<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to
__________
COMMISSION FILE NUMBER 1-12342
AIRTOUCH COMMUNICATIONS, INC.
A DELAWARE CORPORATION I.R.S. EMPLOYER NUMBER 94-3213132
ONE CALIFORNIA STREET
SAN FRANCISCO, CA 94111
(415) 658-2000
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
At October 31, 1998, 572,061,921 shares of common stock were outstanding.
<PAGE> 2
AIRTOUCH COMMUNICATIONS, INC.
INDEX TO REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
PART I -- FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Statements of Income...................................................... 3
Consolidated Balance Sheets............................................................ 4
Consolidated Statements of Cash Flows.................................................. 5
Notes to Consolidated Financial Statements............................................. 6
Selected Proportionate Financial Data ................................................. 11
Selected Proportionate Operating Data ................................................. 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ....................................................... 15
REPORT OF INDEPENDENT ACCOUNTANTS ......................................................... 28
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS .......................................................................... 29
ITEM 2. CHANGES IN SECURITIES ...................................................................... 29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................................................ 29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........................................ 29
ITEM 5. OTHER INFORMATION .......................................................................... 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ........................................................... 29
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
(Dollars in millions, except per share information) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenues $ 1,421 $ 916 $ 3,727 $ 2,653
--------- --------- --------- ---------
Operating expenses:
Cost of revenues 295 209 765 597
Selling and customer operations expenses 384 233 1,024 672
General, administrative, and other expenses 159 120 438 354
Depreciation and amortization expenses 267 139 664 408
--------- --------- --------- ---------
Total operating expenses 1,105 701 2,891 2,031
--------- --------- --------- ---------
Operating income 316 215 836 622
Equity in net income (loss) of unconsolidated wireless systems:
U. S. (7) 8 (24) 12
International 99 55 278 114
Minority interests in net (income) loss of consolidated
wireless systems (52) (35) (139) (106)
Interest:
Expense (42) (21) (103) (69)
Income 4 5 19 14
Miscellaneous income (expense) 6 (2) (1) (6)
--------- --------- --------- ---------
Income before income taxes and preferred dividends 324 225 866 581
Income taxes 111 84 306 244
--------- --------- --------- ---------
Income before preferred dividends 213 141 560 337
Preferred dividends 35 14 82 40
--------- --------- --------- ---------
Net income applicable to common stockholders $ 178 $ 127 $ 478 $ 297
========= ========= ========= =========
Net income applicable to common stockholders - per share
Basic $ 0.31 $ 0.25 $ 0.87 $ 0.59
Diluted $ 0.30 $ 0.25 $ 0.85 $ 0.59
========= ========= ========= =========
Weighted average shares outstanding (in thousands) 573,707 504,235 550,662 503,549
========= ========= ========= =========
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30 December 31
(Dollars in millions) 1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17 $ 1
Accounts receivable (net of allowance for uncollectibles of $77 and $44, respectively) 683 472
Inventories 96 106
Other receivables 109 44
Due from related parties 21 48
Other current assets 128 51
-------- --------
Total current assets 1,054 722
Property, plant, and equipment, net 3,839 2,539
Investments in unconsolidated wireless systems 3,609 2,068
Intangible assets, net 8,560 3,297
Deferred charges and other noncurrent assets 200 344
-------- --------
Total assets $ 17,262 $ 8,970
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 308 $ 244
Short-term borrowings 50 --
Current portion of long-term debt 23 57
Other current liabilities 836 675
-------- --------
Total current liabilities 1,217 976
Long-term debt 2,887 1,362
Deferred income taxes 1,846 711
Deferred credits 139 86
-------- --------
Total liabilities 6,089 3,135
-------- --------
Commitments and contingencies
Minority interests in consolidated wireless systems 407 306
Redeemable preferred stock ($.01 par value; 1.65 million shares authorized,
1.65 million shares issued and outstanding; liquidation value of $1.65 billion) 1,574 --
-------- --------
Stockholders' equity:
Preferred stock and additional paid-in capital ($.01 par value; 48.35 million
shares authorized):
Series A (7 million shares authorized, no shares issued or outstanding) -- --
6.00% Class B Mandatorily Convertible (19 million shares authorized;
17.2 million shares issued and outstanding; liquidation value of $500) 500 500
4.25% Class C Convertible (13 million shares authorized, 11.1 million shares issued
and outstanding; liquidation value of $554) 541 541
Common stock and additional paid-in capital ($.01 par value; 1.1 billion shares authorized,
575.5 million shares issued and 573.1 million shares outstanding [net of 2.2 million treasury
shares at cost of $102] at September 30, 1998, 506.1 million shares issued and 505.5 million shares
outstanding [net of 0.5 million treasury shares at cost of $11] at December 31, 1997) 7,282 4,079
Retained earnings 893 415
Accumulated other comprehensive income 9 1
Deferred compensation (33) (7)
-------- --------
Total stockholders' equity 9,192 5,529
-------- --------
Total liabilities and stockholders' equity $ 17,262 $ 8,970
