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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994.
COMMISSION FILE NUMBER 1-12342
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AIRTOUCH COMMUNICATIONS, INC.
A DELAWARE CORPORATION I.R.S. EMPLOYER NUMBER 94-3213132
ONE CALIFORNIA STREET
SAN FRANCISCO, CA 94111
(415) 658-2000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
COMMON STOCK, $.01 PAR VALUE,
WITH NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None.
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Based on the composite closing sales price on March 20, 1995, the aggregate
market value of all voting stock held by nonaffiliates was approximately $13.5
billion. At March 20, 1995, 494,174,654 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated Parts of this Form 10-K:
1994 Annual Report to Stockholders - Part II
1995 Proxy Statement - Part III
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TABLE OF CONTENTS
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PART I
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. Business.............................................................. 1
ITEM 2. Properties............................................................ 26
ITEM 3. Legal Proceedings..................................................... 26
ITEM 4. Submission of Matters to a Vote of Security Holders................... 27
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................................... 29
ITEM 6. Selected Financial Data............................................... 29
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 29
ITEM 8. Financial Statements and Supplementary Data........................... 29
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................... 29
PART III
ITEM 10. Directors and Executive Officers of the Registrant.................... 30
ITEM 11. Executive Compensation................................................ 30
ITEM 12. Security Ownership of Certain Beneficial Owners and Management........ 30
ITEM 13. Certain Relationships and Related Transactions........................ 30
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...... 30
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Unless the context otherwise requires, references to the "Company" herein
include AirTouch Communications, Inc. and entities over which it has or shares
operational control.
This Form 10-K includes trademarks or service marks of the Company and of other
companies.
The term "POPs" means the population of a licensed cellular market (based on
population estimates for such market) multiplied by the Company's ownership
interest in the cellular licensee operating in such market as of the date
specified. POPs for international cellular markets include networks under
construction.
Proportionate subscriber data is obtained, for each system over which the
Company has or shares operational control, by multiplying (i) the aggregate
number of subscribers to such system and (ii) the Company's ownership interest
in such system. Proportionate subscriber data does not include subscribers to
systems over which the Company does not have or share operational control.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
OVERVIEW
AirTouch Communications, Inc. is one of the world's leading wireless
telecommunications companies, with significant cellular interests in the United
States, Western Europe and Asia. The Company's worldwide cellular interests
represented 99.5 million POPs and more than 1.9 million subscribers on a
proportionate basis at December 31, 1994. In the United States, the Company has
over 35 million POPs and controls or shares control over cellular systems in ten
of the thirty largest markets, including Los Angeles, San Francisco, San Diego,
Detroit and Atlanta. Internationally, the Company has 64.1 million POPs and
holds significant ownership interests, with board representation and substantial
operating influence, in national cellular systems operating in Germany, Japan,
Portugal, Sweden and Belgium. In 1994, the Company's consortia were awarded
national cellular licenses in Italy, South Korea and Spain. The Company is also
the third largest provider of paging services in the United States, based on
industry surveys, with approximately 1.5 million units in service at December
31, 1994.
The following table sets forth the Company's POPs and proportionate subscribers
at December 31, 1994.
<TABLE>
<CAPTION>
Proportionate
POPs Subscribers(1)
(In thousands)
<S> <C> <C>
Domestic Cellular:
Southern California 15,694 648
San Francisco Bay Area 3,096 143
Sacramento Valley 1,834 102
Michigan/Ohio(2) 9,043 413
Georgia and Kansas/Missouri 4,952 254
Other domestic interests 771 -
Domestic Total 35,390 1,560
International Cellular:(3)
Germany(4) 26,430 275
Portugal 2,266 20
Japan 11,475 25
Sweden 4,456 36
Belgium 2,525 32
Italy 5,824 -
South Korea 4,972 -
Spain 6,170 -
International Total 64,118 388
Worldwide Total 99,508 1,948
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</TABLE>
(1) Domestic proportionate subscriber data does not include subscribers to
cellular systems over which the Company does not have or share operational
control. For a list of such systems, see "Domestic Cellular."
(2) POPs and proportionate subscribers for the Michigan/Ohio region reflect both
the Company's 50% interest in a partnership with Cellular Communications, Inc.
("CCI") and the Company's ownership of approximately 13% of the equity in CCI at
December 31, 1994.
(3) Includes POPs for Italy, South Korea, Spain and the Kyushu and Chugoku
regions of Japan, where the systems have not yet commenced operations.
(4) Includes POPs and proportionate subscribers represented by a 2.25% interest
which, under the terms of the cellular license, the Company is under a current
obligation to sell to small and medium-sized German businesses.
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INVESTMENT CONSIDERATIONS
The following factors, in addition to the other information contained elsewhere
herein, should be considered carefully in evaluating the Company and its
business.
COMPETITION
The offering of cellular and paging services in each of the Company's markets is
expected to become increasingly competitive. In the United States, where the
Company currently has one competitor in each cellular market, the Company in the
near future will face up to seven additional competitors following the
completion of auctions by the Federal Communications Commission ("FCC") of
broadband personal communications services ("PCS") licenses and the entry of
specialized mobile radio ("SMR") system operators, which are in the process of
constructing digital mobile communications systems on existing SMR frequencies.
Depending on voice quality and system reliability, such systems may be
competitive with the Company's cellular service. One SMR operator is currently
offering digital SMR service in the Los Angeles and San Francisco markets and
has announced plans to construct a nationwide system with its partners that
would offer service in several of the Company's other cellular markets.
There is also significant competition in the Company's international markets.
For example, the Company's systems in Germany and Japan face competition from
two and five other cellular operators, respectively, and the government-operated
cellular systems in those and other countries have recently become increasingly
competitive with privately-operated systems. In addition, the pursuit of new
international wireless telecommunications opportunities is expected to remain
highly competitive. While the Company believes that its technical and operating
expertise have been critical in its success in attracting desirable joint
venture partners and winning international wireless licenses, there can be no
assurance that this such success will continue. In particular, in light of the
trend toward the "auctioning" of new wireless licenses in international markets,
as opposed to merit-based selection criteria, there can be no assurance that the
Company will be willing or able to compete as successfully as it has in the
past.
REGULATION
The licensing, construction, operation, sale and acquisition of wireless
systems, as well as the number of competitors permitted in each market, are
regulated in the United States by the FCC and by its counterparts in other
countries. In addition, certain aspects of the Company's domestic wireless
operations, including the setting of rates, may be subject to public utility
regulation in the state in which service is provided. In August 1994, the
California Public Utilities Commission ("CPUC") issued an interim decision
pursuant to which existing cellular carriers such as the Company would be
subject to substantially greater regulation than new entrants such as PCS and
SMR operators. See "Regulation-State and Local." Although under current federal
legislation the CPUC's regulatory power may be preempted by the FCC, the CPUC is
seeking to retain such power. In the event the CPUC's authority is not
preempted, the Company's operations in California may be subject to a greater
regulatory burden than certain of its future competitors. The CPUC is also
investigating whether California cellular carriers have complied with rules
regarding the filing of applications and permits to locate and construct cell
sites. No assurance can be given that the outcome of such investigation, or
regulatory changes that may be enacted by federal, state or foreign governmental
authorities, will not have an adverse effect on the Company's business.
In January 1995, the United States Department of Justice ("DOJ") advised the
Company of its view that the Company is subject to the Modification of Final
Judgment entered in 1982 in United States v. American Telegraph and Telephone
Co. (the "MFJ"). The Company believes, based on the terms of the MFJ and its
underlying policies, that it is not subject to the MFJ, and is seeking a ruling
to that effect from the federal court that administers the MJF. In the event the
court rules against the Company, the Company believes that it could obtain a
stay of the MFJ pending appeal. No assurance can be given in this regard,
however, or that the Company's position will be validated by the courts. In the
event the Company is re-subjected to the MFJ, unless a waiver on terms and
conditions acceptable to the Company
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is negotiated with the DOJ and approved by the court, the Company may be
required to cease certain activities in the long-distance and satellite services
businesses, as well as its MFJ-prohibited design and development work in
wireless technology. See "Regulation-MFJ."
The Company's cellular license for the Los Angeles market expired in 1993 and
was renewed without difficulty. The Company's licenses for the Sacramento and
San Diego markets expired in 1994 and the Company's renewal applications are
pending. All of the Company's remaining significant domestic cellular licenses
will expire before the end of 1996. While the Company believes that each of the
expiring licenses will be renewed, based upon its prior experience with expired
licenses and upon FCC rules establishing a presumption in favor of licensees
that have complied with their regulatory obligations during the initial license
period, there can be no assurance that any license will be renewed. See
"Regulation-Federal."
FUTURE FUNDING REQUIREMENTS
The Company expects that its existing domestic cellular operations will require
significant amounts of capital in 1995, as will the Company's contribution to
the costs of the acquisition of PCS licenses and system build-out. In
addition, the construction of cellular systems in international markets where
the Company's consortia have recently been awarded licenses will require
substantial capital contributions by the Company. In October 1995, the Company
has certain obligations to purchase additional equity in CCI. See "Domestic
Cellular-Joint Ventures-New Par." While the Company will apply its operating
cash flow and the remaining proceeds from its December 1993 initial public
offering to the foregoing, these obligations, as well as any additional
obligations arising from the Company's pursuit of acquisitions and other new
opportunities, will require the Company to seek additional sources of financing
in 1995. The Company believes that it will be able to access these sources on
terms and in amounts that will be adequate to accomplish its objectives,
although there can be no assurance that that will be the case. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources." The Company has been assigned a
BBB+ implied senior debt rating by Standard & Poor's based in part upon that
agency's analysis of the expected future financial performance of the Company.
DILUTION OF OPERATING RESULTS
In 1994, the Company's consortia were awarded digital cellular licenses in
Italy, South Korea and Spain, and the Company is continuing to pursue new
opportunities in international markets. In March 1995, the Company's PCS
partnership with Bell Atlantic Corporation, NYNEX Corporation and U S WEST Inc.
("PCS PrimeCo") acquired eleven 30 MHz licenses in the FCC's broadband PCS
auctions for an investment of approximately $1.1 billion, of which the Company's
share is 25%. As a result of costs associated with the foregoing license
acquisitions and system build-out, the Company will incur start-up expenses
which will, at least in the near term, have a dilutive effect on the Company's
earnings.
ANTITRUST PROCEEDINGS
The Company believes that its cellular pricing and marketing practices were and
are in compliance with the antitrust laws. The Company, however, is a defendant
in a number of class action complaints with respect to its Los Angeles, San
Francisco or San Diego operations, which allege that the Company conspired to
fix retail and wholesale cellular prices. In addition, the California State
Attorney General has been investigating the pricing of cellular telephone
service in the Los Angeles market in the mid-to late 1980s. The Company does
not believe that the investigation will have a material adverse effect on its
financial condition. The Company also does not believe that the class actions,
if adversely decided, would have a material adverse effect on its financial
condition. No assurance can be given as to the foregoing, however, or that
any disposition of these proceedings, if adverse to the Company, might not
materially adversely affect the Company's results of operations in the year of
such disposition. See Item 3, "Legal Proceedings."
CCI TRANSACTION
Concurrent with the formation in 1991 of an equally owned joint venture with CCI
("New Par"), the Company purchased 5% of the equity in CCI, agreed to purchase
additional equity in CCI and obtained
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the right to acquire all of CCI's remaining equity in stages over the next
several years. The Company currently owns approximately 13% of the equity in CCI
and has the right to purchase additional equity in CCI in the open market,
through privately negotiated transactions or otherwise. Until October 1995, the
Company's ownership of CCI's equity may not exceed 27.5% on a fully diluted
basis. Pursuant to an agreement between the Company and CCI, the Company is
obligated in October 1995 to purchase up to approximately $720 million of stock
and stock options in CCI, depending on the number of shares tendered to CCI in a
related redemption. The per-share purchase price underlying such obligation is
$60. The stock and options that the Company is obligated to purchase represented
approximately 25% of CCI's equity on a fully diluted basis at December 31, 1994.
The Company also has the right (but not the obligation) during an 18-month
period commencing in August 1996 to purchase the remainder of CCI (but excluding
any assets and related liabilities other than CCI's interest in New Par unless
otherwise agreed by the partners) at a price that reflects appraised private
market value of CCI (excluding such assets and related liabilities) at that
time. In the event that the Company does not exercise such right, New Par
effectively terminates and CCI may be obligated to sell its assets, including
those relating to the joint venture, to a third party. If New Par assets (and
related liabilities) are sold within a specified period (not to exceed two
years) at less than the appraised price, the Company will be obligated to effect
certain "make-whole" payments to CCI's stockholders based upon the amount of the
shortfall. The Company's exercise of its rights to purchase additional equity in
CCI will depend upon the Company's evaluation of the market for CCI's stock,
CCI's business prospects and financial condition, other investment opportunities
available to the Company, prospects for the Company's business, general economic
conditions and other factors. No assurance can be given that the Company's
investment in CCI will be favorable to the Company or that any sale of the joint
venture assets, if required, will be consummated at a price that will eliminate
the Company's make-whole obligation. See "Domestic Cellular-Joint Ventures-New
Par."
IMPLICATIONS OF LICENSEE OWNERSHIP STRUCTURE
The Company holds most of its domestic cellular properties through partnership
interests, a number of which are controlling interests. Upon the contribution of
the Company's domestic cellular properties to its joint venture with U S WEST,
control over such properties will, to a certain extent, be shared with U S WEST.
See "Domestic Cellular-Joint Ventures-U S WEST." In addition, the Company's
interests in international wireless licenses are held almost exclusively through
foreign corporations in which the Company is a significant, but not controlling,
shareholder. Under the governing documents for certain of these partnerships and
corporations, the approval of business plans and decisions as to the timing and
amount of cash distributions may require a greater percentage vote than that
held by the Company. Although the Company has not been materially impeded by the
nature of its wireless ownership interests from pursuing its corporate
objectives, no assurance can be given that it will not experience difficulty in
this regard in the future. The Company may enter into similar arrangements as it
participates in consortia to pursue additional wireless opportunities.
FLUCTUATIONS IN THE VALUE OF WIRELESS LICENSES
A substantial portion of the Company's assets consists of interests in entities
holding cellular licenses, the value of which will depend significantly upon the
success of the operations of such entities and the growth and future direction
of the cellular industry generally. Values of licenses also have been affected
by fluctuations in the level of supply and demand for such licenses. In
addition, the infrequency with which licenses are traded or sold may increase
the difficulty of establishing values for the Company's license interests. Any
transfer of control of an entity holding a domestic license is subject to prior
FCC (and possibly state regulatory) approval. Analogous governmental approvals
are required for transfers of interests in foreign licenses. Where licenses are
held by partnerships or foreign corporations, transfers of interests also are
often subject to contractual restrictions.
The Company believes that international cellular opportunities in the future
will arise primarily through awards by developing countries, where operating
risks may be greater and potential returns lower. In addition, investment
returns from acquisitions of interests in existing entities holding wireless
licenses or from licenses acquired through auctions may be lower than those
resulting from the Company's early license awards because of the substantial
purchase prices required to acquire such interests.
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EXCHANGE RATE FLUCTUATIONS
Foreign currency exchange rates are increasingly material to the Company's
results of operations. The Company evaluates the risk of significant exchange
rate volatility and its ability to hedge as part of its decision whether to
pursue an international opportunity. A significant weakening against the dollar
of the currency of a country where the Company recognizes revenues or earnings
may adversely affect the Company's results, while any weakening of the dollar
against such currency could have an adverse effect if the Company is obligated
to make significant foreign denominated capital investments in such country. The
Company attempts to mitigate the effect of foreign currency fluctuations through
the use of foreign currency contracts and local banking accounts.
RADIOFREQUENCY EMISSIONS CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions from
portable cellular telephones might be linked to cancer. The Company has
collected and reviewed relevant scientific information and, based on such
information, is not aware of any credible evidence linking the usage of portable
cellular telephones with cancer. The FCC currently has a rulemaking proceeding
pending to update the guidelines and methods it uses for evaluating RF emissions
in radio equipment, including cellular telephones. While the proposal would
impose more restrictive standards on RF emissions from low power devices such as
portable cellular telephones, it is anticipated that all cellular telephones
currently marketed and in use will comply with those standards. Additional
concerns have been expressed about the safety of emissions from cellular
facilities which transmit calls to subscriber's telephone handsets. The
Company's facilities are licensed by the FCC and comply with the exposure levels
set by the FCC. The CPUC has also opened an investigation into the safety of
cellular facilities licensed in California. The Company submitted extensive
scientific data to the CPUC to support its conclusion that cellular emissions
will cause no adverse health effects. A CPUC staff report issued in December
1993 concluded that the CPUC is unlikely to adopt stricter requirements than the
FCC absent convincing evidence of risk.
DOMESTIC CELLULAR
The Company is one of the largest providers of cellular services in the United
States, with interests in some of the most attractive cellular markets based
upon total population and demographic characteristics. The Company's United
States cellular interests represented over 35 million POPs and more than 1.5
million proportionate subscribers at December 31, 1994. The Company has or
shares operational control over cellular systems in Los Angeles, San Francisco,
San Diego, Atlanta, Detroit, Cleveland, San Jose, Sacramento, Cincinnati and
Kansas City. These cities represent ten of the 30 largest cellular markets in
the United States. The Company also has or shares operational control over
cellular systems in 34 additional markets, including Columbus, Dayton and
Toledo, Ohio, and owns minority interests in cellular systems serving ten other
markets, including Dallas/Fort Worth, Tucson and Las Vegas.
Prior to the broadband PCS auctions, the FCC licensed only two cellular systems
in each market. One license was initially reserved for applicants affiliated
with a company engaged in the wireline telephone business (the "wireline
licensee") and the other was initially reserved for a non-wireline licensee.
Through FCC license applications and grants, the Company acquired controlling
interests in wireline licensees in San Diego, the greater Los Angeles area,
including Oxnard and Ventura, and the greater Sacramento area, including
Stockton and Reno. Following the FCC's initial license awards, the Company
acquired additional cellular interests throughout the United States. In
evaluating acquisition opportunities, the Company considers the attractiveness
of the market for cellular services, the Company's ability to control or
significantly influence the operations of the system and the opportunity to
create regional networks through integration with the Company's existing systems
or by acquiring licenses in adjacent markets.
The following table sets forth as of December 31, 1994 (i) by region the markets
in which the Company owns an interest in a cellular system, (ii) whether each
such system is the wireline or non-wireline
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licensee, (iii) the total population of the market served by such system, (iv)
the Company's percentage ownership in the operator of the system, and (v) the
Company's POPs based on its percentage ownership.
<TABLE>
<CAPTION>
Wireline/ Total
Non- Population(1) Ownership POPs
Market Wireline (in thousands) Percentage (in thousands)
<S> <C> <C> <C> <C>
Southern California Region
Los Angeles (4)(6) WL 14,719 84.00% 12,364
San Diego (4)(6) WL 2,661 100.00% 2,661
Oxnard/Ventura (4)(6) WL 697 50.00% 349
Las Vegas, NV (3) WL 936 27.79% 260
Santa Barbara (5) WL 378 10.00% 38
San Luis Obispo (5) WL 216 10.00% 22
Subtotal 19,609 15,694
San Francisco Bay Area Region
San Francisco/Oakland (3)(6) NWL 3,832 47.00% 1,801
San Jose (3)(6) NWL 1,542 47.00% 725
Vallejo (3)(6) NWL 489 50.00% 245
Santa Rosa (3)(6) NWL 411 40.18% 165
Salinas/Monterey (3)(6) NWL 372 42.96% 160
Subtotal 6,646 3,096
Sacramento Valley Region
Sacramento (4)(6) WL 1,480 49.88% 738
Stockton (4)(6) WL 517 49.88% 258
Modesto (4)(6) WL 415 49.88% 207
Reno, NV (4)(6) WL 280 49.88% 140
Chico (4)(6) WL 198 49.88% 99
Redding (4)(6) WL 167 48.43% 81
Yuba City (4)(6) WL 136 49.88% 68
Storey, NV (4)(6) WL 105 49.88% 52
Tehema (4)(6) WL 98 49.88% 49
Sierra (4)(6) WL 91 49.88% 45
Lander, NV (3) WL 48 50.00% 24
Modoc (4)(6) WL 60 25.00% 15
Mineral, NV (4)(6) WL 27 50.00% 14
White Pine, NV (4)(6) WL 13 100.00% 13
Del Norte (5) WL 212 5.60% 12
Fresno (5) WL 735 1.10% 8
Bakersfield (5) WL 618 1.10% 7
Visalia/Tulare (5) WL 348 1.10% 4
Subtotal 5,548 1,834
Michigan/Ohio Region (2)
Detroit, MI (3)(6) NWL 4,607 56.69% 2,612
Cleveland, OH (3)(6) NWL 1,857 56.69% 1,053
Cincinnati, OH (3)(6) NWL 1,514 56.69% 858
Columbus, OH (3)(6) NWL 1,291 56.69% 732
Dayton, OH (3)(6) NWL 860 56.69% 488
Toledo, OH/MI (3)(6) NWL 793 56.69% 450
Grand Rapids, MI (3)(6) NWL 728 56.69% 413
Akron, OH (3)(6) NWL 680 56.69% 386
Flint, MI (3)(6) NWL 505 56.69% 286
Lansing, MI (3)(6) NWL 503 56.69% 285
Saginaw/Bay City, MI (3)(6) NWL 403 56.69% 228
Canton, OH (3)(6) NWL 404 56.69% 229
Hamilton/Middletown, OH (3)(6) NWL 317 55.72% 177
Lorain/Elyria, OH (3)(6) NWL 279 56.69% 158
Lima, OH (3)(6) NWL 222 56.69% 126
Mercer, OH (3)(6) NWL 222 56.69% 126
Muskegon, MI (3)(6) NWL 187 62.56% 117
Springfield, OH (3)(6) NWL 186 49.96% 93
Clinton, OH (3)(6) NWL 170 56.69% 96
Mansfield, OH (3)(6) NWL 127 56.69% 72
Ashtabula, OH (3)(6) NWL 102 56.69% 58
Subtotal 15,957 9,043
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Georgia Region
Atlanta (4)(6) NWL 3,002 100.00% 3,002
Chattooga (4)(6) NWL 207 100.00% 207
Athens (4)(6) NWL 166 86.84% 144
Jasper (4)(6) NWL 123 100.00% 123
Subtotal 3,498 3,476
Kansas/Missouri Region
Kansas City, KS/MO (3)(6) NWL 1,503 50.00% 752
Wichita, KS (4)(6) NWL 482 100.00% 482
Topeka, KS (4)(6) NWL 199 78.00% 155
St. Joseph, MO (3)(6) NWL 99 43.50% 43
Lawrence, KS (3)(6) NWL 88 50.00% 44
Subtotal 2,371 1,476
Other
Dallas/Fort Worth, TX (3) NWL 4,288 17.00% 729
Tucson, AZ (3) NWL 722 5.88% 42
Subtotal 5,010 771
TOTAL 58,639 35,390
</TABLE>
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(1) 1994 Donnelly Marketing Information Service population estimates.
(2) The Company's ownership percentage and POPs for the Michigan/Ohio region
reflect both the Company's 50% ownership interest in New Par and the
Company's ownership of 13.03% of the equity in CCI at December 31,1994.
(3) Accounted for under the equity method.
(4) Accounted for under the consolidation method.
(5) Accounted for under the cost method.
(6) Operating results are included in the proportionate cellular operating
results presented in Item 6, "Selected Financial Data," and in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results
of Operations-Proportionate Results of Operations."
MARKETING
The Company aggressively markets its cellular services under the AirTouch
Cellular name through its own sales force and arrangements with independent
agents, as well as newspaper and radio advertising and toll-free telephone
numbers. In certain markets, the Company's cellular service is sold through
resellers who, pursuant to FCC requirements, are allowed to purchase blocks of
cellular telephone numbers and access to cellular services at wholesale rates
for resale to the public. Agents are independent contractors who solicit
customers for the Company's cellular service, and typically include automobile
dealers, specialized electronics stores and department stores. The Company
generally pays its agents a commission for each subscriber who uses the
Company's service for a specified period and makes residual payments to the
agent based on the subscriber's ongoing service charges. Recently, the Company
has been taking steps to align sales costs with revenues by emphasizing residual
payments to agents over upfront commissions and utilizing Company-controlled
distribution channels such as direct sales and telemarketing. In the second half
of 1994, the Company began targeting the consumer market with special promotions
and pricing plans and by expanding into consumer electronics stores and other
mass-market distribution channels.
The Company's wireline systems are part of an alliance that markets cellular
service in the United States and Canada under the MobiLink brand name. The
Company's non-wireline systems in the San Francisco Bay Area, Michigan/Ohio and
Kansas market cellular service under the Cellular One brand name. In addition,
the Company's Georgia regional network is part of SouthReach, a service offered
with three other cellular operators in the southeastern United States.
TOMCOM, L.P. ("TOMCOM"), a joint venture between the Company, U S WEST, Bell
Atlantic and NYNEX, will among other things develop a national brand and
marketing strategy for the partners' existing cellular operations and the PCS
systems to be operated by PCS PrimeCo. See "Joint Ventures-Bell Atlantic/NYNEX."
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SERVICES
In addition to providing high quality wireless telephone service, in most
markets the Company makes available to subscribers custom calling services such
as voice mail, call forwarding, call waiting, three way calling, no-answer and
busy transfer. In 1994, the Company introduced Display Messaging, a new service
that allows a cellular phone to receive and store voice-mail messages, short
alphanumeric messages and pages even if the handset is in use or switched off.
In addition, the Company introduced AirTouch 411 Connect, an enhanced directory
assistance service that enables callers to be connected to the party whose
number was requested without hanging up and redialing.
The Company charges its subscribers for service activation, monthly access,
per-minute airtime and custom calling features, and generally offers a variety
of pricing options, most of which combine a fixed monthly access fee and
per-minute charges. The Company pays the local telephone service company
directly for interconnection of cellular telephone calls with the wireline
telephone network. Subscribers are billed directly by their selected long
distance carrier or by the Company, which provides the billing service for a fee
to the long distance carrier. In late 1994, the Company began offering its own
long-distance service in its Los Angeles, Sacramento, San Diego and Atlanta
markets.
The Company maintains a customer service department in each of its cellular
markets for billing and service inquiries. Using a toll free telephone number,
customers are able to report any problems and obtain up-to-date information with
respect to their accounts. In each of its markets, the Company has technicians
on call on a 24-hour basis. Through the use of sophisticated monitoring
equipment, these technicians are able to check the performance of the cellular
network.
NEW SERVICES
Personal Communications Services. Pursuant to the FCC's decision to allocate
radio frequency spectrum for broadband PCS licenses, six new licenses will be
granted: two 30 MHz licenses (Blocks A and B) in each of the 51 Major Trading
Areas ("MTAs"), and one 30 MHz license (Block C) and three 10 MHz licenses
(Blocks D, E and F) in each of 493 Basic Trading Areas ("BTAs"). The two current
cellular carriers in each market currently have 25 MHz of spectrum each. The
Block C 30 MHz license and Block F 10 MHz license are reserved for "designated
entities," including women, minorities and small businesses. The rules adopted
by the FCC permit a licensee to acquire up to 40 MHz in a single service area.
Cellular licensees (defined as entities owning more than 20% of a cellular
system) are not restricted from participating in PCS in areas outside of their
cellular service areas, although they are only permitted to obtain a 10 MHz
block in their cellular service areas.
In the March 1995 Block A and B license auctions, PCS PrimeCo, the Company's
partnership with Bell Atlantic Corporation, NYNEX Corporation and U S WEST Inc.,
was the high bidder for eleven 30 MHz licenses covering the Chicago, Dallas,
Tampa, Houston, Miami, New Orleans, Milwaukee, Richmond, San Antonio,
Jacksonville and Honolulu markets, with bids totaling approximately $1.1
billion, of which the Company's share is 25%. These licenses complement the
partners' existing cellular franchises and will enable them to provide wireless
services on a nationwide basis. The remainder of the auctions will take place
later in 1995 and are expected to conclude by early 1996. In November, 1994, the
Company acquired one nationwide and three regional narrowband PCS licenses in
1994 for use in connection with advanced paging services. See "Domestic Paging."
Although broadband PCS is expected to be similar to current cellular technology
in providing "anytime, anywhere" voice and data services to mobile users, PCS
may offer additional features not available from analog cellular carriers today.
The Company intends to use the broadband PCS licenses it acquires in the
auctions, its partnerships with U S WEST, Bell Atlantic and NYNEX and other
relationships to create a seamless national wireless network and to offer
services to customers throughout the United States.
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Globalstar. The Company holds an 8.3% interest in Globalstar, L.P.
("Globalstar"), a joint venture led by Loral Corporation and Qualcomm
Incorporated ("Qualcomm") that will construct and operate a satellite-based
network utilizing code division multiple access ("CDMA") technology to offer
voice, data, fax, paging and position location services throughout the world.
The initial launch is expected to take place in 1997, with service expected to
begin in 1998. The Company has exclusive service provider status in the United
States, Austria, Belgium, the Caribbean, Indonesia, Japan, The Netherlands,
Portugal and Switzerland, and has the right to obtain exclusive service provider
status in other areas. Pursuant to a preliminary agreement, the Company will
have co-exclusive provider status in Canada and Mexico. The Company made initial
investments in Globalstar of $25 million in 1994 and expects to contribute an
additional $12.5 million over the next year. The Company may be required to
cease its involvement in Globalstar if the MFJ is determined to apply to the
Company. See "Regulation-MFJ."
Wireless Data. The Company's wireless data group focuses on data-transmission
uses for the Company's cellular network. The Company and three other cellular
carriers were the primary developers of the United States' first nationwide
cellular data service for United Parcel Service ("UPS"). This service allows UPS
drivers to send package tracking information over cellular networks throughout
the country to UPS' private network and ultimately to UPS' mainframe computers.
The Company has also entered into other arrangements to develop wireless data
communications software and customer applications.
The Company and several other cellular operators have formed a consortium to
test wireless packet data transport technology, which is designed to allow short
bursts of data to be transmitted more quickly and efficiently than current
circuit-switching technology. It is expected that the development of this
technology will make it possible for cellular carriers to offer a broad range of
cost-effective wireless data services. In October 1994, the Company introduced
AirTouch ModemConnect service, which features improved reliability and
transmission speed for mobile data customers, in its Atlanta, Los Angeles,
Sacramento and San Diego markets.
TECHNOLOGY
The Company is an industry leader in cellular technology. The Company's Los
Angeles network was the first to introduce cell site sectorization and
overlay/underlay techniques which simultaneously provide increased coverage in
high traffic areas and umbrella coverage of difficult terrain. In 1991, the
Company became the first to deploy microcells, which make use of low power
antennas located significantly farther from cell sites than permitted by earlier
technology, thereby allowing coverage inside buildings, in canyons and tunnels
and in other areas that are difficult or impossible to serve with conventional
cellular technology. Microcell technology also includes a fast hand-off
capability, which is valuable in downtown settings where a greater number of
antennas at lower power settings allows the network to handle high traffic
densities.
The Company also has developed advanced network design and management tools. The
Company's proprietary software predicts cell site coverage, which is critical in
engineering new cellular networks and in making design improvements to existing
systems. Other proprietary software developed by the Company detects and
analyzes system problems, allowing the Company to react quickly, often before
the problem noticeably affects service quality.
Currently, in most markets the radio transmission between the cellular telephone
and the cell site is an analog transmission, and both the cellular telephone and
the transmitting equipment are designed to send and receive voice signals
exclusively in this mode. The Company believes that digital technology will
offer many advantages over analog technology, including substantially increased
capacity, improved voice quality, greater call privacy, lower operating costs
and the opportunity to provide improved data transmissions. Because existing
analog cellular telephones will not be able to receive digital transmissions
from the cell site, the Company expects that the transition by subscribers who
prefer digital service will occur over a number of years. During such
transition, cellular systems will maintain transmitting equipment to serve both
formats and it is expected that manufacturers will make dual-mode cellular
telephones capable of sending and receiving both analog and digital
transmissions in order to meet subscriber needs for roaming in areas outside
their home systems.
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The Company was an early proponent of research into CDMA and worked with
Qualcomm and others to develop this technology. In September 1994, the Company
commenced testing its CDMA network in the Los Angeles market and expects to
introduce CDMA service on a commercial basis in portions of its Los Angeles
market in the summer of 1995. CMT Partners, the Company's joint venture with
McCaw Cellular Communications, Inc., a subsidiary of AT&T, introduced digital
cellular service based on time division multiple access ("TDMA") technology in
the San Francisco Bay Area in October 1993.
COMPETITION
The cellular services industry in the United States is highly competitive.
Cellular systems compete principally on the basis of network quality, customer
service, price and coverage area. The Company's chief competition in each market
is from the other cellular licensee. In certain markets, the Company also
competes at the retail level with resellers. The Company believes that its
technological expertise, emphasis on quality and customer service, large
coverage areas, and development of new products and services make it a strong
competitor.
The Company is likely to face greater competition in the future. PCS licensees
in the Company's cellular markets are expected to provide significant
competition for the Company's existing cellular networks. The FCC has permitted
SMR system operators to construct digital mobile communications systems on
existing SMR frequencies in many metropolitan areas throughout the United
States. When constructed, these multi-site configuration systems will offer
interconnected mobile telephone service and, depending on voice quality and
system reliability, may compete with the Company's cellular services. One SMR
operator is currently offering digital SMR service in the Los Angeles and San
Francisco markets and has announced plans to construct a nationwide system with
its partners that would offer service in several of the Company's other cellular
markets.
AT&T's acquisition of McCaw may increase the competition that the Company faces
in Los Angeles and Sacramento, where its cellular operations compete with McCaw.
McCaw is expected to use the AT&T brand name in marketing its cellular services
and to utilize AT&T's sales, customer service and distribution channels, as well
as the research and development capabilities of AT&T Bell Laboratories. The
Company and McCaw jointly operate cellular systems in San Francisco, San Jose,
Dallas, Kansas City and certain other markets through CMT Partners. See "Joint
Ventures-CMT Partners."
JOINT VENTURES
New Par. In August 1991, the Company and CCI formed New Par, to which CCI
contributed its cellular systems, located primarily in Ohio, and the Company
contributed its cellular systems in Michigan and Ohio. New Par is equally owned
by CCI and the Company and is governed by a four-person committee, with two
members appointed by each company.
The Company and CCI have entered into an agreement (the "Merger Agreement")
under which CCI will, in October 1995, offer to redeem up to 10.04 million
shares of its redeemable stock at $60 per share and the Company is obligated to
purchase from CCI shares or stock options representing in the aggregate
approximately 2.4 million shares at a price of $60 per share, less the exercise
price in the case of stock options (the "MRO"). The Company is obligated to
purchase from CCI at $60 per share a number of newly issued shares of stock
equal to the number of shares purchased by CCI in the MRO. Pursuant to the
Merger Agreement, the Company acquired approximately 5% of CCI and obtained the
right to acquire all of CCI's remaining equity in stages over the next several
years. The Company currently owns approximately 13% of CCI and has the right to
purchase additional equity in CCI in the open market, through privately
negotiated purchases or otherwise. Until October 1995, the Company's ownership
of CCI's equity may not exceed 27.5% on a fully diluted basis.
Beginning in August 1996, the Company has the right, by causing CCI to redeem
all of its redeemable stock not held by the Company (the "Redemption"), to
acquire CCI, including its interests in New Par and such other CCI assets and
related liabilities as the Company and CCI may agree upon, at a price per
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share that reflects the appraised private market value of New Par (and such
other CCI assets and related liabilities as the Company and CCI agree shall be
retained) determined in accordance with an appraisal process set forth in the
Merger Agreement. The Company has the opportunity to evaluate up to three
different appraisal values during the 18-month period beginning in August 1996,
prior to determining whether to cause the Redemption. The Company will finance
the Redemption by providing to CCI any necessary funds.
In the event that the Company does not exercise its right to cause the
Redemption, CCI is obligated to promptly commence a process to sell itself (and,
if directed by the Company, the Company's interest in New Par). In the event
that the Company does not direct CCI to sell the Company's interest in New Par,
such partnership will dissolve and the assets will be returned to the
contributing partner. CCI may, in the alternative, purchase the Company's
interest in CCI or CCI and New Par, as the case may be, at a price based upon
their appraised values determined in accordance with the Merger Agreement. If
CCI or its interest in New Par is sold within certain specified time periods not
to exceed two years for a price less than the appraised private market value,
the Company is obligated to pay to each other CCI stockholder a specified
percentage of such shortfall.
CMT Partners. In September 1993, the Company and McCaw formed CMT Partners, an
equally owned partnership that holds interests in cellular systems operating in
San Francisco, San Jose, Dallas, Kansas City and certain adjacent suburban
areas. CMT Partners is governed by a four-person committee consisting of two
members from each company. The Company's contributions to the partnership
included its 61.1% interest in Bay Area Cellular Telephone Company ("BACTC"),
which operates in the San Francisco and San Jose markets, and its 34% interest
in the non-wireline licensee operating in the Dallas/Fort Worth market, as well
as certain assets and liabilities of its retail reseller operations in the San
Francisco Bay Area. McCaw contributed its 32.9% interest in BACTC, as well as
its interests in the nearby Vallejo, Santa Rosa and Salinas/Monterey systems.
McCaw also contributed its interests in Kansas City, Missouri, Lawrence, Kansas
and St. Joseph, Missouri. In addition, the Company purchased McCaw's interests
in the Wichita and Topeka, Kansas cellular systems for $100 million. Upon
dissolution of CMT Partners its assets will be sold unless either the Company or
McCaw elects to have the assets distributed in kind. If that election is made,
the Dallas/Fort Worth interest would be distributed to McCaw, the
Kansas/Missouri interests would be distributed to the Company, and the interests
in the other systems held by the partnership would be distributed pro rata to
both partners.
U S WEST. In July 1994, the Company and U S WEST announced an agreement to
combine their domestic cellular properties. In the initial phase, a partnership
known as WMC Partners, L.P. ("WMC") was formed in which the Company and U S WEST
will initially hold interests of approximately 70 percent and 30 percent,
respectively. WMC is governed by an eight-member committee consisting of four
representatives of the Company (including the president) and three of U S WEST,
with an independent member to cast tie-breaking votes in deadlock situations.
Voting in the partnership committee is in proportion to the partners' percentage
interests, and supermajority votes are required in connection with certain
financial matters, including the approval of business plans.
The closing of the initial phase (the "Closing") is conditioned on certain
federal and state regulatory approvals and is expected to occur in the third
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.
The parties also formed an equally owned partnership to pursue new PCS
opportunities. In conjunction with the PCS PrimeCo, 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 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 first PCS license, whichever is
later.
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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 would 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 of U S WEST of more
than 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
would 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.
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 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.
Bell Atlantic/NYNEX. In October 1994, the Company and U S WEST announced the
formation of a consortium between their wireless joint venture ("ATI/USW") and
the wireless joint venture announced in June of this year between Bell Atlantic
and NYNEX ("BA/NYN"). This consortium consists of two partnerships, each equally
owned by ATI/USW and BA/NYN. In March 1995, the first partnership, PCS PrimeCo,
acquired eleven 30 MHz PCS licenses covering major metropolitan areas, which
complement the existing domestic cellular franchises of the Company, U S WEST,
BA and NYNEX. See "NEW SERVICES--Personal Communications Services." PCS PrimeCo
will construct and operate PCS systems in those areas and any other areas for
which PCS PrimeCo wins licenses. This entity will be governed by a board
composed of three members from each of ATI/USW and BA/NYN.
The second partnership, TOMCOM, will provide services to the existing cellular
businesses of the four parties and to the PCS properties acquired by the
consortium. It will also develop technical and service standards for wireless
properties, adopt a national brand and marketing strategy, develop information
technology and create a national distribution strategy. The entity will be
governed by a board composed of three members from each of ATI/USW and BA/NYN,
as well as one independent member.
Unlike the Company's joint venture with U S WEST, the agreements with BA/NYN do
not provide for a merger of cellular properties. Accordingly, each of ATI/USW
and BA/NYN will continue to hold such properties separately. In addition, either
such joint venture after seven years may cause PCS PrimeCo to be dissolved and
any PCS properties owned by it to be allocated as equally as possible between
them. Bell Atlantic and NYNEX each are subject to certain standstill
restrictions with respect to the Company through October 20, 2001, unless such
restrictions are earlier terminated or suspended.
INTERNATIONAL CELLULAR
The Company has been highly successful in obtaining significant interests in
cellular licenses in some of the world's most attractive markets. The structure
of the Company's international cellular interests typically reflect government
preferences or requirements that local owners hold at least a majority interest
in their telecommunications licenses. However, the Company has board
representation and substantial
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operating influence in each of its cellular systems outside of the United
States. The Company has the second largest ownership position in Mannesmann
Mobilfunk GmbH ("MMO") and three of the five Japanese cellular companies in
which it has an interest, and currently has the third largest ownership position
in Telecel. In Belgium, the Company is the sole private partner in a joint
venture with the state-owned telecommunications company. The Company has
appointed the director of engineering for the cellular systems in Germany,
Japan, Portugal and Belgium, as well as for the networks under construction in
South Korea, Italy and Spain. Each of these directors is responsible for network
buildout and technical operations.
GERMANY
The Company currently holds a 32.8% interest and is the second largest
shareholder of MMO, the joint venture that holds the second of three national
digital cellular licenses in Germany. The Company's interest in MMO includes a
2.25% interest which, under the terms of MMO's cellular license, the Company is
under an obligation to sell to small or medium-sized German businesses. MMO's
network, known as "D2 Privat," was one of the world's first commercial cellular
systems to utilize the Global System for Mobile Communications ("GSM")
technology standard. MMO began commercial operations in June 1992 and had
approximately 842,000 subscribers at December 31, 1994. The system presently
covers approximately 94% of the population, including all of the major cities
and highways.
The Company believes that Germany's dense population, high per capita income and
attractive workforce profile make it a promising market for cellular services.
In addition, the cellular penetration rate in Germany is significantly lower
than in the United States. However, there can be no assurance that cellular
penetration in Germany will increase to a level comparable to that in the United
States.
The other shareholders of MMO and their ownership interests are Mannesmann AG
("Mannesmann"), a German industrial engineering company and steel manufacturer
(62.17%) and Cable and Wireless plc, the British telecommunications company
(5.03%). The Company's share of MMO's contributed capital is approximately DM
531 million (US $351 million). MMO expects to fund its future capital needs
through operating cash flows and bank loans. MMO has a DM 1.1 billion credit
facility, of which DM 720 million (US $465 million) had been drawn down at
December 31, 1994.
Operations. The Company played the lead role in the design and construction of
the D2 network. In addition to appointing the director of engineering, the
Company provided a large technical staff during the design and construction
phase of operations. The Company also has contributed to the development and
installation of MMO's customer service and billing system and has assisted with
MMO's business planning and marketing, sales and distribution arrangements. The
Company continues to influence MMO's operations through its right to appoint two
of the six members of the owners' panel, including the deputy chairman, and
two of the 12 members of the supervisory board.
The Company believes that D2's continued success in attracting customers
reflects the significantly improved quality of the digital system, falling
equipment prices and D2's customer-oriented service. For example, all D2
subscribers have 24-hour toll-free telephone access to customer service. Demand
is expected to increase as hand-held cellular telephones, as well as roaming on
the GSM standard within Europe, become more available.
MMO utilizes three channels of distribution. Resellers have provided the largest
portion of D2's subscribers to date. While they receive a discount from the
retail rate based on customer longevity, the Company believes that such
resellers nonetheless are an efficient means of distribution. D2 also makes use
of an increasing number of third-party agents and dealers. Agent commissions
generally are paid per new subscriber and are based primarily on the volume of
subscribers generated by the dealer. The remainder of D2's customers are
acquired through direct sales.
While D2's per-minute charges are relatively high by United States standards,
they are comparable to those of the competing state-operated digital cellular
system. Unlike in the United States, there is no additional charge for long
distance service within Germany. In addition, because D2 is a national
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franchise, there is no roaming charge within Germany, although a charge is
imposed for international roaming. In further contrast to United States systems,
the calling party in Germany pays for calls made to cellular subscribers.
Accordingly, cellular users in Germany are generally less reluctant than users
in the United States to encourage incoming calls to their cellular telephones.
Company Rights and Obligations. Under MMO's joint venture agreement, the Company
has significant participation in management. The Company's consent is required
for such matters as increases in capital contributions, incurrence of certain
recourse debt, material transactions with affiliates and any fundamental
corporate transactions. In addition, the Company must consent to the adoption of
annual budgets and business plans (which cover, among other matters,
distributions to the partners, external financing and projected reserves). MMO's
senior management group consists of five members, of which the Company has
appointed the director of engineering and, jointly with Mannesmann, the director
of marketing and sales. In addition, the Company and Mannesmann each appoint one
member to a technical committee, which is charged with resolving matters
presented by the director of engineering and must do so unanimously. The joint
venture agreement provides that any transfer of MMO shares is subject to the
other partners' rights of first refusal. Under the terms of the license, any
transfer of an ownership interest in MMO must be approved by the German
telecommunications ministry. Mannesmann and the Company have committed in
principle to maintaining a substantial share of ownership in MMO until certain
debt is retired pursuant to agreements with MMO's banks.
Competition. Currently, MMO's principal competitor is DeTeMobil, a subsidiary of
the state-owned landline telephone company. DeTeMobil operates three mobile
telephone networks: "B-Netz," an older system used primarily by government
agencies; "C-Netz," an analog cellular system that is reportedly near capacity,
with approximately 720,000 subscribers at December 31, 1994; and the "D1"
network, which operates on the GSM standard. D1 commenced operations in July
1992 and had a reported 870,000 subscribers at December 31, 1994. Although
DeTeMobil has high name recognition and a well-developed distribution channel
integrated with the landline service, the Company believes that MMO's D2
compares favorably with the state-owned digital system based upon network
quality and customer service.
The other competitor in the German market is E-Plus Mobilfunk GmbH, whose
digital system, known as "E1," commenced operations in May 1994 primarily in
Berlin and eastern Germany, where telephone density is much lower. The Company
expects E1, which had an estimated 30,000 subscribers at December 31, 1994, to
become a significant competitor over time.
The German government has stated that no additional licenses will be issued for
cellular or cellular-like services through 1996.
PORTUGAL
The Company owns a 23% interest in Telecel, the cellular company that was
awarded one of two national GSM licenses by the Portuguese government in October
1991. Telecel began commercial service in October 1992, covering all of
Portugal's major cities and highways, and had approximately 88,000 subscribers
at December 31, 1994. Telecel currently covers approximately 94% of the
population and is required under the terms of its license to cover 99% by
October 1996.
The Company's equity interest in Telecel will increase by up to an additional
12% if Portugal changes its law to allow non-European Union ("EU") entities to
own a greater than 25% interest in Portuguese telecommunications licenses. Under
an agreement among the shareholders of Telecel, until January 1, 1997 the
Company is required to fund Telecel's capital as if it held a 35% equity
interest. To the extent that the Company's funding exceeds the amount it would
be required to contribute as a 23% shareholder in Telecel, such funding is
required to be in the form of five-year interest-free loans. If Portuguese law
is amended to permit greater than 25% ownership by non-EU entities, the Company
has the assignable obligation to convert its loans into an additional 12% equity
interest (or such lesser percentage as is permitted under the new law). In the
event that Portugal does not relax its ownership restrictions before October
1996, the Company has agreed to nominate a third party to purchase and convert
the loans,
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subject to the approval of the shareholders of Telecel. Alternatively, the
Company can increase its percentage ownership in Telecel through an
EU-recognized holding company.
As of December 31, 1994, Telecel's contributed capital was approximately ESC
21.5 billion (US $135 million), of which the Company's contribution was
approximately ESC 8.4 billion (US $52.6 million). The Company does not expect
that it will be required to contribute additional capital to Telecel. Telecel's
capital needs are expected to be met through operating cash flow and borrowings.
At December 31, 1994, Telecel had approximately ESC 10.5 billion (US $66
million) in short-term commercial paper and other short-term borrowings
outstanding.
Telecel's other shareholders include Espirito Santo Irmaos, SA (37.5%), an
affiliate of Espirito Santo-Sociedade de Investimentos, SA, a Lisbon-based
international finance and investment company; Amorim, Investimentos e
Participacoes SGPS, SA (37.5%), a diversified Portuguese company; and Eurofon of
Portugal, Inc. (2%), a subsidiary of LCC Incorporated, a United States software
and engineering company.
Operations. Telecel has a distribution network of exclusive agents that account
for a majority of customer activations. These agents, through their own outlets
and those of subagents, represent several hundred points of sale in Portugal.
Telecel also has a direct sales force which accounts for the balance of the
activations. There are no resellers in Portugal.
Company Rights and Obligations. The Company played the lead role in the design
and implementation of Telecel's network. Under the Telecel shareholders'
agreement, the Company appoints the director of network engineering and
operations, who occupies one of five positions on the management board, and
three of the nine elected members of Telecel's shareholder board. As a greater
than 20% shareholder, the Company's consent is necessary for certain fundamental
corporate actions such as issuances of stock or debt convertible into stock, as
well as for the incurrence of recourse debt, material transactions with
affiliates and the approval of business plans and budgets. Telecel's
shareholders may not transfer their shares without government approval for five
years following the grant of the license. Any transfer, other than in connection
with the conversion of the Company's loans to equity or a transfer to a parent
or affiliate of the transferring partner, is subject to the other shareholders'
rights of first refusal.
Competition. Cellular service has been available in Portugal since September
1989 when Telecel's sole competitor, Telecomunicaoes Moveis Nacionais ("TMN"),
which is operated by Portugal Telecom, the state-owned wireline telephone
company, initiated analog cellular service. TMN's analog system utilizes
technology similar to that of the German C-Netz system and was estimated to have
approximately 29,500 subscribers at December 31, 1994. TMN was awarded a GSM
license, and commenced offering GSM service, at approximately the same time as
Telecel. TMN's digital system had an estimated 70,500 subscribers at December
31, 1994. Management believes that Telecel compares favorably with TMN based
upon coverage, network quality, service offerings, customer service and
availability.
JAPAN
The Company is the second largest shareholder in three companies licensed to
build and operate digital cellular systems in the Tokyo, Kansai (Western) and
Tokai (Central) regions of Japan. The Company has a 15% interest in Tokyo
Digital Phone Company ("TDP"), and 13% interests in each of Kansai Digital Phone
Company ("KDP") and Tokai Digital Phone Company ("CDP"). The systems utilize the
Japan Digital Cellular ("JDC") standard and together cover the Tokyo to Osaka
corridor, Japan's most densely populated area. The systems became operational in
1994 and together served over 180,000 subscribers by year-end. The Company also
holds a 4.5 percent interest in two additional Japanese cellular providers,
which plan to offer JDC service in the Kyushu/Okinawa and Chugoku regions
beginning in 1996. The five systems together will eventually cover contiguous
areas with a population of approximately 95 million people, or about 75% of the
Japanese population.
The Company's share of the contributed capital of TDP, KDP and CDP is
approximately Y3.6 billion (US $32.2 million), and the Company does not expect
to be required to make significant additional capital contributions to these
companies. The principal shareholders of each of the three companies include
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Japan Telecom (a long distance carrier in Japan) as lead partner, a regional
railway company, Cable and Wireless plc and Toyota Motor Corporation.
The Company believes that favorable demographics and a relatively low
penetration rate (less than 3%) make Japan an attractive cellular market.
Subscriber growth in Japan is a result of the entry of new competitors,
including TDP, KDP and CDP; a reduction in subscription fees, monthly fees and
usage fees; the implementation of regulations by the Japanese Ministry of Posts
and Telecommunications permitting, for the first time, the purchase of cellular
handsets; and reductions in handset purchase prices and rental fees.
Operations. The Company has been integrally involved in the design of each of
the systems through its appointment of the director of engineering for each
company. The Company also has contributed in other areas, including the
implementation of the networks and the preparation of business plans. The
Company is working with senior management of each venture to ensure that the
networks operate as a single system, with common marketing strategies, pricing
policies and equipment offerings.
Company Rights and Obligations. The Company has appointed one member to the
board of directors of each of the Japanese ventures. To date, such appointees
have also functioned as directors of engineering for the ventures.
Competition. Cellular competition is substantial in Japan, with four digital and
two analog cellular operators in each of the markets served by TDP, KDP and CDP.
Up to three additional competitors are expected when Personal Handy Phone
service is introduced in 1995.
SWEDEN
The Company holds a controlling interest of 51.1% in NordicTel Holdings AB
("NordicTel"), one of three providers of GSM cellular services in Sweden.
NordicTel's cellular service, which is marketed under the name "Europolitan,"
began operations in late 1992 and served approximately 70,000 subscribers at
December 31, 1994. The system covers 90% of the population and all of the major
cities. Under the terms of the authority granted by the Swedish government,
NordicTel will be required to cover all of the major highways and all cities
with a population greater than 10,000 by the end of 1995.
In 1994, NordicTel sold 21.9% of its common stock in an initial public offering.
The remaining principal shareholders of NordicTel are Vodafone Group Plc, with
an 18.5% interest, and AB Volvo, with a 7.5% interest. In 1994, the Company made
a capital contribution to NordicTel of approximately 282 million Swedish krona
(US $32.7 million). At December 31, 1994, NordicTel had drawn approximately 783
million krona ($97.5 million) on its credit facilities.
Cellular penetration in Sweden, which has a population of 8.8 million and
approximately 1.3 million cellular subscribers at December 31, 1994, is the
highest in the world.
Competition. NordicTel competes with two other cellular operators in Sweden.
Telia Mobitel AB, a wholly owned subsidiary of the state-owned telephone
company, operates one GSM network, with 215,000 subscribers at December 31,
1994, and two analog networks with a combined 860,000 subscribers. Comvik GSM AB
operates an analog network and a GSM network, which had a combined 147,000
subscribers at December 31, 1994.
Denmark Option. Prior to the Company's acquisition, NordicTel held a 20%
interest in Dansk Mobiltelefon I/S ("DMT"), one of two GSM cellular licensees in
Denmark, through a wholly owned subsidiary, NordicTel Dk ("Dk"). Certain of the
DMT partners have taken the position that the indirect acquisition by the
Company of a controlling interest in Dk would, under the terms of the DMT joint
venture agreement, require their approval. NordicTel and the Company oppose that
position, and the issue was submitted to arbitration in the summer of 1994. A
binding decision is expected in late 1995.
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In order not to trigger such a transfer, NordicTel sold Dk to the shareholders
of NordicTel other than the Company (the "Dk Shareholders") immediately prior to
the Company's acquisition of its interest in NordicTel. NordicTel also undertook
to be responsible to the government of Denmark, jointly with the Dk
Shareholders, for fulfillment of DMT's obligations under the terms of its
license. The Dk Shareholders have in turn agreed to hold NordicTel harmless for
any loss caused by such undertaking. NordicTel concurrently entered into an
agreement with the Dk Shareholders under which it has the right to purchase a
100% interest in Dk in the event that the arbitration concludes, among other
things, that the approval of the other DMT partners is not required. The Company
concurrently entered into an agreement with the Dk Shareholders under which it
has the right to purchase a 49% interest in Dk. The Company's right is
exercisable only if NordicTel is unable to exercise its right to repurchase Dk
in its entirety, and if the arbitration concludes that such a transfer is
permissible. Under such agreements, the Dk Shareholders also have the right to
sell either a 100% interest in Dk to NordicTel (exercisable only if NordicTel's
right to purchase is exercisable) or a 49% interest in Dk to the Company
(exercisable only if the Company's right to purchase is not exercisable).
BELGIUM
In July 1993, the Company was chosen by Belgium's state-owned telephone company,
Belgacom, from among twenty applicants to provide technical, operating and
marketing support for Belgacom's GSM system, which commenced operations on
January 1, 1994. Operating under the name "Proximus," the system covers over 80%
of Belgium and all of the major cities, including Brussels, Antwerp, Liege and
Ghent. The system reported nearly 70,000 digital and 60,000 analog subscribers
at year-end 1994.
In December 1994, the Company acquired a 25% interest in Belgacom Mobile, a
subsidiary of Belgacom that was formed to hold Belgacom's analog and GSM
cellular telephone operations.
Company Rights and Obligations. Under the Belgacom Mobile shareholders'
agreement, the Company is entitled to appoint the chief operating officer and
the chief technology officer. In addition, the Company appoints three of the 13
members of the Belgacom Mobile board of directors. As a greater than 20%
shareholder, the Company's consent is necessary for certain fundamental
corporate actions such as the issuance of stock, approval of or amendment to the
business plan, the incurrence of significant debt not contemplated by the
business plan, approval of certain contracts with the government and the
disposition of a material amount of assets.
Competition. In November 1994, the Belgian government announced that a second
GSM license would be awarded in 1995.
ITALY
In March 1994, the Italian government awarded the second national GSM license to
Omnitel-Pronto Italia ("OPI"), a consortium in which the Company holds an
indirect 10.2% interest. The other principal partners are Ing. C. Olivetti
(35.7%), Bell Atlantic (11.6%), Cellular Communications International, Inc.
(10.3%), Telia Mobitel AB (6.8%), Lehman Brothers (5.6%) and Mannesmann AG
(4.5%). The Company is the lead technical partner and has appointed OPI's
director of engineering. OPI expects to begin offering service in 1996,
initially covering two-thirds of the population. The license requires that 40%
geographic coverage be achieved by May 1996. The Company believes that favorable
demographics and business travel patterns make Italy an attractive cellular
market.
Competition. The state-owned cellular operator, Telecom Italia, operates three
cellular networks in Italy: two analog cellular systems and one GSM system,
which together served an estimated 2.2 million subscribers at December 31, 1994.
SOUTH KOREA
In May 1994, Shinsegi Telecommunications ("Shinsegi"), a consortium in which the
Company holds an 11.3% interest and is the lead foreign partner, was awarded the
second national cellular license in South
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Korea. The principal Korean partners are Pohang Iron and Steel and the Kolon
Group, a textile manufacturer, which hold interests of 15% and 14%,
respectively. The Company is entitled to appoint Shinsegi's technical director
and one of the eight members of the board of directors.
Shinsegi will construct and operate a nationwide cellular network utilizing CDMA
technology. The Company will take the lead role in designing, constructing and
operating the network. Service is expected to begin in 1996 in Seoul and expand
to Pusan and Taegu, reaching 60% of the country's 44 million people.
Competition. Korea Mobile Telecommunication Corp. is currently the sole cellular
operator, with approximately 900,000 subscribers at year-end 1994. The cellular
penetration rate in Korea, currently 2%, is projected by the government to reach
10% by the year 2000.
SPAIN
In December 1994, the Airtel consortium, in which the Company holds the largest
single interest, 15.78%, was awarded the second digital cellular license in
Spain. The Company will have primary technical responsibility, including design,
construction and operation of the network. Airtel expects to begin service in
late 1995 in major cities such as Madrid, Barcelona and Seville, and to cover
65% of Spain's 39 million people by the end of 1995. The Company believes that
Spain is an attractive market because of the low cellular penetration rate of
approximately 1% and relatively poor landline quality.
Competition. Telefonica de Espana, the partially state-owned telephone company,
operates two analog systems and was awarded a GSM license at the same time as
Airtel. Telefonica's analog networks had approximately 410,000 subscribers at
December 31, 1994.
RUSSIA
In December 1994, the Company purchased an $11 million convertible secured note
from FGI Wireless, Ltd. ("FGI"), the United States company that holds a 45%
interest in a Russian cellular company, Vimpel Communications ("VimpelCom").
The note is convertible into a minority equity position in FGI. VimpelCom
began commercial operations in 1994 in Moscow and holds licenses entitling it
to provide cellular services in a corridor from Moscow to south of St.
Petersburg with a population of approximately 23 million.
NEW OPPORTUNITIES
The Company plans to continue pursuing new opportunities to acquire interests in
wireless systems throughout the world. The Company believes that its proven
technical, operating and marketing expertise make it a highly desired
participant in consortia formed to pursue new international opportunities. The
Company led the design and construction of MMO's and Telecel's nationwide
digital cellular systems, and was integrally involved in the design of three of
its digital cellular systems in Japan. In addition, the Company successfully
supported the launch of digital cellular service in Belgium. The Company
believes that the technical expertise it developed in the United States and
Germany has been a significant factor in the success of the subsequent license
applications by its consortia.
The Company measures each international investment against such criteria as
demographic factors, the degree of economic, political and regulatory stability,
the quality of local partners and the degree to which the Company would control
or meaningfully participate in management. The Company's primary focus in
pursuing licenses has been Western Europe and Asia because the Company believes
that these regions currently provide the highest potential for value creation,
although the Company also is considering opportunities in other parts of the
world. The Company is currently competing or planning to compete for wireless
licenses in Canada and Singapore.
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Canada. Cellular service in Canada is provided by two operators, Rogers Cantel
and Bell Mobility (a consortium led by Bell Canada), which together have
approximately two million subscribers (representing a penetration rate of 7%).
The government is expect to award PCS licenses in late 1995. In February 1995,
the Company purchased an 8.5% interest in TeleZone, Inc., a Canadian consortium
formed to pursue a 2 GHz PCS license, with the opportunity to acquire an equity
interest of 22.5% if TeleZone is successful in acquiring the license.
Singapore. Singapore Telecom ("SingTel"), which operates two analog networks and
one GSM network serving approximately 230,000 subscribers, currently is the sole
cellular operator in Singapore. SingTel is constructing a 1.8 GHz network that
is expected to begin service in late 1996. The Company has a 16% interest in the
WyWy consortium, which includes Motorola (18%). WyWy submitted an application
for a digital cellular license that is expected to be awarded in mid-1995, for
service to begin in April 1997.
TECHNOLOGY
GSM. The Company's cellular systems in Europe conform to the GSM digital
cellular standard. Developed by a standards body within the European
Telecommunications Standards Institute with substantial input from the Company's
engineers, the GSM standard is a wide-band TDMA standard substantially different
from United States TDMA technology and has been adopted by more than 50
countries worldwide, including all those in the EU and others such as Australia,
New Zealand, Singapore, Hong Kong and South Africa. MMO was the first GSM system
to offer commercial service.
The GSM standard allows users to place and receive calls on any GSM cellular
telephone while traveling in all countries utilizing the standard. A subscriber
identification module ("SIM") card, which contains a microchip identifying the
subscriber, is necessary in order to receive GSM cellular service. By inserting
the SIM card into any GSM telephone, customers can make calls from the telephone
and have the calls billed directly to them. The card also allows the
subscriber's home GSM system to locate the subscriber on any GSM network
throughout the world. In addition to these conveniences, the SIM card can reduce
fraud significantly, because each subscriber has a unique personal
identification number that must be used in conjunction with the card.
Japan Digital Cellular Standard. The technology utilized by TDP, KDP and CDP
represents Japan's entry into second-generation cellular communications. The JDC
standard uses narrowband Japanese TDMA technology and allows enhanced roaming
potential and expanded supplementary services potential. To provide service to
subscribers away from their home regions, TDP, KDP and CDP are implementing
automatic roaming throughout their combined coverage areas. Subscribers of any
of the companies will be able to initiate and receive calls anywhere within the
combined coverage area. Two separate digital system frequencies will be utilized
throughout Japan: the 800 MHz band and the 1500 MHz band.
DOMESTIC PAGING
The Company offers local, regional, statewide, and nationwide paging services
under the AirTouch Paging brand name in over 120 markets in 17 states, including
many of the largest metropolitan areas in the United States, such as Atlanta,
Dallas/Fort Worth, Denver, Chicago, Cleveland, Cincinnati, Columbus, Detroit,
Houston, Jacksonville, Kansas City, Las Vegas, Los Angeles, Louisville, Miami,
Orlando, Phoenix, Portland, Sacramento, Salt Lake City, St. Louis, San Antonio,
San Diego, the San Francisco Bay Area, Seattle and Tampa/St. Petersburg. At
December 31, 1994, the Company had over 1.5 million paging units in service and,
based upon industry surveys, was the third largest provider of paging services
in the United States. The Company's growth strategy is to expand into new
markets through start-ups or acquisitions, to increase its share in existing
markets by providing superior customer service, to refine its mix of
distribution channels, including further expansion of its retail sales and to
provide new narrowband PCS services.
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SERVICES
The Company currently offers numeric display, alphanumeric, tone-only and tone
and voice paging services. More than 90% of the Company's subscribers use
numeric display units, which alert the subscriber and then display a short
message, usually a telephone number entered by the calling party in a touch tone
keypad. The Company's paging revenues consist primarily of monthly charges for
paging service and equipment rental.
The Company also offers nationwide coverage on its own private carrier paging
frequency through an inter-carrier agreement with other paging providers and as
a reseller of a nationwide common carrier paging service. In addition, the
Company offers voice retrieval service, which allows callers to leave voice
messages instead of telephone numbers. The Company offers Page Line News
Service, which provides updated news, financial reports, weather and sports
information, in Los Angeles, Miami, Detroit, Dallas, Phoenix and Seattle. In
1993, the Company introduced KidTrack, a value-priced service specifically
designed for families with young children, in its Arizona markets. KidTrack is
now available in San Diego and Las Vegas as well. In 1994, the Company launched
the first commercial paging system in North America using FLEX technology, which
increases transmission speeds, resulting in greater system capacity and lower
costs.
In 1994, the Company acquired one nationwide 50/12.5 KHz narrowband PCS license
and three regional 50/12.5 KHz licenses covering the Northeast, Central and
Western regions of the United States. Narrowband PCS may include advanced
two-way acknowledgment paging, data messaging, electronic mail, facsimile
transmissions and voice paging.
MARKETING
The Company utilizes a decentralized marketing approach, tailored to each
market, to promote and sell its paging services. In all of its markets, the
Company relies on both direct and indirect sales channels. The Company conducts
its direct marketing through its sales, service and customer service
representatives, who are located in the Company's local offices in each market.
The Company's indirect sales channels generally consist of resellers, who
purchase paging services from the Company in bulk quantities at a wholesale
monthly rate, and agents and retailers, who sell only pagers and refer
purchasers to the Company for service at the Company's rates. The Company
typically pays agents and retailers a commission for such referrals. The
Company, which was one of the first to offer paging service through retail
outlets, has greatly expanded its retail marketing efforts and now has sales
arrangements with over 2,000 retail locations nationwide.
COMPETITION
The Company's paging operations face intense competition from local or regional
carriers as well as from carriers with a broad nationwide presence. Paging
systems compete primarily on the basis of reliability, geographic coverage,
customer service and price. The Company believes that its extensive experience
in the paging business and emphasis on cost control and customer service make it
an effective paging competitor. Competition is expected to intensify when
narrowband PCS offerings become available in the Company's paging markets.
INTERNATIONAL PAGING
PORTUGAL
Through Telecel, the Company owns a 23% interest in Telechamada-Servico de
Chamada de Pessoas, S.A. ("Telechamada"), Portugal's first nationwide private
paging company. Telechamada offers numeric and alphanumeric paging services and
began service in October 1992, on the same date that Telecel's nationwide
cellular service became available. At December 31, 1994, Telechamada had
approximately 15,000 subscribers. Telechamada estimates that it currently covers
91% of the population.
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SPAIN
The Company holds a 17.5% indirect interest in Sistelcom-Telemensaje, S.A.,
which was awarded a nationwide paging license by the Spanish government in
August 1992. By January 1993, the digital paging system was operational in 14
cities, including Madrid, Barcelona and Seville. Sistelcom-Telemensaje offers
tone-only, numeric and alphanumeric paging services. At December 31, 1994,
Sistelcom-Telemensaje had approximately 40,000 subscribers.
THAILAND
The Company provides nationwide paging service in Thailand through a 49%
interest in PerCom Service Limited ("PerCom"), which has served all of
Thailand's major population centers since February 1991, and through a wholly
owned subsidiary that has provided service in Bangkok since 1987. These
companies operate together under the name PacLink and jointly served
approximately 111,000 subscribers at December 31, 1994. PerCom is obligated
under its license to pay between 25% and 40% of its annual paging revenues to
the Communications Authority of Thailand ("CAT") during the fifteen-year term of
the license, with guaranteed payments of approximately $57 million over such
period, of which approximately $6.8 million had been paid as of December 1994.
Under the Bangkok paging license, the Company is obligated to pay 33% of its
annual paging revenues to CAT, with guaranteed payments of at least $10.6
million required during the remaining term of the license.
FRANCE
In September 1994, Infomobile, in which the Company holds an 18.5% interest,
began offering commercial service in Paris. Infomobile is constructing a
nationwide digital paging network utilizing the European radio messaging
standard, ERMES. The network will be expanded to offer nationwide service by
1998. The Company's principal partners in Infomobile are Bouygues S.A., Societe
Generale, Preussen Elektra Telekom GmbH and DeNeufliz-Schlumberger-Mallet
Finance.
OTHER SERVICES
TELETRAC
The Company, through its subsidiary Location Technologies, Inc. ("LTI"), has a
51% interest in AirTouch Teletrac, a partnership that offers vehicle location
and fleet tracking services ("Teletrac"). Teletrac currently has operations in
Los Angeles, Detroit, Chicago, Dallas/Fort Worth, Houston and Miami, and has
licenses to operate in more than 100 additional cities. These licenses may be
subject to forfeiture if systems are not constructed in such markets by April
1996. See "Regulation-Federal." Teletrac had approximately 41,000 vehicle
location units and fleet tracking units in service at December 31, 1994.
Teletrac reported net losses before taxes of $26.1 million, $41.6 million and
$49.1 million in 1994, 1993 and 1992, respectively. The Company does not expect
Teletrac's operations, in their current mode, to be profitable for the
foreseeable future. In February 1994, the Company reduced Teletrac's staff by
30% to approximately 200 employees. The Company intends to continue cost
containment measures to minimize Teletrac's operating losses and does not
intend to expand Teletrac's operations significantly unless the Company expects
that Teletrac's current or future services will achieve a higher level of
commercial acceptance. The Company is evaluating its alternatives, from
considering other commercial applications of Teletrac's technology and radio
location spectrum to determining Teletrac's fit with the Company's long-term
investment objectives.
North American Teletrac ("NAT") holds a 49% interest in Teletrac. Prior to
March 31, 1995, and if certain conditions have been fulfilled, LTI and NAT may
each elect to cause a combination of NAT and LTI. In the combination, the
shareholders of LTI and NAT would receive stock in the combined entity in
amounts reflecting their indirect interests in Teletrac. The shareholders of NAT
may also elect to have the combined entity register its shares in an initial
public offering (the "LTI IPO"), which must generally occur prior to March 31,
1995. The Company and its affiliates have the right, but not the obligation,
to provide capital to Teletrac or the combined entity using convertible notes
prior to the earlier of March 31, 1995 or the LTI IPO. If the Company does not
provide such funding, capital may be
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sought from other sources (subject to certain restrictions). Convertible
securities may only be converted after the earlier of the LTI IPO or March 31,
1995. If converted within two years after that date, the conversion rate will
generally be 50% of the price at which stock was sold in the LTI IPO
(or, if the LTI IPO did not occur, an appraised price). The Company may not
convert during that two-year period to the extent the conversion would result in
the Company's having an equity interest of more than 70%. After that time, the
conversion rate will equal the LTI IPO price until another limitation, based on
a 1:9 relative ownership ratio between the former NAT shareholders and the
Company, is reached. Thereafter, the conversion rate will equal the fair market
value of the shares. The March 31, 1995 deadlines referred to in the preceding
sentences may be extended by the parties.
INTERNATIONAL LONG DISTANCE
The Company presently holds a 10% interest in International Digital
Communications ("IDC"). IDC provides long-distance telephone service between
Japan and over 90 international destinations, including the United States, to
business and residential customers. IDC also offers private leased circuit
services within Japan. In 1991, IDC began offering service over a 5,200 mile
undersea fiber optic cable, the first such cable to connect Japan directly with
the U.S. mainland.
CREDIT CARD VERIFICATION
In conjunction with Korea Information and Communications Company, a local
service provider in South Korea, the Company sells point-of-sale terminals and
provides support service for a nationwide credit card verification system.
AIR-TO-GROUND
The Company also provides air-to-ground telephone services, which allow
subscribers to place calls over the public switched telephone network while in
an airplane, in Elmira, New York, New York City, Atlanta, Denver, Houston,
Phoenix, Seattle and Spokane.
INVESTMENT IN QUALCOMM
The Company owns 400,000 shares of common stock of Qualcomm, a publicly held
developer of digital mobile communications technology. The Company also holds
warrants to purchase approximately 780,000 additional shares of Qualcomm common
stock at an exercise price of $5.50 per share.
EMPLOYEES
At December 31, 1994, the Company had approximately 4,576 employees, none of
whom is represented by a labor organization. Management considers its relations
with employees to be good.
REGULATION
The Company is subject to extensive federal and state regulation as a provider
of cellular, paging and radiolocation services. In addition, the international
cellular and paging operations in which the Company has interests are also
subject to regulation, although in general the international regulatory schemes
are less comprehensive than those in the United States.
MFJ
In general, the MFJ required AT&T to divest the Bell Operating Companies
("BOCs") and imposed restrictions on the business activities of the BOCs and
their affiliates, successors and assigns. Among other things, the MFJ generally
prohibits BOCs and their affiliates from providing voice and data services that
cross local access transport areas ("LATAs"). The MFJ also precludes BOCs and
their affiliates from engaging in the design, development or manufacturing of
telecommunications equipment or "customer
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premises equipment" such as cellular telephones or the provision of
telecommunications equipment such as switches. The stated purpose of the MFJ was
to prevent BOCs and their affiliated enterprises from using a BOC's asserted
local exchange monopoly to discriminate against companies in other markets in
which BOCs or their affiliates compete.
In January 1995, the DOJ advised the Company of its view that the Company is
subject to the MFJ. The Company believes, based on the terms of the MFJ and its
underlying policies, that it is not subject to the MFJ. This conclusion is
consistent with the conclusion apparently reached in other transactions in which
BOC affiliates or their assets have been sold. Neither the United States
District Court for the District of Columbia, which administers the MFJ (the
"Court"), nor the DOJ has, to the Company's knowledge, taken the position that
the purchasers of such affiliates or assets are bound by the MFJ.
Accordingly, in February 1995, the Company filed with the Court a motion for
declaratory judgment that the Company is not subject to the MFJ. Pending the
Court's decision on the motion, the DOJ has agreed not to enforce the MFJ
against the Company and the Company has agreed not to undertake new business
activities prohibited to BOCs under the MFJ without prior notice to the DOJ. In
the event the Court rules against the Company, the Company believes that it
could obtain a stay of the MFJ pending appeal. No assurance can be given in this
regard, however, or that the Company's position will be validated by the Court
or an appellate court. In the event the Company is re-subjected to the MFJ,
unless a waiver on terms and conditions acceptable to the Company is negotiated
with the DOJ and approved by the Court, the Company may be required to cease
certain activities in the long-distance and satellite services businesses, as
well as its MFJ-prohibited design and development work in wireless technology.
FEDERAL
The construction, operation and transfer of cellular systems in the United
States are regulated by the FCC pursuant to the Communications Act of 1934, as
amended ("Communications Act"). The FCC has promulgated guidelines for
construction and operation of cellular systems and licensing and technical
standards for the provision of cellular telephone service. For licensing
purposes, the United States is divided into separate markets, called
Metropolitan Statistical Areas ("MSAs") and Rural Service Areas ("RSAs"). At
present, the frequencies allocated for cellular use in each market are divided
into two equal blocks, one of which was initially reserved for entities
affiliated with a wireline telephone company such as the Company, while the
other was initially reserved for non-wireline entities. Under current FCC rules,
any license may be transferred after FCC approval, but no entity may own any
interest in both wireline and non-wireline systems in any one MSA or RSA. The
FCC may prohibit or impose conditions on sales or transfers of licenses.
