<PAGE> 1
As filed with the Securities and Exchange Commission on May 3, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
AIRTOUCH COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 4812 94-3213132
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
One California Street, San Francisco, California 94111, (415) 658-2000
(Address, including Zip Code, and telephone number, including area code, of
Registrant's principal executive offices)
-------------------
MARGARET G. GILL
Senior Vice President Legal, External Affairs and Secretary
AirTouch Communications, Inc.
One California Street, San Francisco, California 94111,
(415) 658-2000 (Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
Copies to:
Kristina Veaco Nathaniel M. Cartmell III
Sharon A. Le Duy Katharine A. Martin
AirTouch Communications, Inc. James M. McLaughlin, Jr.
One California Street Pillsbury Madison & Sutro LLP
San Francisco, California 94111 P.O. Box 7880
(415) 658-2000 San Francisco, California 94120-7880
(415) 983-1000
Richard J. Lubasch Thomas H. Kennedy
Vice President-General Counsel Skadden, Arps, Slate, Meagher & Flom
and Secretary 919 Third Avenue
Cellular Communications, Inc. New York, New York 10022
110 East 59th Street (212) 735-3000
New York, New York 10022
(212) 906-8440
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share(3) * *
6.00% Class B Mandatorily Convertible * * $1,149,967,468 $396,542
Preferred Stock, Series 1996, par value $.01
per share ("Class B Preferred")
4.25% Class C Convertible Preferred Stock, * *
Series 1996, par value $.01 per share
("Class C Preferred")
================================================================================================================================
</TABLE>
*Inapplicable.
(1) This Registration Statement relates to an indeterminable number of shares
of Class B Preferred and Class C Preferred of the Registrant issuable to
holders (other than the Registrant) of stock of Cellular Communications,
Inc., a Delaware corporation ("CCI"), in the proposed merger of CCI with
AirTouch Cellular, a California corporation that is a wholly owned
subsidiary of the Registrant (or at Registrant's election, another wholly
owned subsidiary of the Registrant), and an indeterminable number of shares
of Common Stock to be received upon conversion thereof. This Registration
Statement also relates to an indeterminable number of shares of Class B
Preferred and Class C Preferred issuable upon conversion of CCI's Zero
Coupon Convertible Subordinated Notes due 1999, and an indeterminable
number of shares of Common Stock issued upon further conversion of the
Class B Preferred and the Class C Preferred issuable upon conversion of
such notes.
(2) Estimated solely for the purpose of determining the amount of the
registration fee, in accordance with Rule 457(f) under the Securities Act
of 1933.
(3) The Common Stock being registered includes associated Preferred Stock
Purchase Rights.
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
AIRTOUCH COMMUNICATIONS, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
Location in Proxy
Form S-4 Item Statement-Prospectus
------------- --------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page; Outside Front Cover Page of
Proxy Statement-Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus................................ Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Summary; Risk Factors; The Meeting; The
Merger; Certain Considerations with Respect to
the Merger and Operations After the Merger
4. Terms of the Transaction..................... Summary; The Meeting; The Merger; Certain
Considerations with Respect to the Merger and
Operations After the Merger; The Merger
Agreement; Description of AirTouch Capital
Stock; Comparison of Rights of Stockholders of
AirTouch and CCI; Other Matters
5. Pro Forma Financial Information.............. Summary; Pro Forma Condensed Combined
Financial Statements
6. Material Contracts with the Company Being
Acquired..................................... Summary; The Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to Be Underwriters........................... Inapplicable
8. Interests of Named Experts and Counsel....... Experts; Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Inapplicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants.................................. Available Information; Incorporation of Certain
Documents by Reference; Summary; AirTouch
Communications, Inc.; Pro Forma Condensed
Combined Financial Statements
11. Incorporation of Certain Information by
Reference.................................... Incorporation of Certain Documents by
Reference
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Location in Proxy
Form S-4 Item Statement-Prospectus
------------- --------------------
<S> <C>
12. Information with Respect to S-2 or S-3
Registrants.................................. Inapplicable
13. Incorporation of Certain Information by
Reference.................................... Inapplicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants............ Inapplicable
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to S-3
Companies.................................... Available Information; Incorporation of Certain
Documents by Reference; Summary; Cellular
Communications, Inc.; Pro Forma Condensed
Combined Financial Statements
16. Information with Respect to S-2 or S-3
Companies.................................... Inapplicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.............. Inapplicable
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited........... Incorporation of Certain Documents by
Reference; Summary; The Meeting; The Merger;
Principal and Other Stockholders of CCI
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer............................ Inapplicable
</TABLE>
-ii-
<PAGE> 4
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 Tuesday, July 30, 1996.
At the Meeting, you will be asked to (i) approve and adopt the
Agreement and Plan of Merger (the "1996 Merger Agreement") dated as of April 5,
1996 among Cellular Communications, Inc. ("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 CCI Stock (as defined below)
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 a unit (a "Unit") consisting of [0.___] of a share of
AirTouch's 6.00% Class B Mandatorily Convertible Preferred Stock, Series 1996,
and [0.___] of a share of AirTouch's 4.25% Class C Convertible Preferred Stock,
Series 1996 or a combination of cash and a fraction of a Unit, in each case
subject to adjustment and proration pursuant to the procedures set forth in the
1996 Merger Agreement and described in the attached Proxy Statement-Prospectus.
CCI Stock held by AirTouch, which represented approximately __% of the
outstanding capital stock of CCI at __________, 1996, will be canceled in the
merger without consideration. Of the remaining capital stock of CCI, an
aggregate of approximately 28%, less CCI Stock dissenting to the merger for
which appraisal rights are perfected, will be converted in the merger into cash,
and an aggregate of approximately 72% will be converted in the merger into
Units. The actual percentage of the outstanding shares of CCI Stock to be
acquired with cash or Units is subject to possible adjustment at the time of the
merger in order to maintain tax-free treatment for the holders of CCI Stock,
pursuant to a formula 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" and together with the CCI Series A Common Stock, the CCI
Series C Common Stock and the CCI Redeemable Preferred Stock, the "CCI Stock"),
at the close of business on [__________], 1996 (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, voting together as a single class. 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"). In the event that the CCI Series B
Preference Stock is not redeemed by the date of the meeting, holders thereof
also will be entitled to vote at the rate of 100 votes for each share held.
AirTouch is required to vote the 10,065,641 shares of CCI Series C Common Stock
and the 3,450,800 shares of CCI Class A Common Stock held by it generally in the
same proportion as the shares of CCI Stock voted by all holders of CCI Stock.
AirTouch has no such
-iii-
<PAGE> 5
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. Approval of 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 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 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 (212) 269-5550.
Sincerely,
________ __, 1996
George S. Blumenthal William B. Ginsberg
Chairman and Treasurer President and Chief
Executive Officer
-iv-
<PAGE> 6
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 Tuesday, July 30, 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, 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 ________ __, 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
________ __, 1996 Secretary
-v-
<PAGE> 7
CELLULAR COMMUNICATIONS, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 30, 1996
--------------------------------
AIRTOUCH COMMUNICATIONS, INC.
PROSPECTUS
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
Tuesday, July 30, 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"), Class A Preference Stock, par
value $1.00 per share (the "CCI Class A Preference Stock," and together with the
CCI Series A Common Stock, the CCI Series C Common Stock and the CCI Redeemable
Preferred Stock, the "CCI Stock"), as of the close of business on _________ will
consider and vote upon a proposal to approve and adopt an Agreement and Plan of
Merger (the "1996 Merger Agreement"), dated as of April 5, 1996, 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.
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 Stock Equivalent Share (as
defined below) represented thereby, either (i) $55 in cash without interest, or
(ii) one unit (a "Unit") consisting of [0.__] of a share of AirTouch 6.00% Class
B Mandatorily Convertible Preferred Stock, Series 1996 ("AirTouch Class B
Preferred Stock"), and [0.550] of a share of AirTouch 4.25% Class C Convertible
Preferred Stock, Series 1996 ("AirTouch Class C Preferred Stock"), or (iii) a
combination of cash and a fraction of a Unit, in each case subject to adjustment
and proration pursuant to the procedures set forth in the 1996 Merger Agreement
and described herein. (A Unit is not a separate security, but simply a term
describing a package of AirTouch Class B Preferred Stock and AirTouch Class C
Preferred Stock (together "AirTouch Preferred Stock, Series 1996") to be issued
in exchange for each CCI Common Equivalent Share in the Merger). As used herein,
the term "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 and Series B Preference Stock, $1.00 par
value per share ("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 __% of the CCI Stock at April __,
1996, will be canceled in the Merger without consideration. Of the remaining CCI
Stock, an aggregate of approximately 28%, less Dissenting CCI Stock, will be
converted in the Merger into cash and an aggregate of approximately 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 in
order to maintain tax-free treatment for the holders of CCI Stock pursuant to a
formula set forth in the 1996 Merger Agreement and 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,
-1-
<PAGE> 8
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.
Application has been made to list the AirTouch Class B Preferred Stock and the
AirTouch Class C Preferred Stock on the New York Stock Exchange (the "NYSE")
under the symbols "___" and "___," respectively.
This Proxy Statement-Prospectus and the accompanying Notice of Special
Meeting and proxy card are first being mailed to CCI Stockholders on or about
_______ __, 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 31 AND "CERTAIN CONSIDERATIONS WITH RESPECT
TO THE MERGER AND OPERATIONS AFTER THE MERGER."
----------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS ________ __, 1996.
-2-
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION........................................................ 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. 5
SUMMARY...................................................................... 7
The Parties............................................................. 7
The Meeting and Votes Required.......................................... 7
The Merger.............................................................. 8
General............................................................. 8
Risk Factors........................................................ 8
Transactions Preceding the Merger................................... 8
Merger Consideration................................................ 8
Limitations on Number of Shares of AirTouch Class B Preferred
Stock to be Issued............................................. 10
Examples of Merger Consideration Calculation........................ 10
Adjustments to Preserve Tax Status of Merger........................ 11
Election Procedures................................................. 11
Election of Consideration........................................... 11
Excess Cash Elections............................................... 12
Excess Unit Elections............................................... 12
Insufficient Elections.............................................. 12
AirTouch Class B Preferred Stock.................................... 14
AirTouch Class C Preferred Stock.................................... 15
CCI Convertible Notes............................................... 16
Recommendation of the CCI Board of Directors........................ 16
Employee and Director Stock Options................................. 16
Effects of a Failure to Approve the Merger.......................... 17
Opinions of Financial Advisor....................................... 18
Regulatory Approvals Required....................................... 18
Termination; Effect of Termination.................................. 19
Certain Transactions; Conflicts of Interest......................... 19
Certain Considerations with Respect to the Merger and
Operations after the Merger.................................... 19
Appraisal Rights.................................................... 19
Redemption of CCI Rights................................................ 19
Market Price and Dividend Data.......................................... 20
Selected Historical and Pro Forma Combined Financial Data............... 21
SELECTED PRO FORMA COMBINED FINANCIAL DATA.................................. 28
Comparative Historical and Pro Forma Per Share Data..................... 29
AirTouch Computation of Ratio of Earnings to Fixed Charges.............. 30
RISK FACTORS................................................................. 31
Securities Related Risks................................................ 31
Company-Related Risks................................................... 32
AIRTOUCH COMMUNICATIONS, INC................................................. 36
CELLULAR COMMUNICATIONS, INC................................................. 38
THE MEETING.................................................................. 40
General................................................................. 40
Date, Place and Time.................................................... 40
Record Date............................................................. 40
Required Vote........................................................... 40
Voting and Revocation of Proxies........................................ 41
Solicitation of Proxies................................................. 41
THE MERGER................................................................... 42
Background of the Merger................................................ 42
Transactions Preceding the Merger................................... 42
Appraisal Process................................................... 44
AirTouch Make Whole Obligation...................................... 46
Certain Required Asset Sales; Other Adjustments..................... 46
Events Subsequent to the 1991 Merger................................ 47
CCI Reasons for the Merger; Recommendation of the CCI Board............. 48
Effects of a Failure to Approve the Merger.............................. 50
CCI Fairness Opinions of Wasserstein Perella & Co., Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation................. 51
Public Company Trading Analysis..................................... 53
Precedent Merger and Acquisition Transactions....................... 53
Discounted Cash Flow Analysis....................................... 54
Preliminary Merger Consequences Analysis............................ 54
Terms of Wasserstein Perella's Engagement........................... 55
Terms of Donaldson, Lufkin & Jenrette's Engagement.................. 55
Fairness Opinion of Lehman Brothers..................................... 56
AirTouch Reasons for the Merger and for the Structure................... 61
Merger Consideration.................................................... 61
Limitations on Number of Shares of AirTouch Class B Preferred
Stock to be Issued............................................. 62
Election Procedures..................................................... 65
Treatment of CCI Employee and Director Stock Options.................... 67
Certain Transactions; Conflicts of Interest............................. 68
Effective Time.......................................................... 69
Procedures for Exchange of Certificates................................. 69
Stock Exchange Listing.................................................. 70
Accounting Treatment.................................................... 71
Certain Federal Income Tax Consequences................................. 71
Dissenting Stockholders' Rights of Appraisal............................ 77
REDEMPTION OF THE CCI RIGHTS................................................. 80
CERTAIN CONSIDERATIONS WITH RESPECT TO THE MERGER
AND OPERATIONS AFTER THE MERGER......................................... 82
THE MERGER AGREEMENT......................................................... 83
The Merger.............................................................. 83
Certain Representations and Warranties.................................. 83
Pre-Closing Covenants................................................... 84
Conditions.............................................................. 87
Termination; Effect of Termination...................................... 89
Expenses................................................................ 90
Amendment and Waiver.................................................... 90
CERTAIN PROJECTED FINANCIAL INFORMATION FOR NEW
PAR..................................................................... 91
PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS.............................................................. 94
Explanatory Notes to Pro Forma Condensed Combined Financial
Statements.......................................................... 98
DESCRIPTION OF AIRTOUCH CAPITAL STOCK........................................ 101
General................................................................. 101
AirTouch Common Stock................................................... 101
Certain Certificate of Incorporation Provisions......................... 102
Rights Agreement........................................................ 102
Listing................................................................. 103
AirTouch Class B Preferred Stock........................................ 103
AirTouch Class C Preferred Stock........................................ 110
COMPARISON OF RIGHTS OF STOCKHOLDERS OF AIRTOUCH
AND CCI................................................................. 118
Notice of Stockholder Business.......................................... 118
Notice of Director Nominations.......................................... 119
Stockholder Meetings.................................................... 119
Directors; Classified Board............................................. 119
Right to Elect Directors................................................ 120
Amendment to By-laws.................................................... 120
Amendment to Certificates............................................... 120
Indemnification......................................................... 120
Redemption to Prevent the Loss or Secure the Reinstatement of a
Governmental License or Franchise................................... 121
OTHER MATTERS................................................................ 121
Regulatory Approvals Required........................................... 121
Certain Litigation Related to the Merger................................ 122
Purchases of CCI Stock by CCI and AirTouch During the Past
Two Fiscal Years.................................................... 122
Treatment of CCI Convertible Notes...................................... 122
Directors and Executive Officers of AirTouch and CCI.................... 123
Source and Amount of Funds or Other Consideration....................... 127
PRINCIPAL AND OTHER STOCKHOLDERS OF CCI...................................... 127
EXPERTS...................................................................... 128
LEGAL MATTERS................................................................ 129
ANNEX A AGREEMENT AND PLAN OF MERGER
ANNEX B SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW
ANNEX C FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF AIRTOUCH
CLASS B PREFERRED STOCK
ANNEX D FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF AIRTOUCH
CLASS C PREFERRED STOCK
ANNEX E OPINION OF DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION (to be filed by amendment)
ANNEX F OPINION OF WASSERSTEIN PERELLA & CO., INC. (to
be filed by amendment)
ANNEX G OPINION OF LEHMAN BROTHERS
ANNEX H CONSOLIDATED FINANCIAL STATEMENTS OF
U S WEST NEWVECTOR GROUP
</TABLE>
-3-
<PAGE> 10
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.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT: 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.
AVAILABLE INFORMATION
Under the rules and regulations of the Securities and Exchange
Commission (the "SEC"), the solicitation of CCI Stockholders to approve and
adopt the 1996 Merger Agreement and the transactions contemplated thereby,
including the Merger, and the CCI Rights Redemption constitutes an offering of
AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock to be
issued in conjunction with the Merger. Accordingly, AirTouch has filed with the
SEC a Registration Statement on Form S-4 (together with any amendments thereto,
the "Registration Statement") under the Securities Act, with respect to such
offering. This Proxy Statement-Prospectus does not contain all the information
set forth in the Registration Statement 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 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 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 Securities Exchange Act of 1934, as amended (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
-4-
<PAGE> 11
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's Series A Common Stock is listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AirTouch incorporates herein by reference (a) AirTouch's Annual Report
on Form 10-K for the year ended December 31, 1995, (b) AirTouch's Current
Reports on Form 8-K dated April 7, 1996 and April 25, 1996, (c) 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 (d) 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).
CCI incorporates herein by reference (a) CCI's Annual Report on Form
10-K for the year ended December 31, 1995, as amended by CCI's amended report on
Form 10-K/A-1 dated April 24, 1996, (b) CCI's Current Report on Form 8-K dated
April 8, 1996, (c) 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
(d) 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 JULY 22, 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 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 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
-5-
<PAGE> 12
HAS BEEN SUPPLIED BY CCI. NEITHER AIRTOUCH NOR CCI WARRANTS THE ACCURACY OR
COMPLETENESS OF INFORMATION RELATING TO THE OTHER PARTY.
-6-
<PAGE> 13
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.
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 Tuesday, July 30, 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, holders of CCI Stock 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, voting together as a single class. 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 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 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 [_____], 1996 (the
"Record Date") will be entitled to vote at the Meeting. CCI has called for
redemption all of its Series B Preference Stock, $1.00 par value per share (the
"CCI Series B Preference Stock"). In the event the CCI Series B Preference Stock
is not redeemed prior to the Meeting, the holders thereof also will be entitled
to vote.
As of the Record Date, _______________ shares of CCI Series A Common
Stock, _______________ shares of CCI Series C Common Stock, _______________
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
share of CCI Stock is entitled to one vote. On such Record Date, ________ shares
of CCI Series B Preference Stock were outstanding, each of which, if not
redeemed prior to the Meeting, is entitled to 100 votes.
As of the Record Date, directors and executive officers of CCI and
their respective affiliates (excluding AirTouch) owned approximately
_______________% 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 Merger Agreement and the transactions contemplated
thereby, including the Merger, and FOR
-7-
<PAGE> 14
the CCI Rights Redemption. Pursuant to the 1990 Merger Agreement (as defined
below), AirTouch is required to vote its shares of CCI Common Stock generally in
the same proportion as the shares of CCI Stock voted 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 (___% of the CCI Stock),
10,065,641 shares of CCI Series C Common Stock (_____% of CCI Stock) and
2,206,410 shares of CCI Class A Preference Stock (_____% 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 "THE MERGER."
Risk Factors. CCI Stockholders should carefully review the discussion
of risk factors relating to the Merger and an investment in the 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.
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 the remaining equity interests in CCI at a price reflecting the
appraised private market value of CCI's assets, less certain adjustments. THE
MERGER CONTEMPLATED BY THE 1996 MERGER AGREEMENT IS A PROPOSED ALTERNATIVE
TRANSACTION BY WHICH AIRTOUCH WOULD ACQUIRE CCI. See "THE MERGER--Background of
the Merger" and "--AirTouch Reasons for the Merger and for the Structure."
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 (as defined in the
1996 Merger Agreement) (other than shares owned by AirTouch and
-8-
<PAGE> 15
Dissenting CCI Stock) under the Delaware General Corporation Law (the "DGCL"))
will be converted into the right to receive, for each CCI Common Equivalent
Share (as defined below) represented thereby:
(i) $55.00 in cash, without interest, subject to adjustment
and proration as described below (the "Per Share Cash Consideration"),
or
(ii) a unit of AirTouch Preferred Stock, Series 1996 (a
"Unit") consisting of (a) an amount of shares of AirTouch Class B
Preferred Stock equal to the Class B Per-Unit Amount (as defined below)
and (b) an amount of shares of AirTouch Class C Preferred Stock equal
to the Class C Per-Unit Amount (as defined below), subject in each case
to adjustment and proration as described below (collectively, the "Per
Share Unit Consideration"), or
(iii) a combination of a fractional Unit and cash,
provided that the total number of CCI Common Equivalent Shares outstanding
immediately prior to the Effective Time to be converted into the right to
receive Units and cash will be adjusted and prorated pursuant to the election
procedures set forth in the 1996 Merger Agreement and described below. 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 ___%
of the CCI Stock at April ___, 1996, will be canceled in the Merger without
consideration. Of the remaining CCI Stock outstanding immediately prior to the
Effective Time, an aggregate of approximately 28% (subject to reduction to the
extent of Dissenting CCI Stock) will be converted into the right to receive
cash, and an aggregate of approximately 72% (subject to increase to the extent
of Dissenting CCI Stock) will be converted into the right to receive Units. See
"--Election Procedures" below. As discussed below, the Merger is conditioned on
being a tax-free reorganization and up to an additional 8% of the CCI Common
Equivalent Shares will be exchanged for Units rather than cash to the extent
necessary to achieve tax-free treatment. All fractional shares of AirTouch Class
B Preferred Stock and AirTouch Class C Preferred Stock will be paid in cash.
As used herein, the following terms have the following meanings:
"Preferred Stock Issue Price" means $______, which represents the
Volume-Weighted Average Trading Price for AirTouch Common Stock, par
value $.01 per share (the "AirTouch Common Stock") for the
15-trading-day period ending on the second calendar day preceding the
date on which this Proxy Statement-Prospectus was mailed to CCI
Stockholders, but in no event was it to be lower than $29 or higher
than $35.