======== ========
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
AIRTOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30
----------------------
(Dollars in millions) 1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Income before preferred dividends $ 560 $ 337
Adjustments to reconcile income before preferred dividends
for items currently not affecting operating cash flows:
Depreciation, amortization, and other non cash items 668 417
Equity in net (income) loss of unconsolidated wireless systems (254) (126)
Distributions received from equity investees 94 222
Minority interests in net income (loss) of consolidated wireless systems 139 106
Deferred income tax (benefit) expense 5 5
Loss (gain) on sale of assets and telecommunications interests -- 1
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable, net (43) (41)
Other current assets and receivables 11 (45)
Deferred charges and other noncurrent assets (14) 20
Accounts payable and other current liabilities 15 43
Deferred credits and other liabilities 15 (10)
------- -------
Cash flows from operating activities 1,196 929
------- -------
Cash flows from investing activities:
Investments in wireless systems (626) (260)
Additions to property, plant, and equipment (700) (459)
Proceeds from sale of property, plant, and equipment 16 13
Other investing activities 28 8
------- -------
Cash flows from investing activities (1,282) (698)
------- -------
Cash flows from financing activities:
Proceeds from issuing long-term debt and commercial paper 2,644 346
Retirement of long-term debt and commercial paper (2,512) (534)
Distributions to minority interests of consolidated wireless systems (72) (57)
Contributions from minority interests of consolidated wireless systems 2 5
Proceeds from common shares issued 123 57
Purchases of common stock (66) (5)
Increase (decrease) in short-term borrowings 47 --
Payment of preferred stock dividends (60) (40)
Other financing activities (5) (4)
------- -------
Cash flows from financing activities 101 (232)
------- -------
Effect of exchange rate changes on cash and cash equivalents 1 (5)
------- -------
Net change in cash and cash equivalents 16 (6)
Beginning cash and cash equivalents 1 28
------- -------
Ending cash and cash equivalents $ 17 $ 22
======= =======
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
5
<PAGE> 6
AirTouch Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
A. BASIS OF PRESENTATION
The unaudited Consolidated Financial Statements of AirTouch Communications, Inc.
and Subsidiaries (the "Company") furnished herein have been reviewed by
independent accountants and reflect all adjustments that are, in the opinion of
the Company, necessary to present fairly the financial position and results of
operations for each interim period presented. All such adjustments are normal
recurring adjustments. The Company recommends that these interim financial
statements be read in conjunction with the Consolidated Financial Statements and
accompanying Notes presented in the Company's 1997 Annual Report on Form 10-K.
With respect to the unaudited consolidated financial information of the Company
as of September 30, 1998 and for the three- and nine-month periods ended
September 30, 1998 and 1997 included herein, PricewaterhouseCoopers LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report dated
November 6, 1998, appearing herein, states that they did not audit and they do
not express an opinion on the unaudited consolidated financial information.
PricewaterhouseCoopers LLP has not carried out any significant or additional
audit tests beyond those which would have been necessary if their report had not
been included. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers LLP is not subject to the liability
provisions of Section 11 of the Securities Act of 1933 (the "Act") for their
report on the unaudited consolidated financial information because that report
is not a "report" or a "part" of this Form 10-Q prepared or certified by
PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.
B. CHANGES FROM DECEMBER 31, 1997
ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," consistent with
the required adoption period. For the Company, comprehensive income includes
income before preferred dividends, unrealized gain (loss) on available-for-sale
securities, cumulative translation adjustments, and minimum pension liability
adjustments. The Company's total comprehensive income was $221 million and $149
million for the three months ended September 30, 1998, and 1997, and $568
million and $318 million for the nine months ended September 30, 1998, and 1997,
respectively. The implementation of SFAS No. 130 did not have an impact on the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133 requires the recognition of all derivatives as
either assets or liabilities and the measurement of those instruments at fair
value. Consistent with the requirements of the statement, the Company intends to
adopt SFAS No. 133 effective January 1, 2000. If the Company had implemented
SFAS No. 133 at September 30, 1998, based on the Company's current derivative
instruments, there would not have been a material impact on the Company's
financial position or results of operations.
DEBT ISSUANCE
In April 1998, the Company issued $500 million of 6.65% notes due May 1, 2008.
In May 1998, the Company issued an additional $200 million of 6.35% notes due
June 1, 2005. The Company used the proceeds from the sale of the notes to retire
commercial paper issued in connection with the MediaOne Group merger.
In July 1998, the Company issued Deutsche Mark ("DEM") 400 million of 5.5% notes
due July 24, 2008 in an offering in Europe and received net proceeds of
approximately 397 million DEM ($223 million USD). The Company utilized a portion
of the net proceeds from the notes to retire commercial paper outstanding and
the remainder for general corporate purposes.
