<PAGE> 1
Filed Pursuant to Rule 424(b)
Registration Number 333-03107
CELLULAR COMMUNICATIONS, INC.
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
Dear CCI Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Cellular Communications, Inc. ("CCI"), which will begin at 10:00 a.m. New York
time at The Helmsley Park Lane Hotel, 36 Central Park South, New York, New York
10019 on Friday, August 16, 1996.
At the Meeting, you will be asked to (i) approve and adopt the Agreement
and Plan of Merger dated as of April 5, 1996, as amended and restated as of July
12, 1996 (the "1996 Merger Agreement"), among CCI, AirTouch Communications, Inc.
("AirTouch") and AirTouch Cellular, a wholly owned subsidiary of AirTouch, and
the transactions contemplated thereby, including the merger of CCI into AirTouch
Cellular (or, at AirTouch's election, another wholly owned subsidiary of
AirTouch) and (ii) approve the redemption of the rights (the "CCI Rights")
issued pursuant to the Rights Agreement dated July 31, 1991, as amended, among
CCI, AirTouch and Continental Stock Transfer & Trust Company (the "CCI Rights
Agreement"). As a result of the merger, holders of then outstanding CCI Stock
(as defined in the attached Proxy Statement-Prospectus) will have the right to
receive for each CCI Common Equivalent Share (as defined in the attached
Proxy-Statement Prospectus) represented by the CCI Stock held by them either
cash or 0.919 of a share of AirTouch's 6.00% Class B Mandatorily Convertible
Preferred Stock, Series 1996 and 0.567 of a share of AirTouch's 4.25% Class C
Convertible Preferred Stock, Series 1996 (the amount of AirTouch Class B
Preferred Stock and AirTouch Class C Preferred Stock to be received in exchange
for one CCI Common Equivalent Share being referred to herein as a "Unit") or a
combination of cash and a fraction of a Unit, in each case subject to (i)
adjustment and proration pursuant to the procedures set forth in the 1996 Merger
Agreement and (ii) the statutory right to exercise dissenters' appraisal rights
under Section 262 of the Delaware General Corporation Law (the "DGCL") as
described in the attached Proxy Statement-Prospectus. A copy of Section 262 of
the DGCL is attached as Annex B to the Proxy Statement-Prospectus. CCI Stock
held by AirTouch, which represented approximately 37.6% of the CCI Stock at July
10, 1996 (the "Record Date"), will be canceled in the merger without
consideration. Of the remaining CCI Stock then outstanding, an aggregate of 28%,
less CCI Stock the holders of which have dissented to the merger and perfected
their appraisal rights, will be converted in the merger into cash, and an
aggregate of 72% will be converted in the merger into Units. The actual
percentage of CCI Stock to be acquired with cash or Units is subject to possible
adjustment at the time of the merger (i) in the event that there is
oversubscription for Units or (ii) in order to maintain tax-free treatment for
the holders of CCI Stock, in each case pursuant to formulas set forth in the
1996 Merger Agreement.
The CCI Board of Directors, by unanimous vote of all directors (other than
directors elected by AirTouch, who did not attend or participate in the meetings
at which the 1996 Merger Agreement was discussed and approved), has approved the
terms of the 1996 Merger Agreement and the redemption of the CCI Rights and
recommends that CCI stockholders vote for the proposal to approve and adopt the
1996 Merger Agreement and the transactions contemplated thereby, including the
merger, and for the redemption of the CCI Rights.
Holders of record of CCI's Series A Common Stock, par value $.01 per share
(the "CCI Series A Common Stock"), Series C Common Stock, par value $.01 per
share (the "CCI Series C Common Stock" and together with the CCI Series A Common
Stock, the "CCI Common Stock"), Redeemable Participating Convertible Preferred
Stock, par value $.01 per share (the "CCI Redeemable Preferred Stock") and the
CCI Class A Preference Stock, par value $1.00 per share (the "CCI Class A
Preference Stock"), at the close of business on the Record Date will be entitled
to vote at the meeting. The approval and adoption of the 1996 Merger Agreement
and the transactions contemplated thereby, including the merger, will require
the affirmative vote of the holders of a majority of the outstanding shares of
CCI Stock entitled to vote at the meeting, voting together as a single class.
There is no requirement that the transactions be approved by holders of a
majority of shares of CCI Stock held by non-affiliates and actually voted on the
transaction. CCI has called for redemption all of its outstanding Series B
Preference Stock, $1.00 par value per share (the "CCI Series B Preference
Stock"). As a result, the holders thereof will not be entitled to vote at the
meeting.
<PAGE> 2
AirTouch is required to vote the 10,065,641 shares of CCI Series C Common Stock
and the 3,450,800 shares of CCI Series A Common Stock held by it generally in
the same proportion as the shares of CCI Stock actually voted for or against the
proposals by all holders of CCI Stock. AirTouch has no such obligation with
respect to the shares of CCI Class A Preference Stock held by it. AirTouch
intends to vote all of its shares of CCI Class A Preference Stock for the
approval and adoption of the 1996 Merger Agreement and the transactions
contemplated thereby, including the merger. The redemption of CCI Rights will
require the approval of the holders of a majority of the outstanding shares of
CCI Common Stock and CCI Redeemable Preferred Stock not beneficially owned by
AirTouch voting together as a single class and the consent of AirTouch.
It is important that your shares are represented at the meeting, whether or
not you plan to attend the meeting. An abstention or failure to vote will have
the same effect with respect to your shares' votes as a vote against approval
and adoption of the Merger Agreement and the transactions contemplated thereby,
including the merger, and redemption of the CCI Rights. Accordingly, please
complete, date, sign and return promptly your proxy card in the enclosed
envelope. You may attend the meeting and vote your shares in person if you wish,
even if you have previously returned your proxy card.
The notice of meeting and Proxy Statement-Prospectus describing these
important matters are attached. If you require assistance in completing your
proxy card or have questions about voting procedures or the Proxy
Statement-Prospectus, please contact Richard J. Lubasch, CCI's Vice
President-General Counsel and Secretary, at (212) 906-8440 or D. F. King & Co.,
Inc., CCI's proxy solicitor, at 1-800-628-8510.
Sincerely,
<TABLE>
<S> <C>
George S. Blumenthal William B. Ginsberg
Chairman and Treasurer President and Chief
Executive Officer
</TABLE>
July 17, 1996
<PAGE> 3
CELLULAR COMMUNICATIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Cellular Communications, Inc.:
You are hereby notified that a Special Meeting of Stockholders of Cellular
Communications, Inc. will take place at The Helmsley Park Lane Hotel, 36 Central
Park South, New York, New York 10019 on Friday, August 16, 1996, at 10:00 a.m.
New York time to vote upon (i) the approval and adoption of the Agreement and
Plan of Merger dated as of April 5, 1996, as amended and restated as of July 12,
1996 (the "1996 Merger Agreement"), among Cellular Communications, Inc. ("CCI"),
AirTouch Communications, Inc. ("AirTouch"), and AirTouch Cellular and the
transactions contemplated thereby, including the merger of CCI with and into
AirTouch Cellular, a wholly owned subsidiary of AirTouch (or, at AirTouch's
election, another wholly owned subsidiary of AirTouch), (ii) the redemption of
the CCI Rights (as described in the accompanying Proxy Statement-Prospectus) and
(iii) such other matters as may properly come before the Meeting.
The close of business on July 10, 1996 has been fixed as the record date
for determination of stockholders entitled to notice of and to vote at the
Meeting. A list of such stockholders will be maintained ten days prior to the
meeting at CCI's offices at 110 East 59th Street, New York, New York 10022.
Please mark, sign, date and return your proxy promptly, whether or not you
plan to attend the Meeting.
The CCI Board of Directors, by unanimous vote of all directors (other than
directors elected by AirTouch, who did not attend or participate in the meetings
at which the 1996 Merger Agreement was discussed and approved), has approved the
terms of the 1996 Merger Agreement and the redemption of the CCI Rights and
recommends that CCI stockholders vote for the proposal to approve and adopt the
1996 Merger Agreement and the transactions contemplated thereby, including the
merger, and for the redemption of the CCI Rights.
New York, New York Richard J. Lubasch
July 17, 1996 Secretary
<PAGE> 4
CELLULAR COMMUNICATIONS, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 16, 1996
------------------------
AIRTOUCH COMMUNICATIONS, INC.
PROSPECTUS
17,241,379 SHARES OF 6.00% CLASS B MANDATORILY CONVERTIBLE PREFERRED STOCK,
SERIES 1996
UP TO 19,000,000 SHARES OF 4.25% CLASS C CONVERTIBLE PREFERRED STOCK, SERIES
1996
This Proxy Statement-Prospectus ("Proxy Statement-Prospectus") is being
furnished to the stockholders of Cellular Communications, Inc. ("CCI") in
connection with the solicitation of proxies by the CCI Board of Directors (the
"CCI Board") for use at a special meeting of stockholders of CCI to be held at
The Helmsley Park Lane Hotel, 36 Central Park South, New York, New York 10019 on
Friday, August 16, 1996, at 10:00 a.m. New York time, and at any adjournment or
postponement thereof (the "Meeting").
At the Meeting, holders of record ("CCI Stockholders") of CCI's Series A
Common Stock, par value $.01 per share (the "CCI Series A Common Stock"), Series
C Common Stock, par value $.01 per share (the "CCI Series C Common Stock"),
Redeemable Participating Convertible Preferred Stock, par value $.01 per share
(the "CCI Redeemable Preferred Stock"), and Class A Preference Stock, par value
$1.00 per share (the "CCI Class A Preference Stock"), as of the close of
business on July 10, 1996 (the "Record Date") will consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated as of April
5, 1996, as amended and restated as of July 12, 1996 (the "1996 Merger
Agreement"), among CCI, AirTouch Communications, Inc., a Delaware corporation
("AirTouch"), and AirTouch Cellular, a California corporation and a wholly owned
subsidiary of AirTouch (or, at AirTouch's election, another wholly owned
subsidiary of AirTouch (in either case, the "Surviving Corporation")), and the
transactions contemplated thereby, as more fully described herein. A copy of the
1996 Merger Agreement is attached to this Proxy Statement-Prospectus as Annex A.
CCI Series A Common Stock, CCI Series C Common Stock, CCI Redeemable Preferred
Stock, CCI Class A Preference Stock and CCI's Series B Preference Stock, $1.00
par value ("CCI Series B Preference Stock"), are collectively referred to as the
"CCI Stock."
Pursuant to the 1996 Merger Agreement, CCI will merge into the Surviving
Corporation (the "Merger"), and each share of CCI Stock outstanding at the
effective time of the Merger (other than shares held by AirTouch or those with
respect to which appraisal rights are perfected ("Dissenting CCI Stock")) will
have the right to receive, for each CCI Common Equivalent Share (as defined
below) represented thereby, either (i) $55.00 in cash without interest, or (ii)
0.919 of a share of AirTouch 6.00% Class B Mandatorily Convertible Preferred
Stock, Series 1996 ("AirTouch Class B Preferred Stock") and 0.567 of a share of
AirTouch 4.25% Class C Convertible Preferred Stock, Series 1996 ("AirTouch Class
C Preferred Stock"), having an aggregate face amount of $55.00 (the amount of
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock (together,
"AirTouch Preferred Stock, Series 1996") to be received in exchange for one CCI
Common Equivalent Share being referred to herein as a "Unit") or (iii) a
combination of cash and a fraction of a Unit having an aggregate face amount of
$55.00, in each case subject to adjustment and proration pursuant to the
procedures set forth in the 1996 Merger Agreement and described herein. As used
herein, "CCI Common Equivalent Share" means either (i) one issued and
outstanding share of CCI Series A Common Stock or CCI Series C Common Stock
(collectively, "CCI Common Stock") or (ii) the number of shares of CCI Common
Stock into which issued and outstanding shares of CCI Redeemable Preferred
Stock, CCI Class A Preference Stock or CCI Series B Preference Stock are
convertible (excluding, in both cases, any treasury shares and shares held by
AirTouch). CCI Stock held by AirTouch, which represented approximately 37.6% of
the CCI Stock on the Record Date, will be canceled in the Merger without
consideration. Of the remaining CCI Stock outstanding immediately prior to the
time of the Merger, an aggregate of 28%, less Dissenting CCI Stock, will be
converted in the Merger into cash and an aggregate of 72% will be converted into
Units. The percentage of shares of CCI Stock to be acquired with cash or Units
is subject to possible adjustment at the time of the Merger (i) in the event
that there is oversubscription for Units or (ii) in order to maintain tax-free
treatment for the holders of CCI Stock, in each case, as described herein.
CCI Stockholders also will be asked to vote upon a proposal to approve the
redemption of the rights (the "CCI Rights") issued pursuant to the Rights
Agreement dated July 31, 1991, as amended, among CCI, AirTouch and Continental
Stock Transfer & Trust Company (the "CCI Rights Agreement") as required under
the 1996 Merger Agreement (the "CCI Rights Redemption"), and such other matters
as may properly come before the Meeting. The 1996 Merger Agreement provides that
the CCI Rights Redemption is a condition to the consummation of the Merger.
This Proxy Statement-Prospectus also serves as a prospectus for AirTouch
under the Securities Act of 1933, as amended (the "Securities Act"), for the
issuance of shares of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock in the Merger. No market for the AirTouch Class B Preferred
Stock or the AirTouch Class C Preferred Stock currently exists. AirTouch Class B
Preferred Stock and the AirTouch Class C Preferred Stock have been authorized
for listing on the New York Stock Exchange (the "NYSE") under the symbols "ATIB"
and "ATIC," respectively, upon official notice of issuance.
This Proxy Statement-Prospectus and the accompanying Notice of Special
Meeting and proxy card are first being mailed to CCI Stockholders on or about
July 18, 1996.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT-PROSPECTUS.
THE PROPOSED MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS ARE STRONGLY
URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT-
PROSPECTUS IN ITS ENTIRETY. FOR A DISCUSSION OF CERTAIN RISKS IN
CONNECTION WITH THIS TRANSACTION, SEE "RISK FACTORS" BEGINNING
ON PAGE 37 AND "CERTAIN CONSIDERATIONS WITH RESPECT TO
THE MERGER AND OPERATIONS AFTER THE MERGER."
------------------------
NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION. THE COMMISSION HAS NOT PASSED
UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS JULY 17, 1996.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................ 5
SUMMARY.................................... 6
The Parties.............................. 6
The Meeting and Votes Required........... 6
The Merger............................... 7
General............................... 7
Risk Factors.......................... 7
Transactions Preceding the Merger..... 7
Merger Consideration.................. 8
Limitations on Number of Shares of
AirTouch Class B Preferred Stock to
be Issued........................... 9
Examples of Merger Consideration
Calculation......................... 11
Adjustments to Preserve Tax Status of
Merger.............................. 12
Election Procedures................... 13
Certain Federal Income Tax
Consequences........................ 15
AirTouch Class B Preferred Stock...... 16
AirTouch Class C Preferred Stock...... 18
CCI Convertible Notes................. 19
Recommendation of the CCI Board of
Directors........................... 19
Employee and Director Stock Options... 19
Effects of a Failure to Approve
the Merger.......................... 20
Opinions of Financial Advisors........ 20
AirTouch Determination of Fairness.... 20
Regulatory Approvals Required......... 20
Conditions to the Merger.............. 21
Termination; Effect of Termination.... 21
Certain Transactions; Conflicts of
Interest............................ 21
Certain Considerations with Respect to
the Merger and Operations after the
Merger.............................. 21
Appraisal Rights...................... 22
Litigation Related to the Merger......... 22
Redemption of CCI Rights................. 22
Market Price and Dividend Data........... 23
Selected Historical and Pro Forma
Combined Financial Data............... 24
Comparative Historical and Pro Forma Per
Share Data............................ 32
AirTouch Computation of Ratios of
Earnings to Fixed Charges and Earnings
to Combined Fixed Charges and
Preferred Stock Dividends............. 33
<CAPTION>
PAGE
----
<S> <C>
RISK FACTORS............................... 37
Securities-Related Risks................. 37
Transaction-Related Risk................. 38
Company-Related Risks.................... 39
AIRTOUCH COMMUNICATIONS, INC. ............. 43
CELLULAR COMMUNICATIONS, INC. ............. 45
THE MEETING................................ 47
General.................................. 47
Date, Place and Time..................... 47
Record Date.............................. 47
Required Vote............................ 47
Voting and Revocation of Proxies......... 48
Solicitation of Proxies.................. 48
SPECIAL FACTORS............................ 49
Background of the Merger................. 49
CCI Reasons for the Merger;
Recommendation of the CCI Board....... 57
Effects of a Failure to Approve the
Merger................................ 60
CCI Fairness Opinions of Wasserstein
Perella & Co., Inc. and Donaldson,
Lufkin & Jenrette Securities
Corporation........................... 61
Fairness Opinion of Lehman Brothers...... 66
AirTouch Reasons for the Merger and for
the Structure......................... 70
Merger Consideration..................... 72
Election Procedures...................... 76
Treatment of CCI Employee and Director
Stock Options......................... 78
Certain Transactions; Conflicts of
Interest.............................. 79
Effective Time........................... 80
Procedures for Exchange of
Certificates.......................... 80
Stock Exchange Listing................... 81
Accounting Treatment..................... 82
Certain Federal Income Tax
Consequences.......................... 82
Dissenting Stockholders' Rights of
Appraisal............................. 90
REDEMPTION OF THE CCI RIGHTS............... 93
CERTAIN CONSIDERATIONS WITH RESPECT TO THE
MERGER AND OPERATIONS AFTER THE MERGER... 95
THE MERGER AGREEMENT....................... 95
The Merger............................... 96
Certain Representations and Warranties... 96
Pre-Closing Covenants.................... 97
Conditions............................... 100
Termination; Effect of Termination....... 102
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses................................. 103
Amendment and Waiver..................... 103
CERTAIN PROJECTED FINANCIAL INFORMATION FOR
NEW PAR.................................. 103
PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS............................... 106
DESCRIPTION OF AIRTOUCH CAPITAL STOCK...... 116
General.................................. 116
AirTouch Common Stock.................... 116
Certain Certificate of Incorporation
Provisions............................ 116
Rights Agreement......................... 116
Listing.................................. 117
AirTouch Class B Preferred Stock......... 117
AirTouch Class C Preferred Stock......... 125
COMPARISON OF RIGHTS OF STOCKHOLDERS OF
AIRTOUCH AND CCI......................... 132
Notice of Stockholder Business........... 132
Notice of Director Nominations........... 133
Stockholder Meetings..................... 134
Directors; Classified Board.............. 134
Right to Elect Directors................. 134
Amendment to By-laws..................... 134
Amendment to Certificates................ 134
Indemnification.......................... 135
Redemption to Prevent the Loss or Secure
the Reinstatement of a Governmental
License or Franchise.................. 135
OTHER MATTERS.............................. 135
Regulatory Approvals Required............ 135
Certain Litigation Related to the
Merger................................ 136
Purchases of CCI Stock by CCI and
AirTouch During the Past Two Fiscal
Years................................. 137
<CAPTION>
PAGE
----
<S> <C>
Treatment of CCI Convertible Notes....... 137
Directors and Executive Officers of
AirTouch and CCI...................... 138
Source and Amount of Funds or Other
Consideration......................... 141
PRINCIPAL AND OTHER STOCKHOLDERS OF CCI.... 142
EXPERTS.................................... 143
LEGAL MATTERS.............................. 144
INDEX OF DEFINED TERMS..................... 145
ANNEX A AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER A-1
ANNEX B SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW B-1
ANNEX C FORM OF CERTIFICATE OF
DESIGNATION, PREFERENCES AND
RIGHTS OF AIRTOUCH CLASS B
PREFERRED STOCK C-1
ANNEX D FORM OF CERTIFICATE OF
DESIGNATION, PREFERENCES AND
RIGHTS OF AIRTOUCH CLASS C
PREFERRED STOCK D-1
ANNEX E OPINION OF DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION E-1
ANNEX F OPINION OF WASSERSTEIN PERELLA &
CO., INC. F-1
ANNEX G OPINION OF LEHMAN BROTHERS G-1
ANNEX H CONSOLIDATED FINANCIAL
STATEMENTS OF U S WEST NEWVECTOR
GROUP H-1
ANNEX I THE APPRAISAL PROCESS I-1
</TABLE>
3
<PAGE> 7
NO PERSON IS AUTHORIZED BY AIRTOUCH OR CCI TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION, OTHER THAN ANY INFORMATION OR REPRESENTATION CONTAINED
IN THIS PROXY STATEMENT-PROSPECTUS, IN CONNECTION WITH THE OFFERING AND THE
SOLICITATION MADE BY THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION
OF A PROXY, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY
SECURITIES, IN ANY JURISDICTION IN WHICH A SOLICITATION OR OFFERING MAY NOT
LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER WILL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF AIRTOUCH OR CCI
SINCE THE DATE HEREOF.
WHEN USED IN THIS PROXY STATEMENT-PROSPECTUS, THE WORDS "ESTIMATE,"
"PROJECT," "INTEND," "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. FOR A
DISCUSSION OF SUCH RISKS, SEE "RISK FACTORS" AND "CERTAIN CONSIDERATIONS WITH
RESPECT TO THE MERGER AND OPERATIONS AFTER THE MERGER." READERS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK
ONLY AS OF THE DATE HEREOF. NEITHER AIRTOUCH NOR CCI UNDERTAKES ANY OBLIGATION
TO PUBLICLY RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS; PROVIDED, HOWEVER, THAT AIRTOUCH HAS UNDERTAKEN TO REFLECT
IN THIS PROXY STATEMENT-PROSPECTUS ANY FACTS OR EVENTS ARISING AFTER THE DATE
HEREOF WHICH REPRESENT A FUNDAMENTAL CHANGE IN THE INFORMATION CONTAINED HEREIN.
AVAILABLE INFORMATION
AirTouch has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act, with respect to AirTouch
Class B Preferred Stock and AirTouch Class C Preferred Stock to be issued in
conjunction with the Merger and the AirTouch Common Stock (as defined below)
issuable upon conversion thereof, and AirTouch and CCI have filed with the SEC a
Rule 13e-3 Transaction Statement on Schedule 13E-3 (together with any amendments
thereto, the "Schedule 13E-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") in connection with the Merger. This Proxy
Statement-Prospectus does not contain all the information set forth in the
Registration Statement or the Schedule 13E-3 and the exhibits thereto, certain
portions of which have been omitted as permitted by the rules and regulations of
the SEC. Copies of the Registration Statement and the Schedule 13E-3 are
available from the SEC, upon payment of prescribed rates. Statements contained
in this Proxy Statement-Prospectus or in any document incorporated by reference
in this Proxy Statement-Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, the Schedule 13E-3 or such other
document, each such statement being qualified in all respects by such reference.
AirTouch and CCI are each subject to the informational requirements of the
Exchange Act. In accordance with the Exchange Act, proxy statements, reports and
other information are filed with the SEC by AirTouch and CCI. Material filed by
AirTouch and CCI can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices in Chicago (Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511) and in New
York (Seven World Trade Center, 13th Floor, New York, New York 10048), and
copies of such material can be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material regarding AirTouch can be inspected at
the offices of the NYSE and the Pacific Stock Exchange, where AirTouch Common
Stock is listed, and material regarding CCI can be inspected at the offices of
the Chicago Stock Exchange, where CCI Series A Common Stock is listed.
4
<PAGE> 8
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following AirTouch documents are incorporated herein by reference: (a)
AirTouch's Annual Report on Form 10-K for the year ended December 31, 1995 as
amended by Form 10-K/A-1 filed June 21, 1996, and as amended by Form 10-K/A-2
filed June 28, 1996, (b) AirTouch's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, (c) AirTouch's Current Reports on Form 8-K dated
January 17, 1996, April 5, 1996, April 25, 1996, May 14, 1996, July 2, 1996 and
July 11, 1996, (d) the description of AirTouch Common Stock set forth in the
Registration Statement on Form S-3 dated December 13, 1995 (Registration No.
33-62787), and (e) the description of AirTouch's Preferred Stock Purchase Rights
set forth in the Registration Statement on Form S-3 dated December 13, 1995
(Registration No. 33-62787).
The following CCI documents are incorporated herein by reference: (a) CCI's
Annual Report on Form 10-K for the year ended December 31, 1995, as amended by
CCI's Form 10-K/A No. 1, (b) CCI's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, (c) CCI's Current Reports on Form 8-K dated January 4,
1996, April 6, 1996 and April 11, 1996, (d) the description of CCI Common Stock
contained in CCI's Annual Report on Form 10-K for the year ended December 31,
1991 (File No. 1-10789) and (e) the description of CCI's Rights set forth in the
Registration Statement on Form 8-B dated June 18, 1991 (Registration No.
1-10789).
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED WITHOUT
CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROXY
STATEMENT-PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST OF ANY SUCH
PERSON AND BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS
DAY AFTER RECEIPT OF SUCH REQUEST, A COPY OF ANY OR ALL DOCUMENTS INCORPORATED
HEREIN BY REFERENCE (EXCLUDING EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED THEREIN BY REFERENCE). WITH RESPECT TO DOCUMENTS OF AIRTOUCH
INCORPORATED HEREIN BY REFERENCE, REQUESTS SHOULD BE DIRECTED TO AIRTOUCH
COMMUNICATIONS, INC., INVESTOR RELATIONS, ONE CALIFORNIA STREET, SAN FRANCISCO,
CA 94111 (TELEPHONE (415) 658-2000). WITH RESPECT TO DOCUMENTS OF CCI
INCORPORATED HEREIN BY REFERENCE, REQUESTS SHOULD BE DIRECTED TO CELLULAR
COMMUNICATIONS, INC., INVESTOR RELATIONS, 110 EAST 59TH STREET, 26TH FLOOR, NEW
YORK, NY 10022 (TELEPHONE (212) 906-8440). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS IN ADVANCE OF THE MEETING TO WHICH THIS PROXY STATEMENT-PROSPECTUS
RELATES, ANY SUCH REQUEST SHOULD BE MADE BY AUGUST 9, 1996.
All reports and definitive proxy or information statements filed by
AirTouch and CCI pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act subsequent to the date of this Proxy Statement-Prospectus and prior to the
termination of the offering of the AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock to which this Proxy Statement-Prospectus relates will be
deemed to be incorporated by reference into this Proxy Statement-Prospectus from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference will be
deemed to be modified or superseded for purposes of this Proxy
Statement-Prospectus to the extent that a statement contained herein (as to
documents incorporated or deemed to be incorporated herein by reference) or in
any other subsequently filed document which also is or is deemed to be
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement-Prospectus.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS RELATING TO
AIRTOUCH HAS BEEN SUPPLIED BY AIRTOUCH, AND ALL INFORMATION RELATING TO CCI HAS
BEEN SUPPLIED BY CCI. EACH OF AIRTOUCH AND CCI ASSUMES RESPONSIBILITY FOR THE
ACCURACY AND COMPLETENESS OF THE INFORMATION IT HAS SUPPLIED.
5
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement-Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Proxy Statement-Prospectus, in the attached Annexes and in the documents
incorporated herein by reference. CCI Stockholders are urged to read carefully
this Proxy Statement-Prospectus and the attached Annexes in their entirety.
Capitalized terms used in this Summary and not defined herein are defined
elsewhere in this Proxy Statement-Prospectus. See "INDEX OF DEFINED TERMS"
beginning at page 145.
THE PARTIES
AirTouch is a global wireless communications company, with interests in
businesses providing cellular, paging and personal communications services and
in the Globalstar satellite system in the United States, Europe and Asia.
AirTouch is headquartered at One California Street, San Francisco, California
94111, telephone (415) 658-2000. See "AIRTOUCH COMMUNICATIONS, INC."
CCI is a holding company that indirectly through its subsidiaries primarily
holds a 50% interest in a joint venture with AirTouch ("New Par") that owns and
operates cellular systems located in Ohio and Michigan and in portions of
Indiana and Kentucky. CCI is headquartered at 110 East 59th Street, 26th Floor,
New York, New York 10022, telephone (212) 906-8440. See "CELLULAR
COMMUNICATIONS, INC."
THE MEETING AND VOTES REQUIRED
The Meeting will be held on Friday, August 16, 1996, at 10:00 a.m., New
York time, at The Helmsley Park Lane Hotel, 36 Central Park South, New York, New
York 10019. At the Meeting, CCI Stockholders will be asked to consider and to
vote on (i) the approval and adoption of the 1996 Merger Agreement and the
transactions contemplated thereby, including the Merger, (ii) the CCI Rights
Redemption and (iii) such other matters as may properly come before the Meeting.
The approval and adoption of the 1996 Merger Agreement and the transactions
contemplated thereby, including the Merger, will require the affirmative vote of
the holders of a majority of the outstanding shares of CCI Stock entitled to
vote at the Meeting, voting together as a single class. There is no requirement
that the transactions be approved by holders of a majority of shares of CCI
Stock held by non-affiliates and actually voted on the transactions. Approval of
the CCI Rights Redemption will require the approval of the holders of a majority
of the outstanding shares of CCI Common Stock and CCI Redeemable Preferred Stock
not beneficially owned by AirTouch voting together as a single class and the
consent of AirTouch. AirTouch has given its consent to the CCI Rights Redemption
and to the amendment of the CCI Rights Agreement required to effect the CCI
Rights Redemption. See "REDEMPTION OF THE CCI RIGHTS." The Merger is contingent
on approval of the CCI Rights Redemption, and the CCI Rights Redemption is
contingent on approval of the Merger. Holders of record of CCI Series A Common
Stock, CCI Series C Common Stock, CCI Redeemable Preferred Stock and CCI Class A
Preference Stock at the close of business on July 10, 1996, the Record Date,
will be entitled to vote at the Meeting. CCI has called all of the CCI Series B
Preference Stock for redemption prior to the Meeting. Shares of CCI Series B
Preference Stock so redeemed and those converted into CCI Series A Common Stock
after the Record Date will not be entitled to vote at the Meeting. Shares of CCI
Series B Preference Stock converted into CCI Series A Common Stock will,
however, be entitled to participate in the Merger.
As of the Record Date, 19,784,585 shares of CCI Series A Common Stock,
10,065,641 shares of CCI Series C Common Stock, 9,584,343 shares of CCI
Redeemable Preferred Stock and 2,206,410 shares of CCI Class A Preference Stock
were outstanding and entitled to vote at the Meeting. Each such share is
entitled to one vote.
As of the Record Date, directors and executive officers of CCI and their
respective affiliates (excluding AirTouch) owned approximately 3.38% of the
outstanding shares of CCI Stock. All of the directors and executive officers of
CCI intend to vote their shares of CCI Stock FOR the approval and adoption of
the 1996 Merger Agreement and the transactions contemplated thereby, including
the Merger, and FOR the CCI Rights Redemption. Pursuant to the 1990 Merger
Agreement, AirTouch is required to vote its shares of CCI
6
<PAGE> 10
Common Stock generally in the same proportion as the shares of CCI Stock
actually voted for or against the proposals by all other holders of CCI Stock.
AirTouch has no such obligation with respect to the shares of CCI Class A
Preference Stock held by it. As of the Record Date, AirTouch owned an aggregate
of 3,450,800 shares of CCI Series A Common Stock (8.3% of the CCI Stock),
10,065,641 shares of CCI Series C Common Stock (24.1% of CCI Stock) and
2,206,410 shares of CCI Class A Preference Stock (5.3% of the CCI Stock).
AirTouch intends to vote all of its shares of CCI Class A Preference Stock FOR
the approval and adoption of the 1996 Merger Agreement and the transactions
contemplated thereby, including the Merger.
Approval of the Merger by AirTouch's stockholders is not required.
A CCI Stockholder may revoke a proxy at any time before it is voted by the
filing of an instrument revoking the proxy or of a duly executed proxy bearing a
later date with the Secretary of CCI prior to or at the Meeting, or by attending
the Meeting and voting in person. Attendance at the Meeting will not by itself
constitute revocation of a proxy.
For additional information relating to the Meeting, see "THE MEETING."
THE MERGER
GENERAL. The 1996 Merger Agreement provides that CCI will merge with and
into the Surviving Corporation. See "SPECIAL FACTORS."
RISK FACTORS. CCI Stockholders should carefully review the discussion of
risk factors relating to the Merger and an investment in AirTouch Preferred
Stock, Series 1996. See "RISK FACTORS."
TRANSACTIONS PRECEDING THE MERGER. In 1990, AirTouch (then known as PacTel
Corporation), CCI and the predecessor of CCI (together with certain wholly owned
subsidiaries of CCI formed for purposes of the transactions described below)
entered into an Amended and Restated Agreement and Plan of Merger and Joint
Venture Organization dated as of December 14, 1990 (the "1990 Merger Agreement")
which provided for the transactions (the "Original Transactions") described
below. Both the 1990 Merger Agreement and the Original Transactions were
approved by the stockholders of CCI at a meeting held on January 29, 1991.
The Original Transactions included, among other matters, (a) the
combination in 1991 of CCI's Ohio cellular operations (the "CCI Ohio System")
with the Ohio and Michigan cellular operations of AirTouch (the "AirTouch
Midwest System") in a newly formed joint venture known as New Par, (b) an
initial investment of approximately $87 million in 1991 by AirTouch in CCI and
the establishment of a mechanism whereby AirTouch would subsequently acquire
additional ownership interests in CCI, including through such methods as open
market purchases and the redemption by CCI of 10.04 million shares of CCI
Redeemable Preferred Stock on October 27, 1995 (the "MRO"), and a corresponding
purchase by AirTouch of 10.04 million shares of CCI Series C Common Stock, (c)
the purchase by AirTouch from CCI of an option (the "AirTouch Replacement
Option") for approximately $107.7 million, an amount equal to the aggregate
consideration paid by CCI for cancellation of the Employee Replacement Options
on January 4, 1996 and (d) an appraisal process (the "Appraisal Process"), to
commence in August 1996 (unless deferred), pursuant to which AirTouch has the
right to acquire CCI by causing CCI to redeem the CCI Stock not owned by it at a
price per CCI Common Equivalent Share reflecting the appraised private market
value of CCI's assets, less certain adjustments. See "SPECIAL
FACTORS -- Background of the Merger -- Transactions Preceding the Merger."
Following the Original Transactions and in connection with the spin-off of
AirTouch from its then parent corporation Pacific Telesis Group ("Telesis"), the
parties entered into a Termination Agreement in December 1992. Among other
things, the Termination Agreement eliminated the Fixed Liquidity Adjustment and
increased under certain instances the Make Whole Obligation that AirTouch might
have to pay. In October 1995, the MRO was completed. In January 1996, the
Employee Replacement Options were canceled and AirTouch acquired the AirTouch
Replacement Option. From time to time during the course of such transactions,
the parties had general discussions about the possibility of a transaction to be
effected prior to commencement of the Appraisal Process and exchanged views
regarding the parties' differing perspectives on value and various potential
structures. Their discussions continually proved inconclusive, however, and were
abandoned due to the varying views of the parties as to an appropriate valuation
framework within which to
7
<PAGE> 11
pursue such a transaction. In early February 1996, the parties exchanged
proposals which led to the negotiation and execution of the 1996 Merger
Agreement. See "SPECIAL FACTORS -- Background of the Merger -- Events Subsequent
to the 1991 Merger."
THE MERGER CONTEMPLATED BY THE 1996 MERGER AGREEMENT IS A PROPOSED
ALTERNATIVE TRANSACTION BY WHICH AIRTOUCH WOULD ACQUIRE CCI OTHER THAN THROUGH
THE APPRAISAL PROCESS. See "SPECIAL FACTORS -- Background of the Merger,"
"-- AirTouch Reasons for the Merger and for the Structure" and Annex I.
MERGER CONSIDERATION. The 1996 Merger Agreement provides that, subject to
the election and allocation procedures described under "SPECIAL
FACTORS -- Election Procedures," each share of CCI Stock outstanding immediately
prior to the Effective Time (other than shares owned by AirTouch and Dissenting
CCI Stock) will be converted into the right to receive, for each CCI Common
Equivalent Share represented thereby:
(i) $55.00 in cash, without interest (the "Per Share Cash
Consideration"), or
(ii) a Unit of AirTouch Preferred Stock, Series 1996 having an
aggregate face amount of $55.00 consisting of (a) an amount of shares of
AirTouch Class B Preferred Stock equal to the Class B Per-Unit Amount and
(b) an amount of shares of AirTouch Class C Preferred Stock equal to the
Class C Per-Unit Amount (collectively, the "Per Share Unit Consideration"),
or
(iii) a combination of a fractional Unit and cash, together having an
aggregate face amount of $55.00.
Because the AirTouch Class B Preferred Stock and the AirTouch Class C
Preferred Stock will automatically separate at the Effective Time, holders of
CCI Stock at the Effective Time will not physically receive Units, but rather
only the underlying shares of AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock.
The face amount per share of the AirTouch Class B Preferred Stock is equal
to the Preferred Stock Issue Price. The face amount per share of the AirTouch
Class C Preferred Stock is equal to $50.00. The Per Share Cash Consideration,
the Per Share Unit Consideration and the combination of a fractional Unit and
cash (less the $.01 in value per CCI Common Equivalent Share attributable to the
CCI Rights Redemption, as described below under "-- Redemption of CCI Rights")
are collectively referred to as the "Merger Consideration." CCI Stock held by
AirTouch, which represented approximately 37.6% of the outstanding CCI Stock at
the Record Date (37.8% of the CCI Stock entitled to vote at the Meeting) will be
canceled in the Merger without consideration. Of the remaining shares of CCI
Stock outstanding immediately prior to the Effective Time, an aggregate of 28%
(subject to reduction to the extent of Dissenting CCI Stock) will be converted
into the right to receive cash, and an aggregate of 72% will be converted into
the right to receive Units. Holders of CCI Stock outstanding immediately prior
to the Effective Time will be entitled to elect to receive cash or Units in
exchange for their CCI Stock, subject to proration as described under
"-- Election Procedures." The aggregate amount of CCI Stock to be converted into
the right to receive Units will be increased to up to 74% if there is an
oversubscription for Units, as described under "-- Election Procedures -- Excess
Unit Elections." The Merger is conditioned on being a tax-free reorganization
and the number of CCI Common Equivalent Shares to be exchanged for Units rather
than cash will be increased to the extent necessary to achieve tax-free
treatment, as discussed below under "-- Adjustments to Preserve Tax Status of
Merger," provided that AirTouch shall not be required to exchange Units for in
excess of 80% of the CCI Common Equivalent Shares. In the event of such a tax
adjustment, the Class B Per-Unit Amount and the Class C Per-Unit Amount would be
adjusted in a manner that would likely cause the aggregate face amount of a Unit
to differ from $55.00. All fractional shares of AirTouch Class B Preferred Stock
and AirTouch Class C Preferred Stock will be paid in cash.
Assuming 26,054,228 CCI Common Equivalent Shares outstanding immediately
prior to the Effective Time and no Dissenting CCI Stock, then (i) assuming no
oversubscription of Units or adjustment to preserve the tax treatment of the
Merger, 18,759,044 CCI Common Equivalent Shares (72% of the total) would be
converted into the right to receive Units and 7,295,184 (28% of the total) would
be converted into the right to receive cash; (ii) assuming full oversubscription
of Units and no adjustment to preserve the tax treatment of the Merger,
19,280,128 CCI Common Equivalent Shares (74% of the total) would be converted
into the right to receive Units and 6,774,100 (26% of the total) would be
converted into the right to receive cash; and
8
<PAGE> 12
(iii) assuming no oversubscription of Units and the maximum adjustment AirTouch
is required to make to preserve the tax treatment of the Merger, 20,843,382 CCI
Common Equivalent Shares (80% of the total) would be converted into the right to
receive Units and 5,210,846 (20% of the total) would be converted into the right
to receive cash.
Although holders of CCI Stock outstanding immediately prior to the
Effective Time may receive, on a per CCI Common Equivalent Share basis, a Unit
with a face amount of $55.00, the face amount is not indicative of what the
actual aggregate market value of the AirTouch Class B Preferred Stock and
AirTouch Class C Preferred Stock constituting the Unit will be at the Effective
Time or any given time thereafter. Prior to the Effective Time, there will have
been no public market for these securities. The market value for each of the
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock will
fluctuate over the life of the security depending on numerous factors, including
the fair market value of AirTouch common stock, par value $.01 per share (the
"AirTouch Common Stock"), prevailing interest rates, terms of comparable
securities and general market conditions. There can be no assurance that
AirTouch Class B Preferred Stock or AirTouch Class C Preferred Stock will trade
at their respective face amounts. See "RISK FACTORS--Securities-Related
Risks--Dividend Rates and Issue Price; Fluctuations in Value of AirTouch Class B
Preferred Stock and AirTouch Class C Preferred Stock."
As used herein, the following terms have the following meanings:
"Preferred Stock Issue Price" means $29.00.
"CCI Common Equivalent Shares" means, as of any particular time, the
sum of (i) the number of issued and outstanding shares of CCI Common Stock
and (ii) the number of shares of CCI Common Stock into which issued and
outstanding shares of CCI Redeemable Preferred Stock, Class A Preference
Stock and CCI Series B Preference Stock are convertible (excluding for
purposes of either calculation, any treasury shares and shares held by
AirTouch). Each share of CCI Series A Common Stock (other than those shares
held by AirTouch and treasury shares) and CCI Redeemable Preferred Stock
represents one CCI Common Equivalent Share. Each share of CCI Series B
Preference Stock represents 100 CCI Common Equivalent Shares. As of the
Record Date, there were issued and outstanding shares of CCI Stock
representing 26,054,228 CCI Common Equivalent Shares.
The "Class B Per-Unit Amount" will equal 0.948 (which represents
$27.50 divided by the Preferred Stock Issue Price), and the "Class C
Per-Unit Amount" will equal 0.550 (which represents $27.50 divided by
$50.00, the Call Price for the AirTouch Class C Preferred Stock), in each
case subject to adjustment as set forth below under "-- Limitations on
Number of Shares of AirTouch Class B Preferred Stock to be Issued,"
"-- Election Procedures," and "-- Adjustments to Preserve Tax Status of
Merger." As a result of adjustments to give effect to the Class B Maximum,
and assuming 26,054,228 CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time, of which 72% are converted to
Units, the Class B Per-Unit Amount and the Class C Per-Unit Amount would be
0.919 and 0.567, respectively, as described under "-- Limitations on Number
of Shares of AirTouch Class B Preferred Stock to be Issued." Holders of
AirTouch Class B Preferred Stock will be entitled to receive a Contingent
Payment in the event that the Volume-Weighted Average Trading Price of the
AirTouch Class B Preferred Stock is not equal to a stipulated amount, as
described under "-- AirTouch Class B Preferred Stock -- Contingent
Payment."
The "Volume-Weighted Average Trading Price" means, for any given
period, an amount equal to (i) the cumulative sum for each trade of the
relevant security during such period on the principal exchange or
over-the-counter market on which such security is listed, of the product
of: (x) the sales price times (y) the number of shares of such security
sold at such price, divided by (ii) the total number of shares of such
security so traded during such period.
LIMITATIONS ON NUMBER OF SHARES OF AIRTOUCH CLASS B PREFERRED STOCK TO BE
ISSUED. The number of shares of AirTouch Class B Preferred Stock issued in the
Merger will in no event exceed 17,241,379, which represents the quotient of (i)
$500 million, divided by (ii) the Preferred Stock Issue Price (the "Class B
Maximum"). AirTouch Class B Preferred Stock issued upon conversion of CCI Zero
Coupon Convertible Subordinated Notes due 1999 ("CCI Convertible Notes") or
exercise of outstanding CCI Options occurring,
9
<PAGE> 13
in either case, after the Effective Time, will not be subject to the Class B
Maximum. In the event that, absent any adjustment, the number of shares of
AirTouch Class B Preferred Stock to be issued in the Merger would exceed the
Class B Maximum, then the Class B Per-Unit Amount and Class C Per-Unit Amount
will be adjusted pursuant to a formula, described in "SPECIAL FACTORS -- Merger
Consideration -- Limitations on Number of Shares of AirTouch Class B Preferred
Stock to be Issued," which would have the effect of increasing the Class C
Per-Unit Amount and decreasing the Class B Per-Unit Amount (and thus increasing
the number of shares of AirTouch Class C Preferred Stock to be issued in the
Merger while limiting the number of shares of AirTouch Class B Preferred Stock
to be issued in the Merger to the Class B Maximum). See "SPECIAL
FACTORS -- Merger Consideration -- Limitations on Number of Shares of AirTouch
Class B Preferred Stock to be Issued."
Although the relative mix of AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock constituting a Unit may change if this adjustment, which
is based on (i) the actual number of CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time and (ii) if applicable, an
oversubscription of Units, is made, it will not affect the aggregate face amount
of AirTouch Preferred Stock, Series 1996 constituting a Unit, which is $55.00.
(In contrast, an adjustment to preserve the tax treatment of the Merger would
likely cause such aggregate face amount to differ from $55.00, as described
under "-- Adjustments to Preserve Tax Status of Merger.") However, the face
amount of each of the AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock constituting a Unit may not be indicative of the actual value of
such securities at the Effective Time or subsequent thereto. Prior to the
Effective Time, there will have been no public market for these securities. The
market value for each of the AirTouch Class B Preferred Stock and AirTouch Class
C Preferred Stock will fluctuate over the life of the security depending on
numerous factors, including the fair market value of AirTouch Common Stock,
prevailing interest rates, terms of comparable securities and general market
conditions. There can be no assurance that the AirTouch Class B Preferred Stock
and AirTouch Class C Preferred Stock will trade at their respective face
amounts. See "RISK FACTORS -- Securities-Related Risks."
As of the Record Date, there were issued and outstanding shares of CCI
Stock representing 26,054,228 CCI Common Equivalent Shares. Based on this number
of CCI Common Equivalent Shares (and assuming that 72% of such shares are
converted into the right to receive Units), the formula described above would
adjust the Class B Per-Unit Amount from 0.948 to 0.919 and would adjust the
Class C Per-Unit Amount from 0.550 to 0.567. Assuming the conversion of all
outstanding CCI Convertible Notes and the exercise of all CCI Options prior to
the Effective Time, the formula described above would further adjust the Class B
Per-Unit Amount to 0.820 and would further adjust the Class C Per-Unit Amount to
0.624.
10
<PAGE> 14
EXAMPLES OF MERGER CONSIDERATION CALCULATION
The following chart sets forth the approximate consideration that a holder
of shares of CCI Stock equal to 100 CCI Common Equivalent Shares (the
"Illustrative Holder") would receive in connection with the Merger and the CCI
Rights Redemption, under the following assumptions:
Assumption A -- All holders of CCI Stock outstanding immediately prior
to the Effective Time elect to receive cash. Assumes no adjustment to
preserve the tax-free treatment of the Merger and no Dissenting CCI Stock.
Assumption B -- Holders of half of the CCI Stock outstanding
immediately prior to the Effective Time (including the Illustrative Holder)
elect to receive cash and the holders of half of such CCI Stock elect to
receive Units. Assumes no adjustment to preserve the tax-free treatment of
the Merger and no Dissenting CCI Stock.
Assumption C -- All holders of CCI Stock outstanding immediately prior
to the Effective Time elect to receive Units. Because such oversubscription
of Units results under the 1996 Merger Agreement in increasing the Unit
Election Number from an amount equal to 72% to an amount equal to 74% of
CCI Common Equivalent Shares outstanding immediately prior to the Effective
Time, the aggregate amount of CCI Stock to be converted into the right to
receive Units increases to 74%. Assumes no adjustment to preserve the
tax-free treatment of the Merger and no Dissenting CCI Stock. The increase
of the Unit Election Number in the event of an oversubscription was agreed
to by AirTouch and CCI as part of an arrangement with plaintiffs' counsel
to settle certain litigation related to the Merger. See "OTHER
MATTERS -- Certain Litigation Related to the Merger."
Currently Outstanding -- Assumes 26,054,228 CCI Common Equivalent
Shares outstanding immediately prior to the Effective Time, including
136,100 CCI Common Equivalent Shares resulting from the conversion of all
of the shares of CCI Series B Preference Stock, which have been called for
redemption. Assumes no conversion of the CCI Convertible Notes, which
represented 3,146,500 CCI Common Equivalent Shares as of the Record Date,
and no exercises of CCI Options, which represented 1,294,350 CCI Common
Equivalent Shares as of the Record Date.
Fully adjusted -- Assumes 29,200,728 CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time, including 3,146,500
CCI Common Equivalent Shares issuable upon conversion of the CCI
Convertible Notes, but assumes no exercise of the CCI Options. CCI's
executive officers and directors will consent to the conversion of their
CCI Options into AirTouch Common Options, as described under "-- Employee
and Director Stock Options."
Consideration to Illustrative Holder of shares equal to 100 CCI Common
Equivalent Shares:
<TABLE>
<CAPTION>
ASSUMPTION A ASSUMPTION A ASSUMPTION B ASSUMPTION B ASSUMPTION C ASSUMPTION C
CURRENTLY FULLY- CURRENTLY FULLY- CURRENTLY FULLY-
OUTSTANDING ADJUSTED OUTSTANDING ADJUSTED OUTSTANDING ADJUSTED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Class B Per-Unit Amount: 0.919 0.820 0.919 0.820 0.894 0.798
Class C Per-Unit Amount: 0.567 0.624 0.567 0.624 0.581 0.637
Cash Consideration per
CCI Common Equivalent
Share: $ 55.00 $ 55.00 $ 55.00 $ 55.00 $ 55.00 $ 55.00
Total Number of Units: 72.000 72.000 44.000 44.000 74.000 74.000
Total Number of shares
of AirTouch Class B
Preferred Stock(1): 66.168 59.040 40.436 36.080 66.156 59.052
Total Number of shares
of AirTouch Class C
Preferred Stock(1): 40.824 44.928 24.948 27.456 42.994 47.138
Cash received for CCI
Common Equivalent
Shares: $ 1,540.00 $ 1,540.00 $ 3,080.00 $ 3,080.00 $ 1,430.00 $ 1,430.00
</TABLE>
- ---------------
(1) Each holder of CCI Stock who would otherwise be entitled, after taking into
account all certificates delivered by such holder, to receive a fractional
share will receive cash (without interest) in lieu of fractional shares on
the basis set forth in the 1996 Merger Agreement.
11
<PAGE> 15
ADJUSTMENTS TO PRESERVE TAX STATUS OF MERGER. If Pillsbury Madison & Sutro
LLP, special counsel to AirTouch, determines that the tax opinion of such firm
required to be delivered to AirTouch dated the closing date (described under
"SPECIAL FACTORS -- Certain Federal Income Tax Consequences") cannot be rendered
as a result of the Merger potentially failing to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), then, to the minimum extent necessary to enable such tax
opinion to be rendered: (i) the Cash Election Number (the aggregate number of
CCI Common Equivalent Shares to be converted into the right to receive cash in
the Merger) will be reduced and the Unit Election Number (the aggregate number
of CCI Common Equivalent Shares to be converted into the right to receive Units
in the Merger) will be correspondingly increased on a share-for-share basis, and
(ii) the composition of each Unit will be adjusted by recalculating the Class B
Per-Unit Amount and the Class C Per-Unit Amount pursuant to the formula
described under "SPECIAL FACTORS -- Merger Consideration -- Adjustments to
Preserve Tax Status of Merger."
The effect of the foregoing adjustment will be to increase the equity
component (by increasing the Unit Election Number, as defined below), and reduce
the cash component (by decreasing the Cash Election Number, as defined below),
of the Merger Consideration, while obtaining the same aggregate value of
consideration to be delivered in the Merger that would have resulted if no such
adjustment had been made. As a result of such adjustment, the aggregate face
amount of the AirTouch Preferred Stock, Series 1996 constituting a Unit would
likely differ from $55.00. Notwithstanding anything to the contrary contained in
the 1996 Merger Agreement, in the event that, as a result of the foregoing
adjustments, the Unit Election Number would exceed 80% of the CCI Common
Equivalent Shares outstanding immediately prior to the Effective Time, then the
board of directors of AirTouch (the "AirTouch Board"), in its sole discretion,
may elect to terminate the 1996 Merger Agreement. See "THE MERGER
AGREEMENT -- Termination; Effect of Termination."
Assuming CCI Common Equivalent Shares of 26,054,228 outstanding immediately
prior to the Effective Time, and assuming no oversubscription of Units and no
Dissenting CCI Stock, if no adjustment to preserve the tax treatment of the
Merger were made, the Cash Election Number would be 7,295,184 and the Unit
Election Number would be 18,759,044, and if the maximum adjustment AirTouch is
required to make to preserve the tax treatment of the Merger were made, the Cash
Election Number would be 5,210,846 and the Unit Election Number would be
20,843,382. Assuming 30,495,078 CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time as a result of the conversion of all
outstanding CCI Convertible Notes and the exercise of all CCI Options, and
assuming no oversubscription of Units and no Dissenting CCI Stock, if no
adjustment to preserve the tax treatment of the Merger were made, the Cash
Election Number would be 8,538,622 and the Unit Election Number would be
21,956,456, and if the maximum adjustment AirTouch is required to make to
preserve the tax treatment of the Merger were made, the Cash Election Number
would be 6,099,016 and the Unit Election Number would be 24,396,062.
The following example illustrates as of the date hereof the change in the
Cash Election Number and the corresponding change in the Unit Election Number
(as well as the change in the Class B Per-Unit Amount and the Class C Per-Unit
Amount) that would result in the event that the fair market value of a Unit
immediately prior to the closing were determined to be $50.00 per Unit as a
result of a ratable decline (relative to face value) in the actual value of
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock. The
following example also assumes that there is no Dissenting CCI Stock, that all
representations have been made and all factual assumptions have been verified to
the extent such representations and verifications are requested by Pillsbury
Madison & Sutro LLP in connection with the tax opinion to be delivered to
AirTouch, and that there are 26,054,228 CCI Common Equivalent Shares outstanding
immediately prior to the closing.
Class B Per-Unit
Amount: 0.879
Class C Per-Unit
Amount: 0.595
Unit Election
Number: 19,618,833
Cash Election
Number: 6,435,395
% of Total CCI Common Equivalent Shares Exchanged for Units: 75.3%
% of Total CCI Common Equivalent Shares Exchanged for Cash: 24.7%
12
<PAGE> 16
In the event AirTouch and CCI determine that, as a result of an adjustment
necessary to preserve the tax treatment of the Merger, either (i) the Class B
Per-Unit Amount and the Class C Per-Unit Amount or (ii) the respective
percentages of CCI Common Equivalent Shares exchanged for Units or cash, would
be likely to differ materially at the closing date of the Merger from the levels
set forth under "-- Examples of Merger Consideration Calculation" above,
AirTouch and CCI will distribute not less than five business days prior to the
Meeting to holders of CCI Stock a Proxy Statement-Prospectus supplement (and
will issue a corresponding press release) informing such holders of their
determination and setting forth, based on the assumptions underlying such
determination, the anticipated approximate Class B Per-Unit Amount and Class C
Per-Unit Amount and the anticipated respective percentages of CCI Common
Equivalent Shares that would be exchanged for Units and cash. The Proxy
Statement-Prospectus supplement will be accompanied by a supplemental proxy card
resoliciting the vote of CCI Stockholders. To the extent AirTouch and CCI
determine thereafter that the amounts described in clauses (i) or (ii) of the
second preceding sentence would be likely to differ materially at the closing
date of the Merger from the levels set forth in the Proxy Statement-Prospectus
supplement (or, if no supplement has been distributed, then the Proxy
Statement-Prospectus), AirTouch and CCI will distribute a further supplement
(and will issue a corresponding press release) containing the same information
and accompanied by the supplemental proxy card described in the preceding
sentences and will cause the Meeting if necessary to be rescheduled such that at
least five business days will elapse between the date of such distribution and
the Meeting.
ELECTION PROCEDURES. Both the aggregate number of CCI Common Equivalent
Shares to be converted into the right to receive Units (the "Unit Election
Number") and the aggregate number of such shares to be converted into the right
to receive cash (the "Cash Election Number") in the Merger are fixed under the
terms of the 1996 Merger Agreement. The Cash Election Number will be equal to
(i) 28% of the number of CCI Common Equivalent Shares outstanding immediately
prior to the Effective Time minus (ii) the number of CCI Common Equivalent
Shares represented by Dissenting CCI Stock. The Unit Election Number will be
equal to 72% of the number of CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time. In addition, the Unit Election Number
will be increased to up to 74% of the CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time and the Cash Election Number will be
correspondingly reduced in the event that there is an oversubscription for
Units, as described under "-- Excess Unit Elections." Both the Cash Election
Number and the Unit Election Number also will be subject to adjustment to
preserve the tax treatment of the Merger, as discussed under "-- Limitations on
Number of Shares of AirTouch Class B Preferred Stock to be Issued,"
"-- Adjustments to Preserve Tax Status of Merger" and "SPECIAL FACTORS -- Merger
Consideration."
Election of Consideration. Subject to the allocation and proration
procedures set forth below, each holder of record of shares of CCI Stock
outstanding immediately prior to the Effective Time will be entitled to: (i)
elect to receive cash for all of such shares (a "Cash Election"); (ii) elect to
receive Units for all of such shares (a "Unit Election"); or (iii) indicate that
such holder has no preference as to the receipt of cash or Units for such shares
(a "Non-Election"). All such elections are to be made on a form of election (an
"Election and Transmittal Form"). Holders of record of shares of CCI Stock who
hold such shares as nominees, trustees or in other representative capacities
(individually a "Representative") may submit multiple Election and Transmittal
Forms, provided that each such Representative certifies that each Election and
Transmittal Form covers all the shares of CCI Stock held by such Representative
for a particular beneficial owner. All elections will be revocable until 5:00
p.m. New York time on the last business day prior to the Effective Time.
Holders of CCI Stock should consider that the conversion ratios and the
dividend rates of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock were determined based on the market price of AirTouch Common
Stock over a period prior to the date of mailing of this Proxy
Statement-Prospectus and prevailing interest rates at the time of the original
execution of the 1996 Merger Agreement, respectively. Since the market price of
AirTouch Common Stock and interest rates are subject to fluctuation, and
depending on general market conditions, the combined market value of the
AirTouch Preferred Stock, Series 1996 underlying a Unit that holders of shares
of CCI Stock may receive in the Merger may be less than, greater than or equal
to $55.00. See "RISK FACTORS -- Securities-Related Risks."
13
<PAGE> 17
Excess Cash Elections. If the aggregate number of CCI Common Equivalent
Shares covered by Cash Elections (the "Cash Election Shares") exceeds the Cash
Election Number, then all shares of CCI Stock covered by Unit Elections and all
shares of CCI Stock covered by Non-Elections (the "Non-Election Shares") will be
converted into the right to receive Units and each share of CCI Stock covered by
a Cash Election will be converted into the right to receive (i) an amount in
cash, without interest, equal to the product of (x) the Per Share Cash
Consideration and (y) a fraction (the "Cash Fraction"), the numerator of which
will be the Cash Election Number and the denominator of which will be the total
number of Cash Election Shares, and (ii) a number of Units equal to the product
of (x) the Per Share Unit Consideration and (y) a fraction equal to one minus
the Cash Fraction, multiplied in each case by the number of CCI Common
Equivalent Shares represented by such share.
Excess Unit Elections. If the aggregate number of CCI Common Equivalent
Shares covered by Unit Elections (the "Unit Election Shares") exceeds the Unit
Election Number, then the Unit Election Number will be increased so that it
equals the number of Unit Election Shares (and the Cash Election Number will be
correspondingly decreased), provided that in no event shall such adjustment
cause the Unit Election Number to exceed 74% of the CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time. If, after giving effect to
the foregoing sentence, the number of Unit Election Shares still exceeds the
Unit Election Number, then all shares of CCI Stock covered by Cash Elections and
all shares of CCI Stock covered by Non-Elections will be converted into the
right to receive cash and each share of CCI Stock covered by a Unit Election
will be converted into the right to receive (i) a number of Units equal to a
fraction (the "Unit Fraction"), the numerator of which will be the Unit Election
Number (after giving effect to the foregoing sentence), and the denominator of
which will be the total number of Unit Election Shares, and (ii) an amount in
cash, without interest, equal to the product of (x) the Per Share Cash
Consideration and (y) a fraction equal to one minus the Unit Fraction,
multiplied in each case by the number of CCI Common Equivalent Shares
represented by such share.
Insufficient Elections. In the event that the number of Cash Election
Shares does not exceed the Cash Election Number and the number of Unit Election
Shares does not exceed the Unit Election Number, all shares of CCI Stock covered
by Cash Elections will be converted into the right to receive cash, all shares
of CCI Stock covered by Unit Elections will be converted into the right to
receive Units, and each share of CCI Stock covered by a Non-Election, if any,
will be converted into the right to receive (i) an amount in cash, without
interest, equal to the product of (x) the Per Share Cash Consideration and (y) a
fraction (the "Non-Election Fraction"), the numerator of which will be the
excess of the Cash Election Number over the total number of Cash Election Shares
and the denominator of which will be the excess of (A) the number of CCI Common
Equivalent Shares outstanding immediately prior to the Effective Time over (B)
the sum of the total number of Cash Election Shares and the total number of Unit
Election Shares and (ii) a number of Units equal to the product of (x) the Per
Share Unit Consideration and (y) a fraction equal to one minus the Non-Election
Fraction, multiplied in each case by the number of CCI Common Equivalent Shares
represented by such share.
BOTH THE PERCENTAGE OF CCI COMMON EQUIVALENT SHARES TO BE CONVERTED INTO
THE RIGHT TO RECEIVE CASH (INCLUDING DISSENTING CCI STOCK) AND THE PERCENTAGE OF
SUCH SHARES TO BE CONVERTED INTO THE RIGHT TO RECEIVE UNITS IN THE MERGER ARE
FIXED UNDER THE TERMS OF THE 1996 MERGER AGREEMENT. ACCORDINGLY, NO ASSURANCE
CAN BE GIVEN THAT AN ELECTION BY ANY GIVEN HOLDER OF CCI STOCK CAN BE
ACCOMMODATED. RATHER, SUCH ELECTION WILL BE SUBJECT TO THE RESULTS OF THE
ALLOCATION AND PRORATION PROCEDURES DESCRIBED ABOVE.
AN ELECTION AND TRANSMITTAL FORM IS BEING SENT TO HOLDERS OF RECORD OF CCI
STOCK ON THE RECORD DATE. THE INSTRUCTIONS TO THE ELECTION AND TRANSMITTAL FORM
WILL SPECIFY THAT DELIVERY WILL BE EFFECTED AND RISK OF LOSS AND TITLE TO THE
CERTIFICATES REPRESENTING SHARES OF CCI STOCK WILL PASS, ONLY UPON PROPER
DELIVERY OF SUCH CERTIFICATES TO THE BANK OF NEW YORK (THE "EXCHANGE AGENT"). TO
BE EFFECTIVE, AN ELECTION AND TRANSMITTAL FORM MUST BE PROPERLY COMPLETED AND
SIGNED AND MUST BE RECEIVED BY THE EXCHANGE AGENT ACCOMPANIED BY ALL STOCK
CERTIFICATES REPRESENTING SHARES OF CCI STOCK (OTHER THAN SHARES OF CCI SERIES B
PREFERENCE STOCK, WHICH ARE TO BE REDEEMED) HELD BY THE PERSON SUBMITTING SUCH
ELECTION AND TRANSMITTAL FORM NO LATER THAN 5:00 P.M. NEW YORK TIME ON THE LAST
BUSINESS DAY PRIOR TO THE EFFECTIVE TIME. THE EFFECTIVE TIME OF THE MERGER IS
ANTICIPATED TO OCCUR ON AUGUST 16, 1996. THUS, EACH HOLDER OF CCI STOCK SHOULD
DELIVER A PROPERLY
14
<PAGE> 18
COMPLETED ELECTION AND TRANSMITTAL FORM TO THE EXCHANGE AGENT NO LATER THAN 5:00
P.M. NEW YORK TIME, ON AUGUST 15, 1996, (THE LAST BUSINESS DAY IMMEDIATELY PRIOR
TO THE ANTICIPATED EFFECTIVE TIME). NO ASSURANCE CAN BE GIVEN THAT THE EFFECTIVE
TIME WILL NOT BE DELAYED. AIRTOUCH AND CCI WILL ANNOUNCE PUBLICLY ANY DELAY IN
THE EFFECTIVE TIME AND THE NEW DATE BY WHICH ELECTION AND TRANSMITTAL FORMS MUST
BE SUBMITTED. ALL ELECTIONS MAY BE REVOKED UNTIL 5:00 P.M. NEW YORK TIME ON THE
LAST BUSINESS DAY PRIOR TO THE EFFECTIVE TIME.
In the 1996 Merger Agreement, AirTouch and CCI have each agreed to use
their best efforts to mail an Election and Transmittal Form to all persons who
become holders of CCI Stock between the Record Date and 10:00 a.m., New York
time on the fifth business day prior to the anticipated Effective Time, and to
make an Election and Transmittal Form available to all persons who become
holders of CCI Stock subsequent to such date and not later than the close of
business on the business day prior to the Effective Time. Persons who become
holders of CCI Stock after the Record Date or any other holders of CCI Stock who
need an Election and Transmittal Form may obtain copies of the Election and
Transmittal Form upon request from the Exchange Agent either in writing by mail
at The Bank of New York, Reorganization Services, P.O. Box 11248, Church Street
Station, New York, NY 10286-1248, by hand or courier at The Bank of New York,
Reorganization Services, 101 Barclay Street, Receive and Deliver Window, Street
Level, New York, NY 10286, or by telephone at 1-800-507-9357.
HOLDERS OF CCI STOCK THAT WISH TO SUBMIT AN ELECTION AND TRANSMITTAL FORM
MUST DELIVER THEIR STOCK CERTIFICATES WITH SUCH ELECTION AND TRANSMITTAL FORM.
ANY HOLDER OF CCI STOCK OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE TIME
THAT DOES NOT SUBMIT A PROPERLY COMPLETED ELECTION AND TRANSMITTAL FORM,
ACCOMPANIED BY THE APPLICABLE STOCK CERTIFICATES, THAT IS RECEIVED AND ACCEPTED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. NEW YORK TIME AUGUST 15, 1996 (OR SUCH
LATER DATE AS AIRTOUCH AND CCI SHALL PUBLICLY ANNOUNCE) WILL BE DEEMED TO HAVE
MADE A NON-ELECTION.
If AirTouch or the Exchange Agent determines that any purported Cash
Election or Unit Election was not properly made, such purported Cash Election or
Unit Election will be deemed to be of no force and effect and the holder of CCI
Stock making such purported Cash Election or Unit Election will, for purposes
hereof, be deemed to have made a Non-Election. Neither AirTouch or CCI nor the
Exchange Agent will be under any obligation to notify any person of any defect
in an Election and Transmittal Form.
Subsequent to the Effective Time, AirTouch will mail a letter of
transmittal to holders of record of CCI Stock immediately prior to the Effective
Time who did not deliver their stock certificates with an Election and
Transmittal Form for use in submitting such certificates for the cash and/or
Units which they are entitled to receive in exchange therefor. See "SPECIAL
FACTORS -- Procedures for Exchange of Certificates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The Merger is intended to qualify
as a reorganization within the meaning of Section 368(a) of the Code.
Consummation of the Merger is conditioned upon the receipt by AirTouch of the
opinion of Pillsbury Madison & Sutro LLP, counsel to AirTouch, and by CCI of the
opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to CCI, each dated the
closing date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth or referred to in such opinions
(including representations of AirTouch, AirTouch Cellular, CCI and certain
stockholders of CCI dated as of the closing date), for federal income tax
purposes, the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, and that AirTouch, AirTouch Cellular and CCI will
each be a party to that reorganization under Section 368(b) of the Code. Under
the 1996 Merger Agreement, if Pillsbury Madison & Sutro LLP determines that its
opinion cannot be rendered as a result of the Merger potentially failing to
satisfy continuity of interest requirements under applicable federal income tax
principles relating to reorganizations under Section 368(a), the number of CCI
Common Equivalent Shares to be exchanged for Units rather than cash will be
increased to the extent necessary to achieve such tax-free treatment, provided
that AirTouch is not required to exchange Units for in excess of 80% of the CCI
Common Equivalent Shares outstanding immediately prior to the Effective Time.
See "-- Adjustments to Preserve Tax Status of Merger." No assurances can be
given that certain matters, including matters relating to holders of significant
amounts of
15
<PAGE> 19
CCI Stock, will not prevent Pillsbury Madison & Sutro LLP and Skadden, Arps,
Slate, Meagher & Flom from delivering their respective opinions in the event
that Units were to be exchanged for 80% or less of the CCI Common Equivalent
Shares outstanding immediately prior to the Effective Time. Assuming that the
amount of Units to be exchanged were to be 80% or less, it is uncertain whether
Pillsbury Madison & Sutro LLP would be in a position to render the foregoing
opinion absent certain representations by AirTouch, AirTouch Cellular, CCI and
certain stockholders of CCI as of the closing date. Certain such stockholders
are under no obligation to make such representations and no assurance can be
given that they will provide adequate representations on or prior to the
closing. Holders of CCI Stock are urged to consult their tax advisors as to the
tax consequences of the Merger to them under federal, state, local, foreign or
any other applicable law. See "SPECIAL FACTORS -- Certain Federal Income Tax
Consequences -- Tax Free Reorganization Treatment" and "-- Failure of
Reorganization."
AIRTOUCH CLASS B PREFERRED STOCK.
Dividends. A holder of a share of AirTouch Class B Preferred Stock will be
entitled to receive, when, as and if declared by the AirTouch Board out of funds
legally available therefor, cumulative preferential dividends at a rate per
annum of 6.00% of the Preferred Stock Issue Price (equivalent to $1.74 per annum
for each share of AirTouch Class B Preferred Stock), payable quarterly in
arrears on each February 15, May 15, August 15 and November 15, or, if any such
date is not a business day, on the next succeeding business day until
conversion. See "DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class B
Preferred Stock -- Dividends."
Mandatory Conversion. AirTouch Class B Preferred Stock mandatorily
converts into AirTouch Common Stock on the date that is the third anniversary of
the Effective Time or such earlier date as may occur as a result of a
Reorganization Event (the "Class B Maturity Date") at the following rates
(subject to adjustment for certain events):
If the Class B Maturity Price (as defined below) is greater than or equal
to $35.96 per share (the "Class B Conversion Price"), each share of
AirTouch Class B Preferred Stock will convert into 0.806 of a share of
AirTouch Common Stock.
If the Class B Maturity Price is less than the Class B Conversion Price but
greater than the Preferred Stock Issue Price of $29.00 per share, each
share of AirTouch Class B Preferred Stock will convert into a fraction of a
share of AirTouch Common Stock equal to the Preferred Stock Issue Price
over the Class B Maturity Price.
If the Class B Maturity Price is less than or equal to the Preferred Stock
Issue Price, each share of AirTouch Class B Preferred Stock will convert
into one share of AirTouch Common Stock.
"Class B Maturity Price" means the Volume-Weighted Average Trading Price of
AirTouch Common Stock for the 20 consecutive trading day period immediately
prior to (but not including) the Class B Maturity Date.
Because the conversion ratio will vary depending on the Class B Maturity
Price, the opportunity for price appreciation in AirTouch Common Stock afforded
by an investment in AirTouch Class B Preferred Stock is less than the
opportunity afforded by an investment in AirTouch Common Stock. This is because
the value of the AirTouch Common Stock received at maturity will only exceed the
Preferred Stock Issue Price if the Class B Maturity Price exceeds the Class B
Conversion Price of $35.96. Moreover, in the event that AirTouch Common Stock is
trading at a price that is equal to or above the Class B Conversion Price,
holders of AirTouch Class B Preferred Stock will only be entitled to receive
upon exchange at maturity approximately 80.6% of any appreciation of the value
of AirTouch Common Stock in excess of the Preferred Stock Issue Price. As a
result, the value of any appreciation of AirTouch Common Stock between the
Preferred Stock Issue Price and the Class B Conversion Price will effectively be
retained by AirTouch. Holders of AirTouch Class B Preferred Stock will realize
the entire decline in value if at the time of conversion the market price of
AirTouch Common Stock is less than the Preferred Stock Issue Price. See "RISK
FACTORS -- Securities-Related Risks -- Less Opportunity for Price Appreciation
Compared to AirTouch Common Stock" and
16
<PAGE> 20
"DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class B Preferred Stock --
Mandatory Conversion."
Conversion at the Option of the Holder. Shares of AirTouch Class B
Preferred Stock are convertible into shares of AirTouch Common Stock at the
option of the holder at any time prior to the Class B Maturity Date at a rate
equal to 0.806 of a share of AirTouch Common Stock per share of AirTouch Class B
Preferred Stock (subject to adjustment for certain events), regardless of the
market price of the AirTouch Common Stock on the date of such optional
conversion. See "DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class B
Preferred Stock -- Conversion at the Option of the Holder" and "RISK FACTORS --
Securities-Related Risks -- Less Opportunity for Price Appreciation Compared to
AirTouch Common Stock."
Contingent Payment. If the Volume-Weighted Average Trading Price of
AirTouch Class B Preferred Stock over the 30 consecutive calendar day period
commencing on the date that is three months after the Effective Time (the last
day of such period being the "Contingent Payment Date") is less than $28.736,
then each holder of a share of AirTouch Class B Preferred Stock will be entitled
to receive per share a payment (the "Contingent Payment") out of funds legally
available therefor an amount equal to (a) between $2 million and $16.85 million,
depending on the market price of AirTouch Class B Preferred Stock, divided by
(b) the total number of shares of AirTouch Class B Preferred Stock issued and
outstanding as of the Contingent Payment Date. Accordingly, the amount of the
Contingent Payment and whether it will be paid at all is directly related to the
Volume-Weighted Average Trading Price of the AirTouch Class B Preferred Stock
over a 30-day period following the Effective Time commencing on the date that is
three months after the Effective Time. The lower the Volume-Weighted Average
Trading Price, the higher the Contingent Payment and vice-versa. If the
Volume-Weighted Average Trading Price equals or exceeds $28.736, no Contingent
Payment will be made. Such payment may be made in cash, AirTouch Class C
Preferred Stock or AirTouch Common Stock, at the option of AirTouch. See
"DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class B Preferred
Stock -- Contingent Payment."
Voting Rights. The holders of shares of AirTouch Class B Preferred Stock
will have the right with the holders of AirTouch Common Stock to vote in the
election of directors and upon each other matter coming before any meeting of
the holders of AirTouch Common Stock on the basis of four-fifths of a vote for
each share of AirTouch Class B Preferred Stock. On such matters, the holders of
shares of AirTouch Class B Preferred Stock and the holders of shares of AirTouch
Common Stock will vote together as one class except as otherwise provided by law
or AirTouch's Certificate of Incorporation. In addition, whenever dividends on
the shares of AirTouch Class B Preferred Stock or any other series of AirTouch's
preferred stock (all series of which, including the shares of AirTouch Preferred
Stock, Series 1996, hereinafter are called the "AirTouch Preferred Stock") with
like voting rights are in arrears and unpaid for six quarterly dividend periods,
and in certain other circumstances, the holders of the shares of AirTouch Class
B Preferred Stock (voting separately as a class with all other shares of
AirTouch Preferred Stock upon which like voting rights have been conferred) will
be entitled to vote, on the basis of one vote for each share of AirTouch Class B
Preferred Stock, for the election of two directors, such directors to be in
addition to the number of directors constituting the AirTouch Board immediately
prior to the accrual of such right. See "DESCRIPTION OF AIRTOUCH CAPITAL
STOCK -- AirTouch Class B Preferred Stock -- Voting Rights."
Priority. AirTouch Class B Preferred Stock ranks prior to AirTouch Common
Stock and AirTouch's Series A Participating Preferred Stock, $.01 par value
("AirTouch Series A Preferred Stock"), and on a parity with AirTouch Class C
Preferred Stock, as to payment of dividends, and ranks senior to the AirTouch
Common Stock and AirTouch Series A Preferred Stock and on a parity with AirTouch
Class C Preferred Stock as to preferential distribution of assets upon
liquidation. The liquidation preference of each share of AirTouch Class B
Preferred Stock is an amount equal to the sum of (i) the Preferred Stock Issue
Price and (ii) all accrued and unpaid dividends thereon. See "DESCRIPTION OF
AIRTOUCH CAPITAL STOCK -- AirTouch Class B Preferred Stock -- Dividends" and
"-- Liquidation Rights."
17
<PAGE> 21
AIRTOUCH CLASS C PREFERRED STOCK
Dividends. A holder of a share of AirTouch Class C Preferred Stock will be
entitled to receive, when, as and if declared by the AirTouch Board out of funds
legally available therefor, cumulative preferential dividends at a rate per
annum of 4.25% of the Call Price (equivalent to $2.125 per annum for each share
of AirTouch Class C Preferred Stock), payable quarterly in arrears on each
February 15, May 15, August 15 and November 15 or, if any such date is not a
business day, on the next succeeding business day until redemption or
conversion. See "DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class C
Preferred Stock -- Dividends."
Maturity. Unless previously converted or redeemed, AirTouch Class C
Preferred Stock will mature on the twentieth anniversary of the Effective Time
(the "Class C Maturity Date"), and each holder of a share of AirTouch Class C
Preferred Stock will be entitled to receive out of funds legally available
therefor cash in the amount of $50.00 per share of AirTouch Class C Preferred
Stock (the "Call Price") plus an amount equal to all accrued and unpaid
dividends on such share of AirTouch Class C Preferred Stock. See "DESCRIPTION OF
AIRTOUCH CAPITAL STOCK -- AirTouch Class C Preferred Stock -- Maturity."
Redemption at the Option of AirTouch. From the third anniversary of the
Effective Time until the fourth anniversary of the Effective Time, AirTouch may
redeem AirTouch Class C Preferred Stock (in whole or in part) at any time after
the Volume-Weighted Average Trading Price of AirTouch Common Stock on 15
separate trading days during any 30 consecutive trading day period during such
year has exceeded $47.125. After the fourth anniversary of the Effective Time,
AirTouch may redeem the AirTouch Class C Preferred Stock (in whole or in part)
regardless of the market price of AirTouch Common Stock. Until the tenth
anniversary of the Effective Time, AirTouch may only redeem AirTouch Class C
Preferred Stock by delivering to the holder thereof an amount of AirTouch Common
Stock equal to $50.00 divided by the Volume-Weighted Average Trading Price of
AirTouch Common Stock for the 15 consecutive trading day period prior to the
record date for such redemption. After the tenth anniversary of the Effective
Time, AirTouch may redeem the AirTouch Class C Preferred Stock by delivering
AirTouch Common Stock, as described above, or by paying $50.00 in cash per share
of AirTouch Class C Preferred Stock. See "DESCRIPTION OF AIRTOUCH CAPITAL
STOCK -- AirTouch Class C Preferred Stock -- Optional Redemption."
Conversion at the Option of the Holder. Shares of AirTouch Class C
Preferred Stock are convertible into shares of AirTouch Common Stock at the
option of the holder at any time prior to the Class C Maturity Date at a rate
equal to 1.379 shares of AirTouch Common Stock per share of AirTouch Class C
Preferred Stock (subject to adjustment for certain events), regardless of the
market price of AirTouch Common Stock on the date of such optional conversion.
The right of holders to convert shares of AirTouch Class C Preferred Stock
called for redemption will terminate immediately prior to the close of business
on the redemption date. See "DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch
Class C Preferred Stock -- Conversion at the Option of the Holder" and "RISK
FACTORS -- Securities-Related Risks -- Less Opportunity for Price Appreciation
Compared to AirTouch Common Stock."
Voting Rights. Whenever dividends on the shares of AirTouch Class C
Preferred Stock or any other series of AirTouch Preferred Stock with like voting
rights are in arrears and unpaid for six quarterly dividend periods, and in
certain other circumstances, the holders of the shares of AirTouch Class C
Preferred Stock (voting separately as a class with all other shares of AirTouch
Preferred Stock upon which like voting rights have been conferred) will be
entitled to vote, on the basis of one vote for each share of AirTouch Class C
Preferred Stock, for the election of two AirTouch directors, such directors to
be in addition to the number of directors constituting the AirTouch Board
immediately prior to the accrual of such right. See "DESCRIPTION OF AIRTOUCH
CAPITAL STOCK -- AirTouch Class C Preferred Stock -- Voting Rights."
Priority. The AirTouch Class C Preferred Stock ranks prior to AirTouch
Common Stock and AirTouch Class A Preferred Stock, and on a parity with AirTouch
Class B Preferred Stock as to payment of dividends, and ranks senior to AirTouch
Common Stock and AirTouch Series A Preferred Stock and on a parity with AirTouch
Class B Preferred Stock upon preferential distribution of assets upon
liquidation. The liquidation preference of each share of AirTouch Class B
Preferred Stock is an amount equal to the sum of (i) the Call
18
<PAGE> 22
Price and (ii) all accrued and unpaid dividends thereon. See "DESCRIPTION OF
AIRTOUCH CAPITAL STOCK -- AirTouch Class C Preferred Stock -- Dividends" and
"-- Liquidation Rights."
CCI CONVERTIBLE NOTES. The 1996 Merger Agreement provides that, at the
Effective Time, the CCI Convertible Notes will be assumed by the Surviving
Corporation. The Surviving Corporation will execute one or more supplemental
indentures as may be required pursuant to the terms of the indenture relating to
the CCI Convertible Notes. See "OTHER MATTERS -- Treatment of CCI Convertible
Notes."
RECOMMENDATION OF THE CCI BOARD OF DIRECTORS. At a meeting on April 5,
1996, the CCI Board (with Messrs. Cox and Gyani absent) unanimously determined
that the Merger, upon the terms and conditions set forth in the 1996 Merger
Agreement, is fair to, and in the best interests of, the holders of CCI Stock
(other than AirTouch) and is fair (both substantively and procedurally) to
stockholders of CCI other than AirTouch and affiliates of CCI. The CCI Board
recommends that CCI Stockholders vote FOR the approval and adoption of the 1996
Merger Agreement, the transactions contemplated thereby, including the Merger,
and FOR the CCI Rights Redemption. See "SPECIAL FACTORS -- CCI Reasons for the
Merger; Recommendation of the CCI Board."
EMPLOYEE AND DIRECTOR STOCK OPTIONS. Pursuant to the 1996 Merger
Agreement, CCI is required to use its reasonable best efforts to obtain the
written consent of each holder of options outstanding under the CCI 1991 Stock
Option Plan or the CCI Non-Employee Director Stock Option Plan (collectively,
the "CCI Option Plans") to the conversion procedure described in the next
paragraph. Each executive officer and director of CCI will consent to such
conversion procedure. In the event that a holder of options outstanding under a
CCI Option Plan (each option for one share of CCI Common Stock being a "CCI
Option") fails prior to the Effective Time to consent to such conversion
procedure, the conversion procedure described in the second paragraph below will
be applied to such options.
Consenting Optionholder Procedure. If the optionholder consents, at and as
of the Effective Time, AirTouch will substitute an option to purchase AirTouch
Common Stock (an "AirTouch Common Option") for each CCI Option. Each AirTouch
Common Option so substituted by AirTouch will continue to be subject to
substantially the same terms and conditions set forth in the applicable CCI
Option Plan and in the corresponding CCI Option immediately prior to the
Effective Time, including but not limited to the immediate exercisability of all
CCI Options, except that (i) such AirTouch Common Option will be exercisable for
that number of whole shares of AirTouch Common Stock equal to the product of the
number of shares of CCI Common Stock that were purchasable under such CCI Option
immediately prior to the Effective Time multiplied by the Option Adjustment
Ratio, rounded down to the nearest whole number of shares of AirTouch Common
Stock; and (ii) the per share exercise price for the shares of AirTouch Common
Stock issuable upon exercise of such AirTouch Common Option will be equal to the
quotient determined by dividing the exercise price per share of CCI Common Stock
at which such CCI Option was exercisable immediately prior to the Effective Time
by the Option Adjustment Ratio and rounding the resulting exercise price up to
the nearest whole cent. The Option Adjustment Ratio will be equal to (A) the
Volume-Weighted Average Trading Price of a share of CCI Common Stock during the
last five trading days on which CCI Common Stock is traded before the Effective
Time divided by (B) the Volume-Weighted Average Trading Price of a share of
AirTouch Common Stock during such period.
Non-consenting Optionholder Procedure. If no consent is obtained, at and
as of the Effective Time, AirTouch will substitute an AirTouch option to
purchase one Unit (an "AirTouch Preferred Option") for each CCI Option. Each
AirTouch Preferred Option so substituted by AirTouch will continue to be subject
to substantially the same terms and conditions set forth in the applicable CCI
Option Plan and in the corresponding CCI Option immediately prior to the
Effective Time, including but not limited to the immediate exercisability of all
CCI Options. The per Unit exercise price for the Unit issuable upon exercise of
such AirTouch Preferred Option will be equal to the exercise price per share of
CCI Common Stock at which such CCI Option was exercisable immediately prior to
the Effective Time.
As soon as reasonably practicable after the Effective Time, AirTouch will
register the shares of AirTouch Common Stock and AirTouch Preferred Stock,
Series 1996 underlying the AirTouch Common Options and AirTouch Preferred
Options with the SEC on a Form S-8 and will keep such registration effective
until the
19
<PAGE> 23
exercise or termination of all AirTouch Common Options and AirTouch Preferred
Options. AirTouch will reserve a sufficient number of shares of AirTouch Common
Stock and AirTouch Preferred Stock, Series 1996 for issuance upon exercise of
the AirTouch Common Options and AirTouch Preferred Options.
EFFECTS OF A FAILURE TO APPROVE THE MERGER. If the Merger is not approved,
the Appraisal Process will commence in August 1996, unless deferred for six
months by CCI if there is a calamitous or severe adverse economic condition in
the United States. The price that may be received by holders of CCI Stock (the
"Appraisal Process Price") for their shares as a result of the Appraisal Process
has not yet been determined and holders of CCI Stock will have no right to
approve or reject any exercise by AirTouch of its right to cause the redemption
of each share of CCI Stock not held by AirTouch at the Appraisal Process Price
(the "Appraisal Process Redemption") upon determination of such price. Since the
Appraisal Process Price has not yet been determined, the value of the Merger
Consideration received by holders of CCI Stock in the Merger could be higher or
lower than the value of the consideration that such holders might receive in the
Appraisal Process. Although the provisions of the 1990 Merger Agreement relating
to the Appraisal Process specify definitions of value and other considerations
to be taken into account, they do not specifically require the appraisers to
adopt any particular valuation methodology in reaching their conclusions as to
value. AirTouch will have the opportunity to delay its right to cause the
Appraisal Process Redemption by requiring two additional appraisals and
therefore will have the opportunity to evaluate up to three different appraisal
values during the Appraisal Process prior to determining whether to cause an
Appraisal Process Redemption. As a result, the Appraisal Process Redemption
could occur as late as the fourth quarter of 1997 (assuming no deferral by CCI).
Moreover, AirTouch may elect not to exercise its right to cause the Appraisal
Process Redemption, in which case CCI is obligated to then commence a process to
sell CCI which will result in additional deferral of the receipt by holders of
CCI Stock of payment for their shares. See "SPECIAL FACTORS -- Effects of a
Failure to Approve the Merger" and "-- Background of the Merger -- Appraisal
Process."
OPINIONS OF FINANCIAL ADVISORS. On April 5, 1996, Wasserstein Perella &
Co., Inc. ("Wasserstein Perella") and Donaldson, Lufkin & Jenrette Securities
Corporation ("Donaldson, Lufkin & Jenrette") delivered a joint financial
presentation to the effect, and each of their oral opinions, that as of the date
of such opinions, and subject to the various assumptions and considerations set
forth in such opinions, the Merger Consideration to be received by holders of
CCI Stock other than AirTouch in the Merger is fair from a financial point of
view to such holders. Wasserstein Perella and Donaldson, Lufkin & Jenrette have
confirmed their April 5, 1996 oral opinions by delivery of their written
opinions dated the date of this Proxy Statement-Prospectus (the "CCI Fairness
Opinions"). Wasserstein Perella and Donaldson, Lufkin & Jenrette each noted in
their CCI Fairness Opinions that they were not expressing any opinion as to the
prices at which the AirTouch Class B Preferred Stock or AirTouch Class C
Preferred Stock would actually trade at any time. Copies of the written CCI
Fairness Opinions of such firms are attached hereto as Annexes E and F. See
"SPECIAL FACTORS -- CCI Fairness Opinions of Wasserstein Perella & Co., Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation." Holders of CCI Stock are
urged to read the CCI Fairness Opinions in their entirety for information with
respect to the procedures followed, assumptions made, matters considered and
limits of the review by each of Wasserstein Perella and Donaldson, Lufkin &
Jenrette in rendering their respective CCI Fairness Opinions.
AIRTOUCH DETERMINATION OF FAIRNESS. AirTouch has concluded that the terms
of the Merger are fair from both a procedural and substantive point of view to
the holders of CCI Stock other than AirTouch and affiliates of CCI. See "SPECIAL
FACTORS -- AirTouch Reasons for the Merger and for the Structure."
REGULATORY APPROVALS REQUIRED. AirTouch and CCI have received notice that
the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), with respect to the acquisition by
AirTouch of all of the CCI Stock was terminated on October 4, 1995.
The Merger is also subject to the requirements of the Communications Act of
1934 (the "Communications Act") and the rules, regulations and policies of the
Federal Communications Commission (the "FCC"). Under such rules, regulations and
policies, the acquisition by AirTouch of all of the CCI Stock is deemed to
result in a pro forma transfer of control of New Par and its subsidiaries
holding FCC licenses. Applications
20
<PAGE> 24
requesting the FCC's consents to the foregoing pro forma transfer of control
have been filed; consent to transfer of the cellular licenses has been received,
while that with respect to the microwave licenses is pending. See "OTHER
MATTERS -- Regulatory Approvals Required."
CONDITIONS TO THE MERGER. Consummation of the Merger is subject to the
satisfaction or waiver of various conditions, including approval of the 1996
Merger Agreement and the transactions contemplated thereby (including the Merger
and the CCI Rights Redemption), by the CCI Stockholders, receipt of all
regulatory approvals, termination of the waiting period under the HSR Act, the
effectiveness of the Registration Statement, listing of the AirTouch Preferred
Stock, Series 1996 on the NYSE, that there be no injunction of the Merger, and
the receipt by each of CCI and AirTouch of opinions of their respective tax
counsel with respect to certain tax matters, including that the Merger will be
treated for federal income tax purposes as a reorganization under Section 368(a)
of the Code. In addition to the other conditions set forth in the Merger
Agreement and described herein, AirTouch's obligation to consummate the Merger
is subject to the conditions (a) that there not have occurred any change in the
business, financial condition, assets, liabilities, or results of operations of
CCI, its subsidiaries or New Par, taken as a whole, that would be reasonably
likely to have, individually or in the aggregate, a materially adverse effect
thereon, other than changes resulting from general cellular industry conditions
or a regulatory development affecting the cellular industry generally, (b) that
there be no claims or liabilities of CCI, any subsidiary thereof, or New Par
that could be reasonably expected to have a material adverse effect on CCI, its
subsidiaries or New Par, taken as a whole (which shall be deemed to have
occurred if involving liabilities of more than $60 million), and (c) that there
be no pending or threatened material action or proceeding by any person against
AirTouch, CCI, any subsidiary of either or New Par, or any director, officer or
employee thereof, challenging or in any way or in any manner seeking to restrict
or prohibit the transactions contemplated by the 1996 Merger Agreement or
seeking to obtain any damages against any person as a result of the transactions
contemplated by the 1996 Merger Agreement, which action or proceeding has or
would have a reasonable likelihood of success. See "THE MERGER
AGREEMENT -- Conditions."
TERMINATION; EFFECT OF TERMINATION. The 1996 Merger Agreement may be
terminated at any time prior to the Effective Time: (i) by mutual consent of
AirTouch and CCI; (ii) by either AirTouch or CCI, if the Effective Time does not
occur on or before September 15, 1996; (iii) by AirTouch, with five business
days' advance written notice, in the event that, as a result of the adjustments
required to maintain the tax-free status of the Merger, the Unit Election Number
would exceed 80% of the CCI Common Equivalent Shares outstanding immediately
prior to the Effective Time; (iv) (a) by either AirTouch or CCI, if the CCI
Stockholders do not approve the 1996 Merger Agreement, the transactions
contemplated thereby, including the Merger, and the CCI Rights Redemption, or
(b) by AirTouch, if the recommendations of the CCI Board that CCI Stockholders
approve the 1996 Merger Agreement, the Merger and the CCI Rights Redemption
shall have been withdrawn or modified; (v) by AirTouch, if at the time of the
Meeting CCI Stockholders representing more than 10% of the CCI Common Equivalent
Shares have submitted and not withdrawn written demands for appraisal; or (vi)
by either AirTouch or CCI, if any permanent injunction or other order of a court
or other competent authority preventing the consummation of the Merger shall
have become final and non-appealable.
In the event of the termination of the 1996 Merger Agreement by either
AirTouch or CCI, the 1996 Merger Agreement shall become void and have no effect,
except that certain provisions relating to expenses, confidentiality and the
continuing effect of the 1990 Merger Agreement shall remain in effect.
CERTAIN TRANSACTIONS; CONFLICTS OF INTEREST. Certain members of CCI's
management and the CCI Board have interests in the Merger in addition to their
interests solely as CCI Stockholders. See "SPECIAL FACTORS -- Certain
Transactions; Conflicts of Interest."
CERTAIN CONSIDERATIONS WITH RESPECT TO THE MERGER AND OPERATIONS AFTER THE
MERGER. For a discussion of certain factors that should be considered by CCI
Stockholders in deciding whether to approve and adopt the 1996 Merger Agreement,
See "RISK FACTORS" and "CERTAIN CONSIDERATIONS WITH RESPECT TO THE MERGER AND
OPERATIONS AFTER THE MERGER."
21
<PAGE> 25
APPRAISAL RIGHTS. A CCI Stockholder who makes the demand as described
below with respect to such shares, who continuously is the record holder of such
shares through the Effective Time, who otherwise complies with the statutory
requirements of Section 262 of the Delaware General Corporation Law (the "DGCL")
and who neither votes in favor of the 1996 Merger Agreement nor consents thereto
in writing will be entitled to an appraisal by the Delaware Court of Chancery
(the "Delaware Court") of the fair value of its shares of CCI Stock. CCI
Stockholders who desire to exercise their appraisal rights must not vote in
favor of the 1996 Merger Agreement or the Merger and must deliver a separate
written demand for appraisal to CCI prior to the vote by the CCI Stockholders on
the 1996 Merger Agreement and the transactions contemplated thereby, including
the Merger. A CCI Stockholder who signs and returns a proxy card without
expressly directing by checking the applicable boxes that its shares of CCI
Stock be voted against the proposal or that an abstention be registered with
respect to its shares of CCI Stock in connection with the proposal will
effectively have thereby waived its appraisal rights as to those shares of CCI
Stock because, in the absence of express contrary instructions, such shares of
CCI Stock will be voted in favor of the proposal. See "THE MEETING -- Voting and
Revocation of Proxies." Accordingly, a CCI Stockholder who desires to perfect
appraisal rights with respect to any of its shares of CCI Stock must, as one of
the procedural steps involved in such perfection, either (i) refrain from
executing and returning the enclosed proxy card and from voting in person in
favor of the proposal to approve the 1996 Merger Agreement, or (ii) check either
the "Against" or the "Abstain" box next to the proposal on such card or
affirmatively vote in person against the proposal or register in person an
abstention with respect thereto. A demand for appraisal must be executed by or
on behalf of the CCI Stockholder of record and must reasonably inform CCI of the
identity of the CCI Stockholder of record and that such record CCI Stockholder
intends thereby to demand appraisal of the CCI Stock. See "SPECIAL
FACTORS -- Dissenting Stockholders' Rights of Appraisal" and "Annex B -- Section
262 of the Delaware General Corporation Law."
LITIGATION RELATED TO THE MERGER
Eight purported class action lawsuits have been filed against CCI, AirTouch
and CCI's directors in connection with the Merger alleging, among other things,
that the consideration to be paid to the holders of CCI Stock under the 1996
Merger Agreement is inadequate. On July 10, 1996, the parties to the litigation
entered into a Memorandum of Understanding that contemplates the settlement of
the lawsuits, which settlement remains subject to approval of the Delaware
Court. See "OTHER MATTERS -- Certain Litigation Related to the Merger."
REDEMPTION OF CCI RIGHTS
The 1996 Merger Agreement provides that CCI will redeem the CCI Rights for
$.01 in value per CCI Common Equivalent Share prior to the Effective Time. Of
the Per Share Cash Consideration and Per Share Unit Consideration to be received
by holders of CCI Stock, $.01 in value per CCI Common Stock Equivalent Share
shall be in payment for the redemption of the CCI Right. There will be no
separate payment in respect of the CCI Rights Redemption. The CCI Rights
Agreement requires such a redemption to be approved by the CCI Stockholders (as
discussed below). Approval and adoption of the 1996 Merger Agreement and the
transactions contemplated thereby, including the Merger, is contingent upon
approval of the CCI Rights Redemption, and approval of the CCI Rights Redemption
is contingent upon approval of the 1996 Merger Agreement.
The CCI Rights Agreement was adopted to help ensure that the purpose and
integrity of the Original Transactions were maintained. Upon the acquisition of
beneficial ownership of 15% or more of the outstanding CCI Common Stock and CCI
Redeemable Preferred Stock (taken as a whole) by a person other than AirTouch
(an "Acquiring Person"), the CCI Rights Agreement would be triggered, providing
discount purchase rights to certain CCI stockholders other than the Acquiring
Person and certain transferees. The effect of the CCI Rights Agreement may be to
inhibit, prior to the end of the Appraisal Process, a change in control of CCI
except as part of the Merger or the Original Transactions.
The CCI Rights Agreement provides that one CCI Right will be attached to
each share of CCI Common Stock and CCI Redeemable Preferred Stock issued on or
after the date of the 1991 Merger, including shares
22
<PAGE> 26
of CCI Common Stock issued in connection with the conversion of the CCI Series A
Preference Stock and the CCI Convertible Notes.
Under the terms of the CCI Rights Agreement, all but not less than all of
the outstanding CCI Rights may be redeemed with the approval of the holders of a
majority of the then outstanding shares of CCI Common Stock and CCI Redeemable
Preferred Stock not beneficially owned by AirTouch voting as a single class and
the consent of AirTouch.
Each CCI Right entitles the registered holder thereof to purchase from CCI
at any time following a CCI Rights Distribution Date and prior to the earlier of
July 31, 2001 and the close of business on the day immediately preceding the
Final Redemption Date, one one-hundredth of a share of CCI's Series D Junior
Participating Preference Stock, par value $1.00 per share ("CCI Series D
Preference Stock"), at a purchase price per each one one-hundredth of a share of
$175.00, subject to adjustment. At the close of business on the day preceding
the Final Redemption Date, each share of Series D Preference Stock is
automatically converted into one hundred shares of CCI Series A Common Stock.
See "REDEMPTION OF THE CCI RIGHTS."
MARKET PRICE AND DIVIDEND DATA
AirTouch Common Stock is listed for trading on the NYSE and on the Pacific
Stock Exchange. AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock have been authorized for listing on the NYSE, subject to official notice
of issuance, under the symbols "ATIB" and "ATIC," respectively, but no market
for such securities currently exists. CCI Series A Common Stock is listed on the
Nasdaq National Market ("Nasdaq") and the Chicago Stock Exchange. There is
currently no established trading market for CCI Series C Common Stock, CCI
Redeemable Preferred Stock, CCI Class A Preference Stock or CCI Series B
Preference Stock.
The following table sets forth, for the periods indicated, the range of
high and low last reported sales prices per share for AirTouch Common Stock as
reported on the NYSE composite transactions tape and for CCI Series A Common
Stock as reported on Nasdaq. Neither AirTouch nor CCI pays a dividend with
respect to its shares of common stock.
<TABLE>
<CAPTION>
AIRTOUCH CCI
-------------- --------------
HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
1994
First Quarter............................................. 25 3/4 20 3/8 48 1/4 43 3/4
Second Quarter............................................ 26 3/4 19 7/8 48 44 1/4
Third Quarter............................................. 29 3/8 23 3/8 54 1/4 47 5/8
Fourth Quarter............................................ 30 5/8 25 7/8 55 3/4 49 1/8
1995
First Quarter............................................. 30 25 7/8 52 3/4 46 3/4
Second Quarter............................................ 29 1/4 23 7/8 48 5/8 44 7/8
Third Quarter............................................. 35 5/8 28 1/4 54 3/4 45 1/4
Fourth Quarter............................................ 32 1/4 26 1/4 54 1/2 47
1996
First Quarter............................................. 33 5/8 25 5/8 51 3/4 48 3/4
Second Quarter............................................ 32 7/8 28 1/8 53 3/4 51
Third Quarter (through July 16, 1996)..................... 28 1/2 26 3/8 53 1/8 51
</TABLE>
23
<PAGE> 27
The following table sets forth the last reported sales prices per share of
AirTouch Common Stock and CCI Series A Common Stock, reported as described
above, on April 4, 1996, the last trading day before the announcement of the
1996 Merger Agreement, and on July 16, 1996, the latest practicable trading day
before the printing of this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
APRIL 4, 1996 JULY 16, 1996
------------- -------------
<S> <C> <C>
CCI................................................. $51 3/16 $51
AirTouch............................................ 29 5/8 26 3/8
</TABLE>
On the Record Date, there were approximately 664,753 holders of record of
AirTouch Common Stock. On the Record Date, there were approximately 75 holders
of record of CCI Series A Common Stock, one holder of record of CCI Series C
Common Stock, 508 holders of record of CCI Redeemable Preferred Stock, one
holder of record of CCI Class A Preference Stock and 8 holders of record of CCI
Series B Preference Stock.
CCI STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR AIRTOUCH
COMMON STOCK AND CCI SERIES A COMMON STOCK IN CONNECTION WITH VOTING THEIR
SHARES AND MAKING ELECTIONS TO RECEIVE CASH OR UNITS DURING THE ELECTION PERIOD.
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth (i) consolidated and proportionate
historical selected financial data for the periods and as of the dates indicated
for AirTouch and its consolidated subsidiaries, (ii) consolidated historical
selected financial data for the periods and as of the dates indicated for CCI
and its consolidated subsidiaries and (iii) selected pro forma combined
financial data for the periods and as of the date indicated, giving effect to
(a) the Merger and other Merger-related adjustments and (b) Phase II of the
AirTouch/ U S WEST joint venture as if the Merger and Phase II had been
consummated at the beginning of each period for income statement information and
on March 31, 1996 for balance sheet information as described in the explanatory
notes to the Pro Forma Condensed Combined Financial Statements (the "Pro Forma
Statements"). See "PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
The following information should be read in conjunction with and is
qualified in its entirety by, the consolidated financial statements and
accompanying notes of AirTouch and CCI included in the documents described under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," the Consolidated Financial
Statements of U S WEST NewVector Group attached hereto as Annex H and the Pro
Forma Financial Statements and accompanying discussion and explanatory notes set
forth under "PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
24
<PAGE> 28
AIRTOUCH CONSOLIDATED AND PROPORTIONATE HISTORICAL
SELECTED FINANCIAL DATA
SELECTED HISTORICAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(2) 1992 1991(3)
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating revenues(4)................ $ 448.9 $ 373.9 $1,618.6 $1,246.9 $1,057.7 $ 880.2 $ 781.1
Operating income..................... $ 49.3 $ 54.0 $ 112.8 $ 72.6 $ 128.2 $ 95.9 $ 136.6
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic........................... $ 56.1 $ 35.4 $ 188.2 $ 125.4 $ 70.4 $ 41.1 $ 15.5
International...................... $ (7.1) $ (6.4) $ (35.9) $ (14.7) $ (37.5) $ (38.5) $ (21.4)
Interest:
Income............................. $ 4.5 $ 12.1 $ 34.9 $ 54.7 $ 12.0 $ 13.3 $ 13.8
Expense............................ $ (8.4) $ (3.9) $ (13.0) $ (10.3) $ (22.1) $ (52.9) $ (37.6)
Income (loss) before cumulative
effect of accounting change........ $ 52.2 $ 35.3 $ 131.9 $ 98.1 $ 40.1 $ (10.1) $ 43.1
Per share data:
Income (loss) before cumulative
effect of accounting change...... $ 0.10 $ 0.07 $ 0.27 $ 0.20 $ 0.09 $ (0.02) $ 0.10
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(2) 1992 1991(3)
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investments in unconsolidated
wireless systems................... $3,201.7 $2,002.1 $3,076.3 $1,697.9 $1,154.5 $ 935.4 $ 676.6
Total assets......................... $5,786.4 $4,465.4 $5,647.9 $4,488.0 $4,076.7 $2,371.1 $1,900.1
Long-term obligations(5)............. $1,076.6 $ 140.0 $ 906.4 $ 130.1 $ 78.9 $ 257.3 $ 276.0
Total stockholders' equity........... $3,812.3 $3,526.6 $3,750.7 $3,459.6 $3,337.3 $ 752.1 $ 635.2
Working capital (deficit)............ $ (51.6) $ 539.2 $ 18.5 $ 736.5 $1,346.8 $ (698.4) $ (426.3)
Capital expenditures, excluding
acquisitions and capital
calls(6)........................... $ 80.5 $ 95.5 $ 530.3 $ 408.7 $ 225.9 $ 231.0 $ 230.2
</TABLE>
- ---------------
(1) Prior to April 1, 1994, AirTouch was an 86.1% owned subsidiary of Telesis.