"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, CCI
Class A Preference Stock and CCI Class B Preference Stock are
convertible (excluding for purposes of either calculation, any treasury
shares and shares held by AirTouch).
The "Class B Per-Unit Amount" will equal [(i) $27.50, divided by (ii)
the Preferred Stock Issue Price,] subject to adjustment as set forth
below. The "Class C Per-Unit Amount" will equal .550, subject to
adjustment as set forth below.
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
-9-
<PAGE> 16
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 (without regard to conversions of CCI's Zero Coupon Convertible
Subordinated Notes due 1999 ("CCI Convertible Notes") or exercises of
outstanding CCI stock options occurring, in either case, after the Effective
Time) will in no event exceed [the quotient of (i) $500 million, divided by (ii)
the Preferred Stock Issue Price] (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 "THE MERGER--Merger Consideration--Limitations on Number
of Shares of AirTouch Class B Preferred 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
"THE MERGER--Merger Consideration--Limitations on Number of Shares of AirTouch
Class B Preferred Stock to be Issued."
As of the date of this Proxy Statement-Prospectus, there were issued
and outstanding shares of CCI Stock representing _____ CCI Common Equivalent
Shares. Based on this number of CCI Common Equivalent Shares (and assuming that
no other adjustments to the Merger Consideration would be required pursuant to
other provisions of the 1996 Merger Agreement), the formula described above
would adjust the Class B Per-Unit Amount and Class C Per-Unit Amount to equal
_____ and _____, respectively.
Examples of Merger Consideration Calculation
The following chart sets forth the approximate Merger Consideration
that a holder of 100 CCI Common Equivalent Shares would receive if all holders
of CCI Stock elected to receive cash, such that upon the application of the
allocation and proration procedures described under "THE MERGER--Election
Procedures," each holder of CCI Stock would receive 72% of the Merger
Consideration in Units and 28% in cash (subject to adjustments for fractional
shares which may, on a cumulative basis, cause the actual percentages received
by a particular holder to vary).
Merger Consideration to holder of 100 shares(1):
Class B Per-Unit Amount:
Class C Per-Unit Amount:
Cash Consideration per CCI
Common Equivalent Share:
Total Number of Units:
Total Number of AirTouch
Class B Preferred Shares(2):
Total Number of AirTouch
Class C Preferred Shares(2):
Cash received for CCI Common
Equivalent Shares:
- ----------------
(1) Assumes _________ CCI Common Equivalent Shares outstanding at the
Effective Time including ________ 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 were convertible into
_________ CCI Common Equivalent Shares as of
-10-
<PAGE> 17
April __, 1996, no exercise of CCI Options, which represented ______
CCI Common Equivalent Shares as of April __, 1996, and no conversion of
CCI Series B Preference Stock, which was convertible into _______ CCI
Common Equivalent Shares as of April __, 1996. Also assumes no
adjustment to the Cash Election Number to preserve the tax-free
treatment of the Merger and no CCI Dissenting Stock.
(2) Each holder of CCI Stock who would otherwise be entitled to receive a
fractional share will, after taking into account all certificates
delivered by such holder, receive cash (without interest) in lieu of
fractional shares on the basis set forth in the 1996 Merger Agreement.
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 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 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 above.
See "THE MERGER--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. 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."
Election Procedures. Both the number of CCI Common Equivalent Shares to be
converted in the aggregate into the right to receive Units (the "Unit Election
Number") and the number of such shares to be converted in the aggregate 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) approximately 28% of the number of CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time (which excludes CCI Common
Equivalent Shares owned by AirTouch) less (ii) the number of CCI Common
Equivalent Shares represented by Dissenting CCI Stock. The Unit Election Number
will be equal to approximately 72% of the number of CCI Common Equivalent Shares
outstanding immediately prior to the Effective Time (which excludes CCI Common
Equivalent Shares owned by AirTouch). Both the Cash Election Number and the Unit
Election Number will be subject to adjustment as discussed under "THE
MERGER--Merger Consideration."
Election of Consideration. Subject to the allocation and proration procedures
set forth below, each holder of record of shares of CCI Stock 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 (a "Form of Election"). 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 Forms of Election,
provided that each such Representative certifies that
-11-
<PAGE> 18
each Form of Election 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 1996
Merger Agreement, respectively. Since the market price of AirTouch Common Stock
and interest rates are subject to fluctuation, 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."
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) $55.00, subject to
adjustment as described herein, 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 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
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 NUMBER OF CCI COMMON EQUIVALENT SHARES TO BE CONVERTED INTO THE
RIGHT TO RECEIVE CASH (INCLUDING DISSENTING CCI STOCK) AND THE NUMBER 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.
-12-
<PAGE> 19
RATHER, THE ELECTION BY EACH HOLDER OF CCI STOCK WILL BE SUBJECT TO THE RESULTS
OF THE ALLOCATION AND PRORATION PROCEDURES DESCRIBED ABOVE.
A FORM OF ELECTION IS BEING SENT SEPARATELY TO HOLDERS OF RECORD OF CCI STOCK
ON THE RECORD DATE. THE FORM OF ELECTION 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, A FORM OF ELECTION
MUST BE PROPERLY COMPLETED AND SIGNED AND MUST BE RECEIVED BY THE EXCHANGE AGENT
ACCOMPANIED BY ALL STOCK CERTIFICATES REPRESENTING SHARES OF CCI STOCK HELD BY
THE PERSON SUBMITTING SUCH FORM OF ELECTION NO LATER THAN 5:00 P.M. NEW YORK
TIME ON THE LAST BUSINESS DAY PRIOR TO THE EFFECTIVE TIME. THE 1996 MERGER
AGREEMENT PROVIDES THAT AIRTOUCH AND CCI WILL CAUSE THE EFFECTIVE TIME TO OCCUR
ON THE SECOND BUSINESS DAY AFTER THE APPROVAL BY CCI STOCKHOLDERS OF THE 1996
MERGER AGREEMENT AND THE SATISFACTION (OR WAIVER, IF PERMISSIBLE) OF THE OTHER
CONDITIONS SET FORTH IN THE 1996 MERGER AGREEMENT. THUS, EACH HOLDER OF CCI
STOCK IS URGED TO DELIVER A PROPERLY COMPLETED FORM OF ELECTION TO THE EXCHANGE
AGENT NO LATER THAN 5:00 P.M. NEW YORK TIME, ON ___________, 1996, IN ORDER TO
ENSURE THAT ITS FORM OF ELECTION WILL BE RECEIVED PRIOR TO THE EFFECTIVE TIME.
AS SOON AS THE DATE ON WHICH THE EFFECTIVE TIME IS ANTICIPATED TO OCCUR IS
DETERMINED, AIRTOUCH AND CCI WILL PUBLICLY ANNOUNCE SUCH DATE, ALTHOUGH NO
ASSURANCE CAN BE GIVEN THAT THE EFFECTIVE TIME WILL NOT BE DELAYED. 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 a Form of Election 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 a Form of
Election 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 a Form of Election may obtain
copies of the Form of Election upon request from the Exchange Agent either in
writing at ______________, [mailing address] or by telephone at (XXX) XXX-XXXX.
HOLDERS OF CCI STOCK THAT WISH TO SUBMIT A FORM OF ELECTION SHOULD DELIVER
THEIR STOCK CERTIFICATES WITH SUCH FORM OF ELECTION.
ANY HOLDER OF CCI STOCK THAT DOES NOT SUBMIT A PROPERLY COMPLETED FORM OF
ELECTION, ACCOMPANIED BY THE APPLICABLE STOCK CERTIFICATES, THAT IS RECEIVED AND
ACCEPTED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. NEW YORK TIME ON THE LAST
BUSINESS DAY PRIOR TO THE EFFECTIVE TIME 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 a Form
of Election.
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 a Form of Election for use in
submitting such certificates for the cash and/or Units which they are entitled
to receive in exchange therefor. See "THE MERGER--Procedures for Exchange of
Certificates."
The tax consequences to a holder of CCI Stock of receiving cash and/or Units
are different. See "Certain Federal Income Tax Consequences."
-13-
<PAGE> 20
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 $_____ per
annum for each share of AirTouch Class B Preferred Stock), from the date of
initial issuance of the share of AirTouch Class B Preferred Stock until
conversion, 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. 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
$___ per share (the "Class B Conversion Price"), each share of AirTouch Class
B Preferred Stock will convert into .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 $__ 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.
See "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 .806
shares 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"--Less
Opportunity for Equity Appreciation Compared to AirTouch Common Stock."
Contingent Payment. If the Volume-Weighted Average Trading Price of the
AirTouch Class B Preferred Stock over the consecutive thirty calendar day period
commencing on the date that is three months after the Effective Time (the
"Contingent Payment Date") is less than $_____ [$54.50 X (Preferred Stock Issue
Price/$55.00)], then each holder of a share of AirTouch Class B Preferred Stock
will be entitled to receive per share a payment out of funds legally available
therefor in amount equal to (a) between $2 million and $15 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. 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."
-14-
<PAGE> 21
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."
Liquidation Rights. The AirTouch Class B Preferred Stock ranks prior to
AirTouch Common Stock and AirTouch's Series A Participating Preferred Stock
("AirTouch Series A Preferred Stock"), and on a parity with the AirTouch Class C
Preferred Stock, as to payment of dividends, and senior to the AirTouch Common
Stock and AirTouch Series A Preferred Stock as to 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."
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 (as defined below) (equivalent to $2.125 per
annum for each share of AirTouch Class C Preferred Stock), from the date of
initial issuance of the share of AirTouch Class C Preferred Stock until
redemption or conversion, 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. 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 day following 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--Mandatory Redemption."
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-trading day period has exceeded $___ [130%
of the [Preferred Stock Issue Price] times 1.25]. 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 over the 15 consecutive
-15-
<PAGE> 22
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--Redemption at the Option of AirTouch."
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
________ 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 CLASS C PREFERRED
STOCK--Conversion at the Option of the Holder" and "RISK FACTORS--Less
Opportunity for Equity 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 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."
Liquidation Rights. 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. AirTouch Class C
Preferred Stock will rank on a parity with AirTouch Common Stock upon
distribution of assets upon liquidation. 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. 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 transactions contemplated thereby, including the Merger. The CCI Board
believes that the Merger is in the best interests of CCI and the holders of CCI
Stock, and 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 "THE MERGER--Recommendation
of the Board of Directors and Reasons for the Merger."
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. 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.
-16-
<PAGE> 23
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 (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 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 Preferred 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 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 Redemption Price") for their shares in the redemption
resulting from the Appraisal Process (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.
Since the Appraisal Process Redemption 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. Both CCI and AirTouch have certain rights of
deferral in the Appraisal Process. 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
-17-
<PAGE> 24
additional deferral of the receipt by CCI stockholders of payment for their CCI
Stock. See "THE MERGER--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 dated ________ __,
1996, which were delivered immediately prior to the mailing of this Proxy
Statement-Prospectus, are attached hereto as Annexes E and F. See "THE
MERGER--Opinions of Financial Advisors." 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.
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 requesting the FCC's consent to the foregoing
pro forma transfer of control were filed with the FCC on _______ __, 1996. 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 Internal Revenue Code of 1986. 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
$50 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
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. See "THE MERGER--Conditions."
-18-
<PAGE> 25
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 as of
immediately prior to the Effective Time; (iv) (a) by either AirTouch or CCI, if
the CCI Stockholders shall not have approved 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 transactions contemplated
thereby, including the Merger, and the CCI Rights Redemption shall 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 are
CCI Dissenting Stock; 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 "THE MERGER--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."
Appraisal Rights. For a summary of the appraisal rights to which CCI
Stockholders may be entitled, see "Dissenting CCI Stockholders' Rights of
Appraisal" and "Annex B--Section 262 of the Delaware General Corporation Law."
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. 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 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 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 and the consent of AirTouch.
-19-
<PAGE> 26
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 the date 10 years following the date of the 1991 Merger and
the close of business on the day immediately preceding the Final Redemption Date
(as defined below), a unit consisting of one one-hundredth of a share of CCI
Series D Preference Stock at a purchase price reflecting the long-term value of
the CCI capital stock, as determined by the CCI Board in consultation with its
financial advisor. At the close of business on the day preceding the Final
Redemption Date, each share of Series D Preferred 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. Application has been made to list AirTouch Class B Preferred
Stock and AirTouch Class C Preferred Stock on the NYSE, 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.
The following table sets forth, for the periods indicated, the range of high
and low 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
-------- ---
1994 High Low High Low
- ---- ---- --- ---- ---
<S> <C> <C> <C> <C>
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 (through April 30, 1996)........ 31-7/8 28 52-5/8 51
</TABLE>
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 ____, 1996, the latest practicable trading day
before the printing of this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
April 4, 1996 _____ __, 1996
------------- --------------
<S> <C> <C>
CCI.......................................... $ 51-3/16 $
AirTouch..................................... 29-5/8
</TABLE>
-20-
<PAGE> 27
On ________________, there were approximately ________ holders of record of
AirTouch Common Stock. On ________________, there were approximately ________
holders of record of CCI Series A Common Stock, ________ holders of record of
CCI Series C Common Stock, ________ holders of record of CCI Redeemable
Preferred Stock, _________ holders of record of CCI Class A Preference Stock and
_________ holders of record of CCI Series B Preferred 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 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 on January 1, 1995 for income statement
information and on December 31, 1995 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," to 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."
-21-
<PAGE> 28
AIRTOUCH CONSOLIDATED AND PROPORTIONATE HISTORICAL
SELECTED FINANCIAL DATA
SELECTED FIVE-YEAR HISTORICAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
(Dollars in millions, except per share amounts) 1995 1994 1993 1992 1991
- ------------------------------------------------- -------- --------- --------- --------- --------
(1) (2) (3)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating revenues(4)..................... $1,618.6 $1,246.9 $1,057.7 $880.2 $781.1
Operating income.......................... $ 112.8 $ 72.6 $ 128.2 $ 95.9 $136.6
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic.............................. $ 188.2 $ 125.4 $ 70.4 $ 41.1 $ 15.5
International......................... $ (35.9) $ (14.7) $ (37.5) $(38.5) $(21.4)
Interest:
Income.................................. $ 34.9 $ 54.7 $ 12.0 $ 13.3 $ 13.8
Expense................................. $ (13.0) $ (10.3) $ (22.1) $(52.9) $(37.6)
Income (loss) before cumulative
effect of accounting change............. $ 131.9 $ 98.1 $ 40.1 $(10.1) $ 43.1
Per share data:
Income (loss) before cumulative
effect of accounting change............. $ 0.27 $ 0.20 $ 0.09 $(0.02) $ 0.10
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
(Dollars in millions) 1995 1994 1993 1992 1991
- ------------------------------------------- --------- --------- ---------- --------- --------
(1) (2) (3)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investments in unconsolidated
wireless systems...................... $3,076.3 $1,697.9 $1,154.5 $ 935.4 $ 676.6
Total assets............................ $5,647.9 $4,488.0 $4,076.7 $2,371.1 $1,900.1
Long-term obligations(5)................ $ 906.4 $ 130.1 $ 78.9 $ 257.3 $ 276.0
Total stockholders' equity.............. $3,750.7 $3,459.6 $3,337.3 $ 752.1 $ 635.2
Working capital (deficit)............... $ 18.5 $ 736.5 $1,346.8 $ (698.4) $ (426.3)
Capital expenditures, excluding acquisitions
and capital calls(6).................. $ 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 Pacific
Telesis Group ("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, incorporated herein by reference, for further information.
-22-
<PAGE> 29
(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
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, 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, incorporated herein
by reference.
(5) Includes the current portion of long-term debt.
(6) For the year ended December 31.
-23-
<PAGE> 30
SELECTED FIVE-YEAR 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 Year Ended December 31,
PROPORTIONATE --------------------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1995 1994 1993 1992 1991
------------------------------------------ --------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Total net operating revenues(a)......... $2,605.2 $1,791.8 $1,226.1 $873.2 $687.0
Total operating income.................. $ 296.7 $ 171.5 $ 97.6 $ 11.3 $ 98.8
Total operating cash flow(2)............ $ 702.3 $ 506.1 $ 351.5 $191.5 $223.9
</TABLE>
<TABLE>
<CAPTION>
December 31,
PROPORTIONATE ---------------------------------------------------------------
OPERATING DATA (In thousands) 1995 1994 1993 1992 1991
------------------------------------------ --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Total cellular POPS(3).................. 164,908 99,508 75,290 69,468 57,551
Total cellular subscribers.............. 3,059 1,948 1,206 779 558
Cellular subscriber net adds in period,
excluding acquisitions................ 974 713 409 221 140
Total paging units in service........... 2,474 1,647 1,269 899 669
Paging units in service net adds in
period, excluding acquisitions........ 477 378 348 230 136
</TABLE>
PROPORTIONATE CELLULAR OPERATIONS(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
DOMESTIC CELLULAR ---------------------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1995 1994 1993 1992 1991
--------------------------------------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Service and other revenues(a)........... $1,523.3 $1,160.1 $892.0 $699.4 $564.6
Equipment sales......................... 78.9 74.6 40.2 24.8 19.3
Cost of equipment sales................. (125.6) (82.0) (42.2) (23.9) (18.4)
--------- --------- ------ ------ ------
Net operating revenues.................. 1,476.6 1,152.7 890.0 700.3 565.5
--------- --------- ------ ------ ------
Cost of revenues(a)..................... 188.4 136.5 116.3 98.7 80.0
Selling and customer operations(4)...... 544.0 415.2 297.2 -- --
General, administrative, and other
expenses(4)........................... 139.0 122.0 96.9 322.5 238.6
Depreciation and amortization
expenses.............................. 189.2 185.7 164.7 124.1 93.7
-------- -------- ------ ------ ------
Total operating expenses................ 1,060.6 859.4 675.1 545.3 412.3
-------- -------- ------ ------ ------
Operating income........................ $ 416.0 $ 293.3 $214.9 $155.0 $153.2
======== ======== ====== ====== ======
Operating cash flow(2).................. $ 605.2 $ 479.0 $379.6 $279.1 $246.9
Operating cash flow margin(b)........... 41.0% 41.6% 42.7% 39.9% 43.7%
Capital expenditures, excluding
acquisitions.......................... $ 475.0 $ 296.7 $198.4 $199.8 $159.6
</TABLE>
-24-
<PAGE> 31
<TABLE>
<CAPTION>
December 31,
DOMESTIC CELLULAR --------------------------------------------------
OPERATING DATA (In thousands) 1995 1994 1993 1992 1991
- ----------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total POPs(3) .......................... 37,739 35,390 34,889 34,121 32,560
Subscribers ............................ 2,262 1,560 1,046 744 558
Subscriber net adds in period, excluding
acquisitions ....................... 591 514 286 186 140
<CAPTION>
For the Year Ended December 31,
INTERNATIONAL CELLULAR ----------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1995 1994 1993 1992 1991
- --------------------------------------- ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Existing operations(5):
Net operating revenues ............ $841.0 $352.8 $ 88.3 -- --
Operating income (loss) ........... $ 62.7 $ 10.0 $(17.3) -- --
Operating cash flow(2) ............ $203.7 $ 87.4 $ 6.5 -- --
Income (loss) ..................... $ (0.5) $(13.2) $(18.9) -- --
Start-up systems(6):
Income (loss) ..................... $(51.6) $(26.1) $(20.9) -- --
Total income (loss) ................... $(52.1) $(39.3) $(39.8) -- --
<CAPTION>
December 31,
INTERNATIONAL CELLULAR -------------------------------------------------------
OPERATING DATA (In thousands) 1995 1994 1993 1992 1991
- ----------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total POPs(3) ................ 112,869 64,118 40,401 35,347 24,991
Subscribers .................. 797 388 160 35 --
Subscriber net adds in period,
excluding acquisitions ... 383 199 123 35 --
<CAPTION>
For the Year Ended December 31,
DOMESTIC PAGING OPERATIONS(7) ----------------------------------------------------------
OPERATING RESULTS (Dollars in millions) 1995 1994 1993 1992 1991
- --------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Service and other revenues ............ $219.4 $183.5 $145.7 $113.5 $ 92.6
Equipment sales ....................... 45.5 43.4 35.2 22.2 9.7
Cost of equipment sales ............... (39.5) (38.0) (31.9) (19.2) (7.4)
------ ------ ------ ------ ------
Net operating revenues ................ 225.4 188.9 149.0 116.5 94.9
------ ------ ------ ------ ------
Total operating expenses before
depreciation and amortization ..... 150.8 122.5 98.7 74.0 56.2
Depreciation and amortization expenses. 42.8 36.8 30.6 26.3 23.4
------ ------ ------ ------ ------
Operating income ...................... $ 31.8 $ 29.6 $ 19.7 $ 16.2 $ 15.3
====== ====== ====== ====== ======
Operating cash flow(2) ................ $ 74.6 $ 66.4 $ 50.3 $ 42.5 $ 38.7
Operating cash flow margin ............ 33.1% 35.2% 33.8% 36.5% 40.8%
Capital expenditures, excluding
acquisitions ...................... $ 72.0 $ 61.3 $ 53.4 $ 42.9 $ 34.8
<CAPTION>
December 31,
---------------------------------------------
OPERATING DATA (In thousands) 1995 1994 1993 1992 1991
- ----------------------------- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Units in service ................... 2,338 1,525 1,167 821 601
Units in service net adds in period,
excluding acquisitions ......... 463 358 324 220 127
</TABLE>
-25-
<PAGE> 32
(a) 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 AirTouch's Consolidated
Financial Statements, included in AirTouch's Annual Report on Form
10-K, incorporated herein by reference.