MEDIAONE GROUP MERGER
On April 6, 1998, the Company completed the acquisition of the U.S. cellular
business and the 25% PrimeCo Personal Communications, L.P. ("PrimeCo") interest
(the "Acquired Businesses") of MediaOne Group, Inc. (formerly U S WEST Media
Group). The subsidiaries of MediaOne Group, Inc. ("MediaOne Group") owning the
Acquired Businesses merged into the Company, which is the surviving corporation
(the "Merger"). The Company issued approximately 59.4 million shares of common
stock having a fair market value of about $2.9 billion on the date of issuance
and approximately $1.6 billion of dividend-bearing preferred stock with a 5.143%
coupon and assumed approximately $1.4 billion of debt associated with the
6
<PAGE> 7
AirTouch Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Acquired Businesses. The Company also granted MediaOne Group registration rights
with respect to the common stock and preferred stock described above.
In September 1998, MediaOne Group returned to the Company approximately 0.1
million shares of common stock with a value of approximately $7.5 million as a
purchase price adjustment.
The Merger was accounted for under the purchase method of accounting.
Accordingly, the results of operations of the Acquired Businesses since April 6,
1998, have been included in the Company's results. The aggregate purchase price
was preliminarily allocated to the assets acquired and liabilities assumed based
on their estimated fair value. The excess of the aggregate purchase price over
the estimated fair value of the net assets acquired, including the identifiable
intangible assets of approximately $3 billion was recorded as goodwill. A
deferred income tax liability of approximately $1.2 billion was recorded in
purchase accounting. The identifiable intangible assets primarily include
Federal Communications Commission ("FCC") licenses of approximately $2.6 billion
and customer lists of approximately $0.4 billion. These identifiable intangible
assets are amortized on a straight-line basis over their estimated useful lives.
Goodwill is amortized over 40 years. The valuation and appraisal of the acquired
assets and liabilities have been completed, and the changes made to these
preliminary allocated amounts were not material. As a result, no restatement of
the pro forma data was deemed necessary.
On August 5, 1998, MediaOne Group issued approximately $1.5 billion of notes
that are mandatorily exchangeable into shares of the Company's common stock at
maturity. The Company's common stock underlying the exchangeable notes was
issued to MediaOne Group in the Merger and represents approximately one-half of
the common stock owned by MediaOne Group. The Company's common stock underlying
the exchangeable notes was registered under the Company's Registration Statement
on Form S-3 (Reg. No. 333-56645). The Company did not receive any proceeds from
this offering and the number of shares of the Company's common stock outstanding
did not change as a result of this transaction.
The following unaudited pro forma summary presents the Company's consolidated
results of operations as if the Merger occurred at the beginning of the
respective periods, after giving effect to certain adjustments including
amortization of goodwill and identifiable intangible assets, additional equity
in the losses of PrimeCo, increased interest expense for debt assumed in the
Merger, deduction for preferred stock dividends, and related income tax effects.
The pro forma results are not necessarily indicative of those that would have
actually occurred had the Merger taken place at the beginning of the periods
presented.
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30
-------------------------
(Dollars in millions) 1998 1997
--------- ---------
<S> <C> <C>
Operating revenues $ 4,088 $ 3,732
Net income applicable to common stockholders $ 440 $ 194
Net income applicable to common stockholders - per share:
Basic $ 0.77 $ 0.35
Diluted $ 0.76 $ 0.35
========= =========
</TABLE>
7
<PAGE> 8
AirTouch Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
REDEEMABLE PREFERRED STOCK
The Company has authorized 825,000 shares of 5.143% Class D Cumulative Preferred
Stock, Series 1998 ("Class D Preferred Stock") and 825,000 shares of 5.143%
Class E Cumulative Preferred Stock, Series 1998 ("Class E Preferred Stock")
(together "Preferred Stock"), all of which were issued in connection with the
Merger in April, 1998. These shares do not have conversion rights into any other
class of the Company's shares.
The Preferred Stock accrues dividends at a rate of $51.43 per share per year.
The cumulative dividends are payable quarterly. Dividend payments on the
Preferred Stock rank on a parity with respect to the two series and with the
Company's 6.00% Class B Mandatorily Convertible Preferred Stock, Series 1996
("Class B Preferred Stock") and its 4.25% Class C Convertible Preferred Stock,
Series 1998 ("Class C Preferred Stock"). The holders of Preferred Stock have the
right to elect, together with any other series of preferred stock having similar
rights, two additional Directors to the Board if the dividends payable are in
arrears and unpaid in an amount equal to or exceeding the aggregate amount of
dividends payable thereon for six quarterly dividend periods. This right to
elect two Directors continues until all dividends in arrears on the Preferred
Stock have been paid in full.
The aggregate redemption value of the Preferred Stock is $1.65 billion. The
maturity date of the Class D Preferred Stock is April 6, 2020, and the Company
may redeem in whole or in part, the Class D Preferred Stock after April 7, 2018.
The maturity date of the Class E Preferred Stock is April 7, 2018, with no early
redemption by the Company. The redemption price for the Preferred Stock is
$1,000 per share plus accrued unpaid dividends. In the event of the liquidation,
dissolution, or winding up of the business of the Company, holders of the
Preferred Stock are entitled to receive $1,000 per share plus all accrued unpaid
dividends to the date of liquidation, dissolution or winding up of affairs.