Initial operating licenses are generally granted for terms of 10 years,
renewable upon application to the FCC. Licenses may be revoked at any time and
license renewal applications may be denied for cause. The Company's cellular
license for the Los Angeles market expired in 1993 and was renewed without
difficulty. The Company's licenses for the Sacramento and San Diego markets
expired in 1994 and the Company's renewal applications are pending. All of the
Company's remaining significant domestic cellular licenses will expire before
the end of 1996. The FCC has issued a decision confirming that current licensees
will be granted a relicensing presumption (renewal expectancy) if they have
complied with their obligations under the Communications Act during the initial
period. The Company believes that the licenses held by entities controlled by
the Company will be renewed upon application for relicensing.
Under FCC rules, each cellular licensee was given the exclusive right to
construct one of two cellular systems within the licensee's MSA or RSA during
the initial five-year period of its authorization. At the end of such five-year
period, other persons are permitted to apply to serve areas within the licensed
market that are not served by the licensee. Current FCC rules generally provide
that competing "unserved area" applications are to be resolved through an
auction, except for certain long-pending applications such as those filed by
several entities with respect to certain portions of the Los Angeles market that
were unserved by the Company at the end of 1988. The Company does not expect any
material adverse impact on its operations or financial performance in the event
that others ultimately acquire rights to such unserved areas.
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The Company's radio common carrier activities in connection with its paging
services also are subject to regulation by the FCC. The FCC allocates radio
common carrier frequencies in specific geographic areas and grants licenses for
use of an initial frequency only upon a satisfactory demonstration of an
applicant's legal and technical qualifications. The FCC allocates frequencies to
a number of competitors in each paging market, unlike the current limitation of
two cellular licenses in each cellular market. The Company's paging licenses are
subject to periodic renewal by the FCC and, as with all such licenses, can be
revoked at any time for cause. However, renewal applications are generally
granted by the FCC upon a showing of compliance with FCC regulations and the
provision of adequate service to the public.
The Communications Act prohibits the holding of a common carrier license (such
as the Company's cellular licenses) by a corporation of which any officer or
director is an alien, or of which more than 20% of the capital stock is owned
directly or beneficially by aliens. Where a corporation such as the Company
controls another entity that holds an FCC license, such corporation may not have
any aliens as officers, may not have more than 25% of its directors as aliens,
and may not have more than 25% of its capital stock owned directly or
beneficially by aliens, in each case if the FCC finds that the public interest
would be served by such prohibitions. Failure to comply with these requirements
may result in fines or a denial or revocation of the license.
The FCC also regulates the operation and construction of vehicle location
systems. In February 1995, the FCC released final regulations governing
location and monitoring systems such as those operated by Teletrac. Under the
regulations, Teletrac must indicate whether it intends to construct systems in
markets for which it holds a license but where there are currently no
operations. Such systems must be constructed by April 1996 or the licenses
will be forfeited.
The Omnibus Budget Reconciliation Act of 1993 includes a provision preempting
state regulation of rates or entry for any "commercial mobile service." The FCC
has determined that the Company's cellular, paging and air-to-ground services
are commercial mobile services, and that the Company's vehicle location services
are private services. The FCC has also exercised its authority to forbear from
rate and entry regulation, including tariffs, for cellular, paging and
air-to-ground services. In August 1994, the CPUC filed a petition with the FCC
seeking to retain regulatory authority over cellular service rates in California
for 18 months from September 1, 1994. The Company has filed its opposition to
the CPUC's petition, contending, among other things, that the CPUC has failed to
show that "market conditions with respect to [commercial mobile] services fail
to protect subscribers adequately from unjust and unreasonable rates or rates
that are unjustly or unreasonably discriminatory" or that such conditions exist
and commercial mobile service is a "replacement for land line telephone exchange
service for a substantial portion of the telephone land line exchange service
within such state." The FCC must take final action on the CPUC's petition by
August 1995, during which time the CPUC retains regulatory authority over
cellular services.
STATE AND LOCAL
In many states, the Company must obtain approvals and certification from state
regulators prior to the commencement of commercial service by a cellular system
(or in certain states, prior to construction). In addition, certain state
authorities, including the CPUC, regulate the acquisition of control of cellular
systems and the prices of services or require the filing of prices, price
changes and other terms and conditions of service. The siting and construction
of cellular transmitter towers, antennas and equipment shelters are often
subject to state or local zoning, land use and other local regulation, which may
include zoning and building permit approvals or other state or local
certification.
In December 1993, the CPUC issued an order instituting investigation (the "OII")
into mobile telephone service and wireless communications to review the wireless
market in light of the entrance of multiple new competitors in 1994 and 1995
such as PCS and SMR. In August 1994, the CPUC issued an interim decision
adopting a dominant/nondominant regulatory framework in which existing cellular
carriers are classified as dominant carriers and subject to rate caps and other
regulation. The decision also required cellular carriers, upon receipt of a bona
fide request from a reseller, to permit such reseller to interconnect
-24-
<PAGE> 27
a switch, and to unbundle wholesale network rate elements. 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
cannot exceed the current wholesale rates. The Company does not believe this
order will have a material adverse effect on its financial position or results
of operations. Nondominant carriers, including PCS and SMR, are subject to
minimal regulation involving registration, record inspection and consumer
safeguards. In September 1994, the Company filed an application for rehearing,
which is still pending. Although under current federal legislation the CPUC's
regulatory power may be preempted by the FCC, the CPUC is seeking to retain
such power. In the event the CPUC's authority is not preempted, the Company's
operations in California may be subject to a greater regulatory burden than
certain of its future competitors.
In November 1992, the CPUC staff issued an interim report outlining the partial
findings of an investigation into compliance with General Order 159 ("G.O.
159"), which requires prior CPUC approval of cellular facility additions. In
January 1993, the Company responded to the report indicating that it contains
significant inaccuracies and goes beyond the scope of the CPUC's authority. In
April 1993, the CPUC alleged that the Company failed to obtain five required
permits and issued an order requesting that the Company show why a particular
cellular facility should not be disapproved. Certain of the Company's markets
may have taken steps that the CPUC might consider to be construction of cellular
facilities prior to filing advice letters with the CPUC and/or might be
considered by the CPUC to involve the failure to obtain necessary governmental
permits for certain cellular facilities. The matter has been stayed with respect
to the Company pending the conclusion of proceedings against other carriers. The
CPUC is currently holding workshops concerning proposed revisions to G.O. 159.
The Company does not believe that sanctions, if any, that may be imposed by
the CPUC for any failures to comply with G.O. 159 or to obtain other
governmental permits will have a material adverse effect on its financial
position.
In April 1993, Pacific Bell filed a petition with the CPUC seeking authority to
place cellular and paging interconnection service under tariff. In April 1994,
the CPUC granted Pacific Bell's request to permit tariffing of interconnection
arrangements. Concurrent with the petition, Pacific Bell filed an amended
application in a collateral CPUC proceeding setting forth proposed tariff
rates. General Telephone, another local exchange carrier, also filed proposed
tariff rates in the same proceeding. In September 1994, the Company filed
protests against both Pacific Bell's and General Telephone's tariffs. While the
tariff proposals remain pending before the CPUC, the Company continues to
interconnect under the terms and conditions of negotiated contracts with
Pacific Bell and General Telephone. The impact of the Pacific Bell and General
Telephone proposals on future operations is uncertain and depends upon the
outcome of proceedings before both the CPUC and FCC.
Certain states also require radio common carriers providing paging
services to be certified prior to commencing operations. Certain states in
which the Company operates paging activities require the carrier to file
notices of its prices or price changes for informational purposes or regulate
the acquisition of control of paging systems.
INTERNATIONAL
The Company's international cellular and paging operations provide services
pursuant to the terms of licenses granted by the telecommunications agency or
similar supervisory authority in the various countries. Such agencies typically
also promulgate and enforce regulations regarding the construction and
operation of network equipment. For example, MMO's license to provide digital
cellular mobile telephone services in the Federal Republic of Germany was
issued in accordance with, and is governed by, the applicable provisions of the
German Law on Telecommunications Installations. Under such law the right to
erect and operate telecommunications facilities is reserved to the government,
although the telecommunications ministry is authorized to license such right.
The ministry also determines the terms and conditions of any license so granted
and, to ensure compliance therewith, issues regulations for the supervision of
telecommunications installations erected and/or operated by a licensee. Other
regulations commonly encountered in international markets include legal
restrictions on the percentage ownership of telecommunications licensees by
foreign entities such as the Company and transfer restrictions, or governmental
approval requirements, regarding changes in the ownership of such licensees.
-25-
<PAGE> 28
ITEM 2. PROPERTIES.
For each market served by the Company's cellular operations, the Company
maintains at least one sales or administrative office and many transmitter and
antenna sites. Some of the facilities are leased, and some are owned. The
Company also maintains both owned and leased sales and administrative facilities
for its paging services. The Company believes that its facilities are suitable
for its current business and that additional facilities will be available for
its foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS.
The Company is currently involved in legal proceedings that have arisen in the
ordinary course of business. While assurances cannot be given as to the outcome
of any particular litigation, the Company believes that pending legal
proceedings are unlikely to have a material adverse effect on its financial
condition. In addition, the Company may be subject to legal challenges and
litigation from time to time in connection with matters under the jurisdiction
of the FCC and state regulatory authorities. The Company presently is pursuing
declaratory relief from the federal court administering the MFJ as to the
Company's status under the MFJ. See Item 1, "Business."
Beginning in November 1993, four class action complaints were filed, three in
Orange County Superior Court and one in the United States District Court for the
Central District of California, naming, among others, the Company, and alleging
that the Company, as general partner of Los Angeles SMSA Limited Partnership,
and Los Angeles Cellular Telephone Company ("LACTC") conspired to fix the prices
of retail and wholesale cellular radio services in the Los Angeles market. The
complaints seek damages for the class "in a sum in excess of $100,000,000." In
1994, two class action complaints were filed, one in San Diego County Superior
Court and one in the United States District Court for the Southern District of
California, alleging that the Company and U S WEST conspired to fix the prices
of retail and wholesale cellular radio services in the San Diego market.
Discovery is taking place and motions for class certification are pending. In
1994, a class action complaint was filed in San Francisco Superior Court
alleging that BACTC and GTE Mobilnet conspired to fix the prices of retail and
wholesale cellular radio services in the San Francisco Bay Area market. This
action is still in the preliminary pleading phase. The
-26-
<PAGE> 29
Company intends to defend itself vigorously and does not expect that these
proceedings will have a material adverse effect on its financial condition.
Other Matters. The California State Attorney General has been investigating the
pricing of cellular telephone service in the Los Angeles market in the mid-to
late 1980s. The Company has had meetings with the Attorney General's office and
is cooperating fully in connection with this matter. The Company believes that
its pricing and marketing practices were and are in compliance with the
antitrust laws. The Company does not believe that the investigation will have a
material adverse effect on its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information concerning the persons who serve as
executive officers of the Company. The executive officers serve at the pleasure
of the Board of Directors and are subject to removal at any time.
<TABLE>
<CAPTION>
Name Age Position and Offices Held
------- ------- -----------------------------------
<S> <C> <C>
Sam Ginn 57 Chairman of the Board and Chief Executive Officer
C. Lee Cox 53 Vice Chairman of the Board, President Domestic Wireless Businesses
and Director
Lydell L. Christensen 60 Executive Vice President and Chief Financial Officer
Margaret G. Gill 55 Senior Vice President, Legal and External Affairs and Secretary
Arun Sarin 40 Senior Vice President, Corporate Strategy/Development & International
Operations
Mohan S. Gyani 43 Vice President, Finance and Treasurer
Dwight Jasmann 59 Vice President, Human Resources
Jan K. Neels 56 President and Chief Executive Officer, AirTouch International
</TABLE>
Mr. Ginn has been Chairman of the Board and Chief Executive Officer of the
Company since December 1993. He was Chairman of the Board, President and Chief
Executive Officer of Pacific Telesis Group from 1988 to April 1994 and became a
director of Pacific Telesis Group in 1983. He was Chairman of the Board of
Pacific Bell from 1988 to April 1994. Mr. Ginn is also a director of Chevron
Corporation, Safeway Inc. and Transamerica Corporation.
Mr. Cox was named Vice Chairman of the Board and President Domestic Wireless
Businesses in November 1994. He was President and Chief Operating Officer of the
Company from December 1993 to November 1994. He was President and Chief
Executive Officer of the Company from 1987 to December 1993, was a director of
the Company from 1987 to April 1993 and became a director again in January 1994.
He was a director and a Group President of Pacific Telesis Group from 1988 to
April 1994. Mr. Cox is a director of Cellular Communications, Inc.
-27-
<PAGE> 30
Mr. Christensen has been Executive Vice President and Chief Financial Officer of
the Company since December 1993. He was Executive Vice President, Chief
Financial Officer and Treasurer of Pacific Telesis Group from 1992 to 1993. He
was Vice President and Treasurer of Pacific Telesis Group from 1987 to 1992.
Mrs. Gill became Senior Vice President, Legal and External Affairs and Secretary
of the Company in January 1994. She had been a partner in the law firm of
Pillsbury Madison & Sutro since 1973 and was the head of the firm's Corporate
and Securities Group. Mrs. Gill is a director of Consolidated Freightways, Inc.
Mr. Sarin has been Senior Vice President, Corporate Strategy/Development and
International Operations of the Company since November 1994. He was Vice
President, Corporate Strategy/Development and Human Resources of the Company
from December 1993 to November 1994. From March 1993 to December 1993, he was
Vice President, Strategy of the Company. He was also Vice President,
Organization Design of Pacific Telesis Group from March 1993 to April 1994. Mr.
Sarin was Vice President and General Manager, Bay Operations for Pacific Bell
from 1992 to March 1993, and was Vice President, Chief Financial Officer and
Controller of Pacific Bell from 1990 to 1992.
Mr. Gyani became Vice President, Finance and Treasurer of the Company in
November 1993. He was Vice President and Treasurer of Pacific Telesis Group from
March 1993 to November 1993. From February 1992 to March 1993 he was Vice
President and Controller at Pacific Bell. From November 1991 to February 1992 he
was Vice President Financial Assurance for Pacific Bell. From April 1989 to
November 1991 he was Assistant Treasurer at Pacific Telesis Group.
Mr. Jasmann has been Vice President, Human Resources of the Company since
January 1995. He was an international telecommunications consultant from 1993 to
1994. From 1987 to 1992 he was President and Managing Director for AT&T
Asia/Pacific Communications Services, Inc.
Mr. Neels has been President and Chief Executive Officer of AirTouch
International since 1987. Mr. Neels joined AirTouch International in 1986 as a
Vice President, overseeing the business operations and marketing activities of
subsidiaries in Spain, Japan, Korea and Thailand.
-28-
<PAGE> 31
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Part of the information required by this Item is set forth in the Company's
1994 Annual Report to Stockholders on page 65, which portions are incorporated
herein by reference.
The Company currently intends to retain future earnings for the development of
its business and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. The Company's future dividend policy will be
determined by its Board of Directors on the basis of various factors, including
the Company's results of operation, financial condition, capital requirements
and investment opportunities.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is set forth in the Company's 1994 Annual
Report to Stockholders on pages 10 through 13, which portions are incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this Item is set forth in the Company's 1994 Annual
Report to Stockholders on pages 14 through 25, which portions are incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is set forth in the Company's 1994 Annual
Report to Stockholders on pages 26 through 56, which portions are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No disagreements with accountants on any accounting or financial disclosure
occurred during the Company's two most recent fiscal years or any subsequent
interim period.
-29-
<PAGE> 32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is set forth under "Executive Officers of
the Registrant" at the end of Part I of this report and under the headings
"Class I-Nominees for Election", "Class II-Directors Continuing in Office Until
the 1996 Annual Meeting of Stockholders" and "Class III-Directors Continuing in
Office Until the 1997 Annual Meeting of Stockholders" on pages 2 through 4 and
"Compliance with Section 16(a) of the Exchange Act" on page 17 of the Company's
1995 Proxy Statement, which are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth on pages 7 through 15 of
the Company's 1995 Proxy Statement, which are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item is set forth on page 6 of the
Company's 1995 Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is set forth under the heading "Certain
Relationships and Related Transactions" on pages 15 and 16 of the Company's 1995
Proxy Statement, which are incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements:
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
The financial statements required by this Item are set forth
in the Company's 1994 Annual Report to Stockholders on pages
26 through 56, which portions are incorporated herein by
reference.
CMT PARTNERS
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income and Changes in Partners'
Equity - For the year ended December 31, 1994 and the
four-month period from September 1, 1993 (inception) to
December 31, 1993
Consolidated Statements of Cash Flows - For the year ended
December 31, 1994 and the four-month period from September
1, 1993 (inception) to December 31, 1993
Notes to Financial Statements
Financial Statement Schedules
Report of Independent Accountants
Schedule II - Valuation and Qualifying Accounts and
Reserves
-30-
<PAGE> 33
MANNESMANN MOBILFUNK GMBH
Independent Auditors' Report
Balance Sheets - December 31, 1994 and 1993
Statements of Income - Years ended December 31, 1994, 1993,
and 1992
Statements of Capital Subscribers' Equity - Years
ended December 31, 1994, 1993, and 1992
Statements of Cash Flows - Years ended December 31, 1994,
1993, and 1992
Notes to Financial Statements
NEW PAR
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - Years ended December 31,
1994, 1993, and 1992
Consolidated Statement of Partners' Capital - Years ended
December 31, 1994, 1993, and 1992
Consolidated Statements of Cash Flows - Years ended December
31, 1994, 1993, and 1992
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
2. Financial Statement Schedules:
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts and Reserves
Schedules other than those listed above are omitted because
they are either not required or not applicable, or the
required information is presented in the Consolidated
Financial Statements.
3. Exhibits:
Exhibits identified in parentheses below, on file with the Commission,
are incorporated by reference as exhibits hereto.
<TABLE>
<CAPTION>
Exhibit
Number Description
---------- ----------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on September 19, 1994
(Exhibit 3.i to the Company's Form 8-K - Date of Report: December
15, 1994, File No. 1-12342)
3.2 Designation, Preferences and Rights of Series A Participating
Preferred Stock of the Company, as filed with the Secretary of
State of the State of Delaware on December 15, 1994 (Exhibit 3.2
to the Company's Form 8-B, File No. 1-12342, filed January 27,
1995)
3.3 Amended By-laws of the Company as of November 18, 1994
4.1 Form of Common Stock certificate
4.2 Rights Agreement between the Company and The Bank of New York,
Rights Agent, dated as of September 19, 1994 (Exhibit 4 to the
Company's Form 8-K - Date of Report: December 15, 1994, File No.
1-12342)
</TABLE>
-31-
<PAGE> 34
<TABLE>
<S> <C>
10.1 Joint Venture agreement between Mannesmann Kienzle GmbH, Pacific
Telesis Netherlands B.V., Cable and Wireless plc, DG Bank Deutsch
Genossenschaftsbank and Lyonnaise des Eaux SA dated June 30, 1989
(Exhibit 10.43 to the Company's Registration Statement on Form
S-1, Registration No. 33-68012, filed August 27, 1993)
10.2 Amended and Restated Plan of Merger and Joint Venture Organization
by and among the Company, CCI, CCI Newco, Inc. and CCI Newco Sub,
Inc. dated as of December 14, 1990 (Exhibit 1 to the Company's
Statement on Schedule 13D filed on February 18, 1992, File No.
1-12342)
10.3 Termination Agreement by and among Telesis, the Company, CCI and
Cellular Communications of Ohio, Inc. dated December 11, 1992
(Exhibit 5 to Amendment No. 28 to the Company's Statement on
Schedule 13D filed on December 12, 1992, File No. 1-12342)
10.4 Separation Agreement by and between the Company and Pacific
Telesis Group, dated as of October 7, 1993 (Exhibit 10.1 to the
Company's Registration Statement on Form S-1, Registration
No. 33-68012, filed August 27, 1993)
10.5 Amendment No. 1 to Separation Agreement between the Company and
Pacific Telesis Group, dated November 2, 1993 (Exhibit 10.2 to the
Company's 1993 Annual Report on Form 10-K, File No. 1-12342)
10.6 Amendment No. 2 to Separation Agreement between the Company and
Pacific Telesis Group, dated as of March 25, 1994
10.7 Amendment No. 3 to Separation Agreement between the Company and
Pacific Telesis Group, dated as of April 1, 1994
10.8 Credit Agreement dated as of March 25, 1994 between AirTouch
Communications, Inc. and Bank of America National Trust and
Savings Association
10.9 First Amendment dated as of November 1, 1994 to the Credit
Agreement dated as of March 25, 1994 between AirTouch
Communications, Inc. and Bank of America National Trust and
Savings Association
10.10 Agreement on Retirement and Relocation Benefits between Mr.
Christensen and the Company, dated as of March 31, 1994
10.11 Joint Venture Organization Agreement dated as of July 25, 1994
between the Company and U S WEST Inc. (Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1994, File No. 1-12342)
10.12 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.
(Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1994, File No. 1-12342)
10.13 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.
(Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1994, File No. 1-12342)
10.14 Investment Agreement dated as of July 25, 1994 by and between the
Company and U S WEST Inc. (Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1994, File No.
1-12342)
10.15 Agreement of Exchange dated as of July 25, 1994 by and between the
Company and U S WEST Inc. (Exhibit 10.5 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1994, File No.
1-12342)
10.16 Trust Agreement of Exchange dated as of July 25, 1994 by and
between the Company and U S WEST Inc. (Exhibit 10.6 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1994, File No. 1-12342)
10.17 Agreement of Limited Partnership dated as of October 20, 1994
between CELLCO Partnership and WMC Partners, L.P.(Exhibit 10.1 to
the Company's Form 8-K - Date of Report: October 20, 1994, File
No. 1-12342)
10.18 Agreement of Limited Partnership dated as of October 20, 1994 of
PCS PrimeCo, L.P. (Exhibit 10.2 to the Company's Form 8-K - Date
of Report: October 20, 1994, File No. 1-12342)
10.19 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications, Inc. and Bell Atlantic Corporation (Exhibit 10.3
to the Company's Form 8-K - Date of Report: October 20, 1994, File
No. 1-12342)
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C>
10.20 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications and NYNEX Corporation (Exhibit 10.4 to the
Company's Form 8-K - Date of Report: October 20, 1994, File No.
1-12342)
10.21 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications and CELLCO Partnership (Exhibit 10.5 to the
Company's Form 8-K - Date of Report: October 20, 1994, File No.
1-12342)
10.22 Representative Employment Agreement for Messrs. Ginn, Cox,
Christensen, Sarin and Mrs. Gill
10.23 Representative Employment Agreement for Mr. Schmitt and other
officers of the Company
10.24 Form of Indemnity Agreement between the Company and each of its
directors and certain officers
10.25 Trust Agreement No. 1 for AirTouch Communications, Inc.
Supplemental Executive Pension Plan Benefits
10.26 AirTouch Communications, Inc. Deferred Compensation Plan
10.27 AirTouch Communications, Inc. Deferred Compensation Plan for
Nonemployee Directors (Exhibit 10.10 to the Company's 1993 Annual
Report on Form 10-K, File No. 1-12342)
10.28 AirTouch Communications, Inc. Supplemental Executive Pension Plan
(Exhibit 10.12 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.29 AirTouch Communications, Inc. Executive Life Insurance Plan
(Exhibit 10.13 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.30 AirTouch Communications, Inc. Executive Long-Term Disability Plan
(Exhibit 10.14 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.31 Description of the Company's Business Travel Accident Insurance
for Non-Employee Directors
13 1994 Annual Report to Security Holders - Financial Section
21 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand
23.2 Consent of Ernst & Young
23.3 Consent of KPMG Deutsche Treuhand-Gesellschaft
23.4 Consent of Coopers & Lybrand - Re: CMT Partners
24 Power of Attorney
27 Financial Data Schedule
99 Modification of Final Judgment, United States District Court,
District of Columbia, in "U.S. v. American Tel. & Tel. Co.," Civil
Action No. 82-0192 (Exhibit 99 to the Company's Registration
Statement on Form S-1, Registration No. 33-68012, filed on
August 27, 1993)
</TABLE>
(b) Reports on Form 8-K:
Date of Report: September 19, 1994
Date of Report: October 20, 1994
Date of Report: December 15, 1994
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<PAGE> 36
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ Mohan S. Gyani
- -----------------------------------
Mohan S. Gyani
Title: Vice President, Finance and Treasurer
Date: March 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title
- --------------- -------
<S> <C>
Sam Ginn * Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Lydell L. Christensen * Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Mohan S. Gyani * Vice President, Finance and Treasurer
(Principal Accounting Officer)
C. Lee Cox * Vice Chairman of the Board, President, Domestic Wireless
Businesses and Director
Carol Bartz * Director
James R. Harvey * Director
Paul Hazen * Director
Donald G. Fisher * Director
Arthur Rock * Director
Charles R. Schwab * Director
George P. Shultz * Director
</TABLE>
* By /s/ Mohan S. Gyani
- ---------------------------------
Mohan S. Gyani, Attorney-in-fact
Vice President, Finance and Treasurer
Date: March 22, 1995
-34-
<PAGE> 37
INDEX TO
SEPARATE FINANCIAL STATEMENTS OF
SIGNIFICANT ENTITIES NOT CONSOLIDATED AND
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
CMT PARTNERS
Report of Independent Accountants ......................................... S-3
Consolidated Balance Sheets - December 31, 1994 and 1993 .................. S-4
Consolidated Statements of Income and Changes in Partners' Equity -
For the year ended December 31, 1994 and the four-month period
from September 1, 1993 (inception) to December 31, 1993 ............... S-5
Consolidated Statements of Cash Flows - For the year ended
December 31, 1994 and the four-month period from
September 1, 1993 (inception) to December 31, 1993 .................... S-6
Notes to Financial Statements ............................................. S-7
Financial Statement Schedules
Report of Independent Accountants ..................................... S-16
Schedule II - Valuation and Qualifying Accounts and Reserves .......... S-17
MANNESMANN MOBILFUNK GMBH
Independent Auditors' Report .............................................. S-19
Balance Sheets - December 31, 1994 and 1993 ............................... S-20
Statements of Income - Years ended December 31, 1994, 1993, and 1992 ...... S-22
Statements of Capital Subscribers' Equity - Years ended
December 31, 1994, 1993, and 1992 ..................................... S-23
Statements of Cash Flows - Years ended December 31, 1994, 1993, and 1992 .. S-24
Notes to Financial Statements ............................................. S-26
NEW PAR
Report of Independent Auditors ............................................ S-38
Consolidated Balance Sheets - December 31, 1994 and 1993 .................. S-39
Consolidated Statements of Income - Years ended
December 31, 1994, 1993, and 1992 ..................................... S-40
Consolidated Statement of Partners' Capital - Years ended
December 31, 1994, 1993, and 1992 ..................................... S-41
Consolidated Statements of Cash Flows - Years ended
December 31, 1994, 1993, and 1992 ..................................... S-42
Notes to Consolidated Financial Statements ................................ S-44
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts ....................... S-55
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
Financial Statement Schedules
Report of Independent Accountants ..................................... X-1
Schedule II - Valuation and Qualifying Accounts and Reserves .......... X-2
</TABLE>
S - 1
<PAGE> 38
CMT PARTNERS
------------
CONSOLIDATED FINANCIAL STATEMENTS
for the year ended December 31, 1994 and
for the four-month period from September 1, 1993 (inception)
to December 31, 1993
S - 2
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of CMT Partners:
We have audited the accompanying consolidated balance sheets of CMT Partners
(the "Partnership") as of December 31, 1994 and 1993 and the related
consolidated statements of income and changes in partners' equity and cash flows
for the year ended December 31, 1994 and for the four-month period from
September 1, 1993 (inception) to December 31, 1993. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit. We did not
audit the financial statements of Kansas Combined Cellular, which statements
reflect total assets of 13% and 6% as of December 31, 1994 and 1993,
respectively, and total revenues of 12% and 13% for the year ended December 31,
1994 and for the four-month period from September 1, 1993 (inception) to
December 31, 1993, respectively. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to the amounts included for Kansas Combined Cellular, is based solely on the
report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CMT Partners as of
December 31, 1994 and 1993 and the results of its operations and its cash flows
for the year ended December 31, 1994 and for the four-month period from
September 1, 1993 (inception) to December 31, 1993 in conformity with generally
accepted accounting principles.
/s/ Coopers and Lybrand L.L.P.
San Francisco, California
January 30, 1995
S - 3
<PAGE> 40
CMT PARTNERS
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(in thousands)
------------
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,150 $ 11,615
Accounts receivable:
Trade accounts receivable, net of allowance for
doubtful accounts of $3,135 and $1,516 in
1994 and 1993, respectively 59,441 36,250
Other accounts receivable, net of allowance
for doubtful accounts of $93 and $60 in
1994 and 1993, respectively 18,190 5,781
Due from affiliates, net 3,466 2,881
Other 6,087 3,457
-------- --------
Total current assets 89,334 59,984
Property and equipment, net of accumulated
depreciation of $150,693 and $116,943
in 1994 and 1993, respectively 189,986 160,633
Unconsolidated investment 105,423 95,561
Intangibles, net of accumulated amortization of
$30,502 and $27,010 in 1994 and 1993, respectively 76,464 79,956
-------- --------
$461,207 $396,134
======== ========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 18,201 $ 7,654
Accrued expenses 28,306 24,005
Unearned revenue and customer deposits 3,251 3,834
-------- --------
Total current liabilities 49,758 35,493
-------- --------
Minority interests 13,158 11,183
-------- --------
Commitments and contingencies (Note 8).
Partners' equity 398,291 362,258
Contribution receivable from partner -- (12,800)
-------- --------
Total partners' equity 398,291 349,458
-------- --------
$461,207 $396,134
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S - 4
<PAGE> 41
CMT PARTNERS
CONSOLIDATED STATEMENTS OF INCOME AND
CHANGES IN PARTNERS' EQUITY
for the year ended December 31, 1994 and
the four-month period from September 1, 1993
(inception) to December 31, 1993
(in thousands)
--------------
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues $404,209 $110,848
-------- --------
Expenses:
Cost of revenues 78,700 20,102
Selling, general and administrative 154,849 45,380
Depreciation and amortization 41,835 19,615
-------- --------
275,384 85,097
-------- --------
Operating income 128,825 25,751
Earnings in unconsolidated investment 18,363 4,178
Minority interests (6,955) (1,662)
-------- --------
Net income 140,233 28,267
Partners' equity, beginning of period 349,458 361,191
Distributions to partners (104,200) (32,000)
Contribution from partners 12,800 4,800
Contribution receivable from partner -- (12,800)
-------- --------
Partners' equity, end of period $398,291 $349,458
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S - 5
<PAGE> 42
CMT PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended December 31, 1994 and
the four-month period from September 1, 1993
(inception) to December 31, 1993
(in thousands)
--------------
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $140,233 $ 28,267
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 41,835 19,615
Minority interest 6,955 1,662
Earnings in unconsolidated investment (18,363) (4,178)
Loss on disposition of property and equipment 1,644 25
Changes in assets and liabilities:
Trade accounts receivable, net (23,191) (2,917)
Other account receivable, net (12,409) (2,352)
Other current assets (2,630) (1,153)
Accounts payable 10,547 1,771
Accrued expenses 4,301 7,035
Unearned revenue and customer deposits (583) 37
-------- --------
8,106 19,545
-------- --------
Net cash provided by operating activities 148,339 47,812
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (69,585) (17,864)
Contributions to unconsolidated investment (5,099) (4,800)
Distributions from unconsolidated investment 13,600 --
Increase in other assets 245 (658)
-------- --------
Net cash used for investing activities (60,839) (23,322)
-------- --------
Cash flows from financing activities:
Distributions to partners of CMT (104,200) (32,000)
Distributions to minority partners (4,980) (2,100)
Net payments to affiliates (585) (4,645)
Partners' contribution 12,800 4,800
-------- --------
Net cash used for financing activities (96,965) (33,945)
-------- --------
Net decrease in cash (9,465) (9,455)
Cash and cash equivalents, beginning of period 11,615 21,070
-------- --------
Cash and cash equivalents, end of period $ 2,150 $ 11,615
======== ========
</TABLE>
Supplemental disclosure of noncash activities:
As of December 31, 1993, $12.8 million of the initial contribution from a
partner was outstanding. The amount of the contribution was paid by the
partner in 1994.
The accompanying notes are an integral part of these financial statements.
S - 6
<PAGE> 43
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
---------------------
1. Organization:
-------------
CMT Partners (the Partnership) was formed on September 1, 1993
(inception) pursuant to the Amended and Restated Partnership Agreement
dated as of September 1, 1993 between subsidiaries of AirTouch
Communications, Inc. (ATI) and subsidiaries of McCaw Cellular
Communications, Inc. (MCCI). The Partnership is a Delaware general
partnership equally owned by ATI and MCCI through the following
contributions:
<TABLE>
<CAPTION>
Contributions
to
General Partners CMT Partners
---------------- -------------
<S> <C>
AirTouch Communications, Inc.:
Bay Area Cellular Telephone Company (BACTC) 61.099%
Interest in A Block licensee in Dallas-Fort
Worth, TX (D/FW) 33.915%
McCaw Cellular Communications, Inc.:
Cagal Cellular Communications Corporation (Cagal) 80.370%
Salinas Cellular Telephone Company (Salinas) 85.930%
Napa Cellular Telephone Company (Napa) 99.999%
Net operating assets of A Block licensee in
Kansas City, MO (Kansas City) 100.000%
St. Joseph CellTel Co (St. Joseph) 87.000%
Net operating assets of A Block licensee
in Lawrence, KS (Lawrence) 100.000%
BACTC 32.900%
</TABLE>
The initial contributions were accounted for at the net book value of
the assets and liabilities of the entities. Each of the entities holds
a license or licenses from the Federal Communication Commission (FCC)
and state authorities to operate cellular telephone systems in
Metropolitan Statistical Areas (MSAs) as listed below:
<TABLE>
<CAPTION>
<S> <C>
Bay Area Cellular Telephone Company San Francisco/San Jose, CA
Dallas-Forth Worth Dallas-Fort Worth, TX
Cagal Cellular Communications Corporation Santa Rosa, CA
Salinas Cellular Telephone Company Salinas, CA
Napa Cellular Telephone Company Napa/Vallejo, CA
Net operating assets of A Block licensee Kansas City, MO
St. Joseph CellTel Co St. Joseph, MO
Net operating assets of A Block licensee Lawrence, KS
</TABLE>
Continued
S - 7
<PAGE> 44
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
2. Summary of Significant Accounting Policies:
-------------------------------------------
Principles of Consolidations:
-----------------------------
The consolidated financial statements of the Partnership include the
accounts of all significant ownership interests which include the
accounts of BACTC, Combined Suburban Cellular (CSC), and Kansas
Combined Cellular (KCC). CSC is comprised of the Cagal, Salinas and
Napa cellular markets. KCC is comprised of the Kansas City, St. Joseph,
and Lawrence cellular markets.
Revenue Recognition:
--------------------
Cellular air time and access charges are recorded as revenue when
earned. Sales of equipment and related services are recorded when the
goods and services are delivered.
Cash and Cash Equivalents:
--------------------------
Cash and cash equivalents consist of investments with original
maturities of less than three months. The carrying amount approximates
fair value because of the short maturity of those instruments.
Allocation of Profits and Losses:
---------------------------------
In general, profits and losses incurred by the Partnership are
allocated to the partners pro rata in accordance with their partnership
ownership percentage.
Property and Equipment:
-----------------------
Property and equipment are stated at historical cost. Depreciation is
computed using the straight-line method over the estimated useful lives
of the assets.
Depreciable Life
-----------------
Cellular equipment 3 - 7 years
Cellular towers/shelters 5 - 15 years
Other 3 - 7 years
Continued
S - 8
<PAGE> 45
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
2. Summary of Significant Accounting Policies, continued:
------------------------------------------------------
Leasehold improvements are amortized using the straight-line method
over the shorter of the lease term or the estimated useful life of the
asset. When property and equipment are retired or sold, the cost and
accumulated depreciation of dispositions are removed from the accounts,
and any gain or loss is reflected in income.
Repairs and maintenance costs are charged to expense when incurred.
Renewals and betterments are capitalized and depreciated over the
remaining useful lives of the assets.
Intangibles:
------------
Intangible assets primarily represent costs incurred in the acquisition
and development of the cellular licenses and acquisition of subscriber
lists. The costs of the cellular licenses are being amortized over 40
years using the straight-line method. The costs of the subscribers
lists are being amortized over three years using the straight-line
method.
Income Taxes:
-------------
The income or loss of CMT Partners and its consolidated subsidiaries
are included in the tax returns of the individual partners.
Accordingly, no provision has been made for income taxes for these
entities in the financial statements.
Minority Interests:
-------------------
Minority interests represent equity interests held by entities other
than CMT Partners for the general partnerships serving the St. Joseph,
BACTC and Salinas markets and the corporation serving the Cagal market.
Reclassifications:
------------------
Certain items in the financial statements at December 31, 1993 and for
the four-month period from September 1, 1993 (inception) to December
31, 1993 have been reclassified to conform to the 1994 presentation.
These reclassifications have no effect on previously reported net
income or partners' equity.
Continued
S - 9
<PAGE> 46
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
3. Property and Equipment:
-----------------------
Property and equipment at December 31, 1994 and 1993 consists of the
following:
1994 1993
---- ----
(in thousands)
[S] [C] [C]
Land $ 1,454 $ 1,454
Cellular property and equipment 276,259 236,374
Administrative assets 33,511 25,505
--------- ---------
311,224 263,333
Less accumulated depreciation
and amortization (150,693) (116,943)
--------- ---------
160,531 146,390
Cellular system under construction 29,455 14,243
--------- ---------
$ 189,986 $ 160,633
========= =========
Administrative assets primarily consist of office furniture and
fixtures, including leasehold improvements.
4. Accrued Expenses:
--------------------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accrued commissions $ 5,718 $ 3,028
Accrued employee benefits 5,019 3,579
Other 17,569 17,398
------- -------
$28,306 $24,005
======= =======
</TABLE>
Continued
S - 10
<PAGE> 47
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
5. Unconsolidated Investment:
--------------------------
The unconsolidated investment represents an investment in D/FW Signal
Partnership which owns approximately 34% of Metroplex, the A Block
licensee in Dallas-Fort Worth, Texas. Accordingly, the investment has
been accounted for by the equity method of accounting. The purchase
price in excess of the Partnership's share of net assets is $71.5
million and is being amortized over 40 years. The financial statements
of Metroplex at December 31, 1994 and 1993 and for the year ended
December 31, 1994 and the four-month period from September 1, 1993
(inception) to December 31, 1993 are shown below:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Current assets $ 52,279 $ 35,816
Noncurrent assets 125,900 94,176
-------- --------
Total assets $178,179 $129,992
======== ========
Current liabilities $ 39,596 $ 24,564
-------- --------
Total liabilities $ 39,596 $ 24,564
======== ========
Total equity $138,583 $105,428
======== ========
Revenue $173,718 $ 49,715
======== ========
Net income $ 58,156 $ 14,384
======== ========
</TABLE>
6. Transactions with Related Parties:
----------------------------------
The Partnership and its affiliated companies have entered into several
transactions and agreements related to their respective businesses. The
following represents the material transactions between the Partnership
and its affiliated companies.
Due from Affiliates:
--------------------
Included in the amount due from affiliates at December 31, 1994 and 1993
is $2,958,738 and $2,776,821, which is due from MCCI. This amount is due
on demand and no interest is charged on the amount.
Continued
S - 11
<PAGE> 48
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
6. Transactions with Related Parties , continued:
---------------------------------------------
Acquisition of Cellular Reseller:
---------------------------------
In order to comply with a previous California Public Utilities Commission
order that ATI divest its resale entity in San Francisco, on September 1,
1993, the date of inception, CMT Partners purchased the net assets and
liabilities of ATI's cellular reseller at an agreed upon price of zero.
Immediately thereafter, CMT Partners contributed substantially all of the
assets and liabilities to BACTC.
Technical, Administrative and Marketing Services:
-------------------------------------------------
The Partnership entered into a service agreement (the Agreement) with
MCCI to provide certain services to CSC and KCC markets. The costs
charged pursuant to the Agreement are generally determined using an
allocation method. Substantially all of the services under the Agreements
were terminated during 1994 and CMT Partners began providing these
services to its affiliated markets.
Cellular Equipment Purchases:
-----------------------------
On September 19, 1994, MCCI merged with AT&T Corp. (AT&T). The
Partnership purchased cellular electronic equipment from AT&T comprising
approximately 2% of total capital expenditures for the period from
September 19, 1994 through December 31, 1994.
Long Distance:
--------------
Prior to September 1, 1993, CSC, and KCC served as providers for its
customers' InterLATA long distance services. Effective with the formation
of CMT Partners on September 1, 1993, CSC, KCC, and two interexchange
carriers (Interexchange Carriers), both of which are wholly owned
subsidiaries of MCCI, entered into Agreements under which the
Interexchange Carriers provide InterLATA long distance services for CSC
and KCC customers. As CMT Partners is owned in part by a party to the
Modified Final Judgment CMT Partners may be restricted from providing
InterLATA services.
Continued
S - 12
<PAGE> 49
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
6. Transactions with Related Parties , continued:
----------------------------------------------
Long Distance, continued:
-------------------------
CSC and KCC provide billing and collection functions on behalf of the
Interexchange Carriers at $.42 per customer account. The Interexchange
Carriers are responsible for the wholesale cost of the InterLATA long
distance services, and any other expense incurred by the Interexchange
Carriers in operating their business.
Management of Affiliated Markets:
---------------------------------
Under the terms of a Management Agreement dated September 1, 1993,
between the Partnership and AirTouch Cellular of Kansas (AirTouch
Kansas), a wholly-owned subsidiary of ATI, KCC through the Kansas City
market manages the markets owned by AirTouch Kansas. This includes the
markets providing service in and around Wichita and Topeka, Kansas.
AirTouch Kansas must approve capital and operating budgets for these
markets. In addition, AirTouch Kansas is obligated to reimburse the
Kansas City market for operating expenses. The Kansas City market charges
a system operation fee equal to 6% of the AirTouch Kansas system
revenues. The Management Agreement waived the fee until March 1994.
Additionally, AirTouch Kansas shares the facilities and maintenance of
KCC's mobile switching center. The rate per minute of use (MOU) varies
with monthly usage and ranges from $.03 to $.04 per MOU.
Interconnection:
----------------
BACTC has contracted with Pacific Bell, an affiliate of ATI during 1993
and for the first three months of 1994, for interconnection services
essential to the operation of its cellular network. The costs pursuant to
this contract accounted for 4% and 7% of the total operating costs for
the four-month period ended December 31, 1993 and for the first three
months of 1994, respectively.
Continued
S - 13
<PAGE> 50
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
7. Employee Contribution and Profit Sharing Plan:
----------------------------------------------
Employees of CMT Partners and its subsidiaries participate in a
contributory profit-sharing plan referred to as the Cellular One Section
401(k) and Profit Sharing Plan (the Plan), formerly known as the Bay
Area Cellular Telephone Company 401(k) and Profit Sharing Plan, which
qualifies as a cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code. Upon formation of CMT Partners, employees of the
markets contributed by MCCI may elect to participate in the Plan at any
time. Otherwise, these employees may maintain their contributions in
MCCI's 401(k) plan.
The Plan allows participating employees to elect to contribute up to 15%
of their monthly salaries, to a maximum of $9,240 annually. The Plan
sponsor, CMT Partners, contributes to the Plan, on behalf of each
participating employee, an amount equal to 50% of the employee's
contribution, not to exceed 5% of the participant's salary.
Contributions are invested in six different funds. Under the 401(k)
Plan, participants are at all times fully vested. Under the profit
sharing plan, CMT Partners contributes a discretionary percentage of
each eligible employee's salary. Employees vest in the profit sharing
plan over five years. CMT Partners recorded a payable and related
expense of 5% of eligible salaries. CMT Partners contributed $2,023,757
and $398,000 to the 401(k) and profit sharing plan for 1994 and the
four-month period ended December 31, 1993, respectively.
8. Commitments and Contingencies:
------------------------------
Lease Commitments:
------------------
Future minimum payments, required under operating leases and agreements
that have an initial or remaining noncancelable lease term in excess of
one year at December 31, 1994 are summarized below:
<TABLE>
<CAPTION>
Year Ending December 31
-----------------------
(in thousands)
<S> <C>
1995 $ 7,746
1996 7,222
1997 6,432
1998 5,073
1999 3,054
Thereafter 6,861
-------
$36,388
=======
</TABLE>
Continued
S - 14
<PAGE> 51
CMT PARTNERS
NOTES TO FINANCIAL STATEMENTS
--------
8. Commitments and Contingencies, continued:
----------------------------------------
Lease Commitments, Continued:
----------------------------
Rental expense for operating leases was $7,562,000 and $2,047,000 for
1994 and the four-month period ended December 31, 1993, respectively.
Litigation:
-----------
The Partnership is a party to certain litigation in the ordinary
course of business and is also a party to routine filings with the
FCC, state regulatory authorities and other proceedings which
management believes are immaterial to the Partnership.
9. Line of Credit:
---------------
On July 15, 1994, the Partnership entered into a Revolving Line of
Credit Note (the "line of credit") with Wells Fargo Bank. The line of
credit allows for borrowings up to $10,000,000 of which no borrowings
were outstanding at December 31, 1994. The terms of the line of credit
provide that interest on all advances will accrue at the lesser of a
variable rate equal to the Prime Rate or .90% above the LIBOR rate. The
line of credit agreement expires June 15, 1995.
Continued
S - 15
<PAGE> 52
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of CMT Partners:
Our report on the consolidated financial statements of CMT Partners is included
as an exhibit to the Form 10-K of AirTouch Communications, Inc. (AirTouch). In
connection with our audit of such financial statements, we have audited the
related financial statement schedule listed in the index as an exhibit to
AirTouch's Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers and Lybrand L.L.P.
San Francisco, California
January 30, 1995
S - 16
<PAGE> 53
CMT PARTNERS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Cost and End of
Period Expenses Deductions(a) Period
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful
accounts $1,576 $8,107 $6,455 $3,228
For the four-month period
from September 1, 1993
(inception) to December 31, 1993:
Allowance for doubtful
accounts $1,583 $792 $799 $1,576
</TABLE>
(a) Amounts in this column reflect items written off, net of recoveries.
S - 17
<PAGE> 54
MANNESMANN MOBILFUNK GMBH
Table of Contents
Independent Auditors' Report
Balance Sheets as of December 31, 1994 and 1993
Statements of Income for the Years ended December 31, 1994, 1993 and 1992
Statements of Capital Subscribers' Equity for the Years ended December 31, 1994,
1993 and 1992
Statements of Cash Flows for the Years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
S - 18
<PAGE> 55
Independent Auditors' Report
----------------------------
The Board of Directors and Capital Subscribers
Mannesmann Mobilfunk GmbH
We have audited the accompanying balance sheets of Mannesmann Mobilfunk GmbH as
of December 31, 1994 and 1993, and the related statements of income, capital
subscribers' equity, and cash flows for the years ended December 31, 1994, 1993
and 1992. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted German auditing
standards which, in all material respects, are similar to auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mannesmann Mobilfunk GmbH at
December 31, 1994 and 1993, and the results of its operations and its cash flows
for the years ended December 31,1994, 1993 and 1992 in conformity with
accounting principles generally accepted in the United States.
As discussed in notes 1 and 6 to the financial statements, the Company changed
its method of accounting for income taxes in 1992 to adopt the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
Dusseldorf, Germany, February 27, 1995
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
/s/ Scheffler /s/ Haas
Wirtschaftsprufer Wirtschaftsprufer
S - 19
<PAGE> 56
MANNESMANN MOBILFUNK GMBH
Balance Sheets
December 31, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
Assets 1994 1994 1993
------------ ------------ --------- --------
U.S. Dollars Deutsch- Deutsch-
(Note 1) marks marks
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents (note 2) $ 19,721 DM 30,548 30,848
Accounts receivable,
less allowance for doubtful accounts of
DM 18,215 in 1994 and DM 10,397 in 1993 174,230 269,882 166,563
Due from affiliated companies (note 3) 8,972 13,897 15,577
Inventories of affiliated products, parts
and related supplies (note 4) 14,853 23,008 19,300
Prepaid expenses 9,603 14,875 10,796
Other current assets 3,740 5,794 2,001
--------- --------- ---------
Total current assets 231,119 358,004 245,085
--------- --------- ---------
Property, plant and equipment (notes 3 and 5):
Telecommunications equipment 1,478,328 2,289,931 1,586,664
Equipment in course of construction 32,022 49,602 113,614
Other equipment 57,336 88,813 65,847
--------- --------- ---------
1,567,686 2,428,346 1,766,125
Less accumulated depreciation 351,396 544,313 266,034
--------- --------- ---------
Net property, plant, and equipment 1,216,290 1,884,033 1,500,091
Other assets, at cost, less accumulated amortization
of DM 67,509 in 1994 and DM 45,445 in 1993 39,654 61,424 81,650
Deferred tax asset (note 6) 57,185 88,580 137,528
Due from affiliated company (notes 3 and 6) 78,943 122,283 158,224
--------- --------- ---------
$ 1,623,192 DM 2,514,324 2,122,578
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
S - 20
<PAGE> 57
MANNESMANN MOBILFUNK GMBH
Balance Sheets (Continued)
December 31, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
Liabilities and Capital Subscribers' Equity 1994 1994 1993
------------------------------------------------- ------------- --------- --------
U.S. Dollars Deutsch- Deutsch-
(Note 1) marks marks
<S> <C> <C> <C>
Current liabilities:
Due to banks (note 9) $ 46,495 DM 72,021 77,648
Accounts payable 200,369 310,371 322,633
Accrued expenses 23,394 36,238 9,182
Due to affiliated companies (note 3) 4,468 6,921 15,276
--------- --------- ---------
Total current liabilities 274,726 425,551 424,739
Long-term debt (note 9) 464,816 720,000 440,000
Pension liabilities (note 7) 4,582 7,098 6,256
Other non-current liabilities 4,810 7,450 4,350
--------- --------- ---------
Total liabilities 748,934 1,160,089 875,345
--------- --------- ---------
Commitments (note 10)
Capital subscribers' equity:
Subscribed capital (note 8) 261,459 405,000 405,000
Additional capital 784,377 1,215,000 1,215,000
--------- --------- ---------
1,045,836 1,620,000 1,620,000
Accumulated deficit (171,578) (265,775) (372,767)
--------- --------- ---------
Total capital subscribers' equity 874,258 1,354,225 1,247,233
--------- --------- ---------
$ 1,623,192 DM 2,514,324 2,122,578
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
S - 21
<PAGE> 58
MANNESMANN MOBILFUNK GMBH
Statements of Income
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1994 1993 1992
------------ --------- --------- ---------
U.S. Dollars Deutsch- Deutsch- Deutsch-
(Note 1) marks marks marks
<S> <C> <C> <C> <C>
Net revenues $ 1,125,994 DM 1,744,165 901,201 137,486
--------- --------- -------- --------
Operating costs and expenses:
Cost of services and products, including
DM 5,924, DM 2,583 and DM 2,134 with
related parties in 1994, 1993 and
1992, respectively (note 3) 450,461 697,764 474,077 173,598
Selling, general, and administrative
expenses, including DM 56,548,
DM 46,302 and DM 29,612 with
related parties in 1994, 1993 and
1992, respectively (note 3) 329,828 510,904 403,134 200,639
Depreciation and amortization 199,573 309,139 206,229 105,916
---------- --------- -------- --------
Operating income (loss) 146,132 226,358 (182,239) (342,667)
Other income (expense):
Interest income 1,840 2,851 6,587 25,809
Interest expense (note 5) (26,200) (40,584) (9,969) (150)
Other, net 2,102 3,256 1,294 2,124
---------- --------- -------- --------
(22,258) (34,477) (2,088) 27,783
---------- --------- -------- --------
Income (loss) before income taxes
and cumulative effect of change in
accounting principle 123,874 191,881 (184,327) (314,884)
Income tax (expense) benefit (note 6) (54,802) (84,889) 66,728 148,941
---------- --------- -------- --------
Income (loss) before cumulative effect of
change in accounting principle 69,072 106,992 (117,599) (165,943)
Cumulative effect at January 1, 1992 of change
in accounting for income taxes (note 6) -- -- -- 80,083
---------- --------- -------- --------
Net income (loss) $ 69,072 DM 106,992 (117,599) (85,860)
========== ========= ======== ========
</TABLE>
See accompanying notes to financial statements.
S - 22
<PAGE> 59
MANNESMANN MOBILFUNK GMBH
Statements of Capital Subscribers' Equity
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Subscribed Additional Unpaid Accumulated Capital
Capital Capital Capital Deficit Subscribers' Equity
---------- ---------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Balances at
December 31,
1991 (unaudited) 200,000 600,000 (115,000) (169,308) 515,692
Net loss -- -- -- (85,860) (85,860)
Issuance of subscribed
and additional capital 205,000 615,000 (285,000) -- 535,000
Payment of unpaid capital -- -- 115,000 -- 115,000
------- --------- -------- -------- ---------
Balances at
December 31,
1992 405,000 1,215,000 (285,000) (255,168) 1,079,832
Net loss -- -- -- (117,599) (117,599)
Payment of unpaid capital -- -- 285,000 -- 285,000
------- --------- -------- -------- ---------
Balances at
December 31,
1993 405,000 1,215,000 -- (372,767) 1,247,233
Net income -- -- -- 106,992 106,992
------- --------- -------- -------- ---------
Balances at
December 31,
1994 DM 405,000 1,215,000 -- (265,775) 1,354,225
======= ========= ======== ======== =========
Balances at
December 31,
1994 (U.S. Dollars) $ 261,459 784,377 -- (171,578) 874,258
(Note 1) ======= ========= ======== ======== =========
</TABLE>
See accompanying notes to financial statements.
S - 23
<PAGE> 60
MANNESMANN MOBILFUNK GMBH
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1994 1993 1992
------------ -------- -------- --------
U.S. Dollars Deutsch- Deutsch- Deutsch-
(Note 1) marks marks marks
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 69,072 DM 106,992 (117,599) (85,860)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Cumulative effect of change in
accounting principle -- -- -- (80,083)
Income tax expense (benefit) 54,802 84,889 (66,728) (148,941)
Depreciation and amortization 199,573 309,139 207,520 105,916
Allowance for doubtful accounts 5,159 7,991 7,884 2,595
(Gain)loss on sale of equipment 3,970 6,150 2,664 (137)
Provision for pension costs 893 1,383 1,092 1,192
Provision for other costs 2,001 3,100 2,000 1,360
Changes in operating assets and liabilities
Accounts receivable (71,748) (111,137) (119,071) (57,849)
Due from affiliated companies 1,085 1,680 13,570 (17,052)
Inventories (2,394) (3,708) (10,371) (8,281)
Prepaid expenses (2,633) (4,079) (5,621) (3,551)
Other current assets (2,560) (3,966) (1,281) (413)
Accounts payable (7,916) (12,262) 52,139 106,109
Accrued expenses 17,467 27,056 1,722 3,360
Due to affiliated companies (5,394) (8,355) 1,898 1,477
Pension liabilities (349) (541) 183 105
-------- -------- -------- --------
Net cash provided by (used in)
operating activities 261,028 404,332 (29,998) (180,053)
-------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sale of equipment and other assets 6,803 10,538 6,734 6,340
Capital expenditures,
including interest capitalized (444,918) (689,178) (811,009) (584,791)
Increase in other assets (236) (365) (272) (9,559)
-------- -------- -------- --------
Net cash used in investing activities (438,351) (679,005) (804,547) (588,010)
-------- -------- -------- --------
(Continued)
</TABLE>
S - 24
<PAGE> 61
MANNESMANN MOBILFUNK GMBH
Statements of Cash Flows, continued
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1994 1993 1992
----------- --------- ---------- ---------
U.S. Dollars Deutsch- Deutsch- Deutsch-
(Note 1) marks marks marks
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from contributed capital -- -- 285,000 650,000
Proceeds from issuance of long-term debt 180,762 280,000 440,000 --
Increase (decrease) in due to banks (3,633) (5,627) 77,648 --
------- ------- ------- --------
Net cash provided by financing activities 177,129 274,373 802,648 650,000
------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents (194) (300) (31,897) (118,063)
Cash and cash equivalents at beginning of year 19,915 30,848 62,745 180,808
------- ------- ------- --------
Cash and cash equivalents at end of year $ 19,721 DM 30,548 30,848 62,745
======= ======= ======= ========
</TABLE>
The Company paid interest of DM 48,213, DM 2,301 and DM 150 in 1994, 1993 and
1992 respectively.
See accompanying notes to financial statements.
S - 25
<PAGE> 62
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
Years ended December 31, 1994, 1993 and 1992
(All amounts in thousands of Deutschmarks)
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
Mannesmann Mobilfunk GmbH was incorporated on September 11, 1989.
At December 31, 1994 Mannesmann AG, held a controlling interest of
59.66%, and AirTouch (Netherlands) B.V. held an interest of
30.42%. In addition, a 4.5% interest equally owned by Mannesmann
AG and AirTouch (Netherlands) B.V. was held in a trust, which
under the terms of the Company's license, must be sold to small or
medium sized German businesses.
The Company's primary business is the construction, manufacture
and operation of a private mobile cellular network ("D2") within
Germany. It is conducted under a license agreement with the
Federal Postal and Telecommunications Ministry expiring at the end
of 2009.
Commercial activities commenced in mid 1992 and by the end of 1994
the Company had almost 850,000 customer subscribers.
(b) Basis of Presentation
In order to conform with accounting principles generally accepted
in the United States, certain adjustments are reflected in the
financial statements which are not recorded in the German books of
account. These adjustments relate primarily to capitalization of
own payroll and related costs associated with the design and
construction of telecommunications equipment and accounting for
income taxes.
(c) Cash and Cash Equivalents
The Company considers all highly liquid monetary instruments with
original maturities of three months or less to be cash
equivalents.
(d) Inventories
Inventories are stated at the lower of average cost or market.
S - 26
<PAGE> 63
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated on both the straight-line and declining balance methods
over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Classification Useful lives Method
<S> <C> <C> <C>
Telecommunications equipment:
D2 infrastructure center 10 10% straight-line
Switching locations 15 6.67% straight-line
Base station equipment - poles 10 30% declining balance
- components 20 5% straight-line
Transmission and message
switching technology 8 12.5% straight-line
Other equipment:
Data processing equipment 4 30% declining balance
Office equipment 10 30% declining balance
Measuring instruments 5 30% declining balance
Vehicles 4 30% declining balance
</TABLE>
To the extent permissible under tax laws, systematic depreciation
is computed according to the declining balance method at a rate of
up to 30 percent. Wherever straight-line depreciation results in
higher charges, this method is used.
Certain equipment installed at third party locations for rental
periods less than the above useful lives are depreciated over the
corresponding terms of the agreements.
(f) Other Assets
Other assets are stated at cost. They consist mainly of computer
software, patents, rights, concessions and loan commitment fees
which are being amortized over periods ranging from three to eight
years on a straight-line basis.
S - 27
<PAGE> 64
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
(g) Income Taxes
Effective January 1, 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, and has reported the cumulative effect of the
change in the method of accounting for income taxes in the 1992
statement of operations. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
S - 28
<PAGE> 65
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
(h) Pension Plans
The Company has defined benefit plans limited to its management
group and a small minority of its employees transferred with
continuing pension rights from other Mannesmann AG group
companies. The benefits are based on years of service and recent
compensation. The accumulated benefit obligation is determined
based on annual actuarial calculations and recorded as a liability
in the balance sheet with a corresponding charge to income. The
liability is not funded but represented by the Company's assets.
(i) Financial Statement Translation
The financial statements are expressed in Deutschmarks and, solely
for the convenience of the reader, have been translated into
United States dollars at the rate of DM 1.549 to U.S. $1, the
closing rate quotation (New York time - U.S.A.) per Wall Street
Journal on December 30,1994.
(2) Cash and Cash Equivalents
-------------------------
This caption includes cash equivalents representing time deposits for
amounts maturing within periods of between one day and three months. The
balances at December 31, 1994 and 1993 are DM 24,000 and DM 28,000
respectively.
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of the investments.
(3) Related Party Transactions
--------------------------
The Company has significant business transactions with its main capital
subscribers, Mannesmann AG and AirTouch Communications, through its
group company, AirTouch (Netherlands) B.V., formerly part of the PacTel
Corporation group until spin off on March 21, 1994, and their respective
group companies. Such transactions are normally concluded within a range
of terms similar to those made with non-related parties.
The significant balances and transactions with these current and former
related parties are shown separately in the balance sheets and
statements of operations. In addition, purchases of property, plant and
equipment and other assets from related parties during the periods
stated are shown below:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C> <C>
Purchases included under property
plant and equipment DM 15,174 30,050 20,176
Purchases included under other assets DM -- -- 2,996
</TABLE>
S - 29
<PAGE> 66
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
(4) Inventories
-----------
This caption includes stocks of affiliated products, parts and related
supplies. The balances at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Mobile telephones DM 12,253 10,942
Spare parts 7,734 2,527
Subscriber identification Module cards 2,383 5,794
Other trade goods 638 37
------ ------
DM 23,008 19,300
====== ======
</TABLE>
(5) Interest Cost
-------------
The Company commenced capitalization of interest cost during 1993
commensurate with the drawdown of its credit facility to finance
continuing expansion of the infrastructure for its private mobile
cellular network. The following is a summary of interest cost incurred
and subject to capitalization during 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Interest cost capitalized DM 4,092 2,980
Other trade goods 40,584 9,969
------ ------
Total interest cost incurred DM 44,676 12,949
====== ======
</TABLE>
Interest capitalized has been included in the telecommunications
equipment component of property, plant and equipment.
(6) Income Taxes
------------
Total income taxes for the years ended December 31, 1994, 1993 and 1992
were allocated as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C>
Income (loss) from continuing operations DM (84,889) 66,728 148,941
Cumulative effect of change in
accounting for income taxes -- -- 80,083
------- ------ -------
DM (84,889) 66,728 229,024
======= ====== =======
</TABLE>
S - 30
<PAGE> 67
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
Income tax (expense) benefit attributable to income (loss) from
continuing operations for the years ended December 31, 1994, 1993 and
1992, relating solely to deferred income taxes, consists of various
types of taxes as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
German trade tax DM (33,963) 26,697 55,735
German corporate tax (47,376) 37,240 93,206
German solidarity surcharge tax (3,550) 2,790 --
------- ------ -------
DM (84,889) 66,728 148,941
======= ====== =======
</TABLE>
The respective rates for the above types of taxes and their application
for the years ended December 31, 1994, 1993 and 1992 are analyzed as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Income before income taxes 100% 100% 100%
German trade tax gross rate of 17.7% for
1994, 1993 and 1992 applied to
income before income taxes (17.7%) (17.7%) (17.7%)
----- ----- -----
82.3% 82.3% 82.3%
German corporate tax gross rate of 30%
for 1994 and 1993 and 36% for 1992
applied to income after German trade tax,
a net rate of 24.69% for 1994 and 1993
and 29.6% for 1992 (24.69%) (24.69%) (29.6%)
------ ------ -----
57.61% 57.61% 52.7%
German solidarity surcharge tax gross rate of
7.5%, announced in 1993 effective 1995,
applied to German corporate tax net rate of
24.69%, a net rate of 1.85% (1.85%) (1.85%) --
------ ------ -----
Income after income taxes 55.76% 55.76% 52.7%
====== ===== =====
German trade tax net rate 17.7% 17.7% 17.7%
German corporate tax net rate 24.69% 24.69% 29.6%
German solidarity surcharge tax net rate 1.85% 1.85% --
------ ------ -----
Combined German income tax rate 44.24% 44.24% 47.3%
====== ====== =====
</TABLE>
These rates are based on the assumption that future profits will be
distributable, otherwise higher rates would apply to retained profits.
Since this accords with the future dividend
S - 31
<PAGE> 68
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
policy agreed by the capital subscribers, the adoption of the above
lower basis rates is considered appropriate.
Income tax (expense) benefit attributable to income (loss) from
continuing operations was DM (84,889), DM 66,728 and DM 148,941 for the
years ended December 31, 1994, 1993 and 1992 respectively, and differed
from the amount computed by applying the above combined German income
tax rate of 44.24 per cent for 1994 and 1993 and 47.3 per cent for 1992
to pretax income (loss) from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Computed "expected" tax (expense) benefit DM (84,889) 81,546 148,941
Adjustments to deferred tax assets and
liabilities for enacted changes in tax laws
and rates from 47.3% to 44.24%
announced in 1993 -- (14,818) --
------- ------- -------
DM (84,889) 66,728 148,941
======= ======= =======
</TABLE>
The significant components of the deferred income tax (expense) benefits
attributable to the income (loss) from continuing operations for the
years ended December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Tax effect of the German fiscal basis
income (loss) from continuing operations (89,833) 97,017 159,586
Tax effect of the temporary differences attributable
to items expensed for tax purposes but capitalized
as property, plant and equipment and partly
depreciated for book purposes 4,062 (16,353) (24,666)
Tax effect of temporary difference attributable
to a loan commitment fee expensed for tax
purposes but deferred as other assets and partly
amortized for book purposes 882 882 (4,521)
Tax effect of the temporary difference attributable
to a charge expensed for tax purposes prior to
1992, but expensed for book purposes in 1992 -- -- 18,542
Adjustments to deferred tax assets and liabilities
for enacted changes in tax laws and rates -- (14,818) --
------- ------- -------
Net tax (expense) benefit (84,889) 66,728 148,941
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset and deferred tax liabilities at
December 31,1994, 1993 and 1992 are presented below:
S - 32
<PAGE> 69
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Deferred tax asset:
Net operating loss carryforwards DM 305,638 395,471 319,097
Less amount due from affiliated company for realization
of the benefit of net operating loss carryforwards
for German trade tax purposes (122,283) (158,224) (119,408)
-------- -------- --------
183,355 237,247 199,689
Deferred tax liabilities:
Property, plant and equipment due to differences
in capitalization and related depreciation (92,129) (96,191) (85,359)
Loan commitment fee (2,646) (3,528) (4,714)
-------- -------- --------
Net deferred tax asset DM 88,580 137,528 109,616
======== ======== ========
</TABLE>
No valuation allowance for the deferred tax asset at December 31, 1994,
1993 and 1992 has been recognized. In assessing the realizability of the
deferred tax asset, management considers whether it is more likely than
not that some portion or all of the deferred tax asset will not be
realized. The ultimate realization of the deferred tax asset is
dependent on the generation of future taxable income. The Company's net
operating losses to date have been incurred in the start-up phase of its
operations. This covered the period from incorporation in 1989 to the
end of 1993, by which the time the Company was almost at a break-even
level. Taxable income was generated in 1994 reducing the deferred tax
asset. Based on the growth rate in the number of subscribers and
projected market penetration, management believes it is more likely than
not that the Company will realize the remaining benefits of the net
operating loss carryforwards, which are available to reduce future
income taxes over an indefinite period.
Due to its controlling interest of more than 50%, Mannesmann AG has
included the income (loss) from continuing operations of the Company for
German trade tax purposes in its consolidated tax return under an
agreement common to all its majority owned subsidiaries within the
German fiscal jurisdiction. Under this agreement Mannesmann AG charges
or credits the Company for German trade tax payable or receivable
arising from the income (loss) from continuing operations. At the gross
rate of 17.7% for German trade tax applicable to each of the years ended
December 31, 1994, 1993 and 1992, the respective balances with
Mannesmann AG of DM 122,283, DM 158,224 and DM 119,408, representing the
realization of the benefits of net operating loss carryforwards, are
shown under the balance sheet caption as an amount due from affiliated
company. This group arrangement is not applicable to German corporate
tax and, from 1995, to German solidarity surcharge tax, which is
assessed on an individual legal entity basis without the benefit of
group relief.
As discussed in note 1, the Company adopted Statement 109 as of January
1, 1992. The cumulative effect of this change in accounting for income
taxes of DM 80,083 was
S - 33
<PAGE> 70
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
determined as of January 1, 1992 and has been reported separately in the
statement of income for the year ended December 31, 1992. This amount is
due to the recognition of the net benefits attributable mainly to the
deferred tax effects of net operating loss carryforwards offset
partially by other temporary differences.
(7) Pension Plans
-------------
The Company has two defined benefit pension plans. The first covers all
of its 80 member management group (1993 and 1992 - 73 members). The
second covers only 40 of its employee group (1993 and 1992 - 45
employees) representing those employees transferred with continuing
pension rights from other Mannesmann AG group companies. The remaining
employees totaling about 2,400 at the end of 1994 (about 2,100 and 1,500
at the end of 1993 and 1992 respectively) are not presently covered by
such plans. It is intended that these employees will eventually be
covered by a defined contribution plan funded externally with an
insurance company. All personnel are covered by a German state pension
scheme under a defined contribution plan funded equally by the employer
and the employee.
The pension liabilities shown in the balance sheet result directly from
independent actuarial calculations based on the situation at the end of
each year in accordance with German tax and commercial rules. Due to the
relatively insignificant amount of such pension liabilities given the
small number of employees covered, together with the short periods of
prior service, the Company considers that any potential adjustment or
additional disclosures, that would be required had Statement of
Financial Accounting Standards No 87, Employers' Accounting for
Pensions, been applied, would not be material.
As noted above, the pension liabilities shown in the balance sheet
represent the actuarial present value of accumulated benefit
obligations. Projected benefit obligations and increases in compensation
levels are not considered. The pension liabilities under these plans are
not funded but considered to be represented by the Company's assets.
The pension costs charged to income for 1994, 1993 and 1992 are DM
1,383, DM 1,076 and DM 1,192 respectively.
The discount rate assumed in the actuarial valuations for each of the
years ended December 31, 1994, 1993 and 1992 is 6%.
(8) Subscribed Capital
------------------
Subscribed capital is represented by whole sum subscription amounts,
issued in the form of participation certificates, on a proportional
basis to the various investing parties. The respective amounts of
proportional subscriptions directly reflect the percentage of respective
ownership and related voting and dividend rights. As discussed below in
note 9, the payment of dividends is restricted under the credit facility
agreement.
S - 34
<PAGE> 71
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
(9) Long-term debt
--------------
During 1993 the Company began to utilize its unsecured credit facility
negotiated with a banking consortium for an amount ranging from a
minimum of DM 990,000 to a maximum of DM 1,100,000. The Company is
entitled to draw against the arrangement until December 31, 1995 and is
able to draw Domestic and Eurofacilities on roll-over or term bases and
to choose up to a maximum of five currencies with fixed and variable
interest rates.
Drawings under this facility, all in Deutschmarks, at December 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
First drawing, at end of 1994 on an annual basis until
June 1995 at 5.7875%, at end of 1993 on an annual
basis until June 1994 at 7.4125% 200,000 200,000
Second drawing, at end of 1994 on a monthly basis until
January 1995 at 5.9125%, at end of 1993 on a semi-annual 60,000 60,000
basis until March 1994 at 6.975%
Third drawing, first tranche, at end of 1994 on a monthly basis until
January 1995 at 5.9125%, at end of 1993 on a
quarterly basis until February 1994 at 6.8109% 150,000 180,000
Third drawing, second tranche, at end of 1994 on a monthly basis
until January 1995 at 5.9017% 130,000 --
Fourth drawing, first tranche, at end of 1994 on a monthly basis
until January 1995 at 6.0805% 100,000 --
Fourth drawing, second tranche, at end of 1994 on a monthly basis
until January 1995 at 6.0417% 80,000 --
------- -------
Total long-term debt DM 720,000 440,000
======= =======
</TABLE>
This facility also provides for a flexible repayment schedule with final
maturity between June 30, 1995 and December 30, 2001. Based on the
maximum credit and latest repayment scenario, the maturities of the DM
720,000 long-term debt at December 31, 1994 would be as follows:
<TABLE>
<S> <C>
1995 DM --
1996 --
1997 --
1998 --
1999 170,000
Thereafter 550,000
-------
DM 720,000
=======
</TABLE>
S - 35
<PAGE> 72
MANNESMANN MOBILFUNK GMBH
Notes to Financial Statements
The carrying amount of the long-term debt at December 31, 1994 is
considered to closely approximate fair value to the extent of the
combined DM 520,000 for the second, third and fourth drawings as they
are being rolled over the year end on a monthly basis at various rates,
which did not change significantly during their brief exposure period.
For the remaining DM 200,000 for the first drawing being rolled over the
year end on an annual basis until June 1995, there is a favorable 17
basis points arising from its prior six months exposure period compared
to the weighted average rate for the above monthly basis drawings, and
accordingly the fair value of this portion of long-debt is deemed to
decrease by DM 170 to DM 199,830.
In accordance with the credit facility agreement the Company is also
entitled to borrow up to 10% of its capital subscribers' equity on a
short term basis. The payment of dividends will be dependent upon the
attainment of certain minimum cash flow requirements.
(10) Commitments
-----------
The Company is obligated under various noncancelable operating leases,
primarily of a long-term nature, for the main administrative building,
base stations and sales offices. The rental expense charged to income
during 1994, 1993 and 1992 was DM 51,769, DM 40,739 and DM 25,254
respectively.
Future minimum lease payments under noncancelable leases (with initial
or remaining lease terms in excess of one year) are:
<TABLE>
<S> <C>
Year ending December 31:
1995 27,787
1996 26,214
1997 25,438
1998 11,399
1999 11,407
2000 and beyond 50,970
-------
Total minimum lease payments DM 153,215
=======
</TABLE>
S - 36
<PAGE> 73
New Par (A Partnership)
Index of Consolidated Financial Statements
and Financial Statement Schedules
<TABLE>
<S> <C>
Report of Independent Auditors ....................................................................S - 38
Consolidated Balance Sheets - December 31, 1994 and 1993...........................................S - 39
Consolidated Statements of Income - Years ended December 31, 1994,
1993 and 1992 ..................................................................................S - 40
Consolidated Statement of Partners' Capital - Years ended December 31, 1994,
1993 and 1992...................................................................................S - 41
Consolidated Statements of Cash Flows - Years ended December 31, 1994,
1993 and 1992 ..................................................................................S - 42
Notes to Consolidated Financial Statements ........................................................S - 44
Schedule II - Valuation and Qualifying Accounts................................................... S - 55
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
S - 37
<PAGE> 74
Report of Independent Auditors
The Partnership Committee
New Par
We have audited the accompanying consolidated balance sheets of New Par
as of December 31, 1994 and 1993, and the related consolidated statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1994. Our audits also included the financial
statement schedule (Schedule II-Valuation and Qualifying Accounts). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New Par
at December 31, 1994 and 1993, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
February 14, 1995
S - 38
<PAGE> 75
New Par (A Partnership)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 33,461,000 $ 36,845,000
Accounts receivable--trade, less allowance for doubtful
accounts of $5,265,000 (1994) and $4,382,000
(1993) 65,799,000 51,353,000
Financing receivables, net 20,774,000 6,338,000
Due from affiliates 14,000 49,000
Telephone equipment inventory 16,142,000 8,149,000
Prepaid expenses and other current assets 2,796,000 1,866,000
------------ ------------
Total current assets 138,986,000 104,600,000
Property, plant and equipment, net 352,218,000 304,548,000
License acquisition costs, net 356,034,000 367,063,000
Other assets, net of accumulated amortization
of $6,437,000 (1994) and $10,583,000 (1993) 27,741,000 14,190,000
------------ ------------
Total assets $874,979,000 $790,401,000
============ ============
Liabilities and partners' capital
Current liabilities:
Accounts payable $ 25,482,000 $ 18,148,000
Accrued expenses 18,025,000 14,101,000
Distribution payable to partners 26,133,000 22,982,000
Due to affiliates 1,226,000 1,813,000
Property and other taxes payable 15,790,000 10,955,000
Commissions payable 14,207,000 9,321,000
Deferred revenue 13,968,000 11,066,000
------------ ------------
Total current liabilities 114,831,000 88,386,000
Deferred compensation 171,000 --
Commitments and contingent liabilities
Minority interests 556,000 22,000
Partners' capital 759,421,000 701,993,000
------------ ------------
Total liabilities and partners' capital $874,979,000 $790,401,000
============ ============
</TABLE>
See accompanying notes.
