<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Quarterly Period Ended September 30, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to __________
COMMISSION FILE NUMBER 1-12342
AIRTOUCH COMMUNICATIONS, INC.
A DELAWARE CORPORATION I.R.S. EMPLOYER NUMBER 94-3213132
ONE CALIFORNIA STREET
SAN FRANCISCO, CA 94111
(415) 658-2000
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
At October 31, 1995, 495,412,602 shares of common stock were outstanding.
<PAGE> 2
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Statements of Income.................................. 3
Consolidated Balance Sheets........................................ 4
Consolidated Statements of Cash Flows.............................. 5
Notes to Consolidated Financial Statements ........................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................... 11
REPORT OF INDEPENDENT ACCOUNTANTS.................................. 19
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................. 21
ITEM 2. CHANGES IN SECURITIES.............................................. 21
ITEM 5. OTHER INFORMATION.................................................. 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 24
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenues:
Wireless services and other revenues $ 381.3 $ 293.4 $ 1,089.6 $ 828.7
Cellular and paging equipment sales 25.9 24.4 79.9 65.5
--------- --------- --------- ---------
Total operating revenues 407.2 317.8 1,169.5 894.2
--------- --------- --------- ---------
Operating expenses:
Cost of revenues 52.9 39.7 149.4 111.6
Cost of cellular and paging equipment sales 32.0 27.4 92.9 67.3
Selling and customer operations expenses 121.1 96.4 368.9 252.9
General, administrative, and other expenses 116.7 86.3 284.4 236.4
Depreciation and amortization expenses 55.0 51.9 155.8 147.4
--------- --------- --------- ---------
Total operating expenses 377.7 301.7 1,051.4 815.6
--------- --------- --------- ---------
Operating income 29.5 16.1 118.1 78.6
Interest expense -- (2.0) (4.4) (5.2)
Minority interests in net (income) loss of
consolidated wireless systems (12.6) (5.5) (26.2) (18.8)
Equity in net income (loss) of unconsolidated
wireless systems:
Domestic 58.2 37.1 137.0 100.1
International (13.5) (0.7) (24.8) (6.9)
Interest income 6.2 14.0 29.3 39.3
Miscellaneous income (expense) 8.5 (0.5) (0.3) (5.2)
--------- --------- --------- ---------
Income before income taxes 76.3 58.5 228.7 181.9
Income taxes 29.6 24.1 108.0 86.9
--------- --------- --------- ---------
Net income $ 46.7 $ 34.4 $ 120.7 $ 95.0
========= ========= ========= =========
Net income per share $ 0.09 $ 0.07 $ 0.24 $ 0.19
========= ========= ========= =========
Weighted average shares outstanding (in millions) 495.1 493.4 494.6 493.1
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
3
<PAGE> 4
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 150.1 $ 429.0
Accounts receivable, net of allowance for uncollectibles of
$17.6 and $10.1 in 1995 and 1994 227.1 173.3
Held-to-maturity investments -- 310.1
Available-for-sale securities -- 101.3
Other receivables 57.8 128.2
Due from affiliates 18.8 25.9
Other current assets 90.9 98.5
-------- --------
Total current assets 544.7 1,266.3
-------- --------
Property, plant, and equipment 1,954.4 1,560.7
Less: accumulated depreciation 707.2 585.4
-------- --------
Net property, plant, and equipment 1,247.2 975.3
-------- --------
Investments in unconsolidated wireless systems 2,313.0 1,697.9
Intangible assets, net 498.7 470.5
Deferred charges and other noncurrent assets 116.9 78.0
-------- --------
Total assets $4,720.5 $4,488.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 222.6 $ 202.9
Short-term borrowings 72.5 80.0
Other current liabilities 167.0 246.9
-------- --------
Total current liabilities 462.1 529.8
Long-term debt 121.9 120.2
Deferred income taxes 251.1 209.2
Deferred credits 94.9 39.4
-------- --------
Total liabilities 930.0 898.6
-------- --------
Commitments and contingencies
Minority interests in consolidated wireless systems 145.2 129.8
-------- --------
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; 495,330,709 shares issued and 495,207,749 shares
outstanding at September 30, 1995; 493,915,064 shares issued
and 493,792,104 shares outstanding at December 31, 1994) 5.0 4.9
Additional paid-in capital 3,760.7 3,730.4
Accumulated deficit (169.3) (290.0)
Cumulative translation adjustment 21.3 11.1
Other 27.6 3.2
-------- --------
Total stockholders' equity 3,645.3 3,459.6
-------- --------
Total liabilities and stockholders' equity $4,720.5 $4,488.0
======== ========
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
4
<PAGE> 5
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $120.7 $ 95.0
Adjustments to reconcile net income for items currently not
affecting operating cash flows:
Depreciation and amortization 155.8 147.4
Deferred income taxes 8.7 4.2
Minority interests in net income (loss) of consolidated
wireless systems 26.2 18.8
Equity in net income of unconsolidated wireless systems (112.2) (93.2)
Distributions received from equity investments 64.2 60.2
Changes in assets and liabilities:
Accounts receivable, net (51.2) (28.4)
Other current assets and receivables 95.6 (12.8)
Deferred charges and other noncurrent assets (22.7) (68.6)
Accounts payable and other current liabilities (116.2) (0.7)
Deferred credits and other liabilities (6.2) 9.2
------ ------
Cash flows from operating activities 162.7 131.1
------ ------
Cash flows used for investing activities:
Additions to property, plant, and equipment, net (346.7) (250.9)
Investments in unconsolidated wireless systems (504.9) (129.5)
Maturities of held-to-maturity investments 310.1 310.8
Maturities (purchases) of available-for-sale securities 91.7 (100.3)
Other investing activities 3.5 1.2
------ ------
Cash flows used for investing activities (446.3) (168.7)
------ ------
Cash flows from financing activities:
Retirement of notes and obligations payable (7.6) (5.4)
Distributions to minority interests in consolidated wireless systems (17.4) (25.4)
Contributions from minority interests in consolidated wireless systems 6.2 37.4
Decrease in short-term borrowings (10.3) --
Proceeds from issuing long-term debt 2.8 19.2
Proceeds from shares issued under incentive plans 32.9 --
Other financing activities (2.6) 15.7
------ ------
Cash flows from financing activities 4.0 41.5
------ ------
Effect of exchange rate changes on cash and cash equivalents 0.7 --
------ ------
Net change in cash and cash equivalents (278.9) 3.9
Beginning cash and cash equivalents 429.0 646.7
------ ------
Ending cash and cash equivalents $150.1 $650.6
====== ======
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
5
<PAGE> 6
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
AirTouch Communications, Inc. and its subsidiaries (the "Company") provide
wireless telecommunications services in the United States, Europe, and
Asia. The Company's principal subsidiaries are AirTouch Cellular, AirTouch
Paging, AirTouch International, and AirTouch Teletrac ("Teletrac"), which
provide cellular, paging, and vehicle location services. See Note "G" to
the Consolidated Financial Statements.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries and partnerships in which the Company has controlling
interests. Entities in which the Company has significant influence but
does not have a controlling interest are presented in the Consolidated
Financial Statements using the equity method of accounting. All
significant intercompany balances and transactions have been eliminated.
Certain prior period balances have been reclassified to conform with the
1995 format; however, these reclassifications do not affect previously
reported net income or accumulated deficit.
The Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") and are presented
in accordance with the rules and regulations of the Securities and
Exchange Commission ("SEC") applicable to interim financial information.
Accordingly, certain footnote disclosures have been condensed or omitted.
The Company recommends that these interim financial statements be read in
conjunction with the consolidated financial statements presented in the
Company's 1994 Annual Report to Stockholders.
In the Company's opinion, the Consolidated Financial Statements include
all adjustments necessary to present fairly the financial position and
results of operations for each interim period presented. All such
adjustments are normal recurring adjustments. The Consolidated Financial
Statements have been reviewed by the Company's independent accountants,
and their report is included herein.
With respect to the unaudited consolidated financial information of the
Company for the three- and nine-month periods ended September 30, 1995
included in this Form 10-Q, Price Waterhouse LLP reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report dated November
10, 1995 appearing herein, states that they did not audit and they do not
express an opinion on that unaudited consolidated financial information.
Price Waterhouse LLP has not carried out any significant or additional
audit tests beyond those which would have been necessary if their report
had not been included. Accordingly, the degree of reliance on their report
on such information should be restricted in light of the limited nature of
the review procedures applied. Price Waterhouse LLP is not subject to the
liability provisions of section 11 of the Securities Act of 1933 ("Act")
for their report on the unaudited consolidated financial information
because that report is not a "report" or a "part" of this Form 10-Q
prepared or certified by Price Waterhouse LLP within the meaning of
sections 7 and 11 of the Act.
B. CHANGE IN ACCOUNTING ESTIMATE
In the first quarter of 1995, the Company completed a review of the
estimated service lives of certain domestic and international cellular
telecommunications equipment. As a result, the Company extended the
estimated service lives of such equipment from seven to ten years. The
change was made to reflect more accurately the estimated periods that
such assets will remain in service and was effective January 1, 1995. The
new ten-year depreciation period is consistent with current industry
standards. The change increased net income by approximately $7 million
and $.01 per share in each quarter of 1995 to date and is expected to
have a similar effect on the fourth quarter.
6
<PAGE> 7
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
C. INVESTMENTS IN UNCONSOLIDATED WIRELESS SYSTEMS
The Company's investments in unconsolidated wireless systems increased
$615.1 million from December 31, 1994. The increase primarily consisted of
$504.9 million of capital contributions to and investments in
international and domestic ventures, $112.2 million from equity earnings
from investments, and $63.1 million in foreign currency translation gains
on certain international investments. The increase was offset by $65.1
million which consisted primarily of capital distributions.
SUMMARY FINANCIAL INFORMATION
Condensed operating results for the Company's significant equity
investments are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------------
1995 1994 1995 1994
-------- ----------- ------------- -----------
(dollars in millions)
<S> <C> <C> <C> <C>
Mannesmann Mobilfunk GmbH
Operating revenues $ 486.9 $ 278.1(a) $ 1,279.0(a) $ 700.5(a)
Operating income $ 100.4 $ 33.6 $ 272.1 $ 48.9
Net income $ 52.8 $ 18.5 $ 141.1 $ 19.3
New Par
Operating revenues $ 197.8 $ 151.1(a) $ 547.2 $ 419.2(a)
Operating income $ 61.1 $ 35.4 $ 150.0 $ 94.0
Net income $ 60.3 $ 35.4 $ 150.1 $ 92.3
CMT Partners
Operating revenues $ 113.3 $ 101.1 $ 320.2 $ 289.6
Operating income $ 35.5 $ 32.7 $ 104.5 $ 96.5
Net income $ 42.6 $ 36.3 $ 121.6 $ 106.4
</TABLE>
(a) Revised from previously issued financial statements to conform to
third quarter 1995 presentation.
D. CREDIT FACILITY
In July 1995, the Company obtained for general corporate purposes an
unsecured $2 billion, five-year revolving credit facility (the "Facility")
from a syndicate of banks. The interest rate under the Facility is an
index rate (LIBOR) plus an applicable margin based on the Company's
long-term, senior unsecured debt rating. The commitment fee on the
undrawn, available balance will also be determined with reference to the
Company's credit rating. Drawings under the Facility are available in US
dollars or selected foreign currencies; however, drawings of foreign
currencies are not to exceed the US dollar equivalent of $300 million.
There were no borrowings against the Facility as of September 30, 1995.
See Note "H" to the Consolidated Financial Statements.
7
<PAGE> 8
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
E. REGULATORY MATTER
In 1993, Congress passed legislation prohibiting state and local
governments from regulating the rates for commercial mobile radio
services, including cellular service. States with rate regulation in place
on June 1, 1993, including California, were given the opportunity to
petition the Federal Communications Commission ("FCC") for continuation of
such authority. The California Public Utilities Commission ("CPUC") filed
such a petition with the FCC. The FCC denied the CPUC's petition in an
interim decision issued in May 1995 and issued a final Order in August
1995, thereby preempting the CPUC's authority over rates. As a
consequence, the Company withdrew its rate-related tariffs. The CPUC will
retain authority over other "terms and conditions" of the provision of
cellular service in California.
F. CONTINGENCIES
A class action complaint was filed in November 1993 naming the Company as
general partner for Los Angeles SMSA Limited Partnership. In April 1995,
Los Angeles Cellular Telephone Company ("LACTC") was named as a necessary
party to the action. The plaintiff has alleged that LACTC and the Company
conspired to fix the price of wholesale and retail cellular service in the
Los Angeles market. The plaintiff alleged damages for the class "in a sum
in excess of $100 million." The Company has answered the complaint and is
defending itself vigorously. This case has been consolidated for purposes
of discovery with two other class actions making identical price-fixing
allegations. In addition, two non-class action antitrust cases brought by
cellular agents making similar allegations were settled on favorable
terms. In April 1995, a Federal class action complaint filed in Los
Angeles was dismissed on a motion for summary judgment. The dismissal was
upheld on appeal. The Company does not believe that these proceedings
will have a material adverse effect on the Company's financial position.
In three separate class action complaints filed during October and
November 1994 in San Diego (2) and San Francisco (1), all brought by the
same counsel, plaintiffs also allege price-fixing by the two cellular
carriers in each market. The Company does not believe that these
proceedings will have a material adverse effect on the Company's
financial position.
In September 1995, a class action lawsuit was brought on behalf of all the
Company's subscribers nationwide. The suit alleges that certain of the
Company's billing practices are illegal. No dispositive motions have been
filed in the proceeding and discovery has not yet begun. The Company
believes the lawsuit to be without merit.
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.
In the ordinary course of business, the Company has issued letters of
responsibility and letters of support for performance guarantees,
refundable security deposits and credit facilities of certain subsidiaries
and affiliates providing varying degrees of recourse to the Company. At
September 30, 1995, the Company's proportionate share of the outstanding
balances under such arrangements was approximately $66 million.
Additionally, 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 believes the
possibility is remote that it will be required to pay or perform under the
foregoing arrangements.
8
<PAGE> 9
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
G. TELETRAC ADJUSTMENTS
During the third quarter of 1995, the Company recorded a pre-tax charge of
approximately $25 million primarily related to the write-down of its
investment in Teletrac to net realizable value. The write-down was taken
because of Teletrac's continuing operating losses, despite ongoing cost
containment measures, and the Company's assessment that the cash flows
from Teletrac will be insufficient to support the carrying value of
Teletrac's assets. The Company is continuing to evaluate various
alternatives, including the disposition of the business.
The Company also recognized tax benefits of approximately $19 million
related to Teletrac operations.
H. SUBSEQUENT EVENTS
Acquisition of CCI Shares
On October 30, 1995, in accordance with the terms of a merger agreement
with Cellular Communications, Inc. ("CCI"), the Company purchased 10.04
million shares of CCI stock at $60 per share for a total of $602.4 million
and options to purchase 10,700 shares for approximately $.3 million. These
options have an exercise price of approximately $28 per share. Under the
agreement, the Company is also obligated in January 1996 to purchase
options from CCI exercisable for approximately 2.4 million shares. The
aggregate cost of these options is expected to be $107.7 million. If the
Company purchases the underlying shares instead of the options, the
aggregate cost will be approximately $144 million. A $600 million
irrevocable letter of credit for the benefit of CCI supporting the
Company's obligation was retired on October 30, 1995, and a $107.7
million irrevocable letter of credit was provided in its place, expiring
in 1996. This new letter of credit will be terminated upon satisfaction
of the Company's January purchase obligation. In addition, 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 a
value determined in an appraisal process over an eighteen-month period
beginning in August 1996.
U S WEST Joint Venture
In July 1994, the Company and U S WEST announced an agreement to combine
their domestic cellular properties in a two-phase transaction. On November
1, 1995, the first phase commenced, during which the companies' joint
venture management company, Wireless Management Company ("WMC"), will
provide support services to both companies' domestic cellular operations.
These cellular operations will continue to be owned by the individual
partners.
In the second phase, which is expected to occur upon the earlier of July
25, 1998, the lifting of certain regulatory restrictions imposed upon U S
WEST in connection with the breakup of the Bell System, or at the
Company's option, the companies will merge their domestic cellular
operations into WMC.
Borrowings Against the Facility
Borrowings against the Facility totaled $626.1 million at October 31,
1995. These borrowings consisted of $500 million relating to the
acquisition of CCI shares discussed above and $126.1 million relating to
the acquisition of an additional 1.7% ownership interest in the Company's
cellular venture in Germany. In connection with the above borrowings, the
Company entered into an interest rate swap and a cross currency swap
arrangement on approximately $276 million of nominal principal value, to
effectively convert the floating borrowing rate to a fixed rate and to
hedge foreign currency exposures.
9
<PAGE> 10
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
I. SUPPLEMENTARY SELECTED PROPORTIONATE FINANCIAL DATA
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. Because significant assets of the
Company are not consolidated, the Company believes that proportionate financial
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>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------------
1995 1994 1995 1994
-------- ----------- ---------- ------------
(dollars in millions)
<S> <C> <C> <C> <C>
TOTAL COMPANY
Total proportionate net operating revenues(1) $ 663.3 $ 452.9(a) $ 1,832.6 $1,243.9(a)
Total proportionate operating income (1) $ 76.7 $ 42.6(a) $ 252.3 $ 147.5(a)
Total proportionate operating cash flow (1) & (2) $ 176.2 $ 127.0(a) $ 548.5 $ 379.1(a)
</TABLE>
(a) Revised from previously issued financial data to include the effects of
the Company's interests in Nagoya, Osaka, and Tokyo, Japan.
DOMESTIC CELLULAR OPERATING RESULTS
<TABLE>
<S> <C> C> <C> <C>
Service and other revenues $ 379.2 $ 296.3 $ 1,082.7 $ 838.8
Equipment sales 19.5 17.9 63.2 49.3
Cost of equipment sales (27.5) (22.1) (84.0) (55.0)
-------- -------- --------- --------
Net operating revenues 371.2 292.1 1,061.9 833.1
-------- -------- --------- --------
Cost of revenues 37.5 31.4 111.0 92.4
Selling and customer operations 133.1 104.1 380.7 274.6
General, administrative, and other expenses 35.0 31.1 100.0 88.9
Depreciation and amortization expense 44.9 46.3 135.7 136.0
-------- -------- --------- --------
Total costs and expenses 250.5 212.9 727.4 591.9
-------- -------- --------- --------
Operating income $ 120.7 $ 79.2 $ 334.5 $ 241.2
======== ======== ========= ========
Operating cash flow (2) $ 165.6 $ 125.5 $ 470.2 $ 377.2
======== ======== ========= ========
</TABLE>
(1) Total proportionate results do not include certain international investments
and insignificant domestic cellular investments for which the Company does
not receive detailed income statements on a timely basis. The Company's
share of losses (after foreign taxes where applicable) associated with the
excluded international investments was approximately $15.8 million and $33.7
million for the three-month and nine-month periods ended September 30, 1995,
respectively.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flows 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 flows and does not
represent cash available to the Company.
10
<PAGE> 11
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. This discussion and
analysis should be read in conjunction with the Company's Consolidated Financial
Statements and Notes, the Company's 1994 Annual Report to Stockholders, and Form
10-K for the year ended December 31, 1994 including Item 1, "Business" therein
which includes, among other things, Investment Considerations.
Under 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.
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.
As discussed in Note "H" to the Consolidated Financial Statements, the Company
and U S WEST have announced an agreement to combine their domestic cellular
properties in a two-phase transaction. In the second phase, which is expected to
occur upon the earlier of July 25, 1998, the lifting of certain regulatory
restrictions imposed upon U S WEST, or at the Company's option, the companies
will merge their domestic cellular operations into WMC. At such time each
company will deconsolidate for financial reporting purposes the domestic
cellular operations contributed by it to WMC, using instead the equity method of
accounting to report their respective interests in subsequent operating results.
Because the Company expects, based upon current results, that its domestic
cellular operations over the next few years will continue to achieve higher
profit margins than those of U S WEST, it is possible that the Company could
experience some short-term earnings dilution once the second phase occurs. Such
dilution could be material depending upon the timing of the second phase merger
and the performance of the respective operations. The Company may experience
some near-term minor earnings impact prior to the second phase merger as a
result of entering into the first phase.
The two companies' equally-owned personal communications services ("PCS")
partnership also will be contributed to WMC either at the closing of the second
phase or thereafter, but no later than three years after the partnership
acquired its first PCS license. The timing of such contribution is at U S WEST's
sole discretion. The Company expects the PCS partnership to make significant
capital contributions for the build-out of PCS markets and to experience
substantial operating losses associated with the start-up phase of the PCS
business, which is expected to last several years. Upon the contribution of the
PCS partnership to WMC, the Company's share of the PCS capital contributions and
operating losses will increase to some greater percentage depending upon the
relative values of WMC and the PCS partnership at such time.
RESULTS OF OPERATIONS
The following discussion compares the Company's results of operations for the
three- and nine-month periods ended September 30, 1995, and 1994.
WIRELESS SERVICES AND OTHER REVENUES. Wireless services and other revenues
consist of revenues from cellular, paging, vehicle location and other services.
Such revenues increased $87.9 million and $260.9 million for the three- and
nine-month periods of 1995 over the corresponding periods of 1994, respectively,
primarily as a result of increases of $63.8 million and $193.6 million in
11
<PAGE> 12
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
domestic cellular revenues due to significant subscriber growth. Domestic
cellular subscribers increased 43% from September 30, 1994 to September 30, 1995
primarily as a result of continued growth in the consumer market. Because
consumer customers typically subscribe to lower usage plans than business
customers, increases in cellular service revenues have not kept pace with
subscriber growth. Average revenue per domestic cellular subscriber declined
10.7% for the nine-month period of 1995 over the comparable period of 1994. The
Company expects that average revenue per subscriber will follow the industry
trend and continue to decline as the Company adds new subscribers, a high
percentage of which will continue to be consumer users. In addition, revenues
were adversely affected as domestic cellular roaming fraud, which is a
continuing problem, increased for the third quarter of 1995 and nine months
compared to the same periods in the prior year. The Company is taking aggressive
actions to detect and deter fraudulent usage.
CELLULAR AND PAGING EQUIPMENT SALES. Equipment sales revenue consists of
revenues from sales of cellular telephones and pagers, which are not a
significant part of the Company's business. Equipment sales increased $1.5
million and $14.4 million for the three- and nine-month periods of 1995 over the
corresponding periods of 1994, respectively, due to gross gains in the
subscriber base, partially offset by downward pressure on equipment prices. The
Company faces competitive pressure to sell telephone handsets at very low prices
to meet competitive markets, thus resulting in negative equipment margins.
Adjustments to equipment cost of sales for the first quarter of 1995 contributed
to the negative margin in the nine months ended September 30, 1995. The Company
believes, however, that reduced prices for equipment have contributed
significantly to subscriber growth, particularly in the consumer market. The
Company expects contribution margins of equipment sales to remain negative as it
responds to competitive market pressures.
COST OF REVENUES. Cost of revenues consists primarily 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 fluctuate
independently of revenues and costs associated with the Company's core cellular
business and amounted to approximately six percent of the cost of revenues for
the three- and nine-months ended September 30, 1995 and 1994. After eliminating
amounts related to credit-card verification terminals, cost of revenues as a
percentage of wireless services excluding terminal revenues was largely flat and
amounted to 13.2% and 12.8% for the third quarter of 1995 and 1994,
respectively, and 13.0% and 12.9% for the nine-month periods of 1995 and 1994.
The dollar increase in the cost of revenues is due primarily to interconnect
costs which increase in relation to subscriber growth. The increase in the cost
of revenues as a percentage of operating revenues during the third quarter of
1995 compared to the same period in 1994 is due to increased facilities expenses
required to support customer growth and an increase in costs associated with
fraud, partially offset by economies of scale as more subscribers were added to
the existing network.
SELLING AND CUSTOMER OPERATIONS EXPENSES. These expenses primarily consist of
compensation to sales channels, salaries and related benefits for sales and
customer service personnel, and billing, advertising, and promotional expenses.
Such expenses increased $24.7 million and $116.0 million for the three- and
nine-month periods of 1995 over the corresponding periods of 1994, respectively.
The dollar increases are due primarily to higher subscriber growth resulting
from marketing programs to attract new domestic and international cellular
subscribers, and include commissions paid for new cellular subscribers,
advertising, and other promotional expenses associated with such programs. As a
percentage of operating revenues, selling and customer operations expense
decreased to 29.7% from 30.3% for the third quarter of 1995 and 1994, and
increased to 31.5% from 28.3% for the year-to-date periods of 1995 and 1994,
respectively. The percentage increase for the nine-month period of 1995 compared
to 1994 primarily reflects the costs of domestic marketing sales programs and
commissions, an increase in the costs of detecting and preventing fraud, and the
12
<PAGE> 13
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
impact of the relatively high customer acquisition costs of the Company's
Swedish subsidiary. However, selling and customer operations expenses at the
Swedish subsidiary continue to decline as a percentage of the subsidiary's
revenues. Additionally, customer operations were expanded to support the
increased number of subscribers. The Company expects to complete the deployment
of a new customer support system in each of the Company's domestic managed
markets by mid-1996. The Company expects that customer operations expenses
will decline on a per-subscriber basis once this customer support system
becomes fully operational and further economies of scale are achieved. Although
the Company is actively managing its selling expenses, competitive market
pressure in certain markets continues to hamper the Company's ability to
reduce the incremental cost of adding new subscribers.
GENERAL, ADMINISTRATIVE, AND OTHER EXPENSES. These expenses primarily consist of
salaries, wages and related benefits for general and administrative personnel,
international license application costs, and other overhead expenses. Such
expenses increased $30.4 million and $48.0 million in the third quarter and the
first nine months of 1995 over the corresponding periods of 1994, respectively.
The increase for the third quarter of 1995 relates primarily to one-time charges
for Teletrac's impairment of asset value. See Note "G". In addition to the
foregoing, the increase for the nine months ended September 30, 1995 relates
primarily to the additional expenses for certain corporate functions provided by
Pacific Telesis Group through March 31, 1994 prior to its spin-off of the
Company, and for bad debt. Excluding the one-time charges related to Teletrac,
general, administrative, and other expenses decreased as a percentage of
operating revenues to 23.7% from 27.2% for the third quarter of 1995 and 1994,
respectively, and declined to 22.6% from 26.4% for the year-to-date periods of
1995 and 1994, respectively.
DEPRECIATION AND AMORTIZATION. These charges primarily consist of depreciation
expense on the Company's domestic cellular and paging networks, as well as
amortization of intangibles such as FCC license costs and goodwill. Depreciation
and amortization increased $3.1 million and $8.4 million in the third quarter
and the first nine months of 1995 over the corresponding periods for 1994,
respectively, because of additional capital expenditures, which were partially
offset by the effect of a change in the estimated useful lives of certain
cellular assets. This change reduced depreciation expense by approximately $7
million and $22 million for the third quarter and the first nine months of 1995,
respectively. See Note "B" to the Consolidated Financial Statements. A similar
reduction in depreciation expense is expected for the remaining quarter of 1995.
Depreciation and amortization declined as a percentage of operating revenues to
13.5% from 16.3% for the third quarter of 1995 and 1994, respectively, and to
13.3% from 16.5% for year-to-date periods of 1995 and 1994, respectively.
Depreciation and amortization are expected to increase when the Company's
narrowband and digital systems become operational.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED WIRELESS SYSTEMS:
DOMESTIC. Domestic equity earnings increased $21.1 million and $36.9
million for the three- and nine-month periods of 1995 over the
corresponding periods of 1994, respectively. The increases are primarily
the result of the increased earnings of New Par and CMT Partners due, in
part, to an increase in the subscriber base, combined with a non-recurring
gain on the sale by CCI of certain cellular properties, and were partially
offset by the development expenses incurred by the Company's PCS ventures.
A portion of the increased earnings of New Par and CMT Partners also
resulted from the effect of extending the depreciable lives of certain
assets from seven to ten years effective January 1, 1995.
INTERNATIONAL. Equity losses for international unconsolidated wireless
systems increased $12.8 million and $17.9 million for the three- and
13
<PAGE> 14
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
nine-month periods of 1995 over the corresponding periods of 1994,
respectively. The increased profitability of the Company's operations in
Germany and Portugal and the increase in earnings for the nine-month
period of 1995 due to the operations in Belgium acquired in 1994 were
more than offset by increased operating losses in Japan associated with
high growth, and losses from the Company's start-up operations in Spain,
Italy, and South Korea. A portion of the increased earnings of operations
in Germany resulted from extending the depreciable lives of certain
assets from seven to ten years, effective January 1, 1995. The operating
losses associated with the growth of currently operational systems and
the construction and build-out of new systems in Spain, Italy, South
Korea, and India are expected to continue to dilute earnings
significantly during 1995 and 1996.
MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income (expense) primarily
consists of unrealized gains (losses) on foreign currency fluctuations of
economic hedges caused by changes in the value of the dollar. Unrealized gains
(losses) primarily result from the mismatch in the book value of certain equity
investments (resulting from losses occurring in the early stages of operations)
in relation to the value of qualifying hedges. They result also from the
yen-denominated obligations used to acquire certain Japanese investments which
do not qualify for hedge accounting treatment. Miscellaneous income totaled $8.5
million in the third quarter of 1995, increasing $9.0 million from miscellaneous
expense of $.5 million in the same quarter of 1994. The increase reflects $9.6
million in unrealized foreign exchange gains during the third quarter ended
September 30, 1995 compared to unrealized foreign exchange losses of $.2 million
in the comparable period in 1994. For the nine months ended September 30, 1995,
unrealized foreign exchange gains totaled $1.2 million compared to unrealized
foreign exchange losses of $6.1 million in the same period of 1994.
Additionally, in third quarter 1995, miscellaneous income included a $3.7
million gain related to the disposal of cellular properties which was offset by
miscellaneous expenses of $4.5 million at Teletrac.
TELETRAC. Teletrac reported pre-tax losses of $8.8 million and $5.4 million for
the third quarters of 1995 and 1994, respectively, and $22.5 million and $19.2
million for the nine-month periods of 1995 and 1994, respectively. See Note "G".
14
<PAGE> 15
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
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. Because significant assets of the
Company are not consolidated, 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/Michigan), and CMT Partners (California,
Texas, Missouri, and Kansas). Data from certain cellular systems is excluded
because the data is not available on a timely basis and is insignificant.
SELECTED PROPORTIONATE DOMESTIC CELLULAR OPERATING DATA
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
Operating results (dollars in millions)
<S> <C> <C> <C> <C>
Service and other revenues $ 379.2 $ 296.3 $1,082.7 $ 838.8
Equipment sales 19.5 17.9 63.2 49.3
Cost of equipment sales (27.5) (22.1) (84.0) (55.0)
-------- -------- -------- --------
Net operating revenues 371.2 292.1 1,061.9 833.1
-------- -------- -------- --------
Cost of revenues 37.5 31.4 111.0 92.4
Selling and customer operations 133.1 104.1 380.7 274.6
General, administrative, and other expenses 35.0 31.1 100.0 88.9
Depreciation and amortization expense 44.9 46.3 135.7 136.0
-------- -------- -------- --------
Total cost and expenses 250.5 212.9 727.4 591.9
-------- -------- -------- --------
Operating income $ 120.7 $ 79.2 $ 334.5 $ 241.2
======== ======== ======== ========
Operating cash flow(1) $ 165.6 $ 125.5 $ 470.2 $ 377.2
======== ======== ======== ========
Capital expenditures, excluding acquisitions $ 115.1 $ 69.1 $ 354.9 $ 197.6
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
September 30,
------------------
1995 1994
------ ------
Operating data (in thousands)
<S> <C> <C>
POPs(2) 35,597 35,002
Proportionate cellular subscribers(3) 1,915 1,336
</TABLE>
15
<PAGE> 16
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Footnotes:
(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 flows.
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.
Cellular service and other revenues increased 28.0% and 29.1% for the third
quarter and the first nine months of 1995 over the corresponding periods of
1994, respectively. The increase is attributable to the growth in the subscriber
base, which increased 43.3% from September 30, 1994 to September 30, 1995.
Increases in cellular service and other revenues have not kept pace with
subscriber growth because of declining average revenue per subscriber, resulting
from the continuing shift in the customer mix from the business to the consumer
segments. In addition, fraudulent usage is a continuing problem and has
adversely affected both revenues and costs. The Company is taking aggressive
actions to detect and deter fraudulent usage. The Company expects that average
revenue per subscriber will follow the industry trend and continue to decline as
the Company adds new subscribers.
Equipment sales revenue consists of revenues from sales of cellular telephones
and increased 8.9% and 28.2% for the three- and nine-month periods of 1995 over
the corresponding periods of 1994, respectively. The Company faces competitive
pressure to sell telephone handsets at or below cost, which results in a
negative equipment margin. The Company believes, however, that reduced prices
for equipment have contributed significantly to subscriber growth, particularly
in the consumer market. Additionally, first quarter 1995 equipment write-downs
and other adjustments contributed to the increased negative margin for the
nine-month period of 1995. The Company expects contribution margins of equipment
sales to remain negative as it responds to competitive market pressure.
Cost of revenues increased 19.4% and 20.1% for the third quarter and the first
nine months of 1995 over the corresponding periods of 1994, respectively. As a
percentage of service and other revenues, however, the cost of revenues declined
to 10.0% from 10.6% in the third quarter and declined to 10.3% from 11.0% in the
first nine months of 1995 and 1994, respectively. The decrease reflects
economies of scale, technical efficiencies, and continuing cost containment
efforts in each of the Company's markets, offset in part by increasing
fraudulent usage.
Selling and customer operations expenses increased 27.9% and 38.6% for the third
quarter and the first nine months of 1995, respectively, over the corresponding
periods of 1994. As a percentage of net operating revenues the expenses
increased to 35.9% from 35.6% for the third quarters of 1995 and 1994,
respectively, and to 35.9% from 33.0% for the year-to-date 1995 and 1994
periods, respectively. The increases are primarily due to growth in the
subscriber base resulting from marketing programs to attract new subscribers and
include commissions paid for new cellular subscribers, advertising, and other
promotional expenses associated with such programs. Additionally, customer
operations were expanded to support the increased number of subscribers. The
Company expects that customer operations expenses will decline on a
per-subscriber basis in its managed markets once its new customer support system
is deployed. Deployment is scheduled for mid-1996. Although the Company is
16
<PAGE> 17
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
actively managing its selling expenses, competitive market pressures in certain
markets continues to influence the Company's ability to reduce the cost for each
additional new subscriber.
General, administrative, and other expenses increased 12.5% for both the third
quarter and the first nine months of 1995 over the corresponding periods of
1994, respectively. General, administrative, and other expenses continue to
decline as a percentage of net operating revenues to 9.4% for both the three-
and nine-month periods of 1995, from 10.6% and 10.7% for the third quarter and
the first nine months of 1994, respectively.
COMPETITION AND REGULATION
The Company's domestic operations are regulated and their results of operations
may be affected by new regulatory developments. In addition, the offering of
cellular and paging services in the Company's domestic and international markets
continues to be increasingly competitive. See Item 1, "Business" in the
Company's 1994 Form 10-K for an extensive discussion of these matters.
CONTINGENCIES
The Company is party to various legal proceedings including certain antitrust
litigation. See Note "F" to the Consolidated Financial Statements.
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.
Substantial capital is required to expand and operate existing wireless systems,
to construct new wireless systems, and to acquire interests in existing wireless
systems. The Company does not expect its operations to generate sufficient cash
to meet its capital requirements for the next several years. In July 1995, the
Company obtained an unsecured $2 billion, five-year revolving credit facility to
fund its capital requirements. See Note "D". The amount of the facility is
currently expected to be sufficient to meet the Company's cash requirements
through the end of 1996. Additionally, in September 1995, the Company filed a
registration statement with the SEC registering $2 billion in various forms of
debt and equity securities.
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 in the FCC's auction. The Company's share of the cost of the
licenses is approximately $266 million.
During the nine months ended September 30, 1995, the Company made capital
expenditures of $409 million for additions to its cellular and paging networks
and other capital improvements in order to increase capacity and to support
future customer growth. The Company invested an additional $496 million for
capital contributions to unconsolidated wireless systems, acquisitions of
interests in wireless systems, and payments for PCS narrowband licenses. These
expenditures included new and additional investments in PCS PrimeCo, Globalstar,
and Germany and contributions to ventures in Italy, South Korea, Spain, and
Canada.
The Company will continue to be required to make substantial expenditures in
connection with its efforts to expand its wireless business. At September 30,
1995, the Company was committed to spend approximately $100 million for the
acquisition of property, plant, and equipment. In addition to these commitments,
the Company expects to make additional capital expenditures of approximately
$468 million during the remainder of 1995 and in 1996 to increase the capacity
of the existing analog network and to deploy digital technology.
17
<PAGE> 18
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The Company also expects to make capital contributions of approximately $697
million through the end of 1996 to its existing international and domestic joint
ventures, including the build-out for the PCS markets. The Company expects that
it will spend approximately $710 million for the purchase of additional CCI
shares and options as described below.
On October 30, 1995, in accordance with the terms of a merger agreement with
Cellular Communications, Inc., the Company purchased 10.04 million shares of CCI
stock at $60 per share, for a total of $602.4 million, and options to purchase
10,700 shares for approximately $.3 million. These options have an exercise
price of approximately $28 per share. Under the agreement, the Company is also
obligated in January 1996 to purchase options from CCI exercisable for
approximately 2.4 million shares. The aggregate cost of these options is
expected to be $107.7 million. If the Company purchases the underlying shares
instead of the options, the aggregate cost will be approximately $144 million.
A $600 million irrevocable letter of credit for the benefit of CCI supporting
the Company's obligation was retired on October 30, 1995, and a $107.7 million
irrevocable letter of credit was provided in its place, expiring in 1996. This
new letter of credit will be terminated upon satisfaction of the Company's
January purchase obligation. In addition, 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 a value determined in an appraisal
process over an eighteen-month period beginning in August 1996, as discussed in
the Company's Form 10-K for the year ended December 31, 1994, Item 1,
"Business"-Domestic Cellular-Joint Ventures-New Par.
18
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AirTouch Communications, Inc.:
We have reviewed the accompanying consolidated balance sheet of AirTouch
Communications, Inc. and subsidiaries (Company) as of September 30, 1995 and the
related consolidated statements of income and of cash flows for the three-month
and nine-month periods then ended. These consolidated financial statements are
the responsibility of the Company's management.
We were furnished with the report of other accountants, dated August 10, 1995,
on their review of the consolidated financial statements of the Company as of
and for the six-month period ended June 30, 1995. The amounts of operating
revenues, equity in net income (loss) of unconsolidated wireless systems, and
net income for the six months ended June 30, 1995, represented 65%, 60% and 61%,
respectively, of the amounts for the nine-month period ended September 30, 1995.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly we do not express such an opinion.
Based on our review and the report of other accountants, we are not aware of any
material modifications that should be made to the accompanying consolidated 1995
financial statements for them to be in conformity with generally accepted
accounting principles.
We have also reviewed the Supplementary Selected Proportionate Financial Data
("Data") for the three-month and nine-month periods ended September 30, 1995
presented in Note I. As described in Note I the Data has been prepared by
management to present relevant financial information that is not provided by
consolidated financial statements prepared in conformity with generally accepted
accounting principles and is not intended to be a presentation in accordance
with generally accepted accounting principles.
We were furnished with the report of other accountants, dated August 10, 1995,
on their review of the Data as of and for the six-month period ended June 30,
1995. The amounts of total proportionate net operating revenues, total
proportionate operating income and total proportionate operating cash flow for
the six months ended June 30, 1995, represented 64%, 70% and 68%, respectively,
of the amounts for the nine-month period ended September 30, 1995.
Based on our review and the report of other accountants, we are not aware of any
material modifications that should be made to the Supplementary Selected
Proportionate Financial Data referred to above for them to be in conformity with
the basis of accounting described in Note I.
The consolidated financial statements of the Company for the three-month and
nine-month periods ended September 30, 1994 were reviewed by other accountants
whose report dated November 9, 1994 stated that they were not aware of any
material modifications that should be made to those financial statements in
order for them to be in conformity with generally accepted accounting
principles. However, the Data for the three-month and nine-month periods ended
September 30, 1994 was not reviewed by independent accountants in accordance
with standards established for such reviews.
19
<PAGE> 20
The consolidated balance sheet of the Company as of December 31, 1994 and the
related consolidated statements of income, cash flows, and stockholders' equity
for the year then ended (not presented herein) were audited by other auditors
whose report dated March 13, 1995, expressed an unqualified opinion on those
consolidated financial statements. In their report on the Company's consolidated
financial statements as of and for the six-month period ended June 30, 1995,
dated August 10, 1995, those auditors expressed their opinion that the
information set forth in the consolidated balance sheet as of December 31, 1994
was presented fairly in all material respects in relation to the consolidated
balance sheet from which it was derived.
/s/ Price Waterhouse LLP
San Francisco, California
November 10, 1995
20
<PAGE> 21
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 5. OTHER INFORMATION
The Company uses consolidation and proportionate principles of accounting to
present certain financial information. Proportionate financial information is
not required by 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.
SELECTED SUPPLEMENTAL FINANCIAL DATA (1)
TOTAL COMPANY
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
-------- ------------ -------- -----------
(dollars in millions)
<S> <C> <C> <C> <C>
Consolidated capital expenditures, excluding
acquisitions and capital calls (GAAP basis) $ 115.4 $ 92.0 $ 408.9 $ 256.3
Total proportionate net operating revenues $ 663.3 $ 452.9(a) $1,832.6 $1,243.9(a)
Total proportionate operating income (8) $ 76.7 $ 42.6(a) $ 252.3 $ 147.5(a)
Total proportionate operating cash flow (2), (8) $ 176.2 $ 127.0(a) $ 548.5 $ 379.1(a)
</TABLE>
(a) Revised from previously issued financial data to include the effects of
the Company's interests in Nagoya, Osaka, and Tokyo, Japan.
<TABLE>
<CAPTION>
September 30,
-----------------------
1995 1994
---------- ---------
(in thousands)
<S> <C> <C>
Total proportionate cellular POPs (3) 103,260 89,712
Total proportionate cellular subscribers (4) 2,550 1,612
Total proportionate paging units in service (4) 2,010 1,553
</TABLE>
21
<PAGE> 22
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
DOMESTIC CELLULAR OPERATIONS - PROPORTIONATE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C>
DOMESTIC OPERATING RESULTS
Service and other revenues $ 379.2 $ 296.3 $1,082.7 $ 838.8
Equipment sales 19.5 17.9 63.2 49.3
Cost of equipment sales (27.5) (22.1) (84.0) (55.0)
-------- -------- -------- --------
Net operating revenues 371.2 292.1 1,061.9 833.1
-------- -------- -------- --------
Cost of revenues 37.5 31.4 111.0 92.4
Selling and customer operations 133.1 104.1 380.7 274.6
General, administrative, and other expenses 35.0 31.1 100.0 88.9
Depreciation expense 39.1 41.7 118.9 121.5
Amortization expense 5.8 4.6 16.8 14.5
-------- -------- -------- --------
Total costs and expenses 250.5 212.9 727.4 591.9
-------- -------- -------- --------
Operating income $ 120.7 $ 79.2 $ 334.5 $ 241.2
======== ======== ======== ========
Operating cash flow (2) $ 165.6 $ 125.5 $ 470.2 $ 377.2
Operating cash flow margin 44.6% 43.0% 44.3% 45.3%
Capital expenditures, excluding acquisitions $ 115.1 $ 69.1 $ 354.9 $ 197.6
</TABLE>
<TABLE>
<CAPTION>
September 30,
-----------------------
1995 1994
----------- ----------
(in thousands)
<S> <C> <C>
OPERATING DATA
Total POPs, domestic (3) 35,597 35,002
Proportionate subscribers, domestic (4) 1,915 1,336
</TABLE>
22
<PAGE> 23
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
DOMESTIC PAGING OPERATIONS (5)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C>
DOMESTIC OPERATING RESULTS
Service and other revenues $ 55.8 $ 47.2 $159.9 $134.7
Equipment sales 11.6 11.9 33.5 32.4
Cost of equipment sales (10.2) (10.6) (29.2) (28.5)
------ ------ ------ ------
Net operating revenues 57.2 48.5 164.2 138.6
------ ------ ------ ------
Total operating expenses before
depreciation and amortization expense 38.0 31.2 110.1 89.3
Depreciation and amortization expense 10.9 9.3 31.1 27.0
------ ------ ------ ------
Operating income $ 8.3 $ 8.0 $ 23.0 $ 22.3
====== ====== ====== ======
Operating cash flow (2) $ 19.2 $ 17.3 $ 54.1 $ 49.3
Operating cash flow margin 33.6% 35.7% 32.9% 35.6%
Capital expenditures, excluding acquisitions $ 13.2 $ 17.0 $ 41.2 $ 43.3
</TABLE>
<TABLE>
<CAPTION>
September 30,
-----------------
1995 1994
------ ------
(in thousands)
<S> <C> <C>
OPERATING DATA
Units in service 1,875 1,434
</TABLE>
INTERNATIONAL OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C>
CELLULAR OPERATING RESULTS
Proportionate net operating revenues $218.8 $ 95.9 $559.3 $227.1
Income/(loss) (6) $(16.5) $ (6.3) $(43.4) $(22.1)
Impact of start-ups on income/(loss) (7) $(13.9) $ (5.2) $(28.1) $(10.1)
</TABLE>
<TABLE>
<CAPTION>
September 30,
-----------------
1995 1994
------ ------
(in thousands)
<S> <C> <C>
OPERATING DATA
Proportionate cellular POPs (3) 67,663 54,710
Proportionate cellular subscribers (4) 635 276
Proportionate paging units in service (4) 135 119
</TABLE>
23
<PAGE> 24
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
Footnotes:
(1) Because significant assets of the Company are not consolidated, the Company
believes that proportionate financial and operating data facilitate the
understanding and assessment of its results. Unlike consolidation
accounting, proportionate accounting is not in accordance with GAAP.
Proportionate accounting reflects the relative weight of the Company's
ownership interests in its domestic and international systems and excludes
certain minority investments for which the Company does not receive timely
financial and operating data.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization 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' operating cash flows. 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. Third quarter 1994 data included POPs for
Italy and Belgium where licenses were being finalized.
(4) Reflects total subscribers of all cellular systems and total units in
service of all paging systems in which the Company owns an interest
multiplied by the Company's ownership interest.
(5) Domestic paging is wholly owned by the Company.
(6) Represents the Company's share of income or loss (after foreign taxes where
applicable) for international cellular systems, including Germany,
Portugal, Belgium, Sweden, Japan, South Korea, Italy, Spain, and India.
(7) Represents the Company's share of income or loss (after foreign taxes where
applicable) for international cellular systems which have not yet completed
twelve months of commercial service, as follows:
<TABLE>
<S> <C>
Three- and Nine-Month periods of 1995: Italy, South Korea, Spain, and India
Three- and Nine-Month periods of 1994: Japan
</TABLE>
(8) Total proportionate results do not include certain international and some
small domestic cellular investments for which the Company does not have
timely detailed income statements. Results for 1995 would be impacted by
the cellular start-up losses disclosed with international operations. See
footnote (7).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits identified below are incorporated herein by reference as
exhibits hereto.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Amended and Restated Joint Venture Organization Agreement
dated as of September 30, 1995 between the Company and US
West, Inc.
10.1 Amended and Restated Agreement of Limited Partnership of
WMC Partners, L.P. dated as of September 30, 1995 among
Members of the ATI Group and Members of the USW Group
</TABLE>
24
<PAGE> 25
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
10.2 Amended and Restated Agreement of Limited Partnership of
PCS Nucleus, L.P. dated as of September 30, 1995 between
AirTouch PCS Holding, Inc. and US West PCS Holdings, Inc.
10.3 Amended and Restated Investment Agreement dated as of
September 30, 1995 between the Company and US West, Inc.
10.4 Amended and Restated Agreement of Exchange dated as of
September 30, 1995 between the Company and US West, Inc.
10.5 Amended and Restated Trust Agreement of Exchange dated as
of September 30, 1995 between the Company and US West,
Inc.
15 Letter re unaudited interim financial information
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
Report on Form 8-K; Date of Report: September 20, 1995
25
<PAGE> 26
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
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
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
Date: November 13, 1995
26
<PAGE> 27
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Amended and Restated Joint Venture Organization Agreement
dated as of September 30, 1995 between the Company and US
West, Inc.
10.1 Amended and Restated Agreement of Limited Partnership of WMC
Partners, L.P. dated as of September 30, 1995 among Members
of the ATI Group and Members of the USW Group
10.2 Amended and Restated Agreement of Limited Partnership of PCS
Nucleus, L.P. dated as of September 30, 1995 between
AirTouch PCS Holding, Inc. and US West PCS Holdings, Inc.
10.3 Amended and Restated Investment Agreement dated as of
September 30, 1995 between the Company and US West, Inc.
10.4 Amended and Restated Agreement of Exchange dated as of
September 30, 1995 between the Company and US West, Inc.
10.5 Amended and Restated Trust Agreement of Exchange dated as of
September 30, 1995 between the Company and US West, Inc.
15 Letter re unaudited interim financial information
27 Financial Data Schedule
</TABLE>
27
<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
JOINT VENTURE ORGANIZATION AGREEMENT
BETWEEN
AIRTOUCH COMMUNICATIONS, INC.
AND
U S WEST, INC.
September 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 AGREEMENT OF EXCHANGE . . . . . . . . . . . . . . . . . . . . . 3
1.3 AIRTOUCH CALIFORNIA . . . . . . . . . . . . . . . . . . . . . . 3
1.4 APPROVED BUSINESS PLAN . . . . . . . . . . . . . . . . . . . . . 3
1.5 ARBITRATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . 4
1.6 ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 ATI PHASE II ASSETS . . . . . . . . . . . . . . . . . . . . . . 4
1.8 ATI CELLULAR SUBSIDIARIES . . . . . . . . . . . . . . . . . . . 4
1.9 ATI EMPLOYEE BENEFIT PROGRAM . . . . . . . . . . . . . . . . . . 4
1.10 ATI SERVICES AGREEMENT . . . . . . . . . . . . . . . . . . . . . 4
1.11 ATI PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 ATI PHASE II TRIGGER . . . . . . . . . . . . . . . . . . . . . . 4
1.13 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 BACK END TERMINATION DATE . . . . . . . . . . . . . . . . . . . 4
1.15 BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 BENEFICIAL PHASE II ASSET . . . . . . . . . . . . . . . . . . . 5
1.17 BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.19 CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 CECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 CELLULAR PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . 5
1.22 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 DECREE COURT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 DELAWARE RULPA . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.27 DOMESTIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.28 DOMESTIC CELLULAR ASSET . . . . . . . . . . . . . . . . . . . . 6
1.29 DOMESTIC CELLULAR BUSINESS . . . . . . . . . . . . . . . . . . . 6
1.30 DOMESTIC CELLULAR INVESTMENT . . . . . . . . . . . . . . . . . . 6
1.31 DOMESTIC CELLULAR INVESTMENT ENTITY . . . . . . . . . . . . . . 6
1.32 DOMESTIC CELLULAR SERVICE . . . . . . . . . . . . . . . . . . . 6
1.33 DOMESTIC CELLULAR SUBSIDIARY . . . . . . . . . . . . . . . . . . 6
1.34 DOMESTIC CELLULAR TRANSACTIONS . . . . . . . . . . . . . . . . . 6
1.35 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 EMPLOYEE BENEFIT PROGRAM . . . . . . . . . . . . . . . . . . . . 7
1.37 ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . 8
1.38 EO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.39 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.40 ERISA AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . 8
1.41 ESMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.42 FAIR MARKET VALUE . . . . . . . . . . . . . . . . . . . . . . . 9
1.43 FINAL ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.44 FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.45 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 9
1.46 GOVERNMENTAL BODY . . . . . . . . . . . . . . . . . . . . . . . 9
1.47 INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.48 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.49 INTER-EXCHANGE CARRIER AGREEMENT . . . . . . . . . . . . . . . . 10
1.50 INVESTMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 10
1.51 LEASED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 10
1.52 LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.53 LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.54 MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . . . . 10
1.55 MATERIAL CONTRACT . . . . . . . . . . . . . . . . . . . . . . . 10
1.56 MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.57 MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.58 NEW PAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.59 NEW PAR ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.60 NEW PAR CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . 11
1.61 NEW PAR DETERMINATION DATE . . . . . . . . . . . . . . . . . . . 11
1.62 NEWVECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.63 NEWVECTOR SERVICES AGREEMENT . . . . . . . . . . . . . . . . . . 11
1.64 NV-EMPLOYEE BENEFIT PROGRAMS . . . . . . . . . . . . . . . . . . 11
1.65 ORGANIZATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . 11
1.66 OWNED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.67 PARTIAL MFJ RELIEF . . . . . . . . . . . . . . . . . . . . . . . 11
1.68 PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.69 PARTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.70 PCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.71 PCS CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . . . 12
1.72 PCS PAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.73 PCS PAR EMPLOYEE AGREEMENT . . . . . . . . . . . . . . . . . . . 12
1.74 PCS PAR PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . 13
1.75 PCS TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 13
1.76 PERCENTAGE INTEREST . . . . . . . . . . . . . . . . . . . . . . 13
1.77 PERMITTED LIABILITIES . . . . . . . . . . . . . . . . . . . . . 13
1.78 PERMITTED LIEN . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.79 PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.80 PHASE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.81 PHASE I CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 13
1.82 PHASE I CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . 13
1.83 PHASE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.84 PHASE II CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 14
1.85 PHASE III . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.86 PHASE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . 14
1.87 POPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.88 PRECEDING QUARTER . . . . . . . . . . . . . . . . . . . . . . . 14
1.89 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.90 QUARTER AT ISSUE . . . . . . . . . . . . . . . . . . . . . . . . 14
1.91 REIMBURSED EXPENSES . . . . . . . . . . . . . . . . . . . . . . 14
1.92 RELATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 14
1.93 RELATED PARTY AGREEMENT . . . . . . . . . . . . . . . . . . . . 14
1.94 RESALE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 15
1.95 RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.96 ROAMING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 15
1.97 SAN DIEGO CELLULAR PROPERTY . . . . . . . . . . . . . . . . . . 15
1.98 SCHEDULED NEW PAR RELATED ASSET . . . . . . . . . . . . . . . . 15
1.99 SCHEDULED NPRA 12% VALUE . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.100 SCHEDULED PHASE II RELATED ASSETS . . . . . . . . . . . . . . . 16
1.102 SCHEDULED PIIRA 12% VALUE . . . . . . . . . . . . . . . . . . . 16
1.103 SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.104 SUBSTANCE OF CONCERN . . . . . . . . . . . . . . . . . . . . . . 16
1.105 TAX OR TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.106 TAX SHARING ARRANGEMENT . . . . . . . . . . . . . . . . . . . . 16
1.107 TO THE KNOWLEDGE OF ATI . . . . . . . . . . . . . . . . . . . . 17
1.108 TO THE KNOWLEDGE OF USW . . . . . . . . . . . . . . . . . . . . 17
1.109 TRADEMARK . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.110 TRADE NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.111 TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.112 TRANSFERRED SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . 17
1.114 TRUST AGREEMENT OF EXCHANGE . . . . . . . . . . . . . . . . . . 17
1.115 TUCSON CELLULAR INTEREST . . . . . . . . . . . . . . . . . . . . 17
1.116 UNPERMITTED LIABILITY . . . . . . . . . . . . . . . . . . . . . 17
1.117 USW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.118 USW PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.119 USW PHASE II ASSETS . . . . . . . . . . . . . . . . . . . . . . 18
1.120 WMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.121 WMC EMPLOYEE AGREEMENT . . . . . . . . . . . . . . . . . . . . . 18
1.122 WMC PARTNERSHIP COMMITTEE . . . . . . . . . . . . . . . . . . . 18
1.123 WMC PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 19
2.1 Representations and Warranties of USW . . . . . . . . . . . . . 19
(a) Corporate Organization. . . . . . . . . . . . . . . . . . . 19
(b) Capitalization: Ownership of Shares. . . . . . . . . . . . . 20
(c) Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Authorizations and Consents; No Violation . . . . . . . . . 22
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . 23
(f) Absence of Other Changes . . . . . . . . . . . . . . . . . . 23
(g) Compliance with Laws . . . . . . . . . . . . . . . . . . . . 24
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(l) Material Contracts and Related Party Agreements . . . . . . 26
(m) Employment and Non-Competition Agreements . . . . . . . . . 27
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(o) Intellectual Property . . . . . . . . . . . . . . . . . . . 28
(p) Employee Benefit Programs . . . . . . . . . . . . . . . . . 28
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 31
(r) Environmental Compliance and Liabilities . . . . . . . . . . 32
(s) Other Liabilities . . . . . . . . . . . . . . . . . . . . . 33
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2 Representations and Warranties of ATI . . . . . . . . . . . . . . 34
(a) Corporate Organization. . . . . . . . . . . . . . . . . . . 34
(b) Capitalization: Ownership of Shares. . . . . . . . . . . . . 35
(c) Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) Authorizations and Consents; No Violation . . . . . . . . . 37
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . 39
(f) Absence of Other Changes . . . . . . . . . . . . . . . . . . 39
(g) Compliance with Laws . . . . . . . . . . . . . . . . . . . . 40
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 40
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(l) Material Contracts . . . . . . . . . . . . . . . . . . . . . 42
(m) Employment and Non-Competition Agreements . . . . . . . . . 43
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(o) Intellectual Property . . . . . . . . . . . . . . . . . . . 44
(p) Employee Benefit Programs . . . . . . . . . . . . . . . . . 44
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 47
(r) Environmental Compliance and Liabilities . . . . . . . . . . 48
(s) Other Liabilities . . . . . . . . . . . . . . . . . . . . . 50
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 50
(v) Amendment to Rights Plan . . . . . . . . . . . . . . . . . . 50
ARTICLE 3 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.1 Covenants of USW . . . . . . . . . . . . . . . . . . . . . . . . 51
(a) Effectuation of this Agreement . . . . . . . . . . . . . . . 51
(b) Conduct of Business . . . . . . . . . . . . . . . . . . . . 52
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . . 52
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . . . . 53
(e) Access and Information . . . . . . . . . . . . . . . . . . . 55
(f) Divestiture of San Diego Cellular Property . . . . . . . . . 55
(g) Operation of Certain Assets.
. . . . . . . . . . . . . . . . . . . . . . . . . . 56
(h) Tucson Cellular Interest. . . . . . . . . . . . . . . . . . 57
3.2 Covenants of ATI . . . . . . . . . . . . . . . . . . . . . . . . . 57
(a) Effectuation of this Agreement . . . . . . . . . . . . . . . 58
(b) Conduct of Business . . . . . . . . . . . . . . . . . . . . 59
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 59
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . . . . 60
(e) Access and Information . . . . . . . . . . . . . . . . . . . 62
(f) Divestiture of Tucson Cellular Interest . . . . . . . . . . 63
(g) Operation of Certain Assets . . . . . . . . . . . . . . . . 63
(h) San Diego Cellular Property . . . . . . . . . . . . . . . . 64
3.3 Fiduciary Obligations . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 4 PHASE I CLOSING ADJUSTMENTS . . . . . . . . . . . . . . . . . . . 65
4.1 Cash Flows and Funding Prior to Phase I . . . . . . . . . . . . . 65
4.2 Phase I Closing . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.3 Special Provisions relating to the San Diego
Cellular Property and the Tucson Cellular
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.4 Independent Third Party Verification . . . . . . . . . . . . . . . 71
4.5 Initial Phase II Asset Percentages . . . . . . . . . . . . . . . . 72
4.6 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 5 PHASE II CLOSING PERCENTAGES . . . . . . . . . . . . . . . . . . . 74
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.1 Cash Flows and Funding Prior to Phase II . . . . . . . . . . . . . 74
5.2 Basic Principles for Phase II Closing Percentages . . . . . . . . 75
5.3 Additional Principles for Phase II Closing Percentages . . . . . . 76
5.4 Phase II Closing Percentages . . . . . . . . . . . . . . . . . . . 78
5.5 Restated Phase II Closing Percentages . . . . . . . . . . . . . . 78
5.6 Phase I Quarterly Computations . . . . . . . . . . . . . . . . . . 79
5.7 Phase II Closing Percentages . . . . . . . . . . . . . . . . . . . 81
5.8 Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
5.9 Phase I Quarterly Records . . . . . . . . . . . . . . . . . . . . 85
5.10 Quarterly Values . . . . . . . . . . . . . . . . . . . . . . . . . 85
(a) "Quarterly Value-100% New Par" . . . . . . . . . . . . . . . . 85
(b) "Quarterly Value-50% New Par" . . . . . . . . . . . . . . . . 86
(c) "Quarterly Value-No New Par" . . . . . . . . . . . . . . . . . 86
5.11 New Par Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 86
5.12 Scheduled Phase II Related Assets . . . . . . . . . . . . . . . . 87
5.13 Minority Indebtedness Adjustment . . . . . . . . . . . . . . . . . 90
5.14 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE 6 PHASES OF THE JOINT VENTURE AND CLOSINGS . . . . . . . . . . . . . 90
6.1 Prior to Phase I . . . . . . . . . . . . . . . . . . . . . . . . . 90
6.2 Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
(a) Conditions to Phase I Closing . . . . . . . . . . . . . . . . 91
(b) Deliveries on or before the Phase I Closing . . . . . . . . . 91
6.3 Phase II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
(a) Conditions to Phase II Closing . . . . . . . . . . . . . . . . 92
(b) Deliveries on or before the Phase II Closing . . . . . . . . . 93
6.4 PCS Contribution Date . . . . . . . . . . . . . . . . . . . . . . 95
6.5 New Par Contribution Date . . . . . . . . . . . . . . . . . . . . 96
ARTICLE 7 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.1 Termination of this Organization Agreement. . . . . . . . . . . . 97
7.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.2 Indemnity by USW . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.3 Indemnity by ATI . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.4 Indemnity by WMC . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.5 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . 100
8.6 Notification of Claims . . . . . . . . . . . . . . . . . . . . . . 101
8.7 Access and Cooperation . . . . . . . . . . . . . . . . . . . . . . 101
8.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
ARTICLE 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.3 Modifications; Amendments; Waivers . . . . . . . . . . . . . . . . 103
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.4 Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . 103
9.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 104
9.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.10 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.11 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.12 Survival of Representations and Warranties . . . . . . . . . . . . 106
9.13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 AGREEMENT OF EXCHANGE . . . . . . . . . . . . . . . . . . . . . . 3
1.3 AIRTOUCH CALIFORNIA . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 APPROVED BUSINESS PLAN . . . . . . . . . . . . . . . . . . . . . . 3
1.5 ARBITRATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 4
1.6 ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 ATI PHASE II ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 ATI CELLULAR SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . 4
1.9 ATI EMPLOYEE BENEFIT PROGRAM . . . . . . . . . . . . . . . . . . . 4
1.10 ATI SERVICES AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 4
1.11 ATI PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 ATI PHASE II TRIGGER . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 BACK END TERMINATION DATE . . . . . . . . . . . . . . . . . . . . 4
1.15 BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 BENEFICIAL PHASE II ASSET . . . . . . . . . . . . . . . . . . . . 5
1.17 BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.19 CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 CECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 CELLULAR PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . 5
1.22 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 DECREE COURT . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 DELAWARE RULPA . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.27 DOMESTIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.28 DOMESTIC CELLULAR ASSET . . . . . . . . . . . . . . . . . . . . . 6
1.29 DOMESTIC CELLULAR BUSINESS . . . . . . . . . . . . . . . . . . . . 6
1.30 DOMESTIC CELLULAR INVESTMENT . . . . . . . . . . . . . . . . . . . 6
1.31 DOMESTIC CELLULAR INVESTMENT ENTITY . . . . . . . . . . . . . . . 6
1.32 DOMESTIC CELLULAR SERVICE . . . . . . . . . . . . . . . . . . . . 6
1.33 DOMESTIC CELLULAR SUBSIDIARY . . . . . . . . . . . . . . . . . . . 6
1.34 DOMESTIC CELLULAR TRANSACTIONS . . . . . . . . . . . . . . . . . . 6
1.35 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 EMPLOYEE BENEFIT PROGRAM . . . . . . . . . . . . . . . . . . . . . 7
1.37 ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . 8
1.38 EO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.39 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.40 ERISA AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.41 ESMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.42 FAIR MARKET VALUE . . . . . . . . . . . . . . . . . . . . . . . . 9
1.43 FINAL ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.44 FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.45 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 9
1.46 GOVERNMENTAL BODY . . . . . . . . . . . . . . . . . . . . . . . . 9
1.47 INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.48 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . 9
1.49 INTER-EXCHANGE CARRIER AGREEMENT . . . . . . . . . . . . . . . . . 10
1.50 INVESTMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 10
1.51 LEASED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.52 LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.53 LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.54 MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . . . . . 10
1.55 MATERIAL CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . 10
1.56 MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.57 MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.58 NEW PAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.59 NEW PAR ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.60 NEW PAR CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . . 11
1.61 NEW PAR DETERMINATION DATE . . . . . . . . . . . . . . . . . . . . 11
1.62 NEWVECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.63 NEWVECTOR SERVICES AGREEMENT . . . . . . . . . . . . . . . . . . . 11
1.64 NV-EMPLOYEE BENEFIT PROGRAMS . . . . . . . . . . . . . . . . . . . 11
1.65 ORGANIZATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 11
1.66 OWNED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.67 PARTIAL MFJ RELIEF . . . . . . . . . . . . . . . . . . . . . . . . 11
1.68 PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.69 PARTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.70 PCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.71 PCS CONTRIBUTION DATE . . . . . . . . . . . . . . . . . . . . . . 12
1.72 PCS PAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.73 PCS PAR EMPLOYEE AGREEMENT . . . . . . . . . . . . . . . . . . . . 12
1.74 PCS PAR PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . 13
1.75 PCS TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.76 PERCENTAGE INTEREST . . . . . . . . . . . . . . . . . . . . . . . 13
1.77 PERMITTED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 13
1.78 PERMITTED LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.79 PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.80 PHASE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.81 PHASE I CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.82 PHASE I CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . 13
1.83 PHASE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.84 PHASE II CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.85 PHASE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.86 PHASE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 14
1.87 POPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.88 PRECEDING QUARTER . . . . . . . . . . . . . . . . . . . . . . . . 14
1.89 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
-vii-
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.90 QUARTER AT ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.91 REIMBURSED EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 14
1.92 RELATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 14
1.93 RELATED PARTY AGREEMENT . . . . . . . . . . . . . . . . . . . . . 15
1.94 RESALE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.95 RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.96 ROAMING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 15
1.97 SAN DIEGO CELLULAR PROPERTY . . . . . . . . . . . . . . . . . . . 15
1.98 SCHEDULED NEW PAR RELATED ASSET . . . . . . . . . . . . . . . . . 16
1.99 SCHEDULED NPRA 12% VALUE . . . . . . . . . . . . . . . . . . . . . 16
1.100 SCHEDULED PHASE II RELATED ASSETS . . . . . . . . . . . . . . . . 16
1.102 SCHEDULED PIIRA 12% VALUE . . . . . . . . . . . . . . . . . . . . 16
1.103 SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.104 SUBSTANCE OF CONCERN . . . . . . . . . . . . . . . . . . . . . . . 16
1.105 TAX OR TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.106 TAX SHARING ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . 17
1.107 TO THE KNOWLEDGE OF ATI . . . . . . . . . . . . . . . . . . . . . 17
1.108 TO THE KNOWLEDGE OF USW . . . . . . . . . . . . . . . . . . . . . 17
1.109 TRADEMARK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.110 TRADE NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.111 TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.112 TRANSFERRED SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . 17
1.114 TRUST AGREEMENT OF EXCHANGE . . . . . . . . . . . . . . . . . . . 17
1.115 TUCSON CELLULAR INTEREST . . . . . . . . . . . . . . . . . . . . . 17
1.116 UNPERMITTED LIABILITY . . . . . . . . . . . . . . . . . . . . . . 18
1.117 USW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.118 USW PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.119 USW PHASE II ASSETS . . . . . . . . . . . . . . . . . . . . . . . 18
1.120 WMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.121 WMC EMPLOYEE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 18
1.122 WMC PARTNERSHIP COMMITTEE . . . . . . . . . . . . . . . . . . . . 18
1.123 WMC PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 19
2.1 Representations and Warranties of USW . . . . . . . . . . . . . . 19
(a) Corporate Organization . . . . . . . . . . . . . . . . . . . . 19
(b) Capitalization: Ownership of Shares. . . . . . . . . . . . . . 20
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Authorizations and Consents; No Violation . . . . . . . . . . 22
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . 23
(f) Absence of Other Changes . . . . . . . . . . . . . . . . . . . 23
(g) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 24
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(l) Material Contracts and Related Party Agreements . . . . . . . 27
(m) Employment and Non-Competition Agreements . . . . . . . . . . 27
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(o) Intellectual Property . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<CAPTION>
Page
----
<S> <C>
(p) Employee Benefit Programs . . . . . . . . . . . . . . . . . . 28
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 31
(r) Environmental Compliance and Liabilities . . . . . . . . . . . 32
(s) Other Liabilities . . . . . . . . . . . . . . . . . . . . . . 33
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2 Representations and Warranties of ATI . . . . . . . . . . . . . . . 34
(a) Corporate Organization. . . . . . . . . . . . . . . . . . . . 34
(b) Capitalization: Ownership of Shares. . . . . . . . . . . . . . 35
(c) Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) Authorizations and Consents; No Violation . . . . . . . . . . 38
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . 39
(f) Absence of Other Changes . . . . . . . . . . . . . . . . . . . 40
(g) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 40
(h) MFJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(j) Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(l) Material Contracts . . . . . . . . . . . . . . . . . . . . . . 43
(m) Employment and Non-Competition Agreements . . . . . . . . . . 43
(n) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(o) Intellectual Property . . . . . . . . . . . . . . . . . . . . 44
(p) Employee Benefit Programs . . . . . . . . . . . . . . . . . . 44
(q) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 47
(r) Environmental Compliance and Liabilities . . . . . . . . . . . 48
(s) Other Liabilities . . . . . . . . . . . . . . . . . . . . . . 50
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(v) Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . 50
ARTICLE 3 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1 Covenants of USW . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(a) Effectuation of this Agreement . . . . . . . . . . . . . . . . 51
(b) Conduct of Business . . . . . . . . . . . . . . . . . . . . . 52
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . . . 53
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(e) Access and Information . . . . . . . . . . . . . . . . . . . . 55
(f) Divestiture of San Diego Cellular Property . . . . . . . . . . 55
(g) Operation of Certain Assets . . . . . . . . . . . . . . . . . . 57
(h) Tucson Cellular Interest . . . . . . . . . . . . . . . . . . . 57
3.2 Covenants of ATI . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(a) Effectuation of this Agreement . . . . . . . . . . . . . . . . 58
(b) Conduct of Business . . . . . . . . . . . . . . . . . . . . . 59
(c) Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . 59
(d) No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(e) Access and Information . . . . . . . . . . . . . . . . . . . . 62
(f) Divestiture of Tucson Cellular Interest . . . . . . . . . . . 63
(g) Operation of Certain Assets . . . . . . . . . . . . . . . . . 64
(h) San Diego Cellular Property . . . . . . . . . . . . . . . . . 64
3.3 Fiduciary Obligations . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 4 PHASE I CLOSING ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
-ix-
<PAGE> 11
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.1 Cash Flows and Funding Prior to Phase I . . . . . . . . . . . . . . 65
4.2 Phase I Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.3 Special Provisions relating to the San Diego
Cellular Property and the Tucson Cellular
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.4 Independent Third Party Verification . . . . . . . . . . . . . . . . 71
4.5 Initial Phase II Asset Percentages . . . . . . . . . . . . . . . . . 72
4.6 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 5 PHASE II CLOSING PERCENTAGES . . . . . . . . . . . . . . . . . . . . 74
5.1 Cash Flows and Funding Prior to Phase II . . . . . . . . . . . . . . 74
5.2 Basic Principles for Phase II Closing Percentages . . . . . . . . . 75
5.3 Additional Principles for Phase II Closing Percentages . . . . . . . 76
5.4 Phase II Closing Percentages . . . . . . . . . . . . . . . . . . . . 78
5.5 Restated Phase II Closing Percentages . . . . . . . . . . . . . . . 78
5.6 Phase I Quarterly Computations . . . . . . . . . . . . . . . . . . . 79
5.7 Phase II Closing Percentages . . . . . . . . . . . . . . . . . . . . 81
5.8 Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
5.9 Phase I Quarterly Records . . . . . . . . . . . . . . . . . . . . . 85
5.10 Quarterly Values . . . . . . . . . . . . . . . . . . . . . . . . . . 85
(a) "Quarterly Value-100% New Par" . . . . . . . . . . . . . . . . . 85
(b) "Quarterly Value-50% New Par" . . . . . . . . . . . . . . . . . 86
(c) "Quarterly Value-No New Par" . . . . . . . . . . . . . . . . . . 86
(ii) "Deemed Amount-50% New Par" . . . . . . . . . . . . . . . 87
(iii) "Deemed Amount-No New Par" . . . . . . . . . . . . . . . . 87
5.11 New Par Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 87
5.12 Scheduled Phase II Related Assets . . . . . . . . . . . . . . . . . 88
5.13 Minority Indebtedness Adjustment . . . . . . . . . . . . . . . . . . 91
5.14 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE 6 PHASES OF THE JOINT VENTURE AND CLOSINGS . . . . . . . . . . . . . . 91
6.1 Prior to Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . 91
6.2 Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
(a) Conditions to Phase I Closing . . . . . . . . . . . . . . . . . 92
(b) Deliveries on or before the Phase I Closing . . . . . . . . . . 92
6.3 Phase II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
(a) Conditions to Phase II Closing . . . . . . . . . . . . . . . . . 93
(b) Deliveries on or before the Phase II Closing . . . . . . . . . . 94
6.4 PCS Contribution Closing . . . . . . . . . . . . . . . . . . . . . . 96
6.5 New Par Contribution Date . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE 7 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
7.1 Termination of this Organization Agreement. . . . . . . . . . . . . . 98
7.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>
-x-
<PAGE> 12
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.2 Indemnity by USW . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.3 Indemnity by ATI . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.4 Indemnity by WMC . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.5 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . 101
8.6 Notification of Claims . . . . . . . . . . . . . . . . . . . . . . 102
8.7 Access and Cooperation . . . . . . . . . . . . . . . . . . . . . . 102
8.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
ARTICLE 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.3 Modifications; Amendments; Waivers . . . . . . . . . . . . . . . . 104
9.4 Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . 104
9.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 105
9.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.10 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.11 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.12 Survival of Representations and Warranties . . . . . . . . . . . . 107
9.13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
-xi-
<PAGE> 13
THIS AMENDED AND RESTATED JOINT VENTURE ORGANIZATION AGREEMENT (the
"Organization Agreement") is entered into as of September 30, 1995, by and
between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation ("ATI"), and U S
WEST, INC., a Colorado corporation ("USW").
W I T N E S S E T H:
WHEREAS, ATI and USW or certain of their affiliates are the direct and/or
indirect owners of interests in and rights to certain cellular communications
systems; and
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively with lower costs
in such markets; and
WHEREAS, there are substantial operating, technological and development
efficiencies of scale and scope to be achieved by a joint venture combining
certain of the current cellular and wireless properties of ATI and USW and their
affiliates; and
WHEREAS, ATI and USW have concluded that it will be in their respective best
interests, and the best interests of the public, to form a joint venture for the
purpose of coordinating wireless services and owning, operating, managing,
maintaining, and constructing cellular, PCS (as hereinafter defined), and other
wireless communications systems and, in furtherance thereof, ATI and USW wish to
organize a joint venture; and
WHEREAS, the MFJ (as hereinafter defined) currently applies to USW and its
affiliated companies and restricts them from engaging in certain activities,
which restrictions are acknowledged to have anticompetitive consequences; and
WHEREAS, the MFJ restrictions do not apply to ATI and its affiliates, and
any imposition of those restrictions would create inefficiencies, limit ATI's
competitive options, and reduce consumer choice; and
WHEREAS, it is the intent of the parties to this Organization Agreement to
achieve the scope and scale efficiencies of integration to the extent possible
consistent with the current MFJ restrictions, while, at the same time, limiting
the application of such MFJ restrictions only to those entities and activities
to which they currently apply; and
WHEREAS, the parties have structured this transaction in phases, the timing
of which is dependent on the continued
-1-
<PAGE> 14
applicability of the MFJ, and it is the intent of the parties, subject to the
terms and conditions hereof, to integrate completely all aspects of their
cellular and wireless businesses as soon as practicable without the imposition
of MFJ restrictions on ATI or its cellular properties; and
WHEREAS, on July 25, 1994, AirTouch Communications, a California corporation
and predecessor to ATI ("AirTouch California"), and USW executed a Joint Venture
Organization Agreement (the "Initial Organization Agreement"); and
WHEREAS, simultaneously with the execution of the Initial Organization
Agreement, AirTouch California and USW entered into that certain Investment
Agreement, that certain Agreement of Exchange, that certain Partnership
Agreement of WMC Partners, L.P., that certain Partnership Agreement of PCS
Nucleus, L.P., that certain Trust Agreement of Exchange, and that certain
Arbitration Agreement; and
WHEREAS, ATI and USW now wish to amend and restate the Initial Organization
Agreement and certain of the Related Agreements (as defined below):
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained, the sufficiency of which is hereby acknowledged,
and in order to set forth the respective rights, obligations and interests of
ATI and USW and their Affiliates to one another, the parties hereto, intending
to be bound, agree as follows:
-2-
<PAGE> 15
AGREEMENT
ARTICLE 1
DEFINITIONS
(a) As used herein, the following terms shall have the following meanings:
1.1 AFFILIATE shall mean any Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under
common control with the Person specified. For purposes of this
Organization Agreement, ATI and its Affiliates shall not be considered
to be Affiliates of WMC or PCS Par; USW and its Affiliates shall not be
considered to be Affiliates of WMC or PCS Par; WMC shall not be
considered to be an Affiliate of ATI or USW or any of their respective
Affiliates; PCS Par shall not be considered to be an Affiliate of ATI
or USW or either of their Affiliates; CCI shall not be considered to be
an Affiliate of ATI until such time, if ever, as ATI shall be entitled
to exercise full discretion with respect to voting the shares of Common
Stock of CCI beneficially owned by ATI (other than shares of Common
Stock of CCI owned by ATI by virtue of its ownership of the Class A
Preference Stock of CCI); and no wireline cable television company in
which USW owns, directly or indirectly, less than fifty percent (50%)
of the equity or voting interests shall be considered to be an
Affiliate of USW. For purposes of this definition, the term "CONTROL"
(including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
as used with respect to any Person means the possession, direct or
indirect, of the power to (a) vote in excess of fifty percent (50%) of
the voting securities of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
1.2 AGREEMENT OF EXCHANGE shall mean that certain Amended and Restated
Agreement of Exchange, by and between ATI and USW, dated as of the date
hereof, a copy of which is appended hereto as ATTACHMENT 1.2, as
amended, modified or supplemented from time to time.
1.3 AIRTOUCH CALIFORNIA shall mean AirTouch Communications, a California
corporation.
1.4 APPROVED BUSINESS PLAN shall have the meaning set forth in SECTION 2.10
of the WMC Partnership Agreement.
-3-
<PAGE> 16
1.5 ARBITRATION AGREEMENT shall mean that certain Amended and Restated
Arbitration Agreement entered into by and between USW and ATI, dated as
of the date hereof, a copy of which is appended hereto as ATTACHMENT
1.5, as amended, modified or supplemented from time to time.
1.6 ATI shall mean AirTouch Communications, Inc., a Delaware corporation.
1.7 ATI PHASE II ASSETS shall mean the assets listed on ATTACHMENT 1.7 to
this Organization Agreement.
1.8 ATI CELLULAR SUBSIDIARIES shall mean AirTouch Cellular, Inc., a
California corporation; AirTouch Cellular of Nevada, a Nevada
corporation; and AirTouch Cellular of Saginaw, Inc., a Michigan
corporation, and any successor corporation to any of the foregoing
resulting from the restructuring by ATI of its ownership of Domestic
Cellular Businesses pursuant to SECTION 3.2(a)(v) hereof.
1.9 ATI EMPLOYEE BENEFIT PROGRAMS shall have the meaning set forth in
SECTION 2.2(p)(i) hereof.
1.10 ATI SERVICES AGREEMENT shall mean an agreement to be entered into by
and between WMC and any of the ATI Cellular Subsidiaries, substantially
in the form appended hereto as Attachment 1.10.
1.11 ATI PARTIES shall mean ATI, the ATI Cellular Subsidiaries, and the
corporate and partnership Subsidiaries of the ATI Cellular
Subsidiaries.
1.12 ATI PHASE II TRIGGER shall have the meaning set forth in SECTION
6.3(c)(iii) hereof.
1.13 AUTHORIZATION shall mean any authorization, order, grant, consent,
approval, permission or waiver required to be obtained from any
Governmental Body for the consummation of any specified Transaction of
any Phase or for the performance by any Party of any of its obligations
under this Organization Agreement and the Related Agreements, including
without limitation any Final Order and the expiration of any waiting
period applicable under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.14 BACK END TERMINATION DATE shall have the meaning set forth in Section
1.8 of the WMC Partnership Agreement.
-4-
<PAGE> 17
1.15 BALANCE SHEETS shall have the meaning set forth in SECTION 2.1(e), or
in SECTION 2.2(e) hereof, as the context may require.
1.16 BENEFICIAL PHASE II ASSET shall have the meaning set forth in SECTION
1.8 of the WMC Partnership Agreement.
1.17 BUSINESS DAY shall mean any day on which national banking institutions
in San Francisco, California, are open for the transaction of banking
business.
1.18 CASH FLOW shall have the meaning set forth in Section 5.8.
1.19 CCI shall mean Cellular Communications, Inc., a Delaware corporation.
1.20 CECO shall mean the Civil Enforcement Consent Order entered by the
United States District Court for the District of Columbia on or about
February 2, 1989, in United States v. Western Electric Co. (Case No.
82-0192).
1.21 CELLULAR PARTNERSHIP AGREEMENT shall mean the partnership agreement of
any partnership that conducts a Domestic Cellular Business and in which
any USW Party or ATI Party holds an interest.
1.22 CODE shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.23 CONSENT shall mean any approval, consent or waiver required to be
obtained from any non-governmental third party for the consummation of
a specified Transaction of any Phase or for the performance by any
Party of any of its obligations under this Organization Agreement and
the Related Agreements, including without limitation any option, right
of first refusal, right of first offer or other similar right of a
third party triggered by a specified Transaction contemplated by this
Organization Agreement or any Related Agreement.
1.24 CONTRIBUTION DATE shall mean the date of the Phase II Closing;
provided, however, that with respect to any Beneficial Phase II Asset
or Transferred Subsidiary that is contributed or transferred to WMC
after the Phase II Closing, the Contribution Date shall be the date
such contribution or transfer is effected.
1.25 DECREE COURT shall mean the court having jurisdiction over the MFJ.
-5-
<PAGE> 18
1.26 DELAWARE RULPA shall mean the Delaware Revised Uniform Limited
Partnership Act.
1.27 DOMESTIC shall refer to the fifty (50) states of the United States, the
District of Columbia, Puerto Rico, the Gulf of Mexico, and Guam.
1.28 DOMESTIC CELLULAR ASSET shall mean any assets, rights, properties, and
franchises of every kind and nature used primarily or exclusively in
the operation of a Domestic Cellular Business (including the FCC
Licenses with respect thereto), whether held directly or indirectly
through a Person's wholly owned Subsidiaries, and any other asset,
right, property, or business of such Person or its wholly owned
Subsidiaries constituting part of, or used primarily in connection
with, such Person's Domestic Cellular Business.
1.29 DOMESTIC CELLULAR BUSINESS shall mean the business of acquiring,
developing, owning, and operating businesses, and interests in
businesses, exclusively or primarily engaged in the provision of
Domestic Cellular Service.
1.30 DOMESTIC CELLULAR INVESTMENT shall mean any equity interest held by a
Person in a Domestic Cellular Investment Entity.
1.31 DOMESTIC CELLULAR INVESTMENT ENTITY shall mean any Person that is
conducting a Domestic Cellular Business in which a specified Person
holds an equity interest, but which is not a Subsidiary of such Person.
1.32 DOMESTIC CELLULAR SERVICE shall mean any commercial mobile radio
service, and the resale of such service, provided by a radio
communications system authorized under the rules for the domestic
public cellular radio telecommunications service designated as Subpart
K of Part 22 of the FCC's rules in effect on the Effective Date, or any
revision thereto or successor thereof which may be in effect from time
to time, including the network, marketing, distribution, sales,
customer interface, and operations functions relating thereto.
1.33 DOMESTIC CELLULAR SUBSIDIARY shall mean, with respect to a Person, a
Subsidiary that is conducting a Domestic Cellular Business.
1.34 DOMESTIC CELLULAR TRANSACTIONS shall mean the formation of WMC; the
execution and delivery of the ATI Services Agreement, and the NewVector
Services
-6-
<PAGE> 19
Agreement; the contribution of the ATI Phase II Assets, the USW Phase
II Assets, the Scheduled Phase II Related Assets, the Beneficial Phase
II Assets, the New Par Assets and the Scheduled New Par Related Asset
to WMC; and the other transactions referred to in ARTICLES 6 and 7
hereof.
1.35 EFFECTIVE DATE shall mean July 25, 1994.
1.36 EMPLOYEE BENEFIT PROGRAM shall mean any of the following employee
benefit plans, programs or arrangements (whether or not set forth in a
written document):
(a) Any employee pension benefit plan, as defined in Section 3(2) of
ERISA, including without limitation any multiemployer plan within
the meaning of Section 4001(a)(3) of ERISA;
(b) Any employee welfare benefit plan, as defined in Section 3(1) of
ERISA;
(c) Any bonus, deferred-compensation, incentive, restricted-stock,
stock purchase, stock option, stock appreciation right, phantom
stock, debenture, supplemental pension, profit-sharing,
commission, royalty pool or similar plan or arrangement;
(d) Any plan, program, agreement, policy, commitment or other
arrangement relating to severance or termination pay, whether or
not published or generally known;
(e) Any plan, program, agreement, policy, commitment or other
arrangement relating to the provision of any benefit described in
Section 3(1) of ERISA to former employees or the survivors or
dependents of employees or former employees;
(f) Any plan that is maintained outside of the United States primarily
for the benefit of persons substantially all of whom are
nonresident aliens, as described in Section 4(b)(4) of ERISA;
(g) Any plan that is an excess benefit plan, as defined in Section
3(36) of ERISA, and is unfunded, as described in Section 4(b)(5)
of ERISA;
-7-
<PAGE> 20
(h) Any plan, program, agreement, policy, commitment or other
arrangement relating to loans or other extensions of credit, loan
guarantees, relocation assistance or similar benefits;
(i) Any plan, program, agreement, policy, commitment or other
arrangement relating to paid or unpaid leaves of absence,
education expense or vacation; or
(k) Any other plan, program, agreement, policy, commitment or other
arrangement relating to employee benefits, executive compensation
or fringe benefits or that is subject to Section 125 of the Code.
1.37 ENVIRONMENTAL LAWS shall mean all federal, state, local, and foreign
laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, wetlands, land surface, subsurface strata,
and indoor and outdoor workplace), including, without limitation, (a)
laws and regulations relating to emissions, discharges, releases or
threatened releases of any Substance of Concern or otherwise relating
to the importation, manufacture, processing, formulation, testing,
distribution, use, treatment, storage, disposal, transport or handling
of any Substance of Concern, and (b) common law principles of tort
liability.
1.38 EO shall mean the Enforcement Order entered by the United States
District Court for the District of Columbia on or about February 15,
1991, in United States v. Western Electric Co. (Case No. 82-0192).
1.39 ERISA shall mean the Employee Retirement Security Act of 1974, as
amended.
1.40 ERISA AFFILIATE shall mean each person (as defined in Section 3(9) of
ERISA) that, together with the entity being described, would be treated
as a single employer under Section 4001(b) of ERISA or that would be
deemed to be a member of the same "controlled group" within the meaning
of Section 414(b), (c), (m), and (o) of the Code (provided, however,
that when the subject of the provision is a multiemployer plan only
subsections (b) and (c) of Section 414 shall be taken into account).
ERISA Affiliate shall also mean any partnership in which the entity
being described is a general partner.
-8-
<PAGE> 21
1.41 ESMR shall refer to any commercial mobile radio service, and the resale
of such service, authorized under the rules for Enhanced Specialized
Mobile Radio services designated under Subpart S or Part 90 of the
FCC's rules in effect on the Effective Date, or any revision or
successor thereof which may be in effect from time to time, including
the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
1.42 FAIR MARKET VALUE shall have the meaning set forth in SECTION 1.8 of
the WMC Partnership Agreement.
1.43 FINAL ORDER shall mean any action by the FCC or a state regulatory
authority as to which (a) no request for stay by the FCC or state
regulatory authority is pending, no such stay is in effect, and, if any
deadline for filing any such request is designated by statute or
regulation, it has passed; (b) no petition for rehearing or
reconsideration of the action is pending before the FCC or state
regulatory authority, as applicable, and the time for filing any such
petition has passed; (c) the FCC or state regulatory authority, as
applicable, does not have the action under reconsideration on its own
motion, and the time for such reconsideration has passed; and (d) no
appeal to a court, or request or stay by a court, of the FCC's or state
regulatory authority's action, as applicable, is pending or in effect,
and, if any deadline for filing such appeal or request is designated by
statute or rule, it has passed.
1.44 FCC shall mean the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
1.45 FINANCIAL STATEMENTS shall have the meaning set forth in SECTION
2.1(e), or in SECTION 2.2(e) hereof, as the context may require.
1.46 GOVERNMENTAL BODY shall mean any federal, state, municipal, political
subdivision or other governmental department, commission, board,
bureau, agency or instrumentality.
1.47 INCOME TAXES means any federal, state, local or foreign income,
franchise or similar Taxes and in each instance any interest, penalties
or additions to taxes attributable to such Taxes.
1.48 INTELLECTUAL PROPERTY shall mean all Trademarks, Trade Names,
copyrights or copyright registrations, and patents or patents pending,
including any contracts, licenses or other legal arrangements
-9-
<PAGE> 22
granting rights or privileges to use any Trademark, Trade Name or
patent, used in, and material to the conduct of, the Domestic Cellular
Business of any Person.
1.49 INTER-EXCHANGE CARRIER AGREEMENT shall mean an agreement between any
ATI Party and any inter-exchange carrier or between any USW Party and
any inter-exchange carrier relating to the conduct of a Domestic
Cellular Business.
1.50 INVESTMENT AGREEMENT shall mean that certain Amended and Restated
Investment Agreement, entered into by and between USW and ATI, dated as
of the date hereof, a copy of which is appended hereto as ATTACHMENT
1.50, as amended, modified or supplemented from time to time.
1.51 LEASED PROPERTY shall mean any Domestic Cellular Asset consisting of a
leasehold interest in real or personal property.
1.52 LICENSE shall mean any permit, license, waiver or authorization from
any Governmental Body having jurisdiction over a Person required or
advisable for the conduct of an activity, including, without
limitation, any FCC license or any authorization or certificate of
public convenience and necessity.
1.53 LIEN shall mean any lien, pledge, claim, encumbrance, mortgage,
security interest or other charge against property.
1.54 MATERIAL ADVERSE EFFECT shall mean a material adverse effect on the
business, assets, financial condition, results of operations or
prospects of a specified Person or Persons.
1.55 MATERIAL CONTRACT shall mean any agreement, contract or commitment made
in conjunction with or related to a Domestic Cellular Business
(including, without limitation, contracts with customers or suppliers,
Resale Agreements, Roaming Agreements, Inter-Exchange Carrier
Agreements, and similar agreements) that (a) is reasonably anticipated
by the Party making a representation with respect thereto to involve
annual aggregate payments by any party thereto in excess of five
million dollars ($5,000,000); (b) is reasonably anticipated by the
Party making a representation with respect thereto to involve aggregate
payments by all parties thereto in excess of ten million dollars
($10,000,000) in any five (5) year period; (c) has a term of five (5)
years or more; or (d) that any party thereto would be required to file
as an exhibit to
-10-
<PAGE> 23
its Annual Report on Form 10-K if such Person were a registrant under
Section 12 of the Securities Exchange Act of 1934, as amended.
1.56 MFJ shall mean the Modification of Final Judgment entered in United
States v. AT&T, 552 F. Supp. 131 (D.D.C.), on or about August 24, 1982,
as subsequently modified from time to time.
1.57 MSA shall mean Metropolitan Statistical Area.
1.58 NEW PAR shall mean the general partnership between the PacTel Group and
the CCI Group (or their successors) organized pursuant to the laws of
the State of Delaware and that certain New Par Partnership Agreement,
dated as of August 1, 1991.
1.59 NEW PAR ASSETS shall mean all of the ownership interests in, or assets
of, New Par, as of July 25, 1994.
1.60 NEW PAR CONTRIBUTION DATE shall have the meaning set forth in the WMC
Partnership Agreement.
1.61 NEW PAR DETERMINATION DATE shall mean either (i) if ATI and its
Affiliates shall, directly or indirectly, acquire all of the assets of
New Par, the later to occur of the New Par Contribution Date or the
Phase II Closing or (ii) if ATI and its Affiliates shall not, directly
or indirectly, acquire all of the assets of New Par, the later to occur
of the Back End Termination Date or the Phase II Closing.
1.62 NEWVECTOR shall mean U S WEST NewVector Group, Inc., a Colorado
corporation and wholly owned Subsidiary of USW.
1.63 NEWVECTOR SERVICES AGREEMENT shall mean an agreement to be entered into
by and between WMC and NewVector substantially in the form of the
Services Agreement appended hereto as Attachment 1.10.
1.64 NV-EMPLOYEE BENEFIT PROGRAMS shall have the meaning set forth in
SECTION 2.1(p)(i) hereof.
1.65 ORGANIZATION AGREEMENT shall mean this Joint Venture Organization
Agreement.
1.66 OWNED PROPERTY shall mean any Domestic Cellular Asset consisting of a
fee interest in real or personal property.
1.67 PARTIAL MFJ RELIEF shall mean a final court order, federal agency
action or the enactment of federal
-11-
<PAGE> 24
legislation modifying the MFJ (to the extent such modification is
necessary) to allow WMC:
(a) To provide interexchange telecommunications services that (i)
originate from a cellular radio or other wireless device and that are
not routed through a wireless PBX or comparable device directly to a
landline local telephone company end office, or (ii) are routed through
wireless switching equipment to any terminating device (including
cellular CPE, voice-mail or any other type of terminating device); and
(b) To provide the services identified in subparagraph (a) above free
of the obligations and restrictions contained in sections II(A) and
II(B) of the MFJ, and free of any requirement to provide those services
through a separate subsidiary, sales force or group of employees,
whether imposed in the waiver process or otherwise.
As used herein, Partial MFJ Relief shall be deemed to have occurred
even though equal access or nondiscrimination requirements remain, to
the extent that those requirements are imposed on all wireless carriers
by legislation, by final court order or by final agency action.
1.68 PARTIES shall mean USW and ATI.
1.69 PARTY shall mean USW or ATI, as the context may require.
1.70 PCS shall refer to any broad-band radio communications service
authorized under the rules for personal communications services
designated as Subpart E of Part 24 of the FCC's rules in effect on the
Effective Date, or any revision thereto or successor thereof which may
be in effect from time to time, including the network, marketing,
distribution, sales, customer interface and operations functions
relating thereto.
1.71 PCS CONTRIBUTION DATE shall have the meaning set forth in the WMC
Partnership Agreement.
1.72 PCS PAR shall mean PCS Nucleus, L.P., a Delaware limited partnership
organized pursuant to the PCS Par Partnership Agreement.
1.73 PCS PAR EMPLOYEE AGREEMENT shall mean an agreement regarding employees
to be entered into by and among ATI and USW and PCS Par pursuant to
this Organization Agreement.
-12-
<PAGE> 25
1.74 PCS PAR PARTNERSHIP AGREEMENT shall mean that certain Amended and
Restated Agreement of Limited Partnership of PCS Par, entered into
under the Delaware RULPA by and between ATI and USW, dated as of the
date hereof, a copy of which is appended hereto as ATTACHMENT 1.74, as
amended, modified or supplemented from time to time.
1.75 PCS TRANSACTIONS shall mean the formation of PCS Par, and the
contribution of Percentage Interests in PCS Par to WMC in accordance
with SECTION 6.4 hereof.
1.76 PERCENTAGE INTEREST shall mean a partner's proportional interest in a
partnership, whether as a general partner, a limited partner or both a
general and a limited partner.
1.77 PERMITTED LIABILITIES shall mean, with respect to a Person's Domestic
Cellular Business, ordinary course trade accounts payable, accrued
expenses for goods and services purchased, and unearned revenue and
customer deposits arising in the ordinary course of business.
1.78 PERMITTED LIEN shall mean (a) a statutory Lien not yet due or payable
or (b) a Lien that is not material in character, amount or extent and
does not materially detract from the value, or interfere with the use
of, the assets subject thereto or affected thereby or otherwise
materially impair the business operations being conducted or proposed
to be conducted with such assets.
1.79 PERSON shall mean any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, estate,
unincorporated organization, governmental or regulatory body or other
entity.
1.80 PHASE I shall mean the period beginning at the Phase I Closing and
continuing until the Phase II Closing.
1.81 PHASE I CLOSING shall mean the closing of the Domestic Cellular
Transactions to be closed upon satisfaction or waiver of all conditions
set forth in SECTION 6.2(a) of this Organization Agreement.
1.82 PHASE I CLOSING DATE means the date of the Phase I Closing.
1.83 PHASE II shall mean the period beginning at the Phase II Closing and
continuing until the Phase III Closing, if any.
-13-
<PAGE> 26
1.84 PHASE II CLOSING shall mean the closing of the Transactions to be
closed upon satisfaction or waiver of all conditions set forth in
SECTION 6.3(a) of this Organization Agreement.
1.85 PHASE III shall mean the period following the Phase III Closing.
1.86 PHASE III CLOSING shall mean the closing of the Exchange or the Initial
Exchange as contemplated in the Agreement of Exchange or the Trust
Agreement of Exchange, respectively, as the case may be.
1.87 POPS shall mean the number that is the product of (a) the population of
an FCC-licensed cellular market (based on the 1993 Donnelly Marketing
Service population estimates for such market), and (b) the percentage
of direct or indirect ownership interest of a Person in the entity
holding the valid cellular license for such market as of the date
specified.
1.88 PRECEDING QUARTER shall have the meaning set forth in Section 5.6(d)
hereof.
1.89 PURCHASE PRICE means, with respect to any Scheduled Phase II Related
Asset or Scheduled New Par Related Asset, the amounts set forth in the
last column of Attachment 1.89 hereto opposite the name of such
Scheduled Phase II Related Asset or Scheduled New Par Related Asset.
1.90 QUARTER AT ISSUE means, for the purposes of any computation, the fiscal
quarter during Phase I with respect to which such computation is being
made.
1.91 REIMBURSED EXPENSES means (i) any expenses incurred by one Party (the
"first Party") for the benefit of WMC where the other Party has agreed
in writing to reimburse the first Party, and (ii) any expense for any
Party where the other Party has an obligation to indemnify such Party
pursuant to Article 8 hereof.
1.92 RELATED AGREEMENTS shall mean the WMC Partnership Agreement, the PCS
Par Partnership Agreement, the Agreement of Exchange, the Trust
Agreement of Exchange, the Investment Agreement, the ATI Services
Agreement, the NewVector Services Agreement, and the Arbitration
Agreement. With reference to a particular Party, Related Agreement
shall mean any of the above-referenced agreements to which such Party
or an Affiliate of such Party is a party.
1.93 RELATED PARTY AGREEMENT shall mean any contract, agreement, transaction
or relationship between or
-14-
<PAGE> 27
among (a) a USW Party or an ATI Party and an Affiliate of such ATI
Party or USW Party relating to a Domestic Cellular Business; (b) a USW
Party or an ATI Party or an Affiliate thereof and WMC; or (c) a USW
Party or an ATI Party or an Affiliate thereof and PCS Par.
1.94 RESALE AGREEMENT shall mean any agreement entered into by any ATI Party
or any USW Party with any third party relating to the resale of any
Domestic Cellular Service.
1.95 RETURN means any report, return, statement, estimate, declaration,
claim for refund, form, information return or other document filed or
required to be filed with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof; provided,
however, that whenever a Subsidiary is a member of an affiliated group,
within the meaning of Section 1504 of the Code (or any combined,
consolidated, unitary group or similar group for purposes of any
applicable foreign, state or local law), the Return with respect to
such Subsidiary shall be the schedule to the Return for such group
which relates to such Subsidiary and, when available, any pro forma
Returns prepared for such Subsidiary.
1.96 ROAMING AGREEMENT shall mean any agreement entered into by any ATI
Party or any USW Party with any third party with respect to a roaming
arrangement for domestic cellular or domestic PCS, ESMR or satellite
customers.
1.97 SAN DIEGO CELLULAR PROPERTY shall mean the assets held by U S WEST
Cellular of California, a wholly owned Subsidiary of NewVector, in
connection with the conduct of the non-wireline cellular system
licensed to serve the San Diego MSA, free and clear of all Liens and
liabilities (other than Permitted Liabilities). For purposes of this
Organization Agreement, the San Diego Cellular Property shall not be
considered to be a USW Phase II Asset, a Domestic Cellular Asset, a
Domestic Cellular Subsidiary, a Domestic Cellular Investment or a
component of the Domestic Cellular Business of any Person.
1.98 SCHEDULED NEW PAR RELATED ASSET means Ohio-6 (Morrow).
1.99 SCHEDULED NPRA 12% VALUE means, for any date of determination, an
amount equal to the Purchase Price paid by or on behalf of New Par to
purchase the Scheduled New Par Related Asset, accreted at the rate
-15-
<PAGE> 28
of 12% per annum for the period beginning on the Phase I Closing Date
and ending on such date of determination.
1.100 SCHEDULED PHASE II RELATED ASSETS means the assets set forth on
Attachment 1.89 to be contributed to WMC by USW (or the USW Parties)
on the Phase II Closing.
1.102 SCHEDULED PIIRA 12% VALUE means, with respect to any Scheduled Phase
II Related Asset for any date of determination, an amount equal to the
Purchase Price for such Scheduled Phase II Related Asset, accreted at
the rate of 12% per annum for the period beginning on the Phase I
Closing Date and ending on such date of determination.
1.103 SUBSIDIARY of a Person shall mean (a) an entity at least fifty percent
(50%) of the equity or voting interests of which are owned, directly
or indirectly, by such Person; (b) a limited partnership whose sole
general partner or managing general partner is such Person; or (c) a
general partnership whose managing general partner is such Person. For
purposes of this Organization Agreement, neither WMC nor PCS Par shall
be considered to be a Subsidiary of USW or ATI.
1.104 SUBSTANCE OF CONCERN shall mean any chemical, pollutant, contaminant,
waste, toxic substance, industrial substance, noxious substance,
hazardous substance, radioactive material, asbestos, genetically
modified organism, petroleum or petroleum product.
1.105 TAX OR TAXES means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including,
without limitation, income, gross receipts, ad valorem, value added,
excise, real or personal property, asset, stamp, sales, use, service,
service use, lease, license, payroll, transaction, capital, net worth,
withholding, employment, disability, social security, workers'
compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer, gains,
recapture, alternative or add-on minimum, environmental, estimated or
other governmental taxes imposed or payable to the United States, or
any state, county, local or foreign government or subdivision or
agency thereof, and in each instance such term shall include any
interest, penalties or additions to tax attributable to any such Tax.
1.106 TAX SHARING ARRANGEMENT means any written or unwritten agreement or
arrangement for the allocation
-16-
<PAGE> 29
or payment of or with respect to Tax liabilities or Tax benefits.
1.107 TO THE KNOWLEDGE OF ATI shall mean to the actual knowledge of an
executive officer of ATI.
1.108 TO THE KNOWLEDGE OF USW shall mean to the actual knowledge of an
executive officer of NewVector.
1.109 TRADEMARK shall mean any service mark, trademark, trade name,
trademark registration or application, service mark registration or
application or derivative name.
1.110 TRADE NAME shall mean any trade name, corporate name, business name,
commercial name, trade name, registration or application or any other
name used to identify a business or for any other business purpose.
1.111 TRANSACTIONS shall mean the Domestic Cellular Transactions, the PCS
Transactions, and any other transactions contemplated by this
Organization Agreement and the Related Agreements.
1.112 TRANSFERRED SUBSIDIARY shall mean any ATI Domestic Cellular Subsidiary
or USW Domestic Cellular Subsidiary, as the case may be, the capital
stock of which is actually contributed or transferred to WMC, and any
corporate Subsidiary thereof.
1.113 TRANSITION BONUSES means any amount paid or payable to employees as
retention or transition bonuses.
1.114 TRUST AGREEMENT OF EXCHANGE shall mean that certain Amended and
Restated Trust Agreement of Exchange, by and between ATI and USW,
dated as of the date hereof, a copy of which is appended hereto as
Attachment 1.114, as amended, modified or supplemented from time to
time.
1.115 TUCSON CELLULAR INTEREST shall mean the 5.88 percent (5.88%) limited
partnership interest held by AirTouch Cellular of Arizona in Tucson
Cellular Telephone Company, a Nevada limited partnership that operates
the non-wireline cellular system in the Tucson, Arizona MSA. For
purposes of this Organization Agreement, the Tucson Cellular Interest
shall not be considered to be an ATI Phase II Asset, a Domestic
Cellular Asset, a Domestic Cellular Property, a Domestic Cellular
Investment or a component of the Domestic Cellular Business of any
Person.
1.116 UNPERMITTED LIABILITY means any indebtedness (including principal,
interest or financing
-17-
<PAGE> 30
expenses), and any liability other than a Permitted Liability.
Unpermitted Liabilities shall include any liability incurred with
respect to any controversy or litigation, tax-related or otherwise,
that relates to the period prior to the Phase I Closing.
1.117 USW shall mean U S WEST, Inc., a Colorado corporation.
1.118 USW PARTIES shall mean USW, NewVector, and all corporate and
partnership Subsidiaries of NewVector.
1.119 USW PHASE II ASSETS shall mean the assets listed on ATTACHMENT 1.119
to this Organization Agreement.
1.120 WMC shall mean WMC Partners, L.P., a Delaware limited partnership
organized pursuant to the WMC Partnership Agreement.
1.121 WMC EMPLOYEE AGREEMENT shall mean the WMC Employees Agreement, entered
into as of July 25, 1994, by and between ATI, USW and WMC, a copy of
which is appended hereto as Attachment 1.121 as amended, modified or
supplemented from time to time.
1.122 WMC PARTNERSHIP COMMITTEE shall mean the Partnership Committee of WMC
as defined in SECTION 2.2(a) of the WMC Partnership Agreement.
1.123 WMC PARTNERSHIP AGREEMENT shall mean that certain Amended and Restated
Agreement of Limited Partnership of WMC Partners, L.P., dated as of
the date hereof, a copy of which is appended hereto as ATTACHMENT
1.123, as amended, modified or supplemented from time to time.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Balance Sheet Differential 4.3(b)
Final New Par Adjustment 5.11
Incremental Percentages 5.6(b)
Net Asset Value 4.2(3)
New Par Quarterly Adjustments 4.7(b)
Phase II Closing Percentages 5.4
Quarterly Adjustment Amount 5.6(a)
Quarterly Percentages 5.6(b)
Quarterly Records 5.9
Quarterly Values 5.10
San Diego Taxes 3.1(f)(ii)
Tucson Taxes 3.2(f)(i)
</TABLE>
-18-
<PAGE> 31
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of USW. USW hereby represents and
warrants to ATI that each of the following statements was true and correct as of
the Effective Date, and, except as otherwise expressly stated herein, will be
true and correct as of the Phase I Closing and the Phase II Closing as if made
on and as of such dates.
(a) Corporate Organization.
(i) USW is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation and has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted, to enter into this Organization
Agreement and the Related Agreements and to carry out the provisions of this
Organization Agreement and the Related Agreements and consummate the
Transactions contemplated hereby and thereby. USW is duly qualified and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary and where the failure to be so qualified has or could reasonably be
expected to have a Material Adverse Effect on USW and its Subsidiaries, taken as
a whole.
(ii) All Domestic Cellular Assets currently owned, directly or
indirectly, in whole or in part, by USW are held, owned or operated, directly or
indirectly, by NewVector or by a Subsidiary of NewVector. Except for the
interest it holds in Cascade Mobile Communications, L.P., NewVector is not
engaged, directly or indirectly, in the conduct or ownership of any business or
activity other than the Domestic Cellular Business.
(iii) NewVector is a corporation duly organized, validly existing
and in good standing under the laws of Colorado and has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted. NewVector is duly qualified and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified has or could reasonably be expected to have
a Material Adverse Effect on NewVector and its Subsidiaries, taken as a whole.
(iv) Each corporate Subsidiary of NewVector is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own and
operate its property and to carry on its business as now conducted. Each such
Subsidiary is duly qualified and in good standing in
-19-
<PAGE> 32
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified has or could reasonably be expected to have
a Material Adverse Effect on NewVector and its Subsidiaries, taken as a whole.
(v) Each partnership Subsidiary of NewVector is a general or
limited partnership duly organized and validly existing in its state of
organization and has all requisite partnership power and authority to own and
operate its properties and to carry on its business as now conducted. Each such
partnership Subsidiary is duly qualified in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary and where the failure to be so
qualified has or could reasonably be expected to have a Material Adverse Effect
on NewVector and its Subsidiaries, taken as a whole.
(b) Capitalization: Ownership of Shares.
(i) SCHEDULE 2.1(b)(i) contains a true, current, and complete list
of the authorized, issued and outstanding capital stock (including the par or
stated value thereof) of NewVector. All issued and outstanding shares of capital
stock of NewVector are duly authorized, validly issued, fully paid, and
non-assessable. USW has good legal title to, and beneficial ownership of, such
shares of NewVector free and clear of all Liens, restrictions, equities, options
or claims whatsoever, except as set forth on SCHEDULE 2.1(b)(i). USW has full
authority to transfer, convey, and deliver such shares free and clear of all
Liens, restrictions, equities, options, and claims. Except for this Organization
Agreement and the Related Agreements, there are no outstanding subscriptions,
options, warrants, calls, rights, commitments, rights of exchange, plans,
arrangements, understandings or other agreements of any kind or character
relating to or providing for the issuance, sale, delivery or transfer of
securities of any class of NewVector stock (including any right of conversion or
exchange under any outstanding security or other instrument) to any Person.
(ii) SCHEDULE 2.1(b)(ii) contains a true, current, and complete
list of (A) the name of each corporate Subsidiary of NewVector, (B) the state of
incorporation of such Subsidiary, (C) the states where such Subsidiary is
qualified to do business, (D) the authorized, issued and outstanding capital
stock (including the par or stated value thereof) of each Subsidiary, and (E)
the number of shares and percentage of issued and outstanding capital stock of
each Subsidiary beneficially owned by NewVector. The issued and outstanding
shares of capital stock of each such Subsidiary are duly authorized, validly
issued, fully paid, and non-assessable. NewVector or a wholly owned Subsidiary
of NewVector has good legal title to, and beneficial ownership of, such shares
free and clear of all
-20-
<PAGE> 33
Liens, restrictions, equities, options or claims whatsoever, except as set forth
on SCHEDULE 2.1(b)(ii). There are no outstanding subscriptions, options,
warrants, calls, rights, commitments, rights of exchange, plans, arrangements,
understandings or other agreements of any kind or character relating to or
providing for the issuance, sale, delivery or transfer of securities of any
class of stock of any corporate Subsidiary of NewVector (including any right of
conversion or exchange under any outstanding security or other instrument) to
any Person.
(iii) SCHEDULE 2.1(b)(iii) contains a true, current, and complete
list of (A) the name of each partnership Subsidiary of NewVector, (B) the state
of organization of each such Subsidiary, (C) the states where each such
Subsidiary is qualified to do business, and (D) the general and limited
partnership interests in each such Subsidiary beneficially owned by NewVector.
NewVector or a Subsidiary of NewVector has good legal title to, and beneficial
ownership of, its partnership interest in each such Subsidiary. Except as set
forth on SCHEDULE 2.1(b)(iii) or in any Cellular Partnership Agreement for a
partnership listed on SCHEDULE 2.1(b)(iii), NewVector or a Subsidiary of
NewVector owns each such interest free and clear of all Liens, restrictions,
equities, options or claims whatsoever. Except as set forth on SCHEDULE
2.1(b)(iii), there are no outstanding subscriptions, options, calls, rights,
commitments, rights of exchange, plans, arrangements, understandings or other
agreements of any kind or character relating to or providing for the issuance,
sale, delivery or transfer of partnership interests of any partnership
Subsidiary of NewVector (including any right of conversion or exchange under any
outstanding agreement or instrument) to any Person. USW has furnished to ATI
true and complete copies of all Cellular Partnership Agreements for all
partnerships listed on SCHEDULE 2.1(b)(iii).
(iv) SCHEDULE 2.1(b)(iv) contains a true, current, and complete
list of all Domestic Cellular Investments owned or held by each USW Party,
including the Percentage Interest held in each Domestic Cellular Investment
Entity by such USW Party as a general and/or as a limited partner. Either
NewVector or one of its Subsidiaries has good legal title to, and beneficial
ownership of, such interests. Except as set forth on SCHEDULE 2.1(b)(iv) or in
any Cellular Partnership Agreement for a partnership listed on SCHEDULE
2.1(b)(iv), NewVector or one of its Subsidiaries owns such interests free and
clear of all Liens, encumbrances, restrictions, equities, options or claims
whatsoever. USW has furnished to ATI true and complete copies of all
certificates or articles of incorporation and by-laws, partnership agreements or
joint venture agreements for all Domestic Cellular Investment Entities listed on
SCHEDULE 2.1(b)(iv).
(c) Authority. This Organization Agreement and the Related Agreements
and the consummation of the Transactions
-21-
<PAGE> 34
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action on the part of the USW Parties. This
Organization Agreement has been duly executed and delivered by a duly authorized
officer of USW and constitutes a valid and binding agreement of USW, enforceable
against USW in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar laws of
general application that may affect the enforcement of creditors' rights
generally and by general equitable principles.
(d) Authorizations and Consents; No Violation.
(i) Except as disclosed on one of the Schedules referenced in this
SECTION 2.1(d), neither the execution and delivery of this Organization
Agreement nor the consummation of the Transactions contemplated by this
Organization Agreement and the Related Agreements will (A) conflict with, or
result in any breach or violation of, any provision of the certificates or
articles of incorporation or by-laws of any of the USW Parties; (B) constitute,
with or without notice or the passage of time or both, a breach, violation or
default, create a Lien or give rise to any right of termination, modification,
cancellation, prepayment or acceleration under any order, writ, injunction,
decree, law, statute, rule or regulation, franchise, governmental permit or
license or any mortgage, indenture, lease, Material Contract, agreement or other
instrument of any USW Party or to which any USW Party or its respective
properties is subject, except for breaches, violations, defaults, Liens or
rights of termination, modification, cancellation, prepayment or acceleration
which would not, singly or in the aggregate, have a Material Adverse Effect on
NewVector and its Subsidiaries, taken as a whole, or adversely affect the
ability of USW to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements; (C) give
rise to any option, right of first refusal or similar right of any third party
with respect to any interest in any USW Party, USW Domestic Cellular Asset, USW
Domestic Cellular Subsidiary or any USW Domestic Cellular Investment; or (D)
require any Consent or Authorization to effectuate the Transactions contemplated
by this Organization Agreement and the Related Agreements.
(ii) SCHEDULE 2.1(d)(ii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
federal Governmental Body or court by any USW Party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(iii) SCHEDULE 2.1(d)(iii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
state public utility commission or other state, county or local Governmental
Body by any USW Party with respect to the consummation of the (A) Phase I
Transactions and
-22-
<PAGE> 35
(B) Phase II Transactions contemplated by this Organization Agreement and the
Related Agreements.
(iv) Except as set forth in any Cellular Partnership Agreement,
any Material Contract existing on the Effective Date (a copy of which was
provided to ATI prior to the Effective Date) or other agreement referred to in
SECTION 2.1(b)(iii) or 2.1(b)(iv) hereof or in SCHEDULE 2.1(d)(iv) hereto, no
Consents are reasonably anticipated to be required to be obtained pursuant to
any partnership, joint venture or other similar agreement or any Material
Contract to which any USW Party is a party with respect to the consummation of
the (A) Phase I Transactions and (B) Phase II Transactions contemplated by this
Organization Agreement and the Related Agreements.
(e) Financial Statements. USW has furnished to ATI true and complete
copies of the audited consolidated balance sheets at December 31, 1992 and 1993
("BALANCE SHEETS"); audited consolidated income and cash flow statements of
USW's Domestic Cellular Business for the fiscal years ended December 31, 1992,
and December 31, 1993; an unaudited balance sheet at May 31, 1994; and unaudited
consolidated income and cash flow statements for the five-month period ending
May 31, 1994 (such Balance Sheets and income and cash flow statements are
hereinafter collectively referred to as "FINANCIAL STATEMENTS"), setting forth
the financial condition and results of operations of USW's Domestic Cellular
Business as of the respective dates of the Financial Statements and for the
periods covered thereby. The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified, except as expressly noted therein, and
except that the May 31, 1994 Financial Statements do not contain footnotes. The
Balance Sheets fairly present the financial condition of USW's Domestic Cellular
Business as of the dates thereof. The consolidated income and cash flow
statements fairly present the results of operations of USW's Domestic Cellular
Business for the periods indicated. USW agrees to use reasonable efforts to
furnish to ATI as soon as they are available true and correct unaudited Balance
Sheets as of May 31, 1994, for each USW Domestic Cellular Subsidiary and USW
Domestic Cellular Investment Entity.