On April 1, 1994, AirTouch was spun off from Telesis.
(2) In December 1993, AirTouch completed a public offering of 68,500,000 shares
of newly issued AirTouch Common Stock for proceeds of $1,489.2 million.
Prior to such offering, AirTouch was a wholly owned subsidiary of Telesis.
In September 1993, AirTouch consummated a joint venture ("CMT Partners")
with AT&T Wireless, formerly McCaw Cellular Communications, Inc., and
contributed cellular assets with a net book value totaling $206.0 million.
The formation of CMT Partners resulted in a reduction in the individual
asset, liability, and income statement accounts of AirTouch's Consolidated
Financial Statements, and the reporting instead of income and expense
attributable to CMT Partners in the line item entitled "Equity in net income
(loss) of unconsolidated wireless systems: Domestic." See Note E,
"Investments in Unconsolidated Wireless Systems," to the Consolidated
Financial Statements included in AirTouch's 1995 Annual Report on Form 10-K,
as amended, incorporated herein by reference, for further information.
(3) In 1991, AirTouch and CCI formed New Par. The formation of New Par resulted
in a reduction in the individual asset, liability, and income statement
accounts of AirTouch's Consolidated Financial Statements, and the reporting
25
<PAGE> 29
instead of income and expense attributable to New Par in the line item
entitled "Equity in net income (loss) of unconsolidated wireless systems:
Domestic." See Note E, "Investments in Unconsolidated Wireless Systems," to
the Consolidated Financial Statements included in AirTouch's 1995 Annual
Report on Form 10-K, as amended, incorporated herein by reference, for
further information.
(4) Presentation for 1994 has been restated to conform to the presentation for
the subsequent period. See Note A, "Summary of Significant Accounting
Policies -- Basis of Presentation," to the Consolidated Financial
Statements included in AirTouch's 1995 Annual Report on Form 10-K, as
amended, incorporated herein by reference for further information.
(5) Includes the current portion of long-term debt.
(6) For the quarters ended March 31 and years ended December 31, as applicable.
SELECTED PROPORTIONATE DATA
The following table is not required by generally accepted accounting
principles ("GAAP") and is not intended to replace the AirTouch Consolidated
Financial Statements prepared in accordance with GAAP. It is presented to
provide supplemental data. Because significant assets of AirTouch are not
consolidated and because of the substantial effect of the formation of certain
joint ventures on the year-to-year comparability of AirTouch's consolidated
financial results, AirTouch believes that proportionate financial and operating
data facilitates the understanding and assessment of its Consolidated Financial
Statements.
Under GAAP, AirTouch consolidates the entities in which it has a
controlling interest and uses the equity method to account for entities over
which AirTouch has significant influence but does not have a controlling
interest. In contrast, proportionate accounting reflects AirTouch's relative
ownership interests in operating revenues and expenses for both its consolidated
and equity method entities. For example, domestic cellular proportionate results
present AirTouch's share -- its percentage ownership -- for all significant
domestic cellular operations, including those joint ventures and partnerships
where AirTouch does not own more than 50%. Similarly, total proportionate
results show AirTouch's share of all its significant worldwide operations.
TOTAL COMPANY(1)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH
31, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
PROPORTIONATE OPERATING RESULTS
Total net operating
revenues......................... $ 801.4 $ 562.8 $2,605.2 $1,791.8 $1,226.1 $ 873.2 $ 687.0
Total operating income............. $ 113.0 $ 86.4 $ 296.7 $ 171.5 $ 97.6 $ 11.3 $ 98.8
Total operating cash flow(2)....... $ 244.8 $ 182.0 $ 702.3 $ 506.1 $ 351.5 $ 191.5 $ 223.9
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PROPORTIONATE OPERATING DATA
Total cellular POPS(3)............. 165,002 113,365 164,908 99,508 75,290 69,468 57,551
Total cellular subscribers......... 3,347 2,109 3,059 1,948 1,206 779 558
Cellular subscriber net adds in
period, excluding acquisitions... 288 160 974 713 409 221 140
Total paging units in
service.......................... 2,614 1,760 2,474 1,647 1,269 899 669
Paging units in service net adds in
period, excluding acquisitions... 147 113 477 378 348 230 136
</TABLE>
26
<PAGE> 30
PROPORTIONATE CELLULAR
OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC CELLULAR OPERATING RESULTS
Service and other revenues......... $ 434.1 $ 343.5 $1,523.3 $1,160.1 $ 892.0 $ 699.4 $ 564.6
Equipment sales.................... 18.7 22.8 78.9 74.6 40.2 24.8 19.3
Cost of equipment sales............ (39.3) (31.3) (125.6) (82.0) (42.2) (23.9) (18.4)
-------- -------- -------- -------- --------
Net operating revenues............. 413.5 335.0 1,476.6 1,152.7 890.0 700.3 565.5
-------- -------- -------- -------- --------
Cost of revenues................... 49.4 43.1 188.4 136.5 116.3 98.7 80.0
Selling and customer
operations(4).................... 143.6 113.7 544.0 415.2 297.2 -- --
General, administrative, and other
expenses(4)...................... 33.8 28.9 139.0 122.0 96.9 322.5 238.6
Depreciation and amortization
expenses......................... 58.9 45.3 189.2 185.7 164.7 124.1 93.7
-------- -------- -------- -------- --------
Total operating expenses........... 285.7 231.0 1,060.6 859.4 675.1 545.3 412.3
-------- -------- -------- -------- --------
Operating income................... $ 127.8 $ 104.0 $ 416.0 $ 293.3 $ 214.9 $ 155.0 $ 153.2
======== ======== ======== ======== ========
Operating cash flow(2)............. $ 186.7 $ 149.3 $ 605.2 $ 479.0 $ 379.6 $ 279.1 $ 246.9
Operating cash flow margin(5)...... 45.2% 44.6% 41.0% 41.6% 42.7% 39.9% 43.7%
Capital expenditures, excluding
acquisitions..................... $ 55.8 $ 63.0 $ 475.0 $ 296.7 $ 198.4 $ 199.8 $ 159.6
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC CELLULAR OPERATING DATA
Total POPS(3)....................... 37,798 35,390 37,739 35,390 34,889 34,121 32,560
Subscribers......................... 2,392 1,664 2,262 1,560 1,046 744 558
Subscriber net adds in period,
excluding acquisitions............ 130 104 591 514 286 186 140
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH
31, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL CELLULAR OPERATING
RESULTS
Existing operations(6):
Net operating revenues............ $ 303.8 $ 160.3 $ 841.0 $ 352.8 $ 88.3 -- --
Operating income (loss)........... $ 25.6 $ 10.4 $ 62.7 $ 10.0 $ (17.3) -- --
Operating cash flow(2)............ $ 76.3 $ 43.9 $ 203.7 $ 87.4 $ 6.5 -- --
Income (loss)..................... $ 4.7 $ (1.4) $ (0.5) $ (13.2) $ (18.9) -- --
Start-up systems(7):
Income (loss)..................... $ (19.7) $ (10.2) $ (51.6) $ (26.1) $ (20.9) -- --
Total income (loss)................. $ (15.0) $ (11.6) $ (52.1) $ (39.3) $ (39.8) -- --
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL CELLULAR OPERATING DATA
Total POPS(3)........................ 112,904 64,675 112,869 64,118 40,401 35,347 24,991
Subscribers.......................... 955 445 797 388 160 35 --
Subscriber net adds in period,
excluding acquisitions............. 158 56 383 199 123 35 --
</TABLE>
DOMESTIC PAGING OPERATIONS(8)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH
31, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
PAGING OPERATING RESULTS
Service and other revenues.......... $ 69.0 $ 50.9 $ 219.4 $ 183.5 $ 145.7 $ 113.5 $ 92.6
Equipment sales..................... 12.9 11.3 45.5 43.4 35.2 22.2 9.7
Cost of equipment sales............. (11.4) (9.7) (39.5) (38.0) (31.9) (19.2) (7.4)
-------- -------- -------- -------- --------
Net operating revenues.............. 70.5 52.5 225.4 188.9 149.0 116.5 94.9
-------- -------- -------- -------- --------
Total operating expenses before
depreciation and amortization..... 49.0 35.6 150.8 122.5 98.7 74.0 56.2
Depreciation and amortization
expenses.......................... 14.7 9.7 42.8 36.8 30.6 26.3 23.4
-------- -------- -------- -------- --------
Operating income.................... $ 6.8 $ 7.2 $ 31.8 $ 29.6 $ 19.7 $ 16.2 $ 15.3
======== ======== ======== ======== ========
Operating cash flow(2).............. $ 21.5 $ 16.9 $ 74.6 $ 66.4 $ 50.3 $ 42.5 $ 38.7
Operating cash flow margin.......... 30.5% 32.2% 33.1% 35.2% 33.8% 36.5% 40.8%
Capital expenditures, excluding
acquisitions...................... $ 27.2 $ 13.3 $ 72.0 $ 61.3 $ 53.4 $ 42.9 $ 34.8
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PAGING OPERATING DATA
Units in service..................... 2,468 1,634 2,338 1,525 1,167 821 601
Units in service net adds in period,
excluding acquisitions............. 131 109 463 358 324 220 127
</TABLE>
- ---------------
(1) Reflects results, total subscribers of all cellular systems, and total units
in service of all paging systems in which AirTouch owns an interest,
multiplied by AirTouch's ownership interest, exclusive of cost-based
investments and certain equity-based investments that are not material to
AirTouch's Consolidated Financial Statements taken as a whole.
(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
AirTouch's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents AirTouch's ownership interests in the respective
entities' operating cash flows. As such, proportionate operating cash flow
does not represent cash available to AirTouch.
(3) POPS are the estimated market population multiplied by AirTouch'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 AirTouch cellular POPS included personal communications services
("PCS") POPS of 14,300 at December 31, 1995 and March 31, 1996 and 13,300
PCS POPS at March 31, 1995; international cellular POPS (and therefore total
AirTouch cellular POPS) included 36,943 POPS at December 31, 1995 for
recently formed ventures in India and 7,469 and 7,491 POPS at December 31,
1995 and March 31, 1996, respectively, for Poland where AirTouch's
consortium was awarded a national cellular license in February 1996.
(4) For periods prior to 1993, selling and customer operations expenses were
reported on a combined basis with general, administrative, and other
expenses.
28
<PAGE> 32
(5) If net losses on equipment sales were reclassified as operating expenses,
operating cash flow margins would be 43.0% and 43.5% for the three months
ended March 31, 1996 and 1995, respectively, and 39.7%, 41.3%, 42.6%, 39.9%
and 43.7% for the years 1995, 1994, 1993, 1992 and 1991, respectively.
(6) Represents AirTouch's share of income or loss (after foreign taxes where
applicable) for international cellular systems which have completed 12
months of commercial service, as follows:
<TABLE>
<S> <C>
1st Quarter 1996 and 1995: Germany, Portugal, Sweden, Belgium, and Japan
1995: Germany, Portugal, Sweden, Belgium, and Japan
1994: Germany, Portugal, Sweden, and Belgium (6 months)
1993: Germany (6 months), Portugal (3 months), and Sweden (3 months)
</TABLE>
(7) Effective January 1, 1996, start-up systems represent AirTouch's share of
income or loss (after foreign taxes where applicable) for international
cellular systems which did not provide commercial service for the full 12
months of any preceding calendar year, as follows:
1st Quarter 1996: Italy, South Korea, Spain, India, and Poland
Prior to January 1, 1996, start-up systems represent AirTouch's share of
income or loss (after foreign taxes where applicable) for international
cellular systems which have not yet completed 12 months of commercial
service, as follows:
<TABLE>
<S> <C>
1st Quarter 1995: Italy, South Korea, and Spain
1995: Italy, South Korea, Spain, and India (4 months)
1994: Japan, Italy (3 months), and South Korea (3 months)
1993: Japan, Germany (6 months), and Portugal (9 months)
</TABLE>
(8) Domestic paging is wholly owned by AirTouch; therefore, proportionate
information reflects 100% of the subsidiary's GAAP-basis operating results.
29
<PAGE> 33
CCI CONSOLIDATED HISTORICAL SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1996 1995 1995(1) 1994 1993(2) 1992(3) 1991(4)
------- ------- ------- ------ ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Equity in net income of joint venture.......... $ 29.8 $ 18.9 $101.3 $ 59.0 $47.7 $ 37.9 $ 92.1
Income (loss) before extraordinary item and
cumulative effect of accounting change....... $(27.2) $ 7.3 $ 57.9 $ 17.7 $11.9 $ (1.9) $ (22.3)
Net income (loss).............................. $(27.2) $ 7.3 $ 53.4 $ 17.7 $19.9 $ 0.8 $ (24.7)
Income (loss) before extraordinary item and
cumulative effect of accounting change per
common share................................. $(0.65) $ 0.16 $ 1.30 $ 0.40 $0.27 $(0.09) $ (0.56)
Net income (loss) per common share............. $(0.65) $ 0.16 $ 1.20 $ 0.40 $0.45 $(0.03) $ (0.62)
Weighted average number of common shares....... 41.8 44.7 44.6 44.7 44.3 42.2 40.7
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $693.8 $628.1 $650.9 $613.6 $574.8 $547.1 $ 521.4
Long-term debt and redeemable preferred
stock........................................ $358.7 $295.5 $355.6 $347.8 $346.5 $369.0 $ 229.5
Shareholders' equity........................... $289.6 $248.4 $256.3 $238.3 $209.0 $167.6 $ 278.4
</TABLE>
- ---------------
(1) 1995 includes a gain on sale of subsidiary of $10.5 million, net of tax of
$5.6 million ($0.23 per common share) and a charge of $4.5 million, net of
income tax benefit of $2.4 million, from the early extinguishment of debt
($0.10 per common share).
(2) 1993 includes an $8.0 million increase in net income for the cumulative
effect of a change in accounting for income taxes ($0.18 per common share).
(3) 1992 includes the results of operations of CCPR through February 28, 1992.
(4) 1991 includes the results of operations of CCI's cellular interests in Ohio
through July 31, 1991 and CCI's equity in net income of New Par from August
1, 1991 to December 31, 1991, and the results of operations of CCII and OCOM
Corporation (now ICTL) through July 31, 1991.
CCI did not declare or pay any cash dividends during the years indicated.
30
<PAGE> 34
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited Pro Forma Combined Statement of Income Data for the
three months ended March 31, 1996 and the year ended December 31, 1995, presents
the pro forma combined results of operations of (1) AirTouch and CCI as if the
Merger had been effective at the beginning of each period after giving effect to
the purchase method of accounting and other Merger-related adjustments and (2)
Phase II of the AirTouch/U S WEST joint venture as if Phase II had been
effective at the beginning of each period. The following unaudited Pro Forma
Combined Balance Sheet Data as of March 31, 1996 combines (1) the historical
consolidated balance sheets of AirTouch and subsidiaries and CCI and
subsidiaries as if the Merger had been effective on March 31, 1996 and after
giving effect to the purchase method of accounting and other Merger-related
adjustments and (2) Phase II of the AirTouch/U S WEST joint venture, assuming
Phase II occurred on March 31, 1996, and (A) all of the domestic cellular
interests owned by each of AirTouch and U S WEST, including those subject to
regulatory and other approvals, were contributed at such time to the joint
venture, and (B) U S WEST did not cause the contribution of the AirTouch/U S
WEST PCS partnership to this joint venture at such time. See "PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS."
The unaudited Pro Forma Combined Financial Data set forth below
(collectively "Data") reflects the application of the purchase method of
accounting for the Merger. Under the purchase method of accounting, the purchase
price will be allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the Effective Time. Estimates of the fair values
of CCI and subsidiaries' assets and liabilities have been combined with recorded
values of the assets and liabilities of AirTouch. However, changes to
adjustments included in the Data are expected as valuations/appraisals of assets
and liabilities are completed, and additional information becomes available.
Although AirTouch cannot ascertain what these changes would be, such changes
could be material. In addition, the results of operations of CCI subsequent to
March 31, 1996 will affect allocation of the purchase price. Accordingly, actual
amounts will differ from those set forth in the Data.
This Data should be read in conjunction with and is qualified in its
entirety by the consolidated financial statements and accompanying notes of
AirTouch and CCI included in the documents described under "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE," the consolidated financial statements of U S
WEST NewVector Group attached hereto as Annex H and the Pro Forma Statements and
accompanying discussion and explanatory notes set forth under "PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS." This Data is intended for
informational purposes only and is not necessarily indicative of the financial
position or the results of operations of the combined company that would have
occurred had the Merger been in effect as of the date presented or had Phase II
of the AirTouch/U S WEST joint venture been consummated as of the date
presented.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, 1996 DECEMBER 31, 1995
----------------------------- -----------------------------
PRO FORMA PRO FORMA
PRO FORMA CCI MERGER PRO FORMA CCI MERGER
CCI MERGER AND PHASE II CCI MERGER AND PHASE II
---------- ------------ ---------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Operating revenues........................ $626.4 $127.4 $2,278.9 $ 429.9
Operating income (loss)................... $ 81.0 $(33.6) $ 194.9 $ (192.9)
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic................................ $ 21.8 $118.7 $ 82.4 $ 394.9
International........................... $ (7.1) $ (7.1) $ (35.9) $ (35.9)
Interest:
Income.................................. $ 8.8 $ 3.3 $ 58.8 $ 37.7
Expense................................. $(22.2) $(22.4) $ (108.6) $ (103.4)
Income before extraordinary item.......... $ 37.7 $ 32.9 $ 69.6 $ 45.9
Per share data:
Income (loss) before extraordinary item
per share............................... $ 0.05 $ 0.04 $ 0.03 $ (0.02)
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
PRO FORMA
PRO FORMA CCI MERGER
CCI MERGER AND PHASE II
---------- ------------
(DOLLARS IN MILLIONS)
---------------------------
<S> <C> <C>
COMBINED BALANCE SHEET DATA:(1)
Investments in unconsolidated wireless systems.............................. $1,856.5 $6,814.2
Total assets................................................................ $8,562.8 $8,128.5
Long-term obligations(2).................................................... $1,761.9 $1,760.5
Total stockholders' equity.................................................. $4,892.3 $4,892.3
Working capital............................................................. $ 107.7 $ 2.3
</TABLE>
- ---------------
(1) Pro Forma Balance Sheet Data as of March 31, 1996 combines (1) the
historical consolidated balance sheet data of AirTouch and subsidiaries and
CCI and subsidiaries as if the Merger had been effective as of that date and
after giving effect to the purchase method of accounting and other
Merger-related adjustments and (2) Phase II of the AirTouch/US WEST joint
venture described elsewhere in this Proxy Statement/Prospectus, assuming
Phase II occurred on that date.
(2) Includes current portion of long-term debt of $76.4 million at March 31,
1996.
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
Set forth below are comparative historical and pro forma per share data.
These data should be read in conjunction with the AirTouch and CCI audited
consolidated financial statements, including the accompanying notes, which are
incorporated by reference in this Proxy Statement-Prospectus. The data should
also be read in conjunction with the Pro Forma Condensed Combined Financial
Statements, including the explanatory notes thereto, included elsewhere in this
Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
AIRTOUCH CCI
------------------------------------- --------------------------------------
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED DECEMBER ENDED MARCH YEAR ENDED DECEMBER
MARCH 31, 31, 31, 31,
------------- --------------------- -------------- ---------------------
1996 1995 1995 1994 1993 1996 1995 1995 1994 1993
----- ----- ----- ----- ----- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL(1)
Income (loss) per share before
cumulative effect of accounting
change and extraordinary item.... $0.10 $0.07 $0.27 $0.20 $0.09 $(0.65) $0.16 $1.30 $0.40 $0.27
Book value per share(2)............ $7.64 $7.14 $7.52 $7.01 $6.78 $ 6.93 $5.81 $6.13 $5.57 $4.89
Cash dividends per share(3)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
PRO FORMA PRO FORMA
PRO FORMA CCI MERGER PRO FORMA CCI MERGER
CCI MERGER AND PHASE II CCI MERGER AND PHASE II
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
PRO FORMA BEFORE CONVERSION(4)
Income (loss) per share before extraordinary item........ $ 0.05 $ 0.04 $ 0.03 $(0.02)
Book value per share(2).................................. $ 7.64 $ 7.64
Cash dividends per share(3)
PRO FORMA AFTER CONVERSION(5)
Income per share before extraordinary item
Minimum................................................ $ 0.07 $ 0.06 $ 0.13 $ 0.09
Maximum................................................ $ 0.07 $ 0.06 $ 0.14 $ 0.10
Book value per share(2)
Minimum................................................ $ 9.29 $ 9.29 $ 9.18 $ 9.18
Maximum................................................ $ 9.31 $ 9.31 $ 9.20 $ 9.20
EQUIVALENT PRO FORMA PER SHARE AMOUNTS(6)
Income per share before extraordinary item
Minimum................................................ $ 0.11 $ 0.09 $ 0.20 $ 0.13
Maximum................................................ $ 0.14 $ 0.12 $ 0.26 $ 0.18
Book value per share(2)
Minimum................................................ $13.63 $13.63 $13.47 $13.47
Maximum................................................ $17.68 $17.68 $17.48 $17.48
</TABLE>
- ---------------
(1) Historical income per share before cumulative effect of accounting change
and extraordinary item, book value per share and cash dividends per share
data of AirTouch and CCI.
(2) Book value per share is as of period end.
(3) Neither AirTouch nor CCI declared or paid dividends during the periods
indicated.
(4) Pro forma combined book value per share before conversion of the AirTouch
Class B Preferred Stock and AirTouch Class C Preferred Stock into shares of
AirTouch Common Stock, of (A) AirTouch and CCI as if the Merger had
32
<PAGE> 36
been effective on March 31, 1996 after giving effect to the purchase method
of accounting and other Merger-related adjustments and (B) Phase II of the
AirTouch/U S WEST joint venture as if Phase II had been effective on March
31, 1996; and pro forma combined cash dividends and income per share before
conversion of the AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock into shares of AirTouch Common Stock, of (A) AirTouch and
CCI as if the Merger had been effective at January 1, 1996 and January 1,
1995, after giving effect to the purchase method of accounting, and other
Merger-related adjustments, and (B) Phase II of the AirTouch/U S WEST joint
venture as if Phase II had been effective at these dates. These pro forma
amounts assume the consideration will be cash of $420 million and AirTouch
Class B Preferred Stock and AirTouch Class C Preferred Stock aggregating
$1,080 million. See Pro Forma Condensed Combined Financial Statements
included elsewhere in this Proxy Statement-Prospectus.
(5) Pro forma combined book value per share assuming conversion of AirTouch
Class B Preferred Stock and AirTouch Class C Preferred Stock into shares of
AirTouch Common Stock as described below of (A) AirTouch and CCI as if the
Merger had been effective on March 31, 1996 and December 31, 1995 after
giving effect to the purchase method of accounting and other Merger-related
adjustments and (B) Phase II of the AirTouch/U S WEST joint venture as if
Phase II had been effective on March 31, 1996 and December 31, 1995, both
assuming conversion under the minimum and maximum scenarios as described
below on the equivalent number of common shares associated with the
preferred stock to be issued in the Merger, and pro forma combined income
per share of (A) AirTouch and CCI as if the Merger had been effective at the
beginning of each period, after giving effect to the purchase method of
accounting, and other Merger-related adjustments, and (B) Phase II of the
AirTouch/U S WEST joint venture as if Phase II had been effective at the
beginning of each period, both assuming conversion under the minimum and
maximum scenarios as described below based on the equivalent number of
common shares associated with the preferred stock to be issued in the
Merger. For purposes of calculating these pro forma amounts, the minimum per
share calculation assumes 72% of CCI Common Equivalent Shares are converted
into the right to receive Units and the resultant consideration is $420
million of cash and $1,080 million of AirTouch Class B Preferred Stock and
AirTouch Class C Preferred Stock. The maximum per share calculation assumes
80% of CCI Common Equivalent Shares are converted into the right to receive
Units and the resultant consideration is $300 million of cash and $1,200
million of AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock. The calculation of pro forma book value and income per share amounts
assumes conversion of such preferred stock with a corresponding increase
($1,080 million for the minimum and $1,200 million for the maximum) to
combined book values and issuances of 27,521,000 common shares (minimum) and
39,600,000 common shares (maximum).
Pro forma book income (loss) before extraordinary item before conversion has
been increased by the pro forma preferred stock dividends of $13.7 million
and $54.7 million for the three months ended March 31, 1996 and the year
ended December 31, 1995, respectively, and divided by the pro forma common
shares outstanding for each period increased by the number of common shares
issued upon conversion using the minimum and maximum number of common
shares.
(6) Equivalent pro forma per share amounts are calculated by multiplying the pro
forma income per share before extraordinary item and the pro forma book
value per share data after conversion as described in (5) above by the
exchange ratio so that the per share amounts are equated to the respective
values for one CCI Common Equivalent Share. The exchange ratios used are
1.467 for the minimum and 1.900 for the maximum.
AIRTOUCH COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED CHARGES AND PREFERRED STOCK DIVIDENDS
The following tables set forth (1) the ratios of earnings to fixed charges
of AirTouch on an historical basis, (2) the ratio of earnings to combined fixed
charges and preferred stock dividends on a pro forma basis giving effect to the
Merger and (3) the ratio of earnings to combined fixed charges and preferred
stock dividends on a pro forma basis giving effect to the Merger and Phase II of
the AirTouch/US WEST joint venture for the periods indicated. For the purpose of
calculating these ratios, earnings consist of income before cumulative effect of
accounting change and income taxes and fixed charges included in pre-tax income,
adjusted for minority interests in the income of certain consolidated wireless
systems and equity in net losses and distributed net income of certain
less-than-fifty-percent-owned unconsolidated wireless systems. Fixed charges
include interest on indebtedness and the portion of rental expense
representative of the interest factor.
33
<PAGE> 37
AIRTOUCH
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Reported pre-tax income before cumulative
effect of accounting change.............. $ 93.6 $245.0 $206.4 $107.9 $ 14.4 $ 92.9
Add back:
Minority interests in the income of
consolidated wireless systems........ 8.5 36.5 16.3 46.4 45.5 45.2
Equity in net losses, net of income, of
less-than-fifty-percent-owned
unconsolidated wireless systems...... 2.7 28.2 11.2 29.8 30.4 14.4
Distributed income of
less-than-fifty-percent-owned
unconsolidated wireless systems...... -- 1.7 1.1 8.7 7.8 --
Fixed charges included in reported
pre-tax income....................... 13.3 32.6 24.5 34.5 64.3 46.8
------ ------ ------ ------ ------
Total............................. $118.1 $344.0 $259.5 $227.3 $162.4 $199.3
====== ====== ====== ====== ======
FIXED CHARGES
Total interest on debt..................... $ 17.3 $ 28.2 $ 10.7 $ 25.8 $ 56.5 $ 49.2
1/3 operating rental expense.............. 4.9 19.6 14.2 12.4 11.4 9.2
------ ------ ------ ------ ------
Total............................. $ 22.2 $ 47.8 $ 24.9 $ 38.2 $ 67.9 $ 58.4
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES......... 5.3 7.2 10.4 6.0 2.4 3.4
====== ====== ====== ====== ======
</TABLE>
During 1995, AirTouch obtained an unsecured $2 billion five-year revolving
credit facility, against which borrowings totaled $664.6 million at December 31,
1995 and $121.4 million at March 31, 1996. Separately, in March 1996, AirTouch
initiated a commercial paper program supported by this revolving credit
facility. Borrowings of $705.0 million were payable to holders of commercial
paper at March 31, 1996.
Prior to April 1, 1994, AirTouch was an 86.1% owned subsidiary of Telesis.
As a subsidiary of Telesis, AirTouch met its funding requirements primarily
through short-term borrowings and equity contributions from Telesis. During
1993, Telesis provided equity contributions of $1,179.8 million which AirTouch
used to significantly reduce its indebtedness to Telesis. AirTouch's
indebtedness to Telesis totaled $0.0 million, $0.3 million and $958.4 million at
December 31, 1994, 1993 and 1992, respectively.
34
<PAGE> 38
AIRTOUCH
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
PRO FORMA CCI MERGER(1)
<TABLE>
<CAPTION>
THREE MONTHS FOR THE
ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
PRO FORMA EARNINGS
Pre-tax income before extraordinary item...................... $ 77.8 $ 163.9
Add back:
Minority interests in the income of consolidated wireless
systems................................................ 8.7 37.4
Equity in net losses, net of income, of
less-than-fifty-percent-owned unconsolidated wireless
systems................................................ -- 26.3
Distributed income of less-than-fifty-percent-owned
unconsolidated wireless systems........................ -- 1.7
Fixed charges included in reported pre-tax income........ 27.5 129.5
-------------- -------
Total............................................... $114.0 $ 358.8
-------------- -------
PRO FORMA FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Total interest on debt........................................ $ 31.1 $ 123.8
1/3 operating rental expense................................. 5.3 20.9
Preferred stock dividends(2).................................. 28.2 128.7
-------------- -------
Total............................................... $ 64.6 $ 273.4
-------------- -------
PRO FORMA RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS................................... 1.8 1.3
=========== =============
</TABLE>
- ---------------
(1) Adjusted to reflect consummation of acquisition of CCI as described
elsewhere in this Proxy Statement-Prospectus.
(2) Pro forma preferred stock dividends of $13.7 million for the three months
ended March 31, 1996 and $54.7 million for the year ended December 31, 1995
have been increased to the amount of pro forma pre-tax earnings which would
be required to cover such dividends based on the effective income tax rate
for the periods presented.
35
<PAGE> 39
AIRTOUCH
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
PRO FORMA CCI MERGER AND PHASE II(1)
<TABLE>
<CAPTION>
THREE MONTHS FOR THE
ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
PRO FORMA EARNINGS
Pre-tax income before extraordinary item...................... $ 71.1 $ 129.2
Add back:
Minority interests in the income of consolidated wireless
systems................................................ (7.6) (19.9)
Equity in net losses, net of income, of
less-than-fifty-percent-owned unconsolidated wireless
systems................................................ 7.1 35.9
Distributed income of less-than-fifty-percent-owned
unconsolidated wireless systems........................ -- 1.7
Fixed charges included in reported pre-tax income........ 28.2 126.5
------- -------
Total............................................... $ 98.8 $ 273.4
------- -------
PRO FORMA FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Total interest on debt........................................ $ 31.3 $ 118.6
1/3 operating rental expense................................. 5.8 23.1
Preferred stock dividends(2).................................. 29.6 154.1
------- -------
Total............................................... $ 66.7 $ 295.8
------- -------
PRO FORMA RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS................................... 1.5 N/A(3)
=========== =============
</TABLE>
- ---------------
(1) Adjusted to reflect consummation of acquisition of CCI as described
elsewhere in this Proxy Statement-Prospectus and the consummation of Phase
II of AirTouch's transaction with US WEST as described elsewhere in this
Proxy Statement-Prospectus.
(2) Pro forma preferred stock dividends of $13.7 million for the three months
ended March 31, 1996 and $54.7 million for the year ended December 31, 1995
have been increased to the amount of pro forma pre-tax earnings which would
be required to cover such dividends based on the effective income tax rate
for the periods presented.
(3) Pro forma earnings do not cover pro forma combined fixed charges and
preferred stock dividends by $22.4 million.
36
<PAGE> 40
RISK FACTORS
The following factors, in addition to the other information contained
elsewhere herein, should be considered carefully in evaluating the Merger and
AirTouch and its business.
SECURITIES-RELATED RISKS
LESS OPPORTUNITY FOR PRICE APPRECIATION COMPARED TO AIRTOUCH COMMON
STOCK. Dividends will accrue on the shares of AirTouch Class B Preferred Stock
and AirTouch Class C Preferred Stock notwithstanding that dividends are not
currently paid on AirTouch Common Stock. However, the opportunity for price
appreciation in AirTouch Common Stock afforded by an investment in either
AirTouch Class B Preferred Stock or AirTouch Class C Preferred Stock is less
than the opportunity afforded by an investment in AirTouch Common Stock itself.
For AirTouch Class B Preferred Stock, this is because the value of the AirTouch
Common Stock received at maturity will only exceed the Preferred Stock Issue
Price if the Class B Maturity Price exceeds the Class B Conversion Price of
$35.96. Moreover, in the event that AirTouch Common Stock is trading at a price
that is above the Class B Conversion Price, holders of AirTouch Class B
Preferred Stock will only be entitled to receive upon exchange at maturity
approximately 80.6% of any appreciation of the value of AirTouch Common Stock in
excess of the Preferred Stock Issue Price. As a result, in the situations
described above, the value of any appreciation of AirTouch Common Stock between
the Preferred Stock Issue Price and the Class B Conversion Price will
effectively be retained by AirTouch. Holders of AirTouch Class B Preferred Stock
will realize the entire decline in price value if at the time of conversion the
market price of AirTouch Common Stock is less than the Preferred Stock Issue
Price.
For AirTouch Class C Preferred Stock, the opportunity for price
appreciation compared to AirTouch Common Stock is also limited because the
conversion ratio is set at a 25% premium over the Preferred Stock Issue Price.
Therefore, in the event of a conversion of AirTouch Class C Preferred Stock into
AirTouch Common Stock, the holder will not realize a full appreciation in the
price of AirTouch Common Stock. In addition, AirTouch may, at its option, under
certain circumstances, call AirTouch Class C Preferred Stock for redemption at
the Call Price and may be expected to do so prior to the redemption date if the
market price of AirTouch Common Stock exceeds an appreciation of 25% over the
Preferred Stock Issue Price. In such event, holders of AirTouch Class C
Preferred Stock may elect to convert into AirTouch Common Stock and realize only
the price appreciation over the Class C Conversion Price.
DIVIDEND RATES AND ISSUE PRICE; FLUCTUATIONS IN VALUE OF AIRTOUCH CLASS B
PREFERRED STOCK AND AIRTOUCH CLASS C PREFERRED STOCK. The dividend rates on
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock were
established by negotiation at the time of execution of the 1996 Merger Agreement
on April 5, 1996 taking into consideration prevailing interest rates and terms
of similar securities. The Preferred Stock Issue Price was established based on
the Volume-Weighted Average Trading Price for AirTouch Common Stock for the
15-trading-day period ending on the second day preceding the date on which this
Proxy Statement-Prospectus was first mailed to CCI Stockholders, but in no event
was it to be lower than $29 or higher than $35. Pursuant to the above formula,
the Preferred Stock Issue Price is $29. If at the Effective Time, the price of
AirTouch Common Stock is lower than the Preferred Stock Issue Price or
prevailing interest rates are higher than rates that were in effect on April 5,
1996 and depending on general market conditions, the combined market value of
AirTouch Preferred Stock, Series 1996 constituting the Unit received by holders
of CCI Stock who receive AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock upon consummation of the Merger may be less than $55.00 and
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock may
initially trade at a discount to the Preferred Stock Issue Price of AirTouch
Class B Preferred Stock or the Call Price of AirTouch Class C Preferred Stock.
The last reported sale price per share of AirTouch Common Stock on April 4, 1996
(the last trading day before the announcement of the 1996 Merger Agreement) was
$29 5/8. Since that date, the last reported sale price has ranged from $32 7/8
on May 22, 1996 to $26 3/8 on July 16, 1996 (the latest practicable date before
the printing of this Proxy Statement-Prospectus).
The market price of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock at any time will be affected by changes in the price of AirTouch
Common Stock, prevailing interest rates, terms of
37
<PAGE> 41
comparable securities and general market conditions. The terms of the AirTouch
Class B Preferred Stock do not fix the value of AirTouch Common Stock that a
holder of AirTouch Class B Preferred Stock will receive at the Class B Maturity
Date. Accordingly, there can be no assurance that the per share value of
AirTouch Common Stock received by holders of shares of AirTouch Class B
Preferred Stock at the Class B Maturity Date will not be less than the Preferred
Stock Issue Price due to market fluctuations in the price of AirTouch Common
Stock.
It is impossible to predict whether the price of AirTouch Common Stock will
rise or fall. Trading prices of AirTouch Common Stock will be influenced by
AirTouch's operating results and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the NYSE or Pacific Stock Exchange (on which AirTouch Common Stock
are listed) or the market segment of which AirTouch is a part.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET. It is not possible to
predict how AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock will trade in the secondary market or whether such market will be liquid
or illiquid. There is currently no secondary market for either AirTouch Class B
Preferred Stock or AirTouch Class C Preferred Stock. AirTouch Class B Preferred
Stock and AirTouch Class C Preferred Stock have been authorized for listing on
the NYSE subject to official notice of issuance.
EARNINGS DILUTION AS A RESULT OF THE MERGER. The payment by AirTouch of
the dividends that will be due to holders of AirTouch Preferred Stock, Series
1996, the amortization of the identifiable intangibles and goodwill associated
with the Merger, interest on debt issued or assumed in connection with the
Merger and other factors will materially reduce the earnings of AirTouch
available to holders of AirTouch Common Stock for at least the next several
years and therefore will have a material dilutive effect on AirTouch's earnings
per share. Assuming that the Merger and the MRO had both occurred on January 1,
1995, AirTouch's earnings per share for the year ended December 31, 1995 would
have been reduced from $0.27 per share to $0.03 per share on a pro forma basis.
In the event that the pending second phase of the AirTouch/US West joint venture
also were assumed to have commenced on January 1, 1995 and giving effect to
certain further assumptions regarding the operations contributed to the joint
venture, AirTouch's 1995 earnings per share would have been further reduced to
($0.02) per share on a pro forma basis. See "SUMMARY -- AirTouch Computation of
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends" and "PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
To the extent this reduction in earnings per share has a negative impact on
the market price of AirTouch Common Stock, the value of the conversion feature
of the AirTouch Preferred Stock, Series 1996 and thus the market value of those
securities, could be adversely affected.
TRANSACTION-RELATED RISK
POSSIBLE HIGHER APPRAISAL VALUE. If the Merger is not approved, the
Appraisal Process will commence in August 1996, unless deferred for six months
by CCI as a result of a calamitous or severe adverse economic condition in the
United States. There can be no assurance that holders of CCI Stock would not
obtain a value for their shares in the Appraisal Process that is higher than the
value of the Merger Consideration. The price that may be received by the holders
of CCI Stock for their shares as a result of the Appraisal Process has not yet
been determined. The holders of CCI Stock will have no right to approve or
reject such price once it is so determined, even if such price is lower than the
value of the Merger Consideration. See "SPECIAL FACTORS -- Background of the
Merger -- Appraisal Process" and "SPECIAL FACTORS -- Effects of a Failure to
Approve the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Merger by
AirTouch is conditioned upon receipt by AirTouch of the opinion of Pillsbury
Madison & Sutro LLP, counsel to AirTouch, and consummation of the Merger by CCI
is conditioned upon receipt by CCI of the opinion of Skadden, Arps, Slate,
Meagher & Flom, counsel to CCI, each dated the closing date and substantially to
the effect that, on the basis of facts, representations and assumptions set
forth or referred to in such opinions (including representations of AirTouch,
AirTouch Cellular, CCI and certain stockholders of CCI dated as of the closing
date), for federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of
38
<PAGE> 42
Section 368(a) of the Code. AirTouch does not intend to waive the condition that
it receive such opinion of Pillsbury Madison & Sutro LLP and CCI does not intend
to waive the condition that it receive such opinion of Skadden, Arps, Slate,
Meagher & Flom. If, however, AirTouch and CCI were to waive such conditions and
proceed on a basis in which the Merger fails to be treated for federal income
tax purposes as a reorganization under Section 368(a) of the Code, or if it is
ultimately determined that the Merger is taxable irrespective of the opinions of
counsel, then the Merger and the resulting exchange of CCI Stock for cash,
AirTouch Preferred Stock, Series 1996, or a combination thereof, as applicable,
would be treated for federal income tax purposes, in effect, as a taxable sale
of the CCI Stock by the holders of CCI Stock, CCI would recognize gain on the
difference between CCI's basis in its assets and the fair market value of its
assets and the Surviving Corporation would assume the tax liabilities of CCI as
a result of the gain recognized on the Merger. See "SPECIAL FACTORS--Certain
Federal Income Tax Consequences--Failure of Reorganization Treatment."
TAX ADJUSTMENT RISK. Under the 1996 Merger Agreement, if Pillsbury Madison
& Sutro LLP determines that the opinion of such firm described under "-- Certain
Federal Income Tax Consequences" above cannot be rendered as a result of the
Merger potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a), the number of CCI Common Equivalent Shares to be exchanged for
Units rather than cash will be increased to the extent necessary to achieve such
tax-free treatment, provided that AirTouch is not required to exchange Units for
in excess of 80% of the CCI Common Equivalent Shares outstanding immediately
prior to the Effective Time. See "SPECIAL FACTORS -- Adjustments to Preserve Tax
Status of Merger." No assurances can be given that certain matters, including
matters relating to holders of significant amounts of CCI Stock, will not
prevent Pillsbury Madison & Sutro LLP and Skadden, Arps, Slate, Meagher & Flom
from delivering their respective opinions in the event that Units were to be
exchanged for 80% or less of the CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time. Assuming that the amount of Units to be
exchanged were to be 80% or less, it is uncertain whether Pillsbury Madison &
Sutro LLP would be in a position to render the foregoing opinion absent certain
representations by AirTouch, AirTouch Cellular, CCI and certain stockholders of
CCI as of the closing date. Certain such stockholders are under no obligation to
make such representations and no assurance can be given that they will provide
adequate representations on or prior to the closing.
COMPANY-RELATED RISKS
COMPETITION. The sale of cellular and paging services in each of
AirTouch's markets 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
39
<PAGE> 43
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 regulation. 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 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 recently completed 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
40
<PAGE> 44
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 international and domestic system deployments,
AirTouch's 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 interests 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 auctions 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
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
41
<PAGE> 45
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 EMISSIONS 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.
42
<PAGE> 46
AIRTOUCH COMMUNICATIONS, INC.
AirTouch Communications, Inc. is one of the world's leading wireless
telecommunications companies, with significant cellular telecommunications
interests in the United States, Europe and Asia. AirTouch's proportionate
worldwide cellular and broadband PCS interests represented 164.9 million POPS
and more than 3 million customers at December 31, 1995. In the United States,
AirTouch has approximately 52 million proportionate cellular and broadband PCS
POPS. AirTouch controls or shares control over cellular systems in ten of the 30
largest domestic cellular markets, including Los Angeles, San Francisco, San
Diego, Detroit and Atlanta, and through PCS PrimeCo, shares control over 11
major PCS markets. Internationally, AirTouch had 112.9 million cellular POPS as
of December 31, 1995, and held significant ownership interests, with board
representation and substantial operating influence, in national cellular systems
operating in Germany, Japan, Portugal, Sweden, Belgium, Italy, Spain and Madras,
India, and in systems under construction in South Korea and Madhya Pradesh,
India. In February 1996, AirTouch's consortium was awarded one of two new
national cellular licenses in Poland. Based on industry surveys, AirTouch is
also among the largest providers of paging services in the United States, with
approximately 2.3 million units in service at December 31, 1995.
AirTouch's objective is to be the premier provider of wireless
telecommunications services worldwide. To achieve its objective, AirTouch seeks
to achieve scale and scope in its wireless operations in order to reduce costs
and gain greater efficiencies; pursues wireless licenses in new countries;
opportunistically increases ownership interests in existing wireless markets;
and pursues value-creating wireless opportunities around the world.
In response to the continuing evolution of telecommunications technology
and customer requirements, AirTouch is evaluating the possibility of expanding
its operations into lines of business beyond its historical base of high
mobility wireless services where such expansion would enhance existing wireless
services. Areas of possible expansion could include: wireless local loop (the
construction and operation of dedicated wireless networks designed to compete
directly with or substitute for wireline networks); international long distance
service for AirTouch's cellular subscribers; and international wireline long
distance services which complement AirTouch's wireless properties. Any decision
by AirTouch to enter any of these lines of business will depend on AirTouch's
evaluation of its ability to create value by employing the assets or expertise
of its wireless operations, including networks and customer bases, as well as
the standalone attractiveness of the opportunity.
AirTouch's principal executive offices are located at One California
Street, San Francisco, California 94111 (telephone (415) 658-2000)).
The following table sets forth certain information regarding AirTouch's
cellular and broadband PCS POPS and proportionate customers as of the dates
indicated.
<TABLE>
<CAPTION>
PROPORTIONATE
CUSTOMERS(2)
POPS(1) --------------
------------- (IN THOUSANDS)
(IN MILLIONS)
<S> <C> <C>
Domestic Cellular(3):
Southern California............................................. 15.8 *
San Francisco Bay Area.......................................... 3.1 *
Sacramento Valley............................................... 1.8 *
Michigan/Ohio(4)................................................ 11.2 *
Georgia and Kansas/Missouri..................................... 5.1 *
Other domestic interests........................................ .7
----- -----
Domestic Cellular Subtotal...................................... 37.7 2,392
----- -----
Domestic Broadband PCS.......................................... 14.3 --
----- -----
Domestic Total.......................................... 52.0 2,392
===== =====
</TABLE>
43
<PAGE> 47
<TABLE>
<CAPTION>
POPS(1) PROPORTIONATE
----- CUSTOMERS(2)
(IN MILLIONS) -----
(IN THOUSANDS)
<S> <C> <C>
International Cellular(5)
Belgium......................................................... 2.5 67
Germany......................................................... 28.4 572
India........................................................... 36.9 *
Italy........................................................... 6.8 14
Japan........................................................... 13.0 149
Poland.......................................................... 7.5 --
Portugal........................................................ 2.3 46
Sweden.......................................................... 4.5 95
South Korea..................................................... 4.8 --
Spain........................................................... 6.2 12
----- -----
International Total..................................... 112.9 955
----- -----
Worldwide Total......................................... 164.9 3,347
===== =====
</TABLE>
- ---------------
* Not disclosed.
(1) "POPS" means the population of a licensed market (based on population
estimates for such market) multiplied by AirTouch's ownership interest in a
licensee operating in such market as of the date specified. Includes
networks under construction and markets of certain cost-based investments
not included in proportionate financial results. POPS information is as of
December 31, 1995.
(2) Proportionate customer data is as of March 31, 1996 and does not include
customers to systems where AirTouch accounts for its investment on a cost
basis. For a list of such systems, see "Business -- Domestic Cellular" and
" -- International Cellular" in AirTouch's 1995 Annual Report on Form 10-K,
as amended, incorporated herein by reference. Proportionate data also
excludes information for certain equity-based investments that are not
material to AirTouch's operating results or financial condition taken as a
whole.
(3) Based on Strategic Mapping Inc. population estimates for 1995.
(4) POPS and proportionate customers for the Michigan/Ohio region reflect both
AirTouch's 50% interest in New Par and its ownership of approximately 37.6%
of the outstanding CCI Common Stock at December 31, 1995.
(5) Includes POPS for South Korea, Madhya Pradesh and certain regions of Japan,
where the systems have not yet commenced operations. Includes POPS for
Poland, where AirTouch's consortium was awarded a national cellular license
in February 1996.
For additional information relating to AirTouch and the combined company
that would result from the Merger, see "SPECIAL FACTORS," "CERTAIN
CONSIDERATIONS WITH RESPECT TO THE MERGER AND OPERATIONS AFTER THE MERGER" and
"PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
44
<PAGE> 48
CELLULAR COMMUNICATIONS, INC.
CCI is primarily a holding company that indirectly through its subsidiaries
holds a 50% interest in New Par, which owns and operates cellular telephone
systems that are located in Ohio and Michigan and in portions of Indiana and
Kentucky. As a result of the Original Transactions, CCI's predecessor was merged
into CCI Newco Sub, Inc., a former Delaware corporation and a wholly owned
subsidiary of CCI, and CCI's predecessor became a wholly owned subsidiary of
CCI. CCI is a Delaware corporation that was incorporated in Delaware on November
9, 1990. (CCI's predecessor was incorporated in Delaware on April 7, 1981.)
CCI's principal executive offices are located at 110 East 59th Street, New
York, New York, and its telephone number is (212) 906-8440.
CELLULAR TELEPHONE OWNERSHIP INTERESTS OF NEW PAR
<TABLE>
<CAPTION>
POPULATION APPROXIMATE
ESTIMATES(1) OWNERSHIP POPS(2)
--------- ----------- ----------
<S> <C> <C> <C>
Detroit, MI............................................. 4,602,090 100.00% 4,602,090
Cleveland, OH........................................... 1,842,474 100.00 1,842,474
Cincinnati, OH.......................................... 1,513,457 100.00 1,513,457
Columbus, OH............................................ 1,301,789 100.00 1,301,789
Dayton, OH.............................................. 851,750 100.00 851,750
Toledo, OH.............................................. 794,155 100.00 794,155
Grand Rapids, MI........................................ 734,501 100.00 734,501
Akron, OH............................................... 681,782 100.00 681,782
Flint, MI............................................... 506,318 100.00 506,318
Lansing, MI............................................. 498,597 100.00 498,597
Morrow, OH.............................................. 447,668 100.00 447,668
Canton, OH.............................................. 404,568 100.00 404,568
Saginaw, MI............................................. 402,929 100.00 402,929
Hamilton/Middletown, OH................................. 318,087 99.60 316,815
Lorain/Elyria, OH....................................... 280,539 100.00 280,539
Lima, OH................................................ 221,522 100.00 221,522
Mercer, OH.............................................. 223,619 100.00 223,619
Springfield, OH......................................... 185,899 89.23 165,878
Clinton, OH............................................. 172,773 100.00 172,773
Mansfield, OH........................................... 127,440 100.00 127,440
Ashtabula, OH........................................... 102,679 100.00 102,679
Muskegon, MI............................................ 187,884 38.91 73,106
Total Pops of the Joint Venture............... 16,266,449
----------
Total Pops of the Company in Ohio and Michigan
(50% of New Par)............................ 8,133,224(3)
=========
</TABLE>
- ---------------
(1) Based on 1996 Strategic Mapping, Inc. population estimates for the counties
comprising FCC defined licensed areas.
(2) A cellular system operator's "Pops" is a common technique for measuring the
relative size of different companies in the cellular telephone business.
Pops are defined as the estimated population of a market multiplied by the
ownership interest in the entity operating the cellular telephone system in
that market.
45
<PAGE> 49
The number of Pops owned by a cellular operator does not represent the
number of users of cellular service and is not necessarily indicative of the
number of potential subscribers. Rather, this term is used only as a basis
for comparison of the current size of cellular system operators.
(3) In addition, CCI directly owns .66% (1,230 Pops) of the Springfield, Ohio
market.
As of December 31, 1995, New Par's cellular telephone systems had an
aggregate of approximately 1,027,000 subscribers which represents a penetration
rate for New Par of approximately 6.3% (the number of subscribers divided by the
total estimated population of New Par's markets).
New Par also operates, on the basis of an interim operating license issued
by the FCC, the Ohio-2 and the Ohio-5 Rural Statistical Areas. This interim
license will expire when a permanent licensee is authorized by the FCC.
For additional information relating to CCI and the combined company that
would result from the Merger, see "SPECIAL FACTORS," "CERTAIN CONSIDERATIONS
WITH RESPECT TO THE MERGER AND OPERATIONS AFTER THE MERGER" and "PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS."
46
<PAGE> 50
THE MEETING
GENERAL
This Proxy Statement-Prospectus is being furnished to CCI Stockholders in
connection with the solicitation of proxies by the CCI Board for use at the
Meeting to vote on (i) the approval and adoption of the 1996 Merger Agreement
and the transactions contemplated thereby, including the Merger, (ii) the CCI
Rights Redemption and (iii) such other business as may properly come before the
Meeting. Each copy of this Proxy Statement-Prospectus mailed to CCI Stockholders
is accompanied by a form of proxy for use at the Meeting.
This Proxy Statement-Prospectus is also being furnished by AirTouch to
holders of CCI Stock as a prospectus in connection with the shares of AirTouch
Class B Preferred Stock and AirTouch Class C Preferred Stock to be issued upon
consummation of the Merger.
DATE, PLACE AND TIME
The Meeting will be held on Friday, August 16, 1996, at 10:00 a.m., New
York time, at The Helmsley Park Lane Hotel, 36 Central Park South, New York, New
York 10019.
RECORD DATE
The CCI Board has fixed the close of business on July 10, 1996 as the
Record Date. Holders of record of CCI Series A Common Stock, CCI Series C Common
Stock, CCI Redeemable Preferred Stock and CCI Class A Preference Stock at the
close of business on the Record Date will be entitled to receive notice of and
to vote at the Meeting. CCI has called all of the outstanding CCI Series B
Preference Stock for redemption prior to the Meeting. Shares of CCI Series B
Preference Stock so redeemed and those converted to CCI Series A Common Stock
after the Record Date will not be entitled to vote at the Meeting.
REQUIRED VOTE
As of the Record Date, 19,784,585 shares of CCI Series A Common Stock,
10,065,641 shares of CCI Series C Common Stock, 9,584,343 shares of CCI
Redeemable Preferred Stock and 2,206,410 shares of CCI Class A Preference Stock
were outstanding and entitled to vote at the Meeting. Each such share is
entitled to one vote.
The approval and adoption of the 1996 Merger Agreement and the transactions
contemplated thereby, including the Merger, will require the affirmative vote of
the holders of a majority of the outstanding shares of CCI Stock entitled to
vote at the Meeting, voting together as a single class. There is no requirement
that the transactions be approved by holders of a majority of shares of CCI
Stock held by non-affiliates and actually voted on the transactions. Approval of
the CCI Rights Redemption will require the approval of the holders of a majority
of the outstanding shares of CCI Common Stock and CCI Redeemable Preferred Stock
not beneficially owned by AirTouch voting together as a single class and the
consent of AirTouch. AirTouch has given its consent to the CCI Rights Redemption
and to the amendment of the CCI Rights Agreement required to effect the CCI
Rights Redemption. The approval and adoption of the 1996 Merger Agreement and
the transactions contemplated thereby, including the Merger, is contingent upon
the approval of the CCI Rights Redemption and approval of the CCI Rights
Redemption is contingent upon approval of the 1996 Merger Agreement.
As of the Record Date, directors and executive officers of CCI and their
respective affiliates (excluding AirTouch) owned approximately 3.38% of the
outstanding shares of CCI Stock. All of the directors and executive officers of
CCI intend to vote their shares of CCI Stock FOR the approval and adoption of
the 1996 Merger Agreement and the transactions contemplated thereby, including
the Merger, and FOR the CCI Rights Redemption. Pursuant to the 1990 Merger
Agreement, AirTouch has agreed until the third anniversary of the Back End
Termination Date (as defined below) to vote its shares of CCI Common Stock
generally in the same proportion as the shares of CCI Stock actually voted for
or against the proposals by all other holders of CCI Stock. AirTouch has no such
obligation with respect to the shares of CCI Class A Preference Stock owned by
it. As of the Record Date, AirTouch owned an aggregate of 3,450,800 shares of
CCI Series A
47
<PAGE> 51
Common Stock (8.3% of the CCI Stock), 10,065,641 shares of CCI Series C Common
Stock (24.1% of the CCI Stock) and 2,206,410 shares of CCI Class A Preference
Stock (5.3% of the CCI Stock). AirTouch intends to vote all of its shares of CCI
Class A Preference Stock FOR the approval and adoption of the 1996 Merger
Agreement and the transactions contemplated thereby, including the Merger.
VOTING AND REVOCATION OF PROXIES
Shares of CCI Stock represented by a proxy properly signed and received at
or prior to the Meeting, unless subsequently revoked, will be voted in
accordance with the instructions thereon. IF A PROXY IS SIGNED AND RETURNED
WITHOUT INDICATING ANY VOTING INSTRUCTIONS, THE SHARES OF CCI STOCK REPRESENTED
BY THE PROXY WILL BE VOTED FOR THE PROPOSALS TO APPROVE AND ADOPT THE 1996
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER, AND FOR THE CCI RIGHTS REDEMPTION. The proxy is revocable on written
instruction, including a subsequently received proxy, signed in the same manner
as the proxy, and received by the Secretary of CCI at any time at or before the
balloting on the matter with respect to which such proxy is to be exercised. A
holder of CCI Stock who attends the Meeting may revoke a proxy by voting in
person. Attendance at the Meeting will not in and of itself constitute a
revocation of a proxy. See "SPECIAL FACTORS -- Dissenting Stockholders' Rights
of Appraisal."
Abstentions will be treated as shares present and represented for purposes
of establishing a quorum. Where nominee record holders do not vote on specific
issues because they did not receive specific instructions on such issues from
the beneficial owners, such broker nonvotes will be treated as shares present or
represented for purposes of establishing a quorum. Neither abstentions nor
broker nonvotes, however, will be treated as shares voted in favor of the
proposals. The shares of CCI Stock held by AirTouch which are subject to the
voting restrictions of the 1990 Merger Agreement will be voted in proportion to
the manner in which the shares of CCI Stock held by other than AirTouch actually
are voted for or against the proposals.
The CCI Board is not aware of any business to be acted upon at the Meeting
other than as described herein. If, however, other matters are properly brought
before the Meeting, including any adjournments or postponements thereof, the
persons appointed as proxies will have discretion to vote or act thereon
according to their best judgment, except that properly executed proxies voted
against the Merger will not be voted for any such adjournment or postponement.
The grant of a proxy will also confer discretionary authority on the persons
named in the proxy to vote on matters incident to the conduct of the Meeting.
THE CCI BOARD, BY UNANIMOUS VOTE OF ALL DIRECTORS (OTHER THAN DIRECTORS
ELECTED BY AIRTOUCH, WHO DID NOT ATTEND OR PARTICIPATE IN THE MEETINGS AT WHICH
THE 1996 MERGER AGREEMENT WAS DISCUSSED AND APPROVED) HAS APPROVED THE TERMS OF
THE 1996 MERGER AGREEMENT AND THE CCI RIGHTS REDEMPTION AND RECOMMENDS THAT CCI
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE 1996 MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND
FOR THE CCI RIGHTS REDEMPTION.
SOLICITATION OF PROXIES
Under the 1996 Merger Agreement, the expenses of printing and mailing this
Proxy Statement-Prospectus to CCI Stockholders and the expenses of printing and
filing the related Registration Statement are to be shared equally by AirTouch
and CCI. In addition to solicitations by mail, directors, officers and employees
of CCI, who will not be specifically compensated for such services, may solicit
proxies from CCI Stockholders personally or by telephone or telegram or other
forms of communication. Brokerage house nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in doing
so.
48
<PAGE> 52
CCI has retained D. F. King & Co., Inc. to assist in the solicitation of
proxies from CCI Stockholders. The fees to be paid to such firm for such
services by CCI are not expected to exceed $15,000 plus reasonable expenses.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
TRANSACTIONS PRECEDING THE MERGER. On December 14, 1990, AirTouch (then
known as PacTel Corporation), CCI's predecessor (then known as Cellular
Communications, Inc.) ("Old CCI"), CCI Newco Sub, Inc., a former Delaware
corporation and a wholly owned subsidiary of CCI ("Newco Sub"), and CCI entered
into the 1990 Merger Agreement which provided for the Original Transactions. It
was Old CCI's belief that these arrangements could provide stockholders with an
ability to capture the long-term value of New Par, the joint venture which CCI
entered into with AirTouch. Both the 1990 Merger Agreement and the Original
Transactions were approved by the stockholders of CCI at a meeting held on
January 29, 1991. Set forth below is an overview of the Original Transactions.
This overview is intended only to summarize the basic framework of the Original
Transactions. Accordingly, this description is qualified in its entirety by
reference to the 1990 Merger Agreement and other agreements referred to below. A
copy of the 1990 Merger Agreement and each of the other agreements referred to
below has been filed by CCI with the SEC as exhibits to its Current Report on
Form 8-K dated December 26, 1990.
The Original Transactions provided for, in part, (a) the creation in 1991
of New Par, a joint venture which combined the CCI Ohio System with the AirTouch
Midwest System, (b) an initial investment of approximately $87 million in 1991
by AirTouch in CCI and the establishment of a mechanism whereby AirTouch has
acquired additional ownership interests in CCI through such methods as open
market purchases and the MRO, (c) the purchase by AirTouch from CCI of the
AirTouch Replacement Option for approximately $107.7 million, an amount equal to
the aggregate consideration paid by CCI for cancellation of the Employee
Replacement Options on January 4, 1996 and (d) the Appraisal Process, commencing
in August 1996 (unless deferred as described below), pursuant to which AirTouch
has the right to acquire CCI, including its interest in (i) New Par or (ii) New
Par and any other venture entered into between CCI and AirTouch (in either case,
together with such other assets of CCI as AirTouch and CCI may agree upon) by
causing CCI to redeem (through the Appraisal Process Redemption) each share of
CCI's redeemable stock (consisting of CCI Series A Common Stock and the CCI
Redeemable Preferred Stock (collectively the "CCI Redeemable Stock")) not owned
by AirTouch at a price per CCI Common Equivalent Share reflecting the appraised
private market value of such assets of CCI, less certain adjustments.
Pursuant to the 1990 Merger Agreement, on August 1, 1991, Newco Sub was
merged (the "1991 Merger") with and into Old CCI pursuant to the provisions of
the DGCL. In the 1991 Merger, the common stock, par value $.01 per share, of Old
CCI was converted into CCI Redeemable Preferred Stock. As a result of the 1991
Merger, Old CCI (now known as Cellular Communications of Ohio, Inc.) became a
wholly owned subsidiary of CCI. The purpose of the 1991 Merger was to
recapitalize Old CCI and create a capital structure for CCI that included the
various classes of redeemable stock and other equity securities necessary to
facilitate the Original Transactions. CCI was incorporated in Delaware on
November 9, 1990. Old CCI was incorporated in Delaware on April 7, 1981.
Immediately following the 1991 Merger, CCI contributed the CCI Ohio System
and AirTouch contributed the AirTouch Midwest System to New Par. New Par is a
Delaware general partnership operated in accordance with the terms of a
Partnership Agreement, dated as of August 1, 1991 (the "Partnership Agreement"),
by and among the CCI Group and the AirTouch Group (each as defined therein). New
Par is owned equally by CCI and AirTouch and is governed by a four person
partnership committee, with two members appointed by each of CCI and AirTouch.
In connection with the Original Transactions, on July 31, 1991, Old CCI
distributed pro rata to its stockholders all of the capital stock of its former
subsidiaries that conducted its international and long distance/microwave
operations (Cellular Communications International, Inc. ("CCII") and OCOM Corpo-
49
<PAGE> 53
ration, now known as International CableTel Incorporated ("ICTL"),
respectively). On February 28, 1992, also in connection with the Original
Transactions, CCI distributed pro rata to its stockholders all of the capital
stock of its former subsidiary Cellular Communications of Puerto Rico, Inc.
("CCPR").
Immediately following the 1991 Merger, AirTouch purchased 2,206,410 shares
of CCI's Class A Preferred Stock, par value $.01 per share (the "CCI Class A
Preferred Stock") and 25,641 shares of CCI Series C Common Stock, for
approximately $87.0 million in the aggregate, or an effective price of
approximately $39 per share. Pursuant to the terms of the Termination Agreement
(as defined below), AirTouch subsequently exchanged all of its shares of CCI
Class A Preferred Stock for an equal number of shares of CCI Class A Preference
Stock. In August 1991 and February 1992, CCI paid AirTouch a total of
approximately $1.4 million in closing adjustments. At the time of such purchase,
such shares of CCI Class A Preferred Stock (which were (and the shares of the
CCI Class A Preference Stock similarly are) convertible into CCI Series C Common
Stock on a one-for-one basis, subject to certain adjustments) and CCI Series C
Common Stock represented approximately 5% of CCI's equity on a fully diluted
basis. In accordance with the terms of the 1990 Merger Agreement, AirTouch has
increased its ownership of CCI's equity so that, as of the Record Date, it held
approximately 34% of CCI's equity on a fully diluted basis. In addition,
AirTouch may by the same means increase its ownership in CCI to 49% on a fully
diluted basis.
At the close of business on October 27, 1995, CCI redeemed 10.04 million
shares of CCI Redeemable Preferred Stock at $60 per share in the MRO pursuant to
the 1990 Merger Agreement. In connection with the MRO, AirTouch purchased (i)
10.04 million newly issued shares of CCI Series C Common Stock for $602.4
million and (ii) an option to purchase 10,700 shares of CCI Series C Common
Stock, at an exercise price of $28.51 per share, for approximately $0.3 million.
Pursuant to a registration rights agreement, CCI has agreed to register the
newly issued shares purchased by AirTouch in the MRO, as well as shares of CCI
Series C Common Stock purchased by AirTouch upon exercise of the options
referred to in the preceding sentence and the following paragraph, under terms
that are intended to provide AirTouch with the ability to sell such shares
equivalent to that which AirTouch would have had if the shares were registered
at the time of purchase by AirTouch.
Pursuant to the 1990 Merger Agreement, CCI was obligated to cancel on
January 4, 1996 certain Employee Replacement Options (as defined in the 1990
Merger Agreement) to the extent requested by holders thereof, and repurchase
certain Option Shares (as defined in the 1990 Merger Agreement) of CCI, covering
in the aggregate approximately 2.4 million shares of CCI Stock. The Employee
Replacement Options were canceled in exchange for a payment of $60 less the
applicable exercise price for each share subject thereto, and the Option Shares
were repurchased at $60. Pursuant to the 1990 Merger Agreement, AirTouch
purchased the AirTouch Replacement Option from CCI on January 4, 1996 which
entitles AirTouch to purchase the number of shares of CCI Series C Common Stock
equal to the number of shares subject to the Employee Replacement Options
canceled on January 4, 1996. AirTouch purchased the AirTouch Replacement Option
for approximately $107.7 million, an amount equal to the aggregate consideration
paid by CCI for cancellation of the Employee Replacement Options on January 4,
1996. The exercise price per share for the AirTouch Replacement Option is $15.03
(the weighted average exercise price per share for the Employee Replacement
Options canceled on January 4, 1996) and the term of such option is the later of
(i) in the event of a PacTel Acceptance (as defined in the 1990 Merger
Agreement), one year after the Final Redemption Date (as defined below) or (ii)
in the event AirTouch does not accept either of the Two Main Values (as defined
in the 1990 Merger Agreement), 30 days after the Back End Termination Date (as
defined below).
APPRAISAL PROCESS. Unless the Merger is approved and completed, the
Appraisal Process will commence in August 1996 in accordance with the terms of
the 1990 Merger Agreement, unless deferred for six months as described below.
The following is a summary of the Appraisal Process, which is described in
greater detail in Annex I to this Proxy Statement-Prospectus. This summary is
qualified in its entirety by reference to Annex I and to the provisions of the
1990 Merger Agreement, as supplemented by the Termination Agreement.
Pursuant to the Appraisal Process, which is expressly designed to recognize
CCI's share of any control premium for New Par, AirTouch will have the right, by
causing the Appraisal Process Redemption, to acquire
50
<PAGE> 54
CCI, including its interest in (i) New Par or (ii) New Par and any other venture
entered into between AirTouch and CCI, at a price intended to reflect the
appraised private market value of such acquired interests determined in
accordance with the procedures set forth in the 1990 Merger Agreement (together
in either case with such other CCI assets (the "Other Assets") as AirTouch and
CCI may agree upon). AirTouch will finance the Appraisal Process Redemption by
providing to CCI the necessary funds. The Appraisal Process Price will be
subject to reduction for certain adjustments. The CCI Redeemable Stock held by
holders of CCI Stock (other than AirTouch) is subject to redemption at the
Appraisal Process Price determined pursuant to the Appraisal Process, which
price is not known at this time. If AirTouch elects to cause the Appraisal
Process Redemption, no further action by holders of CCI Stock will be required,
and the equity interest of all holders of CCI Stock (other than AirTouch) will
be terminated.
In the event that any Other Assets are retained by CCI, the Appraisal
Process Price per share will be increased by an amount based upon the appraised
private market value of such Other Assets retained. Any Other Assets not
mutually agreed to be retained will be sold. Any net proceeds from such sale
remaining after reduction for CCI's costs, expenses, appropriate escrows and
taxes relating to the sale will be distributed to CCI stockholders.
In the event that AirTouch does not exercise its right to cause the
Appraisal Process Redemption, CCI is obligated promptly to commence a process to
sell CCI (and, under certain circumstances, AirTouch's interest in New Par). In
the alternative, CCI has the right to purchase (the "CCI Purchase Right")
AirTouch's interest in CCI or CCI and New Par, as the case may be, at a price
based upon their appraised values determined in accordance with the 1990 Merger
Agreement. CCI may not exercise the CCI Purchase Right or elect not to accept
certain bids resulting from the sales process described above (if the effect, in
either case, would be to release AirTouch from its Make Whole Obligation (as
defined below)) without the approval of the holders of a majority of the
outstanding shares of CCI Common Stock and CCI Redeemable Preferred Stock (other
than AirTouch), voting together as a class.
Both CCI and AirTouch have certain rights of deferral in the Appraisal
Process. CCI may defer the appraisal process for six months in the event there
exists a calamitous or severe adverse economic condition in the United States
(the "Initial Deferral"). Should CCI elect to cause the Initial Deferral, each
of the appraisals would commence six months after the indicated date. AirTouch
will have the opportunity to delay its right to cause the Appraisal Process
Redemption by requiring two additional appraisals, and therefore will have the
opportunity to evaluate up to three different appraisal values during the
Appraisal Process prior to determining whether to cause an Appraisal Process
Redemption. The ability to cause such deferrals may impact the price, if any, to
be received by holders of CCI Stock in the Appraisal Process due to potential
valuation changes during such period. In the event AirTouch causes two deferrals
and thereafter elects to
51
<PAGE> 55
cause an Appraisal Process Redemption in the third appraisal, the Appraisal
Process Price will be increased by two percent. The Appraisal Process may
commence in August 1996 as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8/2/96(1)
CCI Exercises
Initial Deferral(1)
NO Yes
First Appraisal(1) Defer Appraisal
1/2 Year
(the "Initial Deferral")(1)
AirTouch Elects to
Cause Redemption?
YES No
CCI Redeemable Stock 2/2/97(1)
Redeemed(2) Second Appraisal
AirTouch Elects to
Cause Redemption?
YES NO
CCI Redeemable Stock 8/2/97(1)
Redeemed(2) Third Appraisal(1)
AirTouch Elects to
Cause Redemption?
YES NO
CCI Redeemable CCI Sales
Stock Redeemable(2) Process(3)
CCI Purchase
Right(3)
Make Whole
Obligation
</TABLE>
- ---------------
(1) Unless the Initial Deferral occurs, the Appraisal Process would commence on
August 2, 1996. If the Initial Deferral occurs, the Appraisal Process would
commence on February 2, 1997 and the second and third appraisals would be
concomitantly delayed until August 2, 1997 and February 2, 1998,
respectively. At each appraisal, AirTouch may elect to purchase any other
venture entered into between CCI and AirTouch (and not New Par). If such
election occurs in the first or second appraisal, the subsequent appraisals
will continue without such other venture. At this time, there is no other
venture between CCI and AirTouch.
(2) Each share of CCI Redeemable Stock will be redeemed at a price reflecting
the appraised private market value per share of CCI's interest in (i) New
Par or (ii) New Par and any other venture entered into between AirTouch and
CCI (adjusted in either case to take into account such Other Assets as
AirTouch and CCI may agree upon) less the Total Per Share Adjustment (as
defined in the 1990 Merger Agreement).
(3) CCI may not exercise the CCI Purchase Right or elect not to accept certain
bids resulting from the sales process described above (if the effect in
either case would be to release AirTouch from its Make Whole Obligation)
without the approval of the holders of a majority of the outstanding shares
of CCI Common Stock and CCI Redeemable Preferred Stock (other than AirTouch)
voting together as a class.
52
<PAGE> 56
AIRTOUCH MAKE WHOLE OBLIGATION. Pursuant to the terms of the 1990 Merger
Agreement, as supplemented by the Termination Agreement, if AirTouch elects not
to cause the Appraisal Process Redemption and CCI or CCI's and AirTouch's
interest in New Par (or, if at AirTouch's election New Par is dissolved, New
Par's assets received upon dissolution by CCI) is sold pursuant to a Qualifying
Third Party Sale (i.e., a sale within certain specified time periods not to
exceed two years) for a Third Party Price Per Share (as defined below) less than
the Gross Make Whole Price Per Share (as defined below), AirTouch is obligated
to pay to each CCI stockholder (the "Make Whole Obligation") an amount equal to
the specified percentage of such shortfall set forth below.
<TABLE>
<CAPTION>
THIRD PARTY PRICE PER SHARE
AS A PERCENTAGE OF PORTION OF SHORTFALL
GROSS MAKE WHOLE PRICE PER SHARE COVERED BY AIRTOUCH
- -------------------------------------------- --------------------------------------------
<S> <C>
80-100%..................................... All
60-80%...................................... 20% of Gross Make Whole Price Per Share +
80% of difference between Third Party Price
Per Share and 80% of Gross Make Whole Price
Per Share
Below 60%................................... 36% of Gross Make Whole Price Per Share +
50% of difference between Third Party Price
Per Share and 60% of Gross Make Whole Price
Per Share
</TABLE>
The Make Whole Obligation will be reduced by the Total Per Share Adjustment
(which is equal to the Unanticipated Tax Adjustment (as defined in the 1990
Merger Agreement) and the Liquidity Adjustment (calculated according to the
Market Illiquidity Compensation Mechanism described in Exhibit F to the 1990
Merger Agreement), but without regard to the Fixed Liquidity Adjustment (as
defined in Exhibit F to the 1990 Merger Agreement) which was effectively
terminated by the Termination Agreement, divided by the number of Fully Diluted
Shares (as defined in the 1990 Merger Agreement) held by CCI stockholders other
than AirTouch or its affiliates). If the amount of the Total Per Share
Adjustment exceeds the Make Whole Obligation, CCI is obligated to pay AirTouch
an amount (the "AirTouch Payment") equal to the aggregate of such excess amounts
(increased to compensate AirTouch for the portion of any such payment indirectly
borne by it as a stockholder of CCI). Such payment would be made by CCI to
AirTouch subsequent to the sale of CCI (and the receipt of the proceeds
therefrom by CCI's stockholders) or the sale of CCI's interest in New Par (or,
if New Par has been dissolved, New Par's assets) (and the receipt of the
proceeds therefrom by CCI). Since the AirTouch Payment would be a liability of
CCI, it may be expected to affect the price received by CCI stockholders in a
Qualifying Third Party Sale. Pursuant to the CCI Certificate of Incorporation,
CCI may not take certain actions that would result in a waiver of AirTouch's
Make Whole Obligation without the approval of CCI's stockholders (other than
AirTouch). If a third party sale is not consummated within certain time periods,
the Make Whole Obligation will expire without any further obligation by AirTouch
with respect thereto.
CERTAIN REQUIRED ASSET SALES; OTHER ADJUSTMENTS. In the event that
AirTouch does not cause the Appraisal Process Redemption, CCI is obligated to
commence the sale of all of its assets (other than its interest in New Par) no
later than one year after AirTouch loses its right to cause the Appraisal
Process Redemption and to promptly consummate such sale. Such a sale may be in
conjunction with a Qualifying Third Party Sale. In connection with a sale of CCI
or CCI's interest in New Par (or, if New Par has been dissolved, New Par's
assets), other than a Qualifying Third Party Sale, CCI is obligated to pay
AirTouch an amount (the "Other Sale Payment") equal to the aggregate amount of
the Total Per Share Adjustment (increased to compensate AirTouch for the portion
of any such payment indirectly borne by it as a stockholder of CCI). Such
obligation continues, regardless of when such a sale is made, whether the Make
Whole Obligation has expired or whether AirTouch has ceased to hold an ownership
interest in CCI or New Par.
EVENTS SUBSEQUENT TO THE 1991 MERGER. On December 11, 1992, CCI entered
into a termination agreement (the "Termination Agreement") with AirTouch and
Telesis, AirTouch's then parent corporation, in connection with the spin-off by
Telesis of AirTouch which was completed on April 1, 1994. The Termination
Agreement had the effect, among other things, of increasing the Make Whole
Obligation that AirTouch might have to pay by (i) lowering to 80% from 90% the
percentage of Third Party Price Per Share
53
<PAGE> 57
to Gross Make Whole Price Per Share at which AirTouch would be obligated to
cover all of the shortfall; (ii) lowering to 60% - 80% from 70% - 90% the
percentage of Third Party Price Per Share to Gross Make Whole Price Per Share at
which AirTouch would be obligated to cover 80% of the shortfall and increasing
the additional amount that would be paid from 10% of the Gross Make Whole Price
Per Share to 20%; and (iii) lowering to 60% from 70% the percentage of Third
Party Price Per Share to Gross Make Whole Price Per Share at which AirTouch
would be obligated to cover 50% of the shortfall and increasing the additional
amount that would be paid from 26% of the Gross Make Whole Price Per Share to
36%. The Termination Agreement also effectively eliminated the Fixed Liquidity
Adjustment component of the Liquidity Adjustment and thereby of the Total Per
Share Adjustment, the effect of which, among other things, could be to increase
the Make Whole Obligation by such amount or decrease the amount of an AirTouch
Payment by CCI. AirTouch also exchanged all of its shares of CCI Class A
Preferred Stock for an equal number of shares of CCI Class A Preference Stock.
As part of the Termination Agreement, CCI agreed to terminate the Telesis letter
of responsibility that had been executed in connection with the 1990 Merger
Agreement. At the date of separation of Telesis and AirTouch, AirTouch provided
substitute credit assurance for its obligation to CCI at the time of the MRO,
and for the payment of any Make Whole Obligation.
During the course of the negotiations leading to the Termination Agreement,
representatives of AirTouch also raised the possibility of restructuring the
form and timing of stock purchase rights and obligations contemplated under the
1990 Merger Agreement to permit AirTouch to use its equity rather than cash as
consideration thereby permitting AirTouch to preserve its future borrowing
capacity and possibly to achieve a complete combination of CCI and AirTouch in
advance of the Appraisal Process. Ensuing discussions proved inconclusive,
however, due to the varying views of the parties as to an appropriate valuation
framework within which to pursue such a transaction. The parties subsequently
abandoned that aspect of the negotiations.
In March 1995, CCI's chairman, George S. Blumenthal, met with AirTouch's
then-Senior Vice President, Arun Sarin, to discuss the MRO and appraisal process
under the 1990 Merger Agreement. During the meeting, Mr. Blumenthal suggested
the possibility of structuring an alternative transaction for the acquisition of
CCI due to his view that a transaction might be beneficial to CCI stockholders
by eliminating the uncertainty of the outcome of the Appraisal Process and of
the ultimate timing of any such outcome. The companies, which as joint venture
partners were in frequent contact on matters related to the joint venture,
commenced such discussion at such time in order to explore whether an acceptable
alternative could be structured. There was no specific reason for the timing of
such meeting, other than a shared understanding of the timing which would be
required, given negotiation of a transaction, the subsequent SEC review process
and the solicitation of proxies for a stockholder meeting, to complete a
transaction prior to the specified date of the MRO. At the conclusion of such
meeting, Messrs. Blumenthal and Sarin agreed that preliminary discussions among
the parties' financial advisors would be appropriate.
Subsequently, discussions were held among the respective financial advisors
to CCI and AirTouch regarding a change to the form and timing of the
transactions, but proved inconclusive due to the varying views of the parties as
to an appropriate valuation framework within which to pursue such a transaction.
AirTouch's financial advisors were only willing to discuss a transaction with a
value of approximately $50.00 or less per CCI Common Equivalent Share and CCI's
financial advisors were not willing to discuss a transaction with a value less
than approximately $60.00 per CCI Common Equivalent Share. In June 1995, after
reviewing the status of their respective financial advisors' discussions on
valuations and concluding that there was no basis for further negotiations,
Messrs. Blumenthal and Sarin determined not to further explore at such time any
alternative transaction for the acquisition of CCI by AirTouch.
In October 1995, the MRO was completed. In January 1996, the Employee
Replacement Options were canceled and AirTouch acquired the AirTouch Replacement
Option.
The 1996 Merger. From time to time in December 1995 and January 1996
following a call in early December initiated by Mr. Sarin, Messrs. Sarin and
Blumenthal had general discussions about the possibility of a transaction to be
effected prior to commencement of the Appraisal Process and exchanged views
regarding the parties' differing perspectives on value and various potential
structures. During such initial discussions, Mr. Sarin stated that AirTouch was
not interested in pursuing a transaction with a value in excess
54
<PAGE> 58
of approximately $50.00 per CCI Common Equivalent Share and Mr. Blumenthal
stated that CCI was seeking a transaction with a value of approximately $60.00
per CCI Common Equivalent Share. Both parties believed that such a transaction
might be beneficial to both parties by eliminating the uncertainty of the
outcome of the Appraisal Process and of the ultimate timing of any such outcome.
In commencing discussions at such time, the parties had a shared understanding
of the time required to complete negotiation of a transaction, the subsequent
SEC review process and the solicitation of proxies for a stockholder meeting and
a common view that, if the merger were to take place, it might be beneficial to
occur before the Appraisal Process commenced so as to avoid the potential
confusion of parallel, mutually exclusive transactions being pursued
simultaneously. In early February 1996, AirTouch proposed a transaction
consisting of units of cash, convertible preferred and mandatorily convertible
preferred stocks to be received by CCI stockholders. The proposal provided for a
package with a $54.00 face amount, comprised of 30% in cash, 35% in 4% perpetual
convertible preferred (with a 25% conversion premium) and 35% in 5 3/4%
mandatorily convertible preferred (with a 22% conversion premium, and a 4-year
maturity). Under AirTouch's proposal, the conversion premium for each of the
foregoing preferred securities was to be calculated based on the higher of (i)
the then-current trading price for AirTouch Common Stock and (ii) the highest
weighted average trading price for any consecutive 20-day trading period during
the twelve-month period following the closing. CCI indicated a desire for a
package with a higher dividend rate and face amount on the two preferreds, and a
lower conversion premium on the mandatorily convertible preferred and for a
"collar" of $27.00 to $36.00 on the price of AirTouch Common Stock to be used in
the pricing of the preferreds. Under CCI's proposal, the determination of the
price of AirTouch Common Stock to be used for calculating the conversion price
was to occur at the time of the mailing of the proxy statement. During February
and March 1996, AirTouch and CCI discussed these issues and, in a negotiation
process, moved closer to each other's positions on appropriate value and terms
for a transaction as representatives of CCI and its financial advisors,
Donaldson, Lufkin & Jenrette and Wasserstein Perella, and AirTouch and its
financial advisor, Lehman Brothers, discussed a number of variations of this
basic economic structure, including the amount of cash, the face value, coupon,
conversion price and term of the convertible preferred and mandatorily
convertible preferred stock and the timing and nature of the pricing mechanism
for such securities. Both AirTouch and CCI recognized that changes in the amount
of cash per share of CCI Stock or in the terms of the AirTouch preferred stocks
would implicate value. CCI attempted to increase the value of the package
relative to AirTouch's proposals by increasing the number of AirTouch securities
to be issued per share of CCI Stock and the dividend rates of such securities,
and, recognizing that a negotiated package of securities was subject to change
in value as a result of market changes, economic conditions and characteristics
of the issuer, CCI sought a form of "value protection" by requesting the
Contingent Payment. AirTouch's proposals contained lower dividend rates and
lower numbers of AirTouch securities. AirTouch also desired to limit the number
of shares of AirTouch Class B Preferred Stock to $500 million in face amount for
reasons related to its own capital structure requirements, recognizing that the
mandatory conversion date would be several years after issuance. AirTouch,
however, eventually acceded to CCI that the pricing period with respect to the
conversion premium be concluded no later than the proxy mailing date. During
these periods, various discussions occurred among CCI Board members (other than
Messrs. C. Lee Cox and Mohan S. Gyani) concerning the status of the
conversations with AirTouch. During such discussions, the CCI Board members
reiterated to Mr. Blumenthal their support for the negotiating positions being
taken by CCI and concluded that negotiations with AirTouch should continue.
AirTouch management briefed the AirTouch Board on the status of the
conversations with CCI at its regular meeting on February 8, 1996.
On March 23, 1996, the CCI Board (excluding Messrs. Cox and Gyani, the
AirTouch-elected directors, who were absent) discussed the status of the
transaction. The CCI Board discussed (i) their legal duties, (ii) the proposed
terms of the transaction and the current status of the negotiations, (iii) the
negotiating posture of both parties with respect to open issues, (iv) a
comparison of the proposed Merger with the Appraisal Process, (v) the business
and financial characteristics of AirTouch, and (vi) the types of securities
which would be received in the Merger and their market characteristics. At a
special meeting held on March 26, 1996, the AirTouch Board discussed the
respective financial impacts of the proposed terms of the transaction and the
Appraisal Process, as well as key risks associated with the transaction.
Representatives of Lehman Brothers participated telephonically in the meeting,
and orally advised the AirTouch Board that, in
55
<PAGE> 59
Lehman Brothers' opinion, the consideration to be paid by AirTouch in the Merger
was fair to AirTouch from a financial point of view. At the conclusion of such
discussion, the AirTouch Board authorized AirTouch's entering into the proposed
business combination subject to the approval by the AirTouch Executive Committee
of the final terms thereof. On March 27, 28, 29 and 30, representatives of CCI
(led by Richard Lubasch, its General Counsel), its legal advisor, Skadden, Arps,
Slate, Meagher & Flom, and financial advisors (Wasserstein Perella and
Donaldson, Lufkin & Jenrette) and AirTouch (led by Willa Seldon, Managing
Director of Corporate Development), its legal advisor, Pillsbury Madison & Sutro
LLP, and financial advisor, Lehman Brothers, met in New York to discuss a draft
merger agreement and a number of significant issues with respect thereto,
principally the tax status of the proposed merger, conditions to the merger,
treatment of CCI and New Par employee benefit plans, level of CCI transaction
expenses and the dilution provisions of the preferred stocks. Discussions with
respect to conditions focused on the nature and scope of conditions related to
material adverse change and contingent liabilities; with respect to employee
benefit plans related to the treatment of CCI Options, including the
consideration to be received upon exercise, and to a desire on the part of CCI
to provide certain long-term New Par employees with cash bonus payments; with
respect to transaction expenses related to AirTouch's desire to limit CCI's
expenses; and with respect to dilution provisions related to CCI's desire that
the holders of the preferreds received in the Merger participate in both
AirTouch's domestic and international businesses if they were separated. A
series of correspondence and telephonic discussions between CCI and AirTouch
executive personnel (principally Mr. Sarin and Ms. Seldon for AirTouch and
Messrs. Blumenthal and Lubasch for CCI) concerning these issues, and various
positions and potential negotiated solutions, ensued during the period from
March 28 until April 3. As the negotiations and documentation concluded, the
AirTouch Board approved the transaction at a meeting held on April 4, 1996.
On April 5, 1996, the CCI Board (with Messrs. Cox and Gyani absent) met.
Members of CCI management and its legal counsel made a presentation to the CCI
Board with respect to (i) the discussions which had occurred between CCI and
AirTouch since March 23, 1996, (ii) the terms of the 1990 Merger Agreement,
(iii) the terms of the AirTouch securities to be issued and (iv) the business
and financial characteristics of AirTouch. The CCI Board received a joint
presentation from Wasserstein Perella and Donaldson, Lufkin & Jenrette, as well
as the oral opinion of each firm as to the fairness from a financial point of
view of the transaction, which joint presentation and opinions are both
described below under "-- CCI Fairness Opinions of Wasserstein Perella & Co.,
Inc. and Donaldson, Lufkin & Jenrette Securities Corporation." The CCI Board
again discussed the Appraisal Process, which it understood was, due to the
existing contractual commitments of the 1990 Merger Agreement, CCI's only
available alternative to a negotiated merger with AirTouch. Thus, the CCI Board
did not consider any other alternative transactions. Various members of the CCI
Board made inquiries of management and legal and financial advisors with respect
to a number of topics, including (i) the trends in AirTouch Common Stock and the
effect of the pricing mechanism, (ii) the nature of the provisions of the 1996
Merger Agreement with respect to the Board's recommendation, (iii) the
antidilution provisions of the AirTouch Preferred Stock, Series 1996, and (iv)
the nature of the inquiries made by CCI and its advisors as to AirTouch.
Generally, as to (i), it was noted that AirTouch Common Stock had declined in
recent weeks and had closed at $29.625 per share on April 4, 1996 (the day prior
to the meeting) and that if the Volume-Weighted Average Trading Price for the
15-day period during which the Preferred Stock Issue Price was established
dropped below $29.00 per share, the Preferred Stock Issue Price would be set at
$29.00. As to (ii), legal counsel discussed the provisions of Section 5.5 of the
1996 Merger Agreement and of Delaware corporate law. As to (iii), it was noted
that while the antidilution provisions of the AirTouch Preferred Stock, Series
1996, generally contain customary provisions, special provision was made with
respect to any future separation of AirTouch's domestic and international
businesses. It was noted that AirTouch had informed CCI that no such separation
was currently contemplated. As to (iv), it was noted that CCI representatives
(together with representatives of its financial advisors) had reviewed public
documents and third party analyst reports with respect to AirTouch and had
participated in discussions with AirTouch management as to AirTouch's business,
finances and prospects. It was noted that CCI and its advisors had not received
nonpublic projections of future financial performance from AirTouch. After
completing its discussion, the CCI Board approved the 1996 Merger Agreement,
which was executed later that day.
56
<PAGE> 60
CCI REASONS FOR THE MERGER; RECOMMENDATION OF THE CCI BOARD
At its April 5, 1996 meeting, the CCI Board (with Messrs. Cox and Gyani
absent) unanimously determined that the Merger, upon the terms and conditions
set forth in the 1996 Merger Agreement, is fair to, and in the best interests
of, the holders of CCI Stock (other than AirTouch) and is fair (both
substantively and procedurally) to stockholders of CCI other than AirTouch and
affiliates of CCI. Accordingly, the CCI Board (excluding Messrs. Cox and Gyani,
who did not participate) has unanimously adopted the 1996 Merger Agreement and
unanimously recommends that CCI Stockholders vote for approval and adoption of
the 1996 Merger Agreement and the transactions contemplated thereby, including
the Merger, at the Meeting. See "-- Background of the Merger" and "-- Certain
Transactions; Conflicts of Interest."
In reaching its determination, the CCI Board consulted with CCI's
management, as well as its legal counsel and financial advisors, and considered
a number of factors, including the following material factors:
(i) The expected value of the consideration to be received by the
holders of CCI Stock in the Merger, as compared with the CCI Board's
perceptions of the possible range of outcomes of the Appraisal Process and
the then-prevailing market price ($51 3/16) of CCI Series A Common Stock
(which the CCI Board believed reflected, to some extent, which it could not
and did not, quantify, the market's perception of the possible range of
outcomes of the Appraisal Process). See "-- Merger Consideration,"
"-- Effective Time" and "-- Procedures for Exchange of Certificates" and
"RISK FACTORS -- Securities-Related Risks -- Dividend Rates and Issue
Price; Fluctuations in AirTouch Common Stock Price."
(ii) The ability of holders of CCI Stock who wish to do so to continue
to participate in the growth of the business conducted by AirTouch after
the Merger and to benefit from the potential appreciation in the value of
AirTouch Common Stock by electing to receive the Units, while realizing an
immediate premium for their CCI Stock and while obtaining tax-free
treatment to the extent that they receive Units. See "-- Certain Federal
Income Tax Consequences."
(iii) The review of the timing and terms of the available alternative,
the Appraisal Process. See "-- Background of the Merger." Based upon their
review of the Appraisal Process and the advantages that could be achieved
from CCI's combination with AirTouch, and recognizing that there was a
possibility of values from the Appraisal Process in excess of the value of
the consideration in the Merger, the members of the CCI Board did not
believe that the Appraisal Process could reasonably be expected to offer
values after adjusting for the time value of money (when giving effect to
AirTouch's contractual rights to defer the process and the time value of
money) significantly in excess of those which the CCI Board believed were
presented by a business combination with AirTouch under the terms of the
1996 Merger Agreement. Both CCI and AirTouch have certain rights of
deferral in the Appraisal Process. AirTouch will have the opportunity to
cause up to two deferrals of appraisals and therefore will have the
opportunity to delay its right to cause the Appraisal Process Redemption by
requiring two additional appraisals, and therefore will have the
opportunity to evaluate up to three different appraisal values during the
Appraisal Process prior to determining whether to cause an Appraisal
Process Redemption. As a result, the Appraisal Process Redemption could
occur as late as the fourth quarter of 1997. Moreover, AirTouch may elect
not to exercise its right to cause the Appraisal Process Redemption, in
which case CCI is obligated to then commence a process to sell CCI which
will result in additional deferral of the receipt by holders of CCI Stock
of payment for their CCI Stock.
(iv) The respective business, assets, liabilities, managements,
strategic objectives, competitive positions and prospects of CCI (including
New Par) and AirTouch. In considering this factor, the CCI Board noted that
CCI's operations (a) were limited by the permitted activity provisions of
the 1990 Merger Agreement and the practical effect of the Appraisal Process
(which might require disposition of assets other than the Ohio and Michigan
cellular systems in a tax inefficient manner at the time of any Appraisal
Process Redemption), (b) were structured as a joint venture so that CCI was
not able to solely determine management and strategy and (c) would face
additional competition from PCS and other communications companies. It
noted that (a) AirTouch could take advantage of its national scope and
brands and the economies of scale of running multiple operations, (b)
AirTouch could seek a broad range
57
<PAGE> 61
of opportunities and (c) AirTouch was generally recognized as the premier
standalone wireless entity. In assessing AirTouch, the CCI Board also
considered the significant opportunities for value creation that it
believed were inherent in AirTouch's international operations, given their
high expected growth rates and a perception that their value is not fully
reflected in AirTouch's current market price, as well as the value of its
domestic cellular operations. The CCI Board viewed the analysis set forth
in this clause (iv) as supporting its determination.
(v) Information provided by CCI's legal counsel with respect to the
federal income tax consequences of the Merger to holders of CCI Stock. The
CCI Board was advised that, for federal income tax purposes, holders that
exchange CCI Stock solely for the Units generally would not recognize
taxable gain or loss on the exchange, that holders that exchange CCI Stock
solely for cash generally would be taxed on the difference between their
tax basis in the CCI Stock exchanged and the cash received, and that
holders that exchange CCI Stock for a combination of cash and Units
generally would recognize taxable gain in an amount equal to the lesser of
(a) the excess of the sum of the cash and the fair market value of the
Units received over the tax basis in the CCI Stock exchanged and (b) the
amount of cash received. The CCI Board was also advised that holders of CCI
Stock could not ascertain their tax consequences at the time of making an
election due to possible applicability of proration. See "-- Election
Procedures" and "-- Certain Federal Income Tax Consequences." The CCI Board
also considered the fact that the terms of the Merger Agreement will permit
holders of CCI Stock to elect to receive the consideration to be issued to
them pursuant to the Merger Agreement in the form of Units or cash (subject
to proration in each case), thereby generally permitting holders of CCI
Stock to influence the tax consequences to them of the Merger. In addition,
the CCI Board noted that the provisions of the 1996 Merger Agreement will
enable holders of CCI Stock who prefer cash to avoid the necessity of
selling any Units they otherwise would have received if all the
consideration was in the form of Units. See "-- Merger Consideration,"
"-- Election Procedures," "-- Procedures for Exchange of Certificates" and
"-- Effective Time."
(vi) The joint presentation of Donaldson, Lufkin & Jenrette and
Wasserstein Perella delivered to the CCI Board on April 5, 1996, including
their opinions that, as of such date, the Merger Consideration to be
received by the holders of CCI Stock (other than AirTouch) pursuant to the
1996 Merger Agreement was fair to such holders from a financial point of
view. Each of Donaldson, Lufkin & Jenrette and Wasserstein Perella
subsequently confirmed its respective April 5, 1996 opinion by delivery of
its written opinion dated the date of this Proxy Statement-Prospectus.
Copies of such opinions are attached to this Proxy Statement-Prospectus as
Annexes E and F. See "-- CCI Fairness Opinions of Wasserstein Perella &
Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation."
(vii) The analysis by CCI's management of the terms of the 1996 Merger
Agreement, together with CCI's management statement that the 1996 Merger
Agreement and the transactions contemplated thereby, including the Merger,
were negotiated at arms'-length and, in management's view, that such terms
were reasonable and customary. In such determination, the CCI Board
recognized that the Merger does not have to be approved by a majority of
unaffiliated holders of CCI Stock as a structural matter. Nevertheless, the
CCI Board recognized that approximately 32.4% of the outstanding CCI Stock
(approximately 86% of the stock held by AirTouch) is held by AirTouch
subject to a requirement under the 1990 Merger Agreement that it vote in
the same proportion as shares of CCI Stock voted by all other holders
thereof. Since the approval of the Merger requires a majority of the
outstanding shares under the DGCL and often not all stockholders are
present and vote at a stockholder meeting, the CCI Board believed that in
most cases, as a practical matter, the approval of a majority of the
non-AirTouch shares voting would be required to achieve the required vote
under the DGCL. Thus, the CCI Board believes that the Merger is
procedurally fair.
(viii) The terms and conditions of the 1996 Merger Agreement,
including the amount and the form of the consideration, the parties'
representations, warranties, covenants and agreements, and the conditions
to their respective obligations set forth in the 1996 Merger Agreement, and
the terms of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock. See "THE MERGER AGREEMENT." The CCI Board, based on
presentations by its legal and financial advisors, deemed the
58
<PAGE> 62
terms of the 1996 Merger Agreement, and the terms of the AirTouch Class B
Preferred Stock and AirTouch Class C Preferred Stock to be reasonable and
acceptable. In so determining, the CCI Board considered the terms of the
1990 Merger Agreement and the restrictions that it placed on both CCI and
AirTouch. In considering the securities to be received as part of the
Units, the CCI Board considered (a) the views of Donaldson, Lufkin &
Jenrette, Wasserstein Perella and Skadden, Arps, Slate, Meagher & Flom with
respect to customary market terms of financially similar securities and (b)
the characteristics of AirTouch, including the prospects for growth in both
the domestic and international segments of AirTouch's business and the
desire to receive a portion of the benefit thereof. The views referred to
in clause (a) of the preceding sentence were that the AirTouch securities
would be expected to be liquid and enjoy broad distribution since they
would be one of the most significant issuances of convertible preferred
securities of a company with characteristics similar to AirTouch. Such
factors were viewed as supporting the CCI Board's conclusion as to
fairness.
(ix) The uncertainties in the wireless industry, including the
likelihood of increased competition in the industry and the possibility
that changes in the industry, depending on their nature, could be
disadvantageous to CCI (including New Par) and/or AirTouch. The CCI Board
believed that, although the uncertainties of the wireless industry could
also be advantageous to CCI and disadvantageous to AirTouch, the combined
company would be better able to respond to the changes in the industry and
to take advantage of the opportunities that such changes might bring.
(x) The fact that, as a result of the Merger, holders of CCI Stock
will not receive the full benefit of any future growth in the value of
their equity that CCI may have achieved as an independent company, and the
potential disadvantage to holders of CCI Stock who receive Units in the
event that AirTouch does not perform as well in the future as CCI may have
performed as an independent company. In considering this factor, the CCI
Board considered the fact that the provisions of the Appraisal Process made
it unlikely, in the CCI Board's view, that CCI would continue as an
independent company.
In electing to approve the 1996 Merger Agreement, the CCI Board determined
that the Merger is a better alternative for CCI stockholders (other than
AirTouch) than the Appraisal Process. The CCI Board believed that all of the
factors set forth above tended to support this determination, although the CCI
Board, in considering factors (i), (iii), (iv) and (x), recognized that under
the possible scenario of continued favorable growth for CCI and favorable market
perception of the wireless industry, there certainly could be outcomes of the
Appraisal Process which would lead to more favorable valuation outcomes than the
1996 Merger Agreement. The Board concluded, however, that the probability of
such outcomes was not high enough to warrant the risk and uncertainty of
pursuing such course of action.
The CCI Board recognized that certain of the analyses in the joint
presentation of Wasserstein Perella and Donaldson, Lufkin & Jenrette, as well as
certain financial analyses prepared at various times by CCI employees, suggested
value scenarios in excess of the Board's view of the approximate value of the
Merger Consideration. The internal analyses were intended as preliminary
background information formulated as part of the exploration of the course of
action considered by CCI. While certain of such analyses by CCI employees
suggested valuations of CCI Stock as high as $156 per share, the analyses were
in many respects hypothetical and preliminary in nature, and dependent upon
assumptions and projections that were speculative and highly unlikely to occur.
The joint presentation presented analyses which produced values as high as $107
per share and as low as $24.06 per share; however, most of the analyses produced
values significantly lower than the highest and significantly higher than the
lowest end. The highest values indicated by such analyses do not reflect the
view of CCI's management or the CCI Board with respect to the actual current
value of CCI Stock or the likely outcome of the Appraisal Process as set forth
in the 1990 Merger Agreement.
The foregoing discussion of information and factors considered and given
weight by the CCI Board is not intended to be exhaustive but is intended to set
forth all material information related thereto. In view of the wide variety of
factors considered in connection with its evaluation of the terms of the Merger,
the CCI Board did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determinations. Schedule 13E-3 requires that the party to a Rule
13e-3 Transaction indicate whether the belief as to fairness is based on certain
specified factors. The
59
<PAGE> 63
CCI Board did consider certain of such factors in its analysis, including
current market price (which, as stated above, the CCI Board believed reflected,
to some extent, the market's perception of the possible range of outcomes of the
Appraisal Process), the joint presentation of Wasserstein Perella and Donaldson,
Lufkin & Jenrette and going concern value. In evaluating going concern value,
the CCI Board, referring to the joint presentation of Wasserstein, Perella and
Donaldson, Lufkin & Jenrette set forth below under "-- CCI Fairness Opinions of
Wasserstein Perella & Co., Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation -- Public Company Trading Analysis" noted that the current market
value of CCI reflected a per POP valuation of $300 compared to a range of
$116-229 for seven other domestic cellular operators (average $181 per POP). In
the CCI Board's view, this indicated that the market price of CCI Stock already
reflected an expectation of the Appraisal Process or some other extraordinary
transaction with AirTouch and that without such expectation and based purely on
going concern operating characteristics the market price of CCI Stock should
decrease to a level more compatible to other cellular operators. The amount of
such possible decrease was not quantified. The CCI Board assigned little or no
weight to historical market prices, net book value, liquidation value, earlier
purchase prices paid by AirTouch for CCI securities or, given the lack thereof,
offers by unaffiliated persons. The CCI Board gave little or no weight to
historical market prices because of changes both in the market for wireless
companies and general levels of valuation in the securities market in the past
several years, net book value because it would not reflect the significant
intangible value of CCI's licenses and goodwill and was not a customary method
of evaluating cellular companies, liquidation value because liquidation was not
an alternative available to CCI under the 1990 Merger Agreement, or earlier
purchase prices paid by AirTouch for CCI securities because they either were
made on the open market or pursuant to negotiations which occurred in 1990. The
CCI Board did note that the 1996 Merger Agreement was approved by all directors
not employees of CCI or AirTouch, and that the transaction is not structured so
that approval of at least a majority of unaffiliated securityholders is
required, but did not attribute significant weight to such factors. In addition,
individual members of the CCI Board may have given different weights to
different factors.
THE CCI BOARD, BY UNANIMOUS VOTE OF ALL DIRECTORS (OTHER THAN DIRECTORS
ELECTED BY AIRTOUCH, WHO DID NOT ATTEND OR PARTICIPATE IN THE MEETINGS AT WHICH
THE 1996 MERGER AGREEMENT WAS DISCUSSED AND APPROVED), RECOMMENDS THAT CCI
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE 1996 MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND FOR THE CCI RIGHTS
REDEMPTION. See "-- Certain Transactions; Conflicts of Interest."