S - 39
<PAGE> 76
New Par (A Partnership)
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues
Cellular service $ 498,077,000 $ 390,181,000 $ 311,197,000
Telephone equipment sales,
rental and other 80,861,000 45,668,000 29,135,000
------------- ------------- -------------
578,938,000 435,849,000 340,332,000
Costs and expenses
Cost of telephone equipment sold 61,986,000 28,037,000 14,538,000
Operating expenses 106,544,000 85,575,000 69,818,000
Selling, general and
administrative expenses 211,182,000 148,248,000 123,108,000
Restructuring charges -- 648,000 --
Depreciation expense 45,648,000 39,796,000 30,437,000
Amortization expense 13,491,000 12,950,000 13,572,000
Depreciation of rental telephones 22,525,000 28,496,000 18,957,000
------------- ------------- -------------
461,376,000 343,750,000 270,430,000
------------- ------------- -------------
Operating income 117,562,000 92,099,000 69,902,000
Other income (expense):
Interest and other income 2,367,000 1,100,000 272,000
Interest expense (95,000) (124,000) (140,000)
------------- ------------- -------------
Income before provision for income
taxes and minority interests 119,834,000 93,075,000 70,034,000
Provision for income taxes (4,424,000) (522,000) (771,000)
------------- ------------- -------------
Income before minority interests 115,410,000 92,553,000 69,263,000
Minority interests (534,000) -- --
------------- ------------- -------------
Net income $ 114,876,000 $ 92,553,000 $ 69,263,000
============= ============= =============
</TABLE>
See accompanying notes.
S - 40
<PAGE> 77
New Par (A Partnership)
Consolidated Statement of Partners' Capital
<TABLE>
<CAPTION>
AirTouch CCI
Group Group Total
<S> <C> <C> <C>
Balance, December 31, 1991 $ 335,865,500 $ 223,932,500 $ 559,798,000
Capital contributions 6,694,000 6,694,000 13,388,000
Distribution payable (13,529,500) (13,529,500) (27,059,000)
Net income for the year ended
December 31, 1992 34,631,500 34,631,500 69,263,000
------------- ------------- -------------
Balance, December 31, 1992 363,661,500 251,728,500 615,390,000
Capital contributions -- 29,714,000 29,714,000
Distribution payable (17,832,000) (17,832,000) (35,664,000)
Net income for the year ended
December 31, 1993 46,276,500 46,276,500 92,553,000
------------- ------------- -------------
Balance, December 31, 1993 392,106,000 309,887,000 701,993,000
Distribution payable (28,724,000) (28,724,000) (57,448,000)
Net income for the year ended
December 31, 1994 57,438,000 57,438,000 114,876,000
------------- ------------- -------------
Balance, December 31, 1994 $ 420,820,000 $ 338,601,000 $ 759,421,000
============= ============= =============
</TABLE>
See accompanying notes.
S - 41
<PAGE> 78
New Par (A Partnership)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating activities
Net income $ 114,876,000 $ 92,553,000 $ 69,263,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 81,664,000 81,242,000 62,966,000
Provision for losses on accounts and financing
receivables 17,236,000 16,877,000 6,603,000
Loss on sale of property, plant and equipment 5,433,000 3,534,000 1,526,000
Provision for rental telephone losses 142,000 4,426,000 1,214,000
Deferred compensation 171,000 -- --
Minority interests 534,000 -- --
Change in operating assets and liabilities:
Accounts receivable (30,336,000) (24,533,000) (15,987,000)
Financing receivables (27,669,000) (6,338,000) --
Due from affiliates 35,000 58,000 773,000
Inventory (7,993,000) 76,000 (2,567,000)
Prepaid expenses and other current assets (930,000) (41,000) (56,000)
Other assets (4,026,000) (4,278,000) (3,882,000)
Accounts payable 8,448,000 4,460,000 (3,782,000)
Accrued expenses 4,119,000 (3,703,000) (3,219,000)
Due to affiliates (587,000) 556,000 (4,044,000)
Taxes payable 4,835,000 (645,000) 3,386,000
Commissions payable 4,886,000 2,422,000 1,537,000
Deferred revenues 2,902,000 2,180,000 2,707,000
------------- ------------- -------------
Net cash provided by operating activities 173,740,000 168,846,000 116,438,000
Investing activities
Purchase of property, plant and equipment (123,376,000) (104,288,000) (114,300,000)
Proceeds from sale of property, plant and equipment 649,000 1,035,000 617,000
Purchase of cellular license interests (100,000) (27,000) (4,463,000)
------------ ------------- -------------
Net cash (used in) investing activities (122,827,000) (103,280,000) (118,146,000)
Financing activities
Capital distributions (54,297,000) (35,000,000) (18,241,000)
Capital contributions -- -- 4,463,000
------------- ------------- -------------
Net cash (used in) financing activities (54,297,000) (35,000,000) (13,778,000)
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents (3,384,000) 30,566,000 (15,486,000)
Cash and cash equivalents at beginning of period 36,845,000 6,279,000 21,765,000
------------- ------------- -------------
Cash and cash equivalents at end of period $ 33,461,000 $ 36,845,000 $ 6,279,000
============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 63,000 $ 76,000 $ 79,000
Income taxes paid $ 3,889,000 $ 944,000 $ 675,000
(Continued)
</TABLE>
S - 42
<PAGE> 79
New Par (A Partnership)
Consolidated Statements of Cash Flows, continued
<TABLE>
<CAPTION> Year ended December 31
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Supplemental Disclosures of Noncash Investing
Activities:
Cellular license interests contributed by Cellular
Communication, Inc. $ -- $ 28,207,000 $ 4,462,000
Purchases of property, plant and equipment included in
current liabilities $ 9,491,000 $ 10,800,000 $ 4,417,000
Supplemental Disclosures of Noncash Financing
Activities:
Distribution payable to partners $ 26,133,000 $ 22,982,000 $ 22,318,000
</TABLE>
See accompanying notes.
S - 43
<PAGE> 80
New Par (A Partnership)
Notes to Consolidated Financial Statements
December 31, 1994 and 1993
1. Organization
New Par was formed on August 1, 1991 pursuant to the Amended and Restated
Agreement and Plan of Merger and Joint Venture Organization dated as of December
14, 1990 between AirTouch Communications ("AirTouch") (formerly PacTel
Corporation), Cellular Communications, Inc. ("CCI"), CCI Newco, Inc. and CCI
Newco Sub, Inc. (the "Merger Agreement"). New Par is a Delaware general
partnership equally owned by AirTouch and CCI through the following
wholly-owned, indirect corporate subsidiaries:
<TABLE>
<CAPTION>
Percentage Ownership of
General Partners New Par
- ---------------- -----------------
The AirTouch Group
- ------------------
<S> <C>
AirTouch Cellular of Michigan 27.74%
AirTouch Cellular of Ohio 18.18
AirTouch Cellular of Saginaw, Inc. 2.64
AirTouch Cellular of Lima, Inc. 1.44
------
50.00
The CCI Group
- -------------
Cellular Communications of Cleveland, Inc. 12.45
Cellular Communications of Cincinnati, Inc. 11.22
Cellular Communications of Columbus, Inc. 7.94
Cellular Communications of Dayton, Inc. 5.19
Cellular Communications of Akron, Inc. 4.14
Cellular Communications of Canton, Inc. 2.29
Cellular Communications of Hamilton, Inc. 1.98
Lorain/Elyria Cellular Telephone Company 1.86
E&J Mobile Radio Service, Inc. .97
Cellular Communications of Mansfield, Inc. .87
Midwest Mobilephone of Cincinnati, Inc. .81
Star-Cel, Inc. .21
Cellular One Sales and Service, Inc. .07
------
50.00
------
100.00%
======
</TABLE>
S - 44
<PAGE> 81
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
1. Organization (continued)
Each wholly-owned, indirect corporate subsidiary of AirTouch and CCI initially
contributed to New Par its interests in the General Partnerships (see below).
The initial contributions were accounted for at the net book value of the assets
and liabilities of the General Partnerships. Each of these partnerships, among
other assets, holds a license or licenses from the Federal Communications
Commission ("FCC") and state authorities to operate cellular telephone systems
in Cellular Geographic Service Areas as listed below. New Par owns 100% of the
partnership interests in each partnership, except as noted.
<TABLE>
<CAPTION>
General Partnership Service Area
------------------- ------------
<S> <C>
Detroit Cellular Telephone Company Detroit, MI
Northern Ohio Cellular Telephone Company Cleveland, OH
Lorain/Elyria, OH
Mansfield, OH
Ashtabula, OH
Southern Ohio Telephone Company Cincinnati, OH
Clinton, OH
Columbus Cellular Telephone Company Columbus, OH
Mercer, OH
Dayton Cellular Telephone Company Dayton, OH
Toledo Cellular Telephone Company Toledo, OH
Lima, OH
Grand Rapids Cellular Telephone Company Grand Rapids, MI
Akron Cellular Telephone Company Akron, OH
Flint Cellular Telephone Company Flint, MI
Saginaw, MI
Lansing Cellular Telephone Company Lansing, MI
Canton Cellular Telephone Company Canton, OH
Hamilton Cellular Telephone Company Hamilton/Middletown, OH
Springfield Cellular Telephone Company Springfield, OH
Muskegon Cellular Partnership (a) Muskegon, MI
</TABLE>
(a) New Par is a 38.91% general partner in the Muskegon partnership. AirTouch
Cellular of Michigan is a 40.5% general partner. The remaining 20.59%
interests are owned by unaffiliated entities.
S - 45
<PAGE> 82
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
1. Organization (continued)
Each of the above General Partnerships owns 100% of the FCC license in the
Service Area, except for Hamilton/Middletown and Springfield in which the
applicable partnership owns 99.6% and 89.23% of the FCC license, respectively.
New Par owns 100% of Cellular One Sales and Service Company, which operates New
Par's sales and service center business.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of New Par, its
wholly-owned partnerships, and partnerships in which New Par's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include cash, deposits in interest-bearing accounts
and short-term highly liquid investments purchased with a maturity of three
months or less.
Telephone Equipment Inventory
Telephone equipment inventory, which consists of telephones and accessories, is
stated at the lower of cost (first-in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives are as follows: building - 25 years, operating plant and equipment
- - 7 to 25 years, rental telephones - 3 years and office furniture, computer and
other equipment - 3 to 5 years.
S - 46
<PAGE> 83
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
License Acquisition Costs
Deferred cellular license costs include costs incurred to design cellular
telephone systems for specific geographic areas, select and acquire sites to
place equipment for such systems, demographic and traffic pattern studies, legal
and organization costs, and costs incurred in connection with the preparation
and filing of FCC license applications. These costs are amortized by the
straight-line method from the commencement of operations over the life of the
Partnership's initial license period (ten years).
In connection with the purchase of license interests, the excess of purchase
price paid over the fair market value of tangible assets acquired is amortized
by the straight-line method over 40 years.
Other Assets
Other assets includes deferred consulting, legal and interconnection costs,
prepaid rent and the long-term portion of financing receivables. The deferred
costs are amortized on a straight-line basis over 3, 5 and 15 years. Prepaid
rent is charged to expense on a straight-line basis over the life of the various
leases.
Revenue Recognition
Service revenue is recognized at the time the cellular service is rendered.
Telephone equipment sales are recorded when the equipment is shipped to the
customer. Telephone rental revenue is billed and recognized on a monthly basis.
Income Taxes
No provision has been made for federal income taxes since such taxes, if any,
are the responsibility of the individual partners. Provision has been made for
state and local income taxes assessed on partnership income which is a liability
of the Partnership.
Allocation of Income
Pursuant to the New Par Partnership Agreement, income is allocated to the
General Partners in proportion to their respective percentage ownership of New
Par.
S - 47
<PAGE> 84
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Fair Value of Financial Instruments
New Par's financial instruments consist primarily of cash and cash equivalents,
accounts receivable, financing receivables, due from affiliates, accounts
payable, accrued expenses, distribution payable to partners, due to affiliates,
property and other taxes payable, and commissions payable. The terms and short
term nature of these assets and liabilities result in their carrying value
approximating fair value.
Reclassifications
Certain of the 1993 amounts have been reclassified to conform to the 1994
presentation.
3. License Acquisition Costs
License acquisition costs consist of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
Deferred cellular license costs $ 3,418,000 $ 3,418,000
Excess of purchase price paid over the fair
market value of tangible assets acquired 430,938,000 430,990,000
------------ ------------
434,356,000 434,408,000
Accumulated amortization 78,322,000 67,345,000
------------ ------------
$356,034,000 $367,063,000
============ ============
</TABLE>
In 1994, New Par wrote-off $152,000 of fully amortized costs and paid $100,000
in connection with its interim operating authority from the FCC for two Ohio
Rural Service Areas.
In August 1991, a subsidiary of CCI ("CCI RSA") acquired the Mercer, Ohio FCC
license. This license was contributed to one of the General Partnerships in
accordance with the New Par Partnership Agreement. The contribution was
initially recorded at CCI RSA's cost through December 31, 1991 of $1,315,000.
During 1993, CCI RSA incurred an additional $19,575,000 upon the receipt of a
favorable determination with respect to certain FCC matters. The additional cost
was recorded as a contribution in 1993.
S - 48
<PAGE> 85
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
3. License Acquisition Costs (continued)
In 1993, a subsidiary of CCI contributed the Ashtabula, Ohio FCC license and the
related assets and liabilities to one of the General Partnerships in accordance
with the New Par Partnership Agreement. The contribution was recorded at
$10,139,000, of which $8,632,000 was for the FCC license and $1,507,000 was for
other assets, net of liabilities.
In 1992, New Par purchased the Clinton, Ohio FCC license from CCI RSA for
$8,925,000 (CCI RSA's cost).
4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
Land $ 10,062,000 $ 8,709,000
Building 13,721,000 10,540,000
Operating plant and equipment 394,903,000 313,966,000
Rental telephones 85,008,000 97,930,000
Office furniture, computer and other equipment 79,654,000 69,587,000
Construction-in-progress 14,207,000 8,940,000
------------ ------------
597,555,000 509,672,000
Allowance for depreciation 244,935,000 202,876,000
Allowance for unreturned rental telephones 402,000 2,248,000
------------ ------------
$352,218,000 $304,548,000
============ ============
</TABLE>
5. Financing Receivables
New Par provides financing for the purchase of cellular telephones by its
customers in the form of noninterest bearing, 12 and 24 month installment
contracts. Financing receivables are recorded net of a discount which is
calculated based on an imputed interest rate of prime plus 1% at inception. The
effective interest rate as of December 31, 1994 was 9.5%.
S - 49
<PAGE> 86
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
5. Financing Receivables (continued)
Financing receivables consists of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
Financing receivables $22,110,000 $ 6,338,000
Less: unamortized discount 621,000 --
Less: allowance for doubtful accounts 715,000 --
----------- -----------
Total current 20,774,000 6,338,000
Financing receivables 13,139,000 --
Less: unamortized discount 621,000 --
Less: allowance for doubtful accounts 631,000 --
----------- -----------
Total noncurrent 11,887,000 --
----------- -----------
$32,661,000 $ 6,338,000
=========== ===========
</TABLE>
6. Related Party Transactions
Due from affiliates consists of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
CCPR Services, Inc. $ 8,000 $24,000
Cellular Communications International, Inc. 3,000 17,000
International CableTel Incorporated 3,000 8,000
------- -------
$14,000 $49,000
======= =======
</TABLE>
S - 50
<PAGE> 87
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
Due to affiliates consists of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
---- ----
<S> <C> <C>
AirTouch and affiliates $ 851,000 $ 937,000
CCI and subsidiaries 184,000 510,000
OCOM Corporation 191,000 366,000
---------- ----------
$1,226,000 $1,813,000
========== ==========
</TABLE>
Pursuant to the New Par Partnership Agreement, the CCI Group is responsible for
appointing and employing New Par's chief executive officer and half of the next
level executives and the AirTouch Group is responsible for appointing and
employing the other half of the next level executives. In addition, the AirTouch
Group employed the individuals associated with its former partnerships until
July 1, 1992. For the year ended December 31, 1994, New Par was charged
$1,215,000 and $1,099,000 for payroll and benefits by AirTouch affiliates and
CCI, respectively, of which $228,000 and $2,086,000 are included in operating
expenses and selling, general and administrative expenses, respectively. For the
year ended December 31, 1993, New Par was charged $779,000 and $816,000 for
payroll and benefits by AirTouch affiliates and CCI, respectively, of which
$176,000 and $1,419,000 are included in operating expenses and selling, general
and administrative expenses, respectively. For the year ended December 31, 1992,
New Par was charged $9,364,000 and $836,000 for payroll and benefits by AirTouch
affiliates and CCI, respectively, of which $2,154,000 and $8,046,000 are
included in operating expenses and selling, general and administrative expenses,
respectively.
In connection with the Merger Agreement, CCI distributed its wholly-owned
subsidiary OCOM Corporation ("OCOM") to its shareholders on July 31, 1991. OCOM
owns the long distance and microwave operations formerly owned by the
partnerships that CCI contributed to New Par. Most of CCI's officers and
directors are officers and directors of OCOM. New Par provides billing and
collection services to OCOM for the long distance telephone service OCOM sells
to certain of New Par's subscribers. OCOM operates the microwave transmission
service between the cell sites and switches contributed by CCI. For the years
ended December 31, 1994, 1993 and 1992, OCOM charged New Par $4,273,000,
$4,043,000, and $4,846,000, respectively, for microwave transmission services
which is included in operating expenses.
S - 51
<PAGE> 88
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
7. Leases
Leases for office space, sales and service centers and cell sites extend through
2039. Total rent expense for the years ended December 31, 1994, 1993 and 1992
under operating leases was $6,786,000, $5,608,000, and $4,359,000, respectively.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1995 $ 4,569,000
1996 4,444,000
1997 4,036,000
1998 3,271,000
1999 2,468,000
Thereafter 23,790,000
----------
$ 42,578,000
==========
</TABLE>
8. Deferred Compensation
In 1994, New Par granted stock appreciation rights to executives and certain
employees entitling them to receive cash in an amount equivalent to any excess
of the market value of a stated number of shares of AirTouch and CCI stock over
a stated grant price. The rights were granted at $24 per share for the AirTouch
shares and $44 per share for the CCI shares. The rights vest based on the
increase in the market value over the grant price. Vested rights may be
exercised for cash after August 6, 1996.
As of December 31, 1994, rights based on 150,300 shares of AirTouch and 150,300
shares of CCI were outstanding. Based on the December 31, 1994 market value of
AirTouch and CCI shares, the cash value of the rights in August 1996 would be
$906,000. New Par recognized $171,000 of compensation expense in 1994 related to
the stock appreciation rights.
S - 52
<PAGE> 89
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
9. Pension Plan
New Par has a defined contribution plan covering all employees who have
completed six months of service and worked over 500 hours. New Par's matching
and discretionary contributions are determined annually. Participants can make
salary deferral contributions of 1% to 16% of annual compensation not to exceed
the maximum allowed by law. New Par's expense for the years ended December 31,
1994, 1993 and 1992 was $3,352,000, $3,186,000, and $2,272,000, respectively.
10. Commitments and Contingent Liabilities
As of December 31, 1994, New Par had purchase commitments of approximately
$86,000,000 primarily for operating equipment, computer equipment and cellular
telephones and accessories.
In March 1994, New Par entered into a one year $5,000,000 unsecured revolving
credit agreement with a bank for working capital and any other proper business
purpose. New Par did not obtain any funds under this agreement during 1994. The
terms of the agreement include a commitment fee of .25% per annum.
There are various legal proceedings pending against New Par in the ordinary
course of business. Management believes the aggregate liabilities, if any,
arising from such proceedings would not have a material adverse effect on New
Par's consolidated financial position.
11. AirTouch and CCI Relationship
A subsidiary of CCI, Cellular Communications of Ohio, Inc., (the parent of the
CCI Group) has a loan agreement which places certain restrictions on New Par.
These restrictions include the following: (i) New Par's aggregate lease payments
may not exceed $8,000,000 for any twelve consecutive months, (ii) New Par's
unsecured indebtedness, capital lease obligations and indebtedness for cellular
network equipment or cellular telephones and accessories evidenced by a note or
subject to a lien may not exceed $5,000,000, (iii) New Par's borrowings secured
by real property may not exceed $10,000,000, (iv) New Par may not enter into an
agreement that restricts partnership distributions and (v) the aggregate payment
obligations outstanding at any time for (ii) and (iii) may not exceed $5,000,000
for any twelve consecutive months.
S - 53
<PAGE> 90
New Par (A Partnership)
Notes to Consolidated Financial Statements (continued)
11. AirTouch and CCI Relationship (continued)
Pursuant to the Merger Agreement, at specified times from August 1996 through
January 1998, AirTouch has the right to buy the shares of CCI it does not own at
an appraised value, subject to certain adjustments. If AirTouch does not
exercise this right, it will determine whether New par should be dissolved or
AirTouch's interest in New Par and CCI should be sold as a whole. Upon such
determination, CCI must promptly commence a process to sell CCI, although in
lieu of any sales to a third party, CCI may purchase AirTouch's CCI shares and,
in certain circumstances, its interest in New Par at their appraised values. Any
decision by CCI to buy out AirTouch or any irrevocable election by CCI not to
effect a sale pursuant to the above sale process would require the approval of
CCI stockholders. In the event that either CCI or CCI's interest in New Par is
sold to a third party for less than the appraised value of CCI's interest in New
Par, AirTouch may be required to pay a "make-whole" amount, subject to certain
downward adjustments, to the other CCI stockholders.
12. Partners' Capital
New Par is required to make cash distributions of a portion of estimated federal
taxable income on a quarterly basis, subject to the amount of cash available
including cash borrowable by New Par. Such distributions shall be made to the
partners in proportion to their respective ownership percentages. As of December
31, 1994 and 1993, there was approximately $26,133,000 and $22,982,000,
respectively, payable to the partners for the estimated federal taxable income
distribution. During 1994, 1993 and 1992, New Par distributed $54,297,000,
$35,000,000 and $18,241,000, respectively, pursuant to this requirement. New Par
must also distribute the amount, if any, that exceeds 120% of the amount
required for estimated federal income tax distributions, plus cash reasonably
contemplated as being necessary for the cash payment of New Par's operating
expenses (net of receipts), debt service, contingencies, budgeted capital
expenditures and working capital requirements within 45 days after each quarter.
Such distributions are to be made to the partners in proportion to their
respective ownership percentages.
S - 54
<PAGE> 91
New Par (A Partnership)
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
Additions
-----------------------
Charged
Balance at Charged to to Other Balance at
Beginning Costs and Accounts Deductions End of
Description of Period Expenses Describe Describe Period
----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts $ 4,382,000 $15,890,000 $ -- $(15,007,000)(1) $ 5,265,000
receivable =========== =========== ===== ============ ===========
Allowance for doubtful financing $ -- $ 1,346,000 $ -- $ -- $ 1,346,000
receivables =========== =========== ===== ============ ===========
Allowance for unreturned rental $ 2,248,000 $ 142,000 $ -- $ (1,988,000)(1) $ 402,000
telephones =========== =========== ===== ============ ===========
Year ended December 31, 1993:
Allowance for doubtful accounts $ 4,431,000 $16,877,000 $ -- $(16,926,000)(1) $ 4,382,000
receivable =========== =========== ===== ============ ===========
Allowance for unreturned rental $ 701,000 $ 4,426,000 $ -- $ (2,879,000)(1) $ 2,248,000
telephones =========== =========== ===== ============ ===========
Year ended December 31, 1992:
Allowance for doubtful accounts $ 3,241,000 $ 6,603,000 $ -- $ (5,413,000)(1) $ 4,431,000
receivable =========== =========== ===== ============ ===========
Allowance for unreturned rental $ 1,258,000 $ 1,214,000 $ -- $ (1,771,000)(1) $ 701,000
telephones =========== =========== ===== ============ ===========
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
S - 55
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of AirTouch Communications,
Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from
Page 27 of the 1994 Annual Report to Stockholders of AirTouch Communications,
Inc. In connection with our audit of such financial statements, we have also
audited the related financial statement schedule listed in Item 14(a) 2 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
March 13, 1995
X - 1
<PAGE> 93
AirTouch Communications, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
(Dollars in millions)
<TABLE>
<CAPTION>
COL A COL B COL C COL D COL E
- ------------------------------------ ---------- --------- ---------- ----------
Charged
Balance at to Costs Balance at
Beginning and Deductions End
Description of Period Expenses (a) of Period
- ------------------------------------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts $ 9.2 $ 33.8 $ 32.9 $ 10.1
Deferred tax valuation allowance $ 4.8 $ 5.7 -- $ 10.5
Various loss reserves $ 5.3 -- $ 2.1 $ 3.2
Year ended December 31, 1993:
Allowance for doubtful accounts $ 10.0 $ 23.8 $ 24.6 $ 9.2
Deferred tax valuation allowance $ 3.0 $ 1.8 -- $ 4.8
Various loss reserves $ 1.7 $ 5.7 $ 2.1 $ 5.3
Year ended December 31, 1992:
Allowance for doubtful accounts $ 9.7 $ 15.1 $ 14.8 $ 10.0
Deferred tax valuation allowance -- $ 3.0 -- $ 3.0
Various loss reserves $ 2.3 $ 1.2 $ 1.8 $ 1.7
</TABLE>
- --------------------
(a) Amounts in this column reflect items written off, net of recoveries.
X - 2
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ---------- ----------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on September 19, 1994
(Exhibit 3.i to the Company's Form 8-K - Date of Report: December
15, 1994, File No. 1-12342)
3.2 Designation, Preferences and Rights of Series A Participating
Preferred Stock of the Company, as filed with the Secretary of
State of the State of Delaware on December 15, 1994 (Exhibit 3.2
to the Company's Form 8-B, File No. 1-12342, filed January 27,
1995)
3.3 Amended By-laws of the Company as of November 18, 1994
4.1 Form of Common Stock certificate
4.2 Rights Agreement between the Company and The Bank of New York,
Rights Agent, dated as of September 19, 1994 (Exhibit 4 to the
Company's Form 8-K - Date of Report: December 15, 1994, File No.
1-12342)
10.1 Joint Venture agreement between Mannesmann Kienzle GmbH, Pacific
Telesis Netherlands B.V., Cable and Wireless plc, DG Bank Deutsch
Genossenschaftsbank and Lyonnaise des Eaux SA dated June 30, 1989
(Exhibit 10.43 to the Company's Registration Statement on Form
S-1, Registration No. 33-68012, filed August 27, 1993)
10.2 Amended and Restated Plan of Merger and Joint Venture Organization
by and among the Company, CCI, CCI Newco, Inc. and CCI Newco Sub,
Inc. dated as of December 14, 1990 (Exhibit 1 to the Company's
Statement on Schedule 13D filed on February 18, 1992, File No.
1-12342)
10.3 Termination Agreement by and among Telesis, the Company, CCI and
Cellular Communications of Ohio, Inc. dated December 11, 1992
(Exhibit 5 to Amendment No. 28 to the Company's Statement on
Schedule 13D filed on December 12, 1992, File No. 1-12342)
10.4 Separation Agreement by and between the Company and Pacific
Telesis Group, dated as of October 7, 1993 (Exhibit 10.1 to the
Company's Registration Statement on Form S-1, Registration
No. 33-68012, filed August 27, 1993)
10.5 Amendment No. 1 to Separation Agreement between the Company and
Pacific Telesis Group, dated November 2, 1993 (Exhibit 10.2 to the
Company's 1993 Annual Report on Form 10-K, File No. 1-12342)
10.6 Amendment No. 2 to Separation Agreement between the Company and
Pacific Telesis Group, dated as of March 25, 1994
10.7 Amendment No. 3 to Separation Agreement between the Company and
Pacific Telesis Group, dated as of April 1, 1994
10.8 Credit Agreement dated as of March 25, 1994 between AirTouch
Communications, Inc. and Bank of America National Trust and
Savings Association
10.9 First Amendment dated as of November 1, 1994 to the Credit
Agreement dated as of March 25, 1994 between AirTouch
Communications, Inc. and Bank of America National Trust and
Savings Association
10.10 Agreement on Retirement and Relocation Benefits between Mr.
Christensen and the Company, dated as of March 31, 1994
10.11 Joint Venture Organization Agreement dated as of July 25, 1994
between the Company and U S WEST Inc. (Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1994, File No. 1-12342)
10.12 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.
(Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1994, File No. 1-12342)
10.13 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.
(Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1994, File No. 1-12342)
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
10.14 Investment Agreement dated as of July 25, 1994 by and between the
Company and U S WEST Inc. (Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1994, File No.
1-12342)
10.15 Agreement of Exchange dated as of July 25, 1994 by and between the
Company and U S WEST Inc. (Exhibit 10.5 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1994, File No.
1-12342)
10.16 Trust Agreement of Exchange dated as of July 25, 1994 by and
between the Company and U S WEST Inc. (Exhibit 10.6 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1994, File No. 1-12342)
10.17 Agreement of Limited Partnership dated as of October 20, 1994
between CELLCO Partnership and WMC Partners, L.P.(Exhibit 10.1 to
the Company's Form 8-K - Date of Report: October 20, 1994, File
No. 1-12342)
10.18 Agreement of Limited Partnership dated as of October 20, 1994 of
PCS PrimeCo, L.P. (Exhibit 10.2 to the Company's Form 8-K - Date
of Report: October 20, 1994, File No. 1-12342)
10.19 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications, Inc. and Bell Atlantic Corporation (Exhibit 10.3
to the Company's Form 8-K - Date of Report: October 20, 1994, File
No. 1-12342)
10.20 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications and NYNEX Corporation (Exhibit 10.4 to the
Company's Form 8-K - Date of Report: October 20, 1994, File No.
1-12342)
10.21 Standstill Agreement dated as of October 20, 1994 between AirTouch
Communications and CELLCO Partnership (Exhibit 10.5 to the
Company's Form 8-K - Date of Report: October 20, 1994, File No.
1-12342)
10.22 Representative Employment Agreement for Messrs. Ginn, Cox,
Christensen, Sarin and Mrs. Gill
10.23 Representative Employment Agreement for Mr. Schmitt and other
officers of the Company
10.24 Form of Indemnity Agreement between the Company and each of its
directors and certain officers
10.25 Trust Agreement No. 1 for AirTouch Communications, Inc.
Supplemental Executive Pension Plan Benefits
10.26 AirTouch Communications, Inc. Deferred Compensation Plan
10.27 AirTouch Communications, Inc. Deferred Compensation Plan for
Nonemployee Directors (Exhibit 10.10 to the Company's 1993 Annual
Report on Form 10-K, File No. 1-12342)
10.28 AirTouch Communications, Inc. Supplemental Executive Pension Plan
(Exhibit 10.12 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.29 AirTouch Communications, Inc. Executive Life Insurance Plan
(Exhibit 10.13 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.30 AirTouch Communications, Inc. Executive Long-Term Disability Plan
(Exhibit 10.14 to the Company's 1993 Annual Report on Form 10-K,
File No. 1-12342)
10.31 Description of the Company's Business Travel Accident Insurance
for Non-Employee Directors
13 1994 Annual Report to Security Holders - Financial Section
21 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand
23.2 Consent of Ernst & Young
23.3 Consent of KPMG Deutsche Treuhand-Gesellschaft
23.4 Consent of Coopers & Lybrand - Re: CMT Partners
24 Power of Attorney
27 Financial Data Schedule
99 Modification of Final Judgment, United States District Court,
District of Columbia, in "U.S. v. American Tel. & Tel. Co.," Civil
Action No. 82-0192 (Exhibit 99 to the Company's Registration
Statement on Form S-1, Registration No. 33-68012, filed on
August 27, 1993)
</TABLE>
<PAGE> 1
EXHIBIT 3.3
B Y - L A W S
OF
AIRTOUCH COMMUNICATIONS, INC.
ARTICLE I
Principal Office
Section 1. The principal executive office for the transaction of the
business of the corporation is hereby fixed and located at 425 Market Street,
San Francisco, California 94105. The board of directors may change said
principal executive office from one location to another.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held at any place
within or without the State of California which may be designated by the board
of directors. In the absence of any such designation, stockholders' meetings
shall be held at the principal executive office of the corporation.
Section 2. The annual meeting of the stockholders of the corporation
shall be held on such date and at such time as shall be determined by the board
of directors (but not more than 13 months after the date of the preceding annual
meeting). At such meeting, directors shall be elected and any other proper
business may be transacted which is within the powers of the stockholders.
Written notice of each annual meeting shall be given to each stockholder
entitled to vote either personally or by United States mail or other means of
written communication (which includes, without limitation and wherever used in
these by-laws, telegraphic and facsimile communication), charges prepaid,
addressed to each stockholder at the address appearing on the books of the
corporation, or given by the stockholder to the corporation for the purpose of
notice.
All such notices shall be given to each stockholder entitled thereto not
less than 10 days nor more than 60 days before each annual meeting, except as
otherwise required by law. Any such notice shall be deemed to have been given at
the time when delivered personally or deposited in the United States mail or
delivered to a common carrier for transmission to the recipient or actually
transmitted by the person giving the notice by electronic means to the recipient
or sent by other means of written communication.
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<PAGE> 2
Such notices shall state:
(a) the place, date and hour of the meeting;
(b) those matters which the board, at the time of the
mailing of the notice, intends to present for action by the
stockholders;
(c) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by management for
election; and
(d) such other matters, if any, as may be expressly
required by law.
Section 3. Special meetings of the stockholders for the purpose of
taking any action permitted to be taken by the stockholders under the General
Corporation Law of the State of Delaware and the certificate of incorporation of
this corporation, may be called only by the chairman of the board, the chief
executive officer or the president, or by any executive vice president or vice
president, or by the board of directors.
Upon request in writing delivered either in person or by registered or
certified mail, return receipt requested, to the chairman, chief executive
officer, president or secretary by any person entitled to call a special meeting
of stockholders, it shall be the duty of such chairman, chief executive officer,
president or secretary forthwith to cause to be given to the stockholders
entitled thereto notice of such meeting to be held on a date not less than 20
nor more than 90 days after the receipt of such request, as such officer may
fix. If such notice is not given within 40 days after the delivery of or mailing
of such request, the persons calling the meeting may fix the time of meeting and
give notice thereof as in the manner hereinafter provided, or cause such notice
to be given by any designated representative.
Except where express provision is made by statute, notice of such
special meetings shall be given in the same manner and contain the same
statements as required for annual meetings of stockholders. Notice of any
special meeting shall also specify the purpose or purposes of such meeting and
no other business may be transacted at such meeting.
Section 4. The presence in person or by proxy of the holders of a
majority in voting power of the outstanding shares of stock entitled to vote at
the meeting shall constitute a quorum for the transaction of business. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a
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<PAGE> 3
majority of the shares required to constitute a quorum. In the absence of a
quorum, any meeting of stockholders may be adjourned from time to time by the
vote of a majority in voting power of the outstanding shares represented at the
meeting either in person or by proxy, but no other business may be transacted
except as provided in the preceding sentence.
Section 5. In any election of directors, the candidates receiving the
highest number of votes of the shares entitled to be voted for them up to the
number of directors to be elected by such shares are elected.
Section 6. To be properly brought before the annual meeting, business
must be either (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a stockholder
of record. In addition to any other applicable requirements, for business to be
properly brought before the annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, addressed to
the attention of the Secretary of the corporation, within the time specified in
the federal proxy rules for timely submission of a stockholder proposal for
inclusion of such proposal in the proxy statement of the corporation or, if not
within such time, then not less than 35 days nor more than 60 days prior to the
meeting; provided, however, that in the event that less than 50 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received by the
earlier of (a) the close of business on the 15th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs, and (b) two days prior to the date
of the meeting. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 6; provided, however,
that nothing in this Section 6 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting.
The Chairman of the board of directors shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 6, and if
he should so determine, he shall
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<PAGE> 4
so declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 7. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations of
persons for election to the board of directors at the annual meeting, by or at
the direction of the board of directors, may be made by any Nominating Committee
or person appointed by the board of directors; nominations may also be made by
any stockholder of record of the corporation entitled to vote for the election
of directors at the meeting who complies with the notice procedures set forth in
this Section 7. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation addressed to the attention of the Secretary of the corporation not
less than 35 days prior to the meeting; provided, however, that, in the case of
an annual meeting and in the event that less than 50 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
earlier of (a) the close of business on the 15th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs, or (b) two days prior to the date of the meeting.
Such stockholder's notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the corporation which are
beneficially owned by the person, (iv) a statement as to the person's
citizenship, and (v) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder; and (b) as to the stockholder
giving the notice, (i) the name and record address of the stockholder and (ii)
the class, series and number of shares of capital stock of the corporation which
are beneficially owned by the stockholder. The corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the corporation to determine the eligibility of such proposed nominee to
serve as director of the corporation. No person shall be eligible for election
as a director of the corporation unless nominated in accordance with the
procedures set forth herein.
In connection with any annual meeting, the Chairman of the board of
directors shall, if the facts warrant, determine and declare to the meeting that
a nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
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<PAGE> 5
ARTICLE III
Board of Directors
Section 1. Subject to the provisions of the General Corporation Law of
the State of Delaware and any limitations in the certificate of incorporation
and these by-laws as to action to be authorized or approved by the stockholders,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the board of directors shall have the
following powers:
First: To conduct, manage and control the affairs and business of
the corporation and to make such rules and regulations therefor, not
inconsistent with law or with the articles of incorporation or with the
by-laws, as they may deem best;
Second: To elect and remove at pleasure the officers, agents and
employees of the corporation, prescribe their duties and fix their
compensation;
Third: To authorize the issue of shares of stock of the corporation
from time to time upon such terms as may be lawful;
Fourth: To borrow money and incur indebtedness for the purposes of
the corporation and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor; and
Fifth: To alter, repeal or amend, from time to time, and at any
time, these by-laws and any and all amendments of the same, and from
time to time, and at any time, to make and adopt such new and additional
by-laws as may be necessary and proper, subject to the power of the
stockholders to adopt, amend or repeal such by-laws, or to revoke the
delegation of authority of the directors, as provided by law or by
Article VI of these by-laws.
ARTICLE IV
Meetings of Directors
Section 1. Regular meetings of the board of directors shall be held at
any place within or without the State of California that has been designated
from time to time by
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<PAGE> 6
the board of directors. In the absence of such designation, regular meetings
shall be held at the principal executive office of the corporation, except as
provided in Section 2 of this Article. Special meetings of the board of
directors may be held at any place within or without the State of California
which has been designated in the notice of the meeting, or, if not designated in
the notice or if there is no notice, at the principal executive office of the
corporation.
Section 2. Immediately following each annual meeting of the stockholders
there shall be a regular meeting of the board of directors of the corporation at
the place of said annual meeting or at such other place as shall have been
designated by the board of directors for the purpose of organization, election
of officers and the transaction of other business. Other regular meetings of the
board of directors shall be held without call on such date and time as may be
fixed by the board of directors; provided, however, that should any such day
fall on a legal holiday, then said meeting shall be held at the same time on the
next business day thereafter ensuing which is not a legal holiday. Notice of
regular meetings of the directors is hereby dispensed with and no notice
whatever of any such meeting need be given, provided that notice of any change
in the time or place of regular meetings shall be given to all of the directors
in the same manner as notice for special meetings of the board of directors.
Section 3. Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board, chief executive
officer or president or, if the chairman of the board, chief executive officer
and the president are all absent or are unable or refuse to act, by any two
directors. Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director, or sent by first-class mail or
telegram or facsimile transmission, charges prepaid, addressed to him or her at
his or her home or office address as they appear upon the records of the
corporation or, if not so shown on the records and not readily ascertainable, at
the place at which the meetings of the directors are regularly held. In case
such notice is mailed, it shall be deposited in the United States mail at least
four days prior to the time of the holding of the meeting. In case such notice
is telegraphed or sent by facsimile transmission, it shall be delivered to a
common carrier for transmission to the director or actually transmitted by the
person giving the notice by electronic means to the director at least 48 hours
prior to the time of the holding of the meeting. In case such notice is
delivered personally or by telephone as above provided, it shall be so delivered
at least eight hours prior to the time of the holding of the meeting. Any notice
given personally, by facsimile or by telephone may be communicated to either the
director or to a person at the office of the director whom the person giving the
notice has reason to believe will promptly communicate it to the director. Such
deposit in the mail, delivery to a common carrier, transmission by electronic
means or delivery, personally or by telephone, as above provided, shall be due,
legal and personal notice to such directors. The notice need not specify the
place of
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<PAGE> 7
the meeting if the meeting is to be held at the principal executive office of
the corporation, and need not specify the purpose of the meeting.
Section 4. Presence of a majority of the then authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the with drawal of directors,
provided that any action taken is approved by at least a majority of the
required quorum for such meeting. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
Section 5. Notice of a meeting need not be given to any director who
signs a waiver of notice or consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 6. Any action required or permitted to be taken by the board of
directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action, and such written
consent or consents shall be filed with the minutes of the proceedings of the
board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
Section 7. The provisions of this Article IV shall also apply, with
necessary changes in points of detail, to committees of the board of directors,
if any, and to actions by such committees (except (i) for the first sentence of
Section 2 of this Article IV, which shall not apply, (ii) that special meetings
of a committee may also be called at any time by any member of the committee and
(iii) that any committee may by resolution adopt provisions governing notice of
committee meetings that are different from the provisions of Section 3 of this
Article IV), unless otherwise provided by these by-laws or by the resolution of
the board of directors designating such committees. For such purpose, references
to "the board" or "the board of directors" shall be deemed to refer to each such
committee and references to "directors" or "members of the board" shall be
deemed to refer to members of the committee. Committees of the board of
directors may be designated, and shall be subject to the limitations on their
authority, as provided in Section 141(c) of the General Corporation Law of the
State of Delaware. The
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<PAGE> 8
appointment of members or alternate members of a committee requires the vote of
a majority of the authorized number of directors.
ARTICLE V
Officers
Section 1. The officers of the corporation shall be a chairman of the
board, chief executive officer or a president, or all of the foregoing, a
secretary, a chief financial officer and a treasurer. The corporation may also
have, at the discretion of the board of directors, one or more executive vice
presidents, senior vice presidents and vice presidents, a general counsel, a
treasurer, one or more assistant secretaries, one or more assistant treasurers,
and such other officers as may be designated from time to time by the board of
directors. Any number of offices may be held by the same person. The officers
shall be elected by the board of directors and shall hold office at the pleasure
of such board.
Chairman of the Board
Section 2. The chairman of the board, if there be such officer, shall,
if present, preside at all meetings of the board of directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
or her by the board of directors or prescribed by the by-laws. If there is not a
chief executive officer, the chairman of the board shall, in addition, be the
general manager and chief executive officer of the corporation and shall have
the powers and duties prescribed in Section 4 of Article V of these by-laws.
Vice Chairman of the Board of Directors
Section 3. Each Vice Chairman of the Board of Directors, if any, shall
perform such duties as may from time to time be delegated to him by the Chairman
of the Board or as may be assigned by the Board of Directors.
Chief Executive Officer
Section 4. Subject to such powers and duties, if any, as may be
prescribed by these by-laws or the board of directors for the chairman of the
board, if there be such officer, the chief executive officer shall, subject to
the control of the board of directors, have general supervision, direction and
control of the business and officers of the corporation. He or she shall preside
at all meetings of the stockholders and, in the absence of the chairman of the
board, or if there be none, at all meetings of the board of directors. He or she
shall have all the powers and shall perform all of the duties which are
ordinarily
-8-
<PAGE> 9
inherent in the office of chief executive officer of a corporation, and he or
she shall have such further powers and shall perform such further duties as may
be prescribed for him or her by the board of directors.
President
Section 5. In the absence or disability of the chief executive officer,
or if there be none, the president shall perform all of the duties of the chief
executive officer, and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the chief executive officer. The
president shall have such other duties as from time to time may be prescribed
for him by the board of directors.
Executive Vice Presidents and Vice Presidents
Section 6. In the absence or disability or refusal to act of the
president, the executive vice presidents and vice presidents in order of their
rank as fixed by the board of directors or, if not ranked, the executive vice
presidents or vice president designated by the president or the board of
directors, shall perform all of the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president. The executive vice presidents and vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them, respectively, by the board of directors or the by-laws.
Secretary
Section 7. The secretary shall keep or cause to be kept at the principal
executive office of the corporation or such other place as the board of
directors may order, a book of minutes of all proceedings of the stockholders,
the board of directors and committees of the board, with the time and place of
holding, whether regular or special, and if special how authorized, the notice
thereof given, the names of those present at directors' and committee meetings,
and the number of shares present or represented at stock holders' meetings. The
secretary shall keep or cause to be kept at the principal executive office or at
the office of the corporation's transfer agent a record of stockholders or a
duplicate record of stockholders showing the names of the stockholders and their
addresses, the number of shares and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation. The secretary or
an assistant secretary or, if they are absent or unable or refuse to act, any
other officer of the corporation, shall give or cause to be given notice of all
the meetings of the stockholders, the board of directors and committees of the
board required by the by-laws or by law to be given, and he or she shall keep
the seal of the corporation, if any, in safe custody and shall have such
-9-
<PAGE> 10
other powers and perform such other duties as may be prescribed by the board of
directors or by the by-laws.
Assistant Secretaries
Section 8. It shall be the duty of the assistant secretaries to assist
the secretary in the performance of his or her duties and generally to perform
such other duties as may be delegated to them by the board of directors.
Chief Financial Officer
Section 9. The chief financial officer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of account of
the corporation. He or she shall receive and deposit all moneys and other
valuables belonging to the corporation in the name and to the credit of the
corporation and shall disburse the same only in such manner as the board of
directors or the appropriate officers of the corporation may from time to time
determine, shall render to the chief executive officer and the board of
directors, whenever they request it, an account of all his or her transactions
as chief financial officer and of the financial condition of the corporation,
and shall perform such further duties as the board of directors may require.
Treasurer and Assistant Treasurers
Section 10. The treasurer of the corporation shall have such duties as
may be specified by the chief financial officer to assist the chief financial
officer in the performance of his or her duties. It shall be the duty of the
assistant treasurers to assist the treasurer in the performance of his or her
duties and generally to perform such other duties as may be delegated to them by
the board of directors.
General Counsel
Section 11. In the absence or disability or refusal to act of the senior
vice president-legal (if any), the general counsel shall perform all of the
duties of the senior vice president-legal and when so acting shall have all of
the powers of and be subject to all of the restrictions upon the senior vice
president-legal. The general counsel shall have such other powers and perform
such other duties as from time to time may be prescribed for him or her by the
board of directors, the by-laws, or the senior vice president-legal (if any).
-10-
<PAGE> 11
ARTICLE VI
Amendments
Section 1. New by-laws may be adopted, or these by-laws may be amended
or repealed, by the affirmative vote of the holders of shares representing as
least 66-2/3% of the combined voting power of the outstanding shares of capital
stock of the corporation entitled to vote, except as otherwise provided by law
or by the certificate of incorporation or these by-laws.
Section 2. Subject to the right of stockholders as provided in Section 1
of this Article to adopt, amend or repeal by-laws, and except as otherwise
provided by law or by the certificate of incorporation, by-laws, other than a
by-law or amendment thereof changing the authorized maximum or minimum number of
directors, may be adopted, amended or repealed by the affirmative vote of at
least 66-2/3% of the directors of the corporation then in office, which shall
include the affirmative vote of at least one director of each class of the board
of directors if the board shall then be divided into classes.
-11-
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
PAR VALUE $.01
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
NUMBER SHARES
AIRTOUCH COMMUNICATIONS, INC.
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
AirTouch Communications, Inc. transferable on the share register of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK
(NEW YORK, N.Y.) TRANSFER AGENT
AND REGISTRAR
BY /S/ William J. Skinner /S/ Margaret G. Gill /S/ Sam Ginn
---------------------- ----------------------- -----------------------
Authorized Signature Secretary Chairman of the Board
of Directors
<PAGE> 2
AIRTOUCH COMMUNICATIONS, INC.
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between the Company and The
Bank of New York (the "Rights Agent") dated as of September 19, 1994 (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, may expire, or may be evidenced by separate
Certificates and will no longer be evidenced by this Certificate. The Company
will mail to the holder of this certificate a copy of the Rights Agreement
without charge within five days after receipt of a written request therefor,
under certain circumstances, Rights issued to Acquiring Persons (as defined in
the Rights Agreement) or certain related Persons and any subsequent holder of
such Rights may become null and void.
The Company will furnish to any shareholder, upon request to its
principal office (or to the office of its transfer agent) and without charge, a
statement of the rights, preferences, privileges and restrictions granted to or
imposed upon each class or series of shares authorized to be issued and upon
the holders thereof.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though
the words set forth below opposite each abbreviation were
written out in full where such abbreviation appears.
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common (Name) CUST (Name) UNIF-- (Name) as Custodian for (Name)
TEN ENT - as tenants by the entireties GIFT MIN ACT (State) under the (State) Uniform
JT TEN - as joint tenants with right of Gifts to Minors Act
survivorship and not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list
For Value received, ___________________ hereby sell, assign and
transfer ___________________Shares represented by the within Certificate unto
<TABLE>
<S> <C>
FOR TRANSFER AGENT USE ONLY
PLEASE PRINT OR TYPE:
SOCIAL SECURITY NUMBER FOR TAXPAYER IDENTIFYING
NUMBER, NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
____________________________________________________________________ ACCT:
SHARES _______________________________________________ CTF: YR.
_______________________________________________ NOTE: H_
CLASS ACCT: E_
</TABLE>
and hereby irrevocably constitute and appoint __________________________________
________________________________________________________________________________
___________________ Attorney to transfer the said shares on the records of the
within named Company with full power of substitution in the premises.
Dated, ________________________ _______________________________________
_______________________________________
IMPORTANT (Before signing, read and
comply carefully with requirements
printed below.)
SIGNATURE(S) GUARANTEED
_______________________________________________
The signature should be guaranteed by a brokerage firm or a financial
institution that is a member of a securities approved Medallion program,
such as Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP) or New York Stock Exchange, Inc. Medallion Signature
Program (MSP)
<PAGE> 1
EXHIBIT 10.6
03/25/94
AMENDMENT NO. 2
TO
SEPARATION AGREEMENT
THIS AMENDMENT NO. 2, Dated March 25, 1994, is between PACIFIC TELESIS
GROUP ("Telesis") and AIRTOUCH COMMUNICATIONS ("PacTel").
WHEREAS, there is currently in full force and effect between the
Parties a Separation Agreement, effective October 7, 1993 (the "Agreement");
and
WHEREAS, the Parties wish to make certain changes regarding the
treatment of nonemployee director and executive compensation described in
Appendix A (Employee Benefits Allocation) of the Agreement;
THEREFORE, the Parties agree that the Agreement is hereby amended as
follows:
1. A new Section 7A is added following Section 7 to read as follows:
SECTION 7A - TELESIS EXECUTIVE LIFE INSURANCE PLAN
7A.1 Employee Terminations. A Post-Separation PacTel
Employee shall be considered to have terminated his or her employment
with Telesis for reasons other than an "Approved Retirement" as that
term is defined in the Pacific Telesis Group Executive Life Insurance
Plan (the "Telesis ELIP"), and as of the Separation Date shall no
longer have any rights or interests in any benefits under the Telesis
ELIP.
7A.2 Transfer of Policy Interests. Not later than 30
days after the Separation Date, Telesis shall transfer to PacTel its
rights and interests in such insurance policy or policies jointly
owned by Telesis and each Post-Separation PacTel Employee who was a
participant in the Telesis ELIP immediately prior to the Separation
Date.
7A.3 Payment by PacTel to Telesis. Not later than 30
days after the Separation Date, PacTel shall pay to Telesis in cash an
amount to be mutually agreed by the parties as compensation for the
value of each policy transferred to PacTel pursuant to Section 7A.2.
2. Section 12 is amended in its entirety to read as follows:
12.1 Termination of Service as a Director of Telesis.
Effective as of the Separation Date, each individual who participated
in the Directors' Retirement Plan before the Separation Date and who
is a non-employee member of PacTel's Board of Directors immediately
after the Separation Date shall not be treated as continuing to serve
as a director
<PAGE> 2
under the terms of the Directors' Retirement Plan by reason of his or
her service as a member of PacTel's Board of Directors after the
Separation Date.
12.2 No Asset Transfer. There shall be no transfer of
assets from Telesis to PacTel or to the trustee of a PacTel Grantor
Trust in connection with the accrued benefits of the PacTel directors
under the Directors' Retirement Plan.
12.3 Liability for Payment of Directors' Retirement
Plan Benefit. Telesis shall be solely and exclusively responsible for
providing the benefits accrued as of the Separation Date under the
Directors' Retirement Plan by any individuals who were participants in
such plan prior to Separation.
3. The first sentence of Section 13.2 is amended to read as follows
"Not later than 90 days after the Separation Date, Telesis
shall cause an amount of assets to be transferred by the
trustee of VEBA I to the trustee of the PacTel VEBA."
4. Except as expressly amended by this Amendment No. 2, the provisions of the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the Parties have caused this Amendment No. 2 to be executed
by their duly authorized representatives.
<TABLE>
<S> <C>
PACIFIC TELESIS GROUP AIRTOUCH COMMUNICATIONS
By: /s/ Philip J. Quigley By: /s/ Sam Ginn
-------------------------------- -----------------------------------
Title: Group President Title: Chairman and Chief Executive Officer
--------------------------------
Date Signed: March 31, 1994 Date Signed: March 31, 1994
</TABLE>
<PAGE> 1
EXHIBIT 10.7
7/15/94
AMENDMENT NO. 3
TO
SEPARATION AGREEMENT
THIS AMENDMENT NO. 3, is between PACIFIC TELESIS GROUP ("Telesis") and AIRTOUCH
COMMUNICATIONS ("AirTouch") and is effective as of April 1,1994.
WHEREAS, there is currently in full force and effect between the
Parties a Separation Agreement, effective October 7, 1993 (the "Agreement"); and
WHEREAS, the Parties wish to make certain changes regarding the form
of payment of certain amounts payable under the Parties' long-term incentive
plans described in Appendix A (Employee Benefits Allocation) of the Agreement;
THEREFORE, the Parties agree that the Agreement is hereby amended as
follows:
1. Section 10.2 of Appendix A is hereby amended by replacing the words
"restricted shares" wherever they appear with the words "restricted
shares or stock units."
IN WITNESS WHEREOF, the Parties have caused this Amendment No. 3 to be executed
by their duly authorized representatives.
<TABLE>
<S> <C>
PACIFIC TELESIS GROUP AIRTOUCH COMMUNICATIONS
By: /s/ Philip J. Quigley By: /s/ Sam Ginn
-------------------------------- ------------------------------------
Title: Chairman, President and Title: Chairman of the Board and
-------------------------------- ------------------------------------
Chief Executive Officer Chief Executive Officer
Date Signed: July 22, 1994 Date Signed: July 21, 1994
</TABLE>
<PAGE> 1
Exhibit 10.8
================================================================================
CREDIT AGREEMENT
DATED AS OF MARCH 25, 1994
AMONG
AIRTOUCH COMMUNICATIONS;
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT;
ABN AMRO BANK N.V.,
CITICORP USA, INC.,
THE BANK OF NOVA SCOTIA, AND
THE TORONTO-DOMINION BANK,
AS CO-AGENTS;
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . 1
-----------
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Interpretive Provisions . . . . . . . . . . . . . . . . . 21
1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE II
THE CREDITS . . . . . . . . . . . . 22
-----------
2.01 Amounts and Terms of Commitments . . . . . . . . . . . . . . . 22
2.02 Loan Accounts; Notes . . . . . . . . . . . . . . . . . . . . . 23
2.03 Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . 23
2.04 Conversion and Continuation Elections . . . . . . . . . . . . . 24
2.05 Voluntary Termination or Reduction of Commitments . . . . . . . 26
2.06 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . 26
2.07 Mandatory Prepayments of Loans . . . . . . . . . . . . . . . . 27
2.08 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.09 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Arrangement Fee . . . . . . . . . . . . . . . . . . . . . . 28
(b) Commitment Fees . . . . . . . . . . . . . . . . . . . . . . 28
(c) Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . 29
2.11 Computation of Fees and Interest . . . . . . . . . . . . . . . 29
2.12 Payments by the Company . . . . . . . . . . . . . . . . . . . . 29
2.13 Payments by the Banks to the Agent . . . . . . . . . . . . . . 30
2.14 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
THE LETTER OF CREDIT . . . . . . . . . . 32
--------------------
3.01 The Letter of Credit Subfacility. . . . . . . . . . . . . . . . 32
3.02 Issuance or Extension of Letter of Credit . . . . . . . . . . . 33
3.03 Drawings and Reimbursements . . . . . . . . . . . . . . . . . . 34
3.04 Repayment of Participations . . . . . . . . . . . . . . . . . . 36
3.05 Role of the Agent as Paying Agent . . . . . . . . . . . . . . . 37
3.06 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . 38
3.07 Cash Collateral Pledge . . . . . . . . . . . . . . . . . . . . . 39
3.08 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . 39
3.09 Uniform Customs and Practice . . . . . . . . . . . . . . . . . . 40
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . 41
--------------------------------------
4.01 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.03 Increased Costs and Reduction of Return . . . . . . . . . . . . 42
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
<S> <C>
4.04 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 43
4.05 Inability to Determine Rates . . . . . . . . . . . . . . . . . 44
4.06 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . 44
4.07 Substitution of Banks . . . . . . . . . . . . . . . . . . . . . 45
4.08 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE V
CONDITIONS PRECEDENT . . . . . . . . . . 45
--------------------
5.01 Conditions of Initial Credit Extensions . . . . . . . . . . . . 45
(a) Credit Agreement and Notes . . . . . . . . . . . . . . . . 45
(b) Pledge Agreement . . . . . . . . . . . . . . . . . . . . . 46
(c) Resolutions; Incumbency . . . . . . . . . . . . . . . . . 46
(d) Organization Documents; Good Standing . . . . . . . . . . 46
(e) Legal Opinions . . . . . . . . . . . . . . . . . . . . . . 46
(f) Payment of Fees . . . . . . . . . . . . . . . . . . . . . 46
(g) Certificate . . . . . . . . . . . . . . . . . . . . . . . 46
(h) Separation Agreement . . . . . . . . . . . . . . . . . . . 47
(i) Other Documents . . . . . . . . . . . . . . . . . . . . . 47
5.02 Conditions to All Credit Extensions . . . . . . . . . . . . . . 47
(a) Notice, Application . . . . . . . . . . . . . . . . . . . 47
(b) Continuation of Representations and Warranties . . . . . . 47
(c) No Existing Default . . . . . . . . . . . . . . . . . . . 47
(d) No Material Adverse Effect . . . . . . . . . . . . . . . . 47
5.03 Conditions to the Issuance of the Letter of Credit . . . . . . 48
ARTICLE VI
REPRESENTATIONS AND WARRANTIES . . . . . . . 48
------------------------------
6.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . 48
6.02 Corporate Authorization; No Contravention . . . . . . . . . . . 48
6.03 Governmental Authorization . . . . . . . . . . . . . . . . . . . 49
6.04 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.06 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.07 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . 50
6.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 51
6.09 Title to Properties . . . . . . . . . . . . . . . . . . . . . . 51
6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . 51
6.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 52
6.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . 52
6.14 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . 52
6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.17 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.18 Collateral Documents . . . . . . . . . . . . . . . . . . . . . 53
6.19 Separation Agreement . . . . . . . . . . . . . . . . . . . . . 53
6.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE VII
AFFIRMATIVE COVENANTS . . . . . . . . . . 54
---------------------
7.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . 54
7.02 Certificates; Other Information . . . . . . . . . . . . . . . . 55
7.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.04 Preservation of Corporate Existence, Etc . . . . . . . . . . . 56
7.05 Maintenance of Property . . . . . . . . . . . . . . . . . . . . 57
7.06 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.07 Payment of Obligations . . . . . . . . . . . . . . . . . . . . 57
7.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 57
7.09 Inspection of Property and Books and Records . . . . . . . . . 57
7.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 58
7.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 58
7.12 Notice of Rating Change . . . . . . . . . . . . . . . . . . . . 58
7.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII
NEGATIVE COVENANTS . . . . . . . . . . 59
------------------
8.01 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . 59
8.02 Consolidations and Mergers . . . . . . . . . . . . . . . . . . 59
8.03 Uninvited Acquisitions . . . . . . . . . . . . . . . . . . . . 60
8.04 Limitation on Indebtedness and Contingent Obligations . . . . . 60
8.05 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 60
8.06 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 60
8.07 Use of Proceeds - Ineligible Securities . . . . . . . . . . . . 60
8.08 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . 61
8.09 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . 61
8.10 Consolidated Leverage Ratio . . . . . . . . . . . . . . . . . . 61
8.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . 61
8.12 Change in Business . . . . . . . . . . . . . . . . . . . . . . 61
8.13 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . 61
8.14 Separation Agreement . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
EVENTS OF DEFAULT . . . . . . . . . . . 62
-----------------
9.01 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 62
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . 62
(b) Representation or Warranty . . . . . . . . . . . . . . . . 62
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . 62
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . 62
(e) Cross-Acceleration . . . . . . . . . . . . . . . . . . . . 62
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . 63
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . 63
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . 63
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . 64
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
<S> <C>
(k) Change of Control . . . . . . . . . . . . . . . . . . . . 64
(l) Loss of Licenses . . . . . . . . . . . . . . . . . . . . . 64
9.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.03 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE X
THE AGENT . . . . . . . . . . . . . 65
---------
10.01 Appointment and Authorization . . . . . . . . . . . . . . . . 65
10.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 66
10.03 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . 66
10.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . 66
10.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . 67
10.06 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . 67
10.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 68
10.08 Agent in Individual Capacity . . . . . . . . . . . . . . . . . 68
10.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 69
10.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . 69
10.11 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . 71
10.12 Co-Agents; Lead Managers . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . 72
-------------
11.01 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 72
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.03 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . 74
11.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 74
11.05 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.06 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . 75
11.07 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 75
11.08 Assignments, Participations, etc. . . . . . . . . . . . . . . 75
11.09 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.10 Notification of Addresses, Lending Offices, Etc. . . . . . . . 79
11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 79
11.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 79
11.13 No Third Parties Benefited . . . . . . . . . . . . . . . . . . 79
11.14 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . 79
11.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 80
11.16 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
SCHEDULES
Schedule 6.05 Litigation
Schedule 6.07 ERISA
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.15 Subsidiaries; Minority Interests; Material Subsidiaries
Schedule 6.16 Insurance Matters
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinions
Exhibit D-1A Form of Opinion of Company's Internal Counsel
Exhibit D-1B Form of Opinion of Pillsbury Madison & Sutro
Exhibit D-2A Form of Letter of Credit Enforceability Opinion
Exhibit D-2B Form of Opinion to be Given by Counsel to Each
Issuing Bank
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Pledge and Security Agreement
Exhibit G Form of L/C Application
Exhibit H Form of the Letter of Credit
Exhibit I Form of Note
Exhibit J Form of L/C Amendment Application
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of March 25, 1994,
among AirTouch Communications, a California corporation (the "Company"); the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"); Bank of America National
Trust and Savings Association, as agent for the Banks; and ABN AMRO Bank N.V.,
Citicorp USA, Inc., The Bank of Nova Scotia and The Toronto-Dominion Bank, as
co-agents.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility upon the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests or equity of any Person or otherwise causing any Person to
become a Subsidiary of the Company, or (c) a merger or consolidation
or any other combination with another Person (other than a Person that
is a Subsidiary of the Company) provided that the Company or the
Company's Subsidiary is the surviving entity.
"Affected Bank" has the meaning specified in Section 4.07.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract or otherwise.
1
<PAGE> 8
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent.
"Agent-Related Persons" means BofA, in its capacity as agent
for the Banks hereunder, and any successor agent arising under Section
10.09, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set
forth on the signature page hereto in relation to the Agent or such
other address as the Agent may from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means, on any date and with respect to
each Revolving Loan (subject to clauses (i) through (iii) of the
definition of "Applicable Rating Level"), the applicable margin set
forth below based on the Type of Revolving Loan and the Applicable
Rating Level on such date:
<TABLE>
<CAPTION>
Applicable
Rating Level Offshore Rate Loans Base Rate Loans
------------ ------------------- ---------------
<S> <C> <C>
Level I 0.3500% 0.0000%
Level II 0.3750% 0.0000%
Level III 0.4000% 0.0000%
Level IV 0.5500% 0.0000%
Level V 0.7500% 0.0000%
</TABLE>
"Applicable Rating Level" shall mean and be determined by the
ratings issued (either expressly or pursuant to a letter from such
Rating Agency stating an "implied" rating) from time to time by S&P
and Moody's (or S&P or Moody's, if ratings shall be available from
only one of such Rating Agencies) as applicable to the Company's
long-term, senior unsecured debt; provided that, for determining
whether the Applicable Rating Level falls within any of Levels I
through IV, as long as the applicable rating of the Company is at
least equal to one of the ratings set forth opposite any such level,
that level corresponding to the highest applicable rating shall apply,
in accordance with the following:
2
<PAGE> 9
<TABLE>
<CAPTION>
S&P Moody's
--- -------
<S> <C> <C>
Level I A- A3
Level II BBB+ Baa1
Level III BBB Baa2
Level IV BBB- Baa3
Level V Below BBB- or Not Rated Below Baa3 or Not Rated
</TABLE>
For purposes of the foregoing, (i) if determinative ratings
shall change (other than as a result of a change in the rating system
used by any applicable Rating Agency) such that a change in Applicable
Rating Level would result, such change shall effect a change in
Applicable Rating Level as of the day which is five Business Days
after the Agent receives notice of such change (such fifth Business
Day, a "Change Day"), and any change in the Applicable Margin or
percentage used in calculating fees due hereunder shall take effect
commencing on such Change Day and ending on the date immediately
preceding the next Change Day (provided, however, that the Applicable
Margin on any Offshore Rate Loan outstanding at the time of such
Change Day shall not change until the expiration of the Interest
Period then in effect with respect to such Offshore Rate Loan); (ii)
if the rating system of any of the Rating Agencies shall change prior
to the date all obligations hereunder have been paid and the
Commitments cancelled, the Company and the Banks shall negotiate in
good faith to amend the references to specific ratings in this
definition to reflect such changed rating system, and pending such
amendment, if no Applicable Rating Level is otherwise determinable
based upon the foregoing, the most recent Applicable Rating Level in
effect shall apply; and (iii) upon the occurrence of and during the
existence of an Event of Default, notwithstanding the foregoing to
the contrary (but subject to subsection 2.09(c)), the Applicable
Rating Level shall be deemed to be Level V.
"Arranger" means BA Securities, Inc., a wholly-owned
subsidiary of BankAmerica Corporation.
"Assignee" has the meaning specified in subsection 11.08(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
3
<PAGE> 10
"Authorized Company Employees" means employees of the Company
designated in writing to the Agent as such from time to time by the
chief financial officer of the Company, and as to whom the Company has
provided to the Agent a certificate of the Secretary or Assistant
Secretary of the Company certifying each of their names and true
signatures and certifying that the Board of Directors of the Company
has delegated such authority to the chief financial officer of the
Company.
"Bank" has the meaning specified in the introductory clause
hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as
publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (It is a rate set by
BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.); and
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Revolving Loan, or an L/C Advance,
that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of Revolving
Loans of the same Type made to the Company on the same day by the
Banks under Article II.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any Offshore Rate Loan, means such a day on
which dealings are
4
<PAGE> 11
carried on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent and the
Banks, as collateral for the L/C Obligations, cash or deposit
account balances, or U.S. Government Securities, pursuant to the
Pledge Agreement. Derivatives of such term shall have corresponding
meaning.
"Change of Control" means the occurrence, after the date of
this Agreement, of any of the following: (i) any Person or two or more
Persons acting in concert acquiring beneficial ownership (within the
meaning of Rule 13d-3 of the SEC under the Exchange Act), directly or
indirectly, of securities of the Company (or other securities
convertible into such securities) representing 35% or more of the
combined voting power of all securities of the Company entitled to
vote in the election of directors; or (ii) during any period of up to
12 consecutive months, commencing after the Closing Date, individuals
who at the beginning of such 12-month period were directors of the
Company ceasing for any reason to constitute a majority of the Board
of Directors of the Company unless the Persons replacing such
individuals were nominated by the Board of Directors of the Company;
or (iii) any Person or two or more Persons acting in concert acquiring
by contract or otherwise, or entering into a contract or arrangement
which upon consummation will result in its or their acquisition of, or
control over, securities of the Company (or other securities
convertible into such securities) representing 35% or more of the
combined voting power of all securities of the Company entitled to
vote in the election of directors.
"Closing Date" means the date on which all conditions precedent
set forth in Section 5.01 are satisfied or waived by all Banks.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Company and
its Subsidiaries in or upon which a Lien now or hereafter exists in
favor of the Banks,
5
<PAGE> 12
or the Agent on behalf of the Banks, whether under this Agreement or
under any other documents executed by any such Person and delivered to
the Agent or the Banks.
"Collateral Documents" means, collectively, (i) the Pledge
Agreement, the Custodial Agreement contemplated thereunder, and all
other security agreements and other similar agreements between the
Company and the Banks or the Agent for its benefit and the benefit of
the Banks now or hereafter delivered to the Banks or the Agent
pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents now or
hereafter filed in accordance with the Uniform Commercial Code or
comparable law) against the Company as debtor in favor of the Banks
or the Agent for its benefit and the benefit of the Banks as secured
party, and (ii) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of
the foregoing.
"Commitment", as to each Bank, has the meaning specified in
Section 2.01.
"Commitment Percentage" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Company" has the meaning specified in the introductory clause
hereto.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Consolidated Net Interest Expense" means, for any period,
gross consolidated interest expense for that period (including all
commissions, discounts, fees and other charges in connection with
standby letters of credit and similar instruments) for the Company and
its Subsidiaries, less interest income for that period; all as
determined in accordance with GAAP.
"Consolidated Net Worth" means, as of the date of
determination, the consolidated shareholders' equity of the Company
and its Subsidiaries, as determined in accordance with GAAP.
"Contingent Obligation" means, as to any Person, (a) any
Guaranty Obligation of that Person; and (b) any direct or indirect
obligation or liability, contingent or otherwise, of that Person, (i)
in respect of any Surety Instrument issued for the account of that
Person or as to
6
<PAGE> 13
which that Person is otherwise liable for reimbursement of drawings
or payments, (ii) to purchase any materials, supplies or other
property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires
that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or tendered, or
such services are ever performed or tendered, or (iii) in respect of
any Swap Contract that is not entered into in connection with a bona
fide hedging operation that provides offsetting benefits to such
Person. The amount of any Contingent Obligation shall (subject, in
the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum
reasonably anticipated liability in respect thereof, and shall, with
respect to item (b)(iii) of this definition, be marked to market on a
current basis.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods maturing on such date.
"Credit Extension" means and includes (a) the making of any
Loans hereunder, and (b) the Issuance of the Letter of Credit
hereunder.
"Custodial Agreement" has the meaning specified in the Pledge
Agreement.
"Custodian" has the meaning specified in the Pledge Agreement.
"Default" means any event or circumstance which, with the
giving of the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, the sum of (a) the net
income (or net loss) for such period plus (b) all amounts treated
as expenses for depreciation, interest and the amortization of
intangibles of any kind to the extent included in the determination of
such net income (or loss), plus (c) all accrued taxes on or measured
by income to the extent included in the determination of such net
income (or loss); each of the foregoing as determined in accordance
with GAAP, provided, however, that net income (or loss)
7
<PAGE> 14
shall be computed for these purposes without giving effect to
extraordinary losses or extraordinary gains.
"Effective Amount" means (i) with respect to any Revolving
Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or repayments
of Revolving Loans occurring on such date; and (ii) with respect to
any outstanding L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to the Issuance of the
Letter of Credit if occurring on such date and any other changes in
the aggregate amount of the L/C Obligations as of such date, including
changes resulting from any reimbursements of outstanding unpaid
drawings under the Letter of Credit on such date or any reductions in
the maximum amount available for drawing under the Letter of Credit
taking effect on such date.
"Eligible Assignee" means (i) a commercial bank organized under
the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $100,000,000 and a
long-term deposit rating of A or better by S&P (an "A Rating");
(ii) a commercial bank organized under the laws of any other country
which is a member of the OECD, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or
agency located in the United States and has an A Rating; and (iii) a
Person that is primarily engaged in the business of commercial banking
and has an A Rating and that is (A) a Subsidiary of a Bank, (B) a
Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a
Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law,
injury to the environment, or for release of any substance which is
regulated by, or which may form the basis of liability under, any
Environmental Law.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, regulations promulgated thereunder.
8
<PAGE> 15
"ERISA Affiliate" has the meaning specified in subsection
6.07(e).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination under
Section 4041 or 4041A of ERISA or the commencement of proceedings by
the PBGC to terminate a Pension Plan subject to Title IV of ERISA;
(d) a failure by the Company to make required contributions to a
Pension Plan or other Plan subject to Section 412 of the Code; (e)
an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan; (f)
the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon the Company; or (g) an application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the
Code with respect to any Pension Plan.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of
New York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
such rate is not so published on any such preceding Business Day, the
rate for such day will be the arithmetic mean as determined by the
Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each
of three leading brokers of Federal funds transactions in New York
City selected by the Agent.
9
<PAGE> 16
"Fee Letters" means those letter agreements referenced in
Section 2.10 relating to payment of certain fees and other amounts.
"FRB" means the Board of Governors of the Federal
Reserve System, and any Governmental Authority succeeding to any of
its principal functions.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession).
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" means, as to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or
any property constituting direct or indirect security therefor, or (b)
to advance or provide funds (i) for the payment or discharge of any
such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure
or hold harmless the holder of any such primary obligation against
loss in respect thereof; in each case (a), (b), (c) or (d), including
arrangements wherein the rights and remedies of the holder of the
primary obligation are limited to repossession or sale of certain
property of such Person. The amount of any Guaranty Obligation shall
be deemed equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is
10
<PAGE> 17
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof.
"Honor Date" has the meaning specified in subsection 3.03(c).
"Honoring Bank" has the meaning specified in subsection
3.03(d).
"Indebtedness" of any Person means, without duplication,
(a) all indebtedness for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the
ordinary course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e)
all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person (even though the
rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such
property); (f) all obligations with respect to capital leases; (g) all
net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section
11.05.
"Indemnified Person" has the meaning specified in Section
11.05.
"Independent Auditor" has the meaning specified in subsection
7.01(a).
