXPENSE. The decrease in interest expense in the second quarter of
1994 and year to date 1994 is primarily the result of retiring a majority of
the Company's debt in the second and third quarters of 1993. This decrease was
partially offset by interest on the debt assumed by the Company as part of the
NordicTel acquisition. NordicTel debt outstanding at June 30, 1994 was $56.2
million.
MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED PARTNERSHIPS AND CORPORATIONS.
The minority partners' portions of net income/loss in consolidated partnerships
and corporations are reported as "Minority interests in net income of
consolidated partnerships and corporations." Earnings allocated to minority
interests, giving effect to the CMT Adjustment, decreased $2.2 million in the
second quarter of 1994 and $0.3 million year to date. Although the Company's
domestic cellular consolidated partnerships have shown better performance in
1994, with allocations increasing $8.2 million year to date after giving effect
to the CMT Adjustment, net earnings allocated to minority interests are lower
in 1994 due to allocations for NordicTel.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED PARTNERSHIPS AND CORPORATIONS.
DOMESTIC. Domestic equity earnings increased in the second quarter and year to
date 1994 compared to the same periods in 1993 primarily due to including in
1994 the Company's share of equity income from CMT Partners. For at least the
near term, equity earnings attributable to CMT Partners are likely to be less
than the Company's prior share of the net income of the contributed cellular
systems.
19
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
INTERNATIONAL. International equity losses decreased in the second quarter of
1994 and year to date 1994 compared to the same periods in 1993. The primary
factors contributing to the decreases were lower losses incurred by the
Company's cellular joint venture in Portugal and the attainment of positive net
income by MMO. Improvements in 1994 were partially offset by higher losses for
cellular systems under construction in Japan. The Company anticipates future
improvements in certain international ventures to be partially offset by
start-up losses incurred by its South Korean and Italian cellular consortia.
INTEREST INCOME. Interest income in 1994 reflects earnings on proceeds from
the initial public offering of the Company's common stock (the "IPO") completed
in December 1993. The Company's interest income in the second quarter of 1993
was primarily the result of the interest earned on amounts loaned to an
affiliate and interest earned by the San Francisco/San Jose cellular system.
The affiliated loan was settled during the third quarter of 1993 and the
interest earned by the San Francisco/San Jose cellular system is no longer
reflected in this account subsequent to the September 1, 1993 formation of CMT
Partners, which is accounted for under the equity method. At least in the
short term, the Company will continue earning interest income on the investment
of proceeds from the IPO.
GAIN ON SALE OF TELECOMMUNICATIONS INTERESTS. The $3.3 million gain in 1993
resulted from the sale of small interests in three wireline cellular systems in
the San Francisco Bay Area. Federal Communications Commission rules required
the Company to sell its interests in two of the three systems because the
Company acquired interests in competing non-wireline carriers as a result of
the formation of CMT Partners. Upon completion of the transaction in December
1993, the gain was adjusted to $3.8 million.
MISCELLANEOUS EXPENSE. Miscellaneous expense primarily consists of currency
exchange gains or losses on financial instruments that have not been deferred
and one-time items such as gains and losses on sales of property, plant, or
equipment. The Company attempts to mitigate the effects of foreign currency
fluctuation through the use of hedges and local banking accounts. At June 30,
1994, the Company had hedged a majority of its international investments
against the risk of currency fluctuations. Certain of these hedge instruments
do not qualify, in whole or in part, as hedges for financial accounting
purposes. Accordingly, the Company is required to recognize the currency
exchange gain or loss on these hedge instruments in the current period results
of operations. The Company is unable to forecast the impact of future currency
exchange gains and losses on its results of operations or financial position.
INCOME TAXES. The Company's estimated annualized effective tax rates for year
to date 1994 and 1993 were 50.9% and 70.7%, respectively. The decline in the
effective estimated annualized tax rate was primarily attributable to the large
increase in pre-tax income and items that are treated differently for book and
tax purposes such as tax-exempt interest income earned in 1994, international
equity earnings/losses, and goodwill. Partially offsetting the decline in the
effective tax rate was a tax loss sharing agreement with a minority interest
holder in a consolidated subsidiary that reduced the amount of tax benefit
recorded by the Company in the second quarter of 1994.
INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE. The growth in income
before cumulative effect of an accounting change in both periods reflects the
improved financial performance of the Company's domestic and international
cellular operations, continued strong growth in cellular and paging subscribers
and related revenues, effective cost management, and interest income related to
IPO proceeds. Income growth was partially offset by additional agent
commissions resulting from the increase in new cellular subscribers and
start-up costs associated with wireless data services. The Company expects
income before effects of accounting changes to be slightly lower during the
second half of the year due to costs associated with plans to accelerate
customer growth and the development of new technologies and products.
20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Teletrac continues to show improvement and experienced lower pre-tax operating
losses during the second quarter of 1994 and year to date 1994. The Company,
however, does not expect Teletrac's operations to be profitable for several
years. Teletrac reported pre-tax losses of $4.7 million during the second
quarter of 1994 compared to $13.6 million for the same period in 1993, and
$13.8 million for the year to date 1994 compared to $24.6 million for the year
to date 1993. The Company intends to continue actions to reduce Teletrac's
operating losses and does not intend to expand Teletrac's operations
significantly until its services achieve a higher level of commercial
acceptance. In February of 1994, the Company reduced Teletrac's staff by 30%
to approximately 200 employees. The Company is continuously evaluating and
considering other commercial applications of Teletrac's technology and radio
location spectrum.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. The Company adopted Statement of
Financial Accounting Standards ("SFAS ") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" effective January 1, 1993 and
recognized a one-time transition obligation of $5.6 million, net of a $3.5
million tax benefit.
On January 1, 1994, the Company adopted the provisions of SFAS 112,
"Employers' Accounting for Postemployment Benefits", and SFAS 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS 112 establishes
accounting standards for employers who provide benefits to former or inactive
employees after employment but before retirement. Implementation of SFAS 112
did not materially impact the Company's results of operations or its financial
condition. SFAS 115 establishes accounting standards for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Implementation of SFAS 115 did not materially
impact the Company's financial condition or its results of operations. See
Note E in the Notes to Condensed Consolidated Financial Statements for further
discussion. In accordance with SFAS 115, prior years' financial statements
have not been restated.
21
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
PROPORTIONATE RESULTS OF OPERATIONS
The following table is unaudited and provides supplemental financial and
operating data for the Company's domestic cellular operations.
SELECTED PROPORTIONATE DOMESTIC CELLULAR OPERATING DATA(1)
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
------ ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Operating Results:
Service and other revenues $284.8 $215.4 $542.5 $413.3
Equipment sales 13.2 9.3 31.4 16.5
Cost of equipment sales (14.6) (8.7) (32.9) (15.8)
------ ------ ------ ------
Net operating revenues 283.4 216.0 541.0 414.0
------ ------ ------ ------
Cost of revenues 30.9 28.4 61.0 56.7
Selling and customer operations 89.2 67.8 170.5 132.2
General, administrative and other 30.3 22.9 57.8 47.3
Depreciation and amortization 45.5 39.7 89.7 77.7
------ ------ ------ ------
Total operating expenses 195.9 158.8 379.0 313.9
------ ------ ------ ------
Operating income $87.5 $57.2 $162.0 $100.1
====== ====== ====== ======
Operating cash flow (2) $133.0 $96.9 $251.7 $177.8
====== ====== ====== ======
Capital expenditures, excluding acquisitions $77.7 $48.1 $128.5 $89.0
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
June 30,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Operating Data (in thousands):
POPs (3) 34,976 34,702
Total Proportionate cellular subscribers (4) 1,221 857
</TABLE>
(1) Significant assets of the Company are not consolidated, and because of
the substantial effect of the formation of certain joint ventures on
the year-to-year comparability of the Company's consolidated financial
results, the Company believes that proportionate financial and
operating data facilitate the understanding and assessment of its
consolidated financial statements. Unlike consolidation accounting,
proportionate accounting is not in accordance with generally accepted
accounting principles. Proportionate accounting reflects the relative
weight of the Company's ownership interests in its domestic systems
and excludes certain minority investments for which the Company does
not receive timely financial and operating data.
(2) Operating cash flow is defined as operating income plus depreciation
and amortization. Proportionate operating cash flow represents the
Company's ownership interest in the entities multiplied by the
entities' operating cash flow. As such, proportionate operating cash
flow does not represent cash available to the Company.
22
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
(3) POPs are the estimated market population multiplied by the Company's
ownership interest in the cellular system in that market.
(4) Cellular subscriber data includes only those cellular systems that are
included in the operating results shown in Selected Proportionate
Domestic Cellular Operating Data multiplied by the Company's ownership
interest.
Cellular service and other revenues increased on a proportionate basis 32% in
the second quarter of 1994 and 31% for the year to date 1994. These gains
primarily reflect an increase of 43% in end of period domestic proportionate
subscribers between June 30, 1993 and June 30, 1994. Also contributing to the
increases were the Company's share of operating results for New Par, a joint
venture with CCI, which began to reflect the success of its 1994 growth
initiative during the second quarter of 1994. The Company expects to implement
additional growth initiatives in other managed markets to continue to improve
market share in future quarters. Increases in the subscriber base are being
partly offset by slowly declining average revenue per subscriber due to changes
in the customer mix. For example, many new customers are taking advantage of
lower cost contract plans that provide a flat rate for access plus a specific
number of monthly airtime minutes. The Company plans to mitigate the impact of
lower average revenue per subscriber by offering new products and services.
The Company expects that average revenue per subscriber will continue to
decline as it adds new subscribers and responds to further competitive
pressures.
Equipment Sales on a proportionate basis increased primarily due to higher
direct sales from retail sales locations in consolidated markets and focus on
equipment pricing as a part of the New Par growth initiative to increase the
subscriber base. Negative gross margins primarily reflect equipment pricing
promotions to meet competition outside the California markets. California
markets have generally been pricing new equipment above cost in compliance with
California law since January 1994. Equipment sales are not a primary part
of the Company's cellular business. The Company expects contribution margins
of equipment sales to continue to decline as it responds to competitive market
pressures.
Cost of Revenues on a proportionate basis increased by 8.8% in the second
quarter of 1994 and 7.6% for the year to date 1994. Cost of Revenues has
increased less than revenues because economies of scale achieved as a result of
spreading fixed network costs over a larger subscriber base and cost
containment efforts throughout the markets.
Selling and customer operations expenses on a proportionate basis increased 32%
in the second quarter of 1994 and 29% for the year to date 1994. These
increases were primarily due to increased commissions associated with higher
gross gains, increased advertising and promotion costs to support the New Par
growth initiative, and increased advertising in managed markets as a result of
the Company's name change to AirTouch. The Company expects selling and
customer operations expenses during the remainder of the year to increase as a
percentage of net operating revenues due to costs associated with plans to
accelerate customer growth. Proportionate acquisition costs per retail gross
gain, however, declined by 8% between June 30, 1993 and June 30, 1994.
General, administrative and other expenses on a proportionate basis remained
relatively constant in 1994 compared to 1993 as a percentage of net operating
revenues. These expenses were 10.7% of net operating revenues in the second
quarter compared to 10.6% for the same period in 1993, and 10.7% for the year
to date 1994 compared to 11.4% for the same period in 1993. The stability of
these expenses reflects market-wide cost containment efforts which were
partially offset by higher costs associated with new services that are not yet
generating revenues.
23
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Depreciation and amortization on a proportionate basis increased by 15% in the
second quarter of 1994 and 15% for the year to date 1994. The increases are
primarily due to a significant increase in network capital, which is generally
depreciated over 7 years. Network capital in service increased by $71.3
million for the consolidated managed markets between December 1993 and June
1994. These significant network enhancements increased capacity and improved
service quality. For instance, to meet increased demand a digital switching
station was added to a Mobile Telephone Switching Office in the Southern
California market in March 1994.
Capital expenditure increases in the second quarter of 1994 and for the year to
date 1994 primarily reflect the overall network enhancements to increase
capacity and improve service quality, deployment of digital technology in the
San Francisco Bay Area, early purchases of digital equipment for planned future
deployment in the Southern California market, and technological upgrades in the
Southern California market to provide future additional customer features.
LIQUIDITY AND CAPITAL RESOURCES
The Company defines liquidity as its ability to generate resources to finance
business expansion, construct capital assets, and pay its current obligations.
The Company has met its financing needs from internally generated funds, equity
infusions from Telesis prior to the IPO, and proceeds from the IPO.
The Company requires substantial capital to expand and operate its existing
wireless systems, to construct new wireless systems, and to acquire interests
in existing wireless systems. Prior to the IPO, the Company met its funding
requirements primarily through short-term borrowings from a former affiliate,
PacTel Capital Resources ("PTCR") and equity contributions from Telesis. In
December 1993, the Company received $1,489.2 million in net proceeds from the
IPO.
As of June 30, 1994, the Company was committed to spend up to $110 million
for the acquisition of property, plant, and equipment. The Company expects
that capital contributions to its existing international ventures will total
approximately $258 million prior to the end of 1995.
In March 1994, the Italian government announced its award of Italy's second
digital cellular license to the consortium Omnitel Pronto Italia. The formal
award and acceptance is expected to take place within the next six months.
AirTouch International ("International") holds a 10.2 percent indirect interest
in the consortium. The total license fee is expected to be 750 billion Lira
($475 million using June 30, 1994 exchange rates). International's share is
estimated to be $48 million and its total investment is expected to be
approximately $100 million using June 30, 1994 exchange rates. The Company's
net income will increase in the quarter in which the license is awarded due to
costs reimbursed by the Company's consortium partners and the capitalization of
previously expensed application costs. The amount of reimbursed or capitalized
costs cannot be determined at this time.
In March 1994, the Company announced it will become a strategic partner in
Globalstar, a new low-cost, global-access, satellite-based mobile telephone
system being formed by Loral Corporation and QUALCOMM. The Company expects to
pay a total of $38 million over the next year for its 8.3 percent stake, which
will give the Company exclusive service provider status in nine countries and
regions: the United States, Japan, Indonesia, Austria, Switzerland, the
Netherlands, Belgium, Portugal, and the Caribbean. The Company has made an
initial investment of $12.5 million as of June 30, 1994. Globalstar, which is
expected to begin service in 1998, will offer low-cost voice, data, fax and
position locating services using a constellation of 48 low-earth-orbit
satellites circumnavigating the globe. The Company expects to incur additional
costs to construct gateway systems in the United States.
24
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
In May 1994, International was selected as a member in the consortium that will
develop, build, and operate a second digital cellular system in South Korea.
International holds an 11.3 percent interest, the third largest interest in
the consortium. In accordance with the consortium's preliminary plan provided
by the Korean partners, International anticipates that its capital investment
will total approximately $60 million by the end of 1996. This preliminary plan
is subject to change upon ratification by the consortium partners.
International made an initial contribution of approximately $20 million in June
1994. The cellular system is expected to begin offering commercial service by
the beginning of 1996.
In June 1994, the Company agreed in principle to form a mobile communications
joint venture with Belgacom, a Belgian-state-owned telecommunications network
operator. The agreement, subject to the Belgian government's approval,
entitles the Company to acquire a 25 percent interest in Belgacom Mobile for
$147 million, to be paid during a three-year period. The amounts payable are
subject to adjustments to reflect the Company's role in Belgacom's successful
GSM network launch (Global System for Mobile Communications) and are
contingent on the business meeting specific performance milestones through the
end of 1996. The new company will include Belgacom's analog and digital
cellular businesses.
On July 29, 1994, the Company was a successful bidder in the FCC auction of
narrowband PCS licenses, spending $47 million for a nationwide 50/12.5 KHz
license. The license will allow the Company to offer advanced paging
communication services. The plans for utilization of this channel are still
being formalized.
In March 1994, the Company signed a definitive bank loan agreement for a $600
million non-amortizing revolving line of credit (the "Facility"). The Facility
provides the Company with funding for general corporate purposes and with
standby letters of credit to support its obligations to purchase shares in CCI.
The Facility is available in the form of committed advances or standby letters
of credit and expires in March 1997. Interest on advances accrues at a rate
equal to an index selected by the Company plus a margin which is based upon the
Company's long-term senior unsecured debt rating. Interest on outstanding but
undrawn standby letters of credit accrues at a margin which is based upon the
Company's long-term senior unsecured debt rating. The Company also has the
option to pledge United States Treasury securities in exchange for a
significantly reduced margin. As of June 30, 1994, the Company had voluntarily
pledged approximately $600 million of securities classified as held-to-maturity
and available-for-sale. Provided the Company is not in default of the
Facility, these securities are immediately, without restriction, available for
redemption by the Company.
Under the terms of a merger agreement with CCI, the Company is obligated to
purchase up to 10.04 million CCI shares in October 1995 at $60 per share. To
support this obligation the Company has issued a $600 million irrevocable
letter of credit under the Facility for the benefit of CCI. This letter of
credit expires in 1996. As of June 30, 1994, there have been no draws against
the letter of credit.
In connection with the merger agreement, the Company is required to pledge to
CCI certain CCI shares owned by the Company. As of June 30, 1994, collateral
pledged to CCI carried a net investment of $195.6 million and had a market
value of $261.4 million. The pledged investment represents approximately 11%
of CCI's fully diluted shares. The Company will continue to pledge any
additional CCI shares it acquires up to 15% of CCI's fully diluted shares.
The Company's cash received from financing activities for the first six months
of 1994 was $31.9 million. The activity consists primarily of capital
contributions from international minority interest holders and from proceeds of
increasing international long-term debt. The 1994 proceeds were partially
offset by distributions to domestic cellular minority partners. The Company
does not expect its operations to generate sufficient cash to meet its capital
requirements for the next several years. However, the Company currently
believes that the net proceeds from the IPO, together with cash flow from
operations, will be sufficient to satisfy the Company's estimated funding
requirements through mid- 1995. After such proceeds are invested, the Company
expects that it will need to raise additional funds through bank borrowings or
public or private sales of debt or equity securities. Although there can be no
assurance that such funding will be available, the Company believes that it
will be able to access the capital markets on terms and in amounts adequate to
meet its objectives.
25
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of AirTouch Communications:
We have reviewed the condensed consolidated balance sheet of AirTouch
Communications (formerly PacTel Corporation) and Subsidiaries as of June 30,
1994 and the related condensed consolidated statements of income for the
three-month and six-month periods ended June 30, 1994 and 1993 and cash flows
for the six-month periods ended June 30, 1994 and 1993. These financial
statements are the responsibility of management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of AirTouch Communications and
Subsidiaries as of December 31, 1993, and the related consolidated statements
of income, cash flows, and stockholders' equity for the year then ended (not
presented herein); and in our report dated March 3, 1994 (except for Notes B,
L, and R, as to which the date is March 9, 1994), we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1993 is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Coopers & Lybrand
San Francisco, California
July 26, 1994
26
<PAGE> 27
PART II--OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The following table of selected supplemental financial data is unaudited.
SELECTED SUPPLEMENTAL FINANCIAL DATA (1)
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
----------------------- -------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C>
Selected Total Proportionate Data
Total proportionate net operating revenues $ 418.9 $ 291.5 $ 789.6 $ 554.9
Total proportionate operating cash flow $ 130.6 $ 89.7 $ 252.3 $ 150.1
Selected Proportionate Domestic Cellular
Operating Results
Cellular service and other revenues $ 284.8 $ 215.4 $ 542.5 $ 413.3
Equipment sales $ 13.2 $ 9.3 $ 31.4 $ 16.5
Cost of equipment sales $ (14.6) $ (8.7) $ (32.9) $ (15.8)
Net operating revenues $ 283.4 $ 216.0 $ 541.0 $ 414.0
Total operating expenses $ 195.9 $ 158.8 $ 379.0 $ 313.9
Operating income $ 87.5 $ 57.2 $ 162.0 $ 100.1
Operating cash flow (2) $ 133.0 $ 96.9 $ 251.7 $ 177.8
Capital expenditures, excluding acquisitions $ 77.7 $ 48.1 $ 128.5 $ 89.0
</TABLE>
<TABLE>
<CAPTION>
June 30,
-----------------------
1994 1993
---------- --------
<S> <C> <C>
Selected Cellular Operating Data (in thousands)
Domestic:
Total POPs (3) 34,976 34,702
Proportionate subscribers 1,221 857
International
POPs (3) & (6) 54,710 35,878
Proportionate subscribers (4) & (7) 235 88
</TABLE>
27
<PAGE> 28
OTHER INFORMATION
(continued)
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
June 30, June 30,
----------------------- -------------------------
1994 1993 1994 1993
--------- --------- ---------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C>
Domestic Paging Operating Results (5)
Service and other revenues $ 45.0 $ 35.3 $ 87.5 $ 67.5
Equipment sales $ 11.4 $ 9.0 $ 20.5 $ 15.9
Cost of equipment sales $ (9.8) $ (7.8) $ (17.9) $ (13.8)
Net operating revenues $ 46.6 $ 36.5 $ 90.1 $ 69.6
Total operating expenses before depreciation
and amortization $ 29.6 $ 24.6 $ 58.1 $ 47.1
Depreciation and amortization $ 9.1 $ 7.2 $ 17.7 $ 14.1
Operating income $ 7.9 $ 4.7 $ 14.3 $ 8.4
Operating cash flow (2) $ 17.0 $ 11.9 $ 32.0 $ 22.5
Capital expenditures, excluding acquisitions $ 14.7 $ 14.3 $ 26.3 $ 24.8
</TABLE>
<TABLE>
<CAPTION>
June 30,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Selected Paging Operating Data (in thousands)
Domestic (5):
Units in Service 1,348 995
International:
Proportionate units in service (4) 115 88
</TABLE>
(1) Significant assets of the Company are not consolidated. Because of
the substantial effect of the formation of certain joint ventures on
the year-to-year comparability of the Company's consolidated financial
results, the Company believes that proportionate financial and
operating data facilitate the understanding and assessment of its
consolidated financial statements. Unlike consolidation accounting,
proportionate accounting is not in accordance with generally accepted
accounting principles. Proportionate accounting reflects the relative
weight of the Company's ownership interests in its domestic and
international systems and excludes certain minority investments for
which the Company does not receive timely financial and operating
data.
(2) Operating cash flow is defined as operating income plus depreciation
and amortization. Proportionate operating cash flow represents the
Company's interest in the entities multiplied by the entities'
operating cash flow. As such, proportionate operating cash flow does
not represent cash available to the Company.
(3) POPs are the estimated market population multiplied by the Company's
ownership interest in the cellular system in that market and include
international markets in which the networks are under construction.
(4) Reflects total subscribers of all cellular systems and total units in
service of all paging systems outside the United States in which the
Company owns an interest multiplied by the Company's ownership
interest.
(5) Domestic paging is wholly owned by the Company.
(6) Second quarter 1994 data includes POPs for Italy, Belgium, South Korea
and the Kyushu region of Japan, where licenses are currently being
finalized or the systems are under construction. Excluding Italy and
Belgium, international POPs would be 46,370.
(7) Second quarter 1994 data does not include subscribers in the cellular
system in Belgium.
28
<PAGE> 29
OTHER INFORMATION
(continued)
Recent Developments
U S WEST Joint Venture
On July 25, 1994, the Company and U S WEST, Inc. ("U S WEST") announced an
agreement to combine their domestic cellular properties.
The initial phase involves the formation of a partnership known as WMC
Partners, L.P. ("WMC"), in which the Company and U S WEST will hold initial
equity interests of approximately 70 percent and 30 percent, respectively. The
closing of this initial phase (the "Closing"), which is conditioned on certain
federal and state regulatory approvals, is expected to occur in the second
quarter of 1995. After the Closing, WMC will provide services to the partners
and their domestic cellular properties. During this phase, the cellular
properties of the parties will continue to be owned by the individual partners.
Simultaneous with the formation of WMC, the parties formed an equally owned
partnership to pursue new Personal Communications Services ("PCS")
opportunities. The PCS partnership will construct and operate PCS systems in
areas where the partners currently do not have cellular operations. WMC will
also provide services to the PCS partnership.
In the next phase, the partners will contribute their domestic cellular
properties to WMC. This contribution is expected to occur upon the lifting of
certain restrictions imposed by the Modification of Final Judgment (the "MFJ"),
or earlier, at the Company's option, but will occur in any event no later than
July 25, 1998. The PCS partnership also will be merged into WMC, either at the
time the cellular properties are contributed or three years after it acquires
its PCS license, whichever is later.
U S WEST has the right, which is exercisable after full relief from the MFJ has
been obtained but which expires on July 25, 2004, to exchange its interest in
WMC for up to 19.9% of the Company's common stock outstanding at the time of
the exchange. Any such exchange will be made at a ratio reflecting the
appraised private market value of U S WEST's interest in WMC and the appraised
public market value of the shares of the Company's common stock to be acquired
by U S WEST in the exchange. In the event that the value of U S WEST's
interest in WMC determined by such appraisals would result in the issuance to
U S WEST of in excess of 19.9% of the Company's then outstanding common stock,
U S WEST is entitled to receive the excess in the form of non-voting preferred
stock. The Company has amended its shareholder rights agreement so that U S
WEST will not be deemed to be an "Acquiring Person," as defined therein, by
reason of its rights in connection with the exchange.
U S WEST also has the right, exercisable between July 25, 1999,
and July 25, 2009, to exchange its interest in WMC for common stock of the
Company to be held by a trust for purposes of systematic sale to the public.
Any such exchange will be made at a ratio reflecting the appraised private
market value of U S WEST's interest in WMC and an averaged trading price of
the Company's common stock during a period prior to US WEST's exercise of the
right.
The Company has the right to cause the exchange to occur either (a) after the
later of full MFJ relief and July 25, 2004, if there is a deadlock with U S
WEST regarding the management of WMC or (b) at any time after full MFJ relief
has been obtained, if at such time U S WEST holds less than a 5% interest in
WMC.
Upon the exercise by U S WEST of its right to exchange its interest in WMC for
capital stock of the Company, U S WEST will be entitled to certain governance
rights (including representation on the Company's board of directors) as well
as registration rights. U S WEST is subject to certain standstill restrictions
with respect to the Company through July 25, 2004, unless such restrictions are
earlier terminated or suspended.
Other
The CPUC in its filing with the FCC on August 9, 1994 (see Note K in the Notes
to Condensed Consolidated Financial Statements) disclosed the existence of a
confidential antitrust investigation being conducted by the California State
Attorney General into the cellular industry within California. The Company is
aware of the investigation and understands that it involves the distribution of
cellular telephone service in the Los Angeles area market in the late 1980s.
The investigation may also encompass other California cellular markets. No
formal charges have been made and no complaint has been filed. The Company is
cooperating fully with the Attorney General's investigation and believes that
its pricing and marketing practices were and are in compliance with the
antitrust laws.
29
<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits identified below are incorporated herein by reference as
exhibits hereto.
<TABLE>
<CAPTION>
Exhibit
Number Description
--------- -----------
<S> <C>
4.1 Amendment No. 1 dated as of July 22, 1994 to Rights Agreement dated
as of July 22, 1993 by and between the Company and The Bank of New York,
as Rights Agent.
10.1 Joint Venture Organization Agreement dated as of July 25, 1994 by
and between the Company and U S WEST, Inc.
10.2 Agreement of Limited Partnership of WMC Partners, L.P. dated as of
July 25, 1994 by and between the Company and U S WEST, Inc.
10.3 Agreement of Limited Partnership of PCS Nucleus, L.P. dated as of
July 25, 1994 by and between the Company and U S WEST, Inc.
10.4 Investment Agreement dated as of July 25, 1994 by and between the Company
and U S WEST, Inc.
10.5 Agreement of Exchange dated as of July 25, 1994 by and between the Company
and U S WEST, Inc.
10.6 Trust Agreement of Exchange dated as of July 25, 1994 by and between
the Company and U S WEST, Inc.
15 Letter re unaudited interim financial information.
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the period covered by this
report.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRTOUCH COMMUNICATIONS
Date: August 12, 1994 By: /s/ Mohan S. Gyani
--------------------------------
Vice President, Finance and Treasurer
(Principal Accounting Officer)
31
<PAGE> 32
EXHIBIT INDEX
Exhibits identified below are incorporated herein by reference as exhibits
hereto and are provided as part of the electronic transmission.
<TABLE>
<CAPTION>
Exhibit
Number Description
---------- -----------
<S> <C>
4.1 Amendment No. 1 dated as of July 22, 1994 to Rights Agreement dated as of July 22, 1993 by and between the
Company and The Bank of New York, as Rights Agent.
10.1 Joint Venture Organization Agreement dated as of July 25, 1994 by
and between the Company and U S WEST, Inc.
10.2 Agreement of Limited Partnership of WMC Partners, L.P. dated as of July 25, 1994 by and between the Company
and U S WEST, Inc.
10.3 Agreement of Limited Partnership of PCS Nucleus, L.P. dated as of
July 25, 1994 by and between the Company and U S WEST, Inc.
10.4 Investment Agreement dated as of July 25, 1994 by and between the Company and U S WEST, Inc.
10.5 Agreement of Exchange dated as of July 25, 1994 by and between the Company and U S WEST, Inc.
10.6 Trust Agreement of Exchange dated as of July 25, 1994 by and between the Company and U S WEST, Inc.
15 Letter re unaudited interim financial information.
</TABLE>
32
<PAGE> 1
EXHIBIT 4.1
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1, dated as of July 22, 1994, is entered into
between AIRTOUCH COMMUNICATIONS, a California corporation (the "Company"), and
THE BANK OF NEW YORK, a New York corporation (the "Rights Agent"),
W I T N E S S E T H:
Whereas the Company and U S West, Inc., a Colorado corporation ("USW")
propose to enter into an Agreement of Exchange (the "Agreement of Exchange")
pursuant to which, among other things, USW will have the right under certain
circumstances to acquire shares of capital stock of the Company; and
Whereas in connection with the Agreement of Exchange, the Company and
USW propose to enter into an Investment Agreement (the "Investment Agreement")
pursuant to which USW will agree to certain restrictions relating to its
ownership of capital stock of the Company; and
Whereas the Board of Directors has determined that the Agreement of
Exchange and the Investment Agreement are in the best interests of the
Company and its shareholders; and
Whereas the Board of Directors has determined that it is in the best
interests of the Company and its shareholders that certain amendments be made
to Section 1(a) of the Rights Agreement, dated as of July 22, 1993 between the
Company and the Rights Agent (the "Rights Agreement") to exempt USW from the
definition of "Acquiring Person" thereunder under certain circumstances; and
Whereas the Board of Directors has determined that such amendments may
be made in accordance with Section 27 of the Rights Agreement:
N o w, T h e r e f o r e, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Definition of Acquiring Person. Section 1(a) of the Rights
Agreement is hereby amended to read in full as follows:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and Associates (as
such term is hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of securities
representing 10% or more of the shares of Common Stock then
outstanding or who was
-1-
<PAGE> 2
such a Beneficial Owner at any time after the date hereof, whether or
not such Person continues to be the Beneficial Owner of securities
representing 10% or more of the outstanding shares of Common Stock.
Notwithstanding the foregoing, (i) in no event shall a Person who or
which, together with all Affiliates and Associates of such Person, is
the Beneficial Owner of less than 10% of the Company's outstanding
shares of Common Stock become an Acquiring Person solely as a result
of a reduction of the number of shares of outstanding Common Stock,
including repurchases of outstanding shares of Common Stock by the
Company, which reduction increases the percentage of outstanding
shares of Common Stock beneficially owned by such Person (provided
that any subsequent increase in the amount of Common Stock
beneficially owned by such Person, together with all Affiliates and
Associates of such Person, without the prior approval of the Company
shall cause such Person to be an Acquiring Person); (ii) the term
Acquiring Person shall not mean (A) the Company, (B) any subsidiary of
the Company (as such term is hereinafter defined), (C) any employee
benefit plan of the Company or any of its subsidiaries, (D) any entity
holding securities of the Company organized, appointed or established
by the Company or any of its subsidiaries for or pursuant to the terms
of any such plan or (E) U S WEST, Inc., a Colorado corporation, or its
Affiliates or Associates (collectively, "USW"), solely as a result of
USW having become the Beneficial Owner of shares of Common Stock
pursuant to the Agreement of Exchange dated as of July 25, 1994
between the Company and USW, provided that USW shall be in
substantial compliance (as determined by the Board of Directors of the
Company in its discretion) with the terms of the Investment Agreement
dated as of July 25, 1994 between the Company and USW, as amended from
time to time, and further provided that upon termination of Section
5.1 of the Investment Agreement, USW does not become the Beneficial
Owner of any additional shares of Common Stock (other than pursuant to
stock dividends, stock subdivisions and the like); and (iii) no
Person shall be deemed to be an Acquiring Person if (A) within five
business days after such Person would otherwise have become an
Acquiring Person (but for the operation of this clause (iii), such
Person notifies the Board of Directors that such Person did so
inadvertently and within two business days after such notification,
such Person is the Beneficial Owner of less than 10% of the
outstanding shares of Common Stock or (B) by reason of such Person's
Beneficial Ownership of 10% or more of the outstanding shares of
Common Stock on the date hereof if prior to the Record Date, such
Person notifies the Board of Directors that such Person is no longer
the Beneficial Owner of 10% or more of the then outstanding shares of
Common Stock.
-2-
<PAGE> 3
Section 2. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, but all such counterparts together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: AIRTOUCH COMMUNICATIONS
/s/ KRISTINA VEACO /s/ C. L. COX
_____________________________ By _______________________________
Title Assistant Secretary Title President and
Chief Operating Officer
Attest: THE BANK OF NEW YORK
/s/ THOMAS M. CRANE /s/ JOHN SIVERTSEN
_____________________________ By _______________________________
Title Assistant Treasurer Title Vice President
-3-
<PAGE> 1
EXHIBIT 10.1
JOINT VENTURE ORGANIZATION AGREEMENT
BETWEEN
AIRTOUCH COMMUNICATIONS
AND
U S WEST, INC.
JULY 25, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Agreement of Exchange . . . . . . . . . . . . . . . . . . . 3
1.3 Approved Business Plan . . . . . . . . . . . . . . . . . . . 3
1.4 Arbitration Agreement . . . . . . . . . . . . . . . . . . . 3
1.5 ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 ATI Phase II Assets . . . . . . . . . . . . . . . . . . . . 4
1.7 ATI Cellular Subsidiaries . . . . . . . . . . . . . . . . . 4
1.8 ATI Employee Benefit Program . . . . . . . . . . . . . . . . 4
1.9 ATI Services Agreement . . . . . . . . . . . . . . . . . . . 4
1.10 ATI Parties . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 ATI Phase II Trigger . . . . . . . . . . . . . . . . . . . . 4
1.12 Authorization . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 Beneficial Phase II Asset . . . . . . . . . . . . . . . . . 4
1.15 Business Day . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 CECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 Cellular Partnership Agreement . . . . . . . . . . . . . . . 5
1.19 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 Consent . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 Contribution Date . . . . . . . . . . . . . . . . . . . . . 5
1.22 Decree Court . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 Delaware RULPA . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 Domestic Cellular Asset . . . . . . . . . . . . . . . . . . 5
1.26 Domestic Cellular Business . . . . . . . . . . . . . . . . . 6
1.27 Domestic Cellular Investment . . . . . . . . . . . . . . . . 6
1.28 Domestic Cellular Investment Entity . . . . . . . . . . . . 6
1.29 Domestic Cellular Service . . . . . . . . . . . . . . . . . 6
1.30 Domestic Cellular Subsidiary . . . . . . . . . . . . . . . . 6
1.31 Domestic Cellular Transactions . . . . . . . . . . . . . . . 6
1.32 Effective Date . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Employee Benefit Program . . . . . . . . . . . . . . . . . . 6
1.34 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 8
1.35 EO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.36 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.37 ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . 8
1.38 ESMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.39 Fair Market Value . . . . . . . . . . . . . . . . . . . . . 8
1.40 Final Order . . . . . . . . . . . . . . . . . . . . . . . . 8
1.41 FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.42 Financial Statements . . . . . . . . . . . . . . . . . . . . 9
1.43 Governmental Body . . . . . . . . . . . . . . . . . . . . . 9
1.44 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 9
1.45 Intellectual Property . . . . . . . . . . . . . . . . . . . 9
1.46 Inter-Exchange Carrier Agreement . . . . . . . . . . . . . . 9
1.47 Investment Agreement . . . . . . . . . . . . . . . . . . . . 9
1.48 Leased Property . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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1.49 License . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.50 License Agreement . . . . . . . . . . . . . . . . . . . . . 10
1.51 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.52 Material Adverse Effect . . . . . . . . . . . . . . . . . . 10
1.53 Material Contract . . . . . . . . . . . . . . . . . . . . . 10
1.54 MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.55 MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.56 New Par . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.57 New Par Assets . . . . . . . . . . . . . . . . . . . . . . . 11
1.58 New Par Contribution Closing . . . . . . . . . . . . . . . . 11
1.59 NewVector . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.60 NewVector Services Agreement . . . . . . . . . . . . . . . . 11
1.61 NV-Employee Benefit Programs . . . . . . . . . . . . . . . . 11
1.62 Organization Agreement . . . . . . . . . . . . . . . . . . . 11
1.63 Owned Property . . . . . . . . . . . . . . . . . . . . . . . 11
1.64 Partial MFJ Relief . . . . . . . . . . . . . . . . . . . . . 11
1.65 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.66 Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.67 PCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.68 PCS Contribution Closing . . . . . . . . . . . . . . . . . . 12
1.69 PCS Par . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.70 PCS Par Employee Agreement . . . . . . . . . . . . . . . . . 12
1.71 PCS Par License Agreement . . . . . . . . . . . . . . . . . 12
1.72 PCS Par Partnership Agreement . . . . . . . . . . . . . . . 12
1.73 PCS Par Services Agreement . . . . . . . . . . . . . . . . 12
1.74 PCS Transactions . . . . . . . . . . . . . . . . . . . . . . 13
1.75 Percentage Interest . . . . . . . . . . . . . . . . . . . . 13
1.76 Permitted Liabilities . . . . . . . . . . . . . . . . . . . 13
1.77 Permitted Lien . . . . . . . . . . . . . . . . . . . . . . . 13
1.78 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.79 Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.80 Phase I Closing . . . . . . . . . . . . . . . . . . . . . . 13
1.81 Phase II . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.82 Phase II Closing . . . . . . . . . . . . . . . . . . . . . . 13
1.83 Phase III . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.84 Phase III Closing . . . . . . . . . . . . . . . . . . . . . 14
1.85 POPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.86 Related Agreements . . . . . . . . . . . . . . . . . . . . . 14
1.87 Related Party Agreement . . . . . . . . . . . . . . . . . . 14
1.88 Resale Agreement . . . . . . . . . . . . . . . . . . . . . . 14
1.89 Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.90 Roaming Agreement . . . . . . . . . . . . . . . . . . . . . 15
1.91 San Diego Cellular Property . . . . . . . . . . . . . . . . 15
1.92 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.93 Substance of Concern . . . . . . . . . . . . . . . . . . . . 15
1.94 Tax or Taxes . . . . . . . . . . . . . . . . . . . . . . . . 15
1.95 Tax Sharing Arrangement . . . . . . . . . . . . . . . . . . 16
1.96 To the knowledge of ATI . . . . . . . . . . . . . . . . . . 16
1.97 To the knowledge of USW . . . . . . . . . . . . . . . . . . 16
1.98 Trademark . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.99 Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.100 Transactions . . . . . . . . . . . . . . . . . . . . . . . . 16
1.101 Transferred Subsidiary . . . . . . . . . . . . . . . . . . . 16
1.102 Trust Agreement of Exchange . . . . . . . . . . . . . . . . 16
</TABLE>
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1.103 Tucson Cellular Interest . . . . . . . . . . . . . . . . . . 16
1.104 USW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.105 USW Parties . . . . . . . . . . . . . . . . . . . . . . . . 17
1.106 USW Phase II Assets . . . . . . . . . . . . . . . . . . . . 17
1.107 WMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.108 WMC Employee Agreement . . . . . . . . . . . . . . . . . . . 17
1.109 WMC Partnership Committee . . . . . . . . . . . . . . . . . 17
1.110 WMC Partnership Agreement . . . . . . . . . . . . . . . . . 17
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 17
2.1 Representations and Warranties of USW . . . . . . . . . . . 17
(a) Corporate Organization. . . . . . . . . . . . . . . . 17
(b) Capitalization: Ownership of Shares. . . . . . . . . . 18
(c) Authority. . . . . . . . . . . . . . . . . . . . . . . 20
(d) Authorizations and Consents; No Violation . . . . . . 20
(e) Financial Statements . . . . . . . . . . . . . . . . . 21
(f) Absence of Other Changes . . . . . . . . . . . . . . . 22
(g) Compliance with Laws . . . . . . . . . . . . . . . . . 22
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . 23
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . 23
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) Material Contracts and Related Party Agreements . . . 25
(m) Employment and Non-Competition Agreements . . . . . . 25
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . 26
(o) Intellectual Property . . . . . . . . . . . . . . . . 26
(p) Employee Benefit Programs . . . . . . . . . . . . . . 27
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . 30
(r) Environmental Compliance and Liabilities . . . . . . . 30
(s) Other Liabilities . . . . . . . . . . . . . . . . . . 32
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . 32
2.2 Representations and Warranties of ATI . . . . . . . . . . . 32
(a) Corporate Organization . . . . . . . . . . . . . . . . 33
(b) Capitalization: Ownership of Shares. . . . . . . . . . 34
(c) Authority. . . . . . . . . . . . . . . . . . . . . . . 36
(d) Authorizations and Consents; No Violation . . . . . . 36
(e) Financial Statements . . . . . . . . . . . . . . . . . 37
(f) Absence of Other Changes . . . . . . . . . . . . . . . 38
(g) Compliance with Laws . . . . . . . . . . . . . . . . . 38
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . 39
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . 39
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . 39
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . 40
(l) Material Contracts . . . . . . . . . . . . . . . . . . 41
(m) Employment and Non-Competition Agreements . . . . . . 42
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . 42
(o) Intellectual Property . . . . . . . . . . . . . . . . 43
(p) Employee Benefit Programs . . . . . . . . . . . . . . 43
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . 46
(r) Environmental Compliance and Liabilities . . . . . . . 47
(s) Other Liabilities . . . . . . . . . . . . . . . . . . 48
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . 49
(v) Amendment to Rights Plan . . . . . . . . . . . . . . . 49
</TABLE>
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ARTICLE 3 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.1 Covenants of USW . . . . . . . . . . . . . . . . . . . . . . 49
(a) Effectuation of this Agreement . . . . . . . . . . . . 49
(b) Conduct of Business . . . . . . . . . . . . . . . . . 51
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . 51
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . 52
(e) Access and Information . . . . . . . . . . . . . . . . 54
(f) Divestiture of San Diego Cellular Property . . . . . . 54
(g) Operation of Certain Assets. . . . . . . . . . . . . 55
(h) Tucson Cellular Interest . . . . . . . . . . . . . . . 56
3.2 Covenants of ATI . . . . . . . . . . . . . . . . . . . . . . 56
(a) Effectuation of this Agreement . . . . . . . . . . . . 56
(b) Conduct of Business . . . . . . . . . . . . . . . . . 57
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . 58
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . 58
(e) Access and Information . . . . . . . . . . . . . . . . 60
(f) Divestiture of Tucson Cellular Interest . . . . . . . 61
(g) Operation of Certain Assets . . . . . . . . . . . . . 62
(h) San Diego Cellular Property . . . . . . . . . . . . . 63
3.3 Fiduciary Obligations . . . . . . . . . . . . . . . . . . . 63
ARTICLE 4 JOINT VENTURE ACCOUNTING . . . . . . . . . . . . . . . . . . 63
4.1 Cash Flows and Funding Prior to Phase II . . . . . . . . . . . . 63
ARTICLE 5 PHASES OF THE JOINT VENTURE AND CLOSINGS . . . . . . . . . . 63
5.1 Prior to Phase I . . . . . . . . . . . . . . . . . . . . . . 63
5.2 Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(a) Conditions to Phase I Closing . . . . . . . . . . . . 64
(b) Deliveries on or before the Phase I Closing . . . . . 64
5.3 Phase II . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(a) Conditions to Phase II Closing . . . . . . . . . . . . 65
(b) Deliveries on or before the Phase II Closing . . . . . 66
5.4 PCS Contribution Closing . . . . . . . . . . . . . . . . . 68
5.5 New Par Contribution Closing . . . . . . . . . . . . . . . 69
ARTICLE 6 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.1 Termination of this Organization Agreement. . . . . . . . . . 70
6.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 71
7.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 71
7.2 Indemnity by USW . . . . . . . . . . . . . . . . . . . . . . 71
7.3 Indemnity by ATI . . . . . . . . . . . . . . . . . . . . . . 72
7.4 Indemnity by WMC . . . . . . . . . . . . . . . . . . . . . . 72
7.5 Tax Indemnification . . . . . . . . . . . . . . . . . . . . 73
7.6 Notification of Claims . . . . . . . . . . . . . . . . . . . 74
7.7 Access and Cooperation . . . . . . . . . . . . . . . . . . . 74
7.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 75
8.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.3 Modifications; Amendments; Waivers . . . . . . . . . . . . . 76
8.4 Rule of Interpretation . . . . . . . . . . . . . . . . . . . 76
8.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . 77
8.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . 78
8.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.10 Time of Essence . . . . . . . . . . . . . . . . . . . . . . 78
8.11 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . 78
8.12 Survival of Representations and Warranties . . . . . . . . . 78
8.13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 78
8.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
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THIS JOINT VENTURE ORGANIZATION AGREEMENT (the "Organization Agreement") is
entered into as of July 25, 1994 (the "Effective Date"), by and between
AIRTOUCH COMMUNICATIONS, a California corporation ("ATI"), and U S WEST, INC.,
a Colorado corporation ("USW").
W I T N E S S E T H:
WHEREAS, ATI and USW or certain of their affiliates are the direct and/or
indirect owners of interests in and rights to certain cellular communications
systems; and
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively with lower costs
in such markets; and
WHEREAS, there are substantial operating, technological and development
efficiencies of scale and scope to be achieved by a joint venture combining
certain of the current cellular and wireless properties of ATI and USW and
their affiliates; and
WHEREAS, ATI and USW have concluded that it will be in their respective best
interests, and the best interests of the public, to form a joint venture for
the purpose of coordinating wireless services and owning, operating, managing,
maintaining, and constructing cellular, PCS (as hereinafter defined), and other
wireless communications systems and, in furtherance thereof, ATI and USW wish
to organize a joint venture; and
WHEREAS, the MFJ (as hereinafter defined) currently applies to USW and its
affiliated companies and restricts them from engaging in certain activities,
which restrictions are acknowledged to have anticompetitive consequences; and
WHEREAS, the MFJ restrictions do not apply to ATI and its affiliates, and any
imposition of those restrictions would create inefficiencies, limit ATI's
competitive options, and reduce consumer choice; and
WHEREAS, it is the intent of the parties to this Organization Agreement to
achieve the scope and scale efficiencies of integration to the extent possible
consistent with the current MFJ restrictions, while, at the same time, limiting
the application of such MFJ restrictions only to those entities and activities
to which they currently apply; and
WHEREAS, the parties have structured this transaction in phases, the timing
of which is dependent on the continued applicability of the MFJ, and it is the
intent of the parties, subject to the terms and conditions hereof, to integrate
completely all aspects of their cellular and wireless businesses
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as soon as practicable without the imposition of MFJ restrictions on ATI or its
cellular properties; and
WHEREAS, simultaneously with the execution of this Agreement, ATI and USW are
entering into that certain Investment Agreement, that certain Agreement of
Exchange, that certain Partnership Agreement of WMC Partners, L.P., that
certain Partnership Agreement of PCS Nucleus, L.P., that certain Trust
Agreement of Exchange, and that certain Arbitration Agreement.
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained, the sufficiency of which is hereby acknowledged,
and in order to set forth the respective rights, obligations and interests of
ATI and USW and their Affiliates to one another, the parties hereto, intending
to be bound, agree as follows:
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<PAGE> 9
AGREEMENT
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 AFFILIATE shall mean any Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under
common control with the Person specified. For purposes of this
Organization Agreement, ATI and its Affiliates shall not be
considered to be Affiliates of WMC or PCS Par; USW and its Affiliates
shall not be considered to be Affiliates of WMC or PCS Par; WMC shall
not be considered to be an Affiliate of ATI or USW or any of their
respective Affiliates; PCS Par shall not be considered to be an
Affiliate of ATI or USW or either of their Affiliates; CCI shall not
be considered to be an Affiliate of ATI until such time, if ever, as
ATI shall be entitled to exercise full discretion with respect to
voting the shares of Common Stock of CCI beneficially owned by ATI
(other than shares of Common Stock of CCI owned by ATI by virtue of
its ownership of the Class A Preference Stock of CCI); and no
wireline cable television company in which USW owns, directly or
indirectly, less than fifty percent (50%) of the equity or voting
interests shall be considered to be an Affiliate of USW. For
purposes of this definition, the term "CONTROL" (including the terms
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") as used with respect
to any Person means the possession, direct or indirect, of the power
to (a) vote in excess of fifty percent (50%) of the voting securities
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
1.2 AGREEMENT OF EXCHANGE shall mean that certain Agreement of Exchange,
by and between ATI and USW, dated as of the Effective Date, a copy of
which is appended hereto as ATTACHMENT 1.2.
1.3 APPROVED BUSINESS PLAN shall have the meaning set forth in SECTION
2.10 of the WMC Partnership Agreement.
1.4 ARBITRATION AGREEMENT shall mean that certain Arbitration Agreement
entered into by and between USW and ATI, effective as of the
Effective Date, a copy of which is appended hereto as ATTACHMENT 8.1.
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1.5 ATI shall mean AirTouch Communications, a California corporation.
1.6 ATI PHASE II ASSETS shall mean the assets listed on ATTACHMENT 1.6 to
this Organization Agreement.
1.7 ATI CELLULAR SUBSIDIARIES shall mean AirTouch Cellular, Inc., a
California corporation; AirTouch Cellular of Nevada, a Nevada
corporation; and AirTouch Cellular of Saginaw, Inc., a Michigan
corporation, and any successor corporation to any of the foregoing
resulting from the restructuring by ATI of its ownership of Domestic
Cellular Businesses pursuant to SECTION 3.2(a)(v) hereof.
1.8 ATI EMPLOYEE BENEFIT PROGRAMS shall have the meaning set forth in
SECTION 2.2(p)(i) hereof.
1.9 ATI SERVICES AGREEMENT shall mean an agreement to be entered into by
and between WMC and any of the ATI Cellular Subsidiaries,
substantially embodying the guidelines and principles set forth in
the Services Agreement Guidelines developed by the ATI and USW
transition teams as of July 25, 1994.
1.10 ATI PARTIES shall mean ATI, the ATI Cellular Subsidiaries, and the
corporate and partnership Subsidiaries of the ATI Cellular
Subsidiaries.
1.11 ATI PHASE II TRIGGER shall have the meaning set forth in SECTION
5.3(c)(iii) hereof.
1.12 AUTHORIZATION shall mean any authorization, order, grant, consent,
approval, permission or waiver required to be obtained from any
Governmental Body for the consummation of any specified Transaction
of any Phase or for the performance by any Party of any of its
obligations under this Organization Agreement and the Related
Agreements, including without limitation any Final Order and the
expiration of any waiting period applicable under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
1.13 BALANCE SHEETS shall have the meaning set forth in SECTION 2.1(e), or
in SECTION 2.2(e) hereof, as the context may require.
1.14 BENEFICIAL PHASE II ASSET shall have the meaning set forth in SECTION
1.8 of the WMC Partnership Agreement.
1.15 BUSINESS DAY shall mean any day on which national banking
institutions in San Francisco, California, are open for the
transaction of banking business.
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1.16 CCI shall mean Cellular Communications, Inc., a Delaware corporation.
1.17 CECO shall mean the Civil Enforcement Consent Order entered by the
United States District Court for the District of Columbia on or about
February 2, 1989, in United States v. Western Electric Co. (Case No.
82-0192).
1.18 CELLULAR PARTNERSHIP AGREEMENT shall mean the partnership agreement
of any partnership that conducts a Domestic Cellular Business and in
which any USW Party or ATI Party holds an interest.
1.19 CODE shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.20 CONSENT shall mean any approval, consent or waiver required to be
obtained from any non-governmental third party for the consummation
of a specified Transaction of any Phase or for the performance by any
Party of any of its obligations under this Organization Agreement and
the Related Agreements, including without limitation any option,
right of first refusal, right of first offer or other similar right
of a third party triggered by a specified Transaction contemplated by
this Organization Agreement or any Related Agreement.
1.21 CONTRIBUTION DATE shall mean the date of the Phase II Closing;
provided, however, that with respect to any Beneficial Phase II Asset
or Transferred Subsidiary that is contributed or transferred to WMC
after the Phase II Closing, the Contribution Date shall be the date
such contribution or transfer is effected.
1.22 DECREE COURT shall mean the court having jurisdiction over the MFJ.
1.23 DELAWARE RULPA shall mean the Delaware Revised Uniform Limited
Partnership Act.
1.24 DOMESTIC shall refer to the fifty (50) states of the United States,
the District of Columbia, Puerto Rico, the Gulf of Mexico, and Guam.
1.25 DOMESTIC CELLULAR ASSET shall mean any assets, rights, properties,
and franchises of every kind and nature used primarily or exclusively
in the operation of a Domestic Cellular Business (including the FCC
Licenses with respect thereto), whether held directly or indirectly
through a Person's wholly-owned Subsidiaries, and any other asset,
right, property, or business of such Person or its wholly-owned
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Subsidiaries constituting part of, or used primarily in connection
with, such Person's Domestic Cellular Business.
1.26 DOMESTIC CELLULAR BUSINESS shall mean the business of acquiring,
developing, owning, and operating businesses, and interests in
businesses, exclusively or primarily engaged in the provision of
Domestic Cellular Service.
1.27 DOMESTIC CELLULAR INVESTMENT shall mean any equity interest held by a
Person in a Domestic Cellular Investment Entity.
1.28 DOMESTIC CELLULAR INVESTMENT ENTITY shall mean any Person that is
conducting a Domestic Cellular Business in which a specified Person
holds an equity interest, but which is not a Subsidiary of such
Person.
1.29 DOMESTIC CELLULAR SERVICE shall mean any commercial mobile radio
service, and the resale of such service, provided by a radio
communications system authorized under the rules for the domestic
public cellular radio telecommunications service designated as
Subpart K of Part 22 of the FCC's rules in effect on the Effective
Date, or any revision thereto or successor thereof which may be in
effect from time to time, including the network, marketing,
distribution, sales, customer interface, and operations functions
relating thereto.
1.30 DOMESTIC CELLULAR SUBSIDIARY shall mean, with respect to a Person, a
Subsidiary that is conducting a Domestic Cellular Business.
1.31 DOMESTIC CELLULAR TRANSACTIONS shall mean the formation of WMC; the
execution and delivery of the License Agreements, the ATI Services
Agreement, and the NewVector Services Agreement; the contribution of
the ATI Phase II Assets, the USW Phase II Assets, the Beneficial
Phase II Assets, and the New Par Assets to WMC; and the other
transactions referred to in ARTICLES 4 and 5 hereof.
1.32 EFFECTIVE DATE shall mean July 25, 1994.
1.33 EMPLOYEE BENEFIT PROGRAM shall mean any of the following employee
benefit plans, programs or arrangements (whether or not set forth in
a written document):
(a) Any employee pension benefit plan, as defined in Section
3(2) of ERISA,
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including without limitation any multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA;
(b) Any employee welfare benefit plan, as defined in Section
3(1) of ERISA;
(c) Any bonus, deferred-compensation, incentive,
restricted-stock, stock purchase, stock option, stock
appreciation right, phantom stock, debenture, supplemental
pension, profit-sharing, commission, royalty pool or
similar plan or arrangement;
(d) Any plan, program, agreement, policy, commitment or other
arrangement relating to severance or termination pay,
whether or not published or generally known;
(e) Any plan, program, agreement, policy, commitment or other
arrangement relating to the provision of any benefit
described in Section 3(1) of ERISA to former employees or
the survivors or dependents of employees or former
employees;
(f) Any plan that is maintained outside of the United States
primarily for the benefit of persons substantially all of
whom are nonresident aliens, as described in Section
4(b)(4) of ERISA;
(g) Any plan that is an excess benefit plan, as defined in
Section 3(36) of ERISA, and is unfunded, as described in
Section 4(b)(5) of ERISA;
(h) Any plan, program, agreement, policy, commitment or other
arrangement relating to loans or other extensions of
credit, loan guarantees, relocation assistance or similar
benefits;
(i) Any plan, program, agreement, policy, commitment or other
arrangement relating to paid or unpaid leaves of absence,
education expense or vacation; or
(k) Any other plan, program, agreement, policy, commitment or
other arrangement relating to employee benefits, executive
compensation or fringe benefits or that is subject to
Section 125 of the Code.
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1.34 ENVIRONMENTAL LAWS shall mean all federal, state, local, and foreign
laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient
air, surface water, ground water, wetlands, land surface, subsurface
strata, and indoor and outdoor workplace), including, without
limitation, (a) laws and regulations relating to emissions,
discharges, releases or threatened releases of any Substance of
Concern or otherwise relating to the importation, manufacture,
processing, formulation, testing, distribution, use, treatment,
storage, disposal, transport or handling of any Substance of Concern,
and (b) common law principles of tort liability.
1.35 EO shall mean the Enforcement Order entered by the United States
District Court for the District of Columbia on or about February 15,
1991, in United States v. Western Electric Co. (Case No. 82-0192).
1.36 ERISA shall mean the Employee Retirement Security Act of 1974, as
amended.
1.37 ERISA AFFILIATE shall mean each person (as defined in Section 3(9) of
ERISA) that, together with the entity being described, would be
treated as a single employer under Section 4001(b) of ERISA or that
would be deemed to be a member of the same "controlled group" within
the meaning of Section 414(b), (c), (m), and (o) of the Code
(provided, however, that when the subject of the provision is a
multiemployer plan only subsections (b) and (c) of Section 414 shall
be taken into account). ERISA Affiliate shall also mean any
partnership in which the entity being described is a general partner.
1.38 ESMR shall refer to any commercial mobile radio service, and the
resale of such service, authorized under the rules for Enhanced
Specialized Mobile Radio services designated under Subpart S or Part
90 of the FCC's rules in effect on the Effective Date, or any
revision or successor thereof which may be in effect from time to
time, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
1.39 FAIR MARKET VALUE shall have the meaning set forth in SECTION 1.8 of
the WMC Partnership Agreement.
1.40 FINAL ORDER shall mean any action by the FCC or a state regulatory
authority as to which (a) no request for stay by the FCC or state
regulatory authority is pending, no such stay is in effect, and, if
any deadline for filing any such request is designated by
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statute or regulation, it has passed; (b) no petition for rehearing
or reconsideration of the action is pending before the FCC or state
regulatory authority, as applicable, and the time for filing any
such petition has passed; (c) the FCC or state regulatory authority,
as applicable, does not have the action under reconsideration on its
own motion, and the time for such reconsideration has passed; and
(d) no appeal to a court, or request or stay by a court, of the
FCC's or state regulatory authority's action, as applicable, is
pending or in effect, and, if any deadline for filing such appeal
or request is designated by statute or rule, it has passed.
1.41 FCC shall mean the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
1.42 FINANCIAL STATEMENTS shall have the meaning set forth in SECTION
2.1(e), or in SECTION 2.2(e) hereof, as the context may require.
1.43 GOVERNMENTAL BODY shall mean any federal, state, municipal, political
subdivision or other governmental department, commission, board,
bureau, agency or instrumentality.
1.44 INCOME TAXES means any federal, state, local or foreign income,
franchise or similar Taxes and in each instance any interest,
penalties or additions to taxes attributable to such Taxes.
1.45 INTELLECTUAL PROPERTY shall mean all Trademarks, Trade Names,
copyrights or copyright registrations, and patents or patents
pending, including any contracts, licenses or other legal
arrangements granting rights or privileges to use any Trademark,
Trade Name or patent, used in, and material to the conduct of, the
Domestic Cellular Business of any Person.
1.46 INTER-EXCHANGE CARRIER AGREEMENT shall mean an agreement between any
ATI Party and any inter-exchange carrier or between any USW Party and
any inter-exchange carrier relating to the conduct of a Domestic
Cellular Business.
1.47 INVESTMENT AGREEMENT shall mean that certain Investment Agreement,
entered into by and between USW and ATI, dated as of the Effective
Date, a copy of which is appended hereto as ATTACHMENT 1.46.
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1.48 LEASED PROPERTY shall mean any Domestic Cellular Asset consisting of
a leasehold interest in real or personal property.
1.49 LICENSE shall mean any permit, license, waiver or authorization from
any Governmental Body having jurisdiction over a Person required or
advisable for the conduct of an activity, including, without
limitation, any FCC license or any authorization or certificate of
public convenience and necessity.
1.50 LICENSE AGREEMENT shall mean any license and/or sublicense agreement
to be entered into by and between WMC and any of PCS Par, any USW or
ATI Domestic Cellular Subsidiary or any USW or ATI Domestic Cellular
Investment Entity substantially embodying the guidelines and
principles set forth in the License Agreement Guidelines developed by
the ATI and USW transition teams as of July 25, 1994.
1.51 LIEN shall mean any lien, pledge, claim, encumbrance, mortgage,
security interest or other charge against property.
1.52 MATERIAL ADVERSE EFFECT shall mean a material adverse effect on the
business, assets, financial condition, results of operations or
prospects of a specified Person or Persons.
1.53 MATERIAL CONTRACT shall mean any agreement, contract or commitment
made in conjunction with or related to a Domestic Cellular Business
(including, without limitation, contracts with customers or
suppliers, Resale Agreements, Roaming Agreements, Inter-Exchange
Carrier Agreements, and similar agreements) that (a) is reasonably
anticipated by the Party making a representation with respect thereto
to involve annual aggregate payments by any party thereto in excess
of five million dollars ($5,000,000); (b) is reasonably anticipated
by the Party making a representation with respect thereto to involve
aggregate payments by all parties thereto in excess of ten million
dollars ($10,000,000) in any five (5) year period; (c) has a term of
five (5) years or more; or (d) that any party thereto would be
required to file as an exhibit to its Annual Report on Form 10-K if
such Person were a registrant under Section 12 of the Securities
Exchange Act of 1934, as amended.
1.54 MFJ shall mean the Modification of Final Judgment entered in United
States v. AT&T, 552 F. Supp. 131 (D.D.C.), on or about August 24,
1982, as subsequently modified from time to time.
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1.55 MSA shall mean Metropolitan Statistical Area.
1.56 NEW PAR shall mean the general partnership between the PacTel Group
and the CCI Group (or their successors) organized pursuant to the
laws of the State of Delaware and that certain New Par Partnership
Agreement, dated as of August 1, 1991.
1.57 NEW PAR ASSETS shall mean all of the ownership interests in, or
assets of, New Par.
1.58 NEW PAR CONTRIBUTION CLOSING shall mean the closing of the
transactions described in SECTION 5.5 hereof.
1.59 NEWVECTOR shall mean U S WEST NewVector Group, Inc., a Colorado
corporation and wholly-owned Subsidiary of USW.
1.60 NEWVECTOR SERVICES AGREEMENT shall mean an agreement to be entered
into by and between WMC and NewVector substantially embodying the
guidelines and principles set forth in the Services Agreement
Guidelines developed by the ATI and USW transition teams as of July
25, 1994.
1.61 NV-EMPLOYEE BENEFIT PROGRAMS shall have the meaning set forth in
SECTION 2.1(p)(i) hereof.
1.62 ORGANIZATION AGREEMENT shall mean this Joint Venture Organization
Agreement.
1.63 OWNED PROPERTY shall mean any Domestic Cellular Asset consisting of a
fee interest in real or personal property.
1.64 PARTIAL MFJ RELIEF shall mean a final court order, federal agency
action or the enactment of federal legislation modifying the MFJ (to
the extent such modification is necessary) to allow WMC:
(a) To provide interexchange telecommunications services that (i)
originate from a cellular radio or other wireless device and that are
not routed through a wireless PBX or comparable device directly to a
landline local telephone company end office, or (ii) are routed
through wireless switching equipment to any terminating device
(including cellular CPE, voice-mail or any other type of terminating
device); and
(b) To provide the services identified in subparagraph (a) above
free of the obligations and restrictions contained in sections II(A)
and II(B) of the MFJ, and free of any requirement to
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provide those services through a separate subsidiary, sales force or
group of employees, whether imposed in the waiver process or
otherwise.
As used herein, Partial MFJ Relief shall be deemed to have occurred
even though equal access or nondiscrimination requirements remain, to
the extent that those requirements are imposed on all wireless
carriers by legislation, by final court order or by final agency
action.
1.65 PARTIES shall mean USW and ATI.
1.66 PARTY shall mean USW or ATI, as the context may require.
1.67 PCS shall refer to any broad-band radio communications service
authorized under the rules for personal communications services
designated as Subpart E of Part 24 of the FCC's rules in effect on
the Effective Date, or any revision thereto or successor thereof
which may be in effect from time to time, including the network,
marketing, distribution, sales, customer interface and operations
functions relating thereto.
1.68 PCS CONTRIBUTION CLOSING shall have the meaning set forth in SECTION
5.4 hereof.
1.69 PCS PAR shall mean PCS Nucleus, L.P., a Delaware limited partnership
organized pursuant to the PCS Par Partnership Agreement.
1.70 PCS PAR EMPLOYEE AGREEMENT shall mean an agreement regarding
employees to be entered into by and among ATI and USW and PCS Par
pursuant to this Organization Agreement.
1.71 PCS PAR LICENSE AGREEMENT shall mean a License Agreement between WMC
and PCS Par.
1.72 PCS PAR PARTNERSHIP AGREEMENT shall mean that certain Agreement of
Limited Partnership of PCS Par, entered into under the Delaware RULPA
by and between ATI and USW, dated as of the Effective Date, a copy of
which is appended hereto as ATTACHMENT 1.72.
1.73 PCS PAR SERVICES AGREEMENT shall mean an agreement to be entered into
by and between WMC and PCS Par substantially embodying the guidelines
and principles set forth in the Services Agreement Guidelines
developed by the ATI and USW transition teams as of July 25, 1994.
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1.74 PCS TRANSACTIONS shall mean the formation of PCS Par, the execution
and delivery of the PCS Par Services Agreement, and the contribution
of Percentage Interests in PCS Par to WMC in accordance with SECTION
5.4 hereof.
1.75 PERCENTAGE INTEREST shall mean a partner's proportional interest in a
partnership, whether as a general partner, a limited partner or both
a general and a limited partner.
1.76 PERMITTED LIABILITIES shall mean, with respect to a Person's Domestic
Cellular Business, ordinary course trade accounts payable, accrued
expenses for goods and services purchased, and unearned revenue and
customer deposits arising in the ordinary course of business.
1.77 PERMITTED LIEN shall mean (a) a statutory Lien not yet due or payable
or (b) a Lien that is not material in character, amount or extent and
does not materially detract from the value, or interfere with the use
of, the assets subject thereto or affected thereby or otherwise
materially impair the business operations being conducted or proposed
to be conducted with such assets.
1.78 PERSON shall mean any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, estate,
unincorporated organization, governmental or regulatory body or other
entity.
1.79 PHASE I shall mean the period beginning at the Phase I Closing and
continuing until the Phase II Closing.
1.80 PHASE I CLOSING shall mean the closing of the Domestic Cellular
Transactions to be closed upon satisfaction or waiver of all
conditions set forth in SECTION 5.2(a) of this Organization
Agreement.
1.81 PHASE II shall mean the period beginning at the Phase II Closing and
continuing until the Phase III Closing, if any.
1.82 PHASE II CLOSING shall mean the closing of the Transactions to be
closed upon satisfaction or waiver of all conditions set forth in
SECTION 5.3(a) of this Organization Agreement.
1.83 PHASE III shall mean the period following the Phase III Closing.
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1.84 PHASE III CLOSING shall mean the closing of the Transactions to be
closed upon satisfaction or waiver of all conditions to Phase III
Closing contained in the Agreement of Exchange or the Trust Agreement
of Exchange, as the case may be.
1.85 POPs shall mean the number that is the product of (a) the population
of an FCC-licensed cellular market (based on the 1993 Donnelly
Marketing Service population estimates for such market), and (b) the
percentage of direct or indirect ownership interest of a Person in
the entity holding the valid cellular license operating in such
market as of the date specified.
1.86 RELATED AGREEMENTS shall mean the WMC Partnership Agreement, the PCS
Par Partnership Agreement, the Agreement of Exchange, the Trust
Agreement of Exchange, the Investment Agreement, the ATI Services
Agreement, the NewVector Services Agreement, the PCS Par Services
Agreement, the License Agreements, and the Arbitration Agreement.
With reference to a particular Party, Related Agreement shall mean
any of the above-referenced agreements to which such Party or an
Affiliate of such Party is a party.
1.87 RELATED PARTY AGREEMENT shall mean any contract, agreement,
transaction or relationship between or among (a) a USW Party or an
ATI Party and an Affiliate of such ATI Party or USW Party relating to
a Domestic Cellular Business; (b) a USW Party or an ATI Party or an
Affiliate thereof and WMC; or (c) a USW Party or an ATI Party or an
Affiliate thereof and PCS Par.
1.88 RESALE AGREEMENT shall mean any agreement entered into by any ATI
Party or any USW Party with any third party relating to the resale of
any Domestic Cellular Service.
1.89 RETURN means any report, return, statement, estimate, declaration,
claim for refund, form, information return or other document filed or
required to be filed with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof; provided,
however, that whenever a Subsidiary is a member of an affiliated
group, within the meaning of Section 1504 of the Code (or any
combined, consolidated, unitary group or similar group for purposes
of any applicable foreign, state or local law), the Return with
respect to such Subsidiary shall be the schedule to the Return for
such group which relates to such Subsidiary and, when
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available, any pro forma Returns prepared for such Subsidiary.
1.90 ROAMING AGREEMENT shall mean any agreement entered into by any ATI
Party or any USW Party with any third party with respect to a roaming
arrangement for domestic cellular or domestic PCS, ESMR or satellite
customers.
1.91 SAN DIEGO CELLULAR PROPERTY shall mean the assets held by U S WEST
Cellular of California, a wholly-owned Subsidiary of NewVector, in
connection with the conduct of the non-wireline cellular system
licensed to serve the San Diego MSA, free and clear of all Liens and
liabilities (other than Permitted Liabilities). For purposes of this
Organization Agreement, the San Diego Cellular Property shall not be
considered to be a USW Phase II Asset, a Domestic Cellular Asset, a
Domestic Cellular Subsidiary, a Domestic Cellular Investment or a
component of the Domestic Cellular Business of any Person.
1.92 SUBSIDIARY of a Person shall mean (a) an entity at least fifty
percent (50%) of the equity or voting interests of which are owned,
directly or indirectly, by such Person; (b) a limited partnership
whose sole general partner or managing general partner is such
Person; or (c) a general partnership whose managing general partner
is such Person. For purposes of this Organization Agreement, neither
WMC nor PCS Par shall be considered to be a Subsidiary of USW or ATI.
1.93 SUBSTANCE OF CONCERN shall mean any chemical, pollutant, contaminant,
waste, toxic substance, industrial substance, noxious substance,
hazardous substance, radioactive material, asbestos, genetically
modified organism, petroleum or petroleum product.
1.94 TAX OR TAXES means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including,
without limitation, income, gross receipts, ad valorem, value added,
excise, real or personal property, asset, stamp, sales, use, service,
service use, lease, license, payroll, transaction, capital, net
worth, withholding, employment, disability, social security, workers'
compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer, gains,
recapture, alternative or add-on minimum, environmental, estimated or
other governmental taxes imposed or payable to the United States, or
any state, county, local or foreign government or subdivision or
agency thereof, and in
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each instance such term shall include any interest, penalties or
additions to tax attributable to any such Tax.
1.95 TAX SHARING ARRANGEMENT means any written or unwritten agreement or
arrangement for the allocation or payment of or with respect to Tax
liabilities or Tax benefits.
1.96 TO THE KNOWLEDGE OF ATI shall mean to the actual knowledge of an
executive officer of ATI.
1.97 TO THE KNOWLEDGE OF USW shall mean to the actual knowledge of an
executive officer of NewVector.
1.98 TRADEMARK shall mean any service mark, trademark, trade name,
trademark registration or application, service mark registration or
application or derivative name.
1.99 TRADE NAME shall mean any trade name, corporate name, business name,
commercial name, trade name, registration or application or any other
name used to identify a business or for any other business purpose.
1.100 TRANSACTIONS shall mean the Domestic Cellular Transactions, the PCS
Transactions, and any other transactions contemplated by this
Organization Agreement and the Related Agreements.
1.101 TRANSFERRED SUBSIDIARY shall mean any ATI Domestic Cellular
Subsidiary or USW Domestic Cellular Subsidiary, as the case may be,
the capital stock of which is actually contributed or transferred to
WMC, and any corporate Subsidiary thereof.
1.102 TRUST AGREEMENT OF EXCHANGE shall mean that certain Trust Agreement
of Exchange, by and between ATI and USW, dated as of the Effective
Date, a copy of which is appended hereto as Attachment 1.102.
1.103 TUCSON CELLULAR INTEREST shall mean the 5.88 percent (5.88%) limited
partnership interest held by AirTouch Cellular of Arizona in Tucson
Cellular Telephone Company, a Nevada limited partnership that
operates the non-wireline cellular system in the Tucson, Arizona MSA.
For purposes of this Organization Agreement, the Tucson Cellular
Interest shall not be considered to be an ATI Phase II Asset, a
Domestic Cellular Asset, a Domestic Cellular Property, a Domestic
Cellular Investment or a component of the Domestic Cellular Business
of any Person.
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1.104 USW shall mean U S WEST, Inc., a Colorado corporation.
1.105 USW PARTIES shall mean USW, NewVector, and all corporate and
partnership Subsidiaries of NewVector.
1.106 USW PHASE II ASSETS shall mean the assets listed on ATTACHMENT 1.106
to this Organization Agreement.
1.107 WMC shall mean WMC Partners, L.P., a Delaware limited partnership
organized pursuant to the WMC Partnership Agreement.
1.108 WMC EMPLOYEE AGREEMENT shall mean an agreement to be entered into by
and among ATI, USW and WMC substantially embodying the guidelines and
principles set forth in the WMC Employee Agreement Guidelines
developed by the ATI and USW transition teams as of July 25, 1994.
1.109 WMC PARTNERSHIP COMMITTEE shall mean the Partnership Committee of WMC
as defined in SECTION 2.2(a) of the WMC Partnership Agreement.
1.110 WMC PARTNERSHIP AGREEMENT shall mean that certain agreement of
limited partnership of WMC Partners, L.P., dated as of the Effective
Date, a copy of which is appended hereto as ATTACHMENT 1.110.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of USW. USW hereby represents and
warrants to ATI that each of the following statements is true and correct as of
the Effective Date and, except as otherwise expressly stated herein, will be
true and correct as of the Phase I Closing and the Phase II Closing as if made
on and as of such dates.
(a) Corporate Organization.
(i) USW is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted, to enter into this Organization
Agreement and the Related Agreements and to carry out the provisions of this
Organization Agreement and the Related Agreements and consummate the
Transactions contemplated hereby and thereby. USW is duly qualified and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary and where the failure to be so qualified
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has or could reasonably be expected to have a Material Adverse Effect on USW
and its Subsidiaries, taken as a whole.
(ii) All Domestic Cellular Assets currently owned,
directly or indirectly, in whole or in part, by USW are held, owned or
operated, directly or indirectly, by NewVector or by a Subsidiary of NewVector.
Except for the interest it holds in Cascade Mobile Communications, L.P.,
NewVector is not engaged, directly or indirectly, in the conduct or ownership
of any business or activity other than the Domestic Cellular Business.
(iii) NewVector is a corporation duly organized, validly
existing and in good standing under the laws of Colorado and has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted. NewVector is duly qualified and in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary and where the failure to be so qualified has or could reasonably be
expected to have a Material Adverse Effect on NewVector and its Subsidiaries,
taken as a whole.
(iv) Each corporate Subsidiary of NewVector is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
authority to own and operate its property and to carry on its business as now
conducted. Each such Subsidiary is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified has or could reasonably be expected to
have a Material Adverse Effect on NewVector and its Subsidiaries, taken as a
whole.
(v) Each partnership Subsidiary of NewVector is a general
or limited partnership duly organized and validly existing in its state of
organization and has all requisite partnership power and authority to own and
operate its properties and to carry on its business as now conducted. Each
such partnership Subsidiary is duly qualified in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary and where the failure to be
so qualified has or could reasonably be expected to have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole.
(b) Capitalization: Ownership of Shares.
(i) SCHEDULE 2.1(b)(i) contains a true, current, and
complete list of the authorized, issued and outstanding capital stock
(including the par or stated value
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thereof) of NewVector. All issued and outstanding shares of capital stock of
NewVector are duly authorized, validly issued, fully paid, and non-assessable.
USW has good legal title to, and beneficial ownership of, such shares of
NewVector free and clear of all Liens, restrictions, equities, options or
claims whatsoever, except as set forth on SCHEDULE 2.1(b)(i). USW has full
authority to transfer, convey, and deliver such shares free and clear of all
Liens, restrictions, equities, options, and claims. Except for this
Organization Agreement and the Related Agreements, there are no outstanding
subscriptions, options, warrants, calls, rights, commitments, rights of
exchange, plans, arrangements, understandings or other agreements of any kind
or character relating to or providing for the issuance, sale, delivery or
transfer of securities of any class of NewVector stock (including any right of
conversion or exchange under any outstanding security or other instrument) to
any Person.
(ii) SCHEDULE 2.1(b)(ii) contains a true, current, and
complete list of (A) the name of each corporate Subsidiary of NewVector, (B)
the state of incorporation of such Subsidiary, (C) the states where such
Subsidiary is qualified to do business, (D) the authorized, issued and
outstanding capital stock (including the par or stated value thereof) of each
Subsidiary, and (E) the number of shares and percentage of issued and
outstanding capital stock of each Subsidiary beneficially owned by NewVector.
The issued and outstanding shares of capital stock of each such Subsidiary are
duly authorized, validly issued, fully paid, and non-assessable. NewVector or
a wholly-owned Subsidiary of NewVector has good legal title to, and beneficial
ownership of, such shares free and clear of all Liens, restrictions, equities,
options or claims whatsoever, except as set forth on SCHEDULE 2.1(b)(ii).
There are no outstanding subscriptions, options, warrants, calls, rights,
commitments, rights of exchange, plans, arrangements, understandings or other
agreements of any kind or character relating to or providing for the issuance,
sale, delivery or transfer of securities of any class of stock of any corporate
Subsidiary of NewVector (including any right of conversion or exchange under
any outstanding security or other instrument) to any Person.
(iii) SCHEDULE 2.1(b)(iii) contains a true, current, and
complete list of (A) the name of each partnership Subsidiary of NewVector, (B)
the state of organization of each such Subsidiary, (C) the states where each
Subsidiary is qualified to do business, and (D) the general and limited
partnership interests in each Subsidiary beneficially owned by NewVector.
NewVector or a Subsidiary of NewVector has good legal title to, and beneficial
ownership of, its partnership interest in each such Subsidiary. Except as set
forth on SCHEDULE 2.1(b)(iii) or in any Cellular Partnership Agreement for a
partnership listed on SCHEDULE 2.1(b)(iii), NewVector or a Subsidiary of
NewVector owns each such interest free and clear of all Liens, restrictions,
equities, options or claims whatsoever. Except as
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set forth on SCHEDULE 2.1(b)(iii), there are no outstanding subscriptions,
options, calls, rights, commitments, rights of exchange, plans, arrangements,
understandings or other agreements of any kind or character relating to or
providing for the issuance, sale, delivery or transfer of partnership interests
of any partnership Subsidiary of NewVector (including any right of conversion
or exchange under any outstanding agreement or instrument) to any Person. USW
has furnished to ATI true and complete copies of all Cellular Partnership
Agreements for all partnerships listed on SCHEDULE 2.1(b)(iii).
(iv) SCHEDULE 2.1(b)(iv) contains a true, current, and
complete list of all Domestic Cellular Investments owned or held by each USW
Party, including the Percentage Interest held in each Domestic Cellular
Investment Entity by such USW Party as a general and/or as a limited partner.
Either NewVector or one of its Subsidiaries has good legal title to, and
beneficial ownership of, such interests. Except as set forth on SCHEDULE
2.1(b)(iv) or in any Cellular Partnership Agreement for a partnership listed on
SCHEDULE 2.1(b)(iv), NewVector or one of its Subsidiaries owns such interests
free and clear of all Liens, encumbrances, restrictions, equities, options or
claims whatsoever. USW has furnished to ATI true and complete copies of all
certificates or articles of incorporation and by-laws, partnership agreements
or joint venture agreements for all Domestic Cellular Investment Entities
listed on SCHEDULE 2.1(b)(iv).
(c) Authority. This Organization Agreement and the Related
Agreements and the consummation of the Transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action on the part of the USW Parties. This Organization Agreement has been
duly executed and delivered by a duly authorized officer of USW and constitutes
a valid and binding agreement of USW, enforceable against USW in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws of general application that
may affect the enforcement of creditors' rights generally and by general
equitable principles.
(d) Authorizations and Consents; No Violation.
(i) Except as disclosed on one of the Schedules referenced
in this SECTION 2.1(d), neither the execution and delivery of this Organization
Agreement nor the consummation of the Transactions contemplated by this
Organization Agreement and the Related Agreements will (A) conflict with, or
result in any breach or violation of, any provision of the certificates or
articles of incorporation or by-laws of any of the USW Parties; (B) constitute,
with or without notice or the passage of time or both, a breach, violation or
default, create a Lien or give rise to any right of termination, modification,
cancellation, prepayment or acceleration under any order, writ, injunction,
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decree, law, statute, rule or regulation, franchise, governmental permit or
license or any mortgage, indenture, lease, Material Contract, agreement or
other instrument of any USW Party or to which any USW Party or its respective
properties is subject, except for breaches, violations, defaults, Liens or
rights of termination, modification, cancellation, prepayment or acceleration
which would not, singly or in the aggregate, have a Material Adverse Effect on
NewVector and its Subsidiaries, taken as a whole, or adversely affect the
ability of USW to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements; (C)
give rise to any option, right of first refusal or similar right of any third
party with respect to any interest in any USW Party, USW Domestic Cellular
Asset, USW Domestic Cellular Subsidiary or any USW Domestic Cellular
Investment; or (D) require any Consent or Authorization to effectuate the
Transactions contemplated by this Organization Agreement and the Related
Agreements.