As disclosed below under "-- CCI Fairness Opinions of Wasserstein Perella &
Co. Inc. and Donaldson, Lufkin & Jenrette Securities Corporation," Wasserstein
Perella and Donaldson, Lufkin & Jenrette were retained by the CCI Board in part
to assist CCI in the negotiations with AirTouch. Such retention was approved by
a vote of the CCI Board (with Messrs. Cox and Gyani absent). A majority of the
directors who are not employees of CCI did not retain an unaffiliated
representative to act solely on behalf of unaffiliated securityholders for the
purposes of negotiating the terms of the Merger and/or preparing a report
concerning the fairness of such transaction.
EFFECTS OF A FAILURE TO APPROVE THE MERGER
If the Merger is not approved, the Appraisal Process will commence in
August 1996, unless deferred for six months by CCI as a result of a calamitous
or severe adverse economic condition in the United States. The price that may be
received by holders of CCI Stock for their shares in the Appraisal Process
Redemption has not yet been determined and holders of CCI Stock will have no
right to approve or reject the Appraisal Process Redemption upon determination
of such price. There can be no assurance that holders of CCI Stock will be able
to obtain a value for their shares in the Appraisal Process which is higher than
the value of the Merger Consideration. Moreover, there can be no assurance that
the Appraisal Process Price will equal or exceed the public market trading
prices of the CCI Redeemable Stock at or about the date of the Appraisal Process
Redemption. Although the provisions of the 1990 Merger Agreement relating to the
Appraisal Process specify definitions of value and other considerations to be
taken into account, which are described in more detail in Annex I, they do not
specifically require the appraisers to adopt any particular valuation
methodology in reaching their conclusions as to value.
60
<PAGE> 64
Both CCI and AirTouch have certain rights of deferral in the Appraisal
Process. AirTouch will have the opportunity to cause up to two deferrals of
appraisals and therefore will have the opportunity to delay its right to cause
the Appraisal Process Redemption by requiring two additional appraisals. As a
result, AirTouch will have the opportunity to evaluate up to three different
appraisal values during the Appraisal Process prior to determining whether to
cause an Appraisal Process Redemption. As a result, the Appraisal Process
Redemption could occur as late as the fourth quarter of 1997 (assuming no
deferral by CCI). Moreover, AirTouch may elect not to exercise its right to
cause the Appraisal Process Redemption, in which case CCI is obligated to then
commence a process to sell CCI which will result in further deferrals.
CCI FAIRNESS OPINIONS OF WASSERSTEIN PERELLA & CO., INC. AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
On April 5, 1996, Wasserstein Perella and Donaldson, Lufkin & Jenrette
delivered a joint financial presentation to the effect, and their oral opinions
that, as of the date of such opinions, and subject to the various assumptions
and considerations set forth in such opinions, the Merger Consideration to be
received in the Merger by holders of CCI Stock other than AirTouch is fair from
a financial point of view to such holders. Wasserstein Perella and Donaldson,
Lufkin & Jenrette have confirmed their April 5, 1996 oral opinions by delivery
of their respective CCI Fairness Opinions. Wasserstein Perella and Donaldson,
Lufkin & Jenrette each noted in its Fairness Opinion that it was not expressing
any opinion as to the prices at which the AirTouch Class B Preferred Stock, or
AirTouch Class C Preferred Stock will actually trade at any time.
THE FULL TEXT OF EACH OF THE CCI FAIRNESS OPINIONS ARE ATTACHED HERETO AS
ANNEXES E AND F. HOLDERS OF CCI STOCK ARE URGED TO READ THE CCI FAIRNESS
OPINIONS IN THEIR ENTIRETY FOR INFORMATION WITH RESPECT TO THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY EACH
OF WASSERSTEIN PERELLA AND DONALDSON, LUFKIN & JENRETTE IN RENDERING ITS
FAIRNESS OPINION. REFERENCES TO THE CCI FAIRNESS OPINIONS HEREIN AND THE SUMMARY
OF THE CCI FAIRNESS OPINIONS SET FORTH BELOW ARE QUALIFIED BY ANNEXES E AND F,
WHICH ARE INCORPORATED HEREIN BY REFERENCE.
The CCI Fairness Opinions are directed only to the fairness from a
financial point of view to the holders of CCI Stock other than AirTouch of the
Merger Consideration pursuant to the Merger, and they do not address any other
aspect of the Merger. The CCI Fairness Opinions do not constitute a
recommendation to any holder with respect to whether to vote in favor of the
Merger and should not be relied upon by any holder of CCI Stock as such. No
limitations were imposed by CCI on the scope of Wasserstein Perella and
Donaldson, Lufkin & Jenrette's investigation or the procedures to be followed by
each of them in rendering their opinions. Neither Wasserstein Perella nor
Donaldson, Lufkin & Jenrette were authorized to, and they did not, solicit the
interest of any other party in acquiring CCI or its assets or investigate any
alternative transactions which may have been available to CCI. In addition,
neither Wasserstein Perella nor Donaldson, Lufkin & Jenrette were requested to,
and neither made, any recommendation to the CCI Board as to the form or the
amount of the consideration to be received in the Merger, which was determined
through arms'-length negotiations between CCI and AirTouch.
The CCI Fairness Opinions were prepared and delivered based upon conditions
as they existed and could be evaluated by each of Wasserstein Perella and
Donaldson, Lufkin & Jenrette as of the date thereof. In arriving at their
opinions, Wasserstein Perella and Donaldson, Lufkin & Jenrette each reviewed the
draft of the 1996 Merger Agreement dated April 4, 1996, the 1990 Merger
Agreement, certain publicly available financial and other information concerning
CCI and AirTouch, certain financial and operating information and projections
relating to CCI provided by management of CCI, and information concerning the
business, operations, assets, financial condition and future prospects of CCI
and AirTouch provided during discussions with management of CCI and AirTouch,
respectively.
At the April 5, 1996 meeting of the CCI Board, Wasserstein Perella and
Donaldson, Lufkin & Jenrette reviewed with the members of the CCI Board certain
financial, industry and market information with respect to CCI, the procedures
used and the analyses underlying the CCI Fairness Opinions. Wasserstein Perella
and Donaldson, Lufkin & Jenrette each arrived at their respective fairness
opinions based upon such procedures and analyses which were determined jointly
by Wasserstein Perella and Donaldson, Lufkin & Jenrette. In connection
61
<PAGE> 65
with their presentation to the CCI Board, Wasserstein Perella and Donaldson,
Lufkin & Jenrette provided the directors with a joint written report summarizing
such information, procedures and analyses. The full text of the report presented
to the CCI Board on April 5, 1996 is attached as an exhibit to Schedule 13E-3,
and is also available for inspection and copying at the principal offices of CCI
during CCI's regular business hours by any interested holder of CCI Stock or
such holder's representative who has been so designated in writing. The summary
set forth below does not purport to be a complete description of the CCI
Fairness Opinions or of Wasserstein Perella's and Donaldson, Lufkin & Jenrette's
joint financial presentation as set forth in an exhibit to Schedule 13E-3. The
preparation of a fairness opinion is a complex process that is not purely
mathematical and is not necessarily susceptible to partial analyses or summary
description. It involves complex considerations and judgments. Interested
holders of CCI Stock are encouraged to review the CCI Fairness Opinions in their
entirety and to obtain a copy of the Wasserstein Perella and Donaldson, Lufkin &
Jenrette report for a more complete description of the procedures used and the
analyses underlying the CCI Fairness Opinions.
In arriving at their opinions, Wasserstein Perella and Donaldson, Lufkin &
Jenrette each assumed and relied upon the accuracy of all the financial and
other information that was provided to, discussed with or publicly available to
each of them. Wasserstein Perella and Donaldson, Lufkin & Jenrette each also
relied upon the reasonableness and accuracy of the financial projections,
forecasts and analyses supplied to them by management of CCI and have assumed
that they were reasonably prepared in good faith on bases reflecting the best
currently available judgments and estimates of CCI's management and neither
Wasserstein Perella nor Donaldson, Lufkin & Jenrette expresses any opinion with
respect to such financial projections, forecasts and analyses. Wasserstein
Perella and Donaldson, Lufkin & Jenrette also did not assume any responsibility
for conducting a physical inspection of the properties or facilities of CCI, or
for making an independent evaluation or appraisal of the assets or liabilities
of CCI. In addition, Wasserstein Perella and Donaldson, Lufkin & Jenrette were
not authorized to, and did not solicit alternative offers for CCI or its assets,
or investigate any other alternative transactions which might be available to
CCI.
In performing their analyses for the CCI Fairness Opinions, Wasserstein
Perella and Donaldson, Lufkin & Jenrette each relied on numerous assumptions
made by the management of CCI, and made industry judgments of its own with
regard to the performance of CCI and New Par, industry performance, general
business and economic conditions and other matters, many of which are beyond
CCI's ability to control. Any estimates contained in such analyses are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested in the Wasserstein Perella
and Donaldson, Lufkin & Jenrette report. In addition, analyses relating to
values of companies do not purport to be appraisals or to reflect the prices at
which companies may actually be sold. Since such estimates are inherently
subject to uncertainty, none of CCI, Wasserstein Perella, Donaldson, Lufkin &
Jenrette or any other person assumes responsibility for their accuracy.
In connection with their presentation to the CCI Board on April 5, 1996,
advising the CCI Board of their opinion on April 5, 1996 and confirming their
opinions in writing on the date hereof, representatives of Wasserstein Perella
and Donaldson, Lufkin & Jenrette considered and discussed various financial and
other matters that they deemed relevant. General valuation considerations,
deemed to be relevant by Wasserstein Perella and Donaldson, Lufkin & Jenrette
include, without limitation, (i) wireless communication and demographic trends
as a whole in CCI's markets; (ii) CCI's historical financial and operating
performance and future prospects in the context of its business strategy, market
position and current and prospective competition; (iii) CCI's technological,
marketing and product strategy; (iv) projections for CCI and New Par provided by
CCI management; (v) CCI's size and asset mix; (vi) CCI's shared control of New
Par with AirTouch and the markets therein; (vii) the breadth and depth of the
potential acquisition universe for CCI; (viii) the potential public market
trading value of CCI as a stand-alone entity; (ix) publicly available
commentary, research and valuation estimates of industry analysts; (x)
AirTouch's ownership of a substantial economic interest in CCI; (xi) AirTouch's
ability to act as a buyer of the CCI public shares; and (xii) the Appraisal
Process scheduled to begin in August 1996.
The financial analyses underlying the CCI Fairness Opinions are outlined in
the Wasserstein Perella and Donaldson, Lufkin & Jenrette report and are
summarized below. The report contains reference ranges of implied prices per CCI
Common Equivalent Share based on Wasserstein Perella's and Donaldson,
62
<PAGE> 66
Lufkin & Jenrette's judgment of the data analyzed. These reference ranges
include reference points, implicit in the Merger Consideration, including a
multiple of earnings before interest, taxes, depreciation and amortization
("EBITDA") for 1995 of 18.2x, the estimated latest twelve months ("LTM") ending
June 30, 1996 EBITDA multiple of 16.3x, an estimated 1996 EBITDA multiple of
13.9x, an estimated LTM ending June 30, 1997 multiple of 12.7x, an estimated
1997 EBITDA multiple of 11.4x and a price of $322 per POP. ("POPs" refer to the
population of a market multiplied by a percentage ownership interest in an
entity licensed or designated to receive a license by the FCC to construct and
operate a cellular telephone system in such market. POPs do not represent actual
subscribers in a cellular system.)
These reference points were all considered in the context of the analyses
described below. Each of these analyses supports the conclusion in the
Wasserstein Perella and Donaldson, Lufkin & Jenrette CCI Fairness Opinions
because the Merger Consideration estimated at $55.00 per CCI Common Equivalent
Share for this purpose, and the per POP prices and the 1995 EBITDA, LTM EBITDA
ending June 30, 1996 and 1997, respectively, estimated 1996 EBITDA and estimated
1997 EBITDA multiples implied by the Merger Consideration, are within the
reference ranges for such prices and multiples calculated using public company
trading analysis, precedent merger and acquisition transactions analysis and
discounted cash flow analysis.
PUBLIC COMPANY TRADING ANALYSIS. Wasserstein Perella and Donaldson, Lufkin
& Jenrette reviewed, analyzed and compared certain operating, financial and
trading information of CCI and seven other publicly traded cellular companies
(AirTouch, Centennial Cellular Corp. ("Centennial"), CommNet Cellular, Inc.
("CommNet"), Palmer Wireless, Inc. ("Palmer"), United States Cellular
Corporation ("US Cellular"), 360(++) Communications Corporation ("360(++)
Comm.") and Vanguard Cellular Systems, Inc. ("Vanguard")), including market
values, adjusted market values (defined as market value plus debt, preferred
stock and minority interest less cash and cash equivalents) (also "enterprise
value"), estimated adjusted markets values of non-U.S. and non-cellular
operations, estimated adjusted market values of domestic cellular operations,
number of domestic POPs, estimated implied enterprise value per POP, and
multiples derived by dividing estimated adjusted market values of domestic
cellular operations by each of domestic cellular estimated 1995 EBITDA and
estimated 1996 EBITDA. These values and multiples, based on closing stock prices
on April 2, 1996, are set forth below.
<TABLE>
<CAPTION>
ENTERPRISE ENTERPRISE VALUE/ ENTERPRISE VALUE/
VALUE/POP 1995E EBITDA 1996E EBITDA
--------- ----------------- -----------------
<S> <C> <C> <C>
AirTouch......................... $ 209 13.1x 10.3x
Centennial....................... 116 12.7x 10.5x
CommNet.......................... 185 25.4x NA
Palmer........................... 229 14.1x 11.2x
US Cellular...................... 131 20.3x 14.2x
360(++) Comm..................... 222 NA NA
Vanguard......................... 176 18.8x 11.4x
AVERAGE........................ 181 17.4X 11.5X
</TABLE>
Wasserstein Perella and Donaldson, Lufkin & Jenrette noted, among other
things, that the trading pattern of the CCI Stock has been affected by the
anticipation of the Appraisal Process and that CCI lacks a precise analog among
publicly traded cellular companies due to its major-market presence and its lack
of international assets. Wasserstein Perella and Donaldson, Lufkin & Jenrette
noted that the per POP approach to analyzing the cellular industry has become
less influential among analysts than cash-flow multiples as the industry has
matured.
Based on the above values and multiples and in Wasserstein Perella's and
Donaldson, Lufkin & Jenrette's judgment, the appropriate reference ranges
derived from public company trading analysis were implied reference ranges of
multiples for CCI of 12.0x (Centennial) to 20.0x (US Cellular) estimated 1995
EBITDA and 10.0x to 13.0x estimated 1996 EBITDA, yielding a reference range of
implied public trading prices of $35.39 to $60.54 per CCI Common Equivalent
Share. The reference ranges of implied public company trading prices are not
based on a purely mathematical analysis, but also take into consideration a
qualitative analysis of each publicly traded company and Wasserstein Perella and
Donaldson, Lufkin & Jenrette's
63
<PAGE> 67
judgments concerning the likely trading position of CCI in such a market of
publicly traded cellular companies.
PRECEDENT MERGER AND ACQUISITION TRANSACTIONS. Wasserstein Perella and
Donaldson, Lufkin & Jenrette reviewed and analyzed selected going private
transactions and merger and acquisition transactions involving other companies
in the cellular industry that they deemed relevant. Wasserstein Perella and
Donaldson, Lufkin & Jenrette noted that, while there have been a number of
recent transactions in the cellular industry, the acquisition of LIN
Broadcasting ("LIN") by AT&T Corporation ("AT&T") is the most recent cellular
industry acquisition of comparable scale.
Wasserstein Perella and Donaldson, Lufkin & Jenrette performed an analysis
of the AT&T acquisition of LIN and indicated that, based on the final offer
price of $129.90 per LIN common share, the per POP price paid for LIN was $320
per POP, the multiple of estimated EBITDA for the 12-month period ending June
30, 1995 was 20.7x, the multiple of estimated EBITDA for the 12-month period
ending June 30, 1996 was 13.8x and the multiple of estimated EBITDA for the
12-month period ending June 30, 1997 was 11.2x. This analysis yielded an implied
price per CCI Common Equivalent Share of $54.70 based on per POP analysis,
$72.93 based on estimated EBITDA for the 12-month period ending June 30, 1996,
$59.86 based on estimated EBITDA for the 12-month period ending June 30, 1997
and $59.29 based on estimated EBITDA for the 12-month period ending June 30,
1998.
In addition to reviewing AT&T's acquisition of LIN, Wasserstein Perella and
Donaldson, Lufkin & Jenrette reviewed and analyzed selected transactions
involving other companies in the cellular industry that they deemed relevant,
including selected going private transactions. The transactions reviewed
included the following, which are listed by acquiror/seller: GTE
Corporation/Contel Cellular, Inc., SBC Communications, Inc./Associated
Communications Corporation, AT&T/McCaw Cellular Communications, Inc. and U S
WEST/U S WEST NewVector Group, Inc. Wasserstein Perella's and Donaldson, Lufkin
& Jenrette's analysis yielded an implied CCI Common Equivalent Share value
reference range of $89.71 to $102.41 based on estimated EBITDA for the 12 months
ending June 30, 1996, $62.49 to $107.05 based on estimated EBITDA for the 12
months ending June 30, 1997, and $24.06 to $48.24 based on per POP values and,
therefore, an overall implied value reference range of $24.06 to $107.05.
Because the market conditions and circumstances surrounding each of the
transactions analyzed were specific to each transaction, and because of the
inherent differences between the businesses, operations and market conditions of
AirTouch and the acquired businesses analyzed, Wasserstein Perella and
Donaldson, Lufkin & Jenrette believed it was inappropriate to, and therefore did
not, rely solely on the quantitative results of the analysis and, accordingly,
also made qualitative judgments concerning differences between the
characteristics of these transactions and the Merger that would affect the
acquisition values of AirTouch and such acquired companies.
DISCOUNTED CASH FLOW ANALYSIS. Wasserstein Perella and Donaldson, Lufkin &
Jenrette performed discounted cash flow analysis based on the financial
projections developed by New Par and provided by CCI management in mid-year
1995, with 1995 and estimated 1996 EBITDA values revised by New Par and provided
by CCI management. The analysis derives a range of present values per CCI Common
Equivalent Share as of August 1, 1996. The analysis uses an estimate, based on
New Par 1996 projections, of cash flows from August 1, 1996 to December 31,
1996, and New Par projections for 1997, 1998 and 1999. Wasserstein Perella and
Donaldson, Lufkin & Jenrette noted that given the nature of the cellular
industry, discounted cash flow valuation ranges are extremely sensitive to
changes in both operating assumptions and valuation parameters.
Wasserstein Perella and Donaldson, Lufkin & Jenrette believed it
appropriate to, and did, utilize a discount rate range of 9.0% to 15.0%.
Wasserstein Perella and Donaldson, Lufkin & Jenrette also believed it
appropriate to use terminal valuations based on multiple of terminal year (1999
in this case, since the New Par projections obtained from management of CCI were
through 1999) of 10.0x to 14.0x.
As determined by Wasserstein Perella and Donaldson, Lufkin & Jenrette, the
reference range values, taking into account CCI's 50% ownership of New Par, were
between $46.89 to $77.53 per CCI Common Equivalent Share. This reference range
implied a perpetuity growth rate of free cash flow of 4.1% to 11.2%.
64
<PAGE> 68
PRELIMINARY MERGER CONSEQUENCES ANALYSIS. Wasserstein Perella and
Donaldson, Lufkin & Jenrette performed preliminary pro forma analysis of the
proposed merger of CCI with AirTouch. CCI projections were obtained from CCI
management. AirTouch projections were based on publicly available institutional
equity analyst research and discussions with AirTouch management. AirTouch
management did not provide specific projections for 1996, 1997 and 1998.
As determined by Wasserstein Perella and Donaldson, Lufkin & Jenrette,
assuming, among other things, an 8% interest rate on acquisition debt and a tax
rate of 46.2% based on AirTouch's historical effective tax rate, the preliminary
pro forma merger consequences analysis yielded dilution of earnings per common
equivalent AirTouch share of 12.9%, 7.8% and 5.1% in 1996, 1997 and 1998,
respectively. The analysis yielded accretion of EBITDA per common equivalent
AirTouch share of 4.1%, 4.6% and 4.4% in 1996, 1997 and 1998, respectively. The
analysis also yielded accretion of EBITDA minus interest per common equivalent
AirTouch share of 0.9%, 1.5% and 1.6% for 1996, 1997 and 1998, respectively.
Wasserstein Perella and Donaldson, Lufkin & Jenrette also performed a
preliminary implied AirTouch value per share accretion analysis based on
illustrative trading multiples of AirTouch for 1996, 1997 and 1998, pro forma
post the Merger. The analysis yielded a dilution of 0.4% to an accretion of 1.8%
for 1996, accretion of 1.0% to 2.7% for 1997, and accretion of 2.0% to 2.7% for
1998.
In addition to the above outlined analyses, each of Wasserstein Perella and
Donaldson, Lufkin & Jenrette performed such other valuation analyses as it
deemed appropriate in determining the fairness to holders of CCI Stock other
than AirTouch of the Merger Consideration to be received in the Merger. Each of
Wasserstein Perella and Donaldson, Lufkin & Jenrette concluded, based on the
full range of their analyses, that the Merger Consideration to be paid in the
Merger was fair from a financial point of view to the holders of CCI Stock other
than AirTouch. However, each of Wasserstein Perella and Donaldson, Lufkin &
Jenrette noted in its Fairness Opinion that it was not expressing any opinion as
to the prices at which the AirTouch Class B Preferred Stock or AirTouch Class C
Preferred Stock will actually trade at any time.
Wasserstein Perella is an investment banking firm engaged, among other
things, in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings, and
secondary distributions of listed and unlisted securities and private
placements. Wasserstein Perella was selected to render its opinion regarding the
fairness of the consideration to be received by the holders of CCI Stock other
than AirTouch in the Merger because it is a nationally recognized investment
banking firm and because of its experience in the valuation of companies,
including companies in the cellular industry.
Donaldson, Lufkin & Jenrette is an investment banking firm engaged, among
other things, in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
and secondary distributions of listed and unlisted securities and private
placements. Donaldson, Lufkin & Jenrette was selected to render its opinion
regarding the fairness of the consideration to be received by the holders of CCI
Stock other than AirTouch in the Merger because it is a nationally recognized
investment banking firm and because of its experience in the valuation of
companies, including companies in the cellular industry.
TERMS OF WASSERSTEIN PERELLA'S ENGAGEMENT. Pursuant to the terms of an
engagement letter dated March 1, 1996, CCI agreed to pay Wasserstein Perella:
(i) a fee equal to $250,000, to be paid upon the signing of the engagement
letter (which fee has been paid); (ii) a fee equal to $750,000, to be paid on
the date on which, at CCI's request, Wasserstein Perella informed CCI that it
was prepared to render a CCI Fairness Opinion (which fee has been paid); (iii) a
fee equal to $250,000, to be paid upon mailing of this Proxy Statement; (iv) a
fee equal to $750,000, to be paid on the date on which Wasserstein Perella
informed CCI that it was prepared to render an updated CCI Fairness Opinion, if
requested by CCI, prior to the vote by CCI Stockholders on whether to approve
the Merger; and (v) a fee equal to $4,250,000 to be paid on the closing of the
Merger less any fee(s) paid pursuant to clauses (i), (ii), (iii) and (iv) above.
The engagement letter noted that CCI also had retained Donaldson, Lufkin &
Jenrette to act as a financial advisor with respect to the Merger. CCI also
agreed to reimburse Wasserstein Perella for its out-of-pocket expenses,
including reasonable fees and disbursements of its counsel. CCI agreed to
indemnify Wasserstein Perella and its affiliates, their
65
<PAGE> 69
respective directors, officers, partners, agents and employees and each person,
if any, controlling Wasserstein Perella or any of its affiliates against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, relating to or arising out of such engagement.
TERMS OF DONALDSON, LUFKIN & JENRETTE'S ENGAGEMENT. Pursuant to the terms
of an engagement letter dated March 1, 1996, CCI agreed to pay Donaldson, Lufkin
& Jenrette: (i) a fee equal to $250,000, to be paid upon the signing of the
engagement letter (which fee has been paid); (ii) a fee equal to $750,000, to be
paid on the date on which, at CCI's request, Donaldson, Lufkin & Jenrette
informed CCI that it was prepared to render a CCI Fairness Opinion (which fee
has been paid); (iii) a fee equal to $250,000, to be paid upon mailing of this
Proxy Statement; (iv) a fee equal to $750,000, to be paid on the date on which
Donaldson, Lufkin & Jenrette informed CCI that it was prepared to render an
updated CCI Fairness Opinion, if requested by CCI, prior to the vote by CCI
Stockholders on whether to approve the Merger; and (v) a fee equal to $4,250,000
to be paid on the closing of the Merger less any fee(s) paid pursuant to clauses
(i), (ii), (iii) and (iv) above. The engagement letter noted that CCI also had
retained Wasserstein Perella to act as a financial advisor with respect to the
Merger. CCI also agreed to reimburse Donaldson, Lufkin & Jenrette for its
out-of-pocket expenses, including reasonable fees and disbursements of its
counsel. CCI agreed to indemnify Donaldson, Lufkin & Jenrette and its
affiliates, their respective directors, officers, partners, agents and employees
and each person, if any, controlling Donaldson, Lufkin & Jenrette or any of its
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, relating to or arising out of
such engagement.
FAIRNESS OPINION OF LEHMAN BROTHERS
AirTouch has engaged Lehman Brothers to act as its financial advisor in
connection with the Merger and to render its opinion (the "Lehman Brothers'
Opinion") with respect to the fairness, from a financial point of view, to
AirTouch of the consideration to be paid by AirTouch in the Merger.
On March 26, 1996, Lehman Brothers participated telephonically in a meeting
among members of the AirTouch Board in connection with their evaluation of the
transactions contemplated by the proposed 1996 Merger Agreement and delivered
its oral opinion, which opinion was subsequently confirmed in writing, that, as
of such date and subject to certain assumptions, factors and limitations as
described below, from a financial point of view, the consideration to be paid by
AirTouch in the Merger was fair to AirTouch.
THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS, DATED APRIL 5,
1996, WHICH SETS FORTH ASSUMPTIONS MADE, FACTORS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS, IS ATTACHED AS ANNEX G TO THIS PROXY
STATEMENT-PROSPECTUS. THE SUMMARY OF THE LEHMAN BROTHERS' OPINION SET FORTH IN
THIS PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
No limitations were imposed by AirTouch on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion, except as described below. Lehman Brothers was not requested to and
did not make any recommendation to the AirTouch Board as to the form or amount
of consideration to be paid by AirTouch in the Merger, which was determined
through active negotiations between the parties. In arriving at its opinion,
Lehman Brothers did not ascribe a specific range of values to CCI, but made its
determination as to the fairness of the consideration to be paid by AirTouch on
the basis of the financial and comparative analyses described below. Lehman
Brothers' Opinion is for the use and benefit of the AirTouch Board and was
rendered to the AirTouch Board in connection with its consideration of the
Merger. Lehman Brothers was not requested to opine as to, and the Lehman
Brothers' Opinion does not in any manner address, (1) the fairness to CCI
Stockholders of the Merger Consideration to be paid by AirTouch, (2) AirTouch's
underlying business decision to proceed with or effect the Merger or (3) the
actual future result of the Appraisal Process set forth in the 1990 Merger
Agreement.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
1990 Merger Agreement, (2) the 1996 Merger Agreement, (3) the Certificates of
Designation, Preferences, and Rights relating to AirTouch Class B Preferred
Stock and AirTouch Class C Preferred Stock, (4) publicly available information
66
<PAGE> 70
concerning AirTouch, CCI and New Par that it believed to be relevant to its
inquiry, including without limitation, the Form 10-K dated December 31, 1995 for
each of AirTouch and CCI, (5) financial and operating information with respect
to the business, operations and prospects of New Par prepared by AirTouch or New
Par (including, in the case of the information prepared by New Par, historical
and projected financial information for New Par for the periods 1992-2000), as
the case may be, and furnished to Lehman Brothers in either case by AirTouch,
(6) the trading history of CCI's publicly traded stock from August 1991 to the
present, (7) the terms and trading histories of certain other publicly traded
convertible preferred securities that Lehman Brothers deemed relevant, (8) a
comparison of stock market trading data, historical financial results and
present financial condition of AirTouch and CCI with those of other companies
that Lehman Brothers deemed relevant, (9) a comparison of the financial terms of
the Merger with the financial terms of certain other transactions that Lehman
Brothers deemed relevant and (10) the terms of the Appraisal Process set forth
in the 1990 Merger Agreement and several hypothetical future appraisal values
for a share of CCI Common Stock as of the appraisal dates outlined in the 1990
Merger Agreement. In addition, Lehman Brothers had discussions with the
management of AirTouch and CCI concerning the business, operations, assets,
financial condition and prospects of CCI and undertook such other studies,
analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information. In arriving at its opinion, Lehman Brothers relied on financial
projections for New Par prepared by AirTouch and financial projections for New
Par prepared by New Par. With respect to such financial projections for New Par,
Lehman Brothers assumed that such projections were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
management of AirTouch and New Par, respectively, as to the future financial
performance of New Par. However, with AirTouch's consent, Lehman Brothers did
not conduct any discussions with the management of New Par concerning such
projections or the business, operations, assets, financial condition or
prospects of New Par. In arriving at its opinion, Lehman Brothers did not
conduct a physical inspection of the properties and facilities of CCI or New Par
and did not make or obtain any evaluations or appraisals of the assets or
liabilities of CCI or New Par. Lehman Brothers also assumed, with AirTouch's
consent, that the Merger would (a) not have any adverse impact on AirTouch
and/or CCI under any existing agreement to which AirTouch and/or CCI is a party,
including any agreement with U S WEST and (b) qualify as a tax-deferred
transaction without any adverse tax consequences to AirTouch or CCI. Lehman
Brothers did not express any opinion as to what the market value of AirTouch
Class B Preferred Stock or AirTouch Class C Preferred Stock will be when issued
pursuant to the 1996 Merger Agreement or the price at which AirTouch Class B
Preferred Stock or the AirTouch Class C Preferred Stock will actually trade
subsequent to the consummation of the Merger. Lehman Brothers' Opinion was
necessarily based upon market, economic and other conditions as any existed on,
and could be evaluated as of the date of the opinion.
In arriving at its fairness opinion, Lehman Brothers performed certain
financial and comparative analyses, as described below. None of these analyses
was presented to the AirTouch Board. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial and comparative analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its fairness
opinion, Lehman Brothers did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portions of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. In its analyses, Lehman Brothers
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of both AirTouch and CCI. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of the businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
67
<PAGE> 71
FINANCIAL TERMS OF THE MERGER. Lehman Brothers compared the terms of
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock with the
terms and trading histories of certain other publicly traded convertible
preferred securities that it deemed relevant. Utilizing this methodology,
assuming the consideration payable by AirTouch in the transaction to be
allocated among cash, AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock in approximately the following proportion: 30%, 35% and 35%, and
taking into account the terms of the collar on AirTouch Common Stock set forth
in the 1996 Merger Agreement, Lehman Brothers assumed for purposes of its
analysis the cost to AirTouch as of March 26, 1996 of the consideration payable
by AirTouch in the Merger to be $54.50 per share of CCI. As executed, the 1996
Merger Agreement provides that somewhat less than 35% of the consideration
payable by AirTouch in the transaction effectively will be allocated to the
AirTouch Class B Preferred Stock and that 72% rather than 70% of the overall
consideration will be payable in AirTouch Preferred Stock, Series 1996.
Lehman Brothers then calculated (i) a transaction multiple for the Merger
by comparing the total transaction value (i.e., market value of equity including
all CCI options based on the per share consideration in the Merger plus total
debt less cash, including cash from exercise of the options) for CCI in the
Merger to CCI's estimated 1996 EBITDA based on a January 1996 projection
prepared by New Par reflecting estimated 1996 New Par EBITDA of $375 million
(the "January 1996 New Par EBITDA Projection") and (ii) a per POP value for CCI
by comparing the total transaction value for CCI in the Merger to the number of
CCI's domestic POPS. Utilizing this methodology, Lehman Brothers calculated the
transaction EBITDA multiple for the Merger to be approximately 13.8x and the per
POP value to be approximately $319 (or, assuming the CCI options owned by
AirTouch, which were acquired for approximately $108 million in October 1995 and
January 1996 and which have an exercise price of approximately $15 per share,
are canceled rather than exercised, a transaction EBITDA multiple of
approximately 13.3x and a per POP value of approximately $307). The subsequent
analyses outlined in this Proxy Statement-Prospectus, are premised on all CCI
options being exercised rather than canceled. While, as part of its analyses,
Lehman Brothers also compared EBITDA multiples for comparable companies and
comparable transactions to the 13.3x transaction EBITDA multiple for the Merger,
Lehman Brothers' analyses outlined in this Proxy Statement-Prospectus are
premised on the exercise of all CCI options because Lehman Brothers believes
that analysts are more likely to analyze the transaction in such a manner.
COMPARABLE COMPANY ANALYSIS. Using publicly available information, Lehman
Brothers compared selected financial information, ratios and public market
multiples of CCI with similar data of seven other selected publicly traded
domestic cellular companies including AirTouch, Centennial, CommNet, Palmer,
U.S. Cellular, Vanguard, and 360(0) Comm. (collectively the "Comparable
Universe"). Lehman Brothers calculated the following multiples for each of the
above companies based on public market prices as of March 22, 1996: (i) the net
market capitalization (i.e., market value of equity plus total debt and
preferred stock less cash and less non-cellular and/or international assets)
(i.e., "Net Market Capitalization") divided by 1996 estimated domestic EBITDA as
determined by various research analysts and (ii) a per POP value (e.g., the Net
Market Capitalization divided by the number of domestic POPS). Utilizing this
methodology, Lehman Brothers calculated a range of EBITDA trading multiples of
11.3x to 15.2x (with an average of 12.6x) and a range of POP values of $123 to
$300 (with an average of $199). Applying the above average values and multiples
to the January 1996 New Par EBITDA Projection, Lehman Brothers derived the
implied equity value of CCI to be (i) $49.61 per share based on the EBITDA
trading multiples and (ii) $33.10 per share based on the per POP values. Lehman
Brothers believes that for more mature cellular companies a per POP approach to
analyzing the cellular industry is less determinative among analysts than
cash-flow multiples.
Because of the inherent differences between the businesses, operations and
prospects of CCI and the businesses, operations and prospects of the companies
included in the Comparable Universe, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis, and accordingly also made qualitative judgments concerning the
differences between the financial and operating characteristics of CCI and the
companies in the Comparable Universe that would affect the public trading values
of CCI and such other companies.
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information,
Lehman Brothers compared selected financial data with respect to the Merger
(including the transaction EBITDA multiple and per POP
68
<PAGE> 72
value) with similar data for five selected transactions in the domestic cellular
industry. The comparable transactions reviewed included the acquisition of
selected GTE cellular properties by Palmer Wireless, the acquisition of LIN by
AT&T, the acquisition of Contel Cellular by GTE, the acquisition of Associated
Communications Corporation by SBC Communications, Inc. and the acquisition of
McCaw Cellular by AT&T (the "Comparable Transaction Universe"). Using the same
methodology as in the analysis of financial terms of the Merger, Lehman Brothers
calculated the transaction year EBITDA multiples for the comparable transactions
to range between 13.1x to 20.9x (with an average of 16.0x) and the per POP
values to range between $191 to $314 (with an average of $239). Applying the
above average values and multiples to the January 1996 New Par EBITDA
Projection, Lehman Brothers derived the implied equity value of CCI to be (i)
$63.01 per share based on the EBITDA trading multiples and (ii) $40.26 per share
based on the per POP values.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction and because of the
inherent differences between the business operations and prospects of CCI and
the businesses, operations and prospects of the companies included in the
Comparable Transaction Universe, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis, and accordingly also made qualitative judgments concerning
differences between the characteristics of these transactions and the Merger
that would affect the acquisition value of CCI and such acquired companies.
DISCOUNTED CASH FLOW ANALYSIS. Lehman Brothers performed a discounted cash
flow analysis by calculating the present value as of August 1, 1996 (the
anticipated closing date of the Merger) of CCI based on the future streams of
unleveraged after-tax cash flows of New Par (since CCI is a 50% owner of New Par
and New Par is CCI's primary asset) utilizing projections for New Par prepared
by AirTouch and projections for New Par prepared by New Par. The projections
prepared by New Par estimate New Par's EBITDA from 1996 through 2000 at: $365.1
million (the January 1996 New Par EBITDA Projection was a standalone projection
for 1996 EBITDA which was orally transmitted to Lehman Brothers and accordingly
was not utilized by Lehman Brothers in its discounted cash flow analysis),
$474.9 million, $576.9 million, $661.7 million and $737.2 million, respectively.
In its analysis, Lehman Brothers assumed various factors including (i) discount
rates, (ii) terminal multiples and (iii) a terminal year of 2000 (in the case of
the projections prepared by New Par) and 2004 (in the case of the projections
prepared by AirTouch). Lehman Brothers estimated the discount rates and
multiples based on its analysis of companies engaged in businesses considered to
be comparable to those of AirTouch and CCI and based on several assumptions
regarding factors such as the inflation rate, interest rates and the inherent
business risks of CCI. Utilizing this methodology, Lehman Brothers derived the
implied equity value per share of CCI Common Stock to range between
approximately $50 and $70.
STOCK PRICE PERFORMANCE/EQUITY RESEARCH ANALYSTS' PRIVATE MARKET
VALUE. Lehman Brothers reviewed the trading history of CCI Common Stock from
the creation of New Par from 1991 to March 22, 1996. During that period, CCI's
publicly traded stock traded in a range of $29.75 to $55.75. In 1996, prior to
the date of Lehman Brothers' Opinion, CCI's publicly traded stock has traded as
low as $48.75 and as high as $51.75 per share.
Lehman Brothers also reviewed estimates of CCI's 1996 private market value
by several equity research analysts which reflect an estimated private market
value per share of CCI Common Stock ranging between $55.00 and $65.00 (with an
average value per share of CCI Common Stock of $60.97).
ANALYSIS OF HYPOTHETICAL FUTURE APPRAISAL VALUES. As part of Lehman
Brothers' ongoing analysis for AirTouch, Lehman Brothers calculated possible
future appraisal values for a share of CCI Common Stock for each of the three
possible appraisal dates (August 1996, February 1997 and August 1997). Utilizing
the January 1996 New Par EBITDA Projection and assuming various factors
including EBITDA multiples ranging from 10x to 16x, Lehman Brothers derived
potential future appraisal values for a share of CCI Common Stock to range
between approximately $38 and $97 per share as of their respective dates (which
if, for example, were discounted to April 1, 1996 using a 13% discount rate,
would range from approximately $36 to $83 per share with an average of
approximately $59 per share). These analyses were hypothetical and
69
<PAGE> 73
preliminary in nature, were dependent on the fulfillment of the assumptions and
projections utilized and were not intended to be an opinion by Lehman Brothers
as to the future appraisal value of a share of CCI Common Stock or the actual
future result of the Appraisal Process set forth in the 1990 Merger Agreement.
With AirTouch's consent, Lehman Brothers did not conduct any discussions with
the management of New Par concerning such projections or the business, assets,
financial conditions or prospects of New Par.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for corporate and for
other purposes. AirTouch selected Lehman Brothers to act as its financial
advisor in connection with the Merger because of its expertise, reputation and
substantial experience in transactions comparable to the Merger and because it
is familiar with AirTouch and its business.
In connection with Lehman Brothers' services as financial advisor to
AirTouch, AirTouch has paid Lehman Brothers to date $150,000 and has agreed to
pay Lehman Brothers an additional fee of $1,550,000 which will be contingent
upon the consummation of the Merger. In addition, in connection with the
rendering of financial advisory services to AirTouch with respect to the Merger,
AirTouch has agreed to reimburse Lehman Brothers for certain out-of-pocket
expenses incurred in connection with its services to AirTouch and to indemnify
Lehman Brothers and certain related persons against certain liabilities and
expenses in connection with the Merger, including liabilities under the federal
securities laws.
Lehman Brothers has performed various investment banking services for
AirTouch in the past (including acting as managing underwriter for AirTouch's
initial public offering and currently as a commercial paper dealer on behalf of
AirTouch) and has received customary fees for such services. Lehman Brothers has
also performed various investment banking services for CCI in the past
(including acting as financial advisor to CCI in connection with CCI's
negotiation with AirTouch of the 1990 Merger Agreement and rendering a fairness
opinion to CCI with respect thereto) and has received customary fees for such
services.
In the ordinary course of its business, Lehman Brothers actively trades in
the debt and equity securities of AirTouch and CCI for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
AIRTOUCH REASONS FOR THE MERGER AND FOR THE STRUCTURE
AirTouch entered into the 1996 Merger Agreement in order to acquire the CCI
Stock that it does not already own in an alternative transaction to the
Appraisal Process Redemption under the 1990 Merger Agreement. By entering into
the 1996 Merger Agreement, AirTouch will be able to acquire all of the CCI Stock
while avoiding the uncertainty, costs and time commitment related to the
Appraisal Process. Pursuant to the 1996 Merger Agreement, AirTouch will obtain
sole ownership of New Par and the cellular markets in Ohio and Michigan operated
by New Par at an earlier date than would have been possible by exercising its
redemption right under the 1990 Merger Agreement, enabling it more rapidly to
extend the AirTouch brand name into those markets and further its strategy of
increasing its national scale and scope. See "CERTAIN CONSIDERATIONS WITH
RESPECT TO THE MERGER AND OPERATIONS AFTER THE MERGER."
AirTouch and CCI structured the transaction described in this Proxy
Statement-Prospectus as a merger using a combination of cash and AirTouch
Preferred Stock, Series 1996 in order to allow AirTouch to acquire all of the
CCI Stock that it does not own in a single transaction while generally providing
the holders of CCI Stock with tax-free treatment with respect to the portion of
Merger Consideration received in the form of AirTouch Preferred Stock, Series
1996, as described in "-- Certain Federal Income Tax Consequences." By using
equity securities as a portion of the Merger Consideration, AirTouch will avoid
the need to borrow cash for the entire acquisition price, thereby preserving its
future borrowing capacity. AirTouch structured the AirTouch Preferred Stock,
Series 1996 as convertible preferred stock with conversion premiums of 24% and
25% in order to minimize dilution to holders of AirTouch Common Stock. In
deciding to approve the execution of the 1996 Merger Agreement, the AirTouch
Board also considered Lehman Brothers' oral opinion
70
<PAGE> 74
that, as of March 26, 1996 (subsequently confirmed in writing as of April 5,
1996), and subject to certain assumptions, factors and limitations, from a
financial point of view, the consideration to be paid by AirTouch in the Merger
was fair to AirTouch. See "-- Fairness Opinion of Lehman Brothers."
AirTouch has concluded that the Merger is fair both procedurally and
substantively to the CCI Stockholders, other than AirTouch and affiliates of
CCI. In arriving at this conclusion, AirTouch considered (i) the fact that the
Merger Consideration and the other terms and conditions of the 1996 Merger
Agreement resulted from active bargaining between AirTouch, on the one hand, and
CCI and its advisors, on the other, (ii) the unanimous determination, and the
basis therefor, of the CCI Board (excluding the two directors elected by
AirTouch, who did not participate) that the terms of the Merger are fair to, and
in the best interest of the CCI Stockholders (see "-- CCI Reasons For Merger;
Recommendation of the CCI Board), and (iii) the fact that the CCI Board had
received an opinion from each of its financial advisors that the Merger
Consideration to be received by the CCI Stockholders was fair to such holders
(see "-- CCI Fairness Opinions of Wasserstein Perella & Co., Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation"). AirTouch did not find it practical
to, and did not, quantify or otherwise attempt to assign relative weights to the
foregoing factors considered in reaching its conclusion regarding the fairness
of the terms of the Merger. Moreover, because AirTouch relied on the foregoing
factors for its conclusion, it did not consider current or historical market
prices, net book value, going concern value or liquidation value of CCI, or the
purchase prices previously paid by AirTouch for CCI Stock. Although AirTouch was
mindful of its relationship with CCI in reaching its conclusion, it did not view
such relationship as affecting the appropriateness of any of the foregoing
factors. Only two of CCI's ten directors, and none of CCI's management, are
representatives of AirTouch. CCI's negotiations were conducted by its management
and advisors, and neither AirTouch-appointed director participated in CCI's
board deliberations. Moreover, despite AirTouch's significant ownership interest
in CCI, it has voting discretion with respect to only approximately 5% of CCI's
total outstanding capital stock. The remaining shares owned by AirTouch are
required as a general matter under the terms of the 1990 Merger Agreement to be
voted in the same proportion as shares of CCI Stock voted by all other holders
thereof. In that regard, since the affirmative vote of a majority of the
outstanding voting shares of CCI Stock is required to approve the Merger,
AirTouch did not perceive the fact that the transaction is not structured to
require approval of at least a majority of unaffiliated securityholders as
affecting its conclusion. AirTouch did not request Lehman Brothers to opine as
to, and Lehman Brothers' opinion did not in any manner address, the fairness to
the holders of CCI Stock of the Merger Consideration. Lehman Brothers also made
no presentation to the AirTouch Board of the financial and comparative analyses
described under "-- Fairness Opinion of Lehman Brothers." The range of possible
values for CCI suggested by such analyses include per share values not only
lower than but also in excess of the Merger Consideration. In explaining its
analyses, Lehman Brothers has observed that its analyses must be considered as a
whole and that any estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable. AirTouch did not consider these Lehman
Brothers' analyses in reaching its conclusion regarding the fairness of the
terms of the Merger to unaffiliated holders of CCI Stock.
In connection with its consideration of a potential transaction with CCI,
AirTouch management periodically requested Lehman Brothers to prepare financial
analyses with respect to possible transaction scenarios, including the operation
of the terms of the 1990 Merger Agreement. These analyses were intended by
AirTouch only as background information as part of its exploration of various
courses of action available to AirTouch as it entered the final phase of its
relationship with CCI. These analyses were recognized by AirTouch to be
hypothetical analyses designed to respond to AirTouch's specific requests, were
preliminary in nature, were in many cases revised, were dependent on the
fulfillment of the assumptions and projections utilized in the particular
analysis and were not intended to be an opinion by Lehman Brothers as to the
future appraisal value of a share of CCI Common Stock or the actual future
result of the Appraisal Process set forth in the 1990 Merger Agreement. None of
these analyses was prepared with a view to disclosure to the AirTouch Board or
was ever presented to the AirTouch Board.
71
<PAGE> 75
MERGER CONSIDERATION
The 1996 Merger Agreement provides that, subject to the election and
allocation procedures provided for therein, each share of CCI Stock outstanding
immediately prior to the Effective Time (other than shares owned by AirTouch and
Dissenting CCI Stock) will be converted into the right to receive, for each CCI
Common Equivalent Share represented thereby:
(i) $55.00 in cash, without interest, or
(ii) a Unit of AirTouch Preferred Stock, Series 1996, having an
aggregate face amount of $55.00 consisting of (a) an amount of shares of
AirTouch Class B Preferred Stock equal to the Class B Per-Unit Amount and
(b) an amount of shares of AirTouch Class C Preferred Stock equal to the
Class C Per-Unit Amount, or
(iii) a combination of a fractional Unit and cash, together having an
aggregate face amount of $55.00.
Because the AirTouch Class B Preferred Stock and the AirTouch Class C
Preferred Stock will automatically separate at the Effective Time, holders of
CCI Stock at the Effective Time will not physically receive Units, but rather
only the underlying shares of AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock.
The face amount per share of the AirTouch Class B Preferred Stock is equal
to the Preferred Stock Issue Price. The face amount per share of the AirTouch
Class C Preferred Stock is equal to $50.00. CCI Stock held by AirTouch, which
represented approximately 37.6% of the outstanding CCI Stock at the Record Date,
will be canceled in the Merger without consideration. Of the remaining CCI Stock
outstanding immediately prior to the Effective Time, an aggregate of 28%
(subject to reduction to the extent of Dissenting CCI Stock) will be converted
into the right to receive cash, and an aggregate of 72% will be converted into
the right to receive Units. Holders of CCI Stock outstanding immediately prior
to the Effective Time will be entitled to elect to receive cash or Units in
exchange for their CCI Common Equivalent Shares, subject to proration as
described under "-- Election Procedures." The aggregate amount of CCI Stock to
be converted into the right to receive Units will be increased to up to 74% if
there is oversubscription for Units, as described under "-- Election
Procedures -- Excess Unit Elections." The Merger is conditioned on being a
tax-free reorganization and the number of CCI Common Equivalent Shares to be
exchanged for Units rather than cash will be increased to the extent necessary
to achieve tax-free treatment, as described below under "Adjustments to Preserve
Tax Status of Merger," provided that AirTouch shall not be required to exchange
Units for in excess of 80% of the CCI Common Equivalent Shares. Holders of
AirTouch Series B Preferred Stock may be entitled to receive a Contingent
Payment in the event that the Volume-Weighted Average Trading Price of the
AirTouch Class B Preferred Stock is not equal to a stipulated amount, as
described under "DESCRIPTION OF AIRTOUCH CAPITAL STOCK -- AirTouch Class B
Preferred Stock -- Contingent Payment." As of the Record Date, there were
26,054,228 CCI Common Equivalent Shares outstanding.
Although holders of CCI Stock outstanding immediately prior to the
Effective Time may receive, on a per CCI Common Equivalent Share basis, a Unit
with a face amount of $55.00, the face amount is not indicative of what the
actual aggregate market value of the AirTouch Class B Preferred Stock and
AirTouch Class C Preferred Stock constituting the Unit will be at the Effective
Time or any given time thereafter. Prior to the Effective Time, there will have
been no public market for these securities. The market value for each of the
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock will
fluctuate over the life of the security depending on numerous factors, including
the fair market value of AirTouch Common Stock, prevailing interest rates, terms
of comparable securities and general market conditions. There can be no
assurance that AirTouch Class B Preferred Stock or AirTouch Class C Preferred
Stock will trade at their face amounts. See "RISK FACTORS -- Securities-Related
Risks."
LIMITATIONS ON NUMBER OF SHARES OF AIRTOUCH CLASS B PREFERRED STOCK TO BE
ISSUED. The number of shares of AirTouch Class B Preferred Stock issued in the
Merger will in no event exceed the Class B Maximum (17,241,379 shares). AirTouch
Class B Preferred Stock issued upon conversions of the CCI Convertible Notes or
the exercise of outstanding CCI Options occurring, in either case, after the
Effective Time, will not be subject to the Class B Maximum. In the event that,
absent any adjustment, the number of shares of AirTouch Class B Preferred Stock
to be issued in the Merger would exceed the Class B Maximum,
72
<PAGE> 76
then instead of issuing shares of AirTouch Class B Preferred Stock in excess of
the Class B Maximum (the "Class B Excess") the composition of each Unit will be
adjusted as follows:
(i) The Class B Per-Unit Amount will be decreased by an amount equal
to (x) the Class B Excess, divided by (y) the number of Units to be issued
in the Merger (the "Class B Per-Unit Reduction"); and
(ii) The Class C Per-Unit Amount will be increased by an amount equal
to (x) the amount of the Class B Per-Unit Reduction, multiplied by (y) a
fraction, the numerator of which is the Class C Per-Unit Amount (prior to
making any adjustment hereunder) and the denominator of which is Class B
Per-Unit Amount (prior to making any adjustment hereunder).
This adjustment would have the effect of increasing the Class C Per-Unit
Amount and decreasing the Class B Per-Unit Amount (and thus increasing the
number of shares of AirTouch Class C Preferred Stock to be issued in the Merger
while limiting the number of shares of AirTouch Class B Preferred Stock to be
issued in the Merger to the Class B Maximum). Although the relative mix of
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock
constituting a Unit or a fraction of a Unit may change if this adjustment, which
is based on (i) the actual number of CCI Common Stock Equivalent Shares
outstanding immediately prior to the Effective Time and (ii) if applicable, an
oversubscription of Units, is made, it will not affect the aggregate face amount
of such AirTouch Preferred Stock, Series 1996 constituting a Unit, which is
$55.00. (In contrast, an adjustment to preserve the tax treatment of the Merger
would likely cause such aggregate face amount to differ from $55.00, as
described under "-- Adjustments to Preserve Tax Status of Merger"). However, the
face amount of each of the AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock constituting a Unit may not be indicative of the actual value of
such securities upon issuance at the Effective Time or subsequent thereto. Prior
to the Effective Time, there will have been no public market for these
securities. The market value for each of the AirTouch Class B Preferred Stock
and AirTouch Class C Preferred Stock will fluctuate over the life of the
security depending on numerous factors, including the fair market value of
AirTouch Common Stock, prevailing interest rates, terms of comparable securities
and general market conditions. There can be no assurance that the AirTouch Class
B Preferred Stock and AirTouch Class C Preferred Stock will trade at their face
amounts. See "RISK FACTORS -- Securities-Related Risks."
As of the Record Date, there were issued and outstanding shares of CCI
Stock representing 26,054,228 CCI Common Equivalent Shares. Based on this number
of CCI Common Equivalent Shares (and assuming that 72% of such shares are
converted into the right to receive Units), the formula described above would
adjust the Class B Per-Unit Amount from 0.948 to 0.919 and would adjust the
Class C Per-Unit amount from 0.550 to 0.567. Assuming the conversion of all
outstanding CCI Convertible Notes and the exercise of all CCI Options prior to
the Effective Time, the formula described above would further adjust the Class B
Per-Unit Amount to 0.820 and would further adjust the Class C Per-Unit Amount to
0.624.
NO FRACTIONAL SHARES. Each holder of shares of CCI Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of either of AirTouch Class B Preferred Stock or AirTouch
Class C Preferred Stock, after taking into account all certificates delivered by
such holder, will receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part multiplied by the Preferred Stock Issue Price (in
the case of the AirTouch Class B Preferred Stock) or $50.00 (in the case of the
AirTouch Class C Preferred Stock). No such holder shall be entitled to
dividends, voting rights or any other rights as a stockholder in respect of any
fractional share of either of AirTouch Class B Preferred Stock or AirTouch Class
C Preferred Stock.
ADJUSTMENTS TO PRESERVE TAX STATUS OF MERGER. If Pillsbury Madison & Sutro
LLP determines that the tax opinion of such firm required to be delivered to
AirTouch, as of the Effective Time (described under "Certain Federal Income Tax
Consequences") cannot be rendered as a result of the Merger potentially failing
to satisfy continuity of interest requirements under applicable federal income
tax principles relating to reorganizations under Section 368(a) of the Code,
then, to the minimum extent necessary to enable such tax opinion to be rendered:
(i) the Cash Election Number (the number of CCI Common Equivalent Shares to be
converted into the right to receive cash in the Merger) will be reduced and the
Unit Election Number (the number of CCI Common Equivalent Shares to be converted
into the right to receive Units in the Merger) will be correspondingly increased
on a share-for-share basis and (ii) the composition of each Unit will be
adjusted by recalculating the Class B Per-Unit Amount and the Class C Per-Unit
Amount pursuant to a formula, set
73
<PAGE> 77
forth immediately below, which would have the effect of increasing the Class C
Per-Unit Amount and decreasing the Class B Per-Unit Amount.
The adjusted Class B Per-Unit Amount will be calculated according to the
following formula:
Class B Shares Pre-Adjustment
-----------------------------------------------------
Units Pre-Adjustment + Additional Unit Amount
The adjusted Class C Per-Unit Amount will be calculated according to the
following formula:
Class C Shares Pre-Adjustment + Additional C Shares
-----------------------------------------------------------
Units Pre-Adjustment + Additional Unit Amount
As used herein, the following terms have the following meanings:
<TABLE>
<S> <C> <C>
Cash Reduction Amount
Additional C Shares = --------------------------
FMV-C Share
Cash Reduction Amount
Additional Unit Amount = --------------------------
$55.00
Cash Reduction Amount = (a) the amount of the reduction in the Cash
Election Number required to enable Pillsbury
Madison & Sutro LLP to render its tax opinion,
multiplied by (b) $55
Class B Shares Pre-Adjustment = (a) $500 million, divided by (b) the Preferred
Stock Issue Price
Class C Shares Pre-Adjustment = (a) (i) Units Pre-Adjustment, multiplied by $55.00,
minus, (ii) $500 million, divided by (b) $50.00
FMV-C Share = the fair market value of one share of AirTouch
Class C Preferred Stock determined in writing by
Lehman Brothers as of the Effective Time
Units Pre-Adjustment = Unit Election Number
</TABLE>
Lehman Brothers will determine the fair market value of a share of AirTouch
Class C Preferred Stock as of the Effective Time based upon market, economic and
other conditions as they exist as of the Effective Time including (1) the market
price of AirTouch Common Stock, (2) the interest rate environment, (3) the
market prices of other publicly traded convertible preferred securities, (4) the
market price of a share of AirTouch Class C Preferred Stock if a public trading
market exists in respect thereof and (5) such other factors as would customarily
be reviewed in similar transactions
The effect of the foregoing adjustment will be to increase the equity
component, and reduce the cash component, of the Merger Consideration, while
obtaining the same aggregate value of consideration to be delivered in the
Merger that would have resulted if no such adjustment had been made. As a result
of such adjustment, the aggregate face amount of the AirTouch Preferred Stock,
Series 1996 constituting a Unit would likely differ from $55.00. Notwithstanding
anything to the contrary contained in the 1996 Merger Agreement, in the event
that as a result of the foregoing adjustments, the Unit Election Number would
exceed 80% of the CCI Common Equivalent Shares outstanding immediately prior to
the Effective Time, then the AirTouch Board, in its sole discretion, may elect
to terminate the 1996 Merger Agreement. See "THE MERGER
AGREEMENT -- Termination; Effect of Termination."
Assuming CCI Common Equivalent Shares of 26,054,228 outstanding immediately
prior to the Effective Time, if no adjustment to preserve the tax treatment of
the Merger were made (and assuming no increase in the Unit Election Number
resulting from oversubscription of Units and no Dissenting CCI Stock), the Cash
Election Number would be 7,295,184 and the Unit Election Number would be
18,759,044, and if the maximum adjustment AirTouch is required to make to
preserve the tax treatment of the Merger were made,
74
<PAGE> 78
the Cash Election Number would be 5,210,846 and the Unit Election Number would
be 20,843,382. Assuming 30,495,078 CCI Common Equivalent Shares outstanding at
the Effective Time as a result of the conversion of all outstanding CCI
Convertible Notes and the exercise of all CCI Options, if no adjustment to
preserve the tax treatment of the Merger were made (and assuming no increase in
the Unit Election Number as a result of oversubscription of Units and no
Dissenting CCI Stock), the Cash Election Number would be 8,538,622 and the Unit
Election Number would be 21,956,456, and if the maximum adjustment AirTouch is
required to make to preserve the tax treatment of the Merger were made, the Cash
Election Number would be 6,099,016 and the Unit Election Number would be
24,396,062. For examples of how the Class B Per-Unit Amount and the Class C
Per-Unit Amount may be adjusted, see "SUMMARY -- The Merger -- Examples of
Merger Consideration Calculation."
ADJUSTMENTS FOR DILUTION AND OTHER MATTERS. The 1996 Merger Agreement
provides that if, prior to the Effective Time, CCI declares a stock dividend or
distribution upon or subdivides, split ups, reclassifies or combines the CCI
Stock, or declares a dividend, or makes a distribution, on the CCI Stock in any
security convertible into CCI Stock, an appropriate adjustment will be made to
the Per Share Cash Consideration and Per Share Unit Consideration. The 1996
Merger Agreement also provides that if, at the Effective Time, CCI has
outstanding more shares of CCI Stock than are contemplated by the representation
and warranty of CCI set forth in the Merger Agreement to be outstanding or
subject to subscription, option, stock-based or stock-related award or right,
warrant, right, conversion, exchange or other agreement, arrangement or
commitment of any character then, at the election of the AirTouch Board, the Per
Share Cash Consideration and the Per Share Unit Consideration will be
appropriately adjusted downward to obtain the same aggregate value of Merger
Consideration that would have resulted if such representation and warranty had
been true and correct at the Effective Time.
OTHER MATTERS RELATING TO CONVERSION OF CCI STOCK. All shares of CCI Stock
converted into the right to receive the Merger Consideration will no longer be
outstanding and will automatically be canceled and will cease to exist, and each
certificate previously representing any such shares will thereafter represent
the right to receive cash and/or a certificate representing the AirTouch
Preferred Stock, Series 1996 into which such shares of CCI Stock are
exchangeable. Certificates previously representing shares of CCI Stock will be
exchanged for cash and/or certificates representing whole shares of AirTouch
Preferred Stock, Series 1996 issued in consideration therefor upon the surrender
of such certificates as provided below, without interest. No fractional shares
of AirTouch Preferred Stock, Series 1996 will be issued, and, in lieu thereof, a
cash payment will be made as provided below.
For a description of the procedures for exchanging certificates for shares
of CCI Stock for certificates for shares of AirTouch Preferred Stock, Series
1996 and for payment of cash for shares of CCI Stock or in lieu of the issuance
of fractional shares, see "-- Procedures for Exchange of Certificates."
CCI CONVERTIBLE NOTES. The 1996 Merger Agreement provides that, at the
Effective Time, the CCI Convertible Notes will be assumed by the Surviving
Corporation. AirTouch and the Surviving Corporation will execute one or more
supplemental indentures as may be required pursuant to the terms of the
indenture relating to the CCI Convertible Notes.
TREASURY SHARES; SHARES HELD BY AIRTOUCH. Each share of CCI Stock held in
the treasury of CCI and each share of CCI Stock owned by AirTouch or any direct
or indirect wholly owned subsidiary of AirTouch or of CCI immediately prior to
the Effective Time will be canceled and extinguished without any conversion
thereof and no payment will be made with respect thereto.
CCI RIGHTS PLAN REDEMPTION CONSIDERATION. In addition to the Merger
Consideration which each holder of a share of CCI Stock will be entitled to
receive, $.01 in value per CCI Common Equivalent Share will be paid in
consideration of the CCI Rights Redemption. The CCI Rights Redemption Payment
will be paid with respect to each CCI Right upon surrender by such holder of the
certificate for the share of CCI Stock with which such CCI Right was associated
in the manner described below under "-- Procedures for Exchange of
Certificates."
75
<PAGE> 79
ELECTION PROCEDURES
Both the Cash Election Number and the Unit Election Number are fixed under
the terms of the 1996 Merger Agreement. The Cash Election Number will be equal
to (i) 28% of the number of CCI Common Equivalent Shares outstanding immediately
prior to the Effective Time, minus (ii) the number of CCI Common Equivalent
Shares represented by Dissenting CCI Stock. The Unit Election Number will be
equal to 72% of the number of CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time. In addition, the Unit Election Number
will be increased to up to 74% of the CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time and the Cash Election Number will be
correspondingly reduced in the event that there is oversubscription for Units,
as described under "-- Excess Unit Election." Both the Cash Election Number and
the Unit Election Number also will be subject to adjustment as discussed under
"-- Merger Consideration -- Adjustments to Preserve Tax Status of Merger."
ELECTION OF CONSIDERATION. Subject to the allocation procedures set forth
below, each record holder of shares of CCI Stock outstanding immediately prior
to the Effective Time will be entitled (i) to make a Cash Election (i.e., to
elect to receive cash for all of such shares); (ii) to make a Unit Election
(i.e., to elect to receive Units for all of such shares) or (iii) to make a
Non-Election (i.e., to indicate that such holder has no preference as to the
receipt of cash or Units for such shares). All such elections are to be made on
an Election and Transmittal Form. Holders of record of shares of CCI Stock who
hold such shares as Representatives (i.e., as nominees, trustees or in other
representative capacities) may submit multiple Election and Transmittal Forms,
provided that each such Representative certifies that each Election and
Transmittal Forms covers all the shares of CCI Stock held by such Representative
for a particular beneficial owner. All elections will be revocable until 5:00
p.m. New York time on the last business day prior to the Effective Time.
Holders of CCI Stock should consider that the conversion ratios and the
dividend rates of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock were determined based on the market price of AirTouch Common
Stock over a period prior to the date of mailing of this Proxy
Statement-Prospectus and prevailing interest rates at the time of the original
execution of 1996 Merger Agreement, respectively. Since the market price of
AirTouch Common Stock and interest rates are subject to fluctuation and,
depending on general market conditions, the combined market value of the
AirTouch Preferred Stock, Series 1996 underlying a Unit that holders of shares
of CCI Stock may receive in the Merger may be less than, greater than or equal
to $55.00. In addition, because of fluctuations in the value of AirTouch
Preferred Stock, Series 1996 the market value of the AirTouch Preferred Stock,
Series 1996 that holders of shares of CCI Stock may receive in the Merger may
increase or decrease following the Merger.
EXCESS CASH ELECTION. If the aggregate number of Cash Election Shares
(i.e., CCI Common Equivalent Shares covered by Cash Elections) exceeds the Cash
Election Number, then all shares of CCI Stock covered by Unit Elections and all
shares of CCI Stock covered by Non-Elections will be converted into the right to
receive Units and the shares of CCI Stock covered by Cash Elections will be
converted into the right to receive (i) an amount in cash, without interest,
equal to the product of (x) the Per Share Cash Consideration and (y) the Cash
Fraction, the numerator of which will be the Cash Election Number as so adjusted
and the denominator of which will be the total number of Cash Election Shares,
and (ii) a number of Units equal to the product of the Per Share Unit
Consideration multiplied by a fraction equal to one minus the Cash Fraction,
multiplied in each case by the number of CCI Common Equivalent Shares
represented by such shares.
EXCESS UNIT ELECTIONS. If the aggregate number of Unit Election Shares
(i.e., CCI Common Equivalent Shares covered by Unit Elections) exceeds the Unit
Election Number, then the Unit Election Number will be increased so that it
equals the number of Unit Election Shares (and the Cash Election Number will be
correspondingly decreased), provided that in no event shall such adjustment
cause the Unit Election Number to exceed 74% of the CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time. If, after giving effect to
the foregoing sentence, the number of Unit Election Shares still exceeds the
Unit Election Number, then all shares of CCI Stock covered by Cash Elections and
all shares of CCI Stock covered by Non-Elections will be converted into the
right to receive cash, and all shares of CCI Stock covered by Unit Elections
will be converted into the right to receive (i) a number of Units equal to the
Unit Fraction,
76
<PAGE> 80
the numerator of which will be the Unit Election Number (after giving effect to
the foregoing sentence) and the denominator of which will be the total number of
Unit Election Shares, and (ii) an amount in cash, without interest, equal to the
product of (x) the Per Share Cash Consideration and (y) a fraction equal to one
minus the Unit Fraction, multiplied in each case by the number of CCI Common
Equivalent Shares represented by such share.
INSUFFICIENT ELECTIONS. In the event that the number of Cash Election
Shares does not exceed the Cash Election Number and the number of Unit Election
Shares does not exceed the Unit Election Number, all shares of CCI Stock covered
by Cash Elections will be converted into the right to receive cash, all shares
of CCI Stock covered by Unit Elections will be converted into the right to
receive Units, and the shares of CCI Stock covered by Non-Elections, if any,
will be converted into the right to receive (i) an amount in cash, without
interest, equal to the product of (x) the Per Share Cash Consideration and (y)
the Non-Election Fraction, the numerator of which will be the excess of the Cash
Election Number over the total number of Cash Election Shares and the
denominator of which will be the excess of (A) the number of CCI Common
Equivalent Shares outstanding immediately prior to the Effective Time over (B)
the sum of the total number of Cash Election Shares and the total number of Unit
Election Shares and (ii) a number of Units equal to the product of (x) the Per
Share Unit Consideration and (y) a fraction equal to one minus the Non-Election
Fraction, multiplied in each case by the number of CCI Common Equivalent Shares
represented by such share.
BOTH THE PERCENTAGE OF CCI COMMON EQUIVALENT SHARES TO BE CONVERTED INTO
THE RIGHT TO RECEIVE CASH (INCLUDING DISSENTING CCI STOCK) AND THE PERCENTAGE OF
SUCH SHARES TO BE CONVERTED INTO THE RIGHT TO RECEIVE UNITS IN THE MERGER ARE
FIXED UNDER THE TERMS OF THE 1996 MERGER AGREEMENT. ACCORDINGLY, NO ASSURANCE
CAN BE GIVEN THAT AN ELECTION BY ANY GIVEN HOLDER OF CCI STOCK CAN BE
ACCOMMODATED. RATHER, THE ELECTION BY EACH HOLDER OF CCI STOCK WILL BE SUBJECT
TO THE RESULTS OF THE ALLOCATION AND PRORATION PROCEDURES DESCRIBED ABOVE.
AN ELECTION AND TRANSMITTAL FORM IS BEING SENT TO HOLDERS OF RECORD OF CCI
STOCK ON THE RECORD DATE. THE INSTRUCTIONS TO THE ELECTION AND TRANSMITTAL FORM
WILL SPECIFY THAT DELIVERY WILL BE EFFECTED AND RISK OF LOSS AND TITLE TO THE
CERTIFICATES REPRESENTING SHARES OF CCI STOCK WILL PASS, ONLY UPON PROPER
DELIVERY OF SUCH CERTIFICATES TO THE EXCHANGE AGENT. TO BE EFFECTIVE, AN
ELECTION AND TRANSMITTAL FORM MUST BE PROPERLY COMPLETED AND SIGNED AND MUST BE
RECEIVED BY THE BANK OF NEW YORK, AS EXCHANGE AGENT, ACCOMPANIED BY ALL STOCK
CERTIFICATES REPRESENTING SHARES OF CCI STOCK (OTHER THAN SHARES OF CCI SERIES B
PREFERENCE STOCK, WHICH ARE TO BE REDEEMED) HELD BY THE PERSON SUBMITTING SUCH
ELECTION AND TRANSMITTAL FORM NO LATER THAN 5:00 P.M. NEW YORK TIME ON THE LAST
BUSINESS DAY PRIOR TO THE EFFECTIVE TIME. THE EFFECTIVE TIME OF THE MERGER IS
ANTICIPATED TO OCCUR ON AUGUST 16, 1996. THUS, EACH HOLDER OF CCI STOCK SHOULD
DELIVER A PROPERLY COMPLETED ELECTION AND TRANSMITTAL FORM TO THE EXCHANGE AGENT
NO LATER THAN 5:00 P.M. NEW YORK TIME, ON AUGUST 15, 1996 (THE LAST BUSINESS DAY
IMMEDIATELY PRIOR TO THE ANTICIPATED EFFECTIVE TIME). NO ASSURANCE CAN BE GIVEN
THAT THE EFFECTIVE TIME WILL NOT BE DELAYED. AIRTOUCH AND CCI WILL ANNOUNCE
PUBLICLY ANY DELAY IN THE EFFECTIVE TIME AND THE NEW DATE BY WHICH ELECTION AND
TRANSMITTAL FORMS MUST BE SUBMITTED. ALL ELECTIONS MAY BE REVOKED UNTIL 5:00
P.M. NEW YORK TIME ON THE LAST BUSINESS DAY PRIOR TO THE EFFECTIVE TIME.
In the 1996 Merger Agreement, AirTouch and CCI have each agreed to use
their best efforts to mail an Election and Transmittal Form to all persons who
become holders of CCI Stock between the Record Date and 10:00 a.m., New York
time, on the fifth business days prior to the anticipated Effective Time and to
make an Election and Transmittal Form available to all persons who become
holders of CCI Stock subsequent to such date and not later than the close of
business on the business day prior to the Effective Time. Persons who become
holders of CCI Stock after the Record Date or any other holders of CCI Stock who
need an Election and Transmittal Form may obtain copies of the Election and
Transmittal Form upon request from the Exchange Agent either in writing by mail
at The Bank of New York, Reorganization Services, P.O. Box 11248, Church Street
Station, New York, NY 10286-1248, by hand or courier at The Bank of New York,
Reorganization Services, 101 Barclay Street, Receive and Deliver Window, Street
Level, New York, NY 10286, or by telephone at 1-800-507-9357.
77
<PAGE> 81
HOLDERS OF SHARES OF CCI STOCK THAT WISH TO SUBMIT AN ELECTION AND
TRANSMITTAL FORM MUST DELIVER THEIR STOCK CERTIFICATES WITH SUCH ELECTION AND
TRANSMITTAL FORM.
ANY HOLDER OF CCI STOCK THAT DOES NOT SUBMIT A PROPERLY COMPLETED ELECTION
AND TRANSMITTAL FORM ACCOMPANIED BY THE APPLICABLE STOCK CERTIFICATES WHICH IS
RECEIVED AND ACCEPTED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. NEW YORK TIME ON
AUGUST 15, 1996 (OR SUCH LATER DATE AS AIRTOUCH AND CCI SHALL PUBLICLY ANNOUNCE)
WILL BE DEEMED TO HAVE MADE A NON-ELECTION.
If AirTouch or the Exchange Agent determines that any purported Cash
Election or Unit Election was not properly made, such purported Cash Election or
Unit Election will be deemed to be of no force and effect and the holder of CCI
Stock making such purported Cash Election or Unit Election will, for purposes
hereof, be deemed to have made a Non-Election. Neither AirTouch or CCI nor the
Exchange Agent will be under any obligation to notify any person of any defect
in an Election and Transmittal Form.
Subsequent to the Effective Time, AirTouch will mail a letter of
transmittal to holders of record of CCI Stock immediately prior to the Effective
Time who did not deliver their stock certificates with an Election and
Transmittal Form for use in submitting such certificates for the cash and/or
Units which they are entitled to receive in exchange therefor. See
"-- Procedures for Exchange of Certificates."
The tax consequences of receiving cash and/or Units are different. See
"-- Certain Federal Income Tax Consequences."
TREATMENT OF CCI EMPLOYEE AND DIRECTOR STOCK OPTIONS
Pursuant to the 1996 Merger Agreement, CCI is required to use its
reasonable best efforts to obtain the written consent of each holder of options
outstanding under the CCI 1991 Stock Option Plan or the CCI Non-Employee
Director Stock Option Plan to the conversion procedure described in the next
paragraph. Each executive officer and director of CCI will consent to such
conversion procedure. In the event that a holder of options outstanding under a
CCI Option Plan fails prior to the Effective Time to consent to such conversion
procedure, the conversion procedure described in the second paragraph below will
be applied to such options.
CONSENTING OPTIONHOLDER PROCEDURE. If the optionholder consents, at and as
of the Effective Time AirTouch will substitute an AirTouch Common Option for
each CCI Option. Each AirTouch Common Option so substituted by AirTouch under
this Agreement will continue to be subject to substantially the same terms and
conditions set forth in the applicable CCI Option Plan and in the corresponding
CCI Option immediately prior to the Effective Time, including but not limited to
the immediate exercisability of all CCI Options, except that (i) such AirTouch
Common Option will be exercisable for that number of whole shares of AirTouch
Common Stock equal to the product of the number of shares of CCI Common Stock
that were purchasable under such CCI Option immediately prior to the Effective
Time multiplied by the Option Adjustment Ratio, rounded down to the nearest
whole number of shares of AirTouch Common Stock; and (ii) the per share exercise
price for the shares of AirTouch Common Stock issuable upon exercise of such
AirTouch Common Option will be equal to the quotient determined by dividing the
exercise price per share of CCI Common Stock at which such CCI Option was
exercisable immediately prior to the Effective Time by the Option Adjustment
Ratio and rounding the resulting exercise price up to the nearest whole cent.
The Option Adjustment Ratio will be equal to (A) the Volume-Weighted Average
Trading Price of a share of CCI Common Stock during the last five trading days
on which CCI Common Stock is traded before the Effective Time divided by (B) the
Volume-Weighted Average Trading Price of a share of AirTouch Common Stock during
such period.
NONCONSENTING OPTIONHOLDER PROCEDURE. If no consent is obtained, at and as
of the Effective Time AirTouch will substitute an AirTouch Preferred Option to
purchase one Unit for each CCI Option. Each AirTouch Preferred Option so
substituted by AirTouch will continue to be subject to substantially the same
terms and conditions set forth in the applicable CCI Option Plan and in the
corresponding CCI Option immediately prior to the Effective Time, including but
not limited to the immediate exercisability of all CCI Options. The per Unit
exercise price for the Unit issuable upon exercise of such AirTouch Preferred
Option
78
<PAGE> 82
will be equal to the exercise price per share of CCI Common Stock at which such
CCI Option was exercisable immediately prior to the Effective Time.
As soon as reasonably practicable after the Effective Time, AirTouch will
register the shares of AirTouch Common Stock and AirTouch Preferred Stock,
Series 1996 underlying the AirTouch Common Options and AirTouch Preferred
Options with the SEC on a Form S-8 and will keep such registration effective
until the exercise or termination of all AirTouch Common Options and AirTouch
Preferred Options. AirTouch will reserve for issuance a sufficient number of
shares of AirTouch Common Stock and AirTouch Preferred Stock, Series 1996 for
issuance upon exercise of the AirTouch Common Options and AirTouch Preferred
Options.
CERTAIN TRANSACTIONS; CONFLICTS OF INTEREST
Certain members of CCI's management and the CCI Board have interests in the
Merger in addition to their interests solely as CCI Stockholders, as described
below.
As set forth above in "-- Treatment of CCI Employee and Director Stock
Options," all CCI Options will be converted at the time of the Merger and
subject to the treatment described. Set forth below is the number (and
approximate weighted average exercise price) of the CCI Options held by
executive officers and directors of CCI:
<TABLE>
<CAPTION>
AVERAGE
CCI EXECUTIVE TOTAL EXERCISE
OFFICERS AND DIRECTORS OPTIONS PRICE
----------------------------------------------------------------- ------- --------
<S> <C> <C>
William B. Ginsberg.............................................. 205,500 $39.47
George S. Blumenthal............................................. 113,000 36.76
J. Barclay Knapp................................................. 113,000 36.76
Richard J. Lubasch............................................... 87,500 36.25
Leigh Costikyan Wood............................................. 162,500 40.69
Gregg Gorelick................................................... 87,500 38.63
C. Lee Cox....................................................... --
Mohan S. Gyani................................................... --
Ted H. McCourtney................................................ 21,250 40.45
Del Mintz........................................................ 21,250 40.45
Sidney R. Knafel................................................. 21,250 40.45
Alan J. Patricof................................................. 21,250 40.45
Warren Potash.................................................... 21,250 40.45
</TABLE>
The 1996 Merger Agreement provides that from and after the Effective Time,
AirTouch will cause the Surviving Corporation to (i) indemnify and hold harmless
the present and former officers and directors of CCI in respect of acts or
omissions occurring prior to the Effective Time to the extent provided under
CCI's Certificate of Incorporation and CCI By-laws in effect on April 5, 1996
and (ii) perform and fulfill all of CCI's obligations under the Indemnification
Agreements between CCI and certain persons (including each of the executive
officers and directors of CCI other than Messrs. Cox and Gyani) and in effect on
April 5, 1996. In addition, the 1996 Merger Agreement provides that, at all
times during the period April 5, 1996 through the Effective Time, CCI will
maintain in full force and effect its directors' and officers' insurance policy,
which was obtained at AirTouch's request prior to the execution of the 1996
Merger Agreement.
The 1996 Merger Agreement provides that as of the Effective Time, the
Cellular One Long-Term Incentive Plan (the "LTIP") will terminate, the stock
appreciation rights granted thereunder will vest in full and, within 45 days
following the Effective Time (or such shorter period as is reasonably
practicable, but no sooner than 30 days following the Effective Time), AirTouch
will cause all vested stock appreciation rights outstanding thereunder to be
paid in cash based on the closing prices of CCI Series A Common Stock and
AirTouch Common Stock on the termination of the LTIP, which will occur at the
Effective Time. Under the LTIP, and using July 8, 1996 as the calculation date
of the payment (for illustration purposes only),
79
<PAGE> 83
Messrs. Gorelick and Lubasch and Ms. Wood will receive payments of $61,250,
$79,625 and $79,625, respectively.
The 1996 Merger Agreement provides that, at or before the Effective Time,
CCI will cause the office lease for CCI's offices at 110 East 59th Street, New
York, New York (the "Headquarters Lease") to be terminated or novated, such that
after the Effective Time neither AirTouch nor the Surviving Corporation will
have any liability or obligation of any kind whatsoever with respect to the
Headquarters Lease. Neither CCI nor any subsidiary thereof is permitted to make,
or obligate itself to make, any payment to any person or entity including,
without limitation, the lessors in connection with such termination or novation.
CCI has a binding commitment from a former subsidiary, ICTL, for the assignment
thereto of the Headquarters Lease in the manner required. Each executive officer
of CCI (other than Mr. Ginsberg and Ms. Wood) and each director of CCI (other
than Messrs. Ginsberg, Cox and Gyani) is an executive officer and director,
respectively, of ICTL.
The 1996 Merger Agreement provides that, at or before the Effective Time,
CCI will sell, or cause to be sold, all office equipment, fixtures, furniture
and leasehold improvements owned by CCI and located at CCI's offices at 110 East
59th Street, New York, New York for net proceeds to CCI of not less than the
book value (approximately $1.9 million) of such equipment, fixtures, furniture
and leasehold improvements. CCI has a binding commitment from ICTL to purchase
such fixtures, furniture and leasehold improvements on the foregoing terms.
The Merger Agreement provides that CCI will use its best efforts to sell,
at or before the Effective Time, the capital stock (or all of the assets and
liabilities) of CCI Data, Inc. and CCI Sub, Inc. for proceeds to CCI of not less
than $2 million. (These entities own an interest in Celsat, Inc., a private
company engaged in developing and promoting satellite communications systems.)
It is possible that ICTL, CCII or CCPR (former affiliates of CCI) may be a buyer
of such assets although no agreement with respect thereto currently exists.
Certain executive officers and directors of CCI are directors, executive
officers and stockholders of these former affiliates.
OCOM Corporation (now ICTL), a subsidiary of a former affiliate of CCI, has
certain contractual arrangements with New Par which relate to the provision of
radio transmission services to New Par and rights to space on New Par's
transmission towers, which agreements are not affected by the Merger.
EFFECTIVE TIME
The Merger will become effective (the "Effective Time") when (i) a
Certificate of Merger has been duly prepared and executed by the Surviving
Corporation and delivered to the Secretary of State of the State of Delaware for
filing and (ii) an Agreement of Merger, together with related certificates, has
been duly prepared and executed by the Surviving Corporation and delivered to
the Secretary of State of California for filing, or at such later time as may be
specified in the Certificate of Merger or Agreement of Merger. The filings with
respect to the Merger will occur as soon as practicable after the second
business day after the satisfaction (or waiver, if permissible) of each
condition to the consummation of the Merger, or such later time as the parties
may mutually agree. See "THE MERGER AGREEMENT -- Conditions."
PROCEDURES FOR EXCHANGE OF CERTIFICATES
CCI STOCKHOLDERS THAT WISH TO SUBMIT AN ELECTION AND TRANSMITTAL FORM
SHOULD DELIVER THEIR STOCK CERTIFICATES TOGETHER WITH SUCH ELECTION AND
TRANSMITTAL FORM.
If a holder of CCI Stock does not submit such holder's stock certificates
with a properly completed Election and Transmittal Form by 5:00 p.m. New York
time on the last business day prior to the Effective Time, such holder will be
deemed to have made a Non-Election. Until surrendered, each certificate which
immediately prior to the Effective Time represented outstanding shares of CCI
Stock (the "Certificates") will be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the certificate
representing shares of AirTouch Preferred Stock, Series 1996 or cash, cash in
lieu of any fractional
80
<PAGE> 84
shares of AirTouch Preferred Stock, Series 1996 and any dividends or other
distributions to which such holder is entitled as described above. Holders of
CCI Stock who surrender a Certificate for cancellation to the Exchange Agent
together with such documents as may be required will receive in exchange for
such Certificate (i) a certificate representing that number of whole shares of
AirTouch Preferred Stock, Series 1996 which such holder has the right to receive
in respect of the shares of CCI Stock formerly represented by such Certificate;
(ii) cash to which such holder is entitled; (iii) cash in lieu of fractional
shares of AirTouch Preferred Stock, Series 1996; and (iv) any dividends or other
distributions to which such holder is entitled as described below, and the
Certificate so surrendered will forthwith be canceled. In the event of a
transfer of ownership of shares of CCI Stock which is not registered in the
transfer records of CCI, a certificate representing the proper number of shares
of AirTouch Preferred Stock, Series 1996 and/or cash may be issued and/or paid
to a transferee if the Certificate representing such shares of CCI Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
Promptly after completion of the election allocation and adjustment
procedures relating to the Merger Consideration, AirTouch will deposit or cause
to be deposited with the Exchange Agent the applicable amounts of AirTouch
Preferred Stock, Series 1996 and cash that comprise the Merger Consideration and
the CCI Rights Redemption Payment.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of AirTouch Preferred Stock, Series 1996 with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to AirTouch Preferred Stock, Series 1996
represented thereby, and no cash payment or cash payment in lieu of fractional
shares of AirTouch Preferred Stock, Series 1996 will be paid to any such holder,
until the holder of such Certificate surrenders such Certificate nor will such
holder have voting rights with respect thereto. Subject to the effect of
applicable laws, following surrender of any such Certificate, there will be paid
to the holder of the certificates representing whole shares of AirTouch
Preferred Stock, Series 1996 issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
AirTouch Preferred Stock, Series 1996 to which such holder is entitled and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of AirTouch
Preferred Stock, Series 1996 and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole share of AirTouch Preferred Stock,
Series 1996. All shares of AirTouch Preferred Stock, Series 1996 issued upon
conversion of the shares of CCI Stock (including any cash paid for fractional
shares) will be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of CCI Stock. No interest will be paid on the
consideration payable in the Merger.
Neither AirTouch nor CCI will be liable to any holder of CCI Stock for any
AirTouch Preferred Stock, Series 1996 (or dividends or distributions with
respect thereto) or cash in respect of shares of CCI Stock or in lieu of
fractional shares of AirTouch Preferred Stock, Series 1996 delivered to a public
official pursuant to any abandoned property, escheat or similar law.
Each holder of shares of CCI Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of AirTouch
Preferred Stock, Series 1996, after taking into account all certificates
delivered by such holder, will receive, in lieu thereof, cash (without interest)
in an amount equal to such fractional part of AirTouch Preferred Stock, Series
1996 multiplied by the Preferred Stock Issue Price (in the case of AirTouch
Class B Preferred Stock) or $50.00 (in the case of the AirTouch Class C
Preferred Stock). No such holder will be entitled to dividends, voting rights or
any other rights as a stockholder in respect of any fractional share of AirTouch
Preferred Stock, Series 1996.
After the Effective Time, there will be no transfers on the stock transfer
books of CCI of the shares of CCI Stock.
STOCK EXCHANGE LISTING
It is a condition to each party's obligation to consummate the Merger that
the shares of AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock to be issued in connection with the Merger be
81
<PAGE> 85
approved for listing on the NYSE, subject to official notice of issuance. See
"THE MERGER AGREEMENT -- Conditions -- Conditions to Obligations of AirTouch and
CCI."
ACCOUNTING TREATMENT
The Merger will be accounted for by AirTouch under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," ("APB No. 16"). Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. AirTouch currently
accounts for its investment in CCI in accordance with the equity method of
accounting. After the Effective Time, AirTouch will include CCI's results using
the consolidation method of accounting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences of (i) the Merger to a holder of CCI Stock and (ii) an
investment in shares of AirTouch Preferred Stock, Series 1996. The discussion
set forth below is for general information only and may not apply to a holder
subject to special treatment under the Code, such as a holder that is a bank, an
insurance company, a dealer in securities, a tax-exempt organization or that
acquired its shares of CCI Stock pursuant to the exercise of an employee stock
option or otherwise as compensation. In addition, this summary only applies to a
holder of CCI Stock (or AirTouch Preferred Stock, Series 1996 received in
exchange for CCI Stock) holding its shares of CCI Stock (or such AirTouch
Preferred Stock, Series 1996) as a capital asset and who is a U.S. citizen or
resident, a U.S. corporation, partnership or other entity created or organized
under the laws of the United States, or an estate or trust the income of which
is subject to U.S. taxation regardless of its source (a "Holder"). This summary
is based upon the Code, administrative pronouncements, judicial decisions, and
Treasury Regulations in effect as of the date hereof, all of which are subject
to change, retroactively or prospectively, and to differing interpretation. No
ruling will be requested from the Internal Revenue Service regarding the tax
consequences of the Merger and an investment in AirTouch Preferred Stock, Series
1996 and, accordingly, there can be no assurance that the Internal Revenue
Service will agree with the discussion of the tax consequences of the Merger or
of an investment in AirTouch Preferred Stock, Series 1996 set forth below. Due
to the uncertainty concerning some of the federal income tax consequences of the
Merger (see, for example, "-- Tax Consequences of the Merger -- Contingent
Payment Right") and due to the summary nature of the following discussion,
Holders are urged to consult their tax advisors as to the particular U.S.
federal income tax consequences to them of the Merger and an investment in
AirTouch Preferred Stock, Series 1996 and as to the foreign, state, local and
other tax consequences thereof.
As of the date hereof, it is intended that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and that
AirTouch, AirTouch Cellular and CCI will each be a party to that reorganization
under Section 368(b) of the Code. Consummation of the Merger is conditioned upon
the receipt by AirTouch of the opinion of Pillsbury Madison & Sutro LLP, counsel
to AirTouch, and by CCI of the opinion of Skadden, Arps, Slate, Meagher & Flom,
counsel to CCI, each dated the closing date, substantially to the effect that,
on the basis of facts, representations and assumptions set forth or referred to
in such opinions (including representations of AirTouch, AirTouch Cellular, CCI
and certain stockholders of CCI dated as of the closing date), the Merger will
be treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that AirTouch, AirTouch Cellular and
CCI will each be a party to that reorganization under Section 368(b) of the
Code. If Pillsbury Madison & Sutro LLP is unable to issue such an opinion
because of a concern that the Merger would not satisfy the "continuity of
interest" requirement for tax-free reorganization treatment, the Unit
consideration to be issued in the Merger will be increased to the minimum extent
necessary to enable such opinion to be issued and the cash consideration will
accordingly be reduced; provided, however, that AirTouch shall not be required
to issue additional Units in the event that the Unit Election Number, the
aggregate number of CCI Common Equivalent Shares to be converted into the right
to receive Units in the Merger, would exceed 80% of the number of CCI Common
Equivalent Shares outstanding immediately prior to the Effective Time. See
"SPECIAL FACTORS -- Adjustments to Preserve Tax Status of Merger." No assurances
can be given that
82
<PAGE> 86
certain matters, including matters relating to holders of significant amounts of
CCI Stock, will not prevent Pillsbury Madison & Sutro LLP and Skadden, Arps,
Slate, Meagher & Flom from delivering their respective opinions in the event
that Units were to be exchanged for 80% or less of the CCI Common Stock
Equivalent Shares outstanding immediately prior to the Effective Time. See
"Principal and Other Stockholders of CCI."
TAX FREE REORGANIZATION TREATMENT.
Assuming the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, it is the opinion of Pillsbury Madison & Sutro LLP
and Skadden, Arps, Slate, Meagher & Flom that the material U.S. federal income
tax consequences of the Merger will be as follows, except that for the reasons
set forth under the caption "-- Contingent Payment Right" such counsel are
unable to opine on the federal income tax consequences attendant to the
Contingent Payment and the Contingent Right (as defined under such caption).
Exchange of CCI Stock. As discussed below, the U.S. federal income tax
consequences of the Merger to a Holder will depend on whether the Holder
exchanges its CCI Stock for cash, AirTouch Preferred Stock, Series 1996, or a
combination thereof, and may further depend on whether (i) the Holder is deemed
to constructively own shares of CCI Stock under Section 318 of the Code (which
generally deems a person to own stock that is owned by certain family members or
related entities or that is the subject of an option or options owned or deemed
owned by such person), and (ii) the Holder actually or constructively owns any
AirTouch stock (including but not limited to AirTouch Common Stock).
Exchange Solely for Cash. In general, if pursuant to the Merger a Holder
exchanges all of the shares of CCI Stock actually owned by it solely for cash
(including pursuant to the exercise of its right to seek an appraisal), it will
recognize capital gain or loss equal to the difference between the amount of
cash received and its adjusted tax basis in the shares of CCI Stock surrendered.
That gain or loss generally will be long-term capital gain or loss if the Holder
held the shares of CCI Stock surrendered for more than one year as of the date
of the exchange. Gain or loss must be calculated separately for each block of
CCI Stock (shares of CCI Stock acquired at the same time in a single
transaction) held by a Holder. Interest, if any, awarded by a court to a
dissenting stockholder will be includible in such stockholder's income as
ordinary income for U.S. federal income tax purposes. If, however, any such
Holder constructively owns shares of CCI Stock that are exchanged for shares of
AirTouch Preferred Stock, Series 1996 in the Merger, or, possibly, owns shares
of AirTouch stock actually or constructively after the Merger, in unusual
circumstances the consequences to such Holder may be similar to the consequences
described below under the heading "Exchange for AirTouch Preferred Stock, Series
1996 and Cash," except that the amount of consideration, if any, treated as a
dividend would be limited to the amount of CCI's current and accumulated
earnings and profits (rather than being limited to the extent of the Holder's
ratable share of CCI's undistributed earnings and profits) and would not be
limited to the amount of such Holder's gain. In addition, under certain
circumstances, a Holder who actually owns no AirTouch stock but pursuant to
Section 318 of the Code constructively owns AirTouch stock may avoid such
attribution by filing a timely agreement with the Internal Revenue Service under
Section 302(c) of the Code. Because of the complexity of these rules, each
Holder that believes it may be subject to these rules should consult its tax
advisor.
Exchange Solely for AirTouch Preferred Stock, Series 1996. If pursuant to
the Merger a Holder exchanges all of the shares of CCI Stock actually owned by
it solely for shares of AirTouch Preferred Stock, Series 1996, it should not
recognize any gain or loss except in respect of cash received in lieu of a
fractional share of AirTouch Preferred Stock, Series 1996 (as discussed below).
The aggregate adjusted tax basis of the shares of AirTouch Preferred Stock,
Series 1996 received in that exchange (allocated between the AirTouch Class B
Preferred Stock and AirTouch Class C Preferred Stock in proportion to their
respective fair market values) will be equal to the aggregate adjusted tax basis
of the shares of CCI Stock surrendered therefor (adjusted with respect to
fractional shares), and the holding period of such AirTouch Preferred Stock,
Series 1996 will include the period during which such shares of CCI Stock were
held. If a Holder has differing bases and/or holding periods in respect of its
shares of CCI Stock, it should consult its tax advisor prior to the exchange
with regard to identifying the bases and/or holding periods of the particular
shares of AirTouch
83
<PAGE> 87
Preferred Stock, Series 1996 received in the exchange, since several methods of
determination may be available.
Exchange for AirTouch Preferred Stock, Series 1996 and Cash. If pursuant
to the Merger a Holder exchanges all of the shares of CCI Stock actually owned
by it for a combination of AirTouch Preferred Stock, Series 1996 and cash, the
Holder should recognize gain, but not loss, with respect to each block of CCI
Stock surrendered in an amount equal to the lesser of (i) the amount of gain
realized (i.e., the excess of the amount of cash and the fair market value of
AirTouch Preferred Stock, Series 1996 received that is allocable to such block
of CCI Stock over the tax basis of such block) and (ii) the amount of cash
received allocable to such block of CCI Stock. For purposes of such calculation,
the aggregate amount of cash and AirTouch Preferred Stock, Series 1996 received
by a Holder will be allocated proportionately among the shares of CCI Stock
surrendered. Any such recognized gain will be treated as capital gain unless the
cash received has the effect of the distribution of a dividend, in which case
the gain would be treated as a dividend to the extent of the Holder's ratable
share of CCI's undistributed earnings and profits.
In general, the determination as to whether the gain recognized in that
exchange will be treated as capital gain or dividend income depends upon whether
and to what extent that exchange reduces the Holder's deemed percentage stock
ownership of AirTouch. For purposes of that determination, the Holder is treated
as if it first exchanged all of its shares of CCI Stock solely for AirTouch
Preferred Stock, Series 1996 and then AirTouch immediately redeemed (the "deemed
redemption") a portion of such AirTouch Preferred Stock, Series 1996 in exchange
for the cash the Holder actually received. The gain recognized in that exchange
will be treated as capital gain if under Section 302 of the Code the deemed
redemption is (i) "not essentially equivalent to a dividend" or (ii)
"substantially disproportionate" with respect to the Holder.
Whether the deemed redemption is "not essentially equivalent to a dividend"
with respect to a Holder will depend upon the Holder's particular circumstances.
At a minimum, however, in order for the deemed redemption to be "not essentially
equivalent to a dividend," the deemed redemption must result in a "meaningful
reduction" in the Holder's deemed percentage stock ownership of AirTouch. In
general, that determination requires a comparison of (i) the percentage of the
outstanding stock of AirTouch the Holder is deemed actually and constructively
to have owned immediately before the deemed redemption and (ii) the percentage
of the outstanding stock of AirTouch the Holder is deemed actually and
constructively to have owned immediately after the deemed redemption. The
Internal Revenue Service has indicated in a published ruling that, in the case
of a small minority holder of a publicly held corporation who exercises no
control over corporate affairs, a reduction in the holder's proportionate
interest in the corporation from .0001118% to .0001081% would constitute a
meaningful reduction.
The deemed redemption will be "substantially disproportionate" with respect
to a Holder if the percentage of the outstanding voting stock of AirTouch
actually and constructively owned by the Holder immediately after the deemed
redemption (treating AirTouch Preferred Stock, Series 1996 acquired by AirTouch
in the deemed redemption as not outstanding) is less than 80% of the percentage
of the outstanding voting stock of AirTouch actually and constructively owned by
the Holder immediately before the deemed redemption (treating the AirTouch
Preferred Stock, Series 1996 acquired by AirTouch in the deemed redemption as
outstanding). However, the deemed redemption will not be treated as
substantially disproportionate unless the Holder's actual and constructive
ownership of AirTouch common stock immediately following and before the deemed
redemption also meets the 80% requirement of the preceding sentence.
In applying the foregoing tests, under certain attribution rules, a
stockholder is deemed to own stock owned and, in some cases, constructively
owned by certain family members, by certain estates and trusts of which the
Holder is a beneficiary, and by certain affiliated entities, as well as stock
subject to an option actually or constructively owned by the stockholder or such
other persons. As these rules are complex, each Holder that believes it may be
subject to these rules should consult its tax advisor.
Under the foregoing tests, in most circumstances, gain recognized by a
Holder that exchanges its share of CCI Stock for a combination of AirTouch
Preferred Stock, Series 1996 and cash is expected to be treated as capital gain,
and will be long-term capital gain if the holding period for such shares was
greater than one year as of the date of the exchange. Holders of CCI Stock who
receive such cash should, however, consult their
84
<PAGE> 88
own tax advisors to determine the proper treatment of such cash payments in
their individual situations (including the impact, if any, of CCI Stock or
AirTouch stock owned by related persons).
The aggregate tax basis of AirTouch Preferred Stock, Series 1996 (allocated
between AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock in
proportion to their respective fair market values) received by a Holder that
exchanges its shares of CCI Stock for a combination of AirTouch Preferred Stock,
Series 1996 and cash pursuant to the Merger, will be the same as the aggregate
tax basis of the shares of CCI Stock surrendered therefor, decreased by the cash
received and increased by any recognized gain (whether capital gain or dividend
income). The holding period of AirTouch Preferred Stock, Series 1996 will
include the holding period of the shares of CCI Stock surrendered therefor.
If a Holder has differing basis and/or holding periods in respect of its
shares of CCI Stock, it should consult its tax advisor prior to the exchange
with regard to identifying the particular basis and/or holding period of the
shares of CCI Stock to be sold in the exchange and the particular bases and/or
holding periods of the particular shares of AirTouch Preferred Stock, Series
1996 it receives in the exchange since several methods of determination may be
available.
Cash Received in Lieu of a Fractional Share. Cash received in lieu of a
fractional share of AirTouch Preferred Stock, Series 1996 will be treated as
received in redemption of such fractional share and gain or loss will be
recognized, measured by the difference between the amount of cash received and
the portion of the basis of the share of CCI Stock allocable to such fractional
interest. Such gain or loss will constitute capital gain or loss, and will be
long-term capital gain or loss if the holding period for such shares of CCI
Stock was greater than one year as of the date of the exchange.
Contingent Payment Right. The proper characterization of the Contingent
Payment and of the right of a Holder of AirTouch Class B Preferred Stock to the
Contingent Payment (the "Contingent Right") for federal income tax purposes is
uncertain under current law, and for that reason neither Pillsbury Madison &
Sutro LLP nor Skadden, Arps, Slate, Meagher & Flom is able to opine on the
federal income tax consequences attendant to the Contingent Payment and the
Contingent Right. The following discussion addresses only some of the possible
characterizations of the Contingent Payment and the Contingent Right and should
be used for general information purposes only. Accordingly, each Holder is urged
to consult with such Holder's own tax advisor regarding the tax consequences to
such Holder of the Contingent Right and the Contingent Payment.
If the Contingent Right is treated as an indivisible part of AirTouch Class
B Preferred Stock for federal income tax purposes, the Contingent Payment may be
characterized as a dividend to the Holders of such AirTouch Class B Preferred
Stock. Under such an analysis, if the Contingent Payment is made in cash, the
Contingent Payment would generally be taxed in the same manner as a cash
dividend as described below in "-- Tax Consequences of an Investment in AirTouch
Preferred Stock, Series 1996 -- Cash Dividends." However, if the Contingent
Payment is made in AirTouch Class C Preferred Stock or AirTouch Common Stock
("Contingent Payment Stock"), the Contingent Payment would generally be taxed in
the same manner as a distribution of stock. Subject to certain exceptions
discussed below, a distribution of Contingent Payment Stock generally would be
treated as a non-taxable distribution to the Holder. The Holder would be
required to allocate its basis in its AirTouch Class B Preferred Stock between
such AirTouch Class B Preferred Stock and the Contingent Payment Stock received
in proportion to their relative fair market values on the date of distribution
of the Contingent Payment Stock. There are several exceptions to the general
rule that stock distributions are generally non-taxable distributions. One such
exception arises in connection with a stock distribution that is made with
respect to "preferred stock." AirTouch Class B Preferred Stock should not,
however, be treated as preferred stock for purposes of such exception. Another
exception to the general rule may arise if a stock distribution, when viewed in
connection with other distributions made by a company to its stockholders has
the effect of the receipt of "property" by some stockholders and an increase in
the proportionate interest in the assets or earnings and profits of the
corporation by the other stockholders (a "disproportionate distribution"). For
additional discussion of these two exceptions, see "-- Tax Consequences of an
Investment in AirTouch Preferred Stock, Series 1996 -- Constructive Dividends."
A third exception to the general rule may arise upon the distribution of
convertible preferred stock unless it can be established that such distribution
would not have the effect of a disproportionate distribution. It is unclear
whether any of the
85
<PAGE> 89
foregoing exceptions apply. However, in the event that any such exception does
apply to all or any portion of a distribution of Contingent Payment Stock with
respect to AirTouch Class B Preferred Stock, such distribution of the Contingent
Payment Stock would be taxable as ordinary dividend income to the extent of
AirTouch's current and accumulated earnings or profits. To the extent that the
distribution of Contingent Payment Stock is taxable as a dividend, a Holder's
basis in such Contingent Payment Stock would equal the fair market value of such
Contingent Payment Stock on the date of distribution.
If the Contingent Right is not treated for federal income tax purposes as
an indivisible part of AirTouch Class B Preferred Stock but is instead treated
as a separable property right, for federal income tax purposes the Contingent
Right may be characterized as additional consideration in the reorganization.