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors,
11
<PAGE> 18
or other, similar arrangement in respect of its creditors generally
or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Loan, the last Business Day of each calendar
quarter and each date such Loan is converted into another Type of Loan,
provided, however, that if any Interest Period for an Offshore Rate
Loan exceeds three months, the date that falls three months after the
beginning of such Interest Period is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Business Day the Loan is disbursed or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period pertaining to an Offshore
Rate Loan would otherwise end on a day that is not a Business
Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period;
(iii) no Interest Period for any Revolving Loan shall
extend beyond March 24, 1997.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions.
"Issuance Date" has the meaning specified in subsection
3.01(a).
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<PAGE> 19
"Issue" means to issue the Letter of Credit, or to amend the
Letter of Credit solely to extend the expiry date thereof to a date no
later than the Revolving Termination Date; and the terms "Issued,"
"Issuing" and "Issuance" have corresponding meanings.
"Joint Venture" means a partnership, joint venture or other
similar legal arrangement (whether created by contract or conducted
through a separate legal entity) now or hereafter formed by the
Company or any of its Subsidiaries with another Person in order to
conduct a common venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Commitment Percentage.
"L/C Amendment Application" means an application for the
amendment of the Letter of Credit in substantially the form of Exhibit
J.
"L/C Application" means an application for the Issuance of the
Letter of Credit in substantially the form of Exhibit G.
"L/C Borrowing" means an extension of credit resulting from a
drawing under the Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing of
Revolving Loans under subsection 3.03(c).
"L/C Commitment" means the non-revolving commitment of the
Banks to Issue, severally in accordance with their respective
Commitment Percentages, the Letter of Credit under Article III, in an
aggregate amount not to exceed $600,000,000, as the same shall be
reduced as a result of a reduction in the L/C Commitment pursuant to
Section 2.05; provided that the L/C Commitment is a part of the
combined Commitments, rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of the Letter of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under the Letter of
Credit which have not been converted into Revolving Loans under
subsection 3.03(d), including all outstanding L/C Borrowings.
"L/C Outstanding Amount" has the meaning specified in Section
3.08.
"L/C-Related Documents" means the Letter of Credit, the L/C
Application, the L/C Amendment Applications, and any other document
relating to the Letter of Credit.
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<PAGE> 20
"Lending Office" means, as to any Bank, the office or
offices of the Bank specified as its "Lending Office" or "Domestic
Lending Office" or "Offshore Lending Office", as the case may be,
beneath its name on the applicable signature page hereto, or such
other office or offices as the Bank may from time to time notify the
Company and the Agent.
"Letter of Credit" means the standby letter of credit in the
form of Exhibit H Issued by the Banks pursuant to Article III.
"Letter of Credit Paying Office" means, as to any Bank, the
office of the Bank specified as its "Letter of Credit Paying Office"
beneath its name on the applicable signature page hereto, or such
other office or offices as the Bank may from time to time notify the
Company and the Agent.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law), but not including the interest of a lessor under an operating
lease.
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Revolving Loan or L/C
Advance.
"Loan Documents" means this Agreement, any Notes, the
Collateral Documents, the Fee Letters, the L/C-Related Documents, and
all other documents delivered to the Agent or any Bank in connection
herewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Market Value" has the meaning specified in the Pledge
Agreement.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company to perform under any Loan
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<PAGE> 21
Document and avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company of any Loan Document.
"Material Subsidiary" means, at any time, any Subsidiary
having at such time total assets, as of the last day of the preceding
fiscal quarter, having a book value in excess of 10% of Consolidated
Net Worth, based upon the Company's most recent annual or quarterly
financial statements delivered to the Agent under Section 7.01.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto that is a nationally-recognized rating agency.
"Net Consolidated Funded Debt" means, as of the date of
determination, (a) all consolidated Indebtedness of the types
described in clauses (a), (c), (d) and (f) of the definition of the
term "Indebtedness" of the Company and its consolidated Subsidiaries,
determined in accordance with GAAP, including the Revolving Loans and
L/C Advances plus (b), without duplication of any amounts included in
clause (a) of this definition, all Guaranty Obligations of the Company
and its consolidated Subsidiaries and all Contingent Obligations of
the Company and its consolidated Subsidiaries with respect to
financial standby letters of credit (including the Letter of Credit,
if Issued hereunder), less (b) the Qualifying Collateral.
"Non-Honoring Bank" has the meaning specified in subsection
3.03(d).
"Note" means a promissory note executed by the Company in favor
of a Bank pursuant to subsection 2.02(b), in substantially the form of
Exhibit I.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document,
owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"OECD" means the Organization for Economic Cooperation and
Development.
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<PAGE> 22
"Offshore Rate" means, for any Interest Period with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the nearest 1/100th of 1%)
determined by the Agent as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the nearest 1/100th of 1%) in effect
on such day (whether or not applicable to any Bank) under
regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") having a term comparable to such
Interest Period; and
"IBOR" means the rate of interest per annum determined by the
Agent to be the arithmetic mean (rounded upward to the nearest
whole multiple of 1/100th of 1%) of the rates of interest per
annum notified to the Agent by each Reference Bank as the rate
of interest at which dollar deposits in the approximate amount
of the amount of the Revolving Loan to be made or continued as,
or converted into, an Offshore Rate Loan by such Reference Bank
and having a maturity comparable to such Interest Period would
be offered by its applicable Lending Office to major banks in
the offshore dollar interbank market at their request at
approximately 10:00 a.m. (New York City time) two Business Days
prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to
all Offshore Rate Loans then outstanding as of the effective
date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Revolving Loan that bears interest
based on the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
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<PAGE> 23
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA which the Company sponsors or
maintains or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pledge Agreement" means a Pledge and Security Agreement in the
form of Exhibit F.
"Qualifying Collateral" means Collateral as to which a first
priority Lien, subject to no other Liens, exists in favor of the Agent
for the benefit of the Banks pursuant to the Pledge Agreement and the
Custodial Agreement contemplated thereby, and of a type as to which
the Company has furnished an opinion addressed to the Agent and the
Banks in form and substance satisfactory to the Agent and the Required
Banks of Pillsbury Madison & Sutro or other counsel satisfactory to
the Agent and the Required Banks opining that a perfected Lien exists
or will exist in favor of the Agent for the benefit of the Banks, and
consisting of (i) cash held in a segregated deposit account with Agent
or with the Custodian contemplated under the Custodial Agreement, (ii)
securities issued or guaranteed by the United States Government or its
agencies, or the central government of an OECD country, (iii)
securities issued or guaranteed by United States Government-sponsored
agencies, or (iv) securities issued by official multilateral lending
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<PAGE> 24
institutions or regional development institutions in which the United
States Government is a shareholder or contributing member; provided,
that if the Company proposes to pledge Collateral which consists of
securities guaranteed by the United States Government or its agencies
or issued or guaranteed by the central government of an OECD Country,
or of the type described in clause (iii) or (iv) above, such
Collateral shall not constitute Qualifying Collateral unless and until
the Company has furnished to the Agent, with sufficient copies for
each Bank, a certificate of the Company signed by a Responsible
Officer to the effect that such Collateral constitutes Collateral of
such type and such other evidence, certificates or opinions as the
Agent may, at the request of any Bank, reasonably request; and
provided, further, that if any Bank shall have notified the Agent that
under any Capital Adequacy Regulation then in effect with respect to
such Bank, assets secured by such Collateral do not have a risk
category with a risk weight of 20% or less, such Collateral shall not
be Qualifying Collateral as to that Bank, and the provisions of
subsection 4.03(b) shall apply to such Bank.
"Rating Agency" means either of S&P or Moody's.
"Reconciliation Statement" means a written statement of the
Company, signed by a Responsible Officer, in form and substance
satisfactory to the Agent reconciling the effect of changes in GAAP as
contemplated or permitted by subsection 1.03(b).
"Reference Banks" means BofA, Citibank, N.A. and The Bank of
Nova Scotia.
"Replacement Bank" has the meaning specified in Section 4.07.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has
been waived in regulations issued by the PBGC.
"Required Banks" means at any time Banks then holding at least
60% of the then aggregate unpaid principal amount of the Loans, or, if
no such principal amount is then outstanding, Banks then having at
least 60% of the Commitments.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the
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<PAGE> 25
Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer, the
president, or the chief financial officer of the Company, or any other
officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, the chief
financial officer or the treasurer of the Company, or any other
officer having substantially the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.01, and
may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of
Revolving Loan).
"Revolving Termination Date" means the earlier to occur of:
(a) March 24, 1997; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"S&P" means Standard & Poor's Corporation and any successor
thereto that is a nationally-recognized rating agency.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Separation" has the meaning assigned to it in the Separation
Agreement.
"Separation Agreement" means that certain Separation Agreement
between Pacific Telesis Group and PacTel Corporation, now known as
AirTouch Communications, effective October 7, 1993.
"Separation Date" has the meaning assigned to it in the
Separation Agreement.
"Solvent" means as to any Person at any time, that (a) the fair
value of the property of such Person is greater than the amount of
such Person's liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(31) of the Bankruptcy Code and,
in the alternative, for purposes of the California Uniform Fraudulent
Transfer Act; (b) the present fair saleable value of the property of
such Person is not less than the amount that will be required to pay
the probable liability of such
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<PAGE> 26
Person on its debts as they become absolute and matured; (c) such
Person is able to realize upon its property and pay its debts and other
liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature; and (e) such Person is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute
unreasonably small capital.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of
the Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contracts" means swap agreements (as such term is defined
in Section 101 of the Bankruptcy Code) and any other agreements or
arrangements designed to provide protection against fluctuations in
interest or currency exchange rates or commodity prices.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Bank's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Bank or
the Agent, as the case may be, is organized or maintains a lending
office.
"Type" has the meaning specified in the definition of
"Revolving Loan."
"UCP" has the meaning specified in Section 3.09.
"Unfunded Pension Liability" means the excess of a Pension
Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over
the current value of that Plan's assets, determined in accordance with
the assumptions used for
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<PAGE> 27
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"United States" and "U.S." each means the United States of
America.
"U.S. Government Securities" means securities issued or
guaranteed by the United States Government or its agencies.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) The term "pro rata" means ratably in accordance
with the respective Commitment Percentages.
(iv) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
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<PAGE> 28
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent,
the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) If any mandatory change in GAAP occurs or takes effect
after the Closing Date, and such change or imposition would result in a change
in any quantity reported to the Banks hereunder which provides the basis for
any covenant, performance obligation or standard of measure used in this
Agreement, then all covenants, performance obligations and standards of
performance shall be calculated without giving effect to such change in GAAP.
At the time of any such change, the Company shall furnish to the Agent, with
sufficient copies for each Bank, a statement of the Company's Independent
Auditor that it concurs with such change and a Reconciliation Statement, and
following such change, the Company shall furnish the Agent, with sufficient
copies for each Bank, with Reconciliation Statements (i) with each financial
statement furnished thereafter under this Agreement, and (ii) with each
certificate or other data or information furnished by the Company under this
Agreement to show the Company's compliance with all applicable covenants,
performance obligations and performance standards hereunder.
(c) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "Revolving Loan") from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
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<PAGE> 29
amount not to exceed at any time outstanding the amount set forth opposite the
Bank's name on the applicable signature page hereto (such amount, as the same
may be reduced under Section 2.05 or increased or reduced as a result of one or
more assignments under Section 11.08, the Bank's "Commitment"); provided,
however, that, after giving effect to any Borrowing of Revolving Loans, the
Effective Amount of all outstanding Revolving Loans and the Effective Amount of
all L/C Obligations shall not at any time exceed the combined Commitments; and
provided further, that (i) the Effective Amount of the Revolving Loans of any
Bank plus (ii) the Commitment Percentage of such Bank times the Effective
Amount of all L/C Obligations shall not at any time exceed such Bank's
Commitment. Within the limits of each Bank's Commitment, and subject to the
other terms and conditions hereof, the Company may borrow under this Section
2.01, prepay under Section 2.06 and reborrow under this Section 2.01.
2.02 Loan Accounts; Notes.
(a) The Loans made by each Bank and each Bank's share of
the Letter of Credit shall be evidenced by one or more accounts or records
maintained by such Bank in the ordinary course of business. The accounts or
records maintained by the Agent and each Bank shall be conclusive absent
manifest error of the amount of the Loans made by the Banks to the Company and
the Letter of Credit Issued for the account of the Company, and the interest
and payments thereon. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Company
hereunder.
(b) Upon the request of any Bank made through the Agent,
the Loans made by such Bank may be evidenced by one or more Notes, instead of
loan accounts. Each such Bank shall endorse on the schedules annexed to its
Note(s) the date, amount and maturity of each Loan made by it and the amount of
each payment of principal made by the Company with respect thereto. Each such
Bank is irrevocably authorized by the Company to endorse its Note(s) and each
Bank's record shall be conclusive absent manifest error; provided, however,
that the failure of a Bank to make, or an error in making, a notation thereon
with respect to any Loan shall not limit or otherwise affect the obligations of
the Company hereunder or under any such Note to such Bank.
2.03 Procedure for Borrowing.
(a) Each Borrowing of Revolving Loans shall be made upon
the Company's irrevocable notice (including notice by a telephone call from an
Authorized Company Employee confirmed immediately by written notice by
facsimile machine) delivered to the Agent in the form of a Notice of Borrowing
signed by an Authorized Company Employee, which notice must be received by
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<PAGE> 30
the Agent prior to 9:00 a.m. (San Francisco time) (i) three Business Days prior
to the requested Borrowing Date, in the case of Offshore Rate Loans; and (ii)
on the requested Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which,
except in the case of a Borrowing of Base Rate Loans under
subsection 3.03(c), shall be in an aggregate minimum amount of
$10,000,000 or any multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Borrowing; and
(D) the duration of the Interest Period
applicable to such Loans included in such notice. If the
Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be three months.
(b) The Agent will promptly notify each Bank of its receipt
of any Notice of Borrowing, of the amount of such Bank's Commitment Percentage
of that Borrowing, and of the interest rate applicable to such Borrowing.
(c) Each Bank will make the amount of its Commitment
Percentage of each Borrowing available to the Agent for the account of the
Company at the Agent's Payment Office by 12:00 noon (San Francisco time) on the
Borrowing Date requested by the Company in funds immediately available to the
Agent. The proceeds of all such Loans will then be made available to the
Company by the Agent at such office by crediting the account of the Company on
the books of BofA with the aggregate of the amounts made available to the Agent
by the Banks and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, there may not be
more than ten different Interest Periods in effect.
2.04 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable notice (including
notice by a telephone call from an Authorized Company Employee confirmed
immediately by written notice by facsimile machine) to the Agent:
(i) elect, on any Business Day, in the case of Base
Rate Loans, or on the last day of the applicable Interest Period, in
the case of any other Type of Revolving
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<PAGE> 31
Loans, to convert any such Loans (or any part thereof in an amount not
less than $10,000,000, or that is in an integral multiple of $1,000,000
in excess thereof) into Loans of any other Type; or
(ii) elect to renew on the last day of the applicable
Interest Period any Revolving Loans having Interest Periods maturing on
such day (or any part thereof in an amount not less than $10,000,000,
or that is in an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $10,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the
right of the Company to continue such Loans as, and convert such Loans into,
Offshore Rate Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/-
Continuation signed by an Authorized Company Employee (including notice by a
telephone call from an Authorized Company Employee confirmed immediately by
written notice by facsimile machine) to be received by the Agent not later
than 9:00 a.m. (San Francisco time) at least (i) three Business Days in advance
of the Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; and (ii) on the Conversion/Continuation Date,
if the Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or renewed;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If the Company has failed, on or before 9:00 a.m. (San
Francisco time) three Business Days in advance of the expiration of any
Interest Period applicable to Offshore Rate Loans, to select a new Interest
Period to be applicable to such Offshore Rate Loans, the Company shall be
deemed, subject to subsection 2.04(e), to have elected to continue or convert
such Offshore Rate Loans into Offshore Rate Loans with a three-month Interest
Period, effective as of the expiration date of such Interest Period.
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<PAGE> 32
(d) The Agent will promptly notify each Bank of its receipt
of a Notice of Conversion/Continuation and of the applicable interest rate or,
if no timely notice is provided by the Company, the Agent will promptly notify
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Bank.
(e) Unless the Required Banks otherwise agree, (i) during
the existence of a Default or Event of Default other than one described in
subsection 9.01(a), the Company may not elect to have a Loan converted into or
continued as an Offshore Rate Loan with an Interest Period which is longer than
three months, and (ii) during the existence of a Default or Event of Default
described in subsection 9.01(a), the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan, and, at the expiration of
the applicable Interest Period, the Company shall be deemed to have elected to
convert any Offshore Rate Loans into Base Rate Loans, subject to subsection
2.09(c).
(f) After giving effect to any conversion or continuation
of Loans, there may not be more than ten different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than five Business Days' prior notice to the Agent,
permanently terminate the Commitments, or permanently reduce the Commitments by
an aggregate minimum amount of $10,000,000 or any multiple of $5,000,000 in
excess thereof; unless, after giving effect thereto and to any prepayments of
Loans made on the effective date thereof, (a) the Effective Amount of all
Revolving Loans and the Effective Amount of all L/C Obligations together would
exceed the amount of the combined Commitments then in effect, or (b) the
Effective Amount of all L/C Obligations then outstanding would exceed the L/C
Commitment. Once reduced in accordance with this Section, the Commitments may
not be increased. Any reduction of the Commitments shall be applied pro rata
to each Bank's Commitment. All accrued commitment and letter of credit fees
to, but not including, the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination. The Agent will promptly notify each Bank of its receipt of a
notice from the Company under this Section 2.05 and of such Bank's Commitment
Percentage of such termination or reduction.
2.06 Optional Prepayments. Subject to Section 4.04, the Company
may, at any time or from time to time, upon not less than three Business Days'
irrevocable notice to the Agent, ratably prepay Loans in whole or in part, in
minimum amounts of $10,000,000 or any multiple of $1,000,000 in excess thereof.
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<PAGE> 33
Such notice of prepayment shall specify the date and amount of such prepayment
and the Type(s) of Loans to be prepaid. The Agent will promptly notify each
Bank of its receipt of any such notice, and of such Bank's Commitment
Percentage of such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 4.04.
2.07 Mandatory Prepayments of Loans. If on any date the Effective
Amount of L/C Obligations exceeds the L/C Commitment, the Company shall Cash
Collateralize on such date the outstanding Letter of Credit in an amount equal
to the excess of the maximum amount then available to be drawn under the Letter
of Credit over the L/C Commitment. Subject to Section 4.04, if on any date
after giving effect to any Cash Collateralization made on such date pursuant to
the preceding sentence, the Effective Amount of all Revolving Loans then
outstanding plus the Effective Amount of all L/C Obligations exceeds the
combined Commitments, the Company shall immediately, and without notice or
demand, prepay the outstanding principal amount of the Revolving Loans and L/C
Advances by an amount equal to the applicable excess.
2.08 Repayment. The Company shall repay to the Banks in full on the
Revolving Termination Date the aggregate principal amount of Loans outstanding
on such date.
2.09 Interest.
(a) Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.04), plus the Applicable Margin.
(b) Interest on each Revolving Loan shall be paid in
arrears on each Interest Payment Date. Interest shall also be paid on the date
of any prepayment of Loans under Section 2.06 or 2.07 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on demand
of the Agent at the request or with the consent of the Required Banks.
(c) Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Loan Document is not paid in full when due
(whether at stated maturity, by acceleration, demand or otherwise), the Company
agrees to pay interest on such unpaid principal or other amount, from the date
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<PAGE> 34
such amount becomes due until the date such amount is paid in full, and after
as well as before any entry of judgment thereon to the extent permitted by law,
payable on demand, at a fluctuating rate per annum equal to the Base Rate plus
2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company hereunder shall be subject to the limitation that
payments of interest shall not be required, for any period for which interest
is computed hereunder, to the extent (but only to the extent) that contracting
for or receiving such payment by the respective Bank would be contrary to the
provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Company shall pay such Bank interest at the highest rate
permitted by applicable law.
2.10 Fees. In addition to certain fees described in Section 3.08:
(a) Arrangement Fee. The Company shall pay to the Arranger for
the Arranger's own account an arrangement fee as required by the letter
agreement between the Company and the Arranger dated February 9, 1994.
(b) Commitment Fees. The Company shall pay to the Agent for
the account of each Bank a commitment fee on the average daily unused portion
of such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter (or longer or shorter period as provided
in this subsection) based upon the daily utilization for that quarter (or
longer or shorter period) as calculated by the Agent, equal to the percent per
annum set forth below opposite the Applicable Rating Level times such Bank's
average daily unused Commitment.
<TABLE>
<CAPTION>
Applicable
Rating Level Commitment Fee
------------ --------------
<S> <C>
Level I 0.10000%
Level II 0.12500%
Level III 0.15000%
Level IV 0.18750%
Level V 0.22500%
</TABLE>
For purposes of calculating utilization under this subsection, the Commitments
shall be deemed used to the extent of the Effective Amount of Revolving Loans
then outstanding, plus the Effective Amount of L/C Obligations then
outstanding. Such commitment fee shall accrue from the Closing Date to the
Revolving
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Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter commencing on June 30, 1994 through the
Revolving Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.05, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date
to such quarterly payment date. The commitment fees provided in this
subsection shall accrue at all times from and after the Closing Date, including
at any time during which one or more conditions in Article V are not met.
(c) Agency Fee. The Company shall pay to the Agent for the
Agent's own account an agency fee in the amount and at the times set forth in a
letter agreement between the Company and the Agent dated February 9, 1994.
2.11 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans when
the Base Rate is determined by BofA's "reference rate" shall be made on the
basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (which results in more interest
being paid than if computed on the basis of a 365-day year). Interest and fees
shall accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent
shall be conclusive and binding on the Company and the Banks in the absence of
manifest error.
(c) If any Reference Bank's Commitment terminates (other
than on termination of all the Commitments), or for any reason whatsoever any
Reference Bank ceases to be a Bank hereunder, that Reference Bank shall
thereupon cease to be a Reference Bank, and the Offshore Rate shall be
determined on the basis of the rates as notified by the remaining Reference
Banks.
(d) Each Reference Bank shall use its best efforts to
furnish quotations of rates to the Agent as contemplated hereby. If any of the
Reference Banks fails to supply such rates to the Agent upon its request, the
rate of interest shall be determined on the basis of the quotations of the
remaining Reference Bank(s).
2.12 Payments by the Company.
(a) All payments to be made by the Company shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Company
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<PAGE> 36
shall be made to the Agent for the account of the Banks at the Agent's Payment
Office, and shall be made in dollars and in immediately available funds, no
later than 12:00 noon (San Francisco time) on the date specified herein. The
Agent will promptly distribute to each Bank its pro rata share (or other
applicable share as expressly provided herein) of such payment in like funds as
received. Any payment received by the Agent later than 12:00 noon (San
Francisco time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior
to the date on which any payment is due to the Banks that the Company will not
make such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Company has not
made such payment in full to the Agent, each Bank shall repay to the Agent on
demand such amount distributed to such Bank, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Bank until the date repaid.
2.13 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing in the case
of any Borrowing of Offshore Rate Loans, or no later than 11:00 a.m. (San
Francisco time) on the date of such Borrowing, in the case of any Borrowing of
Base Rate Loans, that such Bank will not make available as and when required
hereunder to the Agent for the account of the Company the amount of that Bank's
Commitment Percentage of the Borrowing, the Agent may assume that each Bank has
made such amount available to the Agent in immediately available funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Agent in immediately available funds and the Agent
in such circumstances has made available to the Company such amount, that Bank
shall on the Business Day following such Borrowing
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<PAGE> 37
Date make such amount available to the Agent, together with interest at the
Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Bank with respect to amounts owing under this subsection (a)
shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Agent shall constitute such Bank's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing Date,
the Agent will notify the Company of such failure to fund and, upon demand by
the Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
non-pro rata payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise), such Bank shall immediately (a) notify the
Agent of such fact, and (b) purchase from the other Banks such participations
in the Loans made by them as shall be necessary to cause such purchasing Bank
to share the excess payment pro rata with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid therefor,
together with an amount equal to such paying Bank's Commitment Percentage
(according to the proportion of (i) the amount of such paying Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 11.09) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under
this Section and will in each case notify the Banks following any such
purchases or repayments.
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ARTICLE III
THE LETTER OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein, each Bank
severally agrees, (i) to issue the Letter of Credit for the account of the
Company, in accordance with subsection 3.02(a), and to amend the Letter of
Credit solely to extend the expiry date thereof to a date no later than the
Revolving Termination Date, in accordance with subsection 3.02(b), and (ii) to
honor drafts under and in compliance with the Letter of Credit; provided, that
the Banks shall not be obligated to Issue the Letter of Credit if as of the
date of Issuance of the Letter of Credit (the "Issuance Date") (1) the
Effective Amount of all L/C Obligations plus the Effective Amount of all
Revolving Loans exceeds the combined Commitments, (2) the Commitment Percentage
of any Bank times the Effective Amount of all L/C Obligations plus the
Effective Amount of the Revolving Loans of such Bank exceeds such Bank's
Commitment, or (3) the Effective Amount of L/C Obligations exceeds the L/C
Commitment. The L/C Commitment of each Bank is not revolving, and once the
Letter of Credit is Issued, the Banks shall have no obligation to issue any
other letters of credit hereunder. The Letter of Credit is several, not joint,
and each Bank shall be liable to the beneficiary under the Letter of Credit
with respect to any draw thereunder solely in an amount equal to such Bank's
Commitment Percentage times the amount of such draw, provided that no Bank
shall be required under any circumstance to pay to the beneficiary under the
Letter of Credit an amount greater than the amount of such Bank's Commitment.
(b) No Bank shall be under any obligation to Issue the
Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
the Bank from Issuing the Letter of Credit, or any Requirement of Law
applicable to the Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with
jurisdiction over the Bank shall prohibit, or request that the Bank
refrain from, the issuance of letters of credit generally or the
Issuance of the Letter of Credit in particular or shall impose upon the
Bank with respect to the Letter of Credit any restriction, reserve or
capital requirement (for which the Bank is not otherwise compensated
hereunder) not in effect on the Closing Date;
(ii) the Bank has received written notice from the
Agent or the Company or otherwise has knowledge, on or prior to the
Business Day prior to the requested date of
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<PAGE> 39
Issuance of the Letter of Credit, that one or more of the applicable
conditions contained in Article V is not then satisfied; or
(iii) the expiry date of the Letter of Credit is after
the Revolving Termination Date.
3.02 Issuance or Extension of Letter of Credit.
(a) The Letter of Credit shall be issued upon the
irrevocable written request of the Company received by the Agent at least five
Business Days prior to the proposed Issuance Date. Such request for issuance
of the Letter of Credit shall be by facsimile, confirmed immediately in an
original writing, in the form of an L/C Application. The Agent shall promptly
give notice to each Bank of such written request received by the Agent from the
Company for issuance of the Letter of Credit. Subject to the receipt of such
notice, each Bank shall severally issue the Letter of Credit by delivering to
the Agent (i) such Bank's counterpart signature page to the Letter of Credit,
and (ii) an opinion or opinions of counsel to each Bank and addressed to the
beneficiary of the Letter of Credit, substantially in the form of Exhibit D-
2B, not later than 12:00 noon, San Francisco time, on the proposed Issuance
Date. Upon receipt by the Agent of the counterpart signature pages of each
Bank and such legal opinions, the Agent will request that counsel to the Agent
issue the legal opinion addressed to the beneficiary of the Letter of Credit,
substantially in the form of Exhibit D-2A, and the Agent will promptly deliver
the Letter of Credit and such legal opinions to the beneficiary thereof.
(b) From time to time while the Letter of Credit is outstanding
and prior to the Revolving Termination Date, the Banks will, upon the
irrevocable written request of the Company received by the Agent at least five
Business Days prior to the proposed date of amendment, severally amend the
Letter of Credit solely to extend the expiry date thereof to a date no later
than the Revolving Termination Date. Each such request for amendment of the
Letter of Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Amendment Application. The Agent shall promptly
give notice to each Bank of such written request received by the Agent from the
Company for amendment of the Letter of Credit. No Bank shall be under any
obligation to amend the Letter of Credit if: (A) the Bank would have no
obligation at such time to issue the Letter of Credit in its amended form under
the terms of this Agreement; or (B) the beneficiary of the Letter of Credit
does not accept the proposed amendment to the Letter of Credit. Subject to the
foregoing, and to the receipt of such notice from the Agent, each Bank shall
severally issue the amendment to the Letter of Credit by delivering to the
Agent such Bank's counterpart signature page to the amendment to the Letter of
Credit not later than 12:00 noon, San Francisco time, on the proposed date
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<PAGE> 40
of amendment. Upon receipt by the Agent of such counterpart signature pages of
each Bank, the Agent will promptly deliver the amendment to the Letter of
Credit to the beneficiary thereof.
(c) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than the Letter of Credit).
3.03 Drawings and Reimbursements.
(a) In the event of any request for a drawing under the
Letter of Credit by the beneficiary thereof, the Agent will promptly notify the
Company and each Bank. The Agent will promptly transmit, by facsimile
(confirmed promptly by telephonic notice) followed by overnight express mailing
with all charges prepaid, to each Bank at its Letter of Credit Paying Office,
or other office or offices as designated by such Bank, copies of all drafts and
documents presented by the beneficiary under the Letter of Credit, and will
notify each Bank of the date payment is to be made to the beneficiary thereof
as a result of such drawing under the Letter of Credit (such date determined in
accordance with the terms of the Letter of Credit). Each Bank shall notify the
Agent, not later than 11:00 a.m. (San Francisco time) on the date payment is to
be made to the beneficiary thereof as a result of such drawing under the Letter
of Credit, that (i) such Bank has determined that it will make payment under
the Letter of Credit, or (ii) such Bank has determined that it will not make
payment under the Letter of Credit, and give the reasons for such
determination. In the event the Agent receives notice from a Bank under clause
(ii) of this subsection, the Agent shall as soon as practicable notify the
beneficiary and the Company of the determination of such Bank and the reasons
given by such Bank therefor.
(b) Each Bank shall make available to the Agent, not later than
12:00 noon (San Francisco time) on the date on which payment is to be made to
the beneficiary as a result of a drawing under the Letter of Credit, (i) such
Bank's Commitment Percentage, times (ii) the amount of the drawing made by such
beneficiary. The Agent shall then promptly disburse to such beneficiary all
amounts so received from the Banks.
(c) The Company shall reimburse the Agent, for the account of
each Bank, prior to 1:00 p.m. (San Francisco time), on each date that any
amount is paid by such Bank under the Letter of Credit (each such date, an
"Honor Date"), in an amount equal to the amount so paid by such Bank. In the
event that more than one Bank makes a payment under the Letter of Credit on the
Honor Date, any reimbursements from the Company shall be made to the Agent, for
the account of such Banks paying on such Honor Date, in proportion to the
amounts so paid by such Banks. In the event the Company fails to reimburse the
Agent for the
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<PAGE> 41
account of all such Banks for the full amount of any payment made by such Banks
in respect of any drawing under the Letter of Credit by 1:00 p.m. (San
Francisco time) on the Honor Date, the Agent will promptly notify each such
Bank thereof, and the Company shall be deemed to have requested that Base Rate
Loans in an aggregate amount equal to such unreimbursed amount be made by the
Banks to be disbursed on the Honor Date, subject to the amount of the
unutilized portion of the Commitment and subject to the conditions set forth in
Section 5.02. Any notice given by the Agent pursuant to this subsection
3.03(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(d) If all of the Banks have paid their pro rata share of the
draw request under the Letter of Credit, but subject to subsection 3.03(e) and
the proviso in subsection 3.03(f), then each Bank shall upon any notice
pursuant to subsection 3.03(c) be deemed to have made a Revolving Loan
consisting of a Base Rate Loan to the Company equal to its Commitment
Percentage of the amount of the unreimbursed drawing. If one or more of the
Banks shall not have paid its pro rata share of the draw request under the
Letter of Credit on the date on which payment is due thereunder (a
"Non-Honoring Bank"), but subject to subsection 3.03(e) and the proviso in
subsection 3.03(f), each Non-Honoring Bank shall upon any notice pursuant to
subsection 3.03(c) make available to the Agent for the account of the Banks
which have so paid their pro rata share of the draw request under the Letter of
Credit (the "Honoring Banks") an amount in Dollars and in immediately available
funds equal to such Non-Honoring Bank's Commitment Percentage of the amount of
the unreimbursed drawing paid by each Honoring Bank on the Honor Date,
whereupon the Banks shall (subject to subsection 3.03(e) and the proviso in
subsection 3.03(f)) each be deemed to have made a Revolving Loan consisting of
a Base Rate Loan to the Company equal to its Commitment Percentage of the
amount of the unreimbursed drawing. If any Non-Honoring Bank so notified
fails to make available to the Agent for the account of the Honoring Banks the
amount of such Non-Honoring Bank's Commitment Percentage of the amount of the
unreimbursed drawing by no later than 2:00 p.m. (San Francisco time) on the
Honor Date, then interest shall accrue on such Non-Honoring Bank's obligation
to make such payment, from the Honor Date to the date such Non-Honoring Bank
makes such payment, at a rate per annum equal to the Federal Funds Rate in
effect from time to time during such period. The Agent will promptly give
notice of the occurrence of the Honor Date, but failure of the Agent to give
any such notice on the Honor Date or in sufficient time to enable any Bank to
effect such payment on such date shall not relieve such Bank from its
obligations under this Section 3.03.
(e) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans
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<PAGE> 42
to the Company in whole or in part, because of the Company's failure to satisfy
the conditions set forth in Section 5.02 or for any other reason, the Company
shall be deemed to have incurred from each Honoring Bank an L/C Borrowing in
the amount of such drawing, which L/C Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Base Rate plus 2% per annum, and each Non-Honoring Bank shall be
deemed, and hereby irrevocably and unconditionally agrees to, have purchased a
participation in each such L/C Borrowing in an amount equal to the product of
(i) the Commitment Percentage of such Non-Honoring Bank, times (ii) the amount
of each such L/C Borrowing, and each Non-Honoring Bank's payment to the Agent
for the account of the relevant Honoring Bank pursuant to subsection 3.03(d)
shall be deemed payment in respect of its participation in such L/C Borrowing
and shall constitute an L/C Advance from such Non-Honoring Bank in satisfaction
of its participation obligation under this Section 3.03; provided, however,
that each Non-Honoring Bank's obligation to purchase a participation in any
such L/C Borrowing is subject to (and shall not exceed) the amount of the
unutilized portion of the Commitment of such Non-Honoring Bank.
(f) Each Bank's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.03,
as a result of a drawing under the Letter of Credit, shall be absolute and
unconditional and without recourse to the Agent or any other Bank and shall not
be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Agent,
the Company or any other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default, an Event of Default or a Material Adverse Effect;
or (iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Bank's obligation
to make Revolving Loans under this Section 3.03 is subject to the conditions
set forth in Section 5.02 and the amount of the unutilized portion of the
Commitment of such Bank.
3.04 Repayment of Participations.
(a) Upon (and only upon) receipt by the Agent for the
account of any Bank of immediately available funds from the Company or from
another Bank under subsection 3.03(d) (i) in reimbursement of any payment made
by any such Bank under the Letter of Credit with respect to which any Bank has
paid the Agent or (ii) in payment of interest thereon, the Agent will pay to
each Bank, in the same funds as those received by the Agent for the account of
the Bank or Banks making payment with respect to a draw on the Letter of
Credit, the amount of such Bank's share of such funds.
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<PAGE> 43
(b) If the Agent or any Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of such Bank pursuant to subsection
3.04(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or such Bank the amount of its Commitment Percentage of any
amounts so returned by the Agent or such Bank plus interest thereon from the
date such demand is made to the date such amounts are returned by such Bank to
the Agent or such Bank, at a rate per annum equal to the Federal Funds Rate in
effect from time to time.
3.05 Role of the Agent as Paying Agent.
(a) Each Bank and the Company agree that, in disbursing to the
beneficiary amounts made available to the Agent by any Bank for payment to the
beneficiary as a result of a draw under the Letter of Credit, the Agent shall
not have any responsibility to obtain any document or to ascertain or inquire
as to the validity or accuracy of any such document or the authority of the
Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
participants or assignees of the Agent shall be liable to any Bank for: (i) any
action taken or omitted in connection herewith at the request or with the
approval of the Banks (including the Required Banks, as applicable); (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of the
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Company's pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. No Bank, Agent-Related Person, nor any of their respective
participants or assignees, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against a Bank, and such Bank may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which were caused
by such Bank's willful misconduct or gross negligence in determining whether
drafts, demands, certificates or other documents presented under the Letter of
Credit comply with the terms of the Letter of Credit or such Bank's willful
failure to pay under the Letter of Credit
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after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of the Letter
of Credit. In furtherance and not in limitation of the foregoing: (i) any Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) no Bank shall be responsible for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign the Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Banks for a drawing
under the Letter of Credit, and to repay any L/C Borrowing and any drawing
under the Letter of Credit converted into Revolving Loans, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C- Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change (a) in the time, manner or place of
payment of the Letter of Credit, or (b) with the consent of the Company,
in any other term of all or any of the obligations of the Company in
respect of the Letter of Credit, or any other amendment or waiver of or
any consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Company may have at any time against any
beneficiary or any transferee of the Letter of Credit (or any Person for
whom any such beneficiary or any such transferee may be acting), the
Agent, the Banks or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect (even if notified thereof by the
Company); or any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under the Letter of Credit;
or any failure by the beneficiary under the Letter of Credit to send the
original of any drawing request or other communication sent by
telecopier thereunder to the Paying Agent thereunder by prepaid
overnight courier
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<PAGE> 45
for receipt by such Paying Agent within two Business Days of the date of
any such facsimile transmission;
(v) any payment by any Bank under, or disbursement of
funds by the Agent with respect to, the Letter of Credit against
presentation of a draft or certificate that does not strictly comply
with the terms of the Letter of Credit; or any payment made by any Bank
under, or disbursement of funds by the Agent with respect to, the Letter
of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or
any transferee of the Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations of
the Company in respect of the Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Company or a guarantor.
3.07 Cash Collateral Pledge. Upon (i) the request of the Agent, at
the request of any Bank, (A) if any Bank has honored any full or partial
drawing request on the Letter of Credit and such drawing has resulted in an L/C
Borrowing hereunder, or (B) if, as of the Revolving Termination Date, the
Letter of Credit may for any reason remain outstanding and partially or wholly
undrawn, or (ii) the occurrence of the circumstances described in Section 2.07
requiring the Company to Cash Collateralize the Letter of Credit, then, the
Company shall immediately Cash Collateralize the L/C Obligations in an amount
equal to (x) in the case of a Cash Collateralization required under clause (i)
of this Section, the L/C Obligations, or (y) in the case of a Cash
Collateralization required under clause (ii) of this Section, the excess of the
maximum amount then available to be drawn under the Letter of Credit over the
L/C Commitment.
3.08 Letter of Credit Fees. The Company shall pay to the Agent for the
account of each of the Banks a letter of credit fee with respect to the Letter
of Credit equal to the product of (x) the applicable per annum percentages set
forth in clauses (i) and (ii) below, times (y) the average daily maximum amount
available to be drawn under the Letter of Credit, computed on a quarterly basis
in arrears on the last Business Day of each calendar quarter based upon the
undrawn amount with respect to the Letter of Credit for that quarter as
calculated by the Agent
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<PAGE> 46
(such amount as calculated by the Agent, the "L/C Outstanding Amount"):
(i) with respect to that portion of the L/C
Outstanding Amount which is less than or equal to the Market Value of the
Qualifying Collateral, the fee shall be 0.1250% per annum.
(ii) with respect to that portion of the L/C
Outstanding Amount which exceeds the Market Value of the Qualifying Collateral,
the per annum fee shall be determined based on the Applicable Rating Level, as
follows:
<TABLE>
<CAPTION>
Applicable
Rating Level Letter of Credit Fee
------------ --------------------
<S> <C>
Level I 0.3500%
Level II 0.3750%
Level III 0.4000%
Level IV 0.5500%
Level V 0.7500%
</TABLE>
Such letter of credit fees shall be due and payable quarterly in arrears on the
tenth Business Day after the last Business Day of each calendar quarter during
which the Letter of Credit is outstanding, commencing on the first such
quarterly date to occur after the Closing Date, through the Revolving
Termination Date (or such later date upon which the outstanding Letter of
Credit shall expire), with the final payment to be made on the Revolving
Termination Date (or such later expiration date). For purposes of determining
that portion of the L/C Outstanding Amount which is less than, equal to or
exceeds the Market Value of the Qualifying Collateral, the Market Value of the
Qualifying Collateral used shall be equal to the lesser of (x) the Market Value
of the Qualifying Collateral as determined under the Pledge Agreement as of the
end of such calendar quarter (or on the Revolving Termination Date or later
expiration date, as applicable) or (y) the average of the daily Market Values
of the Qualifying Collateral as determined under the Pledge Agreement during
such calendar quarter (or such shorter period for the payment due on the
Revolving Termination Date or later expiration date).
3.09 Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits as published by the International Chamber of Commerce
("UCP") most recently at the time of issuance of the Letter of Credit, and, to
the extent not inconsistent therewith, the laws of the State of New York, shall
apply to the Letter of Credit.
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<PAGE> 47
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes. (a) Any and all payments by the Company to each Bank or
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for any Taxes. In addition,
the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each
Bank and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Bank or the Agent and any liability arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within
30 days after the date any Bank or the Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Bank or the Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid, all
additional amounts which the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes
or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the
Company of Taxes or Other Taxes, the Company shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
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<PAGE> 48
(e) If the Company is required to pay additional amounts to
any Bank or the Agent pursuant to subsection (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Company which may thereafter
accrue, if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank.
4.02 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Company shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate) in or in the interpretation of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or agreeing to issue, issuing or
maintaining its share of or obligations under the Letter of Credit, or of
agreeing to make or making, funding or maintaining its share of any unpaid
drawing under any Letter of Credit, then the Company
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<PAGE> 49
shall be liable for, and shall from time to time, upon demand (with a copy of
such demand to be sent to the Agent), pay to the Agent for the account of such
Bank, additional amounts as are sufficient to compensate such Bank for such
increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy) determines that
the amount of such capital is increased as a consequence of its Commitment,
Loans, share of the Letter of Credit, or any other obligations under this
Agreement, then, upon demand of such Bank to the Company through the Agent, the
Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
Without limiting the generality of the foregoing, the Company agrees that if
any Bank shall have determined that (A) any of the events listed in clauses (i)
through (iv) of this subsection have the effect that assets secured by
Collateral pledged from time to time hereunder do not have a risk category with
a risk weight of 20% or less (where, prior to such determination, such
Collateral constituted Qualifying Collateral) or (B) that the method provided
in the Pledge Agreement for computing the Market Value of the Qualifying
Collateral does not accurately reflect the current market value of the
Qualifying Collateral under any Capital Adequacy Regulation applicable to such
Bank, then, upon demand of such Bank to the Company through the Agent, the
Company shall pay to the Bank, from time to time as specified by the Bank, and
in addition to the letter of credit fees otherwise payable hereunder, as
applicable, an amount equal to the difference between (x) the letter of credit
fees set forth in Section 3.08 determined in accordance with clause (i) of
Section 3.08, and (y) such fees determined in accordance with clause (ii) of
Section 3.08, or an amount equal to the difference between the letter of credit
fees set forth in Section 3.08 computed based on the Market Value of the
Qualifying Collateral as computed under the Pledge Agreement and such fees
computed based on the current market value of the Qualifying Collateral as
determined under any Capital Adequacy Regulation applicable to such Bank.
4.04 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
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<PAGE> 50
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.07 or
4.02) or other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained.
4.05 Inability to Determine Rates. If any two Reference Banks
determine that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to
subsection 2.09(a) for any requested Interest Period with respect to a proposed
Offshore Rate Loan does not adequately and fairly reflect the cost to such
Banks of funding such Loan, the Agent will promptly so notify the Company and
each Bank. Thereafter, the obligation of the Banks to make or maintain
Offshore Rate Loans, as the case may be, hereunder shall be suspended until the
Agent upon the instruction of the Required Banks revokes such notice in
writing. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans.
4.06 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank under this Article IV and such certificate shall be prima facie
evidence of the amount payable to the Bank under this Article IV.
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<PAGE> 51
4.07 Substitution of Banks. Upon the receipt by the Company from any
Bank (an "Affected Bank") of a claim for compensation under Section 4.03, or of
a notice to the Company through the Agent under subsection 4.02(a), the Company
may, if there exists no Default or Event of Default: (i) request the Affected
Bank to use its best efforts to obtain a replacement bank or financial
institution, which (x) is an Eligible Assignee, and (y) is otherwise
satisfactory to the Company (a "Replacement Bank"), to acquire and assume all
or a ratable part of all of such Affected Bank's Loans, L/C Obligations and
Commitment pursuant to the procedures set forth in Section 11.08; (ii) request
one or more of the other Banks to acquire and assume (provided that, after
giving effect to such acquisition and assumption, not less than 51% of the
Commitments would be held by Banks having long-term deposit ratings by S&P of A
or better) all or part of such Affected Bank's Loans, L/C Obligations and
Commitment, which Bank or Banks shall have the right, but not the obligation,
to so acquire and assume such Affected Bank's Loans, L/C Obligations and
Commitment pursuant to the procedures set forth in Section 11.08; or (iii)
designate a Replacement Bank, which shall assume the Loans, L/C Obligations and
Commitment of the Affected Bank pursuant to the procedures set forth in Section
11.08. Any such designation of a Replacement Bank under clause (i) or (iii)
shall be subject to the prior written consent of the Agent (which consent shall
not be unreasonably withheld), and, if the Letter of Credit is then
outstanding, any such designation of a Replacement Bank or acquisition and
assumption by another Bank under this Section 4.07 shall require the consent of
the beneficiary thereof (which consent may be given or withheld in the
beneficiary's sole discretion).
4.08 Survival. The agreements and obligations of the Company in this
Article IV shall survive for one year after the termination of the Commitments,
expiration or cancellation of the Letter of Credit, and payment of all other
Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the condition
that the Agent shall have received on or before the Closing Date all of the
following, in form and substance satisfactory to the Agent and each Bank, and
(except as to the items referenced in subsection 5.01(f) and (h)) in sufficient
copies for each Bank:
(a) Credit Agreement and Notes. This Agreement executed by
each party hereto and, if requested by any Bank, the Note(s) requested by such
Bank executed by the Company;
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<PAGE> 52
(b) Pledge Agreement. The Pledge Agreement executed by
each party thereto;
(c) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions contemplated
hereby, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers of the Company authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to be delivered
by it hereunder;
(d) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation and
the bylaws of the Company as in effect on the Closing Date, certified by
the Secretary or Assistant Secretary of the Company as of the Closing
Date; and
(ii) a good standing and tax good standing certificate
for the Company from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation as of a recent
date, together with a bring-down certificate by facsimile, dated the
Closing Date;
(e) Legal Opinions. An opinion of (i) Kristina Veaco,
counsel to the Company, addressed to the Agent and the Banks, substantially in
the form of Exhibit D-1A, and (ii) Pillsbury Madison & Sutro, counsel to the
Company, addressed to the Agent and the Banks, substantially in the form of
Exhibit D-1B;
(f) Payment of Fees. Evidence of payment by the Company of
fees and expenses arising under or referenced in Section 2.10, to the extent
then due and payable on the Closing Date;
(g) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained in
Article VI are true and correct on and as of such date, as though made
on and as of such date;
(ii) no Default or Event of Default exists or would
result from the Credit Extension; and
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<PAGE> 53
(iii) there has occurred since December 31, 1993, no
event or circumstance that has resulted or could reasonably be expected
to result in a Material Adverse Effect;
(h) Separation Agreement. A copy of the Separation
Agreement and all amendments thereto, certified as of the Closing Date by a
Responsible Officer or by the Secretary or Assistant Secretary of the Company
to be a true, correct and complete copy thereof, a copy of which the Agent will
make available to any Bank upon such Bank's request; and
(i) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. The obligation of each Bank
to make any Loan to be made by it or to continue or convert any Loan under
Section 2.04 and the obligation of each Bank to Issue the Letter of Credit is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date, Conversion/Continuation Date or Issuance Date:
(a) Notice, Application. The Agent shall have received a
Notice of Borrowing or a Notice of Conversion/Continuation, as applicable (or
the Company shall be deemed to have elected automatic conversion or
continuation under subsection 2.04(c) or 2.04(e) or be deemed to have requested
a Borrowing of Base Rate Loans under subsection 3.03(c)), or in the case of any
Issuance of the Letter of Credit, the Agent shall have received an L/C
Application or L/C Amendment Application as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date, Conversion/Continuation
Date or Issuance Date with the same effect as if made on and as of such
Borrowing Date, Conversion/Continuation Date or Issuance Date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct as of such earlier date);
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing, continuation or conversion, or
Issuance; and
(d) No Material Adverse Effect. There shall not have occurred
a Material Adverse Effect.
Each Notice of Borrowing, Notice of Conversion/Continuation, L/C Application
and L/C Amendment Application submitted by the Company hereunder (and each
automatic conversion or continuation
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<PAGE> 54
under subsection 2.04(c) or 2.04(e) and each deemed request for a Borrowing of
Base Rate Loans under subsection 3.03(c)) shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice and as of
each Borrowing Date, Conversion/Continuation Date, or Issuance Date, as
applicable, that the conditions in this Section 5.02 are satisfied.
5.03 Conditions to the Issuance of the Letter of Credit. The
obligation of each Bank to Issue the Letter of Credit is subject to the
condition that each other Bank shall have Issued the Letter of Credit on the
proposed Issuance Date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
6.01 Corporate Existence and Power. The Company and each of its
Material Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and, in the case of the Company, to execute, deliver, and perform
its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law; except,
in each case referred to in clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement, and any other Loan
Document to which the Company is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
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<PAGE> 55
(b) conflict with or result in any breach or contravention
of, or the creation of any Lien under, any document evidencing any contractual
obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject; or
(c) violate any Requirement of Law, except to the extent
that any such violation could not reasonably be expected to have a Material
Adverse Effect.
6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
this Agreement or any other Loan Document.
6.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.05 Litigation. Except as specifically disclosed in Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes pending or, to the
best knowledge of the Company, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Company, or
its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or the Separation Agreement, or any of the transactions
contemplated hereby or thereby; or
(b) as to which there exists a substantial likelihood of an
adverse determination, which determination would reasonably be expected to have
a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.
6.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company or from the grant or
perfection of the Liens of the Agent and the Banks on the Collateral. As of
the Closing Date,
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<PAGE> 56
neither the Company nor any Subsidiary is in default under or with respect to
any contractual obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 9.01(e).
6.07 ERISA Compliance.
(a) Except as specifically disclosed in Schedule 6.07, each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law. Each Plan which is intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the Company,
nothing has occurred which would cause the loss of such qualification.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or other violation of the fiduciary responsibility rule with
respect to any Plan which could reasonably result in a Material Adverse Effect.
(c) Except as specifically disclosed in Schedule 6.07, no
ERISA Event has occurred or is reasonably expected to occur with respect to any
Pension Plan.
(d) Except as specifically disclosed in Schedule 6.07, no
Pension Plan has any Unfunded Pension Liability. The aggregate Unfunded
Pension Liability for all Pension Plans does not, and will not, after giving
effect to the Separation, exceed $50,000,000.
(e) Except as specifically disclosed in Schedule 6.07,
neither the Company nor any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code) (an "ERISA Affiliate") has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan or to any pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which any ERISA Affiliate sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years (other than premiums due and not
delinquent under Section 4007 of ERISA).
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(f) Except as specifically disclosed in Schedule 6.07, the
Company has not transferred and will not, after giving effect to the
Separation, have transferred any Unfunded Pension Liability to any Person or
otherwise engaged in a transaction that could be subject to Section 4069 of
ERISA.
(g) Neither the Company nor any ERISA Affiliate has ever
contributed to any multiemployer plan within the meaning of Section 4001(a)(3)
of ERISA.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are to be used solely for the purposes set forth in and permitted by Section
7.11, Section 8.06 and Section 8.07. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. The Company and each Subsidiary have, and
will have, after giving effect to the Separation, good record title in fee
simple to, or valid leasehold interests in, all real property necessary or used
in the ordinary conduct of their respective businesses, except for such defects
in title as could not, individually or in the aggregate, have a Material
Adverse Effect.
6.10 Taxes. The Company and its Material Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
6.11 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated December 31, 1993, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
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(iii) except as specifically disclosed in Schedule
6.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments and
material Contingent Obligations.
(b) Since December 31, 1993, there has been no Material
Adverse Effect.
6.12 Environmental Matters. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 6.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning
of the Investment Company Act of 1940. The Company is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or any other Federal or state statute
or regulation limiting its ability to incur Indebtedness.
6.14 Copyrights, Patents, Trademarks and Licenses, etc. The Company and
its Material Subsidiaries own or are licensed or otherwise have the right and
will, after giving effect to the Separation, own or be licensed or otherwise
have the right to use all of the patents, trademarks, service marks, trade
names, copyrights, contractual franchises, authorizations and other rights that
are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of, or by, any other Person. To the best
knowledge of the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, or, after giving effect to the Separation,
employed or contemplated to be employed, by the Company or any Subsidiary
infringes or will infringe upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.05, no claim or litigation regarding any
of the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either
case, could reasonably be expected to have a Material Adverse Effect.
6.15 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.15 and has no equity investments in any other
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corporation or entity other than those specifically disclosed in part (b) of
Schedule 6.15. As of the Closing Date, all of the Material Subsidiaries of the
Company are those listed in part (c) of Schedule 6.15.
6.16 Insurance. Except as specifically disclosed in Schedule 6.16, the
properties of the Company and its Material Subsidiaries are insured and, after
giving effect to the Separation, will be insured, with financially sound and
reputable insurance companies not Affiliates of the Company, in such amounts,
with such deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar properties in
localities where the Company or such Material Subsidiary operates.
6.17 Solvency. The Company is Solvent.
6.18 Collateral Documents.
(a) The provisions of each of the Collateral Documents are
effective to create in favor of the Agent for its benefit and the benefit of
the Banks, a legal, valid and enforceable first priority security interest in
all right, title and interest of the Company in the collateral described
therein; and financing statements have been filed in the offices in all of the
jurisdictions listed in the schedule to the Pledge Agreement.
(b) All representations and warranties of the Company
contained in the Collateral Documents are true and correct.
6.19 Separation Agreement. The Separation Agreement is in full force
and effect and constitutes the legal, valid and binding obligations of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability. All approvals, consents, exemptions, authorizations, or
other actions by, or notices to, or filings with, any Governmental Authority
necessary or required to be obtained or performed prior to the Closing Date in
connection with the Separation have been obtained or performed.
6.20 Full Disclosure. None of the representations or warranties made
by the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Company or any Subsidiary in connection with the Loan Documents (including the
offering and disclosure materials delivered by or on behalf of the Company to
the Banks prior to the Closing Date), contains any untrue statement of a
material
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fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or the Letter of Credit
shall remain outstanding, unless the Required Banks waive compliance in
writing:
7.01 Financial Statements. The Company shall deliver to the Agent, in
form and detail satisfactory to the Agent and the Required Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days after
the end of each fiscal year (commencing with the fiscal year ended December 31,
1993), a copy of the audited consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures as of
the end of and for the previous fiscal year, and accompanied by the
unqualified opinion of Coopers & Lybrand or another nationally-recognized
independent public accounting firm ("Independent Auditor") which opinion shall
state that such consolidated financial statements present fairly the financial
position and results of operations as of the end of and for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited because of a restricted
or limited examination by the Independent Auditor of any material portion of
the Company's or any Subsidiary's records or for any other reason; and
(b) as soon as available, but not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ending March 31, 1994), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments and the absence of footnotes), the
financial position and the results of operations of the Company and the
Subsidiaries as of the end of and for such period;
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7.02 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), a schedule listing, all as of the
end of the period being reported on in such financial statements, (i) the
Subsidiaries of the Company, and (ii) the Material Subsidiaries of the Company.
(c) concurrently with the delivery of the financial statements
referred to in subsection 7.01(a), financial projections for the next fiscal
year;
(d) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and, within 15 days of
filing with the SEC, copies of all financial statements and regular, periodical
or special reports (including Forms 10K, 10Q and 8K) that the Company or any
Material Subsidiary may make to, or file with, the SEC; and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Agent, at the request of any Bank, may from time to time reasonably
request.
7.03 Notices. The Company shall promptly notify the Agent and each
Bank:
(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that the
Company anticipates will become a Default or Event of Default;
(b) of any matter that has resulted or that the Company
anticipates will result in a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a contractual obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company or any
Subsidiary; including pursuant to any applicable Environmental Laws;
(c) of any of the following events affecting the Company,
together with a copy of any notice with respect to such event that may be
required to be filed with a Governmental Authority and any notice delivered by
a Governmental Authority to the Company with respect to such event:
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(i) an ERISA Event;
(ii) if any of the representations and warranties in
Section 6.07 ceases to be true and correct;
(iii) the adoption of any new Pension Plan or other Plan
subject to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan
or other Plan subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded Pension
Liability; or
(v) the commencement of contributions to any Pension
Plan or other Plan subject to Section 412 of the Code;
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its Subsidiaries; and
(e) a Change of Control.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or any other Loan Document that have been (or
that the Company anticipates will be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, the
non-preservation of which could reasonably be expected to have a Material
Adverse Effect, except in connection with transactions permitted by Section
8.02 and sales of assets permitted by Section 8.01;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
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(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
7.05 Maintenance of Property. The Company shall, and shall cause each
Material Subsidiary to, maintain and preserve all its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted.
7.06 Insurance. The Company shall maintain, and shall cause each
Material Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.
7.07 Payment of Obligations. The Company shall, and shall cause each
Material Subsidiary to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become
a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
7.08 Compliance with Laws. The Company shall comply, and shall cause
each Material Subsidiary to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business (including the Federal Fair Labor Standards Act), except such
as may be contested in good faith or as to which a bona fide dispute may exist.
7.09 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary and shall
permit employees or agents of the Agent and any Bank, at any reasonable time,
to inspect its and such
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Subsidiary's properties and to examine and audit its and such Subsidiary's
books, accounts, and records and make copies and memoranda thereof, at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Company; provided, however, when
an Event of Default exists the Agent or any Bank may do any of the foregoing at
the expense of the Company at any time during normal business hours and without
advance notice.
7.10 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except where the failure to do so could
not be reasonably expected to have a Material Adverse Effect.
7.11 Use of Proceeds. The Company shall use the proceeds of the Loans
for working capital and other general corporate purposes not in contravention
of any Requirement of Law or of any Loan Document.
7.12 Notice of Rating Change. The Company shall, no later than five
Business Days after it obtains knowledge of any such change, give notice to the
Agent (by telephone, followed promptly by written notice transmitted by
facsimile with a hard copy sent promptly thereafter) of any change (either
expressly or pursuant to a letter from such Rating Agency stating an "implied"
rating) in rating by any Rating Agency in respect of the Company's senior
unsecured long-term debt, together with the details thereof, and of any
announcement by any Rating Agency that its rating in respect of such senior
unsecured long-term debt is "under review" or that any such debt rating has
been placed on a "CreditWatch List"(R) or "watch list" or that any similar
action has been taken by such Rating Agency.
7.13 Further Assurances. Promptly upon request by the Agent or the
Required Banks, the Company shall do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register, any and all such further
acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and
other instruments the Agent or such Banks, as the case may be, may reasonably
require from time to time in order (i) to carry out more effectively the
purposes of this Agreement or any other Loan Document, (ii) to subject to the
Liens created by any of the Collateral Documents any of the properties, rights
or interests covered by any of the Collateral Documents, (iii) to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Agent and Banks the rights granted or now or hereafter intended to be granted
to the Banks under any
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Loan Document or under any other document executed in connection therewith.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or the Letter of Credit
shall remain outstanding, unless the Required Banks waive compliance in
writing:
8.01 Disposition of Assets. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of in one transaction or a series
of related transactions, any property (including accounts and notes receivable,
with or without recourse, and including the stock of any Subsidiary) or enter
into any agreement to do any of the foregoing, where the aggregate value of all
assets subject to such transaction or series of related transactions by the
Company and its Subsidiaries, together, exceeds 25% of (i) the consolidated
assets of the Company and its Subsidiaries or (ii) the consolidated gross
revenues of the Company and its Subsidiaries, except for such consideration and
on such terms as are determined in good faith by the Board of Directors of the
Company or the applicable Subsidiary to be fair and satisfactory; provided,
that, immediately after giving effect to any such transaction or series of
related transactions, no Default or Event of Default shall exist.
8.02 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Material Subsidiary to, merge, consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:
(a) any Material Subsidiary may merge with the Company,
provided that the Company shall be the continuing or surviving corporation, or
with any one or more Subsidiaries, provided that if any transaction shall be
between a Subsidiary and a Material Subsidiary, the continuing or surviving
corporation shall be a Material Subsidiary;
(b) any Material Subsidiary may sell all or substantially
all of its assets (upon voluntary liquidation or otherwise), (i) to the
Company, (ii) to another Material Subsidiary, (iii) to another Subsidiary
which, after giving effect to such transaction, shall be a Material Subsidiary,
or (iv) in a transaction permitted under Section 8.01; and
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(c) the Company may merge with any Person, provided that the
Company shall be the continuing or surviving corporation and, immediately after
giving effect to the merger, no Default or Event of Default shall exist.
8.03 Uninvited Acquisitions. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any Acquisition unless (i) such
Acquisition is undertaken in accordance with all applicable Requirements of
Law; and (ii) the prior, effective written consent or approval to such
Acquisition of the board of directors or equivalent governing body of the
acquiree is obtained.
8.04 Limitation on Indebtedness and Contingent Obligations. The
Company shall not suffer or permit any Subsidiary to create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness or Contingent Obligation, except Indebtedness
and Contingent Obligations existing on the Closing Date and Indebtedness and
Contingent Obligations incurred in the ordinary course of business as presently
conducted or as may be conducted in accordance with standard industry practice.
8.05 Transactions with Affiliates. The Company shall not, and shall
not suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company or such Subsidiary, except (i) upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary, or (ii) where the transaction could not be
reasonably expected to have a Material Adverse Effect.
8.06 Use of Proceeds. Except as the same will not result in a
violation of Regulation G, T, U or X of the FRB or any other applicable
Requirement of Law, the Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds or the Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act.
8.07 Use of Proceeds - Ineligible Securities. The Company shall not,
directly or indirectly, use any portion of the Loan proceeds or the Letter of
Credit (i) knowingly to purchase Ineligible Securities from the Arranger during
any period in which the Arranger makes a market in such Ineligible Securities,
(ii) knowingly to purchase during the underwriting or placement period
Ineligible Securities being underwritten or privately placed by the Arranger,
or (iii) to make payments of principal
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or interest on Ineligible Securities underwritten or privately placed by the
Arranger and issued by or for the benefit of the Company or any Affiliate of
the Company. The Arranger is a registered broker-dealer and permitted to
underwrite and deal in certain Ineligible Securities; and "Ineligible
Securities" means securities which may not be underwritten or dealt in by
member banks of the Federal Reserve System under Section 16 of the Banking Act
of 1933 (12 U.S.C. Section 24, Seventh), as amended.
8.08 Joint Ventures. The Company shall not, and shall not suffer or
permit any Subsidiary to, enter into any Joint Venture, other than in the
ordinary course of business; for purposes of this Section 8.08, the ordinary
course of business shall include entering into any Joint Venture (i) which is
substantially related to the information, cable television, or
telecommunications businesses, or (ii) where the Company's or such Subsidiary's
investment in any such Joint Venture does not exceed $100,000,000.
8.09 Consolidated Net Worth. The Company shall not permit as of the
end of any fiscal quarter its Consolidated Net Worth to be less than
$2,500,000,000.
8.10 Consolidated Leverage Ratio. The Company shall not permit as of
the end of any fiscal quarter its ratio of (i) Net Consolidated Funded Debt to
(ii) Net Consolidated Funded Debt plus Consolidated Net Worth to exceed 0.50 to
1.00.
8.11 Interest Coverage Ratio. The Company shall not permit its ratio of
(i) EBITDA to (ii) Consolidated Net Interest Expense as determined as of the
last day of any fiscal quarter calculated on a four quarter rolling basis to be
less than 3.75 to 1.00.
8.12 Change in Business. The Company shall not, and shall not suffer
or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and its Subsidiaries on the date hereof; provided that the foregoing shall not
be deemed to prohibit engaging in lines of business substantially related to
the information, cable television, or telecommunications businesses.
8.13 Accounting Changes. The Company shall not, and shall not suffer
or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required or permitted by GAAP, or
change the fiscal year of the Company or of any Material Subsidiary.
8.14 Separation Agreement. The Company shall not (i) amend, modify,
supplement, waive or otherwise modify any provision of the Separation
Agreement, or (ii) take any action or fail to take any action thereunder that,
in the case of
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either clause (i) or (ii), has or could reasonably be expected to have a
Material Adverse Effect.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or of any L/C
Obligation, or (ii) within three Business Days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company made or deemed made herein, in any other Loan Document,
or which is contained in any certificate, document or financial or other
statement by the Company or any Responsible Officer, furnished at any time
under this Agreement, or in or under any other Loan Document, is incorrect in
any material respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in any of Section 7.02, 7.03,
7.09 or 7.12 or in Article VIII; or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or any Loan
Document, and such default shall continue unremedied for a period of 30 days
after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which
written notice thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Acceleration. The Company or any Subsidiary
fails (i) to make any payment (other than the final or sole installment of
principal) in respect of any Indebtedness or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts
and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $20,000,000, or any event (including any
notice of default and failure to cure) specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness or
Contingent Obligation shall occur, if, in either case, the effect of such event
has been to cause such Indebtedness or Contingent Obligation actually to become
due prior to its stated maturity or require cash collateralization, or (ii) to
make any payment of the final or sole installment of principal of such
Indebtedness or Contingent Obligation when due; or
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(f) Insolvency; Voluntary Proceedings. The Company or any
Material Subsidiary (i) ceases or fails to be Solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any Material
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
Material Subsidiary's properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Company or any Material Subsidiary
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Company or any Material
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA. (i) An ERISA Event occurs with respect to a
Pension Plan which has resulted or could reasonably be expected to result in
liability of the Company under Title IV of ERISA to the Pension Plan or the
PBGC in an aggregate amount in excess of $25,000,000; or (ii) the commencement
or increase of benefits under, or the adoption of or the amendment of a Pension
Plan by the Company which has resulted or could reasonably be expected to
result in an increase in Unfunded Pension Liability among all Pension Plans in
an aggregate amount in excess of $25,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $25,000,000 or more, and the same
shall remain, after the entry thereof, unsatisfied, unvacated and unstayed
pending appeal for a period which exceeds the period allowed for appeal thereof
under the rules, statutes, or similar authority of the applicable jurisdiction;
or
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(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any (i) Change of
Control, where the prior, effective written consent of the Board of Directors
of the Company is not obtained to such Change of Control; or (ii) Change of
Control, whether or not the prior, effective written consent of the Board of
Directors is obtained, where (A) (x) any Person acquires or two or more Persons
acting in concert acquire beneficial ownership (within the meaning of Rule
13d-3 of the SEC under the Exchange Act), directly or indirectly, of securities
of the Company (or other securities convertible into such securities)
representing more than 50% of the combined voting power of all securities of
the Company entitled to vote in the election of directors, or (y) any Person
acquires or two or more Persons acting in concert acquire by contract or
otherwise, or enter into a contract or arrangement which upon consummation will
result in its or their acquisition of, or control over, securities of the
Company (or other securities convertible into such securities) representing
more than 50% of the combined voting power of all securities of the Company
entitled to vote in the election of directors; and (B) the consent of the
Required Banks to such Change of Control has not been obtained on or before 60
days after the date of such Change of Control; or
(l) Loss of Licenses. The Federal Communications
Commission or any other Governmental Authority revokes or fails to renew any
license, permit or franchise of the Company or any Subsidiary, or the Company
or any Subsidiary for any reason loses any license, permit or franchise, or the
Company or any Subsidiary suffers the imposition of any restraining order,
escrow, suspension or impound of funds in connection with any proceeding
(judicial or administrative) with respect to any material license, permit or
franchise, except where the foregoing could not be reasonably expected to have
a Material Adverse Effect.
9.02 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Required Banks,
(a) declare the commitment of each Bank to make Loans and
to Issue the Letter of Credit to be terminated, whereupon such commitments and
obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available
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for drawing under the Letter of Credit, if outstanding (whether or not any
beneficiary shall have presented, or shall be entitled at such time to present,
the drafts or other documents required to draw under the Letter of Credit) to
be immediately due and payable and to demand that the Company Cash
Collateralize the Obligations to the extent that the Letter of Credit is
outstanding and wholly or partially undrawn, whereupon the Company shall so
Cash Collateralize, and declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.01 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans and to Issue the Letter of Credit shall
automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically
become due and payable without further act of the Agent or any Bank, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company.
9.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except
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those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.03 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document,
or for the value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems
appropriate and, if it so requests, it shall
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first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action (other than any portion of such liability or
expense resulting solely from the Agent's gross negligence or willful
misconduct). The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Banks or, where expressly
required hereunder, all of the Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Bank that has executed this
Agreement shall be deemed to have consented to, approved or accepted, or to be
satisfied with, each document or other matter either sent by the Agent to such
Bank for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Banks in
accordance with Article IX; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable and in the best interest
of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, the value of and title to
any Collateral, and all applicable bank regulatory laws relating to the
transactions contemplated
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hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the Agent
or furnished to the Agent hereunder with sufficient copies for the Banks, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Company or
any Subsidiary which may come into the possession of any of the Agent-Related
Persons either in connection with this Agreement or any other agreement with
the Company or any Subsidiary or otherwise.
10.07 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall severally in accordance with their
respective Commitment Percentages indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and
without limiting the obligation of the Company to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, but
subject to the proviso in the immediately preceding sentence, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the termination of the Commitments,
expiration or cancellation of the Letter of Credit, and payment of all
Obligations hereunder, and the resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial
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advisory, underwriting or other business with the Company and its Subsidiaries
and Affiliates as though BofA were not the Agent hereunder and without notice
to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not the Agent.
10.09 Successor Agent. The Agent may, and at the request of the
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If
the Agent resigns under this Agreement, the Required Banks shall appoint from
among the Banks a successor agent for the Banks. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Banks and the Company, a successor
agent from among the Banks. Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall mean
such successor agent and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article X and Sections 11.04 and 11.05 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Agent hereunder until such time, if any, as the Required Banks appoint a
successor agent as provided for above. Notwithstanding the foregoing, however,
BofA may not be removed as the Agent at the request of the Required Banks
unless BofA shall also simultaneously be replaced as "Paying Agent" under the
Letter of Credit pursuant to documentation in form and substance reasonably
satisfactory to BofA.
10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the
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payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such
Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under
the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank referred to in subsection 10.10(a) claims
exemption from, or reduction of, withholding tax under a United States tax
treaty by providing IRS Form 1001 and such Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to notify the Agent of the percentage
amount in which it is no longer the beneficial owner of Obligations of the
Company to such Bank. To the extent of such percentage amount, the Agent will
treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank referred to in subsection 10.10(a) claiming
exemption from United States withholding tax by filing IRS Form 4224 with the
Agent grants a participation in all or part of the Obligations of the Company
to such Bank, such Bank agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Bank referred to in subsection 10.10(a) is entitled
to a reduction in the applicable withholding tax, the Agent may withhold from
any interest payment to such Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or
other documentation required by subsection (a) of this Section are not
delivered to the Agent, then the Agent may withhold from any interest payment
to such Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
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(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
referred to in subsection 10.10(a) (because the appropriate form was not
delivered, was not properly executed, or because such Bank failed to notify the
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Bank
shall indemnify the Agent fully for all amounts paid, directly or indirectly,
by the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of such Banks under this subsection shall
survive the termination of the Commitments, the expiration or cancellation of
the Letter of Credit, and payment of all Obligations, and the resignation or
replacement of the Agent.
10.11 Collateral Matters.
(a) The Agent is authorized on behalf of all the Banks,
without the necessity of any notice to or further consent from the Banks, from
time to time to take any action with respect to any Collateral or the
Collateral Documents which may be necessary to perfect and maintain perfected
the security interest in and Liens upon the Collateral granted pursuant to the
Collateral Documents.
(b) The Banks irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral (i) at the request of the Company in accordance with
the terms of the Pledge Agreement at any time other than (x) after the
occurrence and during the existence of an Event of Default or (y) as to Cash
Collateral required to be pledged after the occurrence of an event requiring
Cash Collateralization, after the occurrence and during the existence of such
an event; (ii) upon termination of the Commitments, expiration or cancellation
of the Letter of Credit, and payment in full of all Loans and all other
Obligations known to the Agent and payable under this Agreement or any other
Loan Document; (iii) constituting property in which the Company or any
Subsidiary owned no interest at the time the Lien thereon was granted or at any
time thereafter (as to which the Agent may conclusively rely on a certificate
of a Responsible Officer of the Company representing same); or (iv) if
approved, authorized or ratified in writing by the Required Banks or all the
Banks, as the case may be, as provided in subsection 11.01(f). Upon request by
the Agent at any time, the Banks will confirm in writing the Agent's authority
to release particular types or items of Collateral pursuant to this subsection
10.11(b).
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10.12 Co-Agents; Lead Managers. None of the Banks identified on the
facing page or signature pages of this Agreement as a "co-agent" or "lead
manager" shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Banks as such.
Each Bank acknowledges that it has not relied, and will not rely, on any of the
Banks so identified in deciding to enter into this Agreement or in taking or
not taking action hereunder.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by the Company therefrom, shall be effective unless the same
shall be in writing and signed by the Required Banks and the Company and
acknowledged by the Agent, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing
and signed by all the Banks and the Company and acknowledged by the Agent, do
any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated or reduced pursuant to Section 2.05) or
subject any Bank to any additional obligations;
(b) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due to the Banks (or any of them)
hereunder or under any Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (iii) below) any fees or
other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks; or
(f) release all or substantially all of the Collateral
except as otherwise may be provided in the Collateral Documents or in
subsection 10.11(b), or except where the consent of the Required Banks only is
specifically provided for.
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and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Required Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any L/C-Related Document relating to the Letter of Credit Issued
with Agent named as "Paying Agent" therein, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Required Banks or all the Banks, as the case may be, affect the rights or
duties of the Agent under this Agreement or any other Loan Document, and (iii)
the Fee Letters may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto.
11.02 Notices.
(a) All notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on the applicable signature page hereof, and
(ii) shall be followed promptly by delivery of a hard copy original thereof)
and mailed, faxed or delivered, to the address or facsimile number specified
for notices on the applicable signature page hereof; or, as directed to the
Company or the Agent, to such other address as shall be designated by such
party in a written notice to the other parties, and as directed to any other
party, at such other address as shall be designated by such party in a written
notice to the Company and the Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein or in
the Letter of Credit to receive certain notices by telephone or facsimile is
solely for the convenience and at the request of the Company. The Agent and
the Banks shall be entitled to rely on the authority of any Person purporting
to be a Person authorized by the Company or the beneficiary of the Letter of
Credit to give such notice and the Agent and the Banks shall not have any
liability to the Company or any other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans and L/C
Obligations shall not be affected in any way or to any extent by any failure by
the Agent and the Banks to receive written confirmation of any telephonic or
facsimile notice, the receipt by the Agent and the Banks of a confirmation
which is at variance with the terms
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understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice, or by any inaccuracy, error, interruption, delay or other
irregularity in transmission, delivery or teletransmission.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
11.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) and the
Arranger promptly after demand for all reasonable costs and expenses incurred
by BofA (including in its capacity as Agent) and the Arranger in connection
with the development, preparation, delivery, administration and execution of,
and any amendment, supplement, waiver or modification to (in each case, whether
or not consummated), this Agreement, any other Loan Document and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent) and the Arranger
with respect thereto; and
(b) pay or reimburse the Agent and each Bank within five
Business Days after demand for all costs and expenses (including Attorney
Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Obligations, and including in any Insolvency
Proceeding or appellate proceeding).
