<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
/ / 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 July 31, 1996, 499,667,954 shares of common stock were outstanding.
<PAGE> 2
AIRTOUCH COMMUNICATIONS, INC.
INDEX TO REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
<S> <C>
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
Selected Proportionate Operating Data ............................................. 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................................... 11
REPORT OF INDEPENDENT ACCOUNTANTS...................................................... 23
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...................................................................... 24
ITEM 2. CHANGES IN SECURITIES.................................................................. 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................................... 24
ITEM 5. OTHER INFORMATION...................................................................... 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................................... 27
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements
of Income
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=============================================================================================================================
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30 June 30
--------------------------------------------------------------------
(Dollars in millions, except per share amounts) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues (a) $ 481.3 $ 403.4 $ 930.2 $ 777.3
- -----------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Cost of revenues (a) 102.6 89.0 205.6 172.4
Selling and customer operations expenses 153.1 139.3 291.4 247.8
General, administrative, and other expenses 94.6 89.6 187.9 167.7
Depreciation and amortization expenses 68.1 50.9 133.1 100.8
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 418.4 368.8 818.0 688.7
- -----------------------------------------------------------------------------------------------------------------------------
Operating income 62.9 34.6 112.2 88.6
Equity in net income (loss) of unconsolidated
wireless systems:
Domestic 58.5 43.4 114.6 78.8
International (9.4) (4.9) (16.5) (11.3)
Minority interests in net (income) loss of
consolidated wireless systems (25.8) (4.7) (34.3) (13.6)
Interest:
Expense (8.6) (0.5) (17.0) (4.4)
Income 1.8 11.0 6.3 23.1
Foreign exchange gain (loss) 0.7 (0.6) 2.4 (8.4)
Miscellaneous income (expense) 2.9 0.3 8.9 (0.4)
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 83.0 78.6 176.6 152.4
Income taxes 21.8 39.9 63.2 78.4
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 61.2 $ 38.7 $ 113.4 $ 74.0
=============================================================================================================================
Net income per share $ 0.12 $ 0.08 $ 0.23 $ 0.15
=============================================================================================================================
Weighted average shares outstanding (in thousands) 499,323 494,588 499,080 494,338
=============================================================================================================================
</TABLE>
(a) Presentation for 1995 has been restated to conform to current year
presentation. See Note A.
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
3
<PAGE> 4
Consolidated Balance Sheets
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
==================================================================================================
(Unaudited)
June 30 December 31
------------------------
(Dollars in millions) 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7.4 $ 82.9
Accounts receivable, net of allowance for uncollectibles of
$20.2 and $21.2, respectively 217.9 232.4
Other receivables 72.0 103.6
Due from affiliates 20.2 21.0
Other current assets 95.3 66.3
- --------------------------------------------------------------------------------------------------
Total current assets 412.8 506.2
Property, plant, and equipment, net 1,371.1 1,320.2
Investments in unconsolidated wireless systems 3,300.3 3,076.3
Intangible assets, net 570.6 605.7
Deferred charges and other noncurrent assets 280.4 139.5
- --------------------------------------------------------------------------------------------------
Total assets $5,935.2 $5,647.9
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 118.0 $ 171.4
Other current liabilities 392.0 316.3
- --------------------------------------------------------------------------------------------------
Total current liabilities 510.0 487.7
Long-term debt 1,031.8 892.4
Deferred income taxes 261.0 258.6
Deferred credits 74.4 106.0
- --------------------------------------------------------------------------------------------------
Total liabilities 1,877.2 1,744.7
- --------------------------------------------------------------------------------------------------
Commitments and contingencies
Minority interests in consolidated wireless systems 169.4 152.5
- --------------------------------------------------------------------------------------------------
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;
499,393,289 shares issued and 499,270,329 shares outstanding
at June 30, 1996; 498,692,430 shares issued and 498,569,470
shares outstanding at December 31, 1995) 5.0 5.0
Additional paid-in capital 3,895.3 3,877.2
Accumulated deficit (44.7) (158.1)
Cumulative translation adjustment 12.4 17.1
Other 20.6 9.5
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 3,888.6 3,750.7
- --------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $5,935.2 $5,647.9
==================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
4
<PAGE> 5
Consolidated Statements
of Cash Flows
AirTouch Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
============================================================================================================
(Unaudited)
Six months ended
June 30
----------------------
(Dollars in millions) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 113.4 $ 74.0
Adjustments to reconcile net income for items currently
not affecting operating cash flows:
Depreciation, amortization, and other non cash charges 133.1 100.9
Equity in net income of unconsolidated wireless systems (98.1) (67.5)
Distributions received from equity investments 86.1 45.9
Deferred income taxes (11.6) 7.4
Minority interests in net income (loss) of consolidated wireless systems 34.3 13.6
Gain on sale of assets and telecommunications interests (5.8) (1.1)
Changes in assets and liabilities:
Accounts receivable, net 4.9 (44.5)
Other current assets and receivables (9.5) 84.0
Deferred charges and other noncurrent assets 24.5 3.9
Accounts payable and other current liabilities (120.8) (140.8)
Deferred credits and other liabilities 6.7 13.9
- ------------------------------------------------------------------------------------------------------------
Cash flows from operating activities 157.2 89.7
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment in unconsolidated wireless systems (261.5) (428.4)
Additions to property, plant, and equipment, net (117.6) (237.9)
Purchase of CCI options pursuant to merger agreement (107.7) --
Proceeds from sale of property, plant, and equipment 10.5 5.8
Proceeds from sale of telecommunications interests 19.0 (0.1)
Maturity of held-to-maturity investments -- 310.1
Maturity of available-for-sale securities -- 91.7
Other investing activities (23.0) (19.7)
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities (480.3) (278.5)
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuing commercial paper 788.2 --
Retirement of commercial paper (38.0) --
Proceeds from issuing long-term debt 268.9 2.1
Retirement of long-term debt (815.2) (7.1)
Increase (decrease) in short-term borrowings 42.0 (41.5)
Distributions to minority interests in consolidated wireless systems (18.2) (11.6)
Proceeds from shares issued 20.9 25.7
Other financing activities (0.5) 8.9
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities 248.1 (23.5)
- ------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (0.5) 1.0
- ------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (75.5) (211.3)
Beginning cash and cash equivalents 82.9 429.0
- ------------------------------------------------------------------------------------------------------------
Ending cash and cash equivalents $ 7.4 $ 217.7
============================================================================================================
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
5
<PAGE> 6
AirTouch Communications, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
A. Basis of Presentation
AirTouch Communications, Inc., a holding company, together with its
subsidiaries, unconsolidated partnerships, and joint ventures (collectively
referred to herein as the "Company"), provide wireless telecommunications
services in the United States, Europe, and Asia. The principal subsidiaries of
AirTouch Communications, Inc. are AirTouch Cellular, AirTouch Paging, and
AirTouch International. These subsidiaries principally provide cellular and
paging services. The majority of the Company's revenues are provided by its
domestic cellular operations.
The Consolidated Financial Statements include the accounts of the Company, its
subsidiaries, and partnerships in which the Company has controlling interests.
All significant intercompany balances and transactions have been eliminated.
Certain prior period items have been reclassified to conform with the 1996
format. Most significantly, in the fourth quarter of 1995, the Company
classified the costs of its domestic cellular roaming fraud as an operating
expense. These costs had previously been recorded as an offset to operating
revenues. The reclassifications did not have an effect on previously reported
operating income, net income, or accumulated deficit.
The Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applicable in the United
States 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 1995 Annual Report on Form 10-K, as amended.
Conformity with GAAP requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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-month and six-month periods ended June 30, 1996 and 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 August 8, 1996 appearing
herein, states that they did not audit and they do not express an opinion on
the 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.
6
<PAGE> 7
AirTouch Communications, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
B. Significant Changes since December 31, 1995
ACCOUNTING CHANGES
Effective January 1, 1996, the Company implemented the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Under SFAS No. 121, the Company is required to review long-lived assets and
certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
An impairment loss should be recognized whenever the review demonstrates that
the book value of a long-lived asset is not recoverable. The implementation of
SFAS No. 121 did not have an impact on the Company's financial position or
results of operations.
DEFERRED CHARGES AND OTHER NONCURRENT ASSETS
Deferred charges and other noncurrent assets have increased $140.9 million,
approximately 101%, since December 31, 1995, primarily because of the Company's
purchase of options representing approximately 2.4 million shares of Cellular
Communications, Inc. ("CCI") stock. The January 1996 option purchase was for an
aggregate consideration of approximately $107.7 million, an amount equal to the
aggregate consideration paid by CCI for cancellation of its employee replacement
options pursuant to the 1990 Merger Agreement (as defined below). The option
purchase did not affect the Company's percentage ownership of the outstanding
stock of CCI or its results of operations.
COMMERCIAL PAPER PROGRAM
In March 1996, the Company initiated a commercial paper program consisting of
the sale of discounted notes that are exempt from registration under the
Securities Act of 1933. The Company's Board of Directors has authorized the
issuance of commercial paper in amounts necessary to finance the Company's
working capital requirements, provided that the amount outstanding under the
commercial paper program, together with all indebtedness incurred under the $2
billion long-term revolving credit facility, does not in aggregate exceed $2
billion. The Company obtained A-2 and P-2 prime commercial paper ratings from
Standard & Poor's Corporation and Moody's Investor Service, respectively. These
ratings may be revised or withdrawn by the rating agencies at any time. At June
30, 1996, borrowings of $750.2 million were payable to holders of commercial
paper and were classified as long-term debt because these borrowings are
supported by the Company's long-term revolving credit facility. The borrowings
had an average interest rate of 5.56% as of June 30, 1996.
CCI MERGER AGREEMENT
In April 1996, the Company entered into a merger agreement (the "1996 Merger
Agreement") with CCI to acquire all of CCI's capital stock that it does not
already own (approximately 62%) as an alternative transaction (the "CCI Merger")
to the transaction set forth in the Company's original 1990 merger agreement
(the "1990 Merger Agreement") with CCI. The CCI Merger, is subject to CCI
stockholder approval and certain other conditions. CCI stockholders will vote on
the CCI Merger at a stockholders' meeting scheduled for August 16, 1996. If the
CCI Merger is approved by the CCI stockholders, closing will occur shortly
thereafter. Unless the CCI Merger is approved and completed, an appraisal
process will proceed in accordance with the 1990 Merger Agreement. For a
discussion of the appraisal process and the potential obligation of the Company
with respect to a related "make-whole" payment, see Note E to "Notes to
Consolidated Financial Statements" in the Company's 1995 Annual Report on Form
10-K, as amended. Pursuant to the 1996 Merger Agreement, 72% of the merger
consideration will consist of preferred securities and 28% will consist of cash,
subject to adjustment in order to maintain the tax-free nature of the
transaction. As of the date of the 1996 Merger Agreement, the acquisition cost
to the Company was anticipated to be approximately $1.65 billion, including the
assumption of approximately $200 million in net debt. Upon consummation of the
CCI Merger, AirTouch will own 100% of CCI and New Par, the equally owned joint
venture between the Company and CCI that operates cellular properties in
Michigan and Ohio. Accordingly, subsequent to the CCI Merger, the Company may
consolidate the operating results of CCI and New Par, which are currently
reported using the equity method of accounting. The transaction will be recorded
using the purchase method of accounting for business combinations and is
expected to materially dilute earnings for at least the next several years. For
further discussion of matters related to the CCI Merger, see the Company's
Registration Statement on Form S-4 (Reg. No. 333-03107). This registration
statement became effective on July 17, 1996, and proxy statements were mailed to
CCI stockholders beginning on July 18, 1996.
7
<PAGE> 8
AirTouch Communications, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
C. Investments in Unconsolidated Wireless Systems
Interests owned in cellular and other telecommunications systems of
unconsolidated wireless systems are as follows:
<TABLE>
<CAPTION>
June 30 December 31
(Dollars in millions) 1996 1995
- -------------------------------------------------------
<S> <C> <C>
Investments at equity $3,230.1 $3,006.5
Investments at cost 70.2 69.8
- -------------------------------------------------------
$3,300.3 $3,076.3
=======================================================
</TABLE>
The Company's equity in net income of significant equity investees was $96.7
million and $65.1 million for the three months ended June 30, 1996 and 1995,
respectively, and $179.4 million and $111.2 million for the six months ended
June 30, 1996 and 1995, respectively. The Company's equity in net income of
these investees may significantly differ from its proportionate share of their
reported net income in the table below primarily due to adjustments required by
the equity method of accounting, including differences in recognized tax rates.
Condensed operating results for the Company's significant equity investments are
as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
--------------------------------------------------
(Dollars in millions) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mannesmann Mobilfunk GmbH
Operating revenues(a) $ 656.0 $ 438.0 $1,210.4 $ 792.1
Operating income $ 195.8 $ 97.2 $ 343.8 $ 171.7
Net income $ 78.7 $ 50.3 $ 145.5 $ 88.3
New Par
Operating revenues(a) $ 197.2 $ 164.3 $ 374.6 $ 312.8
Operating income(a) $ 76.1 $ 51.5 $ 134.5 $ 88.3
Net income $ 76.5 $ 52.6 $ 135.5 $ 89.8
CMT Partners
Operating revenues(a) $ 133.8 $ 113.5 $ 259.1 $ 213.6
Operating income $ 45.2 $ 36.8 $ 90.9 $ 69.0
Net income $ 51.9 $ 42.9 $ 104.4 $ 79.0
CCI
Equity in net income of joint venture $ 38.5 $ 26.6 $ 68.3 $ 45.2
Operating income(a) $ 37.2 $ 22.4 $ 3.2 $ 36.6
Net income (loss) $ 19.6 $ 12.7 $ (7.5) $ 20.0
==================================================================================================
</TABLE>
(a) Restated to conform to the Company's basis of presentation.
D. Contingencies
In November 1993, four class action complaints were filed on behalf of
AirTouch's cellular customers, three in Orange County Superior Court and one in
the United States District Court for the Central District of California, naming,
among others, the Company, and alleging certain facts, including a similarity in
the pricing structures of the two defendant cellular carriers, which plaintiffs
contend are circumstantial evidence that the Company, as general partner of Los
Angeles SMSA Limited Partnership, and Los Angeles Cellular Telephone Company
conspired to fix the prices of retail and wholesale cellular radio services in
the Los Angeles market. The complaints seek damages for the class "in a sum in
excess of $100,000,000." The federal suit has been dismissed and the three state
cases have been consolidated for purposes of discovery. The Company does not
believe that these proceedings will have a material adverse effect on the
Company's financial position or results of operations.
8
<PAGE> 9
AirTouch Communications, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
In 1994, two class action complaints were filed on behalf of AirTouch's cellular
customers, one in San Diego County Superior Court and one in the United States
District Court for the Southern District of California, alleging that the
Company and U S WEST conspired to fix the prices of retail and wholesale
cellular radio services in the San Diego market by engaging in tacit collusion
by setting their initial basic rates for cellular service at nearly identical
levels. Plaintiffs' expert has estimated the damages to the class at between
$46.0 and $59.0 million. The state case has been stayed pending the outcome of
the federal case. Discovery is taking place and a class has been agreed to for
certification. In late 1995, the California Court of Appeals effectively
reinstated a 1990 lawsuit filed by a U S WEST agent against U S WEST and the
Company containing allegations similar to those in the other San Diego cases.
The Appeals Court reversed a state trial court decision dismissing the remaining
plaintiff in the original suit. The Company does not believe that these
proceedings will have a material adverse effect on the Company's financial
position or results of operations.
In 1994, a class action complaint was filed on behalf of AirTouch's cellular
customers in San Francisco County Superior Court alleging certain facts,
including a similarity in the pricing structures of the two competitors which
plaintiffs contend is circumstantial evidence of an implicit conspiracy between
Bay Area Cellular Telephone Company, in which the Company has an indirect
interest, and GTE Mobilnet to fix the prices of retail and wholesale cellular
radio services in the San Francisco Bay Area market. This action is still in the
preliminary pleading phase. In 1996, an almost identical class action complaint
was filed by a different plaintiff in Alameda County Superior Court. It alleges
essentially the same facts as the San Francisco case alleges, but contends that
the facts are circumstantial evidence of an explicit conspiracy to fix prices
between the two companies. It also names as defendants the parents, former
parents, partners, and predecessors in interest to Bay Area Cellular Telephone
Company and GTE Mobilnet. The Company has moved to abate this complaint pending
resolution of the San Francisco case. The Company does not believe that these
proceedings will have a material adverse effect on the Company's financial
position or results of operations.
The Company is party to various other legal proceedings in the ordinary course
of business. Although the ultimate resolution of these various other proceedings
cannot be ascertained, management does not expect that they will have a material
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 June 30, 1996, the
Company's proportionate share under such arrangements was $165.4 million. The
Company believes it is remote that it will be required to pay under these
various arrangements.
E. Subsequent Events
On July 16, 1996, the Company issued 7 1/8% Notes in the aggregate principle
amount of $250 million and 7 1/2% Notes in the aggregate principle amount of
$400 million, maturing in July 2001 and July 2006, respectively. The Notes were
issued in connection with the Company's shelf Registration Statement on Form S-3
(Reg. No. 33-62787). Interest on the Notes is payable semi-annually on January
15 and July 15 commencing January 15, 1997.
9
<PAGE> 10
AirTouch Communications, Inc. And Subsidiaries
Selected Proportionate Operating Data (UNAUDITED)
The following table is not required by GAAP and is not 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 facilitates the understanding and assessment of its
Consolidated Financial Statements.
Under GAAP, the Company consolidates the entities in which it has a controlling
interest and uses the equity method to account for entities over which 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. For example, domestic cellular proportionate results
present the Company's share -- its percentage ownership -- for all significant
domestic cellular operations, including those joint ventures and partnerships
where the Company does not own more than 50 percent. Similarly, total
proportionate results show the Company's share of all its significant worldwide
operations.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------------------------------------------
(Dollars in millions) 1996 1995(b) 1996 1995(b)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL COMPANY(1)
Total net operating revenues(a) $ 880.4 $ 625.0 $1,681.8 $1,187.8
Total operating income $ 151.3 $ 74.6 $ 264.3 $ 161.0
Total operating cash flow(2) $ 289.3 $ 177.6 $ 534.1 $ 359.6
- ------------------------------------------------------------------------------------------------------------------
DOMESTIC CELLULAR OPERATIONS
Service and other revenues(a) $ 470.5 $ 378.5 $ 904.6 $ 722.0
Equipment sales 20.7 20.9 39.4 43.7
Cost of equipment sales (40.7) (25.2) (80.0) (56.5)
--------------------------------------------------------------------------------------------------------------
Net operating revenues 450.5 374.2 864.0 709.2
--------------------------------------------------------------------------------------------------------------
Cost of revenues(a) 51.5 48.9 100.9 92.0
Selling and customer operations expenses 157.9 133.9 301.5 247.6
General, administrative, and other expenses 37.8 36.1 71.6 65.0
Depreciation and amortization expenses 60.0 45.5 118.9 90.8
--------------------------------------------------------------------------------------------------------------
Total costs and expenses 307.2 264.4 592.9 495.4
--------------------------------------------------------------------------------------------------------------
Operating income $ 143.3 $ 109.8 $ 271.1 $ 213.8
==============================================================================================================
Operating cash flow(2) $ 203.3 $ 155.3 $ 390.0 $ 304.6
==============================================================================================================
</TABLE>
(a)Presentation for 1995 has been restated to conform to current year
presentation. See Note A, "Basis of Presentation," to the Consolidated
Financial Statements.
(b)Certain Total Company data has been restated to include effects of the
Company's interests in Italy, South Korea, and Spain.
(1)Reflects results of systems in which the Company owns an interest,
multiplied by the Company's ownership interest, exclusive of cost-based
investments and certain equity-based investments that are not material to the
information presented.
(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 interests in the respective
entities' operating cash flows. As such, proportionate operating cash flow
does not represent cash available to the Company.
10
<PAGE> 11
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
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 subsidiaries, partnerships, and joint ventures (collectively the
"Company" or "AirTouch"). This discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements and
accompanying Notes and the Company's 1995 Annual Report on Form 10-K, as
amended, including Item 1, "Business" therein.
Private Securities Litigation Reform Act Safe Harbor Statement. In addition to
historical information, management's discussion and analysis includes certain
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial position. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial position to differ materially. Such factors
include, but are not limited to: a change in economic conditions in the
Company's markets which adversely affects the level of demand for wireless
services; greater-than-anticipated competition resulting in price reductions,
new product offerings, or higher customer acquisition costs;
better-than-expected customer growth necessitating increased investment in
network capacity; increased cellular fraud; the impact of new business
opportunities requiring significant initial investments; the impact of
deployment of new technologies on capital spending; and the risk that
technologies will not be developed according to anticipated schedules or perform
according to expectations. These and other risks and uncertainties related to
the business are described in detail in the Company's Registration Statement on
Form S-4 (Reg. No. 333-03107) under the heading "Company-Related Risks," which
is incorporated by reference herein. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Under generally accepted accounting principles ("GAAP"), the Company reports
revenues and expenses in its Consolidated Statements of Income for each
subsidiary and partnership in which it has a controlling interest. The Company
uses the equity method to record the operating results of entities in which the
Company has significant influence, but does not have a controlling interest.
A discussion of the Company's results of operations on a proportionate basis
follows the discussion of the "GAAP-Basis Results of Operations" in
"Proportionate Results of Operations." Proportionate accounting is not required
by GAAP or intended to replace the Consolidated Financial Statements prepared in
accordance with GAAP.
BUSINESS ENVIRONMENT
CELLULAR COMMUNICATIONS, INC. ("CCI") MERGER
See Note B, "Significant Changes since December 31, 1995-CCI Merger Agreement,"
to the Consolidated Financial Statements for a discussion regarding the status
of this acquisition.
U S WEST JOINT VENTURE
In July 1994, the Company and U S WEST, Inc. ("U S WEST") entered into an
agreement to combine their domestic cellular properties into a joint venture
(the "AirTouch/U S WEST joint venture") in a multi-phased transaction. During
the initial phase the companies formed a jointly owned management company to
serve as a single management resource and provide support services to both
companies' domestic cellular operations, which remain separately owned. In May
1996, U S WEST began providing cellular services under the AirTouch brand name
in the 12 states in which it operates.
The Company and U S WEST are currently seeking to obtain the regulatory and
other approvals and consents necessary to enter into the second phase of the
transaction, in which the companies will combine their respective domestic
cellular properties in the joint venture.
Concurrent with the formation of the AirTouch/U S WEST joint venture, the
companies also formed an equally owned personal communications services ("PCS")
partnership (the "PCS Partnership"), which is a 50% partner in
11
<PAGE> 12
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
PrimeCo Personal Communications ("PrimeCo"). The Company and U S WEST plan to
contribute their respective interests in the PCS Partnership to the AirTouch/U S
WEST joint venture. The timing of such contribution is at U S WEST's discretion
and will occur either at the closing of the second phase or a date selected by U
S WEST, but no later than mid-1998. The Company anticipates that the PCS
Partnership will be required to make significant capital contributions to
PrimeCo for the build-out of its PCS markets and that it will continue to
experience substantial operating losses associated with the start-up phase of
the PCS business, which is expected to last several years. Upon contribution of
the PCS Partnership to the joint venture, the Company's relative share of PCS
capital investments and operating losses related to the PCS Partnership will
increase from 50% to its percentage ownership of the joint venture.
The Company presently owns 70% of the management company formed in the initial
phase of the transaction and would expect to own approximately 74% of the
AirTouch/U S WEST joint venture upon the commencement of the second phase in the
event that all of its and U S WEST's domestic cellular properties (but not their
interests in the PCS Partnership) were contributed at that time. However, the
actual ownership interests of the Company and U S WEST in their joint venture at
the commencement of the second phase of the transaction or at any given point in
time thereafter will depend, among other things, on the ability of the companies
to contribute their respective domestic cellular properties, the timing of the
contributions of the domestic cellular properties, the timing and value of the
PCS Partnership contribution, and the status of the Company's acquisition of
CCI. The Company could experience near-term earnings dilution in connection with
the contribution of its and U S WEST's domestic cellular properties to the
AirTouch/U S WEST joint venture. The extent of such dilution, which could be
material, will depend on the relative profitability of the Company's and U S
WEST's respective operations subsequent to the contributions of such operations.
Also, subsequent to the closing of the second phase, the Company and U S WEST
will each deconsolidate for financial reporting purposes the operations they
each contribute to the joint venture, using instead the equity method of
accounting to report their respective percentage interests in subsequent
operating results of the joint venture. The Company cannot precisely assess the
future impact of its joint venture with U S WEST on the Company's results of
operations due to the uncertain timing of the second phase of the transaction
and the uncertain timing of the contribution of the PCS Partnership to the joint
venture. The Company anticipates that the second phase of the transaction will
occur in the fourth quarter of 1996 or the first quarter of 1997. See Pro Forma
Condensed Combined Financial Statements in the Company's Registration Statement
on Form S-4 (Reg. No. 333-03107) for further discussion of the transaction with
U S WEST.
U S WEST has the right to exchange its interest in the AirTouch/U S WEST joint
venture for up to 19.9% of the Company's common stock outstanding at the time of
the exchange ("Phase III"), which is exercisable after (i) the commencement of
Phase II, (ii) the contribution of the PCS Partnership, and (iii) the completion
of the Company's transaction with CCI have occurred. This right expires on July
25, 2004. Any such exchange would be made at a ratio reflecting the appraised
private market value of U S WEST's interest in the AirTouch/U S WEST joint
venture and the appraised public market value of the shares of the Company's
common stock to be acquired by U S WEST in the exchange. In the event that the
value of U S WEST's interest in the AirTouch/U S WEST joint venture determined
by such appraisals would result in the issuance to U S WEST of more than 19.9%
of the Company's then outstanding common stock, U S WEST is entitled to receive
the excess in the form of non-voting preferred stock which preferred stock is
redeemable at any time following issuance, at the option of U S WEST, for cash
or, at the option of the Company, for the Company's common stock). The Company
expects that an issuance of its shares at Phase III would result in per share
earnings dilution. The Company has amended its stockholder rights agreement so
that U S WEST will not be deemed to be an Acquiring Person, as defined therein,
by reason of its rights in connection with the exchange.
If U S WEST exercises its right to exchange its interest in the AirTouch/U S
WEST joint venture for capital stock of the Company, U S WEST will be entitled
to representation on the Company's Board of Directors and will be subject to
certain voting restrictions. U S WEST is subject to certain standstill
restrictions with respect to the Company through July 24, 2004, unless such
restrictions are earlier terminated or suspended. U S WEST is also prohibited
from selling, exchanging, transferring or otherwise disposing of the Company's
common stock received in Phase III (or any interest therein) prior to July 25,
1999 (except for transfers to direct or indirect wholly-owned subsidiaries of U
S WEST), and thereafter is subject to certain transfer restrictions and entitled
to certain registration rights.
12
<PAGE> 13
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
CONTINGENCIES
The Company is party to various legal proceedings, including certain antitrust
litigation. See Note D, "Contingencies," to the Consolidated Financial
Statements.
RESULTS OF OPERATIONS
The following discussions compare the results of operations for the three and
six month periods ended June 30, 1996 to three and six month periods ended June
30, 1995, respectively. The operating results for these periods are not
necessarily indicative of operating results in future periods. The following
comparative information should be read in conjunction with the Consolidated
Financial Statements and Notes for each period discussed, as well as the
information presented in the other sections of management's discussion and
analysis.
CONSOLIDATED DOMESTIC AND INTERNATIONAL OPERATIONS
Consolidated operating revenues and expenses principally include domestic
cellular operations in the Company's six consolidated domestic markets, domestic
paging operations, and the international operations of the Company's Swedish
cellular subsidiary, NordicTel Holdings A.B. ("NordicTel"). The Company's six
consolidated domestic cellular markets are Los Angeles, Sacramento, Atlanta, San
Diego, Wichita, and Topeka.
OPERATING REVENUES AND EXPENSES
Operating revenues primarily include cellular and paging service revenues and
equipment sales. Cellular service revenues primarily consist of air time
charges, access fees, and in-bound roaming charges. Paging service revenues
primarily consist of paging service charges and rentals of paging units in the
United States. Equipment sales consist of revenues from sales of cellular
telephones and pagers. Equipment sales are not a primary part of the Company's
cellular or paging businesses. Rather, the Company offers cellular and paging
equipment at competitive prices, which are usually at or below cost, in order to
market its cellular and paging services.
Operating expenses include: cost of revenues; cost of equipment sales; selling
and customer operations expenses; general, administrative, and other expenses;
and depreciation and amortization expenses. Cost of revenues primarily consists
of cellular and paging network operating costs, interconnection fees accessed by
local exchange carriers, and costs of roaming fraud. Interconnection costs have
fixed and variable components. The fixed component of interconnection costs
consists of monthly flat-rate fees for facilities leased from local exchange
carriers. The variable component of interconnection costs, which fluctuates in
relation to the level of cellular calls and paging transmissions, consists of
per-minute fees charged by local exchange carriers for cellular calls or paging
transmissions originating or terminating on their networks. Selling and customer
operations expenses primarily consist of compensation to sales channels;
salaries, wages, and related benefits for sales and customer service personnel;
and billing, advertising, and promotional expenses. General, administrative, and
other expenses primarily consist of salaries, wages and related benefits for
general and administrative personnel, international license application costs,
bad debt, and other overhead expenses. Depreciation and amortization primarily
consists of depreciation recorded for the Company's cellular and paging
networks, as well as amortization of intangibles such as wireless license costs
and goodwill.
13
<PAGE> 14
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
GAAP-BASIS CONSOLIDATED RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
============================================================================================================================
For the Three Months Ended June 30 For the Six Months Ended June 30
-----------------------------------------------------------------------------------
Change Change
----------------- -----------------
(Dollars in millions) 1996 1995 $ % 1996 1995 $ %
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wireless services and other revenues:
Cellular service(a) $373.7 $304.9 $ 68.8 22.6 $714.6 $583.3 $131.3 22.5
Paging service 65.7 53.6 12.1 22.6 131.7 105.1 26.6 25.3
Other revenues 11.7 18.9 (7.2) (38.1) 24.6 34.9 (10.3) (29.5)
- ----------------------------------------------------------------------------------------------------------------------------
451.1 377.4 73.7 19.5 870.9 723.3 147.6 20.4
Cellular and paging equipment sales 30.2 26.0 4.2 16.2 59.3 54.0 5.3 9.8
- ----------------------------------------------------------------------------------------------------------------------------
Operating revenues 481.3 403.4 77.9 19.3 930.2 777.3 152.9 19.7
- ----------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Cost of revenues(a) 59.0 61.2 (2.2) (3.6) 116.2 111.5 4.7 4.2
Cost of cellular and paging
equipment sales 43.6 27.8 15.8 56.8 89.4 60.9 28.5 46.8
Selling and customer operations
expenses 153.1 139.3 13.8 9.9 291.4 247.8 43.6 17.6
General, administrative, and
other expenses 94.6 89.6 5.0 5.6 187.9 167.7 20.2 12.0
Depreciation and amortization
expenses 68.1 50.9 17.2 33.8 133.1 100.8 32.3 32.0
- ----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 418.4 368.8 49.6 13.4 818.0 688.7 129.3 18.8
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 62.9 34.6 28.3 81.8 112.2 88.6 23.6 26.6
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic 58.5 43.4 15.1 34.8 114.6 78.8 35.8 45.4
International (9.4) (4.9) (4.5) (91.8) (16.5) (11.3) (5.2) (46.0)
Minority interests in net (income)
loss of consolidated wireless
systems (25.8) (4.7) (21.1) (448.9) (34.3) (13.6) (20.7) (152.2)
Interest:
Expense (8.6) (0.5) (8.1) (17.0) (4.4) (12.6) (286.4)
Income 1.8 11.0 (9.2) (83.6) 6.3 23.1 (16.8) (72.7)
Foreign exchange gain (loss) 0.7 (0.6) 1.3 216.7 2.4 (8.4) 10.8 128.6
Miscellaneous income (expense) 2.9 0.3 2.6 866.7 8.9 (0.4) 9.3
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 83.0 78.6 4.4 5.6 176.6 152.4 24.2 15.9
Income taxes 21.8 39.9 (18.1) (45.4) 63.2 78.4 (15.2) (19.4)
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 61.2 $ 38.7 $ 22.5 58.1 $113.4 $ 74.0 $ 39.4 53.2
============================================================================================================================
</TABLE>
(a)Presentation for 1995 has been restated to conform to the current year
presentation. See Note A, "Basis of Presentation," to the Consolidated
Financial Statements.