Although by no means certain, the most likely consequence of such treatment to a
Holder that exchanges CCI Stock for AirTouch Preferred Stock, Series 1996 would
be as follows: (i) the Holder would be required to take the fair market value at
the Effective Time of the Contingent Rights received (the "Contingent Rights
Value") into account (in addition to any cash received in the exchange) for
purposes of determining (a) the amount of gain recognized (and the amount of
gain or loss realized) in the exchange, and (b) whether any gain recognized in
the exchange will be treated as capital gain or dividend income; (ii) the
aggregate tax basis of AirTouch Preferred Stock received by each Holder in the
exchange would be decreased by the Contingent Rights Value of the Contingent
Rights received in the exchange; (iii) the Holder would obtain a tax basis in
the Contingent Rights equal to the Contingent Rights Value; (iv) a Holder of the
Contingent Right would generally recognize gain or loss on the sale or exchange
of the Contingent Right equal to the difference between the amount realized with
respect to such Contingent Right and such Holder's tax basis in the Contingent
Right sold or exchanged; (v) upon maturity of the Contingent Right, a Holder
would generally recognize gain or loss in an amount equal to the difference
between the amount of the Contingent Payment and such Holder's tax basis in the
Contingent Right; (vi) any gain or loss upon sale or exchange or maturity of the
Contingent Right generally would be characterized as capital gain or loss if
such Contingent Right is held as a capital asset; (vii) certain Holders such as
taxpayers using an accrual method of accounting and regulated investment
companies may be required to characterize a portion of the Contingent Payment as
acquisition discount; (viii) a Holder of a Contingent Right may be considered to
hold a "straddle" for federal income tax purposes in which the Contingent Right
constitutes an offsetting position with respect to AirTouch Class B Preferred
Stock such that, for purposes of determining whether capital gain or loss upon
disposition of such property is treated as long-term or short-term capital gain
or loss, such Holder may not be allowed to take into account any holding period
with respect to which one position resulted in a substantial diminution in the
risk of loss with respect to the other position (resulting in, among other
things, the characterization of any gain or loss upon the sale or exchange or
maturity of a Contingent Right as short-term gain or loss); and (ix) with
respect to corporate Holders, rules similar to the straddle rules could result
in a suspension of the holding period necessary in order for such Holder to be
eligible for the dividends received deduction.
Another possible characterization of the Contingent Payment is as a
purchase price adjustment to the original Merger Consideration (as compared to a
distribution with respect to AirTouch Class B Preferred Stock or as a separable
property right). Under such an analysis, if Contingent Payment Stock is issued
to the original Holder of the Contingent Right, such Holder could arguably be
taxed as if AirTouch Class B Preferred Stock had been received by such Holder as
of the closing date (at least to the extent that such Holder is not subject to
the acquisition discount rules which may apply to certain taxpayers, such as
taxpayers using an accrual method of accounting and regulated investment
companies).
AS DESCRIBED ABOVE, FOR FEDERAL INCOME TAX PURPOSES THE CHARACTERIZATION
AND TREATMENT OF THE CONTINGENT PAYMENT AND THE CONTINGENT RIGHT IS UNCERTAIN
AND COMPLEX. EACH HOLDER OF AIRTOUCH CLASS B PREFERRED STOCK IS STRONGLY URGED
TO CONSULT ITS OWN TAX ADVISOR.
Additional Considerations. In addition, a Holder who receives AirTouch
Preferred Stock, Series 1996 could be subject to special rules under Section 306
of the Code on the sale, exchange, redemption or other disposition thereof if
the receipt of cash in lieu of such stock would have been treated as a dividend
under the Section 302 rules described above. Each Holder of CCI Stock should
consult its tax advisor on the potential application of Section 306 to the
receipt of AirTouch Preferred Stock, Series 1996.
86
<PAGE> 90
Consequences to AirTouch, AirTouch Cellular and CCI. None of AirTouch,
AirTouch Cellular or CCI will recognize gain or loss as a result of the Merger.
FAILURE OF REORGANIZATION TREATMENT.
Neither AirTouch nor CCI intends to waive its condition to closing of the
Merger that it shall have received an opinion of Pillsbury Madison & Sutro LLP
and Skadden, Arps, Slate, Meagher & Flom, respectively, dated the closing date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth or referred to in such opinion, for federal income tax
purposes, the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. If, however, AirTouch and CCI were to waive their
respective conditions and proceed on a basis in which the Merger fails to be
treated for federal income tax purposes as a reorganization under Section 368(a)
of the Code, then it is the opinion of Pillsbury Madison & Sutro LLP and
Skadden, Arps, Slate, Meagher & Flom that the material U.S. federal income tax
consequences of the Merger will be as follows except that, due to uncertainty as
to the proper characterization of the Contingent Payment and the Contingent
Right, such counsel are unable to opine on the federal income tax consequences
attendant to the Contingent Payment and the Contingent Right. Such consequences
also would be the case if it is ultimately determined that the Merger is taxable
irrespective of the opinions of counsel.
If the Merger does not qualify as a reorganization under Section 368(a) of
the Code, whether by virtue of failure to meet the continuity of interest test
or otherwise, then, subject to the discussion below, for federal income tax
purposes the Merger would be disregarded and the transaction would be treated,
in effect, as a taxable disposition of CCI Stock by the Holders thereof in
exchange for the Merger Consideration as if the Holders had sold their CCI Stock
for an amount of cash equal to the fair market value of the Merger Consideration
received in exchange therefor. In such case:
(a) Each Holder of CCI Stock, including Holders continuing to hold
AirTouch Preferred Stock, Series 1996 received in the Merger, would
generally recognize gain or loss equal to the difference between such
Holder's basis of the CCI Stock surrendered and the fair market value of
the Merger Consideration received. Such gain or loss generally would be
long-term capital gain or loss if the CCI Stock were held as a capital
asset and for more than one year as of the date of the Effective Time;
(b) Each Holder of CCI Stock would have a basis in the AirTouch
Preferred Stock, Series 1996 received equal to the fair market value of
such AirTouch Preferred Stock, Series 1996 as of the Effective Time;
(c) A Holder's holding period for the AirTouch Preferred Stock, Series
1996 received in the Merger would not include any period of time during
which the surrendered CCI Stock was held;
(d) Gain equal to the difference between CCI's basis in its assets and
the fair market value of CCI's assets would be recognized by CCI as a
result of the exchange; and
(e) No gain or loss would be recognized by AirTouch or the Surviving
Corporation as a result of the exchange (although the Surviving Corporation
as a result of the Merger would assume the tax liabilities of CCI
associated with the gain recognized by CCI and described in (d) above).
The proper characterization of the Contingent Payment and the Contingent
Right for federal income tax purposes is uncertain under current law, and the
timing and the characterization of any gain or loss recognized with respect to
the Contingent Payment and the Contingent Right may differ from that described
with respect to the Merger Consideration.
A CCI Stockholder who perfects dissenters' rights and receives payment for
such CCI Stockholder's shares would be treated in the same manner discussed
above in connection with reorganization treatment under the Code. See "--Tax
Free Reorganization Treatment."
BACKUP WITHHOLDING. Unless a Holder complies with certain reporting and/or
certification procedures or is an "exempt recipient" (i.e., in general,
corporations and certain other entities), the Holder may be subject to
withholding tax of 31% with respect to any cash payments received pursuant to
the Merger. Foreign stockholders should consult with their own tax advisors
regarding withholding taxes in general.
87
<PAGE> 91
TAX CONSEQUENCES OF AN INVESTMENT IN AIRTOUCH PREFERRED STOCK, SERIES 1996.
Cash Dividends. Any cash dividends that are paid in respect of AirTouch
Preferred Stock, Series 1996, to the extent paid out of AirTouch's current and
accumulated earnings and profits, will be taxable as ordinary income. Corporate
Holders generally will qualify for the dividends-received deduction with respect
to such dividends, subject to the minimum holding period and other applicable
requirements. To the extent that AirTouch does not have sufficient current or
accumulated earnings and profits, all or a portion of any distribution made with
respect to AirTouch Preferred Stock, Series 1996 in any particular year will not
qualify as a dividend for U.S. federal income tax purposes and, as a result,
will not be eligible for the dividends-received deduction. A distribution in
respect of AirTouch Preferred Stock, Series 1996 that does not constitute a
dividend for U.S. federal income tax purposes will represent a non-taxable
distribution to the extent of the Holder's basis in its AirTouch Preferred
Stock, Series 1996 (correspondingly reducing such Holder's basis in such
Holder's shares of stock) and, to the extent such distributions exceed the
Holder's basis in such stock, a capital gain.
Under certain circumstances, a corporate stockholder that receives
"extraordinary dividends," as defined in Section 1059(c) of the Code, is
required to reduce its tax basis in the stock on which such dividends are paid
by the non-taxed portion of such dividends. For this purpose, under Section
1059(f) of the Code, any dividend with respect to "disqualified preferred stock"
is treated as an "extraordinary dividend." Generally, quarterly dividends not in
arrears paid to an original Holder of AirTouch Preferred Stock, Series 1996 will
not constitute extraordinary dividends under Section 1059(c) of the Code. In
addition, although the issue is not free from doubt, AirTouch Preferred Stock,
Series 1996 should not constitute "disqualified preferred stock" under Section
1059(f) of the Code.
Mandatory or Optional Conversion of AirTouch Class B Preferred Stock into
AirTouch Common Stock; Optional Conversion of AirTouch Class C Preferred Stock
into AirTouch Common Stock. Except as provided below, gain or loss will not be
recognized by a Holder upon the mandatory or optional conversion, as the case
may be, of its AirTouch Preferred Stock, Series 1996 for shares of AirTouch
Common Stock. Dividend income may be recognized at such time, however, to the
extent cash or AirTouch Common Stock is received in payment of accrued and
unpaid dividends, provided that AirTouch has sufficient current or accumulated
earnings and profits.
A Holder who receives cash in lieu of a fractional share of AirTouch Common
Stock upon conversion of its AirTouch Preferred Stock, Series 1996 will be
treated as having first received such fractional share and as having then
exchanged such fractional share for cash in a taxable transaction. Gain or loss
will be recognized, measured by the difference between the amount of cash
received and the portion of the basis of the share of AirTouch Preferred Stock,
Series 1996 allocable to such fractional interest. Such gain or loss will
constitute capital gain or loss.
Generally, a Holder's basis in AirTouch Common Stock received upon the
conversion of AirTouch Preferred Stock, Series 1996 (other than AirTouch Common
Stock, if any, taxed as a dividend upon receipt as described above) will equal
the Holder's adjusted basis in its converted shares of AirTouch Preferred Stock,
Series 1996. The holding period of such AirTouch Common Stock will include the
holding period of the converted shares of AirTouch Preferred Stock, Series 1996.
Adjustments of the Conversion Rates. Certain possible future adjustments
of the conversion rates to reflect AirTouch's issuance of certain rights,
warrants or evidence of indebtedness, or distributions of securities or other
assets to holders of AirTouch Common Stock may result in constructive
distributions taxable as dividends to the holders of AirTouch Preferred Stock,
Series 1996 (to the extent that AirTouch has current and accumulated earnings
and profits) which may constitute (and cause other dividends to constitute)
"extraordinary dividends" to corporate holders as described above.
Constructive Dividends. Under Section 305 of the Code, if the mandatory
redemption price at maturity of stock exceeds its issue price, such redemption
premium may be considered a constructive stock distribution taxable as a
dividend (to the extent of current and accumulated earnings and profits) over a
specified period. An exception to this rule exists for a redemption premium that
does not exceed a de minimis amount equal to
88
<PAGE> 92
the product of (i) one-quarter of one percent of the mandatory redemption price
and (ii) the number of complete years from the date of issuance of such stock to
the maturity date. AirTouch and CCI, based on advice of their respective
financial advisors, currently expect that the Call Price at the Class C Maturity
Date with respect to AirTouch Class C Preferred Stock will not exceed its issue
price by more than the de minimis amount. If such is the case, AirTouch Class C
Preferred Stock will not have a redemption premium for purposes of these rules.
In the event, however, that a redemption premium in excess of the defined de
minimis amount exists with respect to AirTouch Class C Preferred Stock, the
following tax consequences may result.
Since the rules in this area are highly complex and uncertain in a number
of respects, no assurance can be given that the Internal Revenue Service could
not successfully challenge, or that the Treasury Department will not issue
retroactively effective regulations contrary to, the results described below.
The entire redemption premium with respect to AirTouch Class C Preferred Stock
may constitute a constructive stock distribution to a holder of such stock on an
economic accrual basis (determined under the principles of Section 1273(a)(3) of
the Code). This constructive stock distribution will not be taxable to the
holder of AirTouch Class C Preferred Stock unless one of the two exceptions,
discussed below, applies to the constructive distribution.
First, constructive stock distributions will be subject to taxation (to the
extent of AirTouch's current and accumulated earnings and profits) if AirTouch
Class C Preferred Stock constitutes "preferred stock" for purposes of Section
305 of the Code (the "preferred stock exception"). Although the issue is not
free from doubt, AirTouch and CCI believe that AirTouch Class C Preferred Stock
should not be treated as preferred stock for this purpose because the
liquidation rights of such stock should provide significant participation in the
corporate growth of AirTouch. Accordingly, the preferred stock exception should
not apply.
Second, constructive stock distributions will be subject to taxation (to
the extent of AirTouch's current and accumulated earnings and profits) if
distributions, when viewed in connection with certain other distributions made
by AirTouch with respect to other classes of its stock, are determined to have
the effect of the receipt of "property" by such other stockholders and an
increase in the proportionate interest in the assets or earnings and profits of
AirTouch by holders of AirTouch Class C Preferred Stock (the "disproportionate
distribution exception"). For purposes of the disproportionate distribution
exception, "property" includes money, securities and any other property except
stock of AirTouch.
In the event that either the preferred stock exception or the
disproportionate distribution exception applies to constructive stock
distributions with respect to AirTouch Class C Preferred Stock, such
constructive distributions would be taxable as ordinary dividend income as
described above, thereby subjecting Holders to tax in advance of the actual
redemptions of such AirTouch Class C Preferred Stock. A Holder's tax basis in
its stock would be increased by such taxable amount.
Backup Withholding. As set forth above, certain noncorporate holders may
be subject to backup withholding at a rate of 31% on dividends received on
AirTouch Common Stock and AirTouch Preferred Stock, Series 1996 and certain
consideration received upon the conversion of AirTouch Preferred Stock, Series
1996.
Holders should be aware that legislation has been proposed in Congress and
by the President which, if enacted in its current proposed form, would affect
the above summary of the federal income tax consequences. It is impossible to
predict whether these proposals or other legislation will be enacted and in what
form. In addition, it is uncertain whether the effective date of any such
legislation would apply to the Merger or to the ownership of the AirTouch
Preferred Stock, Series 1996. Holders should consult their own tax advisors
concerning possible changes to the tax laws.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. IF, AS INTENDED AS OF
THE DATE HEREOF, THE MERGER QUALIFIES AS A REORGANIZATION UNDER SECTION 368(a)
OF THE CODE, THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THE HOLDERS OF
CCI
89
<PAGE> 93
STOCK DEPEND TO A GREAT EXTENT ON WHETHER THEY RECEIVE AIRTOUCH PREFERRED STOCK,
SERIES 1996, OR CASH. ACCORDINGLY, IT IS IMPORTANT THAT EACH CCI STOCKHOLDER
RETURN THE ELECTION FORM, SO THAT IT IS RECEIVED BEFORE THE ELECTION DEADLINE.
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
HOLDERS OF SHARES OF CCI STOCK OUTSTANDING AT THE EFFECTIVE TIME ARE
ENTITLED TO APPRAISAL RIGHTS UNDER SECTION 262 OF THE DGCL. SECTION 262 IS
REPRINTED IN ITS ENTIRETY AS ANNEX B TO THIS PROXY STATEMENT-PROSPECTUS. THE
FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO
APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX B. THIS
DISCUSSION AND ANNEX B SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO
EXERCISE STATUTORY APPRAISAL RIGHTS, IF AVAILABLE, OR WHO WISHES TO PRESERVE THE
RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN OR
THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS, IF AVAILABLE.
A CCI Stockholder who makes the demand described below with respect to such
shares, who continuously is the record holder of such shares through the
Effective Time, who otherwise complies with the statutory requirements of
Section 262 and who neither votes in favor of the 1996 Merger Agreement nor
consents thereto in writing will be entitled to an appraisal by the Delaware
Court of the fair value of its shares of CCI Stock. Except as set forth herein,
CCI Stockholders will not be entitled to appraisal rights in connection with the
Merger. Stockholders of AirTouch will have no appraisal rights in connection
with the Merger.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the Meeting, not less than 20 days prior to the
meeting, each constituent corporation must notify each of the holders of its
stock for which appraisal rights are available that such appraisal rights are
available and include in each such notice a copy of Section 262. This Proxy
Statement-Prospectus will constitute such notice to the CCI Stockholders.
CCI Stockholders who desire to exercise their appraisal rights must not
vote in favor of the Merger Agreement or the Merger and must deliver a separate
written demand for appraisal to CCI prior to the vote by the CCI Stockholders on
the 1996 Merger Agreement and the transactions contemplated thereby, including
the Merger. A CCI Stockholder who signs and returns a proxy without expressly
directing by checking the applicable boxes on the proxy card enclosed herewith
that its shares of CCI Stock be voted against the proposal or that an abstention
be registered with respect to its shares of CCI Stock in connection with the
proposal will effectively have thereby waived its appraisal rights as to those
shares of CCI Stock because, in the absence of express contrary instructions,
such shares of CCI Stock will be voted in favor of the proposal. See "THE
MEETING -- Voting and Revocation of Proxies." Accordingly, a CCI Stockholder who
desires to perfect appraisal rights with respect to any of its shares of CCI
Stock must, as one of the procedural steps involved in such perfection, either
(i) refrain from executing and returning the enclosed proxy card and from voting
in person in favor of the proposal to approve the 1996 Merger Agreement, or (ii)
check either the "Against" or the "Abstain" box next to the proposal on such
card or affirmatively vote in person against the proposal or register in person
an abstention with respect thereto. Merely failing to vote against the Merger
will not constitute a waiver of appraisal rights, except as provided above. A
demand for appraisal must be executed by or on behalf of the CCI Stockholder of
record and must reasonably inform CCI of the identity of the CCI Stockholder of
record and that such record CCI Stockholder intends thereby to demand appraisal
of it shares of CCI Stock. A person having a beneficial interest in shares of
CCI Stock that are held of record in the name of another person, such as a
broker, fiduciary or other nominee, must act promptly to cause the record holder
to follow the steps summarized herein properly and in a timely manner to perfect
whatever appraisal rights are available. If the shares of CCI Stock are owned of
record by a person other than the beneficial owner, including a broker,
fiduciary (such as a trustee, guardian or custodian) or other nominee, such
demand must be executed by or for the record owner. If the shares of CCI Stock
are owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by or for all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner. If a stockholder holds
shares through a broker who in turn holds the shares through a central
securities depository nominee such as
90
<PAGE> 94
Cede & Co., a demand for appraisal of such shares must be made by or on behalf
of the depository nominee and must identify the depository nominee as record
holder.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of CCI Stock as a nominee for others, may exercise appraisal rights with
respect to the shares held for all or less than all beneficial owners of shares
as to which such person is the record owner. In such case, the written demand
must set forth the number of shares covered by such demand. Where the number of
shares is not expressly stated, the demand will be presumed to cover all shares
of CCI Stock outstanding in the name of such record owner.
A CCI Stockholder who elects to exercise appraisal rights, if available,
should mail or deliver its written demand to: Cellular Communications, Inc., 110
East 59th Street, New York, New York 10022, Attention: Richard J. Lubasch,
Secretary.
The written demand for appraisal should specify the CCI Stockholder's name
and mailing address, the number of shares of CCI Stock owned, and that the CCI
Stockholder is thereby demanding appraisal of its shares. A proxy or vote
against the 1996 Merger Agreement will not by itself constitute such a demand.
Within ten days after the Effective Time, the Surviving Corporation will provide
notice of the Effective Time to all CCI Stockholders who have complied with
Section 262.
Within 120 days after the Effective Time, either the Surviving Corporation
or any CCI Stockholder who has complied with the required conditions of Section
262 may file a petition in the Delaware Court, with a copy served on the
Surviving Corporation in the case of a petition filed by a CCI Stockholder,
demanding a determination of the fair value of the shares of all dissenting CCI
Stockholders. There is no present intent on the part of AirTouch to file an
appraisal petition and CCI Stockholders seeking to exercise appraisal rights
should not assume that the Surviving Corporation will file such a petition or
that the Surviving Corporation will initiate any negotiations with respect to
the fair value of such shares. Accordingly, CCI Stockholders who desire to have
their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. If appraisal rights are available, within 120 days
after the Effective Time, any CCI Stockholder who has theretofore complied with
the applicable provisions of Section 262 will be entitled, upon written request,
to receive from the Surviving Corporation a statement setting forth the
aggregate number of shares of CCI Stock not voting in favor of the 1996 Merger
Agreement and with respect to which demands for appraisal were received by CCI
and the number of holders of such shares. Such statement must be mailed within
10 days after the written request therefor has been received by the Surviving
Corporation.
If a petition for an appraisal is timely filed and assuming appraisal
rights are available, at the hearing on such petition, the Delaware Court will
determine which CCI Stockholders, if any, are entitled to appraisal rights. The
Delaware Court may require the CCI Stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any CCI Stockholder fails to
comply with such direction, the Delaware Court may dismiss the proceedings as to
such CCI Stockholder. Where proceedings are not dismissed, the Delaware Court
will appraise the shares of CCI Stock owned by such CCI Stockholders,
determining the fair value of such shares exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining fair value, the Delaware Court is to take into
account all relevant factors. In Weinberger v. UOP Inc., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger which throw light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262, however,
91
<PAGE> 95
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
CCI Stockholders considering seeking appraisal should recognize that the
fair value of their shares determined under Section 262 could be more than, the
same as or less than the consideration they are entitled to receive pursuant to
the 1996 Merger Agreement if they do not seek appraisal of their shares. The
cost of the appraisal proceeding may be determined by the Delaware Court and
taxed against the parties as the Delaware Court deems equitable in the
circumstances. Upon application of a dissenting CCI Stockholder, the Delaware
Court may order that all or a portion of the expenses incurred by any dissenting
CCI Stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all shares of stock entitled to appraisal.
Any CCI Stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote for any
purpose any shares subject to such demand or to receive payment of dividends or
other distributions on such shares, except for dividends or distributions
payable to CCI Stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any CCI Stockholder
will have the right to withdraw such demand for appraisal and to accept the
terms offered in the Merger; after this period, the CCI Stockholder may withdraw
such demand for appraisal only with the consent of the Surviving Corporation. If
no petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, CCI Stockholders' rights to appraisal will cease, and CCI
Stockholders will be entitled to receive the Merger Consideration. Inasmuch as
the Surviving Corporation has no obligation to file such a petition, and
AirTouch has no present intention to do so, any CCI Stockholder who desires such
a petition to be filed is advised to file it on a timely basis. Any CCI
Stockholder may withdraw such CCI Stockholder's demand for appraisal by
delivering to the Surviving Corporation a written withdrawal of its demand for
appraisal and acceptance of the Merger Consideration, except (i) that any such
attempt to withdraw made more than 60 days after the Effective Time will require
written approval of the Surviving Corporation and (ii) that no appraisal
proceeding in the Delaware Court will be dismissed as to any CCI Stockholder
without the approval of the Delaware Court, and such approval may be conditioned
upon such terms as the Delaware Court deems just. Any CCI Stockholder who
withdraws such CCI Stockholder's demand for appraisal or who fails to perfect
such demand after the Effective Time will be treated as having made a
Non-Election with respect to its CCI Stock.
92
<PAGE> 96
REDEMPTION OF THE CCI RIGHTS
The 1996 Merger Agreement provides that CCI will redeem the CCI Rights
prior to the Effective Time. The CCI Rights Agreement requires such a redemption
to be approved by the CCI Stockholders (as discussed below). Approval of the
Merger is contingent upon approval of the CCI Rights Redemption, and approval of
the CCI Rights Redemption is contingent on approval of the Merger. Of the Per
Share Cash Consideration and Per Share Unit Consideration to be received by
holders of CCI Stock, $.01 in value per CCI Common Stock Equivalent Share will
be in payment for the Redemption of the CCI Right (the "CCI Rights Redemption
Payment").
The CCI Board by unanimous vote of all directors (other than directors
elected by AirTouch, who did not attend or participate in the meetings at which
the 1996 Merger Agreement was discussed and approved) recommends that CCI
Stockholders vote FOR approval and adoption of the 1996 Merger Agreement and the
transactions contemplated thereby, including the Merger, and FOR the CCI Rights
Redemption.
On July 31, 1991, CCI, AirTouch and Continental Stock Transfer & Trust
Company, a New York corporation (the "CCI Rights Agent"), entered into the CCI
Rights Agreement. The CCI Rights Agreement was subsequently amended on December
11, 1992 and April 5, 1996. The CCI Rights Agreement provides that one CCI Right
be attached with each share of CCI Redeemable Preferred Stock issued in the 1991
Merger. In addition, the CCI Rights Agreement provides that each share of CCI
Series A Common Stock, CCI Series C Common Stock and CCI Redeemable Preferred
Stock issued on or after the date of the 1991 Merger, including shares of CCI
Common Stock issued in connection with the conversion of the CCI Class A
Preference Stock and the CCI Convertible Notes, be issued with a CCI Right
attached.
Each CCI Right entitles the registered holder thereof to purchase from CCI
at any time following a CCI Rights Distribution Date (as defined below) and
prior to the earlier of July 31, 2001 and the close of business on the day
immediately preceding the Final Redemption Date (as defined below) (the "CCI
Rights Expiration Date) one one-hundredth of a share (a "CCI Rights Unit") of
CCI Series D Preference Stock at a purchase price per each one one-hundredth of
a share of $175.00, subject to adjustment (the "Purchase Price"). At the close
of business on the day preceding the Final Redemption Date, each share of CCI
Series D Preference Stock is automatically converted into one hundred shares of
CCI Series A Common Stock. The "Final Redemption Date" means the date, if any,
fixed by CCI for redemption of CCI Series A Common Stock and CCI Redeemable
Preferred Stock in connection with the Appraisal Process provided for under the
1990 Merger Agreement, as described in Annex I.
The CCI Rights will separate from the CCI Stock to which it is attached and
a "CCI Rights Distribution Date" will occur upon the earlier of: (i) the date on
which there is a public announcement that a person or group of affiliated or
associated persons has, after the date of the 1991 Merger, become an Acquiring
Person (such date being referred to below as the "CCI Stock Acquisition Date"),
or (ii) any date, as determined by the CCI Board with the prior written consent
of AirTouch, on or following the date on which a person commences a tender offer
or exchange offer that if consummated would result in a person becoming an
Acquiring Person.
AirTouch or its affiliates and associates will not be considered an
Acquiring Person as a result of AirTouch becoming the beneficial owner of CCI
Stock to which the CCI Rights are attached pursuant to, and in compliance with,
the 1990 Merger Agreement, and AirTouch and its subsidiaries will not be
considered an Acquiring Person as a result of the execution of the 1996 Merger
Agreement or the consummation of the Merger.
The CCI Rights are not exercisable until the CCI Rights Distribution Date
and will expire at the close of business on the CCI Rights Expiration Date
unless earlier redeemed by CCI as described below. As soon as practicable after
the CCI Rights Distribution Date, certificates will be mailed to holders of
record of the CCI Stock to which the CCI Rights are attached as of the close of
business on the CCI Rights Distribution Date and, thereafter, the separate
certificates alone will represent the CCI Rights.
In the event, after the date of the 1991 Merger, that a person or group
becomes an Acquiring Person, except pursuant to a tender offer or an exchange
offer for all outstanding shares of the CCI Stock to which the
93
<PAGE> 97
CCI Rights attach (which offer is consummated after the Back End Termination
Date (as defined below)) at a price and on terms determined by at least a
majority of the members of the CCI Board who are not officers of CCI and who are
not representatives, nominees, affiliates or associates of an Acquiring Person,
after receiving advice from one or more investment banking firms, to be (i) at a
price which is fair to holders of CCI Stock (taking into account all factors
which members of the CCI Board deem relevant including, without limitation,
prices which could reasonably be achieved if CCI or its assets were sold on an
orderly basis designed to realize maximum value) and (ii) otherwise in the best
interests of, CCI and its stockholders (a "CCI Qualifying Offer"), each holder
of a CCI Right will thereafter have the right to receive, upon exercise, CCI
Series A Common Stock (or, in certain circumstances, cash, property or other
securities of CCI) having a value equal to two times the exercise price of the
CCI Right. Notwithstanding any of the foregoing, following the occurrence of any
such event, all CCI Rights that are, or (under certain circumstances specified
in the CCI Rights Agreement) were, beneficially owned by any Acquiring Person
(or certain related parties) will be null and void.
In the event that, at any time following the CCI Stock Acquisition Date:
(i) CCI is acquired in a merger or other business combination transaction in
which CCI is not the surviving corporation (other than a merger which follows a
CCI Qualifying Offer and satisfies certain other requirements); or (ii) more
than 50 percent of CCI's assets or earning power is sold or transferred; each
holder of a CCI Right (except CCI Rights which previously have been voided
described as above) will thereafter have the right to receive, upon exercise,
common stock of the acquiring company (the "Acquiring Company") having a value
equal to two times the exercise price of the CCI Right. The events set forth in
this paragraph and in the preceding paragraph are referred to as the "Triggering
Events." The April 5, 1996 amendment to the CCI Rights Agreement provides that
neither the execution of the Merger Agreement nor the consummation of the Merger
will cause AirTouch or any subsidiary thereof to become an Acquiring Person or
cause a Triggering Event or CCI Rights Distribution Date to occur.
The Purchase Price payable, and the number of CCI Rights Units or other
securities or property issuable, upon exercise of the CCI Rights are subject to
adjustment from time to time to prevent dilution: (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the CCI
Series D Preference Stock; (ii) if holders of the CCI Series D Preference Stock
are granted certain rights or warrants to subscribe for CCI Series D Preference
Stock or convertible securities at less than the current market price of the CCI
Series D Preference Stock; or (iii) upon the distribution to holders of the CCI
Series D Preference Stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent of the
Purchase Price. No fractional CCI Rights Units will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the CCI
Series D Preference Stock on the last trading day prior to the date of exercise.
The CCI Rights Agreement provides that it may be amended to permit the
redemption of all but not less than all of the outstanding CCI Rights prior to
the Back End Termination Date at a redemption price of $.01 per CCI Right with
the approval of the holders of a majority of the then outstanding CCI Common
Stock and CCI Redeemable Preferred Stock not beneficially owned by AirTouch and
the consent of AirTouch. The "Back End Termination Date" means the date as of
which AirTouch loses its right to cause the Appraisal Process Redemption. Except
as described above, the CCI Rights are not redeemable prior to the Back End
Termination Date. At any time following the Back End Termination Date and prior
to the close of business on the CCI Stock Acquisition Date, CCI may redeem the
CCI Rights in whole, but not in part, at a price of $.01 per CCI Right (payable
in cash, CCI Redeemable Preferred Stock and CCI Common Stock or other
consideration deemed appropriate by the CCI Board). Immediately upon the action
of the CCI Board ordering redemption of the CCI Rights, the CCI Rights will
terminate and the only right of the holders of CCI Rights will be to receive the
$.01 per CCI Right redemption price.
The CCI Rights may have the effect of delaying or preventing a change in
control of CCI by significantly increasing the cost of acquiring CCI. If a
person were to attempt to acquire control of CCI prior to the Back
94
<PAGE> 98
End Termination Date or following the Back End Termination Date (without the
approval of the disinterested members of the CCI Board), the CCI Rights, should
they become exercisable, would substantially dilute the purchaser's stock
position in CCI, thereby increasing the effective cost of control
commensurately.
The foregoing summary description of the CCI Rights does not purport to be
complete and is qualified in its entirety by reference to the description and
terms of the CCI Rights set forth in the CCI Rights Agreement (a copy of which
has been filed as an exhibit to the Registration Statement of which this Proxy
Statement-Prospectus is a part).
CERTAIN CONSIDERATIONS WITH RESPECT TO THE MERGER
AND OPERATIONS AFTER THE MERGER
AirTouch anticipates that at or prior to the Effective Time, all of CCI's
existing employees will resign or will be terminated by CCI. The directors of
the Surviving Corporation will be the directors of the surviving entity. After
the Effective Time, New Par will continue to exist and to operate the Michigan
and Ohio cellular properties that it currently operates. AirTouch anticipates
that after the Effective Time, most of the employees of New Par, other than
certain employees seconded to New Par by CCI, will remain employees of New Par,
AirTouch, or one of its subsidiaries. Certain CCI employees who are seconded to
New Par will resign or will be terminated by CCI prior to the Effective Time.
Under the terms of the New Par Partnership Agreement, CCI currently has the
right to appoint certain members of New Par's management. After the Effective
Time, AirTouch will have the sole right to appoint all members of New Par's
management. Upon the Effective Time, AirTouch intends to cause cellular service
in the New Par markets to be offered under the AirTouch Cellular brand name.
AirTouch does not anticipate that the Merger will have a significant impact upon
New Par's customers.
AirTouch intends to eliminate the corporate headquarters' management
functions of CCI and integrate all of those management functions into AirTouch's
existing headquarters. AirTouch expects to achieve modest operating cost savings
through the consolidation of certain operations, the elimination of duplicative
corporate and administrative expense, and the consolidation of marketing efforts
with those of AirTouch Cellular and US WEST NewVector upon the introduction of
the AirTouch Cellular brand name to the New Par properties. However, there can
be no assurance that AirTouch will be able to fully realize such cost savings or
that such cost savings will be significant.
There also can be no assurance given as to the future market value of
AirTouch Class B Preferred Stock, AirTouch Class C Preferred Stock, or AirTouch
Common Stock after the Merger. For a discussion and analysis of AirTouch's
financial results, including its rate of return on average total assets, its
rate of return on average common stockholders' equity, its ratio of common
stockholders' equity to total assets and its earnings per common and common
equivalent share, see AirTouch's Annual Report on Form 10-K for the year ended
December 31, 1995. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." For
certain risks associated with AirTouch's business and financial results, see
"RISK FACTORS."
In deciding whether to approve and adopt the 1996 Merger Agreement, CCI
Stockholders should take particular note of the foregoing matters and other
matters contained herein or in those documents incorporated herein by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
THE MERGER AGREEMENT
The following is a summary of material provisions of the 1996 Merger
Agreement, a copy of which is attached as Annex A to this Proxy
Statement-Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the 1996 Merger Agreement.
95
<PAGE> 99
THE MERGER
The 1996 Merger Agreement provides that CCI will be merged with and into
AirTouch Cellular, a California corporation and a wholly owned subsidiary of
AirTouch, with AirTouch Cellular being the Surviving Corporation, subject to the
requisite approval of CCI Stockholders and the satisfaction or waiver of the
other conditions to the Merger. The Merger will become effective when (a) a
Certificate of Merger has been duly prepared and executed by the Surviving
Corporation and delivered to the Secretary of State of the State of Delaware for
filing and (b) an Agreement of Merger, together with related certificates, has
been duly prepared and executed by the Surviving Corporation and delivered to
the Secretary of State of California for filing, or at such later time as may be
specified in the Certificate of Merger or Agreement of Merger. The filings with
respect to the Merger will occur as soon as practicable after the second
business day after the satisfaction (or waiver, if permissible) of each
condition to the consummation of the Merger, or such later time as the parties
may mutually agree.
CERTAIN REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES OF AIRTOUCH AND CCI. The 1996 Merger
Agreement contains various representations and warranties of AirTouch and CCI
relating to the following matters (which representations and warranties are
subject, in certain cases, to specified exceptions and, generally, apply only to
facts and circumstances existing as of the original date of the 1996 Merger
Agreement): (i) the due organization, power and good standing of, and similar
corporate matters with respect to, each of AirTouch, AirTouch Cellular, CCI and
their respective subsidiaries; (ii) each of AirTouch's and CCI's capital
structure; (iii) the authorization, execution, delivery, performance and
enforceability of the 1996 Merger Agreement by each such party; (iv) the absence
of any governmental or regulatory authorization, consent or approval required to
consummate the Merger, other than as disclosed; (v) the absence of any conflict
with such party's certificate of incorporation or by-laws, or with applicable
law, or with certain contracts; (vi) delivery of reports and other documents
filed with the SEC and other regulatory authorities and the accuracy of the
information contained therein; (vii) the absence of certain changes or events
prior to the date of the 1996 Merger Agreement having a material adverse effect
on the business, financial condition, assets, liabilities or results of
operations (the "Business Condition") of CCI and its subsidiaries or AirTouch
and its subsidiaries, as the case may be; (viii) the absence of any brokerage,
finder's or other fee due in connection with the Merger (except, in the case of
CCI, such fees payable to Donaldson, Lufkin & Jenrette and Wasserstein Perella
as described in "SPECIAL FACTORS -- CCI Fairness Opinions of Wasserstein Perella
& Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation" and, in the
case of AirTouch, such fees payable to Lehman Brothers); and (ix) the absence of
actions taken by CCI or AirTouch that would prevent the Merger from qualifying
as a tax-free reorganization under the Code.
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CCI. CCI also has made
certain additional representations and warranties to AirTouch relating to the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions): (i) absence of undisclosed liabilities; (ii)
compliance with applicable laws; (iii) absence of material pending or threatened
litigation; (iv) CCI's tax returns and taxes owed; (v) CCI's employee benefit
plans; (vi) CCI's receipt of opinions of its financial advisors; (vii)
intercompany balances due to CCI or New Par from, or due from CCI or New Par to,
(a) any former subsidiary or business unit of CCI, (b) any employee, officer or
director of CCI, or (c) any other entity (other than a current CCI subsidiary or
New Par) of which any employee, officer or director of CCI is an officer,
director or significant stockholder (each, a "CCI Affiliate"); (viii)
agreements, contracts or other arrangements effected since December 31, 1995
pursuant to which either (a) any CCI Affiliate provides or provided or causes or
caused to be provided any assets, services or facilities used by CCI or New Par
or (b) CCI or New Par provides or provided, or causes or caused to be provided,
any assets, services or facilities to any CCI Affiliate; (ix) actions taken in
connection with the CCI Rights Agreement and recommendation of the Merger and
the Rights Redemption to CCI Stockholders; (x) information supplied to AirTouch
for inclusion in the Registration Statement and (xi) compliance of the Proxy
Statement with the requirements of the securities laws.
96
<PAGE> 100
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AIRTOUCH. AirTouch also has
made certain additional representations and warranties to the authorization and
validity of the AirTouch Preferred Stock, Series 1996 to be issued pursuant to
the 1996 Merger Agreement and compliance of the Registration Statement with the
requirements of the securities laws.
NEW PAR NOT A SUBSIDIARY OF CCI FOR PURPOSES OF REPRESENTATION AND
WARRANTIES; NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of CCI generally relate only to CCI and its subsidiaries other
than New Par, except as otherwise specified. The respective representations and
warranties of AirTouch and CCI will not survive the Effective Time, although it
is a condition of each party's obligations under the 1996 Merger Agreement that
the other party's representations and warranties (unless made as of a specified
date) be true and correct in all material respects as if made as of the
Effective Time.
PRE-CLOSING COVENANTS
CCI INTERIM OPERATIONS. CCI covenants in the 1996 Merger Agreement that,
during the period from the date of the 1996 Merger Agreement to the Effective
Time, except as otherwise specifically contemplated by the 1996 Merger Agreement
or as otherwise approved in writing by AirTouch (which approval will not be
unreasonably withheld), CCI will conduct its business, and will cause its
subsidiaries to conduct their respective businesses, only in the ordinary course
of their respective existing businesses and as otherwise required by section
3.1.1(a) of the 1990 Merger Agreement.
CCI also covenants in the 1996 Merger Agreement, that during the period
from the date of the 1996 Merger Agreement to the Effective Time, except as
otherwise specifically contemplated by the 1996 Merger Agreement or as otherwise
approved in writing by AirTouch (which approval will not be unreasonably
withheld), CCI will not, and CCI will cause its subsidiaries not to: (i) make or
propose any change or amendment in their respective charters or by-laws; (ii)
make any change in their respective direct or indirect ownership interests in
New Par; (iii) do or effect any of the following actions with respect to its
securities: (a) issue, pledge or sell any shares of capital stock (including
treasury shares) or any other securities of any of them, (b) issue any
securities convertible into, exchangeable for or representing a right to
purchase or receive, or enter into any contract, understanding or arrangement
with respect to the issuance of, any shares of capital stock or based on or
otherwise tracking the performance or characteristics of capital stock, (c)
grant any stock-based or stock-related awards or rights or make any similar
arrangements or awards with respect to or based upon other securities of any of
them, (d) enter into any arrangement or contract with respect to the purchase or
voting of shares of any of their capital stock, (e) adjust, split, combine or
reclassify any of their capital stock or other securities, or (f) make any other
changes in their structures (other than, in each case, (1) the issuance of
shares of CCI Series A Common Stock in connection with conversion of CCI
Redeemable Preferred Stock, (2) the issuance of shares of CCI Series A Common
Stock in connection with the conversion of CCI Series B Preference Stock, (3)
the issuance of shares of CCI Series A Common Stock upon exercise of certain
outstanding employee stock options, or (4) the issuance of shares of CCI Series
A Common Stock upon conversion of CCI Convertible Notes); (iv) declare, set
aside or pay or make any dividend or other distribution or payment (whether in
cash, stock or property) with respect to, or purchase or redeem any shares of
its capital stock; (v) authorize, recommend, propose or enter into an agreement
in principle or a definite agreement with respect to any merger, consolidation,
liquidation, dissolution or similar business combination, any joint venture,
partnership or collaborative arrangement, or any acquisition of a material
amount of assets or securities; (vi) enter into or terminate any material
contract or agreement, or make any change in any of its material leases or
contracts, other than renewals of contracts and leases without material adverse
changes of terms; (vii) enter into, or otherwise engage in, any transaction with
certain affiliated or formerly affiliated persons or entities; (viii) except for
normal changes in the ordinary course of business and that in the aggregate do
not result in a material increase of benefits or compensation expense to CCI or
any of its subsidiaries relative to the level in effect prior to such changes
and except as required by law: (a) adopt, enter into, amend or terminate any
bonus, profit-sharing, compensation, severance, termination, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
individual, to the extent that any such action would affect directors, officers
or employees associated with CCI, its subsidiaries or New Par, (b) enter into
any new
97
<PAGE> 101
employment arrangements or relationships with new or existing employees which
has the legal effect of any relationship other than at-will employment, (c)
increase in any manner the compensation or fringe benefits of any director,
officer or employee associated with CCI, its subsidiaries or New Par or pay any
benefit to any director, officer or employee associated with CCI, its
subsidiaries or New Par other than pursuant to an existing plan or arrangement
and in amounts consistent with past practice, or (d) grant any awards to any
director, officer or employee associated with CCI, its subsidiaries or New Par
under any bonus, incentive, performance or other compensation plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, stock-based or stock-related awards, performance units or
restricted stock, or the removal of existing restrictions in any benefit plans
or agreements or awards made thereunder); (ix) except as required by law, take
any action to segregate assets for, or in any other way secure, the payment of
compensation or benefits to any employee associated with CCI, its subsidiaries
or New Par under any employee plan, agreement, contract or arrangement or adopt,
enter into or amend any contract, agreement, commitment or arrangement to do any
of the acts described in clause (viii); (x) become obligated to make any payment
or transfer of property that constitutes a "parachute payment" within the
meaning of section 280G(b)(2) of the Code; (xi) encumber, sell, lease or
otherwise dispose of any material assets or cancel, release or assign any
indebtedness owed thereto or any claims held thereby, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing; (xii)
except in the ordinary course of business consistent with past practice, (a)
incur or assume any indebtedness (and any indebtedness permitted by the
preceding will, to the extent of indebtedness for money borrowed or capital
leases, be pre-payable without penalty, other than customary prepayment charges
of a nature substantially similar to those provided in the Credit Agreement,
dated as of December 27, 1995, by and among Cellular Communications of Ohio,
Inc., certain of its subsidiaries and the lenders named therein for LIBOR and CD
rate loans), (b) make any loans, advances or capital contributions to, or
investments in, any other person (other than a direct or indirect wholly owned
subsidiary of CCI), (c) issue or sell any debt securities or guarantee any
indebtedness; or (d) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; (xiii) settle any claim, action or
proceeding involving monetary damages, except in the ordinary course of business
consistent with past practice; (xiv) change its methods of accounting in effect
at December 31, 1995, except as required by changes in generally accepted
accounting principles as concurred in by its independent accountants; (xv) pay
(or agree to become obligated to pay) any fees and expense to attorneys,
accountants, investment bankers and other advisers in connection with the Merger
in excess of the amount set forth in the 1996 Merger Agreement, other than any
excess amounts which are immaterial in the aggregate incurred in connection
with, and in furtherance of, consummation of the transactions contemplated by
the 1996 Merger Agreement; or (xvi) take, or agree to take any action that would
result in any of the conditions to AirTouch closing the Merger not being
satisfied.
CCI also covenants in the 1996 Merger Agreement that, during the period
from the date of the 1996 Merger Agreement through the Effective Time, CCI will
and will cause its subsidiaries to, cooperate fully with AirTouch to effect a
transition to AirTouch of control of New Par as of the Effective Time. The
parties have formed a team (chaired by AirTouch) to implement the transition.
ADDITIONAL COVENANTS OF CCI. CCI covenants in the 1996 Merger Agreement
to: (i) cause the CCI Rights Redemption to occur immediately prior to the
Effective Time; (ii) identify those persons who are "affiliates" for purposes of
Rule 145 under the Securities Act, and to use best effort to cause each such
person to enter into an agreement with AirTouch not to dispose of the AirTouch
Preferred Stock, Series 1996 received by them in connection with the Merger
except in compliance with the Securities Act; (iii) at or before the Effective
Time repay (or cause to be repaid) certain intercompany balances, and to
terminate (or cause to be terminated) certain agreements, contracts or other
arrangements, with certain affiliated or formerly affiliated entities or
persons; (iv) to redeem on or before the date of the Meeting the outstanding
shares of CCI Series B Preference Stock (except to the extent that holders of
shares of CCI Series B Preference Stock have elected to exercise their
conversion right in lieu of redemption and CCI has, on or before such date,
converted their shares of Series B Preference Stock into shares of CCI Series A
Common Stock); (v) at or before the Effective Time, obtain, or cause its
subsidiaries to obtain, either a letter of resignation (in form and substance
reasonably satisfactory to AirTouch) from, or terminate, each employee of CCI or
any subsidiary thereof and upon AirTouch's instructions, terminate or cause its
subsidiaries to
98
<PAGE> 102
terminate the secondment to New Par of each employee of CCI or any subsidiary,
in each case without cost, expense or contractual liability to CCI, New Par or
AirTouch; (vi) at all times during the period from the date of the 1996 Merger
Agreement through the Effective Time, maintain in full force and effect the
directors' and officers' insurance policy which was in effect on the date of the
1996 Merger Agreement; (vii) at or before the Effective Time, cause the
Headquarters Lease to be terminated or novated, and dispose of the office
equipment, fixtures, furniture and leasehold improvements of the headquarters
office for net proceeds of not less than book value, (vii) use its best efforts
to sell the capital stock (or all of the assets and liabilities) of CCI Data,
Inc. and CCI Sub, Inc. for proceeds of not less than $2 million, (viii) allow
AirTouch reasonable access to its officers, employees, agents, books,
commitments, records and properties; (ix) deliver certain schedules of
information to AirTouch at least ten business days prior to the closing; and (x)
call the Meeting to consider the matters contained within this Proxy Statement,
use its best efforts to obtain CCI Stockholder approval, and not withdraw or
modify the recommendations of approval of the Merger, the 1996 Merger Agreement
or the CCI Rights Redemption unless required by law.
CERTAIN COVENANTS OF AIRTOUCH. AirTouch covenants in the 1996 Merger
Agreement that during the period from the date of the 1996 Merger Agreement to
the Effective Time, except as otherwise specifically contemplated by the 1996
Merger Agreement or as otherwise approved in writing by CCI (which approval will
not be unreasonably withheld), AirTouch will not: (i) make any change or
amendment in its charter or by-laws, except for such changes or amendments that
would not have had a material adverse effect on the rights of the AirTouch Class
B Preferred Stock or AirTouch Class C Preferred Stock were such AirTouch Class B
Preferred Stock or AirTouch Class C Preferred Stock to have been outstanding on
the date thereof; (ii) undertake a reclassification of AirTouch Common Stock, or
pay any single dividend or other distribution (whether in cash, capital stock or
other assets) to holders of AirTouch Common Stock where the value of such
dividend or distribution (in excess of the fair market value of any
consideration received therefor) together with the amount of all dividends and
distributions made to the holders of AirTouch Common Stock during the period
from the date of the 1996 Merger Agreement and prior to such dividend or
distribution exceeds 20% of the product of (x) the Volume-Weighted Average
Trading Price on the record date for determining the stockholders entitled to
receive such dividend or distribution and (y) the number of shares of AirTouch
Common Stock outstanding on such record date; or (iii) enter into any agreement
providing for a transaction or series of related transactions that results in
the transfer, sale or other disposition by AirTouch of assets of (a) AirTouch
International, a California corporation, (b) AirTouch Cellular of Nevada, a
Nevada corporation, or (c) AirTouch Cellular, to the extent that the assets
subject to such transfer, sale or disposition in the aggregate would represent
more than 20% of the total fair market value of AirTouch and its subsidiaries,
taken as whole, measured on a proportionate basis immediately prior to such
disposition (excepting any such transaction or series of related transactions in
which a majority of the value of the consideration received in exchange for the
assets transferred, sold or otherwise disposed of consists of assets (or
interests in assets) of a like kind or nature and excepting any transactions
pursuant to existing agreements).
ADDITIONAL COVENANTS OF AIRTOUCH. AirTouch also covenants in the 1996
Merger Agreement to: (i) prepare and file the Registration Statement of which
this Proxy Statement-Prospectus forms a part, (ii) from and after the Effective
Time, cause the Surviving Corporation to (a) indemnify and hold harmless the
present and former officers and directors of CCI in respect of acts or omissions
occurring prior to the Effective Time to the extent provided under CCI's
Certificate of Incorporation and by-laws as in effect on the date of the 1996
Merger Agreement and (b) perform and fulfill all of its obligations under
certain indemnification agreements between CCI and certain of its officers and
directors in effect on the date of the 1996 Merger Agreement; and (iii) within
45 days following the Effective Time (or such shorter period as is reasonably
practicable, but no sooner than 30 days following the Effective Time), cause all
vested stock appreciation rights outstanding under the LTIP to be paid in cash.
ADDITIONAL COVENANTS OF AIRTOUCH AND CCI. The 1996 Merger Agreement
contains additional covenants of each of AirTouch and CCI to: (i) not to
knowingly take any action that would jeopardize the treatment of the Merger as a
reorganization under Section 368 of the Code; (ii) furnish to the other party
certain financial information; (iii) notify the other of any change in the
Business Condition of it and its subsidiaries, taken as a whole; (iv) perform
its obligations under the 1996 Merger Agreement and take or
99
<PAGE> 103
cause to be taken and do or cause to be done all things necessary, proper or
advisable under applicable law to obtain all necessary regulatory approvals and
waivers and other necessary consents and satisfy all conditions to the
obligations of the parties under the 1996 Merger Agreement and to cause the
transactions contemplated thereby to be carried out promptly in accordance with
the terms thereof; (v) cooperate fully with one another and their respective
officers, directors, employees, agents and other representatives in connection
with any steps required to be taken as part of their respective obligations
under the 1996 Merger Agreement; (vi) do such things as may be reasonably
requested by the other in order more effectively to consummate the transactions
contemplated by the 1996 Merger Agreement (including, but not limited to,
promptly delivering to the other information necessary to prepare and pursue all
necessary regulatory filings, approvals and waivers); (vii) cooperate and use
reasonable efforts to defend against any claim, action, suit, investigation or
other proceeding by any governmental body or other person which questions the
validity or legality of the Merger or seeks damages in connection therewith and
to use best efforts to have dissolved any injunction, order or decree of a
governmental entity of competent jurisdiction which enjoins or prohibits the
transactions contemplated by the 1996 Merger Agreement; (viii) notify the other
of (a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the
disclosing party contained in the 1996 Merger Agreement to be untrue or
inaccurate in any material respect at any time from the date of the 1996 Merger
Agreement to the Effective Time or which will or may result in the failure to
satisfy any of the conditions to consummation of the Merger or (b) any failure
of the disclosing party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the 1996 Merger
Agreement; (ix) use best efforts to cause to be delivered to the other "comfort"
letters from their respective independent accountants, in form and substance
satisfactory to the recipient dated two days prior to the date of this Proxy
Statement-Prospectus and two days prior to the date of the Meeting; (x) share
equally the expenses incurred in connection with the 1996 Merger Agreement and
the transactions contemplated thereby, whether or not the Merger is consummated
and (xi) file the Proxy Statement with the SEC and use reasonable efforts to
cause the Registration Statement to become effective.
CONDITIONS
CONDITIONS TO OBLIGATIONS OF AIRTOUCH AND CCI. The 1996 Merger Agreement
provides that the obligations of AirTouch and CCI to effect the Merger are
subject to the fulfillment or waiver of the following conditions: (i) the CCI
Stockholders will have approved all matters relating to the 1996 Merger
Agreement, the Merger and the CCI Rights Redemption required to be approved by
such CCI Stockholders by the vote required under the DGCL at the Meeting; (ii)
all required authorizations, orders, grants, consents, permissions, approvals
and waivers of any governmental entity with jurisdiction over the transactions
contemplated by the 1996 Merger Agreement, other than those authorizations,
orders, grants, consents, permissions, approvals and waivers the failure of
which to receive would not, singly or in the aggregate, have a material adverse
effect on the Business Condition of CCI, its subsidiaries and New Par taken as a
whole, will have been received and remain in effect, provided, however, that if
AirTouch waives the condition to its obligation to effect the Merger that all
orders and approvals of the FCC required in connection with the consummation of
the transactions contemplated by the 1996 Merger Agreement ("FCC Consents") will
have been obtained or made, then the foregoing condition will be deemed
satisfied with respect to the FCC Consents; (iii) any applicable waiting period
under the HSR Act will have expired or been terminated; (iv) the Registration
Statement will have been declared effective and will not be subject to a stop
order or any threatened stop order; (v) AirTouch will have received all state
securities and "blue sky" permits and other authorizations necessary to
consummate the transactions contemplated by the 1996 Merger Agreement; (vi) the
AirTouch Preferred Stock, Series 1996 to be issued to the holders of CCI Stock
upon consummation of the Merger will have been authorized for listing on the
NYSE, subject to official notice of issuance; (vii) neither AirTouch nor CCI
will be subject to any order, decree or injunction of a governmental entity of
competent jurisdiction which enjoins or prohibits the consummation of the
transactions contemplated by the 1996 Merger Agreement and no proceeding will
have been initiated by any governmental entity and be continuing which seeks
such an injunction; and (viii) there will not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation thereof illegal.
100
<PAGE> 104
CONDITIONS TO OBLIGATIONS OF CCI. The 1996 Merger Agreement provides that
the obligations of CCI to effect the Merger also are subject to the fulfillment
or waiver of the following conditions: (i) the representations and warranties of
AirTouch set forth in the 1996 Merger Agreement will have been true and correct
in all material respects when made and (unless made as of a specified date) will
be true and correct in all material respects as if made as of the Effective
Time, and CCI will have received a certificate dated as of the closing of the
Merger signed by the vice chairman and the chief financial officer of AirTouch
to that effect; (ii) AirTouch will have performed in all material respects all
obligations required to be performed by it under the 1996 Merger Agreement prior
to the Effective Time, and CCI will have received a certificate dated as of the
closing of the Merger signed by the vice chairman and chief financial officer of
AirTouch to that effect; (iii) CCI will have received the opinions of Margaret
G. Gill, Senior Vice President, Legal, External Affairs and Secretary of
AirTouch, and Pillsbury Madison & Sutro LLP, counsel to AirTouch, both dated as
of the closing of the Merger, substantially in the form attached as exhibits to
the 1996 Merger Agreement; (iv) CCI will have received "comfort" letters of
Price Waterhouse LLP, AirTouch's independent accountants, as of the dates
specified in the 1996 Merger Agreement; and (v) CCI will have received the
opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to CCI, dated as of the
closing of the Merger, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that AirTouch and CCI will each be a party to that reorganization
within the meaning of Section 368(b) of the Code and that no gain or loss will
be recognized by the holders of CCI Stock to the extent they receive AirTouch
Preferred Stock, Series 1996 solely in exchange for shares of CCI Stock.
CONDITIONS TO OBLIGATIONS OF AIRTOUCH. The 1996 Merger Agreement provides
that the obligations of AirTouch to effect the Merger also are subject to the
fulfillment or waiver of the following conditions: (i) the representations and
warranties of CCI set forth in the 1996 Merger Agreement will have been true and
correct in all material respects when made and (unless made as of a specified
date) will be true and correct in all material respects as if made as of the
Effective Time, and AirTouch will have received a certificate dated as of the
closing of the Merger signed by the chairman and the chief financial officer of
CCI to that effect; (ii) CCI will have performed in all material respects all
obligations required to be performed by it under the 1996 Merger Agreement prior
to the Effective Time, and AirTouch will have received a certificate dated as of
the closing of the Merger signed by the chairman and the chief financial officer
of CCI to that effect; (iii) all FCC Consents will have been obtained or made,
whether or not any appeal or for reconsideration thereof is pending, or whether
the time for filing any such appeal or requests for reconsideration or for any
sua sponte action by the FCC has expired; (iv) AirTouch will have received the
opinions of Richard J. Lubasch, Vice President-General Counsel of CCI, and
Skadden, Arps, Slate, Meagher & Flom, counsel to CCI, both dated as of the
closing of the Merger, substantially in the form attached as exhibits to the
1996 Merger Agreement; (v) AirTouch will have received the opinion of Pillsbury
Madison & Sutro LLP, counsel to AirTouch, dated as of the closing of the Merger,
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code, and that
AirTouch, AirTouch Cellular and CCI will each be a party to that reorganization
within the meaning of Section 368(b) of the Code; (vi) there will be no pending
or threatened material action or proceeding by any person against AirTouch, CCI,
any subsidiary of either or New Par, or any director, officer or employee
thereof, challenging or in any way or in any manner seeking to restrict or
prohibit the transactions contemplated by the 1996 Merger Agreement or seeking
to obtain any damages against any person as a result of the transactions
contemplated thereby, which action or proceeding has or would have a reasonable
likelihood of success; (vii) AirTouch will have received "comfort" letters from
Ernst & Young LLP, as CCI's independent accountants, as of the dates specified
in the 1996 Merger Agreement; (viii) the CCI Rights will have been redeemed (by
resolution of the CCI Board and provision for payment as set forth in the 1996
Merger Agreement) in accordance with their terms; (ix) there will not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, by any governmental entity which,
in connection with the transactions contemplated by the 1996 Merger Agreement,
imposes any condition or restriction upon AirTouch or the Surviving Corporation
or their respective subsidiaries which in the reasonable business judgment of
AirTouch would materially interfere with the benefits sought to be obtained by
AirTouch under the 1996 Merger Agreement; (x) except for matters described in
the schedules delivered by CCI to AirTouch under the 1996 Merger Agreement, at
the time of the closing of the Merger (a) there will not be any suit,
101
<PAGE> 105
action or proceeding, or any investigation or inquiry, by any governmental
entity (collectively, "proceeding"), which will be pending or, to the knowledge
of CCI, threatened against or affecting CCI, any subsidiary thereof or New Par,
and (b) there will not be any potential unasserted claim or liability against
CCI, any subsidiary thereof or New Par (whether or not such claim or liability
is required to be accrued or disclosed under SFAS No. 5), in the case of either
a proceeding under clause (a) or a claim or liability under clause (b), which
could be reasonably expected to have, either individually or in the aggregate
with all other such proceedings, claims, or liabilities, a material adverse
effect on CCI, its subsidiaries and New Par taken as a whole (which will be
deemed to have occurred if involving losses, liabilities (which if contingent
could reasonably be expected to result in loss), costs or expenses of more than
$60 million); (xi) since the date of the 1996 Merger Agreement, there will not
have occurred any change in the Business Condition of CCI, its subsidiaries and
New Par, taken as a whole, that would have or would be reasonably likely to
have, individually or in the aggregate, a materially adverse effect thereon,
provided, however, that the foregoing will not apply to any change resulting
from general cellular industry conditions or a regulatory development affecting
the cellular industry generally; (xii) prior to the Effective Time, CCI will
have entered into an amendment of each indemnity agreement by and between CCI
and any officer or director of CCI or any other entity, pursuant to which the
indemnitee (a) acknowledges that for purposes of indemnification by CCI or its
subsidiaries such indemnitee has not served at the request of CCI or any such
subsidiary thereof as a director, officer, employee, trustee, agent or fiduciary
of any corporation, partnership, joint venture, trust or other entity other than
CCI or any of its current subsidiaries ("non-CCI position") and (b) waives any
rights to indemnification that would arise out of or relate to such indemnitee's
service in any such non-CCI position and to which such indemnitee would
otherwise be entitled pursuant to such indemnity agreement or the certificate of
incorporation or bylaws of CCI or any subsidiary thereof; (xiii) the consent,
approval or waiver of each person (other than governmental entities) whose
consent or approval is required in order to permit (a) the Surviving Corporation
to succeed to any material obligation, right or interest of CCI or any
subsidiary of CCI, or (b) the indirect acquisition of CCI's ownership interest
in New Par, under any material loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument will have been
obtained; and (xiv) the Headquarters Lease shall have been terminated or novated
and the office equipment, fixtures, furniture and leasehold improvements related
to that office sold.
TERMINATION; EFFECT OF TERMINATION
The 1996 Merger Agreement may be terminated at any time prior to the
Effective Time:
(i) by mutual consent of AirTouch and CCI;
(ii) by either AirTouch or CCI, if the Effective Time does not occur
on or before September 15, 1996 (unless the failure of such occurrence will
be due to the failure of the party seeking to terminate the 1996 Merger
Agreement to perform or observe its covenants and agreements set forth
therein required to be performed or observed by such party on or before the
Effective Time);
(iii) by AirTouch, in the event that, as a result of the adjustments
(provided for in the 1996 Merger Agreement) required to maintain the
tax-free status of the Merger, the Unit Election Number would exceed 80% of
the CCI Common Equivalent Shares outstanding as of immediately prior to the
Effective Time; provided that AirTouch will have given CCI five business
days' written notice of such termination;
(iv) (a) by either AirTouch or CCI, if CCI Stockholders do not approve
the 1996 Merger Agreement and the transactions contemplated thereby,
including the Merger and the CCI Rights Redemption, at a duly held meeting
of stockholders or any adjournment thereof, or (b) by AirTouch, if the
recommendations of CCI that CCI Stockholders approve the 1996 Merger
Agreement, the Merger and the CCI Rights Redemption will have been
withdrawn or modified;
(v) by AirTouch, if at the time of the Meeting the CCI Stockholders
representing more than 10% of the CCI Common Equivalent Shares have
submitted written demands for appraisal of their respective shares pursuant
to Section 262 of the DGCL which demands have not been withdrawn; or
102
<PAGE> 106
(vi) by either AirTouch or CCI, if any permanent injunction or other
order of a court or other competent authority preventing the consummation
of the Merger will have become final and nonappealable.
In the event of the termination of the 1996 Merger Agreement by either
AirTouch or CCI, the 1996 Merger Agreement will become void and have no effect,
except that (i) certain provisions of the 1996 Merger Agreement relating to
expenses and the continuing effect of the 1990 Merger Agreement and the
Confidentiality Agreement dated March 31, 1995, as extended by the letter
agreement dated January 23, 1996, will survive such termination and (ii) no
party will be relieved or released from any liability arising out of an
intentional breach of any provision of the 1996 Merger Agreement.
EXPENSES
Under the 1996 Merger Agreement, except as described below, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
the 1996 Merger Agreement and the transactions contemplated thereby will be paid
by the party incurring such expenses, except that all costs and expenses,
including filing fees, related to the printing, mailing or filing of the
Registration Statement and this Proxy Statement-Prospectus or to any other
filing with any governmental entity in connection with the transactions
contemplated by the 1996 Merger Agreement will be shared equally by AirTouch and
CCI.
CCI has agreed in the 1996 Merger Agreement that if the 1996 Merger
Agreement is terminated because (i) the CCI Rights Redemption or the 1996 Merger
Agreement fail to receive the requisite vote for approval by the CCI
Stockholders or (ii) the recommendation of the CCI Board that CCI Stockholders
approve the Merger, the CCI Rights Redemption and the 1996 Merger Agreement is
withdrawn or modified, then AirTouch will be entitled to reimbursement from CCI
and its subsidiaries for all reasonable internal and external costs, fees and
expenses incurred by AirTouch and any of its subsidiaries in connection with the
transactions contemplated by the 1996 Merger Agreement including the
preparation, printing, filing, shipping, and distribution of the Registration
Statement and this Proxy Statement-Prospectus and the pursuit of regulatory
approvals (such fees and expenses to include all legal, consulting and
accounting fees, disbursements and expenses).
AMENDMENT AND WAIVER
Any provision of the 1996 Merger Agreement may be waived at any time by the
party which is, or whose stockholders are, entitled to the benefits thereof. The
1996 Merger Agreement may be amended or supplemented at any time before or after
approval of the 1996 Merger Agreement by the CCI Stockholders to the extent
permitted under Section 251(d) of the DGCL.
CERTAIN PROJECTED FINANCIAL INFORMATION FOR NEW PAR
As part of New Par's governance procedure, the New Par Partnership
Committee reviews and approves business plans and budgets. In addition,
information on future projections of New Par's anticipated financial operations
have been prepared by New Par management. Set forth below are (i) projections
from the 1996 business plan approved by the New Par Partnership Committee, (ii)
preliminary projections for 1997 through 2000 prepared by New Par management in
connection with the 1996 business planning process, but not presented to the
Partnership Committee for approval nor subjected to New Par's standard review
procedures for projections presented with the business plan, and (iii)
projections prepared by New Par management and presented to the Partnership
Committee in connection with the 1995 business plan. These projections are
included in this Proxy Statement-Prospectus only because they were provided to
AirTouch and CCI employees or its members on the Partnership Committee in
connection with the New Par business planning process, and such inclusion should
not be regarded as indicative of AirTouch's or CCI's internal estimates for New
Par.
These projections were not prepared with a view to public disclosure or
compliance with published guidelines of the SEC or the guidelines established by
the American Institute of Certified Public Accountants
103
<PAGE> 107
regarding projections or forecasts, nor have such projections been audited,
examined or otherwise reviewed by independent auditors of AirTouch, AirTouch
Cellular, New Par, CCI, or any of their affiliates. These projections are also
not prepared on the same basis or presented in the same manner as AirTouch's or
CCI's financial statements and do not reflect adjustments to the carrying value
of New Par's assets and liabilities, and the impact to net income, resulting
from the application of the purchase method of accounting, assuming consummation
of the Merger. Such adjustments could be material. While presented with
numerical specificity, these projections are based upon a variety of assumptions
relating to the business of New Par and are inherently subject to significant
uncertainties and contingencies that are beyond the control of management of
AirTouch, AirTouch Cellular, New Par and CCI, including the impact of economic
conditions, the competitive environment in which New Par operates, and other
factors set forth under "RISK FACTORS." Accordingly, actual results may differ
materially from those projected. The inclusion of these projections herein
should not be regarded as a representation by AirTouch, AirTouch Cellular, New
Par, CCI or any other person that the assumptions are reasonable or that
projections will prove to be correct. None of AirTouch, AirTouch Cellular, New
Par or CCI intends to update or otherwise revise the projections presented below
to reflect circumstances existing after the date of the most recent financial
statements incorporated by reference in this Proxy Statement-Prospectus or to
reflect the occurrence of unanticipated events. These projections should be read
together with the audited financial statements of AirTouch, New Par and CCI,
incorporated herein by reference, and the Pro Forma Statements and explanatory
notes set forth under "PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
NEW PAR 1996 BUSINESS PLAN
<TABLE>
<CAPTION>
1996
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Operating revenues......................................... $ 930.2
Cost of sales.............................................. 74.3
------
Net operating revenues................................... 855.9
Cash operating expenses.................................... 480.1
------
Operating income before depreciation and amortization...... 375.8
Depreciation and amortization.............................. 103.8
Interest (income) expense.................................. (3.2)
Tax provisions............................................. 5.8
------
Net income............................................... $ 269.4
======
</TABLE>
PRELIMINARY PROJECTIONS PREPARED BY NEW PAR MANAGEMENT IN JANUARY 1996 IN
CONNECTION WITH 1996 BUSINESS PLANNING PROCESS:
In addition to the other considerations in the two paragraphs above, the
reader should bear in mind that these preliminary projections were prepared by
New Par management and were not presented to the New Par Partnership Committee
as part of the 1996 Business Plan nor were they subjected to the standard
preparation
104
<PAGE> 108
and review procedures for projections to be presented to the Partnership
Committee as part of the business planning process.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1998 1999 2000
-------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Operating revenues................................ $1,109.4 $1,281.9 $1,436.7 $1,580.9
Cost of sales..................................... 93.5 120.6 143.9 172.1
-------- -------- -------- --------
Net operating revenues.......................... 1,015.9 1,161.3 1,292.8 1,408.8
Cash operating expenses........................... 541.0 584.3 631.1 671.6
-------- -------- -------- --------
Operating income before depreciation and
amortization.................................... 474.9 577.0 661.7 737.2
Depreciation and amortization..................... 119.4 131.8 142.4 155.4
Interest (income) expense......................... (4.7) (5.2) (5.9) (6.4)
Tax provisions.................................... 7.4 9.0 10.3 11.5
-------- -------- -------- --------
Net income...................................... $ 352.8 $ 441.4 $ 514.9 $ 576.7
======== ======== ======== ========
</TABLE>
PROJECTIONS PREPARED BY NEW PAR MANAGEMENT IN JANUARY 1995 AND PRESENTED TO THE
NEW PAR PARTNERSHIP COMMITTEE IN CONNECTION WITH THE 1995 BUSINESS PLAN:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
------ -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Operating revenues................................. $955.9 $1,136.1 $1,304.8 $1,461.2
Cost of sales...................................... 86.2 95.4 105.4 114.2
------ -------- -------- --------
Net operating revenues........................... 869.7 1,040.7 1,199.4 1,347.0
Cash operating expenses............................ 505.8 581.3 645.8 704.7
------ -------- -------- --------
Operating income before depreciation and
amortization..................................... 363.9 459.4 553.6 642.3
Depreciation and amortization...................... 128.6 154.2 179.7 203.8
Interest (income) expense.......................... (1.5) (1.5) (1.5) (1.5)
Tax provisions..................................... 5.2 6.8 8.3 9.7
------ -------- -------- --------
Net income....................................... $231.6 $ 299.9 $ 367.1 $ 430.3
====== ======== ======== ========
</TABLE>
The material assumptions underlying the foregoing projections concern (i)
revenue and expense and (ii) capital outlays. Traditional service revenues are a
function of the subscriber base and average revenue per subscriber. The
projections assume that subscriber growth in the short term will continue at the
same rate as currently, but that such rate of growth will decline over the long
term due to increased competition. Average revenue per subscriber is forecast to
decline year-over-year. The projections assume that total expenses will continue
to increase, but at a declining rate. Due to an anticipated decrease in the
variable cost per subscriber and the ability to spread fixed costs over a larger
subscriber base, the projections assume that the average cash cost per
subscriber will decrease over time, and at a rate that exceeds the decrease in
the average revenue per subscriber. As a result, the projections assume that New
Par will be able to maintain its present cash flow margin. Capital outlays under
the projections are directly related to subscriber growth and required
functionality. The projections assume that, as the subscriber base grows,
additional network capacity will be necessary to service subscribers.
Additionally, the projections assume implementation of digital service in the
near future.
105
<PAGE> 109
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1996 combines (1) the historical consolidated balance sheets of
AirTouch and subsidiaries and CCI and subsidiaries as if the 1996 Merger had
been effective on that date and after giving effect to the purchase method of
accounting and other Merger-related adjustments described in the accompanying
explanatory notes, and (2) Phase II of the AirTouch/U S WEST joint venture
described in the accompanying explanatory notes, assuming Phase II occurred on
that date. The unaudited Pro Forma Condensed Combined Statements of Income
present the combined results of operations of (1) AirTouch and CCI as if the
1996 Merger had been effective at the beginning of each period after giving
effect to the purchase method of accounting and other Merger-related adjustments
described in the accompanying explanatory notes, and (2) Phase II of the
AirTouch/U S WEST joint venture as if Phase II had been effective at the
beginning of each period as described in the accompanying explanatory notes, and
(A) all of the domestic cellular interests owned by each of AirTouch and U S
WEST, including those subject to regulatory and other approvals, were
contributed at such time to the joint venture, and (B) U S WEST did not cause
the contribution of the AirTouch/U S WEST PCS partnership to this joint venture
at such time.
The Pro Forma Condensed Combined Financial Statements and accompanying
explanatory notes reflect the application of the purchase method of accounting
for the 1996 Merger. Under the purchase method of accounting, the purchase price
will be allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time. As described in the accompanying
notes, estimates of the fair values of CCI and subsidiaries' assets and
liabilities have been combined with recorded values of the assets and
liabilities of AirTouch. However, changes to adjustments included in the Pro
Forma Condensed Combined Financial Statements are expected as
valuations/appraisals of assets and liabilities are completed, and additional
information becomes available. Although AirTouch cannot ascertain what these
changes would be, such changes could be material. In addition, the results of
operations of CCI subsequent to March 31, 1996 will affect allocation of the
purchase price. Accordingly, actual amounts will differ from those set forth in
the Pro Forma Condensed Combined Financial Statements. Contingent Payments, if
any, associated with AirTouch Class B Preferred Stock will not affect the
aggregate purchase price, since the contingency is based on changes in the
volume-weighted average trading price of such preferred stock.
The equity method of accounting was applied for Phase II of the AirTouch/U
S WEST joint venture. Despite having majority ownership, the equity method of
accounting will be required for the joint venture under generally accepted
accounting principles and it will not be consolidated because AirTouch will not
control the joint venture. Under the joint venture agreement, AirTouch is
required to obtain concurrence from U S WEST, or the Independent Member (as
defined in the agreement), with respect to approval of the joint venture's
budgets and business plans, capital contributions in excess of certain levels,
acquisitions or dispositions of assets with fair market value in excess of
certain levels, and any distributions not contemplated in an approved budget.
The equity method of accounting requires recognition of AirTouch's share of the
financial condition and operating results of the AirTouch/U S WEST joint venture
on one line in the Pro Forma Condensed Combined Balance Sheet and in the Pro
Forma Condensed Combined Statement of Income, respectively. The contribution of
net assets to the AirTouch/U S WEST joint venture will be recorded on a
historical basis. The actual interests at the time of the Phase II closing or at
a given point in time thereafter of AirTouch and U S WEST in the capital, income
(loss) and cash flows of the joint venture will depend on a number of factors,
the outcomes of which are subject to significant uncertainties and
contingencies. These factors include, among other things, the timing of the
actual closing of Phase II, the ability of the parties to contribute certain of
their domestic cellular interests to the joint venture (and the timing of such
contributions), the ability of the parties to restructure the allocation of
profits and losses and the distribution of cash and property of the joint
venture in the event that they are unable to contribute all of their domestic
cellular interests to the joint venture at the closing of Phase II (and the
manner in which any such restructuring is implemented, see discussion below),
the timing of the parties' contribution of their PCS Partnership to the joint
venture (and the value of the PCS Partnership at the time of such contribution),
and the timing of the closing of the CCI Merger. The closing of Phase II is
conditioned upon the satisfaction of certain conditions, including the ability
of AirTouch and U S WEST to contribute at least 60% of their
106
<PAGE> 110
respective domestic cellular interests to the joint venture, measured on the
basis of the adjusted POPS represented by such interests and, in the case of
AirTouch, excluding New Par. AirTouch anticipates that Phase II will occur in
the fourth quarter of 1996 or the first quarter of 1997.
Some of the cellular interests of AirTouch and U S WEST, including their
general partner interests in Los Angeles and Seattle, respectively, are subject
to consent provisions in connection with certain transactions. In addition,
other partnership interests may, under certain circumstances, be subject to
rights of first refusal provisions in favor of third parties. The foregoing
provisions may or may not result in certain of the parties' properties not being
contributed to the joint venture. In addition, a limited partner in U S WEST's
majority-owned Seattle system has initiated litigation challenging the
arrangements between AirTouch and U S WEST as they relate to the Seattle
property and the parties' joint venture. To the extent any such properties have
not been contributed to the joint venture at the time of the Phase II closing,
however, AirTouch and U S WEST are obligated throughout the life of the joint
venture to continue to use reasonable efforts to effect to the maximum extent
possible such contribution. In addition, AirTouch and U S WEST have agreed that,
in the event that either is unable to contribute all of its domestic cellular
interests to the joint venture, the parties, to the extent feasible (including
with respect to obligations to third parties) will (for a five-year period
following the Phase II closing) restructure, among other things, the allocation
of profits and losses and the distribution of cash and property of the joint
venture or, to the extent such a restructuring is not feasible, to otherwise
implement a compensation mechanism, in each case, to provide each party with the
same economic result (taking into account all tax consequences) such party would
have obtained if all of the parties' domestic cellular interests had been
contributed to the joint venture at the Phase II closing. AirTouch and U S WEST
have not yet determined whether any such restructuring is feasible, or how any
such restructuring or other compensation mechanism would be implemented.
As a result of the uncertainties and contingencies surrounding Phase II,
AirTouch cannot predict the actual interest which it will have upon the closing
of Phase II in the capital, income (loss) or cash flow of the joint venture, or
the degree to which its domestic cellular operations will be deconsolidated, and
such interest and manner of accounting presentation could differ materially from
the pro forma information presented below. AirTouch nevertheless believes it is
reasonable to use the above-described assumption that all cellular properties
are contributed to the joint venture in the pro forma presentation because of
(i) the continuing obligations of AirTouch and U S WEST to attempt to effect
such contribution, and (ii) the fact that such an assumption reflects the most
conservative expected result (i.e., full deconsolidation) for the purposes of
AirTouch's financial statement reporting of all of AirTouch's domestic cellular
properties.
The Pro Forma Condensed Combined Financial Statements are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined company or
the financial position or the results of operations of the combined company that
would have actually occurred had the Merger and Phase II of the AirTouch/U S
WEST partnership been in effect as of the date or for the periods presented.
The Pro Forma Condensed Combined Financial Statements and the accompanying
notes should be read in conjunction with and are qualified in their entirety by
the Consolidated Financial Statements, including accompanying notes, of
AirTouch, and CCI included in the documents described under "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and the Consolidated Financial Statements of U S
WEST NewVector Group attached hereto as Annex H.
107
<PAGE> 111
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA U S WEST CCI MERGER
---------------------------- CCI CCI JOINT VENTURE AND
AIRTOUCH CCI NEW PAR ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ -------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets.......................... $ 417.4 $203.3 $ 156.8 $ (7.0)(1) $ (207.0)(a)
(101.3)(2) $ 669.2 (156.8)(c) $ 305.4
Property, plant, and equipment, net..... 1,334.9 1.9 476.7 1,813.5 (866.5)(a)
(476.7)(c) 470.3
Investments in unconsolidated wireless
systems............................... 3,201.7 458.5 1,507.0(1) 941.5(a)
107.7(11) 4,016.2(c)
(3,418.4)(4) 1,856.5 6,814.2
Intangible assets, net.................. 582.5 410.0 2,149.3(4) (157.6)(a)
879.4(5) 4,021.2 (3,438.7)(c) 424.9
Deferred charges and other noncurrent
assets................................ 249.9 30.1 30.1 (107.7)(11) 202.4 (58.6)(a)
(30.1)(c) 113.7
-------- ------ -------- --------- -------- --------- --------
Total assets................... $5,786.4 $693.8 $1,073.6 $ 1,009.0 $8,562.8 $ (434.3) $8,128.5
======== ====== ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities..................... $ 469.0 $ 12.0 $ 80.5 $ 561.5 $ (177.9)(a)
(80.5)(c) $ 303.1
Long-term obligations................... 1,000.2 358.7 420.0(1)
(93.4)(2) 1,685.5 (1.4)(a) 1,684.1
Deferred income taxes................... 254.8 33.6 879.4(5) 1,167.8 1,167.8
Deferred credits........................ 93.1 3.9 97.0 (11.9)(a)
(3.9)(c) 81.2
-------- ------ -------- --------- -------- --------- --------
Total liabilities.............. 1,817.1 404.3 84.4 1,206.0 3,511.8 (275.6) 3,236.2
-------- ------ -------- --------- -------- --------- --------
Minority interests in consolidated
wireless systems...................... 157.0 1.7 158.7 (157.0)(a)
(1.7)(c)
-------- ------ -------- --------- -------- --------- --------
Stockholders' equity:
6.00% Mandatorily Convertible Class B
Preferred Stock, Series 1996........ 500.0(1) 500.0 500.0
4.25% Convertible Class C Preferred
Stock, Series 1996.................. 580.0(1) 580.0 580.0
Common stock.......................... 5.0 5.0 5.0
Additional paid-in capital............ 3,887.1 3,887.1 3,887.1
Accumulated deficit................... (105.9) (105.9) (105.9)
Cumulative translation adjustment..... 15.9 15.9 15.9
Other................................. 10.2 10.2 10.2
Stockholders' equity -- CCI........... 289.5 (7.9)(2)
(281.6)(4)
Partners' capital -- New Par.......... 987.5 (987.5)(4)
-------- ------ -------- --------- -------- --------- --------
Total stockholders' equity..... 3,812.3 289.5 987.5 (197.0) 4,892.3 0.0 4,892.3
-------- ------ -------- --------- -------- --------- --------
Total liabilities and
stockholders'
equity....................... $5,786.4 $693.8 $1,073.6 $ 1,009.0 $8,562.8 $ (434.3) $8,128.5
======== ====== ======== ========= ======== ========= ========
</TABLE>
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
108
<PAGE> 112
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA US WEST CCI MERGER
------------------------------ CCI CCI JOINT VENTURE AND
AIRTOUCH CCI(*) NEW PAR(*) ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ ---------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $ 448.9 $177.5 $ 626.4 $ (321.5)(b)
(177.5)(d) $ 127.4
-------- ------- -------- --------- --------
Operating expenses:
Cost of revenues............ 103.0 34.0 137.0 (65.0)(b)
(34.0)(d) 38.0
Selling and customer
operations expenses....... 138.3 52.6 190.9 (93.7)(b)
(52.6)(d) 44.6
General, administrative, and
other expenses............ 93.3 $ 63.4 9.2 $ (61.7)(11) 104.2 (43.2)(b)
(9.2)(d) 51.8
Depreciation and
amortization expenses..... 65.0 0.4 23.2 (2.6)(6) (38.8)(b)
27.3(8) 113.3 (47.9)(d) 26.6
-------- ------ ------- ------- -------- --------- --------
Total operating expenses...... 399.6 63.8 119.0 (37.0) 545.4 (384.4) 161.0
-------- ------ ------- ------- -------- --------- --------
Operating income (loss)....... 49.3 (63.8) 58.5 37.0 81.0 (114.6) (33.6)
Equity in net income (loss) of
unconsolidated wireless
systems:
Domestic.................... 56.1 29.8 (64.1)(7) 21.8 68.0(b)
34.3(d)
(1.9)(e)
(3.5)(f) 118.7
International............... (7.1) (7.1) (7.1)
Minority interests in net
(income) loss of
consolidated wireless
systems..................... (8.5) (0.2) (8.7) 16.1(b)
0.2(d) 7.6
Interest:
Income...................... 4.5 1.9 2.4 8.8 (3.1)(b)
(2.4)(d) 3.3
Expense..................... (8.4) (6.3) (7.5)(9) (22.2) (0.2)(b) (22.4)
Miscellaneous income
(expense)................... 7.7 (3.1) (0.4) 4.2 0.4(d) 4.6
-------- ------ ------- ------- -------- --------- --------
Income (loss) before
extraordinary item and
income taxes................ 93.6 (41.5) 60.3 (34.6) 77.8 (6.7) 71.1
Income taxes.................. 41.4 (14.3) 1.3 11.7(10) 40.1 (1.3)(d)
(0.6)(g) 38.2
-------- ------ ------- ------- -------- --------- --------
Income (loss) before
extraordinary item.......... $ 52.2 $(27.2) $ 59.0 $ (46.3) 37.7 (4.8) 32.9
======== ====== ======= =======
Preferred dividends........... 13.7 13.7
-------- --------- --------
Income attributable to common
stockholders................ $ 24.0 $ (4.8) $ 19.2
======== ========= ========
Income before extraordinary
item per share.............. $ 0.10 $ 0.05 $ 0.04
======== ======== ========
Weighted average shares
outstanding (in
thousands).................. 498,837 498,837 498,837
======== ======== ========
</TABLE>
- ---------------
(*) Conformed to AirTouch's Statement of Income presentation.
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
109
<PAGE> 113
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA US WEST CCI MERGER
------------------------------ CCI CCI JOINT VENTURE AND
AIRTOUCH CCI(*) NEW PAR(*) ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ ---------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $1,618.6 $660.3 $2,278.9 $(1,188.7)(b)
(660.3)(d) $ 429.9
-------- ------- -------- --------- --------
Operating expenses:
Cost of revenues............ 372.9 133.4 506.3 (231.0)(b)
(133.4)(d) 141.9
Selling and customer
operations expenses....... 524.7 204.4 729.1 (380.6)(b)
(204.4)(d) 144.1
General, administrative, and
other expenses............ 392.4 $ 13.6 38.4 444.4 (159.6)(b)
(38.4)(d) 246.4
Depreciation and
amortization expenses..... 215.8 2.2 86.4 $ (10.2)(6) (127.6)(b)
110.0(8) 404.2 (186.2)(d) 90.4
-------- ------ ------- ------- -------- --------- --------
Total operating expenses...... 1,505.8 15.8 462.6 99.8 2,084.0 (1,461.2) 622.8
-------- ------ ------- ------- -------- --------- --------
Operating income (loss)....... 112.8 (15.8) 197.7 (99.8) 194.9 (387.8) (192.9)
Equity in net income (loss) of
unconsolidated wireless
systems:
Domestic.................... 188.2 101.3 (207.1)(7) 82.4 242.4(b)
100.5(d)
(17.5)(e)
(12.9)(f) 394.9
International............... (35.9) (35.9) (35.9)
Minority interests in net
(income) loss of
consolidated wireless
systems..................... (36.5) (0.9) (37.4) 56.4(b)
0.9(d) 19.9
Interest:
Income...................... 34.9 15.1 8.8 58.8 (12.3)(b)
(8.8)(d) 37.7
Expense..................... (13.0) (27.5) (0.1) (68.0)(9) (108.6) 5.1(b)
0.1(d) (103.4)
Miscellaneous income
(expense)................... (5.5) 16.1 (0.9) 9.7 (1.7)(b)
0.9(d) 8.9
-------- ------ ------- ------- -------- --------- --------
Income before extraordinary
item and income taxes....... 245.0 89.2 204.6 (374.9) 163.9 (34.7) 129.2
Income taxes.................. 113.1 31.3 4.3 (54.4)(10) 94.3 (4.3)(d)
(6.7)(g) 83.3
-------- ------ ------- ------- -------- --------- --------
Income before extraordinary
item........................ $ 131.9 $ 57.9 $200.3 $(320.5) 69.6 (23.7) 45.9
======== ====== ======= =======
Preferred dividends........... 54.7 54.7
-------- --------- --------
Income (loss) attributable to
common stockholders......... $ 14.9 $ (23.7) $ (8.8)
======== ========= ========
Income (loss) before
extraordinary item per
share....................... $ 0.27 $ 0.03 $ (0.02)
======== ======== ========
Weighted average shares
outstanding (in
thousands).................. 494,925 494,925 494,925
======== ======== ========
</TABLE>
- ---------------
(*) Conformed to AirTouch's Statement of Income presentation.
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
110
<PAGE> 114
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
CCI MERGER PRO FORMA
Basis of Presentation. The 1996 Merger Agreement provides that at the
Effective Time, and subject to election and allocation procedures, each share of
CCI Stock outstanding immediately prior to the Effective Time will be converted
into the right to receive for each CCI Common Stock Equivalent Share either (i)
$55 in cash, or (ii) one Unit, or (iii) a combination of a fraction of a Unit
and cash. Each Unit consists of a number of shares of AirTouch Class B Preferred
Stock and a number of shares of AirTouch Class C Preferred Stock. The total
number of CCI Common Stock Equivalent Shares outstanding immediately prior to
the Effective Time to be converted into the right to receive Units and cash will
be adjusted pursuant to the election procedures. Of the CCI Stock not held by
AirTouch, 28%, less Dissenting CCI Stock, will be converted into the right to
receive cash and an aggregate of 72% will be converted into the right to receive
Units.
Under the 1996 Merger Agreement, the number of shares of AirTouch Class B
Preferred Stock issued in the Merger (without regard to the conversions of CCI
Convertible Notes or exercises of CCI Options occurring, in either case, after
the Effective Time) should not exceed the quotient of $500 million, divided by
the Preferred Stock Issue Price. In the event that the number of shares of
AirTouch Class B Preferred Stock to be issued in the Merger would exceed the
Class B Maximum, the composition of each Unit will be adjusted to increase the
Class C Per-Unit Amount and decrease the Class B Per-Unit Amount. The effect of
such an adjustment would limit the Class B Preferred to be issued in the Merger
to the Class B Maximum.
Under the 1996 Merger Agreement, CCI Convertible Notes will be assumed by
the Surviving Corporation at the Effective Time. Each holder of CCI Options may
exercise the stock options held before the Effective Time, subject to certain
election procedures, or after, subject to certain conversion procedures.
Pro forma income before extraordinary item per share is calculated based on
income before extraordinary item after deducting dividends of $54.7 million and
$13.7 million for the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively for AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock, and on weighted average shares of 494.9 million and
498.8 million as of December 31, 1995 and March 31, 1996, respectively. The
effect of convertible preferred stock, using the "if converted" method, is not
considered since the effect of such shares is anti-dilutive. The effect of CCI
options and the CCI Convertible Notes has not been considered since the impact
is immaterial.
In the unaudited Pro Forma Condensed Combined Balance Sheet, (1)
outstanding CCI Options have not been considered in the pro forma presentation
since their impact is immaterial, (2) CCI Convertible Notes is assumed to not
convert into CCI Stock prior to the Effective Time (see "OTHER MATTERS --
Treatment of CCI Convertible Notes") and (3) amounts presented assume that the
election would be for the maximum amounts of cash and AirTouch Class B Preferred
Stock. Although there could be other possible combinations of cash and AirTouch
Preferred Stock, Series 1996 as provided by the 1996 Merger Agreement, any
combination other than the one assumed would not have a materially different
impact from that shown by these Pro Forma Condensed Combined Financial
Statements. Because the AirTouch Class C Preferred Stock can be redeemed for
cash or converted into shares of AirTouch Common Stock at the option of
AirTouch, it is not considered to be mandatorily redeemable for financial
reporting purposes.
The purchase price, exclusive of expenses related thereto, for the 1996
Merger is summarized below (in millions of dollars):
<TABLE>
<S> <C>
Cash................................................................ $ 420
Price for Maximum AirTouch Class B Preferred Stock.................. 500
Price for AirTouch Class C Preferred Stock.......................... 580
------
Purchase Price...................................................... $1,500
======
</TABLE>
For purposes of the Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1995, the MRO is assumed to have occurred
concurrently with the Merger although it actually occurred in late October 1995.
For purposes of the Pro Forma Condensed Combined Statement of Income for
111
<PAGE> 115
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
the three months ended March 31, 1996, the AirTouch Replacement Option payment
is assumed to have occurred concurrently with the Merger although actually it
occurred on January 4, 1996 (see Note 11).
The Merger will be accounted for by AirTouch under the purchase method of
accounting in accordance with APB Opinion No. 16, and accordingly, this method
of accounting has been applied in the Pro Forma Condensed Combined Financial
Statements. The acquisition of CCI stock pursuant to the 1990 Merger Agreement
was accounted for using the equity method of accounting.
Under the purchase method of accounting, the purchase price will be
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time. Estimates of the fair values of CCI
and its subsidiaries' assets and liabilities have been combined with recorded
values of the assets and liabilities of AirTouch and subsidiaries in the
unaudited Pro Forma Condensed Combined Financial Statements. However, changes to
adjustments included in the Pro Forma Condensed Combined Financial Statements
are expected as valuations/appraisals of assets and liabilities are completed,
and additional information becomes available. Although AirTouch cannot ascertain
what the changes to pro forma adjustments will be, such changes could be
material. In addition, the results of operations of CCI subsequent to March 31,
1996 will affect allocation of the purchase price. Accordingly, actual amounts
will differ from those in the Pro Forma Condensed Combined Financial Statements.
Contingent Payments, if any, associated with AirTouch Class B Preferred Stock
will not affect the aggregate purchase price, since the contingency is based on
changes in the volume weighted average trading price of AirTouch Class B
Preferred Stock.
CCI Merger Pro Forma Adjustments
1. Records the Merger assuming the estimated professional fees of $7 million
(primarily legal, investment bankers', and accountants' fees) related to the
Merger were paid using available cash. For Pro Forma Condensed Combined
Financial Statement purposes, the as-reported values on CCI's Balance Sheet
other than its investment in New Par have been estimated to approximate fair
value.
2. Applies CCI's reported cash balances toward payment of its estimated merger
fees and the reduction of its long-term debt.
3. Reclassifies AirTouch Replacement Option payment made on January 4, 1996
from deferred charges.
4. Eliminates AirTouch's equity investment reflecting its equity interest in
CCI pursuant to the 1990 Merger Agreement and CCI's investment in New Par.
In addition, this entry allocates the full amount of the excess purchase
price over the as-reported amounts on CCI's and New Par's Consolidated
Balance Sheets to identifiable intangibles of New Par. Under the purchase
method of accounting, the purchase price is based on the total cost of all
equity acquired pursuant to the 1990 Merger Agreement and the 1996 Merger
Agreement.
<TABLE>
<CAPTION>
MARCH
31, 1996
--------
<S> <C>
Aggregate Purchase Price
(1) Pursuant to 1996 Merger Agreement (after adjustments)................ $1,614.7
(2) Pursuant to 1990 Merger Agreement.................................... 810.7
--------
Total cost of acquisition.................................................. 2,425.4
Less: Net assets acquired (net of adjustments)............................. 276.1
--------
Excess Purchase Price...................................................... $2,149.3
=======
</TABLE>
5. Records the deferred tax liability related to identifiable intangible assets
other than goodwill and corresponding adjustment to goodwill (see entry 8).
AirTouch is required to recognize deferred tax liabilities for the temporary
differences between the initial assigned values to the identifiable
intangible assets and their tax bases. The deferred tax liability will be
amortized over the estimated useful lives of the relevant identifiable
intangible assets. Goodwill is considered a residual and no related deferred
tax liability is recognized.
112
<PAGE> 116
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
6. Adjusts New Par's as-reported depreciation expense to extend the lives of
certain domestic cellular telecommunications equipment from seven years to
ten years, to conform to AirTouch's useful lives.
7. Reverses AirTouch's equity in net income of CCI and New Par and CCI's equity
in net income of New Par for the year ended December 31, 1995 and the three
months ended March 31, 1996.
8. Records the amortization expense for identifiable intangible assets and
goodwill. For purposes of calculating the amortization of intangibles,
management has preliminarily estimated that approximately $191 million
relates to subscriber lists and $1,951.3 million relates to FCC licenses.
Amortization periods for subscriber lists and FCC licenses are five and
forty years, respectively.
9. Records interest expense incurred on $420 million of borrowings related to
the Merger and $710.4 million of borrowings related to the MRO and option
payment, based on assumed average interest rates of 7.00% and 6.33%,
respectively. During July 1996, AirTouch issued 7 1/8% Notes due 2001 and
7 1/2% Notes due 2006 (the "Notes") with net proceeds to AirTouch, of
approximately $642.9 million. The difference between the actual effective
interest rate on the Notes of 7.43% and the assumed interest rate of 7.00%
is immaterial. Pending the closing of the Merger, AirTouch will apply the
net proceeds of the Notes to retire commercial paper. AirTouch then intends
to reborrow under its commercial paper program to fund the cash component of
the Merger. The rate of 6.33% represents average LIBOR for 1995 plus 30
basis points. Interest on the amount used to fund the MRO is based on the
terms of AirTouch's unsecured $2 billion, five-year revolving credit
facility. The effect of a 1/8% change in interest rates on interest expense
to pro forma net income of AirTouch is immaterial.
10. Records net income tax effects on the relevant pro forma items arising from
the CCI acquisition at the combined statutory rate of 41.05%. Pro forma
adjustments to the Condensed Combined Statements of Income include interest,
MRO compensation expense recorded by CCI (see Note 11), depreciation and
amortization expenses. Except for amortization of goodwill, these
adjustments were tax effected at the statutory rate to produce net tax
expense of $54.4 million and $11.7 million for the year ended December 31,
1995 and the three months ended March 31, 1996, respectively.
11. Reverses compensation expense recorded by CCI in connection with
cancellation of stock options which options were acquired by AirTouch.
PHASE II OF AIRTOUCH/U S WEST JOINT VENTURE PRO FORMA
Basis of Presentation. In July 1994, AirTouch and U S WEST entered into an
agreement to combine their domestic cellular properties into a joint venture in
a multi-phased transaction. Phase I of the transaction commenced on November 1,
1995, and had no immediate financial accounting presentation impact. In Phase
II, the partners will combine their domestic properties into a joint venture,
subject to obtaining certain required consents and authorizations. AirTouch
believes that Phase II is a probable transaction. The most significant effect of
Phase II is the deconsolidation of AirTouch's domestic cellular interests and
the use of the equity method of accounting for its investment in the joint
venture.
The Pro Forma Condensed Combined Financial Statements assume that all of
AirTouch's domestic cellular properties (including the properties acquired in
the Merger) are contributed to the joint venture at the beginning of Phase II.
Similarly, all domestic cellular properties of U S WEST are assumed to be
contributed to the joint venture. The Pro Forma Condensed Combined Financial
Statements exclude the PCS partnership since its inclusion is solely at the
option of U S WEST, could occur as late as mid-1998, and the effect of the
contribution to the relative ownership interest of the partners is not readily
determinable. The assumed ownership interests for AirTouch and U S WEST
approximate 74% and 26%, respectively, pursuant to a computation set forth in
the partnership agreement.
113
<PAGE> 117
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
The following is selected pro forma financial information as of December
31, 1995 and March 31, 1996 and the periods then ended for the AirTouch/U S WEST
Partnership:
AIRTOUCH/U S WEST PARTNERSHIP
SUMMARY PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
OPERATING RESULTS
Operating revenues................................... $2,790.2 $ 762.9
Operating income..................................... $ 534.9 $ 164.6
Net income from operations........................... $ 562.1 $ 173.2
BALANCE SHEET
Total assets......................................... $6,893.3 $6,806.3
Total partners' capital.............................. $5,939.4 $6,084.0
</TABLE>
Pro forma net income per share is calculated based on income before
extraordinary items after deducting dividends of $54.7 million and $13.7 million
for AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock, and
assumes 494.9 million and 498.8 million weighted average shares outstanding as
of December 31, 1995 and March 31, 1996, respectively. The effect of convertible
preferred stock and convertible debt, using the "if converted" method, is not
considered since the effect of such shares is anti-dilutive. The CCI Options
have not been considered in pro forma presentation since their impact is
immaterial.
Phase II Pro Forma Adjustments
a. Converts AirTouch's as reported investment in domestic cellular net
assets (before the CCI transaction) contributed to the joint venture to
the equity method of accounting.
b. Converts to the equity method of accounting AirTouch's as reported
domestic cellular consolidated 1995 and first quarter 1996 results of
operations.
c. Converts to the equity method of accounting AirTouch's interest in New
Par's as reported net assets (after the Merger), including the related
intangibles.
d. Converts to the equity method of accounting AirTouch's interest in New
Par's 1995 and first quarter 1996 as reported results of operations,
including the amortization of intangibles arising from the Merger.
e. Reduces AirTouch's as reported income in its domestic cellular
properties to reflect its ownership interest in the joint venture.
f. Adjusts AirTouch's share of the joint venture's net income for the
amortization of the implied goodwill (the difference between book value
of AirTouch's net assets (after the Merger) contributed to the
partnership and AirTouch's proportionate share of the pro forma combined
net assets of the joint
114
<PAGE> 118
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
venture at December 31, 1995 and March 31, 1996). The amortization
period for implied goodwill is 40 years.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Book value of assets contributed by AirTouch.......... $4,910.5 $5,065.4
Book value of assets contributed by U.S. WEST......... 1,028.9 1,018.6
------------ ---------
Combined book values contributed...................... $5,939.4 $6,084.0
========== =======
AirTouch's share of combined book values at 74%....... 4,395.2 4,502.2
Book Value of AirTouch's contribution................. 4,910.5 5,065.4
------------ ---------
Implied Goodwill...................................... $ 515.3 $ 563.2
========== =======
Annual Amortization expense........................... $ 12.9 $ 14.1
==========
---------
Quarterly Amortization expense........................ $ 3.5
=======
</TABLE>
g. Records net income tax effects on the relevant pro forma items arising
from Phase II at the statutory rate of 41.05%.
115
<PAGE> 119
DESCRIPTION OF AIRTOUCH CAPITAL STOCK
GENERAL
AirTouch's authorized capital stock consists of 1,100,000,000 shares of
AirTouch Common Stock, par value $.01 per share, and 50,000,000 shares of
AirTouch Preferred Stock, par value $.01 per share. On the Record Date, there
were approximately 449,439,437 shares of AirTouch Common Stock outstanding,
exclusive of treasury shares, and no shares of AirTouch Preferred Stock
outstanding.
AIRTOUCH COMMON STOCK
The AirTouch Common Stock is not redeemable, does not have any conversion
rights and is not subject to call. Holders of shares of AirTouch Common Stock
have no preemptive rights to maintain their percentage of ownership in future
offerings or sales of stock of AirTouch. Holders of shares of AirTouch Common
Stock have one vote per share in all elections of directors and on all other
matters submitted to a vote of stockholders of AirTouch. The holders of AirTouch
Common Stock are entitled to receive dividends, if any, as and when declared
from time to time by the AirTouch Board out of funds legally available therefor.
Upon liquidation, dissolution or winding up of the affairs of AirTouch, the
holders of AirTouch Common Stock will be entitled to participate equally and
ratably, in proportion to the number of shares held, in the net assets of
AirTouch available for distribution to holders of AirTouch Common Stock. The
shares of AirTouch Common Stock currently outstanding are fully paid and
nonassessable.
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS
Certain provisions in AirTouch's Certificate of Incorporation and By-laws
may have the effect of delaying, deferring or preventing a change in control of
AirTouch. These provisions require that the AirTouch Board be divided into three
classes that are elected for staggered three-year terms; provide that
stockholders may act only at annual or special meetings and may not act by
written consent; do not permit stockholders to cumulate votes in the election of
directors; authorize the directors of AirTouch to determine the size of the
AirTouch Board; require a vote of 66 2/3% of the shares outstanding for the
amendment of any of the foregoing provisions; require that stockholder
nominations for directors be made by the Nominating Committee of AirTouch prior
to a meeting of stockholders or by any stockholder of record pursuant to timely
notice; provide that special meetings of stockholders may be called only by
certain officers of AirTouch or by the AirTouch Board; and authorize the
AirTouch Board to establish one or more series of AirTouch Preferred Stock,
without any further stockholder approval, having rights, preferences, privileges
and limitations that could impede, discourage or prevent the acquisition of
control of AirTouch or prevent the stockholders from receiving a premium for
their shares in a change of control transaction.
RIGHTS AGREEMENT
The AirTouch Board has adopted a shareholder rights plan (the "AirTouch
Rights Plan") that provides for the distribution of rights ("AirTouch Rights")
to holders of outstanding shares of AirTouch Common Stock. Except as set forth
below, each AirTouch Right, when exercisable, entitles the holder thereof to
purchase from AirTouch one one-hundredth of a share of AirTouch Series A
Preferred Stock at a price of $80 per share, subject to adjustment. The AirTouch
Rights do not have voting rights.
Initially, the AirTouch Rights are attached to all AirTouch Common Stock
certificates representing shares then outstanding, and no separate AirTouch
Rights certificates will be distributed. The AirTouch Rights will not separate
from the AirTouch Common Stock and will not be exercisable until the earlier of
either (i) a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of securities representing ten percent or more of AirTouch Common
Stock (an "AirTouch Acquiring Party") or (ii) ten days following the
commencement of (or a public announcement of an intention to make) a tender
offer or exchange offer which would result in any person or group of affiliated
persons becoming an AirTouch Acquiring Party. The AirTouch Rights will expire on
the earliest of (x) September 19, 2004, (y) consummation of a merger transaction
with a person or group
116
<PAGE> 120
acquiring AirTouch Common Stock pursuant to an AirTouch Permitted Offer (as
defined below), or (z) redemption by AirTouch, as described below.