11.05 Indemnity. Whether or not the transactions contemplated hereby
are consummated, the Company shall indemnify and hold the Agent- Related
Persons, the Arranger, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including reasonable Attorney Costs) of
any kind or nature whatsoever which may at any time (including at any time
following repayment of the Loans, the termination of the Letter of Credit and
the termination, resignation or replacement of the Agent or replacement of any
Bank) be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of
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this Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the Letter of Credit or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Company shall
have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive termination of the Commitments, expiration or cancellation of the
Letter of Credit, and payment of all other Obligations.
11.06 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to pay to the
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Agent.
11.07 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
11.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Agent
and, at all times other than during the existence of an Event of Default, the
Company, and of the beneficiary under the Letter of Credit if the Letter of
Credit is then outstanding (which consent may be given or withheld in the
beneficiary's sole discretion), at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Company or the
Agent shall be required in connection with any assignment and delegation by a
Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an
"Assignee") all, or any
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ratable part of all, of the Loans, the Commitments, the L/C Obligations and the
other rights and obligations of such Bank hereunder, under the Letter of
Credit, and under the other Loan Documents, in a minimum amount of the lesser
of (i) $25,000,000, or (ii) such Bank's Commitment; provided, however, that the
Company and the Agent may continue to deal solely and directly with such Bank
in connection with the interest so assigned to an Assignee until (x) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Company and the Agent by such Bank and the Assignee; (y) such Bank and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance substantially in the form of Exhibit E ("Assignment and Acceptance")
together with any Note or Notes subject to such assignment and (z) the assignor
Bank or Assignee has paid to the Agent a processing fee in the amount of
$3,000; provided, that if the assignor Bank is making such assignment because
it is an Affected Bank, the assignor Bank shall not be liable to pay the
processing fee, and the Agent will look solely to the Assignee for payment of
such fee. The assignor Bank shall retain all indemnity rights (including
rights arising under Article IV, subsection 11.04(b) and Section 11.05)
applicable to it under this Agreement and the other Loan Documents relating to
Credit Extensions extended, acts or omissions made, or other matters arising,
prior to the effective date of such assignment.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) a
fully executed Assignment and Acceptance and payment of the above-referenced
processing fee (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) If the assignor Bank is holding Note(s) or if the Assignee
requests Note(s), within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in
accordance with subsection 11.08(a)), the Company shall execute and deliver to
the Agent new Note(s) evidencing such Assignee's assigned Loans and Commitment
and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Note(s) in the principal amount of the Commitment
retained by the assignor Bank (such Note(s) to be in exchange for, but not in
payment of, the Note(s) held by such Bank). Immediately upon receipt by the
76
<PAGE> 83
Agent of the processing fee required under subsection 11.08(a), (i) this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom, and (ii) the Company shall be deemed to
have requested that the Letter of Credit be amended to the extent, but only to
the extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom, and each Bank shall be deemed
to have consented to same and shall deliver an amendment to the Letter of
Credit effectuating same promptly upon the Agent's request. The Commitment
allocated to each Assignee shall reduce the Commitment of the assigning Bank
pro tanto.
(d) Any Bank may at any time sell to one or more Eligible
Assignees (a "Participant") participating interests in any Loans, the
Commitment of that Bank and the other interests of that Bank (the "originating
Bank") hereunder and under the other Loan Documents; provided, however, that
(i) the originating Bank's obligations under this Agreement shall remain
unchanged, (ii) the originating Bank shall remain solely responsible for the
performance of such obligations, (iii) the Company and the Agent shall continue
to deal solely and directly with the originating Bank in connection with the
originating Bank's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve or concur with any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Banks as described in the first proviso
to Section 11.01. In the case of any such participation, the Participant shall
be entitled to the benefit of Sections 4.01, 4.03 and 11.05 as though it were
also a Bank hereunder, but shall not have any other rights under this
Agreement, or any of the other Loan Documents, and all amounts payable by the
Company hereunder shall be determined as if such Bank had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off (subject to Section 2.14) in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Each Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Company and
provided to it by the Company or any Subsidiary, or by the Agent on the
Company's or such Subsidiary's behalf, under this Agreement or any other Loan
77
<PAGE> 84
Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from
a source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company known to the Bank; provided,
however, that any Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such
authority; (B) pursuant to subpoena or other court process; (C) when required
to do so in accordance with the provisions of any applicable Requirement of
Law; (D) to the extent reasonably required in connection with any litigation or
proceeding to which the Agent, any Bank or their respective Affiliates may be
party; (E) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (F) to such Bank's
independent auditors, counsel and other professional advisors; (G) to any
Affiliate of such Bank, or to any Participant or Assignee, actual or potential,
provided that such Affiliate, Participant or Assignee agrees in writing
furnished to the Company to keep such information confidential to the same
extent required of the Banks hereunder, and (H) as to any Bank, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Company is party or is deemed party with such
Bank.
(f) Notwithstanding any other provision in this Agreement,
any Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under this Agreement and any Note(s) held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
11.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such
Bank shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Company and the Agent after any such set-off and
application
78
<PAGE> 85
made by such Bank; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.
11.10 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
11.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.12 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
11.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary
of, or have any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents.
11.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS,
79
<PAGE> 86
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
11.15 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
11.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
80
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco, California by their proper and
duly authorized officers as of the day and year first above written.
AIRTOUCH COMMUNICATIONS
By: MOHANBIR S. GYANI
--------------------------------
Name: Mohanbir S. Gyani
Title: Vice President-Finance and
Treasurer
Address for notices:
425 Market Street, Room 3015
San Francisco, CA 94105
Attn: David K. Hall, Staff Director
Bank Financing
Facsimile: (415) 658-2219
Tel: (415) 658-2164
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS AGENT
By: KEVIN LEADER
--------------------------------
Name: Kevin Leader
Title: Vice President
ADDRESS FOR NOTICES:
1455 Market Street, 12th floor
San Francisco, CA 94103
Telex No.: GRT 3726050 BA GA SFO
Facsimile Number: (415) 622-4894
Telephone No.: (415) 953-0108
Attention: Kevin Leader
Vice President
Global Agency #5596
ADDRESS FOR PAYMENTS:
1850 Gateway Boulevard
Concord, CA 94520
ABA No. 121-000-358
Account No. 12336-14248
81
<PAGE> 88
Commitment BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS A BANK
$60,000,000
By: STEPHEN J. DEMARTI
------------------------------
Name: Stephen J. DeMarti
Title: Vice President
ADDRESS FOR NOTICES:
Credit Products #3838
555 California Street
41st Floor
San Francisco, CA 94104-1502
Attention: Stephen J. DeMarti
Facsimile Number: (415) 622-4585
Telephone No.: (415) 622-8168
OFFSHORE AND DOMESTIC LENDING OFFICE
1850 Gateway Boulevard
Concord, CA 94520-3281
Attention: Christina Schifferele
Facsimile Number: (415) 675-7531
Telephone No.: (415) 675-7353
LETTER OF CREDIT PAYING OFFICE
Trade Finance
333 South Beaudry Avenue, 19th Floor
Los Angeles CA 90017
Attention: Frantz Bellevue
Facsimile Number: (213) 345-6694 or 6684
Telephone No.: (213) 345-6632
82
<PAGE> 89
Commitment ABN AMRO BANK N.V., AS CO-AGENT AND
AS A BANK
$50,000,000
By: DIANNE D. WAGGONER
----------------------------------
Name: Dianne D. Waggoner
Title: Vice President and Team Leader
By: JAN-KEES MONSTER
----------------------------------
Name: Jan-Kees Monster
Title: Assistant Vice President
ADDRESS FOR NOTICES:
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Attention: Dianne D. Waggoner
Telex No.: 278137ABNSFUR
Facsimile Number: (415) 362-3524
Telephone No.: (415) 984-3706
AND
Project Finance/Communications Group
135 S. LaSalle Street, Suite 560
Chicago, IL 60603
Attention: Jan-Kees Monster
Facsimile Number: (312) 750-6387
Telephone No.: (312) 750-6386
OFFSHORE AND DOMESTIC LENDING OFFICE
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Attention: Gloria Chiang Lee
Telex No.: 278137ABNSFUR
Facsimile Number: (415) 362-3524
Telephone No.: (415) 984-3720
83
<PAGE> 90
LETTER OF CREDIT PAYING OFFICE
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Attention: Kimiko Paul
Telex No.: 278137ABNSFUR
Facsimile Number: (415) 362-3524
Telephone No.: (415) 984-3723
83A
<PAGE> 91
Commitment CITICORP U.S.A., INC., AS CO-AGENT AND
AS A BANK
$50,000,000
By: BARBARA COHEN
--------------------------------
Name: Barbara Cohen
Title: Vice President
ADDRESS FOR NOTICES:
Citicorp North America, Inc.
One Sansome Street
27th Floor
San Francisco, CA 94104
Attention: J. Kevin Nater
Facsimile Number: (415) 433-0307
Telephone No.: (415) 627-6331
OFFSHORE AND DOMESTIC LENDING OFFICE
Citicorp North America, Inc.
One Sansome Street
27th Floor
San Francisco, CA 94104
Attention: Alice M. Chavez
Telex No.: WU 127001
Facsimile Number: (415) 433-0307
Telephone No.: (415) 627-6351
LETTER OF CREDIT PAYING OFFICE
Citicorp North America, Inc.
One Sansome Street
27th Floor
San Francisco, CA 94104
Attention: Alice M. Chavez
Telex No.: WU 127001
Facsimile Number: (415) 433-0307
Telephone No.: (415) 627-6351
84
<PAGE> 92
Commitment THE BANK OF NOVA SCOTIA, AS CO-AGENT
AND AS A BANK
$50,000,000
By: ERIC M. KNIGHT
--------------------------------
Name: Eric M. Knight
Title: Representative
ADDRESS FOR NOTICES:
101 California Street
48th Floor
San Francisco, CA 94111
Attention: Eric M. Knight
Telex No.: 00340602
Facsimile Number: (415) 397-0791
Telephone No.: (415) 986-1100
OFFSHORE AND DOMESTIC LENDING OFFICE
101 California Street
48th Floor
San Francisco, CA 94111
Attention: Norman Campbell
Catherine Tong
Telex No.: 00340602
Facsimile Number: (415) 397-0791
Telephone No.: (415) 986-1100
LETTER OF CREDIT PAYING OFFICE
The Bank of Nova Scotia
101 California Street
48th Floor
San Francisco, CA 94111
Attention: Norman Campbell
Catherine Tong
Telex No.: 00340602
Facsimile Number: (415) 397-0791
Telephone No.: (415) 986-1100
85
<PAGE> 93
Commitment THE TORONTO-DOMINION BANK, AS CO-AGENT
AND AS A BANK
$50,000,000
By: DIANE BAILEY
---------------------------------
Name: Diane Bailey
Title: Mgr Cr Admin
ADDRESS FOR NOTICES:
31 West 52nd Street
New York, NY 10019
Attention: Susan Reed
Facsimile Number: (212) 262-1928
Telephone No.: (212) 468-0714
OFFSHORE AND DOMESTIC LENDING OFFICE
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Attention: Diane Bailey
Facsimile Number: (713) 951-9921
Telephone No.: (713) 653-8250
LETTER OF CREDIT PAYING OFFICE
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Attention: Diane Bailey
Facsimile Number: (713) 951-9921
Telephone No.: (713) 653-8250
86
<PAGE> 94
Commitment DEUTSCHE BANK AG, LOS ANGELES AND/OR
CAYMAN ISLAND BRANCHES, AS LEAD
$30,000,000 MANAGER AND AS A BANK
By: J. SCOTT JESSUP
---------------------------------
Name: J. Scott Jessup
Title: Vice President
By: STEVEN N. WARDEN
---------------------------------
Name: Steven N. Warden
Title: Director
ADDRESS FOR NOTICES:
Deutsche Bank AG, Los Angeles Branch
550 South Hope Street
Los Angeles, CA 90071
Attention: Steven N. Warden/
Scott Jessup
Facsimile Number: (213) 627-9779
Telephone No.: (213) 627-8200
OFFSHORE LENDING OFFICE
Deutsche Bank AG, Cayman Islands
Branch
c/o New York Branch
31 West 52nd Street
New York, NY 10019
Attention: Bina Dabbah/Alain Bolea
Facsimile Number: (212) 474-8256
Telephone No.: (212) 474-8258
DOMESTIC LENDING OFFICE:
Deutsche Bank AG, Los Angeles Branch
550 South Hope Street
Los Angeles, CA 90071
Attention: Steven N. Warden/
Scott Jessup
Facsimile Number: (213) 627-9779
Telephone No.: (213) 627-8200
87
<PAGE> 95
LETTER OF CREDIT PAYING OFFICE
Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, NY 10019
Attention: Volker Fischer
Facsimile Number: (212) 474-7989
Telephone No.: (212) 474-7978
87A
<PAGE> 96
Commitment NATIONSBANK OF TEXAS, N.A., AS LEAD
MANAGER AND AS A BANK
$30,000,000
By: W. HUTCHINSON MCCLENDON, IV
--------------------------------
Name: W. Hutchinson McClendon, IV
Title: Vice President
ADDRESS FOR NOTICES:
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Hutch McClendon
Facsimile Number: (214) 508-0980
Telephone No.: (214) 508-0996
OFFSHORE AND DOMESTIC LENDING OFFICE
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Nita Gerstung
Facsimile Number: (214) 508-0944
Telephone No.: (214) 508-0590
LETTER OF CREDIT PAYING OFFICE
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Nita Gerstung
Facsimile Number: (214) 508-0944
Telephone No.: (214) 508-0590
88
<PAGE> 97
Commitment BANQUE NATIONALE DE PARIS
$17,500,000 By: DEBORAH GOHH/JENNIFER CHO
--------------------------------
Name: Deborah Gohh/Jennifer Cho
Title: Vice President/Vice President
ADDRESS FOR NOTICES:
180 Montgomery Street
4th Floor
San Francisco, CA 94104
Attention: Debbie Gohh
Facsimile Number: (415) 296-8954
Telex No.: RCA 278900 BNPS UR
Telephone No.: (415) 956-0707
OFFSHORE AND DOMESTIC LENDING OFFICE
180 Montgomery Street
4th Floor
San Francisco, CA 94104
Attention: Don Hart
Facsimile Number: (415) 989-9041
Telex No.: RCA 278900 BNPS UR
Telephone No.: (415) 956-2511
LETTER OF CREDIT PAYING OFFICE
San Francisco Agency
180 Montgomery Street, 4th Floor
San Francisco, CA 94104
Attention: Rafik Homsi
Telex No.: RCA 278900 BNPS UR
Facsimile Number: (415) 391-3390
Telephone No.: (415) 956-0707
89
<PAGE> 98
Commitment CREDIT LYONNAIS NEW YORK BRANCH
$17,500,000 By: BRUCE M. YEAGER
--------------------------------
Name: Bruce M. Yeager
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: BRUCE M. YEAGER
--------------------------------
Name: Bruce M. Yeager
Title: Vice President
ADDRESS FOR NOTICES:
1301 Avenue of Americas
New York, New York 10019
Attention: M. Bernadette Collins
Facsimile Number: (212) 261-7890
Telephone No.: (212) 261-7836
OFFSHORE AND DOMESTIC LENDING OFFICE
1301 Avenue of Americas
New York, New York 10019
Attention: Geraldine Bauerle
Facsimile Number: (212) 261-7890
Telephone No.: (212) 261-7837
LETTER OF CREDIT PAYING OFFICE
1301 Avenue of Americas
New York, New York 10019
Attention: Geraldine Bauerle
Facsimile Number: (212) 261-7890
Telephone No.: (212) 261-7837
90
<PAGE> 99
Commitment DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
$17,500,000 By: ROBERT HERBER
--------------------------------
Name: Robert Herber
Title: Vice President
By: KAREN BRINKMAN
--------------------------------
Name: Karen Brinkman
Title: Vice President
ADDRESS FOR NOTICES:
609 Fifth Avenue
New York, New York 10017
Attention: Robert B. Herber
Telex No.: 214478/666755
Facsimile Number: (212) 745-1556
Telephone No.: (212) 745-1581
OFFSHORE AND DOMESTIC LENDING OFFICE
609 Fifth Avenue
New York, New York 10017
Attention: Maria K. Gillette
Telex No.: 214478/666755
Facsimile Number: (212) 745-1556
Telephone No.: (212) 745-1594
LETTER OF CREDIT PAYING OFFICE
609 Fifth Avenue
New York, NY 10017
Attention: Maria K. Gillette
Telex No.: 214478/666755
Facsimile Number: (212) 745-1556
Telephone No.: (212) 745-1594
91
<PAGE> 100
Commitment FIRST INTERSTATE BANK OF CALIFORNIA
$17,500,000 By: ALFRED F. KENRICK
--------------------------------
Name: Alfred F. Kenrick
Title: Vice President
By: RICHARD G. MALONE
--------------------------------
Name: Richard G. Malone
Title: Senior Vice President
ADDRESS FOR NOTICES:
345 California Street
23rd Floor
San Francisco, CA 94104
Attention: Al Kenrick
Facsimile Number: (415) 773-7062
Telephone No.: (415) 773-7049
OFFSHORE AND DOMESTIC LENDING OFFICE
1055 Wilshire Blvd.
10th Floor (MS: B10-6)
Los Angeles, CA 90017
Attention: Claudine Stines
Facsimile Number: (213) 580-6280
Telephone No.: (213) 580-6147
LETTER OF CREDIT PAYING OFFICE
1055 Wilshire Boulevard
Mail Sort, B10-6
Los Angeles, CA 90017
Attention: Renato Bautista
Facsimile Number: (213) 580-6270
Telephone No.: (213) 580-6109
92
<PAGE> 101
Commitment ISTITUTO BANCARIO SAN PAOLO DI TUBINO,
SPA
$17,500,000
By: ROBERTO GORLIER
--------------------------------
Name: Roberto Gorlier
Title: Branch Manager
By: CRAIG S. NASELOW
--------------------------------
Name: Craig S. Naselow
Title: Assistant Vice President
ADDRESS FOR NOTICES:
444 South Flower Street
45th Floor
Los Angeles, CA 90071
Attention: Craig S. Naselow
Facsimile Number: (213) 622-2514
Telephone No.: (213) 489-3100
OFFSHORE AND DOMESTIC LENDING OFFICE
444 South Flower Street
45th Floor
Los Angeles, CA 90071
Attention: Jean Chang
Facsimile Number: (213) 622-2514
Telephone No.: (213) 489-3100
LETTER OF CREDIT PAYING OFFICE
444 South Flower Street
Suite 4550
Los Angeles, CA 90071
Attention: Jean Chang
Telex No.: 4720338 SPAOL
Facsimile Number: (213) 622-2514
Telephone No.: (213) 489-3100
93
<PAGE> 102
Commitment J.P. MORGAN DELAWARE
$17,500,000 By: PHILIP S. DITZENS
--------------------------------
Name: for David J. Morris
Title: Vice President
ADDRESS FOR NOTICES:
902 Market Street
Wilmington, DE 19801
Attention: David J. Morris
Facsimile Number: (302) 654-5336
Telex No.: 177425/MBDEL UT
Telephone No.: (302) 651-3788
OFFSHORE AND DOMESTIC LENDING OFFICE
J.P. Morgan Services
500 Stanton Christiana Road
Newark, DE 19713-2107
Attention: Loan Department
Facsimile Number: (302) 634-1093
Telephone No.: (302) 634-4218
LETTER OF CREDIT PAYING OFFICE
c/o J.P. Morgan Services
500 Stanton Christiana Road
Newark, DE 19713-2107
Attention: Alan J. Kipp
Telex No.: 177615 MGT UT
Facsimile Number: (302) 634-1838
Telephone No.: (302) 634-1825
94
<PAGE> 103
Commitment NATIONAL WESTMINSTER BANK PLC
$17,500,000 By: GARY A. MILLER
--------------------------------
Name: Gary A. Miller
Title: Senior Vice President
ADDRESS FOR NOTICES:
400 South Hope Street
Suite 1000
Los Angeles, CA 90071-2891
Attention: Gary A. Miller
Facsimile Number: (213) 623-6540
Telephone No.: (213) 624-8555
OFFSHORE AND DOMESTIC LENDING OFFICE
175 Water
19th Floor
New York, NY 10038
Attention: Stephen Parker
Facsimile Number: (212) 602-4118
Telex No.: 233222 NWB
Telephone No.: (212) 602-4249
LETTER OF CREDIT PAYING OFFICE
175 Water Street, 19th Floor
New York, NY 10038
Attention: Sattie Chinapen
Facsimile Number: (212) 602-4118
Telephone No.: (212) 602-4165
95
<PAGE> 104
Commitment SWISS BANK CORPORATION
$17,500,000 By: JAMIE DILLON
--------------------------------
Name: Jamie Dillon
Title: Director, Merchant Banking
By: HANS-UELI SURBER
--------------------------------
Name: Hans-Ueli Surber
Title: Executive Director,
Merchant Banking
ADDRESS FOR NOTICES:
101 California Street
Suite 1700
San Francisco, CA 94111-5884
Attention: Jamie Dillon
Facsimile Number: (415) 989-7570
Telex No.: RCA 278 032 SWBSF UR
Telephone No.: (415) 774-3340
OFFSHORE AND DOMESTIC LENDING OFFICE
101 California Street
Suite 1700
San Francisco, CA 94111-5884
Attention: William B. Walzer
Facsimile Number: (415) 956-3882
Telex No.: RCA 278 032 SWBSF UR
Telephone No.: (415) 774-3329
LETTER OF CREDIT PAYING OFFICE
Swiss Bank Tower
10 E. 50th Street
New York, NY 10022
Attention: Ginger Gensch
Facsimile Number: (212) 574-4657
Telephone No.: (212) 574-4652
96
<PAGE> 105
Commitment THE BANK OF NEW YORK
$17,500,000 By: KALPANA RAINA
--------------------------------
Name: Kalpana Raina
Title: Vice President
ADDRESS FOR NOTICES:
One Wall Street
16th Floor
New York, NY 10286
Attention: Wade Layton
Facsimile Number: (212) 635-8595
Telephone No.: (212) 635-8693
OFFSHORE AND DOMESTIC LENDING OFFICE
One Wall Street
16th Floor
New York, NY 10286
Attention: Brian Marshall
Facsimile Number: (212) 635-8679
Telex No.: MCI 62763 BONY UW
Telephone No.: (212) 635-8741
LETTER OF CREDIT PAYING OFFICE
One Wall St. 16N
New York, NY 10286
Attention: Brian Marshall
Telex No.: MCI 62763 BONY U W
Facsimile Number: (212) 635-8679
Telephone No.: (212) 635-8741
101 Barclay Street 18W
New York, NY 10286
Attention: Pamela Gardner
Telex No.: MCI 62763 BONY U W
Facsimile Number: (212) 815-3311
97
<PAGE> 106
Commitment THE DAI-ICHI KANGYO BANK, LTD.
SAN FRANCISCO AGENCY
$17,500,000
By: SEIGO MAKINO
-------------------------------
Name: Seigo Makino
Title: Joint General Manager
ADDRESS FOR NOTICES:
101 California Street
Suite 4000
San Francisco, CA 94111
Attention: Mr. Mark A. Dirsa
Facsimile Number: (415) 788-7868
Telex No.: 4997193 DKBSF
Telephone No.: (415) 393-1813
OFFSHORE AND DOMESTIC LENDING OFFICE
101 California Street
Suite 4000
San Francisco, CA 94111
Attention: Ms. Kazumi Endo
Facsimile Number: (415) 788-7868
Telex No.: 4997193 DKBSF
Telephone No.: (415) 393-1815
LETTER OF CREDIT PAYING OFFICE
101 California Street
Suite 4000
San Francisco, CA 94111
Attention: Fumiko Shimano/Kazumi Endo
Telex No.: 4997193
Facsimile Number: (415) 788-7868
Telephone No.: (415) 393-1817/1815
98
<PAGE> 107
Commitment THE INDUSTRIAL BANK OF JAPAN,
LIMITED SAN FRANCISCO AGENCY
$17,500,000
By: YOH NAKAHARA
-------------------------------
Name: Yoh Nakahara
Title: General Manager
ADDRESS FOR NOTICES:
555 California Street
Suite 1610
San Francisco, CA 94104
Attention: Cliff White
Facsimile Number: (415) 982-1917
Telex No.: 49608738 IBJ SFO
Telephone No.: (415) 693-1823
OFFSHORE AND DOMESTIC LENDING OFFICE
555 California Street
Suite 1610
San Francisco, CA 94104
Attention: Jeanette O'Donnell
Facsimile Number: (415) 982-1917
Telex No.: 49608738 IBJ SFO
Telephone No.: (415) 693-1831
LETTER OF CREDIT PAYING OFFICE
The Industrial Bank of Japan, Limited
San Francisco Agency 555
California Street, Suite 1610
San Francisco, CA 94104
Attention: Jeanette O'Donnell
Telex No.: 49608738 IBJ SFO
Facsimile Number: (415) 982-1917
Telephone No.: (415) 693-1831
99
<PAGE> 108
Commitment THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
$17,500,000
By: SHUICHI TAKENAKA
-------------------------------
Name: Shuichi Takenaka
Title: Joint General Manager
ADDRESS FOR NOTICES:
444 South Flower Street
Suite 3700
Los Angeles, CA 90071
Attention: Tadashi Inaba
Facsimile Number: (213) 622-6908
Telephone No.: (213) 689-6345
OFFSHORE AND DOMESTIC LENDING OFFICE
444 South Flower Street
Suite 3700
Los Angeles, CA 90071
Attention: Diane Huynh
Facsimile Number: (213) 626-1067
Telephone No.: (213) 689-6245
LETTER OF CREDIT PAYING OFFICE
444 S. Flower Street
Suite 3700
Los Angeles, CA 90071
Attention: Diane Huynh/Ken Nakagawa
Telex No.: 673558
Facsimile Number: (213) 626-1067
Telephone No.: (213) 689-6245/6241
100
<PAGE> 109
Commitment THE SUMITOMO BANK, LIMITED
SAN FRANCISCO BRANCH
$17,500,000
By: HERMAN WHITE, JR.
--------------------------------
Name: Herman White, Jr.
Title: Vice President
By: KAZUAKI KAWAKATSU
--------------------------------
Name: Kazuaki Kawakatsu
Title: General Manager
ADDRESS FOR NOTICES:
555 California Street
Suite 3350
San Francisco, CA 94104
Attention: Herman White
Facsimile Number: (415) 397-1475
Telex No.: 496-10340 SUMIT SF
Telephone No.: (415) 616-3009
OFFSHORE AND DOMESTIC LENDING OFFICE
555 California Street
Suite 3350
San Francisco, CA 94104
Attention: Hiroko Kraus
Facsimile Number: (415) 397-1475
Telex No.: 496-10340 SUMIT SF
Telephone No.: (415) 616-3000
LETTER OF CREDIT PAYING OFFICE
555 California Street, Suite 3350
San Francisco, CA 94104
Attention: Herman White, Jr./
Hiroko Kraus
Telex No.: 496-10340
Facsimile Number: (415) 397-1475
Telephone No.: (415) 616-3000
101
<PAGE> 110
Commitment UNION BANK
$17,500,000 By: NAN BRUSATI-DIAS
--------------------------------
Name: Nan Brusati-Dias
Title: Vice President & District
Manager
ADDRESS FOR NOTICES:
350 California Street
National Banking 11th Floor
San Francisco, CA 94104
Attention: Nan Brusati-Dias
Facsimile Number: (415) 705-7046
Telex No.: 188316 UNION SF UT
Telephone No.: (415) 705-7050
OFFSHORE AND DOMESTIC LENDING OFFICE
350 California Street
National Banking 11th Floor
San Francisco, CA 94104
Attention: Robin Kirsch
Facsimile Number: (415) 705-7046
Telex No.: 188316 UNION SF UT
Telephone No.: (415) 705-7057
LETTER OF CREDIT PAYING OFFICE
350 California Street, 11th Floor
San Francisco, CA 94104
Attention: Robin Kirsch
Telex No.: 188316 UNION SF UT
Facsimile Number: (415) 705-7046
Telephone No.: (415) 705-7057
102
<PAGE> 111
Commitment UNION BANK OF SWITZERLAND
$17,500,000 By: THOMAS G. JACKSON
--------------------------------
Name: Thomas G. Jackson
Title: First Vice President
By: ANDRES T. BROWN
--------------------------------
Name: Andres T. Brown
Title: Vice President
ADDRESS FOR NOTICES:
Los Angeles Branch
444 South Flower Street
45th Floor
Los Angeles, CA 90071
Attention: Andres T. Brown
Facsimile Number: (213) 489-0637
Telephone No.: (213) 489-0660
OFFSHORE AND DOMESTIC LENDING OFFICE
Los Angeles Branch
444 South Flower Street
45th Floor
Los Angeles, CA 90071
Attention: Susan U. Beltran
Maggie Elower
Facsimile Number: (213) 489-0637
Telex No.: 6831878 UBS LSA
Telephone No.: (213) 489-0675/0676
LETTER OF CREDIT PAYING OFFICE
299 Park Avenue
New York, NY 10171-0026
Attention: Peter Grecol
Mary Turnbach
Facsimile Number: (212) 230-4814
Telephone No.: (212) 821-3220/3217
103
<PAGE> 112
Commitment WELLS FARGO BANK, N.A.
$17,500,000 By: RALPH TURNER
--------------------------------
Name: Ralph Turner
Title: Vice President
ADDRESS FOR NOTICES:
420 Montgomery, 9th Floor
San Francisco, CA 94104
Attention: Ralph Turner
Facsimile Number: (415) 421-1352
Telephone No.: (415) 396-4932
OFFSHORE AND DOMESTIC LENDING OFFICE
420 Montgomery, 9th Floor
San Francisco, CA 94104
Attention: Judi Steele
Facsimile Number: (415) 989-4319
Telephone No.: (415) 396-3807
LETTER OF CREDIT PAYING OFFICE
Trade Services Division
525 Market Street, 25th Floor
San Francisco, CA 94105
Attention: Bob Rubio
Telex No.: N/A
Facsimile Number: (415) 541-0299
Telephone No.: (415) 396-5391
104
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT
THIS FIRST AMENDMENT (this "First Amendment") dated as of November 1,
1994, to the Credit Agreement dated as of March 25, 1994 (the "Agreement"),
among AirTouch Communications, a California corporation (the "Company"); the
several financial institutions from time to time party to the Agreement
(collectively, the "Banks"); Bank of America National Trust and Savings
Association, as agent for the Banks; and ABN AMRO Bank N.V., Citicorp USA,
Inc., The Bank of Nova Scotia and The Toronto-Dominion Bank, as co-agents. All
terms capitalized but not defined herein shall have the meanings assigned
thereto in the Agreement.
W I T N E S S E T H:
WHEREAS, the Banks have made available to the Company a revolving
credit facility with a letter of credit subfacility upon the terms and
conditions set forth in the Agreement; and
WHEREAS, the Company and the Banks desire to amend certain terms of
the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
1. Definitions. The definition of "Material Adverse Effect"
contained in Section 1.01 of the Agreement shall be amended by deleting the
phrase "or the Company" from clause (a) of such definition.
2. Reincorporation. Section 7.04(a) of the Agreement shall be
amended to add the following language at the end of subparagraph (a):
"provided, however, that the Company and its Material Subsidiaries
shall be permitted to change their respective states or jurisdictions
of incorporation by reincorporating in another state of the United
States or the District of Columbia;".
3. Sale of Assets. Section 8.02(b) of the Agreement shall be
amended to (a) insert the phrase "or the Company" immediately following the
phrase "any Material Subsidiary"; (b) insert the phrase "in the case of any
Material Subsidiary," immediately preceding the phrase "to the Company" in
subsection (i); (c) delete
1
<PAGE> 2
the word "another" and replace it with the word "any" in subsections (ii) and
(iii); and (d) add the following language at the end of subsection (iv)
immediately following the phrase "under Section 8.01;":
"provided, however, that the Company shall not, directly or indirectly,
in one transaction or a series of related transactions, both (x) sell,
convey, transfer, lease or otherwise dispose of all or substantially all
of its assets and (y) distribute all or substantially all of the
proceeds of such transaction or transactions to its shareholders."
4. Uninvited Acquisition. Section 8.03 of the Agreement shall be
amended in its entirety to read as follows:
"8.03 Uninvited Acquisitions. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any Acquisition unless (i) such
Acquisition is undertaken in accordance with all applicable material
Requirements of Law; and (ii) either (x) the prior, effective written
consent or approval to such Acquisition of the board of directors or
equivalent governing body of the acquiree is obtained (unless, in the
case of an acquiree which is not a corporation, such consent or approval
is not required by the organizational documents of the acquiree), or (y)
the value of the consideration paid by the Company or any Subsidiary in
connection with such Acquisition does not exceed $100,000,000 and the
aggregate value of the consideration paid by the Company and its
Subsidiaries in connection with all such Acquisitions in which consent
or approval is not obtained does not exceed $500,000,000 in any one
calendar year; provided, however, that in no event shall any portion of
the Loan proceeds or the Letter of Credit be used to make an Acquisition
described in this subsection (y)."
5. Change of Control. Section 9.01(k) of the Agreement shall be
amended by deleting the words "in concert" in (ii)(A)(x) and (ii)(A)(y) and
replacing them with the phrase "as a `group' within the meaning of section
13(d) of the Exchange Act"; by inserting the phrase "(including the securities
so acquired)" immediately following the phrase "combined voting power of all
securities" in subsection (ii)(A)(x) of such section; and by inserting the
phrase "(including the securities so acquired or controlled)" immediately
following the phrase "combined voting power of all securities" in subsection
(ii)(A)(y).
6. Representations and Warranties. The Company hereby represents
and warrants to the Agent and the Banks as follows:
2
<PAGE> 3
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
First Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by any Person (including any Governmental
Authority) in order to be effective and enforceable. The Agreement as amended
by this First Amendment constitutes the legal, valid and binding obligations of
the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Agreement and in the other Loan Documents are true and correct.
(d) The Company is entering into this First Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Agent, the Banks or any other Person.
7. Effective Date. This First Amendment will become effective as
of November 1, 1994 (the "Effective Date"), provided that the Agent has
received from the Company and each of the Banks a duly executed original of
this First Amendment.
8. Continued Effectiveness. Except as expressly modified by this
First Amendment, the provisions of the Agreement shall remain in full force and
effect and are hereby in all respects ratified and confirmed. All references
in the Agreement and the other Loan Documents to the Agreement shall henceforth
refer to the Agreement as amended by this First Amendment. This First
Amendment shall be deemed incorporated into, and a part of, the Agreement.
9. Counterparts. This First Amendment may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all such separate counterparts shall together constitute but one and the same
instrument.
10. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
11. Binding Agreement. This First Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and
3
<PAGE> 4
assigns. No third party beneficiaries are intended in connection with this
First Amendment.
12. Exclusive Agreement. This First Amendment, together with the
Agreement and the other Loan Documents, contains the entire and exclusive
agreement of the parties hereto and thereto with reference to the matters
discussed herein and therein. This First Amendment supersedes all prior drafts
and communications with respect thereto. This First Amendment may not be
amended except in accordance with the provisions of Section 11.01 of the
Agreement.
13. Invalid Provisions. If any term or provision of this First
Amendment shall be deemed prohibited by or invalid under any applicable law,
such provision shall be invalidated without affecting the remaining provisions
of this First Amendment or the Agreement, respectively.
14. Fees and Expenses. The Company covenants to pay to or
reimburse the Agent, upon demand, for all costs and expenses (including
allocated costs of in-house counsel), incurred in connection with the
development, preparation, negotiation, execution and delivery of this First
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered in San Francisco, California by
their proper and duly authorized officers as of the day and year first above
written.
AIRTOUCH COMMUNICATIONS
By: /S/ M.S. Gyani
-------------------------------
Name: M. S. Gyani
-------------------------------
Title: Vice President, Finance and
Treasurer
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /S/ Kevin Leader
-------------------------------
Name: Kevin Leader
-----------------------------
Title: Vice President
-----------------------------
4
<PAGE> 5
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
By: /S/ Michael J. Dasher
-----------------------------
Name: Michael J. Dasher
-----------------------------
Title: Vice President
-----------------------------
ABN AMRO BANK N.V.,
as Co-Agent and as a Bank
By: /S/ Diane D. Waggoner
-----------------------------
Name: Diane D. Waggoner
-----------------------------
Title: Vice President
-----------------------------
By: /S/ Peter Melloni
-----------------------------
Name: Peter Melloni
-----------------------------
Title: Vice President
-----------------------------
CITICORP U.S.A., INC.,
as Co-Agent and as a Bank
By: /S/ Barbara A. Cohen
-----------------------------
Name: Barbara A. Cohen
-----------------------------
Title: Vice President
-----------------------------
THE BANK OF NOVA SCOTIA,
as Co-Agent and as a Bank
By: /S/ Eric M. Knight
-----------------------------
Name: Eric M. Knight
-----------------------------
Title: Relationship Manager
-----------------------------
5
<PAGE> 6
THE TORONTO-DOMINION BANK,
as Co-Agent and as a Bank
By: /S/ Warren Finlay
----------------------------------
Name: Warren Finlay
--------------------------------
Title: Manager Credit
------------------------------
DEUTSCHE BANK AG, LOS ANGELES
and/or CAYMAN ISLANDS BRANCHES,
as lead manager and as a Bank
By: /S/ Steven N. Warden
----------------------------------
Name: Steven N. Warden
--------------------------------
Title: Director
------------------------------
By: /S/ J. Scott Jessup
----------------------------------
Name: J. Scott Jessup
--------------------------------
Title: Vice President
------------------------------
NATIONSBANK OF TEXAS, N.A.,
as lead manager and as a Bank
By: /S/ Jennifer F. Zydney
----------------------------------
Name: Jennifer F. Zydney
--------------------------------
Title: Assistant Vice President
------------------------------
BANQUE NATIONALE DE PARIS
By: /S/ Rafael Lumanlan
----------------------------------
/S/ William J. La Herran
----------------------------------
Name: Rafael Lumanlan
--------------------------------
William J. La Herran
--------------------------------
Title: Vice President
------------------------------
Assistant Vice President
------------------------------
6
<PAGE> 7
CREDIT LYONNAIS NEW YORK BRANCH
By: /S/ M. Bernadette Collins
----------------------------------
Name: M. Bernadette Collins
--------------------------------
Title: Vice President
-------------------------------
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /S/ M. Bernadette Collins
----------------------------------
Name: M. Bernadette Collins
--------------------------------
Title: Vice President
-------------------------------
DG BANK Deutsche Genossenschaftsbank
By: /S/ Karen A. Binkman
----------------------------------
/S/ Robert B. Herber
----------------------------------
Name: Karen A. Binkman
----------------------------------
Robert B. Herber
--------------------------------
Title: Vice President
-------------------------------
Vice President
-------------------------------
FIRST INTERSTATE BANK OF CALIFORNIA
By: /S/ John P. Biestman
----------------------------------
Name: John P. Biestman
--------------------------------
Title: Vice President
-------------------------------
By: /S/ Marianne Mitosinka
----------------------------------
Name: Marianne Mitosinka
--------------------------------
Title: Vice President
-------------------------------
7
<PAGE> 8
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, SpA
By: /S/ Donald W. Brown
----------------------------------
Name: Donald W. Brown
--------------------------------
Title: Branch Manager
-------------------------------
By: /S/ Glen Binder
----------------------------------
Name: Glen Binder
--------------------------------
Title: Vice President
-------------------------------
J.P. MORGAN DELAWARE
By: /S/ Jacqlyn Kennedy Sisson
----------------------------------
Name: Jacqlyn Kennedy Sisson
--------------------------------
Title: Associate
-------------------------------
NATIONAL WESTMINSTER BANK PLC
By: /S/ Gary Miller
----------------------------------
Name: G. Miller
--------------------------------
Title: Senior Vice President
-------------------------------
SWISS BANK CORPORATION
By: /S/ Marcia B. Burkey
----------------------------------
Name: Marcia B. Burkey
--------------------------------
Title: Merchant Banking
-------------------------------
By: /S/ Jamie Dillon
----------------------------------
Name: Jamie Dillon
--------------------------------
Title: Merchant Banking
-------------------------------
8
<PAGE> 9
THE BANK OF NEW YORK
By: /S/ Wade Layton
-------------------------------------
Name: Wade Layton
-------------------------------------
Title: Assistant Vice President
-------------------------------------
THE DAI-ICHI KANGYO BANK, LTD.
SAN FRANCISCO AGENCY
By: /S/ Seigo Makino
-------------------------------------
Name: Seigo Makino
-------------------------------------
Title: Joint General Manager
-------------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
SAN FRANCISCO AGENCY
By: /S/ Makoto Masuda
-------------------------------------
Name: Makoto Masuda
-------------------------------------
Title: Deputy General Manager
-------------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By: /S/ Y. Kamisawa
-------------------------------------
Name: Yutaka. Kamisawa
-------------------------------------
Title: Deputy General Manager
-------------------------------------
9
<PAGE> 10
THE SUMITOMO BANK, LIMITED
San Francisco Branch
By: /S/ Kazuaki Kawakatsu
--------------------------------------------
Name: Kazuaki Kawakatsu
-------------------------------------------
Title: General Manager
-------------------------------------------
By: /S/ Herman White Jr.
-------------------------------------------
Name: Herman White Jr.
-------------------------------------------
Title: Vice President
-------------------------------------------
UNION BANK
By: /S/ N. Brusati Dias
-------------------------------------------
Name: N. Brusati Dias
-------------------------------------------
Title: Vice President and District Manager
-------------------------------------------
UNION BANK OF SWITZERLAND
By: /S/ Andres T. Brown
-------------------------------------------
Name: Andres T. Brown
-------------------------------------------
Title: First Vice President
-------------------------------------------
By: /S/ Thomas G. Jackson
-------------------------------------------
Name: Thomas G. Jackson
-------------------------------------------
Title: First Vice President
-------------------------------------------
WELLS FARGO BANK, N.A.
By: /S/ Ralph J. Turner
-------------------------------------------
Name: Ralph J. Turner
-------------------------------------------
Title: Vice President
-------------------------------------------
10
<PAGE> 1
EXHIBIT 10.10
AGREEMENT ON RETIREMENT AND RELOCATION BENEFITS
THIS AGREEMENT, entered into on March 31, 1994, between LYDELL L.
CHRISTENSEN (the "Officer") and AIRTOUCH COMMUNICATIONS, a California
corporation (the "Company"),
W I T N E S S E T H:
Whereas the Officer serves as the Company's Executive Vice President
and Chief Financial Officer; and
Whereas the Officer has agreed to defer his retirement in order to
provide continuity in the Company's senior management team following the
distribution of the Company's common stock to the shareholders of Pacific
Telesis Group; and
Whereas the Company has agreed to provide certain enhanced retirement
and relocation benefits to the Officer:
N o w, T h e r e f o r e, the parties agree as follows:
1. Effective Date.
This Agreement shall be effective as of April 1, 1994.
2. Enhanced Executive Pension.
If the Officer's employment with the Company terminates before October
1, 1997, the Officer's Executive Pension under the AirTouch Communications
Supplemental Executive Pension Plan, as amended from time to time (the "SEPP"),
payable as an individual-life annuity, shall be equal to the greater of:
(a) The amount calculated pursuant to the provisions of
the SEPP; or
(b) The floor amount calculated pursuant to Section 3 below.
-1-
<PAGE> 2
If the Officer's employment with the Company terminates on or after October 1,
1997, the SEPP shall apply without regard to this Agreement.
3. Floor Amount of Executive Pension.
(a) Officer Retires Before October 1, 1995. If the Officer's
employment with the Company terminates before October 1, 1995, the floor amount
of the Officer's Executive Pension under the SEPP shall be equal to 25% of his
Final Average Pay reduced by .833 percentage points for each month by which the
termination precedes October 1, 1995.
(b) Officer Retires on or After October 1, 1995. If the Officer's
employment with the Company terminates on or after October 1, 1995, but before
October 1, 1997, then the floor amount of the Officer's Executive Pension under
the SEPP shall be equal to 45% of his Final Average Pay reduced by .375
percentage points for each month by which the termination precedes October 1,
1997.
(c) Reduction for Other Benefits. The floor amount determined under
Subsections (a) or (b) above shall be reduced by the sum of the Officer's
Qualified Pension Benefit (as defined in the SEPP) and the Officer's Account
Benefit (as defined in the SEPP).
(d) Final Average Pay. The term "Final Average Pay" shall mean the
sum of Final Average Base Pay (as defined in the SEPP) and Final Average STIP
Award (as defined in the SEPP).
4. Payment of Executive Pension.
Regardless of whether the Officer's Executive Pension is enhanced under
this Agreement, it shall be subject to all provisions of the SEPP, including
(without limitation) the provisions relating to the form and time of payment
and the reduction of benefit amounts to reflect forms of payment other than an
individual-life annuity.
5. Home Sale.
If the Officer elects to sell his principal residence in San Francisco
before the termination of his employment with the Company or within 12 months
after such termination, then the
-2-
<PAGE> 3
Home Sale section of the Company's Employee Relocation Plan shall apply to the
sale of such residence. A copy of such Plan is attached to this Agreement and
incorporated herein by this reference.
6. Moving Expenses.
If the Officer elects to move to another location in the United States
within 12 months after the termination of his employment with the Company, then
the Company will provide the following relocation benefits to the Officer:
(a) Household Moving Expenses. The Company shall pay for moving
services for the Officer's household and personal property from his San
Francisco residence to his new residence in accordance with its Employee
Relocation Plan.
(b) Travel Expenses. The Company shall pay the transportation and
living expenses of the Officer and his immediate family in connection with
travel from his San Francisco residence to his new residence in accordance with
its Employee Relocation Plan.
7. Construction and Enforcement.
(a) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
(b) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (except their choice-of-law provisions).
(c) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Punitive damages shall
not be awarded.
8. Miscellaneous Provisions.
(a) Plan Amendments. This Agreement shall not limit the Company's
right to modify its benefit and relocation programs at
-3-
<PAGE> 4
any time; provided that no modification shall reduce the benefits described in
this Agreement.
(b) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement may be
amended only in a written document signed by the Officer and an authorized
officer of the Company.
(c) Benefits Unfunded and Unsecured. Neither the Officer nor any other
person shall, by reason of this Agreement, acquire any right in or title to any
assets, funds or property of the Company. The Officer shall have no rights
under this Agreement other than those of a general creditor of the Company.
(d) No Assignment. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Subsection (d) shall be void.
(e) Withholding Taxes. All payments made pursuant to this Agreement
shall be subject to withholding of applicable taxes.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
AIRTOUCH COMMUNICATIONS
By: /s/ Sam Ginn
----------------------------
/s/ Lydell L. Christensen Title: Chairman & Chief
-------------------------- Executive Officer
Lydell L. Christensen -------------------------
Date: March 31, 1994 Date: March 31, 1994
------------------------ --------------------------
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EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of the 31st day of March, 1994,
by and between ______________________________ (the "Employee") and AIRTOUCH
COMMUNICATIONS, a California corporation (the "Corporation"),
W I T N E S S E T H:
WHEREAS, the Corporation wishes to employ the Employee as its
__________________ or in another position with comparable compensation, either
with the Corporation or with another entity in which the Corporation has a
direct or indirect ownership interest of not less than fifty percent (50%) (an
"Affiliate"); and
WHEREAS, the Employee is willing to accept such employment
upon the terms and conditions set forth below:
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and in consideration of the employment of the Employee by the
Corporation or an Affiliate, the parties agree as follows:
1. Term of Employment.
(a) Basic Rule. The Corporation agrees to continue the Employee's
employment, and the Employee agrees to remain in employment
with the Corporation, from the effective date of this
Agreement until the date when the Employee's employment
terminates pursuant to the provisions of this Agreement.
(b) Early Termination. Subject to Sections 6 and 7, the
Corporation may terminate the Employee's employment by giving
the Employee thirty (30) days' advance notice in writing. The
Employee may terminate the Employee's employment by giving the
Corporation thirty (30) days' advance notice in writing. The
Employee's employment shall terminate automatically in the
event of the Employee's death. Any waiver of notice shall be
valid only if it is made in writing and expressly refers to
the applicable notice requirement of this Section 1.
(c) Cause. Subject to Section 6, the Corporation may terminate
the Employee's employment for Cause by giving the Employee
thirty (30) days' advance notice in writing. For all purposes
under this Agreement, "Cause" shall mean (i) a willful failure
by the Employee to
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substantially perform the Employee's duties hereunder, other
than a failure resulting from the Employee's complete or
partial incapacity due to physical or mental illness or
impairment, (ii) a willful act by the Employee that
constitutes gross misconduct and that is injurious to the
Corporation, (iii) a willful breach by the Employee of a
material provision of this Agreement, or (iv) a material and
willful violation of a federal or state law or regulation
applicable to the business of the Corporation. No act, or
failure to act, by the Employee shall be considered "willful"
unless committed without good faith and without a reasonable
belief that the act or omission was in the Corporation's best
interest.
(d) Disability. Subject to Section 6, the Corporation may
terminate the Employee's employment for Disability by giving
the Employee six (6) months' advance notice in writing. For
all purposes under this Agreement, "Disability" shall mean
that the Employee, at the time notice is given, has been
unable to perform the Employee's duties under this Agreement
for a period of not less than six (6) consecutive months as
the result of the Employee's incapacity due to physical or
mental illness. In the event that the Employee resumes the
performance of substantially all of the Employee's duties
hereunder before the termination of the Employee's employment
under this Subsection (d) becomes effective, the notice of
termination shall automatically be deemed to have been
revoked.
(e) Rights Upon Termination. Except as expressly provided in
Sections 6 and 7, upon the termination of the Employee's
employment pursuant to this Section 1, the Employee shall only
be entitled to the compensation, benefits and reimbursements
described in Sections 3, 4 and 5 for the period preceding the
effective date of the termination. The payments under this
Agreement shall fully discharge all responsibilities of the
Corporation to the Employee upon the termination of the
Employee's employment.
(f) Termination of Agreement. Except as otherwise provided in
this Subsection (f), this Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. In
addition, either the Corporation or the Employee may terminate
this Agreement for any reason, and without affecting the
Employee's status as an employee, by giving the other party
one (1) year's advance notice in writing. A termination of
this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall
not affect the payment or provision of compensation or
benefits under this Agreement on account of a termination of
employment occurring prior to the termination of this
Agreement.
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2. Duties and Scope of Employment.
(a) Position. The Corporation agrees to employ the Employee for
the term of employment under this Agreement in the position of
__________________ (as such position was defined in terms of
responsibilities and compensation as of the effective date of
this Agreement) or in another position offering comparable
compensation, either with the Corporation or with an
Affiliate.
(b) Obligations. During the term of employment under this
Agreement, the Employee shall devote the Employee's full
business efforts and time to the Corporation and its
Affiliates. The foregoing, however, shall not preclude the
Employee from engaging in appropriate civic, charitable or
religious activities or from devoting a reasonable amount of
time to private investments or from serving on the boards of
directors of other entities, as long as such activities and
service do not interfere or conflict with the Employee's
responsibilities to the Corporation.
3. Base Compensation.
During the term of employment under this Agreement, the Corporation
agrees to pay the Employee as compensation for services a base salary
at the annual rate of $___,___, or at such higher rate as the
Corporation's Compensation and Personnel Committee of the Board of
Directors may determine from time to time. Such salary shall be
payable in accordance with the Corporation's standard payroll
procedures. Once the Corporation's Compensation and Personnel
Committee of the Board of Directors has increased such salary, it
thereafter shall not be reduced; provided that, if a Change in Control
has not occurred, such salary (including any increases) may be reduced
by the Corporation if (i) the Employee commits an act or omission that
meets the definition of Cause, as defined in Section 1(c), or (ii) the
Employee and all other officers of the Corporation and its Affiliates
who are parties to written employment agreements containing
substantially the same provisions as this Agreement have their
salaries (including any increases) reduced by the same percentage
amount for the same time period. The annual compensation specified in
this Section 3, together with any increases in such compensation that
the Compensation and Personnel Committee of the Board of Directors of
the Corporation may grant from time to time, and together with any
reductions made in accordance with this Section 3, is referred to in
this Agreement as "Base Compensation."
4. Employee Benefits.
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During the term of employment under this Agreement, the Employee shall
be eligible to participate in the employee benefit plans and executive
compensation programs maintained by the Corporation for management
employees, including (without limitation) pension plans, savings or
profit-sharing plans, deferred compensation plans, supplemental
retirement or excess-benefit plans, stock option, incentive or other
bonus plans, life, disability, health, accident and other insurance
programs, paid vacations, and similar plans or programs, subject in
each case to the generally applicable terms and conditions of the plan
or program in question and to the determination of any person or
committee administering such plan or program.
5. Business Expenses and Travel.
During the term of employment under this Agreement, the Employee shall
be authorized to incur necessary and reasonable travel, entertainment
and other business expenses in connection with the Employee's duties
hereunder. The Corporation shall reimburse the Employee for such
expenses upon presentation of an itemized account and appropriate
supporting documentation, all in accordance with the Corporation's
generally applicable policies.
6. Change in Control.
(a) Definition. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following
events:
(i) Both:
(A) Any "person" (as defined below) is or
becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly,
of securities of the Corporation representing
at least twenty percent (20%) of the total
voting power represented by the Corporation's
then outstanding voting securities; and
(B) The beneficial ownership by such person of
securities representing such percentage has
not been approved by a majority of the
"continuing directors" (as defined below); or
(ii) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of the
Corporation representing at least fifty percent (50%)
of the total voting power represented by the
Corporation's then outstanding voting securities; or
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(iii) A change in the composition of the Corporation's
Board of Directors occurs, as a result of which fewer
than two-thirds (2/3) of the incumbent directors are
directors (the "continuing directors") who either:
(A) Had been directors of the Corporation on the
"look-back date" (as defined below) (the
"original directors"); or
(B) Were elected, or nominated for election, to
such Board with the affirmative votes of at
least a majority of the aggregate of the
original directors who were still in office
at the time of the election or nomination and
the directors whose election or nomination
was previously so approved; or
(iv) The shareholders of the Corporation approve a merger
or consolidation of the Corporation with any other
corporation, if such merger or consolidation would
result in the voting securities of the Corporation
outstanding immediately prior thereto representing
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity) fifty percent (50%) or less of the total
voting power represented by the voting securities of
the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(v) The shareholders of the Corporation approve (A) a
plan of complete liquidation of the Corporation or
(B) an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
For purposes of Paragraphs (i) and (ii) above, the term
"person" shall have the same meaning as when used in sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, but shall exclude (A) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or of a parent or subsidiary of the Corporation,
(B) a corporation owned directly or indirectly by the
shareholders of the Corporation in substantially the same
proportions as their ownership of the common stock of the
Corporation and (C) Pacific Telesis Group.
For purposes of Paragraph (iii) above, the term "look-back
date" shall mean the later of (A) April 1, 1994, or (B) the
date twenty-four (24) months prior to the date of the event
that may constitute a Change in Control.
Any other provision of this Subsection (a) notwithstanding,
the term "Change in Control" shall not include either of the
following events, if undertaken at the election of the
Corporation:
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(A) A transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(B) A transaction, the result of which is to sell
all or substantially all of the assets of the
Corporation to another corporation (the
"surviving corporation"); provided that the
surviving corporation is owned directly or
indirectly by the shareholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the
Corporation's common stock immediately
preceding such transaction; and provided,
further, that the surviving corporation
expressly assumes this Agreement.
(b) Severance Payment. The Employee shall be entitled to receive a
severance payment from the Corporation (the "Severance Payment")
if a Qualifying Termination, as defined in Section 12(j),
occurs. The Severance Payment shall be made in a lump sum not
less than thirty-one (31) days nor more than one hundred twenty
(120) days following the date of the Qualifying Termination and
shall be in an amount determined under Subsection (c) below.
The Severance Payment shall be in lieu of any further payments
to the Employee under Section 3 and any further accrual of
benefits under Section 4 with respect to periods subsequent to
the date of the Qualifying Termination. The Severance Payment
shall not reduce or offset any benefits to which the Employee
may be entitled under Section 7.
(c) Amount. The Amount of the Severance Payment shall be equal to
the following:
(i) Two (2) times the Employee's Base Compensation in
effect on the date of the Qualifying Termination; plus
(ii) Two hundred percent (200%) of the "standard award,"
within the meaning of the AirTouch Communications
Short-Term Incentive Plan, for the Employee's
position rate as of the date of the Qualifying
Termination (the "Standard Award").
Any other provision of this Agreement or of the AirTouch
Communications Short-Term Incentive Plan notwithstanding, after
the amount described in this Subsection (c) has been paid to the
Employee, the Employee shall have no further interest in such
Incentive Plan.
(d) Life Insurance, Health Plan Coverage and Financial Counseling.
If a Qualifying Termination occurs and if the Employee does not
elect any continuation coverage under Part 6 of Title I of the
Employee Retirement Income Security Act of 1974, as amended,
then the Employee (and, where applicable, the Employee's
dependents) shall be entitled, in addition to the Severance
Payment, to continue participation for a period of three (3)
years
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following the date of the Qualifying Termination in the basic
and supplemental group term life insurance plan and in the
health care plan for management employees maintained by the
Corporation, as if the Employee were still an employee of the
Corporation. Where applicable, the Employee's salary for
purposes of such plans shall be deemed to be equal to the
Employee's salary immediately prior to the Qualifying
Termination. To the extent that the Corporation finds it
undesirable to cover the Employee under its group life insurance
and health plans, the Corporation (at its own expense) shall
provide the Employee with the same level of coverage under
individual policies. The Corporation shall also provide to the
Employee for one (1) year after the Qualifying Termination
professional financial counseling services comparable in scope
and value to the financial counseling services made available to
the Employee immediately prior to the Change in Control.
(e) Accelerated Vesting in Incentive Awards. If, during the term of
this Agreement, a Change in Control occurs with respect to the
Company, then each of the incentive awards heretofore or
hereafter granted to the Employee by the Corporation or an
Affiliate shall become fully vested, fully exercisable or fully
payable, as the case may be, any contrary provisions of such
awards or the applicable plan notwithstanding. The term
"incentive award" shall include, without limitation, all awards
under the AirTouch Communications 1993 Long-Term Stock Incentive
Plan, all other awards with respect to equity or derivative
securities of the Corporation or an Affiliate, and all cash
incentive awards.
(f) Accelerated Vesting in Supplemental Pension Benefits. If,
during the term of this Agreement, a Change in Control occurs
with respect to the Company, then all of the Employee's
supplemental pension benefits shall become fully vested, any
contrary provisions of the applicable plan notwithstanding. The
term "supplemental pension benefit" shall include, without
limitation, all benefits under the AirTouch Communications
Supplemental Executive Pension Plan and all other retirement
benefits provided under a plan or program of the Corporation or
an Affiliate that is not intended to qualify under section
401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
(g) Additional Payment. If a Qualifying Termination occurs and if
the Corporation refuses or fails to timely pay or provide the
compensation and benefits specified in this Agreement upon
demand as provided in Section 12(c), and if such refusal or
failure is not corrected within ten (10) business days after
written notice thereof by the Employee to the Corporation, then
the Corporation shall pay immediately to the Employee an
additional amount equal to fifty percent (50%) of the Employee's
Base Compensation. This provision shall apply only once.
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(h) No Mitigation. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Section 6
(whether by seeking new employment or in any other manner), nor
shall any such payment be reduced by any earnings that the
Employee may receive from any other source.
7. Involuntary Termination Without Cause or Disability.
(a) Continuation Period. In the event that, during the
term of this Agreement, the Corporation terminates
the Employee's employment for any reason other than
Cause or Disability, the Employee shall be entitled
to receive all of the payments and benefit coverage
described in the succeeding subsections of this
Section 7. Except as otherwise provided herein, the
benefit coverage described in Subsections (c) and (d)
below shall continue for the period commencing on the
date when the employment termination is effective and
ending on the earlier of (i) the first anniversary of
the date when the employment termination is effective
or (ii) the date of the Employee's death (the
"Continuation Period").
(b) Cash Payment. The Corporation shall pay to the
Employee in a lump sum, not less than thirty-one
(31) days nor more than one hundred twenty (120)
days following the date of the employment
termination, an amount equal to the following:
(i) One (1) times the Employee's Base
Compensation in effect on the date of the
employment termination; plus
(ii) One hundred percent (100%) of the Standard
Award.
Any other provision of this Agreement or of the
AirTouch Communications Short-Term Incentive Plan
notwithstanding, after the amount in this Subsection
(b) has been paid to the Employee, the Employee shall
have no further interest in such Incentive Plan.
(c) Incentive Programs. The Continuation Period shall be
counted as employment with the Corporation for
purposes of vesting in each of the incentive awards
heretofore or hereafter granted to the Employee by
the Corporation or an Affiliate, any contrary
provisions of such awards or the applicable plan
notwithstanding. The term "incentive award" shall
include, without limitation, all awards under the
AirTouch Communications 1993 Long-Term Stock
Incentive Plan, all other awards with respect to
equity or derivative securities of the Corporation
or an Affiliate, and all cash incentive awards. The
preceding sentence shall not be construed to require
the Corporation or an Affiliate to grant any new
awards
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to the Employee during the Continuation Period. The
parties understand and agree that the Continuation
Period also counts as employment with the Corporation
for purposes of determining the expiration date of any
stock option granted by the Corporation or an
Affiliate and held by the Employee when employment
terminates.
(d) Life Insurance and Health Plan Coverage. During the
Continuation Period, the Employee (and, where
applicable, the Employee's dependents) shall be
entitled to continue participation in the basic and
supplemental group term life insurance plan and in
the health care plan for management employees
maintained by the Corporation, as if the Employee
were still an employee of the Corporation, but only
if the Employee does not elect any continuation
coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
Where applicable, the Employee's salary for purposes
of such plans shall be deemed to be equal to the
Employee's Base Compensation in effect on the date
of the employment termination. To the extent that
the Corporation finds it undesirable to cover the
Employee under its group life insurance and health
plans, the Corporation (at its own expense) shall
provide the Employee with the same level of coverage
under individual policies.
(e) No Mitigation. The Employee shall not be required to
mitigate the amount of any payment or benefit
contemplated by this Section 7, nor shall any such
payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other
source.
8. Limitation on Payments.
(a) Basic Rule. Any provision of this Agreement to the
contrary notwithstanding, in the event that the
independent auditors retained by the Corporation
most recently prior to a Change in Control (the
"Auditors") determine that any payment or transfer
by the Corporation to or for the benefit of the
Employee, whether paid or payable (or transferred or
transferable) pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be
nondeductible by the Corporation for federal income
tax purposes because of section 280G of the Code,
then the aggregate present value of all Payments
shall be reduced (but not below zero) to the Reduced
Amount. For purposes of this Section 8, the
"Reduced Amount" shall be the amount, expressed as a
present value, that maximizes the aggregate present
value of the Payments without causing any Payment to
be nondeductible by the Corporation because of
section 280G of the Code.
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(b) Reduction of Payments. If the Auditors determine
that any Payment would be nondeductible by the
Corporation because of section 280G of the Code,
then the Corporation, within five (5) business days
after being notified by the Auditors, shall give the
Employee notice to that effect and a copy of the
detailed calculation thereof and of the Reduced
Amount. The Employee may then elect, in the
Employee's sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long
as after such election the aggregate present value
of the Payments equals the Reduced Amount) and shall
advise the Corporation in writing of this election
within thirty (30) days of receipt of notice. If no
such election is made by the Employee within such
thirty (30) day period, then the Corporation may
elect which and how much of the Payments shall be
eliminated or reduced (as long as after such
election the aggregate present value of the Payments
equals the Reduced Amount) and shall notify the
Employee promptly of such election. For purposes of
this Section 8, present values shall be determined
in accordance with section 280G(d)(4) of the Code.
All determinations made by the Auditors under this
Section 8 shall be binding upon the Corporation and
the Employee and shall be made within sixty (60)
days of the date of the employment termination.
(c) Overpayments and Underpayments. As a result of
uncertainty in the application of section 280G of
the Code at the time of an initial determination by
the Auditors hereunder, it is possible that Payments
will have been made by the Corporation that should
not have been made (an "Overpayment") or that
additional Payments that will not have been made by
the Corporation could have been made (an
"Underpayment"), consistent in each case with the
calculation of the Reduced Amount hereunder. In the
event that the Auditors, based upon the assertion of
a deficiency by the Internal Revenue Service against
the Corporation or the Employee that the Auditors
believe has a high probability of success, determine
that an Overpayment has been made, such Overpayment
shall be treated for all purposes as a loan to the
Employee that the Employee shall repay to the
Corporation, together with interest at the
applicable federal rate provided for in section
7872(f)(2)(A) of the Code; provided, however, that
no amount shall be payable by the Employee to the
Corporation if and to the extent that such payment
would not reduce the amount that is subject to
taxation under section 4999 of the Code. In the
event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Corporation
to or for the benefit of the Employee, together with
interest at the applicable federal rate provided for
in section 7872(f)(2)(A) of the Code.
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9. Successors.
(a) Corporation's Successors. The Corporation shall
require any successor (whether direct or indirect
and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or
substantially all of the Corporation's business
and/or assets, by an agreement in substance and form
satisfactory to the Employee, to assume this
Agreement and to agree expressly to perform this
Agreement in the same manner and to the same extent
as the Corporation would be required to perform it
in the absence of a succession. The Corporation's
failure to obtain such agreement prior to the
effectiveness of a succession shall be a breach of
this Agreement and shall entitle the Employee to all
of the compensation and benefits to which the
Employee would have been entitled hereunder if the
Corporation had involuntarily terminated the
Employee's employment without Cause or Disability,
on the date when such succession becomes effective.
For all purposes under this Agreement, the term
"Corporation" shall include any successor to the
Corporation's business and/or assets that executes
and delivers the assumption agreement described in
this Subsection (a) or that becomes bound by this
Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights
of the Employee hereunder shall inure to the benefit
of, and be enforceable by, the Employee's personal
or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees.
10. Notice.
Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been
duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices
shall be addressed to the Employee at the home address that the
Employee most recently communicated to the Corporation in
writing. In the case of the Corporation, mailed notices shall
be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
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11. Trade Secrets.
(a) Protected Information. The Employee agrees not to
disclose to others, or take or use for the
Employee's own purposes or the purposes of others,
during or after the Employee's employment, any
Information owned or controlled by Pacific Telesis
Group, by the Corporation or by any Affiliate
(collectively, "Pacific"). The Employee agrees that
these restrictions shall also apply to all (i)
Information in Pacific's possession belonging to
third parties, and (ii) Information conceived,
originated, discovered or developed, in whole or in
part, by the Employee. As used herein,
"Information" includes trade secrets and other
confidential or proprietary business, technical,
personnel or financial information, whether or not
the Employee's work product, in written, graphic,
oral or other tangible or intangible forms,
including but not limited to specifications,
samples, records, data, computer programs, drawings,
diagrams, models, customer names, business or
marketing plans, studies, analyses, projections and
reports, communications by or to attorneys
(including attorney-client privileged
communications), memos and other materials prepared
by attorneys or under their direction (including
attorney work product), and software systems and
processes. Any information that is not readily
available to the public shall be considered to be a
trade secret and confidential and proprietary, even
if it is not specifically marked as such, unless
Pacific advises the Employee otherwise in writing.
(b) Termination of Employment. The Employee agrees that
on termination of employment, the Employee shall
return to Pacific all property belonging to Pacific,
including all documents or other media in the
Employee's possession or control that in any way
incorporate or reflect any Information.
12. Miscellaneous Provisions.
(a) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the
modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an
authorized officer of the Corporation (other than
the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall
be considered a waiver of any other condition or
provision or of the same condition or provision at
another time.
(b) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether
express or
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implied) that are not expressly set forth in this
Agreement have been made or entered into by either
party with respect to the subject matter hereof.
In addition, the Employee hereby acknowledges and
agrees that this Agreement supersedes in its entirety
the Employment Agreement between the Employee and
Pacific Telesis Group in effect immediately prior to
the effective date of this Agreement. As of the
effective date of this Agreement, such Employment
Agreement shall terminate without any further
obligation by either party thereto, and the Employee
hereby relinquishes any further rights that the
Employee may have had under such Employment Agreement.
(c) Presumption. Subject to the provisions of Section 8,
the Corporation shall make a payment described in
this Agreement upon receiving written notice from
the Employee describing such payment, referring to
the provision of this Agreement under which such
payment is claimed and certifying that all
conditions for such payment, as set forth in this
Agreement, have been satisfied. The information so
furnished to the Corporation by the Employee shall
be presumed to be correct, subject to rebuttal by
the Corporation after making payment. After making
the payment claimed by the Employee, the Corporation
may seek a refund of such payment in accordance with
Subsection (g) below. This Subsection (c) shall not
be used to cause a payment to be made at a time
earlier than provided in this Agreement.
(d) No Setoff. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or
obligation, against payments to the Employee under
this Agreement.
(e) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall
be governed by the laws of the State of California,
irrespective of California's choice-of-law
principles.
(f) Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall
not affect the validity or enforceability of any
other provision hereof, which shall remain in full
force and effect.
(g) Arbitration. Except as otherwise provided in Section
8, any dispute or controversy arising under or in
connection with this Agreement shall be settled
exclusively by arbitration in San Francisco,
California, in accordance with the rules of the
American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Punitive damages
shall not be awarded. Notwithstanding the
foregoing, a
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dispute or controversy over whether Cause exists for
the termination of an Employee, when such termination
occurred within three (3) years after a Change in
Control, or a dispute or controversy over whether a
Constructive Termination has occurred, shall be
arbitrated by a three- (3-) member panel of the
outside directors of the Corporation, with the
selection of the panel to be made by the Chairman, as
of one (1) year prior to the Change in Control, of
the Corporation's Board of Directors. If three (3)
such individuals are unwilling to serve as
arbitrators, the preceding sentence shall be
inapplicable, and all disputes and controversies
shall be subject to arbitration in accordance with
the rules of the American Arbitration Association, as
provided above in this Subsection (g). For purposes
of this Subsection (g), "outside directors" shall
mean members of the Board of Directors of the
Corporation, as such Board of Directors was
constituted one (1) year prior to the Change in
Control, who were not employees of the Corporation
or an Affiliate one (1) year prior to the Change in
Control.
(h) No Assignment of Benefits. The rights of any person
to payments or benefits under this Agreement shall
not be made subject to option or assignment, either
by voluntary or involuntary assignment or by
operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of
this Subsection (h) shall be void.
(i) Constructive Termination. As used herein, the term
"Constructive Termination" shall mean a material
reduction in salary or benefits, a material change
in responsibilities, or a requirement to relocate,
except for office relocations that would not
increase the Employee's one-way commute distance by
more than forty (40) miles.
(j) Qualifying Termination. As used herein, the term
"Qualifying Termination" shall mean that:
(i) During the term of this Agreement and
within three (3) years after the
occurrence of a Change in Control, the
Employee's employment is involuntarily
terminated for any reason by the
Corporation, including a Constructive
Termination as defined in Subsection (i)
above; or
(ii) During the term of this Agreement and
during the thirteenth (13th) full calendar
month after the occurrence of a Change in
Control, the Employee voluntarily
separates from employment with the
Corporation for any reason.
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(k) Employment at Will; Limitation of Remedies. The
Corporation and the Employee acknowledge that the
Employee's employment is at will, as defined under
applicable law. If the Employee's employment
terminates for any reason, the Employee shall not be
entitled to any payments, benefits, damages, awards
or compensation other than as provided by this
Agreement.
(l) Employment Taxes. All payments made pursuant to this
Agreement shall be subject to withholding of
applicable taxes.
(m) Benefit Coverage Non-Additive. In the event that the
Employee is entitled to life insurance and health
plan coverage under more than one provision
hereunder, only one provision shall apply, and
neither the periods of coverage nor the amounts of
benefits shall be additive.
(n) Assignment of Agreement by Corporation. The
Corporation may assign its rights under this
Agreement to an Affiliate, and an Affiliate may
assign its rights under this Agreement to another
Affiliate or to the Corporation. In the case of any
such assignment, the term "Corporation" when used in
this Agreement shall mean the entity that actually
employs the Employee.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Corporation by its duly authorized officer, as of
the day and year first above written.
AIRTOUCH COMMUNICATIONS
By
---------------------------
Title
------------------------
------------------------------
Employee
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EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of the 31st day of March, 1994,
by and between ______________________________ (the "Employee") and AIRTOUCH
COMMUNICATIONS, a California corporation (the "Corporation"),
W I T N E S S E T H:
WHEREAS, the Corporation wishes to employ the Employee as its
__________________ or in another position with comparable compensation, either
with the Corporation or with another entity in which the Corporation has a
direct or indirect ownership interest of not less than fifty percent (50%) (an
"Affiliate"); and
WHEREAS, the Employee is willing to accept such employment
upon the terms and conditions set forth below:
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and in consideration of the employment of the Employee by the
Corporation or an Affiliate, the parties agree as follows:
1. Term of Employment.
(a) Basic Rule. The Corporation agrees to continue the Employee's
employment, and the Employee agrees to remain in employment
with the Corporation, from the effective date of this
Agreement until the date when the Employee's employment
terminates pursuant to the provisions of this Agreement.
(b) Early Termination. Subject to Sections 6 and 7, the
Corporation may terminate the Employee's employment by giving
the Employee thirty (30) days' advance notice in writing. The
Employee may terminate the Employee's employment by giving the
Corporation thirty (30) days' advance notice in writing. The
Employee's employment shall terminate automatically in the
event of the Employee's death. Any waiver of notice shall be
valid only if it is made in writing and expressly refers to
the applicable notice requirement of this Section 1.
(c) Cause. Subject to Section 6, the Corporation may terminate
the Employee's employment for Cause by giving the Employee
thirty (30) days' advance notice in writing. For all purposes
under this
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Agreement, "Cause" shall mean (i) a willful failure by the
Employee to substantially perform the Employee's duties
hereunder, other than a failure resulting from the Employee's
complete or partial incapacity due to physical or mental
illness or impairment, (ii) a willful act by the Employee
that constitutes gross misconduct and that is injurious to the
Corporation, (iii) a willful breach by the Employee of a
material provision of this Agreement, or (iv) a material and
willful violation of a federal or state law or regulation
applicable to the business of the Corporation. No act, or
failure to act, by the Employee shall be considered "willful"
unless committed without good faith and without a reasonable
belief that the act or omission was in the Corporation's best
interest.
(d) Disability. Subject to Section 6, the Corporation may
terminate the Employee's employment for Disability by giving
the Employee six (6) months' advance notice in writing. For
all purposes under this Agreement, "Disability" shall mean
that the Employee, at the time notice is given, has been
unable to perform the Employee's duties under this Agreement
for a period of not less than six (6) consecutive months as
the result of the Employee's incapacity due to physical or
mental illness. In the event that the Employee resumes the
performance of substantially all of the Employee's duties
hereunder before the termination of the Employee's employment
under this Subsection (d) becomes effective, the notice of
termination shall automatically be deemed to have been
revoked.