(ii) SCHEDULE 2.1(d)(ii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
federal Governmental Body or court by any USW Party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(iii) SCHEDULE 2.1(d)(iii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
state public utility commission or other state, county or local Governmental
Body by any USW Party with respect to the consummation of the (A) Phase I
Transactions and (B) Phase II Transactions contemplated by this Organization
Agreement and the Related Agreements.
(iv) Except as set forth in any Cellular Partnership
Agreement, any Material Contract existing on the Effective Date (a copy of
which has been provided to ATI prior to the Effective Date) or other agreement
referred to in SECTION 2.1(b)(iii) or 2.1(b)(iv) hereof or in SCHEDULE
2.1(d)(iv) hereto, no Consents are reasonably anticipated to be required to be
obtained pursuant to any partnership, joint venture or other similar agreement
or any Material Contract to which any USW Party is a party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(e) Financial Statements. USW has furnished to ATI true and
complete copies of the audited consolidated balance sheets at December 31, 1992
and 1993 ("BALANCE SHEETS"); audited consolidated income and cash flow
statements of USW's Domestic Cellular Business for the fiscal years ended
December 31, 1992, and December 31, 1993; an unaudited balance sheet at May 31,
1994; and unaudited consolidated income and cash flow statements for the
five-month period ending May 31, 1994 (such Balance
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Sheets and income and cash flow statements are hereinafter collectively
referred to as "FINANCIAL STATEMENTS"), setting forth the financial condition
and results of operations of USW's Domestic Cellular Business as of the
respective dates of the Financial Statements and for the periods covered
thereby. The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods specified, except as expressly noted therein, and except
that the May 31, 1994 Financial Statements do not contain footnotes. The
Balance Sheets fairly present the financial condition of USW's Domestic
Cellular Business as of the dates thereof. The consolidated income and cash
flow statements fairly present the results of operations of USW's Domestic
Cellular Business for the periods indicated. USW agrees to use reasonable
efforts to furnish to ATI as soon as they are available true and correct
unaudited Balance Sheets as of May 31, 1994, for each USW Domestic Cellular
Subsidiary and USW Domestic Cellular Investment Entity.
(f) Absence of Other Changes. Except as contemplated by this
Organization Agreement or as set forth in SCHEDULE 2.1(f), from and after June
1, 1994, each of the USW Parties has conducted its Domestic Cellular Business
in the ordinary and usual course and there has not been (i) any borrowing
outside the ordinary course of business or incurrence of any obligations other
than Permitted Liabilities or other liabilities incurred in the ordinary course
of business; (ii) any Lien imposed on any of the properties or assets of any of
the USW Parties (other than Permitted Liens); or (iii) any increases in
compensation payable to officers and employees of NewVector or any Subsidiary
of NewVector, which in the aggregate may be expected to have a Material Adverse
Effect on NewVector and the Subsidiaries of NewVector, taken as a whole. From
and after June 1, 1994, there has not been any change in the business,
financial condition, assets, liabilities or results of operation of USW's
Domestic Cellular Business, other than as a result of a change resulting from
general cellular industry conditions or as a result of a regulatory development
affecting the cellular industry generally, which could reasonably be expected
to have a Material Adverse Effect on NewVector and its Subsidiaries, taken as a
whole, or to affect adversely the ability of USW to consummate the Transactions
and perform its obligations as contemplated by this Organization Agreement and
the Related Agreements.
(g) Compliance with Laws. Subject to SECTION 2.1(h) hereof,
each of the USW Parties is in compliance with all laws, statutes, ordinances,
regulations, rules, judgments, decrees, orders, and other requirements
applicable to the operation of its Domestic Cellular Business, except for any
non-compliances which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on NewVector and its
Subsidiaries, taken as a whole, or to affect adversely the ability of USW to
consummate the Transactions and perform its
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obligations contemplated by this Organization Agreement and the Related
Agreements.
(h) MFJ. USW and USW's Domestic Cellular Business are subject
to the terms of the MFJ, CECO and EO and must operate in conformance with their
respective requirements and prohibitions. USW has reviewed this Organization
Agreement and the Related Agreements attached hereto pursuant to its normal
review procedures under the CECO and the EO and believes it can consummate the
Transactions and perform its obligations as contemplated by this Organization
Agreement and the Related Agreements.
(i) Litigation. Except as disclosed on SCHEDULE 2.1(i), there
are no actions, suits, investigations or proceedings (adjudicatory, rulemaking
or otherwise) pending or, to the knowledge of USW, threatened against any USW
Party or, to the knowledge of USW, pending or threatened against any USW
Domestic Cellular Investment Entity, at law or in equity, before any court or
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole, or to affect
adversely the ability of USW to consummate the Transactions and perform its
obligations as contemplated by this Organization Agreement and the Related
Agreements.
(j) Licenses. The USW Parties and the USW Domestic Cellular
Investment Entities have all material Licenses which are necessary to conduct
USW's Domestic Cellular Business as it is presently conducted. Without
limitation of the foregoing, the USW Parties and the USW Domestic Cellular
Investment Entities hold the material Licenses identified on SCHEDULE 2.1(j),
and all such material Licenses are valid and in full force and effect. No USW
Party has made any untrue statement of fact, or omitted to disclose any fact,
to any Governmental Body or taken or failed to take any action, which
misstatements or omissions, actions or failures to act, individually or in the
aggregate, subject or could reasonably be expected to subject any of the
material Licenses they hold to revocation or failure to renew. No event has
occurred with respect to any of the material Licenses held by a USW Party or by
a USW Domestic Cellular Investment Entity which permits, or after notice or
lapse of time or both would permit, revocation or termination thereof or would
result in any other material impairment of the rights of the holder of any of
the material Licenses. USW has no reason to believe that any of the material
Licenses identified on SCHEDULE 2.1(j) is not likely to be renewed in the
ordinary course or that the holder of any such material License would not be
entitled to a renewal expectancy as such term is defined in 47 C.F.R. Section
22.941 or any successor provisions and associated FCC policies.
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(k) Taxes. NewVector and its corporate Subsidiaries have each
(i) filed, within the times and in the manner prescribed by law, and will
continue to timely file through the Contribution Date all Returns required to
be filed by or with respect to each of them, (ii) paid all Taxes shown to have
become due pursuant to such Returns, and (iii) will continue to pay all Taxes
payable pursuant to such Returns for periods ending on or before the
Contribution Date. There are no Taxes of NewVector and its corporate
Subsidiaries for which a notice of, or assessment or demand for, payment has
been received or which are otherwise due and payable and NewVector and its
corporate Subsidiaries will continue to pay such Taxes for periods ending on or
before the Contribution Date. Except as disclosed in SCHEDULE 2.1(k), no
examination or audit of any Tax Return of NewVector or any of its corporate
Subsidiaries is currently in progress, and there are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any Tax
Return of NewVector or any of its corporate Subsidiaries. Except as disclosed
to ATI on a revised and updated SCHEDULE 2.1(k) delivered by the Phase I
Closing, complete copies of (i) the federal Income Tax Returns of NewVector and
its corporate Subsidiaries and (ii) state and local Income Tax Returns and
other Tax Returns of NewVector and its corporate Subsidiaries for each of the
years ended December 31, 1989, 1990, 1991 and 1992 have been delivered or made
available to ATI. USW will deliver or make available, within 30 days of
filing, (i) the federal Income Tax Return of NewVector and each of its
corporate Subsidiaries (due to be filed on or before September 15, 1994) and
(ii) state and local Income Tax Returns of NewVector and each of its corporate
Subsidiaries (due to be filed on or before October 15, 1994). Except as set
forth on the revised and updated SCHEDULE 2.1(k) to be delivered to ATI by the
Phase I Closing, (A) there is no action, suit, proceeding, investigation,
audit, claim or assessment pending or proposed with respect to any Return,
which action, suit, proceeding, investigation, audit, claim or assessment
relates to NewVector or any of its corporate Subsidiaries, (B) all amounts
required to be collected or withheld by NewVector of any of its corporate
Subsidiaries with respect to Taxes have been duly collected or withheld and any
such amounts that are required to be remitted to any taxing authority have been
duly remitted, (C) no extension of time within which to file any Return that
relates to NewVector or any of its corporate Subsidiaries has been requested
which Return has not since been filed, (D) there are no tax rulings, requests
for rulings, or closing agreements relating to NewVector or any of its
corporate Subsidiaries which could affect their liability for Taxes for any
period after the Phase I Closing, (E) all federal, state and local (x) Income
Tax Returns of NewVector and each of its corporate Subsidiaries, and (y)
consolidated, combined or unitary Income Tax Returns, which include NewVector
or any of its corporate Subsidiaries, with respect to taxable periods through
the year ended December 31, 1989 have been examined and closed or are Returns
with respect to which the
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applicable statute of limitations has expired without extension or waiver, (F)
no power of attorney has been granted by USW or NewVector or any of its
corporate Subsidiaries with respect to any matter relating to Taxes of the
NewVector or its corporate Subsidiaries which is currently in force, (G)
neither USW nor any corporate Subsidiary thereof has filed a consent under
section 341(f) of the Code or any comparable state provision, and (H) there are
no Liens for Taxes (other than for current Taxes not yet due and payable) on
the assets of NewVector or any of its corporate Subsidiaries. Except as set
forth on the revised and updated SCHEDULE 2.1(k) to be delivered to ATI by the
Phase I Closing, NewVector and each of its corporate Subsidiaries has been an
includable member of the affiliated group (within the meaning of section 1504
of the Code) of which USW is the parent corporation and has joined in filing a
consolidated return since the date on which each was incorporated and will be
an includable member of such affiliated group included in USW's consolidated
return through the Contribution Date. Any Tax Sharing Arrangement that may
exist between a USW Transferred Subsidiary, on the one hand, and USW or any
Affiliate of USW, on the other hand, shall terminate, and any obligations to
make payments under any such Tax Sharing Arrangement shall be cancelled, as of
the Contribution Date.
(l) Material Contracts and Related Party Agreements.
(i) SCHEDULE 2.1(l)(i) contains a true and complete list
of all Material Contracts (including Related Party Agreements, if applicable)
to which any USW Party is a party as of the Effective Date.
(ii) Each contract listed in SCHEDULE 2.1(l)(i) is in full
force and effect on the Effective Date, and there exists no default or event,
occurrence, condition or act (including the consummation of the Transactions)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default thereunder by any USW Party or
by any other party thereto which could reasonably be expected to result in a
Material Adverse Effect on NewVector and the Subsidiaries of NewVector, taken
as a whole, or to affect adversely the ability of USW to consummate the
Transactions and perform its obligations contemplated by this Organization
Agreement and the Related Agreements.
(iii) All Related Party Agreements to which any USW Party
is a party have been entered into in the ordinary course of business and
contain terms no more and no less favorable to either party than would be the
case in an arm's-length transaction.
(m) Employment and Non-Competition Agreements. Except as set
forth in SCHEDULE 2.1(m), neither NewVector nor any Subsidiary of NewVector is
a party to any employment agreement or is a party to or otherwise bound by any
non-
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competition, non-solicitation or other similar agreement relating to its
Domestic Cellular Business.
(n) Assets.
(i) Each USW Party has (A) good and marketable fee title
to all its Owned Property and (B) good and valid title to the leasehold estates
in all its Leased Property, in each case free and clear of all Liens other than
Permitted Liens. The Owned Property and the Leased Property of the USW Parties
include all rights and properties necessary to the conduct of such parties'
Domestic Cellular Businesses in the manner in which they are presently
conducted.
(ii) There exists no default, or event which with the
passage of time or notice or both would constitute a default, by any USW Party
with respect to any indebtedness, mortgage, pledge or other hypothecation, the
payment of which is secured by a security interest in all or part of any USW
Party's Domestic Cellular Assets which could reasonably be expected to result
in a Material Adverse Effect on NewVector and the Subsidiaries of NewVector,
taken as a whole, or to affect adversely the ability of USW to consummate the
Transactions and perform its obligations contemplated by this Organization
Agreement and the Related Agreements. None of the USW Parties' Domestic
Cellular Assets is subject to any Lien that would impair or prevent the
continued conduct of USW's Domestic Cellular Business as it has been conducted.
(iii) All of the buildings, structures, appurtenances, and
equipment used in USW's Domestic Cellular Business are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and adequate and suitable for the purposes for which they are
presently being used, except for conditions which would not, singly or in the
aggregate, have a Material Adverse Effect on NewVector and its Subsidiaries,
taken as a whole. None of such buildings, structures, appurtenances or
equipment, nor the operation or maintenance thereof, violates in any material
respect any restrictive covenant or any provision of any federal, state or
local law, ordinance, rule or regulation or encroaches on any property owned by
others. No condemnation proceeding is pending or, to the knowledge of USW,
threatened which would preclude or impair the use of any such property for the
purposes for which it is currently used.
(o) Intellectual Property. A USW Party owns the entire right,
title and interest in and to all Intellectual Property (including Trademarks
and Trade Names) used in, and material to the conduct of, USW's Domestic
Cellular Business. All such Intellectual Property is owned or used pursuant to
defensible licenses or other legal arrangements. There are no pending or, to
the knowledge of USW, threatened proceedings or litigation or other adverse
claims affecting or relating to such
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Intellectual Property, nor to the knowledge of USW any reasonable basis upon
which a claim may be asserted by or against any USW Party for infringement of
any such Intellectual Property which could reasonably be expected to have a
Material Adverse Effect on the USW Parties, taken as a whole. All Intellectual
Property used in, and material to the conduct of, USW's Domestic Cellular
Business will be transferred or licensed to WMC at the Phase I Closing pursuant
to one or more License Agreements and will be usable by WMC in the conduct of
its Domestic Cellular Business on the same terms as such Intellectual Property
is currently being used by the USW Parties in the conduct of USW's Domestic
Cellular Business.
(p) Employee Benefit Programs.
(i) SCHEDULE 2.1(p)(i) sets forth a true and complete list
of all Employee Benefit Programs to which NewVector or any Subsidiary of
NewVector is a party or contributes or is currently obligated to contribute
("NV-Employee Benefit Programs"). USW has provided to ATI a true and complete
list of all executives of NewVector and the Subsidiaries of NewVector for whom
individual agreements pertaining to Employee Benefit Programs are under
consideration by NewVector or any Subsidiary of NewVector (such agreements, if
and when entered into, to be considered NV-Employee Benefit Programs for
purposes of this Organization Agreement).
(ii) USW has provided, or will provide or make available,
to ATI prior to the Effective Date complete, accurate, and current copies of
each of the following:
(A) The text, including amendments, of each of
the NV-Employee Benefit Programs, to the extent reduced to writing;
(B) A written description of all material
elements of the NV-Employee Benefit Programs, to the extent not previously
reduced to writing;
(C) With respect to any NV-Employee Benefit
Program described in Section 3(3) of ERISA that is required to prepare such a
document or make such a filing: (I) the most recent summary plan description,
as described in Section 102 of ERISA, (II) any summary of material
modifications that has been distributed to participants or filed with the U.S.
Department of Labor but that has not been incorporated into an updated summary
plan description furnished under Subparagraph (I) above, and (III) the annual
report, as described in Section 103 of ERISA or Section 6039D of the Code, as
applicable, for the most recent plan year for which an annual report has been
prepared, and any required actuarial and financial statements, opinions and
schedules;
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(D) Where applicable, the actuarial reports
for the most recent three (3) reporting periods for which such a report has
been prepared for any NV-Employee Benefit Program;
(E) The trust agreement or other funding
instrument for each NV-Employee Benefit Program which is funded;
(F) For each NV-Employee Benefit Program that
is intended to meet the qualification requirements of Section 401(a) of the
Code ("NV-Qualified Plan"), the most recent request for a determination
concerning the plan's qualification under Section 401(a) of the Code, as filed
with the Internal Revenue Service ("IRS"); and
(G) For each NV-Qualified Plan, the most
recent determination concerning the plan's qualification under Section 401(a)
of the Code, as issued by the IRS.
(iii) Each NV-Employee Benefit Program is in compliance
with the applicable provisions of ERISA, the Code, and other federal or state
law, including all requirements under the Code and ERISA for filing reports
(which were true and correct in all material respects as of the date filed),
and benefits have been paid in accordance with the provisions of the
NV-Employee Benefit Program, except for such noncompliances and failures which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole.
(iv) Each NV-Qualified Plan has been determined by the IRS
to qualify under Section 401 of the Code, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the Code, and nothing has occurred that would cause the loss of such
qualification or tax-exempt status.
(v) Neither NewVector nor any Subsidiary of NewVector is a
party to, makes, is making or is obligated to make contributions or has made,
or been obligated to make, contributions at any time during the immediately
preceding period covering at least five (5) plan years to a multiemployer plan,
within the meaning of Section 4001(a)(3) of ERISA.
(vi) Neither NewVector nor any Subsidiary of NewVector
expects to incur any liability under Title IV of ERISA (other than premiums due
and not delinquent under Section 4007 of ERISA) with respect to any NV-Employee
Benefit Program.
(vii) Except as set forth in SCHEDULE 2.1(p)(vii), none of
the NV-Qualified Plans subject to Title IV of ERISA has any unfunded pension
liability. For purposes of this SECTION 2.1(p)(vii), an NV-Qualified Plan has
an unfunded pension liability if the plan is subject to Section 412(m) of
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the Code and the plan's benefit liabilities under Section 4001(a)(16) of ERISA
exceed the current value of the plan's assets, determined in accordance with
the assumptions used by the NV-Qualified Plan's actuaries for funding the plan
pursuant to Section 412 of the Code for the applicable plan year. Neither
NewVector nor any Subsidiary of NewVector has transferred any unfunded pension
liability outside of the ERISA Affiliates or otherwise has engaged in a
transaction subject to Section 4069 of ERISA.
(viii) All contributions, premiums or other payments due
from NewVector or any Subsidiary of NewVector to, or under, any NV-Employee
Benefit Program have been fully paid as required by law or by the terms of any
such Employee Benefit Program; all contributions, premiums, or other payments
due from NewVector or any Subsidiary of NewVector to, or under, any NV-Employee
Benefit Program have been adequately provided for on the books and financial
statements of NewVector or the Subsidiary of NewVector, as the case may be; and
no accumulated funding deficiency, as defined in Section 302 of ERISA and
Section 412(m) of the Code, whether or not waived, exists with respect to an
NV-Employee Benefit Program.
(ix) There are no pending or, to the knowledge of USW,
threatened claims, actions or lawsuits, other than routine claims for benefits
in the ordinary course, asserted or instituted against (A) any NV-Employee
Benefit Program or (B) any fiduciary with respect to any NV-Employee Benefit
Program for which NewVector or a Subsidiary of NewVector may be directly or
indirectly liable, through indemnification obligations or otherwise.
(x) Within the six-year period ending on the date of
reference, neither NewVector nor any Subsidiary of NewVector has engaged,
directly or indirectly, in (A) a nonexempt prohibited transaction (as defined
in Section 4975 of the Code or Section 406 of ERISA) in connection with any
Employee Benefit Program that has a reasonable likelihood of having a Material
Adverse Effect on NewVector and its Subsidiaries, taken as a whole, or (B) any
act or omission constituting a violation of Section 404 of ERISA.
(xi) The Transactions contemplated by this Organization
Agreement do not invoke any change-in-control provision in any NV-Employee
Benefit Program.
(xii) NewVector and each Subsidiary of NewVector is in
compliance with the health care continuation provisions of Sections 162(k),
before amendment, and 4980B of the Code and the regulations thereunder with
respect to such requirements.
(xiii) Except as provided in the WMC Employee Agreement or
the PCS Par Employee Agreement, neither NewVector
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<PAGE> 36
nor any Subsidiary of NewVector has any liability or expects to incur any
liability with respect to any Employee Benefit Program to which neither
NewVector nor any Subsidiary of NewVector is a party, contributes or is
obligated to contribute.
(q) Labor Matters. Each of NewVector and each NewVector
Subsidiary has complied with all applicable laws and regulations in all
material respects relating to the employment of labor, including those related
to wages, hours, occupational health and safety, workers' compensation,
collective bargaining, unlawful discrimination, and the payment of Social
Security and similar taxes pertaining to its Domestic Cellular Business. To
the knowledge of USW, there are no threatened labor controversies, strikes or
work stoppages with any of the employees performing work in a Domestic Cellular
Business. Neither NewVector nor any Subsidiary of NewVector is a party to any
collective bargaining agreement, nor are any collective bargaining agreements
currently being negotiated with respect to the employees of NewVector or any
NewVector Subsidiary in its Domestic Cellular Business. Except as set forth in
SCHEDULE 2.1(i), there are no pending employment-related issues, including
without limitation governmental audits, disputes (including those listed in
SCHEDULE 2.1(q) hereto), litigation, labor controversies, strikes or work
stoppages with or regarding any of the employees performing work in the
Domestic Cellular Business that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on NewVector and its
Subsidiaries, taken as a whole. NewVector and each Subsidiary of NewVector
have properly verified the identity and authorization to work in the United
States and have properly completed and retained INS forms I-9 for all employees
where required by the Immigration Reform and Control Act of 1986 and related
statutes. All individuals who are performing or have performed services for
NewVector or any NewVector Subsidiary and are or were classified as
"independent contractors" for tax purposes qualify for such classification.
(r) Environmental Compliance and Liabilities.
(i) Except as set forth in SCHEDULE 2.1(r), USW has no
knowledge of any conditions that exist with respect to any Owned Property,
Leased Property or other property operated by NewVector, any Subsidiary of
NewVector or any USW Domestic Cellular Investment Entity that would be likely
to subject NewVector or any Subsidiary of NewVector to any liability or damages
(including, without limitation, actual, consequential, exemplary or punitive
damages), penalties, injunctive relief or cleanup costs under any Environmental
Law or that require or are likely to require cleanup, removal, remedial action
or other response by NewVector or any Subsidiary of NewVector pursuant to any
Environmental Law which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on NewVector and its Subsidiaries,
taken as a whole.
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(ii) Except as set forth in SCHEDULE 2.1(r), each of
NewVector and its Subsidiaries is in substantial compliance with all applicable
Environmental Laws, which compliance includes, without limitation, (A) the
possession by NewVector and its Subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof, (B) compliance with
notification, reporting, and registration provisions of applicable
Environmental Laws, and (C) compliance with all statutory and regulatory
standards under applicable Environmental Laws.
(iii) Neither NewVector nor any of its Subsidiaries is a
party to any litigation or administrative proceeding, nor, to the knowledge of
USW, is any litigation or administrative proceeding threatened against
NewVector or any of its Subsidiaries that asserts or alleges that NewVector or
any of its Subsidiaries or its or their predecessors violated or is violating
any Environmental Law or that NewVector or any of its Subsidiaries or its or
their predecessors is required to clean up, remove or take remedial or other
responsive action due to the use, storage, treatment, disposal, discharge,
leaking or release of any Substance of Concern. Except as set forth in
SCHEDULE 2.1(r), there are no claims under any Environmental Law pending
against NewVector or any of its Subsidiaries or against any Person whose
liability for any claim NewVector or any of its Subsidiaries has retained or
assumed either contractually or by operation of law, and neither NewVector nor
any of its Subsidiaries nor any of its or their predecessors, nor any part of
the Domestic Cellular Assets of NewVector or any of its Subsidiaries, is
subject to any judgment, decree, order or citation related to or arising out of
any Environmental Law, and neither NewVector nor any of its Subsidiaries has
been named or listed as a potentially responsible party by any governmental or
other entity in a matter arising under or relating to any Environmental Law.
Except as set forth in SCHEDULE 2.1(r), neither NewVector nor any of its
Subsidiaries has received any written communication from a Governmental Body
that alleges that NewVector or any of its Subsidiaries is not in full
compliance with the Environmental Laws. To the knowledge of USW, except as set
forth in SCHEDULE 2.1(r), no USW Domestic Cellular Investment Entity is a party
to any litigation or administrative proceeding, nor is any litigation or
administrative proceeding threatened against a USW Domestic Cellular Investment
Entity, arising under any Environmental Law which would likely have a Material
Adverse Effect, singly or in the aggregate, on the business, operations or
financial condition of NewVector and its Subsidiaries, taken as a whole, or
adversely affect the ability of USW to consummate the Transactions and perform
its obligations contemplated by this Organization Agreement and the Related
Agreements.
(iv) Except as set forth in SCHEDULE 2.1(r), there are no
past or present actions, activities, circumstances,
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conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Substance of Concern, that
could form the basis of any claim arising under Environmental Laws against
NewVector or any of its Subsidiaries or against any Person whose liability for
any claim arising under Environmental Laws NewVector or any of its Subsidiaries
has retained or assumed either contractually or by operation of law.
(v) USW will, upon request by ATI, provide ATI with true
and complete copies of all environmental assessments that have heretofore been
performed on all Owned Property or Leased Property operated by NewVector or any
of its Subsidiaries and of all notices or other materials listed in SCHEDULE
2.1(r).
(s) Other Liabilities. Except (i) as disclosed in SCHEDULE
2.1(s) or any other Schedule attached to this Organization Agreement, (ii) as
reflected on the Balance Sheets or otherwise referred to in the Financial
Statements (including footnotes to the Financial Statements), or (iii) incurred
in the ordinary course of business or otherwise permitted by this Organization
Agreement, there are no outstanding claims, liabilities or indebtedness of any
nature, secured or unsecured, contingent or absolute, matured or unmatured,
known or unknown, which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of
NewVector and its Subsidiaries, taken as a whole, or adversely affect the
ability of USW to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements.
(t) Insurance. USW's Domestic Cellular Assets and the conduct
of USW's Domestic Cellular Business are adequately self-insured by USW or
adequately insured (in the manner and to the extent customary for businesses
engaged in the same or similar business) by financially sound and reputable
insurers. Any such policies are, and each of the USW Parties will cause such
policies or renewals thereof to remain, in full force and effect.
(u) Finders; Investment Bankers. Neither USW nor any of its
Affiliates, nor any of their respective officers or directors, has employed any
broker, finder or investment banker or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the Transactions
contemplated by this Organization Agreement and the Related Agreements that
would be a liability of ATI, WMC, PCS Par or any of USW's Domestic Cellular
Assets, Domestic Cellular Subsidiaries or Domestic Cellular Investments.
2.2 Representations and Warranties of ATI. ATI hereby represents and
warrants to USW that each of the following statements is true and correct as of
the Effective Date and, except as otherwise expressly stated herein, will be
true and
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correct as of the Phase I Closing and the Phase II Closing, as if made on and
as of such dates.
(a) Corporate Organization.
(i) ATI is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted, to enter into this Organization
Agreement and the Related Agreements and to carry out the provisions of this
Organization Agreement and the Related Agreements and consummate the
Transactions contemplated hereby and thereby, except for the approval by the
board of directors of ATI of a certificate of designation with respect to the
preferred stock referred to in the Agreement of Exchange. ATI is duly
qualified and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary and where the failure to be so qualified has
or could reasonably be expected to have a Material Adverse Effect on ATI and
its Subsidiaries, taken as a whole.
(ii) All Domestic Cellular Assets currently owned,
directly or indirectly, in whole or in part, by ATI are held, owned or
operated, directly or indirectly, by the ATI Cellular Subsidiaries, except for
a 14.74% partnership interest in CMT Partners held by AirTouch Paging of
California. The ATI Cellular Subsidiaries are not engaged, directly or
indirectly, in the conduct or ownership of any business or activity other than
the Domestic Cellular Business.
(iii) Each of the ATI Cellular Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all requisite corporate power
and authority to own and operate its properties and to carry on its business as
now conducted. Each of the ATI Cellular Subsidiaries is duly qualified and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary and where the failure to be so qualified has or could
reasonably be expected to have a Material Adverse Effect on the ATI Cellular
Subsidiaries and their Subsidiaries, taken as a whole.
(iv) Each corporate Subsidiary of an ATI Cellular
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own and operate its property and to carry on
its business as now conducted. Each such Subsidiary is duly qualified and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary and
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where the failure to be so qualified has or could reasonably be expected to
have a Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole.
(v) Each partnership Subsidiary of an ATI Cellular
Subsidiary is a general or limited partnership duly organized and validly
existing in its state of organization and has all requisite partnership power
and authority to own and operate its properties and to carry on its business as
now conducted. Each such partnership Subsidiary is duly qualified in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified has or could reasonably be expected to
have a Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole.
(b) Capitalization: Ownership of Shares.
(i) SCHEDULE 2.2(b)(i) contains a true, current and
complete list of the authorized, issued and outstanding capital stock
(including the par or stated value thereof) of ATI, as of the Effective Date,
and of each ATI Cellular Subsidiary. All issued and outstanding shares of
capital stock of ATI and each ATI Cellular Subsidiary are duly authorized,
validly issued, fully paid, and non-assessable. ATI has good legal title to,
and beneficial ownership of, all shares of each ATI Cellular Subsidiary free
and clear of all Liens, restrictions, equities, options or claims whatsoever,
except as set forth in SCHEDULE 2.2(b)(i). ATI has full authority to transfer,
convey and deliver such shares free and clear of all Liens, restrictions,
equities, options and claims. Except for this Organization Agreement and the
Related Agreements, there are no outstanding subscriptions, options, warrants,
calls, rights, commitments, rights of exchange, plans, arrangements,
understandings or other agreements of any kind or character relating to or
providing for the issuance, sale, delivery or transfer of securities of any
class of ATI Cellular Subsidiary stock (including any right of conversion or
exchange under any outstanding security or other instrument) to any Person.
(ii) SCHEDULE 2.2(b)(ii) contains a true, current and,
complete list of (A) the name of each corporate Subsidiary of the ATI Cellular
Subsidiaries, (B) the state of incorporation of each corporate Subsidiary of
the ATI Cellular Subsidiaries, (C) the states where each Subsidiary is
qualified to do business, (D) the authorized, issued and outstanding capital
stock (including the par or stated value thereof) of each Subsidiary, and (E)
the number of shares and percentage of issued and outstanding capital stock of
each Subsidiary beneficially owned by each ATI Cellular Subsidiary. The
issued and outstanding shares of capital stock of each such Subsidiary are duly
authorized, validly issued, fully paid, and non-assessable. An ATI Cellular
Subsidiary or a Subsidiary of an
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ATI Cellular Subsidiary has good legal title to, and beneficial ownership of,
such shares free and clear of all Liens, restrictions, equities, options or
claims whatsoever, except as set forth on SCHEDULE 2.2(b)(ii). There are no
outstanding subscriptions, options, warrants, calls, rights, commitments,
rights of exchange, plans, arrangements, understandings or other agreements of
any kind or character relating to or providing for the issuance, sale, delivery
or transfer of securities of any class of stock of any corporate Subsidiary of
an ATI Cellular Subsidiary (including any right of conversion or exchange under
any outstanding security or other instrument) to any Person.
(iii) SCHEDULE 2.2(b)(iii) contains a true, current, and
complete list of (A) the name of each partnership Subsidiary of the ATI
Cellular Subsidiaries, (B) the state of organization of each Subsidiary, (C)
the states where each Subsidiary is qualified to do business, and (D) the
general and limited partnership interests in each Subsidiary beneficially owned
by each ATI Cellular Subsidiary. An ATI Cellular Subsidiary or a Subsidiary of
an ATI Cellular Subsidiary has good legal title to, and beneficial ownership
of, its partnership interest in each such Subsidiary. Except as set forth on
SCHEDULE 2.2(b)(iii) or in any Cellular Partnership Agreement for a partnership
listed in SCHEDULE 2.2(b)(iii), an ATI Cellular Subsidiary or a Subsidiary of
an ATI Cellular Subsidiary owns each such interest free and clear of all Liens,
restrictions, equities, options or claims whatsoever. Except as set forth on
SCHEDULE 2.2(b)(iii), there are no outstanding subscriptions, options, calls,
rights, commitments, rights of exchange, plans, arrangements, understandings or
other agreements of any kind or character relating to or providing for the
issuance, sale, delivery or transfer of partnership interests of any
partnership Subsidiary of an ATI Cellular Subsidiary (including any right of
conversion or exchange under any outstanding agreement or instrument) to any
Person. ATI has furnished to USW true and complete copies of all Cellular
Partnership Agreements for all partnerships listed on SCHEDULE 2.2(b)(iii).
(iv) SCHEDULE 2.2(b)(iv) contains a true, current, and
complete list of all Domestic Cellular Investments owned or held by each ATI
Party, including the Percentage Interest held in each Domestic Cellular
Investment Entity by such ATI Party as a general partner and/or as a limited
partner. Either an ATI Cellular Subsidiary or one of its Subsidiaries has good
legal title to, and beneficial ownership of, such interests. Except as set
forth on SCHEDULE 2.2(b)(iv) or in any Cellular Partnership Agreement for a
partnership listed on SCHEDULE 2.2(b)(iv), an ATI Cellular Subsidiary or one of
its Subsidiaries owns such interests free and clear of all Liens, encumbrances,
restrictions, equities, options or claims whatsoever. ATI has furnished to USW
true and complete copies of all certificates or articles of incorporation and
by-laws, partnership agreements or joint venture agreements for all
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Domestic Cellular Investment Entities listed on SCHEDULE 2.2(b)(iv).
(c) Authority. This Organization Agreement and the Related
Agreements and the consummation of the Transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action on the part of the ATI Parties, except for the approval by the board of
directors of ATI of a certificate of designation with respect to the preferred
stock referred to in the Agreement of Exchange. This Organization Agreement
has been duly executed and delivered by a duly authorized officer of ATI and
constitutes a valid and binding agreement of ATI, enforceable against ATI in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application that may affect the enforcement of creditors' rights generally and
by general equitable principles. In the event that ATI or any of the ATI
Cellular Subsidiaries shall change the state of its incorporation in any form
of transaction, this Organization Agreement and the Related Agreements and the
consummation of the Transactions contemplated hereby will have been duly
authorized by all necessary corporate or partnership action, and this
Organization Agreement will continue to be a valid and binding agreement of
ATI, enforceable against ATI in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general application that may affect the enforcement of
creditors' rights generally and by general equitable principles.
(d) Authorizations and Consents; No Violation.
(i) Except as disclosed on one of the Schedules referenced
in this SECTION 2.2(d), neither the execution and delivery of this Organization
Agreement nor the consummation of the Transactions contemplated by this
Organization Agreement and the Related Agreements will (A) conflict with, or
result in any breach or violation of, any provision of the certificates or
articles of incorporation or by-laws of any of the ATI Parties; (B) constitute,
with or without notice or the passage of time or both, a breach, violation or
default, create a Lien or give rise to any right of termination, modification,
cancellation, prepayment or acceleration under any order, writ, injunction,
decree, law, statute, rule or regulation, franchise, governmental permit or
license or any mortgage, indenture, lease, Material Contract, agreement or
other instrument of any ATI Party or to which any ATI Party or its respective
properties is subject, except for breaches, violations, defaults, Liens or
rights of termination, modification, cancellation, prepayment or acceleration
which would not, singly or in the aggregate, have a Material Adverse Effect on
the ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole, or
adversely affect the ability of ATI to consummate the Transactions and perform
its obligations contemplated by this Organization Agreement and the
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Related Agreements; (C) give rise to any option, right of first refusal or
similar right of any third party with respect to any interest in any ATI Party,
ATI Domestic Cellular Asset, ATI Domestic Cellular Subsidiary or any ATI
Domestic Cellular Investment; or (D) require any Consent or Authorization to
effectuate the Transactions contemplated by this Organization Agreement and the
Related Agreements.
(ii) SCHEDULE 2.2(d)(ii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
federal Governmental Body or court by any ATI Party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(iii) SCHEDULE 2.2(d)(iii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
state public utility commission or other state, county or local Governmental
Body by any ATI Party with respect to the consummation of the (A) Phase I
Transactions and (B) Phase II Transactions contemplated by this Organization
Agreement and the Related Agreements.
(iv) Except as set forth in any Cellular Partnership
Agreement, any Material Contract existing on the Effective Date (a copy of
which has been provided to USW prior to the Effective Date) or other agreement
referred to in SECTION 2.2(b)(iii) or 2.2(b)(iv) hereof or in SCHEDULE
2.2(d)(iv) hereto, no Consents are reasonably anticipated to be required to be
obtained pursuant to any partnership, joint venture or other similar agreement
or any Material Contract to which any ATI Party is a party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(e) Financial Statements.
(i) ATI has furnished to USW true and complete copies of
the unaudited consolidated balance sheets at December 31, 1992 and 1993
("BALANCE SHEETS"); consolidated income and cash flow statements of ATI's
Domestic Cellular Business for the fiscal years ended December 31, 1992, and
December 31, 1993; an unaudited balance sheet at May 31, 1994; and consolidated
income and cash flow statements for the five-month period ending May 31, 1994
(such Balance Sheets and income and cash flow statements are hereinafter
collectively referred to as "FINANCIAL STATEMENTS"), setting forth the
financial condition and results of operations of ATI's Domestic Cellular
Business as of the respective dates of the Financial Statements and for the
periods covered thereby. The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods specified, except as expressly noted
therein and
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except that the Financial Statements do not include footnotes. The Balance
Sheets fairly present the financial condition of ATI's Domestic Cellular
Business as of the dates thereof, except as expressly noted therein or as set
forth in SCHEDULE 2.2(e). The consolidated income and cash flow statements
fairly present the results of operations of ATI's Domestic Cellular Business
for the periods indicated, except as expressly noted therein or as set forth in
SCHEDULE 2.2(e). ATI agrees to use reasonable efforts to furnish to USW as
soon as they are available unaudited Balance Sheets as of May 31, 1994, for
each ATI Domestic Cellular Subsidiary and ATI Domestic Cellular Investment
Entity.
(ii) ATI covenants and agrees to use reasonable efforts to
furnish promptly to USW after the Effective Date historical financial
information for New Par for the periods, and containing the line items
(including as to customer information) that previously was furnished to USW
with respect to ATI's other Domestic Cellular Assets, Domestic Cellular
Subsidiaries, and Domestic Cellular Investments. ATI represents and warrants
that such historical financial information, when viewed in the aggregate, will
not be inconsistent in any material respect with the publicly available
financial information for New Par for the corresponding periods. In the event
that, after reviewing such information, USW determines that it believes ATI's
representation in the preceding sentence has been breached, USW must notify ATI
of such determination in writing promptly, and in no event later than 30 days
after the furnishing of the last items of such information. Notwithstanding
anything to the contrary elsewhere in this Organization Agreement, in the event
that no such notice is provided within such period, the representation and
warranty set forth in this SECTION 2.2(e)(ii) shall not survive beyond such
period.
(f) Absence of Other Changes. Except as contemplated by this
Organization Agreement or as set forth in SCHEDULE 2.2(f), from and after June
1, 1994, each of the ATI Parties has conducted its Domestic Cellular Business
in the ordinary and usual course and there has not been (i) any borrowing
outside the ordinary course of business or incurrence of any obligations other
than Permitted Liabilities or other liabilities incurred in the ordinary course
of business; (ii) any Lien imposed on any of the properties or assets of any of
the ATI Parties (other than Permitted Liens); or (iii) any increases in
compensation payable to officers and employees of any of the ATI Domestic
Cellular Subsidiaries or their Subsidiaries, which in the aggregate may be
expected to have a Material Adverse Effect on the ATI Domestic Cellular
Subsidiaries and their Subsidiaries, taken as a whole.
(g) Compliance with Laws. Each of the ATI Parties is in
compliance with all laws, statutes, ordinances, regulations, rules, judgments,
decrees, orders, and other requirements applicable to the operation of its
Domestic Cellular Business,
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except for any non-compliances which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the ATI
Cellular Subsidiaries and their Subsidiaries, taken as a whole, or to affect
adversely the ability of ATI to consummate the Transactions and perform its
obligations contemplated by this Organization Agreement and the Related
Agreements.
(h) MFJ. ATI acknowledges that USW is subject to the MFJ, CECO
and EO and must operate in conformance to their requirements and prohibitions,
including performance of the obligations as contemplated by this Organization
Agreement and the Related Agreements.
(i) Litigation. Except as disclosed on SCHEDULE 2.2(i), there
are no actions, suits, investigations or proceedings (adjudicatory, rulemaking
or otherwise) pending or, to the knowledge of ATI, threatened against any ATI
Party or, to the knowledge of ATI, pending or threatened against any ATI
Domestic Cellular Investment Entity, at law or in equity, before any court or
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a
whole, or to affect adversely the ability of ATI to consummate the Transactions
and perform its obligations as contemplated by this Organization Agreement and
the Related Agreements.
(j) Licenses. The ATI Parties and the ATI Domestic Cellular
Investment Entities have all material Licenses which are necessary to conduct
ATI's Domestic Cellular Business as it is presently conducted. Without
limitation of the foregoing, the ATI Parties and the ATI Domestic Cellular
Investment Entities hold the material Licenses identified on SCHEDULE 2.2(j),
and all such material Licenses are valid and in full force and effect. No ATI
Party has made any untrue statement of fact, or omitted to disclose any fact,
to any Governmental Body or taken or failed to take any action, which
misstatements or omissions, actions or failures to act, individually or in the
aggregate, subject or could reasonably be expected to subject any of the
material Licenses they hold to revocation or failure to renew. No event has
occurred with respect to any of the material Licenses held by an ATI Party or
by an ATI Domestic Cellular Investment Entity which permits, or after notice or
lapse of time or both would permit, revocation or termination thereof or would
result in any other material impairment of the rights of the holder of any of
the material Licenses. ATI has no reason to believe that any of the material
Licenses identified on SCHEDULE 2.2(j) is not likely to be renewed in the
ordinary course or that the holder of any such material License would not be
entitled to a renewal expectancy as such term is defined in 47 C.F.R. Section
22.941 or any successor provisions and associated FCC policies.
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(k) Taxes. The ATI Cellular Subsidiaries and their corporate
Subsidiaries have each (i) filed, within the times and in the manner prescribed
by law, and will continue to timely file through the Contribution Date all
Returns required to be filed by or with respect to each of them, (ii) paid all
Taxes shown to have become due pursuant to such Returns, and (iii) will
continue to pay all Taxes payable pursuant to such Returns for periods ending
on or before the Contribution Date. There are no Taxes of the ATI Cellular
Subsidiaries and their corporate Subsidiaries for which a notice of, or
assessment or demand for, payment has been received or which are otherwise due
and payable and the ATI Cellular Subsidiaries and their corporate Subsidiaries
will continue to pay such Taxes for periods ending on or before the
Contribution Date. Except as disclosed in SCHEDULE 2.2(k), no examination or
audit of any Tax Return of any ATI Cellular Subsidiary or any of their
corporate Subsidiaries is currently in progress, and there are no outstanding
agreements or waivers extending the statutory period of limitation applicable
to any Tax Return of any ATI Cellular Subsidiary or any of its corporate
Subsidiaries. Except as disclosed to USW on a revised and updated SCHEDULE
2.2(k) delivered by the Phase I Closing, complete copies of (i) the federal
Income Tax Returns of the ATI Cellular Subsidiaries and their corporate
Subsidiaries and (ii) state and local Income Tax Returns and other Tax Returns
of the ATI Cellular Subsidiaries and their corporate Subsidiaries for each of
the years ended December 31, 1989, 1990, 1991 and 1992 have been delivered or
made available to USW. ATI will deliver or make available, within 30 days of
filing, (i) the federal Income Tax Return of each of the ATI Cellular
Subsidiaries and their corporate Subsidiaries (due to be filed on or before
September 15, 1994) and (ii) state and local Income Tax Returns of each of the
ATI Cellular Subsidiaries and their corporate Subsidiaries (due to be filed on
or before October 15, 1994). Except as set forth on the revised and updated
SCHEDULE 2.2(k) to be delivered to USW by the Phase I Closing, (A) there is no
action, suit, proceeding, investigation, audit, claim or assessment pending or
proposed with respect to any Return, which action, suit, proceeding,
investigation, audit, claim or assessment relates to any of the ATI Cellular
Subsidiaries or their corporate Subsidiaries, (B) all amounts required to be
collected or withheld by any of the ATI Cellular Subsidiaries or their
corporate Subsidiaries with respect to Taxes have been duly collected or
withheld and any such amounts that are required to be remitted to any taxing
authority have been duly remitted, (C) no extension of time within which to
file any Return that relates to any of the ATI Cellular Subsidiaries or their
corporate Subsidiaries has been requested which Return has not since been
filed, (D) there are no tax rulings, requests for rulings, or closing
agreements relating to the ATI Cellular Subsidiaries or their corporate
Subsidiaries which could affect their liability for Taxes for any period after
the Phase I Closing, (E) all federal, state and local (x) Income Tax Returns
of each of the ATI Cellular Subsidiaries and their
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corporate Subsidiaries, and (y) consolidated, combined or unitary Income Tax
Returns, which include any of the ATI Cellular Subsidiaries or their corporate
Subsidiaries, with respect to taxable periods through the year ended December
31, 1989 have been examined and closed or are Returns with respect to which the
applicable statute of limitations has expired without extension or waiver, (F)
no power of attorney has been granted by ATI or any of the ATI Cellular
Subsidiaries or their corporate Subsidiaries with respect to any matter
relating to Taxes of the ATI Cellular Subsidiaries or their corporate
Subsidiaries which is currently in force, (G) neither ATI nor any corporate
Subsidiary thereof has filed a consent under section 341(f) of the Code or any
comparable state provision, and (H) there are no Liens for Taxes (other than
for current Taxes not yet due and payable) on the assets of any of the ATI
Cellular Subsidiaries or their corporate Subsidiaries. Except as set forth on
the revised and updated SCHEDULE 2.2(k) to be delivered to USW by the Phase I
Closing, each of the ATI Cellular Subsidiaries and their corporate Subsidiaries
has been an includable member of the affiliated group (within the meaning of
section 1504 of the Code) of which ATI is the parent corporation and has joined
in filing a consolidated return since the date on which each was incorporated
and will be an includable member of such affiliated group included in ATI's
consolidated return through the Contribution Date. Any Tax Sharing Arrangement
that may exist between an ATI Transferred Subsidiary, on the one hand, and ATI
or any Affiliate of ATI, on the other hand, shall terminate, and any
obligations to make payments under any such Tax Sharing Arrangement shall be
cancelled, as of the Contribution Date.
(l) Material Contracts and Related Party Agreements.
(i) SCHEDULE 2.2(l)(i) contains a true and complete list
of all Material Contracts (including Related Party Agreements, if applicable)
to which any ATI Party is a party as of the Effective Date.
(ii) Each contract listed in SCHEDULE 2.2(l)(i) is in full
force and effect on the Effective Date, and there exists no default or event,
occurrence, condition or act (including the consummation of the Transactions)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default thereunder by any ATI Party or
by any other party thereto which could reasonably be expected to result in a
Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole, or to affect adversely the ability of ATI to
consummate the Transactions and perform its obligations contemplated by this
Organization Agreement and the Related Agreements.
(iii) All Related Party Agreements to which any ATI Party
is a party have been entered into in the ordinary course of business and
contain terms no more and no less
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favorable to either party than would be the case in an arm's-length
transaction.
(m) Employment and Non-Competition Agreements. Except as set
forth in SCHEDULE 2.2(m), no ATI Cellular Subsidiary nor any Subsidiary of an
ATI Cellular Subsidiary is a party to any employment agreement or is a party to
or otherwise bound by any non-competition, non-solicitation or other similar
agreement relating to its Domestic Cellular Business.
(n) Assets.
(i) Each ATI Party has (A) good and marketable fee title
to all its Owned Property and (B) good and valid title to the leasehold estates
in all its Leased Property, in each case free and clear of all Liens other than
Permitted Liens. The Owned Property and the Leased Property of the ATI Parties
include all rights and properties necessary to the conduct of such parties'
Domestic Cellular Businesses in the manner in which they are presently
conducted.
(ii) There exists no default, or event which with the
passage of time or notice or both would constitute a default, by any ATI Party
with respect to any indebtedness, mortgage, pledge or other hypothecation, the
payment of which is secured by a security interest in all or part of any ATI
Party's Domestic Cellular Assets which could reasonably be expected to result
in a Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole, or to affect adversely the ability of ATI to
consummate the Transactions and perform its obligations contemplated by this
Organization Agreement and the Related Agreements. None of the ATI Parties'
Domestic Cellular Assets is subject to any Lien that would impair or prevent
the continued conduct of ATI's Domestic Cellular Business as it has been
conducted.
(iii) All of the buildings, structures, appurtenances, and
equipment used in ATI's Domestic Cellular Business are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and adequate and suitable for the purposes for which they are
presently being used, except for conditions which would not, singly or in the
aggregate, have a Material Adverse Effect on the ATI Cellular Subsidiaries and
their Subsidiaries, taken as a whole. None of such buildings, structures,
appurtenances or equipment, nor the operation or maintenance thereof, violates
in any material respect any restrictive covenant or any provision of any
federal, state or local law, ordinance, rule or regulation or encroaches on any
property owned by others. No condemnation proceeding is pending or, to the
knowledge of ATI, threatened which would preclude or impair the use of any such
property for the purposes for which it is currently used.
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(o) Intellectual Property. An ATI Party owns the entire right,
title and interest in and to all Intellectual Property (including Trademarks
and Trade Names) used in, and material to the conduct of, ATI's Domestic
Cellular Business. All such Intellectual Property is owned or used pursuant to
defensible licenses or other legal arrangements. There are no pending or, to
the knowledge of ATI, threatened proceedings or litigation or other adverse
claims affecting or relating to such Intellectual Property, nor to the
knowledge of ATI any reasonable basis upon which a claim may be asserted by or
against any ATI Party for infringement of any such Intellectual Property which
could reasonably be expected to have a Material Adverse Effect on the ATI
Parties, taken as a whole. All Intellectual Property used in, and material to
the conduct of, ATI's Domestic Cellular Business will be transferred or
licensed to WMC at the Phase I Closing, pursuant to one or more License
Agreements, and will be usable by WMC in the conduct of its Domestic Cellular
Business on the same terms as such Intellectual Property is currently being
used by the ATI Parties in the conduct of ATI's Domestic Cellular Business.
(p) Employee Benefit Programs.
(i) SCHEDULE 2.2(p)(i) sets forth a true and complete list
of all Employee Benefit Programs to which ATI, any ATI Cellular Subsidiary or
any Subsidiary thereof is a party or contributes or is currently obligated to
contribute ("ATI Employee Benefit Programs"). ATI has provided to USW a true
and complete list of all executives of ATI, the ATI Cellular Subsidiaries, and
the Subsidiaries thereof for whom individual agreements pertaining to Employee
Benefit Programs are under consideration by ATI, an ATI Cellular Subsidiary or
a Subsidiary thereof (such agreements, if and when entered into, to be
considered ATI Employee Benefit Programs for purposes of this Organization
Agreement).
(ii) ATI has provided, or will provide or make available
to USW prior to the Effective Date complete, accurate, and current copies of
each of the following:
(A) The text, including amendments, of each of
the ATI Employee Benefit Programs, to the extent reduced to writing;
(B) A written description of all material
elements of the ATI Employee Benefit Programs, to the extent not previously
reduced to writing;
(C) With respect to any ATI Employee Benefit
Program described Section 3(3) of ERISA that is required to prepare such a
document or make such a filing: (I) the most recent summary plan description,
as described in Section 102 of ERISA, (II) any summary of material
modifications that has been distributed to participants or filed with the U.S.
Department of
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Labor but that has not been incorporated into an updated summary plan
description furnished under Subparagraph (I) above, and (III) the annual
report, as described in Section 103 of ERISA or Section 6039D of the Code, as
applicable, for the most recent plan year for which an annual report has been
prepared, and any required actuarial and financial statements, opinions and
schedules;
(D) Where applicable, the actuarial reports
for the most recent three (3) reporting periods for which such a report has
been prepared for any Employee Benefit Program;
(E) The trust agreement or other funding
instrument for each ATI Employee Benefit Program which is funded;
(F) For each ATI Employee Benefit Program that
is intended to meet the qualification requirements of Section 401(a) of the
Code ("ATI Qualified Plan"), the most recent request for a determination
concerning the plan's qualification under Section 401(a) of the Code, as filed
with the IRS; and
(G) For each ATI Qualified plan, the most
recent determination concerning the plan's qualification under Section 401(a)
of the Code, as issued by the IRS.
(iii) Each ATI Employee Benefit Program is in compliance
with the applicable provisions of ERISA, the Code, and other federal or state
law, including all requirements under the Code and ERISA for filing reports
(which were true and correct in all material respects as of the date filed),
and benefits have been paid in accordance with the provisions of the ATI
Employee Benefit Program, except for such noncompliances and failures which, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a
whole.
(iv) Each ATI Qualified Plan has been determined by the
IRS to qualify under Section 401 of the Code, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the Code, and nothing has occurred that would cause the loss of such
qualification or tax-exempt status.
(v) Neither any ATI Cellular Subsidiary nor any Subsidiary
thereof is a party to, makes, is making, or is obligated to make contributions
or has made, or been obligated to make, contributions at any time during the
immediately preceding period covering at least five (5) plan years to a
multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA.
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(vi) Neither any ATI Cellular Subsidiary nor any
Subsidiary thereof expects to incur any liability under Title IV of ERISA
(other than premiums due and not delinquent under Section 4007 of ERISA) with
respect to any ATI Employee Benefit Program.
(vii) Except as set forth in SCHEDULE 2.2(p)(vii), none of
the ATI Qualified Plans subject to Title IV of ERISA has any unfunded pension
liability. For purposes of this SECTION 2.2(p)(vii), an ATI Qualified Plan has
an unfunded pension liability if the plan is subject to Section 412(m) of the
Code and the plan's benefit liabilities under Section 4001(a)(16) of ERISA
exceed the current value of the plans's assets, determined in accordance with
the assumptions used by the ATI Qualified Plan's actuaries for funding the plan
pursuant to Section 412 of the Code for the applicable plan year. Neither any
ATI Cellular Subsidiary nor any Subsidiary thereof has transferred any unfunded
pension liability outside of the ERISA Affiliates or otherwise has engaged in a
transaction subject to Section 4069 of ERISA.
(viii) All contributions, premiums or other payments due
from any ATI Cellular Subsidiary or any Subsidiary thereof to, or under, any
ATI Employee Benefit Program have been fully paid as required by law or by the
terms of any such Employee Benefit Program; all contributions, premiums or
other payments due from any ATI Cellular Subsidiary or any Subsidiary thereof
to, or under, any ATI Employee Benefit Program have been adequately provided
for on the books and financial statements of the applicable ATI Cellular
Subsidiary and/or the applicable Subsidiary thereof; and no accumulated funding
deficiency, as defined in Section 302 of ERISA and Section 412(m) of the Code,
whether or not waived, exists with respect to an ATI Employee Benefit Program.
(ix) There are no pending or, to the knowledge of ATI,
threatened claims, actions or lawsuits, other than routine claims for benefits
in the ordinary course, asserted or instituted against (A) any ATI Employee
Benefit Program or (B) any fiduciary with respect to any ATI Employee Benefit
Program for which an ATI Cellular Subsidiary or any Subsidiary thereof may be
directly or indirectly liable, through indemnification obligations or
otherwise.
(x) Within the six-year period ending on the date of
reference, neither any ATI Cellular Subsidiary nor any Subsidiary thereof has
engaged, directly or indirectly, in (A) any nonexempt prohibited transaction
(as defined in Section 4975 of the Code or Section 406 of ERISA) in connection
with any Employee Benefit Program that has a reasonable likelihood of having a
Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole, or (B) any act or omission constituting a
violation of Section 404 of ERISA.
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(xi) The Transactions contemplated by this Organization
Agreement do not invoke any change-in-control provision in any ATI Employee
Benefit Program.
(xii) Each ATI Cellular Subsidiary and each Subsidiary
thereof is in compliance with the health care continuation provisions of
Sections 162(k), before amendment, and 4980B of the Code and the regulations
thereunder with respect to such requirements.
(xiii) Except as provided in the WMC Employee Agreement or
the PCS Par Employee Agreement, neither any ATI Cellular Subsidiary nor any
Subsidiary thereof has any liability or expects to incur any liability with
respect to any Employee Benefit Program to which neither an ATI Cellular
Subsidiary nor any Subsidiary thereof is a party, contributes or is obligated
to contribute.
(xiv) None of WMC, PCS Par or the USW Parties, nor any
successors thereto, has any existing or contingent liability with respect to
any Employee Benefit Programs maintained or contributed to by the "Telesis
Group" (as the term is defined in that certain Separation Agreement between
Pacific Telesis Group and PacTel Corporation dated October 7, 1993).
(q) Labor Matters. Each of the ATI Cellular Subsidiaries and
their Subsidiaries has complied with all applicable laws and regulations in all
material respects relating to the employment of labor, including those related
to wages, hours, occupational health and safety, worker's compensation,
collective bargaining, unlawful discrimination, and the payment of Social
Security and similar taxes pertaining to their Domestic Cellular Business. To
the knowledge of ATI, there are no threatened labor controversies, strikes or
work stoppages with any of the employees performing work in a Domestic Cellular
Business. No ATI Cellular Subsidiary nor any of its Subsidiaries is a party to
any collective bargaining agreement, nor are any collective bargaining
agreements currently being negotiated with respect to the employees of the ATI
Cellular Subsidiaries and their Subsidiaries in their Domestic Cellular
Business. Except as set forth in SCHEDULE 2.2(i), there are no pending
employment-related issues, including without limitation governmental audits,
disputes (including those listed in SCHEDULE 2.2(q) hereto), litigation, labor
controversies, strikes or work stoppages with or regarding any of the employees
performing work in the Domestic Cellular Business that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
the ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole. Each
ATI Cellular Subsidiary and each Subsidiary thereof has properly verified the
identity and authorization to work in the United States and has properly
completed and retained INS forms I-9 for all employees required by the
Immigration Reform and Control Act of 1986 and related statutes. All
individuals
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who are performing or have performed services for the ATI Cellular Subsidiaries
and their Subsidiaries and are or were classified as "independent contractors"
for tax purposes qualify for such classification.
(r) Environmental Compliance and Liabilities.
(i) Except as set forth in SCHEDULE 2.2(r), ATI has no
knowledge of any conditions that exist with respect to any Owned Property,
Leased Property or other property operated by any ATI Cellular Subsidiary, any
Subsidiaries of an ATI Cellular Subsidiary, any ATI Domestic Cellular
Subsidiary or any ATI Domestic Cellular Investment Entity that would be likely
to subject such ATI Cellular Subsidiary or any of its Subsidiaries to any
liability or damages (including, without limitation, actual, consequential,
exemplary or punitive damages), penalties, injunctive relief or cleanup costs
under any Environmental Law or that require or are likely to require cleanup,
removal, remedial action or other response by any ATI Cellular Subsidiary or
any of its Subsidiaries pursuant to any Environmental Law which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a
whole.
(ii) Except as set forth in SCHEDULE 2.2(r), each of the
ATI Cellular Subsidiaries and their Subsidiaries is in substantial compliance
with all applicable Environmental Laws, which compliance includes, without
limitation, (A) the possession by the ATI Cellular Subsidiaries and their
Subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, (B) compliance with notification, reporting, and
registration provisions of applicable Environmental Laws, and (C) compliance
with all statutory and regulatory standards under applicable Environmental
Laws.
(iii) Neither any ATI Cellular Subsidiary nor any of its
Subsidiaries is a party to any litigation or administrative proceeding, nor, to
the knowledge of ATI, is any litigation or administrative proceeding threatened
against any ATI Cellular Subsidiary or any of its Subsidiaries that asserts or
alleges that such ATI Cellular Subsidiary or any of its Subsidiaries or any
predecessor of any of them violated or is violating any Environmental Law or
that such ATI Cellular Subsidiary or any of its Subsidiaries or any predecessor
of any of them is required to clean up, remove or take remedial or other
responsive action due to the use, storage, treatment, disposal, discharge,
leaking or release of any Substance of Concern. Except as set forth in
SCHEDULE 2.2(r), there are no claims under any Environmental Law pending
against any ATI Cellular Subsidiary or any of its Subsidiaries or against any
Person whose liability for any claim any ATI Cellular Subsidiary
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or any of its Subsidiaries has retained or assumed either contractually or by
operation of law, and neither any ATI Cellular Subsidiary nor any of its
Subsidiaries nor any predecessor of any of them, nor any part of the Domestic
Cellular Assets of any ATI Cellular Subsidiary or any of its Subsidiaries is
subject to any judgment, decree, order or citation related to or arising out of
any Environmental Law, and no ATI Cellular Subsidiary nor any of its
Subsidiaries has been named or listed as a potentially responsible party by any
governmental or other entity in a matter arising under or relating to any
Environmental Law. Except as set forth in SCHEDULE 2.2(r), no ATI Cellular
Subsidiary nor any of its Subsidiaries has received any written communication
from a Governmental Body that alleges that such ATI Cellular Subsidiary or any
of its Subsidiaries is not in full compliance with the Environmental Laws. To
the knowledge of ATI, except as set forth in SCHEDULE 2.2(r), no ATI Domestic
Cellular Investment Entity is a party to any litigation or administrative
proceeding, nor is any litigation or administrative proceeding threatened
against an ATI Domestic Cellular Investment Entity arising under any
Environmental Law which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of the ATI
Domestic Cellular Subsidiaries and their Subsidiaries, taken as a whole, or
adversely affect the ability of ATI to consummate the Transactions and perform
its obligations contemplated by this Organization Agreement and the Related
Agreements.
(iv) Except as set forth in SCHEDULE 2.2(r), there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Substance of Concern, that could form the basis of
any claim arising under Environmental Laws against any ATI Cellular Subsidiary
or any of its Subsidiaries or against any Person whose liability for any claim
arising under Environmental Laws any ATI Cellular Subsidiary or any of its
Subsidiaries has retained or assumed either contractually or by operation of
law.
(v) ATI will, upon request by USW, provide USW with true
and complete copies of all environmental assessments that have heretofore been
performed on all Owned Property or Leased Property operated by any ATI Cellular
Subsidiary or any of its Subsidiaries and of all notices or other materials
listed in SCHEDULE 2.2(r).
(s) Other Liabilities. Except (i) as disclosed in SCHEDULE
2.2(s) or any other Schedule attached to this Organization Agreement, (ii) as
reflected on the Balance Sheets or otherwise referred to in the Financial
Statements (including footnotes to the Financial Statements), or (iii) incurred
in the ordinary course of business or otherwise permitted by this Organization
Agreement, there are no outstanding claims, liabilities or indebtedness of any
nature, secured or unsecured,
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contingent or absolute, matured or unmatured, known or unknown, which would
likely have a Material Adverse Effect, singly or in the aggregate, on the
business, operations or financial condition of the ATI Cellular Subsidiaries
and their Subsidiaries, taken as a whole, or adversely affect the ability of
ATI to consummate the Transactions and perform its obligations contemplated by
this Organization Agreement and the Related Agreements.
(t) Insurance. ATI's Domestic Cellular Assets and the conduct
of ATI's Domestic Cellular Business are adequately self-insured by ATI or
adequately insured (in the manner and to the extent customary for businesses
engaged in the same or similar business) by financially sound and reputable
insurers. Any such policies are, and each of the ATI Parties will cause such
policies or renewals thereof to remain, in full force and effect.
(u) Finders; Investment Bankers. Neither ATI nor any of its
Affiliates, nor any of their respective officers or directors, has employed any
broker, finder or investment banker or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the Transactions
contemplated by this Organization Agreement and the Related Agreements that
would be a liability of USW, WMC, PCS Par or any of ATI's Domestic Cellular
Assets, Domestic Cellular Subsidiaries or Domestic Cellular Investments.
(v) Amendment to Rights Plan. ATI has amended its Rights
Agreement dated as of July 22, 1993 (the "Rights Agreement") so that USW and
its Affiliates shall not be deemed to be "Acquiring Persons" in connection with
their becoming "Beneficial Owners" of "Common Shares" (as such terms are
defined in the Rights Agreement) pursuant to any of the Related Agreements.
ATI has furnished to USW a true and correct copy of such Rights Agreement, as
so amended.
ARTICLE 3
COVENANTS
3.1 Covenants of USW. From and after the Effective Date, except as
otherwise expressly stated herein, USW covenants and agrees as follows:
(a) Effectuation of this Agreement. USW will use reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to carry out all of its
obligations under this Organization Agreement and the Related Agreements and to
consummate and make effective the Transactions contemplated by this
Organization Agreement and the Related Agreements, including without
limitation:
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(i) Promptly to make all applications and filings (all of
which shall be made no later than forty-five (45) days after the Effective
Date) and to use reasonable efforts to obtain all Authorizations and Consents
required to be obtained by the USW Parties on or before the Phase I Closing;
(ii) Promptly, and in any event by the earlier of (A)
forty-five (45) days after notice by either Party that the Phase II Closing is
likely to occur within one hundred eighty (180) days, but for receipt of the
Authorizations described in SCHEDULES 2.1(d)(iv)(A), 2.1(d)(iv)(B),
2.2(d)(iv)(A), and 2.2(d)(iv)(B) hereto, and (B) the third anniversary of the
Effective Date, to make all applications and filings and to use reasonable
efforts to obtain all other Authorizations and Consents required to be obtained
by the USW Parties on or before the Phase II Closing to enable the Parties to
consummate the Phase II Domestic Cellular Transactions and, if applicable, to
cause the PCS Contribution Closing to occur, at the earliest practicable time,
including without limitation to use reasonable efforts to be in a position to
contribute all of the USW Phase II Assets to WMC at the Phase II Closing or as
soon thereafter as possible;
(iii) In the event any changes are required in order to
facilitate obtaining the Authorizations and Consents required for the
Transactions contemplated by this Organization Agreement and the Related
Agreements, to take reasonable steps necessary to accommodate such changes to
the extent they would not materially adversely affect the Parties' rights or
obligations hereunder; provided that in any such event, USW and ATI shall
negotiate in good faith to compensate the other appropriately to the extent
adversely affected by such changes;
(iv) Subject to any applicable fiduciary duties, to use
reasonable efforts to cause USW's Domestic Cellular Subsidiaries and USW's
Domestic Cellular Investment Entities to execute and deliver License Agreements
at the Phase I Closing;
(v) Prior to the Phase II Closing, to use reasonable
efforts to effect such internal restructuring as may be necessary to contribute
the USW Phase II Assets to WMC in the form of direct ownership of Domestic
Cellular Assets or partnership interests rather than shares of capital stock of
corporations;
(vi) Promptly to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the Transactions contemplated by
this Organization Agreement and the Related Agreements on the terms and
conditions set forth herein as soon as reasonably practicable; and
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(vii) In the event any claim, action, suit, investigation
or other proceeding by any Governmental Body or other Person is commenced which
questions the validity or legality of any of the Transactions, and any
injunction or other order is issued in any such proceeding, to use reasonable
efforts to have such injunction or other order dissolved, and to cooperate with
ATI reasonably regarding the defense of such proceedings and the removal of any
other impediment to the consummation of the Transactions.
(b) Conduct of Business. Except as contemplated by this
Organization Agreement and the Related Agreements, USW shall, and shall cause
the other USW Parties to, use reasonable efforts to operate USW's Domestic
Cellular Business in all respects prior to the Phase II Closing in the ordinary
course and consistent with past practice (except as expressly authorized by
this Organization Agreement and the Related Agreements), in a manner not
inconsistent with the Approved Business Plan, and with the objective that the
goodwill and value of USW's Domestic Cellular Business shall be maximized,
including without limitation, by maintaining USW's Domestic Cellular Assets in
good condition, maintaining their material Licenses in good standing, managing
their officers and employees effectively, and preserving and protecting their
material relationships with customers, suppliers and other third parties;
provided, however, that nothing contained in this SECTION 3.1(b) shall apply to
the conduct of any Domestic Cellular Business conducted by Turcell, L.P., a
Delaware limited partnership, in the Tucson, Arizona MSA prior to the
divestiture of the Tucson Cellular Interest by AirTouch Cellular of Arizona,
which shall be operated until such time in the ordinary course by Turcell,
L.P.; and provided further that nothing contained in this SECTION 3.1(b) shall
apply to the conduct of the San Diego Cellular Property, which shall be
operated prior to its divestiture in the ordinary course by U S WEST Cellular
of California.
(c) Reporting. For the period from the Effective Date to the
Phase II Closing, USW shall deliver to ATI and WMC monthly (or less frequent,
at the direction of the WMC Partnership Committee, but no less frequent than
quarterly) reports consisting of such financial information as shall be
directed by the WMC Partnership Committee prepared by or under the supervision
of the principal financial officer of NewVector, in a form specified by WMC,
sufficient to show all transfers of cash or other assets between or among any
of the USW Parties, including, without limitation, all transactions governed by
the methodology adopted pursuant to Article 4 of this Organization Agreement.
From and after the Effective Date, USW covenants and agrees to provide prompt
written notice to ATI describing in reasonable detail any facts or
circumstances that have resulted in any representation or warranty made by USW
in SECTION 2.1 hereof no longer being true and correct in any material respect
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or any failure of a USW Party to comply with any material covenant contained
herein.
(d) No Changes. Except as otherwise permitted in this
Organization Agreement or in an Approved Business Plan, until the Phase II
Closing, USW shall cause NewVector and its Subsidiaries not to:
(i) (A) Grant any material increases in the compensation
of any officers or employees engaged in USW's Domestic Cellular Business,
except in the ordinary course of business consistent with past practice, (B)
pay or agree to pay any material employee benefit not required or contemplated
by the terms of the NV-Employee Benefit Programs in effect or identified to ATI
on the Effective Date, except as those terms may be modified or new Employee
Benefit Programs may be adopted in the ordinary course of business consistent
with past practice, (C) enter into any new, or materially amend any existing,
employment agreement with any such officer or employee engaged in USW's
Domestic Cellular Business, except for employment agreements with new employees
entered into in the ordinary course of business consistent with past practice
and NV-Employee Benefit Programs identified to ATI before the Effective Date,
(D) except as may be required to comply with applicable law, adopt or amend in
any material respect any collective bargaining agreement relating to any
employee engaged in USW's Domestic Cellular Business, (E) enter into any new,
or materially amend any existing, severance agreement with any officer or
employee engaged in USW's Domestic Cellular Business except for NV-Employee
Benefit Programs identified to ATI before the Effective Date, or (F) become
obligated under any new Employee Benefit Program that was not in existence as
of the Effective Date, or amend any NV-Employee Benefit Program in existence as
of the Effective Date if such amendment would have the effect of enhancing or
accelerating any benefits thereunder, except for NV-Employee Benefit Programs
identified to ATI before the Effective Date and for new programs or amendments
that (I) may be required to comply with applicable law or (II) taken together
with other actions involving Employee Benefit Programs, are in the ordinary
course of business and consistent with past practice and do not have a Material
Adverse Effect on NewVector and its Subsidiaries, taken as a whole.
(ii) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization, except in accordance with SECTION 3.1(a)(v) of this
Organization Agreement; provided, however, that in the event of any such
merger, reorganization or restructuring, the certificate of incorporation,
by-laws or other organizational documents of the successor shall be the same as
the certificate of incorporation, by-laws or other organizational documents of
the predecessor in effect on the Effective Date, to the extent legally
permissible.
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(iii) Adopt any amendments to its certificate of
incorporation, by-laws or partnership agreements or alter through merger,
liquidation, reorganization, restructuring or in any other fashion its
corporate or partnership structure or ownership, except in accordance with
SECTION 3.1(a)(v) of this Organization Agreement; provided, however, that in
the event of any such merger, reorganization or restructuring, the certificate
of incorporation, by-laws or other organizational documents of the successor
shall be the same as the certificate of incorporation, by-laws or other
organizational documents of the predecessor in effect on the Effective Date, to
the extent legally permissible.
(iv) Authorize, declare or pay any dividend or other
distribution to, issue any capital stock or partnership interest to, or cause
or permit any investment to be made in, USW by NewVector or any NewVector
Subsidiary, except in accordance with the methodology adopted pursuant to
Article 4 of this Organization Agreement or any Approved Business Plan.
(v) Incur any indebtedness or liabilities other than
Permitted Liabilities or contractual obligations incurred in the ordinary
course of business (other than Material Contracts) or pursuant to SECTION
3.1(d)(vii) hereof; except in the ordinary course consistent with past
practice, make any advances or capital contributions to any other Person; make
any loan to USW, except in accordance with the methodology adopted pursuant to
Article 4 of this Organization Agreement; or consent to the incurrence of any
indebtedness or call for capital contributions by any USW Domestic Cellular
Subsidiary or USW Domestic Cellular Investment Entity;
(vi) Except as provided in SECTION 3.1(f) of this
Organization Agreement or in the WMC Partnership Agreement, sell, assign,
pledge, encumber (except for Permitted Liens) or otherwise transfer any direct
or indirect interest in any material USW Domestic Cellular Asset, NewVector,
any NewVector Subsidiary, any USW Domestic Cellular Subsidiary, any USW
Domestic Cellular Investment, without the prior written consent of the WMC
Partnership Committee;
(vii) Enter into, assume, terminate or materially alter
any Material Contract or Related Party Agreement, except in the ordinary course
of business or with the prior written consent of the WMC Partnership Committee;
(viii) Enter into or consent to any modification or
amendment of any partnership or other agreement or to any sale, exchange or
transfer of assets or other action that would have the effect of delaying the
time that any USW Phase II Asset could be contributed to WMC or changing the
character or diminishing the value of any USW Phase II Asset; or
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(ix) Take any action inconsistent with the consummation of
the Transactions as contemplated by this Organization Agreement and the Related
Agreements.
(e) Access and Information. To the extent permitted by law and
subject to any restrictions contained in Material Contracts and the USW
Cellular Partnership Agreements, USW shall afford to ATI such access, during
normal business hours, to books, records (including, without limitation, tax
returns and, if consented to by the independent auditors, work papers of such
auditors), plant and personnel, and to such other information of USW relating
to USW's Domestic Cellular Business and of NewVector and its Subsidiaries
(except information relating to the San Diego Cellular Property and Turcell,
L.P. and its Domestic Cellular Business before the Tucson Cellular Interest is
divested by AirTouch Cellular of Arizona) as ATI shall reasonably request,
including, without limitation, all information relating to the transactions
governed by the methodology adopted pursuant to Article 4 of this Agreement.
USW agrees to treat, and will cause its respective accountants, counsel and
other representatives to treat, confidentially all nonpublic information
concerning the ATI Parties furnished or made available to it in connection with
the Transactions contemplated by this Organization Agreement and the Related
Agreements, subject to the requirements of law and the provisions of this
Organization Agreement and the Related Agreements. If this Organization
Agreement is terminated prior to the Phase I Closing, USW will deliver to ATI
all documents, work papers and other material (including copies) obtained by it
in connection herewith, whether obtained before or after the Effective Date.
(f) Divestiture of San Diego Cellular Property. USW agrees to
use reasonable efforts to cause NewVector to divest itself of the San Diego
Cellular Property on or before the Phase I Closing or otherwise to obtain any
Authorizations required to permit the Phase I Transactions to occur prior to a
divestiture of the San Diego Cellular Property, subject to the following
conditions:
(i) Prior to the sale or exchange of the San Diego
Cellular Property, USW shall obtain a fairness opinion addressed to USW and ATI
from a qualified investment banking firm of recognized national standing with
expertise applicable to valuation of assets of the type being evaluated to the
effect that the proposed sale or exchange of the San Diego Cellular Property is
fair to NewVector from a financial point of view, without regard to SECTION
3.1(f)(iv) hereof.
(ii) In the event that USW is unable to obtain the
fairness opinion required by SECTION 3.1.(f)(ii) hereof, USW shall not
consummate, or cause to be consummated, the proposed sale or exchange without
first obtaining an appraisal of the Fair Market Value of the San Diego Cellular
Property conducted
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in accordance with the procedures set forth in SECTION 4.10 of the WMC
Partnership Agreement and addressed to USW and ATI.
(iii) On the later of (A) the Phase II Closing or (B) the
date of divestiture of the San Diego Cellular Property, USW shall make a
capital contribution to WMC equal to the sum of: (y) the consideration (cash
and/or non-cash), received from the divestiture of the San Diego Cellular
Property net of tax liabilities and reasonable closing costs in connection with
such divestiture; and (z) if an appraisal was conducted in accordance with
SECTION 3.1(f)(ii), cash in an amount equal to fifty percent (50%) of the
difference, if any, between the Fair Market Value of the San Diego Cellular
Property and the consideration received from its divestiture (before taking
account of any closing costs or taxes resulting therefrom), which cash amounts
shall be held separate by USW in a manner reasonably acceptable to USW and WMC
prior to the date of contribution to WMC.
(iv) USW shall be responsible for making capital
contributions to WMC equal to fifty percent (50%) of all tax liabilities
(exclusive of penalties or interest) arising out of the divestiture of the San
Diego Cellular Property, and USW shall be solely responsible for the payment of
any tax-related penalties and interest. Promptly after closing of a
transaction(s) resulting in the divestiture of the San Diego Cellular Property,
USW shall provide to ATI and WMC a written statement of the amount of the
respective capital contributions to be paid to WMC by USW and ATI pursuant to
this SECTION 3.1(f)(iv) and SECTION 3.2(h), and USW and ATI shall make such
capital contributions to WMC at the same time as the capital contributions
referred to in clause (iii) above.
(v) If and when required or advisable to avoid or mitigate
any non-compliance with the MFJ, CECO or EO or any law or regulation of any
Governmental Body or to obtain any necessary Authorizations, USW agrees to
place its San Diego Cellular Property in trust pending divestiture on such
terms as shall be approved by the Governmental Bodies having jurisdiction
thereof.
(vi) From and after the date of consummation of the
exchange, if any, of the San Diego Cellular Property for another property or
interest, such property or interest shall be treated for all purposes of this
Organization Agreement as a USW Phase II Asset and a USW Domestic Cellular
Asset, USW Domestic Cellular Subsidiary or USW Domestic Cellular Investment, as
the case may be.
(g) Operation of Certain Assets. If and to the extent that
USW, despite its reasonable efforts, is unable to contribute any USW Phase II
Assets to WMC at the Phase II Closing in accordance with SECTION 5.3(b)(ii) of
this Organization Agreement, USW covenants and agrees to continue to
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make reasonable efforts to make such contribution thereafter during Phase II,
to the maximum extent possible without violating the MFJ, CECO, EO or any law,
rule or regulation of any Governmental Body having jurisdiction over WMC or
either Party. The representations and warranties made by USW with respect to
each such Beneficial Phase II Asset in SECTION 2.1 hereof shall remain true and
correct in all material respects on the date such Beneficial Phase II Asset
shall be contributed to WMC, and USW shall comply with all covenants contained
herein with respect to the Beneficial Phase II Assets until such Beneficial
Phase II Assets are contributed to WMC.
(h) Tucson Cellular Interest. USW covenants and agrees to make
a capital contribution to WMC, within ten (10) Business Days of notice from ATI
of the amount, equal to (i) fifty percent (50%) of the difference, if any,
between the Fair Market Value of the Tucson Cellular Interest and the
consideration received by ATI or its Affiliate from its divestiture (before
taking account of any closing costs or taxes resulting therefrom), if an
appraisal is required to be obtained pursuant to SECTION 3.2(f)(iii) hereof;
and (ii) fifty percent (50%) of all tax liabilities (exclusive of penalties or
interest) arising out of the divestiture of the Tucson Cellular Interest.
3.2 Covenants of ATI. From and after the Effective Date, except as
otherwise expressly stated herein, ATI covenants and agrees as follows:
(a) Effectuation of this Agreement. ATI will use reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to carry out all of its
obligations under this Organization Agreement and the Related Agreements and to
consummate and make effective the Transactions contemplated by this
Organization Agreement and the Related Agreements, including without
limitation:
(i) Promptly to make all applications and filings (all of
which shall be made no later than forty-five (45) days after the Effective
Date) and to use reasonable efforts to obtain all Authorizations and Consents
required to be obtained by the ATI Parties on or before the Phase I Closing;
(ii) Promptly, and in any event by the earlier of (A)
forty-five (45) days after notice by either Party that the Phase II Closing is
likely to occur within one hundred eighty (180) days, but for receipt of the
Authorizations described in SCHEDULES 2.1(d)(iv)(A), 2.1(d)(iv)(B),
2.2(d)(iv)(A), and 2.2(d)(iv)(B) hereto, and (B) the third anniversary of the
Effective Date, to make all applications and filings and to use reasonable
efforts to obtain all other Authorizations and Consents required to be obtained
by the ATI Parties on or before the Phase II Closing to enable the Parties
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to consummate the Phase II Domestic Cellular Transactions and, if applicable,
to cause the PCS Contribution Closing to occur, at the earliest practicable
time, including without limitation to use reasonable efforts to be in a
position to contribute all of the ATI Phase II Assets to WMC at the Phase II
Closing or as soon thereafter as possible;
(iii) In the event any changes are required in order to
facilitate obtaining the Authorizations and Consents required for the
Transactions contemplated by this Organization Agreement and the Related
Agreements, to take reasonable steps necessary to accommodate such changes to
the extent they would not materially adversely affect the Parties' rights or
obligations hereunder; provided that in any such event, USW and ATI shall
negotiate in good faith to compensate the other appropriately to the extent
adversely affected by such changes;
(iv) Subject to any applicable fiduciary duties, to use
reasonable efforts to cause ATI's Domestic Cellular Subsidiaries and ATI's
Domestic Cellular Investment Entities to execute and deliver License Agreements
at the Phase I Closing;
(v) Prior to the Phase II Closing, to use reasonable
efforts to effect such internal restructuring as may be necessary to contribute
the ATI Phase II Assets to WMC in the form of direct ownership of Domestic
Cellular Assets or partnership interests rather than shares of capital stock of
corporations;
(vi) Promptly to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the Transactions contemplated by
this Organization Agreement and the Related Agreements on the terms and
conditions set forth herein as soon as reasonably practicable;
(vii) In the event any claim, action, suit, investigation
or other proceeding by any Governmental Body or other Person is commenced which
questions the validity or legality of any of the Transactions and an injunction
or other order is issued in any such proceeding, to use reasonable efforts to
have such injunction or other order dissolved, and to cooperate with USW
reasonably regarding the defense of such proceedings and the removal of any
other impediment to the consummation of the Transactions; and
(viii) To cooperate with, and use reasonable efforts to
assist, USW in obtaining Partial MFJ Relief.