(b) If net losses on equipment sales were reclassified as operating
expenses, operating cash flow margins would be 39.7%, 41.3%, 42.6%,
39.9% and 43.7% for the years 1995, 1994, 1993, 1992 and 1991,
respectively.
(1) Reflects proportionate 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. In 1995, total AirTouch cellular POPs included 14,300 personal
communications services ("PCS") POPs; international cellular POPs (and
therefore total AirTouch cellular POPs) included 36,943 POPs for
recently formed ventures in India and 7,469 POPs 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.
(5) Represents AirTouch's share of operating results (after foreign taxes
where applicable) for international cellular systems which have
completed 12 months of commercial service, as follows:
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)
(6) Represents 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:
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)
(7) Domestic paging is wholly owned by AirTouch; therefore, proportionate
information reflects 100% of the subsidiary's GAAP-basis operating
results.
-26-
<PAGE> 33
CCI CONSOLIDATED HISTORICAL SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
(Dollars in millions, except per share amounts) 1995 1994 1993 1992 1991
- ----------------------------------------------- ------ ----- ----- ------ ------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Equity in net income of
joint venture ........................ $101.3 $59.0 $47.7 $ 37.9 $ 92.1
Income (loss) before
extraordinary item and
cumulative effect of
accounting change .................... $ 57.9 $17.7 $11.9 $ (1.9) $(22.3)
Net income (loss) ......................... $ 53.4 $17.7 $19.9 $ 0.8 $(24.7)
Income (loss) before extra-
ordinary item and cumulative
effect of accounting change
per common share ..................... $ 1.30 $0.40 $0.27 $(0.09) $(0.56)
Net income (loss) per common
share ................................ $ 1.20 $0.40 $0.45 $(0.03) $(0.62)
Weighted average number of
common shares ........................ 44.6 44.7 44.3 42.2 40.7
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
(Dollars in millions) 1995 1994 1993 1992 1991
- --------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ................ $ 650.9 $ 613.6 $ 574.8 $ 547.1 $ 521.4
Long-term debt and redeemable
preferred stock ........ $ 355.6 $ 347.8 $ 346.5 $ 369.0 $ 229.5
Shareholders' equity ........ $ 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.
-27-
<PAGE> 34
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited Pro Forma Combined Statement of Income Data
presents the pro forma combined results of operations of (1) AirTouch and CCI as
if the Merger had been effective on January 1, 1995 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 on
January 1, 1995. The unaudited Pro Forma Combined Balance Sheet Data as of
December 31, 1995 combines (1) the historical consolidated balance sheets of
AirTouch and subsidiaries and CCI and subsidiaries as if the Merger had been
effective on December 31, 1995 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 December 31,
1995, 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 ("Data") set forth
below 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. In
addition, the results of operations of CCI subsequent to December 31, 1995 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 Year Ended December 31, 1995
------------------------------------
Pro Forma
Pro Forma CCI Merger
(Dollars in millions, except per share amounts) CCI Merger and Phase II
- ----------------------------------------------- ---------- ------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenues ........................ $ 2,278.9 $ 429.9
Operating income (loss) ................... $ 194.9 $ (230.1)
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic ............................ $ 82.4 $ 446.8
International ....................... $ (35.9) $ (35.9)
Interest:
Income .............................. $ 58.8 $ 37.7
Expense ............................. $ (108.6) $ (103.4)
Income before extraordinary item .......... $ 69.6 $ 54.9
Per share data:
Income before extraordinary item .......... $ 0.03 $ 0.00
</TABLE>
-28-
<PAGE> 35
<TABLE>
<CAPTION>
December 31, 1995
--------------------------
Pro Forma
Pro Forma CCI Merger
(Dollars in millions) CCI Merger and Phase II
- --------------------- ---------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Investments in unconsolidated
wireless systems ........................... $1,750.3 $6,367.0
Total assets ..................................... $8,523.4 $7,729.7
Long-term obligations(1) ......................... $1,681.8 $1,680.0
Total stockholders' equity ....................... $4,830.7 $4,830.7
Working capital .................................. $ 144.8 $ 99.6
</TABLE>
- ----------------
(1) Includes current portion of long-term debt of $14.0 million.
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
Set forth below are (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, and (2) pro forma combined
per share data of (A) AirTouch and CCI as if the Merger had been effective on
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 on January 1, 1995. The data set forth
below should be read in conjunction with the AirTouch and CCI audited
consolidated financial statements, including the explanatory notes thereto,
which are incorporated by reference in this Proxy Statement-Prospectus. The data
should also be read in conjunction with the Pro Forma Statements, including the
explanatory notes thereto, included elsewhere in this Proxy
Statement-Prospectus.
<TABLE>
<CAPTION>
AirTouch CCI
------------------------- -------------------------
Year Ended December 31, Year Ended December 31,
------------------------- -------------------------
1995 1994 1993 1995 1994 1993
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL:
Income per share before
cumulative effect of
accounting change and
extraordinary item ..... $0.27 $0.20 $0.09 $1.30 $0.40 $0.27
Book value per share ....... $7.52 $7.01 $6.78 $6.13 $5.57 $4.89
Cash dividends per share ... N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
------------------------
Pro Forma
Pro Forma CCI Merger
CCI Merger and Phase II
---------- ------------
<S> <C> <C>
PRO FORMA:
Income per share before
extraordinary item ............................ $0.03 $0.00
Book value per share .............................. $7.52 $7.52
Cash dividends per share .......................... N/A N/A
</TABLE>
-29-
<PAGE> 36
AIRTOUCH COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to combined fixed
charges on an historical basis from continuing operations of AirTouch for the
periods indicated. For the purpose of calculating this ratio, 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.
AIRTOUCH
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------
(Dollars in millions) 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EARNINGS
Reported pre-tax income before
cumulative effect of
accounting change ................. $245.0 $206.4 $107.9 $ 14.4 $ 92.9
Add back:
Minority interests in the
income of consolidated
wireless systems .......... 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 ................... 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 0.0
Fixed charges included in
reported pre-tax income ... 32.6 24.5 34.5 64.3 46.8
------ ------ ------ ------ ------
Total ................................ $344.0 $259.5 $227.3 $162.4 $199.3
------ ------ ------ ------ ------
FIXED CHARGES
Total interest on debt ............... $ 28.2 $ 10.7 $ 25.8 $ 56.5 $ 49.2
1/3 operating rental expense ......... 19.6 14.2 12.4 11.4 9.2
------ ------ ------ ------ ------
Total ................................ $ 47.8 $ 24.9 $ 38.2 $ 67.9 $ 58.4
------ ------ ------ ------ ------
RATIO OF EARNINGS TO
FIXED CHARGES ..................... 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.
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.
-30-
<PAGE> 37
RISK FACTORS
The following factors, in addition to the other information contained
elsewhere herein, should be considered carefully in evaluating 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 the 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 received at
maturity will only exceed the Preferred Stock Issue Price if the Class B
Maturity Price exceeds the Preferred Stock Issue Price by 24%. Moreover, 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 Class B Conversion 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 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 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 AirTouch Common Stock
Price. 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. 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, the combined market value of AirTouch
Preferred Stock, Series 1996 comprising 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 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 Class B
Preferred Stock or the Call Price of AirTouch Class C Preferred Stock.
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 comparable securities
and other 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 be more than the Preferred Stock Issue Price due to market
fluctuations in the price of AirTouch Common Stock.
-31-
<PAGE> 38
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 and Pacific Stock Exchange (on which AirTouch Common Stock
are listed) and 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. Application has been made
to list AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock on
the NYSE.
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 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. See "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.
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 personal communications services ("PCS") on
frequencies recently auctioned by the FCC and specialized mobile radio ("SMR")
services on existing SMR frequencies. PCS providers have already begun service
in select markets in the United States, and competitors are expected to begin
offering PCS services in most of AirTouch's markets between late 1996 and early
1997. One SMR operator is currently offering digital SMR service in the Los
Angeles and San Francisco markets and has announced plans to construct a
nationwide system with its partners that would offer service in several of
AirTouch's other cellular markets. Depending on voice quality, system
reliability, system coverage, product offerings, marketing techniques and
pricing, such services may be competitive with AirTouch's cellular service. The
Telecommunications Act of 1996 may have removed certain restrictions on the
ability of AirTouch's competitors to offer as a single package a variety of
services, such as wireless voice and data, paging, long-distance, local landline
and cable services, some of which AirTouch does not currently provide. Increased
competition could result in pricing pressure, which contributes to lower
revenues per customer, and higher customer acquisition costs resulting in lower
profit margins.
There is also significant competition in AirTouch's international
markets. For example, AirTouch's ventures in Germany and Sweden currently face
competition from two other providers, as will its venture in Poland once it
commences service. In Japan there are as many as four cellular licensees and
three Personal Handy Phone licensees in certain regions. Government-operated
cellular systems in these and other countries have become increasingly
competitive with privately operated systems. In addition, it is expected that
additional licenses will be issued in many of the markets in which AirTouch and
its ventures provide services. For instance, it is expected that the German
government will issue an additional 1800 Mhz cellular license in 1997 or 1998.
-32-
<PAGE> 39
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 has filed with the SEC a registration statement for potential debt
and/or equity proceeds of $2 billion. While AirTouch will apply its operating
cash flow and borrowings under its existing credit facilities to the commitments
described above, these obligations, as well as any additional obligations
arising from AirTouch's pursuit of acquisitions and other new opportunities,
will require AirTouch to seek additional sources of financing in the next few
years. AirTouch believes that it will be able to access these sources on terms
and in amounts that will be adequate to accomplish its objectives, although
there can be no assurance that such will be the case. AirTouch's senior
unsecured long-term debt has been assigned an implied rating of BBB+ by Standard
& Poor's Ratings Group and a rating of Baa2 by Moody's Investors Service, Inc.,
and its commercial paper has been assigned a rating of A-2 by Standard & Poor's
and P-2 by Moody's, based in part upon each agency's respective analysis of the
expected future financial performance of AirTouch. These ratings may be revised
or withdrawn by the rating agency at any time, and there can be no assurance
that AirTouch will be able to maintain such ratings.
-33-
<PAGE> 40
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 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
-34-
<PAGE> 41
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.
-35-
<PAGE> 42
AIRTOUCH COMMUNICATIONS, INC.
AirTouch Communications, Inc. is one of the world's leading wireless
telecommunications companies, with significant cellular 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 cellular markets,
including Los Angeles, San Francisco, San Diego, Detroit and Atlanta, and
through PCS PrimeCo, shares control over 11 major broadband 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 principal executive offices are located at One California
Street, San Francisco, California 94111 (telephone (415) 658-2000)).
The following table sets forth AirTouch's cellular and broadband PCS
POPS and proportionate customers at December 31, 1995.
<TABLE>
<CAPTION>
PROPORTIONATE
POPS(1) CUSTOMERS(2)
------------- --------------
(In millions) (In thousands)
<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 2,262
----- -----
Domestic Broadband PCS ........................... 14.3 --
----- -----
Domestic Total .......................... 52.0 2,262
===== =====
International Cellular(5)
Belgium .......................................... 2.5 59
Germany .......................................... 28.4 507
India ............................................ 36.9 *
Italy ............................................ 6.8 7
Japan ............................................ 13.0 108
Poland ........................................... 7.5 --
Portugal ......................................... 2.3 39
Sweden ........................................... 4.5 75
South Korea ...................................... 4.8 --
Spain ............................................ 6.2 2
----- -----
International Total ..................... 112.9 797
----- -----
Worldwide Total ......................... 164.9 3,059
===== =====
</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
-36-
<PAGE> 43
specified. Includes networks under construction and markets of certain
cost-based investments not included in proportionate financial results.
(2) Proportionate customer data does not include customers to systems where
AirTouch accounts for its investment on a cost basis. For a list of
such systems, see "Domestic Cellular" and "International Cellular."
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, see "THE MERGER,"
"CERTAIN CONSIDERATIONS WITH RESPECT TO THE MERGER AND OPERATIONS AFTER THE
MERGER" and "PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
-37-
<PAGE> 44
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. 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.
-38-
<PAGE> 45
(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 "THE MERGER," "CERTAIN CONSIDERATIONS
WITH RESPECT TO THE MERGER AND OPERATIONS AFTER THE MERGER" and "PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS."
-39-
<PAGE> 46
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 Tuesday, July 30, 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 ______ 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 for redemption all of the outstanding CCI Series B
Preference Stock. In the event the CCI Series B Preference Stock is not redeemed
prior to the Meeting, the holders thereof also will be entitled to vote.
REQUIRED VOTE
As of the Record Date, _________ shares of CCI Series A Common Stock,
________ shares of CCI Series C Common Stock, ______ 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 share of CCI Stock is
entitled to one vote. On such Record Date, ________ shares of CCI Series B
Preference Stock were outstanding, each of which if not redeemed prior to the
Meeting is entitled to 100 votes.
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, voting together as a single class. 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 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 _____% 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 in the 1990 Merger Agreement) to vote its shares of
CCI Common Stock generally in the same proportion as the shares of CCI Stock
voted by all other holders of CCI Stock. AirTouch has no such obligation with
respect to the shares of CCI Class A Preference Stock
-40-
<PAGE> 47
owned by it. As of the Record Date, AirTouch owned an aggregate of 3,450,800
shares of CCI Series A Common Stock (_____% of the CCI Stock), 10,065,641 shares
of CCI Series C Common Stock (_____% of the CCI Stock) and 2,206,410 shares of
CCI Class A Preference Stock (____% 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, 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 "Dissenting CCI Stockholders' Rights of Appraisal."
Abstentions will be treated as shares present and represented for
purposes of establishing a quorum and as votes cast on the proposals and
therefore will have the same effect as a vote against the proposals. 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, but will not be treated as votes cast on the proposals
and therefore will have no effect on the outcome of the voting.
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.
CCI STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY
CARDS. INSTEAD, CCI STOCKHOLDERS SHOULD FOLLOW THE INSTRUCTIONS IN THE ELECTION
FORM AND LETTER OF TRANSMITTAL WHICH IS BEING SEPARATELY MAILED TO CCI
STOCKHOLDERS.
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 solicitation 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,
-41-
<PAGE> 48
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.
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, 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 $________ plus
reasonable expenses.
THE MERGER
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. 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 CCI's Ohio cellular operations
(the "CCI Ohio System") with the Ohio and Michigan cellular operations of
AirTouch (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
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
-42-
<PAGE> 49
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
Corporation, 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
(defined below) AirTouch subsequently exchanged all of its shares of Class A
Preferred Stock for an equal number of shares of Series 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 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 through April 26, 1996 to approximately
39% 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. CCI
and AirTouch have obtained from the SEC an exemption from Rule 10b-13 under the
Exchange Act with respect to such purchases by AirTouch.
At the close of business on October 27, 1995, CCI redeemed 10.04
million shares of 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 (x) upon exercise of the options
referred to in the preceding sentence and the following paragraph or (y) (as
described in 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 from CCI on January 4, 1996 an option (the "AirTouch Replacement
Option") 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 approxi
mately $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 AirTouch Replacement Option was $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 in the 1990 Merger Agreement)
or (ii) in the event AirTouch does not accept either of the Two Main Values (as
defined in the 1990 Merger Agreement), thirty (30) days after the Back End
Termination Date (as defined in the 1990 Merger Agreement).
-43-
<PAGE> 50
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.
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 (together in either case with such other CCI assets as AirTouch
and CCI may agree upon (the "Other Assets")), 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. AirTouch
will finance the Appraisal Process Redemption by providing to CCI the necessary
funds. The Appraisal Process Redemption Price will be subject to reduction for
certain adjustments. The CCI Redeemable Stock held by stockholders of CCI (other
than AirTouch) is subject to redemption at the Appraisal Process Redemption
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 stockholders in CCI (other than AirTouch) will be terminated.
In the event that any Other Assets are retained, the Appraisal Process
Redemption 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
-44-
<PAGE> 51
Redemption. The ability to cause such deferrals may impact the price, if any, to
be received by CCI stockholders in the Appraisal Process due to potential
valuation changes during such period. In the event AirTouch causes two deferrals
and thereafter elects to cause an Appraisal Process Redemption in the third
appraisal, the Appraisal Process Redemption 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(2) Defer Appraisal
1/2 Year
(the "Initial Deferral")
AirTouch Elects to
Cause Redemption?
YES NO
CCI Redeemable Stock 2/2/97(1)
Redeemed(3) Second Appraisal
AirTouch Elects to
Cause Redemption?
YES NO
CCI Redeemable Stock 8/2/97(1)
Redeemed(3) Third Appraisal
AirTouch Elects to
Cause Redemption?
YES NO
CCI Redeemable CCI Sales Process(4)
Stock Redeemed(3) CCI Purchase Right(4)
Make Whole Obligation
</TABLE>
- ----------------
(1) Accordingly, unless the Initial Deferral occurs, the first appraisal
would begin on August 2, 1996. If the Initial Deferral occurs, the
first appraisal would occur 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.
(4) 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.
-45-
<PAGE> 52
AirTouch Make Whole Obligation. Pursuant to the terms of the 1990
Merger Agreement, as supplemented by the Termination Agreement (defined below),
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 (as defined below) 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.
THIRD PARTY PRICE PER SHARE
AS A PERCENTAGE OF PORTION OF SHORTFALL
GROSS MAKE WHOLE PRICE PER SHARE COVERED BY AIRTOUCH
- -------------------------------- --------------------
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
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 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.
-46-
<PAGE> 53
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 eliminating one of the
adjustments that previously would have been included in the Total Per Share
Adjustment and of increasing under certain instances the Make Whole Obligation
that AirTouch might have to pay. 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 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. Ensuing discussions proved
inconclusive, however, and 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 and the possibility of
structuring an alternative transaction for the acquisition of CCI. At the
conclusion of such meeting, Messrs. Blumenthal and Sarin agreed that preliminary
discussions between 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. In June 1995, after reviewing the status
of their respective financial advisors' discussions, 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.
From time to time in December 1995 and January 1996, 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. In early February, 1996, AirTouch proposed a transaction consisting
of units of cash, convertible preferred and mandatorily convertible preferred to
be received by CCI stockholders. During February and March 1996, AirTouch and
CCI 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. 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.
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 and on March 27, 28, 29 and 30, representatives of CCI and its legal
and financial advisors and AirTouch and its legal and financial advisors 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. A series of correspondence and telephonic discussions between CCI and
AirTouch executive personnel
-47-
<PAGE> 54
concerning these issues 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 and approved the 1996 Merger Agreement,
which was executed later that day.
CCI REASONS FOR THE MERGER; RECOMMENDATION OF THE CCI BOARD
At a special meeting of the CCI Board held on April 5, 1996, the CCI
Board received presentations concerning, and reviewed the terms of, the 1996
Merger Agreement with members of CCI's management and its legal counsel and
financial advisors and also received presentations from CCI's management and
representa tives of Donaldson, Lufkin & Jenrette and Wasserstein Perella
concerning the business and prospects of CCI (including New Par) and the
potential combination of CCI and AirTouch. At the meeting, the CCI Board (with
Messrs. Cox and Gyani absent) unanimously determined that the Merger, upon the
terms and conditions set forth in the Merger Agreement, is fair to, and in the
best interests of, the holders of CCI Stock. 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 principal 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,
the market's perception of the possible range of outcomes of the
Appraisal Process). See "--Form of the Merger," "--Merger
Consideration," "--Effective Time" and "Procedures for Exchange of CCI
Common Stock Certificates" and "RISK FACTORS--Fluctuation in Value of
Stock Consideration."
(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 Considerations."
(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, 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
-48-
<PAGE> 55
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 assessing AirTouch, the CCI
Board considered the significant opportunities for value creation that
it believed were inherent in AirTouch's international operations, as
value as its domestic cellular operations.
(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 "--Description
of Election Procedures" and "--Certain Federal Income Tax
Considerations." 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 "--Form of the Merger," "--Merger
Consideration," "--Description of Election Procedures," "--Procedures
for Exchange of CCI Common Stock 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
"--Opinions of the Financial Advisors to the CCI Board."
(vii) The analysis and recommendation of the 1996 Merger
Agreement, and the transactions contemplated thereby, including the
Merger, by CCI's management.
(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 Merger
Agreement, and the terms of AirTouch Class B Preferred Stock and
AirTouch Class C Preferred Stock. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT." The CCI Board, based on presentations by its legal and
financial advisors, deemed the 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
-49-
<PAGE> 56
placed on both CCI and AirTouch. In considering the securities to be
received as part of the Units, the CCI Board considered the views of
Donaldson, Lufkin & Jenrette, Wasserstein Perella and legal counsel
with respect to customary market terms of financially similar
securities as well as the characteristics of AirTouch, including,
without limitation, 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.
(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.
The foregoing discussion of information and factors considered and
given weight by the CCI Board is not intended to be exhaustive. 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. 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."
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 Redemption 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, they do not specifically require the
appraisers to adopt any particular valuation methodology in reaching their
conclusions as to value.
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
-50-
<PAGE> 57
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.
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, 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. In connection 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.
-51-
<PAGE> 58
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, 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
-52-
<PAGE> 59
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[Degree] Communications Corporation
("360[Degree] 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
360o 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.
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,
-53-
<PAGE> 60
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.
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%.
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.
-54-
<PAGE> 61
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 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 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 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 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 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,
-55-
<PAGE> 62
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
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, 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
-56-
<PAGE> 63
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.
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 projections prepared by
New Par of its estimated 1996 EBITDA 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
-57-
<PAGE> 64
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 [degrees] 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 projections prepared by New Par of its
estimated 1996 EBITDA, 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 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 projections prepared by New Par of its estimated 1996
EBITDA, 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
-58-
<PAGE> 65
New Par is CCI's primary asset) utilizing projections for New Par prepared by
New Par and projections for New Par prepared by AirTouch. 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
projections prepared by New Par 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 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 expense 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 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
-59-
<PAGE> 66
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.