(e) Rights Upon Termination. Except as expressly provided in
Sections 6 and 7, upon the termination of the Employee's
employment pursuant to this Section 1, the Employee shall only
be entitled to the compensation, benefits and reimbursements
described in Sections 3, 4 and 5 for the period preceding the
effective date of the termination. The payments under this
Agreement shall fully discharge all responsibilities of the
Corporation to the Employee upon the termination of the
Employee's employment.
(f) Termination of Agreement. Except as otherwise provided in
this Subsection (f), this Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. In
addition, either the Corporation or the Employee may terminate
this Agreement for any reason, and without affecting the
Employee's status as an employee, by giving the other party
one (1) year's advance notice in writing. A termination of
this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall
not affect the payment or provision of compensation or
benefits under this Agreement on account of a termination of
employment occurring prior to the termination of this
Agreement.
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2. Duties and Scope of Employment.
(a) Position. The Corporation agrees to employ the Employee for
the term of employment under this Agreement in the position of
__________________ (as such position was defined in terms of
responsibilities and compensation as of the effective date of
this Agreement) or in another position offering comparable
compensation, either with the Corporation or with an
Affiliate.
(b) Obligations. During the term of employment under this
Agreement, the Employee shall devote the Employee's full
business efforts and time to the Corporation and its
Affiliates. The foregoing, however, shall not preclude the
Employee from engaging in appropriate civic, charitable or
religious activities or from devoting a reasonable amount of
time to private investments or from serving on the boards of
directors of other entities, as long as such activities and
service do not interfere or conflict with the Employee's
responsibilities to the Corporation.
3. Base Compensation.
During the term of employment under this Agreement, the Corporation
agrees to pay the Employee as compensation for services a base salary
at the annual rate of $___,___, or at such higher rate as the
Corporation's Compensation and Personnel Committee of the Board of
Directors may determine from time to time. Such salary shall be
payable in accordance with the Corporation's standard payroll
procedures. Once the Corporation's Compensation and Personnel
Committee of the Board of Directors has increased such salary, it
thereafter shall not be reduced; provided that, if a Change in Control
has not occurred, such salary (including any increases) may be reduced
by the Corporation if (i) the Employee commits an act or omission that
meets the definition of Cause, as defined in Section 1(c), or (ii) the
Employee and all other officers of the Corporation and its Affiliates
who are parties to written employment agreements containing
substantially the same provisions as this Agreement have their
salaries (including any increases) reduced by the same percentage
amount for the same time period. The annual compensation specified in
this Section 3, together with any increases in such compensation that
the Compensation and Personnel Committee of the Board of Directors of
the Corporation may grant from time to time, and together with any
reductions made in accordance with this Section 3, is referred to in
this Agreement as "Base Compensation."
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4. Employee Benefits.
During the term of employment under this Agreement, the Employee shall
be eligible to participate in the employee benefit plans and executive
compensation programs maintained by the Corporation for management
employees, including (without limitation) pension plans, savings or
profit-sharing plans, deferred compensation plans, supplemental
retirement or excess-benefit plans, stock option, incentive or other
bonus plans, life, disability, health, accident and other insurance
programs, paid vacations, and similar plans or programs, subject in
each case to the generally applicable terms and conditions of the plan
or program in question and to the determination of any person or
committee administering such plan or program.
5. Business Expenses and Travel.
During the term of employment under this Agreement, the Employee shall
be authorized to incur necessary and reasonable travel, entertainment
and other business expenses in connection with the Employee's duties
hereunder. The Corporation shall reimburse the Employee for such
expenses upon presentation of an itemized account and appropriate
supporting documentation, all in accordance with the Corporation's
generally applicable policies.
6. Change in Control.
(a) Definition. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following
events:
(i) Both:
(A) Any "person" (as defined below) is or becomes
the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of
1934, as amended), directly or indirectly, of
securities of the Corporation representing at
least twenty percent (20%) of the total
voting power represented by the Corporation's
then outstanding voting securities; and
(B) The beneficial ownership by such person of
securities representing such percentage has
not been approved by a majority of the
"continuing directors" (as defined below); or
(ii) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of the
Corporation representing at least fifty percent (50%)
of the total voting power represented by the
Corporation's then outstanding voting securities; or
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(iii) A change in the composition of the Corporation's
Board of Directors occurs, as a result of which fewer
than two-thirds (2/3) of the incumbent directors are
directors (the "continuing directors") who either:
(A) Had been directors of the Corporation on the
"look-back date" (as defined below) (the
"original directors"); or
(B) Were elected, or nominated for election, to
such Board with the affirmative votes of at
least a majority of the aggregate of the
original directors who were still in office
at the time of the election or nomination and
the directors whose election or nomination
was previously so approved; or
(iv) The shareholders of the Corporation approve a merger
or consolidation of the Corporation with any other
corporation, if such merger or consolidation would
result in the voting securities of the Corporation
outstanding immediately prior thereto representing
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity) fifty percent (50%) or less of the total
voting power represented by the voting securities of
the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(v) The shareholders of the Corporation approve (A) a
plan of complete liquidation of the Corporation or
(B) an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
For purposes of Paragraphs (i) and (ii) above, the term
"person" shall have the same meaning as when used in sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, but shall exclude (A) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or of a parent or subsidiary of the Corporation,
(B) a corporation owned directly or indirectly by the
shareholders of the Corporation in substantially the same
proportions as their ownership of the common stock of the
Corporation and (C) Pacific Telesis Group.
For purposes of Paragraph (iii) above, the term "look-back
date" shall mean the later of (A) April 1, 1994, or (B) the
date twenty-four (24) months prior to the date of the event
that may constitute a Change in Control.
Any other provision of this Subsection (a) notwithstanding,
the term "Change in Control" shall not include either of the
following events, if undertaken at the election of the
Corporation:
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(A) A transaction, the sole purpose of which is to
change the state of the Corporation's
incorporation; or
(B) A transaction, the result of which is to sell
all or substantially all of the assets of the
Corporation to another corporation (the
"surviving corporation"); provided that the
surviving corporation is owned directly or
indirectly by the shareholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the
Corporation's common stock immediately
preceding such transaction; and provided,
further, that the surviving corporation
expressly assumes this Agreement.
(b) Severance Payment. The Employee shall be entitled to receive a
severance payment from the Corporation (the "Severance Payment")
if a Qualifying Termination, as defined in Section 12(j),
occurs. The Severance Payment shall be made in a lump sum not
less than thirty-one (31) days nor more than one hundred twenty
(120) days following the date of the Qualifying Termination and
shall be in an amount determined under Subsection (c) below.
The Severance Payment shall be in lieu of any further payments
to the Employee under Section 3 and any further accrual of
benefits under Section 4 with respect to periods subsequent to
the date of the Qualifying Termination. The Severance Payment
shall not reduce or offset any benefits to which the Employee
may be entitled under Section 7.
(c) Amount. The Amount of the Severance Payment shall be equal to
the following:
(i) One (1) times the Employee's Base Compensation in
effect on the date of the Qualifying Termination; plus
(ii) One hundred percent (100%) of the "standard award,"
within the meaning of the AirTouch Communications
Short-Term Incentive Plan, for the Employee's
position rate as of the date of the Qualifying
Termination (the "Standard Award").
Any other provision of this Agreement or of the AirTouch
Communications Short-Term Incentive Plan notwithstanding, after
the amount described in this Subsection (c) has been paid to the
Employee, the Employee shall have no further interest in such
Incentive Plan.
(d) Life Insurance, Health Plan Coverage and Financial Counseling.
If a Qualifying Termination occurs and if the Employee does not
elect any continuation coverage under Part 6 of Title I of the
Employee Retirement Income Security Act of 1974, as amended,
then the Employee (and, where applicable, the Employee's
dependents) shall be entitled, in addition to the Severance
Payment, to continue participation for a period of two (2) years
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following the date of the Qualifying Termination in the basic
and supplemental group term life insurance plan and in the
health care plan for management employees maintained by the
Corporation, as if the Employee were still an employee of the
Corporation. Where applicable, the Employee's salary for
purposes of such plans shall be deemed to be equal to the
Employee's salary immediately prior to the Qualifying
Termination. To the extent that the Corporation finds it
undesirable to cover the Employee under its group life insurance
and health plans, the Corporation (at its own expense) shall
provide the Employee with the same level of coverage under
individual policies. The Corporation shall also provide to the
Employee for one (1) year after the Qualifying Termination
professional financial counseling services comparable in scope
and value to the financial counseling services made available to
the Employee immediately prior to the Change in Control.
(e) Accelerated Vesting in Incentive Awards. If, during the term of
this Agreement, a Change in Control occurs with respect to the
Company, then each of the incentive awards heretofore or
hereafter granted to the Employee by the Corporation or an
Affiliate shall become fully vested, fully exercisable or fully
payable, as the case may be, any contrary provisions of such
awards or the applicable plan notwithstanding. The term
"incentive award" shall include, without limitation, all awards
under the AirTouch Communications 1993 Long-Term Stock Incentive
Plan, all other awards with respect to equity or derivative
securities of the Corporation or an Affiliate, and all cash
incentive awards.
(f) Accelerated Vesting in Supplemental Pension Benefits. If,
during the term of this Agreement, a Change in Control occurs
with respect to the Company, then all of the Employee's
supplemental pension benefits shall become fully vested, any
contrary provisions of the applicable plan notwithstanding. The
term "supplemental pension benefit" shall include, without
limitation, all benefits under the AirTouch Communications
Supplemental Executive Pension Plan and all other retirement
benefits provided under a plan or program of the Corporation or
an Affiliate that is not intended to qualify under section
401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
(g) Additional Payment. If a Qualifying Termination occurs and if
the Corporation refuses or fails to timely pay or provide the
compensation and benefits specified in this Agreement upon
demand as provided in Section 12(c), and if such refusal or
failure is not corrected within ten (10) business days after
written notice thereof by the Employee to the Corporation, then
the Corporation shall pay immediately to the Employee an
additional amount equal to fifty percent (50%) of the Employee's
Base Compensation. This provision shall apply only once.
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(h) No Mitigation. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Section 6
(whether by seeking new employment or in any other manner), nor
shall any such payment be reduced by any earnings that the
Employee may receive from any other source.
7. Involuntary Termination Without Cause or Disability.
(a) Continuation Period. In the event that, during the
term of this Agreement, the Corporation terminates
the Employee's employment for any reason other than
Cause or Disability, the Employee shall be entitled
to receive all of the payments and benefit coverage
described in the succeeding subsections of this
Section 7. Except as otherwise provided herein, the
benefit coverage described in Subsections (c) and (d)
below shall continue for the period commencing on the
date when the employment termination is effective and
ending on the earlier of (i) the first anniversary of
the date when the employment termination is effective
or (ii) the date of the Employee's death (the
"Continuation Period").
(b) Cash Payment. The Corporation shall pay to the
Employee in a lump sum, not less than thirty-one
(31) days nor more than one hundred twenty (120)
days following the date of the employment
termination, an amount equal to the following:
(i) One (1) times the Employee's Base
Compensation in effect on the date of the
employment termination; plus
(ii) One hundred percent (100%) of the Standard
Award.
Any other provision of this Agreement or of the
AirTouch Communications Short-Term Incentive Plan
notwithstanding, after the amount in this Subsection
(b) has been paid to the Employee, the Employee shall
have no further interest in such Incentive Plan.
(c) Life Insurance and Health Plan Coverage. During the
Continuation Period, the Employee (and, where
applicable, the Employee's dependents) shall be
entitled to continue participation in the basic and
supplemental group term life insurance plan and in
the health care plan for management employees
maintained by the Corporation, as if the Employee
were still an employee of the Corporation, but only
if the Employee does not elect any continuation
coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
Where applicable, the Employee's salary for purposes
of such plans shall
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be deemed to be equal to the Employee's Base
Compensation in effect on the date of the employment
termination. To the extent that the Corporation
finds it undesirable to cover the Employee under its
group life insurance and health plans, the
Corporation (at its own expense) shall provide the
Employee with the same level of coverage under
individual policies.
(d) No Mitigation. The Employee shall not be required to
mitigate the amount of any payment or benefit
contemplated by this Section 7, nor shall any such
payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any
other source.
8. Limitation on Payments.
(a) Basic Rule. Any provision of this Agreement to the
contrary notwithstanding, in the event that the
independent auditors retained by the Corporation
most recently prior to a Change in Control (the
"Auditors") determine that any payment or transfer
by the Corporation to or for the benefit of the
Employee, whether paid or payable (or transferred or
transferable) pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be
nondeductible by the Corporation for federal income
tax purposes because of section 280G of the Code,
then the aggregate present value of all Payments
shall be reduced (but not below zero) to the Reduced
Amount. For purposes of this Section 8, the
"Reduced Amount" shall be the amount, expressed as a
present value, that maximizes the aggregate present
value of the Payments without causing any Payment to
be nondeductible by the Corporation because of
section 280G of the Code.
(b) Reduction of Payments. If the Auditors determine
that any Payment would be nondeductible by the
Corporation because of section 280G of the Code,
then the Corporation, within five (5) business days
after being notified by the Auditors, shall give the
Employee notice to that effect and a copy of the
detailed calculation thereof and of the Reduced
Amount. The Employee may then elect, in the
Employee's sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long
as after such election the aggregate present value
of the Payments equals the Reduced Amount) and shall
advise the Corporation in writing of this election
within thirty (30) days of receipt of notice. If no
such election is made by the Employee within such
thirty (30) day period, then the Corporation may
elect which and how much of the Payments shall be
eliminated or reduced (as long as after such
election the aggregate present value of the Payments
equals the Reduced Amount) and shall notify the
Employee promptly of such election. For purposes of
this Section 8, present
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values shall be determined in accordance with section
280G(d)(4) of the Code. All determinations made by
the Auditors under this Section 8 shall be binding
upon the Corporation and the Employee and shall be
made within sixty (60) days of the date of the
employment termination.
(c) Overpayments and Underpayments. As a result of
uncertainty in the application of section 280G of
the Code at the time of an initial determination by
the Auditors hereunder, it is possible that Payments
will have been made by the Corporation that should
not have been made (an "Overpayment") or that
additional Payments that will not have been made by
the Corporation could have been made (an
"Underpayment"), consistent in each case with the
calculation of the Reduced Amount hereunder. In the
event that the Auditors, based upon the assertion of
a deficiency by the Internal Revenue Service against
the Corporation or the Employee that the Auditors
believe has a high probability of success, determine
that an Overpayment has been made, such Overpayment
shall be treated for all purposes as a loan to the
Employee that the Employee shall repay to the
Corporation, together with interest at the
applicable federal rate provided for in section
7872(f)(2)(A) of the Code; provided, however, that
no amount shall be payable by the Employee to the
Corporation if and to the extent that such payment
would not reduce the amount that is subject to
taxation under section 4999 of the Code. In the
event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Corporation
to or for the benefit of the Employee, together with
interest at the applicable federal rate provided for
in section 7872(f)(2)(A) of the Code.
9. Successors.
(a) Corporation's Successors. The Corporation shall
require any successor (whether direct or indirect
and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or
substantially all of the Corporation's business
and/or assets, by an agreement in substance and form
satisfactory to the Employee, to assume this
Agreement and to agree expressly to perform this
Agreement in the same manner and to the same extent
as the Corporation would be required to perform it
in the absence of a succession. The Corporation's
failure to obtain such agreement prior to the
effectiveness of a succession shall be a breach of
this Agreement and shall entitle the Employee to all
of the compensation and benefits to which the
Employee would have been entitled hereunder if the
Corporation had involuntarily terminated the
Employee's employment without Cause or
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Disability, on the date when such succession becomes
effective. For all purposes under this Agreement,
the term "Corporation" shall include any successor
to the Corporation's business and/or assets that
executes and delivers the assumption agreement
described in this Subsection (a) or that becomes
bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights
of the Employee hereunder shall inure to the benefit
of, and be enforceable by, the Employee's personal
or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees.
10. Notice.
Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been
duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices
shall be addressed to the Employee at the home address that the
Employee most recently communicated to the Corporation in
writing. In the case of the Corporation, mailed notices shall
be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
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11. Trade Secrets.
(a) Protected Information. The Employee agrees not to
disclose to others, or take or use for the
Employee's own purposes or the purposes of others,
during or after the Employee's employment, any
Information owned or controlled by Pacific Telesis
Group, by the Corporation or by any Affiliate
(collectively, "Pacific"). The Employee agrees that
these restrictions shall also apply to all (i)
Information in Pacific's possession belonging to
third parties, and (ii) Information conceived,
originated, discovered or developed, in whole or in
part, by the Employee. As used herein,
"Information" includes trade secrets and other
confidential or proprietary business, technical,
personnel or financial information, whether or not
the Employee's work product, in written, graphic,
oral or other tangible or intangible forms,
including but not limited to specifications,
samples, records, data, computer programs, drawings,
diagrams, models, customer names, business or
marketing plans, studies, analyses, projections and
reports, communications by or to attorneys
(including attorney-client privileged
communications), memos and other materials prepared
by attorneys or under their direction (including
attorney work product), and software systems and
processes. Any information that is not readily
available to the public shall be considered to be a
trade secret and confidential and proprietary, even
if it is not specifically marked as such, unless
Pacific advises the Employee otherwise in writing.
(b) Termination of Employment. The Employee agrees that
on termination of employment, the Employee shall
return to Pacific all property belonging to Pacific,
including all documents or other media in the
Employee's possession or control that in any way
incorporate or reflect any Information.
12. Miscellaneous Provisions.
(a) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the
modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an
authorized officer of the Corporation (other than
the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall
be considered a waiver of any other condition or
provision or of the same condition or provision at
another time.
(b) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether
express or implied) that are not expressly set forth
in this Agreement have
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been made or entered into by either party with
respect to the subject matter hereof. In addition,
the Employee hereby acknowledges and agrees that this
Agreement supersedes in its entirety the Employment
Agreement between the Employee and Pacific Telesis
Group in effect immediately prior to the effective
date of this Agreement. As of the effective date of
this Agreement, such Employment Agreement shall
terminate without any further obligation by either
party thereto, and the Employee hereby relinquishes
any further rights that the Employee may have had
under such Employment Agreement.
(c) Presumption. Subject to the provisions of Section 8,
the Corporation shall make a payment described in
this Agreement upon receiving written notice from
the Employee describing such payment, referring to
the provision of this Agreement under which such
payment is claimed and certifying that all
conditions for such payment, as set forth in this
Agreement, have been satisfied. The information so
furnished to the Corporation by the Employee shall
be presumed to be correct, subject to rebuttal by
the Corporation after making payment. After making
the payment claimed by the Employee, the Corporation
may seek a refund of such payment in accordance with
Subsection (g) below. This Subsection (c) shall not
be used to cause a payment to be made at a time
earlier than provided in this Agreement.
(d) No Setoff. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or
obligation, against payments to the Employee under
this Agreement.
(e) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall
be governed by the laws of the State of California,
irrespective of California's choice-of-law
principles.
(f) Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall
not affect the validity or enforceability of any
other provision hereof, which shall remain in full
force and effect.
(g) Arbitration. Except as otherwise provided in Section
8, any dispute or controversy arising under or in
connection with this Agreement shall be settled
exclusively by arbitration in San Francisco,
California, in accordance with the rules of the
American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Punitive damages
shall not be awarded. Notwithstanding the
foregoing, a dispute or controversy over whether
Cause exists for the
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<PAGE> 14
termination of an Employee, when such termination
occurred within three (3) years after a Change in
Control, or a dispute or controversy over whether a
Constructive Termination has occurred, shall be
arbitrated by a three- (3-) member panel of the
outside directors of the Corporation, with the
selection of the panel to be made by the Chairman, as
of one (1) year prior to the Change in Control, of
the Corporation's Board of Directors. If three (3)
such individuals are unwilling to serve as
arbitrators, the preceding sentence shall be
inapplicable, and all disputes and controversies
shall be subject to arbitration in accordance with
the rules of the American Arbitration Association, as
provided above in this Subsection (g). For purposes
of this Subsection (g), "outside directors" shall
mean members of the Board of Directors of the
Corporation, as such Board of Directors was
constituted one (1) year prior to the Change in
Control, who were not employees of the Corporation or
an Affiliate one (1) year prior to the Change in
Control.
(h) No Assignment of Benefits. The rights of any person
to payments or benefits under this Agreement shall
not be made subject to option or assignment, either
by voluntary or involuntary assignment or by
operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of
this Subsection (h) shall be void.
(i) Constructive Termination. As used herein, the term
"Constructive Termination" shall mean a material
reduction in salary or benefits, a material change
in responsibilities, or a requirement to relocate,
except for office relocations that would not
increase the Employee's one-way commute distance by
more than forty (40) miles.
(j) Qualifying Termination. As used herein, the term
"Qualifying Termination" shall mean that during the
term of this Agreement and within three (3) years
after the occurrence of a Change in Control, the
Employee's employment is involuntarily terminated
for any reason by the Corporation, including a
Constructive Termination as defined in Subsection
(i) above.
(k) Employment at Will; Limitation of Remedies. The
Corporation and the Employee acknowledge that the
Employee's employment is at will, as defined under
applicable law. If the Employee's employment
terminates for any reason, the Employee shall not be
entitled to any payments, benefits, damages, awards
or compensation other than as provided by this
Agreement.
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<PAGE> 15
(l) Employment Taxes. All payments made pursuant to this
Agreement shall be subject to withholding of
applicable taxes.
(m) Benefit Coverage Non-Additive. In the event that the
Employee is entitled to life insurance and health
plan coverage under more than one provision
hereunder, only one provision shall apply, and
neither the periods of coverage nor the amounts of
benefits shall be additive.
(n) Assignment of Agreement by Corporation. The
Corporation may assign its rights under this
Agreement to an Affiliate, and an Affiliate may
assign its rights under this Agreement to another
Affiliate or to the Corporation. In the case of any
such assignment, the term "Corporation" when used in
this Agreement shall mean the entity that actually
employs the Employee.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Corporation by its duly authorized officer, as of
the day and year first above written.
AIRTOUCH COMMUNICATIONS
By
-----------------------------
Title
--------------------------
--------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.24
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, dated as of September 19, 1994, between
AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation (the "Corporation"), and
________ ("Indemnitee"),
W I T N E S S E T H:
WHEREAS, Indemnitee is either a member of the board of directors of the
Corporation (the "Board of Directors") or an officer of the Corporation, or
both, and in such capacity or capacities, or otherwise as an Agent (as
hereinafter defined) of the Corporation, is performing a valuable service for
the Corporation; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Corporation on the condition that
he be indemnified as herein provided; and
WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein:
NOW, THEREFORE, in consideration of the premises and the covenants in
this Agreement, and of Indemnitee continuing to serve the Corporation as an
Agent and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve (a) as a
director or an officer of the Corporation, or both, so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Certificate of Incorporation and By-laws of the Corporation, and until
such time as he resigns or fails to stand for election or is removed from his
position, or (b) otherwise as an Agent (as hereinafter defined) of the
Corporation. Indemnitee may from time to time also perform other services at
the request or for the convenience of, or otherwise benefiting the Corporation.
Indemnitee may at any time and for any reason resign or be removed from such
position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Corporation shall have no
obligation under this Agreement to continue Indemnitee in any such position.
2. Indemnification. Subject to the limitations set forth herein
and in Section 6 hereof, the Corporation hereby agrees to indemnify Indemnitee
as follows:
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The Corporation shall, with respect to any Proceeding associated with
Indemnitee's being an Agent of the Corporation, indemnify Indemnitee to the
fullest extent permitted by applicable law and the Certificate of Incorporation
of the Corporation in effect on the date hereof or as such law or Certificate
of Incorporation may from time to time be amended (but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to provide
broader indemnification rights than the law or Certificate of Incorporation
permitted the Corporation to provide before such amendment). The right to
indemnification conferred herein and in the Certificate of Incorporation shall
be presumed to have been relied upon by Indemnitee in serving or continuing to
serve the Corporation as an Agent and shall be enforceable as a contract right.
Without in any way diminishing the scope of the indemnification provided by
this Section 2, the Corporation will indemnify Indemnitee to the full extent
permitted by law if and wherever he is or was a party or is threatened to be
made a party to any Proceeding, including any such Proceeding brought by or in
the right of the Corporation, by reason of the fact that he is or was an Agent
or by reason of anything done or not done by him in such capacity, against
Expenses and Liabilities actually and reasonably incurred by Indemnitee or on
his behalf in connection with the investigation, defense, settlement or appeal
of such Proceeding. In addition to, and not as a limitation of, the foregoing,
the rights of indemnification of Indemnitee provided under this Agreement shall
include those rights set forth in Sections 3 and 8 below. Notwithstanding the
foregoing, the Corporation shall be required to indemnify Indemnitee in
connection with a Proceeding commenced by Indemnitee (other than a Proceeding
commenced by Indemnitee to enforce Indemnitee's rights under this Agreement)
only if the commencement of such Proceeding was authorized by the Board of
Directors.
3. Advancement of Expenses; Letter of Credit.
(a) Advancement of Expenses. All reasonable Expenses incurred by or
on behalf of Indemnitee (including costs of enforcement of this Agreement)
shall be advanced from time to time by the Corporation to him within thirty
(30) days after the receipt by the Corporation of a written request for an
advance of Expenses, whether prior to or after final disposition of a
Proceeding (except to the extent that there has been a Final Adverse
Determination that Indemnitee is not entitled to be indemnified for such
Expenses), including without limitation any Proceeding brought by or in the
right of the Corporation. The written request for an advancement of any and
all expenses under this paragraph shall contain reasonable detail of the
Expenses incurred by Indemnitee. In the event that such written request shall
be accompanied by an affidavit of counsel to Indemnitee to the effect that such
counsel has reviewed such expenses and that such expenses are reasonable in
such counsel's view, then such expenses shall be deemed reasonable in the
absence of clear and convincing evidence to the contrary. By execution
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<PAGE> 3
of this Agreement, Indemnitee shall be deemed to have made whatever undertaking
may be required by law at the time of any advancement of Expenses with respect
to repayment to the Corporation of such Expenses. In the event that the
Corporation shall breach its obligation to advance Expenses under this Section
3, the parties hereto agree that Indemnitee's remedies available at law would
not be adequate and that Indemnitee would be entitled to specific performance.
(b) Letter of Credit. In order to secure the obligations of the
Corporation to indemnify and advance Expenses to Indemnitee pursuant to this
Agreement, the Corporation shall obtain at the time of any Change in Control an
irrevocable standby letter of credit naming Indemnitee as the sole beneficiary
(the "Letter of Credit"). The Letter of Credit shall be in an appropriate
amount not less than one million dollars ($1,000,000), shall be issued by a
commercial bank headquartered in the United States having assets in excess of
$10 billion and capital according to its most recent published reports equal to
or greater than the then applicable minimum capital standards promulgated by
such bank's primary federal regulator and shall contain terms and conditions
reasonably acceptable to Indemnitee. The Letter of Credit shall provide that
Indemnitee may from time to time draw certain amounts thereunder, upon written
certification by Indemnitee to the issuer of the Letter of Credit that (i)
Indemnitee has made written request upon the Corporation for an amount not less
than the amount he is drawing under the Letter of Credit and that the
Corporation has failed or refused to provide him with such amount in full
within thirty (30) days after receipt of the request, and (ii) Indemnitee
believes that he is entitled under the terms of this Agreement to the amount
which he is drawing upon under the Letter of Credit. The issuance of the
Letter of Credit shall not in any way diminish the Corporation's obligation to
indemnify Indemnitee against Expenses and Liabilities to the full extent
required by this Agreement.
(c) Term of Letter of Credit. Once the Corporation has obtained the
Letter of Credit, the Corporation shall maintain and renew the Letter of Credit
or a substitute letter of credit meeting the criteria of Section 3(b) during
the term of this Agreement so that the Letter of Credit shall have an initial
term of five years, be renewed for successive five-year terms, and always have
at least one year of its term remaining.
4. Presumptions and Effect of Certain Proceedings. Upon making a
request for indemnification, Indemnitee shall be presumed to be entitled to
indemnification under this Agreement and the Corporation shall have the burden
of proof to overcome that presumption in reaching any contrary determination.
The termination of any Proceeding by judgment, order, settlement, arbitration
award or conviction, or upon a plea of nolo contendere or its equivalent shall
not affect this presumption or, except as determined by a judgment or other
final adjudication adverse to Indemnitee, establish a presumption with regard
to any factual matter relevant to determining Indemnitee's rights to indemnifi-
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<PAGE> 4
cation hereunder. If the person or persons so empowered to make a
determination pursuant to Section 5 hereof shall have failed to make the
requested determination within ninety (90) days after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or other disposition or partial disposition
of any Proceeding or any other event which could enable the Corporation to
determine Indemnitee's entitlement to indemnification, the requisite
determination that Indemnitee is entitled to indemnification shall be
deemed to have been made.
5. Procedure for Determination of Entitlement to Indemnification.
(a) Whenever Indemnitee believes that he is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for
indemnification shall include sufficient documentation or information
reasonably available to Indemnitee for the determination of entitlement to
indemnification. In any event, Indemnitee shall submit his claim for
indemnification within a reasonable time, not to exceed five years after any
judgment, order, settlement, dismissal, arbitration award, conviction,
acceptance of a plea of nolo contendere or its equivalent, or final
termination, whichever is the later date for which Indemnitee requests
indemnification. The Secretary or other appropriate officer shall, promptly
upon receipt of Indemnitee's request for indemnification, advise the Board of
Directors in writing that Indemnitee has made such request. Determination of
Indemnitee's entitlement to indemnification shall be made not later than thirty
(30) days after the Corporation's receipt of his written request for such
indemnification, provided that any request for indemnification for Liabilities,
other than amounts paid in settlement, shall have been made after a
determination thereof in a Proceeding.
(b) The Corporation shall be entitled to select the forum in which
Indemnitee's entitlement to indemnification will be heard; provided, however,
that if there is a Change in Control of the Corporation, Independent Legal
Counsel shall determine whether Indemnitee is entitled to indemnification. The
forum shall be any one of the following:
(i) the stockholders of the Corporation;
(ii) a majority vote of Disinterested Directors (as hereinafter
defined), even though less than a quorum;
(iii) Independent Legal Counsel, whose determination shall be made in a
written opinion; or
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<PAGE> 5
(iv) a panel of three arbitrators, one selected by the Corporation,
another by Indemnitee and the third by the first two arbitrators; or if for any
reason three arbitrators are not selected within thirty (30) days after the
appointment of the first arbitrator, then selection of additional arbitrators
shall be made by the American Arbitration Association. If any arbitrator
resigns or is unable to serve in such capacity for any reason, the American
Arbitration Association shall select his replacement. The arbitration shall be
conducted pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect.
6. Specific Limitations on Indemnification. Notwithstanding
anything in this Agreement to the contrary, the Corporation shall not be
obligated under this Agreement to make any payment to Indemnitee with respect
to any Proceeding:
(a) To the extent that payment is actually made to Indemnitee under
any insurance policy, or is made to Indemnitee by the Corporation or an
affiliate otherwise than pursuant to this Agreement. Notwithstanding the
availability of such insurance, Indemnitee also may claim indemnification from
the Corporation pursuant to this Agreement by assigning to the Corporation any
claims under such insurance to the extent Indemnitee is paid by the
Corporation;
(b) Provided there has been no Change in Control, for Liabilities in
connection with Proceedings settled without the Corporation's consent, which
consent, however, shall not be unreasonably withheld;
(c) For an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation within the meaning of section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
similar provisions of any state statutory or common law;
(d) To the extent it would be otherwise prohibited by law, if so
established by a judgment or other final adjudication adverse to Indemnitee.
7. Fees and Expenses of Independent Legal Counsel. The Corporation
agrees to pay the reasonable fees and expenses of Independent Legal Counsel or
a panel of three arbitrators should such Counsel or such arbitrators be
retained to make a determination of Indemnitee's entitlement to indemnification
pursuant to Section 5(b) of this Agreement, and to fully indemnify such Counsel
or arbitrators against any and all expenses and losses incurred by any of them
arising out of or relating to this Agreement or their engagement pursuant
hereto.
8. Remedies of Indemnitee.
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(a) In the event that (i) a determination pursuant to Section 5
hereof is made that Indemnitee is not entitled to indemnification, (ii)
advances of Expenses are not made pursuant to this Agreement, (iii) payment has
not been timely made following a determination of entitlement to
indemnification pursuant to this Agreement, or (iv) Indemnitee otherwise seeks
enforcement of this Agreement, Indemnitee shall be entitled to a final
adjudication in the Court of Chancery of the State of Delaware of the remedy
sought. Alternatively, unless (i) the determination was made by a panel of
arbitrators pursuant to Section 5(b)(iv) hereof, or (ii) court approval is
required by law for the indemnification sought by Indemnitee, Indemnitee at his
option may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the commercial arbitration rules of the American Arbitration
Association now in effect, which award is to be made within ninety (90) days
following the filing of the demand for arbitration. The Corporation shall not
oppose Indemnitee's right to seek any such adjudication or arbitration award.
In any such proceeding or arbitration Indemnitee shall be presumed to be
entitled to indemnification and advancement of Expenses under this Agreement
and the Corporation shall have the burden of proof to overcome that
presumption.
(b) In the event that a determination that Indemnitee is not
entitled to indemnification, in whole or in part, has been made pursuant to
Section 5 hereof, the decision in the judicial proceeding or arbitration
provided in paragraph (a) of this Section 8 shall be made de novo and
Indemnitee shall not be prejudiced by reason of a determination that he is not
entitled to indemnification.
(c) If a determination that Indemnitee is entitled to
indemnification has been made pursuant to Section 5 hereof, or is deemed to
have been made pursuant to Section 4 hereof or otherwise pursuant to the terms
of this Agreement, the Corporation shall be bound by such determination in the
absence of a misrepresentation of a material fact by Indemnitee in connection
with such determination.
(d) The Corporation shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable. The Corporation shall stipulate in any such court or before any
such arbitrator that the Corporation is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.
(e) Expenses reasonably incurred by Indemnitee in connection with
his request for indemnification under, seeking enforcement of or to recover
damages for breach of this Agreement shall be borne by the Corporation when and
as incurred by Indemnitee irrespective of any Final Adverse Determination that
Indemnitee is not entitled to indemnification.
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9. Contribution. To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Corporation, in lieu
of indemnifying Indemnitee, shall contribute to the amount incurred by
Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid
or to be paid in settlement and/or for Expenses, in connection with any claim
relating to an indemnifiable event under this Agreement, in such proportion as
is deemed fair and reasonable in light of all of the circumstances of such
Proceeding in order to reflect (i) the relative benefits received by the
Corporation and Indemnitee as a result of the event(s) and/or transaction(s)
giving cause to such Proceeding; and/or (ii) the relative fault of the
Corporation (and its directors, officers, employees and agents) and Indemnitee
in connection with such event(s) and/or transaction(s).
10. Maintenance of Insurance. The Corporation represents that it
presently has in place certain policies of directors' and officers' liability
insurance. Subject only to the provisions within this Section 10, the
Corporation agrees that so long as Indemnitee shall have consented to serve or
shall continue to serve as a director or officer of the Corporation or both, or
as an Agent of the Corporation, and thereafter so long as Indemnitee shall be
subject to any possible Proceeding (such periods being hereinafter sometimes
referred to as the "Indemnification Period"), the Corporation will use its best
efforts to purchase and maintain in effect for the benefit of Indemnitee one or
more valid, binding and enforceable policies of directors' and officers'
liability insurance providing, in all respects, coverage both in scope and
amount which is no less favorable than that presently provided.
Notwithstanding the foregoing, the Corporation shall not be required to
maintain said policies of directors' and officers' liability insurance if such
insurance is not reasonably available or if it is in good faith determined by
the then directors of the Corporation either that:
(i) The premium cost of maintaining such insurance is substantially
disproportionate to the amount of coverage provided thereunder; or
(ii) The protection provided by such insurance is so limited by
exclusions, deductions or otherwise that there is insufficient benefit to
warrant the cost of maintaining such insurance.
Anything in this Agreement to the contrary notwithstanding, to the
extent that and for so long as the Corporation shall choose to continue to
maintain any policies of directors' and officers' liability insurance during
the Indemnification Period, the Corporation shall maintain similar and
equivalent insurance for the benefit of Indemnitee during the Indemnification
Period (unless such insurance shall be less favorable to Indemnitee than the
Corporation's existing policies).
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11. Modification, Waiver, Termination and Cancellation. No
supplement, modification, termination, cancellation or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver.
12. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
13. Notice by Indemnitee and Defense of Claim. Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter, whether civil, criminal, administrative or
investigative, but the omission so to notify the Corporation will not relieve
it from any liability which it may have to Indemnitee if such omission does not
prejudice the Corporation's rights. If such omission does prejudice the
Corporation's rights, the Corporation will be relieved from liability only to
the extent of such prejudice; nor will such omission relieve the Corporation
from any liability which it may have to Indemnitee otherwise than under this
Agreement. With respect to any Proceeding as to which Indemnitee notifies the
Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense; and
(b) The Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee; provided, however, that the Corporation
shall not be entitled to assume the defense of any Proceeding if there has been
a Change in Control or if Indemnitee shall have reasonably concluded that there
may be a conflict of interest between the Corporation and Indemnitee with
respect to such Proceeding. After notice from the Corporation to Indemnitee of
its election to assume the defense thereof, the Corporation will not be liable
to Indemnitee under this Agreement for any Expenses subsequently incurred by
Indemnitee in connection with the defense thereof, other than reasonable costs
of investigation or as otherwise provided below. Indemnitee shall have the
right to employ its own counsel in such Proceeding, but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of Indemnitee unless:
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(i) the employment of counsel by Indemnitee has been authorized by the
Corporation;
(ii) Indemnitee shall have reasonably concluded that counsel engaged by
the Corporation may not adequately represent Indemnitee; or
(iii) the Corporation shall not in fact have employed counsel to assume
the defense in such Proceeding or shall not in fact have assumed such defense
and be acting in connection therewith with reasonable diligence;
in each of which cases the fees and expenses of such counsel shall be at the
expense of the Corporation.
(c) The Corporation shall not settle any Proceeding in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; provided, however, that Indemnitee will not unreasonably
withhold his consent to any proposed settlement.
14. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to:
____________________
c/o AirTouch Communications
425 Market Street
San Francisco, CA 94105
(b) If to the Corporation, to:
AirTouch Communications
425 Market Street
San Francisco, CA 94105
Attn: Secretary
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
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15. Nonexclusivity. The rights of Indemnitee hereunder shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
applicable law, the Corporation's Certificate of Incorporation or By-laws, or
any agreements, vote of stockholders, resolution of the Board of Directors or
otherwise, and to the extent that during the Indemnification Period the rights
of the then existing directors and officers are more favorable to such
directors or officers than the rights currently provided to Indemnitee
thereunder or under this Agreement, Indemnitee shall be entitled to the full
benefits of such more favorable rights.
16. Pronouns. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
17. Certain Definitions.
(a) "Agent" shall mean any person who is or was, or who has
consented to serve as, a director, officer, employee, agent, fiduciary, joint
venturer, partner, manager or other official of the Corporation or a subsidiary
or an affiliate of the Corporation, or any other entity (including without
limitation, an employee benefit plan) either at the request of, for the
convenience of, or otherwise to benefit the Corporation or a subsidiary of the
Corporation.
(b) "Change in Control" shall mean the occurrence of any of the
following:
(i) Both (A) any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing at least 15% of
the total voting power represented by the Corporation's then outstanding voting
securities; and (b) the beneficial ownership by such person of securities
representing such percentage has not been approved by a majority of the
"continuing directors" (as defined below); or
(ii) Any "person" (as defined below) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing at least 50% of the
total voting power represented by the Corporation's then outstanding voting
securities; or
(iii) A change in the composition of the Board occurs, as a result of
which fewer than two-thirds of the incumbent directors are directors who either
(A) had been directors of the Corporation on the "look-back date" (as defined
below) (the "Original Directors") or (B) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority in the
aggregate of the Original Directors who were still in office at the
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time of the election or nomination and directors whose election or nomination
was previously so approved (the "continuing directors"); or
(iv) The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, if such merger or
consolidation would result in the voting securities of the Corporation
outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) 50% or less of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or
(v) The stockholders of the Corporation approve (A) a plan of complete
liquidation of the Corporation or (B) an agreement for the sale or disposition
by the Corporation of all or substantially all of the Corporation's assets.
For purposes of Subsection (i) above, the term "person" shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a Parent or Subsidiary or (y) a
corporation owned directly or indirectly by the stockholders of the Corporation
in substantially the same proportions as their ownership of the common stock of
the Corporation.
For purposes of Subsection (iii) above, the term "look-back date" shall
mean the later of (x) April 1, 1994 or (y) the date 24 months prior to the date
of the event that may constitute a "Change in Control."
Any other provision of this Section 17(b) notwithstanding, the term
"Change in Control" shall not include a transaction, if undertaken at the
election of the Corporation, the result of which is to sell all or
substantially all of the assets of the Corporation to another corporation (the
"surviving corporation"); provided that the surviving corporation is owned
directly or indirectly by the stockholders of the Corporation immediately
following such transaction in substantially the same proportions as their
ownership of the Corporation's common stock immediately preceding such
transaction; and provided, further, that the surviving corporation expressly
assumes this Agreement.
(c) "Disinterested Director" shall mean a director of the
Corporation who is not or was not a party to or otherwise involved in the
Proceeding in respect of which indemnification is being sought by Indemnitee.
(d) "Expenses" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees,
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travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, all other disbursements or
out-of-pocket expenses and reasonable compensation for time spent by Indemnitee
for which he is otherwise not compensated by the Corporation or any third
party) actually and reasonably incurred in connection with either the
investigation, defense, settlement or appeal of a Proceeding or establishing or
enforcing a right to indemnification under this Agreement, applicable law or
otherwise; provided, however, that "Expenses" shall not include any
Liabilities.
(e) "Final Adverse Determination" shall mean that a determination
that Indemnitee is not entitled to indemnification shall have been made
pursuant to Section 5 hereof and either (1) a final adjudication in the Court
of Chancery of the State of Delaware or decision of an arbitrator pursuant to
Section 8(a) hereof shall have denied Indemnitee's right to indemnification
hereunder, or (2) Indemnitee shall have failed to file a complaint in a
Delaware court or seek an arbitrator's award pursuant to Section 8(a) for a
period of one hundred twenty (120) days after the determination made pursuant
to Section 5 hereof.
(f) "Independent Legal Counsel" shall mean a law firm or a member of
a firm selected by the Corporation and approved by Indemnitee (which approval
shall not be unreasonably withheld) or, if there has been a Change in Control,
selected by Indemnitee and approved by the Corporation (which approval shall
not be unreasonably withheld), that neither is presently nor in the past five
years has been retained to represent: (i) the Corporation or any of its
subsidiaries or affiliates, or Indemnitee or any corporation of which
Indemnitee was or is a director, officer, employee or agent, or any subsidiary
or affiliate of such a corporation, in any material matter, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Legal Counsel" shall not
include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's right to
indemnification under this Agreement.
(g) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
Proceeding.
(h) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, that is associated with Indemnitee's
being an Agent of the Corporation.
-12-
<PAGE> 13
18. Binding Effect; Duration and Scope of Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns (including any
direct or indirect successor by purchase, merger, consolidation or otherwise to
all or substantially all of the business or assets of the Corporation),
spouses, heirs and personal and legal representatives. This Agreement shall
continue in effect during the Indemnification Period, regardless of whether
Indemnitee continues to serve as an Agent.
19. Severability. If any provision or provisions of this Agreement
(or any portion thereof) shall be held to be invalid, illegal or unenforceable
for any reason whatsoever:
(a) The validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and
(b) To the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any
provision held invalid, illegal or unenforceable.
20. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be
performed entirely within the State of Delaware, without regard to conflict of
laws rules.
21. Entire Agreement. This Agreement represents the entire
agreement between the parties hereto, and there are no other agreements,
contracts or understandings between the parties hereto with respect to the
subject matter of this Agreement, except as specifically referred to herein or
as provided in Section 15 hereof.
Executed as of the 19th day of September, 1994.
AIRTOUCH COMMUNICATIONS, INC.
By
--------------------------
INDEMNITEE
-----------------------------
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<PAGE> 1
EXHIBIT 10.25
TRUST AGREEMENT NO. 1
FOR
AIRTOUCH COMMUNICATIONS
SUPPLEMENTAL EXECUTIVE PENSION PLAN BENEFITS
(FIRST AMENDMENT AND RESTATEMENT EFFECTIVE
AS OF OCTOBER 31, 1994)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Establishment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Payments to Plan Participants and Their Beneficiaries . . . . . . . . . . . . . 4
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiaries When a
Company is Insolvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Payments to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Investment Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. Disposition of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Accounting by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. Responsibilities and Authorities of the Trustee and Investment Manager . . . . 11
Section 9. Compensation and Expenses of Trustee . . . . . . . . . . . . . . . . . . . . . 14
Section 10. Resignation or Removal of the Trustee . . . . . . . . . . . . . . . . . . . . . 14
Section 11. Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 12. Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 14. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
TRUST AGREEMENT NO. 1
FOR
AIRTOUCH COMMUNICATIONS
SUPPLEMENTAL EXECUTIVE PENSION PLAN BENEFITS
(FIRST AMENDMENT AND RESTATEMENT EFFECTIVE
AS OF OCTOBER 31, 1994)
This Trust Agreement is made this thirty-first day of October, 1994,
by and between AirTouch Communications, a California Corporation ("ATC"), and
Wells Fargo Bank, N.A (the "Trustee").
Any affiliate of ATC which participates in the executive compensation
plans subject to this Trust Agreement may become a party to this Trust
Agreement by indicating its acceptance, in writing, to ATC and the Trustee.
The term "Company" as used in this Trust Agreement shall include ATC and any
affiliate of ATC which participates in this Trust Agreement unless the context
requires otherwise. In the event of a merger, consolidation or liquidation of
a Company into or with any other corporation, or the sale or other transfer of
all or substantially all of a Company's operating assets, the resulting
successor or purchaser corporation shall automatically be substituted for such
Company under this Trust Agreement if such successor or purchaser corporation
is an affiliate of ATC, participates in any of the executive compensation plans
related to this Trust Agreement and indicates its agreement to participate in
this Trust Agreement in writing to ATC and the Trustee. A successor or
purchaser corporation that is not affiliated with ATC or does not choose to
participate in this Trust Agreement shall be known as a "Former Company."
"Former Company" also means a Company which is designated by ATC as a Former
Company for purposes of withdrawal by such Company from the Trust and
disposition of the percentage interest of such Company from the Trust.
WHEREAS, ATC has adopted the executive benefit plans listed in
Appendix A (the "Plans"); and
WHEREAS, ATC wishes to establish a trust (hereinafter called the
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plans; and
<PAGE> 4
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) The Company hereby deposits with the Trustee in trust one
thousand dollars ($1000.00), which shall become the principal of the Trust to
be held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust and any earnings thereon shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plans and this Trust Agreement
shall be mere unsecured contractual rights of Plan participants and their
beneficiaries against their Company. Any assets held by the Trust will be
subject to the claims of that Company's general creditors under federal and
state law in the event of that Company's Insolvency, as defined in Section 3(a)
herein.
2
<PAGE> 5
(e) Upon a Change of Control, each Company shall, as soon as
possible, but in no event longer than 60 days following the Change of Control,
as defined herein, make an irrevocable contribution to the Trust in an amount
that is sufficient to pay each Plan participant or beneficiary the benefits to
which Plan participants or their beneficiaries would be entitled from such
Company pursuant to the terms of the Plans as of the date on which the Change
of Control occurred.
(f) For purposes of this Trust Agreement, each Company shall be
deemed to have a "percentage interest" in the Trust assets. The percentage
interest shall be equal to a fraction, the numerator of which shall equal that
Company's contributions and income thereon, less payments and expenses of the
Trust charged to that Company, and the denominator of which shall be the total
amount of Trust assets. The Trustee's determination with respect to the
percentage interest of each Company shall be conclusive and binding upon each
Company. The money or other property attributable to the percentage interest
of any Company shall not be available to satisfy the claims of any other
Company's creditors or the Plan participants of any other Company or their
beneficiaries, unless such Company consents to the use of the money or other
property attributable to its percentage interest in the Trust to pay the claims
of the Plan participants of another Company and their beneficiaries.
(g) Not later than 90 days following the end of each Plan year,
each Company shall be required to make an irrevocable contribution to the Trust
in an amount sufficient to pay each Plan participant or beneficiary the
benefits to which the Plan participant or beneficiary would be entitled from
such Company pursuant to the terms of the Plan as of the close of such Plan
year. If a Company fails to make such contribution for a Plan year, the
principal and income of the Trust shall in no event be used to pay any benefits
to which Plan participants or beneficiaries become entitled from such Company
pursuant to the terms of the Plans after the close of such Plan year until such
contribution has been made.
(h) For purposes of Section 1(e) and Section 1(g), the amount of
the benefit to which a participant or beneficiary would be entitled as of the
specified date shall be determined by applying the terms of the applicable Plan
as if the participant's employment with the Company had terminated on such
date.
3
<PAGE> 6
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) ATC shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for or available under
the Plans) and the time of commencement for payment of such amounts. Except
as otherwise provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plans and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by the Company.
(b) Except in the event of a Change of Control and for the 3-year
period following such Change of Control, the Trustee may rely upon, and shall
be under no duty to verify, the formula and other instructions contained in the
Payment Schedule delivered to the Trustee by ATC in accordance with Section
2(a), and may determine that any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plans have been reported, withheld and paid by the Company by
receipt of a certification to that effect from the Company.
(c) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined by ATC or such
party as it shall designate under the Plans, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plans.
(d) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plans. The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants or
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of the Plans, the Company shall make the balance of each such
payment as it falls due. The Trustee
4
<PAGE> 7
shall notify the Company where principal and earnings are not sufficient.
(e) In the event the Company makes payment of benefits as
permitted in Section 2(d), the Company shall provide the Trustee with a
schedule of all benefits, and taxes attributable thereto, that have been paid
by the Company within 15 days after the end of the quarter in which such
payments have been made.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARIES WHEN A COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if their Company is Insolvent. A Company
shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the
Company is unable to pay its debts as they become due, or (ii) the Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Company under federal and state law as
set forth below.
(1) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that the
Company has become Insolvent, the Trustee shall determine whether the
Company is Insolvent and, pending such determination, the Trustee
shall discontinue payment of benefits to the Plan participants or
their beneficiaries.
(2) Unless the Trustee has actual knowledge of a
Company's Insolvency, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on such
evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for
making a determination concerning the Company's solvency.
5
<PAGE> 8
(3) If at any time the Trustee has determined that a
Company is Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the
Trust for the benefit of the Company's general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due under the Plans
or otherwise.
(4) The Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 2
of this Trust Agreement only after the Trustee has determined that the
Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by any Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as provided in Sections 3 and 12 hereof, no Company shall have
the right or power to direct the Trustee to return to the Company or to divert
to others any of the Trust assets before all payments of benefits have been
made to Plan participants and their beneficiaries pursuant to the terms of the
Plans.
SECTION 5. INVESTMENT AUTHORITY.
(a) ATC may appoint an individual or organization to invest and
reinvest assets of the Trust (an "Investment Manager"). ATC shall notify the
Trustee of the appointment of any Investment Manager and identify the Trust
assets allocated to such Investment Manager for purposes of investment and
reinvestment. The terms and conditions of appointment, authority and retention
shall be the sole responsibility of ATC. ATC shall cause each Investment
Manager to furnish the Trustee with the names and
6
<PAGE> 9
signatures of those persons authorized to direct the Trustee on its behalf.
The Trustee shall have the right to assume, in the absence of written notice to
the contrary, that no event constituting a change in the authority of any such
person has occurred. ATC may also direct the Trustee to divide the assets of
the Trust into separate parts for investment purposes and shall have the power,
from time to time, to modify or terminate any existing investment arrangement
as it shall deem appropriate.
(b) The Trust shall be invested and reinvested without distinction
between income and principal. ATC may allocate and reallocate investment
responsibility with respect to any assets of the Trust among ATC, any
Investment Manager and the Trustee. Any such allocations shall be made by ATC
in a written instrument delivered to the Trustee and, if appropriate, the
affected Investment Manager, and shall continue in force and effect until
revoked by ATC in a writing delivered to the Trustee. Any Investment Manager
acting hereunder shall have sole authority and responsibility for the
management, investment and reinvestment of the Trust assets allocated to such
Investment Manager. The portion of the Trust over which ATC or an Investment
Manager shall have investment responsibility is hereinafter referred to as a
"Directed Fund." The Trustee shall be under no duty or obligation to review or
to question any direction of ATC or an Investment Manager, or to review
securities or any other property held in any Directed Fund with respect to
prudence or proper diversification or compliance with any limitation on the
Investment Manager's authority under the terms of any agreement entered into
between ATC and the Investment Manager or imposed by applicable law, or to make
any suggestions or recommendations to ATC or an Investment Manager with respect
to the retention or investment of any assets of any Directed Fund, and shall
have no authority to take any action or to refrain from taking any action with
respect to any asset of a Directed Fund unless and until it is directed to do
so by ATC or an Investment Manager.
(c) The assets of this Trust may be invested and reinvested in
such personal property investments and insurance and annuity contracts as the
individual or organization having investment responsibility, in its sole
discretion, may deem appropriate and consistent with the investment directions
communicated by ATC, including without limiting the generality of the
foregoing: common and preferred stocks; trusts and participation certificates;
bonds; debentures; covered call options; notes secured by personal property;
obligations of governmental bodies, both domestic and foreign; notes,
commercial paper and other evidences of indebtedness, secured or unsecured,
including
7
<PAGE> 10
variable amount notes; convertible securities of all types and kinds; mutual
fund shares; interest-bearing savings or deposit accounts with any
federally-insured bank (including the Trustee) or savings and loan association;
contracts for the immediate or future delivery of financial instruments of any
issuer or of any other property; all forms of options in any combination;
investments commonly known as "synthetic securities" or "derivative securities"
(including, without limitation, investments referred to as asset swaps,
collateralized asset swaps, equity swaps, fixed income swaps, "pure" and
"participating" synthetic securities, and similar arrangements as may now exist
or may be developed in the future); and any other personal property permitted
as investments under applicable law. The Trustee shall not be responsible
under this Agreement, or otherwise, in any way for the form, terms, payment
provisions or issuer of any insurance contract which it is directed to purchase
and/or hold as contractholder, or for performing any functions under any such
insurance contract (other than the execution of documents incidental thereto
and the transfer or receipt of funds thereunder), on the directions of an
Investment Manager or, except in the event of a Change of Control and for the
3-year period following such Change of Control, on the directions of ATC.
(d) The assets of this Trust may be invested and reinvested in
such forms of collective investments as may be consistent with the investment
policies developed and communicated by ATC to the Trustee or the appropriate
Investment Manager. To the extent that the Trust is invested in a common or
collective trust, the terms of the agreement or declaration of trust
establishing such common or collective trust fund shall become a part of this
Trust as if set forth in full herein, to the extent of the allocable share of
the Trust therein.
(e) The Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by ATC.
(f) The Trustee may acquire securities issued by ATC directly from
ATC or from any third party, in such manner and upon such terms as the Trustee
deems appropriate and advisable in the Trustee's sole discretion. There shall
be no limitation on the amount or percentage of Trust assets that may be held
in the form of ATC securities. To the extent the Trustee is directed by ATC or
an Investment Manager to invest in ATC securities, the Trustee shall have no
duty or obligation to sell any portion of the assets of the Trust invested in
ATC securities for the purpose of establishing a mixed, balanced or diversified
8
<PAGE> 11
portfolio of investments and the Trustee shall not be liable for any loss
attributable to the investment of Trust assets in ATC securities.
(g) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee, and shall in
no event be exercisable by or rest with Plan participants, except that voting
rights with respect to ATC securities will be exercised by ATC.
(h) To the extent any assets of the Trust are held in a Directed
Fund, the Trustee shall exercise the rights associated with such assets only as
directed by ATC or an Investment Manager, as the case may be. Notwithstanding
the preceding sentence of this Section 5(h) and the provisions of Section 5(g),
in the event of a Change of Control and for the 3-year period following such
Change of Control, the Trustee shall exercise voting rights with respect to ATC
securities.
(i) ATC shall have the right at any time, and from time to time in
its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by ATC in a non-fiduciary
capacity without the approval or consent of any person in a fiduciary capacity.
(j) Except in the event of a Change of Control and for the 3-year
period following such Change of Control, the Trustee shall be under no duty or
obligation to review or to question any direction of any Company pursuant to
Section 5(i), or to review securities so substituted or any other property so
held with respect to prudence or proper diversification, or to make any
suggestions or recommendations to such Company with respect to the retention or
investment of any such substituted assets and shall have no authority to take
any action with respect to such substituted assets unless and until it is
directed to do so by ATC.
(k) The Trustee shall have the following discretionary powers and
authority in the investment of the Trust with respect to the assets of the
Trust under its management and control and, with respect to a Directed Fund,
ATC or the Investment Manager, as the case may be, shall exercise such powers
and authority:
(1) to purchase, sell, exchange, convey, transfer or
otherwise acquire or dispose of any property, by private contract or
at public auction; and
9
<PAGE> 12
(2) to give general or special proxies or powers of
attorney with or without power of substitution; to exercise any
conversion privileges, subscription rights or other options and to
make any payments incidental thereto; to consent to or otherwise
participate in corporate reorganizations or other changes affecting
corporate securities and to delegate discretionary powers and pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to securities or
other property held in the Trust; and
(3) to make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such records as shall be necessary to determine each Company's
percentage interest in the Trust and such other specific records as shall be
agreed upon in writing between ATC and the Trustee. The Trustee shall submit
to ATC and each Company such interim valuations, reports or other information
as ATC and the Trustee shall mutually agree. Within 60 days following the
close of each calendar year and within 60 days after the removal or
resignation of the Trustee, the Trustee shall deliver to ATC a written account
of its administration of the Trust during such year or during the period from
the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or
10
<PAGE> 13
resignation, as the case may be. ATC shall review each such accounting provided
by the Trustee and within a reasonable period shall advise the Trustee in
writing of any corrections or specific objections to any transaction reported;
provided, however, that nothing in the preceding clause shall prevent ATC from
advising the Trustee of any corrections later discovered to be necessary for
accurate Trust records and accounting.
SECTION 8. RESPONSIBILITIES AND AUTHORITIES OF THE TRUSTEE AND INVESTMENT
MANAGER.
(a) The Trustee and each Investment Manager appointed pursuant to
Section 5 shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee shall incur
no liability to any person for any action taken pursuant to a written
direction, request or approval given by the Company or an Investment Manager
which is contemplated by, and in conformity with, the terms of this Trust
Agreement or anything omitted to be done in the absence of such direction,
request or approval with respect to a Directed Fund, except that any liability
of the Trustee for fraud, gross negligence or willful misconduct shall
continue. In the event of a dispute between a Company and any party, including
any other Company respecting assets in the Trust, the Trustee may apply to a
court of competent jurisdiction to resolve the dispute.
(b) In the absence of fraud, gross negligence or misconduct on the
part of the Trustee, ATC hereby agrees to indemnify the Trustee for, and hold
it harmless against, any and all liabilities, losses, claims, damages, actions,
costs and expenses (including reasonable counsel fees) which may be incurred by
or assessed against it as a direct or indirect result of anything done in good
faith, or alleged to have been done, by or on behalf of the Trustee, in
reliance upon the written directions of ATC, a Company or an Investment Manager
appointed by ATC, or anything omitted to be done in good faith, or alleged to
have been omitted, in the absence of such directions.
(c) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, ATC agrees to indemnify the Trustee against the
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments.
11
<PAGE> 14
If ATC does not pay such costs, expenses and liabilities in a reasonably timely
manner, the Trustee may charge such expenses against the Trust.
(d) If at any time the Trustee determines (as a result of notice
from the participants or beneficiaries or otherwise) that the Trust assets and
earnings thereon are insufficient to make benefit payments to participants or
beneficiaries that have become due, and if the Trustee has no reasonable
expectation that the Trustee will be able within 30 days to cause all past due
Plan benefits to be paid from Trust assets, and no reasonable expectation that
the Company responsible for such past due benefits will within 30 days cause
all past due Plan benefit payments to be made, and no reasonable expectation
that all past due Plan benefit payments will within 30 days be paid by a
combination of Company payments and payments from Trust assets, the Trustee
shall bring an action or proceeding in a court of competent jurisdiction
against the Company responsible for such past due benefit payments under the
Plan to compel such responsible Company to make contributions to the Trust as
necessary to enable the Trustee to pay all past due Plan benefits and to make
Plan benefit payments as they become due. The Trustee shall determine whether
benefit payments are past due with reference to the provisions for payment set
forth in Section 2 hereof. The Trustee shall also be authorized to apply to a
court of competent jurisdiction for direction at any time it determines (as a
result of notice from the participants or beneficiaries or otherwise) that it
has insufficient information to determine the amounts of benefit payments that
would be consistent with the provisions of the Plans. The Company hereby
agrees to pay all attorneys' fees and expenses incurred by the Trustee in
bringing such a cause of action regardless of its outcome. If the Company does
not pay such attorney's fees and expenses in a reasonably timely manner, the
Trustee may charge such payment against the Trust.
(e) The Trustee may consult with legal counsel (who may also be
counsel for any Company generally) with respect to any of its duties or
obligations hereunder.
(f) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder. If the Company does
not pay the fees of such professionals in a reasonably timely manner, the
Trustee may charge such payment against the Trust.
12
<PAGE> 15
(g) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as an asset of
the Trust, the Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(h) However, notwithstanding the provisions of Section 8(g) above,
the Trustee shall be obligated to follow the written directions of ATC with
respect to (1) the payment of premiums for life insurance policies held as an
asset of the Trust, (2) the borrowing of part or all of the cash value, or
increase in cash value, of any life insurance policy held as an asset of the
Trust, and (3) except in the event of a Change of Control and for the 3-year
period following such Change of Control, the lending to the Company of the
proceeds of any borrowing against an insurance policy held as an asset of the
Trust.
(i) The Trustee may register any securities held in the Trust in
its own name or in the name of a nominee and hold any securities in bearer
form, and combine certificates representing such securities with securities of
the same issue held by the Trustee in other fiduciary or representative
capacities or as agents for customers, or deposit or arrange for the deposit of
such securities in any qualified central depository even though when so
deposited, such securities may be merged and held in bulk in the name of the
nominee of such depository with other securities deposited therein by other
depositors, or deposit or arrange for the deposit of any securities issued by
the United States Government, or any agency or instrumentality thereof, with a
Federal Reserve Bank, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust Fund.
(j) With the consent of ATC, the Trustee may compromise, compound,
submit to arbitration or settle any debt or obligation owing to or from or
otherwise adjust all claims in favor of or against the Trust. In the event of
a Change of Control and for the 3-year period following such Change of Control,
the Trustee may exercise the powers set forth in this Section 8(j) with or
without the consent of ATC.
(k) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the
13
<PAGE> 16
Trustee shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative Regulations promulgated
pursuant to the Internal Revenue Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
The Trustee shall be entitled to reasonable compensation for its
services and shall be reimbursed for all reasonable expenses incurred by it in
performing its duties hereunder including, but not limited to, legal and
accounting expenses. Such compensation shall be set forth in a separate
schedule. Such schedule may be modified from time to time as agreed by ATC, or
its successor, and the Trustee. All such compensation and expenses shall be
paid by the Company; provided, however, that such compensation and expenses
shall constitute a charge upon the Trust, and may be withdrawn by the Trustee
from the Trust upon prior written notice to the Company if not otherwise paid
by the Company within 60 days of such prior written notice. Upon written
direction to the Trustee from a Company, any costs or expenses that are
chargeable to the Trust but which for administrative convenience and efficiency
are paid or incurred by a Company shall be fully reimbursed by the Trust to
that Company upon presentation to the Trustee of a copy of the invoice of the
service provider and a certification by the Company that the invoice has been
paid, or, if services are provided by a Company, upon presentation to the
Trustee of an accounting of such costs and expenses incurred with respect to
such services, including any costs and expenses incurred by a Company in
connection with administrative activities for the Plans. In all cases the
Trustee shall be entitled to rely on the Company's statements and directions
concerning the payment of any such expenses and shall be fully protected in
making such payments pursuant to the directions of the Company.
SECTION 10. RESIGNATION OR REMOVAL OF THE TRUSTEE.
(a) The Trustee may resign at any time by written notice to ATC,
which shall be effective 60 days after receipt of such notice unless ATC and
the Trustee agree otherwise.
(b) The Trustee may be removed by ATC, or its successor, on 60
days notice or upon shorter notice accepted by the Trustee.
14
<PAGE> 17
(c) Upon a Change of Control, as defined herein, the Trustee may
not be removed by ATC for 3 years.
(d) If the Trustee resigns within 3 years after a Change of
Control, as defined herein, the Trustee shall select a successor Trustee in
accordance with the provisions of Section 11(b) hereof prior to the effective
date of the Trustee's resignation.
(e) Upon resignation or removal of the Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 90 days after
receipt of the notice of resignation, removal or transfer, unless ATC extends
the time limit.
(f) If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If the Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, ATC, or its successor may appoint a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor Trustee to replace Trustee upon resignation or
removal. The appointment of a successor Trustee shall be effective when
accepted in writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or reasonably
requested by ATC or the successor Trustee to evidence the transfer.
(b) If the Trustee resigns pursuant to the provisions of Section
10(d) hereof and selects a successor Trustee, the Trustee may appoint any third
party such as a bank trust department or other party that may be granted
corporate trustee powers under state law. The appointment of a successor
Trustee shall be effective when accepted in writing by the new Trustee. The
new Trustee shall have all the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The
15
<PAGE> 18
former Trustee shall execute any instrument necessary or reasonably requested
by the successor Trustee to evidence the transfer.
(c) Upon the appointment of any successor Trustee pursuant to this
Section 11 and acceptance of the appointment by such successor Trustee, the
Trustee shall have no responsibility to the Trust for the acts of such
successor Trustee. In addition, the Trustee shall have no responsibility for
assets of the Trust or for acts taken with respect to assets of the Trust
following their transfer to such successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and ATC, or its successor. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Plans or
shall make the Trust revocable after it has become irrevocable in accordance
with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans. Upon termination of the Trust any assets
remaining in the Trust shall be returned to the Company.
(c) Notwithstanding any other provision of this Trust, upon
written approval of two-thirds (2/3) of the Participants entitled to payment of
benefits pursuant to the terms of the Plans, ATC may terminate this Trust prior
to the time all benefit payments under the Plans have been made.
(d) Upon termination of the Trust pursuant to Section 12(b) or
Section 12(c), at the direction of ATC all assets in the Trust at termination
shall be returned to the Companies in proportion to their respective percentage
interests.
(e) Notwithstanding any other provision of this Trust, in the
event that a Company becomes a Former Company, the Trustee shall follow the
written directions of ATC with respect to the disposition of such Former
Company's percentage interest in the Trust.
(f) Sections 1(e), 1(f), 5(h), 8(d), 8(h), 10(c), 10(d) and 12 of
this Trust Agreement may not be amended by ATC, or its
16
<PAGE> 19
successor, for 3 years following a Change of Control, as defined herein.
SECTION 13. MISCELLANEOUS.
(a) Any provisions of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(d) For purposes of this Trust Agreement, "Change of Control"
shall mean the occurrence of any of the following events:
(1) Both:
(A) Any "person" (as defined below) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of ATC representing at least 20
percent of the total voting power represented by ATC's then
outstanding voting securities; and
(B) The beneficial ownership by such person of
securities representing such percentage has not been approved
by a majority of the "continuing directors" (as defined
below); or
(2) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of ATC representing at least 50 percent of the total voting
power represented by ATC's then outstanding voting securities; or
(3) A change in the composition of ATC's Board of Directors
occurs, as a result of which fewer than two-thirds of the incumbent
directors are directors (the "continuing directors") who either:
17
<PAGE> 20
(A) Had been directors of ATC on the "look-back
date" (as defined below) (the "original directors"); or
(B) Were elected, or nominated for election, to such
Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office
at the time of the election or nomination and the directors
whose election or nomination was previously so approved; or
(4) The shareholders of ATC approve a merger or consolidation
of ATC with any other corporation, if such merger or consolidation
would result in the voting securities of ATC outstanding immediately
prior thereto representing (either by remaining outstanding or by
being converted into voting securities of the surviving entity) 50
percent or less of the total voting power represented by the voting
securities of ATC or such surviving entity outstanding immediately
after such merger or consolidation; or
(5) The shareholders of ATC approve (A) a plan of complete
liquidation of ATC or (B) an agreement for the sale or disposition by
ATC of all or substantially all of ATC's assets.
For purposes of Paragraphs (1) and (2) above, the term "person" shall
have the same meaning as when used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, but shall exclude (A) a trustee or
other fiduciary holding securities under an employee benefit plan of ATC or of
a parent or subsidiary of ATC, (B) a corporation owned directly or indirectly
by the shareholders of ATC in substantially the same proportions as their
ownership of the common stock of ATC and (C) Pacific Telesis Group.
For purposes of Paragraph (3) above, the term "look-back date" shall
mean the later of (A) April 1, 1994, or (B) the date 24 months prior to the
date of the event that may constitute a Change of Control.
Any other provision of this Subsection (d) notwithstanding, the term
"Change of Control" shall not include either of the following events, if
undertaken at the election of ATC:
(A) A transaction, the sole purpose of which is to change
the state of ATC's incorporation; or
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<PAGE> 21
(B) A transaction, the result of which is to sell all or
substantially all of the assets of ATC to another corporation (the
"surviving corporation"); provided that the surviving corporation is
owned directly or indirectly by the shareholders of ATC immediately
following such transaction in substantially the same proportions as
their ownership of ATC's common stock immediately preceding such
transaction; and provided, further, that the surviving corporation
expressly assumes this Trust Agreement.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be October 31, 1994.
ATC and the Trustee have caused this Trust Agreement to be executed by
their respective duly authorized officers on the dates set forth below:
AIRTOUCH COMMUNICATIONS
Dated: By: /S/ Mohan S. Gyani
-------------- ----------------------------
As Its: Vice President Finance &
Treasurer
------------------------
WELLS FARGO BANK, N.A.
Dated: November 14, 1994 By: /S/ Judith Dunn
----------------- ----------------------------
As Its: Assistant Vice President
------------------------
19
<PAGE> 22
APPENDIX A
EXECUTIVE BENEFIT PLANS
AirTouch Communications Supplemental Executive Pension Plan
20
<PAGE> 1
EXHIBIT 10.26
AIRTOUCH COMMUNICATIONS
DEFERRED COMPENSATION PLAN
(Third Amendment and Restatement as of April 1, 1994)
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Employees Eligible Under Pre-Separation Plan . . . . . . . . . . . . . . . . . . . . 2
2.2 Eligible Employees on and After Separation Date . . . . . . . . . . . . . . . . . . 2
SECTION 3. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Election to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Form of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Newly Eligible Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Termination and Modification of Election . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. Allocations to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Match Based on Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Restoration Based on Deferred Compensation . . . . . . . . . . . . . . . . . . . . . 6
4.4 Restoration Based on Excess Compensation . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Interest Credited to Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Date of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Distribution Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Immediate Single Sum Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5 Installment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 Hardship Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7 Payment Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 No Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Plan Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.6 Claims and Review Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE> 3
AIRTOUCH COMMUNICATIONS
DEFERRED COMPENSATION PLAN
(Third Amendment and Restatement as of April 1, 1994)
SECTION 1. INTRODUCTION.
Effective January 1, 1989, the AirTouch Communications
Deferred Compensation Plan ("Plan") was established to provide deferred
compensation to a select group of management and highly compensated employees
of AirTouch Communications and its subsidiaries. The Plan is an unfunded
employee pension benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974.
Effective as of the Separation Date, the Separation Agreement
obligates the Company to retain the liability to provide benefits under this
Plan to all Participants, including Participants who will be employed by
Pacific Telesis Group and its subsidiaries at Separation Date. Further,
pursuant to Section 9.02 of Appendix A of such agreement, each Participant in
the Plan who is employed by Pacific Telesis Group and its subsidiaries at
Separation Date shall not be considered to have terminated employment for
purposes of eligibility to receive a distribution from the Plan.
Effective as of Separation Date, the Plan is hereby amended
and restated to comply with the Separation Agreement and to make the following
changes: to increase the number of eligible groups of employees, to permit
participation regardless of length of service, to increase the maximum rate of
deferrals, to provide benefits previously provided by the PacTel Corporation
Excess Benefit Plan relating to limitations under section 401(a)(17) of the
Code, to change the rate of interest credited to Accounts and to approve the
transfer of the obligation to provide the restoration pension benefit
attributable to deferred compensation from this Plan to another plan maintained
by the Company.
Effective as of April 1, 1994, the Plan is further amended to
reflect the new name of the Company, to require annual elections to
participate, to clarify the method of determining the rate of interest to be
credited to Accounts, to permit certain newly eligible Officers at Separation
Date to defer STIP Awards and to recognize certain deferral elections
previously made under the Pacific Telesis Group Executive Deferral Plan.
<PAGE> 4
SECTION 2. ELIGIBILITY.
2.1 EMPLOYEES ELIGIBLE UNDER PRE-SEPARATION PLAN. Each Employee
who was designated as eligible to participate in the Plan pursuant to the
provisions of the Plan in effect before the Separation Date shall continue to
be eligible to participate.
2.2 ELIGIBLE EMPLOYEES ON AND AFTER SEPARATION DATE. Employees
who are Officers and Select Employees of the Company or a Participating Company
and who are not eligible under Section 2.1 shall be eligible to participate in
the Plan.
2
<PAGE> 5
SECTION 3. PARTICIPATION.
3.1 ELECTION TO PARTICIPATE. Prior to the beginning of each
calendar year (except as provided in Section 3.3 below), in accordance with
procedures established by the Plan administrator, an eligible Employee may
elect to participate in the Plan (a) by directing that (i) all or part of his
or her Salary and/or (ii) all or part of his or her awards actually payable
under the Short-Term Incentive Plan (herein referred to as a "STIP Award")
shall be credited to the Employee's Account under the Plan and/or (b) by
electing to receive an allocation of 401(a)(17) Excess Contributions to his or
her Account under the Plan, if eligible therefor. As to Salary, this election
shall be effective for Salary otherwise payable for service in the next
calendar year after the year of election. As to STIP Awards, this election
shall be effective for awards that would otherwise be payable in the second
calendar year following the year of election. In no event, however, shall
Salary and/or STIP Awards (collectively "Compensation") so credited during any
calendar year (A) be less than $2,500 of Salary, or less than $5,000 of STIP
Award, as applicable, or (B) include that amount of current Salary required for
all applicable tax, Social Security and employee benefit plan withholding. An
eligible Employee who does not elect to defer a portion of his or her
Compensation nonetheless may elect to participate in the Plan and receive the
401(a)(17) Excess Contributions, if eligible therefor.
3.2 FORM OF ELECTION. An election to participate in the Plan
shall be in the form of a document approved by the Plan administrator, executed
by the Employee and filed with the Employee's Participating Company each year.
An election related to Salary otherwise payable for services in any calendar
year or an election related to 401(a)(17) Excess Contributions shall become
irrevocable on the last day prior to the beginning of such calendar year. An
election related to the STIP Award otherwise payable in any calendar year shall
become irrevocable on the last day prior to the beginning of the preceding
calendar year.