(f) Absence of Other Changes. Except as contemplated by this
Organization Agreement or as set forth in SCHEDULE 2.1(f), from and after June
1, 1994, each of the USW Parties has conducted its Domestic Cellular Business in
the ordinary and usual course and there has not been (i) any borrowing outside
the ordinary course of business or incurrence of any obligations other than
Permitted Liabilities or other liabilities incurred in the ordinary course of
business; (ii) any Lien imposed on any of the properties or assets of any of the
USW Parties (other than Permitted Liens); or (iii) any increases in compensation
payable to officers and employees of
-23-
<PAGE> 36
NewVector or any Subsidiary of NewVector, which in the aggregate may be expected
to have a Material Adverse Effect on NewVector and the Subsidiaries of
NewVector, taken as a whole. From and after June 1, 1994, there has not been any
change in the business, financial condition, assets, liabilities or results of
operation of USW's Domestic Cellular Business, other than as a result of a
change resulting from general cellular industry conditions or as a result of a
regulatory development affecting the cellular industry generally, which could
reasonably be expected to have a Material Adverse Effect on NewVector and its
Subsidiaries, taken as a whole, or to affect adversely the ability of USW to
consummate the Transactions and perform its obligations as contemplated by this
Organization Agreement and the Related Agreements.
(g) Compliance with Laws. Subject to SECTION 2.1(h) hereof, each of the
USW Parties is in compliance with all laws, statutes, ordinances, regulations,
rules, judgments, decrees, orders, and other requirements applicable to the
operation of its Domestic Cellular Business, except for any non-compliances
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on NewVector and its Subsidiaries, taken as a
whole, or to affect adversely the ability of USW to consummate the Transactions
and perform its obligations contemplated by this Organization Agreement and the
Related Agreements.
(h) MFJ. USW and USW's Domestic Cellular Business are subject to the
terms of the MFJ, CECO and EO and must operate in conformance with their
respective requirements and prohibitions. USW has reviewed this Organization
Agreement and the Related Agreements attached hereto pursuant to its normal
review procedures under the CECO and the EO and believes it can consummate the
Transactions and perform its obligations as contemplated by this Organization
Agreement and the Related Agreements.
(i) Litigation. Except as disclosed on SCHEDULE 2.1(i), there are no
actions, suits, investigations or proceedings (adjudicatory, rulemaking or
otherwise) pending or, to the knowledge of USW, threatened against any USW Party
or, to the knowledge of USW, pending or threatened against any USW Domestic
Cellular Investment Entity, at law or in equity, before any court or
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole, or to affect
adversely the ability of USW to consummate the Transactions and perform its
obligations as contemplated by this Organization Agreement and the Related
Agreements.
(j) Licenses. The USW Parties and the USW Domestic Cellular Investment
Entities have all material Licenses which are necessary to conduct USW's
Domestic Cellular Business as it
-24-
<PAGE> 37
is presently conducted. Without limitation of the foregoing, the USW Parties and
the USW Domestic Cellular Investment Entities hold the material Licenses
identified on SCHEDULE 2.1(j), and all such material Licenses are valid and in
full force and effect. No USW Party has made any untrue statement of fact, or
omitted to disclose any fact, to any Governmental Body or taken or failed to
take any action, which misstatements or omissions, actions or failures to act,
individually or in the aggregate, subject or could reasonably be expected to
subject any of the material Licenses they hold to revocation or failure to
renew. No event has occurred with respect to any of the material Licenses held
by a USW Party or by a USW Domestic Cellular Investment Entity which permits, or
after notice or lapse of time or both would permit, revocation or termination
thereof or would result in any other material impairment of the rights of the
holder of any of the material Licenses. USW has no reason to believe that any of
the material Licenses identified on SCHEDULE 2.1(j) is not likely to be renewed
in the ordinary course or that the holder of any such material License would not
be entitled to a renewal expectancy as such term is defined in 47 C.F.R. Section
22.941 or any successor provisions and associated FCC policies.
(k) Taxes. NewVector and its corporate Subsidiaries have each (i)
filed, within the times and in the manner prescribed by law, and will continue
to timely file through the Contribution Date all Returns required to be filed by
or with respect to each of them, (ii) paid all Taxes shown to have become due
pursuant to such Returns, and (iii) will continue to pay all Taxes payable
pursuant to such Returns for periods ending on or before the Contribution Date.
There are no Taxes of NewVector and its corporate Subsidiaries for which a
notice of, or assessment or demand for, payment has been received or which are
otherwise due and payable and NewVector and its corporate Subsidiaries will
continue to pay such Taxes for periods ending on or before the Contribution
Date. Except as disclosed in SCHEDULE 2.1(k), no examination or audit of any Tax
Return of NewVector or any of its corporate Subsidiaries is currently in
progress, and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Return of NewVector or any
of its corporate Subsidiaries. Except as disclosed to ATI on a revised and
updated SCHEDULE 2.1(k) delivered by the Phase I Closing, complete copies of (i)
the federal Income Tax Returns of NewVector and its corporate Subsidiaries and
(ii) state and local Income Tax Returns and other Tax Returns of NewVector and
its corporate Subsidiaries for each of the years ended December 31, 1989, 1990,
1991, 1992 and 1993 have been delivered or will be made available to ATI by the
Phase I Closing. Except as set forth on the revised and updated SCHEDULE 2.1(k)
to be delivered to ATI by the Phase I Closing, (A) there is no action, suit,
proceeding, investigation, audit, claim or assessment pending or proposed with
respect to any Return, which action, suit, proceeding, investigation, audit,
claim or assessment
-25-
<PAGE> 38
relates to NewVector or any of its corporate Subsidiaries, (B) all amounts
required to be collected or withheld by NewVector of any of its corporate
Subsidiaries with respect to Taxes have been duly collected or withheld and any
such amounts that are required to be remitted to any taxing authority have been
duly remitted, (C) no extension of time within which to file any Return that
relates to NewVector or any of its corporate Subsidiaries has been requested
which Return has not since been filed, (D) there are no tax rulings, requests
for rulings, or closing agreements relating to NewVector or any of its corporate
Subsidiaries which could affect their liability for Taxes for any period after
the Phase I Closing, (E) all federal, state and local (x) Income Tax Returns of
NewVector and each of its corporate Subsidiaries, and (y) consolidated, combined
or unitary Income Tax Returns, which include NewVector or any of its corporate
Subsidiaries, with respect to taxable periods through the year ended December
31, 1989 have been examined and closed or are Returns with respect to which the
applicable statute of limitations has expired without extension or waiver, (F)
no power of attorney has been granted by USW or NewVector or any of its
corporate Subsidiaries with respect to any matter relating to Taxes of the
NewVector or its corporate Subsidiaries which is currently in force, (G) neither
USW nor any corporate Subsidiary thereof has filed a consent under section
341(f) of the Code or any comparable state provision, and (H) there are no Liens
for Taxes (other than for current Taxes not yet due and payable) on the assets
of NewVector or any of its corporate Subsidiaries. Except as set forth on the
revised and updated SCHEDULE 2.1(k) to be delivered to ATI by the Phase I
Closing, NewVector and each of its corporate Subsidiaries has been an includable
member of the affiliated group (within the meaning of section 1504 of the Code)
of which USW is the parent corporation and has joined in filing a consolidated
return since the date on which each was incorporated and will be an includable
member of such affiliated group included in USW's consolidated return through
the Contribution Date. Any Tax Sharing Arrangement that may exist between a USW
Transferred Subsidiary, on the one hand, and USW or any Affiliate of USW, on the
other hand, shall terminate, and any obligations to make payments under any such
Tax Sharing Arrangement shall be canceled, as of the Contribution Date.
(l) Material Contracts and Related Party Agreements.
(i) SCHEDULE 2.1(l)(i) contains a true and complete list of all
Material Contracts (including Related Party Agreements, if applicable) to which
any USW Party was a party as of the Effective Date.
(ii) Each contract listed in SCHEDULE 2.1(l)(i) was in full force
and effect on the Effective Date, and there exists no default or event,
occurrence, condition or act (including the consummation of the Transactions)
which, with the giving of notice, the lapse of time or the happening of any
-26-
<PAGE> 39
other event or condition, would become a default thereunder by any USW Party or
by any other party thereto which could reasonably be expected to result in a
Material Adverse Effect on NewVector and the Subsidiaries of NewVector, taken as
a whole, or to affect adversely the ability of USW to consummate the
Transactions and perform its obligations contemplated by this Organization
Agreement and the Related Agreements.
(iii) All Related Party Agreements to which any USW Party is a
party have been entered into in the ordinary course of business and contain
terms no more and no less favorable to either party than would be the case in an
arm's-length transaction.
(m) Employment and Non-Competition Agreements. Except as set forth in
SCHEDULE 2.1(m), neither NewVector nor any Subsidiary of NewVector is a party to
any employment agreement or is a party to or otherwise bound by any
non-competition, non- solicitation or other similar agreement relating to its
Domestic Cellular Business.
(n) Assets.
(i) Each USW Party has (A) good and marketable fee title to all
its Owned Property and (B) good and valid title to the leasehold estates in all
its Leased Property, in each case free and clear of all Liens other than
Permitted Liens. The Owned Property and the Leased Property of the USW Parties
include all rights and properties necessary to the conduct of such parties'
Domestic Cellular Businesses in the manner in which they are presently
conducted.
(ii) There exists no default, or event which with the passage of
time or notice or both would constitute a default, by any USW Party with respect
to any indebtedness, mortgage, pledge or other hypothecation, the payment of
which is secured by a security interest in all or part of any USW Party's
Domestic Cellular Assets which could reasonably be expected to result in a
Material Adverse Effect on NewVector and the Subsidiaries of NewVector, taken as
a whole, or to affect adversely the ability of USW to consummate the
Transactions and perform its obligations contemplated by this Organization
Agreement and the Related Agreements. None of the USW Parties' Domestic Cellular
Assets is subject to any Lien that would impair or prevent the continued conduct
of USW's Domestic Cellular Business as it has been conducted.
(iii) All of the buildings, structures, appurtenances, and
equipment used in USW's Domestic Cellular Business are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and adequate and suitable for the purposes for which they are
presently being used, except for conditions which would not, singly or in the
aggregate, have a Material Adverse Effect on
-27-
<PAGE> 40
NewVector and its Subsidiaries, taken as a whole. None of such buildings,
structures, appurtenances or equipment, nor the operation or maintenance
thereof, violates in any material respect any restrictive covenant or any
provision of any federal, state or local law, ordinance, rule or regulation or
encroaches on any property owned by others. No condemnation proceeding is
pending or, to the knowledge of USW, threatened which would preclude or impair
the use of any such property for the purposes for which it is currently used.
(o) Intellectual Property. A USW Party owns the entire right, title and
interest in and to all Intellectual Property (including Trademarks and Trade
Names) used in, and material to the conduct of, USW's Domestic Cellular
Business. All such Intellectual Property is owned or used pursuant to defensible
licenses or other legal arrangements. There are no pending or, to the knowledge
of USW, threatened proceedings or litigation or other adverse claims affecting
or relating to such Intellectual Property, nor to the knowledge of USW any
reasonable basis upon which a claim may be asserted by or against any USW Party
for infringement of any such Intellectual Property which could reasonably be
expected to have a Material Adverse Effect on the USW Parties, taken as a whole.
All Intellectual Property used in, and material to the conduct of, USW's
Domestic Cellular Business will be transferred or licensed to WMC at the Phase I
Closing pursuant to one or more license agreements and will be usable by WMC in
the conduct of its Domestic Cellular Business on the same terms as such
Intellectual Property is currently being used by the USW Parties in the conduct
of USW's Domestic Cellular Business.
(p) Employee Benefit Programs.
(i) SCHEDULE 2.1(p)(i) sets forth a true and complete list of all
Employee Benefit Programs to which NewVector or any Subsidiary of NewVector is a
party or contributes or is currently obligated to contribute ("NV-Employee
Benefit Programs"). USW has provided to ATI a true and complete list of all
executives of NewVector and the Subsidiaries of NewVector for whom individual
agreements pertaining to Employee Benefit Programs are under consideration by
NewVector or any Subsidiary of NewVector (such agreements, if and when entered
into, to be considered NV-Employee Benefit Programs for purposes of this
Organization Agreement).
(ii) USW provided to ATI prior to the Effective Date complete,
accurate, and current copies of each of the following:
(A) The text, including amendments, of each of the
NV-Employee Benefit Programs, to the extent reduced to writing;
-28-
<PAGE> 41
(B) A written description of all material elements of the
NV-Employee Benefit Programs, to the extent not previously reduced to writing;
(C) With respect to any NV-Employee Benefit Program described
in Section 3(3) of ERISA that is required to prepare such a document or make
such a filing: (I) the most recent summary plan description, as described in
Section 102 of ERISA, (II) any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor but that
has not been incorporated into an updated summary plan description furnished
under Subparagraph (I) above, and (III) the annual report, as described in
Section 103 of ERISA or Section 6039D of the Code, as applicable, for the most
recent plan year for which an annual report has been prepared, and any required
actuarial and financial statements, opinions and schedules;
(D) Where applicable, the actuarial reports for the most
recent three (3) reporting periods for which such a report has been prepared for
any NV-Employee Benefit Program;
(E) The trust agreement or other funding instrument for each
NV-Employee Benefit Program which is funded;
(F) For each NV-Employee Benefit Program that is intended to
meet the qualification requirements of Section 401(a) of the Code ("NV-Qualified
Plan"), the most recent request for a determination concerning the plan's
qualification under Section 401(a) of the Code, as filed with the Internal
Revenue Service ("IRS"); and
(G) For each NV-Qualified Plan, the most recent determination
concerning the plan's qualification under Section 401(a) of the Code, as issued
by the IRS.
(iii) Each NV-Employee Benefit Program is in compliance with the
applicable provisions of ERISA, the Code, and other federal or state law,
including all requirements under the Code and ERISA for filing reports (which
were true and correct in all material respects as of the date filed), and
benefits have been paid in accordance with the provisions of the NV-Employee
Benefit Program, except for such noncompliances and failures which, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
NewVector and its Subsidiaries, taken as a whole.
(iv) Each NV-Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
Code, and nothing has occurred that would cause the loss of such qualification
or tax-exempt status.
-29-
<PAGE> 42
(v) Neither NewVector nor any Subsidiary of NewVector is a party
to, makes, is making or is obligated to make contributions or has made, or been
obligated to make, contributions at any time during the immediately preceding
period covering at least five (5) plan years to a multiemployer plan, within the
meaning of Section 4001(a)(3) of ERISA.
(vi) Neither NewVector nor any Subsidiary of NewVector expects to
incur any liability under Title IV of ERISA (other than premiums due and not
delinquent under Section 4007 of ERISA) with respect to any NV-Employee Benefit
Program.
(vii) Except as set forth in SCHEDULE 2.1(p)(vii), none of the
NV-Qualified Plans subject to Title IV of ERISA has any unfunded pension
liability. For purposes of this SECTION 2.1(p)(vii), an NV-Qualified Plan has an
unfunded pension liability if the plan is subject to Section 412(m) of the Code
and the plan's benefit liabilities under Section 4001(a)(16) of ERISA exceed the
current value of the plan's assets, determined in accordance with the
assumptions used by the NV-Qualified Plan's actuaries for funding the plan
pursuant to Section 412 of the Code for the applicable plan year. Neither
NewVector nor any Subsidiary of NewVector has transferred any unfunded pension
liability outside of the ERISA Affiliates or otherwise has engaged in a
transaction subject to Section 4069 of ERISA.
(viii) All contributions, premiums or other payments due from
NewVector or any Subsidiary of NewVector to, or under, any NV-Employee Benefit
Program have been fully paid as required by law or by the terms of any such
Employee Benefit Program; all contributions, premiums, or other payments due
from NewVector or any Subsidiary of NewVector to, or under, any NV-Employee
Benefit Program have been adequately provided for on the books and financial
statements of NewVector or the Subsidiary of NewVector, as the case may be; and
no accumulated funding deficiency, as defined in Section 302 of ERISA and
Section 412(m) of the Code, whether or not waived, exists with respect to an
NV-Employee Benefit Program.
(ix) There are no pending or, to the knowledge of USW, threatened
claims, actions or lawsuits, other than routine claims for benefits in the
ordinary course, asserted or instituted against (A) any NV-Employee Benefit
Program or (B) any fiduciary with respect to any NV-Employee Benefit Program for
which NewVector or a Subsidiary of NewVector may be directly or indirectly
liable, through indemnification obligations or otherwise.
(x) Within the six-year period ending on the date of reference,
neither NewVector nor any Subsidiary of NewVector has engaged, directly or
indirectly, in (A) a nonexempt prohibited transaction (as defined in Section
4975 of the Code or Section 406 of ERISA) in connection with any
-30-
<PAGE> 43
Employee Benefit Program that has a reasonable likelihood of having a Material
Adverse Effect on NewVector and its Subsidiaries, taken as a whole, or (B) any
act or omission constituting a violation of Section 404 of ERISA.
(xi) The Transactions contemplated by this Organization Agreement
do not invoke any change-in-control provision in any NV-Employee Benefit
Program.
(xii) NewVector and each Subsidiary of NewVector is in compliance
with the health care continuation provisions of Sections 162(k), before
amendment, and 4980B of the Code and the regulations thereunder with respect to
such requirements.
(xiii) Except as provided in the WMC Employee Agreement or the PCS
Par Employee Agreement, neither NewVector nor any Subsidiary of NewVector has
any liability or expects to incur any liability with respect to any Employee
Benefit Program to which neither NewVector nor any Subsidiary of NewVector is a
party, contributes or is obligated to contribute.
(q) Labor Matters. Each of NewVector and each NewVector Subsidiary has
complied with all applicable laws and regulations in all material respects
relating to the employment of labor, including those related to wages, hours,
occupational health and safety, workers' compensation, collective bargaining,
unlawful discrimination, and the payment of Social Security and similar taxes
pertaining to its Domestic Cellular Business. To the knowledge of USW, there are
no threatened labor controversies, strikes or work stoppages with any of the
employees performing work in a Domestic Cellular Business. Neither NewVector nor
any Subsidiary of NewVector is a party to any collective bargaining agreement,
nor are any collective bargaining agreements currently being negotiated with
respect to the employees of NewVector or any NewVector Subsidiary in its
Domestic Cellular Business. Except as set forth in SCHEDULE 2.1(i), there are no
pending employment-related issues, including without limitation governmental
audits, disputes (including those listed in SCHEDULE 2.1(q) hereto), litigation,
labor controversies, strikes or work stoppages with or regarding any of the
employees performing work in the Domestic Cellular Business that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole. NewVector and each
Subsidiary of NewVector have properly verified the identity and authorization to
work in the United States and have properly completed and retained INS forms I-9
for all employees where required by the Immigration Reform and Control Act of
1986 and related statutes. All individuals who are performing or have performed
services for NewVector or any NewVector Subsidiary and are or were classified as
"independent contractors" for tax purposes qualify for such classification.
-31-
<PAGE> 44
(r) Environmental Compliance and Liabilities.
(i) Except as set forth in SCHEDULE 2.1(r), USW has no knowledge
of any conditions that exist with respect to any Owned Property, Leased Property
or other property operated by NewVector, any Subsidiary of NewVector or any USW
Domestic Cellular Investment Entity that would be likely to subject NewVector or
any Subsidiary of NewVector to any liability or damages (including, without
limitation, actual, consequential, exemplary or punitive damages), penalties,
injunctive relief or cleanup costs under any Environmental Law or that require
or are likely to require cleanup, removal, remedial action or other response by
NewVector or any Subsidiary of NewVector pursuant to any Environmental Law
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on NewVector and its Subsidiaries, taken as a whole.
(ii) Except as set forth in SCHEDULE 2.1(r), each of NewVector and
its Subsidiaries is in substantial compliance with all applicable Environmental
Laws, which compliance includes, without limitation, (A) the possession by
NewVector and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws and compliance with
the terms and conditions thereof, (B) compliance with notification, reporting,
and registration provisions of applicable Environmental Laws, and (C) compliance
with all statutory and regulatory standards under applicable Environmental Laws.
(iii) Neither NewVector nor any of its Subsidiaries is a party to
any litigation or administrative proceeding, nor, to the knowledge of USW, is
any litigation or administrative proceeding threatened against NewVector or any
of its Subsidiaries that asserts or alleges that NewVector or any of its
Subsidiaries or its or their predecessors violated or is violating any
Environmental Law or that NewVector or any of its Subsidiaries or its or their
predecessors is required to clean up, remove or take remedial or other
responsive action due to the use, storage, treatment, disposal, discharge,
leaking or release of any Substance of Concern. Except as set forth in SCHEDULE
2.1(r), there are no claims under any Environmental Law pending against
NewVector or any of its Subsidiaries or against any Person whose liability for
any claim NewVector or any of its Subsidiaries has retained or assumed either
contractually or by operation of law, and neither NewVector nor any of its
Subsidiaries nor any of its or their predecessors, nor any part of the Domestic
Cellular Assets of NewVector or any of its Subsidiaries, is subject to any
judgment, decree, order or citation related to or arising out of any
Environmental Law, and neither NewVector nor any of its Subsidiaries has been
named or listed as a potentially responsible party by any governmental or other
entity in a matter arising under or relating to any Environmental Law. Except as
set forth in SCHEDULE 2.1(r), neither NewVector nor any of its Subsidiaries has
received any
-32-
<PAGE> 45
written communication from a Governmental Body that alleges that NewVector or
any of its Subsidiaries is not in full compliance with the Environmental Laws.
To the knowledge of USW, except as set forth in SCHEDULE 2.1(r), no USW Domestic
Cellular Investment Entity is a party to any litigation or administrative
proceeding, nor is any litigation or administrative proceeding threatened
against a USW Domestic Cellular Investment Entity, arising under any
Environmental Law which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of
NewVector and its Subsidiaries, taken as a whole, or adversely affect the
ability of USW to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements.
(iv) Except as set forth in SCHEDULE 2.1(r), there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Substance of Concern, that could form the basis of any claim
arising under Environmental Laws against NewVector or any of its Subsidiaries or
against any Person whose liability for any claim arising under Environmental
Laws NewVector or any of its Subsidiaries has retained or assumed either
contractually or by operation of law.
(v) USW will, upon request by ATI, provide ATI with true and
complete copies of all environmental assessments that have heretofore been
performed on all Owned Property or Leased Property operated by NewVector or any
of its Subsidiaries and of all notices or other materials listed in SCHEDULE
2.1(r).
(s) Other Liabilities. Except (i) as disclosed in SCHEDULE 2.1(s) or
any other Schedule attached to this Organization Agreement, (ii) as reflected on
the Balance Sheets or otherwise referred to in the Financial Statements
(including footnotes to the Financial Statements), or (iii) incurred in the
ordinary course of business or otherwise permitted by this Organization
Agreement, there are no outstanding claims, liabilities or indebtedness of any
nature, secured or unsecured, contingent or absolute, matured or unmatured,
known or unknown, which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of
NewVector and its Subsidiaries, taken as a whole, or adversely affect the
ability of USW to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements.
(t) Insurance. USW's Domestic Cellular Assets and the conduct of USW's
Domestic Cellular Business are adequately self-insured by USW or adequately
insured (in the manner and to the extent customary for businesses engaged in the
same or similar business) by financially sound and reputable insurers. Any such
policies are, and each of the USW Parties will cause
-33-
<PAGE> 46
such policies or renewals thereof to remain, in full force and effect.
(u) Finders; Investment Bankers. Neither USW nor any of its
Affiliates, nor any of their respective officers or directors, has employed any
broker, finder or investment banker or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the Transactions
contemplated by this Organization Agreement and the Related Agreements that
would be a liability of ATI, WMC, PCS Par or any of USW's Domestic Cellular
Assets, Domestic Cellular Subsidiaries or Domestic Cellular Investments.
2.2 Representations and Warranties of ATI. ATI hereby represents and
warrants to USW that each of the following statements was true and correct as of
the Effective Date and, except as otherwise expressly stated herein, will be
true and correct as of the Phase I Closing and the Phase II Closing, as if made
on and as of such dates.
(a) Corporate Organization.
(i) ATI is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation and has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted, to enter into this Organization
Agreement and the Related Agreements and to carry out the provisions of this
Organization Agreement and the Related Agreements and consummate the
Transactions contemplated hereby and thereby, except for the approval by the
board of directors of ATI of a certificate of designation with respect to the
preferred stock referred to in the Agreement of Exchange. ATI is duly qualified
and in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary and where the failure to be so qualified has or could
reasonably be expected to have a Material Adverse Effect on ATI and its
Subsidiaries, taken as a whole.
(ii) All Domestic Cellular Assets currently owned, directly or
indirectly, in whole or in part, by ATI are held, owned or operated, directly or
indirectly, by the ATI Cellular Subsidiaries, except for a 14.74% partnership
interest in CMT Partners held by AirTouch Paging of California. The ATI Cellular
Subsidiaries are not engaged, directly or indirectly, in the conduct or
ownership of any business or activity other than the Domestic Cellular Business.
(iii) Each of the ATI Cellular Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now
-34-
<PAGE> 47
conducted. Each of the ATI Cellular Subsidiaries is duly qualified and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary and where the failure to be so qualified has or could reasonably be
expected to have a Material Adverse Effect on the ATI Cellular Subsidiaries and
their Subsidiaries, taken as a whole.
(iv) Each corporate Subsidiary of an ATI Cellular Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority to own and operate its property and to carry on its business as now
conducted. Each such Subsidiary is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary and where the
failure to be so qualified has or could reasonably be expected to have a
Material Adverse Effect on the ATI Cellular Subsidiaries and their Subsidiaries,
taken as a whole.
(v) Each partnership Subsidiary of an ATI Cellular Subsidiary is a
general or limited partnership duly organized and validly existing in its state
of organization and has all requisite partnership power and authority to own and
operate its properties and to carry on its business as now conducted. Each such
partnership Subsidiary is duly qualified in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary and where the failure to be so
qualified has or could reasonably be expected to have a Material Adverse Effect
on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole.
(b) Capitalization: Ownership of Shares.
(i) SCHEDULE 2.2(b)(i) contains a true, current and complete list
of the authorized, issued and outstanding capital stock (including the par or
stated value thereof) of ATI, as of the Effective Date, and of each ATI Cellular
Subsidiary. All issued and outstanding shares of capital stock of ATI and each
ATI Cellular Subsidiary are duly authorized, validly issued, fully paid, and
non-assessable. ATI has good legal title to, and beneficial ownership of, all
issued and outstanding shares of each ATI Cellular Subsidiary free and clear of
all Liens, restrictions, equities, options or claims whatsoever, except as set
forth in SCHEDULE 2.2(b)(i). ATI has full authority to transfer, convey and
deliver such shares of each ATI Cellular Subsidiary free and clear of all Liens,
restrictions, equities, options and claims. Except for this Organization
Agreement and the Related Agreements, there are no outstanding subscriptions,
options, warrants, calls, rights, commitments, rights of exchange, plans,
arrangements, understandings or other agreements of any kind or character
-35-
<PAGE> 48
relating to or providing for the issuance, sale, delivery or transfer of any
class of capital stock of any ATI Cellular Subsidiary (including any right of
conversion or exchange under any outstanding security or other instrument) to
any Person.
(ii) SCHEDULE 2.2(b)(ii) contains a true, current and, complete
list of (A) the name of each corporate Subsidiary of the ATI Cellular
Subsidiaries, (B) the state of incorporation of each corporate Subsidiary of the
ATI Cellular Subsidiaries, (C) the states where each Subsidiary is qualified to
do business, (D) the authorized, issued and outstanding capital stock (including
the par or stated value thereof) of each Subsidiary, and (E) the number of
shares and percentage of issued and outstanding capital stock of each Subsidiary
beneficially owned by each ATI Cellular Subsidiary. The issued and outstanding
shares of capital stock of each such Subsidiary are duly authorized, validly
issued, fully paid, and non-assessable. An ATI Cellular Subsidiary or a
Subsidiary of an ATI Cellular Subsidiary has good legal title to, and beneficial
ownership of, such shares free and clear of all Liens, restrictions, equities,
options or claims whatsoever, except as set forth on SCHEDULE 2.2(b)(ii). There
are no outstanding subscriptions, options, warrants, calls, rights, commitments,
rights of exchange, plans, arrangements, understandings or other agreements of
any kind or character relating to or providing for the issuance, sale, delivery
or transfer of securities of any class of stock of any corporate Subsidiary of
an ATI Cellular Subsidiary (including any right of conversion or exchange under
any outstanding security or other instrument) to any Person.
(iii) SCHEDULE 2.2(b)(iii) contains a true, current, and complete
list of (A) the name of each partnership Subsidiary of the ATI Cellular
Subsidiaries, (B) the state of organization of each such Subsidiary, (C) the
states where each such Subsidiary is qualified to do business, and (D) the
general and limited partnership interests in each such Subsidiary beneficially
owned by each ATI Cellular Subsidiary. An ATI Cellular Subsidiary or a
Subsidiary of an ATI Cellular Subsidiary has good legal title to, and beneficial
ownership of, its partnership interest in each such Subsidiary. Except as set
forth on SCHEDULE 2.2(b)(iii) or in any Cellular Partnership Agreement for a
partnership listed in SCHEDULE 2.2(b)(iii), an ATI Cellular Subsidiary or a
Subsidiary of an ATI Cellular Subsidiary owns each such interest free and clear
of all Liens, restrictions, equities, options or claims whatsoever. Except as
set forth on SCHEDULE 2.2(b)(iii), there are no outstanding subscriptions,
options, calls, rights, commitments, rights of exchange, plans, arrangements,
understandings or other agreements of any kind or character relating to or
providing for the issuance, sale, delivery or transfer of partnership interests
of any partnership Subsidiary of an ATI Cellular Subsidiary (including any right
of conversion or exchange under any outstanding agreement or instrument) to any
Person. ATI has furnished to USW true and complete copies of all Cellular
-36-
<PAGE> 49
Partnership Agreements for all partnerships listed on SCHEDULE 2.2(b)(iii).
(iv) SCHEDULE 2.2(b)(iv) contains a true, current, and complete
list of all Domestic Cellular Investments owned or held by each ATI Party,
including the Percentage Interest held in each Domestic Cellular Investment
Entity by such ATI Party as a general partner and/or as a limited partner.
Either an ATI Cellular Subsidiary or one of its Subsidiaries has good legal
title to, and beneficial ownership of, such interests. Except as set forth on
SCHEDULE 2.2(b)(iv) or in any Cellular Partnership Agreement for a partnership
listed on SCHEDULE 2.2(b)(iv), an ATI Cellular Subsidiary or one of its
Subsidiaries owns such interests free and clear of all Liens, encumbrances,
restrictions, equities, options or claims whatsoever. ATI has furnished to USW
true and complete copies of all certificates or articles of incorporation and
by-laws, partnership agreements or joint venture agreements for all Domestic
Cellular Investment Entities listed on SCHEDULE 2.2(b)(iv).
(c) Authority. This Organization Agreement and the Related Agreements
and the consummation of the Transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate or partnership action on the
part of the ATI Parties, except for the approval by the board of directors of
ATI of a certificate of designation with respect to the preferred stock referred
to in the Agreement of Exchange. This Organization Agreement has been duly
executed and delivered by a duly authorized officer of ATI and constitutes a
valid and binding agreement of ATI, enforceable against ATI in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application that
may affect the enforcement of creditors' rights generally and by general
equitable principles. In the event that ATI or any of the ATI Cellular
Subsidiaries shall change the state of its incorporation in any form of
transaction, this Organization Agreement and the Related Agreements and the
consummation of the Transactions contemplated hereby will have been duly
authorized by all necessary corporate or partnership action, and this
Organization Agreement will continue to be a valid and binding agreement of ATI,
enforceable against ATI in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application that may affect the enforcement of
creditors' rights generally and by general equitable principles.
(d) Authorizations and Consents; No Violation.
(i) Except as disclosed on one of the Schedules referenced in this
SECTION 2.2(d), neither the execution and delivery of this Organization
Agreement nor the consummation of the Transactions contemplated by this
Organization Agreement and
-37-
<PAGE> 50
the Related Agreements will (A) conflict with, or result in any breach or
violation of, any provision of the certificates or articles of incorporation or
by-laws of any of the ATI Parties; (B) constitute, with or without notice or the
passage of time or both, a breach, violation or default, create a Lien or give
rise to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, governmental permit or license or any mortgage,
indenture, lease, Material Contract, agreement or other instrument of any ATI
Party or to which any ATI Party or its respective properties is subject, except
for breaches, violations, defaults, Liens or rights of termination,
modification, cancellation, prepayment or acceleration which would not, singly
or in the aggregate, have a Material Adverse Effect on the ATI Cellular
Subsidiaries and their Subsidiaries, taken as a whole, or adversely affect the
ability of ATI to consummate the Transactions and perform its obligations
contemplated by this Organization Agreement and the Related Agreements; (C) give
rise to any option, right of first refusal or similar right of any third party
with respect to any interest in any ATI Party, ATI Domestic Cellular Asset, ATI
Domestic Cellular Subsidiary or any ATI Domestic Cellular Investment; or (D)
require any Consent or Authorization to effectuate the Transactions contemplated
by this Organization Agreement and the Related Agreements.
(ii) SCHEDULE 2.2(d)(ii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
federal Governmental Body or court by any ATI Party with respect to the
consummation of the (A) Phase I Transactions and (B) Phase II Transactions
contemplated by this Organization Agreement and the Related Agreements.
(iii) SCHEDULE 2.2(d)(iii) contains a complete list of all
Authorizations reasonably anticipated to be required to be obtained from any
state public utility commission or other state, county or local Governmental
Body by any ATI Party with respect to the consummation of the (A) Phase I
Transactions and (B) Phase II Transactions contemplated by this Organization
Agreement and the Related Agreements.
(iv) Except as set forth in any Cellular Partnership Agreement,
any Material Contract existing on the Effective Date (a copy of which was
provided to USW prior to the Effective Date) or other agreement referred to in
SECTION 2.2(b)(iii) or 2.2(b)(iv) hereof or in SCHEDULE 2.2(d)(iv) hereto, no
Consents are reasonably anticipated to be required to be obtained pursuant to
any partnership, joint venture or other similar agreement or any Material
Contract to which any ATI Party is a party with respect to the consummation of
the (A) Phase I Transactions and (B) Phase II Transactions contemplated by this
Organization Agreement and the Related Agreements.
-38-
<PAGE> 51
(e) Financial Statements.
(i) ATI has furnished to USW true and complete copies of the
unaudited consolidated balance sheets at December 31, 1992 and 1993 ("BALANCE
SHEETS"); consolidated income and cash flow statements of ATI's Domestic
Cellular Business for the fiscal years ended December 31, 1992, and December 31,
1993; an unaudited balance sheet at May 31, 1994; and consolidated income and
cash flow statements for the five-month period ending May 31, 1994 (such Balance
Sheets and income and cash flow statements are hereinafter collectively referred
to as "FINANCIAL STATEMENTS"), setting forth the financial condition and results
of operations of ATI's Domestic Cellular Business as of the respective dates of
the Financial Statements and for the periods covered thereby. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods specified,
except as expressly noted therein and except that the Financial Statements do
not include footnotes. The Balance Sheets fairly present the financial condition
of ATI's Domestic Cellular Business as of the dates thereof, except as expressly
noted therein or as set forth in SCHEDULE 2.2(e). The consolidated income and
cash flow statements fairly present the results of operations of ATI's Domestic
Cellular Business for the periods indicated, except as expressly noted therein
or as set forth in SCHEDULE 2.2(e). ATI agrees to use reasonable efforts to
furnish to USW as soon as they are available unaudited Balance Sheets as of May
31, 1994, for each ATI Domestic Cellular Subsidiary and ATI Domestic Cellular
Investment Entity.
(ii) ATI covenants and agrees to use reasonable efforts to furnish
promptly to USW after the date hereof historical financial information for New
Par for the periods, and containing the line items (including as to customer
information) that previously was furnished to USW with respect to ATI's other
Domestic Cellular Assets, Domestic Cellular Subsidiaries, and Domestic Cellular
Investments. ATI represents and warrants that such historical financial
information, when viewed in the aggregate, will not be inconsistent in any
material respect with the publicly available financial information for New Par
for the corresponding periods. In the event that, after reviewing such
information, USW determines that it believes ATI's representation in the
preceding sentence has been breached, USW must notify ATI of such determination
in writing promptly, and in no event later than 30 days after the furnishing of
the last items of such information. Notwithstanding anything to the contrary
elsewhere in this Organization Agreement, in the event that no such notice is
provided within such period, the representation and warranty set forth in this
SECTION 2.2(e)(ii) shall not survive beyond such period.
(f) Absence of Other Changes. Except as contemplated by this
Organization Agreement or as set forth in
-39-
<PAGE> 52
SCHEDULE 2.2(f), from and after June 1, 1994, each of the ATI Parties has
conducted its Domestic Cellular Business in the ordinary and usual course and
there has not been (i) any borrowing outside the ordinary course of business or
incurrence of any obligations other than Permitted Liabilities or other
liabilities incurred in the ordinary course of business; (ii) any Lien imposed
on any of the properties or assets of any of the ATI Parties (other than
Permitted Liens); or (iii) any increases in compensation payable to officers and
employees of any of the ATI Domestic Cellular Subsidiaries or their
Subsidiaries, which in the aggregate may be expected to have a Material Adverse
Effect on the ATI Domestic Cellular Subsidiaries and their Subsidiaries, taken
as a whole.
(g) Compliance with Laws. Each of the ATI Parties is in compliance with
all laws, statutes, ordinances, regulations, rules, judgments, decrees, orders,
and other requirements applicable to the operation of its Domestic Cellular
Business, except for any non-compliances which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole, or to
affect adversely the ability of ATI to consummate the Transactions and perform
its obligations contemplated by this Organization Agreement and the Related
Agreements.
(h) MFJ. ATI acknowledges that USW is subject to the MFJ, CECO and EO
and must operate in conformance to their requirements and prohibitions,
including performance of the obligations as contemplated by this Organization
Agreement and the Related Agreements.
(i) Litigation. Except as disclosed on SCHEDULE 2.2(i), there are no
actions, suits, investigations or proceedings (adjudicatory, rulemaking or
otherwise) pending or, to the knowledge of ATI, threatened against any ATI Party
or, to the knowledge of ATI, pending or threatened against any ATI Domestic
Cellular Investment Entity, at law or in equity, before any court or
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a
whole, or to affect adversely the ability of ATI to consummate the Transactions
and perform its obligations as contemplated by this Organization Agreement and
the Related Agreements.
(j) Licenses. The ATI Parties and the ATI Domestic Cellular Investment
Entities have all material Licenses which are necessary to conduct ATI's
Domestic Cellular Business as it is presently conducted. Without limitation of
the foregoing, the ATI Parties and the ATI Domestic Cellular Investment Entities
hold the material Licenses identified on SCHEDULE 2.2(j), and all such material
Licenses are valid and in full force and effect. No ATI Party has made any
untrue statement of
-40-
<PAGE> 53
fact, or omitted to disclose any fact, to any Governmental Body or taken or
failed to take any action, which misstatements or omissions, actions or failures
to act, individually or in the aggregate, subject or could reasonably be
expected to subject any of the material Licenses they hold to revocation or
failure to renew. No event has occurred with respect to any of the material
Licenses held by an ATI Party or by an ATI Domestic Cellular Investment Entity
which permits, or after notice or lapse of time or both would permit, revocation
or termination thereof or would result in any other material impairment of the
rights of the holder of any of the material Licenses. ATI has no reason to
believe that any of the material Licenses identified on SCHEDULE 2.2(j) is not
likely to be renewed in the ordinary course or that the holder of any such
material License would not be entitled to a renewal expectancy as such term is
defined in 47 C.F.R. Section 22.941 or any successor provisions and associated
FCC policies.
(k) Taxes. The ATI Cellular Subsidiaries and their corporate
Subsidiaries have each (i) filed, within the times and in the manner prescribed
by law, and will continue to timely file through the Contribution Date all
Returns required to be filed by or with respect to each of them, (ii) paid all
Taxes shown to have become due pursuant to such Returns, and (iii) will continue
to pay all Taxes payable pursuant to such Returns for periods ending on or
before the Contribution Date. There are no Taxes of the ATI Cellular
Subsidiaries and their corporate Subsidiaries for which a notice of, or
assessment or demand for, payment has been received or which are otherwise due
and payable and the ATI Cellular Subsidiaries and their corporate Subsidiaries
will continue to pay such Taxes for periods ending on or before the Contribution
Date. Except as disclosed in SCHEDULE 2.2(k), no examination or audit of any Tax
Return of any ATI Cellular Subsidiary or any of their corporate Subsidiaries is
currently in progress, and there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return of any
ATI Cellular Subsidiary or any of its corporate Subsidiaries. Except as
disclosed to USW on a revised and updated SCHEDULE 2.2(k) delivered by the Phase
I Closing, complete copies of (i) the federal Income Tax Returns of the ATI
Cellular Subsidiaries and their corporate Subsidiaries and (ii) state and local
Income Tax Returns and other Tax Returns of the ATI Cellular Subsidiaries and
their corporate Subsidiaries for each of the years ended December 31, 1989,
1990, 1991, 1992 and 1993 have been delivered or will be made available to USW
by the Phase I Closing. Except as set forth on the revised and updated SCHEDULE
2.2(k) to be delivered to USW by the Phase I Closing, (A) there is no action,
suit, proceeding, investigation, audit, claim or assessment pending or proposed
with respect to any Return, which action, suit, proceeding, investigation,
audit, claim or assessment relates to any of the ATI Cellular Subsidiaries or
their corporate Subsidiaries, (B) all amounts required to be collected or
withheld by any of the ATI Cellular Subsidiaries or their
-41-
<PAGE> 54
corporate Subsidiaries with respect to Taxes have been duly collected or
withheld and any such amounts that are required to be remitted to any taxing
authority have been duly remitted, (C) no extension of time within which to file
any Return that relates to any of the ATI Cellular Subsidiaries or their
corporate Subsidiaries has been requested which Return has not since been filed,
(D) there are no tax rulings, requests for rulings, or closing agreements
relating to the ATI Cellular Subsidiaries or their corporate Subsidiaries which
could affect their liability for Taxes for any period after the Phase I Closing
, (E) all federal, state and local (x) Income Tax Returns of each of the ATI
Cellular Subsidiaries and their corporate Subsidiaries, and (y) consolidated,
combined or unitary Income Tax Returns, which include any of the ATI Cellular
Subsidiaries or their corporate Subsidiaries, with respect to taxable periods
through the year ended December 31, 1989 have been examined and closed or are
Returns with respect to which the applicable statute of limitations has expired
without extension or waiver, (F) no power of attorney has been granted by ATI or
any of the ATI Cellular Subsidiaries or their corporate Subsidiaries with
respect to any matter relating to Taxes of the ATI Cellular Subsidiaries or
their corporate Subsidiaries which is currently in force, (G) neither ATI nor
any corporate Subsidiary thereof has filed a consent under section 341(f) of the
Code or any comparable state provision, and (H) there are no Liens for Taxes
(other than for current Taxes not yet due and payable) on the assets of any of
the ATI Cellular Subsidiaries or their corporate Subsidiaries. Except as set
forth on the revised and updated SCHEDULE 2.2(k) to be delivered to USW by the
Phase I Closing, each of the ATI Cellular Subsidiaries and their corporate
Subsidiaries has been an includable member of the affiliated group (within the
meaning of section 1504 of the Code) of which ATI is the parent corporation and
has joined in filing a consolidated return since the date on which each was
incorporated and will be an includable member of such affiliated group included
in ATI's consolidated return through the Contribution Date. Any Tax Sharing
Arrangement that may exist between an ATI Transferred Subsidiary, on the one
hand, and ATI or any Affiliate of ATI, on the other hand, shall terminate, and
any obligations to make payments under any such Tax Sharing Arrangement shall be
canceled, as of the Contribution Date.
(l) Material Contracts and Related Party Agreements.
(i) SCHEDULE 2.2(l)(i) contains a true and complete list of all
Material Contracts (including Related Party Agreements, if applicable) to which
any ATI Party was a party as of the Effective Date.
(ii) Each contract listed in SCHEDULE 2.2(l)(i) was in full force
and effect on the Effective Date, and there exists no default or event,
occurrence, condition or act (including the consummation of the Transactions)
which, with the
-42-
<PAGE> 55
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default thereunder by any ATI Party or by any other
party thereto which could reasonably be expected to result in a Material Adverse
Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as a
whole, or to affect adversely the ability of ATI to consummate the Transactions
and perform its obligations contemplated by this Organization Agreement and the
Related Agreements.
(iii) All Related Party Agreements to which any ATI Party is a
party have been entered into in the ordinary course of business and contain
terms no more and no less favorable to either party than would be the case in an
arm's-length transaction.
(m) Employment and Non-Competition Agreements. Except as set forth in
SCHEDULE 2.2(m), no ATI Cellular Subsidiary nor any Subsidiary of an ATI
Cellular Subsidiary is a party to any employment agreement or is a party to or
otherwise bound by any non-competition, non-solicitation or other similar
agreement relating to its Domestic Cellular Business.
(n) Assets.
(i) Each ATI Party has (A) good and marketable fee title to all
its Owned Property and (B) good and valid title to the leasehold estates in all
its Leased Property, in each case free and clear of all Liens other than
Permitted Liens. The Owned Property and the Leased Property of the ATI Parties
include all rights and properties necessary to the conduct of such parties'
Domestic Cellular Businesses in the manner in which they are presently
conducted.
(ii) There exists no default, or event which with the passage of
time or notice or both would constitute a default, by any ATI Party with respect
to any indebtedness, mortgage, pledge or other hypothecation, the payment of
which is secured by a security interest in all or part of any ATI Party's
Domestic Cellular Assets which could reasonably be expected to result in a
Material Adverse Effect on the ATI Cellular Subsidiaries and their Subsidiaries,
taken as a whole, or to affect adversely the ability of ATI to consummate the
Transactions and perform its obligations contemplated by this Organization
Agreement and the Related Agreements. None of the ATI Parties' Domestic Cellular
Assets is subject to any Lien that would impair or prevent the continued conduct
of ATI's Domestic Cellular Business as it has been conducted.
(iii) All of the buildings, structures, appurtenances, and
equipment used in ATI's Domestic Cellular Business are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and adequate and suitable for the purposes for which they are
presently being used, except for conditions which would not,
-43-
<PAGE> 56
singly or in the aggregate, have a Material Adverse Effect on the ATI Cellular
Subsidiaries and their Subsidiaries, taken as a whole. None of such buildings,
structures, appurtenances or equipment, nor the operation or maintenance
thereof, violates in any material respect any restrictive covenant or any
provision of any federal, state or local law, ordinance, rule or regulation or
encroaches on any property owned by others. No condemnation proceeding is
pending or, to the knowledge of ATI, threatened which would preclude or impair
the use of any such property for the purposes for which it is currently used.
(o) Intellectual Property. An ATI Party owns the entire right, title
and interest in and to all Intellectual Property (including Trademarks and Trade
Names) used in, and material to the conduct of, ATI's Domestic Cellular
Business. All such Intellectual Property is owned or used pursuant to defensible
licenses or other legal arrangements. There are no pending or, to the knowledge
of ATI, threatened proceedings or litigation or other adverse claims affecting
or relating to such Intellectual Property, nor to the knowledge of ATI any
reasonable basis upon which a claim may be asserted by or against any ATI Party
for infringement of any such Intellectual Property which could reasonably be
expected to have a Material Adverse Effect on the ATI Parties, taken as a whole.
All Intellectual Property used in, and material to the conduct of, ATI's
Domestic Cellular Business will be transferred or licensed to WMC at the Phase I
Closing, pursuant to one or more license agreements, and will be usable by WMC
in the conduct of its Domestic Cellular Business on the same terms as such
Intellectual Property is currently being used by the ATI Parties in the conduct
of ATI's Domestic Cellular Business.
(p) Employee Benefit Programs.
(i) SCHEDULE 2.2(p)(i) sets forth a true and complete list
of all Employee Benefit Programs to which ATI, any ATI Cellular Subsidiary or
any Subsidiary thereof is a party or contributes or is currently obligated to
contribute ("ATI Employee Benefit Programs"). ATI has provided to USW a true and
complete list of all executives of ATI, the ATI Cellular Subsidiaries, and the
Subsidiaries thereof for whom individual agreements pertaining to Employee
Benefit Programs are under consideration by ATI, an ATI Cellular Subsidiary or a
Subsidiary thereof (such agreements, if and when entered into, to be considered
ATI Employee Benefit Programs for purposes of this Organization Agreement).
(ii) ATI provided to USW prior to the Effective Date complete,
accurate, and current copies of each of the following:
(A) The text, including amendments, of each of the ATI
Employee Benefit Programs, to the extent reduced to writing;
-44-
<PAGE> 57
(B) A written description of all material elements of the ATI
Employee Benefit Programs, to the extent not previously reduced to writing;
(C) With respect to any ATI Employee Benefit Program
described Section 3(3) of ERISA that is required to prepare such a document or
make such a filing: (I) the most recent summary plan description, as described
in Section 102 of ERISA, (II) any summary of material modifications that has
been distributed to participants or filed with the U.S. Department of Labor but
that has not been incorporated into an updated summary plan description
furnished under Subparagraph (I) above, and (III) the annual report, as
described in Section 103 of ERISA or Section 6039D of the Code, as applicable,
for the most recent plan year for which an annual report has been prepared, and
any required actuarial and financial statements, opinions and schedules;
(D) Where applicable, the actuarial reports for the most
recent three (3) reporting periods for which such a report has been prepared for
any Employee Benefit Program;
(E) The trust agreement or other funding instrument for each
ATI Employee Benefit Program which is funded;
(F) For each ATI Employee Benefit Program that is intended to
meet the qualification requirements of Section 401(a) of the Code ("ATI
Qualified Plan"), the most recent request for a determination concerning the
plan's qualification under Section 401(a) of the Code, as filed with the IRS;
and
(G) For each ATI Qualified plan, the most recent
determination concerning the plan's qualification under Section 401(a) of the
Code, as issued by the IRS.
(iii) Each ATI Employee Benefit Program is in compliance with the
applicable provisions of ERISA, the Code, and other federal or state law,
including all requirements under the Code and ERISA for filing reports (which
were true and correct in all material respects as of the date filed), and
benefits have been paid in accordance with the provisions of the ATI Employee
Benefit Program, except for such noncompliances and failures which, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole.
(iv) Each ATI Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
Code,
-45-
<PAGE> 58
and nothing has occurred that would cause the loss of such qualification or
tax-exempt status.
(v) Neither any ATI Cellular Subsidiary nor any Subsidiary thereof
is a party to, makes, is making, or is obligated to make contributions or has
made, or been obligated to make, contributions at any time during the
immediately preceding period covering at least five (5) plan years to a
multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA.
(vi) Neither any ATI Cellular Subsidiary nor any Subsidiary
thereof expects to incur any liability under Title IV of ERISA (other than
premiums due and not delinquent under Section 4007 of ERISA) with respect to any
ATI Employee Benefit Program.
(vii) Except as set forth in SCHEDULE 2.2(p)(vii), none of the ATI
Qualified Plans subject to Title IV of ERISA has any unfunded pension liability.
For purposes of this SECTION 2.2(p)(vii), an ATI Qualified Plan has an unfunded
pension liability if the plan is subject to Section 412(m) of the Code and the
plan's benefit liabilities under Section 4001(a)(16) of ERISA exceed the current
value of the plans's assets, determined in accordance with the assumptions used
by the ATI Qualified Plan's actuaries for funding the plan pursuant to Section
412 of the Code for the applicable plan year. Neither any ATI Cellular
Subsidiary nor any Subsidiary thereof has transferred any unfunded pension
liability outside of the ERISA Affiliates or otherwise has engaged in a
transaction subject to Section 4069 of ERISA.
(viii) All contributions, premiums or other payments due from any
ATI Cellular Subsidiary or any Subsidiary thereof to, or under, any ATI Employee
Benefit Program have been fully paid as required by law or by the terms of any
such Employee Benefit Program; all contributions, premiums or other payments due
from any ATI Cellular Subsidiary or any Subsidiary thereof to, or under, any ATI
Employee Benefit Program have been adequately provided for on the books and
financial statements of the applicable ATI Cellular Subsidiary and/or the
applicable Subsidiary thereof; and no accumulated funding deficiency, as defined
in Section 302 of ERISA and Section 412(m) of the Code, whether or not waived,
exists with respect to an ATI Employee Benefit Program.
(ix) There are no pending or, to the knowledge of ATI, threatened
claims, actions or lawsuits, other than routine claims for benefits in the
ordinary course, asserted or instituted against (A) any ATI Employee Benefit
Program or (B) any fiduciary with respect to any ATI Employee Benefit Program
for which an ATI Cellular Subsidiary or any Subsidiary thereof may be directly
or indirectly liable, through indemnification obligations or otherwise.
-46-
<PAGE> 59
(x) Within the six-year period ending on the date of reference,
neither any ATI Cellular Subsidiary nor any Subsidiary thereof has engaged,
directly or indirectly, in (A) any nonexempt prohibited transaction (as defined
in Section 4975 of the Code or Section 406 of ERISA) in connection with any
Employee Benefit Program that has a reasonable likelihood of having a Material
Adverse Effect on the ATI Cellular Subsidiaries and their Subsidiaries, taken as
a whole, or (B) any act or omission constituting a violation of Section 404 of
ERISA.
(xi) The Transactions contemplated by this Organization Agreement
do not invoke any change-in-control provision in any ATI Employee Benefit
Program.
(xii) Each ATI Cellular Subsidiary and each Subsidiary thereof is
in compliance with the health care continuation provisions of Sections 162(k),
before amendment, and 4980B of the Code and the regulations thereunder with
respect to such requirements.
(xiii) Except as provided in the WMC Employee Agreement or the PCS
Par Employee Agreement, neither any ATI Cellular Subsidiary nor any Subsidiary
thereof has any liability or expects to incur any liability with respect to any
Employee Benefit Program to which neither an ATI Cellular Subsidiary nor any
Subsidiary thereof is a party, contributes or is obligated to contribute.
(xiv) None of WMC, PCS Par or the USW Parties, nor any successors
thereto, has any existing or contingent liability with respect to any Employee
Benefit Programs maintained or contributed to by the "Telesis Group" (as the
term is defined in that certain Separation Agreement between Pacific Telesis
Group and PacTel Corporation dated October 7, 1993).
(q) Labor Matters. Each of the ATI Cellular Subsidiaries and their
Subsidiaries has complied with all applicable laws and regulations in all
material respects relating to the employment of labor, including those related
to wages, hours, occupational health and safety, worker's compensation,
collective bargaining, unlawful discrimination, and the payment of Social
Security and similar taxes pertaining to their Domestic Cellular Business. To
the knowledge of ATI, there are no threatened labor controversies, strikes or
work stoppages with any of the employees performing work in a Domestic Cellular
Business. No ATI Cellular Subsidiary nor any of its Subsidiaries is a party to
any collective bargaining agreement, nor are any collective bargaining
agreements currently being negotiated with respect to the employees of the ATI
Cellular Subsidiaries and their Subsidiaries in their Domestic Cellular
Business. Except as set forth in SCHEDULE 2.2(i), there are no pending
employment-related issues, including without limitation governmental audits,
disputes
-47-
<PAGE> 60
(including those listed in SCHEDULE 2.2(q) hereto), litigation, labor
controversies, strikes or work stoppages with or regarding any of the employees
performing work in the Domestic Cellular Business that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on the
ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole. Each ATI
Cellular Subsidiary and each Subsidiary thereof has properly verified the
identity and authorization to work in the United States and has properly
completed and retained INS forms I-9 for all employees required by the
Immigration Reform and Control Act of 1986 and related statutes. All individuals
who are performing or have performed services for the ATI Cellular Subsidiaries
and their Subsidiaries and are or were classified as "independent contractors"
for tax purposes qualify for such classification.
(r) Environmental Compliance and Liabilities.
(i) Except as set forth in SCHEDULE 2.2(r), ATI has no knowledge
of any conditions that exist with respect to any Owned Property, Leased Property
or other property operated by any ATI Cellular Subsidiary, any Subsidiaries of
an ATI Cellular Subsidiary, any ATI Domestic Cellular Subsidiary or any ATI
Domestic Cellular Investment Entity that would be likely to subject such ATI
Cellular Subsidiary or any of its Subsidiaries to any liability or damages
(including, without limitation, actual, consequential, exemplary or punitive
damages), penalties, injunctive relief or cleanup costs under any Environmental
Law or that require or are likely to require cleanup, removal, remedial action
or other response by any ATI Cellular Subsidiary or any of its Subsidiaries
pursuant to any Environmental Law which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the ATI Cellular
Subsidiaries and their Subsidiaries, taken as a whole.
(ii) Except as set forth in SCHEDULE 2.2(r), each of the ATI
Cellular Subsidiaries and their Subsidiaries is in substantial compliance with
all applicable Environmental Laws, which compliance includes, without
limitation, (A) the possession by the ATI Cellular Subsidiaries and their
Subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, (B) compliance with notification, reporting, and
registration provisions of applicable Environmental Laws, and (C) compliance
with all statutory and regulatory standards under applicable Environmental Laws.
(iii) Neither any ATI Cellular Subsidiary nor any of its
Subsidiaries is a party to any litigation or administrative proceeding, nor, to
the knowledge of ATI, is any litigation or administrative proceeding threatened
against any ATI Cellular Subsidiary or any of its Subsidiaries that asserts or
alleges that such ATI Cellular Subsidiary or any of its
-48-
<PAGE> 61
Subsidiaries or any predecessor of any of them violated or is violating any
Environmental Law or that such ATI Cellular Subsidiary or any of its
Subsidiaries or any predecessor of any of them is required to clean up, remove
or take remedial or other responsive action due to the use, storage, treatment,
disposal, discharge, leaking or release of any Substance of Concern. Except as
set forth in SCHEDULE 2.2(r), there are no claims under any Environmental Law
pending against any ATI Cellular Subsidiary or any of its Subsidiaries or
against any Person whose liability for any claim any ATI Cellular Subsidiary or
any of its Subsidiaries has retained or assumed either contractually or by
operation of law, and neither any ATI Cellular Subsidiary nor any of its
Subsidiaries nor any predecessor of any of them, nor any part of the Domestic
Cellular Assets of any ATI Cellular Subsidiary or any of its Subsidiaries is
subject to any judgment, decree, order or citation related to or arising out of
any Environmental Law, and no ATI Cellular Subsidiary nor any of its
Subsidiaries has been named or listed as a potentially responsible party by any
governmental or other entity in a matter arising under or relating to any
Environmental Law. Except as set forth in SCHEDULE 2.2(r), no ATI Cellular
Subsidiary nor any of its Subsidiaries has received any written communication
from a Governmental Body that alleges that such ATI Cellular Subsidiary or any
of its Subsidiaries is not in full compliance with the Environmental Laws. To
the knowledge of ATI, except as set forth in SCHEDULE 2.2(r), no ATI Domestic
Cellular Investment Entity is a party to any litigation or administrative
proceeding, nor is any litigation or administrative proceeding threatened
against an ATI Domestic Cellular Investment Entity arising under any
Environmental Law which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of the ATI
Domestic Cellular Subsidiaries and their Subsidiaries, taken as a whole, or
adversely affect the ability of ATI to consummate the Transactions and perform
its obligations contemplated by this Organization Agreement and the Related
Agreements.
(iv) Except as set forth in SCHEDULE 2.2(r), there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Substance of Concern, that could form the basis of any claim
arising under Environmental Laws against any ATI Cellular Subsidiary or any of
its Subsidiaries or against any Person whose liability for any claim arising
under Environmental Laws any ATI Cellular Subsidiary or any of its Subsidiaries
has retained or assumed either contractually or by operation of law.
(v) ATI will, upon request by USW, provide USW with true and
complete copies of all environmental assessments that have heretofore been
performed on all Owned Property or Leased Property operated by any ATI Cellular
Subsidiary or any
-49-
<PAGE> 62
of its Subsidiaries and of all notices or other materials listed in SCHEDULE
2.2(r).
(s) Other Liabilities. Except (i) as disclosed in SCHEDULE 2.2(s) or
any other Schedule attached to this Organization Agreement, (ii) as reflected on
the Balance Sheets or otherwise referred to in the Financial Statements
(including footnotes to the Financial Statements), or (iii) incurred in the
ordinary course of business or otherwise permitted by this Organization
Agreement, there are no outstanding claims, liabilities or indebtedness of any
nature, secured or unsecured, contingent or absolute, matured or unmatured,
known or unknown, which would likely have a Material Adverse Effect, singly or
in the aggregate, on the business, operations or financial condition of the ATI
Cellular Subsidiaries and their Subsidiaries, taken as a whole, or adversely
affect the ability of ATI to consummate the Transactions and perform its
obligations contemplated by this Organization Agreement and the Related
Agreements.
(t) Insurance. ATI's Domestic Cellular Assets and the conduct of ATI's
Domestic Cellular Business are adequately self-insured by ATI or adequately
insured (in the manner and to the extent customary for businesses engaged in the
same or similar business) by financially sound and reputable insurers. Any such
policies are, and each of the ATI Parties will cause such policies or renewals
thereof to remain, in full force and effect.
(u) Finders; Investment Bankers. Neither ATI nor any of its Affiliates,
nor any of their respective officers or directors, has employed any broker,
finder or investment banker or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the Transactions contemplated by
this Organization Agreement and the Related Agreements that would be a liability
of USW, WMC, PCS Par or any of ATI's Domestic Cellular Assets, Domestic Cellular
Subsidiaries or Domestic Cellular Investments.
(v) Amendment to Rights Plan. Effective September 19, 1994, ATI has
amended its Rights Agreement dated as of July 22, 1993 (the "Rights Agreement")
so that USW and its Affiliates shall not be deemed to be "Acquiring Persons" in
connection with their becoming "Beneficial Owners" of "Common Shares" (as such
terms are defined in the Rights Agreement) pursuant to any of the Related
Agreements. ATI has furnished to USW a true and correct copy of such Rights
Agreement, as so amended.
-50-
<PAGE> 63
ARTICLE 3
COVENANTS
3.1 Covenants of USW. From and after the Effective Date, except as
otherwise expressly stated herein, USW covenants and agrees as follows:
(a) Effectuation of this Agreement. USW will use reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to carry out all of its obligations under
this Organization Agreement and the Related Agreements and to consummate and
make effective the Transactions contemplated by this Organization Agreement and
the Related Agreements, including without limitation:
(i) Promptly to make all applications and filings and to use
reasonable efforts to obtain all Authorizations and Consents required to be
obtained by the USW Parties on or before the Phase I Closing;
(ii) Promptly, and in any event by the earlier of (A) forty-five
(45) days after notice by either Party that the Phase II Closing is likely to
occur within one hundred eighty (180) days, but for receipt of the
Authorizations described in SCHEDULES 2.1(d)(iv)(A), 2.1(d)(iv)(B),
2.2(d)(iv)(A), and 2.2(d)(iv)(B) hereto, and (B) the third anniversary of the
Effective Date, to make all applications and filings and to use reasonable
efforts to obtain all other Authorizations and Consents required to be obtained
by the USW Parties on or before the Phase II Closing to enable the Parties to
consummate the Phase II Domestic Cellular Transactions and, if applicable, to
cause the PCS Contribution Date to occur, at the earliest practicable time,
including without limitation to use reasonable efforts to be in a position to
contribute all of the USW Phase II Assets and the Scheduled Phase II Related
Assets to WMC at the Phase II Closing or as soon thereafter as possible;
(iii) In the event any changes are required in order to facilitate
obtaining the Authorizations and Consents required for the Transactions
contemplated by this Organization Agreement and the Related Agreements, to take
reasonable steps necessary to accommodate such changes to the extent they would
not materially adversely affect the Parties' rights or obligations hereunder;
provided that in any such event, USW and ATI shall negotiate in good faith to
compensate the other appropriately to the extent adversely affected by such
changes;
(iv) To cause NewVector to execute and deliver the NewVector
Services Agreement at the Phase I Closing;
(v) Prior to the Phase II Closing, to use reasonable efforts to
effect such internal restructuring as may
-51-
<PAGE> 64
be necessary to contribute the USW Phase II Assets and the Scheduled Phase II
Related Assets to WMC in the form of direct ownership of Domestic Cellular
Assets or partnership interests rather than shares of capital stock of
corporations;
(vi) Promptly to take, or cause to be taken, all other actions and
do, or cause to be done, all other things necessary, proper or advisable to
consummate and make effective the Transactions contemplated by this Organization
Agreement and the Related Agreements on the terms and conditions set forth
herein as soon as reasonably practicable; and
(vii) In the event any claim, action, suit, investigation or other
proceeding by any Governmental Body or other Person is commenced which questions
the validity or legality of any of the Transactions, and any injunction or other
order is issued in any such proceeding, to use reasonable efforts to have such
injunction or other order dissolved, and to cooperate reasonably with ATI
regarding the defense of such proceedings and the removal of any other
impediment to the consummation of the Transactions.
(b) Conduct of Business. Except as contemplated by this Organization
Agreement and the Related Agreements, USW shall, and shall cause the other USW
Parties to, use reasonable efforts to operate USW's Domestic Cellular Business
in all respects prior to the Phase II Closing in the ordinary course and
consistent with past practice (except as expressly authorized by this
Organization Agreement and the Related Agreements), in a manner not inconsistent
with the Approved Business Plan, and with the objective that the goodwill and
value of USW's Domestic Cellular Business shall be maximized, including without
limitation, by maintaining USW's Domestic Cellular Assets in good condition,
maintaining their material Licenses in good standing, managing their officers
and employees effectively, and preserving and protecting their material
relationships with customers, suppliers and other third parties; provided,
however, that nothing contained in this SECTION 3.1(b) shall apply to the
conduct of any Domestic Cellular Business conducted by Tucell, L.P., a Delaware
limited partnership, in the Tucson, Arizona MSA prior to the divestiture of the
Tucson Cellular Interest by AirTouch Cellular of Arizona, which shall be
operated until such time in the ordinary course by Tucell, L.P.; and provided
further that nothing contained in this SECTION 3.1(b) shall apply to the conduct
of the San Diego Cellular Property, which shall be operated prior to its
divestiture in the ordinary course by U S WEST Cellular of California.
(c) Reporting. For the period from the Effective Date to the Phase II
Closing, USW shall deliver to ATI and WMC monthly (or less frequent, at the
direction of the WMC Partnership Committee, but no less frequent than quarterly)
reports consisting of such financial information as shall be
-52-
<PAGE> 65
directed by the WMC Partnership Committee prepared by or under the supervision
of the principal financial officer of NewVector, in a form specified by WMC,
sufficient to show all transfers of cash or other assets between or among any of
the USW Parties, including, without limitation, all transactions governed by the
methodology adopted pursuant to Articles 4 and 5 of this Organization Agreement.
From and after the Effective Date, USW shall deliver to ATI such financial
statements or other financial information regarding USW's Domestic Cellular
Business as ATI may reasonably require to comply with requirements of law
(including in connection with any filing by ATI with the Securities and Exchange
Commission) or generally accepted accounting principles. From and after the
Effective Date, USW covenants and agrees to provide prompt written notice to ATI
describing in reasonable detail any facts or circumstances that have resulted in
any representation or warranty made by USW in SECTION 2.1 hereof no longer being
true and correct in any material respect or any failure of a USW Party to comply
with any material covenant contained herein.
(d) No Changes. Except as otherwise permitted in this Organization
Agreement or in an Approved Business Plan, until the Phase II Closing, USW shall
cause NewVector and its Subsidiaries not to:
(i) (A) Grant any material increases in the compensation of any
officers or employees engaged in USW's Domestic Cellular Business, except in the
ordinary course of business consistent with past practice, (B) pay or agree to
pay any material employee benefit not required or contemplated by the terms of
the NV-Employee Benefit Programs in effect or identified to ATI on the Effective
Date, except as those terms may be modified or new Employee Benefit Programs may
be adopted in the ordinary course of business consistent with past practice, (C)
enter into any new, or materially amend any existing, employment agreement with
any such officer or employee engaged in USW's Domestic Cellular Business, except
for employment agreements with new employees entered into in the ordinary course
of business consistent with past practice and NV-Employee Benefit Programs
identified to ATI before the Effective Date, (D) except as may be required to
comply with applicable law, adopt or amend in any material respect any
collective bargaining agreement relating to any employee engaged in USW's
Domestic Cellular Business, (E) enter into any new, or materially amend any
existing, severance agreement with any officer or employee engaged in USW's
Domestic Cellular Business except for NV- Employee Benefit Programs identified
to ATI before the Effective Date, or (F) become obligated under any new Employee
Benefit Program that was not in existence as of the Effective Date, or amend any
NV-Employee Benefit Program in existence as of the Effective Date if such
amendment would have the effect of enhancing or accelerating any benefits
thereunder, except for NV-Employee Benefit Programs identified to ATI before the
Effective Date and for new programs or amendments that
-53-
<PAGE> 66
(I) may be required to comply with applicable law or (II) taken together with
other actions involving Employee Benefit Programs, are in the ordinary course of
business and consistent with past practice and do not have a Material Adverse
Effect on NewVector and its Subsidiaries, taken as a whole.
(ii) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization,
except in accordance with SECTION 3.1(a)(v) of this Organization Agreement;
provided, however, that in the event of any such merger, reorganization or
restructuring, the certificate of incorporation, by-laws or other organizational
documents of the successor shall be the same as the certificate of
incorporation, by-laws or other organizational documents of the predecessor in
effect on the Effective Date, to the extent legally permissible.
(iii) Adopt any amendments to its certificate of incorporation,
by-laws or partnership agreements or alter through merger, liquidation,
reorganization, restructuring or in any other fashion its corporate or
partnership structure or ownership, except in accordance with SECTION 3.1(a)(v)
of this Organization Agreement; provided, however, that in the event of any such
merger, reorganization or restructuring, the certificate of incorporation,
by-laws or other organizational documents of the successor shall be the same as
the certificate of incorporation, by-laws or other organizational documents of
the predecessor in effect on the Effective Date, to the extent legally
permissible.
(iv) Authorize, declare or pay any dividend or other distribution
to, issue any capital stock or partnership interest to, or cause or permit any
investment to be made in, USW by NewVector or any NewVector Subsidiary, except
for distributions or dividends of free cash flow or in accordance with any
Approved Business Plan.
(v) Incur any indebtedness or liabilities other than Permitted
Liabilities or contractual obligations incurred in the ordinary course of
business (other than Material Contracts) or pursuant to SECTION 3.1(d)(vii)
hereof; except in the ordinary course consistent with past practice, make any
advances or capital contributions to any other Person; make any loan to USW; or
consent to the incurrence of any indebtedness or call for capital contributions
by any USW Domestic Cellular Subsidiary or USW Domestic Cellular Investment
Entity;
(vi) Except as provided in SECTION 3.1(f) of this Organization
Agreement or in the WMC Partnership Agreement, sell, assign, pledge, encumber
(except for Permitted Liens) or otherwise transfer any direct or indirect
interest in any material USW Domestic Cellular Asset, NewVector, any NewVector
Subsidiary, any USW Domestic Cellular Subsidiary, any USW
-54-
<PAGE> 67
Domestic Cellular Investment, without the prior written consent of the WMC
Partnership Committee;
(vii) Enter into, assume, terminate or materially alter any
Material Contract or Related Party Agreement, except in the ordinary course of
business or with the prior written consent of the WMC Partnership Committee;
(viii) Enter into or consent to any modification or amendment of
any partnership or other agreement or to any sale, exchange or transfer of
assets or other action that would have the effect of delaying the time that any
USW Phase II Asset or Scheduled Phase II Related Asset could be contributed to
WMC or changing the character or diminishing the value of any USW Phase II Asset
or Scheduled Phase II Related Asset; or
(ix) Take any action inconsistent with the consummation of the
Transactions as contemplated by this Organization Agreement and the Related
Agreements.
(e) Access and Information. To the extent permitted by law and subject
to any restrictions contained in Material Contracts and the USW Cellular
Partnership Agreements, USW shall afford to ATI such access, during normal
business hours, to books, records (including, without limitation, tax returns
and, if consented to by the independent auditors, work papers of such auditors),
plant and personnel, and to such other information of USW relating to USW's
Domestic Cellular Business and of NewVector and its Subsidiaries (except
information relating to the San Diego Cellular Property and Tucell, L.P. and its
Domestic Cellular Business before the Tucson Cellular Interest is divested by
AirTouch Cellular of Arizona) as ATI shall reasonably request, including,
without limitation, all information relating to the transactions governed by the
methodology adopted pursuant to ARTICLES 4 or 5 of this Agreement. USW agrees to
treat, and will cause its respective accountants, counsel and other
representatives to treat, confidentially all nonpublic information concerning
the ATI Parties furnished or made available to it in connection with the
Transactions contemplated by this Organization Agreement and the Related
Agreements, subject to the requirements of law and the provisions of this
Organization Agreement and the Related Agreements. If this Organization
Agreement is terminated prior to the Phase I Closing, USW will deliver to ATI
all documents, work papers and other material (including copies) obtained by it
in connection herewith, whether obtained before or after the Effective Date.
(f) Divestiture of San Diego Cellular Property. USW agrees to use
reasonable efforts to cause NewVector to divest itself of the San Diego Cellular
Property on or before the Phase I Closing or otherwise to obtain any
Authorizations required to permit the Phase I Transactions to occur prior to a
-55-
<PAGE> 68
divestiture of the San Diego Cellular Property, subject to the following
conditions:
(i) On the later of (A) the Phase II Closing or (B) the date of
divestiture of the San Diego Cellular Property, USW shall make a capital
contribution to WMC equal to the pre-Tax consideration (cash and/or non-cash),
received from the divestiture of the San Diego Cellular Property reduced only by
reasonable closing costs incurred in connection with such divestiture.
(ii) USW shall be solely responsible for the payment of any Taxes
related to the divestiture and any Tax- related penalties and interest thereon.
Promptly after the closing of a transaction (or a series of transactions)
resulting in the divestiture of the San Diego Cellular Property, USW shall
deliver to ATI and WMC a written notice (the "San Diego Notice") stating (A) the
amount of the respective capital contributions to be paid to WMC by USW and ATI
pursuant to SECTIONS 3.1(f)(i) and (B) the amount of the San Diego Taxes. For
purposes of this Section 3.1(f)(ii) and Sections 3.2(h),(i) and (j), "San Diego
Taxes" means federal, state and local Taxes incurred in connection with the
divestiture of the San Diego Cellular Property (exclusive of penalties or
interest), determined using an assumed combined federal, state and local Tax
rate of 40% based on the actual taxable gain recognized for federal income tax
purposes upon such divestiture (adjusted to take into account any refunds or
adjustments made by any federal income taxing authority, other than with respect
to penalties or interest) and determined without regard to the availability of
net operating loss carryforwards or similar tax offsets or benefits, and without
regard to the tax effect of the contribution or payment of any amount pursuant
to this Section 3.1(f) or Sections 3.2(h) through (j) hereof.
(iii) If and when required or advisable to avoid or mitigate any
non-compliance with the MFJ, CECO or EO or any law or regulation of any
Governmental Body or to obtain any necessary Authorizations, USW agrees to place
its San Diego Cellular Property in trust pending divestiture on such terms as
shall be approved by the Governmental Bodies having jurisdiction thereof.
(iv) Except as provided in Article 4, from and after the date of
consummation of the exchange, if any, of the San Diego Cellular Property for
another property or interest, such property or interest shall be treated for all
purposes of this Organization Agreement as a USW Phase II Asset and a USW
Domestic Cellular Asset, USW Domestic Cellular Subsidiary or USW Domestic
Cellular Investment, as the case may be.
(g) Operation of Certain Assets. If and to the extent that USW,
despite its reasonable efforts, is unable to contribute any USW Phase II Assets
or Scheduled Phase II Related
-56-
<PAGE> 69
Assets to WMC at the Phase II Closing in accordance with SECTION 6.3(b)(ii) of
this Organization Agreement, USW covenants and agrees to continue to make
reasonable efforts to make such contribution thereafter during Phase II, to the
maximum extent possible without violating the MFJ, CECO, EO or any law, rule or
regulation of any Governmental Body having jurisdiction over WMC or either
Party. The representations and warranties made by USW with respect to each such
Beneficial Phase II Asset in SECTION 2.1 hereof shall remain true and correct in
all material respects on the date such Beneficial Phase II Asset shall be
contributed to WMC, and USW shall comply with all covenants contained herein
with respect to the Beneficial Phase II Assets until such Beneficial Phase II
Assets are contributed to WMC.
(h) Tucson Cellular Interest. Upon USW's receipt of the Tucson Notice,
ATI and USW shall use their best good faith efforts to reach agreement on a form
of payment of 50 percent of the Tucson Taxes (the "Tucson Taxes Payment") which
(A) gives ATI the full benefit of the Tucson Taxes Payment (but without any
gross-up), (B) minimizes the Tax liability of ATI with respect to such Payment,
and (C) improves the ability of USW to treat such amount as an investment under
its method of accounting. If ATI and USW fail to reach agreement on the form of
such Payment within 30 days of ATI's mailing of the Tucson Notice, USW shall
make the Tucson Taxes Payment in cash to ATI upon the later of the expiration of
such 30 day period or the conclusion of the process described in Section 3.1(i).
(i) In the event that USW disagrees with ATI's calculation of the
amount of Tucson Taxes, USW may challenge that determination by notifying ATI in
writing of the grounds for such disagreement within ten (10) days of USW's
receipt of the Tucson Notice. ATI and USW shall negotiate in good faith to
resolve such disagreements. If USW and ATI fail to resolve such disagreements,
then the matter will be referred to arbitration in accordance with the
Arbitration Agreement for resolution.
(j) In the event of a determination that Tucson Taxes may be different
than the amount originally used for purposes of Sections 3.1(h) and (i) and
Section 3.2(f)(i), ATI shall consult with USW concerning the audit, appeal,
amended return or other process potentially leading to such redetermination
provided that such redetermination shall be calculated using the assumed tax
rate, disregarding net operating loss carryforwards and similar tax offsets and
benefits, disregarding the tax effect of the contribution or payment of any
amount and disregarding any penalties and interest, all as provided in Section
3.2(f)(i); and upon any such redetermination becoming final, appropriate
adjustments shall be made among the parties to reflect such redetermination.
3.2 Covenants of ATI. From and after the Effective Date, except as
otherwise expressly stated herein, ATI covenants and agrees as follows:
-57-
<PAGE> 70
(a) Effectuation of this Agreement. ATI will use reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to carry out all of its obligations under
this Organization Agreement and the Related Agreements and to consummate and
make effective the Transactions contemplated by this Organization Agreement and
the Related Agreements, including without limitation:
(i) Promptly to make all applications and filings and to use
reasonable efforts to obtain all Authorizations and Consents required to be
obtained by the ATI Parties on or before the Phase I Closing;
(ii) Promptly, and in any event by the earlier of (A) forty-five
(45) days after notice by either Party that the Phase II Closing is likely to
occur within one hundred eighty (180) days, but for receipt of the
Authorizations described in SCHEDULES 2.1(d)(iv)(A), 2.1(d)(iv)(B),
2.2(d)(iv)(A), and 2.2(d)(iv)(B) hereto, and (B) the third anniversary of the
Effective Date, to make all applications and filings and to use reasonable
efforts to obtain all other Authorizations and Consents required to be obtained
by the ATI Parties on or before the Phase II Closing to enable the Parties to
consummate the Phase II Domestic Cellular Transactions and, if applicable, to
cause the PCS Contribution Closing to occur, at the earliest practicable time,
including without limitation to use reasonable efforts to be in a position to
contribute all of the ATI Phase II Assets to WMC at the Phase II Closing or as
soon thereafter as possible;
(iii) In the event any changes are required in order to facilitate
obtaining the Authorizations and Consents required for the Transactions
contemplated by this Organization Agreement and the Related Agreements, to take
reasonable steps necessary to accommodate such changes to the extent they would
not materially adversely affect the Parties' rights or obligations hereunder;
provided that in any such event, USW and ATI shall negotiate in good faith to
compensate the other appropriately to the extent adversely affected by such
changes;
(iv) To cause ATI's Cellular Subsidiaries to execute and deliver
the ATI Services Agreement at the Phase I Closing;
(v) Prior to the Phase II Closing, to use reasonable efforts to
effect such internal restructuring as may be necessary to contribute the ATI
Phase II Assets to WMC in the form of direct ownership of Domestic Cellular
Assets or partnership interests rather than shares of capital stock of
corporations;
(vi) Promptly to take, or cause to be taken, all other actions and
do, or cause to be done, all other things
-58-
<PAGE> 71
necessary, proper or advisable to consummate and make effective the Transactions
contemplated by this Organization Agreement and the Related Agreements on the
terms and conditions set forth herein as soon as reasonably practicable;
(vii) In the event any claim, action, suit, investigation or other
proceeding by any Governmental Body or other Person is commenced which questions
the validity or legality of any of the Transactions and an injunction or other
order is issued in any such proceeding, to use reasonable efforts to have such
injunction or other order dissolved, and to cooperate reasonably with USW
regarding the defense of such proceedings and the removal of any other
impediment to the consummation of the Transactions; and
(viii) To cooperate with, and use reasonable efforts to assist,
USW in obtaining Partial MFJ Relief.
(b) Conduct of Business. Except as contemplated by this Organization
Agreement and the Related Agreements, ATI shall, and shall cause the other ATI
Parties to, use reasonable efforts to operate ATI's Domestic Cellular Business
in all respects prior to the Phase II Closing in the ordinary course and
consistent with past practice (except as expressly authorized by this
Organization Agreement and the Related Agreements), in a manner not inconsistent
with the Approved Business Plan, and with the objective that the goodwill and
value of ATI's Domestic Cellular Business shall be maximized, including without
limitation, by maintaining ATI's Domestic Cellular Assets in good condition,
maintaining their material Licenses in good standing, managing their officers
and employees effectively, and preserving and protecting their relationships
with customers, suppliers and other third parties; provided, however, that
nothing contained in this SECTION 3.2(b) shall apply to the conduct of (i) the
Tucson Cellular Interest prior to its divestiture or (ii) the Domestic Cellular
Business conducted by any ATI Party in San Diego, California, prior to the
divestiture of the San Diego Cellular Property by NewVector, each of which shall
be operated until such times in the ordinary course and by its respective owner.
(c) Reporting. For the period from the Effective Date to the Phase II
Closing, ATI shall deliver to USW and WMC monthly (or less frequent, at the
direction of the WMC Partnership Committee, but not less frequent than
quarterly) reports consisting of such financial information as shall be directed
by the WMC Partnership Committee prepared by or under the supervision of the
principal financial officer of the ATI Cellular Subsidiaries, in a form
specified by WMC, sufficient to show all transfers of cash or other assets
between or among any of the ATI Parties, including, without limitation, all
transactions governed by the methodology pursuant to Articles 4 and 5 of this
Organization Agreement. From and after the Effective Date, ATI shall deliver to
USW such financial statements or
-59-
<PAGE> 72
other financial information regarding ATI's Domestic Cellular Business as USW
may reasonably require to comply with requirements of law (including in
connection with any filing by USW with the Securities and Exchange Commission)
or generally accepted accounting principles. From and after the Effective Date
hereof, ATI covenants and agrees to provide prompt written notice to USW
describing in reasonable detail any facts or circumstances that have resulted in
any representation or warranty made by ATI in SECTION 2.2 hereof no longer being
true and correct in material respects as of such date or any failure of an ATI
Party to comply with any material covenant contained herein.
(d) No Changes. Except as otherwise permitted in this Organization
Agreement or in any Approved Business Plan, until the Phase II Closing, ATI
shall cause the ATI Cellular Subsidiaries and their Subsidiaries not to:
(i) (A) Grant any material increases in the compensation of any
officers or employees engaged in ATI's Cellular Business, except in the ordinary
course of business consistent with past practice, (B) pay or agree to pay any
material employee benefit not required or contemplated by the terms of the ATI
Employee Benefit Programs in effect or identified to USW on the Effective Date,
except as those terms may be modified or new Employee Benefit Programs may be
adopted in the ordinary course of business consistent with past practice, (C)
enter into any new, or materially amend any existing, employment agreement with
any such officer or employee engaged in ATI's Domestic Cellular Business, except
for employment agreements with new employees entered into in the ordinary course
of business consistent with past practice and ATI Employee Benefit Programs
identified to USW prior to the Effective Date, (D) except as may be required to
comply with applicable law, adopt or amend in any material respect any
collective bargaining agreement relating to any employee engaged in ATI's
Domestic Cellular Business, (E) enter into any new, or materially amend any
existing, severance agreement with any officer or employee engaged in ATI's
Domestic Cellular Business except for ATI Employee Benefit Programs identified
to USW before the Effective Date, or (F) become obligated under any new Employee
Benefit Program that was not in existence as of the Effective Date, or amend any
ATI Employee Benefit Program in existence as of the Effective Date if such
amendment would have the effect of enhancing or accelerating any benefits
thereunder, except for ATI Employee Benefit Programs identified to USW before
the Effective Date and for new programs or amendments that (I) may be required
to comply with applicable law or (II) taken together with other actions
involving Employee Benefit Programs, are in the ordinary course of business and
consistent with past practice and do not have a Material Adverse Effect on the
ATI Cellular Subsidiaries and their Subsidiaries, taken as a whole.
-60-
<PAGE> 73
(ii) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than a reincorporation of ATI pursuant to which the successor corporation
shall assume all rights and obligations of ATI pursuant to this Organization
Agreement), except in accordance with SECTION 3.2(a)(v) of this Organization
Agreement; provided, however, that in the event of any such merger,
reorganization or restructuring, the certificate of incorporation, by-laws or
other organizational documents of the successor shall be the same as the
certificate of incorporation, by-laws or other organizational documents of the
predecessor in effect on the Effective Date, to the extent legally permissible;
(iii) Adopt any amendments to its certificate of incorporation,
by-laws or partnership agreements or alter through merger, liquidation,
reorganization, restructuring or in any other fashion its corporate or
partnership structure or ownership, except in accordance with SECTION 3.2(a)(v)
of this Organization Agreement; provided, however, that in the event of any such
merger, reorganization or restructuring, the certificate of incorporation,
by-laws or other organizational documents of the successor shall be the same as
the certificate of incorporation, by-laws or other organizational documents of
the predecessor in effect on the Effective Date, to the extent legally
permissible;
(iv) Authorize, declare or pay any dividend or other distribution
to, issue any capital stock or partnership interest to, or cause to or permit
any investment to be made in, ATI by any ATI Cellular Subsidiary or any of its
Subsidiaries, except for distributions or dividends of free cash flow or in
accordance with any Approved Business Plan;
(v) Incur any indebtedness or liabilities other than Permitted
Liabilities or contractual obligations incurred in the ordinary course of
business (other than Material Contracts) or pursuant to SECTION 3.2(d)(vii)
hereof; except in the ordinary course consistent with past practice, make any
advances or capital contributions to any other Person; make any loan to ATI; or
consent to the incurrence of any indebtedness or call for capital contributions
by any ATI Domestic Cellular Subsidiary or ATI Domestic Cellular Investment
Entity;
(vi) Except as provided in SECTION 3.2(f) of this Organization
Agreement or in the WMC Partnership Agreement, sell, assign, pledge, encumber
(except for Permitted Liens) or otherwise transfer any direct or indirect
interest in any material ATI Domestic Cellular Asset, any ATI Party, any ATI
Domestic Cellular Subsidiary, or any ATI Domestic Cellular Investment, without
the prior written consent of the WMC Partnership Committee; provided, however,
that nothing contained in this SECTION 3.2(d)(vi) shall apply to any
distribution of assets of CMT Partners, a Delaware general partnership, in
-61-
<PAGE> 74
accordance with the terms and conditions of the CMT Partners Partnership
Agreement or any transfer by any ATI Party of any interest in New Par or CCI
pursuant to SECTION 9(b) of the Termination Agreement between CCI and AirTouch
California and Section 4.4 of the Amended and Restated Agreement and Plan of
Merger and Joint Venture Organization between CCI and AirTouch California.
(vii) Enter into, assume, terminate, or materially alter any
Material Contract or Related Party Agreement, except in the ordinary course of
business or with the prior written consent of the WMC Management Committee;
(viii) Enter into or consent to any modification or amendment of
any partnership or other agreement or to any sale, exchange or transfer of
assets or other action that would have the effect of delaying the time that any
ATI Phase II Asset or any interest in or assets of New Par could be contributed
to WMC or changing the character or diminishing the value of any ATI Phase II
Asset or interest in or assets of New Par; provided that notwithstanding the
foregoing ATI may enter into an agreement or an amendment of any existing
agreements with CCI that would extend for up to one year the time that any
interest in or assets of New Par could be contributed to WMC; or
(ix) Take any action inconsistent with the consummation of the
Transactions time as contemplated by this Organization Agreement and the Related
Agreements.
(e) Access and Information. To the extent permitted by law and subject
to any restrictions contained in Material Contracts and the ATI Cellular
Partnership Agreements, ATI shall afford to USW such access, during normal
business hours, to books, records (including, without limitation, tax returns
and, if consented to by the independent auditors, work papers of such auditors),
plant and personnel, and to such other information of ATI relating to the ATI
Parties and to ATI's Domestic Cellular Business (except its Tucson Cellular
Interest and any Domestic Cellular Business conducted by any ATI Party in San
Diego, California, prior to divestiture of the San Diego Cellular Property by
NewVector) as USW shall reasonably request, including, without limitation, all
information relating to any transactions governed by the methodology adopted
pursuant to ARTICLES 4 or 5 of this Organization Agreement. ATI agrees to treat,
and will cause its respective accountants, counsel and other representatives to
treat confidentially all nonpublic information concerning the USW Parties
furnished or made available to it in connection with the transactions
contemplated by this Organization Agreement and the Related Agreements, subject
to the requirements of law and the provisions of this Organization Agreement and
the Related Agreements. If this Organization Agreement is terminated prior to
the Phase I Closing, ATI will deliver to USW all documents, work papers and
-62-
<PAGE> 75
other material (including copies) obtained by it in connection herewith, whether
obtained before or after the Effective Date.
(f) Divestiture of Tucson Cellular Interest. ATI agrees to use
reasonable efforts to cause AirTouch Cellular of Arizona to divest itself of the
Tucson Cellular Interest on or before the Phase I Closing or otherwise to obtain
any Authorizations required to permit the Phase I Transactions to occur prior to
a divestiture of the Tucson Cellular Interest, subject to the following
conditions:
(i) ATI shall be solely responsible for the payment of any Taxes
related to the divestiture and any Tax-related penalties or interest thereon.
Promptly after the closing of a transaction (or a series of transactions)
resulting in the divestiture of the Tucson Cellular Interest, ATI shall provide
to USW and WMC a written notice (the "Tucson Notice") stating the amount of the
Tucson Taxes. For purposes of this Section 3.2(f)(i) and Sections 3.1(h),(i) and
(j), "Tucson Taxes" means federal, state and local Taxes incurred in connection
with the divestiture of the Tucson Cellular Interest (exclusive of penalties or
interest), determined using an assumed combined federal, state and local Tax
rate of 40% based on the actual taxable gain recognized for federal income tax
purposes upon such divestiture (adjusted to take into account any refunds or
adjustments made by any federal income taxing authority, other than with respect
to penalties or interest) and determined without regard to the availability of
net operating loss carryforwards or similar tax offsets or benefits, and without
regard to the tax effect of the contribution or payment of any amount pursuant
to this Section 3.2(f) or Sections 3.1(h) through (j) hereof.
(ii) If and when required or advisable to avoid or mitigate any
non-compliance with the MFJ, CECO or EO or any law or regulation of any
Governmental Body or to obtain any necessary Authorizations, ATI agrees to place
its Tucson Cellular Interest in trust pending divestiture on such terms as shall
be approved by the Governmental Bodies having jurisdiction thereof.
(iii) From and after the date of consummation of the exchange, if
any, of the Tucson Cellular Interest for another property or interest, such
property or interest shall be treated for all purposes of this Organization
Agreement as an ATI Phase II Asset and as an ATI Domestic Cellular Asset, ATI
Domestic Cellular Subsidiary or ATI Domestic Cellular Interest, as the case may
be.
(g) Operation of Certain Assets. If and to the extent that ATI, despite
its reasonable efforts, is unable to contribute any ATI Phase II Assets to WMC
at the Phase II Closing in accordance with SECTION 6.3(b)(iii) of this
Organization Agreement, ATI covenants and agrees to continue to
-63-
<PAGE> 76
make reasonable efforts to make such contribution thereafter during Phase II, to
the maximum extent possible without violating the MFJ, CECO, EO or any law, rule
or regulation of any Governmental Body having jurisdiction over WMC or either
Party. The representations and warranties made by ATI with respect to each such
Beneficial Phase II Asset in SECTION 2.2 hereof shall remain true and correct in
all material respects on the date such Beneficial Phase II Asset shall be
contributed to WMC, and ATI shall comply with all covenants contained herein
with respect to the Beneficial Phase II Assets until such Beneficial Phase II
Assets are contributed to WMC.
(h) San Diego Cellular Property. Upon ATI's receipt of the San Diego
Notice, USW and ATI shall use their best good faith efforts to reach agreement
on a form of payment of 50 percent of the San Diego Taxes (the "San Diego Taxes
Payment") which (A) gives USW the full benefit of the San Diego Taxes Payment
(but without any gross-up), (B) minimizes the Tax liability of USW with respect
to such Payment, and (C) improves the ability of ATI to treat such amount as an
investment under its method of accounting. If USW and ATI fail to reach
agreement on the form of such Payment within 30 days of USW's mailing of the San
Diego Notice, ATI shall make the San Diego Taxes Payment in cash to USW upon the
later of the expiration of such 30 day period or the conclusion of the process
described in Section 3.2(i).
(i) In the event that ATI disagrees with USW's calculation of the
amount of San Diego Taxes, ATI may challenge that determination by notifying USW
in writing of the grounds for such disagreement within ten (10) days of ATI's
receipt of the San Diego Notice. USW and ATI shall negotiate in good faith to
resolve such disagreements. If ATI and USW fail to resolve such disagreements,
then the matter will be referred to arbitration in accordance with the
Arbitration Agreement for resolution.
(j) In the event of a determination that San Diego Taxes may be
different than the amount originally used for purposes of Section 3.2(h) and (i)
and Section 3.1(f)(ii), USW shall consult with ATI concerning the audit, appeal,
amended return or other process potentially leading to such redetermination
provided that such redetermination shall be calculated using the assumed tax
rate, disregarding net operating loss carryforwards and similar tax offsets and
benefits, disregarding the tax effect of the contribution or payment of any
amount and disregarding any penalties and interest, all as provided in Section
3.1(f)(ii); and upon any such redetermination becoming final, appropriate
adjustments shall be made among the parties to reflect such redetermination.
3.3 Fiduciary Obligations. The Parties hereto acknowledge that each may
have fiduciary obligations to other Persons, including without limitation
shareholders and partners
-64-
<PAGE> 77
in Domestic Cellular Subsidiaries and Domestic Cellular Investment Entities.
Each Party shall comply with all such fiduciary obligations.
ARTICLE 4
PHASE I CLOSING ADJUSTMENTS
4.1 Cash Flows and Funding Prior to Phase I. During the period from the
Effective Date and ending immediately prior to the Phase I Closing (i) USW shall
be entitled to the cash flows and responsible for the funding requirements
relating to the USW Phase II Assets and the Scheduled Phase II Related Assets,
and (ii) ATI shall be entitled to the cash flows and responsible for the funding
requirements relating to the ATI Phase II Assets, New Par and the Scheduled New
Par Related Asset. Except as otherwise provided in this Agreement, any and all
indebtedness or liabilities incurred by the Parties prior to the Phase I Closing
shall be the sole responsibility of such Party.
4.2 Phase I Closing.
(a) At the Phase I Closing, USW and ATI each shall be responsible for
having increased the Net Asset Value of their respective Phase II Assets (and
with respect to ATI, New Par) by an amount equal to the proforma increase in Net
Asset Value determined in accordance with Schedule 4.2A (with respect to USW) or
Schedules 4.2B and 4.2C (with respect to ATI) for the Phase I Closing.
(i) If there is no date on Schedules 4.2A, 4.2B or 4.2C that is
the same as the Phase I Closing Date, the proforma increase in Net Asset Value
shall be determined by interpolating on a straight line basis the amounts on
Schedules 4.2A, 4.2B or 4.2C from the last date preceding and first date
subsequent to the Phase I Closing.
(ii) The appropriate assumption regarding ATI's ownership of New
Par shall be taken into account for purposes of determining ATI's proforma
increase in Net Asset Value (as set forth on Schedules 4.2B and 4.2C). As long
as the New Par Determination Date has not occurred at the time of the Phase I
Closing, ATI's pro forma increase in Net Asset Value shall be determined by
taking 50% of the pro forma increase in Net Asset Value for New Par (as set
forth on Schedule 4.2C) into account.
(iii) As an example, if the Phase I Closing occurs on September
30, 1995 and, assuming that no New Par Determination Date shall have occurred as
of such date, the proforma increase in Net Asset Value for USW shall be
$302,760,000 and the pro forma increase in Net Asset Value for ATI shall be
$466,888,500 (computed as the sum of $381,793,000 from Schedule 4.2B and
$85,095,500 from Schedule 4.2C).
-65-
<PAGE> 78
(iv) The parties acknowledge and agree that the intent of the
provisions of this Article 4 is for the parties to increase the Net Asset Value
of their Phase II Assets and New Par Assets in the ordinary course of business
and primarily through capital expenditures, and for neither party to be able to
obtain any benefit with respect to WMC or the other party from an artificial
increase in the Net Asset Value of their Phase II Assets or New Par Assets.
(b) Within forty-five (45) business days after the Phase I Closing
Date, each Party's change in Net Asset Value from May 31, 1994 to the Phase I
Closing Date shall be calculated. To the extent that ATI's or USW's change in
Net Asset Value from May 31, 1994 to the Phase I Closing Date is greater than or
less than such Party's proforma increase in Net Asset Value from May 31, 1994 to
the Phase I Closing Date shown on Schedule 4.2A or Schedules 4.2B and 4.2C,
respectively, and in each case as adjusted in accordance with Section 4.3 and,
for ATI, the appropriate assumption as to New Par ownership, each of ATI and USW
shall: (i) if such Party's difference (the "Balance Sheet Differential") is a
negative amount, either (A) contribute cash to WMC in an amount equal to the
absolute value of such Balance Sheet Differential, or (B) make a Balance Sheet
Differential election; or (ii) if such Party's Balance Sheet Differential is a
positive amount, either (A) distribute or dividend cash from such Party's
Domestic Cellular Subsidiaries in an amount equal to such Balance Sheet
Differential, or (B) make a Balance Sheet Differential election.
(c) A Party may make a Balance Sheet Differential election with
respect to all, but (except as provided in the proviso to the second sentence of
clause (i) of this paragraph (c)) not less than all, of a positive or negative
Balance Sheet Differential by delivering a written notice of such election to
WMC and to the other Party within ten (10) days of the date on which each
Party's change in Net Asset Value from May 31, 1994 to the Phase I Closing Date
has been finally determined.
(i) Upon either Party making a Balance Sheet Differential
election, such election shall be taken into account for purposes of calculating
the Initial Percentages of the Parties as of the Phase I Closing Date in
accordance with Section 4.5 hereof. A Balance Sheet Differential election shall
not be available to the extent a Party's positive balance is due to Current
Assets that were generated or retained by such Party (such as through the
incurrence of an Unpermitted Liability) unless such Party can show that it acted
in the ordinary course of business, consistent with past practice; provided,
however, that such Current Assets (not available for a Balance Sheet
Differential election) shall be available for distribution to such Party. The
Parties acknowledge and agree that the general business practice is for each
Party to make daily distributions of all excess cash and to retain only the
amount of cash necessary to operate the business.
-66-
<PAGE> 79
(ii) In the event that any Party makes a Balance Sheet
Differential election, (A) the amount of such Party's Balance Sheet Differential
shall be hereinafter referred to as such Party's "Balance Sheet Differential
Amount," (B) unless the other Party also makes a Balance Sheet Differential
election, such other Party's Balance Sheet Differential Amount shall be zero,
and (C) the amount, positive or negative, equal to the sum of the Balance Sheet
Differential Amounts of both of the Parties shall be hereinafter referred to as
the "Total Differential Election Amount."
(d) For the purposes of this Article 4, the following definitions
shall apply as they relate to Phase II Assets and New Par:
(i) "Net Asset Value" means, for either Party, an amount equal to
the sum of:
(A) Current Assets;
(B) plus: Gross Investment in Property, Plant and Equipment;
(C) less: Current Liabilities.
(ii) "Current Assets" means, for each Party, those assets that are
reasonably expected to be realized in cash or sold or consumed during the normal
operating cycle of the entity or within one year. Except as otherwise provided
herein, Current Assets shall include: cash, cash equivalents, accounts
receivable and associated reserves, pre-paid expenses, inventories, marketable
securities and such other current assets as would reasonably be included under
generally accepted accounting principles, but shall exclude (A) all income tax
balances that existed on May 31, 1994, and exist on the Phase I Closing
including prepaid and deferred income taxes and income taxes receivable, (B)
notes or other amounts receivable from affiliates other than amounts receivable
from Affiliates for transactions conducted on an arm's length basis for direct
services rendered or for payment of operating liabilities on behalf of such
Affiliates and (C) any changes in net Cellular Service and Equipment accounts
receivable balances resulting from any change in the Days Sales Outstanding
ratio as of the Phase I Closing Date from the Days Sales Outstanding ratio as of
May 31, 1994. For the purposes of the preceding sentence, the Days Sales
Outstanding ratio shall equal (x) the net Service and Equipment accounts
receivable balance as of May 31, 1994, or the Phase I Closing, as the case may
be, divided by (y) the average of the service and equipment revenues for the two
months preceding May 31, 1994, or the Phase I Closing, as the case may be. The
parties shall use consistent methodologies and accounts in the calculation of
the Day Sales Outstanding ratio.
-67-
<PAGE> 80
(iii) "Gross Investment in Property, Plant and Equipment" means,
for each Party, such Party's gross investment in those assets that are tangible,
relatively long-lived and necessary to generate future cash flows or for the
ongoing operation of the business. Gross property plant and equipment includes
land, buildings, leasehold improvements, cellular plant and switching,
transmission, furniture, computer systems, construction-in-process, software,
office equipment, cellular and other telephone equipment and such other elements
as would reasonably be included under generally accepted accounting principles
but shall exclude capitalized interest incurred after May 31, 1994 and any
write-up of asset values. Depreciation and amortization are excluded from this
balance. In addition, the gross investment in all property, plant and equipment
sold or otherwise disposed of in the ordinary course of business during the
period from May 31, 1994 to the Phase I Closing Date shall be added back in
determining gross property plant and equipment at the Phase I Closing Date;
provided, however, that (A) an amount equal to the net receivables or proceeds
resulting from any such sales or disposals shall be deducted in determining the
Net Asset Value at the Phase I Closing Date, and (B) all cash and non-cash
consideration received from such sale or disposal shall be treated for all other
purposes of this Organization Agreement as a Phase II Asset of the Party making
such sale or disposal (except that such consideration received from any sale or
disposal of any property, plant or equipment of New Par shall be treated for all
other purposes of this Organization Agreement as an asset of New Par).
(iv) "Current Liabilities" means, for each Party, obligations that
are expected to be satisfied either by the use of Current Assets or by the
creation of other Current Liabilities within one year. Current Liabilities shall
also include accounts payable, unearned revenue and customer deposits, accrued
liabilities for equipment, services, employee compensation and benefits and
shall exclude (A) notes payable and capital lease obligations (including amounts
related to borrowing, indebtedness and accrued interest), (B) all income tax
balances (including deferred taxes and income taxes payable), and (C) any
amounts payable to Affiliates, except that amounts payable to Affiliates for
transactions conducted on an arm's length basis for direct services rendered or
for payment of operating liabilities on behalf of USW or ATI such as payment of
the Parties' state and local taxes, insurance or other direct operating expenses
shall not be excluded.
(e) Notwithstanding anything to the contrary in this Article 4, the
Net Asset Value of USW and ATI shall not reflect any effects or changes that are
attributable to any of the following:
(i) such Party's failure to operate its business in accordance
with Section 3.1(b) or Section 3.2(b),
-68-
<PAGE> 81
respectively, or otherwise to operate its business in the ordinary course and
consistent with past practice,
(ii) any Scheduled Phase II Related Asset or any Scheduled New Par
Related Asset,
(iii) any reimbursement made in connection with any Reimbursed
Expense (it being understood that Schedules 4.2A, 4.2B and 4.2C should not
reflect the effects of any such Reimbursed Expense), and
(iv) all balances related to income taxes, including income taxes
payable, receivable, prepaid or deferred.
(f) The calculation of the increase in Net Asset Value shall be
determined from fully proportional balance sheets for each Party for May 31,
1994 and the Phase I Closing Date. Notwithstanding anything herein to the
contrary, the balance sheets for the Phase I Closing Date shall reflect a
consistent application of accounting principles and methods from May 31, 1994 to
the Phase I Closing.
(g) The appropriate assumption regarding ATI's ownership of New Par
shall be taken into account for purposes of determining Net Asset Value of ATI
for May 31, 1994 and the Phase I Closing. As long as the New Par Determination
Date has not occurred at the time of the Phase I Closing, 50% of New Par shall
be taken into account for purposes of calculating the Net Asset Value of ATI for
May 31, 1994 and the Phase I Closing.
(h) The Parties shall mutually agree on the specific methodology for
determining the Net Asset Value as of May 31, 1994 and such methodology shall be
used to calculate each Party's Net Asset Value as of the Phase I Closing. Each
Party shall prepare a schedule that shows such Party's calculation of Net Asset
Value as of May 31, 1994 and shall present such schedule (along with any
workpapers or other supporting documents) to the other Party prior to the Phase
I Closing Date. Each Party shall prepare a schedule that shows such Party's
calculation of Net Asset Value as of the Phase I Closing Date and shall present
such schedule (along with any workpapers or other supporting documents) within
twenty (20) business days after the Phase I Closing Date. In each case, each
Party shall have a right to review the calculations used to determine the other
Party's schedule required hereunder and request adjustments based on such review
or the Independent Third Party review pursuant to Section 4.4.
(i) The Parties acknowledge and agree that the specific methodology to
be used by both Parties to calculate Net Asset Value as of May 31, 1994 and as
of the Phase I Closing (as well as the pro forma increase in Net Asset Value)
should be consistent. If the Parties have used inconsistent methodologies, the
Parties will use reasonable best efforts to
-69-
<PAGE> 82
agree to a consistent methodology and to make the appropriate adjustments to the
Net Asset Values as of May 31, 1994, the pro forma increase thereto, and the Net
Asset Values as of the Phase I Closing to reflect such consistent methodology.
(j) In determining Net Asset Value, each Party's non-managed property
interests shall be accounted for on a fully proportional basis; provided,
however, that if the necessary financial information for any non-managed
property is not available as of any date on which Net Asset Value is to be
calculated, the financial information related to such non-managed property used
in the calculation of Net Asset Value shall be determined by interpolating on a
straight line basis the financial information from the closest date preceding
and the closest date subsequent to such date for which the necessary information
is available.
(k) Any assets (other than New Par) included for purposes of
calculating Net Asset Value of any Party shall be treated as Phase II Assets of
such Party for all purposes of this Organization Agreement (including Article 5
hereof) and accordingly shall in no event be used to satisfy any Unpermitted
Liability of such Party, distributed as a dividend to such Party or otherwise be
used in a manner inconsistent with the use of such Party's Phase II Assets;
provided, however, that the foregoing shall not apply to any cash distributed by
a Party pursuant to subparagraph (A) of clause (ii) of the last sentence of
Section 4.2(b)).
4.3 Special Provisions relating to the San Diego Cellular Property and the
Tucson Cellular Interest. As the change in Net Asset Values calculated under
Section 4.2 above includes the effects of USW's San Diego Cellular Property and
ATI's Tucson Cellular Interest, and since each of USW and ATI intends to sell or
dispose of such properties, this Section 4.3 sets forth the adjustments to the
Net Asset Values to be calculated under Section 4.2 to reflect the sale or other
disposition of the San Diego Cellular Property and the Tucson Cellular Interest.
(a) Upon the sale or other disposition (or deposit in a trust pending
sale) of the San Diego Cellular Property and the Tucson Cellular Interest,
Schedules 4.2A and 4.2B shall be adjusted to remove the effects of the San Diego
Cellular Property and the Tucson Cellular Interest on the increases in Net Asset
Values set forth therein, and such adjustments shall occur prior to determining
a Party's Balance Sheet Differential under Section 4.2 above. Any effect of the
San Diego Cellular Property, the Tucson Cellular Interest or any properties or
interests acquired in exchange for the San Diego Cellular Property shall not be
taken into account for purposes of determining Net Asset Value as of May 31,
1994 or as of the Phase I Closing.
-70-
<PAGE> 83
(b) Any cash proceeds from the sale or other disposition of the San
Diego Cellular Property or the Tucson Cellular Interest shall be:
(i) managed by the recipient at the unanimous direction of the WMC
Partnership Committee;
(ii) separately maintained and tracked in the accounting records
of USW or ATI;
(iii) upon the Phase II Closing, contributed, along with any
interest earned or dividends received, to WMC as part of the capital
contribution of USW, with respect to proceeds from the sale or other disposition
of the San Diego Cellular Property, and of ATI with respect to proceeds from the
sale or other disposition of the Tucson Cellular Interest; and
(iv) if this Agreement terminates prior to the Phase II Closing,
returned to the sole control of USW, along with any interest earned or dividends
received, with respect to the proceeds of the sale or other disposition of the
San Diego Cellular Property, and returned to the sole control of ATI, along with
any interest earned or dividends received, with respect to the proceeds of the
sale or other disposition of the Tucson Cellular Interest.
(c) The sale or disposition of the San Diego Cellular Property or the
Tucson Cellular Interest shall not cause or result in any adjustment to
Schedules 4.5A or 4.5B attached hereto.
4.4 Independent Third Party Verification.
(a) At the earliest practicable date, and in no event later than
October 31, 1995, USW and ATI shall mutually agree upon an independent third
party accounting firm of national standing and/or such other consultant familiar
with the cellular industry (an "Independent Third Party") to (i) verify the
calculations in Section 4.3(a) above, and (ii) verify that the projections for
San Diego and Tucson used to develop Schedule 4.5A were fair and reasonable.
Each of USW and ATI shall provide such Independent Third Party with all
information necessary to make all such verifications by December 15, 1995. The
costs and fees of such Independent Third Party shall be shared equally by the
Parties. The parties acknowledge and agree that if the Independent Third Party
concludes that the calculations in Sections 4.3(a) above are incorrect, there
shall be (i) a recalculation of Section 4.3(a) based upon the findings of the
Independent Third Party, and (ii) an appropriate adjustment to Schedule 4.5A.
(b) Either Party may request that any other calculation or
determination required under this Article 4 or
-71-
<PAGE> 84
under Article 5 also be performed by such Independent Third Party, the costs and
fees of which shall be shared equally among the Parties (as long as, for
purposes of sharing costs and fees, both Parties agree upon the scope and cost
of the calculation or determination to be performed by such Independent Third
Party, with such agreement not to be unreasonably withheld).
4.5 Initial Phase II Asset Percentages. Each Party's relative percentage
interest in the cash flow attributable to the Phase II Assets, the Scheduled
Phase II Related Assets, New Par and the Scheduled New Par Related Asset as of
the Phase I Closing shall be determined in accordance with this Section 4.5.
Such relative percentage interests shall be determined within five (5) days of
the date when the parties no longer have the ability to make Balance Sheet
Differential elections pursuant to Section 4.2(c) and such relative percentage
interests as of the Phase I Closing shall be used for purposes of the
calculation of the relative Phase II Closing Percentages of the Parties as set
forth in Article 5. In general, three alternative computations of such relative
percentage interests are to be made as of the Phase I Closing Date to reflect
three different assumptions as to ATI's ownership of New Par (based on ATI's
potential ownership of 100%, 50% or no portion of New Par) and, as set forth
herein, such New Par assumptions generally affect values and percentages that
are to be used as the basis for such calculations.
(a) First, three sets of "Tentative Initial Percentages" shall be
identified as of the Phase I Closing in accordance with Schedule 4.5A attached
hereto and based on three different assumptions as to New Par ownership. The
first set of Tentative Initial Percentages shall be the "Tentative Initial
Percentage-100% New Par" and shall be based on the assumption that ATI shall
contribute 100% of New Par. The second set of Tentative Initial Percentages
shall be the "Tentative Initial Percentage-50% New Par" and shall be based on
the assumption that ATI shall contribute 50% of New Par. The third set of
Tentative Initial Percentages shall be the "Tentative Initial Percentage-No New
Par" and shall be based on the assumption that ATI shall contribute no interest
in New Par. In the event that there is no date on Schedule 4.5A with the same
date as the Phase I Closing Date, the Tentative Initial Percentages shall be
determined by interpolating on a straight line basis the percentages on Schedule
4.5A from the last date preceding and first date subsequent to the Phase I
Closing Date and closest in time thereto. As an example, if the Phase I Closing
occurs on September 30, 1995, no interpolation shall be necessary and (assuming
Schedule 4.5A is not adjusted pursuant to Section 4.3 hereof) for ATI and USW,
the Tentative Initial Percentages-100% New Par shall be 73.9301% and 26.0699%,
respectively, the Tentative Initial Percentages-50% New Par shall be 69.8117%
and 30.1883%, respectively and the Tentative Initial Percentages-No New Par
shall be 64.1490% and 35.8510%, respectively.
-72-
<PAGE> 85
(b) Second, three alternative "Phase I Closing Values" shall be
determined as of the Phase I Closing as follows:
(i) The first step in determining the Phase I Closing Values shall
be to identify (A) the "Assumed Phase II Assets Value" which shall be the value
indicated on Schedule 4.5B, and (B) the "Assumed New Par Assets Value" which
shall be equal to the product of (I) 38.712%, and (II) the Assumed Phase II
Assets Value. The Parties acknowledge and agree that such Assumed Values are
only a basis to be used for the computations set forth in this Article 5 and are
not intended to reflect the true value of the Phase II Assets or New Par.
(ii) The second step in determining the Phase I Closing Values
shall be to calculate three alternative "Initial Values" by reference to the
Assumed Phase II Assets Value and the Assumed New Par Assets Value and based on
the three different assumptions as to New Par ownership.
(A) The first Initial Value shall be the "Initial Value-100%
New Par" and shall be equal to the Assumed Phase II Assets Value plus 100% of
the Assumed New Par Assets Value.
(B) The second Initial Value shall be the "Initial Value-50%
New Par" and shall be equal to the Assumed Phase II Assets Value plus 50% of the
Assumed New Par Assets Value.
(C) The third Initial Value shall be the "Initial Value-No
New Par" and shall be equal to the Assumed Phase II Assets Value.
(iii) The third step in determining the three alternative Phase I
Closing Values shall be to calculate such values as the three alternative
Initial Values, in each case, accreted at the rate of 12% per annum from July
25, 1994 to the Phase I Closing Date. Such Initial Values as so accreted shall
be referred to respectively as the "Phase I Closing Value-100% New Par," the
"Phase I Closing Value-50% New Par" and the "Phase I Closing Value-No New Par."
(c) Third, three sets of alternative "Initial Percentages" shall be
computed as of the Phase I Closing based on the three different assumptions as
to New Par ownership as follows. In each case, such Initial Percentages shall
take into account the Scheduled New Par Related Asset.
(i) The first set of Initial Percentages shall be the "Initial
Percentages-100% New Par" and, for each Party, shall be determined as the
quotient obtained by dividing (xx) such Party's Restated Phase I Closing Assets
by (yy) the aggregate Restated Phase I Closing Assets of both of the
-73-
<PAGE> 86
Parties. For purposes of this determination, the "Restated Phase I Closing
Assets" shall mean, for each Party, the sum of (A) the product of (I) such
Party's Tentative Initial Percentage-100% New Par, and (II) the Phase I Closing
Value-100% New Par, plus or minus, (B) such Party's Differential
Election Amount, plus (C) for ATI, the Scheduled NPRA 12% Value of the
Scheduled New Par Related Asset as determined as of the Phase I Closing.
(ii) The second set of Initial Percentages shall be the Initial
Percentage-50% New Par and shall be computed in the manner described in clause
(i) except that (A) such Party's Tentative Initial Percentage-50% New Par shall
be used in place of such Party's Tentative Initial Percentage-100% New Par, (B)
the Phase I Closing Value-50% New Par shall be used in place of the Phase I
Closing Value-100% New Par, and (C) 50% (rather than 100%) of the Scheduled NPRA
12% Value as determined as of the Phase I Closing shall be taken into account.
(iii) The third set of Initial Percentages shall be the Initial
Percentage-No New Par and shall be computed in the manner described in clause
(i) except that (A) such Party's Tentative Initial Percentage-No New Par shall
be used in place of such Party's Tentative Initial Percentage-100% New Par, (B)
the Phase I Closing Value-No New Par shall be used in place of the Phase I
Closing Value-100% New Par, and (C) no portion (rather than 100%) of the
Scheduled NPRA 12% Value shall be taken into account.
(d) Examples 2 and 3 of Exhibit A, attached hereto, reflect some of
the basic calculations set forth in this Section 4.5.
4.6 Dispute Resolution. If the Parties are unable to agree on the
adjustments to be made under this Article 4, including the adjustments to be
made to reflect the findings of the Independent Third Party pursuant to Section
4.4, the Parties shall follow the dispute resolution procedures set forth in
Section 5.14.
ARTICLE 5
PHASE II CLOSING PERCENTAGES
5.1 Cash Flows and Funding Prior to Phase II.
(a) During Phase I (i) USW shall be entitled to the cash flows and
responsible for the funding requirements relating to the USW Phase II Assets and
the Scheduled Phase II Related Assets, and (ii) ATI shall be entitled to the
cash flows and responsible for the funding requirements relating to the ATI
Phase II Assets, New Par, and the Scheduled New Par Related Asset.