-60-
<PAGE> 67
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 then 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."
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 "--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.
AirTouch has concluded that the terms of the Merger are fair to the CCI
Stockholders. 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 "--Reasons For Merger;
Recommendations 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"). In view of the wide variety of
factors considered, 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.
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.
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
-61-
<PAGE> 68
owned by AirTouch and shares of 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, subject to adjustment
and proration as described below, or
(ii) a Unit 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, subject to adjustment and proration as described
below, or
(iii) a combination of a fractional Unit and cash,
provided that the total number of CCI Common 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 set
forth in the 1996 Merger Agreement. CCI Stock held by AirTouch, which
represented approximately ___% of CCI Stock at April __, 1996, will be canceled
in the Merger without consideration. Of the remaining CCI Stock outstanding
immediately prior to the Effective Time, an aggregate of approximately 28%
(subject to reduction to the extent of Dissenting CCI Stock) will be converted
into the right to receive cash, and an aggregate of approximately 72% (subject
to increase to the extent of Dissenting CCI Stock) will be converted into the
right to receive Units. See "Election Procedures" below. As discussed below, the
Merger is conditioned on being a tax-free reorganization and up to an additional
8% of the CCI Common Equivalent Shares will be exchanged for Units rather than
cash to the extent necessary to achieve tax-free treatment.
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 (without regard to conversions of CCI Convertible Notes or exercises
of outstanding CCI stock options occurring, in either case, after the Effective
Time) will in no event exceed the Class B Maximum (________ shares). 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 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).
As of the date of this Proxy Statement-Prospectus, there were issued
and outstanding shares of CCI Stock representing _____ CCI Common Equivalent
Shares. Based on this number of CCI Common Equivalent Shares (and assuming that
no other adjustments to the Merger Consideration would be required pursuant to
other provisions of the 1996 Merger Agreement), the formula described above
would adjust the Class B Per-Unit Amount and Class C Per-Unit Amount to equal
_____ and _____, respectively.
-62-
<PAGE> 69
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 (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 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>
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 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 of the AirTouch Class B Preferred Stock.]
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 Stock determined in writing by Lehman
Brothers as of the Effective Time
</TABLE>
-63-
<PAGE> 70
<TABLE>
<S> <C>
Units Pre-Adjustment = 72% of the number of CCI Common Equivalent Shares
outstanding as of immediately prior to the Effective Time
</TABLE>
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. 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."
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 consideration payable in the
Merger 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 Securities 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. 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."
-64-
<PAGE> 71
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) approximately 28% of the number of CCI Common Equivalent Shares,
minus (ii) the number of CCI Common Equivalent Shares represented by Dissenting
CCI Stock. The Unit Election Number will be equal to approximately 72% of the
number of shares of CCI Common Equivalent Shares outstanding immediately prior
to the Effective Time. Both the Cash Election Number and the Unit Election
Number 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 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 a Form of Election. 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 Forms of Election,
provided that each such Representative certifies that each Form of Election
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 1996
Merger Agreement, respectively. Since the market price of AirTouch Common Stock
and interest rates are subject to fluctuation, 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) $55.00 and (y) 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 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 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, the numerator of which will be the Unit Election Number 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
-65-
<PAGE> 72
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 NUMBER OF CCI COMMON EQUIVALENT SHARES TO BE CONVERTED INTO
THE RIGHT TO RECEIVE CASH (INCLUDING DISSENTING CCI STOCK) AND THE NUMBER 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.
A FORM OF ELECTION IS BEING SENT SEPARATELY TO HOLDERS OF RECORD OF CCI
STOCK ON THE RECORD DATE. THE FORM OF ELECTION 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, A FORM OF ELECTION MUST BE PROPERLY COMPLETED
AND SIGNED AND MUST BE RECEIVED BY ________________, AS EXCHANGE AGENT,
ACCOMPANIED BY ALL STOCK CERTIFICATES REPRESENTING SHARES OF CCI STOCK HELD BY
THE PERSON SUBMITTING SUCH FORM OF ELECTION NO LATER THAN 5:00 P.M. NEW YORK
TIME ON THE LAST BUSINESS DAY PRIOR TO THE EFFECTIVE TIME. THE 1996 MERGER
AGREEMENT PROVIDES THAT AIRTOUCH AND CCI WILL CAUSE THE EFFECTIVE TIME TO OCCUR
AS ON THE SECOND BUSINESS DAY AFTER THE APPROVAL BY THE CCI STOCKHOLDERS OF THE
1996 MERGER AGREEMENT AND THE SATISFACTION (OR WAIVER, IF PERMISSIBLE) OF THE
OTHER CONDITIONS SET FORTH IN THE 1996 MERGER AGREEMENT. THUS, EACH HOLDER OF
CCI STOCK IS URGED TO DELIVER A PROPERLY COMPLETED FORM OF ELECTION TO THE
EXCHANGE AGENT NO LATER THAN 5:00 P.M. NEW YORK TIME, ON ___________, 1996, IN
ORDER TO ENSURE THAT ITS FORM OF ELECTION WILL BE RECEIVED PRIOR TO THE
EFFECTIVE TIME. AS SOON AS THE DATE ON WHICH THE EFFECTIVE TIME IS ANTICIPATED
TO OCCUR IS DETERMINED, AIRTOUCH AND CCI WILL PUBLICLY ANNOUNCE SUCH DATE,
ALTHOUGH NO ASSURANCE CAN BE GIVEN THAT THE EFFECTIVE TIME WILL NOT BE DELAYED.
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 a Form of Election 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 a Form of
Election 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 a Form of Election may obtain
copies of the Form of Election upon request from the Exchange Agent either in
writing at ____________________, [mailing address] or by telephone at (XXX)
XXX-XXXX.
HOLDERS OF SHARES OF CCI STOCK THAT WISH TO SUBMIT A FORM OF ELECTION
SHOULD DELIVER THEIR STOCK CERTIFICATES WITH SUCH FORM OF ELECTION.
ANY HOLDER OF CCI STOCK THAT DOES NOT SUBMIT A PROPERLY COMPLETED FORM
OF ELECTION 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 THE LAST
BUSINESS DAY PRIOR TO THE EFFECTIVE TIME 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
-66-
<PAGE> 73
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 a Form of Election.
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 a Form of Election 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. 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 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.
-67-
<PAGE> 74
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 bylaws in effect on the date hereof 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 as
of the date of the 1996 Merger Agreement. In addition, the 1996 Merger Agreement
provides that, at all times during the period from the date hereof through the
Effective Date, 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 ________ __, 1996 as the calculation
date of the payment (for illustration purposes only), Messrs. Gorelick and
Lubasch and Ms. Wood will receive payments of $________, $________ and
$________, 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
-68-
<PAGE> 75
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 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.
EFFECTIVE TIME
The Merger will become effective 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 A FORM OF ELECTION SHOULD DELIVER THEIR
STOCK CERTIFICATES TOGETHER WITH SUCH FORM OF ELECTION.
If a holder of CCI Stock does not submit such holder's stock
certificates with a properly completed Form of Election by 5:00 p.m. New York
time on the last business day prior to the Effective Time, as soon as reasonably
practicable after the Effective Time, AirTouch will instruct the Exchange Agent
to mail to each such holder of record (other than holders of CCI Dissenting
Stock) of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of CCI Stock (such certificates, together
with certificates delivered with a Form of Election, the "Certificates") (i) a
letter of transmittal and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing AirTouch Preferred
Stock, Series 1996 or cash. After the Effective Time, holders of CCI Stock who
have surrendered a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, and such other documents as may
be required pursuant to such instructions, or submitted a Certificate with a
Form of Election, will be entitled to 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
-69-
<PAGE> 76
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered, each
Certificate 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 shares of AirTouch Preferred Stock, Series 1996 and any dividends or
other distributions to which such holder is entitled as described above.
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.
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. 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 (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 approved for
listing on the NYSE, subject to official notice of issuance. See "THE MERGER
AGREEMENT--Conditions to Consummation of the Merger--Conditions to Each Party's
Obligation to Effect the Merger."
-70-
<PAGE> 77
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.
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, 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 the requirement to issue
additional Units will not be applicable 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.
If, in accordance with the opinions referred to above, the Merger
qualifies as a reorganization within the meaning of Section 368(a) of the Code,
the material U.S. federal income tax consequences are as follows.
-71-
<PAGE> 78
Tax Consequences of the Merger.
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. 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 not be limited to
the amount of such Holder's gain. 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.
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 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
-72-
<PAGE> 79
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 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 test, 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 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.
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
-73-
<PAGE> 80
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. 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 result in a disproportionate
distribution. It is unclear whether any of the 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 AirTouch Class B
Preferred Stock, such distribution of the Contingent Payment Stock would be
taxable as ordinary dividend income to the extent of the Holder's ratable share
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
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 Class B 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 contained in AirTouch Class B Preferred Stock
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
-74-
<PAGE> 81
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 AirTouch Class B Preferred Stock containing 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 where 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.
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.
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.
-75-
<PAGE> 82
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 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 Series 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
-76-
<PAGE> 83
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. SINCE THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE HOLDERS OF CCI COMMON STOCK DEPEND
TO A GREAT EXTENT ON WHETHER THEY RECEIVE AIRTOUCH PREFERRED STOCK OR CASH, 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 ARE ENTITLED TO DISSENTERS' 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
-77-
<PAGE> 84
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 Chancery (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 reverse side of 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. 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. 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 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.
-78-
<PAGE> 85
A CCI Stockholder who elects to exercise appraisal rights, if
available, should mail or deliver his or her 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 must 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, 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
-79-
<PAGE> 86
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.
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). 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. 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. Redemption of the CCI
Right will entitle each holder of a share of CCI Stock to receive $.01 in value
per CCI Common Stock Equivalent Share (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 Series 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 and prior to the
earlier of the date 10 years following the date of the 1991 Merger and the close
of business on the day immediately preceding the Final Redemption Date (the "CCI
-80-
<PAGE> 87
Rights Expiration Date") a unit consisting of one one-hundredth of a share (a
"CCI Rights Unit") of Series D Preference Stock at a purchase price reflecting
the long-term value of the CCI capital stock, as determined by the CCI Board in
consultation with its financial advisor (the "Purchase Price"). At the close of
business on the day preceding the Final Redemption Date, each share of Series D
Preferred Stock is automatically converted into one hundred shares of CCI Series
A Common Stock.
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 (as defined in the CCI Rights Agreement) (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 1991 Merger Agreement, except as otherwise provided in the CCI Rights
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 attach 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 CCI Rights attach
(which offer is consummated after the Back End Termination Date) 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 CCI stockholders
(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 Distribution Event to occur.
-81-
<PAGE> 88
The Purchase Price payable, and the number of CCI 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 Series D
Preference Stock; (ii) if holders of the Series D Preference Stock are granted
certain rights or warrants to subscribe for Series D Preference Stock or
convertible securities at less than the current market price of the Series D
Preference Stock; or (iii) upon the distribution to holders of the 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 Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the 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.
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 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. 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.
-82-
<PAGE> 89
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 U S 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
Common 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.
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, among other things, 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 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
-83-
<PAGE> 90
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 "THE
MERGER--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, among
other things, 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 and transactions with certain affiliated
or formerly affiliated persons or entities; (viii) information with respect to
certain contractual arrangements of CCI's business; and (ix) the vote of CCI
Stockholders required to approve the Merger;
Additional Representations and Warranties of AirTouch. AirTouch also
has made certain additional repre sentations and warranties to the authorization
and validity of the AirTouch Preferred Stock, Series 1996 to be issued pursuant
to the 1996 Merger Agreement.
New Par Not a Subsidiary of CCI for Purposes of Representation and
Warranties; Non-Survival of Repre sentations 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, 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 1996 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
outstand-
-84-
<PAGE> 91
ing 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, agree ment,
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
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.
-85-
<PAGE> 92
Additional Covenants of CCI. CCI covenants in the 1996 Merger Agreement
to, among other things: (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 or resignation (in form and substance
reasonably satisfactory to AirTouch) from, or terminate, each employee of CCI or
any subsidiary thereof; (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; and (vii) at or before the Effective Time,
cause the lease for CCI's headquarters office to be terminated or novated, and
dispose of certain assets for the consideration specified in the 1996 Merger
Agreement.
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, among other things: (i) 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 (ii) 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.
-86-
<PAGE> 93
Additional Covenants of AirTouch and CCI. The 1996 Merger Agreement
contains additional covenants of each of AirTouch and CCI to, among other
things: (i) allow the other party reasonable access to its officers, employees,
agents, books, commitments, records and properties; (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 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 to more effectively consummate the transactions contemplated by
the 1996 Merger Agreement (including, but no 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; and (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.
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, among
others: (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 will
remain in effect, provided, however, that if AirTouch will waive 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 Securities to be
issued to the holders of the capital stock of CCI 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.
-87-
<PAGE> 94
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, among others: (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, among others: (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, action or
proceeding, or any investigation or inquiry, by any governmental entity
(collectively,
-88-
<PAGE> 95
"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 $50 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; and (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.
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 the approval of the CCI
Stockholders contemplated by the 1996 Merger Agreement will 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 (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
-89-
<PAGE> 96
(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
[Confidentiality Agreement] 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 Board of Directors of CCI that
CCI Stockholders approve the Merger, the 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.
-90-
<PAGE> 97
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 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. None of AirTouch, AirTouch Cellular,
New Par, CCI, or any of their financial advisors assumes any responsibility for
the accuracy of these projections. 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 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."
-91-
<PAGE> 98
NEW PAR 1996 BUSINESS PLAN
<TABLE>
<CAPTION>
(Dollars in millions)
1996
--------
<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
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,
--------------------------------------------
(Dollars in Millions)
1997 1998 1999 2000
-------- -------- -------- --------
<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>
-92-
<PAGE> 99
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,
--------------------------------------------
(Dollars in Millions)
1996 1997 1998 1999
-------- -------- -------- --------
<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 $ 299.7 $ 367.1 $ 430.3
======== ======== ======== ========
</TABLE>
-93-
<PAGE> 100
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Combined Balance Sheet as
of December 31, 1995 combines (1) the historical consolidated balance sheets of
AirTouch and subsidiaries and CCI and subsidiaries as if the 1996 Merger had
been effective on December 31, 1995 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 December 31, 1995, 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 unaudited Pro Forma Condensed Combined
Statement of Income presents the combined results of operations of (1) AirTouch
and CCI as if the 1996 Merger had been effective on January 1, 1995 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 on January 1,
1995 as described in the accompanying explanatory notes.
The Pro Forma Statements and accompanying explanatory notes reflect 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. 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 Statements are expected as
valuations/appraisals of assets and liabilities are completed, and additional
information becomes available. In addition, the results of operations of CCI
subsequent to December 31, 1995 will affect allocation of the purchase price.
Accordingly, actual amounts will differ from those set forth in the Pro
Forma Statements.
The equity method of accounting was applied for Phase II of the
AirTouch/U S WEST joint venture. 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 balance sheet and in
the statement of income, respectively. The actual interests 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, and the individual or aggregate effect of which
cannot currently be reliably estimated. 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 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 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. 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
-94-
<PAGE> 101
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. 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. As a result of the foregoing, 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 has chosen to use the
above-described assumption that all cellular properties are contributed to the
joint venture in the pro forma presentation because it results in full
deconsolidation for the purposes of AirTouch's financial statement reporting of
all of AirTouch's domestic cellular properties.
The Pro Forma 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 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.
-95-
<PAGE> 102
AIRTOUCH
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
AirTouch/
U S WEST Pro Forma
As Reported CCI Pro Forma Partnership CCI Merger
---------------------------- Adjust- CCI Adjust- and
Dollars in millions) AirTouch CCI New Par ments Merger ments Phase II
- ---------------------------------- -------- ------- -------- ------------ --------- ----------- ----------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets................................ $ 506.2 $ 167.2 $ 162.6 $ (7.0)(1) $ (219.2)(a)
(118.9)(2) (162.6)(c)
25.3 (4) $ 735.4 $ 353.6
Property, plant, and equipment, net .......... 1,320.2 1.9 463.9 1,786.0 (870.6)(a)
(463.9)(c) 451.5
Investments in unconsolidated wireless
systems ................................... 3,076.3 449.7 1,614.7 (1) 911.3 (a)
(3,390.4)(4) 1,750.3 3,999.2 (c)
(293.8)(e) 6,367.0
Intangible assets, net........................ 605.7 413.1 2,149.3 (4) (159.3)(a)
879.4 (5) 4,047.5 (3,441.8)(c) 446.4
Deferred charges and other noncurrent assets.. 139.5 32.1 32.6 204.2 (60.4)(a)
(32.6)(c) 111.2
-------- ------- -------- --------- -------- --------- --------
Total assets.................................. $5,647.9 $ 650.9 $1,072.2 $ 1,152.4 $8,523.4 $ (793.7) $7,729.7
======== ======= ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................... $ 487.7 $ 6.6 $ 125.0 $ (28.7)(3) $ 590.6 $ (240.3)(a)
(96.3)(c) $ 254.0
Long-term obligations......................... 892.4 355.6 527.7 (1)
(107.9)(2) 1,667.8 (1.8)(a) 1,666.0
Deferred income taxes......................... 258.6 32.4 879.4 (5) 1,170.4 (293.8)(e) 876.6
Deferred credits.............................. 106.0 3.9 109.9 (11.2)(a)
(3.9)(c) 94.8
-------- ------- -------- --------- -------- --------- --------
Total liabilities............................. 1,744.7 394.6 128.9 1,270.5 3,538.7 (647.3) 2,891.4
-------- ------- -------- --------- -------- --------- --------
Minority interests in consolidated wireless
systems..................................... 152.5 0.0 1.5 0.0 154.0 (144.9)(a)
(1.5)(c) 7.6
-------- ------- -------- --------- -------- -------- --------
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.................... 3,877.2 3,877.2 3,877.2
Accumulated deficit........................... (158.1) (158.1) (158.1)
Cumulative translation adjustment............. 17.1 17.1 17.1
Other......................................... 9.5 9.5 9.5
Stockholders' equity - CCI.................... 256.3 (11.0)(2)
(245.3)(4) 0.0 0.0
Partners' capital - New Par................... 941.8 28.7 (3)
(970.5)(4) 0.0 0.0
-------- ------- -------- --------- -------- -------- --------
TOTAL STOCKHOLDERS' EQUITY.................... 3,750.7 256.3 941.8 (118.1) 4,830.7 0.0 4,830.7
-------- ------- -------- --------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ... $5,647.9 $ 650.9 $1,072.2 $ 1,152.4 $8,523.4 $ (793.7) $7,729.7
======== ======= ======== ========= ======== ======== ========
</TABLE>
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
-96-
<PAGE> 103
AIRTOUCH
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AirTouch/
U S WEST Pro Forma
As Reported CCI Pro Forma Partnership CCI Merger
------------------------------ Adjust- CCI Adjust- and
(Dollars in millions) AirTouch CCI(*) New Par(*) ments Merger ments Phase II
- ---------------------------------------- -------- ------ ---------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES...................... $1,618.6 $ 0.0 $ 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 (122.4)(b)
(38.4)(d) 283.6
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 (1,424.0) 660.0
-------- ------ ------- ------- -------- --------- -------
OPERATING INCOME (LOSS)................. 112.8 (15.8) 197.7 (99.8) 194.9 (425.0) (230.1)
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic............................. 188.2 101.3 (207.1)(7) 82.4 279.6 (b)
100.5 (d)
(3.7)(f)
(12.0)(g) 446.8
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 (h) 8.9
-------- ------ ------- ------- -------- --------- -------
INCOME BEFORE EXTRAORDINARY ITEM AND
INCOME TAXES.......................... 245.0 89.2 204.6 (374.9) 163.9 (20.0) 143.9
Income taxes............................ 113.1 31.3 4.3 (54.4)(10) 94.3 (4.3) (d)
(1.0)(h) 89.0
-------- ------ ------- ------- -------- --------- -------
INCOME BEFORE EXTRAORDINARY ITEM........ $ 131.9 $ 57.9 $ 200.3 $(320.5) $ 69.6 $ (14.7) $ 54.9
======== ====== ======= ======= ======== ========= =======
Preferred dividends..................... 54.7 54.7
-------- --------- -------
Income attributable to common
stockholders $ 14.9 $ (14.7) $ 0.20
======== ========= =======
INCOME BEFORE EXTRAORDINARY ITEM
PER SHARE.............................. $ 0.27 $ 0.03 $ 0.00
======== ======== =======
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.
-97-
<PAGE> 104
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 approximately 28%, less Dissenting CCI Stock, will be converted into
the right to receive cash and an aggregate of approximately 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 extrordinary item per share is calculated
based on income before extraordinary item after deducting dividends of $54.7
million for AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock, and on weighted average shares of 494.9 million as of December 31, 1995.
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 debt 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 Debt is assumed to not
convert into CCI Stock prior to the Effective Time and the supplemental
indenture is assumed to be obtained from the Bank (see 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.
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 this Pro Forma Condensed Combined Statement of Income,
the MRO is assumed to have occurred concurrently with the Merger although it
actually occurred in late October 1995.
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
-98-
<PAGE> 105
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Forma Statements. The acquisition of CCI 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 Statements. However, changes to adjustments included in the
Pro Forma Statements are expected as valuations/appraisals of assets and
liabilities are completed, and additional information becomes available. In
addition, the results of operations of CCI subsequent to December 31, 1995 will
affect allocation of the purchase price. Accordingly, actual amounts will differ
from those in the Pro Forma Statements.
CCI Merger Pro Forma Adjustments
1. Records the Merger along with the $107.7 million AirTouch Replacement
Option payment made by AirTouch in January 1996. This entry also
accrues the estimated professional fees related to the Merger. For Pro
Forma 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. Reverses New Par's as reported distribution payable to partners at
December 31, 1995.