(b) Conduct of Business. Except as contemplated by this
Organization Agreement and the Related Agreements, ATI shall, and shall cause
the other ATI Parties to, use reasonable efforts to operate ATI's Domestic
Cellular Business in all
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respects prior to the Phase II Closing in the ordinary course and consistent
with past practice (except as expressly authorized by this Organization
Agreement and the Related Agreements), in a manner not inconsistent with the
Approved Business Plan, and with the objective that the goodwill and value of
ATI's Domestic Cellular Business shall be maximized, including without
limitation, by maintaining ATI's Domestic Cellular Assets in good condition,
maintaining their material Licenses in good standing, managing their officers
and employees effectively, and preserving and protecting their relationships
with customers, suppliers and other third parties; provided, however, that
nothing contained in this SECTION 3.2(b) shall apply to the conduct of (i) the
Tucson Cellular Interest prior to its divestiture or (ii) the Domestic Cellular
Business conducted by any ATI Party in San Diego, California, prior to the
divestiture of the San Diego Cellular Property by NewVector, each of which
shall be operated until such times in the ordinary course and by its respective
owner.
(c) Reporting. For the period from the Effective Date to the
Phase II Closing, ATI shall deliver to USW and WMC monthly (or less frequent,
at the direction of the WMC Partnership Committee, but not less frequent than
quarterly) reports consisting of such financial information as shall be
directed by the WMC Partnership Committee prepared by or under the supervision
of the principal financial officer of the ATI Cellular Subsidiaries, in a form
specified by WMC, sufficient to show all transfers of cash or other assets
between or among any of the ATI Parties, including, without limitation, all
transactions governed by the methodology pursuant to Article 4 of this
Organization Agreement. From and after the Effective Date, ATI covenants and
agrees to provide prompt written notice to USW describing in reasonable detail
any facts or circumstances that have resulted in any representation or warranty
made by ATI in SECTION 2.2 hereof no longer being true and correct in material
respects as of such date or any failure of an ATI Party to comply with any
material covenant contained herein.
(d) No Changes. Except as otherwise permitted in this
Organization Agreement or in any Approved Business Plan, until the Phase II
Closing, ATI shall cause the ATI Cellular Subsidiaries and their Subsidiaries
not to:
(i) (A) Grant any material increases in the compensation
of any officers or employees engaged in ATI's Cellular Business, except in the
ordinary course of business consistent with past practice, (B) pay or agree to
pay any material employee benefit not required or contemplated by the terms of
the ATI Employee Benefit Programs in effect or identified to USW on the
Effective Date, except as those terms may be modified or new Employee Benefit
Programs may be adopted in the ordinary course of business consistent with past
practice, (C) enter into any new, or materially amend any existing, employment
agreement with any such officer or employee
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engaged in ATI's Domestic Cellular Business, except for employment agreements
with new employees entered into in the ordinary course of business consistent
with past practice and ATI Employee Benefit Programs identified to USW prior to
the Effective Date, (D) except as may be required to comply with applicable
law, adopt or amend in any material respect any collective bargaining agreement
relating to any employee engaged in ATI's Domestic Cellular Business, (E) enter
into any new, or materially amend any existing, severance agreement with any
officer or employee engaged in ATI's Domestic Cellular Business except for ATI
Employee Benefit Programs identified to USW before the Effective Date, or (F)
become obligated under any new Employee Benefit Program that was not in
existence as of the Effective Date, or amend any ATI Employee Benefit Program
in existence as of the Effective Date if such amendment would have the effect
of enhancing or accelerating any benefits thereunder, except for ATI Employee
Benefit Programs identified to USW before the Effective Date and for new
programs or amendments that (I) may be required to comply with applicable law
or (II) taken together with other actions involving Employee Benefit Programs,
are in the ordinary course of business and consistent with past practice and do
not have a Material Adverse Effect on the ATI Cellular Subsidiaries and their
Subsidiaries, taken as a whole.
(ii) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than a reincorporation of ATI pursuant to which the
successor corporation shall assume all rights and obligations of ATI pursuant
to this Organization Agreement), except in accordance with SECTION 3.2(a)(v) of
this Organization Agreement; provided, however, that in the event of any such
merger, reorganization or restructuring, the certificate of incorporation,
by-laws or other organizational documents of the successor shall be the same as
the certificate of incorporation, by-laws or other organizational documents of
the predecessor in effect on the Effective Date, to the extent legally
permissible;
(iii) Adopt any amendments to its certificate of
incorporation, by-laws or partnership agreements or alter through merger,
liquidation, reorganization, restructuring or in any other fashion its
corporate or partnership structure or ownership, except in accordance with
SECTION 3.2(a)(v) of this Organization Agreement; provided, however, that in
the event of any such merger, reorganization or restructuring, the certificate
of incorporation, by-laws or other organizational documents of the successor
shall be the same as the certificate of incorporation, by-laws or other
organizational documents of the predecessor in effect on the Effective Date, to
the extent legally permissible;
(iv) Authorize, declare or pay any dividend or other
distribution to, issue any capital stock or partnership
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interest to, or cause to or permit any investment to be made in, ATI by any ATI
Cellular Subsidiary or any of its Subsidiaries, except in accordance with the
methodology adopted pursuant to Article 4 of this Organization Agreement or any
Approved Business Plan;
(v) Incur any indebtedness or liabilities other than
Permitted Liabilities or contractual obligations incurred in the ordinary
course of business (other than Material Contracts) or pursuant to SECTION
3.2(d)(vii) hereof; except in the ordinary course consistent with past
practice, make any advances or capital contributions to any other Person; make
any loan to ATI, except in accordance with the methodology adopted pursuant to
Article 4 of this Organization Agreement; or consent to the incurrence of any
indebtedness or call for capital contributions by any ATI Domestic Cellular
Subsidiary or ATI Domestic Cellular Investment Entity;
(vi) Except as provided in SECTION 3.2(f) of this
Organization Agreement or in the WMC Partnership Agreement, sell, assign,
pledge, encumber (except for Permitted Liens) or otherwise transfer any direct
or indirect interest in any material ATI Domestic Cellular Asset, any ATI
Party, any ATI Domestic Cellular Subsidiary, or any ATI Domestic Cellular
Investment, without the prior written consent of the WMC Partnership Committee;
provided, however, that nothing contained in this SECTION 3.2(d)(vi) shall
apply to any distribution of assets of CMT Partners, a Delaware general
partnership, in accordance with the terms and conditions of the CMT Partners
Partnership Agreement or any transfer by any ATI Party of any interest in New
Par or CCI pursuant to SECTION 9(b) of the Termination Agreement between CCI
and ATI and Section 4.4 of the Amended and Restated Agreement and Plan of
Merger and Joint Venture Organization between CCI and ATI.
(vii) Enter into, assume, terminate, or materially alter
any Material Contract or Related Party Agreement, except in the ordinary course
of business or with the prior written consent of the WMC Management Committee;
(viii) Enter into or consent to any modification or
amendment of any partnership or other agreement or to any sale, exchange or
transfer of assets or other action that would have the effect of delaying the
time that any ATI Phase II Asset or interest in or assets of New Par could be
contributed to WMC or changing the character or diminishing the value of any
ATI Phase II Asset or interest in or assets of New Par; or
(ix) Take any action inconsistent with the consummation of
the Transactions at the earliest practicable time as contemplated by this
Organization Agreement.
(e) Access and Information. To the extent permitted by law and
subject to any restrictions contained in Material
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Contracts and the ATI Cellular Partnership Agreements, ATI shall afford to USW
such access, during normal business hours, to books, records (including,
without limitation, tax returns and, if consented to by the independent
auditors, work papers of such auditors), plant and personnel, and to such other
information of ATI relating to the ATI Parties and to ATI's Domestic Cellular
Business (except its Tucson Cellular Interest and any Domestic Cellular
Business conducted by any ATI Party in San Diego, California, prior to
divestiture of the San Diego Cellular Property by NewVector) as USW shall
reasonably request, including, without limitation, all information relating to
any transactions governed by the methodology adopted pursuant to Article 4 of
this Organization Agreement. ATI agrees to treat, and will cause its
respective accountants, counsel and other representatives to treat
confidentially all nonpublic information concerning the USW Parties furnished
or made available to it in connection with the transactions contemplated by
this Organization Agreement and the Related Agreements, subject to the
requirements of law and the provisions of this Organization Agreement and the
Related Agreements. If this Organization Agreement is terminated prior to the
Phase I Closing, ATI will deliver to USW all documents, work papers and other
material (including copies) obtained by it in connection herewith, whether
obtained before or after the Effective Date.
(f) Divestiture of Tucson Cellular Interest. ATI agrees to
cause ATI Cellular of Arizona to use reasonable efforts to divest itself of the
Tucson Cellular Interest on or before the Phase I Closing or otherwise to
obtain any Authorizations required to permit the Phase I Transactions to occur
prior to a divestiture of the Tucson Cellular Interest, subject to the
following conditions:
(i) Prior to the sale or exchange of the Tucson Cellular
Interest, ATI shall obtain a fairness opinion addressed to ATI and USW from a
qualified investment banking firm of recognized national standing with
expertise applicable to valuation of assets of the type being evaluated to the
effect that the proposed sale or exchange of the Tucson Cellular Interest is
fair to the ATI Cellular Subsidiaries from a financial point of view, without
regard to SECTION 3.2(f)(iv) hereof.
(ii) In the event that ATI is unable to obtain the
fairness opinion required by SECTION 3.2(f)(ii) hereof, ATI shall not
consummate, or cause to be consummated, the proposed sale or exchange without
first obtaining an appraisal of the Fair Market Value of the Tucson Cellular
Interest conducted in accordance with the procedures set forth in SECTION 4.10
of the WMC Partnership Agreement and addressed to ATI and USW.
(iii) On the later of (A) the Phase II Closing or (B) the
date of divestiture of the Tucson Cellular Interest, ATI shall make a capital
contribution to WMC equal to the sum
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of: (y) the consideration (cash and/or non-cash) received from the divestiture
of the Tucson Cellular Interest, net of tax liabilities and reasonable closing
costs in connection with such divestiture; and (z) if an appraisal was required
to be obtained pursuant to SECTION 3.2(f)(iii) hereof, cash in an amount equal
to fifty percent (50%) of the difference, if any, between the Fair Market Value
of the Tucson Cellular Interest and the consideration received from its
divestiture (before taking account of any closing costs or taxes resulting
therefrom) which cash amounts shall be held separate by ATI in a manner
reasonably acceptable to ATI and WMC prior to the date of contribution to WMC.
(iv) ATI shall be responsible for making capital
contributions to WMC equal to fifty percent (50%) of all tax liabilities
(exclusive of penalties or interest) arising out of the divestiture of the
Tucson Cellular Interest, and ATI shall be solely responsible for the payment
of any tax-related penalties or interest. Promptly after closing of a
transaction resulting in the divestiture of the Tucson Cellular Interest, ATI
shall provide to USW and WMC a written statement of the amount of the
respective capital contributions to be paid to WMC by ATI and USW pursuant to
this SECTION 3.2(f)(iv) and SECTION 3.1(h), and ATI and USW shall make such
capital contributions to WMC at the same time as the Capital Contributions
referred to in clause (iii) above.
(v) If and when required or advisable to avoid or mitigate
any non-compliance with the MFJ, CECO or EO or any law or regulation of any
Governmental Body or to obtain any necessary Authorizations, ATI agrees to
place its Tucson Cellular Interest in trust pending divestiture on such terms
as shall be approved by the Governmental Bodies having jurisdiction thereof.
(vi) From and after the date of consummation of the
exchange, if any, of the Tucson Cellular Interest for another property or
interest, such property or interest shall be treated for all purposes of this
Organization Agreement as an ATI Phase II Asset and as an ATI Domestic Cellular
Asset, ATI Domestic Cellular Subsidiary or ATI Domestic Cellular Interest, as
the case may be.
(g) Operation of Certain Assets. If and to the extent that
ATI, despite its reasonable efforts, is unable to contribute any ATI Phase II
Assets to WMC at the Phase II Closing in accordance with SECTION 5.3(b)(iii) of
this Organization Agreement, ATI covenants and agrees to continue to make
reasonable efforts to make such contribution thereafter during Phase II, to the
maximum extent possible without violating the MFJ, CECO, EO or any law, rule or
regulation of any Governmental Body having jurisdiction over WMC or either
Party. The representations and warranties made by ATI with respect to each
such Beneficial Phase II Asset in SECTION 2.2
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hereof shall remain true and correct in all material respects on the date such
Beneficial Phase II Asset shall be contributed to WMC, and ATI shall comply
with all covenants contained herein with respect to the Beneficial Phase II
Assets until such Beneficial Phase II Assets are contributed to WMC.
(h) San Diego Cellular Property. ATI covenants and agrees to
make a capital contribution to WMC, within ten (10) Business Days of notice
from USW of the amount equal to: (i) fifty percent (50%) of the difference, if
any, between the Fair Market Value of the San Diego Cellular Property and the
consideration received by USW or its Affiliate from its divestiture (before
taking account of any closing costs or taxes resulting therefrom), if an
appraisal is required to be obtained pursuant to SECTION 3.1(f)(iii) hereof;
and (ii) fifty percent (50%) of all tax liabilities (exclusive of penalties or
interest) arising out of the divestiture of the San Diego Cellular Property.
3.3 Fiduciary Obligations. The Parties hereto acknowledge that each may
have fiduciary obligations to other Persons, including without limitation
shareholders and partners in Domestic Cellular Subsidiaries and Domestic
Cellular Investment Entities. Each Party shall comply with all such fiduciary
obligations.
ARTICLE 4
JOINT VENTURE ACCOUNTING
4.1 Cash Flows and Funding Prior to Phase II. The Parties hereto agree to
cooperate to devise a methodology for accounting for cash flows and funding
requirements of the ATI and USW Phase II Assets for the period from the
Effective Date through the Phase II Closing, consistent with applicable legal
requirements and preserving to the fullest extent possible the intent of the
Parties regarding operations prior to the Phase II Closing. The Parties agree
to use their best efforts to devise such a methodology within forty-five (45)
days after the Effective Date.
ARTICLE 5
PHASES OF THE JOINT VENTURE AND CLOSINGS
5.1 Prior to Phase I. From and after the Effective Date and prior to the
Phase I Closing, the Domestic Cellular Business and PCS activities of the
Parties and their respective Affiliates shall be governed by this Organization
Agreement, the Investment Agreement, the WMC Partnership Agreement, the PCS Par
Partnership Agreement, the PCS Par Services Agreement, and all other documents
delivered in connection therewith. Between the Effective Date and the Phase I
Closing, neither USW nor ATI nor any of their respective Affiliates shall
directly or indirectly
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control, supervise or direct, or attempt to control, supervise or direct, the
operation of any of the Phase II Assets now licensed to the other party or the
other party's Affiliates.
5.2 Phase I. From and after the Phase I Closing and prior to the Phase
II Closing, the Domestic Cellular Business and PCS activities of the Parties
and their respective Affiliates shall be governed by this Organization
Agreement, the Investment Agreement, the Agreement of Exchange, the Trust
Agreement of Exchange, the WMC Partnership Agreement, the PCS Par Partnership
Agreement, the License Agreements, the ATI Services Agreement, the NewVector
Services Agreement, the PCS Par Services Agreement, and all other documents
delivered in connection therewith.
(a) Conditions to Phase I Closing. The obligation of the
Parties to proceed with the Phase I Closing is conditioned on:
(i) Receipt by USW of all Authorizations required to be
obtained with respect to Phase I, as identified in SCHEDULES 2.1(d)(ii) and
2.1(d)(iii) hereto;
(ii) Receipt by ATI of all Authorizations required to be
obtained with respect to Phase I, as identified in SCHEDULES 2.2(d)(ii) and
2.2(d)(iii) hereto; and
(iii) No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Body shall be in effect that would make the consummation of the
Transactions in Phase I contemplated by this Organization Agreement and the
Phase I Related Agreements illegal. In the event any such injunction or order
shall be issued, the Parties hereto agree to cooperate to restructure the Phase
I Transaction to the minimum extent necessary to avoid or mitigate such
consequences, while preserving to the fullest extent possible the intent of the
Parties regarding Phase I operations as well as the relative economic positions
of the Parties. The Parties shall attempt to determine the manner of
restructuring which best gives effect to the intent of the Parties set forth in
this SECTION 5.2(a)(iii).
(b) Deliveries on or before the Phase I Closing. On or before
the Phase I Closing, the Parties shall deliver the following:
(i) Each Party shall deliver to the other a certificate,
executed on such Party's behalf by an authorized officer, to the effect that:
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(A) The representations and warranties of such
Party contained in SECTION 2.1 or SECTION 2.2 of this Organization Agreement
remain true and complete on and as of the Phase I Closing, except as set forth
in such certificate;
(B) Such Party has performed and is in
compliance with all of its agreements and covenants contained in this
Organization Agreement and the Related Agreements, as of the Phase I Closing,
except as set forth in such certificate;
(ii) Each Party shall use reasonable efforts, to the
extent consistent with such Party's or its Affiliates' fiduciary obligations,
to cause to be executed and delivered to WMC, a License Agreement with each of
its Domestic Cellular Assets, Domestic Cellular Subsidiaries, and Domestic
Cellular Investment Entities;
(iii) ATI shall cause to be delivered to WMC the executed
ATI Services Agreement;
(iv) USW shall cause to be delivered to WMC the executed
NewVector Services Agreement; and
(v) Each Party shall cause to be executed and delivered to
WMC any and all instruments required or advisable to license to WMC such
Party's Intellectual Property.
(c) Phase I Closing. The Phase I Closing shall occur on a date
mutually agreed on in writing by USW, ATI and WMC that shall be a Business Day
no later than the twentieth (20th) Business Day following the receipt of the
Authorizations described in SECTIONS 5.2(a)(i) and 5.2(a)(ii) hereof.
5.3 Phase II. From and after the Phase II Closing Date and until and
unless the Phase III Closing shall occur, the Domestic Cellular Businesses and
PCS activities of the Parties shall be governed by this Organization Agreement,
the Investment Agreement, the Agreement of Exchange, the Trust Agreement of
Exchange, the WMC Partnership Agreement, the PCS Par Partnership Agreement, the
then existing License Agreements, and all other documents delivered in
connection therewith.
(a) Conditions to Phase II Closing. The obligation of the
Parties to proceed with the Phase II Closing is conditioned on:
(i) Receipt by USW of all Authorizations required to be
obtained with respect to Phase II, as identified in SCHEDULES 2.1(d)(ii) and
2.1(d)(iii) hereto;
(ii) Receipt by ATI of all Authorizations required to be
obtained with respect to Phase II, as identified in SCHEDULES 2.2(d)(ii) and
2.2(d)(iii) hereto;
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(iii) USW's obligation to proceed with the Phase II
Closing shall be conditioned on ATI's ability to vest in WMC all right, title,
and interest in and to ATI Phase II Assets representing aggregate POPs equal to
sixty percent (60%) or more of the total POPs of all ATI Phase II Assets, which
condition USW may waive, or decline to waive, in writing in its sole
discretion;
(iv) ATI's obligation to proceed with the Phase II Closing
shall be conditioned on USW's ability to vest in WMC all right, title, and
interest in and to USW Phase II Assets representing aggregate POPs equal to
sixty percent (60%) or more of the total POPs of all USW Phase II Assets, which
condition ATI may waive, or decline to waive, in writing in its sole
discretion; and
(v) No preliminary or permanent injunction or other order,
decree (other than the MFJ as currently in effect) or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, nor any statute, rule, regulation or executive order
promulgated or enacted by any Governmental Body shall be in effect that would
make the consummation of the Phase II Closing illegal, or would, after the
Phase II Closing, impose material restrictions or limitations on the operations
of WMC which would not otherwise be imposed on the Phase II Assets of one or
both of the Parties and which would be so burdensome as to deprive such Party
or Parties of fundamental benefits expected to be derived from the Phase II
Closing.
(b) Deliveries on or before the Phase II Closing. On or before
the Phase II Closing, each of the Parties and WMC shall deliver the following:
(i) Each Party shall deliver to the other a certificate,
executed on such Party's behalf by an authorized officer, to the effect that:
(A) The representations and warranties of such
Party contained in SECTION 2.1 or SECTION 2.2 of this Organization Agreement
remain true and complete on and as of the Phase II Closing, except as set forth
in such certificate;
(B) Such Party has performed and is in
compliance, in all material respects, with all of its agreements and covenants
contained in this Organization Agreement and the Related Agreements, as of the
Phase II Closing, except as set forth in such certificate;
(ii) USW shall cause to be executed and delivered to WMC
any and all instruments required or advisable to vest in WMC all right, title,
and interest in and to each of USW's Phase II Assets for which all required
Authorizations and Consents, if any, have been obtained, free and clear of all
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indebtedness for borrowed money and Liens, in the manner most advantageous to
the USW Parties and WMC, as determined by the WMC Partnership Committee;
(iii) ATI shall cause to be executed and delivered to WMC
any and all instruments required or advisable to vest in WMC all right, title,
and interest in and to each of ATI's Phase II Assets for which all required
Authorizations and Consents, if any, have been obtained, free and clear of all
indebtedness for borrowed money and Liens, in the manner most advantageous to
the ATI Parties and WMC, as determined by the WMC Partnership Committee;
(iv) WMC shall assume all Permitted Liabilities associated
with the USW Phase II Assets and the ATI Phase II Assets contributed to WMC at
the Phase II Closing and all other liabilities and obligations associated with
the USW Phase II Assets and the ATI Phase II Assets contributed to WMC at the
Phase II Closing arising on and after the Phase II Closing pursuant to
contracts (other than Material Contracts) entered into in the ordinary course
of business, Material Contracts identified in SCHEDULES 2.1(l) and 2.2(l)
hereto, and Material Contracts approved by the WMC Partnership Committee;
(v) Unless USW shall elect to have the PCS Par
Contribution Closing occur on a subsequent date in accordance with SECTION
5.4(a) of this Organization Agreement, each of USW and ATI shall cause to be
executed and delivered to WMC any and all instruments required or advisable to
vest in WMC all right, title, and interest in and to its Percentage Interest in
PCS Par, free and clear of all indebtedness for borrowed money and Liens,
together with a certificate as described in SECTION 5.4(c)(i) hereof; and
(vi) In the event that the Phase II Closing shall occur
prior to Partial MFJ Relief (except pursuant to SECTION 5.3(c)(iii) hereof),
WMC shall, within 45 days of receipt of each detailed invoice, reimburse ATI
for the one-time cost of restructuring such of its domestic cellular operations
and separating any assets or activities that would otherwise subject WMC or USW
to liability for violation of the MFJ; provided, however, that ATI shall not be
entitled to any compensation from WMC or USW for any lost profits or
opportunity costs arising out of or relating to the commencement of Phase II.
(c) Phase II Closing. The Phase II Closing shall occur on a
date mutually agreed upon in writing by USW, ATI, and WMC that shall be a
Business Day no later than the twentieth (20th) Business Day following
satisfaction of all conditions to the Phase II Closing and the first to occur
of the following:
(i) Receipt of Partial MFJ Relief;
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(ii) The written agreement of USW, ATI, and WMC to
commence Phase II;
(iii) Ninety (90) days following written notice provided
by ATI to USW and WMC that ATI elects to exercise its right under this SECTION
5.3(c)(iii) to cause Phase II to be commenced (such right referred to herein as
the "ATI Phase II Trigger"); and
(iv) The fourth anniversary of the Effective Date.
5.4 PCS Contribution Closing.
(a) On the later of (i) the Phase II Closing and (ii) the third
anniversary of the date that PCS Par first acquires (through the FCC auctions
or otherwise) a PCS License issued by the FCC (the "PCS Contribution Closing"),
or on such earlier date as shall be designated in writing by USW sixty (60)
days in advance, each of USW and ATI and/or their Affiliates shall make a
capital contribution to WMC equal to one hundred percent (100%) of their
respective Percentage Interests in PCS Par, free and clear of all indebtedness
for borrowed money or Liens.
(b) The obligation of the Parties to proceed with the PCS
Contribution Closing is conditioned on: (i) receipt by USW and ATI of all
Authorizations required to be obtained with respect to the contribution of
their Percentage Interests in PCS Par which may include those identified in
SCHEDULES 2.1(d)(ii), 2.1(d)(iii), 2.2(d)(ii), and 2.2(d)(iii) hereto; and (ii)
no preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, nor any statute, rule, regulation or
executive order promulgated or enacted by any Governmental Body, shall be in
effect that would make the consummation of the PCS Contribution Closing illegal
or would impose any material limitation on the consummation of such PCS
Contribution Closing or other operations of WMC or otherwise restrain, enjoin
or prevent the consummation of the PCS Contribution Closing.
(c) On or before the PCS Contribution Closing, each of the
Parties shall deliver the following:
(i) Each Party shall deliver to the other and to WMC a
certificate, executed on such Party's behalf by an authorized officer and dated
as of the date of the PCS Contribution Closing, representing and warranting to
the other Party and to WMC that: (A) such Party has good legal title to, and
beneficial ownership of, its Percentage Interest in PCS Par free and clear of
all Liens, restrictions, equities, options, and claims; (B) the contribution of
such Percentage Interest in PCS Par has been duly authorized by all necessary
corporate or
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partnership action on the part of such Party and will not conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
or other encumbrance on any of its properties or assets pursuant to any
agreement, indenture or instrument to which it is a party, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
properties or assets is bound or affected; and (C) immediately after the PCS
Contribution Closing, WMC will be the owner of all right, title and interest of
USW in and to such Percentage Interest.
(ii) Each Party shall cause to be executed and delivered
to WMC any and all instruments required or advisable to vest in WMC all right,
title, and interest in and to its Percentage Interest in PCS Par.
5.5 New Par Contribution Closing.
(a) If and when ATI shall acquire all of the ownership
interests in New Par (the "New Par Interest"), ATI shall transfer, or cause to
be transferred, to WMC at the earliest practicable time thereafter its entire
right, title, and interest in and to the New Par Interest free and clear of all
indebtedness for borrowed money or Liens (other than Permitted Liabilities).
(b) The obligation of ATI to transfer, or cause to be
transferred, to WMC the New Par Interest (or Domestic Cellular Assets) and the
capital stock of CCI, is conditioned on:
(i) Receipt by ATI of all Authorizations required to be
obtained with respect thereto, which may include certain of those identified in
SCHEDULES 2.2(d)(iv)(A) and 2.2(d)(iv)(B); and
(ii) No preliminary or permanent injunction or other
order, decree, or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Body shall be in effect that would make the consummation of the
New Par Contribution Closing illegal or would impose any material limitation on
the consummation of the New Par Contribution Closing or on the Phase II
operations of WMC or otherwise restrain, enjoin or prevent the consummation of
the New Par Contribution Closing.
(c) On or before the New Par Contribution Closing, ATI shall
deliver the following:
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(i) A certificate, executed on its behalf by an authorized
officer, to the effect that: (A) ATI has good legal title to, and beneficial
ownership of, the New Par Interest free and clear of all Liens, restrictions,
equities, options, and claims, and (B) the transfer of the New Par Interest has
been duly authorized by all necessary corporate or partnership action on the
part of ATI.
(ii) ATI shall cause to be executed and delivered to WMC
any and all instruments required or advisable to vest in WMC all right, title,
and interest in and to the New Par Interest.
ARTICLE 6
TERMINATION
6.1 Termination of this Organization Agreement. (a) This Organization
Agreement shall terminate:
(i) Upon mutual written agreement of the Parties;
(ii) Ninety (90) days after the date that either Party
provides written notice to the other that it declines to proceed with the Phase
II Closing in accordance with SECTION 5.3(a)(iii) or 5.3(a)(iv) of this
Organization Agreement, as the case may be;
(iii) On July 25, 1997, if the Phase I Closing shall not
have occurred by that date; or
(iv) On July 25, 2004, if the Phase II Closing shall not
have occurred by that date.
(b) Anything herein to the contrary notwithstanding, the right
to terminate this Organization Agreement under this SECTION 6.1(a) shall not be
available to a Party whose failure to fulfill any covenant or obligation under
this Organization Agreement has been the cause of, or results in, the failure
of the Phase I Closing or the Phase II Closing to occur within the time period
set forth in this SECTION 6.1(a).
6.2 Winding Up. In the event that this Organization Agreement is
terminated pursuant to SECTION 6.1(a) hereof, the Joint Venture affairs of the
Parties shall be wound up in accordance with the provisions of Article 8 of the
WMC Partnership Agreement and the provisions of Article 8 of the PCS Par
Partnership Agreement.
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ARTICLE 7
INDEMNIFICATION
7.1 Definitions. As used in this ARTICLE 7, the following terms shall
have the meanings set forth below:
(a) "CLAIM" shall mean any claim based upon, arising out of or
otherwise in respect of any Loss.
(b) "INDEMNITEE" shall mean any Person which may be entitled to
seek indemnification pursuant to the provisions of this ARTICLE 7.
(c) "INDEMNITOR" shall mean any Person which may be obligated
to provide indemnification pursuant to this ARTICLE 7.
(d) "LOSS" shall mean any loss, liability, damage, cost, and
expense, including amounts paid in defense of, or with respect to any
settlement or judgment relating to, any demand, claim, action or cause of
action or assessment (including without limitation, diminution in value of any
equity interest), relating to or arising out of any of the occurrences set
forth in SECTION 7.2, 7.3, 7.4 or 7.5 hereof. Loss shall include reasonable
fees, disbursements, and expenses of attorneys, accountants, and other
professional advisers and shall be net of any insurance proceeds received by an
Indemnitee on account of such Losses and net of any reimbursement of Losses
received by an Indemnitee pursuant to a right of contribution or to a
contractual or other arrangement.
(e) "NOTICE PERIOD," as applied to any Claim for which an
Indemnitee seeks to be indemnified pursuant to this ARTICLE 7, shall mean the
period ending twelve (12) months after the time at which the Indemnitee has
received actual notice of a Third-Party Claim, or as to any other claim has
obtained actual knowledge of the facts or circumstances giving rise to such
claim for which such Indemnitee would reasonably be expected to be entitled to
indemnification pursuant to this ARTICLE 7.
(f) "RELATED COST" shall mean any liability, cost, expense
(including, without limitation, any reasonable expenses of investigation and
attorneys' and accountants' fees), loss, damage, assessment, settlement or
judgment (other than an item of Tax) which arises out of the imposition or
assessment of any Tax.
7.2 Indemnity by USW. Except as otherwise expressly provided in this
ARTICLE 7, USW shall defend, indemnify, and hold harmless WMC, ATI, ATI's
Subsidiaries, and each of their officers, directors, employees, agents,
successors and assigns, and shall reimburse such Indemnitees for, from and
against all Losses imposed on or incurred by such Indemnitees, directly or
indirectly, relating to, resulting from or arising out of (a) any
representation or warranty made by USW in this
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Organization Agreement or any Related Agreement that was materially false when
made; (b) any liability or obligation of any nature (known or unknown,
absolute, accrued, contingent or otherwise) related to USW's Phase II Assets
and Percentage Interest in PCS Par and attributable to periods prior to the
Phase II Closing (or such later date on which a particular Phase II Asset was
contributed to WMC) and the PCS Contribution Closing, respectively (excluding
Permitted Liabilities and other liabilities assumed by WMC at the Phase II
Closing in accordance with SECTION 5.3(b)(iv) hereof); or (c) any material
default by USW in the performance of its obligations and covenants under this
Organization Agreement and the Related Agreements; provided, however, that if,
and to the extent that, an adjustment is made to USW's Percentage Interest in
WMC pursuant to Article 4 of the WMC Partnership Agreement on account of the
inability of USW to contribute any Phase II Assets to WMC, no indemnification
obligation shall arise under this SECTION 7.2; and provided further that
nothing herein shall relieve USW of any indemnification obligation under this
SECTION 7.2 for Losses incurred by ATI as a result of a breach of any covenant
by USW hereunder to contribute the USW Phase II Assets to WMC.
7.3 Indemnity by ATI. Except as otherwise expressly provided in this
ARTICLE 7, ATI shall defend, indemnify, and hold harmless WMC, USW, USW's
Subsidiaries, and each of their officers, directors, employees, agents,
successors and assigns, and shall reimburse such Indemnitees for, from and
against all Losses imposed or incurred by such Indemnitees, directly or
indirectly, relating to, resulting from or arising out of (a) any
representation or warranty made by ATI in this Organization Agreement or any
Related Agreement that was materially false when made; (b) any liability or
obligation of any nature (known or unknown, absolute, accrued, contingent or
otherwise) related to ATI's Phase II Assets and Percentage Interest in PCS Par
and attributable to periods prior to the Phase II Closing (or such later date
on which a particular Phase II Asset was contributed to WMC) and the PCS
Contribution Closing, respectively (excluding Permitted Liabilities and other
liabilities assumed by WMC at the Phase II Closing in accordance with SECTION
5.3(b)(iv) hereof); or (c) any material default by ATI in the performance of
its obligations and covenants under this Organization Agreement and the Related
Agreements; provided, however that if, and to the extent that, an adjustment is
made to ATI's Percentage Interest in WMC pursuant to Article 4 of the WMC
Partnership Agreement on account of the inability of ATI to contribute any
Phase II Assets to WMC, no indemnification obligation shall arise under this
SECTION 7.3; and provided further than nothing herein shall relieve ATI of any
indemnification obligation under this SECTION 7.3 for Losses incurred by USW as
a result of a breach of any covenant by ATI hereunder to contribute the ATI
Phase II Assets to WMC.
7.4 Indemnity by WMC. The Parties shall cause WMC, from and after the
Effective Date and to the fullest extent permitted
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by law, to indemnify, defend and hold harmless ATI and USW and their respective
Affiliates, and their Affiliates' officers, directors, employees, agents and
representatives, from and against any and all Losses arising out of, resulting
from or relating to (a) any act or omission taken or omitted to be taken by
such Indemnitee at the direction of the WMC Partnership Committee or the
Approved Business Plan, including without limitation pursuant to SECTION
5.3(b)(ii) or 5.3(b)(iii) of this Organization Agreement or as a result of a
decision by WMC to cause USW or ATI or their Affiliates to terminate the
employment of any employee thereof in furtherance of the Approved Business
Plan; or (b) any claim arising out of the reasonable efforts by any Indemnitee
to make the contributions to WMC required to be made pursuant to SECTION
5.3(b)(ii) or 5.3(b)(iii) hereof.
7.5 Tax Indemnification. (a) Each of ATI and USW shall be individually
responsible for, will pay or cause to be paid, and will individually indemnify
and hold harmless the other Party and WMC from and against any and all Tax
liabilities and Related Costs from or related to each of the following:
(i) Any and all Taxes with respect to any taxable period
of any Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic
Cellular Investment Entity (or any predecessor) ending on or before the date
such Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic Cellular
Investment was contributed or transferred to WMC;
(ii) Any and all Taxes with respect to any taxable period
ending on or before the date any Domestic Cellular Asset, Domestic Cellular
Subsidiary or Domestic Cellular Investment was contributed or transferred to
WMC resulting from any Domestic Cellular Asset, Domestic Cellular Subsidiary or
Domestic Cellular Investment Entity having been (or ceasing to be) included in
any consolidated, combined or unitary tax return for any such period (including
any liability for taxes resulting from a "deferred intercompany transaction,"
within the meaning of Treasury Regulation Section 1.1502-13(a)(2) or any
analogous or similar provision under state or local law or regulation);
(iii) Any and all Taxes arising from any member of a
consolidated, combined or unitary group of which the contributed Domestic
Cellular Asset, Domestic Cellular Subsidiary or Domestic Cellular Investment
Entity is or was a member on or before its contribution or transfer to WMC for
which such Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic
Cellular Investment is liable pursuant to Treasury Regulation Section
1.1502-6(a) or any analogous or similar provision under state or local law or
regulation;
(iv) Any breach by such Party of any representation or
warranty made in SECTION 2.1(k) or 2.2(k) of this Organization Agreement; or
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(v) Any penalty or interest assessed or imposed by any
taxing authority.
(b) There shall be no limitations period with respect to any
indemnity in this SECTION 7.5.
7.6 Notification of Claims. Except as set forth in this SECTION 7.6, no
Indemnitor shall be obligated to indemnify any Indemnitee against any Loss
unless the Indemnitee shall have delivered to the Indemnitor within the Notice
Period a written notice ("CLAIM NOTICE") describing in reasonable detail the
facts giving rise to such Claim of Loss and stating that the Indemnitee intends
to seek indemnification for such Loss from the Indemnitor pursuant to this
ARTICLE 7. The foregoing notwithstanding, if an Indemnitee would otherwise be
entitled to indemnification hereunder but for its failure timely to deliver a
Claim Notice, such Indemnitee shall nevertheless be entitled to be indemnified
hereunder (a) if the Indemnitee can establish that the time elapsed between the
end of the Notice Period and the giving of the Claim Notice is reasonable in
all the circumstances, or (b) to the extent (but only to the extent) that the
Indemnitee can establish that the Indemnitor has not been prejudiced by such
time elapsed or by any intervening payment, settlement or other disposition of
such Claim.
7.7 Access and Cooperation. The Parties shall make available to each
other as reasonably requested all information, records and documents relating
to all Losses and shall preserve all such information, records and documents
until the termination of any Claim and the resolution of any issue with respect
to indemnification hereunder relating to such Claim. Each party shall also
make available to the other, as reasonably requested, their personnel
(including technical personnel), agents and other representatives who are
responsible for preparing or maintaining information, records or other
documents, or who may have particular knowledge, with respect to any Claim. An
Indemnitee shall also cooperate with an Indemnitor in attempting to minimize
the Losses subject to indemnification by pursuing and/or assigning to the
Indemnitor any rights of contribution or right to reimbursement through
contractual or other arrangements.
7.8 Remedies. Except as expressly provided in SECTION 5.3(a)(iii),
5.3(a)(iv) or 6.1(a) of this Organization Agreement, the sole remedies
available to USW, ATI or WMC shall be the right to indemnification set forth
herein and the right to seek specific enforcement. USW and ATI each expressly
and intentionally waives the right to refuse to consummate any transactions
contemplated by this Organization Agreement or the Related Agreements as a
result of any false representation or warranty or breach of any covenant made
in this Organization Agreement or any Related Agreement by the other Party.
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ARTICLE 8
MISCELLANEOUS
8.1 Arbitration. The Parties agree to submit to arbitration those
disputes described in the Arbitration Agreement, a copy of which is ATTACHMENT
8.1 to this Organization Agreement.
8.2 Notices. (a) All notices called for under this Organization
Agreement shall be in writing and shall be deemed given if delivered personally
or by facsimile transmission and followed promptly by mail, telexed or mailed
by registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
If to ATI:
AirTouch Communications
425 Market Street
San Francisco, CA 94105
Telecopier: (415) 658-2298
Attention: Margaret G. Gill, Esq.
Senior Vice President-Legal,
External Affairs, and Secretary
With a Copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 983-1200
Attention: Nathaniel M. Cartmell III
If to USW:
U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: Executive Vice President and General
Counsel
or to any other address or addressee as any party entitled to receive notice
under this Organization Agreement shall designate, from time to time, to others
in the manner provided in this SECTION 8.2 for the service of Notices.
(b) Any notice delivered to the party hereto to whom it is
addressed shall be deemed to have been given and received on the day it was
received; provided, however, that if such day is not a Business Day then the
notice shall be deemed to have
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been given and received on the Business Day next following such day. Any
notice sent by telex or facsimile transmission shall be deemed to have been
given and received on the Business Day next following the day of transmission.
8.3 Modifications; Amendments; Waivers. This Organization Agreement may
be modified only by a written instrument duly executed by each party hereto.
Any waiver of any term or condition of this Organization Agreement shall be
effective only if made in writing and only in the specific instance and for the
purpose for which given. No failure or delay on the part of any party hereto
in exercising any right, power, or privilege under this Organization Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
8.4 Rule of Interpretation. This Organization Agreement and the Related
Agreements shall be interpreted to give effect to every provision contained in
each agreement; provided, however, that if, and to the extent that, there is
any conflict between (a) a provision in this Organization Agreement and a
provision in the Investment Agreement, the Investment Agreement shall control;
(b) a provision in this Organization Agreement and a provision in the WMC
Partnership Agreement, the WMC Partnership Agreement shall control; (c) a
provision in this Organization Agreement and a provision in the PCS Par
Partnership Agreement, the PCS Par Partnership Agreement shall control; (d) a
provision in this Organization Agreement and a provision in the Agreement of
Exchange, the Agreement of Exchange shall control; (e) a provision in this
Organization Agreement and a provision in the Trust Agreement of Exchange, the
Trust Agreement of Exchange shall control; or (f) a provision in this
Organization Agreement and a provision in any other Related Agreement, this
Organization Agreement shall control.
8.5 Expenses. Except as specifically provided herein, whether or not the
transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with the transactions contemplated in this Organization
Agreement shall be paid by the party incurring such cost or expense. Each
Party and its Affiliates shall bear all costs and expenses, including, without
limitation, any sales taxes, transfer taxes, recording fees and attorneys' or
accountants' fees incurred in contributing, transferring or causing its
Affiliates to transfer any Domestic Cellular Assets, Domestic Cellular
Subsidiaries, Domestic Cellular Investments, and Percentage Interests in PCS
Par to WMC, and any expenses, fees, and costs necessary for any Approvals shall
be paid by the party seeking such Approval.
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8.6 Certain Tax Matters.
(a) Whenever it is necessary for purposes of this Agreement to
determine the Tax liability of a taxable entity for a taxable year or period
that begins before and ends after the date such entity was contributed or
transferred to WMC, the determination shall be made (i) in the case of Taxes
that are not based on income or gross receipts (e.g., property taxes), by
apportioning such Taxes on a per diem basis; and (ii) in the case of Taxes
based on income or on gross receipts, by apportioning the total Tax liability
for such taxable year or period on the assumption that the taxable year or
period ended as of the close of the date such entity was contributed or
transferred to WMC, with income (or other applicable measure) apportioned as
provided in Income Tax Regulations section 1.1502-76(b)(4), provided that any
deferred gain or loss on deferred intercompany transactions which must be
restored to income by ATI, USW or their Subsidiaries by reason of the transfer
or contribution of any Domestic Cellular Asset, Domestic Cellular Subsidiary or
Domestic Cellular Investment (or any analogous state, local or foreign tax
effects) shall be allocated entirely to the period ending with the date of such
contribution or transfer.
(b) Each of ATI and USW shall be individually responsible for
preparing and filing all Tax Returns for the Transferred Subsidiaries of ATI
and USW, respectively, for Tax periods ending prior to or on the Contribution
Date and making any required Tax payments with respect of such Tax Returns.
Such Returns will report the operations of such Transferred Subsidiaries
consistent with past practice.
(c) USW and ATI shall, and each shall, as applicable cause
their respective affiliates to, use its best efforts to provide each other with
such assistance as may reasonably be requested by any of them in connection
with Tax matters, including providing information with respect to the
preparation of any Tax Return or other document required to be filed by any
taxing authority, any audit or other examination by any taxing authority, any
judicial or administrative proceeding or dispute relating to liability for
Taxes or any claim arising under this SECTION 8.6 or SECTION 7.5, and each
shall retain and provide to the other access to such records and other
information as may be relevant to such Return, audit, examination, proceeding
or determination.
8.7 Publicity. So long as this Organization Agreement is in effect, each
Party and its Affiliates agree to consult with the other Party in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated hereby, and neither Party nor any of its Affiliates
will issue any press release or make any such public statement prior to such
consultation and giving the other Party a reasonable opportunity to review and
comment on any such
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proposed press release or public statement, except as may be required by law.
8.8 Severability. If any one or more of the provisions of this
Organization Agreement shall be held to be invalid, illegal, or unenforceable,
the validity, legality and enforceability of the remaining provisions of this
Organization Agreement shall not be affected thereby. To the extent permitted
by applicable law, each party hereto waives any provision of law which renders
any provision of this Organization Agreement invalid, illegal, or unenforceable
in any respect.
8.9 Headings. The descriptive headings contained in this Organization
Agreement are for convenience and reference only, do not form a part of it, and
do not in any way modify, interpret or construe the intentions of the parties
to this Organization Agreement.
8.10 Time of Essence. Time is of the essence of this Organization
Agreement.
8.11 Choice of Law. This Organization Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without regard to choice of law principles.
8.12 Survival of Representations and Warranties. The representations and
warranties contained in this Organization Agreement shall survive after the
Effective Date, the Phase I Closing, and the Phase II Closing.
8.13 Miscellaneous. This Organization Agreement (including the documents
and instruments referred to herein and attached hereto and other agreements
executed by the Parties on the date hereof) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof; (b) is not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by either party
hereto by operation of law or otherwise (except as otherwise provided herein).
8.14 Counterparts. This Organization Agreement may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an
original, and all such counterparts shall constitute one and the same
instrument.
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<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have hereunto fixed their
seals this 25th day of July, 1994.
AIRTOUCH COMMUNICATIONS U S WEST, INC.
/s/ L. L. CHRISTENSEN /s/ CHARLES M. LILLIS
By:____________________________ By: ____________________________
Its: Executive Vice President and Its: Executive Vice President
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.2
________________________________________
WMC PARTNERS, L.P.
AGREEMENT OF
LIMITED PARTNERSHIP
DATED AS OF JULY 25, 1994
AMONG
MEMBERS OF THE ATI GROUP
AND
MEMBERS OF THE USW GROUP
________________________________________
<PAGE> 2
TABLE OF CONTENTS
(Not part of the Agreement)
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
ARTICLE 1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Formation of the Partnership . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Registered Office; Agent for Service of Process . . . . . . . . . . . . . 2
1.5. Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Term of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7. Qualification in Other Jurisdictions. . . . . . . . . . . . . . . . . . . 4
1.8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1. Representative Partners . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2. Partnership Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3. Partnership Committee Meetings . . . . . . . . . . . . . . . . . . . . . 16
2.4. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5. No Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.6. Acts by Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7. Procedures in the Event of a Dispute . . . . . . . . . . . . . . . . . . 20
2.8. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.9. Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.10. Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.11. Budget Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.12. Employees and Employee Benefits . . . . . . . . . . . . . . . . . . . . . 24
2.13. Access to Books of Account. . . . . . . . . . . . . . . . . . . . . . . . 24
2.14. Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . 24
2.15. Duty of Partners To Cooperate . . . . . . . . . . . . . . . . . . . . . . 26
2.16. Agreements with Partnership and Licensed or Owned Systems . . . . . . . . 26
2.17. Insurance and Risk Management . . . . . . . . . . . . . . . . . . . . . . 27
2.18. International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 3 CERTAIN AGREEMENTS REGARDING OPERATIONS OF LICENSED
AND OWNED SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.1. General; Fiduciary Obligations . . . . . . . . . . . . . . . . . . . . . 28
3.2. License and Services Agreements . . . . . . . . . . . . . . . . . . . . . 28
3.3. Licensed Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4. System Budget Approval . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.5. System Business Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.6. Management Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Annual Statements . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Quarterly Statements . . . . . . . . . . . . . . . . . . . . . . 30
(c) MFJ Restricted Activities . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4 CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS . . . . . . . 30
4.1. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. Initial Contributions of Capital . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
(a) Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Phase II Contribution Date . . . . . . . . . . . . . . . . . . . . 31
(c) New Par Contribution Date . . . . . . . . . . . . . . . . . . . . 31
(d) PCS Contribution Date . . . . . . . . . . . . . . . . . . . . . . 31
(e) Beneficial Phase II Assets . . . . . . . . . . . . . . . . . . . . 32
4.3. Special Capital Contribution Rights of Partners . . . . . . . . . . . . . . 33
4.4. Additional Contributions by Partners . . . . . . . . . . . . . . . . . . . 33
4.5. Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.6. Withdrawals of Capital Accounts . . . . . . . . . . . . . . . . . . . . . . 35
4.7. Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 35
4.8. Revaluation of Partnership Assets . . . . . . . . . . . . . . . . . . . . . 35
4.9. Redetermination of Percentage Interests . . . . . . . . . . . . . . . . . . 36
4.10. Determination of Fair Market or Private Market Values . . . . . . . . . . 36
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 38
5.1. Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6 TAX MATTERS AND REPORTS; ACCOUNTING . . . . . . . . . . . . . . . . . . 42
6.1. Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.3. Tax Reports to Current and Former Partners . . . . . . . . . . . . . . . . 43
6.4. Accounting Records; Independent Audit . . . . . . . . . . . . . . . . . . . 43
6.5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.6. Tax Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.7. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.8. Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.9. Prior Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7 INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS . . . . . . . . . . 44
7.1. Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . 44
7.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.3. Restrictions on Partners . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.4. Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.5. Duties of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 8 TERMINATION AND DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . 50
8.1. Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2. Bankruptcy of a General Partner . . . . . . . . . . . . . . . . . . . . . . 51
8.3. Order of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4. Orderly Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.5. Dissolution Election . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.6. Obligation To Restore Deficit Balance . . . . . . . . . . . . . . . . . . . 54
8.7. Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 9 ADMISSION OF ADDITIONAL PARTNERS . . . . . . . . . . . . . . . . . . . . 54
9.1. Admission Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2. Designation as a Group . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 10 TRANSFER OR ENCUMBRANCE OF INTEREST . . . . . . . . . . . . . . . . . . 55
10.1. Restriction on Transfer or Encumbrance . . . . . . . . . . . . . . . . . . 55
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate . . . . . . . 55
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
10.3. Transfer of Partnership Interest Other Than to a Wholly Owned Affiliates . 55
10.4. Partnership's Redemption Option . . . . . . . . . . . . . . . . . . . . . 58
10.5. Spin-off Not Deemed To Be a Transfer . . . . . . . . . . . . . . . . . . . 58
10.6. Invalid Transfers Void . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.7. Change in Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.8. Change of Control - ATI . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.9. USW Option To Effect Exchange Into Trust . . . . . . . . . . . . . . . . . 61
10.10. Proportionate Transfer of PCS Interest . . . . . . . . . . . . . . . . . . 61
ARTICLE 11 REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.1. Demand Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . 61
11.2. Successor Company Registration . . . . . . . . . . . . . . . . . . . . . . 64
11.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.4. Conditions to Offerings . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.7. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 12 REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.1. MFJ Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.2. Governing Law, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
13.3. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.5. Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.6. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.7. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
13.11. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
13.12. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Schedules
- - ---------
<S> <C>
Schedule 1-A -- Members of AirTouch Communications and
Initial Percentage Interests
Schedule 1-B -- Members of US West, Inc. and
Initial Percentage Interests
</TABLE>
-iv-
<PAGE> 6
WMC PARTNERS, L.P.
AGREEMENT OF
LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP of WMC Partners, L.P. (the
"Partnership") is entered into and effective as of July 25, 1994, by and among
the members of the AirTouch Communications ("ATI") and the U S West, Inc.
("USW") (each as hereinafter defined), each of which shall be both a general
partner and a limited partner as set forth herein (collectively, the
"Partners").
WHEREAS, the Partners or certain of their Affiliates (as hereinafter defined)
are parties to the Joint Venture Organization Agreement, of even date herewith;
WHEREAS, the Partners or certain of their Affiliates are the direct and/or
indirect owners of interests in and rights to Systems (as hereinafter defined);
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively with lower costs
in such markets;
WHEREAS, there are substantial operating, technological and development
efficiencies of scale and scope to be achieved by an enterprise combining the
management and operations of domestic Cellular, ESMR and PCS Systems (as
hereinafter defined) of the Partners (other than USW's San Diego and ATI's
Tucson cellular properties which are specifically excluded from the
Partnership);
WHEREAS, the Partners have concluded that it will be in their respective best
interests, and the best interests of the public, to form the Partnership for
the purpose of coordinating wireless services to be provided by Systems and
owning, operating, managing, maintaining and constructing Systems and, in
furtherance thereof, the members of the ATI and the USW wish to become partners
in the Partnership (as hereinafter defined);
WHEREAS, the MFJ (as hereinafter defined) currently applies to USW and its
affiliated companies and restricts them from engaging in certain activities,
which restrictions are acknowledged to have anticompetitive consequences;
WHEREAS, the MFJ restrictions do not apply to ATI and its affiliates and any
imposition of those restrictions would create inefficiencies, limit ATI's
competitive options, and reduce consumer choice;
WHEREAS, it is the intent of the parties to this Agreement to achieve the
scope and scale efficiencies of integration to the extent possible consistent
with the current MFJ restrictions, while, at the same time, limiting the
application of such MFJ restrictions to only the entities and activities to
which they currently apply;
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<PAGE> 7
WHEREAS, the parties have structured this transaction in phases, the timing
of which is dependent on the continued applicability of the MFJ, and it is the
intent of the parties to integrate completely all aspects of their businesses
which provide Cellular, ESMR and PCS Services (as hereinafter defined)
domestically as soon as practicable without the imposition of MFJ restrictions
on ATI or its cellular properties:
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained and in order to set forth the respective rights,
obligations and interests of the Partners to one another and to the
Partnership, the Partners hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1. Formation of the Partnership. The Partners agree and hereby form the
Partnership as a limited partnership, pursuant to the Delaware Revised Uniform
Limited Partnership Act, as it may be amended from time to time (the "Act") and
this Agreement. Except as provided in this Agreement, the rights, duties,
liabilities and obligations of the Partners and the administration,
dissolution, winding up and termination of the Partnership shall be governed by
the Act.
1.2. Name. The name of the Partnership shall be: WMC Partners, L.P. The
name of the Partnership may be changed by the Partnership Committee acting by
vote of the Members representing each Group.
1.3. Principal Place of Business. The principal place of business of the
Partnership shall be c/o AirTouch Communications, 2999 Oak Road, Walnut Creek,
California 94596. The principal place of business of the Partnership may be
changed by the Partnership Committee.
1.4. Registered Office; Agent for Service of Process. The address of the
Partnership's registered office in the State of Delaware is c/o The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The agent for service of process at such
address for the Partnership in the State of Delaware is The Corporation Trust
Company. Agents for service of process of the Partnership may be changed by
the Partnership Committee.
1.5. Business of the Partnership.
(a) The purpose of the Partnership is to acquire, own, lease, operate,
manage and maintain Systems; to provide certain services to operators of
Systems pursuant to license agreements or other contractual relationships; to
provide the services which may from time to time be offered, and to engage in
the resale of wireless voice and data communications services, utilizing the
frequencies allocated by the FCC for Systems; to make and prosecute any and all
applications for or renewals of licenses for Systems; to design, construct and
develop Systems; and to engage in other businesses utilizing, to the extent of
cell sites, mobile telephone switching offices, computer programs or other
aspects specific to
-2-
<PAGE> 8
Systems, the Partnership's then existing business infrastructure or
communications network (the "Partnership Business"). In connection therewith
and subject thereto, the Partnership shall have the power: (i) to enter into
leases for, or purchase properties necessary for, antennae, base stations and
office sites; (ii) to construct improvements in, furnish and equip the sites;
(iii) to acquire or lease all equipment, supplies and services necessary for
the design, development, construction, ownership, operation, management and
maintenance of Systems; (iv) to borrow or raise money necessary for the
acquisition, design, development, construction, ownership, operation,
management and maintenance of Systems; (v) to use any contributions from the
Partners for such purposes; (vi) to execute any documents required in
connection with the foregoing; (vii) to do any and all acts and things which
may be necessary, incidental or convenient to carry on the Partnership Business
as contemplated by this Agreement; and (viii) to take any other action
permissible under the Act in connection with the Partnership Business. The
Partnership may engage in any business other than the Partnership Business as
the Partnership Committee may determine. Notwithstanding anything to the
contrary herein, the Partnership shall not acquire, own, lease, operate, manage
or maintain Systems outside of the 50 states of the United States, the District
of Columbia, Puerto Rico, the Gulf of Mexico and Guam.
(b) Subject to the terms of this Agreement, the Partnership may enter
into, deliver and perform all contracts, agreements and other undertakings and
engage in all activities and transactions as may be necessary or appropriate to
carry out the foregoing purposes. Without limiting the foregoing, the
Partnership may, subject to the terms of this Agreement:
(i) enter into license agreements or other contractual relationships
with the Partners or Systems, regardless of whether the Partnership or any
Partner has an ownership interest in such Systems;
(ii) enter into services agreements or other contractual
relationships with the Partners or other Persons with respect to Systems
owned or managed by the Partners or other Persons;
(iii) acquire, sell, lease, exchange, transfer, assign, encumber,
pledge or mortgage securities and assets in Systems (or licenses or permits
therefor) or otherwise exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to such securities and
assets;
(iv) borrow or raise money and secure the payment of any obligations
of the Partnership by mortgage upon, or pledge or hypothecation of, all or
any part of the assets of the Partnership;
(v) engage personnel, whether part-time or full-time, to do such
acts as are necessary or advisable in connection with the maintenance,
operation and administration of the Partnership and its investments; and
-3-
<PAGE> 9
(vi) engage attorneys, independent accountants, investment bankers,
consultants or such other Persons as are necessary or advisable.
(c) Notwithstanding the foregoing, the Partnership will not engage in any
act that would put the Partnership, or any Partner, in violation of the MFJ.
Specifically, the Partnership will not engage in any activity that would
constitute the provision of interexchange (interLATA) telecommunications
service, the provision of telecommunications equipment, or the manufacture of a
telecommunications product (all as defined by the MFJ, the Decree Court, or
both), unless any such activity has been the subject of a waiver or other
legislative or court relief, or the MFJ otherwise ceases to apply to the
activities of the Partnership.
1.6. Term of the Partnership. The term of the Partnership shall commence on
the date the Certificate of Limited Partnership of the Partnership is filed in
the Office of the Secretary of State of the State of Delaware, and shall
continue through the 99th anniversary thereof, unless earlier dissolved as
provided in Section 8.1. The existence of the Partnership as a separate legal
entity shall continue until the cancellation of the Partnership's Certificate
of Limited Partnership.
1.7. Qualification in Other Jurisdictions. The General Partners shall cause
the Partnership to be qualified, formed, or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership owns property or engages in activities if such qualification,
formation or registration is necessary to permit the Partnership lawfully to
own property and engage in the Partnership's business or transact business.
The General Partners shall execute, file and publish all such certificates,
notices, statements or other instruments necessary to permit the Partnership to
engage in the Partnership's business as a limited partnership in all
jurisdictions where the Partnership elects to engage in or do business.
1.8. Definitions.
(a) For purposes of this Agreement the following terms have the following
meanings (unless indicated otherwise, all Article and Section references are to
Articles and Sections in this Agreement, and all Schedule references are to
Schedules to this Agreement):
"Additional Partner" means a Person admitted to the Partnership pursuant to
Article 9.
"Adjusted Capital Contributions" means, for each Partner, such Partner's
share of the Phase II Assets Value the cumulative amount of such Partner's
contributions to the Partnership (other than contributions of Phase II Assets
or New Par Assets or contributions made pursuant to Article 7 of the
Organization Agreement relating to a Partner's indemnification obligations
thereunder which for purposes of this definition shall be equal to the sum of
(i) the amount of cash, and the Fair Market Value of any other property at the
time of contribution, plus (ii) the cumulative amount of Adjusted Revaluation
Gain, plus (iii) 7.5% of the cumulative amount of such Partner's Make-Up
Contributions which relate to
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<PAGE> 10
another Partner's Defaulted Contributions, less (iv) such Partner's
Noncontributed Assets Value, if any, less (v) the cumulative amount of Adjusted
Revaluation Loss and less (vi) 7.5% of such Partner's Defaulted Contributions.
"Adjusted Revaluation Gain" or "Adjusted Revaluation Loss" means,
respectively, the Revaluation Gain or Revaluation Loss, as the case may be,
with respect to an asset being revalued which would have arisen had the basis
used in computing Revaluation Gain or Revaluation Loss been equal to (i) the
Capital Account book basis of such asset immediately following the later of its
contribution or acquisition or any immediately preceding revaluation under
Section 4.8 hereof, or, (ii) solely for purposes of the first revaluation of
the Phase II Assets or the Phase II Assets Value.
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified; provided, however, that for purposes of this Agreement, (i)
the Partnership shall not be considered an Affiliate of ATI or USW or any
member of the ATI Group or the USW Group, (ii) any wireline cable television
company in which the USW Group and its Affiliates do not have an ownership
interest in excess of 50% shall not be considered an Affiliate of USW or any
member of the USW Group and (iii) CCI shall not be considered an Affiliate of
ATI or any member of the ATI Group until such time, if ever, as ATI shall be
entitled to exercise full discretion with respect to voting the shares of
Common Stock of CCI beneficially owned by ATI (other than shares of common
stock of CCI beneficially owned by ATI by virtue of its ownership of the Class
A Preference Stock of CCI). For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") of a Person means the possession, direct or indirect, of the
power to (i) vote in excess of 50% of the Voting Stock of such Person or (ii)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement" means this Agreement of Limited Partnership of the Partnership,
as it may be amended, supplemented or restated from time to time.
"Agreement of Exchange" means the Agreement of Exchange, dated as of July 25,
1994, by and between ATI and USW.
"Appraiser" means any of the First Appraiser, the Second Appraiser and the
Third Appraiser.
"Appraiser's Certificate" means a certificate prepared by an Appraiser,
executed on behalf of an Appraiser by a duly authorized officer thereof, and
setting forth such Appraiser's opinion as to the Fair Market Value or Private
Market Value of an asset.
"ATI" means AirTouch Communications, a California corporation.
"ATI Group" means the Persons set forth on Schedule 1-A and any Affiliate
Transferees thereof, unless or until the ATI Group ceases to be designated as a
Group hereunder.
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<PAGE> 11
"ATI RP" means the member of the ATI Group that is a Representative Partner
as specified in Section 2.1.
"Attributed Entity" means, with respect to any Partner, any Person whose
ownership of Systems (or licenses or permits therefor) would be attributable,
in whole or in part, to such Partner under applicable FCC regulations.
"Bankruptcy" of a Partner means (i) the filing by such Partner of a voluntary
petition seeking liquidation, reorganization, arrangement or readjustment, in
any form, of its debts under Title 11 of the United States Code (or
corresponding provisions of future laws) or any other bankruptcy or insolvency
law, or such Partner's filing an answer consenting to or acquiescing in any
such petition, (ii) the making by such Partner of any assignment for the
benefit of its creditors or the admission by such Partner in writing of its
inability to pay its debts as they mature or (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), an application for the
appointment of a receiver for the assets of such Partner, or an involuntary
petition seeking liquidation, reorganization, arrangement, composition,
dissolution or readjustment of its debts or similar relief under any bankruptcy
or insolvency law; provided that the same shall not have been vacated, set
aside or stayed within such 60-day period.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as amended.
"Beneficial Phase II Assets" means, with respect to any Partner, the Phase II
Assets of such Partner (other than any New Par Assets) which are not
contributed to the capital of the Partnership on or before the Phase II
Contribution Date.
"Budget" means a one-year revenue, expense and capital expenditure budget for
the Partnership, as it may be amended from time to time in accordance with the
terms of this Agreement.
"Business Plan" means a five-year business plan for the Partnership, as it
may be amended from time to time in accordance with the terms of this
Agreement, which shall include (i) an annual operating budget for each year
contemplated in the business plan; (ii) a five-year financial plan for the
Partnership; and (iii) a general description of the key underlying assumptions
and key strategies.
"Capital Account" means the capital account maintained by the Partnership for
each Partner as described in Section 4.1.
"CCI" means Cellular Communications, Inc., a Delaware corporation.
"Cellular Service" means the provision of any commercial mobile radio service
by a Cellular System, including the resale of such service.
"Cellular System" means a radio communications system authorized under the
rules for the domestic public cellular radio telecommunications service
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<PAGE> 12
designated as Subpart K of Part 22 of the FCC's rules in effect on the
Effective Date, or any revision thereto or successor thereof which may be in
effect from time to time, including the network, marketing, distribution,
sales, customer interface and operations functions relating thereto.
"CECO" means the Civil Enforcement Consent Order entered by the Decree Court
on February 2, 1989.
"CECO Decree Committee" means the committee created by USW pursuant to CECO
for the review of USW's business activities.
"Change of Control" has the meaning set forth in the Investment Agreement,
dated as of July 25, 1994, by and between ATI and USW.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means all confidential documents and information
(including, without limitation, confidential commercial information and
information with respect to customers and proprietary technologies or processes
and the design and development of new products or services) concerning the
Partnership, the Owned Systems, the Licensed Systems, other Systems in which
the Partnership has an ownership interest, the Partners or their Affiliates
furnished to a Partner in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Partnership, the Owned
Systems, the Licensed Systems, other Systems in which the Partnership has an
ownership interest or their respective businesses, except to the extent that
such information can be shown to have been (a) generally available to the
public other than as a result of a breach of the provisions of Section 2.14 of
this Agreement; (b) already in the possession of the receiving Person or its
Representatives (as such term is defined in Section 2.14 hereof) without
restriction and prior to any disclosure in connection with the Partnership or
pursuant to any of the terms of this Agreement; (c) lawfully disclosed to the
receiving Person or its Representatives by a third party who is free lawfully
to disclose the same; or (d) independently developed by the receiving Person
without use of any Confidential Information obtained in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Partnership, the Owned Systems, other Systems in which the Partnership
has an ownership interest and the Licensed Systems or their respective
businesses.
"Debt-to-Cash Flow Ratio" means, as of any date of determination, the ratio
of (a) the aggregate principal amount outstanding of indebtedness for borrowed
money of the Partnership to (b) (i) the Cash Flow of the Partnership for the
most recently completed fiscal quarter, multiplied by (ii) four. For purposes
of this definition, "Cash Flow" of the Partnership means, for any period, the
net income of, or otherwise derived from, the Partnership for such period, plus
the sum of depreciation, amortization and other non-cash charges to income for
such period, in each case to the extent deducted in determining such net
income, plus or minus other funds from operations, all as determined on a
consolidated basis in accordance with GAAP, or such other measurement of cash
flow from operations as may, from time to time, be utilized by Standard & Poors
in connection with determining debt ratings.
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<PAGE> 13
"Debt-to-Total Book Capital" means, as of any date of determination, the
percentage equivalent of (a) the aggregate principal amount outstanding of
indebtedness for borrowed money of the Partnership, divided by (b) the sum of
(i) the aggregate capital, surplus, retained earnings of the Partnership and
(ii) the aggregate principal amount outstanding of indebtedness for borrowed
money of the Partnership, in each case, as would be shown on the consolidated
balance sheet of the Partnership prepared in accordance with GAAP.
"Decree Court" means the court having original jurisdiction over MFJ waivers.
"Defaulted Contributions" means, for each Partner, the cumulative amount of
any capital contributions required to be made under Section 4.4(a) which have
not been made by such Partner prior to expiration of the 15-day grace period
provided for in Section 4.4(b), regardless of whether such amounts are
thereafter contributed; provided that such capital contributions had been
specifically identified as to use (i) in a Budget approved pursuant to Section
2.11(a), (ii) in a Budget for the following year approved pursuant to Section
2.11(b), or (iii) by other action of the Partnership Committee, and in any such
case, had been voted for by such Partner's Group.
"Domestic Cellular Investment Entity" shall have the meaning set forth in the
Organization Agreement.
"Domestic Cellular Subsidiary" shall have the meaning set forth in the
Organization Agreement.
"Effective Date" means July 25, 1994.
"ESMR Service" means the provision of any commercial mobile radio service by
an ESMR System, including the resale of such services.
"ESMR System" means a radio communications system authorized under the rules
for Enhanced Specialized Mobile Radio services designated under Subpart S of
Part 90 of the FCC's rules in effect on the Effective Date, or any revision or
successor thereof which may be in effect from time to time, including the
network, marketing, distribution, sales, customer interface and operations
functions relating thereto.
"EO" means the Enforcement Order entered by the Decree Court on February 15,
1991.
"Fair Market Value" means, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such asset in an arm's-length negotiated transaction
with an unaffiliated third party without time constraints.
"FCC" means the Federal Communications Commission or any successor agency or
entity performing substantially the same functions.
"GAAP" means generally accepted accounting principles.
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<PAGE> 14
"General Partner" means each member of the ATI Group and each member of the
USW Group, and includes any Person who becomes an additional general partner of
the Partnership or a substitute general partner of the Partnership pursuant to
the provisions of this Agreement.
"General Partner Percentage Interest" means, with respect to any Partner, the
Percentage Interest of such Partner as a general partner of the Partnership.
"Group" means (i) the ATI Group, (ii) the USW Group, (iii) any Person
admitted to the Partnership as both an Additional General Partner and an
Additional Limited Partner pursuant to Article 9 and designated as a Group upon
such admission or (iv) any Person (and any Affiliate Transferee thereof) who
acquires all of the Partnership Interests held by any of the foregoing in
accordance with Section 10.3 and becomes a Substitute General Partner and a
Substitute Limited Partner pursuant to Article 10; provided that a Group may
cease to be designated as a Group at any time in accordance with the provisions
of Section 10.3(g).
"Make-Up Contributions" means, for each Partner, the amount of any capital
contribution made by such Partner which such Partner is permitted, but not
required, to make under Section 4.4(b) upon failure of another Partner to make
a required capital contribution.
"License Agreement" means an agreement to be entered into by the Partnership
and certain Domestic Cellular Subsidiaries and Domestic Cellular Investment
Entities of the Partners and other Systems, as contemplated by Section 3.2 and
Exhibit A hereto and incorporating such terms and conditions as, with respect
to each such license, may be approved by the Partnership Committee or the
President, as the case may be.
"Licensed Systems" means, collectively, each System with respect to which the
Partnership performs certain services pursuant to a License Agreement and,
individually, any one of the foregoing Systems; provided that USW's San Diego
Cellular Property and ATI's Tucson Cellular Interest, as defined in the
Organization Agreement, will not be Licensed Systems.
"Limited Partner" means each member of the ATI Group and each member of the
USW Group, and includes any Person admitted as an additional limited partner of
the Partnership or a substitute limited partner of the Partnership pursuant to
the provisions of this Agreement.
"Limited Partner Percentage Interest" means, with respect to any Partner, the
Percentage Interest of such Partner as a limited partner of the Partnership.
"Member" means a member of the Partnership Committee.
"MFJ" means the Modification of Final Judgment entered in United States v.
AT&T, 552 F. Supp. 131 (D.D.C. 1982), and as subsequently modified from time to
time, or any legislative scheme embodying substantially similar restrictions.
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<PAGE> 15
"MFJ Compliance Committee" means the committee created by USW pursuant to the
EO for the review of USW's business practices.
"MFJ Restricted Activity" means an activity or business the undertaking of
which by the Partnership would cause the Partnership, or any Partner, to be in
violation of the MFJ.
"Net Operating Available Cash" means, at the time of determination, (a) all
cash and cash equivalents on hand in the Partnership, less (b) the Forecast
Cash Requirements, if any, of the Partnership, as determined by the Partnership
Committee in a manner consistent with an Approved Budget. "Forecast Cash
Requirements" means, for the four-month period following the date of
determination, the excess, if any, of (a) forecast capital expenditures,
capital contributions to other entities and other investments, acquisitions,
cash income tax payments and debt service including principal and interest
requirements and other non-cash credits to income, plus forecast cash reserves
for future operations or other requirements, over (b) forecast net income of
the Partnership, plus the sum of forecast depreciation, amortization, interest
expenses, income tax expenses and other non-cash charges to income, in each
case to the extent deducted in determining such net income, plus or minus
forecast changes in working capital, plus the forecast cash proceeds of
dispositions of assets (net of expenses), plus an amount equal to the forecast
net proceeds of debt financings.
"New Par Assets" means all of the ownership interests in, or assets of, New
Par, a Delaware general partnership.
"New Par Contribution Date" means the later of (i) the Phase II Contribution
Date and (ii) the date ATI and its Affiliates shall have directly or indirectly
acquired the New Par Assets, received all required regulatory approvals for the
contribution of such assets to the Partnership, and contributed the New Par
Assets to the Partnership.
"Noncontributed Assets" means, with respect to any Partner, the Beneficial
Phase II Assets of such Partner which are not contributed to the capital of the
Partnership on or before their respective Noncontributed Assets Recalculation
Dates.
"Noncontributed Assets Recalculation Date" means, with respect to any
Beneficial Phase II Asset of a Partner, the earliest of (i) the date such
Beneficial Phase II Asset is assigned, sold, transferred or otherwise disposed
of by such Partner, (ii) the date such Partner ceases to be a Partner and (iii)
the fifth anniversary of the Phase II Contribution Date.
"Noncontributed Assets Value" means, with respect to any Partner, the Fair
Market Value (determined in accordance with Section 4.10) of such Partner's
Noncontributed Assets as of their respective Noncontributed Assets
Recalculation Dates.
"Organization Agreement" means the Joint Venture Organization Agreement,
dated as of July 25, 1994, between USW and ATI, as amended, modified or
supplemented from time to time.
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<PAGE> 16
"Owned System" means any System (a) in which the Partnership owns, directly
or indirectly, an equity interest, or which is leased by the Partnership and
(b) with respect to which the Partnership possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.
"Parent Entity" means, as to any Person, an Affiliate of which such Person is
a Wholly Owned Subsidiary.
"Partner" means a member of the ATI Group or of the USW Group that is a
General Partner and Limited Partner of the Partnership under this Agreement and
any Additional or Substitute General Partner or Limited Partner of the
Partnership. Members of the ATI Group and members of the USW Group executing
this Agreement on the date hereof shall be admitted as Partners of the
Partnership on the date hereof. A Person who is not admitted on the date
hereof as a partner of the Partnership shall be deemed admitted as a Partner
upon satisfaction of the requirements of Section 9.1 of this Agreement and upon
execution by or on behalf of such Person of this Agreement or a counterpart
hereof.
"Partnership Interest" means, for each Partner separately, all of the
Partner's interest in, and rights and obligations in connection with, the
Partnership whether as a General Partner or Limited Partner.
"PCS Assets" means all ownership interests in PCS Par.
"PCS Contribution Date" means the Phase II Contribution Date, unless the USW
RP, in its sole discretion, elects to postpone the PCS Contribution Date to a
date not later than the third anniversary of the date that PCS Par first
acquires (through the FCC auctions or otherwise) a broad band PCS license, in
which case it shall be such later date.
"PCS Par" means PCS Nucleus, L.P., a Delaware limited partnership.
"PCS Service" means the provision of any commercial mobile radio service by a
PCS System, including the resale of such service.
"PCS System" means a radio communications system authorized under the rules
for broadband personal communications services designated as Subpart E of Part
24 of the FCC's rules in effect on the Effective Date, or any revision thereto
or successor thereof which may be in effect from time to time, including the
network, marketing, distribution, sales, customer interface and operations
functions relating thereto.
"Percentage Interest" means, for each Partner, the Percentage Interests set
forth opposite such Partner's name on Schedules 1-A and 1-B.
"Person" means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust, estate,
unincorporated organization, governmental or regulatory body or other entity.
"Phase I Closing Date" means the date of the Phase I Closing (as defined in
the Organization Agreement).
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<PAGE> 17
"Phase II Assets" means the assets set forth on Schedule 2 hereto to be
contributed to the Partnership by the USW Group and the ATI Group on the Phase
II Contribution Date.
"Phase II Assets Percentage" means, with respect to the ATI Group or the USW
Group, for any period, the percentage set forth opposite such Group's name on
Schedule(s) ____ hereto.
"Phase II Assets Value" means (i) with respect to the USW Group, the product
of (a) the Phase II Assets Percentage of the USW Group, multiplied by (b) the
aggregate Fair Market Value of the Phase II Assets determined in accordance
with Section 4.10 and (ii) with respect to the ATI Group, the product of (a)
the Phase II Assets Percentage of the ATI Group, multiplied by (b) the
aggregate Fair Market Value of the Phase II Assets determined in accordance
with Section 4.10, in each case, as of the date of determination, or if such
date of determination is after the Phase II Contribution Date, the Phase II
Contribution Date.
"Phase II Contribution Date" means the Phase II Closing Date (as defined in
the Organization Agreement).
"President" means the President of the Partnership.
"Prime Rate" means the rate announced, from time to time, by Bank of America
NT&SA at its home office as its prime rate.
"Private Market Value" means, with respect to any asset, as of the date of
determination, the Fair Market Value of such asset adjusted to include (to the
extent not previously included) any control premium inherent therein (or, in
the case of an interest in the Partnership, adjusted to include a pro rata
share of any control premium inherent in a sale of the Partnership as a whole).
"Revaluation Gain" means the amount of gain which would have been realized
had there been a taxable disposition of any Partnership asset being revalued
under Section 4.8 for an amount of cash equal to such asset's then Fair Market
Value, determined in accordance with the provisions of Section 4.10 hereof.
"Revaluation Loss" means the amount of loss which would have been realized
had there been a taxable disposition of any Partnership asset being revalued
under Section 4.8 for an amount of cash equal to such asset's then Fair Market
Value, determined in accordance with the provisions of Section 4.10 hereof.
"Services Agreement" means an agreement to be entered into by the Partnership
and certain Domestic Cellular Subsidiaries and Domestic Cellular Investment
Entities of the Partners and other Systems, as contemplated by Section 3.2 and
Exhibit B hereto and incorporating such terms and conditions as may be approved
by the Partnership Committee or the President, as the case may be.
"Substitute Partner" means a Person admitted to the Partnership pursuant to
Article 10.
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<PAGE> 18
"Supermajority Vote" means the affirmative vote of (a) Members representing
Groups whose aggregate Percentage Interests equal or exceed 80% of the
Percentage Interests of the Groups entitled to vote thereon or (b) pursuant to
Section 2.4(b), the Members representing the ATI Group and the Independent
Member.
"System" means a Cellular System, an ESMR System or a PCS System, or any
business or enterprise which resells the Cellular, ESMR or PCS Services
provided by any of the foregoing.
"Tax Matters Partner" means the Tax Matters Partner of the Partnership as
referred to in Section 6.2.
"Taxes" means all taxes, charges, fees, levies or other assessments imposed
by any taxing authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments) and "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect
to Taxes.
"USW" means U S West, Inc., a Colorado corporation.
"USW Group" means the Persons set forth on Schedule 1-B and any Affiliate
Transferees thereof unless and until the USW Group ceases to be designated as a
Group hereunder.
"USW RP" means the member of the USW Group that is a Representative Partner
as specified in Section 2.1.
"Voting Stock" means capital stock issued by a corporation, or comparable
interests in any other Person, the holders of which are ordinarily entitled to
vote for the election of directors (or Persons performing similar functions) of
such Person.
"Wholly Owned Affiliate" means, as to any Person, a Parent Entity or any
Affiliate that is a Wholly Owned Subsidiary of such Parent Entity.
"Wholly Owned Subsidiary" means, as to any Person, a corporation or other
entity all of the capital stock or other equity interests of which corporation
or entity is at the time owned, directly or indirectly, through one or more
intermediaries, or both, by such Person.
"Wireless Assets" means, with respect to any Partner, all of such Partner's
interests in its Phase II Assets, PCS Par and the Partnership.
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<PAGE> 19
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
<S> <C>
Approved Budget 2.11(a)
Approved Business Plan 2.10(a)
Act 1.1
Affiliate Transferee 10.2
CFO 2.9
Default Fees 4.4
Exchange Act 2.7(d)
Executive Officers 2.9
Indemnified Party 7.1
Independent Member 2.2(a)
Late Fees 4.4
LEC Affiliates 2.4(e)
Member 2.2(a)
Partial Interest 10.2
Partnership 1.1
Partnership Business 1.5(a)
Partnership Committee 2.2(a)
Related Party Agreement 2.16
System Manager 3.3(a)
</TABLE>
ARTICLE 2
MANAGEMENT
2.1. Representative Partners.
(a) The General Partners of each Group, as such, shall be entitled
collectively to designate one Person to serve as a Representative Partner of
the Partnership with the rights and obligations set forth in this Agreement.
The Representative Partners, together with the Partnership Committee and the
President, shall cause the Partnership to fulfill the Partnership's obligations
under the Agreement and to enforce all rights of the Partnership under this
Agreement and the Organization Agreement. Except as otherwise expressly
provided herein, a Representative Partner may bind the other Partners of its
Group with respect to any determination made or action taken in connection with
this Agreement. The General Partners of any Group may, at any time, with or
without cause, collectively replace the Representative Partner designated by
such Group.
(b) Except as otherwise required by the Act, no vote or approval
by any Limited Partner, or class or group thereof, shall be required under this
Agreement for the taking of any action, including without limitation the
amendment of this Agreement, and the Percentage Interest of any Limited Partner
who is not also a General Partner shall not be included in any calculation of a
Partner's Percentage Interest entitled to vote on any matter.
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<PAGE> 20
2.2. Partnership Committee.
(a) The partnership committee of the Partnership (the "Partnership
Committee") shall be vested with the full authority of the General Partners and
shall be composed of four individuals appointed by the ATI RP and three
individuals appointed by each other Representative Partner (collectively the
"Members" and individually a "Member"), or in each case, such lesser number of
Members as may be determined by a vote of Members representing each Group. In
the event, and as long as, there are only two Representative Partners, the
Representative Partners shall appoint one additional individual (the
"Independent Member") to serve on the Partnership Committee as set forth in
subsection (b) below.
(b) (i) Within 60 days after the Effective Date, each Representative
Partner shall nominate two individuals to serve as the initial Independent
Member. If the Representative Partners are unable to agree on the appointment
of an Independent Member from among the four nominees within 15 days after the
nomination of such individuals, the selection of the initial Independent Member
shall be determined in accordance with Section 2.7.