3.3 NEWLY ELIGIBLE EMPLOYEES. Within thirty (30) days after first
becoming eligible to participate pursuant to Section 2 of the Plan, an Employee
may elect to defer Salary payable for service remaining in the calendar year by
filing an election to participate pursuant to procedures established by the
Plan Administrator. An election that is filed by the fifteenth day of a month
shall be effective with respect to Salary payable for service in subsequent
months in that year. At the same time the Employee is eligible to elect to
defer Salary, the Employee may elect to receive 401(a)(17) Excess Contributions
for the year, if eligible therefor.
Newly eligible Employees shall not be eligible to defer STIP
Awards, except as provided in Section 3.2. This section also shall apply to
any Employee who first becomes eligible to participate in the Plan on or about
the Separation Date. In addition, any such Employee who is an Officer and who
participated in the Pacific Telesis Group Executive Deferral Plan for 1994
shall be eligible to defer the 1994 STIP Award attributable to service
remaining in 1994. Further, any election to defer STIP or similar awards under
the Pacific Telesis Group Executive Deferral Plan shall be treated as made
under this Plan for the portion of the STIP Award attributable to service
before the Separation Date. The total STIP Award deferred under this Plan for
1994 shall not exceed the deferral that would have been made under the Pacific
Telesis Group Executive Deferral Plan for 1994 relating to non-Salary
deferrals.
3
<PAGE> 6
In addition to the deferrals provided for under Section 3.1,
with respect to any Employee who is an Officer and who participated in the
Pacific Telesis Group Executive Deferral Plan for 1994, any election under that
plan to defer Long-Term Incentive Plan awards for the 1992-1994 and 1993-1995
cycles shall be treated as made under this Plan.
3.4 TERMINATION AND MODIFICATION OF ELECTION. An election shall
continue until the Employee terminates or modifies such election by written
notice in a form approved by the Plan administrator, or until the Employee
ceases to be employed by his or her Participating Company (other than a
transfer to another Participating Company after which the Employee is still
eligible to participate in the Plan), in which case the Employee shall be
considered to have terminated the election. Any such termination or
modification shall become effective at the time an election would become
effective under Section 3.1.
3.5 REINSTATEMENT. An eligible Employee who has filed a
termination of election may again file an election to participate with respect
to Compensation otherwise payable as provided under Section 3.1.
3.6 ESTABLISHMENT OF ACCOUNT. An Account shall be established for
each eligible Employee who becomes a Participant. The Account shall be
credited with allocations under Section 4 and debited with withdrawals and
distributions under Section 5.
4
<PAGE> 7
SECTION 4. ALLOCATIONS TO ACCOUNTS.
4.1 DEFERRED COMPENSATION. Deferred amounts related to
Compensation that would otherwise have been distributed in cash by a
Participating Company shall be credited to the Employee's Account and shall
bear interest from the date the Compensation would otherwise have been paid.
4.2 MATCH BASED ON DEFERRED COMPENSATION. After the Employee has
made the maximum elective deferrals under section 402(g) of the Code for the
calendar year (as further limited by section 401(k)(3) of the Code, if
applicable) to an employee benefit plan that is maintained by the Company or
any corporation affiliated with and that is qualified under sections 401(a) and
401(k) of the Code, matching amounts based on Compensation deferred pursuant to
this Plan ("Deferred Match") and interest thereon shall be credited to the
Employee's Account, as provided below.
(a) Subject to the limitations provided in (b) and (c) below,
the Deferred Match for a calendar year shall be equal to:
(i) The dollar amount of Compensation deferred under
this Plan and credited to an Employee's Account under Section 4.1 for
such year, multiplied by--
(ii) The Matching Rate (the percentage in the Retirement
Plan in effect for that calendar year at which the Employee's salary
deferrals and employee contributions under the Retirement Plan are
matched by employing Company contributions).
(b) Notwithstanding the provisions of (a) above, the maximum
Deferred Match that may be credited to an Employee's Account hereunder with
respect to Compensation for a particular calendar year shall not exceed:
(i) The Employee's Compensation for that calendar year,
multiplied by--
(ii) The lesser of (A) six percent (6%), or (B) a
percentage equivalent to a fraction, the numerator of which is the
total amount for that calendar year that the Employee caused to be
contributed as salary deferrals or employee contributions to the
Employee's account in the Retirement Plan plus the amount of the
Employee's Compensation for that calendar year actually deferred
pursuant to this Plan, and the denominator of which is the Employee's
Compensation for that calendar year, multiplied by--
(iii) The Matching Rate (the percentage under the
Retirement Plan in effect for that calendar year at which the
Employee's salary deferrals and employee contributions are matched by
company contributions) under the Retirement Plan, less
(iv) The sum of (A) the amounts credited to the
Employee's account under the Retirement Plan as matching company
contributions for that calendar year and (B) the amounts
5
<PAGE> 8
credited to the Employee's Account as the 401(a)(17) Match under
Section 4.4 of the Plan for that calendar year.
If this maximum limitation is reached with respect to a particular calendar
year, no Deferred Match shall be credited with respect to subsequent amounts of
Compensation for that calendar year deferred pursuant to this Plan.
(c) In making the determinations in (a) and (b) above, the
provisions regarding matching company contributions in the Retirement Plan
shall take precedence over the provisions of this Section 4.2. The limitations
of (a) and (b) above shall be applied to limit the crediting of Deferred Match
hereunder, and shall not limit or affect the application of the provisions
regarding matching Company contributions in the Retirement Plan.
(d) The Deferred Match, as limited by (b) and (c) above,
shall be credited to the Employee's Account effective as of the same time that
the amounts of deferred Compensation to which the Deferred Match relates are
credited to the Employee's Account, except as follows. In no event shall the
Deferred Match for a calendar year be credited until after the Employee has
made the maximum elective deferrals for that calendar year, as provided under
section 402(g) of the Code (as further limited by section 401(k)(3) of the
Code, if applicable), to an employee benefit plan that is maintained by the
Company or any corporation affiliated with the Company and that is qualified
under sections 401(a) and 401(k) of the Code. After such maximum elective
deferrals have been made in a calendar year, the Employee's Account shall be
credited with an amount equal to the Deferred Match for that year that was not
credited previously solely because the Employee had not yet made such maximum
elective deferrals. With respect to the Deferred Match described in the
preceding sentence, interest shall be applied as if such Deferred Match had
been credited to the Employee's Account at the same time that the related
amounts of Compensation deferred hereunder were credited to the Employee's
Account. In the case of an eligible Employee who leaves the service of the
Company and all corporations affiliated with the Company before the maximum
elective deferrals have been made for the calendar year, no Deferred Match
shall be credited for that calendar year.
4.3 RESTORATION BASED ON DEFERRED COMPENSATION. If an eligible
Employee defers Compensation under this Plan for a calendar year, additional
amounts shall be allocated to the Employee's Account based on the rate of basic
and variable contributions under the Retirement Plan for the year, as follows.
(a) The additional amount for a calendar year shall be equal
to:
(i) The dollar amount of Compensation deferred under
this Plan for such year, but only to the extent that the Compensation
relates to a period the Employee also participated in the Retirement
Plan, multiplied by
(ii) The sum of the Basic Rate and the Variable Rate
applicable to the Employee for the calendar year under the Retirement
Plan.
6
<PAGE> 9
(b) The allocations under (a) above relating to the Basic
Rate shall be credited to the Employee's Account effective as of the same time
that the amounts of deferred Compensation to which the allocation relates are
credited to the Employee's Account. The allocation under (a) above relating to
the Variable Rate shall be credited to the Employee's Account effective as of
the last day of the calendar year and shall be based on the Employee's deferred
Compensation for the entire calendar year.
4.4 RESTORATION BASED ON EXCESS COMPENSATION. Employees eligible
to receive an allocation under this Section 4.4 are those Employees whose
Retirement Plan Compensation for a calendar year exceeds the limitations under
section 401(a)(17) of the Code. In addition, in order to be eligible to
receive a restoration allocation attributable to the Matching Rate under the
Retirement Plan (the "401(a)(17) Match"), as provided in (a)(ii)(A) below, the
Employee must have made the maximum elective deferrals for the calendar year
under section 402(g) of the Code (as further limited by section 401(k)(3) of
the Code, if applicable) to the Retirement Plan and any other plan that is
maintained by the Company or any corporation affiliated with the Company and
this qualified under sections 401(a) and 401(k) of the Code.
The amounts allocated to an Employee's Account under this
Section 4.4 are based on the basic, variable and matching contribution rates
under the Retirement Plan and the Employee's Retirement Plan Compensation that
exceeds the limits of section 401(a)(17) of the Code, and interest thereon, as
provided below.
(a) The 401(a)(17) Excess Contribution for a calendar year
shall be equal to:
(i) The dollar amount of Retirement Plan Compensation
that is not recognized under the Retirement Plan due to the limits on
compensation under section 401(a)(17) of the Code, multiplied by
(ii) The sum of the following percentages applicable to
the Employee under the Retirement Plan for such year:
(A) The Matching Rate multiplied by the rate of
employee contributions and salary deferrals (up to six
percent) that the Employee was making to the Retirement Plan
when the Employee's Retirement Plan Compensation reached the
limit under section 401(a)(17) during the year;
(B) The Basic Rate; and
(C) The Variable Rate.
The above formula shall be adjusted, as appropriate, to reflect any changes in
the rates under the Retirement Plan due to transfers of employment between
Participating Companies or for any other reason and to reflect periods of
ineligibility under the Retirement Plan.
7
<PAGE> 10
(b) The 401(a)(17) Excess Contribution shall be credited to
the Employee's Account as of December 31 of each calendar year or the date of
the Employee's termination, if earlier. In no event shall the 401(a)(17) Match
under (a)(ii)(A) above for a calendar year be credited unless the Employee made
the maximum elective deferrals for that calendar year, as provided under
sections 402(g) of the Code (as further limited by section 401(k)(3) of the
Code, if applicable) to the Retirement Plan or any like plan maintained the
Company or any other employer and that is qualified under section 401(a) and
401(k) of the Code.
(c) In the case of an eligible Employee who leaves the
service of the Company and the Participating Companies before the maximum
elective deferrals have been made for the calendar year, no 401(a)(17) Match
shall be credited for that calendar year, but any 401(a)(17) Excess
Contribution attributable to basic and variable contributions shall be made.
4.5 INTEREST CREDITED TO ACCOUNT. Allocations to the Account
shall bear interest from the dates specified in Sections 4.1, 4.2(d), 4.3(b)
and 4.4(b) above. The interest credited to the Account shall be compounded
annually at the end of each calendar year. The annual rate of interest to be
applied to Accounts for calendar years before 1995 shall be the rate earned
under the Interest Income Fund in the Retirement Plan. For interest credited
to Accounts for calendar years beginning after 1994, the annual rate shall be
determined by the Committee from time to time, and promptly communicated to
eligible Employees in advance of its application.
4.6 VESTING. The portion of an Employee's Account attributable to
deferred Compensation and interest credited thereon shall be immediately fully
vested and nonforfeitable. The remaining portion of the Employee's Account
shall vest on the same schedule and in the same manner as the Employee's
interest in Company contributions in the Retirement Plan.
8
<PAGE> 11
SECTION 5. DISTRIBUTION.
5.1 DATE OF ELECTION. At the time an eligible Employee makes an
election to participate in the Plan, the Employee also shall make an election
with respect to the distribution (during the employee's lifetime or in the
event of the employee's death) of the amounts credited to the Employee's
Account. Such an election shall be made under Section 5.2 below, shall apply
to all amounts credited to the Employee's Account for period that the election
is in effect and shall become irrevocable as provided in Section 3.2, subject
to the provisions on hardship distributions in Section 5.6 below. Amounts
distributed from the Employee's Account, less applicable withholding taxes,
shall be paid in cash.
An eligible Employee may change the distribution option for
future deferrals and company contributions by filing a new form of election to
participate as provided in Section 3.2.
5.2 DISTRIBUTION OPTIONS. A Participant may elect to receive the
amounts credited to the Participant's Account in one payment or in a number of
annual installments (over a period not exceeding 10 years). As specified by the
Participant, distributions shall commence as soon as practicable on or after
February 15 of the calendar year next following (a) retirement or termination
from a Participating Company without employment by another Participating
Company or (b) the earlier of a specified number of years (maximum of 5) after
retirement or termination from a Participating Company without employment by
another Participating Company, or attainment of age 70. For this purpose
"Participating Company" shall also include Pacific Telesis Group and its
subsidiaries (but only with respect to a Participant who was a Post-Separation
Telesis Employee as defined in the Separation Agreement) and any other company
affiliated with the Company, as determined by the Plan Administrator.
5.3 IMMEDIATE SINGLE SUM PAYMENT. Notwithstanding an election
pursuant to Section 5.2 above, at the discretion of the Committee, the entire
vested amount then credited to the Participant's Account shall be paid
immediately in a single payment if the Participant is discharged for cause by
his or her Participating Company or becomes employed by a governmental agency
having jurisdiction over the activities of the Company or any of its
subsidiaries.
5.4 DEATH. A Participant may elect that, in the event the
Participant should die before full payment of all amounts credited to the
Participant's Account, the balance of the deferred amounts shall be distributed
in one payment, or by a continuation of the installment distributions being
made or to be made to the Participant, to the beneficiary or beneficiaries
designated in writing by the Participant, or if no designation has been made,
to the estate of the Participant in a single payment. The first installment
(or the single payment if the Participant has so elected) shall be paid within
ninety (90) days of the Participant's death. The preceding sentence shall not
apply if the beneficiary or beneficiaries are to receive a continuation of
installment distributions being made or to be made to the Participant.
5.5 INSTALLMENT PAYMENTS. Installments subsequent to the first
installment paid to the Participant, or to a beneficiary or to the
Participant's estate, shall be paid on or about the anniversary date of the
first annual installment in each succeeding calendar year until the entire
vested amount credited to the Participant's Account is paid. Deferred amounts
held pending distribution shall continue to be credited with interest
determined in accordance with Sections 4.4 and 4.5.
9
<PAGE> 12
5.6 HARDSHIP DISTRIBUTION. A request may be made at any time by
or on behalf of a Participant for a hardship distribution from his or her
Account by filing the request with the Committee. For purposes of the Plan,
"hardship" means immediate and heavy financial needs arising from one or more
of the following, as determined by the Committee in its sole discretion:
(a) Extraordinary and unreimbursed medical or hospital
expenses incurred by the Employee or a member of his or her family or
a relative; or
(b) Any other unanticipated expense that imposes an
extraordinary financial burden on the employee.
A distribution based on hardship cannot exceed the amount required to meet the
immediate financial need created by the hardship and not reasonably available
from other resources of the employee.
5.7 PAYMENT OBLIGATION. The obligation to make distribution of
deferred amounts credited to a Participant's Account during any calendar year
plus additional matching amounts under Sections 4.2 and 4.3 and interest
thereon under Section 4.4 shall be borne primarily by each Participating
Company that otherwise would have paid the related amounts concurrently (the
"primarily liable Participating Companies"). However, if for any reason any
primarily liable Participating Company fails to make timely payment of an
amount due to or on behalf of an Employee or former employee, the Company shall
be jointly and severally liable for the obligation to pay the amount due. A
company's withdrawal from participation shall not affect that company's
liability hereunder. In addition, the liability of a company shall not be
affected by any action or inaction (on the part of an employee, his
beneficiaries or any company) with respect to amounts owed, including, but not
limited to, the granting of extensions of time or other indulgences, the
failure to make timely demand, the failure to make timely payment or the
failure to give notices of any type.
10
<PAGE> 13
SECTION 6. MISCELLANEOUS.
6.1 NO FUNDING. The deferred amounts related to each
Participating Company shall be held in the general funds of such company. A
Participating Company shall not be required to reserve, or otherwise set aside,
funds for the payment of such amounts. All amounts of Compensation deferred
hereunder shall remain an asset of the Participating Company, and the
Participating Company's obligation to pay such amounts shall be unfunded as to
the employee.
6.2 NO ASSIGNMENT. The rights of an Employee to any deferred
amounts plus the additional amounts credited pursuant to Sections 4.2, 4.3 and
4.4 shall be those of a general creditor and shall not be subject in any manner
to assignment by the employee. Title to and beneficial ownership of any assets
that the Participating Companies may earmark to make payments under the Plan
shall at all times remain in the Participating Companies, and the Participant
shall not have any property interest in any specific assets of the
Participating Companies.
6.3 ADVERSE IRS ACTION ON EMPLOYEE OR PLAN. Notwithstanding any
other provision hereof, in the event there is a determination by the Internal
Revenue Service, not being appealed by the Employee, or in the event of a final
determination by a court of competent jurisdiction, that amounts credited to
the Employee's Account hereunder are includable in the Employee's gross income,
the Committee may in its sole discretion distribute the entire amount credited
to the Employee's Account to the Employee and cause the termination of future
deferrals of Compensation by that employee.
In the event that with respect to an employee, there is a
determination by the Internal Revenue Service, not being appealed by the
Company or an affiliate, or in the event of a final determination of a court of
competent jurisdiction, that the Plan is subject to Parts 2, 3 or 4 of Title I
of ERISA, the Committee may in its sole discretion distribute the entire amount
credited to the Employee's Account to the employee and cause the termination of
future deferrals of Compensation by that employee.
6.4 PLAN ADMINISTRATOR. The Company's Senior Vice President
- -Corporate Strategy/Development and Human Resources shall be the Plan
administrator and shall have the authority and discretion to administer and
interpret the Plan.
6.5 PLAN AMENDMENT AND TERMINATION. The Board of Directors of the
Company may amend or terminate the Plan at any time and for any reason. In the
event of an amendment or termination of the Plan, the amount of an employee's
benefits hereunder shall not be less than the amount of the benefits to which
the Employee would have been entitled if his or her employment had terminated
immediately prior to such amendment or termination. Any termination of the
Plan shall not terminate the deferral of Compensation previously deferred, but
may prevent the deferral of Compensation not yet earned.
6.6 CLAIMS AND REVIEW PROCEDURES.
(a) ADMINISTRATOR TO GRANT AND DENY CLAIMS. The Plan
administrator shall have the sole discretion to grant or deny claims for
benefits under the Plan with respect to Employees (other than the Plan
administrator) of each Participating Company, respectively, and authorize
disbursements
11
<PAGE> 14
according to this Plan. The Committee shall have the sole discretion to grant
or deny claims for benefits with respect to the Plan administrator as a
Participant and in such a case the Board of Directors of the Company shall
serve as the Review Committee for purposes of Section 6.5(b). Adequate notice,
pursuant to applicable law and prescribed Company practices, shall be provided
in writing to any Employee or beneficiary whose claim has been denied, setting
forth the specific reasons for such denial and any other information required
to be provided under ERISA.
(b) COMMITTEE TO REVIEW DENIED CLAIMS. The Committee (the
"Review Committee") shall serve as the final review committee under the Plan
and ERISA, for the review of all appeal claims by Participants or beneficiaries
whose initial claims for benefits have been denied, in whole or part, by the
Plan administrator, with respect to this Plan.
Any Participant or beneficiary whose claim for benefits has
been denied, in whole or part, may (and must for the purpose of seeking any
further review of a decision or determining any entitlement to a benefit under
the Plan), within 60 days after receipt of notice of denial, submit a written
request for review of the decision denying the claim. In such case, the Review
Committee, shall:
(i) Make full and fair review of such decision within
60 days after receipt of the written request for review, or within an
additional 60 days, provided the claimant is notified of the delay and
the reasons for requiring such additional time; and
(ii) Notify the claimant in writing of the review
decision, specifying the reasons for such decision.
(c) OTHER RIGHTS OF REVIEW. Any Participant or beneficiary
whose claim for benefits has been denied shall have such further rights of
review as are provided in section 503 of ERISA and regulations promulgated
thereunder, and the Review Committee and the Plan administrator shall retain
such right, authority and discretion as is provided in or not expressly limited
by said section 503 of ERISA and the regulations thereunder.
12
<PAGE> 15
SECTION 7. DEFINITIONS.
For purposes of this Plan, the following words shall have the
meaning so defined unless the context clearly indicates otherwise.
7.1 "ACCOUNT" shall mean the account established under the Plan
for each eligible Participant to reflect the allocations under Section 4 and
the payments under Section 5.
7.2 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
7.3 "COMMITTEE" shall mean the Compensation and Personnel
Committee of the Board of Directors of the Company.
7.4 "COMPANY" shall mean AirTouch Communications, a California
corporation.
7.5 "COMPENSATION" means the Employee's Salary and the award
actually payable under the Short-Term Incentive Plan.
7.6 "EMPLOYEE" means a common law employee of the Company or any
Participating Company.
7.7 "ERISA" means the Employee Retirement Income Security Act of
1974.
7.8 "OFFICER" means an Employee who is elected or appointed to,
and serving in, one or more of the following positions:
(a) A position with the Company described in the bylaws of
the Company as that of an officer, other than an Assistant Officer position; or
(b) A position with a Participating Company for which there
is in effect a specific designation by the Company's Board of Directors that
the position shall be considered to be that of an officer for purposes of the
benefit and retirement plans.
7.9 "PARTICIPANT" means (a) an Officer or Select Employee who is
eligible to participate under Section 2 of the Plan and who elects to
participate in the Plan pursuant to Section 3, or (b) a former Officer or
former Select Employee who has an Account under the Plan. Any employee of
Pacific Telesis Group or its subsidiaries as of Separation Date with an Account
shall remain a Participant.
7.10 "PARTICIPATING COMPANY" means the Company, a subsidiary of the
Company that determines, with the concurrence of the Company's Board of
Directors, to participate in the Plan and each other corporation, partnership
or joint venture designated by the Committee or the Company's Board of
Directors as a Participating Company.
13
<PAGE> 16
7.11 "RETIREMENT PLAN" means the AirTouch Communications Retirement
Plan, a defined contribution plan that is qualified under sections 401(a) and
401(k) of the Code and its predecessor plan, the PacTel Corporation Retirement
Plan.
7.12 "RETIREMENT PLAN COMPENSATION" means "compensation" as defined
in the Retirement Plan, without reduction for deferrals of compensation under
that plan and without regard to the limit on compensation under section
401(a)(17) of the Code. "Retirement Plan Compensation" does not recognize
Compensation that is deferred under this Plan.
7.13 "SALARY" means the rate of base pay in effect as of January 1 of
each calendar year whether or not deferred under this Plan; provided, however,
that in the case of any newly eligible Employee who is not yet a Participant,
"Salary" means the rate of base pay in effect as of the first day of the
calendar month following the date that the Employee was designated as an
eligible Employee.
7.14 "SELECT EMPLOYEE" means an Employee whose position is rated as
an Executive Director or above, and whose rate of compensation paid by a
Company or a Participating Company falls within the Company's salary
classification of E-10 or above, as determined by the Plan administrator.
7.15 "SEPARATION AGREEMENT" means the agreement entered into between
AirTouch Communications and Pacific Telesis Group on October 7, 1993.
7.16 "SEPARATION DATE" means April 1, 1994, the date as of which the
total and complete separation of the ownership of AirTouch Communications from
Pacific Telesis Group occurs.
7.17 "SHORT-TERM INCENTIVE PLAN" means the AirTouch Communications
Short-Term Incentive Plan, as may be amended from time to time, and any
predecessor plan.
7.18 "401(A)(17) EXCESS CONTRIBUTION" means the allocation to an
Employee's Account under Section 4.4 of the Plan based on the Employee's
Retirement Plan Compensation that exceeds the limits under Section 401(a)(17)
of the Code and the company contribution rates under the Retirement Plan.
14
<PAGE> 1
Exhibit 10.31
Description of the Company's Business Travel
Accident Insurance for Non-Employee Directors
The Company's business travel accident insurance policy covers each
non-employee director for up to $250,000 for accidental death or dismemberment
that occurs when traveling on business for the Company. Coverage begins from
the start of travel, whether it is from home, office or other location, and
terminates upon return to home or office. Significant policy exclusions are
scheduled vacations or leaves of absence and commuting between home and work
before or after travel. In addition, coverage is not available for travel in
an experimental aircraft or while the covered person is operating or serving as
a crew member of an aircraft.
INSURED: AirTouch Communications, Inc., its subsidiaries, associated,
affiliated or interrelated companies, partnerships, sponsored
joint ventures and any interest of AirTouch Communications,
Inc. or any of its subsidiaries in non-sponsored joint
ventures or nonwholly owned subsidiaries, and any company
organization coming under the interest or control, or active
management of any of them, and any entity or party required
to be insured under any contract or agreement or which it
may agree to insure, as now existing, previously existing,
or hereinafter acquired.
POLICY TERM: April 1, 1994 -- April 1, 1997
DESCRIPTION OF Business Travel Accidental Death & Dismemberment for Non
COVERAGE: Employee Directors only.
Principal Sum - $250,000
Total Limit of Liability - $1,000,000 per accident.
Includes coverage for paralysis and while traveling in the
following aircraft:
1988 British Aerospace 125-800
An additional death benefit of up to a maximum of $10,000 is
available if the covered person suffers loss of life while
wearing a seatbelt in a private passenger car.
CANCELLATION: 30 Days by Assured or Assurer
<PAGE> 1
EXHIBIT 13
-------------------------------------------------------------------------
SELECTED FINANCIAL DATA, MANAGEMENT'S DISCUSSION & ANALYSIS AND FINANCIAL
STATEMENTS
-------------------------------------------------------------------------
10 SELECTED FINANCIAL DATA
11 Summary Consolidated Statements of Income
11 Summary Consolidated Balance Sheets
12 Selected Proportionate Results of Operations
14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
26 AIRTOUCH COMMUNICATIONS, INC.
AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
26 Report of Management
27 Report of Independent Accountants
28 Consolidated Statements of Income
for the years ended December 31, 1994, 1993, and 1992
29 Consolidated Balance Sheets
as of December 31, 1994 and 1993
30 Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1994, 1993, and 1992
31 Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993, and 1992
33 Notes to Consolidated Financial Statements
56 Supplementary Selected Proportionate Financial Data
9
<PAGE> 2
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
CONSOLIDATED AND PROPORTIONATE FINANCIAL RESULTS
- --------------------------------------------------------------------------------
The Company uses consolidation and proportionate principles of accounting to
present certain financial information. Proportionate financial information is
not required by generally accepted accounting principles ("GAAP") or intended to
replace the Consolidated Financial Statements prepared in accordance with GAAP.
Under GAAP, the Company consolidates the entities in which it has a controlling
interest, and uses the equity method to account for entities when the Company
has significant influence but does not have a controlling interest. In contrast,
proportionate accounting reflects the Company's relative ownership interests in
operating revenues and expenses for both its consolidated and equity method
entities.
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 financial and operating data facilitate the
understanding and assessment of its Consolidated Financial Statements. For
example, domestic cellular proportionate results present the Company's share -
its percentage ownership - for all the significant domestic cellular operations,
including those joint ventures and partnerships where the Company does not own
more than 50 percent. Similarly, total proportionate results show the Company's
share of all its significant worldwide operations but exclude certain
international investments for which the Company does not receive timely detailed
income statements.
FIVE-YEAR FINANCIAL SUMMARY
- --------------------------------------------------------------------------------
The following table sets forth selected consolidated financial data of the
Company for each of the five years in the period ended December 31,
1994. The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related Notes
appearing elsewhere herein.
The selected consolidated financial data at December 31, 1994 and 1993 and for
each of the three years in the period ended December 31, 1994, have been derived
from the Consolidated Financial Statements included elsewhere herein and audited
by Coopers & Lybrand as set forth in their report also included elsewhere
herein. The selected consolidated financial data for the year ended December 31,
1991 has been derived from audited Consolidated Financial Statements not
included herein. The selected consolidated financial data as of December 31,
1990 has been derived from unaudited Consolidated Financial Statements not
included herein.
10
<PAGE> 3
------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
------------------------------------------------------------------------------
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED FIVE-YEAR
FINANCIAL SUMMARY
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------
(Dollars in millions, except per share amounts) 1994 1993(a) 1992 1991(a) 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 1,235.4 $1,057.7 $ 880.2 $ 781.1 $ 699.6
Total operating expenses 1,162.8 929.5 784.3 644.5 532.9
------------------------------------------------------------------------------------------------------------------
Operating income 72.6 128.2 95.9 136.6 166.7
Interest expense (10.3) (22.1) (52.9) (37.6) (21.7)
Minority interests in net income of consolidated
wireless systems (16.3) (46.4) (45.5) (45.2) (38.1)
Equity in net income (loss) of unconsolidated
wireless systems:
Domestic 125.4 70.4 41.1 15.5 5.3
International (14.7) (37.5) (38.5) (21.4) (11.2)
Other income 49.7 15.3 14.3 45.0 0.7
------------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item,
and cumulative effects of accounting changes 206.4 107.9 14.4 92.9 101.7
Income taxes 108.3 67.8 24.5 49.8 51.7
------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item and
cumulative effects of accounting changes 98.1 40.1 (10.1) 43.1 50.0
Extraordinary item: loss from retirement of debt,
net of income tax benefit of $5.1 -- -- (7.6) -- --
Cumulative effect of accounting change for
postretirement costs in 1993, net of income
tax benefit of $3.5, and income taxes in 1992 -- ( 5.6) 27.9 -- --
------------------------------------------------------------------------------------------------------------------
Net income $ 98.1 $ 34.5 $ 10.2 $ 43.1 $ 50.0
==================================================================================================================
Income (loss) per share before extraordinary item
and cumulative effects of accounting changes $ 0.20 $ 0.09 $ (0.02) $ 0.10 $ 0.12
==================================================================================================================
Weighted average shares outstanding (In millions) 493.4 429.6 424.0 424.0 424.0
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------
December 31,
--------------------------------------------------------------------
(Dollars in millions) 1994 1993(a) 1992 1991(a) 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 4,488.0 $ 4,076.7 $2,371.1 $1,900.1 $ 1,433.2
Total long-term obligations(b) $ 130.1 $ 78.9 $ 257.3 $ 276.0 $ 225.1
Total stockholders' equity $ 3,459.6 $ 3,337.3 $ 752.1 $ 635.2 $ 644.6
Working capital (deficit) $ 736.5 $ 1,346.8 $ (698.4) $ (426.3) $ (147.4)
Capital expenditures, excluding acquisitions
and capital calls(c) $ 408.7 $ 225.9 $ 231.0 $ 230.2 $ 241.3
------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Company contributed net cellular assets totaling $206.0 million to the
CMT Partners joint venture in 1993 and net cellular assets totaling $330.0
million to the New Par joint venture in 1991. The effect of these
transactions was a reduction in the individual asset, liability, and income
statement accounts and the reporting of income and expense associated with
these assets in the line item entitled "Equity in net income (loss) of
unconsolidated wireless systems: Domestic." See Note F, "Joint Ventures and
Acquisitions," in the Consolidated Financial Statements for further
information.
(b) Includes the current portion of long-term debt.
(c) For the year ended December 31.
11
<PAGE> 4
- -------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------
SELECTED PROPORTIONATE RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
The following table is not required by GAAP or intended to replace the
Consolidated Financial Statements prepared in accordance with GAAP. It is
presented to provide supplemental data. The Company believes that proportionate
financial and operating data facilitate the understanding and assessment of its
Consolidated Financial Statements.
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES PROPORTIONATE FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
TOTAL COMPANY
- -----------------------------------------------------------------------------------------------------------------
For the Year Ended December 31,
--------------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total proportionate net operating revenues(1) $ 1,781.3 $1,226.1 $ 873.2
Total proportionate operating income(1) $ 171.5 $ 97.6 $ 11.3
Total proportionate operating cash flow (1)(2) $ 506.1 $ 351.5 $ 191.5
<CAPTION>
December 31,
--------------------------------------------------------
OPERATING DATA (In thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
Total proportionate cellular POPs (3)(6) 99,508 75,290 69,468
Total proportionate cellular subscribers (7) 1,948 1,206 779
Total proportionate paging units in service 1,647 1,269 899
<CAPTION>
PROPORTIONATE CELLULAR OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
For the Year Ended December 31,
--------------------------------------------------------
DOMESTIC OPERATING RESULTS (Dollars in millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
Service and other revenues $ 1,149.6 $ 892.0 $ 699.4
Equipment sales 74.6 40.2 24.8
Cost of equipment sales (82.0) (42.2) (23.9)
- -----------------------------------------------------------------------------------------------------------------
Net operating revenues 1,142.2 890.0 700.3
- -----------------------------------------------------------------------------------------------------------------
Cost of revenues 126.0 116.3 98.7
Selling, general, administrative and other expenses 537.2 394.1 322.5
Depreciation expense 163.5 147.0 109.0
Amortization expense 22.2 17.7 15.1
- -----------------------------------------------------------------------------------------------------------------
Total costs and expenses 848.9 675.1 545.3
- -----------------------------------------------------------------------------------------------------------------
Operating income $ 293.3 $ 214.9 $ 155.0
=================================================================================================================
Operating cash flow(2) $ 479.0 $ 379.6 $ 279.1
Operating cash flow margin 41.9% 42.7% 39.9%
Capital expenditures, excluding acquisitions $ 296.7 $ 198.4 $ 199.8
<CAPTION>
December 31,
--------------------------------------------------------
OPERATING DATA (In thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
Domestic: Total POPs(3) 35,390 34,889 34,121
Proportionate subscribers 1,560 1,046 744
International: Total POPs (3)(6) 64,118 40,401 35,347
Proportionate subscribers (4)(7) 388 160 35
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(See footnotes on page 13)
12
<PAGE> 5
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGING OPERATIONS
-----------------------------------------------------------------------------------------------------------------
For the Year Ended December 31,
------------------------------------------------------
DOMESTIC OPERATING RESULTS(5) (Dollars in millions) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service and other revenues $ 183.5 $ 145.7 $ 113.5
Equipment sales 43.4 35.2 22.2
Cost of equipment sales (38.0) (31.9) (19.2)
-----------------------------------------------------------------------------------------------------------------
Net operating revenues 188.9 149.0 116.5
-----------------------------------------------------------------------------------------------------------------
Total operating expenses before depreciation and
amortization expense 122.5 98.7 74.0
Depreciation and amortization expense 36.8 30.6 26.3
-----------------------------------------------------------------------------------------------------------------
Operating income $ 29.6 $ 19.7 $ 16.2
=================================================================================================================
Operating cash flow(2) $ 66.4 $ 50.3 $ 42.5
Operating cash flow margin 35.2% 33.8% 36.5%
Capital expenditures, excluding acquisitions $ 61.3 $ 53.4 $ 42.9
<CAPTION>
December 31,
------------------------------------------------------
OPERATING DATA (In thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------
Domestic: Units in service(5) 1,525 1,167 821
International: Proportionate units in service(4) 122 102 78
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total proportionate results do not include certain international investments
and some small domestic cellular investments for which the Company does not
have timely detailed income statements. Net loss associated with these
international investments was approximately $6.3 million for the year ended
December 31, 1994.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flow from operating activities in
the Company's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents the Company's ownership interest in the respective
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 that market and includes 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) Year-end 1994 data includes POPs for Italy, Spain, South Korea and the
Kyushu and Chugoku regions of Japan, where licenses are currently being
finalized or the systems are under construction. Excluding Spain, where the
license was awarded but not yet finalized, international POPs would be
57,948,000 and total proportionate POPs would be 93,338,000.
(7) 1994 data reflects the Company's 25% ownership interest in Belgium and an
increase in the Company's ownership interest in Germany from 29.2% to 32.7%.
13
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
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GENERAL
The following discussion is intended to assist in the understanding and
assessment of significant changes and trends related to the results of
operations and financial condition of AirTouch Communications, Inc., together
with its consolidated subsidiaries and partnerships (the "Company"). This
discussion and analysis should be read in conjunction with the Company's
Consolidated Financial Statements and Notes.
Under generally accepted accounting principles ("GAAP"), the Company reports
revenues and expenses in its consolidated income statement for each
subsidiary and partnership in which it has a controlling interest. The
Company uses the equity method 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. See Note A, "Summary of Significant
Accounting Policies," in the Notes to the Consolidated Financial Statements.
A discussion of the Company's domestic cellular results of operations on a
proportionate basis follows the GAAP presentation in "Proportionate Results
of Domestic Cellular Operations." Proportionate accounting is not required by
GAAP or intended to replace the Consolidated Financial Statements prepared in
accordance with GAAP.
RESULTS OF OPERATIONS
The following discussions compare the results of operations for the
years ended December 31, 1994, 1993 and 1992. The Company cannot assess the
future impact of the Company's joint venture with U S WEST ("ATI/USW") on
the Company's results of operations due to the uncertain timing of the
phases of the transaction. Additionally, the Company is unable to estimate
the impact that the ATI/USW's joint venture with Bell Atlantic and NYNEX
will have on the Company's future results of operations, given the early
stage of development for domestic broadband personal communications services
("PCS"). See Note F "Joint Ventures and Acquisitions - U S WEST Joint
Venture, and Bell Atlantic/NYNEX Consortium," in the Notes to
Consolidated Financial Statements.
CMT PARTNERS AND NORDICTEL
While net income is comparable, consolidated cellular service revenues and
operating expenses for 1994 are not comparable to 1993 and 1992. Until the
formation of the Company's partnership with McCaw ("CMT Partners") on
September 1, 1993, the San Francisco/San Jose cellular system was
consolidated. Once formed, the Company used the equity method of accounting
to report CMT Partners' results. If the revenues and expenses from such
system were not included in the 1993 and 1992 consolidated amounts, the
Company's operating revenues would have increased by 32.9% in 1994 and 30.1%
in 1993, and operating expenses would have increased by 36.2% in 1994 and
24.4% in 1993. Hereafter, the discussions are based on 1993 and 1992 amounts
as adjusted to give retroactive effect to the adoption of equity accounting
for CMT Partners.
Additionally, the comparability of operating revenue and operating expenses
is affected by NordicTel Holdings AB ("NordicTel") which was acquired in
October 1993. In 1993, operations for NordicTel were included in Consolidated
Financial Statements for three months, while in 1994 operations were included
for the entire year.
OPERATING REVENUES
The following table sets forth the components of the Company's operating
revenues for each of the last three years.
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------
For the Year Ended December 31,
-------------------------------
(Dollars in millions) 1994 1993 1992
---------------------------------------------------------
Proforma(a)
-------------------
<S> <C> <C> <C>
Wireless services and
other revenues:
Cellular service $ 884.9 $ 661.7 $ 518.2
Paging service 188.0 148.7 117.9
Vehicle location
service 6.2 4.0 2.4
Other revenues 59.9 46.9 32.4
--------------------------------------------------------
1,139.0 861.3 670.9
Cellular and paging
equipment sales 96.4 68.2 43.5
--------------------------------------------------------
Operating revenues $ 1,235.4 $ 929.5 $ 714.4
--------------------------------------------------------
</TABLE>
(a) Adjusted to give effect to the adoption of the equity method of accounting
for CMT Partners; see "CMT Partners and NordicTel."
14
<PAGE> 7
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
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CELLULAR SERVICE
Cellular service revenues primarily consist of air time, access fees, and
in-bound roaming charges. Cellular service revenues increased by 33.7% from
1993 to 1994 and 27.7% from 1992 to 1993. The number of domestic subscribers
grew by 49.3%, and 42.1%, while the average revenue per subscriber declined
10.3%, and 8.0%, from 1993 to 1994 and from 1992 to 1993, respectively.
NordicTel comprised 3.2% and 0.1% of cellular revenues in 1994 and 1993,
respectively.
The increase in cellular service revenues in both 1994 and 1993 was primarily
due to continued domestic subscriber growth. Domestic subscribers are
customers in the Company's six managed markets: Los Angeles, Atlanta,
Sacramento, San Diego, Wichita, and Topeka. The 1994 increase is attributable
to the penetration of the domestic consumer market particularly during the
last half of the year. The growth was achieved through advertising,
increasing the number of distribution points, new sales channels and the
availability of low-cost handsets and service plans designed to meet the
needs of less frequent users. The consumer market is the fastest growing
segment of the subscriber base.
The increase in cellular service revenues did not keep pace with subscriber
growth primarily because of declining average revenue per subscriber. The
change in the customer mix between the business and consumer segments of the
subscriber base is the primary reason average revenue per subscriber has
continued to decline. New consumer customers typically use their phones less
than business subscribers, resulting in lower average revenue per subscriber.
The Company expects that average revenue per subscriber will follow the
industry trend and continue to decline as it adds new subscribers. Since much
of the subscriber growth occurred late in 1994, increases in revenues from
the new subscribers is expected to be realized more fully during 1995. The
Company expects the rate of growth for new subscribers to decline as more
customers are acquired, primarily due to the increasing size of the customer
base.
PAGING SERVICE
Paging service revenues primarily consist of paging service charges and
rentals of paging units in the United States and, to a small extent,
Thailand. Paging service revenues increased 26.4% in 1994 and 26.1% in 1993,
as compared to the previous year. Such increases in paging service revenues
primarily resulted from 30.7% and 42.1% increases in the number of domestic
paging units in service in 1994 and 1993, respectively, as compared to the
previous year. The increases in domestic paging units in service reflect
increased penetration in existing markets, primarily through successful
retail and reseller pager sales programs, and an acquisition of new paging
operations during 1993.
The effect of the growth in paging units in service on revenues was offset in
part by a decrease in the average revenue per paging unit, due to an increase
in customer-owned and maintained units (i.e., a corresponding loss in lease
and maintenance revenues) as pager prices declined, and reduced contract
prices to match competition. Late in 1994, the Company expanded its paging
operations to five new cities: Cincinnati, Cleveland and Columbus, Ohio;
Chicago, Illinois; and Denver, Colorado. Revenue from start-up of operations
in these cities is expected during 1995. The Company expects that average
revenue per paging unit will follow the industry trend, and continue to
decline as it adds new units.
The increase between 1992 and 1993 was partially due to the purchase of Front
Page, which added approximately 22,000 units. With the acquisition of Front
Page, the Company entered the Salt Lake City paging market and expanded its
existing substantial customer base in northern California, San Diego,
Los Angeles, Phoenix, and Tucson.
15
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
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CELLULAR AND PAGING EQUIPMENT
Equipment sales consist of revenues from sales of cellular telephones and
pagers. Equipment sales are not a primary part of the Company's cellular and
paging businesses. Equipment sales increased 41.3% from 1993 to 1994 and
56.8% from 1992 to 1993. The increase in equipment sales in both 1994 and
1993 was attributable to the availability of low-cost handsets. However, the
revenue from increased number of handsets sold was offset by the declining
selling price. Despite significant increases in revenues for equipment sales,
gross margins have declined as the Company sold cellular telephones at or
below cost in order to meet competition. The Company expects contribution
margins of equipment sales to remain negative as it responds to competitive
market pressure.
OPERATING EXPENSES
The following table sets forth the components of the Company's operating
expenses for each of the last three years.
<TABLE>
<CAPTION>
------------------------------------------------------------
For the Year Ended December 31,
-------------------------------
(Dollars in millions) 1994 1993 1992
------------------------------------------------------------
Proforma(a)
------------------
<S> <C> <C> <C>
Cost of revenues $ 155.9 $ 127.7 $ 121.3
Cost of cellular and
paging equipment sold 99.2 67.5 39.9
Selling and customer
operations expenses 389.8 263.1 222.8
General, administrative,
and other expenses 312.6 235.9 177.3
Depreciation and
amortization 205.3 159.5 124.8
------------------------------------------------------------
Total operating
expenses $ 1,162.8 $ 853.7 $ 686.1
------------------------------------------------------------
</TABLE>
(a) Adjusted to give effect to the adoption of the equity method of accounting
for CMT Partners; see "CMT Partners and NordicTel."
COST OF REVENUES
Cost of revenues primarily consists of interconnection charges with wireline
telephone companies for cellular and paging operations, other
network-related expenses, and equipment costs for credit-card verification
terminals. Costs associated with credit-card verification terminals amounted
to 6.3%, 5.5%, and 4.3% of the cost of revenues for 1994, 1993 and 1992,
respectively. Cost of revenues as a percentage of wireless services and
other revenues was 13.0%, 14.2% and 17.6% for 1994, 1993 and 1992,
respectively, after eliminating amounts related to credit-card verification
terminals.
Interconnection costs have variable and fixed components. The variable
portion directly relates to the number of calls, and therefore costs
increase as more calls occur. However, the fixed interconnection costs
remain constant over a given volume of calls, resulting in economies of
scale. Accordingly, the declines reflect these economies as well as
effective cost management and technical efficiencies, partially offset by
costs related to paging system capacity expansion, and the effects of
acquiring NordicTel. NordicTel comprised 4.3% and 0.3% of cost of revenues
for 1994 and 1993, respectively. Cost of revenues is expected to continue to
decline as a percentage of wireless services and other revenues.
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. As a percentage of operating revenues, these expenses were 31.6%,
28.3%, and 31.2% in 1994, 1993, and 1992, respectively. NordicTel comprised
7.7% and 1.3% of selling and customer operations expenses for 1994 and 1993,
respectively.
16
<PAGE> 9
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
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The 1994 increase reflects aggressive growth strategies employed primarily
during the second half of the year to attract new domestic cellular
subscribers. As a result, the Company experienced increases in commissions
paid for new cellular subscribers, and advertising and other promotional
expenses associated with new marketing efforts. A large portion of these
costs were incurred during the fourth quarter. However, the acquisition cost
per net domestic cellular subscriber gain declined by 20.1% from 1993 to
1994, and 24.0% from 1992 to 1993. This decline is expected to continue as
new subscribers are acquired, since distribution costs have significant fixed
components and certain commission rates are based on the declining average
revenue per subscriber.
Customer operations during 1994 were expanded to support the significant
customer growth. To meet the needs of a growing customer base, a new customer
support system is under development to significantly improve the handling of
customer calls. Once the system is fully operational, the Company expects the
increase in the cost of customer operations expenses to grow at a lesser
rate. Additionally, the Company expects to invest in billing systems to
support subscriber growth, as well as new cellular products and services.
This investment is not expected to result in higher per subscriber costs.
However, the total selling and customer operations expenses are expected to
increase as a percentage of operating revenues as the Company continues its
promotional programs and marketing efforts to increase the number of
subscribers and invests in more efficient customer support and billing
systems.
The decrease in these expenses as a percentage of operating revenue, between
1992 and 1993, was primarily attributable to increased revenues from the
larger subscriber base and cost containment initiatives particularly in the
Company's domestic billing operations. This was partially offset by an
increase in agent commissions resulting from the increase in new cellular
subscribers and the increase in marketing and promotional expenses that
commenced in late 1992.
GENERAL, ADMINISTRATIVE, AND OTHER EXPENSES
General, administrative, and other expenses primarily consist of salaries,
wages and related benefits for general and administrative personnel,
international license application costs, and other overhead expenses. As a
percentage of operating revenues, general, administrative, and other expenses
were 25.3%, 25.4%, and 24.8% in 1994, 1993, and 1992, respectively. NordicTel
comprised 6.2% and 0.8% of general, administrative, and other expenses for
1994 and 1993, respectively.
On April 1, 1994, the Company was spun-off ("spin-off") from Pacific Telesis
Group ("Telesis"). Approximately 5% of general, administrative, and other
expenses in 1994 related to additional expenses for certain corporate
functions previously provided by Telesis. Other increases from 1993 to 1994
were primarily due to costs related to research and development, the costs
associated with developing and acquiring foreign licenses, an increase in bad
debt expense due to the larger subscriber base, expenses for NordicTel, and
legal expenses for defending several antitrust suits brought against the
Company and other cellular operators. The Company expects to continue to
incur costs defending itself against these actions, but does not expect these
costs to be significant to its financial position. The increases were
partially offset by higher billing of shared joint costs for developing and
acquiring foreign licenses with international joint ventures, and capitalized
license costs. Additionally, cost containment efforts at AirTouch Teletrac
included reducing staff by 30% to approximately 200 employees. General,
administrative, and other expenses are expected to decline as a percentage of
operating revenue.
17
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
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The increase in 1993 from 1992 was primarily due to organizational and other
costs associated with the spin-off. In 1993, the Company provided
approximately $9.2 million ($5.0 million after tax) in reserve for spin-off
related expenses. The reserve was substantially utilized during 1994. Costs
incurred relate to expenditures for changing the Company's corporate
identity, for physical assets, legal, and other expenses associated with the
spin-off. Other increases were for start-up expenses related to the
development of wireless data services. This, combined with the costs of
supporting the Company's growth, including entry into new business
opportunities, caused the general, administrative, and other expenses to
increase as a percentage of operating revenues.
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 Federal Communications Commission ("FCC") license
costs and goodwill. Depreciation and amortization as a percentage of
operating revenues was 16.6%, 17.2%, and 17.5% in 1994, 1993, and 1992,
respectively. NordicTel comprised 8.4% and 1.3% of depreciation and
amortization for 1994 and 1993, respectively.
As a percentage of operating revenue, the decline between 1994 and 1993 is
primarily the result of economies of scale as more subscribers are added to
the existing network. The increase in the amount of depreciation and
amortization expense in both 1994 and 1993 mainly reflects increased capital
investment in the Company's domestic cellular and paging networks.
The Company is currently deploying CDMA (Code Division Multiple Access)
equipment in the northern Los Angeles area, and plans to commence commercial
services by mid-1995. Completion of the remaining build-out in Los Angeles
is expected during 1996. Since this represents the initial deployment of the
CDMA digital technology, there can be no assurance that it will be
commercially successful. Additionally, the Company must continue its current
investment in its analog network in order to support the subscriber growth
and to maintain the quality of the existing service. More importantly, both
analog and digital technological standards will coexist and appear seamless
to the customer. Accordingly, both technologies will continue to serve the
existing and future customer base. However, the Company expects the
investment in digital technology will continue to increase, and eventually
pass and replace the investment in analog technology.
The planned deployment of digital technology in the Company's domestic
cellular markets is expected to have minimal impact on depreciation expense.
Additionally, the Company expects to make a change in the accounting
estimate for the useful lives of certain analog assets from seven to ten
years in 1995, which is expected to improve 1995 net income by approximately
$15 million to $25 million. Depreciation and amortization is expected to
continue to decline as a percentage of operating revenues.
NON-OPERATING INCOME (EXPENSE)
The following table sets forth the components of the Company's non-operating
income (expense) for each of the last three years.
<TABLE>
<CAPTION>
---------------------------------------------------------
For the Year Ended December 31,
-------------------------------
(Dollars in millions) 1994 1993 1992
--------------------------------------------------------
Proforma(a)
------------------
<S> <C> <C> <C>
Interest income $ 54.7 $ 11.4 $ 12.5
========================================================
Interest expense $ (10.3) $ (21.3) $ (51.7)
========================================================
Minority interests
in net income
of consolidated
wireless systems $ (16.3) $ (25.5) $ (17.3)
========================================================
Equity in net income
(loss) of unconsolidated
wireless systems:
Domestic $ 125.4 $ 101.5 $ 79.7
International $ (14.7) $ (37.5) $ (38.5)
========================================================
</TABLE>
(a) Adjusted to give effect to the adoption of the equity method of accounting
for CMT Partners; see "CMT Partners and NordicTel."
18
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
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INTEREST
Interest expense in 1994 is primarily due to debt incurred by NordicTel and
bank promissory notes in Japan. The debt outstanding for NordicTel was $97.5
million and $50.1 million at December 31, 1994 and 1993, respectively. See
Note H, "Debt and Credit Facilities - Long-term Debt," in the Notes to
Consolidated Financial Statements. In 1993, the Company used the $1,179.8
million of equity contributions received from Telesis to substantially
eliminate its indebtedness to a Telesis subsidiary, PacTel Capital Resources
("PTCR"). As a result, interest expense decreased $30.4 million in 1993 when
compared to 1992.
In 1994, interest income is primarily from the earnings on investments of
held-to-maturity, and available-for-sale securities purchased with the
proceeds of the Company's initial public offering ("IPO") in December 1993.
Interest expense and income during each of the periods presented will not be
indicative of 1995. The Company will utilize the proceeds from the IPO by
mid-1995, and will need additional funding thereafter. See "Liquidity and
Capital Resources."
MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED WIRELESS SYSTEMS
The minority partners' portions of net income in consolidated partnerships
and corporations are reported as "Minority interests in net income of
consolidated wireless systems." The decrease for 1994 is primarily the result
of operating losses incurred by NordicTel.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED WIRELESS SYSTEMS
DOMESTIC. Domestic equity earnings increased in 1994 and 1993 over the prior
year period primarily as a result of the increased earnings of CMT Partners
and New Par.
INTERNATIONAL. The improvement for international unconsolidated wireless
systems was primarily due to the reduction of equity losses in 1994 when
compared to 1993. The improvement can be attributed to the profitability of
Mannesmann Mobilfunk GmbH ("MMO") and reduced losses in Portugal, partially
offset by losses from Japan operations, losses from Belgium operations
acquired during the year, and by the costs of start-up joint ventures which
acquired new licenses in Italy and South Korea. The improvement in
international equity losses in 1993 was primarily due to lower losses
incurred by MMO, partially offset by higher losses for cellular operations in
Portugal and cellular systems under construction in Japan, and paging systems
in Portugal and Spain.
The international equity losses were partially offset by tax benefits of
$27.3 million, $20.7 million, and $32.0 million in 1994, 1993, and 1992,
respectively, recognized as a result of the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." See "Income Taxes." The Company expects that its international equity
earnings in 1995 will be negatively affected by substantial operating losses
associated with construction and build-out of new cellular systems in Italy,
South Korea, and Spain.
In 1994, the tax benefit related to international equity investments was
$27.3 million, and approximately 90% ($24.7 million) is attributable to the
tax benefits recorded by the Company's investment in the three cellular
networks in Japan for their net operating losses ("NOLs"). These tax benefits
for equity method investees are shown in the "Equity in net income (loss) of
unconsolidated wireless systems: International" on the consolidated
statements of income. These tax benefits are recorded as an asset that
represents the future realization to be gained by deducting the current
operating losses from future taxable income. While the Company believes that
it is more likely than not that the recorded deferred tax benefits will be
fully realized, there can be no
19
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
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assurance that this will happen as certain factors beyond control of the
joint ventures and the Company, such as worsening local economic conditions
and increasing competition, can affect future levels of taxable income.
MMO had accumulated NOLs of approximately $265.9 and $384.6 million of which
the Company's share was approximately $86.9 and $109.5 million in 1994 and
1993, respectively. The Company's share of MMO's 1994 net income was
approximately $19 million. The Company and MMO believe it is more likely than
not that MMO will continue to generate sufficient income to utilize its
accumulated NOLs by early 1996.
Since the Company does not hedge the net income of international equity
earnings, fluctuations in currency exchange rates will affect equity earnings
and losses from the Company's international ventures. For example, a
significant weakening against the dollar of the currency of a country in
which the Company's venture is generating net income would adversely affect
the Company's results.
INCOME TAXES
The Company's income tax expenses and effective tax rates for 1994, 1993, and
1992 were $108.3 million (52.5%), $67.8 million (62.8%), and $24.5 million
(170.1%), respectively. The effective tax rates for all such periods were
primarily affected by the international equity losses of unconsolidated
wireless systems. See Note K, "Income Taxes," in the Notes to Consolidated
Financial Statements for a detailed reconciliation of the effective tax rates
to statutory rates. At December 31, 1994, the Company had net deferred tax
assets of $41.1 million and deferred tax liabilities of $212.7 million. A
valuation allowance of $10.5 million has been provided for deferred tax
assets. The Company believes that it is more likely than not that the future
benefits from the remaining deferred tax assets will be realized in full.
In August 1993, the United States government enacted the Omnibus Budget
Reconciliation Act of 1993, which incorporates new business tax provisions.
These include an increase in the corporate tax rate from 34% to 35%
retroactive to January 1, 1993. The Company's adjustment for the change in
tax rate reduced net income by $4.4 million in 1993.
OTHER ITEMS AFFECTING THE RESULTS OF OPERATIONS
START-UP COSTS
In connection with the eleven broadband PCS licenses the Company's
partnership recently won, the Company will incur start-up expenses that, at
least in the short-term, are expected to have a dilutive effect on the
Company's future earnings. See "Liquidity and Capital Resources."
COST OF FRAUD
Like most other carriers, the Company experiences fraud in its cellular
markets. Costs of fraud include variable interconnect costs, capacity costs,
administrative costs, costs related to preventive measures, and payments to
other carriers for unbillable fraudulent roaming activity. The Company is
unable to quantify all of the costs associated with fraud. The incidence of
cellular telephone fraud is generally increasing, particularly in the Los
Angeles market. The Company tracks the percentage of fraudulent minutes of
use and excludes the related revenues from cellular revenues and related
receivables. The Company will continue to develop and invest in anti-fraud
measures to prevent cellular fraud.
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TELETRAC
Teletrac (including International Teletrac Systems) reported pre-tax losses
of $26.1 million, $41.6 million, and $49.1 million during 1994, 1993, and
1992, respectively. In its current mode of operations, the Company does not
expect Teletrac's operations to be profitable for the foreseeable future. In
February 1994, the Company reduced Teletrac's staff by 30% to approximately
200 employees. The Company intends to continue cost containment to minimize
Teletrac's operating losses and does not intend to expand Teletrac's
operations significantly unless the Company expects Teletrac's current or
future services will achieve a higher level of commercial acceptance. The
Company is evaluating its alternatives, from considering other commercial
applications of Teletrac's technology and radio location spectrum to
determining Teletrac's fit within the Company's long-term investment
objectives. The Company expects the FCC to issue rules for Location and
Monitoring Systems shortly. Licenses not built-out by April 1996 will be
forfeited. See Note Q, "Subsequent Events," in the Notes to Consolidated
Financial Statements for further discussion of Teletrac regulatory matters.
PROPORTIONATE RESULTS OF DOMESTIC CELLULAR OPERATIONS
The following table is not required by GAAP or intended to replace the
Consolidated Financial Statements prepared in accordance with GAAP. It is
presented to provide supplemental data. However, 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 financial and operating data facilitate the understanding and
assessment of its Consolidated Financial Statements. The following
proportionate accounting table reflects the relative weight of the Company's
ownership interests in its consolidated domestic cellular subsidiaries and in
New Par (Ohio/Michigan), Cellular Communications, Inc. (Ohio and Michigan),
and CMT Partners (California, Texas, Missouri, and Kansas).
SELECTED PROPORTIONATE DOMESTIC CELLULAR OPERATING DATA
<TABLE>
<CAPTION>
OPERATING RESULTS For the Year Ended December 31,
-------------------------------
(Dollars in millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Service and other
revenues $1,149.6 $ 892.0 $ 699.4
Equipment sales 74.6 40.2 24.8
Cost of equipment sales (82.0) (42.2) (23.9)
--------------------------------------------------------
Net operating revenues 1,142.2 890.0 700.3
--------------------------------------------------------
Cost of revenues 126.0 116.3 98.7
Selling, general
and administrative
expenses 537.2 394.1 322.5
Depreciation and
amortization 185.7 164.7 124.1
--------------------------------------------------------
Total operating
expenses 848.9 675.1 545.3
--------------------------------------------------------
Operating income $ 293.3 $ 214.9 $ 155.0
========================================================
Operating cash flow(1) $ 479.0 $ 379.6 $ 279.1
========================================================
Capital expenditures,
excluding
acquisitions $ 296.7 $ 198.4 $ 199.8
========================================================
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA December 31,
-----------------------------
(In thousands) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
POPs(2) 35,390 34,889 34,121
Proportionate cellular
subscribers(3) 1,560 1,046 744
--------------------------------------------------------
</TABLE>
(1) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flow from operating activities in
the Company's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents the Company's ownership interest in the respective
domestic cellular entities multiplied by the entities' operating cash flow.
As such, proportionate operating cash flow does not represent cash available
to the Company.
(2) POPs are the estimated market population multiplied by the Company's
ownership interest in the cellular system in that market.
(3) 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.
21
<PAGE> 14
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MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
-----------------------------------------------------------------------------
The overall comparison between 1994, 1993, and 1992 reflects the increase of
operating income of 36.5% in 1994 and 38.6% in 1993, which is attributable to
the growth of 49.1% and 40.6% in the number of subscribers from 1993 to 1994,
and from 1992 to 1993, respectively.
Cellular service and other revenues increased 28.9% from 1993 to 1994, and
27.5% from 1992 to 1993. In 1994, growth strategies were directed at the
consumer market to attract new domestic subscribers. This program was in
effect throughout 1994 for CMT Partners and New Par, and during the second
half of the year for its consolidated markets. Increases in cellular service
revenues have not kept pace with subscriber growth because of declining
average revenue per subscriber, which is primarily due to the change in
customer mix between the business and consumer segments of the subscriber
base. The penetration into the consumer cellular market is due to the
availability of low-cost handsets and service plans designed to meet the
needs of less frequent users. New consumer customers typically use their
phones less often, which generates less average revenue per subscriber than
business subscribers. In 1993, fixed-term discount plans and various
promotional programs reduced customer disconnects in all of the Company's
cellular markets and accounted for the increase in subscriber growth. The
Company expects that average revenue per subscriber will follow the industry
trend, and continue to decline as it adds new subscribers.
Equipment sales consist of revenues from sales of cellular telephones.
Equipment sales are not a primary part of the Company's cellular business.
Accordingly, the costs associated with these sales have been reclassified to
the revenue section from operating expenses in the proportionate results of
operations. Equipment sales increased 85.6% in 1994 over 1993 and 62.1% in
1993 over 1992, primarily due to higher volumes of direct sales from retail
sales locations in managed markets, and focus on equipment pricing as a part
of the New Par growth initiative to increase the subscriber base. The lower
selling price of handsets contributed to the increased penetration into the
consumer cellular market. However, this increase is offset by the competitive
pressure to sell telephone handsets at or below cost. The Company expects
contribution margins of retail equipment sales to remain negative as it
responds to competitive market pressure.
Cost of revenues declined as a percentage of net operating revenues, and was
11.0%, 13.1%, and 14.1% in 1994, 1993, and 1992, respectively. The decrease
reflects economies of scale as fixed network costs are spread over a larger
subscriber base and cost containment efforts continue in each of the
Company's markets. Additionally, 1993 reflected the reassessment of property
taxes and lower interconnection charges.
Selling, general, and administrative expenses as a percentage of net
operating revenues were 47.0%, 44.3%, and 46.1% in 1994, 1993, and 1992,
respectively. The 1994 increase reflects an increase in sales commissions,
advertising, promotional expenses, and billing expenses associated with the
increased number of domestic cellular subscribers, partially offset by the
effects of cost containment initiatives. The 1993 decrease reflects a
decrease in the rate of subscriber growth and related selling expenses.
Depreciation and amortization as a percentage of net operating revenues were
16.3%, 18.5%, and 17.7% in 1994, 1993, and 1992, respectively. The decline in
depreciation and amortization expense in each year during the three-year
period ended December 31, 1994, reflects the Company's significant increase
in subscriber growth that allows the increase of capital expenditures in its
cellular systems to be spread over a larger customer base. In 1994, CMT
Partners completed its initial phase for the deployment of digital technology
in the San Francisco Bay Area.
22
<PAGE> 15
----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
----------------------------------------------------------------------------
BUSINESS ENVIRONMENT
COMPETITION AND REGULATION
The Company's domestic and international wireless operations are facing
increasing levels of competition. For example, in the domestic markets, the
recently completed narrowband and broadband PCS auctions will increase the
number of competitors and the level of competition in the Company's cellular
and paging markets. The Company is unable to estimate the impact of such
potentially competitive services on the Company's operations which could be
significant. For an extensive discussion of competition, see Item 1
"Business," in the Company's 1994 Form 10-K.
The Company's domestic operations are highly regulated and its results of
operations may be significantly affected by new regulatory developments.
For example, in January 1995, the Department of Justice ("DOJ") concluded
that the Company is subject to the Modification of Final Judgment ("MFJ").
The MFJ prohibits Bell Operating Companies from offering long-distance
telephone service or manufacturing telecommunications equipment. While the
Company believes that the short term impact of this decision is not
significant, compliance with the MFJ's line-of-business restrictions would
mean halting the Company's entry into long-distance and satellite services
businesses, as well as limiting its MFJ-prohibited design and development
work on wireless equipment. The Company disagrees with the DOJ's
conclusion and is seeking a prompt decision from the U.S. District Court
that the Company is not subject to the MFJ. Until this decision is made,
the DOJ has agreed not to enforce the restrictions in the MFJ on the
Company, and the Company has agreed not to undertake any new business
activities which would be restricted under the MFJ. See Note O, "Regulatory
Matters," in the Notes to the Consolidated Financial Statements. For an
extensive discussion of regulation, see Item 1 "Business," in the Company's
1994 Form 10-K.
CONTINGENCIES
The Company is party to various legal proceedings including certain antitrust
litigation. See Note P, "Commitments and Contingencies," in the Notes to
Consolidated Financial Statements. For an extensive discussion of legal
matters, see Item 3 "Legal Proceedings," in the Company's 1994 Form 10-K.
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 requires substantial capital to expand and operate
its existing wireless systems, to construct new wireless systems, and to
acquire interests in existing wireless systems. During 1994, funding needs
were satisfied by cash generated through operations, distributions received
from joint venture interests, use of the IPO net proceeds, and interest
income from investments.
In December 1993, the Company sold to the public 68.5 million shares of
common stock for net proceeds of $1,489.2 million. Prior to the IPO, the
Company met its funding requirements primarily through short-term borrowings
and equity contributions from Telesis.
During 1994, the Company made capital expenditures of $399.5 million for
additions to its cellular and paging networks, and other capital
improvements. The investment in property, plant, and equipment primarily
expanded the cellular and paging networks to increase capacity and to support
the rapid customer growth. Other investments primarily included $84.6 million
of capital contributions to unconsolidated wireless systems, and $417.7
million for the cost of acquiring interests in wireless systems. These
expenditures included: investments in Globalstar; the investment in new
international ventures in Italy, South Korea, Belgium, and Spain; an option
for an indirect equity
23
<PAGE> 16
-----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
-----------------------------------------------------------------------------
interest in a cellular system in Russia; and the successful award of national
and regional PCS paging licenses. Additionally, the Company purchased
additional shares of Cellular Communications, Inc. ("CCI") common stock, and
increased its equity interest in MMO to approximately 32.7 percent.
The Company will be required to make substantial expenditures in connection
with its efforts to expand its wireless business. In March 1995, PCS PrimeCo,
in which the Company, U S WEST, Bell Atlantic and NYNEX are partners, was the
high bidder for eleven PCS broadband licenses for Major Trading Areas ("MTA")
in the FCC's auction. The Company's share of the cost of the licenses is
approximately $277 million. The cost of the MTA licenses and expected capital
expenditures are included in the estimates that follow. The remainder of the
auctions will take place later in 1995 and are expected to conclude by early
1996. The potential expenditures for the cost of the remaining licenses and
related capital expenditures are excluded from the estimates in the
discussion below because the Company is not able to estimate such costs until
the auctions are completed.
At December 31, 1994, the Company was committed to spend approximately $160
million for the acquisition of property, plant, and equipment. In addition to
these commitments, the Company expects to make capital expenditures of
approximately $920 million during 1995 and 1996 to increase the capacity of
the existing analog network, and to deploy digital technology. The Company
expects to make capital contributions to its existing international and
domestic joint ventures, including the recently acquired PCS broadband
licenses and the associated market build-out, of approximately $880 million
through the end of 1996. Also, approximately $720 million will be spent for
the purchase of additional CCI shares as described below.
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, and
to purchase from CCI shares or stock options representing in the aggregate
approximately 2.4 million shares at a price of $60 per share, less the
exercise price in the case of stock options (the "Mandatory Redemption
Obligation" or "MRO"). The Company's funding obligation in connection with
the MRO will not exceed $720 million. To support the MRO obligation, the
Company obtained a revolving line of credit for $600 million and a
$600 million irrevocable letter of credit under the credit facility for the
benefit of CCI that expires in 1996. In addition, beginning in August 1996,
the Company may be obligated to make payments to CCI stockholders in the
event that the Company does not elect to purchase CCI's interest in New Par
at an appraised value. See Note H, "Debt and Credit Facilities - Revolving
Lines of Credit," in the Notes to Consolidated Financial Statements.
The amount of cash available including cash and cash equivalents, investments
in securities, available unused financial arrangements, off balance sheet
financing, and cash from 1995 operations, will not be sufficient to fund the
Company's capital needs beyond mid-1995. Further, the Company does not expect
its operations to generate sufficient cash to meet its capital requirements
for the next several years. Accordingly, the Company will need to raise
additional funds through bank borrowings or public or private sales of debt
or equity securities. The Company believes that it will be able to access the
capital markets on terms and in amounts adequate to meet its objectives.
However, because of changes in market conditions or other occurrences, there
can be no certainty that such funding will be available in quantities and
terms that are favorable to the Company.
24
<PAGE> 17
----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
----------------------------------------------------------------------------
FOREIGN CURRENCY RISKS
The Company engages in foreign exchange forward contracts for hedging foreign
currency denominated investment asset values. Currently, none of these
forward exchange positions contain more than one contract, nor have any
derivative instruments been layered on to these forward exchange positions.
Since the forward foreign exchange market is developed for major and minor
currencies into multi-year periods, to the extent allowed by those markets,
the Company's forward hedges can be adjusted to fit the changed circumstances
of the underlying assets being hedged, provided that the Company continues to
adhere to consistent accounting practices for hedges. In addition, the
Company does not currently have any interest rate swaps or interest rate risk
management arrangements.
The Company invests in joint ventures in Germany, Sweden, Portugal, Spain,
France, Japan, South Korea, Belgium, Italy, and Thailand. Such investments
take the form of equity interests in foreign joint ventures and are viewed as
long-term assets valued in the local currency, translated into United States
dollars and reported in the Company's financial statements under the equity
or consolidation method. The Company hedges these investments with long-term
forward contracts because of the long-term nature of the underlying
investment. These hedges are in accordance with the Company's objective to
neutralize the United States dollar values of foreign currency denominated
assets and liabilities. As a result of hedging, the Company is limited in its
ability to benefit from favorable fluctuations in foreign exchange rates
unless any of the underlying investments are liquidated. The accounting
treatment is described in Note D, "Financial Instruments," in the Notes to
Consolidated Financial Statements. At December 31, 1994, the Company did not
have in place any hedges of firm commitments or anticipated transactions.
To date, there have been no disruptions to the foreign-exchange markets that
would prevent market activities from proceeding. Generally, the currencies in
which the Company has foreign exchange forward contracts have numerous market
makers to provide ample depth for hedging activities.
Approximately 98% of the Company's hedges qualify as hedges under accounting
rules. The remaining 2% of the hedges are non-qualifying hedges under
accounting rules. Non-qualifying hedges consist either of mismatches of the
hedge instrument to the hedged investment due to equity losses of the joint
ventures during project build-out, or of cost method investments that do not
qualify for hedge accounting treatment. All gains and losses pertaining to
hedges that do not qualify as such are included in net income. As of December
31, 1994, the Company's investment in international ventures of $750.2
million was 89% hedged. Translation gains and losses related to the unhedged
portion of these net international investments are recorded in the cumulative
translation adjustment account and have no effect on net income.
The Company is not presently aware of any economic, political, or competitive
conditions in countries in which it is operating that would have a material
adverse effect on the Company.
25
<PAGE> 18
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
To the Stockholders of AirTouch Communications, Inc.:
FINANCIAL STATEMENTS
The management of AirTouch Communications, Inc. prepared the accompanying
financial statements and is responsible for their integrity and objectivity.
The statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis and are not misstated as a result of
material fraud or error. The financial statements include amounts based on
management's best estimates and judgments, where necessary. Management also
prepared the other information in this annual financial review and is
responsible for its accuracy and consistency with the financial statements.
The Company's financial statements have been audited by Coopers & Lybrand,
independent accountants, whose appointment has been ratified by the Board of
Directors. Management has made available to Coopers & Lybrand all the Company's
financial records and related data, as well as the minutes of meetings of the
Board of Directors. Furthermore, management believes that all of the
representations made to Coopers & Lybrand during its audit were valid and
appropriate.
INTERNAL CONTROL SYSTEM
AirTouch Communications, Inc. maintains a system of internal controls over
financial reporting, one of the purposes of which is to provide reasonable
assurance to the Company's management and Board of Directors regarding the
preparation of reliable published financial statements. The Audit Committee of
the Board of Directors is responsible for overseeing the Company's financial
reporting process on behalf of the Board. During 1994, the Audit Committee met
regularly with management, internal audit and the independent accountants to
review internal controls, accounting, auditing, and financial reporting
matters.
The system of internal controls contains self-monitoring mechanisms, and actions
are taken to correct deficiencies as they are identified. Even an effective
internal control system, no matter how well designed, has inherent limitations -
including the possibility of the circumvention or overriding of controls - and
therefore can provide only reasonable assurance with respect to financial
statement preparation. Further, because of changes in conditions, internal
control system effectiveness may vary over time.
The Company assessed its internal control system in its consolidated operations
throughout the year ended December 31, 1994 in relation to criteria for
effective internal control over financial reporting described in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO"). To assess the internal
control systems in its unconsolidated partnerships and corporations, management
relied on reports issued by various external public accountants who performed
audits of those entities, where such reports were available. Based on these
assessments, the Company believes that, as of December 31, 1994, its overall
system of internal control over financial reporting was effective.
/s/ Sam Ginn
Sam Ginn
Chairman and Chief Executive Officer
/s/ Lydell L. Christensen
Lydell L. Christensen
Executive Vice President and Chief Financial Officer
March 13, 1995
26
<PAGE> 19
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of AirTouch Communications, Inc.:
We have audited the accompanying consolidated balance sheets of AirTouch
Communications, Inc. and Subsidiaries (the "Company") as of December 31, 1994
and 1993 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the 1994 and 1993 financial
statements of Mannesmann Mobilfunk GmbH ("MMO"), an equity investee of the
Company, which statements reflect total assets of $1,623,192,000 and
$1,221,135,000 as of December 31, 1994 and 1993, respectively, and net income
(loss) of $69,072,000 and ($67,655,000) for the years ended December 31, 1994
and 1993, respectively. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
the amounts included for MMO, is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of AirTouch
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1993 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes B and M, in 1993 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions."
We have also audited the Supplementary Selected Proportionate Financial Data
for each of the three years in the period ended December 31, 1994 presented on
Page 56, certain of which data includes amounts derived from financial
statements of MMO, which statements are audited by other auditors as stated
above. As described on Page 56, the Supplementary Selected Proportionate
Financial Data have been prepared by management to present relevant financial
information that is not provided by the consolidated financial statements and
is not intended to be a presentation in accordance with generally accepted
accounting principles.