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.
5. Records the deferred tax liability related to identifiable intangible
assets other than goodwill and corresponding adjustment to goodwill
(see entry 8).
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 1995 equity in net income of CCI and New Par and
CCI's 1995 equity in net income of New Par.
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 list and $1,951.6 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.
-99-
<PAGE> 106
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
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%.
Phase II of AirTouch/U S WEST Partnership 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 partnership 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 partnership,
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
partnership.
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 partnership at the beginning of Phase II.
Similarly, all domestic cellular properties of U S WEST are assumed to be
contributed to the partnership. 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.
The following is selected pro forma financial information as of
December 31, 1995 and the year then ended for the AirTouch/U S West Partnership:
AIRTOUCH/U S WEST PARTNERSHIP
SUMMARY PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Pro Forma
Combined
---------
<S> <C>
OPERATING RESULTS
Operating revenues....................... $ 2,790.2
Operating income......................... $ 572.1
Net income from operations............... $ 508.7
BALANCE SHEET
Total assets............................. $ 7,133.1
Total partners' capital.................. $ 5,939.4
</TABLE>
Pro forma income before extrordinary item per share is calculated
based on income before extraordinary items after deducting dividends of $54.7
million for AirTouch Class B Preferred Stock and AirTouch Class C Preferred
Stock, and assumes 494.9 million weighted average shares outstanding as of
December 31, 1995. The effect of convertible preferred stock, using the "if
converted" method, is not considered since the effect of such shares is
anti-dilutive. The CCI options and CCI convertible debt 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 partnership to
the equity method of accounting.
-100-
<PAGE> 107
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
b. Converts to the equity method of accounting AirTouch's as reported
domestic cellular consolidated 1995 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 as reported results of operations, including the
amortization of intangibles arising from the Merger.
e. Adjusts AirTouch's deferred income tax balances after the Merger and
the investment in the partnership for the tax effects of its
contribution to the partnership.
f. Reduces AirTouch's as reported income in its domestic cellular
properties to reflect its ownership interest in the partnership.
g. Adjusts AirTouch's share of the partnership's net income for the
amortization of the implied goodwill (the difference between carrying
value of AirTouch's net assets (after the Merger) contributed to the
partnership and AirTouch's proportionate share of the pro forma net
assets of the partnership at December 31, 1995). The amortization
period for implied goodwill is 40 years.
h. Records net income tax effects on the relevant pro forma items arising
from Phase II at the statutory rate of 41.05%.
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
preferred stock, par value $.01 per share ("AirTouch Preferred Stock"). At
________________, there were approximately ________ shares of AirTouch Common
Stock outstanding, exclusive of treasury shares, and no shares of AirTouch
Preferred Stock outstanding.
Descriptions of the material terms of AirTouch's capital stock are set
forth below. Such descriptions are not complete and are subject in all respects
to the DGCL and AirTouch's Certificate of Incorporation, including the
certificates of designation pursuant to which the AirTouch Class B Preferred
Stock and the AirTouch Class C Preferred Stock will be issued.
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.
-101-
<PAGE> 108
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 or discourage the acquisition of control of
AirTouch.
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 10% or more of the AirTouch Common Stock
(an "AirTouch Acquiring Party") or (ii) 10 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 acquiring AirTouch Common Stock pursuant to an AirTouch Permitted Offer
(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
-102-
<PAGE> 109
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 "THE MERGER--Merger
Consideration," at the Effective Time, the issued and outstanding CCI Stock may
be converted into the right to receive a Unit containing a fraction of a share
of AirTouch Class B Preferred Stock.
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 ____ per share
(equivalent to $______ 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 date of initial issuance of the share of AirTouch Class B
Preferred Stock 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.
-103-
<PAGE> 110
However, 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, notwithstanding the
foregoing, dividends on such AirTouch Class B Preferred Stock will be payable
from the Effective Time.
The AirTouch Board may fix a record date for the determination of
holders 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 the AirTouch Class B Preferred Stock as to
the payment of dividends and the distribution of assets upon liquidation ("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 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
-104-
<PAGE> 111
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 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 hereinafter described, on the Class B
Maturity Date, which is the day following the third anniversary of the Effective
Date, 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
-105-
<PAGE> 112
shares, as described herein, (a) if the Class B Maturity Price is greater than
or equal to the Class B Conversion Price ($___ per share), 0.806 shares of
Common Stock per AirTouch Class B Preferred Share, (b) if the Class B Maturity
Price is less than the AirTouch Class B Conversion Price but greater than the
Preferred Stock Issue Price ($___ per share), the rate 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.
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--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 "--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 .806 of a share of AirTouch Common Stock for
each share of AirTouch Class B Preferred Stock (the "Class B Optional Conversion
Rate"), equivalent to a conversion price of $____ 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
certificate 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
-106-
<PAGE> 113
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 Equity Security unless such 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 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 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 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 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) 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.
If AirTouch will, after the Effective Time, make 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 the 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
Series B Preferred Shares outstanding and subsequently issued, the dividend and
the liquidation amount for each share of AirTouch Series 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 AirTouch Class B Preferred Stock would result in
an adverse tax consequence to AirTouch or the holders of the 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, will determine 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
-107-
<PAGE> 114
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 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 in the
Class B Maturity 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 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 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 of the Common Stock, 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 (the
"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] (the "Contingent Payment Calculation Date") is as follows:
-108-
<PAGE> 115
<TABLE>
<CAPTION>
Cumulative Amount
-----------------
Per Share
---------
Trading Price ($ million)
-------------
<S> <C> <C> <C>
$54.50 to $55.00 in each case multiplied 0.00 in each case divided by
$54.49 to $54.00 by the quotient obtained 2.00 the total number of
$53.99 to $53.75 by dividing the 4.00 shares of AirTouch
$53.74 to $53.50 Preferred Stock Issue 6.00 Class B Preferred Stock
$53.49 to $53.25 Price by $55.00 8.00 issued and outstanding
$53.24 to $53.00 10.00 as of the Contingent
$52.99 to $52.75 12.50 Payment Calculation
less than $52.75 15.00 Date
</TABLE>
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
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
having a preference and a priority over the Class B Preferred Stock on
liquidation are entitled to receive an amount 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 Class B Junior Stock upon liquidation, dissolution or winding
up.
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 Class B Parity
Preferred Stock, the holders of shares of AirTouch Class B Preferred Stock and
of all other series of Class B Parity 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. If 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, the holders of
AirTouch Class B Preferred Stock are entitled to participate on a pro rata basis
with the holders of AirTouch Common Stock.
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. 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
-109-
<PAGE> 116
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 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 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 will have been
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 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. Application has been made to list the AirTouch Class B
Preferred Stock on the NYSE under the symbol "______."
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 its 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 "THE MERGER--Merger
Consideration," at the Effective Time, the issued and
-110-
<PAGE> 117
outstanding CCI Stock may be converted into the right to receive a Unit
containing a fraction of a share of AirTouch Class C Preferred Stock or cash.
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 the next
succeeding business day. The first dividend period will be from the date of
initial issuance of the share of AirTouch Class C Preferred Stock 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. However, 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, notwithstanding the foregoing, dividends on such AirTouch Class
C Preferred Stock will be payable from the Effective Time.
The AirTouch Board may fix a record date for the determination of
holders 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 the AirTouch Class C Preferred Stock as to
the payment of dividends and the distribution of assets upon liquidation ("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
-111-
<PAGE> 118
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 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
-112-
<PAGE> 119
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 day following the
twentieth anniversary of the Effective Date, 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 an amount in cash equal to $50.00
per share (the "Call Price") plus all accrued and unpaid dividends on such
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 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 the AirTouch Common Stock on a per day basis has exceeded $______ [130% OF
THE PRODUCT OF THE AIRTOUCH CLASS C ISSUE PRICE AND 1.25] 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 AirTouch 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
-113-
<PAGE> 120
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 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 ____ 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
-114-
<PAGE> 121
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
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 will, after the Effective Time, make 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 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 AirTouch Class C Preferred Stock would result in
an adverse tax consequence to AirTouch or the holders of the 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, will determine 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 1/100th 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,
then proper provision will be made so that each AirTouch Class C Preferred Share
will, 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
-115-
<PAGE> 122
consummation of such transaction by a holder of the number of shares of AirTouch
Common Stock into which such AirTouch Class C Preferred Share might have been
converted immediately prior to consummation of such transaction, (ii) conversion
on the Class C Maturity Date into the Merger Consideration receivable upon
consummation of such transaction by a holder of the number of shares of AirTouch
Common Stock into which such AirTouch Class C Preferred Share 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 AirTouch Class C Preferred Shares (other than previously declared dividends
payable to a holder of record as of a prior date), (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).
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 AirTouch Class C Preferred Shares 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 Class C Preferred Shares on
liquidation, will be entitled to be paid out of the assets of AirTouch available
for distribution to its stockholders on a parity basis with the holders of
AirTouch Common Stock, as if such shares of AirTouch Class C Preferred Stock had
converted to AirTouch Common Stock at the Class C Exchange Rate then in effect
on the date immediately prior to such distribution, an amount per share of
AirTouch Class C Preferred Stock of cash equal to the amount paid per share of
AirTouch Common Stock. The holders of shares of AirTouch Class C Preferred Stock
and of all other series of AirTouch Common Stock will share ratably in such
distribution of assets in proportion to the amount of shares of AirTouch Common
Stock held by such holders, in the case of AirTouch Common Stock, or represented
by the shares of AirTouch Class C Preferred Stock, in the case of shares of
AirTouch Class C Preferred Stock. Except as provided above, holders of shares of
AirTouch Class C Preferred Stock will not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of AirTouch.
-116-
<PAGE> 123
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 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 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. Application has been made to list the AirTouch Class C
Preferred Stock on the NYSE under the symbol "______."
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.
-117-
<PAGE> 124
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 ("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. 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 10th 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.
-118-
<PAGE> 125
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 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 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 AirTouch 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.
-119-
<PAGE> 126
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.
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 outstanding.
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.
-120-
<PAGE> 127
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 to Consummation of the
Merger--Conditions to Each Party's Obligation to Effect the Merger" and
"--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 to Consummation
of the Merger--Conditions to the Obligations of AirTouch to Effect the Merger."
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 Act 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 consent to the foregoing pro forma transfer of
control were filed with the FCC on ________ __, 1996.
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.
-121-
<PAGE> 128
CERTAIN LITIGATION RELATED TO THE MERGER
Since April 8, 1996, seven lawsuits have been filed in Delaware
Chancery Court, in and for New Castle County, and one lawsuit has been 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 name
as a defendant one member of the Partnership Committee which manages New Par who
is not a CCI director. Each lawsuit purports to be a class action brought on
behalf of all CCI common and convertible preferred stockholders and alleges that
the consideration to be paid the class under the 1996 Merger Agreement is
inadequate. The Delaware Chancery Court has granted plaintiffs' motion to
consolidate the Delaware cases. CCI and its directors (other than Messrs. Cox
and Gyani) have filed an answer in the consolidated proceeding.
Plaintiffs contend that the director defendants have 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 allege 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 allege that actions taken under the 1996 Merger Agreement
violated certain contractual rights owing under the 1990 Merger Agreement. The
complaints seek an injunction against the Merger, rescission of the Merger, if
consummated, unspecified damages, attorneys' fees and other relief.
Both CCI and AirTouch believe that these lawsuits are without merit and
they and the other named defendants intend to oppose vigorously these lawsuits.
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 "THE
MERGER--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 April __, 1996, CCI had ________ 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 Indenture) through the CCI Note Purchase Date. As of April __, 1996, the
Issue Price plus Original Issue Discount per CCI Convertible Note through such
date was $__________.
The Surviving Corporation will enter into a supplemental indenture
pursuant to which it 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
-122-
<PAGE> 129
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 April __, 1996, 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.
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....... 44 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........ 41 Vice President, Corporate Development and Strategy
Carol A. Bartz....... 47 Director
Paul Hazen........... 54 Director
James R. Harvey...... 61 Director
Arthur Rock.......... 69 Director
George P. Shultz..... 75 Director
Donald G. Fisher..... 67 Director
Charles R. Schwab.... 58 Director
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
-123-
<PAGE> 130
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.
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.
James R. Harvey became a director of AirTouch in April 1993. Mr. Harvey
has been Chairman of the Executive Committee of the Board of Directors of
Transamerica Corporation since January 1, 1996 and was Chairman of the Board of
Transamerica Corporation from 1993 to 1996. He was Chief Executive Officer of
Transamerica from 1981 through 1991. He was a director of Pacific Telesis Group
from 1983 to April 1994. Mr. Harvey is a director of The Charles Schwab
Corporation and McKesson Corporation.
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
-124-
<PAGE> 131
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.
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.
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................ 54 Director
Mohan Gyani............... 44 Director
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
-125-
<PAGE> 132
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.
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.
-126-
<PAGE> 133
SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source of the cash to be paid by AirTouch as part of the Merger
Consideration will be (1) borrowings (a) under the 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, (b) pursuant to AirTouch's
commercial paper program, or (c) pursuant to debt which may be issued from time
to time pursuant to AirTouch's Registration Statement on Form S-3 (Registration
No. 33-62787) or pursuant to a transaction exempt from registration under the
Securities Act, or (2) any combination of one or more of the foregoing. AirTouch
has no current plans regarding the refinancing or repayment of any such
borrowings.
PRINCIPAL AND OTHER STOCKHOLDERS OF CCI
The following table sets forth certain information regarding the
beneficial ownership of CCI Stock, as of April 10, 1996, 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)................... 328,601 16,000 21,250 *
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
The Capital Group Companies, Inc. 2,150,400(14) -- -- 5.15%
Capital Research and
Management Company................. 1,920,310(14) -- -- 4.60%
333 South Hope Street
Los Angeles, CA 90071
HBK Investments L.P..................... 1,696,722(15) -- -- 4.06%
777 Main Street, Suite 2750
Fort Worth, TX 76102
All directors and officers as a group
(13 in number)....................... 1,321,042 699,500 875,250 4.76%
</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. Based upon information
available to CCI, including the Schedule 13-D referred to in footnote
12, 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. Based upon the
-127-
<PAGE> 134
Form 13-G referred to in footnote 13, the title of the class of CCI
Stock owned by The Capital Group Companies, Inc. is 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 and Presently Exercisable Options.
(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 nonemployee 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 nonemployee 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.
(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. An additional 91,549 shares of CCI
Stock are owned by a corporation of which Mr. Knafel is President and a
director, 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) 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-G (Amendment No. 5), dated February 9,
1996, filed by the Capital Group Companies, Inc. with the SEC.
(15) Based solely upon a Form 13-D, dated April 8, 1996, filed by HBK
Investments L.P. with the SEC.
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 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.
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 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.
The consolidated financial statements and schedule of Cellular
Communications, Inc. incorporated by reference in AirTouch Communications,
Inc.'s Annual Report (Form 10-K) 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
-128-
<PAGE> 135
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) 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, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
The consolidated financial statements of CMT Partners for the years
ended December 31, 1995 and 1994 and for the four-month period ended December
31, 1993, incorporated by reference from AirTouch's Annual Report on Form 10-K
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.
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, 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 Margaret G. Gill. As of March
31, 1995, Mrs. Gill had a direct or indirect interest in 1,932 shares of
AirTouch Common Stock and had options to purchase 326,880 additional shares, of
which 30,000 options were exercisable. 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.
-129-
<PAGE> 136
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
AIRTOUCH COMMUNICATIONS, INC.,
AIRTOUCH CELLULAR
and
CELLULAR COMMUNICATIONS, INC.
--------------
Dated as of April 5, 1996
- --------------------------------------------------------------------------------
<PAGE> 137
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER................................................................................ 1
1.1 Effective Time of the Merger.............................................................. 1
1.2 Closing................................................................................... 2
1.3 Effects of the Merger..................................................................... 2
ARTICLE II MANNER OF CONVERTING SHARES............................................................... 2
2.1 Certain Definitions....................................................................... 2
2.2 Conversion of Securities.................................................................. 3
(a) AirTouch Cellular Capital Stock.................................................... 3
(b) CCI Stock.......................................................................... 3
(c) Election of Consideration.......................................................... 3
(d) Excess Cash Elections.............................................................. 4
(e) Excess Unit Elections.............................................................. 4
(f) Insufficient Elections............................................................. 4
(g) Class B Maximum Adjustment......................................................... 5
(h) Treasury Shares; Shares Held by AirTouch........................................... 5
(i) Dissenting Shares.................................................................. 5
(j) No Fractional Shares............................................................... 5
(k) Closing of Transfer Books.......................................................... 6
(l) Adjustments to Preserve Tax Status of Merger....................................... 6
2.3 Election Procedures....................................................................... 6
2.4 Adjustments for Dilution and Other Matters................................................ 7
2.5 Conversion of Dissenting CCI Stock........................................................ 7
2.6 Employee Stock Options.................................................................... 7
2.7 CCI Convertible Debt...................................................................... 8
2.8 Calculation of Conversion Price for AirTouch Class B and Class C Preferred................ 8
2.9 Rights Plan Redemption Consideration...................................................... 9
ARTICLE III EXCHANGE OF SHARES........................................................................ 9
3.1 Exchange Procedures....................................................................... 9
3.2 Voting and Dividends...................................................................... 10
3.3 No Liability.............................................................................. 10
3.4 Withholding Rights........................................................................ 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................................ 11
4.1 Representations and Warranties of CCI..................................................... 11
(a) Corporate Organization............................................................. 11
(b) Capitalization..................................................................... 11
(c) Authority.......................................................................... 12
(d) Disclosure Documents............................................................... 12
(e) Consents; No Violation............................................................. 13
(f) SEC Reports; Material Contracts; Financial Statements.............................. 13
(g) Absence of Certain Changes......................................................... 14
(h) Undisclosed Liabilities............................................................ 14
(i) Compliance with Laws............................................................... 14
(j) Legal Proceedings.................................................................. 14
(k) Finders; Investment Bankers........................................................ 14
(l) Tax Returns, Audits and Liabilities................................................ 14
(m) Employee Benefit Plans............................................................. 16
(n) Opinion of Financial Advisor....................................................... 17
(o) Intercompany Balances; Transactions with Affiliates................................ 17
</TABLE>
-i-
<PAGE> 138
<TABLE>
<S> <C>
(p) Tax Matters........................................................................ 18
(q) Material Contracts................................................................. 18
4.2 Representations and Warranties of AirTouch................................................ 18
(a) Corporate Organization............................................................. 18
(b) Capitalization..................................................................... 18
(c) Authority.......................................................................... 18
(d) Valid Issuance..................................................................... 18
(e) Disclosure Documents............................................................... 18
(f) Consents; No Violation............................................................. 19
(g) SEC Reports; Financial Statements.................................................. 19
(h) Absence of Certain Changes......................................................... 19
(i) Finders; Investment Bankers........................................................ 20
(j) Tax Matters........................................................................ 20
ARTICLE V PRE-CLOSING COVENANTS..................................................................... 20
5.1 CCI Interim Operations.................................................................... 20
(a) Conduct of Business................................................................ 20
(b) Charters and By-Laws; Ownership of New Par......................................... 20
(c) Capital Stock...................................................................... 20
(d) Dividends; Other Payments.......................................................... 20
(e) No Material Transactions; No Affiliate Transactions................................ 20
(f) Employee Plans, Compensation, et. ................................................. 21
(g) Assets............................................................................. 21
(h) Debt............................................................................... 21
(i) Settlements........................................................................ 22
(j) Accounting Methods................................................................. 22
(k) Merger Fees........................................................................ 22
(l) No Inconsistent Acts............................................................... 22
5.2 Certain Covenants of AirTouch............................................................. 22
(a) Charters and Bylaws................................................................ 22
(b) Capital Stock; Dividends........................................................... 22
(c) Disposition of Assets.............................................................. 22
5.3 Access and Information.................................................................... 23
5.4 Registration Statement.................................................................... 23
5.5 Stockholders' Approval.................................................................... 24
5.6 Stockholder Rights Plan................................................................... 24
5.7 Tax Matters............................................................................... 24
5.8 Indemnification........................................................................... 24
5.9 Further Assurances; Cooperation........................................................... 24
5.10 New York Office Lease; Furniture and Fixtures............................................. 25
5.11 Affiliates; Other Documents............................................................... 25
5.12 Affiliate Transactions.................................................................... 25
5.13 Redemption of Series B Preference Stock................................................... 25
5.14 Accountants "Comfort" Letters............................................................. 26
5.15 Employees................................................................................. 26
5.16 Expenses.................................................................................. 26
5.17 Sale of Celsat Subsidiaries............................................................... 26
5.18 Transition Arrangements................................................................... 26
5.19 Maintenance of D&O Insurance.............................................................. 27
ARTICLE VI CONDITIONS................................................................................ 27
6.1 Conditions to Each Party's Obligation to Effect the Merger................................ 27
(a) Stockholder Approval............................................................... 27
(b) Regulatory Approvals............................................................... 27
</TABLE>
-ii-
<PAGE> 139
<TABLE>
<S> <C>
(c) HSR Act............................................................................ 27
(d) Registration Statement Effective................................................... 27
(e) State Securities Laws.............................................................. 27
(f) NYSE Listing....................................................................... 27
(g) No Injunction...................................................................... 27
6.2 Conditions to Obligations of CCI to Effect the Merger..................................... 27
(a) Representations and Warranties..................................................... 28
(b) Performance of Obligations......................................................... 28
(c) Legal Opinions..................................................................... 28
(d) Comfort Letter of AirTouch's Accountants........................................... 28
(e) Tax Opinion........................................................................ 28
6.3 Conditions to Obligations of AirTouch to Effect the Merger ............................... 28
(a) Representations and Warranties..................................................... 28
(b) Performance of Obligations......................................................... 28
(c) FCC Consents....................................................................... 28
(d) Consents Under Agreements.......................................................... 28
(e) Legal Opinions..................................................................... 29
(f) Tax Opinion........................................................................ 29
(g) Litigation, etc.................................................................... 29
(h) Comfort Letter of CCI's Accountants................................................ 29
(i) Rights Agreement................................................................... 29
(j) Consummation of Certain Transactions............................................... 29
(k) Absence of Restrictive Conditions.................................................. 29
(l) Contingent Liabilities............................................................. 29
(m) Change in Business Condition....................................................... 30
(n) Amendment of Indemnification Agreements............................................ 30
ARTICLE VII TERMINATION; AMENDMENT AND MISCELLANEOUS.................................................. 30
7.1 Termination............................................................................... 30
7.2 Effect of Termination..................................................................... 31
7.3 Termination Expenses...................................................................... 31
7.4 Non-Survival of Representations, Warranties and Coventants Following the Effective Time... 31
7.5 Waiver and Amendment...................................................................... 31
7.6 Entire Agreement.......................................................................... 31
7.7 Applicable Law............................................................................ 31
7.8 Interpretation............................................................................ 31
7.9 Notices................................................................................... 31
7.10 Counterparts.............................................................................. 32
7.11 Severability.............................................................................. 32
7.12 No Assignment............................................................................. 32
7.13 Specific Performance...................................................................... 33
7.14 Consent to Jurisdiction................................................................... 33
7.15 Publicity................................................................................. 33
Certain Schedules and Exhibits that do not contain material information have been omitted. The
Company will furnish such exhibits and schedules to the Commission supplementally upon request.