-74-
<PAGE> 87
(b) Except as otherwise provided herein, any and all indebtedness or
liabilities incurred by the Parties prior to the Phase II Closing shall be the
sole responsibility of such Party. USW and ATI shall make every reasonable
effort to have any and all indebtedness or liabilities outstanding as of the
Phase I Closing Date and incurred in connection with such Party's Phase II
Assets (and for USW, Scheduled Phase II Related Assets) other than any
indebtedness and liabilities of the type allowed pursuant to Section 3.1(d)(v)
or Section 3.2(d)(v), respectively, repaid as soon as reasonably practicable and
in all events prior to the Phase II Closing.
5.2 Basic Principles for Phase II Closing Percentages. This Section 5.2 is
intended to provide general guidelines with respect to certain basic principles
that govern the process to be used to determine the relative Phase II Closing
Percentages of the Parties as of the Phase II Closing. Section 5.3 sets forth
general guidelines with respect to certain additional principles which are also
to be taken into account in determining such Phase II Closing Percentages.
Specific guidelines for computing the relative Phase II Closing Percentages
(based upon the general principles referred to in this Section 5.2 and Section
5.3) are set forth in Sections 5.4 through 5.10 hereof and Section 5.12 hereof.
(a) During Phase I (i) USW shall be entitled to the cash flows and
responsible for the funding requirements relating to the USW Phase II Assets and
the Scheduled Phase II Related Assets, and (ii) ATI shall be entitled to the
cash flows and responsible for the funding requirements relating to the ATI
Phase II Assets, New Par, and the Scheduled New Par Related Asset.
(b) The percentage interests of the Parties in the cash flows
(positive or negative) attributable to the Phase II Assets and New Par are
initially determined at the Phase I Closing in accordance with Section 4.5 and
the schedule set forth therein (i.e., with such initial percentages determined
by reference to the time of the Phase I Closing and after taking into account
certain additional complicating factors, as generally described in Section 5.3).
(c) Cash flows for Phase II Assets, Scheduled Phase II Related Assets,
New Par, and the Scheduled New Par Related Asset are recorded quarterly and
generally serve as the basis for computing adjustments to the initial percentage
interests (established as of the Phase I Closing) as follows, in each case, as
modified to take into account additional complicating factors (as generally set
forth in Section 5.3):
(i) For each quarter of Phase I, a cash flow adjustment amount is
calculated for each Party as follows. For USW the quarterly cash flow adjustment
amount shall be the difference between (A) the quarterly cash flow attributable
to
-75-
<PAGE> 88
USW's Phase II Assets and the Scheduled Phase II Related Assets, and (B) the
product of (1) USW's percentage interest in cash flows (generally as determined
by reference to its initial percentage interest for the first quarter and to its
restated percentage interest for each quarter thereafter), and (2) the aggregate
quarterly cash flows of both Parties attributable to the Phase II Assets, the
Scheduled Phase II Related Assets, and ATI's share of New Par and the Scheduled
New Par Related Asset. For ATI the quarterly cash flow adjustment amount shall
be the difference between (A) the quarterly cash flow attributable to ATI's
Phase II Assets and ATI's share of New Par and the Scheduled New Par Related
Asset and (B) the product of (1) ATI's percentage interest in cash flows
(generally as determined by reference to its initial percentage interest for the
first quarter and to its restated percentage interest for each quarter
thereafter), and (2) the aggregate quarterly cash flows of both Parties
attributable to the Phase II Assets, the Scheduled Phase II Related Assets, and
ATI's share of New Par and the Scheduled New Par Related Asset.
(ii) For each quarter of Phase I, the cash flow adjustment amount
is converted into a percentage (an "incremental percentage") of the total value
of the Phase II Assets, the Scheduled Phase II Related Assets, New Par and the
Scheduled New Par Related Asset (with such values accreting at the rate of 12%
per annum).
(iii) For each quarter of Phase I, the Party with a negative cash
flow adjustment amount for such quarter shall be identified and the incremental
percentage for such quarter shall be added to such Party's restated percentage
interest as of such quarter (and subtracted from the other Party's restated
percentage interest as of such quarter) in order to obtain the restated
percentage interests for the Parties that will apply for the following quarter.
(iv) The percentage interests of the Parties are revised and
restated pursuant to this process for each quarter of Phase I and such quarterly
revisions are cumulative until Phase II Closing Percentages are calculated at
the Phase II Closing (generally by adding or subtracting, as appropriate, the
incremental percentage determined for the final quarter of Phase I to the
restated percentage interests of the Parties as of such final quarter).
5.3 Additional Principles for Phase II Closing Percentages. Section 5.2 sets
forth the general guidelines with respect to certain basic principles that
govern the process to be used to determine the relative Phase II Closing
Percentages of the Parties as of the Phase II Closing. This Section 5.3 sets
forth the general guidelines with respect to certain additional principles that
complicate such determination but are nevertheless to be taken into account.
Specific guidelines for computing such Phase II Closing Percentages (based upon
the
-76-
<PAGE> 89
general principles set forth in Section 5.2 and this Section 5.3) are set forth
in Sections 5.4 through 5.10 hereof and Section 5.12 hereof.
(a) In general, three alternative computations are to be made
initially (as described in Section 4.5) and for each quarter of Phase I to
reflect three different assumptions as to ATI's ownership of New Par (based on
ATI's potential ownership of 100%, 50% or no portion of New Par).
(i) Such New Par assumptions generally affect values, percentages
and cash flows to be used for each quarterly calculation.
(A) If a New Par Contribution Date occurs at the time of the
Phase II Closing, initial and quarterly assumptions based on ATI's 100%
ownership of New Par are used to determine Phase II Closing Percentages.
(B) If a Back End Termination Date occurs prior to or on the
Phase II Closing, initial and quarterly assumptions based on ATI's ownership of
no portion of New Par are used to determine Phase II Closing Percentages.
(C) If the New Par Determination Date has not occurred at the
time of the Phase II Closing, initial and quarterly assumptions based on ATI's
50% ownership of New Par are used to determine Phase II Closing Percentages.
(ii) The Scheduled New Par Related Asset is to be taken into
account as of the Phase I Closing based on the appropriate New Par assumption
(ownership of 100%, 50% or no portion, as the case may be).
(iii) If the New Par Determination Date occurs after the Phase II
Closing, revised Phase II Closing Percentages are computed, but only for
purposes of determining the Parties' revised percentage interests in WMC cash
flows after the New Par Determination Date.
(b) In the event that either Party has made a Balance Sheet
Differential Election, the initial percentage interests of the Parties are
restated as of the Phase I Closing in the manner described in Section 4.5.
(c) The initial percentage interests of the Parties shall be restated
as of the Phase I Closing in the manner described in Section 4.5 to take into
account the Scheduled New Par Related Asset.
-77-
<PAGE> 90
(d) Scheduled Phase II Related Assets are contributed to WMC at the
Phase II Closing. At such time, ATI can elect to either (i) contribute cash in
an amount so as to avoid dilution, or (ii) have the final percentage interests
of the Parties in the Phase II Assets restated as of the Phase II Closing to
take into account USW's contribution of the Scheduled Phase II Related Assets.
5.4 Phase II Closing Percentages. Promptly after the Phase II Closing (and
in no event later than forty-five (45) days after the Phase II Closing), the
"Phase II Closing Percentages" of each Partner shall be determined as follows:
(a) In the event that the New Par Contribution Date occurs at the time
of the Phase II Closing, each Party's Phase II Closing Percentage shall be equal
to the Phase II Closing Percentage-100% New Par determined for the date of the
Phase II Closing for such Party pursuant to Section 5.7.
(b) In the event that the New Par Determination Date has not occurred
at the time of the Phase II Closing, each Party's Phase II Closing Percentage
shall be equal to the Phase II Closing Percentage-50% New Par determined for the
date of the Phase II Closing for such Party pursuant to Section 5.7.
(c) In the event that a Back End Termination Date occurs prior to (or
on) the Phase II Closing, each Party's Phase II Closing Percentage shall be
equal to the Phase II Closing Percentage-No New Par determined for the date of
the Phase II Closing for such Party pursuant to Section 5.7.
(d) In the event that the New Par Determination Date has not occurred
at the time of the Phase II Closing, all three sets of Phase II Closing
Percentages shall be determined for the date of the Phase II Closing pursuant to
Section 5.7 and shall be recorded and retained by the Parties until the time
that the Phase II Closing Percentages are redetermined in accordance with
Section 5.5.
(e) Each Party shall have the right to review the calculations used to
determine the Phase II Closing Percentages, including quarterly Cash Flow
computations (as set forth in Section 5.8) and to request adjustments based on
such review or the Independent Third Party review (pursuant to Section 4.4).
5.5 Restated Phase II Closing Percentages.
(a) In the event that the New Par Determination Date occurs after the
Phase II Closing, the applicable "Phase II Closing Percentages" of the Parties
shall be redetermined as of the New Par Determination Date as follows:
(i) In the event a New Par Contribution Date occurs subsequent to
the Phase II Closing, each Party's Phase II
-78-
<PAGE> 91
Closing Percentage applicable as of such New Par Contribution Date shall be
equal to the Phase II Closing Percentage-100% New Par determined for the date of
the Phase II Closing for such Party and recorded pursuant to Section 5.4(d).
(ii) In the event that a Back End Termination Date occurs
subsequent to the Phase II Closing, each Party's Phase II Closing Percentage
applicable as of such Back End Termination Date shall be equal to the Phase II
Closing Percentage-No New Par determined for the date of the Phase II Closing
for such Party and recorded pursuant to Section 5.4(d).
(b) Such Phase II Closing Percentages are one factor in the
calculation used to determine the relative Percentage Interests of the Parties
in WMC as of such New Par Determination Date (with such Percentage Interests to
be computed in accordance with Section 4.9 of the WMC Partnership Agreement).
5.6 Phase I Quarterly Computations. To provide a basis for the
determination of Phase II Closing Percentages in Section 5.4 and the
redetermination of Phase II Closing Percentages in Section 5.5, three sets of
"Quarterly Percentages" (based on the three different assumptions as to New Par
ownership) shall be computed for each fiscal quarter of Phase I (by reference to
the immediately preceding fiscal quarter) and for the Phase II Closing (by
reference to the final quarter of Phase I), in each case, as follows:
(a) First, for each fiscal quarter of Phase I, three sets of
"Quarterly Adjustment Amounts" shall be computed for the Parties.
(i) The first set of Quarterly Adjustment Amounts shall be the
"Quarterly Adjustment Amounts-100% New Par" and shall be determined for each
Party as the difference between (A) the Cash Flow for such Party set forth in
such Party's Quarterly Record for such quarter (as retained in accordance with
Section 5.9 and, with respect to ATI, as determined by reference to the ATI
Record-100% New Par), and (B) the product of (I) such Party's Quarterly
Percentage-100% New Par (determined in accordance with paragraph (d) hereof) for
such quarter, and (II) the aggregate Cash Flow for both Parties as set forth in
the Quarterly Records for such quarter (determined for ATI by reference to the
ATI Record-100% New Par).
(ii) The second set of Quarterly Adjustment Amounts shall be the
"Quarterly Adjustment Amounts-50% New Par" and shall be computed in the manner
described in clause (i) except that (A) Cash Flow for ATI (and aggregate Cash
Flow for both Parties) shall be determined by reference to the ATI Record-50%
New Par rather than the ATI Record-100% New Par, and (B) a Party's Quarterly
Percentage-50% New Par shall be used in place of the Party's Quarterly
Percentage-100% New Par,
-79-
<PAGE> 92
(iii) The third set of Quarterly Adjustment Amounts shall be the
"Quarterly Adjustment Amounts-No New Par" and shall be computed in the manner
described in clause (i) except that (A) Cash Flow for ATI (and aggregate Cash
Flow for both Parties) shall be determined by reference to the ATI Record-No New
Par rather than the ATI Record-100% New Par, and (B) a Party's Quarterly
Percentage-No New Par shall be used in place of the Party's Quarterly
Percentage-100% New Par,
(b) Second, for each fiscal quarter of Phase I, three "Incremental
Percentages" shall be determined as follows.
(i) The first Incremental Percentage shall be the "Incremental
Percentage-100% New Par" and shall be determined as the quotient obtained by
dividing (A) the positive Quarterly Adjustment Amount-100% New Par (determined
in accordance with paragraph (a) of this Section 5.6) for such quarter, by (B)
the Quarterly Value-100% New Par (determined in accordance with Section 5.10(a))
for such quarter,
(ii) The second Incremental Percentage shall be the "Incremental
Percentage-50% New Par" and shall be determined as the quotient obtained by
dividing (A) the positive Quarterly Adjustment Amount-50% New Par for such
quarter, by (B) the Quarterly Value-50% New Par (determined in accordance with
Section 5.10(b)) for such quarter,
(iii) The third Incremental Percentage shall be the "Incremental
Percentage-No New Par" and shall be determined as the quotient obtained by
dividing (A) the positive Quarterly Adjustment Amount-No New Par for such
quarter, by (B) the Quarterly Value-No New Par (determined in accordance with
Section 5.10(c)) for such quarter,
(c) Third, for the first fiscal quarter of Phase I, each Party's
Quarterly Percentage-100% New Par shall be equal to its Initial Percentage-100%
New Par (as determined in accordance with Section 4.5(c)(i)), each Party's
Quarterly Percentage-50% New Par shall be equal to its Initial Percentage-50%
New Par (as determined in accordance with Section 4.5(c)(ii)), and each Party's
Quarterly Percentage-No New Par shall be equal to its Initial Percentage-No New
Par (as determined in accordance with Section 4.5(c)(iii)).
(d) Fourth, for each fiscal quarter of Phase I after the first fiscal
quarter, by reference to the immediately preceding fiscal quarter of Phase I,
and for the date of the Phase II Closing, by reference to the final quarter of
Phase I (with such immediately preceding fiscal quarter or final quarter of
Phase I, as the case may be, hereinafter referred to as the "Preceding
Quarter"), three sets of "Quarterly Percentages" shall be determined for the
Parties as follows:
-80-
<PAGE> 93
(i) The first set of Quarterly Percentages shall be the "Quarterly
Percentages-100% New Par" and shall be computed (A) for the Party whose
Quarterly Adjustment Amount-100% New Par for the Preceding Quarter (as
determined in accordance with paragraph (a) of this Section 5.6) was positive,
by subtracting the Incremental Percentage-100% New Par determined (in accordance
with paragraph (b) of this Section 5.6) for such Preceding Quarter from such
Party's Quarterly Percentage-100% New Par (as determined in accordance with this
Section 5.6(d)) for such Preceding Quarter, and (B) for the Party whose
Quarterly Adjustment Amount-100% New Par for the Preceding Quarter was negative,
by adding the Incremental Percentage-100% New Par determined for such Preceding
Quarter to such Party's Quarterly Percentage-100% New Par (as determined in
accordance with this Section 5.6(d)) for such Preceding Quarter),
(ii) The second set of Quarterly Percentages shall be the
"Quarterly Percentages-50% New Par" and shall be computed in the manner set
forth in clause (i) except that (A) a Party's Quarterly Adjustment Amount-50%
New Par shall be used in place of the Party's Quarterly Adjustment Amount-100%
New Par, (B) the Incremental Percentage-50% New Par shall be used in place of
the Incremental Percentage-100% New Par, and (C) a Party's Quarterly
Percentage-50% New Par shall be used in place of the Party's Quarterly
Percentage-100% New Par,
(iii) The third set of Quarterly Percentages shall be the
"Quarterly Percentages-No New Par" and shall be computed in the manner set forth
in clause (i) except that (A) a Party's Quarterly Adjustment Amount-No New Par
shall be used in place of the Party's Quarterly Adjustment Amount-100% New Par,
(B) the Incremental Percentage-No New Par shall be used instead of the
Incremental Percentage-100% New Par, and (C) a Party's Quarterly Percentage-No
New Par shall be used in place of the Party's Quarterly Percentage-100% New Par.
(c) Example 4 of Exhibit A, attached hereto, reflects some of the
basic calculations set forth in this Section 5.6.
5.7 Phase II Closing Percentages. For the date of the Phase II Closing, the
three sets of "Phase II Closing Percentages" shall be determined for the Parties
as follows:
(a) If, ATI contributes to the capital of WMC cash (or a note) in an
amount equal to the PIIRA LIBOR+ Adjustment in accordance with Sections 5.12(b)
and (c) hereof, then each Party's Phase II Closing Percentage-100% New Par shall
be equal to its Quarterly Percentage-100% New Par, each Party's Phase II Closing
Percentage-50% New Par shall be equal to its Quarterly Percentage-50% New Par,
and each Party's Phase II Closing Percentage-No New Par shall be equal to its
Quarterly Percentage-No New Par (in each case, with such Party's Quarterly
-81-
<PAGE> 94
Percentages determined as of the Phase II Closing in accordance with Section
5.6(d)).
(b) If, ATI invokes a Scheduled PIIRA Redetermination Procedure, then
the three sets of Phase II Closing Percentages as of the Phase I Closing shall
be redetermined in the manner described in Section 5.12.
5.8 Cash Flow.
(a) The general intent of this Section 5.8 is to calculate free cash
flow while (i) excluding the impact of all payments made or expenses incurred
with respect to financing and debt, (ii) excluding all impacts from acquisitions
and dispositions of domestic cellular licenses, businesses and business units,
and (iii) assuming that each Party has a 40% income tax rate with no book to tax
adjustments.
(b) For purposes of this Article 5 (including the computation set
forth under Section 5.6), "Cash Flow" derived from any Phase II Asset, New Par,
any Scheduled Phase II Related Asset or the Scheduled New Par Related Asset
generally means, for any period, an amount equal to the sum of:
(i) pre-tax net income or loss,
(ii) plus interest expense and any other costs related to
indebtedness charged to income,
(iii) plus any impact or expense related to any affiliate
contracts or any expenses allocable from the parent company
of one of the Partners except to the extent such contracts
or expenses have been approved by the WMC Partnership
Committee in the manner set forth in Section 2.16(a) of the
WMC Partnership Agreement (such unapproved contracts or
expenses, "Affiliate Contracts"), if such impacts or
expenses are charged to income,
(iv) plus expenses incurred in connection with a Party's failure
to operate its business in accordance with Section 3.1(b) or
Section 3.2(b), as the case may be, or that relate to the
period prior to the Phase I Closing, including but not
limited to, any controversy, litigation, penalty or fine
assessed by a regulatory agency that relate to the period
prior to the Phase I Closing ("Exceptional Items") if the
expense for such Exceptional Item is charged to income,
-82-
<PAGE> 95
(v) plus expenses attributable to Reimbursed Expenses or
Transition Bonuses if such expenses are charged to income,
(vi) minus revenues attributable to Exceptional Items if such
revenues are credited to income,
(vii) minus revenues (or expense relief) attributable to
Reimbursed Expenses if such revenues or expense relief are
credited to income,
(viii) minus 40% of the sum (positive or negative) obtained by
adding the amounts set forth in clauses (i) through (vii)
above,
(ix) plus depreciation and amortization charged to income,
(x) plus non-cash charges to income where the offsetting entry
does not impact working capital,
(xi) minus non-cash credits to income where the offsetting entry
does not impact working capital,
(xii) plus decreases in working capital, or
(xiii) minus increases in working capital, it being understood
that working capital changes calculated for purposes of
clause (xii) or this clause (xiii) shall exclude any
impacts related to (A) payments, payables, prepayments,
deferrals, or distributions with respect to Unpermitted
Liabilities, (B) Reimbursed Expenses, Transition Bonuses,
or Affiliate Contracts, or (C) accrued, prepaid or deferred
interest, income taxes or dividends,
(xiv) minus capital expenditures,
(xv) minus expenditures that create tangible non-current assets
or prepaids,
(xvi) minus capital contributions to Excluded Minority Interests
as described in paragraph (h),
(xvii) plus distributions received from Excluded Minority
Interests as described in paragraph (h),
-83-
<PAGE> 96
(xviii) minus expenditures for long-lived intangible assets if
such expenditures were approved by the WMC Partnership
Committee.
(c) Cash Flow shall be determined in accordance with GAAP accounting
principles and presented on a fully proportional basis.
(d) Any revenues, expenses, profits and losses from MFJ Restricted
Activities shall be excluded from the determination of Cash Flow and for all
purposes under this Article 5.
(e) In each case, the items set forth in paragraph (b) shall only be
taken into account as they relate to any Phase II Asset, New Par, any Scheduled
Phase II Related Asset or the Scheduled New Par Related Asset, as the case may
be, for the period for which such Cash Flow is being computed. Any item set
forth in paragraph (b), as it relates to any asset for any period, should only
be counted once (and any repetitive descriptions of the same item should be
ignored).
(f) Impacts related to acquisitions and dispositions of domestic
cellular licenses, businesses and business units shall not be taken into account
for purposes of determining Cash Flow.
(g) Impacts related to payments, payables, prepayments, deferrals,
expenses, or distributions with respect to Unpermitted Liabilities or any income
tax payment or receipt (and other similar direct account changes) shall not be
taken into account for purposes of determining Cash Flow.
(h) For purposes of this Section 5.8, "Excluded Minority Interests"
mean minority interests with respect to which sufficiently detailed financial
information is not available within a reasonable time frame to prepare a
proportional cash flow calculation prior to the date of the Phase II Closing. As
set forth in clauses (xvi) and (xvii) of paragraph (b), Cash Flow for purposes
of this Article 5 (including the calculation of Phase II Closing Percentages
pursuant to Section 5.6) shall originally be calculated by reference to capital
contributions to, and distributions from, such Excluded Minority Interests. The
Parties agree to recalculate such Cash Flow (and any items, such as Phase II
Closing Percentages, computed in whole or in part by reference to Cash Flow) as
the actual financial information becomes available (by using such actual
financial information rather than capital contributions and distributions);
provided, however, that such actual financial information is provided within
three (3) years of the Phase II Closing.
(i) Items that would otherwise reduce Cash Flow shall not be taken
into account (A) to the extent that such items are attributable (I) to USW's or
ATI's failure to operate
-84-
<PAGE> 97
its business in accordance with Section 3.1(b) or Section 3.2(b), respectively,
or (II) to a Party's failure (except as contemplated in an Approved Business
Plan) to operate its business in the ordinary course, consistent with past
practice and in the manner contemplated by the Approved Business Plan, or (B) to
the extent that such items are attributable to an expenditure or payment that is
not ordinary and necessary.
5.9 Phase I Quarterly Records. To provide a basis for purposes of the
calculations set forth in Section 5.6, quarterly records for each fiscal quarter
of Phase I ("Quarterly Records") shall be maintained as follows:
(a) Quarterly Records for USW (the "USW Records") shall be maintained
for each quarter of Phase I to record the Cash Flow for such quarter from (A)
the USW Phase II Assets, and (B) the Scheduled Phase II Related Assets.
(b) Three alternative Quarterly Records for ATI (the "ATI Record")
shall be maintained for each quarter of Phase I to record Cash Flow based on the
three alternative assumptions as to New Par ownership.
(i) The first type of ATI Record shall be the ATI Record-100% New
Par and shall record for each quarter of Phase I (1) the Cash Flow for such
quarter from the ATI Phase II Assets, (2) 100% of the Cash Flow for such quarter
from New Par, and (3) 100% of the Cash Flow for such quarter from the Scheduled
New Par Related Asset.
(ii) The second type of ATI Quarterly Record shall be the "ATI
Record-50% New Par" and shall be computed in the manner described in clause (i)
except that 50% (rather than 100%) of the Cash Flow for such quarter from New
Par shall be included and 50% (rather than 100%) of the Cash Flow for such
quarter from the Scheduled New Par Related Asset shall be included.
(iii) The third type of ATI Quarterly Record shall be the "ATI
Record-No New Par" and shall be computed in the same manner described in clause
(i) except that no portion (rather than 100%) of the Cash Flow for such quarter
from New Par shall be included and no portion (rather than 100%) of the Cash
Flow for such quarter from the Scheduled New Par Related Asset shall be
included.
5.10 Quarterly Values. For purposes of the calculations set forth in Section
5.6, three alternative "Quarterly Values" (based on the three assumptions as to
New Par ownership) shall be defined with respect to any fiscal Quarter of Phase
I as follows.
(a) "Quarterly Value-100% New Par" shall mean, an amount equal to the
sum of (A) the Initial Value-100% New Par
-85-
<PAGE> 98
(as determined in accordance with 4.5(b)(ii)(A)), accreted at the rate of 12%
per annum from July 25, 1994 to the last day of the Quarter at Issue, plus (B)
the aggregate Scheduled PIIRA 12% Values of all Scheduled Phase II Related
Assets as determined for the last day of the Quarter at Issue, plus (C) 100% of
the Scheduled NPRA 12% Value as determined for the last day of the Quarter at
Issue, plus or minus (D) the Total Differential Election Amount (as defined in
Section 4.2(c)), if any, accreted at the rate of 12% per annum from the Phase I
Closing Date to the last day of the Quarter at Issue.
(b) "Quarterly Value-50% New Par" shall mean an amount computed in the
same manner as provided in paragraph (a) except (i) the Initial Value-50% New
Par (as determined in accordance with 4.5(b)(ii)(B)) shall be used in place of
the Initial Value-100% New Par, and (ii) 50% (rather than 100%) of the Scheduled
NPRA 12% Value shall be taken into account.
(c) "Quarterly Value-No New Par" shall mean an amount computed in the
same manner as provided in paragraph (a) except (i) the Initial Value-No New Par
(as determined in accordance with 4.5(b)(ii)(C)) shall be used in place of the
Initial Value-100% New Par, and (ii) no portion (rather than 100%) of the
Scheduled NPRA 12% Value shall be taken into account.
5.11 New Par Adjustment.
(a) In the event that a New Par Determination Date occurs subsequent to
the Phase II Closing, New Par Quarterly Adjustments shall be determined for each
quarter during the period beginning on the Phase II Closing and ending on the
New Par Determination Date.
(b) For any quarter during Phase II (prior to the New Par Determination
Date), the New Par Quarterly Adjustment shall be the product of (i) 50% of the
Cash Flow for New Par for such quarter, and (ii) USW's Percentage Interest in
WMC for such quarter (as determined pursuant to the WMC Partnership Agreement).
(c) Such New Par Quarterly Adjustments (positive or negative) shall
accrete at the rate of 3 month LIBOR + 1/2%, compounded quarterly, for the
period beginning on the first day subsequent to the fiscal quarter to which such
Quarterly Adjustment relates and ending on the date that the Final New Par
Adjustment computed hereunder is paid.
(d) The quarterly amounts so accreted shall be totaled to determine a
Final New Par Adjustment.
-86-
<PAGE> 99
(e) Within forty-five (45) days after the New Par Determination Date:
(i) if the Final New Par Adjustment is positive, ATI shall
contribute an amount to WMC, in cash or in the form of a note, equal to (A) the
Final New Par Adjustment, divided by (B) USW's Percentage Interest in WMC on the
New Par Determination Date (as redetermined pursuant to Section 4.9 of the WMC
Partnership Agreement);
(ii) if the Final New Par Adjustment is negative, USW shall
contribute an amount to WMC, in cash or in the form of a note, equal to (A) the
Final New Par Adjustment, divided by (B) ATI's Percentage Interest in WMC on the
New Par Determination Date (as redetermined pursuant to Section 4.9 of the WMC
Partnership Agreement).
(f) Any note issued pursuant to this Section 5.11 shall bear interest
at a rate equal to three month LIBOR + 1/2%, compounded quarterly, and shall be
due and payable no later than two years after the date of issuance.
(g) Example 5 of Exhibit A attached hereto, reflects some of the basic
calculations set forth in this Section 5.11.
5.12 Scheduled Phase II Related Assets.
(a) On the Phase II Closing USW shall contribute the Scheduled Phase
II Related Assets to WMC.
(b) ATI shall elect by written notice to USW and WMC within thirty
days after the date that the Scheduled Phase II Related Assets are contributed
to WMC, either (i) to contribute to the capital of WMC, within thirty (30) days
after sending such written notice, cash (or a note) in an amount equal to the
PIIRA LIBOR+ Adjustment computed in accordance with paragraph (c) below, or (ii)
to have each Party's Phase II Closing Percentage redetermined as of the date of
the Phase II Closing (based on the three different assumptions as to New Par
ownership) and as of the New Par Determination Date (based on the appropriate
assumption as to New Par ownership), in each case with such percentages
redetermined in accordance with the procedures set forth in paragraph (d) below
(the "Scheduled PIIRA Redetermination Procedure").
(c) In the event that ATI decides pursuant to paragraph (b) above to
contribute cash (or a note) to WMC, the following shall occur:
(i) First, the "PIIRA LIBOR+ Value" shall be determined as an
amount equal to the aggregate Purchase Prices for the Scheduled Phase II Related
Assets, in each case accreted at the rate of 3 month LIBOR + 1/2%, compounded
quarterly, for the
-87-
<PAGE> 100
period beginning on the Phase I Closing Date and ending on the date of the Phase
II Closing.
(ii) Second, the PIIRA LIBOR+ Adjustment shall be determined as
the product of (i) the PIIRA LIBOR+ Value, and (ii) two-and one-third (the
quotient obtained by dividing seventy percent by thirty percent).
(iii) The Phase II Closing Percentages shall not be redetermined
on the date of the Phase II Closing to take into account USW's contribution of
the Scheduled Phase II Related Assets.
(d) In the event that ATI has elected to invoke the Scheduled PIIRA
Redetermination Procedure, each Party's Phase II Closing Percentage as of the
Phase I Closing (and as of the New Par Determination Date) shall be determined
in the following manner:
(i) First, three alternative "Restated Phase II Asset Values"
shall be computed as of the Phase II Closing (based on the three different
assumptions as to New Par ownership) as follows:
(A) The "Restated Phase II Asset Value-100% New Par" shall be
equal to the sum of (A) the Initial Value-100% New Par (as determined in
accordance with 4.5(b)(ii)(A)), accreted at the rate of 12% per annum from July
25, 1994 to the date of the Phase II Closing, plus (B) 100% of the Scheduled
NPRA 12% Value as determined for the date of the Phase II Closing, plus or minus
(C) the Total Differential Election Amount (as defined in Section 4.2(c)), if
any, accreted at the rate of 12% per annum from the Phase I Closing Date to the
date of the Phase II Closing.
(B) The "Restated Phase II Asset Value-50% New Par" shall be
computed in the same manner as provided in subparagraph (A) except (I) the
Initial Value-50% New Par (as determined in accordance with Section
4.5(b)(ii)(B)) shall be used in place of the Initial Value-100% New Par, and
(II) 50% (rather than 100%) of the Scheduled NPRA 12% Value as of the Phase II
Closing shall be taken into account.
(C) The "Restated Phase II Asset Value-No New Par" shall be
computed in the same manner as provided in subparagraph (A) except (I) the
Initial Value-No New Par (as determined in accordance with Section
4.5(b)(ii)(C)) shall be used in place of the Initial Value-100% New Par, and
(II) no portion (rather than 100%) of the Scheduled NPRA 12% Value as of the
Phase II Closing shall be taken into account.
(ii) Second, the three alternative Phase II Closing Percentages
shall be redetermined in the following manner:
-88-
<PAGE> 101
(A) The "Phase II Closing Percentage-100% New Par" of each
Party shall be redetermined as the quotient obtained by dividing (1) the
Restated Closing Phase II Assets of such Party, by (2) the Restated Closing
Phase II Assets of both of the Parties. For purposes of this determination,
"Restated Closing Phase II Assets" shall mean, for each Party, the sum of (I)
the product of x) such Party's Phase II Quarterly Percentage-100% New Par
determined for the Phase II Closing in accordance with Section 5.6(d)), and y)
the Restated Phase II Asset Value-100% New Par, plus (II) for USW, the aggregate
Scheduled PIIRA 12% Values of all Scheduled Phase II Related Assets, as
determined for the date of the Phase II Closing.
(B) The "Phase II Closing Percentage-50% New Par" shall be
redetermined in the manner described in subparagraph (A) except that (I) such
Party's Phase II Quarterly Percentage-50% New Par shall be used in place of such
Party's Phase II Quarterly Percentage-100% New Par, and (II) the Restated Phase
II Asset Value-50% New Par shall be used in place of the Restated Phase II Asset
Value-100% New Par.
(C) The "Phase II Closing Percentage-No New Par" shall be
redetermined in the manner described in subparagraph (A) except that (I) such
Party's Phase II Quarterly Percentage-No New Par shall be used in place of such
Party's Phase II Quarterly Percentage-100% New Par, and (II) the Restated Phase
II Asset Value-No New Par shall be used in place of the Restated Phase II Asset
Value-100% New Par.
(e) This Section 5.12 assumes that USW shall have obtained all
Authorizations and Consents necessary to transfer all Scheduled Phase II Related
Assets to WMC as of the Phase II Closing. In the event that any Scheduled Phase
II Related Assets are not contributed to WMC as of the Phase II Closing, this
Section 5.12 shall be applied as of the Phase II Closing without taking into
account Scheduled Phase II Related Assets that are not contributed to WMC on the
Phase II Closing. In the event that such Scheduled Phase II Related Assets are
later contributed to WMC, a similar methodology shall be used to allow ATI to
elect to (i) contribute cash (or a note) so as to avoid dilution (with such
amount determined based upon the Purchase Price of such Scheduled Phase II
Related Assets, accreted from the Phase I Closing Date at the rate of 3 month
LIBOR + 1/2%, compounded quarterly), or (ii) to have Phase II Closing
Percentages as of the date such Scheduled Phase II Related Assets are
contributed to WMC redetermined (based upon assumed accretion at 12% per annum
of the Purchase Prices of such Scheduled Phase II Related Assets and of the
appropriate Initial Value or Values, the appropriate portion or portions (100%,
50% or no portion) of the Scheduled NPRA 12% Value, the Total Differential
Election Amount, and any Scheduled Phase II Related Assets previously
contributed to WMC).
-89-
<PAGE> 102
(f) Example 6 and Example 7 (Calculation 1) of Exhibit A, attached
hereto, reflects some of the basic calculations set forth in this Section 5.12.
5.13 Minority Indebtedness Adjustment. In the event that any direct or
indirect Unpermitted Liability of any Party is assumed, directly or indirectly,
by WMC, such Party shall contribute cash to WMC equal to the amount of such
liability, including, without limitation, the amount of all unpaid interest
accrued with respect to such liability. This Section 5.13 is not intended to be
the sole remedy in the event that indebtedness is incurred in violation of a
Party's covenant pursuant to Section 3.1(d) or 3.2(d), as the case may be, of
this Organization Agreement.
5.14 Dispute Resolution. If the Parties are unable to agree on the
adjustments to be made under Article 4 or under this Article 5:
(a) First, the Parties shall refer the disputed matter to their
respective Chief Financial Officers in an attempt to reach a resolution;
(b) Second, if the Chief Financial Officers are unable to resolve a
disputed matter within thirty (30) days after referral to them of a dispute, the
dispute shall be submitted to the Chairman of the Board of Directors of each
Party in an attempt to reach a resolution; and
(c) Third, if the Chairmen are unable to resolve a disputed matter
within thirty (30) days after referral to them of the dispute, the dispute shall
be referred to arbitration in accordance with the Arbitration Agreement for
resolution.
ARTICLE 6
PHASES OF THE JOINT VENTURE AND CLOSINGS
6.1 Prior to Phase I. From and after the Effective Date and prior to the
Phase I Closing, the Domestic Cellular Business and PCS activities of the
Parties and their respective Affiliates shall be governed by this Organization
Agreement, the Investment Agreement, the WMC Partnership Agreement, the PCS Par
Partnership Agreement, and all other documents delivered in connection therewith
or in connection with the Initial Organization Agreement. Between the Effective
Date hereof and the Phase I Closing, neither USW nor ATI nor any of their
respective Affiliates shall directly or indirectly control, supervise or direct,
or attempt to control, supervise or direct, the operation of any of the Phase II
Assets now licensed to the other Party or the other Party's Affiliates.
6.2 Phase I. From and after the Phase I Closing and prior to the Phase II
Closing, the Domestic Cellular Business
-90-
<PAGE> 103
and PCS activities of the Parties and their respective Affiliates shall be
governed by this Organization Agreement, the Investment Agreement, the Agreement
of Exchange, the Trust Agreement of Exchange, the WMC Partnership Agreement, the
PCS Par Partnership Agreement, the ATI Services Agreement, the NewVector
Services Agreement, and all other documents delivered in connection therewith or
in connection with the Initial Organization Agreement.
(a) Conditions to Phase I Closing. The obligation of the Parties to
proceed with the Phase I Closing is conditioned on:
(i) Receipt by USW of all Authorizations required to be obtained
with respect to Phase I, as identified in SCHEDULES 2.1(d)(ii) and 2.1(d)(iii)
hereto;
(ii) Receipt by ATI of all Authorizations required to be obtained
with respect to Phase I, as identified in SCHEDULES 2.2(d)(ii) and 2.2(d)(iii)
hereto; and
(iii) No preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Body shall be in effect that would make the consummation of the
Transactions in Phase I contemplated by this Organization Agreement and the
Phase I Related Agreements illegal. In the event any such injunction or order
shall be issued, the Parties hereto agree to cooperate to restructure the Phase
I Transaction to the minimum extent necessary to avoid or mitigate such
consequences, while preserving to the fullest extent possible the intent of the
Parties regarding Phase I operations as well as the relative economic positions
of the Parties. The Parties shall attempt to determine the manner of
restructuring which best gives effect to the intent of the Parties set forth in
this SECTION 6.2(a)(iii).
(b) Deliveries on or before the Phase I Closing. On or before the
Phase I Closing, the Parties shall deliver the following:
(i) Each Party shall deliver to the other a certificate, executed
on such Party's behalf by an authorized officer, to the effect that:
(A) The representations and warranties of such Party
contained in SECTION 2.1 or SECTION 2.2 of this Organization Agreement remain
true and complete on and as of the Phase I Closing, except as set forth in such
certificate;
(B) Such Party has performed and is in compliance with all of
its agreements and covenants contained in
-91-
<PAGE> 104
this Organization Agreement and the Related Agreements, as of the Phase I
Closing, except as set forth in such certificate;
(ii) ATI shall cause to be delivered to WMC the executed ATI
Services Agreement;
(iii) USW shall cause to be delivered to WMC the executed
NewVector Services Agreement; and
(iv) Each Party shall cause to be executed and delivered to WMC
any and all instruments required or advisable to license to WMC such Party's
Intellectual Property.
(c) Phase I Closing. The Phase I Closing shall occur on a date
mutually agreed on in writing by USW, ATI and WMC that shall be a Business Day
no later than the twentieth (20th) Business Day following the receipt of the
Authorizations described in SECTIONS 6.2(a)(i) and 6.2(a)(ii) hereof.
6.3 Phase II. From and after the Phase II Closing Date and until and unless
the Phase III Closing shall occur, the Domestic Cellular Businesses and PCS
activities of the Parties shall be governed by this Organization Agreement, the
Investment Agreement, the Agreement of Exchange, the Trust Agreement of
Exchange, the WMC Partnership Agreement, the PCS Par Partnership Agreement, and
all other documents delivered in connection therewith or in connection with the
Initial Organization Agreement.
(a) Conditions to Phase II Closing. The obligation of the Parties to
proceed with the Phase II Closing is conditioned on:
(i) Receipt by USW of all Authorizations required to be obtained
with respect to Phase II, as identified in SCHEDULES 2.1(d)(ii) and 2.1(d)(iii)
hereto;
(ii) Receipt by ATI of all Authorizations required to be obtained
with respect to Phase II, as identified in SCHEDULES 2.2(d)(ii) and 2.2(d)(iii)
hereto;
(iii) USW's obligation to proceed with the Phase II Closing shall
be conditioned on ATI's ability to vest in WMC all right, title, and interest in
and to ATI Phase II Assets representing aggregate POPs equal to sixty percent
(60%) or more of the total POPs of all ATI Phase II Assets, which condition USW
may waive, or decline to waive, in writing in its sole discretion;
(iv) ATI's obligation to proceed with the Phase II Closing shall
be conditioned on USW's ability to vest in WMC all right, title, and interest in
and to USW Phase II Assets representing aggregate POPs equal to sixty percent
(60%) or more of the total POPs of all USW Phase II Assets and
-92-
<PAGE> 105
Scheduled Phase II Related Assets, which condition ATI may waive, or decline to
waive, in writing in its sole discretion; and
(v) No preliminary or permanent injunction or other order, decree
(other than the MFJ as currently in effect) or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, nor any statute, rule, regulation or executive order promulgated
or enacted by any Governmental Body shall be in effect that would make the
consummation of the Phase II Closing illegal, or would, after the Phase II
Closing, impose material restrictions or limitations on the operations of WMC
which would not otherwise be imposed on the Phase II Assets or Scheduled Phase
II Related Assets of one or both of the Parties and which would be so burdensome
as to deprive such Party or Parties of fundamental benefits expected to be
derived from the Phase II Closing.
(b) Deliveries on or before the Phase II Closing. On or before the
Phase II Closing, each of the Parties and WMC shall deliver the following:
(i) Each Party shall deliver to the other a certificate, executed
on such Party's behalf by an authorized officer, to the effect that:
(A) The representations and warranties of such Party
contained in SECTION 2.1 or SECTION 2.2 of this Organization Agreement remain
true and complete on and as of the Phase II Closing, except as set forth in such
certificate;
(B) Such Party has performed and is in compliance, in all
material respects, with all of its agreements and covenants contained in this
Organization Agreement and the Related Agreements, as of the Phase II Closing,
except as set forth in such certificate;
(ii) USW shall cause to be executed and delivered to WMC any and
all instruments required or advisable to vest in WMC all right, title, and
interest in and to each of USW's Phase II Assets and the Scheduled Phase II
Related Assets for which all required Authorizations and Consents, if any, have
been obtained, free and clear of all indebtedness for borrowed money and Liens,
in the manner most advantageous to the USW Parties and WMC, as determined by the
WMC Partnership Committee;
(iii) ATI shall cause to be executed and delivered to WMC any and
all instruments required or advisable to vest in WMC all right, title, and
interest in and to each of ATI's Phase II Assets for which all required
Authorizations and Consents, if any, have been obtained, free and clear of all
indebtedness for borrowed money and Liens, in the manner most
-93-
<PAGE> 106
advantageous to the ATI Parties and WMC, as determined by the WMC Partnership
Committee;
(iv) WMC shall assume all Permitted Liabilities associated with
the USW Phase II Assets and Scheduled Phase II Related Assets and the ATI Phase
II Assets contributed to WMC at the Phase II Closing and all other liabilities
and obligations associated with the USW Phase II Assets and Scheduled Phase II
Related Assets and the ATI Phase II Assets contributed to WMC at the Phase II
Closing arising on and after the Phase II Closing pursuant to contracts (other
than Material Contracts) entered into in the ordinary course of business,
Material Contracts identified in SCHEDULES 2.1(l) and 2.2(l) hereto, and
Material Contracts approved by the WMC Partnership Committee but shall not
assume (A) any Unpermitted Liability or (B) any liability for income taxes for
any period prior to the Phase II Contribution Date;
(v) Unless USW shall elect to have the PCS Par Contribution Date
occur on a subsequent date in accordance with the WMC Partnership Agreement,
each of USW and ATI shall cause to be executed and delivered to WMC any and all
instruments required or advisable to vest in WMC all right, title, and interest
in and to its Percentage Interest in PCS Par, free and clear of all indebtedness
for borrowed money and Liens, together with a certificate as described in
SECTION 6.4(c)(i) hereof; and
(vi) In the event that the Phase II Closing shall occur prior to
Partial MFJ Relief (except pursuant to SECTION 6.3(c)(iii) hereof), WMC shall,
within 45 days of receipt of each detailed invoice, reimburse ATI for the
one-time cost of restructuring such of its domestic cellular operations and
separating any assets or activities that would otherwise subject WMC or USW to
liability for violation of the MFJ; provided, however, that ATI shall not be
entitled to any compensation from WMC or USW for any lost profits or opportunity
costs arising out of or relating to the commencement of Phase II.
(c) Phase II Closing. The Phase II Closing shall occur on a date
mutually agreed upon in writing by USW, ATI, and WMC that shall be a Business
Day no later than the twentieth (20th) Business Day following satisfaction of
all conditions to the Phase II Closing and the first to occur of the following:
(i) Receipt of Partial MFJ Relief;
(ii) The written agreement of USW, ATI, and WMC to commence Phase
II;
(iii) Ninety (90) days following written notice provided by ATI to
USW and WMC that ATI elects to exercise its right under this SECTION 6.3(c)(iii)
to cause Phase II to be
-94-
<PAGE> 107
commenced (such right referred to herein as the "ATI Phase II Trigger"); and
(iv) The fourth anniversary of the Effective Date.
6.4 PCS Contribution Date.
(a) On the PCS Contribution Date (as defined in the WMC Partnership
Agreement), each of USW and ATI and/or their Affiliates shall make a capital
contribution to WMC equal to one hundred percent (100%) of their respective
Percentage Interests in PCS Par, free and clear of all indebtedness for borrowed
money or Liens.
(b) The obligation of the Parties to proceed with the PCS Contribution
Date is conditioned on: (i) receipt by USW and ATI of all Authorizations
required to be obtained with respect to the contribution of their Percentage
Interests in PCS Par which may include those identified in SCHEDULES 2.1(d)(ii),
2.1(d)(iii), 2.2(d)(ii), and 2.2(d)(iii) hereto; and (ii) no preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, nor any statute, rule, regulation or executive order promulgated
or enacted by any Governmental Body, shall be in effect that would make the
consummation of the PCS Contribution Date illegal or would impose any material
limitation on the consummation of such PCS Contribution Date or other operations
of WMC or otherwise restrain, enjoin or prevent the consummation of the PCS
Contribution Date.
(c) On or before the PCS Contribution Date, each of the Parties shall
deliver the following:
(i) Each Party shall deliver to the other and to WMC a
certificate, executed on such Party's behalf by an authorized officer and dated
as of the date of the PCS Contribution Date, representing and warranting to the
other Party and to WMC that: (A) such Party has good legal title to, and
beneficial ownership of, its Percentage Interest in PCS Par free and clear of
all Liens, restrictions, equities, options, and claims; (B) the contribution of
such Percentage Interest in PCS Par has been duly authorized by all necessary
corporate or partnership action on the part of such Party and will not conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
or other encumbrance on any of its properties or assets pursuant to any
agreement, indenture or instrument to which it is a party, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
-95-
<PAGE> 108
properties or assets is bound or affected; and (C) immediately after the PCS
Contribution Date, WMC will be the owner of all right, title and interest of USW
in and to such Percentage Interest.
(ii) Each Party shall cause to be executed and delivered to WMC
any and all instruments required or advisable to vest in WMC all right, title,
and interest in and to its Percentage Interest in PCS Par.
6.5 New Par Contribution Date.
(a) If and when ATI shall acquire, directly or indirectly, all of the
New Par Assets, ATI shall transfer, or cause to be transferred, to WMC at the
earliest practicable time thereafter, but in no event earlier than the Phase II
Closing Date, its entire right, title, and interest in and to the New Par Assets
and the Scheduled New Par Related Asset (as defined in the WMC Agreement) free
and clear of all indebtedness for borrowed money or Liens (other than Permitted
Liabilities).
(b) The obligation of ATI to transfer, or cause to be transferred, to
WMC the New Par Assets and the Scheduled New Par Related Asset is conditioned
on:
(i) Receipt by ATI of all Authorizations required to be obtained
with respect thereto, which may include certain of those identified in SCHEDULES
2.2(d)(iv)(A) and 2.2(d)(iv)(B); and
(ii) No preliminary or permanent injunction or other order,
decree, or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Body shall be in effect that would make the consummation of the New
Par Contribution Date illegal or would impose any material limitation on the
consummation of the New Par Contribution Date or on the Phase II operations of
WMC or otherwise restrain, enjoin or prevent the consummation of the New Par
Contribution Date.
(c) On or before the New Par Contribution Date, ATI shall deliver the
following:
(i) A certificate, executed on its behalf by an authorized
officer, to the effect that: (A) ATI has good legal title to, and beneficial
ownership of, the New Par Assets and the Scheduled New Par Related Asset free
and clear of all Liens, restrictions, equities, options, and claims, and (B) the
transfer of the New Par Assets and the Scheduled New Par Related Asset has been
duly authorized by all necessary corporate or partnership action on the part of
ATI.
-96-
<PAGE> 109
(ii) ATI shall cause to be executed and delivered to WMC any and
all instruments required or advisable to vest in WMC all right, title, and
interest in and to the New Par Assets and the Scheduled New Par Related Asset.
(iii) WMC shall assume all Permitted Liabilities associated with
the New Par Assets and the Scheduled New Par Related Asset contributed to WMC at
the New Par Contribution Date and all other liabilities and obligations
associated with the New Par Assets and the Scheduled New Par Related Assets
contributed to WMC at the New Par Contribution Date arising on and after the New
Par Contribution Date pursuant to contracts (other than Material Contracts)
entered into in the ordinary course of business, Material Contracts identified
in Section 2.2(e) hereto, and Material Contracts approved by the WMC Partnership
Committee, but WMC shall not assume (A) any Unpermitted Liability or (B) any
liability for income taxes for any period prior to the New Par Contribution
Date.
ARTICLE 7
TERMINATION
7.1 Termination of this Organization Agreement. (a) This Organization
Agreement shall terminate:
(i) Upon mutual written agreement of the Parties;
(ii) Ninety (90) days after the date that either Party provides
written notice to the other that it declines to proceed with the Phase II
Closing in accordance with SECTION 6.3(a)(iii) or 6.3(a)(iv) of this
Organization Agreement, as the case may be;
(iii) On July 25, 1997, if the Phase I Closing shall not have
occurred by that date; or
(iv) On July 25, 2004, if the Phase II Closing shall not have
occurred by that date.
(b) Anything herein to the contrary notwithstanding, the right to
terminate this Organization Agreement under this SECTION 7.1(a) shall not be
available to a Party whose failure to fulfill any covenant or obligation under
this Organization Agreement has been the cause of, or results in, the failure of
the Phase I Closing or the Phase II Closing to occur within the time period set
forth in this SECTION 7.1(a).
7.2 Winding Up. In the event that this Organization Agreement is terminated
pursuant to SECTION 7.1(a) hereof, the joint venture affairs of the Parties
shall be wound up in accordance with the provisions of Article 8 of the WMC
-97-
<PAGE> 110
Partnership Agreement and the provisions of Article 8 of the PCS Par Partnership
Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Definitions. As used in this ARTICLE 8, the following terms shall have
the meanings set forth below:
(a) "CLAIM" shall mean any claim based upon, arising out of or
otherwise in respect of any Loss.
(b) "INDEMNITEE" shall mean any Person which may be entitled to seek
indemnification pursuant to the provisions of this ARTICLE 8.
(c) "INDEMNITOR" shall mean any Person which may be obligated to
provide indemnification pursuant to this ARTICLE 8.
(d) "LOSS" shall mean any loss, liability, damage, cost, and expense,
including amounts paid in defense of, or with respect to any settlement or
judgment relating to, any demand, claim, action or cause of action or assessment
(including without limitation, diminution in value of any equity interest),
relating to or arising out of any of the occurrences set forth in SECTION 8.2,
8.3, 8.4 or 8.5 hereof. Loss shall include reasonable fees, disbursements, and
expenses of attorneys, accountants, and other professional advisers and shall be
net of any insurance proceeds received by an Indemnitee on account of such
Losses and net of any reimbursement of Losses received by an Indemnitee pursuant
to a right of contribution or to a contractual or other arrangement.
(e) "NOTICE PERIOD," as applied to any Claim for which an Indemnitee
seeks to be indemnified pursuant to this ARTICLE 8, shall mean the period ending
twelve (12) months after the time at which the Indemnitee has received actual
notice of a Third-Party Claim, or as to any other claim has obtained actual
knowledge of the facts or circumstances giving rise to such claim for which such
Indemnitee would reasonably be expected to be entitled to indemnification
pursuant to this ARTICLE 8.
(f) "RELATED COST" shall mean any liability, cost, expense (including,
without limitation, any reasonable expenses of investigation and attorneys' and
accountants' fees), loss, damage, assessment, settlement or judgment (other than
an item of Tax) which arises out of the imposition or assessment of any Tax.
8.2 Indemnity by USW. Except as otherwise expressly provided in this
ARTICLE 8, USW shall defend, indemnify, and hold harmless WMC, ATI, ATI's
Subsidiaries, and each of their officers, directors, employees, agents,
successors and assigns,
-98-
<PAGE> 111
and shall reimburse such Indemnitees for, from and against all Losses imposed on
or incurred by such Indemnitees, directly or indirectly, relating to, resulting
from or arising out of (a) any representation or warranty made by USW in this
Organization Agreement or any Related Agreement that was materially false when
made; (b) any liability or obligation of any nature (known or unknown, absolute,
accrued, contingent or otherwise) related to USW's Phase II Assets or Scheduled
Phase II Related Assets and Percentage Interest in PCS Par and attributable to
periods prior to the Phase II Closing (or such later date on which a particular
Phase II Asset was contributed to WMC) and the PCS Contribution Date,
respectively (excluding Permitted Liabilities and other liabilities assumed by
WMC at the Phase II Closing in accordance with SECTION 6.3(b)(iv) hereof); or
(c) any material default by USW in the performance of its obligations and
covenants under this Organization Agreement and the Related Agreements;
provided, however, that if, and to the extent that, an adjustment is made to
USW's Percentage Interest in WMC pursuant to Article 4 of the WMC Partnership
Agreement on account of the inability of USW to contribute any Phase II Assets
to WMC, no indemnification obligation shall arise under this SECTION 8.2; and
provided further that nothing herein shall relieve USW of any indemnification
obligation under this SECTION 8.2 for Losses incurred by ATI as a result of a
breach of any covenant by USW hereunder to contribute the USW Phase II Assets or
Scheduled Phase II Related Assets to WMC.
8.3 Indemnity by ATI. Except as otherwise expressly provided in this ARTICLE
8, ATI shall defend, indemnify, and hold harmless WMC, USW, USW's Subsidiaries,
and each of their officers, directors, employees, agents, successors and
assigns, and shall reimburse such Indemnitees for, from and against all Losses
imposed or incurred by such Indemnitees, directly or indirectly, relating to,
resulting from or arising out of (a) any representation or warranty made by ATI
in this Organization Agreement or any Related Agreement that was materially
false when made; (b) any liability or obligation of any nature (known or
unknown, absolute, accrued, contingent or otherwise) related to ATI's Phase II
Assets, Percentage Interest in PCS Par and he New Par Assets and Scheduled New
Par Related Asset if a New Par Contribution Date shall occur and attributable
to periods prior to the Phase II Closing (or such later date on which a
particular Phase II Asset was contributed to WMC), the PCS Contribution Date and
the New Par Contribution Date, respectively (excluding Permitted Liabilities and
other liabilities assumed by WMC at the Phase II Closing of the New Par
Contribution Date in accordance with SECTIONS 6.3(b)(iv) and 6.5(c)(iii) hereof
respectively); or (c) any material default by ATI in the performance of its
obligations and covenants under this Organization Agreement and the Related
Agreements; provided, however that if, and to the extent that, an adjustment is
made to ATI's Percentage Interest in WMC pursuant to Article 4 of the WMC
Partnership Agreement on
-99-
<PAGE> 112
account of the inability of ATI to contribute any Phase II Assets to WMC, no
indemnification obligation shall arise under this SECTION 8.3; and provided
further than nothing herein shall relieve ATI of any indemnification obligation
under this SECTION 8.3 for Losses incurred by USW as a result of a breach of any
covenant by ATI hereunder to contribute the ATI Phase II Assets to WMC.
8.4 Indemnity by WMC. The Parties shall cause WMC, from and after the
Effective Date and to the fullest extent permitted by law, to indemnify, defend
and hold harmless ATI and USW and their respective Affiliates, and their
Affiliates' officers, directors, employees, agents and representatives, from and
against any and all Losses arising out of, resulting from or relating to (a) any
act or omission taken or omitted to be taken by such Indemnitee at the direction
of the WMC Partnership Committee or the Approved Business Plan, including
without limitation pursuant to SECTION 6.3(b)(ii) or 6.3(b)(iii) of this
Organization Agreement or as a result of a decision by WMC to cause USW or ATI
or their Affiliates to terminate the employment of any employee thereof in
furtherance of the Approved Business Plan; or (b) any claim arising out of the
reasonable efforts by any Indemnitee to make the contributions to WMC required
to be made pursuant to SECTION 6.3(b)(ii) or 6.3(b)(iii) hereof.
8.5 Tax Indemnification. (a) Each of ATI and USW shall be individually
responsible for, will pay or cause to be paid, and will individually indemnify
and hold harmless the other Party and WMC from and against any and all Tax
liabilities and Related Costs from or related to each of the following:
(i) Any and all Taxes with respect to any taxable period of any
Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic Cellular
Investment Entity (or any predecessor) ending on or before the date such
Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic Cellular
Investment was contributed or transferred to WMC;
(ii) Any and all Taxes with respect to any taxable period ending
on or before the date any Domestic Cellular Asset, Domestic Cellular Subsidiary
or Domestic Cellular Investment was contributed or transferred to WMC resulting
from any Domestic Cellular Asset, Domestic Cellular Subsidiary or Domestic
Cellular Investment Entity having been (or ceasing to be) included in any
consolidated, combined or unitary tax return for any such period (including any
liability for taxes resulting from a "deferred intercompany transaction," within
the meaning of Treasury Regulation Section 1.1502-13(a)(2) or any analogous or
similar provision under state or local law or regulation);
(iii) Any and all Taxes arising from any member of a consolidated,
combined or unitary group of which the contributed Domestic Cellular Asset,
Domestic Cellular
-100-
<PAGE> 113
Subsidiary or Domestic Cellular Investment Entity is or was a member on or
before its contribution or transfer to WMC for which such Domestic Cellular
Asset, Domestic Cellular Subsidiary or Domestic Cellular Investment is liable
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or similar
provision under state or local law or regulation;
(iv) Any breach by such Party of any representation or warranty
made in SECTION 2.1(k) or 2.2(k) of this Organization Agreement;
(v) Any penalty or interest assessed or imposed by any taxing
authority; or
(vi) Any repayment of any refund described in Section 9.6(d).
(b) There shall be no limitations period with respect to any indemnity
in this SECTION 8.5.
8.6 Notification of Claims. Except as set forth in this SECTION 8.6, no
Indemnitor shall be obligated to indemnify any Indemnitee against any Loss
unless the Indemnitee shall have delivered to the Indemnitor within the Notice
Period a written notice ("CLAIM NOTICE") describing in reasonable detail the
facts giving rise to such Claim of Loss and stating that the Indemnitee intends
to seek indemnification for such Loss from the Indemnitor pursuant to this
ARTICLE 8. The foregoing notwithstanding, if an Indemnitee would otherwise be
entitled to indemnification hereunder but for its failure timely to deliver a
Claim Notice, such Indemnitee shall nevertheless be entitled to be indemnified
hereunder (a) if the Indemnitee can establish that the time elapsed between the
end of the Notice Period and the giving of the Claim Notice is reasonable in all
the circumstances, or (b) to the extent (but only to the extent) that the
Indemnitee can establish that the Indemnitor has not been prejudiced by such
time elapsed or by any intervening payment, settlement or other disposition of
such Claim.
8.7 Access and Cooperation. The Parties shall make available to each other
as reasonably requested all information, records and documents relating to all
Losses and shall preserve all such information, records and documents until the
termination of any Claim and the resolution of any issue with respect to
indemnification hereunder relating to such Claim. Each party shall also make
available to the other, as reasonably requested, their personnel (including
technical personnel), agents and other representatives who are responsible for
preparing or maintaining information, records or other documents, or who may
have particular knowledge, with respect to any Claim. An Indemnitee shall also
cooperate with an Indemnitor in attempting to minimize the Losses subject to
indemnification by pursuing and/or assigning to the Indemnitor any rights of
-101-
<PAGE> 114
contribution or right to reimbursement through contractual or other
arrangements.
8.8 Remedies. Except as expressly provided in SECTION 6.3(a)(iii),
6.3(a)(iv) or 7.1(a) of this Organization Agreement, the sole remedies available
to USW, ATI or WMC shall be the right to indemnification set forth herein and
the right to seek specific enforcement. USW and ATI each expressly and
intentionally waives the right to refuse to consummate any transactions
contemplated by this Organization Agreement or the Related Agreements as a
result of any false representation or warranty or breach of any covenant made in
this Organization Agreement or any Related Agreement by the other Party.
ARTICLE 9
MISCELLANEOUS
9.1 Arbitration. The Parties agree to submit to arbitration those disputes
described in the Arbitration Agreement.
9.2 Notices. (a) All notices called for under this Organization Agreement
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission and followed promptly by mail, telexed or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
If to ATI:
AirTouch Communications
One California Street
San Francisco, CA 94111
Telecopier: (415) 658-2298
Attention: Margaret G. Gill, Esq.
Senior Vice President-Legal,
External Affairs, and Secretary
With a Copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 983-1200
Attention: Nathaniel M. Cartmell III
-102-
<PAGE> 115
If to USW:
U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: Executive Vice President and General
Counsel
or to any other address or addressee as any party entitled to receive notice
under this Organization Agreement shall designate, from time to time, to others
in the manner provided in this SECTION 9.2 for the service of Notices.
(b) Any notice delivered to the party hereto to whom it is addressed
shall be deemed to have been given and received on the day it was received;
provided, however, that if such day is not a Business Day then the notice shall
be deemed to have been given and received on the Business Day next following
such day. Any notice sent by telex or facsimile transmission shall be deemed to
have been given and received on the Business Day next following the day of
transmission.
9.3 Modifications; Amendments; Waivers. This Agreement amends and restates
in its entirety the Initial Organization Agreement. This Organization Agreement
may be modified only by a written instrument duly executed by each Party hereto.
Any waiver of any term or condition of this Organization Agreement shall be
effective only if made in writing and only in the specific instance and for the
purpose for which given. No failure or delay on the part of any party hereto in
exercising any right, power, or privilege under this Organization Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
9.4 Rules of Interpretation.
(a) This Organization Agreement and the Related Agreements shall be
interpreted to give effect to every provision contained in each agreement;
provided, however, that if, and to the extent that, there is any conflict
between (i) a provision in this Organization Agreement and a provision in the
Investment Agreement, the Investment Agreement shall control; (ii) a provision
in this Organization Agreement and a provision in the WMC Partnership Agreement,
the WMC Partnership Agreement shall control; (iii) a provision in this
Organization Agreement and a provision in the PCS Par Partnership Agreement, the
PCS Par Partnership Agreement shall control; (iv) a provision in this
Organization Agreement and a provision in the Agreement of Exchange, the
Agreement of Exchange shall control; (v) a provision in this Organization
Agreement and a provision in the Trust Agreement of Exchange, the Trust
-103-
<PAGE> 116
Agreement of Exchange shall control; or (vi) a provision in this Organization
Agreement and a provision in any other Related Agreement, this Organization
Agreement shall control.
(b) The examples set forth in Exhibit A, attached hereto, are not
intended to amend, modify or supercede the provisions of Articles 4 and 5. In
the event of any conflict between the terms of this Organization Agreement and
the examples set forth in Exhibit A, the terms of this Organization Agreement
shall control.
9.5 Expenses. Except as specifically provided herein, whether or not the
Transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with the Transactions contemplated in this Organization
Agreement shall be paid by the Party incurring such cost or expense. Each Party
and its Affiliates shall bear all costs and expenses, including, without
limitation, any sales taxes, transfer taxes, recording fees and attorneys' or
accountants' fees incurred in contributing, transferring or causing its
Affiliates to transfer any Domestic Cellular Assets, Domestic Cellular
Subsidiaries, Domestic Cellular Investments, and Percentage Interests in PCS Par
to WMC, and any expenses, fees, and costs necessary for any Approvals shall be
paid by the Party seeking such Approval.
9.6 Certain Tax Matters.
(a) Whenever it is necessary for purposes of this Agreement to
determine the Tax liability of a taxable entity for a taxable year or period
that begins before and ends after the date such entity was contributed or
transferred to WMC, the determination shall be made (i) in the case of Taxes
that are not based on income or gross receipts (e.g., property taxes), by
apportioning such Taxes on a per diem basis; and (ii) in the case of Taxes based
on income or on gross receipts, by apportioning the total Tax liability for such
taxable year or period on the assumption that the taxable year or period ended
as of the close of the date such entity was contributed or transferred to WMC,
with income (or other applicable measure) apportioned as provided in Income Tax
Regulations section 1.1502-76(b)(4), provided that any deferred gain or loss on
deferred intercompany transactions which must be restored to income by ATI, USW
or their Subsidiaries by reason of the transfer or contribution of any Domestic
Cellular Asset, Domestic Cellular Subsidiary or Domestic Cellular Investment (or
any analogous state, local or foreign tax effects) shall be allocated entirely
to the period ending with the date of such contribution or transfer.
(b) Each of ATI and USW shall be individually responsible for preparing
and filing all Tax Returns for the Transferred Subsidiaries of ATI and USW,
respectively, for Tax periods ending prior to or on the Contribution Date and
making any required Tax payments with respect of such Tax Returns.
-104-
<PAGE> 117
Such Returns will report the operations of such Transferred Subsidiaries
consistent with past practice.
(c) USW and ATI shall, and each shall, as applicable cause their
respective affiliates to, use its best efforts to provide each other with such
assistance as may reasonably be requested by any of them in connection with Tax
matters, including providing information with respect to the preparation of any
Tax Return or other document required to be filed by any taxing authority, any
audit or other examination by any taxing authority, any judicial or
administrative proceeding or dispute relating to liability for Taxes or any
claim arising under this SECTION 9.6 or SECTION 8.5, and each shall retain and
provide to the other access to such records and other information as may be
relevant to such Return, audit, examination, proceeding or determination.
(d) Each of ATI and USW shall individually be entitled to all refunds
of Taxes received with respect to any taxable period of any Domestic Cellular
Asset, Domestic Cellular Subsidiary or Domestic Cellular Investment Entity (or
any predecessor) ending on or before the date such Domestic Cellular Asset,
Domestic Cellular Subsidiary or Domestic Cellular Investment Entity was
contributed or transferred to WMC; provided, however, that if any amount of such
refund is later determined to be repayable to the appropriate taxing authority,
ATI or USW, as appropriate shall indemnify the other Party from and against the
amount of such repayment under Section 7.5(a)(vi).
9.7 Publicity. So long as this Organization Agreement is in effect, each
Party and its Affiliates agree to consult with the other Party in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated hereby, and neither Party nor any of its Affiliates
will issue any press release or make any such public statement prior to such
consultation and giving the other Party a reasonable opportunity to review and
comment on any such proposed press release or public statement, except as may be
required by law.
9.8 Severability. If any one or more of the provisions of this Organization
Agreement shall be held to be invalid, illegal, or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Organization
Agreement shall not be affected thereby. To the extent permitted by applicable
law, each party hereto waives any provision of law which renders any provision
of this Organization Agreement invalid, illegal, or unenforceable in any
respect.
9.9 Headings. The descriptive headings contained in this Organization
Agreement are for convenience and reference only, do not form a part of it, and
do not in any way modify,
-105-
<PAGE> 118
interpret or construe the intentions of the parties to this Organization
Agreement.
9.10 Time of Essence. Time is of the essence of this Organization Agreement.
9.11 Choice of Law. This Organization Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without regard to choice of law principles.
9.12 Survival of Representations and Warranties. The representations and
warranties contained in this Organization Agreement shall survive after the date
hereof, the Phase I Closing, and the Phase II Closing.
9.13 Miscellaneous. This Organization Agreement (including the documents and
instruments referred to herein and attached hereto and other agreements executed
by the Parties on the Effective Date or the date hereof) (a) constitutes the
entire agreement and supersedes all other agreements and understandings, both
written and oral, among the parties that are prior to the date hereof, or any of
them, with respect to the subject matter hereof; (b) is not intended to confer
upon any other person any rights or remedies hereunder; and (c) shall not be
assigned by either party hereto by operation of law or otherwise (except as
otherwise provided herein).
9.14 Counterparts. This Organization Agreement may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an original,
and all such counterparts shall constitute one and the same instrument.
-106-
<PAGE> 119
IN WITNESS WHEREOF, the parties hereto have hereunto fixed their
signatures this 30th day of September, 1995.
AIRTOUCH COMMUNICATIONS, INC. U S WEST, INC.
By: _________________________ By: __________________________
Its: ________________________ Its: _________________________
<PAGE> 120
The following attachments have been omitted. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon request.
<TABLE>
<S> <C>
Attachment 1.5 Arbitration Agreement
Attachment 1.7 ATI Phase I Assets
Attachment 1.10 ATI Services Agreement
Attachment 1.50 Investment Agreement
Attachment 1.89 Scheduled Phase II Related Assets
Attachment 1.114 Trust Agreement of Exchange
Attachment 1.119 USW Phase II Assets
Attachment 1.21 WMC Employment Agreement
Attachment 1.123 WMC Partnership Agreement
Attachment 1.2 Agreement of Exchange
Article 2 Existing Schedules
Article 4 4.2A, 4.2B, 4.2C, 4.5A, 4.5B
</TABLE>
<PAGE> 1
EXHIBIT 10.1
----------------------------------------
WMC PARTNERS, L.P.
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
DATED AS OF SEPTEMBER 30, 1995
AMONG
MEMBERS OF THE ATI GROUP
AND
MEMBERS OF THE USW GROUP
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
(Not part of the Agreement)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE 1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Formation and Continuation of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Registered Office; Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Term of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7. Qualification in Other Jurisdictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1. Representative Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2. Partnership Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3. Partnership Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.4. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5. No Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6. Acts by Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.7. Procedures in the Event of a Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.8. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9. Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.10. Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.11. Budget Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.12. Employees and Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.13. Access to Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.14. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.15. Duty of Partners To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.16. Agreements with Partnership and Owned Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.17. Insurance and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.18. International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.19. Procedures With Respect to PCS Primeco Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.20. Tomcom Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 3 CERTAIN AGREEMENTS REGARDING OPERATIONS OF
LICENSED AND OWNED SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1. General; Fiduciary Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2. Phase I Services Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.3. Licensed Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.4. System Budget Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.5. System Business Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.6. Management Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Annual Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Quarterly Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) MFJ Restricted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 4 CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL
ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2. Initial Contributions of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Phase II Contribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) New Par Contribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) PCS Contribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Beneficial Phase II Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.3. Special Capital Contribution Rights of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
4.4. Additional Contributions by Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.5. Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.6. Withdrawals of Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7. Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.8. Revaluation of Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.9. Redetermination of Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.10. Determination of Fair Market or Private Market Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.1. Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 6 TAX MATTERS AND REPORTS; ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.1. Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.2. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.3. Tax Reports to Current and Former Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4. Accounting Records; Independent Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.6. Tax Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.7. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.8. Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.9. Prior Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 7 INDEMNIFICATION AND EXCULPATION; CERTAIN
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1. Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.3. Restrictions on Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.4. Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.5. Duties of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8 TERMINATION AND DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.1. Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.2. Bankruptcy of a General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.3. Order of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.4. Orderly Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.5. Dissolution Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.6. Obligation To Restore Deficit Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.7. Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9 ADMISSION OF ADDITIONAL PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.1. Admission Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.2. Designation as a Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 10 TRANSFER OR ENCUMBRANCE OF INTEREST ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.1. Restriction on Transfer or Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.2. Transfer of Partnership Interest to a Wholly
Owned Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.3. Transfer of Partnership Interest Other Than
to a Wholly Owned Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.4. Partnership's Redemption Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.5. Spin-off Not Deemed To Be a Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.6. Invalid Transfers Void . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.7. Change in Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.8. Change of Control - ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.9. USW Option To Effect Exchange Into Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
10.10. Proportionate Transfer of PCS Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 11 REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.1. Demand Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.2. Successor Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.4. Conditions to Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.7. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 12 REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.1. MFJ Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
13.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
13.2. Governing Law, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
13.3. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.5. Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.6. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.7. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.12. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
-iii-
<PAGE> 5
Schedules
- ---------
<TABLE>
<S> <C>
Schedule 1-A - Members of ATI Group and Initial Percentage Interests
Schedule 1-B - Members of USW Group and Initial Percentage Interests
Exhibits
- --------
Exhibit A - Term Sheet with respect to License Agreement
Exhibit B - Form of Transferee Investment Agreement
Exhibit C - Form of Full Transferee Agreement of Exchange
Exhibit D - Form of Partial Transferee Agreement of Exchange
Exhibit E - Term Sheet for Change of Control Notes
Exhibit F - Determination of Base Account
</TABLE>
-iv-
<PAGE> 6
WMC PARTNERS, L.P.
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of WMC Partners,
L.P. (the "Partnership") is entered into and effective as of September 30,
1995, by and among the members of the ATI Group and the USW Group (each as
hereinafter defined), each of which shall be both a general partner and a
limited partner as set forth herein (collectively, the "Partners").
WHEREAS, the Partners or certain of their Affiliates (as hereinafter defined)
are parties to the Amended and Restated Joint Venture Organization Agreement,
of even date herewith;
WHEREAS, the Partners or certain of their Affiliates are the direct and/or
indirect owners of interests in and rights to Systems (as hereinafter defined);
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively with lower costs
in such markets;
WHEREAS, there are substantial operating, technological and development
efficiencies of scale and scope to be achieved by an enterprise combining the
management and operations of domestic Cellular, ESMR and PCS Systems (as
hereinafter defined) of the Partners;
WHEREAS, the Partners have concluded that it will be in their respective best
interests, and the best interests of the public, to form the Partnership for
the purpose of coordinating wireless services to be provided by Systems and
owning, operating, managing, maintaining and constructing Systems and, in
furtherance thereof, the members of the ATI Group and the USW Group wish to
become partners in the Partnership (as hereinafter defined);
WHEREAS, the MFJ (as hereinafter defined) currently applies to USW and its
affiliated companies and restricts them from engaging in certain activities,
which restrictions are acknowledged to have anticompetitive consequences;
WHEREAS, the MFJ restrictions do not apply to ATI and its Affiliates and any
imposition of those restrictions would create inefficiencies, limit ATI's
competitive options, and reduce consumer choice;
WHEREAS, it is the intent of the parties to this Agreement to achieve the
scope and scale efficiencies of integration to the extent possible consistent
with the current MFJ restrictions, while, at the same time, limiting the
application of such MFJ restrictions to only the entities and activities to
which they currently apply;
WHEREAS, the parties have structured this transaction in phases, the timing
of which is dependent on the continued applicability of the MFJ, and it is the
intent of the parties to integrate completely all aspects of their businesses
which provide Cellular, ESMR and PCS Services (as hereinafter defined)
domestically as soon as practicable without the imposition of MFJ restrictions
on ATI or its cellular properties:
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained and in order to set forth the respective rights,
-1-
<PAGE> 7
obligations and interests of the Partners to one another and to the
Partnership, the Partners hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1. Formation and Continuation of the Partnership. The Partnership was
heretofore formed under the laws of the State of Delaware on July 25, 1994
pursuant to an agreement of limited partnership, by and among members of the
ATI Group and members of the USW Group, dated as of July 25, 1994 (the
"Original Partnership Agreement"). The Partners hereby amend and restate the
Original Partnership Agreement in its entirety, and the Partnership shall
continue without dissolution or interruption as a limited partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act, as it may be amended
from time to time (the "Act"), and this Agreement. Except as provided in this
Agreement, the rights, duties, liabilities and obligations of the Partners and
the administration, dissolution, winding up and termination of the Partnership
shall be governed by the Act.
1.2. Name. The name of the Partnership shall be: WMC Partners, L.P. The
name of the Partnership may be changed by the Partnership Committee acting by
vote of the Members representing each Group.
1.3. Principal Place of Business. The principal place of business of the
Partnership shall be c/o AirTouch Communications, Inc. 2999 Oak Road, Walnut
Creek, California 94596. The principal place of business of the Partnership
may be changed by the Partnership Committee.
1.4. Registered Office; Agent for Service of Process. The address of the
Partnership's registered office in the State of Delaware is c/o The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The agent for service of process at such
address for the Partnership in the State of Delaware is The Corporation Trust
Company. Agents for service of process of the Partnership may be changed by
the Partnership Committee.
1.5. Business of the Partnership.
(a) The purpose of the Partnership is to acquire, own, lease, operate,
manage and maintain Systems or interests in Systems; to provide certain
services to operators of Systems pursuant to license agreements or other
contractual relationships; to provide the services which may from time to time
be offered, and to engage in the resale of wireless voice and data
communications services, utilizing the frequencies allocated by the FCC for
Systems; to make and prosecute any and all applications for or renewals of
licenses for Systems; to design, construct and develop Systems; and to engage
in other businesses utilizing, to the extent of cell sites, mobile telephone
switching offices, computer programs or other aspects specific to Systems, the
Partnership's then existing business infrastructure or communications network
(the "Partnership Business"). In connection therewith and subject thereto, the
Partnership shall have the power: (i) to enter into leases for, or purchase
properties necessary for, antennae, base stations and office sites; (ii) to
construct improvements in, furnish and equip the sites; (iii) to acquire or
lease all equipment, supplies and services necessary for the design,
development, construction, ownership, operation, management and maintenance of
Systems; (iv) to borrow or raise money necessary for the acquisition, design,
development, construction, ownership, operation, management and maintenance of
Systems; (v) to use any contributions from the Partners for such purposes; (vi)
to execute any documents required in connection with the foregoing; (vii) to do
any and all acts and things which may be necessary, incidental or convenient to
carry on the Partnership Business as contemplated by this Agreement; and (viii)
to take any other action permissible under the Act in connection with the
-2-
<PAGE> 8
Partnership Business. The Partnership may engage in any business other than the
Partnership Business as the Partnership Committee may determine. Notwithstanding
anything to the contrary herein, the Partnership shall not acquire, own, lease,
operate, manage or maintain Systems outside of the 50 states of the United
States, the District of Columbia, Puerto Rico, the Gulf of Mexico and Guam.
(b) Subject to the terms of this Agreement, the Partnership may enter
into, deliver and perform all contracts, agreements and other undertakings and
engage in all activities and transactions as may be necessary or appropriate to
carry out the foregoing purposes. Without limiting the foregoing, the
Partnership may, subject to the terms of this Agreement:
(i) enter into license agreements or other contractual relationships
with the Partners or Systems, regardless of whether the Partnership or any
Partner has an ownership interest in such Systems;
(ii) enter into services agreements or other contractual
relationships with the Partners or other Persons with respect to Systems
owned or managed by the Partners or other Persons;
(iii) acquire, sell, lease, exchange, transfer, assign, encumber,
pledge or mortgage securities and assets in Systems (or licenses or permits
therefor) or otherwise exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to such securities and
assets;
(iv) borrow or raise money and secure the payment of any obligations
of the Partnership by mortgage upon, or pledge or hypothecation of, all or
any part of the assets of the Partnership;
(v) engage personnel, whether part-time or full-time, to do such
acts as are necessary or advisable in connection with the maintenance,
operation and administration of the Partnership and its investments; and
(vi) engage attorneys, independent accountants, investment bankers,
consultants or such other Persons as are necessary or advisable.
(c) Notwithstanding the foregoing, the Partnership will not, directly or
indirectly, engage in any act that would put the Partnership, or any Partner,
in violation of the MFJ. For example, the Partnership will not engage in any
activity that would constitute the provision of interexchange (interLATA)
telecommunications service, the provision of telecommunications equipment, or
the manufacture of a telecommunications product (all as defined by the MFJ, the
Decree Court, or both), unless any such activity has been the subject of a
waiver or other legislative or court relief, or the MFJ otherwise ceases to
apply to the activities of the Partnership.
1.6. Term of the Partnership. The term of the Partnership shall commence on
the date the Certificate of Limited Partnership of the Partnership is filed in
the Office of the Secretary of State of the State of Delaware, and shall
continue through the 99th anniversary thereof, unless earlier dissolved as
provided in Section 8.1. The existence of the Partnership as a separate legal
entity shall continue until the cancellation of the Partnership's Certificate
of Limited Partnership.
1.7. Qualification in Other Jurisdictions. The General Partners shall cause
the Partnership to be qualified, formed, or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in
-3-
<PAGE> 9
which the Partnership owns property or engages in activities if such
qualification, formation or registration is necessary to permit the Partnership
lawfully to own property and engage in the Partnership's business or transact
business. The General Partners shall execute, file and publish all such
certificates, notices, statements or other instruments necessary to permit the
Partnership to engage in the Partnership's business as a limited partnership in
all jurisdictions where the Partnership elects to engage in or do business.
1.8. Definitions.
(a) For purposes of this Agreement the following terms have the following
meanings (unless indicated otherwise, all Article and Section references are to
Articles and Sections in this Agreement, and all Schedule references are to
Schedules to this Agreement):
"Additional Partner" means a Person admitted to the Partnership pursuant to
Article 9.
"Adjusted Revaluation Gain" or "Adjusted Revaluation Loss" means,
respectively, the Revaluation Gain or Revaluation Loss, as the case may be,
with respect to an asset being revalued which would have arisen had the basis
used in computing Revaluation Gain or Revaluation Loss been equal to the
Capital Account book basis of such asset immediately following the later of its
contribution or acquisition or any immediately preceding revaluation under
Section 4.8 hereof. Each Partner's share of any Adjusted Revaluation Gain or
Adjusted Revaluation Loss shall be determined by ignoring any allocation of
Revaluation Gain pursuant to Section 5.1(m)(ii) or Revaluation Loss pursuant to
Section 5.1(n)(i) and by allocating the corresponding Adjusted Revaluation Gain
or Adjusted Revaluation Loss among the Partners proportionately in accordance
with their Percentage Interests.
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified; provided, however, that for purposes of this Agreement, (i)
the Partnership shall not be considered an Affiliate of ATI or USW or any
member of the ATI Group or the USW Group, (ii) any wireline cable television
company in which the USW Group and its Affiliates do not have an ownership
interest in excess of 50% shall not be considered an Affiliate of USW or any
member of the USW Group and (iii) CCI shall not be considered an Affiliate of
ATI or any member of the ATI Group until such time, if ever, as ATI shall be
entitled to exercise full discretion with respect to voting the shares of
Common Stock of CCI beneficially owned by ATI (other than shares of common
stock of CCI beneficially owned by ATI by virtue of its ownership of the Class
A Preference Stock of CCI). For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") of a Person means the possession, direct or indirect, of the
power to (i) vote in excess of 50% of the Voting Stock of such Person or (ii)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement" means this Agreement of Limited Partnership of the Partnership,
as it may be amended, supplemented or restated from time to time.
"Agreement of Exchange" means the Amended and Restated Agreement of Exchange,
dated as of September 30, 1995, by and between ATI and USW, as amended,
modified or supplemented from time to time.
"Applicable Phase II Asset Pool Revaluation Gain" or "Applicable Phase II
Asset Pool Revaluation Loss" means, respectively, for any date of
determination, (i) in the event that such date of determination is prior to the
New Par Determination Date, the Pre- Determination Revaluation Gain or the
Pre-Determination Revaluation Loss, as the case may be, determined prior
-4-
<PAGE> 10
to or on such date of determination, and (ii) in the event that such date of
determination is after the New Par Determination Date, the Post-Determination
Revaluation Gain or Post-Determination Revaluation Loss, as the case may be.
"Applicable Phase II Closing Contributions" means, for each Partner, for any
date of determination (i) in the event that such date of determination is prior
to the New Par Determination Date, such Partner's Assumed Phase II Closing
Contributions, and (ii) in the event that such date of determination is on or
after the New Par Determination Date, such Partner's Redetermined Phase II
Closing Contributions.
"Appraiser" means any of the First Appraiser, the Second Appraiser and the
Third Appraiser as defined in Section 4.10 hereof.
"Appraiser's Certificate" means a certificate prepared by an Appraiser,
executed on behalf of an Appraiser by a duly authorized officer thereof, and
setting forth such Appraiser's opinion as to the Fair Market Value or Private
Market Value of an asset.
"Assumed Phase II Closing Contributions" mean, for each Partner, the product
of (i) such Partner's Phase II Closing Percentage (determined pursuant to
Section 5.4 of the Organization Agreement for the date of the Phase II Closing),
and (ii) the sum of (A) 119.356% of the Fair Market Value (determined in
accordance with Section 4.10 hereof) of the Phase II Assets on the Phase II
Contribution Date, plus (B) the Fair Market (determined in accordance with
Section 4.10 hereof) of the Scheduled Phase II Related Assets on the Phase II
Contribution Date, plus (C) 50% of the Scheduled NPRA 12% Value on the Phase II
Contribution Date.
"ATI" means AirTouch Communications, Inc., a Delaware corporation.
"ATI Group" means the Persons set forth on Schedule 1-A and any Affiliate
Transferees thereof, unless and until the ATI Group ceases to be designated as
a Group hereunder.
"ATI RP" means the member of the ATI Group that is a Representative Partner
as specified in Section 2.1.
"Attributed Entity" means, with respect to any Partner, any Person whose
ownership of Systems (or licenses or permits therefor) would be attributable,
in whole or in part, to such Partner under applicable FCC regulations.
"Back End Termination Date" means the Back End Termination Date as defined in
the Restated Certificate of Incorporation of Cellular Communications, Inc. as
in effect on the date hereof or as modified or amended in accordance with the
proviso to Section 3.2(d)(viii) of the Organization Agreement as in effect on
the date hereof.
"Bankruptcy" of a Partner means (i) the filing by such Partner of a voluntary
petition seeking liquidation, reorganization, arrangement or readjustment, in
any form, of its debts under Title 11 of the United States Code (or
corresponding provisions of future laws) or any other bankruptcy or insolvency
law, or such Partner's filing an answer consenting to or acquiescing in any
such petition, (ii) the making by such Partner of any assignment for the
benefit of its creditors or the admission by such Partner in writing of its
inability to pay its debts as they mature or (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), an application for the
appointment of a receiver for the assets of such Partner, or an involuntary
petition seeking liquidation, reorganization, arrangement, composition,
dissolution or readjustment of its debts or similar relief under any bankruptcy
or insolvency law; provided that the
-5-
<PAGE> 11
same shall not have been vacated, set aside or stayed within such 60-day period.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended.
"Base Account" means (i) the amount set forth on Exhibit F, minus (ii) the
cumulative amount allocated to the USW Group in accordance with Section
5.1(m)(ii), minus (iii) the cumulative amount (expressed as a positive number)
allocated to the ATI Group in accordance with Section 5.1(n)(i).
"Beneficial Phase II Assets" means, with respect to any Partner, (i) the
Phase II Assets of such Partner which are not contributed to the capital of the
Partnership on or before the Phase II Contribution Date and (ii) New Par Assets
which are not contributed to the capital of the Partnership on or before the
New Par Contribution Date.
"Budget" means a one-year revenue, expense and capital expenditure budget for
the Partnership, as it may be amended from time to time in accordance with the
terms of this Agreement.
"Business Plan" means a five-year business plan for the Partnership, as it
may be amended from time to time in accordance with the terms of this
Agreement, which shall include (i) an annual operating budget for each year
contemplated in the business plan; (ii) a five-year financial plan for the
Partnership; and (iii) a general description of the key underlying assumptions
and key strategies.
"Capital Account" means the capital account maintained by the Partnership for
each Partner as described in Section 4.1 which shall be comprised of a Common
Capital Account and, in certain circumstances prior to the Phase II
Contribution Date, a Preferred Capital Account.
"CCI" means Cellular Communications, Inc., a Delaware corporation.
"CECO" means the Civil Enforcement Consent Order entered by the Decree Court
on February 2, 1989.
"CECO Decree Committee" means the committee created by USW pursuant to the
CECO for the review of USW's business activities.
"Cellular Service" means the provision of any commercial mobile radio service
by a Cellular System, including the resale of such service.
"Cellular System" means a radio communications system authorized under the
rules for the domestic public cellular radio telecommunications service
designated as Subpart K of Part 22 of the FCC's rules in effect on the
Effective Date, or any revision thereto or successor thereof which may be in
effect from time to time, including the network, marketing, distribution,
sales, customer interface and operations functions relating thereto.
"Change of Control" has the meaning set forth in the Investment Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Capital" means that portion of a Partner's Capital Account not
designated as such Partner's Preferred Amount.
"Confidential Information" means all confidential documents and information
(including, without limitation, confidential commercial information and
information with respect to customers and proprietary technologies or processes
and the design and development of new products or services) concerning the
Partnership, the Owned Systems, the Licensed Systems, other Systems in which
the Partnership has an ownership interest,
-6-
<PAGE> 12
the Partners or their Affiliates furnished to a Partner in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Partnership, the Owned Systems, the Licensed Systems, other Systems in
which the Partnership has an ownership interest or their respective businesses,
except to the extent that such information can be shown to have been (a)
generally available to the public other than as a result of a breach of the
provisions of Section 2.14 of this Agreement; (b) already in the possession of
the receiving Person or its Representatives (as such term is defined in Section
2.14 hereof) without restriction and prior to any disclosure in connection with
the Partnership or pursuant to any of the terms of this Agreement; (c) lawfully
disclosed to the receiving Person or its Representatives by a third party who is
free lawfully to disclose the same; or (d) independently developed by the
receiving Person without use of any Confidential Information obtained in
connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, the Owned Systems, the Licensed
Systems and other Systems in which the Partnership has an ownership interest or
their respective businesses.
"Debt-to-Cash Flow Ratio" means, as of any date of determination, the ratio
of (a) the aggregate principal amount outstanding of indebtedness for borrowed
money of the Partnership to (b) (i) the Cash Flow of the Partnership for the
most recently completed fiscal quarter, multiplied by (ii) four. For purposes
of this definition, "Cash Flow" of the Partnership means, for any period, the
net income of, or otherwise derived from, the Partnership for such period, plus
the sum of depreciation, amortization and other non- cash charges to income for
such period, in each case to the extent deducted in determining such net
income, plus or minus other funds from operations, all as determined on a
consolidated basis in accordance with GAAP, or such other measurement of cash
flow from operations as may, from time to time, be utilized by Standard &
Poor's in connection with determining debt ratings.
"Debt-to-Total Book Capital" means, as of any date of determination, the
percentage equivalent of (a) the aggregate principal amount outstanding of
indebtedness for borrowed money of the Partnership, divided by (b) the sum of
(i) the aggregate capital, surplus, retained earnings of the Partnership and
(ii) the aggregate principal amount outstanding of indebtedness for borrowed
money of the Partnership, in each case, as would be shown on the consolidated
balance sheet of the Partnership prepared in accordance with GAAP.
"Decree Court" means the court having original jurisdiction over MFJ waivers.
"Defaulted Contributions" means, for each Partner, the cumulative amount of
any capital contributions required to be made under Section 4.4(a) at any time
on or after the Phase II Contribution Date which have not been made by such
Partner prior to expiration of the 15-day grace period provided for in Section
4.4(b), regardless of whether such amounts are thereafter contributed; provided
that such capital contributions had been specifically identified as to use (i)
in a Budget approved pursuant to Section 2.11(a), (ii) in a Budget for the
following year approved pursuant to Section 2.11(b), or (iii) by other action
of the Partnership Committee, and in any such case, had been voted for by such
Partner's Group.
"Effective Date" means July 25, 1994.
"EO" means the Enforcement Order entered by the Decree Court on February 15,
1991.
"ESMR Service" means the provision of any commercial mobile radio service by
an ESMR System, including the resale of such service.
-7-
<PAGE> 13
"ESMR System" means a radio communications system authorized under the rules
for Enhanced Specialized Mobile Radio services designated under Subpart S of
Part 90 of the FCC's rules in effect on the Effective Date, or any revision or
successor thereof which may be in effect from time to time, including the
network, marketing, distribution, sales, customer interface and operations
functions relating thereto.
"Fair Market Value" means, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such asset in an arm's-length negotiated transaction
with an unaffiliated third party without time constraints.
"FCC" means the Federal Communications Commission or any successor agency or
entity performing substantially the same functions.
"GAAP" means generally accepted accounting principles.
"General Partner" means each member of the ATI Group and each member of the
USW Group, and includes any Person who becomes an additional general partner of
the Partnership or a substitute general partner of the Partnership pursuant to
the provisions of this Agreement.
"General Partner Percentage Interest" means, with respect to any Partner, the
Percentage Interest of such Partner as a general partner of the Partnership.
"Group" means (i) the ATI Group, (ii) the USW Group, (iii) any Person
admitted to the Partnership as both an Additional General Partner and an
Additional Limited Partner pursuant to Article 9 and designated as a Group upon
such admission or (iv) any Person (and any Affiliate Transferee thereof) who
acquires all of the Partnership Interests held by any of the foregoing in
accordance with Section 10.3 and becomes a Substitute General Partner and a
Substitute Limited Partner pursuant to Article 10; provided that a Group may
cease to be designated as a Group at any time in accordance with the provisions
of Section 10.3(g).
"Investment Agreement" means the Amended and Restated Investment Agreement
dated as of September 30, 1995, by and between ATI and USW, as amended,
modified or supplemented from time to time.
"License Agreement" means an agreement to be entered into by the Partnership
and certain Systems, as contemplated by Sections 4.2(e) and 7.4(b) and
incorporating such terms and conditions as may be approved by the Partnership,
taking into account the terms and conditions set forth in Exhibit A and all
other relevant facts and circumstances with respect to each such agreement.
"Licensed Systems" means, collectively, (a) each System with respect to which
the Partnership performs certain services pursuant to a Phase I Services
Agreement and (b) each System which enters into a License Agreement and
Services Agreement and, individually, any one of the foregoing Systems.
"Limited Partner" means each member of the ATI Group and each member of the
USW Group, and includes any Person admitted as an additional limited partner of
the Partnership or a substitute limited partner of the Partnership pursuant to
the provisions of this Agreement.
"Limited Partner Percentage Interest" means, with respect to any Partner, the
Percentage Interest of such Partner as a limited partner of the Partnership.
"Make-Up Contributions" means, for each Partner, the amount of any capital
contribution made by such Partner which such Partner is permitted,
-8-
<PAGE> 14
but not required, to make under Section 4.4(d) upon failure of another Partner
to make a required capital contribution.
"MFJ" means the Modification of Final Judgment entered in United States v.
AT&T, 552 F. Supp. 131 (D.D.C. 1982), and as subsequently modified from time to
time, or any legislative scheme embodying substantially similar restrictions.
"MFJ Compliance Committee" means the committee created by USW pursuant to the
EO for the review of USW's business practices.
"MFJ Restricted Activity" means an activity or business the undertaking of
which by the Partnership would cause the Partnership, or any Partner, to be in
violation of the MFJ.
"Net Operating Available Cash" means, at the time of determination, (a) all
cash and cash equivalents on hand in the Partnership, less (b) the Forecast Cash
Requirements, if any, of the Partnership, as determined by the Partnership
Committee in a manner consistent with an Approved Budget. For purposes of this
definition, "Forecast Cash Requirements" means, for the four-month period
following the date of determination, the excess, if any, of (a) forecast capital
expenditures, capital contributions to other entities and other investments,
acquisitions, cash income tax payments and debt service including principal and
interest requirements and other non-cash credits to income, plus forecast cash
reserves for future operations or other requirements, over (b) forecast net
income of the Partnership, plus the sum of forecast depreciation, amortization,
interest expenses, income tax expenses and other non-cash charges to income, in
each case to the extent deducted in determining such net income, plus or minus
forecast changes in working capital, plus the forecast cash proceeds of
dispositions of assets (net of expenses), plus an amount equal to the forecast
net proceeds of debt financings.
"New Par Assets" shall have the meaning set forth in the Organization
Agreement.
"New Par Contribution Date" means the later of (i) the Phase II Contribution
Date and (ii) the date ATI and its Affiliates shall have directly or indirectly
acquired the New Par Assets, received all required regulatory approvals for the
contribution of such assets to the Partnership, and contributed the New Par
Assets to the Partnership.
"New Par Determination Date" shall have the meaning set forth in the
Organization Agreement.
"Noncontributed Assets" means, with respect to any Partner, the Beneficial
Phase II Assets of such Partner which are not contributed to the capital of the
Partnership on or before their respective Noncontributed Assets Recalculation
Dates.
"Noncontributed Assets Recalculation Date" means, with respect to any
Beneficial Phase II Asset of a Partner, the earliest of (i) the date such
Beneficial Phase II Asset is assigned, sold, transferred or otherwise disposed
of by such Partner, (ii) the date such Partner ceases to be a Partner and (iii)
(A) in the case of any Beneficial Phase II Asset which is a Phase II Asset, the
fifth anniversary of the Phase II Contribution Date and (B) in the case of any
Beneficial Phase II Asset which is a New Par Asset, the fifth anniversary of
the New Par Contribution Date.
"Noncontributed Assets Value" means, with respect to any Partner, the Fair
Market Value (determined in accordance with Section 4.10) of such Partner's
Noncontributed Assets as of their respective Noncontributed Assets Recalculation
Dates.
-9-
<PAGE> 15
"Organization Agreement" means the Amended and Restated Joint Venture
Organization Agreement, dated as of September 30, 1995, between USW and ATI, as
amended, modified or supplemented from time to time.
"Organizational Expenses" shall mean organizational expenses as defined under
Code Section 709 of the Internal Revenue Code.
"Other Contributions" means, for each Partner, such Partner's contributions
to the Partnership which, for purposes of this definition, shall be the amount
of cash and the Fair Market Value of property at the time of contribution, but
shall specifically exclude (i) the assets included in the Phase II Assets, (ii)
the Scheduled Phase II Related Assets, (iii) the New Par Assets, (iv) the
Scheduled New Par Related Asset, (v) contributions made pursuant to Article 8 of
the Organization Agreement relating to a Partner's indemnification obligations
thereunder, (vi) any contributions of Organizational Expenses pursuant to
Section 4.1(b), (vii) any Preferred Amounts contributed in accordance with
Section 4.4(c), and (viii) any Final New Par Adjustment contributed pursuant to
Section 5.11 of the Organization Agreement. Accordingly, "Other Contributions"
shall include (x) capital contributions by a Phase I Non-Defaulting Partner at
the time of, and corresponding to, the capital that a Defaulting Partner failed
to contribute that gave rise to a Preferred Account and (y) upon contribution,
the Fair Market Value of each Partner's interest in PCS Par.
"Owned System" means any System (a) in which the Partnership owns, directly
or indirectly, an equity interest, or which is leased by the Partnership and
(b) with respect to which the Partnership possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.
"Parent Entity" means, as to any member of the ATI Group, ATI, or, as to any
member of the USW Group, USW, and in each case, their respective successors and
assigns, whether by means of merger, spinoff in accordance with Section 10.5
hereof or otherwise.
"Partner" means a member of the ATI Group or of the USW Group that is a
General Partner and Limited Partner of the Partnership under this Agreement and
any Additional or Substitute General Partner or Limited Partner of the
Partnership. Members of the ATI Group and members of the USW Group executing
this Agreement on the date hereof shall be admitted as Partners of the
Partnership on the date hereof. A Person who is not admitted on the date hereof
as a partner of the Partnership shall be deemed admitted as a Partner upon
satisfaction of the requirements of Section 9.1 of this Agreement and upon
execution by or on behalf of such Person of this Agreement or a counterpart
hereof.
"Partnership Interest" means, for each Partner separately, all of the
Partner's interest in, and rights and obligations in connection with, the
Partnership whether as a General Partner or Limited Partner.
"PCS Assets" means all ownership interests in PCS Par.
"PCS Contribution Date" means the Phase II Contribution Date, unless the USW
RP, in its sole discretion, elects to postpone the PCS Contribution Date to a
date not later than the third anniversary of the date that PCS Par first
acquires, directly or indirectly through PCS Primeco, (through the FCC auctions
or otherwise) a broadband PCS license, in which case it shall be such later
date.
"PCS Par" means PCS Nucleus, L.P., a Delaware limited partnership.
"PCS Service" means the provision of any commercial mobile radio service by a
PCS System, including the resale of such service.
-10-
<PAGE> 16
"PCS System" means a radio communications system authorized under the rules
for broadband personal communications services designated as Subpart E of Part
24 of the FCC's rules in effect on the Effective Date, or any revision thereto
or successor thereof which may be in effect from time to time, including the
network, marketing, distribution, sales, customer interface and operations
functions relating thereto.
"Percentage Interest" means, initially for each Partner, the percentages set
forth opposite such Partner's name on Schedules 1-A and 1-B. A Partner's
Percentage Interest shall be adjusted from time to time as provided in Section
4.9 of this Agreement.
"Person" means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust, estate,
unincorporated organization, governmental or regulatory body or other entity.
"Phase I Closing Date" has the meaning set forth in the Organization
Agreement.
"Phase I Default Amount" has the meaning set forth in Section 4.4(c).
"Phase I Services Agreement" means the ATI Services Agreement and the
NewVector Services Agreement, in each case as defined in the Organization
Agreement.
"Phase II Assets" mean, collectively, the ATI Phase II Assets and the USW
Phase II Assets (as defined in the Organization Agreement) (and accordingly
shall include any assets received in exchange for the San Diego Cellular
Property and any amounts taken into account pursuant to Article 4 of the
Organization Agreement (including, without limitation, any amounts taken into
account for purposes of computing Net Asset Value (as defined in Section 4.2(d)
of the Organization Agreement) other than (A) any cash distributed as a dividend
pursuant to Section 4.2(b) of the Organization Agreement and (B) the New Par
Assets).
"Phase II Contribution Date" means the date of the Phase II Closing (as
defined in the Organization Agreement).
"Post-Determination Revaluation Gain" or "Post Determination Revaluation Loss"
means, respectively, the Adjusted Revaluation Gain or the Adjusted Revaluation
Loss determined with respect to the Phase II Assets, the Scheduled Phase II
Related Assets (and, if a New Par Contribution Date has occurred, the New Par
Assets and the Scheduled New Par Related Asset) on any date after the New Par
Determination Date.
"Pre-Determination Revaluation Gain" or "Pre-Determination Revaluation Loss"
means, respectively, (i) 119.356% of the Adjusted Revaluation Gain or the
Adjusted Revaluation Loss determined with respect to the Phase II Assets at any
time prior to the New Par Determination Date, and (ii) the Adjusted Revaluation
Gain or the Adjusted Revaluation Loss determined with respect to the Scheduled
Phase II Related Assets at any time prior to the New Par Determination Date.
"President" means the President of the Partnership.
"Primeco" means PCS Primeco, L.P., a Delaware limited partnership.
"Primeco Agreement" means the Agreement of Limited Partnership of PCS
Primeco, L.P., dated as of October 20, 1994, between PCS Co. and PCS Nucleus,
L.P., as amended from time to time.
"Prime Rate" means the rate announced, from time to time, by Bank of America
NT&SA at its home office as its prime rate.
-11-
<PAGE> 17
"Private Market Value" means, with respect to any asset, as of the date of
determination, the Fair Market Value of such asset adjusted to include (to the
extent not previously included) any control premium inherent therein (or, in the
case of an interest in the Partnership, adjusted to include a pro rata share of
any control premium inherent in a sale of the Partnership as a whole).
"Redetermined Phase II Closing Contributions" means, for each Partner, the
product of (i) such Partner's Phase II Closing Percentage (as determined
pursuant to Section 5.4 of the Organization Agreement if the New Par
Determination Date occurs on the Phase II Contribution Date or as redetermined
pursuant to Section 5.5 of the Organization Agreement if the New Par
Determination Date occurs after the Phase II Contribution Date), and (ii) the
sum of (A) the Fair Market Value (determined in accordance with the provisions
of Section 4.10 hereof) of the Phase II Assets and the Scheduled Phase II
Related Assets on the New Par Determination Date, plus (B) in the event that a
New Par Contribution Date has occurred or is occurring, the Fair Market Value
(determined in accordance with the provisions of Section 4.10 hereof) of New Par
and the Scheduled New Par Related Asset on the New Par Determination Date.
"Revaluation Gain" means the amount of gain which would have been realized
had there been a taxable disposition of any Partnership asset being revalued
under Section 4.8 for an amount of cash equal to such asset's then Fair Market
Value, determined in accordance with the provisions of Section 4.10 hereof.
"Revaluation Loss" means the amount of loss which would have been realized
had there been a taxable disposition of any Partnership asset being revalued
under Section 4.8 for an amount of cash equal to such asset's then Fair Market
Value, determined in accordance with the provisions of Section 4.10 hereof.
"Scheduled New Par Related Asset" shall have the meaning set forth in the
Organization Agreement.
"Scheduled NPRA 12% Value" shall have the meaning set forth in the
Organization Agreement"
"Scheduled Phase II Related Assets" shall have the meaning set forth in the
Organization Agreement.
"Services Agreement" means an agreement to be entered into by the Partnership
and certain Systems, as contemplated by Sections 4.2(e) and 7.4(f) and
incorporating such terms and conditions as may be approved by the Partnership,
taking into account the terms and conditions set forth in the Phase I Services
Agreement and all other relevant facts and circumstances with respect to each
such agreement.
"Substitute Partner" means a Person admitted to the Partnership pursuant to
Article 10.
"Supermajority Vote" means the affirmative vote of (a) Members representing
Groups whose aggregate Percentage Interests equal or exceed 80% of the
Percentage Interests of the Groups entitled to vote thereon or (b) pursuant to
Section 2.4(b), the Members representing the ATI Group and the Independent
Member.
"System" means a Cellular System, an ESMR System or a PCS System, or any
business or enterprise which resells the Cellular, ESMR or PCS Services
provided by any of the foregoing.
"Tax Matters Partner" means the Tax Matters Partner of the Partnership as
referred to in Section 6.2.
-12-
<PAGE> 18
"Taxes" means all taxes, charges, fees, levies or other assessments imposed by
any taxing authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments) and "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect to
Taxes.
"Trust Agreement of Exchange" means the Amended and Restated Trust Agreement
of Exchange, dated as of September 30, 1995, by and between ATI and USW, as
amended, modified or supplemented from time to time.
"USW" means U S West, Inc., a Colorado corporation.
"USW Group" means the Persons set forth on Schedule 1-B and any Affiliate
Transferees thereof unless and until the USW Group ceases to be designated as a
Group hereunder.
"USW RP" means the member of the USW Group that is a Representative Partner
as specified in Section 2.1.
"Voting Stock" means capital stock issued by a corporation, or comparable
interests in any other Person, the holders of which are ordinarily entitled to
vote for the election of directors (or Persons performing similar functions) of
such Person.
"Wholly Owned Affiliate" means, as to any Person, an Affiliate of such Person
all of the equity interests of which are owned, directly or indirectly, by a
Partner, by another Wholly Owned Affiliate of such Person or by the Parent
Entity thereof.
"Wireless Assets" means, with respect to any Partner, all of such Partner's
interests in its Phase II Assets, Scheduled Phase II Related Assets, PCS Par,
Primeco and the Partnership.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Appropriate Preferred Rate 4.4(c)
Approved Budget 2.11(a)
Approved Business Plan 2.10(a)
Act 1.1
Affiliate Transferee 10.2(a)
Closing Adjusted Capital
Contributions 4.9(b)
CFO 2.9(a)
Default Amount 4.4(d)
Default Fee 4.4(d)
Defaulting Partner 4.4(d)
Distributions 4.4(c)
Due Date 4.4(a)
Exchange Act 2.7(d)
Executive Officers 2.9(a)
Indemnified Party 7.1
Independent Member 2.2(a)
Late Amount 4.4(b)
Late Fee 4.4(a)
LEC Affiliates 2.4(e)
Member 2.2(a)
Non-Defaulting Partner 4.4(b)
</TABLE>
-13-
<PAGE> 19
<TABLE>
<S> <C>
Partial Interest 10.2(b)
Partnership Business 1.5(a)
Partnership Committee 2.2(a)
Phase II Adjusted Capital
Contributions 4.9(c)
Phase II Related Assets 7.4(b)
Preferred Amount 4.4(c)
Preferred Partner 4.4(c)
Quarterly Preferred Return 4.4(c)
Related Party Agreement 2.16(a)
System Manager 3.3(a)
Transferring Partner 10.3(e)
</TABLE>
ARTICLE 2
MANAGEMENT
2.1. Representative Partners.
(a) The General Partners of each Group, as such, shall be entitled
collectively to designate one Person to serve as a Representative Partner of
the Partnership with the rights and obligations set forth in this Agreement.
The Representative Partners, together with the Partnership Committee and the
President, shall cause the Partnership to fulfill the Partnership's obligations
under the Agreement and to enforce all rights of the Partnership under this
Agreement and the Organization Agreement. Except as otherwise expressly
provided herein, a Representative Partner may bind the other Partners of its
Group with respect to any determination made or action taken in connection with
this Agreement. The General Partners of any Group may, at any time, with or
without cause, collectively replace the Representative Partner designated by
such Group.
(b) Except as otherwise required by the Act, no vote or approval
by any Limited Partner, or class or group thereof, shall be required under this
Agreement for the taking of any action, including without limitation the
amendment of this Agreement, and the Percentage Interest of any Limited Partner
who is not also a General Partner shall not be included in any calculation of a
Partner's Percentage Interest entitled to vote on any matter.
2.2. Partnership Committee.
(a) The partnership committee of the Partnership (the "Partnership
Committee") shall be vested with the full authority of the General Partners and
shall be composed of four individuals appointed by the ATI RP and three
individuals appointed by the other Representative Partner(s) (collectively the
"Members" and individually a "Member"), or in each case, such lesser number of
Members as may be determined by a vote of Members representing each Group. In
the event, and as long as, there are only two Representative Partners, the
Representative Partners shall appoint one additional individual (the
"Independent Member") to serve on the Partnership Committee as set forth in
subsection (b) below.
(b) The Independent Member will serve for an initial term to be
mutually agreed upon by the Representative Partners, not to exceed three years,
or until a third Representative Partner is appointed. The Representative
Partners will agree on five individuals (the "Replacement Pool"), one of whom
would replace the Independent Member (i) upon expiration of his term (unless
the Independent Member is reappointed for another term), (ii) his death or
resignation, or (iii) his removal by unanimous vote of the Representative
Partners. In any such event, the Representative Partners will select an
individual from the Replacement Pool to replace the incumbent Independent
Member. If the Representative Partners are unable to agree on a replacement,
the Independent Member will name his replacement from one of
-14-
<PAGE> 20
the five individuals. If the Representative Partners are unable to agree and if
the Independent Member is unable to name his replacement, each of the
Representative Partners will eliminate two of the five individuals from the
Replacement Pool, with the remaining individual becoming the Independent Member.
If an individual in the Replacement Pool is selected to become the Independent
Member, or dies, resigns, is removed from the Replacement Pool by unanimous vote
of the Representative Partners or otherwise becomes incapable of serving as an
Independent Member, the Representative Partners will agree on an individual to
replace such individual in the Replacement Pool. If the Representative Partners
are unable to agree on a replacement, the individuals in the Replacement Pool
will name such replacement.
(c) Effective upon the giving of notice thereof to the other
Partners, any Representative Partner may, at any time, in its sole discretion,
replace any or all of its appointed Members with other individuals and may
designate one or more alternates for any or all of its Members. Each Member
shall be an officer or employee of a Partner or an Affiliate thereof. Each
Member shall serve on the Partnership Committee until his successor is
appointed, or until his earlier death, resignation or removal. Effective upon
a Group's ceasing to be designated as such, the Members representing such Group
on the Partnership Committee shall cease to be Members.
(d) Except as reserved herein for, or otherwise delegated to, the
Representative Partners or the President, the Partnership Committee shall have
authority and discretion to act on behalf of the Partnership on all matters
that a board of directors of a Delaware corporation would have, including,
without limitation, on the matters set forth in Section 2.4 or elsewhere herein
and with respect to the following matters:
(i) the appointment and removal of the President;
(ii) the determination to require capital contributions not
otherwise contemplated in an Approved Budget;
(iii) the authorization of any acquisition or disposition of
assets (not otherwise contemplated by an Approved Budget) having a
Fair Market Value in excess of $25 million;
(iv) the delegation of powers and authority of the
Partnership Committee to the President (other than with respect to the
matters set forth in Section 2.4(c) or (d));
(v) the compensation of the President and Executive Officers;
and
(vi) except as provided in Section 2.8(c)(vi) or Section
2.16(b) hereof, the entering into of any Related Party Agreement.
Each Partner, by execution of this Agreement, agrees to, consents to, and
acknowledges the delegation of powers and authority to such Members, and to the
actions and decisions of such Members within the scope of such Members'
authority as provided herein.
(e) The Partnership Committee shall receive such reports and
information from the President and Executive Officers as are usually provided
to the board of directors of a publicly held Delaware corporation of similar
size.
2.3. Partnership Committee Meetings.
(a) The Partnership Committee shall hold regular meetings (at
least quarterly) at such time and place as shall be determined by the
Partnership Committee (or by the Chairman of the Partnership Committee).
Special
-15-
<PAGE> 21
meetings of the Partnership Committee may be called at any time by any
Representative Partner by delivering a notice of meeting in accordance with
Section 2.3(g) hereof. Each Representative Partner shall be limited to calling
two special meetings per year.
(b) The Chairman of the Partnership Committee shall be appointed
by the Partnership Committee from time to time. The Chairman shall establish
the agendas for, and regulate the proceeding of, meetings of the Partnership
Committee, but must include on such agendas matters requested by any
Representative Partner in writing received at least two business days in
advance of any meeting.
(c) Members may participate in a meeting of the Partnership
Committee by conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(d) Any action required or permitted to be taken at any meeting of
the Partnership Committee may be taken without a meeting upon the unanimous
written consent of the Members representing each Group.
(e) The Partnership Committee shall appoint a Secretary from time
to time. The Secretary shall keep written minutes of all Partnership Committee
meetings. A duplicate copy of such minutes shall be provided to the Chairman
of the Partnership Committee and to each Member.
(f) A Member shall have the right to designate an alternate to
attend meetings of the Partnership Committee, in stead and in place of such
Member, and to exercise all of the functions of such Member. Any such
alternate shall be an officer or employee of a General Partner or an Affiliate
thereof. Any such alternate shall be deemed to be a Member for all purposes
hereunder until such designation is revoked.
(g) Notice of each regular meeting and each special meeting of the
Partnership Committee shall be given to each Member at least three business days
before such meeting. Notices of special meetings shall contain a description,
in reasonable detail, of the items of business to be conducted at such meeting
and no business other than those items (unless expressly agreed to by Members
representing each of the Groups whose Members are entitled to vote thereon) may
be conducted at such special meeting. The notice provisions of this Section
2.3(g) shall be waived upon either the signing of a written waiver thereof or
attendance at a meeting by Members representing each Group.
2.4. Voting.
(a) On any matter on which a vote of the Partnership Committee is
taken, the Members representing a Group, if more than one Member has been
designated and is present at a meeting, shall vote the entire Percentage
Interest of such Group as a single bloc. Except as provided in Sections 2.4(c)
and (d) or elsewhere herein, any action taken by the Partnership Committee shall
require the vote of Members representing Groups who hold a majority of the
aggregate Percentage Interests of the Groups entitled to vote thereon; provided
that in the event that all Members representing any Group shall abstain from the
vote on any matter (because of a conflict of interest or for any other reason),
the outcome of such vote shall be determined by the vote of Members representing
Groups who hold a majority of the Percentage Interests of the other Groups
entitled to vote on such matter, and such vote shall constitute the act of the
Partnership Committee with respect to such matter. A quorum of any meeting of
the Partnership Committee shall require the presence of Members who represent
Groups holding a majority of the Percentage Interests entitled to be voted by
all Members; provided that the presence of at least one Member representing each
Group is required to have a quorum to conduct any business referred to in
Section 2.4(c) below and the presence of at least one Member representing each
of
-16-
<PAGE> 22
the ATI Group and one other Group (or the Independent Member, if there are only
two Groups) is required to have a quorum to conduct any business referred to in
2.4(d) below. At the request of any Member, all Members shall cast their votes
for any acquisition of assets that occurs prior to the Phase II Contribution
Date by secret ballot.
(b) The Independent Member, if one has been appointed pursuant to
Section 2.2, shall attend all meetings of the Partnership Committee and shall
receive all information regarding the Partnership made available to the
Partnership Committee, but shall be entitled to vote only with respect to the
matters set forth in Section 2.4(d). The Independent Member shall not be
deemed to represent any Group.
(c) The Partnership shall not take any of the following actions,
unless such action has been approved by the Members representing each Group:
(i) any amendment of this Agreement;
(ii) any determination to engage in any business other than
the Partnership Business;
(iii) except as provided in Article 10, the admission of any
Additional General and Limited Partners to the Partnership;
(iv) the dissolution or liquidation of the Partnership;
(v) a merger or consolidation of the Partnership with or into
another Person (other than a merger or consolidation in which the
Partnership is the surviving entity in connection with a cash
acquisition of assets approved by the Partnership Committee or
President as provided herein), or the sale of all or substantially all
of the Partnership's assets;
(vi) the authorization of any acquisition (or series of
related acquisitions) or disposition (or series of related
dispositions) of assets having a Fair Market Value, in each case, in
excess of $500 million, not otherwise specifically identified in an
Approved Budget which has been voted for by the Members representing
each Group;
(vii) a determination to require capital contributions (not
otherwise specifically identified as to use in an Approved Budget
which has been voted for by the Members representing each Group)
within any fiscal year if the total contributions required from the
Partners within that period would exceed $1 billion;
(viii) the authorization of the incurrence by the Partnership
of indebtedness for borrowed money, if after giving effect to such
incurrence, (A) the Debt-to-Total Book Capital of the Partnership
would exceed 30% or (B) the Debt-to-Cash Flow Ratio of the Partnership
would exceed 1.5; provided that, following the Phase II Contribution
Date, the Partnership Committee shall consider and, acting by vote of
the Members representing each Group, may increase the ratios set forth
above to levels consistent with Standard & Poor's then current
guidelines for "investment grade" wireless communications companies.
(ix) the approval of the initial Budget and initial Business
Plan; and
(x) the approval of the initial Phase I Services Agreements.
-17-
<PAGE> 23
(d) The Partnership shall not take any of the following actions,
unless such action has been approved by a Supermajority Vote:
(i) the approval of Budgets and Business Plans, and
material amendments or revisions thereto; provided that no such
approval shall be deemed to be an approval of any of the matters set
forth in Section 2.4(c) by the Members representing any Group who
voted not to approve;
(ii) a determination to require capital contributions (not
otherwise contemplated in an Approved Budget) within any fiscal year
if the total contributions required from the Partners within that
period would exceed $200 million;
(iii) the approval of any License Agreement or Services
Agreement, and material changes thereto;
(iv) the approval of a material change to the Phase I
Services Agreements;
(v) the authorization of any acquisition (or series of
related acquisitions) or disposition (or series of related
dispositions) of assets having a Fair Market Value in excess of $100
million not otherwise contemplated in an Approved Budget; and
(vi) any distribution to the Partners of Partnership assets,
other than Net Operating Available Cash or distributions of Special
System Assets pursuant to Section 5.2(d), not otherwise contemplated
in an Approved Budget.