INTERNATIONAL OPERATIONS
Consolidated international results during the three and six months ended June
30, 1996 comprised 11.0% and 10.4% of operating revenues and 14.3% and 14.3% of
operating expenses, respectively, as compared to 9.3% and 8.7% of operating
revenues and 16.1% and 14.5% of operating expenses, respectively, during the
three and six months ended June 30, 1995.
OPERATING REVENUES
The increase in cellular service revenues resulted primarily from a 34.3%
increase in the Company's domestic consolidated customer base from June 30, 1995
through June 30, 1996, partially offset by a 14.3% and a 13.7% decrease in the
corresponding average revenue per customer for the three and six month periods
ended June 30, 1996, respectively. The Company achieved customer growth in its
consolidated markets through advertising and by continuing to offer incentive
programs such as waived service establishment charges, discounted monthly access
fees, heavily discounted cellular handsets, free or discounted air time, and
reduced or fixed rates for off-peak usage and roaming. The decline in average
revenue per customer was primarily attributable to continued success in
penetrating the consumer markets and to rate reductions and discounts associated
with customer incentive programs.
14
<PAGE> 15
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
Consumer usage patterns contributed to declines in average revenue per customer
because consumers typically make fewer telephone calls than business customers
and often place many of their calls during lower-rate, off-peak calling periods.
The Company expects the shift toward consumer markets to follow industry trend
and continue to result in declining average revenue per customer.
The increase in paging service revenues resulted from the acquisition of Message
Center Beepers, Inc. ("Message Center") in mid-December 1995, as well as from
growth in existing and start-up paging markets.
CELLULAR AND PAGING EQUIPMENT SALES AND COST OF SALES
Negative equipment margins increased from $1.8 and $6.9 million during the three
and six months ended June 30, 1995, respectively, to $13.4 and $30.1 million
during the three and six months ended June 30, 1996, respectively, as a result
of competitive pressures which required the Company to offer new customers
heavily discounted cellular equipment. The Company also experienced an increase
in the level of discounted equipment offered to existing customers in connection
with retention efforts. Competitive pressure to offer heavily discounted
cellular equipment became substantially more significant in the Company's
California markets subsequent to the lifting of California Public Utilities
Commission ("CPUC") restrictions on the bundling of cellular service and
equipment on April 5, 1995. Prior to the lifting of such restrictions, cellular
carriers in California were prohibited from requiring customers to activate
service in order to receive discounts on cellular equipment. The effects of
competitive pressures and customer retention efforts were partially offset by
decreases in handset prices. The Company expects cellular equipment sales to
continue to generate negative margins for the foreseeable future.
OPERATING EXPENSES
Despite significant growth in the Company's consolidated markets, cost of
revenues decreased during the three months ended June 30, 1996, as compared to
same period during 1995, due primarily to significant reductions in domestic
cellular roaming fraud, successful negotiation of reduced domestic cellular
interconnection rates, and the sale of the Company's credit card verification
company during the first quarter of 1996. These factors, in addition to
increasing economies of scale, also contributed to a decrease in cost of
revenues as a percentage of wireless service and other revenues, which decreased
from 16.2% and 15.4% during the three and six months ended June 30, 1995,
respectively, to 13.1% and 13.3% during the three and six months ended June 30,
1996, respectively. These benefits were partially offset by increased costs
associated with domestic paging start-up markets and the acquisition of Message
Center during December 1995. However, cost of revenues increased during the six
months ended June 30, 1996, as compared to the six months ended June 30, 1995,
due primarily to increased costs associated with the acquisition of Message
Center and domestic paging start-up markets, as well as slightly higher domestic
cellular interconnection costs associated with increased usage. These increases
were partially offset by significant reductions in domestic cellular roaming
fraud, successful negotiation of reduced domestic cellular interconnection
rates, and the sale of the Company's credit card verification company during the
first quarter of 1996. The Company anticipates cost of revenues to continue to
decline as a percentage of operating revenues as customers are added to existing
networks and additional economies of scale are achieved.
The increases in selling and customer operations expenses were partially
attributable to increased selling costs associated with an 18.9% and 28.6%
increase in the gross number of customers added to the Company's consolidated
domestic cellular networks during the three and six months ended June 30, 1996,
respectively. Increases were also attributable to costs of second quarter
AirTouch national brand name advertising campaigns, increased selling costs
associated with customer growth in consolidated international cellular
operations, and expansion of customer operations necessary to support domestic
and international cellular and paging customer growth. Despite expansion of
customer operations, consolidated customer operations costs remained stable as a
percentage of operating revenues. Although aggregate selling expenses increased
due to strong customer growth, the average acquisition cost per gross customer
added to consolidated domestic cellular networks decreased due to improved
performance of lower-cost direct sales channels and to increased usage of
customer incentive programs such as discounted cellular service and telephones.
However, increased distribution through direct channels resulted in a shift of
some customer acquisition costs from selling expenses to negative margins on
cellular handsets. Including the impact of negative equipment margins, the
consolidated domestic cellular average acquisition cost per gross customer added
remained relatively flat during the three and six month periods ended June 30,
1996, as compared to the corresponding periods in 1995.
15
<PAGE> 16
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
The increases in general, administrative, and other expenses during the three
and six months ended June 30, 1996, as compared to the corresponding periods
during 1995, were due to moderate expansion of administrative functions
necessary to support cellular and paging customer growth, the addition of
administrative functions associated with Message Center, the Company's share of
U S WEST's costs incurred to adopt the AirTouch brand name, increases in bad
debt expenses, and costs associated with deployment of a new customer support
system. Increases in bad debt expenses were consistent with increases in
consolidated revenues. Increases in expenses were partially offset by the
absence of expenses associated with AirTouch Teletrac, which was sold early in
the first quarter of 1996. As a percentage of operating revenues, general,
administrative, and other expenses decreased slightly during the three and six
month periods ended June 30, 1996, reflecting increasing economies of scale and
other efficiencies gained through the operation of the AirTouch/U S WEST joint
venture.
Despite the overall increase in cash costs, the average cash cost per customer
including losses on equipment sales decreased 17.5% and 12.2% for the three and
six months ended June 30, 1996, respectively, as compared to the smaller
declines in average revenue per customer during the corresponding periods.
Decreases in average cash cost per customer were a result of the Company's
efforts to drive down cash costs faster than declines in average revenue per
customer.
Increases in depreciation and amortization primarily reflect increased
investment in property, plant, and equipment. The increase was also attributable
to amortization of identifiable intangible assets and goodwill associated with
the acquisition of Message Center during December 1995 and goodwill associated
with the purchase of an additional 24% interest in CCI during October 1995. As a
percentage of operating revenues, depreciation and amortization increased from
approximately 13% during the three and six months ended June 30, 1995 to
approximately 14% during the corresponding periods of 1996, reflecting
incremental depreciation of significant capital investments incurred during 1995
and 1996 to build-out and expand wireless networks, to deploy a new customer
support system, and to install new fraud prevention and detection equipment.
EQUITY IN NET INCOME (LOSS) OF UNCONSOLIDATED WIRELESS SYSTEMS
Domestic. Equity earnings increased primarily as a result of growth in each of
the customer bases of New Par and CMT Partners, partially offset by continuing
declines in average revenue per customer. A portion of the increase also was
attributable to the purchase of an additional 24% interest in CCI, the Company's
50% partner in New Par.
International. Increased losses were due primarily to continuing start-up and
post-launch costs associated with cellular operations in Spain, Italy, Korea,
and Poland, and continued high customer growth in Japan, substantially offset by
significantly improved operating results of existing systems in Germany,
Portugal, and Belgium. Increased costs incurred in start-up markets were
primarily attributable to costs associated with rapid customer growth and
continued network buildout. Improvements in existing cellular operations
resulted from significant expansion of customer bases.
OTHER INCOME AND EXPENSES
The increase in interest expense reflects higher debt balances during the three
and six months ended June 30, 1996, as compared to the same periods during 1995,
partially offset by increased capitalization of interest during 1996. Similarly,
the decrease in interest income reflects lower cash balances available for
investment during the three and six months ended June 30, 1996, as compared to
the same periods during the prior year.
The favorable variance in foreign exchange gain (loss) during the three and six
months ended June 30, 1996, as compared to the corresponding periods during
1995, resulted from gains recorded on foreign currency financial instruments not
qualifying for hedge accounting under GAAP. The favorable increase in
miscellaneous income (expense) during the three and six months ended June 30,
1996 was attributable to the net gain on the disposition of certain
international telecommunications interests recorded during the first quarter of
1996 and a gain recognized during the second quarter of 1996 on the termination
for accounting purposes of certain interest rate swaps, which were redesignated.
INCOME TAXES
The effective tax rates for the three and six month periods ended June 30, 1996
and June 30, 1995 were 26.3%, 35.8%, 50.8%, and 51.4%, respectively. The
effective income tax rates for the three and six months ended June 30, 1996 were
lower than the prior year's effective income tax rates primarily as a result of
a reduction in the valuation
16
<PAGE> 17
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
allowance which was recorded in the second quarter of 1996 related to the
Company's consolidated international operations.
PROPORTIONATE RESULTS OF OPERATIONS
The following tables for domestic and international proportionate cellular
operations are not required by GAAP or intended to replace the Consolidated
Financial Statements prepared in accordance with GAAP. The tables are presented
to provide supplemental data. Because significant assets of the Company are not
consolidated, the Company believes that proportionate financial and operating
data facilitates the understanding and assessment of its Consolidated Financial
Statements. The following proportionate accounting tables reflect the relative
weight of the Company's ownership interests in its domestic and international
cellular systems. Data from certain systems is excluded because the data is not
available on a timely basis and is not material to the information presented.
DOMESTIC CELLULAR PROPORTIONATE RESULTS
<TABLE>
<CAPTION>
==========================================================================================================
For the Three Months Ended June 30
-------------------------------------------
Change
-------------------
OPERATING RESULTS (Dollars in millions) 1996 %(a) 1995 %(a) $ %
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service and other revenues(b) $470.5 104.4 $378.5 101.1 $ 92.0 24.3
Equipment sales 20.7 4.6 20.9 5.6 (0.2) (1.0)
Cost of equipment sales (40.7) (9.0) (25.2) (6.7) (15.5) (61.5)
- ----------------------------------------------------------------------------------------------------------
Net operating revenues 450.5 100.0 374.2 100.0 76.3 20.4
- ----------------------------------------------------------------------------------------------------------
Cost of revenues(b) 51.5 11.4 48.9 13.1 2.6 5.3
Selling and customer operations expenses 157.9 35.0 133.9 35.8 24.0 17.9
General, administrative, and other
expenses 37.8 8.4 36.1 9.6 1.7 4.7
Depreciation and amortization expenses 60.0 13.3 45.5 12.2 14.5 31.9
- ----------------------------------------------------------------------------------------------------------
Total costs and expenses 307.2 68.1 264.4 70.7 42.8 16.2
- ----------------------------------------------------------------------------------------------------------
Operating income $143.3 31.9 $109.8 29.3 $ 33.5 30.5
==========================================================================================================
Operating cash flow $203.3 $155.3 $ 48.0 30.9
Operating cash flow margin(c) 45.1% 41.5% 8.7
==========================================================================================================
<CAPTION>
For the Six Months Ended June 30
-------------------------------------------
Change
--------------------
OPERATING RESULTS (Dollars in millions) 1996 %(a) 1995 %(a) $ %
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service and other revenues(b) $904.6 104.7 $722.0 101.8 $182.6 25.3
Equipment sales 39.4 4.6 43.7 6.2 (4.3) (9.8)
Cost of equipment sales (80.0) (9.3) (56.5) (8.0) (23.5) (41.6)
- -----------------------------------------------------------------------------------------------------------
Net operating revenues 864.0 100.0 709.2 100.0 154.8 21.8
- -----------------------------------------------------------------------------------------------------------
Cost of revenues(b) 100.9 11.7 92.0 13.0 8.9 9.7
Selling and customer operations expenses 301.5 34.9 247.6 34.9 53.9 21.8
General, administrative, and other
expenses 71.6 8.3 65.0 9.2 6.6 10.2
Depreciation and amortization expenses 118.9 13.8 90.8 12.8 28.1 30.9
- -----------------------------------------------------------------------------------------------------------
Total costs and expenses 592.9 68.7 495.4 69.9 97.5 19.7
- -----------------------------------------------------------------------------------------------------------
Operating income $271.1 31.3 $213.8 30.1 $ 57.3 26.8
===========================================================================================================
Operating cash flow $390.0 $304.6 $ 85.4 28.0
Operating cash flow margin(c) 45.1% 42.9% 5.1
===========================================================================================================
</TABLE>
(a)Percentage of net operating revenues.
(b)Presentation for 1995 has been restated to conform to the current year
presentation. See Note A, "Basis of Presentation," to the Consolidated
Financial Statements.
(c)If net losses on equipment sales were reclassified as operating expenses,
operating cash flow margins would be 43.2% and 41.0% for the three months
ended June 30, 1996 and 1995, respectively, and 43.1% and 42.2% for the six
months ended June 30, 1996 and 1995, respectively.
17
<PAGE> 18
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
DOMESTIC CELLULAR PROPORTIONATE OPERATING DATA
<TABLE>
<CAPTION>
=================================================================================================================
For the Three Months Ended June 30 For the Six Months Ended June 30
-----------------------------------------------------------------------------
Change Change
------------------ -----------------
(In thousands, except per unit data) 1996 1995 Units/$ % 1996 1995 Units/$ %
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subscribers 2,550 1,804 746 41.4 2,550 1,804 746 41.4
Subscriber net adds in period,
excluding acquisitions 158 140 18 12.9 288 244 44 18.0
Monthly average revenue per unit $ 64 $ 73 $ (9) (12.3) $ 63 $ 72 $ (9) (12.5)
Monthly cash cost per unit $ 36 $ 43 $ (7) (16.3) $ 36 $ 42 $ (6) (14.3)
=================================================================================================================
</TABLE>
ACQUISITION OF ADDITIONAL INTEREST IN CCI
In October 1995, the Company purchased an additional 24% interest in CCI, its
50% partner in New Par. Accordingly, as a result of this acquisition, the
Company's proportionate share of New Par's operating results increased to
reflect its additional 12% indirect interest. This increase in the Company's
ownership interest in CCI and the related indirect increase in its interest in
New Par were responsible for 5.8 and 5.8 percentage points of the total increase
in net operating revenues and 5.4 and 5.2 percentage points of the total
increase in operating expenses during the three and six months ended June 30,
1996, respectively, as compared to the corresponding periods of 1995.
SERVICE AND OTHER REVENUES
The increase in cellular service revenues resulted primarily from a 41.4%
increase in the Company's domestic customer base from June 30, 1995 through June
30, 1996, partially offset by a 12.3% and a 12.5% decrease in the corresponding
average revenue per customer for the three and six month periods ended June 30,
1996, respectively. The Company achieved customer growth in its domestic markets
through advertising and by continuing to offer incentive programs such as waived
service establishment charges, discounted monthly access fees, discounted
cellular handsets, free or discounted air time, and reduced or fixed rates for
off-peak usage and roaming. The decline in average revenue per customer was
primarily attributable to continued success in penetrating the consumer markets
and to rate reductions and discounts associated with customer incentive
programs. Consumer usage patterns contributed to declines in average revenue per
customer because consumers typically make fewer telephone calls than business
customers and often place many of their calls during lower-rate, off-peak
calling periods. The Company expects the shift toward consumer markets to follow
industry trend and continue to result in declining average revenue per customer.
EQUIPMENT SALES AND COST OF SALES
Negative equipment margins increased from $4.3 and $12.8 million during the
three and six months ended June 30, 1995, respectively, to $20.0 and $40.6
million during the three and six months ended June 30, 1996, respectively, as a
result of competitive pressures which required the Company to offer new
customers heavily discounted cellular equipment. The Company also experienced an
increase in the level of discounted equipment offered to existing customers in
connection with retention efforts. Competitive pressure to offer heavily
discounted cellular equipment became substantially more significant in the
Company's California markets, subsequent to the lifting of CPUC restrictions on
the bundling of cellular service and equipment on April 5, 1995. The effects of
competitive pressures and customer retention efforts were partially offset by
decreases in handset prices. The Company expects cellular equipment sales to
continue to generate negative margins for the foreseeable future.
OPERATING EXPENSES
Cost of revenues increased by only 5.3% and 9.7% during the three and six months
ended June 30, 1996, respectively, despite revenue increases of approximately
25% for the corresponding periods. Increases were due primarily to incremental
variable interconnection costs associated with increased usage, substantially
offset by significant reductions in domestic cellular roaming fraud and
successful negotiation of reduced domestic cellular interconnection rates. As a
percentage of wireless services and other revenues, cost of revenues decreased
from 12.9% and 12.7% during the three and six months ended June 30, 1995,
respectively, to 10.9% and 11.2% during the three months and six months ended
June 30, 1996, respectively. The decrease in costs as a percentage of revenue
was attributable to reduced roaming fraud, cost containment efforts, negotiation
of reduced interconnection rates, and economies of scale. The Company
anticipates cost of revenues to continue to decline as a percentage of operating
revenues as customers are added to existing networks and additional economies of
scale are achieved.
18
<PAGE> 19
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
The increases in selling and customer operations expenses were partially
attributable to increased selling costs associated with a 20.2% and a 27.5%
increase in the gross number of customers added to the Company's domestic
cellular networks during the three and six months ended June 30, 1996,
respectively. Increases were also attributable to costs of second quarter
AirTouch national brand name advertising campaigns, increases in bad debt
expense, and expansion of customer operations necessary to support cellular
customer growth. Increases in bad debt expenses were consistent with increases
in revenues. Despite expansion of customer operations, domestic customer
operations costs remained relatively stable as a percentage of operating
revenues. Although aggregate selling expenses increased due to strong customer
growth, the average acquisition cost per gross customer added to domestic
cellular networks decreased due to improved performance of lower-cost direct
sales channels and to increased usage of customer incentive programs such as
discounted or free cellular service and telephones. However, increased
distribution through direct channels resulted in a shift of some customer
acquisition costs from selling expenses to negative margins on cellular
handsets. Including the impact of negative equipment margins, the domestic
cellular average acquisition cost per gross customer added remained relatively
flat during the three and six month periods ended June 30, 1996, as compared to
the corresponding periods in 1995.
The increases in general, administrative, and other expenses during the three
and six months ended June 30, 1996 were due to moderate expansion of
administrative functions necessary to support customer growth in domestic
markets, the Company's share of U S WEST's costs incurred to adopt the AirTouch
brand name, and costs associated with deployment of a new customer support
system. Despite the Company's share of U S WEST's advertising costs and system
deployment costs, general, administrative, and other expenses decreased as a
percentage of net operating revenues during the three and six months ended June
30, 1996, reflecting increasing economies of scale and other efficiencies gained
through the operation of the AirTouch/U S WEST joint venture.
Despite the overall increase in cash costs, the average cash cost per customer
including losses on equipment sales decreased 16.3% and 14.3% for the three and
six months ended June 30, 1996, respectively, as compared to the smaller
declines in average revenue per customer during the corresponding periods.
Decreases in average cash cost per customer were a result of the Company's
efforts to drive down cash costs faster than declines in average revenue per
customer.
Increases in depreciation and amortization primarily reflect increased
investment in property, plant, and equipment and intangible assets associated
with the Company's purchase of an additional 24% interest in CCI during October
1995. Depreciation and amortization as a percentage of net operating revenues
increased from 12.2% and 12.8% during the three and six months ended June 30,
1995, respectively, to 13.3% and 13.8% during the corresponding periods of 1996,
due primarily to incremental depreciation of significant capital investments
incurred during 1995 and 1996 to build-out and expand wireless networks, to
deploy a new customer support system, and to install new fraud prevention and
detection equipment.
19
<PAGE> 20
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
INTERNATIONAL CELLULAR PROPORTIONATE RESULTS AND OPERATING DATA
<TABLE>
<CAPTION>
====================================================================================================================
For the Three Months Ended June 30
------------------------------------------------------------------------
Change
--------------------
OPERATING RESULTS (Dollars in millions) 1996 %(a) 1995(b) %(a) $ %
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Existing operations:(c)
Net operating revenues $ 342.9 100.0 $ 180.1 100.0 $ 162.8 90.4
Operating income $ 57.6 16.8 $ (4.1) (2.3) $ 61.7
Operating cash flow $ 108.4 31.6 $ 36.0 20.0 $ 72.4 201.1
Income/(loss) $ 26.4 $ (11.3) $ 37.7 333.6
Start-up systems:(d)
Income/(loss) $ (29.7) $ (4.0) $ (25.7) (642.5)
Total cellular income/(loss) $ (3.3) $ (15.3) $ 12.0 78.4
OPERATING DATA (In thousands)
- --------------------------------------------------------------------------------------------------------------------
Subscribers 1,166 543 623 114.7
Subscriber net adds in period, excluding
acquisitions 205 98 107 109.2
====================================================================================================================
<CAPTION>
For the Six Months Ended June 30
-------------------------------------------------------------------
Change
------------------
OPERATING RESULTS (Dollars in millions) 1996 %(a) 1995(b) %(a) $ %
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Existing operations:(c)
Net operating revenues $ 646.7 100.0 $ 340.4 100.0 $ 306.3 90.0
Operating income $ 83.2 12.9 $ 6.3 1.9 $ 76.9
Operating cash flow $ 184.7 28.6 $ 79.9 23.5 $ 104.8 131.2
Income/(loss) $ 31.1 $ (12.7) $ 43.8 344.9
Start-up systems:(d)
Income/(loss) $ (49.4) $ (14.2) $ (35.2) (247.9)
Total cellular income/(loss) $ (18.3) $ (26.9) $ 8.6 32.0
OPERATING DATA (In thousands)
- ---------------------------------------------------------------------------------------------------------------
Subscribers 1,166 543 623 114.7
Subscriber net adds in period, excluding
acquisitions 363 154 209 135.7
===============================================================================================================
</TABLE>
(a)Percentage of net operating revenues.
(b)Certain data has been restated to include effects of the Company's interests
in Italy, South Korea, and Spain.
(c)Effective January 1, 1996, existing operations represent the Company's share
of income or loss (after foreign taxes where applicable) for the following
international cellular systems which have provided commercial service for the
full twelve months of any preceding calendar year: Germany, Portugal, Sweden,
Belgium, and Japan. Prior to January 1, 1996, existing operations represented
the Company's share of income or loss (after foreign taxes where applicable)
for the following international cellular systems which had completed twelve
months of commercial service: Germany, Portugal, Sweden, Belgium, and Japan.
(d)Effective January 1, 1996, start-up systems represent the Company's share of
income or loss (after foreign taxes where applicable) for the following
international cellular systems which did not provide commercial service for
the full twelve months of any preceding calendar year: Italy, South Korea,
Spain, India, and Poland. Prior to January 1, 1996, start-up systems
represented the Company's share of income or loss (after foreign taxes where
applicable) for the following international cellular systems which had not
yet completed twelve months of commercial service: Italy, South Korea, and
Spain.
NET OPERATING REVENUES
Existing Operations. The increase in net operating revenues resulted primarily
from the 115% increase in proportionate customers as of June 30, 1996, as
compared to June 30, 1995, partially offset by slight declines in average
revenue per customer. The declines in average revenue per customer were due
primarily to competitive pressures, continued penetration of international
consumer markets, and unfavorable movements in exchange rates.
20
<PAGE> 21
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
OPERATING INCOME
Existing Operations. The significant increases in proportionate operating income
resulted from improved profitability in existing international operations.
Improved profitability was primarily attributable to rapidly declining cash
costs per customer, achieved as the Company's existing operations gained
economies of scale.
TOTAL CELLULAR INCOME (LOSS)
Existing Operations. The improvement in income (loss) was due to improved
profitability in existing international operations, which resulted primarily
from the expanding customer base and economies of scale achieved as customers
were added to existing networks.
Start-up Systems. The increased losses resulted primarily from post-launch costs
associated with network build-out and rapid subscriber growth in Spain, Italy,
and South Korea and, to a lesser extent, losses associated with start-up
systems in India and Poland.
LIQUIDITY AND CAPITAL RESOURCES
The Company defines liquidity as its ability to generate resources to finance
business expansion, construct capital assets, and pay its current obligations.
The Company requires substantial capital to operate and expand its existing
wireless systems, to construct new wireless systems, and to acquire interests in
existing wireless systems.
1996 CAPITAL EXPENDITURES
During the six months ended June 30, 1996, the Company incurred capital
expenditures of $117.6 million for additions to property, plant, and equipment
for its consolidated domestic and international cellular and paging networks, as
well as other capital expenditures, primarily to increase cellular and paging
network capacity and to expand customer operations functions necessary to
support customer growth. The Company invested an additional $261.5 million in
its unconsolidated wireless systems to fund the build-out of cellular and PCS
networks. In addition, during January 1996, the Company purchased options for
2.4 million shares of stock in CCI for an aggregate cost of $107.7 million, an
amount equal to the aggregate consideration paid by CCI for cancellation of its
employee replacement options pursuant to the transaction set forth in the
Company's original 1990 merger agreement with CCI.
FUNDING OF 1996 CAPITAL NEEDS
The Company did not generate sufficient cash from operations to meet its capital
requirements during the six months ended June 30, 1996. Accordingly, in March
1996, the Company initiated a commercial paper program consisting of the sale of
discounted notes that are exempt from registration under the Securities Act of
1933 (see Note B, "Significant Changes since December 31, 1995-Commercial Paper
Program," to the Consolidated Financial Statements). The Company's Board of
Directors authorized the issuance of commercial paper in amounts necessary to
finance the Company's working capital requirements, provided that the amount
outstanding under the commercial paper program, together with all indebtedness
incurred under the $2 billion long-term revolving credit facility ("the
Facility"), does not in the aggregate exceed $2 billion. Additional funding
needs for the first six months of 1996 were satisfied primarily by proceeds from
borrowings under the Facility and the commercial paper program. During the six
months ended June 30, 1996, the Company raised $203.9 million in new capital
consisting of the net issuance of $750.2 million in commercial paper, less the
net repayment of $546.3 million on indebtedness under the Facility. In addition,
the Company also received $62.9 million in proceeds from the issuance of capital
stock and other short-term debt. The net proceeds from the issuance of debt and
capital stock, in addition to $157.2 million in cash flows from operating
activities, were used primarily to fund capital expenditures and investments in
unconsolidated wireless systems.
FUTURE CAPITAL EXPENDITURES
The Company will continue to be required to make substantial expenditures in
connection with its efforts to expand its wireless business. Domestic and
international capital requirements for 1996 are expected to reach approximately
$1 billion, excluding funding required for the acquisition of CCI.
Consolidated Expenditures. The Company plans to incur significant capital
expenditures in its consolidated markets to expand its existing analog and
digital networks and to construct and deploy new digital networks, including the
continuing deployment of its Code Division Multiple Access ("CDMA") digital
network in Los Angeles under the brand name Powerband. The Company expects its
future capital expenditures for digital technology to continue to increase and,
at some point, surpass its capital expenditures for analog technology. The
Company anticipates that a significant portion of its future domestic network
traffic will migrate to digital service as high-usage customers take
21
<PAGE> 22
AirTouch Communications, Inc. And Subsidiaries
Management's Discussion and Analysis
advantage of enhanced digital features such as superior voice quality, longer
handset battery life, improved security, and high-speed data transmission.
However, both analog and digital technologies are expected to coexist for the
foreseeable future due to continued demand for analog service and the fact that
analog networks provide the only common roaming platform currently available
throughout the United States. Management believes that a viable analog market
will continue to exist for the foreseeable future to serve consumers and other
customers who do not desire digital features or do not wish to purchase new
digital handsets. With respect to roaming capabilities, the Company believes
that a significant portion of its digital and analog customer base will continue
to require access to nation wide analog networks in the United States.
Accordingly, the Company plans to maintain and, as required, expand its analog
networks and to offer dual-mode analog/digital phones in each of its digital
markets to facilitate the greatest possible roaming capabilities for its
customers.
At June 30, 1996, the Company was committed to spend approximately $50 million
for the acquisition of property, plant, and equipment for its consolidated
subsidiaries. In addition to these commitments, the Company plans to make
additional capital expenditures of approximately $340 million during 1996 to
increase the capacity of its existing domestic analog networks and to deploy
digital technology. At June 30, 1996, the Company had also committed to spend
approximately $16 million for the purchase of cellular handsets.
Unconsolidated Wireless Systems. As of June 30, 1996, the Company was committed
to make capital contributions of approximately $60 million to its unconsolidated
wireless systems. In addition to these commitments, the Company plans to make
additional capital contributions of approximately $223 million during 1996 to
its existing international and domestic joint ventures, including contributions
to PrimeCo for the construction of its PCS networks. The majority of PrimeCo's
networks are expected to be operational by the fourth quarter of 1996. The
Company constantly evaluates opportunities to increase its ownership in its
existing international ventures, and is currently pursuing, and has authority to
consummate, a transaction to increase its indirect ownership in its Italian
cellular venture, Omnitel-Pronto Italia, which, if consummated, would result in
additional capital commitments.
CCI Merger. Under the 1996 Merger Agreement, AirTouch will acquire the
outstanding stock of CCI in exchange for a combination of AirTouch preferred
stock and cash. As of the date of the 1996 Merger Agreement, the acquisition
cost to the Company was anticipated to be approximately $1.65 billion, including
the assumption of approximately $200 million in net debt. Pursuant to the 1996
Merger Agreement, the merger consideration will consist of 72% in AirTouch
preferred securities and 28% in cash, subject to adjustments necessary to
maintain the tax-free nature of the transaction. The cash portion of the
acquisition will be funded through borrowings (see "Future Capital Funding").
The balance of the CCI stock will be acquired with a combination of preferred
securities ("Class B" and "Class C") registered under the Securities Act of 1933
on the Company's Registration Statement on Form S-4 (Reg. No. 333-03107), which
became effective on July 17, 1996. The Class B and Class C preferred stock will
bear dividends at the rate of 6.00% and 4.25% per annum, respectively.
FUTURE CAPITAL FUNDING
On July 16, 1996, the Company issued long-term debt in the form of $250 million
in 7 1/8% Notes and $400 million in 7 1/2% Notes, maturing in July 2001 and July
2006, respectively. The Notes were issued pursuant to AirTouch's Registration
Statement on Form S-3 (Reg. No. 33-62787), which registered $2 billion in
various forms of debt and equity securities (the "Shelf"). Interest on the Notes
is payable semi-annually on January 15 and July 15, both commencing in 1997.
Working capital raised by the sale of commercial paper, borrowings issued under
the Facility, and debt issued pursuant to the Shelf are currently expected to be
sufficient to meet the Company's cash requirements through the end of 1996.