(ii) The Independent Member will serve for an initial term to be
mutually agreed upon by the Representative Partners, not to exceed three years,
or until a third Representative Partner is appointed. The Representative
Partners will agree on five individuals (the "Replacement Pool"), one of whom
would replace the Independent Member (A) upon expiration of his term (unless
the Independent Member is reappointed for another term), (B) his death or
resignation, or (C) his removal by unanimous vote of the Representative
Partners. In any such event, the Representative Partners will select an
individual from the Replacement Pool to replace the incumbent Independent
Member. If the Representative Partners are unable to agree on a replacement,
the Independent Member will name his replacement from one of the five
individuals. If the Representative Partners are unable to agree and if the
Independent Member is unable to name his replacement, each of the
Representative Partners will eliminate two of the five individuals from the
Replacement Pool, with the remaining individual becoming the Independent
Member. If an individual in the Replacement Pool is selected to become the
Independent Member, or dies, resigns, is removed from the Replacement Pool by
unanimous vote of the Representative Partners or otherwise becomes incapable of
serving as an Independent Member, the Representative Partners will agree on an
individual to replace such individual in the Replacement Pool. If the
Representative Partners are unable to agree on a replacement, the individuals
in the Replacement Pool will name such replacement.
(c) Effective upon the giving of notice thereof to the other
Partners, any Representative Partner may, at any time, in its sole discretion,
replace any or all of its appointed Members with other individuals and may
designate one or more alternates for any or all of its Members. Each Member
must be an officer or employee of a Partner or an Affiliate thereof. Each
Member shall serve on the Partnership Committee until his successor is
appointed, or until his earlier death, resignation or removal. Effective upon
a Group's ceasing to be designated as such, the Members representing such Group
on the Partnership Committee shall cease to be Members.
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<PAGE> 21
(d) Except as reserved herein for, or otherwise delegated to, the
Representative Partners or the President, the Partnership Committee shall have
authority and discretion to act on behalf of the Partnership on all matters
that a board of directors of a Delaware corporation would have, including,
without limitation, on the matters set forth in Section 2.4 or elsewhere herein
and with respect to the following matters:
(i) the appointment and removal of the President;
(ii) the determination to require capital contributions not
otherwise contemplated in an Approved Budget;
(iii) the authorization of any acquisition or disposition of
assets having a Fair Market Value in excess of $25 million not
otherwise contemplated by an Approved Budget;
(iv) the delegation of powers and authority of the
Partnership Committee to the President (other than with respect to the
matters set forth in Section 2.4(c) or (d));
(v) the compensation of the President and Executive Officers;
and
(vi) except as provided in Section 2.8(c)(vii) or Section
2.16(b) hereof, the entering into of any Related Party Agreement.
Each Partner, by execution of this Agreement, agrees to, consents to, and
acknowledges the delegation of powers and authority to such Members, and to the
actions and decisions of such Members within the scope of such Members'
authority as provided herein.
(e) The Partnership Committee shall receive such reports and
information from the President and Executive Officers as are usually provided
to the board of directors of a publicly held Delaware corporation of similar
size.
2.3. Partnership Committee Meetings.
(a) The Partnership Committee shall hold regular meetings (at
least quarterly) at such time and place as shall be determined by the
Partnership Committee (or by the Chairman of the Partnership Committee).
Special meetings of the Partnership Committee may be called at any time by any
Representative Partner by delivering a notice of meeting in accordance with
Section 2.3(g) hereof. Each Representative Partner shall be limited to calling
two special meetings per year.
(b) The Chairman of the Partnership Committee shall be appointed
by the Partnership Committee from time to time. The Chairman shall establish
the agendas for, and regulate the proceeding of, meetings of the Partnership
Committee, but must include on such agendas matters requested by any
Representative Partner in writing received at least two business days in
advance of any meeting.
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<PAGE> 22
(c) Members may participate in a meeting of the Partnership
Committee by conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(d) Any action required or permitted to be taken at any meeting of
the Partnership Committee may be taken without a meeting upon the unanimous
written consent of at least one Member representing each Group.
(e) The Partnership Committee shall appoint a Secretary from time
to time. The Secretary shall keep written minutes of all Partnership Committee
meetings. A duplicate copy of such minutes shall be provided to the Chairman
of the Partnership Committee and to each Member.
(f) A Member shall have the right to designate an alternate to
attend meetings of the Partnership Committee, in stead and in place of such
Member, and to exercise all of the functions of such Member. Any such
alternate shall be an officer or employee of a General Partner or an Affiliate
thereof. Any such alternate shall be deemed to be a Member for all purposes
hereunder until such designation is revoked.
(g) Notice of each regular meeting and each special meeting of the
Partnership Committee shall be given to each Member at least five business days
before such meeting. Notices of special meetings shall contain a description,
in reasonable detail, of the items of business to be conducted at such meeting
and no business other than those items (unless expressly agreed to by Members
representing each of the Groups whose Members are entitled to vote thereon) may
be conducted at such special meeting. The notice provisions of this Section
2.3(g) shall be waived upon either the signing of a written waiver thereof or
attendance at a meeting by Members representing each Group.
2.4. Voting.
(a) On any matter on which a vote of the Partnership Committee is
taken, the Members representing a Group, if more than one Member has been
designated and is present at a meeting, shall vote the entire Percentage
Interest of such Group as a single bloc. Except as provided in Sections 2.4(c)
and (d) or elsewhere herein, any action taken by the Partnership Committee
shall require the vote of Members representing Groups who hold a majority of
the aggregate Percentage Interests of the Groups entitled to vote thereon;
provided that in the event that all Members representing any Group shall
abstain from the vote on any matter (because of a conflict of interest or for
any other reason), the outcome of such vote shall be determined by the vote of
Members representing Groups who hold a majority of the Percentage Interests of
the other Groups entitled to vote on such matter, and such vote shall
constitute the act of the Partnership Committee with respect to such matter. A
quorum of any meeting of the Partnership Committee shall require the presence
of Members who represent Groups holding a majority of the Percentage Interests
entitled to be voted by all Members; provided that the presence of at least one
Member representing each Group is required to have a quorum to conduct any
business referred to in Section 2.4(c) below and the presence of at least one
Member representing each of the ATI and one other Group (or the Independent
Member, if there are only
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two Groups) is required to have a quorum to conduct any business referred to in
2.4(d) below.
(b) The Independent Member, if one has been appointed pursuant to
Section 2.2, shall attend all meetings of the Partnership Committee and shall
receive all information regarding the Partnership made available to the
Partnership Committee, but shall be entitled to vote only with respect to the
matters set forth in Section 2.4(d). The Independent Member shall not be
deemed to represent any Group.
(c) The Partnership shall not take any of the following actions,
unless such action has been approved by the Members representing each Group:
(i) any amendment of this Agreement;
(ii) any determination to engage in any business other than
the Partnership Business;
(iii) except as provided in Article 10, the admission of any
Additional General and Limited Partners to the Partnership;
(iv) the dissolution or liquidation of the Partnership;
(v) a merger or consolidation of the Partnership with or into
another Person (other than a merger or consolidation in which the
Partnership is the surviving entity in connection with a cash
acquisition of assets approved by the Partnership Committee or
President as provided herein), or the sale of all or substantially all
of the Partnership's assets;
(vi) the authorization of any acquisition (or series of
related acquisitions) or disposition (or series of related
dispositions) of assets having a Fair Market Value, in each case, in
excess of $500 million, not otherwise specifically identified in an
Approved Budget which has been voted for by the Members representing
each Group;
(vii) a determination to require capital contributions (not
otherwise specifically identified as to use in an Approved Budget
which has been voted for by the Members representing each Group)
within any fiscal year if the total contributions required from the
Partners within that period would exceed $1 billion;
(viii) the authorization of the incurrence by the Partnership
of indebtedness for borrowed money, if after giving effect to such
incurrence, (A) the Debt-to-Total Book Capital of the Partnership
would exceed 30% or the Debt-to-Cash Flow Ratio of the Partnership
would exceed 1.5;provided that, following the Phase II Contribution
Date, the Partnership Committee shall consider and, acting by vote of
the Members representing each Group, may increase the ratios set forth
above to levels consistent with Standard & Poors' then current
guidelines for "investment grade" wireless communications companies.
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(ix) the approval of the initial Budget and initial Business
Plan; and
(x) the approval of the initial License Agreements and
Services Agreements.
(d) The Partnership shall not take any of the following actions,
unless such action has been approved by a Supermajority Vote:
(i) the approval of Budgets and Business Plans, and
material amendments or revisions thereto, provided that no such
approval shall be deemed to be an approval of any of the matters set
forth in Section 2.4(c) by the Members representing any Group who
voted not to approve;
(ii) a determination to require capital contributions (not
otherwise contemplated in an Approved Budget) within any fiscal year
if the total contributions required from the Partners within that
period would exceed $200 million;
(iii) the authorization of a material change to the License
Agreements;
(iv) the authorization of a material change to the Services
Agreements;
(v) the authorization of any acquisition (or series of
related acquisitions) or disposition (or series of related
dispositions) of assets having a Fair Market Value in excess of $100
million not otherwise contemplated in an Approved Budget; and
(vi) any distribution to the Partners of Partnership assets,
other than Net Operating Available Cash, not otherwise contemplated in
an Approved Budget.
(e)(i) Notwithstanding the foregoing, Members designated by the USW
Group shall not be entitled to participate in discussions or votes specifically
relating to the Partnership's then existing or planned operations in any market
served by a USW local exchange carrier Affiliate (a "LEC Affiliate"), if such
existing or planned operations of the Partnership could reasonably be expected
to compete or conflict with, in any material respect, the then existing or
planned wireless communications operations owned or conducted by USW's LEC
Affiliate. Nothing in this Section 2.4(e) shall restrict the manner in which
Members representing the USW Group shall participate in deliberations,
discussions or votes of the Partnership Committee with respect to the Budget
and Business Plan of the Partnership; provided that such Members shall act in
good faith and in the best interest of the Partnership without regard to any
such competitive considerations. USW agrees that no Member designated by USW
shall participate in decisions regarding the existing or planned wireless
communications operations of USW's LEC Affiliates, whether through the
furnishing of advice or information or otherwise, it being understood that
certain Members designated by USW may have ultimate responsibility for those
who participate
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in such decisions (and that such Members shall not be deemed to have
participated in such decision solely by virtue of having such ultimate
responsibility).
(ii) Without limitation of the obligations of the members of USW
Group under Section 2.14, neither USW nor any Members appointed by USW shall
provide to any LEC Affiliate operating data or financial or other information
with respect to the Partnership's existing or planned operations in the local
exchange markets of such LEC Affiliate.
(iii) Notwithstanding anything to the contrary set forth herein, in
the event that pursuant to Section 2.4(c)(vi) the Members representing the USW
Group shall vote against any acquisition of assets by the Partnership in a
market served by a USW LEC Affiliate, ATI shall have the option to loan to the
Partnership, on terms and conditions no less favorable than could be obtained
from a third party, an amount equal to the difference of (A) the purchase price
of such assets, minus (B) $500 million, and the Partnership shall pursue such
acquisition notwithstanding the vote of the Members representing the USW Group.
2.5. No Compensation. No Member (other than any Independent Member)
shall be compensated for his services as a member of the Partnership Committee
from the assets of the Partnership, nor shall such Member be reimbursed by the
Partnership for out-of-pocket expenses incurred in connection therewith. An
Independent Member shall be entitled to such compensation and reimbursement of
out-of-pocket expenses as may be determined from time to time by the
Partnership Committee.
2.6. Acts by Partners. Other than actions of the Tax Matters Partner
pursuant to Sections 6.1 and 6.2 hereof, no Partner shall take, or commit the
Partnership to take, any action, either in its own name in respect of the
Partnership or in the name of the Partnership, without the prior approval of
the Partnership Committee.
2.7. Procedures in the Event of a Dispute.
(a) In cases where the Members are unable to reach agreement on
the matters specified in Section 2.4(d)(i) (or the selection from time to time
of an Independent Member or individuals in the Replacement Pool), the dispute
shall be resolved in the following manner:
(i) First, the Representative Partners shall refer the
disputed matter to the Chairmen of their respective publicly held
Parent Entities in an attempt to reach a resolution; and
(ii) Second, if the Chairmen are unable to resolve a disputed
matter within 60 days after the referral to them of a dispute (or such
longer period of time as to which the Chairmen mutually agree in
writing), the dispute shall be submitted to the respective Boards of
Directors of the Representative Partners' publicly held Parent
Entities in an attempt to reach a resolution.
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(b) From and after the tenth anniversary of the Effective Date or
at any time following a Change of Control of the ultimate Parent Entity of any
Representative Partner (other than ATI), if the Boards of Directors of the
publicly held Parent Entities of the Representative Partners are unable to
resolve a disputed matter arising under Section 2.4(d)(i) above within one year
after the expiration of the 60-day period specified in (a)(ii) above and, since
the date of such dispute, the Partnership shall not have approved a Business
Plan pursuant to Section 2.10, the ATI RP shall have the option, exercisable
for a 90-day period, to elect to cause the Exchange contemplated by Section 1.1
of the Agreement of Exchange (in the case of a dispute involving any member of
the USW Group) or by a similar provision of any agreement of exchange with ATI
entered into pursuant to Article 10 (in the case of a dispute involving any
other Representative Partner).
(c) If the ATI RP's option to elect to cause the Exchange with
respect to the USW Group (as set forth in (b) above) arises prior to the
receipt of Final MFJ Relief (as defined in the Agreement of Exchange), USW
shall be obligated to request a waiver for the benefit of ATI that would enable
ATI to engage in the business and activities then engaged in, or planned to be
engaged in, by ATI.
(d) From and after the tenth anniversary of the Effective Date and
until the fifteenth anniversary of the Effective Date, as long as (i) Final MFJ
Relief shall not have occurred and USW is not willing to execute the Merger
Agreement (as defined in the Agreement of Exchange) and provide ATI with the
protections afforded by Section 3.4 of the Agreement of Exchange, or (ii) the
common stock of ATI shall not be registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or the common stock of ATI shall not
be broadly held or actively traded by public stockholders, then notwithstanding
the provisions of Section 2.4(d), if after the expiration of the one-year
period set forth in (b) above, a disputed matter arising under Section 2.4(d)
remains unresolved and the Partnership shall not have subsequently approved a
Business Plan pursuant to Section 2.10, the Members representing the ATI Group
shall have the right to approve a Budget and a Business Plan for the
Partnership without the approval or vote of the Members representing any other
Group; provided, however, that nothing in this Section 2.7(d) shall relieve the
President of his responsibility under Section 2.10.
2.8. President.
(a) The Partnership's President shall have authority and
discretion comparable to that of a chief executive officer of a publicly held
Delaware corporation of similar size to direct and control the business and
affairs of the Partnership, including without limitation its day-to-day
operations in a manner consistent with the Approved Business Plan and Approved
Budget. Each General Partner and each Member of the Partnership Committee
hereby acknowledges, agrees to and authorizes the delegation of their authority
hereunder pursuant to the preceding sentence and Section 2.8(c).
(b) The President shall be appointed by and serve at the pleasure
of the Partnership Committee. The President may serve, from time to time, as
an executive officer or employee of ATI or any Affiliate thereof.
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(c) Subject to Sections 2.2(d) and 2.4, the President shall be
responsible for and have the authority and discretion for exercising primary
responsibility in managing the staff and operations of the Partnership,
including, but not limited to:
(i) implementing an Approved Business Plan and Approved
Budget, including without limitation, the taking of all actions
contemplated thereby;
(ii) making immaterial changes to, or taking actions which
would constitute an immaterial deviation from, an Approved Business
Plan or Approved Budget;
(iii) operating or coordinating the operations of Owned or
Licensed Systems and acquiring or constructing new Systems;
(iv) preparing proposed revisions to an Approved Business
Plan and Approved Budget for submittal to the Partnership Committee
for approval;
(v) the authorization of any acquisition or disposition of
assets having a Fair Market Value not in excess of $25 million not
otherwise contemplated by an Approved Budget;
(vi) the authorization of Related Party Agreements set forth
in Section 2.16(b) and any other Related Party Agreement that provides
for total annual consideration not exceeding $750,000, the terms and
conditions of which are no less favorable than could be obtained from
a third party;
(vii) making immaterial changes to the License Agreements and
Services Agreements, and implementing such agreements;
(viii) the delegation of powers and authority to the
Executive Officers consistent with the other provisions of this
Agreement; and
(ix) ensuring that the Partnership complies with all
applicable legal requirements.
2.9. Executive Officers.
(a) The executive officers of the Partnership shall consist of a
Chief Financial Officer ("CFO"), a Vice President - Operations, a Vice
President - Marketing, a Vice President - Engineering, a Vice President -
Corporate Strategy/Development and Human Resources, a President - PCS, a Vice
President - Finance, a Vice President - Legal and External Affairs and one or
more Regional Systems Managers (collectively, the "Executive Officers").
(b) Each Executive Officer shall be subject to the direction and
control of the President; provided that the Vice President - Finance shall also
report to the CFO. Each Executive Officer shall be appointed by the President.
The initial Executive Officers shall be appointed from
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candidates recommended by the Representative Partners, based on a review of the
candidates' qualifications. All subsequent appointments of Executive Officers
(other than the officer holding the Long-Term Position, as defined below) will
be made based on the most qualified candidate for the office regardless of
whether such individual is or was employed by a Partner or any Affiliate
thereof. The CFO, the Vice President - Corporate Strategy/Development and
Human Resources and the Vice President - Legal and External Affairs may serve,
from time to time, as executive officers or employees of ATI or USW or any
Affiliates thereof.
(c) Each Executive Officer shall hold office until his death,
resignation or removal. Any Executive Officer, other than the officer holding
the Initial Position (as defined below), may be removed with or without cause,
at any time, by the President. The President may remove the officer holding
the Initial Position only for reasonable cause.
(d) The President shall interview and evaluate the qualifications
of each of the candidates recommended by the USW RP as initial Executive
Officers and shall select two of such candidates to occupy respectively
designated Executive Officer positions (other than Vice President - Legal and
External Affairs). Within 30 days after the Effective Date, the USW RP shall
designate one of these two officer positions as the "Initial Position" and the
other as the "Long-Term Position." Until the tenth anniversary of the
Effective Date, the USW RP shall be entitled to designate a candidate, who must
be reasonably acceptable to the ATI RP, to replace the officer in the Long-Term
Position upon his death, resignation or removal.
2.10. Business Plan. The President shall submit to the Partnership
Committee a Business Plan for the Partnership, not less frequently than
annually, at least 30 days prior to the start of the first fiscal year covered
by such Business Plan. Each such Business Plan shall be considered at the
first meeting of the Partnership Committee following its submission and shall
be subject to the approval of the Partnership Committee in accordance with
Section 2.4(d) or 2.7 hereof. Any such Business Plan (or any amendment
thereto) which is approved by the Partnership Committee in accordance with the
provisions of Section 2.4(d) or 2.7 hereof shall be considered approved for all
purposes of this Agreement until amended or replaced (an "Approved Business
Plan").
2.11. Budget Approval.
(a) The President shall include in his submission of the Business
Plan, a Budget in respect of the Partnership for the next fiscal year,
including an income statement, balance sheet and capital budget prepared on an
accrual basis for the Partnership for the forthcoming fiscal year and a cash
flow statement which shall show in reasonable detail the receipts and
disbursements (including without limitation, the anticipated distributions)
projected for the Partnership for the forthcoming fiscal year and the amount of
any corresponding cash deficiency or surplus, and the amount and due dates of
all required capital contributions, if any. Such Budget shall be prepared on a
basis consistent with the Partnership's financial statements prepared in
accordance with the provisions of Section 6.4 hereof and the Approved Business
Plan. If requested by any Member, the President shall promptly meet with the
Partnership Committee for the purpose of discussing
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such Budget. Each such Budget shall be considered at the first meeting of the
Partnership Committee following submission thereof. Any such Budget (or any
amendment thereto) which is approved by the Partnership Committee in accordance
with Section 2.4(d) or 2.7 hereof shall be considered approved for all purposes
of this Agreement until amended or replaced (an "Approved Budget").
(b) If for any fiscal year no new Budget is agreed upon in
accordance with Section 2.4(d) or 2.7, then for such fiscal year the
Partnership shall be managed in a manner consistent with the forecasts for such
fiscal year included in the then Approved Business Plan (such forecasts, as
they relate to either of the two years following a year in which a Budget has
been approved pursuant to Section 2.11(a), being deemed for all purposes of
this Agreement to be an Approved Budget) as adjusted by the President to
reflect the Partnership's contractual obligations for such year and other
changes resulting from the passage of time or the occurrence of events beyond
the control of the Partnership.
2.12. Employees and Employee Benefits. The compensation program,
benefit plans and personnel policies of the Partnership shall be in accordance
with an agreement to be entered into by and among USW, ATI and the Partnership.
2.13. Access to Books of Account. Notwithstanding any other provision
of this Agreement, each Partner shall have the right at all reasonable times
during usual business hours to audit, examine, and make copies or extracts of
or from the complete books of account of the Partnership, including but not
limited to the books and records maintained in accordance with Section 6.4 and
all other books and records of the Partnership. Such right may be exercised
through any agent or employee of such Partner designated by it or by
independent certified public accountants or counsel designated by such Partner.
Each Partner shall bear all expenses incurred in any examination made for such
Partner's account.
2.14. Confidential Information.
(a) Each Partner shall, and shall cause each of its Affiliates,
and its and their respective partners, shareholders, directors, officers,
employees and agents (collectively, "Representatives"), to keep secret and
retain in strictest confidence, except as provided in subsection (c) hereof,
any and all Confidential Information and shall not distribute, disseminate or
disclose such Confidential Information, and shall cause its Representatives not
to distribute, disseminate or disclose such Confidential Information, except to
(i) the Partnership or any Owned System and their respective agents, (ii) any
lender to the Partnership or any Owned System, (iii) any Partner or any of
their respective Affiliates or other Representatives on a "need to know" basis
in connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, the Licensed Systems, the Owned
Systems and their respective businesses, or (iv) any other Person that agrees
in writing to keep in confidence such Confidential Information in accordance
with the terms of this Section 2.14, and such Partner disclosing Confidential
Information pursuant to this Section 2.14 shall use, and shall cause its
Affiliates and other Representatives to use, such Confidential Information
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only for the benefit of the Partnership in conducting the Partnership Business
or for any other specific purposes for which it was disclosed to such party;
provided that the disclosure of financial statements of, or other information
relating to, the Partnership shall not be deemed to be the disclosure of
Confidential Information (i) to the extent that any Partner is required by law
or GAAP to disclose such financial statements or other information or (ii) to
the extent that in order to sustain a position taken for tax purposes, any
Partner deems it necessary and appropriate to disclose such financial
statements or other information. All Confidential Information disclosed in
connection with the Partnership or pursuant to this Agreement shall remain the
property of the Person whose property it was prior to such disclosure.
(b) No Confidential Information regarding the plans or operations
of any Partner or any Affiliate thereof received or acquired by or disclosed to
any unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership Business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas in which any
other Partner and the unaffiliated Partner and their respective Affiliates
compete in the provision of telecommunications services.
(c) In the event that a Partner or anyone to whom a Partner
transmits any Confidential Information becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
investigative demand or similar process) to disclose any of the Confidential
Information, such Partner will use its best efforts to provide the other
Partners and the Partnership with prompt written notice prior to disclosure
(not less than 24 hours) so that the other Partners and the Partnership may
seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event that such protective order
or other remedy is not obtained, or that the Partnership and the other Partners
waive compliance with the provisions of this Section 2.14, the Partner or
Person who is compelled to disclose such Confidential Information will furnish
only that portion of the Confidential Information which (based on the advice of
counsel) it is legally required to disclose and will exercise its best efforts
to obtain reliable assurance that protective treatment will be accorded the
Confidential Information.
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and representatives to, maintain the confidentiality required by
this Section 2.14 and to destroy or return upon request, all documents and
other materials, and all copies thereof, obtained by such Partner or on its
behalf from either the Partnership or the other Partners or any of their
Affiliates in connection with the transactions leading up to and contemplated
by this Agreement and the operation of the Partnership, the Licensed Systems,
the Owned System and any other System in which the Partnership has an ownership
interest or their respective businesses that are subject to such
confidentiality obligations. The obligations under this
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Section 2.14 shall survive the termination of the Partnership for a period of
five years.
(e) To the fullest extent permitted by law, if a Partner or any of
its Affiliates or Representatives breaches, or threatens to commit a breach of,
this Section 2.14, the other Partners and the Partnership shall have the right
and remedy to have this Section 2.14 specifically enforced pursuant to the
provisions of the Arbitration Agreement referred to Section 13.11, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such other Partners or the Partnership. Nothing in this Section 2.14 shall
be construed to limit the right of any Partner or the Partnership to collect
money damages in the event of breach of this Section 2.14.
2.15. Duty of Partners To Cooperate. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by
the Partnership Committee and as may be necessary or reasonably desirable in
connection with the business of the Partnership.
2.16. Agreements with Partnership and Licensed or Owned Systems.
(a) Any Partner or any Affiliate thereof may enter into and
maintain in effect any contract, agreement, transaction or relationship between
such Partner or Affiliate and the Partnership or any Owned System (a "Related
Party Agreement") on terms and conditions approved by the Partnership Committee
(by vote of Members representing Groups who hold a majority of the Percentage
Interests of the Groups other than the Group of any Partner interested in such
Related Party Agreement) or otherwise pursuant to the terms hereof and may
derive and retain profits therefrom.
(b) Notwithstanding the foregoing, each General Partner and each
Member of the Partnership Committee hereby approves, and authorizes the
Partnership to enter into:
(i) Related Party Agreements with ATI, or any Affiliate
thereof which provides paging or vehicle location services, relating
to (A) co-location of technical site leases (which individually do not
provide for annual rental payments of in excess of $4,000), (B) sales
office leases (which individually do not provide for rental payments
in excess of $400,000), and (C) other Related Party Agreements
relating to paging terminal and cellular switching equipment, joint
mailing and other co-marketing efforts, the aggregate annual
consideration under which does not exceed $1 million and the terms and
conditions of which are no less favorable than could be obtained from
a third party;
(ii) Related Party Agreements with any LEC Affiliate of USW
or any wireline cable television company in which USW has an ownership
interest related to the purchase of Cellular, ESMR or PCS Services
from the Owned Systems for resale in such LEC Affiliate's
local-exchange markets or such wireline cable
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<PAGE> 32
television company's franchise markets, as the case may be; provided
that such agreements provide for reasonable notice of cancellation.
As long as USW or an Affiliate thereof remains a Representative
Partner, the pricing of such services shall be on terms no less
favorable than those offered to any third party (for like types and
volumes of service); provided that if the Partnership provides services
of comparable quality and scope as those available from third parties,
such LEC Affiliate or such wireline cable television company, as the
case may be, shall have entered into an agreement with the Partnership
(and/or the Owned Systems or PCS Par) to purchase its entire
requirements of wireless communications services in such markets from
the Owned Systems or PCS Par; and
(iii) Related Party Agreements with ATI or any Affiliate
thereof related to the purchase of satellite communications services
provided by the Globalstar satellite communications venture, which
agreements may provide that Globalstar will be the exclusive provider
of satellite communications services to the Partnership; provided that
the Partnership shall be entitled to purchase such services at prices
and on terms no less favorable than those offered by Globalstar to any
third party (for like volumes and types of service).
2.17. Insurance and Risk Management. The property and casualty
insurance program for the Partnership shall be integrated into the ATI
insurance program providing customary business insurance coverage as of the
Effective Date. Each Partner hereby consents and agrees that the Partnership
shall compensate ATI for a proportional allocation to the Partnership for
insurance premiums, casualty loss funding pools, and related expenses.
2.18. International.
(a) The Partnership shall provide access during normal business
hours to the facilities of the Systems for the Los Angeles and Seattle markets
to any Affiliate of a Partner which is engaged, in whole or in part, in the
business of offering any type of mobile radio services outside the United
States and its territories and possessions (an "International Affiliate"), for
the purpose of providing facility tours and product demonstrations for
employees of such Affiliate and for third parties who are actual or potential
customers or business partners of such Affiliate; provided that such access
does not cause undue disruption to the conduct of the Partnership's business
activities.
(b) The Partnership and the International Affiliates of the
Partners shall cooperate to develop mutually acceptable licensing arrangements,
which arrangements shall be on an arm's-length basis, relating to billing
systems, information systems, wireless communications technology and know-how,
software, engineering processes and products.
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ARTICLE 3
CERTAIN AGREEMENTS REGARDING OPERATIONS OF LICENSED AND OWNED SYSTEMS
3.1. General; Fiduciary Obligations.
(a) The Partnership shall manage the operations of the Licensed
Systems and Owned Systems, in accordance with their respective budgets and
business plans for such systems then in effect, and the applicable terms of
this Agreement. Between the Effective Date and the Phase I Closing, neither
USW nor ATI nor any of their respective Affiliates shall directly or indirectly
control, supervise or direct, or attempt to control, supervise or direct, the
operation of any of the Systems now licensed to the other party or the other
party's Affiliates. The Partnership will not manage the operations of a
Licensed System (including, without limitation, all the functions specified in
this Article 3) to the extent those operations relate to any MFJ Restricted
Activities undertaken by that Licensed System; the Partners will use best
efforts to negotiate and agree to procedures to monitor the activities of the
Partnership for compliance with this sentence.
(b) The Partners acknowledge that each of the Partners of the
Partnership may have fiduciary obligations to and from other Persons in
connection with the Partnership's interest in or contractual relationships with
any System. Each of the Partnership Committee, the Representative Partners,
and the other Partners shall use all reasonable efforts to cause the
Partnership to comply with all such fiduciary obligations, and the obligations
of the Partnership, the Partnership Committee, the Representative Partners and
the other Partners hereunder are subject in all respects to such fiduciary
obligations.
3.2. License and Services Agreements.
(a) Upon the Phase I Closing Date, each of the Partners will,
subject to fiduciary duties to third parties, use reasonable efforts to cause
each of their respective Domestic Cellular Subsidiaries and Domestic Cellular
Investment Entities to enter into a License Agreement and a Services Agreement
with the Partnership and amend such agreements from time to time to reflect
such changes therein as may be approved by the Partnership Committee or the
President, as the case may be, in accordance with Article 2.
(b) The Partners agree to use best efforts to prepare and approve
the initial form of License Agreement and Services Agreement within 60 days
after the Effective Date.
3.3. Licensed Systems. From and after the Phase I Closing Date:
(a) At the direction of the President, each Partner agrees to
take, and to cause each of its Affiliates to take, all reasonable actions to
effect the appointment or removal of the general manager or, if applicable, the
regional manager or other person with equivalent management responsibility (the
"System Manager") of any Licensed or Owned System.
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(b) The Partners acknowledge that each System Manager shall manage
the day-to-day operations of the applicable System in accordance with any
partnership agreement or other organizational documents of the applicable
System so long as they are in existence, and the License Agreement, Services
Agreement, budget and business plans then in effect for such System. Each
Partner agrees to take, and to cause each of its Affiliates to take, all
reasonable actions to permit the President to have control, supervision and
oversight over the System Manager with respect to such responsibilities, as
such responsibilities relate to WMC, the Approved Budget, the Approved Business
Plan, and the License and Services Agreements; provided, however, the President
shall have no such control, supervision and oversight (i) with respect to the
MFJ Restricted Activities undertaken by a Licensed System, or (ii) in the case
of a Licensed System owned (in whole or in part) by USW, that System's
compliance with the CECO and the EO.
3.4. System Budget Approval.
(a) The System Manager for each Licensed or Owned System shall
submit annually to the President a budget in respect of such System (a "System
Budget") for the next fiscal year at such time and in such format as may be
determined, from time to time, by the President. If requested by the
President, the System Manager shall promptly meet with the President for the
purpose of discussing such System Budget; provided, however, System Budgets for
Licensed Systems shall not include or otherwise reflect any MFJ Restricted
Activities undertaken, or to be undertaken, by their respective Licensed
Systems.
(b) Neither the Partnership nor any Partner shall take or cause to
be taken any action to approve or implement a System Budget (or any amendment
thereof or modification thereto) until such System Budget (or amendment thereof
or modification thereto) shall have been approved by the President.
3.5. System Business Plans.
(a) The System Manager for each Licensed or Owned System shall
submit to the President a business plan in respect of such System (a "System
Business Plan") at such time and in such format as may be determined, from time
to time, by the President; provided, however, System Business Plans for
Licensed Systems shall not reflect or take account of any MFJ Restricted
Activities undertaken, or to be undertaken, by their respective Licensed
Systems.
(b) Neither the Partnership nor any Partner shall take or cause to
be taken any action to approve or implement a System Business Plan until such
System Business Plan (or amendment or modification) shall have been approved by
the President.
3.6. Management Reports. The System Manager for each Licensed or
Owned System shall prepare and distribute, or cause to be prepared and
distributed, promptly such reports and other information in respect of such
System as the President reasonably may request; provided, however, the reports
submitted with respect to Licensed Systems shall not include or
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otherwise reflect any MFJ Restricted Activities undertaken, or to be
undertaken, by their respective Licensed Systems.
3.7. Financial Statements.
(a) Annual Statements. As soon as practicable following the end
of each fiscal year, but in any event within 45 days after the end of the
fiscal year, the System Manager for each Licensed or Owned System shall cause
to be prepared and delivered to the President unaudited statements of income
(loss) in respect of such System, and an unaudited statement of cash flows for
such fiscal year, and an unaudited balance sheet of such System, in each case,
consistent with Partnership accounting practices.
(b) Quarterly Statements. As soon as possible following the end
of each fiscal quarter, but in any event within 20 days after the end of each
quarter, the System Manager for each Licensed or Owned System shall prepare, or
cause to be prepared, and deliver to the President an unaudited statement of
income (loss) in respect of such System and an unaudited statement of cash
flows for such fiscal quarter, and an unaudited balance sheet of such System as
of the end of such fiscal quarter, in each case, consistent with Partnership
accounting practices.
(c) MFJ Restricted Activities. The annual and quarterly financial
statements submitted with respect to a Licensed System shall exclude the income
(loss) of such System and changes in such System's cash flows attributable to
the MFJ Restricted Activities (if any) undertaken by such System, and the
effect of such MFJ Restricted Activities on the balance sheet of such System.
ARTICLE 4
CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS
4.1. Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate
capital account (a "Capital Account") in accordance with the capital accounting
rules of section 704(b) of the Code and the Income Tax Regulations thereunder
(including particularly section 1.704-1(b)(2)(iv) of the Income Tax
Regulations).
(b) In general, under such capital accounting rules (but subject
to any contrary requirements of the Code and the Income Tax Regulations
thereunder), a Partner's Capital Account shall be (i) increased by the amount
of money (including Make-Up Contributions) and the Fair Market Value
(determined in accordance with Section 4.10 hereof) of other property (net of
liabilities secured by such contributed property that the Partnership is
considered to take subject to or assume under section 752 of the Code)
contributed by the Partner to the Partnership and allocations to the Partner of
Partnership income and gain (or items thereof), including income and gains
exempt from tax, and (ii) decreased by the amount of money and the Fair Market
Value (determined in accordance with Section 4.10 hereof) of other property
distributed (net of liabilities secured by such distributed
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property that such Partner is considered to take subject to or assume under
section 752 of the Code) to the Partner by the Partnership and allocations to
the Partner of Partnership loss and deduction (or items thereof), including
Partnership expenditures not deductible in computing its taxable income and not
properly chargeable to capital account.
(c) Where section 704(c) of the Code applies to Partnership
property, each Partner's Capital Account shall be adjusted in accordance with
paragraph (b)(2)(iv)(g) of section 1.704-1 of the Income Tax Regulations as to
allocations to the Partners of depreciation, depletion, amortization and gain
or loss, as computed for book purposes with respect to such property.
(d) When Partnership property is distributed in kind (whether in
connection with dissolution and liquidation of the Partnership or otherwise),
the Capital Accounts of the Partners first shall be adjusted to reflect the
manner in which the unrealized income, gain, loss or deduction inherent in such
property (that has not previously been reflected in Capital Accounts) would be
allocated among the Partners if there were a taxable disposition of such
property for its fair market value (determined in accordance with Section 4.10
hereof and taking into account section 7701(g) of the Code) and such income,
gain, loss or deduction had been recognized for federal income tax purposes
immediately upon such distribution or the event requiring such revaluation.
(e) Upon a revaluation of any Partnership assets pursuant to
Section 4.8 hereof, the Capital Accounts of the Partners will be adjusted as
provided in Section 4.8(c).
(f) The Tax Matters Partner shall direct the Partnership's
accountant to make all necessary adjustments in each Partner's Capital Account
as required by the rules of section 704(b) of the Code and the Income Tax
Regulations thereunder.
4.2. Initial Contributions of Capital.
(a) Effective Date. On the Effective Date, each ATI Partner and
each USW Partner shall make the contributions to the capital of the Partnership
set forth opposite such Partner's name on Schedule 1 hereto.
(b) Phase II Contribution Date.
On the Phase II Contribution Date, each Group shall contribute to the
capital of the Partnership the Phase II Assets required to be contributed by it
pursuant to Section 5.3(b) of the Organization Agreement.
(c) New Par Contribution Date.
On the New Par Contribution Date, the ATI Group shall contribute to
the capital of the Partnership the New Par Assets required to be contributed by
it pursuant to Section 5.5 of the Organization Agreement.
(d) PCS Contribution Date. On the PCS Contribution Date, each
Group shall contribute to the capital of the Partnership the PCS Assets
required
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to be contributed by it pursuant to Section 5.4 of the Organization Agreement.
(e) Beneficial Phase II Assets.
(i) Each Partner shall consult with the Partnership Committee
regarding the status of all third-party consents and approvals required in
connection with the contribution of such Partner's Phase II Assets to the
Partnership. Each Partner shall use reasonable efforts to obtain all such
third-party consents or approvals on or prior to the Phase II Contribution
Date, or as promptly thereafter as practicable. The Partnership shall
reimburse each Partner for all costs and expenses incurred in connection with
obtaining such consents and approvals to the extent that the incurrence of such
costs and expenses shall have been approved by a Supermajority Vote of the
Partnership Committee.
(ii) Following the Phase II Contribution Date, each Partner will
continue to use reasonable efforts to obtain any consent or approval necessary
to effectuate the contribution to the Partnership of such Partner's Beneficial
Phase II Assets and shall take all reasonable actions to effectuate the
contribution of such Beneficial Phase II Assets after such consent or approval
is obtained. No Partner may assign, sell, transfer or otherwise dispose of,
pledge, hypothecate, grant a security interest in or otherwise encumber a
Beneficial Phase II Asset, unless such Beneficial Phase II Asset is being sold
in connection with a sale or transfer of such Partner's Wireless Assets and
such Partner shall have provided the other Partners with a right of first
refusal (subject to any similar contractual obligations applicable to any
Wireless Asset on the Effective Date) with respect to the purchase of such
Beneficial Phase II Asset in accordance with the procedures for the sale of a
Transferred Interest set forth in Section 10.3. Following any such sale or
transfer, the License Agreement and Services Agreement referred to in
subsection (iii) below shall be subject to termination by any party thereto
upon one year's notice.
(iii) Following the Phase II Contribution Date, each Partner will,
and will cause each of its Affiliates to, take all reasonable actions necessary
to operate each of the Systems which comprise its Beneficial Phase II Assets
for the use and benefit of the Partnership, so that the Partnership and each
Partner shall receive the same economic benefits that the Partnership and each
Partner would have received if the Beneficial Phase II Assets had in fact been
contributed to the Partnership on the Phase II Contribution Date. Such actions
shall include but not be limited to, causing any such Systems to enter into a
License Agreement and a Services Agreement with the Partnership and to amend
such agreements from time to time to reflect changes therein which may be
approved by the Partnership Committee or the President, as the case may be,
pursuant to Article 2.
(iv) Promptly following the Phase II Contribution Date, the Partners
will restructure, among other things, the allocation of profit and losses and
the distribution of cash and property of the Partnership or, to the extent such
a restructuring is not feasible, to otherwise implement a compensation
mechanism, in each case, to provide each Partner with the same economic result
(taking into account all tax consequences) such Partner
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would have obtained if all Beneficial Phase II Assets had been contributed to
the Partnership on the Phase II Contribution Date.
(v) A transferee of a Partial Interest shall be subject to all of the
obligations of a transferring Partner hereunder with respect to such
transferring Partner's Beneficial Phase II Assets, including obligations
relating to an adjustment of such transferee's Adjusted Capital Contributions
and Percentage Interest to take into account the transferring Partner's failure
to contribute to the Partnership any Noncontributed Asset on or before the
Beneficial Phase II Assets Recalculation Date for such asset.
4.3. Special Capital Contribution Rights of Partners.
(a) The ATI Group shall be entitled to contribute to the capital
of the Partnership an amount of cash equal to (i) (A) the Private Market Value
of the Partnership determined in accordance with Section 4.10, multiplied by
(B) the excess, if any, of (1) 51%, minus (2) the aggregate Percentage
Interests of the ATI Group calculated as if the ATI Group had not transferred
any of its Partnership Interest pursuant to Section 10.3, divided by (ii) 49%
("an ATI Ownership Deficiency Contribution") immediately following (i) the PCS
Contribution Date, (ii) the Back End Termination Date (as defined in the
Restated Certificate of Incorporation of CCI), (iii) each USW Ownership
Deficiency Contribution pursuant to subsection (c) below and (iv) each
admission of an Additional Partner to the Partnership pursuant to Article 9.
(b) The USW Group shall be entitled to contribute to the capital
of the Partnership an amount of cash equal to (i) (A) the Private Market Value
of the Partnership determined in accordance with Section 4.10, multiplied by
(B) the excess, if any, of (1) 24% minus (2) the aggregate Percentage Interests
of the USW Group (calculated as if the USW had made all Defaulted Contributions
to the Partnership or PCS Par and had not transferred any of its Partnership
Interest pursuant to Section 10.3), divided by (ii) 76% (a "USW Ownership
Deficiency Contribution") immediately following (i) each ATI Ownership
Deficiency Contribution pursuant to subsection (a) above, (i) the PCS
Contribution Date, (ii) each admission of an Additional Partner to the
Partnership pursuant to Article 9 and (iii) the New Par Contribution Date.
4.4. Additional Contributions by Partners.
(a) In the event of (i) a capital contribution required by the
terms of an Approved Business Plan or an Approved Budget, or (ii) in the event
that the Partnership Committee determines that additional capital
contributions, payable in cash or other property (or combination thereof), are
necessary or advisable, each Partner will be notified in writing by the
Partnership, at least 60 days prior to the date on which such additional
capital contribution is payable (the "Due Date"), of the amount of additional
capital contribution required from each of them, on a pro rata basis,
determined in accordance with such Partner's respective Percentage Interest,
and the Due Date for such additional capital contribution. Each such
additional capital contribution shall be payable in cash unless otherwise
determined by the Partnership Committee by vote of the Members representing
each Group. Such contributions, when made, shall be credited
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to each Partner's Capital Account. In the event that any Partner fails to make
such additional capital contribution on or before the Due Date thereof, but
wishes to make such contribution on or before the 15th day immediately
following such Due Date (a "Late Amount"), such Partner shall be entitled to
contribute such Late Amount during such 15-day period and have such Late Amount
credited to its Capital Account; provided that in addition to the payment of
such Late Amount, such Partner must also pay at such time a late fee equal to
the interest that would have accrued on the unpaid portion of such Late Amount
from the Due Date to the date of payment, calculated at a per annum rate of the
Prime Rate plus 2% (a "Late Fee"), which Late Fee shall not be credited in
whole to the Partner's Capital Account, but shall be treated as income and
allocated among the Partners proportionately in accordance with their
Percentage Interests.
(b) In the event that a Partner fails to make the required
additional capital contribution on or prior to the expiration of 15 days after
the Due Date thereof (a "Defaulting Partner"), any one or more of the other
Partners, who are not members of the Defaulting Partner's Group (the
"Non-Defaulting Partners"), within 30 days following the mailing of notice from
the Partnership that payment from the Defaulting Partner has not been made, may
pay some or all of the contribution which the Defaulting Partner failed to make
to the capital of the Partnership (a "Default Amount"). In the event that more
than one Non-Defaulting Partner elects to contribute a Default Amount so that
the aggregate amount to be contributed by Non-Defaulting Partners would exceed
the full Default Amount, each of such Non-Defaulting Partners shall be entitled
to contribute a portion of the Default Amount that is equal to such
Non-Defaulting Partner's Percentage Interest divided by the Percentage
Interests of all Non-Defaulting Partners electing to contribute such Default
Amount. Thereafter, to the extent that such Default Amount remains unpaid and
the Partnership shall not have funded such Default Amount through a subsequent
capital call, the Defaulting Partner shall have the right to contribute such
unpaid portion of such Default Amount and have such previously unpaid Default
Amount credited to its Capital Account; provided that such contribution is
accompanied by the payment of a fee in an amount equal to the interest that
would have accrued on the unpaid portion of such Default Amount from the Due
Date to the date of such payment, calculated at a per annum rate of the Prime
Rate plus 2% (a "Default Fee"), which Default Fee shall not be credited to the
Partner's Capital Account, but shall be treated as income and allocated among
the Partners proportionately in accordance with their Percentage Interests.
(c) If the Defaulting Partner fails to contribute a Default Amount
which relates to a Defaulted Contribution and such Default Amount has not been
paid in full by one or more of the Non-Defaulting Partners, the Non-Defaulting
Partner or Partners may by a vote of the Members representing Groups who held a
majority of the Percentage Interests of the Non-Defaulting Partners, elect to
cause the Partnership to initiate and maintain an action against the Defaulting
Partner for such unpaid Defaulted Contribution and to pursue any available
remedy, including but not limited to seeking payment by the Defaulting Partner
of such Default Amount or the unpaid portion thereof and damages incurred by
the Partnership in connection therewith. The Defaulting Partner's Capital
Account shall be increased by an amount equal to that portion of the Default
Amount recovered in any action maintained in accordance with the immediately
preceding sentence. The costs of any action
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commenced by the Partnership pursuant to this Section 4.4(c) shall be paid by
the Partnership and shall be reimbursed by the Defaulting Partner to the
Partnership and to the extent not paid will be deducted from such Defaulting
Partner's Capital Account and Adjusted Capital Contributions.
4.5. Partner Obligations. If upon liquidation of its interest in the
Partnership or upon liquidation of the Partnership within the meaning of
Treasury Regulations section 1.704-1(b)(2)(ii)(g) any Partner has a deficit
balance in its Capital Account after taking into account Capital Account
adjustments for the Partnership taxable year during which liquidation occurs,
such Partner shall be unconditionally obligated to restore only that portion of
such deficit balance caused by distributions in kind pursuant to Section
8.5(a)(i), (ii) or (iii) hereof, such Partner shall restore such portion by
making a cash contribution to the Partnership by the end of such taxable year
(or, if later, 90 days after the date of such liquidation), which amount shall,
upon liquidation of the Partnership, be paid to creditors of the Partnership or
distributed to other Partners in accordance with their positive Capital Account
balances.
4.6. Withdrawals of Capital Accounts. No Partner shall be entitled to
withdraw any amount from its Capital Account prior to dissolution of the
Partnership.
4.7. Interest on Capital Accounts. No interest or compensation shall
be paid on or with respect to the Capital Account or capital contributions of
any of the Partners, except as otherwise expressly provided herein.
4.8. Revaluation of Partnership Assets.
(a) The assets of the Partnership shall be revalued in accordance
with Section 4.10 to their then Fair Market Values as of the date of and
immediately prior to (i) the acquisition of an additional interest in the
Partnership (including adjustments to Percentage Interests arising as a result
of a failure of any Partner to make a required capital contribution pursuant to
Section 4.4 hereof) by any new or existing Partner in exchange for more than a
de minimis capital contribution to the Partnership, (ii) the distribution by
the Partnership of more than a de minimis amount of property as consideration
for a redemption of (but not all) of a Partner's interest in the Partnership,
(iii) the contribution of the Phase II Assets to the capital of the Partnership
on the Phase II Contribution Date, (iv) the contribution of the PCS Assets to
the capital of the Partnership on the PCS Contribution Date, (v) the
contribution of the New Par Assets to the capital of the Partnership on the New
Par Contribution Date, (vi) any capital contribution by either the ATI Group or
the USW Group pursuant to Section 4.3 and (vii) the liquidation of a Partner's
entire interest in the Partnership or immediately prior to the distribution of
Partnership assets in liquidation of the Partnership within the meaning of
Treasury Regulations section 1.704-1(b)(2)(ii)(g); provided, however, that no
revaluation shall occur if the Partnership Committee by Supermajority Vote
reasonably determines that a revaluation would not materially affect the
Capital Accounts of the Partners or that the cost of such revaluation would be
disproportionate to any benefit to be derived by the Partners from such
revaluation.
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(b) Immediately prior to the distribution of any asset by the
Partnership, the Partnership Committee shall revalue such asset to its then
Fair Market Value as determined in accordance with Section 4.10.
(c) Any Revaluation Gain or Revaluation Loss arising from a
revaluation of any Partnership asset pursuant to this Section 4.8 shall
respectively be credited to or debited from the Partners' Capital Accounts in
accordance with their respective Percentage Interests immediately prior to the
event giving rise to such revaluation.
4.9. Redetermination of Percentage Interests. The respective
Percentage Interests of each of the Partners shall be redetermined immediately
after any event giving rise to a change in any Partner's Adjusted Capital
Contributions. If a Partner is both a General Partner and a Limited Partner,
such adjustment shall be made to the Percentage Interests of such Partner as
both a General Partner and a Limited Partner pro rata in proportion to such
interests.
4.10. Determination of Fair Market or Private Market Values. The Fair
Market Value or Private Market Value as required herein, as of the date of
determination, of any asset shall be determined (a) by mutual agreement of the
Representative Partners or (b) if no such agreement is reached within ten days
of the relevant date of determination, as follows:
(i) Selection of Appraisers. Each of (A) the Partner who is
either contributing an asset to the Partnership, receiving an asset
from the Partnership or transferring an asset which is being valued
hereunder (or, if there is no such Partner, the ATI RP) (the "Asset
Partner") and (B) the other Representative Partners shall designate by
written notice to the Partnership and each Representative Partner a
firm of recognized national standing familiar with appraisal
techniques applicable to assets of the type being evaluated to serve
as an Appraiser pursuant to this Section 4.10 (the firms designated by
the Asset Partner and the other Representative Partners being referred
to herein as the "First Appraiser" and the "Second Appraiser,"
respectively) within five business days after the failure to reach
agreement in accordance with the terms of clause (a) above. In the
event that either the Asset Partner or the other Representative
Partners fail to designate its or their Appraiser within the foregoing
time period, the other shall have the right to designate such
Appraiser by notifying the failing party or parties in writing of such
designation (and the Appraiser so designated shall be the First
Appraiser or the Second Appraiser, as the case may be).
(ii) Evaluation Procedures. Each Appraiser shall be directed
to determine the Fair Market Value or Private Market Value, as the
case may be, of the asset. Each Appraiser will also be directed to
deliver an Appraiser's Certificate to each Representative Partner on
or before the 30th day after their respective designation (the
"Certificate Date"), upon the conclusion of its evaluation, and each
Appraiser's Certificate once delivered may not be retracted or
modified in any respect.
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Each Appraiser will keep confidential all information disclosed by the
Partnership in the course of conducting its evaluation, and, to that
end, will execute such customary documentation as the Partnership may
reasonably request with respect to such confidentiality obligation.
The Representative Partners will cooperate in causing the Partnership
to provide each Appraiser with such information within the
Partnership's possession that may be reasonably requested in writing
by the Appraiser for purposes of its evaluation hereunder. The
Appraisers shall consult with each other in the course of conducting
their respective evaluations. Each Representative Partner shall have
full access to each Appraiser's work papers. Each Appraiser will be
directed to comply with the provisions of this Section 4.10, and to
that end each party will provide to its respective Appraiser a
complete and correct copy of this Section 4.10 (and the definitions of
capitalized terms used in this Section 4.10 that are defined elsewhere
in this Agreement).
(iii) Fair Market or Private Market Value Determination. The
Fair Market Value or Private Market Value, as the case may be, of any
asset shall be determined on the basis of the Appraisers' Certificates
in accordance with the provisions of this subparagraph (iii). The
higher of the values set forth on the Appraisers' Certificates is
hereinafter referred to as the "Higher Value" and the lower of such
values is hereinafter referred to as the "Lower Value." If the Higher
Value is not more than 110% of the Lower Value, the Fair Market Value
or Private Market Value, as the case may be, will be the arithmetic
average of such two Values. If the Higher Value is more than 110% of
the Lower Value, a third appraiser shall be selected in accordance
with the provisions of subparagraph (iv) below, and the Fair Market
Value or Private Market Value, as the case may be, will be determined
in accordance with the provisions of subparagraph (v) below.
(iv) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, within seven days
thereafter the First Appraiser and the Second Appraiser shall agree
upon and jointly designate a third firm of recognized national
standing familiar with appraisal techniques applicable to assets of
the type being evaluated to serve as an appraiser pursuant to this
Section 4.10 (the "Third Appraiser"), by written notice to each
Representative Partner. The Representative Partners shall direct the
Third Appraiser to determine the Fair Market Value or Private Market
Value, as the case may be, of the asset (the "Third Value") in
accordance with the provisions of subparagraph (ii) above, and to
deliver to the Representative Partners an Appraiser's Certificate on
or before the 30th day after the designation of such Appraiser
hereunder. The Third Appraiser will be directed to comply with the
provisions of this Section 4.10, and to that end the parties will
provide to the Third Appraiser a complete and correct copy of this
Section 4.10 (and the definitions of capitalized terms
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used in this Section 4.10 that are defined elsewhere in this
Agreement).
(v) Alternative Determination of Fair Market Value. Upon the
delivery of the Appraiser's Certificate of the Third Appraiser, the
Fair Market Value or Private Market Value, as the case may be, will be
determined as provided in this subparagraph (v). The Fair Market
Value or Private Market Value, as the case may be, will be (w) the
Lower Value, if the Third Value is less than the Lower Value, (x) the
Higher Value, if the Third Value is greater than the Higher Value, (y)
the arithmetic average of the Third Value and the other Value (Lower
or Higher) that is closer to the Third Value if the Third Value falls
within the range between (and including) the Lower Value and the
Higher Value and (z) the Third Value, if the Lower Value and the
Higher Value are equally close to the Third Value.
(vi) Costs. Each of the Asset Partner and the other
Representative Partners will bear the cost of the Appraiser designated
by it or on its behalf. If the Higher Value is not more than 115% of
the Lower Value, or if the Higher Value and the Lower Value are
equally close to the Third Value, each of the Asset Partner and the
other Representative Partners shall bear 50% of the cost of the Third
Appraiser, if any; otherwise, the party whose Appraiser's
determination of Fair Market Value or Private Market Value, as the
case may be, is further away from the Third Value shall bear the
entire cost of the Third Appraiser. The Representative Partners agree
to pay when due the fees and expenses of the Appraisers in accordance
with the foregoing provisions.
(vii) Conclusive Determination. To the fullest extent
provided by law, the determination of the Fair Market Value or Private
Market Value, as the case may be, made pursuant to this Section 4.10
shall be final and binding on the Partnership and the Partners hereto,
and such determination shall not be appealable to or reviewable by any
court or arbitrator; provided that the foregoing shall not limit a
Partner's rights to seek arbitration of the obligations of the other
Partners and the Partnership hereunder.
ARTICLE 5
ALLOCATIONS AND DISTRIBUTIONS
5.1. Profits and Losses. A Partner's distributive share of income,
gain, loss, deduction or credit (or items thereof) as shown on the annual
federal income tax return prepared by the Partnership's accountants or as
finally determined by the Internal Revenue Service or the courts, and as
modified by the capital accounting rules of section 704(b) of the Code and the
Income Tax Regulations thereunder as implemented by Section 4.1 hereof, as
applicable, shall be determined as provided in this Article 5.
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(a) Except as otherwise provided in this Section 5.1, profits and
losses of the Partnership shall be allocated among the Partners proportionately
in accordance with their Percentage Interests.
(b) Solely for tax purposes, in determining each Partner's allocable
share of the taxable income or loss of the Partnership, depreciation,
depletion, amortization and gain or loss with respect to any contributed
property, or with respect to revalued property where Partnership property is
revalued pursuant to Section 4.8 hereof, shall be allocated to the Partners
under any method allowable under Section 704(c) of the Code and the applicable
Income Tax Regulations thereunder. The Partnership Committee shall decide
which such method shall be utilized by the Partnership with respect to its
property; provided, however, that if the Partnership Committee fails to act in
a timely manner, the Partnership shall utilize the method set forth in section
1.704-3(c) of the Income Tax Regulations (the traditional method with curative
allocations).
(c) Minimum Gain Chargeback. Notwithstanding anything to the
contrary in this Article 5, if there is a net decrease in Partnership Minimum
Gain or Partner Nonrecourse Debt Minimum Gain (as such terms are defined in
sections 1.704-2(b) and 1.704-2(i)(2), respectively, of the Income Tax
Regulations) during a Partnership taxable year, then each Partner shall be
allocated items of Partnership income and gain for such year (and, if
necessary, for subsequent years), to the extent required by, and in the manner
provided in, section 1.704-2 of the Income Tax Regulations.
This provision is intended to be a "minimum gain chargeback" within
the meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax
Regulations and shall be interpreted and implemented as therein provided.
(d) Qualified Income Offset. Subject to the provisions of Section
5.1(c), but otherwise notwithstanding anything to the contrary in this Article
5, if any Partner's capital account has a deficit balance in excess of such
Partner's obligation to restore its capital account balance, computed in
accordance with the rules of paragraph (b)(2)(ii)(d) of section 1.704-1 of the
Income Tax Regulations (including such Partner's share of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain as provided in section
1.704-2(g) and 2(i)(5) of the Income Tax Regulations), then sufficient amounts
of income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income, and gain for such year) shall be
allocated to such Partner in an amount and manner sufficient to eliminate such
deficit as quickly as possible. This provision is intended to be a "qualified
income offset" within the meaning of section 1.704-1(b)(2)(ii)(d) of the Income
Tax Regulations and shall be interpreted and implemented as therein provided.
(e) Subject to the provisions of section 704(c) of the Code and
Sections 5.1(b) through (d) hereof, gain recognized (or deemed recognized under
the provisions hereof) upon the sale or other disposition of Partnership
property, which is treated as depreciation recapture, shall be allocated to the
Partner who was entitled to deduct such depreciation.
(f) Except as otherwise provided in Section 5.1(j), if and to the
extent any Partner is deemed to recognize income as a result of any loans
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described herein pursuant to the rules of section 1272, 1273, 1274, 7872 or 482
of the Code, or any similar provision now or hereafter in effect, any
corresponding resulting deduction of the Partnership shall be allocated to the
Partner who is charged with the income. Subject to the provisions of section
704(c) of the Code and Sections 5.1(b) through (d) hereof, if and to the extent
the Partnership is deemed to recognize income as a result of any loans
described herein pursuant to the rules of section 1272, 1273, 1274, 7872 or 482
of the Code, or any similar provision now or hereafter in effect, or as a
result of any payment to the Partnership pursuant to Article 7 of the
Organization Agreement such income shall be allocated to the Partner who is
entitled to any corresponding resulting deduction or adjustment.
(g) Except as otherwise required by law, tax credits shall be
allocated among the Partners pro rata in accordance with the manner in which
Partnership profits are allocated to the Partners under this Article 5, as of
the time the credit property is placed in service or if no property is
involved, as of the time the credit is earned. Recapture of any tax credit
required by the Code shall be allocated to the Partners in the same proportion
in which such tax credit was allocated.
(h) Except as provided in Sections 5.1(f) and (g) hereof or as
otherwise required by law, if the Partnership Interests of the Partners are
changed herein during any taxable year, all items to be allocated to the
Partners for such entire taxable year shall be prorated on the basis of the
portion of such taxable year which precedes each such change and the portion of
such taxable year on and after each such change according to the number of days
in each such portion, and the items so allocated for each such portion shall be
allocated to the Partners in the manner in which such items are allocated as
provided in this Article 5 during each such portion of the taxable year in
question; provided that, if the transferor and the transferee of an interest in
the Partnership (i) shall both have given the Partnership written notice within
15 days of the end of such taxable year of the Partnership stating their
agreement that such division and allocation shall be made on some other basis
permitted by Code section 706(d) and (ii) shall have agreed to reimburse the
Partnership for any incremental accounting fees and other expenses incurred by
the Partnership in utilizing such other basis for such division and allocation,
then such other basis permitted by Code section 706(d) shall be used.
(i) Any special allocation of income or gain pursuant to Section
5.1(c) or 5.1(d) hereof shall be taken into account in computing subsequent
allocations of income and gain pursuant to this Article 5 so that the net
amount of all such allocations to each Partner shall, to the extent possible,
be equal to the net amount that would have been allocated to each such Partner
pursuant to the provisions of this Article 5 if such special allocations of
income or gain under Section 5.1(c) or 5.1(d) hereof had not occurred.
(j) Losses.
(i) Items of deduction and loss attributable to recourse liabilities
of the Partnership (within the meaning of section 1.752-1(a)(1) of the Income
Tax Regulations but excluding Partner nonrecourse debt within the
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meaning of section 1.704-2(b)(4) of the Income Tax Regulations) shall be
allocated among the Partners in accordance with the ratio in which the Partners
share the economic risk of loss (within the meaning of section 1.752-2 of the
Income Tax Regulations) for such liabilities.
(ii) Items of deduction and loss attributable to Partner nonrecourse
debt within the meaning of section 1.704-2(b)(4) of the Income Tax Regulations
shall be allocated to the Partners bearing the economic risk of loss with
respect to such debt in accordance with section 1.704-2(i) of the Income Tax
Regulations.
(iii) Items of deduction and loss attributable to Partnership
nonrecourse liabilities within the meaning of section 1.704-2(b)(1) of the
Income Tax Regulations shall be allocated among the Partners proportionately in
accordance with their Partnership interests.
(iv) All other items of operating net loss ("Net Loss") shall be
allocated among the Partners, proportionately in accordance with their
Partnership Interests, except that Net Loss shall not be allocated to any
Partner to the extent it would create a deficit balance in excess of such
Partner's obligation to restore its capital account balance, computed in
accordance with the rules of Section 1.704-1(b)(2)(ii)(d) of the Income Tax
Regulations (including such Partner's share of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain as provided in section 1.704-2(g) and
2(i)(5) of the Income Tax Regulations). Any Net Loss which cannot be allocated
to a Partner because of the limitation set forth in the previous sentence shall
be allocated first to the other Partners to the extent such other Partners
would not be subject to such limitation and second any remaining amount to the
Partners in the manner required by the Code and the Income Tax Regulations.
(k) Subject to the provisions of Sections 5.1(c) through (j),
items of income and gain shall be allocated to the Partners in the following
priority:
(i) First, if allocations of Net Loss have been made to the
Partners under Section 5.1(j)(iv), then in the amount of, and
proportionate to, the amount of such Net Loss.
(ii) Second, to those Partners who have had items of loss or
deduction allocated to them under section 5.1(j)(i), in the amount of,
and proportionate to, the amount of such items of loss or deduction.
(iii) Third, the balance among the Partners in proportion to
their relative Partnership Interests.
5.2. Distributions.
(a) As promptly as practicable after the end of each month, but in no
event later than the end of the following month, all Net Operating Available
Cash of the Partnership (as determined based on the Partnership financial
statements for such month) shall be distributed to the Partners. Other
distributions, whether in cash or in kind, shall be made to the Partners at
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such times and in such amounts as shall be determined by Supermajority Vote of
the Partnership Committee. The amount of any in-kind distribution shall be the
distributed property's then Fair Market Value. The Partnership shall take all
reasonable actions to cause each Owned System to distribute all Net Operating
Available Cash of such Owned System on a monthly basis, to the extent
permissible under the governing documents for such Owned Systems.
(b) Except as provided in Section 5.2(c), distributions shall be made
among the Partners in accordance with their respective Percentage Interests at
the time of such distribution.
(c) Upon liquidation of the Partnership, within the meaning of Income
Tax Regulations section 1.704-1(b)(2)(ii)(g), distributions shall be made among
the Partners as provided in Section 8.3.
(d) Except as otherwise provided herein, all allocations hereunder to
a Group and all distributions hereunder to a Group shall be made among or
between the Partners of such Group pro rata in proportion to their respective
Percentage Interests. Notwithstanding the foregoing, to the extent not
inconsistent with Income Tax Regulations section 1.704-1(b) and the provisions
of Article 10, Percentage Interests of Partners of a Group may be allocated
among the Partners of such Group as those Partners may agree as among
themselves.
(e) Any other provision of this Agreement to the contrary
notwithstanding, no distribution shall be made by the Partnership, or on behalf
of the Partnership which would violate Section 17-607(a) of the Act or which
would render the Partnership insolvent or which is prohibited by the terms of
any Partnership indebtedness.
ARTICLE 6
TAX MATTERS AND REPORTS; ACCOUNTING
6.1. Filing of Tax Returns. The Tax Matters Partner shall prepare and
file, or cause the accountants of the Partnership to prepare and file, all Tax
Returns for each tax year of the Partnership.
6.2. Tax Matters Partner.
(a) The Tax Matters Partner of the Partnership within the meaning of
section 6231(a)(7) of the Code shall be the ATI RP. Unless otherwise expressly
provided herein, the Tax Matters Partner is authorized to take any action that
it determines to be necessary or appropriate with respect to all tax matters.
(b) The Tax Matters Partner shall promptly advise the other Partners
of all audits or other actions by the Internal Revenue Service and shall
furnish to the Partnership and to each Partner a copy of each notice or other
communication received by the Tax Matters Partner from the Internal Revenue
Service except such notice or communication sent directly to the Partners by
the Internal Revenue Service. All expenses incurred by the Tax
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Matters Partner in its capacity as such shall be expenses of the Partnership
and shall be paid by the Partnership.
(c) To the fullest extent permitted by law, the Partnership shall
indemnify Partners on an after-tax basis against any liabilities incurred while
acting as the Tax Matters Partner of the Partnership but only to the extent
such Partner acts within the scope of its authority as Tax Matters Partner
under this Agreement. The Tax Matters Partner shall not be indemnified against
any liability regarding Partnership tax matters arising by reason of the
willful misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
6.3. Tax Reports to Current and Former Partners. After the end of
each fiscal year, the Tax Matters Partner shall, in a timely manner, prepare
and mail, or cause its accountants to prepare and mail, to each Partner and, to
the extent necessary, to each former Partner (or its legal representatives), a
report setting forth in sufficient detail such information as is required to be
furnished to partners by law (e.g., section 6031(b) of the Code and Income Tax
Regulations thereunder) and as shall enable such Partner or former Partner (or
its legal representatives) to prepare their respective federal and state income
tax or informational returns in accordance with the laws, rules and regulations
then prevailing.
6.4. Accounting Records; Independent Audit. Complete books and
records accurately reflecting the accounts, business, transactions and partners
of the Partnership and each System in which it has an interest shall be
maintained and kept by the Partnership at the Partnership's principal place of
business. The accounting records of the Partnership shall be maintained to
assure preparation of the financial statements in accordance with GAAP. The
accounting records of the Partnership shall be audited by certified public
accountants selected by the Partnership Committee and shall contain
proportional accounting information with respect to the Partnership's interest
in any Owned System.
6.5. Fiscal Year. Except as may otherwise be required by the federal
tax laws, the fiscal year of the Partnership for both financial and tax
reporting purposes shall end on December 31.
6.6. Tax Accounting Method. The books and accounts of the Partnership
shall be maintained using the accrual method of accounting for tax purposes.
Those documents relating to allocations of items of partnership income, gain,
loss, deduction or credit and Capital Accounts shall be kept under federal
income tax accounting principles as provided herein.
6.7. Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action that it
determines to be necessary or appropriate to cause the Partnership to comply
with any Federal, state and local withholding requirement with respect to any
allocation, payment or distribution by the Partnership to any Partner or other
Person. All amounts withheld to satisfy any Federal, state or local
withholding requirement with respect to a Partner shall be treated as
distributions to such Partner. If any such withholding requirement with
respect to any Partner exceeds the amount distributable to such Partner
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under this Agreement, or if any such withholding requirement was not satisfied
with respect to any amount previously allocated or distributed to such Partner,
such Partner and any successor or assignee with respect to such Partner's
interest in the Partnership hereby, to the fullest extent permitted by law,
indemnifies and agrees to hold harmless the Partners and the Partnership for
such excess amount or such withholding requirement, as the case may be.
6.8. Tax Elections. Upon the request of a transferee of a Partnership
Interest or a distributee of a Partnership distribution, the Partnership will
make the election under section 754 of the Code in accordance with applicable
Income Tax Regulations thereunder for the first fiscal year in which such
election could apply, unless the Tax Matters Partner agrees at the time for
filing the Partnership tax information return not to make such election. The
Partnership may seek to revoke such election (if made) if agreed to by the Tax
Matters Partner. In addition to the foregoing, the Tax Matters Partner shall,
in its sole discretion, determine whether to make any other available tax
elections and select any other appropriate tax accounting methods and
conventions for any purpose under this Agreement.
6.9. Prior Tax Information. Each Partner agrees to deliver all
relevant Tax information to the Partnership that the Partnership will require
in order to comply with its own tax accounting and reporting requirements,
including without limitation schedules setting forth the fair market value and
tax basis of each asset that may from time to time be contributed by a Partner
to the Partnership; provided, however, that no Partner shall be required to
disclose the income tax returns of itself or any of its Affiliates.
ARTICLE 7
INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS
7.1. Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the Representative Partners, the Members, the Partners and
their Affiliates, and their respective partners, shareholders, directors,
officers, employees and agents and/or the legal representatives of any of them,
and each other Person who may incur liability as a Partner or otherwise in
connection with the management or ownership of the Partnership, any entity in
which the Partnership has an interest or any Licensed System (each, an
"Indemnified Party"), against all liabilities and expenses (including amounts
paid in satisfaction of judgments, in compromise, as fines and penalties, and
as counsel fees) reasonably incurred by him or it in connection with the
investigation, defense or disposition of any action, suit or other proceeding,
whether civil or criminal, in which any Indemnified Party may be involved or
with which he or it may be threatened, while a Partner or serving in such other
capacity or thereafter, by reason of its being or having been a Partner, or by
serving in such other capacity, except with respect to any matter which
constitutes willful misconduct, bad faith, gross negligence or reckless
disregard of the duties of his office, or criminal intent. The Partnership
shall have the right to approve any counsel selected by any Indemnified Party
and to approve the
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terms of any proposed settlement. The Partnership shall advance to any
Indemnified Party or Partner reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any such action or
proceeding. Each Partner hereby agrees, and each other Indemnified Party shall
agree in writing prior to any such advancement, that in the event he or it
receives any such advance, such Indemnified Party shall reimburse the
Partnership for such fees, costs and expenses to the extent that it shall be
determined that he or it was not entitled to indemnification under this
Section. The rights accruing to a Partner and each other Indemnified Party
under this Section 7.1 shall not exclude any other right to which it or they
may be lawfully entitled; provided that any right of indemnity or reimbursement
granted in this Section 7.1 or to which any Indemnified Party may be otherwise
entitled may only be satisfied out of the assets of the Partnership, and no
Partner and no withdrawn Partner shall be personally liable with respect to any
such claim for indemnity or reimbursement. Notwithstanding any of the
foregoing to the contrary, the provisions of this Section 7.1 shall not be
construed so as to provide for the indemnification of a Partner or any other
Indemnified Party for any liability to the extent (but only to the extent) that
(a) such liability arises out of a Partner's or any Indemnified Party's
indemnification obligations under Article 7 of the Organization Agreement or
(b) such indemnification would be in violation of applicable law or such
liability may not be waived, modified or limited under applicable law, but
shall be construed so as to effectuate the provisions of this Section 7.1 to
the fullest extent permitted by law.
7.2. Exculpation. Any Representative Partner, any Member, any
Partnership employee, any Partner and any Affiliate thereof and their
respective partners, shareholders, directors, officers, employees, or agents
and/or the legal representatives of any of them shall not be liable to any
Partner or the Partnership for mistakes of judgment or for action or inaction
which such Member, Partner, Affiliate, partner, shareholder, director, officer,
employee, agent or legal representative reasonably believed to be in or not
opposed to the best interests of Partnership unless such action or inaction
constitutes willful misconduct, bad faith, gross negligence or reckless
disregard of his or its duties and, with respect to any criminal action, such
party reasonably believes his conduct was lawful. Each Partner may (on its own
behalf or on the behalf of any Member designated by such Partner, any
Affiliates of such Partner or their respective partners, shareholders,
directors, officers, employees or agents and/or legal representatives of any of
them), consult with counsel, accountants and other experts in respect of the
Partnership affairs and such Person shall be fully protected and justified in
any action or inaction which is taken in accordance with the advice or opinion
of such counsel, accountants or other experts; provided that they shall have
been selected with reasonable care. Notwithstanding any of the foregoing to
the contrary, the provisions of this Section 7.2 shall not be construed so as
to relieve (or attempt to relieve) a Partner or any other Person of any
liability, to the extent (but only to the extent) that such liability may not
be waived, modified or limited under applicable law, but shall be construed so
as to effectuate the provisions of this Section 7.2 to the fullest extent
permitted by law.
7.3. Restrictions on Partners. No Partner may, without the prior
written consent of all of the other Partners:
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(a) confess a judgment against the Partnership;
(b) make any agreement on behalf of any other Partner, except
to the extent that a Representative Partner may, under the terms of
this Agreement, bind the members of the Group that he represents;
(c) except to the extent permitted by Article 8 hereof,
withdraw as a Partner, dissolve, terminate, liquidate or wind up the
affairs of the Partnership; or
(d) use or possess Partnership property except for a
Partnership purpose, except as provided under contractual arrangement.
7.4. Outside Activities.
(a) Except as otherwise expressly provided in this Section 7.4,
any Partner or Affiliate thereof may engage in or possess any interest in any
other business venture of any nature independently or with others, and neither
the Partnership nor any other Partner shall have any right by virtue of this
Agreement in or to such venture or in or to any income or profits derived
therefrom.
(b) Except for Systems (or licenses or permits therefor) acquired
in accordance with this Section 7.4, no Partner or any Affiliate thereof may,
directly or indirectly, acquire an ownership interest in, or lease, any System
(or license or permit therefor) unless such Partner first shall have offered
the Partnership the opportunity to acquire such ownership or other interest.
Any such offer by a Partner to the Partnership of an opportunity to acquire an
ownership interest in, or lease, a System (or any license or permit therefor)
shall be made in writing, delivered to the Partnership and each Representative
Partner, and shall set forth a general description of such opportunity. A
Partner shall be required to make such an offer to the Partnership promptly
upon becoming aware of any such opportunity, including the opportunity to
acquire an additional ownership interest in any Phase II Asset or Beneficial
Phase II Asset pursuant to a right of first refusal or similar right. A
Partner will be deemed to have complied with this subsection (b) and shall be
free to pursue such acquisition unless within 30 days from the date of delivery
of such notice (or, in the case of an opportunity that would expire in a
shorter period, such shorter period), the Partnership Committee approves a plan
to pursue either (i) the acquisition of such ownership or other interest by the
Partnership (by vote of the Members representing Groups holding a majority of
the Percentage Interests of Groups without regard to the Percentage Interests
of such Partner's Group) or (ii) the acquisition of an alternative ownership
interest in any System (or license or permit therefor) with a substantially
overlapping service coverage area. If the Partnership declines any such
opportunity or if the Partnership subsequently abandons the acquisition of such
opportunity, the offering Partner (or the members of any Group that voted to
approve the Partnership's acquisition of such opportunity) shall be free to
pursue such opportunity, subject to the condition that (i) an acquisition of
such opportunity shall be consummated within one year from the date notice of
such opportunity under this Section 7.4(b) is delivered to the
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Partnership (subject to extension if and to the extent necessary to any
required regulatory approvals) is delivered and (ii) such System at the time of
such consummation shall enter into a License Agreement and Services Agreement
with the Partnership.
(c) No Partner will, and each Partner will not permit any
Affiliate to, directly or indirectly, engage in the business of providing
Domestic PCS, Cellular or ESMR Services outside the Partnership.
(d) Nothing contained in this Section 7.4 shall prohibit or
otherwise restrict:
(i) the provision by a Partner or its Affiliates of Cellular
Service through Systems to the extent that such Partner or its
Affiliates were providing such service through such System on the
Effective Date, and as long as that such Partner shall have complied
with its obligations to contribute the Phase II Assets and Beneficial
Phase II Assets to the Partnership in accordance with the terms hereof
and the Organization Agreement;
(ii) the provision by a Partner or its Affiliates of
Cellular, ESMR or PCS Services through Systems acquired in accordance
with Section 7.4(b);
(iii) the acquisition by PCS Nucleus, L.P. of PCS Systems (or
licenses or permits therefor) or the provision of PCS Services by such
Systems prior to the PCS Contribution Date;
(iv) the acquisition by the ATI Group from a Partner of
Systems (or licenses or permits therefor) or the provision of
Cellular, ESMR or PCS Services by such Systems;
(v) the acquisition of an ownership interest by a LEC
Affiliate of USW, if permitted under applicable law, in a PCS System
having 10 MHz of PCS spectrum (and a 10 MHz license or permit
therefor), or the provision of PCS Service by such PCS System, in each
case, substantially within the local-exchange market of such LEC
Affiliate;provided that if, at any time, the continued ownership,
operation or management of such PCS System would result in any
material restrictions being imposed by any court, governmental agency
or regulatory or administrative authority on the then existing or
planned activities or acquisitions of the Partnership (other than the
acquisition by the Partnership of a PCS System having 10 MHz of PCS
spectrum in the markets served by the USW's Phase II Assets as of the
Effective Date) as contemplated by an Approved Budget, an Approved
Business Plan or other action of the Partnership, then such LEC
Affiliate will divest as promptly as possible in compliance with
applicable law, or cease to operate or manage, any such System (or
license or permit therefor), or take such other action as is necessary
(in the determination of the Partnership Committee) to remove such
restrictions;
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(vi) the ownership or other participation of ATI or any
Affiliate thereof in the Globalstar satellite communications venture,
or the ownership or other participation of USW or its Affiliates in
any satellite communications venture that would not be competitive
with services provided by Systems, or the provision of wireless
communications services by Globalstar or such other ventures; provided
that, in either case, the Partnership shall be entitled to purchase
wireless communications services from Globalstar or such other venture
at prices and on terms no less favorable than those offered to any
third party (for like volumes and types of service);
(vii) the acquisition, ownership, operation or management by
ATI or any Affiliate thereof of an MFJ Restricted Activity; provided
that the Partnership shall have an option (exercisable for a period of
90 days from the date such activity or business ceases to be an MFJ
Restricted Activity) to acquire the MFJ Restricted Activity from ATI
or such Affiliate at a purchase price equal to the Private Market
Value thereof determined in accordance with Section 4.10;
(viii) the acquisition by ATI or any Affiliate thereof of
ownership interests in CCI or New Par, a Delaware general partnership,
as long as ATI shall contribute the New Par Assets to the Partnership
in accordance with the terms hereof and the Organization Agreement;
(ix) the acquisition by ATI or any Affiliate thereof of
ownership interests in Systems (or licenses or permits therefor) as a
result of distributions from CMT Partners, a Delaware general
partnership, as long as ATI shall contribute such Systems to the
Partnership in accordance with the terms hereof and the Organization
Agreement;
(x) the provision of Cellular Service by Systems which are
Noncontributed Assets pursuant to a License Agreement and Services
Agreement with the Partnership;
(xi) the acquisition (through merger, consolidation, purchase
of stock or assets, or otherwise), of an ownership interest of less
than 5% in a Person, which owns or leases Systems, or provides
Cellular, ESMR or PCS Services (directly or indirectly through an
Affiliate that is controlled by such Person) so long as such services
account for less than 20% of both (A) the revenues of such Person as
set forth in the most recent available audited financial statements of
such Person as of the date of execution of the definitive agreement
providing for such acquisition, and (B) the value of such Person (as
determined in good faith by the acquiring Partner or Affiliate);
provided that, if the Partnership Committee (by vote of the Members
representing Groups other than the Group of the acquiring Partner)
shall determine, in its sole discretion, that the acquired business
would be reasonably expected to compete with or to conflict with the
existing or planned activities or acquisitions of the Partnership
(as contemplated by an Approved Budget, an Approved Business Plan or
other
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action of the Partnership Committee), or result in any material
restrictions being imposed on such existing or planned activities or
acquisitions by any court, governmental agency or regulatory or
administrative authority, the Partner and its Affiliates shall
promptly, but in any event within 30 days, divest such ownership
interest, or take such other action as is necessary (in the
determination of the Partnership Committee) to eliminate such
competition or conflict, or remove such restrictions; and
(xii) the acquisition (through merger, consolidation,
purchase of stock or assets, or otherwise) of a Person, or an interest
in a Person, which owns or leases Systems, or provides Cellular, ESMR
or PCS Services (directly or indirectly through an Affiliate that is
controlled by such Person) so long as such services account for less
than 20% of both (A) the revenues of such Person as set forth in the
most recent available audited financial statements of such Person as
of the date of execution of the definitive agreement providing for
such acquisition, and (B) the value of such Person (as determined in
good faith by the acquiring Partner or Affiliate), provided, that if
the Partnership Committee (by vote of Members representing Groups
other than the Group of the acquiring Partner) shall determine, in its
sole discretion, that the acquired business would be reasonably
expected to compete with or to conflict with the existing or planned
activities or acquisitions of the Partnership (as contemplated by an
Approved Budget, an Approved Business Plan or other action of the
Partnership Committee), or result in any material restrictions being
imposed on such existing or planned activities or acquisitions by any
court, governmental agency, regulatory or administrative authority,
the Partner and its Affiliates shall enter into a definitive agreement
to sell the Cellular, ESMR and PCS Systems to a third person not later
than the consummation of the acquisition by the Partner or its
Affiliates of the Person and shall consummate such sale of the
Cellular, ESMR and PCS Systems not later than 90 days after
consummation of such acquisition.
(e) Each Partner shall use its reasonable efforts to cause each of
its Attributed Entities to abide by the restrictions contained in this Section
7.4 and to comply with the terms set forth herein.