In the event that a person has become an AirTouch Acquiring Party, proper
provision will be made so that each holder of an AirTouch Right (other than an
AirTouch Acquiring Party) will thereafter have the right (the "AirTouch
Subscription Right") for a 60-day period to receive, upon the exercise of the
AirTouch Right by the holder at the then current exercise price, that number of
shares of AirTouch Common Stock (or of AirTouch Series A Preferred Stock or
other AirTouch Common Stock equivalents if all AirTouch Common Stock has been
issued) which would have a market value at the time of such transaction of two
times the exercise price for each AirTouch Right. This provision of the AirTouch
Rights Plan does not apply, however, to a tender offer or exchange offer for all
outstanding shares of AirTouch Common Stock at a price and on terms determined
by at least a majority of the disinterested members of the AirTouch Board to be
in the best interests of AirTouch and its stockholders (an "AirTouch Permitted
Offer").
If, after a public announcement has been made that a person has become an
AirTouch Acquiring Party, either (i) AirTouch is involved in a merger or other
business combination (other than with a person who acquired shares pursuant to
an AirTouch Permitted Offer) or (ii) 50% or more of AirTouch's assets are sold
in one or a series of transactions, proper provision will be made so that each
holder of an AirTouch Right (other than an AirTouch Acquiring Party) will
thereafter have the right to receive, upon the exercise of the AirTouch Right by
the holder at the then current exercise price, that number of shares of AirTouch
Common Stock or of the acquiring company (whichever remains as the surviving
corporation under the terms of the merger or consolidation) which would have a
market value at the time of such transaction of two times the exercise price for
each AirTouch Right.
The AirTouch Board, at its option, may at any time after a person becomes
an AirTouch Acquiring Party (but not after the acquisition by such person of 50%
or more of the outstanding AirTouch Common Stock) exchange on behalf of AirTouch
all or part of the then outstanding and exercisable AirTouch Rights for shares
of AirTouch Common Stock (or AirTouch Common Stock equivalents), at an exchange
ratio of one share of AirTouch Common Stock or equivalent for each AirTouch
Right.
At any time prior to the earlier to occur of either (i) a person becoming
an AirTouch Acquiring Party or (ii) the expiration of the AirTouch Rights,
AirTouch may redeem the AirTouch Rights in whole, but not in part, at a price of
$0.01 per AirTouch Right (the "AirTouch Redemption Price"). After a person
becomes an AirTouch Acquiring Party, AirTouch may also redeem the AirTouch
Rights in whole, but not in part, at the AirTouch Redemption Price (x) if such
redemption is incidental to a merger or other business combination transaction
or series of transactions involving AirTouch but not involving an AirTouch
Acquiring Party or certain other related parties or (y) following an event
giving rise to, and the expiration of the 60-day exercise period for, the
AirTouch Subscription Right if and for as long as any AirTouch Acquiring Party
owns less than 10% of AirTouch's voting securities.
The AirTouch Rights Plan may have the effect of delaying, deferring or
preventing a change in control of AirTouch without further action of the
stockholders and therefore could have a depressive effect on the price of
AirTouch Common Stock.
LISTING
The AirTouch Common Stock is listed on the NYSE and the Pacific Stock
Exchange under the symbol "ATI."
AIRTOUCH CLASS B PREFERRED STOCK
The description of AirTouch Class B Preferred Stock should be read
carefully by the holders of CCI Stock. As described in "SPECIAL
FACTORS -- Merger Consideration," at the Effective Time, the issued and
outstanding CCI Stock may be converted into the right to receive a Unit
containing an amount of shares of AirTouch Class B Preferred Stock.
117
<PAGE> 121
THE FOLLOWING SUMMARY OF THE TERMS OF THE AIRTOUCH CLASS B PREFERRED STOCK
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO ALL OF THE PROVISIONS OF AIRTOUCH'S CERTIFICATE OF INCORPORATION
AND CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS RELATING TO THE AIRTOUCH
CLASS B PREFERRED STOCK (THE "CLASS B CERTIFICATE OF DESIGNATION"), A COPY OF
WHICH IS INCLUDED HEREIN AS ANNEX C.
The AirTouch Board has adopted resolutions authorizing the issuance of up
to 24,000,000 shares of 6.00% Class B Mandatorily Convertible Preferred Stock,
Series 1996, par value $.01 per share.
DIVIDENDS. A holder of a share of AirTouch Class B Preferred Stock will be
entitled to receive, when, as and if declared by the AirTouch Board out of funds
legally available therefor, cumulative preferential dividends from the date of
issuance of such share of AirTouch Class B Preferred Stock, at the rate of 6.00%
per annum of the Preferred Stock Issue Price of $29.00 per share (equivalent to
$1.74 per annum), payable quarterly in arrears on the 15th day of each February,
May, August and November or, if any such date is not a business day, on the next
succeeding business day. The first dividend period will be from the Effective
Time to, but excluding, the first day of the next calendar quarter. Each
quarterly period beginning on January 1, April 1, July 1 and October 1 in each
year and ending on and including the day next preceding the first day of the
next quarterly period will be a dividend period. If the date of issuance of a
particular share of AirTouch Class B Preferred Stock is later than the Effective
Time solely due to a delay in the surrender by the holder of a certificate
representing a share of CCI Stock pursuant to Section 3.2 of the 1996 Merger
Agreement, then dividends on such AirTouch Class B Preferred Stock will be
payable from the Effective Time. If a particular share of AirTouch Class C
Preferred Stock is issued on a date that is later than the Effective Time for
reasons other than those described in the preceding sentence, then dividends on
such share of AirTouch Class C Preferred Stock will accrue only from the first
day of the dividend period during which such share of AirTouch Class C Preferred
Stock was issued.
The AirTouch Board may fix a record date for the determination of holders
of AirTouch Class B Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which will be no more than 60 days preceding the
payment date thereof. Dividends payable on shares of AirTouch Class B Preferred
Stock for any period less than a full quarterly dividend period will be computed
on the basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in any period less than one month. Dividends on shares of AirTouch
Class B Preferred Stock will accrue whether or not there are funds legally
available for the payment of such dividends and whether or not such dividends
are declared. Accumulated unpaid dividends will not bear interest. Dividends
will cease to accrue in respect of the shares of AirTouch Class B Preferred
Stock on the Class B Maturity Date or on the date of their earlier conversion.
The shares of AirTouch Class B Preferred Stock will rank on a parity as to
payment of dividends with the outstanding shares of AirTouch Class C Preferred
Stock and with any future preferred stock issued by AirTouch that by its terms
ranks on a parity with the shares of AirTouch Class B Preferred Stock (the
"Class B Parity Preferred Stock") with respect to payment of dividends. The
shares of AirTouch Class B Preferred Stock will be subordinate as to payment of
dividends with any future shares of AirTouch Preferred Stock that by its terms
is senior to the shares of AirTouch Class B Preferred Stock (the "Class B Senior
Preferred Stock").
As long as any shares of AirTouch Class B Preferred Stock are outstanding,
no dividends or other distributions for any dividend period (other than
dividends payable in shares of, or warrants, rights or options exercisable for
or convertible into shares of, AirTouch Common Stock or any other capital stock
of AirTouch ranking junior to AirTouch Class B Preferred Stock as to the payment
of dividends and the distribution of assets upon liquidation, including AirTouch
Series A Preferred Stock ("Class B Junior Stock") and cash in lieu of fractional
shares of such Class B Junior Stock in connection with any such dividend) will
be paid on any Class B Junior Stock unless: (i) full dividends on all
outstanding shares of Class B Senior Preferred Stock and Class B Parity
Preferred Stock (including the AirTouch Class B Preferred Stock) have been paid,
or declared and set aside for payment, for all dividend periods terminating on
or prior to the payment date of such
118
<PAGE> 122
Class B Junior Stock dividend or distribution and for the current dividend
period, to the extent such Class B Senior Preferred Stock or Class B Parity
Preferred Stock dividends are cumulative; (ii) AirTouch has paid or set aside
all amounts, if any, then or theretofore required to be paid or set aside for
all purchase, retirement and sinking funds, if any, for any outstanding shares
of Class B Senior Preferred Stock or Class B Parity Preferred Stock; and (iii)
AirTouch is not in default on any of its obligations to redeem any outstanding
shares of Class B Senior Preferred Stock or Class B Parity Preferred Stock.
In addition, as long as any shares of AirTouch Class B Preferred Stock are
outstanding, no shares of any Class B Junior Stock may be purchased, redeemed or
otherwise acquired by AirTouch or any of its subsidiaries (except in connection
with a reclassification or exchange of any Class B Junior Stock through the
issuance of other Class B Junior Stock (and cash in lieu of fractional shares of
such Class B Junior Stock in connection therewith) or the purchase, redemption
or other acquisition of any Class B Junior Stock with any Class B Junior Stock
(and cash in lieu of fractional shares of such Class B Junior Stock in
connection therewith)) nor may any funds be set aside or made available for any
sinking fund for the purchase or redemption of any Class B Junior Stock unless:
(i) full dividends on all outstanding shares of Class B Senior Preferred Stock
and Class B Parity Preferred Stock have been paid, or declared and set aside for
payment, for all dividend periods terminating on or prior to the date of such
purchase, redemption or acquisition and for the current dividend period, to the
extent such Class B Senior Preferred Stock or Class B Parity Preferred Stock
dividends are cumulative; (ii) AirTouch has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Class B
Senior Preferred Stock or Class B Parity Preferred Stock; and (iii) AirTouch is
not in default on any of its obligations to redeem any outstanding shares of
Class B Senior Preferred Stock or Class B Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Class B Junior Stock) as may be
determined from time to time by the AirTouch Board may be declared and paid on
the shares of any Class B Junior Stock, and from time to time Class B Junior
Stock may be purchased, redeemed or otherwise acquired by AirTouch or any of its
subsidiaries. In the event of the declaration and payment of any such dividends
or other distributions, the holders of such Class B Junior Stock will be
entitled, to the exclusion of holders of any outstanding Class B Senior
Preferred Stock or Class B Parity Preferred Stock, to share therein according to
their respective interests.
As long as any shares of AirTouch Class B Preferred Stock are outstanding,
dividends or other distributions for any dividend period may not be paid on any
outstanding shares of Class B Parity Preferred Stock (other than dividends or
other distributions payable in Class B Junior Stock and cash in lieu of
fractional shares of such Class B Junior Stock in connection therewith), unless
either: (a) (i) full dividends on all outstanding shares of Class B Senior
Preferred Stock and Class B Parity Preferred Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the payment date of such Class B Senior Preferred Stock or Class B Parity
Preferred Stock dividend or distribution and for the current dividend period, to
the extent such Class B Senior Preferred Stock or Class B Parity Preferred Stock
dividends are cumulative; (ii) AirTouch has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Class B
Senior Preferred Stock and Class B Parity Preferred Stock; and (iii) AirTouch is
not in default on any of its obligations to redeem any outstanding shares of
Class B Senior Preferred Stock or Class B Parity Preferred Stock; or (b) any
such dividends are declared and paid pro rata so that the amounts of any
dividends declared and paid per share on outstanding AirTouch Class B Preferred
Stock and each other share of such Class B Parity Preferred Stock will in all
cases bear to each other the same ratio that accrued and unpaid dividends
(including any accumulation with respect to unpaid dividends for prior dividend
periods, if such dividends are cumulative) per share of outstanding AirTouch
Class B Preferred Stock and such other outstanding shares of Class B Parity
Preferred Stock bear to each other.
In addition, as long as any shares of AirTouch Class B Preferred Stock are
outstanding, AirTouch may not purchase, redeem or otherwise acquire any Class B
Parity Preferred Stock (except with any Class B Junior Stock and cash in lieu of
fractional shares of such Class B Junior Stock in connection therewith) unless:
(i) full dividends on all outstanding shares of Class B Senior Preferred Stock
and Class B Parity Preferred
119
<PAGE> 123
Stock have been paid, or declared and set aside for payment, for all dividend
periods terminating on or prior to the payment date of such Class B Senior
Preferred Stock or Class B Parity Preferred Stock purchase, redemption or other
acquisition and for the current dividend period, to the extent such Class B
Senior Preferred Stock and Class B Parity Preferred Stock dividends are
cumulative; (ii) AirTouch has paid or set aside all amounts, if any, then or
theretofore required to be paid or set aside for all purchase, retirement and
sinking funds, if any, for any outstanding shares of Class B Senior Preferred
Stock and Class B Parity Preferred Stock; (iii) AirTouch is not in default of
any of its obligations to redeem any outstanding shares of Class B Senior
Preferred Stock or Class B Parity Preferred Stock unless all Class B Parity
Preferred Stock as to which such a default exists is purchased or redeemed on a
pro rata basis.
MANDATORY CONVERSION. Unless previously converted at the option of the
holder into AirTouch Common Stock, as described below, on the Class B Maturity
Date, which is the third anniversary of the Effective Time, each outstanding
share of AirTouch Class B Preferred Stock will automatically convert into
AirTouch Common Stock at the Class B Maturity Exchange Rate in effect on the
Class B Maturity Date, and each holder will be entitled to receive cash in an
amount equal to all accrued and unpaid dividends on such share of AirTouch Class
B Preferred Stock (other than previously declared dividends payable to a holder
of record as of a prior date) through and including the Class B Maturity Date,
whether or not declared, out of funds legally available for the payment of
dividends, subject to the conversion of the shares of AirTouch Class B Preferred
Stock at the option of the holder at any time prior to the Class B Maturity
Date. The "Class B Maturity Exchange Rate" is equal to, subject to adjustment as
to amount and shares, as described herein, (a) if the Class B Maturity Price is
greater than or equal to the Class B Conversion Price ($35.96 per share), 0.806
of a share of AirTouch Common Stock for each share of AirTouch Class B Preferred
Stock, (b) if the Class B Maturity Price is less than the AirTouch Class B
Conversion Price but greater than the Preferred Stock Issue Price ($29.00 per
share), the number of shares of AirTouch Common Stock per AirTouch Class B
Preferred Stock that is equal to the Preferred Stock Issue Price divided by the
Class B Maturity Price, and (c) if the Class B Maturity Price is less than or
equal to the Preferred Stock Issue Price, one share of AirTouch Common Stock per
AirTouch Class B Preferred Stock.
The opportunity for price appreciation in AirTouch Common Stock afforded by
an investment in AirTouch Class B Preferred Stock is less than the opportunity
afforded by an investment in AirTouch Common Stock. This is because the value of
the AirTouch Common Stock received at maturity will only exceed the Preferred
Stock Issue Price if the Class B Maturity Price exceeds the Class B Conversion
Price of $35.96. Moreover, in the event that AirTouch Common Stock is trading at
a price that is equal to or above the Class B Conversion Price, holders of
AirTouch Class B Preferred Stock will only be entitled to receive upon exchange
at maturity approximately 80.6% of any appreciation of the value of AirTouch
Common Stock in excess of the Preferred Stock Issue Price. As a result, the
value of any appreciation of AirTouch Common Stock between the Preferred Stock
Issue Price and the Class B Conversion Price will effectively be retained by
AirTouch. Holders of AirTouch Class B Preferred Stock will realize the entire
decline in value if at the time of conversion the market price of AirTouch
Common Stock is less than the Preferred Stock Issue Price. See "RISK
FACTORS -- Securities-Related Risks -- Less Opportunity for Price Appreciation
Compared to AirTouch Common Stock."
Because the price of the AirTouch Common Stock is subject to market
fluctuations, the value of the AirTouch Common Stock that may be received by a
holder of a share of AirTouch Class B Preferred Stock upon its mandatory
conversion may be more or less than the stated amount of a share of AirTouch
Class B Preferred Stock. See "RISK FACTORS -- Securities-Related Risks -- Less
Opportunity for Price Appreciation Compared to AirTouch Common Stock."
OPTIONAL REDEMPTION OR REDEMPTION FOR REGULATORY REASONS. Except as
described below, shares of AirTouch Class B Preferred Stock are not redeemable
by AirTouch prior to the Class B Maturity Date. See "-- AirTouch Class C
Preferred Stock -- Redemption for Regulatory Reasons."
CONVERSION AT THE OPTION OF THE HOLDER. The shares of AirTouch Class B
Preferred Stock are convertible, in whole or in part, at the option of the
holders thereof, at any time prior to the Class B Maturity Date into shares of
AirTouch Common Stock at a rate of 0.806 of a share of AirTouch Common Stock for
120
<PAGE> 124
each share of AirTouch Class B Preferred Stock (the "Class B Optional Conversion
Rate"), equivalent to a conversion price of $35.96 per share of AirTouch Common
Stock, subject to adjustment as described below.
Conversion of AirTouch Class B Preferred Stock at the option of the holder
may be effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
AirTouch or in blank, to the office or agency to be maintained by AirTouch for
that purpose, and otherwise in accordance with conversion procedures established
by AirTouch. Each optional conversion will be deemed to have been effected
immediately prior to the close of business on the date on which the foregoing
requirements will have been satisfied and dividends will cease to accrue in
respect of AirTouch Class B Preferred Stock at such time. The conversion will be
at the Class B Optional Conversion Rate in effect at such time and on such date.
Holders of AirTouch Class B Preferred Stock at the close of business on a
record date for any payment of declared dividends will be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding dividend payment date. Except as provided above, upon
any optional conversion of AirTouch Class B Preferred Stock, AirTouch will make
no payment or allowance for unpaid dividends, whether or not in arrears, on
converted AirTouch Class B Preferred Stock or for previously declared dividends
or distributions on the shares of AirTouch Common Stock issued upon such
conversion.
CONVERSION ADJUSTMENTS. The Class B Maturity Exchange Rate (including the
Preferred Stock Issue Price and the Class B Conversion Price) and the Class B
Optional Conversion Rate are each subject to adjustment as appropriate in
certain circumstances, including if AirTouch will after the initial issuance
date (a) pay a stock dividend or make a distribution with respect to AirTouch
Common Stock in shares of AirTouch Common Stock, (b) subdivide or split
outstanding AirTouch Common Stock into a greater number of shares, (c) combine
outstanding AirTouch Common Stock into a smaller number of shares, (d) issue any
shares of capital stock of AirTouch as a distribution with respect to, or by
reclassification of, the AirTouch Common Stock (other than the AirTouch Rights,
AirTouch Common Stock or any debt, equity or other security or contractual
right, in each case that is convertible into or exercisable or exchangeable for,
or based on the value of, the AirTouch Common Stock or any warrants, options or
other rights to purchase the AirTouch Common Stock (other than the AirTouch
Rights) (collectively the "AirTouch Equity Securities") and distributions
pursuant to the Contingent Payment), (e) issue AirTouch Equity Securities (other
than AirTouch Common Stock, the AirTouch Rights or Exempt Issuances (as defined
below)) to all holders of AirTouch Common Stock entitling them (for a period not
exceeding 45 days from the later of the record date and the determination date
of such issuance) to subscribe for or purchase shares of AirTouch Common Stock
or other AirTouch Equity Securities at a price per share less than the Fair
Market Value (as defined below) of Common Stock or other AirTouch Equity
Security unless such AirTouch Equity Securities are issued to each holder of
shares of AirTouch Class B Preferred Stock on a pro rata basis with the shares
of AirTouch Common Stock based on the Class B Optional Conversion Rate in effect
on the date immediately preceding such issuance, (f) pay a dividend or make a
distribution to all holders of AirTouch Common Stock (i) of cash in an amount
that, when combined with all other cash dividends over the previous 12-month
period, exceeds 12.5% of the aggregate Fair Market Value of all shares of
AirTouch Common Stock outstanding on the record date for determining the
stockholders entitled to receive such distribution or (ii) of evidences of its
indebtedness of AirTouch or evidences of indebtedness or securities of any other
person or any other property, in each case unless such dividend or distribution
is made to each holder of shares of AirTouch Class B Preferred Stock on a pro
rata basis with the shares of AirTouch Common Stock based on the Class B
Optional Conversion Rate in effect on the record date for such dividend or
distribution, or (g) sell, issue or exchange shares of AirTouch Common Stock
(other than pursuant to the AirTouch Rights, Exempt Issuances, or in certain
other instances) or any AirTouch Equity Securities where the consideration
received is less than the Fair Market Value of such AirTouch Common Stock or
rights or warrants to purchase AirTouch Common Stock, unless the AirTouch Board
has determined that the value of the consideration to be received following
arm's-length negotiations was based on prevailing market prices. "Fair Market
Value" means the Volume-Weighted Average Trading Price of the security in
question for the five-day period before the earlier of the day in question and
the "ex" date with respect to any issuance or distribution requiring such
computation. The
121
<PAGE> 125
term "ex" date, when used with respect to any issuance or distribution, means
the first day on which AirTouch Common Stock trades regular way, without the
right to receive such issuance or distribution, on the exchange or in the market
used to determine that day's Volume-Weighted Average Trading Price. With respect
to any asset or security for which there is no established trading market, the
Fair Market Value of such asset or security will be determined in good faith by
the AirTouch Board. "Exempt Issuance" means (a) AirTouch Equity Securities
issued pursuant to any existing or future employee stock purchase plan, employee
stock option plan or other employee or director benefit plan or (b) AirTouch
Equity Securities issued pursuant to any stockholder purchase plan or plan for
the reinvestment of dividends or interest, to the extent that the consideration
paid for the AirTouch Equity Securities issued pursuant to any such stockholder
or dividend or interest reinvestment plan is not less than 95% of the Fair
Market Value of such securities as of the date of the issuance of the AirTouch
Equity Securities.
If AirTouch, after the Effective Time, makes a distribution to the holders
of AirTouch Common Stock of any equity interest in an International Entity (as
defined below) (an "International Distribution"), and on the record date for
such International Distribution the Fair Market Value of AirTouch Common Stock
is greater than the Class B Conversion Price, then each holder of shares of
AirTouch Class B Preferred Stock as of the record date of such International
Distribution will receive such distribution on a pro rata basis with the shares
of AirTouch Common Stock based on the Class B Optional Conversion Rate in effect
on the record date for such International Distribution, and the Preferred Stock
Issue Price and the Class B Conversion Price will be adjusted appropriately. In
addition, with respect to all shares of AirTouch Class B Preferred Stock
outstanding and subsequently issued, the dividend and the liquidation amount for
each share of AirTouch Class B Preferred Stock will each be reduced
appropriately. If AirTouch has received an opinion of a nationally recognized
law firm or accounting firm that the International Distribution to the holders
of shares of AirTouch Class B Preferred Stock would result in an adverse tax
consequence to AirTouch or the holders of shares of AirTouch Common Stock, then
no such distribution will be made, and alternatively an appropriate adjustment
will be made to the Class B Maturity Exchange Rate (including the Preferred
Stock Issue Price and the Class B Conversion Price) and the Class B Optional
Conversion Rate. An "International Entity" means any entity predominately
holding interests in cellular operations outside the United States that has an
aggregate Fair Market Value of US$1 billion or more.
In addition, AirTouch will be entitled (but will not be required) to make
adjustments in the Class B Maturity Exchange Rate and the Class B Optional
Conversion Rate as AirTouch, in its sole discretion, determines to be advisable,
in order that any stock dividend, subdivision or split of shares, distribution
of rights to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock (or any transaction which could be
treated as any of the foregoing transactions pursuant to Section 305 of the
Code) thereafter made by AirTouch to its stockholders will not be taxable.
All adjustments to the Class B Maturity Exchange Rate and the Class B
Optional Conversion Rate will be calculated to the nearest 1/1000th of a share
of AirTouch Common Stock. No adjustment in the Class B Maturity Exchange Rate or
the Class B Optional Conversion Rate will be required unless such adjustment
would require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which, by reason of the foregoing, are not
required to be made will be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Class B Maturity Exchange Rate and the Class B Optional
Conversion Rate are adjusted as provided in the preceding paragraph, AirTouch
will file with the transfer agent for the shares of AirTouch Class B Preferred
Stock a certificate with respect to such adjustment, make a prompt public
announcement thereof and mail a notice to holders of the shares of AirTouch
Class B Preferred Stock providing specified information with respect to such
adjustment.
EFFECT OF CONSOLIDATIONS OR MERGERS. In case of (A) any consolidation or
merger to which AirTouch is a party (other than a merger or consolidation in
which AirTouch is the surviving or continuing corporation and in which the
AirTouch Common Stock outstanding immediately prior to the merger or
consolidation remains unchanged), (B) any sale or transfer to another
corporation of the property of AirTouch as an entirety or substantially as an
entirety, or (C) any statutory exchange of securities with another corporation
(other than
122
<PAGE> 126
in connection with a merger or acquisition in which AirTouch is the surviving or
continuing corporation and in which the AirTouch Common Stock outstanding
immediately prior to the merger or consolidation remains unchanged) (each a
"Reorganization Event"), then the Class B Maturity Date will accelerate to be
the time and date that is immediately prior to the effective time of the
Reorganization Event, and the AirTouch Class B Preferred Stock will
automatically convert on such date into AirTouch Common Stock at the Class B
Maturity Exchange Rate without any further action on the part of the holder or
AirTouch. Notwithstanding the foregoing, a transaction described in (A), (B) or
(C) above will only be a Reorganization Event if it is a bona fide transaction
not entered into primarily for the purposes of causing the Class B Maturity Date
to occur.
Any sale or transfer to another corporation of property of AirTouch which
did not account for at least 50% of the consolidated net income of AirTouch for
its most recent fiscal year ending prior to the consummation of such transaction
will not in any event be deemed to be a sale or transfer of the property of
AirTouch as an entirety or substantially as an entirety.
FRACTIONAL SHARES. No fractional shares or script representing fractional
shares of AirTouch Common Stock will be issued upon the redemption or conversion
of any AirTouch Class B Preferred Stock. In lieu of any fractional share
otherwise issuable in respect of the aggregate number of shares of AirTouch
Class B Preferred Stock of any holder which are converted at the Class B
Maturity Date or upon any optional conversion, such holder will be entitled to
receive an amount in cash (computed to the nearest cent) equal to the same
fraction of (i) the Class B Maturity Price, in the case of conversion at the
Class B Maturity Date, or (ii) the market price as of the second trading date
immediately preceding the effective date of conversion, in the case of an
optional conversion by a holder. If more than one share will be surrendered for
conversion at one time by or for the same holder, the number of full shares of
AirTouch Common Stock issuable upon conversion thereof will be computed on the
basis of the aggregate number of shares of AirTouch Class B Preferred Stock so
surrendered.
CONTINGENT PAYMENT. Holders of outstanding AirTouch Class B Preferred
Stock will be entitled to receive, when, as and if declared by the AirTouch
Board out of funds legally available therefor, a Contingent Payment in the
amount set forth below if the Volume-Weighted Average Trading Price of the
AirTouch Class B Preferred Stock over the 30-consecutive calendar days
commencing the date that is three months after the Effective Time and ending on
the Contingent Payment Date is as follows:
<TABLE>
<CAPTION>
CUMULATIVE AMOUNT
PER SHARE
TRADING PRICE ($ MILLION)
- ------------------ -----------------
<S> <C> <C>
$29.000 to $28.736 0.00 in each case divided by the total number of shares
$28.735 to $28.473 2.00 of AirTouch Class B Preferred Stock issued and
$28.472 to $28.341 4.00 outstanding as of the Contingent Payment Date
$28.340 to $28.209 6.00
$28.208 to $28.077 8.00
$28.076 to $27.945 10.00
$27.944 to $27.814 12.50
$27.813 to $27.550 15.00
Less than $27.550 16.85
</TABLE>
Accordingly, the amount of the Contingent Payment and whether it will be
paid at all is directly related to the Volume-Weighted Average Trading Price of
the AirTouch Class B Preferred Stock over a thirty day period following Closing
commencing on the date that is three months after the Effective Time. The lower
the Volume-Weighted Average Trading Price, the higher the Contingent Payment and
vice-versa. If the Volume-Weighted Average Trading Price equals or exceeds
$28.736, no Contingent Payment will be made.
AirTouch may, at its option, pay the Contingent Payment in the form of
capital stock by delivering a number of shares of AirTouch Class C Preferred
Stock or AirTouch Common Stock equal to the Contingent Payment Amount divided by
the Volume-Weighted Average Trading Price of the AirTouch Class C Preferred
123
<PAGE> 127
Stock or AirTouch Common Stock, as applicable, over the 30-day period described
above, or cash in lieu of fractional shares at such price.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or
winding up of the business of AirTouch, whether voluntary or involuntary, the
holders of outstanding shares of AirTouch Class B Preferred Stock, after payment
or provision for payment of the debts and other liabilities of AirTouch and the
payment or provision for payment of any distribution on any shares of AirTouch
capital stock having a preference and a priority over the Class B Preferred
Stock on liquidation, are entitled to receive an amount per share equal to the
Preferred Stock Issue Price, plus accrued and unpaid dividends thereon, out of
the assets of AirTouch available for distribution to stockholders, before any
distribution of assets is made to holders of any shares of AirTouch capital
stock that are junior and subordinate to AirTouch Class B Preferred Stock on
liquidation, including AirTouch Common Stock and AirTouch Series A Preferred
Stock, and shall, after the holders of AirTouch Common Stock have received an
amount per share of AirTouch Common Stock equal to the amount paid per share of
AirTouch Class B Preferred Stock, be entitled to participate on a pro rata basis
with the holders of AirTouch Common Stock.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of AirTouch, the assets of AirTouch are insufficient to permit the payment of
the full preferential amounts payable with respect to shares of AirTouch Class B
Preferred Stock and all other series of AirTouch Preferred Stock that rank on a
parity with AirTouch Class B Preferred Stock, the holders of shares of AirTouch
Class B Preferred Stock and of all such other series of Preferred Stock will
share ratably in any distribution of assets of AirTouch in proportion to the
full respective preferential amounts to which they are entitled.
A consolidation or merger of AirTouch with one or more corporations
(whether or not AirTouch is the corporation surviving such consolidation or
merger) or a sale, lease, transfer or exchange of all or substantially all of
the assets of AirTouch will not be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of AirTouch.
VOTING RIGHTS. The holders of shares of AirTouch Class B Preferred Stock
will have the right with the holders of AirTouch Common Stock to vote in the
election of directors and upon each other matter coming before any meeting on
which the holders of AirTouch Common Stock are entitled to vote, on the basis of
four-fifths of a vote for each share of AirTouch Class B Preferred Stock held
(subject to adjustment in accordance with adjustments to the Class B Optional
Conversion Rate). The holders of shares of AirTouch Class B Preferred Stock and
the holders of AirTouch Common Stock will vote together as one class on such
matters except as otherwise provided by law or the Certificate of Incorporation
of AirTouch.
In the event that dividends payable on the shares of AirTouch Class B
Preferred Stock or any other series of AirTouch Class B Parity Preferred Stock
are in arrears and unpaid in an aggregate amount equal to or exceeding the
aggregate amount of dividends payable thereon for six quarterly dividend
periods, or if any other series of AirTouch Preferred Stock is entitled for any
other reason to exercise voting rights, separate from the AirTouch Common Stock,
to elect any directors of AirTouch ("Preferred Stock Directors"), the holders of
the shares of AirTouch Class B Preferred Stock (voting separately as a class
with holders of all other series of Preferred Stock upon which like voting
rights have been conferred and are exercisable), with each share of AirTouch
Class B Preferred Stock entitled to one vote, will be entitled to vote for the
election of two Preferred Stock Directors, such directors to be in addition to
the number of directors constituting the AirTouch Board immediately prior to the
accrual of such right. Such right, when vested, will continue until all
dividends in arrears on the shares of AirTouch Class B Preferred Stock and such
other series of AirTouch Preferred Stock will have been paid in full and the
right of any other series of AirTouch Preferred Stock to exercise voting rights,
separate from the AirTouch Common Stock, to elect Preferred Stock Directors
terminates or has terminated, and, when so paid and any such termination occurs
or has occurred, such right of the holders of the shares of AirTouch Class B
Preferred Stock will cease. The term of office of any Preferred Stock Director
elected by the holders of the shares of AirTouch Class B Preferred Stock and
such other series will terminate on the earlier of (i) the next annual meeting
of stockholders at which a successor is elected and qualified or (ii) the
termination of the right of holders of the shares of AirTouch Class B Preferred
Stock and such other series to vote for such directors. Vacancies on the
AirTouch Board (including with respect to a Preferred
124
<PAGE> 128
Stock Director) resulting from death, resignation or other cause will be filled
exclusively by no less than two-thirds of the remaining directors and the
director so elected will hold office until a successor is elected and qualified.
The affirmative consent of the holders of at least two-thirds of the
AirTouch Class B Preferred Stock thereof actually voting, i.e., voting
affirmatively or negatively (voting separately as a class), will be necessary to
amend, alter or repeal any of the provisions of the AirTouch Certificate of
Incorporation which would adversely affect the powers, preferences or rights of
the holders of the AirTouch Class B Preferred Stock then outstanding or reduce
the minimum time required for any notice to which such holders may be entitled;
provided, however, that any such amendment, alteration or repeal that would
authorize, create or increase the authorized amount of any shares of stock
(whether or not already authorized) ranking junior to, on a parity with or
senior to the AirTouch Class B Preferred Stock with respect to payment of
dividends or payment upon liquidation will be deemed not to affect adversely
such powers, preferences or rights and will not be subject to approval by the
holders of AirTouch Class B Preferred Stock. The holders of the AirTouch Class B
Preferred Stock will not have any voting rights with respect to the amendment,
alteration or repeal of any provisions of the AirTouch Certificate of
Incorporation approved at a meeting of the stockholders the record date of which
is prior to the issuance of any AirTouch Class B Preferred Stock.
There is no limitation on the issuance by AirTouch of any class of stock
ranking senior to, equal to or junior to the shares of AirTouch Class B
Preferred Stock.
LISTING. AirTouch Class B Preferred Stock has been authorized for listing
on the NYSE under the symbol "ATIB," subject to official notice of issuance.
TRANSFER AGENT AND REGISTRAR. The Bank of New York will act as transfer
agent and registrar for, and paying agent for the payment of dividends on, the
shares of AirTouch Class B Preferred Stock.
MISCELLANEOUS. Upon issuance, the shares of AirTouch Class B Preferred
Stock will be fully paid and nonassessable. Holders of shares of AirTouch Class
B Preferred Stock have no preemptive rights. AirTouch will at all times reserve
and keep available out of authorized and unissued AirTouch Common Stock, solely
for issuance upon the conversion or redemption of shares of AirTouch Class B
Preferred Stock, such number of shares of AirTouch Common Stock as will from
time to time be issuable upon the conversion or redemption of all the shares of
AirTouch Class B Preferred Stock then outstanding.
AIRTOUCH CLASS C PREFERRED STOCK
The description of AirTouch Class C Preferred Stock should be read
carefully by the holders of CCI Stock. As described in "SPECIAL
FACTORS -- Merger Consideration," at the Effective Time, the issued and
outstanding CCI Stock may be converted into the right to receive a Unit
containing an amount of shares of AirTouch Class C Preferred Stock.
THE FOLLOWING SUMMARY OF THE TERMS OF THE AIRTOUCH CLASS C PREFERRED STOCK
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO ALL OF THE PROVISIONS OF AIRTOUCH'S CERTIFICATE OF INCORPORATION
AND CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS RELATING TO THE AIRTOUCH
CLASS C PREFERRED STOCK (THE "CLASS C CERTIFICATE OF DESIGNATION"), A COPY OF
WHICH IS INCLUDED HEREIN AS ANNEX D.
The AirTouch Board has adopted resolutions authorizing the issuance of up
to 19,000,000 shares of 4.25% Class C Convertible Preferred Stock, Series 1996,
par value $.01 per share.
DIVIDENDS. A holder of a share of AirTouch Class C Preferred Stock will be
entitled to receive, when, as and if declared by the AirTouch Board out of funds
legally available therefor, cumulative preferential dividends from the date of
issuance of such share of AirTouch Class C Preferred Stock, at the rate of 4.25%
per annum of the Call Price of $50.00 per share (equivalent to $2.125 per
annum), payable quarterly in arrears on the 15th day of each February, May,
August and November or, if any such date is not a business day, on
125
<PAGE> 129
the next succeeding business day. The first dividend period will be from the
Effective Time to, but excluding, the first day of the next calendar quarter.
Each quarterly period beginning on January 1, April 1, July 1 and October 1 in
each year and ending on and including the day next preceding the first day of
the next quarterly period will be a dividend period. If the date of issuance of
a particular share of AirTouch Class C Preferred Stock is later than the
Effective Time solely due to a delay in the surrender by the holder of a
certificate representing a share of CCI Stock pursuant to Section 3.2 of the
1996 Merger Agreement, then, dividends on such AirTouch Class C Preferred Stock
will be payable from the Effective Time. If a particular share of AirTouch Class
C Preferred Stock is issued on a date that is later than the Effective Time for
reasons other than those described in the preceding sentence, then dividends on
such share of AirTouch Class C Preferred Stock shall accrue only from the first
day of the dividend period during which such share of AirTouch Class C Preferred
Stock was issued.
The AirTouch Board may fix a record date for the determination of holders
of AirTouch Class C Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which will be no more than 60 days preceding the
payment date thereof. Dividends payable on shares of AirTouch Class C Preferred
Stock for any period less than a full quarterly dividend period will be computed
on the basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in any period less than one month. Dividends on shares of AirTouch
Class C Preferred Stock will accrue whether or not there are funds legally
available for the payment of such dividends and whether or not such dividends
are declared. Accumulated unpaid dividends will not bear interest. Dividends
will cease to accrue in respect of the shares of AirTouch Class C Preferred
Stock on the Class C Maturity Date or on the date of their earlier conversion.
The shares of AirTouch Class C Preferred Stock will rank on a parity as to
payment of dividends with the outstanding shares of AirTouch Class B Preferred
Stock and with any future preferred stock issued by AirTouch that by its terms
ranks on a parity with the shares of AirTouch Class C Preferred Stock (the
"Class C Parity Preferred Stock"). The shares of AirTouch Class C Preferred
Stock will be subordinate as to payment of dividends with any future shares of
AirTouch Preferred Stock that by its terms is senior to the shares of AirTouch
Class C Preferred Stock (the "Class C Senior Preferred Stock").
As long as any shares of AirTouch Class C Preferred Stock are outstanding,
no dividends or other distributions for any dividend period (other than
dividends payable in shares of, or warrants, rights or options exercisable for
or convertible into shares of, AirTouch Common Stock or any other capital stock
of AirTouch ranking junior to AirTouch Class C Preferred Stock as to the payment
of dividends ("Class C Junior Stock") and cash in lieu of fractional shares of
such Class C Junior Stock in connection with any such dividend) will be paid on
any Class C Junior Stock unless: (i) full dividends on all outstanding shares of
Class C Senior Preferred Stock and Class C Parity Preferred Stock (including the
AirTouch Class C Preferred Stock) have been paid, or declared and set aside for
payment, for all dividend periods terminating on or prior to the payment date of
such Class C Junior Stock dividend or distribution and for the current dividend
period, to the extent such Class C Senior Preferred Stock or Class C Parity
Preferred Stock dividends are cumulative; (ii) AirTouch has paid or set aside
all amounts, if any, then or theretofore required to be paid or set aside for
all purchase, retirement and sinking funds, if any, for any outstanding shares
of Class C Senior Preferred Stock or Class C Parity Preferred Stock; and (iii)
AirTouch is not in default on any of its obligations to redeem any outstanding
shares of Class C Senior Preferred Stock or Class C Parity Preferred Stock.
In addition, as long as any shares of AirTouch Class C Preferred Stock are
outstanding, no shares of any Class C Junior Stock may be purchased, redeemed or
otherwise acquired by AirTouch or any of its subsidiaries (except in connection
with a reclassification or exchange of any Class C Junior Stock through the
issuance of other Class C Junior Stock (and cash in lieu of fractional shares of
such Class C Junior Stock in connection therewith) or the purchase, redemption
or other acquisition of any Class C Junior Stock with any Class C Junior Stock
(and cash in lieu of fractional shares of such Class C Junior Stock in
connection therewith)) nor may any funds be set aside or made available for any
sinking fund for the purchase or redemption of any Class C Junior Stock unless:
(i) full dividends on all outstanding shares of Class C Senior Preferred Stock
and Class C Parity Preferred Stock have been paid, or declared and set aside for
payment, for all dividend periods terminating on or prior to the date of such
purchase, redemption or acquisition and for the current dividend period, to the
extent such Class C Senior Preferred Stock or Class C Parity Preferred Stock
126
<PAGE> 130
dividends are cumulative; (ii) AirTouch has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Class C
Senior Preferred Stock or Class C Parity Preferred Stock; and (iii) AirTouch is
not in default on any of its obligations to redeem any outstanding shares of
Class C Senior Preferred Stock or Class C Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Class C Junior Stock) as may be
determined from time to time by the AirTouch Board may be declared and paid on
the shares of any Class C Junior Stock and from time to time Class C Junior
Stock may be purchased, redeemed or otherwise acquired by AirTouch or any of its
subsidiaries. In the event of the declaration and payment of any such dividends
or other distributions, the holders of such Class C Junior Stock will be
entitled, to the exclusion of holders of any outstanding Class C Senior
Preferred Stock or Class C Parity Preferred Stock, to share therein according to
their respective interests.
As long as any shares of AirTouch Class C Preferred Stock are outstanding,
dividends or other distributions for any dividend period may not be paid on any
outstanding shares of Class C Parity Preferred Stock (other than dividends or
other distributions payable in Class C Junior Stock and cash in lieu of
fractional shares of such Class C Junior Stock in connection therewith), unless
either: (a) (i) full dividends on all outstanding shares of Class C Senior
Preferred Stock and Class C Parity Preferred Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the payment date of such Class C Senior Preferred Stock or Class C Parity
Preferred Stock dividend or distribution and for the current dividend period, to
the extent such Class C Senior Preferred Stock or Class C Parity Preferred Stock
dividends are cumulative; (ii) AirTouch has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Class C
Senior Preferred Stock and Class C Parity Preferred Stock; and (iii) AirTouch is
not in default on any of its obligations to redeem any outstanding shares of
Class C Senior Preferred Stock or Class C Parity Preferred Stock; or (b) any
such dividends are declared and paid pro rata so that the amounts of any
dividends declared and paid per share on outstanding AirTouch Class C Preferred
Stock and each other share of such Class C Parity Preferred Stock will in all
cases bear to each other the same ratio that accrued and unpaid dividends
(including any accumulation with respect to unpaid dividends for prior dividend
periods, if such dividends are cumulative) per share of outstanding AirTouch
Class C Preferred Stock and such other outstanding shares of Class C Parity
Preferred Stock bear to each other.
In addition, as long as any shares of AirTouch Class C Preferred Stock are
outstanding, AirTouch may not purchase, redeem or otherwise acquire any Class C
Parity Preferred Stock (except with any Class C Junior Stock and cash in lieu of
fractional shares of such Class C Junior Stock in connection therewith) unless:
(i) full dividends on all outstanding shares of Class C Senior Preferred Stock
and Class C Parity Preferred Stock have been paid, or declared and set aside for
payment, for all dividend periods terminating on or prior to the payment date of
such Class C Senior Preferred Stock or Class C Parity Preferred Stock purchase,
redemption or other acquisition and for the current dividend period, to the
extent such Class C Senior Preferred Stock and Class C Parity Preferred Stock
dividends are cumulative; (ii) AirTouch has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Class C
Senior Preferred Stock and Class C Parity Preferred Stock; (iii) AirTouch is not
in default of any of its obligations to redeem any outstanding shares of Class C
Senior Preferred Stock or Class C Parity Preferred Stock unless all Class C
Parity Preferred Stock as to which such a default exists is purchased or
redeemed on a pro rata basis.
MATURITY. On the Class C Maturity Date, which is the twentieth anniversary
of the Effective Time, the AirTouch Class C Preferred Stock will mature and the
holder of each outstanding share of AirTouch Class C Preferred Stock will be
entitled to receive in cash the Call Price of $50.00 per share, plus all accrued
and unpaid dividends on such share of AirTouch Class C Preferred Stock (other
than previously declared dividends payable to a holder of record on a prior
date) to the Class C Maturity Date, whether or not declared, out of funds
legally available for the payment of dividends, subject to the redemption of the
AirTouch Class C Preferred Stock by AirTouch or the conversion of the shares of
AirTouch Class C Preferred Stock at the option of the holder at any time prior
to the Class C Maturity Date. Dividends on the AirTouch Class C
127
<PAGE> 131
Preferred Stock will cease to accrue and such shares will cease to be
outstanding on the Class C Maturity Date. AirTouch will make such arrangements
as it deems appropriate for the payment of cash in respect of the Call Price and
accrued and unpaid dividends, if any, in exchange for and contingent upon
surrender of certificates representing AirTouch Class C Preferred Stock, and
AirTouch may defer the payment of the Call Price or dividends on such shares of
AirTouch Common Stock and the voting thereof until, and make such payment and
voting contingent upon, the surrender of such certificates representing AirTouch
Class C Preferred Stock, provided that AirTouch will give the holders of
AirTouch Class C Preferred Stock such notice of any such actions as AirTouch
deems appropriate and upon such surrender such holders will be entitled to
receive such dividends declared and paid on such shares of AirTouch Common Stock
subsequent to the Class C Maturity Date. Amounts payable in cash in respect of
the AirTouch Class C Preferred Stock or in respect of such shares of AirTouch
Common Stock will not bear interest.
OPTIONAL REDEMPTION. Except as discussed below, AirTouch Class C Preferred
Stock is not redeemable by AirTouch prior to the third anniversary of the
Effective Time (the "Provisional Redemption Date"). From and after the
Provisional Redemption Date until the fourth anniversary of the Effective Time
(the "Provisional Redemption Year"), the AirTouch Class C Preferred Stock may be
redeemed by AirTouch at any time after the Volume-Weighted Average Trading Price
of AirTouch Common Stock on a per day basis has exceeded $47.125 on 15 separate
trading days during any 30 consecutive trading day period during the Provisional
Redemption Year (the "Provisional Redemption Price"). After the Provisional
Redemption Year, the AirTouch Class C Preferred Stock may be redeemed by
AirTouch regardless of whether the AirTouch Common Stock has achieved the
Provisional Redemption Price. Until the tenth anniversary of the Effective Time,
AirTouch may only redeem the Class C Preferred Stock by delivering an amount of
AirTouch Common Stock equal to the Call Price divided by the Volume-Weighted
Average Trading Price of AirTouch Common Stock for the 15 consecutive
trading-day period prior to the record date for such redemption. From the tenth
anniversary of the Effective Time until the Class C Maturity Date, the AirTouch
Class C Preferred Stock may be redeemed by AirTouch by delivering either (a) the
amount of AirTouch Common Stock described in the previous sentence or (b) cash
in an amount equal to the Call Price.
The public announcement of any call for redemption will be made prior to,
or at the time of, the mailing of the notice of such call to holders of AirTouch
Class C Preferred Stock as described below. If fewer than all the outstanding
shares of AirTouch Class C Preferred Stock are to be redeemed, the shares of
AirTouch Class C Preferred Stock to be redeemed will be selected by AirTouch
from outstanding AirTouch Class C Preferred Stock not previously redeemed by lot
or pro rata (as nearly as may be practicable) or by any other method determined
by the AirTouch Board in its sole discretion to be equitable. The term "Notice
Date" with respect to any notice given by AirTouch in connection with a
redemption of AirTouch Class C Preferred Stock means the date on which first
occurs either the public announcement of such redemption or the commencement of
mailing of such notice to the holders of AirTouch Class C Preferred Stock.
AirTouch will provide notice of any redemption of the AirTouch Class C
Preferred Stock to holders of record of AirTouch Class C Preferred Stock to be
called for redemption not less than 15 nor more than 60 days prior to the date
fixed for such redemption. Such notice will be provided by mailing notice of
such redemption, first class postage prepaid, to each holder of record of
AirTouch Class C Preferred Stock to be redeemed, at such holder's address as it
appears on the stock register of AirTouch; provided, however, that neither
failure to give such notice nor any defect therein will affect the validity of
the proceeding for the redemption of any Class C Preferred Stock to be redeemed
except as to the holders to whom AirTouch has failed to give said notice or
whose notice was defective.
Each holder of shares of AirTouch Class C Preferred Stock called for
redemption must surrender the certificates evidencing such shares to AirTouch at
the place designated in the notice of redemption and will thereupon be entitled
to receive certificates for shares of AirTouch Common Stock and cash for any
fractional share amount.
REDEMPTION FOR REGULATORY REASONS. Notwithstanding any other provision of
AirTouch's Certificate of Incorporation to the contrary, outstanding shares of
stock of AirTouch will always be subject to redemption by AirTouch, by action of
the AirTouch Board, if in the judgment of the AirTouch Board such action should
be
128
<PAGE> 132
taken, pursuant to applicable law, to the extent necessary to prevent the loss
or secure the reinstatement of any license or franchise from any governmental
agency held by AirTouch or any subsidiary to conduct any portion of the business
of AirTouch or any subsidiary, which license or franchise is conditioned upon
some or all of the holders of AirTouch's stock possessing prescribed
qualifications. The redemption price is to be equal to the fair market value of
such shares. The redemption price may be paid in cash, redemption securities or
any combination thereof.
CONVERSION AT THE OPTION OF THE HOLDER. The shares of AirTouch Class C
Preferred Stock are convertible, in whole or in part, at the option of the
holders thereof, at any time prior to the Class C Maturity Date into shares of
AirTouch Common Stock at a rate of 1.379 shares of AirTouch Common Stock for
each share of AirTouch Class C Preferred Stock (the "Class C Exchange Rate"),
subject to adjustment as described below.
Conversion of AirTouch Class C Preferred Stock at the option of the holder
may be effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
AirTouch or in blank, to the office or agency to be maintained by AirTouch for
that purpose, and otherwise in accordance with conversion procedures established
by AirTouch. Each optional conversion will be deemed to have been effected
immediately prior to the close of business on the date on which the foregoing
requirements will have been satisfied and dividends will cease to accrue in
respect of AirTouch Class C Preferred Stock at such time. The conversion will be
at the Class C Exchange Rate in effect at such time and on such date.
Holders of AirTouch Class C Preferred Stock at the close of business on a
record date for any payment of declared dividends will be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding dividend payment date. Except as provided above, upon
any optional conversion of AirTouch Class C Preferred Stock, AirTouch will make
no payment or allowance for unpaid dividends, whether or not in arrears, on
converted AirTouch Class C Preferred Stock or for previously declared dividends
or distributions on the shares of AirTouch Common Stock issued upon such
conversion.
CONVERSION ADJUSTMENTS. The Class C Exchange Rate is subject to adjustment
as appropriate in certain circumstances, including if AirTouch will after the
initial issuance date (a) pay a stock dividend or make a distribution with
respect to AirTouch Common Stock in shares of AirTouch Common Stock, (b)
subdivide or split outstanding AirTouch Common Stock into a greater number of
shares, (c) combine outstanding AirTouch Common Stock into a smaller number of
shares, (d) issue any shares of capital stock of AirTouch as a distribution with
respect to, or by reclassification of, the AirTouch Common Stock (other than the
AirTouch Rights and the AirTouch Equity Securities), (e) issue AirTouch Equity
Securities (other than AirTouch Common Stock, the AirTouch Rights or Exempt
Issuances) to all holders of AirTouch Common Stock entitling them (for a period
not exceeding 45 days from the later of the record date and the determination
date of such issuance) to subscribe for or purchase shares of AirTouch Common
Stock or other AirTouch Equity Securities at a price per share less than the
Fair Market Value of AirTouch Common Stock or other AirTouch Equity Security
unless such AirTouch Equity Securities are issued to each holder of shares of
AirTouch Class C Preferred Stock on a pro rata basis with the shares of AirTouch
Common Stock based on the Class C Exchange Rate in effect on the date
immediately preceding such issuance, (f) pay a dividend or make a distribution
to all holders of AirTouch Common Stock (i) of cash in an amount that, when
combined with all other cash dividends over the previous 12-month period,
exceeds 12.5% of the aggregate Fair Market Value of all shares of AirTouch
Common Stock outstanding on the record date for determining the stockholders
entitled to receive such distribution or (ii) of evidences of its indebtedness
of AirTouch or evidences of indebtedness or securities of any other person or
any other property, in each case unless such dividend or distribution is made to
each holder of shares of AirTouch Class C Preferred Stock on a pro rata basis
with the shares of AirTouch Common Stock based on the Class C Exchange Rate in
effect on the date immediately preceding such dividend or distribution, (g)
issue AirTouch Common Stock or rights or warrants to purchase AirTouch Common
Stock where the consideration received is less than the Fair Market Value of
such AirTouch Common Stock or rights or warrants to purchase AirTouch Common
Stock, unless the
129
<PAGE> 133
AirTouch Board has determined that the value of the consideration to be received
following arm's-length negotiations was based on prevailing market prices.
If AirTouch, after the Effective Time, makes an International Distribution
to the holders of AirTouch Common Stock, then each holder of shares of AirTouch
Class C Preferred Stock as of the record date of such International Distribution
will receive such distribution on a pro rata basis with the shares of AirTouch
Common Stock based on the Class C Exchange Rate in effect on the record date for
such International Distribution. With respect to all shares of AirTouch Class C
Preferred Stock outstanding and subsequently issued, the dividend and the
liquidation amount for each share of AirTouch Class C Preferred Stock will each
be reduced appropriately. If AirTouch has received an opinion of a nationally
recognized law firm or accounting firm that the International Distribution to
the holders of shares of AirTouch Class C Preferred Stock would result in an
adverse tax consequence to AirTouch or the holders of AirTouch Common Stock,
then no such distribution will be made, and alternatively an appropriate
adjustment will be made to the Class C Exchange Rate.
In addition, AirTouch will be entitled (but will not be required) to make
adjustments in the Class C Exchange Rate as AirTouch, in its sole discretion,
determines to be advisable, in order that any stock dividend, subdivision or
split of shares, distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock (or any
transaction which could be treated as any of the foregoing transactions pursuant
to Section 305 of the Code hereafter made by AirTouch to its stockholders will
not be taxable. All adjustments to the Class C Exchange Rate will be calculated
to the nearest 1/1000th of a share of AirTouch Common Stock. No adjustment in
the Class C Exchange Rate will be required unless such adjustment would require
an increase or decrease of at least one percent in the Class C Exchange Rate;
provided, however, that any adjustments which, by reason of the foregoing, are
not required to be made will be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Class C Exchange Rate is adjusted as provided in the preceding
paragraph, AirTouch will file with the transfer agent for the shares of AirTouch
Class C Preferred Stock a certificate with respect to such adjustment, make a
prompt public announcement thereof and mail a notice to holders of the shares of
AirTouch Class C Preferred Stock providing specified information with respect to
such adjustment.
EFFECT OF CONSOLIDATIONS OR MERGERS. In case of a Reorganization Event,
proper provision will be made so that each share of AirTouch Class C Preferred
Stock will, after consummation of such transaction, be subject to (i) conversion
at the option of the holder into the Reorganization Consideration (as defined
below) receivable upon consummation of such transaction by a holder of the
number of shares of AirTouch Common Stock into which such share of AirTouch
Class C Preferred Stock might have been converted immediately prior to
consummation of such transaction, (ii) conversion on the Class C Maturity Date
into the Reorganization Consideration receivable upon consummation of such
transaction by a holder of the number of shares of AirTouch Common Stock into
which such share of AirTouch Class C Preferred Stock would have converted if the
conversion on the Class C Maturity Date had occurred immediately prior to the
date of consummation of such transaction, plus the right to receive cash in an
amount equal to all accrued and unpaid dividends on such shares of AirTouch
Class C Preferred Stock (other than previously declared dividends payable to a
holder of record as of a prior date) and (iii) redemption on any redemption date
in exchange for the Reorganization Consideration receivable upon consummation of
such transaction by a holder of the number of shares of AirTouch Common Stock
that would have been issuable in effect on such redemption date upon a
redemption of such share immediately prior to consummation of such transaction,
assuming that, if the notice date for such redemption is not prior to such
transaction, the notice date had been the date of such transaction.
"Reorganization Consideration" means the kind or amount of securities, cash
or other property receivable upon consummation of a Reorganization Event
(provided that if the kind or amount of securities, cash or other property
receivable upon consummation of such transaction is not the same for each
non-electing share, then the kind and amount of securities, cash or other
property receivable upon consummation of such transaction for each non-electing
share will be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares).
130
<PAGE> 134
For purposes of the preceding provisions, any sale or transfer to another
corporation of property of AirTouch which did not account for at least 50% of
the consolidated net income of AirTouch for its most recent fiscal year ending
prior to the consummation of such transaction will not in any event be deemed to
be a sale or transfer of the property of AirTouch as an entirety or
substantially as an entirety.
FRACTIONAL SHARES. No fractional shares or script representing fractional
shares of AirTouch Common Stock will be issued upon the redemption or conversion
of any AirTouch Class C Preferred Stock. In lieu of any fractional share
otherwise issuable in respect of the aggregate number of shares of AirTouch
Class C Preferred Stock of any holder which are converted at the Class C
Maturity Date or upon any optional conversion, such holder will be entitled to
receive an amount in cash (computed to the nearest cent) equal to the same
fraction of the Class C Maturity Price or the market price on the second trading
date immediately preceding the effective date of conversion. If more than one
share will be surrendered for conversion at one time by or for the same holder,
the number of full shares of AirTouch Common Stock issuable upon conversion
thereof will be computed on the basis of the aggregate number of shares of
AirTouch Class C Preferred Stock so surrendered.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or
winding up of the business of AirTouch, whether voluntary or involuntary, the
holders of shares of AirTouch Class C Preferred Stock then outstanding, after
payment or provision for payment of the debts and other liabilities of AirTouch
and the payment or provision for payment of any distribution on any shares of
AirTouch having a preference and a priority over the shares of AirTouch Class C
Preferred Stock on liquidation, are entitled to receive an amount per share
equal to the Call Price, plus accrued and unpaid dividends thereon, out of the
assets of AirTouch available for distribution to stockholders, before any
distribution of assets is made to holders of any shares of AirTouch capital
stock that are junior and subordinate to the AirTouch Class C Preferred Stock on
liquidation, including AirTouch Common Stock and AirTouch Series A Preferred
Stock, and shall, after the holders of AirTouch Common Stock have received an
amount per share of AirTouch Common Stock equal to the Call Price of $50.00, as
it may be adjusted, divided by the Class C Exchange Rate, be entitled to
participate on a pro rata basis with the holders of AirTouch Common Stock.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of AirTouch, the assets of AirTouch are insufficient to permit the payment of
the full preferential amounts payable with respect to shares of AirTouch Class C
Preferred Stock and all other series of AirTouch Preferred Stock that rank on a
parity with AirTouch Class C Preferred Stock, the holders of shares of AirTouch
Class C Preferred Stock and of all such other series of AirTouch Preferred Stock
will share ratably in any distribution of assets of AirTouch in proportion to
the full respective preferential amounts to which they are entitled.
A consolidation or merger of AirTouch with one or more corporations
(whether or not AirTouch is surviving such consolidation or merger), or a sale,
lease or transfer or exchange of all or substantially all of the assets of
AirTouch will not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of AirTouch.
VOTING RIGHTS. The AirTouch Class C Preferred Stock will not have any
voting rights except as required by law and as described below.
In the event that dividends payable on the shares of AirTouch Class C
Preferred Stock or any other series of AirTouch Class C Parity Preferred Stock
are in arrears and unpaid in an aggregate amount equal to or exceeding the
aggregate amount of dividends payable thereon for six quarterly dividend
periods, or if any other series of AirTouch Preferred Stock is entitled for any
other reason to exercise voting rights, separate from the AirTouch Common Stock,
to elect any Preferred Stock Directors, the holders of the shares of AirTouch
Class C Preferred Stock (voting separately as a class with holders of all other
series of Preferred Stock upon which like voting rights have been conferred and
are exercisable), with each share of AirTouch Class C Preferred Stock entitled
to one vote, will be entitled to vote for the election of two Preferred Stock
Directors, such directors to be in addition to the number of directors
constituting the AirTouch Board immediately prior to the accrual of such right.
Such right, when vested, will continue until all dividends in arrears on the
shares of AirTouch Class C Preferred Stock and such other series of Preferred
Stock will have been paid in full and the right of any other series of preferred
stock to exercise voting rights, separate from the AirTouch Common
131
<PAGE> 135
Stock, to elect Preferred Stock Directors terminates or has terminated, and,
when so paid and any such termination occurs or has occurred, such right of the
holders of the shares of AirTouch Class C Preferred Stock will cease. The term
of office of any Preferred Stock Director elected by the holders of the shares
of AirTouch Class C Preferred Stock and such other series will terminate on the
earlier of (i) the next annual meeting of stockholders at which a successor will
have been elected and qualified or (ii) the termination of the right of holders
of the shares of AirTouch Class C Preferred Stock and such other series to vote
for such directors. Vacancies on the AirTouch Board (including with respect to a
Preferred Stock Director) resulting from death, resignation or other cause will
be filled exclusively by no less than two-thirds of the remaining directors and
the director so elected will hold office until a successor is elected and
qualified.
The affirmative consent of the holders of at least two-thirds of AirTouch
Class C Preferred Stock thereof actually voting, i.e., voting affirmatively or
negatively (voting separately as a class), will be necessary to amend, alter or
repeal any of the provisions of AirTouch's Certificate of Incorporation which
would adversely affect the powers, preferences or rights of the holders of the
AirTouch Class C Preferred Stock then outstanding or reduce the minimum time
required for any notice to which such holders may be entitled; provided,
however, that any such amendment, alteration or repeal that would authorize,
create or increase the authorized amount of any shares of stock (whether or not
already authorized) ranking junior to, on a parity with or senior to the
AirTouch Class C Preferred Stock with respect to payment of dividends or payment
upon liquidation will be deemed not to affect adversely such powers, preferences
or rights and will not be subject to approval by the holders of AirTouch Class C
Preferred Stock. The holders of AirTouch Class C Preferred Stock will not have
any voting rights with respect to the amendment, alteration or repeal of any
provisions of AirTouch's Certificate of Incorporation approved at a meeting of
the stockholders the record date of which is prior to the issuance of any
AirTouch Class C Preferred Stock.
There is no limitation on the issuance by AirTouch of any class of stock
ranking senior to, equal to or junior to the shares of AirTouch Class C
Preferred Stock.
LISTING. AirTouch Class C Preferred Stock has been authorized for listing
on the NYSE under the symbol "ATIC," subject to official notice of issuance.
TRANSFER AGENT AND REGISTRAR. The Bank of New York will act as transfer
agent and registrar for, and paying agent for the payment of dividends on, the
shares of AirTouch Class C Preferred Stock.
MISCELLANEOUS. Upon issuance, the shares of AirTouch Class C Preferred
Stock will be fully paid and nonassessable. Holders of shares of AirTouch Class
C Preferred Stock have no preemptive rights. AirTouch will at all times reserve
and keep available out of its authorized and unissued AirTouch Common Stock,
solely for issuance upon the conversion or redemption of shares of AirTouch
Class C Preferred Stock, such number of shares of AirTouch Common Stock as will
from time to time be issuable upon the conversion or redemption of all the
shares of AirTouch Class C Preferred Stock then outstanding.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF AIRTOUCH AND CCI
The rights of AirTouch stockholders are governed by AirTouch's Certificate
of Incorporation, its By-laws (the "AirTouch By-laws") and the laws of the State
of Delaware. The rights of CCI stockholders are governed by CCI's Certificate of
Incorporation, its By-laws (the "CCI By-laws") and the laws of the State of
Delaware. After the Effective Time of the Merger, the rights of holders of CCI
Stock who become AirTouch stockholders will be governed by AirTouch's
Certificate of Incorporation, the AirTouch By-laws and the laws of the State of
Delaware. In most respects, the rights of AirTouch stockholders and CCI
stockholders are similar. The following is a summary of all material differences
between the rights of AirTouch stockholders and the rights of CCI stockholders
under their respective Certificates of Incorporation and By-laws.
NOTICE OF STOCKHOLDER BUSINESS
Under the AirTouch By-laws, no business may be conducted at the annual
meeting of stockholders except in accordance with the procedures set forth in
the AirTouch By-laws. Under the AirTouch By-laws, a stockholder must give timely
notice of the stockholder's intention to bring business before the annual
meeting.
132
<PAGE> 136
To be timely, the stockholder's notice must be mailed or delivered to and
received by the Secretary of AirTouch 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 or, if not within such time, then not less
than 75 days prior to the meeting; provided, however, that if less than 90 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, then notice by the stockholder to be timely must be so received by
the earlier of (X) 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 is first to occur, and (Y) two days prior to the
date of the meeting (a notice received by AirTouch within such time periods will
be referred to herein as an "AirTouch Timely Notice"). The notice must contain a
brief description of the business, the name and record address of the
stockholder proposing the business, the number and class of shares of stock of
AirTouch beneficially owned by the stockholder and any material interest of the
stockholder in such business.
The CCI By-laws contain a similar requirement that no business may be
conducted at any annual or special meeting of stockholders except in accordance
with the procedures set forth in the CCI By-laws. Under the CCI By-laws,
stockholders must give timely advance notice to the Secretary of CCI of business
the stockholder intends to bring before any annual or special meeting of
stockholders (other than a stockholder proposal governed by the federal proxy
rules). To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of CCI not less than 60 nor more
than 90 days prior the anniversary date of the immediately preceding annual
meeting of stockholders or, in the case of a special meeting or in the event
that the annual meeting is called for a date more than 60 days prior to such
anniversary date, not later than the close of business on the tenth day
following the day on which notice of the date of such meeting was made,
whichever first occurs (a notice received by CCI within such time periods will
be referred to herein as a "CCI Timely Notice"). The notice must contain a brief
description of the business and the reasons for conducting such business, the
name and record address of the stockholder proposing the business, the number,
class and series of shares of stock of CCI beneficially owned by the stockholder
and any other information which would be required to be included in a proxy
statement or other filing required to be filed with the SEC if such stockholder
were a participant in a solicitation subject to the federal proxy rules.
NOTICE OF DIRECTOR NOMINATIONS
Under the AirTouch By-laws, only persons who are nominated in accordance
with the procedures set forth in the AirTouch By-laws may be eligible for
election as directors. Stockholders may nominate persons at an annual meeting
for election to the board of directors only if such stockholder provides an
AirTouch Timely Notice to the Secretary of AirTouch of such stockholder's
intention to make such nomination at the meeting. The notice must 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 and (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, (ii) the class, series and number of
shares of capital stock of the corporation which are beneficially owned by the
stockholder and (iii) such other information as may be reasonably requested by
AirTouch to determine the eligibility of such proposed nominee to serve as
director.
Similarly, only persons who are nominated in accordance with the procedures
set forth in the CCI By-laws are eligible for election as directors at any
meeting of stockholders of CCI. Stockholders may nominate persons at an annual
meeting for election of directors only if such stockholder provides a CCI Timely
Notice to the Secretary of CCI of such stockholder's intention to make such
nomination at the meeting. The notice must 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, number
and series of shares of capital stock of CCI which are beneficially owned by the
person, (iv) any other information relating to such person that is required to
be disclosed in proxy solicitations for election of directors under the federal
proxy rules and (v) the consent of such person and (b) as to the stockholder
giving such notice, (i) the name and record address of the stockholder, (ii) the
class, series and number of shares of capital stock of CCI which are
beneficially owned by
133
<PAGE> 137
the stockholder, (iii) a representation that such stockholder intends to appear
at the meeting to nominate such person and (iv) a representation that the
stockholder is qualified as of the date of the notice to have such individual
serve as the nominee of such stockholder.
STOCKHOLDER MEETINGS
Section 228 of the DGCL provides that, unless otherwise provided in its
certificate of incorporation, any action required to (or which may) be taken at
any annual or special meeting of stockholders of a Delaware stock corporation
may be taken without notice and without a meeting if a consent or consents in
writing, signed by the holders of outstanding stock having not less than the
minimum votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted, is
delivered to the corporation. AirTouch's Certificate of Incorporation prohibits
stockholders from acting by written consent. CCI's Certificate of Incorporation
contains an identical provision.
DIRECTORS; CLASSIFIED BOARD
The authorized number of directors of AirTouch is fixed from time to time
by resolution of the AirTouch Board. Under CCI's Certificate of Incorporation,
the authorized number of directors may not be less than eight nor more than 25,
with the exact number fixed by resolution of the CCI Board from time to time.
Both the AirTouch Board and the CCI Board are each divided into three
classes of directors serving staggered three-year terms (a "classified board"),
with each class being as nearly equal in number as possible. As a result,
approximately one-third of each of the AirTouch Board and the CCI Board is
elected each year. In addition, under the DGCL, stockholders of a company with a
classified board may remove a director or the entire board of directors only for
cause.
RIGHT TO ELECT DIRECTORS
CCI's Certificate of Incorporation provides that the holders of CCI Class A
Preference Stock are entitled to elect one director to the CCI Board of
Directors if the number of shares of CCI Common Stock beneficially owned by them
(assuming conversion of all then outstanding shares of convertible stock owned
by them at the then applicable conversion rate(s)) represents at least 10% of
the total number of fully diluted shares of CCI then outstanding. As of the date
hereof, AirTouch is the only holder of CCI Class A Preference Stock and has
elected Mr. Cox pursuant to this provision. CCI's Certificate of Incorporation
also provides that the holders of CCI Class A Preference Stock are entitled to
elect one additional director to the CCI Board if (i) the number of shares of
CCI Common Stock beneficially owned by them (assuming conversion of all then
outstanding shares of convertible stock owned by them at the then applicable
conversion rate(s)) represents at least 30% of the total number of fully diluted
shares of CCI then outstanding (excluding certain shares) or (ii) the value of
CCI's assets on a consolidated basis (excluding CCI's interest in New Par)
exceeds 20% of the total value of CCI's assets on a consolidated basis
(including CCI's interest in New Par). In November 1995, Mr. Gyani was elected
to the CCI Board as a result of this provision.
AMENDMENT TO BY-LAWS
Section 109 of the DGCL provides that, after a corporation has received any
payment for its shares of stock, the power to adopt, amend or repeal bylaws will
be in the stockholders entitled to vote, provided that the corporation may, in
its certificate of incorporation, confer such power also upon the directors of
the corporation. Under AirTouch's Certificate of Incorporation, the AirTouch
Board may make, amend or repeal the AirTouch By-laws without stockholder
approval by a vote of at least 66 2/3% of the directors. AirTouch stockholders
may amend or repeal the AirTouch By-laws with the affirmative vote of the
holders of shares representing at least 66 2/3% of the combined voting power.
Under CCI's Certificate of Incorporation, the CCI Board and the CCI
stockholders may make, alter, amend and repeal the CCI By-laws. However, an
amendment to or repeal of any CCI By-law relating to terms of office and
election of directors or amendment to By-laws may not be amended without the
vote of two-thirds of the stockholders.
134
<PAGE> 138
AMENDMENT TO CERTIFICATES
An amendment to AirTouch's Certificate of Incorporation affecting the
following provisions requires the vote of 66 2/3% of the shares outstanding: (i)
the directors may determine the size of the AirTouch Board; (ii) the classified
board; (iii) stockholders may not cumulate votes in the election of directors;
(iv) indemnification and limitation of director liability for monetary damages;
(v) redemption to prevent the loss or secure the reinstatement of any license or
franchise; (vi) stockholders may act only at an annual or special meeting and
may not act by written consent; and (vii) amendments to or repeals of the
AirTouch By-laws.
An amendment to CCI's Certificate of Incorporation affecting the following
provisions requires the affirmative vote of the holders of at least two-thirds
of the combined voting power, voting as a class: (i) the classified board; (ii)
the range of the authorized number of directors; (iii) amendments or repeals of
the CCI By-laws by the CCI stockholders requiring the affirmative vote of the
holders of two-thirds of the combined voting power; (iv) stockholders may act
only at annual or special meeting and may not act by written consent; and (v)
indemnification and limitation of director liability for monetary damages.
INDEMNIFICATION
Both ATI's and CCI's Certificates of Incorporation provide that directors,
officers and certain other persons will be indemnified to the fullest extent
authorized by the DGCL.
REDEMPTION TO PREVENT THE LOSS OR SECURE THE REINSTATEMENT OF A GOVERNMENTAL
LICENSE OR FRANCHISE
Notwithstanding any other provision of ATI's Certificate of Incorporation
to the contrary, outstanding shares of stock of AirTouch will always be subject
to redemption by AirTouch, by action of the AirTouch Board if in the judgment of
the AirTouch Board such action should be taken, pursuant to applicable law, to
the extent necessary to prevent the loss or secure the reinstatement of any
license or franchise from any governmental agency held by AirTouch or any
subsidiary to conduct any portion of the business of AirTouch or any subsidiary,
which license or franchise is conditioned upon some or all of the holders of
AirTouch's stock possessing prescribed qualifications. The redemption price is
to be equal to the fair market value of such shares. The redemption price may be
paid in cash, redemption securities or any combination thereof. CCI's
Certificate of Incorporation contains no similar provisions.
OTHER MATTERS
REGULATORY APPROVALS REQUIRED
The Merger cannot proceed in the absence of the requisite regulatory
approvals. See "THE MERGER AGREEMENT -- Conditions -- Conditions to Obligations
of AirTouch and CCI" and "-- Termination; Effect of Termination." There can be
no assurance that such regulatory approvals will be obtained, and, if obtained,
there can be no assurance as to the date of any such approvals. There can also
be no assurance that any such approvals will not contain a condition or
requirement which causes such approvals to fail to satisfy the conditions set
forth in the 1996 Merger Agreement. Specifically, under the 1996 Merger
Agreement, neither party is obligated to effect the Merger unless all required
approvals of governmental entities are obtained, other than those which would
not have a material adverse effect on the Business Condition of CCI. In
addition, AirTouch is not obligated to effect the Merger unless the FCC Consents
are obtained. See "THE MERGER AGREEMENT -- Conditions -- Conditions to
Obligations of AirTouch."
ANTITRUST REGULATION. On September 21, 1995, in connection with the MRO,
CCI and AirTouch filed with the Department of Justice ("DOJ") and the Federal
Trade Commission ("FTC") material required under HSR Act relating to the
acquisition by AirTouch of CCI voting stock in connection with the MRO and the
acquisition of up to 100% of the outstanding voting stock of CCI. By letter
dated October 4, 1995, the FTC notified CCI and AirTouch that their request for
early termination of the waiting period under the HSR Act
135
<PAGE> 139
was granted effective as of such date. As a result, AirTouch has the right for a
period of one year from October 4, 1995 to acquire up to 100% of the outstanding
stock of CCI.
The DOJ and the FTC frequently scrutinize the legality under the antitrust
laws of transaction such as the acquisition by AirTouch of voting securities of
CCI. At any time before of after the Effective Time either or both of such
agencies could take such action under the antitrust laws as it deems or they
deem necessary or desirable in the public interest, or certain other persons
could take action under the antitrust laws, including seeking to enjoin the
acquisition by AirTouch of voting securities of CCI.
COMMUNICATIONS ACT REGULATION. The Merger is also subject to the
requirements of the Communications Act and the rules, regulations and policies
of the FCC. Under such rules, regulations and policies, the acquisition by
AirTouch of all of the outstanding stock of CCI is deemed to result in a pro
forma transfer of control of New Par and its subsidiaries holding FCC licenses.
Applications requesting the FCC's consents to the foregoing pro forma transfer
of control have been filed; consent to transfer of the cellular licenses have
been received, while that with respect to the microwave licenses is pending.
STATE REGULATION. CCI and AirTouch are required to file notices of the
Merger with the Ohio Public Utilities Commission and the Kentucky Public Service
Commission upon consummation of the Merger. No further state filings or
approvals are necessary.
CERTAIN LITIGATION RELATED TO THE MERGER
Since April 8, 1996, seven lawsuits were filed in the Delaware Court, in
and for New Castle County, and one lawsuit was filed in the Supreme Court of the
State of New York, County of New York, naming as defendants CCI, AirTouch and
CCI's directors. Certain of the lawsuits also named as a defendant one member of
the Partnership Committee which manages New Par who is not a CCI director. Each
lawsuit purported to be a class action brought on behalf of all CCI common and
convertible preferred stockholders and alleged that the consideration to be paid
the class under the 1996 Merger Agreement is inadequate. The seven Delaware
cases were consolidated in the Delaware Court. The New York action was dismissed
without prejudice and the parties have stipulated that the plaintiff in that
action may be joined as a party plaintiff in the Delaware consolidated action.
Plaintiffs contended that the director defendants breached their fiduciary
duties to CCI stockholders and that AirTouch, as an approximately 40%
stockholder of CCI, has breached fiduciary duties owed to CCI's minority
stockholders. One or more complaints also alleged that those defendants who are
members of the Partnership Committee which manages New Par owe plaintiffs
fiduciary duties which are also breached by the 1996 Merger Agreement. In
addition, plaintiffs alleged that actions taken under the 1996 Merger Agreement
violated certain contractual rights owing under the 1990 Merger Agreement. The
complaints sought an injunction against the Merger, rescission of the Merger, if
consummated, unspecified damages, attorneys' fees and other relief.
During June 1996, the parties commenced settlement discussions, and
plaintiffs' counsel, after reviewing the Proxy Statement-Prospectus as filed in
preliminary form with the Commission and conducting initial discovery, offered
comments on the adequacy of the disclosure contained in the Proxy
Statement-Prospectus and suggested changes to the financial terms of the
transaction. In response to plaintiffs' lawsuits and statements regarding
disclosure, AirTouch and CCI made certain modifications to the Proxy Statement-
Prospectus. The parties also agreed to certain specified changes to the
financial terms of the Merger, as the basis for settling the lawsuits. On July
10, 1996, the parties entered into a Memorandum of Understanding (the
"Memorandum") setting forth their agreement in principle to settle the lawsuits,
including the following agreed modifications to the terms of the 1996 Merger
Agreement: (i) the increase by $1.85 million in the maximum Contingent Payment
payable with respect to AirTouch Class B Preferred Stock, such that in the event
that the Volume-Weighted Average Trading Price of AirTouch Class B Preferred
Stock during the 30 consecutive calendar days commencing three months after the
Effective Time is less than $27.55, the aggregate amount of the Contingent
Payment will be $16.85 million (see "DESCRIPTION OF AIRTOUCH CAPITAL
STOCK -- AirTouch Class B Preferred Stock -- Contingent Payment"); (ii) the
revision of the terms of the AirTouch Class C Preferred Stock to provide a
liquidation preference ranking pari passu with
136
<PAGE> 140
that of the AirTouch Class B Preferred Stock (see "DESCRIPTION OF AIRTOUCH
CAPITAL STOCK -- AirTouch Class C Preferred Stock -- Liquidation Rights"); (iii)
an increase in the Unit Election Number in the event that it is less than the
number of Unit Election Shares, provided that in no event shall such increase
cause the Unit Election Number to exceed 74% of the CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time (see "SUMMARY -- The
Merger -- Examples of Merger Consideration Calculation" and "SPECIAL
FACTORS -- Merger Consideration and -- Election Procedures -- Excess Unit
Elections"); and (iv) the revision of Section 6.3(l) of the 1996 Merger
Agreement to increase the amount of contingent liabilities specified in that
provision from $50 million to $60 million (see Annex I).
The Memorandum requires the parties in good faith to agree upon and execute
a Stipulation of Settlement pursuant to which the lawsuits will be dismissed.
The settlement is subject to, among other things, approval of the Delaware
Court, completion of discovery to confirm that the settlement is fair and
reasonable to CCI stockholders, consummation of the Merger and certification of
a class of CCI stockholders for purposes of obtaining approval of the
Stipulation and entry of a judgment approving the settlement, dismissing with
prejudice the lawsuits and releasing all claims. Attorneys for the plaintiffs
will apply to the court for fees and expenses to be paid by the defendants in an
amount not to exceed $895,000. CCI and AirTouch will pay the costs and expenses
related to providing notice of the settlement to the CCI stockholders, as well
as the fees and expenses of counsel ordered by the court (but not to exceed
$895,000).
CCI and AirTouch have agreed to the Memorandum in order to eliminate the
burden and expense of further litigation and to facilitate the consummation of
the Merger. If the proposed settlement is not consummated, CCI and AirTouch
intend to contest the claims asserted against them in these lawsuits because
each believes, based on their respective evaluations of the legal and factual
matters relating to the negotiation and execution of the 1996 Merger Agreement
and the allegations of the complaints, and after consulting with legal counsel,
that these lawsuits are without merit.
PURCHASES OF CCI STOCK BY CCI AND AIRTOUCH DURING THE PAST TWO FISCAL YEARS
In addition to the purchases of CCI Stock by AirTouch described in "SPECIAL
FACTORS -- Background of the Merger," since January 1, 1994, AirTouch has
purchased an aggregate of 192,000 shares of CCI Series A Common Stock, for
prices ranging from $46.875 to $47.5625 per share. The average purchase price
per share that AirTouch paid for CCI Stock in the second quarter of 1994 was
$47.267. The average price per share of the CCI Series C Common Stock purchased
in the fourth quarter of 1995 was $60. The purchase price paid by AirTouch for
the AirTouch Replacement Option in the first quarter of 1996 represents an
average price of $44.975 per CCI Common Equivalent Share.
Since January 1, 1995, CCI purchased an aggregate of 1,005,000 shares of
CCI Series A Common Stock in open market purchases, for an aggregate purchase
price of $48,356,000, at prices per share ranging from $47.875 to $48.955. The
average purchase price per share that CCI paid for CCI Series A Common Stock in
each of the third and fourth calendar quarters of 1995 and the first calendar
quarter of 1996 was $47.875, $48.125, $48.955, respectively.
TREATMENT OF CCI CONVERTIBLE NOTES
As of the Record Date, CCI had the principal amount of $217,000,000 CCI
Convertible Notes outstanding. Under the terms of the Indenture dated as of
January 27, 1992 between CCI and Chemical Bank, as trustee (the "CCI
Indenture"), the Merger will result in a Change of Control (as defined in the
CCI Indenture) of CCI. As a result of such Change of Control, holders of the CCI
Convertible Notes may, at their option, require CCI or its successor to purchase
their CCI Convertible Notes on the date that is 35 business days after the
occurrence of the Change of Control (the "CCI Note Purchase Date") for an amount
equal to the Issue Price (as defined in the CCI Indenture) plus Original Issue
Discount (as defined in the CCI Indenture) through the CCI Note Purchase Date.
As of the Record Date, the Issue Price plus Original Issue Discount per CCI
Convertible Note through such date was $174,175,000.
137
<PAGE> 141
AirTouch and the Surviving Corporation will enter into a supplemental
indenture pursuant to which the Surviving Corporation will assume any CCI
Convertible Notes not required by the holder thereof to be purchased by CCI or
its successor, as described above. Each CCI Convertible Note that is outstanding
after the Effective Time will, under the terms of the CCI Indenture, be
convertible into the Merger Consideration that would have been received by a
holder of the number of CCI Common Equivalent Shares into which such CCI
Convertible Note would have been convertible but for the occurrence of the
Merger, assuming such CCI Common Equivalent Shares had been covered by a
Non-Election.
As of the Record Date, the CCI Convertible Notes were convertible into an
aggregate of 3,146,500 CCI Common Equivalent Shares.
DIRECTORS AND EXECUTIVE OFFICERS OF AIRTOUCH AND CCI
DIRECTORS AND EXECUTIVE OFFICERS OF AIRTOUCH
Below is information with respect to those individuals who serve as
directors and executive officers of AirTouch.
<TABLE>
<S> <C> <C>
Sam Ginn............................. 59 Chairman of the Board and Chief Executive Officer
C. Lee Cox........................... 55 Vice Chairman of the Board
Arun Sarin........................... 41 Vice Chairman of the Board
Mohan S. Gyani....................... 45 Executive Vice President and Chief Financial
Officer
Margaret G. Gill..................... 56 Senior Vice President, Legal, External Affairs and
Secretary
Dwight Jasmann....................... 60 Vice President, Human Resources and Corporate
Services
Michael Miron........................ 40 Vice President, Corporate Development and Strategy
Carol A. Bartz....................... 47 Director
Paul Hazen........................... 54 Director
Arthur Rock.......................... 69 Director
George P. Shultz..................... 75 Director
Donald G. Fisher..................... 67 Director
Charles R. Schwab.................... 58 Director
</TABLE>
Sam Ginn has been Chairman of the Board and Chief Executive Officer of
AirTouch since December 1993. He was Chairman of the Board, President and Chief
Executive Officer of Pacific Telesis Group from 1988 to April 1994 and became a
director of Pacific Telesis Group in 1983. He was Chairman of the Board of
Pacific Bell from 1988 to April 1994. Mr. Ginn is also a director of Chevron
Corporation, Safeway Inc., Transamerica Corporation and Hewlett-Packard Company.
C. Lee Cox was named Vice Chairman of the Board in November 1994, and has
been President and Chief Executive Officer of AirTouch Cellular since November
1990. He was President and Chief Operating Officer of AirTouch from December
1993 to November 1994. He was President and Chief Executive Officer of AirTouch
from 1987 to December 1993, was a director of AirTouch from 1987 to April 1993
and became a director again in January 1994. He was a director and a Group
President of Pacific Telesis Group from 1988 to April 1994. Mr. Cox is a
director of CCI and Pacific Gas & Electric Company.
Arun Sarin became Vice Chairman of the Board in August 1995, and has been
President and Chief Executive Officer of AirTouch International since May 1995.
He was Senior Vice President, Corporate Strategy/Development and International
Operations until August 1995, and was also responsible for Human Resources
through 1994. He was Vice President, Organization Design of Pacific Telesis
Group from March 1993 to April 1994. Mr. Sarin joined Pacific Telesis Group in
1984 and held a variety of positions there until the spin-off of AirTouch in
April 1994.
138
<PAGE> 142
Mohan S. Gyani became Executive Vice President and Chief Financial Officer
of AirTouch in September 1995. From November 1993 until that time he was Vice
President, Finance and Treasurer of AirTouch. He was Vice President and
Treasurer of Pacific Telesis Group from March 1993 to November 1993. From
February 1992 to March 1993 he was Vice President and Controller at Pacific
Bell. From November 1991 to February 1992 he was Vice President Financial
Assurance for Pacific Bell. From April 1989 to November 1991 he was Assistant
Treasurer at Pacific Telesis Group. Mr. Gyani is a director of CCI.
Margaret G. Gill became Senior Vice President, Legal, External Affairs and
Secretary of AirTouch in January 1994. She had been a partner in the law firm of
Pillsbury Madison & Sutro LLP since 1973 and was the head of the firm's
Corporate and Securities Group. Mrs. Gill is a director of Consolidated
Freightways, Inc.
Michael Miron has been Vice President, Corporate Development and Strategy
since April 1996. Prior to joining AirTouch, Mr. Miron was Managing Director,
Strategic Planning and Analysis at Salomon Brothers Inc. Mr. Miron joined
Salomon Brothers Inc in 1990.
Dwight Jasmann has been Vice President, Human Resources and Corporate
Services since January 1995. He was an international telecommunications
consultant from 1993 to 1994. From 1987 to 1992 he was President and Managing
Director for AT&T Asia/Pacific Communications Services, Inc. Mr. Jasmann is a
director of Elcotel, Inc.
Carol A. Bartz became a director of AirTouch in February 1994. She has been
Chairman of the Board, President and Chief Executive Officer of Autodesk, Inc.
since April 1992. From 1983 to April 1992, Ms. Bartz served in various positions
with Sun Microsystems, Inc., most recently as Vice President of Worldwide Field
Operations. Ms. Bartz is also a Director of Cadence Design Systems and Network
Appliance.
Paul Hazen became a director of AirTouch in April 1993. He became Chairman
and Chief Executive Officer of Wells Fargo & Company and its principal
subsidiary, Wells Fargo Bank, N.A., in January 1995. He was President and Chief
Operating Officer of Wells Fargo & Company and Wells Fargo Bank, N.A. from 1984
to January 1995. He served as a director of Pacific Telesis Group from 1989 to
April 1994. Mr. Hazen is a director of Wells Fargo & Company, Wells Fargo Bank,
N.A., Phelps Dodge Corporation and Safeway Inc.
Arthur Rock became a director of AirTouch in January 1994. He has been a
principal in Arthur Rock & Co., a venture capital firm, since 1969. Mr. Rock is
a director of Intel Corporation and Argonaut Group, Inc.
George P. Shultz became a director of AirTouch in January 1994. He has been
a Professor at the Stanford University Graduate School of Business for more than
five years. He served as United States Secretary of State from 1982 to 1989. Mr.
Shultz is a Distinguished Fellow at the Hoover Institution, a director of the
Bechtel Group, Inc., Chairman of J.P. Morgan's International Council and
Chairman of the Governor's California Economic Policy Advisory Council.
Donald G. Fisher became a director of AirTouch in January 1994. He is the
founder and Chairman of the Board of The Gap, Inc. and was Chief Executive
Officer of The Gap, Inc. until November 1995. He is a director of The Charles
Schwab Corporation, San Francisco Bay Area Council and the National Retail
Federation.
Charles R. Schwab became a director of AirTouch in January 1994. He is the
founder, Chairman of the Board and Chief Executive Officer of The Charles Schwab
Corporation and Chairman of Charles Schwab & Co. Inc. Mr. Schwab is a director
of The Gap, Inc. and Transamerica Corporation.
139
<PAGE> 143
DIRECTORS AND EXECUTIVE OFFICERS OF CCI
Set forth below is information with respect to those individuals who serve
as directors and executive officers of CCI.
<TABLE>
<S> <C> <C>
William B. Ginsberg.................. 52 President, Chief Executive Officer and Director
George S. Blumenthal................. 52 Chairman of the Board, Treasurer and Director
J. Barclay Knapp..................... 39 Executive Vice President, Chief Operating and Financial
Officer and Director
Richard J. Lubasch................... 49 Vice President -- General Counsel and Secretary
Gregg Gorelick....................... 37 Vice President -- Controller
Leigh Costikyan Wood................. 38 Vice President -- Operations
Sidney R. Knafel..................... 65 Director
Ted H. McCourtney.................... 57 Director
Del Mintz............................ 68 Director
Alan J. Patricof..................... 61 Director
Warren Potash........................ 65 Director
C. Lee Cox........................... 55 Director
Mohan Gyani.......................... 45 Director
</TABLE>
William B. Ginsberg, one of the co-founders of CCI, has been President,
Chief Executive Officer and a director of CCI since its founding. Prior to March
1981, Mr. Ginsberg was employed at the FCC, commencing in July 1978, first as
Special Assistant to the Chairman, and then as Deputy Chief, Policy in the FCC's
Common Carrier Bureau. Mr. Ginsberg is also Chairman, President, Chief Executive
Officer and a director of CCII.
George S. Blumenthal, one of the co-founders of CCI, has been Chairman,
Treasurer and a director since CCI's founding. Mr. Blumenthal was President of
Blumenthal Securities, Inc. (and its predecessors), a member firm of The New
York Stock Exchange, from 1967 until 1992. Mr. Blumenthal is Chairman, Chief
Executive Officer, Treasurer and a director of ICTL and CCPR and a director of
Andover Togs, Inc.
J. Barclay Knapp, a director since 1989, is CCI's Executive Vice President,
Chief Operating and Financial Officer, positions he has held since 1989 and
1984, respectively. Mr. Knapp is also Executive Vice President, Chief Operating
Officer and a director of CCII and President, Chief Operating Officer, Chief
Financial Officer and a director of ICTL and CCPR.
Richard J. Lubasch, CCI's Vice President -- General Counsel and Secretary,
joined CCI in July 1987. Mr. Lubasch is Senior Vice President -- General Counsel
and Secretary of CCII, ICTL and CCPR, as well as Treasurer of CCII.
Gregg Gorelick, CCI's Vice President -- Controller, joined CCI in September
1986. From 1981 to 1986, he was employed by Ernst & Whinney (now known as Ernst
& Young LLP). Mr. Gorelick is a certified public accountant and holds an M.B.A.
from Rutgers University. Mr. Gorelick is also Vice President -- Controller of
CCII, ICTL and CCPR.
Leigh Costikyan Wood, CCI's Vice President -- Operations, joined CCI in
November 1984. Ms. Wood has been the Chief Executive Officer of New Par since
April 1993. From October 1982 until November 1984, she was Deputy Chief Officer
of General Atlantic Corp., a private investment firm. Previously, she was
employed by Peat Marwick Mitchell & Co. Ms. Wood is a certified public
accountant and holds an M.B.A. from New York University. Ms. Wood is also Vice
President -- Operations of CCII and CCPR.
Sidney R. Knafel, a director since 1982, has been Managing Partner of SRK
Management Company, a private investment concern, since 1981. In addition, Mr.
Knafel is Chairman of Insight Communications, Inc. and Microbiological
Associates, Inc. Mr. Knafel is also director of General American Investors
Company, Inc., IGENE Biotechnology, Inc., four distinct Prudential Mutual Funds,
CCII, ICTL, CCPR and several privately owned companies.
140
<PAGE> 144
Ted H. McCourtney, a director since 1982, is a General Partner of Venrock
Associates, a venture capital investment partnership, a position he has held
since 1970. Mr. McCourtney also serves as a director of MedPartners/Mullikin,
Inc., CCII, ICTL, CCPR and several privately owned companies.
Del Mintz, a director since 1985, is President of Cleveland Mobile Tele
Trak, Inc. and President of Cleveland Mobile Radio Sales, Inc. and Ohio Mobile
Tele Trak, Inc., companies providing telephone answering and radio
communications services to Cleveland and Columbus, respectively. Mr. Mintz has
held similar positions with the predecessor of these companies since June 1967.
Mr. Mintz is President of several other companies, and was President and a
principal stockholder of Cleveland Mobile Cellular Telephone, Inc. before such
company was acquired by merger with CCI in May 1985. Mr. Mintz is also a
director of CCII, ICTL, CCPR and several privately owned companies.
Alan J. Patricof, a director during the period December 1981 until April
1982 and from February 1985, is Chairman of Patricof & Co. Ventures, Inc., a
venture capital firm he founded in 1969. Mr. Patricof also serves as a director
of CCII, ICTL, CCPR and several privately owned companies.
Warren Potash has been a director since 1984. Mr. Potash retired in 1991 as
President and Chief Executive Officer of the Radio Advertising Bureau, a trade
association, a position he had held since February 1989. Prior to that time and
beginning in 1986, he was President of New Age Communications, Inc., a
communications consultancy firm. Until his retirement in 1986, Mr. Potash was a
Vice President of Capital Cities/ABC Broadcasting, Inc., a position he held
since 1970. Mr. Potash is also a director of CCII, ICTL and CCPR.
For information with respect to C. Lee Cox and Mohan Gyani, see
"--Directors and Executive Officers of AirTouch" above.
All the directors and executive officers of AirTouch and CCI are United
States citizens.
SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
In addition to the AirTouch Preferred Stock, Series 1996 to be issued in
the Merger, AirTouch may pay cash consideration of up of $469,624,201 (including
amounts paid in respect of Dissenting CCI Stock), which assumes the conversion
of the CCI Convertible Notes and the exercise of all CCI Options, resulting in
30,495,078 CCI Common Equivalent Shares. In addition, it is estimated that
AirTouch and CCI will incur in the aggregate approximately $700,000 in costs and
expenses related to printing, mailing and filing the Registration Statement and
this Proxy Statement-Prospectus and in filing fees with other governmental
agencies, which they will share equally. AirTouch estimates that it will incur
an additional $2,500,000 in legal fees, accounting fees and other expenses
(exclusive of the $1,700,000 to be paid in the aggregate to Lehman Brothers) in
connection with the transactions. CCI estimates that it will incur an additional
$1,110,000 in legal fees, accounting fees and other expenses (exclusive of the
$8,500,000 to be paid in the aggregate to Wasserstein Perella and Donaldson,
Lufkin & Jenrette and the $15,000 plus expenses to be paid to D.F. King).
AirTouch intends to obtain funds necessary to satisfy the cash component of
the Merger Consideration through the sale of $650 million principal amount of
debt securities pursuant to its Registration Statement on Form S-3 (Registration
No. 33-62787). Pending the closing of the Merger, AirTouch will apply the net
proceeds from this debt offering to retire commercial paper. AirTouch then
intends to reborrow under its commercial paper program. AirTouch also has
sufficient amounts available for borrowing under its Credit Agreement dated as
of July 20, 1995 among AirTouch, Bank of America N.T. & S.A., as agent, and the
other financial institutions party thereto, that are not otherwise dedicated to
commercial paper backstop to pay up to the $469,624,201 maximum amount of cash
to holders of CCI Stock. Borrowings under the Credit Agreement bear interest at
a rate equal to LIBOR plus a margin that varies based upon the ratings of
AirTouch's senior unsecured long-term debt (currently .30%).
141
<PAGE> 145
PRINCIPAL AND OTHER STOCKHOLDERS OF CCI
The following table sets forth certain information regarding the beneficial
ownership of CCI Stock, as of the Record Date (unless otherwise noted), by (i)
each officer and director of CCI, (ii) stockholders holding 5% or more of CCI
Stock and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------
PRESENTLY
EXECUTIVE OFFICERS, DIRECTORS CCI EXERCISABLE TOTAL
AND PRINCIPAL STOCKHOLDERS STOCK(1) OPTIONS(2) OPTIONS PERCENT(3)
- ---------------------------------------------------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
William B. Ginsberg(4).............................. 170,684 158,500 205,500 *
George S. Blumenthal(5)............................. 144,056 98,500 113,000 *
J. Barclay Knapp.................................... 427 98,500 113,000 *
Richard J. Lubasch(6)............................... 5,387 76,500 87,500 *
Leigh Costikyan Wood................................ 1,907 117,500 162,500 *
Gregg Gorelick...................................... 424 70,000 87,500 *
C. Lee Cox(7)....................................... -- -- -- --
Mohan S. Gyani(8)................................... -- -- -- --
Ted H. McCourtney(9)................................ 30,336 16,000 21,250 *
Del Mintz(10)....................................... 603,349 16,000 21,250 1.48%
Sidney R. Knafel(11)................................ 420,150 16,000 21,250 1.04%
Alan J. Patricof(12)................................ 35,520 16,000 21,250 *
Warren Potash....................................... 251 16,000 21,250 *
AirTouch Communications, Inc........................ 15,722,851(13) 2,405,193 2,405,193 41.03%
One California Street
San Francisco, CA 94111
HBK Management LLC.................................. 4,007,829(14) -- -- 10.45%
777 Main Street, Suite 2750
Fort Worth, TX 76102
All directors and officers as a group (13 in 1,412,591 699,500 875,250 4.97%
number)...........................................
</TABLE>
- ---------------
* Less than 1%.
(1) The title of the class of CCI Stock owned by each officer and director
listed is CCI Redeemable Preferred Stock.
(2) Includes shares of CCI Stock purchasable upon the exercise of options
which are exercisable or become so in the next 60 days ("Presently
Exercisable Options").
(3) Includes CCI Stock, Presently Exercisable Options and CCI Stock issuable
on conversion of CCI Convertible Notes.
(4) Includes 31,126 shares of CCI Stock owned by Mr. Ginsberg's wife, as to
which shares Mr. Ginsberg disclaims beneficial ownership. Includes 61,032
shares of CCI Stock owned by a charitable trust. Mr. and Mrs. Ginsberg are
the trustees of this trust.
(5) Includes 5,800 shares of CCI Stock held by trusts for the benefit of Mr.
Blumenthal's children.
(6) Includes 305 shares for which Mr. Lubasch acts as a custodian under the
N.Y. U.G.M.A. for shares registered in his daughter's name.
(7) Mr. Cox is Vice Chairman and President of AirTouch. Mr. Cox is entitled to
receive option grants pursuant to CCI's non-employee director stock option
plan. Mr. Cox has declined to accept such options.
(8) Mr. Gyani is Executive Vice President and Chief Financial Officer of
AirTouch. Mr. Gyani is entitled to receive option grants pursuant to CCI's
non-employee director stock option plan. Mr. Gyani has declined to accept
such options.
(9) Includes 1,524 shares of CCI Stock held by trusts for the benefit of Mr.
McCourtney's children, as to which shares Mr. McCourtney disclaims
beneficial ownership.
142
<PAGE> 146
(10) Includes 99,640 shares of CCI Stock owned by Mr. Mintz's children or by Mr.
Mintz's children as trustees for their children as well as a niece and
daughters-in-law, and 50,167 shares owned by Mr. Mintz's wife, as to which
shares Mr. Mintz disclaims beneficial ownership.
(11) Includes 130,709 shares of CCI Stock owned by a trust account for the
benefit of a child of Mr. Knafel, as to which shares Mr. Knafel disclaims
beneficial ownership. An additional 130,709 shares are owned by an adult
child of Mr. Knafel, as to which shares Mr. Knafel disclaims beneficial
ownership.
(12) Includes 190 shares of CCI Stock owned by Mr. Patricof's wife and 7,758
shares owned by, or in trust for the benefit of, Mr. Patricof's children,
as to which shares Mr. Patricof disclaims beneficial ownership.
(13) Based upon information available to CCI, AirTouch owns 3,450,800 shares of
CCI Series A Common Stock, 10,065,641 shares of CCI Series C Common Stock
and 2,206,410 shares of CCI Class A Preference Stock. Information on
ownership of CCI Series A Common Stock is based solely upon an amendment to
Schedule 13-D filed on October 30, 1995 by AirTouch with the SEC.
(14) Based solely upon a Form 13-D (Amendment No. 4), dated July 9, 1996, filed
by HBK Investments L.P. ("Investments"), HBK Main Street Investments L.P.
("Main Street") and HBK Finance L.P. ("Finance") with the SEC. According to
such amendment, Investments holds 1,292,807 shares of CCI Redeemable
Preferred Stock, Main Street holds 1,606,700 shares of CCI Redeemable
Preferred Stock and CCI Convertible Notes convertible into 561,672 shares
of CCI Redeemable Preferred Stock and Finance owns 362,500 shares of CCI
Redeemable Preferred Stock and CCI Convertible Notes convertible into
169,650 shares of CCI Redeemable Preferred Stock.
EXPERTS
The consolidated financial statements of AirTouch and subsidiaries as of
December 31, 1995, incorporated in this Proxy Statement-Prospectus by reference
to AirTouch's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1995, have been so incorporated in reliance upon the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of
AirTouch for the three-month period ended March 31, 1996, incorporated by
reference in this Proxy Statement-Prospectus, Price Waterhouse LLP reported that
they have applied limited procedures in accordance with professional standards
for review of such information. However, their separate report dated May 10,
1996 incorporated by reference herein, states that they did not audit and they
do not express an opinion on that unaudited consolidated financial information.
Price Waterhouse LLP has not carried out any significant or additional audit
tests beyond those which would have been necessary if their report had not been
included. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. Price Waterhouse LLP is not subject to the liability
provisions of section 11 of the Securities Act for their report on the unaudited
consolidated financial information because that report is not a "report" or
"part" of the Registration Statement prepared or certified by Price Waterhouse
LLP within the meaning of sections 7 and 11 of the Securities Act.
The consolidated financial statements of AirTouch and subsidiaries for the
two year period ended December 31, 1994, incorporated by reference from
AirTouch's Annual Report on Form 10-K, as amended, for the year ended December
31, 1995 have been incorporated herein in reliance upon the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
With respect to the unaudited consolidated financial information of
AirTouch for the three-month period ended March 31, 1995, incorporated by
reference in this Proxy Statement-Prospectus, Coopers & Lybrand L.L.P. reported
that they have applied limited procedures in accordance with professional
standards for review of such information. However, their separate report dated
May 11, 1995 incorporated by reference herein, states that they did not audit
and they do not express an opinion on that unaudited consolidated financial
information. Coopers & Lybrand L.L.P. has not carried out any significant or
additional audit tests beyond
143
<PAGE> 147
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.
Coopers & Lybrand L.L.P. is not subject to the liability provisions of section
11 of the Securities Act for their report on the unaudited consolidated
financial information because that report is not a "report" or "part" of the
Registration Statement prepared or certified by Coopers & Lybrand L.L.P. within
the meaning of sections 7 and 11 of the Securities Act.
The financial statements and schedule of CMT Partners for the years ended
December 31, 1995 and 1994, and for the period from inception (September 1,
1993) to December 31, 1993, incorporated by reference from AirTouch
Communication, Inc.'s Annual Report on Form 10-K, as amended, for the year ended
December 31, 1995, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report. In that report, the firm states that
with respect to Kansas Combined Cellular, a division of CMT Partners, its
opinion is based on the report of other independent public accountants, namely
Arthur Andersen LLP. The financial statements and schedule of CMT Partners
referred to above have been included herein in reliance upon the authority of
those firms as experts in giving said reports.