However, management anticipates that additional external financing will be
necessary to fund expansion and operations beyond 1996. Accordingly, the Company
will need to raise additional funds through borrowings or public or private
sales of debt or equity securities. Additional funding beyond 1996 may be
obtained through borrowings under the Facility; through the Company's commercial
paper program; from additional securities which may be issued from time to time
under the Shelf; through the issuance of securities in a transaction exempt from
registration under the Securities Act of 1933; or a combination of one or more
of the foregoing. The Company believes that it will be able to access the
capital markets on terms and in amounts adequate to meet its objectives.
However, given the possibility of changes in market conditions or other
occurrences, there can be no certainty that such funding will be available in
quantities or on terms favorable to the Company.
22
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AirTouch Communications, Inc.:
We have reviewed the accompanying Consolidated Balance Sheets of AirTouch
Communications, Inc. and subsidiaries ("Company") as of June 30, 1996 and 1995
and the related Consolidated Statements of Income and of Cash Flows for the
three-month and six-month periods then ended. These Consolidated Financial
Statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists 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, we are not aware of any material modifications that should
be made to the accompanying Consolidated Financial Statements for them to be in
conformity with generally accepted accounting principles.
Our review was made for the purpose of expressing limited assurance on the
Consolidated Financial Statements taken as a whole. The Selected Proportionate
Operating Data ("Proportionate Data") for the three-month and six-month periods
ended June 30, 1996 and 1995 appearing on page 10 is presented for additional
analysis and is not a required part of the basic financial statements. As
discussed on page 10, the Proportionate Data has been prepared by the Company
to present financial information that, in the opinion of management, is not
provided by financial statements prepared in conformity with generally
accepted accounting principles. Such Proportionate Data, prepared on the basis
of presentation described on page 10, has been subjected to the inquiry and
analytical procedures applied in the review of the basic financial statements.
Based on our review, we are not aware of any material modifications that
should be made to such information in relation to the basic Consolidated
Financial Statements taken as a whole.
We previously audited in accordance with generally accepted auditing standards,
the Consolidated Balance Sheet as of December 31, 1995, and the related
Consolidated Statements of Income, of Stockholders' Equity, and of Cash Flows
for the year then ended (not presented herein), and in our report dated February
23, 1996 we expressed an unqualified opinion on those Consolidated Financial
Statements. In our opinion, the information set forth in the accompanying
Consolidated Balance Sheet information as of December 31, 1995, is fairly stated
in all material respects in relation to the Consolidated Balance Sheet from
which it has been derived.
/s/ Price Waterhouse LLP
San Francisco, California
August 8, 1996
23
<PAGE> 24
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Footnote D, "Contingencies", in the Notes to Consolidated Financial
Statements.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1996, the Company held its Annual Meeting of Stockholders. Two
matters were considered and the results are as follows:
-Proposal 1 to elect three directors, constituting Class II of the
Company's Board of Directors, to serve a three-year term: 410,986,071
shares voted for Carol A. Bartz, and 6,196,071 shares withheld;
410,221,602 shares voted for C. Lee Cox and 6,960,540 shares
withheld; 410,230,683 shares voted for Paul Hazen and 6,951,459
shares withheld.
-Proposal 2 to ratify the appointment of Price Waterhouse LLP as the
Company's independent accountants for 1996: 413,763,360 shares voted
for this proposal, 1,654,973 shares voted against, and 1,763,809
shares abstained.
ITEM 5. OTHER INFORMATION
The Company uses consolidation and proportionate principles of accounting to
present certain financial information. The following proportionate table is not
required by GAAP and is not 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 facilitates the understanding and assessment of its Consolidated Financial
Statements.
Under GAAP, the Company consolidates the entities in which it has a controlling
interest and uses the equity method to account for entities over which 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. For example, domestic cellular proportionate results
present the Company's share -- its percentage ownership -- for all significant
domestic cellular operations, including those joint ventures and partnerships
where the Company does not own more than 50 percent. Similarly, total
proportionate results show the Company's share of all its significant worldwide
operations.
24
<PAGE> 25
Selected Proportionate Operating Data(1)
<TABLE>
<CAPTION>
TOTAL COMPANY
=========================================================================================
Three months ended Six months ended
June 30 June 30
-----------------------------------------
OPERATING RESULTS (Dollars in millions) 1996 1995 1996 1995(B)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total net operating revenues(a) $ 880.4 $ 625.0 $1,681.8 $1,187.8
Total operating income $ 151.3 $ 74.6 $ 264.3 $ 161.0
Total operating cash flow(2) $ 289.3 $ 177.6 $ 534.1 $ 359.6
OPERATING DATA (In thousands)
- -----------------------------------------------------------------------------------------
Total cellular POPs(3) 166,788 113,158 166,788 113,158
Total cellular subscribers 3,716 2,347 3,716 2,347
Cellular subscribers net adds in period,
excluding acquisitions 363 238 651 398
Total paging units in service 2,631 1,891 2,631 1,891
<CAPTION>
DOMESTIC CELLULAR OPERATIONS
===================================================================================================================
Three months ended Six months ended
June 30 June 30
------------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service and other revenues(a) $ 470.5 $ 378.5 $ 904.6 $ 722.0
Equipment sales 20.7 20.9 39.4 43.7
Cost of equipment sales (40.7) (25.2) (80.0) (56.5)
---------------------------------------------------------------------------------------------------------------
Net operating revenues 450.5 374.2 864.0 709.2
---------------------------------------------------------------------------------------------------------------
Cost of revenues(a) 51.5 48.9 100.9 92.0
Selling and customer operations expenses 157.9 133.9 301.5 247.6
General, administrative, and other expenses 37.8 36.1 71.6 65.0
Depreciation and amortization expenses 60.0 45.5 118.9 90.8
---------------------------------------------------------------------------------------------------------------
Total costs and expenses 307.2 264.4 592.9 495.4
---------------------------------------------------------------------------------------------------------------
Operating income $ 143.3 $ 109.8 $ 271.1 $ 213.8
===================================================================================================================
Operating cash flow(2) $ 203.3 $ 155.3 $ 390.0 $ 304.6
Operating cash flow margin(c) 45.1% 41.5% 45.1% 42.9%
Capital expenditures, excluding acquisitions $ 99.2 $ 176.8 $ 155.0 $ 239.8
OPERATING DATA (In thousands, except per unit data)
- -------------------------------------------------------------------------------------------------------------------
Total POPs(3) 37,798 35,390 37,798 35,390
Subscribers 2,550 1,804 2,550 1,804
Subscriber net adds in period, excluding acquisitions 158 140 288 244
Monthly average revenue per unit $ 64 $ 73 $ 63 $ 72
Monthly cash cost per unit $ 36 $ 43 $ 36 $ 42
===================================================================================================================
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
DOMESTIC PAGING OPERATIONS(4)
=======================================================================================================
Three months ended Six months ended
June 30 June 30
---------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service and other revenues $ 71.6 $ 53.2 $ 140.6 $ 104.1
Equipment sales 11.9 10.6 24.8 21.9
Cost of equipment sales (10.6) (9.3) (22.0) (19.0)
---------------------------------------------------------------------------------------------------
Net operating revenues 72.9 54.5 143.4 107.0
---------------------------------------------------------------------------------------------------
Total operating expenses before
depreciation and amortization expenses 50.3 36.5 99.3 72.1
Depreciation and amortization expenses 15.6 10.5 30.3 20.2
---------------------------------------------------------------------------------------------------
Operating income $ 7.0 $ 7.5 $ 13.8 $ 14.7
=======================================================================================================
Operating cash flow(2) $ 22.6 $ 18.0 $ 44.1 $ 34.9
Operating cash flow margin 31.0% 33.0% 30.8% 32.6%
Capital expenditures, excluding acquisitions $ 19.5 $ 14.7 $ 46.7 $ 28.0
OPERATING DATA (In thousands)
- -------------------------------------------------------------------------------------------------------
Units in service 2,612 1,762 2,612 1,762
Units in service net adds in period,
excluding acquisitions 143 128 274 237
=======================================================================================================
<CAPTION>
INTERNATIONAL OPERATIONS
==============================================================================================================
Three months ended Six months ended
June 30 June 30
---------------------------------------------------
CELLULAR OPERATING RESULTS (Dollars in millions) 1996 1995(b) 1996 1995(b)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Existing operations:(5)
Net operating revenues $ 342.9 $ 180.1 $ 646.7 $ 340.4
Operating income (loss) $ 57.6 $ ( 4.1) $ 83.2 $ 6.3
Operating cash flow(2) $ 108.4 $ 36.0 $ 184.7 $ 79.9
Income / (loss) $ 26.4 $( 11.3) $ 31.1 $ ( 12.7)
Start-up systems:(6)
Income / (loss) $ ( 29.7) $ ( 4.0) $ ( 49.4) $ ( 14.2)
Total cellular income / (loss) $ ( 3.3) $( 15.3) $ ( 18.3) $ ( 26.9)
OPERATING DATA (In thousands)
- --------------------------------------------------------------------------------------------------------------
Cellular POPs(3) 114,690 64,468 114,690 64,468
Cellular subscribers 1,166 543 1,166 543
Subscriber net adds in period, excluding acquisitions 205 98 363 154
==============================================================================================================
</TABLE>
Footnotes:
(a)Presentation for 1995 has been restated to classify roaming fraud as an
operating expense in conformity with the current year presentation.
(b)Certain data has been restated to include effects of the Company's interests
in Italy, South Korea, and Spain.
(c)If net losses on equipment sales were reclassified as operating expenses,
operating cash flow margins would be 43.2% and 41.0% for the three months
ended June 30, 1996 and 1995, respectively, and 43.1% and 42.2% for the six
months ended June 30, 1996 and 1995, respectively.
(1)Reflects results, 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, exclusive of cost-based
investments and certain equity-based investments that are not material to the
information presented.
(continued)
26
<PAGE> 27
(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 interests 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 a licensee operating in that market and includes
markets in which the networks are under construction and the markets of
certain cost-based investments not included in proportionate operating
results. Total Company cellular POPs include 14,300 and 13,300 personal
communications services POPs at June 30, 1996 and June 30, 1995,
respectively; international cellular POPs (and therefore total Company
cellular POPs) include 7,492 POPs at June 30, 1996 for Poland where the
Company's consortium was awarded a national cellular license in February
1996.
(4)Domestic paging is wholly owned by the Company; therefore, proportionate
information reflects 100% of the subsidiary's GAAP-basis operating results.
(5)Effective January 1, 1996, existing operations represent the Company's share
of income or loss (after foreign taxes where applicable) for the following
international cellular systems which have provided commercial service for the
full twelve months of any preceding calendar year: Germany, Portugal, Sweden,
Belgium, and Japan. Prior to January 1, 1996, existing operations represented
the Company's share of income or loss (after foreign taxes where applicable)
for the following international cellular systems which had completed twelve
months of commercial service: Germany, Portugal, Sweden, Belgium, and Japan.
(6)Effective January 1, 1996, start-up systems represent the Company's share of
income or loss (after foreign taxes where applicable) for the following
international cellular systems which did not provide commercial service for
the full twelve months of any preceding calendar year: Italy, South Korea,
Spain, India, and Poland. Prior to January 1, 1996, start-up systems
represented the Company's share of income or loss (after foreign taxes where
applicable) for the following international cellular systems which had not
yet completed twelve months of commercial service: Italy, South Korea, and
Spain.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits identified in parenthesis below, on file with the Commission,
are incorporated by reference as exhibits hereto.
Exhibit
Number Description
------- -----------
3 Amended By-laws of the Company as of June 13, 1996.
4.1 Indenture dated as of July 16, 1996 between the
Company and The First National Bank of Chicago, as
trustee.
4.2 First Supplemental Indenture dated as of July 16,
1996 between the Company and The First National Bank
of Chicago, as trustee (Exhibit 4.1 to the Company's
Current Report on Form 8-K, Date of Report: July 3,
1996, File No. 1-12342).
4.3 Second Supplemental Indenture dated as of July 16,
1996 between the Company and The First National Bank
of Chicago, as trustee (Exhibit 4.1 to the Company's
Current Report on Form 8-K, Date of Report: July 11,
1996, File No. 1-12342).
10.1 Agreement and Plan of Merger dated as of April 4,
1996, between the Company and Cellular
Communications, Inc., as amended and restated as of
July 12, 1996 (Exhibit 2.1 to the Company's
Registration Statement on Form S-4, No. 333-03107).
10.2 First Amendment to Amended and Restated Agreement of
Limited Partnership of WMC Partners, L.P. as of April
16, 1996 between the Company and U S WEST New Vector
Group, Inc.
10.3 First Amendment to Amended and Restated Agreement of
Limited Partnership of PCS Nucleus, L.P. dated as of
April 16, 1996 between AirTouch PCS Holdings, Inc.
and U S WEST PCS Holdings, Inc.
10.4 First Amendment to Amended and Restated Investment
Agreement dated as of April 16, 1996 between the
Company and U S WEST, Inc.
10.5 First Amendment to Amended and Restated Agreement of
Exchange dated as of April 16, 1996 between the
Company and U S WEST, Inc.
27
<PAGE> 28
10.6 First Amendment to Amended and Restated Trust
Agreement of Exchange dated as of April 16, 1996
between the Company and U S WEST, Inc.
10.7 First Amendment to Arbitration Agreement dated as of
April 16, 1996 between the Company and U S WEST, Inc.
15.1 Letter of Price Waterhouse LLP Re: Unaudited
Financial Information
27 Financial Data Schedule
99 Risk Factors.
(b) Reports on Form 8-K:
Date of Report: April 9, 1996
Item 5. Press Release and Item 8. Exhibit
Date of Report: April 26, 1996
Item 5. Press Release
Date of Report: May 31, 1996
Item 5. Press Release
28
<PAGE> 29
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: August 9, 1996
29
<PAGE> 30
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibits identified in parenthesis below, on file with the
Commission, are incorporated by reference as exhibits hereto.
Exhibit
Number Description
------- -----------
3 Amended By-laws of the Company as of June 13, 1996.
4.1 Indenture dated as of July 16, 1996 between the
Company and The First National Bank of Chicago, as
trustee.
4.2 First Supplemental Indenture dated as of July 16,
1996 between the Company and The First National Bank
of Chicago, as trustee (Exhibit 4.1 to the Company's
Current Report on Form 8-K, Date of Report: July 3,
1996, File No. 1-12342).
4.3 Second Supplemental Indenture dated as of July 16,
1996 between the Company and The First National Bank
of Chicago, as trustee (Exhibit 4.1 to the Company's
Current Report on Form 8-K, Date of Report: July 11,
1996, File No. 1-12342).
10.1 Agreement and Plan of Merger dated as of April 4,
1996, between the Company and Cellular
Communications, Inc., as amended and restated as of
July 12, 1996 (Exhibit 2.1 to the Company's
Registration Statement on Form S-4, No. 333-03107).
10.2 First Amendment to Amended and Restated Agreement of
Limited Partnership of WMC Partners, L.P. as of April
16, 1996 between the Company and U S WEST New Vector
Group, Inc.
10.3 First Amendment to Amended and Restated Agreement of
Limited Partnership of PCS Nucleus, L.P. dated as of
April 16, 1996 between AirTouch PCS Holdings, Inc.
and U S WEST PCS Holdings, Inc.
10.4 First Amendment to Amended and Restated Investment
Agreement dated as of April 16, 1996 between the
Company and U S WEST, Inc.
10.5 First Amendment to Amended and Restated Agreement of
Exchange dated as of April 16, 1996 between the
Company and U S WEST, Inc.
10.6 First Amendment to Amended and Restated Trust
Agreement of Exchange dated as of April 16, 1996
between the Company and U S WEST, Inc.
10.7 First Amendment to Arbitration Agreement dated as of
April 16, 1996 between the Company and U S WEST, Inc.
15.1 Letter of Price Waterhouse LLP Re: Unaudited
Financial Information
27 Financial Data Schedule
99 Risk Factors.
30
<PAGE> 1
EXHIBIT 3
AMENDED AND RESTATED BY-LAWS
OF
AIRTOUCH COMMUNICATIONS, INC.
(as of June 13, 1996)
ARTICLE I
Principal Office
Section 1. The principal executive office for the transaction of the
business of the Corporation is hereby fixed and located at One California
Street, San Francisco, California 94111. The board of directors may change said
principal executive office from one location to another.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held at any place
within or without the State of California which may be designated by the board
of directors. In the absence of any such designation, stockholders' meetings
shall be held at the principal executive office of the Corporation.
Section 2. The annual meeting of the stockholders of the Corporation
shall be held on such date and at such time as shall be determined by the board
of directors (but not more than 13 months after the date of the preceding annual
meeting). At such meeting, directors shall be elected and any other proper
business may be transacted which is within the powers of the stockholders.
Written notice of each annual meeting shall be given to each stockholder
entitled to vote either personally or by United States mail or other means of
written communication (which includes, without limitation and wherever used in
these By-Laws, telegraphic and facsimile communication), charges prepaid,
addressed to each stockholder at the address appearing on the books of the
Corporation, or given by the stockholder to the Corporation for the purpose of
notice.
All such notices shall be given to each stockholder entitled thereto not
less than 10 days nor more than 60 days before each annual meeting, except as
otherwise required by
-1-
<PAGE> 2
law. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the United States mail or delivered to a
common carrier for transmission to the recipient or actually transmitted by the
person giving the notice by electronic means to the recipient or sent by other
means of written communication.
Such notices shall state:
(a) the place, date and hour of the meeting;
(b) those matters which the board, at the time of the mailing of
the notice, intends to present for action by the stockholders;
(c) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by management for
election; and
(d) such other matters, if any, as may be expressly required by
law.
Section 3. Special meetings of the stockholders for the purpose of
taking any action permitted to be taken by the stockholders under the General
Corporation Law of the State of Delaware and the certificate of incorporation of
this Corporation, may be called only by the chairman of the board, the chief
executive officer or the president, or by any executive vice president, senior
vice president or vice president, or by the board of directors.
Upon request in writing delivered either in person or by registered or
certified mail, return receipt requested, to the chairman, chief executive
officer, president or secretary by any person entitled to call a special meeting
of stockholders, it shall be the duty of such chairman, chief executive officer,
president or secretary forthwith to cause to be given to the stockholders
entitled thereto notice of such meeting to be held on a date not less than 20
nor more than 90 days after the receipt of such request, as such officer may
fix. If such notice is not given within 40 days after the delivery of or mailing
of such request, the persons calling the meeting may fix the time of meeting and
give notice thereof as in the manner hereinafter provided, or cause such notice
to be given by any designated representative.
Except where express provision is made by statute, notice of such
special meetings shall be given in the same manner and contain the same
statements as required for annual meetings of stockholders. Notice of any
special meeting shall also specify the purpose or purposes of such meeting as
specified by the person calling the meeting and no other business may be
transacted at such meeting.
-2-
<PAGE> 3
Section 4. The presence in person or by proxy of the holders of a
majority in voting power of the outstanding shares of stock entitled to vote at
the meeting shall constitute a quorum for the transaction of business. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum. In the absence of a quorum, any meeting of
stockholders may be adjourned from time to time by the vote of a majority in
voting power of the outstanding shares represented at the meeting either in
person or by proxy, but no other business may be transacted except as provided
in the preceding sentence.
Section 5. In any election of directors, the candidates receiving the
highest number of votes of the shares entitled to be voted for them up to the
number of directors to be elected by such shares are elected.
Section 6. To be properly brought before the annual meeting, business
must be either (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a stockholder
of record. In addition to any other applicable requirements, for business to be
properly brought before the annual meeting by a stockholder, the stockholder
must have given timely notice in writing to the Secretary of the Corporation of
the stockholder's intention to bring such business before the meeting. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, addressed to the attention
of the Secretary of the Corporation, within the time specified in the federal
proxy rules for timely submission of a stockholder proposal for inclusion of
such proposal in the proxy statement of the Corporation or, if not within such
time, then not less than 75 days prior to the meeting provided, however, that in
the event that less than 90 days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received by the earlier of (a) the close of business on the
15th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made, whichever first occurs,
and (b) two days prior to the date of the meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at the annual
meeting except in accordance with the procedures set forth
-3-
<PAGE> 4
in this Section 6; provided, however, that nothing in this Section 6 shall be
deemed to preclude discussion by any stockholder of any business properly
brought before the annual meeting.
The Chairman of the board of directors shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 6, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 7. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations of
persons for election to the board of directors at the annual meeting, by or at
the direction of the board of directors, may be made by any Nominating Committee
or person appointed by the board of directors; nominations may also be made at
the annual meeting by any stockholder of record of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 7. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation of such
stockholder's intention to make such nomination at the meeting. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation addressed to the attention of the
Secretary of the Corporation not less than 75 days prior to the meeting;
provided, however, that, in the case of an annual meeting and in the event that
less than 90 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the earlier of (a) the close of business on the 15th
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made, whichever first occurs, or (b) two days
prior to the date of the meeting. Such stockholder's notice to the Secretary
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person, (iv) a statement as to
the person's citizenship, and (b) as to the stockholder giving the notice, (i)
the name and record address of the stockholder and (ii) the class, series and
number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as director of
the Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
-4-
<PAGE> 5
In connection with any annual meeting, the Chairman of the board of
directors shall, if the facts warrant, determine and declare to the meeting that
a nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE III
Board of Directors
Section 1. Subject to the provisions of the General Corporation Law of
the State of Delaware and any limitations in the certificate of incorporation
and these By-Laws as to action to be authorized or approved by the stockholders,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
ARTICLE IV
Meetings of Directors
Section 1. Regular meetings of the board of directors shall be held at
any place within or without the State of California that has been designated
from time to time by the board of directors. In the absence of such designation,
regular meetings shall be held at the principal executive office of the
Corporation, except as provided in Section 2 of this Article. Special meetings
of the board of directors may be held at any place within or without the State
of California which has been designated in the notice of the meeting, or, if not
designated in the notice or if there is no notice, at the principal executive
office of the Corporation.
Section 2. Regular meetings of the board of directors shall be held
without call on such date and time as may be fixed by the board of directors;
provided, however, that should any such day fall on a legal holiday, then said
meeting shall be held at the same time on the next business day thereafter
ensuing which is not a legal holiday. Notice of regular meetings of the
directors is hereby dispensed with and no notice whatever of any such meeting
need be given, provided that notice of any change in the time or place of
regular meetings shall be given to all of the directors in the same manner as
notice for special meetings of the board of directors.
Section 3. Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board, chief executive
officer or president or, if the chairman of the board, chief executive officer
and the president are all absent or are unable or refuse to act, by any two
directors. Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director,
-5-
<PAGE> 6
or sent by first-class mail or telegram or facsimile transmission, charges
prepaid, addressed to him or her at his or her home or office address as they
appear upon the records of the Corporation or, if not so shown on the records
and not readily ascertainable, at the place at which the meetings of the
directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail at least four days prior to the time of the
holding of the meeting. In case such notice is telegraphed or sent by facsimile
transmission, it shall be delivered to a common carrier for transmission to the
director or actually transmitted by the person giving the notice by electronic
means to the director at least 48 hours prior to the time of the holding of the
meeting. In case such notice is delivered personally or by telephone as above
provided, it shall be so delivered at least eight hours prior to the time of the
holding of the meeting. Any notice given personally, by facsimile or by
telephone may be communicated to either the director or to a person at the
office of the director whom the person giving the notice has reason to believe
will promptly communicate it to the director. Such deposit in the mail, delivery
to a common carrier, transmission by electronic means or delivery, personally or
by telephone, as above provided, shall be due, legal and personal notice to such
directors. The notice need not specify the place of the meeting if the meeting
is to be held at the principal executive office of the Corporation, and need not
specify the purpose of the meeting.
Section 4. Presence of a majority of the then authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors,
provided that any action taken is approved by at least a majority of the
required quorum for such meeting. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
Section 5. Notice of a meeting need not be given to any director who
signs a waiver of notice or consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 6. Any action required or permitted to be taken by the board of
directors may be taken without a meeting if all members of the board shall
individually or
-6-
<PAGE> 7
collectively consent in writing to such action, and such written consent or
consents shall be filed with the minutes of the proceedings of the board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors.
Section 7. The provisions of this Article IV shall also apply, with
necessary changes in points of detail, to committees of the board of directors,
if any, and to actions by such committees (except (i) that special meetings of a
committee may also be called at any time by any member of the committee, (ii)
that any committee may by resolution adopt provisions governing notice of
committee meetings that are different from the provisions of Section 3 of this
Article IV, and (iii) where a committee has only two members, the presence of
one member shall constitute a quorum), unless otherwise provided by these
By-Laws or by the resolution of the board of directors designating such
committees. For such purpose, references to "the board" or "the board of
directors" shall be deemed to refer to each such committee and references to
"directors" or "members of the board" shall be deemed to refer to members of the
committee. Committees of the board of directors may be designated, and shall be
subject to the limitations on their authority, as provided in Section 141(c) of
the General Corporation Law of the State of Delaware. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of such absent or disqualified member.
ARTICLE V
Officers
Section 1. The officers of the Corporation shall be a chairman of the
board, chief executive officer or a president, or all of the foregoing, a
secretary and a chief financial officer. The Corporation may also have, at the
discretion of the board of directors, one or more executive vice presidents,
senior vice presidents and vice presidents, a general counsel, a treasurer, one
or more assistant secretaries, one or more assistant treasurers, and such other
officers as may be designated from time to time by the board of directors. Any
number of offices may be held by the same person. The officers shall be elected
by the board of directors and shall hold office at the pleasure of such board.
Chairman of the Board
Section 2. The chairman of the board, if there be such officer, shall,
if present, preside at all meetings of the board of directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
or her by the board of directors or prescribed by the By-Laws. If there is not a
chief executive officer, the chairman of the board shall, in addition, be the
general manager and chief executive
-7-
<PAGE> 8
officer of the Corporation and shall have the powers and duties prescribed in
Section 4 of Article V of these By-Laws.
Vice Chairman of the Board
Section 3. Each Vice Chairman of the Board of Directors, if any, shall
perform such duties as may from time to time be delegated to him by the Chairman
of the Board or as may be assigned by the Board of Directors.
Chief Executive Officer
Section 4. Subject to such powers and duties, if any, as may be
prescribed by these By-Laws or the board of directors for the chairman of the
board, if there be such officer, the chief executive officer shall, subject to
the control of the board of directors, have general supervision, direction and
control of the business and officers of the Corporation. He or she shall preside
at all meetings of the stockholders and, in the absence of the chairman of the
board, or if there be none, at all meetings of the board of directors. He or she
shall have all the powers and shall perform all of the duties which are
ordinarily inherent in the office of chief executive officer of a Corporation,
and he or she shall have such further powers and shall perform such further
duties as may be prescribed for him or her by the board of directors.
President
Section 5. In the absence or disability of the chief executive officer,
or if there be none, the president shall perform all of the duties of the chief
executive officer, and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the chief executive officer. The
president shall have such other duties as from time to time may be prescribed
for him by the board of directors.
-8-
<PAGE> 9
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents
Section 6. In the absence or disability or refusal to act of the
president, the executive vice presidents, senior vice presidents and vice
presidents in order of their rank as fixed by the board of directors or, if not
ranked, the executive vice president, senior vice president or vice president
designated by the president or the board of directors, shall perform all of the
duties of the president and when so acting shall have all the powers of and be
subject to all the restrictions upon the president. The executive vice
presidents, senior vice presidents and vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them, respectively, by the board of directors or the By-Laws.
Secretary
Section 7. The secretary shall keep or cause to be kept at the principal
executive office of the Corporation or such other place as the board of
directors may order, a book of minutes of all proceedings of the stockholders,
the board of directors and committees of the board, with the time and place of
holding, whether regular or special, and if special how authorized, the notice
thereof given, the names of those present at directors' and committee meetings,
and the number of shares present or represented at stockholders' meetings. The
secretary shall keep or cause to be kept at the principal executive office or at
the office of the Corporation's transfer agent a record of stockholders or a
duplicate record of stockholders showing the names of the stockholders and their
addresses, the number of shares and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation. The secretary or
an assistant secretary or, if they are absent or unable or refuse to act, any
other officer of the Corporation, shall give or cause to be given notice of all
the meetings of the stockholders, the board of directors and committees of the
board required by the By-Laws or by law to be given, and he or she shall keep
the seal of the Corporation, if any, in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or by the By-Laws.
Assistant Secretaries
Section 8. It shall be the duty of the assistant secretaries to assist
the secretary in the performance of his or her duties and generally to perform
such other duties as may be delegated to them by the board of directors.
-9-
<PAGE> 10
Chief Financial Officer
Section 9. The chief financial officer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of account of
the Corporation. He or she shall receive and deposit all moneys and other
valuables belonging to the Corporation in the name and to the credit of the
Corporation and shall disburse the same only in such manner as the board of
directors or the appropriate officers of the Corporation may from time to time
determine, shall render to the chief executive officer and the board of
directors, whenever they request it, an account of all his or her transactions
as chief financial officer and of the financial condition of the Corporation,
and shall perform such further duties as the board of directors may require.
Treasurer and Assistant Treasurers
Section 10. The treasurer of the Corporation shall have such duties as
may be specified by the chief financial officer to assist the chief financial
officer in the performance of his or her duties. It shall be the duty of the
assistant treasurers to assist the treasurer in the performance of his or her
duties and generally to perform such other duties as may be delegated to them by
the board of directors.
General Counsel
Section 11. In the absence or disability or refusal to act of the senior
vice president-legal (if any), the general counsel shall perform all of the
duties of the senior vice president-legal and when so acting shall have all of
the powers of and be subject to all of the restrictions upon the senior vice
president-legal. The general counsel shall have such other powers and perform
such other duties as from time to time may be prescribed for him or her by the
board of directors, the By-Laws, or the senior vice president-legal (if any).
ARTICLE VI
Amendments
Section 1. New By-Laws may be adopted, or these By-Laws may be amended
or repealed, by the affirmative vote of the holders of shares representing as
least 66-2/3% of the combined voting power of the outstanding shares of capital
stock of the Corporation entitled to vote, except as otherwise provided by law
or by the certificate of incorporation or these By-Laws.
Section 2. Subject to the right of stockholders as provided in Section
1 of this Article to adopt, amend or repeal By-Laws, and except as otherwise
provided by law or
-10-
<PAGE> 11
by the certificate of incorporation, By-Laws may be adopted, amended or repealed
by the affirmative vote of at least 66-2/3% of the directors of the Corporation
then in office.