(f) This Agreement shall not be deemed to create any duties other
than as expressly provided for herein or imposed by applicable law, nor shall
its existence be deemed to alter the legal duties and obligations that any
Partner or any Affiliate has to the other Partners or their Affiliates as to
matters outside the scope of the Agreement, including, without limitation,
those concerning the terms and conditions of interconnection services. Each of
the Partners and its Affiliates acknowledge their respective right to compete
vigorously with the other Partners and their Affiliates in markets or areas in
which they are otherwise competitors in the offering of telecommunications
services.
(g) Each Partner (whether or not such Partner shall have withdrawn
as a General Partner from the Partnership in violation of Section 8.1) shall
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remain subject to the provisions of this Section 7.4 for a period of one year
from the date such Partner and its Affiliates cease to have aggregate General
Partner and Limited Partner Percentage Interests equal to or exceeding 5%. If
a General Partner withdraws from the Partnership in violation of Section 8.1,
then the Limited Partner Percentage Interest of such Partner, for purposes of
this Section 7.4(g), shall be deemed to be increased by the General Partner
Percentage Interest of such Partner at the time of such withdrawal.
7.5. Duties of Partners. The fiduciary duties of Partners or Members
of the Partnership Committee shall not restrict any Partner or Affiliate or any
Member of the Partnership Committee from:
(a) engaging in conduct permitted by Section 7.4(a);
(b) taking any action in any capacity other than that of a
Partner or Member of the Partnership Committee, respectively; or
(c) acting to prevent the Partnership from engaging in an
activity that is outside the scope of the Partnership Business;
whether or not such Partner, Affiliate or Member of the Partnership Committee
is motivated in whole or in part by a desire to further the interests of a
Person other than the Partnership.
ARTICLE 8
TERMINATION AND DISSOLUTION
8.1. Events of Dissolution. The Partnership shall be dissolved upon
(i) expiration of the term of the Partnership specified in Section 1.6 hereof,
(ii) an election to dissolve the Partnership pursuant to Section 8.2(b)(i),
(iii) the withdrawal of a General Partner, the filing of a certificate of
dissolution, or its equivalent, for the General Partner or the revocation of
its charter and the expiration of 90 days after the date of notice to the
General Partner of revocation without a reinstatement of its charter, or the
occurrence of any other event that results in the General Partner ceasing to be
a general partner of the Partnership as required under the Act; provided that
the Partnership shall not be dissolved and required to be wound up in
connection with any of the events specified in this clause (iii) if (A) at the
time of the occurrence of such event there is at least one remaining general
partner of the Partnership who is hereby authorized to and does carry on the
business of the Partnership without dissolution, or (B) within 90 days after
the occurrence of such event, a majority in interest of the remaining partners
(or such greater percentage in interest as is required by the Act) agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of such event, of one or more additional general
partners of the Partnership, (i) the transfer or sale of all or substantially
all of the assets of the Partnership, (ii) the entry of a decree of judicial
dissolution pursuant to Section 17-802 of the Act, (iii) the unanimous written
consent of the Partners, and (iv) the termination of the Organization
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Agreement in accordance with the provisions of Article 6 thereof. Without the
unanimous written consent of the Partners, each Partner agrees not to withdraw
as a Partner or do anything that would otherwise dissolve the Partnership
(except as permitted by the terms of Article 10). Notwithstanding the
foregoing, if a General Partner withdraws from the Partnership, upon such
withdrawal, (i) the general partner interests in the Partnership of such
Partner shall automatically be deemed to become limited partner interests in
the Partnership and (ii) such Partner shall have no right to participate in the
management of the Partnership Business and affairs of the Partnership,
including the right to designate a Representative Partner, Members of the
Partnership Committee or Executive Officers.
8.2. Bankruptcy of a General Partner.
(a) If the Bankruptcy of a General Partner occurs and at such time
there is at least one other General Partner, such remaining General Partner or
General Partners are hereby authorized and shall carry on the business of the
Partnership without dissolution, and the Partnership Interests of the General
Partner in Bankruptcy (the "Bankrupt Partner") shall automatically be deemed to
become limited partner interests in the Partnership, and such Bankrupt Partner
shall cease to be a General Partner and continue to be, or become, a Limited
Partner having (i) no right to participate in the management of the Partnership
Business and affairs of the Partnership, including no right to designate a
Representative Partner, Members to the Partnership Committee or any Executive
Officers, and (ii) the same interest in all items of income, gain, loss,
deduction or credit of the Partnership to the same extent as if such Bankruptcy
had not occurred. The Partnership shall continue to be governed by the terms
of this Agreement, the Partnership Business and the property of the Partnership
shall continue to be owned by the Partnership, and the Partnership Business
shall otherwise continue unaffected by such Bankruptcy. Upon the occurrence of
the Bankruptcy of any General Partner, (i) the Bankrupt Partner and the other
Partners shall execute such documents as may be necessary or appropriate to
carry out the provisions of this Section 8.2 and (ii) the other Partners are,
without necessity of any further action or documentation, hereby appointed
attorneys-in-fact of the Bankrupt Partner for the purpose of carrying out the
provisions of this Section 8.2 and taking any action and executing any
documents which such Partners may deem necessary or advisable to accomplish the
purposes hereof, such appointment being irrevocable and coupled with an
interest.
(b) If the Bankruptcy of a General Partner occurs and at such time
the Bankrupt Partner is the only General Partner, the other Partners may (i)
consent in writing to dissolve the Partnership or (ii) within 90 days after
such Bankruptcy occurs, agree in writing to continue the business of the
Partnership and to appoint, effective as of the date of such Bankruptcy, one or
more additional General Partners. In the case of clause (ii), the Partnership
Business shall be carried on by such newly appointed General Partner(s) and the
Bankrupt Partner shall have its general partnership interest in the Partnership
converted into a limited partner interest in the Partnership and continue to
be, or become, a Limited Partner subject to the provisions of Section 8.2. In
the event the remaining Partners fail to make any election pursuant to this
subsection (b), the Partnership shall be dissolved.
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(c) In the event any General Partner shall become a "debtor" as
defined in the Bankruptcy Code in any case commenced thereunder and at any time
during the pendency of such case there shall be appointed (i) a trustee with
respect to the Bankrupt Partner under Section 701, 702 or 1104 of the
Bankruptcy Code (or any successor provisions thereto), or (ii) an examiner
having expanded powers beyond those specifically enumerated in Section 1104(b)
of the Bankruptcy Code, then the other Partners may, at any time thereafter, so
long as such condition exists, elect to dissolve the Partnership, in which
event the affairs of the Partnership shall be wound up as provided in this
Article 8.
8.3. Order of Dissolution. In settling accounts upon winding up and
liquidation of the Partnership, the assets of the Partnership shall be applied
and distributed as expeditiously as possible in the following order not later
than the end of the taxable year of the liquidation (i.e., the date upon which
the Partnership ceases to be a going concern as provided in Income Tax
Regulation section 1.704- 1(b)(2)(ii)(g) or if later, within 90 days after the
date of such liquidation):
(a) to pay (or make reasonable provision for the payment
of) all creditors of the Partnership, including to the extent
permitted by law Partners or their Affiliates who are creditors, in
satisfaction of liabilities of the Partnership in the order of
priority provided by law, including expenses relating to the
dissolution and winding up of the affairs of the Partnership
(including, without limitation, expenses of selling assets of the
Partnership, discharging the liabilities of the Partnership,
distributing the assets of the Partnership and terminating the
Partnership as a limited partnership in accordance with this Agreement
and the Act); and
(b) to the Partners in proportion to their respective
positive Capital Account balances, as those balances are determined
after all adjustments to such Capital Accounts as required by this
Agreement for all periods immediately prior to such distribution.
8.4. Orderly Winding Up. Notwithstanding anything to the contrary in
Sections 8.1, 8.2 and 8.3, but subject to Section 8.5 and the order of priority
in Section 8.3, upon winding up and liquidation, if required to maximize the
proceeds of liquidation, the Partnership Committee may, upon unanimous
approval, transfer the assets of the Partnership to a liquidating trustee or
trustees.
8.5. Dissolution Election.
(a) Notwithstanding the terms of Section 8.3(b) to the contrary, but
subject to Section 17-804(a)(1) of the Act, any Partner may elect upon the
occurrence of any of the events of dissolution specified in Section 8.1, by
written notice to the Partnership any time prior to actual distribution, to
require that the Partnership distribute the assets of the Partnership upon
dissolution and winding up as follows:
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(i) First, the ATI Group shall receive the Phase II Assets
and the New Par Assets contributed by the ATI Group pursuant to
Section 4.3;
(ii) Second, the USW Group shall receive the Phase II Assets
contributed by the USW Group;
(iii) Third, prior to the Phase II Contribution Date, the ATI
Group shall receive all of the non-cash assets (other than Systems) of
the Partnership;
(iv) Fourth, the Partners shall attempt to reach agreement on
the Fair Market Value and distribution among the partners of each of
the remaining non-cash assets of the Partnership and liabilities
related thereto, subject always to distributions being made in
accordance with Capital Accounts as provided in Section 8.3(b), with
such distributed assets being valued at their Fair Market Value. To
the extent that the Partners are unable to reach agreement on the Fair
Market Value and distribution among the Partners of certain of such
non-cash assets and liabilities, the Chairman of the Partnership
Committee not later than 20 days after an event of dissolution set
forth in Section 8.1 shall implement the following internal auction
procedures. For a period of up to ten days, the Chairman shall
entertain any and all bids by the Partners for such non-cash assets
and related liabilities, either singly (a "Single Bid") or as a whole
(an "Aggregate Bid"). The Chairman will only entertain bids which
exceed the previous Single Bid for any non-cash asset and related
liabilities or the previous Aggregate Bid for all such non-cash assets
and related liabilities by at least one percent (a "Qualifying Bid").
The Chairman will promptly make each bid submitted by any Partner
available to each other Partner. If during any 24-hour period within
the ten- day period specified above, the Chairman does not receive a
Qualifying Single Bid with respect to any non-cash asset or related
liabilities or a Qualifying Aggregate Bid, the Chairman shall not
entertain any further Single Bids with respect to such non-cash asset
or any further Aggregate Bids, as the case may be. At the conclusion
of such bidding period, the highest Single Bid by any Partner for each
non-cash asset and related liabilities or, if an Aggregate Bid for all
such non-cash assets and related liabilities which exceeds the sum of
the Single Bids is received, such Aggregate Bid, shall constitute the
Fair Market Value of such non-cash assets and related liabilities.
The Partnership shall thereafter pay any amounts referred to in
Section 8.3(a) (except to the extent any such liabilities are to be
assumed by any Partner), and the non-cash assets and liabilities
valued pursuant to the previous sentence shall be distributed to the
Partner who specified the highest Fair Market Value therefor (and
shall be debited against its Capital Account balance), and the
remaining non-cash assets, if any, and liabilities shall be
distributed in the manner agreed upon by the Partners; provided that
if the distributions pursuant to this sentence would result in any
Partner receiving
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more than its positive Capital Account balance, determined after
taking into account distributions required by clauses (i) and (ii) of
this Section 8.5(a) and any deficit restoration obligation arising
under Section 4.5 as a result of such distributions (an "Excess
Distribution"), assets with a Fair Market Value equal to the Excess
Distribution shall instead be distributed among the other Partners in
accordance with Capital Account balances (such assets as selected by
such other Partners) and immediately thereafter sold for cash to the
Partner who would have otherwise received the Excess Distribution in
the absence of this proviso, which cash shall be paid simultaneously
with the liquidating distributions; and
(v) All other remaining assets shall be distributed to the
Partners in accordance with Section 8.3(b) hereof.
In the event of a distribution pursuant to this subsection, the value of any
assets distributed to the Partners shall be equal to their Fair Market Value
determined in accordance with Section 4.10.
(b) Notwithstanding the foregoing, in the event that the distribution
of an asset of the Partnership to any Partner upon liquidation (whether
pursuant to clause (a) of this Section 8.5 of otherwise) would cause such
Partner to have a deficit restoration obligation under the terms of Section 4.5
hereof, such Partner may elect by written notice to the Partnership at any time
prior to actual distribution, to require the Partnership Committee either (i)
to use its best efforts to reduce such asset to cash or cash equivalents,
subject to obtaining fair value for such asset and any tax or other legal
considerations or (ii) cause such asset to be distributed in accordance with
Section 8.3(b) hereof.
8.6. Obligation To Restore Deficit Balance. No Partner shall be
liable for the return of the capital contributions of any other Partner, nor
shall any Partner be required to have any obligation to restore a deficit
balance in its Capital Account on winding up, liquidation and termination of
the Partnership except to the extent of any obligation specifically imposed
under Section 5 hereof and except to the extent required by the Act.
8.7. Termination of Partnership. The Partnership shall terminate when
all of the assets of the Partnership, after payment of or due provision for all
debts, liabilities and obligations of the Partnership, shall have been
distributed to the Partners in the manner provided for in Article 8, and the
Certificate of Limited Partner of the Partnership shall be canceled in the
manner required by the Act.
ARTICLE 9
ADMISSION OF ADDITIONAL PARTNERS
9.1. Admission Procedures. With the approval of the Partnership
Committee pursuant to Section 2.4(c), the Partnership may admit additional
Persons as a General Partner or a Limited Partner subject to the condition that
the proposed Additional Partner shall execute and deliver to the
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Partnership an agreement by which it (i) shall become a party to this Agreement
and (ii) shall make representations and warranties to the Partnership with
respect to itself substantially similar to those set forth in the Organization
Agreement and relating to such additional matters as the Partnership Committee
may request.
9.2. Designation as a Group. Any Person admitted as both an
Additional General Partner and an Additional Limited Partner pursuant to
Section 9.1, together with any Affiliates of such Person concurrently admitted
as Additional Partners, that is designated by the Partnership Committee
pursuant to Section 2.4(c) as a Group upon admission shall be entitled to
designate a Representative Partner and members of the Partnership Committee.
ARTICLE 10
TRANSFER OR ENCUMBRANCE OF INTEREST
10.1. Restriction on Transfer or Encumbrance. No Partner may assign,
sell, transfer or otherwise dispose of (any such transaction being referred to
in this Article 10 as a "transfer"), pledge, hypothecate, grant a security
interest in or otherwise encumber, its Partnership Interest, except (i) to ATI
or any Affiliate thereof in connection with an investment by such Partner in
ATI, (ii) pursuant to the Agreement of Exchange, (iii) pursuant to Section 10.9
and the Trust Agreement of Exchange substantially in the form of Exhibit A
hereto, (iv) pursuant to Article 11 hereto, or (v) otherwise in accordance with
the terms of this Article 10.
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate.
(a) Any Partner may, without the consent of the other Partners,
transfer ownership of all or any part of its Partnership Interest to a Wholly
Owned Affiliate (any Affiliate to which a transfer is permitted under this
Section 10.2 being referred to herein as an "Affiliate Transferee"). An
Affiliate Transferee shall be admitted as both a Substitute General Partner and
a Substitute Limited Partner at the time such Affiliate Transferee executes (i)
this Agreement or a counterpart to this Agreement, which evidences such
Affiliate Transferee's agreement to be bound by the terms and conditions of
this Agreement, (ii) an investment agreement with ATI substantially in the form
of the Investment Agreement and (iii) an agreement of exchange with ATI,
substantially in the form of the Agreement of Exchange.
(b) A transfer of less than all of a Partner's Partnership Interest
(a "Partial Interest") pursuant to this Section 10.2 shall be deemed to
constitute a transfer of both the General Partner and Limited Partner
Percentage Interests of such Partner pro rata in proportion to the portion of
such Partner's entire Partnership Interest transferred.
10.3. Transfer of Partnership Interest Other Than to a Wholly Owned
Affiliates. Subject to the terms of this Section 10.3, from and after the
earlier of (i) the fifth anniversary of the Effective Date and (ii) the third
anniversary of the Phase II Contribution Date, any Partner may
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transfer ownership of all or, prior to the tenth anniversary of the Effective
Date, any portion of the Partnership Interest of such Partner to any Person;
provided that prior to the Phase II Contribution Date, a Partner may transfer
all or any portion of its Partnership Interest only as part of a transfer of
all of its Wireless Assets.
(a) In the event that any Partner has received a bona fide written
offer, which such Partner (the "Transferring Partner") is willing to accept, to
sell all or any portion of its interest in the Partnership or all of its
Wireless Assets, as the case may be (the "Transferred Interest"), to any Person
who is financially and professionally qualified to carry out the terms and
intent of this Agreement, the Transferring Partner shall deliver a written
notice (the "Transfer Notice") to each of the other Partners other than any
Partner who is a member of the Group of the Transferring Partner (the
"Non-Transferring Partners") stating its intent to sell the Transferred
Interest. The Transfer Notice shall (i) specify the purchase price for the
Transferred Interest, (ii) identify the proposed purchaser of the Transferred
Interest (iii) specify the date scheduled for the transfer (which date shall
not be less than 120 days from the date the Transfer Notice is delivered) and
(iv) contain a statement that the offer has been accepted pending compliance
with the right of first refusal set forth herein and regulatory and other
approvals, and shall have attached thereto a copy of the written offer
containing all of the terms and conditions on which the Transferred Interest is
to be sold.
(b) The Non-Transferring Partners shall have the option to
purchase all (but not less than all) of the Transferred Interest on terms and
conditions substantially the same in all material respects, and at the same
price, set forth in the written offer delivered pursuant to Section 10.3(a)
above; provided that (i) if such terms and conditions include any non-cash
assets or any non-financial requirements which would be impracticable for the
Non-Transferring Partners to satisfy, then the purchase price for the
Transferred Interest will be equal to the Fair Market Value of the Transferred
Interest in cash (determined in accordance with Section 4.10).
(c) Each of the Non-Transferring Partners shall initially be
entitled to purchase that fraction of the Transferred Interest equal to its
Percentage Interest divided by the Percentage Interests of all of the
Non-Transferring Partners. If any of the Non-Transferring Partners declines to
exercise its right to purchase the Transferred Interest hereunder, the other
Non-Transferring Partners electing to exercise that right shall be entitled to
purchase that portion of the Transferred Interest that has been declined by the
other Non-Transferring Partners in amounts determined pursuant to reapplication
of the principles set forth in the immediately preceding sentence, excluding
from consideration the Percentage Interests of any declining Non-Transferring
Partner. Each Non-Transferring Partner shall notify the Partnership and each
of the other Partners of its intention to exercise or not to exercise its
purchase rights hereunder within 30 days of receipt by it of a Transfer Notice.
The President shall thereupon notify each of the Partners of the elections made
by each of the Non-Transferring Partners. Subsequent written notifications, if
necessary, of such exercising Non-Transferring Partners elections with respect
to that portion of the Transferred Interest which has been declined by any
Non-Transferring Partner shall be required within ten days after receipt by the
exercising
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Non-Transferring Partners of such notifications by the President. No portion
of an Transferred Interest may be purchased by any of the Non- Transferring
Partners unless all the Transferred Interest is purchased by one or more
Non-Transferring Partners. In the event that one or more of the
Non-Transferring Partners shall have duly elected to purchase the Transferred
Interest, the Non-Transferring Partners shall diligently pursue obtaining all
regulatory approvals and use reasonable efforts to consummate the closing of
the purchase of the Transferred Interest as soon as practicable and in any
event within one year from receipt of the Transfer Notice; provided that, if
such closing does not occur within such one-year period due to the failure of
the Non-Transferring Partners to receive any material required regulatory
approvals, the Non- Transferring Partners right to close such sale may be
extended, at the option of any Non-Transferring Partner, until such regulatory
approvals are received, but in no event for a period of greater than one year.
During the period of any such extension, the purchase price payable by the
Non-Transferring Partners for the Transferred Interest shall increase at a rate
to be determined which shall be intended to compensate fairly the Transferring
Partner. In the event of a failure of the Non-Transferring Partners to elect
to purchase the Transferred Interest or to consummate such purchase in
accordance herewith, the Transferring Partner will be free, at any time within
120 days from the date the Non- Transferring Partners elect not to exercise
their purchase rights hereunder or from the date the time periods specified in
this subsection (c) for such election have expired (in the case of a failure to
elect to purchase) or one year from the expiration of the extended period set
forth (in the case of a failure to consummate a purchase), subject, in each
such case, to extension for up to an additional one year to the extent
necessary to receive any material required regulatory approvals, to consummate
the sale of the Transferred Interest to the purchaser at a price and upon terms
and conditions no more favorable to the purchaser than those specified in the
Transfer Notice; provided that the purchaser shall assume the obligations of
the Transferring Partner under this Agreement.
(d) In connection with any transfer, the transferee thereof shall
be admitted as a Substitute Partner at the time such transferee executes (i)
this Agreement or a counterpart to this Agreement which, subject to subsection
(e), evidences such transferee's agreement to be bound by the terms and
conditions of this Agreement, (ii) an investment agreement with ATI
substantially in the form of Exhibit B hereto (or Exhibit D hereto in the case
of a transferee of a Partial Interest) and (iii) an agreement to exchange with
ATI, substantially in the form of Exhibit E hereto (or Exhibit C hereto in the
case of a transferee of a Partial Interest). The Transferring Partner shall
not be relieved of any of its obligations under this Agreement arising prior to
such transfer, to the extent such obligations shall not be discharged by the
transferee, but the Transferring Partner shall be relieved of any obligations
under this Agreement arising subsequent to such transfer. The Transferring
Partner and the transferee shall execute such documents as the Non-Transferring
Partners shall reasonably request to evidence the assumption and continuing
obligations referred to in this Section 10.3.
(e) A transferee of all of the Partnership Interests of a Group shall
be admitted as both a Substitute General Partner and a Substitute Limited
Partner; provided that a transferee of all the USW's Partnership Interests
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shall not be entitled to designate Executive Officers pursuant to Section
2.9(d) or to make capital contributions to the Partnership pursuant to Section
4.3. A transfer by a Partner of a Partial Interest pursuant to this Section
10.3 shall be deemed to constitute a transfer of both the General Partner and
Limited Partner Percentage Interests of such Partner pro rata in proportion to
the portion of such Partner's entire Partnership Interest transferred; provided
that the transferee of a Partial Interest shall (i) be admitted only as a
Substitute Limited Partner in the Partnership and (ii) shall have no right to
participate in the management of the Partnership Business and affairs of the
Partnership, including no right to designate a Representative Partner, Members
of the Partnership Committee or Executive Officers.
(f) If members of the ATI Group and the USW Group are the only
Partners, the Non-Transferring Partners shall be entitled to designate a third
party to exercise its rights under this Section 10.3.
(g) If at any time, the members of the USW Group cease to own in
the aggregate at least 15% of the aggregate Percentage Interests (without
giving effect to any dilution of ownership which results from the failure to
contribute Noncontributed Assets), (i) such Group shall cease to be designated
as a Group, (ii) the interests in the Partnership of the members of such Group
shall automatically be deemed to become limited partner interests in the
Partnership and (iii) the members of such Group shall have no right to
participate in the management of the Partnership Business and affairs of the
Partnership, including no right to designate a Representative Partner, Members
of the Partnership Committee or Executive Officers.
(h) Each Partner shall cooperate, and shall in no way oppose, the
closing of any transfer which is in compliance with this Article 10.
10.4. Partnership's Redemption Option. If, at any time, the aggregate
Percentage Interests of any Partner, together with the Wholly Owned Affiliates
of such Partner, are less than 5%, the Partnership shall have the option to
redeem the Partnership Interests of such Partner and its Wholly Owned
Affiliates at a purchase price equal to the Fair Market Value of such
Partnership Interest as determined pursuant to Section 4.10.
10.5. Spin-off Not Deemed To Be a Transfer.
(a) A tax-free spin-off qualifying under Section 355 of the Code
(a "Spin-off"), by the members of a Group to the shareholders of their publicly
held Parent Entity, of an entity the assets of which include all, but not less
than all, of such Group's Wireless Assets will not be deemed to be a transfer
or Change in Ownership subject to the restrictions set forth in this Article 10
if the following conditions are satisfied.
(i) No more than 240 days nor less than 180 days prior to the
Spin-off, the Representative Partner of the Group effecting the
Spin-off shall provide the other Representative Partners with such
information regarding the entity to be spun-off as the other
Representative Partners shall reasonably request, provided that such
information shall be promptly updated if the financial
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condition of the spun-off entity changes in any material respect after
delivery of such information.
(ii) The spun-off entity shall have the financial capacity to
fund all projected capital contributions to the Partnership
contemplated in the Approved Business Plan.
(iii) Prior to the Spin-off, neither any member of the Group
or any Affiliate thereof nor the spun-off entity shall have entered
into any agreement, or formulated any plan or intention, with respect
to any merger or other business combination transaction involving the
spun-off entity and a party other than ATI or an Affiliate thereof.
(iv) If the Fair Market Value of the Wireless Assets (as
determined in accordance with Section 4.10) is less than 50% of the
Fair Market Value of the entity spun off, then the spun-off entity
shall have all of the rights and obligations hereunder of the Group
effecting the Spin-off.
(v) If the Fair Market Value of the Wireless Assets equals or
exceeds 50% of the Fair Market Value of the entity spun off, then the
spun-off entity shall have all of the rights and obligations hereunder
of the Group effecting the Spin-off; provided that, in the event of a
subsequent Change of Control of the spun-off entity, the spun-off
entity shall have the same rights and obligations as an acquiror of
all of the Partnership Interests of the Group effecting the Spin-off
as provided in Section 10.3(d) and (e).
(vi) If the Fair Market Value of the Wireless Assets equals
or exceeds 75% of the Fair Market Value of the entity spun off, then,
prior to consummating the Spin-off, the spun-off entity shall be
required to have offered to ATI the opportunity to purchase the
Wireless Assets at a purchase price equal to the Private Market Value
thereof determined in accordance with Section 4.10, and if ATI accepts
such offer, shall have entered into a definitive purchase agreement
with ATI, containing customary terms and conditions and subject to the
approval of the spun-off entity's shareholders following the Spin-off.
(vii) The spun-off entity, following the Spin-off, will
retain all right, title and interest to all trade names or other
intellectual property licensed to the Partnership by such Group.
(viii) The spun-off entity shall have executed an investment
agreement with ATI substantially in the form of the Investment
Agreement and a agreement of exchange with ATI, substantially in the
form of the Agreement of Exchange.
10.6. Invalid Transfers Void. Any purported transfer of any
Partnership Interest or any part thereof not in compliance with this Article 10
shall be void and of no force or effect and the transferring Partner shall be
liable to the other Partners and the Partnership for all
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liabilities, obligations, damages, losses, costs and expenses (including
reasonable attorneys' fees and court costs) arising as a result of such
noncomplying transfer.
10.7. Change in Ownership.
(a) For purposes of this Agreement, a "Change in Ownership" of a
Partner shall be deemed to have occurred when (i) any Person, other than a
publicly held Parent Entity of such Partner or an Affiliate Transferee (an
"Unaffiliated Entity"), shall acquire (whether by merger, consolidation, sale,
assignment, lease, transfer or otherwise, in one transaction or series of
related transactions), or otherwise beneficially own or control 50% or more of
the outstanding Voting Stock of any Partner (or any entity, other than the
publicly held Parent Entity of such Partner, which, directly or indirectly,
controls such Partner (a "Control Entity")), (ii) an Unaffiliated Entity, or
group of persons acting in concert therewith, shall acquire the power to direct
or cause the direction of the management and policies of such Partner or a
Control Entity thereof, or (iii) the publicly held Parent Entity of such
Partner shall otherwise cease to beneficially own or control a majority of the
outstanding Voting Stock of any Partner or a Control Entity thereof.
(b) Any Change in Ownership of a Partner shall be deemed for all
purposes hereof to be a proposed transfer of the Partnership Interest of such
Partner and such Partnership Interest shall be deemed to be a Transferred
Interest, the transfer of which shall be subject to all of the terms and
conditions set forth in Sections 10.1 and 10.3 hereof, and the purchase price
of which shall be the Fair Market Value of the Wireless Assets of the Partner
experiencing a Change of Ownership. In the event that the Transferred Interest
is not purchased pursuant to the preceding sentence, any Unaffiliated Entity
effecting such Change in Ownership, shall, by a binding written instrument
which shall be enforceable by the Partnership and the other Partners, assume
all obligations and liabilities hereunder of the Partner which is the subject
of such Change in Ownership.
10.8. Change of Control - ATI.
(a) From and after the Phase I Closing Date, if at any time there
shall occur a Change of Control of ATI, then at any time within six months
after the date of such Change of Control, the USW Group may by written notice
delivered to ATI require ATI to purchase, and ATI shall purchase, in accordance
with the provisions of this Section 10.8, all of the Wireless Assets of the USW
Group (the "Put Interest") at a price (the "Put Price") equal to the Private
Market Value thereof as determined in accordance with Section 4.10.
(b) On or prior to January 25, 2009, if the shares of common stock
of ATI are not then registered under Section 12(b) or 12(g) of the Exchange
Act, or the common stock of ATI shall not then be broadly held and actively
traded by public stockholders, the USW Group may notify ATI in writing that the
USW Group may elect to require ATI to purchase the Put Interest as set forth
below. If the USW Group shall have delivered the notice described in the
preceding sentence, then at any time from and after July 25, 2009 to January
25, 2010, the USW Group may by written notice delivered to ATI
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require ATI to purchase, and ATI shall purchase, in accordance with the
provisions of this Section 10.8, the Put Interest at the Put Price.
(c) Any purchase and sale of a Put Interest effected pursuant to
this Section 10.8 shall be consummated at a closing as promptly as practicable,
but in any event no later than on the 120th day following the determination of
the Put Price; provided that such period shall be extended for such period of
time as shall be necessary in order to obtain requisite governmental or
regulatory approvals with respect to such transaction if ATI has diligently
pursued all necessary approvals and if the failure to obtain such approvals
will have a material adverse effect on ATI. At such closing, ATI shall pay the
selling Group the Put Price in cash or by delivery of notes (which provide for
terms substantially similar to those set forth in Exhibit F) issued by ATI or
the Partnership having a Fair Market Value equal to the Put Price (or any
combination of cash and such notes), and the selling Group shall, pursuant to
such instruments as may be reasonably requested by the ATI, deliver to ATI the
Put Interest in appropriate form for transfer, free and clear of any lien or
other encumbrance. In the event that the Put Price is paid in notes, the Fair
Market Value of such notes shall be conclusively determined at least 10 days
prior to the closing and in the manner set forth in Section 4.10.
10.9. USW Option To Effect Exchange Into Trust. Upon the consummation
of the first closing under the Trust Agreement of Exchange, the USW Group shall
cease to be designated as a Group, the interests in the Partnership of the
members of such Group shall automatically be deemed to become limited partner
interests in the Partnership and the members of the USW Group shall have no
further right to participate in the management of the Partnership Business and
affairs of the Partnership, including no right to designate a Representative
Partner, Members of the Partnership Committee or Executive Officers.
10.10. Proportionate Transfer of PCS Interest. No Partner may effect
a transfer of its interest in the Partnership without transferring a
partnership interest in PCS Par representing the same proportion of its
Percentage Interest in PCS Par as the proportion of the Percentage Interest in
the Partnership being transferred, and any such attempted transfer shall be
null and void and of no effect.
ARTICLE 11
REGISTRATION RIGHTS
11.1. Demand Registration Rights.
(a) Notwithstanding anything in this Agreement to the contrary, at
any time following the 15th anniversary of the Effective Date and prior to the
50th anniversary of the Effective Date, the Partnership shall, upon receipt of
written notice from either the ATI RP or the USW RP (a "Demand Notice"), take
such action as is reasonably necessary to cause the Partnership to be
reconstituted into a corporation (the "Successor Company") organized under the
laws of the State of Delaware, or any other jurisdiction selected by the
Partnership and to convert the Partnership Interests into
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common stock of the Successor Company ("Common Shares") and to file a
registration statement (a "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), and under the securities or blue sky
laws of any jurisdictions designated by such Representative Partner, Common
Shares representing Partnership Interests constituting not less than 25% of the
aggregate Partnership Interests held by the Group represented by such
Representative Partner. The members of the USW and ATI Groups who receive
Common Shares upon the conversion of their respective Partnership Interests are
referred to herein as the "Original Stockholders."
(b) Following the initial registration of Common Shares under the
Securities Act, the Original Stockholders shall be entitled, from time to time,
to make such further Demand Notices as are necessary to enable them to dispose
of the entirety of the Common Shares issued upon the initial conversion of
their respective Partnership Interests (the "Registrable Shares") and the
Successor Company shall comply with such additional Demand Notices on the terms
and conditions of this Article; provided that no Original Stockholders shall be
entitled to make a Demand Notice (i) within 180 days after the last day of
effectiveness of the most recent registration statement relating to a Demand
Notice, or (ii) if the number of Demand Notices made by such Original
Stockholder and its Affiliates would equal or exceed (x) the Fair Market Value
of the Registrable Shares held by such Original Stockholder and its Affiliates
on the date of the conversion, divided by (y) $750 million, rounded to the
nearest whole number.
(c) Any Persons requesting registration (the "Selling Parties")
shall deliver a copy of a Demand Notice to the Partnership (or the Successor
Company) and each Representative Partner (or Original Stockholder) that is not
participating in the registration (the "Non-Selling Parties"). Each Demand
Notice shall specify the amount of each Selling Party's Percentage Interest (or
the number of Registrable Shares) that shall be included in the registration
(the "Sale Interest"), and the proposed closing date for the offering (which
date shall not be less than 120 days (in the case of the initial public
offering of Common Shares) or 30 days (in the case of subsequent public
offerings) from the date on which the Demand Notice is delivered). The Demand
Notice shall be accompanied by a letter from an investment banking firm of
national reputation, who shall be reasonably acceptable to the Partnership (or
the Successor Company), stating the price (net of any underwriters' fees and
commissions) at which such firm, in good faith, believes that, based on the
then prevailing market conditions, it would be able to sell the Registrable
Shares in a public offering (the "Proposed Offering Price"). With respect to
the first Demand Notice delivered pursuant to this Article 11, the Proposed
Offering Price may reflect an initial public offering discount, if appropriate.
The Proposed Offering Price with respect to subsequent Demand Notices may
assume that all Common Shares that were the subject of prior Demand Notices had
been fully distributed to the public (regardless of whether the Non-Selling
Parties had exercised their right of first offer with respect to such Common
Shares pursuant to Section 11.1(d)) and may reflect the price that would
otherwise be obtainable in the public market if such shares had been fully
distributed (the difference between the Proposed Offering Price and such price
that would otherwise be obtainable is referred to herein as a "Liquidity
Adjustment"). If the Selling Parties and the Non-Selling Parties are unable to
agree as to the amount of any such Liquidity Adjustment, the amount of
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such Liquidity Adjustment shall be determined pursuant to an appraisal process
following the procedures set forth in Section 4.10.
(d) The Non-Selling Parties shall have the option to purchase all
(but not less than all) of the Sale Interest at the Proposed Offering Price
plus any Liquidity Adjustment. Each of the Non-Selling Parties shall initially
be entitled to purchase that fraction of the Sale Interest equal to its
Percentage Interest (or percentage ownership interest in the Successor Company)
divided by the Percentage Interests (or percentage ownership interests in the
Successor Company) of all of the Non-Selling Parties. If any of the
Non-Selling Parties declines to exercise its right to purchase the Sale
Interest hereunder, the other Non-Selling Parties electing to exercise that
right shall be entitled to purchase that portion of the Sale Interest that has
been declined by the other Non-Selling Parties in amounts allocable determined
pursuant to reapplication of the principles set forth in the immediately
preceding sentence, excluding from consideration the Percentage Interests (or
other ownership interests) of any declining Non-Selling Partner. Each
Non-Selling Party shall notify the Partnership (or the Successor Company) of
its intention to exercise or not to exercise its purchase rights hereunder
within 30 days (in the case of the initial public offering of Common Shares) or
10 days (in the case of subsequent public offerings) after receipt by it of a
Demand Notice. The President (or any successor officer of the Successor
Company) shall thereupon notify each of the USW RP and ATI RP (or the Original
Stockholder) of the elections made by each of the Non-Selling Parties.
Subsequent written notifications, if necessary, of such exercising Non-Selling
Parties elections with respect to that portion of the Sale Interest which has
been declined by any Non-Selling Party shall be required within ten days (in
the case of the initial public offering) or 5 days (in the case of subsequent
public offerings) after receipt by the exercising Non-Selling Parties of such
notifications by the President. No portion of a Sale Interest may be purchased
by any of the Non-Selling Parties unless all of the Sale Interest is purchased
by one or more Non-Selling Parties. In the event that one or more of the
Non-Selling Parties shall have duly elected to purchase the Sale Interest, the
closing of the purchase of the Sale Interest by such Non-Selling Parties shall
take place within one year of the date of such election; provided that from and
after the proposed closing date for the offering set forth in the Demand
Notice, the purchase price payable by the Non-Selling Parties for the Sale
Interest shall increase at a rate equal to the Prime Rate per annum, compounded
semi-annually. In the event of a failure of the Non-Selling Parties to elect
to purchase the Sale Interest or to consummate such purchase in accordance
herewith, the Selling Party will be free, at any time within 90 days from the
date the Demand Notice is delivered (in the case of a failure to elect to
purchase the Sale Interest) and 120 days (in the case of a failure to
consummate such purchase within the one year period referred to above) subject
to extension for up to an additional 60 days to the extent necessary to comply
with applicable regulatory requirements, to consummate the sale of the Sale
Interest at a price (net of underwriters fees and commissions) equal to or
exceeding the Proposed Offering Price. If the sale of the Sale Interest is not
completed within the foregoing periods or if market conditions cause the
managing underwriter to reduce the proposed price per share to the public or
the net proceeds to Selling Parties or otherwise to materially revise the terms
set forth in the Demand Notice, the Selling Parties shall promptly so notify
the
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Non-Selling Parties and the Non-Selling Parties shall again have a right of
first offer with respect to the Sale Interest, upon the revised terms, except
that such new right must be exercised within three business days after such
notification.
(e) If members of the ATI and the USW Groups are the only
Representative Partners (or Original Stockholders, as the case may be), the
Non-Selling Parties shall be entitled to designate a third party to exercise
its rights under this Section 11.1.
(f) Upon receipt of a Demand Notice, the Partnership shall
promptly use all reasonable efforts to cause the Partnership to be in a
position to be reconstituted as a corporation and effect the registration of
the Common Shares which are included in the Sale Interest in accordance with
Section 11.3; provided that the Partnership shall not be required to consummate
the reconstitution prior to the time the registration statement filed in
accordance with Section 11.3(a) shall have become effective under the
Securities Act.
11.2. Successor Company Registration.
(a) If the Successor Company shall determine to register any of
its Common Shares either for its own account or the account of a security
holder or holders exercising their respective demand registration rights, other
than a registration relating solely to employee benefit plans, or a
registration relating solely to a Rule 145 transaction, or a registration on
any registration form that does not permit secondary sales, the Successor
Company will:
(i) promptly give to each Original Stockholder written notice
thereof; and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other
compliance), except as set forth in section 11.2(b) below, and in any
underwriting involved therein, all the Registrable Shares specified in
a written request made by such Original Stockholder and received by
the Successor Company within seven days after the written notice from
the Successor Company described in clause (i) above is mailed or
delivered by the Successor Company. Such written request may specify
all or a part of such Original Stockholder's Registrable Shares.
(b) If the registration of which the Successor Company gives
notice is for a registered public offering involving an underwriting, the
Successor Company shall so advise each Original Stockholder as a part of the
written notice given pursuant to Section 11.2(a)(i). In such event, the right
of each Original Stockholder to registration pursuant to this Section 11.2
shall be conditioned upon such Original Stockholder's participation in such
underwriting and the inclusion of such Original Stockholder's Registrable
Shares in the underwriting to the extent provided herein. The Original
Stockholders shall (together with the Successor Company and the other holders
of securities of the Successor Company with registration rights to participate
therein distributing their securities through such underwriting)
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enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Successor Company.
Notwithstanding any other provision of this Section 11.2, if the
representative of the underwriters advises the Successor Company in writing
that marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Shares from, or limit the number of Registrable
Shares to be included in, the registration and underwriting. The Successor
Company shall so advise the Original Stockholders, and the number of shares of
securities that are entitled to be included in the registration and
underwriting shall be allocated first to the Successor Company for securities
being sold for its own account and thereafter as set forth in Section 11.2(c).
(c) In any circumstance in which all of the Registrable Shares and
other Common Shares with registration rights (the "Other Shares") requested to
be included in a registration on behalf of the Original Stockholders or other
selling stockholders cannot be so included as a result of limitations of the
aggregate number of Registrable Shares and Other Shares that may be so
included, the number of Registrable Shares and Other Shares that may be so
included shall be allocated among the Original Stockholders and other selling
stockholders requesting inclusion of shares pro rata on the basis of the number
of Registrable Shares and Other Shares that are held by the Original
Stockholders and other selling stockholders; provided, however, that such
allocation shall not operate to reduce the aggregate number of Registrable
Shares and Other Shares to be included in such registration. If the Original
Stockholders or other selling stockholder does not request inclusion of the
maximum number of Registrable Shares and Other Shares allocated to him pursuant
to the above-described procedure, the remaining portion of his allocation shall
be reallocated among the Original Stockholders and other selling stockholders
whose allocations did not satisfy their requests pro rata on the basis of the
number of Registrable Shares and Other Shares which are held by the Original
Stockholders and other selling stockholders, and this procedure shall be
repeated until all of the Registrable Shares and Other Shares which may be
included in the registration on behalf of the Original Stockholders and other
selling stockholders have been so allocated.
11.3. Registration Procedures. In the case of each registration
involving Registrable Shares pursuant to this Article 11, the Partnership (or
Successor Company) will:
(a) furnish to the Original Stockholders participating in
such registration (the "Participating Stockholders"), prior to the
filing of a Registration Statement, copies of such Registration
Statement as it is proposed to be filed, and thereafter such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary
prospectus) and such other documents in such quantities as such
Participating Stockholders reasonably may request from time to
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time in order to facilitate the disposition of such Registrable
Shares;
(b) use all reasonable efforts to register or qualify the
offer and sale of such Registrable Shares under such other securities
or blue sky laws of such jurisdiction as the Participating
Stockholders reasonably request and do any and all other acts and
things as reasonably may be necessary or advisable to enable such
Participating Stockholders to consummate the disposition in such
jurisdictions of the Registrable Shares owned by such Participating
Stockholders; provided that the Successor Company will not be required
to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection
(b), (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(c) use all reasonable efforts to cause such Registrable
Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Successor Company to enable the Participating
Stockholders to consummate the disposition of such Registrable Shares;
(d) notify the Participating Stockholders at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which
the prospectus included in such Registration Statement or amendment
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Successor Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares,
such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(e) enter into customary agreements (including an
underwriting agreement in customary form and an indemnification
agreement with the Participating Stockholders in customary form) and
take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Shares;
(f) make available for inspection by the Participating
Stockholders participating in such registration, any underwriter
participating in any disposition pursuant to such registration, and
any attorney, accountant or other agent retained by such Participating
Stockholders or any such underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents and
properties of the Successor Company (collectively, the "Records") as
shall be
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reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the
Successor Company to supply all information reasonably requested by
any such Inspector in connection with such registration;provided that
(i) Records and information obtained hereunder shall be used by such
persons only to exercise their due diligence responsibility and (ii)
Records or information which the Successor Company determines, in good
faith, to be confidential shall not be disclosed in such Registration
Statement or otherwise by the Inspectors unless (x) the disclosure of
such Records or information is necessary to avoid or correct a
misstatement or omission in the Registration Statement or (y) the
release of such Records or information is ordered pursuant to a
subpoena or other order from a court or governmental authority of
competent jurisdiction. The Participating Stockholders shall use its
best efforts, prior to any such disclosure, to inform the Successor
Company that such disclosure is necessary to avoid or correct a
misstatement or omission in the Registration Statement. Each
Participating Stockholder further agrees that it will, upon learning
that disclosure of such Records or information is sought in a court or
by a governmental authority, give notice to the Successor Company and
allow the Successor Company, at the expense of the Successor Company,
to undertake appropriate action to prevent disclosure of the Records
or information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter
from the independent public accountants for the Successor Company in
customary form and covering such matters of the type customarily
covered by comfort letters as the Participating Stockholders
reasonably request;
(h) otherwise use all reasonable efforts to comply with
all applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"), and make generally available to its security
holders, as soon as reasonably practicable, an earning statement
covering a period of twelve months beginning within three months after
the effective date of such Registration Statement, which earning
statement shall satisfy the provisions of section 11(a) of the
Securities Act and Rule 158 thereunder;
(i) use all reasonable efforts to cause all such
Registrable Shares to be listed on each securities exchange on which
similar securities issued by the Successor Company are listed; and
(j) use its best efforts (i) to have any registration of
the Registrable Shares declared effective as promptly as practicable
after the filing thereof and (ii) to keep such Registration Statement
effective for a period (up to three months) sufficient to complete the
distribution of the Registrable Shares. The Successor Company further
agrees to
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supplement or make amendments to the Registration Statement, if
required by (x) the registration form utilized by the Successor
Company for such registration or by the instructions applicable to
such registration form, (y) the Securities Act or the rules and
regulations thereunder or (z) the Participating Stockholders (or any
underwriter for the Participating Stockholders) with respect to
information concerning the Participating Stockholders or such
underwriter or the plan of distribution to be utilized with respect to
the Registrable Shares. The Successor Company agrees to furnish to
the Participating Stockholders copies of any such supplement or
amendment prior to its being used or filed with the SEC.
11.4. Conditions to Offerings. The obligations of the Partnership
(or the Successor Company) to take the actions contemplated by Section 11.1
with respect to an offering of Registrable Shares shall be subject to the
following conditions:
(a) The Registrable Shares shall be distributed in an
underwritten firm commitment public offering. The Partnership shall
have the right to select the investment banker or bankers and lead
manager or managers to administer the initial public offering of the
Common Shares; provided that such lead manager or mangers must be
reasonably acceptable to the Original Stockholder who delivered the
Demand Notice. The Participating Stockholders shall have the right to
select the investment banker or bankers and lead manager or managers
to administer the offering and its or their counsel in any subsequent
underwritten offering; provided that such lead manager or managers and
such counsel must be reasonably satisfactory to the Successor Company;
and
(b) The Participating Stockholders shall conform to all
applicable requirements of the Securities Act and the Exchange Act
with respect to the offering and sale of such Registrable Shares and
shall advise each underwriter, broker or dealer through which any of
such Registrable Shares are offered that such Registrable Shares are
part of a distribution that is subject to the prospectus delivery
requirements of the Securities Act.
The Successor Company may require the Participating Stockholders to
furnish to the Successor Company such information regarding the Participating
Stockholders or the distribution of the Registrable Shares as the Successor
Company may from time to time reasonably request in writing, in each case only
as required by the Securities Act or the rules and regulations thereunder or
under state securities or blue sky laws.
Each Participating Stockholder agrees that, upon receipt of any notice
from the Successor Company of the happening of any event of the kind described
in Section 11.3(d) of this Agreement, such Participating Stockholder will
forthwith discontinue disposition of Registrable Shares pursuant to the
registration covering such Registrable Shares until such
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Participating Stockholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 11.3(a) of this Agreement.
11.5. Additional Conditions.
(a) The Partnership's (or Successor Company's) obligations
pursuant to Section 11.1 shall be suspended if (i) the fulfillment of such
obligations would require the Partnership (or Successor Company) to make a
disclosure that would, in the reasonable good faith judgment of the Partnership
Committee (or Successor Company's Board of Directors), be detrimental to the
Partnership (or Successor Company) and premature and the Partnership Committee
(or Successor Company's Board of Directors) concludes, as a result, that it is
essential to defer the filing of the registration statement at such time, (ii)
the Partnership (or Successor Company) has filed or proposes to file a
registration statement with respect to any of its securities to be distributed
in an underwritten public offering and it is advised by its lead or managing
underwriter that an offering by the Original Stockholders of Registrable Shares
would materially adversely affect the distribution of such securities; provided
that the Partnership (or Successor Company) is actively employing, or upon such
proposed filing actively employs, all reasonable efforts to cause any such
filed registration statement to become effective, or (iii) the fulfillment of
such obligations would require the Successor Company to prepare financial
statements not required to be prepared for the Successor Company to comply with
its obligations under the Exchange Act at the time that the registration
statement is proposed to be filed. Such obligations shall be reinstated (x) in
the case of clause (i) above, upon the making of such disclosure by the
Partnership (or the Successor Company) (or, if earlier, when such disclosure
would either no longer be necessary for the fulfillment of such obligations or
no longer be detrimental), (y) in the case of clause (ii) above, upon the
conclusion of any period during which the Partnership (or the Successor
Company) would not, pursuant to the terms of its underwriting arrangements, be
permitted to sell Registrable Securities for its own account and (z) in the
case of clause (iii) above, as soon as it would no longer be necessary to
prepare such financial statements to comply with the Securities Act. The
period during which the Participating Stockholders are required to sell their
Registrable Shares pursuant to Section 11.3(j) shall be tolled for the duration
of any suspension pursuant to this Section 11.5(a).
(b) The number of Registrable Shares to be registered pursuant to
Section 11.1 of this Agreement shall be reduced to the extent that the
Successor Company is advised in writing by an investment banker of national
standing that the sale of all of the Registrable Shares requested to be
registered by the Participating Stockholders would materially and adversely
affect the market price of the Successor Company's equity securities.
11.6. Registration Expenses. All expenses incident to the
performance of or compliance with this Agreement by the Partnership (or the
Successor Company), including, without limitation, all fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Shares), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses
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of its officers and employees performing legal or accounting duties), the fees
and expenses incurred in connection with the listing of the Registrable Shares
to be registered on each securities exchange on which similar securities issued
by the Partnership (or the Successor Company) are then listed, fees and
disbursements of counsel for the Partnership (or the Successor Company) and its
independent certified public accountants (including the expenses of any comfort
letters required by or incident to such performance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Partnership (or the
Successor Company) in connection with such registration and the fees and
expenses of other persons retained by the Partnership (or the Successor
Company) will be borne by the Company. Notwithstanding anything in this
Section 11.6 to the contrary, the Partnership (or the Successor Company) will
not have any responsibility for any registration or filing fees payable under
any federal or state securities or blue sky laws or for any of the expenses of
the Participating Stockholders incurred in connection with any registration
hereunder including, without limitation, underwriting fees, discounts and
commissions and transfer taxes, if any, attributable to the sale of the
Participating Stockholders' Registrable Securities, counsel fees of the
Participating Stockholders and travel costs.
11.7. Indemnification; Contribution.
(a) Indemnification by Partnership (or Successor Company). The
Partnership (or the Successor Company) agrees to indemnify, to the fullest
extent permitted by law, each Participating Stockholder (and any Affiliate
thereof holding Registrable Shares), each person who controls such a
Participating Stockholder or such Affiliate (within the meaning of either the
Securities Act or the Exchange Act), and their respective directors and
officers against any and all losses, claims, damages, liabilities and expenses
(including attorneys' fees) caused by any untrue or alleged untrue statement of
material fact contained in any Registration Statement, prospectus or
preliminary prospectus (each as amended and/or supplemented, if the Partnership
(or the Successor Company) shall have furnished any amendments or supplements
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a prospectus, in the light of the circumstances under which they
were made) not misleading; provided that the Partnership (or the Successor
Company) shall not be required to indemnify such Participating Stockholder or
such Affiliate, such controlling persons or their respective officers or
directors for any losses, claims, damages, liabilities or expenses resulting
from any such untrue statement or omission if such untrue statement or omission
is made in reliance on and conformity with any information with respect to such
Participating Stockholder or its Affiliates or the underwriters furnished to
the Partnership (or the Successor Company) by such Participating Stockholder or
its Affiliates expressly for use therein; and provided further, that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of such Participating
Stockholder or such Affiliate, if the liability or expense results from the
fact that a copy of the prospectus was not sent or given to such person at or
prior to the written confirmation of sale of such
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Registrable Shares to such person as required by the Securities Act, and if the
untrue statement or omission has been corrected in the prospectus unless such
failure to deliver the prospectus was a result of noncompliance by the
Partnership (or the Successor Company) with its obligations under Section
11.3(a) hereof. In connection with an underwritten offering, the Partnership
(or the Successor Company) will indemnify each underwriter thereof, the
officers and directors of such underwriter, and each person who controls such
underwriter (within the meaning of either the Securities Act or Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Participating Stockholder; provided that such underwriter agrees to indemnify
the Partnership (or the Successor Company) to the same extent as provided below
with respect to the indemnification of the Partnership (or the Successor
Company) by the Participating Stockholder.
(b) Indemnification by the Participating Stockholder. In connection
with any registration in which a Participating Stockholder is participating,
each Participating Stockholder will furnish to the Partnership (or the
Successor Company) in writing such information with respect to USW and its
Affiliates as the Partnership (or the Successor Company) reasonably requests
for use in connection with any such registration, prospectus, or preliminary
prospectus and agrees to indemnify the Partnership (or the Successor Company),
its directors, its officers who sign the Registration Statement and each
person, if any, who controls the Partnership (or the successor Company) (within
the meaning of either the Securities Act or of the Exchange Act) to the same
extent as the foregoing indemnity from the Partnership (or the Successor
Company) to such holder, but only with respect to information relating to such
holder furnished to the Partnership (or the Successor Company) in writing by a
Participating Stockholder expressly for use in the Registration Statement, the
prospectus, any amendment or supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 11.7(a)
or Section 11.7(b) of this Agreement, such person (hereinafter called the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (hereinafter called the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and the indemnified party shall have been advised by counsel
that representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any
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local counsel) for all such indemnified parties, and that all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the indemnified parties, such firm shall be designated in
writing by the indemnified parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the third sentence of this
Section 11.7(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not
either have reimbursed the indemnified party in accordance with such request or
reasonably objected in writing, on the basis of the standards set forth herein,
to the propriety of such reimbursement prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) Contribution. If the indemnification provided for in this
Section 11.7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to in this Section 11.7, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 11.7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation
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<PAGE> 78
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 11.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 11.7(a) and (b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 11.7(d).
ARTICLE 12
REGULATORY MATTERS
12.1. MFJ Compliance.
(a) USW agrees that it will pursue, in conjunction with the
Regional Bell Operating Companies (as defined in the MFJ), the "Motion of the
Bell Companies for a Modification of Section II of the Decree to Permit Them to
Provide Cellular and Other Wireless Services Across LATA Boundaries," filed
with the Decree Court on June 20, 1994. If the Decree Court were to deny the
Bell Companies' motion or if the Decree Court or the Department of Justice were
to take the position that the relief requested in the motion does not apply to
PCS Service, USW will request a waiver for the benefit of the Partnership or
any Owned or Licensed System that would enable the Partnership to provide PCS
Service free of its restrictions on Bell Operating Companies in the MFJ. In
addition, USW will request a waiver for the benefit of the Partnership or any
Owned or Licensed System or USW, as appropriate, if the waiver (a "Me Too
Waiver") is: (i) to permit the Partnership or any Owned or Licensed System or
USW, as appropriate, to offer the same services as those set forth in any
waiver request which USW or an affiliate has pending or which USW, any of its
affiliates, or any Bell Operating Company ("BOC") within the meaning of the MFJ
has obtained for its cellular businesses, including businesses incidental
thereto; (ii) based on relevant facts which are comparable to those set forth
in any such waiver USW, an affiliate thereof or a BOC has pending or has
obtained, as the case may be, and (iii) with respect to the Partnership or any
Owned or Licensed System, within the scope of the Partnership Business as
defined in Section 1.5. Except as described above, neither USW nor any USW
affiliate shall be obliged to request any waiver for the benefit of the
Partnership.
(b) Neither the Partnership, nor any Owned System, nor any
Licensed System belonging to USW, shall engage (directly or indirectly) in any
MFJ Restricted Activity. During the period from the Effective Date to the
Phase II Contribution Date ("Phase I"), ATI and its Licensed Systems will be
engaged in the provision of interexchange (interLATA) telecommunications
services and other MFJ Restricted Activities. The parties intend that, during
Phase I, ATI and its Licensed Systems will not be subject to the MFJ or in any
way restricted by any of its provisions. Revenues, expenses, profits and
losses from interexchange (interLATA) services provided by ATI shall flow
directly to ATI and not to the Partnership.
-73-
<PAGE> 79
(c) If, at any time prior to or during Phase I, a third party
raises legitimate concerns regarding whether ATI or its Licensed Systems can
lawfully engage in MFJ Restricted Activities, or if a third party or USW's CECO
Decree Committee raises legitimate concerns regarding whether, in light of the
activities of the Partnership and ATI, USW is in compliance with the MFJ
(collectively, "MFJ Concerns"), the parties agree:
(i) except in the circumstances set forth in (iii) below,
that ATI, its Licensed Systems and/or the Partnership shall have the
right to continue the activities giving rise to the MFJ Concerns;
(ii) to restructure the Phase I relationships among them and
their respective properties to the minimum extent necessary to satisfy
the MFJ Concerns while preserving, as described in clause (b) above
and otherwise to the fullest extent possible, the intent of the
parties regarding Phase I operations as well as the relative economic
positions of the parties. The obligation to restructure shall arise
either when counsel for the parties agree that an MFJ Concern is well
founded, or when USW's CECO Decree Committee determines that an
activity of the Partnership or ATI has or will put USW in violation of
the MFJ, and (in either case) counsel for either party issues a
written opinion that the MFJ Concern cannot be cured without
restructuring the Phase I relationships. In the event the obligation
to restructure arises pursuant to the preceding sentence, the parties
shall attempt to determine the manner of restructuring which best
gives effect to the first sentence of this clause (ii). If the
parties reach agreement on a proposal, they will present it to USW's
CECO Decree Committee and then, if the CECO Decree Committee approves
that proposal, to the Partnership Committee. If the parties are
unable to agree on a restructuring proposal, each of them will present
its proposal to USW's CECO Decree Committee; the parties will then
present to the Partnership Committee whichever (or both) of the
proposals the CECO Decree Committee has approved. The parties will
implement a restructuring proposal only upon the unanimous vote of the
Partnership Committee. If the Partnership Committee, having two
restructuring proposals before it, does not unanimously approve either
of them, the parties shall resolve the manner of restructuring by the
procedure described in paragraph 2.7 of this Agreement (provided that
the 60-day period set forth therein for referral of disputes to the
Representative Partners' board of directors shall be a 30-day period);
and
(iii) ATI, its Licensed Systems and/or the Partnerships will
stop the activities giving rise to the MFJ Concerns if USW has
received either:
(A) an opinion from the Decree Court that such
activities have put USW in violation of the MFJ; or
(B) a written opinion from the Department of Justice
that such activities have put USW in violation of
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<PAGE> 80
the MFJ, and either counsel for the parties agree, or USW's CECO
Decree Committee has determined, that there is a reasonable
factual and legal basis for such an opinion from the Department
of Justice.
(d) Subject to the provisions of Section 2.16 and compliance with
the MFJ by the Partnership in connection therewith, ATI or any Affiliate
thereof will have the option to engage in MFJ Restricted Activities,
specifically including the provision of interexchange (interLATA)
telecommunications services (it being understood that such services will be
provided by the WMC if it is thereafter permitted to do so, as provided in
Section 7.4(vii)) and engage in any business practice and enter into any
transaction in which the Partnership does not engage by reason of the MFJ.
Except as provided in the preceding sentence, the provisions of this Section
12.1 shall take precedence, in the event of any conflict, over any other
provision of this Agreement.
(e) The USW RP shall have the right to designate candidates to
occupy a position in the legal staff of the Partnership with responsibility for
monitoring the Partnership's compliance with applicable provisions of the MFJ
(the "MFJ Compliance Counsel"). The Vice President - Legal and External
Affairs shall interview and evaluate the qualifications of each of the
candidates recommended by the USW RP, and shall select one candidate to occupy
such position. The MFJ Compliance Counsel shall report to, and may be removed
with or without cause at any time by, the Vice President - Legal and External
Affairs. The Partnership will submit to the MFJ Compliance Counsel all
Business Activities of the Partnership (as defined below) prior to their
implementation. If the MFJ Compliance Counsel determines that a Business
Activity of the Partnership requires review by USW's CECO Decree Committee, the
Partnership will not implement that Business Activity prior to its having been
reviewed and approved by the CECO Decree Committee. For purposes of this
subsection, "Business Activity of the Partnership" means the provision of a
product or service by the Partnership to a person other than: the Partnership
itself; the PCS Partnership; an Owned or Licensed System; or ATI, USW, or an
Affiliate of either of them.
ARTICLE 13
MISCELLANEOUS
13.1. Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party (i) when delivered
personally (by courier service or otherwise), (ii) when delivered by telecopy
and confirmed by return telecopy, (iii) on the business day after the date sent
by a nationally recognized overnight courier service, or (iv) seven days after
being mailed by first-class, registered or certified mail, postage prepaid and
return receipt requested, in each case to the applicable addresses set forth
below:
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<PAGE> 81
If to any USW Partner:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: President
Telecopy: (303) 793-6294
With copies to:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: General Counsel
Telecopy: (303) 793-6294
If to any ATI Partner:
AirTouch Communications
2999 Oak Road
Walnut Creek, CA 94596
Attn: C. Lee Cox, President and
Chief Operating Officer
Telecopy: (510) 210-3599
With copies to:
AirTouch Communications
425 Market Street
San Francisco, CA 94105
Attn: Senior Vice President-Legal and
External Affairs
Telecopy: (415) 658-2298
and
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Nathaniel M. Cartmell III, Esq.
Telecopy: (415) 477-4816
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance with this Section 13.1.
13.2. Governing Law, etc.
(a) This Agreement has been executed and delivered in the State of
Delaware and shall, in all respects be governed by, interpreted, and construed
in accordance with the laws of the State of Delaware, all rights and remedies
of the Partners in respect thereof being governed by such laws, without regard
to its conflict of law rules.
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<PAGE> 82
(b) Each of the Partners hereby irrevocably appoints The
Corporation Trust Company, at its office in Wilmington, Delaware, United States
of America, its lawful agent and attorney to accept and acknowledge service of
any and all process against it in any action, suit or proceeding arising in
connection with this Agreement and upon whom such process may be served, with
the same effect as if such party were a resident of the State of Delaware and
had been lawfully served with such process in such jurisdiction, and waives all
claim of error by reason of such service; provided that in the case of any
service upon such agent and attorney, the party effecting such service shall
also deliver a copy thereof to the other party at the address and in the manner
specified in Section 13.1. In the event that such agent and attorney resigns
or otherwise becomes incapable of acting as such, such party will appoint a
successor agent and attorney in Wilmington, Delaware, reasonably satisfactory
to the other party, with like powers.
(c) The choice of law provisions of this Article 13 have been
negotiated in good faith and agreed upon by the parties hereto and are
reasonable especially considering that this Agreement is subject to and
conforms with the Act. All Partners, by their execution of this Agreement,
expressly agree, to the fullest extent permitted by law, not to challenge the
choice of law provisions contained in this Article 13.
13.3. Amendments. This Agreement may be modified or amended only by
an instrument in writing signed by each Partner, and, as so modified and
amended, shall inure to the benefit of all of the Partners.
13.4. Entire Agreement. Except to the extent other agreements are
specifically referred to herein, this Agreement constitutes the entire
agreement between the Partners with respect to the matters covered hereby or
thereby and supersedes all prior agreements, understandings, offers and
negotiations, oral or written.
13.5. Waiver of Partition. Each Partner hereby irrevocably waives any
and all rights that it may have to maintain an action for partition of any of
the Partnership's property.
13.6. Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Partnership.
13.7. Successors. Subject to Section 10.1, all rights and duties of
the Partners hereunder shall inure to the benefit of and be binding upon their
respective successors and assigns.
13.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
13.9. Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision which is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable and contrary to
existing or future applicable law, such invalidity
-77-
<PAGE> 83
shall not impair the operation of or affect those provisions of this Agreement
which are valid. In that case, this Agreement shall be construed so as to
limit any term or provision so as to make it enforceable or valid within the
requirements of any applicable law, and in the event such term or provision
cannot be so limited, this Agreement shall be construed to omit such invalid or
unenforceable provisions.
13.10. Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Partnership until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
13.11. Arbitration. Each partner hereby acknowledges that this
Agreement is subject to the Arbitration Agreement of the partners which is
being entered into of even date herewith, and the Arbitration Agreement will
govern the resolution of disputes relating to this Agreement in accordance with
its terms. Each Additional Partner or Substitute Partner shall execute the
Arbitration Agreement or a counterpart to the Arbitration Agreement prior to
its admission to the Partnership.
13.12. No Third-Party Beneficiaries. Nothing contained in this
Agreement is intended to, or shall, confer upon any Person other than the
parties hereto any rights or remedies hereunder.
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<PAGE> 84
IN WITNESS WHEREOF, the Partners have executed this Partnership
Agreement as of the date first hereinabove written.
U S WEST, INC.
/s/ CHARLES M. LILLIS
By: _______________________________
Name: Charles M. Lillis
Title: Executive Vice President
AIRTOUCH COMMUNICATIONS
/s/ L. L. CHRISTENSEN
By: _______________________________
Name: L. L. Christensen
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 85
SCHEDULE 1-A
ATI GROUP
<TABLE>
<CAPTION> Percentage Interest
Members of ----------------------------------
ATI Group General Partner Limited Partner
---------- --------------- ---------------
<S> <C>
AirTouch Communications
---------------
Total: %
===============
</TABLE>
<PAGE> 86
SCHEDULE 1-B
USW GROUP
<TABLE>
<CAPTION> Percentage Interest
Members of ----------------------------------
USW Group General Partner Limited Partner
---------- --------------- ---------------
<S> <C>
U S West, Inc.
---------------
Total: %
===============
</TABLE>
<PAGE> 87
EXHIBIT F
Term Sheet
Note to be Issued by ATI to USW Pursuant to Section 10.8
--------------------------------------------------------
Securities: Senior Notes
Principal amount split equally
between four tranches.
Credit: - Rating of A- or better by
both S&P and Moody's
(separately an "Agency")
- Credit supported if necessary
Maturity: Tranche 1: 6 mos.
Tranche 2: 1 year
Tranche 3: 18 mos.
Tranche 4: 2 years
Price: Par
Interest Rate: - For each tranche fixed at
issuance or floating at
option of USW.
- Payable quarterly.
Interest Rate Adjustment: - Any time credit rating by an
Agency falls two notches,
interest rate adjusts to
reprice notes to par.
Covenants: - Lesser of: (i) covenants of
existing debt securities of
the Company, or
(ii) "standard" investment
grade covenants.
- If rating by an Agency falls
below BBB, typical covenants
including:
- Debt incurrence
- Restricted payments
Transfer Restrictions: None
Registration Rights: Notes will be registered for
resale to the public at USW's
option.
Prepayment: Prepayable at any time at par at
option of issuer as long as Notes
are held by USW; not prepayable if
sold by USW.
<PAGE> 88
SERIES C PARTICIPATING CONVERTIBLE PREFERRED STOCK
SUMMARY OF TERMS
HOLDER: Acquirer of all of USW's WMC Interest
(Note: such acquirer must enter into an
Investment Agreement with ATI).
NUMBER OF SHARES: To be determined.
DIVIDENDS: Holder shares ratably and proportionately
with holders of Common Stock in the payment
of dividends when, as and if declared by the
Board of Directors.
CONVERSION: (a) Automatically converts into Common Stock
immediately prior to (i) the consummation
of a merger or other business combination
transaction approved by the holders of a
majority of the Common Stock or (ii) the
consummation of a transfer to a third party.
(b) May be converted, at the option of the
holder, into Common Stock upon the occurrence
of an event that would except the holder from
the standstill provisions of the Investment
Agreement to be entered into with ATI.
CONVERSION RATIO: 1:1.
RESTRICTIONS ON TRANSFER: Shares of Series C Preferred Stock, as such,
may not be transferred except to wholly
owned affiliates of the holder. (In the
event of a transfer to any other person,
the transferred shares automatically convert
into Common Stock).
After July 25, 1999, Holder may transfer
shares to third parties subject to the
restrictions of the Investment Agreement.
VOTING RIGHTS: None.
BOARD REPRESENTATION: Holders of Series C Preferred Stock are not
entitled to representation on the Board of
Directors.
<PAGE> 1
EXHIBIT 10.3
________________________________________
PCS NUCLEUS, L.P.
AGREEMENT OF
LIMITED PARTNERSHIP
DATED AS OF JULY 25, 1994
AMONG
AIRTOUCH COMMUNICATIONS
AND
U S WEST, INC.
________________________________________
<PAGE> 2
TABLE OF CONTENTS
(Not part of the Agreement)
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
ARTICLE 1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 1
1.1. Formation of the Partnership . . . . . . . . . . . . . . . 1
1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Principal Place of Business . . . . . . . . . . . . . . . . 1
1.4. Registered Office; Agent for Service of Process . . . . . . 2
1.5. Business of the Partnership . . . . . . . . . . . . . . . . 2
1.6. Term of the Partnership . . . . . . . . . . . . . . . . . . 3
1.7. Qualification of Other Jurisdictions . . . . . . . . . . . 3
1.8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Partnership Committee . . . . . . . . . . . . . . . . . . . 10
2.2. Partnership Committee Meetings . . . . . . . . . . . . . . 11
2.3. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4. No Compensation . . . . . . . . . . . . . . . . . . . . . . 14
2.5. Acts by Partners . . . . . . . . . . . . . . . . . . . . . 14
2.6. Procedures in the Event of a Dispute . . . . . . . . . . . 14
2.7. Management . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8. Business Plan . . . . . . . . . . . . . . . . . . . . . . . 15
2.9. Budget Approval . . . . . . . . . . . . . . . . . . . . . . 15
2.10. Employees and Employee Benefits . . . . . . . . . . . . . . 16
2.11. Access to Books of Account . . . . . . . . . . . . . . . . 16
2.12. Confidential Information . . . . . . . . . . . . . . . . . 16
2.13. Duty of Partners to Cooperate . . . . . . . . . . . . . . . 18
2.14. Agreements with Partnership or Owned Systems . . . . . . . 18
ARTICLE 3 CERTAIN AGREEMENTS REGARDING OPERATIONS OF THE
PARTNERSHIP AND THE PCS OWNED SYSTEMS . . . . . . . . . . . 19
3.1. General; Fiduciary Obligations . . . . . . . . . . . . . . 19
3.2. License Agreements . . . . . . . . . . . . . . . . . . . . 19
3.3. Services Agreement . . . . . . . . . . . . . . . . . . . . 19
3.4. PCS Owned Systems . . . . . . . . . . . . . . . . . . . . . 20
3.5. System Budget Approval . . . . . . . . . . . . . . . . . . 20
3.6. System Business Plans . . . . . . . . . . . . . . . . . . . 20
3.7. Management Reports . . . . . . . . . . . . . . . . . . . . 20
3.8. Financial Statements . . . . . . . . . . . . . . . . . . . 21
ARTICLE 4 CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS . . 21
4.1. Capital Accounts . . . . . . . . . . . . . . . . . . . . . 21
4.2. Initial Contributions of Capital . . . . . . . . . . . . . 22
4.3. Additional Contributions by Partners . . . . . . . . . . . 22
4.4. Partner Obligations . . . . . . . . . . . . . . . . . . . . 23
4.5. Withdrawals of Capital Accounts . . . . . . . . . . . . . . 24
4.6. Interest on Capital Accounts . . . . . . . . . . . . . . . 24
4.7. Revaluation of Partnership Assets . . . . . . . . . . . . . 24
4.8. Redetermination of Percentage Interests . . . . . . . . . . 24
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . 27
5.1. Profits and Losses . . . . . . . . . . . . . . . . . . . . . 27
(c) Minimum Gain Chargeback . . . . . . . . . . . . . . . . 27
(d) Qualified Income Offset . . . . . . . . . . . . . . . . 27
(j) Losses . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 6 TAX MATTERS AND REPORTS; ACCOUNTING . . . . . . . . . . . . . 31
6.1. Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . 31
6.2. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . 31
6.3. Tax Reports to Current and Former Partners . . . . . . . . . 31
6.4. Accounting Records; Independent Audit . . . . . . . . . . . . 31
6.5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.6. Tax Accounting Method . . . . . . . . . . . . . . . . . . . . 32
6.7. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.8. Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . 32
6.9. Prior Tax Information . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7 INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS . . . . . 33
7.1. Indemnification of the Partners . . . . . . . . . . . . . . . 33
7.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3. Restrictions on Partners . . . . . . . . . . . . . . . . . . 34
7.4. Outside Activities . . . . . . . . . . . . . . . . . . . . . 34
7.5. Duties of Partners . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 8 TERMINATION AND DISSOLUTION . . . . . . . . . . . . . . . . . 35
8.1. Events of Dissolution . . . . . . . . . . . . . . . . . . . . 35
8.2. Bankruptcy of a General Partner . . . . . . . . . . . . . . . 36
8.3. Order of Dissolution . . . . . . . . . . . . . . . . . . . . 37
8.4. Orderly Winding Up . . . . . . . . . . . . . . . . . . . . . 37
8.5. Dissolution Election . . . . . . . . . . . . . . . . . . . . 38
8.6. Obligation to Restore Deficit Balance . . . . . . . . . . . . 39
8.7. Termination of Partnership . . . . . . . . . . . . . . . . . 39
ARTICLE 9 ADMISSION OF ADDITIONAL PARTNERS . . . . . . . . . . . . . . 39
9.1. Admission Procedures . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10 TRANSFER OR ENCUMBRANCE OF INTEREST . . . . . . . . . . . . . 39
10.1. Restriction on Transfer or Encumbrance . . . . . . . . . . . 39
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate. 40
10.3. Partnership's Redemption Option . . . . . . . . . . . . . . . 40
10.4. Spin-off Not Deemed to be a Transfer . . . . . . . . . . . . 40
10.5. Invalid Transfers Void . . . . . . . . . . . . . . . . . . . 40
10.6. Change in Ownership . . . . . . . . . . . . . . . . . . . . . 41
10.7. Proportional Transfers of WMC Interest . . . . . . . . . . . 41
ARTICLE 11 REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . 41
11.1. MFJ Compliance . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 43
12.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.2. Governing Law, etc . . . . . . . . . . . . . . . . . . . . 44
12.3. Amendments . . . . . . . . . . . . . . . . . . . . . . . . 45
12.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 45
12.5. Waiver of Partition . . . . . . . . . . . . . . . . . . . . 45
12.6. Consents . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.7. Successors . . . . . . . . . . . . . . . . . . . . . . . . 45
12.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 45
12.9. Severability . . . . . . . . . . . . . . . . . . . . . . . 45
12.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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<PAGE> 5
PCS NUCLEUS, L.P.
AGREEMENT OF
LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP of PCS NUCLEUS, L.P. (the
"Partnership") is entered into and effective as of July 25, 1994, by and
between AirTouch Communications, a California corporation ("ATI"), and U S
West, Inc., a Colorado corporation ("USW"), each of which shall be both a
general partner and a limited partner as set forth herein (collectively, the
"Partners").
WHEREAS, the Partners or certain of their Affiliates (as hereinafter
defined) are parties to a Joint Venture Organization Agreement of even date
herewith;
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively in such markets;
WHEREAS, the Partners have therefore concluded that it will be in
their best interests, and the best interests of the public, to form the
Partnership for the purpose of acquiring, owning, operating, managing,
maintaining and constructing PCS Systems (as hereinafter defined) and, in
furtherance thereof, ATI and USW wish to become partners in the Partnership (as
hereinafter defined);
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained and in order to set forth the respective rights,
obligations and interests of the Partners to one another and to the
Partnership, the Partners hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1. Formation of the Partnership. The Partners agree and hereby form
the Partnership as a limited partnership, pursuant to the Delaware Revised
Uniform Limited Partnership Act, as it may be amended from time to time (the
"Act"), and this Agreement. Except as provided in this Agreement, the rights,
duties, liabilities and obligations of the Partners and the administration,
dissolution, winding up and termination of the Partnership shall be governed by
the Act.
1.2. Name. The name of the Partnership shall be: PCS Nucleus, L.P.
The name of the Partnership may be changed by the Partnership Committee.
1.3. Principal Place of Business. The principal place of business of
the Partnership shall be c/o AirTouch Communications, 2999 Oak Road, Walnut
Creek, California 94596. The principal place of business of the Partnership
may be changed by the Partnership Committee.
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<PAGE> 6
1.4. Registered Office; Agent for Service of Process. The address of
the Partnership's registered office in the State of Delaware is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The agent for service of
process at such address for the Partnership in the State of Delaware is The
Corporation Trust Company. Agents for service of process of the Partnership
may be changed by the Partnership Committee.
1.5. Business of the Partnership.
(a) The purpose of the Partnership is to acquire, own, lease,
operate, manage and maintain PCS Systems; to provide the services which may
from time to time be offered, and to engage in the resale of wireless voice and
data communications services, utilizing the frequencies allocated by the FCC
for PCS Systems; to make and prosecute any and all applications for or renewals
of licenses for PCS Systems; to design, construct and develop PCS Systems; and
to engage in other businesses utilizing, to the extent of cell sites, mobile
telephone switching offices, computer programs or other aspects specific to PCS
Systems, the Partnership's then existing business infrastructure or
communications network (the "Partnership Business"). In connection therewith
and subject thereto, the Partnership shall have the power: (i) to enter into
leases for, or purchase properties necessary for, antennae, base stations and
office sites; (ii) to construct improvements in, furnish and equip the sites;
(iii) to acquire or lease all equipment, supplies and services necessary for
the design, development, construction, ownership, operation, management and
maintenance of PCS Systems; (iv) to borrow or raise money necessary for the
acquisition, design, development, construction, ownership, operation,
management and maintenance of PCS Systems; (v) to use any contributions from
the Partners for such purposes; (vi) to execute any documents required in
connection with the foregoing; (vii) to do any and all acts and things which
may be necessary, incidental or convenient to carry on the Partnership Business
as contemplated by this Agreement; and (viii) to take any other action
permissible under the Act in connection with the Partnership Business. The
Partnership may engage in any business other than the Partnership Business as
the Partnership Committee may determine. Notwithstanding anything to the
contrary herein, the Partnership shall not acquire, own, lease, operate, manage
or maintain Systems outside of the 50 states of the United States, the District
of Columbia, Puerto Rico, the Gulf of Mexico and Guam.
(b) Subject to the terms of this Agreement, the Partnership may
enter into, deliver and perform all contracts, agreements and other
undertakings and engage in all activities and transactions as may be necessary
or appropriate to carry out the foregoing purposes. Without limiting the
foregoing, the Partnership may, subject to the terms of this Agreement:
(i) enter into license agreements, service contracts or other
contractual relationships with WMC;
(ii) acquire, sell, lease, exchange, transfer, assign,
encumber, pledge or mortgage securities and assets in PCS Systems (or
licenses therefor) or otherwise exercise all rights,
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<PAGE> 7
powers, privileges and other incidents of ownership or possession with
respect to such securities and assets;
(iii) borrow or raise money and secure the payment of any
obligations of the Partnership by mortgage upon, or pledge or
hypothecation of, all or any part of the assets of the Partnership;
(iv) engage personnel, whether part-time or full-time, to do
such acts as are necessary or advisable in connection with the
maintenance, operation and administration of the Partnership and its
investments (avoiding redundancies with the staff and operations of
WMC); and
(v) engage attorneys, independent accountants, investment
bankers, consultants or such other Persons as are necessary or
advisable.
(c) Notwithstanding the foregoing, the Partnership will not engage
in any act that would put the Partnership, or any Partner, in violation of the
MFJ. Specifically, the Partnership will not engage in any activity that would
constitute the provision of interexchange (interLata) telecommunications
service, the provision of telecommunications equipment, or the manufacture of a
telecommunications product (all as defined by the MFJ, the Decree Court, or
both), unless any such activity has been the subject of a waiver or other
legislative or court relief, or the MFJ otherwise ceases to apply to the
activities of the Partnership.
1.6. Term of the Partnership. The term of the Partnership shall
commence on the date the Certificate of Limited Partnership is filed in the
office of the Secretary of State of the State of Delaware, and shall continue
through the 99th anniversary thereof, unless earlier dissolved as provided in
Section 8.1. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Partnership's Certificate of Limited
Partnership.
1.7. Qualification of Other Jurisdictions. The General Partners
shall cause the Partnership to be qualified, formed, or registered under
assumed or fictitious name statutes or similar laws in any jurisdiction in
which the Partnership owns property or engages in activities if such
qualification, formation or registration is necessary to permit the Partnership
lawfully to own property and engage in the Partnership's business or transact
business. The General Partners shall execute, file and publish all such
certificates, notices, statements or other instruments necessary to permit the
Partnership to engage in the Partnership's business as a limited partnership in
all jurisdictions where the Partnership elects to engage in or do business.
1.8. Definitions. (a) For purposes of this Agreement the following
terms have the following meanings (unless indicated otherwise, all Article and
Section references are to Articles and Sections in this Agreement, and all
Schedule references are to Schedules to this Agreement):
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<PAGE> 8
"Additional Partner" means any additional Person admitted to the
Partnership pursuant to Article 9.
"Adjusted Capital Contributions" means, for each Partner, the
cumulative amount of such Partner's contributions to the Partnership which for
purposes of this definition shall be equal to the sum of (i) the amount of cash
and the Fair Market Value of any other property, plus (ii) the cumulative
amount of Adjusted Revaluation Gain plus (iii) 7.5% of the cumulative amount of
such Partner's Make-Up Contributions which relate to another Partner's
Defaulted Contributions, less (iv) the cumulative amount of Adjusted
Revaluation Loss and less (v) 7.5% of such Partner's Defaulted Contributions.