(e)(i) Notwithstanding the foregoing, Members designated by the USW
Group shall not be entitled to participate in discussions or votes specifically
relating to the Partnership's then existing or planned operations in any market
served by a local exchange carrier Affiliate of USW (a "LEC Affiliate"), if such
existing or planned operations of the Partnership could reasonably be expected
to compete or conflict with, in any material respect, the then existing or
planned wireless communications operations owned or conducted by USW's LEC
Affiliates. Nothing in this Section 2.4(e) shall restrict the manner in which
Members representing the USW Group shall participate in deliberations,
discussions or votes of the Partnership Committee with respect to the Budget and
Business Plan of the Partnership; provided that such Members shall act in good
faith and in the best interests of the Partnership without regard to any such
competitive considerations. The USW Group agrees that no Member designated by
the USW Group shall participate in decisions regarding the existing or planned
wireless communications operations of USW's LEC Affiliates, whether through the
furnishing of advice or information or otherwise, it being understood that
certain Members designated by the USW Group may have ultimate responsibility for
those who participate in such decisions (and that such Members shall not be
deemed to have participated in such decision solely by virtue of having such
ultimate responsibility).
(ii) Without limitation of the obligations of the members of the USW
Group under Section 2.14, neither USW nor any Members appointed by the USW
Group shall provide to any LEC Affiliate operating data or financial or other
information with respect to the Partnership's existing or planned operations in
the local exchange markets of such LEC Affiliate.
(iii) Notwithstanding anything to the contrary set forth herein, in
the event that pursuant to Section 2.4(c)(vi) the Members representing the USW
Group shall vote against any acquisition of assets by the Partnership in a
market served by a LEC Affiliate of USW, ATI shall have the option to loan to
the Partnership, on terms and conditions no less favorable than could be
obtained from a third party, an amount equal to the difference of (A) the
-18-
<PAGE> 24
purchase price of such assets, minus (B) $500 million, and the Partnership
shall pursue such acquisition notwithstanding the vote of the Members
representing the USW Group.
2.5. No Compensation. No Member (other than any Independent Member)
shall be compensated for his services as a member of the Partnership Committee
from the assets of the Partnership, nor shall such Member be reimbursed by the
Partnership for out-of-pocket expenses incurred in connection therewith. An
Independent Member shall be entitled to such compensation and reimbursement of
out-of-pocket expenses as may be determined from time to time by the Partnership
Committee.
2.6. Acts by Partners. Other than actions of the Tax Matters Partner
pursuant to Sections 6.1 and 6.2 hereof, no Partner shall take, or commit the
Partnership to take, any action, either in its own name in respect of the
Partnership or in the name of the Partnership, without the prior approval of the
Partnership Committee.
2.7. Procedures in the Event of a Dispute.
(a) In cases where the Members are unable to reach agreement on
the matters specified in Section 2.4(d) (or the selection from time to time of
an Independent Member or individuals in the Replacement Pool), the dispute
shall be resolved in the following manner:
(i) First, the Representative Partners shall refer the
disputed matter to the Chairmen of their respective publicly held
Parent Entities in an attempt to reach a resolution; and
(ii) Second, if the Chairmen are unable to resolve a disputed
matter within 60 days after the referral to them of a dispute (or such
longer period of time as to which the Chairmen mutually agree in
writing), the dispute shall be submitted to the respective Boards of
Directors of the Representative Partners' publicly held Parent
Entities in an attempt to reach a resolution.
(b) From and after the Expiration Date (as defined in the
Agreement of Exchange) or at any time following a Change of Control of the
Parent Entity of any Representative Partner (other than ATI), if the Boards of
Directors of the Parent Entities of the Representative Partners are unable to
resolve a disputed matter arising under Section 2.4(d)(i) above within one year
after the expiration of the 60-day period specified in (a)(ii) above and, since
the date of such dispute, the Partnership shall not have approved a Business
Plan pursuant to Section 2.10, the ATI RP shall have the option, exercisable
for a 90-day period, to elect to cause the Exchange contemplated by Section 1.1
of the Agreement of Exchange (in the case of a dispute involving any member of
the USW Group) or by a similar provision of any agreement of exchange with ATI
entered into pursuant to Article 10 (in the case of a dispute involving any
other Representative Partner).
(c) If the ATI RP's option to elect to cause the Exchange with
respect to the USW Group (as set forth in (b) above) arises prior to the
receipt of Final MFJ Relief (as defined in the Agreement of Exchange), USW
shall be obligated to request a waiver for the benefit of ATI that would enable
ATI to engage in the business and activities then engaged in, or planned to be
engaged in, by ATI.
(d) From and after the Expiration Date (as defined in the
Agreement of Exchange) and until the Expiration Date (as defined in the Trust
Agreement of Exchange), as long as (i) Final MFJ Relief shall not have occurred
and USW is not willing to execute the Merger Agreement (as defined in the
Agreement of Exchange) and provide ATI with the protections afforded by Section
3.4 of the Agreement of Exchange, or (ii) the common stock of ATI shall not be
registered under the Securities Exchange Act of 1934, as
-19-
<PAGE> 25
amended (the "Exchange Act"), or the common stock of ATI shall not be broadly
held or actively traded by public stockholders, then notwithstanding the
provisions of Section 2.4(d), if after the expiration of the one-year period set
forth in (b) above, a disputed matter arising under Section 2.4(d)(i) remains
unresolved and the Partnership shall not have subsequently approved a Business
Plan pursuant to Section 2.10, the Members representing the ATI Group shall have
the right to approve a Budget and a Business Plan for the Partnership without
the approval or vote of the Members representing any other Group; provided,
however, that nothing in this Section 2.7(d) shall relieve the President of his
responsibility to submit a Business Plan for the Partnership to the Partnership
Committee under Section 2.10.
2.8. President.
(a) The Partnership's President shall have authority and
discretion comparable to that of a chief executive officer of a publicly held
Delaware corporation of similar size to direct and control the business and
affairs of the Partnership, including without limitation its day-to-day
operations in a manner consistent with the Approved Business Plan and Approved
Budget. Each General Partner and each Member of the Partnership Committee
hereby acknowledges, agrees to and authorizes the delegation of their authority
hereunder pursuant to the preceding sentence and Section 2.8(c).
(b) The President shall be appointed by and serve at the pleasure
of the Partnership Committee. The President may serve, from time to time, as
an executive officer or employee of ATI or any Affiliate thereof.
(c) Subject to Sections 2.2(d) and 2.4, the President shall be
responsible for and have the authority and discretion for exercising primary
responsibility in managing the staff and operations of the Partnership,
including, but not limited to:
(i) implementing an Approved Business Plan and Approved
Budget, including without limitation, the taking of all actions
contemplated thereby;
(ii) making immaterial changes to, or taking actions which
would constitute an immaterial deviation from, an Approved Business
Plan or Approved Budget;
(iii) operating or coordinating the operations of Owned or
Licensed Systems and acquiring or constructing new Systems;
(iv) preparing proposed revisions to an Approved Business
Plan and Approved Budget for submission to the Partnership Committee
for approval;
(v) the authorization of any acquisition or disposition of
assets (not otherwise contemplated by an Approved Budget) having a
Fair Market Value not in excess of $25 million;
(vi) the authorization of Related Party Agreements set forth
in Section 2.16(b) and any other Related Party Agreement that provides
for total annual consideration not exceeding $750,000, the terms and
conditions of which are no less favorable than could be obtained from
a third party;
(vii) making immaterial changes to any License Agreement or
Services Agreement, and implementing such agreements;
(viii) making immaterial changes to the Phase I Services
Agreement, and implementing such agreements;
-20-
<PAGE> 26
(ix) the delegation of powers and authority to the Executive
Officers consistent with the other provisions of this Agreement; and
(x) ensuring that the Partnership complies with all applicable
legal requirements.
2.9. Executive Officers.
(a) The executive officers of the Partnership shall consist of a
Chief Financial Officer ("CFO"), a Vice President - Operations, a Vice President
- - Marketing, a Vice President - Engineering, a Vice President - Corporate
Strategy/Development and Human Resources, a President - PCS, a Vice President -
Finance, a Vice President - Legal and External Affairs and one or more Regional
Systems Managers (collectively, the "Executive Officers").
(b) Each Executive Officer shall be subject to the direction and
control of the President; provided that the Vice President - Finance shall also
report to the CFO. Each Executive Officer shall be appointed by the President.
The initial Executive Officers shall be appointed from candidates recommended by
the Representative Partners, based on a review of the candidates'
qualifications. All subsequent appointments of Executive Officers (other than
the officer holding the Long-Term Position, as defined below) will be made based
on the most qualified candidate for the office regardless of whether such
individual is or was employed by a Partner or any Affiliate thereof. The CFO,
the Vice President - Corporate Strategy/Development and Human Resources and the
Vice President - Legal and External Affairs may serve, from time to time, as
executive officers or employees of ATI or USW or any Affiliates thereof.
(c) Each Executive Officer shall hold office until his death,
resignation or removal. Any Executive Officer, other than the officer holding
the Initial Position (as defined below), may be removed with or without cause,
at any time, by the President. The President may remove the officer holding
the Initial Position only for reasonable cause.
(d) The President shall interview and evaluate the qualifications
of each of the candidates recommended by the USW RP as initial Executive
Officers and shall select two of such candidates to occupy respectively
designated Executive Officer positions (other than Vice President-Legal and
External Affairs). Within 30 days after the Effective Date, the USW RP shall
designate one of these two officer positions as the "Initial Position" and the
other as the "Long-Term Position." Until the tenth anniversary of the Effective
Date, the USW RP shall be entitled to designate a candidate, who must be
reasonably acceptable to the ATI RP, to replace the officer in the Long-Term
Position upon his death, resignation or removal.
2.10. Business Plan. The President shall submit to the Partnership
Committee a Business Plan for the Partnership, not less frequently than
annually, at least 30 days prior to the start of the first fiscal year covered
by such Business Plan. Each such Business Plan shall be considered at the first
meeting of the Partnership Committee following its submission and shall be
subject to the approval of the Partnership Committee in accordance with Section
2.4(d) or 2.7 hereof. Any such Business Plan (or any amendment thereto) which
is approved by the Partnership Committee in accordance with the provisions of
Section 2.4(d) or 2.7 hereof shall be considered approved for all purposes of
this Agreement until amended or replaced (an "Approved Business Plan").
2.11. Budget Approval.
(a) The President shall include in his submission of the Business
Plan, a Budget in respect of the Partnership for the next fiscal year,
including an income statement, balance sheet and capital budget prepared on
-21-
<PAGE> 27
an accrual basis for the Partnership for the forthcoming fiscal year and a cash
flow statement which shall show in reasonable detail the receipts and
disbursements (including without limitation, the anticipated distributions)
projected for the Partnership for the forthcoming fiscal year and the amount of
any corresponding cash deficiency or surplus, and the amount and due dates of
all required capital contributions, if any. Such Budget shall be prepared on a
basis consistent with the Partnership's financial statements prepared in
accordance with the provisions of Section 6.4 hereof and the Approved Business
Plan. If requested by any Member, the President shall promptly meet with the
Partnership Committee for the purpose of discussing such Budget. Each such
Budget shall be considered at the first meeting of the Partnership Committee
following submission thereof. Any such Budget (or any amendment thereto) which
is approved by the Partnership Committee in accordance with Section 2.4(d) or
2.7 hereof shall be considered approved for all purposes of this Agreement until
amended or replaced (an "Approved Budget").
(b) If for any fiscal year no new Budget is agreed upon in
accordance with Section 2.4(d) or 2.7, then for such fiscal year the Partnership
shall be managed in a manner consistent with the forecasts for such fiscal year
included in the then Approved Business Plan (such forecasts, as they relate to
either of the two years following a year in which a Budget has been approved
pursuant to Section 2.11(a), being deemed for all purposes of this Agreement to
be an Approved Budget) as adjusted by the President to reflect the Partnership's
contractual obligations for such year and other changes resulting from the
passage of time or the occurrence of events beyond the control of the
Partnership.
2.12. Employees and Employee Benefits. The compensation program,
benefit plans and personnel policies of the Partnership shall be in accordance
with an agreement to be entered into by and among USW, ATI and the Partnership.
2.13. Access to Books of Account. Notwithstanding any other provision
of this Agreement, each Partner shall have the right at all reasonable times
during usual business hours to audit, examine, and make copies or extracts of or
from the complete books of account of the Partnership, including but not limited
to the books and records maintained in accordance with Section 6.4 and all other
books and records of the Partnership. Such right may be exercised through any
agent or employee of such Partner designated by it or by independent certified
public accountants or counsel designated by such Partner. Each Partner shall
bear all expenses incurred in any examination made for such Partner's account.
2.14. Confidential Information.
(a) Each Partner shall, and shall cause each of its Affiliates, and
its and their respective partners, shareholders, directors, officers, employees
and agents (collectively, "Representatives") to keep secret and retain in
strictest confidence, except as provided in subsection (c) hereof, any and all
Confidential Information and shall not distribute, disseminate or disclose such
Confidential Information, and shall cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) the
Partnership or any Owned System and their respective agents, (ii) any lender to
the Partnership or any Owned System, (iii) any Partner or any of their
respective Affiliates or other Representatives on a "need to know" basis in
connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, the Licensed Systems, the Owned
Systems and their respective businesses, or (iv) any other Person that agrees in
writing to keep in confidence such Confidential Information in accordance with
the terms of this Section 2.14, and such Partner disclosing Confidential
Information pursuant to this Section 2.14 shall use, and shall cause its
Affiliates and other Representatives to use, such Confidential Information only
for the benefit of the Partnership in conducting the Partnership
-22-
<PAGE> 28
Business or for any other specific purposes for which it was disclosed to such
party; provided that the disclosure of financial statements of, or other
information relating to, the Partnership shall not be deemed to be the
disclosure of Confidential Information (i) to the extent that any Partner is
required by law or GAAP to disclose such financial statements or other
information or (ii) to the extent that in order to sustain a position taken for
tax purposes, any Partner deems it necessary and appropriate to disclose such
financial statements or other information. All Confidential Information
disclosed in connection with the Partnership or pursuant to this Agreement shall
remain the property of the Person whose property it was prior to such
disclosure.
(b) No Confidential Information regarding the plans or operations
of any Partner or any Affiliate thereof received or acquired by or disclosed to
any unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership Business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas in which any
other Partner and the unaffiliated Partner and their respective Affiliates
compete in the provision of telecommunications services.
(c) In the event that a Partner or anyone to whom a Partner
transmits any Confidential Information becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
investigative demand or similar process) to disclose any of the Confidential
Information, such Partner will use its best efforts to provide the other
Partners and the Partnership with prompt written notice prior to disclosure (not
less than 24 hours) so that the other Partners and the Partnership may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In the event that such protective order or other
remedy is not obtained, or that the Partnership and the other Partners waive
compliance with the provisions of this Section 2.14, the Partner or Person who
is compelled to disclose such Confidential Information will furnish only that
portion of the Confidential Information which (based on the advice of counsel)
it is legally required to disclose and will exercise its best efforts to obtain
reliable assurance that protective treatment will be accorded the Confidential
Information.
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and representatives to, maintain the confidentiality required by
this Section 2.14 and to destroy or return upon request, all documents and other
materials, and all copies thereof, obtained by such Partner or on its behalf
from either the Partnership or the other Partners or any of their Affiliates in
connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, the Licensed Systems, the Owned
System and any other System in which the Partnership has an ownership interest
or their respective businesses that are subject to such confidentiality
obligations. The obligations under this Section 2.14 shall survive the
termination of the Partnership for a period of five years.
(e) To the fullest extent permitted by law, if a Partner or any of
its Affiliates or Representatives breaches, or threatens to commit a breach of,
this Section 2.14, the other Partners and the Partnership shall have the right
and remedy to have this Section 2.14 specifically enforced pursuant to the
provisions of the Arbitration Agreement referred to in Section 13.11, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such other Partners or the Partnership. Nothing in this Section 2.14 shall
be construed to limit the right of any Partner or the Partnership to collect
money damages in the event of breach of this Section 2.14.
-23-
<PAGE> 29
2.15. Duty of Partners To Cooperate. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by the
Partnership Committee and as may be necessary or reasonably desirable in
connection with the business of the Partnership.
2.16. Agreements with Partnership and Owned Systems.
(a) Any Partner or any Affiliate thereof may enter into and
maintain in effect any contract, agreement, transaction or relationship between
such Partner or Affiliate and the Partnership or any Owned System (a "Related
Party Agreement") on terms and conditions approved by the Partnership Committee
(by vote of Members representing Groups who hold a majority of the Percentage
Interests of the Groups other than the Group of any Partner interested in such
Related Party Agreement) or otherwise pursuant to the terms hereof and may
derive and retain profits therefrom.
(b) Notwithstanding the foregoing, each General Partner and each
Member of the Partnership Committee hereby approves, and authorizes the
Partnership to enter into:
(i) Related Party Agreements with ATI, or any Affiliate
thereof which provides paging or vehicle location services, relating to
(A) co-location of technical site leases (which individually do not
provide for annual rental payments of in excess of $4,000), (B) sales
office leases (which individually do not provide for rental payments in
excess of $400,000), and (C) other Related Party Agreements relating to
paging terminal and cellular switching equipment, joint mailing and
other co-marketing efforts, the aggregate annual consideration under
which does not exceed $1 million and the terms and conditions of which
are no less favorable than could be obtained from a third party;
(ii) Related Party Agreements with any LEC Affiliate of USW or
any wireline cable television company in which USW has an ownership
interest related to the purchase of Cellular, ESMR or PCS Services from
the Owned Systems for resale in such LEC Affiliate's local-exchange
markets or such wireline cable television company's franchise markets,
as the case may be; provided that such agreements provide for
reasonable notice of cancellation. As long as USW or an Affiliate
thereof remains a Representative Partner, the pricing of such services
shall be on terms no less favorable than those offered to any third
party (for like types and volumes of service); provided that if the
Partnership provides services of comparable quality and scope as those
available from third parties, such LEC Affiliate or such wireline cable
television company, as the case may be, shall have entered into an
agreement with the Partnership (and/or the Owned Systems or PCS Par) to
purchase its entire requirements of wireless communications services in
such markets from the Owned Systems or PCS Par; and
(iii) Related Party Agreements with ATI or any Affiliate
thereof related to the purchase of satellite communications services
provided by the Globalstar satellite communications venture, which
agreements may provide that Globalstar will be the exclusive provider
of satellite communications services to the Partnership; provided that
the Partnership shall be entitled to purchase such services at prices
and on terms no less favorable than those offered by Globalstar to any
third party (for like volumes and types of service).
-24-
<PAGE> 30
2.17. Insurance and Risk Management. The property and casualty
insurance program for the Partnership shall be integrated into the ATI insurance
program providing customary business insurance coverage as of the Effective
Date. Each Partner hereby consents and agrees that the Partnership shall
compensate ATI for a proportional allocation to the Partnership for insurance
premiums, casualty loss funding pools, and related expenses.
2.18. International.
(a) The Partnership shall provide access during normal business
hours to the facilities of the Systems for the Los Angeles and Seattle markets
to any Affiliate of a Partner which is engaged, in whole or in part, in the
business of offering any type of mobile radio services outside the United States
and its territories and possessions (an "International Affiliate"), for the
purpose of providing facility tours and product demonstrations for employees of
such Affiliate and for third parties who are actual or potential customers or
business partners of such Affiliate; provided that such access does not cause
undue disruption to the conduct of the Partnership's business activities.
(b) The Partnership and the International Affiliates of the
Partners shall cooperate to develop mutually acceptable licensing arrangements,
which arrangements shall be on an arm's-length basis, relating to billing
systems, information systems, wireless communications technology and know-how,
software, engineering processes and products.
2.19. Procedures With Respect to PCS Primeco Dissolution.
(a) The Partners hereby agree that, unless otherwise unanimously
determined in writing by the ATI RP and USW RP, the Partnership will elect to
terminate Primeco on October 20, 2001 in accordance with Section 10.2(d) of the
Primeco Agreement.
(b) If the dissolution of Primeco occurs after the PCS Contribution
Date, the Partnership will prepare and submit a Liquidating Proposal (as defined
in Section 10.3(b) of the Primeco Agreement) to the Executive Committee of
Primeco on or before the date specified in the Primeco Agreement for submission
of Liquidating Proposals by general partners of PCS Primeco (the "Submission
Date") in accordance with the following procedures:
(i) The ATI RP and USW RP shall attempt to reach agreement on
the Liquidating Proposal to be submitted by the Partnership to Primeco
(the "Partnership Proposal") on or before the 20th day preceding the
applicable Submission Date.
(ii) If the ATI RP and USW RP are unable to reach agreement on
the Partnership Proposal within the foregoing time period, each of the
ATI RP and USW RP shall submit to the Independent Member a proposed
Partnership Proposal as promptly as practicable but in any event no
later than the 15th day prior to the applicable Submission Date
therefor.
(iii) Within 10 days following the submission of such proposed
Partnership Proposals to the Independent Member, the Independent Member
shall select one of such proposals in its entirety as the Partnership
Proposal, without varying, modifying or otherwise altering the terms of
such proposal in any way. The decision of the Independent Member shall
be final and binding and the Partnership shall promptly submit the
Partnership Proposal to Primeco on the Submission Date therefor.
2.20. Tomcom Representatives. The Partnership Committee shall
designate as its representatives to the Executive Committee of Tomcom, L.P.,
-25-
<PAGE> 31
a Delaware limited partnership, two individuals designated by the ATI RP and one
individual designated by the USW RP.
ARTICLE 3
CERTAIN AGREEMENTS REGARDING OPERATIONS OF LICENSED AND OWNED SYSTEMS
3.1. General; Fiduciary Obligations.
(a) The Partnership shall manage the operations of the Licensed
Systems and Owned Systems in accordance with the respective budgets and business
plans for such Systems then in effect and the applicable terms of this
Agreement. Between the Effective Date and the Phase I Closing Date, neither USW
nor ATI nor any of their respective Affiliates shall directly or indirectly
control, supervise or direct, or attempt to control, supervise or direct, the
operation of any of the Systems now licensed to the other party or the other
party's Affiliates. The Partnership will not manage the operations of a
Licensed System (including, without limitation, all the functions specified in
this Article 3) to the extent those operations relate to any MFJ Restricted
Activities undertaken by that Licensed System; the Partners will use best
efforts to negotiate and agree to procedures to monitor the activities of the
Partnership for compliance with this sentence.
(b) The Partners acknowledge that each of the Partners or the
Partnership may have fiduciary obligations to and from other Persons in
connection with the Partnership's interest in or contractual relationships with
any System. Each of the Partnership Committee, the Representative Partners, and
the other Partners shall use all reasonable efforts to cause the Partnership to
comply with all such fiduciary obligations, and the obligations of the
Partnership, the Partnership Committee, the Representative Partners and the
other Partners hereunder are subject in all respects to such fiduciary
obligations.
3.2. Phase I Services Agreements.
Upon the Phase I Closing Date, each of the Partners will, subject to
fiduciary duties to third parties, use reasonable efforts to cause each of
NewVector and the ATI Cellular Subsidiaries (as defined in the Organization
Agreement) to enter into a Phase I Services Agreement with the Partnership and
amend such agreement from time to time to reflect such changes therein as may
be approved by the Partnership Committee or the President, as the case may be,
in accordance with Article 2.
3.3. Licensed Systems. From and after the Phase I Closing Date:
(a) At the direction of the President, each Partner agrees to take,
and to cause each of its Affiliates to take, all reasonable actions to effect
the appointment or removal of the general manager or, if applicable, the
regional manager or other person with equivalent management responsibility (the
"System Manager") of any Licensed or Owned System.
(b) The Partners acknowledge that each System Manager shall manage
the day-to-day operations of the applicable System in accordance with any
partnership agreement or other organizational documents of the applicable System
so long as they are in existence and the License Agreement, Services Agreement,
budget and business plans then in effect for such System. Each Partner agrees
to take, and to cause each of its Affiliates to take, all reasonable actions to
permit the President to have control, supervision and oversight over the System
Manager with respect to such responsibilities, as such responsibilities relate
to WMC, the Approved Budget, the Approved Business Plan, and the License and
Services Agreements; provided, however, the President shall have no such
control, supervision and oversight (i) with respect to the MFJ Restricted
Activities undertaken by a Licensed System, or
-26-
<PAGE> 32
(ii) in the case of a Licensed System owned (in whole or in part) by USW, that
System's compliance with the CECO and the EO.
3.4. System Budget Approval.
(a) The System Manager for each Licensed or Owned System shall
submit annually to the President a budget in respect of such System (a "System
Budget") for the next fiscal year at such time and in such format as may be
determined, from time to time, by the President; provided, however, System
Budgets for any Licensed System shall not include or otherwise reflect any MFJ
Restricted Activities undertaken, or to be undertaken, by any such Licensed
System. If requested by the President, the System Manager shall promptly meet
with the President for the purpose of discussing such System Budget.
(b) Neither the Partnership nor any Partner shall take or cause to
be taken any action to approve or implement a System Budget (or any amendment
thereof or modification thereto) until such System Budget (or amendment thereof
or modification thereto) shall have been approved by the President.
3.5. System Business Plans.
(a) The System Manager for each Licensed or Owned System shall
submit to the President a business plan in respect of such System (a "System
Business Plan") at such time and in such format as may be determined, from time
to time, by the President; provided, however, System Business Plans for any
Licensed System shall not reflect or take account of any MFJ Restricted
Activities undertaken, or to be undertaken, by such Licensed System.
(b) Neither the Partnership nor any Partner shall take or cause to
be taken any action to approve or implement a System Business Plan until such
System Business Plan (or amendment or modification) shall have been approved by
the President.
3.6. Management Reports. The System Manager for each Licensed or
Owned System shall prepare and distribute, or cause to be prepared and
distributed, promptly such reports and other information in respect of such
System as the President reasonably may request; provided, however, the reports
submitted with respect to any Licensed System shall not include or otherwise
reflect any MFJ Restricted Activities undertaken, or to be undertaken, by such
Licensed System.
3.7. Financial Statements.
(a) Annual Statements. As soon as practicable following the end
of each fiscal year, but in any event within 45 days after the end of the
fiscal year, the System Manager for each Licensed or Owned System shall cause
to be prepared and delivered to the President unaudited statements of income
(loss) in respect of such System, and an unaudited statement of cash flows for
such fiscal year, and an unaudited balance sheet of such System, in each case,
consistent with Partnership accounting practices.
(b) Quarterly Statements. As soon as possible following the end
of each fiscal quarter, but in any event within 20 days after the end of each
quarter, the System Manager for each Licensed or Owned System shall prepare, or
cause to be prepared, and deliver to the President an unaudited statement of
income (loss) in respect of such System and an unaudited statement of cash
flows for such fiscal quarter, and an unaudited balance sheet of such System as
of the end of such fiscal quarter, in each case, consistent with Partnership
accounting practices.
(c) MFJ Restricted Activities. The annual and quarterly financial
statements submitted with respect to a Licensed System shall exclude the income
(loss) of such System and changes in such System's cash flows
-27-
<PAGE> 33
attributable to the MFJ Restricted Activities (if any) undertaken by such
System, and the effect of such MFJ Restricted Activities on the balance sheet of
such System.
ARTICLE 4
CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS
4.1. Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate capital
account (a "Capital Account") in accordance with the capital accounting rules of
section 704(b) of the Code and the Income Tax Regulations thereunder (including
particularly section 1.704-1(b)(2)(iv) of the Income Tax Regulations).
(b) In general, under such capital accounting rules (but subject
to any contrary requirements of the Code and the Income Tax Regulations
thereunder), a Partner's Capital Account shall be (i) increased by the amount
of money (including Make-Up Contributions) and the Fair Market Value (determined
in accordance with Section 4.10 hereof) of other property (net of liabilities
secured by such contributed property that the Partnership is considered to take
subject to or assume under section 752 of the Code) contributed by the Partner
to the Partnership (including the amount of any Organizational Expenses of the
Partnership paid or accrued by such Partner and any Preferred Amounts
contributed in accordance with Section 4.4(c)) and allocations to the Partner of
Partnership income and gain (or items thereof), including income and gains
exempt from tax, and amounts allocated in accordance with Section 4.4(c)(vi) and
(ii) decreased by the amount of money and the Fair Market Value (determined in
accordance with Section 4.10 hereof) of other property distributed (net of
liabilities secured by such distributed property that such Partner is considered
to take subject to or assume under section 752 of the Code) to the Partner by
the Partnership and allocations to the Partner of Partnership loss and deduction
(or items thereof), including Partnership expenditures not deductible in
computing its taxable income and not properly chargeable to capital account.
(c) Where section 704(c) of the Code applies to Partnership
property, each Partner's Capital Account shall be adjusted in accordance with
paragraph (b)(2)(iv)(g) of section 1.704-1 of the Income Tax Regulations as to
allocations to the Partners of depreciation, depletion, amortization and gain
or loss, as computed for book purposes with respect to such property.
(d) When Partnership property is distributed in kind (whether in
connection with dissolution and liquidation of the Partnership or otherwise),
the Capital Accounts of the Partners first shall be adjusted to reflect the
manner in which the unrealized income, gain, loss or deduction inherent in such
property (that has not previously been reflected in Capital Accounts) would be
allocated among the Partners if there were a taxable disposition of such
property for its Fair Market Value (determined in accordance with Section 4.10
hereof and taking into account section 7701(g) of the Code) and such income,
gain, loss or deduction had been recognized for federal income tax purposes
immediately upon such distribution or the event requiring such revaluation.
(e) Upon a revaluation of any Partnership assets pursuant to
Section 4.8 hereof, the Capital Accounts of the Partners will be adjusted as
provided in Section 4.8(c).
(f) The Tax Matters Partner shall direct the Partnership's
accountant to make all necessary adjustments in each Partner's Capital Account
as required by the rules of section 704(b) of the Code and the Income Tax
Regulations thereunder.
-28-
<PAGE> 34
4.2. Initial Contributions of Capital.
(a) Effective Date. On the Effective Date, each Partner shall
make the contributions to the capital of the Partnership set forth opposite
such Partner's name on Schedule 1 hereto.
(b) Phase II Contribution Date.
On the Phase II Contribution Date, each Group shall contribute to the
capital of the Partnership the Phase II Assets and the Scheduled Phase II
Related Assets required to be contributed by it pursuant to Section 6.3 of the
Organization Agreement.
(c) New Par Contribution Date.
On the New Par Contribution Date, the ATI Group shall contribute to
the capital of the Partnership the New Par Assets and the Scheduled New Par
Related Asset required to be contributed by it pursuant to Section 6.5 of the
Organization Agreement.
(d) PCS Contribution Date. On the PCS Contribution Date, each
Group shall contribute to the capital of the Partnership the PCS Assets required
to be contributed by it pursuant to Section 6.4 of the Organization Agreement.
(e) Beneficial Phase II Assets.
(i) Each Partner shall consult with the Partnership Committee
regarding the status of all third-party consents and approvals required in
connection with the contribution of such Partner's Phase II Assets and
Scheduled Phase II Related Assets to the Partnership. Each Partner shall use
reasonable efforts to obtain all such third-party consents or approvals on or
prior to the Phase II Contribution Date, or as promptly thereafter as
practicable. The Partnership shall reimburse each Partner for all costs and
expenses incurred in connection with obtaining such consents and approvals to
the extent that the incurrence of such costs and expenses shall have been
approved by a Supermajority Vote of the Partnership Committee.
(ii) Following the Phase II Contribution Date, each Partner will
continue to use reasonable efforts to obtain any consent or approval necessary
to effectuate the contribution to the Partnership of such Partner's Beneficial
Phase II Assets and shall take all reasonable actions to effectuate the
contribution of such Beneficial Phase II Assets after such consent or approval
is obtained. No Partner may assign, sell, transfer or otherwise dispose of,
pledge, hypothecate, grant a security interest in or otherwise encumber a
Beneficial Phase II Asset, unless such Beneficial Phase II Asset is being sold
in connection with a sale or transfer of such Partner's Wireless Assets and such
Partner shall have provided the other Partners with a right of first refusal
(subject to any similar contractual obligations applicable to any Wireless Asset
on the Effective Date) with respect to the purchase of such Beneficial Phase II
Asset in accordance with the procedures for the sale of a Transferred Interest
set forth in Section 10.3. Following any such sale or transfer, the License
Agreement and Services Agreement referred to in subsection (iii) below shall be
subject to termination by any party thereto upon one year's written notice.
(iii) Following the Phase II Contribution Date, each Partner will,
and will cause each of its Affiliates to, take all reasonable actions necessary
to operate each of the Systems which comprise its Beneficial Phase II Assets
for the use and benefit of the Partnership, so that the Partnership and each
Partner shall receive the same economic benefits that the Partnership and each
Partner would have received if the Beneficial Phase II Assets had in fact been
contributed to the Partnership on the Phase II Contribution Date or the New Par
Contribution Date, as applicable. Such actions shall include but not be limited
to, causing any such Systems
-29-
<PAGE> 35
to enter into a License Agreement and a Services Agreement with the Partnership
and to amend such agreements from time to time to reflect changes therein which
may be approved by the Partnership Committee or the President, as the case may
be, pursuant to Article 2.
(iv) Promptly following the Phase II Contribution Date and the New Par
Contribution Date, the Partners will restructure, among other things, the
allocation of profit and losses and the distribution of cash and property of the
Partnership or, to the extent such a restructuring is not feasible, to otherwise
implement a compensation mechanism, in each case, to provide each Partner with
the same economic result (taking into account all tax consequences) such Partner
would have obtained if all Beneficial Phase II Assets had been contributed to
the Partnership on the Phase II Contribution Date or the New Par Contribution
Date, as applicable.
(v) A transferee of a Partial Interest shall be subject to all of the
obligations of a Transferring Partner hereunder with respect to such
Transferring Partner's Beneficial Phase II Assets, including obligations
relating to an adjustment of such transferee's Closing Adjusted Capital
Contributions or Phase II Adjusted Capital Contributions, as the case may be,
and Percentage Interest to take into account the Transferring Partner's failure
to contribute to the Partnership any Noncontributed Asset on or before the
Noncontributed Assets Recalculation Date for such asset.
(f) SLP Interests. Upon any dissolution of Primeco in accordance
with Article 10 of the Primeco Agreement occurring after the PCS Contribution
Date, each Partner will promptly contribute to the capital of the Partnership
any SLP Interests (as defined in the Primeco Agreement) received by such
Partner or any Affiliate thereof as part of a liquidating distribution from
Primeco.
4.3. Special Capital Contribution Rights of Partners.
(a) The members of ATI Group shall be entitled to contribute
collectively to the capital of the Partnership an amount of cash equal to (i)
(A) the Private Market Value of the Partnership determined in accordance with
Section 4.10, multiplied by (B) the excess, if any, of (1) 51%, minus (2) the
aggregate Percentage Interests of the ATI Group (calculated as if the ATI Group
had not transferred any of its Partnership Interest pursuant to Section 10.3),
divided by (ii) 49% ("an ATI Ownership Deficiency Contribution") immediately
following (v) the PCS Contribution Date, (w) the Back End Termination Date, (x)
each USW Ownership Deficiency Contribution pursuant to subsection (b) below, (y)
each admission of an Additional Partner to the Partnership pursuant to Article 9
and (z) any capital contribution by a member of the USW Group pursuant to
Section 4.2(f).
(b) The members of USW Group shall be entitled to contribute
collectively to the capital of the Partnership an amount of cash equal to (i)
(A) the Private Market Value of the Partnership determined in accordance with
Section 4.10, multiplied by (B) the excess, if any, of (1) 24% minus (2) the
aggregate Percentage Interests of the USW Group (calculated as if the members of
USW Group had made all Defaulted Contributions to the Partnership or PCS Par and
had not transferred any of its Partnership Interest pursuant to Section 10.3),
divided by (ii) 76% (a "USW Ownership Deficiency Contribution") immediately
following (v) each ATI Ownership Deficiency Contribution pursuant to subsection
(a) above, (w) the PCS Contribution Date, (x) each admission of an Additional
Partner to the Partnership pursuant to Article 9, (y) the New Par Contribution
Date and (z) any capital contribution by a member of the ATI Group pursuant to
Section 4.2(f).
4.4. Additional Contributions by Partners.
(a) In the event that (i) a capital contribution is required by the
terms of an Approved Business Plan or an Approved Budget or (ii) the
-30-
<PAGE> 36
Partnership Committee determines that an additional capital contribution,
payable in cash or other property (or combination thereof), is necessary or
advisable, each Partner will be notified in writing by the Partnership, at least
60 days prior to the date on which such capital contribution is payable (the
"Due Date"), of the amount of the capital contribution required from each of
them, on a pro rata basis, determined in accordance with such Partner's
respective Percentage Interest, and the Due Date for such capital contribution.
Each such capital contribution shall be payable in cash unless otherwise
determined by the Partnership Committee by vote of the Members representing each
Group. Such contributions, when made by a Partner, shall be credited to such
Partner's Capital Account.
(b) In the event that any Partner fails to make such a capital
contribution on or before the Due Date thereof, but wishes to make such
contribution on or before the 15th day immediately following such Due Date (a
"Late Amount"), such Partner shall be entitled to contribute such Late Amount
during such 15-day period and have such Late Amount credited to its Capital
Account; provided that in addition to the payment of such Late Amount, such
Partner must also pay at such time a late fee equal to the interest that would
have accrued on the unpaid portion of such Late Amount from the Due Date to the
date of payment, calculated at a per annum rate of the Prime Rate plus 2% (a
"Late Fee"), which Late Fee shall not be credited in whole to the Partner's
Capital Account, but shall be treated as income and allocated among the Partners
proportionately in accordance with their Percentage Interests.
(c) Defaults Prior to Phase II Contribution Date. In the event
that, at any time prior to the Phase II Contribution Date, any Partner fails to
make the required additional capital contribution on or prior to the expiration
of 15 days after the Due Date thereof (a "Phase I Defaulting Partner"), the
other Partner or Partners, who are not members of the Phase I Defaulting
Partner's Group (the "Phase I Non-Defaulting Partners") may by a vote of the
Members representing Groups who hold a majority of the Percentage Interests of
the Phase I Non-Defaulting Partners, elect to cause the Partnership to (x) allow
Phase I Non-Defaulting Partners to withdraw their corresponding additional
capital contribution, in which event the Partnership shall promptly return any
such contributions to such Partners and, pending such return, the amount of such
contribution shall be deemed to be a demand loan from such Partners to the
Partnership, or (y) invoke the following procedure (the "Phase I Default
Contribution Procedure") to permit the Phase I Non-Defaulting Partners to
contribute on behalf of the Phase I Defaulting Partners that have not
contributed the entire amount required to be contributed pursuant to Section
4.4(a) such amount they failed to contribute (the "Phase I Default Amount").
(i) The Phase I Default Contribution Procedure shall be
invoked by the Partnership by giving notice (the "Phase I Default
Contribution Notice") to the Phase I Non-Defaulting Partners, with a
copy to the Phase I Defaulting Partner's Group. Within 30 days
following the mailing of the Phase I Default Contribution Notice (the
"Phase I Default Contribution Date"), any one or more of the Phase I
Non-Defaulting Partners may pay some or all of the Phase I Default
Amount.
(ii) In the event that more than one Phase I Non-Defaulting
Partner elects to contribute a Phase I Default Amount so that the
aggregate amount to be contributed by the Phase I Non-Defaulting
Partners would exceed the full Phase I Default Amount, each of such
Phase I Non-Defaulting Partners shall be entitled to contribute a
portion of the Phase I Default Amount that is equal to such Phase I
Non-Defaulting Partner's Percentage Interest divided by the Percentage
Interests of all Phase I Non-Defaulting Partners electing to
contribute such Phase I Default Amount.
-31-
<PAGE> 37
(iii) The amount contributed pursuant to this Phase I
Default Contribution Procedure (as determined at the date 30 days after
the Phase I Default Contribution Date) (the "Phase I Default
Contribution Procedure Termination Date") shall constitute an amount
(the "Preferred Amount") allocated appropriately among the Phase I
Non-Defaulting Partners, effective as of the Phase I Default
Contribution Procedure Termination Date and such Preferred Amount shall
be appropriately credited to the Capital Accounts of such Phase I
Non-Defaulting Partners.
(iv) The Preferred Amount of each such Partner shall
thereafter be (A) increased on the first day of each quarter by the
appropriate Quarterly Preferred Return (as hereinafter defined) and (B)
reduced by all distributions (as hereinafter defined) made to each such
Partner, and by capital contributions made as contemplated by paragraph
(vii) below. On the first day of each month of each year, each Phase I
Non-Defaulting Partner having a positive Preferred Amount ("Preferred
Partner") shall be entitled to receive, out of cash distributions which
would otherwise be made to the Phase I Defaulting Partners pursuant to
Article 5 ("Distributions"), an amount equal to the balance of such
Preferred Amount.
(v) The "Quarterly Preferred Return" shall, for the date of
determination, be equal to the product of (A) the Appropriate
Preferred Rate, and (B) such Phase I Non-Defaulting Partner's average
daily balance in the Preferred Amount for the quarter preceding the
Quarterly Payment Date at issue. The "Appropriate Preferred Rate"
shall be (I) 5% with respect to capital contributions related to
acquisitions of assets that had been voted for by the Phase I
Defaulting Partner's Group, (II) 3% with respect to capital
contributions related to all other acquisitions of assets, and (III)
6.25% with respect all other capital contributions. A capital
contribution shall be classified under clause (III) unless it is
specifically identified as relating to an acquisition of assets prior
to the time that the vote of the Partnership Committee is taken with
respect to such capital contribution. If more than one Quarterly
Preferred Return applies to a Preferred Amount of a Preferred Partner,
the Preferred Amount balances will be accounted for separately and any
gross income allocations pursuant to clause (vi) of this Section 4.4(c)
and any distributions pursuant to clause (vii) of this Section 4.4(c)
shall be applied first to the oldest Preferred Amount account.
(vi) Subject to Section 5.1(b) and the minimum gain
provisions of Section 5.1(c), the Partnership's gross income for any
fiscal quarter otherwise distributable to each Phase I Defaulting
Partner shall first be allocated to the Preferred Partners until the
cumulative amount allocated to each such Preferred Partner for all
periods under this paragraph is equal to the cumulative amount of
Quarterly Preferred Return of such Preferred Partner for all periods.
(vii) The Phase I Defaulting Partners may, at any time,
contribute cash to the Partnership in an amount equal to all or any
part of the aggregate Preferred Amount, which cash shall be promptly
distributed to the Preferred Partners in full or partial satisfaction
of their respective Preferred Amounts.
(viii) On the Phase II Contribution Date, the balance of the
Preferred Amount of each Partner shall be converted into Common Capital
and such Partner's Preferred Amount shall be reduced to zero; provided,
however, that if (i) the Preferred
-32-
<PAGE> 38
Amount of a Preferred Partner, exceeds (ii) the amount credited to
such Preferred Partner's Capital Account in respect of such Preferred
Amount, then such Preferred Partner may elect instead to have the
amount described in clause (ii) of this provision converted into Common
Capital and to continue to have the Partnership's gross income for any
fiscal quarter otherwise distributable to the Phase I Defaulting
Partners allocated first to such Preferred Partner until the amount so
allocated is equal to the amount of such excess. The Preferred Amounts
outstanding immediately prior to any such conversion shall be taken
into account in determining the Partner's Percentage Interest on and
after the Phase II Contribution Date, as provided in Section 4.9.
(d) Defaults On or After Phase II Contribution Date. In the event
that at any time on or after the Phase II Contribution Date, a Partner fails to
make a required capital contribution on or prior to the expiration of 15 days
after the Due Date thereof (a "Defaulting Partner"), any one or more of the
other Partners, who are not members of the Defaulting Partner's Group (the
"Non-Defaulting Partners"), within 30 days following the mailing of notice from
the Partnership that payment from the Defaulting Partner has not been made, may
pay some or all of the contribution which the Defaulting Partner failed to make
to the capital of the Partnership (a "Default Amount"). In the event that more
than one Non-Defaulting Partner elects to contribute a Default Amount so that
the aggregate amount to be contributed by Non-Defaulting Partners would exceed
the full Default Amount, each of such Non-Defaulting Partners shall be entitled
to contribute a portion of the Default Amount that is equal to such
Non-Defaulting Partner's Percentage Interest divided by the Percentage Interests
of all Non-Defaulting Partners electing to contribute such Default Amount.
Thereafter, to the extent that such Default Amount remains unpaid and the
Partnership shall not have funded such Default Amount through a subsequent
capital call, the Defaulting Partner shall have the right to contribute such
unpaid portion of such Default Amount and have such previously unpaid Default
Amount credited to its Capital Account; provided that such contribution is
accompanied by the payment of a fee in an amount equal to the interest that
would have accrued on the unpaid portion of such Default Amount from the Due
Date to the date of such payment, calculated at a per annum rate of the Prime
Rate plus 2% (a "Default Fee"), which Default Fee shall not be credited to the
Partner's Capital Account, but shall be treated as income and allocated among
the Partners proportionately in accordance with their Percentage Interests.
(e) If the Defaulting Partner fails to contribute a Default Amount
(or a Phase I Default Amount) which relates to a Defaulted Contribution and such
Default Amount (or Phase I Default Amount) has not been paid in full by one or
more of the Non-Defaulting Partners (or Phase I Non-Defaulting Partners), the
Non-Defaulting Partner or Partners (or Phase I Non-Defaulting Partner or
Partners) may by a vote of the Members representing Groups who held a majority
of the Percentage Interests of the Non-Defaulting Partners (or Phase I
Non-Defaulting Partners), elect to cause the Partnership to initiate and
maintain an action against the Defaulting Partner (or Phase I Defaulting
Partner) for such unpaid Defaulted Contribution (or Phase I Default
Contribution) and to pursue any available remedy, including but not limited to
seeking payment by the Defaulting Partner (or Phase I Defaulting Partner) of
such Default Amount (or Phase I Default Amount) or the unpaid portion thereof
and damages incurred by the Partnership in connection therewith. The Defaulting
Partner's (or Phase I Defaulting Partner's) Capital Account shall be increased
by an amount equal to that portion of the Default Amount (or Phase I Default
Amount) recovered in any action maintained in accordance with the immediately
preceding sentence. The costs of any action commenced by the Partnership
pursuant to this Section 4.4(c) shall be paid by the Partnership and shall be
reimbursed by the Defaulting Partner (or the Phase I Defaulting Partner) to the
Partnership and to the extent not paid will be deducted from such Defaulting
Partner's (or Phase I Defaulting Partner's) Capital Account and Closing Adjusted
Capital
-33-
<PAGE> 39
Contributions or Phase II Adjusted Capital Contributions, as the case may be.
4.5. Partner Obligations. If upon liquidation of its interest in the
Partnership or upon liquidation of the Partnership within the meaning of Income
Tax Regulations section 1.704-1(b)(2)(ii)(g) any Partner has a deficit balance
in its Capital Account after taking into account Capital Account adjustments for
the Partnership taxable year during which liquidation occurs, such Partner shall
be unconditionally obligated to restore only that portion of such deficit
balance caused by distributions in kind pursuant to Section 8.5(a)(i), (ii) or
(iii) hereof, and such Partner shall restore such portion by making a cash
contribution to the Partnership by the end of such taxable year (or, if later,
90 days after the date of such liquidation), which amount shall, upon
liquidation of the Partnership, be paid to creditors of the Partnership or
distributed to other Partners in accordance with their positive Capital Account
balances.
4.6. Withdrawals of Capital Accounts. No Partner shall be entitled to
withdraw any amount from its Capital Account prior to dissolution of the
Partnership.
4.7. Interest on Capital Accounts. No interest or compensation shall be
paid on or with respect to the Capital Account or capital contributions of any
of the Partners, except as otherwise expressly provided herein.
4.8. Revaluation of Partnership Assets.
(a) The assets of the Partnership shall be revalued in accordance with
Section 4.10 to their then Fair Market Values as of the date of and immediately
prior to (i) the acquisition of an additional interest in the Partnership
(including adjustments to Percentage Interests arising as a result of a failure
of any Partner to make a required capital contribution pursuant to Section 4.4
hereof) by any new or existing Partner in exchange for more than a de minimis
capital contribution to the Partnership, (ii) the distribution by the
Partnership of more than a de minimis amount of property as consideration for a
redemption of a portion (but not all) of a Partner's interest in the
Partnership, (iii) the contribution of the Phase II Assets and Scheduled Phase
II Related Assets to the capital of the Partnership on the Phase II Contribution
Date, (iv) the contribution of the PCS Assets to the capital of the Partnership
on the PCS Contribution Date, (v) on the New Par Determination Date if the New
Par Determination Date occurs after the Phase II Contribution Date, (vi) any
capital contribution by either the ATI Group or the USW Group pursuant to
Section 4.3 and (vii) the liquidation of a Partner's entire interest in the
Partnership, or immediately prior to the distribution of Partnership assets in
liquidation of the Partnership within the meaning of Treasury Regulations
section 1.704-1(b)(2)(ii)(g); provided, however, that no revaluation shall occur
if the Partnership Committee by Supermajority Vote reasonably determines that a
revaluation would not materially affect the Capital Accounts of the Partners or
that the cost of such revaluation would be disproportionate to any benefit to be
derived by the Partners from such revaluation.
(b) Immediately prior to the distribution of any asset by the
Partnership, the Partnership Committee shall revalue such asset to its then Fair
Market Value as determined in accordance with Section 4.10.
(c) Any Revaluation Gain or Revaluation Loss arising from a revaluation
of any Partnership asset pursuant to this Section 4.8 shall respectively be
credited to or debited from the Partners' Capital Accounts in accordance with
Article 5 hereof.
4.9. Redetermination of Percentage Interests. The respective Percentage
Interests of each of the Partners shall be redetermined (i) on the Phase II
Contribution Date; (ii) on the New Par Determination Date; (iii) on the PCS
Contribution Date, and (iv) immediately after any event
-34-
<PAGE> 40
(after the Phase II Contribution Date) giving rise to a change in any Partner's
Closing Adjusted Capital Contributions, or Phase II Adjusted Capital
Contributions, as the case may be. If a Partner is both a General Partner and a
Limited Partner, such adjustment shall be made to the Percentage Interests of
such Partner as both a General Partner and a Limited Partner pro rata in
proportion to such interests. Appropriate adjustments shall be made to take into
account any Noncontributed Assets.
(a) On the Phase II Contribution Date. The Percentage Interest of each
Partner on the Phase II Contribution Date shall be the quotient obtained by
dividing (i) such Partner's Closing Adjusted Capital Contributions as of the
Phase II Contribution Date by (ii) the aggregate Closing Adjusted Capital
Contributions as of the Phase II Contribution Date for all Partners. For
purposes of this determination "Closing Adjusted Capital Contributions" shall
mean, for each Partner, the sum of (i) such Partner's Applicable Phase II
Closing Contributions, plus (ii) the balance of the Preferred Amount of the
Capital Account of such Partner immediately prior to the Phase II Contribution
Date, if any, plus (iii) the cumulative amount of such Partner's Other
Contributions, plus (iv) such Partner's share of the cumulative amount of
Adjusted Revaluation Gain with respect to Other Contributions, less (v) such
Partner's share of the cumulative amount of Adjusted Revaluation Loss with
respect to Other Contributions. "Closing Adjusted Capital Contributions" shall
also be reduced by (or, if appropriate, shall not include) the amount of cash
and the Fair Market Value of any property (determined in accordance with Section
4.10 as of the date of distribution) distributed by the Partnership to such
Partner in redemption of a portion (but not all) of such Partner's interest in
the Partnership (including any distribution pursuant to Section 5.2(d) hereof).
(b) After the Phase II Contribution Date. The Percentage Interest of
each Partner after the Phase II Contribution Date shall be redetermined after
any event giving rise to a change in any Partner's Phase II Adjusted Capital
Contributions (including the New Par Determination Date) and, in each case,
shall be the quotient obtained by dividing (I) such Partner's Phase II Adjusted
Capital Contributions by (II) the aggregate Phase II Adjusted Capital
Contributions of all Partners. For purposes of this determination, "Phase II
Adjusted Capital Contributions" shall mean, for each Partner, the sum of (i)
such Partner's Applicable Phase II Closing Contributions, plus (ii) the balance
of the Preferred Amount of the Capital Account of such Partner immediately prior
to the Phase II Contribution Date, if any, plus (iii) the cumulative amount of
such Partner's Other Contributions, plus (iv) such Partner's share of the
cumulative amount of any Applicable Phase II Asset Pool Revaluation Gain with
respect to the Phase II Assets, the Scheduled Phase II Related Assets, the New
Par Assets and the Scheduled New Par Related Asset, plus (v) such Partner's
share of the cumulative amount of Adjusted Revaluation Gain with respect to
Other Contributions, plus (vi) 7.5% of the cumulative amount of such Partner's
Make-Up Contributions which relate to another Partner's Defaulted Contributions,
less (vii) such Partner's share of the cumulative amount of Applicable Phase II
Asset Pool Revaluation Loss with respect to the Phase II Assets, the Scheduled
Phase II Related Assets, the New Par Assets and the Scheduled New Par Related
Asset, less (viii) such Partner's share of the cumulative amount of Adjusted
Revaluation Loss with respect to Other Contributions, less (ix) 7.5% of such
Partner's Defaulted Contributions. "Phase II Adjusted Capital Contributions"
shall also be reduced by (or, if appropriate, shall not include) the amount of
cash and the Fair Market Value of any property (determined in accordance with
Section 4.10 as of the date of distribution) distributed by the Partnership to
such Partner in redemption of a portion (but not all) of such Partner's interest
in the Partnership (including any distribution pursuant to Section 5.2(d)
hereof).
4.10. Determination of Fair Market or Private Market Values. The Fair
Market Value or Private Market Value as required herein, as of the date of
determination, of any asset shall be determined (a) by mutual agreement
-35-
<PAGE> 41
of the Representative Partners or (b) if no such agreement is reached within ten
days of the relevant date of determination, as follows:
(i) Selection of Appraisers. Each of (A) the Partner who is
either contributing an asset to the Partnership, receiving an asset
from the Partnership or transferring an asset which is being valued
hereunder (or, if there is no such Partner, the ATI RP) (the "Asset
Partner") and (B) the other Representative Partners shall designate by
written notice to the Partnership and each Representative Partner a
firm of recognized national standing familiar with appraisal techniques
applicable to assets of the type being evaluated to serve as an
Appraiser pursuant to this Section 4.10 (the firms designated by the
Asset Partner and the other Representative Partners being referred to
herein as the "First Appraiser" and the "Second Appraiser,"
respectively) within five business days after the failure to reach
agreement in accordance with the terms of clause (a) above. In the
event that either the Asset Partner or the other Representative
Partners fail to designate its or their Appraiser within the foregoing
time period, the other shall have the right to designate such Appraiser
by notifying the failing party or parties in writing of such
designation (and the Appraiser so designated shall be the First
Appraiser or the Second Appraiser, as the case may be).
(ii) Evaluation Procedures. Each Appraiser shall be directed
to determine the Fair Market Value or Private Market Value, as the case
may be, of the asset. Each Appraiser will also be directed to deliver
an Appraiser's Certificate to each Representative Partner on or before
the 30th day after their respective designation (the "Certificate
Date"), upon the conclusion of its evaluation, and each Appraiser's
Certificate once delivered may not be retracted or modified in any
respect. Each Appraiser will keep confidential all information
disclosed by the Partnership in the course of conducting its
evaluation, and, to that end, will execute such customary documentation
as the Partnership may reasonably request with respect to such
confidentiality obligation. The Representative Partners will cooperate
in causing the Partnership to provide each Appraiser with such
information within the Partnership's possession that may be reasonably
requested in writing by the Appraiser for purposes of its evaluation
hereunder. The Appraisers shall consult with each other in the course
of conducting their respective evaluations. Each Representative Partner
shall have full access to each Appraiser's work papers. Each Appraiser
will be directed to comply with the provisions of this Section 4.10,
and to that end each party will provide to its respective Appraiser a
complete and correct copy of this Section 4.10 (and the definitions of
capitalized terms used in this Section 4.10 that are defined elsewhere
in this Agreement).
(iii) Fair Market or Private Market Value Determination. The
Fair Market Value or Private Market Value, as the case may be, of any
asset shall be determined on the basis of the Appraisers' Certificates
in accordance with the provisions of this subparagraph (iii). The
higher of the values set forth on the Appraisers' Certificates is
hereinafter referred to as the "Higher Value" and the lower of such
values is hereinafter referred to as the "Lower Value." If the Higher
Value is not more than 110% of the Lower Value, the Fair Market Value
or Private Market Value, as the case may be, will be the arithmetic
average of such two Values. If the Higher Value is more than 110% of
the Lower Value, a third appraiser shall be selected in accordance
with the provisions of subparagraph (iv) below, and the Fair Market
Value or Private Market Value, as the case may
-36-
<PAGE> 42
be, will be determined in accordance with the provisions of
subparagraph (v) below.
(iv) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, within seven days
thereafter the First Appraiser and the Second Appraiser shall agree
upon and jointly designate a third firm of recognized national standing
familiar with appraisal techniques applicable to assets of the type
being evaluated to serve as an appraiser pursuant to this Section 4.10
(the "Third Appraiser"), by written notice to each Representative
Partner. The Representative Partners shall direct the Third Appraiser
to determine the Fair Market Value or Private Market Value, as the case
may be, of the asset (the "Third Value") in accordance with the
provisions of subparagraph (ii) above, and to deliver to the
Representative Partners an Appraiser's Certificate on or before the
30th day after the designation of such Appraiser hereunder. The Third
Appraiser will be directed to comply with the provisions of this
Section 4.10, and to that end the parties will provide to the Third
Appraiser a complete and correct copy of this Section 4.10 (and the
definitions of capitalized terms used in this Section 4.10 that are
defined elsewhere in this Agreement).
(v) Alternative Determination of Fair Market Value. Upon the
delivery of the Appraiser's Certificate of the Third Appraiser, the
Fair Market Value or Private Market Value, as the case may be, will be
determined as provided in this subparagraph (v). The Fair Market Value
or Private Market Value, as the case may be, will be (w) the Lower
Value, if the Third Value is less than the Lower Value, (x) the Higher
Value, if the Third Value is greater than the Higher Value, (y) the
arithmetic average of the Third Value and the other Value (Lower or
Higher) that is closer to the Third Value if the Third Value falls
within the range between (and including) the Lower Value and the Higher
Value and (z) the Third Value, if the Lower Value and the Higher Value
are equally close to the Third Value.
(vi) Costs.
(A) Except as provided in paragraph (B) below, each of the
Asset Partner and the other Representative Partners will bear the cost
of the Appraiser designated by it or on its behalf. If the Higher Value
is not more than 115% of the Lower Value, or if the Higher Value and
the Lower Value are equally close to the Third Value, each of the Asset
Partner and the other Representative Partners shall bear 50% of the
cost of the Third Appraiser, if any; otherwise, the party whose
Appraiser's determination of Fair Market Value or Private Market Value,
as the case may be, is further away from the Third Value shall bear the
entire cost of the Third Appraiser.
(B) Notwithstanding anything contained herein to the contrary,
if the revaluation occurs in connection with a Defaulting Partner's
failure to contribute a Default Amount (and provided that there is not
more than one Defaulting Group), the Representative Partner of the
Defaulting Group shall bear the entire cost of all of the Appraisers
(C) The Representative Partners agree to pay when due the fees
and expenses of the Appraisers in accordance with the foregoing
provisions.
(vii) Conclusive Determination. To the fullest extent provided
by law, the determination of the Fair Market Value or
-37-
<PAGE> 43
Private Market Value, as the case may be, made pursuant to this Section
4.10 shall be final and binding on the Partnership and the Partners
hereto, and such determination shall not be appealable to or reviewable
by any court or arbitrator; provided that the foregoing shall not limit
a Partner's rights to seek arbitration of the obligations of the other
Partners and the Partnership hereunder.
ARTICLE 5
ALLOCATIONS AND DISTRIBUTIONS
5.1. Profits and Losses. Except as provided in Section 4.4(c) hereof, a
Partner's distributive share of income, gain, loss, deduction or credit (or
items thereof) as shown on the annual federal income tax return prepared by the
Partnership's accountants or as finally determined by the Internal Revenue
Service or the courts, and as modified by the capital accounting rules of
section 704(b) of the Code and the Income Tax Regulations thereunder as
implemented by Section 4.1 hereof, as applicable, shall be determined as
provided in this Article 5.
(a) Except as otherwise provided in this Section 5.1, profits and
losses of the Partnership shall be allocated among the Partners proportionately
in accordance with their Percentage Interests.
(b) Solely for tax purposes, in determining each Partner's allocable
share of the taxable income or loss of the Partnership, depreciation, depletion,
amortization and gain or loss with respect to any contributed property, or with
respect to revalued property where Partnership property is revalued pursuant to
Section 4.8 hereof, shall be allocated to the Partners under any method
allowable under section 704(c) of the Code and the applicable Income Tax
Regulations thereunder. The Partnership Committee shall decide which such method
shall be utilized by the Partnership with respect to its property; provided,
however, that if the Partnership Committee fails to act in a timely manner, the
Partnership shall utilize the method set forth in section 1.704- 3(c) of the
Income Tax Regulations (the traditional method with curative allocations).
(c) Minimum Gain Chargeback. Notwithstanding anything to the contrary
in this Article 5, if there is a net decrease in Partnership Minimum Gain or
Partner Nonrecourse Debt Minimum Gain (as such terms are defined in sections
1.704-2(b) and 1.704-2(i)(2), respectively, of the Income Tax Regulations)
during a Partnership taxable year, then each Partner shall be allocated items of
Partnership income and gain for such year (and, if necessary, for subsequent
years), to the extent required by, and in the manner provided in, section
1.704-2 of the Income Tax Regulations.
This provision is intended to be a "minimum gain chargeback" within the
meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax Regulations
and shall be interpreted and implemented as therein provided.
(d) Qualified Income Offset. Subject to the provisions of Section
5.1(c), but otherwise notwithstanding anything to the contrary in this Article
5, if any Partner's capital account has a deficit balance in excess of such
Partner's obligation to restore its capital account balance, computed in
accordance with the rules of paragraph (b)(2)(ii)(d) of section 1.704-1 of the
Income Tax Regulations (including such Partner's share of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain as provided in section 1.704-2(g)
and 2(i)(5) of the Income Tax Regulations), then sufficient amounts of income
and gain (consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for such year) shall be allocated to such
Partner in an amount and manner sufficient to eliminate such deficit as quickly
as possible. This provision is intended to be a "qualified income offset" within
the meaning of section
-38-
<PAGE> 44
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and shall be interpreted and
implemented as therein provided.
(e) Subject to the provisions of section 704(c) of the Code and
Sections 5.1(b) through (d) hereof, gain recognized (or deemed recognized under
the provisions hereof) upon the sale or other disposition of Partnership
property, which is treated as depreciation recapture, shall be allocated to the
Partner who was entitled to deduct such depreciation.
(f) Except as otherwise provided in Section 5.1(k), if and to the
extent any Partner is deemed to recognize income as a result of any loans
described herein pursuant to the rules of section 1272, 1273, 1274, 7872 or 482
of the Code, or any similar provision now or hereafter in effect, or any other
item of imputed income, any corresponding resulting deduction of the Partnership
shall be allocated to the Partner who is charged with the income. Subject to the
provisions of section 704(c) of the Code and Sections 5.1(b) through (d) hereof,
if and to the extent the Partnership is deemed to recognize income as a result
of any loans described herein pursuant to the rules of section 1272, 1273, 1274,
7872 or 482 of the Code, any similar provision now or hereafter in effect, or
any other item of imputed income, or as a result of any payment to the
Partnership pursuant to Article 8 of the Organization Agreement such income
shall be allocated to the Partner who is entitled to any corresponding resulting
deduction or adjustment.
(g) Organizational Expenses of the Partnership, if contributed by a
Partner, shall be allocated to such Partner.
(h) Except as otherwise required by law, tax credits shall be allocated
among the Partners pro rata in accordance with the manner in which Partnership
profits are allocated to the Partners under this Article 5, as of the time the
credit property is placed in service or if no property is involved, as of the
time the credit is earned. Recapture of any tax credit required by the Code
shall be allocated to the Partners in the same proportion in which such tax
credit was allocated.
(i) Except as provided in Sections 5.1(f) and (h) hereof or as
otherwise required by law, if the Partnership Interests of the Partners are
changed herein during any taxable year, all items to be allocated to the
Partners for such entire taxable year shall be prorated on the basis of the
portion of such taxable year which precedes each such change and the portion of
such taxable year on and after each such change according to the number of days
in each such portion, and the items so allocated for each such portion shall be
allocated to the Partners in the manner in which such items are allocated as
provided in this Article 5 during each such portion of the taxable year in
question; provided that, if the transferor and the transferee of an interest in
the Partnership (i) shall both have given the Partnership written notice within
15 days of the end of such taxable year of the Partnership stating their
agreement that such division and allocation shall be made on some other basis
permitted by Code section 706(d) and (ii) shall have agreed to reimburse the
Partnership for any incremental accounting fees and other expenses incurred by
the Partnership in utilizing such other basis for such division and allocation,
then such other basis permitted by Code section 706(d) shall be used.
(j) Any special allocation of income or gain pursuant to Section 5.1(c)
or 5.1(d) hereof shall be taken into account in computing subsequent allocations
of income and gain pursuant to this Article 5 so that the net amount of all such
allocations to each Partner shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Partner pursuant to the
provisions of this Article 5 if such special allocations of income or gain under
Section 5.1(c) or 5.1(d) hereof had not occurred.
-39-
<PAGE> 45
(k) Losses.
(i) Items of deduction and loss attributable to recourse liabilities of
the Partnership (within the meaning of section 1.752-1(a)(1) of the Income Tax
Regulations but excluding Partner nonrecourse debt within the meaning of section
1.704-2(b)(4) of the Income Tax Regulations) shall be allocated among the
Partners in accordance with the ratio in which the Partners share the economic
risk of loss (within the meaning of section 1.752-2 of the Income Tax
Regulations) for such liabilities.
(ii) Items of deduction and loss attributable to Partner nonrecourse
debt within the meaning of section 1.704-2(b)(4) of the Income Tax Regulations
shall be allocated to the Partners bearing the economic risk of loss with
respect to such debt in accordance with section 1.704-2(i) of the Income Tax
Regulations.
(iii) Items of deduction and loss attributable to Partnership
nonrecourse liabilities within the meaning of section 1.704- 2(b)(1) of the
Income Tax Regulations shall be allocated among the Partners proportionately in
accordance with their Percentage Interests.
(iv) Subject to the provisions of Section 5.1(n), all other items of
operating net loss ("Net Loss") shall be allocated among the Partners,
proportionately in accordance with their Percentage Interests, except that Net
Loss shall not be allocated to any Partner to the extent it would create a
deficit balance in excess of such Partner's obligation to restore its capital
account balance, computed in accordance with the rules of Section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations (including such Partner's
share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as
provided in section 1.704-2(g) and 2(i)(5) of the Income Tax Regulations) and
taking into account any contributions, distributions, allocations and other
Capital Account adjustments related to any Preferred Amount. Any Net Loss which
cannot be allocated to a Partner because of the limitation set forth in the
previous sentence shall be allocated first to the other Partners to the extent
such other Partners would not be subject to such limitation and second any
remaining amount to the Partners in the manner required by the Code and the
Income Tax Regulations.
(l) Subject to the provisions of Sections 5.1(c) through (k) and
Section 4.4(c), items of income and gain shall be allocated to the Partners in
the following priority:
(i) First, if allocations of Net Loss have been made to the
Partners under Section 5.1(k)(iv), then in the amount of, and
proportionate to, the amount of such Net Loss.
(ii) Second, to those Partners who have had items of loss or
deduction allocated to them under section 5.1(k)(i), in the amount of,
and proportionate to, the amount of such items of loss or deduction.
(iii) Thereafter, the balance among the Partners in proportion
to their respective Percentage Interests.
(m) Notwithstanding Section 5.1(l), but otherwise subject to the
provisions of Section 5.1(c) through (k), on any date after the Phase II
Contribution Date, gain which is recognized (or deemed to be recognized) upon
the sale, exchange or other disposition of any asset of the Partnership or of
any partnership in which the Partnership holds an interest (whether directly or
indirectly) or upon the dissolution of the Partnership or any Partnership in
which the Partnership holds an interest (whether directly or indirectly) shall
be allocated in the following order:
(i) First, to the Partners having deficit balances in their
Capital Accounts (computed after giving effect to all
-40-
<PAGE> 46
contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation or dissolution occurs and including each Partner's share of
Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain (as
such terms are defined in Sections 1.704-2(g) and 1.704-2(i)(5) of the
Income Tax Regulations)), to the extent of, and in proportion to, those
deficits; and
(ii) Second, one hundred percent (100%) to the USW Group until
the Base Account is zero.
(iii) Thereafter, the balance among the Partners in proportion
to their respective Percentage Interests.
(n) Notwithstanding Section 5.1(k)(iv), but otherwise subject to the
provisions of Section 5.1(c) through (k), on any date after the Phase II
Contribution Date, loss which is recognized (or deemed to be recognized) upon
the sale, exchange or other disposition of any asset of the Partnership or of
any partnership in which the Partnership holds an interest (whether directly or
indirectly) or upon the dissolution of the Partnership or any Partnership in
which the Partnership holds an interest (whether directly or indirectly) shall
be allocated in the following order:
(i) First, one hundred percent (100%) to the ATI Group until
the Base Account is zero.
(ii) Thereafter, the balance among the Partners in proportion
to their respective Percentage Interests.
5.2. Distributions.
(a) Subject to Section 4.4(c), as promptly as practicable after the end
of each month, but in no event later than the end of the following month, all
Net Operating Available Cash of the Partnership (as determined based on the
Partnership financial statements for such month) shall be distributed to the
Partners. Other distributions, whether in cash or in kind, shall be made to the
Partners at such times and in such amounts as shall be determined by
Supermajority Vote of the Partnership Committee. The amount of any in-kind
distribution shall be the distributed property's then Fair Market Value. The
Partnership shall take all reasonable actions to cause each Owned System to
distribute all Net Operating Available Cash of such Owned System on a monthly
basis, to the extent permissible under the governing documents for such Owned
Systems.
(b) Except as provided in Sections 5.2(c) or (d), distributions shall
be made among the Partners in accordance with their respective Percentage
Interests at the time of such distribution.
(c) Upon liquidation of the Partnership, within the meaning of Income
Tax Regulations section 1.704-1(b)(2)(ii)(g), distributions shall be made among
the Partners as provided in Section 4.4(d) and Section 8.3.
(d) (i) If upon the liquidation of Primeco in accordance with Article
10 of the Primeco Agreement, the Partnership receives as a part of a
liquidating distribution the assets, liabilities and business
operations of any Special System (as defined in the Primeco Agreement),
then the Partnership Committee may elect, at any time within a
six-month period commencing upon the Partnership's receipt of such
liquidating distribution, to distribute the assets, liabilities and
business operations of such Special System ("Special System Assets")
among the Partner(s) that had previously made a capital contribution to
the Partnership pursuant to Section 4.2(f) of a SLP Interest with
respect to such Special System (the "Contributing Partners").
-41-
<PAGE> 47
(ii) The Fair Market Value of the Special System Assets
distributed pursuant to this Section 5.2(d) shall be deemed to be equal
to the product of (x) the Fair Market Value of the SLP Interests with
respect to such Special System at the time of their contribution to the
Partnership by the Contributing Partners, multiplied by (y) 100%
divided by the aggregate SLP Percentage Interests (as defined in the
Primeco Agreement) represented by such SLP Interests.
(iii) Any such distribution of Special System Assets shall be
made among the Contributing Partners pro rata in proportion to the SLP
Percentage Interests associated with the SLP Interests contributed to
the Partnership by each Contributing Partner.
(iv) At the election of the Partnership Committee, the
Contributing Partners receiving a distribution of Special System Assets
pursuant to this Section 5.2(d) shall cause the related Special System
to enter into a License Agreement and Services Agreement with the
Partnership.
(e) Except as otherwise provided herein, all allocations hereunder to a
Group and all distributions hereunder to a Group shall be made among or between
the Partners of such Group pro rata in proportion to their respective Percentage
Interests. Notwithstanding the foregoing, to the extent not inconsistent with
Income Tax Regulations section 1.704-1(b) and the provisions of Article 10,
Percentage Interests of Partners of a Group may be allocated among the Partners
of such Group as those Partners may agree as among themselves.
(f) Any other provision of this Agreement to the contrary
notwithstanding, no distribution shall be made by the Partnership, or on behalf
of the Partnership which would violate Section 17-607(a) of the Act or which
would render the Partnership insolvent or which is prohibited by the terms of
any Partnership indebtedness.
ARTICLE 6
TAX MATTERS AND REPORTS; ACCOUNTING
6.1. Filing of Tax Returns. The Tax Matters Partner shall prepare
and file, or cause the accountants of the Partnership to prepare and file, all
Tax Returns for each tax year of the Partnership.
6.2. Tax Matters Partner.
(a) The Tax Matters Partner of the Partnership within the meaning of
section 6231(a)(7) of the Code shall be the ATI RP. Unless otherwise expressly
provided herein, the Tax Matters Partner is authorized to take any action that
it determines to be necessary or appropriate with respect to all tax matters.
(b) The Tax Matters Partner shall promptly advise the other Partners
of all audits or other actions by the Internal Revenue Service and shall
furnish to the Partnership and to each Partner a copy of each notice or other
communication received by the Tax Matters Partner from the Internal Revenue
Service except such notice or communication sent directly to the Partners by
the Internal Revenue Service. All expenses incurred by the Tax Matters Partner
in its capacity as such shall be expenses of the Partnership and shall be paid
by the Partnership.
(c) To the fullest extent permitted by law, the Partnership shall
indemnify Partners on an after-tax basis against any liabilities incurred while
acting as the Tax Matters Partner of the Partnership but only to the
-42-
<PAGE> 48
extent such Partner acts within the scope of its authority as Tax Matters
Partner under this Agreement. The Tax Matters Partner shall not be indemnified
against any liability regarding Partnership tax matters arising by reason of the
willful misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
6.3. Tax Reports to Current and Former Partners. After the end
of each fiscal year, the Tax Matters Partner shall, in a timely manner,
prepare and mail, or cause its accountants to prepare and mail, to each
Partner and, to the extent necessary, to each former Partner (or its
legal representatives), a report setting forth in sufficient detail
such information as is required to be furnished to partners by law
(e.g., section 6031(b) of the Code and Income Tax Regulations
thereunder) and as shall enable such Partner or former Partner (or its
legal representatives) to prepare their respective federal and state
income tax or informational returns in accordance with the laws, rules
and regulations then prevailing.
6.4. Accounting Records; Independent Audit. Complete books and
records accurately reflecting the accounts, business, transactions and
partners of the Partnership and each System in which it has an interest
shall be maintained and kept by the Partnership at the Partnership's
principal place of business. The accounting records of the Partnership
shall be maintained to assure preparation of the financial statements
in accordance with GAAP. The accounting records of the Partnership
shall be audited by certified public accountants selected by the
Partnership Committee and shall contain proportional accounting information
with respect to the Partnership's interest in any Owned System.
6.5. Fiscal Year. Except as may otherwise be required by the federal
tax laws, the fiscal year of the Partnership for both financial and tax
reporting purposes shall end on December 31.
6.6. Tax Accounting Method. The books and accounts of the
Partnership shall be maintained using the accrual method of accounting
for tax purposes. Those documents relating to allocations of items of
partnership income, gain, loss, deduction or credit and Capital
Accounts shall be kept under federal income tax accounting principles
as provided herein.
6.7. Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action
that it determines to be necessary or appropriate to cause the
Partnership to comply with any Federal, state and local withholding
requirement with respect to any allocation, payment or distribution by
the Partnership to any Partner or other Person. All amounts withheld to
satisfy any Federal, state or local withholding requirement with
respect to a Partner shall be treated as distributions to such Partner.
If any such withholding requirement with respect to any Partner exceeds
the amount distributable to such Partner under this Agreement, or if
any such withholding requirement was not satisfied with respect to any
amount previously allocated or distributed to such Partner, such
Partner and any successor or assignee with respect to such Partner's
interest in the Partnership hereby, to the fullest extent permitted by
law, indemnifies and agrees to hold harmless the Partners and the
Partnership for such excess amount or such withholding requirement, as
the case may be.
6.8. Tax Elections.
(a) The Partnership shall elect for federal income tax purposes
to amortize the Organizational Expenses.
(b) Upon the request of a transferee of a Partnership Interest or a
distributee of a Partnership distribution, the Partnership will make the
election under section 754 of the Code in accordance with applicable Income
Tax Regulations thereunder for the first fiscal year in which such election
-43-
<PAGE> 49
could apply, unless the Tax Matters Partner agrees at the time for filing the
Partnership tax information return not to make such election. The Partnership
may seek to revoke such election (if made) if agreed to by the Tax Matters
Partner.
(c) In addition to the foregoing, the Tax Matters Partner shall, in its
sole discretion, determine whether to make any other available tax elections and
select any other appropriate tax accounting methods and conventions for any
purpose under this Agreement.
6.9. Prior Tax Information. Each Partner agrees to deliver to the
Partnership all relevant information regarding Taxes that the Partnership will
require in order to comply with its own tax accounting and reporting
requirements, including without limitation schedules setting forth the fair
market value and tax basis of each asset that may from time to time be
contributed by a Partner to the Partnership; provided, however, that no Partner
shall be required to disclose the income tax returns of itself or any of its
Affiliates.
ARTICLE 7
INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS
7.1. Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the Representative Partners, the Members, the Partners and
their Affiliates, and their respective partners, shareholders, directors,
officers, employees and agents and/or the legal representatives of any of them,
and each other Person who may incur liability as a Partner or otherwise in
connection with the management or ownership of the Partnership, any entity in
which the Partnership has an interest or any Licensed System (each, an
"Indemnified Party"), against all liabilities and expenses (including amounts
paid in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him or it in connection with the
investigation, defense or disposition of any action, suit or other proceeding,
whether civil or criminal, in which any Indemnified Party may be involved or
with which he or it may be threatened, while a Partner or serving in such other
capacity or thereafter, by reason of its being or having been a Partner, or by
serving in such other capacity, except with respect to any matter which
constitutes willful misconduct, bad faith, gross negligence or reckless
disregard of the duties of his office, or criminal intent. The Partnership shall
have the right to approve any counsel selected by any Indemnified Party and to
approve the terms of any proposed settlement. The Partnership shall advance to
any Indemnified Party or Partner reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any such action or
proceeding. Each Partner hereby agrees, and each other Indemnified Party shall
agree in writing prior to any such advancement, that in the event he or it
receives any such advance, such Indemnified Party shall reimburse the
Partnership for such fees, costs and expenses to the extent that it shall be
determined that he or it was not entitled to indemnification under this Section.
The rights accruing to a Partner and each other Indemnified Party under this
Section 7.1 shall not exclude any other right to which it or they may be
lawfully entitled; provided that any right of indemnity or reimbursement granted
in this Section 7.1 or to which any Indemnified Party may be otherwise entitled
may only be satisfied out of the assets of the Partnership, and no Partner and
no withdrawn Partner shall be personally liable with respect to any such claim
for indemnity or reimbursement. Notwithstanding any of the foregoing to the
contrary, the provisions of this Section 7.1 shall not be construed so as to
provide for the indemnification of a Partner or any other Indemnified Party for
any liability to the extent (but only to the extent) that (a) such liability
arises out of a Partner's or any Indemnified Party's indemnification obligations
under Article 8 of the Organization Agreement or (b) such indemnification would
be in violation of applicable law or such liability may not be waived, modified
or limited
-44-
<PAGE> 50
under applicable law, but shall be construed so as to effectuate the provisions
of this Section 7.1 to the fullest extent permitted by law.
7.2. Exculpation. Any Representative Partner, any Member, any
Partnership employee, any Partner and any Affiliate thereof and their respective
partners, shareholders, directors, officers, employees, or agents and/or the
legal representatives of any of them shall not be liable to any Partner or the
Partnership for mistakes of judgment or for action or inaction which such
Member, Partner, Affiliate, partner, shareholder, director, officer, employee,
agent or legal representative reasonably believed to be in or not opposed to the
best interests of Partnership unless such action or inaction constitutes willful
misconduct, bad faith, gross negligence or reckless disregard of his or its
duties and, with respect to any criminal action, such party reasonably believes
his conduct was lawful. Each Partner may (on its own behalf or on the behalf of
any Member designated by such Partner, any Affiliates of such Partner or their
respective partners, shareholders, directors, officers, employees or agents
and/or legal representatives of any of them), consult with counsel, accountants
and other experts in respect of the Partnership affairs and such Person shall be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel, accountants or other
experts; provided that they shall have been selected with reasonable care.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 7.2 shall not be construed so as to relieve (or attempt to relieve) a
Partner or any other Person of any liability, to the extent (but only to the
extent) that such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 7.2 to the fullest extent permitted by law.
7.3. Restrictions on Partners. No Partner may, without the prior
written consent of all of the other Partners:
(a) confess a judgment against the Partnership;
(b) make any agreement on behalf of any other Partner, except
to the extent that a Representative Partner may, under the terms of
this Agreement, bind the members of the Group that he represents;
(c) except to the extent permitted by Article 8 hereof,
withdraw as a Partner, dissolve, terminate, liquidate or wind up the
affairs of the Partnership; or
(d) use or possess Partnership property except for a
Partnership purpose, except as provided under contractual arrangement.
7.4. Outside Activities.
(a) Except as otherwise expressly provided in this Section 7.4, any
Partner or Affiliate thereof may engage in or possess any interest in any other
business venture of any nature independently or with others, and neither the
Partnership nor any other Partner shall have any right by virtue of this
Agreement in or to such venture or in or to any income or profits derived
therefrom.
(b) (i) Except for Systems (or licenses or permits therefor) acquired
in accordance with this Section 7.4, no Partner or any Affiliate thereof may,
directly or indirectly, acquire an ownership interest in, or lease, any System
(or license or permit therefor) unless such Partner first shall have (A) offered
the Partnership the opportunity to acquire such ownership or other interest or
(B) if the opportunity involves the acquisition of an additional ownership
interest in any Phase II Asset or Beneficial Phase II Asset pursuant to a right
of first refusal or similar
-45-
<PAGE> 51
right, offered to acquire such additional ownership interests and contribute
them to the Partnership on the Phase II Contribution Date (such additional
ownership interests which the Partnership agrees will be contributed to the
Partnership, the "Phase II Related Assets"). Any such offer by a Partner to the
Partnership of an opportunity to acquire an ownership interest in, or lease, a
System (or license or permit therefor) shall be made in writing, delivered to
the Partnership and each Representative Partner, and shall set forth a general
description of such opportunity. A Partner shall be required to make such an
offer to the Partnership promptly upon becoming aware of any such opportunity. A
Partner will be deemed to have complied with this subsection (b) and shall be
free to pursue such acquisition unless within 30 days from the date of delivery
of such notice (or, in the case of an opportunity that would expire in a shorter
period, such shorter period), the Partnership Committee approves a plan to
pursue either (A) the acquisition of such ownership or other interest by the
Partnership or the acquisition of an additional ownership interest in Phase II
Related Assets or Beneficial Phase II Assets for purposes of their contribution
to the Partnership as described above (by vote of the Members representing
Groups holding a majority of the Percentage Interests of Groups without regard
to the Percentage Interest of such Partner's Group) or (B) the acquisition of an
alternative ownership interest in any System (or license or permit therefor)
with a substantially overlapping service coverage area. If the Partnership
declines any such opportunity or if the Partnership subsequently abandons the
acquisition of such opportunity, the offering Partner (or the members of any
Group that voted to approve the Partnership's acquisition of such opportunity)
shall be free to pursue such opportunity, subject to the condition that (A) an
acquisition of such opportunity shall be consummated within one year from the
date notice of such opportunity under this Section 7.4(b) is delivered to the
Partnership (subject to extension if and to the extent necessary to any required
regulatory approvals) and (B) such System at the time of such consummation shall
enter into a License Agreement and Services Agreement with the Partnership.
(c) No Partner will, and each Partner will not permit any Affiliate to,
directly or indirectly, engage in the business of providing Domestic PCS,
Cellular or ESMR Services outside the Partnership.
(d) Nothing contained in this Section 7.4 shall prohibit or otherwise
restrict:
(i) the provision by a Partner or its Affiliates of Cellular
Service through Systems to the extent that such Partner or its
Affiliates were providing such service through such Systems on the
Effective Date, and as long as such Partner shall comply with its
obligations to contribute the Phase II Assets and Beneficial Phase II
Assets to the Partnership in accordance with the terms hereof and the
Organization Agreement;
(ii) the provision by a Partner or its Affiliates of Cellular,
ESMR or PCS Services through Systems acquired in accordance with
Section 7.4(b);
(iii) the provision by a Partner or its Affiliates of PCS
Services through Systems acquired in accordance with Section 5.2(d).
(iv) the acquisition by PCS Nucleus, L.P. (through PCS Primeco
or otherwise) of PCS Systems (or licenses or permits therefor) or the
provision of PCS Service by such Systems prior to the PCS Contribution
Date;
(v) the acquisition by any Partner of SLP Interests in PCS
Primeco, as long as such Partner shall comply with its obligation to
contribute such SLP Interests to the Partnership pursuant to Section
4.2(f).
-46-
<PAGE> 52
(vi) the acquisition by the ATI Group from a Partner of
Systems (or licenses or permits therefor) or the provision of Cellular,
ESMR or PCS Services by such Systems;
(vii) the acquisition of an ownership interest by a LEC
Affiliate of USW, if permitted under applicable law, in a PCS System
having 10 MHz of PCS spectrum (and a 10 MHz license or permit
therefor), or the provision of PCS Service by such PCS System, in each
case, substantially within the local-exchange market of such LEC
Affiliate; provided that if, at any time, the continued ownership,
operation or management of such PCS System would result in any material
restrictions being imposed by any court, governmental agency or
regulatory or administrative authority on the then existing or planned
activities or acquisitions of the Partnership (other than the
acquisition by the Partnership of a PCS System having 10 MHz of PCS
spectrum in the markets served by USW's Phase II Assets as of the
Effective Date) as contemplated by an Approved Budget, an Approved
Business Plan or other action of the Partnership, then such LEC
Affiliate will divest as promptly as possible in compliance with
applicable law, or cease to operate or manage, any such System (or
license or permit therefor), or take such other action as is necessary
(in the determination of the Partnership Committee) to remove such
restrictions;
(viii) the ownership or other participation of ATI or any
Affiliate thereof in the Globalstar satellite communications venture,
or the ownership or other participation of USW or its Affiliates in any
satellite communications venture that would not be competitive with
services provided by Systems, or the provision of wireless
communications services by Globalstar or such other ventures; provided
that, in either case, the Partnership shall be entitled to purchase
wireless communications services from Globalstar or such other venture
at prices and on terms no less favorable than those offered to any
third party (for like volumes and types of service);
(ix) the acquisition, ownership, operation or management by
ATI or any Affiliate thereof of an MFJ Restricted Activity; provided
that the Partnership shall have an option (exercisable for a period of
90 days from the date such activity or business ceases to be an MFJ
Restricted Activity) to acquire the MFJ Restricted Activity from ATI or
such Affiliate at a purchase price equal to the Private Market Value
thereof determined in accordance with Section 4.10;
(x) the acquisition by ATI or any Affiliate thereof of
ownership interests in CCI or New Par, a Delaware general partnership,
as long as ATI shall comply with its obligation to contribute the New
Par Assets to the Partnership in accordance with the terms hereof and
the Organization Agreement;
(xi) the acquisition by ATI or any Affiliate thereof of
ownership interests in Systems (or licenses or permits therefor) as a
result of distributions from CMT Partners, a Delaware general
partnership, as long as ATI shall comply with its obligation to
contribute such Systems to the Partnership in accordance with the terms
hereof and the Organization Agreement;
(xii) the provision of Cellular Service by Systems which are
Noncontributed Assets pursuant to a License Agreement and Services
Agreement with the Partnership;
(xiii) the acquisition (through merger, consolidation,
purchase of stock or assets, or otherwise) of an ownership interest of
less
-47-
<PAGE> 53
than 5% in a Person, which owns or leases Systems, or provides
Cellular, ESMR or PCS Services (directly or indirectly through an
Affiliate that is controlled by such Person) so long as such services
account for less than 20% of both (A) the revenues of such Person as
set forth in the most recent available audited financial statements of
such Person as of the date of execution of the definitive agreement
providing for such acquisition, and (B) the value of such Person (as
determined in good faith by the acquiring Partner or Affiliate);
provided that, if the Partnership Committee (by vote of the Members
representing Groups other than the Group of the acquiring Partner)
shall determine, in its sole discretion, that the acquired business
would be reasonably expected to compete with or to conflict with the
existing or planned activities or acquisitions of the Partnership (as
contemplated by an Approved Budget, an Approved Business Plan or other
action of the Partnership Committee), or result in any material
restrictions being imposed on such existing or planned activities or
acquisitions by any court, governmental agency or regulatory or
administrative authority, the Partner and its Affiliates shall
promptly, but in any event within 30 days, divest such ownership
interest, or take such other action as is necessary (in the
determination of the Partnership Committee) to eliminate such
competition or conflict, or remove such restrictions; and
(xiv) the acquisition (through merger, consolidation, purchase
of stock or assets, or otherwise) of a Person, or an interest in a
Person, which owns or leases Systems, or provides Cellular, ESMR or PCS
Services (directly or indirectly through an Affiliate that is
controlled by such Person) so long as such services account for less
than 20% of both (A) the revenues of such Person as set forth in the
most recent available audited financial statements of such Person as of
the date of execution of the definitive agreement providing for such
acquisition, and (B) the value of such Person (as determined in good
faith by the acquiring Partner or Affiliate), provided, that if the
Partnership Committee (by vote of Members representing Groups other
than the Group of the acquiring Partner) shall determine, in its sole
discretion, that the acquired business would be reasonably expected to
compete with or to conflict with the existing or planned activities or
acquisitions of the Partnership (as contemplated by an Approved Budget,
an Approved Business Plan or other action of the Partnership
Committee), or result in any material restrictions being imposed on
such existing or planned activities or acquisitions by any court,
governmental agency, regulatory or administrative authority, the
Partner and its Affiliates shall enter into a definitive agreement to
sell the Cellular, ESMR and PCS Systems to a third person not later
than the consummation of the acquisition by the Partner or its
Affiliates of the Person and shall consummate such sale of the
Cellular, ESMR and PCS Systems not later than 90 days after
consummation of such acquisition.
(e) Each Partner shall use its reasonable efforts to cause each of its
Attributed Entities to abide by the restrictions contained in this Section 7.4
and to comply with the terms set forth herein.
(f) This Agreement shall not be deemed to create any duties other than
as expressly provided for herein or imposed by applicable law, nor shall its
existence be deemed to alter the legal duties and obligations that any Partner
or any Affiliate has to the other Partners or their Affiliates as to matters
outside the scope of the Agreement, including, without limitation, those
concerning the terms and conditions of interconnection services. Each of the
Partners and its Affiliates acknowledge their respective right to compete
vigorously with the other Partners and their Affiliates in markets or areas in
which they are otherwise competitors in the offering of telecommunications
services.
-48-
<PAGE> 54
(g) Each Partner (whether or not such Partner shall have withdrawn as a
General Partner from the Partnership in violation of Section 8.1) shall remain
subject to the provisions of this Section 7.4 for a period of one year from the
date such Partner and its Affiliates cease to have aggregate General Partner and
Limited Partner Percentage Interests equal to or exceeding 5%. If a General
Partner withdraws from the Partnership in violation of Section 8.1, then the
Limited Partner Percentage Interest of such Partner, for purposes of this
Section 7.4(g), shall be deemed to be increased by the General Partner
Percentage Interest of such Partner at the time of such withdrawal.
7.5. Duties of Partners. The fiduciary duties of Partners or Members of
the Partnership Committee shall not restrict any Partner or Affiliate or any
Member of the Partnership Committee from:
(a) engaging in conduct permitted by Section 7.4(a);
(b) taking any action in any capacity other than that of a
Partner or Member of the Partnership Committee, respectively; or
(c) acting to prevent the Partnership from engaging in an
activity that is outside the scope of the Partnership Business;
whether or not such Partner, Affiliate or Member of the Partnership Committee is
motivated in whole or in part by a desire to further the interests of a Person
other than the Partnership.
ARTICLE 8
TERMINATION AND DISSOLUTION
8.1. Events of Dissolution.
(a) The Partnership shall be dissolved upon (i) expiration of the term
of the Partnership specified in Section 1.6 hereof, (ii) the Bankruptcy of a
General Partner under the circumstances described in Section 8.2(b), (iii) the
withdrawal of a General Partner, the filing of a certificate of dissolution, or
its equivalent, for a General Partner or the revocation of its charter and the
expiration of 90 days after the date of notice to a General Partner of
revocation without a reinstatement of its charter, or the occurrence of any
other event that results in a General Partner ceasing to be a general partner of
the Partnership as required under the Act; provided that the Partnership shall
not be dissolved and required to be wound up in connection with any of the
events specified in this clause (iii) if (A) at the time of the occurrence of
such event there is at least one remaining general partner of the Partnership
who is hereby authorized to and does carry on the business of the Partnership
without dissolution, or (B) within 90 days after the occurrence of such event, a
majority in interest of the remaining Partners (or such greater percentage in
interest as is required by the Act) agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date of such event,
of one or more additional general partners of the Partnership, (iv) the transfer
or sale of all or substantially all of the assets of the Partnership, (v) the
entry of a decree of judicial dissolution pursuant to Section 17-802 of the Act,
(vi) the unanimous written consent of the Partners, and (vii) the termination of
the Organization Agreement in accordance with the provisions of Article 7
thereof.
(b) Without the unanimous written consent of the Partners, each Partner
agrees not to withdraw as a Partner or do anything that would otherwise dissolve
the Partnership (except as permitted by the terms of Article 10).
Notwithstanding the foregoing, if a General Partner withdraws from the
Partnership, upon such withdrawal, (i) the general partner
-49-
<PAGE> 55
interests in the Partnership of such Partner shall automatically be deemed to
become limited partner interests in the Partnership and (ii) such Partner shall
have no right to participate in the management of the Partnership Business and
affairs of the Partnership, including the right to designate a Representative
Partner, Members of the Partnership Committee or Executive Officers.
8.2. Bankruptcy of a General Partner.
(a) If the Bankruptcy of a General Partner occurs and at such time
there is at least one other General Partner, such remaining General Partner or
General Partners are hereby authorized and shall carry on the business of the
Partnership without dissolution, and the Partnership Interests of the General
Partner in Bankruptcy (the "Bankrupt Partner") shall automatically be deemed to
become limited partner interests in the Partnership, and such Bankrupt Partner
shall cease to be a General Partner and continue to be, or become, a Limited
Partner having (i) no right to participate in the management of the Partnership
Business and affairs of the Partnership, including no right to designate a
Representative Partner, Members to the Partnership Committee or any Executive
Officers, and (ii) the same interest in all items of income, gain, loss,
deduction or credit of the Partnership to the same extent as if such Bankruptcy
had not occurred. The Partnership shall continue to be governed by the terms of
this Agreement, the Partnership Business and the property of the Partnership
shall continue to be owned by the Partnership, and the Partnership Business
shall otherwise continue unaffected by such Bankruptcy. Upon the occurrence of
the Bankruptcy of any General Partner, (i) the Bankrupt Partner and the other
Partners shall execute such documents as may be necessary or appropriate to
carry out the provisions of this Section 8.2 and (ii) the other Partners are,
without necessity of any further action or documentation, hereby appointed
attorneys-in-fact of the Bankrupt Partner for the purpose of carrying out the
provisions of this Section 8.2 and taking any action and executing any documents
which such Partners may deem necessary or advisable to accomplish the purposes
hereof, such appointment being irrevocable and coupled with an interest.
(b) If the Bankruptcy of a General Partner occurs and at such time the
Bankrupt Partner is the only General Partner, the Partnership shall be dissolved
unless within 90 days after such Bankruptcy occurs, the other Partners agree in
writing to continue the business of the Partnership and to appoint, effective as
of the date of such Bankruptcy, one or more additional General Partners. In the
event that the other Partners make such an election, the Partnership Business
shall be carried on by such newly appointed General Partner(s) and the Bankrupt
Partner shall have its general partnership interest in the Partnership converted
into a limited partner interest in the Partnership and continue to be, or
become, a Limited Partner subject to the provisions of Section 8.2.
(c) In the event any General Partner shall become a "debtor" as defined
in the Bankruptcy Code in any case commenced thereunder and at any time during
the pendency of such case there shall be appointed (i) a trustee with respect to
the Bankrupt Partner under section 701, 702 or 1104 of the Bankruptcy Code (or
any successor provisions thereto), or (ii) an examiner having expanded powers
beyond those specifically enumerated in section 1104(b) of the Bankruptcy Code,
then the other Partners may, at any time thereafter, so long as such condition
exists, elect to dissolve the Partnership, in which event the affairs of the
Partnership shall be wound up as provided in this Article 8.
8.3. Order of Dissolution. In settling accounts upon winding up and
liquidation of the Partnership, the assets of the Partnership shall be applied
and distributed as expeditiously as possible in the following order not later
than the end of the taxable year of the liquidation (i.e., the date upon which
the Partnership ceases to be a going concern as provided in
-50-
<PAGE> 56
Income Tax Regulation section 1.704-1(b)(2)(ii)(g) or if later, within 90 days
after the date of such liquidation):
(a) to pay (or make reasonable provision for the payment of)
all creditors of the Partnership, including to the extent permitted by
law Partners or their Affiliates who are creditors, in satisfaction of
liabilities of the Partnership in the order of priority provided by
law, including expenses relating to the dissolution and winding up of
the affairs of the Partnership (including, without limitation, expenses
of selling assets of the Partnership, discharging the liabilities of
the Partnership, distributing the assets of the Partnership and
terminating the Partnership as a limited partnership in accordance with
this Agreement and the Act);
(b) to Preferred Partners, if applicable, in proportion to
their respective Preferred Amounts, the amount of such Preferred
Amounts; and
(c) to the Partners in proportion to their respective positive
Capital Account balances, as those balances are determined after all
adjustments to such Capital Accounts as required by this Agreement for
all periods immediately prior to such distribution.
8.4. Orderly Winding Up. Notwithstanding anything to the contrary in
Sections 8.1, 8.2 and 8.3, but subject to Section 8.5 and the order of priority
in Section 8.3, upon winding up and liquidation, if required to maximize the
proceeds of liquidation, the Partnership Committee may, upon unanimous approval,
transfer the assets of the Partnership to a liquidating trustee or trustees.
8.5. Dissolution Election.
(a) Notwithstanding the terms of Section 8.3(c) to the contrary, but
subject to Section 17-804(a)(1) of the Act and, if applicable, the provisions of
Section 8.3(b) hereof, any Partner may elect upon the occurrence of any of the
events of dissolution specified in Section 8.1, by written notice to the
Partnership any time prior to actual distribution, to require that the
Partnership distribute the assets of the Partnership upon dissolution and
winding up as follows:
(i) First, the ATI Group shall receive the Phase II Assets
contributed by the ATI Group;
(ii) Second, the USW Group shall receive the Phase II Assets
contributed by the USW Group;
(iii) Third, prior to the Phase II Contribution Date, the ATI
Group shall receive all of the non-cash assets (other than Systems) of
the Partnership;
(iv) Fourth, the Partners shall attempt to reach agreement on
the Fair Market Value and distribution among the Partners of each of
the remaining non-cash assets of the Partnership and liabilities
related thereto, subject always to distributions being made first to
Preferred Partners in accordance with the terms of Section 8.3(b), if
applicable, and in accordance with Capital Accounts as provided in
Section 8.3(c), with such distributed assets being valued at their Fair
Market Value. To the extent that the Partners are unable to reach
agreement on the Fair Market Value and distribution among the Partners
of certain of such non-cash assets and liabilities, the Chairman of the
Partnership Committee not later than 20 days after an event of
dissolution set forth in Section 8.1 shall
-51-
<PAGE> 57
implement the following internal auction procedures. For a
period of up to ten days, the Chairman shall entertain any and all bids
by the Partners for such non-cash assets and related liabilities,
either singly (a "Single Bid") or as a whole (an "Aggregate Bid"). The
Chairman will only entertain bids which exceed the previous Single Bid
for any non-cash asset and related liabilities or the previous
Aggregate Bid for all such non-cash assets and related liabilities by
at least one percent (a "Qualifying Bid"). The Chairman will promptly
make each bid submitted by any Partner available to each other Partner.
If during any 24-hour period within the ten-day period specified above,
the Chairman does not receive a Qualifying Single Bid with respect to
any non-cash asset or related liabilities or a Qualifying Aggregate
Bid, the Chairman shall not entertain any further Single Bids with
respect to such non-cash asset or any further Aggregate Bids, as the
case may be. At the conclusion of such bidding period, the highest
Single Bid by any Partner for each non-cash asset and related
liabilities or, if an Aggregate Bid for all such non-cash assets and
related liabilities which exceeds the sum of the Single Bids is
received, such Aggregate Bid, shall constitute the Fair Market Value of
such non-cash assets and related liabilities. The Partnership shall
thereafter (I) pay any amounts referred to in Section 8.3(a) (except to
the extent any such liabilities are to be assumed by any Partner), (II)
distribute to each Preferred Partner an amount equal to such Partner's
Preferred Amount, (III) distribute the non-cash assets and liabilities
valued pursuant to the previous sentence shall be distributed to the
Partner who specified the highest Fair Market Value therefor (which
shall be debited against its Capital Account balance), and (IV)
distribute the remaining non-cash assets, if any, and liabilities in
the manner agreed upon by the Partners; provided that if the
distributions pursuant to this sentence would result in any Partner
receiving more than its positive Capital Account balance, determined
after taking into account distributions required by clauses (i) and
(ii) of this Section 8.5(a) and any deficit restoration obligation
arising under Section 4.5 as a result of such distributions (an "Excess
Distribution"), assets with a Fair Market Value equal to the Excess
Distribution shall instead be distributed among the other Partners in
accordance with Capital Account balances (such assets as selected by
such other Partners) and immediately thereafter sold for cash to the
Partner who would have otherwise received the Excess Distribution in
the absence of this proviso, which cash shall be paid simultaneously
with the liquidating distributions; and
(v) All other remaining assets shall be distributed to the
Partners in accordance with Section 8.3(c) hereof.
In the event of a distribution pursuant to this Section 8.5(a), the value of any
assets distributed to the Partners shall be equal to their Fair Market Value
determined in accordance with Section 4.10.
(b) Notwithstanding the foregoing, in the event that the distribution
of an asset of the Partnership to any Partner upon liquidation (whether pursuant
to clause (a) of this Section 8.5 of otherwise) would cause such Partner to have
a deficit restoration obligation under the terms of Section 4.5 hereof, such
Partner may elect by written notice to the Partnership at any time prior to
actual distribution, to require the Partnership Committee either (i) to use its
best efforts to reduce such asset to cash or cash equivalents, subject to
obtaining fair value for such asset and any tax or other legal considerations or
(ii) cause such asset to be distributed in accordance with Section 8.3(b)
hereof.
-52-
<PAGE> 58
8.6. Obligation To Restore Deficit Balance. No Partner shall be liable
for the return of the capital contributions of any other Partner, nor shall any
Partner be required to have any obligation to restore a deficit balance in its
Capital Account on winding up, liquidation and termination of the Partnership
except to the extent of any obligation specifically imposed under Section 5
hereof and except to the extent required by the Act.
8.7. Termination of Partnership. The Partnership shall terminate when
all of the assets of the Partnership, after payment of or due provision for all
debts, liabilities and obligations of the Partnership, shall have been
distributed to the Partners in the manner provided for in Article 8, and the
Certificate of Limited Partner of the Partnership shall be canceled in the
manner required by the Act.
ARTICLE 9
ADMISSION OF ADDITIONAL PARTNERS
9.1. Admission Procedures. With the approval of the Partnership
Committee pursuant to Section 2.4(c), the Partnership may admit additional
Persons as a General Partner or a Limited Partner subject to the condition that
the proposed Additional Partner shall execute and deliver to the Partnership an
agreement by which it (i) shall become a party to this Agreement and (ii) shall
make representations and warranties to the Partnership with respect to itself
substantially similar to those set forth in the Organization Agreement and
relating to such additional matters as the Partnership Committee may request.
9.2. Designation as a Group. Any Person admitted as both an Additional
General Partner and an Additional Limited Partner pursuant to Section 9.1,
together with any Affiliates of such Person concurrently admitted as Additional
Partners, that is designated by the Partnership Committee pursuant to Section
2.4(c) as a Group upon admission shall be entitled to designate a Representative
Partner and Members of the Partnership Committee.
ARTICLE 10
TRANSFER OR ENCUMBRANCE OF INTEREST
10.1. Restriction on Transfer or Encumbrance. No Partner may assign,
sell, transfer or otherwise dispose of (any such transaction being referred to
in this Article 10 as a "transfer"), pledge, hypothecate, grant a security
interest in or otherwise encumber, its Partnership Interest, except (i) to ATI
or any Affiliate thereof in connection with an investment by such Partner in
ATI, (ii) pursuant to the Agreement of Exchange, (iii) pursuant to Section 10.9
and the Trust Agreement of Exchange, (iv) pursuant to Article 11 hereto, or (v)
otherwise in accordance with the terms of this Article 10.
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate.
(a) Any Partner may, without the consent of the other Partners,
transfer ownership of all or any part of its Partnership Interest to a Wholly
Owned Affiliate (any Affiliate to which a transfer is permitted under this
Section 10.2 being referred to herein as an "Affiliate Transferee"). An
Affiliate Transferee shall be admitted as both a Substitute General Partner and
a Substitute Limited Partner at the time such Affiliate Transferee executes (i)
this Agreement or a counterpart to this Agreement, which evidences such
Affiliate Transferee's agreement to be bound by the terms and conditions of this
Agreement, (ii) an investment agreement with ATI substantially in the form of
the Investment Agreement and (iii) an
-53-
<PAGE> 59
agreement of exchange with ATI substantially in the form of the Agreement of
Exchange.
(b) A transfer of less than all of a Partner's Partnership Interest (a
"Partial Interest") pursuant to this Section 10.2 shall be deemed to constitute
a transfer of both the General Partner and Limited Partner Percentage Interests
of such Partner pro rata in proportion to the portion of such Partner's entire
Partnership Interest transferred.
10.3. Transfer of Partnership Interest Other Than to a Wholly Owned
Affiliates. Subject to the terms of this Section 10.3, from and after the
earlier of (i) July 25, 1999 and (ii) the third anniversary of the Phase II
Contribution Date, any Partner may transfer ownership of all or, prior to July
25, 2004, any portion of the Partnership Interest of such Partner to any Person;
provided that prior to the Phase II Contribution Date, a Partner may transfer
all or any portion of its Partnership Interest only as part of a transfer of all
of its Wireless Assets.
(a) In the event that any Partner has received a bona fide written
offer, which such Partner (the "Transferring Partner") is willing to accept, to
sell all or any portion of its interest in the Partnership or all of its
Wireless Assets, as the case may be (the "Transferred Interest"), to any Person
who is financially and professionally qualified to carry out the terms and
intent of this Agreement, the Transferring Partner shall deliver a written
notice (the "Transfer Notice") to each of the other Partners other than any
Partner who is a member of the Group of the Transferring Partner (the
"Non-Transferring Partners") stating its intent to sell the Transferred
Interest. The Transfer Notice shall (i) specify the purchase price for the
Transferred Interest, (ii) identify the proposed purchaser of the Transferred
Interest (iii) specify the date scheduled for the transfer (which date shall not
be less than 120 days from the date the Transfer Notice is delivered) and (iv)
contain a statement that the offer has been accepted pending compliance with the
right of first refusal set forth herein and receipt of required regulatory and
other approvals, and shall have attached thereto a copy of the written offer
containing all of the terms and conditions on which the Transferred Interest is
to be sold.
(b) The Non-Transferring Partners shall have the option to purchase all
(but not less than all) of the Transferred Interest on terms and conditions
substantially the same in all material respects as, and at the same price, set
forth in the written offer delivered pursuant to Section 10.3(a) above; provided
that if such terms and conditions include any non-cash assets or any
non-financial requirements which would be impracticable for the Non-Transferring
Partners to satisfy, then the Non-Transferring Partners shall not be required to
satisfy such terms, conditions and requirements and the purchase price for the
Transferred Interest will be equal to the Fair Market Value of the Transferred
Interest (determined in accordance with Section 4.10) in cash.
(c) Each of the Non-Transferring Partners shall initially be entitled
to purchase that fraction of the Transferred Interest equal to its Percentage
Interest divided by the Percentage Interests of all of the Non-Transferring
Partners. If any of the Non-Transferring Partners declines to exercise its right
to purchase the Transferred Interest hereunder, the other Non-Transferring
Partners electing to exercise that right shall be entitled to purchase that
portion of the Transferred Interest that has been declined by the other
Non-Transferring Partners in amounts determined pursuant to reapplication of the
principles set forth in the immediately preceding sentence, excluding from
consideration the Percentage Interests of any declining Non-Transferring
Partner. Each Non-Transferring Partner shall notify the Partnership and each of
the other Partners of its intention to exercise or not to exercise its purchase
rights hereunder within 30 days of receipt by it of a Transfer Notice. The
President shall thereupon notify each of the Partners of the elections made by
each of the Non-Transferring Partners. Subsequent written notifications, if
necessary, of such
-54-
<PAGE> 60
exercising Non-Transferring Partners' elections with respect to that portion of
the Transferred Interest which has been declined by any Non-Transferring Partner
shall be required within ten days after receipt by the exercising
Non-Transferring Partners of such notifications by the President. No portion of
a Transferred Interest may be purchased by any of the Non-Transferring Partners
unless all the Transferred Interest is purchased by one or more Non-Transferring
Partners. In the event that one or more of the Non-Transferring Partners shall
have duly elected to purchase the Transferred Interest, the Non-Transferring
Partners shall diligently pursue obtaining all regulatory approvals and use
reasonable efforts to consummate the closing of the purchase of the Transferred
Interest as soon as practicable and in any event within one year from receipt of
the Transfer Notice; provided that, if such closing does not occur within such
one-year period due to the failure of the Non-Transferring Partners to receive
any material required regulatory approvals, the Non-Transferring Partners right
to close such sale may be extended, at the option of any Non- Transferring
Partner, until such regulatory approvals are received, but in no event for a
period of greater than one year. During the period of any such extension, the
purchase price payable by the Non-Transferring Partners for the Transferred
Interest shall increase at a rate to be determined which shall be intended to
compensate fairly the Transferring Partner. In the event of a failure of the
Non-Transferring Partners to elect to purchase the Transferred Interest or to
consummate such purchase in accordance herewith, the Transferring Partner will
be free, at any time within 120 days from the date the Non-Transferring Partners
elect not to exercise their purchase rights hereunder or from the date the time
periods specified in this subsection (c) for such election have expired (in the
case of a failure to elect to purchase) or one year from the expiration of the
period set forth above to consummate a purchase (in the case of a failure to
consummate a purchase), subject, in each such case, to extension for up to an
additional one year to the extent necessary to receive any material required
regulatory approvals, to consummate the sale of the Transferred Interest to the
purchaser at a price and upon terms and conditions no more favorable to the
purchaser than those specified in the Transfer Notice; provided that the
purchaser shall assume the obligations of the Transferring Partner under this
Agreement.
(d) In connection with any such transfer, the transferee thereof shall
be admitted as a Substitute Partner at the time such transferee executes (i)
this Agreement or a counterpart to this Agreement which, subject to subsection
(e), evidences such transferee's agreement to be bound by the terms and
conditions of this Agreement, (ii) an investment agreement with ATI
substantially in the form of Exhibit B hereto and (iii) an agreement to exchange
with ATI, substantially in the form of Exhibit C hereto (or Exhibit D hereto in
the case of a transferee of a Partial Interest). The Transferring Partner shall
not be relieved of any of its obligations under this Agreement arising prior to
such transfer, to the extent such obligations shall not be discharged by the
transferee, but the Transferring Partner shall be relieved of any obligations
under this Agreement arising subsequent to such transfer. The Transferring
Partner and the transferee shall execute such documents as the Non-Transferring
Partners shall reasonably request to evidence the assumption and continuing
obligations referred to in this Section 10.3.
(e) A transferee of all of the Partnership Interests of a Group shall
be admitted as both a Substitute General Partner and a Substitute Limited
Partner; provided that a transferee of all the USW Group's Partnership Interests
shall not be entitled to designate Executive Officers pursuant to Section 2.9(d)
or to make capital contributions to the Partnership pursuant to Section 4.3. A
transfer by a Partner of a Partial Interest pursuant to this Section 10.3 shall
be deemed to constitute a transfer of both the General Partner and Limited
Partner Percentage Interests of such Partner pro rata in proportion to the
portion of such Partner's entire Partnership Interest transferred; provided that
the transferee of a Partial Interest shall (i) be admitted only as a Substitute
Limited Partner in the
-55-
<PAGE> 61
Partnership and (ii) shall have no right to participate in the management of the
Partnership Business and affairs of the Partnership, including no right to
designate a Representative Partner, Members of the Partnership Committee or
Executive Officers.
(f) If members of the ATI Group and the USW Group are the only
Partners, the Non-Transferring Partners shall be entitled to designate a third
party to exercise its rights under this Section 10.3.
(g) If at any time, the members of the USW Group cease to own in the
aggregate at least 15% of the aggregate Percentage Interests (without giving
effect to any dilution of ownership which results from the failure to contribute
Noncontributed Assets), (i) such Group shall cease to be designated as a Group,
(ii) the interests in the Partnership of the members of such Group shall
automatically be deemed to become limited partner interests in the Partnership
and (iii) the members of such Group shall have no right to participate in the
management of the Partnership Business and affairs of the Partnership, including
no right to designate a Representative Partner, Members of the Partnership
Committee or Executive Officers.
(h) Each Partner shall cooperate, and shall in no way oppose, the
closing of any transfer which is in compliance with this Article 10.
10.4. Partnership's Redemption Option. If, at any time, the aggregate
Percentage Interests of any Partner, together with the Wholly Owned Affiliates
of such Partner, are less than 5%, the Partnership shall have the option to
redeem the Partnership Interests of such Partner and its Wholly Owned Affiliates
at a purchase price equal to the Fair Market Value of such Partnership Interest
as determined pursuant to Section 4.10.
10.5. Spin-off Not Deemed To Be a Transfer. A tax-free spin-off
qualifying under Section 355 of the Code (a "Spin-off"), by the members of a
Group to the shareholders of their publicly held Parent Entity, of an entity the
assets of which include all, but not less than all, of such Group's Wireless
Assets will not be deemed to be a transfer or Change in Ownership subject to the
restrictions set forth in this Article 10 if the following conditions are
satisfied.
(a) No more than 240 days nor less than 180 days prior to the
Spin-off, the Representative Partner of the Group effecting the
Spin-off shall provide the other Representative Partners with such
information regarding the entity to be spun-off as the other
Representative Partners shall reasonably request, provided that such
information shall be promptly updated if the financial condition of the
spun-off entity changes in any material respect after delivery of such
information.
(b) The spun-off entity shall have the financial capacity to
fund all projected capital contributions to the Partnership
contemplated in the Approved Business Plan.
(c) Prior to the Spin-off, neither any member of the Group
effecting the Spin-off or any Affiliate thereof nor the spun-off entity
shall have entered into any agreement, or formulated any plan or
intention, with respect to any merger or other business combination
transaction involving the spun-off entity and a party other than ATI or
an Affiliate thereof.
(d) If the Fair Market Value of the Wireless Assets (as
determined in accordance with Section 4.10) is less than 50% of the
Fair Market Value of the entity spun off, then the spun-off entity
shall have all of the rights and obligations hereunder of the Group
effecting the Spin-off.
-56-
<PAGE> 62
(e) If the Fair Market Value of the Wireless Assets equals or
exceeds 50% of the Fair Market Value of the entity spun off, then the
spun-off entity shall have all of the rights and obligations hereunder
of the Group effecting the Spin-off; provided that, in the event of a
subsequent Change of Control of the spun-off entity, the spun-off
entity shall have the same rights and obligations as an acquiror of all
of the Partnership Interests of the Group effecting the Spin-off as
provided in Section 10.3(d) and (e).
(f) If the Fair Market Value of the Wireless Assets equals or
exceeds 75% of the Fair Market Value of the entity spun off, then,
prior to consummating the Spin-off, the spun-off entity shall be
required to have offered to ATI the opportunity to purchase the
Wireless Assets at a purchase price equal to the Private Market Value
thereof determined in accordance with Section 4.10, and if ATI accepts
such offer, shall have entered into a definitive purchase agreement
with ATI containing customary terms and conditions and subject to the
approval of the spun-off entity's shareholders following the Spin-off.
(g) The spun-off entity, following the Spin-off, will retain
all right, title and interest to all trade names or other intellectual
property licensed to the Partnership by such Group.
(h) The spun-off entity shall have executed an investment
agreement with ATI substantially in the form of the Investment
Agreement and a agreement of exchange with ATI, substantially in the
form of the Agreement of Exchange.
10.6. Invalid Transfers Void. Any purported transfer of any Partnership
Interest or any part thereof not in compliance with this Article 10 shall be
void and of no force or effect and the transferring Partner shall be liable to
the other Partners and the Partnership for all liabilities, obligations,
damages, losses, costs and expenses (including reasonable attorneys' fees and
court costs) arising as a result of such noncomplying transfer.