-11-
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
EXECUTION COPY
INDENTURE
Between
AIRTOUCH COMMUNICATIONS, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
Dated as of July 16, 1996
<PAGE> 2
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS
Section 1.01 Certain Terms Defined................................... 1
Board of Directors...................................... 2
Business Day............................................ 2
Certified Resolution.................................... 2
Commission.............................................. 2
Company................................................. 2
Depository.............................................. 3
Event of Default........................................ 3
Global Security......................................... 3
Indenture............................................... 3
Interest Payment Date................................... 3
Officer's Certificate................................... 3
Opinion of Counsel...................................... 3
Original Issue Discount Security........................ 4
Outstanding............................................. 4
Paying Agent............................................ 4
Periodic Offering....................................... 4
Person.................................................. 5
Principal Office of the Trustee......................... 5
Record Date............................................. 5
Redemption Date......................................... 5
Redemption Price........................................ 5
Register................................................ 5
Responsible Officer..................................... 5
Security or Securities.................................. 6
Securityholder; Holder.................................. 6
Series.................................................. 6
Stated Maturity......................................... 6
Supplemental Indenture.................................. 6
Trustee................................................. 6
Trust Indenture Act of 1939............................. 6
United States Dollars................................... 6
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION,
TRANSFER AND EXCHANGE OF SECURITIES
Section 2.01 Amount, Series, Execution, Authentication
and Delivery of Securities............................ 7
Section 2.02 Form of Securities and Trustee's
Certificate of Authentication......................... 10
<PAGE> 3
Section 2.03 Denominations; Payment of Interest
on Securities........................................ 11
Section 2.04 Execution of Securities................................ 12
Section 2.05 Registration, Transfer and Exchange
of Securities........................................ 13
Section 2.06 Temporary Securities................................... 13
Section 2.07 Mutilated, Destroyed, Lost or Stolen
Securities........................................... 14
Section 2.08 Cancellation and Destruction of
Surrendered Securities............................... 14
Section 2.09 Securities in Global Form;
Depositories......................................... 15
ARTICLE THREE
REDEMPTION OF SECURITIES
Section 3.01 Redemption of Securities............................... 16
Section 3.02 Notice of Redemption................................... 16
Section 3.03 Selection of Securities for Redemption................. 16
Section 3.04 Partial Redemption of Registered
Security............................................ 17
Section 3.05 Effect of Redemption................................... 17
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01 Payment of Principal of and Interest
on Securities........................................ 17
Section 4.02 Maintenance of Offices or Agencies for
Transfer, Registration, Exchange and
Payment of Securities................................ 17
Section 4.03 Appointment to Fill a Vacancy in the
Office of Trustee.................................... 18
Section 4.04 Duties of Paying Agent................................. 18
Section 4.05 Notice of Default...................................... 19
<PAGE> 4
ARTICLE FIVE
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 5.01 Company to Furnish Trustee
Information as to the Names and
Addresses of Securityholders.......................... 19
Section 5.02 Preservation of Information;
Communication to Securityholders........................ 19
Section 5.03 Reports by Company...................................... 20
Section 5.04 Reports by Trustee...................................... 21
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
Section 6.01 Events of Default; Acceleration, Waiver
of Default and Restoration of
Position and Rights................................... 22
Section 6.02 Covenant of Company to Pay to Trustee
Whole Amount Due on Securities on
Default in Payment of Interest or
Principal............................................. 24
Section 6.03 Trustee May File Proofs of Claim........................ 25
Section 6.04 Trustee May Enforce Claims Without
Possession of Securities.............................. 25
Section 6.05 Application of Moneys Collected by
Trustee............................................... 25
Section 6.06 Limitation on Suits By Holders of
Securities............................................ 26
Section 6.07 Rights and Remedies Cumulative.......................... 27
Section 6.08 Delay or Omission Not Waiver............................ 27
Section 6.09 Control By Holders; Waiver of Past
Defaults.............................................. 27
Section 6.10 Trustee to Give Notice of Defaults
Known to It, But May Withhold in
<PAGE> 5
Certain Circumstances................................. 28
Section 6.11 Requirement of an Undertaking to Pay
Costs in Certain Suits Under the
Indenture or Against the Trustee...................... 28
ARTICLE SEVEN
CONCERNING THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities
of Trustee............................................ 28
Section 7.02 Certain Rights of Trustee............................... 29
Section 7.03 Trustee Not Responsible for Recitals
or Application of Proceeds............................ 30
Section 7.04 Trustee May Own Securities.............................. 30
Section 7.05 Moneys Received by Trustee to be Held
in Trust.............................................. 30
Section 7.06 Trustee Entitled to Compensation,
Reimbursement and Indemnity........................... 31
Section 7.07 Right of Trustee to Rely on Officer's
Certificate Where No Other Evidence
Specifically Prescribed............................... 31
Section 7.08 Disqualification; Conflicting Interest.................. 31
Section 7.09 Requirements for Eligibility of
Trustee............................................... 36
Section 7.10 Resignation and Removal of Trustee;
Appointment of Successor.............................. 37
Section 7.11 Acceptance of Appointment by
Successor Trustee..................................... 38
Section 7.12 Successor to Trustee by Merger,
Consolidation or Succession
to Business........................................... 38
Section 7.13 Preferential Collection of Claims
Against the Company................................... 39
<PAGE> 6
ARTICLE EIGHT
CONCERNING THE SECURITYHOLDERS
Section 8.01 Evidence of Action by Securityholders................... 42
Section 8.02 Proof of Execution of Instruments and
of Holding of Securities.............................. 43
Section 8.03 Who May be Deemed Owners of
Securities............................................ 43
Section 8.04 Securities Owned by the Company or
Controlled or Controlling Persons
Disregarded for Certain Purposes...................... 43
Section 8.05 Instruments Executed by Securityholders
Bind Future Holders................................... 44
ARTICLE NINE
SECURITYHOLDERS' MEETINGS
Section 9.01 Purposes for Which Meetings May be
Called................................................ 44
Section 9.02 Manner of Calling Meetings.............................. 45
Section 9.03 Call of Meeting by the Company or
Securityholders....................................... 45
Section 9.04 Who May Attend and Vote at Meetings..................... 45
Section 9.05 Regulations May be Made by Trustee;
Conduct of the Meeting; Voting
Rights - Adjournment.................................. 45
Section 9.06 Manner of Voting at Meetings and
Record to be Kept..................................... 46
Section 9.07 Exercise of Rights of Trustee and
Securityholders Not to be Hindered
or Delayed............................................ 46
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01 Purposes for Which Supplemental
Indentures May be Entered Into
Without Consent of Securityholders.................... 47
<PAGE> 7
Section 10.02 Modification of Indenture with Consent
of Holders of Securities............................... 48
Section 10.03 Effect of Supplemental Indentures........................ 49
Section 10.04 Securities May Bear Notation of Changes
by Supplemental Indentures............................. 49
ARTICLE ELEVEN
DISCHARGE; DEFEASANCE
Section 11.01 Discharge of Indenture................................... 49
Section 11.02 Discharge of Liability on Securities .................... 50
Section 11.03 Discharge of Certain Covenants and Other
Obligations.............................................. 50
Section 11.04 Discharge of Certain Obligations Upon
Deposit of Money or Securities with
Trustee................................................ 50
Section 11.05 Unclaimed Moneys......................................... 51
ARTICLE TWELVE
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
Section 12.01 Incorporators, Stockholders, Officers
and Directors of Company Exempt
From Individual Liability.............................. 52
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
Section 13.01 Successors and Assigns of the Company
Bound by Indenture.................................... 52
Section 13.02 Notices; Effectiveness.................................. 52
Section 13.03 Compliance Certificates and Opinions.................... 53
Section 13.04 Days on Which Payment to be Made,
Notice Given or Other Action
Taken................................................. 54
<PAGE> 8
Section 13.05 Provisions Required by Trust Indenture
Act of 1939 to Control................................ 54
Section 13.06 Governing Law........................................... 54
Section 13.07 Provisions of the Indenture and
Securities for the Sole Benefit of
the Parties and the Securityholders................... 54
Section 13.08 Indenture May be Executed in
Counterparts.......................................... 54
Signatures ........................................................ 55
<PAGE> 9
TABLE SHOWING REFLECTION IN THIS INDENTURE OF
CERTAIN PROVISIONS OF THE TRUST INDENTURE ACT OF 1939*
<TABLE>
<CAPTION>
Section Section
of Indenture of Act
- --------------------------------------------------------------------------------
<S> <C>
310(a)(1) ....................................... 7.09
310(a)(2) ....................................... 7.09
310(a)(3) ....................................... Inapplicable
310(a)(4) ....................................... Inapplicable
310(a)(5) ....................................... 7.09
310(b) ....................................... 7.08, 7.10
310(c) ....................................... Inapplicable
311(a) ....................................... 7.13(a), 7.13(c)
311(b) ....................................... 7.13(b), 7.13(c)
311(c) ....................................... Inapplicable
312(a) ....................................... 5.01, 5.02(a)
312(b) ....................................... 5.02(b)
312(c) ....................................... 5.02(c)
313(a) ....................................... 5.04(a)
313(b)(1) ....................................... Inapplicable
313(b)(2) ....................................... 5.04(b)
313(c) ....................................... 5.04(c)
313(d) ....................................... 5.04(d)
314(a)(1) ....................................... 5.03(a)
314(a)(2) ....................................... 5.03(b)
314(a)(3) ....................................... 5.03(c)
314(a)(4) ....................................... 5.03(d)
314(b) ....................................... Inapplicable
314(c) ....................................... 13.03
314(d) ....................................... Inapplicable
314(e) ....................................... 13.03
314(f) ....................................... Omitted
315(a) ....................................... 7.01
315(b) ....................................... 6.10
315(c) ....................................... 7.01
315(d) ....................................... 7.01
315(e) ....................................... 6.11
316(a)(1) ....................................... 6.09
316(a)(2) ....................................... Omitted
316(b) ....................................... 6.06
316(c) ....................................... 6.09
317(a) ....................................... 6.02, 6.03
317(b) ....................................... 4.08
318(a) ....................................... 13.05
</TABLE>
- -----------------
* This Table is not part of the Indenture.
<PAGE> 10
INDENTURE
THIS INDENTURE, dated as of July 16, 1996, between AIRTOUCH
COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association duly organized and
existing under the laws of the United States of America.
WITNESSETH:
WHEREAS, the Company has duly authorized the issuance, sale, execution
and delivery, from time to time, of its unsecured evidences of indebtedness
(hereinafter referred to as the "Securities"), without limit as to principal
amount, issuable in one or more Series, the amount and terms of each such Series
to be determined as hereinafter provided; and, to provide the terms and
conditions upon which the Securities are to be issued, authenticated and
delivered, the Company has duly authorized the execution of this Indenture; and
WHEREAS, all acts and things necessary to make the Securities, when
executed by the Company and authenticated and delivered by the Trustee as in
this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute this Indenture a valid indenture and agreement
according to its terms, have been done and performed, and the execution of this
Indenture and the issuance hereunder of the Securities have in all respects been
duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Securities are to be issued, authenticated and delivered, and in consideration
of the premises and of the purchase and acceptance of the Securities by the
Holders thereof, the Company covenants and agrees with the Trustee, for the
equal and proportionate benefit of the respective Holders from time to time of
the Securities or of any Series thereof, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. CERTAIN TERMS DEFINED. For all purposes of this
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article One have the meanings
assigned to them in this Article One, and include the plural as well as
the singular;
-1-
<PAGE> 11
(b) all other terms used herein which are defined in the Trust
Indenture Act of 1939, either directly or by reference therein, have
the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein shall
have the meanings assigned to them and all computations herein provided
for shall be made, in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles"
shall mean such principles as they exist at the date of applicability
thereof; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
BOARD OF DIRECTORS
The term "Board of Directors" shall mean the Board of Directors of the
Company, or any duly authorized committee of such Board of Directors.
BUSINESS DAY
The term "Business Day" shall mean any day which is not a Saturday or
Sunday or which in the City and County of San Francisco, The City of New York or
the city in which the Principal Office of the Trustee is located is neither a
legal holiday nor a day on which banking institutions are authorized by law or
regulation to close.
CERTIFIED RESOLUTION
The term "Certified Resolution" shall mean a resolution of the Board of
Directors of the Company certified by the Secretary or by an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors of the
Company and to be in full force and effect on the date of such certification.
COMMISSION
The term "Commission" shall mean the Securities and Exchange
Commission, as from time to time constituted, created under the Securities
Exchange Act of 1934, as amended, or if at any time after the execution of this
Indenture such Commission is not existing and performing the duties theretofore
assigned to it under the Trust Indenture Act of 1939, then the body performing
such duties at such time.
COMPANY
The term "Company" shall mean AirTouch Communications, Inc., a
Delaware corporation, until a successor corporation shall have become such
pursuant to the applicable provisions hereof, and thereafter "Company" shall
mean such successor Company.
-2-
<PAGE> 12
DEPOSITORY
The term "Depository" shall mean, with respect to the
Securities of any Series issuable or issued in whole or in part in the form of
one or more Global Securities, the Person designated as Depository by the
Company pursuant to Section 2.01 of this Indenture until a successor Depository
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter the term "Depository" shall mean or include each Person who is
then a Depository hereunder, and if at any time there is more than one such
Person, "Depository" as used with respect to the Securities of any such Series
shall mean the Depository with respect to the Securities of that Series.
EVENT OF DEFAULT
The term "Event of Default" with respect to Securities of any Series
shall mean any event specified as such in Section 6.01 and any other event as
may be established with respect to the securities of such Series as permitted by
Section 2.01. An Event of Default shall "exist" if an Event of Default shall
have occurred and be continuing.
GLOBAL SECURITY
The term "Global Security" shall mean a Security evidencing
all or a portion of a Series of Securities, issued under the Indenture and
delivered to the Depository for such Series in accordance with Section 2.09 of
this Indenture, and bearing the legend prescribed in such Section 2.09.
INDENTURE
The term "Indenture" shall mean this instrument as originally executed,
or as it may from time to time be supplemented, modified or amended, as provided
herein, and shall include the form and terms of particular Series of Securities
established in accordance with the provisions of Sections 2.01 and 2.02.
INTEREST PAYMENT DATE
The term "Interest Payment Date" when used with respect to any Security
means the Stated Maturity of an installment of interest on such Security.
OFFICER'S CERTIFICATE
The term "Officer's Certificate" shall mean a certificate signed by the
Chairman of the Board, any Vice Chairman of the Board, the Chief Executive
Officer, the President, any Executive or Senior Vice President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company. Each such certificate shall include the
statements provided for in Section 13.03, if and to the extent required by the
provisions of such Section.
OPINION OF COUNSEL
The term "Opinion of Counsel" shall mean a written opinion of counsel
who may be an employee or other counsel to the Company. Each such opinion shall
include the statements provided for in Section 13.03, if and to the extent
required by the provisions of such Section.
-3-
<PAGE> 13
ORIGINAL ISSUE DISCOUNT SECURITY
The term "Original Issue Discount Security" shall mean (a) any Security
which provides for an amount less than the principal amount thereof to be due
and payable upon declaration of acceleration of the maturity thereof pursuant to
Section 6.01 or (b) any other Security which for United States Federal income
tax purposes would be considered an original issue discount security.
OUTSTANDING
The term "Outstanding" when used with reference to Securities shall,
subject to the provisions of Section 8.04, mean, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, for whose payment or redemption moneys in the
necessary amount have been theretofore deposited with the Trustee or
with any Paying Agent in trust for the Holders of such Securities,
provided that if such Securities are to be redeemed, notice of such
redemption has been duly given as provided in Article Three hereof, or
provision therefor satisfactory to the Trustee has been made;
(c) Securities in exchange for or in lieu of which other
Securities shall have been authenticated and delivered under this
Indenture; and
(d) Securities alleged to have been destroyed, lost or stolen
which have been paid as provided in Section 2.07 hereof.
In determining whether the Holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding for such purposes shall
be the amount of the principal thereof that would be due and payable as of the
date of such determination as if a declaration of acceleration of the maturity
thereof pursuant to Section 6.01 had been made.
PAYING AGENT
The term "Paying Agent" means any Person authorized by the Company to
pay the principal of and any interest and premium on any Securities on behalf of
the Company.
PERIODIC OFFERING
The term "Periodic Offering" means an offering of Securities
of a Series, from time to time the specific terms of which (including without
limitation, the rate or rates of interest, if any, thereon or any methods of
calculating such, the maturity date or dates thereof and any redemption
provisions with respect thereto) are to be determined by the Company or its
agents upon the issuance of such Series of Securities.
-4-
<PAGE> 14
PERSON
The term "Person" shall mean an individual, a corporation, a
partnership, a joint venture, an association, a joint stock company, a trust, an
unincorporated organization, or a government or any agency, authority or
political subdivision thereof.
PRINCIPAL OFFICE OF THE TRUSTEE
The term "Principal Office of the Trustee" shall mean the principal
corporate trust office of the Trustee at which, at any particular time, its
corporate trust business shall be administered, which office at the date hereof
is located at One First National Plaza, Suite 0126, Chicago, Illinois
60670-0126, Attention: Corporate Trust Services Division, except that for
purposes of Section 4.02, such term shall mean the office or agency of the
Trustee in the Borough of Manhattan, the City of New York, which office at the
date hereof is located at 14 Wall Street, Eighth Floor, New York, New York
10005.
RECORD DATE
The term "Record Date" for the interest payable on any Interest Payment
Date on any Series of Securities shall mean the date specified as such in the
Securities of such Series.
REDEMPTION DATE
The term "Redemption Date" when used with respect to any Security to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
REDEMPTION PRICE
The term "Redemption Price" when used with respect to any Security to
be redeemed means the price at which it is to be redeemed pursuant to this
Indenture. It includes any applicable premium but does not include installments
of interest whose Stated Maturity is on or before the Redemption Date.
REGISTER
The term "Register" shall mean the books for the registration and
transfer of Securities which books are kept by the Trustee pursuant to Section
2.05.
RESPONSIBLE OFFICER
The term "Responsible Officer" when used with respect to the Trustee
shall mean the chairman and vice-chairman of the board of directors, the
chairman and vice-chairman of the executive committee of said board, the
president, any executive vice president, any senior vice president, any first
vice president, any vice president or assistant vice president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any corporate trust officer, the controller, any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer of the Trustee to whom such matter is referred because of such Person's
knowledge of and familiarity with the particular subject.
-5-
<PAGE> 15
SECURITY OR SECURITIES
The terms "Security" or "Securities" shall mean any security or
securities of the Company without regard to Series, authenticated and delivered
under this Indenture.
SECURITYHOLDER; HOLDER
The terms "Securityholder" or "Holder", whenever employed herein with
respect to a Security, shall mean the Person in whose name such Security shall
be registered on the Register.
SERIES
The term "Series" shall mean an issue of Securities under this
Indenture.
STATED MATURITY
The term "Stated Maturity" when used with respect to any Security or
any installment of interest thereon means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
SUPPLEMENTAL INDENTURE
The term "Supplemental Indenture" shall mean an indenture
supplemental hereto as such Supplemental Indenture may be originally executed,
or as it may from time to time be supplemented, modified or amended, as provided
herein and therein.
TRUSTEE
The term "Trustee" shall mean The First National Bank of Chicago until
a successor Trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
TRUST INDENTURE ACT OF 1939
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture
Act of 1939, as amended as of the date of this Indenture.
UNITED STATES DOLLARS
The term "United States Dollars" shall mean the lawful currency of the
United States of America.
-6-
<PAGE> 16
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION,
TRANSFER AND EXCHANGE OF SECURITIES
SECTION 2.01. AMOUNT, SERIES, EXECUTION, AUTHENTICATION AND DELIVERY OF
SECURITIES. The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is not limited. The Securities
may be issued in one or more Series.
(A) The following terms and provisions of each Series of Securities
shall be established by, or pursuant to authority set forth in, a resolution of
the Board of Directors and set forth in either a Certified Resolution or a
Supplemental Indenture:
(1) the designation of the Series of Securities (which shall
distinguish the Securities of such Series from all other Series of
Securities),
(2) any limit upon the aggregate principal amount of the
particular Series of Securities which may be executed, authenticated
and delivered under this Indenture; provided, however, that nothing
contained in this Section 2.01 or elsewhere in this Indenture or in the
Securities or in such Certified Resolution or in a Supplemental
Indenture is intended to or shall limit execution by the Company or
authentication and delivery by the Trustee of Securities under the
circumstances contemplated by Sections 2.05, 2.06, 2.07, 3.04 and
10.04,
(3) the currency or currencies or composite currency in which
principal of and interest and any premium on such Series of Securities
shall be payable (if other than in United States Dollars),
(4) the Stated Maturity for payment of principal of such
Series of Securities and any sinking fund or analogous provisions,
(5) the rate or rates at which such Series of Securities shall
bear interest or the method of calculating such rate or rates of
interest and the Interest Payment Dates for such Series of Securities,
(6) the place or places where such Series of Securities may be
presented for payment and for the other purposes provided in Section
4.02,
(7) any Redemption Price or Prices, the Redemption Date or
Dates and other applicable redemption or repurchase provisions for such
Series of Securities,
(8) whether such Series of Securities shall be issuable as one
or more Global Securities and the form of such Series of Securities,
(9) if the Securities of such Series shall be issued in whole
or in part as one or more Global Securities, the Depository for such
Global Security or Securities and any additional terms and conditions
relating to such Global Securities not set forth in this Indenture,
(10) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which such Series of Securities
shall be issuable,
-7-
<PAGE> 17
(11) the date from which interest on such Securities shall
accrue,
(12) the basis upon which interest on such Series of
Securities shall be computed (if other than on the basis of a 360-day
year of twelve 30-day months),
(13) if other than the principal amount thereof, the portion
of the principal amount of such Series of Securities which shall be
payable upon declaration of acceleration of the maturity thereof
pursuant to Section 6.01,
(14) the Person or Persons who shall be registrar for such
Series of Securities, and the place or places where the Register of
such Series of Securities shall be kept,
(15) any additional events of default with respect to the
Securities of a particular Series not set forth herein,
(16) any additional covenants of the Company with respect to
the Securities of a particular Series not set forth herein,
(17) the terms and conditions, if any, upon which any
Securities of such Series may or shall be converted into other
instruments or other forms of property and
(18) any other terms of such Series of Securities (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one Series shall be substantially identical
except that any Series may have serial maturities and different interest rates
for different maturities and except as to denomination and the differences
herein specified between Global Securities and Securities issued in definitive
form and except as may otherwise be provided in or pursuant to the Certified
Resolution or Supplemental Indenture relating to such Series of Securities. All
Securities of any one Series need not be issued at the same time, and, unless
otherwise provided in the Certified Resolution or Supplemental Indenture
relating to such Series, a Series may be reopened for issuances of additional
Securities of such Series.
(B) At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver any Series of Securities executed by
the Company to the Trustee for authentication by it, and the Trustee shall
thereupon authenticate and deliver said Securities (or if only a single Global
Security, such Global Security) to or upon the written order of the Company,
signed by an officer of the Company, without any further corporate action. In
authenticating such Securities and accepting the additional responsibilities
under this Indenture in relation to such Securities and except as hereinafter
provided with respect to a Series of Securities subject to a Periodic Offering,
the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon:
(1) each Certified Resolution relating to such Series of
Securities,
(2) an executed Supplemental Indenture, if any, relating to
such Series of Securities,
(3) an Opinion of Counsel to the effect that:
-8-
<PAGE> 18
(a) the terms and form of such Securities have been
established as permitted by Sections 2.01 and 2.02 in
conformity with the provisions of this Indenture,
(b) such Securities, when executed and issued by the
Company and authenticated and delivered by the Trustee in
accordance with the provisions of this Indenture and subject
to any conditions specified in such Opinion of Counsel, will
constitute valid and binding obligations of the Company,
except as any rights thereunder may be limited by the effect
of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws
affecting or relating to the rights of creditors generally;
the rules governing the availability of specific performance,
injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a
proceeding in equity or at law; the effect of applicable court
decisions invoking statutes or principles of equity, which
have held that certain covenants and provisions of agreements
are unenforceable where the breach of such covenants or
provisions imposes restrictions or burdens upon a borrower,
and it cannot be demonstrated that the enforcement of such
restrictions or burdens is necessary for the protection of the
creditor, or which have held that the creditor's enforcement
of such covenants or provisions under the circumstances would
have violated the creditor's covenants of good faith and fair
dealing implied under California law; and the effect of
California statutes and rules of law which cannot be waived
prospectively by a borrower, and
(c) the Company has complied with all applicable
Federal laws and requirements in respect of the execution and
delivery of such Securities.
With respect to a Series of Securities subject to a Periodic Offering, the
Trustee shall be entitled to receive, and, subject to Section 7.01, shall be
fully protected in relying upon the documents described in the foregoing
subsections (1), (2) and (3) of this Section 2.01; provided that (i) the
Certified Resolution may be delivered to the Trustee prior to the delivery to
the Trustee of such Securities for authentication and delivery, (ii) the Trustee
shall authenticate and deliver Securities of such Series for original issue from
time to time, in an aggregate principal amount not exceeding the aggregate
principal amount, if any, established for such Series, pursuant to such
Certified Resolution or pursuant to such procedures as may be specified from
time to time by a Certified Resolution, (iii) the maturity date or dates,
original issue date or dates, interest rate or rates or the method or methods of
calculating such and any other terms of the Securities of such Series shall be
determined by the Certified Resolution or pursuant to such procedures, (iv) if
provided for in such procedures, such Certified Resolution may authorize
authentication and delivery pursuant to oral or electronic instructions from the
Company or its duly authorized agent or agents, which oral instructions shall be
promptly confirmed in writing and (v) the Trustee shall be entitled to receive
an Opinion of Counsel only once at or prior to the time of the first
authentication of Securities of such Series and that the opinions described in
the foregoing subsections (3)(a) and (3)(b) of this Section 2.01 may be to the
effect that:
(x) the form of the Securities of such Series has been duly
authorized by the Company and has been established in conformity with
the provisions of this Indenture and that, when the terms of such
Securities shall have been established pursuant to a Certified
Resolution or pursuant to such procedures as maybe specified from time
to time by a Certified Resolution, such terms will have been duly
authorized by the
-9-
<PAGE> 19
Company and will have been established in conformity with the
provisions of this Indenture and
(y) Securities of such Series, when executed and issued by the
Company and completed, authenticated and delivered by the Trustee in
accordance with the provisions of this Indenture and subject to any
conditions specified in such Opinion of Counsel and when paid for, all
as contemplated by and in accordance with the Certified Resolution or
specified procedures, as the case may be, will constitute valid and
binding obligations of the Company, except as any rights thereunder may
be limited by the effect of bankruptcy, insolvency, reorganization,
receivership, conservatorship, arrangement, moratorium or other laws
affecting or relating to the rights of creditors generally; the rules
governing the availability of specific performance, injunctive relief
or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law;
the effect of applicable court decisions invoking statutes or
principles of equity, which have held that certain covenants and
provisions of agreements are unenforceable where the breach of such
covenants or provisions imposes restrictions or burdens upon a
borrower, and it cannot be demonstrated that the enforcement of such
restrictions or burdens is necessary for the protection of the
creditor, or which have held that the creditor's enforcement of such
covenants or provisions under the circumstances would have violated the
creditor's covenants of good faith and fair dealing implied under
California law; and the effect of California statutes and rules of law
which cannot be waived prospectively by a borrower.
With respect to Securities of a Series offered in a Periodic Offering,
the Trustee may rely, as to the authorization by the Company of any such
Securities, the form and terms thereof and the valid and binding effect thereof,
upon the Opinion of Counsel and other documents delivered pursuant to this
Section 2.01 in connection with the first authentication of Securities of such
Series unless and until such Opinion of Counsel or other documents shall have
been superseded or revoked. In connection with the authentication and delivery
of Securities of a Series subject to a Periodic Offering, the Trustee shall be
entitled to assume that the instructions of the Company to authenticate and
deliver such Securities do not violate any rules, regulations or orders of any
governmental agency having jurisdiction over the Company.
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF
AUTHENTICATION. The Securities of each Series shall be substantially of the
tenor and purport as shall be authorized by the related Certified Resolution or
Supplemental Indenture, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements thereon as the
Board of Directors may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Securities of such Series may be listed, or
to conform to usage.
The definitive Securities and each Global Security may be printed,
lithographed or fully or partly engraved or produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution thereof.
-10-
<PAGE> 20
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities, of the Series designated
herein, referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: ____________________________________
Name:
Title:
SECTION 2.03. DENOMINATIONS; PAYMENT OF INTEREST ON SECURITIES. The
Securities of each Series may be issued as fully registered Securities in
denominations all as shall be specified as contemplated by Section 2.01. In the
absence of such provisions with respect to the Securities of any Series, the
Securities of such Series (other than any Global Securities) shall be issued in
denominations of $1,000 and any integral multiple thereof.
If the Securities of any Series shall bear interest, each Security of
such Series shall bear interest from the applicable date at the rate per annum
specified in the Certified Resolution or Supplemental Indenture with respect to
such Series of Securities. Unless otherwise specified in the Certified
Resolution or Supplemental Indenture with respect to the Securities of any
Series, interest on the Securities of such Series shall be computed on the basis
of a 360-day year of twelve 30-day months. Such interest shall be payable on the
Interest Payment Dates specified in the Certified Resolution or Supplemental
Indenture with respect to such Series of Securities. The Person in whose name
any Security is registered at the close of business on the applicable Record
Date for the Series of which such Security is a part shall be entitled to
receive the interest payable thereon on such Interest Payment Date
notwithstanding the cancellation of such Security upon any transfer or exchange
thereof subsequent to such Record Date and prior to such Interest Payment Date
unless such Security shall have been called for redemption on a Redemption Date
which is subsequent to such Record Date and prior to such Interest Payment Date
or unless the Company shall default in the payment of interest due on such
Interest Payment Date on any Security of such Series.
Any interest on any Security of any Series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Record Date solely by virtue of such Holder
having been such Holder; and such Defaulted Interest may be paid by the Company,
at its election in each case, as provided in subsection A or B below:
A. The Company may elect to make payment of any Defaulted
Interest on the Securities of any Series to the Persons in whose names
such Securities are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment (which date shall be such
as will enable the Trustee to comply with the next sentence hereof),
and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
-11-
<PAGE> 21
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
subsection provided. Thereupon the Trustee shall fix a special record
date (the "Special Record Date") for the payment of such Defaulted
Interest which shall be not more than 15 nor less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder of a Security of such Series at such Holder's address as it
appears in the Security Register not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such Series are registered on such
Special Record Date and shall no longer be payable pursuant to the
following subsection B.
B. The Company may make payment of any Defaulted Interest on
the Securities of any Series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this subsection, such payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.03, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry all the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security and each such Security
shall bear interest from such date, such that neither gain nor loss in interest
shall result from such transfer, exchange or substitution.
SECTION 2.04. EXECUTION OF SECURITIES. The Securities shall be executed
manually or in facsimile, by an officer and the Secretary or an Assistant
Secretary of the Company under its corporate seal, which may be affixed thereto
or printed, engraved or otherwise reproduced thereon, by facsimile or otherwise.
Only such Securities as shall bear thereon a certificate of authentication
substantially in the form recited herein, executed by the Trustee manually by an
authorized officer, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate of authentication of the
Trustee upon any Security executed by the Company shall be conclusive evidence
that the Security so authenticated has been duly authenticated and delivered
hereunder and that the Holder is entitled to the benefits of this Indenture.
Typographical or other errors or defects in the seal or facsimile signature on
any Security or in the text thereof shall not affect the validity or
enforceability of such Security if it has been duly authenticated and delivered
by the Trustee.
In case any officer of the Company who shall have signed any of the
Securities (manually or in facsimile) shall cease to be such officer before the
Securities so signed shall have been authenticated and delivered by the Trustee,
or disposed of by the Company, such Securities nevertheless may be authenticated
and delivered or disposed of as though the Person who signed such Securities had
not ceased to be such officer of the Company. Also, any Security may be signed
on behalf of the Company by such Persons as on the actual date of execution of
such Security shall be the proper officers of the Company, although at the date
of the execution of this Indenture or on the nominal date of such Security any
such Person was not such officer.
-12-
<PAGE> 22
SECTION 2.05. REGISTRATION, TRANSFER AND EXCHANGE OF SECURITIES. Except
as specifically otherwise provided herein with respect to Global Securities,
Securities of any Series may be exchanged for a like aggregate principal amount
of Securities of the same Series of other authorized denominations. Securities
to be exchanged shall be surrendered at the offices or agencies to be maintained
in accordance with the provisions of Section 4.02 and the Company shall execute
the Security or Securities, and the Trustee shall authenticate and deliver in
exchange therefor the Security or Securities which the Securityholder making the
exchange shall be entitled to receive.
The Company shall cause the Trustee to keep or cause to be kept, at one
or more of the offices or agencies to be maintained by the Trustee in accordance
with the provisions of Section 4.02 with respect to the Securities of each
Series, the Register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Securities of
such Series and the transfer of Securities of such Series as in this Article
provided. The Register shall be in written form or in any other form capable of
being converted into written form within a reasonable time. At all reasonable
times the Register shall be open for inspection by the Trustee and any registrar
of the Securities of such Series other than the Trustee. Upon due presentment
for transfer of any Security of any Series at the offices or agencies of the
Company to be maintained in accordance with Section 4.02 with respect to the
Securities of such Series, the Company shall execute a new Security and the
Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Security or Securities of the same Series for a like aggregate
principal amount of authorized denominations.