The consolidated financial statements and schedule of Cellular
Communications, Inc. incorporated by reference in AirTouch Communications,
Inc.'s Annual Report (Form 10-K, as amended) for the year ended December 31,
1995, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon incorporated by reference therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of New Par (A Partnership) as of
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 included in AirTouch Communications, Inc.'s Annual Report
(Form 10-K, as amended) for the year ended December 31, 1995, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of U S WEST NewVector Group, Inc. and
subsidiaries as of December 31, 1995, included in this registration statement,
to the extent and for the periods indicated in their report, have been audited
by Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
The financial statements of Mannesmann Mobilfunk GmbH as of December 31,
1995 and 1994, and for each of the years in the three-year period ended December
31, 1995 included in AirTouch's Annual Report on Form 10-K, as amended, have
been incorporated by reference herein in reliance upon the report of KPMG
Deutsche Treuhand-Gesellschaft, independent auditors, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the shares of AirTouch Preferred Stock, Series 1996 offered
hereby will be passed upon for AirTouch by Pillsbury Madison & Sutro LLP.
Certain legal matters relating to the Merger will be passed upon for AirTouch by
Pillsbury Madison & Sutro LLP, San Francisco, California and for CCI by Skadden,
Arps, Slate, Meagher and Flom, New York, New York.
144
<PAGE> 148
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- ------------------------------------------------------------------------------- ---------------
<S> <C>
Acquiring Company.............................................................. 94
Acquiring Person............................................................... 22
AirTouch....................................................................... cover page
AirTouch Acquiring Party....................................................... 116
Air Touch Board................................................................ 12
AirTouch By-laws............................................................... 132
AirTouch Class B Preferred Stock............................................... cover page
AirTouch Class C Preferred Stock............................................... cover page
AirTouch Common Option......................................................... 19
AirTouch Common Stock.......................................................... 9
AirTouch Equity Securities..................................................... 121
AirTouch Midwest System........................................................ 7
AirTouch Payment............................................................... 53
AirTouch Permitted Offer....................................................... 117
AirTouch Preferred Option...................................................... 19
AirTouch Preferred Stock....................................................... 17
AirTouch Preferred Stock, Series 1996.......................................... cover page
AirTouch Redemption Price...................................................... 117
AirTouch Replacement Option.................................................... 7
AirTouch Rights................................................................ 116
AirTouch Rights Plan........................................................... 116
AirTouch Timely Notice......................................................... 133
AirTouch Series A Preferred Stock.............................................. 17
AirTouch Subscription Right.................................................... 117
APB No. 16..................................................................... 82
Appraisal Process.............................................................. 7
Appraisal Process Redemption................................................... 20
Appraisal Process Price........................................................ 20
AT&T........................................................................... 64
Back End Termination Date...................................................... 94
Bell Atlantic.................................................................. 41
Business Condition............................................................. 96
Call Price..................................................................... 17
Cash Election.................................................................. 13
Cash Election Number........................................................... 13
Cash Election Shares........................................................... 14
Cash Fraction.................................................................. 14
CCI............................................................................ cover page
CCI Affiliate.................................................................. 96
CCI Board...................................................................... cover page
CCI By-laws.................................................................... 132
CCI Class A Preferred Stock.................................................... 50
CCI Class A Preference Stock................................................... cover page
CCI Common Equivalent Share.................................................... cover page
CCI Common Stock............................................................... cover page
CCI Convertible Notes.......................................................... 9
</TABLE>
145
<PAGE> 149
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- ------------------------------------------------------------------------------- ---------------
<S> <C>
CCI Fairness Opinions.......................................................... 20
CCII........................................................................... 49
CCI Indenture.................................................................. 137
CCI Note Purchase Date......................................................... 137
CCI Ohio System................................................................ 7
CCI Option..................................................................... 19
CCI Option Plans............................................................... 19
CCI Purchase Right............................................................. 51
CCI Qualifying Offer........................................................... 94
CCI Redeemable Preferred Stock................................................. cover page
CCI Redeemable Stock........................................................... 49
CCI Rights..................................................................... cover page
CCI Rights Agent............................................................... 93
CCI Rights Agreement........................................................... cover page
CCI Rights Distribution Date................................................... 93
CCI Rights Expiration Date..................................................... 93
CCI Rights Redemption.......................................................... cover page
CCI Rights Redemption Payment.................................................. 93
CCI Rights Unit................................................................ 93
CCI Series A Common Stock...................................................... cover page
CCI Series B Preference Stock.................................................. cover page
CCI Series C Common Stock...................................................... cover page
CCI Series D Preference Stock.................................................. 23
CCI Stock...................................................................... cover page
CCI Stock Acquisition Date..................................................... 93
CCI Stockholders............................................................... cover page
CCI Timely Notice.............................................................. 133
CCPR........................................................................... 50
Centennial..................................................................... 63
Certificates................................................................... 80
Class B Certificate of Designation............................................. 118
Class B Conversion Price....................................................... 16
Class B Excess................................................................. 73
Class B Junior Stock........................................................... 118
Class B Maturity Date.......................................................... 16
Class B Maturity Exchange Rate................................................. 120
Class B Maturity Price......................................................... 16
Class B Maximum................................................................ 9
Class B Optional Conversion Rate............................................... 121
Class B Parity Preferred Stock................................................. 118
Class B Senior Preferred Stock................................................. 118
Class B Per-Unit Amount........................................................ 9
Class B Per-Unit Reduction..................................................... 73
Class C Certificate of Designation............................................. 125
Class C Exchange Rate.......................................................... 129
Class C Junior Stock........................................................... 126
Class C Maturity Date.......................................................... 18
</TABLE>
146
<PAGE> 150
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- ------------------------------------------------------------------------------- ---------------
<S> <C>
Class C Parity Preferred Stock................................................. 126
Class C Per-Unit Amount........................................................ 9
Class C Senior Preferred Stock................................................. 126
CMT Partners................................................................... 25
Code........................................................................... 12
Communications Act............................................................. 20
CommNet........................................................................ 63
Comparable Transaction Universe................................................ 69
Comparable Universe............................................................ 68
Contingent Payment............................................................. 17
Contingent Payment Date........................................................ 17
Contingent Payment Stock....................................................... 85
Contingent Right............................................................... 85
Contingent Rights Value........................................................ 86
CPUC........................................................................... 40
Data........................................................................... 31
Delaware Court................................................................. 21
DGCL........................................................................... 21
DOJ............................................................................ 135
Dissenting CCI Stock........................................................... cover page
Donaldson, Lufkin & Jenrette................................................... 20
EBITDA......................................................................... 63
Effective Time................................................................. 80
Election and Transmittal Form.................................................. 13
Exchange Act................................................................... 4
Exchange Agent................................................................. 14
Exempt Issuance................................................................ 122
Fair Market Value.............................................................. 121
FCC............................................................................ 20
FCC Consents................................................................... 100
Final Redemption Date.......................................................... 93
Finance........................................................................ 143
FTC............................................................................ 135
GAAP........................................................................... 26
Headquarters Lease............................................................. 80
Holder......................................................................... 82
HSR Act........................................................................ 20
ICTL........................................................................... 50
Illustrative Holder............................................................ 11
Initial Deferral............................................................... 51
International Distribution..................................................... 122
International Entity........................................................... 122
Investments.................................................................... 143
January 1996 New Par EBITDA Projection......................................... 68
Lehman Brothers' Opinion....................................................... 66
LIN............................................................................ 64
LTIP........................................................................... 79
</TABLE>
147
<PAGE> 151
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- ------------------------------------------------------------------------------- ---------------
<S> <C>
LTM............................................................................ 63
Main Street.................................................................... 143
Make Whole Obligation.......................................................... 53
Meeting........................................................................ cover page
Memorandum..................................................................... 136
Merger......................................................................... cover page
Merger Consideration........................................................... 8
MRO............................................................................ 7
Nasdaq......................................................................... 23
Newco Sub...................................................................... 49
New Par........................................................................ 6
Net Market Capitalization...................................................... 68
Non-Election................................................................... 13
Non-Election Fraction.......................................................... 14
Non-Election Shares............................................................ 14
Notice Date.................................................................... 128
NYNEX.......................................................................... 41
NYSE........................................................................... cover page
Old CCI........................................................................ 49
Original Transactions.......................................................... 7
Other Assets................................................................... 51
Other Sale Payment............................................................. 53
Palmer......................................................................... 63
Partnership Agreement.......................................................... 49
PCS............................................................................ 28
PCS PrimeCo.................................................................... 40
Per Share Cash Consideration................................................... 8
Per Share Unit Consideration................................................... 8
POPS........................................................................... 44
Pops........................................................................... 45
POPs........................................................................... 63
Preferred Stock Directors...................................................... 124
Preferred Stock Issue Price.................................................... 9
Presently Exercisable Options.................................................. 142
Pro Forma Statements........................................................... 24
Provisional Redemption Date.................................................... 128
Provisional Redemption Price................................................... 128
Provisional Redemption Year.................................................... 128
Proxy Statement-Prospectus..................................................... cover page
Purchase Price................................................................. 93
Record Date.................................................................... cover page
Registration Statement......................................................... 4
Reorganization Consideration................................................... 130
Reorganization Event........................................................... 123
Representative................................................................. 13
RF............................................................................. 42
Schedule 13E-3................................................................. 4
</TABLE>
148
<PAGE> 152
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- ------------------------------------------------------------------------------- ---------------
<S> <C>
SEC............................................................................ 4
Securities Act................................................................. cover page
SMR............................................................................ 39
Surviving Corporation.......................................................... cover page
Telesis........................................................................ 7
Termination Agreement.......................................................... 53
Triggering Events.............................................................. 94
Unit........................................................................... cover page
Unit Election.................................................................. 13
Unit Election Number........................................................... 13
Unit Election Shares........................................................... 14
Unit Fraction.................................................................. 14
US Cellular.................................................................... 63
US WEST........................................................................ 40
Vanguard....................................................................... 63
Volume-Weighted Average Trading Price.......................................... 9
Wasserstein Perella............................................................ 20
360(++) Comm................................................................... 63
1990 Merger Agreement.......................................................... 7
1991 Merger.................................................................... 49
1996 Merger Agreement.......................................................... cover page
</TABLE>
149
<PAGE> 153
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
AIRTOUCH COMMUNICATIONS, INC.,
AIRTOUCH CELLULAR
and
CELLULAR COMMUNICATIONS, INC.
------------------------------------
Dated as of April 5, 1996
as amended and restated as of July 12, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 154
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER............................................................ A-1
1.1 Effective Time of the Merger.......................................... A-1
1.2 Closing............................................................... A-2
1.3 Effects of the Merger................................................. A-2
ARTICLE II MANNER OF CONVERTING SHARES........................................... A-2
2.1 Certain Definitions................................................... A-2
2.2 Conversion of Securities.............................................. A-2
(a) AirTouch Cellular Capital Stock.................................. A-3
(b) CCI Stock........................................................ A-3
(c) Election of Consideration........................................ A-3
(d) Excess Cash Elections............................................ A-3
(e) Excess Unit Elections............................................ A-4
(f) Insufficient Elections........................................... A-4
(g) Class B Maximum Adjustment....................................... A-4
(h) Treasury Shares; Shares Held by AirTouch......................... A-4
(i) Dissenting Shares............................................... A-5
(j) No Fractional Shares............................................ A-5
(k) Closing of Transfer Books........................................ A-5
(l) Adjustments to Preserve Tax Status of Merger.................... A-5
2.3 Election Procedures................................................... A-6
2.4 Adjustments for Dilution and Other Matters............................ A-6
2.5 Conversion of Dissenting CCI Stock.................................... A-6
2.6 Employee Stock Options................................................ A-7
2.7 CCI Convertible Debt.................................................. A-8
2.8 Calculation of Conversion Price for AirTouch Class B and Class C A-8
Preferred.............................................................
2.9 Rights Plan Redemption Consideration.................................. A-8
ARTICLE III EXCHANGE OF SHARES.................................................... A-8
3.1 Exchange Procedures................................................... A-8
3.2 Voting and Dividends.................................................. A-9
3.3 No Liability.......................................................... A-9
3.4 Withholding Rights.................................................... A-9
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................ A-10
4.1 Representations and Warranties of CCI................................. A-10
(a) Corporate Organization........................................... A-10
(b) Capitalization................................................... A-10
(c) Authority........................................................ A-11
(d) Disclosure Documents............................................. A-11
(e) Consents; No Violation........................................... A-12
(f) SEC Reports; Material Contracts; Financial Statements............ A-12
(g) Absence of Certain Changes....................................... A-13
(h) Undisclosed Liabilities.......................................... A-13
(i) Compliance with Laws............................................ A-13
(j) Legal Proceedings............................................... A-13
(k) Finders; Investment Bankers...................................... A-13
</TABLE>
A-i
<PAGE> 155
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(l) Tax Returns, Audits and Liabilities............................. A-13
(m) Employee Benefit Plans............................................ A-15
(n) Opinion of Financial Advisor..................................... A-16
(o) Intercompany Balances; Transactions with Affiliates.............. A-16
(p) Tax Matters...................................................... A-16
(q) Material Contracts............................................... A-16
4.2 Representations and Warranties of AirTouch............................ A-17
(a) Corporate Organization........................................... A-17
(b) Capitalization................................................... A-17
(c) Authority........................................................ A-17
(d) Valid Issuance................................................... A-17
(e) Disclosure Documents............................................. A-17
(f) Consents; No Violation........................................... A-17
(g) SEC Reports; Financial Statements................................ A-18
(h) Absence of Certain Changes....................................... A-18
(i) Finders; Investment Bankers..................................... A-18
(j) Tax Matters..................................................... A-18
4.3 Date of Representations and Warranties................................ A-18
ARTICLE V PRE-CLOSING COVENANTS................................................. A-19
5.1 CCI Interim Operations................................................ A-19
(a) Conduct of Business.............................................. A-19
(b) Charters and By-Laws; Ownership of New Par....................... A-19
(c) Capital Stock.................................................... A-19
(d) Dividends; Other Payments........................................ A-19
(e) No Material Transactions; No Affiliate Transactions.............. A-19
(f) Employee Plans, Compensation, etc................................ A-19
(g) Assets........................................................... A-20
(h) Debt............................................................. A-20
(i) Settlements..................................................... A-20
(j) Accounting Methods.............................................. A-20
(k) Merger Fees...................................................... A-20
(l) No Inconsistent Acts............................................ A-20
5.2 Certain Covenants of AirTouch......................................... A-21
(a) Charters and Bylaws.............................................. A-21
(b) Capital Stock; Dividends......................................... A-21
(c) Disposition of Assets............................................ A-21
5.3 Access and Information................................................ A-21
5.4 Registration Statement................................................ A-22
5.5 Stockholders' Approval................................................ A-22
5.6 Stockholder Rights Plan............................................... A-22
5.7 Tax Matters........................................................... A-22
5.8 Indemnification....................................................... A-22
5.9 Further Assurances; Cooperation....................................... A-23
5.10 New York Office Lease; Furniture and Fixtures......................... A-23
5.11 Affiliates; Other Documents........................................... A-24
5.12 Affiliate Transactions................................................ A-24
5.13 Redemption of Series B Preference Stock............................... A-24
</TABLE>
A-ii
<PAGE> 156
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.14 Accountants "Comfort" Letters......................................... A-24
5.15 Employees; Long-Term Incentive Plan................................... A-24
5.16 Expenses.............................................................. A-25
5.17 Sale of Celsat Subsidiaries........................................... A-25
5.18 Transition Arrangements............................................... A-25
5.19 Maintenance of D&O Insurance.......................................... A-25
ARTICLE VI CONDITIONS............................................................ A-25
6.1 Conditions to Each Party's Obligation to Effect the Merger............ A-25
(a) Stockholder Approval............................................. A-25
(b) Regulatory Approvals............................................. A-25
(c) HSR Act.......................................................... A-25
(d) Registration Statement Effective................................. A-25
(e) State Securities Laws............................................ A-25
(f) NYSE Listing..................................................... A-26
(g) No Injunction.................................................... A-26
6.2 Conditions to Obligations of CCI to Effect the Merger................. A-26
(a) Representations and Warranties................................... A-26
(b) Performance of Obligations....................................... A-26
(c) Legal Opinions................................................... A-26
(d) Comfort Letter of AirTouch's Accountants......................... A-26
(e) Tax Opinion...................................................... A-26
6.3 Conditions to Obligations of AirTouch to Effect the Merger............ A-26
(a) Representations and Warranties................................... A-26
(b) Performance of Obligations....................................... A-26
(c) FCC Consents..................................................... A-26
(d) Consents Under Agreements........................................ A-27
(e) Legal Opinions................................................... A-27
(f) Tax Opinion...................................................... A-27
(g) Litigation, etc.................................................. A-27
(h) Comfort Letter of CCI's Accountants.............................. A-27
(i) Rights Agreement................................................ A-27
(j) Consummation of Certain Transactions............................ A-27
(k) Absence of Restrictive Conditions................................ A-27
(l) Contingent Liabilities.......................................... A-27
(m) Change in Business Condition...................................... A-28
(n) Amendment of Indemnification Agreements.......................... A-28
ARTICLE VII TERMINATION; AMENDMENT AND MISCELLANEOUS.............................. A-28
7.1 Termination........................................................... A-28
7.2 Effect of Termination................................................. A-28
7.3 Termination Expenses.................................................. A-29
7.4 Non-Survival of Representations, Warranties and Covenants Following A-29
the Effective Time....................................................
7.5 Waiver and Amendment.................................................. A-29
7.6 Entire Agreement...................................................... A-29
7.7 Applicable Law........................................................ A-29
7.8 Interpretation........................................................ A-29
</TABLE>
A-iii
<PAGE> 157
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.9 Notices............................................................... A-29
7.10 Counterparts.......................................................... A-30
7.11 Severability.......................................................... A-30
7.12 No Assignment......................................................... A-30
7.13 Specific Performance.................................................. A-30
7.14 Consent to Jurisdiction............................................... A-30
7.15 Publicity............................................................. A-31
</TABLE>
Certain Schedules and Exhibits that do not contain material information
have been omitted.
A-iv
<PAGE> 158
TABLE OF CERTAIN DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ----------------------------------- ---------
<S> <C>
Affiliate Transactions............. 4.1(o)
AirTouch Common Stock.............. 4.2(b)
AirTouch Preferred Stock Issue
Price............................ 2.8(c)
AirTouch Security.................. 2.2(j)
April Agreement.................... Recitals
Business Condition................. 4.1(e)
Cash Election...................... 2.2(c)
Cash Election Shares............... 2.2(d)
CCI Class A Preferred.............. 4.1(b)
CCI Class A Preference Stock....... 4.1(b)
CCI Convertible Debt............... 2.7
CCI Financial Statements........... 4.1(f)
CCI Option Plans................... 2.6
CCI Redeemable Preferred........... 4.1(b)
CCI Series A Common................ 4.1(b)
CCI Series B Preference Stock...... 4.1(b)
CCI Series C Common................ 4.1(b)
CCI Series D Preference Stock...... 4.1(b)
CGCL............................... 1.1(b)
Closing............................ 1.2
Closing Date....................... 1.2
Code............................... Recitals
Commission......................... 2.6(b)
Confidentiality Agreement.......... 7.2(b)
Credit Agreement................... 5.1(h)
DGCL............................... 1.1(a)
Disclosure Documents............... 4.1(d)
Dissenting CCI Stock............... 2.2(i)
Effective Time..................... 1.1
Employee New Options............... 4.1(b)
<CAPTION>
TERM SECTION
- ----------------------------------- ---------
<S> <C>
Exchange Act....................... 4.1(d)
Exchange Agent..................... 2.2(k)
Existing Agreement................. Recitals
FCC Consents....................... 6.3(c)
Form of Election................... 2.2(c)
Governmental Entity................ 4.1(e)
HSR Act............................ 4.1(e)
Intercompany Balances.............. 4.1(o)
Merger............................. Recitals
Merger Fees........................ 4.1(k)
New Par............................ Recitals
Non-Election....................... 2.2(c)
Non-Election Shares................ 2.2(d)
NYSE............................... 2.8(c)
Per Share Cash Consideration....... 2.2(b)
Per Share Unit Consideration....... 2.2(b)
Proxy Statement.................... 4.1(d)
Registration Statement............. 4.2(e)
Regulatory Approvals............... 4.1(e)
Rights............................. 4.1(b)
Rights Agreement................... 4.1(b)
Rights Redemption.................. 5.6
Securities Act..................... 3.1(c)
Stockholders Meeting............... 5.5
Surviving Corporation.............. 1.3(a)
Unit Election...................... 2.2(c)
Unit Election Shares............... 2.2(e)
Volume Weighted-Average Trading
Price............................ 2.8(c)
</TABLE>
A-v
<PAGE> 159
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is dated as of April 5, 1996, and is
amended and restated as of July 12, 1996 (this "AGREEMENT"), among AIRTOUCH
COMMUNICATIONS, INC., a Delaware corporation ("AirTouch"), AIRTOUCH CELLULAR, a
California corporation ("AirTouch Cellular"), and CELLULAR COMMUNICATIONS, INC.,
a Delaware corporation ("CCI").
WITNESSETH:
WHEREAS, AirTouch and CCI, among others, are parties to an Amended and
Restated Agreement and Plan of Merger and Joint Venture Organization dated as of
December 14, 1990 (the "Existing Agreement"); and
WHEREAS, pursuant to the Existing Agreement, AirTouch and CCI on July 31,
1991 organized New Par, a Delaware general partnership ("New Par"), and
currently each hold indirectly a fifty percent ownership interest therein; and
WHEREAS, AirTouch presently owns approximately 37% of the outstanding
capital stock of CCI and, pursuant to an Appraisal Process (as defined in the
Existing Agreement) which is currently scheduled to commence on August 2, 1996,
has the right, by causing the Redemption (as defined in the Existing Agreement),
to acquire the rest of CCI's equity; and
WHEREAS, pursuant to an Agreement and Plan of Merger dated April 5, 1996
(the "April Agreement"), AirTouch and CCI agreed instead to effect a business
combination in the form of a merger of CCI with and into AirTouch Cellular, or
another wholly owned subsidiary of AirTouch (the "Merger"); and
WHEREAS, AirTouch and CCI desire to make certain modifications to the April
Agreement, and accordingly are entering into this Amended and Restated Agreement
and Plan of Merger, which supersedes in its entirety the April Agreement (except
as set forth herein); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the respective Boards of Directors of AirTouch, AirTouch Cellular
and CCI have resolved that the transactions described herein are in the best
interests of the parties and their respective stockholders and have approved the
transactions described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date:
(a) a certificate of merger (the "Certificate of Merger") shall be
duly prepared and executed by AirTouch Cellular and thereafter delivered to
the Secretary of State of Delaware for filing, as provided in the Delaware
General Corporation Law ("DGCL"); and
(b) an agreement of merger, together with related certificates (the
"Agreement of Merger"), shall be duly prepared and executed by AirTouch
Cellular and thereafter delivered to the Secretary of State of California
for filing, as provided in the California General Corporation Law ("CGCL").
The Merger shall become effective upon the later of such filings, or at
such time thereafter as is provided in the Certificate of Merger or Agreement of
Merger (the "Effective Time").
A-1
<PAGE> 160
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
10:00 a.m. on the second business day after satisfaction (or waiver) of each of
the conditions set forth in Article 6 (the "Closing Date"), at the offices of
Pillsbury Madison & Sutro LLP in San Francisco, California, unless another time,
date or place is agreed to in writing by the parties hereto.
1.3 Effects of the Merger.
(a) At the Effective Time, (i) the separate existence of CCI shall cease,
and CCI shall be merged with and into AirTouch Cellular with the result that
AirTouch Cellular shall be the "Surviving Corporation" following the Effective
Time, (ii) the Certificate of Incorporation of AirTouch Cellular as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation and (iii) the by-laws of AirTouch
Cellular as in effect immediately prior to the Effective Time shall be the by-
laws of the Surviving Corporation.
(b) The directors and officers of AirTouch Cellular immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation as of the Effective Time and until their successors are
duly appointed and elected in accordance with applicable law.
(c) At and after the Effective Time, the Merger shall have the effects set
forth in section 259 of the DGCL and section 1107 of the CGCL.
ARTICLE II
MANNER OF CONVERTING SHARES
2.1 Certain Definitions. As used in Article II and elsewhere in this
Agreement, the following terms shall have the meanings set forth below:
"AirTouch Class B Preferred" means AirTouch's 6.00% Mandatorily
Convertible Class B Preferred Stock, Series 1996, par value $0.01 per
share, to be issued at the Closing pursuant to the Certificate of
Designation, Preferences and Rights attached hereto as Exhibit 2.1(a).
"AirTouch Class C Preferred" means AirTouch's 4.25% Convertible Class
C Preferred Stock, Series 1996, par value $0.01 per share, to be issued at
the Closing pursuant to the Certificate of Designation, Preferences and
Rights attached hereto as Exhibit 2.1(b).
"AirTouch Preferred Stock Issue Price" has the meaning set forth in
Section 2.8(c).
"Cash Election Number" shall be equal to (i) 28% (or such lesser
percentage as may result from the operation of Section 2.2(e)) of the
number of CCI Common Equivalent Shares outstanding as of immediately prior
to the Effective Time, minus (ii) the number of CCI Common Equivalent
Shares represented by Dissenting CCI Stock; provided that the Cash Election
Number shall be subject to adjustment in accordance with Section 2.2(l).
"Class B Per-Unit Amount" means an amount equal to (i) $27.50, divided
by (ii) the AirTouch Preferred Stock Issue Price, as adjusted in accordance
with Sections 2.2(g) and 2.2(l) (calculated to the nearest one-thousandth).
"Class C Per-Unit Amount" means 0.550, as adjusted in accordance with
Sections 2.2(g) and 2.2(l) (calculated to the nearest one-thousandth).
"CCI Common Stock" means the CCI Series A Common and the CCI Series C
Common.
"CCI Stock" means the CCI Common Stock, the CCI Redeemable Preferred,
the CCI Class A Preference Stock, and the CCI Series B Preference Stock.
"CCI Common Equivalent Shares" means, as of any particular time, the
sum of (i) the number of issued and outstanding shares of CCI Common Stock
and (ii) the number of shares of CCI Common Stock into which shares of
issued and outstanding shares of CCI Redeemable Preferred, CCI Class A
A-2
<PAGE> 161
Preference Stock and CCI Series B Preference Stock are convertible
(excluding, for purposes of either calculation, any treasury shares and
shares held by AirTouch).
"Unit" means one unit of AirTouch securities (nominal value, $55 per
unit) consisting of (i) a number of shares of AirTouch Class B Preferred
equal to the Class B Per-Unit Amount and (ii) a number of shares of
AirTouch Class C Preferred equal to the Class C Per-Unit Amount.
"Unit Election Number" shall be equal to 72% (or such greater
percentage as may result from the operation of Section 2.2(e)) of the
number of CCI Common Equivalent Shares outstanding as of immediately prior
to the Effective Time; provided that the Unit Election Number shall be
subject to adjustment in accordance with Section 2.2(l).
2.2 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of AirTouch, AirTouch Cellular, CCI or
the holders of any of the following securities:
(a) AirTouch Cellular Capital Stock. Each share of capital stock of
AirTouch Cellular issued and outstanding immediately prior to the Effective
Time shall remain outstanding as one share of Common Stock of the Surviving
Corporation;
(b) CCI Stock. Subject to the other provisions of this Section 2.2
and Article II (including, without limitation, Section 2.9), each share of
CCI Stock issued and outstanding immediately prior to the Effective Time
(excluding any treasury shares, shares held by AirTouch, and shares of
Dissenting CCI Stock) shall be converted into the right to receive, for
each CCI Common Equivalent Share represented thereby:
(i) one Unit, subject to adjustment in accordance with Section 2.4
(the "Per Share Unit Consideration"),
(ii) $55 in cash, without interest, subject to adjustment in
accordance with Section 2.4 (the "Per Share Cash Consideration"), or
(iii) a combination of a fraction of a Unit and cash;
determined in accordance with Section 2.2(d), Section 2.2(e) or Section
2.2(f), as applicable.
(c) Election of Consideration. Subject to the allocation and election
procedures set forth in this Section 2.2, each holder of record (as of the
Effective Time) of shares of CCI Stock will be entitled (i) to elect to
receive cash for all of such shares (a "Cash Election"), (ii) to elect to
receive Units for all of such shares (a "Unit Election"), or (iii) to
indicate that such record holder has no preference as to the receipt of
cash or Units for such shares (a "Non-Election"). All such elections shall
be made on a form designed for that purpose (a "Form of Election"). Holders
of record of shares of CCI Stock who hold such shares as nominees, trustees
or in other representative capacities (a "Representative") may submit
multiple Forms of Election, provided that such Representative certifies
that each such Form of Election covers all the shares of CCI Stock held by
each Representative for a particular beneficial owner.
(d) Excess Cash Elections. If the aggregate number of CCI Common
Equivalent Shares covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, all shares of CCI Stock covered by Unit
Elections and all shares of CCI Stock covered by Non-Elections (the
"Non-Election Shares") shall be converted into the right to receive Units,
and the shares of CCI Stock covered by Cash Elections shall be converted
into the right to receive Units and cash in the following manner:
each share shall be converted into the right to receive (i) an amount in
cash, without interest, equal to the product of (x) the Per Share Cash
Consideration and (y) a fraction (the "Cash Fraction"), the numerator of
which shall be the Cash Election Number and the denominator of which
shall be the total number of Cash Election Shares, and (ii) a number of
Units equal to the product of (x) the Per Share Unit Consideration and
(y) a fraction equal to one minus the Cash Fraction, multiplied in each
case by the number of CCI Common Equivalent Shares represented by such
share.
A-3
<PAGE> 162
(e) Excess Unit Elections. If the aggregate number of CCI Common
Equivalent Shares covered by Unit Elections (the "Unit Election Shares")
exceeds the Unit Election Number, then the Unit Election Number shall be
increased so that it equals the number of Unit Election Shares (and the
Cash Election Number shall be correspondingly decreased), provided that in
no event shall such adjustment cause the Unit Election Number to exceed 74%
of the CCI Common Equivalent Shares outstanding immediately prior to the
Effective Time. If, after giving effect to the foregoing sentence, the
number of Unit Election Shares still exceeds the Unit Election Number, then
all shares of CCI Stock covered by Cash Elections and all shares of CCI
Stock covered by Non-Elections shall be converted into the right to receive
cash, and all shares of CCI Stock covered by Unit Elections shall be
converted into the right to receive Units and cash in the following manner:
each share shall be converted into the right to receive (i) a number of
Units equal to a fraction (the "Unit Fraction"), the numerator of which
shall be the Unit Election Number and the denominator of which shall be
the total number of Unit Election Shares, and (ii) an amount in cash,
without interest, equal to the product of (x) the Per Share Cash
Consideration and (y) a fraction equal to one minus the Unit Fraction,
multiplied in each case by the number of CCI Common Equivalent Shares
represented by such share.
(f) Insufficient Elections. In the event that neither Section 2.2(d)
nor Section 2.2(e) above is applicable, all shares of CCI Stock covered by
Cash Elections shall be converted into the right to receive cash, all
shares of CCI Stock covered by Unit Elections shall be converted into the
right to receive Units, and the shares of CCI Stock covered by
Non-Elections, if any, shall be converted into the right to receive Units
and cash in the following manner:
each share shall be converted into the right to receive (i) an amount in
cash, without interest, equal to the product of (x) the Per Share Cash
Consideration and (y) a fraction (the "Non-Election Fraction"), the
numerator of which shall be the excess, if any, of the Cash Election
Number over the total number of Cash Election Shares and the denominator
of which shall be the excess of (A) the number of shares of CCI Common
Equivalent Shares immediately prior to the Effective Time over (B) the
sum of the total number of Cash Election Shares and the total number of
Unit Election Shares and (ii) a number of Units equal to the product of
(x) the Per Share Unit Consideration and (y) a fraction equal to one
minus the Non-Election Fraction, multiplied in each case by the number
of CCI Common Equivalent Shares represented by such share.
(g) Class B Maximum Adjustment. Notwithstanding the foregoing, the
number of shares of AirTouch Class B Preferred issued in the Merger
(without regard to conversions of CCI Convertible Debt or exercises of
options under the CCI Option Plans occurring, in either case, after the
Effective Time) shall in no event exceed the quotient of (i) $500 million,
divided by (ii) the AirTouch Preferred Stock Issue Price (the "Class B
Maximum"). If the calculations pursuant to Sections 2.2(d)-(f) would
otherwise cause the number of shares of AirTouch Class B Preferred issued
in the Merger to exceed the Class B Maximum, then instead of issuing such
shares of AirTouch Class B Preferred in excess of the Class B Maximum (the
"Class B Excess"), the composition of each Unit shall be adjusted as
follows:
(i) the Class B Per-Unit Amount shall be decreased by an amount
equal to (x) the Class B Excess, divided by (y) the number of Units to
be issued in the Merger (the "Class B Per-Unit Reduction"); and
(ii) the Class C Per-Unit Amount shall be increased by an amount
equal to (x) the amount of the Class B Per-Unit Reduction, multiplied by
(y) a fraction, the numerator of which is the Class C Per-Unit Amount
(prior to making any adjustment hereunder) and the denominator of which
is the Class B Per-Unit Amount (prior to making any adjustment
hereunder).
(h) Treasury Shares; Shares Held by AirTouch. Each share of CCI Stock
held in the treasury of CCI and each share of CCI Stock owned by AirTouch
or any direct or indirect wholly owned subsidiary of AirTouch or of CCI
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
A-4
<PAGE> 163
(i) Dissenting Shares. Each outstanding share of CCI Stock as to
which a written demand for appraisal is filed in accordance with section
262 of the DGCL at or prior to the Stockholders' Meeting and not withdrawn
at or prior to the Stockholders' Meeting and which is not voted in favor of
the Merger shall not be converted into or represent a right to receive
Units or cash hereunder unless and until the holder shall have failed to
perfect, or shall have effectively withdrawn or lost his or her right to
appraisal of and payment for his or her CCI Stock under such section 262,
at which time his or her shares shall be treated in accordance with Section
2.5. All such shares of CCI Stock as to which such a written demand for
appraisal is so filed and not withdrawn at or prior to the time of such
vote and which are not voted in favor of the Merger, except any such shares
of CCI Stock the holder of which, prior to the Effective Time, shall have
effectively withdrawn or lost his or her right to appraisal of payment for
his or her shares of CCI Stock under such section 262, are herein called
"Dissenting CCI Stock." CCI shall give AirTouch prompt notice upon receipt
by CCI of any written demands for appraisal rights, withdrawal of such
demands, and any other instruments served pursuant to section 262 of the
DGCL, and CCI shall give AirTouch the opportunity to direct all
negotiations and proceedings with respect to such demands. CCI shall not
voluntarily make any payment with respect to any demands for appraisal
rights and shall not, except with the prior written consent of AirTouch,
settle or offer to settle any such demands. Each holder of CCI Stock who
becomes entitled, pursuant to section 262 of the DGCL, to payment for his
or her shares of CCI Stock under the provisions of such section shall
receive payment therefor from the Surviving Corporation and such shares of
CCI Stock shall be canceled.
(j) No Fractional Shares. Notwithstanding any other provisions of
this Agreement, each holder of shares of CCI Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of
a share of AirTouch Class B Preferred or AirTouch Class C Preferred (each,
an "AirTouch Security"), after taking into account all certificates
delivered by such holder, shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of an AirTouch
Security multiplied by the AirTouch Preferred Stock Issue Price (in the
case of the AirTouch Class B Preferred) or $50 (in the case of the AirTouch
Class C Preferred). No such holder shall be entitled to dividends, voting
rights or any other rights as a stockholder in respect of any fractional
share of AirTouch Security.
(k) Closing of Transfer Books. At the Effective Time, the stock
transfer books of CCI shall be closed as to holders of CCI capital stock
immediately prior to the Effective Time and no transfer of CCI capital
stock by any such holder shall thereafter be made or recognized. If, after
the Effective Time, certificates are properly presented in accordance with
Article III of this Agreement to the exchange agent, Bank of New York (the
"Exchange Agent"), such certificates shall be canceled and exchanged for
certificates representing the number of whole AirTouch Securities, and a
check representing the amount of cash, if any, into which the CCI Stock
represented thereby was converted in the Merger. Any other provision of
this Agreement notwithstanding, none of AirTouch, CCI, the Surviving
Corporation and the Exchange Agent shall be liable to a holder of CCI
capital stock for any amount paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat, or
similar law.
(l) Adjustments to Preserve Tax Status of Merger. If, after giving
effect to the calculations made pursuant to Sections 2.2(d)-(f) (but
without giving effect to any adjustment that would otherwise be required
pursuant to Section 2.2(g)), the Tax Opinion referred to in Section 6.3(f)
cannot be rendered (as determined in writing by Pillsbury Madison & Sutro
LLP) as a result of the Merger potentially failing to satisfy continuity of
interest requirements under applicable federal income tax principles
relating to reorganization under Section 368(a) of the Code, then, to the
minimum extent necessary (as determined by Pillsbury Madison & Sutro LLP)
to enable the Tax Opinion to be rendered: (i) the Cash Election Number
shall be reduced (and the Unit Election Number shall be correspondingly
increased on a share-for-share basis) and (ii) the composition of each Unit
shall be adjusted by recalculating the Class B Per-Unit Amount and the
Class C Per-Unit Amount in the manner contemplated by Exhibit 2.2(l).
Notwithstanding the foregoing, in the event that as a result of adjustments
contemplated by this Section 2.2(l), the Unit Election Number would exceed
80% of the number of CCI Common Equivalent Shares outstanding as of
immediately prior to the Effective Time, then the Board of Directors of
A-5
<PAGE> 164
AirTouch, in its sole discretion, may elect to terminate this Agreement by
providing written notice to CCI of such intention.
2.3 Election Procedures.
(a) Elections shall be made by holders of CCI Stock by mailing to the
Exchange Agent a Form of Election. To be effective, a Form of Election must be
properly completed, signed and submitted to the Exchange Agent and accompanied
by the certificates representing the shares of CCI Stock as to which the
election is being made (or by an appropriate trust company in the United States
or a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc. (the "NASD")). AirTouch shall have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of Election.
The decision of AirTouch (or the Exchange Agent) in such matters shall be
conclusive and binding. Neither AirTouch nor the Exchange Agent shall be under
any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by this Section 2.3 and all such computations shall be
conclusive and binding on the holders of CCI Stock. Forms of Election and other
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected and risk of loss and title to the certificates
theretofore representing shares of CCI Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as AirTouch
and CCI shall mutually agree shall be mailed on the date that the Proxy
Statement is first mailed to the stockholders of CCI.
(b) For the purposes hereof, a holder of CCI Stock who does not submit a
Form of Election which is received by the Exchange Agent prior to the Election
Deadline (as hereinafter defined) shall be deemed to have made a Non-Election.
If AirTouch or the Exchange Agent shall determine that any purported Cash
Election or Unit Election was not properly made, such purported Cash Election or
Unit Election shall be deemed to be of no force and effect and the stockholder
making such purported Cash Election or Unit Election shall, for purposes hereof,
be deemed to have made a Non-Election.
(c) AirTouch and CCI shall each use its best efforts to mail the Form of
Election to all persons or entities who become holders of CCI Stock during the
period between the record date for the Stockholders' Meeting and 10:00 a.m. New
York time, on the date five business days prior to the anticipated Effective
Time and to make the Form of Election available to all persons or entities who
become holders of CCI Stock subsequent to such day and no later than the close
of business on the business day prior to the Effective Time. A Form of Election
must be received by the Exchange Agent by the close of business on the last
business day prior to the Effective Time (the "Election Deadline") in order to
be effective. All elections may be revoked until the Election Deadline.
2.4 Adjustments for Dilution and Other Matters. If prior to the Effective
Time, CCI shall declare a stock dividend or distribution upon or subdivide,
split up, reclassify or combine the CCI Stock, or declare a dividend, or make a
distribution, on the CCI Stock in any security convertible into CCI Stock
(provided that no such action may be taken by CCI without AirTouch's prior
written consent as so provided in Article V), an appropriate adjustment or
adjustments will be made to the Per Share Cash Consideration and the Per Share
Unit Consideration. If at the Effective Time, CCI shall have outstanding more
shares of CCI Stock than are contemplated to be outstanding or subject to
subscription, option, stock-based or stock-related award or right, warrant,
right, conversion, exchange or other agreement, arrangement or commitment of any
character by the representation and warranty in Section 4.1(b), then, at the
election of the Board of Directors of AirTouch and notwithstanding other
provisions hereof, and without limiting any of its other rights hereunder, the
Per Share Cash Consideration and the Per Share Unit Consideration shall be
appropriately adjusted downward to obtain the same aggregate value of
consideration to be delivered in the Merger by AirTouch that would have resulted
if such representation and warranty had been true and correct at the Effective
Time.
2.5 Conversion of Dissenting CCI Stock. If prior to the Effective Time any
stockholder of CCI shall fail to perfect, or shall effectively withdraw or lose,
his or her right to appraisal of and payment for his or her shares of Dissenting
CCI Stock under section 262 of the DGCL, the Dissenting CCI Stock of such holder
shall be treated for purposes of this Article II like any other shares of
outstanding CCI Stock. If, after the Effective
A-6
<PAGE> 165
Time, any holder of CCI Stock shall fail to perfect, or shall effectively
withdraw or lose, his or her right to appraisal of and payment for his or her
Dissenting CCI Stock under section 262 of the DGCL, each share of Dissenting CCI
Stock of such holder shall be treated in the same manner as Non-Election Shares
under the procedures of set forth in Article II and in accordance with the
procedures, and subject to the conditions, set forth in this Article III.
2.6 Employee Stock Options.
(a) CCI shall use its reasonable best efforts to obtain the written consent
of each holder of options outstanding under the CCI 1991 Stock Option Plan or
the CCI Non-Employee Director Stock Option Plan (collectively, the "CCI Option
Plans") to the conversion procedure described in paragraph (b) below. In the
event that a holder of options outstanding under a CCI Option Plan (each option
for one share of CCI Common Stock being a "CCI Option") fails prior to the
Effective Time to consent to the conversion procedure described in paragraph (b)
below, the conversion procedure described in paragraph (c) below shall be
applied to such options.
(b) If this paragraph (b) applies, at and as of the Effective Time AirTouch
shall substitute an option to purchase AirTouch Common Stock (an "AirTouch
Common Option") for each CCI Option. Each AirTouch Common Option so substituted
by AirTouch under this Agreement shall continue to be subject to substantially
the same terms and conditions set forth in the applicable CCI Option Plan and in
the corresponding CCI Option immediately prior to the Effective Time, including
but not limited to the immediate exercisability of each such CCI Option, except
that:
(i) Such AirTouch Common Option shall be exercisable for that number
of whole shares of AirTouch Common Stock equal to the product of the number
of shares of CCI Common Stock that were purchasable under such CCI Option
immediately prior to the Effective Time multiplied by the Option Adjustment
Ratio (as defined below), rounded down to the nearest whole number of
shares of AirTouch Common Stock; and
(ii) The per share exercise price for the shares of AirTouch Common
Stock issuable upon exercise of such AirTouch Common Option shall be equal
to the quotient determined by dividing the exercise price per share of CCI
Common Stock at which such CCI Option was exercisable immediately prior to
the Effective Time by the Option Adjustment Ratio and rounding the
resulting exercise price up to the nearest whole cent.
The "Option Adjustment Ratio" shall be equal to (A) the Volume-Weighted Average
Trading Price of a share of CCI Common Stock during the last five trading days
on which CCI Common Stock is traded before the Effective Time divided by (B) the
Volume-Weighted Average Trading Price of a share of AirTouch Common Stock during
such period. As soon as reasonably practicable after the Effective Time,
AirTouch shall register the shares of AirTouch Common Stock underlying the
AirTouch Common Options with the Securities and Exchange Commission (the
"Commission") on a Form S-8 and shall keep such registration effective until the
exercise or termination of all AirTouch Common Options. AirTouch shall reserve
for issuance a sufficient number of shares of AirTouch Common Stock for issuance
upon exercise of the AirTouch Common Options.
(c) If this paragraph (c) applies, at and as of the Effective Time AirTouch
shall substitute an option to purchase one Unit (an "AirTouch Preferred Option")
for each CCI Option. Each AirTouch Preferred Option so substituted by AirTouch
under this Agreement shall continue to be subject to substantially the same
terms and conditions set forth in the applicable CCI Option Plan and in the
corresponding CCI Option immediately prior to the Effective Time, including but
not limited to the immediate exercisability of each such CCI Option. The per
Unit exercise price for the Unit issuable upon exercise of such AirTouch
Preferred Option shall be equal to the exercise price per share of CCI Common
Stock at which such CCI Option was exercisable immediately prior to the
Effective Time. As soon as reasonably practicable after the Effective Time,
AirTouch shall register the shares of AirTouch Class B Preferred and AirTouch
Class C Preferred underlying the AirTouch Preferred Options with the Commission
on a Form S-8 and shall keep such registration effective until the exercise or
termination of all AirTouch Preferred Options. AirTouch shall
A-7
<PAGE> 166
reserve for issuance a sufficient number of shares of AirTouch Class B Preferred
and AirTouch Class C Preferred for issuance upon exercise of the AirTouch
Preferred Options.
2.7 CCI Convertible Debt. Effective as of the Effective Time, the Zero
Coupon Convertible Subordinated Notes due 1999 of CCI (the "CCI Convertible
Debt") shall be assumed by the Surviving Corporation. The Surviving Corporation
shall execute one or more supplemental indentures as may be required pursuant to
the terms of the indenture relating to the CCI Convertible Debt.
2.8 Calculation of Conversion Price for AirTouch Class B and Class C
Preferred.
(a) The Conversion Price for purposes of the Certificate of Designation,
Preferences and Rights for the AirTouch Class B Preferred shall be the dollar
amount equal to the product of (i) the AirTouch Preferred Stock Issue Price (as
defined below) and (ii) 1.24.
(b) The Conversion Price for purposes of Certificate of Designation,
Preferences and Rights for the AirTouch Class C Preferred shall be the dollar
amount equal to the product of (i) the AirTouch Preferred Stock Issue Price and
(ii) 1.25.
(c) As used in this Section 2.8:
"AirTouch Preferred Stock Issue Price" means the Volume-Weighted
Average Trading Price for AirTouch Common Stock for the 15 trading-day
period ending on the second calendar day preceding the date on which the
Proxy Statement is first mailed to CCI's stockholders, but shall in no
event be lower than $29 nor higher than $35.
"Volume-Weighted Average Trading Price" means, for any given period,
an amount equal to (i) the cumulative sum, for each trade of AirTouch
Common Stock during such period on the New York Stock Exchange ("NYSE") (or
such other principal exchange or over-the-counter market on which such
security is listed), of the product of: (x) the sale price times (y) the
number of shares of AirTouch Common Stock sold at such price, divided by
(ii) the total number of shares of AirTouch Common Stock so traded during
the period.
2.9 Rights Plan Redemption Consideration. Of the consideration provided
for in Section 2.2(b) which each holder of a share of CCI Stock issued and
outstanding immediately prior to the Effective Time shall be entitled to
receive, $.01 in value per CCI Common Stock Equivalent Share shall be in payment
for the redemption of the Right associated therewith pursuant to Section 5.6
hereof (the "Rights Redemption Payment"). Accordingly, the consideration
provided for in Section 2.2(b) which each holder of a share of CCI Stock shall
be entitled to receive by virtue of the Merger shall be the consideration
described in (i), (ii) or (iii) thereof, less $.01 in value. The Rights
Redemption Payment shall be paid with respect to each Right upon surrender by
such holder of the certificate formerly representing CCI Stock with which such
Right was associated in the manner provided in Article III.
ARTICLE III
EXCHANGE OF SHARES
3.1 Exchange Procedures.
(a) Upon the later to occur of the Effective Time and the completion of the
allocation procedure set forth in Section 2.2, AirTouch shall issue to the
Exchange Agent the number of AirTouch Securities issuable in the Merger and the
amount of cash payable in the Merger; provided, however, that notwithstanding
any other provision of this Agreement, AirTouch shall not issue to the Exchange
Agent AirTouch Securities or cash payable with respect to shares of CCI Stock
unless and until share certificates and the required transmittal materials
pursuant to Article II and Article III have been received in proper form by the
Exchange Agent. The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to AirTouch Securities held by it from time to
time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto.
A-8
<PAGE> 167
(b) After completion of the allocation procedure set forth in Section 2.2,
each holder of a certificate formerly representing CCI Stock who surrenders or
has surrendered such certificate (or customary affidavits and indemnification
regarding the loss or destruction of such certificate), together with duly
executed transmittal materials included in the Election Form, to the Exchange
Agent shall, upon acceptance thereof, be entitled to the number of Units, and/or
cash, into which the shares of CCI Stock shall have been converted pursuant
hereto. AirTouch shall cause the Exchange Agent to accept such certificate upon
compliance with such reasonable and customary terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal practices. Until surrendered as contemplated by this Section 3.1,
each certificate representing CCI Stock shall be deemed at any time after the
Effective Time to evidence only the right to receive upon such surrender Units
and/or cash, as provided in this Agreement.
(c) To the extent provided by Section 2.2(j) of this Agreement, each holder
of shares of CCI Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional AirTouch Securities to which such holder
would otherwise be entitled. AirTouch shall not be obligated to deliver the
consideration to which any former holder of CCI Stock is entitled as a result of
the Merger until such holder surrenders his certificate or certificates
representing shares of CCI Stock for exchange as provided in this Article III.
In addition, certificates surrendered for exchange by any person constituting an
"affiliate" of CCI for purposes of Rule 144(c) under the Securities Act of 1933,
as amended (the "Securities Act"), shall not be exchanged for AirTouch
Securities until AirTouch has received a written agreement from such person as
provided in Section 5.11. If any AirTouch Securities, or any check representing
cash and/or declared but unpaid dividends, is to be issued in a name other than
that in which a certificate surrendered for exchange is issued, the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and the person requesting such exchange shall affix any requisite stock
transfer tax stamps to the certificate surrendered or provide funds for their
purchase or establish to the satisfaction of the Exchange Agent that such taxes
are not payable.
3.2 Voting and Dividends. Former stockholders of CCI shall not be entitled
to exercise any voting rights with respect to AirTouch Securities which they are
entitled to receive in the Merger, unless and until such holders have exchanged
their certificates representing CCI Stock for certificates representing AirTouch
Securities in accordance with the provisions of this Agreement. Until
surrendered for exchange in accordance with the provisions of Section 3.1 of
this Agreement, each certificate theretofore representing shares of CCI Stock
(other than shares to be canceled pursuant to Section 2.2(h) of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive Units, and/or cash, as set forth in this Agreement. No
dividends or other distributions declared or made after the Effective Time with
respect to AirTouch Securities with a record date after the Effective Time shall
be paid to the holder of any unsurrendered certificate of CCI Stock with respect
to the shares of AirTouch Securities represented thereby, until the holder of
such certificate of CCI Stock shall surrender such certificate. Subject to the
effect of applicable laws, following surrender of any such certificate of CCI
Stock, there shall be paid to the holder of the certificates representing whole
shares of AirTouch Securities issued in exchange therefor, without interest, (i)
the amount of any cash payable with respect to a fractional AirTouch Security to
which such holder is entitled pursuant to Section 2.2(j) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of AirTouch Securities, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of AirTouch Securities.
3.3 No Liability. Neither AirTouch nor CCI shall be liable to any holder
of shares of CCI Stock for any such AirTouch Security (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3.4 Withholding Rights. AirTouch or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of CCI Stock such amounts as AirTouch or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by AirTouch or the Exchange
Agent, such withheld amounts shall be treated for all
A-9
<PAGE> 168
purposes of this Agreement as having been paid to the holder of the shares of
CCI Stock in respect of which such deduction and withholding was made by
AirTouch or the Exchange Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of CCI. CCI hereby represents and
warrants to AirTouch and AirTouch Cellular that:
(a) Corporate Organization.
(i) CCI and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. CCI has delivered to AirTouch copies of the certificate of
incorporation and by-laws of CCI and each of its subsidiaries, as amended to
date, which certificates and by-laws are in full force and effect; and
(ii) For purposes of this Agreement, neither New Par nor any entity
controlled by New Par (a "New Par Subsidiary") shall be deemed to be a
subsidiary of CCI, and, unless specifically provided to the contrary, references
to "CCI and its subsidiaries, taken as a whole" or phrases of similar effect
shall be deemed to exclude New Par or any New Par Subsidiary from their scope.
References to New Par shall be deemed to include New Par and the New Par
Subsidiaries.
(b) Capitalization.
(i) The authorized capital stock of CCI consists of 100,000,000 shares of
Redeemable Common Stock, par value $.01 per share, of which 100,000,000 shares
have been designated Series A Common Stock ("CCI Series A Common"); 100,000,000
shares of Nonredeemable Common Stock, par value $.01 per share, of which
100,000,000 shares have been designated Series C Common Stock ("CCI Series C
Common"); 100,000,000 shares of Redeemable Participating Convertible Preferred
Stock, par value $.01 per share ("CCI Redeemable Preferred"); 2,500,000 shares
of Class A Preferred Stock, par value $.01 per share ("CCI Class A Preferred");
218 shares of Series B Preferred Stock, par value $100 per share ("CCI Series B
Preferred"); 3,000 shares of Class C Preferred Stock, par value $100 per share
("CCI Class C Preferred"); and 5,000,000 shares of Preference Stock, par value
$1.00 per share, of which 2,500,000 shares have been designated Class A
Preference Stock ("CCI Class A Preference Stock"), 3,000 shares have been
designated Series B Preference Stock ("CCI Series B Preference Stock"), and
500,000 shares have been designated Series D Junior Participating Preference
Stock ("CCI Series D Preference Stock"). As of April 5, 1996, there were issued
and outstanding (A) 17,151,730 shares of CCI Series A Common, (B) 10,066,000
shares of CCI Series C Common, (C) 13,196,498 shares of CCI Redeemable
Preferred, (D) 2,206,000 shares of CCI Class A Preference Stock and (E) 1,566
shares of CCI Series B Preference Stock, all of which have been duly authorized
and validly issued, and are fully paid and nonassessable and free from
preemptive or other similar rights. There are no shares of CCI Class A
Preferred, CCI Series B Preferred, CCI Class C Preferred or CCI Series D
Preference Stock issued or outstanding. Other than 1,005,000 shares of CCI
Series A Common, no shares of CCI capital stock are held as treasury shares.
(ii) Set forth on Schedule 4.1(b)(ii) is a list of each subsidiary, whether
direct or indirect, of CCI. No subsidiary, whether direct or indirect, of CCI
holds any shares of CCI capital stock. Except as set forth in Schedule
4.1(b)(ii), CCI owns directly or indirectly all the shares of capital stock of
each subsidiary and such shares have been duly authorized and validly issued and
are fully paid and nonassessable, and are owned free and clear of all liens,
claims or encumbrances (including, without limitation, preemptive or other
similar rights) with respect to the equity ownership thereof. Schedule
4.1(b)(ii) lists each subsidiary of CCI that has an ownership interest in New
Par, along with the amount of such ownership interest. Each such subsidiary
conducts no business other than the ownership of New Par. All such ownership
interests in New Par are owned free and clear of all liens, claims or
encumbrances with respect to the equity ownership thereof. Except for the
subsidiaries of CCI set forth on Schedule 4.1(b)(ii), a 50% equity interest in
New Par, and the other
A-10
<PAGE> 169
equity interests described in Schedule 4.1(b)(ii), CCI has no direct or indirect
beneficial ownership interest in any corporation, partnership, joint venture or
other entity.
(iii) Except for (A) the preferred stock purchase rights (the "Rights") of
CCI issued pursuant to the Rights Agreement dated as of July 31, 1991 (the
"Rights Agreement"), between CCI and Continental Stock Transfer & Trust Company,
as Rights Agent, (B) Employee New Options (as defined in the Existing Agreement)
outstanding on the date hereof, (C) shares of CCI Redeemable Preferred, CCI
Class A Preference Stock, CCI Series B Preference Stock and CCI Series A Common,
(D) the CCI Convertible Debt, and (E) the agreements listed on Schedule
4.1(b)(iii), there are no outstanding subscriptions, options, stock-based or
stock-related awards or rights, warrants, rights, convertible or exchangeable
securities or other agreements, arrangements or commitments of any character
(including, without limitation, registration rights) relating to or based upon
the issued or unissued capital stock or other securities of CCI or any of it
subsidiaries. Schedule 4.1(b)(iii) sets forth the number of Employee New Options
outstanding as of April 5, 1996 categorized by name of optionee, character of
the option, underlying shares, exercise price, date of vesting, expiration date
and employer. CCI has previously furnished to AirTouch a detailed list of
Employee New Options setting forth the name of each optionee and the material
terms of such option, together with complete copies of each stock option plan
and agreement. Except for the Existing Agreement, there are no voting trusts or
other agreements or understandings to which CCI or any subsidiary thereof is a
party with respect to the voting of capital stock of CCI or any subsidiary
thereof.
(iv) Set forth on Schedule 4.1(b)(iv) is a summary of all repurchases of
CCI capital stock effected by CCI or any subsidiary thereof during the last
three years, setting forth in reasonable detail the number of shares acquired
and the purchase price paid.
(c) Authority. CCI has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Merger and the Rights Redemption and the other transactions
contemplated hereby by CCI have been duly authorized by all necessary corporate
action on the part of CCI, subject only to approval by the stockholders of CCI
at the Stockholders' Meeting by the affirmative vote of a majority of the shares
of CCI Stock, voting together as a single class. The Board of Directors of CCI
has (i) approved the transactions contemplated hereby, (ii) taken all necessary
corporate action so neither Section 203 of the DGCL ("Section 203") nor, to the
extent applicable, Section 1707.041 of the Ohio Securities Law ("Section
1707.041"), requires any special vote of stockholders in connection therewith,
and none of the restrictions on business combinations set forth in Section 203
or, to the extent applicable, Section 1707.041 will apply to the Merger, (iii)
taken all necessary corporate action so that the Rights Agreement will not apply
to the Merger (including without limitation the amendment of the Rights
Agreement so that AirTouch will not be deemed to be an Acquiring Person by
virtue of the execution of this agreement or the consummation of the
transactions contemplated hereby, which amendment is in full force and effect),
and (iv) resolved to recommend that stockholders of CCI vote in favor of the
approval of this Agreement, the Merger, the Rights Redemption and the other
transactions contemplated hereby at the Stockholders' Meeting. This Agreement
has been duly executed and delivered by CCI and constitutes a valid and binding
obligation thereof, enforceable against it in accordance with its terms.
(d) Disclosure Documents.
(i) None of the information supplied by CCI in writing specifically for
inclusion in the Registration Statement or any Disclosure Document (as defined
in paragraph (ii) below) in connection with the Merger, or in any amendments or
supplements thereto, at the time of effectiveness (with respect to the
Registration Statement or any amendment thereto), the first mailing and at the
time of the Stockholders' Meeting, will contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) Each other document required to be filed by CCI with the Commission in
connection with the Merger (the "Disclosure Documents") including, without
limitation, the letter to stockholders, notice of meeting, proxy statement and
form of proxy to be distributed to stockholders in connection with the Merger,
and any schedules required to be filed with the Commission in connection
therewith (collectively, the "Proxy
A-11
<PAGE> 170
Statement"), and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). At the time
the Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of CCI and at the time of the Stockholders Meeting, the Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing of any
Disclosure Documents other than the Proxy Statement and at the time of any
distribution thereof, such Disclosure Document will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
(iii) The representations and warranties contained in Section 4.1(d)(i) and
(ii) shall not apply to statements or omissions included in the Disclosure
Documents based upon information furnished in writing by AirTouch to CCI
specifically for use therein.
(e) Consents; No Violation. Neither the execution and delivery of this
Agreement by CCI, nor the consummation of the transactions contemplated hereby,
will (i) conflict with, or result in any breach or violation of, any provision
of the certificate of incorporation or by-laws of CCI or any subsidiary thereof;
(ii) constitute, with or without notice or the passage of time or both, a
breach, violation or default, create a lien, or give rise to any right of
termination, modification, cancellation, prepayment or acceleration, under any
order, writ, injunction, decree, law, statute, rule or regulation, governmental
permit or license, or any mortgage, indenture, lease, agreement or other
instrument of CCI or any subsidiary thereof, or to which any of their respective
properties is subject, except for breaches, violations, defaults, liens, or
rights of termination, modification, cancellation, prepayment or acceleration
which would not, singly or in the aggregate, have a material adverse effect on
the business, financial condition, assets, liabilities or results of operations
(the "Business Condition") of CCI and its subsidiaries, taken as a whole, or on
the ability of CCI to consummate the transactions contemplated hereby; (iii)
give rise to any preemptive or other similar right of any third party with
respect to any shares of capital stock or properties of CCI or any subsidiary
thereof; or (iv) require any consent, approval or authorization of, notification
to, or filing with, any court, governmental agency or regulatory or
administrative authority (each, a "Governmental Entity") on the part of CCI or
any subsidiary thereof, other than (A) the filing of certificates with respect
to the Merger in accordance with the DGCL and CGCL and, where applicable, the
corporation laws of Michigan or Ohio, (B) filings with the Commission under the
Securities Act and the Exchange Act, (C) filings under state securities or blue
sky laws, (D) filings required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (E) approvals required by
the Federal Communications Commission (the "FCC") and, if required, the public
utility commissions of Ohio, Kentucky and Indiana to effectuate the Merger (the
foregoing being hereinafter referred to as the "Regulatory Approvals"), (F) the
consents and approvals listed on Schedule 4.1(e), and (G) consents, approvals,
authorizations, notifications, waivers or filings the failure of which to obtain
or make would not, singly or in the aggregate, have a material adverse effect on
the Business Condition of CCI and its subsidiaries, taken as a whole, or
materially adversely affect the ability of CCI to consummate the transactions
contemplated hereby.
(f) SEC Reports; Material Contracts; Financial Statements.
(i) CCI has furnished to AirTouch complete copies of all reports,
statements and schedules required to be filed by CCI with the Commission
pursuant to the Exchange Act since January 1, 1994 (collectively, the "CCI SEC
Reports"). As of their respective dates, the CCI SEC Reports complied in all
material respects with all applicable requirements of the Exchange Act and did
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(ii) The audited and unaudited consolidated financial statements of CCI
included (or incorporated by reference) in the CCI SEC Reports (the "CCI
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as stated in the
financial statements or the notes thereto), and fairly present the financial
position of CCI and its consolidated
A-12
<PAGE> 171
subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended, subject, in the case of the unaudited
financial statements, to normal year-end adjustments.
(g) Absence of Certain Changes. Since December 31, 1995, (i) except as set
forth in Schedule 4.1(g), CCI and its subsidiaries have each conducted their
respective businesses only in the ordinary and usual course, and (ii) neither
CCI nor any of its subsidiaries has undergone or suffered any change in its
Business Condition which has been, individually or in the aggregate, materially
adverse to CCI and its subsidiaries, taken as a whole, or to the ability of CCI
to consummate the transactions contemplated hereby.
(h) Undisclosed Liabilities. Except as disclosed in Schedule 4.1(h),
neither CCI nor any subsidiary thereof is subject to any liabilities of any
nature (whether or not required to be accrued or disclosed under SFAS No. 5)
which have had or can reasonably be expected to have, individually or in the
aggregate, an adverse financial effect with respect to CCI and its subsidiaries
exceeding $10 million, except (i) to the extent set forth or provided for in the
CCI Financial Statements for the year ended December 31, 1995 and (ii)
liabilities incurred since December 31, 1995 in the ordinary course of business,
none of which has had or can reasonably be expected to have individually or in
the aggregate an adverse financial effect with respect to CCI and its
subsidiaries exceeding $10 million.
(i) Compliance with Laws. Neither CCI nor any subsidiary thereof is in
violation of any decree, order, statute, rule or regulation so as to materially
adversely affect the Business Condition of CCI and its subsidiaries, taken as a
whole, or the ability of CCI to consummate the transactions contemplated hereby.
(j) Legal Proceedings. Except as set forth in Schedule 4.1(j), there is no
litigation, proceeding or governmental investigation pending or, to the best of
CCI's knowledge, threatened, against CCI or any subsidiary thereof or any of
their respective properties or businesses or against any CCI Employee Plan or
CCI Benefit Arrangement (as each is defined in Section 4.1(m)) or any of their
respective assets which, if decided adversely, would have a material adverse
effect on the Business Condition of CCI and its subsidiaries, taken as a whole,
or on the ability of CCI to consummate the transactions contemplated hereby.
(k) Finders; Investment Bankers. Neither CCI nor any subsidiary thereof,
nor any of their respective officers or directors, has employed any broker,
finder or investment banker or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
hereby, except that CCI has arrangements with Donaldson Lufkin & Jenrette
Securities Corporation and Wasserstein Perella & Co. (a copy of the written
agreement relating to each of which has previously been provided to AirTouch).
Schedule 4.1(k) sets forth a bona fide estimate of the aggregate amount of all
fees and expenses expected to be paid by CCI to all attorneys, accountants,
investment bankers, proxy solicitors and other advisors in connection with the
Merger ("Merger Fees").
(l) Tax Returns, Audits and Liabilities.
(i) For purposes of this Section 4.1(l), the following terms shall have the
following meanings:
"Income Taxes" means any federal, state, local or foreign income,
franchise or similar tax.
"Group" means each affiliated group, within the meaning of Section
1504 of the Code (and any combined, consolidated, unitary group or similar
group for purposes of any applicable foreign, state or local law), of which
CCI or any present CCI subsidiary, or any predecessors or successors to CCI
or any present CCI subsidiary is a member (collectively the "Groups").
"Returns" means any return, report, information return, questionnaire,
statement, estimate, declaration or other document (including any related
or supporting information) filed or required to be filed for any period
through and including the Closing with any taxing authority in connection
with the determination, assessment or collection of any Taxes or the
administration of any laws, regulations or administrative requirements
relating to any Taxes (whether or not payment is required to be made with
respect to such document).
A-13
<PAGE> 172
"Subsidiary" means any subsidiary of CCI and shall include any present
or former subsidiary for the period during which such subsidiary (i) was
owned, directly or indirectly, by CCI; or (ii) was the member of a Group.
"Tax" or "Taxes" means all material taxes, fees, levies, imposts,
assessments or other charges including, but not limited to, foreign,
federal, state, county or local income, profits, gross receipts, payroll,
excise, property, sales, use, employment, value added, unitary, capital,
net worth, transfer, withholding, and franchise taxes and customs duties
together with any penalties, interest or additions to tax thereon or costs
or expenses related thereto.
(ii) Except as set forth in Schedule 4.1(l)(ii), CCI, each Subsidiary
thereof, New Par (to the extent CCI, or any of its subsidiaries, or any employee
thereof, is responsible for the preparation of Returns therefor) and the Groups
have (A) timely filed in accordance with all applicable laws, and will continue
through the Effective Time to timely file, all Returns required to be filed by
them and all Returns were or will be correct and complete in all material
respects, and (B) paid all Taxes whether or not shown on any Return required to
be paid by CCI, each of its Subsidiaries and the Groups and will continue to pay
such Taxes for periods ending on or before the Effective Time. Except as set
forth in Schedule 4.1(l)(ii), complete copies of (A) consolidated federal Income
Tax Returns for CCI and its Subsidiaries, and (B) state and local Income and
other Tax Returns of CCI and its Subsidiaries and the Groups for each of the
years ended December 31, 1991, 1992, 1993 and 1994, and (C) all information
relating to any valuation of International, LDCO and PRCO (as each is defined in
the Existing Agreement) at the time of or done in connection with the
distribution of common stock of International, LDCO and PRCO, have heretofore
been delivered or made available to AirTouch (it being understood that the only
information so described may be earnings and profits workpapers prepared by
Ernst & Young LLP). CCI will deliver or make available, within 30 days of
filing, (A) the consolidated federal income tax Returns for the year ended
December 31, 1995 for CCI and its Subsidiaries (due to be filed on or before
September 15, 1996), and (B) state and local income tax Returns of CCI, any
Subsidiary thereof and any Group. Except as set forth in Schedule 4.1(l)(ii),
(A) there is no action, suit, proceeding, investigation, audit, claim or
assessment pending or proposed with respect to any Return that relates to CCI or
any Subsidiary thereof or any Group for Taxes, nor is there any factual or legal
basis therefor that has not been reserved or provided for on the audited
consolidated and consolidating balance sheet, (B) there are no encumbrances upon
any property or assets of CCI, any Subsidiary thereof or any Group that arose in
connection with any failure (or alleged failure) to pay any Taxes other than
liens for current property taxes not yet due, (C) all amounts required to be
collected or withheld by CCI and each Subsidiary thereof with respect to amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party have been duly collected or withheld and any such amounts that
are required to be remitted to any taxing authority have been duly remitted, (D)
no extension of time within which to file any Return that relates to CCI, its
Subsidiaries or the Groups has been requested which Return has not since been
filed, (E) there are no waivers or extensions of any applicable statute of
limitations for the assessment or collection of Taxes with respect to any Return
that relates to CCI, any Subsidiary thereof or any Group which remain in effect,
(F) there are no tax rulings, requests for rulings, or closing agreements
relating to CCI or any Subsidiary thereof or any Group which could affect their
liability for Taxes for any period after the Effective Time, (G) all federal,
state and local Income Tax Returns of CCI or each Subsidiary thereof or any
Group with respect to taxable periods through the year ended December 31, 1990
have been examined and closed or are Returns with respect to which the
applicable statute of limitations has expired without extension or waiver and no
notification of intention to audit or examine has been received from the
Internal Revenue Service or any other taxing authority with respect to the Taxes
of CCI, any Subsidiary thereof or any Group, and any deficiencies resulting from
such audits have been paid in full, (H) no issue was raised by any taxing
authority with respect to any audit that, if raised with respect to any Return
filed for a subsequent taxable period, could result in a deficiency of Taxes or
other adjustment, (I) no power of attorney has been granted by CCI or any
Subsidiary thereof or any Group with respect to any matter relating to Taxes of
CCI or its Subsidiaries or any Group which is currently in force, and (J)
neither CCI or any of its Subsidiaries, nor any Group, has filed a consent under
section 341(f) of the Code or any comparable provision of state revenue
statutes. Except as set forth in Schedule 4.1(l)(ii), CCI has filed a
consolidated Return for federal Income Tax purposes on behalf
A-14
<PAGE> 173
of itself and other members of the Group (within the meaning of section 1504 of
the Code) of which it is the parent corporation since at least the date on which
each was incorporated.
(iii) CCI has heretofore provided AirTouch with complete copies
(descriptions if unwritten) of any and all Tax allocation, indemnity, or sharing
arrangement or agreement to which CCI or any Subsidiary thereof is a party.
(iv) Except as set forth in Schedule 4.1(l)(iv), none of CCI, any
Subsidiary thereof or any Group has either agreed nor been required to make an
adjustment under section 481 of the Code by reason of a change in accounting
method or otherwise.
(v) The unpaid Taxes of CCI and its Subsidiaries (A) did not, as of the
year ended December 31, 1995, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the audited consolidated and
consolidating balance sheet (rather than in any notes thereto) as of and for the
year ended December 31, 1995, and (B) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of CCI and its Subsidiaries in filing their Returns.
(m) Employee Benefit Plans.
(i) Schedule 4.1(m)(i) sets forth a correct list of all of the following:
(A) each "employee benefit plan," as such term is defined in section
3(3) of ERISA, which is covered by Title I of ERISA and which is
maintained, or otherwise contributed to, by CCI or any of its subsidiaries
for the benefit of, or pursuant to which any of them has any liability with
respect to, current or former employees of CCI or any subsidiary thereof (a
"CCI Employee Plan") and any trust (including a trust intended to qualify
under section 501(c)(9) of the Code) related thereto;
(B) each other plan, program, policy, contract or arrangement
providing for bonuses, pensions, deferred compensation, retirement
benefits, profit sharing, incentive pay, stock appreciation rights,
severance pay, salary continuation or similar benefits, hospitalization,
medical, dental or disability benefits, life insurance or other employee
benefits, or compensation to or for any current or former officer,
consultant, director or employee of CCI or any subsidiary thereof or
members of their respective families (other than directors' and officers'
liability policies), maintained or otherwise contributed to by CCI or any
subsidiary thereof, whether or not reduced to writing (a "CCI Benefit
Arrangement");
(C) each "employee benefit plan" and related trust described in
subparagraph (A) above, and each plan, program, policy, contract or
arrangement described in subparagraph (B) above, that would have been
included within the definition of CCI Employee Plan or CCI Benefit
Arrangement had such descriptions also referred to current or former
employees of New Par (or, with respect to (B), members of their respective
families); and
(D) all individuals employed by CCI or any subsidiary thereof, and the
position, employer and compensation payable to each such individual.
(ii) Each CCI Employee Plan and CCI Benefit Arrangement has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, including, but not limited to, ERISA
and the Code. No CCI Employee Plan is subject to Part 3 of Subtitle B of Title I
of ERISA, Title IV of ERISA or section 412 of the Code. To the best knowledge of
CCI, none of CCI or any subsidiary thereof, or any of the CCI Employee Plans,
nor any of their respective current or former directors, officers, employees or
agents, have, with respect to any CCI Employee Plan, engaged directly or
indirectly in any "prohibited transaction," as such term is defined in section
4975 of the Code or section 406 of ERISA. With respect to those CCI Employee
Plans intended to qualify under the Code, CCI has obtained from the Internal
Revenue Service an advance determination letter to the effect that such CCI
Employee Plan and related trust are so qualified, and to the best knowledge of
CCI, no circumstances exist which would adversely affect such qualification.
With respect to any CCI Employee Plan, there has not occurred and no
circumstances exist which would constitute a reportable event under section 4043
of ERISA (other than a
A-15
<PAGE> 174
reportable event for which the 30-day notice requirement has been waived).
Neither CCI nor any subsidiary thereof has contributed to a "multiemployer plan"
within the meaning of section 3(37) of ERISA.
(iii) Neither CCI nor any subsidiary thereof has ever represented, promised
or contracted (whether in oral or written form) to any current or former
employee (either individually or to employees as a group) that such current or
former employee(s) would be provided at any cost to CCI with life insurance or
employee welfare plan benefits (within the meaning of section 3(l) of ERISA)
upon their retirement or termination of employment.
(iv) No payment or benefit which will or may be made by CCI or any
subsidiary thereof will be characterized as a "parachute payment" within the
meaning of section 280G(b)(2) of the Code.
(v) CCI has provided to AirTouch complete copies of all CCI Employee Plans,
CCI Benefit Arrangements, any trusts related thereto and the most recent annual
reports on Form 5500 and Summary Plan Descriptions required to be filed by CCI
or any subsidiary thereof in connection with any CCI Employee Plan.
(vi) Neither CCI nor any subsidiary thereof is a party to a collective
bargaining agreement.
(vii) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby (either alone or together
with any additional or subsequent events), shall constitute an event under any
CCI Employee Plan, CCI Benefit Arrangement, loan or individual agreement or
contract that may result in any payment (whether of severance pay or otherwise),
restriction or limitation upon the assets of any CCI Employee Plan or CCI
Benefit Arrangement, acceleration of payment or funding, vesting, or increase in
benefits or compensation with respect to any current or former employee or
director of CCI, any subsidiary thereof or New Par, or the forgiveness of any
loan.
(viii) All contributions, premiums or other payments due from CCI or any
subsidiary thereof to (or under) any CCI Employee Plan or CCI Benefit
Arrangement to provide benefits for any individuals associated with CCI or any
subsidiary thereof have been fully paid or adequately provided for on the books
or financial statements of CCI or any subsidiary thereof.
(n) Opinion of Financial Advisor. The Company has received the opinions of
Donaldson Lufkin & Jenrette Securities Corporation and Wasserstein Perella & Co.
to the effect that, as of April 5, 1996, the consideration to be received by the
holders of the CCI Stock in the Merger is fair to such holders from a financial
point of view.
(o) Intercompany Balances; Transactions with Affiliates.
(i) Schedule 4.1(o)(i) sets forth a correct list of each amount (an
"Intercompany Balance") due to CCI, its subsidiaries or New Par from, or due
from CCI, its subsidiaries or New Par to, (A) any former subsidiary or business
unit of CCI, (B) any employee, officer or director of CCI or (C) any other
entity (other than a current CCI subsidiary or New Par) of which any employee,
officer or director of CCI is an officer, director or significant stockholder
(collectively, "CCI Affiliates").
(ii) Schedule 4.1(o)(ii) sets forth a correct list of all agreements,
contracts or other arrangements in effect at any time since December 31, 1995
pursuant to which either (A) any CCI Affiliate provides or provided, or causes
or caused, to be provided any assets, services or facilities used by CCI, any
subsidiary thereof or New Par or (B) CCI, any subsidiary thereof or New Par
provides or provided, or causes or caused to be provided, any assets, services
or facilities to any CCI Affiliate (each, an "Affiliate Transaction").
(p) Tax Matters. Neither CCI or its subsidiaries, nor, to the knowledge of
CCI, any of its affiliates has knowingly taken or agreed to take any action that
would prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.
(q) Material Contracts. Except for the contracts identified as material
contracts in CCI's Annual Report on Form 10-K for the year ended December 31,
1995 and the contracts identified on the Schedules hereto, there are no material
contracts, leases, agreements or understandings, whether written or oral, to
which CCI or any subsidiary is a party or by which any of them is bound.
A-16
<PAGE> 175
4.2 Representations and Warranties of AirTouch. AirTouch hereby represents
and warrants to CCI that:
(a) Corporate Organization. Each of AirTouch and AirTouch Cellular is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.
(b) Capitalization. The authorized capital stock of AirTouch consists of
1,100,000,000 shares of common stock, $.01 par value ("AirTouch Common Stock"),
and 50,000,000 shares of preferred stock, $.01 par value ("AirTouch Preferred
Stock"). As of April 5, 1996, there were (i) 499,170,915 shares of AirTouch
Common Stock issued and outstanding, all of which have been duly authorized and
validly issued, and are fully paid and non-assessable and free from preemptive
or other similar rights and (ii) no shares of AirTouch Preferred Stock issued
and outstanding.
(c) Authority. Each of AirTouch and AirTouch Cellular has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by AirTouch and AirTouch Cellular have been, and the consummation
of the transactions contemplated hereby by AirTouch and AirTouch Cellular will
be, duly authorized by all necessary corporate action on the part of each of
them. This Agreement has been duly executed and delivered by each of AirTouch
and AirTouch Cellular and constitutes a valid and binding obligation thereof,
enforceable against it in accordance with its terms.
(d) Valid Issuance. The AirTouch Securities to be delivered at the
Closing, when issued and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly authorized, validly issued, fully
paid and non-assessable.
(e) Disclosure Documents.
(i) The registration statement(s) to be filed by AirTouch with the
Commission with respect to the offering of AirTouch Class B Preferred and
AirTouch Class C Preferred in connection with the Merger (the "Registration
Statement") and any amendments or supplements thereto, will, when filed, comply
as to form in all material respects with the requirements of the Securities Act
and will not contain, at the time the Registration Statement becomes effective
or at the time of the Stockholders' Meeting, any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements contained therein not misleading.
(ii) The representations and warranties contained in Section 4.2(e)(i)
shall not apply to statements or omissions included in the Registration
Statement or the Disclosure Documents based upon information furnished in
writing by CCI to AirTouch specifically for use therein.
(f) Consents; No Violation. Neither the execution and delivery of this
Agreement by AirTouch or AirTouch Cellular, nor the consummation of the
transactions contemplated hereby will (i) conflict with, or result in any breach
or violation of, any provision of the certificate of incorporation or by-laws of
AirTouch or AirTouch Cellular or any of their respective subsidiaries; (ii)
constitute, with or without notice or the passage of time or both, a breach,
violation or default, create a lien, or give rise to any right of termination,
modification, cancellation, prepayment or acceleration, under any order, writ,
injunction, decree, law, statute, rule or regulation, governmental permit or
license, or any mortgage, indenture, lease, agreement or other instrument of
AirTouch or AirTouch Cellular or to which any of their respective subsidiaries,
or any of their respective properties is subject, except for breaches,
violations, defaults, liens, or rights of termination, modification,
cancellation, prepayment or acceleration which would not, singly or in the
aggregate, have a material adverse effect on the Business Condition of AirTouch
and its subsidiaries, taken as a whole, or on the ability of AirTouch or
AirTouch Cellular to consummate the transactions contemplated hereby; (iii) give
rise to any preemptive or other similar right of any third party with respect to
any shares of capital stock or properties of AirTouch; or (iv) require any
consent, approval or authorization of, notification to, or filing with, any
Governmental Entity on the part of AirTouch or AirTouch Cellular or any of their
subsidiaries, other than (A) the filing of certificates with respect to the
Merger in accordance with the DGCL and CGCL and, where
A-17
<PAGE> 176
applicable, the corporation laws of Michigan or Ohio, (B) the filing of the
Certificates of Designation, Preferences and Rights of the AirTouch Class B
Preferred and the AirTouch Class C Preferred with the Secretary of State of
Delaware, (C) filings with the Commission under the Securities Act and the
Exchange Act, (D) filings under state securities or "blue" sky laws, (E) filings
required pursuant to the HSR Act, (F) the Regulatory Approvals, (G) the consents
and approvals listed on Schedule 4.2(f), and (H) consents, approvals,
authorizations, notifications, waivers or filings the failure of which to obtain
or make would not, singly or in the aggregate, have a material adverse effect on
the Business Condition of AirTouch and its subsidiaries, taken as a whole, or
materially adversely affect the ability of AirTouch or AirTouch Cellular to
consummate the transactions contemplated hereby.
(g) SEC Reports; Financial Statements.
(i) AirTouch has furnished to CCI complete copies of all reports,
statements and schedules required to be filed by AirTouch with the Commission
pursuant to the Exchange Act since January 1, 1994 (collectively, the "AirTouch
SEC Reports"). As of their respective dates, the AirTouch SEC Reports complied
in all material respects with all applicable requirements of the Exchange Act
and did not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(ii) The audited and unaudited consolidated financial statements of
AirTouch included (or incorporated by reference) in the AirTouch SEC Reports
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as stated in the financial statements or
the notes thereto) and fairly present the financial position of AirTouch and its
consolidated subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended, subject, in the case of
the unaudited financial statements, to normal year-end adjustments.
(h) Absence of Certain Changes. From December 31, 1995 to April 5, 1996,
(i) except as set forth in Schedule 4.2(h), AirTouch has conducted its
respective businesses only in the ordinary and usual course, and (ii) AirTouch
has not undergone or suffered any change in its Business Condition which has
been, individually or in the aggregate, materially adverse to AirTouch and its
subsidiaries, taken as a whole, or to the ability of AirTouch or AirTouch
Cellular to consummate the transactions contemplated hereby.
(i) Finders; Investment Bankers. Neither AirTouch, AirTouch Cellular or
any of their respective subsidiaries, nor any of their respective officers or
directors, has employed any broker, finder or investment banker or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated hereby, except that AirTouch has an
arrangement with Lehman Brothers Inc. and, in connection with the execution of
the Existing Agreement, CS First Boston Corporation and Salomon Inc.
(j) Tax Matters. Neither AirTouch or its subsidiaries, nor, to the
knowledge of AirTouch, any of its affiliates has knowingly taken or agreed to
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
4.3. Date of Representations and Warranties. For purposes of Sections 4.2,
4.3, 6.2(a) and 6.3(a) hereof, the date as of which such representations and
warranties shall be deemed to have been made shall be April 5, 1996 unless made
as of a specified date. Nothing in the foregoing sentence shall be deemed to
affect the provisions of Sections 6.2(a) and 6.3(a) hereto as they relate to the
accuracy of representations and warranties as if made as of the Effective Time.
A-18
<PAGE> 177
ARTICLE V
PRE-CLOSING COVENANTS
5.1 CCI Interim Operations. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by this
Agreement or as otherwise approved in writing by AirTouch, which approval shall
not be unreasonably withheld:
(a) Conduct of Business. CCI shall conduct its business, and shall cause
its subsidiaries to conduct their respective businesses, only in the ordinary
course of their respective existing businesses and otherwise as required by
section 3.1.1(a) of the Existing Agreement.
(b) Charters and By-Laws; Ownership of New Par. Except as expressly
contemplated by this Agreement, CCI will not, and CCI will cause its
subsidiaries not to, make or propose any change or amendment in their respective
charters or by-laws. CCI will not, and will cause its subsidiaries not to, make
any change in their respective direct or indirect ownership interests in New
Par.
(c) Capital Stock. CCI will not, and CCI will cause its subsidiaries not
to, (i) issue, pledge or sell any shares of capital stock (including treasury
shares) or any other securities of any of them, or (ii) issue any securities
convertible into, exchangeable for or representing a right to purchase or
receive, or enter into any contract, understanding or arrangement with respect
to the issuance of, any shares of capital stock or based on or otherwise
tracking the performance or characteristics of capital stock, or (iii) grant any
stock-based or stock-related awards or rights or make any similar arrangements
or awards with respect to or based upon other securities of any of them, or (iv)
enter into any arrangement or contract with respect to the purchase or voting of
shares of any of their capital stock, or (v) adjust, split, combine or
reclassify any of their capital stock or other securities, or (vi) make any
other changes in their capital structures. Notwithstanding the foregoing, this
Section 5.1(c) shall not apply to (A) the issuance of shares of CCI Series A
Common in connection with conversion of CCI Redeemable Preferred, (B) the
issuance of shares of CCI Series A Common in connection with the conversion of
CCI Series B Preference Stock, (C) the issuance of shares of CCI Series A Common
upon exercise of Employee New Options, or (D) the issuance of shares of CCI
Series A Common upon conversion of CCI Convertible Debt. CCI shall promptly
inform AirTouch of the terms of any issuances of shares in accordance with the
preceding sentence.
(d) Dividends; Other Payments. Neither CCI nor any subsidiary thereof will
declare, set aside, pay or make any dividend or other distribution or payment
(whether in cash, stock or property) with respect to, or purchase or redeem, any
shares of its capital stock.
(e) No Material Transactions; No Affiliate Transactions. CCI will not, and
CCI will cause its subsidiaries not to, (A) authorize, recommend, propose or
enter into an agreement in principle or a definitive agreement with respect to
any merger, consolidation, liquidation, dissolution or similar business
combination, any joint venture partnership or collaborative arrangement, or any
acquisition of a material amount of assets or securities; (B) enter into or
terminate any material contract or agreement, or make any change in any of its
material leases or contracts, other than renewals of contracts and leases
without material adverse changes of terms; or (C) enter into, or otherwise
engage in, any Affiliate Transaction. Notwithstanding the foregoing, CCI shall
be permitted to effect the transactions contemplated by Section 5.10 and the
sale of capital stock contemplated by Section 5.17 with any person or entity.
(f) Employee Plans, Compensation, etc. Except for normal changes in the
ordinary course of business that are consistent with past practice, or as
provided by Section 2.6 hereof, and that, in the aggregate, do not result in a
material increase of benefits or compensation expense to CCI or any of its
subsidiaries relative to the level in effect prior to such changes and except as
required by law, CCI will not, and will cause its subsidiaries not to:
(i) adopt, enter into, amend or terminate any bonus, profit-sharing,
compensation, severance, termination, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any individual, to
the extent that
A-19
<PAGE> 178
any such action would affect directors, officers or employees associated
with CCI, its subsidiaries or New Par;
(ii) enter into any new employment arrangements or relationships with
new or existing employees which has the legal effect of any relationship
other than at-will employment;
(iii) increase in any manner the compensation or fringe benefits of
any director, officer or employee associated with CCI, its subsidiaries or
New Par or pay any benefit to any director, officer or employee associated
with CCI, its subsidiaries or New Par other than pursuant to an existing
plan or arrangement and in amounts consistent with past practice; or
(iv) grant any awards to any director, officer or employee associated
with CCI, its subsidiaries or New Par under any bonus, incentive,
performance or other compensation plan or arrangement (including, without
limitation, the granting of stock options, stock appreciation rights,
stock-based or stock-related awards, performance units or restricted stock,
or the removal of existing restrictions in any benefit plans or agreements
or awards made thereunder).
Except as required by law, CCI will not, and will cause its subsidiaries not to,
take any action to segregate assets for, or in any other way secure, the payment
of compensation or benefits to any employee associated with CCI, its
subsidiaries or New Par under any employee plan, agreement, contract or
arrangement or adopt, enter into or amend any contract, agreement, commitment or
arrangement to do any of the acts described in this Section 5.1(f). CCI will
not, and will cause its subsidiaries not to, become obligated to make any
payment or transfer of property that constitutes a "parachute payment" within
the meaning of section 280G(b)(2) of the Code.
(g) Assets. CCI will not, and will cause its subsidiaries not to,
encumber, sell, lease or otherwise dispose of any material assets or cancel,
release or assign any indebtedness owed thereto or any claims held thereby, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing.
(h) Debt. Except in the ordinary course of its business consistent with
past practice, CCI will not, and will cause its subsidiaries not to, (i) incur
or assume any indebtedness (and any indebtedness permitted by the preceding
shall, to the extent of indebtedness for money borrowed or capital leases, be
prepayable without penalty, other than customary prepayment charges of a nature
substantially similar to those provided in the Credit Agreement, dated as of
December 27, 1995, by and among Cellular Communications of Ohio, Inc., certain
of its subsidiaries and the lenders named therein (the "Credit Agreement") for
LIBOR and CD rate loans); (ii) make any loans, advances or capital contributions
to, or investments in, any other person (other than a direct or indirect wholly
owned subsidiary of CCI); (iii) issue or sell any debt securities or guarantee
any indebtedness; or (iv) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing. CCI will not incur indebtedness under
the Credit Agreement that would have a maturity date, or interest period ending,
after August 1, 1996, except for any such indebtedness incurred prior to the
date hereof.
(i) Settlements. CCI will not, and will cause its subsidiaries not to,
settle any claim, action or proceeding involving monetary damages, except in the
ordinary course of business, consistent with past practice.
(j) Accounting Methods. CCI will not change its methods of accounting in
effect at December 31, 1995, except as required by changes in generally accepted
accounting principles as concurred in by its independent accountants.
(k) Merger Fees. CCI will not, and will cause its subsidiaries not to, pay
(or agree to become obligated to pay) any Merger Fees in excess of the amount
set forth in Schedule 4.1(k), other than any excess amounts which are immaterial
in the aggregate incurred in connection with, and in furtherance of,
consummation of the transactions contemplated hereby.
(l) No Inconsistent Acts. Neither CCI nor any subsidiary thereof will
take, or agree to take, any action that would result in any of the conditions
set forth in Sections 6.1 and 6.3 not being satisfied.
A-20
<PAGE> 179
5.2 Certain Covenants of AirTouch. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by this
Agreement or as otherwise approved in writing by CCI, which approval shall not
be unreasonably withheld:
(a) Charters and Bylaws. AirTouch will not make any change or
amendment in its charter or by-laws except for such changes or amendments
that would not have had a material adverse effect on the rights of the
AirTouch Class B Preferred or AirTouch Class C Preferred were such AirTouch
Class B Preferred or AirTouch Class C Preferred to have been outstanding on
the date thereof.
(b) Capital Stock; Dividends. AirTouch will not undertake a
reclassification of AirTouch Common Stock, or pay any single dividend or
other distribution (whether in cash, capital stock or other assets) to
holders of AirTouch Common Stock where the value of such dividend or
distribution (in excess of the fair market value of any consideration
received therefor) together with the amount of all dividends and
distributions made to the holders of AirTouch Common Stock during the
period from the date hereof and prior to such dividend or distribution
exceeds 20% of the product of (i) the Volume-Weighted Average Trading Price
on the record date for determining the stockholders entitled to receive
such dividend or distribution and (ii) the number of shares of AirTouch
Common Stock outstanding on such record date.
(c) Disposition of Assets. AirTouch will not enter into any agreement
providing for a transaction or series of related transactions that results
in the transfer, sale or other disposition by AirTouch of assets of (i)
AirTouch International, a California corporation, (ii) AirTouch Cellular of
Nevada, a Nevada corporation, or (iii) AirTouch Cellular, to the extent
that the assets subject to such transfer, sale or disposition in the
aggregate would represent more than 20% of the total fair market value of
AirTouch and its subsidiaries, taken as whole, measured on a proportionate
basis immediately prior to such disposition (excepting any such transaction
or series of related transactions in which a majority of the value of the
consideration received in exchange for the assets transferred, sold or
otherwise disposed of consists of assets (or interests in assets) of a like
kind or nature and excepting any transactions pursuant to existing
agreements).
5.3 Access and Information.
(a) During the period from the date hereof through the Effective Time, CCI
shall, and shall cause its subsidiaries to, afford AirTouch, and its
accountants, counsel and other representatives, reasonable access from time to
time during normal business hours to the properties, books, contracts, Returns
and other tax records, commitments and records of CCI and its subsidiaries, and
shall also cause such of its officers, employees, accountants, counsel and other
agents or representatives to meet and confer with AirTouch and its accountants,
counsel and other representatives as AirTouch may reasonably request, for the
purpose of conducting any review or investigation reasonably related to the
Merger, and CCI and its subsidiaries will cooperate fully with all such reviews
and investigations.
(b) During the period from the date hereof through the Effective Time, CCI
shall furnish to AirTouch (i) all reports filed by CCI or any subsidiary thereof
with the Commission (other than reports filed pursuant to section 13(d) or 13(g)
of the Exchange Act) promptly upon the filing thereof, and (ii) monthly and
other interim financial statements in the form prepared by CCI for its internal
use. During this period, CCI also shall notify AirTouch in writing promptly of
any material change in the Business Condition of CCI and its subsidiaries, or of
CCI, its subsidiaries and New Par, taken as a whole. During the period from the
date hereof through the Effective Time, AirTouch shall furnish to CCI all
reports filed by AirTouch with the Commission (other than reports filed pursuant
to section 13(d) or 13(g) of the Exchange Act) promptly upon the filing thereof.
During this period AirTouch also shall notify CCI in writing promptly of any
material change in the Business Condition of AirTouch and its subsidiaries,
taken as a whole.
(c) CCI shall and shall cause its subsidiaries to deliver to AirTouch at
least ten business days prior to the Closing a schedule which sets forth the
following information with respect to CCI and each of its subsidiaries as of
December 31, 1995 (it being understood that some information set forth therein
may be developed on the basis of estimates derived by CCI and its subsidiaries
in good faith and using reasonable best efforts):
A-21
<PAGE> 180
(A) the adjusted basis of CCI and each of its subsidiaries in its assets; (B)
the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax credit, or excess charitable contribution
allocable to CCI and each of its subsidiaries; and (C) the amount of any
deferred gain or loss allocable to CCI and each of its subsidiaries arising out
of any deferred intercompany transaction (within the meaning of section
1.1502-13(a)(2) of the Income Tax Regulations); and (D) the amount of any excess
loss accounts (within the meaning of section 1.1502-19 of the Income Tax
Regulations), if any, of each of the subsidiaries.
(d) Notwithstanding the foregoing provisions of this Section, no party
shall be required to grant access or furnish information to the other party to
the extent that such access or the furnishing of such information is prohibited
by law. No investigation by a party hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation.
5.4 Registration Statement. AirTouch and CCI shall promptly prepare and
file with the Commission the Proxy Statement, and AirTouch shall prepare and
file with the Commission the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of AirTouch and CCI shall provide
reasonable opportunity for the other to review and comment upon the contents of
the Proxy Statement and the Registration Statement and shall not include therein
or omit therefrom any information to which counsel to the other shall reasonably
object. After the date of the mailing of the Proxy Statement, each of AirTouch
and CCI agrees promptly to notify the other of and to correct any information
which either of them shall have furnished for inclusion in the Proxy Statement
that shall have become false or misleading in any material respect. Each of
AirTouch and CCI shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing. AirTouch shall also take any action (other than qualifying to
do business in any jurisdiction in which it is now not so qualified) reasonably
required to be taken under any applicable state securities laws in connection
with the issuance of the AirTouch Securities in the Merger, and CCI shall
furnish all information concerning CCI and the holders of CCI Stock as may be
reasonably requested in connection with any such action.
5.5 Stockholders' Approval. CCI shall promptly call a meeting of its
stockholders to be held no later than August 16, 1996 for voting upon the Merger
(the "Stockholders' Meeting"), provided that the Registration Statement shall
then be effective. In connection with the Stockholders' Meeting, CCI shall mail
the Proxy Statement and Registration Statement to its stockholders on a timely
basis, but in no event earlier than June 17, 1996. The Board of Directors of CCI
(i) has recommended approval of the Merger, the Rights Redemption and this
Agreement, (ii) shall include, and shall not withdraw or modify, each such
recommendation in the Proxy Statement unless under applicable law, including
applicable disclosure obligations, it is required to omit, withdraw or modify
any such recommendation, (iii) shall submit for approval of its stockholders the
matters to be voted upon at the Stockholders' Meeting, and (iv) shall use its
best efforts (including, without limitation, soliciting proxies for such
approvals), to the extent permitted by applicable law, to obtain such
stockholder approval.
5.6 Stockholder Rights Plan. CCI will take all actions necessary to cause
the Rights to be redeemed immediately prior to the Effective Time (the "Rights
Redemption"), with the payment therefor to be in the manner and form provided
for by Section 2.9 hereof.
5.7 Tax Matters. Neither CCI or AirTouch nor any direct or indirect
subsidiary of either of them shall knowingly take any action that would
jeopardize the treatment of the Merger as a reorganization under section 368 of
the Code.
5.8 Indemnification. From and after the Effective Time, AirTouch shall
cause the Surviving Corporation to (i) indemnify and hold harmless the present
and former officers and directors of CCI in respect of acts or omissions
occurring prior to the Effective Time to the extent provided under the Amended
and Restated Certificate of Incorporation and bylaws of CCI in effect on the
date hereof and (ii) perform and fulfill all of its obligations under the
Indemnification Agreements between CCI and the persons listed in Schedule 5.8
and in effect as of the date hereof.
A-22
<PAGE> 181
5.9 Further Assurances; Cooperation. Each of the parties hereto shall
perform its obligations under this Agreement and take or cause to be taken and
do or cause to be done all things necessary, proper or advisable under
applicable law to obtain all necessary regulatory approvals and waivers and
other necessary consents and satisfy all conditions to the obligations of the
parties under this Agreement and to cause the transactions contemplated hereby
to be carried out promptly in accordance with the terms hereof and shall
cooperate fully with one another and their respective officers, directors,
employees, agents, counsel, accountants and other representatives in connection
with any steps required to be taken as part of their respective obligations
under this Agreement; upon the execution of this Agreement and thereafter, each
party shall do such things as may be reasonably requested by the other parties
herein in order more effectively to consummate such transactions (including, but
not limited to, promptly delivering to the other information necessary to
prepare and pursue all necessary regulatory filings, approvals and waivers), in
each case including, without limitation:
(a) Subject to the terms and conditions herein provided, CCI and
AirTouch shall promptly make their respective filings and submissions and
shall take, or cause to be taken, all actions and do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to (i) obtain the consents, approvals, authorizations and
waivers described in Section 4.1(e) and 4.2(f), (ii) comply with the
provisions of the HSR Act, and (iii) obtain any other required approval of
any Governmental Entity with jurisdiction over the Merger and to obtain any
other necessary consents, and, in the event any change in the transactions
contemplated hereby is required in order to accomplish the foregoing,
except as provided elsewhere in this Agreement, to take all necessary steps
to accommodate such change to the extent it would not materially adversely
affect the parties' rights or obligations hereunder. Each of the parties
hereto agrees to cooperate in the preparation of and to provide all
information required for the prompt filing of all applications, the Proxy
Statement, the Registration Statement, the Disclosure Documents, approvals
and waivers required for the approval and consummation of the Merger.
(b) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which
questions the validity or legality of the Merger or seeks damages in
connection therewith, the parties agree to cooperate and use all reasonable
efforts to defend against such claim, action, suit, investigation or other
proceeding and, if any injunction or other order of the type referred to in
Section 6.1(g) is issued in any such action, suit or other proceeding, to
use best efforts to have such injunction or other order dissolved, and to
cooperate reasonably regarding the removal of any other impediment to the
consummation of the Merger.
(c) AirTouch shall give prompt written notice to CCI and CCI shall
give prompt notice to AirTouch, to the extent known by the chief executive
officer or any financial officer of the party giving notice, of (i) the
occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty of the disclosing
party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or
which will or may result in the failure to satisfy any of the conditions
specified in Article VI or (ii) any failure of the disclosing party to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder.
5.10 New York Office Lease; Furniture and Fixtures.
(a) At or before the Effective Time, CCI shall cause the office lease for
CCI's offices at 110 E. 59th Street, New York, New York (covering a portion of
the 21st floor and all of the 26th floor of such premises) (the "Headquarters
Lease"), a copy of which has previously been furnished to AirTouch, to be
terminated or novated, such that after the Effective Time neither AirTouch nor
the Surviving Corporation shall have any liability or obligation of any kind
whatsoever with respect to the Headquarters Lease. Neither CCI nor any
subsidiary thereof shall make, or obligate itself to make, any payment to any
person or entity including, without limitation, the lessors in connection with
such termination or novation. CCI represents and warrants that as of April 5,
1996 it has a binding commitment from a formerly affiliated company for the
assignment thereto of the Headquarters Lease in the manner required by this
Section 5.10(a).
A-23
<PAGE> 182
(b) At or before the Effective Time, CCI shall sell, or cause to be sold,
all office equipment, fixtures, furniture and leasehold improvements owned by
CCI and located at CCI's offices at 110 E. 59th Street, New York, New York for
net proceeds to CCI of not less than the book value of such equipment, fixtures,
furniture and leasehold improvements. CCI represents and warrants that as of
April 5, 1996 it has a binding commitment from a formerly affiliated company to
purchase such fixtures, furniture and leasehold improvements on the foregoing
terms.
5.11 Affiliates; Other Documents. At least 40 days prior to the Effective
Time, CCI shall deliver to AirTouch a letter identifying all persons who are, at
the time, "affiliates" of CCI for purposes of Rule 145 under the Securities Act.
CCI shall use best efforts to cause each person named in the letter delivered by
it to deliver to AirTouch prior to the Closing Date a written "Affiliates"
agreement, in the form attached hereto as Exhibit 5.11, providing that such
person shall dispose of the AirTouch Securities to be received by such person in
the Merger only in accordance with applicable law and, in addition, contains a
representation by such "affiliate" that it has no present plan or intention to
dispose of any such shares of AirTouch Securities. CCI agrees, upon request, to
use all reasonable efforts to obtain and deliver to AirTouch any customary
certificate or other document from any officer or stockholder of CCI as may be
reasonably requested by Pillsbury Madison & Sutro LLP in connection with the Tax
Opinion referred to in Section 6.3(f).
5.12 Affiliate Transactions. At or before the Effective Time, CCI shall
(a) repay, or cause to be repaid, all Intercompany Balances and (b) terminate,
or cause to be terminated, all Affiliate Transactions.
5.13 Redemption of Series B Preference Stock. On or before the date that
the Proxy Statement is first mailed to stockholders, CCI shall mail a notice of
redemption (a "Redemption Notice") to each of the holders of CCI's Series B
Preference Stock, which shall (i) specify a date for redemption no later than
the date of the Stockholders' Meeting, (ii) contain the information required by,
and otherwise be in form and substance as required by, the terms of the Series B
Preference Stock, and (iii) call for redemption all of the issued and
outstanding shares of such Series B Preference Stock. On or before the date of
the Stockholders' Meeting, CCI shall have redeemed all of the issued and
outstanding shares of Series B Preference Stock, except to the extent that
holders of shares of Series B Preference Stock have elected to exercise their
conversion right in lieu of redemption and CCI has, on or before such date,
converted their Series B Preference Stock into shares of CCI's Series A
Redeemable Common.
5.14 Accountants "Comfort" Letters. Each of AirTouch and CCI will use best
efforts to cause to be delivered to the other "comfort" letters from their
respective independent accountants, in form and substance reasonably
satisfactory to the recipient, dated (i) two days prior to the date the Proxy
Statement is first mailed to CCI's stockholders and (ii) two days prior to the
date the stockholders of CCI adopt this Agreement.
5.15 Employees; Long-Term Incentive Plan.
(a) At or before the Effective Time, CCI shall, or shall cause its
subsidiaries to, either obtain a letter of resignation in form and substance
reasonably satisfactory to AirTouch, or terminate, each employee of CCI or any
subsidiary thereof (including any such employees who may be seconded to New Par
at the Effective Time).
(b) Immediately prior to the Effective Time, upon instructions from
AirTouch, CCI will terminate, or will cause its subsidiaries to terminate, the
secondment to New Par of each employee of CCI or any subsidiary thereof.