10.7. Change in Ownership.
(a) For purposes of this Agreement, a "Change in Ownership" of a
Partner shall be deemed to have occurred when (i) any Person, other than a
publicly held Parent Entity of such Partner or a Wholly Owned Affiliate of such
Parent Entity (an "Unaffiliated Entity"), shall acquire (whether by merger,
consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or series of related transactions), or otherwise beneficially own or
control 50% or more of the outstanding Voting Stock of any Partner or any entity
(other than the publicly held Parent Entity of such Partner) which, directly or
indirectly, through the ownership of one or more majority-owned successive
subsidiary entities, owns more than 50% of the outstanding Voting Stock in or
controls such Partner (a "Control Entity"), (ii) an Unaffiliated Entity, or
group of persons acting in concert therewith, shall acquire the power to direct
or cause the direction of the management and policies of such Partner or a
Control Entity thereof, or (iii) the publicly held Parent Entity of such Partner
shall otherwise cease to beneficially own or control a majority of the
outstanding Voting Stock of any Partner or a Control Entity thereof.
(b) Any Change in Ownership of a Partner shall be deemed for all
purposes hereof to be a proposed transfer of the Partnership Interest of such
Partner and such Partnership Interest shall be deemed to be a Transferred
Interest, the transfer of which shall be subject to all of the terms and
conditions set forth in Sections 10.1 and 10.3 hereof, and the purchase price of
which shall be the Fair Market Value of the Wireless Assets of the Partner
experiencing a Change of Ownership. In the event that
-57-
<PAGE> 63
the Transferred Interest is not purchased pursuant to the preceding sentence,
any Unaffiliated Entity effecting such Change in Ownership, shall, by a binding
written instrument which shall be enforceable by the Partnership and the other
Partners, assume all obligations and liabilities hereunder of the Partner which
is the subject of such Change in Ownership.
10.8. Change of Control - ATI.
(a) From and after the Phase I Closing Date, if at any time there shall
occur a Change of Control of ATI, then at any time within six months after the
date of such Change of Control, the USW Group may by written notice delivered to
ATI require ATI to purchase, and ATI shall purchase, in accordance with the
provisions of this Section 10.8, all of the Wireless Assets of the USW Group
(the "Put Interest") at a price (the "Put Price") equal to the Private Market
Value thereof as determined in accordance with Section 4.10.
(b) On or prior to January 25, 2009, if the shares of common stock of
ATI are not then registered under Section 12(b) or 12(g) of the Exchange Act, or
the common stock of ATI shall not then be broadly held and actively traded by
public stockholders, the USW Group may notify ATI in writing that the USW Group
may elect to require ATI to purchase the Put Interest as set forth below. If the
USW Group shall have delivered the notice described in the preceding sentence,
then at any time from and after July 25, 2009 to January 25, 2010, if either of
the conditions specified in the preceding sentence have been in effect at any
time within the two-year period immediately preceding July 25, 2009, the USW
Group may by written notice delivered to ATI require ATI to purchase, and ATI
shall purchase, in accordance with the provisions of this Section 10.8, the Put
Interest at the Put Price.
(c) Any purchase and sale of the Put Interest effected pursuant to this
Section 10.8 shall be consummated at a closing as promptly as practicable, but
in any event no later than on the 120th day following the determination of the
Put Price; provided that such period shall be extended for such period of time
as shall be necessary in order to obtain requisite governmental or regulatory
approvals with respect to such transaction if ATI has diligently pursued all
necessary approvals and if the failure to obtain such approvals will have a
material adverse effect on ATI. At such closing, ATI shall pay the USW Group the
Put Price in cash or by delivery of notes (which provide for terms substantially
similar to those set forth in Exhibit E) issued by ATI or the Partnership having
a Fair Market Value equal to the Put Price (or any combination of cash and such
notes), and the USW Group shall, pursuant to such instruments as may be
reasonably requested by the ATI, deliver to ATI the Put Interest in appropriate
form for transfer, free and clear of any lien or other encumbrance. In the event
that the Put Price is paid in notes, the Fair Market Value of such notes shall
be conclusively determined at least 10 days prior to the closing and in the
manner set forth in Section 4.10.
10.9. USW Option To Effect Exchange Into Trust. Upon the consummation
of the first closing under the Trust Agreement of Exchange, the USW Group shall
cease to be designated as a Group, the interests in the Partnership of the
members of the USW Group shall automatically be deemed to become limited partner
interests in the Partnership and the members of the USW Group shall have no
further right to participate in the management of the Partnership Business and
affairs of the Partnership, including no right to designate a Representative
Partner, Members of the Partnership Committee or Executive Officers.
10.10. Proportionate Transfer of PCS Interest. No Partner may effect a
transfer of its interest in the Partnership without transferring a partnership
interest in PCS Par representing the same proportion of its Percentage Interest
in PCS Par as the proportion of the Percentage Interest
-58-
<PAGE> 64
in the Partnership being transferred, and any such attempted transfer shall be
null and void and of no effect.
ARTICLE 11
REGISTRATION RIGHTS
11.1. Demand Registration Rights.
(a) Notwithstanding anything in this Agreement to the contrary, at any
time following the 15th anniversary of the Effective Date and prior to the 50th
anniversary of the Effective Date, the Partnership shall, upon receipt of
written notice from either the ATI RP or the USW RP (a "Demand Notice"), take
such action as is reasonably necessary to cause the Partnership to be
reconstituted into a corporation (the "Successor Company") organized under the
laws of the State of Delaware, or any other jurisdiction selected by the
Partnership, to convert the Partnership Interests into common stock of the
Successor Company ("Common Shares") and to file a registration statement (a
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), and under the securities or blue sky laws of any
jurisdictions designated by such Representative Partner, with respect to Common
Shares representing Partnership Interests constituting not less than 25% of the
aggregate Partnership Interests held by the Group represented by such
Representative Partner. The members of the USW and ATI Groups who receive Common
Shares upon the conversion of their respective Partnership Interests are
referred to herein as the "Original Stockholders."
(b) Following the initial registration of Common Shares under the
Securities Act, the Original Stockholders shall be entitled, from time to time,
to make such further Demand Notices as are necessary to enable them to dispose
of the entirety of the Common Shares issued upon the initial conversion of their
respective Partnership Interests (the "Registrable Shares") and the Successor
Company shall comply with such additional Demand Notices on the terms and
conditions of this Article; provided that no Original Stockholder shall be
entitled to make a Demand Notice (i) within 180 days after the last day of
effectiveness of the most recent registration statement relating to a Demand
Notice, or (ii) if the number of Demand Notices made by such Original
Stockholder and its Affiliates would equal or exceed (x) the Fair Market Value
of the Registrable Shares held by such Original Stockholder and its Affiliates
on the date of the conversion, divided by (y) $750 million, rounded to the
nearest whole number.
(c) Any Persons requesting registration (the "Selling Parties") shall
deliver a copy of a Demand Notice to the Partnership (or the Successor Company)
and each Representative Partner (or Original Stockholder) that is not
participating in the registration (the "Non-Selling Parties"). Each Demand
Notice shall specify the amount of each Selling Party's Percentage Interest (or
the number of Registrable Shares) that shall be included in the registration
(the "Sale Interest"), and the proposed closing date for the offering (which
date shall not be less than 120 days (in the case of the initial public offering
of Common Shares) or 30 days (in the case of subsequent public offerings) from
the date on which the Demand Notice is delivered). The Demand Notice shall be
accompanied by a letter from an investment banking firm of national reputation,
who shall be reasonably acceptable to the Partnership (or the Successor
Company), stating the price (net of any underwriters' fees and commissions) at
which such firm, in good faith, believes that, based on the then prevailing
market conditions, it would be able to sell the Registrable Shares in a public
offering (the "Proposed Offering Price"). With respect to the first Demand
Notice delivered pursuant to this Article 11, the Proposed Offering Price may
reflect an initial public offering discount, if appropriate. The Proposed
Offering Price with respect to subsequent Demand Notices may assume that all
Common Shares that were the subject of prior Demand Notices had been fully
-59-
<PAGE> 65
distributed to the public (regardless of whether the Non-Selling Parties had
exercised their right of first offer with respect to such Common Shares pursuant
to Section 11.1(d)) and may reflect the price that would otherwise be obtainable
in the public market if such shares had been fully distributed (the difference
between the Proposed Offering Price and such price that would otherwise be
obtainable is referred to herein as a "Liquidity Adjustment"). If the Selling
Parties and the Non-Selling Parties are unable to agree as to the amount of any
such Liquidity Adjustment, the amount of such Liquidity Adjustment shall be
determined pursuant to an appraisal process following the procedures set forth
in Section 4.10.
(d) The Non-Selling Parties shall have the option to purchase all (but
not less than all) of the Sale Interest at a purchase price equal to the
Proposed Offering Price, including any Liquidity Adjustment. Each of the
Non-Selling Parties shall initially be entitled to purchase that fraction of the
Sale Interest equal to its Percentage Interest (or percentage ownership interest
in the Successor Company) divided by the Percentage Interests (or percentage
ownership interests in the Successor Company) of all of the Non-Selling Parties.
If any of the Non-Selling Parties declines to exercise its right to purchase the
Sale Interest hereunder, the other Non-Selling Parties electing to exercise that
right shall be entitled to purchase that portion of the Sale Interest that has
been declined by the other Non-Selling Parties in amounts allocable determined
pursuant to reapplication of the principles set forth in the immediately
preceding sentence, excluding from consideration the Percentage Interests (or
other ownership interests) of any declining Non-Selling Partner. Each
Non-Selling Party shall notify the Partnership (or the Successor Company) of its
intention to exercise or not to exercise its purchase rights hereunder within 30
days (in the case of the initial public offering of Common Shares) or 10 days
(in the case of subsequent public offerings) after receipt by it of a Demand
Notice. The President (or any equivalent officer of the Successor Company) shall
thereupon notify each of the Representative Partners (or the Original
Stockholders) of the elections made by each of the Non-Selling Parties.
Subsequent written notifications, if necessary, of such exercising Non-Selling
Parties elections with respect to that portion of the Sale Interest which has
been declined by any Non-Selling Party shall be required within ten days (in the
case of the initial public offering) or 5 days (in the case of subsequent public
offerings) after receipt by the exercising Non-Selling Parties of such
notifications by the President. No portion of a Sale Interest may be purchased
by any of the Non-Selling Parties unless all of the Sale Interest is purchased
by one or more Non-Selling Parties. In the event that one or more of the
Non-Selling Parties shall have duly elected to purchase the Sale Interest, the
closing of the purchase of the Sale Interest by such Non-Selling Parties shall
take place within one year of the date of such election; provided that from and
after the proposed closing date for the offering set forth in the Demand Notice,
the purchase price payable by the Non-Selling Parties for the sale Interest
shall increase at a per annum rate equal to the Prime Rate, compounded
semi-annually. In the event of a failure of the Non-Selling Parties to elect to
purchase the Sale Interest or to consummate such purchase in accordance
herewith, the Selling Party will be free, at any time within 90 days from the
date the Demand Notice is delivered (in the case of a failure to elect to
purchase the Sale Interest) and 120 days (in the case of a failure to consummate
such purchase within the one year period referred to above) subject to extension
for up to an additional 60 days to the extent necessary to comply with
applicable regulatory requirements, to consummate the sale of the Sale Interest
at a price (net of underwriters fees and commissions) equal to or exceeding the
Proposed Offering Price excluding any Liquidity Adjustment. If the sale of the
Sale Interest is not completed within the foregoing periods or if market
conditions cause the managing underwriter to reduce the proposed price per share
to the public or the net proceeds to Selling Parties or otherwise to materially
revise the terms set forth in the Demand Notice, the Selling Parties shall
promptly so notify the Non-Selling Parties and the Non-Selling Parties shall
again have a right of first offer with respect to the Sale
-60-
<PAGE> 66
Interest, upon the revised terms, except that such new right must be exercised
within three business days after such notification.
(e) If members of the ATI and the USW Groups are the only
Representative Partners (or Original Stockholders, as the case may be), a
Non-Selling Party shall be entitled to designate a third party to exercise such
Non-Selling Party's rights under this Section 11.1.
(f) Upon receipt of a Demand Notice, the Partnership shall promptly use
all reasonable efforts to cause the Partnership to be in a position to be
reconstituted as a corporation and effect the registration of the Common Shares
which are included in the Sale Interest in accordance with Section 11.3;
provided that the Partnership shall not be required to consummate the
reconstitution prior to the time the Registration Statement filed in accordance
with Section 11.3(a) shall have become effective under the Securities Act.
11.2. Successor Company Registration.
(a) If the Successor Company shall determine to register any Common
Shares either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction, or a registration on any registration
form that does not permit secondary sales, the Successor Company will:
(i) promptly give to each Original Stockholder written notice
thereof; and
(ii) use its best efforts to include in such registration (and
any related qualification under blue sky laws or other compliance),
except as set forth in Section 11.2(b) below, and in any underwriting
involved therein, all the Registrable Shares specified in a written
request made by such Original Stockholder and received by the Successor
Company within seven days after the written notice from the Successor
Company described in clause (i) above is mailed or delivered by the
Successor Company. Such written request may specify all or a part of
such Original Stockholder's Registrable Shares.
(b) If the registration of which the Successor Company gives notice is
for a registered public offering involving an underwriting, the Successor
Company shall so advise each Original Stockholder as a part of the written
notice given pursuant to Section 11.2(a)(i). In such event, the right of each
Original Stockholder to registration pursuant to this Section 11.2 shall be
conditioned upon such Original Stockholder's participation in such underwriting
and the inclusion of such Original Stockholder's Registrable Shares in the
underwriting to the extent provided herein. The Original Stockholders shall
(together with the Successor Company and the other holders of securities of the
Successor Company with registration rights to participate therein distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriters selected by the
Successor Company.
Notwithstanding any other provision of this Section 11.2, if the
representative of the underwriters advises the Successor Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Shares from, or limit the number of Registrable
Shares to be included in, the registration and underwriting. The Successor
Company shall so advise the Original Stockholders, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Successor
-61-
<PAGE> 67
Company for securities being sold for its own account and thereafter as set
forth in Section 11.2(c).
(c) In any circumstance in which all of the Registrable Shares and
other Common Shares with registration rights (the "Other Shares") requested to
be included in a registration on behalf of the Original Stockholders or other
selling stockholders cannot be so included as a result of limitations of the
aggregate number of Registrable Shares and Other Shares that may be so included,
the number of Registrable Shares and Other Shares that may be so included shall
be allocated among the Original Stockholders and other selling stockholders
requesting inclusion of shares pro rata on the basis of the number of
Registrable Shares and Other Shares that are held by the Original Stockholders
and other selling stockholders; provided, however, that such allocation shall
not operate to reduce the aggregate number of Registrable Shares and Other
Shares to be included in such registration. If the Original Stockholders or
other selling stockholders do not request inclusion of the maximum number of
Registrable Shares and Other Shares allocated to them pursuant to the
above-described procedure, the remaining portion of their allocation shall be
reallocated among the Original Stockholders and other selling stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of Registrable Shares and Other Shares which are held by the Original
Stockholders and other selling stockholders, and this procedure shall be
repeated until all of the Registrable Shares and Other Shares which may be
included in the registration on behalf of the Original Stockholders and other
selling stockholders have been so allocated.
11.3. Registration Procedures. In the case of each registration
involving Registrable Shares pursuant to this Article 11, the Partnership (or
Successor Company) will:
(a) furnish to the Representative Partners or Original
Stockholders participating in such registration (the "Participating
Stockholders"), prior to the filing of a Registration Statement, copies
of such Registration Statement as it is proposed to be filed, and
thereafter such number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents in
such quantities as such Participating Stockholders reasonably may
request from time to time in order to facilitate the disposition of
such Registrable Shares;
(b) use all reasonable efforts to register or qualify the
offer and sale of such Registrable Shares under such other securities
or blue sky laws of such jurisdiction as the Participating Stockholders
reasonably request and do any and all other acts and things as
reasonably may be necessary or advisable to enable such Participating
Stockholders to consummate the disposition in such jurisdictions of the
Registrable Shares owned by such Participating Stockholders; provided
that the Partnership (or Successor Company) will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection (b), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(c) use all reasonable efforts to cause such Registrable
Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Partnership (or Successor Company) to enable the
Participating Stockholders to consummate the disposition of such
Registrable Shares;
-62-
<PAGE> 68
(d) notify the Participating Stockholders at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement or amendment
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Partnership (or Successor
Company) will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(e) enter into customary agreements (including an underwriting
agreement in customary form and an indemnification agreement with the
Participating Stockholders in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Shares;
(f) make available for inspection by the Participating
Stockholders participating in such registration, any underwriter
participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by such Participating
Stockholders or any such underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents and
properties of the Partnership (or Successor Company) (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the officers, directors
and employees of the Partnership (or Successor Company) to supply all
information reasonably requested by any such Inspector in connection
with such registration; provided that (i) Records and information
obtained hereunder shall be used by such persons only to exercise their
due diligence responsibility and (ii) Records or information which the
Partnership (or Successor Company) determines, in good faith, to be
confidential shall not be disclosed in such Registration Statement or
otherwise by the Inspectors unless (x) the disclosure of such Records
or information is necessary to avoid or correct a misstatement or
omission in the Registration Statement or (y) the release of such
Records or information is ordered pursuant to a subpoena or other order
from a court or governmental authority of competent jurisdiction. The
Participating Stockholders shall use their best efforts, prior to any
such disclosure, to inform the Partnership (or Successor Company) that
such disclosure is necessary to avoid or correct a misstatement or
omission in the Registration Statement. Each Participating Stockholder
further agrees that it will, upon learning that disclosure of such
Records or information is sought in a court or by a governmental
authority, give notice to the Partnership (or Successor Company) and
allow the Partnership (or Successor Company), at the expense of the
Partnership (or Successor Company), to undertake appropriate action to
prevent disclosure of the Records or information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter from
the independent public accountants for the Partnership (or Successor
Company) in customary form and covering such matters of the type
customarily covered by comfort letters as the Participating
Stockholders reasonably request;
-63-
<PAGE> 69
(h) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"), and make generally available to its security
holders, as soon as reasonably practicable, an earning statement
covering a period of twelve months beginning within three months after
the effective date of such Registration Statement, which earning
statement shall satisfy the provisions of section 11(a) of the
Securities Act and Rule 158 thereunder;
(i) use all reasonable efforts to cause all such Registrable
Shares to be listed on each securities exchange on which similar
securities issued by the Successor Company are listed; and
(j) use its best efforts (i) to have any registration of the
Registrable Shares declared effective as promptly as practicable after
the filing thereof and (ii) to keep such Registration Statement
effective for a period (up to three months) sufficient to complete the
distribution of the Registrable Shares. The Successor Company further
agrees to supplement or make amendments to the Registration Statement,
if required by (x) the registration form utilized by the Successor
Company for such registration or by the instructions applicable to such
registration form, (y) the Securities Act or the rules and regulations
thereunder or (z) the Participating Stockholders (or any underwriter
for the Participating Stockholders) with respect to information
concerning the Participating Stockholders or such underwriter or the
plan of distribution to be utilized with respect to the Registrable
Shares. The Successor Company agrees to furnish to the Participating
Stockholders copies of any such supplement or amendment prior to its
being used or filed with the SEC.
11.4. Conditions to Offerings. The obligations of the Partnership (or
the Successor Company) to take the actions contemplated by Section 11.1 with
respect to an offering of Registrable Shares shall be subject to the following
conditions:
(a) The Registrable Shares shall be distributed in an
underwritten firm commitment public offering. The Partnership shall
have the right to select the investment banker or bankers and lead
manager or managers to administer the initial public offering of the
Common Shares; provided that such lead manager or mangers must be
reasonably acceptable to the Original Stockholder who delivered the
Demand Notice. The Participating Stockholders shall have the right to
select the investment banker or bankers and lead manager or managers to
administer the offering and its or their counsel in any subsequent
underwritten offering; provided that such lead manager or managers and
such counsel must be reasonably satisfactory to the Successor Company;
and
(b) The Participating Stockholders shall conform to all
applicable requirements of the Securities Act and the Exchange Act with
respect to the offering and sale of such Registrable Shares and shall
advise each underwriter, broker or dealer through which any of such
Registrable Shares are offered that such Registrable Shares are part of
a distribution that is subject to the prospectus delivery requirements
of the Securities Act.
The Partnership (or Successor Company) may require the Participating
Stockholders to furnish to the Partnership (or Successor Company) such
information regarding the Participating Stockholders or the distribution of
-64-
<PAGE> 70
the Registrable Shares as the Partnership (or Successor Company) may from time
to time reasonably request in writing, in each case only as required by the
Securities Act or the rules and regulations thereunder or under state securities
or blue sky laws.
Each Participating Stockholder agrees that, upon receipt of any notice
from the Partnership (or Successor Company) of the happening of any event of the
kind described in Section 11.3(d) of this Agreement, such Participating
Stockholder will forthwith discontinue disposition of Registrable Shares
pursuant to the registration covering such Registrable Shares until such
Participating Stockholder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 11.3(a) of this Agreement.
11.5. Additional Conditions.
(a) The Partnership's (or Successor Company's) obligations pursuant to
Section 11.1 shall be suspended if (i) the fulfillment of such obligations would
require the Partnership (or Successor Company) to make a disclosure that would,
in the reasonable good faith judgment of the Partnership Committee (or Successor
Company's Board of Directors), be detrimental to the Partnership (or Successor
Company) and premature and the Partnership Committee (or Successor Company's
Board of Directors) concludes, as a result, that it is essential to defer the
filing of the registration statement at such time, (ii) the Partnership (or
Successor Company) has filed or proposes to file a registration statement with
respect to any of its securities to be distributed in an underwritten public
offering and it is advised by its lead or managing underwriter that an offering
by the Original Stockholders of Registrable Shares would materially adversely
affect the distribution of such securities; provided that the Partnership (or
Successor Company) is actively employing, or upon such proposed filing actively
employs, all reasonable efforts to cause any such filed registration statement
to become effective, or (iii) the fulfillment of such obligations would require
the Successor Company to prepare financial statements not required to be
prepared for the Successor Company to comply with its obligations under the
Exchange Act at the time that the registration statement is proposed to be
filed. Such obligations shall be reinstated (x) in the case of clause (i) above,
upon the making of such disclosure by the Successor Company (or, if earlier,
when such disclosure would either no longer be necessary for the fulfillment of
such obligations or no longer be detrimental), (y) in the case of clause (ii)
above, upon the conclusion of any period during which the Partnership (or the
Successor Company) would not, pursuant to the terms of its underwriting
arrangements, be permitted to sell Registrable Securities for its own account
and (z) in the case of clause (iii) above, as soon as it would no longer be
necessary to prepare such financial statements to comply with the Securities
Act. The period during which the Participating Stockholders are required to sell
their Registrable Shares pursuant to Section 11.3(j) shall be tolled for the
duration of any suspension pursuant to this Section 11.5(a).
(b) The number of Registrable Shares to be registered pursuant to
Section 11.1 of this Agreement shall be reduced to the extent that the Successor
Company is advised in writing by an investment banker of national standing that
the sale of all of the Registrable Shares requested to be registered by the
Participating Stockholders would materially and adversely affect the market
price of the Successor Company's equity securities.
11.6. Registration Expenses. All expenses incident to the performance
of or compliance with this Agreement by the Partnership (or the Successor
Company), including, without limitation, all fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable Shares),
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the fees and expenses incurred
in connection with the listing of the Registrable
-65-
<PAGE> 71
Shares to be registered on each securities exchange on which similar securities
issued by the Partnership (or the Successor Company) are then listed, fees and
disbursements of counsel for the Partnership (or the Successor Company) and its
independent certified public accountants (including the expenses of any comfort
letters required by or incident to such performance), securities acts liability
insurance (if the Partnership (or Successor Company) elects to obtain such
insurance), the reasonable fees and expenses of any special experts retained by
the Partnership (or the Successor Company) in connection with such registration
and the fees and expenses of other persons retained by the Partnership (or the
Successor Company) will be borne by the Partnership (or Successor Company).
Notwithstanding anything in this Section 11.6 to the contrary, the Partnership
(or the Successor Company) will not have any responsibility for any registration
or filing fees payable under any federal or state securities or blue sky laws or
for any of the expenses of the Participating Stockholders incurred in connection
with any registration hereunder including, without limitation, underwriting
fees, discounts and commissions and transfer taxes, if any, attributable to the
sale of the Participating Stockholders' Registrable Shares, counsel fees of the
Participating Stockholders and travel costs.
11.7. Indemnification; Contribution.
(a) Indemnification by Partnership (or Successor Company). The
Partnership (or the Successor Company) agrees to indemnify, to the fullest
extent permitted by law, each Participating Stockholder (and any Affiliate
thereof holding Registrable Shares), each person who controls such a
Participating Stockholder or such Affiliate (within the meaning of either the
Securities Act or the Exchange Act), and their respective directors and officers
against any and all losses, claims, damages, liabilities and expenses (including
attorneys' fees) caused by any untrue or alleged untrue statement of material
fact contained in any Registration Statement, prospectus or preliminary
prospectus (each as amended and/or supplemented, if the Partnership (or the
Successor Company) shall have furnished any amendments or supplements thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading; provided that the Partnership (or the Successor Company) shall not
be required to indemnify such Participating Stockholder or such Affiliate, such
controlling persons or their respective officers or directors for any losses,
claims, damages, liabilities or expenses resulting from any such untrue
statement or omission if such untrue statement or omission is made in reliance
on and conformity with any information with respect to such Participating
Stockholder or its Affiliates or the underwriters furnished to the Partnership
(or the Successor Company) by such Participating Stockholder or its Affiliates
expressly for use therein; and provided further, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of such Participating Stockholder or such
Affiliate, if the liability or expense results from the fact that a copy of the
prospectus was not sent or given to such person at or prior to the written
confirmation of sale of such Registrable Shares to such person as required by
the Securities Act, and if the untrue statement or omission has been corrected
in the prospectus unless such failure to deliver the prospectus was a result of
noncompliance by the Partnership (or the Successor Company) with its obligations
under Section 11.3(a) hereof. In connection with an underwritten offering, the
Partnership (or the Successor Company) will indemnify each underwriter thereof,
the officers and directors of such underwriter, and each person who controls
such underwriter (within the meaning of either the Securities Act or Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Participating Stockholder; provided that such underwriter agrees to
indemnify the Partnership (or the Successor Company)
-66-
<PAGE> 72
to the same extent as provided below with respect to the indemnification of the
Partnership (or the Successor Company) by the Participating Stockholder.
(b) Indemnification by the Participating Stockholder. In connection
with any registration in which a Participating Stockholder is participating,
each Participating Stockholder will furnish to the Partnership (or the Successor
Company) in writing such information with respect to such Participating
Stockholder and its Affiliates as the Partnership (or the Successor Company)
reasonably requests for use in connection with any such registration,
prospectus, or preliminary prospectus and agrees to indemnify the Partnership
(or the Successor Company), its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Partnership (or
the successor Company) (within the meaning of either the Securities Act or of
the Exchange Act) to the same extent as the foregoing indemnity from the
Partnership (or the Successor Company) to such holder, but only with respect to
information relating to such holder furnished to the Partnership (or the
Successor Company) in writing by a Participating Stockholder expressly for use
in the Registration Statement, the prospectus, any amendment or supplement
thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 11.7(a)
or Section 11.7(b) of this Agreement, such person (hereinafter called the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (hereinafter called the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and the indemnified party shall have been advised by counsel that representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the indemnified
parties, such firm shall be designated in writing by the indemnified parties.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third sentence of this Section 11.7(c), the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not either have reimbursed the indemnified party in
accordance with such request or reasonably objected in writing, on the basis of
the standards set forth herein, to the propriety of such reimbursement prior to
the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity
-67-
<PAGE> 73
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section
11.7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to in this Section 11.7, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 11.7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 11.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 11.7(a) and (b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 11.7(d).
ARTICLE 12
REGULATORY MATTERS
12.1. MFJ Compliance.
(a) The USW Group agrees that USW will pursue, in conjunction with the
Regional Bell Operating Companies ("BOCs") within the meaning of the MFJ, the
"Motion of the Bell Companies for a Modification of Section II of the Decree to
Permit Them to Provide Cellular and Other Wireless Services Across LATA
Boundaries," filed with the Decree Court on June 20, 1994. If the Decree Court
were to deny the BOCs' motion or if the Decree Court or the Department of
Justice were to take the position that the relief requested in the motion does
not apply to PCS Service, USW will request a waiver for the benefit of the
Partnership or any Owned or Licensed System that would enable the Partnership to
provide PCS Service free of restrictions on BOCs in the MFJ. In addition, USW
will request a waiver for the benefit of the Partnership or any Owned or
Licensed System or USW, as appropriate, if the waiver is: (i) to permit the
Partnership or any Owned or Licensed System or USW, as appropriate, to offer the
same services as those set forth in any waiver request which USW or an Affiliate
has pending or which USW, any of its affiliates, or any BOC has obtained for its
cellular businesses,
-68-
<PAGE> 74
including businesses incidental thereto; (ii) based on relevant facts which are
comparable to those set forth in any such waiver USW, an affiliate thereof or a
BOC has pending or has obtained, as the case may be, and (iii) with respect to
the Partnership or any Owned or Licensed System, within the scope of the
Partnership Business. Except as described above, neither USW nor any USW
affiliate shall be obliged to request any waiver for the benefit of the
Partnership.
(b) Neither the Partnership, nor any Owned System, nor any Licensed
System owned by USW, shall engage (directly or indirectly) in any MFJ Restricted
Activity. During the period from the Effective Date to the Phase II Contribution
Date ("Pre-Phase II"), ATI and its Licensed Systems will be engaged in the
provision of interexchange (interLATA) telecommunications services and other MFJ
Restricted Activities. The parties intend that, during Pre-Phase II, ATI and its
Licensed Systems will not be subject to the MFJ or in any way restricted by any
of its provisions. Revenues, expenses, profits and losses from interexchange
(interLATA) services and other MFJ Restricted Activities provided by ATI shall
flow directly to ATI and not to the Partnership.
(c) If, at any time during Pre-Phase II, a third party raises
legitimate concerns regarding whether ATI or its Licensed Systems can lawfully
engage in MFJ Restricted Activities, or if a third party or USW's CECO Decree
Committee raises legitimate concerns regarding whether, in light of the
activities of the Partnership and ATI, USW is in compliance with the MFJ
(collectively, "MFJ Concerns"), the parties agree:
(i) except in the circumstances set forth in (iii) below, that
ATI, its Licensed Systems and/or the Partnership shall have the right
to continue the activities giving rise to the MFJ Concerns;
(ii) to restructure the Pre-Phase II relationships among them
and their respective properties to the minimum extent necessary to
satisfy the MFJ Concerns while preserving, as described in clause (b)
above and otherwise to the fullest extent possible, the intent of the
parties regarding Pre-Phase II operations as well as the relative
economic positions of the parties. The obligation to restructure shall
arise either when counsel for the parties agree that an MFJ Concern is
well founded, or when USW s CECO Decree Committee determines that an
activity of the Partnership or ATI has or will put USW in violation of
the MFJ, and (in either case) counsel for either party issues a written
opinion that the MFJ Concern cannot be cured without restructuring the
Pre-Phase II relationships. In the event the obligation to restructure
arises pursuant to the preceding sentence, the parties shall attempt to
determine the manner of restructuring which best gives effect to the
first sentence of this clause (ii). If the parties reach agreement on a
proposal, they will present it to USW s CECO Decree Committee and then,
if the CECO Decree Committee approves that proposal, to the Partnership
Committee. If the parties are unable to agree on a restructuring
proposal, each of them will present its proposal to USW s CECO Decree
Committee; the parties will then present to the Partnership Committee
whichever (or both) of the proposals the CECO Decree Committee has
approved. The parties will implement a restructuring proposal only upon
the unanimous vote of the Partnership Committee. If the Partnership
Committee, having two restructuring proposals before it, does not
unanimously approve either of them, the parties shall resolve the
manner of restructuring by the procedure described in Section 2.7 of
this Agreement (provided that the 60-day period set forth therein for
referral of disputes to the Representative Partners' board of directors
shall be a 30-day period); and
-69-
<PAGE> 75
(iii) ATI, its Licensed Systems and/or the Partnerships will
stop the activities giving rise to the MFJ Concerns if USW has received
either:
(A) an opinion from the Decree Court that such
activities have put USW in violation of the MFJ; or
(B) a written opinion from the Department of Justice
that such activities have put USW in violation of the MFJ, and
either counsel for the parties agree, or USW's CECO Decree
Committee has determined, that there is a reasonable factual
and legal basis for such an opinion from the Department of
Justice.
(d) Subject to the provisions of Section 2.16 and compliance with the
MFJ by the Partnership in connection therewith, ATI or any Affiliate thereof
will have the option to engage in MFJ Restricted Activities, specifically
including the provision of interexchange (interLATA) telecommunications services
(it being understood that such services may be provided by the WMC if it is
thereafter permitted to do so, as provided in Section 7.4(d)(ix)) and engage in
any business practice and enter into any transaction in which the Partnership
does not engage by reason of the MFJ. Except as provided in the preceding
sentence, the provisions of this Section 12.1 shall take precedence, in the
event of any conflict, over any other provision of this Agreement.
(e) The USW RP shall have the right to designate candidates to occupy a
position in the legal staff of the Partnership with responsibility for
monitoring the Partnership's compliance with applicable provisions of the MFJ
(the "MFJ Compliance Counsel"). The Vice President - Legal and External Affairs
shall interview and evaluate the qualifications of each of the candidates
recommended by the USW RP, and shall select one candidate to occupy such
position. The MFJ Compliance Counsel shall report to, and may be removed with or
without cause at any time by, the Vice President - Legal and External Affairs.
The Partnership will submit to the MFJ Compliance Counsel all Business
Activities of the Partnership (as defined below) prior to their implementation.
If the MFJ Compliance Counsel determines that a Business Activity of the
Partnership requires review by USW's CECO Decree Committee, the Partnership will
not implement that Business Activity prior to its having been reviewed and
approved by the CECO Decree Committee. For purposes of this subsection,
"Business Activity of the Partnership" means the provision of a product or
service by the Partnership to a Person other than: the Partnership itself; PCS
Par; an Owned or Licensed System; or ATI, USW, or an Affiliate of either of
them.
ARTICLE 13
MISCELLANEOUS
13.1. Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party (i) when delivered
personally (by courier service or otherwise), (ii) when delivered by telecopy
and confirmed by return telecopy, (iii) on the business day after the date sent
by a nationally recognized overnight courier service, or (iv) seven days after
being mailed by first-class, registered or certified mail, postage prepaid and
return receipt requested, in each case to the applicable addresses set forth
below:
-70-
<PAGE> 76
If to any USW Partner:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: President
Telecopy: (303) 793-6294
With copies to:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: General Counsel
Telecopy: (303) 793-6294
If to any ATI Partner:
AirTouch Communications, Inc.
2999 Oak Road
Walnut Creek, CA 94596
Attn: C. Lee Cox, President and
Chief Operating Officer
Telecopy: (510) 210-3599
With copies to:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attn: Senior Vice President-Legal and
External Affairs
Telecopy: (415) 658-2298
and
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Nathaniel M. Cartmell III, Esq.
Telecopy: (415) 477-4816
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance with this Section 13.1.
13.2. Governing Law, etc.
(a) This Agreement has been executed and delivered in the State of
Delaware and shall, in all respects be governed by, interpreted, and construed
in accordance with the laws of the State of Delaware, all rights and remedies of
the Partners in respect thereof being governed by such laws, without regard to
its conflict of law rules.
(b) Each of the Partners hereby irrevocably appoints The Corporation
Trust Company, at its office in Wilmington, Delaware, United States of America,
its lawful agent and attorney to accept and acknowledge service of any and all
process against it in any action, suit or proceeding arising in connection with
this Agreement and upon whom such process may be served, with the same effect as
if such party were a resident of the State of Delaware and had been lawfully
served with such process in such jurisdiction, and waives all claim of error by
reason of such service; provided that in the case of any service upon such agent
and attorney, the party effecting such service shall also deliver a copy thereof
to the other party at the address and in the manner specified in Section 13.1.
In the event that such agent and attorney resigns or otherwise becomes incapable
of
-71-
<PAGE> 77
acting as such, such party will appoint a successor agent and attorney in
Wilmington, Delaware, reasonably satisfactory to the other party, with like
powers.
(c) The choice of law provisions of this Article 13 have been
negotiated in good faith and agreed upon by the parties hereto and are
reasonable especially considering that this Agreement is subject to and conforms
with the Act. All Partners, by their execution of this Agreement, expressly
agree, to the fullest extent permitted by law, not to challenge the choice of
law provisions contained in this Article 13.
13.3. Amendments. This Agreement may be modified or amended only by an
instrument in writing signed by each Partner, and, as so modified and amended,
shall inure to the benefit of all of the Partners.
13.4. Entire Agreement. Except to the extent other agreements are
specifically referred to herein, this Agreement and the other agreements
executed by the Partners on the Effective Date or the date hereof constitute the
entire agreement between the Partners with respect to the matters covered hereby
or thereby and supersede all other agreements, understandings, offers and
negotiations, oral or written that are prior to the date hereof.
13.5. Waiver of Partition. Each Partner hereby irrevocably waives any
and all rights that it may have to maintain an action for partition of any of
the Partnership's property.
13.6. Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Partnership.
13.7. Successors. Subject to Section 10.1, all rights and duties of the
Partners hereunder shall inure to the benefit of and be binding upon their
respective successors and assigns.
13.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
13.9. Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision which is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable and contrary to
existing or future applicable law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement which are valid. In
that case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of any
applicable law, and in the event such term or provision cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions.
13.10. Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Partnership until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
13.11. Arbitration. Each Partner hereby acknowledges that this
Agreement is subject to the Arbitration Agreement of the Partners which is being
entered into of even date herewith, and the Arbitration Agreement will govern
the resolution of disputes relating to this Agreement in accordance with its
terms. Each Additional Partner or Substitute Partner shall execute the
Arbitration Agreement or a counterpart to the Arbitration Agreement prior to its
admission to the Partnership.
-72-
<PAGE> 78
13.12. No Third-Party Beneficiaries. Nothing contained in this
Agreement is intended to, or shall, confer upon any Person other than the
parties hereto any rights or remedies hereunder.
-73-
<PAGE> 79
IN WITNESS WHEREOF, the Partners have executed this Partnership
Agreement as of the date first hereinabove written.
U S WEST NEW VECTOR GROUP, INC.
By:_________________________________
Name:
Title:
AIRTOUCH COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
<PAGE> 80
SCHEDULE 1-A
ATI GROUP
<TABLE>
<CAPTION>
Percentage Interest
--------------------------------
Members of ATI Group General Partner Limited Partner
- -------------------- --------------- ---------------
<S> <C> <C>
AirTouch Communications, Inc. . . . . . . . . . . . . . . . . . . 14.1% 55.9%
---- ----
Total . . . . . . . . . . . . . . . . 14.1% 55.9%
==== ====
</TABLE>
<PAGE> 81
SCHEDULE 1-B
USW GROUP
<TABLE>
<CAPTION>
Percentage Interest
--------------------------------
Members of the USW Group General Partner Limited Partner
- ------------------------ --------------- ---------------
<S> <C> <C>
U S West New Vector Group, Inc. . . . . . . . . . . . . . . . . . 6.0% 24.0%
--- ----
Total . . . . . . . . . . . . . . . . 6.0% 24.0%
=== ====
</TABLE>
<PAGE> 82
EXHIBIT A
PREFACE TO LICENSE AGREEMENT TERM SHEET
The provisions of this Term Sheet represent guidelines and principles
developed and agreed to by the transition teams of USW and ATI on or about July
25, 1994. The parties acknowledge that the License Agreements are subject to the
approval of WMC Partners, L.P., and that only the terms contained in executed
License Agreements will be binding on the parties. When completed, such
Agreements shall generally be consistent with the guidelines and principles set
forth in this Term Sheet, and shall further the goals of ATI and USW of
achieving scale and scope advantages and economies and of the creation of a
national wireless network.
<PAGE> 83
Draft 9/30/95
EXHIBIT B
----------------------------------------
FORM OF TRANSFEREE INVESTMENT AGREEMENT
dated as of __________, 199_
by and between
AIRTOUCH COMMUNICATIONS, INC.,
a Delaware corporation
and
[Transferee],
a _______________ corporation
----------------------------------------
<PAGE> 84
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ATI . . . . . . . . . . . . . 3
2.1. Organization and Qualification . . . . . . . . . . . . . . . . . 3
2.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . 3
2.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4. Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TRANSFEREE . . . . . . . . . . 4
3.1. Organization and Qualification . . . . . . . . . . . . . . . . . 4
3.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . 4
3.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. Ownership of Securities of ATI . . . . . . . . . . . . . . . . . 5
ARTICLE IV COVENANTS OF ATI . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1. Modification of Terms . . . . . . . . . . . . . . . . . . . . . 5
4.2. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V COVENANTS OF TRANSFEREE . . . . . . . . . . . . . . . . . . . . 6
5.1. Standstill Provisions . . . . . . . . . . . . . . . . . . . . . 6
5.2. Transfers; Tender Offers; Suspension of Transfers . . . . . . . 9
ARTICLE VI REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Demand Registration . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Company Registration . . . . . . . . . . . . . . . . . . . . . . 12
6.3. Registration Procedures . . . . . . . . . . . . . . . . . . . . 13
6.4. Conditions to Offerings . . . . . . . . . . . . . . . . . . . . 15
6.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . 16
6.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . 17
6.7. Indemnification; Contribution . . . . . . . . . . . . . . . . . 17
6.8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.9. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . 20
6.10. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII RIGHTS OF FIRST OFFER AND FIRST REFUSAL . . . . . . . . . . . . 20
7.1. Notice of Intent to Transfer . . . . . . . . . . . . . . . . . . 20
7.2. Right of First Offer . . . . . . . . . . . . . . . . . . . . . . 20
7.3. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 23
8.1. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1. Legend; Removal of Legend . . . . . . . . . . . . . . . . . . . 23
9.2. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3. Specific Enforcement . . . . . . . . . . . . . . . . . . . . . . 24
9.4. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . 24
9.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-i-
<PAGE> 85
<TABLE>
<S> <C> <C>
9.6. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 25
9.9. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 26
9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.12. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
-ii-
<PAGE> 86
FORM OF TRANSFEREE INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement"), dated as of ___________, 199_,
by and between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation ("ATI"),
and , a _______________ corporation ("Transferee"),
W I T N E S S E T H:
WHEREAS, Transferee has agreed to acquire a __% partnership interest in WMC
Partners, L.P., a Delaware limited partnership ("WMC") from U S WEST, INC., a
Colorado corporation ("USW"), representing [all/specify percentage if less than
all] of the partnership interest in WMC previously held by USW;
WHEREAS, as a condition precedent to the closing of such acquisition,
Transferee is required to enter into an investment agreement and an agreement of
exchange with ATI;
WHEREAS, concurrently herewith, ATI and Transferee are entering into that
certain Transferee Agreement of Exchange dated as of the date hereof (the
"Transferee Agreement of Exchange");
WHEREAS, upon the terms and subject to the conditions set forth in the
Transferee Agreement of Exchange, under certain circumstances ATI may elect to
cause an exchange, by merger or otherwise (the "Exchange"), of the partnership
interest in WMC to be acquired by Transferee for shares of [Series B
Participating Redeemable -- if Partial Transferee][Series C Participating
Convertible -- if Full Transferee] Preferred Stock of ATI ("Preferred Stock");
and
WHEREAS, in connection with the foregoing, ATI and Transferee desire to set
forth herein certain terms regarding their relationship both before and after
the Exchange;
NOW, THEREFORE, ATI and Transferee agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. (a) As used in this Agreement, the following terms shall
have the following meanings (unless indicated otherwise, all Article and Section
references are to Articles and Sections of this Agreement):
"Affiliate" shall have the meaning specified in Rule 12b-2 under the
Exchange Act, as such rule is currently in effect.
"beneficial ownership" shall have the meaning specified in Rule 13d-3 under
the Exchange Act, as such rule is currently in effect.
"Change of Control" shall mean (i) any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or otherwise) that results
in any Person, including a "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) that includes such Person, acquiring beneficial ownership,
directly or indirectly, of 50% or more of the aggregate voting power of the
Voting Securities of ATI or Transferee, as the case may be; (ii) any transaction
or series of related transactions that results in the transfer, sale or other
disposition by ATI or Transferee, as the case may be, of assets (A) that
represent more than 80% of the total fair market value of its assets on a
proportionate basis immediately prior to such disposition, (B) that generated
more than 80% of its total operating revenues on a proportionate basis in the
preceding fiscal year and (C) that generated more than 80% of its total net
income from operations on a proportionate basis during the preceding fiscal
year; provided, however, that any such
-1-
<PAGE> 87
transaction or series of related transactions shall not be deemed to be a Change
of Control if a majority of the value of the consideration received in exchange
for the assets transferred, sold or otherwise disposed of consists of assets (or
interests in assets) of a like kind or nature; or (iii) when individuals who at
the beginning of any period of two consecutive calendar years constituted the
Board of Directors (together with any new directors whose election to the Board
of Directors or whose nomination for election was approved by a vote of at least
two-thirds of the members of the Board of Directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of the Board of
Directors then in office.
"Common Stock" shall mean ATI's Common Stock, $.01 par value.
"Exchange" shall have the meaning set forth in the fourth recital of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations thereunder, all as
the same shall be in effect from time to time.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated organization or other entity, or a government or agency or
political subdivision thereof.
"Preferred Stock" shall have the meaning set forth in the fourth recital of
this Agreement.
"Rights Agreement" shall mean that certain Rights Agreement between ATI and
the Bank of New York, as Rights Agent, dated as of September 19, 1994, as it may
be amended from time to time, or any successor agreement.
"SEC" shall mean the Securities and Exchange Commission or its successor.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations thereunder, all as the
same shall be in effect from time to time.
"transfer" shall mean, with respect to any Voting Security, a sale,
exchange, transfer or other disposition, whether or not for value, of such
Voting Security or any interest therein, or of any direct or indirect right or
option to acquire beneficial ownership of the same.
"Transferee Agreement of Exchange" shall have the meaning set forth in the
third recital of this Agreement.
"Voting Securities" shall mean any securities of ATI (unless the context
specifically contemplates another issuer) having the ordinary power to vote, in
the absence of contingencies, in the election of directors of ATI.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any entity
as to which 100% of the securities or other ownership interests having power to
elect the board of directors or other persons performing similar functions are
owned directly or indirectly by such Person.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Proposal 5.1(b)
Future Investment Agreement 4.1(a)
</TABLE>
-2-
<PAGE> 88
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Inspectors 6.3(f)
Notice of Intent 7.1
Notice of Election 7.2(b)
Other Investor 4.1(a)
Other Shares 6.2(c)
Permitted Offering 7.1
Records 6.3(f)
Registrable Shares 6.1
Registration Statement 6.1
ROFO Notice 7.2(a)
ROFR Notice 7.3(b)
Spin-off 5.3(d)
Spun-off Person 5.3(d)
Unapproved Offer 5.3(c)
Transferee Response 5.1(b)
1% Purchaser 7.3(b)
</TABLE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ATI
ATI hereby makes the following representations and warranties to Transferee:
2.1. Organization and Qualification. ATI is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and has the
corporate power to own its properties and to carry on its business as now being
conducted.
2.2. Authorization; Enforcement. (a) ATI has full legal right, power and
authority to enter into and perform this Agreement, (b) the execution and
delivery of this Agreement by ATI and the consummation by it of the transactions
contemplated hereby have been duly authorized by it, (c) this Agreement has been
duly authorized, executed and delivered by ATI and (d) this Agreement
constitutes a valid and binding obligation of ATI enforceable against ATI in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar law relating to, or affecting generally the enforcement of, creditors'
rights and remedies and (ii) the remedies of specific performance and injunctive
relief may be subject to general principles of equity.
2.3. No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by ATI of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of ATI pursuant
to any agreement, indenture or instrument to which ATI is a party, or by which
any property or asset of ATI is bound or affected, or result in a violation of
its Certificate of Incorporation or By-laws or any law, rule, regulation, order,
judgment or decree of any court or governmental agency applicable to ATI or by
which any property or asset of ATI is bound or affected. Except for such filings
as may be required by the Exchange Act or as specifically contemplated hereby,
no consent, authorization or order of, or filing or registration with, any court
or governmental agency is required for the execution, delivery and performance
of this Agreement.
2.4. Amendment to Rights Plan. ATI has amended the Rights Agreement so that
Transferee and its Affiliates shall not be deemed to be "Acquiring
-3-
<PAGE> 89
Persons" in connection with their becoming "Beneficial Owners" of "Common
Shares" (as such terms are defined in the Rights Agreement) pursuant to this
Agreement or the Transferee Agreement of Exchange. ATI has furnished to
Transferee a true and correct copy of the Rights Agreement, as so amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE
Transferee hereby makes the following representations and warranties to ATI:
3.1. Organization and Qualification. Transferee is a corporation duly
organized and existing in good standing under the laws of the State of
_____________ and has the corporate power to own its properties and to carry on
its business as now being conducted.
3.2. Authorization; Enforcement. (a) Transferee has full legal right, power
and authority to enter into and perform this Agreement, (b) the execution and
delivery of this Agreement by Transferee and the consummation by it of the
transactions contemplated hereby have been duly authorized by it, (c) this
Agreement has been duly authorized, executed and delivered by Transferee and (d)
this Agreement constitutes a valid and binding obligation of Transferee
enforceable against Transferee in accordance with its terms, except that (i)
such enforcement is subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar law relating to, or affecting
generally the enforcement of, creditors' rights and remedies and (ii) the
remedies of specific performance and injunctive relief may be subject to general
principles of equity.
3.3. No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by Transferee of the transactions contemplated hereby will
not conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of
Transferee pursuant to any agreement, indenture or instrument to which
Transferee is a party, or by which any property or asset of Transferee is bound
or affected, or result in a violation of Transferee's charter documents or
by-laws or any law, rule, regulation, order, judgment or decree of any court or
governmental agency applicable to Transferee or by which any property or asset
of Transferee is bound or affected. Except for such filings as may be required
by the Exchange Act or as specifically contemplated hereby, no consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance of
this Agreement.
3.4. Ownership of Securities of ATI. Other than such rights as may be
conferred on Transferee under this Agreement or the Transferee Agreement of
Exchange, Transferee and its Affiliates do not beneficially own any securities
of ATI.
ARTICLE IV
COVENANTS OF ATI
4.1. Modification of Terms. (a) ATI will provide to Transferee copies of
each agreement that ATI enters into with any Person (other than Transferee, an
ATI employee stock ownership plan, if any, or a Person who is restricted by law
or regulation from holding in excess of 25% of ATI's Voting Securities and other
than underwriting agreements) obligating ATI to transfer to such Person Voting
Securities (or securities convertible or exchangeable by such Person for Voting
Securities) representing 10% or more of the sum of (x) the then outstanding
Voting Securities and (y) Voting Securities to be transferred in connection with
such agreement (or issuable
-4-
<PAGE> 90
upon the conversion or exchange of securities to be so purchased) (each such
agreement a "Future Investment Agreement" and each such Person an "Other
Investor").
(b) Within thirty (30) days after the execution by ATI of a Future
Investment Agreement, ATI shall choose one of the following and by written
notice inform Transferee:
(i) ATI shall offer to amend the terms of Section 5.1(a)(i) to
correspond to the percentage limitation on ownership of Voting Securities
imposed on the Other Investor in such Future Investment Agreement; or
(ii) ATI shall offer to amend the terms of Section 5.1(a) (other than
subparagraph (i) thereof) to provide for the corresponding terms (other than
as to Section 5.1(a)(i)) in their entirety (including the date certain
specified as the expiration date for the standstill provisions) as set forth
in such Future Investment Agreement;
provided that ATI shall choose, and offer to Transferee, the option set forth in
clause (ii) above if the percentage limitation on ownership of Voting Securities
by such Other Investor is less than 20%. If Transferee wishes to accept such
offer, it must do so by written notice to ATI within twenty days after receipt
of ATI's offer. Upon any such acceptance by Transferee, ATI and Transferee shall
execute an agreement confirming such amendment.
4.2. Rights Agreement. ATI will not amend or supplement the Rights Agreement
or adopt a new agreement providing for the issuance of rights or securities
comparable to the Rights Agreement, unless the Rights Agreement as so amended or
supplemented or such new agreement, as the case may be, provides to the same
effect as the amendment described in Section 2.4. ATI further agrees that in the
event of any amendment of the terms of Section 5.1(a) pursuant to Section 4.1
above, it will effect such further amendment of the Rights Agreement as may be
reasonably necessary so that Transferee and its Affiliates shall not be deemed
to be Acquiring Persons by reason of any such amendment of the terms of Section
5.1(a).
ARTICLE V
COVENANTS OF TRANSFEREE
5.1. Standstill Provisions. (a) Transferee covenants to and agrees with ATI
that, except as it may be specifically permitted by this Agreement or the
Transferee Agreement of Exchange, or unless it is specifically invited in
writing to do so by ATI, Transferee will not, and will cause each of its
Affiliates not to, directly or indirectly:
(i) in any way acquire or agree to acquire beneficial ownership of any
securities or any direct or indirect rights or options to acquire beneficial
ownership of any securities of ATI, except pursuant to the Exchange;
(ii) make any public announcement with respect to, or submit to ATI or
any of its directors, officers, representatives, employees, attorneys,
advisers, agents or Affiliates (whether publicly or otherwise) any proposal
for, the acquisition of Voting Securities or for or with respect to any
merger, consolidation or business combination involving ATI or its
Affiliates or for or with respect to any purchase of a substantial portion
of the assets of ATI or its Affiliates, whether or not any parties other
than Transferee and its Affiliates are involved and whether or not such
proposal might require the making of a public announcement by ATI;
-5-
<PAGE> 91
(iii) make, or in any way participate in, any "solicitation" of
"proxies" to vote any Voting Securities or become a "participant" in any
"election contest" (as such terms are defined or used in Regulation 14A
under the Exchange Act, as such Regulation is currently in effect);
(iv) propose any matter for submission to a vote of stockholders of
ATI;
(v) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Voting
Securities of ATI;
(vi) grant any proxy with respect to any Voting Securities to any
Person not approved by ATI;
(vii) deposit any Voting Securities in a voting trust or subject any
Voting Securities to any arrangement or agreement with respect to the voting
of such Voting Securities or other agreement having similar effect;
(viii) take any action which would be reasonably likely to require ATI
to make a public announcement regarding any of the matters specified in this
Section 5.1(a)(i)-(xii); or
(ix) enter into any negotiations, arrangements or understandings with
any third party with respect to any of the foregoing, or any discussions
designed to advise, assist or encourage any third party in connection with
any of the foregoing;
(x) disclose publicly any intention, plan or arrangement inconsistent
with the foregoing;
(xi) request ATI (or any of its officers, directors, representatives,
employees, attorneys, advisors, agents or Affiliates) to waive, amend or
modify any provisions of Section 5.1(a)(i)-(xii); or
(xii) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of ATI.
(b) Notwithstanding any provision of this Section 5.1 to the contrary, in
the event that (i) ATI and any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) enter into an agreement pursuant to which (A) such
Person or group would acquire a majority (calculated by voting power) of the
then outstanding Voting Securities of ATI or the right to appoint a majority of
the directors of ATI, or (B) a majority (calculated by voting power) of the then
outstanding Voting Securities of ATI is to be acquired by any Person or group
(within the meaning of Section 13(d)(3) of the Exchange Act) in a merger,
consolidation, or other business combination (any such event being an
"Acquisition Proposal"), (ii) a bona fide tender or exchange offer by any Person
or group (within the meaning of Section 13(d)(3) of the Exchange Act) (other
than ATI or any wholly-owned Affiliate thereof) which would result, if
consummated in accordance with its terms, in the beneficial ownership by such
Person or group of in excess of 50% (calculated by voting power) of the then
outstanding Voting Securities is approved or recommended by the Board of
Directors of ATI, (iii) in connection with the matters discussed in clause (i)
or (ii), or a tender or exchange offer for greater than 40% of the outstanding
Voting Securities which the Board of Directors of ATI has not approved or
recommended, the Board of Directors of ATI has terminated or amended (or agreed
to terminate or amend) the Rights Agreement or has redeemed (or agreed to
redeem) the Rights issued thereunder, and such action has permitted or will have
-6-
<PAGE> 92
permitted the consummation of such Acquisition Proposal or offer, or a final,
non-appealable court order has declared the Rights Agreement invalid or
otherwise required the redemption of the Rights issued thereunder or (iv) ATI
and any Person enter into an agreement providing for a transaction or series of
related transactions that results in the transfer, sale or other disposition by
ATI of assets (A) that represent more than 80% of the total fair market value of
its assets on a proportionate basis immediately prior to such disposition, (B)
that generated more than 80% of its total operating revenues on a proportionate
basis in the preceding fiscal year and (C) that generated more than 80% of its
total net income from operations on a proportionate basis during the preceding
fiscal year (excepting any such transaction or series of related transactions in
which a majority of the value of the consideration received in exchange for the
assets transferred, sold or otherwise disposed of consists of assets (or
interests in assets) of a like kind or nature), this Section 5.1 shall not
prohibit Transferee (unless acting in concert with such Person) from making
either a competing Acquisition Proposal or a tender or exchange offer pursuant
to which Transferee or its Affiliates would acquire at least the same percentage
(calculated by voting power) of ATI's then outstanding Voting Securities as
would be acquired in such non-Transferee Acquisition Proposal or such
non-Transferee tender or exchange offer (a "Transferee Response"). Transferee
agrees that any Transferee Response (including amendments thereto) will provide
for consideration that is no less favorable to ATI's shareholders than that
being offered pursuant to such non-Transferee Acquisition Proposal or such
non-Transferee tender or exchange offer (taking into account the form of
consideration and the number of shares to be acquired pursuant to such
Transferee Response). In the event that the transactions contemplated by clauses
(i), (ii), (iii) or (iv) shall have been terminated or abandoned after the
Transferee Response, Transferee shall have the ability, subject to the
requirements of the preceding sentence, to amend or modify its response, and to
consummate the transaction contemplated by the Transferee Response or such
amendment or modification, so long as Transferee shall not have terminated or
abandoned its initial response other than as a result of such amendment or
modification. In the event that the transactions contemplated by clauses (i),
(ii), (iii) or (iv) shall have been terminated or abandoned prior to the
Transferee Response, or, if not so terminated or abandoned, in the event
thereafter that such transactions and those contemplated by such Transferee
Response shall have been terminated or abandoned, all of the restrictions
contained in this Section 5.1 shall again be applicable.
(c) For so long as Transferee and its Affiliates beneficially own shares of
Preferred Stock convertible into 5% or more (calculated by voting power) of the
outstanding Voting Securities, neither Transferee nor its Affiliates may (i) act
in concert with any Other Investor with respect to any of the activities set
forth in this Section 5.1 or (ii) transfer any shares of Preferred Stock to any
Other Investor.
5.2. Transfers; Tender Offers; Suspension of Transfers. (a) During the
period ending on July 25, 1999, Transferee and its Affiliates will not, at any
time, directly or indirectly, transfer, or offer to transfer, any Preferred
Stock beneficially owned by them, except as provided by paragraph (b) below.
Thereafter, Transferee and its Affiliates may transfer Preferred Stock only (i)
as provided in paragraph (b), (c) or (d) below; (ii) in transactions in
compliance with the volume limitations and restrictions on manner of sale set
forth in paragraphs (e) and (f) of Rule 144 promulgated under the Securities Act
(whether or not such paragraphs by their terms would apply to such
transactions), as such Rule exists on the date hereof; (iii) in privately
negotiated or other transactions, or pursuant to the registration rights set
forth in Article VI of this Agreement other than as described in the following
clause (iv); or (iv) pursuant to the registration rights set forth in Article VI
of this Agreement, in a firm commitment underwritten public offering managed by
a nationally recognized investment banking firm and satisfying the conditions
set forth in Section 6.4(a) hereof.
-7-
<PAGE> 93
In connection with any transfer permitted under clauses (ii), (iii) and (iv)
of this paragraph (a), the following shall apply:
(w) the aggregate number of shares transferred by Transferee and its
Affiliates pursuant to clauses (ii), (iii) and (iv) shall not exceed, in any
twelve-month period, one-half of the aggregate number of shares of Preferred
Stock issued to Transferee pursuant to the Exchange;
(x) Transferee and its Affiliates may not make any transfer pursuant to
clause (ii), (iii) or (iv) unless the transferee, together with its
Affiliates and any "group" (within the meaning of Section 13(d) of the
Exchange Act) of which such transferee or any Affiliate is a part, would
not, after such transfer, beneficially own Voting Securities representing in
excess of 4.9% of the then outstanding Voting Securities;
(y) no transfer of shares of Preferred Stock convertible into more than
2.5% of the total number of Voting Securities then outstanding shall be made
in any single transaction or series of related transactions to any Person or
group (within the meaning of Section 13(d) of the Exchange Act); and
(z) no transfer of shares of Preferred Stock convertible into more than
1% of the then outstanding Voting Securities shall be made to any Person or
group unless Transferee believes in good faith after due inquiry that such
Person or group would be eligible with respect to such Voting Securities to
file a Statement on Schedule 13G pursuant to Rule 13d-1(b)(1) under the
Exchange Act (without regard to the beneficial ownership threshold set forth
in such Rule), as such Rule is presently in effect.
(b) Transferee may transfer shares of Preferred Stock beneficially owned by
it to a Wholly Owned Subsidiary of Transferee, provided that such Wholly Owned
Subsidiary also shall agree in writing to be bound by the terms of this
Agreement. No such transfer shall be deemed to relieve Transferee from, and
Transferee shall be liable for the performance by such transferee of, its
obligations under this Agreement. In the event of any such transfer, Transferee
shall act as agent for any and all such Wholly Owned Subsidiaries in connection
with the giving of any and all notices under this Agreement. The Preferred Stock
held by any Wholly Owned Subsidiary of Transferee shall be transferred back to
Transferee or another Wholly Owned Subsidiary of Transferee prior to any
transaction that, if consummated, would result in such Wholly Owned Subsidiary
ceasing to be such.
(c) In the event of (i) a tender or exchange offer for Voting Securities
commenced by ATI (or an Affiliate of ATI) or (ii) a tender or exchange offer for
Voting Securities commenced by a third party, (x) in connection with which, ATI
has terminated or amended (or agreed to terminate or amend) the Rights Agreement
or redeemed (or agreed to redeem) the Rights issued thereunder and such action
has permitted or will have permitted the consummation of such offer, or a final,
non-appealable court order has declared the Rights Agreement invalid or
otherwise required the redemption of the Rights issued thereunder or (y) which
ATI's Board of Directors has otherwise approved, Transferee and its Affiliates
shall be permitted to tender or sell the Voting Securities then owned by them
upon conversion of the Preferred Stock in accordance with the terms of any such
offer without restriction hereunder.
In the event that a tender or exchange offer not described in the
immediately preceding paragraph is commenced by any Person or group (within the
meaning of Section 13(d)(3) of the Exchange Act) and such offer would result, if
consummated in accordance with its terms, in the beneficial ownership by such
Person or group of in excess of 50% (calculated by voting
-8-
<PAGE> 94
power) of the Voting Securities then outstanding (an "Unapproved Offer"),
Transferee and its Affiliates shall have the right to tender or sell the Voting
Securities then owned by them upon conversion of the Preferred Stock to the
offerer pursuant to such offer if the Board of Directors of Transferee, upon the
advice of legal counsel and financial advisers, reasonably believes in good
faith, taking into account the conditions of the offer, that such tender offer
will result in shares being purchased (without any extension of the then
scheduled expiration date and without giving effect to shares that might be
tendered by Transferee and its Affiliates); provided, however, that prior to
tendering or offering for exchange any such Voting Securities in such Unapproved
Offer, Transferee first shall have offered to ATI not later than seventy-two
hours prior to the expiration of such Unapproved Offer the right to purchase for
the same consideration (or cash equivalent) that number of such Voting
Securities which, if tendered or offered for exchange, would be purchased in
such Unapproved Offer, which purchase shall be closed not later than the second
business day following the consummation of such Unapproved Offer; and provided
further, that Transferee may tender or offer for exchange such Voting Securities
in such Unapproved Offer in the event that ATI shall have failed within the
later of forty-eight hours after receipt of such notice or twenty-four hours
prior to the expiration of such Unapproved Offer to provide Transferee with
reasonable assurance that it shall be ready, willing and able to consummate such
purchase.
(d) Transferee may spin off to its shareholders a Wholly Owned Subsidiary
of Transferee (the "Spun-off Person") the assets of which include all, but not
less than all, of the Voting Securities beneficially owned by Transferee and its
Affiliates (the "Spin- off") in a transaction qualifying under Section 355 of
the Internal Revenue Code of 1986, as amended, if all of the following
conditions are satisfied:
(i) No more than 240 days nor less than 180 days prior to the
Spin-off, Transferee shall advise ATI of its plan to effect the Spin-off and
thereafter shall promptly provide ATI with such information regarding the
Spun-off Person as ATI shall reasonably request; provided that such
information shall promptly be updated if the financial condition of the
Spun-off Person changes in any material respect after delivery of such
information;
(ii) Prior to the Spin-off, neither Transferee, any Affiliate of
Transferee nor the Spun-off Person shall have entered into any agreement, or
formulated any plan or intention, with respect to any merger or other
business combination transaction involving the Spun-off Person and a party
other than ATI or an Affiliate of ATI;
(iii) The Fair Market Value of the Voting Securities to be beneficially
owned by the Spun-off Person shall not equal or exceed 50% of the Fair
Market Value of the Spun-off Person; and
(iv) The Spun-off Person shall have executed an investment agreement
with ATI substantially in the form of this Agreement; provided, however,
that any such agreement shall terminate on the tenth anniversary of the date
of this Agreement.
(e) All transfers of Voting Securities held by Transferee and its
Affiliates other than transfers permitted by Sections 5.3(a)(ii), (b), (c) or
(d) shall be subject to Article VII of this Agreement.
(f) Any transfer of Voting Securities in violation of this Section 5.3 may
be suspended on the books of ATI.
-9-
<PAGE> 95
ARTICLE VI
REGISTRATION RIGHTS
6.1. Demand Registration. ATI agrees that upon the written request of
Transferee it will file a registration statement under the Securities Act (a
"Registration Statement") as to the number of shares of Common Stock issuable
upon conversion of the Preferred Stock then held by Transferee or its Affiliates
(the "Registrable Shares") specified in such request, provided that ATI shall
not be required to file more than such number of Registration Statements that
become effective and remain effective for the period referred to in Section
6.3(j) equal to the quotient (rounded up to the nearest whole number) obtained
by dividing (i) the product of (A) the average closing price per share of the
Common Stock for the thirty business days immediately preceding the Notice Date
(as defined in the Transferee Agreement of Exchange) and (B) the number of
shares of Common Stock issuable upon conversion of the Preferred Stock issued in
the Exchange, by (ii) $750 million, and further provided that ATI shall not be
required to file a Registration Statement if ATI delivers to Transferee an
opinion, in form and substance reasonably satisfactory to Transferee and its
counsel, to the effect that the Registrable Shares are freely transferable under
Section 4(1) of the Securities Act without regard to any volume or other
restrictions.
6.2. Company Registration. (a) If ATI shall determine to register any Common
Stock either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a transaction described in Rule 145 promulgated under the
Securities Act, or a registration on any registration form that does not permit
secondary sales, ATI will:
(i) promptly give to Transferee written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as
set forth in section 7.2(b) below, and in any underwriting involved therein,
all the Registrable Shares specified in a written request made by Transferee
and received by ATI within seven (7) days after the written notice from ATI
described in clause (i) above is mailed or delivered by ATI. Such written
request may specify all or a part of Transferee's Registrable Shares.
(b) If the registration of which ATI gives notice is for a registered
public offering involving an underwriting, ATI shall so advise Transferee as a
part of the written notice given pursuant to paragraph (a)(i) above. In such
event, the right of Transferee to registration pursuant to this Section 6.2
shall be conditioned upon Transferee's participation in such underwriting and
the inclusion of Transferee's Registrable Shares in the underwriting to the
extent provided herein. Transferee shall (together with ATI and the other
holders of securities of ATI with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by ATI.
Notwithstanding any other provision of this Section 6.2, if the
representative of the underwriters advises ATI in writing that marketing factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Shares from, or limit the number of Registrable Shares to be
included in, the registration and underwriting. ATI shall so advise Transferee,
and the number of shares of Common Stock that are entitled to be included in the
registration and underwriting shall be allocated first to
-10-
<PAGE> 96
ATI for securities being sold for its own account and thereafter as set forth in
paragraph (c) below.
(c) In any circumstance in which all of the Registrable Shares and other
shares of Common Stock with registration rights (the "Other Shares") requested
to be included in a registration on behalf of Transferee or other selling
shareholders cannot be so included as a result of limitations or the aggregate
number of Registrable Shares and Other Shares that may be so included, the
number of Registrable Shares and Other Shares that may be so included shall be
allocated among Transferee and other selling shareholders requesting inclusion
of shares pro rata on the basis of the number of Registrable Shares and Other
Shares that are held by Transferee and other selling shareholders, provided,
however, that such allocation shall not operate to reduce the aggregate number
of Registrable Shares and Other Shares to be included in such registration. If
Transferee or any other selling shareholder does not request inclusion of the
maximum number of Registrable Shares and Other Shares allocated to it pursuant
to the above-described procedure, the remaining portion of its allocation shall
be reallocated among Transferee and other selling shareholders whose allocations
did not satisfy their requests pro rata on the basis of the number of
Registrable Shares and Other Shares which are held by Transferee and other
selling shareholders, and this procedure shall be repeated until all of the
Registrable Shares and Other Shares which may be included in the registration on
behalf of Transferee and other selling shareholders have been so allocated.
6.3. Registration Procedures. In the case of each registration involving
Registrable Shares pursuant to this Article VI, ATI will:
(a) furnish to Transferee, prior to the filing of a Registration Statement,
copies of such Registration Statement as it is proposed to be filed, and
thereafter such number of copies of such Registration Statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such Registration Statement (including each preliminary
prospectus) and such other documents in such quantities as Transferee reasonably
may request from time to time in order to facilitate the disposition of such
Registrable Shares;
(b) use all reasonable efforts to register or qualify the offer and sale of
such Registrable Shares under such other securities or blue sky laws of such
jurisdiction as Transferee reasonably requests and do any and all other acts and
things as reasonably may be necessary or advisable to enable Transferee to
consummate the disposition in such jurisdictions of the Registrable Shares owned
by Transferee; provided that ATI will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection (b), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(c) use all reasonable efforts to cause such Registrable Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of ATI to enable
Transferee to consummate the disposition of such Registrable Shares;
(d) notify Transferee, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such Registration Statement or
amendment contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and ATI will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any material
-11-
<PAGE> 97
fact required to be stated therein or necessary to make the statements therein
not misleading;
(e) enter into customary agreements (including an underwriting agreement in
customary form and an indemnification agreement with Transferee in customary
form) and take such other actions as reasonably are required in order to
expedite or facilitate the disposition of such Registrable Shares;
(f) make available for inspection by Transferee, any underwriter
participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by Transferee or any such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of ATI (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the officers, directors and employees of ATI
to supply all information reasonably requested by any such Inspector in
connection with such registration; provided that (i) Records and information
obtained hereunder shall be used by such persons only to exercise their due
diligence responsibility and (ii) Records or information which ATI determines,
in good faith, to be confidential shall not be disclosed in such Registration
Statement or otherwise by the Inspectors unless (x) the disclosure of such
Records or information is necessary to avoid or correct a misstatement or
omission in the Registration Statement or (y) the release of such Records or
information is ordered pursuant to a subpoena or other order from a court or
governmental authority of competent jurisdiction. Transferee shall use its best
efforts, prior to any such disclosure, to inform ATI that such disclosure is
necessary to avoid or correct a misstatement or omission in the Registration
Statement. Transferee further agrees that it will, upon learning that disclosure
of such Records or information is sought in a court or by a governmental
authority, give notice to ATI and allow ATI, at the expense of ATI, to undertake
appropriate action to prevent disclosure of the Records or information deemed
confidential;
(g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for ATI in customary form and covering such
matters of the type customarily covered by comfort letters as Transferee
reasonably requests;
(h) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve months beginning within three months after the effective date
of such Registration Statement, which earnings statement shall satisfy the
provisions of section 11(a) of the Securities Act and Rule 158 thereunder;
(i) use all reasonable efforts to cause all such Registrable Shares to be
listed on each securities exchange on which similar securities issued by ATI are
listed; and
(j) use its best efforts (i) to have any registration of the Registrable
Shares declared effective as promptly as practicable after the filing thereof
and (ii) to keep such Registration Statement effective for a period (up to three
months) sufficient to complete the distribution of the Registrable Shares. ATI
further agrees to supplement or make amendments to the Registration Statement,
if required by (x) the registration form utilized by ATI for such registration
or by the instructions applicable to such registration form, (y) the Securities
Act or the rules and regulations thereunder or (z) Transferee (or any
underwriter for Transferee) with respect to information concerning Transferee or
such underwriter or the plan of distribution to be utilized with respect to the
Registrable Shares. ATI agrees to furnish to Transferee copies of any such
supplement or amendment prior to its being used or filed with the SEC.
-12-
<PAGE> 98
6.4. Conditions to Offerings. The obligations of ATI to take the actions
contemplated by Section 6.1 with respect to an offering of Registrable Shares
shall be subject to the following conditions:
(a) if the Registrable Shares are to be transferred pursuant to Section
5.3(a)(iv), Transferee shall have the right to select the investment banker or
bankers and, if applicable, lead manager or managers to administer the offering
and its or their counsel, provided that such lead manager or managers and such
counsel must be reasonably satisfactory to ATI; with respect to any such
transfer, Transferee and such investment banker(s) or manager(s) shall use best
efforts to effect as wide a distribution of such Registrable Shares as is
reasonably practicable and to prevent any Person who, together with its
Affiliates and any "group" (within the meaning of Section 13(a)(3) of the
Exchange Act) of which such Person or any Affiliate is a party, from purchasing
in excess of 15% of the Registrable Shares being registered. ATI may require
Transferee to furnish to ATI such information regarding Transferee or the
distribution of the Registrable Shares as ATI from time to time may reasonably
request in writing, in each case only as required by the Securities Act or the
rules and regulations thereunder or under state securities or blue sky laws.
(b) in the event that the Registrable Shares are to be transferred pursuant
to Section 5.3(a)(iii), such Registrable Shares shall be transferred only to a
Person that Transferee believes in good faith after due inquiry is eligible with
respect to the Registrable Shares to file a Statement on Schedule 13G pursuant
to Rule 13d-1(b)(i) under the Exchange Act (without regard to the beneficial
ownership threshold set forth in such Rule), as such Rule is currently in
effect. Transferee shall have the right to select the investment banker or
bankers and, if applicable, the lead manager or managers to administer the
offering and its or their counsel, provided that such lead manager or managers
and such counsel must be reasonably satisfactory to ATI.
(c) there shall not have been an offering registered pursuant to Section
6.1 of this Agreement within the immediately preceding six months; and
(d) Transferee shall conform to all requirements of the Securities Act and
the Exchange Act applicable to it with respect to the offering and sale of such
Registrable Shares and shall advise each underwriter, broker or dealer through
which any of such Registrable Shares are offered that such Registrable Shares
are part of a distribution that is subject to the prospectus delivery
requirements of the Securities Act.
Transferee agrees that, upon receipt of any notice from ATI of the happening
of any event of the kind described in Section 6.3(d) of this Agreement,
Transferee will forthwith discontinue disposition of Registrable Shares pursuant
to the registration covering such Registrable Shares until Transferee's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
6.3(a) of this Agreement.
6.5. Additional Conditions. (a) ATI's obligations pursuant to Section 6.1
shall be suspended if (i) the fulfillment of such obligations would require ATI
to make a disclosure that would, in the reasonable good faith judgment of ATI's
Board of Directors, be detrimental to ATI and premature and the Board of
Directors of ATI concludes, as a result, that it is essential to defer the
filing of the registration statement at such time, (ii) ATI has filed or
proposes to file a registration statement with respect to any of its securities
to be distributed in an underwritten public offering and it is advised by its
lead or managing underwriter that an offering by Transferee of Registrable
Shares would materially adversely affect the distribution of such securities,
provided that ATI is actively employing, or upon such proposed filing actively
employs, all reasonable efforts to cause any such filed registration statement
to become effective, or (iii) the fulfillment of such obligations would require
ATI to prepare
-13-
<PAGE> 99
financial statements not required to be prepared for ATI to comply with its
obligations under the Exchange Act at the time that the registration statement
is proposed to be filed. Such obligations shall be reinstated (x) in the case of
clause (i) above, upon the making of such disclosure by ATI (or, if earlier,
when such disclosure would either no longer be necessary for the fulfillment of
such obligations or no longer be detrimental), (y) in the case of clause (ii)
above, upon the conclusion of any period during which ATI would not, pursuant to
the terms of its underwriting arrangements, be permitted to sell Registrable
Securities for its own account and (z) in the case of clause (iii) above, as
soon as it would no longer be necessary to prepare such financial statements to
comply with the Securities Act. The period during which Transferee is required
to sell its Registrable Shares pursuant to Section 6.3(j) shall be tolled for
the duration of any suspension pursuant to this paragraph (a).
(b) In connection with any distribution pursuant to Section 5.3(a)(iv), the
number of Registrable Shares to be registered pursuant to Section 6.1 of this
Agreement shall be reduced to the extent that ATI is advised in writing by an
investment banker of national standing that the sale of all of the Registrable
Shares requested to be registered by Transferee would materially and adversely
affect the market price of ATI's equity securities. If the number of shares
registered is reduced pursuant to this paragraph (b) by more than 50% of the
number requested to be registered by Transferee, the Registration Statement
relating to such reduced number shall not count as one of the Registration
Statements available to Transferee under Section 6.1.
6.6. Registration Expenses. All expenses incident to the performance of or
compliance with this Agreement by ATI, including, without limitation, all fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Shares), printing expenses, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing of the Registrable Shares to be registered on each securities exchange
on which similar securities issued by ATI are then listed, fees and
disbursements of counsel for ATI and its independent certified public
accountants (including the expenses of any comfort letters required by or
incident to such performance), securities acts liability insurance (if ATI
elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained by ATI in connection with such registration and the
fees and expenses of other persons retained by ATI will be borne by ATI.
Notwithstanding anything in this Section 6.6 to the contrary, ATI will not have
any responsibility for any registration or filing fees payable under any federal
or state securities or blue sky laws or for any of the expenses of Transferee
incurred in connection with any registration hereunder including, without
limitation, underwriting fees, discounts and commissions and transfer taxes, if
any, attributable to the sale of Transferee's Registrable Securities, counsel
fees of Transferee and travel costs.
6.7. Indemnification; Contribution.
(a) Indemnification by ATI. ATI agrees to indemnify, to the fullest extent
permitted by law, Transferee (and any Affiliate thereof holding Registrable
Shares), each person who controls Transferee or such Affiliate (within the
meaning of either the Securities Act or the Exchange Act), and their respective
directors and officers against any and all losses, claims, damages, liabilities
and expenses (including attorneys' fees) caused by any untrue or alleged untrue
statement of material fact contained in any Registration Statement, prospectus
or preliminary prospectus (each as amended and/or supplemented, if ATI shall
have furnished any amendments or supplements thereto), or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circum-
-14-
<PAGE> 100
stances under which they were made) not misleading; provided that ATI shall not
be required to indemnify Transferee or such Affiliate, such controlling persons
or their respective officers or directors for any losses, claims, damages,
liabilities or expenses resulting from any such untrue statement or omission if
such untrue statement or omission is made in reliance on and conformity with any
information with respect to Transferee or its Affiliates or the underwriters
furnished to ATI by Transferee or its Affiliates expressly for use therein; and
provided further, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not inure to the benefit
of Transferee or such Affiliate, if the liability or expense results from the
fact that a copy of the prospectus was not sent or given to such person at or
prior to the written confirmation of sale of such Registrable Shares to such
person as required by the Securities Act, and if the untrue statement or
omission has been corrected in the prospectus unless such failure to deliver the
prospectus was a result of noncompliance by ATI with its obligations under
Section 6.3(a) hereof. In connection with an underwritten offering, ATI will
indemnify each underwriter thereof, the officers and directors of such
underwriter, and each person who controls such underwriter (within the meaning
of either the Securities Act or Exchange Act) to the same extent as provided
above with respect to the indemnification of Transferee; provided that such
underwriter agrees to indemnify ATI to the same extent as provided below with
respect to the indemnification of ATI by Transferee.
(b) Indemnification by Transferee. In connection with any registration in
which Transferee is participating, Transferee will furnish to ATI in writing
such information with respect to Transferee and its Affiliates as ATI reasonably
requests for use in connection with any such registration, prospectus, or
preliminary prospectus and agrees to indemnify ATI, its directors, its officers
who sign the Registration Statement and each person, if any, who controls ATI
(within the meaning of either the Securities Act or of the Exchange Act) to the
same extent as the foregoing indemnity from ATI to such holder, but only with
respect to information relating to such holder furnished to ATI in writing by
Transferee expressly for use in the Registration Statement, the prospectus, any
amendment or supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to paragraph (a) or
(b) above, such person (hereinafter called the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the "indemnifying party") in writing and the indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and the indemnified party
shall have been advised by counsel that representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties, and that
all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the indemnified parties, such firm shall be
designated in writing by the indemnified parties. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
-15-
<PAGE> 101
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the third sentence of this
paragraph (c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not either
have reimbursed the indemnified party in accordance with such request or
reasonably objected in writing, on the basis of the standards set forth herein,
to the propriety of such reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 6.7
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 6.7, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in paragraph (c) above, any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6.7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
paragraphs (a) and (b) above without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this paragraph (d).
6.8. Rule 144. ATI covenants that it will file the reports required to be
filed by it under the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and it will take such further action as Transferee may
reasonably request, all to the extent required from time to time to enable
Transferee to sell Common Stock issuable upon conversion of the Preferred Stock
without registration under the Securities Act within the
-16-
<PAGE> 102
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC. Upon the request of Transferee, ATI will deliver
to Transferee a written statement as to whether it has complied with such
requirements.
6.9. Certain Limitations. The rights of Transferee under this Article VI
are subject to Sections 5.3(a), 7.1, 7.2 and 7.3.
6.10. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In the event that ATI shall propose to enter into an agreement of
merger, consolidation or other business combination with any Person which has a
class of equity securities having substantially the same rights as the Common
Stock (including, but not limited to, voting, dividend, liquidation and
redemption rights) and in connection with such agreement ATI will no longer have
a class of equity securities having substantially the same rights as the Common
Stock registered with the SEC pursuant to Section 12(b) or 12(g) of the Exchange
Act, ATI hereby covenants and agrees with Transferee that it will cause such
Person to assume the rights and obligations of ATI set forth in this Article VI
and in Article VII (as they relate to Article VI), to the full extent set forth
herein.
ARTICLE VII
RIGHTS OF FIRST OFFER AND FIRST REFUSAL
7.1. Notice of Intent to Transfer. Transferee shall give written notice (a
"Notice of Intent") to ATI at such time as it first forms a bona fide intention
to transfer, within the next twelve months, Voting Securities issuable upon
conversion of the Preferred Stock then held by Transferee or its Affiliates in
transactions permitted by clauses (iii) or (iv) of Section 5.3(a) (any
registered public offering permitted by Section 5.3(a)(iii) or (iv) being
referred to hereinafter as a "Permitted Offering"). Transferee shall not be
permitted to effect any such transfer until 90 days after the delivery of such
Notice of Intent. Transferee shall include in such Notice of Intent all
additional information required to be included in a ROFO Notice or ROFR Notice
(as defined below) that reasonably can be provided at the time the Notice of
Intent is delivered. Transferee shall be under no obligation to send more than
one such Notice of Intent.
7.2. Right of First Offer. Any proposed transfer by Transferee of Voting
Securities issuable upon conversion of the Preferred Stock in a Permitted
Offering pursuant to Section 5.3(a)(iv) shall be subject to a right of first
offer on the part of ATI, as follows:
(a) Transferee shall deliver to ATI a notice (a "ROFO Notice") 10 days
prior to the delivery of a request pursuant to Section 6.1(a) to file a
registration statement, which ROFO Notice shall set forth, among other things:
(i) the identity of the prospective managing underwriter for the proposed
offering, (ii) the proposed price per share to public and net proceeds per share
to Transferee, (iii) the number of shares of Common Stock issuable upon
conversion of the Preferred Stock to be registered for sale, (iv) the identity
(if known) of any Person that has expressed an interest in purchasing in excess
of 1% of the Common Stock issuable upon conversion of the Preferred Stock in the
proposed offering, (v) any other material terms and conditions of the proposed
offering, (vi) the closing date for the proposed offering (which date shall not
be less than 30 days from the date on which the ROFO Notice is delivered), and
(vii) a statement from the managing underwriter that it is highly confident that
the proposed offering can be underwritten on the terms and conditions set forth
in the ROFO Notice. The ROFO Notice shall constitute an irrevocable offer to
ATI, upon the terms specified therein, to purchase the shares of Common Stock
issuable upon conversion of the Preferred Stock.
-17-
<PAGE> 103
(b) ATI may elect, at its option, to purchase all, but not less than all,
of the Registrable Shares referred to in the ROFO Notice at a price per share
equal to the net proceeds per share referred to in the ROFO Notice by delivering
to Transferee written notice of its election (a "Notice of Election") within 10
days after receipt of the ROFO Notice. Such Notice of Election shall constitute
a binding obligation on the part of ATI, subject to standard terms and
conditions for a stock purchase agreement between an issuer and a significant
shareholder, to purchase such Voting Securities. Such Notice of Election shall
include the proposed date for the closing of the purchase, which shall be no
later than 21 days following the delivery of such Notice of Election. ATI may
designate a third party to exercise its right of first offer.
(c) If ATI or its designee does not exercise the foregoing right of first
offer within such 10-day period, Transferee may proceed with the proposed
offering as described in the ROFO Notice. Such offering must be closed within 90
days after the date the Registration Statement is filed with the SEC and the
price per share to the public and the net proceeds per share to Transferee must
equal or exceed such terms as set forth in ROFO Notice. Transferee shall, and
shall cause its managing underwriters to, use best efforts to cause the filing
of the Registration Statement and the closing of the offering pursuant thereto
to occur as quickly as possible. If the offering is not completed within such
90-day period or if market conditions cause the managing underwriter to reduce
the proposed price per share to the public or the net proceeds to Transferee or
otherwise to materially revise the terms set forth in the ROFO Notice,
Transferee shall promptly so notify ATI and ATI shall again have a right of
first offer pursuant to paragraph (b) above with respect to the shares of Common
Stock issuable upon conversion of the Preferred Stock referred to in the ROFO
Notice, upon the revised terms, except that such new right must be exercised
within three business days after such notification.
7.3. Right of First Refusal. Any proposed transfer by Transferee of Common
Stock issuable upon conversion of the Preferred Stock pursuant to Section
5.3(a)(iii) shall be subject to a right of first refusal on the part of ATI, as
follows:
(a) In the event of a transfer (or series of related transfers) which is
not a Permitted Offering and involves in the aggregate less than 1% of the then
outstanding Voting Securities, ATI shall have no right of first refusal.
(b) In all other cases, Transferee shall deliver to ATI a notice (a "ROFR
Notice") at least four business days prior to (x) in the case of a Permitted
Offering, the delivery of a request to file a registration statement pursuant to
Section 6.1(a), or (y) in all other cases the execution of a stock purchase
agreement or other action committing Transferee to such transfer. Such ROFR
Notice shall set forth (A) the identities of each proposed transferee that,
together with its Affiliates and any group (within the meaning of Section
13(d)(3) of the Exchange Act) of which such transferee or any Affiliate is a
part, proposes to purchase 1% or more of the then outstanding Voting Securities
(a "1% Purchaser") and the total number of shares such 1% Purchaser proposes to
acquire, (B) the aggregate number of Voting Securities to be transferred to all
transferees, (C) the proposed price per share at which the Voting Securities are
to be transferred, and the net proceeds per share to Transferee therefrom, and
(D) any other material terms and conditions of the proposed transfer. In the
case of a Permitted Offering, such ROFR Notice shall also contain the
information specified in clauses (vi) and (vii) of Section 7.2(a). The ROFR
Notice shall constitute an irrevocable offer to sell such Voting Securities to
ATI upon the terms specified therein.
(c) In the case of other than a Permitted Offering, ATI may elect to
purchase (x) with respect to non-1% Purchasers, all, but not less than all, of
the Voting Securities referred to in the ROFR Notice which are to be
-18-
<PAGE> 104
transferred to such non-1% Purchasers, or (y) any or all of the blocks to be
transferred to 1% Purchasers or (z) any combination of (x) and (y).
(d) In the case of a Permitted Offering, ATI may elect to purchase (x) with
respect to non-1% Purchasers, all but not less than all, of the Voting
Securities referred to in the ROFR Notice which are to be sold to such non-1%
Purchasers, (y) one or more of the blocks to be transferred to 1% Purchasers
provided that, unless ATI effects the purchase described in clause (x) above,
ATI must leave at least one such block unpurchased, or (z) any combination of
(x) and (y).
(e) Any election by ATI described in paragraphs (c) or (d) above shall be
upon the terms and conditions set forth in the ROFR Notice and shall be effected
by sending to Transferee a Notice of Election within four business days after
receipt of the ROFR Notice. Such Notice of Election shall constitute a binding
obligation, subject to standard terms and conditions for a stock purchase
agreement between an issuer and a significant shareholder, to purchase the
specified amount of Voting Securities (at a price per share equal to the net
proceeds per share referred to in the ROFR Notice). Such Notice of Election also
shall include the proposed date for the closing of the purchase, which shall be
no later than 21 days following the delivery of such Notice of Election. ATI may
designate a third party to exercise its right of first refusal.
(f) If ATI or its designee does not exercise its right of first refusal
within such four-day period, Transferee may proceed with the proposed transfer
described in the ROFR Notice. Such transfer must be closed within 30 days after
the date the ROFR Notice is delivered (with respect to other than Permitted
Offerings), and within 90 days after the Registration Statement is filed with
the SEC, with respect to Permitted Offerings, and the price per share and the
net proceeds per share to Transferee must equal or exceed such terms set forth
in the ROFR Notice. Transferee shall, and shall cause any lead manager or
managing underwriter to, use best efforts to cause the filing of the
Registration Statement and the closing of the offering pursuant thereto to occur
as quickly as possible. If the proposed price per share or net proceeds per
share are less than those set forth in the ROFR Notice, Transferee shall
promptly so notify ATI and ATI shall again have a right of first refusal
pursuant to this Section 7.3 with respect to the Voting Securities referred to
in the ROFR Notice, upon the revised terms, except such that new right must be
exercised within three business days after such notification.
ARTICLE VIII
TERM OF AGREEMENT
8.1. Term of Agreement. The term of this Agreement shall be until the
earlier of (a) the date, following the consummation of the Exchange or the
termination of the Transferee Agreement of Exchange, when Transferee and its
Affiliates cease to beneficially own shares of Preferred Stock convertible into
at least 5% of the total voting power of the then outstanding Voting Securities
and (b) July 25, 2004; provided, however, that the provisions of Article V and
Article VII shall irrevocably terminate upon any Change of Control of ATI.
Upon the expiration of the term of this Agreement, all further obligations
of the parties hereunder shall terminate, except that (i) if there shall have
been a Change of Control of Transferee prior to the expiration of the term of
this Agreement, the agreements set forth in Sections 5.1(a), 5.2 and 5.3 and
Articles VII and IX shall remain in effect until the earlier of (A) a change of
Control of ATI and (B) the later of (x) the expiration of the term of this
Agreement and (y) four years from the date of the Change of Control of
Transferee, (ii) the agreement set forth in Section 5.1(c) shall survive
indefinitely, (iii) the rights in Article VI shall survive until the 10th
anniversary of the Effective Time or the Closing Date (as each are
-19-
<PAGE> 105
defined in the Transferee Agreement of Exchange), as the case may be, and (iv)
nothing herein shall relieve any party from liability for any breach hereof.
ARTICLE IX
MISCELLANEOUS
9.1. Legend; Removal of Legend. (a) All certificates evidencing shares of
Preferred Stock beneficially owned by Transferee shall have the following
legend, which shall remain on such certificates until such time as the
securities represented by such certificates are no longer subject to the
restrictions of this Agreement:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN INVESTMENT
AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER SET FORTH THEREIN) DATED
AS OF ________________, BETWEEN ATI AND [TRANSFEREE] AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF ATI.
(b) Any legend endorsed on a certificate pursuant to paragraph (a) shall be
removed if the Common Stock issuable upon conversion of the shares of Preferred
Stock represented by such certificate shall have been effectively transferred in
compliance with clause (ii), (iii) or (iv) of the second sentence of Section
5.3(a) or all obligations of Transferee under Articles V and VII of this
Agreement have terminated, or a Change of Control of ATI has occurred.
9.2. Severability. If any term, provision, covenant or restriction of this
Agreement is determined to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
9.3. Specific Enforcement. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
9.4. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
Transferee contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein
or therein, neither ATI nor Transferee makes any representation, warranty,
covenant or undertaking with respect to such matters. This Agreement may be
amended only by an agreement in writing executed by the parties hereto. The
parties hereto may amend this Agreement without notice to or the consent of any
third party.
9.5. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) when personally
delivered or transmitted by telecopier on a business day during normal business
hours where such notice is to be received at the address or number designated
below or (b) on the business day following the date of mailing by overnight
courier, fully prepaid, addressed to such address, whichever shall first occur.
The addresses for such communications shall be:
-20-
<PAGE> 106
If to ATI: AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Telecopier: (415) 658-2298
Attention: Margaret G. Gill, Esq.
Senior Vice President, Legal and
External Affairs
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 983-1200
Attention: Nathaniel M. Cartmell III
If to Transferee:
With a copy to:
Any party hereto may from time to time change its address for notices under this
Section 9.5 by giving at least 10 days' notice of such changed address to the
other party hereto.
9.6. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
9.7. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
9.8. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and legal representatives.
The parties hereto may amend this Agreement without notice to or the consent of
any third party. Neither ATI nor Transferee shall assign this Agreement or any
rights hereunder without the prior written consent of the other (which consent
may be withheld for any reason in the sole discretion of the party from whom
consent is sought); provided, however, that Transferee may assign its rights
(but not its obligations) under this Agreement to any Wholly Owned Subsidiary of
Transferee which agrees in writing to become bound by the terms of this
Agreement, but no such assignment or obligation by Transferee shall release
Transferee, and Transferee shall remain liable for the performance by such
assignee of, its obligations hereunder.
9.9. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
9.10. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
-21-
<PAGE> 107
9.11. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
9.12. Arbitration. The parties agree to submit their disputes to arbitration
in accordance with the Arbitration Agreement dated the date hereof between ATI
and Transferee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS, INC.
By __________________________________
Name:
Title:
[TRANSFEREE]
By __________________________________
Name:
Title:
-22-
<PAGE> 108
Draft 9/30/95
EXHIBIT C
FORM OF FULL TRANSFEREE AGREEMENT OF EXCHANGE
THIS AGREEMENT OF EXCHANGE (this "Agreement"), dated as of ____________,
199_, by and between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation
("ATI"), and [TRANSFEREE], a ____________ corporation ("Transferee"),
W I T N E S S E T H:
WHEREAS, Transferee has acquired a ___% interest in WMC Partners, L.P., a
Delaware limited partnership ("WMC") from U S WEST, Inc., a Colorado corporation
("USW"), representing all of the partnership interest in WMC previously held by
USW;
WHEREAS, as a condition precedent to the closing of such acquisition,
Transferee is required to enter into an investment agreement and an agreement of
exchange with ATI;
WHEREAS, concurrently herewith, ATI and Transferee are entering into that
certain Transferee Investment Agreement dated as of the date hereof (the
"Transferee Investment Agreement"); and
WHEREAS, ATI has certain rights to cause the direct or indirect exchange
(the "Exchange") of the WMC Interest for Series C Participating Convertible
Preferred Stock of ATI ("Series C Preferred Stock");
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the conditions
set forth herein, the parties agree that the Exchange shall be effected either
pursuant to (i) a merger (the "Merger"), as set forth in the Agreement and Plan
of Merger attached hereto as Exhibit A (the "Merger Agreement"), or (ii) a sale
by Transferee or a subsidiary thereof to ATI of the WMC Interest as described in
Section 1.5(a) or (b) (the "Sale").
1.2. Delivery of Notice. Transferee and ATI shall complete and execute the
Merger Agreement and employ all reasonable efforts to satisfy the conditions to
the Merger set forth in Article IV of the Merger Agreement upon the receipt by
Transferee of written notice from ATI of ATI's election to cause the Exchange to
occur.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice Date")
when a notice shall have been delivered pursuant to Section 1.2, representatives
of ATI and Transferee shall meet to determine the appropriate number of shares
of Series C Preferred Stock of ATI to be exchanged for the WMC Interest (the
"Final Number of ATI Shares"). In the event that such representatives of ATI and
Transferee shall be unable to reach agreement with respect to the Final Number
of ATI Shares within 30 business days after the Notice Date, the Final Number of
ATI Shares shall be determined as follows.
<PAGE> 109
(b) Selection of Appraisers. ATI and Transferee each shall designate by
written notice to WMC and the other a firm of recognized national standing
familiar with appraisal techniques applicable to the determination of the
Appraisal Number of ATI Shares (as defined below) to serve as an Appraiser
pursuant to this Section 1.3 (the firms designated by ATI and Transferee being
referred to herein as the "ATI Appraiser" and the "Transferee Appraiser,"
respectively) within 30 business days after the failure to reach mutual
agreement referred to in paragraph (a) above. In the event that either ATI or
Transferee fails to designate its Appraiser within the foregoing time period,
the other shall have the right to designate such Appraiser by notifying the
failing party in writing of such designation (and the Appraiser so designated
shall be the ATI Appraiser or the Transferee Appraiser, as the case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to determine
the number of shares of Series C Preferred Stock of ATI equal to the quotient of
(i) the Private Market Value (as defined in Section 6.1 hereof) of the WMC
Interest as of the Notice Date, divided by (ii) the Fair Market Value as defined
in Section 6.1 of Series C Preferred Stock as of the Notice Date (the quotient
for such Appraisal being the "Appraisal Number of ATI Shares"). Each Appraiser
also shall be directed to deliver a certificate (an "Appraiser's Certificate")
to both ATI and Transferee upon the conclusion of its determination, which in no
event shall be later than the 30th day after its respective designation, and
each Appraiser's Certificate once delivered may not be retracted or modified in
any respect. Each Appraiser will keep confidential all information disclosed by
ATI and WMC in the course of conducting its evaluation, and, to that end, will
execute such customary documentation as ATI and WMC reasonably may request with
respect to such confidentiality obligation. ATI will provide, and ATI and
Transferee will cooperate in causing WMC to provide, each Appraiser with such
information within ATI's and WMC's possession that reasonably may be requested
in writing by the Appraiser for purposes of its evaluation hereunder. The
Appraisers shall consult with each other in the course of conducting their
respective evaluations. Each Appraiser will be directed to comply with the
provisions of this Section 1.3, and to that end each of ATI and Transferee will
provide to its respective Appraiser a complete and correct copy of this Section
1.3 (and the definitions of capitalized terms used in this Section 1.3 that are
defined elsewhere).
(d) Determination of the Final Number of ATI Shares. The Final Number of
ATI Shares shall be determined on the basis of the Appraisers' Certificates in
accordance with the provisions of this paragraph. The higher of the Appraisal
Number of ATI Shares set forth on the Appraisers' Certificates is hereinafter
referred to as the "Higher Value" and the lower of the Appraisal Number of ATI
Shares is hereinafter referred to as the "Lower Value." If the Higher Value is
not more than 110% of the Lower Value, the Final Number of ATI Shares shall be
the arithmetic average of such two Values. If the Higher Value is more than 110%
of the Lower Value, a third appraiser shall be selected in accordance with the
provisions of paragraph (e) below, and the Final Number of ATI Shares will be
determined in accordance with the provisions of paragraph (f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher Value is
more than 110% of the Lower Value, within seven days thereafter the ATI
Appraiser and the Transferee Appraiser shall agree upon and jointly designate a
third firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by written
notice to each of ATI and Transferee. ATI and Transferee shall direct the Third
Appraiser to determine the Appraisal Number of ATI Shares (the "Third Value") in
accordance with the provisions of paragraph (c) above, and to deliver to ATI and
Transferee an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be directed to
comply with the provisions of this Section 1.3, and to that end the parties will
provide
-2-
<PAGE> 110
to the Third Appraiser a complete and correct copy of this Section 1.3 (and the
definitions of capitalized terms used in this Section 1.3 that are defined
elsewhere).
(f) Alternative Determination of the Final Number of ATI Shares. Upon the
delivery by the Third Appraiser of its Appraiser's Certificate, the Final Number
of ATI Shares will be determined as provided in this paragraph (f). The Final
Number of ATI Shares will be (w) the Lower Value, if the Third Value is less
than the Lower Value, (x) the Higher Value, if the Third Value is greater than
the Higher Value, (y) the arithmetic average of the Third Value and the other
Value (Lower or Higher) that is closer to the Third Value if the Third Value
falls within the range between (and including) the Lower Value and the Higher
Value and (z) the Third Value, if the Lower Value and the Higher Value are
equally close to the Third Value.
(g) Costs. ATI and Transferee each will bear the cost of the Appraiser
designated by it or on its behalf. If the Higher Value is not more than 115% of
the Lower Value, or if the Higher Value and the Lower Value are equally close to
the Third Value, ATI and Transferee each shall bear 50% of the cost of the Third
Appraiser, if any; otherwise, the party whose Appraiser's determination of the
Final Number of ATI Shares is farther from the Third Value shall bear the entire
cost of the Third Appraiser. ATI and Transferee agree to pay when due the fees
and expenses of the Appraisers in accordance with the foregoing provisions.
(h) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in paragraphs (d) and (f) above, and the Final Number of
ATI Shares used in the calculations described in paragraph (h) above, shall be
adjusted appropriately for stock splits, stock dividends, stock combinations,
reclassifications and the like of ATI Common Stock subsequent to the Notice
Date.
(i) Conclusive Determination. To the fullest extent provided by law, the
determination of the Final Number of ATI Shares made pursuant to this Section
1.3 shall be final and binding on ATI and Transferee, and such determination
shall not be appealable to or reviewable by any court or arbitrator.
1.4. Execution of Merger Agreement. As soon as practicable following the
determination of the Final Number of ATI Shares pursuant to Section 1.3, but in
no event later than 10 days thereafter, ATI and Transferee each shall complete
and execute, and each shall cause its appropriate respective subsidiary to
execute, the Merger Agreement in substantially the form set forth in Exhibit A
hereto. The parties agree that ATI shall have the right to determine in its sole
discretion the form and substance of Annexes A and B to the Merger Agreement.
1.5. Right to Require Sale. In the event that either ATI or Transferee shall
fail within 10 days after the determination of the Final Number of ATI Shares to
have the Merger Agreement executed by their respective appropriate parties, the
following shall apply:
(a) If ATI shall have so failed, Transferee may deliver to ATI written
notice requiring ATI to purchase the WMC Interest in exchange for the Aggregate
Consideration plus, if ATI's failure shall have resulted from other than the
prohibition of such execution by any order, decree or injunction of a court of
competent jurisdiction or an action taken or any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity that makes execution of the Merger Agreement illegal, an amount equal to
35% of the taxable income attributable to such sale (net of the amount of
taxable income that would have been generated by the Merger, such as income
arising from deferred intercompany gain or an excess loss account in the stock
of any Transferee HoldSub (as defined in Section 2.2(a))) (the "Tax
Adjustment").
-3-
<PAGE> 111
(b) If Transferee shall have so failed, ATI may deliver to Transferee
written notice requiring Transferee to cause the WMC Interest to be sold to ATI
in exchange for the Aggregate Consideration.
(c) In the event that either ATI or Transferee exercises its right to cause
the Sale, the provisions of Sections 1.6 and 1.7 and of Article IV shall be
applicable.
1.6. Sale Procedure. Any written notice delivered pursuant to paragraph (a)
or (b) of Section 1.5 (a "Sale Notice") shall specify the closing date of the
Sale, which closing date shall be at least 15 but not more than 30 business days
after the date of such notice; provided, however, that such date shall be
extended in order to permit the parties to obtain all requisite regulatory
approvals.
1.7. Closing. The closing of the Sale (the "Closing") shall take place at
such time and place as the parties may agree and on the date specified in the
Sale Notice or at such other time, date or place as may be agreed to by the
parties or as extended pursuant to Section 1.6. The date and time at which a
Closing occurs is referred to as the "Closing Date." At the Closing, Transferee
shall cause to be assigned to ATI all right, title and interest in and to the
WMC Interest, free and clear of any Liens (as hereinafter defined), and ATI
shall simultaneously deliver to Transferee a certificate or certificates
representing the Aggregate Consideration and, if the Sale is pursuant to Section
1.5(a), a wire transfer in the amount of the Tax Adjustment, if any, to an
account designated by Transferee three business days in advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents and
warrants to Transferee as follows:
(a) Organization and Qualification. It is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and has the
corporate power to own its properties and to carry on its business as now being
conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by it and the consummation by it of the transactions
contemplated hereby, other than the approval by ATI's board of directors of the
Merger Consideration (as defined in the Merger Agreement) and the approval of
the Preferred Certificate (as defined in Section 3.1(a)), have been duly
authorized by it; this Agreement has been duly executed and delivered by it and
this Agreement constitutes its valid and binding obligation enforceable against
it in accordance with its terms, except that (i) such enforcement is subject to
the effect of any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies and (ii) the remedies of specific performance
and injunctive relief may be subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party, or
result in a violation of its certificate of incorporation or by-laws or any law,
rule, regulation, order, judgment or decree applicable to it or by which any of
its properties or assets is bound or
-4-
<PAGE> 112
affected. No consent, authorization or order of, or filing or registration with,
any court or governmental agency is required for the execution, delivery and
performance by it of this Agreement, except to the extent of (i) any applicable
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) any consent or approval of the FCC or any other
federal or state governmental agency the necessity of which arises solely out of
WMC's licenses or operations, (iii) any filings required under the Exchange Act,
or (iv) any filings expressly contemplated hereby.
(d) Authorization of ATI Common Stock and ATI Preferred Stock. ATI has
taken all necessary action to permit it to issue (i) the number of shares of
Series C Preferred Stock issuable pursuant to the terms of this Agreement and
(ii) the number of shares of Common Stock issuable upon conversion of the Series
C Preferred Stock. Shares of Series C Preferred Stock issued pursuant to the
terms of this Agreement will, when issued, be validly issued, fully paid and
nonassessable and no person will have any preemptive right of subscription or
purchase in respect thereof.
2.2. Representations and Warranties of Transferee. Transferee hereby
represents and warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary thereof that
holds the WMC Interest (a "Transferee HoldSub") will be at the time of the
Closing, a corporation duly organized and existing in good standing under the
laws of the state of its incorporation and it has, and each Transferee HoldSub
at the time of the Closing will have, the corporate power to own its properties
and to carry on its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by Transferee and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies and
(ii) the remedies of specific performance and injunctive relief may be subject
to general principles of equity. At the time of the Closing, each Transferee
HoldSub will have duly authorized the transactions contemplated hereby to the
extent required and will have full legal right, power and authority to perform
this Agreement.
(c) No Conflicts. The execution, delivery and performance of this Agreement
by it and the consummation by each of Transferee and, to the extent required,
the consummation by each Transferee HoldSub, of the transactions contemplated
hereby will not conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien (as defined in paragraph (d) below) on any properties
or assets of any of them pursuant to any agreement, indenture or instrument to
which any of them is a party or by which the properties or assets of any of them
are bound or affected, or result in a violation of the certificate of
incorporation or by-laws of any of them or any law, rule, regulation, order,
judgment or decree applicable to any of them or by which any of the properties
or assets of any of them is bound or affected. No consent, authorization or
order of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by each of Transferee and,
to the extent required, by each Transferee HoldSub of this Agreement, except to
the extent of (i) any applicable requirements under the HSR Act, (ii) any
consent or approval of the FCC or any other federal or state governmental
-5-
<PAGE> 113
agency the necessity of which arises solely out of WMC's licenses or operations,
(iii) any filings required under the Exchange Act, or (iv) any filings expressly
contemplated hereby.
(d) Title. At the Effective Time or Closing, as the case may be, Transferee
will be the sole record and beneficial owner of all of the capital stock of each
Transferee HoldSub, free and clear of all liens, adverse claims, pledges,
security interests, options, liabilities or other contractual, legal or
equitable rights or encumbrances (collectively, "Liens"). At the Effective Time
or Closing, as appropriate, Transferee or a Transferee HoldSub will be the sole
legal and beneficial owner of the WMC Interest free and clear of all Liens; and
immediately after the Effective Time or the Closing, as the case may be, ATI or
a subsidiary of ATI will be the owner of all the right, title and interest of
Transferee and each Transferee HoldSub to and in the WMC Interest free and clear
of all Liens. The WMC Interest owned by Transferee constitutes, and at the
Effective Time or the Closing, as the case may be, the WMC Interest held by each
Transferee HoldSub will constitute, the entirety of any WMC interest held
directly or indirectly by Transferee.
ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date hereof to the
Effective Time or the Closing, as the case may be, except as specifically
contemplated by this Agreement or as otherwise approved in writing by
Transferee:
(a) Designation and Reservation of Shares. ATI will reserve and keep
available out of its authorized but unissued shares of capital stock the full
number of shares Series C Preferred Stock at any time deliverable upon the
consummation of the Merger or at the Closing, as the case may be. ATI agrees
that prior to the Effective Time or the Closing Date, as the case may be, it
will have filed with the appropriate public official in its state of
incorporation a certificate (the "Preferred Certificate") designating a
sufficient number of shares of ATI Preferred Stock.
(b) No Inconsistent Agreements. After the date hereof, ATI shall not and
shall not permit its Affiliates to, take any action or enter into any agreement
inconsistent with the rights granted to Transferee hereunder or which could
adversely affect the ability of ATI and Transferee to consummate the Merger or
Sale as contemplated hereunder, including, without limitation, entering into any
loan agreement or other arrangement containing terms or conditions which would
limit or prohibit the consummation of the Merger or Sale.
3.2. Covenants of Transferee. During the period from the date of this
Agreement to the Effective Time or the Closing, as the case may be, except as
specifically contemplated by this Agreement or as otherwise approved in writing
by ATI:
(a) No Inconsistent Agreements. After the date hereof, Transferee shall
not, and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to ATI hereunder or which could
adversely affect the ability of ATI, Transferee or any Transferee HoldSub to
consummate the Merger or Sale as contemplated hereunder, including, without
limitation, entering into any loan agreement or other arrangement containing
terms or conditions which would limit or prohibit the consummation of the Merger
or Sale.
(b) Transfer of WMC Interest Prohibited. From and after the Notice Date,
unless the Merger or the Closing shall have been abandoned pursuant to Section
4.4, Transferee shall not, and shall not permit its subsidiaries to, and its
subsidiaries shall not, sell, pledge, transfer or otherwise dispose
-6-
<PAGE> 114
of the WMC Interest or any interest therein, including through the creation of
any Lien thereon.
3.3. Further Assurances; Cooperation.
(a) Each of the parties hereto shall perform its obligations under this
Agreement and take or cause to be taken and do or cause to be done all things
necessary, proper or advisable under applicable law to obtain all necessary
regulatory approvals and waivers and all other necessary consents and satisfy
all conditions to the obligations of the parties under this Agreement and shall
cooperate fully with one another and their respective officers, directors,
employees, agents, counsel, accountants and other representatives in connection
with any steps required to be taken as a part of their respective obligations
under this Agreement; and each party shall do such things as reasonably may be
requested by the other parties hereto in order more effectively to consummate
the Merger or the Sale, as the case may be (including, but not limited to,
promptly delivering to the other information necessary to prepare and pursue all
necessary regulatory filings, approvals and waivers).
(b) In the event that a change in the structure of the Exchange would be
necessary or desirable to accomplish a tax-free merger or reorganization
(including a reorganization described in Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended), Transferee and ATI shall take all reasonable
steps necessary to accommodate such change to the extent it would not adversely
affect the parties' rights or obligations under the terms of the Merger
Agreement or this Agreement; provided that in any such event ATI and Transferee
shall negotiate in good faith to appropriately compensate the other to the
extent adversely affected by such change.
3.4. Provision in Case of Consolidation or Merger of ATI. In the event that
prior to the Effective Time or the Closing, as the case may be, ATI shall enter
into an agreement of merger, consolidation or other business combination with
any Person ("Acquiring Corporation") which has a class of equity securities
having substantially the same rights as Series C Preferred Stock (including but
not limited to voting, dividend, liquidation, and redemption rights) ("Acquiror
Preferred Stock"), and in connection with such agreement (i) the Acquiring
Corporation shall acquire at least 85% of the Voting Power Outstanding or ATI
Common Stock will no longer be registered with the Securities and Exchange
Commission pursuant to section 12(b) or 12(g) of the Exchange Act or (ii) the
Acquiring Corporation shall acquire assets satisfying the requirements of
clauses (A), (B) and (C) of clause (ii) of the definition of Change of Control
contained in the Investment Agreement between the parties dated the date hereof,
and a majority of the value of the consideration to be received by ATI in
exchange therefor shall not consist of assets (or interests in assets) of a like
kind or nature, then ATI shall cause such agreement to provide that upon
consummation of such consolidation, merger or other business combination this
Agreement and the Merger Agreement shall be deemed to be modified and amended to
provide that Transferee shall receive Acquiror Preferred Stock rather than
Series C Preferred Stock in any Merger or Sale. Accordingly, from and after such
consummation references herein to Series C Preferred Stock shall be deemed to be
references to Acquiror Preferred Stock. If any such consolidation, merger or
other business combination shall be consummated after the Notice Date and prior
to the Closing, the Closing shall be delayed for an appropriate period to
determine under Section 1.3 the number of shares of Acquiror Preferred Stock to
be issued at the Effective Time or the Closing, as the case may be, and to
satisfy all conditions to the Merger or the Closing. ATI shall not enter into
any such consolidation, merger or other business combination unless the
Acquiring Corporation assumes in writing all the obligations of ATI hereunder.
The provisions of this Section 3.5 shall apply to successive consolidations,
mergers or other business combinations.
3.5. Contributions, Distributions and Dividends After the Notice Date. ATI
agrees to compensate Transferee at the Effective Time or at the
-7-
<PAGE> 115
Closing, as the case may be, for (i) any dividends (other than those for which
adjustments have been made pursuant to Section 1.3(i)) that would have been
received prior to the Effective Time or the Closing Date by Transferee in
respect of the Aggregate Consideration if the Aggregate Consideration had been
issued to Transferee on or prior to the first record date therefor announced by
ATI subsequent to the Notice Date, and (ii) any capital contributions to WMC
made by Transferee or its Affiliates with respect to the WMC Interest during the
period after the Notice Date and prior to the Effective Time or the Closing, as
the case may be. Transferee agrees to make, or to cause to be made, all capital
contributions due after the Notice Date and prior to the Effective Time or the
Closing, as the case may be, to the extent any such capital contribution, if not
made, would constitute a Defaulted Contribution (as defined in the WMC
Partnership Agreement). Transferee agrees to compensate ATI at the Closing for
any distributions received by Transferee or its Affiliates with respect to the
WMC Interest during the period after the Notice Date and prior to the Closing.
ARTICLE IV
CONDITIONS TO CLOSING OF THE SALE
4.1. Conditions to Each Party's Obligation to Effect the Sale. The
obligations of the parties hereto to consummate the Sale are subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:
(a) No Prohibition. The consummation of the Sale shall not be prohibited by
any order, decree or injunction of a court of competent jurisdiction (each party
agreeing to use all reasonable efforts to have any such order reversed or
injunction lifted), and there shall not have been any action taken or any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Sale by any Governmental Entity that makes consummation of the Sale illegal.
(b) Authorizations. All required authorizations, orders, grants, consents,
permissions, approvals and waivers of any governmental entity with jurisdiction
over the Sale (including all filings under the HSR Act and the expiration of all
waiting periods thereunder) shall have been received and shall remain in effect,
other than authorizations, orders, grants, consents, permissions and approvals
the failure of which to receive would not, singly or in the aggregate, have a
material adverse effect on the business condition of Transferee or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to effect the
Sale are subject to the satisfaction or waiver, at or before the Closing, of
each of the following conditions, except to the extent that any failure of the
conditions set forth in paragraphs (a) or (b) below results in damage to ATI
that is fully compensable by monetary damages.
(a) Representations and Warranties. The representations and warranties of
Transferee set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Transferee. Transferee shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(c) Nature of Acquisition. Transferee shall have provided ATI with an
undertaking to the effect that Transferee is acquiring the shares of Preferred
Stock hereunder for its own account, for investment and not with a view to the
resale or distribution thereof, except in compliance with the Securities Act of
1933, as amended.
-8-
<PAGE> 116
(d) No Change of Control. There shall not have been a Change of Control of
Transferee at any time after the date hereof and Transferee shall not be a party
to any agreement which contemplates a transaction (or series of transactions)
which, when consummated, would result in a Change of Control of Transferee.
4.3. Conditions to Obligations of Transferee. The obligations of Transferee
to effect the Sale are subject to the satisfaction or waiver, at or before the
Closing, of each of the following conditions, except to the extent that the
failure of any such condition results in damage to Transferee that is fully
compensable by monetary damages:
(a) Representations and Warranties. The representations and warranties of
ATI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of ATI. ATI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
4.4. Abandonment of Merger or Sale. In the event that the Effective Time or
the Closing, as the case may be, has not occurred within two years after the
Notice Date, either ATI or Transferee may elect, subject to the following
sentence, by written notice to the other to abandon the Merger or the Sale, as
the case may be, in which event this Agreement shall be operative thereafter as
if the notice delivered pursuant to Section 1.2 never had been delivered;
provided, however, that in the event July 25, 2004 shall have occurred within
the foregoing two year period, such two year period may be extended, subject to
the following sentence, at the option of either party, by written notice to the
other delivered prior to the expiration of such two year period, for one
additional year. Notwithstanding the foregoing, the right to abandon the Merger
or the Sale, or to extend the two-year period for one additional year, pursuant
to this Section shall not be available to any party whose failure to fulfill any
obligation under this Agreement or the Merger Agreement has been the cause of,
or results in, the failure of the Effective Time or the Closing to have occurred
within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification.