Notwithstanding any other provisions of this Section 2.05, unless and
until it is exchanged in whole or in part for Securities in definitive form, a
Global Security representing all or a portion of the Securities of a Series may
not be transferred except as a whole by the Depository for such Series to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository or by such Depository or any such nominee
to a successor Depository for such Series or a nominee of such successor
Depository.
All Securities of any Series presented or surrendered for exchange,
transfer, redemption, conversion or payment shall, if so required by the Company
or any registrar of the Securities of such Series, be accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Company and
such registrar, duly executed by the registered Holder or by such Person's
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto.
The Company shall not be required to exchange or transfer (a) any
Securities of any Series during a period beginning at the opening of business 15
days before the day of the first publication or the mailing (if there is no
publication) of a notice of redemption of Securities of such Series and ending
at the close of business on the day of such publication or mailing or (b) any
Securities called or selected for redemption in whole or in part, except, in the
case of Securities called for redemption in part, the portion thereof not so
called for redemption in whole or in part or during a period beginning at the
opening of business on any Record Date for such Series and ending at the close
of business on the relevant Interest Payment Date therefor.
SECTION 2.06. TEMPORARY SECURITIES. Pending the preparation of
definitive Securities of any Series, the Company may execute and the Trustee
shall authenticate and deliver temporary Securities of
-13-
<PAGE> 23
such Series which are printed, lithographed, typewritten or otherwise produced,
in any denomination substantially of the tenor of the definitive Securities in
lieu of which they are issued, in registered form and with such appropriate
omissions, insertions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities. Every such temporary Security shall be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Securities. If temporary Securities are issued, the
Company will cause definitive Securities to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
of such Series shall be exchangeable for definitive Securities upon surrender of
the temporary Securities without charge to the Holder at the offices or agencies
to be maintained by the Trustee as provided in Section 4.02 with respect to the
Securities of such Series. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange for such temporary Securities an equal
aggregate principal amount of definitive Securities of such Series. Until so
exchanged, the temporary Securities of any Series shall in all respects be
entitled to the benefits of this Indenture and interest thereon, when and as
payable, shall be paid to the registered owners thereof.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. If (i)
any mutilated Security is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Security and (ii) there is delivered to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and upon
its request the Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Security, a new Security
of the same Series and of like tenor and principal amount, bearing a number not
contemporaneously Outstanding,.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 2.07, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other fees
or expenses connected therewith.
Every new Security issued pursuant to this Section 2.07 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the security and benefits of this Indenture equally and ratably
with all other Outstanding Securities of such Series.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. CANCELLATION AND DESTRUCTION OF SURRENDERED SECURITIES.
All Securities surrendered for payment, redemption, transfer, conversion or
exchange shall, if surrendered to the Company, the Trustee or any agent of the
Company or of the Trustee, be delivered to the Trustee, and the same, together
with Securities surrendered to the Trustee for cancellation, shall be canceled
by it and thereafter disposed of by it as directed by the Company, and no
Securities shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee shall destroy canceled
Securities and deliver a certificate of destruction thereof to the Company
unless by an Officer's
-14-
<PAGE> 24
Certificate of the Company, the Company shall direct that canceled Securities be
returned to it. If the Company shall purchase or otherwise acquire any of the
Securities, however, such purchase or acquisition shall not operate as a
payment, redemption or satisfaction of the indebtedness represented by such
Securities unless and until the Company, at its option shall deliver or
surrender the same to the Trustee for cancellation.
SECTION 2.09. SECURITIES IN GLOBAL FORM; DEPOSITORIES. (a) Each Global
Security shall: (i) represent and be denominated in an aggregate amount equal to
the aggregate principal amount of the Securities of the Series to be represented
by such Global Security, (ii) be registered in the name of either the Depository
for such Global Security or the nominee of such Depository, (iii) be delivered
by the Trustee to such Depository or pursuant to such Depository's written
instruction and (iv) bear a legend substantially to the following effect:
"Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Global Security may not be transferred except as a whole
by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any nominee to a successor Depository or a nominee of any
successor Depository." The notation of the record owner's interest in such
Global Security upon the original issuance thereof shall be deemed to be
delivery in connection with the original issuance of each beneficial owner's
interest in such Global Security. Without limiting the foregoing, the Company
and the Trustee shall have no responsibility, obligation or liability with
respect to: (x) the maintenance, review or accuracy of the records of the
Depository or of any of its participating organizations with respect to any
ownership interest in or payments with respect to such Global Security, (y) any
communication with or delivery of any notice (including notices of redemption)
with respect to the Series of Securities represented by the Global Security to
any Person having any ownership interest in such Global Security or to any of
the Depository's participating organizations or (z) any payment made on account
of any beneficial ownership interest in such Global Security.
(b) If any Security of a Series is issuable in the form of a Global
Security or Securities, each such Global Security may provide that it shall
represent the aggregate amount of Outstanding Securities of such Series from
time to time endorsed thereon and may also provide that the aggregate amount of
Outstanding Securities of such Series represented thereby may from time to time
be reduced to reflect exchanges. Any endorsement of a Global Security to reflect
the amount of Outstanding Securities of a Series represented thereby shall be
made by the Trustee and in such manner as shall be specified on such Global
Security. Any instructions by the Company with respect to a Global Security,
after its initial issuance, shall be in writing but need not comply with Section
13.03 of this Indenture.
(c) Each Depository designated pursuant to the provisions of Section
2.01 of this Indenture for a Global Security must, at the time of its
designation and at all times while it serves as a depositary, be a clearing
agency registered under the Securities Exchange Act of 1934, as amended, and any
other applicable statute or regulation. If at any time the Depository for the
Securities of a Series notifies the Company that it is unwilling or unable to
continue as Depository for the Securities of such Series or if at any time the
Depository for the Securities of such Series shall no longer be eligible under
this Section 2.09, the Company shall appoint a successor Depository with respect
to the Securities of such Series. If a successor Depository for the Securities
of such Series is not appointed by the Company within 90 days after the Company
receives such notice or learns of such ineligibility, the Company shall execute
and the Company shall direct the Trustee to authenticate and deliver definitive
Securities of such Series in authorized denominations in exchange for the Global
Security or Securities. Upon receipt of such direction, the Trustee shall
thereupon authenticate and deliver the definitive Securities of such Series in
the same aggregate principal amount as the Global Security or Securities
representing such Series in exchange for such Global Security or Securities, in
accordance with the provisions of subsection (e) of this Section 2.09, without
any further corporate action by the Company.
-15-
<PAGE> 25
(d) The Company may at any time and in its sole discretion determine
that the Securities of any Series issued in the form of one or more Global
Securities shall no longer be represented by such Global Security or Securities.
In such event, the Company will execute and upon receipt of a written order from
the Company, the Trustee shall thereupon authenticate and deliver Securities of
such Series in definitive form and in authorized denominations in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Series in exchange for such Global Security or
Securities, in accordance with the provisions of subsection (e) of this Section
2.09 without any further corporate action by the Company.
(e) Upon any exchange hereunder of the Global Security or Securities
for Securities in definitive form, such Global Security or Securities shall be
canceled by the Trustee. Securities issued hereunder in exchange for the Global
Security or Securities shall be registered in such names and in such authorized
denominations as the Depository for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such definitive Securities in
exchange for the Global Security or Securities to the persons in whose name such
definitive Securities have been registered in accordance with the directions of
the Depository.
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. REDEMPTION OF SECURITIES. Securities of any Series may be
made subject to redemption prior to their Stated Maturity, as a whole or in
part, at such time or times, upon payment of the principal amount thereof plus
such premium or premiums, if any, as shall be set forth in the resolution of the
Board of Directors or the Supplemental Indenture relating to such Series.
SECTION 3.02. NOTICE OF REDEMPTION. In all cases other than redemption
at the option of the Holders of Securities, notice of redemption shall be given
by first class mail, postage prepaid, not less than 30 nor more than 60 days
prior to the Redemption Date, to each Person in whose name any Security called
for redemption is registered on the Register as of the date of such notice, but
neither a failure to give notice by mail nor any defect in any notice so mailed
shall affect the validity of the proceedings for such redemption. Each notice of
redemption shall state the Redemption Date, the Redemption Price, the place of
redemption, the principal amount and, if less than all, the distinctive numbers
of the Securities to be redeemed and shall also state that the interest on the
Securities in such notice designated for redemption shall cease to accrue from
and after such Redemption Date.
Notice of redemption of Securities may be given by the Company or, at
the option of the Company, by the Trustee on behalf of the Company, provided
that if the Trustee give such notice, the Company shall give the Trustee notice
of any such redemption at least 45 days prior to the redemption date, unless a
shorter time is acceptable to the Trustee. Upon receipt of any direction to give
notice, the Trustee shall promptly give such notice. The Trustee may rely upon
such direction that all conditions precedent to the giving of such direction
have been complied with or done.
SECTION 3.03. SELECTION OF SECURITIES FOR REDEMPTION. Whenever
provision is made for the redemption of any Series of Securities or portion
thereof and less than all of the Securities of such Series or portion thereof
are called for redemption, the Trustee shall select the Securities to be
redeemed, from the Outstanding Securities of such Series or portion thereof not
previously called for redemption, in any manner which the Trustee deems fair and
appropriate. For the purpose of any such selection, the Trustee shall accord
each $1,000 principal amount of each Security of a denomination of more than
$1,000 equal
-16-
<PAGE> 26
probability of selection, except that if the Securities of any Series are
denominated in a currency other than U.S. dollars, the Trustee shall accord
equal probability of selection to each principal amount equal to the minimum
denomination of each Security of such Series of a denomination greater than such
minimum denomination.
SECTION 3.04. PARTIAL REDEMPTION OF REGISTERED SECURITY. Upon surrender
of any registered Security (including any Global Security) to be redeemed in
part only, the Company shall execute and the Trustee shall authenticate and
deliver to the registered owner thereof, without service charge, a new Security
or Securities (or in the case of a Global Security, a new Global Security) of
the same Series and maturity and of authorized denomination or denominations as
requested by such registered owners, in aggregate principal amount equal to and
in exchange for the unredeemed portion of the principal of the Security so
surrendered.
SECTION 3.05. EFFECT OF REDEMPTION. If notice of redemption shall have
been duly given as provided in Section 3.02, the Securities or portions of
Securities specified in such notice shall become due and payable on the
Redemption Date and at the place or places stated in such notice at the
Redemption Price specified in such notice, and on and after such Redemption Date
(unless the Company shall default in the payment of such Securities at the
applicable Redemption Price) such Securities or portions of Securities shall
cease to bear interest, and such Securities shall cease from and after the
Redemption Date to be entitled to any benefit or security under this Indenture,
and the Holders thereof shall have no right in respect of such Securities except
the right to receive the Redemption Price thereof and any unpaid interest
accrued to the Redemption Date. Upon presentation and surrender of such
Securities at said place of payment in said notice specified, the said
Securities or portions thereof shall be paid and redeemed by the Company at the
applicable Redemption Price, together with any interest accrued to the
Redemption Date; provided, however, that any regular payment of interest
becoming due on any Securities on the Redemption Date shall be payable to the
registered owners of such Securities as of the Relevant Record Date as provided
in Article Two hereof. Upon presentation of any Security which is redeemed in
part only, the Company shall execute a new Security and the Trustee shall
authenticate and deliver at the expense of the Company a new Security of the
same Series of authorized denomination in principal amount equal to the
unredeemed portion of the Security so presented.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal thereof shall, to the extent
permitted by law, bear interest from the date fixed for redemption at the rate
borne by the Security, or, in the case of a Security which does not bear
interest, at the rate of interest set forth therefor in the Security in either
case, until paid.
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01. PAYMENT OF PRINCIPAL OF AND INTEREST ON SECURITIES. The
Company covenants that it will duly and punctually pay or cause to be paid the
principal of and any interest and premium on each of the Securities in
accordance with the terms of the Securities and this Indenture. Except with
respect to any Global Securities, if the Securities of any Series bear interest,
each installment of interest on the Securities of such Series may, at the option
of the Company, be paid by mailing a check or checks for such interest payable
to the Person entitled thereto pursuant to Section 2.03 to the address of such
Person as it appears on the Register of the Securities of such Series on the
applicable Record Date for such interest payment.
-17-
<PAGE> 27
SECTION 4.02. MAINTENANCE OF OFFICES OR AGENCIES FOR TRANSFER,
REGISTRATION, EXCHANGE AND PAYMENT OF SECURITIES. So long as any of the
Securities shall remain Outstanding, the Company covenants that it will cause
the Trustee to maintain an office or agency in the City and County of New York,
State of New York, where the Securities may be presented for registration,
exchange and transfer as in this Indenture provided, and where notices and
demands to or upon the Trustee in respect of the Securities or of this Indenture
may be served, and where the Securities may be presented for payment. In case
the Trustee shall fail to maintain any such office or agency, presentations and
demands may be made and notices may be served at the principal office of the
Company.
In addition to such office or agency, the Company may from time to time
constitute and appoint one or more other offices or agencies for such purposes
with respect to Securities of any Series, and one or more paying agents for the
payment of Securities of any Series, in such cities or in one or more other
cities, and may from time to time rescind such appointments, as the Company may
deem desirable or expedient, and as to which the Company has notified the
Trustee.
SECTION 4.03. APPOINTMENT TO FILL A VACANCY IN THE OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, covenants that it will appoint, in the manner provided in Section 7.10,
a Trustee, so that there shall at all times be a Trustee with respect to the
Outstanding Securities.
SECTION 4.04. DUTIES OF PAYING AGENT. (a) If the Company shall appoint
a Paying Agent other than the Trustee with respect to Securities of any Series,
it will cause such Paying Agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 4.04 and Section 11.05,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of or interest, if any, on the Securities
of such Series (whether such sums have been paid to it by the Company
or by any other obligor on the Securities of such Series) in trust for
the benefit of the Holders of the Securities entitled to such principal
or interest and will notify the Trustee of the receipt of sums to be so
held,
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities of such Series) to
make any payment of the principal of or interest on the Securities of
such Series when the same shall be due and payable, and
(3) that it will at any time during the continuance of any
Event of Default, upon the written request of the Trustee, deliver to
the Trustee all sums so held in trust by it.
(b) Whenever the Company shall have one or more Paying Agents with
respect to the Securities of any Series, it will, prior to each due date of the
principal of or any interest on the Securities of such Series, deposit with a
Paying Agent of such Series a sum sufficient to pay the principal or interest so
becoming due, such sum to be held in trust for the benefit of the Holders of
Securities entitled to such principal or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture with respect to one or more or all Series of
Securities hereunder, or for any other reason, pay or cause to be paid to the
Trustee
-18-
<PAGE> 28
all sums held in trust for such Series by it, or any Paying Agent hereunder, as
required by this Section 4.04, and such sums are to be held by the Trustee upon
the trust herein contained.
SECTION 4.05. NOTICE OF DEFAULT. The Company covenants that, as soon as
is practicable, the Company will furnish the Trustee notice of any event which
is an Event of Default or which with the giving of notice or the passage of time
or both would constitute an Event of Default which has occurred and is
continuing on the date of such notice, which notice shall set forth the nature
of such event and the action which the Company proposes to take with respect
thereto.
ARTICLE FIVE
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 5.01. COMPANY TO FURNISH TRUSTEE INFORMATION AS TO THE NAMES
AND ADDRESSES OF SECURITYHOLDERS. The Company will furnish or cause to be
furnished to the Trustee, not less than 45 days nor more than 60 days after each
date (month and day) specified as an Interest Payment Date for the Securities of
the first Series issued under this Indenture (whether or not any Securities of
that Series are then Outstanding), but in no event less frequently than
semiannually, and at such other times as the Trustee may request in writing,
within 30 days after receipt by the Company of any such request, a list in such
form as the Trustee may reasonably require containing all the information in the
possession or control of the Company, or any of its Paying Agents other than the
Trustee, as to the names and addresses of the Holders of Securities, obtained
since the date as of which the next previous list, if any, was furnished,
excluding from any such list the names and addresses received by the Trustee in
its capacity as registrar (if so acting). Any such list may be dated as of a
date not more than 15 days prior to the time such information is furnished and
need not include information received after such date.
SECTION 5.02. PRESERVATION OF INFORMATION; COMMUNICATION TO
SECURITYHOLDERS. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Securities of
each Series (1) contained in the most recent list furnished to it as provided in
Section 5.01, (2) received by the Trustee in the capacity of Paying Agent or
registrar (if so acting) and (3) filed with the Trustee within the two preceding
years as provided for in Section 5.04(c). The Trustee may destroy any list
furnished to it as provided in Section 5.01 upon receipt of a new list so
furnished.
(b) If three or more Holders of Securities (hereinafter referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of any Series or with Holders of all Securities with respect to their
rights under this Indenture or under such Securities, and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five Business Days after the receipt
of such application, at its election, either:
(1) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 5.02 or
(2) inform such applicants as to the approximate number of
Holders of Securities of such Series or all Securities, as the case may
be, whose names and addresses appear in the information preserved at
the time by the Trustee in accordance with the provisions of subsection
(a) of this Section 5.02, and as to the approximate cost
-19-
<PAGE> 29
of mailing to such Securityholders the form of proxy or other
communications, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each of the Holders of Securities of such Series, or all Securities, as
the case may be, whose name and address appear in the information preserved at
the time by the Trustee in accordance with the provisions of subsection (a) of
this Section 5.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Securities of such Series or
all Securities, as the case may be, or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every Holder of the Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any Paying Agent nor any registrar shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Holders of Securities in accordance with the provisions of subsection (b)
of this Section 5.02, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under said subsection (b).
SECTION 5.03. REPORTS BY COMPANY. (a) The Company covenants and agrees
to file with the Trustee within 15 days after the Company is required to file
the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934;
or, if the Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Securities Exchange Act of 1934 in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit to the Holders of
Securities within 30 days after the filing thereof with the Trustee, in the
manner and to the extent provided in subsection (c)
-20-
<PAGE> 30
of Section 5.04 with respect to reports pursuant to subsection (a) of said
Section 5.04, such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of this Section
5.03 as may be required by rules and regulations prescribed from time to time by
the Commission.
(d) The Company and any other obligor on the Securities each covenant
and agree to furnish to the Trustee, not less than annually, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants of this Indenture (which compliance shall be
determined without regard to any period of grace or requirement of notice as
provided in this Indenture). Such certificates need not comply with Section
13.03 of this Indenture.
SECTION 5.04. REPORTS BY TRUSTEE. (a) On or before the first July 15th
following the date of execution of this Indenture, and on or before July 15 in
every year thereafter, if and so long as any Securities are Outstanding
hereunder, the Trustee shall transmit to the Securityholders as hereinafter in
this Section 5.04 provided, a brief report dated as of the preceding May 15 with
respect to any of the following events which may have occurred within the
previous 12 months (but if no such event has occurred within such period no
report need be transmitted):
(1) any change to its eligibility under Section 7.09, and its
qualifications under Section 7.08;
(2) the creation of or any material change to a relationship
specified in paragraph (1) through (10) of Section 7.08(d);
(3) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report, and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities of any Series,
on any property or funds held or collected by it as Trustee, except
that the Trustee shall not be required (but may elect) to state such
advances if such advances so remaining unpaid aggregate not more than
one-half of one percent of the principal amount of the Securities of
such Series Outstanding on the date of such report;
(4) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of
such report, with a brief description of any property held as
collateral security therefor, except indebtedness based upon a creditor
relationship arising in any manner described in paragraph (2), (3), (4)
or (6) of subsection (b) of Section 7.13;
(5) any change to the property and funds, if any, physically
in the possession of the Trustee (as such) on the date of such report;
(6) any additional issue of Securities which the Trustee has
not previously reported; and
(7) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and
which in its opinion materially
-21-
<PAGE> 31
affects the Securities, except action in respect of a default, notice
of which has been or is to be withheld by it in accordance with the
provisions of Section 6.10.
(b) The Trustee shall transmit to the Securityholders, as hereinafter
provided, a brief report with respect to the character and amount of any
advances (and if the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) since the date of the last
report transmitted pursuant to the provisions of subsection (a) of this Section
5.04 (or if no such report has yet been so transmitted, since the date of
execution of this Indenture), for the reimbursement of which it claims or may
claim a lien or charge prior to that of the Securities of any Series on property
or funds held or collected by it as Trustee, and which it has not previously
reported pursuant to this subsection, except that the Trustee shall not be
required (but may elect) to report such advances if such advances remaining
unpaid at any time aggregate ten percent or less of the principal amount of
Securities of such Series Outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) Reports pursuant to this Section 5.04 shall be transmitted by mail
(i) to all Holders of Securities of any Series, as the names and addresses of
such Holders shall appear upon the Register of the Securities of such Series,
(ii) to such Holders of Securities as have, within the two years preceding such
transmission, filed their names and addresses with the Trustee for that purpose
and (iii) except in the case of reports pursuant to subsection (b) of this
Section 5.04 to each Holder whose name and address are preserved at the time by
the Trustee as provided in Section 5.02(a) hereof.
(d) A copy of each such report shall, at the time of such transmission
to Securityholders, be filed by the Trustee with each stock exchange upon which
the Securities of any Series are listed and also with the Commission. The
Company will notify the Trustee when and as the Securities of any Series become
listed on any stock exchange.
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT; ACCELERATION, WAIVER OF DEFAULT AND
RESTORATION OF POSITION AND Rights. The term "Event of Default" whenever used
herein with respect to any particular Series of Securities shall mean any one of
the following events:
(a) default in the payment of any installment of interest on
any Security of such Series as and when the same shall become due and
payable, and continuance of such default for a period of 30 days, or
(b) default in the payment of all or any part of the principal
of or any premium on any Security of such Series as and when the same
shall become due and payable whether at maturity, by proceedings for
redemption, by declaration or otherwise, or
(c) default in the satisfaction of any sinking fund payment
obligation relating to such Series of Securities, when and as such
obligation shall become due and payable, or
(d) failure on the part of the Company to observe or perform
in any material respect any other of the covenants or agreements on its
part in the Securities or in this
-22-
<PAGE> 32
Indenture (including any Supplemental Indenture or pursuant to any
Certified Resolution, as contemplated by Section 2.01) specifically
contained for the benefit of the Holders of the Securities of such
Series, for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee, or to the
Company and the Trustee by the Holders of not less than 25% in
principal amount of the Securities of such Series and all other Series
so benefited (all Series voting as one class) at the time Outstanding
under this Indenture a written notice specifying such failure and
stating that such is a "Notice of Default" hereunder, or
(e) the entry by a court having jurisdiction in the premises
of a decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for any substantial part of its property,
or ordering the winding up or liquidation of its affairs, if such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days, or
(f) the commencement by the Company of a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or the Company's consent to the entry of an order
for relief in any involuntary case under any such law, or its consent
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of the
Company or for any substantial part of its property, or the making by
the Company of any general assignment for the benefit of creditors, or
its failure generally to pay its debts as they become due or the taking
by the Company of any corporate action in furtherance of any of the
foregoing.
If an Event of Default shall have occurred and be continuing with
respect to any one or more Series of Outstanding Securities, then and in each
and every such case, unless the principal amount of all the Securities of each
Series as to which there is an Event of Default shall have already become due
and payable, either the Trustee or the Holders of not less than 25% in principal
amount of the Securities of such Series then Outstanding hereunder (each such
Series voting as a separate class) by notice in writing to the Company (and to
the Trustee if given by Securityholders) may declare the principal amount (or,
if the Securities of any such Series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of such
Series) of all the Securities of such Series, together with any accrued
interest, to be due and payable immediately, and upon any such declaration the
same shall be immediately due and payable, anything in this Indenture or in the
Securities of such Series contained to the contrary notwithstanding. The
foregoing provisions, however, are subject to the condition that if, at any time
after the principal amount of the Securities of any one or more Series (or of
all the Securities, as the case may be) shall have been so declared due and
payable, and before any judgment or decree for the payment of moneys due shall
have been obtained or entered as hereinafter provided, the Company shall pay or
shall deposit with the Trustee a sum sufficient to pay all matured installments
of interest upon all the Securities of such Series (or upon all the Securities,
as the case may be) and the principal of any and all Securities of such Series
(or of any and all the Securities, as the case may be) which shall have become
due otherwise than by declaration (with interest on overdue installments of
interest to the extent permitted by law and on such principal at the rate or
rates of interest borne by, or prescribed therefor in the Securities of such
Series to the date of such payment or deposit) and the amounts payable to the
Trustee under Section 7.06 and any and all defaults under the Indenture with
respect to Securities of such Series (or all Securities, as the case may be),
other than the non-payment of principal of and any accrued interest on
Securities of such Series (or any Securities, as the case may be) which shall
have become due
-23-
<PAGE> 33
by declaration shall have been cured, remedied or waived as provided in Section
6.09 -- then and in every such case the Holders of a majority in principal
amount of the Securities of such Series (or of all the Securities, as the case
may be) then Outstanding (such Series or all Series voting as one class if more
than one Series are so entitled) by written notice to the Company and to the
Trustee, may rescind and annul such declaration and its consequences; but no
such rescission and annulment shall extend to or shall affect any subsequent
default, or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the Holders of the Securities of such Series (or of all
the Securities, as the case may be) shall be restored respectively to their
former positions and rights hereunder, and all rights, remedies and powers of
the Company and the Trustee and the Holders of the Securities of such Series (or
of all the Securities, as the case may be) shall continue as though no such
proceedings had been taken.
SECTION 6.02. COVENANT OF COMPANY TO PAY TO TRUSTEE WHOLE AMOUNT DUE ON
SECURITIES ON DEFAULT IN PAYMENT OF INTEREST OR PRINCIPAL. The Company covenants
that:
(1) in case default shall be made in the payment of any
installment of interest on any of the Securities of any Series as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days or
(2) in case default shall be made in the payment of all or any
part of the principal of any of the Securities of any Series when the
same shall have become due and payable, whether at the Stated Maturity
of such Series or by any call for redemption or by declaration of
acceleration or otherwise or
(3) in case default shall be made in the satisfaction of any
sinking fund obligation when and as such obligation becomes due and
payable,
upon demand of the Trustee, the Company will pay to the Trustee, for the benefit
of the Holders of the Securities of such Series, the whole amount that then
shall have become due and payable on all such Securities of such Series for
principal (and any premium) and interest and for any overdue sinking fund
payment together with interest upon the overdue principal and installments of
interest (to the extent permitted by law) at the rate or rates of interest borne
by, or prescribed therefor in, the Securities of such Series; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expense of collection, including a reasonable compensation to the Trustee, its
agents and counsel, and any expenses or liabilities incurred, and all advances
made, by the Trustee hereunder other than through its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as Trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon such
Securities, and collect in the manner provided by law out of the property of the
Company or any other obligor upon such Securities wherever situated the moneys
adjudged or decreed to be payable.
If an Event of Default with respect to Securities of any Series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of
-24-
<PAGE> 34
Securities of such Series by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 6.03. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other similar judicial proceeding
relative to the Company or any other obligor upon the Securities or the property
of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities of any Series shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, to the fullest extent permitted by law, by intervention in such
proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities (or, if the Securities are Original Issue
Discount Securities, such portion of the principal amount as may be
specified in the terms of such Securities) and to file such other
papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.04. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee to the fullest extent
permitted by law without the possession of any of the Securities or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
SECTION 6.05. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys
collected by the Trustee pursuant to Section 6.02 shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the several Securities in respect of
-25-
<PAGE> 35
which moneys have been collected, and stamping thereon the payment, if only
partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due to the Trustee under
Section 7.06;
SECOND: In case the principal of the Outstanding Securities in
respect of which moneys have been collected shall not have become due
and be unpaid, to the payment of any interest on such Securities, in
the order of the maturity of the installments of such interest, with
interest upon the overdue installments of interest (so far as permitted
by law and to the extent that such interest has been collected by the
Trustee at the rate or rates of interest borne by such Securities or
prescribed therefor therein) such payments to be made ratably to the
Persons entitled thereto, without discrimination or preference;
THIRD: In case the principal of the Outstanding Securities in
respect of which such moneys have been collected shall have become due,
by declaration or otherwise, to the payment of the whole amount then
owing and unpaid upon such Securities for principal and interest, if
any, with interest on the overdue principal and any installments of
interest (so far as permitted by law and to the extent that such
interest has been collected by the Trustee) at the rate or rates of
interest borne by, or prescribed therefor in, such Securities; and in
case such moneys shall be insufficient to pay in full the whole amount
so due and unpaid upon such Securities, then to the payment of such
principal and interest, without preference or priority of principal
over interest, or of interest over principal, or of any installment of
interest over any other installment of interest, or of any Security
over any other Security, ratably to the aggregate of such principal and
accrued and unpaid interest; and
FOURTH: To the payment of the remainder, with appropriate
interest to the Company or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.
SECTION 6.06. LIMITATION ON SUITS BY HOLDERS OF SECURITIES. No Holder
of any Security of any Series shall have any right by virtue or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
such Holder previously shall have given to the Trustee written notice of a
continuing Event of Default, as hereinbefore provided, and unless also the
Holders of not less than 25% in principal amount of the Securities of such
Series then Outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby (including the reasonable fees of counsel for the Trustee), and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to this Section 6.06; it being understood and
intended, and being expressly covenanted by the taker and Holder of every
Security with every other taker and Holder and the Trustee, that no one or more
Holders of Securities shall have any right in any manner whatever by virtue or
by availing of any provision of this Indenture to affect, disturb or prejudice
the rights of the Holders of any other of such Securities, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders of Securities. For the
protection and enforcement of the provisions of
-26-
<PAGE> 36
this Section 6.06, each and every Holder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Notwithstanding any other provisions in this Indenture, the right of
any Holder of any Security to receive payment of the principal of and interest
on such Security on or after the respective due dates expressed in such Security
(or, in the case of redemption, on or after the date fixed for redemption), or
to institute suit for the enforcement of any such payment on or after such
respective dates shall not be impaired or affected without the consent of such
Holder.
SECTION 6.07. RIGHTS AND REMEDIES CUMULATIVE. All powers and remedies
given by this Article Six to the Trustee or to the Holders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the Holders, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained in this Indenture, and no delay or
omission of the Trustee or of any Holder of any of the Securities to exercise
any right or power accruing upon any default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 6.06, every power and remedy given by this Article Six or
by law to the Trustee or to the Holders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Holders. The
assertion or employment of any right or remedy hereunder or otherwise shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 6.08. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Subject to the provisions of Section 6.06, every right and remedy given by this
Article Six or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 6.09. CONTROL BY HOLDERS; WAIVER OF PAST DEFAULTS. The Holders
of a majority in principal amount of the Securities of all Series (voting as one
class) at the time Outstanding (determined as provided in Section 8.04) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee; provided, however, that, subject to Section 7.01 the
Trustee shall have the right to decline to follow any such direction if the
Trustee in reliance upon an Opinion of Counsel determines that the action so
directed may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Holders not parties to such direction, and provided
further that nothing in this Indenture shall impair the right of the Trustee to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction by the Holders.
The Company may set a special record date for purposes of determining
the identity of the Holders of Securities entitled to vote or consent to any
action by vote or consent authorized or permitted by this Section 6.09. Such
record date shall be the later of 15 days prior to the first solicitation of
such consent or the date of the most recent list of Holders furnished to the
Trustee pursuant to Section 5.01 of this Indenture prior to such solicitation,
or may be established otherwise in accordance with the requirements of a
Depositary.