</TABLE>
-iii-
<PAGE> 140
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)
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)
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)
</TABLE>
-iv-
<PAGE> 141
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
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>
-v-
<PAGE> 142
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of April 5, 1996, among AIRTOUCH COMMUNICATIONS, INC., a Delaware
corporation ("AirTouch"), AIRTOUCH CELLULAR, a California corporation
("AirTouch Cellular"), and CELLULAR COMMUNICATIONS, INC., a Delaware
corporation ("CCI").
W I T N E S S E T H:
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 the terms and subject to the conditions of this
Agreement, AirTouch and CCI desire 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, 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").
-1-
<PAGE> 143
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").
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% 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).
-2-
<PAGE> 144
"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 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% 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
-3-
<PAGE> 145
"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.
(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, 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,
-4-
<PAGE> 146
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.
(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
-5-
<PAGE> 147
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 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
-6-
<PAGE> 148
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 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.
-7-
<PAGE> 149
(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 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.
-8-
<PAGE> 150
(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.
(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,
-9-
<PAGE> 151
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 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.
-10-
<PAGE> 152
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 the
date hereof, 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
-11-
<PAGE> 153
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 the
date hereof 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
-12-
<PAGE> 154
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 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.
-13-
<PAGE> 155
(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 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").
-14-
<PAGE> 156
"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).
"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
-15-
<PAGE> 157
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 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.
-16-
<PAGE> 158
(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 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 the date hereof, 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
-17-
<PAGE> 159
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.
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 the date hereof, 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
-18-
<PAGE> 160
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 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 the date
hereof, (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.
-19-
<PAGE> 161
(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.
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
-20-
<PAGE> 162
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 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
-21-
<PAGE> 163
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.
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).
-22-
<PAGE> 164
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) 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.
-23-
<PAGE> 165
5.5 Stockholders' Approval. CCI shall promptly call a meeting of its
stockholders to be held no later than July 26, 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.
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 Sections 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.
-24-
<PAGE> 166
(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 the date hereof 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).
(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 the date hereof 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
-25-
<PAGE> 167
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.
(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
-26-
<PAGE> 168
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 the date hereof through the Effective Date, CCI shall maintain in full
force and effect the directors' and officers' insurance policy which is in
effect on the date hereof.
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.
(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:
-27-
<PAGE> 169
(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 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
-28-
<PAGE> 170
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 $50 million).
-29-
<PAGE> 171
(m) Change in Business Condition. Since the date hereof,
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.
-30-
<PAGE> 172
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.
(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; provided, however, that the Existing Agreement and the
Confidentiality Agreement remain in full force and effect and are not modified
hereby.
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:
-31-
<PAGE> 173
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
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
-32-
<PAGE> 174
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 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.
-33-
<PAGE> 175
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 Executive Officer
CELLULAR COMMUNICATIONS, INC.
By: /s/ George Blumenthal
----------------------------------
Name: George Blumenthal
Title: Chairman
-34-
<PAGE> 176
Exhibit 2.2(l)
<TABLE>
<CAPTION>
1. Definitions
-----------
<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 = 72% of the number of CCI Common Equivalent Shares
outstanding as of immediately prior to the Effective Time
2. Calculation of Adjustments
to Class B Per-Unit Amount
and Class C Per-Unit Amount
Class B Shares Pre-Adjustment
Class B Per-Unit Amount = -----------------------------
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>
<PAGE> 177
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 Section 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 Section 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.
B-1
<PAGE> 178
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 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 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
Section 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for any
or all of the shares of the constituent corporation, and shall include
in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to
the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of the notice, demand in writing from
the surviving or resulting corporation the 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.
(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 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
B-2
<PAGE> 179
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.
(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.
B-3
<PAGE> 180
(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> 181
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 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 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.
1
<PAGE> 182
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).
2
<PAGE> 183
"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 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).
3
<PAGE> 184
"Mandatory Conversion" has the meaning set forth in Section 4(a).
"Maturity Date" has the meaning set forth in Section 4(a).
"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 $____ per share (the "Conversion Price") [THE ISSUE PRICE TIMES
1.24], 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 $___ per share
(the "Issue Price") [AIRTOUCH PREFERRED STOCK ISSUE PRICE AS DEFINED IN THE
MERGER AGREEMENT], 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).
4
<PAGE> 185
"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.
"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 from the Security Issue Date, at the rate per Class B Preferred Share
of $____ per annum, as may be adjusted in accordance with the provisions hereof
[6% OF THE ISSUE PRICE], 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 Security Issue 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,
notwithstanding the foregoing, dividends on such Class B Preferred Share shall
be payable from the Initial Issuance Date.
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.
5
<PAGE> 186
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 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 ("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, if such dividends are cumulative) per
6
<PAGE> 187
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 share of
Common Stock for each Class B Preferred Share (the "Optional Conversion Rate")
(equivalent to a conversion price of $__ per share of Common Stock)[ISSUE PRICE
TIMES 1.24], subject to adjustment as set forth below.
7
<PAGE> 188
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
8
<PAGE> 189
(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 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 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
9
<PAGE> 190
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.
(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
10
<PAGE> 191
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 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.
11
<PAGE> 192
(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 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
12
<PAGE> 193
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 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
13
<PAGE> 194
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.
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:
14
<PAGE> 195
<TABLE>
<CAPTION>
Trading Price Cumulative Amount per share
- ------------- ---------------------------
($ million)
<S> <C> <C> <C>
$54.50 to $55.00 in each case 0.00 in each case
$54.49 to $54.00 multiplied by the 2.00 divided by the total
$53.99 to $53.75 quotient obtained 4.00 number of Class B
$53.74 to $53.50 by dividing the 6.00 Preferred Shares
$53.49 to $53.25 Issue Price by 8.00 issued and
$53.24 to $53.00 $55.00 10.00 outstanding as of
$52.99 to $52.75 12.50 the Contingent
less than $52.75 15.00 Payment
Calculation Date
</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
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 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, 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 $ ___ [THE "INITIAL ISSUE PRICE"], 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 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:
15
<PAGE> 196
(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
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
16
<PAGE> 197
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: _____________________________________
17
<PAGE> 198
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.
1
<PAGE> 199
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
2
<PAGE> 200
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 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
3
<PAGE> 201
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).
"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
4
<PAGE> 202
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 from the Security Issue Date, 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
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 date of issuance 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, notwithstanding the foregoing,
dividends on such Class C Preferred Share shall be payable from the Initial
Issuance Date.
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 ("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
5
<PAGE> 203
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 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.
6
<PAGE> 204
(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 $______ [130% OF THE PRODUCT OF THE
AIRTOUCH ISSUE PRICE AND 1.25] 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
7
<PAGE> 205
with a redemption of Class C Preferred Shares 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 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
8
<PAGE> 206
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
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 __ shares of Common Stock per Class C Preferred Share, as such rate may be
adjusted as provided below (the "Exchange Rate") [CALL PRICE DIVIDED BY THE
PRODUCT OF THE AIRTOUCH PREFERRED STOCK ISSUE PRICE (AS DEFINED IN THE MERGER
AGREEMENT) AND 1.25].
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,
9
<PAGE> 207
(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 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.
10
<PAGE> 208
(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 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
11
<PAGE> 209
Rights, (ii) Exempt Issuances or pursunt 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 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.
12
<PAGE> 210
(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 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 1/100th 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), (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.
13
<PAGE> 211
(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
14
<PAGE> 212
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 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) 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, shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders on a parity basis with the
holders of Common Stock, 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, an amount per Class C Preferred Share of cash equal to the
amount paid per share of Common Stock. The holders of Class C Preferred Shares
and of all other series of Common Stock shall share ratably in such distribution
of assets in proportion to the amount of shares of Common Stock held by such
holders, in the case of Common Stock, or represented by the Class C Preferred
Shares, in the case of Class C Preferred Shares. 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.
(b) 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:
15
<PAGE> 213
(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 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
16
<PAGE> 214
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:______________________
17
<PAGE> 215
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
G-1
<PAGE> 216
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 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,
LEHMAN BROTHERS
G-2
<PAGE> 217
ANNEX H
U S WEST NEWVECTOR GROUP, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
<PAGE> 218
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
<PAGE> 219
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
========== ===========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
2
<PAGE> 220
U S WEST NewVector Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
---------- ---------
<S> <C> <C>
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.
3
<PAGE> 221
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.
4
<PAGE> 222
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 Additional Total
--------------------- Paid-In Accumulated Shareowner'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.
5
<PAGE> 223
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.
6
<PAGE> 224
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.
7
<PAGE> 225
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
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 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.
8
<PAGE> 226
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
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.
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.
9
<PAGE> 227
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
(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.
(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>
10
<PAGE> 228
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
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.
(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>
11
<PAGE> 229
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
(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>
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>
12
<PAGE> 230
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
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 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.
13
<PAGE> 231
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
(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.
14
<PAGE> 232
U S WEST NewVector Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
15
<PAGE> 233
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
permits AirTouch's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed action, suit or proceeding in which such person is made a
party by reason of his being or having been a director, officer, employee or
agent of AirTouch, in terms sufficiently broad to permit such indemnification
under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
Article EIGHTH of AirTouch's Certificate of Incorporation provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by law.
As permitted by Sections 102 and 145 of the DGCL, Article NINTH of
AirTouch's Certificate of Incorporation eliminates a director's personal
liability for monetary damage to AirTouch and its stockholders arising from a
breach or alleged breach of director's fiduciary duty except to the extent not
permitted under the DGCL.
In addition, AirTouch has entered into separate indemnification
agreements with its directors and officers that require AirTouch, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers to the fullest extent not
prohibited by law.
The directors and officers of AirTouch are covered by insurance
policies indemnifying against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by AirTouch.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
2.1 Agreement and Plan of Merger dated as of April 5, 1996 among
CCI, AirTouch and AirTouch Cellular (without exhibits)
(included as Annex A to the Proxy Statement- Prospectus)
(incorporated by reference to Exhibit 4 to AirTouch's Current
Report on Form 8-K, dated April 7, 1996, File No. 1-12342).
4.1 Certificate of Incorporation of AirTouch, as filed with the
Secretary of State of the State of Delaware on September 19,
1994 (incorporated by reference to Exhibit 3.1 to AirTouch's
Current Report on Form 8-K dated December 15, 1994, File No.
1-12342).
4.2 Rights Agreement between AirTouch and The Bank of New York,
Rights Agent, dated as of September 19, 1994 (incorporated by
reference to Exhibit 4 to AirTouch's Current Report on Form
8-K, dated December 15, 1994, File No. 1-12342, filed on
December 19, 1994).
4.3 Amended By-laws of AirTouch, as of February 8, 1996
(incorporated by reference to Exhibit 3.3 to AirTouch's Annual
Report on Form 10-K for the year ended December 31, 1995, File
No. 1-12342, filed on March 27, 1996).
II-1
<PAGE> 234
4.4 Form of Certificate of Designation, Preferences and Rights of
Class B Preferred Stock, Series 1996 (included as Annex C to
the Proxy Statement-Prospectus).
4.5 Form of Certificate of Designation, Preferences and Rights of
Class C Preferred Stock, Series 1996 (included as Annex D to
the Proxy Statement-Prospectus).
5.1 Opinion of Margaret G. Gill (to be filed by amendment).
10.1 Amended and Restated Plan of Merger and Joint Venture
Organization by and among AirTouch, Old CCI, CCI Newco, Inc.
and CCI Newco Sub, Inc. dated as of December 14, 1990
(incorporated by reference to Exhibit 1 to AirTouch's
Statement on Schedule 13D, File No. 1-12342, filed on February
18, 1992).
10.2 Termination Agreement by and among Pacific Telesis Group,
AirTouch, CCI and Cellular Communications of Ohio, Inc. dated
December 11, 1992 (incorporated by reference to Exhibit 5 to
Amendment No. 28 to AirTouch's Statement on Schedule 13D, File
No. 1-12342, filed on December 12, 1992).
12.1 Statement re computation of ratios of earnings to fixed
charges (included at page 30 of the Proxy
Statement-Prospectus).
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Ernst & Young LLP (CCI).
23.4 Consent of KPMG Deutsche Treuhand-Gesellschaft (Mannesmann
Mobilfunk GmbH).
23.5 Consent of Coopers & Lybrand L.L.P. (CMT Partners).
23.6 Consent of Ernst & Young LLP (New Par).
23.7 Consent of Arthur Andersen LLP (U S WEST NewVector Group, Inc.
and subsidiaries).
23.8 Consent of Margaret G. Gill (to be included in Exhibit 5.1).
24.1 Power of Attorney.
99.1 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
(to be included as Annex E to the Proxy Statement-Prospectus)
(to be filed by amendment).
99.2 Opinion of Wasserstein Perella & Co., Inc. (to be included as
Annex F to the Proxy Statement-Prospectus) (to be filed by
amendment).
99.3 CCI Election Form and Letter of Transmittal.
99.4 Form of CCI Proxy Card.
99.5 Rights Agreement among AirTouch, CCI and Continental Stock
Transfer & Trust Company ("Continental"), dated as of July 31,
1991 (incorporated by reference to Exhibit __ to CCI's
Registration Statement on Form 8-B, dated June 18, 1991, File
No. 1-10789).
II-2
<PAGE> 235
99.6 Amendment No. 1 to Rights Agreement among AirTouch, CCI &
Continental, dated as of December 11, 1992.
99.7 Amendment to Rights Agreement among AirTouch, CCI &
Continental, dated April 5, 1996.
99.8 Opinion of Lehman Brothers (included as Annex G to the Proxy
Statement-Prospectus).
99.9 Credit Agreement between AirTouch, Bank of America National
Trust and Savings Association and the Other Financial
Institutions Party Thereto dated July 20, 1995 (incorporated
by reference to Exhibit No. 10 to AirTouch's Quarterly Report
on Form 10-Q for the period ended June 30, 1995, File No.
1-12342).
(B) FINANCIAL STATEMENT SCHEDULES.
None.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or event arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-3
<PAGE> 236
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first-class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 20 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 237
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 2nd of May, 1996.
AIRTOUCH COMMUNICATIONS, INC.
By /s/ MOHAN S. GYANI
--------------------------------------
Mohan S. Gyani,
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons and in the
capacities indicated on the 2nd day of May, 1996.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ SAM GINN* Chairman of the Board and Chief Executive Officer
---------------------------- (principal executive officer)
(Sam Ginn)
/s/ MOHAN S. GYANI Executive Vice President and Chief Financial Officer
---------------------------- (principal financial officer and principal accounting
(Mohan S. Gyani) officer)
/s/ CAROL A. BARTZ* Director
----------------------------
(Carol A. Bartz)
/s/ C. LEE COX* Vice Chairman of the Board
----------------------------
(C. Lee Cox)
/s/ DONALD G. FISHER* Director
----------------------------
(Donald G. Fisher)
/s/ JAMES R. HARVEY* Director
----------------------------
(James R. Harvey)
/s/ PAUL HAZEN* Director
----------------------------
(Paul Hazen)
/s/ ARTHUR ROCK* Director
----------------------------
(Arthur Rock)
/s/ ARUN SARIN* Vice Chairman of the Board
----------------------------
(Arun Sarin)
/s/ CHARLES R. SCHWAB* Director
----------------------------
(Charles R. Schwab)
/s/ GEORGE P. SHULTZ* Director
----------------------------
(George P. Shultz)
*By /s/ MOHAN S. GYANI*
----------------------------
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 238
EXHIBIT INDEX
Exhibit
Number
2.1 Agreement and Plan of Merger dated as of April 5, 1996 among CCI,
AirTouch and AirTouch Cellular (without exhibits) (included as
Annex A to the Proxy Statement-Prospectus) (incorporated by
reference to Exhibit 4 to AirTouch's Current Report on Form 8-K,
dated April 7, 1996, File No. 1-12342).
4.1 Certificate of Incorporation of AirTouch, as filed with the
Secretary of State of the State of Delaware on September 19, 1994
(incorporated by reference to Exhibit 3.1 to AirTouch's Current
Report on Form 8-K dated December 15, 1994, File No. 1-12342).
4.2 Rights Agreement between AirTouch and The Bank of New York,
Rights Agent, dated as of September 19, 1994 (incorporated by
reference to Exhibit 4 to AirTouch's Current Report on Form 8-K,
dated December 15, 1994, File No. 1-12342, filed on December 19,
1994).
4.3 Amended By-laws of AirTouch, as of February 8, 1996 (incorporated
by reference to Exhibit 3.3 to AirTouch's Annual Report on Form
10-K for the year ended December 31, 1995, File No. 1-12342,
filed on March 27, 1996).
4.4 Form of Certificate of Designation, Preferences and Rights of
Class B Preferred Stock, Series 1996 (included as Annex C to the
Proxy Statement-Prospectus).
4.5 Form of Certificate of Designation, Preferences and Rights of
Class C Preferred Stock, Series 1996 (included as Annex D to the
Proxy Statement-Prospectus).
5.1 Opinion of Margaret G. Gill (to be filed by amendment).
10.1 Amended and Restated Plan of Merger and Joint Venture
Organization by and among AirTouch, Old CCI, CCI Newco, Inc. and
CCI Newco Sub, Inc. dated as of December 14, 1990 (incorporated
by reference to Exhibit 1 to AirTouch's Statement on Schedule
13D, File No. 1-12342, filed on February 18, 1992).
10.2 Termination Agreement by and among Pacific Telesis Group,
AirTouch, CCI and Cellular Communications of Ohio, Inc. dated
December 11, 1992 (incorporated by reference to Exhibit 5 to
Amendment No. 28 to AirTouch's Statement on Schedule 13D, File
No. 1-12342, filed on December 12, 1992).
12.1 Statement re computation of ratios of earnings to fixed charges
(included at page 30 of the Proxy Statement-Prospectus).
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Ernst & Young LLP (CCI).
23.4 Consent of KPMG Deutsche Treuhand-Gesellschaft (Mannesmann
Mobilfunk GmbH).
-1-
<PAGE> 239
Exhibit
Number
23.5 Consent of Coopers & Lybrand L.L.P. (CMT Partners).
23.6 Consent of Ernst & Young LLP (New Par).
23.7 Consent of Arthur Andersen LLP (U S WEST NewVector Group, Inc.
and subsidiaries).
23.8 Consent of Margaret G. Gill (to be included in Exhibit 5.1).
24.1 Power of Attorney.
99.1 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
(to be included as Annex E to the Proxy Statement-Prospectus) (to
be filed by amendment).
99.2 Opinion of Wasserstein Perella & Co., Inc. (to be included as
Annex F to the Proxy Statement- Prospectus) (to be filed by
amendment).
99.3 CCI Election Form and Letter of Transmittal.
99.4 Form of CCI Proxy Card.
99.5 Rights Agreement among AirTouch, CCI and Continental Stock
Transfer & Trust Company ("Continental"), dated as of July 31,
1991 (incorporated by reference to Exhibit __ to CCI's
Registration Statement on Form 8-B, dated June 18, 1991, File No.
1-10789).
99.6 Amendment No. 1 to Rights Agreement among AirTouch, CCI &
Continental, dated as of December 11, 1992.
99.7 Amendment to Rights Agreement among AirTouch, CCI & Continental,
dated April 5, 1996.
99.8 Opinion of Lehman Brothers (included as Annex G to the Proxy
Statement-Prospectus).
99.9 Credit Agreement between AirTouch, Bank of America National Trust
and Savings Association and the Other Financial Institutions
Party Thereto dated July 20, 1995 (incorporated by reference to
Exhibit No. 10 to AirTouch's Quarterly Report on Form 10-Q for
the period ended June 30, 1995, File No. 1-12342).
-2-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of AirTouch
Communications, Inc. of our report dated February 23, 1996, which appears on
page 39 of the 1995 Annual Report to Stockholders, which is incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1995. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule which appears on page X-1 of such Annual Report on
Form 10-K. We also consent to the references to us under the heading "Experts"
in such Prospectus.