The foregoing description of the Preferred Stock is qualified in its entirety by
the Certificates of Designation, Preferences and Rights of the Preferred Stock,
filed as Exhibits 3.1 and 3.2 of the Company's Current Report on Form 8-K dated
April 6, 1998, incorporated herein by reference.
The Preferred Stock was reported on the Balance Sheet at its fair value on April
6, 1998, the closing date of the Merger. The difference between the fair value
at that date and the redemption value is approximately $77 million. This
difference is amortized and reported as incremental preferred dividends, using
the interest method, over the maturity periods of each of Class D and Class E
Preferred Stock.
C. EARNINGS PER SHARE
Basic earnings per share ("EPS") is calculated based on net income applicable to
common stockholders divided by the weighted average common shares outstanding.
Diluted EPS is calculated based on net income applicable to common stockholders
divided by the sum of the weighted average common shares outstanding and any
common stock equivalents. Common stock equivalents ("CSEs") related to stock
options, determined using the treasury stock method, had a dilutive impact on
EPS for the three and nine months ended September 30, 1998. CSEs related to
stock options had no impact on EPS for the three and nine months ended September
30, 1997. CSEs related to convertible Class B and Class C preferred stock and
convertible debt, determined using the "if converted" method, had an
anti-dilutive impact on EPS for the three and nine months ended September 30,
1998 and 1997 and therefore were not included in the calculation of diluted EPS.
8
<PAGE> 9
AirTouch Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Three Months Ended
(Dollars in millions, except per share information; September 30, 1998 September 30, 1997
-------------------------------- ------------------------------
shares in thousands) Income Shares Per Share Income Shares Per Share
-------------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Net income applicable to common stockholders $ 178 573,707 $ 0.31 $ 127 504,235 $ 0.25
======= =======
Effect of Dilutive Securities
Stock Options 12,766 4,633
------------------ -----------------
Diluted Earnings Per Share
Net income applicable to common stockholders $ 178 586,473 $ 0.30 $ 127 508,868 $ 0.25
====== ======= ======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Nine Months Ended
(Dollars in millions, except per share information; September 30, 1998 September 30, 1997
-------------------------------- ------------------------------
shares in thousands) Income Shares Per Share Income Shares Per Share
-------------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Net income applicable to common stockholders $ 478 550,662 $ 0.87 $ 297 503,549 $ 0.59
======= =======
Effect of Dilutive Securities
Stock Options 9,396 2,610
------------------ -----------------
Diluted Earnings Per Share
Net income applicable to common stockholders $ 478 560,058 $ 0.85 $ 297 506,159 $ 0.59
====== ======= ======= ====== ======= =======
</TABLE>
D. INVESTMENTS IN UNCONSOLIDATED WIRELESS SYSTEMS
The Company's investments in unconsolidated wireless systems consist of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
(Dollars in millions) 1998 1997
------ ------
<S> <C> <C>
Investments at equity $3,462 $1,958
Investments at cost 147 110
------ ------
$3,609 $2,068
====== ======
</TABLE>
The Company's equity in net income of significant equity investees (Mannesmann
Mobilfunk GmbH and CMT Partners) was $115 million and $95 million for the three
months ended September 30, 1998 and 1997, and $324 million and $256 million for
the nine months ended September 30, 1998 and 1997, respectively. The Company's
equity in net income of these investees differs from its proportionate share of
their reported net income in the table below primarily due to amortization of
intangibles and other adjustments. Condensed operating results for the Company's
significant equity investments are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -------------------
(Dollars in millions) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Mannesmann Mobilfunk GmbH
Operating revenues $1,102 $ 846 $2,938 $2,336
Operating income $ 412 $ 334 $1,177 $ 870
Net income $ 178 $ 143 $ 508 $ 372
CMT Partners
Operating revenues $ 149 $ 144 $ 422 $ 433
Operating income $ 65 $ 61 $ 183 $ 175
Net income $ 74 $ 67 $ 205 $ 196
</TABLE>
9
<PAGE> 10
AirTouch Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
E. CONTINGENCIES
The Company has been a defendant in various antitrust lawsuits filed in both
state and federal courts. In 1993, a class action complaint was filed in Orange
County Superior Court alleging price fixing in the Los Angeles cellular market.
A parallel class action filed in Orange County Superior Court in 1994 was stayed
pending the resolution of the 1993 case. In 1997, a settlement of the 1993 case
was approved by the Court. The case is now on appeal. In 1994, two class action
complaints also alleging price fixing were filed against the Company, one in San
Diego County Superior Court and one in the U.S. District Court. The state case
was dismissed and a settlement of the federal case has been approved by the
Court. Also in 1994, a class action complaint was filed against the Company in
San Francisco County Superior Court alleging price fixing. In 1996, an almost
identical class action complaint was filed against the Company in Alameda County
Superior Court. In 1998, a settlement of these cases was approved by the Court.