(a) Indemnification by ATI. ATI shall defend, indemnify and hold harmless
Transferee and each of Transferee's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (Transferee and
such persons, collectively, "Transferee's Indemnified Persons"), and shall
reimburse Transferee's Indemnified Persons for, from and against each and every
demand, claim, loss, liability, judgment, damage, cost and expense (including,
without limitation, interest, penalties, costs of preparation and investigation,
and the reasonable fees, disbursements and expenses of attorneys, accountants
and other professional advisors) (collectively, "Losses") imposed on or incurred
by Transferee's Indemnified Persons, directly or indirectly (including without
limitation diminution in value of an equity interest), relating to, resulting
from or arising out of any inaccuracy in any representation or warranty of ATI
herein or in the Merger Agreement in any respect, whether or not Transferee's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of ATI under this Agreement, the Merger
Agreement, or any certificate or other document delivered or to be delivered
pursuant hereto. [The parties agree that the Tax Adjustment described in Section
1.5(a) is an agreed upon payment limited to the failure to execute
-9-
<PAGE> 117
the Merger Agreement under the circumstances described therein and is not
intended as an admission of the fact or measure of damages for any purpose, and
that this Section 5.1 shall govern with respect to a Loss relating to, resulting
from or arising out of any other matter described in the foregoing sentence.]
(b) Indemnification by Transferee. Transferee shall defend, indemnify and
hold harmless ATI and each of ATI's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (ATI and such
persons, collectively, "ATI's Indemnified Persons"), and shall reimburse ATI's
Indemnified Persons, for, from and against all Losses imposed on or incurred by
ATI's Indemnified Persons, directly or indirectly (including without limitation
diminution in value of an equity interest), relating to, resulting from or
arising out of any inaccuracy in any representation or warranty of Transferee
herein or in the Merger Agreement in any respect, whether or not ATI's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of Transferee under this Agreement, the
Merger Agreement, or any certificate or other document delivered or to be
delivered pursuant hereto.
ARTICLE VI
MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Fair Market Value" means, with respect to the Series C Preferred
Stock, as of the Notice Date, the price at which a willing seller would sell,
and a willing buyer would buy, shares of Series C Preferred Stock each being
apprised of all relevant facts with respect to ATI and neither acting under
compulsion, in an arm's-length negotiated transaction with an unaffiliated third
party without time constraints.
(b) "Private Market Value" is defined as the price, as of the Notice Date,
at which a willing seller would sell, and a willing buyer would buy, each being
apprised of all relevant facts, including the tax effects of the Exchange on the
buyer and seller, and neither acting under compulsion, the WMC Interest in an
arm's-length negotiation without time constraints, with such price adjusted to
include (to the extent not previously included) a pro rata share of any control
premium inherent in a sale of WMC as a whole.
(c) "Voting Power Outstanding" means the aggregate number of votes which
may be cast by holders of those securities outstanding which entitle the holders
thereof to vote generally on all matters submitted to ATI's shareholders for a
vote.
All capitalized terms in this Agreement which are not defined herein shall
have the meanings set forth in the WMC Partnership Agreement as in effect on the
date hereof.
6.2. Termination. This Agreement and the Merger Agreement shall
automatically terminate (whether or not a notice has previously been delivered
pursuant to Section 1.2 hereof) at such time as Transferee no longer holds any
WMC interest. The termination of this Agreement shall not relieve any party from
liability for any breach hereof or of the Merger Agreement.
6.3. Severability. If any term, provision, covenant or restriction of this
Agreement is determined to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
-10-
<PAGE> 118
6.4. Specific Enforcement. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
6.5. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
Transferee contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein,
neither ATI nor Transferee makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement may be amended only by
a writing executed by the parties hereto. The parties hereto may amend this
Agreement without notice to or the consent of any third party.
6.6. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) when personally
delivered or transmitted by telecopier on a business day during normal business
hours where such notice is to be received at the address or number designated
below or (b) on the business day following the date of mailing by overnight
courier, fully prepaid, addressed to such address, whichever shall first occur.
The addresses for such communications shall be:
If to ATI: AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to Transferee: _________________________
_________________________
_________________________
With a copy to: _________________________
_________________________
_________________________
Any party may change its address for notices under this Section 6.6 by giving at
least 10 days' prior notice of such changed address to the other party hereto.
6.7. Legends. All certificates evidencing shares of Preferred Stock acquired
by Transferee directly or indirectly pursuant to this Agreement shall be
endorsed with the legends set forth below:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR
UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
-11-
<PAGE> 119
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN INVESTMENT
AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER SET FORTH THEREIN), DATED
AS OF ________ __, ____ BETWEEN THE COMPANY AND USW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE
COMPANY.
6.8. Removal of Legends. Any legend endorsed on a certificate pursuant to
Section 6.7 shall be removed (i) with respect to the first legend set forth
under Section 6.7, (A) if the securities represented by such certificate shall
have been effectively registered under the Securities Act or otherwise lawfully
sold in a public transaction, or (B) if the holder of such securities shall have
provided ATI with an opinion of counsel, in form and substance acceptable to ATI
and its counsel stating that a sale, transfer or assignment of the securities
may be made without registration under the Securities Act of 1933, as amended,
and (ii) with respect to the second legend set forth under Section 6.7, if the
securities represented by such certificate shall have been effectively
transferred in compliance with clause (ii), (iii) or (iv) of the second sentence
of Section 5.3(a) of the Investment Agreement dated as of ________ __, ____
between ATI and Transferee (the "Investment Agreement") or all the obligations
of Transferee under Articles V or VIII of the Investment Agreement have
terminated, or a Change of Control of ATI has occurred.
6.9. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
6.10. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and legal representatives.
Neither ATI nor Transferee shall assign this Agreement or any rights hereunder
without the prior written consent of the other (which consent may be withheld
for any reason in the sole discretion of the party from whom consent is sought);
provided, however, that Transferee may assign its rights (but not its
obligations) under this Agreement to a Wholly Owned Subsidiary that is the
direct beneficial owner of the WMC Interest.
6.12. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
6.13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
6.14. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
-12-
<PAGE> 120
6.15. Arbitration. The parties agree to submit to arbitration their disputes
described in the Arbitration Agreement dated the date hereof between ATI and
Transferee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS, INC.
By _______________________________
Name:
Title:
TRANSFEREE
By _______________________________
Name:
Title:
-13-
<PAGE> 121
Draft 9/30/95
Exhibit D
FORM OF PARTIAL TRANSFEREE AGREEMENT OF EXCHANGE
THIS AGREEMENT OF EXCHANGE (this "Agreement"), dated as of ____________,
199_, by and between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation
("ATI"), and [TRANSFEREE], a ____________ corporation ("Transferee"),
W I T N E S S E T H:
WHEREAS, Transferee has acquired a ___% interest in WMC Partners, L.P., a
Delaware limited partnership ("WMC") from U S WEST, Inc., a Colorado corporation
("USW"), representing [___%] of the partnership interest in WMC previously held
by USW;
WHEREAS, as a condition precedent to the closing of such acquisition,
Transferee is required to enter into an investment agreement and an agreement of
exchange with ATI;
WHEREAS, concurrently herewith, ATI and Transferee are entering into that
certain Transferee Investment Agreement dated as of the date hereof (the
"Transferee Investment Agreement"); and
WHEREAS, ATI has certain rights to cause the direct or indirect exchange
(the "Exchange") of the WMC Interest for Series B Participating Redeemable
Preferred Stock of ATI ("Series B Preferred Stock");
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the conditions
set forth herein, the parties agree that the Exchange shall be effected either
pursuant to (i) a merger (the "Merger"), as set forth in the Agreement and Plan
of Merger attached hereto as Exhibit A (the "Merger Agreement"), or (ii) a sale
by Transferee or a subsidiary thereof to ATI of the WMC Interest as described in
Section 1.5(a) or (b) (the "Sale").
1.2. Delivery of Notice. Transferee and ATI shall complete and execute the
Merger Agreement and employ all reasonable efforts to satisfy the conditions to
the Merger set forth in Article IV of the Merger Agreement upon the receipt by
Transferee of written notice from ATI of ATI's election to cause the Exchange to
occur.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice Date")
when a notice shall have been delivered pursuant to Section 1.2, representatives
of ATI and Transferee shall meet to determine the appropriate number of shares
of Series B Preferred Stock of ATI to be exchanged for the WMC Interest (the
"Final Number of ATI Shares"). In the event that such representatives of ATI and
Transferee shall be unable to reach agreement with respect to the Final Number
of ATI Shares within 30 business days after the Notice Date, the Final Number of
ATI Shares shall be determined as follows.
<PAGE> 122
(b) Selection of Appraisers. ATI and Transferee each shall designate by
written notice to WMC and the other a firm of recognized national standing
familiar with appraisal techniques applicable to the determination of the
Appraisal Number of ATI Shares (as defined below) to serve as an Appraiser
pursuant to this Section 1.3 (the firms designated by ATI and Transferee being
referred to herein as the "ATI Appraiser" and the "Transferee Appraiser,"
respectively) within 30 business days after the failure to reach mutual
agreement referred to in paragraph (a) above. In the event that either ATI or
Transferee fails to designate its Appraiser within the foregoing time period,
the other shall have the right to designate such Appraiser by notifying the
failing party in writing of such designation (and the Appraiser so designated
shall be the ATI Appraiser or the Transferee Appraiser, as the case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to determine
the number of shares of Series B Preferred Stock of ATI equal to the quotient of
(i) the Fair Market Value without a Control Premium as defined in Section 6.1 of
the WMC Interest as of the Notice Date, divided by (ii) the Fair Market Value of
Series B Preferred Stock as of the Notice Date (the quotient for such Appraisal
being the "Appraisal Number of ATI Shares"). Each Appraiser also shall be
directed to deliver a certificate (an "Appraiser's Certificate") to both ATI and
Transferee upon the conclusion of its determination, which in no event shall be
later than the 30th day after its respective designation, and each Appraiser's
Certificate once delivered may not be retracted or modified in any respect. Each
Appraiser will keep confidential all information disclosed by ATI and WMC in the
course of conducting its evaluation, and, to that end, will execute such
customary documentation as ATI and WMC reasonably may request with respect to
such confidentiality obligation. ATI will provide, and ATI and Transferee will
cooperate in causing WMC to provide, each Appraiser with such information within
ATI's and WMC's possession that reasonably may be requested in writing by the
Appraiser for purposes of its evaluation hereunder. The Appraisers shall consult
with each other in the course of conducting their respective evaluations. Each
Appraiser will be directed to comply with the provisions of this Section 1.3,
and to that end each of ATI and Transferee will provide to its respective
Appraiser a complete and correct copy of this Section 1.3 (and the definitions
of capitalized terms used in this Section 1.3 that are defined elsewhere).
(d) Determination of the Final Number of ATI Shares. The Final Number of
ATI Shares shall be determined on the basis of the Appraisers' Certificates in
accordance with the provisions of this paragraph. The higher of the Appraisal
Number of ATI Shares set forth on the Appraisers' Certificates is hereinafter
referred to as the "Higher Value" and the lower of the Appraisal Number of ATI
Shares is hereinafter referred to as the "Lower Value." If the Higher Value is
not more than 110% of the Lower Value, the Final Number of ATI Shares shall be
the arithmetic average of such two Values. If the Higher Value is more than 110%
of the Lower Value, a third appraiser shall be selected in accordance with the
provisions of paragraph (e) below, and the Final Number of ATI Shares will be
determined in accordance with the provisions of paragraph (f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher Value is
more than 110% of the Lower Value, within seven days thereafter the ATI
Appraiser and the Transferee Appraiser shall agree upon and jointly designate a
third firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by written
notice to each of ATI and Transferee. ATI and Transferee shall direct the Third
Appraiser to determine the Appraisal Number of ATI Shares (the "Third Value") in
accordance with the provisions of paragraph (c) above, and to deliver to ATI and
Transferee an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be directed to
comply with the provisions of this Section 1.3, and to that end the parties will
provide
-2-
<PAGE> 123
to the Third Appraiser a complete and correct copy of this Section 1.3 (and the
definitions of capitalized terms used in this Section 1.3 that are defined
elsewhere).
(f) Alternative Determination of the Final Number of ATI Shares. Upon the
delivery by the Third Appraiser of its Appraiser's Certificate, the Final Number
of ATI Shares will be determined as provided in this paragraph (f). The Final
Number of ATI Shares will be (w) the Lower Value, if the Third Value is less
than the Lower Value, (x) the Higher Value, if the Third Value is greater than
the Higher Value, (y) the arithmetic average of the Third Value and the other
Value (Lower or Higher) that is closer to the Third Value if the Third Value
falls within the range between (and including) the Lower Value and the Higher
Value and (z) the Third Value, if the Lower Value and the Higher Value are
equally close to the Third Value.
(g) Costs. ATI and Transferee each will bear the cost of the Appraiser
designated by it or on its behalf. If the Higher Value is not more than 115% of
the Lower Value, or if the Higher Value and the Lower Value are equally close to
the Third Value, ATI and Transferee each shall bear 50% of the cost of the Third
Appraiser, if any; otherwise, the party whose Appraiser's determination of the
Final Number of ATI Shares is farther from the Third Value shall bear the entire
cost of the Third Appraiser. ATI and Transferee agree to pay when due the fees
and expenses of the Appraisers in accordance with the foregoing provisions.
(h) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in paragraphs (d) and (f) above, and the Final Number of
ATI Shares used in the calculations described in paragraph (h) above, shall be
adjusted appropriately for stock splits, stock dividends, stock combinations,
reclassifications and the like of ATI Common Stock subsequent to the Notice
Date.
(i) Conclusive Determination. To the fullest extent provided by law, the
determination of the Final Number of ATI Shares made pursuant to this Section
1.3 shall be final and binding on ATI and Transferee, and such determination
shall not be appealable to or reviewable by any court or arbitrator.
1.4. Execution of Merger Agreement. As soon as practicable following the
determination of the Final Number of ATI Shares pursuant to Section 1.3, but in
no event later than 10 days thereafter, ATI and Transferee each shall complete
and execute, and each shall cause its appropriate respective subsidiary to
execute, the Merger Agreement in substantially the form set forth in Exhibit A
hereto. The parties agree that ATI shall have the right to determine in its sole
discretion the form and substance of Annexes A and B to the Merger Agreement.
1.5. Right to Require Sale. In the event that either ATI or Transferee shall
fail within 10 days after the determination of the Final Number of ATI Shares to
have the Merger Agreement executed by their respective appropriate parties, the
following shall apply:
(a) If ATI shall have so failed, Transferee may deliver to ATI written
notice requiring ATI to purchase the WMC Interest in exchange for the Aggregate
Consideration plus, if ATI's failure shall have resulted from other than the
prohibition of such execution by any order, decree or injunction of a court of
competent jurisdiction or an action taken or any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity that makes execution of the Merger Agreement illegal, an amount equal to
35% of the taxable income attributable to such sale (net of the amount of
taxable income that would have been generated by the Merger, such as income
arising from deferred intercompany gain or an excess loss account in the stock
of any Transferee HoldSub (as defined in Section 2.2(a))) (the "Tax
Adjustment").
-3-
<PAGE> 124
(b) If Transferee shall have so failed, ATI may deliver to Transferee
written notice requiring Transferee to cause the WMC Interest to be sold to ATI
in exchange for the Aggregate Consideration.
(c) In the event that either ATI or Transferee exercises its right to cause
the Sale, the provisions of Sections 1.6 and 1.7 and of Article IV shall be
applicable.
1.6. Sale Procedure. Any written notice delivered pursuant to paragraph (a)
or (b) of Section 1.5 (a "Sale Notice") shall specify the closing date of the
Sale, which closing date shall be at least 15 but not more than 30 business days
after the date of such notice; provided, however, that such date shall be
extended in order to permit the parties to obtain all requisite regulatory
approvals.
1.7. Closing. The closing of the Sale (the "Closing") shall take place at
such time and place as the parties may agree and on the date specified in the
Sale Notice or at such other time, date or place as may be agreed to by the
parties or as extended pursuant to Section 1.6. The date and time at which a
Closing occurs is referred to as the "Closing Date." At the Closing, Transferee
shall cause to be assigned to ATI all right, title and interest in and to the
WMC Interest, free and clear of any Liens (as hereinafter defined), and ATI
shall simultaneously deliver to Transferee a certificate or certificates
representing the Aggregate Consideration and, if the Sale is pursuant to Section
1.5(a), a wire transfer in the amount of the Tax Adjustment, if any, to an
account designated by Transferee three business days in advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents and
warrants to Transferee as follows:
(a) Organization and Qualification. It is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and has the
corporate power to own its properties and to carry on its business as now being
conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by it and the consummation by it of the transactions
contemplated hereby, other than the approval by ATI's board of directors of the
Merger Consideration (as defined in the Merger Agreement) and the approval of
the Preferred Certificate (as defined in Section 3.1(a)), have been duly
authorized by it; this Agreement has been duly executed and delivered by it and
this Agreement constitutes its valid and binding obligation enforceable against
it in accordance with its terms, except that (i) such enforcement is subject to
the effect of any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies and (ii) the remedies of specific performance
and injunctive relief may be subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party, or
result in a violation of its certificate of incorporation or by-laws or any law,
rule, regulation, order, judgment or decree applicable to it or by which any of
its properties or assets is bound or
-4-
<PAGE> 125
affected. No consent, authorization or order of, or filing or registration with,
any court or governmental agency is required for the execution, delivery and
performance by it of this Agreement, except to the extent of (i) any applicable
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) any consent or approval of the FCC or any other
federal or state governmental agency the necessity of which arises solely out of
WMC's licenses or operations, (iii) any filings required under the Exchange Act,
or (iv) any filings expressly contemplated hereby.
(d) Authorization of ATI Preferred Stock. ATI has taken all necessary
action to permit it to issue the number of shares of Series B Preferred Stock
issuable pursuant to the terms of this Agreement. Shares of Series B Preferred
Stock issued pursuant to the terms of this Agreement will, when issued, be
validly issued, fully paid and nonassessable and no person will have any
preemptive right of subscription or purchase in respect thereof.
2.2. Representations and Warranties of Transferee. Transferee hereby
represents and warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary thereof that
holds the WMC Interest (a "Transferee HoldSub") will be at the time of the
Closing, a corporation duly organized and existing in good standing under the
laws of the state of its incorporation and it has, and each Transferee HoldSub
at the time of the Closing will have, the corporate power to own its properties
and to carry on its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by Transferee and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies and
(ii) the remedies of specific performance and injunctive relief may be subject
to general principles of equity. At the time of the Closing, each Transferee
HoldSub will have duly authorized the transactions contemplated hereby to the
extent required and will have full legal right, power and authority to perform
this Agreement.
(c) No Conflicts. The execution, delivery and performance of this Agreement
by it and the consummation by each of Transferee and, to the extent required,
the consummation by each Transferee HoldSub, of the transactions contemplated
hereby will not conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien (as defined in paragraph (d) below) on any properties
or assets of any of them pursuant to any agreement, indenture or instrument to
which any of them is a party or by which the properties or assets of any of them
are bound or affected, or result in a violation of the certificate of
incorporation or by-laws of any of them or any law, rule, regulation, order,
judgment or decree applicable to any of them or by which any of the properties
or assets of any of them is bound or affected. No consent, authorization or
order of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by each of Transferee and,
to the extent required, by each Transferee HoldSub of this Agreement, except to
the extent of (i) any applicable requirements under the HSR Act, (ii) any
consent or approval of the FCC or any other federal or state governmental agency
the necessity of which arises solely out of WMC's licenses or
-5-
<PAGE> 126
operations, (iii) any filings required under the Exchange Act, or (iv) any
filings expressly contemplated hereby.
(d) Title. At the Effective Time or Closing, as the case may be, Transferee
will be the sole record and beneficial owner of all of the capital stock of each
Transferee HoldSub, free and clear of all liens, adverse claims, pledges,
security interests, options, liabilities or other contractual, legal or
equitable rights or encumbrances (collectively, "Liens"). At the Effective Time
or Closing, as appropriate, Transferee or a Transferee HoldSub will be the sole
legal and beneficial owner of the WMC Interest free and clear of all Liens; and
immediately after the Effective Time or the Closing, as the case may be, ATI or
a subsidiary of ATI will be the owner of all the right, title and interest of
Transferee and each Transferee HoldSub to and in the WMC Interest free and clear
of all Liens. The WMC Interest owned by Transferee constitutes, and at the
Effective Time or the Closing, as the case may be, the WMC Interest held by each
Transferee HoldSub will constitute, the entirety of any WMC interest held
directly or indirectly by Transferee.
ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date hereof to the
Effective Time or the Closing, as the case may be, except as specifically
contemplated by this Agreement or as otherwise approved in writing by
Transferee:
(a) Designation and Reservation of Shares. ATI will reserve and keep
available out of its authorized but unissued shares of capital stock the full
number of shares of Series B Preferred Stock at any time deliverable upon the
consummation of the Merger or at the Closing, as the case may be. ATI agrees
that prior to the Effective Time or the Closing Date, as the case may be, it
will have filed with the appropriate public official in its state of
incorporation a certificate (the "Preferred Certificate") designating a
sufficient number of shares of ATI Preferred Stock.
(b) No Inconsistent Agreements. After the date hereof, ATI shall not and
shall not permit its Affiliates to, take any action or enter into any agreement
inconsistent with the rights granted to Transferee hereunder or which could
adversely affect the ability of ATI and Transferee to consummate the Merger or
Sale as contemplated hereunder, including, without limitation, entering into any
loan agreement or other arrangement containing terms or conditions which would
limit or prohibit the consummation of the Merger or Sale.
3.2. Covenants of Transferee. During the period from the date of this
Agreement to the Effective Time or the Closing, as the case may be, except as
specifically contemplated by this Agreement or as otherwise approved in writing
by ATI:
(a) No Inconsistent Agreements. After the date hereof, Transferee shall
not, and shall not permit its Affiliates to, take any action or enter into any
agreement inconsistent with the rights granted to ATI hereunder or which could
adversely affect the ability of ATI, Transferee or any Transferee HoldSub to
consummate the Merger or Sale as contemplated hereunder, including, without
limitation, entering into any loan agreement or other arrangement containing
terms or conditions which would limit or prohibit the consummation of the Merger
or Sale.
(b) Transfer of WMC Interest Prohibited. From and after the Notice Date,
unless the Merger or the Closing shall have been abandoned pursuant to Section
4.4, Transferee shall not, and shall not permit its subsidiaries to, and its
subsidiaries shall not, sell, pledge, transfer or otherwise dispose
-6-
<PAGE> 127
of the WMC Interest or any interest therein, including through the creation of
any Lien thereon.
3.3. Further Assurances; Cooperation. (a) Each of the parties hereto shall
perform its obligations under this Agreement and take or cause to be taken and
do or cause to be done all things necessary, proper or advisable under
applicable law to obtain all necessary regulatory approvals and waivers and all
other necessary consents and satisfy all conditions to the obligations of the
parties under this Agreement and shall cooperate fully with one another and
their respective officers, directors, employees, agents, counsel, accountants
and other representatives in connection with any steps required to be taken as a
part of their respective obligations under this Agreement; and each party shall
do such things as reasonably may be requested by the other parties hereto in
order more effectively to consummate the Merger or the Sale, as the case may be
(including, but not limited to, promptly delivering to the other information
necessary to prepare and pursue all necessary regulatory filings, approvals and
waivers).
(b) In the event that a change in the structure of the Exchange would be
necessary or desirable to accomplish a tax-free merger or reorganization
(including a reorganization described in Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended), Transferee and ATI shall take all reasonable
steps necessary to accommodate such change to the extent it would not adversely
affect the parties' rights or obligations under the terms of the Merger
Agreement or this Agreement; provided that in any such event ATI and Transferee
shall negotiate in good faith to appropriately compensate the other to the
extent adversely affected by such change.
3.4. Provision in Case of Consolidation or Merger of ATI. In the event that
prior to the Effective Time or the Closing, as the case may be, ATI shall enter
into an agreement of merger, consolidation or other business combination with
any Person ("Acquiring Corporation") which has a class of equity securities
having substantially the same rights as Series B Preferred Stock (including but
not limited to voting, dividend, liquidation, and redemption rights) ("Acquiror
Preferred Stock"), and in connection with such agreement (i) the Acquiring
Corporation shall acquire at least 85% of the Voting Power Outstanding or ATI
Common Stock will no longer be registered with the Securities and Exchange
Commission pursuant to section 12(b) or 12(g) of the Exchange Act or (ii) the
Acquiring Corporation shall acquire assets satisfying the requirements of
clauses (A), (B) and (C) of clause (ii) of the definition of Change of Control
contained in the Investment Agreement between the parties dated the date hereof,
and a majority of the value of the consideration to be received by ATI in
exchange therefor shall not consist of assets (or interests in assets) of a like
kind or nature, then ATI shall cause such agreement to provide that upon
consummation of such consolidation, merger or other business combination this
Agreement and the Merger Agreement shall be deemed to be modified and amended to
provide that Transferee shall receive Acquiror Preferred Stock rather than
Series B Preferred Stock in any Merger or Sale. Accordingly, from and after such
consummation references herein to Series B Preferred Stock shall be deemed to be
references to Acquiror Preferred Stock. If any such consolidation, merger or
other business combination shall be consummated after the Notice Date and prior
to the Closing, the Closing shall be delayed for an appropriate period to
determine under Section 1.3 the number of shares of Acquiror Preferred Stock to
be issued at the Effective Time or the Closing, as the case may be, and to
satisfy all conditions to the Merger or the Closing. ATI shall not enter into
any such consolidation, merger or other business combination unless the
Acquiring Corporation assumes in writing all the obligations of ATI hereunder.
The provisions of this Section 3.5 shall apply to successive consolidations,
mergers or other business combinations.
3.5. Contributions, Distributions and Dividends After the Notice Date. ATI
agrees to compensate Transferee at the Effective Time or at the Closing, as the
case may be, for (i) any dividends (other than those for which adjustments have
been made pursuant to Section 1.3(i)) that would have
-7-
<PAGE> 128
been received prior to the Effective Time or the Closing Date by Transferee in
respect of the Aggregate Consideration if the Aggregate Consideration had been
issued to Transferee on or prior to the first record date therefor announced by
ATI subsequent to the Notice Date, and (ii) any capital contributions to WMC
made by Transferee or its Affiliates with respect to the WMC Interest during the
period after the Notice Date and prior to the Effective Time or the Closing, as
the case may be. Transferee agrees to make, or to cause to be made, all capital
contributions due after the Notice Date and prior to the Effective Time or the
Closing, as the case may be, to the extent any such capital contribution, if not
made, would constitute a Defaulted Contribution (as defined in the WMC
Partnership Agreement). Transferee agrees to compensate ATI at the Closing for
any distributions received by Transferee or its Affiliates with respect to the
WMC Interest during the period after the Notice Date and prior to the Closing.
ARTICLE IV
CONDITIONS TO CLOSING OF THE SALE
4.1. Conditions to Each Party's Obligation to Effect the Sale. The
obligations of the parties hereto to consummate the Sale are subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:
(a) No Prohibition. The consummation of the Sale shall not be prohibited by
any order, decree or injunction of a court of competent jurisdiction (each party
agreeing to use all reasonable efforts to have any such order reversed or
injunction lifted), and there shall not have been any action taken or any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Sale by any Governmental Entity that makes consummation of the Sale illegal.
(b) Authorizations. All required authorizations, orders, grants, consents,
permissions, approvals and waivers of any governmental entity with jurisdiction
over the Sale (including all filings under the HSR Act and the expiration of all
waiting periods thereunder) shall have been received and shall remain in effect,
other than authorizations, orders, grants, consents, permissions and approvals
the failure of which to receive would not, singly or in the aggregate, have a
material adverse effect on the business condition of Transferee or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to effect the
Sale are subject to the satisfaction or waiver, at or before the Closing, of
each of the following conditions, except to the extent that any failure of the
conditions set forth in paragraphs (a) or (b) below results in damage to ATI
that is fully compensable by monetary damages.
(a) Representations and Warranties. The representations and warranties of
Transferee set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Transferee. Transferee shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(c) Nature of Acquisition. Transferee shall have provided ATI with an
undertaking to the effect that Transferee is acquiring the shares of Preferred
Stock hereunder for its own account, for investment and not with a view to the
resale or distribution thereof, except in compliance with the Securities Act of
1933, as amended.
(d) No Change of Control. There shall not have been a Change of Control of
Transferee at any time after the date hereof and Transferee shall
-8-
<PAGE> 129
not be a party to any agreement which contemplates a transaction (or series of
transactions) which, when consummated, would result in a Change of Control of
Transferee.
4.3. Conditions to Obligations of Transferee. The obligations of Transferee
to effect the Sale are subject to the satisfaction or waiver, at or before the
Closing, of each of the following conditions, except to the extent that the
failure of any such condition results in damage to Transferee that is fully
compensable by monetary damages:
(a) Representations and Warranties. The representations and warranties of
ATI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of ATI. ATI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
4.4. Abandonment of Merger or Sale. In the event that the Effective Time or
the Closing, as the case may be, has not occurred within two years after the
Notice Date, either ATI or Transferee may elect, subject to the following
sentence, by written notice to the other to abandon the Merger or the Sale, as
the case may be, in which event this Agreement shall be operative thereafter as
if the notice delivered pursuant to Section 1.2 never had been delivered;
provided, however, that in the event July 25, 2004 shall have occurred within
the foregoing two year period, such two year period may be extended, subject to
the following sentence, at the option of either party, by written notice to the
other delivered prior to the expiration of such two year period, for one
additional year. Notwithstanding the foregoing, the right to abandon the Merger
or the Sale, or to extend the two-year period for one additional year, pursuant
to this Section shall not be available to any party whose failure to fulfill any
obligation under this Agreement or the Merger Agreement has been the cause of,
or results in, the failure of the Effective Time or the Closing to have occurred
within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification.
(a) Indemnification by ATI. ATI shall defend, indemnify and hold harmless
Transferee and each of Transferee's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (Transferee and
such persons, collectively, "Transferee's Indemnified Persons"), and shall
reimburse Transferee's Indemnified Persons for, from and against each and every
demand, claim, loss, liability, judgment, damage, cost and expense (including,
without limitation, interest, penalties, costs of preparation and investigation,
and the reasonable fees, disbursements and expenses of attorneys, accountants
and other professional advisors) (collectively, "Losses") imposed on or incurred
by Transferee's Indemnified Persons, directly or indirectly (including without
limitation diminution in value of an equity interest), relating to, resulting
from or arising out of any inaccuracy in any representation or warranty of ATI
herein or in the Merger Agreement in any respect, whether or not Transferee's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of ATI under this Agreement, the Merger
Agreement, or any certificate or other document delivered or to be delivered
pursuant hereto. The parties agree that the Tax Adjustment described in Section
1.5(a) is an agreed upon payment limited to the failure to execute the Merger
Agreement under the circumstances described therein and is not intended as an
admission of the fact or measure of damages for any purpose,
-9-
<PAGE> 130
and that this Section 5.1 shall govern with respect to a Loss relating to,
resulting from or arising out of any other matter described in the foregoing
sentence.
(b) Indemnification by Transferee. Transferee shall defend, indemnify and
hold harmless ATI and each of ATI's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (ATI and such
persons, collectively, "ATI's Indemnified Persons"), and shall reimburse ATI's
Indemnified Persons, for, from and against all Losses imposed on or incurred by
ATI's Indemnified Persons, directly or indirectly (including without limitation
diminution in value of an equity interest), relating to, resulting from or
arising out of any inaccuracy in any representation or warranty of Transferee
herein or in the Merger Agreement in any respect, whether or not ATI's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of Transferee under this Agreement, the
Merger Agreement, or any certificate or other document delivered or to be
delivered pursuant hereto.
ARTICLE VI MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Fair Market Value without a Control Premium" means, with respect to
the WMC Interest as of the Notice Date, the price at which a willing seller
would sell, and a willing buyer would buy, the WMC Interest, each being apprised
of all relevant facts with respect to the WMC Interest and neither acting under
compulsion, in an arm's-length negotiated transaction with an unaffiliated third
party without time constraints.
(b) "Fair Market Value" means, with respect to the Series B Preferred
Stock, as of the Notice Date, the price at which a willing seller would sell,
and a willing buyer would buy, shares of Series B Preferred Stock each being
apprised of all relevant facts with respect to ATI and neither acting under
compulsion, in an arm's-length negotiated transaction with an unaffiliated third
party without time constraints.
(c) "Voting Power Outstanding" means the aggregate number of votes which
may be cast by holders of those securities outstanding which entitle the holders
thereof to vote generally on all matters submitted to ATI's shareholders for a
vote.
All capitalized terms in this Agreement which are not defined herein shall
have the meanings set forth in the WMC Partnership Agreement as in effect on the
date hereof.
6.2. Termination. This Agreement and the Merger Agreement shall
automatically terminate (whether or not a notice has previously been delivered
pursuant to Section 1.2 hereof) at such time as Transferee no longer holds any
WMC interest. The termination of this Agreement shall not relieve any party from
liability for any breach hereof or of the Merger Agreement.
6.3. Severability. If any term, provision, covenant or restriction of this
Agreement is determined to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
6.4. Specific Enforcement. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms
-10-
<PAGE> 131
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this being in addition to any other remedy to
which they may be entitled by law or equity.
6.5. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
Transferee contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein,
neither ATI nor Transferee makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement may be amended only by
a writing executed by the parties hereto. The parties hereto may amend this
Agreement without notice to or the consent of any third party.
6.6. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) when personally
delivered or transmitted by telecopier on a business day during normal business
hours where such notice is to be received at the address or number designated
below or (b) on the business day following the date of mailing by overnight
courier, fully prepaid, addressed to such address, whichever shall first occur.
The addresses for such communications shall be:
If to ATI: AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to Transferee: _________________________
_________________________
_________________________
With a copy to: _________________________
_________________________
_________________________
Any party may change its address for notices under this Section 6.6 by giving at
least 10 days' prior notice of such changed address to the other party hereto.
6.7. Legends. All certificates evidencing shares of Preferred Stock acquired
by Transferee directly or indirectly pursuant to this Agreement shall be
endorsed with the legends set forth below:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR
UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN INVESTMENT
AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER SET FORTH THEREIN), DATED
AS OF ______________ _____, ______ BETWEEN THE COMPANY
-11-
<PAGE> 132
AND USW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF
THE CORPORATE SECRETARY OF THE COMPANY.
6.8. Removal of Legends. Any legend endorsed on a certificate pursuant to
Section 6.7 shall be removed (i) with respect to the first legend set forth
under Section 6.7, (A) if the securities represented by such certificate shall
have been effectively registered under the Securities Act or otherwise lawfully
sold in a public transaction, or (B) if the holder of such securities shall have
provided ATI with an opinion of counsel, in form and substance acceptable to ATI
and its counsel stating that a sale, transfer or assignment of the securities
may be made without registration under the Securities Act of 1933, as amended,
and (ii) to the second legend set forth under Section 6.7, if the securities
represented by such certificate shall have been effectively transferred in
compliance with clause (ii), (iii) or (iv) of the second sentence of Section
5.3(a) of the Investment Agreement dated as of ________ __, ____ between ATI and
Transferee (the "Investment Agreement") or all the obligations of Transferee
under Articles V or VIII of the Investment Agreement have terminated, or a
Change of Control of ATI has occurred..
6.9. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
6.10. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and legal representatives.
Neither ATI nor Transferee shall assign this Agreement or any rights hereunder
without the prior written consent of the other (which consent may be withheld
for any reason in the sole discretion of the party from whom consent is sought);
provided, however, that Transferee may assign its rights (but not its
obligations) under this Agreement to a Wholly Owned Subsidiary that is the
direct beneficial owner of the WMC Interest.
6.12. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
6.13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
6.14. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
6.15. Arbitration. The parties agree to submit to arbitration their disputes
described in the Arbitration Agreement dated the date hereof between ATI and
Transferee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
-12-
<PAGE> 133
AIRTOUCH COMMUNICATIONS, INC.
By _______________________________
Name:
Title:
TRANSFEREE
By _______________________________
Name:
Title:
-13-
<PAGE> 134
Term Sheet
Note to be Issued by ATI to USW Pursuant to Section 10.8
Securities: Senior Notes
Principal amount split equally
between four tranches.
Credit: - Rating of A- or better by
both S&P and Moody's
(separately an "Agency")
- Credit supported if necessary
Maturity: Tranche 1: 6 mos.
Tranche 2: 1 year
Tranche 3: 18 mos.
Tranche 4: 2 years
Price: Par
Interest Rate: - For each tranche fixed at
issuance or floating at
option of USW.
- Payable quarterly.
Interest Rate Adjustment: - Any time credit rating by an
Agency falls two notches,
interest rate adjusts to
reprice notes to par.
Covenants: - Lesser of: (i) covenants of
existing debt securities of
the Company, or
(ii) "standard" investment
grade covenants.
- If rating by an Agency falls
below BBB, typical covenants
including:
- Debt incurrence
- Restricted payments
Transfer Restrictions: None
Registration Rights: Notes will be registered for
resale to the public at USW's
option.
Prepayment: Prepayable at any time at par at
option of issuer as long as Notes
are held by USW; not prepayable if
sold by USW.
<PAGE> 135
Exhibit F
As determined by mutual written agreement of the Partners.
<PAGE> 1
EXHIBIT 10.2
Draft 9/30/95
----------------------------------------
PCS NUCLEUS, L.P.
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
DATED AS OF SEPTEMBER 30, 1995
BETWEEN
AIRTOUCH PCS HOLDING, INC.
AND
U S WEST PCS HOLDINGS, INC.
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
(Not part of the Agreement)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE 1 GENERAL PROVISIONS.......................................... 1
1.1. Formation and Continuation of the Partnership.................... 1
1.2. Name ............................................................ 2
1.3. Principal Place of Business...................................... 2
1.4. Registered Office; Agent for Service of Process.................. 2
1.5. Business of the Partnership...................................... 2
1.6. Term of the Partnership.......................................... 3
1.7. Qualification of Other Jurisdictions............................. 3
1.8. Definitions...................................................... 4
ARTICLE 2 MANAGEMENT.................................................. 11
2.1. Partnership Committee........................................... 11
2.2. Partnership Committee Meetings.................................. 11
2.3. Voting.......................................................... 12
2.4. No Compensation................................................. 14
2.5. Acts by Partners................................................ 14
2.6. Procedures in the Event of a Dispute............................ 15
2.7. President-PCS................................................... 15
2.8. Business Plan................................................... 15
2.9. Budget Approval................................................. 15
2.10. Employees and Employee Benefits................................. 16
2.11. Access to Books of Account...................................... 16
2.12. Confidential Information........................................ 16
2.13. Duty of Partners to Cooperate................................... 18
2.14. Agreements with Partnership or Owned Systems.................... 18
ARTICLE 3 CERTAIN AGREEMENTS REGARDING OPERATIONS OF THE
PARTNERSHIP AND THE PCS OWNED SYSTEMS..... 19
3.1. General; Fiduciary Obligations................................... 19
3.2. License Agreements............................................... 20
3.3. Services Agreement............................................... 20
3.4. PCS Owned Systems................................................ 20
3.5. System Budget Approval........................................... 20
3.6. System Business Plans............................................ 20
3.7. Management Reports............................................... 21
3.8. Financial Statements............................................. 21
ARTICLE 4 CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS..... 21
4.1. Capital Accounts................................................. 21
4.2. Initial Contributions of Capital................................. 22
4.3. Additional Contributions by Partners............................. 23
4.4. Partner Obligations.............................................. 24
4.5. Withdrawals of Capital Accounts.................................. 24
4.6. Interest on Capital Accounts..................................... 24
4.7. Revaluation of Partnership Assets................................ 24
4.8. Redetermination of Percentage Interests.......................... 25
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS............................... 27
5.1. Profits and Losses............................................... 27
5.2. Distributions.................................................... 31
ARTICLE 6 TAX MATTERS AND REPORTS; ACCOUNTING......................... 32
6.1. Filing of Tax Returns............................................ 32
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
6.2. Tax Matters Partner.............................................. 32
6.3. Tax Reports to Current and Former Partners....................... 32
6.4. Accounting Records; Independent Audit............................ 33
6.5. Fiscal Year...................................................... 33
6.6. Tax Accounting Method............................................ 33
6.7. Withholding...................................................... 33
6.8. Tax Elections.................................................... 33
6.9. Prior Tax Information............................................ 34
ARTICLE 7 INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS......... 34
7.1. Indemnification of the Partners.................................. 34
7.2. Exculpation...................................................... 35
7.3. Restrictions on Partners......................................... 35
7.4. Outside Activities............................................... 35
7.5. Duties of Partners............................................... 36
ARTICLE 8 TERMINATION AND DISSOLUTION................................. 37
8.1. Events of Dissolution............................................ 37
8.2. Bankruptcy of a General Partner.................................. 37
8.3. Order of Dissolution............................................. 38
8.4. Orderly Winding Up............................................... 39
8.5. Dissolution Election............................................. 39
8.6. Obligation to Restore Deficit Balance............................ 40
8.7. Termination of Partnership....................................... 40
ARTICLE 9 ADMISSION OF ADDITIONAL PARTNERS............................ 40
9.1. Admission Procedures............................................. 40
ARTICLE 10 TRANSFER OR ENCUMBRANCE OF INTEREST......................... 41
10.1. Restriction on Transfer or Encumbrance.......................... 41
10.2. Transfer of Partnership Interest to a Wholly Owned
Affiliate................................................... 41
10.3. Partnership's Redemption Option................................. 41
10.4. Spin-off Not Deemed to be a Transfer............................ 42
10.5. Invalid Transfers Void.......................................... 42
10.6. Change in Ownership............................................. 42
10.7. Proportional Transfers of WMC Interest.......................... 42
ARTICLE 11 REGULATORY MATTERS.......................................... 42
11.1. MFJ Compliance.................................................. 43
ARTICLE 12 MISCELLANEOUS............................................... 44
12.1. Notices......................................................... 44
12.2. Governing Law, etc.............................................. 45
12.3. Amendments...................................................... 45
12.4. Entire Agreement................................................ 46
12.5. Waiver of Partition............................................. 46
12.6. Consents........................................................ 46
12.7. Successors...................................................... 46
12.8. Counterparts.................................................... 46
12.9. Severability.................................................... 46
12.10. Survival........................................................ 46
12.11. Arbitration..................................................... 46
</TABLE>
-ii-
<PAGE> 4
PCS NUCLEUS, L.P.
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of PCS
NUCLEUS, L.P. (the "Partnership") is entered into and effective as of September
30, 1995, by and between AirTouch PCS Holding, Inc., a Delaware corporation
("ATPH"), and U S West PCS Holdings, Inc., a Colorado corporation ("USWPH"),
each of which shall be both a general partner and a limited partner as set forth
herein (collectively, the "Partners").
WHEREAS, the Partners or certain of their Affiliates (as hereinafter
defined) are parties to an Amended and Restated Joint Venture Organization
Agreement of even date herewith;
WHEREAS, regional and national markets are developing in the wireless
communications business, and it is becoming increasingly important to increase
the scale and scope of services offered to compete effectively in such markets;
WHEREAS, the Partners have therefore concluded that it will be in their
best interests, and the best interests of the public, to form the Partnership
for the purpose of acquiring, owning, operating, managing, maintaining and
constructing PCS Systems (as hereinafter defined) and, in furtherance thereof,
ATPH and USWPH wish to become partners in the Partnership (as hereinafter
defined);
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained and in order to set forth the respective rights,
obligations and interests of the Partners to one another and to the Partnership,
the Partners hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1. Formation and Continuation of the Partnership. The Partnership was
heretofore formed under the laws of the State of Delaware on July 25, 1994
pursuant to an agreement of limited partnership, by and between AirTouch
Communications, a California corporation, and USW, dated as of July 25, 1994
(the "Original Partnership Agreement"). The Partners hereby amend and restate
the Original Partnership Agreement in its entirety, and the Partnership shall
continue without dissolution or interruption as a limited partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act, as it may be amended
from time to time (the "Act"), and this Agreement. Except as provided in this
Agreement, the rights, duties, liabilities and obligations of the Partners and
the administration, dissolution, winding up and termination of the Partnership
shall be governed by the Act.
1.2. Name. The name of the Partnership shall be: PCS Nucleus, L.P.
The name of the Partnership may be changed by the Partnership Committee.
1.3. Principal Place of Business. The principal place of business of
the Partnership shall be c/o AirTouch Communications, Inc., 2999 Oak Road,
Walnut Creek, California 94596. The principal place of business of the
Partnership may be changed by the Partnership Committee.
1.4. Registered Office; Agent for Service of Process. The address of
the Partnership's registered office in the State of Delaware is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
-1-
<PAGE> 5
Wilmington, New Castle County, Delaware 19801. The agent for service of process
at such address for the Partnership in the State of Delaware is The Corporation
Trust Company. Agents for service of process of the Partnership may be changed
by the Partnership Committee.
1.5. Business of the Partnership.
(a) The purpose of the Partnership is to acquire, own, lease, operate,
manage and maintain PCS Systems or interests in PCS Systems; to provide the
services which may from time to time be offered, and to engage in the resale of
wireless voice and data communications services, utilizing the frequencies
allocated by the FCC for PCS Systems; to make and prosecute any and all
applications for or renewals of licenses for PCS Systems; to design, construct
and develop PCS Systems; and to engage in other businesses utilizing, to the
extent of cell sites, mobile telephone switching offices, computer programs or
other aspects specific to PCS Systems, the Partnership's then existing business
infrastructure or communications network (the "Partnership Business"). In
connection therewith and subject thereto, the Partnership shall have the power:
(i) to enter into leases for, or purchase properties necessary for, antennae,
base stations and office sites; (ii) to construct improvements in, furnish and
equip the sites; (iii) to acquire or lease all equipment, supplies and services
necessary for the design, development, construction, ownership, operation,
management and maintenance of PCS Systems; (iv) to borrow or raise money
necessary for the acquisition, design, development, construction, ownership,
operation, management and maintenance of PCS Systems; (v) to use any
contributions from the Partners for such purposes; (vi) to execute any documents
required in connection with the foregoing; (vii) to do any and all acts and
things which may be necessary, incidental or convenient to carry on the
Partnership Business as contemplated by this Agreement; and (viii) to take any
other action permissible under the Act in connection with the Partnership
Business. The Partnership may engage in any business other than the Partnership
Business as the Partnership Committee may determine. Notwithstanding anything to
the contrary herein, the Partnership shall not acquire, own, lease, operate,
manage or maintain PCS Systems outside of the 50 states of the United States,
the District of Columbia, Puerto Rico, the Gulf of Mexico and Guam.
(b) Subject to the terms of this Agreement, the Partnership may
enter into, deliver and perform all contracts, agreements and other
undertakings and engage in all activities and transactions as may be
necessary or appropriate to carry out the foregoing purposes. Without
limiting the foregoing, the Partnership may, subject to the terms of this
Agreement:
(i) enter into license agreements, service contracts or other
contractual relationships with WMC;
(ii) acquire, sell, lease, exchange, transfer, assign, encumber,
pledge or mortgage securities and assets in PCS Systems (or licenses or
permits therefor) or otherwise exercise all rights, powers, privileges
and other incidents of ownership or possession with respect to such
securities and assets;
(iii) borrow or raise money and secure the payment of any
obligations of the Partnership by mortgage upon, or pledge or
hypothecation of, all or any part of the assets of the Partnership;
(iv) engage personnel, whether part-time or full-time, to do such
acts as are necessary or advisable in connection with the maintenance,
operation and administration of the Partnership and its investments
(avoiding redundancies with the staff and operations of WMC); and
-2-
<PAGE> 6
(v) engage attorneys, independent accountants, investment bankers,
consultants or such other Persons as are necessary or advisable.
(c) Notwithstanding the foregoing, the Partnership will not, directly
or indirectly, engage in any act that would put the Partnership, or any Partner,
in violation of the MFJ. For example, the Partnership will not engage in any
activity that would constitute the provision of interexchange (interLATA)
telecommunications service, the provision of telecommunications equipment, or
the manufacture of a telecommunications product (all as defined by the MFJ, the
Decree Court, or both), unless any such activity has been the subject of a
waiver or other legislative or court relief, or the MFJ otherwise ceases to
apply to the activities of the Partnership.
1.6. Term of the Partnership. The term of the Partnership shall
commence on the date the Certificate of Limited Partnership of the Partnership
is filed in the office of the Secretary of State of the State of Delaware, and
shall continue through the 99th anniversary thereof, unless earlier dissolved as
provided in Section 8.1. The existence of the Partnership as a separate legal
entity shall continue until the cancellation of the Partnership's Certificate of
Limited Partnership.
1.7. Qualification of Other Jurisdictions. The General Partners shall
cause the Partnership to be qualified, formed, or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership owns property or engages in activities if such qualification,
formation or registration is necessary to permit the Partnership lawfully to own
property and engage in the Partnership's business or transact business. The
General Partners shall execute, file and publish all such certificates, notices,
statements or other instruments necessary to permit the Partnership to engage in
the Partnership's business as a limited partnership in all jurisdictions where
the Partnership elects to engage in or do business.
1.8. Definitions. (a) For purposes of this Agreement the following
terms have the following meanings (unless indicated otherwise, all Article
and Section references are to Articles and Sections in this Agreement, and
all Schedule references are to Schedules to this Agreement):
"Additional Partner" means any additional Person admitted to the
Partnership pursuant to Article 9.
"Adjusted Capital Contributions" means, for each Partner, the
cumulative amount of such Partner's contributions to the Partnership which for
purposes of this definition shall be equal to the sum of (i) the amount of cash
and the Fair Market Value of any other property, plus (ii) such Partner's share
of the cumulative amount of Adjusted Revaluation Gain plus (iii) 7.5% of the
cumulative amount of such Partner's Make-Up Contributions which relate to
another Partner's Defaulted Contributions, less (iv) such Partner's share of the
cumulative amount of Adjusted Revaluation Loss, less (v) 7.5% of such Partner's
Defaulted Contributions. "Adjusted Capital Contributions" shall also be reduced
by (or, if appropriate, shall not include) the amount of cash and the Fair
Market Value of any property (determined in accordance with Section 4.9 as of
the date of distribution) distributed by the Partnership to such Partner in
redemption of a portion (but not all) of such Partner's interest in the
Partnership (including any distribution pursuant to Section 5.2(d) hereof).
"Adjusted Revaluation Gain" or "Adjusted Revaluation Loss" means,
respectively, the Revaluation Gain or Revaluation Loss, as the case may be, with
respect to an asset being revalued which would have arisen had the basis used in
computing Revaluation Gain or Revaluation Loss been equal to the Capital Account
book basis of such asset immediately following the later of its contribution or
acquisition or any immediately preceding revaluation under Section 4.7 hereof.
-3-
<PAGE> 7
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the Person specified; provided, however, that (i) the Partnership shall not be
deemed to be an Affiliate of ATPH, USWPH or any of their respective Affiliates,
(ii) any wireline cable television company in which USW and its Affiliates do
not have an ownership interest in excess of 50% shall not be considered an
Affiliate of USW, and (iii) Cellular Communications, Inc. ("CCI"), a Delaware
corporation, shall not be considered an Affiliate of ATI until such time, if
ever, as ATI shall be entitled to exercise full discretion with respect to
voting the shares of common stock of CCI beneficially owned by ATI (other than
shares of common stock of CCI beneficially owned by ATI by virtue of its
ownership of the Class A Preference Stock of CCI). For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to (i) vote in excess of 50% of the Voting Stock of such
Person, or (ii) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.
"Agreement" means this Agreement of Limited Partnership of the
Partnership, as it may be amended, supplemented or restated from time to time.
"Appraiser" means any of the First Appraiser, the Second Appraiser and
the Third Appraiser as defined in Section 4.9 hereof.
"Appraiser's Certificate" means a certificate prepared by an Appraiser,
executed on behalf of an Appraiser by a duly authorized officer thereof, and
setting forth such Appraiser's opinion as to the Fair Market Value of an asset.
"ATI" means AirTouch Communications, Inc., a Delaware corporation.
"Attributed Entity" means, with respect to any Partner, any Person
whose ownership of Systems (or licenses or permits therefor) would be
attributable, in whole or in part, to such Partner under applicable FCC
regulations.
"Bankruptcy" of a Partner means (i) the filing by such Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other bankruptcy or
insolvency law, or such Partner's filing an answer consenting to or acquiescing
in any such petition, (ii) the making by such Partner of any assignment for the
benefit of its creditors or the admission by such Partner in writing of its
inability to pay its debts as they mature or (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), an application for the
appointment of a receiver for the assets of such Partner, or an involuntary
petition seeking liquidation, reorganization, arrangements, composition,
dissolution or readjustment of its debts or similar relief under any bankruptcy
or insolvency law; provided that the same shall not have been vacated, set aside
or stayed within such 60-day period.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended.
"Budget" means a one-year revenue, expense and capital expenditure
budget for the Partnership, as it may be amended from time to time in accordance
with the terms of this Agreement.
"Business Plan" means a five-year business plan for the Partnership, as
it may be amended from time to time in accordance with the terms of this
-4-
<PAGE> 8
Agreement, which shall include (i) an annual operating budget for each year
contemplated in the business plan; (ii) a five-year financial plan for the
Partnership; and (iii) a general description of the key underlying assumptions
and key strategies.
"Capital Account" means the capital account maintained by the
Partnership for each Partner as described in Section 4.1.
"CECO" means the Civil Enforcement Consent Order entered by the Decree
Court on February 2, 1989.
"CECO Decree Committee" means the committee created by USW pursuant to
the CECO for the review of USW's business activities.
"Change of Control" has the meaning set forth in the Amended and
Restated Investment Agreement dated as of September 30, 1995, by and between ATI
and USW, as amended, modified or supplemented from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means all confidential documents and
information (including, without limitation, confidential commercial information
and information with respect to customers and proprietary technologies or
processes and the design and development of new products or services) concerning
the Partnership, WMC, the PCS Owned Systems, other PCS Systems in which the
Partnership has an ownership interest, the Partners or their Affiliates
furnished to a Partner in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Partnership, WMC, the
PCS Owned Systems, or other PCS Systems in which the Partnership has an
ownership interest or their respective businesses, except to the extent that
such information can be shown to have been (a) generally available to the public
other than as a result of a breach of the provisions of Section 2.12 of this
Agreement; (b) already in the possession of the receiving Person or its
Representatives (as such term is defined in Section 2.12 hereof) without
restriction and prior to any disclosure in connection with the Partnership or
pursuant to any of the terms of this Agreement; (c) lawfully disclosed to the
receiving Person or its Representatives by a third party who is free lawfully to
disclose the same; or (d) independently developed by the receiving Person
without use of any Confidential Information obtained in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Partnership, WMC, the PCS Owned Systems and other PCS Systems in which
the Partnership has an ownership interest, or their respective businesses.
"Decree Court" means the court having original jurisdiction over MFJ
waivers.
"Defaulted Contributions" means, for each Partner, the cumulative
amount of any capital contributions required to be made under Section 4.3(a),
which have not been made by such Partner prior to expiration of the 15-day grace
period provided for in Section 4.3(b), regardless of whether such amounts are
thereafter contributed; provided that such capital contributions had been
specifically identified as to use (i) in a Budget approved pursuant to Section
2.9(a), (ii) in a Budget for the following year approved pursuant to Section
2.9(b) or (iii) by other action of the Partnership Committee.
"Effective Date" means July 25, 1994.
"EO" means the Enforcement Order entered by the Decree Court on
February 15, 1991.
"Fair Market Value" means, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and
-5-
<PAGE> 9
neither acting under compulsion, such asset in an arm's-length negotiated
transaction with an unaffiliated third party without time constraints.
"FCC" means the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
"GAAP" means generally accepted accounting principles.
"General Partner" means each of ATPH and USWPH, and includes any Person
who becomes an Additional General Partner of the Partnership or a Substitute
General Partner of the Partnership pursuant to the provisions of this Agreement.
"General Partner Percentage Interest" means, with respect to any
Partner, the Percentage Interest of such Partner as a General Partner of the
Partnership. The initial General Partner Percentage Interest of each
Partner is set forth on Schedule 1.
"License Agreement" means an agreement to be entered into by the
Partnership and WMC as contemplated by Section 3.2 hereof and incorporating such
terms and conditions as may be approved by WMC, taking into account the terms
and conditions set forth in Exhibit A to the WMC Agreement and all other
relevant facts and circumstances.
"Limited Partner" means each of ATPH and USWPH, and includes any Person
admitted as an Additional Limited Partner of the Partnership or a Substitute
Limited Partner of the Partnership pursuant to the provisions of this Agreement.
"Limited Partner Percentage Interest" means, with respect to any
Partner, the Percentage Interest of such Partner as a limited partner of the
Partnership. The initial Limited Partner Percentage Interest of each
Partner is set forth on Schedule 1.
"Make-Up Contributions" means, for each Partner, the amount of any
capital contribution made by such Partner which such Partner is permitted, but
not required, to make under Section 4.3(b) upon failure of another Partner to
make a required capital contribution.
"MFJ" means the Modification of Final Judgment entered in United
States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), and as subsequently modified
from time to time, or any legislative scheme embodying substantially similar
restrictions.
"MFJ Compliance Committee" means the committee created by USW pursuant
to the EO for the review of USW's business practices.
"MFJ Restricted Activity" means an activity or business the undertaking
of which by the Partnership would cause the Partnership, or any Partner, to be
in violation of the MFJ.
"Net Operating Available Cash" means at the time of determination, (a)
all cash and cash equivalents on hand in the Partnership, less (b) the Forecast
Cash Requirements, if any, of the Partnership, as determined by the Partnership
Committee in a manner consistent with an Approved Budget. For purposes of this
definition, "Forecast Cash Requirements" means, for the four-month period
following the date of determination, the excess, if any, of (a) forecast capital
expenditures, capital contributions to other entities and other investments,
acquisitions, cash income tax payments and debt service (including principal and
interest) requirements and other non-cash credits to income, plus forecast cash
reserves for future operations or other requirements, over (b) forecast net
income of the Partnership, plus the sum of forecast depreciation, amortization,
interest expenses, income tax expenses and other non-cash charges to income, in
each case to the extent deducted in determining such net income, plus or minus
forecast
-6-
<PAGE> 10
changes in working capital, plus the forecast cash proceeds of dispositions of
assets (net of expenses), plus an amount equal to the forecast net proceeds of
debt financings.
"Organization Agreement" means the Amended and Restated Joint Venture
Organization Agreement, dated as of September 30, 1995, between USW and ATI, as
amended, modified or supplemented from time to time.
"Organizational Expenses" shall mean organizational expenses as defined
under Code Section 709 of the Internal Revenue Code.
"Parent Entity" means, ATI or USW and their respective successors and
assigns, whether by means of merger, spinoff in accordance with Section
10.4. hereof or otherwise.
"Partner" means ATI or USW and any Additional or Substitute General
Partner or Limited Partner of the Partnership. ATPH and USWPH shall be admitted
as Partners of the Partnership on the date hereof. A Person who is not admitted
on the date hereof as a partner of the Partnership shall be deemed admitted as a
Partner upon satisfaction of the requirements of Section 9.1 of this Agreement
upon execution by or on behalf of such Person of this Agreement or a counterpart
hereof.
"Partnership Interest" means, for each Partner separately, all of the
Partner's interest in, and rights and obligations in connection with, the
Partnership whether as a General Partner or Limited Partner.
"PCS" means those commercial mobile radio services offered by a PCS
System.
"PCS Owned System" means any PCS System (a) in which the Partnership
owns, directly or indirectly, an equity interest, or which is leased by the
Partnership, and (b) with respect to which the Partnership possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"PCS Service" means the provision of any commercial mobile radio
service by a PCS System, including the resale of such service.
"PCS System" means a radio communications system authorized under the
rules for broadband personal communications services designated as Subpart E of
Part 24 of the FCC's rules in effect on the Effective Date, or any revision
thereto or successor thereof which may be in effect from time to time, including
the network, marketing, distribution, sales, customer interface and operations
functions relating thereto, or any business or enterprise which resells PCS
services.
"Percentage Interest" means, for each Partner, the quotient obtained by
dividing (i) such Partner's Adjusted Capital Contributions by (ii) the aggregate
Adjusted Capital Contributions for all Partners, as adjusted from time to time
pursuant to Section 4.8 hereof. The initial General Partner and Limited Partner
Percentage Interests of the Partners are set forth on Schedule 1
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, estate, unincorporated
organization, governmental or regulatory body or other entity.
"Primeco" means PCS Primeco, L.P., a Delaware limited partnership.
"Primeco Agreement" means the Agreement of Limited Partnership of PCS
Primeco, L.P. dated as of October 20, 1994, between PCS Co. and this
Partnership, as amended, modified or supplemented from time to time.
-7-
<PAGE> 11
"Prime Rate" means the rate announced, from time to time, by Bank of
America NT&SA at its home office as its prime rate.
"Revaluation Gain" means the amount of gain which would have been
realized had there been a taxable disposition of any Partnership asset being
revalued under Section 4.7 for an amount of cash equal to such asset's then Fair
Market Value, determined in accordance with the provisions of Section 4.9
hereof.
"Revaluation Loss" means the amount of loss which would have been
realized had there been a taxable disposition of any Partnership asset being
revalued under Section 4.7 for an amount of cash equal to such asset's then Fair
Market Value, determined in accordance with the provisions of Section 4.9
hereof.
"Services Agreement" means an agreement to be entered into by the
Partnership and WMC as contemplated by Section 3.2 hereof and incorporating such
terms and conditions as may be approved by WMC, taking into account the terms
and conditions of the Phase I Services Agreement (as defined in the WMC
Agreement) and all other relevant facts and circumstances.
"Substitute Partner" means any Person admitted to the Partnership
pursuant to Article 10.
"System" means a Cellular System (as defined in the WMC Partnership
Agreement), an ESMR System (as defined in the WMC Partnership Agreement), or a
PCS System, or any business or enterprise which resells to Cellular, ESMR an PCS
Services (each as defined in the WMC Partnership Agreement) provided by any of
the foregoing.
"Tax Matters Partner" means the Tax Matters Partner of the Partnership
as referred to in Section 6.2.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments) and "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect to
Taxes.
"USW" means U S WEST, Inc., a Colorado corporation.
"Voting Stock" means capital stock issued by a corporation, or
comparable interests in any other Person, the holders of which are ordinarily
entitled to vote for the election of directors (or Persons performing similar
functions) of such Person.
"Wholly Owned Affiliate" means, as to any Person, an Affiliate of such
person all of the equity interests of which are owned, directly or indirectly,
by a Partner, by another Wholly Owned Affiliate of such Person or by the Parent
Entity thereof.
"Wireless Assets" means, with respect to any Partner, all of such
Partner's interests in WMC, such Partner's Phase II Assets and Scheduled Phase
II Related Assets (each as defined in the WMC Partnership Agreement) and the
Partnership.
"WMC" means WMC Partners, L.P., a Delaware limited partnership, or any
successor thereto.
-8-
<PAGE> 12
"WMC Partnership Agreement" means the Amended and Restated WMC
Partners, L.P. Agreement of Limited Partnership, dated as of September 30, 1995,
among members of the ATI Group and members of USW Group, as amended, modified or
supplemented from time to time.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Approved Budget 2.9(a)
Approved Business Plan 2.8(a)
Act 1.1
Affiliate Transferee 10.2(a)
Default Fees 4.3(b)
Indemnified Party 7.1
Late Fees 4.3(a)
LEC Affiliates 2.3(d)
Member 2.1(a)
Partial Interest 10.2(b)
Partnership Business 1.5(a)
Partnership Committee 2.1(a)
Related Party Agreement 2.14(a)
</TABLE>
ARTICLE 2
MANAGEMENT
2.1. Partnership Committee.
(a) The partnership committee of the Partnership (the "Partnership
Committee") shall be composed of three individuals appointed by each General
Partner (collectively the "Members" and individually a "Member"), or such lesser
number of Members as may be determined by a vote of the Members representing
each General Partner; provided that any Affiliate Transferees pursuant to
Section 10.2 shall not be entitled separately to designate Members. Each Member
shall be an officer or employee of a Partner or an Affiliate thereof.
(b) Effective upon the giving of notice thereof to the other Partners,
any General Partner may, at any time, in its sole discretion, replace any or all
of its appointed Members with other individuals and may designate one or more
alternates for any or all of its Members. Each Member shall serve on the
Partnership Committee until his successor is appointed, or until his earlier
death, resignation or removal. Effective upon a General Partner ceasing to be a
general partner of the Partnership, the Members representing such General
Partner on the Partnership Committee shall cease to be Members.
(c) Except as otherwise required by the Act, no vote or approval by any
Limited Partner shall be required under this Agreement for the taking of an
action, including without limitation the amendment of this Agreement, and the
Percentage Interest of any Limited Partner who is not also a General Partner
shall not be included in any calculation of a Partner's Percentage Interest
entitled to vote on any matter.
(d) The Partnership Committee shall cause the Partnership to fulfill
the Partnership's obligations under this Agreement, the License Agreement, the
Services Agreement and the Organization Agreement, and to enforce all rights of
the Partnership under this Agreement, any License Agreement, any Services
Agreement and the Organization Agreement.
-9-
<PAGE> 13
2.2. Partnership Committee Meetings.
(a) The Partnership Committee shall hold regular meetings (at least
quarterly) at such time and place as shall be determined by the Partnership
Committee (or by the Chairman of the Partnership Committee). Special meetings of
the Partnership Committee may be called at any time by any General Partner by
delivering a notice of meeting in accordance with Section 2.2(g) hereof. Each
General Partner shall be limited to calling two special meetings per year.
(b) The Chairman of the Partnership Committee shall be appointed by the
Partnership Committee from time to time. The Chairman shall establish the
agendas for, and regulate the proceedings of, meetings of the Partnership
Committee, but must include on such agendas matters requested by any General
Partner in writing received at least two business days in advance of any
meeting.
(c) Members may participate in a meeting of the Partnership Committee
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(d) Any action required or permitted to be taken at any meeting of the
Partnership Committee may be taken without a meeting upon the unanimous written
consent of the Members representing each General Partner.
(e) The Partnership Committee shall appoint a Secretary from time to
time. The Secretary shall keep written minutes of all Partnership Committee
meetings. A duplicate copy of such minutes shall be provided to the Chairman of
the Partnership Committee and to each Member.
(f) A Member shall have the right to designate an alternate to attend
meetings of the Partnership Committee, in stead and in place of such Member, and
to exercise all of the functions of such Member. Any such alternate shall be an
officer or employee of a Partner or an Affiliate thereof. Any such alternate
shall be deemed to be a Member for all purposes hereunder until such designation
is revoked.
(g) Notice of each regular meeting and each special meeting of the
Partnership Committee shall be given to each Member at least three business days
before such meeting. Notices of special meetings shall contain a description, in
reasonable detail, of the items of business to be conducted at such meeting and
no business other than those items (unless expressly agreed to by Members
representing each of the General Partners whose Members are entitled to vote
thereon) may be conducted at such special meeting. The notice provisions of this
Section 2.2(g) shall be waived upon either the signing of a written waiver
thereof or attendance at a meeting by Members representing each General Partner.
2.3. Voting.
(a) On any matter on which a vote of the Partnership Committee is
taken, the Members representing a General Partner, if more than one Member has
been designated and is present at a meeting, shall vote the entire Percentage
Interest of such Partner (whether as a general partner or a limited partner of
the Partnership) as a single bloc. Any action that may be taken by the
Partnership Committee shall require the affirmative vote of Members representing
each of the General Partners entitled to vote thereon; provided that in the
event that all Members representing any General Partner shall abstain from the
vote on any matter (because of a conflict of interest or for any other reason),
the outcome of such vote shall be determined by the affirmative vote of Members
representing the other General Partners entitled to vote on such matter, and
such vote shall constitute the act of the Partnership Committee with respect to
such matter. A quorum of any
-10-
<PAGE> 14
meeting of the Partnership Committee shall require the presence of at least one
Member representing each General Partner entitled to vote thereon.
(b) Except as reserved herein for, or otherwise delegated to, the
General Partners or the President-PCS, the Partnership Committee shall have
authority and discretion to act on behalf of the Partnership on all matters that
a board of directors of a Delaware corporation would have, including, without
limitation, on the matters set forth elsewhere herein and with respect to the
following matters:
(i) any amendment of this Agreement;
(ii) a determination to engage in any business other than the
Partnership Business;
(iii) except as provided in Article 10, the admission of any
Additional General and Limited Partners to the Partnership;
(iv) the dissolution or liquidation of the Partnership;
(v) a merger or consolidation of the Partnership with or into
another Person, or the sale of all or substantially all of the
Partnership's assets;
(vi) the approval of Budgets and Business Plans, and material
amendments or revisions thereto;
(vii) a determination to require additional capital contributions
within any fiscal year; provided that capital contributions
specifically identified in an Approved Budget shall not require a
further vote of the Partnership Committee pursuant to this clause
(vii);
(viii) except as provided in Section 2.14(b) hereof or as
contemplated by an Approved Budget, the entering into of any
Related Party Agreement;
(ix) the authorization of the incurrence by the Partnership of
indebtedness for borrowed money not otherwise specifically identified
in an Approved Budget;
(x) the authorization of any acquisition or disposition of assets
not otherwise specifically identified in an Approved Budget;
(xi) determinations of PCS auction strategy, including the
identification of target PCS markets and bidding ranges;
(xii) the delegation of powers and authority of the Partnership
Committee to the President-PCS; and
(xiii) any distribution to the Partners of Partnership assets,
other than Net Operating Available Cash or distributions of Special
System Assets pursuant to Section 5.2(d), not otherwise contemplated in
an Approved Budget.
Each Partner, by execution of this Agreement, agrees to, consents to, and
acknowledges the delegation of powers and authority to the Members of the
Partnership Committee, and to the actions and decisions of such Members within
the scope of such Members' authority as provided herein and in accordance with
the License Agreement and Services Agreement.
(c) The Partnership Committee shall receive such reports and
information from the President-PCS as are usually provided to the board of
directors of a publicly held Delaware corporation.
-11-
<PAGE> 15
(d)(i) Notwithstanding the foregoing, Members of the Partnership
Committee designated by USWPH shall not be entitled to participate in
discussions of or votes of the Partnership Committee specifically relating to
the Partnership's then existing or planned operations in any market served by a
local exchange carrier Affiliate of USW (a "LEC Affiliate"), if such existing or
planned operations of the Partnership could reasonably be expected to compete or
conflict with, in any material respect, the then existing or planned wireless
communications operations owned or conducted by USW's LEC Affiliates in such
market. Nothing in this Section 2.3(d) shall restrict the manner in which
Members designated by USWPH shall participate in deliberations, discussions or
votes of the Partnership Committee with respect to the Budget or Business Plan
of the Partnership; provided that such Members shall act in good faith and in
the best interests of the Partnership without regard to any such competitive
considerations. USW agrees that no Member designated by USWPH shall participate
in decisions regarding the existing or planned wireless communications
operations of USW's LEC Affiliates, whether through the furnishing of advice or
information or otherwise, it being understood that certain Members designated by
USWPH may have ultimate responsibility for those who participate in such
decisions (and that such Members shall not be deemed to have participated in
such decision solely by virtue of having such ultimate responsibility).
(ii) Without limitation of the obligations of USWPH under Section 2.12,
neither USWPH nor any Members appointed by USWPH shall provide to any LEC
Affiliate operating data or financial or other information with respect to the
Partnership's existing or planned operations in the local exchange markets of
such LEC Affiliate.
2.4. No Compensation. No Member shall be compensated for his
services as a member of the Partnership Committee from the assets of the
Partnership, nor shall such Member be reimbursed by the Partnership for out-
of-pocket expenses incurred in connection therewith.
2.5. Acts by Partners. Other than actions of the Tax Matters Partner
pursuant to Sections 6.1 and 6.2 hereof, no Partner shall take, or commit the
Partnership to take, any action, either in its own name in respect of the
Partnership or in the name of the Partnership, without the prior approval of the
Partnership Committee.
2.6. Procedures in the Event of a Dispute.
(a) In cases where the Members are unable to reach agreement on the
matters specified in Section 2.3(b)(vi) or (xi) above, the dispute shall be
resolved in the following manner:
(i) First, the General Partners shall refer the disputed matter to
the Chairmen of their respective publicly held Parent Entities in an
attempt to reach a resolution; and
(ii) Second, if the Chairmen are unable to resolve a disputed
matter within 60 days after the referral to them of a dispute (or such
longer period of time as to which the Chairmen mutually agree in
writing), the dispute shall be submitted to the respective Boards of
Directors of the General Partners' publicly held Parent Entities in an
attempt to reach a resolution.
2.7. President-PCS.
The President-PCS shall have authority and discretion comparable to
that of a chief executive officer of a publicly held Delaware corporation of
similar size to direct and control the business and affairs of the Partnership,
including its day-to-day operations, in a manner consistent with the Approved
Business Plan and the Approved Budget, and in accordance with
-12-
<PAGE> 16
any License Agreement and Services Agreement in effect from time to time (and
the directives of WMC thereunder). The President-PCS shall be an employee (who
may be seconded to WMC from USW or ATI) and executive officer of WMC and shall
report to the President of WMC. The President of WMC shall have the exclusive
authority to appoint and remove the President-PCS. Each Partner, by execution of
this Agreement, agrees to, consents to, and acknowledges the delegation of
powers and authority to the President-PCS and to WMC hereunder and pursuant to
any License and Services Agreements, and to the actions and decisions of the
President-PCS and WMC within the scope of such authority.
2.8. Business Plan. The President-PCS shall submit to the Partnership
Committee a Business Plan for the Partnership, not less frequently than
annually, at least 60 days prior to the start of the first fiscal year covered
by such Business Plan. Each Business Plan shall be consistent with any License
Agreement and Services Agreement in effect from time to time (and the directives
of WMC thereunder). Each such Business Plan shall be considered at the first
meeting of the Partnership Committee following its submission and shall be
subject to the approval of the Partnership Committee. Any such Business Plan (or
any amendment thereto) which is approved by the Partnership Committee shall be
considered approved for all purposes of this Agreement until amended or replaced
(an "Approved Business Plan").
2.9. Budget Approval.
(a) The President-PCS shall include in his submission of the Business
Plan a Budget in respect of the Partnership for the next fiscal year, including
an income statement, balance sheet and capital budget
prepared on an accrual basis for the Partnership for the forthcoming fiscal year
and a cash flow statement which shall show in reasonable detail the receipts and
disbursements (including without limitation, the anticipated distributions)
projected for the Partnership for the forthcoming fiscal year and the amount of
any corresponding cash deficiency or surplus, and the amount and due dates of
all required capital contributions, if any. Each such Budget shall be prepared
on a basis consistent with the Partnership's financial statements prepared in
accordance with the provisions of Section 6.4 hereof and the Approved Business
Plan. Each such Budget shall be consistent with any License Agreement and
Services Agreement in effect from time to time (and the directives of WMC
thereunder). If requested by any Member, the President-PCS shall promptly meet
with the Partnership Committee for the purpose of discussing such Budget. Each
such Budget shall be considered at the first meeting of the Partnership
Committee following submission thereof. Any such Budget (or any amendment
thereto) which is approved by the Partnership Committee shall be considered
approved for all purposes of this Agreement until amended or replaced (an
"Approved Budget").
(b) If for any fiscal year no new Budget is agreed upon by the
Partnership Committee, then for such fiscal year the Partnership shall be
managed in a manner consistent with the forecasts for such fiscal year included
in the then Approved Business Plan (such forecasts, as they relate to either of
the two years following a year in which a Budget has been approved pursuant to
Section 2.9(a), being deemed to be for all purposes of this Agreement an
Approved Budget), as adjusted by the President-PCS to reflect the Partnership's
contractual obligations for such year and other changes resulting from the
passage of time or the occurrence of events beyond the control of the
Partnership.
2.10. Employees and Employee Benefits. The compensation program,
benefit plans and personnel policies of the Partnership shall be in
accordance with an agreement to be entered into by and among USW, ATI and
the Partnership.
2.11. Access to Books of Account. Notwithstanding any other provision
of this Agreement, each Partner shall have the right at all
-13-
<PAGE> 17
reasonable times during usual business hours to audit, examine, and make copies
or extracts of or from the complete books of account of the Partnership,
including but not limited to the books and records maintained in accordance with
Section 6.4 and all other books and records of the Partnership. Such right may
be exercised through any agent or employee of such Partner designated by it or
by independent certified public accountants or counsel designated by such
Partner. Each Partner shall bear all expenses incurred in any examination made
for such Partner's account.
2.12. Confidential Information.
(a) Each Partner shall, and shall cause each of its Affiliates, and its
and their respective partners, shareholders, directors, officers, employees and
agents (collectively, "Representatives") to, keep secret and retain in strictest
confidence, except as provided in subsection (c) hereof, any and all
Confidential Information and shall not distribute, disseminate or disclose such
Confidential Information, and shall cause its Representatives not to distribute,
disseminate or disclose such Confidential Informa- tion, except to (i) the
Partnership, WMC or any PCS Owned System and their respective agents, (ii) any
lender to the Partnership, WMC or any PCS Owned System, (iii) any Partner, WMC
or any of their respective Affiliates or other Representatives on a "need to
know" basis in connection with the transactions leading up to and contemplated
by this Agreement and the operation of the Partnership, WMC, the PCS Owned
Systems and their respective businesses, or (iv) any other Person that agrees in
writing to keep in confidence such Confidential Information in accordance with
the terms of this Section 2.12, and such Partner disclosing Confidential
Information pursuant to this Section 2.12 shall use, and shall cause its
Affiliates and other Representatives to use, such Confidential Information only
for the benefit of the Partnership in conducting the Partnership Business or for
any other specific purposes for which it was disclosed to such party; provided
that the disclosure of financial statements of, or other information relating
to, the Partnership shall not be deemed to be the disclosure of Confidential
Information (i) to the extent that any Partner is required by law or GAAP to
disclose such financial statements or other information or (ii) to the extent
that in order to sustain a position taken for tax purposes, any Partner deems it
necessary and appropriate to disclose such financial statements or other
information. All Confidential Information disclosed in connection with the
Partnership or pursuant to this Agreement shall remain the property of the
Person whose property it was prior to such disclosure.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership Business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas in which any
other Partner and the unaffiliated Partner and their respective Affiliates
compete in the provision of telecommunications services.
(c) In the event that a Partner or anyone to whom a Partner transmits
any Confidential Information becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, investigative
demand or similar process) to disclose any of the Confidential Information, such
Partner will use its best efforts to provide the other Partners and the
Partnership with prompt written notice prior to disclosure (not less than 24
hours) so that the other Partners and the Partnership or WMC may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In the event that such protective order or other
remedy is not obtained, or that the Partnership,
-14-
<PAGE> 18
WMC and the other Partners waive compliance with the provisions of this Section
2.12, the Partner or Person who is compelled to disclose such Confidential
Information will furnish only that portion of the Confidential Information which
(based on the advice of counsel) it is legally required to disclose and will
exercise its best efforts to obtain reliable assurance that protective treatment
will be accorded the Confidential Information.
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and representatives to, maintain the confidentiality required by this
Section 2.12 and to destroy or return upon request, all documents and other
materials, and all copies thereof, obtained by such Partner or on its behalf
from any of the Partnership, WMC or the other Partners or any of their
Affiliates in connection with the transactions leading up to and contemplated by
this Agreement and the operation of the Partnership, WMC, and the PCS Owned
Systems or their respective businesses that are subject to such confidentiality
obligations. The obligations under this Section 2.12 shall survive the
termination of the Partnership for a period of five years.
(e) To the fullest extent permitted by law, if a Partner or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 2.12, the other Partners and the Partnership shall have the right and
remedy to have this Section 2.12 specifically enforced by any pursuant to the
provisions of the Arbitration Agreement referred to in Section 12.11, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such other Partners or the Partnership. Nothing in this Section 2.12 shall be
construed to limit the right of any Partner or the Partnership to collect money
damages in the event of breach of this Section 2.12.
2.13. Duty of Partners to Cooperate. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by the
Partnership Committee and as may be necessary or reasonably desirable in
connection with the business of the Partnership.
2.14. Agreements with Partnership or Owned Systems.
(a) Any Partner or any Affiliate thereof may enter into and maintain in
effect any contract, agreement, transaction or relationship between such Partner
or Affiliate and the Partnership or any PCS Owned System (a "Related Party
Agreement") on terms and conditions approved by the Partnership Committee (by
vote of Members representing each General Partner other than the Partner
interested in such Related Party Agreement) and may derive and retain profits
therefrom.
(b) Notwithstanding the foregoing, each General Partner and each Member
of the Partnership hereby approves, and authorizes the Partnership to enter
into:
(i) Related Party Agreements with ATI or any Affiliate thereof
which provides paging or vehicle location services, relating to (A)
co-location of technical site leases (which leases individually do not
provide for annual rental payments in excess of $4,000), (B) sales
office leases (which leases individually do not provide for annual
rentals in excess of $400,000), and (C) other Related Party Agreements
relating to paging terminal and cellular switching equipment, joint
mailing and other co-marketing efforts, the aggregate annual
consideration under which does not exceed $1 million and the terms and
conditions of which are no less favorable than could be obtained from a
third party;
(ii) Related Party Agreements with any LEC Affiliate of USW or
any wireline cable television company in which USW has an
-15-
<PAGE> 19
ownership interest related to the purchase of PCS Services from the PCS
Owned Systems for resale in such LEC Affiliate's localexchange markets
or such wireline cable television company's franchise markets, as the
case may be; provided that such agreements provide for reasonable
notice of cancellation. As long as USW or an Affiliate thereof remains
a General Partner, the pricing of such services shall be on terms no
less favorable than those offered to any third party (for like types
and volumes of service); provided that if the Partnership provides
services of comparable quality and scope as those available from third
parties, such LEC Affiliate or such wireline cable television company,
as the case may be, shall have entered into an agreement with the
Partnership (or WMC or the Licensed or Owned Systems, as defined in the
WMC Partnership Agreement) to purchase its entire requirements of
wireless communications services in such markets from the Partnership,
WMC or the Licensed or Owned Systems; and
(iii) Related Party Agreements with ATI or any Affiliate
thereof related to the purchase of satellite communications services
provided by the Globalstar satellite communications venture which
agreements may provide that Globalstar will be the exclusive provider
of satellite communications services to the Partnership; provided that
the Partnership shall be entitled to purchase such services at a price
and on terms no less favorable than those offered by Globalstar to any
third party (for like volumes and types of service).
2.15. Insurance and Risk Management. The property and casualty
insurance program for the Partnership shall be integrated into the ATI insurance
program providing customary business insurance coverage as of the Effective
Date. Each Partner hereby consents and agrees that the Partnership shall
compensate ATI for a proportional allocation to the Partnership for insurance
premiums, casualty loss funding pools, and related expenses.
ARTICLE 3
CERTAIN AGREEMENTS REGARDING OPERATIONS OF THE
PARTNERSHIP AND THE PCS OWNED SYSTEMS
3.1. General; Fiduciary Obligations. The Partnership shall manage the
operations of the PCS Owned Systems in accordance with the respective budgets
and business plans for such PCS Systems then in effect, any License and Services
Agreements in effect from time to time (and the directives of WMC thereunder)
and the applicable terms of this Agreement. The Partners acknowledge that the
Partnership may have fiduciary obligations to and from other Persons in
connection with the Partnership's interest in any PCS Owned System. Each of the
Partnership Committee and the Partners shall use all reasonable efforts to cause
the Partnership to comply with all such fiduciary obligations, and the
obligations of the Partnership, the Partnership Committee and the Partners
hereunder are subject in all respects to such fiduciary obligations.
3.2. License Agreements. Within 10 days after the adoption of a form of
License Agreement by WMC pursuant to the WMC Partnership Agreement, the
Partnership shall enter into a License Agreement with WMC, in the form approved
by WMC. The Partnership shall amend such agreement from time to time to reflect
such changes therein as may be approved by WMC.
3.3. Services Agreement. Within 10 days after the adoption of a form of
Services Agreement by WMC pursuant to the WMC Partnership Agreement, the
Partnership shall enter into a Services Agreement with WMC, in the form
-16-
<PAGE> 20
approved by WMC. The Partnership shall amend such agreement from time to time to
reflect such changes therein as may be approved by WMC.
3.4. PCS Owned Systems.
(a) The President-PCS shall have full power and authority to take all
action necessary to effect the appointment or removal of the general manager or,
if applicable, the regional manager or other person with equivalent management
responsibility ("System Manager") of the Partnership's interest in any PCS Owned
System.
(b) Each System Manager shall manage the day-to-day operations of the
applicable PCS Owned System in accordance with any partnership agreement or
other organizational documents of the applicable PCS Owned System so long as
they are in existence and the budget and business plans then in effect for such
PCS Owned System, subject to the control, supervision and oversight of the
President-PCS.
3.5. System Budget Approval.
(a) The System Manager for each PCS Owned System shall submit annually
to the President-PCS a system budget in respect of such PCS Owned System
("System Budget") for the next fiscal year at such time and in such format as
may be determined from time to time, by the President-PCS. If requested by the
President-PCS, the System Manager shall promptly meet with the President-PCS for
the purpose of discussing such System Budget. Each System Budget shall be
consistent with any License Agreement and Services Agreement in effect from time
to time (and the directives of WMC thereunder).
(b) The Partnership shall neither take nor cause to be taken any action
to approve or implement a System Budget (or any amendment thereof or
modification thereto) until such System Budget (or amendment or modification)
shall have been approved by the President-PCS.
3.6. System Business Plans.
(a) The System Manager for each PCS Owned System shall submit to the
President-PCS a business plan in respect of such PCS Owned System (a "System
Business Plan") at such time and in such format as may be determined from time
to time by the President-PCS. Each System Business Plan shall be consistent with
any License Agreement and Services Agreement in effect from time to time (and
the directives of WMC thereunder).
(b) The Partnership shall neither take nor cause to be taken any action
to approve or implement a System Business Plan, until such System Business Plan
(or amendment or modification) shall have been approved by the President-PCS.
3.7. Management Reports. The System Manager for each PCS Owned System
shall prepare and distribute, or cause to be prepared and distributed, promptly
such reports and other information in respect of such PCS Owned System as the
President-PCS reasonably may request.
3.8. Financial Statements.
(a) Annual Statements. As soon as practicable following the end of each
fiscal year, but in any event within 45 days after the end of the fiscal year,
the System Manager for each PCS Owned System shall cause to be prepared and
delivered to the President-PCS unaudited statements of income (loss) in respect
of such PCS Owned System, and statements of cash flows for such fiscal year, and
an unaudited balance sheet of such PCS Owned System, in each case, consistent
with Partnership accounting practices.
-17-
<PAGE> 21
(b) Quarterly Statements. As soon as possible following the end of each
fiscal quarter, but in any event within 20 days after the end of each quarter,
the System Manager for each PCS Owned System shall prepare, or cause to be
prepared, and deliver to the President-PCS an unaudited statement of income
(loss) in respect of such PCS Owned System and an unaudited statement of cash
flows for such fiscal quarter, and an unaudited balance sheet of such PCS Owned
System as of the end of such fiscal quarter, in each case, consistent with
Partnership accounting practices.
ARTICLE 4
CAPITAL CONTRIBUTIONS, WITHDRAWALS AND CAPITAL ACCOUNTS
4.1. Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate capital
account (a "Capital Account") in accordance with the capital accounting rules of
section 704(b) of the Code and the Income Tax Regulations thereunder (including
particularly section 1.704-1(b)(2)(iv) of the Income Tax Regulations).
(b) In general, under such capital accounting rules (but subject to any
contrary requirements of the Code and the Income Tax Regulations thereunder), a
Partner's Capital Account shall be (i) increased by the amount of money
(including Make-Up Contributions) and the Fair Market Value (determined in
accordance with Section 4.9 hereof) of other property (net of liabilities
secured by such contributed property that the Partnership is considered to take
subject to or assume under section 752 of the Code) contributed by the Partner
to the Partnership (including the amount of any Organizational Expenses of the
Partnership paid or accrued by such Partner) and allocations to the Partner of
Partnership income and gain (or items thereof), including income and gains
exempt from tax, and (ii) decreased by the amount of money and the Fair Market
Value (determined in accordance with Section 4.9 hereof) of other property
distributed (net of liabilities secured by such distributed property that such
Partner is considered to take subject to or assume under section 752 of the
Code) to the Partner by the Partnership and allocations to the Partner of
Partnership loss and deduction (or items thereof), including Partnership
expenditures not deductible in computing its taxable income and not properly
chargeable to capital account.
(c) Where section 704(c) of the Code applies to Partnership property,
each Partner's Capital Account shall be adjusted in accordance with paragraph
(b)(2)(iv)(g) of section 1.704-1 of the Income Tax Regulations as to allocations
to the Partners of depreciation, depletion, amortization and gain or loss, as
computed for book purposes with respect to such property.
(d) When Partnership property is distributed in kind (whether in
connection with dissolution and liquidation of the Partnership or otherwise),
the Capital Accounts of the Partners first shall be adjusted to reflect the
manner in which the unrealized income, gain, loss or deduction inherent in such
property (that has not previously been charged to Capital Accounts) would be
allocated among the Partners if there were a taxable disposition of such
property for its Fair Market Value (determined in accordance with Section 4.9
hereof and taking into account section 7701(g) of the Code) and such income,
gain, loss or deduction had been recognized for federal income tax purposes
immediately upon such distribution or the event requiring such revaluation.
(e) Upon a revaluation of any Partnership assets pursuant to Section
4.7 hereof, the Capital Accounts of the Partners will be adjusted as provided in
Section 4.7(d).
-18-
<PAGE> 22
(f) The Tax Matters Partner shall direct the Partnership's accountant
to make all necessary adjustments in each Partner's Capital Account as required
by the rules of section 704(b) of the Code and the Income Tax Regulations
thereunder.
4.2. Initial Contributions of Capital.
(a) On the Effective Date, each Partner shall make the contributions to
the capital of the Partnership set forth opposite such Partner's name on
Schedule 1 hereto.
(b) Upon the dissolution of Primeco in accordance with Article 10 of
the Primeco Agreement, each Partner will promptly contribute to the capital of
the Partnership any SLP Interests (as defined in the Primeco Agreement) held by
such Partner or any Affiliate thereof.
4.3. Additional Contributions by Partners.
(a) In the event that (i) a capital contribution is required by the
terms of an Approved Business Plan or an Approved Budget or (ii) the Partnership
Committee determines that an additional capital contribution, payable in cash or
other property (or combination thereof), is necessary or advisable, each Partner
will be notified in writing by the Partnership, at least 25 days prior to the
date on which such capital contribution is payable (the "Due Date"), of the
amount of the capital contribution required from each of them, on a pro rata
basis, determined in accordance with such Partner's respective Percentage
Interest, and the Due Date for such capital contribution. Each such capital
contribution shall be payable in cash unless otherwise determined by vote of the
Partnership Committee. Such contributions, when made by a Partner, shall be
credited to such Partner's Capital Account. In the event that any Partner fails
to make such a capital contribution on or before the Due Date thereof, but
wishes to make such contribution on or before the fifth day immediately
following such Due Date (a "Late Amount"), such Partner shall be entitled to
contribute such Late Amount during such five-day period and have such Late
Amount credited to its Capital Account; provided that in addition to the payment
of such Late Amount, such Partner must also pay at such time a late fee equal to
the interest that would have accrued on the unpaid portion of such Late Amount
from the Due Date to the date of payment, calculated at a per annum rate of the
Prime Rate plus 2% (a "Late Fee"), which Late Fee shall not be credited in whole
to the Partner's Capital Account, but shall be treated as income and allocated
among the Partners proportionately in accordance with their Percentage
Interests.
(b) In the event that a Partner fails to make a required capital
contribution on or prior to the expiration of five days after the Due Date
thereof (a "Defaulting Partner"), any one or more of the other Partners, who are
not Affiliate Transferees of the Defaulting Partner (the "Non-Defaulting
Partners"), within 30 days following the mailing of notice from the Partnership
that payment from the Defaulting Partner has not been made, may pay some or all
of the contribution which the Defaulting Partner failed to make to the capital
of the Partnership (a "Default Amount"). In the event that more than one
Non-Defaulting Partner elects to contribute a Default Amount so that the
aggregate amount to be contributed by Non-Defaulting Partners would exceed the
full Default Amount, each of such Non-Defaulting Partners shall be entitled to
contribute a portion of the Default Amount that is equal to such Non-Defaulting
Partner's Percentage Interest divided by the Percentage Interests of all
Non-Defaulting Partners electing to contribute such Default Amount. Thereafter,
to the extent that such Default Amount remains unpaid and the Partnership shall
not have funded such Default Amount through a subsequent capital call, the
Defaulting Partner shall have the right to contribute such unpaid portion of
such Default Amount and have such previously unpaid Default Amount credited to
its Capital Account; provided that such contribution is accompanied by the
payment of a fee in an amount equal to the interest that would have accrued on
the unpaid portion
-19-
<PAGE> 23
of such Default Amount from the Due Date to the date of such payment, calculated
at a per annum rate of the Prime Rate plus 2% (a "Default Fee"), which Default
Fee shall not be credited in whole to the Partner's Capital Account, but shall
be treated as income and allocated among the Partners proportionately in
accordance with their Percentage Interests.
(c) If the Defaulting Partner fails to contribute a Default Amount
which relates to a Defaulted Contribution and such Default Amount has not been
paid in full by one or more of the Non-Defaulting Partners, the NonDefaulting
Partner or Partners may by a vote of the Members representing a majority of the
Percentage Interests of the Non-Defaulting Partners, elect to cause the
Partnership to initiate and maintain an action against the Defaulting Partner
for such unpaid Defaulted Contribution and to pursue any available remedy,
including but not limited to seeking payment by the Defaulting Partner of such
Default Amount or the unpaid portion thereof and damages incurred by the
Partnership in connection therewith. The Defaulting Partner's Capital Account
shall be increased by an amount equal to that portion of the Default Amount
recovered in any action maintained in accordance with the immediately preceding
sentence. The costs of any action commenced by the Partnership pursuant to this
Section 4.3(c) shall be paid by the Partnership and shall be reimbursed by the
Defaulting Partner to the Partnership and to the extent not paid will be
deducted from such Defaulting Partner's Capital Account and Adjusted Capital
Contributions.
4.4. Partner Obligations. No Partner shall have any obligation to
restore any portion of any deficit balance in such Partner's Capital
Account, whether upon liquidation of its interest in the Partnership,
liquidation of the Partnership or otherwise.
4.5. Withdrawals of Capital Accounts. No Partner shall be entitled
to withdraw any amount from its Capital Account prior to dissolution of the
Partnership.
4.6. Interest on Capital Accounts. No interest or compensation shall
be paid on or with respect to the Capital Account or capital contributions
of any of the Partners, except as otherwise expressly provided herein.
4.7. Revaluation of Partnership Assets.
(a) The assets of the Partnership shall be revalued in accordance with
Section 4.9 to their then Fair Market Values as of the date of and immediately
prior to (i) the acquisition of an additional interest in the Partnership
(including adjustments to Percentage Interests arising as a result of a failure
of any Partner to make a required capital contribution pursuant to Section 4.3
hereof) by any new or existing Partner in exchange for more than a de minimis
capital contribution to the Partnership, (ii) the distribution by the
Partnership of more than a de minimis amount of property as consideration for
the redemption of a portion (but not all) of a Partner's interest in the
Partnership and (iii) the liquidation of a Partner's entire interest in the
Partnership, or immediately prior to the distribution of Partnership assets in
liquidation of the Partnership within the meaning of Income Tax Regulations
section 1.704-1(b)(2)(ii)(g); provided, however, that no revaluation shall occur
if the Partnership Committee reasonably determines that a revaluation would not
materially affect the Capital Accounts of the Partners or that the cost of such
revaluation would be disproportionate to any benefit to be derived by the
Partners from such revaluation.
(b) Immediately prior to the distribution of any asset by the
Partnership, the Partnership Committee shall revalue such asset to its then Fair
Market Value.
(c) Any Revaluation Gain or Revaluation Loss arising from a revaluation
of any Partnership asset pursuant to this Section 4.7 shall respectively be
credited to or debited from the Partners' Capital Accounts
-20-
<PAGE> 24
in accordance with their respective Percentage Interests immediately prior to
the event giving rise to such revaluation.
4.8. Redetermination of Percentage Interests. The respective Percentage
Interests of each of the Partners shall be redetermined immediately after any
event giving rise to a change in any Partner's Adjusted Capital Contributions.
If a Partner is both a General Partner and a Limited Partner such adjustment
shall be made to both the General Partner and the Limited Partner Percentage
Interests of such Partner as both a General Partner and a Limited Partner pro
rata in proportion to such interests.
4.9. Determination of Fair Market Value. The Fair Market Value, as of
the date of determination, of any asset shall be determined (a) by mutual
agreement of the General Partners or (b) if no such agreement is reached within
ten days of the relevant date of determination, as follows:
(i) Selection of Appraisers. Each of (A) the Partner who is
either contributing an asset to the Partnership, receiving an asset as
a distribution from the Partnership or transferring an asset which is
being valued hereunder (or, if there is no such Partner, ATPH) (the
"Asset Partner") and (B) the other General Partners shall designate by
written notice to the Partnership and each General Partner a firm of
recognized national standing familiar with appraisal techniques
applicable to assets of the type being evaluated to serve as an
Appraiser pursuant to this Section 4.9 (the firms designated by the
Asset Partner and the other General Partners being referred to herein
as the "First Appraiser" and the "Second Appraiser," respectively)
within five business days after the failure to reach agreement in
accordance with the terms of clause (a) above. In the event that either
the Asset Partner or the other General Partners fails to designate its
or their Appraiser within the foregoing time period, the other shall
have the right to designate such Appraiser by notifying the failing
party or parties in writing of such designation (and the Appraiser so
designated shall be the First Appraiser or the Second Appraiser, as the
case may be).
(ii) Evaluation Procedures. Each Appraiser shall be directed
to determine the Fair Market Value of the asset. Each Appraiser will
also be directed to deliver an Appraiser's Certificate to each General
Partner on or before the 30th day after their respective designation
(the "Certificate Date"), upon the conclusion of its evaluation, and
each Appraiser's Certificate once delivered may not be retracted or
modified in any respect. Each Appraiser will keep confidential all
information disclosed by the Partnership in the course of conducting
its evaluation, and, to that end, will execute such customary
documentation as the Partnership may reasonably request with respect to
such confidentiality obligation. The General Partners will cooperate in
causing the Partnership to provide each Appraiser with such information
within the Partnership's possession that may be reasonably requested in
writing by the Appraiser for purposes of its evaluation hereunder. The
Appraisers shall consult with each other in the course of conducting
their respective evaluations. Each General Partner shall have full
access to each Appraiser's work papers. Each Appraiser will be directed
to comply with the provisions of this Section 4.9, and to that end each
party will provide to its respective Appraiser a complete and correct
copy of this Section 4.9 (and the definitions of capitalized terms used
in this Section 4.9 that are defined elsewhere in this Agreement).
-21-
<PAGE> 25
(iii) Fair Market Determination. The Fair Market Value of any
asset shall be determined on the basis of the Appraisers' Certificates
in accordance with the provisions of this subparagraph (iii). The
higher of the values set forth on the Appraisers' Certificates is
hereinafter referred to as the "Higher Value" and the lower of such
values is hereinafter referred to as the "Lower Value". If the Higher
Value is not more than 110% of the Lower Value, the Fair Market Value
will be the arithmetic average of such two Values. If the Higher Value
is more than 110% of the Lower Value, a third appraiser shall be
selected in accordance with the provisions of subparagraph (iv) below,
and the Fair Market Value will be determined in accordance with the
provisions of subparagraph (v) below.
(iv) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, within seven days
thereafter the First Appraiser and the Second Appraiser shall agree
upon and jointly designate a third firm of recognized national standing
familiar with appraisal techniques applicable to assets of the type
being evaluated to serve as an appraiser pursuant to this Section 4.9
(the "Third Appraiser"), by written notice to each General Partner. The
General Partners shall direct the Third Appraiser to determine the Fair
Market Value of the asset (the "Third Value") in accordance with the
provisions of subparagraph (ii) above, and to deliver to the General
Partners an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be
directed to comply with the provisions of this Section 4.9, and to that
end the parties will provide to the Third Appraiser a complete and
correct copy of this Section 4.9 (and the definitions of capitalized
terms used in this Section 4.9 that are defined elsewhere in this
Agreement).
(v) Alternative Determination of Fair Market. Upon the
delivery of the Appraiser's Certificate of the Third Appraiser,
the Fair Market Value will be determined as provided in this
subparagraph (v). The Fair Market Value will be (w) the Lower
Value, if the Third Value is less than the Lower Value, (x) the Higher
Value, if the Third Value is greater than the Higher Value, (y) the
arithmetic average of the Third Value and the other Value (Lower or
Higher) that is closer to the Third Value if the Third Value falls
within the range between (and including) the Lower Value and the Higher
Value and (z) the Third Value, if the Lower Value and the Higher Value
are equally close to the Third Value.
(vi) Costs. Each of the Asset Partner and the other General
Partners will bear the cost of the Appraiser designated by it or on its
behalf. If the Higher Value is not more than 115% of the Lower Value,
or if the Higher Value and the Lower Value are equally close to the
Third Value, each of the Asset Partner and the other General Partners
shall bear 50% of the cost of the Third Appraiser, if any; otherwise,
the party whose Appraiser's determination of Fair Market Value is
further away from the Third Value shall bear the entire cost of the
Third Appraiser. The General Partners agree to pay when due the fees
and expenses of the Appraisers in accordance with the foregoing
provisions.
(vii) Conclusive Determination. To the fullest extent provided
by law, the determination of the Fair Market Value made pursuant to
this Section 4.9 shall be final and binding on the Partnership and the
Partners hereto, and such determination shall not be appealable to or
reviewable by any court or arbitrator; provided that the foregoing
shall not limit a
-22-
<PAGE> 26
Partner's rights to seek arbitration of the obligations of the other
Partners and the Partnership hereunder.
ARTICLE 5
ALLOCATIONS AND DISTRIBUTIONS
5.1. Profits and Losses. A Partner's distributive share of income,
gain, loss, deduction or credit (or items thereof) as shown on the annual
federal income tax return prepared by the Partnership's accountants or as
finally determined by the Internal Revenue Service or the courts, and as
modified by the capital accounting rules of section 704(b) of the Code and the
Income Tax Regulations thereunder as implemented by Section 4.1 hereof, as
applicable, shall be determined as provided in this Article 5.
(a) Except as otherwise provided in this Section 5.1, profits and
losses of the Partnership shall be allocated among the Partners proportionately
in accordance with their Percentage Interests.
(b) Solely for tax purposes, in determining each Partner's allocable
share of the taxable income or loss of the Partnership, depreciation, depletion,
amortization and gain or loss with respect to any contributed property, or with
respect to revalued property where Partnership property is revalued pursuant to
Section 4.7 hereof, shall be allocated to the Partners under any method
allowable under section 704(c) of the Code and the applicable Income Tax
Regulations thereunder. The Partnership Committee shall decide which such method
shall be utilized by the Partnership with respect to its property; provided,
however, that if the Partnership Committee fails to act in a timely manner, the
Partnership shall utilize the method set forth in section 1.704-3(c) of the
Income Tax Regulations (the traditional method with curative allocations).
(c) Minimum Gain Chargeback. Notwithstanding anything to the contrary
in this Article 5, if there is a net decrease in Partnership Minimum Gain or
Partner Nonrecourse Debt Minimum Gain (as such terms are defined in sections
1.704-2(b) and 1.704-2(i)(2), respectively, of the Income Tax Regulations)
during a Partnership taxable year, then each Partner shall be allocated items of
Partnership income and gain for such year (and, if necessary, for subsequent
years), to the extent required by, and in the manner provided in, section
1.704-2 of the Income Tax Regulations.
This provision is intended to be a "minimum gain chargeback" within the
meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax Regulations
and shall be interpreted and implemented as therein provided.
(d) Qualified Income Offset. Subject to the provisions of Section
5.1(c), but otherwise notwithstanding anything to the contrary in this Article
5, if any Partner's capital account has a deficit balance in excess of such
Partner's obligation to restore its capital account balance, computed in
accordance with the rules of paragraph (b)(2)(ii)(d) of section 1.704-1 of the
Income Tax Regulations (including such Partner's share of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain as provided in section 1.704-2(g)
and 2(i)(5) of the Income Tax Regulations), then sufficient amounts of income
and gain (consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for such year) shall be allocated to such
Partner in an amount and manner sufficient to eliminate such deficit as quickly
as possible. This provision is intended to be a "qualified income offset" within
the meaning of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and
shall be interpreted and implemented as therein provided.
(e) Subject to the provisions of section 704(c) of the Code and
Sections 5.1(b) through (d) hereof, gain recognized (or deemed recognized under
the provisions hereof) upon the sale or other disposition of
-23-
<PAGE> 27
Partnership property, which is treated as depreciation recapture, shall be
allocated to the Partner who was entitled to deduct such depreciation.
(f) Except as otherwise provided in Section 5.1(k), if and to the
extent any Partner is deemed to recognize income as a result of any loans
described herein pursuant to the rules of sections 1272, 1273, 1274, 7872 or 482
of the Code, or any similar provision now or hereafter in effect, or any other
item of imputed income, any corresponding resulting deduction of the Partnership
shall be allocated to the Partner who is charged with the income. Subject to the
provisions of section 704(c) of the Code and Sections 5.1(b) through (d) hereof,
if and to the extent the Partnership is deemed to recognize income as a result
of any loans described herein pursuant to the rules of sections 1272, 1273,
1274, 7872 or 482 of the Code, or any similar provision now or hereafter in
effect, or any other item of imputed income, such income shall be allocated to
the Partner who is entitled to any corresponding resulting deduction.
(g) Organizational Expenses of the Partnership, if contributed by a
Partner, shall be allocated to such Partner.
(h) Except as otherwise required by law, tax credits shall be allocated
among the Partners pro rata in accordance with the manner in which Partnership
profits are allocated to the Partners under this Article 5, as of the time the
credit property is placed in service or if no property is involved, as of the
time the credit is earned. Recapture of any tax credit required by the Code
shall be allocated to the Partners in the same proportion in which such tax
credit was allocated.
(i) Except as provided in Sections 5.1(f) and (h) hereof or as
otherwise required by law, if the Partnership Interests of the Partners are
changed herein during any taxable year, all items to be allocated to the
Partners for such entire taxable year shall be prorated on the basis of the
portion of such taxable year which precedes each such change and the portion of
such taxable year on and after each such change according to the number of days
in each such portion, and the items so allocated for each such portion shall be
allocated to the Partners in the manner in which such items are allocated as
provided in this Article 5 during each such portion of the taxable year in
question; provided that, if the transferor and the transferee of an interest in
the Partnership (i) shall both have given the Partnership written notice within
15 days of the end of such taxable year of the Partnership stating their
agreement that such division and allocation shall be made on some other basis
permitted by Code section 706(d) and (ii) shall have agreed to reimburse the
Partnership for any incremental accounting fees and other expenses incurred by
the Partnership in utilizing such other basis for such division and allocation,
then such other basis permitted by Code section 706(d) shall be used.
(j) Any special allocation of income or gain pursuant to Section 5.1(c)
or 5.1(d) hereof shall be taken into account in computing subsequent allocations
of income and gain pursuant to this Article 5 so that the net amount of all such
allocations to each Partner shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Partner pursuant to the
provisions of this Article 5 if such special allocations of income or gain under
Section 5.1(c) or 5.1(d) hereof had not occurred.
(k) Losses.
(i) Items of deduction and loss attributable to recourse
liabilities of the Partnership (within the meaning of section
1.752-1(a)(1) of the Income Tax Regulations but excluding Partner
nonrecourse debt within the meaning of section 1.704- 2(b)(4) of the
Income Tax Regulations) shall be allocated among the Partners in
accordance with the ratio in which the Partners
-24-
<PAGE> 28
share the economic risk of loss (within the meaning of section 1.752-2
of the Income Tax Regulations) for such liabilities.
(ii) Items of deduction and loss attributable to Partner
nonrecourse debt within the meaning of section 1.704-2(b)(4) of the
Income Tax Regulations shall be allocated to the Partners bearing the
economic risk of loss with respect to such debt in accordance with
section 1.704-2(i) of the Income Tax Regulations.
(iii) Items of deduction and loss attributable to Partnership
nonrecourse liabilities within the meaning of section 1.704-2(b)(1) of
the Income Tax Regulations shall be allocated among the Partners
proportionately in accordance with their respective Percentage
Interests.
(iv) All other items of operating net loss ("Net Loss") shall
be allocated among the Partners, proportionately in accordance with
their Percentage Interests, except that Net Loss shall not be allocated
to any Partner to the extent it would create a deficit balance in
excess of such Partner's obligation to restore its capital account
balance, computed in accordance with the rules of Section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations (including such
Partner's share of Partnership Minimum Gain and Partner Nonrecourse
Debt Minimum Gain as provided in section 1.704-2(g) and 2(i)(5) of the
Income Tax Regulations). Any Net Loss which cannot be allocated to a
Partner because of the limitation set forth in the previous sentence
shall be allocated first to the other Partners to the extent such other
Partners would not be subject to such limitation and second any
remaining amount to the Partners in the manner required by the Code and
the Income Tax Regulations.
(l) Subject to the provisions of Sections 5.1(c) through (k), items of
income and gain shall be allocated to the Partners in the following priority:
(i) First, if allocations of Net Loss have been made to the
Partners under Section 5.1(k)(iv), then in the amount of, and
proportionate to, the amount of such Net Loss.
(ii) Second, to those Partners who have had items of loss or
deduction allocated to them under Section 5.1(k)(i), in the amount of,
and proportionate to, the amount of such items of loss or deduction.
(iii) Third, so as to bring the relationship of the credit balance
in each Partner's Capital Account (computed in the same manner as
provided in Section 5.1(k)(iv)), as nearly as possible, in accord with
their Percentage Interests.
(iv) Thereafter, the balance among the Partners in proportion to
their relative Percentage Interests.
5.2. Distributions.
(a) As promptly as practicable after the end of each month, but in no
event later than the end of the following month, all Net Operating Available
Cash of the Partnership (as determined based on the Partnership's financial
statements for such month) shall be distributed to the Partners. Other
distributions, whether in cash or in kind, shall be made to the Partners at such
times and in such amounts as shall be determined by the Partnership Committee.
The amount of any in-kind distribution shall be the distributed property's then
Fair Market Value. The Partnership shall take all reasonable actions to cause
each PCS Owned System to distribute all Net Operating
-25-
<PAGE> 29
Available Cash of such PCS Owned System on a monthly basis to the extent
permissible under the governing documents for such PCS Owned Systems.
(b) Except as provided in Sections 5.2(c) or (d), distributions shall
be made among the Partners in accordance with their respective Percentage
Interests at the time of such distribution.
(c) Upon liquidation of the Partnership, within the meaning of Income
Tax Regulations section 1.704-1(b)(2)(ii)(g), distributions shall be made among
the Partners as provided in Section 8.3.
(d) (i) If upon the liquidation of Primeco in accordance with Article
10 of the Primeco Agreement, the Partnership receives as part of a liquidating
distribution the assets, liabilities and business operations of any Special
System (as defined in the Primeco Agreement), then the Partnership Committee may
elect, at any time within the six-month period commencing upon the Partnership's
receipt of such liquidating distribution, to distribute the assets, liabilities
and business operations of such Special System ("Special System Assets") among
the Partner(s) that had previously made a capital contribution to the
Partnership pursuant to Section 4.2(b) of a SLP Interest with respect to such
Special System (the "Contributing Partners").
(ii) The Fair Market Value of the Special System Assets distributed
pursuant to this Section 5.2(d) shall be deemed to be equal to the product of
(x) the Fair Market Value of the SLP Interests with respect to such Special
System at the time of their contribution to the Partnership by the Contributing
Partners, multiplied by (y) 100% divided by the aggregate SLP Percentage
Interest (as defined in the Primeco Agreement) represented by such SLP
Interests.
(iii) Any such distribution of Special System Assets shall be made
among the Contributing Partners pro rata in proportion to the SLP Percentage
Interests associated with the SLP Interests contributed to the Partnership by
each Contributing Partner.
(iv) At the election of WMC, the Contributing Partners receiving a
distribution of Special System Assets pursuant to this Section 5.2(d) shall
cause the related Special System to enter into a License Agreement and Services
Agreement with WMC.
(e) Any other provision of this Agreement to the contrary notwith-
standing, no distribution shall be made by the Partnership, or on behalf of
the Partnership which would violate Section 17-607(a) of the Act, which would
render the Partnership insolvent or which is prohibited by the terms of any
Partnership indebtedness.
(f) All matters not expressly provided for by the terms of Article 5 or
elsewhere in this Agreement concerning the valuation of securities and other
assets of the Partnership, the allocation of profits and losses and items
thereof (including credits) among the Partners and accounting procedures shall
be reasonably determined by the Partnership Committee, whose determination shall
be final and conclusive as to all of the Partners.
ARTICLE 6
TAX MATTERS AND REPORTS; ACCOUNTING
6.1. Filing of Tax Returns. The Tax Matters Partner shall prepare
and file, or cause the accountants of the Partnership to prepare and file,
all Tax Returns for each tax year of the Partnership.
-26-
<PAGE> 30
6.2. Tax Matters Partner.
(a) The Tax Matters Partner of the Partnership within the meaning of
section 6231(a)(7) of the Code shall be ATPH. Unless otherwise expressly
provided herein, the Tax Matters Partner is authorized to take any action that
it determines to be necessary or appropriate with respect to all tax matters.
(b) The Tax Matters Partner shall promptly advise the other Partners of
all audits or other actions by the Internal Revenue Service and shall furnish to
the Partnership and to each Partner a copy of each notice or other communication
received by the Tax Matters Partner from the Internal Revenue Service except
such notice or communication sent directly to the Partners by the Internal
Revenue Service. All expenses incurred by the Tax Matters Partner in its
capacity as such shall be expenses of the Partnership and shall be paid by the
Partnership.
(c) To the fullest extent permitted by law, the Partnership shall
indemnify Partners on an after-tax basis against any liabilities incurred while
acting as the Tax Matters Partner of the Partnership but only to the extent such
Partner acts within the scope of its authority as Tax Matters Partner under this
Agreement. The Tax Matters Partner shall not be indemnified against any
liability regarding Partnership tax matters arising by reason of the willful
misconduct, bad faith, gross negligence or reckless disregard of the duties of
the Tax Matters Partner.
6.3. Tax Reports to Current and Former Partners. After the end of each
fiscal year, the Tax Matters Partner shall, in a timely manner, prepare and
mail, or cause its accountants to prepare and mail, to each Partner and, to the
extent necessary, to each former Partner (or its legal representatives), a
report setting forth in sufficient detail such information as is required to be
furnished to partners by law (e.g., section 6031(b) of the Code and the Income
Tax Regulations thereunder) and as shall enable such Partner or former Partner
(or its legal representatives) to prepare their respective federal and state
income tax or informational returns in accordance with the laws, rules and
regulations then prevailing.
6.4. Accounting Records; Independent Audit. Complete books and records
accurately reflecting the accounts, business, transactions and partners of the
Partnership and each PCS System in which it has an interest shall be maintained
and kept by the Partnership at the Partnership's principal place of business.
The accounting records of the Partnership shall be maintained to assure
preparation of the financial statements in accordance with GAAP. The accounting
records of the Partnership shall be audited by certified public accountants
selected by the Partnership Committee and shall contain proportional accounting
information with respect to the Partnership's interest in any PCS Owned System.
6.5. Fiscal Year. Except as may otherwise be required by the federal
tax laws, the fiscal year of the Partnership for both financial and tax
reporting purposes shall end on December 31.
6.6. Tax Accounting Method. The books and accounts of the Partnership
shall be maintained using the accrual method of accounting for tax purposes.
Those documents relating to allocations of items of partnership income, gain,
loss, deduction or credit and Capital Accounts shall be kept under federal
income tax accounting principles as provided herein.
6.7. Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action that it
determines to be necessary or appropriate to cause the Partnership to comply
with any Federal, state and local withholding requirement with respect to any
allocation, payment or distribution by the Partnership to any Partner or other
Person. All amounts withheld to satisfy any Federal, state or local
-27-
<PAGE> 31
withholding requirement with respect to a Partner shall be treated as
distributions to such Partner. If any such withholding requirement with respect
to any Partner exceeds the amount distributable to such Partner under this
Agreement, or if any such withholding requirement was not satisfied with respect
to any amount previously allocated or distributed to such Partner, such Partner
and any successor or assignee with respect to such Partner's interest in the
Partnership hereby, to the fullest extent permitted by law, indemnifies and
agrees to hold harmless the Partners and the Partnership for such excess amount
or such withholding requirement, as the case may be.
6.8. Tax Elections. Upon the request of a transferee of a Partnership
Interest or a distributee of a Partnership distribution, the Partnership will
make the election under section 754 of the Code in accordance with applicable
Income Tax Regulations thereunder for the first fiscal year in which such
election could apply, unless the Tax Matters Partner agrees at the time for
filing the Partnership tax information return not to make such election. The
Partnership may seek to revoke such election (if made) if agreed to by the Tax
Matters Partner. In addition to the foregoing, the Tax Matters Partner shall, in
its sole discretion, determine whether to make any other available tax elections
and select any other appropriate tax accounting methods and conventions for any
purpose under this Agreement.
6.9. Prior Tax Information. Each Partner agrees to deliver to the
Partnership all relevant information regarding Taxes that the Partnership will
require in order to comply with its own tax accounting and reporting
requirements, including without limitation schedules setting forth the fair
market value and tax basis of each asset that may from time to time be
contributed by a Partner to the Partnership; provided, however, that no Partner
shall be required to disclose the income tax returns of itself or any of its
Affiliates.