The Holders of not less than a majority in principal amount of the
Securities of any Series at the time Outstanding (determined as provided in
Section 8.04) may on behalf of the Holders of all the
-27-
<PAGE> 37
Securities of such Series waive any past Event of Default with respect to such
Series and its consequences (subject to Section 6.02), except a continuing Event
of Default specified in Section 6.01(a), (b) or (c), or in respect of a covenant
or provision of this Indenture which under Article Ten cannot be modified or
amended without the consent of the Holder of each Security so affected. Upon any
such waiver, the Company, the Trustee and the Holders of the Securities of such
Series shall be restored to their former positions and rights hereunder,
respectively, and such Event of Default shall be deemed to have been cured and
not continuing for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Event of Default or impair any right
consequent thereon.
SECTION 6.10. TRUSTEE TO GIVE NOTICE OF DEFAULTS KNOWN TO IT, BUT MAY
WITHHOLD IN CERTAIN Circumstances. The Trustee shall, within 90 days after the
occurrence of any default hereunder with respect to the Securities of any
Series, give to the Holders of the Securities of such Series in the manner and
to the extent provided in subsection (c) of Section 5.04 with respect to reports
pursuant to subsection (a) of said Section 5.04, notice of such default known to
the Trustee unless such default shall have been cured, remedied or waived before
the giving of such notice (the term "default" for the purposes of this Section
6.10 being hereby defined to be the events specified in Section 6.01 and any
additional events specified in the terms of any Series of Securities pursuant to
Section 2.01 not including any periods of grace provided for therein, and
irrespective of the giving of written notice specified in clause (d) of Section
6.01 and in any such terms); provided, that except in the case of default in the
payment of the principal of or interest on any of the Securities of such Series,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of the Securities
of such Series.
SECTION 6.11. REQUIREMENT OF AN UNDERTAKING TO PAY COSTS IN CERTAIN
SUITS UNDER THE INDENTURE OR AGAINST THE TRUSTEE. All parties to this Indenture
agree, and each Holder of any Security by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 6.11 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder of
Securities of any Series, or group of such Holders, holding in the aggregate
more than ten percent in principal amount of the Securities of such Series
Outstanding, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of or any interest or premium on any Security, on or
after the due date expressed in such Security or for such interest (or in the
case of any redemption, on or after the Redemption Date).
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE. The
Trustee, prior to the occurrence of an Event of Default and after the curing,
remedying or waiving of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default has occurred (which has not
been cured, remedied or waived), the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
-28-
<PAGE> 38
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, provided, however, that:
(a) prior to the occurrence of an Event of Default and after
the curing, remedying or waving of all Events of Default which may have
occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of Securities pursuant to Section 6.09
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided
in Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties,
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officer's
Certificate (unless other evidence in respect thereof shall be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a Certified Resolution,
-29-
<PAGE> 39
(c) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with such written advice or Opinion of Counsel,
(d) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Securityholders, pursuant to the
provisions of this Indenture, unless such Securityholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby,
(e) The Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture,
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, note or other paper or document,
unless requested in writing so to do by the Holders of Securities
pursuant to Section 6.09; provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the Trustee
may require reasonable indemnity against such costs, expenses or
liabilities as a condition to such proceeding; and provided further,
that nothing in this subsection (f) shall require the Trustee to give
the Securityholders any notice other than that required by Section
6.10. The reasonable expense of every such examination shall be paid by
the Company or, if paid by the Trustee, shall be reimbursed by the
Company upon demand,
(g) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder and
(h) The Trustee shall be under no responsibility for the
approval by it in good faith of any expert for any of the purposes
expressed in this Indenture.
SECTION 7.03. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR APPLICATION OF
PROCEEDS. The recitals contained herein and in the Securities (other than the
certificate of authentication on the Securities) shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Company of any of the Securities
or of the proceeds thereof.
SECTION 7.04. TRUSTEE MAY OWN SECURITIES. The Trustee, any Paying
Agent, registrar or any agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights, subject to Section 7.08, it would have if it were not
Trustee, Paying Agent, registrar or such other agent.
-30-
<PAGE> 40
SECTION 7.05. MONEYS RECEIVED BY TRUSTEE TO BE HELD IN TRUST. Moneys
held by the Trustee in trust need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed in writing with
the Company.
SECTION 7.06. TRUSTEE ENTITLED TO COMPENSATION, REIMBURSEMENT AND
INDEMNITY. The Company agrees to pay to the Trustee from time to time reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of any express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in connection with
the acceptance or administration of its trust under this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also agrees to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on the part of the Trustee and arising out of or in connection with the
acceptance or administration of this trust, including the reasonable costs and
expenses of defending itself against any claim of liability in the premises. The
obligations of the Company under this Section to compensate the Trustee, to pay
or reimburse the Trustee for expenses, disbursements and advances and to
indemnify and hold harmless the Trustee shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this Indenture.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of or interest or
redemption premium on particular Securities.
SECTION 7.07. RIGHT OF TRUSTEE TO RELY ON OFFICER'S CERTIFICATE WHERE
NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED. Except as otherwise provided in
Section 7.01, whenever in the administration of the provisions of this Indenture
the Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officer's
Certificate of the Company delivered to the Trustee, and such Officer's
Certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 7.08. DISQUALIFICATION; CONFLICTING INTEREST. (a) If the
Trustee has or shall acquire any conflicting interest, as defined in this
Section 7.08, it shall, within 90 days after ascertaining that it has such
conflicting interest, and if the Event of Default to which such conflicting
interest relates has not been cured or duly waived or otherwise eliminated
before the end of such 90-day period, the Trustee shall either eliminate such
conflicting interest or, except as otherwise provided in this Section 7.08,
resign in the manner and with the effect specified in Section 7.10, such
resignation to become effective upon the appointment of a successor trustee and
such successor's acceptance of such appointment, and the Company shall take
prompt steps to appoint a successor in accordance with Section 7.10.
(b) In the event that the Trustee shall fail to comply with the
provisions of subsection (a) of this Section 7.08, the Trustee shall, within ten
days after the expiration of such 90-day period, transmit notice of such failure
to the Securityholders in the manner and to the extent provided in subsection
(c) of Section 5.04 with respect to reports pursuant to subsection (a) of said
Section 5.04.
(c) Subject to the provisions of Section 6.11 of this Indenture, unless
the Trustee's duty to resign is stayed as provided in subsection (f) of this
Section 7.08, any Holder who has been a bona fide Holder of Securities for at
least six months may, on such Holder's behalf and on behalf of all other
-31-
<PAGE> 41
Holders similarly situated, petition any court of competent jurisdiction for the
removal of such Trustee and the appointment of a successor, if such Trustee
fails after written request thereof by such Holder to comply with the provisions
of subsection (a) of this Section 7.08.
(d) For the purposes of this Section 7.08 the Trustee shall be deemed
to have a conflicting interest with respect to the Securities of any Series if
an Event of Default (exclusive of any period of grace or requirement of notice)
has occurred with respect to Securities of such Series and:
(1) the Trustee is trustee under another indenture under which
any other securities, or certificates of interest or participation in
any other securities, of the Company or any other obligor on the
Securities are outstanding or is trustee for more than one outstanding
series of securities, as hereinafter defined, under a single indenture
of the Company or any other obligor on the Securities, unless such
other indenture is a collateral trust indenture under which the only
collateral consists of Securities issued under this Indenture, provided
that there shall be excluded from the operation of this paragraph, this
Indenture with respect to the Securities of any other Series
Outstanding, and any other indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Company or any other obligor on the Securities are
outstanding, if (A) this Indenture is and such other indenture or
indentures (and all series of securities issued thereunder) are wholly
unsecured and rank equally, and such other indenture or indentures (and
such series) are hereafter qualified under the Trust Indenture Act of
1939, unless the Commission shall have found and declared by order
pursuant to subsection (b) of Section 305 or subsection (c) of Section
307 of the Trust Indenture Act of 1939, that differences exist between
the provisions of this Indenture with respect to Securities of such
Series and one or more other Series, or the provisions of this
Indenture and the provisions of such other indenture or indentures (or
such series), which are so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustee from acting as such
under this Indenture with respect to Securities of such Series and such
other Series, or under this Indenture and such other indenture or
indentures, or (B) the Company shall have sustained the burden of
proving, on application to the Commission and after opportunity for
hearing thereon, that the trusteeship under this Indenture with respect
to Securities of such Series and such other Series, or under this
Indenture and such other indenture, is not so likely to involve a
material conflict of interest as to make it necessary in the public
interest or for the protection of investors to disqualify the Trustee
from acting as such under this Indenture with respect to Securities of
such Series and such other Series, or under this Indenture and one of
such indentures,
(2) the Trustee or any of its directors or executive officers
is an underwriter for the Company or any other obligor on the
Securities,
(3) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
control with an underwriter for the Company or any other obligor on the
Securities,
(4) the Trustee or any of its directors or executive officers
is a director, officer, partner, employee, appointee or representative
of the Company or any other obligor on the Securities, or of an
underwriter (other than the Trustee itself) for the Company or any
other obligor on the Securities who is currently engaged in the
business of underwriting, except that (A) one individual may be a
director and/or an executive
-32-
<PAGE> 42
officer of the Trustee and a director and/or an executive officer of
the Company or any other obligor on the Securities, but may not be at
the same time an executive officer of both the Trustee and the Company
or any other obligor on the Securities; (B) if and so long as the
number of directors of the Trustee in office is more than nine, one
additional individual may be a director and/or an executive officer of
the Trustee and a director of the Company or any other obligor on the
Securities; and (C) the Trustee may be designated by the Company or any
other obligor on the Securities or by an underwriter for the Company or
any other obligor on the Securities to act in the capacity of transfer
agent, registrar, custodian, paying agent, fiscal agent, escrow agent
or depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this subsection (d), to act as trustee
whether under an indenture or otherwise,
(5) ten percent or more of the voting securities of the
Trustee is beneficially owned either by the Company or any other
obligor on the Securities or by any director, partner or executive
officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such Persons;
or ten percent or more of the voting securities of the Trustee is
beneficially owned either by an underwriter for the Company or any
other obligor on the Securities or by any director, partner or
executive officer thereof or is beneficially owned, collectively, by
any two or more such Persons,
(6) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, as
hereinafter defined, (A) five percent or more of the voting securities,
or ten percent or more of any other class of security, of the Company
or any other obligor on the Securities, not including the Securities
issued under this Indenture and securities issued under any other
indenture under which the Trustee is also trustee, or (B) ten percent
or more of any class of security of an underwriter for the Company or
any other obligor on the Securities,
(7) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, as
hereinafter defined, five percent or more of the voting securities of
any Person who, to the knowledge of the Trustee, owns ten percent or
more of the voting securities of, or controls directly or indirectly or
is under direct or indirect common control with the Company or any
other obligor on the Securities,
(8) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, as
hereinafter defined, ten percent or more of any class of security of
any Person who, to the knowledge of the Trustee, owns 50% or more of
the voting securities of the Company or any other obligor on the
Securities or
(9) the Trustee owns on the date of the occurrence of such
Event of Default (exclusive of any period of grace or requirement of
notice) or any anniversary thereof while such Event of Default remains
outstanding, in the capacity of executor, administrator, testamentary
or inter vivos trustee, guardian, committee or conservator, or in any
other similar capacity an aggregate of 25% or more of the voting
securities or of any class of security, of any Person, the beneficial
ownership of a specified percentage of which would have constituted a
conflicting interest under paragraph (6), (7) or (8) of this subsection
(d). As to any such securities of which the Trustee acquired ownership
through becoming executor, administrator or testamentary trustee of an
estate which included them, the provisions of the preceding sentence
shall not apply, for a period of
-33-
<PAGE> 43
two years from the date of such acquisition, to the extent that such
securities included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after the
date of the occurrence of any such Event of Default and annually in
each succeeding year that the Securities or any Series thereof remain
in default, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such date. If
the Company or any other obligor on the Securities fails to make
payment in full of principal of or interest on any of the Securities
when and as the same become due and payable and such failure continues
for 30 days thereafter, the Trustee shall make a prompt check of its
holdings of such securities in any of the above-mentioned capacities as
of the date of the expiration of such 30-day period, and after such
date, notwithstanding the foregoing provisions of this paragraph (9),
all such securities so held by the Trustee, with sole or joint control
over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned by
the Trustee for the purposes of paragraphs (6), (7) and (8) of this
subsection (d), or
(10) except under the circumstances described in paragraphs
(1), (3), (4), (5) or (6) of Section 7.13(b), the Trustee shall be or
become a creditor of the Company or any other obligor on the
Securities.
The specifications of percentages in paragraphs (5) to (9), inclusive,
of this subsection (d) shall not be construed as indicating that the ownership
of such percentages of the securities of a Person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this subsection (d).
For the purposes of paragraphs (6), (7), (8) and (9) of this subsection
(d) only, (A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a Person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (B) an obligation shall be deemed to be in default
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (C) the Trustee shall not be deemed to be the
owner or Holder of (i) any security which it holds as collateral security (as
trustee or otherwise) for an obligation which is not in default as defined in
clause (B) above, or (ii) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (iii) any
security which it holds as agent for collection, or as custodian, escrow agent
or depositary, or in any similar representative capacity.
(e) For the purposes of this Section 7.08:
(1) The term "underwriter" when used with reference to the
Company or any other obligor on the Securities shall mean every Person
who, within one year prior to the time as of which the determination is
made, has purchased from the Company or any other obligor on the
Securities with a view to, or has offered or sold for the Company or
any other obligor on the Securities in connection with, the
distribution of any security of the Company or any other obligor on the
Securities outstanding at such time, or has participated or has had a
direct or indirect participation in any such undertaking, or has
participated or has had a participation in the direct or indirect
underwriting of any such undertaking, but such term shall not include a
Person whose interest was limited to a
-34-
<PAGE> 44
commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
(2) The term "director" shall mean any director of a Company
or any individual performing similar functions with respect to any
organization whether incorporated or unincorporated.
(3) The term "trust" shall include only a trust where the
interest or interests of the beneficiary or beneficiaries are evidenced
by a security.
(4) The term "voting security" shall mean any security
presently entitling the owner or Holder thereof to vote in the
direction or management of the affairs of a Person, or any security
issued under or pursuant to any trust, agreement or arrangement whereby
a trustee or trustees or agent or agents for the owner or Holder of
such security are presently entitled to vote in the direction or
management of the affairs of a Person.
(5) The term "executive officer" shall mean the president,
every vice president, every trust officer, the cashier, the secretary
and the treasurer of a Company, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(6) Except for purposes of paragraphs (6), (7), (8) and (9) of
subsection (d) of this Section 7.08, the term "security" or
"securities" shall mean any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust
certificate, pre-organization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas or
other mineral rights, or, in general, any interest or instrument
commonly known as a "security" or any certificate of interest or
participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase, any of
the foregoing.
(7) For the purpose of subsection (d)(1) of this Section 7.08,
the term "series of securities" or "series" means a series, class or
group of securities issuable under an indenture pursuant to whose terms
Holders of one such series may vote to direct the indenture trustee, or
otherwise take action pursuant to a vote of such holders, separately
from holders of another such series; provided, that "series of
securities" or "series" shall not include any series of securities
issuable under an indenture if all such series rank equally and are
wholly unsecured.
The percentages of voting securities and other securities specified in
this Section shall be calculated in accordance with the following provisions:
(A) A specified percentage of the voting securities of the
Trustee, the Company or any other Person referred to in this Section
7.08 (each of whom is referred to as a "Person" in this paragraph)
means such amount of the outstanding voting securities of such Person
as entitles the Holder or Holders thereof to cast such specified
percentage of the aggregate votes which the Holders of all the
outstanding voting
-35-
<PAGE> 45
securities of such Person are entitled to cast in the direction or
management of the affairs of such Person.
(B) A specified percentage of a class of securities of a
Person means such percentage of the aggregate amount of securities of
the class outstanding.
(C) The term "amount", when used in regard to securities,
means the principal amount if relating to evidences of indebtedness,
the number of shares if relating to capital shares, and the number of
units if relating to any other kind of security.
(D) The term "outstanding" means issued and not held by or for
the account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) Securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(ii) Securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the
obligation evidenced by such other class of securities is not
in default as to principal or interest or otherwise;
(iii) Securities pledged by the issuer thereof as security
for an obligation of the issuer not in default as to principal
or interest or otherwise; and
(iv) Securities held in escrow if placed in escrow by the
issuer thereof;
provided, however, that any voting securities of an issuer shall be
deemed outstanding if any Person other than the issuer is entitled to
exercise the voting rights thereof.
(E) A security shall be deemed to be of the same class as
another security if both securities confer upon the Holder or Holders
thereof substantially the same rights and privileges, provided,
however, that, in the case of secured evidences of indebtedness, all of
which are issued under a single indenture, differences in the interest
rates or maturity dates of various series thereof shall not be deemed
sufficient to constitute such series different classes, and provided
further that, in the case of unsecured evidences of indebtedness,
differences in the interest rate or maturity dates thereof shall not be
deemed sufficient to constitute them securities of different classes,
whether or not they are issued under a single indenture.
(f) Except in the case of a default in the payment of the principal of
or interest on any Securities, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 7.08 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under this Indenture may be cured or waived during a reasonable
period and under the procedures described in such application, and (ii) a stay
of the Trustee's duty to resign will not be inconsistent with the interests of
Holders of such Series of Securities. The filing of such an application shall
automatically stay the performance of the duty to resign until the Commission
orders otherwise. Any resignation of the Trustee shall become effective only
upon the appointment of a successor trustee and such successor's acceptance of
such appointment.
-36-
<PAGE> 46
SECTION 7.09. REQUIREMENTS FOR ELIGIBILITY OF TRUSTEE. There shall
always be at least one Trustee hereunder. The Trustee hereunder shall at all
times be a company organized and doing business as a commercial bank or trust
company under the laws of the United States of America or any state thereof or
of the District of Columbia or a company or other Person permitted to act as a
trustee by the Commission and, in each case, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $100,000,000, and subject to supervision or examination by Federal, State
or District of Columbia authority. If such company publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section , the combined capital and surplus of such company shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. No obligor on the Securities or Person directly or
indirectly controlling, controlled by or under common control with such obligor
shall serve as Trustee. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.09, the Trustee
shall resign immediately in the manner and with the effect specified in this
Article Seven.
SECTION 7.10. RESIGNATION AND REMOVAL OF TRUSTEE; APPOINTMENT OF
SUCCESSOR. (a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign with respect to one or more or all Series of Securities by
giving written notice of such resignation to the Company and by giving to the
Holders of Securities notice thereof in the manner and to the extent provided in
subsection (c) of Section 5.04 with respect to reports pursuant to subsection
(a) of Section 5.04. Upon receiving such notice of resignation and if the
Company shall deem it appropriate, evidence satisfactory to it of such mailing
to the Holders, the Company shall promptly appoint a successor trustee with
respect to all Series of Securities or, if appropriate, the applicable Series by
written instrument executed by an authorized officer of the Company, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Holder who has
been a bona fide Holder of a Security or Securities for at least six months may,
subject to the provisions of Section 6.11, on such Holder's behalf and on behalf
of all others similarly situated, petition any such court for the appointment of
a successor trustee. Such court may thereupon after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
subsection (a) of Section 7.08 after written request therefor by the
Company or by any Securityholder who has been a bona fide Holder of a
Security or Securities of the applicable Series for at least six
months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.09 and shall fail to resign after written
request therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, or
-37-
<PAGE> 47
(4) the Company shall determine that the Trustee has failed to
perform its obligations under this Indenture in any material respect,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument executed by an authorized officer of the
Company, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 6.11, any Securityholder who has been a bona fide Holder of a Security
or Securities of the affected Series for at least six months may, on such
Person's behalf and on behalf of all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee with respect to such Series. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in principal amount of the Securities
Outstanding (determined as provided in Section 8.04) may at any time remove the
Trustee and appoint a successor trustee by written instrument or instruments
signed by such Holders or their attorneys-in-fact duly authorized, or by the
affidavits of the permanent chairman and secretary of a meeting of the
Securityholders evidencing the vote upon a resolution or resolutions submitted
thereto with respect to such removal and appointment (as provided in Article
Nine), and by delivery thereof to the Trustee so removed, to the successor
trustee and to the Company.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section 7.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.11.
SECTION 7.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Any
successor trustee appointed as provided in Section 7.10 shall execute,
acknowledge and deliver to the Company and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations with respect to such Series of
its predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Company or of the
successor trustee, the trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of Section 7.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers with
respect to the trustee so ceasing to act. Upon written request of any such
successor trustee, the Company shall execute any and all instruments in writing
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers. Any trustee ceasing to act shall, nevertheless,
retain a lien upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this
Section 7.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 7.08 and eligible under the
provisions of Section 7.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 7.11, the successor trustee shall at the expense of the Company
transmit notice of the succession of such trustee hereunder to the Holders of
Securities in the manner and to the extent provided in subsection (c) of Section
5.04 with respect to reports pursuant to subsection (a) of said Section 5.04.
SECTION 7.12. SUCCESSOR TO TRUSTEE BY MERGER, CONSOLIDATION OR
SUCCESSION TO BUSINESS. Any Company into which the Trustee may be merged or
converted or with which it may be consolidated,
-38-
<PAGE> 48
or any Company resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any Company succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such Company shall be qualified under the
provisions of Section 7.08 and eligible under the provisions of Section 7.09,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor Trustee or
to authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
SECTION 7.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. (a)
Subject to the provisions of subsection (b) of this Section 7.13, if the Trustee
shall be or shall become a creditor, directly or indirectly, secured or
unsecured, of the Company or any other obligor on the Securities within three
months prior to a default, as defined in subsection (c) of this Section 7.13, or
subsequent to such a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in a special account for the benefit
of the Trustee individually, the Holders of the Securities for which it is
acting as Trustee, and the holders of other indenture securities (as defined in
subsection (c) of this Section 7.13):
(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of principal
or interest, effected after the beginning of such three months' period,
and valid as against the Company or such other obligor on the
Securities and its other creditors, except any such reduction resulting
from the receipt or disposition of any property described in paragraph
(2) of this subsection, or from the exercise of any right of set-off
which the Trustee could have exercised if a petition in bankruptcy had
been filed by or against the Company or such other obligor on the
Securities upon the date of such default; and
(2) all property received by the Trustee in respect of any
claims as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning
of such three months' period, or an amount equal to the proceeds of any
such property if disposed of, subject, however, to the rights, if any,
of the Company or such other obligor on the Securities and their
respective other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account
of any such claim by any Person (other than the Company or such other
obligor on the Securities) who is liable thereon, and (ii) the proceeds
of the bona fide sale of any such claim by the Trustee to a third
Person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company or such other
obligor on the Securities in
-39-
<PAGE> 49
bankruptcy or receivership or in proceedings for reorganization
pursuant to Title 11 of the United States Code or applicable State
laws;
(B) to realize, for its own account, upon any property held by
it as security for any such claim, if such property was so held prior
to the beginning of such three months' period;
(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such three months' period and such property was received
as security therefor simultaneously with the creation thereof, and if
the Trustee shall sustain the burden of proving that at the time such
property was so received, the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section
7.13, would occur within three months; or
(D) to receive payment on any claim referred to in paragraph
(B) or (C), against the release of any property held as security for
such claim as provided in such paragraph (B) or (C), as the case may
be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three months' period for property held as security
at the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any preexisting claim of the Trustee as such creditor, such claim shall have the
same status as such preexisting claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned among
the Trustee, the Holders of Securities for which it is acting as Trustee, and
the holders of other indenture securities in such manner that the Trustee, such
Securityholders and the holders of other indenture securities realize, as a
result of payments from such special account and payments of dividends on claims
filed against the Company or such other obligor on the Securities in bankruptcy
or receivership or in proceedings for reorganization pursuant to Title 11 of the
United States Code or applicable State law, the same percentage of their
respective claims, figured before crediting to the claim of the Trustee anything
on account of the receipt by it from the Company or such other obligor on the
Securities of the funds and property in such special account and before
crediting to the respective claims of the Trustee, such Securityholders, and the
holders of other indenture securities dividends on claims filed against the
Company or such other obligor on the Securities in bankruptcy or receivership or
in proceedings for reorganization pursuant to Title 11 of the United States Code
or applicable State law, but after crediting thereon receipts on account of the
indebtedness represented by their respective claims from all sources other than
from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim in
bankruptcy or receivership or in proceedings for reorganization pursuant to
Title 11 of the United States Code or applicable State law, whether such
distribution is made in cash, securities or other property, but shall not
include any such distribution with respect to the secured portion, if any, of
such claim. The court in which such bankruptcy, receivership or proceeding for
reorganization is pending shall have jurisdiction (i) to apportion among the
Trustee, such Securityholders, and the holders of other indenture securities, in
accordance with the provisions of this paragraph, the funds and property held in
such special account and the proceeds thereof, or (ii) in lieu of such
apportionment in whole or in part, to give to the provisions of this paragraph
due consideration in determining the fairness of the distributions to be made to
the
-40-
<PAGE> 50
Trustee, such Securityholders and the holders of other indenture securities with
respect to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claim, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee who has resigned or been removed after the beginning of
such three months' period shall be subject to the provisions of this subsection
(a) as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such three months' period, it
shall be subject to the provisions of this subsection (a) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such Trustee had
continued, as trustee, occurred after the beginning of such three
months' period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
In every case commenced under the Bankruptcy Act of 1898, or any
amendment thereto enacted prior to November 6, 1978, all references to periods
of three months shall be deemed to be references to periods of four months.
(b) There shall be excluded from the operation of subsection (a) of
this Section 7.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a maturity of one
year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to the
Securityholders at the time and in the manner provided in Section
5.04(c) with respect to reports pursuant to subsections (a) and (b)
thereof, respectively;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered
or premises rented, or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of
this Section 7.13;
(5) the ownership of stock or of other securities of a Company
organized under the provisions of Section 25(a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the
Company or any other obligor on the Securities; and
-41-
<PAGE> 51
(6) the acquisition, ownership, acceptance or negotiation of
any drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper as defined in
subsection (c) of this Section 7.13.
(c) As used in this Section 7.13 the following terms shall be accorded
the following definitions:
(1) the term "default" shall mean any failure to make payment
in full of the principal of or interest on any of the Securities or on
the other indenture securities when and as such principal or interest
becomes due and payable.
(2) the term "other indenture securities" shall mean
securities upon which the Company or any other obligor on the
Securities is an "obligor" (as defined in the Trust Indenture Act of
1939) outstanding under any other indenture (A) under which the Trustee
is also trustee, (B) which contains provisions substantially similar to
the provisions of subsection (a) of this Section 7.13, and (C) under
which a default exists at the time of the apportionment of the funds
and property held in said special account.
(3) the term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made within seven
days after delivery of the goods or securities in currency or in checks
or other orders drawn upon banks or bankers and payable upon demand.
(4) the term "self-liquidating paper" shall mean any draft,
bill of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company or any other obligor on the
Securities for the purpose of financing the purchase, processing,
manufacture, shipment, storage or sale of goods, wares or merchandise
and which is secured by documents evidencing title to, possession of,
or a lien upon, the goods, wares or merchandise or the receivables or
proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security, provided the security is received
by the Trustee simultaneously with the creation of the creditor
relationship with the Company or any other obligor on the Securities
arising from the making, drawing, negotiating or incurring of the
draft, bill of exchange, acceptance or obligation.
ARTICLE EIGHT
CONCERNING THE SECURITYHOLDERS
SECTION 8.01. EVIDENCE OF ACTION BY SECURITYHOLDERS. Whenever in this
Indenture it is provided that the Holders of a specified percentage in principal
amount of the Securities of any or all Series may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action), the fact that at the time of taking any such
action the Holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by such Securityholders in Person or by agent or proxy appointed in
writing, or (b) by the record of such Holders of Securities voting in favor
thereof at any meeting of such Securityholders duly called and held in
accordance with the provisions of Article Nine, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of such
Securityholders.
-42-
<PAGE> 52
SECTION 8.02. PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
SECURITIES. Subject to the provisions of Sections 7.01, 7.02 and 9.05, proof of
the execution of any instrument by a Securityholder or such Holder's agent or
proxy and proof of the holding by any Person of any of the Securities shall be
sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of
any instrument may be proved in any reasonable manner acceptable to the
Trustee.
(b) The ownership of Securities of any Series (including
Global Securities) shall be proved by the Register of such Securities
of such Series, or by certificates of the Security registrar or
registrars thereof.
The Trustee shall not be bound to recognize any Person as a
Securityholder unless and until such Person's title to the Securities held by it
is proved in the manner in this Article Eight provided.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 9.06.
The Trustee may accept such other proof or require such additional
proof of any matter referred to in this Section 8.02 as it shall deem
reasonable.
SECTION 8.03. WHO MAY BE DEEMED OWNERS OF SECURITIES. Prior to due
presentment for transfer of any Security, the Company, the Trustee and any agent
of the Company or the Trustee may deem and treat the Person in whose name such
Security shall be registered upon the Register of Securities of the Series of
which such Security is a part as the absolute owner of such Security (whether or
not such Security shall be overdue and notwithstanding any notation of ownership
or other writing thereon) for the purpose of receiving payment of or on account
of the principal of and interest, subject to Section 2.03, on such Security and
for all other purposes; and neither the Company nor the Trustee nor any agent of
the Company or the Trustee shall be affected by any notice to the contrary. All
such payments so made to any such Holder for the time being, or upon such
Holder's order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability of moneys payable upon any such
Security.
If the Securities of any Series are issued in the form of one or more
Global Securities, the Depository therefor may grant proxies to Persons having a
beneficial ownership in such Global Security or Securities for purposes of
voting or otherwise responding to any request for consent, waiver or other
action which the Holder of such Security is entitled to grant or take under this
Indenture and the Trustee shall accept such proxies for the purposes granted;
provided that neither the Trustee nor the Company shall have any obligation with
respect to the grant of or solicitation by the Depository of such proxies.
SECTION 8.04. SECURITIES OWNED BY THE COMPANY OR CONTROLLED OR
CONTROLLING PERSONS DISREGARDED FOR CERTAIN PURPOSES. In determining whether the
Holders of the requisite principal amount of Securities have concurred in any
demand, direction, request, notice, vote, consent, waiver or other action under
this Indenture, Securities which are owned by the Company or any other obligor
on the Securities or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
other obligor on the Securities shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such demand, direction, request, notice, vote, consent, waiver or other action,
only Securities which a Responsible Officer of the Trustee assigned to its
principal office knows are so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section
-43-
<PAGE> 53
8.04, if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Securities and that the pledgee is not a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor.
Upon request of the Trustee, the Company shall furnish to the Trustee
promptly an Officer's Certificate listing and identifying all Securities, if
any, known by the Company to be owned or held by or for the account of the
Company or any other obligor on the Securities or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Securities; and, subject to
the provisions of Section 7.01, the Trustee shall be entitled to accept such
Officer's Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
SECTION 8.05. INSTRUMENTS EXECUTED BY SECURITYHOLDERS BIND FUTURE
HOLDERS. At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 8.01, of the taking of any action by the Holders of the
percentage in principal amount of the Securities specified in this Indenture in
connection with such action, any Holder of a Security which is shown by the
evidence to be included in the Securities the Holders of which have consented to
such action may, by filing written notice with the Trustee at its principal
office and upon proof of holding as provided in Section 8.02, revoke such action
so far as concerns such Security. Except as aforesaid any such action taken by
the Holder of any Security and any direction, demand, request, notice, waiver,
consent, vote or other action of the Holder of any Security which by any
provisions of this Indenture is required or permitted to be given shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Security, and of any Security issued in lieu thereof, irrespective of
whether any notation in regard thereto is made upon such Security. Any action
taken by the Holders of the percentage in principal amount of the Securities of
any or all Series specified in this Indenture in connection with such action
shall be conclusively binding upon the Company, the Trustee and the Holders of
all of the Securities of such Series subject, however, to the provisions of
Section 7.01.