The cases are now on appeal. In the aggregate these settlements will not have a
material adverse effect on the Company's financial position or results of
operations.
In July 1998, a complaint was filed in Sacramento County Superior Court against
the Company and other cellular and PCS carriers by customers challenging the
legality of certain billing practices and claiming that the practices are not
adequately disclosed in the California markets. In August 1998, a complaint was
filed against PrimeCo, an unconsolidated subsidiary of the Company, in the Cook
County Chancery Court by customers challenging the legality of certain billing
practices and claiming that the practices are not adequately disclosed. The
complaints in both billing cases seek monetary damages and revisions to the
billing practices of the relevant carriers. Also in August 1998, a complaint was
filed against PrimeCo in the Cook County Chancery Court alleging certain
deficiencies in PrimeCo's network performance. The complaint seeks monetary
damages. Each of these cases is in the preliminary pleading phase and the
Company is not currently able to assess the impact, if any, of these cases on
its financial position or results of operations.
The Company is party to various other legal proceedings in the ordinary course
of business. Although the ultimate resolution of these various other proceedings
cannot be ascertained, management does not expect that they will have a material
adverse effect on the Company's financial position or results of operations.
In the ordinary course of business, the Company has issued letters of
responsibility and letters of support for performance guarantees, refundable
security deposits, and credit facilities of certain subsidiaries and affiliates
providing varying degrees of recourse to the Company. At September 30, 1998, the
Company's share under such arrangements was $224 million. The Company believes
it is remote that it will be required to pay under these various arrangements.
10
<PAGE> 11
AirTouch Communications, Inc. and Subsidiaries
SELECTED PROPORTIONATE FINANCIAL DATA (UNAUDITED) (1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
(Dollars in millions) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
TOTAL COMPANY
Service and other revenues $ 1,959 $ 1,275 $ 5,112 $ 3,586
Operating expenses before depreciation and amortization expenses (2) 1,176 786 3,074 2,258
Depreciation and amortization expenses 364 203 915 581
------- ------- ------- -------
Operating income 419 286 1,123 747
Interest and other income (expenses) (35) (23) (102) (70)
------- ------- ------- -------
Income before income taxes and preferred dividends 384 263 1,021 677
Income taxes 171 122 461 340
------- ------- ------- -------
Income before preferred dividends 213 141 560 337
Preferred dividends 35 14 82 40
------- ------- ------- -------
Net income applicable to common stockholders $ 178 $ 127 $ 478 $ 297
======= ======= ======= =======
Operating cash flow (3) $ 783 $ 489 $ 2,038 $ 1,328
Operating cash flow margin (4) 40.0 % 38.4 % 39.9 % 37.0 %
======= ======= ======= =======
U.S. CELLULAR OPERATIONS
Service and other revenues $ 984 $ 602 $ 2,550 $ 1,768
------- ------- ------- -------
Cost of revenues 102 57 263 175
Selling and customer operations expenses (2) 334 208 890 614
General, administrative, and other expenses 70 41 166 115
Depreciation and amortization expenses 214 99 519 290
------- ------- ------- -------
Operating income $ 264 $ 197 $ 712 $ 574
======= ======= ======= =======
Operating cash flow (3) $ 478 $ 296 $ 1,231 $ 864
Operating cash flow margin (4) 48.6 % 49.2 % 48.3 % 48.9 %
======= ======= ======= =======
INTERNATIONAL OPERATIONS
Service and other revenues $ 828 $ 578 $ 2,167 $ 1,555
Operating expenses before depreciation and amortization expenses (2) 513 379 1,319 1,057
Depreciation and amortization expenses 98 74 265 205
------- ------- ------- -------
Operating income $ 217 $ 125 $ 583 $ 293
======= ======= ======= =======
Operating cash flow (3) $ 315 $ 199 $ 848 $ 498
Operating cash flow margin (4) 38.0 % 34.4 % 39.1 % 32.0 %
======= ======= ======= =======
U.S. PAGING OPERATIONS (5)
Service and other revenues (6) $ 95 $ 84 $ 276 $ 244
Operating expenses before depreciation and amortization expenses 65 57 186 164
Depreciation and amortization expenses 21 18 59 55
------- ------- ------- -------
Operating income $ 9 $ 9 $ 31 $ 25
======= ======= ======= =======
Operating cash flow (3) $ 30 $ 27 $ 90 $ 80
Operating cash flow margin (4) 31.6 % 32.1 % 32.6 % 32.8 %
======= ======= ======= =======
U.S. PCS OPERATIONS (7)
Service and other revenues $ 52 $ 10 $ 118 $ 20
Operating expenses before depreciation and amortization expenses (2) 71 26 180 79
Depreciation and amortization expenses 28 9 64 25
------- ------- ------- -------
Operating loss $ (47) $ (25) $ (126) $ (84)
======= ======= ======= =======
Operating cash flow (3) $ (19) $ (16) $ (62) $ (59)
Operating cash flow margin (4) (36.5)% (160.0)% (52.5)% (295.0)%
======= ======= ======= =======
</TABLE>
11
<PAGE> 12
AirTouch Communications, Inc. and Subsidiaries
Footnotes:
(1) This table is not required by generally accepted accounting principles
("GAAP") and is not intended to replace the Consolidated Financial
Statements prepared in accordance with GAAP. It is presented to provide
supplemental data. Because significant assets of the Company are not
reported on a consolidated basis, the Company believes that proportionate
financial data facilitates the understanding and assessment of its
Consolidated Financial Statements. Under GAAP, the Company consolidates the
entities in which it has a controlling interest and uses the equity method
to account for entities over which the Company has significant influence but
does not have a controlling interest. In contrast, proportionate accounting
reflects the Company's relative ownership interests in operating revenues
and expenses for both its consolidated and equity-method entities, exclusive
of cost-based investments and certain equity-method investments that are not
material. For example, U.S. Cellular Operations' proportionate results
present the Company's share -- its percentage ownership -- for all
significant U.S. cellular operations, including those entities where the
Company does not own more than 50%. Similarly, Total Company proportionate
results show the Company's share of all its significant worldwide
operations.