ARTICLE 7
INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS
7.1. Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the Members, the Partners and their Affiliates, and their
respective partners, shareholders, directors, officers, employees and agents
and/or the legal representatives of any of them, and each other Person who may
incur liability as a Partner or otherwise in connection with the management or
ownership of the Partnership or any entity in which the Partnership has an
interest (each, an "Indemnified Party"), against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him or it in
connection with the investigation, defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which any Indemnified Party may
be involved or with which he or it may be threatened, while a Partner or serving
in such other capacity or thereafter, by reason of its being or having been a
Partner, or by serving in such other capacity, except with respect to any matter
which constitutes willful misconduct, bad faith, gross negligence or reckless
disregard of the duties of his office, or criminal intent. The Partnership shall
have the right to approve any counsel selected by any Indemnified Party and to
approve the terms of any proposed settlement. The Partnership shall advance to
any Indemnified Party or Partner reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any such action or
proceeding. Each Partner hereby agrees, and each other Indemnified Party shall
agree in writing prior to any such advancement, that in the event he or it
receives any such advance, such Indemnified Party shall reimburse the
Partnership for such fees, costs and expenses to the extent that it shall be
determined that he or it was not entitled to indemnification under this Section.
The rights accruing to a Partner and
-28-
<PAGE> 32
each other Indemnified Party under this Section 7.1 shall not exclude any other
right to which it or they may be lawfully entitled; provided that any right of
indemnity or reimbursement granted in this Section 7.1 or to which any
Indemnified Party may be otherwise entitled may only be satisfied out of the
assets of the Partnership, and no Partner and no withdrawn Partner shall be
personally liable with respect to any such claim for indemnity or reimbursement.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 7.1 shall not be construed so as to provide for the indemnification of a
Partner or any other Indemnified Party for any liability to the extent (but only
to the extent) that such indemnification would be in violation of applicable law
or such liability may not be waived, modified or limited under applicable law,
but shall be construed so as to effectuate the provisions of this Section 7.1 to
the fullest extent permitted by law.
7.2. Exculpation. Any Member, any Partnership employee, any Partner and
any Affiliate thereof and their respective partners, shareholders, directors,
officers, employees, or agents and/or the legal representatives of any of them
shall not be liable to any Partner or the Partnership for mistakes of judgment
or for action or inaction which such Member, Partner, Affiliate, partner,
shareholder, director, officer, employee, agent or legal representative
reasonably believed to be in or not opposed to the best interests of Partnership
unless such action or inaction constitutes willful misconduct, bad faith, gross
negligence or reckless disregard of his or its duties and, with respect to any
criminal action, such party reasonably believes his conduct was lawful. Each
Partner may (on its own behalf or on the behalf of any Member designated by such
Partner, any Affiliates of such Partner or their respective partners,
shareholders, directors, officers, employees or agents and/or legal
representatives of any of them), consult with counsel, accountants and other
experts in respect of the Partnership affairs and such Person shall be fully
protected and justified in any action or inaction which is taken in accordance
with the advice or opinion of such counsel, accountants or other experts;
provided that they shall have been selected with reasonable care.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 7.2 shall not be construed so as to relieve (or attempt to relieve) a
Partner or any other Person of any liability, to the extent (but only to the
extent) that such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 7.2 to the fullest extent permitted by law.
7.3. Restrictions on Partners. No Partner may, without the prior
written consent of all of the other Partners:
(i) confess a judgment against the Partnership;
(ii) make any agreement on behalf of any other Partner;
(iii) except to the extent permitted by Article 8 hereof, withdraw
as a Partner, dissolve, terminate, liquidate or wind up the affairs of
the Partnership; or
(iv) use or possess Partnership property except for a Partnership
purpose, except as provided under contractual arrangement.
7.4. Outside Activities.
(a) Except as otherwise expressly provided in this Section 7.4, any
Partner or Affiliate thereof may engage in or possess any interest in any other
business venture of any nature independently or with others, and neither the
Partnership nor any other Partner shall have any right by virtue of this
Agreement in or to such venture or in or to any income or profits derived
therefrom.
-29-
<PAGE> 33
(b) Except for Systems (or licenses or permits therefor) acquired in
accordance with Section 7.4 of the WMC Partnership Agreement, no Partner or any
Affiliate thereof may, directly or indirectly, acquire an ownership interest in
any System (or license or permit therefor).
(c) Except as permitted by Section 7.4 of the WMC Partnership
Agreement, no Partner will, and each Partner will not permit any Affiliate to,
directly or indirectly, engage in the business of providing PCS, Cellular or
ESMR Services (as defined in the WMC Partnership Agreement).
(d) Each Partner shall use its reasonable efforts to cause each of its
Attributed Entities to abide by restrictions contained in this Section 7.4 and
to comply with the terms set forth herein.
(e) This Agreement shall not be deemed to create any duties other than
as expressly provided for herein or imposed by applicable law, nor shall its
existence be deemed to alter the legal duties and obligations that any Partner
or any Affiliate has to the other Partners or their Affiliates as to matters
outside the scope of the Agreement, including, without limitation, those
concerning the terms and conditions of interconnection services. Each of the
Partners and its Affiliates acknowledge their respective right to compete
vigorously with the other Partners and their Affiliates in markets or areas in
which they are otherwise competitors in the offering of telecommunications
services.
(f) Each Partner (whether or not such Partner shall have withdrawn as a
General Partner from the Partnership in violation of Section 8.1) shall remain
subject to the provisions of this Section 7.4 for a period of one year from the
date such Partner and its Affiliates cease to have aggregate General Partner and
Limited Partner Percentage Interests equal to or exceeding 5%. If a General
Partner withdraws from the Partnership in violation of Section 8.1, then the
Limited Partner Percentage Interest of such Partner for purposes of this Section
7.4(f), shall be deemed to be increased by the General Partner Percentage
Interest at the time of such withdrawal.
7.5. Duties of Partners. The fiduciary duties of Partners or Members
of the Partnership Committee shall not restrict any Partner or Affiliate or
any Member of the Partnership Committee from:
(i) engaging in conduct permitted by Section 7.4;
(ii) taking any action in any capacity other than that of a Partner
or Member of the Partnership Committee, respectively; or
(iii) acting to prevent the Partnership from engaging in an
activity that is outside the scope of the Partnership Business;
whether or not such Partner, Affiliate or Member of the Partnership Committee is
motivated in whole or in part by a desire to further the interests of a Person
other than the Partnership.
ARTICLE 8
TERMINATION AND DISSOLUTION
8.1. Events of Dissolution.
(a) The Partnership shall be dissolved upon (i) expiration of the term
of the Partnership specified in Section 1.6 hereof, (ii) the Bankruptcy of a
General Partner under the circumstances described in Section 8.2(b), (iii) the
withdrawal of a General Partner, the filing of a certificate of dissolution, or
its equivalent, for a General Partner or the revocation of
-30-
<PAGE> 34
its charter and the expiration of 90 days after the date of notice to a General
Partner of revocation without a reinstatement of its charter, or the occurrence
of any other event that results in a General Partner ceasing to be a general
partner of the Partnership as required under the Act; provided, the Partnership
shall not be dissolved and required to be wound up in connection with any of the
events specified in this clause (iii) if (A) at the time of the occurrence of
such event there is at least one remaining General Partner of the Partnership
who is hereby authorized to and does carry on the business of the Partnership
without dissolution, or (B) within 90 days after the occurrence of such event, a
majority in interest of the remaining Partners (or such greater percentage in
interest as is required by the Act) agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date of such event,
of one or more additional general partners of the Partnership, (iv) the transfer
or sale of all or substantially all of the assets of the Partnership, (v) the
entry of a decree of judicial dissolution pursuant to Section 17-802 of the Act,
(vi) the unanimous written consent of the Partners, and (vii) the termination of
the Organization Agreement in accordance with the provisions of Article 7
thereof.
(b) Without the unanimous written consent of the Partners, each Partner
agrees not to withdraw as a Partner or do anything that would otherwise dissolve
the Partnership (except as permitted by the terms of Article 10).
Notwithstanding the foregoing, if a General Partner withdraws from the
Partnership, upon such withdrawal, (i) the general partner interests in the
Partnership of such Partner shall automatically be deemed to become limited
partner interests in the Partnership and (ii) such Partner shall have no right
to participate in the management of the Partnership Business and affairs of the
Partnership, including the right to designate Members of the Partnership
Committee.
8.2. Bankruptcy of a General Partner.
(a) If the Bankruptcy of a General Partner occurs and at such time
there is at least one other General Partner, such remaining General Partner or
General Partners are hereby authorized to carry on the business of the
Partnership without dissolution, and the Partnership Interests of the General
Partner in Bankruptcy (the "Bankrupt Partner") shall automatically be deemed to
become limited partner interests in the Partnership, and such Bankrupt Partner
shall cease to be a General Partner and continue to be, or become, a Limited
Partner having (i) no right to participate in the management of the Partnership
Business and affairs of the Partnership, including no right to designate Members
to the Partnership Committee, and (ii) the same interest in all items of income,
gain, loss, deduction or credit of the Partnership to the same extent as if such
Bankruptcy had not occurred. The Partnership shall continue to be governed by
the terms of this Agreement, the Partnership Business and the property of the
Partnership shall continue to be owned by the Partnership, and the Partnership
Business shall otherwise continue unaffected by such Bankruptcy. Upon the
occurrence of the Bankruptcy of any General Partner, (i) the Bankrupt Partner
and the other Partners shall execute such documents as may be necessary or
appropriate to carry out the provisions of this Section 8.2 and (ii) the other
Partners are, without necessity of any further action or documentation, hereby
appointed attorneys-in-fact of the Bankrupt Partner for the purpose of carrying
out the provisions of this Section 8.2 and taking any action and executing any
documents which such Partners may deem necessary or advisable to accomplish the
purposes hereof, such appointment being irrevocable and coupled with an
interest.
(b) If the Bankruptcy of a General Partner occurs and at such time the
Bankrupt Partner is the only General Partner, the Partnership shall be dissolved
unless within 90 days after such Bankruptcy occurs, the other Partners agree in
writing to continue the business of the Partnership and to appoint, effective as
of the date of such Bankruptcy, one or more additional General Partners. In the
event that the other Partners make such an
-31-
<PAGE> 35
election, the Partnership Business shall be carried on by such newly appointed
General Partner(s) and the Bankrupt Partner shall have its general partnership
interest in the Partnership converted into a limited partner interest in the
Partnership and continue to be, or becomes a Limited Partner subject to the
provisions of Section 8.2.
(c) In the event any General Partner shall become a "debtor" as defined
in the Bankruptcy Code in any case commenced thereunder and at any time during
the pendency of such case there shall be appointed (i) a trustee with respect to
the Bankrupt Partner under section 701, 702 or 1104 of the Bankruptcy Code (or
any successor provisions thereto), or (ii) an examiner having expanded powers
beyond those specifically enumerated in section 1104(b) of the Bankruptcy Code,
then the other Partners may, at any time thereafter, so long as such condition
exists, elect to dissolve the Partnership, in which event the affairs of the
Partnership shall be wound up as provided in this Article 8.
8.3. Order of Dissolution. In settling accounts upon winding up and
liquidation of the Partnership, the assets of the Partnership shall be applied
and distributed as expeditiously as possible in the following order not later
than the end of the taxable year of the liquidation (i.e., the date upon which
the Partnership ceases to be a going concern as provided in Income Tax
Regulation section 1.704-1(b)(2)(ii)(g) or if later, within 90 days after the
date of such liquidation):
(a) to pay (or make reasonable provision for the payment of) all
creditors of the Partnership, including to the extent permitted by law Partners
or their Affiliates who are creditors, in satisfaction of liabilities of the
Partnership in the order of priority provided by law, including expenses
relating to the dissolution and winding up of the affairs of the Partnership
(including, without limitation, expenses of selling assets of the Partnership,
discharging the liabilities of the Partnership, distributing the assets of the
Partnership and terminating the Partnership as a limited partnership in
accordance with this Agreement and the Act); and
(b) to the Partners in proportion to their respective positive Capital
Account balances, as those balances are determined after all adjustments to such
Capital Accounts as required by this Agreement for all periods immediately prior
to such distribution.
8.4. Orderly Winding Up. Notwithstanding anything to the contrary in
Sections 8.1, 8.2 and 8.3, but subject to Section 8.5 and the order of priority
in Section 8.3, upon winding up and liquidation, if required to maximize the
proceeds of liquidation, the Partnership Committee may, upon unanimous approval,
transfer the assets of the Partnership to a liquidating trustee or trustees.
8.5. Dissolution Election. Notwithstanding the terms of any provision
of Section 8.3(b) to the contrary, but subject to Section 17- 804(a)(1) of the
Act, any Partner may elect upon the occurrence of any of the events of
dissolution specified in Section 8.1, by written notice to the Partnership any
time prior to actual distribution, to require that the Partnership distribute
the assets of the Partnership upon dissolution and winding up as follows:
(i) First, the Partners shall attempt to reach agreement on
the Fair Market Value and distribution among the Partners of each of
the non-cash assets of the Partnership and liabilities related thereto,
subject always to distributions being made in accordance with Capital
Accounts as provided in Section 8.3(b), with such distributed assets
being valued at their Fair Market Value. To the extent that the
Partners are unable to reach agreement on the Fair Market Value and
distribution among the Partners of certain of such non-cash assets and
liabilities, the Chairman of the Partnership Committee not later than
20 days
-32-
<PAGE> 36
after an event of dissolution set forth in Section 8.1 shall implement
the following internal auction procedures. For a period of up to ten
days, the Chairman shall entertain bids by the Partners for such
non-cash assets and related liabilities, either singly (a "Single Bid")
or as a whole (an "Aggregate Bid"). The Chairman will only entertain
bids which exceed the previous Single Bid for any non-cash asset and
related liabilities or the previous Aggregate Bid for all such non-cash
assets and related liabilities by at least one percent (a "Qualifying
Bid"). The Chairman will promptly make each bid submitted by any
Partner available to each other Partner. If during any 24-hour period
within the ten-day period specified above, the Chairman does not
receive a Qualifying Single Bid with respect to any non-cash asset or
related liabilities or a Qualifying Aggregate Bid, the Chairman shall
not entertain any further Single Bids with respect to such non-cash
asset or any further Aggregate Bids, as the case may be. At the
conclusion of such bidding period, the highest Single Bid by any
Partner for each non-cash asset and related liabilities or, if an
Aggregate Bid for such non-cash assets and related liabilities, which
exceeds the sum of the Single Bids, is received such Aggregate Bid,
shall constitute the Fair Market Value of such non-cash assets and
related liabilities. The Partnership shall thereafter pay any amounts
referred to in Section 8.3(a) (except to the extent any such
liabilities are to be assumed by any Partner), and the non-cash assets
and liabilities valued pursuant to the previous sentence shall be
distributed to the Partner who specified the highest Fair Market Value
therefor (and shall be debited against its Capital Account balance),
and the remaining non-cash assets, if any, and liabilities shall be
distributed in the manner agreed upon by the Partners; provided that if
the distributions pursuant to this sentence would result in any Partner
receiving more than its positive Capital Account balance (an "Excess
Distribution"), assets with a Fair Market Value equal to the Excess
Distribution shall instead be distributed among the other Partners in
accordance with Capital Account balances (such assets as selected by
such other Partners) and immediately thereafter sold for cash to the
Partner who would have otherwise received the Excess Distribution in
the absence of this proviso, which cash shall be paid simultaneously
with the liquidating distributions; and
(ii) All other remaining assets shall be distributed to the
Partners in accordance with Section 8.3(b) hereof..
8.6. Obligation to Restore Deficit Balance. No Partner shall be liable
for the return of the capital contributions of any other Partner, nor shall any
Partner be required to have any obligation to restore a deficit balance in its
Capital Account on winding up, liquidation and termination of the Partnership
except to the extent required by the Act.
8.7. Termination of Partnership. The Partnership shall terminate when
all of the assets of the Partnership, after payment of or due provision for all
debts, liabilities and obligations of the Partnership, shall have been
distributed to the Partners in the manner provided for in Article 8, and the
Certificate of Limited Partnership of the Partnership shall be canceled in the
manner required by the Act.
ARTICLE 9
ADMISSION OF ADDITIONAL PARTNERS
9.1. Admission Procedures. With the approval of the Partnership
Committee, the Partnership may admit additional Persons as both a General
-33-
<PAGE> 37
Partner or a Limited Partner subject to the condition that the proposed
Additional Partner shall execute and deliver to the Partnership an agreement by
which it (i) shall become a party to this Agreement and (ii) shall make
representations and warranties to the Partnership with respect to itself
substantially similar to those set forth in the Organization Agreement and
relating to such additional matters as the Partnership Committee may request.
ARTICLE 10
TRANSFER OR ENCUMBRANCE OF INTEREST
10.1. Restriction on Transfer or Encumbrance. No Partner may assign,
sell, transfer or otherwise dispose of (any such transaction being referred to
in this Article 10 as a "transfer"), pledge, hypothecate, grant a security
interest in or otherwise encumber, its Partnership Interest, except (i) to the
WMC in accordance with the provisions of the Organization Agreement, (ii) to ATI
or any Affiliate thereof in connection with an investment by such Partner in
ATI, (iii) to ATI in accordance with Section 10.8 of the WMC Partnership
Agreement or (iv) otherwise in accordance with the terms of Section 10.2.
10.2. Transfer of Partnership Interest to a Wholly Owned Affiliate.
(a) Any Partner may, without the consent of the other Partners,
transfer ownership of all or any part of its Partnership Interest to a Wholly
Owned Affiliate (any Affiliate to which a transfer is permitted under this
Section 10.2 being referred to herein as an "Affiliate Transferee"). An
Affiliate Transferee shall be admitted as both a Substitute General Partner and
a Substitute Limited Partner at the time such Affiliate Transferee executes (i)
this Agreement or a counterpart to this Agreement, which evidences such
Affiliate Transferee's agreement to be bound to the terms and conditions of this
Agreement, (ii) the Amended and Restated Investment Agreement, of even date
herewith, by and between ATI and USW and (iii) the Amended and Restated
Agreement of Exchange, of even date herewith, by and between ATI and USW.
(b) A transfer of less than all of a Partner's Partnership Interest (a
"Partial Interest") pursuant to this Section 10.2 shall be deemed to constitute
a transfer of both the General Partner and Limited Partner Percentage Interests
of such Partner pro rata in proportion to the portion of such Partner's entire
Partnership Interest transferred.
(c) If at any time, any Partner and any Affiliate Transferees thereof
cease to own in the aggregate at least 20% of the aggregate Percentage Interests
(without giving effect to any dilution of ownership which results from the
admission of Additional Partners), (i) the interests of such Partner and any
Affiliate Transferees thereof as a General Partner shall automatically be deemed
to become interests as a Limited Partner and (ii) such Partner and any Affiliate
Transferees thereof shall have no right to participate in the management of the
Partnership Business and affairs of the Partnership, including no right to
designate Members of the Partnership Committee.
10.3. Partnership's Redemption Option. If, at any time, the aggregate
Percentage Interests of any Partner and its Affiliate Transferees are less than
5%, the Partnership shall have the option to redeem such Partner's and its
Affiliate Transferees' Partnership Interests at a purchase price equal to the
Fair Market Value of such Partnership Interests as determined pursuant to
Section 4.9.
10.4. Spin-off Not Deemed to be a Transfer. A tax-free spin-off
qualifying under section 355 of the Code, by a Partner to the shareholders of
its publicly held Parent Entity, of an entity the assets of which include
-34-
<PAGE> 38
all, but not less than all, of such Partner's Wireless Assets will not be deemed
to be a transfer or Change in Ownership (as hereinafter defined) if effected in
accordance with Section 10.5 of the WMC Partnership Agreement.
10.5. Invalid Transfers Void. Any purported transfer of any Partnership
Interest or any part thereof not in compliance with this Article 10 shall be
void and of no force or effect and the transferring Partner shall be liable to
the other Partners and the Partnership for all liabilities, obligations,
damages, losses, costs and expenses (including reasonable attorneys' fees and
court costs) arising as a result of such noncomplying transfer.
10.6. Change in Ownership.
(a) For purposes of this Agreement, a "Change in Ownership" of a
Partner shall be deemed to have occurred when (i) any Person, other than a
publicly held Parent Entity of such Partner or a Wholly Owned Affiliate of such
Parent Entity (an "Unaffiliated Entity"), shall acquire (whether by merger,
consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or series of related transactions), or otherwise beneficially own or
control 50% or more of the outstanding Voting Stock of any Partner or any entity
(other than a publicly held Parent Entity) which, directly or indirectly,
through ownership of one or more majority-owned successive subsidiary entities,
owns more than 50% of the outstanding Voting Stock in or controls such Partner
(a "Control Entity"), (ii) an Unaffiliated Entity, or group of persons acting in
concert therewith, shall acquire the power to direct or cause the direction of
the management and policies of such Partner or a Control Entity thereof, or
(iii) the publicly held Parent Entity of such Partner shall otherwise cease to
beneficially own or control a majority of the outstanding Voting Stock of any
Partner or a Control Entity thereof.
(b) Any Change in Ownership of Partner shall be deemed for all purposes
hereof to be a proposed transfer of the Partnership Interest of such Partner.
10.7. Proportional Transfers of WMC Interest. No Partner may effect a
transfer of its interest in the Partnership without transferring a partnership
interest in the WMC representing the same proportion of its Percentage Interest
in the WMC as the proportion of the Percentage Interest in the Partnership being
transferred, and any such attempted transfer shall be null and void and of no
effect.
ARTICLE 11
REGULATORY MATTERS
11.1. MFJ Compliance.
(a) USWPH agrees that USW will pursue, in conjunction with the Regional
Bell Operating Companies ("BOCs") within the meaning of the MFJ, the "Motion of
the Bell Companies for a Modification of Section II of the Decree to Permit Them
to Provide Cellular and Other Wireless Services Across LATA Boundaries," filed
with the Decree Court on June 20, 1994. If the Decree Court were to deny the
BOCs' motion or if the Decree Court or Department of Justice were to take the
position that the relief requested in the motion does not apply to PCS Service,
USW will request a waiver for the benefit of the Partnership that would enable
the Partnership to provide PCS Service free of restrictions on BOCs in the MFJ.
In addition, USW will request a waiver for the benefit of the Partnership, any
PCS Owned System or USW, as appropriate, if the waiver is: (i) to permit the
Partnership or, any PCS Owned System or USW, as appropriate, to offer the same
services as those set forth in any waiver request which USW or an affiliate has
pending or which USW, any of its affiliates, or any BOC has obtained for its
-35-
<PAGE> 39
cellular businesses, including businesses incidental thereto; (ii) based on
relevant facts which are comparable to those set forth in any such waiver USW,
an affiliate thereof or a BOC has pending or has obtained, as the case may be,
and (iii) with respect to the Partnership or any PCS Owned System, within the
scope of the Partnership Business. Except as described above, neither USW nor
any affiliate thereof shall be obliged to request any waiver for the benefit of
the Partnership.
(b) Unless and until the Decree Court, the Department of Justice, or
USW's CECO Decree Committee or the MFJ Compliance Committee shall issue a
written opinion that the MFJ does not apply to the Partnership, the Partnership
will conform to the requirements and prohibitions of the MFJ. As long as USW or
any Affiliate holds any ownership interest in the Partnership, the Partnership
will not engage in any MFJ Restricted Activities. ATI or any Affiliate thereof
will have the option to engage in MFJ Restricted Activities, specifically
including the provision of interexchange (interLATA) telecommunications services
(it being understood that such services may be provided by the WMC if it is
thereafter permitted to do so, as provided in Section 7.4(d)(ix) of the WMC
Partnership Agreement) and engage in any business practice and enter into any
transaction in which the Partnership does not engage by reason of the MFJ.
Except as provided in the preceding sentence, the provisions of this Section
11.1 shall take precedence, in the event of any conflict, over any other
provision of this Agreement.
(c) Unless and until the Decree Court, the Department of Justice, or
USW's CECO Decree Committee shall issue a written opinion that the CECO does not
apply to the Partnership, the Partnership will conform to the requirements and
prohibitions of the CECO. Unless and until the Decree Court, the Department of
Justice, or USW's MFJ Compliance Committee shall issue a written opinion that
the EO does not apply to the Partnership, the Partnership will conform to the
requirements and prohibitions of the EO. In conforming to the requirements and
prohibitions of the CECO and EO, the Partnership will utilize the procedures
established by USW for compliance with them. At the request of the Partnership,
USW will provide training, instruction and assistance to the Partnership in
matters associated with CECO and EO compliance.
(d) If, as a result of this Agreement, any MFJ Concerns (as defined in
Article 12 of the WMC Partnership Agreement) are raised concerning the Partners
or activities of this Partnership or the Partners in WMC and/or ATI or USW, the
parties will adopt for purposes of this Agreement, the restructuring provisions
of Sections 12.1(b)-(d) of the WMC Partnership Agreement, as if fully set forth
herein.
ARTICLE 12
MISCELLANEOUS
12.1. Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party (i) when delivered
personally (by courier service or otherwise), (ii) when delivered by telecopy
and confirmed by return telecopy, (iii) on the business day after the date sent
by a nationally recognized overnight courier service, or (iv) seven days after
being mailed by first-class, registered or certified mail, postage prepaid and
return receipt requested, in each case to the applicable addresses set forth
below:
-36-
<PAGE> 40
If to USWPH:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: President
Telecopy: (303) 793-6294
With copies to:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: General Counsel
Telecopy: (303) 793-6294
If to ATPH:
AirTouch Communications, Inc.
2999 Oak Road
Walnut Creek, CA 94596
Attn: C. Lee Cox, President and
Chief Operating Officer
Telecopy: (510) 210-3599
With copies to:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attn: Senior Vice President-Legal and
External Affairs
Telecopy: (415) 658-2298
and
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Nathaniel M. Cartmell III, Esq.
Telecopy: (415) 477-4816
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance with this Section 12.1.
12.2. Governing Law, etc.
(a) This Agreement has been executed and delivered in the State of
Delaware and shall, in all respects be governed by, interpreted, and construed
in accordance with the laws of the State of Delaware, all rights and remedies of
the Partners in respect thereof being governed by such laws.
(b) Each Partner hereby irrevocably appoints The Corporation Trust
Company, at its office in Wilmington, Delaware, United States of America, its
lawful agent and attorney to accept and acknowledge service of any and all
process against it in any action, suit or proceeding arising in connection with
this Agreement and upon whom such process may be served, with the same effect as
if such party were a resident of the State of Delaware and had been lawfully
served with such process in such jurisdiction, and waives all claim of error by
reason of such service; provided that in the case of any service upon such agent
and attorney, the party effecting such service shall also deliver a copy thereof
to the other party at the address and in the manner specified in Section 12.1.
In the event that such agent and attorney resigns or otherwise becomes incapable
of acting as such, such party will appoint a successor agent and attorney in
-37-
<PAGE> 41
Wilmington, Delaware, reasonably satisfactory to the other party, with like
powers.
(c) The choice of law provisions of this Article 12 have been
negotiated in good faith and agreed upon by the parties hereto and are
reasonable especially considering that this Agreement is subject to and conforms
with the Act. All Partners, by their execution of this Agreement, expressly
agree, to the fullest extent permitted by law, not to challenge the choice of
law provisions contained in this Article 12.
12.3. Amendments. This Agreement may be modified or amended only by
an instrument in writing signed by each Partner, and, as so modified and
amended, shall inure to the benefit of all of the Partners.
12.4. Entire Agreement. Except to the extent other agreements are
specifically referred to herein, this Agreement and the other agreements of the
Partners or their Affiliates entered into on the Effective Date or the date
hereof constitute the entire agreement between the Partners with respect to the
matters covered hereby and thereby and supersede all other agreements,
understandings, offers and negotiations, oral or written that are prior to the
date hereof.
12.5. Waiver of Partition. Each Partner hereby irrevocably waives
any and all rights that it may have to maintain an action for partition of
any of the Partnership's property.
12.6. Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof
shall be filed and kept with the books of the Partnership.
12.7. Successors. Subject to Section 10.1, all rights and duties of
the Partners hereunder shall inure to the benefit of and be binding upon
their respective successors and assigns.
12.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
12.9. Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision which is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable and contrary to
existing or future applicable law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement which are valid. In
that case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of any
applicable law, and in the event such term or provision cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions.
12.10. Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Partnership until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
12.11. Arbitration. Each partner hereby acknowledges that this
Agreement is subject to the Arbitration Agreement of the partners which is being
entered into of even date herewith, and the Arbitration Agreement will govern
the resolution of disputes relating to this Agreement in accordance with its
terms. Each Additional Partner or Substitute Partner shall execute the
Arbitration Agreement or a counterpart to the Arbitration Agreement on or prior
to its admission to the Partnership.
-38-
<PAGE> 42
12.12. No Third Party Beneficiaries. Nothing contained in this
Agreement is intended to, or shall, confer upon any Person other than the
parties hereto any rights or remedies hereunder.
-39-
<PAGE> 43
IN WITNESS WHEREOF, the Partners have executed this Partnership
Agreement as of the date first hereinabove written.
U S WEST PCS HOLDINGS, INC.
By:
---------------------------
Name:
Title:
AIRTOUCH PCS HOLDING, INC.
By:
---------------------------
Name:
Title:
<PAGE> 44
SCHEDULE 1
<TABLE>
<CAPTION>
Percentage Interests
--------------------
Partner General Partner Limited Partner Total
- ------- --------------- --------------- -----
<S> <C> <C> <C>
AirTouch PCS Holding, Inc. 10.1% 39.9% 50.0%
US West PCS Holdings, Inc. 10.1% 39.9% 50.0%
</TABLE>
-41-
<PAGE> 1
Exhibit 10.3
Draft 9/30/95
----------------------------------------
AMENDED AND RESTATED
INVESTMENT AGREEMENT
dated as of September 30, 1995
by and between
AIRTOUCH COMMUNICATIONS, INC.
a Delaware corporation
and
U S WEST, INC.,
a Colorado corporation
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ATI . . . . . . . . . . . . . 3
2.1. Organization and Qualification . . . . . . . . . . . . . . . . . . . . 3
2.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . 4
2.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5. Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF USW . . . . . . . . . . . . . 4
3.1. Organization and Qualification . . . . . . . . . . . . . . . . . . . . 4
3.2. Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . 4
3.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. Ownership of Securities of ATI . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV COVENANTS OF ATI . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1. Modification of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3. Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V COVENANTS OF USW . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1. Standstill Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3. Transfers; Tender Offers; Suspension of Transfers . . . . . . . . . . . 10
5.4. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI BOARD REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . 13
6.1. USW's Right to Designate. . . . . . . . . . . . . . . . . . . . . . . . 13
6.2. Consultation; Expansion of Board and Appointment; Classification. . . . 13
6.3. Subsequent Nomination of Persons Designated by USW. . . . . . . . . . . 13
6.4. Replacement of Directors Designated by USW. . . . . . . . . . . . . . . 13
6.5. Termination of USW's Right to Designate; Resignation. . . . . . . . . . 14
6.6. Mandatory Recusal of USW's Board Designee . . . . . . . . . . . . . . . 14
ARTICLE VII REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2. Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4. Conditions to Offerings . . . . . . . . . . . . . . . . . . . . . . . . 18
7.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . 20
7.8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.10. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII RIGHTS OF FIRST OFFER AND FIRST REFUSAL . . . . . . . . . . . . . 23
8.1. Notice of Intent to Transfer . . . . . . . . . . . . . . . . . . . . . 23
8.2. Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IX TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1. Legend; Removal of Legend . . . . . . . . . . . . . . . . . . . . . . 26
10.2. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3. Specific Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . 27
10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 28
10.9. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . 28
10.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.12. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED INVESTMENT AGREEMENT
THIS AMENDED AND RESTATED INVESTMENT AGREEMENT (the "Agreement"), dated as
of September 30, 1995, by and between AIRTOUCH COMMUNICATIONS, INC., a Delaware
corporation ("ATI"), and U S WEST, INC., a Colorado corporation ("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Amended and Restated Joint
Venture Organization Agreement, dated as of the date hereof (the "Organization
Agreement"), providing for a series of transactions, including the establishment
of a partnership to be known as WMC Partners, L.P. ("WMC");
WHEREAS, ATI and USW are parties to that certain Amended and Restated
Agreement of Exchange and that certain Amended and Restated Trust Agreement of
Exchange, each dated as of the date hereof (the "Agreement of Exchange" and the
"Trust Agreement of Exchange," respectively);
WHEREAS, upon the terms and subject to the conditions set forth in the
Agreement of Exchange or the Trust Agreement of Exchange, under certain
circumstances either ATI or USW may elect to cause an exchange, by merger or
otherwise, of USW's partnership interests in WMC for capital stock of ATI (such
exchange being referred to herein as the "Exchange"); and
WHEREAS, in connection with the foregoing, ATI and USW desire to set forth
herein certain terms regarding their relationship both before and after the
Exchange;
NOW, THEREFORE, ATI and USW agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. (a) As used in this Agreement, the following terms shall
have the following meanings (unless indicated otherwise, all Article and Section
references are to Articles and Sections of this Agreement):
"Affiliate" shall have the meaning specified in Rule 12b-2 under the
Exchange Act, as such rule is currently in effect.
"Agreement of Exchange" shall have the meaning set forth in the second
recital of this Agreement.
"beneficial ownership" shall have the meaning specified in Rule 13d-3 under
the Exchange Act, as such rule is currently in effect.
"Change of Control" shall mean (i) any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or otherwise) that results
in any Person, including a "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) that includes such Person, acquiring beneficial ownership,
directly or indirectly, of 50% or more of the aggregate voting power of the
Voting Securities of ATI or USW, as the case may be; (ii) any transaction or
series of related transactions that results in the transfer, sale or other
disposition by ATI or USW, as the case may be, of assets (A) that represent more
than 80% of the total fair market value of its assets on a proportionate basis
immediately prior to such disposition, (B) that generated more than 80% of its
total operating revenues on a proportionate basis in the preceding fiscal year
and (C) that generated more than 80% of its total net income from operations on
a proportionate basis during the preceding fiscal year; provided, however, that
any such transac-
-1-
<PAGE> 5
tion or series of related transactions shall not be deemed to be a Change of
Control if a majority of the value of the consideration received in exchange for
the assets transferred, sold or otherwise disposed of consists of assets (or
interests in assets) of a like kind or nature; or (iii) when individuals who at
the beginning of any period of two consecutive calendar years constituted the
Board of Directors (together with any new directors whose election to the Board
of Directors or whose nomination for election was approved by a vote of at least
two-thirds of the members of the Board of Directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of the Board of
Directors then in office.
"Common Stock" shall mean ATI's Common Stock, $.01 par value.
"Exchange" shall have the meaning set forth in the third recital of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations thereunder, all as
the same shall be in effect from time to time.
"Organization Agreement" shall have the meaning set forth in the first
recital of this Agreement.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated organization or other entity, or a government or agency or
political subdivision thereof.
"Related Agreements" shall have the meaning set forth in the Organization
Agreement.
"Rights Agreement" shall mean that certain Rights Agreement between ATI and
the Bank of New York, as Rights Agent, dated as of September 19, 1994, as it may
be amended from time to time, any successor agreement.
"SEC" shall mean the Securities and Exchange Commission or its successor.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations thereunder, all as the
same shall be in effect from time to time.
"transfer" shall mean, with respect to any Voting Security, a sale,
exchange, transfer or other disposition, whether or not for value, of such
Voting Security or any interest therein, or of any direct or indirect right or
option to acquire beneficial ownership of the same.
"Trust Agreement of Exchange" shall have the meaning set forth in the second
recital of this Agreement.
"Voting Securities" shall mean any securities of ATI (unless the context
specifically contemplates another issuer) having the ordinary power to vote, in
the absence of contingencies, in the election of directors of ATI.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any entity
as to which 100% of the securities or other ownership interests having power to
elect the board of directors or other persons performing similar functions are
owned directly or indirectly by such Person.
"WMC" shall mean WMC Partners L.P., a Delaware limited partnership.
(b) Each of the following terms is defined in the Section set forth opposite
such term:
-2-
<PAGE> 6
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Proposal 5.1(b)
Future Investment Agreement 4.1(a)
Inspectors 7.3(f)
Notice of Intent 8.1
Notice of Election 8.2(b)
Other Investor 4.1(a)
Other Shares 7.2(c)
Percentage Limitation 5.1(a)
Permitted Offering 8.1
Records 7.3(f)
Registrable Shares 7.1
Registration Statement 7.1
ROFO Notice 8.2(a)
ROFR Notice 8.3(b)
Spin-off 5.3(d)
Spun-off Person 5.3(d)
Threshold Percentage 6.5
Unapproved Offer 5.3(c)
USW Response 5.1(b)
1% Purchaser 8.3(b)
</TABLE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ATI
ATI hereby makes the following representations and warranties to USW:
2.1. Organization and Qualification. ATI is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and has the
corporate power to own its properties and to carry on its business as now being
conducted.
2.2. Authorization; Enforcement. (a) ATI has full legal right, power and
authority to enter into and perform this Agreement, (b) the execution and
delivery of this Agreement by ATI and the consummation by it of the transactions
contemplated hereby have been duly authorized by it, (c) this Agreement has been
duly authorized, executed and delivered by ATI and (d) this Agreement
constitutes a valid and binding obligation of ATI enforceable against ATI in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar law relating to, or affecting generally the enforcement of, creditors'
rights and remedies and (ii) the remedies of specific performance and injunctive
relief may be subject to general principles of equity.
2.3. No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by ATI of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of ATI pursuant
to any agreement, indenture or instrument to which ATI is a party, or by which
any property or asset of ATI is bound or affected, or result in a violation of
its Amended and Restated Articles of Incorporation or By-laws or any law, rule,
regulation, order, judgment or decree of any court or governmental agency
applicable to ATI or by which any property or asset of ATI is bound or affected.
Except for such filings as may be required by the Exchange Act or as
specifically contemplated hereby, no consent, authorization or order of, or
filing or registration with, any court or governmental agency is required for
the execution, delivery and performance of this Agreement.
-3-
<PAGE> 7
2.4. Rights Agreement. ATI has furnished to USW a true and correct copy of
the Rights Agreement, as amended.
2.5. Delaware Law. The Board of Directors of ATI has approved by resolution
USW as an "interested stockholder" for purposes of section 203 of the Delaware
General Corporation Law by reason of its acquiring of Voting Securities pursuant
to the Agreement of Exchange.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USW
USW hereby makes the following representations and warranties to ATI:
3.1. Organization and Qualification. USW is a corporation duly organized and
existing in good standing under the laws of the State of Colorado and has the
corporate power to own its properties and to carry on its business as now being
conducted.
3.2. Authorization; Enforcement. (a) USW has full legal right, power and
authority to enter into and perform this Agreement, (b) the execution and
delivery of this Agreement by USW and the consummation by it of the transactions
contemplated hereby have been duly authorized by it, (c) this Agreement has been
duly authorized, executed and delivered by USW and (d) this Agreement
constitutes a valid and binding obligation of USW enforceable against USW in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar law relating to, or affecting generally the enforcement of, creditors'
rights and remedies and (ii) the remedies of specific performance and injunctive
relief may be subject to general principles of equity.
3.3. No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by USW of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of USW pursuant
to any agreement, indenture or instrument to which USW is a party, or by which
any property or asset of USW is bound or affected, or result in a violation of
USW's charter documents or by-laws or any law, rule, regulation, order, judgment
or decree of any court or governmental agency applicable to USW or by which any
property or asset of USW is bound or affected. Except for such filings as may be
required by the Exchange Act or as specifically contemplated hereby, no consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance of
this Agreement.
3.4. Ownership of Securities of ATI. Other than such rights as may be
conferred on USW under this Agreement or the Related Agreements, USW and its
Affiliates do not beneficially own any securities of ATI.
ARTICLE IV
COVENANTS OF ATI
4.1. Modification of Terms. (a) ATI will provide to USW copies of each
agreement that ATI enters into with any Person (other than USW, an ATI employee
stock ownership plan, if any, or a Person who is restricted by law or regulation
from holding in excess of 25% of ATI's Voting Securities and other than
underwriting agreements) obligating ATI to transfer to such Person Voting
Securities (or securities convertible or exchangeable by such Person for Voting
Securities) representing 10% or more of the sum of (x) the then outstanding
Voting Securities and (y) Voting Securities to be
-4-
<PAGE> 8
transferred in connection with such agreement (or issuable upon the conversion
or exchange of securities to be so purchased) (each such agreement a "Future
Investment Agreement" and each such Person an "Other Investor").
(b) Within thirty (30) days after the execution by ATI of a Future
Investment Agreement, ATI shall choose one of the following and by written
notice inform USW:
(i) ATI shall offer to amend the terms of Section 5.1(a)(i) to
correspond to the percentage limitation on ownership of Voting Securities
imposed on the Other Investor in such Future Investment Agreement; or
(ii) ATI shall offer to amend the terms of Section 5.1(a) (other than
subparagraph (i) thereof) to provide for the corresponding terms (other than
as to Section 5.1(a)(i)) in their entirety (including the date certain
specified as the expiration date for the standstill provisions) as set forth
in such Future Investment Agreement;
provided that ATI shall choose, and offer to USW, the option set forth in clause
(ii) above if the percentage limitation on ownership of Voting Securities by
such Other Investor is less than 20%. If USW wishes to accept such offer, it
must do so by written notice to ATI within twenty days after receipt of ATI's
offer. Upon any such acceptance by USW, ATI and USW shall execute an agreement
confirming such amendment.
4.2. Rights Agreement. ATI will not amend or supplement the Rights Agreement
or adopt a new agreement providing for the issuance of rights or securities
comparable to the Rights Agreement, unless the Rights Agreement as so amended or
supplemented or such new agreement, as the case may be, provides to the same
effect as the amendments described in Section 4.3 and to the effect that USW and
its Affiliates shall not be deemed to be "Acquiring Persons" in connection with
their becoming "Beneficial Owners" of "Common Shares" pursuant to this Agreement
or the Agreement of Exchange. ATI further agrees that in the event of any
amendment of the terms of Section 5.1(a) pursuant to Section 4.1 above, it will
effect such further amendment of the Rights Agreement as may be reasonably
necessary so that USW and its Affiliates shall not be deemed to be Acquiring
Persons by reason of any such amendment of the terms of Section 5.1(a).
4.3. Amendment to Rights Plan. As soon as reasonably practicable after the
date hereof, ATI shall take all actions necessary to amend the Rights Agreement
such that the Trustee (as defined in the Trust Agreement of Exchange) shall not
be deemed to be an "Acquiring Person" in connection with its becoming a
"Beneficial Owner" of "Common Shares" (as such terms are defined in the Rights
Agreement) pursuant to the Trust Agreement of Exchange.
ARTICLE V
COVENANTS OF USW
5.1. Standstill Provisions. (a) USW covenants to and agrees with ATI that,
except as it may be specifically permitted by this Agreement or the Related
Agreements or unless it is specifically invited in writing to do so by ATI, USW
will not, and will cause each of its Affiliates not to, directly or indirectly:
(i) in any way acquire or agree to acquire beneficial ownership of any
securities or any direct or indirect rights or options to acquire beneficial
ownership of any securities of ATI, except (A) pursuant to the Exchange and
(B) thereafter, through open-market or privately-negotiated purchases from
third
-5-
<PAGE> 9
parties of Voting Securities, if the aggregate percentage (calculated by voting
power) of the Voting Securities beneficially owned by USW and its Affiliates
after giving effect to such acquisition would not exceed (I) the aggregate
percentage of total voting power of ATI's capital stock represented on the date
of the Exchange by the Common Stock issued to USW pursuant to such Exchange or
(II), if the aggregate percentage described in the preceding clause (I) was less
than 16%, then 16% (the applicable percentage pursuant to clause (I) or (II)
being known as the "Percentage Limitation"); provided that if, immediately
following any transfer of Voting Securities by USW or its Affiliates to any
person other than an Affiliate of USW, the percentage of outstanding Voting
Securities then beneficially owned by them is less than the Percentage
Limitation minus two percentage points, the Percentage Limitation shall be
reduced to the percentage of outstanding Voting Securities then beneficially
owned by them plus two percentage points; and provided further that in no event
shall USW and its Affiliates be deemed to have exceeded any Percentage
Limitation then in effect solely as a result of a reduction in the outstanding
Voting Securities, including through repurchases of outstanding Voting
Securities by ATI, which reduction has the effect of increasing the percentage
(calculated by voting power) of outstanding Voting Securities beneficially owned
by USW and its Affiliates beyond the Percentage Limitation (provided that any
subsequent increase in the Voting Securities beneficially owned by USW and its
Affiliates, without the prior approval of ATI, shall be deemed to be a violation
of the Percentage Limitation);
(ii) make any public announcement with respect to, or submit to ATI or
any of its directors, officers, representatives, employees, attorneys,
advisers, agents or Affiliates (whether publicly or otherwise) any proposal
for, the acquisition of Voting Securities not permitted by paragraph (i)
above which would result in USW's exceeding the Percentage Limitation or for
or with respect to any merger, consolidation or business combination
involving ATI or its Affiliates or for or with respect to any purchase of a
substantial portion of the assets of ATI or its Affiliates, whether or not
any parties other than USW and its Affiliates are involved and whether or
not such proposal might require the making of a public announcement by ATI;
(iii) make, or in any way participate in, any "solicitation" of
"proxies" to vote any Voting Securities or become a "participant" in any
"election contest" (as such terms are defined or used in Regulation 14A
under the Exchange Act, as such Regulation is currently in effect), provided
that USW shall not be deemed to be a "participant" by reason of the
membership of any of its designees on ATI's Board of Directors or solely by
reason of its exercise of the voting rights set forth in Section 5.2;
(iv) propose any matter for submission to a vote of stockholders of
ATI;
(v) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Voting
Securities of ATI;
(vi) grant any proxy with respect to any Voting Securities to any
Person not approved by ATI;
(vii) deposit any Voting Securities in a voting trust or subject any
Voting Securities to any arrangement or agreement
-6-
<PAGE> 10
with respect to the voting of such Voting Securities or other agreement
having similar effect;
(viii) take any action which would be reasonably likely to require ATI
to make a public announcement regarding any of the matters specified in this
Section 5.1(a)(i)-(xii); or
(ix) enter into any negotiations, arrangements or understandings with
any third party with respect to any of the foregoing, or any discussions
designed to advise, assist or encourage any third party in connection with
any of the foregoing;
(x) disclose publicly any intention, plan or arrangement inconsistent
with the foregoing;
(xi) request ATI (or any of its officers, directors, representatives,
employees, attorneys, advisors, agents or Affiliates) to waive, amend or
modify any provisions of Section 5.1(a)(i)-(xii); or
(xii) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of ATI.
Nothing in this Section 5.1(a) shall restrict the manner in which any
designee of USW on ATI's Board of Directors participates in deliberations or
discussions of the Board, votes on any matter submitted to the Board, or
otherwise acts in his capacity as a director of ATI.
(b) Notwithstanding any provision of this Section 5.1 to the contrary, in
the event that (i) ATI and any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) enter into an agreement pursuant to which (A) such
Person or group would acquire a majority (calculated by voting power) of the
then outstanding Voting Securities of ATI or the right to appoint a majority of
the directors of ATI, or (B) a majority (calculated by voting power) of the then
outstanding Voting Securities of ATI is to be acquired by any Person or group
(within the meaning of Section 13(d)(3) of the Exchange Act) in a merger,
consolidation, or other business combination (any such event being an
"Acquisition Proposal"), (ii) a bona fide tender or exchange offer by any Person
or group (within the meaning of Section 13(d)(3) of the Exchange Act) (other
than ATI or any wholly-owned Affiliate thereof) which would result, if
consummated in accordance with its terms, in the beneficial ownership by such
Person or group of in excess of 50% (calculated by voting power) of the then
outstanding Voting Securities is approved or recommended by the Board of
Directors of ATI, (iii) in connection with the matters discussed in clause (i)
or (ii), or a tender or exchange offer for greater than 40% of the outstanding
Voting Securities which the Board of Directors of ATI has not approved or
recommended, the Board of Directors of ATI has terminated or amended (or agreed
to terminate or amend) the Rights Agreement or has redeemed (or agreed to
redeem) the Rights issued thereunder, and such action has permitted or will have
permitted the consummation of such Acquisition Proposal or offer, or a final,
non-appealable court order has declared the Rights Agreement invalid or
otherwise required the redemption of the Rights issued thereunder or (iv) ATI
and any Person enter into an agreement providing for a transaction or series of
related transactions that results in the transfer, sale or other disposition by
ATI of assets (A) that represent more than 80% of the total fair market value of
its assets on a proportionate basis immediately prior to such disposition, (B)
that generated more than 80% of its total operating revenues on a proportionate
basis in the preceding fiscal year and (C) that generated more than 80% of its
total net income from operations on a proportionate basis during the preceding
fiscal year (excepting any such transaction or series of related transactions in
which a majority of the value of the consideration received in exchange for the
assets transferred,
-7-
<PAGE> 11
sold or otherwise disposed of consists of assets (or interests in assets) of a
like kind or nature), this Section 5.1 shall not prohibit USW (unless acting in
concert with such Person) from making either a competing Acquisition Proposal or
a tender or exchange offer pursuant to which USW or its Affiliates would acquire
at least the same percentage (calculated by voting power) of ATI's then
outstanding Voting Securities as would be acquired in such non-USW Acquisition
Proposal or such non-USW tender or exchange offer (a "USW Response"). USW agrees
that any USW Response (including amendments thereto) will provide for
consideration that is no less favorable to ATI's shareholders than that being
offered pursuant to such non-USW Acquisition Proposal or such non-USW tender or
exchange offer (taking into account the form of consideration and the number of
shares to be acquired pursuant to such USW Response). In the event that the
transactions contemplated by clauses (i), (ii), (iii) or (iv) shall have been
terminated or abandoned after the USW Response, USW shall have the ability,
subject to the requirements of the preceding sentence, to amend or modify its
response, and to consummate the transaction contemplated by the USW Response or
such amendment or modification, so long as USW shall not have terminated or
abandoned its initial response other than as a result of such amendment or
modification. In the event that the transactions contemplated by clauses (i),
(ii), (iii) or (iv) shall have been terminated or abandoned prior to the USW
Response, or, if not so terminated or abandoned, in the event thereafter that
such transactions and those contemplated by such USW Response shall have been
terminated or abandoned, all of the restrictions contained in this Section 5.1
shall again be applicable.
(c) For so long as USW and its Affiliates beneficially own 5% or more
(calculated by voting power) of the outstanding Voting Securities, neither USW
nor its Affiliates may (i) act in concert with any Other Investor with respect
to any of the activities set forth in this Section 5.1 or (ii) transfer any
Voting Securities of ATI to any Other Investor.
(d) Notwithstanding anything to the contrary herein, no exercise by USW and
its Affiliates of their rights under the Trust Agreement of Exchange shall be
deemed to violate this Section 5.1.
5.2. Voting Rights. (a) USW and its Affiliates shall vote all of the Voting
Securities held by them in favor of the individuals nominated by ATI for
election to the Board of Directors.
(b) USW and its Affiliates shall be free to vote the Voting Securities held
by them in their discretion with respect to any of the following matters that
may be submitted to a vote of the shareholders of ATI: (i) Acquisition
Proposals; (ii) a sale of all or substantially all of the assets of ATI; (iii)
dissolution of ATI; (iv) a recapitalization or restructuring of ATI resulting in
a fundamental change in its capital structure; (v) a transaction or other event
involving a fundamental change in the scope of ATI's business; and (vi)
amendments to ATI's articles or by-laws.
(c) On all matters other than those set forth in Sections 5.2(a) and (b)
above, USW and its Affiliates shall vote the Voting Securities held by them
either (i) as directed by ATI or (ii) in the same proportions as all other
shareholders of ATI, at the option of USW.
5.3. Transfers; Tender Offers; Suspension of Transfers. (a) During the
period ending on July 25, 1999, USW and its Affiliates will not, at any time,
directly or indirectly, transfer, or offer to transfer, any Voting Securities
beneficially owned by them, except as provided by Section 5.3(b). Thereafter,
USW and its Affiliates may transfer Voting Securities only (i) as provided in
Section 5.3(b), (c) or (d); (ii) in transactions in compliance with the volume
limitations and restrictions on manner of sale set forth in paragraphs (e) and
(f) of Rule 144 promulgated under the Securities Act (whether or not such
paragraphs by their terms would apply to such transactions), as such Rule exists
on the date hereof; (iii) in privately negotiated or other transactions, or
pursuant to the registration
-8-
<PAGE> 12
rights set forth in Article VII of this Agreement other than as described in the
following clause (iv); or (iv) pursuant to the registration rights set forth in
Article VII of this Agreement, in a firm commitment underwritten public offering
managed by a nationally recognized investment banking firm and satisfying the
conditions set forth in Section 7.4(a) hereof.
In connection with any transfer permitted under clauses (ii), (iii) and (iv)
of this Section 5.3(a), the following shall apply:
(w) the aggregate number of shares transferred by USW and its
Affiliates pursuant to clauses (ii), (iii) and (iv) shall not exceed, in any
twelve-month period, one-half of the aggregate number of Voting Securities
issued to USW pursuant to the Exchange (for purposes of this paragraph (w)
only, each share of Preferred Stock (as defined in the Agreement of
Exchange), if any, issued to USW shall be deemed to be the issuance of a
share of Common Stock, and the transfer of a share of Preferred Stock shall
be deemed to be the transfer of a share of Common Stock);
(x) USW and its Affiliates may not make any transfer pursuant to clause
(ii), (iii) or (iv) unless the transferee, together with its Affiliates and
any "group" (within the meaning of Section 13(d) of the Exchange Act) of
which such transferee or any Affiliate is a part, would not, after such
transfer, beneficially own Voting Securities representing in excess of 4.9%
of the then outstanding Voting Securities;
(y) no transfer of shares representing more than 2.5% of the total
number of Voting Securities then outstanding shall be made in any single
transaction or series of related transactions to any Person or group (within
the meaning of Section 13(d) of the Exchange Act); and
(z) no transfer of an amount of Voting Securities representing more
than 1% of the then outstanding Voting Securities shall be made to any
Person or group unless USW believes in good faith after due inquiry that
such Person or group would be eligible with respect to such Voting
Securities to file a Statement on Schedule 13G pursuant to Rule 13d-1(b)(1)
under the Exchange Act (without regard to the beneficial ownership threshold
set forth in such Rule), as such Rule is presently in effect.
(b) USW may transfer the Voting Securities beneficially owned by it to a
Wholly Owned Subsidiary of USW, provided that such Wholly Owned Subsidiary also
shall agree in writing to be bound by the terms of this Agreement. No such
transfer shall be deemed to relieve USW from, and USW shall be liable for the
performance by such transferee of, its obligations under this Agreement. In the
event of any such transfer, USW shall act as agent for any and all such Wholly
Owned Subsidiaries in connection with the giving of any and all notices under
this Agreement. The Voting Securities held by any Wholly Owned Subsidiary of USW
shall be transferred back to USW or another Wholly Owned Subsidiary of USW prior
to any transaction that, if consummated, would result in such Wholly Owned
Subsidiary ceasing to be such.
(c) In the event of (i) a tender or exchange offer for Voting Securities
commenced by ATI (or an Affiliate of ATI) or (ii) a tender or exchange offer for
Voting Securities commenced by a third party, (x) in connection with which, ATI
has terminated or amended (or agreed to terminate or amend) the Rights Agreement
or redeemed (or agreed to redeem) the Rights issued thereunder and such action
has permitted or will have permitted the consummation of such offer, or a final,
non-appealable court order has declared the Rights Agreement invalid or
otherwise required the redemption of the Rights issued thereunder or (y) which
ATI's Board of Directors has
-9-
<PAGE> 13
otherwise approved, USW and its Affiliates shall be permitted to tender or sell
the Voting Securities then owned by them in accordance with the terms of any
such offer without restriction hereunder.
In the event that a tender or exchange offer not described in the
immediately preceding paragraph is commenced by any Person or group (within the
meaning of Section 13(d)(3) of the Exchange Act) and such offer would result, if
consummated in accordance with its terms, in the beneficial ownership by such
Person or group of in excess of 50% (calculated by voting power) of the Voting
Securities then outstanding (an "Unapproved Offer"), USW and its Affiliates
shall have the right to tender or sell the Voting Securities then owned by them
to the offerer pursuant to such offer if the Board of Directors of USW, upon the
advice of legal counsel and financial advisers, reasonably believes in good
faith, taking into account the conditions of the offer, that such tender offer
will result in shares being purchased (without any extension of the then
scheduled expiration date and without giving effect to shares that might be
tendered by USW and its Affiliates); provided, however, that prior to tendering
or offering for exchange any such Voting Securities in such Unapproved Offer,
USW first shall have offered to ATI not later than seventy-two hours prior to
the expiration of such Unapproved Offer the right to purchase for the same
consideration (or cash equivalent) that number of such Voting Securities which,
if tendered or offered for exchange, would be purchased in such Unapproved
Offer, which purchase shall be closed not later than the second business day
following the consummation of such Unapproved Offer; and provided further, that
USW may tender or offer for exchange such Voting Securities in such Unapproved
Offer in the event that ATI shall have failed within the later of forty-eight
hours after receipt of such notice or twenty-four hours prior to the expiration
of such Unapproved Offer to provide USW with reasonable assurance that it shall
be ready, willing and able to consummate such purchase.
(d) USW may spin off to its shareholders a Wholly Owned Subsidiary of USW
(the "Spun-off Person") the assets of which include all, but not less than all,
of the Voting Securities beneficially owned by USW and its Affiliates (the
"Spin-off") in a transaction qualifying under Section 355 of the Internal
Revenue Code of 1986, as amended, if all of the following conditions are
satisfied:
(i) No more than 240 days nor less than 180 days prior to the Spin-off,
USW shall advise ATI of its plan to effect the Spin-off and thereafter shall
promptly provide ATI with such information regarding the Spun-off Person as
ATI shall reasonably request; provided that such information shall promptly
be updated if the financial condition of the Spun-off Person changes in any
material respect after delivery of such information;
(ii) Prior to the Spin-off, neither USW, any Affiliate of USW nor the
Spun-off Person shall have entered into any agreement, or formulated any
plan or intention, with respect to any merger or other business combination
transaction involving the Spun-off Person and a party other than ATI or an
Affiliate of ATI;
(iii) The Fair Market Value of the Voting Securities to be beneficially
owned by the Spun-off Person shall not equal or exceed 50% of the Fair
Market Value of the Spun-off Person; and
(iv) The Spun-off Person shall have executed an investment agreement
with ATI substantially in the form of this Agreement; provided, however,
that any such agreement shall terminate on the tenth anniversary of the date
of this Agreement.
-10-
<PAGE> 14
(e) All transfers of Voting Securities held by USW and its Affiliates other
than transfers permitted by Sections 5.3(a)(ii), (b), (c) or (d) shall be
subject to Article VIII of this Agreement.
(f) Any transfer of Voting Securities in violation of this Section 5.3 may
be suspended on the books of ATI.
5.4. Non-Competition. For a period of one year after the later of the date
on which USW (i) ceases to be entitled (or irrevocably waives its right) to
nominate a director to ATI's Board of Directors or (ii) ceases to have a
designee on ATI's Board of Directors, USW shall be subject to Section 7.4 of the
Agreement of Limited Partnership of WMC Partners, L.P. (as in effect on the date
hereof) to the same extent as any Partner in WMC and as if the provisions
thereof were set forth herein; provided, however, that any obligations imposed
by this Section 5.4 shall terminate upon a Change of Control of ATI.
ARTICLE VI
BOARD REPRESENTATION
6.1. USW's Right to Designate. Upon the consummation of the Exchange, USW
shall be entitled to designate such number of persons for election to ATI's
Board of Directors equal to the nearest whole number less than the product
obtained by multiplying (a) the percentage of the total voting power of the then
outstanding Voting Securities represented by the Voting Securities then
beneficially owned by USW and its Affiliates and (b) the number of persons,
including any vacancies, on ATI's Board of Directors; provided, however, that
for so long as USW and its Affiliates beneficially own 10% or more of the total
voting power of ATI's outstanding Voting Securities and its rights under this
Agreement have not otherwise terminated, USW shall be entitled to designate at
least one such person.
6.2. Consultation; Expansion of Board and Appointment; Classification. The
designation by USW of any person pursuant to Section 6.1 shall be made after
consultation with ATI and shall be a person reasonably satisfactory to ATI.
Following such designation, ATI shall take such steps as are necessary to
increase the size of the Board of Directors to accommodate the person so
designated, and the Directors then in office will appoint such person to fill
the resulting vacancy and determine the class in which such person shall be
placed.
6.3. Subsequent Nomination of Persons Designated by USW. The Nominating
Committee of the Board of Directors shall recommend to the Board of Directors
that any person designated by USW and appointed in accordance with the
provisions of this Article VI be recommended by ATI to its shareholders for
election as a director at each meeting of shareholders of ATI at which directors
of the class in which such person was placed are elected, and ATI shall use its
reasonable best efforts to cause the election of each person designated by USW.
6.4. Replacement of Directors Designated by USW. In the event that any
designee of USW for election to ATI's Board of Directors pursuant to the
foregoing provisions shall cease to serve as a director for any reason (except
under circumstances described in Section 6.5 below), the vacancy resulting
therefrom shall be filled as soon as practicable with a person designated by USW
pursuant to the above provisions.
6.5. Termination of USW's Right to Designate; Resignation. At such time as
(a) subject to the last sentence of this Section, USW and its Affiliates cease
to be the beneficial owner of Voting Securities representing at least 10% of the
total voting power of the then outstanding Voting Securities (the "Threshold
Percentage") or (b) there shall have been a Change of Control of USW, USW shall
no longer be entitled to designate any person for election to ATI's Board of
Directors. USW shall at such time or
-11-
<PAGE> 15
upon expiration of the term of this Agreement cause any person designated by it
pursuant to the foregoing provisions then serving on the Board of Directors to
resign promptly. In the event that USW's failure to beneficially own the
Threshold Percentage does not result from any transfer by USW of beneficial
ownership of Voting Securities, then USW shall have a period of one year after
the date it ceases to own the Threshold Percentage to cure such failure
(provided that this sentence shall no longer be operative once USW again
beneficially owns the Threshold Percentage, or in the event that prior to again
achieving such Threshold Percentage USW transfers beneficial ownership of any
Voting Securities).
6.6. Mandatory Recusal of USW's Board Designee. All designees of USW on the
Board of Directors of ATI shall recuse themselves from discussions of the
operations or planned operations of ATI or its Affiliates, if the interests of
such operations or planned operations reasonably could be expected to conflict
with the interests of any operations or planned operations of USW and its
Affiliates.
ARTICLE VII
REGISTRATION RIGHTS
7.1. Demand Registration. ATI agrees that upon the written request of USW it
will file a registration statement under the Securities Act (a "Registration
Statement") as to the number of shares of Common Stock then held by USW or its
Affiliates (the "Registrable Shares") specified in such request, provided that
ATI shall not be required to file more than such number of Registration
Statements that become effective and remain effective for the period referred to
in Section 7.3(j) equal to the quotient (rounded up to the nearest whole number)
obtained by dividing (i) the product of (A) the average closing price per share
of ATI's Common Stock for the thirty business days immediately preceding the
Notice Date (as defined in the Agreement of Exchange) and (B) the number of
shares of Common Stock issued in the Exchange, by (ii) $750 million, and further
provided that ATI shall not be required to file a Registration Statement if ATI
delivers to USW an opinion, in form and substance reasonably satisfactory to USW
and its counsel, to the effect that the Registrable Shares are freely
transferable under Section 4(1) of the Securities Act without regard to any
volume or other restrictions.
7.2. Company Registration. (a) If ATI shall determine to register any Common
Stock either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a transaction described in Rule 145 promulgated under the
Securities Act, or a registration on any registration form that does not permit
secondary sales, ATI will:
(i) promptly give to USW written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as
set forth in section 7.2(b) below, and in any underwriting involved therein,
all the Registrable Shares specified in a written request made by USW and
received by ATI within seven (7) days after the written notice from ATI
described in clause (i) above is mailed or delivered by ATI. Such written
request may specify all or a part of USW's Registrable Shares.
(b) If the registration of which ATI gives notice is for a registered public
offering involving an underwriting, ATI shall so advise USW as a part of the
written notice given pursuant to Section 7.2(a)(i). In such event, the right of
USW to registration pursuant to this Section 7.2 shall be conditioned upon USW's
participation in such underwriting and the inclusion of
-12-
<PAGE> 16
USW's Registrable Shares in the underwriting to the extent provided herein. USW
shall (together with ATI and the other holders of securities of ATI with
registration rights to participate therein distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by ATI.
Notwithstanding any other provision of this Section 7.2, if the
representative of the underwriters advises ATI in writing that marketing factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Shares from, or limit the number of Registrable Shares to be
included in, the registration and underwriting. ATI shall so advise USW, and the
number of shares of Common Stock that are entitled to be included in the
registration and underwriting shall be allocated first to ATI for securities
being sold for its own account and thereafter as set forth in Section 7.2(c).
(c) In any circumstance in which all of the Registrable Shares and other
shares of Common Stock with registration rights (the "Other Shares") requested
to be included in a registration on behalf of USW or other selling shareholders
cannot be so included as a result of limitations or the aggregate number of
Registrable Shares and Other Shares that may be so included, the number of
Registrable Shares and Other Shares that may be so included shall be allocated
among USW and other selling shareholders requesting inclusion of shares pro rata
on the basis of the number of Registrable Shares and Other Shares that are held
by USW and other selling shareholders, provided, however, that such allocation
shall not operate to reduce the aggregate number of Registrable Shares and Other
Shares to be included in such registration. If USW or any other selling
shareholder does not request inclusion of the maximum number of Registrable
Shares and Other Shares allocated to it pursuant to the above-described
procedure, the remaining portion of its allocation shall be reallocated among
USW and other selling shareholders whose allocations did not satisfy their
requests pro rata on the basis of the number of Registrable Shares and Other
Shares which are held by USW and other selling shareholders, and this procedure
shall be repeated until all of the Registrable Shares and Other Shares which may
be included in the registration on behalf of USW and other selling shareholders
have been so allocated.
7.3. Registration Procedures. In the case of each registration involving
Registrable Shares pursuant to this Article VII, ATI will:
(a) furnish to USW, prior to the filing of a Registration Statement, copies
of such Registration Statement as it is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents in such quantities as USW reasonably may request from
time to time in order to facilitate the disposition of such Registrable Shares;
(b) use all reasonable efforts to register or qualify the offer and sale of
such Registrable Shares under such other securities or blue sky laws of such
jurisdiction as USW reasonably requests and do any and all other acts and things
as reasonably may be necessary or advisable to enable USW to consummate the
disposition in such jurisdictions of the Registrable Shares owned by USW;
provided that ATI will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this subsection (b), (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction;
(c) use all reasonable efforts to cause such Registrable Shares to be
registered with or approved by such other governmental agencies or
-13-
<PAGE> 17
authorities as may be necessary by virtue of the business and operations of ATI
to enable USW to consummate the disposition of such Registrable Shares;
(d) notify USW, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such Registration Statement or
amendment contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and ATI will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(e) enter into customary agreements (including an underwriting agreement in
customary form and an indemnification agreement with USW in customary form) and
take such other actions as reasonably are required in order to expedite or
facilitate the disposition of such Registrable Shares;
(f) make available for inspection by USW, any underwriter participating in
any disposition pursuant to such registration, and any attorney, accountant or
other agent retained by USW or any such underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of ATI (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the officers, directors and employees of ATI to supply all information
reasonably requested by any such Inspector in connection with such registration;
provided that (i) Records and information obtained hereunder shall be used by
such persons only to exercise their due diligence responsibility and (ii)
Records or information which ATI determines, in good faith, to be confidential
shall not be disclosed in such Registration Statement or otherwise by the
Inspectors unless (x) the disclosure of such Records or information is necessary
to avoid or correct a misstatement or omission in the Registration Statement or
(y) the release of such Records or information is ordered pursuant to a subpoena
or other order from a court or governmental authority of competent jurisdiction.
USW shall use its best efforts, prior to any such disclosure, to inform ATI that
such disclosure is necessary to avoid or correct a misstatement or omission in
the Registration Statement. USW further agrees that it will, upon learning that
disclosure of such Records or information is sought in a court or by a
governmental authority, give notice to ATI and allow ATI, at the expense of ATI,
to undertake appropriate action to prevent disclosure of the Records or
information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for ATI in customary form and covering such
matters of the type customarily covered by comfort letters as USW reasonably
requests;
(h) otherwise use all reasonable efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve months beginning within three months after the effective date
of such Registration Statement, which earnings statement shall satisfy the
provisions of section 11(a) of the Securities Act and Rule 158 thereunder;
(i) use all reasonable efforts to cause all such Registrable Shares to be
listed on each securities exchange on which similar securities issued by ATI are
listed; and
(j) use its best efforts (i) to have any registration of the Registrable
Shares declared effective as promptly as practicable after the filing thereof
and (ii) to keep such Registration Statement effective for a period
-14-
<PAGE> 18
(up to three months) sufficient to complete the distribution of the Registrable
Shares. ATI further agrees to supplement or make amendments to the Registration
Statement, if required by (x) the registration form utilized by ATI for such
registration or by the instructions applicable to such registration form, (y)
the Securities Act or the rules and regulations thereunder or (z) USW (or any
underwriter for USW) with respect to information concerning USW or such
underwriter or the plan of distribution to be utilized with respect to the
Registrable Shares. ATI agrees to furnish to USW copies of any such supplement
or amendment prior to its being used or filed with the SEC.
7.4. Conditions to Offerings. The obligations of ATI to take the actions
contemplated by Section 7.1 with respect to an offering of Registrable Shares
shall be subject to the following conditions:
(a) if the Registrable Shares are to be transferred pursuant to Section
5.3(a)(iv), USW shall have the right to select the investment banker or bankers
and, if applicable, lead manager or managers to administer the offering and its
or their counsel, provided that such lead manager or managers and such counsel
must be reasonably satisfactory to ATI; with respect to any such transfer, USW
and such investment banker(s) or manager(s) shall use best efforts to effect as
wide a distribution of such Registrable Shares as is reasonably practicable and
to prevent any Person who, together with its Affiliates and any "group" (within
the meaning of Section 13(a)(3) of the Exchange Act) of which such Person or any
Affiliate is a party, from purchasing in excess of 15% of the Voting Securities
being registered. ATI may require USW to furnish to ATI such information
regarding USW or the distribution of the Registrable Shares as ATI from time to
time may reasonably request in writing, in each case only as required by the
Securities Act or the rules and regulations thereunder or under state securities
or blue sky laws.
(b) in the event that the Registrable Shares are to be transferred pursuant
to Section 5.3(a)(iii), such Registrable Shares shall be transferred only to a
Person that USW believes in good faith after due inquiry is eligible with
respect to the Registrable Shares to file a Statement on Schedule 13G pursuant
to Rule 13d-1(b)(i) under the Exchange Act (without regard to the beneficial
ownership threshold set forth in such Rule), as such Rule is currently in
effect. USW shall have the right to select the investment banker or bankers and,
if applicable, the lead manager or managers to administer the offering and its
or their counsel, provided that such lead manager or managers and such counsel
must be reasonably satisfactory to ATI.
(c) there shall not have been an offering registered pursuant to Section 7.1
of this Agreement within the immediately preceding six months; and
(d) USW shall conform to all requirements of the Securities Act and the
Exchange Act applicable to it with respect to the offering and sale of such
Registrable Shares and shall advise each underwriter, broker or dealer through
which any of such Registrable Shares are offered that such Registrable Shares
are part of a distribution that is subject to the prospectus delivery
requirements of the Securities Act.
USW agrees that, upon receipt of any notice from ATI of the happening of any
event of the kind described in Section 7.3(d) of this Agreement, USW will
forthwith discontinue disposition of Registrable Shares pursuant to the
registration covering such Registrable Shares until USW's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 7.3(a) of this
Agreement.
7.5. Additional Conditions. (a) ATI's obligations pursuant to Section 7.1
shall be suspended if (i) the fulfillment of such obligations would require ATI
to make a disclosure that would, in the reasonable good
-15-
<PAGE> 19
faith judgment of ATI's Board of Directors, be detrimental to ATI and premature
and the Board of Directors of ATI concludes, as a result, that it is essential
to defer the filing of the registration statement at such time, (ii) ATI has
filed or proposes to file a registration statement with respect to any of its
securities to be distributed in an underwritten public offering and it is
advised by its lead or managing underwriter that an offering by USW of
Registrable Shares would materially adversely affect the distribution of such
securities, provided that ATI is actively employing, or upon such proposed
filing actively employs, all reasonable efforts to cause any such filed
registration statement to become effective, or (iii) the fulfillment of such
obligations would require ATI to prepare financial statements not required to be
prepared for ATI to comply with its obligations under the Exchange Act at the
time that the registration statement is proposed to be filed. Such obligations
shall be reinstated (x) in the case of clause (i) above, upon the making of such
disclosure by ATI (or, if earlier, when such disclosure would either no longer
be necessary for the fulfillment of such obligations or no longer be
detrimental), (y) in the case of clause (ii) above, upon the conclusion of any
period during which ATI would not, pursuant to the terms of its underwriting
arrangements, be permitted to sell Registrable Securities for its own account
and (z) in the case of clause (iii) above, as soon as it would no longer be
necessary to prepare such financial statements to comply with the Securities
Act. The period during which USW is required to sell its Registrable Shares
pursuant to Section 7.3(j) shall be tolled for the duration of any suspension
pursuant to this Section 7.5(a).
(b) In connection with any distribution pursuant to Section 5.3(a)(iv), the
number of Registrable Shares to be registered pursuant to Section 7.1 of this
Agreement shall be reduced to the extent that ATI is advised in writing by an
investment banker of national standing that the sale of all of the Registrable
Shares requested to be registered by USW would materially and adversely affect
the market price of ATI's equity securities. If the number of shares registered
is reduced pursuant to this Section 7.5(b) by more than 50% of the number
requested to be registered by USW, the Registration Statement relating to such
reduced number shall not count as one of the Registration Statements available
to USW under Section 7.1.
7.6. Registration Expenses. All expenses incident to the performance of or
compliance with this Agreement by ATI, including, without limitation, all fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Shares), printing expenses, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing of the Registrable Shares to be registered on each securities exchange
on which similar securities issued by ATI are then listed, fees and
disbursements of counsel for ATI and its independent certified public
accountants (including the expenses of any comfort letters required by or
incident to such performance), securities acts liability insurance (if ATI
elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained by ATI in connection with such registration and the
fees and expenses of other persons retained by ATI will be borne by ATI.
Notwithstanding anything in this Section 7.6 to the contrary, ATI will not have
any responsibility for any registration or filing fees payable under any federal
or state securities or blue sky laws or for any of the expenses of USW incurred
in connection with any registration hereunder including, without limitation,
underwriting fees, discounts and commissions and transfer taxes, if any,
attributable to the sale of USW's Registrable Securities, counsel fees of USW
and travel costs.
-16-
<PAGE> 20
7.7. Indemnification; Contribution.
(a) Indemnification by ATI. ATI agrees to indemnify, to the fullest extent
permitted by law, USW (and any Affiliate thereof holding Registrable Shares),
each person who controls USW or such Affiliate (within the meaning of either the
Securities Act or the Exchange Act), and their respective directors and officers
against any and all losses, claims, damages, liabilities and expenses (including
attorneys' fees) caused by any untrue or alleged untrue statement of material
fact contained in any Registration Statement, prospectus or preliminary
prospectus (each as amended and/or supplemented, if ATI shall have furnished any
amendments or supplements thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading; provided that ATI
shall not be required to indemnify USW or such Affiliate, such controlling
persons or their respective officers or directors for any losses, claims,
damages, liabilities or expenses resulting from any such untrue statement or
omission if such untrue statement or omission is made in reliance on and
conformity with any information with respect to USW or its Affiliates or the
underwriters furnished to ATI by USW or its Affiliates expressly for use
therein; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of USW or such Affiliate, if the liability or expense results
from the fact that a copy of the prospectus was not sent or given to such person
at or prior to the written confirmation of sale of such Registrable Shares to
such person as required by the Securities Act, and if the untrue statement or
omission has been corrected in the prospectus unless such failure to deliver the
prospectus was a result of noncompliance by ATI with its obligations under
Section 7.3(a) hereof. In connection with an underwritten offering, ATI will
indemnify each underwriter thereof, the officers and directors of such
underwriter, and each person who controls such underwriter (within the meaning
of either the Securities Act or Exchange Act) to the same extent as provided
above with respect to the indemnification of USW; provided that such underwriter
agrees to indemnify ATI to the same extent as provided below with respect to the
indemnification of ATI by USW.
(b) Indemnification by USW. In connection with any registration in which USW
is participating, USW will furnish to ATI in writing such information with
respect to USW and its Affiliates as ATI reasonably requests for use in
connection with any such registration, prospectus, or preliminary prospectus and
agrees to indemnify ATI, its directors, its officers who sign the Registration
Statement and each person, if any, who controls ATI (within the meaning of
either the Securities Act or of the Exchange Act) to the same extent as the
foregoing indemnity from ATI to such holder, but only with respect to
information relating to such holder furnished to ATI in writing by USW expressly
for use in the Registration Statement, the prospectus, any amendment or
supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 7.7(a) or
Section 7.7(b) of this Agreement, such person (hereinafter called the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (hereinafter called the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named
-17-
<PAGE> 21
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and the indemnified party shall
have been advised by counsel that representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the indemnified parties, such firm shall be designated in
writing by the indemnified parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the third sentence of this
Section 7.7(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not either
have reimbursed the indemnified party in accordance with such request or
reasonably objected in writing, on the basis of the standards set forth herein,
to the propriety of such reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 7.7
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 7.7, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.7(c), any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
-18-
<PAGE> 22
If indemnification is available under this Section 7.7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7.7(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.7(d).
7.8. Rule 144. ATI covenants that it will file the reports required to be
filed by it under the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and it will take such further action as USW may reasonably
request, all to the extent required from time to time to enable USW to sell
Voting Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC. Upon the request of USW, ATI will deliver to USW a
written statement as to whether it has complied with such requirements.
7.9. Certain Limitations. The rights of USW under this Article VII are
subject to Sections 5.3(a), 8.1, 8.2 and 8.3.
7.10. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In the event that ATI shall propose to enter into an agreement of
merger, consolidation or other business combination with any Person which has a
class of equity securities having substantially the same rights as the Common
Stock (including, but not limited to, voting, dividend, liquidation and
redemption rights) and in connection with such agreement ATI will no longer have
a class of equity securities having substantially the same rights as the Common
Stock registered with the SEC pursuant to Section 12(b) or 12(g) of the Exchange
Act, ATI hereby covenants and agrees with USW that it will cause such Person to
assume the rights and obligations of ATI set forth in this Article VII and in
Article VIII (as they relate to Article VII), to the full extent set forth
herein.
ARTICLE VIII
RIGHTS OF FIRST OFFER AND FIRST REFUSAL
8.1. Notice of Intent to Transfer. USW shall give written notice (a "Notice
of Intent") to ATI at such time as it first forms a bona fide intention to
transfer, within the next twelve months, Voting Securities then held by USW or
its Affiliates in transactions permitted by clauses (iii) or (iv) of Section
5.3(a) (any registered public offering permitted by Section 5.3(a)(iii) or (iv)
being referred to hereinafter as a "Permitted Offering"). USW shall not be
permitted to transfer outstanding Voting Securities until 90 days after the
delivery of such Notice of Intent. USW shall include in such Notice of Intent
all additional information required to be included in a ROFO Notice or ROFR
Notice (as defined below) that reasonably can be provided at the time the Notice
of Intent is delivered. USW shall be under no obligation to send more than one
such Notice of Intent.
8.2. Right of First Offer. Any proposed transfer of Voting Securities by USW
in a Permitted Offering pursuant to Section 5.3(a)(iv) shall be subject to a
right of first offer on the part of ATI, as follows:
(a) USW shall deliver to ATI a notice (a "ROFO Notice") 10 days prior to the
delivery of a request pursuant to Section 7.1(a) to file a registration
statement, which ROFO Notice shall set forth, among other things: (i) the
identity of the prospective managing underwriter for the proposed offering, (ii)
the proposed price per share to public and net proceeds per share to USW, (iii)
the number of Voting Securities to be registered for sale, (iv) the identity (if
known) of any Person that has expressed an interest in purchasing in excess of
1% of the outstanding Voting Securities in the proposed offering, (v) any other
material terms and conditions of the proposed offering, (vi) the closing date
for the proposed
-19-
<PAGE> 23
offering (which date shall not be less than 30 days from the date on which the
ROFO Notice is delivered), and (vii) a statement from the managing underwriter
that it is highly confident that the proposed offering can be underwritten on
the terms and conditions set forth in the ROFO Notice. The ROFO Notice shall
constitute an irrevocable offer to ATI, upon the terms specified therein, to
purchase such Voting Securities.
(b) ATI may elect, at its option, to purchase all, but not less than all, of
the Registrable Shares referred to in the ROFO Notice at a price per share equal
to the net proceeds per share referred to in the ROFO Notice by delivering to
USW written notice of its election (a "Notice of Election") within 10 days after
receipt of the ROFO Notice. Such Notice of Election shall constitute a binding
obligation on the part of ATI, subject to standard terms and conditions for a
stock purchase agreement between an issuer and a significant shareholder, to
purchase such Voting Securities. Such Notice of Election shall include the
proposed date for the closing of the purchase, which shall be no later than 21
days following the delivery of such Notice of Election. ATI may designate a
third party to exercise its right of first offer.
(c) If ATI or its designee does not exercise the foregoing right of first
offer within such 10-day period, USW may proceed with the proposed offering as
described in the ROFO Notice. Such offering must be closed within 90 days after
the date the Registration Statement is filed with the SEC and the price per
share to the public and the net proceeds per share to USW must equal or exceed
such terms as set forth in ROFO Notice. USW shall, and shall cause its managing
underwriters to, use best efforts to cause the filing of the Registration
Statement and the closing of the offering pursuant thereto to occur as quickly
as possible. If the offering is not completed within such 90-day period or if
market conditions cause the managing underwriter to reduce the proposed price
per share to the public or the net proceeds to USW or otherwise to materially
revise the terms set forth in the ROFO Notice, USW shall promptly so notify ATI
and ATI shall again have a right of first offer pursuant to Section 8.2(b) with
respect to the Voting Securities referred to in the ROFO Notice, upon the
revised terms, except that such new right must be exercised within three
business days after such notification.
8.3. Right of First Refusal. Any proposed transfer of Voting Securities by
USW pursuant to Section 5.3(a)(iii) shall be subject to a right of first refusal
on the part of ATI, as follows:
(a) In the event of a transfer (or series of related transfers) which is not
a Permitted Offering and involves in the aggregate less than 1% of the then
outstanding Voting Securities, ATI shall have no right of first refusal.
(b) In all other cases, USW shall deliver to ATI a notice (a "ROFR Notice")
at least four business days prior to (x) in the case of a Permitted Offering,
the delivery of a request to file a registration statement pursuant to Section
7.1(a), or (y) in all other cases the execution of a stock purchase agreement or
other action committing USW to such transfer. Such ROFR Notice shall set forth
(A) the identities of each proposed transferee that, together with its
Affiliates and any group (within the meaning of Section 13(d)(3) of the Exchange
Act) of which such transferee or any Affiliate is a part, proposes to purchase
1% or more of the then outstanding Voting Securities (a "1% Purchaser") and the
total number of shares such 1% Purchaser proposes to acquire, (B) the aggregate
number of Voting Securities to be transferred to all transferees, (C) the
proposed price per share at which the Voting Securities are to be transferred,
and the net proceeds per share to USW therefrom, and (D) any other material
terms and conditions of the proposed transfer. In the case of a Permitted
Offering, such ROFR Notice shall also contain the information specified in
clauses (vi) and (vii) of Section 8.2(a). The ROFR Notice shall constitute an
-20-
<PAGE> 24
irrevocable offer to sell such Voting Securities to ATI, upon the terms
specified therein.
(c) In the case of other than a Permitted Offering, ATI may elect to
purchase (x) with respect to non-1% Purchasers, all, but not less than all, of
the Voting Securities referred to in the ROFR Notice which are to be transferred
to such non-1% Purchasers, or (y) any or all of the blocks to be transferred to
1% Purchasers or (z) any combination of (x) and (y).
(d) In the case of a Permitted Offering, ATI may elect to purchase (x) with
respect to non-1% Purchasers, all but not less than all, of the Voting
Securities referred to in the ROFR Notice which are to be sold to such non-1%
Purchasers, (y) one or more of the blocks to be transferred to 1% Purchasers
provided that, unless ATI effects the purchase described in clause (x) above,
ATI must leave at least one such block unpurchased, or (z) any combination of
(x) and (y).
(e) Any election by ATI described in paragraphs (c) or (d) above shall be
upon the terms and conditions set forth in the ROFR Notice and shall be effected
by sending to USW a Notice of Election within four business days after receipt
of the ROFR Notice. Such Notice of Election shall constitute a binding
obligation, subject to standard terms and conditions for a stock purchase
agreement between an issuer and a significant shareholder, to purchase the
specified amount of Voting Securities (at a price per share equal to the net
proceeds per share referred to in the ROFR Notice). Such Notice of Election also
shall include the proposed date for the closing of the purchase, which shall be
no later than 21 days following the delivery of such Notice of Election. ATI may
designate a third party to exercise its right of first refusal.
(f) If ATI or its designee does not exercise its right of first refusal
within such four-day period, USW may proceed with the proposed transfer
described in the ROFR Notice. Such transfer must be closed within 30 days after
the date the ROFR Notice is delivered (with respect to other than Permitted
Offerings), and within 90 days after the Registration Statement is filed with
the SEC, with respect to Permitted Offerings, and the price per share and the
net proceeds per share to USW must equal or exceed such terms set forth in the
ROFR Notice. USW shall, and shall cause any lead manager or managing underwriter
to, use best efforts to cause the filing of the Registration Statement and the
closing of the offering pursuant thereto to occur as quickly as possible. If the
proposed price per share or net proceeds per share are less than those set forth
in the ROFR Notice, USW shall promptly so notify ATI and ATI shall again have a
right of first refusal pursuant to this Section 8.3 with respect to the Voting
Securities referred to in the ROFR Notice, upon the revised terms, except such
that new right must be exercised within three business days after such
notification.
ARTICLE IX
TERM OF AGREEMENT
9.1. Term of Agreement. The term of this Agreement shall be until the
earlier of (a) the date, following the consummation of the Exchange or the
termination of both the Agreement of Exchange and the Trust Agreement of
Exchange, when USW and its Affiliates cease to beneficially own Voting
Securities representing at least 5% of the total voting power of the then
outstanding Voting Securities and (b) July 25, 2004; provided, however, that the
provisions of Article V and Article VIII shall irrevocably terminate upon any
Change of Control of ATI.
Upon the expiration of the term of this Agreement, all further obligations
of the parties hereunder shall terminate, except that (i) if there shall have
been a Change of Control of USW prior to the expiration of the term of this
Agreement, the agreements set forth in Sections 5.1(a), 5.2
-21-
<PAGE> 25
and 5.3 and Articles VIII and X shall remain in effect until the earlier of (A)
a change of Control of ATI and (B) the later of (x) the expiration of the term
of this Agreement and (y) four years from the date of the Change of Control of
USW, (ii) the agreement set forth in Section 5.1(c) shall survive indefinitely,
(iii) the rights in Article VI shall survive until termination pursuant to
Section 6.5, (iv) the rights in Article VII. shall survive until the 10th
anniversary of the Effective Time or the Closing Date (as each are defined in
the Agreement of Exchange), as the case may be, and (v) nothing herein shall
relieve any party from liability for any breach hereof.
ARTICLE X
MISCELLANEOUS
10.1. Legend; Removal of Legend. (a) All certificates evidencing Voting
Securities beneficially owned by USW shall have the following legend, which
shall remain on such certificates until such time as the securities represented
by such certificates are no longer subject to the restrictions of this
Agreement:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN AMENDED
AND RESTATED INVESTMENT AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER
SET FORTH THEREIN) DATED AS OF SEPTEMBER 30, 1995, BETWEEN ATI AND U S WEST,
INC. AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF
THE CORPORATE SECRETARY OF ATI.
(b) Any legend endorsed on a certificate pursuant to paragraph (a) shall be
removed if the Voting Securities represented by such certificate shall have been
effectively transferred in compliance with clause (ii), (iii) or (iv) of the
second sentence of Section 5.3(a) or all obligations of USW under Articles V and
VIII of this Agreement have terminated, or a Change of Control of ATI has
occurred.
10.2. Severability. If any term, provision, covenant or restriction of this
Agreement is determined to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
10.3. Specific Enforcement. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
10.4. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
USW contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither ATI nor USW makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement amends and restates in
its entirety that certain Investment Agreement, dated as of July 25, 1994,
between ATI's predecessor, AirTouch Communications, a California corporation and
USW. This Agreement may be amended only by an agreement in writing executed by
the parties hereto. The parties hereto may amend this Agreement without notice
to or the consent of any third party.
10.5. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective
-22-
<PAGE> 26
(a) when personally delivered or transmitted by telecopier on a business day
during normal business hours where such notice is to be received at the address
or number designated below or (b) on the business day following the date of
mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to ATI: AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Telecopier: (415) 658-2298
Attention: Margaret G. Gill, Esq.
Senior Vice President, Legal and
External Affairs
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 983-1200
Attention: Nathaniel M. Cartmell III
If to USW: U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: President
With a copy to: U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Telecopier: (303) 793-6294
Attention: General Counsel
Any party hereto may from time to time change its address for notices under this
Section 10.5 by giving at least 10 days' notice of such changed address to the
other party hereto.
10.6. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
10.7. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
10.8. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and legal representatives.
The parties hereto may amend this Agreement without notice to or the consent of
any third party. Neither ATI nor USW shall assign this Agreement or any rights
hereunder without the prior written consent of the other (which consent may be
withheld for any reason in the sole discretion of the party from whom consent is
sought); provided, however, that ATI may assign its rights and delegate its
obligations under this Agreement to any corporation which becomes the owner of
all of the outstanding Voting Securities in connection with any reincorporation
of ATI and which agrees in writing to become bound by the terms of this
Agreement, and thereafter all references to ATI hereunder shall become
references to such assignee; and provided further that USW may assign its rights
(but not its obligations) under this Agreement to any Wholly Owned Subsidiary of
USW which agrees in writing to become bound by the terms of this Agreement, but
no such assignment or obligation by USW shall release USW from, and USW shall
remain liable for the performance by such assignee of, its obligations
hereunder.
-23-
<PAGE> 27
10.9. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
10.10. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
10.11. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
10.12. Arbitration. The parties agree to submit their disputes to
arbitration in accordance with the Arbitration Agreement dated as of the date
hereof between ATI and USW.
-24-
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS, INC.
By ______________________________
Name:
Title:
U S WEST, INC.
By ______________________________
Name:
Title:
<PAGE> 1
Exhibit 10.4
Draft 9/30/95
AMENDED AND RESTATED
AGREEMENT OF EXCHANGE
THIS AMENDED AND RESTATED AGREEMENT OF EXCHANGE (this "Agreement"), dated as
of September 30, 1995, by and between AIRTOUCH COMMUNICATIONS, INC., a Delaware
corporation ("ATI"), and U S WEST, INC., a Colorado corporation ("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Amended and Restated Joint
Venture Organization Agreement dated as of the date hereof (the "Organization
Agreement"), providing for a series of transactions, including the establishment
of a partnership to be known as WMC Partners, L.P. ("WMC") pursuant to that
certain Amended and Restated Agreement of Limited Partnership of WMC Partners,
L.P., dated as of the date hereof (the "WMC Partnership Agreement"); and
WHEREAS, USW holds a direct beneficial ownership interest in WMC (such
interest in WMC, to the extent it continues to be beneficially held by USW from
time to time hereafter, the "WMC Interest"); and
WHEREAS, each of USW and ATI have certain rights to cause the direct or
indirect exchange of the WMC Interest for capital stock of ATI (the "Exchange");
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the conditions
set forth herein, the parties agree that the Exchange shall be effected either
pursuant to (i) a merger (the "Merger"), as set forth in the Agreement and Plan
of Merger attached hereto as Exhibit A (the "Merger Agreement"), or (ii) a sale
by USW or a subsidiary thereof to ATI of the WMC Interest as described in
Section 1.5(a) or (b) (the "Sale").
1.2. Delivery of Notice. Except as otherwise provided in the Amended and
Restated Trust Agreement of Exchange dated as of the date hereof between ATI and
USW (the "Trust Agreement of Exchange"), USW and ATI shall complete and execute
the Merger Agreement and employ all reasonable efforts to satisfy the conditions
to the Merger set forth in Article IV of the Merger Agreement upon the
occurrence of any of the following:
(a) During the period beginning on the latest of (i) the Phase II Closing
Date, (ii) the PCS Contribution Date, or (iii) the earlier of (A) the New Par
Contribution Date or (B) the Back-End Termination Date, and ending on the
earlier of the Expiration Date or the closing of the initial Exchange described
in Section 1.5 of the Trust Agreement of Exchange, ATI shall have received from
USW written notice of USW's election to cause the Exchange to occur;
(b) Following the later of (i) the date on which Final MFJ Relief first
occurs or (ii) the Expiration Date, and during any 90-day period referred to in
Section 2.7(b) of the WMC Partnership Agreement if the dispute involves USW, USW
shall have received from ATI written notice of ATI's election to cause the
Exchange to occur; or
<PAGE> 2
(c) At any time after both (i) the date on which Final MFJ Relief first
occurs and (ii) the date the USW Group first owns less than 5% of the aggregate
Percentage Interests in WMC, USW shall have received from ATI written notice of
ATI's election to cause the Exchange to occur.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice Date")
when a notice shall have been delivered pursuant to Section 1.2, representatives
of ATI and USW shall meet to determine the appropriate number of shares of
capital stock of ATI to be exchanged for the WMC Interest (the "Final Number of
ATI Shares"). In the event that such representatives of ATI and USW shall be
unable to reach agreement with respect to the Final Number of ATI Shares within
30 business days after the Notice Date, the Final Number of ATI Shares and the
Aggregate Consideration (as defined in paragraph (h) below) shall be determined
as follows.
(b) Selection of Appraisers. ATI and USW each shall designate by written
notice to WMC and the other a firm of recognized national standing familiar with
appraisal techniques applicable to the determination of the Appraisal Number of
ATI Shares (as defined below) to serve as an Appraiser pursuant to this Section
1.3 (the firms designated by ATI and USW being referred to herein as the "ATI
Appraiser" and the "USW Appraiser," respectively) within 30 business days after
the failure to reach mutual agreement referred to in paragraph (a) above. In the
event that either ATI or USW fails to designate its Appraiser within the
foregoing time period, the other shall have the right to designate such
Appraiser by notifying the failing party in writing of such designation (and the
Appraiser so designated shall be the ATI Appraiser or the USW Appraiser, as the
case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to determine the
number of shares of capital stock of ATI equal to the quotient of (i) (A) the
Private Market Value (as defined in Section 6.1 hereof) or (B) in the case of an
election by ATI pursuant to Section 1.2(c) hereof, the Fair Market Value (as
defined in Section 6.1 hereof), in either case of the WMC Interest as of the
Notice Date, divided by (ii) the Fair Public Market Value Per Share (as defined
in Section 6.1 hereof) of ATI Common Stock (as defined in Section 6.1 hereof) as
of the Notice Date (the quotient for each such Appraisal being the "Appraisal
Number of ATI Shares"). Each Appraiser also shall be directed to deliver a
certificate (an "Appraiser's Certificate") to both ATI and USW upon the
conclusion of its determination, which in no event shall be later than the 30th
day after its respective designation, and each Appraiser's Certificate once
delivered may not be retracted or modified in any respect. Each Appraiser will
keep confidential all information disclosed by ATI and WMC in the course of
conducting its evaluation, and, to that end, will execute such customary
documentation as ATI and WMC reasonably may request with respect to such
confidentiality obligation. ATI will provide, and ATI and USW will cooperate in
causing WMC to provide, each Appraiser with such information within ATI's and
WMC's possession that reasonably may be requested in writing by the Appraiser
for purposes of its evaluation hereunder. The Appraisers shall consult with each
other in the course of conducting their respective evaluations. Each Appraiser
will be directed to comply with the provisions of this Section 1.3, and to that
end each of ATI and USW will provide to its respective Appraiser a complete and
correct copy of this Section 1.3 (and the definitions of capitalized terms used
in this Section 1.3 that are defined elsewhere).
(d) Determination of the Final Number of ATI Shares. The Final Number of ATI
Shares shall be determined on the basis of the Appraisers' Certificates in
accordance with the provisions of this paragraph. The higher of the Appraisal
Number of ATI Shares set forth on the Appraisers' Certificates is hereinafter
referred to as the "Higher Value" and the lower of the Appraisal Number of ATI
Shares is hereinafter referred to as the "Lower Value." If the Higher Value is
not more than 110% of the Lower
-2-
<PAGE> 3
Value, the Final Number of ATI Shares shall be the arithmetic average of such
two Values. If the Higher Value is more than 110% of the Lower Value, a third
appraiser shall be selected in accordance with the provisions of paragraph (e)
below, and the Final Number of ATI Shares will be determined in accordance with
the provisions of paragraph (f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher Value is
more than 110% of the Lower Value, within seven days thereafter the ATI
Appraiser and the USW Appraiser shall agree upon and jointly designate a third
firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by written
notice to each of ATI and USW. ATI and USW shall direct the Third Appraiser to
determine the Appraisal Number of ATI Shares (the "Third Value") in accordance
with the provisions of paragraph (c) above, and to deliver to ATI and USW an
Appraiser's Certificate on or before the 30th day after the designation of such
Appraiser hereunder. The Third Appraiser will be directed to comply with the
provisions of this Section 1.3, and to that end the parties will provide to the
Third Appraiser a complete and correct copy of this Section 1.3 (and the
definitions of capitalized terms used in this Section 1.3 that are defined
elsewhere).
(f) Alternative Determination of the Final Number of ATI Shares. Upon the
delivery by the Third Appraiser of its Appraiser's Certificate, the Final Number
of ATI Shares will be determined as provided in this paragraph (f). The Final
Number of ATI Shares will be (w) the Lower Value, if the Third Value is less
than the Lower Value, (x) the Higher Value, if the Third Value is greater than
the Higher Value, (y) the arithmetic average of the Third Value and the other
Value (Lower or Higher) that is closer to the Third Value, if the Third Value
falls within the range between (and including) the Lower Value and the Higher
Value, and (z) the Third Value, if the Lower Value and the Higher Value are
equally close to the Third Value.
(g) Costs. ATI and USW each will bear the cost of the Appraiser designated
by it or on its behalf. If the Higher Value is not more than 115% of the Lower
Value, or if the Higher Value and the Lower Value are equally close to the Third
Value, ATI and USW each shall bear 50% of the cost of the Third Appraiser, if
any; otherwise, the party whose Appraiser's determination of the Final Number of
ATI Shares is farther from the Third Value shall bear the entire cost of the
Third Appraiser. ATI and USW agree to pay when due the fees and expenses of the
Appraisers in accordance with the foregoing provisions.
(h) Aggregate Consideration. The aggregate consideration to be received by
USW or a subsidiary thereof (the "Aggregate Consideration") in connection with
the Merger or the Sale, as the case may be, shall consist of ATI Common Stock
and, if necessary, shares of a series of preferred stock of ATI embodying the
terms set forth in Exhibit B hereto (the "ATI Preferred Stock"), determined as
follows:
(i) USW shall receive that number of shares of ATI Common Stock
(rounded down to the nearest whole number) equal to the least of (A) the
number of shares which would at the Effective Time (as defined in Section
6.1 hereof) of the Merger or the Closing of the Sale, as the case may be,
have voting power equal to or less than 19.9% of the Voting Power
Outstanding before the issuance of such shares, (B) the number of shares
which at the Effective Time (as defined in the Merger Agreement) of the
Merger or the Closing of the Sale, as the case may be, would be equal to or
less than 19.9% of the number of shares of common stock of ATI outstanding
immediately before the issuance of such shares; and (C) the Final Number of
ATI Shares.
(ii) USW shall receive that number of shares of ATI Preferred Stock
equal to the excess, if any, of the Final Number
-3-
<PAGE> 4
of ATI Shares over the number of shares of ATI Common Stock determined
pursuant to clause (i) above.
(i) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in paragraphs (d) and (f) above, and the Final Number of
ATI Shares used in the calculations described in paragraph (h) above, shall be
adjusted appropriately for stock splits, stock dividends, stock combinations,
reclassifications and the like of ATI Common Stock subsequent to the Notice
Date.
(j) Conclusive Determination. To the fullest extent provided by law, the
determination of the Final Number of ATI Shares made pursuant to this Section
1.3 shall be final and binding on ATI and USW, and such determination shall not
be appealable to or reviewable by any court or arbitrator.
1.4. Execution of Merger Agreement. As soon as practicable following the
determination of the Final Number of ATI Shares pursuant to Section 1.3, but in
no event later than 10 days thereafter, ATI and USW each shall complete and
execute, and each shall cause its appropriate respective subsidiary to execute,
the Merger Agreement in substantially the form set forth in Exhibit A hereto.
The parties agree that ATI shall have the right to determine in its sole
discretion the form and substance of Annexes A and B to the Merger Agreement.
1.5. Right to Require Sale. In the event that either ATI or USW shall fail
within 10 days after the determination of the Final Number of ATI Shares to have
the Merger Agreement executed by their respective appropriate parties, the
following shall apply:
(a) If ATI shall have so failed, USW may deliver to ATI written notice
requiring ATI to purchase the WMC Interest in exchange for the Aggregate
Consideration plus, if ATI's failure shall have resulted from other than the
prohibition of such execution by any order, decree or injunction of a court of
competent jurisdiction or an action taken or any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity that makes execution of the Merger Agreement illegal, an amount equal to
35% of the taxable income attributable to such sale (net of the amount of
taxable income that would have been generated by the Merger, such as income
arising from deferred intercompany gain or an excess loss account in the stock
of any USW HoldSub (as defined in Section 2.2(a))) (the "Tax Adjustment").
(b) If USW shall have so failed, ATI may deliver to USW written notice
requiring USW to cause the WMC Interest to be sold to ATI in exchange for the
Aggregate Consideration.
(c) In the event that either ATI or USW exercises its right to cause the
Sale, the provisions of Sections 1.6 and 1.7 and of Article IV shall be
applicable.
1.6. Sale Procedure. Any written notice delivered pursuant to paragraph (a)
or (b) of Section 1.5 (a "Sale Notice") shall specify the closing date of the
Sale, which closing date shall be at least 15 but not more than 30 business days
after the date of such notice; provided, however, that such date shall be
extended in order to permit the parties to obtain all requisite regulatory
approvals.
1.7. Closing. The closing of the Sale (the "Closing") shall take place at
such time and place as the parties may agree and on the date specified in the
Sale Notice or at such other time, date or place as may be agreed to by the
parties or as extended pursuant to Section 1.6. The date and time at which a
Closing occurs is referred to as the "Closing Date." At the Closing, USW shall
cause to be assigned to ATI all right, title and interest in and to the WMC
Interest, free and clear of any Liens (as herein-
-4-
<PAGE> 5
after defined), and ATI shall simultaneously deliver to USW a certificate or
certificates representing the Aggregate Consideration and, if the Sale is
pursuant to Section 1.5(a), a wire transfer in the amount of the Tax Adjustment,
if any, to an account designated by USW three business days in advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents and
warrants to USW as follows:
(a) Organization and Qualification. It is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and has the
corporate power to own its properties and to carry on its business as now being
conducted.
(b) Authorization; Enforcement. It has full legal right, power and authority
to enter into and perform this Agreement; the execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated
hereby, other than the approval by ATI's board of directors of the Merger
Consideration (as defined in the Merger Agreement) and the approval of the
Preferred Certificate (as defined in Section 3.1(a)), have been duly authorized
by it; this Agreement has been duly executed and delivered by it and this
Agreement constitutes its valid and binding obligation enforceable against it in
accordance with its terms, except that (i) such enforcement is subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies and (ii) the remedies of specific performance and injunctive
relief may be subject to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party, or
result in a violation of its certificate of incorporation or by-laws or any law,
rule, regulation, order, judgment or decree applicable to it or by which any of
its properties or assets is bound or affected. No consent, authorization or
order of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by it of this Agreement,
except to the extent of (i) any applicable requirements under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) any
consent or approval of the FCC or any other federal or state governmental agency
the necessity of which arises solely out of WMC's licenses or operations, (iii)
any filings required under the Exchange Act, or (iv) any filings expressly
contemplated hereby.
(d) Authorization of ATI Common Stock and ATI Preferred Stock. ATI has taken
all necessary action to permit it to issue the number of shares of ATI Common
Stock issuable pursuant to the terms of this Agreement, and prior to the Closing
or the Effective Time, as the case may be, ATI will have taken all necessary
action to permit it to issue the number of shares of ATI Preferred Stock
issuable pursuant to the terms of this Agreement. Shares of ATI Common Stock and
ATI Preferred Stock issued pursuant to the terms of this Agreement will, when
issued, be validly issued, fully paid and nonassessable and no person will have
any preemptive right of subscription or purchase in respect thereof.
-5-
<PAGE> 6
2.2. Representations and Warranties of USW. USW hereby represents and
warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary thereof that
holds the WMC Interest (a "USW HoldSub") will be at the time of the Closing, a
corporation duly organized and existing in good standing under the laws of the
state of its incorporation and it has, and each USW HoldSub at the time of the
Closing will have, the corporate power to own its properties and to carry on its
business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power and authority
to enter into and perform this Agreement; the execution and delivery of this
Agreement by USW and the consummation by it of the transactions contemplated
hereby have been duly authorized by it; this Agreement has been duly executed
and delivered by it and this Agreement constitutes its valid and binding
obligation enforceable against it in accordance with its terms, except that (i)
such enforcement is subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies and (ii)
the remedies of specific performance and injunctive relief may be subject to
general principles of equity. At the time of the Closing, each USW HoldSub will
have duly authorized the transactions contemplated hereby to the extent required
and will have full legal right, power and authority to perform this Agreement.
(c) No Conflicts. The execution, delivery and performance of this Agreement
by it and the consummation by each of USW and, to the extent required, the
consummation by each USW HoldSub, of the transactions contemplated hereby will
not conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien (as defined in paragraph (d) below) on any properties or
assets of any of them pursuant to any agreement, indenture or instrument to
which any of them is a party or by which the properties or assets of any of them
are bound or affected, or result in a violation of the certificate of
incorporation or by-laws of any of them or any law, rule, regulation, order,
judgment or decree applicable to any of them or by which any of the properties
or assets of any of them is bound or affected. No consent, authorization or
order of, or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance by each of USW and, to the
extent required, by each USW HoldSub of this Agreement, except to the extent of
(i) any applicable requirements under the HSR Act, (ii) any consent or approval
of the FCC or any other federal or state governmental agency the necessity of
which arises solely out of WMC's licenses or operations, (iii) any filings
required under the Exchange Act, or (iv) any filings expressly contemplated
hereby.
(d) Title. At the Effective Time or Closing, as the case may be, USW will be
the sole record and beneficial owner of all of the capital stock of each USW
HoldSub, free and clear of all liens, adverse claims, pledges, security
interests, options, liabilities or other contractual, legal or equitable rights
or encumbrances (collectively, "Liens"). At the Effective Time or Closing, as
appropriate, USW or a USW HoldSub will be the sole legal and beneficial owner of
the WMC Interest free and clear of all Liens; and immediately after the
Effective Time or the Closing, as the case may be, ATI or a subsidiary of ATI
will be the owner of all the right, title and interest of USW and each USW
HoldSub to and in the WMC Interest free and clear of all Liens. The WMC Interest
owned by USW constitutes, and at the Effective Time or the Closing, as the case
may be, the WMC Interest held by each USW HoldSub will constitute, the entirety
of any WMC interest held directly or indirectly by USW.
-6-
<PAGE> 7
ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date hereof to the
Effective Time or the Closing, as the case may be, except as specifically
contemplated by this Agreement or as otherwise approved in writing by USW:
(a) Designation and Reservation of Shares. ATI will reserve and keep
available out of its authorized but unissued shares of capital stock the full
number of shares of ATI Common Stock and ATI Preferred Stock, if any, at any
time deliverable upon the consummation of the Merger or at the Closing, as the
case may be. ATI agrees that prior to the Effective Time or the Closing Date, as
the case may be, it will have filed with the appropriate public official in its
state of incorporation a certificate (the "Preferred Certificate") designating a
sufficient number of shares of ATI Preferred Stock.
(b) No Inconsistent Agreements. After the date hereof, ATI shall not and
shall not permit its Affiliates to, take any action or enter into any agreement
inconsistent with the rights granted to USW hereunder or which could adversely
affect the ability of ATI and USW to consummate the Merger or Sale as
contemplated hereunder, including, without limitation, entering into any loan
agreement or other arrangement containing terms or conditions which would limit
or prohibit the consummation of the Merger or Sale.
3.2. Covenants of USW. During the period from the date of this Agreement to
the Effective Time or the Closing, as the case may be, except as specifically
contemplated by this Agreement or as otherwise approved in writing by ATI:
(a) No Inconsistent Agreements. After the date hereof, USW shall not, and
shall not permit its Affiliates to, take any action or enter into any agreement
inconsistent with the rights granted to ATI hereunder or which could adversely
affect the ability of ATI, USW or any USW HoldSub to consummate the Merger or
Sale as contemplated hereunder, including, without limitation, entering into any
loan agreement or other arrangement containing terms or conditions which would
limit or prohibit the consummation of the Merger or Sale.
(b) Transfer of WMC Interest Prohibited. From and after the Notice Date,
unless the Merger or the Closing shall have been abandoned pursuant to Section
4.4, USW shall not, and shall not permit its subsidiaries to, and its
subsidiaries shall not, sell, pledge, transfer or otherwise dispose of the WMC
Interest or any interest therein, including through the creation of any Lien
thereon.
3.3. Further Assurances; Cooperation. (a) Each of the parties hereto shall
perform its obligations under this Agreement and take or cause to be taken and
do or cause to be done all things necessary, proper or advisable under
applicable law to obtain all necessary regulatory approvals and waivers and all
other necessary consents and satisfy all conditions to the obligations of the
parties under this Agreement and shall cooperate fully with one another and
their respective officers, directors, employees, agents, counsel, accountants
and other representatives in connection with any steps required to be taken as a
part of their respective obligations under this Agreement; and each party shall
do such things as reasonably may be requested by the other parties hereto in
order more effectively to consummate the Merger or the Sale, as the case may be
(including, but not limited to, promptly delivering to the other information
necessary to prepare and pursue all necessary regulatory filings, approvals and
waivers).
(b) In the event that a change in the structure of the Exchange would be
necessary or desirable to accomplish a tax-free merger or reorganization
(including a reorganization described in Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended), USW and ATI shall take
-7-
<PAGE> 8
all reasonable steps necessary to accommodate such change to the extent it would
not adversely affect the parties' rights or obligations under the terms of the
Merger Agreement or this Agreement; provided that in any such event ATI and USW
shall negotiate in good faith to appropriately compensate the other to the
extent adversely affected by such change.
3.4. Occurrence of the Exchange Prior to Final MFJ Relief. If the Effective
Time or the Closing, as the case may be, shall occur as a result of USW's
sending a notice pursuant to Section 1.2(a) prior to the date on which Final MFJ
Relief first occurs, the parties agree that: (i) ATI shall not be obligated to
take any action or forego any business opportunity in order to accommodate USW's
election to cause the Merger or Sale to occur prior to the date on which Final
MFJ Relief first occurs, (ii) ATI shall not be obligated to take any action or
forego any business opportunity in order to enable USW to maintain beneficial
ownership of any capital stock of ATI and (iii) if (A) an activity or proposed
activity in which ATI or an Affiliate is or would be engaged, or a transaction
or proposed transaction to which ATI or an Affiliate is or would be a party, is
not or would not be, or is perceived by any regulatory authority not to be, in
compliance with the MFJ, and (B) the indemnification of ATI by USW pursuant to
Section 5.1(b)(ii) is unavailable or inadequate, then USW shall take all actions
necessary in order to avoid or correct such noncompliance and to allow ATI at
all times to operate its business free of any and all MFJ restrictions.
3.5. Provision in Case of Consolidation or Merger of ATI. In the event that
prior to the Effective Time or the Closing, as the case may be, ATI shall enter
into an agreement of merger, consolidation or other business combination with
any Person ("Acquiring Corporation") which has a class of equity securities
having substantially the same rights as ATI Common Stock (including but not
limited to voting, dividend, liquidation, and redemption rights) ("Acquiror
Common Stock"), and in connection with such agreement (i) the Acquiring
Corporation shall acquire at least 85% of the Voting Power Outstanding or ATI
Common Stock will no longer be registered with the Securities and Exchange
Commission pursuant to section 12(b) or 12(g) of the Exchange Act or (ii) the
Acquiring Corporation shall acquire assets satisfying the requirements of
clauses (A), (B) and (C) of clause (ii) of the definition of Change of Control
contained in the Amended and Restated Investment Agreement between the parties
dated the date hereof, and a majority of the value of the consideration to be
received by ATI in exchange therefor shall not consist of assets (or interests
in assets) of a like kind or nature, then ATI shall cause such agreement to
provide that upon consummation of such consolidation, merger or other business
combination this Agreement and the Merger Agreement shall be deemed to be
modified and amended to provide that USW shall receive Acquiror Common Stock
rather than ATI Common Stock in any Merger or Sale. Accordingly, from and after
such consummation references herein to ATI Common Stock shall be deemed to be
references to Acquiror Common Stock (including for purposes of Section 6.1(a)).
If any such consolidation, merger or other business combination shall be
consummated after the Notice Date and prior to the Closing, the Closing shall be
delayed for an appropriate period to determine under Section 1.3 the number of
shares of Acquiror Common Stock to be issued at the Effective Time or the
Closing, as the case may be, and to satisfy all conditions to the Merger or the
Closing. ATI shall not enter into any such consolidation, merger or other
business combination unless the Acquiring Corporation assumes in writing all the
obligations of ATI hereunder. The provisions of this Section 3.5 shall apply to
successive consolidations, mergers or other business combinations.
3.6. Contributions, Distributions and Dividends After the Notice Date. ATI
agrees to compensate USW at the Effective Time or at the Closing, as the case
may be, for (i) any dividends (other than those for which adjustments have been
made pursuant to Section 1.3(i)) that would have been received prior to the
Effective Time or the Closing Date by USW in respect of the Aggregate
Consideration if the Aggregate Consideration had been issued to USW on or prior
to the first record date therefor announced by ATI
-8-
<PAGE> 9
subsequent to the Notice Date, and (ii) any capital contributions to WMC made by
USW or its Affiliates with respect to the WMC Interest during the period after
the Notice Date and prior to the Effective Time or the Closing, as the case may
be. USW agrees to make, or to cause to be made, all capital contributions due
after the Notice Date and prior to the Effective Time or the Closing, as the
case may be, to the extent any such capital contribution, if not made, would
constitute a Defaulted Contribution (as defined in the WMC Partnership
Agreement). USW agrees to compensate ATI at the Closing for any distributions
received by USW or its Affiliates with respect to the WMC Interest during the
period after the Notice Date and prior to the Closing.
ARTICLE IV
CONDITIONS TO CLOSING OF THE SALE
4.1. Conditions to Each Party's Obligation to Effect the Sale. The
obligations of the parties hereto to consummate the Sale are subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:
(a) No Prohibition. The consummation of the Sale shall not be prohibited by
any order, decree or injunction of a court of competent jurisdiction (each party
agreeing to use all reasonable efforts to have any such order reversed or
injunction lifted), and there shall not have been any action taken or any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Sale by any Governmental Entity that makes consummation of the Sale illegal.
(b) Authorizations. All required authorizations, orders, grants, consents,
permissions, approvals and waivers of any governmental entity with jurisdiction
over the Sale (including all filings under the HSR Act and the expiration of all
waiting periods thereunder) shall have been received and shall remain in effect,
other than authorizations, orders, grants, consents, permissions and approvals
the failure of which to receive would not, singly or in the aggregate, have a
material adverse effect on the business condition of USW or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to effect the
Sale are subject to the satisfaction or waiver, at or before the Closing, of
each of the following conditions, except to the extent that any failure of the
conditions set forth in paragraphs (a) or (b) below results in damage to ATI
that is fully compensable by monetary damages.
(a) Representations and Warranties. The representations and warranties of
USW set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of USW. USW shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) Nature of Acquisition. USW shall have provided ATI with an undertaking
to the effect that USW is acquiring the shares of ATI Common Stock and ATI
Preferred Stock, if any, hereunder for its own account, for investment and not
with a view to the resale or distribution thereof, except in compliance with the
Securities Act of 1933, as amended.
(d) No Change of Control. There shall not have been a Change of Control of
USW at any time after the date hereof and USW shall not be a party to any
agreement which contemplates a transaction (or series of transactions) which,
when consummated, would result in a Change of Control of USW.
-9-
<PAGE> 10
4.3. Conditions to Obligations of USW. The obligations of USW to effect the
Sale are subject to the satisfaction or waiver, at or before the Closing, of
each of the following conditions, except to the extent that the failure of any
such condition results in damage to USW that is fully compensable by monetary
damages:
(a) Representations and Warranties. The representations and warranties of
ATI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance of Obligations of ATI. ATI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
4.4. Abandonment of Merger or Sale. In the event that the Effective Time or
the Closing, as the case may be, has not occurred within two years after the
Notice Date, either ATI or USW may elect, subject to the following sentence, by
written notice to the other to abandon the Merger or the Sale, as the case may
be, in which event this Agreement shall be operative thereafter as if the notice
delivered pursuant to Section 1.2 never had been delivered; provided, however,
in the event that the Expiration Date shall have occurred within the foregoing
two year period, such two year period may be extended, subject to the following
sentence, at the option of either party, by written notice to the other
delivered prior to the expiration of such two year period, for one additional
year. Notwithstanding the foregoing, the right to abandon the Merger or the
Sale, or to extend the two-year period for one additional year, pursuant to this
Section shall not be available to any party whose failure to fulfill any
obligation under this Agreement or the Merger Agreement has been the cause of,
or results in, the failure of the Effective Time or the Closing to have occurred
within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification.