"Adjusted Revaluation Gain" or "Adjusted Revaluation Loss" means,
respectively, the Revaluation Gain or Revaluation Loss, as the case may be,
with respect to an asset being revalued which would have arisen had the basis
used in computing Revaluation Gain or Revaluation Loss been equal to the
Capital Account book basis of such asset immediately following the later of its
contribution or acquisition or any immediately preceding revaluation under
Section 4.7 hereof.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the Person specified; provided, however, that (i) the Partnership shall not be
deemed to be an Affiliate of ATI, USW or any of their respective Affiliates,
(ii) any wireline cable television company in which USW and its Affiliates do
not have an ownership interest in excess of 50% shall not be considered an
Affiliate of USW, and (iii) Cellular Communications, Inc. ("CCI"), a Delaware
corporation, shall not be considered an Affiliate of ATI until such time, if
ever, as ATI shall be entitled to exercise full discretion with respect to
voting the shares of common stock of CCI beneficially owned by ATI (other than
shares of common stock of CCI beneficially owned by ATI by virtue of its
ownership of the Class A Preference Stock of CCI). For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct
or indirect, of the power to (i) vote in excess of 50% of the Voting Stock of
such Person, or (ii) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Agreement" means this Agreement of Limited Partnership of the
Partnership, as it may be amended, supplemented or restated from time to time.
"Appraiser" means any of the First Appraiser, the Second Appraiser and
the Third Appraiser.
"Appraiser's Certificate" means a certificate prepared by an
Appraiser, executed on behalf of an Appraiser by a duly authorized officer
thereof, and setting forth such Appraiser's opinion as to the Fair Market Value
of an asset.
"ATI" means AirTouch Communications, a California corporation.
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<PAGE> 9
"Attributed Entity" means, with respect to any Partner, any Person
whose ownership of Systems (or licenses or permits therefor) would be
attributable, in whole or in part, to such Partner under applicable FCC
regulations.
"Bankruptcy" of a Partner means (i) the filing by such Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States
Code (or corresponding provisions of future laws) or any other bankruptcy or
insolvency law, or such Partner's filing an answer consenting to or acquiescing
in any such petition, (ii) the making by such Partner of any assignment for the
benefit of its creditors or the admission by such Partner in writing of its
inability to pay its debts as they mature or (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), an application for the
appointment of a receiver for the assets of such Partner, or an involuntary
petition seeking liquidation, reorganization, arrangements, composition,
dissolution or readjustment of its debts or similar relief under any bankruptcy
or insolvency law; provided that the same shall not have been vacated, set
aside or stayed within such 60-day period.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended.
"Budget" means a one-year revenue, expense and capital expenditure
budget for the Partnership, as it may be amended from time to time in
accordance with the terms of this Agreement.
"Business Plan" means a five-year business plan for the Partnership,
as it may be amended from time to time in accordance with the terms of this
Agreement, which shall include (i) an annual operating budget for each year
contemplated in the business plan; (ii) a five-year financial plan for the
Partnership; and (iii) a general description of the key underlying assumptions
and key strategies.
"Capital Account" means the capital account maintained by the
Partnership for each Partner as described in Section 4.1.
"CECO" means the Civil Enforcement Consent Order entered by the Decree
Court on February 2, 1989.
"CECO Decree Committee" means the committee created by USW pursuant to
CECO for the review of USW's business activities.
"Change of Control" has the meaning set forth in the Investment
Agreement dated as of July 25, 1994, by and between ATI and USW.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means all confidential documents and
information (including, without limitation, confidential commercial information
and information with respect to customers and proprietary technologies or
processes and the design and development of new products or
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<PAGE> 10
services) concerning the Partnership, WMC, the PCS Owned Systems, other PCS
Systems in which the Partnership has an ownership interest, the Partners or
their Affiliates furnished to a Partner in connection with the transactions
leading up to and contemplated by this Agreement and the operation of the
Partnership, WMC, the PCS Owned Systems, or other PCS Systems in which the
Partnership has an ownership interest or their respective businesses, except to
the extent that such information can be shown to have been (a) generally
available to the public other than as a result of a breach of the provisions of
Section 2.12 of this Agreement; (b) already in the possession of the receiving
Person or its Representatives (as such term is defined in Section 2.12 hereof)
without restriction and prior to any disclosure in connection with the
Partnership or pursuant to any of the terms of this Agreement; (c) lawfully
disclosed to the receiving Person or its Representatives by a third party who
is free lawfully to disclose the same; or (d) independently developed by the
receiving Person without use of any Confidential Information obtained in
connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, WMC, the PCS Owned Systems and
other PCS Systems in which the Partnership has an ownership interest, or their
respective businesses.
"Decree Court" means the court having original jurisdiction over MFJ
waivers.
"Defaulted Contributions" means, for each Partner, the cumulative
amount of any capital contributions required to be made under Section 4.3(a),
which have not been made by such Partner prior to expiration of the 15-day
grace period provided for in Section 4.3(b), regardless of whether such amounts
are thereafter contributed; provided that such capital contributions had been
specifically identified as to use (i) in a Budget approved pursuant to Section
2.9(a), (ii) in a Budget for the following year approved pursuant to Section
2.9(b) or (iii) by other action of the Partnership Committee.
"Effective Date" means July 25, 1994.
"EO" means the Enforcement Order entered by the Decree Court on
February 15, 1991.
"Fair Market Value" means, with respect to any asset, as of the date
of determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such asset in an arm's-length negotiated transaction
with an unaffiliated third party without time constraints.
"FCC" means the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
"GAAP" means generally accepted accounting principles.
"General Partner" means each of ATI and USW, and includes any Person
who becomes an additional general partner of the Partnership or a substitute
general partner of the Partnership pursuant to the provisions of this
Agreement.
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"General Partner Percentage Interest" means, with respect to any
Partner, the Percentage Interest of such Partner as a general partner of the
Partnership. The initial General Partner Percentage Interest of each Partner
is set forth on Schedule 1.
"License Agreement" means an agreement to be entered into by the
Partnership and WMC as contemplated by Section 3.2 hereof and Exhibit A hereto
and such terms and conditions as may be approved by WMC pursuant to Sections
2.4(c), 2.4(d) or 2.8(c) of the WMC Partnership Agreement.
"Limited Partner" means each of ATI and USW, and includes any Person
admitted as an additional limited partner of the Partnership or a substitute
limited partner of the Partnership pursuant to the provisions of this
Agreement.
"Limited Partner Percentage Interest" means, with respect to any
Partner, the Percentage Interest of such Partner as a limited partner of the
Partnership. The initial Limited Partner Percentage Interest of each Partner
is set forth on Schedule 1.
"Member" means a member of the Partnership Committee.
"MFJ" means the Modification of Final Judgment entered in United
States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), and as subsequently modified
from time to time, or any legislative scheme embodying substantially similar
restrictions.
"MFJ Compliance Committee" means the committee created by USW pursuant
to the EO for the review of USW's business practices.
"MFJ Restricted Activity" means an activity or business the
undertaking of which by the Partnership would cause the Partnership, or any
Partner, to be in violation of the MFJ.
"Make-Up Contributions" means, for each Partner, the amount of any
capital contribution made by such Partner which such Partner is permitted, but
not required, to make under Section 4.3(b) upon failure of another Partner to
make a required capital contribution.
"Net Operating Available Cash" means at the time of determination, (a)
all cash and cash equivalents on hand in the Partnership, less (b) the Forecast
Cash Requirements, if any, of the Partnership, as determined by the Partnership
Committee in a manner consistent with an Approved Budget. "Forecast Cash
Requirements" means, for the four-month period following the date of
determination, the excess, if any, of (a) forecast capital expenditures,
capital contributions to other entities and other investments, acquisitions,
cash income tax payments and debt service (including principal and interest)
requirements and other non-cash credits to income, plus forecast cash reserves
for future operations or other requirements, over (b) forecast net income of
the Partnership, plus the sum of forecast depreciation, amortization, interest
expenses, income tax expenses and other non-cash charges to income, in each
case to the extent deducted in determining such net income, plus or minus
forecast changes in working capital, plus the forecast cash proceeds of
dispositions of assets (net of
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<PAGE> 12
expenses), plus an amount equal to the forecast net proceeds of debt
financings.
"Organization Agreement" means the Joint Venture Organization
Agreement, dated as of July 25, 1994, between USW and ATI, as amended, modified
or supplemented from time to time.
"PCS" means those commercial mobile radio services offered by a PCS
System.
"PCS Owned System" means any PCS System (a) in which the Partnership
owns, directly or indirectly, an equity interest, or which is leased by the
Partnership, and (b) with respect to which the Partnership possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"PCS Service" means the provision of any commercial mobile radio
service by a PCS System, including the resale of such service.
"PCS System" means a radio communications system authorized under the
rules for broadband personal communications services designated as Subpart E of
Part 24 of the FCC's rules in effect on the Effective Date, or any revision
thereto or successor thereof which may be in effect from time to time,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto, or any business or enterprise which
resells PCS services.
"Parent Entity" means, as to any Person, an Affiliate of which such
Person is a Wholly Owned Subsidiary.
"Partner" means ATI or USW and any Additional or Substitute General
Partner or Limited Partner of the Partnership. ATI and USW shall be admitted
as Partners of the Partnership on the date hereof. A Person who is not
admitted on the date hereof as a partner of the Partnership shall be deemed
admitted as a Partner upon satisfaction of the requirements of Section 9.1 of
this Agreement upon execution by or on behalf of such Person of this Agreement
or a counterpart hereof.
"Partnership Interest" means, for each Partner separately, all of the
Partner's interest in, and rights and obligations in connection with, the
Partnership whether as a General Partner or Limited Partner.
"Percentage Interest" means, for each Partner, the quotient obtained
by dividing (i) such Partner's Adjusted Capital Contributions by (ii) the
aggregate Adjusted Capital Contributions for all Partners, as adjusted from
time to time pursuant to Section 4.8 hereof. The initial General Partner and
Limited Partner Percentage Interests of the Partners are set forth on Schedule
1
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, estate, unincorporated
organization, governmental or regulatory body or other entity.
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"Prime Rate" means the rate announced, from time to time, by Bank of
America NT&SA at its home office as its prime rate.
"Revaluation Gain" means the amount of gain which would have been
realized had there been a taxable disposition of any Partnership asset being
revalued under Section 4.7 for an amount of cash equal to such asset's then
Fair Market Value, determined in accordance with the provisions of Section 4.9
hereof.
"Revaluation Loss" means the amount of loss which would have been
realized had there been a taxable disposition of any Partnership asset being
revalued under Section 4.7 for an amount of cash equal to such asset's then
Fair Market Value, determined in accordance with the provisions of Section 4.9
hereof.
"Services Agreement" means an agreement to be entered into by the
Partnership and WMC as contemplated by Section 3.2 hereof and Exhibit B hereto
and such terms and conditions as may be approved by WMC pursuant to Sections
2.4(c), 2.4(d) or 2.8(c) of the WMC Partnership Agreement.
"Substitute Partner" means any Person admitted to the Partnership
pursuant to Article 10.
"System" means a Cellular System (as defined in the WMC Partnership
Agreement), an ESMR System, or a PCS System, or any business or enterprise
which resells to Cellular, ESMR an PCS Services (each as defined in the WMC
Partnership Agreement) provided by any of the foregoing.
"Tax Matters Partner" means the Tax Matters Partner of the Partnership
as referred to in Section 6.2.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments) and "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect
to Taxes.
"USW" means U S WEST, Inc., a Colorado corporation.
"Voting Stock" means capital stock issued by a corporation, or
comparable interests in any other Person, the holders of which are ordinarily
entitled to vote for the election of directors (or Persons performing similar
functions) of such Person.
"Wholly Owned Affiliate" means, as to any Person, a Parent Entity or
any Affiliate that is a Wholly Owned Subsidiary of such Parent Entity.
"Wholly Owned Subsidiary" means, as to any Person, a corporation or
other entity all of the capital stock or other equity interests of which
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<PAGE> 14
corporation or entity is at the time owned, directly or indirectly, through one
or more intermediaries, or both, by such Person.
"Wireless Assets" means, with respect to any Partner, all of such
Partner's interests in WMC, such Partner's Phase II Assets (as defined in the
WMC Partnership Agreement) and the Partnership.
"WMC" means WMC Partners, L.P., a Delaware limited partnership, or any
successor thereto.
"WMC Partnership Agreement" means the WMC Partners, L.P. Agreement of
Limited Partnership, dated July 25, 1994, among members of the ATI Group and
members of USW Group.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Approved Budget 2.9(a)
Approved Business Plan 2.8(a)
Act 1.1
Affiliate Transferee 10.2
Default Fees 4.3
Indemnified Party 7.1
Late Fees 4.3
LEC Affiliates 2.3(c)
Member 2.1(a)
Partial Interest 10.2
Partnership 1.1
Partnership Business 1.5(a)
Partnership Committee 2.1(a)
PCS Auction Strategy 2.3(b)(xi)
Related Party Agreement 2.14
</TABLE>
ARTICLE 2
MANAGEMENT
2.1. Partnership Committee.
(a) The partnership committee of the Partnership (the "Partnership
Committee") shall be composed of three individuals appointed by each General
Partner (collectively the "Members" and individually a "Member"), or such
lesser number of Members as may be determined by a vote of the Members
representing each General Partner; provided that any Affiliate Transferees
pursuant to Section 10.2 shall not be entitled separately to designate Members.
Any Member must be an officer or employee of a Partner or any Affiliate
thereof.
(b) Effective upon the giving of notice thereof to the other
Partners, any General Partner may, at any time, in its sole discretion, replace
any or all of its appointed Members with other individuals and may
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<PAGE> 15
designate one or more alternates for any or all of its Members. Each Member
shall serve on the Partnership Committee until his successor is appointed, or
until his earlier death, resignation or removal. Effective upon a General
Partner ceasing to be a general partner of the Partnership, the Members
representing such General Partner on the Partnership Committee shall cease to
be Members.
(c) Except as otherwise required by the Act, no vote or approval
by any Limited Partner shall be required under this Agreement for the taking of
an action, including without limitation the amendment of this Agreement, and
the Percentage Interest of any Limited Partner who is not also a General
Partner shall not be included in any calculation of a Partner's Percentage
Interest entitled to vote on any matter.
(d) The Partnership Committee shall cause the Partnership to
fulfill the Partnership's obligations under this Agreement, the License
Agreement, the Services Agreement, and the Organization Agreement and to
enforce all rights of the Partnership under this Agreement, the License
Agreement, the Services Agreement, and the Organization Agreement.
2.2. Partnership Committee Meetings.
(a) The Partnership Committee shall hold regular meetings (at
least quarterly) at such time and place as shall be determined by the
Partnership Committee (or by the Chairman of the Partnership Committee).
Special meetings of the Partnership Committee may be called at any time by any
General Partner by delivering a notice of meeting in accordance with Section
2.2(g) hereof. Each General Partner shall be limited to calling two special
meetings per year.
(b) The Chairman of the Partnership Committee shall be appointed
by the Partnership Committee from time to time. The Chairman shall establish
the agendas for, and regulate the proceedings of, meetings of the Partnership
Committee, but must include on such agendas matters requested by any General
Partner in writing received at least two business days in advance of any
meeting.
(c) Members may participate in a meeting of the Partnership
Committee by conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(d) Any action required or permitted to be taken at any meeting of
the Partnership Committee may be taken without a meeting upon the unanimous
written consent of at least one Member representing each General Partner.
(e) The Partnership Committee shall appoint a Secretary from time
to time. The Secretary shall keep written minutes of all Partnership Committee
meetings. A duplicate copy of such minutes shall be provided to the Chairman
of the Partnership Committee and to each Member.
(f) A Member shall have the right to designate an alternate to
attend meetings of the Partnership Committee, in stead and in place of such
Member, and to exercise all of the functions of such Member. Any such
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<PAGE> 16
alternate shall be an officer or employee of a Partner or an Affiliate thereof.
Any such alternate shall be deemed to be a Member for all purposes hereunder
until such designation is revoked.
(g) Notice of each regular meeting and each special meeting of the
Partnership Committee shall be given to each Member at least five business days
before such meeting. Notices of special meetings shall contain a description,
in reasonable detail, of the items of business to be conducted at such meeting
and no business other than those items (unless expressly agreed to by Members
representing each of the General Partners whose Members are entitled to vote
thereon) may be conducted at such special meeting. The notice provisions of
this Section 2.2(g) shall be waived upon either the signing of a written waiver
thereof or attendance at a meeting by Members representing each General
Partner.
2.3. Voting.
(a) On any matter on which a vote of the Partnership Committee is
taken, the Members representing a General Partner, if more than one Member has
been designated and is present at a meeting, shall vote the entire Percentage
Interest of such Partner (whether as a general partner or a limited partner of
the Partnership) as a single bloc. Any action may be taken by the Partnership
Committee shall require the affirmative vote of Members representing each of
the General Partners entitled to vote thereon; provided that in the event that
all Members representing any General Partner shall abstain from the vote on any
matter (because of a conflict of interest or for any other reason), the outcome
of such vote shall be determined by the affirmative vote of Members
representing the other General Partners entitled to vote on such matter, and
such vote shall constitute the act of the Partnership Committee with respect to
such matter. A quorum of any meeting of the Partnership Committee shall
require the presence of at least one Member representing each General Partner
entitled to vote thereon.
(b) Except as reserved herein for, or otherwise delegated to, the
General Partners or the President-PCS, the Partnership Committee shall have
authority and discretion to act on behalf of the Partnership on all matters
that a board of directors of a Delaware corporation would have, including,
without limitation, on the matters set forth elsewhere herein and with respect
to the following matters:
(i) any amendment of this Agreement;
(ii) a determination to engage in any business other than
the Partnership Business;
(iii) except as provided in Article 10, the admission of
any Additional General and Limited Partners to the Partnership;
(iv) the dissolution or liquidation of the Partnership;
(v) a merger or consolidation of the Partnership with or
into another Person, or the sale of all or substantially all of the
Partnership's assets;
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(vi) the approval of Budgets and Business Plans, and
material amendments or revisions thereto;
(vii) a determination to require additional capital
contributions within any fiscal year; provided that capital
contributions specifically identified in an Approved Budget shall not
require a further vote of the Partnership Committee pursuant to this
clause (vii);
(viii) except as provided in Section 2.14(b) hereof or as
contemplated by an Approved Budget, the entering into of any Related
Party Agreement;
(ix) the authorization of the incurrence by the
Partnership of indebtedness for borrowed money not otherwise
specifically identified in an Approved Budget;
(x) the authorization of any acquisition or disposition
of assets not otherwise specifically identified in an Approved Budget;
(xi) determinations of PCS auction strategy, including the
identification of target PCS markets and bidding ranges (the "PCS
Auction Strategy");
(xii) the delegation of powers and authority of the
Partnership Committee to the President-PCS; and
(xiii) any distribution to the Partners of Partnership
assets, other than Net Operating Available Cash, not otherwise
contemplated in an Approved Budget.
Each Partner, by execution of this Agreement, agrees to, consents to, and
acknowledges the delegation of powers and authority to the Members of the
Partnership Committee, and to the actions and decisions of such Members within
the scope of such Members' authority as provided herein and in accordance with
the License Agreement and Services Agreement.
(c) The Partnership Committee shall receive such reports and
information from the President-PCS as are usually provided to the board of
directors of a publicly held Delaware corporation.
(d)(i) Notwithstanding the foregoing, Members of the Partnership
Committee designated by USW shall not be entitled to participate in discussions
of or votes of the Partnership Committee specifically relating to the
Partnership's then existing or planned operations in any market served by a USW
local exchange carrier Affiliate (a "LEC Affiliate"), if such existing or
planned operations of the Partnership could reasonably be expected to compete
or conflict with, in any material respect, the then existing or planned
wireless communications operations owned or conducted by USW's LEC Affiliate in
such market. Nothing in this Section 2.3(d) shall restrict the manner in which
Members designated by USW shall participate in deliberations, discussions or
votes of the Partnership Committee with respect to the Budget or Business Plan
of the Partnership;
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provided that such Members shall act in good faith and in the best interests of
the Partnership without regard to any such competitive considerations. USW
agrees that no Member designated by USW shall participate in decisions
regarding the existing or planned wireless communications operations of USW's
LEC Affiliates, whether through the furnishing of advice or information or
otherwise, it being understood that certain Members designated by USW may have
ultimate responsibility for those who participate in such decisions (and that
such Members shall not be deemed to have participated in such decision solely
by virtue of having such ultimate responsibility).
(ii) Without limitation of the obligations of USW under Section 2.12,
neither USW nor any Members appointed by USW shall provide to any LEC Affiliate
operating data or financial or other information with respect to the
Partnership's existing or planned operations in the local exchange markets of
such LEC Affiliate.
2.4. No Compensation. No Member shall be compensated for his
services as a member of the Partnership Committee from the assets of the
Partnership, nor shall such Member be reimbursed by the Partnership for
out-of-pocket expenses incurred in connection therewith.
2.5. Acts by Partners. Other than actions of the Tax Matters
Partner pursuant to Sections 6.1 and 6.2 hereof, no Partner shall take, or
commit the Partnership to take, any action, either in its own name in respect
of the Partnership or in the name of the Partnership, without the prior
approval of the Partnership Committee.
2.6. Procedures in the Event of a Dispute.
(a) In cases where the Members are unable to reach agreement on
the matters specified in Section 2.3(b)(vi) or (xi) above, the dispute shall be
resolved in the following manner:
(i) First, the General Partners shall refer the disputed
matter to the Chairmen of their respective publicly held Parent
Entities in an attempt to reach a resolution; and
(ii) Second, if the Chairmen are unable to resolve a
disputed matter within 60 days after the referral to them of a dispute
(or such longer period of time as to which the Chairmen mutually agree
in writing), the dispute shall be submitted to the respective Boards
of Directors of the General Partners' publicly held Parent Entities in
an attempt to reach a resolution.
2.7. Management.
The President-PCS shall have authority and discretion comparable to
that of a chief executive officer of a publicly held Delaware corporation of
similar size to direct and control the business and affairs of the Partnership,
including its day-to-day operations, in a manner consistent with the Approved
Business Plan, the Approved Budget, and in accordance with the License
Agreement and the Services Agreement (and the directives of WMC
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thereunder). The President-PCS shall be an employee (who may be seconded to
WMC from USW) and executive officer of WMC and shall report to the President of
WMC. The President of WMC shall have the exclusive authority to appoint and
remove the President-PCS. Each Partner, by execution of this Agreement, agrees
to, consents to, and acknowledges the delegation of powers and authority to the
President-PCS and to WMC pursuant to the License and Services Agreements, and
to the actions and decisions of the President-PCS and WMC within the scope of
such authority.
2.8. Business Plan.
(a) The President-PCS shall submit to the Partnership Committee a
Business Plan for the Partnership, not less frequently than annually, at least
60 days prior to the start of the first fiscal year covered by such Business
Plan. Each Business Plan shall be consistent with the License Agreement and
Services Agreement (and the directives of WMC thereunder). Each such Business
Plan shall be considered at the first meeting of the Partnership Committee
following its submission and shall be subject to the approval of the
Partnership Committee. Any such Business Plan (or any amendment thereto) which
is approved by the Partnership Committee shall be considered approved for all
purposes of this Agreement until amended or replaced (an "Approved Business
Plan").
(b) Each Partner hereby agrees to use best efforts to prepare and
approve the initial Approved Business Plan within 90 days after the Effective
Date.
2.9. Budget Approval.
(a) The President-PCS shall include in his submission of the
Business Plan a Budget in respect of the Partnership for the next fiscal year,
including an income statement, balance sheet and capital budget prepared on an
accrual basis for the Partnership for the forthcoming fiscal year and a cash
flow statement which shall show in reasonable detail the receipts and
disbursements (including without limitation, the anticipated distributions)
projected for the Partnership for the forthcoming fiscal year and the amount of
any corresponding cash deficiency or surplus, and the amount and due dates of
all required capital contributions, if any. Each such Budget shall be prepared
on a basis consistent with the Partnership's financial statements prepared in
accordance with the provisions of Section 6.4 hereof and the Approved Business
Plan. Each such Budget shall be consistent with the License Agreement and
Services Agreement (and the directives of WMC thereunder). If requested by any
Member, the President-PCS shall promptly meet with the Partnership Committee
for the purpose of discussing such Budget. Each such Budget shall be
considered at the first meeting of the Partnership Committee following
submission thereof. Any such Budget (or any amendment thereto) which is
approved by the Partnership Committee shall be considered approved for all
purposes of this Agreement until amended or replaced (an "Approved Budget").
(b) If for any fiscal year no new Budget is agreed upon by the
Partnership Committee, then for such fiscal year the Partnership shall be
managed in a manner consistent with the forecasts for such fiscal year included
in the then Approved Business Plan (such forecasts, as they relate
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to either of the two years following a year in which a Budget has been approved
pursuant to Section 2.9(a), being deemed to be for all purposes of this
Agreement an Approved Budget), as adjusted by the President-PCS to reflect the
Partnership's contractual obligations for such year and other changes resulting
from the passage of time or the occurrence of events beyond the control of the
Partnership.
(c) Each Partner hereby agrees to use best efforts to prepare and
approve the initial Approved Budget within 90 days after the Effective Date.
2.10. Employees and Employee Benefits. The compensation program,
benefit plans and personnel policies of the Partnership shall be in accordance
with an agreement to be entered into by and among USW, ATI and the Partnership.
2.11. Access to Books of Account. Notwithstanding any other provision
of this Agreement, each Partner shall have the right at all reasonable times
during usual business hours to audit, examine, and make copies or extracts of
or from the complete books of account of the Partnership, including but not
limited to the books and records maintained in accordance with Section 6.4 and
all other books and records of the Partnership. Such right may be exercised
through any agent or employee of such Partner designated by it or by
independent certified public accountants or counsel designated by such Partner.
Each Partner shall bear all expenses incurred in any examination made for such
Partner's account.
2.12. Confidential Information.
(a) Each Partner shall, and shall cause each of its Affiliates,
and its and their respective partners, shareholders, directors, officers,
employees and agents (collectively, "Representatives"), to keep secret and
retain in strictest confidence, except as provided in subsection (c) hereof,
any and all Confidential Information and shall not distribute, disseminate or
disclose such Confidential Information, and shall cause its Representatives not
to distribute, disseminate or disclose such Confidential Information, except to
(i) the Partnership, WMC or any PCS Owned System and their respective agents,
(ii) any lender to the Partnership, WMC or any PCS Owned System, (iii) any
Partner, WMC or any of their respective Affiliates or other Representatives on
a "need to know" basis in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Partnership, WMC, the
PCS Owned Systems and their respective businesses, or (iv) any other Person
that agrees in writing to keep in confidence such Confidential Information in
accordance with the terms of this Section 2.12, and such Partner disclosing
Confidential Information pursuant to this Section 2.12 shall use, and shall
cause its Affiliates and other Representatives to use, such Confidential
Information only for the benefit of the Partnership in conducting the
Partnership Business or for any other specific purposes for which it was
disclosed to such party; provided that the disclosure of financial statements
of, or other information relating to, the Partnership shall not be deemed to be
the disclosure of Confidential Information (i) to the extent that any Partner
is required by law or GAAP to disclose such financial statements or other
information or (ii) to the extent that in order to sustain a position taken for
tax purposes, any Partner deems it necessary and appropriate to disclose
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such financial statements or other information. All Confidential Information
disclosed in connection with the Partnership or pursuant to this Agreement
shall remain the property of the Person whose property it was prior to such
disclosure.
(b) No Confidential Information regarding the plans or operations
of any Partner or any Affiliate thereof received or acquired by or disclosed to
any unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership Business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas in which any
other Partner and the unaffiliated Partner and their respective Affiliates
compete in the provision of telecommunications services.
(c) In the event that a Partner or anyone to whom a Partner
transmits any Confidential Information becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
investigative demand or similar process) to disclose any of the Confidential
Information, such Partner will use its best efforts to provide the other
Partners and the Partnership with prompt written notice prior to disclosure
(not less than 24 hours) so that the other Partners and the Partnership or WMC
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event that such protective order
or other remedy is not obtained, or that the Partnership, WMC and the other
Partners waive compliance with the provisions of this Section 2.12, the Partner
or Person who is compelled to disclose such Confidential Information will
furnish only that portion of the Confidential Information which (based on the
advice of counsel) it is legally required to disclose and will exercise its
best efforts to obtain reliable assurance that protective treatment will be
accorded the Confidential Information.
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and representatives to, maintain the confidentiality required by
this Section 2.12 and to destroy or return upon request, all documents and
other materials, and all copies thereof, obtained by such Partner or on its
behalf from any of the Partnership, WMC or the other Partners or any of their
Affiliates in connection with the transactions leading up to and contemplated
by this Agreement and the operation of the Partnership, WMC, and the PCS Owned
Systems or their respective businesses that are subject to such confidentiality
obligations. The obligations under this Section 2.12 shall survive the
termination of the Partnership for a period of five years.
(e) To the fullest extent permitted by law, if a Partner or any of
its Affiliates or Representatives breaches, or threatens to commit a breach of,
this Section 2.12, the other Partners and the Partnership shall have the right
and remedy to have this Section 2.12 specifically enforced by any pursuant to
the provisions of the Arbitration Agreement referred to in Section 12.11, it
being acknowledged and agreed that money damages will not provide an adequate
remedy to such other Partners or the Partnership. Nothing in this Section 2.12
shall be construed to limit the right of any
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Partner or the Partnership to collect money damages in the event of breach of
this Section 2.12.
2.13. Duty of Partners to Cooperate. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by
the Partnership Committee and as may be necessary or reasonably desirable in
connection with the business of the Partnership.
2.14. Agreements with Partnership or Owned Systems.
(a) Any Partner or any Affiliate thereof may enter into and
maintain in effect any contract, agreement, transaction or relationship between
such Partner or Affiliate and the Partnership or any PCS Owned System (a
"Related Party Agreement") on terms and conditions approved by the Partnership
Committee (by vote of Members representing each General Partner other than the
Partner interested in such Related Party Agreement) and may derive and retain
profits therefrom.
(b) Notwithstanding the foregoing, each General Partner and each
Member of the Partnership hereby approves, and authorizes the Partnership to
enter into:
(i) Related Party Agreements with ATI or any Affiliate
thereof which provides paging or vehicle location services, relating
to (A) co-location of technical site leases (which leases individually
do not provide for annual rental payments in excess of $4,000), (B)
sales office leases (which leases individually do not provide for
annual rentals in excess of $400,000), and (C) other Related Party
Agreements relating to paging terminal and cellular switching
equipment, joint mailing and other co-marketing efforts, the aggregate
annual consideration under which does not exceed $1 million and the
terms and conditions of which are no less favorable than could be
obtained from a third party;
(ii) Related Party Agreements with any LEC Affiliate of USW
or any wireline cable television company in which USW has an ownership
interest related to the purchase of PCS Services from the PCS Owned
Systems for resale in such LEC Affiliate's local-exchange markets or
such wireline cable television company's franchise markets, as the
case may be; provided that such agreements provide for reasonable
notice of cancellation. As long as USW or an Affiliate thereof
remains a General Partner, the pricing of such services shall be on
terms no less favorable than those offered to any third party (for
like types and volumes of service); provided that (A) if the
Partnership provides services of comparable quality and scope as those
available from third parties, such LEC Affiliate or such wireline
cable television company, as the case may be, shall have entered into
an agreement with the Partnership (or WMC or the Licensed or Owned
Systems, as defined in the WMC Partnership Agreement) to purchase its
entire requirements of wireless
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communications services in such markets from the Partnership, WMC or
the Licensed or Owned Systems; and
(iii) Related Party Agreements with ATI or any Affiliate
thereof related to the purchase of satellite communications services
provided by the Globalstar satellite communications ventures which
agreements may provide that Globalstar will be the exclusive provider
of satellite communications services to the Partnership; provided that
the Partnership shall be entitled to purchase such services at a price
and on terms no less favorable than those offered by Globalstar to any
third party (for like volumes and types of service).
2.15. Insurance and Risk Management. The property and casualty
insurance program for the partnership shall be integrated into the ATI
insurance program providing customary business insurance coverage as of the
Effective Date. Each Partner hereby consents and agrees that the Partnership
shall compensate ATI for a proportional allocation to the Partnership for
insurance premiums, casualty loss funding pools, and related expenses.
ARTICLE 3
CERTAIN AGREEMENTS REGARDING OPERATIONS OF THE
PARTNERSHIP AND THE PCS OWNED SYSTEMS
3.1. General; Fiduciary Obligations. The Partnership shall manage the
operations of the PCS Owned Systems, in accordance with the respective budgets
and business plans for such PCS systems then in effect, the License and
Services Agreements (and the directives of WMC thereunder) and the applicable
terms of this Agreement. The Partners acknowledge that the Partnership may
have fiduciary obligations to and from other Persons in connection with the
Partnership's interest in any PCS Owned System. Each of the Partnership
Committee and the Partners shall use all reasonable efforts to cause the
Partnership to comply with all such fiduciary obligations, and the obligations
of the Partnership, the Partnership Committee and the Partners hereunder are
subject in all respects to such fiduciary obligations.
3.2. License Agreements. Within 10 days after the adoption of a form
of License Agreement by WMC pursuant to Section 3.2(b) of WMC Partnership
Agreement, the Partnership shall enter into a License Agreement with WMC, in
the form approved by WMC. The Partnership shall amend such agreement from time
to time to reflect such changes therein as may be approved by WMC.
3.3. Services Agreement. Within 10 days after the adoption of a form
of Services Agreement by WMC pursuant to Section 3.2(b) of WMC Partnership
Agreement, the Partnership shall enter into a Services Agreement with WMC, in
the form approved by WMC. The Partnership shall amend such agreement from time
to time to reflect such changes therein as may be approved by WMC.
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3.4. PCS Owned Systems.
(a) The President-PCS shall have full power and authority to take
all action necessary to effect the appointment or removal of the general
manager or, if applicable, the regional manager or other person with equivalent
management responsibility ("System Manager") of the Partnership's interest in
any PCS Owned System.
(b) Each System Manager shall manage the day-to-day operations of
the applicable PCS Owned System, in accordance with any partnership agreement
or other organizational documents of the applicable PCS Owned System so long as
they are in existence, and the budget and business plans then in effect for
such PCS Owned System, subject to the control, supervision and oversight of the
President-PCS.
3.5. System Budget Approval.
(a) The System Manager for each PCS Owned System shall submit
annually to the President-PCS a system budget in respect of such PCS Owned
System ("System Budget") for the next fiscal year at such time and in such
format as may be determined from time to time, by the President-PCS. If
requested by the President-PCS, the System Manager shall promptly meet with the
President-PCS for the purpose of discussing such System Budget. Each System
Budget shall be consistent with the License Agreement and Services Agreement
(and the directives of WMC thereunder).
(b) The Partnership shall neither take nor cause to be taken any
action to approve or implement a System Budget (or any amendment thereof or
modification thereto) until such System Budget (or amendment or modification)
shall have been approved by the President-PCS.
3.6. System Business Plans.
(a) The System Manager for each PCS Owned System shall submit to
the President-PCS a business plan in respect of such PCS Owned System (a
"System Business Plan") at such time and in such format as may be determined
from time to time by the President-PCS. Each System Business Plan shall be
consistent with the License Agreement and Services Agreement (and the
directives of WMC thereunder).
(b) The Partnership shall neither take nor cause to be taken any
action to approve or implement a System Business Plan, until such System
Business Plan (or amendment or modification) shall have been approved by the
President-PCS.
3.7. Management Reports. The System Manager for each PCS Owned System
shall prepare and distribute, or cause to be prepared and distributed, promptly
such reports and other information in respect of such PCS Owned System as the
President-PCS reasonably may request.
3.8. Financial Statements.
(a) Annual Statements. As soon as practicable following the end
of each fiscal year, but in any event within 45 days after the end of the
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fiscal year, the System Manager for each PCS Owned System shall cause to be
prepared and delivered to the President-PCS unaudited statements of income
(loss) in respect of such PCS Owned System, and statements of cash flows for
such fiscal year, and an unaudited balance sheet of such PCS Owned System, in
each case, consistent with Partnership accounting practices.
(b) Quarterly Statements. As soon as possible following the end
of each fiscal quarter, but in any event within 20 days after the end of each
quarter, the System Manager for each PCS Owned System shall prepare, or cause
to be prepared, and deliver to the President-PCS an unaudited statement of
income (loss) in respect of such PCS Owned System and an unaudited statement of
cash flows for such fiscal quarter, and an unaudited balance sheet of such PCS
Owned System as of the end of such fiscal quarter, in each case, consistent
with Partnership accounting practices.
ARTICLE 4
CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS
4.1. Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate
capital account (a "Capital Account") in accordance with the capital accounting
rules of section 704(b) of the Code and the Income Tax Regulations thereunder
(including particularly section 1.704-1(b)(2)(iv) of the Income Tax
Regulations).
(b) In general, under such capital accounting rules (but subject
to any contrary requirements of the Code and the Income Tax Regulations
thereunder), a Partner's Capital Account shall be (i) increased by the amount
of money (including Make-Up Contributions) and the Fair Market Value
(determined in accordance with Section 4.9 hereof) of other property (net of
liabilities secured by such contributed property that the Partnership is
considered to take subject to or assume under section 752 of the Code)
contributed by the Partner to the Partnership and allocations to the Partner of
Partnership income and gain (or items thereof), including income and gains
exempt from tax, and (ii) decreased by the amount of money and the Fair Market
Value (determined in accordance with Section 4.9 hereof) of other property
distributed (net of liabilities secured by such distributed property that such
Partner is considered to take subject to or assume under section 752 of the
Code) to the Partner by the Partnership and allocations to the Partner of
Partnership loss and deduction (or items thereof), including Partnership
expenditures not deductible in computing its taxable income and not properly
chargeable to capital account.
(c) Where section 704(c) of the Code applies to Partnership
property, each Partner's Capital Account shall be adjusted in accordance with
paragraph (b)(2)(iv)(g) of section 1.704-1 of the Income Tax Regulations as to
allocations to the Partners of depreciation, depletion, amortization and gain
or loss, as computed for book purposes with respect to such property.
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(d) When Partnership property is distributed in kind (whether in
connection with dissolution and liquidation of the Partnership or otherwise),
the Capital Accounts of the Partners first shall be adjusted to reflect the
manner in which the unrealized income, gain, loss or deduction inherent in such
property (that has not previously been charged to Capital Accounts) would be
allocated among the Partners if there were a taxable disposition of such
property for its Fair Market Value (determined in accordance with Section 4.9
hereof and taking into account section 7701(g) of the Code) and such income,
gain, loss or deduction had been recognized for federal income tax purposes
immediately upon such distribution or the event requiring such revaluation.
(e) Upon a revaluation of any Partnership assets pursuant to
Section 4.7 hereof, the Capital Accounts of the Partners will be adjusted as
provided in Section 4.7(d).
(f) The Tax Matters Partner shall direct the Partnership's accountant
to make all necessary adjustments in each Partner's Capital Account as required
by the rules of section 704(b) of the Code and the Income Tax Regulations
thereunder.
4.2. Initial Contributions of Capital.
On the Effective Date, each Partner shall make the contributions to
the capital of the Partnership set forth opposite such Partner's name on
Schedule 1 hereto.
4.3. Additional Contributions by Partners.
(a) In the event of (i) a capital contribution required by the
terms of an Approved Business Plan or an Approved Budget, or (ii) in the event
that the Partnership Committee determines that additional capital
contributions, payable in cash or other property (or combination thereof), are
necessary or advisable, each Partner will be notified in writing by the
Partnership, at least 60 days prior to the date on which such additional
capital contribution is payable (the "Due Date"), of the amount of additional
capital contribution required from each of them, on a pro rata basis,
determined in accordance with such Partner's respective Percentage Interest,
and the Due Date for such additional capital contribution. Each such
additional capital contribution shall be payable in cash unless otherwise
determined by vote of the Partnership Committee. Such contributions, when
made, shall be credited to each Partner's Capital Account. In the event that
any Partner fails to make such additional capital contribution on or before the
Due Date thereof, but wishes to make such contribution on or before the 15th
day immediately following such Due Date (a "Late Amount"), such Partner shall
be entitled to contribute such Late Amount during such 15-day period and have
such Late Amount credited to its Capital Account; provided that in addition to
the payment of such Late Amount, such Partner must also pay at such time a late
fee equal to the interest that would have accrued on the unpaid portion of such
Late Amount from the Due Date to the date of payment, calculated at a per annum
rate of the Prime Rate plus 2% (a "Late Fee"), which Late Fee shall not be
credited in whole to the Partner's Capital Account, but shall be treated as
income
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and allocated among the Partners proportionately in accordance with their
Percentage Interests.
(b) In the event that a Partner fails to make the required
additional capital contribution on or prior to the expiration of 15 days after
the Due Date thereof (a "Defaulting Partner"), any one or more of the other
Partners, who are not Affiliate Transferees of the Defaulting Partner (the
"Non-Defaulting Partners"), within 30 days following the mailing of notice from
the Partnership that payment from the Defaulting Partner has not been made, may
pay some or all of the contribution which the Defaulting Partner failed to make
to the capital of the Partnership (a "Default Amount"). In the event that more
than one Non-Defaulting Partner elects to contribute a Default Amount so that
the aggregate amount to be contributed by Non-Defaulting Partners would exceed
the full Default Amount, each of such Non-Defaulting Partners shall be entitled
to contribute a portion of the Default Amount that is equal to such
Non-Defaulting Partner's Percentage Interest divided by the Percentage
Interests of all Non-Defaulting Partners electing to contribute such Default
Amount. Thereafter, to the extent that such Default Amount remains unpaid and
the Partnership shall not have funded such Default Amount through a subsequent
capital call, the Defaulting Partner shall have the right to contribute such
unpaid portion of such Default Amount; provided that such contribution is
accompanied by the payment of a fee in an amount equal to the interest that
would have accrued on the unpaid portion of such Default Amount from the Due
Date to the date of such payment, calculated at a per annum rate of the Prime
Rate plus 2% (a "Default Fee"), which Default Fee shall not be credited in
whole to the Partner's Capital Account, but shall be treated as income and
allocated among the Partners proportionately in accordance with their
Percentage Interests.
(c) If the Defaulting Partner fails to contribute a Default Amount
which relates to a Defaulted Contribution and such Default Amount has not been
paid in full by one or more of the Non-Defaulting Partners, the Non-Defaulting
Partner or Partners may by a vote of the Members representing a majority of the
Percentage Interests of the Non-Defaulting Partners, elect to cause the
Partnership to initiate and maintain an action against the Defaulting Partner
for such unpaid Defaulted Contribution and to pursue any available remedy,
including but not limited to seeking payment by the Defaulting Partner of such
Default Amount or the unpaid portion thereof and damages incurred by the
Partnership in connection therewith. The Defaulting Partner's Capital Account
shall be increased by an amount equal to that portion of the Default Amount
recovered in any action maintained in accordance with the immediately preceding
sentence. The costs of any action commenced by the Partnership pursuant to
this Section 4.3(c) shall be paid by the Partnership and shall be reimbursed by
the Defaulting Partner to the Partnership and to the extent not paid will be
deducted from such Defaulting Partner's Capital Account and Adjusted Capital
Contributions.
4.4. Partner Obligations. No Partner shall have any obligation to
restore any portion of any deficit balance in such Partner's Capital Account,
whether upon liquidation of its interest in the Partnership, liquidation of the
Partnership or otherwise.
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4.5. Withdrawals of Capital Accounts. No Partner shall be entitled to
withdraw any amount from its Capital Account prior to dissolution of the
Partnership.
4.6. Interest on Capital Accounts. No interest or compensation shall
be paid on or with respect to the Capital Account or capital contributions of
any of the Partners, except as otherwise expressly provided herein.
4.7. Revaluation of Partnership Assets.
(a) The assets of the Partnership shall be revalued in accordance
with Section 4.9 to their then Fair Market Values as of the date of and
immediately prior to (i) the acquisition of an additional interest in the
Partnership (including adjustments to Percentage Interests arising as a result
of a failure of any Partner to make a required capital contribution pursuant to
Section 4.3 hereof) by any new or existing Partner in exchange for more than a
de minimis capital contribution to the Partnership, (ii) the distribution by
the Partnership of more than a de minimis amount of property as consideration
for the redemption of a portion (but not all) of a Partner's interest in the
Partnership and (iii) the liquidation of a Partner's entire interest in the
Partnership or immediately prior to the distribution of Partnership assets in
liquidation of the Partnership within the meaning of Income Tax Regulations
section 1.704-1(b)(2)(ii)(g); provided, however, that no revaluation shall
occur if the Partnership Committee reasonably determines that a revaluation
would not materially affect the Capital Accounts of the Partners or that the
cost of such revaluation would be disproportionate to any benefit to be derived
by the Partners from such revaluation.
(b) Immediately prior to the distribution of any asset by the
Partnership, the Partnership Committee shall revalue such asset to its then
Fair Market Value.
(c) Any Revaluation Gain or Revaluation Loss arising from a
revaluation of any Partnership asset pursuant to this Section 4.7 shall
respectively be credited to or debited from the Partners' Capital Accounts in
accordance with their respective Percentage Interests immediately prior to the
event giving rise to such revaluation.
4.8. Redetermination of Percentage Interests. The respective
Percentage Interests of each of the Partners shall be redetermined immediately
after any event giving rise to a change in any Partner's Adjusted Capital
Contributions. If a Partner is both a General Partner and a Limited Partner
such adjustment shall be made to both the General Partner and the Limited
Partner Percentage Interests of such Partner as both a General Partner and a
Limited Partner pro rata in proportion to such interests.
4.9. Determination of Fair Market Value. The Fair Market Value, as of
the date of determination, of any asset shall be determined (a) by mutual
agreement of the General Partners or (b) if no such agreement is reached within
ten days of the relevant date of determination, as follows:
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(i) Selection of Appraisers. Each of (A) the Partner who is
either contributing an asset to the Partnership, receiving an asset as
a distribution from the Partnership or transferring an asset which is
being valued hereunder (or, if there is no such Partner, ATI) (the
"Asset Partner") and (B) the other General Partners shall designate by
written notice to the Partnership and the each General Partner a firm
of recognized national standing familiar with appraisal techniques
applicable to assets of the type being evaluated to serve as an
Appraiser pursuant to this Section 4.9 (the firms designated by the
Asset Partner and the other General Partners being referred to herein
as the "First Appraiser" and the "Second Appraiser," respectively)
within five business days after the failure to reach agreement in
accordance with the terms of clause (a) above. In the event that
either the Asset Partner or the other General Partners fails to
designate its or their Appraiser within the foregoing time period, the
other shall have the right to designate such Appraiser by notifying
the failing party or parties in writing of such designation (and the
Appraiser so designated shall be the First Appraiser or the Second
Appraiser, as the case may be).
(ii) Evaluation Procedures. Each Appraiser shall be directed
to determine the Fair Market Value of the asset. Each Appraiser will
also be directed to deliver an Appraiser's Certificate to each
Representative Partner on or before the 30th day after their
respective designation (the "Certificate Date"), upon the conclusion
of its evaluation, and each Appraiser's Certificate once delivered may
not be retracted or modified in any respect. Each Appraiser will keep
confidential all information disclosed by the Partnership in the
course of conducting its evaluation, and, to that end, will execute
such customary documentation as the Partnership may reasonably request
with respect to such confidentiality obligation. The General Partners
will cooperate in causing the Partnership to provide each Appraiser
with such information within the Partnership's possession that may be
reasonably requested in writing by the Appraiser for purposes of its
evaluation hereunder. The Appraisers shall consult with each other in
the course of conducting their respective evaluations. Each General
Partner shall have full access to each Appraiser's work papers. Each
Appraiser will be directed to comply with the provisions of this
Section 4.9, and to that end each party will provide to its respective
Appraiser a complete and correct copy of this Section 4.9 (and the
definitions of capitalized terms used in this Section 4.9 that are
defined elsewhere in this Agreement).
(iii) Fair Market Determination. The Fair Market Value of
any asset shall be determined on the basis of the Appraisers'
Certificates in accordance with the provisions of this subparagraph
(iii). The higher of the values set forth on the Appraisers'
Certificates is hereinafter referred to as the "Higher Value" and the
lower of such values is hereinafter referred to as the "Lower Value".
If the Higher Value is not
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more than 110% of the Lower Value, the Fair Market Value will be the
arithmetic average of such two Values. If the Higher Value is more
than 110% of the Lower Value, a third appraiser shall be selected in
accordance with the provisions of subparagraph (iv) below, and the
Fair Market Value will be determined in accordance with the provisions
of subparagraph (v) below.
(iv) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, within seven days
thereafter the First Appraiser and the Second Appraiser shall agree
upon and jointly designate a third firm of recognized national
standing familiar with appraisal techniques applicable to assets of
the type being evaluated to serve as an appraiser pursuant to this
Section 4.9 (the "Third Appraiser"), by written notice to each General
Partner. The General Partners shall direct the Third Appraiser to
determine the Fair Market Value of the asset (the "Third Value") in
accordance with the provisions of subparagraph (ii) above, and to
deliver to the General Partners an Appraiser's Certificate on or
before the 30th day after the designation of such Appraiser hereunder.
The Third Appraiser will be directed to comply with the provisions of
this Section 4.9, and to that end the parties will provide to the
Third Appraiser a complete and correct copy of this Section 4.9 (and
the definitions of capitalized terms used in this Section 4.9 that are
defined elsewhere in this Agreement).
(v) Alternative Determination of Fair Market. Upon the
delivery of the Appraiser's Certificate of the Third Appraiser, the
Fair Market Value will be determined as provided in this subparagraph
(v). The Fair Market Value will be (w) the Lower Value, if the Third
Value is less than the Lower Value, (x) the Higher Value, if the Third
Value is greater than the Higher Value, (y) the arithmetic average of
the Third Value and the other Value (Lower or Higher) that is closer
to the Third Value if the Third Value falls within the range between
(and including) the Lower Value and the Higher Value and (z) the Third
Value, if the Lower Value and the Higher Value are equally close to
the Third Value.
(vi) Costs. Each of the Asset Partner and the other General
Partners will bear the cost of the Appraiser designated by it or on
its behalf. If the Higher Value is not more than 115% of the Lower
Value, or if the Higher Value and the Lower Value are equally close to
the Third Value, each of the Asset Partner and the other General
Partners shall bear 50% of the cost of the Third Appraiser, if any;
otherwise, the party whose Appraiser's determination of fair market
value is further away from the Third Value shall bear the entire cost
of the Third Appraiser. The General Partners agree to pay when due
the fees and expenses of the Appraisers in accordance with the
foregoing provisions.
(vii) Conclusive Determination. To the fullest extent
provided by law, the determination of the Fair Market Value made
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pursuant to this Section 4.9 shall be final and binding on the
Partnership and the Partners hereto, and such determination shall not
be appealable to or reviewable by any court or arbitrator; provided
that the foregoing shall not limit a Partner's rights to seek
arbitration of the obligations of the other Partners and the
Partnership hereunder.
ARTICLE 5
ALLOCATIONS AND DISTRIBUTIONS
5.1. Profits and Losses. A Partner's distributive share of income,
gain, loss, deduction or credit (or items thereof) as shown on the annual
federal income tax return prepared by the Partnership's accountants or as
finally determined by the Internal Revenue Service or the courts, and as
modified by the capital accounting rules of section 704(b) of the Code and the
Income Tax Regulations thereunder as implemented by Section 4.1 hereof, as
applicable, shall be determined as provided in this Article 5.
(a) Except as otherwise provided in this Section 5.1, profits and
losses of the Partnership shall be allocated among the Partners proportionately
in accordance with their Percentage Interests.
(b) Solely for tax purposes, in determining each Partner's allocable
share of the taxable income or loss of the Partnership, depreciation,
depletion, amortization and gain or loss with respect to any contributed
property, or with respect to revalued property where Partnership property is
revalued pursuant to Section 4.7 hereof, shall be allocated to the Partners
under any method allowable under Section 704(c) of the Code and the applicable
Income Tax Regulations thereunder. The Partnership Committee shall decide
which such method shall be utilized by the Partnership with respect to its
property; provided, however, that if the Partnership Committee fails to act in
a timely manner, the Partnership shall utilize the method set forth in section
1.704-3(c) of the Income Tax Regulations (the traditional method with curative
allocations).
(c) Minimum Gain Chargeback. Notwithstanding anything to the
contrary in this Article 5, if there is a net decrease in Partnership Minimum
Gain or Partner Nonrecourse Debt Minimum Gain (as such terms are defined in
sections 1.704-2(b) and 1.704-2(i)(2), respectively, of the Income Tax
Regulations) during a Partnership taxable year, then each Partner shall be
allocated items of Partnership income and gain for such year (and, if
necessary, for subsequent years), to the extent required by, and in the manner
provided in, section 1.704-2 of the Income Tax Regulations.
This provision is intended to be a "minimum gain chargeback" within
the meaning of sections 1.704-2(f) and 1.704- 2(i)(4) of the Income Tax
Regulations and shall be interpreted and implemented as therein provided.
(d) Qualified Income Offset. Subject to the provisions of Section
5.1(c), but otherwise notwithstanding anything to the contrary in this Article
5, if any Partner's capital account has a deficit balance in excess of such
Partner's obligation to restore its capital account balance,
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computed in accordance with the rules of paragraph (b)(2)(ii)(d) of section
1.704-1 of the Income Tax Regulations (including such Partner's share of
Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as provided
in section 1.704-2(g) and 2(i)(5) of the Income Tax Regulations), then
sufficient amounts of income and gain (consisting of a pro rata portion of each
item of Partnership income, including gross income, and gain for such year)
shall be allocated to such Partner in an amount and manner sufficient to
eliminate such deficit as quickly as possible. This provision is intended to
be a "qualified income offset" within the meaning of section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and shall be interpreted and
implemented as therein provided.
(e) Subject to the provisions of section 704(c) of the Code and
Sections 5.1(b) through (d) hereof, gain recognized (or deemed recognized under
the provisions hereof) upon the sale or other disposition of Partnership
property, which is treated as depreciation recapture, shall be allocated to the
Partner who was entitled to deduct such depreciation.
(f) Except as otherwise provided in Section 5.1(j), if and to the
extent any Partner is deemed to recognize income as a result of any loans
described herein pursuant to the rules of sections 1272, 1273, 1274, 7872 or
482 of the Code, or any similar provision now or hereafter in effect, any
corresponding resulting deduction of the Partnership shall be allocated to the
Partner who is charged with the income. Subject to the provisions of section
704(c) of the Code and Sections 5.1(b) through (d) hereof, if and to the extent
the Partnership is deemed to recognize income as a result of any loans
described herein pursuant to the rules of sections 1272, 1273, 1274, 7872 or
482 of the Code, or any similar provision now or hereafter in effect, such
income shall be allocated to the Partner who is entitled to any corresponding
resulting deduction.
(g) Except as otherwise required by law, tax credits shall be
allocated among the Partners pro rata in accordance with the manner in which
Partnership profits are allocated to the Partners under this Article 5, as of
the time the credit property is placed in service or if no property is
involved, as of the time the credit is earned. Recapture of any tax credit
required by the Code shall be allocated to the Partners in the same proportion
in which such tax credit was allocated.
(h) Except as provided in Sections 5.1(f) and (g) hereof or as
otherwise required by law, if the Partnership Interests of the Partners are
changed herein during any taxable year, all items to be allocated to the
Partners for such entire taxable year shall be prorated on the basis of the
portion of such taxable year which precedes each such change and the portion of
such taxable year on and after each such change according to the number of days
in each such portion, and the items so allocated for each such portion shall be
allocated to the Partners in the manner in which such items are allocated as
provided in this Article 5 during each such portion of the taxable year in
question; provided that, if the transferor and the transferee of an interest in
the Partnership (i) shall both have given the Partnership written notice within
15 days of the end of such taxable year of the Partnership stating their
agreement that such division and allocation shall be made on some other basis
permitted by Code section 706(d) and (ii) shall have agreed to reimburse the
Partnership for any incremental
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accounting fees and other expenses incurred by the Partnership in utilizing
such other basis for such division and allocation, then such other basis
permitted by Code section 706(d) shall be used.
(i) Any special allocation of income or gain pursuant to Section
5.1(c) or 5.1(d) hereof shall be taken into account in computing subsequent
allocations of income and gain pursuant to this Article 5 so that the net
amount of all such allocations to each Partner shall, to the extent possible,
be equal to the net amount that would have been allocated to each such Partner
pursuant to the provisions of this Article 5 if such special allocations of
income or gain under Section 5.1(c) or 5.1(d) hereof had not occurred.
(j) Losses.
(i) Items of deduction and loss attributable to recourse
liabilities of the Partnership (within the meaning of section
1.752-1(a)(1) of the Income Tax Regulations but excluding Partner
nonrecourse debt within the meaning of section 1.704-2(b)(4) of the
Income Tax Regulations) shall be allocated among the Partners in
accordance with the ratio in which the Partners share the economic
risk of loss (within the meaning of section 1.752-2 of the Income Tax
Regulations) for such liabilities.
(ii) Items of deduction and loss attributable to Partner
nonrecourse debt within the meaning of section 1.704-2(b)(4) of the
Income Tax Regulations shall be allocated to the Partners bearing the
economic risk of loss with respect to such debt in accordance with
section 1.704-2(i) of the Income Tax Regulations.
(iii) Items of deduction and loss attributable to Partnership
nonrecourse liabilities within the meaning of section 1.704-2(b)(1) of
the Income Tax Regulations shall be allocated among the Partners
proportionately in accordance with their Partnership interests.
(iv) All other items of operating net loss ("Net Loss") shall
be allocated among the Partners, proportionately in accordance with
their Partnership Interests, except that Net Loss shall not be
allocated to any Partner to the extent it would create a deficit
balance in excess of such Partner's obligation to restore its capital
account balance, computed in accordance with the rules of Section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations (including such
Partner's share of Partnership Minimum Gain and Partner Nonrecourse
Debt Minimum Gain as provided in section 1.704-2(g) and 2(i)(5) of the
Income Tax Regulations). Any Net Loss which cannot be allocated to a
Partner because of the limitation set forth in the previous sentence
shall be allocated first to the other Partners to the extent such
other Partners would not be subject to such limitation and second any
remaining amount to the Partners in the manner required by the Code
and the Income Tax Regulations.
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(k) Subject to the provisions of Sections 5.1(c) through (j),
items of income and gain shall be allocated to the Partners in the following
priority:
(i) First, if allocations of Net Loss have been made to
the Partners under Section 5.1(j)(iv), then in the amount of, and
proportionate to, the amount of such Net Loss.
(ii) Second, to those Partners who have had items of loss or
deduction allocated to them under section 3.5(j)(i), in the amount of,
and proportionate to, the amount of such items of loss or deduction.
(iii) Third, the balance among the Partners in proportion
to their relative Partnership Interests.
5.2. Distributions.
(a) As promptly as practicable after the end of each month, but in no
event later than the end of the following month, all Net Operating Available
Cash of the Partnership (as determined based on the Partnership's financial
statements for such month) shall be distributed to the Partners. Other
distributions, whether in cash or in kind, shall be made to the Partners at
such times and in such amounts as shall be determined by the Partnership
Committee. The amount of any in-kind distribution shall be the distributed
property's then Fair Market Value. The Partnership shall take all reasonable
actions to cause each PCS Owned System to distribute all Net Operating
Available Cash of such PCS Owned System on a monthly basis to the extent
permissible under the governing documents for such PCS Owned Systems.
(b) Except as provided in Section 5.2(c), distributions shall be made
among the Partners in accordance with their respective Percentage Interests at
the time of such distribution.
(c) Upon liquidation of the Partnership, within the meaning of Income
Tax Regulations section 1.704-1(b)(2)(ii)(g), distributions shall be made among
the Partners as provided in Section 8.3.
(d) Any other provision of this Agreement to the contrary
notwithstanding, no distribution shall be made by the Partnership, or on behalf
of the Partnership which would violate Section 17-607(a) of the Act, which
would render the Partnership insolvent or which is prohibited by the terms of
any Partnership indebtedness.
(e) All matters not expressly provided for by the terms of Article 5
or elsewhere in this Agreement concerning the valuation of securities and other
assets of the Partnership, the allocation of profits and losses and items
thereof (including credits) among the Partners and accounting procedures shall
be reasonably determined by the Partnership Committee, whose determination
shall be final and conclusive as to all of the Partners.
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ARTICLE 6
TAX MATTERS AND REPORTS; ACCOUNTING
6.1. Filing of Tax Returns. The Tax Matters Partner shall prepare and
file, or cause the accountants of the Partnership to prepare and file, all Tax
Returns for each tax year of the Partnership.
6.2. Tax Matters Partner.
(a) The Tax Matters Partner of the Partnership within the meaning of
section 6231(a)(7) of the Code shall be ATI. Unless otherwise expressly
provided herein, the Tax Matters Partner is authorized to take any action that
it determines to be necessary or appropriate with respect to all tax matters.
(b) The Tax Matters Partner shall promptly advise the other Partners
of all audits or other actions by the Internal Revenue Service and shall
furnish to the Partnership and to each Partner a copy of each notice or other
communication received by the Tax Matters Partner from the Internal Revenue
Service except such notice or communication sent directly to the Partners by
the Internal Revenue Service. All expenses incurred by the Tax Matters Partner
in its capacity as such shall be expenses of the Partnership and shall be paid
by the Partnership.
(c) To the fullest extent permitted by law, the Partnership shall
indemnify Partners on an after-tax basis against any liabilities incurred while
acting as the Tax Matters Partner of the Partnership but only to the extent
such Partner acts within the scope of its authority as Tax Matters Partner
under this Agreement. The Tax Matters Partner shall not be indemnified against
any liability regarding Partnership tax matters arising by reason of the
willful misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
6.3. Tax Reports to Current and Former Partners. After the end of
each fiscal year, the Tax Matters Partner shall, in a timely manner, prepare
and mail, or cause its accountants to prepare and mail, to each Partner and, to
the extent necessary, to each former Partner (or its legal representatives), a
report setting forth in sufficient detail such information as is required to be
furnished to partners by law (e.g., section 6031(b) of the Code and the Income
Tax Regulations thereunder) and as shall enable such Partner or former Partner
(or its legal representatives) to prepare their respective federal and state
income tax or informational returns in accordance with the laws, rules and
regulations then prevailing.
6.4. Accounting Records; Independent Audit. Complete books and
records accurately reflecting the accounts, business, transactions and partners
of the Partnership and each PCS System in which it has an interest shall be
maintained and kept by the Partnership at the Partnership's principal place of
business. The accounting records of the Partnership shall be maintained to
assure preparation of the financial statements in accordance with GAAP. The
accounting records of the Partnership shall be audited by certified public
accountants selected by the Partnership
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Committee and shall contain proportional accounting information with respect to
the Partnership's interest in any Owned PCS System.
6.5. Fiscal Year. Except as may otherwise be required by the federal
tax laws, the fiscal year of the Partnership for both financial and tax
reporting purposes shall end on December 31.
6.6. Tax Accounting Method. The books and accounts of the Partnership
shall be maintained using the accrual method of accounting for tax purposes.
Those documents relating to allocations of items of partnership income, gain,
loss, deduction or credit and Capital Accounts shall be kept under federal
income tax accounting principles as provided herein.
6.7. Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action that it
determines to be necessary or appropriate to cause the Partnership to comply
with any Federal, state and local withholding requirement with respect to any
allocation, payment or distribution by the Partnership to any Partner or other
Person. All amounts withheld to satisfy any Federal, state or local
withholding requirement with respect to a Partner shall be treated as
distributions to such Partner. If any such withholding requirement with
respect to any Partner exceeds the amount distributable to such Partner under
this Agreement, or if any such withholding requirement was not satisfied with
respect to any amount previously allocated or distributed to such Partner, such
Partner and any successor or assignee with respect to such Partner's interest
in the Partnership hereby, to the fullest extent permitted by law, indemnifies
and agrees to hold harmless the Partners and the Partnership for such excess
amount or such withholding requirement, as the case may be.
6.8. Tax Elections. Upon the request of a transferee of a Partnership
Interest or a distributee of a Partnership distribution, the Partnership will
make the election under section 754 of the Code in accordance with applicable
Treasury Regulations thereunder for the first fiscal year in which such
election could apply, unless the Tax Matters Partner agrees at the time for
filing the Partnership tax information return not to make such election. The
Partnership may seek to revoke such election (if made) if agreed to by the Tax
Matters Partner. In addition to the foregoing, the Tax Matters Partner shall,
in its sole discretion, determine whether to make any other available tax
elections and select any other appropriate tax accounting methods and
conventions for any purpose under this Agreement.
6.9. Prior Tax Information. Each Partner agrees to deliver all
relevant Tax information to the Partnership that the Partnership will require
in order to comply with its own tax accounting and reporting requirements,
including without limitation schedules setting forth the fair market value and
tax basis of each asset that may from time to time be contributed by a Partner
to the Partnership; provided, however, that no Partner shall be required to
disclose the income tax returns of itself or any of its Affiliates.
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ARTICLE 7
INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS
7.1. Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the Members, the Partners and their Affiliates, and their
respective partners, shareholders, directors, officers, employees and agents
and/or the legal representatives of any of them, and each other Person who may
incur liability as a Partner or otherwise in connection with the management or
ownership of the Partnership or any entity in which the Partnership has an
interest (each, an "Indemnified Party"), against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him or it in
connection with the investigation, defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which any Indemnified Party
may be involved or with which he or it may be threatened, while a Partner or
serving in such other capacity or thereafter, by reason of its being or having
been a Partner, or by serving in such other capacity, except with respect to
any matter which constitutes willful misconduct, bad faith, gross negligence or
reckless disregard of the duties of his office, or criminal intent. The
Partnership shall have the right to approve any counsel selected by any
Indemnified Party and to approve the terms of any proposed settlement. The
Partnership shall advance to any Indemnified Party or Partner reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any such action or proceeding. Each Partner hereby agrees, and each
other Indemnified Party shall agree in writing prior to any such advancement,
that in the event he or it receives any such advance, such Indemnified Party
shall reimburse the Partnership for such fees, costs and expenses to the extent
that it shall be determined that he or it was not entitled to indemnification
under this Section. The rights accruing to a Partner and each other
Indemnified Party under this Section 7.1 shall not exclude any other right to
which it or they may be lawfully entitled; provided that any right of indemnity
or reimbursement granted in this Section 7.1 or to which any Indemnified Party
may be otherwise entitled may only be satisfied out of the assets of the
Partnership, and no Partner and no withdrawn Partner shall be personally liable
with respect to any such claim for indemnity or reimbursement. Notwithstanding
any of the foregoing to the contrary, the provisions of this Section 7.1 shall
not be construed so as to provide for the indemnification of a Partner or any
other Indemnified Party for any liability to the extent (but only to the
extent) that such indemnification would be in violation of applicable law or
such liability may not be waived, modified or limited under applicable law, but
shall be construed so as to effectuate the provisions of this Section 7.1 to
the fullest extent permitted by law.
7.2. Exculpation. Any Member, any Partnership employee, any Partner
and any Affiliate thereof and their respective partners, shareholders,
directors, officers, employees, or agents and/or the legal representatives of
any of them shall not be liable to any Partner or the Partnership for mistakes
of judgment or for action or inaction which such Member, Partner, Affiliate,
partner, shareholder, director, officer, employee, agent or legal
representative reasonably believed to be in or not opposed to the best
interests of Partnership unless such action or inaction constitutes willful
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misconduct, bad faith, gross negligence or reckless disregard of his or its
duties and, with respect to any criminal action, such party reasonably believes
his conduct was lawful. Each Partner may (on its own behalf or on the behalf
of any Member designated by such Partner, any Affiliates of such Partner or
their respective partners, shareholders, directors, officers, employees or
agents and/or legal representatives of any of them), consult with counsel,
accountants and other experts in respect of the Partnership affairs and such
Person shall be fully protected and justified in any action or inaction which
is taken in accordance with the advice or opinion of such counsel, accountants
or other experts; provided that they shall have been selected with reasonable
care. Notwithstanding any of the foregoing to the contrary, the provisions of
this Section 7.2 shall not be construed so as to relieve (or attempt to
relieve) a Partner or any other Person of any liability, to the extent (but
only to the extent) that such liability may not be waived, modified or limited
under applicable law, but shall be construed so as to effectuate the provisions
of this Section 7.2 to the fullest extent permitted by law.
7.3. Restrictions on Partners. No Partner may, without the prior
written consent of all of the other Partners:
(i) confess a judgment against the Partnership;
(ii) make any agreement on behalf of any other Partner;
(iii) except to the extent permitted by Article 8 hereof,
withdraw as a Partner, dissolve, terminate, liquidate or wind up the
affairs of the Partnership; or
(iv) use or possess Partnership property except for a
Partnership purpose, except as provided under contractual arrangement.
7.4. Outside Activities.
(a) Except as otherwise expressly provided in this Section 7.4,
any Partner or Affiliate thereof may engage in or possess any interest in any
other business venture of any nature independently or with others, and neither
the Partnership nor any other Partner shall have any right by virtue of this
Agreement in or to such venture or in or to any income or profits derived
therefrom.
(b) Except for Systems (or licenses or permits therefor) acquired
in accordance with Section 7.4 of the WMC Partnership Agreement, no Partner or
any Affiliate thereof may, directly or indirectly, acquire an ownership
interest in any System (or license or permit therefor).
(c) Except as permitted by Section 7.4 of the WMC Partnership
Agreement, no Partner will, and each Partner will not permit any Affiliate to,
directly or indirectly, engage in the business of providing PCS, Cellular or
ESMR Services (as defined in the WMC Partnership Agreement).
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(d) Each Partner shall use its reasonable efforts to cause each of
its Attributed Entities to abide by restrictions contained in this Section 7.4
and to comply with the terms set forth herein.
(e) This Agreement shall not be deemed to create any duties other
than as expressly provided for herein or imposed by applicable law, nor shall
its existence be deemed to alter the legal duties and obligations that any
Partner or any Affiliate has to the other Partners or their Affiliates as to
matters outside the scope of the Agreement, including, without limitation,
those concerning the terms and conditions of interconnection services. Each of
the Partners and its Affiliates acknowledge their respective right to compete
vigorously with the other Partners and their Affiliates in markets or areas in
which they are otherwise competitors in the offering of telecommunications
services.
(f) Each Partner (whether or not such Partner shall have withdrawn
as a General Partner from the Partnership in violation of Section 8.1) shall
remain subject to the provisions of this Section 7.4 for a period of one year
from the date such Partner and its Affiliates cease to have aggregate General
Partner and Limited Partner Percentage Interests equal to or exceeding 5%. If
a General Partner withdraws from the Partnership in violation of Section 8.1,
then the Limited Partner Percentage Interest of such Partner for purposes of
this Section 7.4(f), shall be deemed to be increased by the General Partner
Percentage Interest at the time of such withdrawal.
7.5. Duties of Partners. The fiduciary duties of Partners or Members
of the Partnership Committee shall not restrict any Partner or Affiliate or any
Member of the Partnership Committee from:
(i) engaging in conduct permitted by Sections 7.4;
(ii) taking any action in any capacity other than that of
a Partner or Member of the Partnership Committee, respectively; or
(iii) acting to prevent the Partnership from engaging in an
activity that is outside the scope of the Partnership Business;
whether or not such Partner, Affiliate or Member of the Partnership Committee
is motivated in whole or in part by a desire to further the interests of a
Person other than the Partnership.
ARTICLE 8
TERMINATION AND DISSOLUTION
8.1. Events of Dissolution. The Partnership shall be dissolved upon
(i) expiration of the term of the Partnership specified in Section 1.6 hereof,
(ii) an election to dissolve the Partnership pursuant to Section 8.2(b)(i),
(iii) the withdrawal of a General Partner, the filing of a certificate of
dissolution, or its equivalent, for the General Partner or the revocation of
its charter and the expiration of 90 days after the date
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of notice to the General Partner of revocation without a reinstatement of its
charter, or the occurrence of any other event that results in the General
Partner ceasing to be a general partner of the Partnership as required under
the Act, provided, the Partnership shall not be dissolved and required to be
wound up in connection with any of the events specified in this clause (iii) if
(A) at the time of the occurrence of such event there is at least one remaining
general partner of the Partnership who is hereby authorized to and does carry
on the business of the Partnership without dissolution, or (B) within 90 days
after the occurrence of such event, a majority in interest of the remaining
partners (or such greater percentage in interest as is required by the Act)
agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of such event, of one or more additional
general partners of the Partnership, (iv) the transfer or sale of all or
substantially all of the assets of the Partnership, (v) the entry of a decree
of judicial dissolution pursuant to Section 17-802 of the Act, (vi) the
unanimous written consent of the Partners, and (vii) the termination of the
Organization Agreement in accordance with the provisions of Article 6 thereof.
Without the unanimous written consent of the Partners, each Partner agrees not
to withdraw as a Partner or do anything that would otherwise dissolve the
Partnership (except as permitted by the terms of Article 10). Notwithstanding
the foregoing, if a General Partner withdraws from the Partnership, upon such
withdrawal, (i) the general partner interests in the Partnership of such
Partner shall automatically be deemed to become limited partner interests in
the Partnership and (ii) such Partner shall have no right to participate in the
management of the Partnership Business and affairs of the Partnership,
including the right to designate Members of the Partnership Committee.
8.2. Bankruptcy of a General Partner.
(a) If the Bankruptcy of a General Partner occurs and at such time
there is at least one other General Partner, such remaining General Partner or
General Partners are hereby authorized to carry on the business of the
Partnership without dissolution, and the Partnership Interests of the General
Partner in Bankruptcy (the "Bankrupt Partner") shall automatically be deemed to
become limited partner interests in the Partnership, and such Bankrupt Partner
shall cease to be a General Partner and continue to be, or become, a Limited
Partner having (i) no right to participate in the management of the Partnership
Business and affairs of the Partnership, including no right to designate
Members to the Partnership Committee, and (ii) the same interest in all items
of income, gain, loss, deduction or credit of the Partnership to the same
extent as if such Bankruptcy had not occurred. The Partnership shall continue
to be governed by the terms of this Agreement, the Partnership Business and the
property of the Partnership shall continue to be owned by the Partnership, and
the Partnership Business shall otherwise continue unaffected by such
Bankruptcy. Upon the occurrence of the Bankruptcy of any General Partner, (i)
the Bankrupt Partner and the other Partners shall execute such documents as may
be necessary or appropriate to carry out the provisions of this Section 8.2 and
(ii) the other Partners are, without necessity of any further action or
documentation, hereby appointed attorneys-in-fact of the Bankrupt Partner for
the purpose of carrying out the provisions of this Section 8.2 and taking any
action and executing any documents which such Partners may deem
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necessary or advisable to accomplish the purposes hereof, such appointment
being irrevocable and coupled with an interest.
(b) If the Bankruptcy of a General Partner occurs and at such time
the Bankrupt Partner is the only General Partner, the other Partners may (i)
consent in writing to dissolve the Partnership or (ii) within 90 days after
such Bankruptcy occurs, agree in writing to continue the business of the
Partnership and to appoint, effective as of the date of such Bankruptcy, one or
more additional General Partners. In the case of clause (ii), the Partnership
Business shall be carried on by such newly appointed General Partner(s) and the
Bankrupt Partner shall have its general partnership interest in the Partnership
converted into a limited partner interest in the Partnership and continue to
be, or becomes a Limited Partner subject to the provisions of Section 8.2. In
the event the remaining Partners fail to make any election pursuant to this
subsection (b), the Partnership shall be dissolved.
(c) In the event any General Partner shall become a "debtor" as
defined in the Bankruptcy Code in any case commenced thereunder and at any time
during the pendency of such case there shall be appointed (i) a trustee with
respect to the Bankrupt Partner under Section 701, 702 or 1104 of the
Bankruptcy Code (or any successor provisions thereto), or (ii) an examiner
having expanded powers beyond those specifically enumerated in Section 1104(b)
of the Bankruptcy Code, then the other Partners may, at any time thereafter, so
long as such condition exists, elect to dissolve the Partnership, in which
event the affairs of the Partnership shall be wound up as provided in this
Article 8.
8.3. Order of Dissolution. In settling accounts upon winding up and
liquidation of the Partnership, the assets of the Partnership shall be applied
and distributed as expeditiously as possible in the following order not later
than the end of the taxable year of the liquidation (i.e., the date upon which
the Partnership ceases to be a going concern as provided in Income Tax
Regulation section 1.704-1(b)(2)(ii)(g) or if later, within 90 days after the
date of such liquidation):
(a) to pay (or make reasonable provision for the payment of) all
creditors of the Partnership, including to the extent permitted by law Partners
or their Affiliates who are creditors, in satisfaction of liabilities of the
Partnership in the order of priority provided by law, including expenses
relating to the dissolution and winding up of the affairs of the Partnership
(including, without limitation, expenses of selling assets of the Partnership,
discharging the liabilities of the Partnership, distributing the assets of the
Partnership and terminating the Partnership as a limited partnership in
accordance with this Agreement and the Act); and
(b) to the Partners in proportion to their respective positive
Capital Account balances, as those balances are determined after all
adjustments to such Capital Accounts as required by this Agreement for all
periods immediately prior to such distribution.
8.4. Orderly Winding Up. Notwithstanding anything to the contrary in
Sections 8.1, 8.2 and 8.3, but subject to Section 8.5 and the order of priority
in Section 8.3, upon winding up and liquidation, if required to
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maximize the proceeds of liquidation, the Partnership Committee may, upon
unanimous approval, transfer the assets of the Partnership to a liquidating
trustee or trustees.
8.5. Dissolution Election. Notwithstanding the terms of any provision
of Section 8.3(b) to the contrary, but subject to Section 17-804(a)(1) of the
Act, any Partner may elect upon the occurrence of any of the events of
dissolution specified in Section 8.1, by written notice to the Partnership any
time prior to actual distribution, to require that the Partnership distribute
the assets of the Partnership upon dissolution and winding up as follows:
(i) First, the Partners shall attempt to reach agreement
on the Fair Market Value and distribution among the partners of each
of the remaining non-cash assets of the Partnership and liabilities
related thereto, subject always to distributions being made in
accordance with Capital Accounts as provided in Section 8.3(b), with
such distributed assets being valued at their Fair Market Value. To
the extent that the Partners are unable to reach agreement on the Fair
Market Value and distribution among the Partners of certain of such
non-cash assets and liabilities, the Chairman of the Partnership
Committee not later than 20 days after an event of dissolution set
forth in Section 8.1 shall implement the following internal auction
procedures. For a period of up to ten days, the Chairman shall
entertain bids by the Partners for such non-cash assets and related
liabilities, either singly (a "Single Bid") or as a whole (an
"Aggregate Bid"). The Chairman will only entertain bids which exceed
the previous Single Bid for any non-cash asset and related liabilities
or the previous Aggregate Bid for all such non-cash assets and related
liabilities by at least one percent (a "Qualifying Bid"). The
Chairman will promptly make each bid submitted by any Partner
available to each other Partner. If during any 24-hour period within
the ten-day period specified above, the Chairman does not receive a
Qualifying Single Bid with respect to any non-cash asset or related
liabilities or a Qualifying Aggregate Bid, the Chairman shall not
entertain any further Single Bids with respect to such non-cash asset
or any further Aggregate Bids, as the case may be. At the conclusion
of such bidding period, the highest Single Bid by any Partner for each
non-cash asset and related liabilities or, if an Aggregate Bid for
such non-cash assets and related liabilities, which exceeds the sum of
the Single Bids, is received such Aggregate Bid, shall constitute the
Fair Market Value of such non-cash assets and related liabilities.
The Partnership shall thereafter pay any amounts referred to in
Section 8.3(a) (except to the extent any such liabilities are to be
assumed by any Partner), and the non-cash assets and liabilities
valued pursuant to the previous sentence shall be distributed to the
Partner who specified the highest Fair Market Value therefor (and
shall be debited against its Capital Account balance), and the
remaining non-cash assets, if any, and liabilities shall be
distributed in the manner agreed upon by the Partners; provided that if
the distributions pursuant to
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this sentence would result in any Partner receiving more than its
positive Capital Account balance (an "Excess Distribution"), assets
with a Fair Market Value equal to the Excess Distribution shall
instead be distributed among the other Partners in accordance with
Capital Account balances (such assets as selected by such other
Partners) and immediately thereafter sold for cash to the Partner who
would have otherwise received the Excess Distribution in the absence
of this proviso, which cash shall be paid simultaneously with the
liquidating distributions; and
(ii) All other remaining assets shall be distributed to
the Partners in accordance with Section 8.3(b) hereof.
8.6. Obligation to Restore Deficit Balance. No Partner shall be
liable for the return of the capital contributions of any other Partner, nor
shall any Partner be required to have any obligation to restore a deficit
balance in its Capital Account on winding up, liquidation and termination of
the Partnership except to the extent required by the Act.
8.7. Termination of Partnership. The Partnership shall terminate
when all of the assets of the Partnership, after payment of or due provision
for all debts, liabilities and obligations of the Partnership, shall have been
distributed to the Partners in the manner provided for in Article 8, and the
Certificate of Limited Partnership of the Partnership shall be canceled in the
manner required by the Act.
ARTICLE 9
ADMISSION OF ADDITIONAL PARTNERS
9.1. Admission Procedures. With the approval of the Partnership
Committee pursuant to Section 2.3(b), the Partnership may admit additional
Persons as both a General Partner or a Limited Partner subject to the condition
that the proposed Additional Partner shall execute and deliver to the
Partnership an agreement by which it (i) shall become a party to this Agreement
and (ii) shall make representations and warranties to the Partnership with
respect to itself substantially similar to those set forth in the Organization
Agreement and relating to such additional matters as the Partnership Committee
may request.
ARTICLE 10
TRANSFER OR ENCUMBRANCE OF INTEREST
10.1. Restriction on Transfer or Encumbrance. No Partner may assign,
sell, transfer or otherwise dispose of (any such transaction being referred to
in this Article 10 as a "transfer"), pledge, hypothecate, grant a security
interest in or otherwise encumber, its Partnership Interest, except (i) to the
WMC in accordance with the provisions of the Organization Agreement, (ii) to
ATI or any Affiliate thereof in connection with an investment by such Partner
in ATI, (iii) to ATI in accordance with Section
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10.8 of the WMC Partnership Agreement or (iv) otherwise in accordance with the
terms of Section 10.2.
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate.