(c) Any voluntary resignation, or termination, of employees of CCI or its
subsidiaries effected pursuant to paragraph (a) or (b) above shall be without
any cost, expense or contractual liability (including, without limitation,
severance payments or similar costs) to CCI, New Par, AirTouch or any of their
respective affiliates. CCI shall use its best efforts to obtain a written
commitment from such employees of CCI and its subsidiaries as AirTouch may
designate to provide AirTouch (at the request of AirTouch) with consulting or
advisory services following the Effective Time with respect to the operations of
CCI, its subsidiaries or New Par for reasonable and customary compensation.
A-24
<PAGE> 183
(d) As of the Effective Time, the Cellular One Long-Term Incentive Plan
will terminate, the stock appreciation rights granted thereunder will vest in
full and, within 45 days following the Effective Time (or such shorter period as
is reasonably practicable, but no sooner than 30 days following the Effective
Time), AirTouch shall cause all vested stock appreciation rights outstanding
thereunder to be paid in cash.
5.16 Expenses. Subject to Section 7.3, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that all costs and expenses, including filing fees,
related to the printing, mailing or filing of the Registration Statement and
Proxy Statement or to any other filing with any Governmental Entity in
connection with the transactions contemplated hereby shall be shared equally by
AirTouch and CCI.
5.17 Sale of Celsat Subsidiaries. CCI shall use its best efforts to sell,
at or before the Effective Time, the capital stock (or all of the assets and
liabilities) of CCI Data, Inc. and CCI Sub, Inc. for proceeds to CCI of not less
than $2 million. CCI hereby represents and warrants to AirTouch that (a) except
for CCI Data, Inc. and CCI Sub, Inc., neither CCI nor any subsidiary thereof has
any direct or indirect beneficial ownership interest in Celsat America, Inc. and
(b) neither CCI Data, Inc. nor CCI Sub, Inc. has any assets (having more than de
minimis value) other than in interests in, and rights associated with, Celsat
America, Inc.
5.18 Transition Arrangements. During the period from the date hereof
through the Effective Time, CCI shall, and shall cause its subsidiaries to,
cooperate fully with AirTouch to effect a transition to AirTouch of control of
New Par as of the Effective Time. AirTouch and CCI will form a team (to be
chaired by AirTouch) which will have the authority to implement the transition
(including, without limitation, a transition to use by New Par of the "AirTouch"
brand name as of the Effective Time).
5.19 Maintenance of D&O Insurance. At all times during the period from
April 5, 1996 through the Effective Date, CCI shall maintain in full force and
effect the directors' and officers' insurance policy in effect on April 5, 1996.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each of AirTouch and CCI to effect the Merger and the
other transactions contemplated hereby shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The stockholders of CCI shall have approved
all matters relating to this Agreement, the Merger and the Rights
Redemption required to be approved by such stockholders by the vote
required under the DGCL at the Stockholders' Meeting.
(b) Regulatory Approvals. All required authorizations, orders,
grants, consents, permissions, approvals and waivers of any Governmental
Entity with jurisdiction over the transactions contemplated hereby, other
than those authorizations, orders, grants, consents, permissions, approvals
and waivers the failure of which to receive would not, singly or in the
aggregate, have a material adverse effect on the Business Condition of CCI,
its subsidiaries and New Par taken as a whole, shall have been received and
shall remain in effect, provided, however, that if the condition set forth
in Section 6.3(c) is waived by AirTouch, then this condition will be deemed
to have been satisfied with respect to the FCC Consents.
(c) HSR Act. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(d) Registration Statement Effective. The Registration Statement
shall have been declared effective and shall not be subject to a stop order
or any threatened stop order.
(e) State Securities Laws. AirTouch shall have received all state
securities and "blue sky" permits and other authorizations necessary to
consummate the transactions contemplated hereby.
A-25
<PAGE> 184
(f) NYSE Listing. The AirTouch Securities to be issued to the holders
of the capital stock of CCI upon consummation of the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(g) No Injunction. Neither AirTouch nor CCI shall be subject to any
order, decree or injunction of a Governmental Entity of competent
jurisdiction which enjoins or prohibits the consummation of the
transactions contemplated hereby and no proceeding shall have been
initiated by any Governmental Entity and be continuing which seeks such an
injunction. There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation thereof illegal.
6.2 Conditions to Obligations of CCI to Effect the Merger. The obligations
of CCI to effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of AirTouch set forth in this Agreement shall have been true and
correct in all material respects when made and (unless made as of a
specified date) shall be true and correct in all material respects as if
made as of the Effective Time, and CCI shall have received a certificate
dated as of the Closing Date signed by the vice chairman and the chief
financial officer of AirTouch to that effect.
(b) Performance of Obligations. AirTouch shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and CCI shall have received a
certificate dated as of the Closing Date signed by the vice chairman and
chief financial officer of AirTouch to that effect.
(c) Legal Opinions. CCI shall have received the opinions of Margaret
G. Gill, Senior Vice President, Legal, External Affairs and Secretary of
AirTouch, and Pillsbury Madison & Sutro LLP, counsel to AirTouch, both
dated the Closing Date, substantially in the form of Exhibits 6.2(c)-1 and
6.2(c)-2 hereto, respectively.
(d) Comfort Letter of AirTouch's Accountants. CCI shall have received
the letter of Price Waterhouse, AirTouch's independent accountants,
prepared pursuant to the provisions of Section 5.14.
(e) Tax Opinion. CCI shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom, counsel to CCI, dated the Closing Date, to the
effect that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code, and that
AirTouch and CCI will each be a party to that reorganization within the
meaning of section 368(b) of the Code and that no gain or loss will be
recognized by the stockholders of CCI to the extent they receive AirTouch
Securities solely in exchange for shares of CCI Stock.
6.3 Conditions to Obligations of AirTouch to Effect the Merger. The
obligations of AirTouch to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. The representations and
warranties of CCI set forth in this Agreement shall have been true and
correct in all material respects when made and (unless made as of a
specified date) shall be true and correct in all material respects as if
made as of the Effective Time, and AirTouch shall have received a
certificate dated as of the Closing Date signed by the chairman and the
chief financial officer of CCI to that effect.
(b) Performance of Obligations. CCI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and AirTouch shall have received a
certificate dated as of the Closing Date signed by the chairman and the
chief financial officer of CCI to that effect.
(c) FCC Consents. All orders and approvals of the FCC required in
connection with the consummation of the transactions contemplated hereby
("FCC Consents") shall have been obtained or
A-26
<PAGE> 185
made, whether or not any appeal or request for reconsideration of such
order is pending, or whether the time for filing any such appeal or request
for reconsideration or for any sua sponte action by the FCC has expired.
(d) Consents Under Agreements. The consent, approval or waiver of
each person (other than Governmental Entities) whose consent or approval
shall be required in order to permit (i) the succession by AirTouch
Cellular as the Surviving Corporation in the Merger to any material
obligation, right or interest of CCI or any subsidiary of CCI, or (ii) the
indirect acquisition of CCI's ownership interest in New Par, under any
material loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument (other than the Credit Agreement,
as to which the parties acknowledge repayment will be required at the
Effective Time) shall have been obtained.
(e) Legal Opinions. AirTouch shall have received the opinions of
Richard J. Lubasch, Vice President-General Counsel of CCI, and Skadden,
Arps, Slate, Meagher & Flom, counsel to CCI, both dated the Closing Date,
substantially in the form attached hereto as Exhibits 6.3(e)-1 and 6.3(e)-2
hereto, respectively.
(f) Tax Opinion. AirTouch shall have received the opinion of
Pillsbury Madison & Sutro LLP, counsel to AirTouch, dated the Closing Date,
to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that AirTouch, AirTouch Cellular and CCI will each be a party to
that reorganization within the meaning of Section 368(b) of the Code.
(g) Litigation, etc. There shall be no pending or threatened material
action or proceeding by any person against AirTouch, CCI, any subsidiary of
either or New Par, or any director, officer or employee thereof,
challenging or in any way or in any manner seeking to restrict or prohibit
the transactions contemplated hereby or seeking to obtain any damages
against any person as a result of the transactions contemplated hereby,
which action or proceeding has or would have a reasonable likelihood of
success.
(h) Comfort Letter of CCI's Accountants. AirTouch shall have received
the letters from Ernst & Young LLP, as CCI's independent accountants,
prepared pursuant to the provisions of Section 5.14.
(i) Rights Agreement. The Rights shall have been redeemed (by
resolution of the Board of Directors of CCI and provision for payment as
set forth in Section 2.9) in accordance with their terms.
(j) Consummation of Certain Transactions. The transactions
contemplated by Section 5.10 shall have been consummated in accordance with
the provisions thereof.
(k) Absence of Restrictive Conditions. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the Merger, by any Governmental Entity which, in
connection with the transactions contemplated hereby, imposes any condition
or restriction upon AirTouch or the Surviving Corporation or their
respective subsidiaries which in the reasonable business judgment of
AirTouch would materially interfere with the benefits sought to be obtained
by AirTouch hereunder.
(l) Contingent Liabilities. Except for matters described in the
schedules delivered by CCI to AirTouch hereunder, at the time of the
Closing (i) there shall not be any suit, action or proceeding, or any
investigation or inquiry, by any Governmental Entity (collectively,
"proceeding"), which shall be pending or, to the knowledge of CCI,
threatened against or affecting CCI, any subsidiary thereof or New Par, and
(ii) there shall not be any potential unasserted claim or liability against
CCI, any subsidiary thereof or New Par (whether or not such claim or
liability is required to be accrued or disclosed under SFAS No. 5), in the
case of either a proceeding under clause (i) or a claim or liability under
clause (ii), which could be reasonably expected to have, either
individually or in the aggregate with all other such proceedings, claims or
liabilities, a material adverse effect on CCI, its subsidiaries and New Par
taken as a whole (which shall be deemed to have occurred if involving
losses, liabilities (which if contingent could reasonably be expected to
result in loss), costs or expenses of more than $60 million).
A-27
<PAGE> 186
(m) Change in Business Condition. Since April 5, 1996, there shall
not have occurred any change in the Business Condition of CCI, its
subsidiaries and New Par, taken as a whole, that would have or would be
reasonably likely to have, individually or in the aggregate, a materially
adverse effect thereon; provided, however, that the foregoing shall not
apply to any change resulting from general cellular industry conditions or
a regulatory development affecting the cellular industry generally.
(n) Amendment of Indemnification Agreements. Prior to the Effective
Time, CCI shall have entered into an amendment of each indemnity agreement
by and between CCI and any officer or director of CCI or any other entity,
pursuant to which the indemnitee (i) acknowledges that for purposes of
indemnification by CCI or its subsidiaries such indemnitee has not served
at the request of CCI or any such subsidiary thereof as a director,
officer, employee, trustee, agent or fiduciary of any corporation,
partnership, joint venture, trust or other entity other than CCI or any of
its current subsidiaries ("non-CCI position") and (ii) waives any rights to
indemnification that would arise out of or relate to such indemnitee's
serving in any such non-CCI position and to which such indemnitee would
otherwise be entitled pursuant to such indemnity agreement or the
certificate of incorporation or bylaws of CCI or any subsidiary thereof.
ARTICLE VII
TERMINATION; AMENDMENT AND MISCELLANEOUS
7.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the stockholders of CCI, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of AirTouch and CCI; or
(b) By either AirTouch or CCI, if the Effective Time does not occur on
or before September 15, 1996 (unless the failure of such occurrence shall
be due to the failure of the party seeking to terminate this Agreement to
perform or observe its covenants and agreements set forth herein required
to be performed or observed by such party on or before the Effective Time);
or
(c) By AirTouch, in accordance with the provisions of Section 2.2(l);
provided that AirTouch shall have given CCI five business days' written
notice of such termination; or
(d) (i) By either AirTouch or CCI, if the approval of the stockholders
of CCI contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
stockholders or of any adjournment thereof, or (ii) by AirTouch, if any of
the recommendations described in clause (i) of Section 5.5 shall not have
been included in the Proxy Statement, or shall have been withdrawn or
modified; or
(e) By AirTouch, if at the time of the Stockholders' Meeting the
holders of shares of CCI Stock representing more than 10% of the CCI Common
Equivalent Shares have submitted written demands for appraisal of their
respective shares pursuant to section 262 of the DGCL which demands have
not been withdrawn; or
(f) By either AirTouch or CCI, if any permanent injunction or other
order of a court or other competent authority preventing the consummation
of the Merger shall have become final and non-appealable.
7.2 Effect of Termination.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 7.1, this Agreement shall become void and have no effect,
except that (i) the provisions of this Section 7.2, Section 7.3 and Section 7.6
shall survive any such termination and abandonment and (ii) no party shall be
relieved or released from any liability arising out of an intentional breach of
any provision of this Agreement.
A-28
<PAGE> 187
(b) Upon any such termination and abandonment of this Agreement, the
Existing Agreement and the letter agreement, dated March 31, 1995, between
AirTouch and CCI, as extended by letter agreement dated January 23, 1996
(together, the "Confidentiality Agreement"), shall remain in full force and
effect.
7.3 Termination Expenses. In the event this Agreement is terminated
pursuant to Section 7.1(d) AirTouch shall be entitled to reimbursement from CCI
and its subsidiaries for all reasonable internal and external costs, fees and
expenses incurred by such terminating party and any of its subsidiaries in
connection with the transactions contemplated hereby, including the preparation,
printing, filing, shipping, and distribution of the Registration Statement and
the Proxy Statement and the pursuit of Regulatory Approvals (such fees and
expenses to include all legal, consulting and accounting fees, disbursements and
expenses).
7.4 Non-Survival of Representations, Warranties and Covenants Following the
Effective Time. Except for Article II, Article III, Section 5.8, Section
5.15(d) and Article VII (excluding Sections 7.1, 7.2 and 7.3), none of the
respective representations, warranties, obligations, covenants and agreements of
the parties shall survive the Effective Time.
7.5 Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party which is, or whose stockholders are, entitled to the
benefits hereof and this Agreement may be amended or supplemented at any time
before or after approval of this Agreement by the stockholders of CCI to the
extent permitted under section 251(d) of the DGCL. No waiver, amendment or
supplement shall be effective unless in writing and signed by the party or
parties sought to be bound thereby.
7.6 Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto) contains the entire agreement among AirTouch, AirTouch Cellular and CCI
with respect to the transactions contemplated hereby, and this Agreement
supersedes all prior agreements among the parties with respect to these matters
including, without limitation, the April Agreement; provided, however, that the
Existing Agreement and the Confidentiality Agreement remain in full force and
effect and are not modified hereby. Execution of this Agreement as amended and
restated shall not be deemed to have relieved any party from the consequences of
the breach of any representation, warranty or agreement made in this Agreement
in the form executed on April 5, 1996.
7.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
7.8 Interpretation. The descriptive headings contained in this Agreement
are for convenience and reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
7.9 Notices. Each party shall promptly give written notice to the other
parties upon becoming aware of the occurrence or, to its knowledge, a pending or
threatened occurrence, of any event which would case or constitute a breach of
any of its representations, warranties or covenants contained or referenced in
this Agreement and will use its best efforts to prevent or promptly remedy the
same. Any notice or communication required or permitted hereunder shall be in
writing and either delivered personally, telegraphed or telecopied or sent by
certified or registered mail, postage prepaid, and shall be deemed to be given,
dated and received when so delivered personally, telegraphed or telecopied or,
if mailed, five business days after the date of mailing to the following address
or telecopy number, or to such other address or addresses as such person may
subsequently designate by notice given hereunder:
If to CCI:
Cellular Communications, Inc.
110 East 59th Street
New York, NY 10022
Attention: Richard J. Lubasch,
Vice President and General Counsel
Telecopy: (212) 906-8497
A-29
<PAGE> 188
With copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Kenneth J. Bialkin and
Thomas H. Kennedy
Telecopy: (212) 735-2000
If to AirTouch or AirTouch Cellular:
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: Margaret G. Gill,
Senior Vice President,
Legal, External Affairs and Secretary
Telecopy: (415) 658-2298
With copies to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Nathaniel M. Cartmell III
Telecopy: (415) 983-1200
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 7.9.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one agreement.
7.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
7.12 No Assignment. Neither of the parties hereto may assign any of its
rights or delegate any of its obligations (whether by operation of law or
otherwise) under this Agreement to any other person or entity; provided that
AirTouch Cellular shall be entitled to assign all of its rights and obligations
hereunder to any wholly owned subsidiary of AirTouch. Any such purported
assignment or delegation that is made without the prior written consent of the
other parties to this Agreement shall be void and of no effect. Subject to the
foregoing provisions of this Section 7.12, this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
7.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
7.14 Consent to Jurisdiction. Each of the parties hereby submits to the
exclusive jurisdiction of the Chancery Court of the State of Delaware and the
Federal courts of the United States of America located in
A-30
<PAGE> 189
Delaware in respect of the transactions contemplated by this Agreement, and
hereby waives, and agrees not to assert, as a defense in any action, suit or
proceeding for the transactions contemplated by this Agreement, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the Agreement may not be enforced in or
by said courts or that its property is exempt or immune from execution, that the
suit, action or proceeding is brought in an inconvenient forum, or that the
venue of the suit, action or proceeding is improper.
7.15 Publicity. So long as this Agreement is in effect, each of AirTouch
and CCI agrees to consult with the other in issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated hereby or the other party, and neither CCI nor AirTouch will issue
any press release or make any such public statement prior to such consultation
and giving the other a reasonable opportunity to review and comment on any such
proposed press release or public statement, except as may be required by law.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ ARUN SARIN
Name: Arun Sarin
Title: Vice Chairman
AIRTOUCH CELLULAR
By: /s/ MOHAN GYANI
Name: Mohan Gyani
Title: Executive Vice President and
Chief Financial Officer
CELLULAR COMMUNICATIONS, INC.
By: /s/ GEORGE BLUMENTHAL
Name: George Blumenthal
Title: Chairman
A-31
<PAGE> 190
EXHIBIT 2.2(l)
1. DEFINITIONS
<TABLE>
<S> <C>
Additional C Shares = Cash Reduction Amount
---------------------
FMV-C Share
Additional Unit Amount = Cash Reduction Amount
---------------------
$55
Cash Reduction Amount = (a) the amount of the reduction in Cash Election Number
required pursuant to clause (i) of Section 2.2(l),
multiplied by (b) $55
Class B Shares Pre-Adjustment = (a) $500 million, divided by (b) the AirTouch Preferred
Stock Issue Price.
Class C Shares Pre-Adjustment = (a) (i) Units Pre-Adjustment, multiplied by $55, minus,
(ii) $500 million, divided by (b) $50
FMV-C Share = the fair market value of one share of AirTouch Class C
Preferred determined in writing by Lehman Brothers Inc.
as of the Effective Time
Units Pre-Adjustment = Unit Election Number
</TABLE>
2. CALCULATION OF ADJUSTMENTS
TO CLASS B PER-UNIT AMOUNT AND CLASS C PER-UNIT AMOUNT
<TABLE>
<S> <C>
Class B Per-Unit Amount = Class B Shares Pre-Adjustment
-----------------------------
Units Pre-Adjustment + Additional Unit Amount
Class C Per-Unit Amount = Class C Shares Pre-Adjustment + Additional C Shares
---------------------------------------------------
Units Pre-Adjustment + Additional Unit Amount
</TABLE>
A-32
<PAGE> 191
ANNEX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262
APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sections 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) or (g) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale
B-1
<PAGE> 192
of all or substantially all of the assets of the corporation. If the certificate
of incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the next day preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise
B-2
<PAGE> 193
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
B-3
<PAGE> 194
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-4
<PAGE> 195
ANNEX C
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
6.00% CLASS B MANDATORILY CONVERTIBLE PREFERRED STOCK,
SERIES 1996
OF
AIRTOUCH COMMUNICATIONS, INC.
AIRTOUCH COMMUNICATIONS, INC. (the "Corporation"), a Delaware corporation
governed by the provisions of the General Corporation Law of the State of
Delaware, as amended, hereby certifies that, under authority conferred upon the
Board of Directors by the Certificate of Incorporation of the Corporation and
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors at a meeting held on April 4, 1996 duly adopted
the following resolution:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation by the Certificate of Incorporation and Section 151 of the
Delaware General Corporation Law, the Board of Directors hereby approves the
amount, preferences and rights, including voting rights, of this Corporation's
6.0% Class B Mandatorily Convertible Preferred Stock, Series 1996 (the "Class B
Preferred"), as presented to the Board of Directors; and be it further
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation by the Certificate of Incorporation and Section 141 of the
Delaware General Corporation Law, a committee known as the Preferred Stock
Committee, of which Arun Sarin shall be the sole member, is established, and
that such committee is authorized to incorporate the amount, rights, and
preferences of each of the Class B Preferred and the Class C Preferred, as
approved by this Board of Directors, into Certificates of Designation,
Preferences and Rights to be filed with the Secretary of State of the State of
Delaware, provided that the Preferred Stock Committee may approve modifications
to the amounts, preferences and rights of the Class B Preferred and the Class C
Preferred, other than the voting rights.
The Corporation further certifies that under the authority conferred upon
the Preferred Stock Committee by resolutions of the Board of Directors adopted
at a meeting held on April 4, 1996 and the provisions of Sections 141 and 151 of
the General Corporation Law of the State of Delaware, the Preferred Stock
Committee of the Board of Directors duly adopted the following resolution:
RESOLVED, that under authority conferred upon the Preferred Stock Committee
by resolutions of the Board of Directors duly adopted at a meeting held on April
4, 1996 and the provisions of Section 141 and 151 of the General Corporation Law
of the State of Delaware, the Preferred Stock Committee hereby fixes the amount,
preferences and rights of the shares of the 6% Class B Mandatorily Convertible
Preferred Stock, Series 1996, as set forth in Schedule A attached hereto, and
the proper officers of the Corporation are hereby authorized and directed to
execute and file a Certificate of Designation, Preferences and Rights containing
such provisions with the Secretary of the State of Delaware and with such other
governmental agencies or authorities as any of such officers may deem
appropriate.
C-1
<PAGE> 196
SCHEDULE A
1. DESIGNATION AND AMOUNT.
The designation of the series of Preferred Stock created by this
Certificate shall be "6.00% Class B Mandatorily Convertible Preferred Stock,
Series 1996, par value $0.01 per share" (the "Class B Preferred Shares"), and
the number of shares constituting such series shall be 24,000,000. Such number
of shares may be increased or decreased by resolution of the Board of Directors,
provided that no decrease shall reduce the number of Class B Preferred Shares to
a number less than that of the Class B Preferred Shares then outstanding plus
the number of shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Corporation.
2. DEFINITIONS.
As used in this Certificate:
"Anti-Dilution Adjustment Ratio" has the meaning set forth in Section
4(d)(ii).
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of California or the State of New
York are authorized or obligated by law or executive order to close or are
closed because of a banking moratorium or otherwise.
"Class B Preferred Shares" means the shares of 6.00% Class B Mandatorily
Convertible Preferred Stock, 1996 Series.
"Class C Preferred Stock" shall mean the 4.25% Class C Convertible
Preferred Stock, Series 1996.
"Common Stock" shall mean the common stock of the Corporation, par value
$.01 per share.
"Contingent Payment" has the meaning set forth in Section 5(a).
"Contingent Payment Calculation Date" has the meaning set forth in Section
5(a).
"Conversion Price" has the meaning set forth in the definition of Maturity
Exchange Rate.
"Current Market Price" per share of Common Stock at any date shall be
deemed to be the Volume-Weighted Average Trading Price over the fifteen
consecutive Trading Day period ending on and including such date of
determination; provided, however, if any event that results in an adjustment of
the Maturity Exchange Rate or the Optional Conversion Rate occurs during such
fifteen Trading Day period, the Current Market Price as determined pursuant to
the foregoing shall be appropriately adjusted to reflect the occurrence of such
event.
"Determination Date" means, with respect to the issuance, sale or exchange
of any Equity Securities, the later of (a) the date upon which the price or the
amount of consideration to be received in consideration of such issuance, sale
or exchange is fixed and (b) the date upon which a public announcement of the
transaction is made, provided that if no public announcement is made, the
Determination Date shall be the date set forth in (a).
"Distribution Adjustment Ratio" has the meaning set forth in Section
4(d)(iii).
"Dividend Payment Date" has the meaning set forth in Section 3(a).
"Equity Securities" shall mean the Common Stock or any debt, equity or
other security or contractual right, in each case that is convertible into or
exercisable or exchangeable for, or based on the value of, the Common Stock or
any warrants, options or other rights to purchase the Common Stock or other
Equity Securities (other than Rights).
"Equity Security Adjustment Ratio" has the meaning set forth in Section
4(d)(vi).
"Exempt Issuance" means (a) Equity Securities issued pursuant to any
existing or future employee stock purchase plan, employee stock option plan or
other employee or director benefit plan or (b) Equity Securities
C-2
<PAGE> 197
issued pursuant to any stockholder purchase plan or plan for the reinvestment of
dividends or interest, to the extent that the consideration paid for the Equity
Securities issued pursuant to any such stockholder or dividend or interest
reinvestment plan is not less than 95% of the Fair Market Value of such
securities as of the date of the issuance of the Equity Securities.
"Extraordinary Distribution" means any single dividend or other
distribution (including by reclassification of shares or recapitalization of the
Corporation, as well as any such dividend or distribution made in connection
with a merger or consolidation in which the Corporation is the continuing
corporation and the Common Stock is not changed or exchanged) to holders of
Common Stock (effected while any of the Class B Preferred Shares are
outstanding) (i) of cash, where the aggregate amount of such single cash
dividend or distribution together with the amount of all cash dividends and
distributions made to holders of Common Stock over the twelve-month period
ending on the payment date for such cash dividend or distribution, when combined
with the aggregate amount of all previous Pro Rata Repurchases during such
period (for this purpose, including only that portion of the aggregate purchase
price of each such Pro Rata Repurchase which is in excess of the Fair Market
Value of the Common Stock repurchased as determined on the Business Day prior to
the public announcement of such Pro Rata Repurchase made during such period),
exceeds twelve and one-half percent (12 1/2%) of the aggregate Fair Market Value
of all shares of Common Stock outstanding on the record date for determining the
stockholders entitled to receive such Extraordinary Distribution and (ii) of any
evidences of indebtedness of the Corporation or evidences of indebtedness or
securities of any other person or any other property (including, without
limitation, shares of capital stock of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of any such single dividend or
other distribution that, pursuant to clause (i), constitutes an Extraordinary
Distribution shall for purposes of the first paragraph of Section 4(d)(iii)
hereof be the sum of the Fair Market Value of such Extraordinary Distribution
plus the amount of any other cash dividends and distributions made within the
relevant period referred to above to holders of Common Stock to the extent such
other dividends and distributions were not previously included in the
calculation of an adjustment pursuant to the first paragraph of Section
4(d)(iii) hereof within such period.
"Fair Market Value" shall mean the Volume-Weighted Average Trading Price of
the Security in question for the five-day period before the earlier of the day
in question and the "ex" date with respect to any issuance or distribution
requiring such computation. The term "ex" date, when used with respect to any
issuance or distribution, means the first day on which the Common Stock trades
regular way, without the right to receive such issuance or distribution, on the
exchange or in the market to determine that day's Volume-Weighted Average
Trading Price. With respect to any asset or security for which there is no
Current Market Price, the Fair Market Value of such asset or security shall be
determined in good faith by the Board of Directors.
"Initial Issuance Date" means the date upon which the Class B Preferred
Shares are initially issued.
"International Adjustment Ratio" has the meaning set forth in Section
4(d)(iv).
"International Distribution" means a distribution to the holders of Common
Stock of any equity interest in an International Entity, on a per share basis.
"International Entity" means any entity predominantly holding interests in
cellular operations outside the United States that has an aggregate Fair Market
Value of U.S.$1 billion or more.
"Issue Price" has the meaning set forth in the definition of Maturity
Exchange Rate.
"Issued Equity Securities" has the meaning set forth in Section 4(d)(ii).
"Junior Stock" has the meaning set forth in Section 3(b).
"Liquidation Amount" has the meaning set forth in Section 6(c).
"Mandatory Conversion" has the meaning set forth in Section 4(a).
"Maturity Date" has the meaning set forth in Section 4(a).
C-3
<PAGE> 198
"Maturity Exchange Rate" is equal to, subject to adjustment as to amount
and shares, as described herein, (a) if the Maturity Price is greater than or
equal to $35.96 per share (the "Conversion Price"), 0.806 shares of Common Stock
per Class B Preferred Share, (b) if the Maturity Price is less than the
Conversion Price but greater than $29.00 per share (the "Issue Price"), the rate
of Common Stock per Class B Preferred Share that is equal to the Issue Price
divided by the Maturity Price, and (c) if the Maturity Price is less than or
equal to the Issue Price, one share of Common Stock per Class B Preferred Share.
"Maturity Price" means the Volume-Weighted Average Trading Price per share
of Common Stock for the 20 consecutive Trading Day period immediately prior to
(but not including) the Maturity Date.
"New Issuance Adjustment Ratio" has the meaning set forth in Section
4(d)(v).
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by the
Corporation of any Equity Securities (other than Common Stock) shall mean the
excess of (i) the Fair Market Value of a share of Common Stock on the
Determination Date multiplied by the maximum number of shares of Common Stock
which could be acquired on such date upon the exercise, conversion or exchange
in full of such Equity Securities (and any Equity Securities receivable upon
exercise, conversion or exchange thereof), whether or not then exercisable,
convertible or exchangeable at such date, if any, over (ii) the aggregate amount
payable pursuant to the exercise, conversion or exchange of such Equity
Securities, whether or not then exercisable, convertible or exchangeable, to
purchase or acquire such maximum number of shares of Common Stock (and any
Equity Securities receivable upon exercise, conversion or exchange thereof);
provided, however, that in no event shall the Non-Dilutive Amount be less than
zero. For purposes of the foregoing sentence, the amount payable pursuant to the
exercise, conversion or exchange of such Equity Securities to purchase or
acquire shares of Common Stock shall be deemed to be the Fair Market Value of
the consideration payable pursuant to the exercise, conversion or exchange of
such Equity Securities on the Determination Date (excluding for that purpose the
Fair Market Value of the Equity Security to be so exercised, converted or
exchanged).
"Optional Conversion Rate" has the meaning set forth in Section 4(c).
"Parity Preferred Stock" has the meaning set forth in Section 3(a).
"Preferred Stock Directors" has the meaning set forth in Section 8(b).
"Pro Rata Repurchases" means any purchase of shares of Common Stock by the
Corporation or any affiliate thereof (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934 (the "Exchange Act")) pursuant to any tender
offer or exchange offer subject to Section 13(e) of the Exchange Act, or
pursuant to any other offer available to substantially all holders of Common
Stock, whether for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the Corporation or
any other person or any other property (including, without limitation, shares of
capital stock, other securities or evidences of indebtedness of a subsidiary of
the Corporation), or any combination thereof, effected while any of the shares
of Class B Preferred Shares are outstanding; provided, however, that "Pro Rata
Repurchase" shall not include any purchase of shares by the Corporation or any
affiliate thereof made in open market transactions substantially in accordance
with the requirements of Rule 10b-18 as in effect under the Exchange Act or on
such other terms and conditions as the Board of Directors shall have determined
are reasonably designed to prevent such purchases from having a material effect
on the trading market for the Common Stock. The "Effective Date" of a Pro Rata
Repurchase shall mean the date of acceptance of shares for purchase or exchange
under any tender or exchange offer which is a Pro Rata Repurchase or the date of
purchase with respect to any Pro Rata Repurchase that is not a tender or
exchange offer.
"Recapitalization Adjustment Ratio" has the meaning set forth in Section
4(d)(i).
"Reorganization Event" has the meaning set forth in Section 4(e).
"Rights" means rights of the Corporation issued or issuable under the
Rights Agreement dated September 9, 1994 between the Corporation and The Bank of
New York or pursuant to any successor stockholder rights plan replacing the
Rights Agreement.
"Security Issue Date" means the date on which a particular Class B
Preferred Share is issued.
C-4
<PAGE> 199
"Senior Preferred Stock" has the meaning set forth in Section 3(a).
"Third Party" means any person as to which the Corporation does not own,
directly or indirectly, and does not have the power to direct, more than 20% of
the outstanding voting interests.
"Trading Date" shall mean a date on which the New York Stock Exchange (or
any successor thereto) is open for the transaction of business.
"Volume-Weighted Average Trading Price" for any given period means, for a
security, an amount equal to (A) the cumulative sum, for each trade of such
security during such period on the New York Stock Exchange (or such other
principal exchange or over-the-counter market on which such security is listed),
of the product of: (x) the sale price times (y) the number of shares of the
security sold at such price; divided by (B) the total number of securities so
traded during the specified period.
3. DIVIDENDS.
(a) Payment of Dividends. The holders of outstanding Class B Preferred
Shares shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cumulative preferential
dividends at the rate per Class B Preferred Share of $1.74 per annum, as may be
adjusted in accordance with the provisions hereof, and no more, payable
quarterly in arrears on the 15th day of each February, May, August and November,
respectively (each such date being hereinafter referred to as a "Dividend
Payment Date"), or, if any Dividend Payment Date is not a Business Day, then the
Dividend Payment Date shall be the next succeeding Business Day. The first
dividend payment shall be for the period from the Initial Issuance Date to but
excluding the first day of the next calendar quarter, and will be payable on the
first Dividend Payment Date thereafter. Each quarterly period beginning on
January 1, April 1, July 1 and October 1 in each year and ending on and
including the day next preceding the first day of the next such quarterly period
shall be a dividend period. Dividends (or amounts equal to accrued and unpaid
dividends) payable on Class B Preferred Shares for any period less than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in any period less
than one month. The Board of Directors may fix a record date for the
determination of holders of Class B Preferred Shares entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be no
more than 60 calendar days prior to the date fixed for the payment thereof. If
the Security Issue Date of a particular Class B Preferred Share is later than
the Initial Issuance Date solely due to a delay in the surrender by the holder
of a certificate representing a share of capital stock of Cellular
Communications, Inc. ("CCI") pursuant to Section 3.2 of the Agreement and Plan
of Merger between the Corporation and CCI, then dividends on such Class B
Preferred Share shall be payable from the Initial Issuance Date. If the Security
Issuance Date of a particular Class B Preferred Share is later than the Initial
Issuance Date for reasons other than those described in the preceding sentence,
then dividends on such Class B Preferred Share shall accrue only from the first
day of the dividend period during which such Class B Preferred Share was issued.
Dividends on the Class B Preferred Shares will accrue, whether or not there
are funds legally available for the payment of such dividends and whether or not
such dividends are declared, on a daily basis from the previous Dividend Payment
Date. Accumulated unpaid dividends shall not bear interest. Dividends will cease
to accrue in respect of Class B Preferred Shares on the Maturity Date or on the
date of their earlier conversion.
The Preferred Shares will rank on a parity as to payment of dividends with
the Class C Preferred, and with any future preferred stock issued by the
Corporation (the "Parity Preferred Stock") that by its terms ranks pari passu
with the Preferred Shares with respect to payment of dividends.
The Preferred Shares will be subordinate as to payment of dividends to any
future preferred stock issued by the Corporation that by its terms is senior to
the Preferred Shares with respect to payment of dividends (the "Senior Preferred
Stock").
(b) Payment of Dividends on Junior Stock. As long as any Class B Preferred
Shares are outstanding, no dividends or other distributions for any dividend
period (other than dividends payable in shares of, or
C-5
<PAGE> 200
warrants, rights or options exercisable for or convertible into shares of,
Common Stock or any other capital stock of the Corporation ranking junior to the
Class B Preferred Shares as to the payment of dividends and the distribution of
assets upon liquidation, including the Corporation's Series A Participating
Preferred Stock, par value $0.01 per share ("Junior Stock"), and cash in lieu of
fractional shares of such Junior Stock in connection with any such dividend)
will be paid on any Junior Stock unless: (i) full dividends on all outstanding
shares of Senior Preferred Stock and Parity Preferred Stock (including the Class
B Preferred Shares) have been paid, or declared and set aside for payment, for
all dividend periods terminating on or prior to the payment date of such Junior
Stock dividend or distribution and for the current dividend period, to the
extent such Senior Preferred Stock or Parity Preferred Stock dividends are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any outstanding shares of Senior Preferred Stock
or Parity Preferred Stock; and (iii) the Corporation is not in default on any of
its obligations to redeem any outstanding shares of Senior Preferred Stock or
Parity Preferred Stock.
In addition, as long as any Class B Preferred Shares are outstanding, no
shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by
the Corporation or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Stock through the issuance of other
Junior Stock (and cash in lieu of fractional shares of such Junior Stock in
connection therewith) or the purchase, redemption, or other acquisition of any
Junior Stock with any Junior Stock (and cash in lieu of fractional shares of
such Junior Stock in connection therewith)) nor may any funds be set aside or
made available for any sinking fund for the purchase or redemption of any Junior
Stock unless: (i) full dividends on all outstanding shares of Senior Preferred
Stock and Parity Preferred Stock have been paid, or declared and set aside for
payment, for all dividend periods terminating on or prior to the date of such
purchase, redemption or acquisition and for the current dividend period, to the
extent such Senior Preferred Stock or Parity Preferred Stock dividends are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any outstanding shares of Senior Preferred Stock
or Parity Preferred Stock; and (iii) the Corporation is not in default on any of
its obligations to redeem any outstanding shares of Senior Preferred Stock or
Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
from time to time by the Board of Directors may be declared and paid on the
shares of any Junior Stock and from time to time Junior Stock may be purchased,
redeemed or otherwise acquired by the Corporation or any of its subsidiaries. In
the event of the declaration and payment of any such dividends or other
distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any outstanding Senior Preferred Stock or Parity
Preferred Stock, to share therein according to their respective interests.
(c) Payment of Dividends on Parity Preferred Stock. As long as any Class B
Preferred Shares are outstanding, dividends or other distributions for any
dividend period may not be paid on any outstanding shares of Parity Preferred
Stock (other than dividends or other distributions payable in Junior Stock and
cash in lieu of fractional shares of such Junior Stock in connection therewith),
unless either: (a) (i) full dividends on all outstanding shares of Senior
Preferred Stock and Parity Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the
payment date of such Senior Preferred Stock or Parity Preferred Stock dividend
or distribution and for the current dividend period, to the extent such Senior
Preferred Stock or Parity Preferred Stock dividends are cumulative; (ii) the
Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement and sinking funds,
if any, for any outstanding shares of Senior Preferred Stock and Parity
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of Senior Preferred Stock or Parity
Preferred Stock; or (b) any such dividends are declared and paid pro rata so
that the amounts of any dividends declared and paid per share on outstanding
Class B Preferred Shares and each other share of such Parity Preferred Stock
will in all cases bear to each other the same ratio that accrued and unpaid
dividends (including any accumulation with respect to unpaid dividends for prior
dividend periods,
C-6
<PAGE> 201
if such dividends are cumulative) per share of outstanding Class B Preferred
Shares and such other outstanding shares of Parity Preferred Stock bear to each
other.
In addition, as long as any Class B Preferred Shares are outstanding, the
Corporation may not purchase, redeem or otherwise acquire any Parity Preferred
Stock (except with any Junior Stock and cash in lieu of fractional shares of
such Junior Stock in connection therewith) unless: (i) full dividends on all
outstanding shares of Senior Preferred Stock and Parity Preferred Stock have
been paid, or declared and set aside for payment, for all dividend periods
terminating on or prior to the payment date of such Senior Preferred Stock or
Parity Preferred Stock purchase, redemption or other acquisition and for the
current dividend period, to the extent such Senior Preferred Stock and Parity
Preferred Stock dividends are cumulative; (ii) the Corporation has paid or set
aside all amounts, if any, then or theretofore required to be paid or set aside
for all purchase, retirement, and sinking funds, if any, for any outstanding
shares of Senior Preferred Stock and Parity Preferred Stock; (iii) the
Corporation is not in default of any of its obligations to redeem any
outstanding shares of Senior Preferred Stock or Parity Preferred Stock unless
all Parity Preferred Stock as to which such a default exists is purchased or
redeemed on a pro rata basis.
(d) Any dividend payment made on the Class B Preferred Shares shall first
be credited against the earliest accrued but unpaid dividend due with respect to
the Class B Preferred Shares.
(e) All dividends paid with respect to the Class B Preferred Shares shall
be paid pro rata to the holders entitled thereto.
(f) Holders of the Class B Preferred Shares shall be entitled to receive
dividends in preference to and in priority over any dividends upon any shares of
the Corporation ranking junior to the Class B Preferred Shares as to dividends,
but subject to the rights of holders of shares of the Corporation having a
preference and a priority over the payment of dividends on the Class B Preferred
Shares.
4. CONVERSION.
(a) Mandatory Conversion. On , 1999, or such earlier date as may
occur as a result of an event set forth in Section 4(e) (the "Maturity Date")
[THREE YEARS AFTER INITIAL ISSUANCE DATE], each outstanding Class B Preferred
Share shall convert automatically (the "Mandatory Conversion") into Common Stock
at the Maturity Exchange Rate in effect on the Maturity Date, and all accrued
and unpaid dividends on such Class B Preferred Share (other than previously
declared dividends payable to the holder of record on a prior date) through and
including the Maturity Date, whether or not declared, shall be immediately due
and payable in cash out of funds legally available for the payment of dividends,
subject to the conversion of the Class B Preferred Shares at the option of the
holder at any time prior to the Maturity Date. Dividends on the Class B
Preferred Shares shall cease to accrue and such shares shall cease to be
outstanding on the Maturity Date. The Corporation shall make such arrangements
as it deems appropriate for the issuance of certificates representing shares of
Common Stock and for the payment of cash in respect of such accrued and unpaid
dividends, if any, or cash in lieu of fractional shares, if any, in exchange for
and contingent upon surrender of certificates representing the Class B Preferred
Shares, and the Corporation may defer the payment of dividends on shares of
Common Stock issuable upon conversion of the Class B Preferred Shares and the
voting thereof until, and make such payment and voting contingent upon, the
surrender of such certificates representing the Class B Preferred Shares,
provided that the Corporation shall give the holders of the Class B Preferred
Shares such notice of any such actions as the Corporation deems appropriate and
upon such surrender such holders shall be entitled to receive such dividends
declared and paid on such shares of Common Stock subsequent to the Maturity
Date. Amounts payable in cash in respect of the Class B Preferred Shares or in
respect of such shares of Common Stock shall not bear interest.
(b) Redemption by the Corporation. Class B Preferred Shares are not
redeemable by the Corporation prior to the Maturity Date.
(c) Conversion at Option of Holder. Class B Preferred Shares are
convertible at the option of the holder thereof at any time prior to the
Maturity Date into shares of Common Stock at a rate of 0.806 of a
C-7
<PAGE> 202
share of Common Stock for each Class B Preferred Share (the "Optional Conversion
Rate") (equivalent to a conversion price of $35.96 per share of Common Stock),
subject to adjustment as set forth below.
Conversion of Class B Preferred Shares at the option of the holder may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to the
Corporation or in blank, to the office or agency to be maintained by the
Corporation for that purpose (and, if applicable, cash payment of an amount
equal to the dividend payable on such shares), and otherwise in accordance
with conversion procedures established by the Corporation. Each optional
conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the foregoing requirements shall have
been satisfied and dividends will cease to accrue in respect of Class B
Preferred Shares at such time. The conversion shall be at the Optional
Conversion Rate in effect at such time and on such date.
Holders of Class B Preferred Shares at the close of business on a record
date for any payment of declared dividends shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding Dividend Payment Date. Except as provided above, upon
any optional conversion of Class B Preferred Shares, the Corporation shall make
no payment or allowance for unpaid dividends, whether or not in arrears, on
converted Class B Preferred Shares or for previously declared dividends or
distributions on the shares of Common Stock issued upon such conversion.
(d) Maturity Exchange Rate and Optional Conversion Rate Adjustments. The
Maturity Exchange Rate and the Optional Conversion Rate shall each be subject to
adjustment from time to time as provided below in this section (d).
(i) If the Corporation shall, after the Initial Issuance Date:
(A) pay a stock dividend or make a distribution with respect to its
Common Stock in shares of such Common Stock,
(B) subdivide or split its outstanding Common Stock into a greater
number of shares,
(C) combine its outstanding shares of Common Stock into a smaller
number of shares, or
(D) issue any shares of capital stock of the Corporation as a
distribution with respect to, or by reclassification of, its Common
Stock (other than the Rights, Equity Securities covered under Section
4(d)(ii), and distributions pursuant to Section 5 hereof),
then, in any such event, (1) the Maturity Exchange Rate in effect
immediately prior to such event shall be adjusted such that (aa) the Issue
Price and the Conversion Price shall each be adjusted by multiplying them
by a fraction, the numerator of which is one and the denominator of which
is the number of shares of Common Stock of the Corporation that a holder of
one share of Common Stock prior to any event described above would hold
after such event (assuming the issuance of fractional shares) (the
"Recapitalization Adjustment Ratio"), and (bb) the ratios set forth in (a),
(b) and (c) of the definition of Maturity Exchange Rate shall each be
adjusted by multiplying them by a fraction, the numerator of which is one
and the denominator of which is the Recapitalization Adjustment Ratio; and
(2) the Optional Conversion Rate in effect immediately prior to such event
shall be adjusted by multiplying it by a fraction, the numerator of which
is one and the denominator of which is the Recapitalization Adjustment
Ratio. Such adjustment shall become effective at the opening of business on
the Business Day next following the record date for determination of
stockholders entitled to receive such dividend or distribution, in the case
of a dividend or distribution, and shall become effective immediately after
the effective date, in the case of a subdivision, split, combination or
reclassification. Such adjustment shall be made successively. In the case
of an event described in subsection (D) above, each Class B Preferred Share
shall become convertible into shares of capital stock of the Corporation as
to which a holder of Common Stock immediately prior to such a distribution
shall be entitled, or into which the Common Stock has become reclassified,
at the Maturity Exchange Rate or Optional Conversion Rate as modified by
this subsection (i). In the event of any such reclassification into more
than one resulting class of
C-8
<PAGE> 203
capital stock of the Corporation, the shares of each such resulting class
issuable upon conversion of a Class B Preferred Share shall be in the same
proportion, if possible, or if not possible, in substantially the same
portion, which the total number of shares of such class resulting from such
reclassification bears to the total number of shares of all classes
resulting from all such reclassifications.
(ii) If the Corporation shall, after the Initial Issuance Date, issue
Equity Securities (other than Common Stock, the Rights or Exempt Issuances)
("Issued Equity Securities") to all holders of its Common Stock entitling
them (for a period not exceeding 45 days from the later of the record date
and the Determination Date of such issuance) to subscribe for or purchase
shares of Common Stock or other Equity Securities at a price per share less
than the Fair Market Value of the Common Stock or other Equity Security to
be acquired in effect on the Determination Date for such issuance of Equity
Securities (treating the price per share of the Equity Securities to be
acquired as equal to (x) the sum of (A) the Fair Market Value of the
consideration payable for a unit of the Equity Security plus (B) the Fair
Market Value of any additional consideration initially payable upon the
exercise, conversion or exchange of such security into Common Stock divided
by (y) the number of shares of Common Stock initially underlying or that
may be acquired upon the exercise, conversion or exchange of such Equity
Security) then, in any such event unless such Equity Securities are issued
to holders of Class B Preferred Shares on a pro rata basis with the shares
of Common Stock based on the Optional Conversion Rate on the date
immediately preceding the record date for such issuance, (A) the Maturity
Exchange Rate in effect on the record date described below shall be
adjusted (1) by multiplying the ratios set forth in (a), (b) and (c) of the
definition of Maturity Exchange by a fraction of which the numerator shall
be the sum of (x) the number of shares of Common Stock outstanding on the
date of issuance of such Issued Equity Securities immediately prior to such
issuance, plus (y) the number of additional shares of Common Stock offered
for subscription or purchase pursuant to such Issued Equity Securities
(including the Common Stock that may be acquired upon the exercise,
conversion or exchange of the Equity Securities), and of which the
denominator shall be the sum of (x) the number of shares of Common Stock
outstanding on the date of issuance of such Issued Equity Securities
immediately prior to such issuance, plus (y) the number of additional
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or purchase
(including, without limitation, the Fair Market Value of the consideration
payable for a unit of the Equity Securities so offered plus the Fair Market
Value of any additional consideration payable upon exercise, conversion or
exchange of such Equity Securities) would purchase at such Fair Market
Value as of the record date for such issuance (the "Anti-Dilution
Adjustment Ratio") and (2) by multiplying the Issue Price and the
Conversion Price by a fraction equal to one divided by the Anti-Dilution
Adjustment Ratio, and (B) the Optional Conversion Ratio in effect on the
record date described below shall be adjusted by multiplying it by the
Anti-Dilution Adjustment Ratio. Such adjustment shall become effective at
the opening of business on the Business Day next following the record date
for the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Maturity Exchange Rate and
the Optional Conversion Rate shall each be readjusted to the Maturity
Exchange Rate and the Optional Conversion Rate which would then be in
effect had the adjustments been made upon the issuance of such rights or
warrants upon the basis of delivery of only the number of shares of Common
Stock actually delivered. Such adjustment shall be made successively.
(iii) If the Corporation shall, after the Initial Issuance Date, make
an Extraordinary Dividend or effect a Pro Rata Repurchase of Common Stock,
then unless such Extraordinary Dividend is made to each holder of Class B
Preferred Shares on a pro rata basis with the shares of Common Stock based
on the Optional Conversion Rate in effect on the record date for such
payment or distribution, in any such event, then (A) the Maturity Exchange
Rate in effect immediately prior to such event shall be adjusted (1) by
multiplying the ratios set forth in (a), (b) and (c) of the definition of
Maturity Exchange Rate by a fraction of which the numerator shall be the
product of (i) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase (minus, in the
case of a Pro Rata Repurchase, the number of shares of Common Stock
repurchased by the Corporation) and (ii) the Fair Market Value per share of
the Common Stock on the record date for the determination
C-9
<PAGE> 204
of stockholders entitled to receive such Extraordinary Dividend or, with
respect to a Pro Rata Purchase, on the Trading Day immediately preceding
the first public announcement of such Pro Rata Repurchase, and of which the
denominator shall be (i) the product of (x) the number of shares of Common
Stock outstanding immediately before such Extraordinary Distribution or Pro
Rata Repurchase and (y) the Fair Market Value of a share of Common Stock on
the record date with respect to such Extraordinary Distribution, or, in the
case of a Pro Rata Repurchase on the Trading Day immediately preceding the
first public announcement by the Corporation or any of its Affiliates of
the intent to effect such Pro Rata Repurchase, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of
the Pro Rata Repurchase, as the case may be (provided that such denominator
shall never be less than 1.0) (the "Distribution Adjustment Ratio") and (2)
by multiplying the Issue Price and the Conversion Price by a fraction of
which the numerator shall be one and the denominator shall be the
Distribution Adjustment Ratio; and (B) the Optional Conversion Rate in
effect immediately prior to such event shall be adjusted by multiplying it
by the Distribution Adjustment Ratio; provided, however, that no Pro Rata
Repurchase shall cause an adjustment to the Maturity Exchange Rate or the
Optional Conversion Rate unless the amount of all cash dividends and
distributions made to holders of Common Stock over the twelve-month period
ending on the Effective Date of such Pro Rata Repurchase, when combined
with the aggregate amount of all Pro Rata Repurchases, including such Pro
Rata Repurchase (for all purposes of this Section 4(d)(iii) including only
that portion of the Fair Market Value of the aggregate purchase price of
each Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the Trading Day immediately
preceding the first public announcement by the Corporation or any of its
Affiliates of the intent to effect each such Pro Rata Repurchase), the
Effective Dates of which fall within such period, exceeds twelve and
one-half percent (12 1/2%) of the aggregate Fair Market Value of all shares
of Common Stock outstanding on the Trading Day immediately preceding the
first public announcement by the Corporation or any of its Affiliates of
the intent to effect such Pro Rata Repurchase. Such adjustment shall become
effective on the opening of business on the Business Day next following the
record date for the determination of stockholders entitled to receive such
dividend or distribution. Such adjustment shall be made successively.
(iv) If the Corporation shall, after the Initial Issuance Date, make
an International Distribution, and on the record date for such
International Distribution the Fair Market Value of the Common Stock is
greater than the Conversion Price, then each holder of Class B Preferred
Shares as of the record date of such distribution shall receive such
International Distribution on a pro rata basis with the shares of Common
Stock based on the Optional Conversion Rate in effect on the record date
for such International Distribution, and the Issue Price and the Conversion
Price shall be adjusted by multiplying the Issue Price and the Conversion
Price by a fraction, of which the numerator shall be (i) the product of (x)
the number of shares of Common Stock outstanding immediately prior to such
International Distribution and (y)(i) the Fair Market Value of a share of
Common Stock on the record date with respect to such International
Distribution, minus (ii) the Fair Market Value of the International
Distribution, and of which the denominator shall be the product of (x) the
number of shares of Common Stock outstanding immediately prior to such
International Distribution and (y) the Fair Market Value per share of the
Common Stock on the record date for the determination of stockholders
entitled to receive such International Dividend (the "International
Adjustment Rate"). With respect to all shares of Series B Preferred Shares
outstanding and subsequently issued, the dividend payable pursuant to
Section 2(a) hereof and the Liquidation Amount shall each be adjusted by
multiplying each of them by the International Adjustment Rate. Such
adjustment shall be made successively. In the event that this subsection
(iv) is applicable, then the provisions of subsection (iii) shall not
apply. If this subsection (iv) is not applicable, then the provisions of
subsection (iii) shall apply to such International Distribution. All
adjustments pursuant to this subsection shall become effective on the
opening of business on the Business Day next following the record date for
the determination of stockholders entitled to receive such International
Distribution. If the Corporation has received an opinion of a nationally
recognized law firm or accounting firm that the procedure set forth in this
subsection (iv) would result in an adverse tax consequence to the
Corporation or the holders of the Common Stock, then the provisions of this
subsection (iv) shall not apply, and the provisions of subsection (iii)
shall be applicable.
C-10
<PAGE> 205
(v) In case the Corporation shall, at any time or from time to time
while any of the shares of Class B Preferred Shares are outstanding, issue,
sell or exchange shares of Common Stock (other than (i) pursuant to any
Rights, (ii) Exempt Issuances or pursuant to Equity Securities issued as
Exempt Issuances, (iii) pursuant to Equity Security theretofore outstanding
entitling the holder to purchase or acquire shares of Common Stock, (iv) a
dividend or distribution to holders of Common Stock or (v) distributions
pursuant to Section 5 hereof) for a consideration having a Fair Market
Value on the Determination Date less than the Fair Market Value of such
shares of Common Stock on the Determination Date, then (A) the Maturity
Exchange Rate in effect immediately prior to such issuance, sale or
exchange shall be adjusted (1) by multiplying the ratios set forth in (a),
(b) and (c) of the definition of Maturity Exchange Rate by a fraction of
which the numerator shall be the sum of (x) number of shares of Common
Stock outstanding on the date of such issuance immediately prior to such
issuance, plus (y) the number of additional shares of Common Stock so
issued, and of which the denominator shall be the sum of (x) the number of
shares of Common Stock outstanding on the date of such issuance immediately
prior to such issuance, plus (y) the number of additional shares of Common
Stock which the aggregate price paid for the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Fair Market Value as of the Determination Date (the "New Issuance
Adjustment Ratio") and (2) by multiplying the Issue Price and the
Conversion Price by a fraction equal to one divided by the New Issuance
Adjustment Ratio, and (B) the Optional Conversion Ratio in effect
immediately prior to such issuance shall be adjusted by multiplying it by
the New Issuance Adjustment Ratio. Notwithstanding the foregoing, the
provisions of this subsection (iv) shall not apply if the Board of
Directors of the Corporation has determined that the value of any
consideration to be received in exchange for the issuance, sale or exchange
of such Common Stock to any Third Party following arm's length negotiations
shall be based upon the Volume-Weighted Average Trading Price or closing
price or similar measure of the Common Stock or of the consideration to be
paid for the Common Stock, as measured on a single date or over a period of
days within a reasonable amount of time prior to the issuance, sale or
exchange of such Common Stock.
(vi) In case the Corporation shall, at any time or from time to time
while any of the shares of Class B Preferred Shares are outstanding, issue,
sell or exchange any Equity Security (other than Common Stock, the Rights,
Exempt Issuances or distributions pursuant to Section 5 hereof) other than
any such issuance to all holders of shares of Common Stock as a dividend or
distribution (including by way of a reclassification of shares or a
recapitalization of the Corporation) for a consideration having a Fair
Market Value on the Determination Date less than the Non-Dilutive Amount,
then (A) the Maturity Exchange Rate shall be adjusted (1) by multiplying
the ratios set forth in (a), (b) and (c) of the definition of Maturity
Exchange Rate by a fraction, the numerator of which shall be the product of
(x) the Fair Market Value of a share of Common Stock on the Determination
Date and (y) the sum of the number of shares of Common Stock outstanding on
such day plus the maximum number of shares of Common Stock underlying or
which could be acquired pursuant to such Equity Security at the time of the
issuance, sale or exchange of such Equity Security (assuming shares of
Common Stock could be acquired pursuant to such Equity Security at such
time), and the denominator of which shall be the sum of (x) the Fair Market
Value of all the shares of Common Stock outstanding on Determination Date
plus (y) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of such Equity
Security plus (z) the Fair Market Value as of the Determination Date of the
consideration which the Corporation would receive upon exercise, conversion
or exchange in full of all such Equity Securities (the "Equity Security
Issuance Adjustment Ratio") and (2) by multiplying the Issue Price and the
Conversion Price by a fraction equal to one over the Equity Security
Adjustment Ratio, and (B) the Optional Conversion Ratio shall be adjusted
by multiplying it by the Equity Security Adjustment Ratio. Notwithstanding
the foregoing, the provisions of this subsection (vi) shall not apply if
the Board of Directors has determined that the value of any consideration
to be received in exchange for the issuance, sale or exchange of such
Equity Securities to a Third Party following arm's length negotiations
shall be based upon the Volume-Weighted Average Trading Price or closing
price or similar measure of the Equity Securities or of the consideration
to be paid therefor, as measured on a single day
C-11
<PAGE> 206
or over a period of days within a reasonable amount of time prior to the
issuance, sale or exchange of such Equity Securities.
(vii) Any shares of Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of
business on the record date for such dividend for purposes of calculating
the number of outstanding shares of Common Stock under subsection (ii)
above.
(viii) The Corporation shall also be entitled to make such adjustments
in the Maturity Exchange Rate and the Optional Conversion Rate as it in its
sole discretion shall determine to be advisable in order that any stock
dividends, subdivisions of shares, distribution of rights to purchase stock
or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction which could be treated as any of
the foregoing transactions pursuant to Section 305 of the Internal Revenue
Code of 1986, as amended) made by the Corporation to its stockholders after
the Initial Issuance Date shall not be taxable.
(ix) In any case in which subsection 4(d) shall require that an
adjustment as a result of any event become effective at the opening of
business on the Business Day next following a record date and the date
fixed for conversion pursuant to subsection 4(a) or 4(c) occurs after such
record date, but before the occurrence of such event, the Corporation may,
in its sole discretion, elect to defer the following until after the
occurrence of such event: (A) issuing to the holder of any converted Class
B Preferred Shares the additional shares of Common Stock issuable upon such
conversion over the shares of Common Stock issuable before giving effect to
such adjustments and (B) paying to such holder any amount in cash in lieu
of a fractional share of Common Stock pursuant to subsection 4(i).
(x) All adjustments to the Maturity Exchange Rate and the Optional
Conversion Rate shall be calculated to the nearest 1/1000th of a share of
Common Stock. No adjustment in the Maturity Exchange Rate or the Optional
Conversion Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however,
that any adjustment which by reason of this subsection (x) is not required
to be made shall be carried forward and taken into account in any
subsequent adjustment, and provided further that any adjustment shall be
required and made in accordance with the provisions of this Section (other
than this subparagraph (x)) not later than such time as may be required in
order to preserve the taxfree nature of a distribution to the holders of
shares of Common Stock. If any action or transaction would require
adjustment to the Maturity Exchange Rate or the Optional Conversion Rate
pursuant to more than one paragraph of this Section 4, only one adjustment
shall be made and such adjustment shall be the amount of the adjustment
that has the highest absolute value.
(e) Adjustment for Consolidation or Merger. In case of (A) any
consolidation or merger to which the Corporation is a party (other than a merger
or consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged), (B) any sale or transfer to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, or (C) any statutory exchange of securities with another
corporation (other than in connection with a merger or acquisition in which the
Corporation is the surviving or continuing corporation and in which the Common
Stock outstanding immediately prior to the merger or consolidation remains
unchanged) (each a "Reorganization Event"), then the Maturity Date of the Class
B Preferred Shares shall accelerate to be the time and date that is immediately
prior to the effective time of the Reorganization Event, and the Class B
Preferred Shares shall automatically convert on such date in accordance with the
procedure set forth in Section 4(a) without any further action on the part of
the holder or the Corporation. Notwithstanding the foregoing, a transaction
described in (A), (B) or (C) above shall only be a Reorganization Event if it is
a bona fide transaction not entered into primarily for the purposes of causing
the Maturity Date to occur.
For purposes of the immediately preceding paragraph and subsection 4(g)
(iii), any sale or transfer to another corporation of property of the
Corporation which did not account for at least 50% of the consolidated net
income of the Corporation for its most recent fiscal year ending prior to the
consummation of such
C-12
<PAGE> 207
transaction shall not in any event be deemed to be a sale or transfer of the
property of the Corporation as an entirety or substantially as an entirety.
(f) Notice of Adjustments. Whenever the Maturity Exchange Rate and
Optional Conversion Rate are adjusted as herein provided, the Corporation shall:
(i) forthwith compute the adjusted Maturity Exchange Rate and Optional
Conversion Rate in accordance herewith and prepare a certificate signed by
an officer of the Corporation setting forth the adjusted Maturity Exchange
Rate and the Optional Conversion Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which
such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and file such
certificate forthwith with the transfer agent for the Class B Preferred
Shares and the Common Stock; and
(ii) make a prompt public announcement and mail a notice to the
holders of the outstanding Class B Preferred Shares stating that the
Maturity Exchange Rate and the Optional Conversion Rate have been adjusted,
the facts requiring such adjustment and upon which such adjustment is based
and setting forth the adjusted Maturity Exchange Rate and Optional
Conversion Rate, such notice to be mailed at or prior to the time the
Corporation mails an interim statement to its stockholders covering the
fiscal quarter during which the facts requiring such adjustment occurred,
but in any event within 45 days of the end of such fiscal quarter.
(g) Notices. In case, at any time while any of the Class B Preferred
Shares are outstanding,
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash dividends (other than
Extraordinary Dividends), or
(ii) the Corporation shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or purchase shares
or its Common Stock or of any other Equity Securities, or
(iii) the Corporation shall authorize any reclassification of its
Common Stock (other than a subdivision or combination thereof) or capital
stock or any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required
(except for a merger of the Corporation into one of its subsidiaries solely
for the purpose of changing the corporate name or corporate domicile of the
Corporation to another state of the United States and in connection with
which there is no substantive change in the rights or privileges of any
securities of the Corporation other than changes resulting from differences
in the corporate statutes of the then existing and the new state of
domicile), or the sale or transfer to another corporation of the property
of the Corporation as an entirety or substantially as an entirety, or
(iv) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, or
(v) there shall occur any Pro Rata Repurchase,
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Class B Preferred Shares,
and shall cause to be mailed to the holders of Class B Preferred Shares at
their last addresses as they shall appear on the stock register, at least
10 days before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified),
a notice stating (A) the date on which a record is to be taken for the
purpose of such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants
are to be determined, or (B) the date on which any such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property (including cash), if any,
deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation. or winding up. The failure to give or
receive the notice
C-13
<PAGE> 208
required by this subsection (g) or any defect therein shall not affect the
legality or validity of such dividend, distribution, right or warrant or
other action.
(h) Effect of Conversions. The person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be usable upon
any conversion or redemption shall be deemed to have become on the date of any
such conversion or redemption the holder or holders of record of the shares
represented thereby; provided, however, that any such surrender on any date when
the stock transfer books of the Corporation shall be closed shall constitute the
person or persons in whose name or names the certificate or certificates for
such shares are to be issued as the record holder or holders thereof for all
purposes at the opening of business on the next succeeding day on which such
stock transfer books are open.
(i) No Fractional Shares. No fractional shares or script representing
fractional shares of Common Stock shall be issued upon the redemption or
conversion of any Class B Preferred Shares. In lieu of any fractional share
otherwise issuable in respect of the aggregate number of Class B Preferred
Shares of any holder which are converted upon Mandatory Conversion or any
optional conversion, such holder shall be entitled to receive an amount in cash
(computed to the nearest cent) equal to the same fraction of (i) the Maturity
Price of the Common Stock, in the case of a Mandatory Conversion, or (ii) the
Current Market Price as of the second Trading Date immediately preceding the
effective date of conversion, in the case of an optional conversion by a holder.
If more than one share shall be surrendered for conversion at one time by or for
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
Class B Preferred Shares so surrendered.
(j) Re-issuance. Class B Preferred Shares that have been issued and
reacquired in any manner, including shares purchased, exchanged, redeemed or
converted, shall not be reissued as 6.00% Class B Mandatorily Convertible
Preferred Stock, Series 1996 and shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) have the status of authorized
and unissued shares of the Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock.
(k) Payment of Taxes. The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the redemption or conversion of share of
Class B Preferred Shares pursuant to this Section 4; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of Class B
Preferred Shares redeemed or converted or to be redeemed or converted, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid.
(l) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock and/or its issued Common Stock held in
its treasury, for the purpose of effecting any Mandatory Conversion of the Class
B Preferred Shares or any conversion of the Class B Preferred Shares at the
option of the holder, the full number of shares of Common Stock then deliverable
upon any such conversion of all outstanding Class B Preferred Shares.
C-14
<PAGE> 209
5. CONTINGENT PRICE ADJUSTMENT PAYMENT.
(a) Holders of outstanding Class B Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available therefor, a contingent payment (the "Contingent Payment") in the
amount set forth below if the Volume-Weighted Average Trading Price of the Class
B Preferred Shares over the 30 consecutive calendar days commencing ,
1996 [THE DATE THAT IS THREE MONTHS AFTER THE INITIAL ISSUANCE DATE] and ending
, 1996 (the "Contingent Payment Calculation Date") is as follows:
<TABLE>
<CAPTION>
TRADING PRICE
- ------------------ CUMULATIVE AMOUNT
PER SHARE
-----------------
($ MILLION)
<S> <C> <C>
$29.000 to $28.736 0.00 in each case divided by the
$28.735 to $28.473 2.00 total number of shares of Class
$28.472 to $28.341 4.00 B Preferred Stock issued and
$28.340 to $28.209 6.00 outstanding as of the
$28.208 to $28.077 8.00 Contingent Payment Calculation
$28.076 to $27.945 10.00 Date
$27.944 to $27.814 12.50
$27.813 to $27.550 15.00
Less than $27.550 16.85
</TABLE>
The Contingent Payment shall be sent no later than the tenth Business Day
following the Contingent Payment Date to holders of record as of the Contingent
Payment Date.
(b) The Corporation may, at its option, pay the Contingent Payment in the
form of capital stock by delivering a number of shares of Class C Preferred
Stock or Common Stock equal to the Contingent Payment Amount divided by the
Volume-Weighted Average Trading Price of the Class C Preferred Stock or Common
Stock, as applicable, over the 30 day period described above, or cash in lieu of
fractional shares at such price.
6. LIQUIDATION RIGHTS.
(a) The Class B Preferred Shares will rank on a parity as to preference on
distribution of assets upon liquidation with the Class C Preferred Stock, and
with any future preferred stock issued by the Corporation that by its terms
ranks pari passu with the Class B Preferred Shares with respect to distribution
of assets upon liquidation.
(b) The Class B Preferred Shares will be subordinate as to preference on
distribution of assets upon liquidation of dividends to any future preferred
stock issued by the Corporation that by its terms is senior to the Class B
Preferred Shares with respect to distribution of assets upon liquidation.
(c) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
Class B Preferred Shares then outstanding, after payment or provision for
payment of the debts and other liabilities of the Corporation and the payment or
provision for payment of any distribution on any shares of the Corporation
having a preference and a priority over the Class B Preferred Shares on
liquidation, and before any distribution to holders of any shares of the
Corporation that are junior and subordinate to the Class B Preferred Shares on
liquidation, including the Common Stock and the Series A Participating Preferred
Stock, shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount per Class B Preferred
Share of cash equal to $29.00, as adjusted pursuant to the terms hereof (the
"Liquidation Amount"), plus an amount equal to all accrued and unpaid dividends
thereon, and shall, after the holders of Common Stock have received an amount
per share of Common Stock equal to the amount paid per Class B Preferred Share,
be entitled to participate on a pro rata basis with the holders of Common Stock.
In the event the assets of the Corporation available for distribution to the
holders of the Class B Preferred Shares upon any dissolution, liquidation or
winding up of the Corporation shall be insufficient to pay in full the
liquidation payments payable to the holders of outstanding Class B Preferred
Shares and of all other series of Preferred Stock that ranks on a parity with
the Class B Preferred Shares in the event of liquidation, the holders of Class B
Preferred Shares and of all other series of such parity Preferred Stock shall
share ratably in such distribution of assets in proportion to the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding Class B Preferred Shares and the holders of outstanding shares of
such parity Preferred Stock were paid in full. Except as
C-15
<PAGE> 210
provided in this Section 6, holders of Class B Preferred Shares shall not be
entitled to any distribution in the event of liquidation, dissolution or winding
up of the affairs of the Corporation.
(d) For the purposes of this Section 6, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the sale, lease, transfer or exchange of all or substantially all
of the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or more
other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger).
7. NO PREEMPTIVE RIGHTS.
The holders of Class B Preferred Shares shall have no preemptive rights,
including preemptive rights with respect to any shares of capital stock or other
securities of the Corporation convertible into or carrying rights or options to
purchase any such shares.
8. VOTING RIGHTS.
(a) The holders of Class B Preferred Shares shall have the right with the
holders of Common Stock to vote in the election of directors and upon each other
matter coming before any meeting of the stockholders on which the holders of
Common Stock are entitled to vote, on the basis of four-fifths of a vote for
each share held (which number shall be adjusted in accordance with adjustments
to the Optional Conversion Ratio). The holders of Class B Preferred Shares and
Common Stock shall vote together as one class except as otherwise set forth
herein or as otherwise provided by law or elsewhere in the Certificate of
Incorporation.
(b) If at any time dividends payable on the Class B Preferred Shares or any
other series of Parity Preferred Stock are in arrears and unpaid in an aggregate
amount equal to or exceeding the aggregate amount of dividends payable thereon
for six quarterly dividend periods, or if any other series of Preferred Stock
shall be entitled for any other reason to exercise voting rights, separate from
the Common Stock, to elect any Directors of the Corporation ("Preferred Stock
Directors"), the holders of the Class B Preferred Shares, voting separately as a
class with the holders of all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable, shall have the right to
vote for the election of two Preferred Stock Directors of the Corporation, such
Directors to be in addition to the number of Directors constituting the Board of
Directors immediately prior to the accrual of such right. Such right of the
holders of Class B Preferred Shares to elect two Preferred Stock Directors
shall, when vested, continue until all dividends in arrears on the Class B
Preferred Shares and such other series of Preferred Stock shall have been paid
in full and the right of any other series of Preferred Stock to exercise voting
rights, separate from the Common Stock, to elect Preferred Stock Directors shall
terminate or have terminated and, when so paid, and any such termination occurs
or has occurred, such right of the holders of Class B Preferred Shares to elect
two Preferred Stock Directors separately as a class shall cease, subject always
to the same provisions for the vesting of such right of the holders of the Class
B Preferred Shares to elect two Preferred Stock Directors in the case of future
dividend defaults.
The term of office of each Director elected pursuant to the preceding
paragraph shall terminate on the earlier of (i) the next annual meeting of
stockholders at which a successor shall have been elected and qualified or (ii)
the termination of the right of the holders of Class B Preferred Shares and such
other series of Preferred Stock to vote for Directors pursuant to the preceding
paragraph. Vacancies on the Board of Directors resulting from the death,
resignation or other cause of any such Director shall be filled exclusively by
no less than two-thirds of the remaining Directors and the Director so elected
shall hold office until a successor is elected and qualified.
(c) For as long as any Class B Preferred Shares remain outstanding, the
affirmative consent of the holders of at least two-thirds thereof actually
voting (voting separately as a class) given in person or by proxy, at any annual
meeting or special meeting of the stockholders called for such purpose, shall be
necessary to amend, alter or repeal any of the provisions of the Certificate of
Incorporation of the Corporation which would adversely affect the powers,
preferences or rights of the holders of the Class B Preferred Shares then
C-16
<PAGE> 211
outstanding or reduce the minimum time required for any notice to which holders
of Class B Preferred Shares then outstanding may be entitled; provided, however,
that any such amendment, alteration or repeal that would authorize, create or
increase the authorized amount of any shares of stock (whether or not already
authorized) ranking junior to, on a parity with, or senior to the Class B
Preferred Shares with respect to payment of dividends or payment upon
liquidation shall be deemed not to affect adversely such powers, preferences or
rights and shall not be subject to approval by the holders of Class B Preferred
Shares; and provided further that the holders of the Class B Preferred Shares
shall not have any voting rights with respect to the amendment, alteration or
repeal of any provisions of the Certificate of Incorporation of the Corporation
approved at a meeting of the stockholders the record date of which is prior to
the issuance of any Class B Preferred Shares.
(d) Except as set forth in this Section 8 or as required by law, the
holders of the Class B Preferred Shares shall not have any voting rights.
IN WITNESS WHEREOF, AirTouch Communications, Inc. has caused this
certificate to be executed this day of , 1996.
AIRTOUCH COMMUNICATIONS, INC.
By:
C-17
<PAGE> 212
ANNEX D
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
4.25% CLASS C CONVERTIBLE PREFERRED STOCK,
SERIES 1996
OF
AIRTOUCH COMMUNICATIONS, INC.
AIRTOUCH COMMUNICATIONS, INC. (the "Corporation"), a Delaware corporation
governed by the provisions of the General Corporation Law of the State of
Delaware, as amended, hereby certifies that, under authority conferred upon the
Board of Directors by the Certificate of Incorporation of the Corporation and
the provisions of Section 151 and Section 141 of the General Corporation Law of
the State of Delaware, the Board of Directors at a meeting held on April 4, 1996
duly adopted the following resolutions:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation by the Certificate of Incorporation and Section 151 of the
Delaware General Corporation Law, the Board of Directors hereby approves the
amount, preferences and rights, including voting rights, of this Corporation's
4.25% Class C Convertible Preferred Stock, Series 1996 (the "Class C
Preferred"), as presented to the Board of Directors; and be it further
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation by the Certificate of Incorporation and Section 141 of the
Delaware General Corporation Law, a committee known as the Preferred Stock
Committee, of which Arun Sarin shall be the sole member, is established, and
that such committee is authorized to incorporate the amount, rights, and
preferences of each of the Class B Preferred and the Class C Preferred, as
approved by this Board of Directors, into Certificates of Designation,
Preferences and Rights to be filed with the Secretary of State of the State of
Delaware, provided that the Preferred Stock Committee may approve modifications
to the amounts, preferences and rights of the Class B Preferred and the Class C
Preferred, other than the voting rights.
The Corporation further certifies that under the authority conferred upon
the Preferred Stock Committee by resolutions of the Board of Directors adopted
at a meeting held on April 4, 1996 and the provisions of Sections 141 and 151 of
the General Corporation Law of the State of Delaware, the Preferred Stock
Committee of the Board of Directors duly adopted the following resolution:
RESOLVED, that under authority conferred upon the Preferred Stock Committee
by resolutions of the Board of Directors duly adopted at a meeting held on April
4, 1996 and the provisions of Section 141 and 151 of the General Corporation Law
of the State of Delaware, the Preferred Stock Committee hereby fixes the amount,
preferences and rights of the shares of the 4.25% Class C Mandatorily
Convertible Preferred Stock, Series 1996, as set forth in Schedule B attached
hereto, and the proper officers of the Corporation are hereby authorized and
directed to execute and file a Certificate of Designation, Preferences and
Rights containing such provisions with the Secretary of the State of Delaware
and with such other governmental agencies or authorities as any of such officers
may deem appropriate.
D-1
<PAGE> 213
SCHEDULE B
SECTION 1. DESIGNATION AND AMOUNT.
The designation of the series of Preferred Stock created by this
Certificate shall be "4.25% Class C Convertible Preferred Stock, Series 1996,
par value $0.01 per share" (the "Class C Preferred Shares"), and the number of
shares constituting such series shall be 19,000,000. Such number of shares may
be increased or decreased by resolution of the Board of Directors, provided that
no decrease shall reduce the number of Class C Preferred Shares to a number less
than that of the Class C Preferred Shares then outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
SECTION 2. DEFINITIONS.
As used in this Certificate:
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of California or the State
of New York are authorized or obligated by law or executive order to close
or are closed because of a banking moratorium or otherwise.
"Current Market Price" per share of Common Stock at any date shall be
deemed to be the Volume-Weighted Average Trading Price over the fifteen
consecutive Trading Day period ending on and including such date of
determination; provided, however, if any event that results in an
adjustment of the Exchange Rate occurs during such fifteen Trading Day
period, the Current Market Price as determined pursuant to the foregoing
shall be appropriately adjusted to reflect the occurrence of such event;
"Call Price" has the meaning set forth in Section 4(a).
"Class B Preferred Shares" means the shares of 6.0% Class B
Mandatorily Convertible Preferred Stock, 1996 Series.
"Class C Preferred Shares" means the shares of 4.25% Class C
Convertible Preferred Stock, 1996 Series.
"Determination Date" means, with respect to the issuance, sale or
exchange of any Equity Securities, the later of (a) the date upon which the
price or the amount of consideration to be received in consideration of
such issuance, sale or exchange is fixed and (b) the date upon which a
public announcement of the transaction is made, provided that if no public
announcement is made, the Determination Date shall be the date set forth in
(a).
"Dividend Payment Date" has the meaning set forth in Section 3(a).
"Equity Securities" shall mean the Common Stock or any debt, equity or
other security or contractual right, in each case that is convertible into
or exercisable or exchangeable for, or based on the value of, the Common
Stock or any warrants, options or other rights to purchase the Common Stock
or other Equity Securities (other than Rights).
"Exchange Rate" has the meaning set forth in Section 4(c).
"Exempt Issuance" means (a) Equity Securities issued pursuant to any
existing or future employee stock purchase plan, employee stock option plan
or other employee or director benefit plan or (b) Equity Securities issued
pursuant to any stockholder purchase plan or plan for the reinvestment of
dividends or interest, to the extent that the consideration paid for the
Equity Securities issued pursuant to any such stockholder or dividend or
interest reinvestment plan is not less than 95% of the Fair Market Value of
such securities as of the date of the issuance of the Equity Securities.
"Extraordinary Distribution" means any single dividend or other
distribution (including by reclassification of shares or recapitalization
of the Corporation, as well as any such dividend or distribution made in
connection with a merger or consolidation in which the Corporation is the
continuing corporation and the Common Stock is not changed or exchanged) to
holders of Common Stock (effected while any of the
D-2
<PAGE> 214
shares of Class C Preferred Stock are outstanding) (i) of cash, where the
aggregate amount of such single cash dividend or distribution together with
the amount of all cash dividends and distributions made to holders of
Common Stock during the twelve-month period ending on the payment date for
such cash dividend or distribution to holders of Common Stock, when
combined with the aggregate amount of all previous Pro Rata Repurchases
during such period (for this purpose, including only that portion of the
aggregate purchase price of each such Pro Rata Repurchase which is in
excess of the Fair Market Value of the Common Stock repurchased as
determined on the Business Day prior to the public announcement of such Pro
Rata Repurchase made during such period), exceeds twelve and one-half
percent (12 1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the
stockholders entitled to receive such Extraordinary Distribution and (ii)
of any evidences of indebtedness of the Corporation or evidences of
indebtedness or securities of any other person or any other property
(including, without limitation, shares of capital stock of any subsidiary
of the Corporation), or any combination thereof. The Fair Market Value of
any such single dividend or other distribution that, pursuant to clause
(i), constitutes an Extraordinary Distribution shall for purposes of the
first paragraph of Section 4(d)(iii) hereof be the sum of the Fair Market
Value of such Extraordinary Distribution plus the amount of any other cash
dividends and distributions made within the relevant period referred to
above to holders of Common Stock to the extent such other dividends and
distributions were not previously included in the calculation of an
adjustment pursuant to the first paragraph of Section 4(d)(iii) hereof
within such period.
"Fair Market Value" shall mean the Volume-Weighted Average Trading
Price of the Security in question for the five-day period before the
earlier of the day in question and the "ex" date with respect to any
issuance or distribution requiring such computation. The term "ex" date,
when used with respect to any issuance or distribution, means the first day
on which the Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market to
determine that day's Volume-Weighted Average Trading Price. With respect to
any asset or security for which there is no Current Market Price, the Fair
Market Value of such asset or security shall be determined in good faith by
the Board of Directors.
"Issued Equity Securities" has the meaning set forth in Section
4(d)(ii).
"Initial Issuance Date" means the date upon which the first Class C
Preferred Share is initially issued.
"International Distribution" means a distribution to the holders of
Common Stock of any equity interest in an International Entity, on a per
share basis.
"International Entity" means any entity predominantly holding
interests in cellular operations outside the United States that has an
aggregate Fair Market Value of U.S.$1 billion or more.
"Junior Stock" has the meaning set forth in Section 3(b).
"Maturity Date" has the meaning set forth in Section 4(a).
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by
the Corporation of any Equity Securities (other than Common Stock) shall
mean the excess of (i) the Fair Market Value of a share of Common Stock on
the Determination Date multiplied by the maximum number of shares of Common
Stock which could be acquired on such date upon the exercise, conversion or
exchange in full of such Equity Securities (and any Equity Securities
receivable upon exercise, conversion or exchange thereof), whether or not
then exercisable, convertible or exchangeable at such date, if any, over
(ii) the aggregate amount payable pursuant to the exercise, conversion or
exchange of such Equity Securities, whether or not then exercisable,
convertible or exchangeable, to purchase or acquire such maximum number of
shares of Common Stock (and any Equity Securities receivable upon exercise,
conversion or exchange thereof); provided, however, that in no event shall
the Non-Dilutive Amount be less than zero. For purposes of the foregoing
sentence, the amount payable pursuant to the exercise, conversion or
exchange of such Equity Securities to purchase or acquire shares of Common
Stock shall be deemed to be the Fair Market Value of the consideration
payable pursuant to the exercise, conversion or exchange of
D-3
<PAGE> 215
such Equity Securities on the Determination Date (excluding for that
purpose the Fair Market Value of the Equity Security to be so exercised,
converted or exchanged).
"Parity Preferred Stock" has the meaning set forth in Section 3(a).
"Preferred Stock Directors" has the meaning set forth in Section 8(b).
"Pro Rata Repurchases" means any purchase of shares of Common Stock by
the Corporation or any affiliate thereof (as defined in Rule 12b-2 under
the Security Exchange Act of 1934 (the "Exchange Act") pursuant to any
tender offer or exchange offer subject to Section 13(e) of the Exchange
Act, or pursuant to any other offer available to substantially all holders
of Common Stock, whether for cash, shares of capital stock of the
Corporation, other securities of the Corporation, evidences of indebtedness
of the Corporation or any other person or any other property (including,
without limitation, shares of capital stock, other securities or evidences
of indebtedness of a subsidiary of the Corporation), or any combination
thereof, effected while any of the shares of Class C Preferred Shares are
outstanding, pursuant to any tender offer or exchange offer subject to
Section 13(e) of the Exchange Act, or pursuant to any other offer available
to substantially all holders of Common Stock; provided, however, that "Pro
Rata Repurchase" shall not include any purchase of shares by the
Corporation or any subsidiary thereof made in open market transactions
substantially in accordance with the requirements of Rule 10b-18 as in
effect under the Exchange Act or on such other terms and conditions as the
Board of Directors shall have determined are reasonably designed to prevent
such purchases from having a material effect on the trading market for the
Common Stock. The "Effective Date" of a Pro Rata Repurchase shall mean the
date of acceptance of shares for purchase or exchange under any tender or
exchange offer which is a Pro Rata Repurchase or the date of purchase with
respect to any Pro Rata Repurchase that is not a tender or exchange offer.
"Provisional Redemption Date" has the meaning set forth in Section
4(b)(i).
"Provisional Redemption Price" has the meaning set forth in Section
4(b)(i).
"Provisional Redemption Year" has the meaning set forth in Section
4(b)(i).
"Reorganization Event" has the meaning set forth in Section 4(e).
"Rights" means rights of the Corporation issued or issuable under the
Rights Agreement dated September 9, 1994 between the Corporation and The
Bank of New York or pursuant to any successor stockholder rights plan
replacing the Rights Agreement.
"Senior Preferred Stock" has the meaning set forth in Section 3(a).
"Security Issue Date" means the date on which a particular Class C
Preferred Share is issued.
"Third Party" means any person as to which the Corporation does not
own, directly or indirectly, and does not have the power to direct, more
than 20% of the outstanding voting interests.
"Trading Date" shall mean a date on which the New York Stock Exchange
(or any successor thereto) is open for the transaction of business.
"Volume-Weighted Average Trading Price" for any given period means,
for a security, an amount equal to (A) the cumulative sum, for each trade
of such security during such period on the New York Stock Exchange (or such
other principal exchange or over-the-counter market on which such security
is listed), of the product of: (x) the sale price and (y) the number of
shares of the security sold at such price; divided by (B) the total number
of securities so traded during the specified period.
SECTION 3. DIVIDENDS.
(a) Payment of Dividends. The holders of outstanding Class C Preferred
Shares shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cumulative preferential
dividends at the rate per Class C Preferred Share of $2.125 per annum, as
adjusted pursuant hereto, and no more, payable quarterly in arrears on the 15th
day of each February, May, August and
D-4
<PAGE> 216
November, respectively (each such date being hereinafter referred to as a
"Dividend Payment Date"), or, if any Dividend Payment Date is not a Business
Day, then the Dividend Payment Date shall be the next succeeding Business Day.
The first dividend payment shall be for the period from the Initial Issuance
Date to but excluding the first day of the next calendar quarter, and will be
payable on the first Dividend Payment Date thereafter. Each quarterly period
beginning on January 1, April 1, July 1 and October 1 in each year and ending on
and including the day next preceding the first day of the next such quarterly
period shall be a dividend period. Dividends (or amounts equal to accrued and
unpaid dividends) payable on Class C Preferred Shares for any period less than a
full quarterly dividend period will be computed on the basis of a 360-day year
of twelve 30-day months and the actual number of days elapsed in any period less
than one month. The Board of Directors may fix a record date for the
determination of holders of Class C Preferred Shares entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be no
more than 60 calendar days prior to the date fixed for the payment thereof. If
the Security Issue Date of a particular Class C Preferred Share is later than
the Initial Issuance Date solely due to a delay in the surrender by the holder
of a certificate representing a share of capital stock of Cellular
Communications, Inc. ("CCI") pursuant to Section 3.2 of the Agreement and Plan
of Merger between the Corporation and CCI, then, dividends on such Class C
Preferred Share shall be payable from the Initial Issuance Date. If the Security
Issuance Date of a particular Class C Preferred Share is later than the Initial
Issuance Date for reasons other than those described in the preceding sentence,
then dividends on such Class C Preferred Share shall accrue only from the first
day of the dividend period during which such Class C Preferred Share was issued.
Dividends on the Class C Preferred Shares will accrue whether or not there
are funds legally available for the payment of such dividends and whether or not
such dividends are declared on a daily basis from the previous Dividend Payment
Date. Accumulated unpaid dividends shall not bear interest. Dividends will cease
to accrue in respect of Class C Preferred Shares on the Maturity Date or on the
date of their earlier redemption or conversion.
The Class C Preferred Shares will rank on a parity as to payment of
dividends with Class B Preferred Shares, and with any future preferred stock
issued by the Corporation (the "Parity Preferred Stock") that by its terms ranks
pari passu with the Class C Preferred Shares with respect to payment of
dividends.
The Class C Preferred Shares will be subordinate as to payment of dividends
to any future preferred stock issued by the Corporation that by its terms is
senior to the Class C Preferred Shares with respect to payment of dividends (the
"Senior Preferred Stock").
(b) Payment of Dividends on Junior Stock. As long as any Class C Preferred
Shares are outstanding, no dividends or other distributions for any dividend
period (other than dividends payable in shares of, or warrants, rights or
options exercisable for or convertible into shares of, Common Stock or any other
capital stock of the Corporation ranking junior to the Class C Preferred Shares
as to the payment of dividends and distribution of assets upon liquidation,
including the Corporation's Series A Redeemable Participating Preferred Stock,
par value $0.01 per share ("Junior Stock"), and cash in lieu of fractional
shares of such Junior Stock in connection with any such dividend) will be paid
on any Junior Stock unless: (i) full dividends on all outstanding shares of
Senior Preferred Stock and Parity Preferred Stock (including the Class C
Preferred Shares) have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the payment date of such Junior
Stock dividend or distribution and for the current dividend period, to the
extent such Senior Preferred Stock or Parity Preferred Stock dividends are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then
or theretofor required to be paid or set aside for all purchase, retirement, and
sinking funds, if any, for any outstanding shares of Senior Preferred Stock or
Parity Preferred Stock; and (iii) the Corporation is not in default on any of
its obligations to redeem any outstanding shares of Senior Preferred Stock or
Parity Preferred Stock.
In addition, as long as any Class C Preferred Shares are outstanding, no
shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by
the Corporation or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Stock through the issuance of other
Junior Stock (and cash in lieu of fractional shares of such Junior Stock in
connection therewith) or the purchase, redemption, or other acquisition of any
Junior Stock with any Junior Stock (and cash in lieu of fractional
D-5
<PAGE> 217
shares of such Junior Stock in connection therewith)) nor may any funds be set
aside or made available for any sinking fund for the purchase or redemption of
any Junior Stock unless: (i) full dividends on all outstanding shares of Senior
Preferred Stock and Parity Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the date
of such purchase, redemption or acquisition and for the current dividend period,
to the extent such Senior Preferred Stock or Parity Preferred Stock dividends
are cumulative; (ii) the Corporation has paid or set aside all amounts, if any,
then or theretofor required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of Senior
Preferred Stock or Parity Preferred Stock; and (iii) the Corporation is not in
default on any of its obligations to redeem any outstanding shares of Senior
Preferred Stock or Parity Preferred Stock unless all Parity Preferred Stock at
to which such a default exists is purchased or redeemed on a pro rata basis.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
from time to time by the Board of Directors may be declared and paid on the
shares of any Junior Stock and from time to time Junior Stock may be purchased,
redeemed or otherwise acquired by the Corporation or any of its subsidiaries. In
the event of the declaration and payment of any such dividends or other
distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any outstanding Senior Preferred Stock or Parity
Preferred Stock, to share therein according to their respective interests.
(c) Payment of Dividends on Parity Preferred Stock. As long as any Class C
Preferred Shares are outstanding, dividends or other distributions for any
dividend period may not be paid on any outstanding shares of Parity Preferred
Stock (other than dividends or other distributions payable in Junior Stock and
cash in lieu of fractional shares of such Junior Stock in connection therewith),
unless either: (a) (i) full dividends on all outstanding shares of Senior
Preferred Stock and Parity Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the
payment date of such Senior Preferred Stock or Parity Preferred Stock dividend
or distribution and for the current dividend period, to the extent such Senior
Preferred Stock or Parity Preferred Stock dividends are cumulative; (ii) the
Corporation has paid or set aside all amounts, if any, then or theretofor
required to be paid or set aside for all purchase, retirement and sinking funds,
if any, for any outstanding shares of Senior Preferred Stock and Parity
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of Senior Preferred Stock or Parity
Preferred Stock; or (b) any such dividends are declared and paid pro rata so
that the amounts of any dividends declared and paid per share on outstanding
Class C Preferred Shares and each other share of such Parity Preferred Stock
will in all cases bear to each other the same ratio that accrued and unpaid
dividends (including any accumulation with respect to unpaid dividends for prior
dividend periods, if such dividends are cumulative) per share of outstanding
Class C Preferred Shares and such other outstanding shares of Parity Preferred
Stock bear to each other.
In addition, as long as any Class C Preferred Shares are outstanding, the
Corporation may not purchase, redeem or otherwise acquire any Senior Preferred
Stock or Parity Preferred Stock (except with any Junior Stock and cash in lieu
of fractional shares of such Junior Stock in connection therewith) unless: (i)
full dividends on all outstanding shares of Senior Preferred Stock and Parity
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the payment date of such Parity
Preferred Stock purchase, redemption or other acquisition and for the current
dividend period, to the extent such Senior Preferred Stock and Parity Preferred
Stock dividends are cumulative; (ii) the Corporation has paid or set aside all
amounts, if any, then or theretofor required to be paid or set aside for all
purchase, retirement, and sinking funds, if any, for any outstanding shares of
Senior Preferred Stock and Parity Preferred Stock; and (iii) the Corporation is
not in default of any of its obligations to redeem any outstanding shares of
Senior Preferred Stock or Parity Preferred Stock., unless all Parity Preferred
Stock as to which such a default exists is purchased or redeemed on a pro rata
basis.
(d) Any dividend payment made on the Class C Preferred Shares shall first
be credited against the earliest accrued but unpaid dividend due with respect to
the Class C Preferred Shares.
D-6
<PAGE> 218
(e) All dividends paid with respect to the Class C Preferred Shares shall
be paid pro rata to the holders entitled thereto.
(f) Holders of the Class C Preferred Shares shall be entitled to receive
dividends in preference to and in priority over any dividends upon any shares of
the Corporation ranking junior to the Class C Preferred Shares as to dividends,
but subject to the rights of holders of shares of the Corporation having a
preference and a priority over the payment of dividends on the Class C Preferred
Shares.
SECTION 4. REDEMPTION AND CONVERSION.
(a) Mandatory Redemption. On , 2016 (the "Maturity Date") [20
YEARS FROM THE INITIAL ISSUANCE DATE], the Class C Preferred Shares shall
terminate and the holder of each outstanding Class C Preferred Share shall be
entitled to receive an amount in cash equal to $50.00 per share (the "Call
Price") plus all accrued and unpaid dividends on such Class C Preferred Share
(other than previously declared dividends payable to a holder of record on a
prior date) to the Maturity Date, whether or not declared, out of funds legally
available for the payment of dividends, subject to the redemption of the Class C
Preferred Shares by the Corporation or the conversion of the Class C Preferred
Shares at the option of the holder at any time prior to the Maturity Date.
Dividends on the Class C Preferred Shares shall cease to accrue and such shares
shall cease to be outstanding on the Maturity Date. The Corporation shall make
such arrangements as it deems appropriate for the payment of cash in respect of
the Call Price and accrued and unpaid dividends, if any, in exchange for and
contingent upon surrender of certificates representing the Class C Preferred
Shares, and the Corporation may defer the payment of the Call Price or dividends
on such shares of Common Stock and the voting thereof until, and make such
payment and voting contingent upon, the surrender of such certificates
representing the Class C Preferred Shares, provided that the Corporation shall
give the holders of the Class C Preferred Shares such notice of any such actions
as the Corporation deems appropriate and upon such surrender such holders shall
be entitled to receive such dividends declared and paid on such shares of Common
Stock subsequent to the Maturity Date. Amounts payable in cash in respect of the
Class C Preferred Shares or in respect of such shares of Common Stock shall not
bear interest.
(b) Redemption at the Option of the Corporation.
(i) Right to Redeem. Class C Preferred Shares are not redeemable by the
Corporation prior to , 1999 (the "Provisional Redemption Date") [THE
DATE THAT IS THREE YEARS AFTER THE INITIAL ISSUANCE DATE]. From and after the
Provisional Redemption Date until , 2000 [THE DATE THAT IS FOUR YEARS
AFTER THE INITIAL ISSUANCE DATE] (the "Provisional Redemption Year"), the Class
C Preferred Shares may be redeemed by the Corporation at any time after the
Volume-Weighted Average Trading Price of the Common Stock on a per day basis has
exceeded $47.125 on 15 separate Trading Days during any 30 consecutive Trading
Day period during the Provisional Redemption Year (the "Provisional Redemption
Price"). After the Provisional Redemption Year, the Class C Preferred Shares may
be redeemed by the Corporation regardless of whether the Common Stock has
achieved the Provisional Redemption Price. Until , 2006, the Corporation may
only redeem the Class C Preferred Shares by delivering an amount of Common Stock
equal to the Call Price divided by the Volume-Weighted Average Trading Price of
the Common Stock for the 15 consecutive Trading Day period prior to the record
date for such redemption. From , 2006 [the date that is 10 years after
the Initial Issuance Date] until the Maturity Date, the Class C Preferred Shares
may be redeemed by the Corporation by delivering either (a) the amount of Common
Stock described in the previous sentence or (b) cash in an amount equal to the
Call Price.
The public announcement of any call for redemption shall be made prior to,
or at the time of, the mailing of the notice of such call to holders of Class C
Preferred Shares as described below. If fewer than all the outstanding Class C
Preferred Shares are to be redeemed, Class C Preferred Shares to be redeemed
shall be selected by the Corporation from outstanding Class C Preferred Shares
not previously redeemed by lot or pro rata (as nearly as may be practicable) or
by any other method determined by the Board of Directors in its sole discretion
to be equitable. As used in this subparagraph (b), the term "Notice Date" with
respect to any notice given by the Corporation in connection with a redemption
of Class C Preferred Shares means the date
D-7
<PAGE> 219
on which first occurs either the public announcement of such redemption or the
commencement of mailing of such notice to the holders of Class C Preferred
Shares.
(ii) Notice of Redemption. The Corporation shall provide notice of any
redemption of the Class C Preferred Shares to holders of record of Class C
Preferred Shares to be called for redemption not less than 15 nor more than 60
days prior to the date fixed for such redemption. Such notice shall be provided
by mailing notice of such redemption, first class postage prepaid, to each
holder of record of Class C Preferred Shares to be redeemed, at such holder's
address as it appears on the stock register of the Corporation; provided,
however, that neither failure to give such notice nor any defect therein shall
affect the validity of the proceeding for the redemption of any Class C
Preferred Shares to be redeemed except as to the holders to whom the Corporation
has failed to give said notice or whose notice was defective.
Each such notice shall state, as appropriate, the following and may contain
such other information as the Corporation deems advisable:
(A) the redemption date;
(B) that all outstanding Class C Preferred Shares are to be redeemed
or, in the case of a call for redemption of fewer than all outstanding
Class C Preferred Shares, the number of such shares held by such holder to
be redeemed;
(C) the number of shares of Common Stock deliverable upon redemption
of each Class C Preferred Share to be redeemed and, if applicable, the Call
Price and the Current Market Price used to calculate such number of shares
of Common Stock;
(D) the place or places where certificates for such shares are to be
surrendered for redemption; and
(E) that dividends on the Class C Preferred Shares to be redeemed
shall cease to accrue on such redemption date (except as otherwise provided
herein).
(iii) Deposit of Shares and Funds. The Corporation's obligation to deliver
shares of Common Stock and provide funds upon redemption in accordance with this
Section 4 shall be deemed fulfilled if, on or before a redemption date, the
Corporation shall irrevocably deposit, with a bank or trust company, or an
affiliate of a bank or trust company, having an office or agency in New York
City and having a capital and surplus of at least $50,000,000, or shall set
aside or make other reasonable provision for the issuance of such number of
shares of Common Stock as are required to be delivered by the Corporation
pursuant to this Section 4 upon the occurrence of the related redemption (and
for the payment of cash in lieu of the issuance of fractional share amounts and
accrued and unpaid dividends payable in cash on the shares to be redeemed as and
to the extent provided by this Section 4). Any interest accrued on such funds
shall be paid to the Corporation from time to time. Any shares of Common Stock
or funds so deposited and unclaimed at the end of two years from such redemption
date shall be repaid and released to the Corporation, after which the holder or
holders of such Class C Preferred Shares so called for redemption shall look
only to the Corporation for delivery of such shares of Common Stock or funds.
(iv) Surrender of Certificates; Status. Each holder of Class C Preferred
Shares to be redeemed shall surrender the certificates evidencing such shares
(properly endorsed or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state) to the Corporation at the place
designated in the notice of such redemption and shall there upon be entitled to
receive certificates evidencing shares of Common Stock and to receive any funds
payable pursuant to this Section 4 following such surrender and following the
date of such redemption. In case fewer than all the Class C Preferred Shares
represented by any such surrendered certificate are called for redemption, a new
certificate shall be issued at the expense of the Corporation representing the
unredeemed Class C Preferred Shares. If such notice of redemption shall have
been given, and if on the date fixed for redemption, shares of Common Stock and
funds necessary for the redemption shall have been irrevocably either set aside
by the Corporation separate and apart from its other funds or assets in trust
for the account of the holders of the shares to be redeemed or converted (and so
as to be and continue to be available therefore) or deposited with a bank or a
trust company or an affiliate thereof as provided herein or the Corporation
shall have made other reasonable provision therefore, then, notwithstanding that
the
D-8
<PAGE> 220
certificates evidencing any Class C Preferred Shares so called for redemption or
subject to conversion shall not have been surrendered, the Class C Preferred
Shares represented thereby so called for redemption shall be deemed no longer
outstanding, dividends with respect to the Class C Preferred Shares so called
for redemption shall cease to accrue on the date fixed for redemption (except
that holders of Class C Preferred Shares at the close of business on a record
date for any payment of dividends shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares following such record date and
prior to such Dividend Payment Date) and all rights with respect to the Class C
Preferred Shares so called for redemption shall forthwith after such date cease
and terminate, except for the rights of the holders to receive the shares of
Common Stock and funds, if any, payable pursuant to this Section 4 without
interest upon surrender of their certificates therefore (unless the Corporation
defaults on the delivery of such shares or the payment of such funds). Holders
of Class C Preferred Shares that are redeemed shall not be entitled to receive
dividends declared and paid on such shares of Common Stock, and such shares of
Common Stock shall not be entitled to vote, until such shares of Common Stock
are issued upon the surrender of the certificates representing such Class C
Preferred Shares and upon such surrender such holders shall be entitled to
receive such dividends declared and paid on such shares of Common Stock
subsequent to such redemption date without interest thereon.
(c) Conversion at Option of Holder. Class C Preferred Shares are
convertible at the option of the holder thereof at any time prior to the
Maturity Date, unless previously redeemed, into shares of Common Stock at a rate
of 1.379 shares of Common Stock per Class C Preferred Share, as such rate may be
adjusted as provided below (the "Exchange Rate").
Conversion of Class C Preferred Shares at the option of the holder may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to the
Corporation or in blank, to the office or agency to be maintained by the
Corporation for that purpose (and, if applicable, cash payment of an amount
equal to the dividend payable on such shares), and otherwise in accordance with
conversion procedures established by the Corporation. Each optional conversion
shall be deemed to have been effected immediately prior to the close of business
on the date on which the foregoing requirements shall have been satisfied, and
dividends will cease to accrue in respect of Class C Preferred Shares at such
time. The conversion shall be at the Exchange Rate in effect at such time and on
such date.
Holders of Class C Preferred Shares at the close of business on a record
date for any payment of declared dividends shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding Dividend Payment Date. Except as provided above, upon
any optional conversion of Class C Preferred Shares, the Corporation shall make
no payment or allowance for unpaid dividends, whether or not in arrears, on
converted Class C Preferred Shares or for previously declared dividends or
distributions on the shares of Common Stock issued upon such conversion.
(d) Exchange Rate Adjustments. The Exchange Rate shall be subject to
adjustment from time to time as provided below in this section (d).