(a) Indemnification by ATI. ATI shall defend, indemnify and hold harmless
USW and each of USW's subsidiaries, shareholders, affiliates, officers,
directors, employees, agents, successors and assigns (USW and such persons,
collectively, "USW's Indemnified Persons"), and shall reimburse USW's
Indemnified Persons for, from and against each and every demand, claim, loss,
liability, judgment, damage, cost and expense (including, without limitation,
interest, penalties, costs of preparation and investigation, and the reasonable
fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses") imposed on or incurred by USW's
Indemnified Persons, directly or indirectly (including without limitation
diminution in value of an equity interest), relating to, resulting from or
arising out of any inaccuracy in any representation or warranty of ATI herein or
in the Merger Agreement in any respect, whether or not USW's Indemnified Persons
relied thereon, or any breach or nonfulfillment of any covenant, agreement or
other obligation of ATI under this Agreement, the Merger Agreement, or any
certificate or other document delivered or to be delivered pursuant hereto. The
parties agree that the Tax Adjustment described in Section 1.5(a) is an agreed
upon payment limited to the failure to execute the Merger Agreement under the
circumstances described therein and is not intended as an admission of the fact
or measure of damages for any purpose, and that this Section 5.1 shall govern
with respect to a Loss relating to, resulting from or arising out of any other
matter described in the foregoing sentence.
-10-
<PAGE> 11
(b) Indemnification by USW. USW shall defend, indemnify and hold harmless
ATI and each of ATI's subsidiaries, shareholders, affiliates, officers,
directors, employees, agents, successors and assigns (ATI and such persons,
collectively, "ATI's Indemnified Persons"), and shall reimburse ATI's
Indemnified Persons, for, from and against all Losses imposed on or incurred by
ATI's Indemnified Persons, directly or indirectly (including without limitation
diminution in value of an equity interest), relating to, resulting from or
arising out of (i) any inaccuracy in any representation or warranty of USW
herein or in the Merger Agreement in any respect, whether or not ATI's
Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of USW under this Agreement, the Merger
Agreement, or any certificate or other document delivered or to be delivered
pursuant hereto and (ii) the occurrence of the Exchange prior to the time of
Final MFJ Relief as a result of USW's sending a notice pursuant to Section
1.2(a) hereof, including but not limited with respect thereto to any Losses
suffered as a result of the circumstances described in Section 3.4(iii).
ARTICLE VI
MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following terms have
the following meanings:
(a) "ATI Common Stock" means shares of the class designated as Common Stock
of ATI at the date of this Agreement or shares of any class or classes resulting
from any reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of ATI and which
are not subject to redemption by ATI;provided that if at any time there shall be
more than one such resulting class, the shares of each such class then so
issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
(b) "Expiration Date" means July 25, 2004, unless subsequent to the date
hereof ATI shall have entered into an agreement, or an amendment of any existing
agreement, with CCI that would extend the time that any interest in or assets of
New Par could be contributed to WMC, in which case it shall be July 25, 2005.
(c) "Fair Public Market Value Per Share" shall mean the price per share as
of the Notice Date at which a willing investor would purchase and a willing
publicly traded company would sell, the combination of primary shares of ATI
Common Stock and ATI Preferred Stock to be issued to USW as contemplated by this
Agreement, each being apprised of all relevant facts and circumstances,
including without limitation, such investor's pro forma ownership percentage,
rights to board representation, voting restrictions, ownership limitations,
transfer rights and restrictions and the terms of any preferred stock to be
issued (including redemption features), any material non-public information in
ATI's possession and any temporary market anomalies existing on the Notice Date,
in a single arm's-length negotiated transaction without time constraints.
(d) "Fair Market Value" means, with respect to the WMC Interest, as of the
Notice Date, the price at which a willing seller would sell, and a willing buyer
would buy, the WMC Interest each being apprised of all relevant facts with
respect to the WMC Interest and neither acting under compulsion, in an
arm's-length negotiated transaction with an unaffiliated third party without
time constraints.
(e) "Final MFJ Relief" shall mean that the MFJ has been vacated or is
otherwise no longer enforceable or in effect as a result of federal agency
-11-
<PAGE> 12
action, legislation or final court order and that none of the equal access
requirements (as defined under Section II (A) of the MFJ), the nondiscrimination
requirements (as defined under Section II (B) of the MFJ) and the line of
business restrictions (as defined in Section II (D) of the MFJ) on the Bell
Operating Companies (as defined in the MFJ) has been imposed or extended by
legislation, final agency action or final court order; provided, however, that
Final MFJ Relief shall be deemed to have occurred even though equal access or
nondiscrimination requirements remain, in the event that such requirements are
imposed equally on the wireless operations of all telecommunications carriers by
legislation, final court order or final agency action.
(f) "Private Market Value of the WMC Interest" is defined as the price, as
of the Notice Date, at which a willing seller would sell, and a willing buyer
would buy, each being apprised of all relevant facts, including the tax effects
of the Exchange on the buyer and seller, and neither acting under compulsion,
the WMC Interest in an arm's-length negotiation without time constraints, with
such price adjusted to include (to the extent not previously included) a pro
rata share of any control premium inherent in a sale of WMC as a whole.
(g) "Voting Power Outstanding" means the aggregate number of votes which may
be cast by holders of those securities outstanding which entitle the holders
thereof to vote generally on all matters submitted to ATI's shareholders for a
vote.
All capitalized terms in this Agreement which are not defined herein shall
have the meanings set forth in the WMC Partnership Agreement as in effect on the
date hereof.
6.2. Termination. This Agreement and the Merger Agreement shall
automatically terminate (whether or not a notice has previously been delivered
pursuant to Section 1.2 hereof) at such time as USW no longer holds any WMC
interest. Subject to Section 3.5(i), upon the consummation of any transaction
which results in ATI no longer having a class of equity securities registered
with the Securities and Exchange Commission pursuant to Section 12(b) or 12(g)
of the Exchange Act having substantially the same rights as the ATI Common
Stock, neither USW nor ATI shall have the right to deliver a notice pursuant to
Section 1.2 hereof until such further time as ATI again shall have a class of
equity securities registered with the Securities and Exchange Commission
pursuant to Section 12(b) or 12(g) of the Exchange Act having substantially the
same rights as the ATI Common Stock, and any Merger or Sale as to which the
Effective Time or Closing has not yet occurred shall be abandoned and this
Agreement shall be operative thereafter as if the notice delivered pursuant to
Section 1.2 never had been delivered. The termination of this Agreement shall
not relieve any party from liability for any breach hereof or of the Merger
Agreement.
6.3. Severability. If any term, provision, covenant or restriction of this
Agreement is determined to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
6.4. Specific Enforcement. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
-12-
<PAGE> 13
6.5. Entire Agreement; Amendments. Except to the extent that other
agreements are specifically referred to herein, this Agreement between ATI and
USW contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein, neither
ATI nor USW makes any representation, warranty, covenant or undertaking with
respect to such matters. This Agreement amends and restates in its entirety that
certain Agreement of Exchange, dated as of July 25, 1994, between ATI's
predecessor, AirTouch Communications, a California corporation, and USW. This
Agreement may be amended only by a writing executed by the parties hereto. The
parties hereto may amend this Agreement without notice to or the consent of any
third party.
6.6. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) when personally
delivered or transmitted by telecopier on a business day during normal business
hours where such notice is to be received at the address or number designated
below or (b) on the business day following the date of mailing by overnight
courier, fully prepaid, addressed to such address, whichever shall first occur.
The addresses for such communications shall be:
If to ATI: AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to USW: U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attention: President
Telecopier: (303) 793-6294
With a copy to: U S WEST, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attention: General Counsel
Telecopier: (303) 793-6294
Any party may change its address for notices under this Section 6.6 by giving at
least 10 days' prior notice of such changed address to the other party hereto.
6.7. Legends. All certificates evidencing shares of ATI Common Stock and ATI
Preferred Stock, if any, acquired by USW directly or indirectly pursuant to this
Agreement shall be endorsed with the legends set forth below:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR
UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
-13-
<PAGE> 14
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN AMENDED
AND RESTATED INVESTMENT AGREEMENT (INCLUDING THE RESTRICTIONS ON TRANSFER
SET FORTH THEREIN), DATED AS OF SEPTEMBER 30, 1995, BETWEEN THE COMPANY AND
USW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF
THE CORPORATE SECRETARY OF THE COMPANY.
6.8. Removal of Legends. Any legend endorsed on a certificate pursuant to
Section 6.7 shall be removed (i) with respect to the first legend set forth
under Section 6.7, (A) if the securities represented by such certificate shall
have been effectively registered under the Securities Act or otherwise lawfully
sold in a public transaction, or (B) if the holder of such securities shall have
provided ATI with an opinion of counsel, in form and substance acceptable to ATI
and its counsel stating that a sale, transfer or assignment of the securities
may be made without registration under the Securities Act of 1993, as amended,
and (ii) with respect to the second legend set forth under Section 6.7, if the
securities represented by such certificate shall have been effectively
transferred in compliance with clause (ii), (iii) or (iv) of the second sentence
of Section 5.3(a) of the Amended and Restated Investment Agreement dated as of
September 30, 1995 between ATI and USW (the "Investment Agreement") or all the
obligations of USW under Articles V or VIII of the Investment Agreement have
terminated, or a Change of Control of ATI has occurred.
6.9. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
6.10. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and legal representatives.
Neither ATI nor USW shall assign this Agreement or any rights hereunder without
the prior written consent of the other (which consent may be withheld for any
reason in the sole discretion of the party from whom consent is sought);
provided, however, that USW may assign its rights (but not its obligations)
under this Agreement to a Wholly Owned Subsidiary that is the direct beneficial
owner of the WMC Interest.
6.12. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other person.
6.13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
6.14. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
6.15. Arbitration. The parties agree to submit to arbitration their disputes
described in the Arbitration Agreement dated the date hereof between ATI and
USW.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
AIRTOUCH COMMUNICATIONS, INC. U S WEST, INC.
By ______________________________ By ______________________________
Name: Name:
Title: Title:
<PAGE> 16
EXHIBIT B TO EXCHANGE AGREEMENT
SUMMARY OF TERMS
<TABLE>
<S> <C>
HOLDER: U S West, Inc. or its affiliates ("USW").
NUMBER OF SHARES: To be determined in accordance with the Amended
and Restated Agreement of Exchange between
AirTouch Communications, Inc. ("ATI") and USW
dated September 30, 1995.
DIVIDENDS: USW shares ratably and proportionately with
holders of ATI Common Stock in the payment of
dividends when, as and if declared by the Board
of Directors.
LIQUIDATION VALUE: Liquidation value per share of Series B
Preferred stock is equal to the fair market
value, at the date of liquidation, of one share
of ATI Common Stock.
REDEMPTION: (a) Redeemable at USW's option for a price per
share equal to the fair market value per share
of ATI Common Stock. Redemption price is fixed
on the date USW delivers redemption notice;
payment (including interest at rate TBD) to be
made no later than 180 days thereafter. Amounts
redeemed count against twelve-month maximum in
Section 5.3(a) of the Amended and Restated
Investment Agreement between ATI and USW dated
September 30, 1995.
(b) Each share of Series B Preferred Stock is
also redeemable at ATI's option at any time for
one share of ATI Common Stock.
CONVERSION: The Series B Preferred Stock is not convertible.
RESTRICTIONS ON TRANSFER: Shares of Series B Preferred Stock may not be
transferred except to wholly owned subsidiaries
of USW.
VOTING RIGHTS: None.
BOARD REPRESENTATION: Series B Preferred Stock does not by itself
entitle USW to representation on the Board of
Directors.
</TABLE>
<PAGE> 1
Exhibit 10.5
Draft 9/30/95
AMENDED AND RESTATED
TRUST AGREEMENT OF EXCHANGE
THIS AMENDED AND RESTATED TRUST EXCHANGE AGREEMENT (this "Agreement"),
dated as of September 30, 1995, by and between AIRTOUCH COMMUNICATIONS, INC., a
Delaware corporation ("ATI"), and U S WEST, INC., a Colorado corporation
("USW"),
W I T N E S S E T H:
WHEREAS, ATI and USW are parties to that certain Amended and Restated
Joint Venture Organization Agreement dated as of the date hereof (the
"Organization Agreement") and that certain Amended and Restated Agreement of
Limited Partnership for WMC Partners, L.P. ("WMC") dated as of the date hereof
(the "WMC Partnership Agreement"); and
WHEREAS, USW beneficially holds an ownership interest in WMC (such
interest, to the extent it continues to be beneficially held by USW from time to
time hereafter, the "WMC Interest"); and
WHEREAS, ATI has granted to USW certain rights to cause the exchange of
the WMC Interest, for shares of ATI Common Stock, including, without limitation,
pursuant to that certain Amended and Restated Agreement of Exchange, dated as of
the date hereof, by and between ATI and USW (the "Agreement of Exchange"); and
WHEREAS, at the time of the exchange under the Agreement of Exchange,
ATI may be involved incidentally in activities forbidden to USW under the MFJ
(as defined in the Organization Agreement) and, as a result, if Final MFJ Relief
(as hereinafter defined) has not been obtained, USW may not be able to exercise
its rights under the Agreement of Exchange; and
WHEREAS, ATI is willing to grant to USW additional rights to exchange
its WMC Interest for shares of ATI Common Stock in accordance with the terms and
conditions of this Agreement; and
WHEREAS, in order to ensure that USW does not become involved, upon the
exchange of its WMC Interest for shares of ATI Common Stock, indirectly in
activities forbidden to USW under the MFJ through an "affiliated enterprise" by
virtue of its receipt or disposition of shares of ATI Common Stock, and for
other reasons, USW may elect to utilize a trust structure under which, upon such
exchange and subject to the terms and conditions set forth herein, the ATI
Common Stock will be held by a trustee (the "Trustee") for the purpose of
disposing of such shares for the benefit of USW:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.1. Manner of the Exchange. Upon the terms and subject to the
conditions set forth herein, the parties agree that, if USW shall elect to
utilize a trust structure for the disposition of ATI Common Stock received upon
exchange of its WMC Interest (the "Exchange"), the Exchange shall be effected as
described herein.
1.2. Delivery of Notice. During the period (a) beginning on the latest
of (i) July 25, 1999, (ii) the Phase II Closing Date, (iii) the PCS
<PAGE> 2
Contribution Date, or (iv) the earlier of (A) the New Par Contribution Date, or
(B) the Back-End Termination Date and (b) ending on the earlier of the
consummation of (i) the Merger or Sale (as defined in the Agreement of Exchange)
and (ii) the Expiration Date, USW, if it has not already delivered a notice
pursuant to Section 1.2 of the Agreement of Exchange and the Merger or Closing
resulting therefrom has not been abandoned pursuant to Section 4.4 thereof, may
deliver to ATI written notice of USW's election to cause the Exchange to occur.
Following ATI's receipt of such notice, USW and ATI shall employ all reasonable
efforts to satisfy the conditions to the Exchange set forth in Article IV of
this Agreement. Upon the delivery of such notice to ATI, USW shall cease to have
the ability to deliver notice pursuant to Section 1.2 of the Agreement of
Exchange until such time, if ever, as the initial Closing (as defined herein)
shall be abandoned pursuant to Section 4.4 hereof.
1.3. Determination of Consideration.
(a) General. Within ten business days after the date (the "Notice
Date") when a notice shall have been delivered pursuant to Section 1.2,
representatives of ATI and USW shall meet to determine the appropriate amount of
capital stock of ATI to be exchanged for the WMC Interest (the "Final Number of
ATI Shares"). In the event that such representatives of ATI and USW shall be
unable to reach agreement with respect to the Final Number of ATI Shares within
30 business days after the Notice Date, the Final Number of ATI Shares and the
Aggregate Consideration (as defined in paragraph (h) below) shall be determined
as follows.
(b) Selection of Appraisers. ATI and USW each shall designate by
written notice to WMC and the other a firm of recognized national standing
familiar with appraisal techniques applicable to the determination of the
Appraisal Number of ATI Shares (as defined below) to serve as an Appraiser
pursuant to this Section 1.3 (the firms designated by ATI and USW being referred
to herein as the "ATI Appraiser" and the "USW Appraiser," respectively) within
30 business days after the failure to reach mutual agreement referred to in
paragraph (a) above. In the event that either ATI or USW fails to designate its
Appraiser within the foregoing time period, the other shall have the right to
designate such Appraiser by notifying the failing party in writing of such
designation (and the Appraiser so designated shall be the ATI Appraiser or the
USW Appraiser, as the case may be).
(c) Evaluation Procedures. Each Appraiser shall be directed to
determine the number of shares of capital stock of ATI equal to the quotient
of (i) the Private Market Value of the WMC Interest (as defined in Section
6.1 hereof) divided by (ii) the Fair Public Market Value Per Share of ATI Common
Stock (the quotient for each Appraisal being the "Appraisal Number of ATI
Shares"). Each Appraiser also shall be directed to deliver a certificate (an
"Appraiser's Certificate") to both ATI and USW upon the conclusion of its
evaluation, which in no event shall be later than the 30th day after its
respective designation, and each Appraiser's Certificate once delivered may not
be retracted or modified in any respect. Each Appraiser will keep confidential
all information disclosed by ATI and WMC in the course of conducting its
evaluation, and, to that end, will execute such customary documentation as ATI
and WMC reasonably may request with respect to such confidentiality obligation.
ATI will provide, and ATI and USW will cooperate in causing WMC to provide, each
Appraiser with such information within ATI's and WMC's possession that
reasonably may be requested in writing by the Appraiser for purposes of its
evaluation hereunder. The Appraisers shall consult with each other in the course
of conducting their respective evaluations. Each Appraiser will be directed to
comply with the provisions of this Section 1.3, and to that end each of ATI and
USW will provide to its respective Appraiser a complete and correct copy of this
Section 1.3 (and the definitions of capitalized terms used in this Section 1.3
that are defined elsewhere).
-2-
<PAGE> 3
(d) Determination of the Final Number of ATI Shares. The Final Number
of ATI Shares shall be determined on the basis of the Appraisers' Certificates
in accordance with the provisions of this paragraph. The higher of the Appraisal
Number of ATI Shares set forth on the Appraisers' Certificates is hereinafter
referred to as the "Higher Value" and the lower of the Appraisal Number of ATI
Shares is hereinafter referred to as the "Lower Value." If the Higher Value is
not more than 110% of the Lower Value, the "Final Number of ATI Shares" shall be
the arithmetic average of such two Values. If the Higher Value is more than 110%
of the Lower Value, a third appraiser shall be selected in accordance with the
provisions of paragraph (e) below, and the "Final Number of ATI Shares" will be
determined in accordance with the provisions of paragraph (f) below.
(e) Selection of and Procedure for Third Appraiser. If the Higher Value
is more than 110% of the Lower Value, within seven days thereafter the ATI
Appraiser and the USW Appraiser shall agree upon and jointly designate a third
firm of recognized national standing familiar with appraisal techniques
applicable to the determination of the Appraisal Number of ATI Shares to serve
as an appraiser pursuant to this Section 1.3 (the "Third Appraiser"), by written
notice to each of ATI and USW. ATI and USW shall direct the Third Appraiser to
determine the Appraisal Number of ATI Shares (the "Third Value") in accordance
with the provisions of Section 1.3(c) above, and to deliver to ATI and USW an
Appraiser's Certificate on or before the 30th day after the designation of such
Appraiser hereunder. The Third Appraiser will be directed to comply with the
provisions of this Section 1.3, and to that end the parties will provide to the
Third Appraiser a complete and correct copy of this Section 1.3 (and the
definitions of capitalized terms used in this Section 1.3 that are defined
elsewhere).
(f) Alternative Determination of the Number of ATI Shares. Upon the
delivery by the Third Appraiser of its Appraiser's Certificate, the Final Number
of ATI Shares will be determined as provided in this paragraph (f). The Final
Number of ATI Shares will be (i) the Lower Value, if the Third Value is less
than the Lower Value, (ii) the Higher Value, if the Third Value is greater than
the Higher Value, (iii) the arithmetic average of the Third Value and the other
Value (Lower or Higher) that is closer to the Third Value, if the Third Value
falls within the range between (and including) the Lower Value and the Higher
Value, and (iv) the Third Value, if the Lower Value and the Higher Value are
equally close to the Third Value.
(g) Costs. ATI and USW will bear the cost of the Appraiser designated
by it or on its behalf. If the Higher Value is not more than 115% of the Lower
Value, or if the Higher Value and the Lower Value are equally close to the Third
Value, ATI and USW shall each bear 50% of the cost of the Third Appraiser, if
any; otherwise, the party whose Appraiser's determination of the Final Number of
ATI Shares is farther from the Third Value shall bear the entire cost of the
Third Appraiser. ATI and USW agree to pay when due the fees and expenses of the
Appraisers in accordance with the foregoing provisions.
(h) Aggregate Consideration. Subject to paragraph (j) below, the
aggregate consideration (the "Aggregate Consideration") to be received by the
Trustee pursuant to the Trust Agreement (as defined in Section 1.4) in
connection with the Exchange shall consist of ATI Common Stock and, if
necessary, an amount of cash, determined as follows:
(i) The Trustee shall receive for the benefit of USW that
number of shares of ATI Common Stock (rounded down to the nearest whole
number) equal to the lesser of (A) the number of shares which would at
the Closing Date have voting power equal to or less than 19.9% of the
Voting Power Outstanding (as defined in Section 6.1 hereof) before the
issuance of such shares; (B) the number of shares which at the Closing
Date (as defined herein) would be equal to or less than 19.9% of the
-3-
<PAGE> 4
number of shares of common stock outstanding immediately before the
issuance of such shares; and (C) the Final Number of ATI Shares. The
number of shares of ATI Common Stock determined in accordance with this
Section 1.3(h)(i) shall be referred to hereinafter as the "Total
Exchange Shares."
(ii) USW shall receive cash in an amount equal to the product
of (i) the Fair Public Market Value Per Share and (ii) the excess, if
any, of (A) the Final Number of ATI Shares over (B) the number of Total
Exchange Shares, in each case rounded down to the nearest whole number.
(i) Stock Adjustments. The Final Number of ATI Shares used in the
calculations described in paragraphs (d) and (f) above, and the Final Number of
ATI Shares used in the calculations described in paragraph (h) above, shall be
adjusted appropriately for stock splits, stock dividends, stock combinations,
reclassifications and the like of ATI Common Stock effectuated between the
Notice Date and each Closing Date.
(j) Conclusive Determination. To the fullest extent permitted by law,
the determination of the Final Number of ATI Shares made pursuant to this
Section 1.3 shall be final and binding on ATI and USW, and such determination
shall not be appealable to or reviewable by any court or arbitrator.
1.4. Execution of Trust Agreement. As soon as practicable following the
determination of the Final Number of ATI Shares pursuant to Section 1.3, but in
no event later than 10 days thereafter, ATI and USW each shall execute the ATI
Stock Disposition Trust Agreement in the form attached hereto as Exhibit A (the
"Trust Agreement"). The parties agree that USW shall have the right to designate
the Trustee, who must be reasonably acceptable to ATI, and USW shall be
responsible for causing the Trustee to execute the Trust Agreement.
1.5. Initial Exchange Procedure. Promptly after execution of the Trust
Agreement, USW shall deliver to ATI a written notice ("Initial Exchange Notice")
specifying (a) the number of shares of ATI Common Stock to be deposited with the
Trustee upon the initial Exchange, which shall not be less than twenty percent
(20%) of the Total Exchange Shares; (b) the percentage of the WMC Interest being
exchanged in such Exchange, which shall be equal to the percentage that the
shares to be deposited with the Trustee pursuant to the Initial Exchange Notice,
together with the excess of the Final Number of ATI Shares over the number of
Total Exchange Shares, bears to the Final Number of ATI Shares; and (c) the
closing date of such Exchange, which closing date shall be at least 10 but not
more than 30 business days after the date of the Initial Exchange Notice.
Subject to Section 4.4 hereof, the Closing Date of the Initial Exchange, and
subsequent closing dates hereunder, may be extended if necessary to obtain
necessary regulatory and governmental approvals.
1.6. Subsequent Exchanges. After the closing of the initial Exchange
hereunder, USW may, from time to time, until the third anniversary of the
Initial Exchange Notice, deliver to ATI written notices (each a "Subsequent
Exchange Notice") specifying (a) the number of additional shares of ATI Common
Stock to be deposited with the Trustee upon the next subsequent Exchange, which
in each case shall not be less than twenty percent (20%) of the Total Exchange
Shares; (b) the percentage of the WMC Interest being exchanged in such Exchange,
which shall be equal to the percentage of the Total Exchange Shares to be
deposited with the Trustee pursuant to such Subsequent Exchange Notice; and (c)
the closing date of such Exchange, which closing date shall be at least 10 but
not more than 30 business days after the date of such Subsequent Exchange
Notice.
1.7. Closing. The closing of an Exchange hereunder (a "Closing") shall
take place at such time and place as the parties may agree and on the
-4-
<PAGE> 5
date specified in the Initial Exchange Notice or Subsequent Exchange Notice, as
the case may be, or at such other time, date or place as may be agreed to by the
parties. The date and time at which a Closing hereunder occurs is referred to as
the "Closing Date." At each Closing, USW shall cause to be assigned to ATI all
right, title and interest in and to the WMC Interest being exchanged at such
Closing, free and clear of any Liens (as hereinafter defined), and ATI (a) shall
deliver to the Trustee to be held in trust as contemplated by the Trust
Agreement a certificate or certificates representing the shares of ATI Common
Stock to be issued in exchange for the WMC Interest being transferred to ATI,
and (b) if the Exchange is the initial Exchange and cash is payable by ATI
pursuant to Section 1.3(h)(ii) above, ATI shall cause such amount of cash to be
deposited by wire transfer of next day funds in such account(s) as USW shall
specify in writing no fewer than three (3) business days prior to the Closing
Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of ATI. ATI hereby represents and
warrants to USW as follows:
(a) Organization and Qualification. It is a corporation duly organized
and existing in good standing under the laws of the State of Delaware and has
the corporate power to own its properties and to carry on its business as now
being conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies and
(ii) the remedies of specific performance and injunctive relief may be subject
to general principles of equity.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by it of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any of its properties or assets
pursuant to any agreement, indenture or instrument to which it is a party or by
which any of its properties or assets are bound or affected, or result in a
violation of its certificate of incorporation or by-laws or any law, rule,
regulation, order, judgment or decree applicable to it or by which any of its
properties or assets is bound or affected. No consent, authorization or order
of, or filing or registration with, any court or governmental agency is required
for the execution, delivery and performance by it of this Agreement, except to
the extent of (i) any applicable requirements under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) any consent
or approval of the FCC or any other federal or state governmental agency the
necessity of which arises solely out of WMC's licenses or operations, (iii) any
filings required under the Exchange Act, or (iv) any filings expressly
contemplated hereby.
(d) Authorization of ATI Common Stock. ATI has taken all necessary
action to permit it to issue the Total Exchange Shares. Shares of ATI Common
Stock will, when issued, be validly issued, fully paid and nonassessable, and no
Person will have any preemptive right of subscription to purchase any of such
shares of ATI Common Stock.
-5-
<PAGE> 6
2.2. Representations and Warranties of USW. USW hereby represents and
warrants to ATI as follows:
(a) Organization and Qualification. It is, and each subsidiary thereof
that holds the WMC Interest (a "USW HoldSub") will be at the time of each
Closing, a corporation duly organized and existing in good standing under the
laws of the state of its incorporation and it has, and each USW HoldSub at the
time of each Closing will have, the corporate power to own its properties and to
carry on its business as now being conducted.
(b) Authorization; Enforcement. It has full legal right, power and
authority to enter into and perform this Agreement; the execution and delivery
of this Agreement by USW and the consummation by it of the transactions
contemplated hereby have been duly authorized by it; this Agreement has been
duly executed and delivered by it and this Agreement constitutes its valid and
binding obligation enforceable against it in accordance with its terms, except
that (i) such enforcement is subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies and
(ii) the remedies of specific performance and injunctive relief may be subject
to general principles of equity. At the time of each Closing, each USW HoldSub
will have duly authorized the transactions contemplated hereby to the extent
required and will have full legal right, power and authority to perform this
Agreement.
(c) No Conflicts. The execution, delivery and performance of this
Agreement by it and the consummation by each of USW and, to the extent required,
the consummation by each USW HoldSub, of the transactions contemplated hereby
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any properties or assets of any
of them pursuant to any agreement, indenture or instrument to which any of them
is a party or by which the properties or assets of any of them are bound or
affected, or result in a violation of the certificate of incorporation or
by-laws of any of them or any law, rule, regulation, order, judgment or decree
applicable to any of them or by which any of the properties or assets of any of
them is bound or affected. No consent, authorization or order of, or filing or
registration with, any court or governmental agency is required for the
execution, delivery and performance by each of USW and, to the extent required,
by each USW HoldSub of this Agreement, except to the extent of (i) any
applicable requirements under the HSR Act, (ii) any consent or approval of the
FCC or any other federal or state governmental agency the necessity of which
arises solely out of WMC's licenses or operations, (iii) any filings required
under the Exchange Act, or (iv) any filings expressly contemplated hereby.
(d) Title. At each Closing, USW will be the sole record and beneficial
owner of all of the capital stock of each USW HoldSub, free and clear of all
liens, adverse claims, pledges, security interests, options, liabilities or
other contractual, legal or equitable rights or encumbrances (collectively,
"Liens"). Each USW HoldSub is, and at such Closing will be, the sole legal and
beneficial owner of the WMC Interest being exchanged, free and clear of all
Liens; and immediately after the Closing, ATI will be the owner of all the
right, title and interest of USW and each USW HoldSub in and to the WMC Interest
being exchanged, free and clear of any Liens.
(e) MFJ. USW represents that neither the consummation of any Exchange
contemplated herein nor the deposit of ATI Common Stock into the Trust on the
terms and conditions set forth therein shall subject ATI to any restrictions
under the MFJ.
-6-
<PAGE> 7
ARTICLE III
COVENANTS
3.1. Covenants of ATI. During the period from the date of this
Agreement to the final Closing, except as specifically contemplated by this
Agreement or as otherwise approved in writing by USW, which approval shall not
be unreasonably withheld:
(a) Designation and Reservation of Shares. ATI will reserve and keep
available out of its authorized but unissued shares of capital stock the full
number of Total Exchange Shares.
(b) No Inconsistent Agreements. ATI shall not, and shall not permit its
Affiliates to, take any action or enter into any agreement inconsistent with the
rights granted to USW hereunder or which could adversely affect the ability of
USW and ATI to consummate the Exchanges as contemplated hereby, including,
without limitation, entering into any loan agreement or other arrangement
containing terms or conditions which would limit or prohibit the consummation of
the Exchanges.
3.2. Covenants of USW. During the period from the date of this
Agreement to the final Closing, except as specifically contemplated by this
Agreement or as otherwise approved in writing by ATI, which approval shall not
be unreasonably withheld:
(a) No Inconsistent Agreements. USW shall not, and shall not permit its
Affiliates to, take any action or enter into any agreement inconsistent with the
rights granted to the ATI hereunder or which could adversely affect the ability
of ATI and USW or any USW HoldSub to consummate the Exchanges as contemplated
hereunder, including, without limitation, entering into any loan agreement or
other arrangement containing terms or conditions which would limit or prohibit
the consummation of the Exchanges.
(b) Transfer of USW Interest Prohibited. Subject to Section 4.4, from
and after the Notice Date, USW shall not, and shall not permit its subsidiaries
to, and its subsidiaries shall not, sell, pledge, transfer or otherwise dispose
of the WMC Interest or any interest therein, including through the creation of
any Lien thereon.
3.3. Further Assurances; Cooperation. (a) Each of the parties hereto
shall perform its obligations under this Agreement and take or cause to be taken
and do or cause to be done all things necessary, proper or advisable under
applicable law to obtain all necessary regulatory approvals and waivers and all
other necessary consents and satisfy all conditions to the obligations of the
parties under this Agreement and shall cooperate fully with one another and
their respective officers, directors, employees, agents, counsel, accountants
and other representatives in connection with any steps required to be taken as a
part of their respective obligations under this Agreement; and upon the
execution of this Agreement and thereafter, each party shall do such things as
reasonably may be requested by the other parties hereto in order more
effectively to consummate the Exchanges (including, but not limited to, promptly
delivering to the other information necessary to prepare and pursue all
necessary regulatory filings, approvals and waivers).
(b) In the event that a change in the structure of the Exchange would
be necessary or desirable to accomplish a more tax-efficient transaction, USW
and ATI shall take all reasonable steps necessary to accommodate such change to
the extent it would not adversely affect the parties' rights or obligations
under the terms of this Agreement; provided that in any such event ATI and USW
shall negotiate in good faith to appropriately compensate the other to the
extent adversely affected by such change.
-7-
<PAGE> 8
3.4. Provision in Case of Consolidation or Merger of ATI. In the event
that ATI shall enter into an agreement of merger, consolidation or other
business combination with any Person ("Acquiring Corporation") which has a class
of equity securities having substantially the same rights as ATI Common Stock
(including but not limited to voting, dividend, liquidation, and redemption
rights) ("Acquiror Common Stock"), and in connection with such agreement (i) the
Acquiring Corporation shall acquire at least 85% of the Voting Power Outstanding
or ATI Common Stock will no longer be registered with the Securities and
Exchange Commission pursuant to section 12(b) or 12(g) of the Exchange Act or
(ii) the Acquiring Corporation shall acquire assets satisfying the requirements
of clauses (A), (B) and (C) of clause (ii) of the definition of Change of
Control contained in the Amended and Restated Investment Agreement between the
parties dated the date hereof, and a majority of the value of the consideration
to be received by ATI in exchange therefor shall not consist of assets (or
interests in assets) of a like kind or nature, then ATI shall cause such
agreement to provide that upon consummation of such consolidation, merger or
other business combination this Agreement shall be deemed to be modified and
amended to provide that USW shall receive Acquiror Common Stock rather than ATI
Common Stock in any Exchange. Accordingly, from and after such consummation
references herein to ATI Common Stock shall be deemed to be references to
Acquiror Common Stock (including for purposes of Section 6.1(a)). If any such
consolidation, merger or other business combination shall be consummated after
the Notice Date and prior to any Closing, such Closing shall be delayed for an
appropriate period to determine under Section 1.3 the number of shares of
Acquiror Common Stock to be issued in connection with the related Exchange and
to satisfy all conditions to such Exchange. ATI shall not enter into any such
consolidation, merger or other business combination unless the Acquiring
Corporation assumes in writing all the obligations of ATI hereunder. The
provisions of this Section 3.4 shall apply to successive consolidations, mergers
or other business combinations.
3.5. Contributions, Distributions and Dividends After the Notice Date.
ATI agrees to compensate USW at each Closing for (i) any dividends (other than
those for which adjustments have been made pursuant to Section 1.3(i)) that
would have been received prior to the appropriate Closing Date by USW in respect
of that portion of the Aggregate Consideration to be received at such Closing
(assuming, for the initial Closing, that the Aggregate Consideration to be
received includes a number of shares equal to the excess of the Final Number of
ATI Shares over the number of Total Exchange Shares, rather than cash
consideration therefor) had such portion of the Aggregate Consideration been
issued to USW on or prior to the first record date therefor announced by ATI
subsequent to the Notice Date, and (ii) any capital contributions to WMC made by
USW or its Affiliates with respect to the WMC Interest during the period after
the Notice Date and prior to such Closing. USW agrees to make, or to cause to be
made, all capital contributions due after the Notice Date and prior to the final
Closing to the extent any such capital contribution, if not made, would
constitute a Defaulted Contribution (as defined in the WMC Partnership
Agreement). USW agrees to compensate ATI at each Closing for any distributions
received by USW or its Affiliates with respect to the WMC Interest to be
exchanged at such Closing during the period after the Notice Date and prior to
such Closing.
3.6. Occurrence of the Exchange Prior to Final MFJ Relief. If any
Closing shall occur prior to the date on which Final MFJ Relief first occurs,
the parties agree that: (i) ATI shall not be obligated to take any action or
forgo any business opportunity in order to accommodate USW's election to cause
the Exchange to occur prior to the date on which Final MFJ Relief first occurs,
(ii) ATI shall not be obligated to take any action or forgo any business
opportunity in order to enable USW to maintain beneficial ownership of any
capital stock of ATI and (iii) if (A) an activity or proposed activity in which
ATI or an Affiliate is or would be engaged, or a transaction or proposed
transaction to which ATI or an Affiliate is or would be a party, is not or would
not be, or is perceived by any regulatory
-8-
<PAGE> 9
authority not to be, in compliance with the MFJ, and (B) the indemnification of
ATI by USW pursuant to Section 5.3 is unavailable or inadequate, then USW shall
take all actions necessary in order to avoid or correct such noncompliance and
to allow ATI at all times to operate its business free of any and all MFJ
restrictions.
ARTICLE IV
CONDITIONS TO CLOSING OF THE EXCHANGES
4.1. Conditions to Each Party's Obligation to Effect Exchanges. The
obligations of the parties hereto to consummate each Exchange are subject to the
satisfaction or waiver, at or before each Closing, of each of the following
conditions:
(a) No Prohibition. The consummation of the Exchange shall not be
prohibited by any order, decree or injunction of a court of competent
jurisdiction (each party agreeing to use reasonable efforts to have any such
order reversed or injunction lifted), and there shall not have been any action
taken or any statute, rule or regulation enacted, promulgated or deemed
applicable to the Exchange by any Governmental Entity that makes consummation of
the Exchange illegal.
(b) Authorizations. All required authorizations, orders, grants,
consents, permissions, approvals and waivers of any governmental entity with
jurisdiction over the Exchange (including all filings under the HSR Act and the
expiration of all waiting periods thereunder) shall have been received and shall
remain in effect, other than authorizations, orders, grants, consents,
permissions and approvals the failure of which to receive would not, singly or
in the aggregate, have a material adverse effect on the business condition of
USW or ATI.
4.2. Conditions to Obligations of ATI. The obligations of ATI to effect
each Exchange are subject to the satisfaction or waiver, at or before each
Closing, of each of the following conditions, except to the extent that any
failure of any such condition results in damage to ATI that is fully compensable
by monetary damages:
(a) Representations and Warranties. The representations and warranties
of USW set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the date of
each Closing as though made on and as of the date of such Closing.
(b) Performance of Obligations of USW. USW shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to such Closing.
(c) Nature of Acquisition. USW shall have provided ATI with an
undertaking to the effect that USW is acquiring the shares of ATI Common Stock
and ATI Preferred Stock, if any, hereunder for its own account, for investment
and not with a view to the resale or distribution thereof, except in compliance
with the Securities Act of 1933, as amended.
4.3. Conditions to Obligations of USW. The obligations of USW to effect
the Exchange are subject to the satisfaction or waiver, at or before each
Closing, of each of the following conditions, except to the extent that the
failure of any such condition results in damage to USW that is fully compensable
by monetary damages:
(a) Representations and Warranties. The representations and warranties
of ATI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as
-9-
<PAGE> 10
of the date of each Closing as though made on and as of the date of such
Closing.
(b) Performance of Obligations of ATI. ATI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to such Closing.
4.4. Abandonment of Exchange. If the Closing of the initial Exchange
has not occurred within two years after the Notice Date, either ATI or USW may
elect, subject to the following sentence, by written notice to the other, to
abandon the pending Exchange, in which event this Agreement shall be operative
thereafter as if the notice delivered pursuant to Section 1.2 never had been
delivered; provided, however, that in the event the Expiration Date shall have
occurred within the foregoing two-year period, such two-year period may be
extended, subject to the following sentence, at the option of either party, by
written notice to the other delivered prior to the expiration of such two-year
period, for one additional year. Notwithstanding the foregoing, the right to
abandon the Exchange, or to extend the two-year period for one additional year,
pursuant to this Section 4.4 shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or results
in, the failure of the Closing to have occurred within such period.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification by ATI. ATI shall defend, indemnify, and hold
harmless USW and each of USW's subsidiaries, shareholders, affiliates, officers,
directors, employees, agents, successors, and assigns (collectively "USW's
Indemnified Persons") and shall reimburse USW's Indemnified Persons for, from,
and against each and every demand, claim, loss, liability, judgment, damage,
cost and expenses of attorneys, accountants, and other professional advisors
(collectively, "Losses") imposed on or incurred by USW's Indemnified Persons,
directly or indirectly (including, without limitation, diminution in value of an
equity interest), relating to, resulting from or arising out of any inaccuracy
in any representation or warranty of ATI herein or in the Trust Agreement in any
respect, whether or not USW's Indemnified Persons relied thereon, or any breach
or nonfulfillment of any covenant, agreement or other obligation of ATI under
this Agreement or any certificate or other document delivered or to be delivered
pursuant hereto.
5.2. Indemnification by USW. USW shall defend, indemnify, and hold
harmless ATI and each of ATI's subsidiaries, shareholders, affiliates, officers,
directors, employees, agents, successors and assigns (collectively, ATI's
Indemnified Persons") and shall reimburse ATI's Indemnified Persons for, from,
and against all Losses imposed on or incurred by ATI's Indemnified Persons,
directly or indirectly (including without limitation diminution in value of an
equity interest), relating to, resulting from or arising out of any inaccuracy
in any representation or warranty of USW herein in any respect, whether or not
ATI's Indemnified Persons relied thereon, or any breach or nonfulfillment of any
covenant, agreement or other obligation of USW under this Agreement or any
certificate or other document delivered or to be delivered pursuant thereto.
5.3. MFJ Indemnification. USW shall indemnify and hold ATI and its
Affiliates harmless against all Losses related to the absence of Final MFJ
Relief or any claim that ATI is subject to the MFJ as a result of the
transactions contemplated by this Agreement and the Trust Agreement.
-10-
<PAGE> 11
ARTICLE VI
MISCELLANEOUS
6.1. Definitions. For purposes of this Agreement, the following terms
have the following meanings:
(a) "ATI Common Stock" means shares of the class designated as
Common Stock of ATI at the date of this Agreement or shares of any
class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of ATI and which are
not subject to redemption by ATI; provided that if at any time there
shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which
the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
(b) "Expiration Date" means July 25, 2009, unless subsequent
to the date hereof ATI shall have entered into an agreement, or an
amendment of existing agreement, with CCI that would extend the time
that any interest in or assets of New Par could be contributed to WMC,
in which case it shall be July 25, 2010.
(c) "Fair Public Market Value Per Share" shall mean, with
respect to a share of ATI Common Stock, as follows: (i) if the ATI
Common Stock is traded on a securities exchange, then the average of
the last reported sale price therefor on the principal such exchange,
and (ii) if the ATI Common Stock is actively traded in the
over-the-counter market, the average of the last reported sale price
(or, if not available, the average of the closing bid and ask price),
in either case during the twenty trading day period commencing thirty
trading days prior to the earlier of (X) the Notice Date or (Y) the
date of first public disclosure by USW, whether by way of Schedule 13D
(or amendment thereto), or otherwise, of its intent to exchange its WMC
Interest pursuant to this Agreement.
(d) "Final MFJ Relief" shall mean that the MFJ has been
vacated or is otherwise no longer enforceable or in effect as a result
of federal agency action, legislation or final court order and that
none of the equal access requirements (as defined under Section II (A)
of the MFJ), the nondiscrimination requirements (as defined under
Section II (B) of the MFJ) and the line of business restrictions (as
defined in Section II (D) of the MFJ) on the Bell Operating Companies
(as defined in the MFJ) has been imposed or extended by legislation,
final agency action or final court order; provided, however, that Final
MFJ Relief shall be deemed to have occurred even though equal access or
nondiscrimination requirements remain, in the event that such
requirements are imposed equally on the wireless operations of all
telecommunications carriers by legislation, final court order or final
agency action.
(e) "Private Market Value of the WMC Interest" is defined as
the price, as of the Notice Date, at which a willing seller would sell,
and a willing buyer would buy, each being apprised of all relevant
facts, including the tax effects of the Exchange on the buyer and
seller, and neither acting under compulsion, the WMC Interest in an
arm's-length negotiation without time constraints, with such price
adjusted to include (to the extent
-11-
<PAGE> 12
not previously included) a pro rata share of any control premium
inherent in a sale of WMC as a whole.
(f) "Voting Power Outstanding" means the aggregate number of
votes which may be cast by holders of those securities outstanding
which entitle the holders thereof to vote generally on all matters
submitted to ATI's shareholders for a vote.
All capitalized terms in this Agreement which are not defined herein
shall have the meanings set forth in the WMC Partnership Agreement as in effect
on the date hereof.
6.2. Termination. This Agreement shall automatically terminate (whether
or not a notice has previously been delivered pursuant to Section 1.2 hereof) at
such time as neither USW nor any of its Wholly Owned Subsidiaries holds any WMC
interest. Subject to Section 3.4, upon the consummation of any transaction which
results in ATI no longer having a class of equity securities registered with the
Securities and Exchange Commission pursuant to Section 12(b) or 12(g) of the
Exchange Act having substantially the same rights as the ATI Common Stock, USW
shall not have the right to deliver a notice pursuant to Section 1.2 hereof
until such further time as ATI again shall have a class of equity securities
registered with the Securities and Exchange Commission pursuant to Section 12(b)
or 12(g) of the Exchange Act having substantially the same rights as the ATI
Common Stock, and any Exchange as to which the Closing has not yet occurred
shall be abandoned and this Agreement shall be operative thereafter as if the
notice delivered pursuant to Section 1.2 never had been delivered. The
termination of this Agreement shall not relieve any party from liability for any
breach hereof.
6.3. Severability. If any term, provision, covenant or restriction of
this Agreement is determined to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect, unless such action would substantially impair
the benefits to either party of the remaining provisions of this Agreement.
6.4. Specific Enforcement. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this being in addition to any other remedy to
which they may be entitled by law or equity.
6.5. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither ATI nor USW makes any
representation, warranty, covenant or undertaking with respect to such matters.
This Agreement amends and restates in its entirety that certain Trust Agreement
of Exchange, dated as of July 25, 1994, between ATI's predecessor, AirTouch
Communications, a California corporation, and USW. This Agreement may be amended
only by a writing executed by the parties hereto. The parties hereto may amend
this Agreement without notice to or the consent of any third party.
6.6. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) when
personally delivered or transmitted by telecopier on a business day during
normal business hours where such notice is to be received at the address or
number designated below or (b) on the business day following the date of mailing
by overnight courier, fully prepaid, addressed to such address, whichever shall
first occur. The addresses for such communications shall be:
-12-
<PAGE> 13
If to ATI:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Margaret G. Gill
Senior Vice President-Legal,
External Affairs and Secretary
Telecopier: (415) 658-2298
With a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopier: (415) 983-1200
If to USW:
U S West, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: President
Telecopier: (303) 793-6294
With a copy to:
U S West, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: General Counsel
Telecopier: (303) 793-6294
Any party may change its address for notices under this Section 6.6 by giving at
least 10 days' prior notice of such changed address to the other party hereto.
6.7. Legends. All certificates evidencing shares of ATI Common Stock
and ATI Preferred Stock, if any, acquired by USW directly or indirectly
pursuant to this Agreement shall be endorsed with the legends set forth
below:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
AMENDED AND RESTATED INVESTMENT AGREEMENT (INCLUDING THE RESTRICTIONS
ON TRANSFER SET FORTH THEREIN), DATED AS OF SEPTEMBER 30, 1995, BETWEEN
THE COMPANY AND USW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
ALIENATED EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY.
6.8. Removal of Legends. Any legend endorsed on a certificate pursuant
to Section 6.7 shall be removed (i) with respect to the first
-13-
<PAGE> 14
legend set forth under Section 6.7, (A) if the securities represented by such
certificate shall have been effectively registered under the Securities Act or
otherwise lawfully sold in a public transaction, or (B) if the holder of such
securities shall have provided ATI with an opinion of counsel, in form and
substance acceptable to ATI and its counsel stating that a sale, transfer or
assignment of the securities may be made without registration under the
Securities Act of 1993, as amended, and (ii), with respect to the second legend
set forth under Section 6.7, if the securities represented by such certificate
shall have been effectively transferred in compliance with clause (ii), (iii) or
(iv) of the second sentence of Section 5.3(a) of the Amended and Restated
Investment Agreement dated as of September 30, 1995 between ATI and USW (the
"Investment Agreement") or all the obligations of USW under Articles V and VIII
of the Investment Agreement have terminated, or a Change of Control of ATI has
occurred.
6.9. Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement of this Agreement; nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
6.10. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
6.11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and legal
representatives. Neither ATI nor USW shall assign this Agreement or any rights
hereunder without the prior written consent of the other (which consent may be
withheld for any reason in the sole discretion of the party from whom consent is
sought); provided, however, that ATI may assign its rights and delegate its
obligations under this Agreement to any corporation which becomes the owner of
all of the outstanding Voting Securities in connection with the currently
proposed reincorporation of ATI and which agrees in writing to be bound by the
terms of this Agreement and thereafter all references to ATI hereunder shall
become references to such assignee; and provided further that USW may assign its
rights (but not its obligations) under this Agreement to a Wholly Owned
Subsidiary that is the direct beneficial owner of the WMC Interest.
6.12. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision of this
Agreement be enforced by, any other person.
6.13. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
6.14. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts shall together constitute one and the
same instrument.
6.15. Arbitration. The parties agree to submit to arbitration their
disputes described in the Arbitration Agreement dated the date hereof between
ATI and USW.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
U S WEST, INC.
By
----------------------------
Name:
Title:
AIRTOUCH COMMUNICATIONS, INC.
By
----------------------------
Name:
Title:
<PAGE> 16
EXHIBIT A
Form Of
ATI STOCK DISPOSITION TRUST AGREEMENT
by and among
U S WEST, INC.,
GRANTOR,
[TRUSTEE],
TRUSTEE,
and
AIRTOUCH COMMUNICATIONS, INC.
[Date]
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Representations and Warranties of Grantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Representations and Warranties of ATI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Representations and Warranties of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
FORMATION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Formation and Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Appointment of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 No Additional Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 Title to Trust Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Instruments of Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4
POWERS OF THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Specific Powers and Responsibilities of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Authority and Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Resignation of Trustee; Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 5
TRUST ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Interim Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 6
STANDSTILL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 7
VOTING RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Power To Vote the Trust Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 8
TRANSFERS; TENDER OFFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Tender or Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
- i -
<PAGE> 18
<TABLE>
<S> <C>
ARTICLE 9
REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.1 Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.2 ATI Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.4 Conditions to Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.5 Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6 Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.7 Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.8 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.9 Certain Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 10
RIGHTS OF FIRST OFFER AND FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Notice of Intent to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 11
EXPIRATION OF CERTAIN RESTRICTIONS;
TERMINATION OF TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Expiration of Certain Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 12
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.1 Indemnification of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Procedures Relating to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 13
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.1 Legend; Removal of Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.6 Entire Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
- ii -
<PAGE> 19
Form Of
ATI STOCK DISPOSITION TRUST AGREEMENT
This ATI Stock Disposition Trust Agreement (this "Trust
Agreement"), dated as of _____________, by and among U S WEST, INC., a Colorado
corporation ("Grantor"); [Trustee], as Trustee; and AIRTOUCH COMMUNICATIONS,
INC., a Delaware corporation ("ATI").
WITNESSETH:
WHEREAS, pursuant to that certain Amended and Restated Trust
Agreement of Exchange, by and between Grantor and ATI dated as of September 30,
1995 (the "Trust Exchange Agreement"), Grantor has the right under certain
circumstances to acquire shares of the common stock of ATI in exchange for
certain interests owned by Grantor in WMC Partners, L.P., a Delaware limited
partnership ("WMC"); and
WHEREAS, the Total Exchange Shares (as defined in the Trust
Exchange Agreement) that Grantor is entitled to receive pursuant to Section 1.3
of the Trust Exchange Agreement has been determined to be _______ shares of the
common stock of ATI (the "Aggregate Trust Exchange Shares"); and
WHEREAS, Grantor is subject to the prohibitions of the MFJ (as
hereinafter defined), and ATI may be involved in activities forbidden to
Grantor under the MFJ; and
WHEREAS, in order to ensure that it does not become involved
indirectly in activities forbidden to Grantor under the MFJ through an
"affiliated enterprise" by virtue of its receipt or disposition of shares of
the common stock of ATI, and for other reasons, Grantor desires to utilize a
trust structure pursuant to which all or a portion of the Total Exchange Shares
will be held by a trustee for the purpose of disposing of such shares for the
benefit of Grantor; and
WHEREAS, Grantor desires to appoint [Trustee] as Trustee under
this Trust Agreement, and Trustee is willing to accept such appointment on the
terms and conditions set forth in this Trust Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
<PAGE> 20
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. The following terms shall have the meanings set
forth herein:
"Affiliate" has the meaning specified in Rule 12b-2 under the
Exchange Act, as such Rule was in effect on September 30, 1995.
"ATI" means AirTouch Communications, Inc., a Delaware
corporation, or its successor.
"ATI Common Stock" means shares of the class designated as
Common Stock of ATI on and as of July 25, 1994, or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
ATI and which are not subject to redemption by ATI; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"Authorization" means any authorization, order, grant,
consent, approval, permission or waiver required to be obtained from any
Governmental Body for the consummation of a specified transaction or for the
performance of any obligation under this Trust Agreement, including without
limitation any final order of any Governmental Body or the expiration of any
waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Beneficial Ownership" shall have the meaning specified in
Rule 13d-3 under the Exchange Act, as such rule was in effect on September 30,
1995.
"Change of Control" means (a) any transaction or series of
transactions (as a result of a tender offer, merger, consolidation or
otherwise) that results in any Person, including a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) that includes such Person, acquiring
Beneficial Ownership, directly or indirectly, of 50% or more of the aggregate
voting power of the Voting Securities of ATI or Grantor, as the case may be;
(b) any transaction or series of related transactions that
- 2 -
<PAGE> 21
results in the transfer, sale or other disposition by ATI or Grantor, as the
case may be, of assets (i) that represent more than 80% of the total fair
market value of its assets on a proportionate basis immediately prior to such
disposition, (ii) that generated more than 80% of its total operating revenues
on a proportionate basis in the preceding fiscal year and (iii) that generated
more than 80% of its total net income from operations on a proportionate basis
during the preceding fiscal year; provided, however, that any such transaction
or series of related transactions shall not be deemed to be a Change of Control
if a majority of the value of the consideration received in exchange for the
assets transferred, sold or otherwise disposed of consists of assets (or
interests in assets) of a like kind or nature; or (c) when individuals who at
the beginning of any period of two consecutive calendar years constituted the
Board of Directors (together with any new directors whose election to the Board
of Directors or whose nomination for election was approved by a vote of at
least two-thirds of the members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor thereto, and references to sections of the Code shall be
deemed to include references to successor provisions of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time (unless
otherwise specified).
"Governmental Body" means any federal, state, municipal,
political subdivision or other governmental department, commission, board,
bureau, agency or instrumentality.
"Grantor" means U S WEST, Inc., a Colorado corporation.
"Investment Agreement" means that certain Amended and Restated
Investment Agreement by and between ATI and Grantor, dated as of September 30,
1995.
"MFJ" means the Modification of Final Judgment entered in
United States v. AT&T, 552 F. Supp. 131 (D.D.C.), on or about August 24, 1982,
as subsequently modified from time to time, or any legislative scheme embodying
substantially similar restrictions.
- 3 -
<PAGE> 22
"Organization Agreement" means that certain Amended and
Restated Joint Venture Organization Agreement by and between ATI and Grantor,
dated as of September 30, 1995. "Other Shares" has the meaning set forth in
Section 9.2(c) hereof.
"Person" means any individual, partnership, corporation,
trust, unincorporated organization or other entity, or a government or agency
or political subdivision thereof.
"Registrable Shares" has the meaning set forth in Section 9.1
hereof.
"Registration Statement" has the meaning set forth in Section
9.1 hereof.
"Rights Agreement" means that certain Rights Agreement between
ATI and the Bank of New York, as Rights Agent, dated as of September 19, 1994,
as it may be amended from time to time, or any successor agreement or any
similar type of agreement entered into by a permitted assignee and delegatee of
ATI's rights and obligations pursuant to Section 10.8 of the Investment
Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations thereunder, all
as the same shall be in effect from time to time (unless otherwise specified).
"Treasury Regulations" means regulations promulgated under the
Code, and references to sections of the Treasury Regulations shall be deemed to
include references to successor provisions of the Treasury Regulations.
"Trust" means the trust created and governed by this Trust
Agreement.
"Trust Property" has the meaning set forth in Section 3.6
hereof.
"Trust Shares" means the shares of ATI Common Stock delivered
by ATI to the Trustee and deposited in Trust for the benefit of Grantor from
time to time in accordance with the terms and conditions of this Trust
Agreement and the Trust Exchange Agreement.
"Trustee" means _________ and any successor Trustee, if
applicable, appointed pursuant to Section 4.4 hereof.
- 4 -
<PAGE> 23
"Unapproved Offer" has the meaning set forth in Section 8.2(b)
hereof.
"Voting Securities" means any securities of ATI (unless the
context specifically contemplates another issuer) having the ordinary power to
vote, in the absence of contingencies, in the election of directors of ATI.
"WMC Partnership Agreement" means that certain Amended and
Restated Agreement of Limited Partnership of WMC Partners, L.P., dated as of
September 30, 1995.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF GRANTOR. Grantor hereby
represents and warrants to the Trustee and ATI as follows, and acknowledges
that the Trustee and ATI are relying on such representations and warranties in
entering into this Trust Agreement and the transactions contemplated hereby:
(a) It is a corporation duly organized, validly existing,
and in good standing under the laws of its state of incorporation, and has the
corporate power and authority to enter into and carry out the terms of this
Trust Agreement.
(b) The execution and delivery of this Trust Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its behalf and, except as
otherwise expressly set forth herein, it is not subject to any agreement,
instrument, order or decree of any court or Governmental Body that would
prevent consummation of the transactions contemplated hereby.
(c) All Authorizations required for Grantor to execute
this Trust Agreement have been obtained and all Authorizations required for
Grantor to consummate the transactions as contemplated by this Trust Agreement
will have been obtained prior to such consummation.
(d) This Trust Agreement has been duly executed and
delivered by, and constitutes a legal, valid, and binding obligation
enforceable against it in accordance with its terms, subject as to enforcement
to applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application, both at law and in equity, affecting the rights of
creditors generally. The execution and delivery by it of this
- 5 -
<PAGE> 24
Trust Agreement and any other agreements or instruments executed and delivered
pursuant hereto to which it is a party do not and will not contravene any
provisions of its charter documents.
(e) The Trust Shares, when delivered to the Trustee, will
not be subject to any outstanding options, rights, arrangements, understandings
or other agreements of any kind or character granted or entered into by Grantor
that would impose any liens, restrictions, equities, options or claims on the
Trust Shares.
2.2 REPRESENTATIONS AND WARRANTIES OF ATI. ATI hereby represents
and warrants to the Trustee and Grantor as follows, and acknowledges that the
Trustee and Grantor are relying on such representations and warranties in
entering into this Trust Agreement and the transactions contemplated hereby:
(a) It is a corporation duly organized, validly existing,
and in good standing under the laws of its state of incorporation, and has the
corporate power and authority to enter into and carry out those terms of this
Trust Agreement applicable to ATI.
(b) The execution and delivery of this Trust Agreement
and the consummation of the transactions hereunder involving ATI have been duly
authorized by all necessary corporate action on its behalf and, except as
otherwise expressly set forth herein, it is not subject to any agreement,
instrument, order or decree of any court or Governmental Body that would
prevent consummation of such transactions.
(c) All Authorizations required for ATI to execute this
Trust Agreement have been obtained and all Authorizations required for ATI to
consummate the transactions hereunder involving ATI will have been obtained
prior to such consummation.
(d) This Trust Agreement has been duly executed and
delivered by, and constitutes a legal, valid, and binding obligation
enforceable against it in accordance with its terms, subject as to enforcement
to applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application, both at law and in equity, affecting the rights of
creditors generally. The execution and delivery by it of this Trust Agreement
and any other agreements or instruments executed and delivered pursuant hereto
to which it is a party do not and will not contravene any provisions of its
charter documents.
(e) The Trust Shares, when delivered to the Trustee, will
be duly authorized, validly issued, fully paid and non-
- 6 -
<PAGE> 25
assessable shares of ATI Common Stock. ATI has full corporate authority to
transfer, convey and deliver the Trust Shares free and clear of all liens,
restrictions, equities, options and claims.
(f) The Trustee is not an "Acquiring Person" in
connection with its becoming "Beneficial Owner" of "Common Shares" (as such
terms are defined in the Rights Agreement) pursuant to this Trust Agreement.
ATI has furnished to the Trustee and the Grantor a true and correct copy of the
Rights Agreement.
2.3 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee
hereby represents and warrants to Grantor and ATI as follows, and acknowledges
that Grantor and ATI are relying on such representations and warranties in
entering into this Trust Agreement and the transactions contemplated hereby:
(a) It is a corporation duly organized, validly existing,
and in good standing under the laws of its state of incorporation, and has the
corporate power and authority to enter into and carry out the terms of this
Trust Agreement.
(b) The execution and delivery of this Trust Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its behalf, and it is not
subject to any agreement, instrument, order or decree of any court or
Governmental Body that would prevent consummation of the transactions
contemplated hereby.
(c) All Authorizations required for the Trustee to
execute this Trust Agreement have been obtained and all Authorizations required
for Trustee to consummate the transactions contemplated by this Trust Agreement
will have been obtained prior to such consummation.
(d) This Trust Agreement has been duly executed and
delivered by, and constitutes a legal, valid, and binding obligation
enforceable against it in accordance with its terms, subject as to enforcement
to the applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application, both at law and in equity, affecting the rights of
creditors generally. The execution and delivery by it of this Trust Agreement
and any other agreements or instruments executed and delivered pursuant hereto
to which it is a party do not and will not contravene any provisions of its
charter documents.
- 7 -
<PAGE> 26
(e) Trustee has Beneficial Ownership of less than 1% of the
outstanding Voting Securities.
ARTICLE 3
FORMATION OF THE TRUST
3.1 FORMATION AND NAME. The Trust created hereby shall be known
as the "ATI Stock Disposition Trust," in which name the Trustee may conduct the
activities of the Trust, make and execute contracts and other instruments on
behalf of the Trust, and sue and be sued.
3.2 PURPOSE. The purpose of the Trust is to receive and hold the
Trust Shares and to dispose of the Trust Shares in orderly fashion as promptly
as reasonably prudent, consistent with the restrictions contained herein and in
applicable law and Grantor's interest in obtaining the best obtainable prices
for disposition of the Trust Shares. Pursuant to this express purpose, and
subject to the provisions of this Trust Agreement and to the restrictions set
forth in the Trust Exchange Agreement, the Trustee is hereby authorized and
directed to take all reasonable and necessary action to hold, conserve, and
protect the Trust Shares and to sell, or otherwise liquidate or dispose of the
Trust Shares, and to distribute the net proceeds of such disposition to Grantor
in a prompt, efficient and orderly fashion.
3.3 APPOINTMENT OF TRUSTEE. Grantor hereby appoints [Trustee] as
Trustee of the Trust, to have all the rights, powers, and duties set forth
herein, and Trustee accepts such appointment.
3.4 DECLARATION OF TRUST. Upon and subject to the conditions set
forth herein and in the Trust Exchange Agreement, ATI agrees to deliver from
time to time shares of ATI Common Stock to the Trustee, as directed from time
to time in writing by Grantor, to be held and administered and divested by the
Trustee IN TRUST upon and subject to the conditions set forth herein.
3.5 NO ADDITIONAL BENEFICIARIES. The Trust created by this Trust
Agreement shall be solely for the benefit of Grantor and its successors and
assigns.
3.6 TITLE TO TRUST PROPERTY. Title to all of the Trust Shares,
upon delivery by ATI, shall be vested in the Trustee, not in such Trustee's
individual capacity but solely as Trustee of the ATI Stock Disposition Trust
created by this Trust Agreement. The Trustee shall maintain the Trust Shares
and any dividends or
- 8 -
<PAGE> 27
other consideration received in respect thereof and proceeds obtained from the
disposition thereof (the "Trust Property") in a separate trust account, and
shall not commingle such Trust Property with other assets of, or maintained by,
the Trustee. Grantor shall not have title to any of the Trust Property.
3.7 INSTRUMENTS OF FURTHER ASSURANCE. Grantor and ATI, upon
reasonable request of the Trustee, shall execute, acknowledge, and deliver such
further instruments and do such further acts as may be necessary or proper to
carry out the purposes of this Trust Agreement, to transfer any property
intended to be conveyed hereby, and to vest in the Trustee, its successors and
assigns, the estate, powers, instruments or funds in trust hereunder.
ARTICLE 4
POWERS OF THE TRUSTEE
4.1 SPECIFIC POWERS AND RESPONSIBILITIES OF TRUSTEE. The Trustee
shall have the following specific powers and responsibilities in addition to
any powers and responsibilities conferred upon it by any other Section or
provision of this Trust Agreement; provided, however, that enumeration of the
following powers and responsibilities shall not be considered in any way to
limit or control the power of the Trustee to act as specifically authorized by
any other Section or provision of this Trust Agreement and to act in such a
manner as the Trustee in its discretion may deem necessary or appropriate to
conserve and protect the Trust Property:
(a) Subject to Articles 6 and 8 of this Trust Agreement,
cause the Trust Shares to be sold in orderly fashion as promptly as reasonably
prudent in such open market or in private transactions as the Trustee deems
appropriate in its sole and absolute discretion to obtain the best obtainable
prices, taking into account the amount of securities to be sold, current
trading prices, and other factors it deems relevant; provided, however, that
Trustee shall not cause any Trust Shares to be offered or sold unless such
offer or sale is registered or qualified under all applicable securities laws
or the Grantor or Trustee has delivered to ATI an opinion of counsel (such
counsel to be reasonably acceptable to ATI) that no such registration or
qualification is required in connection with such offer or sale.
(b) Collect and receive any and all money and other
property of whatsoever kind or nature due to or owing or belonging to the Trust
or payable in respect of the Trust Property;
- 9 -
<PAGE> 28
(c) Do and perform any acts or things necessary or
appropriate for the conservation and protection of the Trust Property,
including acts or things necessary or appropriate to maintain the Trust
Property pending sale or other disposition thereof, and in connection therewith
to employ such agents, including counsel, accountants, experts, advisors or
other Persons, and to confer upon them such authority as the Trustee in its
discretion may deem expedient, and to pay reasonable compensation therefor;
(d) Comply with all applicable laws and regulations;
(e) Perform any act authorized, permitted or required
under any instrument, contract, agreement or cause of action relating to or
forming a part of the Trust, whether in the nature of an approval, consent,
demand or notice thereunder or otherwise unless such act would require the
consent of Grantor in accordance with Section 4.4 of this Trust Agreement;
(f) File or cause to be filed all required federal,
state, and local tax filings, make any tax elections available to the Trust
under federal, state, or local law, and prepare applications for rulings or
other administrative determinations from federal, state, and local tax
authorities as may be reasonably necessary to determine the tax liabilities of
the Trust; and
(g) Prepare, or cause to be prepared, and deliver
promptly to Grantor a monthly accounting of expenses incurred, paid and
reimbursed out of Trust Property and all receipts and dispositions of Trust
Property.
4.2 AUTHORITY AND DUTIES OF TRUSTEE. (a) The Trustee accepts and
undertakes to discharge the Trust, upon the terms and conditions hereof. The
Trustee shall exercise such of the rights and powers vested in it by this Trust
Agreement, and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. No provision of this Trust Agreement shall be
construed to relieve the Trustee from liability for its grossly negligent
action, its own grossly negligent failure to act, or its own willful
misconduct; provided, however, that the Trustee shall not be liable (i) except
for the performance of such duties and obligations as are specifically set
forth in this Trust Agreement, and no implied covenants or obligations shall be
read into this Trust Agreement against the Trustee, or (ii) for any error of
judgment made in good faith.
- 10 -
<PAGE> 29
(b) The Trustee shall discharge (or cause to be
discharged) all of its responsibilities pursuant to the terms of this Trust
Agreement and shall administer the Trust in the interest of Grantor. The
Trustee shall not take any action that is inconsistent with the terms of this
Trust Agreement. The Trustee shall have the right, but not the duty, to employ
and consult with counsel of its own choice regarding its duties under this
Trust Agreement, and shall have full and complete authorization and protection
for any action taken by it hereunder in good faith and in accordance with the
opinion of such counsel. Any and all reasonable costs and expenses incurred by
Trustee by virtue of said employment and consultation shall be paid in
accordance with Section 4.3 of this Trust Agreement. The Trustee shall not be
required to take any action hereunder if the Trustee has reasonably determined,
or has been advised by counsel, that such action is likely to result in
liability on the part of the Trustee or is contrary to the terms of this Trust
Agreement or is contrary to law. The Trustee may act in reliance upon any
writing or instrument or signature which it, in good faith, believes to be
genuine, may assume the validity and accuracy of any statement or assertion
contained in such a writing or instrument and may assume that any Person
purporting to give any writing, notice, advice or instruction in connection
with the provisions hereof has been duly authorized to do so. The Trustee
shall not be liable in any manner for the sufficiency or correctness as to
form, manner, and execution, or validity of any instrument deposited in this
Trust, nor as to the identity, authority, or right of any Person executing the
same; and its duties hereunder shall be limited to the safekeeping of such
certificates, moneys, instruments, securities or other documents received by it
as the Trustee, and the administration and disposition of the same in
accordance with the terms of this Trust Agreement.
(c) The Trustee shall have a lien on the Trust Property
for the amount of any unpaid fees and expenses, and any liability, loss or
expense that may be incurred by the Trustee in connection with the performance
of its duties hereunder, including the expense of defending any action or
proceeding instituted against such Trustee with respect to which such Trustee
is entitled to indemnification pursuant to Section 11.1(a) of this Trust
Agreement.
(d) Persons dealing with the Trust shall look solely to
the Trust Property for the enforcement of any claims against the Trust or to
satisfy any liability incurred by the Trustee to such persons in carrying out
the terms of this Trust, and neither the Trustee nor Grantor shall have any
personal liability or individual obligation to satisfy any such liability.
- 11 -
<PAGE> 30
4.3 FEES AND EXPENSES. The Trustee shall receive as compensation
for its services hereunder such fees as have been separately agreed upon
between Grantor and the Trustee. The Trustee shall be entitled to be
reimbursed out of the Trust Property for the actual cost of goods, services,
and materials used for or by the Trust in accordance with this Trust Agreement
and for the administrative services necessary for the prudent operation of the
Trust and provided in accordance with this Trust Agreement; provided, however,
that the Trustee shall have no obligation to advance any funds or pay any
expenses of the Trust other than from the Trust Property.
4.4 RESIGNATION OF TRUSTEE; SUCCESSOR TRUSTEE. The Trustee may at
any time resign as Trustee and from its duties under this Trust Agreement by
giving at least sixty (60) days' prior written notice to Grantor and ATI, such
resignation to be effective on the acceptance of appointment by a successor
Trustee selected by Grantor and reasonably acceptable to ATI. In addition,
Grantor may at any time remove Trustee with or without cause by giving written
notice to Trustee and ATI, such removal to be effective upon the acceptance of
appointment by a successor Trustee selected by Grantor and reasonably
acceptable to ATI. If a successor Trustee shall not have been appointed within
sixty (60) days of written notice of resignation or removal, Trustee may apply
to any court of competent jurisdiction to appoint a successor Trustee to act
until such time, if any, as a successor shall have been selected and appointed
by Grantor. Any successor Trustee shall execute and deliver to the predecessor
Trustee an instrument accepting such appointment, a copy of which shall also be
delivered to Grantor and ATI, and thereupon such successor Trustee, without
further act, shall become bound by the terms of this Trust Agreement and be
vested with all the estates, properties, rights, powers, duties, and trusts of
the predecessor Trustee; and such predecessor Trustee shall duly assign,
transfer, deliver, and pay over to such successor Trustee all moneys and other
property then held by such predecessor Trustee under this Trust Agreement,
except that the Trustee may retain sufficient funds to pay itself for amounts
owed to it hereunder.
- 12 -
<PAGE> 31
ARTICLE 5
TRUST ADMINISTRATION
5.1 INTERIM DISTRIBUTIONS. (a) Distributions to be made by the
Trustee to Grantor shall be made only from the Trust Property. Grantor shall
look solely to the Trust Property for distributions as herein provided.
(b) Upon the disposition of any of the Trust Shares or
receipt or liquidation of any other Trust Property, the Trustee shall
distribute and pay, or cause to be distributed and paid, to Grantor, all such
cash or cash proceeds, excluding reasonable amounts of cash withheld for taxes
or other charges pursuant to Section 4.3 of this Trust Agreement or otherwise
required to pay the reasonable expenses, debts, charges, liabilities and
obligations of the Trust.
5.2 FINAL DISTRIBUTION. Upon the termination of the Trust in
accordance with Article 10 of this Trust Agreement, the Trustee shall promptly
distribute any remaining Trust Property to Grantor.
ARTICLE 6
STANDSTILL PROVISIONS
(a) Except as it may be specifically permitted by this
Trust Agreement or unless it is specifically invited in writing to do so by
ATI, the Trustee shall not, directly or indirectly:
(i) in any way acquire or agree to acquire
Beneficial Ownership of any securities or any direct or indirect rights or
options to acquire Beneficial Ownership of any securities of ATI except for the
Trust Shares and any dividends or other distributions in respect of the Trust
Shares; provided, however, that nothing contained herein shall prohibit the
Trustee (acting in any capacity other than as Trustee) from acquiring
Beneficial Ownership of any ATI securities for its own accounts or for the
accounts of any Persons other than the Trust, in ordinary brokerage or trading
transactions so long as Trustee at all times remains the Beneficial Owner of
less than 2% of the outstanding Voting Securities (exclusive of all Trust
Shares);
(ii) make any public announcement with respect to,
or submit to ATI or any of its directors, officers, representatives, employees,
attorneys, advisers, agents or Affiliates (whether publicly or otherwise) any
proposal for, the acquisition of Voting Securities not permitted by paragraph
(i)
- 13 -
<PAGE> 32
above or for or with respect to any merger, consolidation or business
combination involving ATI or its Affiliates or for or with respect to any
purchase of a substantial portion of the assets of ATI or its Affiliates,
whether or not any parties other than the Trustee and its Affiliates are
involved and whether or not such proposal might require the making of a public
announcement by ATI;
(iii) as Trustee, make, or in any way participate in, any
"solicitation" of "proxies" to vote any Voting Securities or become a
"participant" in any "election contest" (as such terms are defined or used in
Regulation 14A under the Exchange Act), as such regulation was in effect on
September 30, 1995; provided that the Trustee shall not be deemed to be a
"participant" by reason of its exercise of the voting rights set forth in
Article 7 hereof;
(iv) propose any matter for submission to a vote of
shareholders of ATI;
(v) with respect to the Trust Shares, form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any Voting Securities of ATI;
(vi) grant any proxy with respect to the Trust Shares to
any Person not approved by ATI;
(vii) deposit any Trust Shares in a voting trust or
subject any Trust Shares to any arrangement or agreement with respect to the
voting of such Trust Shares or other agreement having similar effect;
(viii) take any action which would be reasonably likely to
require ATI to make a public announcement regarding any of the matters
specified in this Article 6;
(ix) enter into any negotiations, arrangements or
understandings with any third party with respect to any of the foregoing, or
any discussions designed to advise, assist or encourage any third party in
connection with any of the foregoing;
(x) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing;
(xi) request ATI (or any of its officers, directors,
representatives, employees, attorneys, advisors,
- 14 -
<PAGE> 33
agents or Affiliates) to waive, amend or modify any provisions of this Article
6; or
(xii) otherwise act, alone or in concert with others, to
seek to control or influence the management, Board of Directors or policies
of ATI.
ARTICLE 7
VOTING RIGHTS OF TRUSTEE
7.1 POWER TO VOTE THE TRUST SHARES. The Trustee shall have sole
power to vote the Trust Shares, subject to the provisions set forth in Section
7.2 hereof.
7.2 VOTING RIGHTS.
(a) The Trustee shall vote all Trust Shares in favor of
the individuals nominated by ATI for election to its Board of Directors.
(b) The Trustee shall be free to vote the Trust Shares in
its discretion with respect to any of the following matters that may be
submitted to a vote of the shareholders of ATI:
(i) acquisition proposals;
(ii) a sale of all or substantially all of the
assets of ATI;
(iii) dissolution of ATI;
(iv) a recapitalization or restructuring of ATI
resulting in a fundamental change in its capital structure;
(v) a transaction or other event involving a
fundamental change in the scope of ATI's business; and
(vi) amendments to ATI's articles of incorporation
or by-laws.
(c) On all matters other than those set forth in Sections
7.2(a) and (b) above, the Trustee shall vote the Trust Shares either (i) as
directed by ATI or (ii) in the same proportions as all other shareholders of
ATI, at the option of the Trustee.
- 15 -
<PAGE> 34
ARTICLE 8
TRANSFERS; TENDER OFFERS
8.1 TRANSFERS. The Trustee will not, at any time, directly or
indirectly, transfer or distribute, or offer to transfer or distribute, any
Trust Shares, except (a) as provided in Section 8.2 hereof; (b) in transactions
in compliance with the volume limitations and restrictions on manner of sale
set forth in paragraphs (e) and (f) of Rule 144 promulgated under the
Securities Act (whether or not such paragraphs by their terms would apply to
such transactions), as such Rule existed on September 30, 1995; (c) in
privately negotiated or other transactions, or pursuant to the registration
rights set forth in Article 9 hereof other than as described in the following
clause (d); or (d) pursuant to the registration rights set forth in Article 9
hereof, in a firm commitment underwritten public offering managed by a
nationally recognized investment banking firm and satisfying the conditions set
forth in Section 9.4(a) hereof. In connection with any transfer permitted
under clauses (b), (c), and (d) of this Section 8.1, the following shall apply:
(i) the aggregate number of shares transferred by the
Trustee pursuant to clauses (b), (c), and (d) shall not
exceed, in any twelve-month period, one-half the aggregate
number of Total Exchange Shares;
(ii) the Trustee may not make any transfer pursuant to
clause (b), (c), or (d) unless the transferee, together with
its Affiliates and any "group" (within the meaning of Section
13(d) of the Exchange Act) of which such transferee or any
Affiliate is a part, would not, after such transfer,
beneficially own Voting Securities representing in excess of
4.9% of the then outstanding Voting Securities;
(iii) no transfer of Trust Shares representing more than
2.5% of the total number of Voting Securities then outstanding
shall be made in any single transaction or series of related
transactions to any Person or group (within the meaning of
Section 13(d) of the Exchange Act); and
(iv) no transfer of an amount of Trust Shares representing
more than 1% of the then outstanding Voting Securities shall
be made to any Person or group unless the Trustee believes in
good faith after due inquiry that such Person or group would
be eligible to file a Statement on Schedule 13G pursuant to
Rule
- 16 -
<PAGE> 35
13d-1(b)(1) under the Exchange Act (without regard to the
Beneficial Ownership threshold set forth in such Rule), as
such Rule is in effect on September 30, 1995.
8.2 TENDER OR EXCHANGE OFFER.
(a) In the event of (i) a tender or exchange offer for Voting
Securities commenced by ATI (or an Affiliate of ATI) or (ii) a tender or
exchange offer for Voting Securities commenced by a third party, (x) in
connection with which, ATI has terminated or amended (or agreed to terminate or
amend) the Rights Agreement or redeemed (or agreed to redeem) the Rights issued
thereunder and such action has permitted or will have permitted the
consummation of such offer, or a final, non-appealable court order has declared
the Rights Agreement invalid or otherwise required the redemption of the Rights
issued thereunder or (y) which ATI's Board of Directors has otherwise approved,
the Trustee shall be permitted to tender or sell the Trust Shares in accordance
with the terms of any such offer without restriction hereunder.
(b) In the event that a tender or exchange offer not
described in the immediately preceding paragraph is commenced by any Person or
group (within the meaning of Section 13(d)(3) of the Exchange Act) and such
offer would result, if consummated in accordance with its terms, in the
Beneficial Ownership by such Person or group of in excess of 50% (calculated by
voting power) of the Voting Securities of ATI then outstanding (an "Unapproved
Offer"), the Trustee shall have the right to tender or sell all or any part of
the Trust Shares to the offerer pursuant to such offer if the Trustee, upon the
advice of legal counsel and financial advisers, reasonably believes in good
faith, taking into account the conditions of the offer, that such tender offer
will result in shares being purchased (without any extension of the then
scheduled expiration date and without giving effect to shares that might be
tendered by the Trustee); provided, however, that prior to tendering or
offering for exchange any such Trust Shares in such Unapproved Offer, the
Trustee first shall have offered to ATI not later than seventy-two hours prior
to the expiration of such Unapproved Offer the right to purchase for the same
consideration (or cash equivalent) that number of such Trust Shares which if
tendered or offered for exchange, would be purchased in such Unapproved Offer,
which purchase shall be closed not later than the second business day following
the consummation of such Unapproved Offer; and provided further, that the
Trustee may tender or offer for exchange such Trust Shares in such Unapproved
Offer in the event that ATI shall have failed within the later of forty-eight
hours after receipt of such notice or twenty-four hours prior to the expiration
of such
- 17 -
<PAGE> 36
Unapproved Offer to provide the Trustee with reasonable assurance that it shall
be ready, willing and able to consummate such purchase.
(c) All transfers of Trust Shares other than transfers
permitted by Sections 8.1(b) and 8.2 shall be subject to Article 10 of this
Agreement.
(d) Any transfer of Trust Shares in violation of this Article
8 may be suspended on the books of ATI.
ARTICLE 9
REGISTRATION RIGHTS
9.1 DEMAND REGISTRATION. ATI agrees that upon the written
request of the Trustee it will file a registration statement under the
Securities Act (a "Registration Statement") as to the number of Trust Shares
specified in such request (the "Registrable Shares"); provided that ATI shall
not be required to file more than such number of Registration Statements that
become effective and remain effective for the period referred to in Section
9.3(j) equal to the quotient (rounded up to the nearest whole number) obtained
by dividing (i) the product of (A) the average closing price per share of ATI's
Common Stock for the thirty business days immediately preceding the Notice Date
(as defined in Section 1.3(a) of the Trust Exchange Agreement) and (B) the
number of Total Exchange Shares by (ii) $750 million, and further provided that
ATI shall not be required to file a Registration Statement if ATI delivers to
the Trustee an opinion, in form and substance reasonably satisfactory to the
Trustee and its counsel, to the effect that the Registrable Shares are freely
transferable under Section 4(1) of the Securities Act without regard to any
volume or other restrictions.
9.2 ATI REGISTRATION. (a) If ATI shall determine to register any
ATI Common Stock either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a transaction described in paragraph (a) of Rule 145
promulgated under the Securities Act (as such Rule may be amended from time to
time or any similar successor rule that may be promulgated by the Securities
and Exchange Commission ("SEC"), or a registration on any registration form
that does not permit secondary sales, ATI will:
(i) promptly give to the Trustee written notice thereof; and
- 18 -
<PAGE> 37
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), except as set forth in section
9.2(b) below, and in any underwriting involved therein, all
the Registrable Shares specified in a written request made by
the Trustee and received by ATI within seven (7) days after
the written notice from ATI described in clause (i) above is
mailed or delivered to the Trustee by ATI. Such written
request may specify all or a part of the Registrable Shares.
(b) If the registration of which ATI gives notice is for
a registered public offering involving an underwriting, ATI shall so advise the
Trustee as a part of the written notice given pursuant to Section 9.2(a)(i).
In such event, the right of the Trustee to registration pursuant to this
Section 9.2 shall be conditioned upon the Trustee's participation in such
underwriting and the inclusion of the Registrable Shares in the underwriting to
the extent provided herein. The Trustee shall (together with ATI and the other
holders of securities of ATI with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by ATI.
Notwithstanding any other provision of this Section 9.2, if
the representative of the underwriters advises ATI in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Shares from, or limit the number of Registrable Shares to be
included in, the registration and underwriting. ATI shall so advise the
Trustee, and the number of shares of ATI Common Stock that are entitled to be
included in the registration and underwriting shall be allocated first to ATI
for securities being sold for its own account and thereafter as set forth in
Section 9.2(c).
(c) In any circumstance in which all of the Registrable
Shares and other shares of ATI stock with registration rights (the "Other
Shares") requested to be included in a registration on behalf of the Trustee or
other selling stockholders cannot be so included as a result of limitations on
the aggregate number of Registrable Shares and Other Shares that may be so
included pursuant to Section 9.2(b), the number of
- 19 -
<PAGE> 38
Registrable Shares and Other Shares that may be so included shall be allocated
among the Trustee and other selling stockholders requesting inclusion of shares
pro rata on the basis of the number of Registrable Shares and Other Shares that
are held by the Trustee and other selling stockholders, provided, however, that
such allocation shall not operate to reduce the aggregate number of Registrable
Shares and Other Shares to be included in such registration. If the Trustee or
other selling stockholder does not request inclusion of the maximum number of
Registrable Shares and Other Shares allocated to it pursuant to the
above-described procedure, the remaining portion of its allocation shall be
reallocated among the Trustee and other selling stockholders whose allocations
did not satisfy their requests pro rata on the basis of the number of
Registrable Shares and Other Shares which are held by the Trustee and other
selling stockholders, and this procedure shall be repeated until all of the
Registrable Shares and Other Shares which may be included in the registration
on behalf of the Trustee and other selling stockholders have been so allocated.
9.3 REGISTRATION PROCEDURES. In the case of each registration
involving Registrable Shares pursuant to this Article 9, ATI will:
(a) furnish to the Trustee, prior to the filing of a
Registration Statement, copies of such Registration Statement as it is proposed
to be filed, and thereafter such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents in such
quantities as the Trustee may reasonably request from time to time in order to
facilitate the disposition of such Registrable Shares;
(b) use all reasonable efforts to register or qualify the
offer and sale of such Registrable Shares under such other securities or blue
sky laws of such jurisdiction as the Trustee reasonably requests and do any and
all other acts and things as reasonably may be necessary or advisable to enable
the Trustee to consummate the disposition in such jurisdictions of the
Registrable Shares owned by the Trustee; provided that ATI will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection (b), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
- 20 -
<PAGE> 39
(c) use all reasonable efforts to cause such Registrable
Shares to be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of ATI
to enable the Trustee to consummate the disposition of such Registrable Shares;
(d) notify the Trustee, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
Registration Statement or amendment contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and ATI will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(e) enter into customary agreements (including an
underwriting agreement in customary form and an indemnification agreement with
the Trustee in customary form) and take such other actions as reasonably are
required in order to expedite or facilitate the disposition of such Registrable
Shares;
(f) make available for inspection by the Trustee, any
underwriter participating in any disposition pursuant to such registration, and
any attorney, accountant or other agent retained by the Trustee or any such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of ATI (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the officers, directors and employees
of ATI to supply all information reasonably requested by any such Inspector in
connection with such registration; provided that (i) Records and information
obtained hereunder shall be used by such persons only to exercise their due
diligence responsibility and (ii) Records or information which ATI determines,
in good faith, to be confidential shall not be disclosed in such Registration
Statement or otherwise by the Inspectors unless (x) the disclosure of such
Records or information is necessary to avoid or correct a misstatement or
omission in the Registration Statement or (y) the release of such Records or
information is ordered pursuant to a subpoena or other order from a court or
governmental authority of competent jurisdiction. The Trustee shall use its
best efforts, prior to any such disclosure, to inform ATI that such disclosure
is necessary to avoid or correct
- 21 -
<PAGE> 40
a misstatement or omission in the Registration Statement. The Trustee further
agrees that it will, upon learning that disclosure of such Records or
information is sought in a court or by a governmental authority, give notice to
ATI and allow ATI, at the expense of ATI, to undertake appropriate action to
prevent disclosure of the Records or information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter
from the independent public accountants for ATI in customary form and covering
such matters of the type customarily covered by comfort letters as the Trustee
reasonably requests;
(h) otherwise use all reasonable efforts to comply with
all applicable rules and regulations of the SEC, and make generally available
to its security holders, as soon as reasonably practicable, an earnings
statement covering a period of twelve months beginning within three months
after the effective date of such Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(i) use all reasonable efforts to cause all such
Registrable Shares to be listed on each securities exchange on which similar
securities issued by ATI are listed; and
(j) use its best efforts (i) to have any registration of
the Registrable Shares declared effective as promptly as practicable after the
filing thereof and (ii) to keep such Registration Statement effective for a
period (up to three months) sufficient to complete the distribution of the
Registrable Shares. ATI further agrees to supplement or make amendments to the
Registration Statement, if required by (x) the registration form utilized by
ATI for such registration or by the instructions applicable to such
registration form, (y) the Securities Act or the rules and regulations
thereunder or (z) the Trustee (or any underwriter for the Trustee) with respect
to information concerning Grantor, the Trustee or such underwriter or the plan
of distribution to be utilized with respect to the Registrable Shares. ATI
agrees to furnish to the Trustee copies of any such supplement or amendment
prior to its being used or filed with the SEC.
9.4 CONDITIONS TO OFFERINGS. The obligations of ATI to take the
actions contemplated by Section 9.1 with respect to an offering of Registrable
Shares shall be subject to the following conditions:
(a) if the Registrable Shares are to be transferred
pursuant to Section 8.1(d), the Trustee shall have the right to
- 22 -
<PAGE> 41
select the investment banker or bankers and, if applicable, lead manager or
managers to administer the offering and its or their counsel, provided that
such lead manager or managers and such counsel must be reasonably satisfactory
to ATI; with respect to any such transfer, the Trustee and such investment
banker(s) or manager(s) shall use best efforts to effect as wide a distribution
of such Registrable Shares as is reasonably practicable and to prevent any
Person who, together with its Affiliates and any "group" (within the meaning of
Section 13(a)(3) of the Exchange Act) of which such Person or any Affiliate is
a party, from purchasing in excess of 15% of the Voting Securities of ATI being
registered. ATI may require the Trustee to furnish to ATI such information
regarding the Trustee or the distribution of the Registrable Shares as ATI from
time to time may reasonably request in writing, in each case only as required
by the Securities Act or the rules and regulations thereunder or under state
securities or blue sky laws;
(b) in the event that the Registrable Shares are to be
transferred pursuant to Section 8.1(c), such Registrable Shares shall be
transferred only to a Person that the Trustee believes in good faith after due
inquiry is eligible with respect to the Registrable Shares to file a Statement
on Schedule 13G pursuant to Rule 13d-1(b)(i) under the Exchange Act (without
regard to the Beneficial Ownership threshold set forth in such Rule), as such
Rule was in effect on September 30, 1995. The Trustee shall have the right to
select the investment banker or bankers and, if applicable, the lead manager or
managers to administer the offering and its or their counsel, provided that
such lead manager or managers and such counsel must be reasonably satisfactory
to ATI;
(c) there shall not have been an offering registered
pursuant to Section 9.1 of this Trust Agreement within the immediately
preceding six months; and
(d) the Trustee shall conform to all requirements of the
Securities Act and the Exchange Act applicable to it with respect to the
offering and sale of such Registrable Shares and shall advise each underwriter,
broker or dealer through which any of such Registrable Shares are offered that
such Registrable Shares are part of a distribution that is subject to the
prospectus delivery requirements of the Securities Act.
The Trustee agrees that, upon receipt of any notice from ATI
of the happening of any event of the kind described in Section 9.3(d) of this
Agreement, the Trustee will forthwith discontinue disposition of Registrable
Shares pursuant to the registration covering such Registrable Shares until the
Trustee's
- 23 -
<PAGE> 42
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 9.3(a) of this Trust Agreement.
9.5 ADDITIONAL CONDITIONS. (a) ATI's obligations pursuant to
Section 9.1 shall be suspended if (i) the fulfillment of such obligations would
require ATI to make a disclosure that would, in the reasonable good faith
judgment of ATI's Board of Directors, be detrimental to ATI and premature and
the Board of Directors of ATI concludes, as a result, that it is essential to
defer the filing of the registration statement at such time, (ii) ATI has filed
or proposes to file a registration statement with respect to any of its
securities to be distributed in an underwritten public offering and it is
advised by its lead or managing underwriter that an offering by the Trustee of
Registrable Shares would materially adversely affect the distribution of such
securities, provided that ATI is actively employing, or upon such proposed
filing actively employs, all reasonable efforts to cause any such filed
registration statement to become effective, or (iii) the fulfillment of such
obligations would require ATI to prepare financial statements not required to be
prepared for ATI to comply with its obligations under the Exchange Act at the
time that the registration statement is proposed to be filed. Such obligations
shall be reinstated (x) in the case of clause (i) above, upon the making of such
disclosure by ATI (or, if earlier, when such disclosure would either no longer
be necessary for the fulfillment of such obligations or no longer be
detrimental), (y) in the case of clause (ii) above, upon the conclusion of any
period during which ATI would not, pursuant to the terms of its underwriting
arrangements, be permitted to sell Registrable Securities for its own account
and (z) in the case of clause (iii) above, as soon as it would no longer be
necessary to prepare such financial statements to comply with the Securities
Act. The period during which the Trustee is required to sell the Registrable
Shares pursuant to Section 9.3(j) shall be tolled for the duration of any
suspension pursuant to this Section 9.5(a).
(b) In connection with any distribution pursuant to
Section 8.1(d), the number of the Registrable Shares to be registered pursuant
to Section 9.1 of this Agreement shall be reduced to the extent that ATI is
advised in writing by an investment banker of national standing that the sale
of all of the Registrable Shares requested to be registered by the Trustee
would materially and adversely affect the market price of ATI's equity
securities. If the number of shares registered is reduced pursuant to this
Section 9.5(b) by more than 50% of the number requested to be registered by the
Trustee, the Registration Statement relating to such reduced number shall not
be counted as
- 24 -
<PAGE> 43
one of the Registration Statements available to the Trustee under Section 9.1.
9.6 REGISTRATION EXPENSES. All expenses incident to the performance of or
compliance with this Trust Agreement by ATI, including, without limitation, all
fees and expenses of compliance with securities or blue sky laws (including fees
and disbursements of counsel in connection with blue sky qualifications of the
Registrable Shares), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the Registrable Shares to be
registered on each securities exchange on which similar securities of ATI are
then listed, fees and disbursements of counsel for ATI and its independent
certified public accountants (including the expenses of any comfort letters
required by or incident to such performance), securities acts liability
insurance (if ATI elects to obtain such insurance), the fees and expenses of any
special experts retained by ATI in connection with such registration, and the
fees and expenses of other Persons retained by ATI will be borne by ATI.
Notwithstanding anything in this Section 9.6 to the contrary, ATI will not have
any responsibility for any registration or filing fees payable under any federal
or state securities or blue sky laws or for any of the expenses of the Trustee
incurred in connection with any registration hereunder including, without
limitation, underwriting fees, discounts and commissions and transfer taxes, if
any, attributable to the sale of the Registrable Shares, counsel fees of the
Trustee and travel costs.
9.7 INDEMNIFICATION; CONTRIBUTION. (a) Indemnification by ATI. ATI agrees to
indemnify, to the fullest extent permitted by law, Grantor, the Trustee (and any
Affiliate thereof holding Registrable Shares), each person who controls Grantor,
the Trustee or such Affiliate (within the meaning of either the Securities Act
or the Exchange Act), and their respective directors and officers against any
and all losses, claims, damages, liabilities and expenses (including attorneys'
fees) caused by any untrue or alleged untrue statement of material fact
contained in any Registration Statement, prospectus or preliminary prospectus
(each as amended and/or supplemented, if ATI shall have furnished any amendments
or supplements thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading; provided that ATI shall not be required to
indemnify Grantor, the Trustee or such Affiliate, such controlling persons or
their
- 25 -
<PAGE> 44
respective officers or directors for any losses, claims, damages, liabilities
or expenses resulting from any such untrue statement or omission if such untrue
statement or omission is made in reliance on and conformity with any
information with respect to the Trustee furnished to ATI by the Trustee
expressly for use therein; and provided further, that with respect to any
untrue statement or omission or alleged untrue statement or omission made in
any preliminary prospectus, the indemnity agreement contained in this paragraph
shall not inure to the benefit of Grantor, the Trustee or such Affiliate, if
the liability or expense results from the fact that a copy of the prospectus
was not sent or given to such Person at or prior to the written confirmation of
sale of such Registrable Shares to such Person as required by the Securities
Act, and if the untrue statement or omission has been corrected in the
prospectus unless such failure to deliver the prospectus was a result of
noncompliance by ATI with its obligations under Section 9.3(a) hereof. In
connection with an underwritten offering, ATI will indemnify each underwriter
thereof, the officers and directors of such underwriter, and each Person who
controls such underwriter (within the meaning of either the Securities Act or
Exchange Act) to the same extent as provided above with respect to the
indemnification of the Trustee, provided that such underwriter agrees to
indemnify ATI to the same extent as provided below with respect to the
indemnification of ATI by the Trustee.
(b) Indemnification by the Trustee. In connection with any
registration in which the Trustee is participating, the Trustee will furnish to
ATI in writing such information with respect to the Trustee as ATI reasonably
requests for use in connection with any such registration, prospectus, or
preliminary prospectus and agrees to indemnify ATI, its directors, its officers
who sign the Registration Statement and each Person, if any, who controls ATI
(within the meaning of either the Securities Act or of the Exchange Act) to the
same extent as the foregoing indemnity from ATI to such holder, but only with
respect to information relating to such holder furnished to ATI in writing by
the Trustee expressly for use in the Registration Statement, the prospectus,
any amendment or supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 9.7(a) or Section 9.7(b) of this Trust Agreement, such person
(hereinafter called the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the "indemnifying
party") in writing and the indemnifying party, upon
- 26 -
<PAGE> 45
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and the indemnified party
shall have been advised by counsel that representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all such indemnified parties, and
that all such fees and expenses shall be reimbursed as they are incurred. In
the case of any such separate firm for the indemnified parties, such firm shall
be designated in writing by the indemnified parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by the
third sentence of this Section 9.7(c), the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not either have reimbursed the indemnified party in
accordance with such request or reasonably objected in writing, on the basis of
the standards set forth herein, to the propriety of such reimbursement prior to
the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
- 27 -
<PAGE> 46
(d) Contribution. If the indemnification provided for in
this Section 9.7 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to in this Section 9.7, then the indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 9.7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 9.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 9.7(a) and (b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 9.7(d).
9.8 RULE 144. ATI covenants that it will file the reports
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and it will take such further action as the
Trustee may reasonably request, all to the extent required from time to time to
enable the Trustee to
- 28 -
<PAGE> 47
sell Trust Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC. Upon the request of the Trustee, ATI will
deliver to the Trustee a written statement as to whether it has complied with
such requirements.
9.9 CERTAIN LIMITATIONS. The rights of the Trustee under this
Article 9 are subject to Sections 8.1, 10.1, 10.2 and 10.3 of this Trust
Agreement.
9.10 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In the event that ATI shall propose to enter into an
agreement of merger, consolidation or other business combination with any
Person which has a class of equity securities having substantially the same
rights as the ATI Common Stock (including, but not limited to, voting,
dividend, liquidation and redemption rights) and in connection with such
agreement ATI will no longer have a class of equity securities having
substantially the same rights as the ATI Common Stock registered with the SEC
pursuant to Section 12(b) or 12(g) of the Exchange Act, ATI hereby covenants
and agrees with the Trustee that it will cause such Person to assume the rights
and obligations of ATI set forth in this Article 9, to the full extent set
forth herein.
ARTICLE 10
RIGHTS OF FIRST OFFER AND FIRST REFUSAL
10.1 NOTICE OF INTENT TO TRANSFER. The Trustee shall give written
notice (a "Notice of Intent") to ATI at such time as it first forms a bona fide
intention to transfer, within the next twelve months, Trust Shares in
transactions permitted by Section 8.1(c) or (d) (any registered public offering
permitted by Section 8.1(c) or (d) being referred to hereinafter as a
"Permitted Offering"). The Trustee shall not be permitted to transfer
outstanding Trust Shares until 90 days after the delivery of such Notice of
Intent. The Trustee shall include in such Notice of Intent all additional
information required to be included in a ROFO Notice or ROFR Notice (as defined
below) that reasonably can be provided at the time the Notice of Intent is
delivered. The Trustee shall be under no obligation to send more than one such
Notice of Intent.
10.2 RIGHT OF FIRST OFFER. Any proposed transfer of Trust Shares
by the Trustee in a Permitted Offering pursuant to Section
- 29 -
<PAGE> 48
8.1(d) shall be subject to a right of first offer on the part of ATI, as
follows:
(a) The Trustee shall deliver to ATI a notice (a "ROFO
Notice") 10 days prior to the delivery of a request pursuant to Section 9.1 to
file a registration statement, which ROFO Notice shall set forth, among other
things: (i) the identity of the prospective managing underwriter for the
proposed offering, (ii) the proposed price per share to public and net proceeds
per share to the Trustee, (iii) the number of Trust Shares to be registered for
sale, (iv) the identity (if known) of any Person that has expressed an interest
in purchasing in excess of 1% of the outstanding Voting Securities in the
proposed offering, (v) any other material terms and conditions of the proposed
offering, (vi) the closing date for the proposed offering (which date shall not
be less than 30 days from the date on which the ROFO Notice is delivered), and
(vii) a statement from the managing underwriter that it is highly confident
that the proposed offering can be underwritten on the terms and conditions set
forth in the ROFO Notice. The ROFO Notice shall constitute an irrevocable
offer to ATI, upon the terms specified therein, to purchase such Trust Shares.
(b) ATI may elect, at its option, to purchase all, but not
less than all, of the Registrable Shares referred to in the ROFO Notice at a
price per share equal to the net proceeds per share referred to in the ROFO
Notice by delivering to the Trustee written notice of its election (a "Notice
of Election") within 10 days after receipt of the ROFO Notice. Such Notice of
Election shall constitute a binding obligation on the part of ATI, subject to
standard terms and conditions for a stock purchase agreement between an issuer
and a significant shareholder, to purchase such Trust Shares. Such Notice of
Election shall include the proposed date for the closing of the purchase, which
shall be no later than 21 days following the delivery of such Notice of
Election. ATI may designate a third party to exercise its right of first
offer.
(c) If ATI or its designee does not exercise the foregoing
right of first offer within such 10-day period, the Trustee may proceed with
the proposed offering as described in the ROFO Notice. Such offering must be
closed within 90 days after the date the Registration Statement is filed with
the SEC and the price per share to the public and the net proceeds per share to
the Trustee must equal or exceed such terms as set forth in the ROFO Notice.
The Trustee shall, and shall cause its managing underwriters to, use best
efforts to cause the filing of the Registration Statement and the closing of
the offering pursuant thereto to occur as quickly as possible. If the
- 30 -
<PAGE> 49
offering is not completed within such 90-day period or if market conditions
cause the managing underwriter to reduce the proposed price per share to the
public or the net proceeds to the Trustee or otherwise to materially revise the
terms set forth in the ROFO Notice, the Trustee shall promptly so notify ATI
and ATI shall again have a right of first offer pursuant to Section 10.2(b)
with respect to the Trust Shares referred to the ROFO Notice, upon the revised
terms, except that such new right must be exercised within three business days
after such notification.
10.3 RIGHT OF FIRST REFUSAL. Any proposed transfer of Trust Shares
by the Trustee pursuant to Section 8.1(c) shall be subject to a right of first
refusal on the part of ATI, as follows:
(a) In the event of a transfer (or series of related
transfers) which is not a Permitted Offering and involves in the aggregate less
than 1% of the then outstanding Voting Securities, ATI shall have no right of
first refusal.
(b) In all other cases, the Trustee shall deliver to ATI a
notice (a "ROFR Notice") at least four business days prior to (x) in the case
of a Permitted Offering, the delivery of a request to file a registration
statement pursuant to Section 9.1, or (y) in all other cases the execution of a
stock purchase agreement or other action committing the Trustee to such
transfer. Such ROFR Notice shall set forth (A) the identities of each proposed
transferee that, together with its Affiliates and any group (within the meaning
of Section 13(d)(3) of the Exchange Act) of which such transferee or any
Affiliate is a part, proposed to purchase 1% or more of the then outstanding
Voting Securities (a "1% Purchaser") and the total number of shares such 1%
Purchaser proposes to acquire, (B) the aggregate number of Trust Shares to be
transferred to all transferees, (C) the proposed price per share at which the
Trust Shares are to be transferred, and the net proceeds per share to the
Trustee therefrom, and (D) any other material terms and conditions of the
proposed transfer. In the case of a Permitted Offering, such ROFR Notice shall
also contain the information specified in clauses (vi) and (vii) of Section
10.2(a). The ROFR Notice shall constitute an irrevocable offer to sell such
Trust Shares to ATI, upon the terms specified therein.
(c) In the case of other than a Permitted Offering, ATI may
elect to purchase (x) with respect to non-1% Purchasers, all, but not less than
all, of the Trust Shares referred to in the ROFR Notice which are to be
transferred to such non- 1% Purchasers, or (y) any or all of the blocks to be
transferred to 1% Purchasers or (z) any combination of (x) and (y).
- 31 -
<PAGE> 50
(d) In the case of a Permitted Offering, ATI may elect to
purchase (x) with respect to non-1% Purchasers, all but not less than all, of
the Trust Shares referred to in the ROFR Notice which are to be sold to such
non-1% Purchasers, (y) one or more of the blocks to be transferred to 1%
Purchasers provided that, unless ATI effects the purchase described in clause
(x) above, ATI must leave at least one such block unpurchased, or (z) any
combination of (x) and (y).
(e) Any election by ATI described in paragraphs (c) or (d)
above shall be upon the terms and conditions set forth in the ROFR Notice and
shall be effected by sending to the Trustee a Notice of Election within four
business days after receipt of the ROFR Notice. Such Notice of Election shall
constitute a binding obligation, subject to standard terms and conditions for a
stock purchase agreement between an issuer and a significant shareholder, to
purchase the specified amount of Trust Shares (at a price per share equal to
the net proceeds per share referred to in the ROFR Notice). Such Notice of
Election also shall include the proposed date for the closing of the purchase,
which shall be no later than 21 days following the delivery of such Notice of
Election. ATI may designate a third party to exercise its right of first
refusal.
(f) If ATI or its designee does not exercise its right of
first refusal within such four-day period, the Trustee may proceed with the
proposed transfers described in the ROFR Notice. Such transfer must be closed
within 30 days after the date the ROFR Notice is delivered (with respect to
other than Permitted Offerings), and within 90 days after the Registration
Statement is filed with the SEC, with respect to Permitted Offerings, and the
price per share and the net proceeds per share to the Trustee must equal or
exceed such terms set forth in the ROFR Notice. The Trustee shall, and shall
cause any lead manager or managing underwriter to, use best efforts to cause
the filing of the Registration Statement and the closing of the offering
pursuant thereto to occur as quickly as possible. If the proposed price per
share or net proceeds per share are less than those set forth in the ROFR
Notice, the Trustee shall promptly so notify ATI and ATI shall again have a
right of first refusal pursuant to this Section 10.3 with respect to the Trust
Shares referred to in the ROFR Notice, upon the revised terms, except that such
new right must be exercised within three business days after such notification.
- 32 -
<PAGE> 51
ARTICLE 11
EXPIRATION OF CERTAIN RESTRICTIONS;
TERMINATION OF TRUST AGREEMENT
11.1 EXPIRATION OF CERTAIN RESTRICTIONS.
(a) The provisions of Articles 6, 7, 8 and 10 of this
Trust Agreement shall irrevocably terminate upon any Change of Control of ATI.
(b) The rights contained in Article 9 of this Trust
Agreement (with respect to Voting Securities acquired by the Trustee pursuant
to the Trust Exchange Agreement and any Voting Securities received as a
dividend thereon or upon conversion thereof) shall survive until the tenth
anniversary of the Closing Date with respect to the Initial Exchange (as
defined in Sections 1.5 and 1.7 of the Trust Exchange Agreement).
11.2 TERMINATION OF TRUST AGREEMENT.
Subject to Section 11.1, the Trust Agreement shall terminate
and the Trust shall be dissolved and its affairs shall be wound up at such time
as Grantor has no further right to cause a Closing to occur under the Trust
Exchange Agreement and the Trustee shall have disposed of all Trust Property in
accordance with this Trust Agreement. The termination of this Trust Agreement
shall not relieve any party from liability for any breach thereof occurring
prior to such termination.
11.3 DISSOLUTION. Upon the dissolution of the Trust, the Trustee
shall prepare the final tax information return of the Trust, file such return
with the Internal Revenue Service and other applicable governmental agencies,
and distribute to Grantor a copy thereof.
ARTICLE 12
INDEMNIFICATION
12.1 INDEMNIFICATION OF TRUSTEE. (a) Grantor shall indemnify the
Trustee, its officers, directors, employees, and agents and hold each of them
harmless from any loss, liability, claim, damage, or expense (including
reasonable legal fees and expenses) suffered or incurred by the Trustee for any
reason whatsoever as a result of or relating to this Trust Agreement, except
those resulting from any action or inaction by the Trustee taken or omitted to
be taken in bad faith or constituting gross negligence or willful misconduct.
- 33 -
<PAGE> 52
(b) ATI shall indemnify the Trustee, its officers,
directors, employees and agents and hold them harmless from any loss,
liability, claim, damage, or expense (including reasonable legal fees and
expenses) suffered or incurred by the Trustee as a result of or relating to (i)
any representation or warranty made by ATI in this Trust Agreement or pursuant
to this Trust Agreement that was materially false when made or that omitted to
state a material fact known to ATI necessary to be disclosed in order to make
such representation or warranty not materially misleading, or (ii) any failure
to perform any obligations of ATI hereunder.
(c) The indemnification rights and responsibilities set
forth in this Section 12.1 are in addition to, and not in derogation of, those
indemnification rights and responsibilities set forth elsewhere in this Trust
Agreement.
12.2 PROCEDURES RELATING TO INDEMNIFICATION.
(a) The Trustee shall give notice to the indemnifying
party in writing, and in reasonable detail, of any claim or demand made by any
person, firm, governmental authority or corporation against the Trustee (a
"Third Party Claim") for which the Trustee seeks indemnity pursuant to Section
12.1(a) or (b) hereof, promptly after receipt by such Trustee of written notice
of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder.
Thereafter, the Trustee shall deliver to the indemnifying party promptly after
the Trustee's receipt thereof, copies of all notices and documents (including
court papers) received by the Trustee relating to the Third Party Claim.
(b) If a Third Party Claim is made against the Trustee,
the indemnifying party will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the indemnifying party and reasonably satisfactory to the Trustee. Should the
indemnifying party so elect to assume the defense of a Third Party Claim, the
indemnifying party will not be liable to the Trustee for legal expenses
subsequently incurred by the Trustee in connection with the defense thereof.
If the indemnifying party assumes such defense, the Trustee shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense (and not at the expense of the Trust), separate from the counsel
employed by the indemnifying party, it being understood that the indemnifying
party shall control such defense. The indemnifying party shall be liable for
the fees and expenses of counsel employed by the Trustee for any period during
which the indemnifying party has not assumed the defense thereof
- 34 -
<PAGE> 53
(other than during any period in which the Trustee shall have failed to give
notice of the Third Party Claim as provided above). All the parties hereto
shall cooperate in the defense of any Third Party Claim. Such cooperation
shall include the retention and (upon reasonable request) the provision of
records and information which are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Whether or not the indemnifying party shall have assumed the defense of a Third
Party Claim, the Trustee shall not admit any liability with respect to, or
settle, compromise, or discharge, such Third Party Claim without the
indemnifying party's prior written consent (which consent shall not be
unreasonably withheld). The indemnifying party shall obtain the consent of the
Trustee before entering into any settlement, adjustment, or compromise of such
claim, or ceasing to defend against such claim, if as a result thereof, or
pursuant thereto, there would be imposed on the Trustee any liability or
obligation not covered by the indemnity obligations of the indemnifying party
under this Trust Agreement (including, without limitation, any injunctive
relief or other remedy).
ARTICLE 13
MISCELLANEOUS
13.1 LEGEND; REMOVAL OF LEGEND. (a) All Trust Shares shall have
the following legend, which shall remain on such certificates until such time
as the securities represented by such certificates are no longer subject to the
restrictions of this Agreement:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF
A STOCK DISPOSITION TRUST AGREEMENT (INCLUDING THE
RESTRICTIONS ON TRANSFER SET FORTH THEREIN) DATED AS OF
________, 199_, BETWEEN U S WEST, INC., AIRTOUCH
COMMUNICATIONS, INC. AND __________ AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE ALIENATED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE
OF THE CORPORATE SECRETARY OF AIRTOUCH COMMUNICATIONS, INC.
(b) Any legend endorsed on a certificate pursuant to
paragraph (a) shall be removed if the Trust Shares represented by such
certificate shall have been effectively transferred in
- 35 -
<PAGE> 54
compliance with Section 8.1(c) or (d) or a Change of Control of ATI has
occurred.
13.2 NOTICE. (a) All notices called for under this Trust
Agreement must be in writing and will be deemed given if
(i) delivered personally;
(ii) delivered by facsimile transmission and
receipt is confirmed;
(iii) mailed by registered or certified mail
(return receipt requested), postage prepaid;
to Grantor or ATI at the following address or to the Trustee at the address set
forth next to its signature below (or at such other address for a party as is
specified by like notice; provided that notices of a change of address will be
effective only upon receipt of the notice):
If to Grantor:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: [Title]
Telecopy: (303) xxx-xxxx
With copies to:
U S West, Inc.
7800 East Orchard Road
Englewood, CO 80111
Attn: [General Counsel]
Telecopy: (303) xxx-xxxx
If to ATI:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attn: Margaret G. Gill, Esq.
Senior Vice President, Legal
and External Affairs
Telecopy: (415) 658-2298
With a copy to:
Pillsbury Madison & Sutro
- 36 -
<PAGE> 55
235 Montgomery Street
San Francisco, CA 94104
Attn: Nathaniel M. Cartmell III, Esq.
Telecopy: (415) 983-1200
(b) Any notice given in the manner described in this
Section 13.1 will be deemed to have been given and received as follows:
<TABLE>
<CAPTION>
Form of Delivery Effective Date
- ---------------- --------------
<S> <C>
Registered or Certified Mail The fifth business day of uninterrupted postal
service next following the date of mailing.
Personal delivery The day notice was received, provided that if such
day is not a business day then the notice shall be
deemed to have been given and received on the
business day next following such day.
Facsimile transmission The day notice was received and receipt is
confirmed, provided that if such day is not a
business day then the notice shall be deemed to
have been given and received on the business day
next following such day.
</TABLE>
13.3 SEVERABILITY. If any provision of this Trust Agreement is
held invalid, such invalidity will not affect any other provision of the Trust
Agreement that can be given effect without the invalid provision, and to this
end the provisions of this Trust Agreement are separable.
13.4 AMENDMENT. This Trust Agreement may be modified only by a
written instrument duly executed by Grantor and by the Trustee and, if such
modification affects Articles 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 12 or 13 of this
Trust Agreement, by ATI. Compliance with any provision or condition contained
in this Trust Agreement, or the obtaining of any consent provided for in this
Trust Agreement, may be waived only by written instrument duly executed by the
party to be bound by such waiver; provided that if such waiver affects Articles
1, 2, 3, 4, 6, 7, 8, 9, 10,
- 37 -
<PAGE> 56
11, 12 or 13 of this Trust Agreement, such waiver shall not be effective
without the written consent of ATI.
13.5 GOVERNING LAW. The rights of the parties arising under this
Trust Agreement shall be construed and enforced under the laws of the State of
Delaware without giving effect to any choice of law or conflict of law rules.
13.6 ENTIRE TRUST AGREEMENT. This Trust Agreement contains the
entire understanding of the parties to this Trust Agreement respecting the
subject matter hereof and supersedes all prior agreements, discussions, and
understandings.
13.7 CAPTIONS. The captions in this Trust Agreement are for
convenience only, do not form a part of it, and do not in any way modify,
interpret, or construe the intentions of the parties to it.
13.8 COUNTERPARTS. This Trust Agreement may be executed in three
or more counterparts, each of which will be deemed an original but all of which
will constitute one and the same instrument.
- 38 -
<PAGE> 57
IN WITNESS WHEREOF, the undersigned have executed this Trust
Agreement as of the date set forth in the first paragraph of this Trust
Agreement.
U S WEST, INC. [TRUSTEE]
[Address]
By ________________________________ By______________________________
Name: Name:
Title: Title:
Agreed to and executed by ATI solely with respect to Articles 1, 2, 3, 4, 6, 7,
8, 9, 10, 11, 12 and 13 of this Trust Agreement:
AIRTOUCH COMMUNICATIONS, INC.
By ________________________________
Name:
Title:
- 39 -
<PAGE> 1
EXHIBIT 15
November 10, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that AirTouch Communications, Inc. has included our report dated
November 10, 1995 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Company's Report on Form 10-Q for the quarter ended
September 30, 1995 which is incorporated by reference in the Registration
Statements 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), and which will be incorporated by
reference in the Prospectus constituting part of its Registration Statement on
Form S-3 (No. 33-62787) which was filed on September 21, 1995. We are also
aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 150,100
<SECURITIES> 0
<RECEIVABLES> 244,700
<ALLOWANCES> 17,600
<INVENTORY> 0
<CURRENT-ASSETS> 544,700
<PP&E> 1,954,400
<DEPRECIATION> 707,200
<TOTAL-ASSETS> 4,720,500
<CURRENT-LIABILITIES> 462,100
<BONDS> 121,900
<COMMON> 5,000
0
0
<OTHER-SE> 3,640,300
<TOTAL-LIABILITY-AND-EQUITY> 4,720,500
<SALES> 79,900
<TOTAL-REVENUES> 1,169,500
<CGS> 92,900
<TOTAL-COSTS> 1,051,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,400
<INCOME-PRETAX> 228,700
<INCOME-TAX> 108,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,700
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