(a) Any Partner may, without the consent of the other Partners,
transfer ownership of all or any part of its Partnership Interest to a Wholly
Owned Affiliate (any Affiliate to which a transfer is permitted under this
Section 10.2 being referred to herein as an "Affiliate Transferee"). An
Affiliate Transferee shall be admitted as both a Substitute General Partner and
a Substitute Limited Partner at the time such Person executes (i) this
Agreement or a counterpart to this Agreement, which evidences such Person's
agreement to be bound to the terms and conditions of this Agreement, (ii) the
Investment Agreement, of even date herewith, by and between ATI and USW and
(iii) the Agreement of Exchange, of even date herewith, by and between ATI and
USW.
(b) A transfer of less than all of a Partner's Partnership Interest
(a "Partial Interest") pursuant to this Section 10.2 shall be deemed to
constitute a transfer of both the General Partner and Limited Partner
Percentage Interests of such Partner pro rata in proportion to the portion of
such Partner's entire Partnership Interest transferred.
(c) If at any time, any Partner and any Affiliate Transferees
thereof cease to own in the aggregate at least 20% of the aggregate Percentage
Interests (without giving effect to any dilution of ownership which results
from the admission of Additional Partners), (i) the interests of such Partner
and any Affiliate Transferees thereof as a General Partner shall automatically
be deemed to become interests as a Limited Partner and (ii) such Partner and
any Affiliate Transferees thereof shall have no right to participate in the
management of the Partnership Business and affairs of the Partnership,
including no right to designate Members of the Partnership Committee.
10.3. Partnership's Redemption Option. If, at any time, the aggregate
Percentage Interests of any Partner and its Affiliate Transferees are less than
5%, the Partnership shall have the option to redeem such Partner's and its
Affiliate Transferees' Partnership Interests at a purchase price equal to the
Fair Market Value of such Partnership Interests as determined pursuant to
Section 4.9.
10.4. Spin-off Not Deemed to be a Transfer.
(a) A tax-free spin-off qualifying under Section 355 of the Code,
by a Partner to the shareholders of its publicly held Parent Entity, of an
entity the assets of which include all, but not less than all, of such
Partner's Wireless Assets will not be deemed to be a transfer or Change in
Ownership (as hereinafter defined) if effected in accordance with Section 10.5
of the WMC Partnership Agreement.
10.5. Invalid Transfers Void. Any purported transfer of any
Partnership Interest or any part thereof not in compliance with this Article 10
shall be void and of no force or effect and the transferring Partner shall be
liable to the other Partners and the Partnership for all
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liabilities, obligations, damages, losses, costs and expenses (including
reasonable attorneys' fees and court costs) arising as a result of such
noncomplying transfer.
10.6. Change in Ownership.
(a) For purposes of this Agreement, a "Change in Ownership" of a
Partner shall be deemed to have occurred when (i) any Person, other than a
publicly held Parent Entity of such Partner or a Wholly Owned Affiliate (an
"Unaffiliated Entity"), shall acquire (whether by merger, consolidation, sale,
assignment, lease, transfer or otherwise, in one transaction or series of
related transactions), or otherwise beneficially own or control 50% or more of
the outstanding Voting Stock of any Partner (or any entity, other than a
publicly held Parent Entity, which, directly or indirectly, controls such
Partner (a "Control Entity")), (ii) an Unaffiliated Entity, or group of persons
acting in concert therewith, shall acquire the power to direct or cause the
direction of the management and policies of such Partner or a Control Entity
thereof, or (iii) the publicly held Parent Entity of such Partner shall
otherwise cease to beneficially own or control a majority of the outstanding
Voting Stock of any Partner or a Control Entity thereof.
(b) Any Change in Ownership of Partner shall be deemed for all
purposes hereof to be a proposed transfer of the Partnership Interest of such
Partner.
10.7. Proportional Transfers of WMC Interest. No Partner may effect a
transfer of its interest in the Partnership without transferring a partnership
interest in the WMC representing the same proportion of its Percentage Interest
in the WMC as the proportion of the Percentage Interest in the Partnership
being transferred, and any such attempted transfer shall be null and void and
of no effect.
ARTICLE 11
REGULATORY MATTERS
11.1. MFJ Compliance.
(a) USW agrees that it will pursue, in conjunction with the
Regional Bell Operating Companies, the "Motion of the Bell Companies for a
Modification of Section II of the Decree to Permit Them to Provide Cellular and
Other Wireless Services Across LATA Boundaries," filed with the Decree Court on
June 20, 1994. If the Decree Court were to deny the Bell Companies' motion or
if the Decree Court or Department of Justice were to take the position that the
relief requested in the motion does not apply to PCS Service, USW will request
a waiver for the benefit of the Partnership that would enable the Partnership
to provide PCS Service free of its restrictions on Bell Operating Companies in
the MFJ. In addition, USW will request a waiver for the benefit of the
Partnership, any PCS Owned System or USW, as appropriate, if the waiver (a "Me
Too Waiver") is: (i) to permit the Partnership or, any Owned or Licensed
System or USW, as appropriate, to offer the same services as those set forth in
any waiver request which USW or an affiliate has pending or which USW, any of
its affiliates, or any Bell
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<PAGE> 46
Operating Company ("BOC") within the meaning of the MFJ has obtained for its
cellular businesses, including businesses incidental thereto; (ii) based on
relevant facts which are comparable to those set forth in any such waiver USW,
an affiliate thereof or a BOC has pending or has obtained, as the case may be,
and (iii) with respect to the Partnership or any PCS Owned System, within the
scope of the Partnership Business as defined in Section 1.5. Except as
described above, neither USW nor any USW affiliate shall be obliged to request
any waiver for the benefit of the Partnership.
(b) Unless and until the Decree Court, the Department of Justice,
or USW's CECO Decree Committee or MFJ Compliance Committee shall issue a
written opinion that the MFJ does not apply to the Partnership, the Partnership
will conform to the requirements and prohibitions of the MFJ. As long as USW
holds any ownership interest in the Partnership, the Partnership will not
engage in any MFJ Restricted Activities. Subject to the provisions of Section
2.14, ATI or any Affiliate thereof will have the option to engage in MFJ
Restricted Activities, specifically including the provision of interexchange
(interLATA) telecommunications services (it being understood that such services
will be provided by the WMC if it is thereafter permitted to do so, as provided
in Section 7.4(vii) of the WMC Partnership Agreement) and engage in any
business practice and enter into any transaction in which the Partnership does
not engage by reason of the MFJ. Except as provided in the preceding sentence,
the provisions of this Section 11.1 shall take precedence, in the event of any
conflict, over any other provision of this Agreement.
(c) Unless and until the Decree Court, the Department of Justice,
or USW's CECO Decree Committee shall issue a written opinion that the CECO does
not apply to the Partnership, the Partnership will conform to the requirements
and prohibitions of the CECO. Unless and until the Decree Court, the
Department of Justice, or USW's MFJ Compliance Committee shall issue a written
opinion that the EO does not apply to the Partnership, the Partnership will
conform to the requirements and prohibitions of the EO. In conforming to the
requirements and prohibitions of the CECO and EO, the Partnership will utilize
the procedures established by USW for compliance with them. At the request of
the Partnership, USW will provide training, instruction and assistance to the
Partnership in matters associated with CECO and EO compliance.
(d) If, as a result of this Agreement, any MFJ Concerns (as
defined in Article 12 of the WMC Partnership Agreement) are raised concerning
the Partners or activities of this Partnership or the Partners in the WMC
and/or ATI or USW, the parties will adopt for purposes of this Agreement, the
restructuring provisions of Article 12.1(b)-(d) of the WMC Partnership
Agreement, as if fully set forth herein.
ARTICLE 12
MISCELLANEOUS
12.1. Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party (i) when
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delivered personally (by courier service or otherwise), (ii) when delivered by
telecopy and confirmed by return telecopy, (iii) on the business day after the
date sent by a nationally recognized overnight courier service, or (iv) seven
days after being mailed by first-class, registered or certified mail, postage
prepaid and return receipt requested, in each case to the applicable addresses
set forth below:
If to USW:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: President
Telecopy: (303) 793-6294
With copies to:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: General Counsel
Telecopy: (303) 793-6294
If to ATI:
AirTouch Communications
2999 Oak Road
Walnut Creek, CA 94596
Attn: C. Lee Cox, President and
Chief Operating Officer
Telecopy: (510) 210-3599
With copies to:
AirTouch Communications
425 Market Street
San Francisco, CA 94105
Attn: Senior Vice President-Legal and
External Affairs
Telecopy: (415) 658-2298
and
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Nathaniel M. Cartmell III, Esq.
Telecopy: (415) 477-4816
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance with this Section 12.1.
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12.2. Governing Law, etc.
(a) This Agreement has been executed and delivered in the State of
Delaware and shall, in all respects be governed by, interpreted, and construed
in accordance with the laws of the State of Delaware, all rights and remedies
of the Partners in respect thereof being governed by such laws.
(b) Each Partner hereby irrevocably appoints The Corporation Trust
Company, at its office in Wilmington, Delaware, United States of America, and
each of the ATI Partners hereby irrevocably appoints The Corporation Trust
Company at its office in Wilmington, Delaware, United States of America, its
lawful agent and attorney to accept and acknowledge service of any and all
process against it in any action, suit or proceeding arising in connection with
this Agreement and upon whom such process may be served, with the same effect
as if such party were a resident of the State of Delaware and had been lawfully
served with such process in such jurisdiction, and waives all claim of error by
reason of such service; provided that in the case of any service upon such
agent and attorney, the party effecting such service shall also deliver a copy
thereof to the other party at the address and in the manner specified in
Section 12.1. In the event that such agent and attorney resigns or otherwise
becomes incapable of acting as such, such party will appoint a successor agent
and attorney in Wilmington, Delaware, reasonably satisfactory to the other
party, with like powers.
(c) The choice of law provisions of this Article 12 have been
negotiated in good faith and agreed upon by the parties hereto and are
reasonable especially considering that this Agreement is subject to and
conforms with the Act. All Partners, by their execution of this Agreement,
expressly agree, to the fullest extent permitted by law, not to challenge the
choice of law provisions contained in this Article 12.
12.3. Amendments. This Agreement may be modified or amended only by
an instrument in writing signed by each Partner, and, as so modified and
amended, shall inure to the benefit of all of the Partners.
12.4. Entire Agreement. Except to the extent other agreements are
specifically referred to herein, this Agreement constitutes the entire
agreement between the Partners with respect to the matters covered hereby and
thereby and supersedes all prior agreements, understandings, offers and
negotiations, oral or written.
12.5. Waiver of Partition. Each Partner hereby irrevocably waives any
and all rights that it may have to maintain an action for partition of any of
the Partnership's property.
12.6. Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Partnership.
12.7. Successors. Subject to Section 10.1, all rights and duties of
the Partners hereunder shall inure to the benefit of and be binding upon their
respective successors and assigns.
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12.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
12.9. Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision which is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable and contrary to
existing or future applicable law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement which are valid. In
that case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of any
applicable law, and in the event such term or provision cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions.
12.10. Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Partnership until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
12.11. Arbitration. Each partner hereby acknowledges that this
Agreement is subject to the Arbitration Agreement of the partners which is
being entered into of even date herewith, and the Arbitration Agreement will
govern the resolution of disputes relating to this Agreement in accordance with
its terms. Each Additional Partner or Substitute Partner shall execute the
Arbitration Agreement or a counterpart to the Arbitration Agreement on or prior
to its admission to the Partnership.
12.12. No Third Party Beneficiaries. Nothing contained in this
Agreement is intended to, or shall, confer upon any Person other than the
parties hereto any rights or remedies hereunder.
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IN WITNESS WHEREOF, the Partners have executed this Partnership
Agreement as of the date first hereinabove written.
U S WEST, INC.
/s/ CHARLES M. LILLIS
By:_______________________________
Name: Charles M. Lillis
Title: Executive Vice President
AIRTOUCH COMMUNICATIONS
/s/ L. L. CHRISTENSEN
By:_______________________________
Name: L. L. Christensen
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.4
________________________________________
INVESTMENT AGREEMENT
dated as of July 25, 1994
by and between
AIRTOUCH COMMUNICATIONS,
a California corporation
and
U S WEST, INC.,
a Colorado corporation
________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4. Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5. Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF USW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. Ownership of Securities of ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV COVENANTS OF ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1. Modification of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3. Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V COVENANTS OF USW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1. Standstill Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3. Transfers; Tender Offers; Suspension of Transfers . . . . . . . . . . . . . . . . . . . . 10
5.4. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI BOARD REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1. USW's Right to Designate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2. Consultation; Expansion of Board and Appointment; Classification. . . . . . . . . . . . . 13
6.3. Subsequent Nomination of Persons Designated by USW. . . . . . . . . . . . . . . . . . . . 13
6.4. Replacement of Directors Designated by USW. . . . . . . . . . . . . . . . . . . . . . . . 14
6.5. Termination of USW's Right to Designate; Resignation. . . . . . . . . . . . . . . . . . . 14
6.6. Mandatory Recusal of USW's Board Designee . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2. Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4. Conditions to Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.10. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets . . . . 23
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VIII RIGHTS OF FIRST OFFER AND FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1. Notice of Intent to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2. Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1. Legend; Removal of Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3. Specific Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.9. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.12. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.13. Possible Reincorporation of ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<PAGE> 4
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement"), dated as of July 25,
1994, by and between AIRTOUCH COMMUNICATIONS, a California corporation ("ATI"),
and U S WEST, INC., a Colorado corporation ("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Joint Venture
Organization Agreement, dated as of the date hereof (the "Organization
Agreement"), providing for a series of transactions, including the
establishment of a partnership to be known as WMC Partners, L.P. ("WMC");
WHEREAS, ATI and USW are parties to that certain Agreement of
Exchange and that certain Trust Agreement of Exchange, each dated as of the
date hereof (the "Agreement of Exchange" and the "Trust Agreement of Exchange,"
respectively);
WHEREAS, upon the terms and subject to the conditions set forth in
the Agreement of Exchange or the Trust Agreement of Exchange, under certain
circumstances either ATI or USW may elect to cause an exchange, by merger or
otherwise, of USW's partnership interests in WMC for capital stock of ATI (such
exchange being referred to herein as the "Exchange"); and
WHEREAS, in connection with the foregoing, ATI and USW desire to set
forth herein certain terms regarding their relationship both before and after
the Exchange;
NOW, THEREFORE, ATI and USW agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. (a) As used in this Agreement, the following
terms shall have the following meanings (unless indicated otherwise, all
Article and Section references are to Articles and Sections of this Agreement):
"Affiliate" shall have the meaning specified in Rule 12b-2 under the
Exchange Act, as such rule is currently in effect.
"Agreement of Exchange" shall have the meaning set forth in the
second recital of this Agreement.
"beneficial ownership" shall have the meaning specified in Rule 13d-3
under the Exchange Act, as such rule is currently in effect.
"Change of Control" shall mean, except as otherwise provided in
Section 10.13, (i) any transaction or series of transactions (as a result of a
tender offer, merger, consolidation or otherwise) that results in any Person,
including a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) that includes such Person, acquiring beneficial ownership, directly or
indirectly, of 50% or more of the aggregate voting power of the
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<PAGE> 5
Voting Securities of ATI or USW, as the case may be; (ii) any transaction or
series of related transactions that results in the transfer, sale or other
disposition by ATI or USW, as the case may be, of assets (A) that represent
more than 80% of the total fair market value of its assets on a proportionate
basis immediately prior to such disposition, (B) that generated more than 80%
of its total operating revenues on a proportionate basis in the preceding
fiscal year and (C) that generated more than 80% of its total net income from
operations on a proportionate basis during the preceding fiscal year; provided,
however, that any such transaction or series of related transactions shall not
be deemed to be a Change of Control if a majority of the value of the
consideration received in exchange for the assets transferred, sold or
otherwise disposed of consists of assets (or interests in assets) of a like
kind or nature; or (iii) when individuals who at the beginning of any period of
two consecutive calendar years constituted the Board of Directors (together
with any new directors whose election to the Board of Directors or whose
nomination for election was approved by a vote of at least two-thirds of the
members of the Board of Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of Directors then
in office.
"Common Stock" shall mean ATI's Common Stock, $.01 par value.
"Exchange" shall have the meaning set forth in the third recital of
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Organization Agreement" shall have the meaning set forth in the
first recital of this Agreement.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated organization or other entity, or a government or agency or
political subdivision thereof.
"Related Agreements" shall have the meaning set forth in the
Organization Agreement.
"Rights Agreement" shall mean that certain Rights Agreement between
ATI and the Bank of New York, as Rights Agent, dated as of July 22, 1993, as it
may be amended from time to time, or any successor agreement.
"SEC" shall mean the Securities and Exchange Commission or its
successor.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
"transfer" shall mean, with respect to any Voting Security, a sale,
exchange, transfer or other disposition, whether or not for value, of such
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<PAGE> 6
Voting Security or any interest therein, or of any direct or indirect right or
option to acquire beneficial ownership of the same.
"Trust Agreement of Exchange" shall have the meaning set forth in the
second recital of this Agreement.
"Voting Securities" shall mean any securities of ATI (unless the
context specifically contemplates another issuer) having the ordinary power to
vote, in the absence of contingencies, in the election of directors of ATI.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
entity as to which 100% of the securities or other ownership interests having
power to elect the board of directors or other persons performing similar
functions are owned directly or indirectly by such Person.
"WMC" shall mean WMC Partners L.P., a Delaware limited partnership.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Proposal 5.1(b)
Future Investment Agreement 4.1(a)
Inspectors 7.3(f)
Notice of Intent 8.1
Notice of Election 8.2(b)
Other Investor 4.1(a)
Other Shares 7.2(c)
Percentage Limitation 5.1(a)
Permitted Offering 8.1
Records 7.3(f)
Registrable Shares 7.1
Registration Statement 7.1
ROFO Notice 8.2(a)
ROFR Notice 8.3(b)
Spin-off 5.3(d)
Spun-off Person 5.3(d)
Threshold Percentage 6.5
Unapproved Offer 5.3(c)
USW Response 5.1(b)
1% Purchaser 8.3(b)
</TABLE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ATI
ATI hereby makes the following representations and warranties to USW:
2.1. Organization and Qualification. ATI is a corporation duly
organized and existing in good standing under the laws of the State of
California and has the corporate power to own its properties and to carry on
its business as now being conducted.
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<PAGE> 7
2.2. Authorization; Enforcement. (a) ATI has full legal right,
power and authority to enter into and perform this Agreement, (b) the execution
and delivery of this Agreement by ATI and the consummation by it of the
transactions contemplated hereby have been duly authorized by it, (c) this
Agreement has been duly authorized, executed and delivered by ATI and (d) this
Agreement constitutes a valid and binding obligation of ATI enforceable against
ATI in accordance with its terms, except that (i) such enforcement is subject
to the effect of any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar law relating to, or affecting generally the enforcement
of, creditors' rights and remedies and (ii) the remedies of specific
performance and injunctive relief may be subject to general principles of
equity.
2.3. No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by ATI of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of ATI
pursuant to any agreement, indenture or instrument to which ATI is a party, or
by which any property or asset of ATI is bound or affected, or result in a
violation of its Amended and Restated Articles of Incorporation or By-laws or
any law, rule, regulation, order, judgment or decree of any court or
governmental agency applicable to ATI or by which any property or asset of ATI
is bound or affected. Except for such filings as may be required by the
Exchange Act or as specifically contemplated hereby, no consent, authorization
or order of, or filing or registration with, any court or governmental agency
is required for the execution, delivery and performance of this Agreement.
2.4. Amendment to Rights Plan. ATI has amended the Rights Agreement
so that USW and its Affiliates shall not be deemed to be "Acquiring Persons" in
connection with their becoming "Beneficial Owners" of "Common Shares" (as such
terms are defined in the Rights Agreement) pursuant to this Agreement or the
Agreement of Exchange. ATI has furnished to USW a true and correct copy of the
Rights Agreement, as so amended.
2.5. Delaware Law. The Board of Directors of ATI has approved by
resolution, in the event of a reincorporation of ATI in Delaware, (a) the
acquisition by USW of Voting Securities of ATI pursuant to the Agreement of
Exchange, and (b) USW as an "interested stockholder" for purposes of section
203 of the Delaware General Corporation Law by reason of its acquiring of
Voting Securities pursuant to the Agreement of Exchange.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USW
USW hereby makes the following representations and warranties to ATI:
3.1. Organization and Qualification. USW is a corporation duly
organized and existing in good standing under the laws of the State of Colorado
and has the corporate power to own its properties and to carry on its business
as now being conducted.
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<PAGE> 8
3.2. Authorization; Enforcement. (a) USW has full legal right,
power and authority to enter into and perform this Agreement, (b) the execution
and delivery of this Agreement by USW and the consummation by it of the
transactions contemplated hereby have been duly authorized by it, (c) this
Agreement has been duly authorized, executed and delivered by USW and (d) this
Agreement constitutes a valid and binding obligation of USW enforceable against
USW in accordance with its terms, except that (i) such enforcement is subject
to the effect of any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar law relating to, or affecting generally the enforcement
of, creditors' rights and remedies and (ii) the remedies of specific
performance and injunctive relief may be subject to general principles of
equity.
3.3. No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by USW of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of USW
pursuant to any agreement, indenture or instrument to which USW is a party, or
by which any property or asset of USW is bound or affected, or result in a
violation of USW's charter documents or by-laws or any law, rule, regulation,
order, judgment or decree of any court or governmental agency applicable to USW
or by which any property or asset of USW is bound or affected. Except for such
filings as may be required by the Exchange Act or as specifically contemplated
hereby, no consent, authorization or order of, or filing or registration with,
any court or governmental agency is required for the execution, delivery and
performance of this Agreement.
3.4. Ownership of Securities of ATI. Other than such rights as may
be conferred on USW under this Agreement or the Related Agreements, USW and its
Affiliates do not beneficially own any securities of ATI.
ARTICLE IV
COVENANTS OF ATI
4.1. Modification of Terms. (a) ATI will provide to USW copies of
each agreement that ATI enters into with any Person (other than USW, an ATI
employee stock ownership plan, if any, or a Person who is restricted by law or
regulation from holding in excess of 25% of ATI's Voting Securities and other
than underwriting agreements) obligating ATI to transfer to such Person (an
"Other Investor") Voting Securities (or securities convertible or exchangeable
by such Person for Voting Securities) representing 10% or more of the sum of
(x) the then outstanding Voting Securities and (y) Voting Securities to be
transferred in connection with such Future Investment Agreement (or issuable
upon the conversion or exchange of securities to be so purchased) (each such
agreement a "Future Investment Agreement").
(b) Within thirty (30) days after the execution by ATI of a Future
Investment Agreement, ATI shall choose one of the following and by written
notice inform USW:
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<PAGE> 9
(i) ATI shall offer to amend the terms of Section 5.1(a)(i)
to correspond to the percentage limitation on ownership of Voting
Securities imposed on the Other Investor in such Future Investment
Agreement; or
(ii) ATI shall offer to amend the terms of Section 5.1(a)
(other than subparagraph (i) thereof) to provide for the
corresponding terms (other than as to Section 5.1(a)(i)) in their
entirety (including the date certain specified as the expiration date
for the standstill provisions) as set forth in such Future Investment
Agreement;
provided that ATI shall choose, and offer to USW, the option set forth in
clause (ii) above if the percentage limitation on ownership of Voting
Securities by such Other Investor is less than 20%. If USW wishes to accept
such offer, it must do so by written notice to ATI within twenty days after
receipt of ATI's offer. Upon any such acceptance by USW, ATI and USW shall
execute an agreement confirming such amendment.
4.2. Rights Agreement. ATI will not amend or supplement the Rights
Agreement or adopt a new agreement providing for the issuance of rights or
securities comparable to the Rights Agreement, unless the Rights Agreement as
so amended or supplemented or such new agreement, as the case may be, provides
to the same effect as the amendments described in Section 2.4 and Section 4.3.
ATI further agrees that in the event of any amendment of the terms of Section
5.1(a) pursuant to Section 4.1 above, it will effect such further amendment of
the Rights Agreement as may be reasonably necessary so that USW and its
Affiliates shall not be deemed to be Acquiring Persons by reason of any such
amendment of the terms of Section 5.1(a).
4.3. Amendment to Rights Plan. As soon as reasonably practicable
after the date hereof, ATI shall take all actions necessary to amend the Rights
Agreement such that the Trustee (as defined in the Trust Agreement of Exchange)
shall not be deemed to be an "Acquiring Person" in connection with its becoming
a "Beneficial Owner" of "Common Shares" (as such terms are defined in the
Rights Agreement) pursuant to the Trust Agreement of Exchange.
ARTICLE V
COVENANTS OF USW
5.1. Standstill Provisions. (a) USW covenants to and agrees with
ATI that, except as it may be specifically permitted by this Agreement or the
Related Agreements or unless it is specifically invited in writing to do so by
ATI, USW will not, and will cause each of its Affiliates not to, directly or
indirectly:
(i) in any way acquire or agree to acquire beneficial
ownership of any securities or any direct or indirect rights or
options to acquire beneficial ownership of any securities of ATI,
except (A) pursuant to the Exchange and (B) thereafter, through
open-market or privately-negotiated purchases from third parties of
Voting Securities, if the aggregate percentage
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<PAGE> 10
(calculated by voting power) of the Voting Securities beneficially
owned by USW and its Affiliates after giving effect to such
acquisition would not exceed (I) the aggregate percentage of total
voting power of ATI's capital stock represented on the date of the
Exchange by the Common Stock issued to USW pursuant to such Exchange
or (II), if the aggregate percentage described in the preceding
clause (I) was less than 16%, then 16% (the applicable percentage
pursuant to clause (I) or (II) being known as the "Percentage
Limitation"); provided, however, that the Percentage Limitation;
provided that if, immediately following any transfer of Voting
Securities by USW or its Affiliates to any person other than an
Affiliate of USW, the percentage of outstanding Voting Securities
then beneficially owned by them is less than the Percentage
Limitation minus two percentage points, the Percentage Limitation
shall be reduced to the percentage of outstanding Voting Securities
then beneficially owned by them plus two percentage points; and
provided further that in no event shall USW and its Affiliates be
deemed to have exceeded any Percentage Limitation then in effect
solely as a result of a reduction in the outstanding Voting
Securities, including through repurchases of outstanding Voting
Securities by ATI, which reduction has the effect of increasing the
percentage (calculated by voting power) of outstanding Voting
Securities beneficially owned by USW and its Affiliates beyond the
Percentage Limitation (provided that any subsequent increase in the
Voting Securities beneficially owned by USW and its Affiliates,
without the prior approval of ATI, shall be deemed to be a violation
of the Percentage Limitation);
(ii) make any public announcement with respect to, or
submit to ATI or any of its directors, officers, representatives,
employees, attorneys, advisers, agents or Affiliates (whether
publicly or otherwise) any proposal for, the acquisition of Voting
Securities not permitted by paragraph (i) above which would result in
USW's exceeding the Percentage Limitation or for or with respect to
any merger, consolidation or business combination involving ATI or
its Affiliates or for or with respect to any purchase of a
substantial portion of the assets of ATI or its Affiliates, whether
or not any parties other than USW and its Affiliates are involved and
whether or not such proposal might require the making of a public
announcement by ATI;
(iii) make, or in any way participate in, any
"solicitation" of "proxies" to vote any Voting Securities or become a
"participant" in any "election contest" (as such terms are defined or
used in Regulation 14A under the Exchange Act, as such Regulation is
currently in effect), provided that USW shall not be deemed to be a
"participant" by reason of the membership of any of its designees on
ATI's Board of Directors or solely by reason of its exercise of the
voting rights set forth in Section 5.2;
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<PAGE> 11
(iv) propose any matter for submission to a vote of
shareholders of ATI;
(v) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any Voting Securities of ATI;
(vi) grant any proxy with respect to any Voting Securities
to any Person not approved by ATI;
(vii) deposit any Voting Securities in a voting trust or
subject any Voting Securities to any arrangement or agreement with
respect to the voting of such Voting Securities or other agreement
having similar effect;
(viii) take any action which would be reasonably likely to
require ATI to make a public announcement regarding any of the
matters specified in this Section 5.1(a)(i)-(xii); or
(ix) enter into any negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing, or any discussions designed to advise, assist or encourage
any third party in connection with any of the foregoing;
(x) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing;
(xi) request ATI (or any of its officers, directors,
representatives, employees, attorneys, advisors, agents or
Affiliates) to waive, amend or modify any provisions of Section
5.1(a)(i)-(xii); or
(xii) otherwise act, alone or in concert with others, to
seek to control or influence the management, Board of Directors or
policies of ATI.
Nothing in this Section 5.1(a) shall restrict the manner in which any
designee of USW on ATI's Board of Directors participates in deliberations or
discussions of the Board, votes on any matter submitted to the Board, or
otherwise acts in his capacity as a director of ATI.
(b) Notwithstanding any provision of this Section 5.1 to the
contrary, in the event that (i) ATI and any Person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) enter into an agreement
pursuant to which (A) such Person or group would acquire a majority (calculated
by voting power) of the then outstanding Voting Securities of ATI or the right
to appoint a majority of the directors of ATI, or (B) a majority (calculated by
voting power) of the then outstanding Voting Securities of ATI is to be
acquired by any Person or group (within the meaning of Section 13(d)(3) of the
Exchange Act) in a merger, consolidation, or other business combination (any
such event being an "Acquisition Proposal"), (ii) a bona fide tender or
exchange offer by any Person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) (other than ATI or any wholly-owned
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<PAGE> 12
Affiliate thereof) which would result, if consummated in accordance with its
terms, in the beneficial ownership by such Person or group of in excess of 50%
(calculated by voting power) of the then outstanding Voting Securities is
approved or recommended by the Board of Directors of ATI, (iii) in connection
with the matters discussed in clause (i) or (ii), or a tender or exchange offer
for greater than 40% of the outstanding Voting Securities which the Board of
Directors of ATI has not approved or recommended, the Board of Directors of ATI
has terminated or amended (or agreed to terminate or amend) the Rights
Agreement or has redeemed (or agreed to redeem) the Rights issued thereunder,
and such action has permitted or will have permitted the consummation of such
Acquisition Proposal or offer, or a final, non-appealable court order has
declared the Rights Agreement invalid or otherwise required the redemption of
the Rights issued thereunder or (iv) ATI and any Person enter into an agreement
providing for a transaction or series of related transactions that results in
the transfer, sale or other disposition by ATI of assets (A) that represent
more than 80% of the total fair market value of its assets on a proportionate
basis immediately prior to such disposition, (B) that generated more than 80%
of its total operating revenues on a proportionate basis in the preceding
fiscal year and (C) that generated more than 80% of its total net income from
operations on a proportionate basis during the preceding fiscal year (excepting
any such transaction or series of related transactions in which a majority of
the value of the consideration received in exchange for the assets transferred,
sold or otherwise disposed of consists of assets (or interests in assets) of a
like kind or nature), this Section 5.1 shall not prohibit USW (unless acting in
concert with such Person) from making either a competing Acquisition Proposal
or a tender or exchange offer pursuant to which USW or its Affiliates would
acquire at least the same percentage (calculated by voting power) of ATI's then
outstanding Voting Securities as would be acquired in such non-USW Acquisition
Proposal or such non-USW tender or exchange offer (a "USW Response"). USW
agrees that any USW Response (including amendments thereto) will provide for
consideration that is no less favorable to ATI's shareholders than that being
offered pursuant to such non-USW Acquisition Proposal or such non- USW tender
or exchange offer (taking into account the form of consideration and the number
of shares to be acquired pursuant to such USW Response). In the event that the
transactions contemplated by clauses (i), (ii), (iii) or (iv) shall have been
terminated or abandoned after the USW Response, USW shall have the ability,
subject to the requirements of the preceding sentence, to amend or modify its
response, and to consummate the transaction contemplated by the USW Response or
such amendment or modification, so long as USW shall not have terminated or
abandoned its initial response other than as a result of such amendment or
modification. In the event that the transactions contemplated by clauses (i),
(ii), (iii) or (iv) shall have been terminated or abandoned prior to the USW
Response, or, if not so terminated or abandoned, in the event thereafter that
such transactions and those contemplated by such USW Response shall have been
terminated or abandoned, all of the restrictions contained in this Section 5.1
shall again be applicable.
(c) For so long as USW and its Affiliates beneficially own 5% or
more (calculated by voting power) of the outstanding Voting Securities, neither
USW nor its Affiliates may (i) act in concert with any Other Investor with
respect to any of the activities set forth in this Section 5.1 or (ii) transfer
any Voting Securities of ATI to any Other Investor.
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(d) Notwithstanding anything to the contrary herein, no exercise by
USW and its Affiliates of their rights under the Trust Agreement of Exchange
shall be deemed to violate this Section 5.1.
5.2. Voting Rights. (a) USW and its Affiliates shall vote all of
the Voting Securities held by them in favor of the individuals nominated by ATI
for election to the Board of Directors.
(b) USW and its Affiliates shall be free to vote the Voting
Securities held by them in their discretion with respect to any of the
following matters that may be submitted to a vote of the shareholders of ATI:
(i) Acquisition Proposals; (ii) a sale of all or substantially all of the
assets of ATI; (iii) dissolution of ATI; (iv) a recapitalization or
restructuring of ATI resulting in a fundamental change in its capital
structure; (v) a transaction or other event involving a fundamental change in
the scope of ATI's business; and (vi) amendments to ATI's articles or by-laws.
(c) On all matters other than those set forth in Sections 5.2(a) and
(b) above, USW and its Affiliates shall vote the Voting Securities held by them
either (i) as directed by ATI or (ii) in the same proportions as all other
shareholders of ATI, at the option of USW.
5.3. Transfers; Tender Offers; Suspension of Transfers. (a) During
the period ending on the fifth anniversary of the date of this Agreement, USW
and its Affiliates will not, at any time, directly or indirectly, transfer, or
offer to transfer, any Voting Securities beneficially owned by them, except as
provided by Section 5.3(b). Thereafter, USW and its Affiliates may transfer
Voting Securities only (i) as provided in Section 5.3(b), (c) or (d); (ii) in
transactions in compliance with the volume limitations and restrictions on
manner of sale set forth in paragraphs (e) and (f) of Rule 144 promulgated
under the Securities Act (whether or not such paragraphs by their terms would
apply to such transactions), as such Rule exists on the date hereof; (iii) in
privately negotiated or other transactions, or pursuant to the registration
rights set forth in Article VII of this Agreement other than as described in
the following clause (iv); or (iv) pursuant to the registration rights set
forth in Article VII of this Agreement, in a firm commitment underwritten
public offering managed by a nationally recognized investment banking firm and
satisfying the conditions set forth in Section 7.4(a) hereof.
In connection with any transfer permitted under clauses (ii), (iii)
and (iv) of this Section 5.3(a), the following shall apply:
(w) the aggregate number of shares transferred by USW and
its Affiliates pursuant to clauses (ii), (iii) and (iv) shall not
exceed, in any twelve-month period, one-half of the aggregate number
of Voting Securities issued to USW pursuant to the Exchange (for
purposes of this paragraph (w) only, each share of Preferred Stock
(as defined in the Agreement of Exchange), if any, issued to USW
shall be deemed to be the issuance of a share of Common Stock, and
the transfer of a share of Preferred Stock shall be deemed to be the
transfer of a share of Common Stock);
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(x) USW and its Affiliates may not make any transfer
pursuant to clause (ii), (iii) or (iv) unless the transferee,
together with its Affiliates and any "group" (within the meaning of
Section 13(d) of the Exchange Act) of which such transferee or any
Affiliate is a part, would not, after such transfer, beneficially own
Voting Securities representing in excess of 4.9% of the then
outstanding Voting Securities;
(y) no transfer of shares representing more than 2.5% of
the total number of Voting Securities then outstanding shall be made
in any single transaction or series of related transactions to any
Person or group (within the meaning of Section 13(d) of the Exchange
Act); and
(z) no transfer of an amount of Voting Securities
representing more than 1% of the then outstanding Voting Securities
shall be made to any Person or group unless USW believes in good
faith after due inquiry that such Person or group would be eligible
with respect to such Voting Securities to file a Statement on
Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act
(without regard to the beneficial ownership threshold set forth in
such Rule), as such Rule is presently in effect.
(b) USW may transfer the Voting Securities beneficially owned by it
to a Wholly Owned Subsidiary of USW, provided that such Wholly Owned Subsidiary
also shall agree in writing to be bound by the terms of this Agreement. No
such transfer shall be deemed to relieve USW from, and USW shall be liable for
the performance by such transferee of, its obligations under this Agreement.
In the event of any such transfer, USW shall act as agent for any and all such
Wholly Owned Subsidiaries in connection with the giving of any and all notices
under this Agreement. The Voting Securities held by any Wholly Owned
Subsidiary of USW shall be transferred back to USW or another Wholly Owned
Subsidiary of USW prior to any transaction that, if consummated, would result
in such Wholly Owned Subsidiary ceasing to be such.
(c) In the event of (i) a tender or exchange offer for Voting
Securities commenced by ATI (or an Affiliate of ATI) or (ii) a tender or
exchange offer for Voting Securities commenced by a third party, (x) in
connection with which, ATI has terminated or amended (or agreed to terminate or
amend) the Rights Agreement or redeemed (or agreed to redeem) the Rights issued
thereunder and such action has permitted or will have permitted the
consummation of such offer, or a final, non-appealable court order has declared
the Rights Agreement invalid or otherwise required the redemption of the Rights
issued thereunder or (y) which ATI's Board of Directors has otherwise approved,
USW and its Affiliates shall be permitted to tender or sell the Voting
Securities then owned by them in accordance with the terms of any such offer
without restriction hereunder.
In the event that a tender or exchange offer not described in the
immediately preceding paragraph is commenced by any Person or group (within the
meaning of Section 13(d)(3) of the Exchange Act) and such offer would result,
if consummated in accordance with its terms, in the beneficial
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<PAGE> 15
ownership by such Person or group of in excess of 50% (calculated by voting
power) of the Voting Securities then outstanding (an "Unapproved Offer"), USW
and its Affiliates shall have the right to tender or sell the Voting Securities
then owned by them to the offerer pursuant to such offer if the Board of
Directors of USW, upon the advice of legal counsel and financial advisers,
reasonably believes in good faith, taking into account the conditions of the
offer, that such tender offer will result in shares being purchased (without
any extension of the then scheduled expiration date and without giving effect
to shares that might be tendered by USW and its Affiliates); provided, however,
that prior to tendering or offering for exchange any such Voting Securities in
such Unapproved Offer, USW first shall have offered to ATI not later than
seventy-two hours prior to the expiration of such Unapproved Offer the right to
purchase for the same consideration (or cash equivalent) that number of such
Voting Securities which, if tendered or offered for exchange, would be
purchased in such Unapproved Offer, which purchase shall be closed not later
than the second business day following the consummation of such Unapproved
Offer; and provided further, that USW may tender or offer for exchange such
Voting Securities in such Unapproved Offer in the event that ATI shall have
failed within the later of forty-eight hours after receipt of such notice or
twenty-four hours prior to the expiration of such Unapproved Offer to provide
USW with reasonable assurance that it shall be ready, willing and able to
consummate such purchase.
(d) USW may spin off to its shareholders a Wholly Owned Subsidiary
of USW (the "Spun-off Person") the assets of which include all, but not less
than all, of the Voting Securities beneficially owned by USW and its Affiliates
(the "Spin-off") in a transaction qualifying under Section 355 of the Internal
Revenue Code of 1986, as amended, if all of the following conditions are
satisfied:
(i) No more than 240 days nor less than 180 days prior to
the Spin-off, USW shall advise ATI of its plan to effect the Spin-off
and thereafter shall promptly provide ATI with such information
regarding the Spun- off Person as ATI shall reasonably request;
provided that such information shall promptly be updated if the
financial condition of the Spun-off Person changes in any material
respect after delivery of such information;
(ii) Prior to the Spin-off, neither USW, any Affiliate of
USW nor the Spun-off Person shall have entered into any agreement, or
formulated any plan or intention, with respect to any merger or other
business combination transaction involving the Spun-off Person and a
party other than ATI or an Affiliate of ATI;
(iii) The Fair Market Value of the Voting Securities to be
beneficially owned by the Spun-off Person shall not equal or exceed
50% of the Fair Market Value of the Spun-off Person; and
(iv) The Spun-off Person shall have executed an investment
agreement with ATI substantially in the form of this Agree-
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<PAGE> 16
ment; provided, however, that any such agreement shall terminate on
the tenth anniversary of the date of this Agreement.
(e) All transfers of Voting Securities held by USW and its
Affiliates other than transfers permitted by Sections 5.3(a)(ii), (b), (c) or
(d) shall be subject to Article VIII of this Agreement.
(f) Any transfer of Voting Securities in violation of this Section
5.3 may be suspended on the books of ATI.
5.4. Non-Competition. For a period of one year after the later of
the date on which USW (i) ceases to be entitled (or irrevocably waives its
right) to nominate a director to ATI's Board of Directors or (ii) ceases to
have a designee on ATI's Board of Directors, USW shall be subject to Section
7.4 of the Agreement of Limited Partnership of WMC Partners, L.P. (as in effect
on the date hereof) to the same extent as any Partner in WMC and as if the
provisions thereof were set forth herein; provided, however, that any
obligations imposed by this Section 5.4 shall terminate upon a Change of
Control of ATI.
ARTICLE VI
BOARD REPRESENTATION
6.1. USW's Right to Designate. Upon the consummation of the
Exchange, USW shall be entitled to designate such number of persons for
election to ATI's Board of Directors equal to the nearest whole number less
than the product obtained by multiplying (a) the percentage of the total voting
power of the then outstanding Voting Securities represented by the Voting
Securities then beneficially owned by USW and its Affiliates and (b) the number
of persons, including any vacancies, on ATI's Board of Directors; provided,
however, that for so long as USW and its Affiliates beneficially own 10% or
more of the total voting power of ATI's outstanding Voting Securities and its
rights under this Agreement have not otherwise terminated, USW shall be
entitled to designate at least one such person.
6.2. Consultation; Expansion of Board and Appointment;
Classification. The designation by USW of any person pursuant to Section 6.1
shall be made after consultation with ATI and shall be a person reasonably
satisfactory to ATI. Following such designation, ATI shall take such steps as
are necessary to increase the size of the Board of Directors to accommodate the
person so designated, and the Directors then in office will appoint such person
to fill the resulting vacancy and determine the class in which such person
shall be placed.
6.3. Subsequent Nomination of Persons Designated by USW. The
Nominating Committee of the Board of Directors shall recommend to the Board of
Directors that any person designated by USW and appointed in accordance with
the provisions of this Article VI be recommended by ATI to its shareholders for
election as a director at each meeting of shareholders of ATI at which
directors of the class in which such person was placed are elected, and ATI
shall use its reasonable best efforts to cause the election of each person
designated by USW.
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<PAGE> 17
6.4. Replacement of Directors Designated by USW. In the event that
any designee of USW for election to ATI's Board of Directors pursuant to the
foregoing provisions shall cease to serve as a director for any reason (except
under circumstances described in Section 6.5 below), the vacancy resulting
therefrom shall be filled as soon as practicable with a person designated by
USW pursuant to the above provisions.
6.5. Termination of USW's Right to Designate; Resignation. At such
time as (a) subject to the last sentence of this Section, USW and its
Affiliates cease to be the beneficial owner of Voting Securities representing
at least 10% of the total voting power of the then outstanding Voting
Securities (the "Threshold Percentage") or (b) there shall have been a Change
of Control of USW, USW shall no longer be entitled to designate any person for
election to ATI's Board of Directors. USW shall at such time or upon
expiration of the term of this Agreement cause any person designated by it
pursuant to the foregoing provisions then serving on the Board of Directors to
resign promptly. In the event that USW's failure to beneficially own the
Threshold Percentage does not result from any transfer by USW of beneficial
ownership of Voting Securities, then USW shall have a period of one year after
the date it ceases to own the Threshold Percentage to cure such failure
(provided that this sentence shall no longer be operative once USW again
beneficially owns the Threshold Percentage, or in the event that prior to again
achieving such Threshold Percentage USW transfers beneficial ownership of any
Voting Securities).
6.6. Mandatory Recusal of USW's Board Designee. All designees of
USW on the Board of Directors of ATI shall recuse themselves from discussions
of the operations or planned operations of ATI or its Affiliates, if the
interests of such operations or planned operations reasonably could be expected
to conflict with the interests of any operations or planned operations of USW
and its Affiliates.
ARTICLE VII
REGISTRATION RIGHTS
7.1. Demand Registration. ATI agrees that upon the written request
of USW it will file a registration statement under the Securities Act (a
"Registration Statement") as to the number of shares of Common Stock then held
by USW or its Affiliates specified in such request (the "Registrable Shares"),
provided that ATI shall not be required to file more than such number of
Registration Statements that become effective and remain effective for the
period referred to in Section 7.3(j) equal to the quotient (rounded up to the
nearest whole number) obtained by dividing (i) the product of (A) the average
closing price per share of ATI's Common Stock for the thirty business days
immediately preceding the Notice Date (as defined in the Agreement of Exchange)
and (B) the number of shares of Common Stock issued in the Exchange, by (ii)
$750 million, and further provided that ATI shall not be required to file a
Registration Statement if ATI delivers to USW an opinion, in form and substance
reasonably satisfactory to USW and its counsel, to the effect that the
Registrable Shares are freely transferable under Section 4(1) of the Securities
Act without regard to any volume or other restrictions.
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<PAGE> 18
7.2. Company Registration. (a) If ATI shall determine to register
any Common Stock either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, ATI will:
(i) promptly give to USW written notice thereof; and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other
compliance), except as set forth in section 7.2(b) below, and in any
underwriting involved therein, all the Registrable Shares specified
in a written request made by USW and received by ATI within seven (7)
days after the written notice from ATI described in clause (i) above
is mailed or delivered by ATI. Such written request may specify all
or a part of USW's Registrable Shares.
(b) If the registration of which ATI gives notice is for a
registered public offering involving an underwriting, ATI shall so advise USW
as a part of the written notice given pursuant to Section 7.2(a)(i). In such
event, the right of USW to registration pursuant to this Section 7.2 shall be
conditioned upon USW's participation in such underwriting and the inclusion of
USW's Registrable Shares in the underwriting to the extent provided herein.
USW shall (together with ATI and the other holders of securities of ATI with
registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by
ATI.
Notwithstanding any other provision of this Section 7.2, if the
representative of the underwriters advises ATI in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Shares from, or limit the number of Registrable Shares to be
included in, the registration and underwriting. ATI shall so advise USW, and
the number of shares of Common Stock that are entitled to be included in the
registration and underwriting shall be allocated first to ATI for securities
being sold for its own account and thereafter as set forth in Section 7.2(c).
(c) In any circumstance in which all of the Registrable Shares and
other shares of Common Stock with registration rights (the "Other Shares")
requested to be included in a registration on behalf of USW or other selling
shareholders cannot be so included as a result of limitations of the aggregate
number of Registrable Shares and Other Shares that may be so included, the
number of Registrable Shares and Other Shares that may be so included shall be
allocated among USW and other selling shareholders requesting inclusion of
shares pro rata on the basis of the number of Registrable Shares and Other
Shares that are held by USW and other selling shareholders, provided, however,
that such allocation shall not operate to reduce the aggregate number of
Registrable Shares and Other Shares to be included in such registration. If
USW or any other selling shareholder does not request
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inclusion of the maximum number of Registrable Shares and Other Shares
allocated to it pursuant to the above-described procedure, the remaining
portion of its allocation shall be reallocated among USW and other selling
shareholders whose allocations did not satisfy their requests pro rata on the
basis of the number of Registrable Shares and Other Shares which are held by
USW and other selling shareholders, and this procedure shall be repeated until
all of the Registrable Shares and Other Shares which may be included in the
registration on behalf of USW and other selling shareholders have been so
allocated.
7.3. Registration Procedures. In the case of each registration
involving Registrable Shares pursuant to this Article VII, ATI will:
(a) furnish to USW, prior to the filing of a Registration Statement,
copies of such Registration Statement as it is proposed to be filed, and
thereafter such number of copies of such Registration Statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such Registration Statement (including each preliminary
prospectus) and such other documents in such quantities as USW reasonably may
request from time to time in order to facilitate the disposition of such
Registrable Shares;
(b) use all reasonable efforts to register or qualify the offer and
sale of such Registrable Shares under such other securities or blue sky laws of
such jurisdiction as USW reasonably requests and do any and all other acts and
things as reasonably may be necessary or advisable to enable USW to consummate
the disposition in such jurisdictions of the Registrable Shares owned by USW;
provided that ATI will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this subsection (b), (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction;
(c) use all reasonable efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of ATI
to enable USW to consummate the disposition of such Registrable Shares;
(d) notify USW, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such Registration
Statement or amendment contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and ATI will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(e) enter into customary agreements (including an underwriting
agreement in customary form and an indemnification agreement with USW in
customary form) and take such other actions as reasonably are required in order
to expedite or facilitate the disposition of such Registrable Shares;
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(f) make available for inspection by USW, any underwriter
participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by USW or any such underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of ATI (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of ATI to
supply all information reasonably requested by any such Inspector in connection
with such registration; provided that (i) Records and information obtained
hereunder shall be used by such persons only to exercise their due diligence
responsibility and (ii) Records or information which ATI determines, in good
faith, to be confidential shall not be disclosed in such Registration Statement
or otherwise by the Inspectors unless (x) the disclosure of such Records or
information is necessary to avoid or correct a misstatement or omission in the
Registration Statement or (y) the release of such Records or information is
ordered pursuant to a subpoena or other order from a court or governmental
authority of competent jurisdiction. USW shall use its best efforts, prior to
any such disclosure, to inform ATI that such disclosure is necessary to avoid
or correct a misstatement or omission in the Registration Statement. USW
further agrees that it will, upon learning that disclosure of such Records or
information is sought in a court or by a governmental authority, give notice to
ATI and allow ATI, at the expense of ATI, to undertake appropriate action to
prevent disclosure of the Records or information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for ATI in customary form and covering such
matters of the type customarily covered by comfort letters as USW reasonably
requests;
(h) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to
its security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months beginning within three months after the
effective date of such Registration Statement, which earnings statement shall
satisfy the provisions of section 11(a) of the Securities Act and Rule 158
thereunder;
(i) use all reasonable efforts to cause all such Registrable Shares
to be listed on each securities exchange on which similar securities issued by
ATI are listed; and
(j) use its best efforts (i) to have any registration of the
Registrable Shares declared effective as promptly as practicable after the
filing thereof and (ii) to keep such Registration Statement effective for a
period (up to three months) sufficient to complete the distribution of the
Registrable Shares. ATI further agrees to supplement or make amendments to the
Registration Statement, if required by (x) the registration form utilized by
ATI for such registration or by the instructions applicable to such
registration form, (y) the Securities Act or the rules and regulations
thereunder or (z) USW (or any underwriter for USW) with respect to information
concerning USW or such underwriter or the plan of distribution to be utilized
with respect to the Registrable Shares. ATI agrees to furnish to USW copies
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of any such supplement or amendment prior to its being used or filed with the
SEC.
7.4. Conditions to Offerings. The obligations of ATI to take the
actions contemplated by Section 7.1 with respect to an offering of Registrable
Shares shall be subject to the following conditions:
(a) if the Registrable Shares are to be transferred pursuant to
Section 5.3(a)(iv), USW shall have the right to select the investment banker or
bankers and, if applicable, lead manager or managers to administer the offering
and its or their counsel, provided that such lead manager or managers and such
counsel must be reasonably satisfactory to ATI; with respect to any such
transfer, USW and such investment banker(s) or manager(s) shall use best
efforts to effect as wide a distribution of such Registrable Shares as is
reasonably practicable and to prevent any Person who, together with its
Affiliates and any "group" (within the meaning of Section 13(a)(3) of the
Exchange Act) of which such Person or any Affiliate is a party, from purchasing
in excess of 15% of the Voting Securities being registered. ATI may require
USW to furnish to ATI such information regarding USW or the distribution of the
Registrable Shares as ATI from time to time may reasonably request in writing,
in each case only as required by the Securities Act or the rules and
regulations thereunder or under state securities or blue sky laws.
(b) in the event that the Registrable Shares are to be transferred
pursuant to Section 5.3(a)(iii), such Registrable Shares shall be transferred
only to a Person that USW believes in good faith after due inquiry is eligible
with respect to the Registrable Shares to file a Statement on Schedule 13G
pursuant to Rule 13d-1(b)(i) under the Exchange Act (without regard to the
beneficial ownership threshold set forth in such Rule), as such Rule is
currently in effect. USW shall have the right to select the investment banker
or bankers and, if applicable, the lead manager or managers to administer the
offering and its or their counsel, provided that such lead manager or managers
and such counsel must be reasonably satisfactory to ATI.
(c) there shall not have been an offering registered pursuant to
Section 7.1 of this Agreement within the immediately preceding six months; and
(d) USW shall conform to all requirements of the Securities Act and
the Exchange Act applicable to it with respect to the offering and sale of such
Registrable Shares and shall advise each underwriter, broker or dealer through
which any of such Registrable Shares are offered that such Registrable Shares
are part of a distribution that is subject to the prospectus delivery
requirements of the Securities Act.
USW agrees that, upon receipt of any notice from ATI of the happening
of any event of the kind described in Section 7.3(d) of this Agreement, USW
will forthwith discontinue disposition of Registrable Shares pursuant to the
registration covering such Registrable Shares until USW's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 7.3(a) of
this Agreement.
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7.5. Additional Conditions. (a) ATI's obligations pursuant to
Section 7.1 shall be suspended if (i) the fulfillment of such obligations would
require ATI to make a disclosure that would, in the reasonable good faith
judgment of ATI's Board of Directors, be detrimental to ATI and premature and
the Board of Directors of ATI concludes, as a result, that it is essential to
defer the filing of the registration statement at such time, (ii) ATI has filed
or proposes to file a registration statement with respect to any of its
securities to be distributed in an underwritten public offering and it is
advised by its lead or managing underwriter that an offering by USW of
Registrable Shares would materially adversely affect the distribution of such
securities, provided that ATI is actively employing, or upon such proposed
filing actively employs, all reasonable efforts to cause any such filed
registration statement to become effective, or (iii) the fulfillment of such
obligations would require ATI to prepare financial statements not required to
be prepared for ATI to comply with its obligations under the Exchange Act at
the time that the registration statement is proposed to be filed. Such
obligations shall be reinstated (x) in the case of clause (i) above, upon the
making of such disclosure by ATI (or, if earlier, when such disclosure would
either no longer be necessary for the fulfillment of such obligations or no
longer be detrimental), (y) in the case of clause (ii) above, upon the
conclusion of any period during which ATI would not, pursuant to the terms of
its underwriting arrangements, be permitted to sell Registrable Securities for
its own account and (z) in the case of clause (iii) above, as soon as it would
no longer be necessary to prepare such financial statements to comply with the
Securities Act. The period during which USW is required to sell its
Registrable Shares pursuant to Section 7.3(j) shall be tolled for the duration
of any suspension pursuant to this Section 7.5(a).
(b) In connection with any distribution pursuant to Section
5.3(a)(iv), the number of Registrable Shares to be registered pursuant to
Section 7.1 of this Agreement shall be reduced to the extent that ATI is
advised in writing by an investment banker of national standing that the sale
of all of the Registrable Shares requested to be registered by USW would
materially and adversely affect the market price of ATI's equity securities.
If the number of shares registered is reduced pursuant to this Section 7.5(b)
by more than 50% of the number requested to be registered by USW, the
Registration Statement relating to such reduced number shall not count as one
of the Registration Statements available to USW under Section 7.1.
7.6. Registration Expenses. All expenses incident to the
performance of or compliance with this Agreement by ATI, including, without
limitation, all fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Shares), printing expenses,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the Registrable Shares to be registered on each securities
exchange on which similar securities issued by ATI are then listed, fees and
disbursements of counsel for ATI and its independent certified public
accountants (including the expenses of any comfort letters required by or
incident to such performance), securities acts liability insurance (if ATI
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elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained by ATI in connection with such registration and the
fees and expenses of other persons retained by ATI will be borne by ATI.
Notwithstanding anything in this Section 7.6 to the contrary, ATI will not have
any responsibility for any registration or filing fees payable under any
federal or state securities or blue sky laws or for any of the expenses of USW
incurred in connection with any registration hereunder including, without
limitation, underwriting fees, discounts and commissions and transfer taxes, if
any, attributable to the sale of USW's Registrable Securities, counsel fees of
USW and travel costs.
7.7. Indemnification; Contribution.
(a) Indemnification by ATI. ATI agrees to indemnify, to the fullest
extent permitted by law, USW (and any Affiliate thereof holding Registrable
Shares), each person who controls USW or such Affiliate (within the meaning of
either the Securities Act or the Exchange Act), and their respective directors
and officers against any and all losses, claims, damages, liabilities and
expenses (including attorneys' fees) caused by any untrue or alleged untrue
statement of material fact contained in any Registration Statement, prospectus
or preliminary prospectus (each as amended and/or supplemented, if ATI shall
have furnished any amendments or supplements thereto), or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading;
provided that ATI shall not be required to indemnify USW or such Affiliate,
such controlling persons or their respective officers or directors for any
losses, claims, damages, liabilities or expenses resulting from any such untrue
statement or omission if such untrue statement or omission is made in reliance
on and conformity with any information with respect to USW or its Affiliates or
the underwriters furnished to ATI by USW or its Affiliates expressly for use
therein; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of USW or such Affiliate, if the liability or expense results
from the fact that a copy of the prospectus was not sent or given to such
person at or prior to the written confirmation of sale of such Registrable
Shares to such person as required by the Securities Act, and if the untrue
statement or omission has been corrected in the prospectus unless such failure
to deliver the prospectus was a result of noncompliance by ATI with its
obligations under Section 7.3(a) hereof. In connection with an underwritten
offering, ATI will indemnify each underwriter thereof, the officers and
directors of such underwriter, and each person who controls such underwriter
(within the meaning of either the Securities Act or Exchange Act) to the same
extent as provided above with respect to the indemnification of USW; provided
that such underwriter agrees to indemnify ATI to the same extent as provided
below with respect to the indemnification of ATI by USW.
(b) Indemnification by USW. In connection with any registration in
which USW is participating, USW will furnish to ATI in writing such information
with respect to USW and its Affiliates as ATI reasonably requests for use in
connection with any such registration, prospectus, or preliminary prospectus
and agrees to indemnify ATI, its directors, its officers who sign
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the Registration Statement and each person, if any, who controls ATI (within
the meaning of either the Securities Act or of the Exchange Act) to the same
extent as the foregoing indemnity from ATI to such holder, but only with
respect to information relating to such holder furnished to ATI in writing by
USW expressly for use in the Registration Statement, the prospectus, any
amendment or supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 7.7(a)
or Section 7.7(b) of this Agreement, such person (hereinafter called the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (hereinafter called the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and the indemnified party shall have been advised by counsel
that representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
indemnified parties, such firm shall be designated in writing by the
indemnified parties. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the third sentence of this
Section 7.7(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not
either have reimbursed the indemnified party in accordance with such request or
reasonably objected in writing, on the basis of the standards set forth herein,
to the propriety of such reimbursement prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional
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release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this
Section 7.7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to in this Section 7.7, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 7.7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 7.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 7.7(a) and (b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 7.7(d).
7.8. Rule 144. ATI covenants that it will file the reports required
to be filed by it under the Exchange Act and the rules and regulations adopted
by the SEC thereunder, and it will take such further action as USW may
reasonably request, all to the extent required from time to time to enable USW
to sell Voting Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the Securities Act,
as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC. Upon the request of USW, ATI will
deliver to USW a written statement as to whether it has complied with such
requirements.
7.9. Certain Limitations. The rights of USW under this Article VII
are subject to Sections 5.3(a), 8.1, 8.2 and 8.3.
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7.10. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In the event that ATI shall propose to enter into an
agreement of merger, consolidation or other business combination with any
Person which has a class of equity securities having substantially the same
rights as the Common Stock (including, but not limited to, voting, dividend,
liquidation and redemption rights) and in connection with such agreement ATI
will no longer have a class of equity securities having substantially the same
rights as the Common Stock registered with the SEC pursuant to Section 12(b) or
12(g) of the Exchange Act, ATI hereby covenants and agrees with USW that it
will cause such Person to assume the rights and obligations of ATI set forth in
this Article VII and in Article VIII (as they relate to Article VII), to the
full extent set forth herein.
ARTICLE VIII
RIGHTS OF FIRST OFFER AND FIRST REFUSAL
8.1. Notice of Intent to Transfer. USW shall give written notice (a
"Notice of Intent") to ATI at such time as it first forms a bona fide intention
to transfer, within the next twelve months, Voting Securities then held by USW
or its Affiliates in transactions (a) permitted by clauses (iii) and (iv) of
Section 5.3(a) (any registered public offering permitted by Section 5.3(a)(iii)
or (iv) being referred to hereinafter as a "Permitted Offering"). USW shall
not be permitted to transfer outstanding Voting Securities until 90 days after
the delivery of such Notice of Intent. USW shall include in such Notice of
Intent all additional information required to be included in a ROFO Notice or
ROFR Notice (as defined below) that reasonably can be provided at the time the
Notice of Intent is delivered. USW shall be under no obligation to send more
than one such Notice of Intent.
8.2. Right of First Offer. Any proposed transfer of Voting
Securities by USW in a Permitted Offering pursuant to Section 5.3(a)(iv) shall
be subject to a right of first offer on the part of ATI, as follows:
(a) USW shall deliver to ATI a notice (a "ROFO Notice") 10 days
prior to the delivery of a request pursuant to Section 7.1(a) to file a
registration statement, which ROFO Notice shall set forth, among other things:
(i) the identity of the prospective managing underwriter for the proposed
offering, (ii) the proposed price per share to public and net proceeds per
share to USW, (iii) the number of Voting Securities to be registered for sale,
(iv) the identity (if known) of any Person that has expressed an interest in
purchasing in excess of 1% of the outstanding Voting Securities in the proposed
offering, (v) any other material terms and conditions of the proposed offering,
(vi) the closing date for the proposed offering (which date shall not be less
than 30 days from the date on which the ROFO Notice is delivered), and (vii) a
statement from the managing underwriter that it is highly confident that the
proposed offering can be underwritten on the terms and conditions set forth in
the ROFO Notice. The ROFO Notice shall constitute an irrevocable offer to ATI,
upon the terms specified therein, to purchase such Voting Securities.
(b) ATI may elect, at its option, to purchase all, but not less than
all, of the Registrable Shares referred to in the ROFO Notice at a price per
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share equal to the net proceeds per share referred to in the ROFO Notice by
delivering to USW written notice of its election (a "Notice of Election")
within 10 days after receipt of the ROFO Notice. Such Notice of Election shall
constitute a binding obligation on the part of ATI, subject to standard terms
and conditions for a stock purchase agreement between an issuer and a
significant shareholder, to purchase such Voting Securities. Such Notice of
Election shall include the proposed date for the closing of the purchase, which
shall be no later than 21 days following the delivery of such Notice of
Election. ATI may designate a third party to exercise its right of first
offer.
(c) If ATI or its designee does not exercise the foregoing right of
first offer within such 10-day period, USW may proceed with the proposed
offering as described in the ROFO Notice. Such offering must be closed within
90 days after the date the Registration Statement is filed with the SEC and the
price per share to the public and the net proceeds per share to USW must equal
or exceed such terms as set forth in ROFO Notice. USW shall, and shall cause
its managing underwriters to, use best efforts to cause the filing of the
Registration Statement and the closing of the offering pursuant thereto to
occur as quickly as possible. If the offering is not completed within such
90-day period or if market conditions cause the managing underwriter to reduce
the proposed price per share to the public or the net proceeds to USW or
otherwise to materially revise the terms set forth in the ROFO Notice, USW
shall promptly so notify ATI and ATI shall again have a right of first offer
pursuant to Section 8.2(b) with respect to the Voting Securities referred to in
the ROFO Notice, upon the revised terms, except that such new right must be
exercised within three business days after such notification.
8.3. Right of First Refusal. Any proposed transfer of Voting
Securities by USW pursuant to Section 5.3(a)(iii) shall be subject to a right
of first refusal on the part of ATI, as follows:
(a) In the event of a transfer (or series of related transfers)
which is not a Permitted Offering and involves in the aggregate less than 1% of
the then outstanding Voting Securities, ATI shall have no right of first
refusal.
(b) In all other cases, USW shall deliver to ATI a notice (a "ROFR
Notice") at least four business days prior to (x) in the case of a Permitted
Offering, the delivery of a request to file a registration statement pursuant
to Section 7.1(a), or (y) in all other cases the execution of a stock purchase
agreement or other action committing USW to such transfer. Such ROFR Notice
shall set forth (A) the identities of each proposed transferee that, together
with its Affiliates and any group (within the meaning of Section 13(d)(3) of
the Exchange Act) of which such transferee or any Affiliate is a part, proposes
to purchase 1% or more of the then outstanding Voting Securities (a "1%
Purchaser") and the total number of shares such 1% Purchaser proposes to
acquire, (B) the aggregate number of Voting Securities to be transferred to all
transferees, (C) the proposed price per share at which the Voting Securities
are to be transferred, and the net proceeds per share to USW therefrom, and (D)
any other material terms and conditions of the proposed transfer. In the case
of a Permitted Offering, such ROFR Notice shall also contain the information
specified in clauses
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(vi) and (vii) of Section 8.2(a). The ROFR Notice shall constitute an
irrevocable offer to ATI, upon the terms specified therein, to purchase such
Voting Securities.
(c) In the case of other than a Permitted Offering, ATI may elect to
purchase (x) with respect to non-1% Purchasers, all, but not less than all, of
the Voting Securities referred to in the ROFR Notice which are to be
transferred to such non-1% Purchasers, or (y) any or all of the blocks to be
transferred to 1% Purchasers or (z) any combination of (x) and (y).
(d) In the case of a Permitted Offering, ATI may elect to purchase
(x) with respect to non-1% Purchasers, all but not less than all, of the Voting
Securities referred to in the ROFR Notice which are to be sold to such non-1%
Purchasers, (y) one or more of the blocks to be transferred to 1% Purchasers
provided that, unless ATI effects the purchase described in clause (x) above,
ATI must leave at least one such block unpurchased, or (z) any combination of
(x) and (y).
(e) Any election by ATI described in paragraphs (b) or (c) above
shall be upon the terms and conditions set forth in the ROFR Notice and shall
be effected by sending to USW a Notice of Election within four business days
after receipt of the ROFR Notice. Such Notice of Election shall constitute a
binding obligation, subject to standard terms and conditions for a stock
purchase agreement between an issuer and a significant shareholder, to purchase
the specified amount of Voting Securities (at a price per share equal to the
net proceeds per share referred to in the ROFR Notice). Such Notice of
Election also shall include the proposed date for the closing of the purchase,
which shall be no later than 21 days following the delivery of such Notice of
Election. ATI may designate a third party to exercise its right of first
refusal.
(f) If ATI or its designee does not exercise its right of first
refusal within such four-day period, USW may proceed with the proposed transfer
described in the ROFR Notice. Such transfer must be closed within 30 days
after the date the ROFR Notice is delivered (with respect to other than
Permitted Offerings), and within 90 days after the Registration Statement is
filed with the SEC, with respect to Permitted Offerings, and the price per
share and the net proceeds per share to USW must equal or exceed such terms set
forth in the ROFR Notice. USW shall, and shall cause any lead manager or
managing underwriter to, use best efforts to cause the filing of the
Registration Statement and the closing of the offering pursuant thereto to
occur as quickly as possible. If the proposed price per share or net proceeds
per share are less than those set forth in the ROFR Notice, USW shall promptly
so notify ATI and ATI shall again have a right of first refusal pursuant to
this Section 8.3 with respect to the Voting Securities referred to in the ROFR
Notice, upon the revised terms, except such that new right must be exercised
within three business days after such notification.
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ARTICLE IX
TERM OF AGREEMENT
9.1. Term of Agreement. The term of this Agreement shall be until
the earlier of (a) the date, following the consummation of the Exchange or the
termination of both the Agreement of Exchange and the Trust Agreement of
Exchange, when USW and its Affiliates cease to beneficially own Voting
Securities representing at least 5% of the total voting power of the then
outstanding Voting Securities and (b) the tenth anniversary of the date hereof;
provided, however, that the provisions of Article V and Article VIII shall
irrevocably terminate upon any Change of Control of ATI.
Upon the expiration of the term of this Agreement, all further
obligations of the parties hereunder shall terminate, except that (i) if there
shall have been a Change of Control of USW prior to the expiration of the term
of this Agreement, the agreements set forth in Sections 5.1(a), 5.2 and 5.3 and
Articles VIII and X shall remain in effect until the earlier of (A) a change of
Control of ATI and (B) the later of (x) the expiration of the term of this
Agreement and (y) four years from the date of the Change of Control of USW,
(ii) the agreement set forth in Section 5.1(c) shall survive indefinitely,
(iii) the rights in Article VI shall survive until termination pursuant to
Section 6.5, (iv) the rights in Article VII shall survive until the 10th
anniversary of the Effective Time or the Closing Date (as each are defined in
the Agreement of Exchange), as the case may be, and (v) nothing herein shall
relieve any party from liability for any breach hereof.
ARTICLE X
MISCELLANEOUS
10.1. Legend; Removal of Legend. (a) All certificates evidencing
Voting Securities beneficially owned by USW shall have the following legend,
which shall remain on such certificates until such time as the securities
represented by such certificates are no longer subject to the restrictions of
this Agreement:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
INVESTMENT AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER SET
FORTH THEREIN) DATED AS OF JULY 25, 1994, BETWEEN ATI AND U S WEST,
INC. AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE ALIENATED EXCEPT
IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
OFFICE OF THE CORPORATE SECRETARY OF ATI.
(b) Any legend endorsed on a certificate pursuant to paragraph (a)
shall be removed if the Voting Securities represented by such certificate shall
have been effectively transferred in compliance with clause (ii), (iii) or (iv)
of the second sentence of Section 5.3(a) or all obligations of USW under
Articles V and VIII of this Agreement have terminated, or a Change of Control
of ATI has occurred.
10.2. Severability. If any term, provision, covenant or restriction
of this Agreement is determined to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect, unless such action would
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substantially impair the benefits to either party of the remaining provisions
of this Agreement.
10.3. Specific Enforcement. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they may be entitled by law or equity.
10.4. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
USW contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein
or therein, neither ATI nor USW makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement may be amended only
by an agreement in writing executed by the parties hereto. The parties hereto
may amend this Agreement without notice to or the consent of any third party.
10.5. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered or transmitted by telecopier on a business day during
normal business hours where such notice is to be received at the address or
number designated below or (b) on the business day following the date of
mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to ATI: AirTouch Communications
425 Market Street
San Francisco, CA 94105
Telecopier: (415) 658-2298
Attention: Margaret G. Gill, Esq.
Senior Vice President, Legal and
External Affairs
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 983-1200
Attention: Nathaniel M. Cartmell III
If to USW: U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: President
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With a copy to: U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: General Counsel
Any party hereto may from time to time change its address for notices under
this Section 10.5 by giving at least 10 days' notice of such changed address to
the other party hereto.
10.6. Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future thereof or a waiver of any other
provision, condition or requirement of this Agreement; nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
10.7. Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions of this Agreement.
10.8. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and legal
representatives. The parties hereto may amend this Agreement without notice to
or the consent of any third party. Neither ATI nor USW shall assign this
Agreement or any rights hereunder without the prior written consent of the
other (which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought); provided, however, that ATI may assign
its rights and delegate its obligations under this Agreement to any corporation
which becomes the owner of all of the outstanding Voting Securities in
connection with any reincorporation of ATI and which agrees in writing to
become bound by the terms of this Agreement, and thereafter all references to
ATI hereunder shall become references to such assignee; and provided further
that USW may assign its rights (but not its obligations) under this Agreement
to any Wholly Owned Subsidiary of USW which agrees in writing to become bound
by the terms of this Agreement, but no such assignment or obligation by USW
shall release USW, and USW shall remain liable for the performance by such
assignee of, its obligations hereunder.
10.9. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
10.10. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of laws.
10.11. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
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10.12. Arbitration. The parties agree to submit their disputes to
arbitration in accordance with the Arbitration Agreement dated the date hereof
between ATI and USW.
10.13. Possible Reincorporation of ATI. ATI is considering
reincorporating in the State of Delaware. Such reincorporation may be effected
by a merger in which ATI would become a wholly owned subsidiary of a Delaware
corporation ("ATI Delaware") and the shareholders of ATI would become
stockholders of ATI Delaware. Effective upon any such reincorporation, ATI
would assign its rights and delegate its obligations under this Agreement to
ATI Delaware as provided in Section 10.8 hereof. USW agrees that any such
reincorporation shall not constitute a Change of Control as such term is
defined herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS
/s/ L. L. CHRISTENSEN
By _____________________________________
Name: L. L. Christensen
Title: Executive Vice President and
Chief Financial Officer
U S WEST, INC.
/s/ CHARLES M. LILLIS
By _____________________________________
Name: Charles M. Lillis
Title: Executive Vice President
<PAGE> 1
EXHIBIT 10.5
AGREEMENT OF EXCHANGE
THIS AGREEMENT OF EXCHANGE (this "Agreement"), dated as of July 25,
1994, by and between AIRTOUCH COMMUNICATIONS, a California corporation ("ATI"),
and U S WEST, INC., a Colorado corporation ("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Joint Venture
Organization Agreement dated as of the date hereof (the "Organization
Agreement"), providing for a series of transactions, including the
establishment of a partnership to be known as WMC Partners, L.P. ("WMC")
pursuant to that certain Agreement of Limited Partnership of WMC Partners,
L.P., dated as of the date hereof (the "WMC Partnership Agreement"); and
WHEREAS, USW holds a direct beneficial ownership interest in WMC (such
interest in WMC to the extent it continues to be beneficially held by USW from
time to time hereafter, the "WMC Interest"); and
WHEREAS, each of USW and ATI have certain rights to cause the direct
or indirect exchange of the WMC Interest for capital stock of ATI (the
"Exchange");
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the
conditions set forth herein, the parties agree that the Exchange shall be
effected either pursuant to (i) a merger (the "Merger"), as set forth in the
Agreement and Plan of Merger attached hereto as Exhibit A (the "Merger
Agreement"), or (ii) a sale by USW or a subsidiary thereof to ATI of the WMC
Interest as described in Section 1.5(a) or (b) (the "Sale").
1.2. Delivery of Notice. Except as otherwise provided in the Trust
Agreement of Exchange dated as of the date hereof between ATI and USW (the
"Trust Agreement of Exchange"), USW and ATI shall complete and execute the
Merger Agreement and employ all reasonable efforts to satisfy the conditions to
the Merger set forth in Article IV of the Merger Agreement upon the occurrence
of any of the following:
(a) During the period beginning on the latest of (i) the Phase II
Closing Date, (ii) the PCS Contribution Date, or (iii) the earlier of (A) the
New Par Contribution Date or (B) the Back-End Termination Date (as defined in
the New Par Partnership Agreement dated as of August 1, 1991 between the PacTel
Group and the CCI Group as currently in effect), and ending on the earlier of
the 10th anniversary of the date hereof or the closing of the initial exchange
described in Section 1.5 of the Trust Agreement of Exchange, ATI shall have
received from USW written notice of USW's election to cause the Exchange to
occur;
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(b) Following the later of (i) the date on which Final MFJ Relief
first occurs or (ii) the 10th anniversary of the date hereof, and during any
90-day period referred to in Section 2.7(b) of the WMC Partnership Agreement if
the dispute involves USW, USW shall have received from ATI written notice of
ATI's election to cause the Exchange to occur; or
(c) At any time after both (i) the date on which Final MFJ Relief
first occurs and (ii) the date the USW Group first owns less than 5% of the
aggregate Percentage Interests in WMC, USW shall have received from ATI written
notice of ATI's election to cause the Exchange to occur.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice
Date") when a notice shall have been delivered pursuant to Section 1.2,
representatives of ATI and USW shall meet to determine the appropriate number
of shares of capital stock of ATI to be exchanged for the WMC Interest (the
"Final Number of ATI Shares"). In the event that such representatives of ATI
and USW shall be unable to reach agreement with respect to the Final Number of
ATI Shares within 30 business days after the Notice Date, the Final Number of
ATI Shares and the Aggregate Consideration (as defined in subparagraph (h)
below) shall be determined as follows.
(b) Selection of Appraisers. ATI and USW each shall designate by
written notice to WMC and the other a firm of recognized national standing
familiar with appraisal techniques applicable to the determination of the
Appraisal Number of ATI Shares (as defined below) to serve as an Appraiser
pursuant to this Section 1.3 (the firms designated by ATI and USW being
referred to herein as the "ATI Appraiser" and the "USW Appraiser,"
respectively) within 30 business days after the failure to reach mutual
agreement referred to in paragraph (a) above. In the event that either ATI or
USW fails to designate its Appraiser within the foregoing time period, the
other shall have the right to designate such Appraiser by notifying the failing
party in writing of such designation (and the Appraiser so designated shall be
the ATI Appraiser or the USW Appraiser, as the case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to
determine the number of shares of capital stock of ATI equal to the quotient of
(i) (A) the Private Market Value (as defined in Section 6.1 hereof) or (B) in
the case of an election by ATI pursuant to Section 1.2(c) hereof, the Fair
Market Value (as defined in Section 6.1 hereof), in either case of the WMC
Interest as of the Notice Date, divided by (ii) the Fair Public Market Value
Per Share (as defined in Section 6.1 hereof) of ATI Common Stock (as defined in
Section 6.1 hereof) as of the Notice Date (the quotient for each such Appraisal
being the "Appraisal Number of ATI Shares"). Each Appraiser also shall be
directed to deliver a certificate (an "Appraiser's Certificate") to both ATI
and USW upon the conclusion of its determination, which in no event shall be
later than the 30th day after its respective designation, and each Appraiser's
Certificate once delivered may not be retracted or modified in any respect.
Each Appraiser will keep confidential all information disclosed by ATI and WMC
in the course of conducting its evaluation, and, to that end, will execute
such customary documentation as ATI and WMC reasonably may request with respect
to such confidentiality obligation. ATI will provide, and ATI and USW will
cooperate in causing WMC to provide, each Appraiser with such information
within ATI's and WMC's
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possession that reasonably may be requested in writing by the Appraiser
for purposes of its evaluation hereunder. The Appraisers shall consult with
each other in the course of conducting their respective evaluations. Each
Appraiser will be directed to comply with the provisions of this Section 1.3,
and to that end each of ATI and USW will provide to its respective Appraiser a
complete and correct copy of this Section 1.3 (and the definitions of
capitalized terms used in this Section 1.3 that are defined elsewhere).
(d) Determination of the Final Number of ATI Shares. The Final
Number of ATI Shares shall be determined on the basis of the Appraisers'
Certificates in accordance with the provisions of this paragraph. The higher
of the Appraisal Number of ATI Shares set forth on the Appraisers' Certificates
is hereinafter referred to as the "Higher Value" and the lower of the Appraisal
Number of ATI Shares is hereinafter referred to as the "Lower Value." If the
Higher Value is not more than 110% of the Lower Value, the Final Number of ATI
Shares shall be the arithmetic average of such two Values. If the Higher Value
is more than 110% of the Lower Value, a third appraiser shall be selected in
accordance with the provisions of paragraph (e) below, and the Final Number of
ATI Shares will be determined in accordance with the provisions of paragraph
(f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher
Value is more than 110% of the Lower Value, within seven days thereafter the
ATI Appraiser and the USW Appraiser shall agree upon and jointly designate a
third firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by
written notice to each of ATI and USW. ATI and USW shall direct the Third
Appraiser to determine the Appraisal Number of ATI Shares (the "Third Value")
in accordance with the provisions of paragraph (c) above, and to deliver to ATI
and USW an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be directed
to comply with the provisions of this Section 1.3, and to that end the parties
will provide to the Third Appraiser a complete and correct copy of this Section
1.3 (and the definitions of capitalized terms used in this Section 1.3 that are
defined elsewhere).
(f) Alternative Determination of the Final Number of ATI Shares.
Upon the delivery by the Third Appraiser of its Appraiser's Certificate, the
Final Number of ATI Shares will be determined as provided in this paragraph
(f). The Final Number of ATI Shares will be (w) the Lower Value, if the Third
Value is less than the Lower Value, (x) the Higher Value, if the Third Value is
greater than the Higher Value, (y) the arithmetic average of the Third Value
and the other Value (Lower or Higher) that is closer to the Third Value if the
Third Value falls within the range between (and including) the Lower Value and
the Higher Value and (z) the Third Value, if the Lower Value and the Higher
Value are equally close to the Third Value.
(g) Costs. ATI and USW each will bear the cost of the Appraiser
designated by it or on its behalf. If the Higher Value is not more than 115%
of the Lower Value, or if the Higher Value and the Lower Value are equally
close to the Third Value, ATI and USW each shall bear 50% of the cost of the
Third Appraiser, if any; otherwise, the party whose Appraiser's determination
of the Final Number of ATI Shares is further away from the
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Third Value shall bear the entire cost of the Third Appraiser. ATI and USW
agree to pay when due the fees and expenses of the Appraisers in accordance
with the foregoing provisions.
(h) Aggregate Consideration. The aggregate consideration to be
received by USW or a subsidiary thereof (the "Aggregate Consideration") in
connection with the Merger or the Sale, as the case may be, shall consist of
ATI Common Stock and, if necessary, shares of a series of preferred stock of
ATI embodying the terms set forth in Exhibit B hereto (the "ATI Preferred
Stock"), determined as follows:
(i) USW shall receive that number of shares of ATI Common
Stock (rounded down to the nearest whole number) equal to the least of
(A) the number of shares which would at the Effective Time of the
Merger or the Closing of the Sale, as the case may be, have voting
power equal to or less than 19.9% of the Voting Power Outstanding (as
defined in Section 6.1 hereof) before the issuance of such shares, (B)
the number of shares which at the Effective Time (as defined in the
Merger Agreement) of the Merger or the Closing of the Sale, as the
case may be, would be equal to or less than 19.9% of the number of
shares of common stock of ATI outstanding immediately before the
issuance of such shares; and (C) the Final Number of ATI Shares.