PRICE WATERHOUSE LLP
San Francisco, California
May 1, 1996
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting part
of this Registration Statement on Form S-4 of AirTouch Communications, Inc. of
our reports dated March 13, 1995, on our audits of the consolidated financial
statements and financial statement schedule of AirTouch Communications, Inc. as
of December 31, 1994, and for the years ended December 31, 1994 and 1993, which
reports are included in AirTouch Communications, Inc.'s Annual Report on Form
10-K. We also consent to the references to us under the heading "Experts" in
such Prospectus.
COOPERS & LYBRAND L.L.P.
San Francisco, California
May 1, 1996
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Prospectus of AirTouch
Communications, Inc. for the registration of Common Stock, 6.00% Class B
Mandatorily Convertible Preferred Stock, Series 1996 and 4.25% Class C
Convertible Preferred Stock Series 1996 and to the incorporation by reference of
our report dated February 16, 1996, relating to the consolidated financial
statements and schedule of Cellular Communications, Inc., included in its Annual
Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
New York, New York
April 26, 1996
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of AirTouch
Communications, Inc. of our report dated February 23, 1996 relating to the
financial statements of Mannesmann Mobilfunk GmbH, appearing in AirTouch
Communications, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1995, and to the reference to our firm under the heading "Experts" in the
Prospectus.
Dusseldorf, Germany, April 29, 1996
KMPG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Scheffler Haas
Wirtschaftsprufer Wirtschaftsprufer
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting part
of this Registration Statement on Form S-4 of AirTouch Communications, Inc. of
our reports dated February 1, 1996, on our audits of the consolidated financial
statements and financial statement schedule of CMT Partners as of December 31,
1995 and 1994, and for the years ended December 31, 1995 and 1994 and for the
four-month period ended December 31, 1993, which reports are included in
AirTouch Communications, Inc.'s Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
San Francisco, California
May 1, 1996
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Prospectus of AirTouch
Communications, Inc. for the registration of Common Stock, 6.00% Class B
Mandatorily Convertible Preferred Stock, Series 1996 and 4.25% Class C
Convertible Preferred Stock, Series 1996 and to the incorporation by reference
therein of our report dated February 16, 1996, with respect to the consolidated
financial statements and schedule of New Par (A Partnership) included in
AirTouch Communications, Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Columbus, Ohio
April 26, 1996
<PAGE> 1
Exhibit 23.7
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 29, 1996
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation
(hereinafter referred to as this "Corporation"), proposes to file shortly with
the Securities and Exchange Commission (the "SEC"), under the provisions of the
Securities Act of 1933, as amended, a Registration Statements on Form S-4 in
connection with the issuance of this Corporation's securities pursuant to the
Agreement and Plan of Merger between this Corporation, AirTouch Cellular and
Cellular Communications, Inc., and
WHEREAS, each of the undersigned is an officer or director, or both, of
this Corporation, as indicated below under his/her name;
NOW THEREFORE, each of the undersigned hereby constitutes and appoints
Margaret G. Gill, Sam Ginn, and Mohan S. Gyani, and each of them, his/her
attorneys for him/her in his stead, in each of his/her offices and capacities as
an officer, director, or both of this Corporation, to sign and to file with the
SEC such Registration Statements on Form S-4, and any and all amendments,
modifications, or supplements thereto, and any exhibits thereto, and grants to
each of said attorneys full power and authority to sign and file any and all
other documents and to perform and do all and every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully, to all
intents and purposes, as he/she might or could do if personally present at the
doing thereof, and hereby ratifies and confirms all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof in connection with the
registration of the aforesaid securities.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his/her
hand this 4th day of April, 1996.
DIRECTORS
/s/ Carol A. Bartz /s/ C.Lee Cox
- ------------------------ ------------------------------------------------
Carol A. Bartz C.Lee Cox
Director Vice Chairman of the Board
/s/ Donald G. Fisher /s/ Sam Ginn
- ------------------------ ------------------------------------------------
Donald G. Fisher Sam Ginn
Director Chairman of the Board, Chief Executive Officer
/s/ James R. Harvey /s/ Paul Hazen
- ------------------------ ------------------------------------------------
James R. Harvey Paul Hazen
Director Director
/s/ Arthur Rock /s/ Arun Sarin
- ------------------------ ------------------------------------------------
Arthur Rock Arun Sarin
Director Vice Chairman of the Board
/s/ George P. Shultz /s/ Charles R. Schwab
- ------------------------ ------------------------------------------------
George P. Shultz Charles R. Schwab
Director Director
<PAGE> 1
Exhibit 99.3
[Front Side of Form]
CELLULAR COMMUNICATIONS, INC.
ELECTION FORM AND LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES REPRESENTING SHARES OF SERIES A COMMON STOCK,
PAR VALUE $.01 PER SHARE ("CCI SERIES A COMMON STOCK"), SERIES C COMMON STOCK,
PAR VALUE $.01 PER SHARE ("CCI SERIES C COMMON STOCK"), REDEEMABLE PARTICIPATING
CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE ("CCI REDEEMABLE PREFERRED
STOCK"), AND CLASS A PREFERENCE STOCK, PAR VALUE $1.00 PER SHARE ("CCI CLASS A
PREFERENCE STOCK") OF CELLULAR COMMUNICATIONS, INC. ("CCI") (COLLECTIVELY, "CCI
STOCK") WHEN SUBMITTED PURSUANT TO AN ELECTION IN CONNECTION WITH THE MERGER OF
CCI WITH AND INTO AIRTOUCH CELLULAR ("AIRTOUCH CELLULAR"), A WHOLLY OWNED
SUBSIDIARY OF AIRTOUCH COMMUNICATIONS, INC. ("AIRTOUCH") OR, AT AIRTOUCH'S
ELECTION, ANOTHER WHOLLY OWNED SUBSIDIARY OF AIRTOUCH (IN EITHER CASE, THE
"SURVIVING CORPORATION").
THE INSTRUCTIONS ACCOMPANYING THIS ELECTION FORM AND LETTER OF
TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS ELECTION FORM AND LETTER OF
TRANSMITTAL IS COMPLETED.
EACH HOLDER OF CCI STOCK IS URGED TO DELIVER A PROPERLY COMPLETED
ELECTION FORM [AND LETTER OF TRANSMITTAL NO LATER THAN 5:00 P.M. NEW YORK TIME
ON ________________ 1996 TO ENSURE RECEIPT PRIOR TO THE EFFECTIVE TIME. 5:00
P.M., NEW YORK TIME ON THE LAST BUSINESS DAY PRIOR TO THE EFFECTIVE TIME FOR THE
MERGER, IS THE ELECTION DEADLINE (AS SUCH TERM IS DEFINED BELOW) AT WHICH DATE A
COMPLETED ELECTION FORM AND LETTER OF TRANSMITTAL, TOGETHER WITH YOUR STOCK
CERTIFICATES, MUST BE RECEIVED BY THE EXCHANGE AGENT IN ORDER FOR ANY ELECTION
CONTAINED HEREIN TO BE CONSIDERED. AS SOON AS THE DATE ON WHICH THE EFFECTIVE
TIME IS ANTICIPATED TO OCCUR IS DETERMINED, AIRTOUCH AND CCI WILL PUBLICLY
ANNOUNCE SUCH DATE, ALTHOUGH NO ASSURANCE CAN BE GIVEN THAT THE EFFECTIVE TIME
WILL NOT BE DELAYED.
Nominee record holders, which include a nominee, trustee or any other
person that holds shares of CCI Stock in any capacity whatsoever on behalf of
another person or entity ("Nominees"), are directed to Instruction 13 and, if
submitting more than one election, must complete Box A below. Each record
holder, other than a Nominee record holder, should indicate such holder's
election in the boxes immediately under "ELECTION" below.
AirTouch will regard any record holder of CCI Stock who has delivered a
written demand for appraisal and who subsequently delivers an Election Form and
Letter of Transmittal to the Exchange Agent as having withdrawn such demand for
appraisal.
The tax consequences to a holder of CCI Stock will vary depending upon,
among other things, whether a unit election or cash election is made. For
information as to the federal income tax consequences of receiving shares of
AirTouch's 6.00% Mandatorily Convertible Class B Preferred Stock, Series 1996,
Par Value $0.01 Per Share ("AirTouch Class B Preferred Stock") and AirTouch's
4.25% Convertible Class C Preferred Stock, Series 1996, Par Value $0.01 Per
Share ("AirTouch Class C Preferred Stock") (collectively, "AirTouch Preferred
Stock, Series 1996)" ) or cash in exchange for your shares of CCI Stock, see
"THE MERGER--Certain Federal Income Tax Consequences" in the Proxy Statement-
Prospectus dated _________,
-1-
<PAGE> 2
1996 (the "Proxy Statement-Prospectus") delivered prior hereto. You are urged,
in addition, to consult with your tax advisor.
IF YOUR STOCK CERTIFICATE(S) HAS BEEN EITHER LOST, STOLEN OR DESTROYED AND YOU
REQUIRE ASSISTANCE IN REPLACING IT (THEM), CALL ___________ TOLL-FREE AT
______________ IMMEDIATELY TO RECEIVE INSTRUCTIONS REGARDING REPLACEMENT. SEE
INSTRUCTION 12 ON THE REVERSE SIDE HEREOF. YOU CANNOT SUBMIT AN EFFECTIVE
ELECTION FORM AND LETTER OF TRANSMITTAL WITHOUT ATTACHING YOUR STOCK
CERTIFICATES TO THIS ELECTION FORM AND LETTER OF TRANSMITTAL; THEREFORE, IF YOU
WISH TO MAKE AN EFFECTIVE ELECTION, IT IS CRITICAL THAT YOU ACT IMMEDIATELY TO
OBTAIN REPLACEMENT STOCK CERTIFICATES.
TERMS NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE
PROXY STATEMENT-PROSPECTUS.
To ____________________:
In connection with the merger (the "Merger") of Cellular
Communications, Inc. ("CCI") with and into the Surviving Corporation and
pursuant to an Agreement and Plan of Merger, dated as of April 5, 1996, by and
among AirTouch, AirTouch Cellular and CCI (the "1996 Merger Agreement"), the
undersigned hereby makes the election or elections set forth herein and
surrenders to you for cancellation, as exchange agent (the "Exchange Agent"),
certificates representing all of the undersigned's shares of CCI Stock (the "CCI
Shares") listed below in exchange for the right to receive, for each CCI Common
Equivalent Share (as defined below) represented thereby (i) $55.00 in cash
without interest, subject to adjustment and proration as described in the Proxy
Statement-Prospectus (the "Per Share Cash Consideration"), (ii) a unit of
AirTouch Preferred Stock, Series 1996 (a "Unit") consisting of (A) a number of
shares of AirTouch Class B Preferred Stock equal to the Class B Per-Unit amount
and (B) a number of shares of AirTouch Class C Preferred Stock equal to the
Class C Per-Unit Amount, subject to adjustment and proration as described in the
Proxy Statement-Prospectus (collectively, the "Per Share Unit Consideration"),
or (iii) a combination of a fractional Unit and cash. In addition, it is
understood that the Exchange Agent will pay cash in lieu of any fractional
shares of the AirTouch Preferred, Series 1996 in connection with the Merger. As
used herein, the term "CCI Common Equivalent Share" means either (i) an
individual issued and outstanding share of CCI Series A Common Stock and 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 and, CCI Class A Preference Stock are convertible. As
used herein, the term "Merger Consideration" refers to the Per Share Unit
Consideration, the Per Share Cash Consideration, a combination of a fractional
Unit and cash, and any cash payable in lieu of fractional shares (less the $.01
in value per CCI Common Equivalent Share attributable to the CCI Rights
Redemption).
The undersigned understands that the election referred to above is
subject to certain terms, conditions and limitations that have been set forth in
the 1996 Merger Agreement, instructions on the reverse side hereof and the Proxy
Statement-Prospectus. The 1996 Merger Agreement is included as Annex A to the
Proxy Statement-Prospectus. Extra copies of this Election Form and Letter of
Transmittal and the Proxy Statement-Prospectus may be requested from
____________________, as Exchange Agent, at the addresses or phone number shown
below. The filing of this Election Form and Letter of Transmittal is
acknowledgment of the receipt of the Proxy Statement-Prospectus.
The undersigned hereby represents and warrants that the undersigned is
as of the date hereof, and will be as of the Effective Time of the Merger, the
registered holder of the CCI Shares, with good title to the above-described CCI
Shares and full power and authority to sell, assign and transfer the CCI Shares
represented by the enclosed certificates, free and clear of all liens, claims
and encumbrances, and not subject to any adverse claims. The undersigned will,
upon request, execute any additional documents necessary or desirable to
complete the surrender and exchange of such CCI Shares. The undersigned hereby
irrevocably appoints the Exchange Agent, as agent of the undersigned, to effect
the exchange pursuant to the 1996 Merger
-2-
<PAGE> 3
Agreement and the Instructions on the reverse side hereof. All authority
conferred or agreed to be conferred in this Election Form and Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
ELECTION
Check the appropriate box below to make an election for each CCI Share
to be converted into the right to receive, for each CCI Common Equivalent Share
represented thereby, (i) $55.00 in cash, without interest, subject to adjustment
and proration as described in the 1996 Merger Agreement (a "Cash Election"), OR
(ii) a Unit, subject to adjustment and proration in accordance with the 1996
Merger Agreement (a "Unit Election"), OR (iii) to indicate no election. If you
make no election, your CCI Shares will be converted into either the Per Share
Unit Consideration, the Per Share Cash Consideration or a combination of a
fractional Unit and cash pursuant to the allocation procedures described in the
Proxy Statement-Prospectus.
TO BE COMPLETED BY ALL
HOLDERS EXCEPT NOMINEES / / UNIT ELECTION
HOLDING SHARES ON
BEHALF OF MORE THAN ONE
PERSON OR ENTITY. SUCH CHECK ONLY ONE BOX / / CASH ELECTION
NOMINEES MUST USE BOX A
BELOW TO MAKE VALID
ELECTIONS. / / NO ELECTION
_________________________, ACTING AS EXCHANGE AGENT, RESERVES THE RIGHT
TO DEEM THAT YOU HAVE CHECKED THE "NO ELECTION" BOX IF:
a. NO CHOICE IS INDICATED ABOVE;
b. YOU FAIL TO FOLLOW THE INSTRUCTIONS ON THIS ELECTION FORM AND
LETTER OF TRANSMITTAL (INCLUDING SUBMISSION OF YOUR CCI STOCK
CERTIFICATES) OR OTHERWISE FAIL TO PROPERLY MAKE AN ELECTION;
OR
c. A COMPLETED ELECTION FORM AND LETTER OF TRANSMITTAL (INCLUDING
SUBMISSION OF YOUR CCI STOCK CERTIFICATES) IS NOT ACTUALLY
RECEIVED BY THE ELECTION DEADLINE.
Both the number of CCI Common Equivalent Shares to be converted into
the right to receive cash and the number 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 stockholder 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 herein and in more detail in the Proxy
Statement-Prospectus. See "THE MERGER--Description of Election Procedures" and
"--Conversion of Shares of CCI Stock" in the Proxy Statement-Prospectus and
Instruction 3 hereto.
If the elections result in an oversubscription of either the Per Share
Unit Consideration or the Per Share Cash Consideration, the procedures for
allocating AirTouch Preferred Stock, Series 1996 and cash set forth in the 1996
Merger Agreement and described in the Proxy Statement-Prospectus will be
followed by the Exchange Agent. See "THE MERGER--Description of Election
Procedures" and "--Conversion of Shares of CCI Stock" in the Proxy
Statement-Prospectus and Instruction 3 hereto.
Prior to the Election Deadline (specified in Instruction 1), this
Election Form and Letter of Transmittal should be (i) completed and signed in
the space provided below and on the Substitute Form W-9 and
-3-
<PAGE> 4
(ii) mailed or delivered with your certificates representing CCI Shares to the
Exchange Agent at either of the following addresses:
<TABLE>
<CAPTION>
BY MAIL: FOR INFORMATION CALL: BY HAND/OVERNIGHT COURIER:
<S> <C> <C>
[Bank] ( ) [Bank]
------------------------- ---- ---------------- ---------------
-------------- ----------------------
-------------- ------------------------
- ----------------------------- --------------------------------
</TABLE>
The method of delivery of the certificates representing the CCI Shares
and all other required documents is at the election and risk of the owner;
however, if the stock certificates are sent by mail, it is recommended that they
be sent by certified mail, appropriately insured, with return receipt requested.
<TABLE>
<CAPTION>
===============================================================================================
DESCRIPTION OF SHARES OF CCI STOCK ENCLOSED
- -----------------------------------------------------------------------------------------------
Name and Address of Registered Holder(s) Certificate(s) Enclosed
(Please fill in, if blank, exactly as Name (Please list below--
appears on Certificate(s)) attach additional list if necessary)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class of Certificate Number of
CCI Stock Number(s) Shares
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Total Number of Shares:
===============================================================================================
</TABLE>
BOX A: TO BE COMPLETED ONLY BY A NOMINEE, TRUSTEE OR ANY OTHER PERSON THAT HOLDS
SHARES OF CCI Stock IN ANY CAPACITY WHATSOEVER ON BEHALF OF MORE THAN ONE PERSON
OR ENTITY AND THAT WISHES TO SUBMIT MULTIPLE ELECTIONS.
If this Box A is completed, the undersigned, acting for itself and as nominee,
trustee or in another representative capacity on behalf of another person or
entity, hereby submits the following elections and attaches share certificates
for all shares held of record by the undersigned (attach additional sheets if
necessary).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Check One:
Total Number of Shares of CCI Common Stock,
Number of CCI Redeemable Preferred Stock and CCI Class A Cash Unit No
Election(s) Preference Stock Subject to Election Election Election Election
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1
- --------------------------------------------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated below under "SPECIAL ISSUANCE AND PAYMENT
INSTRUCTIONS," in exchange for the enclosed certificates, the undersigned
requests delivery of the Merger Consideration.
-4-
<PAGE> 5
Similarly, unless otherwise indicated under "SPECIAL DELIVERY INSTRUCTIONS," the
undersigned requests that the Merger Consideration be mailed to the undersigned
at the address shown above. In the event that both the "SPECIAL DELIVERY
INSTRUCTIONS" and the "SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS" are completed,
please issue the Merger Consideration, as the case may be, in the name of, and
mail the Merger Consideration to, the person or entity so indicated at the
address so indicated. Appropriate signature guarantees have been included with
respect to CCI Shares for which Special Delivery Instructions and/or Special
Issuance and Payment Instructions have been given. The proceeds of the CCI
Rights Redemption that it is applicable to such CCI Shares will be paid in the
same manner as the Merger Consideration.
In the event that the 1996 Merger Agreement is terminated pursuant to
its terms, the Exchange Agent will promptly return stock certificates
representing CCI Shares previously submitted with Election Forms and Letters of
Transmittal. In such event, CCI shares held through The Depository Trust Company
are expected to be available for sale or transfer promptly following the
termination of the 1996 Merger Agreement; however, certificates representing CCI
Shares held directly by holders of CCI Stock will be returned by registered mail
(with attendant delay). The Exchange Agent and AirTouch have agreed to use their
commercially reasonable efforts to cooperate with CCI and holders of CCI Stock
to facilitate return of certificates representing CCI Shares in the event of
such termination, but return other than by registered mail will only be made at
the expense, written direction and risk of holders of CCI Stock, accompanied by
a pre-paid, pre-addressed return courier envelope sent to the Exchange Agent.
SPECIAL ISSUANCE AND PAYMENT
INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5 and 10)
To be completed ONLY if the certificate representing the Per Share Unit
Consideration or the check representing the Per Share Cash Consideration or cash
in lieu of fractional shares, as the case may be, is to be issued in the name of
and mailed to someone other than the undersigned. NOTE: THE PERSON NAMED IN
THESE SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS MUST BE THE PERSON WHO COMPLETES
THE SUBSTITUTE FORM W-9.
Issue the certificate representing the Per Share Unit Consideration or the check
representing the Per Share Cash Consideration or cash in lieu of fractional
shares to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
-5-
<PAGE> 6
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4 AND 10)
To be completed ONLY if the certificate representing the Per Share Unit
Consideration or the check representing the Per Share Cash Consideration or cash
in lieu of fractional shares, as the case may be, issued in the name of the
undersigned is to be sent to someone other than the undersigned or to the
undersigned at an address other than that shown above.
Mail the certificate representing the Per Share Unit Consideration or the check
representing the Per Share Cash Consideration or cash in lieu of fractional
shares to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
The undersigned represents and warrants that the undersigned has full
power and authority to transfer the CCI Shares surrendered hereby and that the
transferee will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim when the shares are accepted for exchange by the Exchange Agent. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or AirTouch to be necessary and desirable to
complete the transfer of the CCI Shares surrendered hereby.
Dated: , 19
------------------------------------------------------------------- --
PLEASE SIGN HERE
- - -------------------------------------------------------------------------
- - -------------------------------------------------------------------------
Signature(s) of registered holder(s) must be EXACTLY as name(s) appear(s) on the
box headed "Description of Shares of CCI Stock Enclosed" or on the assignment
authorizing transfer.
If signed by an attorney, trustee, executor, administrator, guardian, officer or
other person acting in a fiduciary or representative capacity, the capacity of
the person signing should be indicated. (See Instruction 8.)
Dated: , 1996
------------------------------
Name(s):
- --------------------------------------------------------------------------------
(Please Print)
Capacity:
-------------------------------------
Area Code and
Telephone Number:
-----------------------------
THE EXCHANGE AGENT HAS BEEN INSTRUCTED NOT TO MAKE ANY EXCHANGE OF YOUR SHARES
UNTIL THIS ELECTION FORM AND LETTER OF TRANSMITTAL HAS BEEN EXECUTED AND
DELIVERED TO THE EXCHANGE AGENT TOGETHER WITH YOUR STOCK CERTIFICATES.