(2) Includes net loss on handsets sold.
(3) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flow from operating activities in
the Company's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents the Company's ownership interests in the respective
entities' operating cash flows. As such, proportionate operating cash flow
does not represent cash available to the Company.
(4) Operating cash flow margin is calculated by dividing "Operating cash flow"
by "Service and other revenues."
(5) U.S. Paging Operations, which are wholly owned by the Company, include
operations in Canada.
(6) Includes any gain or loss on equipment sales.
(7) PCS data relates to PrimeCo Personal Communications, L.P. ("PrimeCo"), a
U.S. personal communications services ("PCS") business in which the Company
had a 50% interest as of September 30, 1998 and a 25% interest at September
30, 1997. Because PrimeCo does not own 100% of all its markets, the
Company's proportionate interest in PrimeCo's results is slightly less.
12
<PAGE> 13
AirTouch Communications, Inc. and Subsidiaries
SELECTED PROPORTIONATE OPERATING DATA (UNAUDITED) (1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in millions and operating September 30 September 30
----------------------- -----------------------
data in thousands, except per unit data) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL COMPANY
Cellular and PCS POPs (2)(3)(4) 235,738 178,071 235,738 178,071
Cellular and PCS subscribers (2)(4)(8) 12,687 6,570 12,687 6,570
Paging units in service (4)(5) 3,420 3,099 3,420 3,099
Total proportionate customers (4) 16,107 9,669 16,107 9,669
Cellular and PCS subscriber net adds in period,
excluding acquisitions (2) 987 537 2,510 1,424
Capital expenditures and capital calls,
excluding acquisitions (6) $ 366 $ 233 $ 954 $ 664
Proportionate capital expenditures (7) $ 433 $ 353 $ 1,125 $ 941
-------- -------- -------- --------
U.S. CELLULAR OPERATIONS
Cellular POPs (3)(4) 67,560 43,364 67,560 43,364
Cellular subscribers (4)(8) 7,461 3,901 7,461 3,901
Cellular subscriber net adds in period,
excluding acquisitions 201 156 628 498
Monthly average revenue per unit $ 44.53 $ 52.42 $ 45.18 $ 53.88
Monthly cash cost per unit $ 22.90 $ 26.65 $ 23.37 $ 27.55
Proportionate capital expenditures (7) $ 155 $ 121 $ 432 $ 322
-------- -------- -------- --------
INTERNATIONAL OPERATIONS
Cellular POPs (3)(4) 138,658 120,478 138,658 120,478
Cellular subscribers (4) 4,897 2,607 4,897 2,607
Cellular subscriber net adds in period,
excluding acquisitions 735 366 1,762 873
Monthly average revenue per unit $ 60.75 $ 79.16 $ 61.35 $ 81.95
Monthly cash cost per unit $ 37.64 $ 51.91 $ 37.34 $ 55.70
Proportionate capital expenditures (7) $ 173 $ 178 $ 476 $ 494
-------- -------- -------- --------
U.S. PAGING OPERATIONS (9)
Total paging units in service (4) 3,331 3,058 3,331 3,058
Paging units in service net adds in period,
excluding acquisitions 103 61 229 203
Capital expenditures (6) $ 21 $ 17 $ 59 $ 47
-------- -------- -------- --------
U.S. PCS OPERATIONS (2)
PCS POPs (2)(3)(4) 29,520 14,229 29,520 14,229
PCS subscribers (2)(4) 329 62 329 62
PCS subscriber net adds in period,
excluding acquisitions (2) 51 15 120 53
Monthly average revenue per unit $ 56.76 $ 61.46 $ 58.40 $ 57.81
Monthly cash cost per unit $ 77.49 $ 159.79 $ 89.09 $ 240.36
======== ======== ======== ========
</TABLE>
13
<PAGE> 14
AirTouch Communications, Inc. and Subsidiaries
Footnotes:
(1) This table is not required by generally accepted accounting principles
("GAAP") and is presented to provide supplemental data. The table reflects
operating data of systems in which the Company owns an interest, multiplied
by the Company's ownership interest, exclusive of cost-based investments
and certain equity-based investments that are not material to the
information presented.