In our opinion, the Supplementary Selected Proportionate Financial Data
referred to above presents fairly, in all material respects, the information
set forth therein on the basis of accounting described on Page 56.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
March 13, 1995
27
<PAGE> 20
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=================================================================================================================
For the Year Ended December 31,
-----------------------------------------
(Dollars in millions, except per share amounts) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Wireless services and other revenues $ 1,139.0 $ 987.3 $ 834.8
Cellular and paging equipment sales 96.4 70.4 45.4
- -----------------------------------------------------------------------------------------------------------------
Operating Revenues 1,235.4 1,057.7 880.2
- -----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Cost of revenues 155.9 144.0 132.7
Cost of cellular and paging equipment sales 99.2 69.7 41.7
Selling, general, administrative, and other expenses 702.4 541.6 466.5
Depreciation and amortization 205.3 174.2 143.4
- -----------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,162.8 929.5 784.3
- -----------------------------------------------------------------------------------------------------------------
Operating Income 72.6 128.2 95.9
Interest expense (10.3) (22.1) (52.9)
Minority interests in net income of consolidated
wireless systems (16.3) (46.4) (45.5)
Equity in net income (loss) of unconsolidated
wireless systems:
Domestic 125.4 70.4 41.1
International (14.7) (37.5) (38.5)
Interest income 54.7 12.0 13.3
Miscellaneous income (expense) (5.0) 3.3 1.0
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item, and
cumulative effects of accounting changes 206.4 107.9 14.4
Income taxes 108.3 67.8 24.5
- -----------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item and
cumulative effects of accounting changes 98.1 40.1 (10.1)
Extraordinary item: Loss from retirement of debt,
net of income tax benefit of $5.1 (Note H) -- -- (7.6)
Cumulative effect of accounting change for other
postretirement benefits, net of income tax benefit of $3.5
(Notes B and M) -- (5.6) --
Cumulative effect of accounting change for
income taxes (Note B) -- -- 27.9
- -----------------------------------------------------------------------------------------------------------------
Net Income $ 98.1 $ 34.5 $ 10.2
=================================================================================================================
Per Share Amounts:
Income (loss) before extraordinary item and
cumulative effects of accounting changes $ 0.20 $ 0.09 $ (0.02)
Extraordinary item -- -- (0.02)
Cumulative effects of accounting changes -- (0.01) 0.06
- -----------------------------------------------------------------------------------------------------------------
Net Income $ 0.20 $ 0.08 $ 0.02
=================================================================================================================
Weighted average shares outstanding (In millions) 493.4 429.6 424.0
==================================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
28
<PAGE> 21
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=================================================================================================================
December 31,
--------------------------
(Dollars in millions, except share and per share amounts) 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 429.0 $ 646.7
Accounts receivable, net of allowance for uncollectibles
of $10.1 and $9.2 in 1994 and 1993, respectively 173.3 137.0
Held-to-maturity investments 310.1 814.0
Available-for-sale securities 101.3 --
Other receivables 128.2 15.1
Due from affiliates 25.9 --
Other current assets 98.5 48.0
- -----------------------------------------------------------------------------------------------------------------
Total Current Assets 1,266.3 1,660.8
- -----------------------------------------------------------------------------------------------------------------
Property, plant, and equipment 1,560.7 1,175.5
Less: accumulated depreciation 585.4 433.4
- -----------------------------------------------------------------------------------------------------------------
Net property, plant, and equipment 975.3 742.1
Investments in unconsolidated wireless systems 1,697.9 1,154.5
Intangible assets, net 470.5 413.2
Deferred charges and other noncurrent assets 78.0 106.1
- -----------------------------------------------------------------------------------------------------------------
Total Assets $ 4,488.0 $ 4,076.7
=================================================================================================================
Liabilities and Stockholders' Equity
Accounts payable $ 202.9 $ 185.2
Short-term borrowings 80.0 2.4
Other current liabilities 246.9 126.4
- -----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 529.8 314.0
Long-term debt 120.2 68.6
Deferred income taxes 209.2 197.6
Deferred credits 39.4 54.1
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities 898.6 634.3
- -----------------------------------------------------------------------------------------------------------------
Commitments and contingencies. (Note P)
Minority interests in consolidated wireless systems 129.8 105.1
- -----------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock ($.01 par value; 50,000,000 shares authorized;
no shares issued or outstanding) -- --
Common stock ($.01 par value; 1,100,000,000 shares authorized;
493,915,064 shares issued and 493,792,104 shares outstanding
at December 31, 1994; 492,622,960 shares issued and
492,500,000 shares outstanding at December 31, 1993) 4.9 4.9
Additional paid-in capital 3,730.4 3,719.5
Accumulated deficit (290.0) (387.9)
Cumulative translation adjustment 11.1 0.8
Other 3.2 --
- -----------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 3,459.6 3,337.3
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 4,488.0 $ 4,076.7
=================================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
29
<PAGE> 22
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
====================================================================================================================
Common Stock Additional Cumulative
---------------- Paid-in Accumulated Translation
(In millions) Shares Amount Capital Deficit Adjustment Other Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1991 424.0 $ 4.2 $ 839.0 $ (210.7) $ 2.7 -- $ 635.2
Net income 10.2 10.2
Dividends paid to Telesis (108.3) (108.3)
Equity infusion by Telesis 212.2 212.2
Foreign currency translation gain 2.8 2.8
- --------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1992 424.0 4.2 1,051.2 (308.8) 5.5 -- 752.1
Net income 34.5 34.5
Dividends paid to Telesis (113.6) (113.6)
Equity infusion by Telesis 1,179.8 1,179.8
Shares issued under initial
stock offering 68.5 0.7 1,488.5 1,489.2
Foreign currency translation loss (4.7) (4.7)
- --------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1993 492.5 4.9 3,719.5 (387.9) 0.8 -- 3,337.3
Net income 98.1 98.1
Shares exercised under
incentive programs 1.3 10.9 10.9
Foreign currency translation gain 10.1 10.1
Minimum pension liability $(0.6) (0.6)
Unrealized holding gain on
available-for-sale securities, net 3.8 3.8
Other (0.2) 0.2 --
- --------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1994 493.8 $ 4.9 $3,730.4 $ (290.0) $ 11.1 $ 3.2 $ 3,459.6
====================================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
30
<PAGE> 23
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=================================================================================================================
For the Year Ended December 31,
----------------------------------------
(Dollars in millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash from (Used for) Operating Activities:
Net income $ 98.1 $ 34.5 $ 10.2
Adjustments to reconcile net income for items currently
not affecting operating cash flows:
Depreciation and amortization 205.3 174.2 143.4
Deferred income taxes (28.5) 23.9 36.0
Minority interests in net income of consolidated
wireless systems 16.3 46.4 45.5
Equity in net income of unconsolidated
wireless systems (110.7) (32.9) (2.6)
Distributions received from equity investments 80.3 42.2 17.0
(Gain) loss on sale of assets (1.1) 3.4 3.9
Cumulative effect of accounting change for
postretirement costs -- 9.1 --
Cumulative effect of accounting change for
income taxes -- -- (27.9)
Loss from retirement of debt -- -- 12.7
Changes in assets and liabilities:
Accounts receivable, net (35.1) (30.4) (21.8)
Other current assets and receivables (167.1) 130.5 (126.8)
Deferred charges and other noncurrent assets (51.1) (1.3) 47.7
Accounts payable and other current liabilities 130.1 18.7 62.4
Deferred credits and other liabilities (20.4) 28.3 (0.8)
- -----------------------------------------------------------------------------------------------------------------
Cash from Operating Activities 116.1 446.6 198.9
- ------------------------------------------------------------------------------------------------------------------
Cash from (Used for) Investing Activities:
Investment in unconsolidated wireless systems (502.3) (386.9) (233.8)
Additions to property, plant, and equipment, net (383.4) (216.8) (225.4)
Maturity (purchase) of held-to-maturity investments 500.5 (814.0) --
Purchase of available-for-sale securities (110.9) -- --
Increase (decrease) in short-term borrowings from
Telesis affiliate (0.3) (773.1) 275.5
Loan repayments from Telesis affiliate -- 106.5 5.5
Issuance of loan to Telesis affiliate -- (6.8) (30.0)
Retirement of long-term debt from Telesis affiliate -- (234.5) --
Proceeds from non-current Telesis affiliate borrowings -- -- 85.0
Other investing activities 24.8 (28.9) (32.7)
- -----------------------------------------------------------------------------------------------------------------
Cash Used for Investing Activities (471.6) (2,354.5) (155.9)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued on next page)
31
<PAGE> 24
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
AirTouch Communications, Inc and Subsidiaries
(Continued from previous page)
<TABLE>
<CAPTION>
=================================================================================================================
For the Year Ended December 31,
------------------------------------
(Dollars in millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash from (Used for) Financing Activities:
Increase (decrease) in short-term borrowings 77.8 (2.6) 4.5
Proceeds from issuing long-term debt 45.9 13.8 1.2
Contributions from minority interests in consolidated wireless systems 36.7 2.8 3.3
Distributions to minority interests in consolidated wireless systems (32.0) (30.3) (41.5)
Retirement of notes and obligations payable (5.5) (1.0) (100.7)
Proceeds from shares issued 10.9 1,489.2 --
Equity infusion by Telesis -- 1,179.8 212.2
Dividends paid to Telesis -- (113.6) (108.3)
Other financing activities (0.1) (0.1) (13.6)
- -----------------------------------------------------------------------------------------------------------------
Cash from (Used for) Financing Activities 133.7 2,538.0 (42.9)
- -----------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 4.1 (0.5) --
- -----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (217.7) 629.6 0.1
Beginning Cash and Cash Equivalents 646.7 17.1 17.0
- -----------------------------------------------------------------------------------------------------------------
Ending Cash and Cash Equivalents $ 429.0 $ 646.7 $ 17.1
=================================================================================================================
Supplemental Cash Flow Information:
Cash payments for:
Interest, net of amounts capitalized of $0.4,
$3.7, and $3.6 for 1994, 1993,
and 1992, respectively $ 9.4 $ 26.4 $ 51.4
Income taxes $ 151.2 $ 51.5 $ 16.3
Noncash transactions:
Contribution of assets to CMT Partners at book value -- $ 206.0 --
Assumption of liabilities in exchange for net assets
of International Teletrac Systems -- -- $ 80.0
=================================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
32
<PAGE> 25
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
AirTouch Communications, Inc. and its subsidiaries (the "Company") provide
wireless telecommunications services in the United States, Europe, and Asia. The
Company is a holding company and its principal subsidiaries are AirTouch
Cellular, AirTouch Paging, AirTouch International, and AirTouch Teletrac. These
subsidiaries principally provide cellular, paging, and vehicle location
services.
Prior to April 1, 1994, the Company was an 86.1% owned subsidiary of Pacific
Telesis Group ("Telesis"), a reporting company under the Securities Exchange
Act of 1934. On April 1, 1994, Telesis distributed to its shareowners all of the
common stock of the Company owned by Telesis (the "spin-off"). In 1993, the
Company provided a reserve of $9.2 million ($5.0 million after tax) for
anticipated incremental costs directly attributable to the spin-off and, as of
December 31, 1994, the Company had substantially utilized this reserve.
Management believes that the consolidated financial statements of the Company
reasonably reflect the historical relationships with Telesis and its affiliates
and reflect all of the Company's costs of doing business. Management believes
there would not have been any material difference from the amounts presented in
the historical financial statements had the Company operated on a stand-alone
basis.
The Consolidated Financial Statements include the accounts of the Company and
its subsidiaries and partnerships in 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 Consolidated Financial
Statements have been prepared in accordance with generally accepted accounting
principles applicable in the United States.
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid held-to-maturity investments with
original maturities of ninety days or less from the date of purchase.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Held-to-maturity investments are carried at amortized cost and consist
principally of highly liquid debt securities with contractual maturities in
excess of three months.
Available-for-sale investments are carried at fair value and consist principally
of highly liquid debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies and generally have contractual maturities
in excess of three months.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Results of operations for foreign investments are translated using average
exchange rates during the period, while assets and liabilities are translated
using end-of-period rates. The resulting exchange gains or losses are
accumulated in the "Cumulative translation adjustment" account (the "CTA
account"), a component of stockholders' equity. All significant gains and losses
resulting from foreign currency transactions are included in operations.
33
<PAGE> 26
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Gains or losses associated with forward exchange contracts that qualify as
accounting hedges ("qualifying hedges") are recorded in the CTA account, with a
corresponding adjustment to a deferred asset or liability account. For forward
exchange contracts that are not qualifying hedges, gains or losses are recorded
in "Miscellaneous income/(expense)" in the income statement.
Gains and losses related to qualifying hedges of firm commitments are deferred
and are recognized as adjustments of carrying amounts when the hedged
transaction occurs.
PROPERTY, PLANT, AND EQUIPMENT
Assets of businesses purchased are recorded at their fair values at the date of
acquisition. All other property, plant, and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the related assets'
estimated useful lives ranging from three to forty years except land, which is
not depreciated. Gains and losses on disposals are included in income at amounts
equal to the difference between net book value of the disposed assets and
proceeds received upon disposal. Expenditures for replacements and betterments
are capitalized, while expenditures for maintenance and repairs are charged
against earnings as incurred.
INTANGIBLE ASSETS
The Company uses modeling techniques on new acquisitions and long-range business
plans, revised annually, to assess whether a revision of the existing estimated
useful lives of intangible assets is necessary.
FCC AND INTERNATIONAL LICENSES. The Federal Communications Commission ("FCC")
issues cellular licenses that enable domestic cellular carriers to provide
service in specific Cellular Geographic Service Areas. A cellular license is
issued conditionally for ten years. Historically, the FCC has routinely granted
license renewals providing the licensees have complied with applicable
commission rules, policies, and the Communications Act of 1934. The Company
believes it has complied and intends to continue to comply with these standards
and is amortizing the related costs using the straight-line method over forty
years.
FCC licenses for domestic paging operations are amortized on a straight-line
basis over forty years, and FCC licenses for vehicle location operations are
amortized on a straight-line basis over twenty years.
FCC licenses acquired by the Company through business combinations are stated at
appraised values as of the date of acquisition and amortized using the
straight-line method over forty years.
International licenses for the Company's international cellular and paging
operations are amortized on a straight-line basis over the expected term of the
license, which generally ranges from twenty to forty years.
SUBSCRIBER LISTS. Subscriber lists acquired through business combinations are
stated at appraised values as of the date of acquisition. Amortization is
computed using the straight-line method over estimated average customer service
length, typically consisting of up to thirty-six months.
34
<PAGE> 27
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL. The excess of the purchase price paid over the fair value of net
assets acquired in business combinations is recorded as goodwill and is
amortized using the straight-line method over twenty to forty years.
INVESTMENTS IN UNCONSOLIDATED WIRELESS SYSTEMS
The equity method is used to account for all domestic cellular markets and
international consortia in which the Company has significant influence but is
not the controlling or managing general partner, even though the ownership
percentage may be less than 20%. Limited partnership interests and joint
ventures in which the Company does not have significant influence are accounted
for using the cost method.
EARNINGS PER SHARE
Earnings per share are calculated by using weighted average common shares
outstanding. The dilutive effect of common stock equivalents is determined using
the treasury stock method. However, common stock equivalents do not have a
significant impact on earnings per share.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Deferred
income taxes are provided to reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. Until March 31, 1994,
the Company was included in the consolidated federal and combined state income
tax returns of Telesis.
B. ACCOUNTING CHANGES
- --------------------------------------------------------------------------------
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits." Implementation did not materially impact the Company's
financial condition or its results of operations.
Effective January 1, 1994, the Company adopted the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
Implementation did not materially impact the Company's financial condition or
its results of operations.
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" ("SFAS
106"). 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. In addition, the Company recorded $2.0 million pre-tax
expense for the periodic SFAS 106 charge for 1993. The income tax benefits
related to these expenses totaled $4.4 million.
Effective January 1, 1992, the Company adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Use of the new rules resulted in a
$59.8 million tax benefit to 1992 earnings. Of this amount, $32.0 million is
included in "Equity in net income (loss) of unconsolidated wireless systems:
International" and $27.9 million is reported within "Cumulative effect of
accounting change for income taxes." These amounts were offset by $0.1 million
included in "Income taxes."
35
<PAGE> 28
----------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------------------
C. PROPERTY, PLANT, AND EQUIPMENT
----------------------------------------------------------------------------
Property, plant, and equipment consists of the following:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------
Depreciable
(Dollars in millions) Lives (Years) 1994 1993
-----------------------------------------------------------
<S> <C> <C> <C>
Land, buildings
and leasehold
improvements 5-40 $ 156.7 $ 128.2
Cellular plant
and equipment 5-15 814.2 647.3
Pagers, paging
terminals, and other
paging equipment 3-15 181.4 165.0
Office furniture and
other equipment 3-7 247.2 172.8
Construction in
progress 161.2 62.2
-----------------------------------------------------------
1,560.7 1,175.5
Less: accumulated
depreciation 585.4 433.4
-----------------------------------------------------------
$ 975.3 $ 742.1
===========================================================
</TABLE>
Depreciation and amortization expense relating to property, plant, and
equipment for the years ended December 31, 1994, 1993, and 1992 was $184.0
million, $161.7 million, and $132.4 million, respectively. The Company
expects to make a change in the accounting estimate for useful lives of
certain cellular assets from seven to ten years in 1995.
D. FINANCIAL INSTRUMENTS
----------------------------------------------------------------------------
Effective December 31, 1994, the Company adopted the provisions of SFAS No.
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments."
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. The portfolio, carried at amortized cost which approximates
fair value, is summarized as follows:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-----------------
(Dollars in millions) 1994 1993
------------------------------------------------------
<S> <C> <C>
United States government
debt securities $ 181.6 $ 661.3
State and local government
debt securities 89.1 113.1
Auction rate reset
type securities(a) 34.8 10.0
Municipal commercial paper -- 16.7
------------------------------------------------------
305.5 801.1
Accrued interest 4.6 12.9
------------------------------------------------------
$ 310.1 $ 814.0
======================================================
</TABLE>
(a) Auction rate reset type securities are shares in variable rate preferred
municipal funds with contractual reset periods greater than 90 days.
The Company's available-for-sale investment portfolio of $110.9 million
consists of $101.3 million included in current assets and $9.6 million
included in "Deferred charges and other noncurrent assets" at December 31,
1994. The portfolio included in current assets consists of debt securities
issued by the U.S. Treasury and other U.S. government corporations and
agencies. At December 31, 1994, the current asset portfolio is carried at
fair value, has an amortized cost of $100.9 million, includes a $0.7 million
unrealized holding loss, and includes accrued interest of $1.1 million. The
contractual maturities of the securities in this portfolio are generally in
excess of three months. The portion included in "Deferred charges and
36
<PAGE> 29
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
other noncurrent assets" consists of the Company's investment in Qualcomm, a
publicly held developer of digital mobile communications technology. Effective
January 1, 1994, the Company reclassified its investment in Qualcomm at fair
value to an available-for-sale security to comply with the provisions of SFAS
115 and recorded a corresponding unrealized holding gain as a separate component
of stockholders' equity. At December 31, 1994, the Company's unrealized holding
gain in Qualcomm was $4.5 million, net of tax, and its amortized cost was $2.0
million. At December 31, 1993, the Company's investment of $2.0 million in
Qualcomm was included at cost in "Investments in unconsolidated wireless
systems" and had a market value of $10.6 million.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into forward exchange contracts to reduce exposures of its
long-term investments in foreign subsidiaries and international joint ventures
to market risks from changes in foreign exchange rates. In addition, the Company
enters into forward exchange contracts to reduce exposures of firm capital
commitments denominated in foreign currencies. The Company does not hold or
issue financial instruments for trading or speculative purposes.
At December 31, 1994, the Company did not have any hedges of firm capital
commitments or anticipated transactions in place.
As of December 31, 1994 and 1993, the Company had outstanding forward exchange
contracts principally in Portuguese Escudo, Belgian Francs, German Marks,
Swedish Krona, and Japanese Yen with face amounts totaling $638.4 million and
$291.2 million, respectively, with maturities through 2001. The amounts
exchanged are calculated on the basis of the face amounts of the financial
instruments.
CONCENTRATION OF CREDIT RISK
The off-balance-sheet risk in outstanding forward exchange contracts involves
both the risk of a counterparty not performing under the terms of the contract
and the risk associated with changes in market value. The Company monitors its
positions, the credit ratings of counterparties, and the level of contracts the
Company enters with any one party. The counterparties to these contracts are
major financial institutions. The Company has a policy of entering into
contracts with parties that have at least "B" (or equivalent) credit rating as
well as other stringent qualifications and, given the high level of credit
quality of its derivative counterparties, the Company does not believe it
necessary to obtain collateral arrangements. The Company believes that losses
from counterparty nonperformance on settlements of these transactions would not
have any material adverse effect upon the Company's financial position or
results of operations. The Company does not have any significant exposure to any
individual counterparty.
Financial instruments that potentially subject the Company to concentrations of
credit risk are trade receivables and interest-bearing investments. Due to the
large number and diversity of the Company's customer base, concentrations of
credit risk with respect to trade receivables are limited. The Company avoids
concentrations of credit risk in its interest- bearing investment portfolio by
investing in securities issued by the United States Government and its agencies,
and by limiting other investments in interest- bearing securities to those rated
in the highest category by nationally recognized statistical rating agencies.
37
<PAGE> 30
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FAIR VALUE
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The Company uses available market
information and appropriate valuation methods to determine fair value amounts.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
December 31,
-------------------------------------------------------------
1994 1993
----------------------------- --------------------------
Carrying Estimated Carrying Estimated
(Dollars in millions) Value Fair Value Value Fair Value
- ---------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C>
Financial assets
Held-to-maturity investments $ 310.1 $ 310.1 $ 814.0 $ 814.0
Available-for-sale securities $ 110.9 $ 110.9 -- --
Investments at cost:
Practicable to estimate fair value -- -- $ 2.0 $ 10.6
Not practicable to estimate fair value $ 52.8 -- $ 25.3 --
Off-balance-sheet financial instruments -- $ 19.2 -- $ 18.1
Financial liabilities
Current obligations $ 89.9 $ 89.9 $ 12.7 $ 12.7
Deposit liabilities $ 31.6 $ 31.6 $ 22.4 $ 22.4
Long-term debt, including leases $ 120.2 $ 120.2 $ 68.6 $ 70.0
Off-balance-sheet financial instruments -- $ 19.5 -- $ 4.3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Held-to-maturity securities and current obligations: due to the short-term
character of the securities and obligations portfolios, carrying amounts are a
reasonable approximation of fair value.
Available-for-sale securities: carrying amounts are valued at quoted market
prices.
Investments at cost: it is not practicable to estimate the fair value of the
Company's cost-based investments because quoted market prices are not available
and, since certain of these ventures are in the start-up mode, other valuation
techniques are not appropriate. At December 31, 1994, the Company's ownership
interest in these ventures' assets and stockholders' equity was approximately
$105 million and $25 million, respectively. In addition, the Company's ownership
interest in 1994 revenues and net income was approximately $53 million and $2
million, respectively.
Long-term debt: interest rates that are currently available to the Company for
issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues that are not quoted on an exchange.
Off-balance-sheet financial instruments: fair value of forward exchange
contracts is based upon the current value in the market for transactions with
similar terms and adjusted for the holding period. Warrants to purchase
additional shares of common stock are valued using a warrant pricing model. The
Company has letters of responsibility and letters of support for various credit
facilities and financing activities of certain of its subsidiaries and
affiliates (see Note P for further information). Fair value is based on
estimated fees to enter into similar arrangements.
38
<PAGE> 31
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
E. INVESTMENTS IN UNCONSOLIDATED WIRELESS SYSTEMS
- -------------------------------------------------------------------------------
Interests owned in cellular and other telecommunications systems of
unconsolidated wireless systems are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
December 31,
- ---------------------------------------------------------
(Dollars in millions) 1994 1993
- ---------------------------------------------------------
<S> <C> <C>
Investments at equity $ 1,645.1 $ 1,127.2
Investments at cost 52.8 27.3
- ---------------------------------------------------------
$ 1,697.9 $ 1,154.5
=========================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Percentage of Ownership
-----------------------
December 31,
-----------------------
1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
COST INVESTMENTS
Cellular:
GTE Mobilnet of Santa Barbara
Limited Partnership
(Santa Barbara, California) 10% 10%
Cal-One Cellular Limited
Partnership (Eureka, California) 6% 6%
Digital TU-KA Chugoku Co.,
Ltd. (Japan) 4% --
Digital TU-KA Kyushu Co.,
Ltd. (Japan) 4% --
Fresno MSA Limited Partnership
(Fresno, California) 1% 1%
Other:
International Digital
Communications, Inc. (Japan) 10% 10%
Globalstar 8% --
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Percentage of Ownership
-----------------------
December 31,
-----------------------
1994 1993
- ------------------------------------------------------------
<S> <C> <C>
EQUITY INVESTMENTS
Cellular:
New Par (Ohio/Michigan) 50% 50%
CMT Partners (California,
Texas, Missouri, and Kansas) 50% 50%
Nevada RSA2 Ltd. Partnership
(Lander, Nevada) 50% 50%
Muskegon Cellular Partnership
(Muskegon, Michigan) 41% 41%
Mannesmann Mobilfunk
GmbH (Germany) 33% 29%
Centel Cellular Company
of Nevada Limited Partnership
(Las Vegas, Nevada) 28% 28%
Telecel Comunicacoes Pessoais,
S.A. (Portugal) 23% 23%
Belgacom Mobile (Belgium) 25% --
PCS Nucleus 50% --
Airtel, S.A. (Spain) 16% --
Tokyo Digital Phone Co. (Japan) 15% 15%
Kansai Digital Phone Co. (Japan) 13% 13%
Central Japan Digital
Phone Co. (Japan) 13% 13%
Cellular Communications, Inc.
(Ohio/Michigan) 13% 12%
Shinsegi Mobile Communication
Co., Ltd. (South Korea) 11% --
Omnitel-Pronto Italia,
S.p.A. (Italy) 10% --
Tucson Cellular Telephone
Company (Tucson, Arizona) 6% 6%
Paging:
Telechamada-Servico de Pessoas,
S.A. (Portugal) 23% 23%
Sistelcom, S.A. (Spain) 25% 25%
Infomobile (formerly Omnicom)
(France) 19% 19%
- -------------------------------------------------------------
</TABLE>
Cellular Communications, Inc. ("CCI"), which represents the only equity method
investment for which a quoted market price is available, had a market value of
$304.0 million at December 31, 1994 and $235.8 million at December 31, 1993. The
Company has an obligation to purchase additional shares of CCI in a multi-step
transaction, the majority of which would be at a price reflecting private market
value (see Note F for further information).
39
<PAGE> 32
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
During 1994, the Company's consortia acquired three cellular licenses, including
licenses in Spain, Italy, and South Korea. Additionally, the Company acquired an
interest in an existing cellular venture in Belgium and an interest in
Globalstar. The Company increased its investment in MMO and CCI, and funded PCS
Nucleus in alliance with U S WEST.
The Company expects to purchase either an additional 5% or, under certain
circumstances, may be obligated to purchase an additional 10% interest in its
Spain cellular consortium. The purchase is expected during 1998. The purchase of
the full 10% interest could require an investment of as much as $200 million.
Condensed combined financial information for unconsolidated wireless systems
accounted for under the equity method is summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
December 31,
------------------------------------------------------------------
1994 1993
---------------------------- ----------------------------
(Dollars in millions) Domestic International Domestic International
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets $ 448.5 $ 978.8 $ 350.4 $ 370.0
Noncurrent assets 1,605.6 2,952.7 1,513.7 1,631.5
Current liabilities (168.5) (819.7) (116.3) (373.0)
Noncurrent liabilities (380.1) (1,620.0) (420.1) (630.8)
- --------------------------------------------------------------------------------------------------------------------------
Total partners' and stockholders' capital 1,505.5 1,491.8 1,327.7 997.7
Other partners' and stockholders'
share of capital 777.3 1,103.1 753.4 732.8
- --------------------------------------------------------------------------------------------------------------------------
Company's share of capital 728.2 388.7 574.3 264.9
Goodwill and other intangible items 191.6 336.6 255.8 32.2
- --------------------------------------------------------------------------------------------------------------------------
Equity investments in unconsolidated
wireless systems $ 919.8 $ 725.3 $ 830.1 $ 297.1
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------------------
1994 1993 1992
------------------------ ------------------------ ------------------------
(Dollars in millions) Domestic International Domestic International Domestic International
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $1,090.1 $ 1,401.0 $ 697.5 $ 527.7 $ 501.6 $ 75.9
Cost of revenues 292.3 451.9 223.0 194.7 154.6 97.8
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit (loss) 797.8 949.1 474.5 333.0 347.0 (21.9)
Selling, general, administrative,
and other expenses, net 500.1 1,200.3 277.3 555.8 226.2 244.7
Interest expense (income) 2.0 48.6 10.8 10.7 11.8 (20.3)
Income tax expense (benefit) 10.8 (144.4) 6.5 (93.3) 2.2 (114.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before accounting changes 284.9 (155.4) 179.9 (140.2) 106.8 (132.3)
Cumulative effect of accounting changes -- -- 8.5 -- -- 51.4
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 284.9 (155.4) 188.4 (140.2) 106.8 (80.9)
Other partners' and stockholders' share
of net income (loss) 153.7 (144.7) 110.4 (103.5) 60.0 (56.6)
- ----------------------------------------------------------------------------------------------------------------------------------
Company's share of net income (loss) 131.2 (10.7) 78.0 (36.7) 46.8 (24.3)
Cumulative effect of accounting change
for income taxes recorded by the Company -- -- -- -- -- (13.7)
Amortization of goodwill and other
intangible items(a) (5.8) (4.0) (7.6) (0.8) (5.7) (0.5)
- ----------------------------------------------------------------------------------------------------------------------------------
Equity in net income (loss) of uncon-
solidated wireless systems $ 125.4 $ (14.7) $ 70.4 $ (37.5) $ 41.1 $ (38.5)
==================================================================================================================================
</TABLE>
(a) Goodwill and other intangible items are amortized primarily over forty
years.
40
<PAGE> 33
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SUMMARY FINANCIAL INFORMATION
Condensed operating results for the Company's significant equity investments are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Year Ended December 31,
-----------------------------------
(Dollars in millions) 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Mannesmann Mobilfunk GmbH
Net revenues $1,126.0 $ 518.5 $ 84.8
Operating income (loss) $ 146.1 $(104.8) $(211.5)
Net income (loss) $ 69.1 $ (67.7) $ (53.0)
New Par
Operating revenues $ 578.9 $ 435.8 $ 340.3
Operating income $ 117.6 $ 92.1 $ 69.9
Net income $ 114.9 $ 92.6 $ 69.3
CMT Partners
Operating revenues $ 404.2 $ 110.8 (a) --
Operating income $ 128.8 $ 25.7 (a) --
Net income $ 140.2 $ 28.3 (a) --
- --------------------------------------------------------------------------
</TABLE>
(a) For the four month period from September 1, 1993 (inception) to December 31,
1993
F. JOINT VENTURES AND ACQUISITIONS
- --------------------------------------------------------------------------------
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 in a two-phase
transaction.
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 third 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. In conjunction with the partnership described below under "Bell
Atlantic/NYNEX Consortium," 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 first 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 would 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 more
than 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 stockholder 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.
41
<PAGE> 34
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 would be made at a ratio reflecting the appraised private market value
of US WEST's interest in WMC and the average trading price of the Company's
common stock during a period prior to U S 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.
BELL ATLANTIC/NYNEX CONSORTIUM
On October 20, 1994, the Company and U S WEST announced the formation of a
consortium between their wireless joint venture ("ATI/USW") and the wireless
joint venture announced in June of 1994, between Bell Atlantic Corporation
("BA") and NYNEX Corporation ("NYNEX") ("BA/NYN"). This consortium consists of
two partnerships, each equally owned by ATI/USW and BA/NYN.
The first partnership (the "Combined PCS Partnership") is intended to bid for,
construct and operate PCS licenses and systems in areas which complement the
existing domestic cellular franchises of the Company, U S WEST, BA and NYNEX.
This entity will be governed by a board composed of three members from each of
ATI/USW and BA/NYN.
The second partnership is intended to provide services to the existing cellular
businesses of the four parties and to any PCS properties acquired by the
consortium. It also is chartered to develop technical and service standards for
wireless properties, adopt a national brand and marketing strategy, develop
information technology and create a national distribution strategy. The entity
will be governed by a board composed of three members from each of ATI/USW and
BA/NYN, as well as one independent member.
Unlike the Company's joint venture with U S WEST, the agreements with BA/NYN do
not provide for further merger of cellular properties. Accordingly, each of
ATI/USW and BA/NYN will continue to hold such properties separately. In
addition, after seven years either such joint venture may cause the Combined PCS
Partnership to be dissolved and any PCS properties owned by it to be allocated
as equally as possible between them. BA and NYNEX each are subject to certain
standstill restrictions with respect to the Company through October 20, 2001,
unless such restrictions are earlier terminated or suspended.
Under the agreements with BA/NYN, the Company as a partner in ATI/USW may be
responsible for a portion of any tax liability that BA and NYNEX might incur by
divesting cellular properties in territories that overlap with those of the
Company or U S WEST. The Company is unable to estimate the impact, if any, of
this provision at this time.
CELLULAR COMMUNICATIONS, INC.
The Company's operations in Ohio and Michigan are conducted through New Par, a
General Partnership. The Company and CCI are each 50% partners in New Par.
Pursuant to the agreements which established New Par in 1991, the Company
purchased approximately 5% of CCI for $90 million, agreed to purchase additional
equity in CCI, and obtained the right to acquire all of CCI's remaining equity
in
42
<PAGE> 35
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
stages over the next several years. At December 31, 1994, the Company owned
11.5% of the fully diluted equity in CCI and has the right to purchase up to an
additional 16% of CCI's fully diluted equity in the open market, through
privately negotiated transactions or otherwise, through October 1995.
In October 1995, CCI will offer to redeem up to 10.04 million shares of its
redeemable stock at $60 per share. The Company is obligated to purchase from CCI
a like number of newly issued shares at the same price. In addition, CCI is
obligated to redeem or buy back options held by CCI management an aggregate 2.4
million shares at $60 per share (less the exercise price in the case of the
options). The Company is obligated to purchase from CCI a like number of newly
issued shares at the same price. If the maximum number of shares and options are
redeemed by CCI, the total obligation of the Company to purchase CCI shares
would be approximately $720 million, and the Company will have purchased an
additional 25% of CCI.
Beginning in August 1996, the Company has the right to acquire (through a
redemption process similar to that discussed above) any remaining interests in
CCI at a price to be determined by an appraisal process. Should the Company not
accept the results of the appraisal process by February 1998 and not exercise
its right to purchase CCI, CCI is obligated to seek alternative buyers (and if
directed by the Company, also seek buyers for the Company's interest in New
Par), or may purchase the Company's interest in CCI or CCI and New Par, at a
price based on the appraised values. If CCI or its interest in New Par is sold
within a two year period for a price less than the values determined in the
appraisal process, the Company is obligated to pay to the other CCI shareholders
a specified percentage of such shortfall.
The Company has obtained a $600 million irrevocable letter of credit, expiring
in 1996, for the benefit of CCI (see Note H for further information). In
addition, the Company has pledged its shares of CCI to CCI and must continue to
pledge any additional shares it acquires and must vote such shares in the same
proportion as the votes of the other shareholders.
MCCAW CELLULAR COMMUNICATIONS, INC.
In September 1993, the Company and McCaw Cellular Communications, Inc. ("McCaw")
contributed their respective cellular operations in San Francisco, San Jose,
Dallas, Kansas City (Missouri/Kansas) and certain adjoining areas to a joint
venture with equal ownership by each company. In a related transaction, the
Company purchased McCaw's Wichita and Topeka systems for $100.0 million.
NORDICTEL
In October 1993, the Company acquired a 51% interest in NordicTel Holdings AB
("NordicTel"), one of three providers of Global System for Mobile
Communications ("GSM") cellular service in Sweden, for $153.0 million. The
Company also contributed $5.4 million to NordicTel's equity capital at the time
of acquisition.
G. INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
Intangible assets consist of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31,
---------------------
(Dollars in millions) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
FCC and international licenses,
at cost, less accumulated
amortization of $43.6 and $36.9
for 1994 and 1993, respectively $186.1 $143.7
Goodwill, at cost, less accumulated
amortization of $16.4 and $8.4
for 1994 and 1993, respectively 272.4 262.3
Other intangible assets, at cost,
less accumulated amortization
of $15.5 and $9.6 for 1994
and 1993, respectively 12.0 7.2
- -------------------------------------------------------------------------------
$470.5 $413.2
===============================================================================
</TABLE>
43
<PAGE> 36
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1994, FCC licenses increased approximately $47.3 million as result of
purchasing three regional 50/12.5 KHz licenses in the FCC auction of regional
narrowband PCS licenses. These licenses, covering the northeast, central, and
western regions of the United States will be used to expand services in existing
and new markets.
Amortization expense relating to intangible assets for the years ended December
31, 1994, 1993, and 1992 was $21.3 million, $12.5 million, and $11.0 million,
respectively.
H. DEBT AND CREDIT FACILITIES
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
Short-term borrowings of $80.0 million at December 31, 1994 consist of unsecured
bank loans with a weighted average interest rate of 6.7%. Short-term borrowings
of $2.4 million at December 31, 1993 primarily consisted of a bank note payable
with a weighted average interest rate of 8.0%.
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
December 31,
------------------
(Dollars in millions) 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C>
Revolving credit facility, due 1997 $ 52.5 --
Revolving credit facility, due 1998 45.0 $50.1
Bank promissory notes 29.8 24.1
Various other notes and obligations 2.8 4.7
- -----------------------------------------------------------------------
130.1 78.9
Less portion due within one year 9.9 10.3
- -----------------------------------------------------------------------
$120.2 $68.6
=======================================================================
</TABLE>
The revolving credit facilities support cellular equipment purchases by
NordicTel. Borrowings bear interest at the Stockholm Interbank Borrowing Rate
plus a margin. At December 31, 1994, the weighted average interest rate of these
facilities was 8.1%. If the borrowing was made in the United States, the
interest rate would have been approximately 6.8%. Borrowings are collateralized
by certain of the equipment purchased thereunder and by shares of a wholly owned
subsidiary of NordicTel. In addition, NordicTel is restricted in making
distributions or interest payments on its common stock or stockholders'
contributions.
The bank promissory notes represent, in 1993, two notes with a Japanese bank
which were refinanced with a single note in 1994. The new note is due in 1997
with options to extend for two additional years. The note bears interest at the
Euroyen rate plus a margin which is dependent upon the Company's Standard and
Poor's rating. At December 31, 1994, the interest rate was 2.8%. If the
borrowing was made in the United States, the interest rate would have been
approximately 6.6%.
Annual maturities of long-term debt, including capital leases, are as follows:
1996, $13.0 million; 1997, $63.6 million; 1998, $13.8 million; and 1999, $29.8
million.
REVOLVING LINES 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 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 and agency securities in exchange for a
significantly reduced margin. At December 31, 1994, the Company had voluntarily
44
<PAGE> 37
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
pledged approximately $600 million of securities classified as cash
equivalents, held-to-maturity, and available-for-sale. Provided the Company
is not in default under the Facility, these securities are immediately,
obtained 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 (see
Note F for further information). To support this obligation, the Company has
obtained a $600 million irrevocable letter of credit under the Facility for the
benefit of CCI. This letter of credit expires in 1996. As of December 31, 1994,
there have been no draws against the letter of credit.
The Company has various other lines of credit with certain banks. For the most
part, these arrangements do not require compensating balances or commitment fees
and, accordingly, are subject to continued review by the lending institutions.
At December 31, 1994 and 1993, the total unused amount under these lines of
credit available were approximately $130.0 million and $86.2 million,
respectively.
OTHER
In 1992, the Company prepaid $100 million of long-term debt. The early
redemption expense related to the prepayment was $12.7 million and carried an
income tax benefit of $5.1 million. The net expense was recorded as an
extraordinary item in the second quarter of 1992 and reduced net income by $7.6
million.
I. CAPITAL STOCK
- --------------------------------------------------------------------------------
In December 1994, the Company changed its state of incorporation from
California to Delaware.
In December 1993, the Company completed a public offering of 68,500,000
shares of newly issued common stock for proceeds of $1,489.2 million, net of
underwriting discounts and direct stock issuance costs.
In addition to the common shares outstanding, a subsidiary of the Company owns
122,960 shares of the Company's common stock. Because the accounting treatment
for subsidiary-held shares is similar to that for treasury stock, the
subsidiary-held shares are not considered outstanding.
PREFERRED STOCK
Of the 50,000,000 authorized shares of preferred stock, 6,000,000 shares have
been designated as Series A Participating Preferred Stock. There are no
outstanding shares of Series A Participating Preferred Stock. The remaining
authorized preferred stock may be issued in one or more series, and the Board of
Directors is authorized to designate the series and fix the relative rights,
preferences, and limitations of the respective series without any further vote
or action of the stockholders.
STOCKHOLDER RIGHTS PLAN
The Company's stockholder rights plan (the "Rights Plan") provides for the
distribution of rights ("Rights") to holders of outstanding shares of common
stock. Except as set forth below, each Right, when exercisable, entitles the
stockholder to purchase from the Company one one-hundredth of a share of
Series A Participating Preferred Stock at a price of $80 per share, subject
to adjustment.
45
<PAGE> 38
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Rights are not currently exercisable, but would become exercisable if
certain events occurred related to a person or group ("Acquiring Party")
acquiring or attempting to acquire 10% or more of the Company's common stock. In
the event that the Rights become exercisable, each holder of a Right (other than
an Acquiring Party) would be entitled to purchase, for the exercise price then
in effect, shares of the Company's common stock having a market value at the
time of such transaction of two times the exercise price for each Right.
The Board of Directors, at its option, may at any time after a person becomes an
Acquiring Party (but not after the acquisition by such person of 50% or more of
the outstanding common stock) exchange on behalf of the Company all or part of
the then outstanding and exercisable Rights for shares of common stock at an
exchange ratio of one share of common stock for each Right.
At any time prior to the earlier of the occurrence of either (i) a person
becoming an Acquiring Party or (ii) the expiration of the Rights, the Company
may redeem the Rights in whole, but not in part, at a price of $0.01 per Right.
J. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
- --------------------------------------------------------------------------------
The Company has a Long-Term Stock Incentive Plan ("the Plan"), under which it
has reserved 24.0 million shares of common stock. Awards to eligible employees
under the plan can take the form of incentive ("ISOs") or non qualified ("NSOs")
stock options, stock appreciation rights ("SARs"), restricted stock, stock units
or a combination of these forms. Each award has specific terms, including
vesting provisions, at the discretion of the Company.
The plan requires that the exercise price be equal to the fair market value of
the stock at the grant date for ISOs and at the discretion of the Company for
NSOs. The exercise price may be paid in cash, stock already owned by the holder,
or a combination. SARs may be settled in cash or stock at the discretion of the
Company. The settlement of SARs issued in conjunction with NSOs require the
related unexercised NSOs to be canceled. Restricted stock is held in escrow
until the vesting provisions are satisfied although such shares have full voting
and other rights. Stock units represent shares of common stock. Holders of stock
units are not required to pay for such units and have no voting or other rights
as a stockholder. Settlement of stock unit awards may be in cash, shares, or a
combination at the discretion of the Company.
Notwithstanding the general vesting provisions of restricted stock awards,
early vesting can occur for certain awards if the Company's initial public
offering stock price ($23 per share) is doubled within a specified period of
time.
Compensation expense for NSOs issued at prices less than fair market value at
the grant date, Restricted Stock, and Stock Units is measured at the grant date
and charged to income over the vesting period. Compensation for SARs is recorded
over the vesting period at amounts equal to the excess of the current stock
price over the fair market value of the stock at the grant date.
At December 31, 1994, the Company had accrued $14.9 million of deferred
compensation expense (classified as a reduction of "Additional paid-in capital")
related to awards under the plan. Compensation expense in connection with awards
charged to income in 1994 was $1.5 million.
The following table summarizes award activity in 1994:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Price Range
Shares Per Share
- -----------------------------------------------------------
<S> <C> <C>
Options and SARs
granted and replaced
(Telesis) 6,369,662 $ 8.51 - $24.00
Restricted stock issued 840,075 $ 20.88 - $28.50
Stock units granted 201,773 $ 20.88 - $28.50
Options exercised (256,315) $ 8.51 - $18.90
Awards forfeited (120,792) $ 20.38 - $28.50
- -----------------------------------------------------------
Shares issuable under
outstanding awards
at December 31, 1994 7,034,403 $ 8.51 - $28.50
- -----------------------------------------------------------
</TABLE>
46
<PAGE> 39
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
There were options to purchase 3.1 million shares of common stock exercisable at
December 31, 1994, and 16.7 million shares available for future awards.
In addition, the Company granted SARs to an investment firm that advised Telesis
and the Company at the time of the spin-off. The Company and Telesis each
granted SARs covering 350,000 shares of their respective common stock. The
exercise price for the Company's shares is $20 per share for one half the shares
and $24 per share for the remaining shares ($30 per share and $36 per share,
respectively for the Telesis shares). The SARs are exercisable through April,
1997. The SARs may be exercised as to the Telesis shares or the Company's shares
in any order, however, once SARs with an aggregate value of $6 million have been
exercised, the remaining rights are canceled. At December 31, 1994, SARs with
respect to 100,000 shares of the Company's common stock (representing $0.9
million in value) had been exercised. The Company has accrued the excess of fair
market value over the exercise price for the remaining shares applicable to the
Company.
K. INCOME TAXES
- --------------------------------------------------------------------------------
The components of income tax expense for each year ended December 31 are as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
(Dollars in millions) 1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 92.6 $ 48.8 $ 1.5
State and other taxes 20.2 9.4 (4.4)
- ------------------------------------------------------
Total current 112.8 58.2 (2.9)
- ------------------------------------------------------
Deferred:
Federal (2.5) 8.5 19.1
Change in federal enacted
tax rate -- 4.4 --
State and other taxes (2.0) (3.3) 8.4
- ------------------------------------------------------
Total deferred (4.5) 9.6 27.5
- ------------------------------------------------------
Amortization of investment
tax credits, net -- -- (0.1)
- ------------------------------------------------------
Total income taxes $ 108.3 $ 67.8 $ 24.5
======================================================
</TABLE>
In state and other taxes, the Company recorded international tax expense on its
consolidated foreign subsidiaries of $1.3 million, $1.6 million, and $1.3
million, for 1994, 1993, and 1992, respectively.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-----------------
(Dollars in millions) 1994 1993
- ------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ 121.6 $ 124.6
Equity investments 69.8 59.0
Other 21.3 22.3
- ------------------------------------------------------
212.7 205.9
- ------------------------------------------------------
Deferred tax assets:
Postretirement benefits obligation 2.2 4.4
Foreign tax benefits in
consolidated subsidiaries 10.5 4.8
Equity investments 18.5 --
Accruals deductible for tax
purposes when paid 18.3 16.0
Other 2.1 8.2
- ------------------------------------------------------
51.6 33.4
Valuation allowance (10.5) (4.8)
- ------------------------------------------------------
Total deferred taxes recorded
in consolidated balance sheets $ 171.6 $ 177.3
======================================================
Current $ (33.8) $ (13.1)
Non-current 205.4 190.4
- ------------------------------------------------------
Net deferred tax liabilities $ 171.6 $ 177.3
======================================================
</TABLE>
The net change in the valuation allowance for deferred tax assets was an
increase of $5.7 million relating to benefits arising from foreign net operating
loss carryforwards of consolidated subsidiaries. At December 31, 1994, the
Company had unused tax benefits of $10.5 million related to foreign net
operating loss carryforwards. Of this amount, $5.9 million can be carried
forward indefinitely and the balance expires at various dates through 2002. The
loss before income tax expense on the Company's con-solidated foreign
subsidiaries was $10.0 million and $5.2 million in 1994 and 1993, respectively.
47
<PAGE> 40
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The reasons for differences each year between the statutory federal income tax
rate and the effective income tax rate are provided in the following
reconciliations:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 34.0%
Increase (decrease) in taxes
resulting from:
Equity losses of unconsol-
idated wireless systems 7.0 11.5 101.0
State income taxes, net of
federal tax benefit 5.3 3.7 (9.3)
Partner share of tax benefit 2.6 -- --
Nondeductible
amortization 1.5 3.0 4.6
Tax on international income 0.7 1.5 8.9
Tax exempt interest (2.4) -- --
Change in deferred taxes
due to tax rate change -- 4.1 --
Nondeductible amortiza-
tion of investment
tax credits -- -- (0.6)
International Teletrac
Systems losses prior to
March 31, 1992 -- -- 36.8
Other 2.8 4.0 (5.3)
- ---------------------------------------------------------
Effective income tax rate 52.5% 62.8% 170.1%
- ---------------------------------------------------------
</TABLE>
At December 31, 1994, deferred tax liabilities totaling $11.6 million relating
to cumulative unrepatriated earnings on consolidated foreign subsidiaries were
excluded from recognition under SFAS 109 because such earnings are intended to
be reinvested indefinitely. Federal income and foreign withholding tax expense
of $3.3 million would be due if this income were repatriated.
At December 31, 1994, defered tax liabilities relating to items which were
credited directly to stockholders' equity totaled $12.0 million.
In August 1993, the United States government enacted the Omnibus Budget
Reconciliation Act of 1993 which incorporated new business tax provisions. These
included an increase in the corporate tax rate from 34% to 35% retroactive to
January 1, 1993. The Company's adjustment for this change reduced net income by
$4.4 million in 1993.
L. RETIREMENT PLANS
- --------------------------------------------------------------------------------
DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution plan, the AirTouch Communications
Retirement Plan ("Retirement Plan"), which covers substantially all full-time
employees. The Company's contributions to the Retirement Plan are based on a
combination of percentage of pay and on matching a portion of employee
contributions. The cost recognized for the plan was $16.3 million, $12.9
million, and $9.8 million for 1994, 1993, and 1992, respectively.
DEFINED BENEFIT PENSION PLAN
The Company maintains a defined benefit plan under which individuals who were
employees at December 31, 1986, and transferees from Telesis, receive pension,
death and survivor benefits based on a percentage of final five year average pay
and years of service. An accrual of service credit was discontinued in 1986 for
most of the Company's employees and for the former Telesis employees. Currently,
benefits only increase for changes in compensation because the accrual of
service credit was discontinued.
In 1993, the plan was amended to include approximately 130 employees of a joint
venture of Telesis to be included in the Company's defined benefit plan. This
increased the reported plan assets and actuarial present value of projected plan
benefit obligations by $3.7 million and $2.1 million, respectively. Also in
1993, approximately 85% of the such employees elected early retirement or
termination benefits. This was accounted for as a plan curtailment in accordance
with SFAS No. 88, "Employers' Accounting for
48
<PAGE> 41
--------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------------
Settlements and Curtailments of Defined Benefit Plans and for Termination
Benefits," and resulted in one-time $3.0 million net gain. This gain has not
been included in the following annual pension income table:
<TABLE>
<CAPTION>
--------------------------------------------------------
(Dollars in millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Actual return on assets $ 0.2 $ 10.2 $ 0.6
Net amortization and deferral
of items subject to delayed
recognition(a) 6.2 (4.8) 3.4
Interest cost on projected
benefit obligations (2.6) (2.6) (1.6)
Service cost-benefits earned
during the year (0.1) (0.1) (0.3)
--------------------------------------------------------
Pension income recognized $ 3.7 $ 2.7 $ 2.1
--------------------------------------------------------
</TABLE>
(a) Under SFAS No. 87, "Employers' Accounting for Pensions," ("SFAS 87"),
differences between actual returns and losses on assets and assumed returns,
which are based on an expected long-term rate of return, are deferred and
included with other "unrecognized net gain" (see following table). During
1994, actual returns were less than assumed returns by $5.6 million. During
1993, actual returns exceeded assumed returns by $5.8 million. During 1992,
actual returns were less than assumed returns by $3.5 million. Recognition
of these differences has been deferred.
The following table sets forth the status of the plan's assets and
obligations and the amounts recognized in the Company's consolidated balance
sheets:
<TABLE>
<CAPTION>
December 31,
---------------
(Dollars in millions) 1994 1993
---------------
<S> <C> <C>
Plan assets at estimated fair value $ 73.9 $ 68.3
Actuarial present value of projected
benefit obligations 26.6 31.1
--------------------------------------------------------
Plan assets in excess of projected
benefit obligations 47.3 37.2
Less items subject to delayed
recognition:
Unrecognized net gain(a) 16.8 15.4
Unrecognized transition amount(b) 4.8 5.3
Unrecognized prior service cost 1.0 1.1
--------------------------------------------------------
Prepaid pension cost recognized
in the consolidated balance sheets $ 24.7 $ 15.4
--------------------------------------------------------
</TABLE>
(a) Gains or losses from actual returns on assets different from assumed
returns, as well as from demographic experience different from assumed and
the effects of changes in other assumptions, are recognized through
amortization, over time, when the cumulative gains or losses exceed certain
limits.
(b) The $10.2 million excess of the fair value of the plan's assets over
projected benefit obligations as of the January 1, 1987 adoption of SFAS 87
is being recognized through amortization over approximately 17 years.
Recognition has been accelerated due to the settlement of pension
obligations through lump sum benefit payments.
The assets of the plan are primarily composed of common stocks, United
States government and corporate obligations, and index funds. The plan's
projected benefit obligations for employee service to date reflect the
company's expectations of the effects of future salary progressions of 5.5%
per year. As of December 31, 1994 and 1993, the actuarial present value of
the plan's accumulated benefit obligations, which do not anticipate future
salary increases, were $22.1 million and $26.1 million, respectively. Of
these amounts, $19.0 million and $23.2 million, respectively, were vested.
The assumptions used in computing the present values of benefit obligations
include a discount rate of 9.0%, 7.5%, and 8.5% for December 31, 1994,
1993, and 1992, respectively. An 8.5% long-term rate of return on assets
was assumed in calculating pension costs in 1994 and an 8.0% rate was used
for 1993.
M. OTHER POSTRETIREMENT BENEFITS
----------------------------------------------------------------------------
The Company provides health care benefits for retired employees and their
eligible dependents and provides life insurance benefits to retired
employees. Employees become eligible for these benefits upon retirement with
eligibility for a service pension under the defined benefit pension plan or
attainment of "retirement status" under the defined contribution plan.
Substantially all retirees and their dependents are covered under the
Company's plans for medical, dental, and life insurance benefits.
Approximately 41 retirees were eligible to receive benefits as of January 1,
1994. The Company retains the right, subject to applicable legal
requirements, to amend or terminate these benefits.
The Company currently pays a portion of the cost of these benefits, with
retirees paying monthly contributions for medical and dental costs based on
the individual's family status. Commencing in 1994, the Company has
implemented managed care in order to reduce and contain medical costs. The
terms of this cost sharing have been reflected in the Company's
consolidated financial statements. Through 1992, postretirement health care
costs were expensed as claims were incurred. Postretirement life insurance
benefits were expensed as premiums were paid.
49
<PAGE> 42
-----------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
On January 1, 1993, the Company implemented SFAS 106 on an immediate
recognition basis resulting in a one-time, noncash expense of $9.1 million
before a tax benefit of $3.5 million. The projected unit credit actuarial
method was used to determine the cost of these benefits.
A discount rate of 9.0% was used to measure the accumulated postretirement
benefit obligation ("APBO") at December 31, 1994. A discount rate of 7.5%
was assumed in calculating the 1993 net periodic postretirement benefit
cost. At December 31, 1994, the postretirement benefit plans were
principally unfunded.
The annual net periodic postretirement benefit cost consisted of the
following:
<TABLE>
<CAPTION>
------------------------------------------------------
December 31,
---------------
(Dollars in millions) 1994 1993
------------------------------------------------------
<S> <C> <C>
Service cost $ 2.5 $ 1.2
Interest cost on accumulated
postretirement benefit obligation 1.2 0.8
------------------------------------------------------
Postretirement benefit cost $ 3.7 $ 2.0
------------------------------------------------------
</TABLE>
The following table sets forth the status of the plans and the amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
------------------------------------------------------
December 31,
----------------
(Dollars in millions) 1994 1993
------------------------------------------------------
<S> <C> <C>
Retirees $ 2.3 $ 3.5
Eligible active employees 1.9 1.0
Other active employees 4.8 7.9
------------------------------------------------------
Total accumulated postretirement
benefit obligation 9.0 12.4
Less fair value of plan assets 0.2 --
------------------------------------------------------
Plan assets less than accumulated
benefit obligation 8.8 12.4
Unrecognized net loss (gain), subject
to delayed recognition(a) (6.1) 1.1
------------------------------------------------------
Accrued postretirement benefit cost $ 14.9 $ 11.3
------------------------------------------------------
</TABLE>
(a) Gains or losses from actual returns on assets different than assumed
returns, as well as from demographic experience different than assumed and
the effects of changes in other assumptions, are recognized through
amortization, over time, when the cumulative gains or losses exceed certain
limits.
A 10% annual increase in health care costs is assumed in 1994. The rate of
increase is assumed to decline to an ultimate 6% by the year 2002. Should
the health care cost trend rate increase by 1% each year, the 1994 impact
increases the APBO by $10.8 million and the aggregate of the service and
interest cost components of the net period cost by $4.4 million.
N. TRANSACTIONS WITH FORMER AFFILIATES
---------------------------------------------------------------------------
SEPARATION AND TRANSITION AGREEMENTS
Prior to the spin-off, the Company and Telesis entered into a separation
agreement that provided for complete separation of all properties after the
spin-off as well as transition agreements that disengaged the affairs of
the Company and Telesis in an orderly manner.
The separation agreement provided that the Company will continue to join in
filing consolidated federal income tax returns with Telesis for all taxable
periods in which the parties are required or permitted to file a
consolidated return. In each taxable period, the Company must pay Telesis
an amount equal to the Company's share of the consolidated tax liability
based on the Company's separate taxable income and an amount equal to the
Company's contribution to Telesis' state tax liability. If the Company were
to report a net operating loss for any such year, Telesis would pay an
amount equal to its reduction in tax liability attributable to such loss. A
similar method of allocation would be applied to state income taxes filed
pursuant to a combined return.
50
<PAGE> 43
- --------------------------------------------------------------------------------
NOTES CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The separation agreement also provided for the transfer of a limited number of
employees' and retirees' accounts and for indemnification against certain
claims. Telesis and the Company have exchanged such payroll data, service
records, tax-related information, and other employee information necessary for
the effective administration of Company benefit plans and compliance with
governmental reporting requirements.
In general, the separation agreement allocated non-tax liabilities that become
certain after the spin-off according to the origin of the claim and acts by, or
benefits to, Telesis or the Company.
FINANCIAL AND ADMINISTRATIVE SERVICES
Equity contributions from Telesis totaled $1,179.8 million in 1993 and $212.2
million in 1992.
Prior to the spin-off, the Company obtained certain administrative services and
other additional services from Telesis and its affiliates ("former affiliates").
Service costs that were specifically attributable to the Company were directly
charged to the Company by Telesis. Other service costs and corporate charges
were allocated proportionately among former affiliates, including the Company.
Prior to the spin-off, in the ordinary course of business, the Company
participated with former affiliates in the following transactions:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
For the
Three Months For the Year
Ended March 31, Ended December 31,
-------------------------------------
(Dollars in millions) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provided by the Company:
Revenues from cellular services $ 0.6 $ 2.7 $ 2.3
Revenues from paging services $ 0.4 $ 1.7 $ 1.4
Provided to the Company:
Expenses from telephone services $ 5.5 $ 28.5 $ 29.0
Expenses from administrative, research and development, and insurance services $ 6.0 $ 16.3 $ 17.4
Expenses from lending services -- $ 19.6 $ 46.6
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 44
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
O. REGULATORY MATTERS
- --------------------------------------------------------------------------------
CELLULAR REGULATION
The California Public Utilities Commission ("CPUC") regulates the Company's
California markets and ventures and has several ongoing investigations. First,
in an interim decision, issued on August 3, 1994, the CPUC exercised its option
under federal law to file a petition with the 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 Company filed its opposition to the CPUC's
petition on September 19, 1994. The FCC will make a final determination
regarding whether the CPUC will be permitted to regulate cellular rates or entry
by August 10, 1995. Second, 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 cannot exceed the current wholesale rates. The
Company does not believe this order will have a material adverse effect on
its financial position or results of operations. The Company filed an
Application for Rehearing of this decision stating that the CPUC exceeded its
authority by ordering that cellular carriers must unbundle their wholesale rates
and allow a reseller's switch to be interconnected. Third, the CPUC deferred to
later phases of its ongoing investigation 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.
P. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
CONTINGENCIES
A class action complaint was filed in November 1993 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."
The Company has answered the complaint and intends to defend itself vigorously.
The Company is attempting to coordinate for discovery several other class
actions (see below) and antitrust cases brought by individual plaintiffs. The
Company does not believe that these proceedings will have a material adverse
effect on the Company's financial position.
In four separate class action complaints filed during October and November 1994
in Los Angeles, Orange County, San Diego and San Francisco, all brought by the
same counsel, plaintiffs allege similar facts and circumstances as the complaint
described in the previous paragraph. The Company does not believe that these
proceedings will have a material adverse effect on the Company's financial
position.
The California State Attorney General has been investigating the pricing of
cellular telephone service in the Los Angeles market in the mid- to late 1980s.
The Company has had meetings with the Attorney General's office and is
cooperating fully in connection with this matter. The Company believes that its
pricing and marketing practices were and are in compliance with the antitrust
laws. The Company does not believe that the investigation will have a material
adverse effect on the Company's financial position.
The Company is party to various other legal proceedings in the ordinary course
of business. Although the ultimate resolution of these proceedings cannot be
ascertained, management does not believe they will have a materially adverse
effect on the results of operations or financial position of the Company.
LEASE COMMITMENTS
The Company leases various facilities and equipment under noncancelable lease
arrangements. Most leases contain renewal options for varying periods. Rent
expense under all operating leases was approximately $35.3 million, $33.3
million, and $31.9 million in 1994, 1993, and 1992, respectively.
52
<PAGE> 45
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Future minimum lease payments under noncancelable operating leases with an
initial term of one year or more are as follows at December 31, 1994:
<TABLE>
<CAPTION>
- -----------------------------------------
(Dollars in millions)
- -----------------------------------------
<S> <C>
1995 $ 43.2
1996 39.7
1997 36.7
1998 33.3
1999 29.4
Thereafter 74.5
- -----------------------------------------
Total minimum lease payments $ 256.8
=========================================
</TABLE>
OTHER
In the ordinary course of business, 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 provide varying degrees
of recourse to the Company, but in the aggregate they would not have a material
adverse impact on the Company's financial position or results of operations.
Separately, as of December 31, 1994, the Company guaranteed approximately $10.6
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 stockholders unaffiliated with the Company. The Company
provided a letter supporting the commercial paper program entered into by
Telecel Comunicacoes Pessoais, S.A. If certain loan covenants are not met, the
Company may be liable for its proportionate share of the loans, approximately
$7.2 million. The Company believes it is remote that it will be required to pay
under these various arrangements.
Commitments for future acquisitions of property, plant, and equipment at
December 31, 1994, are approximately $160 million.
Q. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
In January 1995, the Department of Justice ("DOJ") concluded that the Company is
subject to the Modification of Final Judgment ("MFJ"). The MFJ is the 1982
consent decree that governs the Bell Operating Companies ("BOC") which were
divested by AT&T in 1984. The MFJ prohibits BOCs from offering long-distance
telephone service or manufacturing telecommunications equipment. Compliance with
the MFJ's line-of-business restrictions would mean halting the Company's
long-distance and satellite services businesses, as well as limiting its design
and development work on wireless equipment. The Company has determined this
decision does not significantly impact its short term operations. The Company
disagrees with the DOJ's conclusion and is seeking a prompt decision from U.S.
District Court Judge Harold Greene that the Company is not subject to the MFJ.
Until this decision is made, the DOJ has agreed not to enforce the restrictions
in the MFJ on the Company, and the Company has agreed not to undertake any new
business activities which would be restricted under the MFJ.
Globalstar received a license in January 1995 from the FCC, authorizing it to
begin construction of its low earth orbit satellite system. See the preceding
paragraph for a discussion of the DOJ conclusions with respect the Company's
ability to participate in long-distance telephone service.
In February 1995, the FCC issued permanent rules for Location and Monitoring
Systems in the 902-928 megahertz band in which AirTouch Teletrac ("Teletrac")
operates. Under a grandfathering clause in the new rules, Teletrac can continue
to operate its existing systems, with modifications as necessary by April 1,
1998 to conform to the sub-band frequencies specified in the
53
<PAGE> 46
- -----------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
order. To maintain the licenses it holds for markets in which systems have
not yet been constructed, Teletrac must file with the FCC a list of markets
it intends to build-out. Teletrac will have until April 1996 to construct
these licenses, or forfeit such licenses not built-out. Exclusive licenses
for multilateration systems within a Major Trading Area ("MTA") will be
available for purchase through competitive bidding for each of three
sub-bands in the FCC order. Licenses will be made available for purchase in
MTAs in which Teletrac systems are grandfathered. Teletrac will continue to
share its spectrum with government and amateur radio users.
On March 13, 1995, PCS PrimeCo, one of the Company's alliances with U S WEST,
BA, and NYNEX, was the high bidder in eleven MTAs in the FCC's auctions for
PCS broadband licenses. The Company's share of the cost of the licenses was
approximately $277 million.
R. ADDITIONAL FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-------------------
(Dollars in millions) 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Accounts payable:
Trade $ 135.5 $ 110.8
Other 67.4 74.4
- -----------------------------------------------------------------
Total $ 202.9 $ 185.2
=================================================================
Miscellaneous other current liabilities:
Accrued taxes payable $ 54.4 $ 28.2
Deferred gain $ 31.9 $ 1.1
Advance billings and
customer deposits $ 31.6 $ 22.4
Accrued expenses $ 25.4 $ 16.4
Other receivables:
Income taxes receivable $ 64.3 --
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
For the Year Ended December 31,
-------------------------------
(Dollars in millions) 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Miscellaneous income
(expense):
Foreign exchange
activity, net $ (3.5) $ (3.4) $ 2.2
Gain on sale of telecom-
munications interests -- 3.8 --
Defined benefit plan
settlement gain, net -- 3.0 --
Other (1.5) (0.1) (1.2)
- -----------------------------------------------------------------
Total $ (5.0) $ 3.3 $ 1.0
=================================================================
Wireless services and
other revenues:
Cellular service $ 884.9 $ 787.0 $ 681.7
Paging service 188.0 148.7 117.9
Vehicle location service 6.2 4.0 2.4
Other revenues 59.9 47.6 32.8
- -----------------------------------------------------------------
Total $ 1,139.0 $ 987.3 $ 834.8
=================================================================
</TABLE>
54
<PAGE> 47
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
S. QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------
1994 First Second Third Fourth
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 276.2 $ 300.2 $ 317.8 $ 341.2
Operating income (loss) $ 33.9 $ 28.6 $ 16.1 $ (6.0)
Net income $ 27.5 $ 33.1 $ 34.4 $ 3.1
Per share data:
Net income $ 0.06 $ 0.07 $ 0.07 $ 0.01
- -----------------------------------------------------------------------------------------------------------------
1993 First Second Third Fourth
- -----------------------------------------------------------------------------------------------------------------
Operating revenues $ 252.4 $ 275.9 $ 271.9 $ 257.5
Operating income $ 28.2 $ 42.4 $ 47.9 $ 9.7
Income (loss) before cumulative effect of accounting change $ (2.3) $ 12.5 $ 15.3 $ 14.6
Net income (loss) $ (7.9) $ 12.5 $ 15.3 $ 14.6
Per share data:
Income (loss) before cumulative effect of accounting change $ (0.01) $ 0.03 $ 0.04 $ 0.03
Net income (loss) $ (0.02) $ 0.03 $ 0.04 $ 0.03
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The operating loss in the fourth quarter of 1994 was the result of an increase
in operating expenses, principally due to increased selling expenses for
commissions, advertising and other promotional expenses that were associated
with the rapid growth of domestic cellular subscribers.
In 1993, the Company implemented SFAS No. 106 which reduced net income by $5.6
million in the first quarter of 1993.
55
<PAGE> 48
- --------------------------------------------------------------------------------
SUPPLEMENTARY SELECTED PROPORTIONATE FINANCIAL DATA
- --------------------------------------------------------------------------------
SELECTED PROPORTIONATE RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following table is not required by generally accepted accounting principles
("GAAP") or intended to replace the Consolidated Financial Statements prepared
in accordance with GAAP. It is presented to provide supplemental data. However,
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 financial and operating data facilitate the
understanding and assessment of its Consolidated Financial Statements.
The following proportionate accounting table reflects the relative weight of the
Company's ownership interests in its domestic and international systems and
excludes certain investments for which the Company does not receive timely
detailed income statements.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the Year Ended December 31,
-------------------------------------
(Dollars in millions) 1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL COMPANY
Total proportionate net operating revenues(1) $ 1,781.3 $ 1,226.1 $ 873.2
Total proportionate operating income(1) $ 171.5 $ 97.6 $ 11.3
Total proportionate operating cash flow(1)(2) $ 506.1 $ 351.5 $ 191.5
=======================================================================================================
DOMESTIC CELLULAR OPERATING RESULTS
Service and other revenues $ 1,149.6 $ 892.0 $ 699.4
Equipment sales 74.6 40.2 24.8
Cost of equipment sales (82.0) (42.2) (23.9)
-------------------------------------------------------------------------------------------------------
Net operating revenues 1,142.2 890.0 700.3
-------------------------------------------------------------------------------------------------------
Cost of revenues 126.0 116.3 98.7
Selling, general, administrative and other expenses 537.2 394.1 322.5
Depreciation expense 163.5 147.0 109.0
Amortization expense 22.2 17.7 15.1
-------------------------------------------------------------------------------------------------------
Total costs and expenses 848.9 675.1 545.3
-------------------------------------------------------------------------------------------------------
Operating income $ 293.3 $ 214.9 $ 155.0
=======================================================================================================
Operating cash flow(2) $ 479.0 $ 379.6 $ 279.1
=======================================================================================================
</TABLE>
(1) Total proportionate results do not include certain international investments
and some small domestic cellular investments for which the Company does not
have timely detailed income statements. Net loss associated with these
international investments was approximately $6.3 million for the year ended
December 31, 1994.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flow from operating activities in
the Company's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents the Company's ownership interest in the respective
entities multiplied by the entities' operating cash flow. As such,
proportionate operating cash flow does not represent cash available to the
Company.
56
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF NAME DOING
SUBSIDIARY INCORPORATION BUSINESS AS
---------- ------------- -----------
<S> <C> <C>
AirTouch Communications California Not Applicable
of California
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AirTouch Communications, Inc. on Form S-8 relating to the AirTouch
Communications, Inc. Retirement Plan (File No. 33-57083), AirTouch
Communications, Inc. Employee Stock Purchase Plan (File No. 33-57077), and
AirTouch Communications, Inc. 1993 Long-Term Stock Incentive Plan (File No.
33-57081) of our reports dated March 13, 1995, on our audits of the
consolidated financial statements and financial statement schedule of AirTouch
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1993, and
for the years ended December 31, 1994, 1993, and 1992, which reports are
incorporated by reference in this Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
March 16, 1995
<PAGE> 1
Exhibit 23.2
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-57081, No. 33-57077, and No. 33-57083) pertaining to the
AirTouch Communications, Inc. 1993 Long-Term Stock Incentive Plan, the
AirTouch Communications, Inc. Employee Stock Purchase Plan, and the AirTouch
Communications, Inc. Retirement Plan, of our report dated February 14, 1995,
with respect to the consolidated financial statements and schedule of New Par
included in the Annual Report (Form 10-K) of AirTouch Communications, Inc. for
the year ended December 31, 1994.
/s/ Ernst & Young LLP
Columbus, Ohio
March 20, 1995
<PAGE> 1
Exhibit 23.3
Consent of Independent Auditors
The Board of Directors and Capital Subscribers
Mannesmann Mobilfunk GmbH:
We consent to incorporation by reference in the registration statements on Form
S-8 of AirTouch Communications, Inc. relating to the AirTouch Communications,
Inc. Retirement Plan (file no. 33-57083), AirTouch Communications, Inc.
Employee Stock Purchase Plan (file no. 33-57077), and AirTouch Communications,
Inc. 1993 Long-Term Stock Incentive Plan (file no. 33-57081) of our report,
dated February 27, 1995, relating to the balance sheets of Mannesmann Mobilfunk
GmbH as of December 31, 1994 and 1993, and the related statements of income,
capital subscribers' equity, and cash flows for the years ended December 31,
1994, 1993, 1992, which report appears in the December 31, 1994 annual report on
Form 10-K of AirTouch Communications, Inc.
Dusseldorf, Germany, March 10, 1995
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
/s/ Scheffler /s/Haas
Wirtschaftsprufer Wirtschaftsprufer
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference, in the Registration Statements
(Form S-8's No. 33-57081, No. 33-57077, and No. 33-57083) pertaining to the
AirTouch Communications, Inc. 1993 Long-Term Stock Incentive Plan, the
AirTouch Communications, Inc. Employee Stock Purchase Plan, and the AirTouch
Communications, Inc. Retirement Plan, of our report dated January 30, 1995,
with respect to the consolidated financial statements of CMT Partners included
in the Annual Report (Form 10-K) of AirTouch Communications, Inc. for the year
ended December 31, 1994.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
February 27, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation (the
"Corporation"), proposes to file with the Securities and Exchange Commission
(the "SEC"), under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K; and
WHEREAS, each of the undersigned is an officer or director, or both, of the
Corporation as indicated below under his/her name;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints Sam
Ginn, C. Lee Cox, Lydell L. Christensen, Margaret G. Gill, Mohan S. Gyani, and
each of them, his/her attorneys for him/her in his/her stead, in his/her
capacity as an officer, director, or both, of the Corporation, to execute and
file such Annual Report on Form 10-K, and any and all amendments, modifications
or supplements thereto, and any exhibits thereto, and granting to each of said
attorneys full power and authority to sign and file any and all other documents
and to perform and do all and every act and thing whatsoever requisite and
necessary to be done as fully, to all intents and purposes, as he/she might or
could do if personally present at the doing thereof, and hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof in connection with effecting the filing of the Annual
Report on Form 10-K.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand this 28th day
of February, 1995.
<TABLE>
<S> <C>
/s/ Sam Ginn /s/ C. Lee Cox
- ------------ ------------------
Sam Ginn C. Lee Cox
Chairman of the Board and Vice Chairman of the Board and
Chief Executive Officer President Domestic Wireless Businesses
and Director
/s/ Lydell L. Christensen /s/ Mohan S. Gyani
- ------------------------- ------------------
Lydell L. Christensen Mohan S. Gyani
Executive Vice President Vice President, Finance and Treasurer
and Chief Financial Officer (Principal Accounting Officer)
/s/ Carol Bartz /s/ Donald G. Fisher
- --------------- --------------------
Carol Bartz Donald G. Fisher
Director Director
/s/ James R. Harvey /s/ Paul Hazen
- ------------------- --------------------
James R. Harvey Paul Hazen
Director Director
/s/ Arthur Rock /s/ Charles R. Schwab
- --------------- ---------------------
Arthur Rock Charles R. Schwab
Director Director
/s/ George P. Shultz
- --------------------
George P. Shultz
Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 429,000
<SECURITIES> 411,400
<RECEIVABLES> 183,400
<ALLOWANCES> 10,100
<INVENTORY> 0
<CURRENT-ASSETS> 1,266,300
<PP&E> 1,560,700
<DEPRECIATION> 585,400
<TOTAL-ASSETS> 4,488,000
<CURRENT-LIABILITIES> 529,800
<BONDS> 0
<COMMON> 4,900
0
0
<OTHER-SE> 3,454,700
<TOTAL-LIABILITY-AND-EQUITY> 4,488,000
<SALES> 96,400
<TOTAL-REVENUES> 1,235,400
<CGS> 99,200
<TOTAL-COSTS> 255,100
<OTHER-EXPENSES> 205,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,300
<INCOME-PRETAX> 206,400
<INCOME-TAX> 108,300
<INCOME-CONTINUING> 98,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,100
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