(ii) USW shall receive that number of shares of ATI
Preferred Stock equal to the excess, if any, of the Final Number of
ATI Shares over the number of shares of ATI Common Stock determined
pursuant to clause (i) above.
(i) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in paragraph (d) and (f) above, and the Final Number of
ATI Shares used in the calculations described in paragraph (h) above, shall be
adjusted appropriately for stock splits, stock dividends, stock combinations,
reclassifications and the like of ATI Common Stock subsequent to the Notice
Date.
(j) Conclusive Determination. To the fullest extent provided by
law, the determination of the Final Number of ATI Shares made pursuant to this
Section 1.3 shall be final and binding on ATI and USW, and such determination
shall not be appealable to or reviewable by any court or arbitrator.
1.4. Execution of Merger Agreement. As soon as practicable
following the determination of the Final Number of ATI Shares pursuant to
Section 1.3, but in no event later than 10 days thereafter, ATI and USW each
shall complete and execute, and each shall cause its appropriate respective
subsidiary to execute, the Merger Agreement in substantially the form set forth
in Exhibit A hereto. The parties agree that ATI shall have the right
to determine in its sole discretion the form and substance of Annexes A and B
to the Merger Agreement.
1.5. Right to Require Sale. In the event that either ATI or USW
shall fail within 10 days after the determination of the Final Number of ATI
Shares to have the Merger Agreement executed by their respective appropriate
parties, the following shall apply:
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(a) If ATI shall have so failed, USW may deliver to ATI written
notice requiring ATI to purchase the WMC Interest in exchange for the Aggregate
Consideration plus, if ATI's failure shall have resulted from other than the
prohibition of such execution by any order, decree or injunction of a court of
competent jurisdiction or an action taken or any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity that makes execution of the Merger Agreement illegal, an amount equal to
35% of the taxable income attributable to such sale (net of the amount of
taxable income that would have been generated by the Merger, such as income
arising from deferred intercompany gain or an excess loss account in the stock
of any USW HoldSub (as defined in Section 2.2(a))) (the "Tax Adjustment").
(b) If USW shall have so failed, ATI may deliver to USW written
notice requiring USW to cause the WMC Interest to be sold to ATI in exchange
for the Aggregate Consideration.
(c) In the event that either ATI or USW exercises its right to
cause the purchase and sale transaction described in (a) or (b) above (the
"Sale"), the provisions of Sections 1.6 and 1.7 and of Article IV shall be
applicable.
1.6. Sale Procedure. Any written notice delivered pursuant to
paragraph (a) or (b) of Section 1.5 (a "Sale Notice") shall specify the closing
date of the Sale, which closing date shall be at least 15 but not more than 30
business days after the date of such notice; provided, however, that such date
shall be extended in order to permit the parties to obtain all requisite
regulatory approvals.
1.7. Closing. The closing of the Sale (the "Closing") shall take
place at such time and place as the parties may agree and on the date specified
in the Sale Notice or at such other time, date or place as may be agreed to by
the parties or as extended pursuant to Section 1.6. The date and time at which
a Closing occurs is referred to as the "Closing Date." At the Closing, USW
shall cause to be assigned to ATI all right, title and interest in and to the
WMC Interest, free and clear of any Liens (as hereinafter defined), and ATI
shall simultaneously deliver to USW a certificate or certificates representing
the Aggregate Consideration and, if the Sale is pursuant to Section 1.5(a), a
wire transfer in the amount of the Tax Adjustment, if any, to an account
designated by USW three business days in advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents
and warrants to USW as follows:
(a) Organization and Qualification. It is a corporation duly
organized and existing in good standing under the laws of the State of
California and has the corporate power to own its properties and to carry on
its business as now being conducted.
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(b) Authorization; Enforcement. It has full legal right, power
and authority to enter into and perform this Agreement; the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated hereby, other than the approval by ATI's board of directors of the
Merger Consideration (as defined in the Merger Agreement) and the approval of
the Preferred Certificate (as defined in Section 3.1(a)), have been duly
authorized by it; this Agreement has been duly executed and delivered by it and
this Agreement constitutes its valid and binding obligation enforceable against
it in accordance with its terms, except that (i) such enforcement is subject to
the effect of any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies and (ii) the remedies of specific
performance and injunctive relief may be subject to general principles of
equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party, or
result in a violation of its certificate of incorporation or by-laws or any
law, rule, regulation, order, judgment or decree applicable to it or by which
any of its properties or assets is bound or affected. No consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance by
it of this Agreement, except to the extent of (i) any applicable requirements
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) any consent or approval of the FCC or any other federal or
state governmental agency the necessity of which arises solely out of WMC's
licenses or operations, (iii) any filings required under the Exchange Act, or
(iv) any filings expressly contemplated hereby.
(d) Authorization of ATI Common Stock and ATI Preferred Stock.
ATI has taken all necessary action to permit it to issue the number of shares
of ATI Common Stock issuable pursuant to the terms of this Agreement, and prior
to the Closing or the Effective Time, as the case may be, ATI will have taken
all necessary action to permit it to issue the number of shares of ATI
Preferred Stock issuable pursuant to the terms of this Agreement. Shares of
ATI Common Stock and ATI Preferred Stock issued pursuant to the terms of this
Agreement will, when issued, be validly issued, fully paid and nonassessable
and no person will have any preemptive right of subscription or purchase in
respect thereof.
2.2. Representations and Warranties of USW. USW hereby represents
and warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary
thereof that holds the WMC Interest (a "USW HoldSub") will be at the time of
the Closing, a corporation duly organized and existing in good standing under
the laws of the state of its incorporation and it has, and each USW HoldSub at
the time of the Closing will have, the corporate power to own its properties
and to carry on its business as now being conducted.
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(b) Authorization; Enforcement. It has full legal right, power
and authority to enter into and perform this Agreement; the execution and
delivery of this Agreement by USW and the consummation by it of the
transactions contemplated hereby have been duly authorized by it; this
Agreement has been duly executed and delivered by it and this Agreement
constitutes its valid and binding obligation enforceable against it in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies and (ii) the remedies of specific performance
and injunctive relief may be subject to general principles of equity. At the
time of the Closing, each USW HoldSub will have duly authorized the
transactions contemplated hereby to the extent required and will have full
legal right, power and authority to perform this Agreement.
(c) No Conflicts. The execution, delivery and performance of this
Agreement by it and the consummation by each of USW and, to the extent
required, the consummation by each USW HoldSub, of the transactions
contemplated hereby will not conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien (as defined in paragraph
(d) below) on any properties or assets of any of them pursuant to any
agreement, indenture or instrument to which any of them is a party or by which
the properties or assets of any of them are bound or affected, or result in a
violation of the certificate of incorporation or by-laws of any of them or any
law, rule, regulation, order, judgment or decree applicable to any of them or
by which any of the properties or assets of any of them is bound or affected.
No consent, authorization or order of, or filing or registration with, any
court or governmental agency is required for the execution, delivery and
performance by each of USW and, to the extent required, by each USW HoldSub of
this Agreement, except to the extent of (i) any applicable requirements under
the HSR Act, (ii) any consent or approval of the FCC or any other federal or
state governmental agency the necessity of which arises solely out of WMC's
licenses or operations, (iii) any filings required under the Exchange Act, or
(iv) any filings expressly contemplated hereby.
(d) Title. At the Effective Time or Closing, as the case may be,
USW will be the sole record and beneficial owner of all of the capital stock of
each USW HoldSub, free and clear of all liens, adverse claims, pledges,
security interests, options, liabilities or other contractual, legal or
equitable rights or encumbrances (collectively, "Liens"). At the Effective
Time or Closing, as appropriate, USW or a USW HoldSub will be the sole legal
and beneficial owner of the WMC Interest free and clear of all Liens; and
immediately after the Effective Time or the Closing, as the case may be, ATI or
a subsidiary of ATI will be the owner of all the right, title and interest of
USW and each USW HoldSub to and in the WMC Interest free and clear of all
Liens. The WMC Interest owned by USW constitutes, and at the Effective Time or
the Closing, as the case may be, the WMC Interest held by each USW HoldSub will
constitute, the entirety of any WMC interest held directly or indirectly by
USW.
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ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date hereof to
the Effective Time or the Closing, as the case may be, except as specifically
contemplated by this Agreement or as otherwise approved in writing by USW:
(a) Designation and Reservation of Shares. ATI will reserve and
keep available out of its authorized but unissued shares of capital stock the
full number of shares of ATI Common Stock and ATI Preferred Stock, if any, at
any time deliverable upon the consummation of the Merger or at the Closing, as
the case may be. ATI agrees that prior to the Effective Time or the Closing
Date, as the case may be, it will have filed with the appropriate public
official in its state of incorporation a certificate (the "Preferred
Certificate") designating a sufficient number of shares of ATI Preferred Stock.
(b) No Inconsistent Agreements. After the date hereof, ATI shall
not and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to USW hereunder or which could
adversely affect the ability of ATI and USW to consummate the Merger or Sale as
contemplated hereunder, including, without limitation, entering into any loan
agreement or other arrangement containing terms or conditions which would limit
or prohibit the consummation of the Merger or Sale.
3.2. Covenants of USW. During the period from the date of this
Agreement to the Effective Time or the Closing, as the case may be, except as
specifically contemplated by this Agreement or as otherwise approved in writing
by ATI:
(a) No Inconsistent Agreements. After the date hereof, USW shall
not, and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to ATI hereunder or which could
adversely affect the ability of ATI, USW or any USW HoldSub to consummate the
Merger or Sale as contemplated hereunder, including, without limitation,
entering into any loan agreement or other arrangement containing terms or
conditions which would limit or prohibit the consummation of the Merger or
Sale.
(b) Transfer of WMC Interest Prohibited. From and after the Notice
Date, unless the Merger or the Closing shall have been abandoned pursuant to
Section 4.4, USW shall not, and shall not permit its subsidiaries to, and its
subsidiaries shall not, sell, pledge, transfer or otherwise dispose of the WMC
Interest or any interest therein, including through the creation of any Lien
thereon.
3.3. Further Assurances; Cooperation. (a) Each of the parties
hereto shall perform its obligations under this Agreement and take or cause to
be taken and do or cause to be done all things necessary, proper or advisable
under applicable law to obtain all necessary regulatory approvals and waivers
and all other necessary consents and satisfy all conditions to the obligations
of the parties under this Agreement and shall cooperate fully with one another
and their respective officers, directors, employees, agents, counsel,
accountants and other representatives in connection with any steps required to
be taken as a part of their respective obligations
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under this Agreement; and each party shall do such things as reasonably
may be requested by the other parties hereto in order more effectively to
consummate the Merger or the Sale, as the case may be (including, but not
limited to, promptly delivering to the other information necessary to prepare
and pursue all necessary regulatory filings, approvals and waivers).
(b) In the event that a change in the structure of the Exchange
would be necessary or desirable to accomplish a tax-free merger or
reorganization (including a reorganization described in Section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended), USW and ATI shall take all
reasonable steps necessary to accommodate such change to the extent it would
not adversely affect the parties' rights or obligations under the terms of the
Merger Agreement or this Agreement; provided that in any such event ATI and USW
shall negotiate in good faith to appropriately compensate the other to the
extent adversely affected by such change.
3.4. Occurrence of the Exchange Prior to Final MFJ Relief. If the
Effective Time or the Closing, as the case may be, shall occur as a result of
USW's sending a notice pursuant to Section 1.2(a) prior to the date on which
Final MFJ Relief first occurs, the parties agree that: (i) ATI shall not be
obligated to take any action or forego any business opportunity in order to
accommodate USW's election to cause the Merger or Sale to occur prior to the
date on which Final MFJ Relief first occurs, (ii) ATI shall not be obligated to
take any action or forego any business opportunity in order to enable USW to
maintain beneficial ownership of any capital stock of ATI and (iii) if (A) an
activity or proposed activity in which ATI or an Affiliate is or would be
engaged, or a transaction or proposed transaction to which ATI or an Affiliate
is or would be a party, is not or would not be, or is perceived by any
regulatory authority not to be, in compliance with the MFJ, and (B) the
indemnification of ATI by USW pursuant to Section 5.1(b)(ii) is unavailable or
inadequate, then USW shall take all actions necessary in order to avoid or
correct such noncompliance and to allow ATI at all times to operate its
business free of any and all MFJ restrictions.
3.5. Provision in Case of Consolidation or Merger of ATI. In the
event that prior to the Effective Time or the Closing, as the case may be, ATI
shall enter into an agreement of merger, consolidation or other business
combination with any Person ("Acquiring Corporation") which has a class of
equity securities having substantially the same rights as ATI Common Stock
(including but not limited to voting, dividend, liquidation, and redemption
rights) ("Acquiror Common Stock"), and in connection with such agreement
(i) the Acquiring Corporation shall acquire at least 85% of the Voting Power
Outstanding or ATI Common Stock will no longer be registered with the
Securities and Exchange Commission pursuant to section 12(b) or 12(g) of the
Exchange Act or (ii) the Acquiring Corporation shall acquire assets satisfying
the requirements of clauses (A), (B) and (C) of clause (ii) of the definition
of Change of Control contained in the Investment Agreement between the parties
dated the date hereof, and a majority of the value of the consideration to be
received by ATI in exchange therefor shall not consist of assets (or interests
in assets) of a like kind or nature, then ATI shall cause such agreement to
provide that upon consummation of such consolidation, merger or other business
combination this Agreement and the Merger Agreement shall be deemed to be
modified and amended to provide that USW shall receive Acquiror Common Stock
rather than ATI Common Stock in any Merger or Sale. Accordingly, from and
after such consummation references
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herein to ATI Common Stock shall be deemed to be references to Acquiror
Common Stock (including for purposes of Section 6.1(i)). If any such
consolidation, merger or other business combination shall be consummated after
the Notice Date and prior to the Closing, the Closing shall be delayed for an
appropriate period to determine under Section 1.3 the number of shares of
Acquiror Common Stock to be issued at the Effective Time or the Closing, as the
case may be, and to satisfy all conditions to the Merger or the Closing. ATI
shall not enter into any such consolidation, merger or other business
combination unless the Acquiring Corporation assumes in writing all the
obligations of ATI hereunder. The provisions of this Section 3.5 shall apply
to successive consolidations, mergers or other business combinations.
3.6. Contributions, Distributions and Dividends After the Notice
Date. ATI agrees to compensate USW at the Effective Time or at the Closing, as
the case may be, for (i) any dividends (other than those for which adjustments
have been made pursuant to Section 1.3(i)) that would have been received prior
to the Effective Time or the Closing Date by USW in respect of the Aggregate
Consideration if the Aggregate Consideration had been issued to USW on or prior
to the first record date therefor announced by ATI subsequent to the Notice
Date, and (ii) any capital contributions to WMC made by USW or its Affiliates
with respect to the WMC Interest during the period after the Notice Date and
prior to the Effective Time or the Closing, as the case may be. USW agrees to
make, or to cause to be made, all capital contributions due after the Notice
Date and prior to the Effective Time or the Closing, as the case may be, to the
extent any such capital contribution, if not made, would constitute a Defaulted
Contribution (as defined in the WMC Partnership Agreement). USW agrees to
compensate ATI at the Closing for any distributions received by USW or its
Affiliates with respect to the WMC Interest during the period after the Notice
Date and prior to the Closing.
ARTICLE IV
CONDITIONS TO CLOSING OF THE SALE
4.1. Conditions to Each Party's Obligation to Effect the Sale. The
obligations of the parties hereto to consummate the Sale are subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:
(a) No Prohibition. The consummation of the Sale shall not be
prohibited by any order, decree or injunction of a court of competent
jurisdiction (each party agreeing to use all reasonable efforts to have any
such order reversed or injunction lifted), and there shall not have been any
action taken or any statute, rule or regulation enacted, promulgated or deemed
applicable to the Sale by any Governmental Entity that makes consummation of
the Sale illegal.
(b) Authorizations. All required authorizations, orders, grants,
consents, permissions, approvals and waivers of any governmental entity with
jurisdiction over the Sale (including all filings under the HSR Act and the
expiration of all waiting periods thereunder) shall have been received and
shall remain in effect, other than authorizations, orders, grants, consents,
permissions and approvals the failure of which to receive would not, singly
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or in the aggregate, have a material adverse effect on the business
condition of USW or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to
effect the Sale are subject to the satisfaction or waiver, at or before the
Closing, of each of the following conditions, except to the extent that any
failure of the conditions set forth in paragraphs (a) or (b) below results in
damage to ATI that is fully compensable by monetary damages.
(a) Representations and Warranties. The representations and
warranties of USW set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of USW. USW shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing.
(c) No Change of Control. There shall not have been a Change of
Control of USW at any time after the date hereof and USW shall not be a party
to any agreement which contemplates a transaction (or series of transactions)
which, when consummated, would result in a Change of Control of USW.
4.3. Conditions to Obligations of USW. The obligations of USW to
effect the Sale are subject to the satisfaction or waiver, at or before the
Closing, of each of the following conditions, except to the extent that the
failure of any such condition results in damage to USW that is fully
compensable by monetary damages:
(a) Representations and Warranties. The representations and
warranties of ATI set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of ATI. ATI shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
4.4. Abandonment of Merger or Sale. In the event that the
Effective Time or the Closing, as the case may be, has not occurred within two
years after the Notice Date, either ATI or USW may elect, subject to the
following sentence, by written notice to the other to abandon the Merger or the
Sale, as the case may be, in which event this Agreement shall be operative
thereafter as if the notice delivered pursuant to Section 1.2 never had been
delivered; provided, however, that in the event the 10th anniversary of the
date hereof shall have occurred within the foregoing two year period, such two
year period may be extended, subject to the following sentence, at the option
of either party, by written notice to the other delivered prior to the
expiration of such two year period, for one additional year. Notwithstanding
the foregoing, the right to abandon the Merger or the Sale, or to extend the
two-year period for one additional year, pursuant to this Section shall not be
available to any party whose failure to fulfill any obligation
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under this Agreement or the Merger Agreement has been the cause of, or
results in, the failure of the Effective Time or the Closing to have occurred
within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification.
(a) Indemnification by ATI. ATI shall defend, indemnify and hold
harmless USW and each of USW's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (USW and such
persons hereinafter, collectively, "USW's Indemnified Persons"), and shall
reimburse USW's Indemnified Persons for, from and against each and every
demand, claim, loss, liability, judgment, damage, cost and expense (including,
without limitation, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors) (collectively,
"Losses") imposed on or incurred by USW's Indemnified Persons, directly or
indirectly (including without limitation diminution in value of an equity
interest), relating to, resulting from or arising out of any inaccuracy in any
representation or warranty of ATI herein or in the Merger Agreement in any
respect, whether or not USW's Indemnified Persons relied thereon, or any breach
or nonfulfillment of any covenant, agreement or other obligation of ATI under
this Agreement, the Merger Agreement, or any certificate or other document
delivered or to be delivered pursuant hereto. The parties agree that the Tax
Adjustment described in Section 1.5(a) is an agreed upon payment limited to the
failure to execute the Merger Agreement under the circumstances described
therein and is not intended as an admission of the fact or measure of damages
for any purpose, and that this Section 5.1 shall govern with respect to a Loss
relating to, resulting from or arising out of any other matter described in the
foregoing sentence.
(b) Indemnification by USW. USW shall defend, indemnify and hold
harmless ATI and each of ATI's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (ATI and such
persons, collectively, "ATI's Indemnified Persons"), and shall reimburse ATI's
Indemnified Persons, for, from and against all Losses imposed on or incurred by
ATI's Indemnified Persons, directly or indirectly (including without limitation
diminution in value of an equity interest), relating to, resulting from or
arising out of (i) any inaccuracy in any representation or warranty of USW
herein or in the Merger Agreement in any respect, whether or not ATI's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of USW under this Agreement, the Merger
Agreement, or any certificate or other document delivered or to be delivered
pursuant hereto and (ii) the occurrence of the Exchange prior to the time of
Final MFJ Relief as a result of USW's sending a notice pursuant to Section
1.2(a) hereof, including but not limited with respect thereto to any Losses
suffered as a result of the circumstances described in Section 3.4(iii).
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<PAGE> 13
ARTICLE VI
MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following
terms have the following meanings:
(a) "ATI Common Stock" means shares of the class designated as
Common Stock of ATI at the date of this Agreement or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
ATI and which are not subject to redemption by ATI; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
(b) "Fair Public Market Value Per Share" shall mean the price per
share as of the Notice Date at which a willing investor would purchase and a
willing publicly traded company would sell, the combination of primary shares
of ATI Common Stock and ATI Preferred Stock to be issued to USW as contemplated
by this Agreement, each being apprised of all relevant facts and circumstances,
including without limitation, such investor's pro forma ownership percentage,
rights to board representation, voting restrictions, ownership limitations,
transfer rights and restrictions and the terms of any preferred stock to be
issued (including redemption features), any material non-public information in
ATI's possession and any temporary market anomalies existing on the Notice
Date, in a single arm's-length negotiated transaction without time constraints.
(c) "Fair Market Value" means, with respect to the WMC Interest, as
of the Notice Date, the price at which a willing seller would sell, and a
willing buyer would buy, the WMC Interest each being apprised of all relevant
facts with respect to the WMC Interest and neither acting under compulsion, in
an arm's-length negotiated transaction with an unaffiliated third party without
time constraints.
(d) "Final MFJ Relief" shall mean that the MFJ has been vacated or is
otherwise no longer enforceable or in effect as a result of federal agency
action, legislation or final court order and that none of the equal access
requirements (as defined under Section II (A) of the MFJ), the
nondiscrimination requirements (as defined under Section II (B) of the MFJ) and
the line of business restrictions (as defined in Section II (D) of the MFJ) on
the Bell Operating Companies (as defined in the MFJ) has been imposed or
extended by legislation, final agency action or final court order; provided,
however, that Final MFJ Relief shall be deemed to have occurred even though
equal access or nondiscrimination requirements remain, in the event that such
requirements are imposed equally on the wireless operations of all
telecommunications carriers by legislation, final court order or final agency
action.
(e) "Private Market Value of the WMC Interest" is defined as the
price, as of the Notice Date, at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts,
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<PAGE> 14
including the tax effects of the Exchange on the buyer and seller, and
neither acting under compulsion, the WMC Interest in an arm's-length
negotiation without time constraints, with such price adjusted to include (to
the extent not previously included) a pro rata share of any control premium
inherent in a sale of WMC as a whole.
(f) "Voting Power Outstanding" means the aggregate number of votes
which may be cast by holders of those securities outstanding which entitle the
holders thereof to vote generally on all matters submitted to ATI's
shareholders for a vote.
All capitalized terms in this Agreement which are not defined herein
shall have the meanings set forth in the WMC Partnership Agreement as in effect
on the date hereof.
6.2. Termination. This Agreement and the Merger Agreement shall
automatically terminate (whether or not a notice has previously been delivered
pursuant to Section 1.2 hereof) at such time as USW no longer holds any WMC
interest. Subject to Section 3.5(i), upon the consummation of any transaction
which results in ATI no longer having a class of equity securities registered
with the Securities and Exchange Commission pursuant to Section 12(b) or 12(g)
of the Exchange Act having substantially the same rights as the ATI Common
Stock, neither USW nor ATI shall have the right to deliver a notice pursuant to
Section 1.2 hereof until such further time as ATI again shall have a class of
equity securities registered with the Securities and Exchange Commission
pursuant to Section 12(b) or 12(g) of the Exchange Act having substantially the
same rights as the ATI Common Stock, and any Merger or Sale as to which the
Effective Time or Closing has not yet occurred shall be abandoned and this
Agreement shall be operative thereafter as if the notice delivered pursuant to
Section 1.2 never had been delivered. The termination of this Agreement shall
not relieve any party from liability for any breach hereof or of the Merger
Agreement.
6.3. Severability. If any term, provision, covenant or restriction
of this Agreement is determined to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect, unless such action would
substantially impair the benefits to either party of the remaining provisions
of this Agreement.
6.4. Specific Enforcement. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they may be entitled by law or equity.
6.5. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
USW contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth
herein, neither ATI nor USW makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement may be amended
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<PAGE> 15
only by a writing executed by the parties hereto. The parties hereto may
amend this Agreement without notice to or the consent of any third party.
6.6. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered or transmitted by telecopier on a business day during
normal business hours where such notice is to be received at the address or
number designated below or (b) on the business day following the date of
mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to ATI: AirTouch Communications
425 Market Street
San Francisco, CA 94105
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to USW: U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attention: President
Telecopier: (303) 793-6294
With a copy to: U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attention: General Counsel
Telecopier: (303) 793-6294
Any party may change its address for notices under this Section 6.6 by giving
at least 10 days' prior notice of such changed address to the other party
hereto.
6.7. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future thereof or a waiver of any other
provision, condition or requirement of this Agreement; nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
6.8. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and legal
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<PAGE> 16
representatives. Neither ATI nor USW shall assign this Agreement or any rights
hereunder without the prior written consent of the other (which consent may be
withheld for any reason in the sole discretion of the party from whom consent
is sought); provided, however, that ATI may assign its rights and delegate its
obligations under this Agreement to any corporation which becomes the owner of
all of the outstanding Voting Securities in connection with the reincorporation
of ATI and which agrees in writing to be bound by the terms of this Agreement
and thereafter all references to ATI hereunder shall become references to such
assignee; and provided further that USW may assign its rights (but not its
obligations) under this Agreement to a Wholly Owned Subsidiary that is the
direct beneficial owner of the WMC Interest.
6.10. No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
6.11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of laws.
6.12. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
6.13. Arbitration. The parties agree to submit to arbitration their
disputes described in the Arbitration Agreement dated the date hereof between
ATI and USW.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS U S WEST, INC.
/s/ L. L. CHRISTENSEN /s/ CHARLES M. LILLIS
By ____________________________ By ______________________________
Name: L. L. Christensen Name: Charles M. Lillis
Title: Executive Vice President Title: Executive Vice President
and Chief Financial Officer
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<PAGE> 18
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
_______________, by and among AIRTOUCH COMMUNICATIONS, a __________ corporation
("ATI"), ___________ a Delaware corporation and wholly owned direct subsidiary
of ATI ("ATI Sub"), U S WEST, INC., a Colorado corporation ("USW"), and
__________, a Delaware corporation and wholly owned direct subsidiary of USW
("USW Sub"),
W I T N E S S E T H:
WHEREAS, affiliates of ATI and USW have formed WMC Partners L.P., a
Delaware limited partnership ("WMC"), pursuant to an Agreement of Limited
Partnership dated as of July 25, 1994 (the "WMC Partnership Agreement"); and
WHEREAS, ATI and USW are parties to an Agreement of Exchange, dated as
of July 25, 1994 (the "Agreement of Exchange"), pursuant to which each of them
has certain rights to cause a merger of ATI Sub with and into USW Sub (the
"Merger") in order to effect the exchange of USW's beneficial ownership
interest in WMC (the "USW Interest") for capital stock of ATI; and
WHEREAS, all of the USW Interest is held by USW through USW Sub's
direct ownership interest in WMC (the "WMC Interest"); and
WHEREAS, the Board of Directors of each of ATI, ATI Sub, USW and USW
Sub has determined that the Merger is advisable and in the best interests of
each of their respective stockholders, and has approved the Merger; and
WHEREAS, ATI, as sole stockholder of ATI Sub, and USW, as sole
stockholder of USW Sub, have approved the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger.
(a) Surviving Corporation. Upon the terms and subject to the
conditions of this Agreement, the Merger shall be effected in accordance with
the provisions of the Delaware General Corporation Law ("DGCL"). As a result
of the Merger, the separate corporate existence of ATI Sub shall cease, and USW
Sub (sometimes referred to herein as the "Surviving Corporation") shall
continue as the surviving corporation of the Merger and shall be a wholly owned
subsidiary of ATI.
(b) Effective Time. The Merger shall be effective when a properly
executed certificate of merger, prepared in accordance with Section 251 of the
DGCL and incorporating the terms hereof to the extent required thereby (the
"Certificate of Merger"), together with any other documents required by
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<PAGE> 19
law to effectuate the Merger, shall be filed on behalf of ATI Sub and USW Sub
with the Secretary of State of the State of Delaware, or at such later time as
is specified in the Certificate of Merger (the "Effective Time").
1.2. Certificate of Incorporation; By-laws; Officers and Directors.
(a) Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of USW Sub shall become amended to read in its
entirety as set forth in Annex A hereto. As so amended, the Certificate of
Incorporation of USW Sub shall be the Restated Certificate of Incorporation of
the Surviving Corporation, and thereafter may be amended in accordance with its
terms and as provided by law.
(b) By-laws. At the Effective Time, the By-laws of USW Sub as in
effect immediately prior to the Effective Time shall be amended in their
entirety as set forth in Annex B hereto. As so amended, the By-laws of USW Sub
shall become the By-laws of the Surviving Corporation, and may thereafter be
amended in accordance with their terms and as provided by law.
(c) Officers and Directors. The officers and directors of ATI Sub
in office immediately prior to the Effective Time shall become the officers and
directors of the Surviving Corporation (and the terms of office of the officers
and directors of USW Sub shall terminate).
1.3. Conversion of Shares.
(a) USW Sub Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of USW or the holder of all issued
and outstanding shares of common stock, par value ___ per share, of USW Sub
(the "USW Sub Common Stock"), each share of USW Sub Common Stock validly issued
and outstanding immediately prior to the Effective Time shall automatically be
converted into and become the Merger Consideration. The Merger Consideration
shall be equal to that number of shares of (i) common stock, par value $___ per
share, of ATI (the "ATI Common Stock") and (ii) Series B Participating
Redeemable Preferred Stock, par value $___ per share, of ATI (the "ATI
Preferred Stock"), if any, which constitutes the Aggregate Consideration (as
defined in the Agreement of Exchange), divided by the total number of issued
and outstanding shares of USW Sub Common Stock. Each such share of ATI Common
Stock and ATI Preferred Stock, if any, shall be validly issued, fully paid and
non-assessable. No fractional shares of ATI Common Stock or ATI Preferred
Stock shall be issued in the Merger, and if USW would be entitled to receive a
fractional share as a result of the Merger, USW shall be entitled to receive,
in lieu thereof, an amount in cash determined by multiplying the closing sale
price per share of ATI Common Stock on the New York Stock Exchange on the
trading day next preceding the Effective Time by the fraction of a share of ATI
Common Stock or ATI Preferred Stock to which USW would otherwise have been
entitled. No such cash in lieu of fractional shares shall be paid to USW until
certificates representing all issued and outstanding shares of USW Sub Common
Stock are surrendered in accordance with Section 1.4(a).
(b) ATI Sub Shares. At the Effective Time, each share of common
stock, par value $___ per share, of ATI Sub validly issued and outstanding
immediately prior to the Effective Time shall automatically be converted
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into and become one validly issued, fully paid and nonassessable share of
common stock, par value $___ per share, of the Surviving Corporation.
1.4. Surrender and Exchange.
(a) From and after the Effective Time, an agent to be designated
by ATI and approved by USW shall effect the exchange of certificates that,
prior to the Effective Time, represented USW Sub Common Stock. USW, as sole
holder of all of the issued and outstanding shares of USW Sub Common Stock,
shall be entitled to receive, upon surrender of such certificates, the Merger
Consideration payable in respect of such shares as provided for in Section 1.3,
and such certificates shall thereafter be canceled. After the Effective Time,
each such certificate shall, until so surrendered, represent for all purposes
only the right to receive such Merger Consideration. After the Effective Time,
there shall be no further registration of transfers of shares of USW Sub Common
Stock outstanding prior to the Effective Time.
(b) No dividends, interest or other distributions with respect to
the Merger Consideration shall be paid to the holder of any unsurrendered
certificates representing the USW Sub Common Stock outstanding prior to the
Effective Time until such certificates are surrendered as provided in this
Section. Upon such surrender, there shall be paid, without interest, to USW as
the person in whose name the certificates representing the Merger Consideration
into which such shares were converted are registered, all dividends, interest
and other distributions payable in respect of such securities on a date
subsequent to, and in respect of a record date after, the Effective Time.
1.5. Certain Effects of the Merger. At the Effective Time, USW Sub,
as the Surviving Corporation, shall thereupon and thereafter possess all the
rights, privileges, powers and franchises, of a public as well as of a private
nature, and be subject to all restrictions, disabilities and duties of each of
ATI Sub and USW Sub (collectively, the "Constituent Corporations"); and all and
singular, the rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions all other things in action or belonging to each
of the Constituent Corporations shall be vested in the Surviving Corporation;
and all property, rights, privileges, powers and franchises and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the several and respective Constituent
Corporations; and the title to any real estate, vested by deed or otherwise,
under the laws of Delaware or elsewhere in either of the Constituent
Corporations, shall not revert or be in any way impaired by reason of the
Merger; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of each of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred
or contracted by it.
1.6. Closing of the Merger. As soon as practicable after the
satisfaction (or waiver, if applicable) of the conditions set forth in Article
IV, USW Sub and ATI Sub, as appropriate, shall execute in the manner
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required by the DGCL, and shall file with the Secretary of State of the State
of Delaware, the Certificate of Merger. At the Effective Time, a closing (the
"Closing") will be held at such place and time as the parties may agree for the
purpose of confirming all of the foregoing. The date of such Closing is
referred to hereinafter as the "Closing Date." Except as specifically stated
herein, all references herein to "ATI Sub" with respect to matters following
the Effective Time shall be deemed to refer to USW Sub.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI and ATI Sub. Each of
ATI and ATI Sub hereby represents and warrants to USW and USW Sub as follows:
(a) Organization and Qualification. It is a corporation duly
organized and existing in good standing under the laws of the state of its
incorporation and has the corporate power to own its properties and to carry on
its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power
and authority to enter into and perform this Agreement; the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
and (ii) the remedies of specific performance and injunctive relief may be
subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party or by
which any of the properties or assets is bound or affected, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
properties or assets is bound or affected. No consent, authorization or order
of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by it of this Agreement,
except to the extent of (i) any applicable requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) any consent or approval of the FCC or any other federal or state
governmental agency the necessity of which arises solely out of WMC's licenses
or operations, (iii) any filings required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or (iv) any filings expressly
contemplated hereby.
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(d) Authorization of ATI Common Stock and ATI Preferred Stock.
ATI has taken all necessary action to permit it to issue the number of shares
of ATI Common Stock and ATI Preferred Stock, if any, issuable pursuant to the
terms of this Agreement. Such shares will, when issued, be validly issued,
fully paid and nonassessable and no person will have any preemptive right of
subscription or purchase in respect thereof.
(e) Amendment to Stockholder Rights Plan. ATI has amended its
Rights Agreement dated as of ____________, ____ with ________________ so that
USW shall not be deemed to be an "Acquiring Person" in connection with its
becoming a "Beneficial Owner" of "Common Shares" (as such terms are defined in
the Rights Agreement) pursuant to this Agreement. The Company has furnished to
USW a true and correct copy of such Rights Agreement, as so amended.
2.2. Representations and Warranties of USW and USW Sub. Each of
USW and USW Sub hereby represents and warrants to ATI and ATI Sub as follows:
(a) Organization and Qualification. It is a corporation duly
organized and existing in good standing under the laws of the state of its
incorporation and has the corporate power to own its properties and to carry on
its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power
and authority to enter into and perform this Agreement; the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
and (ii) the remedies of specific performance and injunctive relief may be
subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party or by
which any of the properties or assets is bound or affected, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
properties or assets is bound or affected. No consent, authorization or order
of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by it of this Agreement,
except to the extent of (i) any applicable requirements under the HSR Act, (ii)
any consent or approval of the FCC or any other federal or state governmental
agency the necessity of which arises solely out of WMC's licenses or
operations, (iii) any filings required under the Exchange Act, or (iv) any
filings expressly contemplated hereby.
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<PAGE> 23
(d) Capitalization. On the date hereof, the authorized capital
stock of USW Sub consists of ____ shares of USW Sub Common Stock, all of which
are issued and outstanding. There are no outstanding warrants, options,
convertible securities or other rights requiring the issuance or transfer of
any share of USW Sub capital stock. Each share of USW Sub Common Stock has
been validly issued and is fully paid, nonassessable and free of preemptive or
other similar rights. USW Sub has not effected any distributions on or
redemptions or repurchase of any of its capital stock on or after the Notice
Date (as defined in the Agreement of Exchange), or made any payment to another
party other than for Permitted Liabilities.
(e) Title. USW is, and at the Effective Time will be, the sole
record and beneficial owner of all issued and outstanding shares of USW Sub
Common Stock, free and clear of all liens, adverse claims, pledges, security
interests, options, liabilities or other contractual, legal or equitable rights
or encumbrances (collectively, "Liens"); and immediately after the Effective
Time, ATI will be the owner of all the right, title and interest of USW to and
in all of the issued and outstanding shares of USW Sub Common Stock free and
clear of any Liens. USW Sub at all times on and subsequent to the Notice Date
has been, and at the Effective Time will be, the sole legal and beneficial
owner of the WMC Interest, free and clear of all Liens. The WMC Interest owned
by USW Sub constitutes and at the Effective Time will constitute the entirety
of any beneficial interest in WMC held directly or indirectly by USW.
(f) Assets and Liabilities of USW Sub. USW Sub at all times on
and subsequent to the Notice Date has had, and at the Effective Time will have,
as its only assets the WMC Interest and the contract rights under this
Agreement and the WMC Partnership Agreement and at all times on and subsequent
to the Notice Date has had, and at the Effective Time will have, no liabilities
or obligations of any nature (known or unknown, absolute, accrued, contingent
or otherwise) other than those expressly contemplated by or arising solely out
of actions pursuant to and not inconsistent with this Agreement or the WMC
Partnership Agreement (such liabilities to be known as the "Permitted
Liabilities").
ARTICLE III
COVENANTS
3.1. Covenants of USW and USW Sub. From the date of this Agreement
to the Effective Time, USW shall not permit USW Sub to, and USW Sub shall not:
(i) conduct any business other than the holding of the WMC Interest and
engaging in acts and business incidental thereto, (ii) incur any indebtedness
or liabilities or Liens other than Permitted Liabilities, (iii) dissolve, make
or propose any change or amendment to its certificate of incorporation or
by-laws, issue any securities, merge, consolidate or sell its securities or
assets or any interest therein with or to any other person or firm except as
contemplated or permitted herein, (iv) effect any distributions on or
redemptions or repurchases of any capital stock, or (v) sell, pledge, transfer
or otherwise dispose of the WMC Interest or any interest therein, including
through the creation of any Lien thereon (and USW shall not take any such
action with respect to the USW Sub Common Stock). USW shall cause USW Sub to,
and USW Sub shall, make adequate
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<PAGE> 24
provision for payment of taxes and on a timely basis file all federal, state
and local income tax returns and pay in full all taxes that have become due as
reflected on any such return and any interest and penalties with respect
thereto. [The parties hereto agree that USW Sub shall, if possible, exercise
its option to be excluded from the affiliated group of USW pursuant to Treasury
Regulations Section 1.1502-76(b)(5)(ii) and file its own separate federal tax
returns.]
3.2. Further Assurances; Cooperation. Each of the parties hereto
shall perform its obligations under this Agreement or the Agreement of Exchange
and take or cause to be taken and do or cause to be done all things necessary,
proper or advisable under applicable law to obtain all necessary regulatory
approvals and waivers and all other necessary consents and satisfy all
conditions to the obligations of the parties under this Agreement, and shall
cooperate fully with one another and their respective officers, directors,
employees, agents, counsel, accountants and other representatives in connection
with any steps required to be taken as a part of their respective obligations
under this Agreement; and upon the execution of this Agreement and thereafter,
each party shall do such things as may be reasonably requested by the other
parties hereto in order more effectively to consummate the Merger.
ARTICLE IV
CLOSING CONDITIONS
4.1. Conditions to Each Party's Obligation to Effect the Merger.
The obligations of the parties hereto to consummate the Merger are subject to
the satisfaction or waiver, at or before the Effective Time, of each of the
following conditions:
(a) No Prohibition. The consummation of the Merger shall not be
prohibited by any order, decree or injunction of a court of competent
jurisdiction (each party agreeing to use all reasonable efforts to have any
such order reversed or injunction lifted), and there shall not have been any
action taken or any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity that makes consummation of
the Merger illegal.
(b) Authorizations. All required authorizations, orders, grants,
consents, permissions, approvals and waivers of any Governmental Entity with
jurisdiction over the Merger (including all filings under the HSR Act and the
expiration of all waiting periods thereunder) shall have been received and
shall remain in effect, other than those authorizations, orders, grants,
consents, permissions and approvals the failure of which to receive would not,
singly or in the aggregate, have a material adverse effect on the business
condition of USW or ATI.
4.2. Conditions to the Obligations of ATI and ATI Sub. The
obligations of ATI and ATI Sub to effect the Merger are subject to the
satisfaction or waiver, at or before the Effective Time, of each of the
following conditions, except to the extent that any failure of the conditions
set forth in paragraphs (a) or (b) below results in damage to ATI and ATI Sub
that is fully compensable by monetary damages.
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<PAGE> 25
(a) Representations and Warranties. The representations and
warranties of USW and USW Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Effective Time as though made on and as of the Effective Time.
(b) Performance of Obligations of USW and USW Sub. Each of USW
and USW Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time.
(c) No Change of Control. There shall not have been a Change of
Control of USW at any time after July 25, 1994 and USW shall not be a party to
any agreement which contemplates a transaction (or series of transactions)
which, when consummated, would result in a Change of Control of USW.
4.3. Conditions to Obligations of USW and USW Sub. The obligations
of USW and USW Sub to effect the Merger are subject to the satisfaction or
waiver, at or before the Effective Time, of each of the following conditions,
except to the extent that the failure of any such condition results in damage
to USW and USW Sub that is fully compensable by monetary damages:
(a) Representations and Warranties. The representations and
warranties of ATI and ATI Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
to the extent such representations and warranties peak as of an earlier date)
as of the Effective Time as though made on and as of the Effective Time.
(b) Performance of Obligations of ATI and ATI Sub. Each of ATI
and ATI Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time.
ARTICLE V
MISCELLANEOUS
5.1. Tax Indemnification.
(a) USW shall be individually responsible for, will pay or cause
to be paid, and will individually indemnify and hold harmless ATI's Indemnified
Persons on an after-tax basis from and against any and all federal, state,
local, and foreign tax liabilities and related costs from or related to each of
the following:
(i) Any and all taxes with respect to any taxable period of
USW Sub, any subsidiary thereof (or any predecessor of any of them)
ending on or before the Effective Time;
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<PAGE> 26
(ii) Any and all taxes with respect to any taxable period
ending on or before the Effective Time resulting from USW Sub or any
subsidiary thereof having been (or ceasing to be) included in any
consolidated, combined or unitary tax return for any such period
(including any liability for taxes resulting from a "deferred
intercompany transaction," within the meaning of Treasury Regulation
Section 1.1502-13(a)(2) or any analogous or similar provision under
state or local law or regulation);
(iii) Any and all taxes arising from any member of a
consolidated, combined or unitary group of which USW Sub is or was a
member on or before the Effective Time pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar provision under state
or local law or regulation; and
(iv) Any penalty or interest assessed or imposed by any
taxing authority.
(b) There shall be no limitations period with respect to any
indemnity in this Section 5.1.
5.2. Definitions. All capitalized terms in this Agreement which
are not defined herein shall have the meanings set forth in the WMC Partnership
Agreement.
5.3. Termination. This Agreement may be terminated or abandoned at
any time as provided in Sections 4.4 and 6.2 of the Agreement of Exchange.
5.4. Legends. All certificates evidencing shares of ATI Common
Stock and ATI Preferred Stock, if any, acquired by USW directly or indirectly
pursuant to this Agreement shall be endorsed with the legends set forth below:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
INVESTMENT AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER SET FORTH
THEREIN), DATED AS OF JULY 25, 1994, BETWEEN THE COMPANY AND USW AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY.
5.5. Removal of Legends. Any legend endorsed on a certificate
pursuant to Section 5.4 shall be removed (i) with respect to the first legend
set forth under Section 5.4, (A) if the securities represented by such
certificate shall have been effectively registered under the Securities Act or
otherwise lawfully sold in a public transaction, or (B) if the holder
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<PAGE> 27
of such securities shall have provided ATI with an opinion of counsel, in form
and substance acceptable to ATI and its counsel stating that a public sale,
transfer or assignment of the securities may be made without registration under
the Securities Act of 1993, as amended, and (ii), with respect to the second
legend set forth under Section 5.4, if the restrictions on transfer set forth
in that certain Investment Agreement dated as of July 25, 1994 between ATI and
USW shall no longer apply to such securities.
5.6. Severability. If any term, provision, covenant or restriction
of this Agreement is determined to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect, unless such action would
substantially impair the benefits to either party of the remaining provisions
of this Agreement.
5.7. Specific Enforcement. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they may be entitled by law or equity.
5.8. Obligation of ATI or USW. Whenever this Agreement obligates ATI
Sub to taken any action, such obligation shall be deemed to include an
undertaking on the part of ATI to cause ATI Sub to take such action. Whenever
this Agreement obligates USW Sub to take any action, such obligation shall be
deemed to include an undertaking on the part of USW to cause USW Sub to take
such action.
5.9. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
5.10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and legal
representatives. Neither ATI or ATI Sub nor USW or USW Sub shall assign this
Agreement or any rights hereunder without the prior written consent of the
others (which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought).
5.11. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
5.12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
5.13. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed
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<PAGE> 28
an original, but all such counterparts shall together constitute one and the
same instrument.
5.14. Expenses. Each party shall bear its own expenses in connection
with the execution, delivery and performance of this Agreement, except that USW
shall bear all such expenses incurred by USW Sub and such expenses shall not be
considered Permitted Liabilities for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS U S WEST, INC.
By _____________________________ By _____________________________
Name: Name:
Title: Title:
[ATI SUB] [USW SUB]
By _____________________________ By ______________________________
Name: Name:
Title: Title:
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<PAGE> 29
EXHIBIT B
SERIES B PARTICIPATING REDEEMABLE PREFERRED STOCK
SUMMARY OF TERMS
<TABLE>
<S> <C>
HOLDER: U S West, Inc. or its affiliates ("USW").
NUMBER OF SHARES: To be determined in accordance with the Agreement of
Exchange between AirTouch Communications ("ATI") and USW
to be dated July 25, 1994.
DIVIDENDS: USW shares ratably and proportionately with holders of ATI
Common Stock in the payment of dividends when, as and if
declared by the Board of Directors.
LIQUIDATION VALUE: Liquidation value per share of Series B Preferred stock is
equal to the fair market value, at the date of redemption,
of one share of ATI Common Stock.
REDEMPTION: Redeemable at USW's option for a price equal to the
Liquidation Value. Redemption price is locked in on the date
USW delivers redemption notice; payment (including interest
at rate TBD) to be made no later than 180 days thereafter.
Amounts redeemed count against twelve-month maximum in
Section 5.3(a)(w) of the Investment Agreement between ATI
and USW to be dated July 25, 1994.
CONVERSION: The Series B Preferred Stock is not convertible.
RESTRICTIONS ON TRANSFER: Shares of Series B Preferred Stock may not be transferred
except to wholly owned subsidiaries of USW.
VOTING RIGHTS: None.
BOARD REPRESENTATION: Series B Preferred Stock does not by itself entitle USW to
representation on the Board of Directors.
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</TABLE>
<PAGE> 1
Exhibit 10.6
TRUST AGREEMENT OF EXCHANGE
THIS TRUST EXCHANGE AGREEMENT (this "Agreement"), dated as of July 25,
1994, by and between AIRTOUCH COMMUNICATIONS, a California corporation ("ATI"),
and U S WEST, INC., a Colorado corporation ("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Joint Venture
Organization Agreement dated as of the date hereof (the "Organization
Agreement") and that certain Agreement of Limited Partnership for WMC Partners,
L.P. ("WMC") dated as of the date hereof (the "WMC Partnership Agreement"); and
WHEREAS, USW beneficially holds an ownership interest in WMC (such
interest to the extent it continues to be beneficially held by USW from time to
time hereafter, the "WMC Interest"); and
WHEREAS, ATI has granted to USW certain rights to cause the exchange
of the WMC Interest, for shares of ATI Common Stock, including, without
limitation, pursuant to that Certain Agreement of Exchange, dated as of July
25, 1994, by and between ATI and USW (the "Agreement of Exchange"); and
WHEREAS, at the time of the exchange under the Agreement of Exchange,
ATI may be involved incidentally in activities forbidden to USW under the MFJ
(as defined in the Organization Agreement) and, as a result, if Final MFJ
Relief (as hereinafter defined) has not been obtained, USW may not be able to
exercise its rights under the Agreement of Exchange; and
WHEREAS, ATI is willing to grant to USW additional rights to exchange
its WMC Interest for shares of ATI Common Stock in accordance with the terms
and conditions of this Agreement; and
WHEREAS, in order to ensure that USW does not become involved, upon
the exchange of its WMC Interest for shares of ATI Common Stock, indirectly in
activities forbidden to USW under the MFJ through an "affiliated enterprise" by
virtue of its receipt or disposition of shares of ATI Common Stock, and for
other reasons, USW may elect to utilize a trust structure under which, upon
such exchange and subject to the terms and conditions set forth herein, the ATI
Common Stock will be held by a trustee (the "Trustee") for the purpose of
disposing of such shares for the benefit of USW:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the
conditions set forth herein, the parties agree that, if USW shall elect to
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<PAGE> 2
utilize a trust structure for the disposition of ATI Common Stock received upon
exchange of its WMC Interest (the "Exchange"), the Exchange shall be effected
as described herein.
1.2. Delivery of Notice. During the period (a) beginning on the
latest of (i) the fifth anniversary of the date hereof, (ii) the Phase II
Closing Date, (iii) the PCS Contribution Date, or (iv) the earlier of (A) the
New Par Contribution Date or (B) the Back-End Termination Date (as defined in
the New Par Partnership Agreement dated as of August 1, 1991 between the PacTel
Group and the CCI Group as currently in effect) and (b) ending on the earlier
of the consummation of (i) the Merger or Sale (as defined in the Agreement of
Exchange) and (ii) the fifteenth anniversary of the date hereof, USW, if it has
not already delivered a notice pursuant to Section 1.2 of the Agreement of
Exchange and the Merger or Closing resulting therefrom has not been abandoned
pursuant to Section 4.4 thereof, may deliver to ATI written notice of USW's
election to cause the Exchange to occur. Following ATI's receipt of such
notice, USW and ATI shall employ all reasonable efforts to satisfy the
conditions to the Exchange set forth in Article IV of this Agreement. Upon the
delivery of such notice to ATI, USW shall cease to have the ability to deliver
notice pursuant to Section 1.2 of the Agreement of Exchange until such time, if
ever, as the initial Closing (as defined herein) shall be abandoned pursuant to
Section 4.4 hereof.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice
Date") when a notice shall have been delivered pursuant to Section 1.2,
representatives of ATI and USW shall meet to determine the appropriate amount
of capital stock of ATI to be exchanged for USW's WMC Interest (the "Final
Number of ATI Shares"). In the event that such representatives of ATI and USW
shall be unable to reach agreement with respect to the Final Number of ATI
Shares within 30 business days after the Notice Date, the Final Number of ATI
Shares and the Aggregate Consideration (as defined in subparagraph (h) below)
shall be determined as follows.
(b) Selection of Appraisers. ATI and USW each shall designate by
written notice to WMC and the other a firm of recognized national standing
familiar with appraisal techniques applicable to the determination of the
Appraisal Number of ATI Shares (as defined below) to serve as an Appraiser
pursuant to this Section 1.3 (the firms designated by ATI and USW being
referred to herein as the "ATI Appraiser" and the "USW Appraiser,"
respectively) within 30 business days after the failure to reach mutual
agreement referred to in paragraph (a) above. In the event that either ATI or
USW fails to designate its Appraiser within the foregoing time period, the
other shall have the right to designate such Appraiser by notifying the failing
party in writing of such designation (and the Appraiser so designated shall be
the ATI Appraiser or the USW Appraiser, as the case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to
determine the number of shares of capital stock of ATI equal to the quotient of
(i) the Private Market Value of the WMC Interest (as defined in Section 6.1
hereof) divided by (ii) the Fair Public Market Value Per Share of ATI Common
Stock (the quotient for each Appraisal being the "Appraisal Number of ATI
Shares"). Each Appraiser also shall be directed to deliver a certifi-
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<PAGE> 3
cate (an "Appraiser's Certificate") to both ATI and USW upon the conclusion of
its evaluation, which in no event shall be later than the 30th day after its
respective designation, and each Appraiser's Certificate once delivered may not
be retracted or modified in any respect. Each Appraiser will keep confidential
all information disclosed by ATI and WMC in the course of conducting its
evaluation, and, to that end, will execute such customary documentation as ATI
and WMC reasonably may request with respect to such confidentiality obligation.
ATI will provide, and ATI and USW will cooperate in causing WMC to provide,
each Appraiser with such information within ATI's and WMC's possession that
reasonably may be requested in writing by the Appraiser for purposes of its
evaluation hereunder. The Appraisers shall consult with each other in the
course of conducting their respective evaluations. Each Appraiser will be
directed to comply with the provisions of this Section 1.3, and to that end
each of ATI and USW will provide to its respective Appraiser a complete and
correct copy of this Section 1.3 (and the definitions of capitalized terms used
in this Section 1.3 that are defined elsewhere).
(d) Determination of the Final Number of ATI Shares. The Final
Number of ATI Shares shall be determined on the basis of the Appraisers'
Certificates in accordance with the provisions of this paragraph. The higher
of the Appraisal Number of ATI Shares set forth on the Appraisers' Certificates
is hereinafter referred to as the "Higher Value" and the lower of the Appraisal
Number of ATI Shares is hereinafter referred to as the "Lower Value." If the
Higher Value is not more than 110% of the Lower Value, the "Final Number of ATI
Shares" shall be the arithmetic average of such two Values. If the Higher
Value is more than 110% of the Lower Value, a third appraiser shall be selected
in accordance with the provisions of paragraph (e) below, and the "Final Number
of ATI Shares" will be determined in accordance with the provisions of
paragraph (f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher
Value is more than 110% of the Lower Value, within seven days thereafter the
ATI Appraiser and the USW Appraiser shall agree upon and jointly designate a
third firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by
written notice to each of ATI and USW. ATI and USW shall direct the Third
Appraiser to determine the Appraisal Number of ATI Shares (the "Third Value")
in accordance with the provisions of Section 1.3(c) above, and to deliver to
ATI and USW an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be directed
to comply with the provisions of this Section 1.3, and to that end the parties
will provide to the Third Appraiser a complete and correct copy of this Section
1.3 (and the definitions of capitalized terms used in this Section 1.3 that are
defined elsewhere).
(f) Alternative Determination of the Number of ATI Shares. Upon
the delivery by the Third Appraiser of its Appraiser's Certificate, the Final
Number of ATI Shares will be determined as provided in this paragraph (f). The
Final Number of ATI Shares will be (i) the Lower Value, if the Third Value is
less than the Lower Value, (ii) the Higher Value, if the Third Value is greater
than the Higher Value, (iii) the arithmetic average of the Third Value and the
other Value (Lower or Higher) that is closer to the
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<PAGE> 4
Third Value if the Third Value falls within the range between (and including)
the Lower Value and the Higher Value and (iv) the Third Value, if the Lower
Value and the Higher Value are equally close to the Third Value.
(g) Costs. ATI and USW will bear the cost of the Appraiser
designated by it or on its behalf. If the Higher Value is not more than 115%
of the Lower Value, or if the Higher Value and the Lower Value are equally
close to the Third Value, ATI and USW shall each bear 50% of the cost of the
Third Appraiser, if any; otherwise, the party whose Appraiser's determination
of the Final Number of ATI Shares is further away from the Third Value shall
bear the entire cost of the Third Appraiser. ATI and USW agree to pay when due
the fees and expenses of the Appraisers in accordance with the foregoing
provisions.
(h) Aggregate Consideration. Subject to Section 1.3(j) below, the
aggregate consideration (the "Aggregate Consideration") to be received by the
Trustee pursuant to the Trust Agreement (as defined in Section 1.4) in
connection with the Exchange shall consist of ATI Common Stock and, if
necessary, an amount of cash, determined as follows:
(i) The Trustee shall receive for the benefit of USW that
number of shares of ATI Common Stock (rounded down to the nearest
whole number) equal to the lesser of (A) the number of shares which
would at the Closing Date have voting power equal to or less than
19.9% of the Voting Power Outstanding (as defined in Section 6.1
hereof) before the issuance of such shares; (B) the number of shares
which at the Closing Date (as defined herein) would be equal to or
less than 19.9% of the number of shares of common stock outstanding
immediately before the issuance of such shares; and (C) the Final
Number of ATI Shares. The number of shares of ATI Common Stock
determined in accordance with this Section 1.3(h)(i) shall be referred
to hereinafter as the "Total Exchange Shares."
(ii) USW shall receive cash in an amount equal to the product
of (i) the Fair Public Market Value Per Share and (ii) the excess, if
any, of (A) the Final Number of ATI Shares over (B) the number of
Total Exchange Shares, in each case rounded down to the nearest whole
number.
(i) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in Sections 1.3(d) and 1.3(f) above, and the Final
Number of ATI Shares used in the calculations described in Section 1.3(h)
above, shall be adjusted appropriately for stock splits, stock dividends, stock
combinations, reclassifications and the like ("Stock Adjustments") of ATI
Common Stock effectuated between the Notice Date and each Closing Date.
(j) Conclusive Determination. To the fullest extent permitted by
law, the determination of the Final Number of ATI Shares made pursuant to this
Section 1.3 shall be final and binding on ATI and USW, and such determination
shall not be appealable to or reviewable by any court or arbitrator.
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<PAGE> 5
1.4. Execution of Trust Agreement. As soon as practicable
following the determination of the Final Number of ATI Shares pursuant to
Section 1.3, but in no event later than 10 days thereafter, ATI and USW each
shall execute a trust agreement (the "Trust Agreement") containing terms and
conditions to be agreed upon by ATI and USW within 45 days after the date
hereof. The parties agree that USW shall have the right to designate the
Trustee, who must be reasonably acceptable to ATI, and shall be responsible for
causing the Trustee to execute the Trust Agreement.
1.5. Initial Exchange Procedure. Promptly after execution of the
Trust Agreement, USW shall deliver to ATI a written notice ("Initial Exchange
Notice") specifying (a) the number of shares of ATI Common Stock to be
deposited with the Trustee upon the initial Exchange, which shall not be less
than twenty percent (20%) of the Total Exchange Shares; (b) the percentage of
the WMC Interest being exchanged in such Exchange, which shall be equal to the
percentage that the shares to be deposited with the Trustee pursuant to the
Initial Exchange Notice, together with the excess of the Final Number of ATI
Shares over the number of Total Exchange Shares, bears to the Final Number of
ATI Shares; and (c) the closing date of such Exchange, which closing date shall
be at least 10 but not more than 30 business days after the date of the Initial
Exchange Notice. Subject to Section 4.4 hereof, the Closing Date of the
Initial Exchange, and subsequent closing dates hereunder, may be extended if
necessary to obtain necessary regulatory and governmental approvals.
1.6. Subsequent Exchanges. After the closing of the initial
Exchange hereunder, USW may, from time to time, until the third anniversary of
the Initial Exchange Notice, deliver to ATI written notices (each a "Subsequent
Exchange Notice") specifying (a) the number of additional shares of ATI Common
Stock to be deposited with the Trustee upon the next subsequent Exchange, which
in each case shall not be less than twenty percent (20%) of the Total Exchange
Shares; (b) the percentage of the WMC Interest being exchanged in such
Exchange, which shall be equal to the percentage of the Total Exchange Shares
to be deposited with the Trustee pursuant to such Subsequent Exchange Notice;
and (c) the closing date of such Exchange, which closing date shall be at least
10 but not more than 30 business days after the date of such Subsequent
Exchange Notice.
1.7. Closing. The closing of an Exchange hereunder (a "Closing")
shall take place at such time and place as the parties may agree and on the
date specified in the Initial Exchange Notice or Subsequent Exchange Notice, as
the case may be, or at such other time, date or place as may be agreed to by
the parties. The date and time at which a Closing hereunder occurs is referred
to as the "Closing Date." At each Closing, USW shall cause to be assigned to
ATI all right, title and interest in and to the WMC Interest being exchanged at
such Closing, free and clear of any Liens (as hereinafter defined), and ATI (a)
shall deliver to the Trustee to be held in trust as contemplated by the Trust
Agreement a certificate or certificates representing the shares of ATI Common
Stock to be issued in exchange for the WMC Interest being transferred to ATI,
and (b) if the Exchange is the initial Exchange and cash is payable by ATI
pursuant to Section 1.3(h)(ii) above, ATI shall cause such amount of cash to be
deposited by wire transfer of next day funds in such account(s) as USW shall
specify in writing no fewer than three (3) business days prior to the Closing
Date.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents
and warrants to USW as follows:
(a) Organization and Qualification. It is a corporation duly
organized and existing in good standing under the laws of the State of
California and has the corporate power to own its properties and to carry on
its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power
and authority to enter into and perform this Agreement; the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
and (ii) the remedies of specific performance and injunctive relief may be
subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party or by
which any of its properties or assets are bound or affected, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
properties or assets is bound or affected. No consent, authorization or order
of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by it of this Agreement,
except to the extent of (i) any applicable requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) any consent or approval of the FCC or any other federal or state
governmental agency the necessity of which arises solely out of WMC's licenses
or operations, (iii) any filings required under the Exchange Act, or (iv) any
filings expressly contemplated hereby.
(d) Authorization of ATI Common Stock. ATI has taken all
necessary action to permit it to issue the Total Exchange Shares. Shares of
ATI Common Stock will, when issued, be validly issued, fully paid and
nonassessable, and no Person will have any preemptive right of subscription to
purchase any of such shares of ATI Common Stock.
(e) Rights Agreement. As soon as practicable after the date
hereof, ATI will amend that certain Rights Agreement between ATI and the Bank
of New York, as Rights Agent, dated as of July 22, 1993, so that neither USW
and
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<PAGE> 7
its Affiliates nor the Trustee shall be deemed to be "Acquiring Persons" in
connection with their becoming a "Beneficial Owner" of "Common Shares" (as such
terms are defined therein) pursuant to this Agreement.
2.2. Representations and Warranties of USW. USW hereby represents
and warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary
thereof that holds the WMC Interest (a "USW HoldSub") will be at the time of
the Closing, a corporation duly organized and existing in good standing under
the laws of the state of its incorporation and it has, and each USW HoldSub at
the time of the Closing will have, the corporate power to own its properties
and to carry on its business as now being conducted.
(b) Authorization; Enforcement. It and any USW HoldSub each has
full legal right, power and authority to enter into and perform this Agreement;
the execution and delivery of this Agreement by USW and the consummation by it
of the transactions contemplated hereby have been duly authorized by it; this
Agreement has been duly executed and delivered by it and this Agreement
constitutes its valid and binding obligation enforceable against it in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies and (ii) the remedies of specific performance
and injunctive relief may be subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement by it and the consummation by each of USW and, to the extent
required, the consummation by each USW HoldSub, of the transactions
contemplated hereby will not conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any properties or assets of any of them pursuant to any agreement, indenture or
instrument to which any of them is a party or by which the properties or assets
of any of them are bound or affected, or result in a violation of the
certificate of incorporation or by-laws of any of them or any law, rule,
regulation, order, judgment or decree applicable to any of them or by which any
of the properties or assets of any of them is bound or affected. No consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance by
each of USW and, to the extent required, by each USW HoldSub of this Agreement,
except to the extent of (i) any applicable requirements under the HSR Act, (ii)
any consent or approval of the FCC or any other federal or state governmental
agency the necessity of which arises solely out of WMC's licenses or
operations, (iii) any filings required under the Exchange Act, or (iv) any
filings expressly contemplated hereby.
(d) Title. At each Closing, USW will be the sole record and
beneficial owner of all of the capital stock of each USW HoldSub, free and
clear of all liens, adverse claims, pledges, security interests, options,
liabilities or other contractual, legal or equitable rights or encumbrances
(collectively, "Liens"). Each USW HoldSub is, and at such Closing will be,
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<PAGE> 8
the sole legal and beneficial owner of the WMC Interest being exchanged, free
and clear of all Liens; and immediately after the Closing, ATI will be the
owner of all the right, title and interest of USW and each USW HoldSub in and
to the WMC Interest being exchanged, free and clear of any Liens.
(e) USW represents that neither the consummation of any Exchange
contemplated herein nor the deposit of ATI Common Stock into the Trust on the
terms and conditions set forth therein shall subject ATI to any restrictions
under the MFJ.
ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date of this
Agreement to the final Closing, except as specifically contemplated by this
Agreement or as otherwise approved in writing by USW, which approval shall not
be unreasonably withheld:
(a) Designation and Reservation of Shares. ATI will reserve and
keep available out of its authorized but unissued shares of capital stock the
full number of Total Exchange Shares.
(b) No Inconsistent Agreements. After the date hereof, ATI shall
not, and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to USW hereunder or which could
adversely affect the ability of USW and ATI to consummate the Exchanges as
contemplated hereby, including, without limitation, entering into any loan
agreement or other arrangement containing terms or conditions which would limit
or prohibit the consummation of the Exchanges.
3.2. Covenants of USW. During the period from the date of this
Agreement to the final Closing, except as specifically contemplated by this
Agreement or as otherwise approved in writing by ATI, which approval shall not
be unreasonably withheld:
(a) No Inconsistent Agreements. After the date hereof, USW shall
not, and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to the ATI hereunder or which
could adversely affect the ability of ATI and USW or any USW HoldSub to
consummate the Exchanges as contemplated hereunder, including, without
limitation, entering into any loan agreement or other arrangement containing
terms or conditions which would limit or prohibit the consummation of the
Exchanges.
(b) Transfer of USW Interest Prohibited. Subject to Section 4.4,
from and after the Notice Date, USW shall not, and shall not permit its
subsidiaries to, and its subsidiaries shall not, sell, pledge, transfer or
otherwise dispose of the WMC Interest or any interest therein, including
through the creation of any Lien thereon.
3.3. Further Assurances; Cooperation. (a) Each of the parties
hereto shall perform its obligations under this Agreement and take or cause to
be taken and do or cause to be done all things necessary, proper or advisable
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<PAGE> 9
under applicable law to obtain all necessary regulatory approvals and waivers
and all other necessary consents and satisfy all conditions to the obligations
of the parties under this Agreement and shall cooperate fully with one another
and their respective officers, directors, employees, agents, counsel,
accountants and other representatives in connection with any steps required to
be taken as a part of their respective obligations under this Agreement; and
upon the execution of this Agreement and thereafter, each party shall do such
things as reasonably may be requested by the other parties hereto in order more
effectively to consummate the Exchanges (including, but not limited to,
promptly delivering to the other information necessary to prepare and pursue
all necessary regulatory filings, approvals and waivers).
(b) In the event that a change in the structure of the Exchange
would be necessary or desirable to accomplish a more tax-efficient transaction,
USW and ATI shall take all reasonable steps necessary to accommodate such
change to the extent it would not adversely affect the parties' rights or
obligations under the terms of this Agreement; provided that in any such event
ATI and USW shall negotiate in good faith to appropriately compensate the other
to the extent adversely affected by such change.
3.4. Provision in Case of Consolidation or Merger of ATI. In the
event that prior to the initial Closing, ATI shall enter into an agreement of
merger, consolidation or other business combination with any Person ("Acquiring
Corporation") which has a class of equity securities having substantially the
same rights as ATI Common Stock (including but not limited to voting, dividend,
liquidation, and redemption rights) ("Acquiror Common Stock"), and in
connection with such agreement (i) the Acquiring Corporation shall acquire at
least 85% of the Voting Power Outstanding or ATI Common Stock will no longer be
registered with the Securities and Exchange Commission pursuant to section
12(b) or 12(g) of the Exchange Act or (ii) the Acquiring Corporation shall
acquire assets satisfying the requirements of clauses (A), (B) and (C) of
clause (ii) of the definition of Change of Control contained in the Investment
Agreement between the parties dated the date hereof, and a majority of the
value of the consideration to be received by ATI in exchange therefor shall not
consist of assets (or interests in assets) of a like kind or nature, then ATI
shall cause such agreement to provide that upon consummation of such
consolidation, merger or other business combination this Agreement and the
Merger Agreement shall be deemed to be modified and amended to provide that USW
shall receive Acquiror Common Stock rather than ATI Common Stock in any Merger
or Sale. Accordingly, from and after such consummation references herein to
ATI Common Stock shall be deemed to be references to Acquiror Common Stock
(including for purposes of Section 6.1(i)). If any such consolidation, merger
or other business combination shall be consummated after the Notice Date and
prior to the initial Closing, the initial Closing shall be delayed for an
appropriate period to determine under Section 1.3 the number of shares of
Acquiror Common Stock to be issued at the Effective Time or the Closing, as the
case may be, and to satisfy all conditions to the Merger or the Closing. ATI
shall not enter into any such consolidation, merger or other business
combination unless the Acquiring Corporation assumes in writing all the
obligations of ATI hereunder. The provisions of this Section 3.4 shall apply
to successive consolidations, mergers or other business combinations.
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<PAGE> 10
3.5. Contributions, Distributions and Dividends After the Notice
Date. ATI agrees to compensate USW at each Closing for (i) any dividends
(other than those for which adjustments have been made pursuant to Section
1.3(i)) that would have been received prior to the appropriate Closing Date by
USW in respect of that portion of the Aggregate Consideration to be received at
such Closing (assuming, for the initial Closing, that the Aggregate
Consideration to be received includes a number of shares equal to the excess of
the Final Number of ATI Shares over the number of total Exchange Shares, rather
than cash consideration therefor) had such portion of the Aggregate
Consideration been issued to USW on or prior to the first record date therefor
announced by ATI subsequent to the Initial Notice Date, and (ii) any capital
contributions to WMC made by USW or its Affiliates with respect to the WMC
Interest during the period after the Initial Notice Date and prior to such
Closing. USW agrees to make, or to cause to be made, all capital contributions
due after the Initial Notice Date and prior to the final Closing to the extent
any such capital contribution, if not made, would constitute a Defaulted
Contribution (as defined in the WMC Partnership Agreement). USW agrees to
compensate ATI at each Closing for any distributions received by USW or its
Affiliates with respect to the WMC Interest to be exchanged at such Closing
during the period after the Initial Notice Date and prior to such Closing.
3.6. Occurrence of the Exchange Prior to Final MFJ Relief. If the
any Closing shall occur prior to the date on which Final MFJ Relief first
occurs, the parties agree that: (i) ATI shall not be obligated to take any
action or forego any business opportunity in order to accommodate USW's
election to cause the Exchange to occur prior to the date on which Final MFJ
Relief first occurs, (ii) ATI shall not be obligated to take any action or
forego any business opportunity in order to enable USW to maintain beneficial
ownership of any capital stock of ATI and (iii) if (A) an activity or proposed
activity in which ATI or an Affiliate is or would be engaged, or a transaction
or proposed transaction to which ATI or an Affiliate is or would be a party, is
not or would not be, or is perceived by any regulatory authority not to be, in
compliance with the MFJ, and (B) the indemnification of ATI by USW pursuant to
Section 5.3 is unavailable or inadequate, then USW shall take all actions
necessary in order to avoid or correct such noncompliance and to allow ATI at
all times to operate its business free of any and all MFJ restrictions.
ARTICLE IV
CONDITIONS TO CLOSING OF THE EXCHANGES
4.1. Conditions to Each Party's Obligation to Effect Exchanges.
The obligations of the parties hereto to consummate each Exchange are subject
to the satisfaction or waiver, at or before each Closing, of each of the
following conditions:
(a) No Prohibition. The consummation of the Exchange shall not be
prohibited by any order, decree or injunction of a court of competent
jurisdiction (each party agreeing to use reasonable efforts to have any such
order reversed or injunction lifted), and there shall not have been any action
taken or any statute, rule or regulation enacted, promulgated or
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<PAGE> 11
deemed applicable to the Exchange by any Governmental Entity that makes
consummation of the Exchange illegal.
(b) Authorizations. All required authorizations, orders, grants,
consents, permissions, approvals and waivers of any governmental entity with
jurisdiction over the Exchange (including all filings under the HSR Act and the
expiration of all waiting periods thereunder) shall have been received and
shall remain in effect, other than authorizations, orders, grants, consents,
permissions and approvals the failure of which to receive would not, singly or
in the aggregate, have a material adverse effect on the business condition of
USW or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to
effect each Exchange are subject to the satisfaction or waiver, at or before
each Closing, of each of the following conditions, except to the extent that
any failure of any such condition results in damage to ATI that is fully
compensable by monetary damages:
(a) Representations and Warranties. The representations and
warranties of USW set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the date
of each Closing as though made on and as of the date of such Closing.
(b) Performance of Obligations of USW. USW shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to such Closing.
4.3. Conditions to Obligations of USW. The obligations of USW to
effect the Exchange are subject to the satisfaction or waiver, at or before
each Closing, of each of the following conditions, except to the extent that
the failure of any such condition results in damage to USW that is fully
compensable by monetary damages:
(a) Representations and Warranties. The representations and
warranties of ATI set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the date
of each Closing as though made on and as of the date of such Closing.
(b) Performance of Obligations of ATI. ATI shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to such Closing.
4.4. Abandonment of Exchange. If the Closing of the initial
Exchange has not occurred within two years after the Notice Date, either ATI
or USW may elect, subject to the following sentence, by written notice to the
other, to abandon the pending Exchange, in which event this Agreement shall be
operative thereafter as if the notice delivered pursuant to Section 1.2 never
had been delivered; provided, however, that in the event the 15th anniversary
of the date hereof shall have occurred within the foregoing two-year period,
such two-year period may be extended, subject to the following
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<PAGE> 12
sentence, at the option of either party, by written notice to the other
delivered prior to the expiration of such two-year period, for one additional
year. Notwithstanding the foregoing, the right to abandon the Exchange, or to
extend the two-year period for one additional year, pursuant to this Section
4.4 shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or results in, the failure of the
Closing to have occurred within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification by ATI. ATI shall defend, indemnify, and hold
harmless USW and each of USW's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors, and assigns (collectively
"USW's Indemnified Persons") and shall reimburse USW's Indemnified Persons for,
from, and against each and every demand, claim, loss, liability, judgment,
damage, cost and expenses of attorneys, accountants, and other professional
advisors (collectively, "Losses") imposed on or incurred by USW's Indemnified
Persons, directly or indirectly (including, without limitation, diminution in
value of an equity interest), relating to, resulting from or arising out of any
inaccuracy in any representation or warranty of ATI herein or in the Trust
Agreement in any respect, whether or not USW's Indemnified Persons relied
thereon, or any breach or nonfulfillment of any covenant, agreement or other
obligation of ATI under this Agreement or any certificate or other document
delivered or to be delivered pursuant hereto.
5.2. Indemnification by USW. USW shall defend, indemnify, and
hold harmless ATI and each of ATI's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
ATI's "Indemnified Persons") and shall reimburse ATI's Indemnified Persons for,
from, and against all Losses imposed on or incurred by ATI's Indemnified
Persons, directly or indirectly (including without limitation diminution in
value of an equity interest), relating to, resulting from or arising out of any
inaccuracy in any representation or warranty of USW herein in any respect,
whether or not ATI's Indemnified Persons relied thereon, or any breach or
nonfulfillment of any covenant, agreement or other obligation of USW under this
Agreement or any certificate or other document delivered or to be delivered
pursuant thereto.
5.3. MFJ Indemnification. USW shall indemnify and hold ATI and its
Affiliates harmless against all Losses related to the absence of Full MFJ
Relief or any claim that ATI is subject to the MFJ as a result of the
transactions contemplated by this Agreement and the Trust Agreement.
ARTICLE VI
MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following
terms have the following meanings:
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(a) "ATI Common Stock" means shares of the class
designated as Common Stock of ATI at the date of this Agreement or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of ATI and which
are not subject to redemption by ATI; provided that if at any time
there shall be more than one such resulting class, the shares of each
such class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
(b) "Fair Public Market Value Per Share" shall mean, with
respect to a share of ATI Common Stock, as follows: (i) if the ATI
Common Stock is traded on a securities exchange, then the average of
the last reported sale price therefor on the principal such exchange;
and (ii) if the ATI Common Stock is actively traded in the
over-the-counter market, the average of the last reported sale price
(or, if not available, the average of the closing bid and ask price),
in either case during the twenty trading day period commencing thirty
trading days prior to the earlier of (A) the Notice Date or (B) the
public disclosure by USW, whether by way of Schedule 13D (or amendment
thereto), or otherwise, of its intent to exchange its WMC Interest
pursuant to this Agreement.
(c) "Final MFJ Relief" shall mean that the MFJ has been
vacated or is otherwise no longer enforceable or in effect as a result
of federal agency action, legislation or final court order and that
none of the equal access requirements (as defined under Section II (A)
of the MFJ), the nondiscrimination requirements (as defined under
Section II (B) of the MFJ) and the line of business restrictions (as
defined in Section II (D) of the MFJ) on the Bell Operating Companies
(as defined in the MFJ) has been imposed or extended by legislation,
final agency action or final court order; provided, however, that
Final MFJ Relief shall be deemed to have occurred even though equal
access or nondiscrimination requirements remain, in the event that
such requirements are imposed equally on the wireless operations of
all telecommunications carriers by legislation, final court order or
final agency action.
(d) "Private Market Value of the WMC Interest" is defined
as the price, as of the Notice Date, at which a willing seller would
sell, and a willing buyer would buy, each being apprised of all
relevant facts, including the tax effects of the Exchange on the buyer
and seller, and neither acting under compulsion, the WMC Interest in
an arm's-length negotiation without time constraints, with such price
adjusted to include (to the extent not previously included) a pro rata
share of any control premium inherent in a sale of WMC as a whole.
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(e) "Voting Power Outstanding" means the aggregate number of
votes which may be cast by holders of those securities outstanding
which entitle the holders thereof to vote generally on all matters
submitted to ATI's shareholders for a vote.
All capitalized terms in this Agreement which are not defined herein
shall have the meanings set forth in the WMC Partnership Agreement as in effect
on the date hereof.
6.2. Termination. This Agreement shall automatically terminate
(whether or not a notice has previously been delivered pursuant to Section 1.2
hereof) at such time as neither USW nor any of its Wholly Owned Subsidiaries
holds any WMC interest. Subject to Section 3.4, upon the consummation of any
transaction which results in ATI no longer having a class of equity securities
registered with the Securities and Exchange Commission pursuant to Section
12(b) or 12(g) of the Exchange Act having substantially the same rights as the
ATI Common Stock, USW shall not have the right to deliver a notice pursuant to
Section 1.2 hereof until such further time as ATI again shall have a class of
equity securities registered with the Securities and Exchange Commission
pursuant to Section 12(b) or 12(g) of the Exchange Act having substantially the
same rights as the ATI Common Stock, and any Exchange as to which the Closing
has not yet occurred shall be abandoned and this Agreement shall be operative
thereafter as if the notice delivered pursuant to Section 1.2 never had been
delivered. The termination of this Agreement shall not relieve any party from
liability for any breach hereof.
6.3. Severability. If any term, provision, covenant or restriction
of this Agreement is determined to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect, unless such action would
substantially impair the benefits to either party of the remaining provisions
of this Agreement.
6.4. Specific Enforcement. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they may be entitled by law or equity.
6.5. Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither ATI nor USW makes any
representation, warranty, covenant or undertaking with respect to such matters.
This Agreement may be amended only by a writing executed by the parties hereto.
The parties hereto may amend this Agreement without notice to or the consent of
any third party.
6.6. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered or transmitted by telecopier on a business day
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during normal business hours where such notice is to be received at the address
or number designated below or (b) on the business day following the date of
mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to ATI:
AirTouch Communications
425 Market Street
San Francisco, CA 94105
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to USW:
U S West, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: President
Telecopier: (303) 793-6294
With a copy to:
U S West, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: General Counsel
Telecopier: (303) 793-6294
Any party may change its address for notices under this Section 5.5 by giving
at least 10 days' prior notice of such changed address to the other party
hereto.
6.7. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future thereof or a waiver of any other
provision, condition or requirement of this Agreement; nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
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6.8. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and legal
representatives. Neither ATI nor USW shall assign this Agreement or any rights
hereunder without the prior written consent of the other (which consent may be
withheld for any reason in the sole discretion of the party from whom consent
is sought); provided, however, that ATI may assign its rights and delegate its
obligations under this Agreement to any corporation which becomes the owner of
all of the outstanding Voting Securities in connection with the currently
proposed reincorporation of ATI and which agrees in writing to be bound by the
terms of this Agreement and thereafter all references to ATI hereunder shall
become references to such assignee; and provided further that USW may assign
its rights (but not its obligations) under this Agreement to a Wholly Owned
Subsidiary that is the direct beneficial owner of the WMC Interest.
6.10. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
6.11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
6.12. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
6.13. Arbitration. The parties agree to submit to arbitration their
disputes described in the Arbitration Agreement dated the date hereof between
ATI and USW.
-16-
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
U S WEST, INC.
/s/ CHARLES M. LILLIS
By ____________________________________
Name: Charles M. Lillis
Title: Executive Vice President
AIRTOUCH COMMUNICATIONS
/s/ L. L. CHRISTENSEN
By ____________________________________
Name: L. L. Christensen
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 1
Exhibit 15
August 12, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: AirTouch Communications
Registration Statements on Form S-8
Ladies and Gentlemen:
We are aware that our report dated July 26, 1994 on our review of interim
financial information of AirTouch Communications (formerly PacTel Corporation)
and Subsidiaries (the "Company") for the period ended June 30, 1994 and
included in the Company's quarterly report on Form 10-Q for the quarterly
period then ended is incorporated by reference in the registration statements
of the Company on Form S-8 relating to the AirTouch Communications Retirement
Plan, AirTouch Communications Employee Stock Purchase Plan and AirTouch
Communications 1993 Long Term Stock Incentive Plan. Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part
of the registration statements prepared or certified by us within the meaning
of Sections 7 and 11 of that Act.
Very truly yours,
/s/ Coopers & Lybrand
33