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
<TABLE>
<CAPTION>
PAYER'S NAME: THE BANK OF NEW YORK
<S> <C> <C>
SUBSTITUTE FORM W-9 PART 1--PLEASE PROVIDE YOUR TAX-
(SEE INSTRUCTION 11) PAYER IDENTIFICATION NUMBER IN THE ---------------------------------
BOX AT RIGHT AND CERTIFY BY Social Security Number(s)
PLEASE FILL IN YOUR NAME AND SIGNING AND DATING BELOW. See the OR
ADDRESS BELOW enclosed "Guidelines for
Certification of Taxpayer Status" ---------------------------------
for instructions. Employer Identification Number
Name (if joint names, list first CERTIFICATION--UNDER PENALTIES OF PART 2--
and circle the name of the person PERJURY, I CERTIFY THAT:
or entity whose name is entered Exempt Payees / /
in Part 1) (1) The number shown on this
form is my correct Taxpayer
- --------------------------------- Identification Number (or I am PART 3--
Address (number and street) waiting for a number to be issued
to me) and Awaiting TIN / /
- ---------------------------------
City, State and Zip Code (2) I am not subject to backup
withholding because (a) I am
exempt from backup withholding or
(b) I have not been notified by
the Internal Revenue Service
("IRS") that I am subject to back
up withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has
notified me that I am no longer
subject to backup withholding.
DEPARTMENT OF THE TREASURY CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
INTERNAL REVENUE SERVICE notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you are subject to backup withholding you received
another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2). If you are exempt from backup
withholding, check the box in Part 2 above.
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) Signature Date , 1996
--------------------------------- -------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS ELECTION FORM AND LETTER OF
TRANSMITTAL MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU
PURSUANT TO THE MERGER OF CCI WITH AND INTO AIRTOUCH CELLULAR. PLEASE REVIEW THE
ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER STATUS" FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
-7-
<PAGE> 8
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
number.
, 1996
- ------------------------------------------ ---------------------------
Signature Date
SIGNATURE GUARANTEE
(REQUIRED ONLY IN CASES SPECIFIED IN INSTRUCTION 5)
The undersigned hereby guarantees the signature(s) which appear(s) on this
Election Form and Letter of Transmittal:
- --------------------------------------------------------------------------------
(Name of Firm Providing Signature Guarantee)
(Please Print)
- --------------------------------------------------------------------------------
(Fix medallion stamp above)
Dated: , 1996
---------------------
-8-
<PAGE> 9
[Reverse Side of Form]
INSTRUCTIONS
Holders of CCI Stock will not receive any certificates representing
shares of the Per Share Unit Consideration or the check representing the Per
Share Cash Consideration or cash in lieu of fractional shares (if any) in
exchange for their certificates representing CCI Shares or any dividends payable
on such shares of AirTouch Preferred Stock, Series 1996 comprising the Per Share
Unit Consideration, until the certificates representing CCI Shares owned by such
holders are received by the Exchange Agent at one of the addresses set forth on
the front hereof, together with such documents as the Exchange Agent may require
and until the same are processed for exchange by the Exchange Agent. No interest
will accrue on the Per Share Cash Consideration, the cash in lieu of fractional
shares or such dividends. If your stock certificate(s) is lost, stolen or
destroyed, please refer to Instruction 12 below.
UNLESS THE SPECIAL CIRCUMSTANCES DESCRIBED BELOW IN INSTRUCTION 13
APPLY, A HOLDER OF CCI STOCK MUST CHECK ONE BOX ON THE REVERSE HEREOF
IMMEDIATELY UNDER THE CAPTION "ELECTION" TO MAKE AN EFFECTIVE ELECTION.
You should understand that your election is subject to certain terms,
conditions and limitations that have been set out in the 1996 Merger Agreement
and the Proxy Statement-Prospectus. The 1996 Merger Agreement is included as
Annex A to the Proxy Statement-Prospectus. Extra copies of the Proxy
Statement-Prospectus may be requested from the Exchange Agent, at the addresses
or phone number shown on the front of these Instructions. The filing of this
Election Form and Letter of Transmittal is acknowledgment of the receipt of the
Proxy Statement-Prospectus.
i. ELECTION DEADLINE. For any election contained herein to be
considered, this Election Form, properly completed, and the related certificates
for CCI Shares, must be received by the Exchange Agent at one of the addresses
on the front of this Election Form and Letter of Transmittal no later than the
Election Deadline which is 5:00 p.m., New York time, on the last business day
before the Effective Time of the Merger. As soon as the date on which the
Effective Time is anticipated to occur is determined, AirTouch and CCI will
publicly announce such date, although no assurance can be given that the
Effective Time will not be delayed. All elections may be revoked until 5:00 P.M.
New York time on the last business day prior to the Effective Time. The Exchange
Agent will determine whether any Election Form and Letter of Transmittal is
received on a timely basis and whether an Election Form and Letter of
Transmittal has been properly completed.
ii. REVOCATION OR CHANGE OF ELECTION FORM. Any Election Form and Letter
of Transmittal may be revoked or changed by written notice from the person
submitting such Election Form and Letter of Transmittal to the Exchange Agent,
but to be effective such notice must be received by the Exchange Agent at or
prior to the Election Deadline. The Exchange Agent will have reasonable
discretion to determine whether any revocation or change is received on a timely
basis and whether any such revocation or change has been properly made.
iii. ELECTION PROCEDURES/ALLOCATION. As set forth in the Proxy
Statement-Prospectus, both the number of CCI Common Equivalent Shares to be
converted into the right to receive cash and the number 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 stockholder 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 in the Proxy Statement-Prospectus. If the
elections result in an oversubscription of either the Per Share Unit
Consideration or the Per Share Cash Consideration, the procedures for allocating
AirTouch Preferred Stock, Series 1996 and cash set forth in the 1996 Merger
Agreement and described in the Proxy Statement-Prospectus will be followed by
the Exchange Agent. Thus, an election made by you may not be honored in certain
circumstances. See "THE MERGER--Election Procedures" and "--Conversion of Shares
of CCI Stock" in the Proxy Statement-Prospectus.
-9-
<PAGE> 10
iv. NO FRACTIONAL INTERESTS. Each holder of CCI Shares 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, shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of
share of AirTouch Preferred Stock, Series 1996 multiplied by the Preferred Stock
Issue Price (in the case of the AirTouch Class B Preferred Stock) or $50.00 (in
the case of 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 AirTouch Preferred Stock, Series 1996.
v. GUARANTEE OF SIGNATURES. Signatures on this Election Form and Letter
of Transmittal must be guaranteed by an eligible guarantor institution pursuant
to Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934 (an
"Eligible Institution") unless (i) the Election Form and Letter of Transmittal
is signed by the registered holder(s) of the CCI Shares tendered therewith and
such holder(s) has (have) not completed the "Special Issuance and Payment
Instructions" on the reverse side hereof or (ii) the CCI Shares described above
are delivered for the account of an Eligible Institution. IN ALL OTHER CASES ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. Public notaries cannot
execute acceptable guarantees of signatures.
vi. DELIVERY OF ELECTION FORM AND CERTIFICATES. This Election Form and
Letter of Transmittal, properly completed and duly executed, together with the
certificate(s) representing the CCI Shares, should be delivered to the Exchange
Agent at one of the addresses set forth on the reverse side hereof. The method
of delivery of the certificates representing the CCI Shares and all other
required documents is at the election and risk of the owner of such CCI Shares;
however, if the stock certificates are sent by mail, it is recommended that they
be sent by certified mail, appropriately insured, with return receipt requested.
vii. INADEQUATE SPACE. If the space provided herein is inadequate, the
class of CCI Shares, the stock certificate numbers and the numbers of CCI Shares
represented thereby should be listed on additional sheets attached hereto.
viii. SIGNATURES ON ELECTION FORM, STOCK POWERS AND ENDORSEMENTS.
(A) All signatures must correspond exactly with the name written on the
face of the stock certificate(s) without alteration, variation or any change
whatsoever.
(B) If the stock certificate(s) surrendered hereby is owned of record
by two or more joint owners, all such owners must sign this Election Form and
Letter of Transmittal.
(C) If any surrendered CCI Shares are registered in different names on
several stock certificates, it will be necessary to complete, sign and submit as
many separate Election Forms and Letters of Transmittal as there are different
registrations of stock certificates.
(D) If this Election Form is signed by a person(s) other than the
registered holder(s) of the certificates listed (other than as set forth in
paragraph (e) below), the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name of the
registered holder(s) appears on the certificate.
(E) If the Election Form and Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity and
such person is not the registered stockholder, it must indicate the capacity
when signing and must submit proper evidence of his or her authority to act.
ix. STOCK TRANSFER TAXES. In the event that any transfer or other taxes
become payable by reason of the issuance of the Merger Consideration in any name
other than that of the record holder, such transferee or assignee must pay such
tax to the Exchange Agent or must establish to the satisfaction of the Exchange
Agent that such tax has been paid.
-10-
<PAGE> 11
x. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Indicate the name and/or
address of the person(s) to whom the Per Share Unit Consideration or the check
representing the Per Share Cash Consideration or cash in lieu of fractional
shares (if any) is to be issued and sent, if different from the name and/or
address of the person(s) signing this Election Form and Letter of Transmittal.
xi. WITHHOLDING. Each surrendering stockholder is required to provide
the Exchange Agent with such holder's correct Taxpayer Identification Number
("TIN") on the Substitute Form W-9 and to certify whether the stockholder is
subject to backup withholding. The TIN that must be provided is that of the
registered holder of the certificate(s) or of the last transferee appearing in
the transfers attached to or endorsed on the certificate(s) or, if the check is
made payable to another person as provided in the box on the reverse side hereof
entitled "Special Issuance and Payment Instructions," then the TIN of such
person(s). Failure to provide the information on the form may subject the
surrendering stockholder to 31% federal income tax withholding on payments made
to such surrendering stockholder with respect to the CCI Shares and on future
dividends paid by AirTouch. A holder must cross out item (2) in the
Certification box of Substitute Form W-9 if such holder has been notified by the
Internal Revenue Service that such holder is currently subject to backup
withholding. The box in Part 3 of the form should be checked if the surrendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 3 is checked and the Exchange
Agent is not provided with a TIN within 60 days thereafter, AirTouch will
withhold 31% of all such payments and dividends until a TIN is provided to the
Exchange Agent. Foreign investors should consult their tax advisors regarding
the need to complete IRS Form W-8 and any other forms that may be required.
xii. LOST, STOLEN OR DESTROYED CERTIFICATES. You cannot submit an
effective Election Form and Letter of Transmittal without attaching your stock
certificates to this Election Form and Letter of Transmittal. If your stock
certificate(s) has (have) been either lost, stolen or destroyed, a completed
affidavit of loss must be submitted to the Exchange Agent. You are urged to call
______________ toll-free at _______________ immediately to receive instructions
as to the steps you must take in order to effect an exchange of your shares of
CCI Stock.
xiii. HOLDERS WHO ARE NOMINEES, TRUSTEES OR OTHER REPRESENTATIVES. Each
holder of record is entitled to make an election and submit an Election Form and
Letter of Transmittal covering all shares of CCI Stock actually held of record
by such holder. Nominee record holders, which include nominees, trustees or any
other person that holds shares of CCI Stock in any capacity whatsoever on behalf
of more than one person or entity, are entitled to make an election for such
nominee record holders as well as an election on behalf of each beneficial owner
of shares of CCI Stock held through such nominee record holders, but such
elections must be made on one Election Form and Letter of Transmittal.
Beneficial owners who are not record holders are not entitled to submit Election
Forms and Letters of Transmittal. Persons submitting an Election Form and Letter
of Transmittal on behalf of a registered stockholder as trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or acting in
another fiduciary or representative capacity should refer to Instruction 8
above.
xiv. MISCELLANEOUS. Neither AirTouch nor the Exchange Agent is under
any duty to give notification of defects in any Election Form and Letter of
Transmittal. AirTouch and the Exchange Agent shall not incur any liability for
failure to give such notification, and each of AirTouch and the Exchange Agent
has the absolute right to reject any and all Election Forms and Letters of
Transmittal not in proper form or to waive any irregularities in any Election
Form and Letter of Transmittal.
xv. INFORMATION AND ADDITIONAL COPIES. Information and additional
copies of this Election Form and Letter of Transmittal may be obtained by
telephoning toll-free ___________________.
-11-
<PAGE> 12
IMPORTANT TAX INFORMATION
Under the Federal income tax law, the Exchange Agent is required to
file a report with the Internal Revenue Service ("IRS") disclosing any payments
of cash being made to each holder of certificates formerly representing CCI
Shares pursuant to the Merger Agreement and to impose 31% backup withholding if
required. If the correct certifications on Substitute Form W-9 are not provided,
a $50 penalty may be imposed by the IRS and payments made for CCI Shares or for
surrender of fractional certificate(s) may be subject to backup withholding of
31%. Withholding is also required if the IRS notifies the recipient that it is
subject to backup withholding as a result of a failure to report interest and
dividends.
In order to avoid backup withholding of Federal income tax resulting
from a failure to provide a correct certification, a United States (U.S.)
citizen or resident or other U.S. entity must, unless an exemption applies,
provide the Exchange Agent with his correct Taxpayer Identification Number
("TIN") on Substitute Form W-9 as set forth on this Election Form and Letter of
Transmittal. Such person must certify under penalties of perjury that such
number is correct and that such holder is not otherwise subject to backup
withholding. The TIN that must be provided is that of the registered holder of
the certificate(s) or of the last transferee appearing on the transfers attached
to or endorsed on the certificate(s) (or, if a check is made payable to another
person as provided in the box entitled "SPECIAL ISSUANCE AND PAYMENT
INSTRUCTIONS," then the TIN of such person). Foreign investors should consult
their tax advisors regarding the need to complete IRS Form W-8 and any other
forms that may be required.
Backup withholding is not an additional Federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
the amount of tax withheld. If backup withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
Please read the enclosed Guidelines for Certification of Taxpayer
Status for additional important information on how to complete the Substitute
Form W-9.
-12-
<PAGE> 1
Exhibit 99.4
CELLULAR COMMUNICATIONS, INC. PROXY
110 East 59th Street Solicited on behalf of the BOARD OF DIRECTORS
New York, New York 10022 for the Special Meeting on July 30, 1996
The undersigned hereby appoints George S. Blumenthal, William B. Ginsberg and
Richard J. Lubasch, and each of them, with full power of substitution, proxies
to represent the undersigned at the Special Meeting of Stockholders of Cellular
Communications, Inc. to be held on Tuesday, July 30, 1996, at 10:00 a.m. New
York time, and at any adjournment or adjournments thereof, and thereat to vote
all of the shares of stock which the undersigned would be entitled to vote, with
all the powers the undersigned would possess if personally present.
1. Approval and adoption of the Agreement and Plan of Merger,
dated as of April 5, 1996 among Cellular Communications, Inc.,
AirTouch Communications, Inc., and AirTouch Cellular and the
transactions contemplated thereby, including the Merger.
For Against Abstain
/ / / / / /
2. Approval of the redemption of the CCI Rights.
For Against Abstain
/ / / / / /
3. In their discretion, to act upon such other business as may
properly come before the meeting or any adjournment or
adjournments thereof.
Unless otherwise indicated this proxy will be voted
"FOR" the proposals referred to herein.
-----------------------------------------------------
-----------------------------------------------------
Dated ____________, 1996
In case of joint owners, each joint owner should
sign. When signing in a fiduciary or representative
capacity, please give full title as such. Proxies
executed by a corporation should be signed in full
corporate name by a duly authorized officer.
PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS AND RETURN IN THE ENCLOSED
ENVELOPE.
<PAGE> 1
Exhibit 99.6
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1, dated as of December 11, 1992, to that certain
Rights Agreement, dated as of July 31, 1991 (the "Rights Agreement"), between
CELLULAR COMMUNICATIONS, INC., a Delaware corporation (the "Company"), PACTEL
CORPORATION, a California corporation ("PacTel"), and CONTINENTAL STOCK TRANSFER
TRUST COMPANY, a New York corporation (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, the Company, PacTel and the Rights Agent entered into the
Rights Agreement as of July 31, 1991;
WHEREAS, the Company and PacTel, inter alia, have entered into a
Termination Agreement as of December 11, 1992 (the "Termination Agreement");
WHEREAS, pursuant to the Termination Agreement, PacTel has the right to
exchange its shares of the Company's Class A Preferred Stock, $.01 par value per
share (the "Class A Preferred Stock"), for an equal number of shares of Class A
Preference Stock, $1 par value per share (the "Class A Preference Stock");
WHEREAS, the Company and PacTel desire to amend the Rights Agreement in
such a manner as to provide PacTel with the same rights thereunder as a holder
of Class A Preference Stock as PacTel currently has thereunder as a holder of
Class A Preferred Stock; and
WHEREAS, the Company has requested that the Rights Agreement be amended
as set forth herein, and the Rights Agent is willing to amend the Rights
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the Rights Agreement is hereby amended as follows:
Section 1. Amendment of Definition of "Acquiring Person". The
definition of "Acquiring Person" is hereby amended to read in its entirety as
follows:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall,
after the date of the Merger, be the Beneficial Owner of 15% (such
percentage to be referred to herein as the "Acquiring Person
Threshold") or more of the shares of Capital Stock then outstanding
which were acquired other than pursuant to a Qualifying Offer, but
shall not include the Company or any Subsidiary of the Company;
provided, however, that PacTel Corporation or its Affiliates and
Associates or any successor thereto (collectively, "PacTel") shall not
be considered an "Acquiring Person" as a result of PacTel having become
the beneficial Owner of Capital Stock acquired pursuant to, and in
compliance with, the Merger Agreement or the Termination Agreement and
further, provided that "Acquiring Person" shall not include any Person
who becomes an Acquiring Person solely as a result of a reduction in
the number of shares of Capital Stock outstanding due to the redemption
or repurchase of shares of Capital Stock by the Company, unless and
until such Person shall purchase or otherwise become the Beneficial
Owner of additional shares of Capital Stock (which were acquired other
than pursuant to a Qualifying Offer) constituting 1% or more the then
outstanding shares of Capital Stock. Notwithstanding the foregoing, for
purposes hereof, if PacTel shall acquire any Capital Stock otherwise
than in accordance with the Merger Agreement or the Termination
Agreement, then (i) PacTel shall be deemed to beneficially own all such
securities as well as any securities previously or
-1-
<PAGE> 2
thereafter acquired and then owned by PacTel; and (ii) all securities
deemed to be beneficially owned by PacTel shall be counted in
determining whether PacTel is considered an "Acquiring Person";
provided, however, that PacTel shall not be deemed to beneficially own
shares of Capital Stock unless and until (i) PacTel has reported, or
intentionally failed to report as required, such ownership in a
Schedule 13D Filing; and (ii) at least ten business days have elapsed
since the date of such event and PacTel then beneficially owns such
shares.
Section 2. Definition of "Class A Preference Stock". The following
definition is hereby added to Section 1 of the Rights Agreement:
(i)(i)(i) "Class A Preference Stock" shall mean the Class A
Preference Stock, $1 par value per share, of the Company to be created
and issued pursuant to Section 7 of the Termination Agreement.
Section 3. Amendment of Section 22. Section 22 of the Rights Agreement
is hereby amended to read in its entirety as follows:
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be approved
by its Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made
in accordance with the provisions of this Agreement. In connection with
the conversion of shares of Class A Preferred Stock or Class A
Preference Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company shall issue a
Rights Certificate in respect of each share of Series C Common Stock
issued upon the conversion of such shares of Class A Preferred Stock or
Class A Preference Stock on such date. In addition, in connection with
the issuance or sale of shares of Capital Stock following the
Distribution Date and prior to the redemption or expiration of the
Rights, the Company shall, with respect to shares of Capital Stock so
issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded as of the Distribution
Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company (other than as described in the
immediately preceding sentence) issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or
sale; provided, however, that (i) no such Rights Certificate shall be
issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material
adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: CELLULAR COMMUNICATIONS, INC.
By /s/ Sandra Brown By /s/ Richard J. Lubasch
----------------------------- -----------------------------------------
Name: Sandra Brown Name: Richard J. Lubasch
Title: Assistant Secretary Title: Vice President - General Counsel
Attest: PACTEL CORPORATION
By: By:
----------------------------- -----------------------------------------
Name: Name:
Title: Title:
ATTEST: CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By: By: /s/ Stepen Nelson
----------------------------- -----------------------------------------
Name: Name: Stepen Nelson
Title: Title: Chairman
-3-
<PAGE> 1
Exhibit 99.7
AMENDMENT
The Rights Agreement, dated as of July 31, 1991 (the "Rights
Agreement"), among Continental Stock Transfer & Trust Company (the "Rights
Agent"), Cellular Communications, Inc. (as successor to CCI Newco, Inc.) (the
"Corporation"), and Airtouch Communications, Inc. (as successor to Pactel
Corporation) ("AirTouch"), is hereby amended to provide that neither the
execution of the Agreement and Plan of Merger among the Corporation, Airtouch
Communications and Airtouch Cellular, a wholly owned subsidiary of AirTouch (the
"Merger Agreement"), nor the consummation of the Merger (as defined in the
Merger Agreement) will cause AirTouch or any subsidiary thereof to become an
Acquiring Person (as defined in the Rights Agreement) or cause a Triggering
Event (as defined in the Rights Agreement) or Distribution Event (as defined in
the Rights Agreement).
IN WITNESS THEREOF, the parties hereto have caused this Amendment to be
duly executed, all as of April 5, 1996.
CELLULAR COMMUNICATIONS, INC.
By: /s/ George Blumenthal
-----------------------------------------
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ Arun Sarin
-----------------------------------------
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: /s/ Michael Nielson
-----------------------------------------
President
Dated: April 5, 1996