(2) PCS data relates to PrimeCo Personal Communications, L.P. ("PrimeCo"), a
U.S. personal communications services ("PCS") business in which the Company
had a 50% interest as of September 30, 1998 and a 25% interest at September
30, 1997. Because PrimeCo does not own 100% of all its markets, the
Company's proportionate interest in PrimeCo's results is slightly less.
(3) POPs are the estimated market population multiplied by the Company's
ownership interest in a licensee operating in that market and includes
markets in which the networks are under construction and the markets of
certain cost-based investments not included in proportionate operating
results.
(4) As of the period ended.
(5) Total Company "Paging units in service" include both U.S. and International
paging units in service.
(6) Reflects GAAP-basis operating data for the three months and nine months
ended September 30.
(7) Proportionate capital expenditures are expenditures for property, plant,
and equipment of each system in which the Company owns an interest
multiplied by the Company's ownership interest.
(8) The number of cellular subscribers at September 30, 1998 has been decreased
by 30,000 non-revenue generating subscribers to reflect an entry point
adjustment related to the U S WEST Media Group Merger to conform to
AirTouch's subscriber policy.
(9) U.S. Paging Operations, which are wholly owned by the Company, include
operations in Canada.
14
<PAGE> 15
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis for AirTouch Communications, Inc.,
together with its subsidiaries and partnerships (collectively, the "Company" or
"AirTouch"), focuses on material changes in financial condition from December
31, 1997, and in results of operations for the three- and nine-month periods
ended September 30, 1998, and the same periods of 1997. Please read the
following discussion and analysis with management's discussion and analysis
included in the Company's 1997 Annual Report on Form 10-K and with the Company's
Consolidated Financial Statements and accompanying Notes included herein.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
In addition to historical information, management's discussion and analysis
include certain forward-looking statements regarding events and financial trends
that may affect the Company's future operating results and financial position.
Such forward-looking statements are often identified by the words "estimate,"
"project," "intend," "plan," "expect," "believe," or similar expressions. These
statements are subject to risks and uncertainties that could cause actual
results to differ materially. Such factors include: a change in economic
conditions in the various markets served by the Company's operations which would
adversely affect the level of demand for wireless services; intensified
competitive activity requiring reduced pricing and/or new product offerings or
resulting in an increased rate of customers terminating service ("churn"),
slower customer growth as customers choose to receive service from other
providers and higher customer selling costs; declining average revenue per
customer due to an increasing proportion of consumer customers and declining
rates; growth in customers and usage driving increased investment in network
capacity; the level of fraudulent activity; the impact of new business
opportunities requiring significant up-front investments; the impact on capital
spending from the deployment of new technologies; the possibility that
technologies will not perform according to expectations or that vendor
performance will not meet requirements; and higher than anticipated costs
associated with correcting the Year 2000 issue. These and other factors related
to the business are described in the Company's Securities and Exchange
Commission ("SEC") filings, included in its Form 10-K under "Investment
Considerations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which are valid as of the date of this filing. The
Company has no obligation to publicly release the results of any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this filing.
MEDIAONE GROUP MERGER
On April 6, 1998, the Company acquired the U.S. cellular business and the 25%
PrimeCo Personal Communications, L.P. ("PrimeCo") interest (the "Acquired
Businesses") of MediaOne Group, Inc. (formerly U S WEST Media Group). The
subsidiaries of MediaOne Group, Inc. owning the Acquired Businesses merged into
the Company, which is the surviving corporation (the "Merger"). The Company
issued approximately 59.4 million shares of common stock having a fair market
value of about $2.9 billion on the date of issuance and approximately $1.6
billion of dividend-bearing preferred stock with a 5.143% coupon and assumed
approximately $1.4 billion of debt associated with the Acquired Businesses. The
Company also granted MediaOne Group, Inc. registration rights with respect to
the common stock and preferred stock above.
In September 1998, MediaOne Group, Inc., returned approximately 0.1 million
shares of common stock to the Company, with a value of approximately $7.5
million as a purchase price adjustment.
For a more detailed discussion of the Merger and for pro forma financial
statements for the period ended December 31, 1997, please see the Company's
Current Report on Form 8-K/A-1 dated April 6, 1998. Pro forma financial
statements present the combined results of operations, including merger-related
adjustments, as if the Merger was effective on January 1, 1997. Updated pro
forma financial statements for the three-month period ended March 31, 1998 are
filed on the Company's Current Report on Form 8-K dated May 28, 1998.
RESULTS OF OPERATIONS
The following discussions compare the results of operations for the three- and
nine-month periods ended September 30, 1998, to the comparable periods of 1997.
The operating results of the periods discussed below are not necessarily
indicative of operating results in future periods.