(i) If the Corporation shall, after the Initial Issuance Date:
(A) pay a stock dividend or make a distribution with respect to its
Common Stock in capital stock of the Corporation,
(B) subdivide or split its outstanding Common Stock into a greater
number of shares,
(C) combine its outstanding shares of Common Stock into a smaller
number of shares, or
(D) issue any shares of capital stock of the Corporation as a
distribution with respect to, or by reclassification of its shares of
Common Stock (other than the Rights or Equity Securities covered under
Section 4(d)(ii)),
then, in any such event, the Exchange Rate in effect immediately prior to such
event shall be adjusted so that the holder of any Preferred Shares shall
thereafter be entitled to receive upon conversion or upon redemption
D-9
<PAGE> 221
by the Corporation in the form of Common Stock or conversion at the option of
the holder, the number of shares of Common Stock of the Corporation which such
holder would have owned or been entitled to receive immediately following any
event described above had such Preferred Shares been converted immediately prior
to such event or any record date with respect thereto. Such adjustment shall
become effective at the opening of business on the business day next following
the record date for determination of stockholders entitled to receive such
dividend or distribution, in the case of a dividend or distribution, and shall
become effective immediately after the effective date, in the case of a
subdivision, split, combination or reclassification. Such adjustment shall be
made successively. In the case of an event described in subsection (D) above,
each Class C Preferred Share shall become convertible into shares of capital
stock of the Corporation as to which a holder of Common Stock immediately prior
to such a distribution shall be entitled, or into which the Common Stock has
become reclassified, at the Exchange Rate as modified by this subsection (i). In
the event of any such reclassification into more than one resulting class of
capital stock of the Corporation, the shares of each such resulting class
issuable upon conversion of a Class C Preferred Share shall be in the same
proportion, if possible, or if not possible, substantially the same proportion
which the total number of shares of such class resulting from such
reclassification bears to the total number of shares of all classes resulting
from all such reclassifications.
(ii) If the Corporation shall, after the Initial Issuance Date, issue
without cost Equity Securities (other than Common Stock, the Rights or Exempt
Issuances) ("Issued Equity Securities") to all holders of its Common Stock
entitling them (for a period not exceeding 45 days from the later of the record
date of such issuance and the Determination Date) to subscribe for or purchase
shares of Common Stock or other Equity Securities at a price per share less than
the Fair Market Value of the Common Stock or other Equity Security to be
acquired in effect on the Determination Date for such issuance (treating the
price per share of the Equity Securities to be acquired as equal to (x) the sum
of the Fair Market Value of the consideration payable for a unit of the Equity
Security plus (B) the Fair Market Value of any additional consideration
initially payable upon the exercise, conversion or exchange of such security
into Common Stock divided by (y) the number of shares of Common Stock initially
underlying or that may be acquired upon the exercise, conversion or exchange of
such Equity Security) then, in any such event unless such Equity Securities are
issued to holders of Class C Preferred Shares on a pro rata basis with the
shares of Common Stock based on the Exchange Rate on the date immediately
preceding such issuance, the Exchange Rate in effect on the record date
described below shall be adjusted by multiplying it by a fraction of which the
numerator shall be the sum of (x) the number of shares of Common Stock
outstanding on the date of issuance of such Issued Equity Securities immediately
prior to such issuance, plus (y) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such Issued Equity Securities
(including the Common Stock that may be acquired upon the exercise, conversion
or exchange of the Equity Securities), and of which the denominator shall be the
sum of (x) number of shares of Common Stock outstanding on the date of issuance
of such Issued Equity Securities immediately prior to such issuance, plus (y)
the number of additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered for subscription
or purchase (including, without limitation, the Fair Market Value of the
consideration payable for a unit of the Equity Securities so offered plus the
Fair Market Value of any additional consideration payable upon exercise,
conversion or exchange of such Equity Securities) would purchase at such Fair
Market Value as of the Determination Date for such issuance. Such adjustment
shall become effective at the opening of business on the Business Day next
following the record date for the determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of Common Stock are
not delivered after the expiration of such Equity Securities, the Exchange Rate
shall each be readjusted to the Exchange Rate which would then be in effect had
the adjustments been made upon the issuance of such Equity Securities upon the
basis of delivery of only the number of shares of Common Stock actually
delivered. Such adjustment shall be made successively.
(iii) If the Corporation shall, after the Initial Issuance Date, make an
Extraordinary Dividend or effect a Pro Rata Repurchase of Common Stock, then
unless such Extraordinary Dividend is made to each holder of Class C Preferred
Shares on a pro rata basis with the shares of Common Stock based on the Exchange
Rate in effect on the date immediately preceding such payment or distribution,
in any such event, then the Exchange Rate in effect immediately prior to such
event shall be adjusted by multiplying it by a fraction of which the
D-10
<PAGE> 222
numerator shall be the product of (i) the number of shares of Common Stock
outstanding immediately before such Extraordinary Dividend or Pro Rata
Repurchase (minus, in the case of a Pro Rata Repurchase, the number of shares of
Common Stock repurchased by the Corporation and (ii) the Fair Market Value per
share of the Common Stock on the record date for the determination of
stockholders entitled to receive such Extraordinary Dividend and the number of
shares outstanding immediately prior to such Distribution or, in the case of a
Pro Rata Repurchase on the Trading Day immediately preceding the first public
announcement of such Pro Rata Repurchase, as the case may be, and of which the
denominator shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Extraordinary Distribution or Pro Rata
Repurchase and (y) the Fair Market Value of a share of Common Stock on the
record date with respect to such Extraordinary Distribution, or, in the case of
a Pro Rata Repurchase on the Trading Day immediately preceding the first public
announcement by the Corporation or any of its Affiliates of the intent to effect
such Pro Rata Repurchase, as the case may be, minus (ii) the Fair Market Value
of the Extraordinary Distribution or the aggregate purchase price of the Pro
Rata Repurchase, as the case may be (provided that such denominator shall never
be less than 1.0); provided, however, that no Pro Rata Repurchase shall cause an
adjustment to the Exchange Rate unless the amount of all cash dividends and
distributions made to holders of Common Stock during the twelve-month period
ending on the Effective Date of such Pro Rata Repurchase, when combined with the
aggregate amount of all Pro Rata Repurchases, including such Pro Rata Repurchase
(for all purposes of this Section 4(d)(iii) including only that portion of the
Fair Market Value of the aggregate purchase price of each Pro Rata Repurchase
which is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the Trading Day immediately preceding the first public
announcement by the Corporation or any of its Affiliates of the intent to effect
each such Pro Rata Repurchase), the Effective Dates of which fall within such
period, exceeds twelve and one-half percent (12 1/2%) of the aggregate Fair
Market Value of all shares of Common Stock outstanding on the Trading Day
immediately preceding the first public announcement by the Corporation or any of
its Affiliates of the intent to effect such Pro Rata Repurchase. Such adjustment
shall become effective on the opening of business on the Business Day next
following the record date for the determination of stockholders entitled to
receive such dividend or distribution. Such adjustment shall be made
successively.
(iv) If the Corporation shall, after the Initial Issuance Date, make an
International Distribution, then each holder of Class C Preferred Shares as of
the record date of such distribution shall receive such International
Distribution on a pro rata basis with the shares of Common Stock based on the
Exchange Rate in effect on the record date for such International Distribution.
With respect to all shares of Series C Preferred Shares outstanding and
subsequently issued, the dividend payable pursuant to Section 2(a) hereof and
the Call Price shall each be adjusted by multiplying each of them by a fraction,
of which the numerator shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately prior to such International Distribution
and (y)(i) the Fair Market Value of a share of Common Stock on the record date
with respect to such International Distribution, minus (ii) the Fair Market
Value of the International Distribution, and of which the denominator shall be
the product of (x) the number of shares of Common Stock outstanding immediately
prior to such International Distribution and (y) the Fair Market Value per share
of the Common Stock on the record date for the determination of stockholders
entitled to receive such International Dividend. Such adjustment shall be made
successively. In the event that this subsection (iv) is applicable, then the
provisions of subsection (iii) shall not apply. All adjustments pursuant to this
subsection shall become effective on the opening of business on the Business Day
next following the record date for the determination of stockholders entitled to
receive such International Distribution. If the Corporation has received an
opinion of a nationally recognized law firm or accounting firm that the
procedure set forth in this subsection (iv) would result in an adverse tax
consequence to the Corporation or the holders of the Common Stock, then the
provisions of this subsection (iv) shall not apply, and the provisions of
subsection (iii) shall be applicable.
(v) In case the Corporation shall, at any time or from time to time while
any of the shares of Class C Preferred Shares are outstanding, issue, sell or
exchange shares of Common Stock (other than (i) pursuant to any Rights, (ii)
Exempt Issuances or pursuant to Equity Securities issued as Exempt Issuances,
(iii) pursuant to any Equity Security theretofore outstanding entitling the
holder to purchase or acquire shares of Common Stock or (iv) distributions
pursuant to Section 5 of the Certificate of Designation, Rights and Preferences
of
D-11
<PAGE> 223
the Class B Preferred Shares) for a consideration having a Fair Market Value on
the Determination Date for such issuance of Equity Securities less than the Fair
Market Value of such shares of Common Stock on the date of such issuance, sale
or exchange, then the Exchange Rate in effect immediately prior to such
issuance, sale or exchange shall be adjusted by multiplying it by a fraction of
which the numerator shall be the sum of (x) number of shares of Common Stock
outstanding on the date of such issuance immediately prior to such issuance,
plus (y) the number of additional shares of Common Stock so issued, and of which
the denominator shall be the sum of (x) the number of shares of Common Stock
outstanding on the date of such issuance immediately prior to such issuance,
plus (y) the number of additional shares of Common Stock which the aggregate
price paid for the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such Fair Market Value as of the
Determination Date for such issuance. Notwithstanding the foregoing, the
provisions of this subsection (v) shall not apply if the Board of Directors of
the Corporation has determined that the value of any consideration to be
received in exchange for the issuance, sale or exchange of such Common Stock in
a transaction with a Third Party negotiated at arm's length shall be based upon
the Volume-Weighted Average Trading Price or closing price or similar measure of
the Common Stock or of the consideration to be paid for the Common Stock, as
measured on a single date or over a period of days within a reasonable amount of
time prior to the issuance, sale or exchange of such Common Stock.
(vi) In case the Corporation shall, at any time or from time to time while
any of the shares of Class C Preferred Shares are outstanding, issue, sell or
exchange any Equity Security (other than Common Stock, the Rights, Exempt
Issuances or distributions to holders pursuant to Section 5 of the Certificate
of Designation, Preferences and Rights for the Class B Shares) other than any
such issuance to all holders of shares of Common Stock as a dividend or
distribution (including by way of a reclassification of shares or a
recapitalization of the Corporation) for a consideration having a Fair Market
Value on the Distribution Date less than the Non-Dilutive Amount, then the
Exchange Rate shall be adjusted by multiplying it by a fraction, the numerator
of which shall be the product of (x) the Fair Market Value of a share of Common
Stock on the Trading Day immediately preceding the first public announcement of
such issuance, sale or exchange and (y) the sum of the number of shares of
Common Stock outstanding on such day plus the maximum number of shares of Common
Stock underlying or which could be acquired pursuant to such Equity Security at
the time of the issuance, sale or exchange of such Equity Security (assuming
shares of Common Stock could be acquired pursuant to such Equity Security at
such time), and the denominator of which shall be the sum of (x) the Fair Market
Value of all the shares of Common Stock outstanding on the Distribution Date
plus (y) the Fair Market Value of the consideration received by the Corporation
in respect of such issuance, sale or exchange of such Equity Security plus (z)
the Fair Market Value as of the time of such issuance of the consideration which
the Corporation would receive upon exercise, conversion or exchange in full of
all such Equity Securities. Notwithstanding the foregoing, the provisions of
this subsection (vi) shall not apply if the Board of Directors has determined
that the value of any consideration to be received in exchange for the issuance,
sale or exchange of such Equity Securities in a transaction with a Third Party
negotiated at arm's length shall be based upon the Volume-Weighted Average
Trading Price or closing price or similar measure of the Equity Securities or of
the consideration to be paid therefor, as measured on a single day or over a
period of days within a reasonable amount of time prior to the issuance, sale or
exchange of such Equity Securities.
(vi) Any shares of Common Stock issuable in payment of a dividend shall be
deemed to have been issued immediately prior to the close of business on the
record date for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under subsection (ii) above.
(vii) The Corporation shall also be entitled to make such adjustments in
the Exchange Rate as it in its sole discretion shall determine to be advisable
in order that any stock dividends, subdivisions of shares, distribution of
rights to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock (or any transaction which could be
treated as any of the foregoing transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) made by the Corporation to its
stockholders the Initial Issuance Date shall not be taxable.
(viii) In any case in which subsection 4(d) shall require that an
adjustment as a result of any event become effective at the opening of business
on the Business Day next following a record date and the date fixed for
conversion pursuant to subsection 4(b) occurs after such record date, but before
the occurrence of
D-12
<PAGE> 224
such event, the Corporation may, in its sole discretion, elect to defer the
following until after the occurrence of such event: (A) issuing to the holder of
any converted Class C Preferred Shares the additional shares of Common Stock
issuable upon such conversion over the shares of Common Stock issuable before
giving effect to such adjustments and (B) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock pursuant to subsection 3(i).
(ix) All adjustments to the Exchange Rate shall be calculated to the
nearest 1/1000th of a share of Common Stock. No adjustment in the Exchange Rate
shall be required unless such adjustment would require an increase or decrease
of at least one percent therein; provided, however, that any adjustment which by
reason of this subsection (ix) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment and provided further
that any adjustment shall be required and made in accordance with the provisions
of this Section (other than this subparagraph (ix)) not later than such time as
may be required in order to preserve the taxfree nature of a distribution to the
holders of shares of Common Stock. If any action or transaction would require
adjustment to the Exchange Rate pursuant to more than one paragraph of this
Section 4, only one adjustment shall be made and such adjustment shall be the
amount of the adjustment that has the highest absolute value.
(e) Adjustment for Consolidation or Merger. In case of (A) any
consolidation or merger to which the Corporation is a party (other than a merger
or consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged), (B) any sale or transfer to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, or (C) any statutory exchange of securities with another
corporation (other than in connection with a merger or acquisition in which the
Corporation is the surviving or continuing corporation and in which the Common
Stock outstanding immediately prior to the merger or consolidation remains
unchanged) (each a "Reorganization Event"), then proper provision shall be made
so that each Class C Preferred Share shall, after consummation of such
transaction, be subject to (i) conversion at the option of the holder into the
Merger Consideration (as defined below) receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which such
Class C Preferred Share might have been converted immediately prior to
consummation of such transaction, (ii) conversion on the Maturity Date into the
Merger Consideration receivable upon consummation of such transaction by a
holder of the number of shares of Common Stock into which such Class C Preferred
Share would have converted if the conversion on the Maturity Date had occurred
immediately prior to the date of consummation of such transaction, plus the
right to receive cash in an amount equal to all accrued and unpaid dividends on
such Class C Preferred Shares (other than previously declared dividends payable
to a holder of record as of a prior date) and (iii) redemption on any redemption
date in exchange for the Merger Consideration receivable upon consummation of
such transaction by a holder of the number of shares of Common Stock that would
have been issuable in effect on such redemption date upon a redemption of such
share immediately prior to consummation of such transaction, assuming that, if
the Notice Date for such redemption is not prior to such transaction, the Notice
Date had been the date of such transaction.
"Merger Consideration" means the kind or amount of securities, cash or
other property receivable upon consummation of a Reorganization Event (provided
that if the kind or amount of securities, cash or other property receivable upon
consummation of such transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares).
For purposes of the immediately preceding paragraph and subsection
4(g)(iii), any sale or transfer to another corporation of property of the
Corporation which did not account for at least 50% of the consolidated net
income of the Corporation for its most recent fiscal year ending prior to the
consummation of such transaction shall not in any event be deemed to be a sale
or transfer of the property of the Corporation as an entirety or substantially
as an entirety.
D-13
<PAGE> 225
(f) Notice of Adjustments. Whenever the Exchange Rate is adjusted as
herein provided, the Corporation shall:
(i) forthwith compute the adjusted Exchange Rate in accordance
herewith and prepare a certificate signed by an officer of the Corporation
setting forth the adjusted Exchange Rate, the method of calculation thereof
in reasonable detail and the facts requiring such adjustment and upon which
such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and file such
certificate forthwith with the transfer agent for the Class C Preferred
Shares and the Common Stock; and
(ii) make a prompt public announcement and mail a notice to the
holders of the outstanding Class C Preferred Shares stating that the
Exchange Rate has been adjusted, the facts requiring such adjustment and
upon which such adjustment is based and setting forth the adjusted Exchange
Rate, such notice to be mailed within 45 days after the close of the fiscal
quarter during which the facts requiring such adjustment occurred.
(g) Notices. In case, at any time while any of the Class C Preferred
Shares are outstanding,
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash dividends (other than
an Extraordinary Distribution); or
(ii) the Corporation shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or purchase shares
or its Common Stock or of any other Equity Securities; or
(iii) the Corporation shall authorize any reclassification of its
Common Stock (other than a subdivision or combination thereof) or capital
stock or any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required
(except for a merger of the Corporation into one of its subsidiaries solely
for the purpose of changing the corporate name or corporate domicile of the
Corporation to another state of the United States and in connection with
which there is no substantive change in the rights or privileges of any
securities of the Corporation other than changes resulting from differences
in the corporate statutes of the then existing and the new state of
domicile), or the sale or transfer to another corporation of the property
of the Corporation as an entirety or substantially as an entirety; or
(iv) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation; or
(v) there shall occur any Pro Rata Repurchase,
then the Corporation shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Class C Preferred Shares, and shall cause
to be mailed to the holders of Class C Preferred Shares at their last addresses
as they shall appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified, in the
event that more than one date is specified), a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (B) the date on which any such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property (including cash),
if any, deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation. or winding up. The failure to give or
receive the notice required by this subsection (g) or any defect therein shall
not affect the legality or validity of such dividend, distribution, right or
warrant or other action.
(h) Effect of Conversions. The person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be usable upon
any conversion or redemption shall be deemed to have become on the date of any
such conversion or redemption the holder or holders of record of the shares
represented thereby; provided, however, that any such surrender on any date when
the stock transfer books of the Corporation shall be closed shall constitute the
person or persons in whose name or names the certificate
D-14
<PAGE> 226
or certificates for such shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open.
(i) No Fractional Shares. No fractional shares or script representing
fractional shares of Common Stock shall be issued upon the redemption or
conversion of any Class C Preferred Shares. In lieu of any fractional share
otherwise issuable in respect of the aggregate number of Class C Preferred
Shares of any holder which are converted upon Mandatory Conversion or any
optional conversion, such holder shall be entitled to receive an amount in cash
(computed to the nearest cent) equal to the same fraction of (i) the Maturity
Price of the Common Stock or (ii) the Current Market Price on the second Trading
Date immediately preceding the effective date of conversion, in the case of an
optional conversion by a holder. If more than one share shall be surrendered for
conversion at one time by or for the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of Class C Preferred Shares so surrendered.
(j) Re-issuance. Class C Preferred Shares that have been issued and
reacquired in any manner, including shares purchased, exchanged, redeemed or
converted, shall not be reissued as 4.25% Class C Convertible Preferred Stock,
Series 1996, and shall (upon compliance with any applicable provisions of the
laws of the State of Delaware) have the status of authorized and unissued shares
of the Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock.
(k) Payment of Taxes. The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the redemption or conversion of share of
Class C Preferred Shares pursuant to this Section 3; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of Class C
Preferred Shares redeemed or converted or to be redeemed or converted, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid.
(l) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock and/or its issued Common Stock held in
its treasury, for the purpose of effecting any Mandatory Conversion of the Class
C Preferred Shares or any conversion of the Class C Preferred Shares at the
option of the holder, the full number of shares of Common Stock then deliverable
upon any such conversion of all outstanding Class C Preferred Shares.
SECTION 5. LIQUIDATION RIGHTS.
(a) The Class C Preferred Shares will rank on a parity as to distribution
of assets upon liquidation with the Class B Preferred Stock, and with any future
preferred stock issued by the Corporation that by its terms ranks pari passu
with the Class C Preferred Shares, with respect to distribution of assets upon
liquidation.
(b) The Class C Preferred Shares will be subordinate as to distribution
upon liquidation to any future preferred stock issued by the Corporation that by
its terms is senior to the Class C Preferred Shares with respect to distribution
of assets upon liquidation.
(c) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
Class C Preferred Shares then outstanding, after payment or provision for
payment of the debts and other liabilities of the Corporation and the payment or
provision for payment of any distribution on any shares of the Corporation
having a preference and a priority over the Class C Preferred Shares on
liquidation, and before any distribution to holders of any shares of the
Corporation that are junior and subordinate to the Class C Preferred Shares on
liquidation, including the Common Stock and the Series A Participating Preferred
Stock, shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount of cash per Class C
Preferred Share equal to the Call Price, as adjusted pursuant to the terms
hereof, plus an amount equal to all accrued and unpaid dividends thereon, and
shall, after the holders of Common Stock have received an amount per share of
Common Stock
D-15
<PAGE> 227
equal to the Call Price divided by the Exchange Rate, be entitled to participate
on a pro rata basis with the holders of Common Stock on a per share basis, as if
such Class C Preferred Shares had converted to Common Stock at the Exchange Rate
then in effect on the date immediately prior to such distribution. In the event
the assets of the Corporation available for distribution to the holders of the
Class C Preferred Shares upon any dissolution, liquidation or winding up of the
Corporation shall be insufficient to pay in full the liquidation payments
payable to the holders of outstanding Class C Preferred Shares and of all other
series of Preferred Stock that rank on a parity with the Class C Preferred
Shares in the event of liquidation, the holders of the Class C Preferred Shares
and of all other series of such parity Preferred Stock shall share ratably in
such distribution of assets in proportion to the amount which would be payable
on such distribution if the amounts to which the holders of outstanding Class C
Preferred Shares and the holders of outstanding shares of such parity Preferred
Stock were paid in full. Except as provided in this Section 5, holders of Class
C Preferred Shares shall not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation.
(d) For the purposes of this Section 5, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the sale, lease, transfer or exchange of all or substantially all
of the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or more
other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger).
SECTION 6. NO PREEMPTIVE RIGHTS.
The holders of Class C Preferred Shares shall have no preemptive rights,
including preemptive rights with respect to any shares of capital stock or other
securities of the Corporation convertible into or carrying rights or options to
purchase any such shares.
SECTION 7. VOTING RIGHTS.
(a) The holders of Class C Preferred Shares shall not have any voting
rights except as required by law and except as set forth below in Section 7(b)
and (c).
(b) If at any time dividends payable on the Class C Preferred Shares or any
other series of Parity Preferred Stock are in arrears and unpaid in an aggregate
amount equal to or exceeding the aggregate amount of dividends payable thereon
for six quarterly dividend periods, or if any other series of Preferred Stock
shall be entitled for any other reason to exercise voting rights, separate from
the Common Stock, to elect any Directors of the Corporation ("Preferred Stock
Directors"), the holders of the Class C Preferred Shares, voting separately as a
class with the holders of all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable, shall have the right to
vote for the election of two Preferred Stock Directors of the Corporation, such
Directors to be in addition to the number of Directors constituting the Board of
Directors immediately prior to the accrual of such right. Such right of the
holders of Class C Preferred Shares to elect two Preferred Stock Directors
shall, when vested, continue until all dividends in arrears on the Class C
Preferred Shares and such other series of Preferred Stock shall have been paid
in full and the right of any other series of Preferred Stock to exercise voting
rights, separate from the Common Stock, to elect Preferred Stock Directors shall
terminate or have terminated and, when so paid, and any such termination occurs
or has occurred, such right of the holders of Class C Preferred Shares to elect
two Preferred Stock Directors separately as a class shall cease, subject always
to the same provisions for the vesting of such right of the holders of the Class
C Preferred Shares to elect two Preferred Stock Directors in the case of future
dividend defaults.
The term of office of each Director elected pursuant to the preceding
paragraph shall terminate on the earlier of (i) the next annual meeting of
stockholders at which a successor shall have been elected and qualified or (ii)
the termination of the right of the holders of Class C Preferred Shares and such
other series of Preferred Stock to vote for Directors pursuant to the preceding
paragraph. Vacancies on the Board of Directors resulting from the death,
resignation or other cause of any such Director shall be filled exclusively by
D-16
<PAGE> 228
no less than two-thirds of the remaining Directors and the Director so elected
shall hold office until a successor is elected and qualified.
(c) For as long as any Class C Preferred Shares remain outstanding, the
affirmative consent of the holders of at least two-thirds thereof actually
voting (voting separately as a class) given in person or by proxy, at any annual
meeting or special meeting of the shareholders called for such purpose, shall be
necessary to amend, alter or repeal any of the provisions of the Certificate of
Incorporation of the Corporation which would adversely affect the powers,
preferences or rights of the holders of the Class C Preferred Shares then
outstanding or reduce the minimum time required for any notice to which holders
of Class C Preferred Shares then outstanding may be entitled; provided, however,
that any such amendment, alteration or repeal that would authorize, create or
increase the authorized amount of any shares of stock (whether or not already
authorized) ranking junior to, on a parity with, or senior to the Class C
Preferred Shares with respect to payment of dividends or payment upon
liquidation shall be deemed not to adversely affect such powers, preferences or
rights and shall not be subject to approval by the holders of Class C Preferred
Shares; and provided further that the holders of the Preferred Shares shall not
have any voting rights with respect to the amendment, alteration or repeal of
any provisions of the Certificate of Incorporation of the Corporation approved
at a meeting of the stockholders the record date of which is prior to the
issuance of any Class C Preferred Shares.
IN WITNESS WHEREOF, AirTouch Communications, Inc. has caused this
certificate to be executed this day of , 1996.
AIRTOUCH COMMUNICATIONS, INC.
By:
D-17
<PAGE> 229
ANNEX E
July 17, 1996
Board of Directors
Cellular Communications, Inc.
110 East 59th Street
New York, NY 10022
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders, other than AirTouch Communications, Inc. ("AirTouch"),
of Cellular Communications, Inc. (the "Company") (the "Public Shareholders") of
the consideration to be received by such shareholders pursuant to the terms of
the Agreement and Plan of Merger dated as of April 4, 1996, among AirTouch, the
Company and AirTouch Cellular (the "Agreement"). The Agreement provides, among
other things, for a merger of the Company with and into AirTouch Cellular (the
"Merger").
Pursuant to the Agreement, each share of the Company's (i) Series A Common
Stock, Series C Common Stock, (ii) Redeemable Participating Convertible
Preferred Stock, (iii) Class A Preference Stock, and (iv) Series B Preference
Stock (collectively, the "Shares") will be converted into the right to receive
(i) $55.00 in cash or (ii) a unit of AirTouch securities (a "Unit") having an
aggregate face amount of $55.00 per Unit, each such Unit consisting of (x)
shares of AirTouch 6.00% Mandatorily Convertible Class B Preferred Stock, Series
1996, par value $0.01 per share (the "Mandatorily Convertible Preferred Stock")
and (y) shares of AirTouch 4.25% Convertible Class C Preferred Stock, Series
1996, par value $0.01 per share (the "Convertible Preferred Stock") or (iii) a
combination of a fraction of a Unit and cash together having an aggregate face
amount of $55.00. The terms of the Merger are more fully set forth in the
Agreement.
In arriving at our opinion, we have reviewed the Merger Agreement and the
Amended and Restated Agreement and Plan of Merger and Joint Venture Organization
dated as of December 14, 1990 among AirTouch (then known as PacTel Corporation),
the Company and predecessors of the Company. We also have reviewed financial and
other information that was publicly available or furnished to us by the Company
and AirTouch including information provided during discussions with their
respective managements. Included in the information provided during discussions
with the respective managements were certain financial projections of the
Company prepared by the management of the Company. In addition, we have compared
certain financial and securities data of the Company and AirTouch with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of the common stock of the Company
and AirTouch, reviewed prices and premiums paid in other business combinations
and conducted such other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion. We were not requested to, nor
did we, solicit the interest of any other party in acquiring the Company or
investigate any other alternative transactions which might be available to the
Company.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company or
its representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company and AirTouch. We have not
assumed any responsibility for making an independent evaluation of the Company's
assets or liabilities or for making any independent verification of any of the
information reviewed by us. We have relied as to all legal matters on advice of
counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although
E-1
<PAGE> 230
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. We are expressing no opinion herein
as to the prices at which the Convertible Preferred Stock, the Mandatorily
Convertible Preferred Stock or the Units will actually trade at any time. Our
opinion does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the Public Shareholders
pursuant to the Agreement is fair to the Public Shareholders from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael J. Connelly
----------------------------------
Michael J. Connelly
Managing Director
E-2
<PAGE> 231
ANNEX F
July 17, 1996
Board of Directors
Cellular Communications, Inc.
110 East 59th Street
New York, NY 10022
Gentlemen:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the Series A Common Stock, Series C
Common Stock, Redeemable Participating Convertible Preferred Stock, Class A
Preference Stock and Series B Preference Stock (the "Shares") of Cellular
Communications, Inc. (the "Company"), other than AirTouch Communications, Inc.
("AirTouch"), of the consideration to be received by such holders pursuant to
the terms of the Agreement and Plan of Merger, dated as of April 5, 1996 (the
"Merger Agreement"), among the Company, AirTouch, and AirTouch Cellular
("AirTouch Cellular"). The Merger Agreement provides for, among other things, a
merger of the Company with and into AirTouch Cellular (the "Transaction")
pursuant to which each outstanding Share will be converted into the right to
receive (i) $55.00 in cash, or (ii) a unit ("Unit") of AirTouch securities
having an aggregate face amount of $55.00 per share consisting of a specified
number of shares of AirTouch 6.00% Mandatorily Convertible Class B Preferred
Stock, Series 1996, par value $0.01 per share ("Class B Preferred Stock"), and a
specified number of shares of AirTouch 4.25% Convertible Class C Preferred
Stock, Series 1996, par value $0.01 per share ("Class C Preferred Stock"), or
(iii) a combination of a fraction of a Unit and cash together having an
aggregate face amount of $55.00 (the "Consideration"). The terms and conditions
of the Transaction are set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed the Merger
Agreement. We have also reviewed and analyzed certain publicly available
business and financial information relating to the Company and AirTouch for
recent years and interim periods to date. We have also reviewed and analyzed
certain internal financial and operating information of the Company including
financial forecasts, analyses and projections prepared by or on behalf of the
Company and provided to us for purposes of our analysis, and we have met with
management of the Company to review and discuss such information and, among
other matters, the Company's business, operations, assets, financial condition
and future prospects. We have also met with the management of AirTouch to
discuss the business, operations, assets, financial condition and future
prospects of AirTouch. We have also reviewed the Amended and Restated Agreement
and Plan of Merger and Joint Venture Organization dated as of December 14, 1990
by and among PacTel Corporation (a predecessor of AirTouch), the Company, CCI
Newco, Inc. and CCI Newco Sub, Inc.
We have also reviewed and considered certain financial and stock market
data relating to the Company, and we have compared that data with similar data
for certain other companies, the securities of which are publicly traded, that
we believe may be relevant or comparable in certain respects to the Company or
one or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the cellular industry which we believe to be reasonably
comparable to the Transaction or otherwise relevant to our inquiry. We also
performed such other studies, analyses, and investigations and reviewed such
other information as we considered appropriate.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also relied upon the reasonableness and accuracy of the
financial projections, forecasts and analyses provided to us and we have
assumed, with your consent, that the financial projections, forecasts and
analyses provided to us were reasonably prepared in good faith and on bases
reflecting the best currently available judgments and estimates of the Company's
management, and we express no opinion with respect to such projections,
forecasts and analyses or the assumptions upon which they are based. In
addition, we have not
F-1
<PAGE> 232
reviewed any of the books and records of the Company or assumed any
responsibility for conducting a physical inspection of the properties or
facilities of the Company, or for making or obtaining an independent valuation
or appraisal of the assets or liabilities of the Company. Our opinion is
necessarily based on economic and market conditions and other circumstances as
they exist and can be evaluated by us as of the date hereof. In rendering this
opinion, we are not expressing any opinion as to the prices at which the Class B
Preferred Stock, Class C Preferred Stock or Units will actually trade at any
time.
Additionally, we have not been authorized to and have not solicited
alternative offers for the Company or its assets, or investigated any other
alternative transactions which may be available to the Company.
It is understood that this letter was prepared for the benefit and use of
the Board of Directors of the Company in its consideration of the Transaction
and may not be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose, without our prior
written consent. This opinion does not constitute a recommendation to any
shareholder with respect to how such holder should vote with respect to the
Merger, and should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the Consideration to be received by the shareholders of the Company other than
AirTouch pursuant to the Transaction is fair to such shareholders from a
financial point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
F-2
<PAGE> 233
ANNEX G
April 5, 1996
Board of Directors
AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Members of the Board:
We understand that AirTouch Communications, Inc. ("AirTouch" or the
"Company") and Cellular Communications, Inc. ("CCI") intend to enter into an
Agreement and Plan of Merger (the "Merger Agreement") between the Company, CCI
and AirTouch Cellular, a wholly owned subsidiary of the Company ("AirTouch
Cellular"), pursuant to which CCI will be merged into AirTouch Cellular in a
transaction in which shares of capital stock of CCI not owned by the Company
will be converted into the right to receive (1) one unit of newly issued Company
securities (nominal value, $55 per unit) ("Company Securities") consisting of a
number of shares of (a) 6.00% Mandatorily Convertible Class B Preferred Stock,
Series 1996, par value $0.01 per share (the "Class B Preferred Stock"), and (b)
4.25% Convertible Class C Preferred Stock, Series 1996, par value $0.01 per
share (the "Class C Preferred Stock") as set forth in the Merger Agreement; or
(2) $55 in cash; or (3) a fractional combination of units of Company Securities
and cash (the "Proposed Transaction"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Merger Agreement and the terms
of the Class B Preferred Stock and Class C Preferred Stock are set forth in more
detail in the Certificates of Designations, Preferences and Rights relating
thereto.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the consideration to be paid by the Company in the Proposed
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, the Company's underlying business decision to proceed
with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Amended and
Restated Agreement and Plan of Merger and Joint Venture Organization dated as of
December 14, 1990 between the Company, CCI and the other parties thereto (the
"Existing Agreement"), (2) the Merger Agreement dated April 5, 1996, (3) the
Certificate of Designations, Preferences, and Rights relating to the Company's
Class B Preferred Stock and Class C Preferred Stock, each dated April 5, 1996,
(4) publicly available information concerning the Company, CCI and the joint
venture owned 50% by the Company and 50% by CCI ("NewPar") that we believe to be
relevant to our inquiry, including without limitation, the Form 10-K dated
December 31, 1995 for each of the Company and CCI, (5) financial and operating
information with respect to the business, operations and prospects of NewPar
prepared by the Company or NewPar, as the case may be, and furnished to us in
either case by the Company, (6) the trading history of CCI's publicly traded
stock from August 1991 to the present, (7) the terms and trading histories of
certain other publicly traded convertible preferred securities that we deemed
relevant, (8) a comparison of stock market trading data, historical financial
results and present financial condition of the Company and CCI with those of
other companies that we deemed relevant, (9) a comparison of the financial terms
of the Proposed Transaction with the financial terms of certain other
transactions that we deemed relevant, and (10) the terms of the Appraisal
Process set forth in the Existing Agreement and several hypothetical future
appraisal values for a share of CCI common stock as of the appraisal dates
outlined in the Existing Agreement. In addition, we have had discussions with
the management of the Company and CCI concerning the business, operations,
assets, financial condition and prospects of CCI and undertook such other
studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information. In
arriving at our opinion, we have relied on two sets of financial projections for
NewPar prepared respectively by the Company and NewPar. With respect to the
financial projections for NewPar prepared by the Company, upon the advice of the
Company we have assumed that such projections have been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
G-1
<PAGE> 234
management of the Company as to the future financial performance of NewPar. With
respect to the financial projections for NewPar prepared by NewPar, we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgment of the management
of NewPar as to the future financial performance of NewPar. However, with the
Company's consent we have not conducted any discussions with the management of
NewPar concerning such projections or the business, operations, assets,
financial condition or prospects of NewPar. In arriving at our opinion, we have
not conducted a physical inspection of the properties and facilities of CCI or
NewPar and have not made or obtained any evaluations or appraisals of the assets
or liabilities of CCI or NewPar. We have assumed for purposes of our opinion,
with the Company's consent, that the Proposed Transaction will (a) not have any
adverse impact on the Company and/or CCI under any existing agreement to which
the Company and/or CCI is a party including any agreement with U S WEST, Inc.
and (b) qualify as a tax-deferred transaction without any adverse tax
consequences to the Company and/or CCI. We are not expressing any opinion as to
what the market value of the Class B Preferred Stock or Class C Preferred Stock
will be when issued pursuant to the Merger Agreement or the price at which the
Class B Preferred Stock or Class C Preferred Stock will actually trade
subsequent to the consummation of the Proposed Transaction. Our opinion
necessarily is based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be paid
by the Company in the Proposed Transaction is fair to the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including acting as managing underwriter
for the Company's initial public offering and currently as a commercial paper
dealer on behalf of the Company) and have received customary fees for such
services. We also have performed various investment banking services for CCI in
the past (including acting as financial advisor to CCI in connection with CCI's
negotiation with the Company of the Existing Agreement and rendering a fairness
opinion to CCI with respect thereto) and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the debt
and equity securities of the Company and CCI for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction.
Very truly yours,
/s/ LEHMAN BROTHERS
G-2
<PAGE> 235
ANNEX H
CONSOLIDATED FINANCIAL STATEMENTS
OF U S WEST NEWVECTOR GROUP
H-1
<PAGE> 236
U S WEST NEWVECTOR GROUP, INC.
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE FIRST QUARTERS ENDED MARCH 31, 1996 AND 1995
H-2
<PAGE> 237
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ -- $ --
Trade accounts receivable, net................................... 128,565 142,210
Federal income taxes receivable from affiliate................... 2,259 12,315
Other............................................................ 40,305 42,853
---------- ------------
Total current assets..................................... 171,129 197,378
---------- ------------
Property, plant and equipment, net................................. 810,089 805,947
Other non-current assets:
Intangible assets, net........................................... 437,608 440,320
Investments and other............................................ 10,518 11,741
---------- ------------
Total other non-current assets........................... 448,126 452,061
---------- ------------
Total Assets............................................. $1,429,344 $1,455,386
========= ==========
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities:
Notes payable.................................................... $ 13,125 $ 13,125
Trade accounts payable........................................... 127,575 163,056
Accounts payable to affiliate.................................... 46,867 31,389
Accrued taxes.................................................... 49,919 34,567
Other current liabilities........................................ 59,172 59,990
---------- ------------
Total current liabilities................................ 296,658 302,127
Notes payable to affiliate......................................... -- 553,098
Other liabilities.................................................. 26,398 26,304
---------- ------------
Total liabilities........................................ 323,056 881,529
---------- ------------
Minority interests in consolidated partnerships.................... 72,718 71,599
Shareowner's equity:
Common stock, no par, 43,000,000 shares authorized, one share
issued and outstanding........................................ -- --
Additional paid-in capital....................................... 1,056,342 550,523
Accumulated deficit.............................................. (22,772) (48,265)
---------- ------------
Total shareowner's equity................................ 1,033,570 502,258
---------- ------------
Total Liabilities and Shareowner's Equity................ $1,429,344 $1,455,386
========= ==========
</TABLE>
The accompanying notes are an integral part of the Consolidated Condensed
Financial Statements.
H-3
<PAGE> 238
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
REVENUES:
Cellular service................................................. $239,211 $185,462
Cellular equipment............................................... 24,699 16,730
-------- --------
Total revenues........................................... 263,910 202,192
-------- --------
OPERATING REVENUES:
Cellular service................................................. 37,330 30,941
Cellular equipment............................................... 32,761 17,893
Selling, general and administrative.............................. 109,846 92,330
Depreciation and amortization.................................... 33,945 28,075
-------- --------
Total operating expenses................................. 213,882 169,239
-------- --------
Operating income................................................... 50,028 32,953
-------- --------
OTHER INCOME (EXPENSE):
Interest expense................................................. (1,004) (6,313)
Other income (expense), net...................................... (217) 6,079
Minority interests in income of consolidated partnerships........ (6,015) (5,133)
Equity in income (losses) of unconsolidated partnerships......... 356 (205)
-------- --------
Total other expense...................................... (6,880) (5,572)
-------- --------
Income before income taxes......................................... 43,148 27,381
Income tax provision............................................... (17,655) (12,050)
-------- --------
NET INCOME............................................... $ 25,493 $ 15,331
======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Condensed
Financial Statements.
H-4
<PAGE> 239
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................................... $ 25,493 $ 15,331
Adjustments to net income
Depreciation and amortization..................................... 33,945 28,075
Bad debt provision................................................ 6,205 5,044
Minority interests in income of consolidated partnerships......... 6,015 5,133
Equity in (income) losses of unconsolidated partnerships.......... (356) 205
Income taxes...................................................... 23,118 12,113
Changes in operating assets and liabilities:
Accounts receivable............................................. 8,078 6,089
Accounts payable and accrued liabilities........................ (11,631) (20,436)
Other........................................................... 1,324 7,119
-------- --------
Cash provided by operating activities........................ 92,191 58,673
-------- --------
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment....................... (54,767) (60,167)
Cellular acquisitions................................................ -- (20,555)
Other................................................................ (307) 2,413
-------- --------
Cash used for investing activities........................... (55,074) (78,309)
-------- --------
FINANCING ACTIVITIES:
Capital contributions from limited partners.......................... 1,264 4,241
Capital distributions to limited partners............................ (4,896) --
Proceeds from issuance of affiliate debt............................. -- 121,710
Principal payments on affiliate and other debt....................... (634) (98,385)
Dividends and other return of capital to U S WEST, Inc............... (32,851) (7,930)
-------- --------
Cash provided by (used for) financing activities............. (37,117) 19,636
-------- --------
CASH
Change............................................................... -- --
Beginning balance.................................................... -- --
-------- --------
Ending balance....................................................... $ -- $ --
======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Condensed
Financial Statements.
H-5
<PAGE> 240
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS -- UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated condensed financial statements have been
prepared by U S WEST NewVector Group, Inc. and subsidiaries (the "Company")
pursuant to the interim reporting rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally accompanying financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. In the opinion of the Company's management, the
consolidated condensed financial statements include all adjustments, consisting
of only normal recurring adjustments, necessary to present fairly the financial
information set forth therein. It is suggested that these consolidated condensed
financial statements be read in conjunction with the Company's 1995 consolidated
financial statements and notes thereto included in AirTouch Communications'
Registration Statement on Form S-4 (Registration Statement No. 333-03107).
Certain prior year presentations have been reclassified to conform to the
current year presentation.
(2) RECAPITALIZATION OF DEBT
Borrowings under the Company's credit facility with U S WEST were replaced
with equity on January 1, 1996, when U S WEST contributed capital of $553,098 to
the Company.
H-6
<PAGE> 241
U S WEST NEWVECTOR GROUP, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
H-7
<PAGE> 242
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREOWNER OF U S WEST NEWVECTOR GROUP, INC.:
We have audited the accompanying consolidated balance sheets of U S WEST
NewVector Group, Inc. (a Colorado corporation and wholly owned subsidiary of U S
WEST, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in shareowner's equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U S WEST NewVector Group,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Denver, Colorado
February 12, 1996
H-8
<PAGE> 243
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ -- $ --
Trade accounts receivable, net of allowance for doubtful accounts
of $23,302 and $17,144, respectively........................... 142,210 108,090
Inventories....................................................... 23,912 18,375
Deferred tax asset................................................ 9,800 8,477
Federal income taxes receivable from affiliate.................... 12,315 --
Other............................................................. 9,141 14,784
--------- ---------
Total current assets......................................... 197,378 149,726
--------- ---------
Property, plant and equipment, at cost.............................. 1,178,768 972,982
Less accumulated depreciation and amortization.................... (372,821) (334,444)
--------- ---------
Property, plant and equipment, net........................... 805,947 638,538
--------- ---------
Other non-current assets:
Goodwill, net of accumulated amortization......................... 337,563 347,442
Operating licenses and other intangible assets, net of accumulated
amortization................................................... 102,757 112,821
Taxes receivable from affiliate................................... -- 31,439
Investments and other............................................. 11,741 11,216
--------- ---------
Total other non-current assets............................... 452,061 502,918
--------- ---------
TOTAL ASSETS................................................. $1,455,386 $1,291,182
========= =========
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities:
Notes payable..................................................... $ 13,125 $ --
Trade accounts payable............................................ 163,056 97,674
Accounts payable to affiliate..................................... 31,389 30,779
Accrued liabilities:
Employee compensation.......................................... 26,203 25,767
Taxes.......................................................... 34,567 25,292
Other.......................................................... 14,212 14,617
Deferred revenue.................................................. 15,844 11,436
Other current liabilities......................................... 7,302 5,149
--------- ---------
Total current liabilities.................................... 305,698 210,714
Notes payable....................................................... -- 13,125
Notes payable to affiliate.......................................... 553,098 448,103
Other liabilities................................................... 22,733 24,191
--------- ---------
Total liabilities............................................ 881,529 696,133
--------- ---------
Minority interests in consolidated partnerships..................... 71,599 84,013
Shareowner's equity:
Common stock, no par, 43,000,000 shares authorized, one share
issued and outstanding......................................... -- --
Additional paid-in capital........................................ 550,523 620,994
Accumulated deficit............................................... (48,265) (109,958)
--------- ---------
Total shareowner's equity.................................... 502,258 511,036
--------- ---------
TOTAL LIABILITIES AND SHAREOWNER'S EQUITY.................... $1,455,386 $1,291,182
========= =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
H-9
<PAGE> 244
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Cellular service.......................................... $845,493 $624,174 $442,890
Cellular equipment........................................ 95,755 119,594 63,534
-------- -------- --------
Total revenues......................................... 941,248 743,768 506,424
-------- -------- --------
OPERATING EXPENSES:
Cellular service.......................................... 125,768 88,796 58,198
Cellular equipment........................................ 118,432 122,064 63,645
Selling, general and administrative....................... 428,892 353,074 259,240
Depreciation and amortization............................. 121,014 97,394 93,211
Loss on disposition of cellular equipment................. -- -- 75,000
-------- -------- --------
Total operating expenses............................... 794,106 661,328 549,294
-------- -------- --------
Operating income (loss)..................................... 147,142 82,440 (42,870)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (26,759) (23,299) (26,670)
Other income (expense), net............................... 5,636 6 (1,416)
Minority interests in (income) losses of consolidated
partnerships........................................... (23,898) (15,849) 1,136
Equity in income (losses) of unconsolidated
partnerships........................................... 1,332 (19) (922)
-------- -------- --------
Total other expense.................................... (43,689) (39,161) (27,872)
-------- -------- --------
Income (loss) from continuing operations before income
taxes..................................................... 103,453 43,279 (70,742)
Income tax (provision) benefit.............................. (41,760) (20,669) 20,527
-------- -------- --------
Income (loss) from continuing operations.................... 61,693 22,610 (50,215)
Income from operations of discontinued paging segment, net
of tax.................................................... -- 2,930 3,878
Gain on sale of paging segment, net of tax.................. -- 41,504 --
-------- -------- --------
NET INCOME (LOSS)...................................... $ 61,693 $ 67,044 $(46,337)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
H-10
<PAGE> 245
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITION TOTAL
--------------------- PAID-IN ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- --------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1992.................... 1 $ 182,467 $441,084 $(130,665) $ 492,886
Recapitalization.................. -- (182,467) 182,467 -- --
Equity infusion................... -- -- 90,000 -- 90,000
Transfer of assets to affiliate...... -- -- (14,067) -- (14,067)
Net loss.......................... -- -- -- (46,337) (46,337)
--------- --------- --------- --------- ---------
Balance,
December 31, 1993.................... 1 -- 699,484 (177,002) 522,482
Dividends......................... -- -- (78,490) -- (78,490)
Net income........................ -- -- -- 67,044 67,044
--------- --------- --------- --------- ---------
BALANCE,
December 31, 1994.................... 1 -- 620,994 (109,958) 511,036
Dividends......................... -- -- (70,471) -- (70,471)
Net income........................ -- -- -- 61,693 61,693
--------- --------- --------- --------- ---------
DECEMBER 31, 1995.................... 1 $ -- $550,523 $ (48,265) $ 502,258
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
H-11
<PAGE> 246
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income (loss) from continuing operations............... $ 61,693 $ 22,610 $ (50,215)
Adjustments to income (loss) from continuing
operations:
Depreciation and amortization....................... 121,014 97,394 93,211
Bad debt provision.................................. 22,369 12,408 5,263
Loss on disposition of cellular equipment........... -- -- 75,000
Gain on sale of cellular interests.................. -- (100) --
Loss on sale of property............................ 479 639 861
Minority interests in income (losses) of
consolidated partnerships......................... 23,898 15,849 (1,136)
Equity in (income) losses of unconsolidated
partnerships...................................... (1,332) 19 922
Deferred income taxes............................... 7,741 19,168 (20,527)
Changes in operating assets and liabilities:
Accounts receivable............................... (49,731) (48,018) (30,514)
Accounts payable and accrued liabilities.......... 30,343 21,468 37,850
Other............................................. 8,477 (6,130) 6,514
Net cash provided by discontinued paging segment.... -- 3,716 7,225
--------- --------- ---------
Cash provided by operating activities.......... 224,951 139,023 124,454
--------- --------- ---------
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment......... (242,222) (264,368) (140,773)
Cellular acquisitions.................................. (29,905) (1,004) (27,682)
Proceeds from sale or exchange of cellular interests... 7,508 634 --
Proceeds from sale of paging interests................. -- 142,716 --
Investment in unconsolidated partnerships.............. -- -- (2,652)
(Advances to) receipts from unconsolidated
partnerships........................................ (748) (3,694) 1,153
Other.................................................. -- 2,683 (3,631)
--------- --------- ---------
Cash used for investing activities............. (265,367) (123,033) (173,585)
--------- --------- ---------
FINANCING ACTIVITIES:
Capital contributions from limited partners............ 11,941 2,559 4,484
Capital distributions to limited partners.............. (6,049) (1,823) (768)
Proceeds from issuance of affiliate debt............... 520,770 462,431 267,654
Principal payments on affiliate debt................... (415,775) (400,667) (222,239)
Dividends.............................................. (70,471) (78,490) --
--------- --------- ---------
Cash provided by (used for) financing
activities................................... 40,416 (15,990) 49,131
--------- --------- ---------
CASH:
Change................................................. -- -- --
Beginning balance...................................... -- -- --
--------- --------- ---------
Ending balance......................................... $ -- $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
H-12
<PAGE> 247
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND OPERATIONS
U S WEST NewVector Group, Inc. and subsidiaries (the Company) is a wholly
owned subsidiary of U S WEST, Inc. (U S WEST).
The Company is engaged in operating cellular telephone systems in 13
western and midwestern states. During 1995 and 1994, the Company filed renewal
applications for Federal Communications Commission (FCC) licenses in several of
the Company's major cellular Metropolitan Statistical Area (MSA) markets. The
license renewal applications filed in 1994 have been approved, while the 1995
applications are still pending.
(2) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
its majority owned subsidiaries and partnerships over which it exercises
management control. Investments in entities in which the Company has a minority
interest and does not exercise management control are accounted for using the
equity method. All significant intercompany accounts and transactions have been
eliminated in consolidation. The Company's paging operations are presented as
discontinued operations in the consolidated financial statements (see Note 11
for disposition of paging segment). Certain prior year presentations have been
reclassified to conform to the current year presentation.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
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.
REVENUE RECOGNITION
The Company earns cellular service revenue by providing access to the
cellular network (access revenue) and for use of the network (airtime revenue).
Access revenue is billed one month in advance and is recognized in the following
month when service is provided. Airtime revenue is recognized in the month when
service is provided.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventories consist primarily of cellular mobile
telephone equipment and accessories.
INCOME TAX (PROVISION) BENEFIT
The income tax (provision) benefit consists of an amount for taxes
currently payable/receivable and an amount for tax consequences deferred to
future periods, reflected at current income tax rates.
For Federal income tax purposes, the Company's operations are included in a
consolidated tax return filed by U S WEST. The allocation of income tax
consequences to the Company is calculated under a tax allocation agreement with
U S WEST which provides that benefits or liabilities created by the Company will
be allocated to the extent the benefits are usable or additional liabilities are
incurred in the U S WEST
H-13
<PAGE> 248
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
consolidated tax return. The Company records an income tax receivable for tax
benefits of operating losses, or an income tax payable for tax provision on
operating income, reflected in the consolidated return of U S WEST. At December
31, 1995 and 1994, the Company had outstanding tax receivables from U S WEST of
$12,315 and $31,439, respectively.
For state income tax purposes inside the 14 states in which U S WEST
operates, the Company's operations are included in combined tax returns filed by
U S WEST. For years when the Company has pretax income, the allocation of state
income tax consequences to the Company is calculated under a tax allocation
agreement with U S WEST which provides that liabilities created by the Company
will be allocated to the extent additional liabilities are incurred in the U S
WEST combined returns. For years when the Company has pretax losses, any tax
benefit resulting from the filing of combined state income tax returns inside
the U S WEST 14-state region are generally retained by U S WEST. State income
taxes on a combined basis for states outside the U S WEST 14-state region are
allocated to the Company based on its contribution to the total U S WEST
presence in those states.
Income tax expense for the year ended December 31, 1995, computed by the
Company on a stand-alone basis, is not materially different from the expense
recorded in the financial statements.
Cash paid to U S WEST for taxes during the years ended December 31, 1995
and 1994 was $39,115 and $1,501, respectively. No cash was paid for taxes in
1993.
PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment is stated at cost
less accumulated depreciation. Interest incurred during the construction period
is capitalized and amortized over the life of the underlying asset. Interest
capitalized during 1995, 1994 and 1993 was $12,363, $7,230 and $4,667,
respectively.
The cost of constructed assets includes purchased materials, contracted
services, internal labor and applicable overhead.
Depreciation is calculated on a straight-line basis over the following
estimated useful lives:
<TABLE>
<S> <C>
Cellular systems.............................................. 3 to 20 years
Data processing, furniture and other equipment................ 3 to 5 years
</TABLE>
Depreciation expense in 1995, 1994 and 1993 was $108,645, $84,336 and
$79,331, respectively.
Leasehold improvements and assets held by the Company under capital lease
obligations are depreciated over the lease terms, which range from two to ten
years.
Betterments, renewals and extraordinary repairs that extend the life of an
asset are capitalized. All other repairs and maintenance are expensed when
incurred. The cost and accumulated depreciation applicable to assets retired are
removed from the accounts and any gain or loss on disposition is recognized in
income.
GOODWILL, OPERATING LICENSES AND OTHER INTANGIBLE ASSETS
Intangible assets are recorded when the cost of acquired companies exceeds
the fair value of their tangible assets. The excess costs, primarily FCC
operating licenses and goodwill, are amortized by the straight-line method over
40 years. The assets are evaluated, with other related assets, for impairment
using a discounted cash flow methodology.
H-14
<PAGE> 249
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
As of December 31, 1995 and 1994, accumulated amortization on goodwill was
$42,548 and $33,171, respectively and accumulated amortization on operating
licenses and other intangible assets was $12,889 and $28,399, respectively.
Amortization expense for the years ended December 31, 1995, 1994 and 1993, was
$12,369, $13,058 and $13,880, respectively.
RECOVERABILITY OF LONG-LIVED AND INTANGIBLE ASSETS
In 1996, the Company will adopt Statement of Financial Accounting Standard
No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that long-lived
assets and associated intangibles be written down to fair value whenever an
impairment review indicates that the carrying value cannot be recovered on an
undiscounted cash flow basis. SFAS No. 121 also requires that a company no
longer record depreciation expense on assets held for sale. The Company expects
that the adoption of SFAS No. 121 will not have a material effect on its
financial position or results of operations.
(3) PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Cellular systems............................................. $ 869,174 $693,672
Data processing, furniture and other equipment............... 161,388 142,554
Construction in progress..................................... 148,206 136,756
--------- --------
$1,178,768 $972,982
========= ========
</TABLE>
During the years ended December 31, 1995, 1994 and 1993, the Company
replaced substantially all of its cellular network equipment, consisting
primarily of cell site electronics and switching equipment, in certain of its
major markets. In 1993, the Company recorded a pretax loss of $75,000 to record
the equipment at its net realizable value.
VENDOR CONCENTRATIONS
The Company utilizes Motorola as its primary vendor for infrastructure
equipment and cellular mobile telephone equipment and accessories. In addition,
Motorola provides ongoing technological support for the infrastructure
equipment. As a result, the Company receives significant discounts on the
purchase of such equipment from Motorola. Approximately 75% of the Company's
major cellular MSA markets' infrastructures are comprised of Motorola equipment.
(4) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
As of December 31, 1995, the Company had investments in partnerships
representing four MSA and eight Rural Statistical Area (RSA) cellular systems
which are managed by other cellular operators. These cellular investments, which
are accounted for using the equity method, amounted to $6,204 and $8,829 at
December 31, 1995 and 1994, respectively.
H-15
<PAGE> 250
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
(5) DEBT AND CREDIT ARRANGEMENTS
CREDIT FACILITIES WITH AFFILIATE
The following shows the Company's credit facilities with U S WEST as of
December 31:
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Available credit facilities.................................. $ 600,000 $560,000
Amounts borrowed............................................. 553,098 448,103
--------- --------
Available credit............................................. $ 46,902 $111,897
========= ========
</TABLE>
During 1995, the maximum borrowed under the Company's credit facilities was
$553,098. The weighted average month-end balance of the debt outstanding was
$498,744, $398,924 and $386,229 for the years ended December 31, 1995, 1994 and
1993, respectively and the weighted average interest rate was 7.51%, 7.57% and
7.68% for the same periods, respectively. Interest expense related to these
credit facilities, net of amounts capitalized, was $25,142, $22,484 and $25,316
in 1995, 1994 and 1993, respectively. Borrowings under the credit facility
accrued interest at 7.5% and were replaced with equity on January 1, 1996, when
U S WEST contributed capital of $553,098 to the Company.
OTHER
Cash paid for interest, net of amounts capitalized, was $26,062, $23,002
and $27,458 for 1995, 1994 and 1993, respectively.
CAPITAL LEASES
Future minimum payments under a capital lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
<S> <C>
1996.............................................................. $2,872
1997.............................................................. 2,154
------
Total minimum future lease payments............................... 5,026
Less: interest costs............................................ (371)
------
NET CAPITALIZED LEASE OBLIGATION.................................. $4,655
======
</TABLE>
FAIR VALUES
The fair values of the Company's financial instruments, including debt, are
not significantly different from recorded values, primarily as a result of
relatively short-term, market-based interest rate structures.
H-16
<PAGE> 251
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
(6) OPERATING LEASES
The Company has entered into certain operating leases which are
noncancelable and relate to office facilities, equipment and real estate with
terms ranging from 1 to 9 years. Rent expense under the operating leases was
$21,737, $20,775 and $19,053 for 1995, 1994 and 1993, respectively. Minimum
future lease payments as of December 31, 1995 under the leases described above
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
<S> <C>
1996...................................................................... $24,621
1997...................................................................... 19,371
1998...................................................................... 15,395
1999...................................................................... 11,517
2000...................................................................... 5,710
Thereafter................................................................ 545
-------
TOTAL MINIMUM FUTURE LEASE PAYMENTS....................................... $77,159
=======
</TABLE>
(7) SHAREOWNER'S EQUITY
In 1993, the stated value of common stock was reduced to one dollar and the
excess was transferred to paid-in capital in accordance with a shareowner's
resolution. Also during 1993, a capital contribution of $90,000 was made to the
Company in the form of a reduction of debt payable to a subsidiary of U S WEST.
In addition, $14,067 of prepaid supplier credits were transferred to U S WEST
Communications, an affiliate of the Company. This asset transfer was recorded at
net book value, which approximated market value.
The Company issues dividends quarterly to U S WEST based on net income
adjusted for the amortization of intangibles.
(8) INCOME TAXES
The components of the income tax (provision) benefit are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
FEDERAL:
Current............................................... $ (50,441) $ (7,547) $ 9,707
Deferred.............................................. 12,687 (10,720) 9,668
--------- --------- ---------
Total federal...................................... (37,754) (18,267) 19,375
--------- --------- ---------
STATE:
Current............................................... (6,574) (1,858) (709)
Deferred.............................................. 2,568 (544) 1,861
--------- --------- ---------
Total state........................................ (4,006) (2,402) 1,152
--------- --------- ---------
TOTAL INCOME TAX (PROVISION) BENEFIT.................. $ (41,760) $ (20,669) $ 20,527
========= ========= =========
</TABLE>
H-17
<PAGE> 252
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
The effective tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax
rate............................ 35.0% 35.0% 35.0%
State income taxes, net of
federal effect............... 2.5 3.1 1.2
Goodwill amortization........... 3.4 8.8 (4.8)
Other........................... (.5 ) .9 (2.4)
---- ---- ----
EFFECTIVE TAX RATE.............. 40.4% 47.8% 29.0%
================ ================ ================
</TABLE>
The cumulative balance sheet effects of deferred tax consequences are:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Asset revaluation............................................ $ 22,221 $ 22,221
Asset reserves............................................... 4,761 8,724
Gain on dispositions......................................... 45,665 7,418
OPEB and pension............................................. 4,952 5,401
Credit losses................................................ 5,795 5,402
Amortization................................................. -- 1,439
Other........................................................ 7,137 5,593
-------- --------
Deferred tax assets........................................ 90,531 56,198
-------- --------
Depreciation................................................. (60,882) (44,611)
Amortization................................................. (2,082) --
Capitalized construction costs............................... (13,291) (8,887)
Deferred leases.............................................. -- (1,542)
Other........................................................ (68) (2,205)
-------- --------
Deferred tax liabilities................................... (76,323) (57,245)
-------- --------
NET DEFERRED TAX ASSET (LIABILITY)........................... $ 14,208 $ (1,047)
======== ========
</TABLE>
Federal legislation was enacted which increased the corporate tax rate from
34% to 35%, effective January 1, 1993.
(9) EMPLOYEE BENEFITS
The Company's employees participate in various U S WEST benefit plans that
provide certain health care and life insurance benefits for retired employees.
The Company recorded annual postretirement medical and life insurance costs of
$3,152, $3,700 and $3,005 for the years ended December 31, 1995, 1994 and 1993,
respectively. (These costs are included in selling, general and administrative
expense.) U S WEST uses the projected unit credit method for the determination
of postretirement medical costs.
The Company participates in the U S WEST Pension Plan (the Plan), which
covers substantially all full-time employees. Benefits under the Plan are based
on a final-pay formula. The Company recognizes as its net pension cost the
amount determined by the Plan's administrator. The assets of the Plan are held
in a trust and are not segregated or otherwise restricted for benefits of the
Company or any other participating entity. Based on the actuarial valuations of
the Plan, the fair value of net assets available for Plan benefits exceeded
H-18
<PAGE> 253
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
the actuarial present value of the vested and nonvested accumulated Plan
benefits at January 1, 1995, 1994 and 1993. Future anticipated benefit increases
have been reflected in the actuarial assumptions.
The annual pension expense for 1995 and 1994 was $229 and $485,
respectively. In 1993, return on plan assets exceeded the annual service and
interest costs resulting in a net pension credit of $2,745. The Company uses the
aggregate cost method for funding purposes. No funding was required in 1995,
1994 or 1993.
(10) EXCHANGE AND ACQUISITIONS OF CELLULAR INTERESTS
In July, 1995 the Company exchanged cellular properties, representing 2.7
million potential customers (POPs), for cellular properties representing 3.2
million POPs. No gain or loss was recognized on the exchange.
In addition, acquisitions were completed for aggregate monetary
consideration of $29,905, and $1,004 during 1995 and 1994, respectively, and
acquisitions were completed for aggregate monetary and non-monetary
consideration of approximately $30,000 during 1993. The results of operations
for these acquisitions have been included in the Company's consolidated
financial results since their respective acquisition dates. The purchase method
of accounting was used to record these acquisitions.
These transactions did not materially impact the Company's results of
operations.
(11) DISPOSITION OF PAGING SEGMENT
Effective June 30, 1994, the Company completed the sale of its paging
segment, resulting in a gain of $41,504, net of related taxes of $27,018. Income
for the discontinued paging segment for the six months ended June 30, 1994 and
for the year ended December 31, 1993, is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
1994 1993
-------- --------
<S> <C> <C>
Revenues...................................................... $ 28,471 $ 54,374
Costs and expenses............................................ (23,182) (46,636)
Income tax provision.......................................... (2,359) (3,860)
-------- --------
INCOME FROM OPERATIONS OF DISCONTINUED PAGING SEGMENT......... $ 2,930 $ 3,878
======== ========
</TABLE>
(12) OTHER RELATED PARTY TRANSACTIONS
CASH MANAGEMENT
U S WEST manages a centralized cash account for its affiliated companies.
Interest is earned based upon the Company's prorated share of the account.
REVENUES
The Company had sales of cellular service and equipment to U S WEST
affiliates of $17,321, $14,096 and $11,375 during 1995, 1994 and 1993,
respectively. The charges for these services are generally based upon prevailing
market rates.
H-19
<PAGE> 254
U S WEST NEWVECTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
PURCHASES
The Company purchases services from U S WEST and certain of its
subsidiaries. These services include telecommunications, general management and
other centralized services (primarily research and development, cash management,
legal and personnel support). The cost of these services to the Company is
determined based upon arm's-length prices or, in certain cases, tariffed rates,
or fully distributed costs. The Company's operations include charges of $55,380,
$45,519 and $46,659 for 1995, 1994 and 1993, respectively, in relation to these
services. The related payables for these services were $5,812 and $8,767 at
December 31, 1995 and 1994, respectively.
(13) PARTNERSHIP WITH AIRTOUCH
In July 1994, U S WEST signed an agreement with AirTouch Communications,
Inc. ("AirTouch") to combine their domestic cellular properties into a
partnership in a multi-phased transaction. During Phase I, which commenced on
November 1, 1995, the partners are operating their cellular properties
separately; accordingly, Phase I had no immediate financial accounting
presentation impact. In the next phase, (Phase II), the partners will combine
their domestic properties into a partnership, subject to obtaining certain
authorizations. The parties are seeking to obtain regulatory and other approvals
and to satisfy other conditions precedent to entering into Phase II. The recent
passage of the Telecommunications Act of 1996 has removed significant regulatory
barriers to completion of Phase II. The initial interests in the partnership at
the commencement of Phase II depends, among other things, on the timing of the
Phase II closing, the ability of the parties to combine their domestic
properties, and the status of AirTouch's proposed acquisition of other cellular
properties. Currently, management expects the initial interests in the
partnership will be approximately 74% AirTouch and 26% U S WEST.
H-20
<PAGE> 255
ANNEX I
THE APPRAISAL PROCESS
APPRAISAL PROCESS-GENERAL
The Amended and Restated Agreement and Plan of Merger and Joint Venture
Organization dated December 14, 1990, as supplemented by the Termination
Agreement (together, as used herein, the "1990 Merger Agreement"), provides that
the Appraisal Process will commence in August 1996 (unless CCI elects to defer
the Appraisal Process for six months in the event there exists a calamitous or
severe adverse economic condition in the United States (the "Initial Differal").
Pursuant to the Appraisal Process, which is expressly designed to recognize
CCI's share of any control premium for New Par, AirTouch will have the right, by
causing the Appraisal Process Redemption, to acquire CCI, including its interest
in (i) New Par or (ii) New Par and any other venture entered into between
AirTouch and CCI (the "Second Venture"), as well as, in either case, any other
assets (the "Other Assets") that CCI and AirTouch mutually agree upon that CCI
should retain (the "Retained Assets"). The 1990 Merger Agreement provides that
AirTouch will finance the Appraisal Process Redemption by providing to CCI the
necessary funds. In addition, AirTouch has the right to purchase CCI's interest
in only the Second Venture, at a price reflecting the appraised private market
value thereof determined in accordance with the Appraisal Process.
Pursuant to the 1990 Merger Agreement, both CCI and AirTouch have certain
rights of deferral in the Appraisal Process. Depending on whether these rights
are exercised, the final appraisal of the Appraisal Process will commence
between August 1996 and February 1998.
In the event that AirTouch determines to exercise its right to cause the
Appraisal Process Redemption, any Other Assets not mutually agreed to be
retained by CCI will be sold. In the event that AirTouch does not cause the
Appraisal Process Redemption, CCI will promptly be sold pursuant to the sales
process described in the 1990 Merger Agreement, subject to certain rights not to
effect such a sale. Even if CCI is not sold in its entirety, CCI is obligated to
commence the sale of all of its assets (other than its interest in New Par or,
if New Par has been dissolved, New Par assets) no later than one year after the
date (the "Back End Termination Date") AirTouch loses its right to cause the
Appraisal Process Redemption. The net proceeds from any such sale remaining
after reduction for CCI's costs, expenses, appropriate escrows and taxes
relating to the sale will be distributed to CCI stockholders (including
AirTouch) on a basis proportionate to their ownership interests. If such a sale
occurs after the Final Redemption Date (as defined below) such proceeds shall be
distributed to CCI stockholders on a basis proportionate to their ownership
interests as of the Final Redemption Date.
In the event that AirTouch determines not to exercise its right to cause
the Appraisal Process Redemption and there is a Qualifying Third Party Sale (as
defined below) for a Third Party Price Per Share (as defined below) less than
the Gross Make Whole Price Per Share (as defined below), AirTouch will pay to
CCI stockholders the Make Whole Obligation (as defined below). The amount that
AirTouch will pay will be the Make Whole Obligation reduced by the Total Per
Share Adjustment (as defined below). In the event the amount of the Total Per
Share Adjustment exceeds the Make Whole Obligation, CCI is obligated to pay to
AirTouch an amount equal to the aggregate amount of such excess (increased to
compensate AirTouch, as a stockholder of CCI, for its share of such payment by
CCI to AirTouch). Pursuant to CCI's Certificate of Incorporation, CCI may not
take certain actions that would result in a waiver of AirTouch's Make Whole
Obligation without the approval of CCI's stockholders.
In connection with a sale of CCI (or CCI's interest in New Par), other than
a Qualifying Third Party Sale, CCI is obligated to pay AirTouch an amount equal
to the aggregate amount of the Total Per Share Adjustments (increased to
compensate AirTouch, as a stockholder of CCI, for its share of such payment by
CCI to AirTouch).
I-1
<PAGE> 256
DETERMINATION OF VALUES
As the first step in the Appraisal Process, two appraisers (one selected by
each of AirTouch and CCI from an agreed upon list) will each separately
determine the Value (as hereinafter defined) of (i) CCI's interest in New Par
(the "CCI-New Par Value"), (ii) CCI's interest in the Second Venture (the "CCI-
Second Venture Value"), (iii) CCI's cellular business apart from New Par and the
Second Venture (the "Other Cellular Assets" and the "Other Cellular Assets
Value," respectively), (iv) CCI's businesses and assets, apart from New Par, the
Second Venture and the Other Cellular Assets (the "Remaining Assets" and,
adjusted as described below, the "Remaining Assets Value") and (v) for purposes
of the final appraisal, AirTouch's interest in New Par (the "AirTouch-New Par
Value").
CCI-New Par Value; AirTouch-New Par Value. The CCI-New Par Value and the
AirTouch-New Par Value, as the case may be, will be equal to the aggregate
direct and indirect Cumulative Dissolution Preferences (as defined in the New
Par Partnership Agreement attached as Exhibit A to the 1990 Merger Agreement),
if any, of CCI (including its affiliates) and AirTouch (including its
affiliates), respectively, plus the product of (i) CCI's (and its affiliates')
or AirTouch's (and its affiliates') aggregate direct and indirect Common Capital
Accounts (as defined in the New Par Partnership Agreement attached as Exhibit A
to the 1990 Merger Agreement) with such aggregate stated as a percentage of the
total Common Capital Accounts of New Par and (ii) the greater of: (a) the
Integrated Value (as defined in the New Par Partnership Agreement attached as
Exhibit A to the 1990 Merger Agreement) of all partnership interests in New Par
or (b) the Value of New Par if (1) the Expanded AirTouch Midwest System Assets
and Liabilities (as defined below), (2) the Expanded CCI Ohio System Assets and
Liabilities (as defined below) and (3) the remaining assets of New Par each were
sold at their Stand Alone Value (as defined below).
CCI-Second Venture Value. The CCI-Second Venture Value will be equal to
the product of (i) the Stand Alone Value of the Second Venture and (ii) the
aggregate direct and indirect percentage ownership interest of CCI in such
Second Venture.
Other Cellular Assets Value. The Other Cellular Assets Value will be equal
to the Stand Alone Value of the Other Cellular Assets; provided, however, that
the Value of CCI's interest in the Additional Systems (as defined in the 1990
Merger Agreement) shall be determined as though CCI's interest in such
Additional Systems was sold in an integrated transaction with New Par (taking
into account any benefit of joint operation or synergies with New Par).
Remaining Assets Value. The Remaining Assets Value will be equal to the
Stand Alone Value of the Remaining Assets; provided, however, that if such Value
is greater than 20 percent of the sum of (i) such Value, (ii) the CCI-New Par
Value, (iii) the CCI-Second Venture Value and (iv) the Other Cellular Assets
Value, then the Value of the Remaining Assets will be reduced by any taxes that
would be incurred by CCI as a result of a deemed sale thereof at a price equal
to the Value described in clause (i) of this proviso. Such Value, after any
adjustment pursuant to the preceding provision, is hereinafter referred to as
the "Remaining Assets Value."
For purposes of the 1990 Merger Agreement, "Expanded AirTouch Midwest
System Assets and Liabilities" and "Expanded CCI Ohio System Assets and
Liabilities" mean those assets owned by, and liabilities of, New Par relating to
or associated with the operation of the "Expanded AirTouch Midwest System" and
the "Expanded CCI Ohio System," respectively. "Expanded AirTouch Midwest System"
and "Expanded CCI Ohio System" means the AirTouch Midwest System and the CCI
Ohio System, respectively, as supplemented by certain additional assets
contributed to or acquired by New Par. "Integrated Value" with respect to all
partnership interests in New Par will mean the Value of all such partnership
interests if sold, in a manner and pursuant to a process designed to maximize
value, as a whole (including any control premium inherent therein) in a unitary
transaction to a willing buyer, but without regard to any tax liability as a
result of such sale. "Stand Alone Value" with respect to any entity or group of
assets will mean the Value of each such entity or group of assets if sold, in a
manner and pursuant to a process designed to maximize value, on a stand-alone
basis, but without regard to any tax liability as a result of such sale.
For purposes of the 1990 Merger Agreement, "Value" with respect to any
entity or group of assets, shall mean the value of (i) all tangible and
intangible assets (including licenses, permits, goodwill and going-concern
value) as adjusted for (ii) all liabilities (whether actual or contingent), in
each case which are
I-2
<PAGE> 257
associated therewith. In the event that the liabilities determined in clause
(ii) above for any entity or group of assets exceeds the value of such entity or
group of assets as determined in clause (i) above, the Value of such entity or
group of assets shall be negative to the extent of such excess liabilities. For
purposes of valuing the Remaining Assets, any actual or contingent liabilities
of CCI not otherwise taken into account in determining the Value of any entity
or group of assets will be deemed to be a liability associated with the
Remaining Assets. For purposes of valuing New Par, each Cumulative Dissolution
Preference shall be treated as a liability in the amount of such preference. The
cost of the appraisals shall be the sole responsibility of CCI and shall also be
treated as a liability thereof, provided that the cost of the appraiser selected
by AirTouch in excess (if applicable) of the cost of the appraiser selected by
CCI shall be borne by AirTouch (the cost of the appraiser selected by CCI shall,
regardless of any lesser amount actually paid, be deemed for purposes of this
sentence to be no less than that customarily charged for such an appraisal).
Component Appraisals. From the valuations described above, each appraiser
will prepare the following component appraisals: "Appraisal Value-CCI Joint
Venture" is the CCI-New Par Value. "Appraisal Value-CCI Joint Venture and 2V" is
the sum of the CCI-New Par Value and the CCI-Second Venture Value. "Appraisal
Value-Other Cellular" is the Other Cellular Assets Value. "Appraisal
Value-Remaining Assets" is the Remaining Assets Value. "Appraisal Value-Just 2V"
will be the CCI-Second Venture Value. "Appraisal Value-All" is the sum of the
CCI-New Par Value, the CCI-Second Venture Value, the Other Cellular Assets Value
and the Remaining Assets Value. "Appraisal Value-Sans 2V" is the sum of the
CCI-New Par Value and the Other Cellular Assets Value and the Remaining Assets
Value. "Appraisal Value-AirTouch Joint Venture" is the AirTouch-New Par Value
and is determined using the same method as the Appraisal Value-CCI Joint
Venture.
The component appraisal values of the two appraisers will be compared
against each other. If any of the two appraisal values for a component differs
and the higher is less than 110% of the lower, then the final Value of such
component is the average of such appraisal values. If any of the two appraisal
values for any component differ and the higher is 110% or more of the lower, a
third appraiser will be jointly selected by the two appraisers from an agreed
upon list of appraisers which is attached to the 1990 Merger Agreement. The
third appraiser will prepare component appraisals for those components which are
10% or more apart in Value. The final Value of such component(s) determined by
the third appraiser will be the average of the two closest of the three values
of such component(s), unless with respect to any such component the Value
determined by the third appraiser is the highest or lowest of the three values,
in which case the third appraisal will be ignored and the final Value of such
component will be the average of the first two Values of such component. The
final Value of each component appraisal is referred to as the Agreed Appraisal
Value of each such component. The Agreed Appraisal Value-CCI Joint Venture, the
Agreed Appraisal Value-CCI Joint Venture and 2V, the Agreed Appraisal Value-Just
2V, the Agreed Appraisal Value-Other Cellular and the Agreed Appraisal
Value-Remaining Assets, are referred to collectively as "the Agreed Appraisal
Values" except that, in connection with Step 3 (or, in the event that CCI has
exercised its right to cause the Initial Deferral, Step 4) of the Appraisal
Process described below, "Agreed Appraisal Values" will also include the terms
Agreed Appraisal Value-All, Agreed Appraisal Value-Sans 2V and the Agreed
Appraisal Value-AirTouch Joint Venture. "Two Main Values" means the Agreed
Appraisal Value-CCI Joint Venture and the Agreed Appraisal Value-CCI Joint
Venture and 2V.
MECHANICS OF APPRAISAL PROCESS
Step 1. The 1990 Merger Agreement provides that on August 2, 1996 (the
"Step 1 Date"), CCI must indicate by written notice to AirTouch whether it
intends to commence the Appraisal Process or cause the Initial Deferral. If CCI
elects to cause the Initial Deferral, the Appraisal Process will be deferred and
the parties will proceed to Step 2 six months after the Step 1 Date (the "Step 2
Date"); otherwise, the Appraisal Process will commence. If the Appraisal Process
commences in Step 1, the Agreed Appraisal Values will be presented to CCI and
AirTouch. AirTouch must elect within 20 days after such presentation to: (i)
proceed to Step 2 which would commence on the Step 2 Date or (ii) accept one of
the Two Main Values or accept the Agreed Appraisal Value-Just 2V.
I-3
<PAGE> 258
Step 2. If Step 2 is reached, an appraisal will commence on the Step 2
Date. CCI must immediately present the Agreed Appraisal Values to AirTouch for
its consideration upon completion of such appraisal. AirTouch must elect within
20 days after such presentation to: (i) proceed to Step 3 which would take place
six months after the Step 2 Date (the "Step 3 Date") or (ii) accept one of the
Two Main Values or accept the Agreed Appraisal Value-Just 2V.
Step 3. If Step 3 is reached, an appraisal will commence on the Step 3
Date. CCI must immediately present the Agreed Appraisal Values to AirTouch for
its consideration upon completion of such appraisal. AirTouch must elect within
20 days after such presentation to: (i) in the event that CCI has exercised its
right to cause the Initial Deferral, either (a) proceed to Step 4, which would
take place six months following the Step 3 Date (the "Step 4 Date"), or (b)
accept one of the Two Main Values or the Agreed Appraisal-Value Just 2V or (ii)
in the event that CCI has not exercised its right to cause the Initial Deferral,
either (a) accept one of the Two Main Values or the Agreed Appraisal Value-Just
2V or (b) reject both of the Two Main Values and the Agreed Appraisal Value-Just
2V.
Step 4. If Step 4 is reached, an appraisal will commence on the Step 4
Date. CCI must immediately present the Agreed Appraisal Values to AirTouch for
its consideration upon completion of such appraisal. AirTouch must elect within
20 days after such presentation to: (i) accept one of the Two Main Values or the
Agreed Appraisal Value-Just 2V or (ii) reject both of the Two Main Values and
the Agreed Appraisal Value-Just 2V.
EFFECT OF AIRTOUCH ACCEPTANCE
Effect of AirTouch Acceptance of Agreed Appraisal Price. The 1990 Merger
Agreement provides that if at any time during Steps 1 through 3 and, if
applicable, Step 4 of the Appraisal Process, AirTouch accepts either of the Two
Main Values (an "AirTouch Acceptance"), then within five business days after the
later of (i) such acceptance, (ii) with respect to an acceptance in Step 3 (or,
in the event that CCI has theretofore exercised its right to cause the Initial
Deferral, Step 4), the expiration or termination of AirTouch's option to
reconsider or (iii) the receipt of all regulatory and other approvals required
to consummate the Appraisal Process Redemption, CCI must give a redemption
notice to the holders of shares of CCI Series A Common Stock and CCI Redeemable
Preferred Stock (the "CCI Redeemable Stock") stating that such shares (other
than shares owned by AirTouch or any of its affiliates) will be redeemed at the
Appraisal Process Redemption Price Per Share (as defined below) on a date fixed
in such notice, which date will not be more than 60 nor less than 10 days from
the date of such notice, subject to certain extensions described in the 1990
Merger Agreement (the "Final Redemption Date"). If AirTouch accepts either of
the Two Main Values during Step 3 (or, in the event that CCI has theretofore
exercised its right to cause the Initial Deferral, Step 4), then the price at
which shares of CCI Redeemable Stock will be redeemed is an Appraisal Process
Redemption Price Per Share based on 102 percent of such Agreed Appraisal Value.
The 1990 Merger Agreement provides that at least one day prior to the Final
Appraisal Process Redemption Date, AirTouch will provide to CCI the funds
necessary to finance the Appraisal Process Redemption.
Determination of Agreed Redemption Values. In connection with an AirTouch
Acceptance, AirTouch and CCI will mutually determine which, if any, of the Other
Cellular Assets and the Remaining Assets are to be retained by CCI. CCI will be
obligated to sell promptly all Other Cellular Assets and all Remaining Assets
(the "Unwanted Assets") which the parties fail to agree CCI should retain. To
the extent such sales process occurs prior to the Final Redemption Date, it
shall be conducted by CCI in accordance with the terms and procedures provided
in the 1990 Merger Agreement. To the extent such sales process occurs after the
Final Redemption Date, it shall be conducted by AirTouch in a manner designed to
maximize value. The net proceeds from such sale remaining after reduction for
CCI's costs, expenses, appropriate escrows and taxes relating to the sale will
be distributed to CCI stockholders on a basis proportionate to their ownership
interests as of the Final Redemption Date.
The Other Cellular Assets and the Remaining Assets that AirTouch and CCI
have mutually agreed to retain are referred to as the "Agreed Retained-Other
Cellular Assets" or the "Agreed Retained-Remaining
I-4
<PAGE> 259
Assets," respectively, and are referred to collectively as the "Agreed Retained
Assets." Absent a different agreement between AirTouch and CCI as to the Value
for any Agreed Retained-Other Cellular Assets or Agreed Retained-Remaining
Assets, the Value of such Agreed Retained Assets will be the average of the
separately stated Values for such entity or group of assets as determined by the
appraisers (including a reduction for any deemed taxes taken into account in
determining the Appraisal Value-Remaining Assets).
The Agreed Value-Retained Assets, if any, will be added thereafter to both
the Agreed Appraisal Value-CCI Joint Venture and the Agreed Appraisal Value-CCI
Joint Venture and 2V to determine the "Agreed Redemption Value-CCI Joint
Venture" and the "Agreed Redemption Value-CCI Joint Venture and 2V,"
respectively. The Agreed Redemption Value-CCI Joint Venture and the Agreed
Value-CCI Joint Venture and 2V are referred to collectively as the "Agreed
Redemption Values." The Agreed Appraisal Values and the Agreed Redemption Values
are subject to adjustment in accordance with the terms of the 1990 Merger
Agreement including (i) in certain circumstances, reductions for taxes on a
deemed sale of certain assets and (ii) adjustments for distributions from, or
contributions to, CCI, New Par or the Second Venture subsequent to the date of
the appraisal.
The 1990 Merger Agreement provides that the Agreed Redemption Values, as
adjusted, will be divided by the number of Fully Diluted Shares (as defined in
the 1990 Merger Agreement) as of the Final Redemption Date to determine,
respectively, the "Gross Appraisal Process Price-CCI Joint Venture Per Share"
and the "Gross Appraisal Process Price-CCI Joint Venture and 2V Per Share"
(collectively, the "Gross Appraisal Process Prices Per Share"). The "Appraisal
Process Price Per Share" is equal to the Gross Appraisal Process Price Per Share
less the Total Per Share Adjustment. The "Total Per Share Adjustment" is equal
to (i) the Liquidity Adjustment as defined below) and determined without regard
to the Fixed Liquidity Adjustment plus the Unanticipated Tax Adjustment (as
defined below), divided by (ii) the number of Fully Diluted Shares (other than
shares held by AirTouch and its affiliates) at the date of determination.
Sale of Second Venture. Pursuant to the 1990 Merger Agreement, if at any
time during Steps 1 through 3 and, if applicable, Step 4, AirTouch accepts the
Agreed Appraisal Value-CCI Joint Venture, then AirTouch will sell the Second
Venture (including both CCI's and AirTouch's interests therein) and CCI shall
distribute the proceeds of the sale of CCI's interest in the Second Venture (net
of any taxes incurred) to CCI's stockholders. However, if such acceptance occurs
in Step 3 (or, in the event that CCI has theretofore exercised its right to
cause the Initial Deferral, Step 4), the sale of the Second Venture will not be
consummated for 90 days to accommodate AirTouch's option to reconsider described
below.
AirTouch Acquisition of CCI's Second Venture Interest. The 1990 Merger
Agreement provides that if AirTouch or its affiliate accepts the Agreed
Appraisal Value-Just 2V, AirTouch or such affiliate will pay to CCI an amount
equal to the Agreed Appraisal Value-Just 2V and AirTouch or such affiliate will
thereafter own all of CCI's direct or indirect interest in the Second Venture.
In the event that such acceptance occurs in any of Steps 1 and 2 (or, in the
event that CCI has theretofore exercised its right to cause the Initial
Deferral, Steps 1 through 3), the parties will continue to the next Step as if
no such acceptance had occurred. In addition, in the event AirTouch accepts an
Agreed Appraisal Value-Just 2V in any of the Steps 1 and 2 (or, in the event
that CCI has theretofore exercised its right to cause the Initial Deferral,
Steps 1 through 3), and after a subsequent appraisal accepts the Agreed
Appraisal Value-CCI New Par, the latter value will be increased by the amount of
any tax liability incurred by CCI in connection with the sale of CCI's Second
Venture interest to AirTouch to the extent that such tax liability resulted in a
reduction of such Agreed Appraisal Value-CCI New Par either (i) as an unpaid tax
liability or (ii) due to the fact that such taxes were paid prior to the
appraisal date. If AirTouch accepts the Agreed Appraisal Value-Just 2V in Step 3
(or, in the event CCI has theretofore exercised its right to cause the Initial
Deferral, Step 4), the Agreed Appraisal Value-CCI New Par to be used for
purposes of determining the amount, if any, of AirTouch's Make Whole Obligation
will be reduced by the amount of any tax liability incurred by CCI in connection
with the sale of CCI's Second Venture interest to AirTouch (whether paid or
payable).
I-5
<PAGE> 260
EFFECT OF AIRTOUCH REJECTION
Sale of CCI; Sale of CCI and New Par. The 1990 Merger Agreement provides
that if in Step 3 (or, in the event that CCI has theretofore exercised its right
to cause the Initial Deferral, Step 4) AirTouch rejects both of the Two Main
Values and does not subsequently accept one of the Two Main Values pursuant to
its option to reconsider, AirTouch will determine on or before the Back End
Termination Date, whether (i) New Par is to be dissolved pursuant to its
partnership agreement or (ii) CCI (in its entirety) and AirTouch's (including
its affiliates') interests in New Par are jointly to be sold. Accordingly, the
Back End Termination Date will be the date after the expiration of all AirTouch
rights (including the option to reconsider described below) to cause the
Appraisal Process Redemption. Upon such determination by AirTouch, CCI will
promptly commence the sales process described in the 1990 Merger Agreement. The
1990 Merger Agreement does not prohibit AirTouch or its affiliates from
submitting a bid or proposal to purchase CCI (or CCI's interest in New Par)
pursuant to such process. The CCI Board may, in the exercise of its fiduciary
duties, determine not to effect such a sale. Any irrevocable determination by
the CCI Board to reject a sale proposal received during such process will, in
the absence of a superior bona fide bid, require the approval by the affirmative
vote of the holders of a majority of the CCI Redeemable Preferred Stock and CCI
Common Stock (other than AirTouch), voting together as a class.
Sale of Assets of CCI. The 1990 Merger Agreement provides that CCI may at
any time after the Back End Termination Date sell any of its assets (subject to
the following). Any such sale must be conducted pursuant to a customary sales
process intended to maximize value to CCI's stockholders. Moreover, a sale of
New Par or New Par assets must comply with, among other things, the following
procedures in order to be treated as a Qualifying Third Party Sale. AirTouch
will have the right to participate in the negotiation of any such sale. In
addition, at AirTouch's option, any sale of the Second Venture or New Par, as
the case may be, shall involve a sale of the Second Venture or New Par as a
whole (including any control premium inherent therein) in a unitary transaction.
Moreover, in the event AirTouch has determined that New Par is to be dissolved,
all of the CCI Joint Venture Assets must be sold if CCI or its affiliates choose
to sell any of such assets or none of them shall be sold. Any sale of CCI or its
and its affiliates' interest in New Par or, if New Par is dissolved, any sale of
the CCI Joint Venture Assets held by CCI and its affiliates shall be pursuant to
a single transaction that does not involve the sale of any other asset or the
transfer of any liabilities except those liabilities which were reflected in the
Appraisal Value-CCI Joint Venture or incurred after the Appraisal Date with
respect to New Par. In connection with any such sale, the 1990 Merger Agreement
requires that the purchasers assume all liabilities associated with the
transferred entities or assets or that appropriate escrows be established to
cover retained liabilities and/or indemnification obligations.
Certain Required Asset Sales. In the event that AirTouch does not cause
the Appraisal Process Redemption, CCI is obligated to commence the sale of all
of its assets (other than its and its affiliates interest in New Par) no later
than one year after AirTouch loses its right to cause the Appraisal Process
Redemption. In connection with a sale of CCI (or CCI's and its affiliates
interest in New Par), other than a Qualifying Third Party Sale, CCI is obligated
to pay AirTouch an amount equal to the aggregate Total Per Share Adjustment
(increased to compensate AirTouch, as a stockholder of CCI, for its share of
such payment by CCI to AirTouch).
CCI Purchase Right. The 1990 Merger Agreement provides that if in Step 3
(or, in the event that CCI has theretofore exercised its right to cause the
Initial Deferral, Step 4) AirTouch has rejected both of the Two Main Values and
has determined that New Par is to be dissolved, CCI or any of its affiliates has
the right, for a period of 120 days after the Back End Termination Date, to
purchase AirTouch's and its affiliates' interest in CCI for an amount equal to
the Value of AirTouch's Interest in CCI (as hereinafter defined). The 1990
Merger Agreement further provides that if in Step 3 (or, in the event that CCI
has theretofore exercised its right to cause the Initial Deferral, Step 4),
AirTouch decides that CCI (in its entirety) and AirTouch's and its affiliates'
interests in New Par are to be sold, CCI or any of its affiliates will have the
right for a period of 120 days after the Back End Termination Date to purchase
AirTouch's and its affiliates' interest in CCI and AirTouch's and it affiliates'
interest in New Par, on an all or nothing basis for an amount equal to the sum
of (i) the Value of AirTouch's Interest in CCI plus (ii) the Agreed Appraisal
Value-AirTouch Joint Venture, as may be adjusted. An election by CCI (i) to
purchase AirTouch's and its affiliates' interest in CCI and
I-6
<PAGE> 261
AirTouch and its affiliates interest in New Par or (ii) to purchase AirTouch's
and its affiliates' interest in CCI will relieve AirTouch of any obligation to
make payment to the CCI stockholders under the Make Whole Obligation.
The 1990 Merger Agreement defines the "Value of AirTouch's Interest in CCI"
as (i) the Agreed Appraisal Value All (as adjusted) or the Agreed Appraisal
Value-Sans 2V (as adjusted), as the case may be, multiplied by a fraction the
numerator of which will be the number of Fully Diluted Shares held by AirTouch
and its affiliates and the denominator of which will be the number of Fully
Diluted Shares, both determined as of the date of the closing of the sale to CCI
(the "CCI Purchase Date") plus (ii) the sum of the Liquidity Adjustment
(determined without regard to the Fixed Liquidity Adjustment) plus the
Unanticipated Tax Adjustment, as adjusted in accordance with the 1990 Merger
Agreement to compensate AirTouch as a stockholder of CCI for its shares of such
payment by CCI to AirTouch.
A determination by the CCI Board to exercise either of the options
described in the second preceding paragraph will require CCI stockholder
approval.
AirTouch Option to Reconsider. The 1990 Merger Agreement provides that if
AirTouch accepts either the Agreed Appraisal Value-CCI Joint Venture or Agreed
Appraisal Value-Just 2V in Step 3 (or, in the event that CCI has theretofore
exercised its right to cause the Initial Deferral, Step 4), AirTouch will have
the option, for 90 days thereafter, to accept instead the Agreed Appraisal
Value-CCI Joint Venture and 2V; provided, that such value will then be deemed to
have increased by an amount equal to four percent of the difference between the
Agreed Appraisal Value-CCI Joint Venture or the Agreed Appraisal Value-Just 2V
initially accepted and the Agreed Appraisal Value-CCI Joint Venture and 2V
subsequently accepted, plus an interest factor. The CCI Redeemable Stock will
then be redeemed as provided for above.
The 1990 Merger Agreement further provides that in the event that AirTouch
in Step 3 (or, in the event that CCI has theretofore exercised its right to
cause the Initial Deferral, Step 4) rejects both of the Two Main Values and the
Agreed Appraisal Value-Just 2V, AirTouch will have the option, for a period of
90 days following such rejection, to reconsider its decision and accept either
of the Two Main Values or the Agreed Appraisal Value-Just 2V. If AirTouch
accepts one of the Two Main Values or the Agreed Appraisal Value-Just 2V
pursuant to this option, such Agreed Appraisal Value will then be deemed to have
increased by an amount equal to four percent of such Agreed Appraisal Value so
accepted plus interest.
AIRTOUCH MAKE WHOLE OBLIGATION
The 1990 Merger Agreement provides that if in Step 3 (or, in the event that
CCI has theretofore exercised its right to cause the Initial Deferral, Step 4)
AirTouch does not accept either of the Two Main Values and either: (i)(a) CCI
retained its and its affiliates' interests in New Par (or in the event that New
Par has been dissolved, in New Par assets distributed to CCI or its affiliates
(the "CCI Joint Venture Assets")), (b) the CCI stockholders within one year
after the Back End Termination Date have voted to approve a transaction or have
tendered in excess of 50 percent of the outstanding shares of capital stock of
CCI, in either case in connection with a binding agreement pursuant to which all
outstanding capital stock of CCI is to be acquired by a third party and (c) such
acquisition is completed within two years after the Back End Termination Date;
or (ii)(a) CCI and its affiliates within one year after the Back End Termination
Date (I) have sold in their entirety their interests in New Par (or, in the
event that New Par has been dissolved, in the CCI New Par Assets) or (II) have
entered into a binding agreement pursuant to which the CCI's and its affiliates'
interests in New Par, or all of CCI's and its affiliates' interests in the CCI
Joint Venture Assets, are to be acquired by a third party, and (b) such
acquisition is completed within two years of the Back End Termination Date (any
such transaction being a "Qualifying Third Party Sale"); then AirTouch is
obligated to pay to each CCI stockholder upon completion of such Qualifying
Third Party Sale (the "Acquisition Completion Date") the Make Whole Obligation
reduced by the Total Per Share Adjustment. Pursuant to the 1990 Merger
Agreement, neither AirTouch nor any of its affiliates shall be deemed to be an
affiliate of CCI for purposes of the 1990 Merger Agreement by virtue of any of
the Original Transactions. Thus, AirTouch (or an affiliate of AirTouch) may be a
"third party" for purposes of purchasing CCI (or CCI's interest in New Par)
following AirTouch's election not to cause the Appraisal Process Redemption. The
"Make Whole Obligation" is determined pursuant to the following formula:
I-7
<PAGE> 262
(1) First, the "Third Party Price Per Share" must be determined. With
respect to an acquisition of shares of CCI Redeemable Preferred Stock and CCI
Common Stock described in clause (i) above, the Third Party Price Per Share will
be the price at which tendered shares were accepted for payment in an
acquisition, or if there is no tender offer in such acquisition, the price per
share approved at the stockholders' meeting. With respect to an acquisition of
CCI's and its affiliates' interests in New Par (or CCI's and its affiliates'
interests in the CCI Joint Venture Assets) described in clause (ii) above, the
Third Party Price Per Share will be the price paid for CCI's and its affiliates'
interests in New Par (or CCI's and its affiliates' interests in the CCI Joint
Venture Assets) divided by the number of Fully Diluted Shares as of the
Acquisition Completion Date;
(2) Second, the Gross Make Whole Price Per Share must be determined. The
"Gross Make Whole Price Per Share" will be the Agreed Appraisal Value-CCI Joint
Venture, as adjusted (including a reduction for taxes on the sale of the Second
Venture to AirTouch, if applicable, and the excess, if any, of non-Joint Venture
liabilities over non-Joint Venture assets), divided by the number of Fully
Diluted Shares as of the Acquisition Completion Date;
(3) If the Third Party Price Per Share is greater than the Gross Make Whole
Price Per Share, the Make Whole Obligation will be zero;
(4) If the Third Party Price Per Share is less than the applicable Gross
Make Whole Price Per Share but not less than 80% of such Gross Make Whole Price
Per Share, then the Make Whole Obligation will be 100% of the difference between
the Third Party Price Per Share and such Gross Make Whole Price Per Share;
(5) If the Third Party Price Per Share is less than 80% of the applicable
Gross Make Whole Price Per Share but not less than 60% of such Gross Make Whole
Price Per Share, then the Make Whole Obligation will be (i) 80% of the
difference between the Third Party Price Per Share and 80% of such Gross Make
Whole Price Per Share plus (ii) 20% of such Gross Make Whole Price Per Share;
and
(6) If the Third Party Price Per Share is less than 60% of the applicable
Gross Make Whole Price Per Share, then the Make Whole Obligation will be (i) 50%
of the difference between the Third Party Price Per Share and 60% of such Gross
Make Whole Price Per Share plus (ii) 36% of the Gross Make Whole Price Per
Share.
If in Step 3 (or, in the event that CCI has theretofore exercised its right
to cause the Initial Deferral, Step 4), AirTouch does not accept either of the
Two Main Values and AirTouch is required to make a payment to the CCI
stockholders pursuant to the Make Whole Obligation, the Agreed Appraisal
Value-CCI Joint Venture will be increased by two percent.
The 1990 Merger Agreement provides that if either provisions of clause
(i)(b) above have been satisfied but the Modification of Final Judgment entered
in United States v. AT&T (the "MFJ") prohibits AirTouch from receiving or
holding the consideration being offered by the third party for the shares of CCI
capital stock held by AirTouch or such third party is unwilling to succeed to
the business restrictions contained in the 1990 Merger Agreement, then AirTouch
shall promptly seek an MFJ waiver which would permit it to receive and hold such
consideration or have such consideration held by a third party for AirTouch's
benefit.
The 1990 Merger Agreement further provides that in the event that the Total
Per Share Adjustment is greater than the Make Whole Obligation, CCI will pay to
AirTouch an amount equal to (i) the sum of (a) the Liquidity Adjustment
(determined without regard to the Fixed Liquidation Adjustment), plus (b) the
Unanticipated Tax Adjustment, minus (ii) (a) the total Make Whole Obligation
multiplied by (b) the number of Fully Diluted Shares held by stockholders other
than AirTouch or its affiliates at the Acquisition Completion Date, multiplied
by (iii) a fraction, the numerator of which is the number of Fully Diluted
Shares and the denominator of which is the number of Fully Diluted Shares held
by stockholders other than AirTouch or its affiliates, both determined at the
Acquisition Completion Date.
ADJUSTMENTS
The Unanticipated Tax Adjustment. The 1990 Merger Agreement defines the
"Unanticipated Tax Adjustment" as the lesser of (i) the aggregate of CCI's (or
its predecessor, Old CCI's, as the case may be)
I-8
<PAGE> 263
and AirTouch's respective Unanticipated Tax Amounts (as defined below), as
increased by 12.5 % per annum or (ii) $20,000,000. Pursuant to the 1990 Merger
Agreement, the "Unanticipated AirTouch Tax Amount" will equal all taxes paid or
accrued for financial statement purposes by AirTouch as a result of the
Transactions (other than the distribution of shares of Cellular Communications
of Puerto Rico, Inc. (the "Puerto Rico Distribution")). The "Unanticipated CCI
Tax Amount" will equal (i) if on or before the MRO Date, CCI (or Old CCI, as the
case may be) has paid or accrued (for financial statement purposes) taxes as a
result of the Puerto Rico Distribution ("Unanticipated CCI Taxes"), the sum of
all such Unanticipated CCI Taxes paid or accrued multiplied by a fraction the
numerator of which is the number of shares of CCI Common Stock and options
AirTouch has purchased pursuant to the MRO (the "MRO Shares") and the
denominator of which will be the number of Fully Diluted Shares measured as of
immediately after such purchases by AirTouch or (ii) the amount of Unanticipated
CCI Taxes paid or accrued after the MRO Date multiplied by a fraction the
numerator of which is the number of MRO Shares and the denominator of which will
be the number of Fully Diluted Shares as of the date of such occurrence.
The Liquidity Adjustment. The 1990 Merger Agreement defines the "Liquidity
Adjustment" as the sum of the Market Liquidity Adjustment (as defined below) and
the Fixed Liquidity Adjustment.
The "Market Liquidity Adjustment" is determined as follows. At each
quarterly anniversary after the date that was six months after the closing of
the 1990 Merger Agreement (the "Six Month Date") the ratio of shares of CCI
Series A Common Stock outstanding (excluding for specified periods shares of CCI
Series A Common Stock owned and CCI Redeemable Preferred Stock purchased prior
to the Six Month Date by a person who at any time prior to the MRO owns more
than 15 percent of such shares) to the total number of shares of CCI Series A
Common Stock and CCI Redeemable Preferred Stock outstanding (the "Liquidity
Factor") will be calculated. This ratio will be compared to a predetermined
"Target Liquidity Factor." The difference of one and the ratio of the Liquidity
Factor to the Target Liquidity Factor will be defined as the "Illiquidity
Percentage." The Illiquidity Percentage will be multiplied by an "Ownership
Scaling Factor," which represents the difference of one and the ratio of the
number of shares of the CCI Redeemable Preferred Stock and CCI Series A Common
Stock purchased by AirTouch to the "AirTouch OMP Target Shares." The AirTouch
OMP Target Shares means the number of shares equal to (i) 20% of the Fully
Diluted Shares at the first two quarterly anniversary dates after the Six Month
Date and 27.5% of the Fully Diluted Shares at all following quarterly
anniversary dates up to and including the date of the MRO, minus (ii) the sum of
the number of shares of CCI Series C Common Stock purchased by AirTouch plus the
number of CCI Series C Common Stock which AirTouch is entitled to receive upon
conversion of the Class A Preferred Stock purchased by AirTouch. The product of
the Illiquidity Percentage and the Ownership Scaling Factor is the "Adjusted
Liquidity Index." At the date of the MRO the mean of the 16 quarterly Adjusted
Liquidity Indices (the "Mean Liquidity Index") is determined and multiplied by a
predetermined "Adjusted Liquidity Base" ($70 million, or $75 million if CCI
exercises its right to cause the Initial Deferral) to determine the "Market
Liquidity Adjustment." The Market Liquidity Adjustment may not be more than $75
million nor less than $0.
The 1990 Merger Agreement defines the "Fixed Liquidity Adjustment" as
$5,580,128 accreted at 12.5%, compounded daily, from the Effective Time until
the Liquidity Adjustment is paid, including any Appraisal deferral period
requested by, CCI, but excluding Appraisal deferral periods requested by
AirTouch. The Fixed Liquidity Adjustment was effectively terminated by the
Termination Agreement.
I-9