ARTICLE NINE
SECURITYHOLDERS' MEETINGS
SECTION 9.01. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of
Holders of Securities of any or all Series may be called at any time and from
time to time pursuant to the provisions of this Article for any of the following
purposes:
(1) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
default hereunder and its consequences, or to take any other action
authorized to be taken by Holders of Securities of any or all Series,
as the case may be, pursuant to any of the provisions of Article Six;
(2) to remove the Trustee and appoint a successor trustee
pursuant to the provisions of Article Seven;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.02; or
(4) to take any other action authorized to be taken by or on
behalf of the Holders of any specified principal amount of the
Securities of any or all Series, as the case may be, under any other
provision of this Indenture or under applicable law.
-44-
<PAGE> 54
SECTION 9.02. MANNER OF CALLING MEETINGS. The Trustee may at any time
call a meeting of Securityholders to take any action specified in Section 9.01,
to be held at such time and at such place in The City of New York, New York, as
the Trustee shall determine. Notice of every meeting of Securityholders, setting
forth the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be mailed not less than 20 nor more
than 60 days prior to the date fixed for the meeting.
SECTION 9.03. CALL OF MEETING BY THE COMPANY OR SECURITYHOLDERS. In
case at any time the Company pursuant to a resolution of its Board of Directors,
or the Holders of not less than ten percent in principal amount of the
Securities of any or all Series, as the case may be, then Outstanding, shall
have requested the Trustee to call a meeting of Holders of Securities of any or
all Series, as the case may be, to take any action authorized in Section 9.01 by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed notice of such
meeting within 20 days after receipt of such request, then the Company or such
Holders of Securities in the amount above specified may determine the time and
place in either the City and County of San Francisco, California or The City of
New York, New York for such meeting and may call such meeting to take any action
authorized in Section 9.01, by mailing (and publishing, if required) notice
thereof as provided in Section 9.02.
SECTION 9.04. WHO MAY ATTEND AND VOTE AT MEETINGS. To be entitled to
vote at any meeting of Securityholders a Person shall (a) be a Holder of one or
more Securities with respect to which the meeting is being held; or (b) be a
Person appointed by an instrument in writing as proxy by such Holder of one or
more Securities. The only Persons who shall be entitled to be present or to
speak at any meeting of Securityholders shall be the Persons entitled to vote at
such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 9.05. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE
MEETING; VOTING RIGHTS - ADJOURNMENT. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holding
of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit. Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 8.02. and the
appointment of any proxy shall be proved in the manner specified in said Section
8.02; provided, however, that such regulations may provide that written
instruments appointing proxies regular on their face, may be presumed valid and
genuine without the proof hereinabove or in said Section 8.02 specified.
The Trustee shall by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 9.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each
Securityholder or proxy shall be entitled to one vote for each $1,000 principal
amount (in the case of Original Issue Discount Securities, such principal amount
shall be equal to such portion of the principal amount as may be specified in
the terms of such Series) of Securities held or represented by such Holder;
provided, however, that no vote
-45-
<PAGE> 55
shall be cast or counted at any meeting in respect of any Security challenged as
not Outstanding and ruled by the chairman of the meeting to be not Outstanding.
The chairman of the meeting shall have no right to vote other than by virtue of
Securities held by such Person or instruments in writing as aforesaid duly
designating such Person as the Person to vote on behalf of other
Securityholders. Any meeting of Securityholders duly called pursuant to the
provisions of Section 9.02 or 9.03 may be adjourned from time to time, and the
meeting may be held so adjourned without further notice.
At any meeting of Securityholders, the presence of Persons holding or
representing Securities in principal amount sufficient to take action on the
business for the transaction of which such meeting was called shall constitute a
quorum, but, if less than a quorum is present, the Persons holding or
representing a majority in principal amount of the Securities represented at the
meeting may adjourn such meeting with the same effect for all intents and
purposes, as though a quorum had been present.
SECTION 9.06. MANNER OF VOTING AT MEETINGS AND RECORD TO BE KEPT. The
vote upon any resolution submitted to any meeting of Securityholders shall be by
written ballots on which shall be subscribed the signatures of the Holders of
Securities or of their representatives by proxy and the principal amount or
principal amounts of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more Persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 9.02. The record shall show the principal amount or
principal amounts of the Securities voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one copy thereof shall be
delivered to the Company and the other to the Trustee to be preserved by the
Trustee.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 9.07. EXERCISE OF RIGHTS OF TRUSTEE AND SECURITYHOLDERS NOT TO
BE HINDERED OR DELAYED. Nothing in this Article Nine contained shall be deemed
or construed to authorize or permit, by reason of any call of a meeting of
Securityholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrances or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Securityholders under any of
the provisions of this Indenture or of the Securities.
-46-
<PAGE> 56
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE
ENTERED INTO WITHOUT CONSENT OF SECURITYHOLDERS. Without the consent of or
notice to the Holders of any Securities, the Company and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
hereto (which shall comply with the provisions of the Trust Indenture Act of
1939 as then in effect) for one or more of the following purposes:
(a) if deemed appropriate by the Company or required by law,
to evidence the succession of another Company to the Company or
successive successions and the assumption by the successor Company of
the covenants, agreements and obligations of the Company pursuant to
Article Four hereof,
(b) to add to the covenants of the Company such further
covenants, restrictions or conditions as its Board of Directors and the
Trustee shall consider to be for the protection of the Holders of all
or any Series of Securities (and if such covenants, restrictions or
conditions are to be for the benefit of less than all Series of
Securities, stating that such covenants, restrictions or conditions are
expressly being included solely for the benefit of such Series), and to
make the occurrence, or the occurrence and continuance, of a default in
any such additional covenants, restrictions or conditions an Event of
Default permitting the enforcement of all or any of the several
remedies provided in this Indenture as herein set forth; provided,
however, that in respect to any such additional covenant, restriction
or condition such Supplemental Indenture may provide for a particular
period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default,
(c) to add or change any of the provisions of this Indenture
to such extent as shall be necessary to facilitate the issuance of
Securities in (i) global form or (ii) bearer form, registerable or not
registerable as to principal or principal and interest, and with or
without coupons,
(d) to change or eliminate any of the provisions of this
Indenture; provided, however, that any such change or elimination shall
become effective only when there is no Security of any Series
Outstanding created prior to the execution of such Supplemental
Indenture which is entitled to the benefit of such provision,
(e) to establish the form or terms of Securities of any Series
as permitted by Sections 2.01 and 2.02,
(f) to appoint, at the request of the Trustee, a successor
Trustee for a particular Series of Securities to act as such pursuant
to the provisions of this Indenture and to add to or change the
provisions of this Indenture to such extent as shall be necessary to
facilitate the performance of the duties of such trustee and
(g) to cure any ambiguity or to correct or supplement any
provisions contained herein or in any Supplemental Indenture which may
be defective or inconsistent with any other provision contained herein
or in any Supplemental Indenture,
-47-
<PAGE> 57
or to make such other provisions in regard to matters or questions
arising under this Indenture or any Supplemental Indenture which shall
not adversely affect the interests of the Holders of the Securities in
any material respect.
SECTION 10.02. MODIFICATION OF INDENTURE WITH CONSENT OF HOLDERS OF
SECURITIES. With the consent (evidenced as provided in Section 8.01) of the
Holders of not less than a majority in principal amount of the Securities of all
Series at the time Outstanding (determined as provided in Section 8.04) affected
by such Supplemental Indenture (voting as one class), the Company and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall comply with the provisions of the
Trust Indenture Act of 1939 as then in effect) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any Supplemental Indenture or of modifying in any manner
the rights of the Holders of the Securities of each such Series; provided,
however, that no such Supplemental Indenture shall, without the consent of the
Holders of each Outstanding Security affect thereby:
(a) Change the fixed maturity or Redemption Date of any
Security or reduce the rate of interest thereon or alter the method of
determining such rate of interest or extend the time of payment of
interest or reduce the principal amount (including the amount of
principal of an Original Issue Discount Security that would be due upon
declaration of acceleration of the maturity thereof pursuant to
Section 6.01 hereof) thereof or reduce any premium payable upon the
redemption thereof, or change the coin or currency in which any
Security or the interest thereon is payable or impair the right to
institute suit for the enforcement of any such payment on or after
the maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(b) Reduce the percentage in principal amount of the
Outstanding Securities the consent of the Holders of which is required
for any such Supplemental Indenture, or the consent of the Holders of
which is required for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture or
(c) Change the time of payment or reduce the amount of any
minimum sinking account or fund payment or
(d) Modify any of the provisions of this Section 10.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby.
A Supplemental Indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular Series of Securities, or which modifies
the rights of Holders of Securities of such Series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other Series.
It shall not be necessary for the consent of the Securityholders under
this Section 10.02 to approve the particular form of any proposed Supplemental
Indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
-48-
<PAGE> 58
Promptly after the execution by the Company and the Trustee of any
Supplemental Indenture pursuant to the provisions of this Section 10.02, the
Company shall mail a notice to the Holders of Registered Securities of each
Series so affected, setting forth in general terms the substance of such
Supplemental Indenture. Any failure of the Company to mail or publish such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such Supplemental Indenture.
SECTION 10.03. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any Supplemental Indenture pursuant to the provisions of this Article Ten, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the Holders
of Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such Supplemental Indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
The Trustee shall be entitled to receive, and subject to the provisions
of Section 7.01 shall be entitled to rely upon, an Opinion of Counsel as
conclusive evidence that any such Supplemental Indenture complies with the
provisions of this Article Ten and that the Securities affected by the
Supplemental Indenture, when such Securities are authenticated and delivered by
the Trustee and executed and issued by the Company in the manner and subject to
any conditions specified in such Opinion of Counsel, will be valid and binding
obligations of the Company, except as any rights thereunder may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles.
SECTION 10.04. SECURITIES MAY BEAR NOTATION OF CHANGES BY SUPPLEMENTAL
INDENTURES. Securities authenticated and delivered after the execution of any
Supplemental Indenture pursuant to the provisions of this Article Ten, or after
any action taken at a Securityholders' meeting pursuant to Article Nine, may
bear a notation in form approved by the Trustee as to any matter provided for in
such Supplemental Indenture or as to any action taken at any such meeting. If
the Company or the Trustee shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Company, to any modification of
this Indenture contained in any such Supplemental Indenture may be prepared by
the Company, authenticated by the Trustee and delivered in exchange for the
Securities then Outstanding.
ARTICLE ELEVEN
DISCHARGE; DEFEASANCE
SECTION 11.01. DISCHARGE OF INDENTURE. If the Company shall pay and
discharge or cause to be paid or discharged the entire indebtedness on all
Outstanding Securities by paying or causing to be paid the principal of
(including redemption premium, if any) and interest on the Outstanding
Securities, as and when the same become due and payable or by delivering to the
Trustee, for cancellation by it, all Outstanding Securities, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by it,
thereupon, upon written request of the Company and upon receipt by the Trustee
of such certificates, if any, as the Trustee shall reasonably require, to the
effect that all conditions precedent to the satisfaction and discharge of the
Company's obligations under this Indenture have been complied with, this
Indenture shall be discharged and terminated and the Trustee shall forthwith
execute proper instruments acknowledging satisfaction of and discharging and
terminating this Indenture with respect to the Company's obligations hereunder
and any such other interests.
-49-
<PAGE> 59
The Company may at any time surrender to the Trustee for cancellation
by it any Securities previously authenticated and delivered, belonging which the
Company may have acquired in any manner whatsoever, and such Securities, upon
such surrender and cancellation, shall be deemed to be paid and retired.
SECTION 11.02. DISCHARGE OF LIABILITY ON SECURITIES Upon the deposit
with the Trustee, in trust, at or before maturity, of money or securities of the
kind and in the necessary amount (as provided in Section 11.04 of this
Indenture) to pay or redeem Outstanding Securities (whether upon or prior to
their maturity or the Redemption Date of such Securities, provided that, if such
Securities are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as in Article Three hereof provided or
provision satisfactory to the Trustee shall have been made for the giving of
such notice), the obligation of the Company duly and punctually to pay or cause
to be paid the principal of and any interest and premium in respect of such
Securities and all liability of the Company in respect of such payment shall
cease, terminate and be completely discharged and the Holders thereof shall
thereafter be entitled only to payment out of the money or securities deposited
with the Trustee as aforesaid for their payment; provided, however, that this
discharge of the Company's obligation so to pay and of the liability of the
Company in respect of such payment shall not occur unless the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that Holders of the
Securities of such Series will not recognize income, gain or loss for Federal
income tax purposes as a result of such discharge.
SECTION 11.03. DISCHARGE OF CERTAIN COVENANTS AND OTHER OBLIGATIONS.
Upon the deposit with the Trustee, in trust, prior to maturity of money or
securities of the kind and in the necessary amount (as provided in Section 11.04
of this Indenture) to pay or redeem Outstanding Securities of one or more Series
(whether upon or prior to their maturity or the Redemption Date of such
Securities, provided that, if such Securities are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as in Article
Three hereof provided or provision satisfactory to the Trustee shall have been
made for the giving of such notice), all of the obligations, covenants and
agreements of the Company with respect to such Securities, other than the
covenants set forth under Sections 4.01, 4.02, 4.03, 4.04 and 4.05 hereof, shall
cease, terminate and be completely discharged.
SECTION 11.04. DISCHARGE OF CERTAIN OBLIGATIONS UPON DEPOSIT OF MONEY
OR SECURITIES WITH TRUSTEE. The conditions for deposit of money or securities
contained in Sections 11.02 and 11.03 shall have been satisfied whenever with
respect to any Securities denominated in United States Dollars, the Company
shall have deposited or caused to be deposited irrevocably in trust with the
Trustee dedicated solely to the benefit of the Holders of such Securities:
(a) Lawful money of the United States of America in an amount
equal to the principal amount of such Securities and all unpaid
interest thereon to maturity, except that, in the case of Securities
which are to be redeemed prior to maturity, the amount so to be
deposited or held shall be the principal amount of such Securities and
interest thereon to the Redemption Date, together with the redemption
premium, if any; or
(b) Direct obligations of the United States of America or
obligations the principal of and interest on which are guaranteed by
the United States of America (which obligations are not subject to
redemption prior to maturity at the option of the issuer), in such
amounts and maturing at such times that the proceeds of said
obligations to be received upon their respective maturities and
interest payment dates will provide funds sufficient to pay the
principal, premium, if any, and interest to maturity, or to the
Redemption Date, as the case may be, with respect to all of the
Securities to be paid or redeemed, as such principal, premium and
interest become due, provided that the Trustee
-50-
<PAGE> 60
shall have been irrevocably instructed to apply the proceeds of said
obligations to the payment of said principal, premium, if any, and
interest with respect to said Securities.
The conditions for deposit of money or securities contained in Sections 11.02
and 11.03 shall have been satisfied whenever with respect to any Securities
denominated in one or more currencies or composite currency other than United
States Dollars, the Company shall have deposited or caused to be deposited
irrevocably in trust with the Trustee dedicated solely to the benefit of the
Holders of such Securities:
(i) Lawful money in such currency, currencies or composite
currency in which such Securities are payable and in an amount equal to
the principal amount of such Securities and all unpaid interest thereon
to maturity, except than, in the case of Securities which are to be
redeemed prior to maturity, the amount so to be deposited or held shall
be the principal amount of such Securities and interest thereon to the
Redemption Date, together with the redemption premium, if any; or
(ii) Either (1) direct obligations of the government that
issued or caused to be issued the currency in which such Securities are
payable, for which obligations the full faith and credit of the
government is pledged (which obligations are not subject to redemption
prior to maturity at the option of the issuer) or (2) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of such government the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by
such government (which obligations are not subject to redemption prior
to maturity at the option of the issuer), in either case, in such
amounts and maturing at such times that the proceeds of said
obligations to be received upon their respective maturities and
interest payment dates will provide funds sufficient to pay the
principal, premium, if any, and interest to maturity, or to the
Redemption Date, as the case may be, with respect to all of the
Securities to be paid or redeemed, as such principal, premium and
interest become due, provided that the Trustee shall have been
irrevocably instructed to apply the proceeds of said obligations to the
payment of said principal, premium, if any, and interest with respect
to said Securities.
SECTION 11.05. UNCLAIMED MONEYS. Any moneys deposited with or paid to
the Trustee or any Paying Agent for the payment of the principal of and any
premium and interest on any Security and not so applied but remaining unclaimed
under applicable law shall be transferred by the Trustee to the appropriate
Persons in accordance with applicable laws, and the Holder of such Security
shall thereafter look only to such Persons for any payment which such Holder may
be entitled to collect and all liability of the Trustee and such Paying Agent
with respect to such moneys shall thereupon cease.
-51-
<PAGE> 61
ARTICLE TWELVE
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 12.01. INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS OF
COMPANY EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of any Security, or for
any claim based thereon or otherwise in respect thereof, shall be had against
any incorporator, stockholder, officer or director, as such past, present or
future, of the Company, either directly or through the Company, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate obligations,
and that no personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, stockholders, officers or directors, as such, of
the Company because of the creation of the indebtedness hereby authorized, or
under or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Securities or implied therefrom; and that any and all
such personal liability of every name and nature, either at common law or in
equity or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer or director, as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any of the Securities or implied therefrom are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of such Securities.
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
SECTION 13.01. SUCCESSORS AND ASSIGNS OF THE COMPANY BOUND BY
INDENTURE. All the covenants, stipulations, promises and agreements in this
Indenture contained by or in behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 13.02. NOTICES; EFFECTIVENESS. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the Holders of Securities to or on the Company, or by the
Company or by the Holders of Securities to the Trustee or upon the Depository by
the Company or the Trustee may be electronically communicated or hand delivered
or sent by overnight courier, addressed to the relevant party as provided in
this Section 13.02.
All communications intended for the Company shall be sent to:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Senior Vice President, Legal,
External Affairs and Secretary
Fax Number: (415) 658-2551
All communications intended for the Trustee shall be sent to the Principal
Office of the Trustee, Fax Number (312) 407-1708, or to any other address of
which any of the foregoing shall have notified the others in any manner
prescribed in this Section 13.02.
For all purposes of this Indenture, a notice or communication will be
deemed effective:
-52-
<PAGE> 62
(a) if delivered by hand or sent by overnight courier, on the
day it is delivered unless (i) that day is not a Business Day in the
city specified (a "Local Business Day") in the address for notice
provided by the recipient or (ii) if delivered after the close of
business on a Local Business Day, then on the next succeeding Local
Business Day or
(b) if sent by facsimile transmission, on the date
transmitted, provided that oral or written confirmation of receipt is
obtained by the sender unless the date of transmission and confirmation
is not a Local Business Day, in which case, on the next succeeding
Local Business Day.
Any notice, direction, requires, demand, consent or waiver by the Company, any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given, made or filed, for all purposes, if given, made or filed in writing at
the Principal Office of the Trustee in accordance with the provisions of this
Section 13.02.
Any notice, request, consent or waiver by the Company or the Trustee upon the
Depository shall have been sufficiently given, made or filed, for all purposes,
if give or made in accordance with the provisions of this Section 13.02 at the
address shown for such Depository in the Register or at such other address as
the Depository shall have provided for purposes of notice.
SECTION 13.03. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any request
or application by the Company to the Trustee to take any action under any of the
provisions of this Indenture, the Company shall furnish to the Trustee an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of any
such application or demand as to which the furnishing of such document is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
Section 5.03(d) shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the certificate
or opinion or representations with respect to the matters upon which such
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon the certificate, statement or opinion of or
representations by an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows that the certificate, statement or opinion or
representations with respect to the matters upon which such Person's
certificate,
-53-
<PAGE> 63
statement or opinion may be based as aforesaid are erroneous, or in the exercise
of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants, unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his or her certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous. Any certificate or opinion of any firm of independent
public accountants filed with the Trustee shall contain a statement that such
firm is independent.
SECTION 13.04. DAYS ON WHICH PAYMENT TO BE MADE, NOTICE GIVEN OR OTHER
ACTION TAKEN. If any date on which a payment is to be made, notice given or
other action taken hereunder is a Saturday, Sunday or legal holiday in the state
in which the payment, notice or other action is to be made, given or taken, then
such payment, notice or other action shall be made, given or taken on the next
succeeding Business Day in such state, and in the case of any payment, no
interest shall accrue for the delay.
SECTION 13.05. PROVISIONS REQUIRED BY TRUST INDENTURE ACT OF 1939 TO
CONTROL. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939 such required provision shall
control.
SECTION 13.06. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
SECTION 13.07. PROVISIONS OF THE INDENTURE AND SECURITIES FOR THE SOLE
BENEFIT OF THE PARTIES AND THE SECURITYHOLDERS. Nothing in this Indenture or in
the Securities, expressed or implied, shall give or be construed to give any
Person, firm or Company, other than the parties hereto and the Holders of the
Securities, any legal or equitable right, remedy or claim under or in respect of
this Indenture, or under any covenant, condition and provision herein contained;
all its covenants, conditions and provisions being for the sole benefit of the
parties hereto and of the Holders of the Securities.
SECTION 13.08. INDENTURE MAY BE EXECUTED IN COUNTERPARTS. This
Indenture may be executed in any number of counterparts, each of which shall be
an original; but such counterparts shall together constitute but one and the
same instrument.
-54-
<PAGE> 64
The First National Bank of Chicago hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, AIRTOUCH COMMUNICATIONS, INC. has caused this
Indenture to be signed by its Chairman of the Board or any Vice Chairmen of the
Board or one of its Executive Vice Presidents, Senior Vice Presidents, or Vice
Presidents and to be signed and acknowledged by its Secretary or one of its
Assistant Secretaries and THE FIRST NATIONAL BANK OF CHICAGO has caused this
Indenture to be signed and acknowledged by one of its Vice Presidents and to be
signed and acknowledged by one of its Assistant Secretaries, all as of the day
and year first written above.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ Mohan S. Gyani
______________________________
Name:
Title:
By: /s/ Kristina Veaco
_______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ Lawrence Dillard
______________________________
Name: Lawrence Dillard
Title: Vice President
By: /s/ Janice Ott Rotunno
_______________________________
Name: Janice Ott Rotunno
Title: Assistant Secretary
-55-
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
WMC PARTNERS, L.P.
This FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF WMC PARTNERS, L.P. (the "First Amendment") is entered into as of
the 16th day of April 1996, by and among the members of the ATI GROUP ("ATI")
and the members of the USW GROUP ("USW") (collectively, the "Partners").
W I T N E S S E T H:
WHEREAS, on July 25, 1994, ATI and USW entered into an agreement of
limited partnership (the "Original Partnership Agreement") to create a limited
partnership under the laws of the State of Delaware; and
WHEREAS, ATI and USW agreed to amend the Original Partnership Agreement
in certain respects and entered into that certain WMC Partners, L.P. Amended and
Restated Agreement of Limited Partnership as of September 30, 1995 (the
"Partnership Agreement"); and
WHEREAS, ATI and USW desire to further amend the Partnership Agreement
as set forth hereinbelow.
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreement herein contain, the sufficiency of which is hereby acknowledged, and
in order to set forth the respective rights, obligations, and interests of ATI
and USW to one another and to the Partnership, the Partners hereby agree as
follows:
AGREEMENT
1. Section 2.4(e)(i) of the Partnership Agreement is hereby
deleted in its entirety and replaced with the following:
"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 complete or
conflict with, in any material respect, the then existing or
planned wireless communications operations owned or conducted
by USW's LEC Affiliates.
<PAGE> 2
Nothing in the Section 2.4(e) shall restrict the manner in
which Members representing the USW Group shall participate in
deliberations, discussion 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, or
the existing or planned wireless communications operations of
USW's wireline cable television company Affiliates in the WMC
Territory (as defined in Section 7.4(d)(xv)) (other than
decisions relating generally to the overall wireless
communications operations of USW's wireline cable television
company 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)."
2. Section 2.4(e)(ii) of the Partnership Agreement is hereby
deleted in its entirety and replaced with the following:
"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 (A) 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
or (B) to any wireline cable television company Affiliate
operating data or financial or other information with respect
to the Partnership's existing or planned operations in the
wireline cable television service territory of such wireline
cable television company Affiliate".
3. Section 2.4(e)(iii) of the Partnership Agreement is hereby
deleted in its entirety and replaced with the following:
"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 or a wireline cable television company
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) 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."
4. Section 2.7(b) of the Partnership Agreement is hereby amended
by adding the following as the last sentence thereto:
"The 90-day period during which the ATI RP shall have the
option to elect to cause the Exchange shall be extended by the
cumulative number of days during
<PAGE> 3
such 90-day period on which a Blockage Period (as defined in
the Agreement of Exchange) shall be in effect."
5. The following Section 7.4(d)(xv) is hereby added to Article 7
("Indemnification and Exculpation; Certain Agreements") of the Partnership
Agreement:
"(xv)(A) the acquisition of an ownership interest by
a wireline cable television company Affiliate of a Partner, 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 wireline cable television service
territory of such Affiliate; provided, however, that such
Affiliate shall not make such an acquisition in the WMC
Territory (as defined below) (a) before the later of (1) April
1, 1998 and (2) the date on which any change in law or FCC
regulations that would permit each of WMC, on the one hand,
and such Affiliate and its related Partner, on the other, to
own in a territory already served by WMC in each case in
addition to WMC's existing spectrum as of the date hereof a
PCS System having 10 MHz of PCS spectrum (and a 10 MHz license
or permit therefor) and (b) until such Affiliate has offered
to WMC the opportunity to make such acquisition on terms no
less favorable than those available to such Affiliate, and
WMC, by vote of Members representing Groups holding a majority
of the Percentage Interests of the Groups without regard to
the Percentage Interest of such Partner's Group, has declined
to make such acquisition within thirty (30) days after
receiving written notice of the opportunity from such
Affiliate:
(B) any activity of a wireline cable television
company Affiliate of a Partner in its wireline cable
television service territory required in accordance with all
applicable laws, regulations or orders of governmental
authorities, or any agreement with a regulatory authority
which agreement is existing as of April 16, 1996;
(C) the limited use of radio spectrum by a wireline
cable television company Affiliate of a Partner for the
provision of "wireline tails" or other similar services
ancillary to the provision of landline communications by such
Affiliate within the wireline cable television service
territory of such Affiliate;
(D) the purchase by a wireline cable television
company Affiliate of a Partner from any Person of Service and
the resale thereof within the wireline cable television
service territory of such Affiliate; provided, however, that
in the WMC Territory (as defined below) such Affiliate shall
purchase such Services from WMC unless such Affiliate
reasonably determines that WMC is not competitive on all terms
and conditions, including price and features of Services
offered, within the relevant market with the Services to be
purchased from such Person by such Affiliate; or
(E) the provision and management by a wireline cable
television Affiliate of a Partner in its wireline cable
television service territory of network infrastructure and
associated systems for unaffiliated entities providing
Services;
<PAGE> 4
provided, however, that in the WMC Territory (as defined
below), such network infrastructure and associated systems are
primarily utilized by such Affiliate.
As used in this Section 7.4(d)(xv) and Section 2.4(e), "WMC
Territory" shall mean the territory served by any System in
which WMC, any Partner thereof or any of their respective
Affiliates has an ownership interest; provided, however, that
for purposes of this definition, neither PrimeCo nor TomCom,
L.P., a Delaware limited partnership, nor any partnership or
other entity in which either has an ownership interest shall
be deemed an Affiliate of WMC or an Affiliate of a Partner. If
a territory becomes WMC Territory after April 16, 1996,
notwithstanding anything to the contrary in Section
7.4(d)(xv)(A) or 7.4(d)(xv)(D) above, a wireline cable
television company Affiliate of a Partner shall be permitted
to provided PCS Service pursuant to a 10 MHz license or permit
acquired to serve a territory before the territory became WMC
Territory and to continue any resale arrangements entered into
in a territory before the territory became WMC Territory."
6. The Partners agree that none of USW, any member of the USW
Group and any wireline cable television Affiliate of USW shall be deemed to
violate that certain letter agreement dated July 25, 1994 between USW and ATI (a
copy of which is attached as Exhibit A hereto) by reason of engaging in any
activity permitted under Section 7.4(d)(xv) of the Partnership Agreement.
7. Section 7.4(g) of the Partnership Agreement is hereby deleted
in its entirety and replace with the following:
"Except as provided in Section 7.4(h) of this Agreement, 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)
and 7.4(h), shall be deemed to be increased by the General
Partner Percentage Interest of such Partner at the time of
such withdrawal."
8. A new Section 7.4(h) is hereby added to Article 7 of the
Partnership Agreement, as follows:
"Anything herein to the contrary notwithstanding, each Partner
that is a member of the USW Group (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 until all of the following
conditions shall have been satisfied: (i) such Partner and its
Affiliates cease to have aggregate General Partner and Limited
Partner Percentage Interests equal to or exceeding 5%, (ii) no
designee of USW is a member of ATI's Board of Directors
pursuant to Section 6.1 of the Investment Agreement, and (iii)
USW ceases to be entitled (or
<PAGE> 5
irrevocably waives its rights) to nominate a director to ATI's
Board of Directors pursuant to Section 6.1 of the Investment
Agreement."
9. Except as expressly set forth herein, the terms and provisions
of the Partnership Agreement shall remain in full force and effect without
modification.
10. This First Amendment to Amended and Restated Agreement of
Limited Partnership of WMC Partners, L.P. may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but both such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the Partners have executed this First
Amendment to Amended and Restated Agreement of Limited Partnership of WMC
Partners, L.P. as of the date first hereinabove written.
U S WEST NEW VECTOR GROUP, INC.
By: /s/ Janice C. Peters
----------------------------------------------
Name: Janice C. Peters
Title: President and Chief Executive Officer
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ C. Lee Cox
----------------------------------------------
Name: C. Lee Cox
Title:
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PCS NUCLEUS, L.P.
This FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PCS NUCLEUS, L.P. (the "First Amendment") is entered into as of
the 16th day of April 1996, by and between AIRTOUCH PCS HOLDING, INC. ("ATIPH")
and U S WEST PCS HOLDINGS, INC. ("USWPH")
W I T N E S S E T H:
WHEREAS, on July 25, 1994, ATIPH and USWPH entered into an agreement of
limited partnership (the "Original Partnership Agreement") to create a limited
partnership under the laws of the State of Delaware; and
WHEREAS, ATIPH and USWPH agreed to amend the Original Partnership
Agreement in certain respects and entered into that certain PCS Nucleus, L.P.
Amended and Restated Agreement of Limited Partnership as of September 30, 1995
(the "Partnership Agreement"); and
WHEREAS, ATIPH and USWPH desire to further amend the Partnership
Agreement as set forth hereinbelow.
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
ATIPH and USWPH to one another and to the Partnership, the Partners hereby agree
as follows:
AGREEMENT
1. Section 2.3(d)(i) of the Partnership Agreement is hereby deleted in
its entirety and replaced with the following:
"Notwithstanding the foregoing, Members of the
Partnership Committee designated by USWPH shall not be
entitled to participate in discussions of 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 2.3(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 and Business Plan of the
Partnership; provided that such Members shall act in good
faith and in the best interest of the Partnership without
regard to any such
<PAGE> 2
competitive considerations. USWPH agrees that no Member
designated by USWPH shall participate in decisions regarding
the existing or planned wireless communications operations of
USW's LEC Affiliates, or the existing or planned wireless
communications operations of USW's wireline cable television
company Affiliates in the WMC Territory (as defined
hereinbelow) (other than decisions relating generally to the
overall wireless communications operations of USW's wireline
cable television company 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). As used in this Section 2.3(d)(i),
"WMC Territory" shall mean the territory served by any System
in which WMC, any Partner thereof or any of their respective
Affiliates has an ownership interest; provided, however, that
for purposes of this definition, neither PrimeCo nor TomCom,
L.P., a Delaware limited partnership, nor any partnership or
other entity in which either has an ownership interest shall
be deemed an Affiliate of WMC or an Affiliate of a Partner."
2. Section 2.3(d)(ii) of the Partnership Agreement is hereby deleted in
its entirety and replaced with the following:
"Without limitation of the obligations of USWPH under
Section 2.12, neither USWPH nor any Members appointed by USWPH
shall provide (A) 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 or (B) to any wireline
cable television company Affiliate of USW operating data or
financial or other information with respect to the
Partnership's existing or planned operations in the wireline
cable television service territory of such wireline cable
television company Affiliate."
3. Section 7.4(f) of the Partnership Agreement is hereby deleted in its
entirety and replaced with the following:
"Except as provided in Section 7.4(g) of this Agreement, 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 purpose of this Section 7.4(f)
and 7.4(g), shall be deemed to be increased by the General
Partner Percentage Interest of such Partner at the time of
such withdrawal."
4. A new Section 7.4(g) is hereby added t Article 7 of the Partnership
Agreement, as follows:
"Anything herein to the contrary notwithstanding, USWPH
(whether or not USWPH shall have withdrawn as a General
Partner from the Partnership in
<PAGE> 3
violation of Section 8.1) shall remain subject to the
provisions of this Section 7.4 until all of the following
conditions shall have been satisfied: (i) such Partner and its
Affiliates cease to have aggregate General Partner and Limited
Partner Percentage Interests equal to or exceeding 5%; (ii) no
designee of USW is a member of ATI's Board of Directors
pursuant to Section 6.1 of the Amended and Restated Investment
Agreement, dated as of September 30, 1995, between ATI and
USW, as amended (the "Investment Agreement"); and (iii) USW
ceases to be entitled (or irrevocably waives its right) to
nominate a director to ATI's Board of Directors pursuant to
Section 6.1 of the Investment Agreement."
5. Except as expressly set forth herein, the terms and provisions of
the Partnership Agreement shall remain in full force and effect without
modification.
6. This First Amendment to Amended and Restated Agreement of Limited
Partnership of PCS Nucleus, L.P. may be executed in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but both
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the Partnership executed this First Amendment to
Amend and Restate Agreement of Limited Partnership of PCS Nucleus, L.P. as of
the date first hereinabove written.
U S WEST PCS HOLDINGS, INC.
By: /s/ Charles M. Lillis
----------------------------------------------
Name: Charles M. Lillis
Title: President and Treasurer
AIRTOUCH PCS HOLDINGS, INC.
By: /s/ C. Lee Cox
----------------------------------------------
Name: C. Lee Cox
Title:
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO
AMENDED AND RESTATED INVESTMENT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED INVESTMENT AGREEMENT (the
"First Amendment") is entered into as of this 16th day of April 1996, by and
between AirTouch Communications, Inc. ("ATI") and U S WEST, INC. ("USW").
W I T N E S S E T H:
WHEREAS, ATI and USW entered into an Investment Agreement on July 25,
1994 (the "Original Investment Agreement"); and
WHEREAS, ATI and USW agreed to amend the Original Investment Agreement
in certain respects and entered into that certain Amended and Restated
Investment Agreement as of September 30, 1995 (the "Investment Agreement"); and
WHEREAS, ATI and USW desire to further amend the Investment Agreement
as set forth hereinbelow.
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 and obligations of
the parties to one another, ATI and USW hereby agree as follows:
AGREEMENT
1. Section 5.4 of the Investment Agreement is hereby deleted in its
entirety and replaced with the following:
"Non-Competition. Until USW both (a) ceases to be entitled (or
irrevocably waives the right) to nominate a director to ATI's
Board of Directors and (b) 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 April 16, 1996) 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."
2. Section 10.1(a) of the Investment Agreement is hereby deleted in its
entirety and replaced with the following:
<PAGE> 2
"(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, AS AMENDED AS OF APRIL 16, 1996, 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."
2. Except as expressly set forth herein, the terms and provisions of
the Investment Agreement shall remain in full force and effect without
modification.
3. This First Amendment to Amended and Restated Investment Agreement
may be executed in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but both such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Amended and Restated Investment Agreement as of the date first hereinabove
written.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ C. Lee Cox
----------------------------------------------
Name: C. Lee Cox
Title
U S WEST, INC.
By: /s/ Charles M. Lillis
----------------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and CEO U S WEST
Media Group
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO
AMENDED AND RESTATED AGREEMENT OF EXCHANGE
This FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF EXCHANGE (the
"First Amendment") is entered into as of this 16th day of April 1996, by and
between AIRTOUCH COMMUNICATIONS, INC. ("ATI") and U S WEST, INC. ("U S WEST").
W I T N E S S E T H:
WHEREAS, ATI and USW entered into an Agreement of Exchange on July 25,
1994 (the "Original Exchange Agreement"); and
WHEREAS, ATI and USW agreed to amend the Original Exchange Agreement in
certain respects and entered into that certain Amended and Restated Agreement of
Exchange as of September 30, 1995 (the "Exchange Agreement"); and
WHEREAS, ATI and USW desire to further amend the Exchange Agreement as
set forth hereinbelow.
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 and obligations of the parties
to one another, ATI and USW hereby agree as follows:
AGREEMENT
1. The first paragraph of Section 1.2 of the Exchange Agreement is
hereby deleted and replaced with the following:
"Delivery of Notice. Except as otherwise provided in the
Amended and Restated Trust Agreement of Exchange dated as of
September 30, 1995, and amended as of April 16, 1996 (the
"Trust Agreement of Exchange"), or in Section 1.8 hereof, USW
and ATI shall complete and execute the Merger Agreement and
employ 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:"
2. The following Section 1.8 is hereby added to Article I ("The
Exchange") of the Exchange Agreement:
<PAGE> 2
"1.8. Force Majeure.
(a) Except as provided in Section 1.8(g) below, neither ATI nor
USW shall cause the Notice Date to occur after the commencement of any
Force Majeure Event, unless and until (i) the average closing sale
price per share of ATI Common Stock, for any period of ten (10)
consecutive trading days beginning after the conclusion of such Force
Majeure Event, shall equal or exceed (ii) the average closing sale
price per share of ATI Common Stock for the twenty (20) consecutive
trading day period ending on the last trading day preceding the
commencement of such Force Majeure Event (the "Base Period"). The
period beginning upon the commencement of such Force Majeure Event and
ending upon the cure thereof is referred to herein as the "Blockage
Period."
(b) Notwithstanding the foregoing, the Blockage Period with
respect to an individual Force Majeure Event shall expire (whether or
not the individual Force Majeure Event shall have been cured pursuant
to Section 1.8(a)) on the date which is three (3) months (in the case
of a Force Majeure Event described in Section 1.8(c)(i) below) or five
(5) months (in the case of a Force Majeure Event described in Section
1.8(c)(ii) below) following the conclusion of such Force Majeure Event.
(c) "Force Majeure Event" means the occurrence of any of the
following:
(i) either:
(A) a general suspension of, or limitation on prices
for, trading in securities on the New York Stock Exchange,
or other national securities exchange or over-the-counter
market which then constitutes the principal trading market
for ATI Common Stock, or
(B) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United
States (whether or not mandatory), in each case, only if
the closing sale price per share of ATI Common Stock on
the first trading day following the conclusion of such
event is 90% or less of the closing sale price per share
of ATI Common Stock on the last trading day preceding the
commencement of such event; or
(ii) a decline in both (A) the Standard and Poor's 500
Stock Price Index and (B) the closing sale price per share of
ATI Common Stock, in each case, by an amount in excess of 10%
during the same period of twenty (20) or fewer consecutive
trading days.
(d) Each Force Majeure Event shall have independent significance,
and the termination of the Blockage Period with respect to an
individual Force Majeure Event (whether by virtue of the cure of the
Force Majeure Event pursuant to Section 1.8(s) or the expiration of the
Blockage Period pursuant to Section 1.8(b)) shall not affect the
operation of any other Force Majeure Event as to which the Blockage
Period has not terminated.
(e) In the event that a Blockage Period shall be in effect at any
time during the 90-day period immediately preceding the Expiration
Date, then the Expiration Date shall be extended to the minimum
extent necessary so that there shall be a 90-day period
<PAGE> 3
immediately preceding the Expiration Date during which no Blockage
Period shall be in effect.
(f) The Expiration Date shall be extended by the cumulative number
of days during which one or more Blockage Periods shall have been in
effect under this Section 1.8, but in no event pursuant to this Section
1.8(f) for more than 365 days.
(g) In the event that USW shall have delivered to ATI notice of
USW's election to cause the Exchange to occur and, subsequent to the
delivery of such notice, it shall be determined that such notice was
delivered during the period between the commencement of a Force Majeure
Event and the conclusion of a Force Majeure Event, then USW, at its
election (a "Section 1.8(g) Election"), shall be entitled either to:
(i) withdraw such notice (without prejudice to USW's right
to deliver subsequently a notice of its election to cause the
Exchange to occur); or
(ii) elect to cause the Exchange to occur pursuant to the
notice; provided that in such event, notwithstanding the
provisions of Section 1.3(c), both the Private Market Value of
the WMC Interest and the Fair Public Market Value Per Share of
ATI Common Stock (for purposes of determining the Final Number
of ATI Shares or Appraisal Number of ATI Shares, as the case
may be) shall be determined as of the Base Period rather than
as of the Notice Date.
In determining the Private Market Value of the WMC Interest and the
Fair Public Market Value Per Share of ATI Common Stock in connection
with this Section 1.8(g), each Appraiser shall be specifically
instructed not to take into account any events or circumstances which
may have occurred subsequent to the Base Period (but such instructions
shall not preclude any Appraiser from taking into account events or
circumstances occurring within the Base Period). USW shall deliver
notice of any Section 1.8(g) Election within fifteen (15) business days
after its receipt of notice from ATI of the occurrence of a Force
Majeure Event. The commencement of the process for determining the
Final Number of ATI Shares contemplated by Section 1.3 shall be tolled
until USW shall have delivered notice of a Section 1.8(g) Election or
if no such notice is delivered by USW, the expiration of the foregoing
fifteen (15) business day period."
3. Section 6.7 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
"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.
<PAGE> 4
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, AS AMENDED AS OF APRIL 16, 1996, 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."
4. Except as expressly set forth herein, the terms and provisions of
the Exchange Agreement shall remain in full force and effect without
modification.
5. The First Amendment to Amended and Restated Agreement of Exchange
may be executed in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but both such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Amended and Restated Agreement of Exchange as of the first date hereinabove
written.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/C. Lee Cox
----------------------------------------------
Name: C. Lee Cox
Title:
U S WEST, INC.
By: /s/ C.M. Lillis
----------------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and CEO U S WEST
Media Group
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO
AMENDED AND RESTATED TRUST AGREEMENT OF EXCHANGE
This FIRST AMENDMENT TO AMENDED AND RESTATED TRUST AGREEMENT OF
EXCHANGE (the "First Amendment") is entered into as of this 16th day of April
1996, by and between AIRTOUCH COMMUNICATIONS, INC. ("ATI") and U S WEST, INC.
("USW").
W I T N E S S E T H:
WHEREAS, ATI and USW entered into a Trust Agreement of Exchange on July
25, 1994 (the "Original Trust Exchange Agreement"); and
WHEREAS, ATI and USW agreed to amend the Original Trust Exchange
Agreement in certain respects and entered into that certain Amended and Restated
Trust Agreement of Exchange as of September 30, 1995 (the "Trust Exchange
Agreement"); and
WHEREAS, ATI and USW desire to further amend the Trust Exchange
Agreement as set forth hereinbelow.
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 and obligations of the parties
to one another, ATI and USW hereby agree as follows:
AGREEMENT
1. Section 1.2 of the Trust Exchange Agreement is hereby amended by
adding the following to the beginning thereof: "Subject to Section 1.8 hereof,".
2. The following Section 1.8 is hereby added to Article I ("The
Exchange") of the Trust Exchange Agreement:
"1.8. Force Majeure.
(a) Neither ATI nor USW shall cause the Notice Date to occur after
the commencement of any Force Majeure Event, unless and until (i) the
average closing sale price per share of ATI Common Stock, for any
period of ten (10) consecutive trading days beginning after the
conclusion of such Force Majeure Event shall equal or exceed (ii) the
average closing sale price per share of ATI Common Stock for the twenty
(20) consecutive
<PAGE> 2
trading day period ending on the last trading day preceding the
commencement of such Force Majeure Event (the "Base Period"). The
period beginning upon the commencement of such Force Majeure Event and
ending upon the cure thereof is referred to herein as the "Blockage
Period."
(b) Notwithstanding the foregoing, the Blockage Period with
respect to an individual Force Majeure Event shall expire (whether or
not the individual Force Majeure Event shall have been cured pursuant
to Section 1.8(a)) on the date which is three (3) months (in the case
of a Force Majeure Event described in Section 1.8(c)(i) below) or five
(5) months (in the case of a Force Majeure Event described in Section
1.8(c)(i) below) following the conclusion of such Force Majeure Event.
(c) "Force Majeure Event" means the occurrence of any of the
following:
(i) either:
(A) a general suspension of, or limitation
on prices for, trading in securities on the New York
Stock Exchange, or other national securities exchange
or over-the-counter market which then constitutes the
principal trading market for ATI Common Stock, or
(B) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the
United States (whether or not mandatory),
in each case, only if the closing sale price per
share of ATI Common Stock on the first trading day
following the conclusion of such event is 90% or less
of the closing sale price per share of ATI Common
Stock on the last trading day preceding the
commencement of such event; or
(ii) a decline in both (A) the Standard
and Poor's 500 Stock Price Index and (B) the closing
sale price per share of ATI Common Stock, in each
case, by an amount in excess of 10% during the same
period of twenty (20) or fewer consecutive trading
days.
(d) Each Force Majeure Event shall have independent significance,
and the termination of the Blockage Period with respect to an
individual Force Majeure Event (whether by virtue of the cure of the
Force Majeure Event pursuant to Section 1.8(a) or the expiration of the
Blockage Period pursuant to Section 1.8(b)) shall not affect the
operation of any other Force Majeure Event as to which the Blockage
Period has not terminated.
(e) In the event that a Blockage Period shall be in effect at any
time during the 90-day period immediately preceding the Expiration
Date, then the Expiration Date shall be extended to the minimum extent
necessary so that there shall be a 90-day period immediately preceding
the Expiration Date during which no Blockage Period shall be in effect.
<PAGE> 3
(f) The Expiration Date shall be extended by the cumulative number
of days during which one or more Blockage Periods shall have been in
effect under this Section 1.8, but in no event pursuant to this Section
1.8(f) for more than 365 days."
3. Section 6.1(c) of the Trust Exchange Agreement is hereby deleted in
its entirety and replaced with the following:
"Fair 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 (20) trading day period commencing thirty (30) trading days
prior to the earlier of (X) the Notice Date of (Y) the date of first
public disclosure by USW, whether by way of Schedule 13D (or amendment
hereto), or otherwise, of its intent to exchange its WMC Interest
pursuant to this Agreement; provided that in determining the foregoing
twenty (20) trading day period, there shall be excluded any trading day
which occurs during a Blockage Period."
4. Section 6.7 of the Trust Exchange Agreement is hereby deleted and
replaced with the following:
"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, AS AMENDED AS OF APRIL 16, 1996, BETWEEN
THE COMPANY AND USW AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE ALIENATED EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE
SECRETARY OF THE COMPANY."
5. Except as expressly set forth herein, the terms and provisions of
the Trust Exchange Agreement shall remain in full force and effect without
modification.
6. This First Amendment to Amended and Restated Trust Agreement of
Exchange may be executed in separate counterparts, each of which when so
executed and delivered shall be
<PAGE> 4
deemed an original, but both such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Amend and Restated Trust Agreement of Exchange as of the firs date hereinabove
written.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/C. Lee Cox
-------------------------------------------
Name: C. Lee Cox
Title:
U S WEST, INC.
By: /s/ C.M. Lillis
-------------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and CEO U S WEST
Media Group
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO
ARBITRATION AGREEMENT
This FIRST AMENDMENT TO ARBITRATION AGREEMENT (the "First Amendment")
is entered into as of the 16th day of April, 1996, by and between AIRTOUCH
COMMUNICATIONS, INC. ("ATI") and U S WEST, Inc. ("USW").
W I T N E S S E T H:
WHEREAS, on September 30, 1995, ATI and USW entered into that certain
Arbitration Agreement; and
WHEREAS, ATI and USW desire to amend the Arbitration Agreement as set
forth hereinbelow.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations expressed herein, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
AGREEMENT
1. Exhibit A to the Arbitration Agreement is hereby deleted and
replaced with the Exhibit A (April 16, 1996) attached to this First Amendment.
2. Except as expressly set forth herein, the terms and provisions of
the Arbitration Agreement shall remain in full force and effect without
modification.
3. This First Amendment may be executed in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but both
such counterparts shall together constitute one and the same instrument.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Arbitration Agreement as of the date first hereinabove written.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/C. Lee Cox
-------------------------------------------
Name: C. Lee Cox
Title:
U S WEST, INC.
By: /s/ C.M. Lillis
-------------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and CEO U S WEST
Media Group
<PAGE> 3
EXHIBIT A
(APRIL 16, 1996)
RELATED AGREEMENTS
1. Amended and Restated Joint Venture Organization Agreement, dated September
30, 1995, between AirTouch Communications, Inc. ("ATI") and U S WEST, Inc.
("USW").
2. Amended and Restated Agreement of Limited Partnership of WMC Partners, L.P.,
dated as of September 30, 1995, as amended as of April 16, 1996, among
members of the ATI Group and members of the USW Group.
3. Amended and Restated Agreement of Limited Partnership of PCS Nucleus, L.P.,
dated as of September 30, 1995, as amended as of April 16, 1996, between
AirTouch PCS Holding, Inc. and USW PCS Holdings, Inc.
4. Amended and Restated Investment Agreement, dated as of September 30, 1995,
as amended as April 16, 1996, by and between ATI and USW.
5. Amended and Restated Agreement of Exchange, dated as of September 30, 1995,
as amended as of April 16, 1996, by and between ATI and USW.
6. Amended and Restated Trust Agreement of Exchange, dated as of September 30,
1995, as amended as of April 16, 1996, by and between ATI and USW.
<PAGE> 1
EXHIBIT NUMBER 15.1
August 8, 1996
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
August 8, 1996 (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
June 30, 1996 which is incorporated by reference in the Registration Statements
on Form S-8 (No. 33-57083, No. 33-57077 and No. 33-57081), the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-62787) and
the Prospectus constituting part of the Registration Statement on Form S-4 (No.
333-03107). 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 7,400
<SECURITIES> 0
<RECEIVABLES> 238,100
<ALLOWANCES> 20,200
<INVENTORY> 0
<CURRENT-ASSETS> 412,800
<PP&E> 2,211,600
<DEPRECIATION> 840,500
<TOTAL-ASSETS> 5,935,200
<CURRENT-LIABILITIES> 510,000
<BONDS> 1,031,800
0
0
<COMMON> 5,000
<OTHER-SE> 3,883,600
<TOTAL-LIABILITY-AND-EQUITY> 5,935,200
<SALES> 59,300
<TOTAL-REVENUES> 930,200
<CGS> 89,400
<TOTAL-COSTS> 818,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> 176,600
<INCOME-TAX> 63,200
<INCOME-CONTINUING> 63,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,400
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
<PAGE> 1
EXHIBIT 99
RISK FACTORS
Competition. The sale of cellular and paging services in each of the markets of
AirTouch Communications, Inc. ("AirTouch") has become increasingly competitive.
In the United States, where AirTouch previously had one cellular competitor in
each market, AirTouch in the near future will face up to eight wireless
competitors due to the introduction of broadband PCS on frequencies recently
auctioned by the FCC and specialized mobile radio ("SMR") services on existing
SMR frequencies. PCS providers have already begun service in select markets in
the United States, and competitors are expected to begin offering PCS services
in most of AirTouch's markets between late 1996 and early 1997. One SMR operator
is currently offering digital SMR service in the Los Angeles and San Francisco
markets and has announced plans to construct a nationwide system with its
partners that would offer service in several of AirTouch's other cellular
markets. Depending on voice quality, system reliability, system coverage,
product offerings, marketing techniques and pricing, such services may be
competitive with AirTouch's cellular service. The Telecommunications Act of 1996
may have removed certain restrictions on the ability of AirTouch's competitors
to offer as a single package a variety of services, such as wireless voice and
data, paging, long-distance, local landline and cable services, some of which
AirTouch does not currently provide. Increased competition could result in
pricing pressure, which contributes to lower revenues per customer, and higher
customer acquisition costs resulting in lower profit margins.
There is also significant competition in AirTouch's international markets. For
example, AirTouch's ventures in Germany and Sweden currently face competition
from two other providers, as will its venture in Poland once it commences
service. In Japan there are as many as four cellular licensees and three
Personal Handy Phone licensees in certain regions. Government-operated cellular
systems in these and other countries have become increasingly competitive with
privately operated systems. In addition, it is expected that additional licenses
will be issued in many of the markets in which AirTouch and its ventures provide
services. For instance, it is expected that the German government will issue an
additional 1800 MHz cellular license in 1997 or 1998.
Technology. The operations of AirTouch and its ventures depend in part upon the
successful deployment of continuously evolving wireless communications
technologies. AirTouch licenses technologies from a number of vendors and makes
significant capital expenditures in connection with the deployment of such
technologies. There can be no assurance that such technologies will be developed
according to anticipated schedules, that they will perform according to
expectations or that they will achieve commercial acceptance. AirTouch may be
required to make more capital expenditures than is currently expected if vendors
fail to meet anticipated schedules, if a technology's performance falls short of
expectations, or if commercial acceptance is not achieved.
Regulation. The licensing, construction, operation, sale and acquisition of
wireless systems, as well as the number of competitors permitted in each market,
are regulated in the United States by the FCC and by its counterparts in other
countries. In addition, certain aspects of AirTouch's domestic wireless
operations may be subject to public utility regulation in the state in which
service is provided and to local regulations. Frequently, regulatory consent is
necessary for the change in ownership of licenses. The location and construction
of transmitter towers, antennas and equipment shelters are often subject to
state or local zoning, land use and other local regulation. The California
Public Utilities Commission ("CPUC") is investigating whether California
cellular
<PAGE> 2
carriers have complied with rules regarding the filing of applications and
permits to locate and construct cell sites, although no formal allegations of
wrongdoing have been made against AirTouch. However, no assurance can be given
that the outcome of such investigation or other regulatory determinations or
changes by federal, state or foreign governmental authorities will not have an
adverse effect on AirTouch's business. In connection with the Telecommunications
Act of 1996, the FCC is expected to conduct more than 80 rulemaking proceedings
during 1996. The outcome of these proceedings could have a material effect on
AirTouch's operations.
AirTouch's international and domestic wireless licenses are granted for specific
periods of time. The most significant domestic cellular and paging licenses are
granted for a period of ten years. AirTouch believes that each of its expiring
domestic licenses will be renewed based upon its prior experience with expired
licenses and upon FCC rules establishing a presumption in favor of licensees
that have substantially complied with their regulatory obligations during the
initial license period. However, there can be no assurance that any domestic or
international license will be renewed.
Future Funding Requirements. AirTouch expects that its existing domestic
cellular operations will require significant amounts of capital in 1996 and
future years, as will the construction of the 11 PCS systems by PrimeCo Personal
Communications, L.P. ("PCS PrimeCo"), AirTouch's PCS partnership with Bell
Atlantic Corporation ("Bell Atlantic"), NYNEX Corporation ("NYNEX"), and U S
WEST, Inc. ("U S WEST"). In addition, the construction of cellular systems in
international markets where AirTouch's consortia have been awarded licenses
within the past several years will require substantial capital contributions by
AirTouch. To meet its financing needs, including with respect to the funding of
the cash consideration in the Merger, AirTouch currently has a $2 billion
committed revolving credit facility, has the ability to sell commercial paper in
aggregate amounts available for borrowing under the committed revolving credit
facility, and is conducting a $650 million debt offering under its shelf
registration statement filed with the SEC for potential debt and/or equity
proceeds of $2 billion. While AirTouch will apply its operating cash flow and
borrowings under its existing credit facilities to the commitments described
above, these obligations, as well as any additional obligations arising from
AirTouch's pursuit of acquisitions and other new opportunities, will require
AirTouch to seek additional sources of financing in the next few years. AirTouch
believes that it will be able to access these sources on terms and in amounts
that will be adequate to accomplish its objectives, although there can be no
assurance that such will be the case. AirTouch's senior unsecured long-term debt
has been assigned an implied rating of BBB+ by Standard & Poor's Ratings Group
and a rating of Baa2 by Moody's Investors Service, Inc. and its commercial paper
has been assigned a rating of A-2 by Standard & Poor's and P-2 by Moody's, based
in part upon each agency's respective analysis of the expected future financial
performance of AirTouch. These ratings may be revised or withdrawn by the rating
agency at any time, and there can be no assurance that AirTouch will be able to
maintain such ratings.
Dilution of Operating Results. Over the past several years, AirTouch's consortia
were awarded digital cellular licenses in India, Italy, Japan, Poland, South
Korea and Spain, and AirTouch is continuing to pursue new opportunities in
international markets. In March 1995, PCS PrimeCo was awarded eleven 30 MHz
licenses in the FCC's broadband PCS auctions for a license cost of approximately
$1.1 billion. AirTouch's indirect interest in PCS PrimeCo is currently 25%, but
will increase upon the contribution by U S WEST and AirTouch of their respective
interests in PCS PrimeCo to their cellular joint venture. As a result of costs
associated with the foregoing
<PAGE> 3
international and domestic system deployments, AirTouch investments will incur
losses which will, at least in the near term, have a dilutive effect on
AirTouch's earnings.
Antitrust Proceedings. AirTouch believes that its cellular pricing and marketing
practices were and are in compliance with antitrust laws. AirTouch, however, is
a defendant in a number of class action complaints with respect to its Los
Angeles, San Francisco and San Diego operations, which allege that AirTouch
conspired to fix retail and wholesale cellular prices. AirTouch does not believe
that the class actions, if adversely decided, would have a material adverse
effect on its financial condition. No assurance can be given as to the
foregoing, however, or that any disposition of these proceedings, if adverse to
AirTouch, might not materially adversely affect AirTouch's results of operations
in the year of such disposition.
Implications of Licensee Ownership Structure. AirTouch holds most of its
domestic cellular properties and its domestic broadband PCS properties through
partnership interests, a number of which are controlling interests. Upon the
contribution of certain of AirTouch's domestic cellular properties to its joint
venture with U S WEST, control over such properties will, to a certain extent,
be shared with U S WEST. In addition, AirTouch's interest in international
wireless licenses are held almost exclusively through foreign entities in which
AirTouch is a significant, but not controlling, owner. Under the governing
documents for certain of these partnerships and corporations, certain key
matters such as the approval of business plans and decisions as to the timing
and amount of cash distributions may not be approved without the consent of
AirTouch's partners, or may be approved without the consent of AirTouch.
Although AirTouch has not been materially impeded by the nature of its wireless
ownership interests from pursuing its corporate objectives, no assurance can be
given that it will not experience difficulty in this regard in the future.
AirTouch may enter into similar arrangements as it participates in consortia
"formed" or "organized" to pursue additional wireless opportunities.
Fluctuations in the Value of Wireless Licenses. A substantial portion of
AirTouch's assets consists of interests in entities holding cellular licenses,
the value of which will depend upon the success of the operations of such
entities and the growth and future direction of the cellular industry generally.
Values of licenses also have been affected by fluctuations in the level of
supply and demand for such licenses. In addition, the infrequency with which
licenses are traded or sold may increase the difficulty of establishing values
for AirTouch's license interests. Any transfer of control of an entity holding a
domestic license is subject to prior FCC (and possibly state regulatory)
approval. Analogous governmental approvals are required for transfers of
interests in foreign licenses. Where licenses are held by partnerships or
foreign corporations, transfers of ownership interests in such entities are
often subject to contractual restrictions.
AirTouch believes that future international cellular opportunities will arise
primarily through awards by developing countries, where operating and political
risks may be greater and potential returns lower than in countries in which
AirTouch currently has investments. In addition, investment returns from
acquisitions of interests in existing entities holding wireless licenses or from
licenses acquired through actions may be lower than those resulting from
AirTouch's early license awards because of the substantial purchase prices
required to acquire such interests.
Exchange Rate Fluctuations. Foreign currency exchange rates are increasingly
material to AirTouch's results of operations. AirTouch evaluates the risk of
significant exchange rate volatility and its ability to hedge as part of its
decision whether to pursue an international opportunity. A significant weakening
against the dollar of the currency of a country where
<PAGE> 4
AirTouch generates revenues or earnings may adversely affect AirTouch's results,
while any weakening of the dollar against such currency could have an adverse
effect if AirTouch is obligated to make significant foreign currency denominated
capital investments in such country. AirTouch attempts to mitigate the effect of
foreign currency fluctuations through the use of foreign currency contracts and
foreign denominated credit arrangements. There can be no assurance that AirTouch
will be successful in its foreign currency hedging efforts.
Radio Frequency Emission Concerns: Media reports have suggested that certain
radio frequency ("RF") emissions from portable cellular telephones might be
linked to cancer. AirTouch has collected and reviewed relevant scientific
information and, based on such information, is not aware of any credible
evidence linking the usage of portable cellular telephones with cancer. The FCC
currently has a rulemaking proceeding pending to update the guidelines and
methods it uses for evaluating RF emissions in radio equipment, including
cellular telephones. While the proposal would impose more restrictive standards
on RF emissions from low-power devices such as portable cellular telephones, it
is anticipated that all cellular telephones currently marketed and in use will
comply with those standards. The Telecommunications Act of 1996 requires that
the FCC complete action in that rulemaking proceeding within 180 days after
February 7, 1996. Additional concerns have been expressed about the safety of
emissions from cellular facilities which transmit calls to customers telephone
handsets. AirTouch's facilities are licensed by the FCC and comply with the
exposure levels set by the FCC. The Telecommunications Act of 1996 provides that
state and local governments may not regulate the placement, construction or
modification of personal wireless service facilities on the basis of the
environmental effects of RF emissions as long as such facilities comply with the
FCC's regulations concerning such emissions. However, local authorities still
have jurisdiction over zoning and permitting of such facilities.
Fraud. The cellular industry continues to be subject to fraudulent activity.
Cloning, which is one form of such fraud, refers to the use of scanners and
other electronic devices to illegally obtain telephone numbers and electronic
serial numbers during cellular transmission. These stolen telephone and serial
number combinations can be programmed into a cellular phone and used to obtain
fraudulent access to cellular networks. Roaming fraud occurs when a phone
programmed with a number stolen from AirTouch's customer is used to place
fraudulent calls from another carrier's market, resulting in a roaming fee
charged to AirTouch that cannot be collected from the customer. AirTouch is
working to reduce the negative impacts of fraud through investment in new
technologies and the deployment of other measures. In its own markets, AirTouch
has had significant success in detecting and reducing fraudulent usage of
numbers stolen from AirTouch's customers. However, AirTouch continues to
experience significant levels of roaming fraud. The cost of cellular fraud could
have a significant impact on AirTouch's operating results for the foreseeable
future.
Economic Fluctuations. AirTouch's performance is affected by the general
condition of the economy with demand for wireless services and the amount of
cellular use tending to decline when economic growth and retail activity
decline. It is not possible for AirTouch to accurately predict economic
fluctuations and the impact of such fluctuations on its performance.