Consolidated Operations
For the third quarter of 1998, the Company continued its strong operating
performance, driven by increased demand for wireless services, as evidenced by
continued subscriber growth, and the Company's ongoing efforts to control costs.
On April 6, 1998, the Company began consolidating the operating revenues and
expenses of the Acquired Businesses. As a result, the three- and nine-month
periods ended September 30, 1998, are not comparable to the same periods of
1997.
15
<PAGE> 16
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
Given the significance of the Merger, the Company believes it is more
meaningful to discuss the operating results on a pro forma basis, as if the
Merger had been effective at the beginning of each period presented, and
accordingly, the following discussion is based on the pro forma results
presented below. The pro forma results of operations are not necessarily
indicative of the future results of operations of the combined Company or the
results of operations of the combined Company that would have actually occurred.
Pro Forma Consolidated Results of Operations (GAAP Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
(Dollars in millions) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues $ 1,421 $ 1,300 $ 4,088 $ 3,732
------- ------- ------- -------
Operating expenses:
Operating expenses before depreciation
and amortization expenses 838 790 2,440 2,265
Depreciation and amortization expenses 267 237 776 702
------- ------- ------- -------
Total operating expenses 1,105 1,027 3,216 2,967
------- ------- ------- -------
Operating income 316 273 872 765
Equity in net income (loss) of
unconsolidated wireless systems 92 38 218 36
Minority interests in net (income) loss
of consolidated wireless systems (52) (49) (149) (141)
Miscellaneous income (expense) (32) (41) (99) (120)
------- ------- ------- -------
Income before income taxes
and preferred dividends 324 221 842 540
Income taxes 111 87 297 242
------- ------- ------- -------
Income before preferred dividends 213 134 545 298
Preferred dividends 35 35 105 104
------- ------- ------- -------
Net income applicable to
common stockholders $ 178 $ 99 $ 440 $ 194
======= ======= ======= =======
</TABLE>
Consolidated operating revenues during the three- and nine-month periods ended
September 30, 1998, increased 9% and 10%, respectively, while consolidated
operating income rose 16% and 14% for the same periods. The increases were
primarily the result of substantial subscriber growth in the Company's
international and U.S. cellular markets.
Increases in equity in net income of unconsolidated wireless systems were
primarily attributable to substantial growth in the subscriber base of
international wireless systems operated by the Company's equity investees. These
favorable results were partially offset by the operating losses of PrimeCo, the
Company's personal communications services ("PCS") partnership with Bell
Atlantic Corporation. PrimeCo launched service in November 1996 and is currently
focused on building its subscriber base, and has not yet achieved sufficient
economies of scale to generate net income.
Excluding the effect of equity in net income of unconsolidated international
wireless systems and the effect of foreign consolidated entities, the effective
tax rates were approximately 43% and 45% for the three-month periods ended
September 30, 1998 and 1997, and 46% and 48% for the nine-month periods ended
September 30, 1998 and 1997, respectively.
16
<PAGE> 17
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
U.S. Cellular Operations
U.S. Cellular Operating Results (GAAP Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
(Dollars in millions) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Service and other revenues $ 989 $ 601 $ 2,562 $ 1,757
Equipment sales 52 32 127 90
------- ------- ------- -------
Operating revenues 1,041 633 2,689 1,847
------- ------- ------- -------
Operating expenses before depreciation
and amortization expenses 570 347 1,481 1,006
Depreciation and amortization expenses 214 97 516 284
------- ------- ------- -------
Operating income 257 189 692 557
Equity in net income of
unconsolidated wireless systems 41 35 109 100
Minority interests in net (income) loss
of consolidated wireless systems (23) (20) (66) (64)
Other income (expense) included in
equity income and minority interests (a) (11) (7) (23) (19)
------- ------- ------- -------
U.S. cellular operating contribution
to net income (b) $ 264 $ 197 $ 712 $ 574
======= ======= ======= =======
</TABLE>
(a) Represents amount necessary to reconcile GAAP Basis and Proportionate Basis
results. The amounts represent income taxes and non-operating expenses or
income included in Equity in net income (loss) of unconsolidated wireless
systems and in Minority interests in net (income) loss of consolidated
wireless systems.
(b) Represents the Company's share of combined operating income of consolidated
and unconsolidated U.S. cellular operations, net of the interests of
minority and equity partners (equal to proportionate operating income
presented on page 11).
As previously discussed, the Company believes it is more meaningful to discuss
U.S. cellular operating results on a pro forma basis, which assumes the Merger
had been effective at the beginning of each period presented. These pro forma
operating results and management's discussion and analysis thereon are presented
below.
17
<PAGE> 18
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
Pro Forma U.S. Cellular Operating Results (GAAP Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
(Dollars in millions) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Service and other revenues $ 989 $ 929 $ 2,897 $ 2,713
Equipment sales 52 87 153 213
------- ------- ------- -------
Operating revenues 1,041 1,016 3,050 2,926
------- ------- ------- -------
Operating expenses before depreciation
and amortization expenses 570 578 1,694 1,650
Depreciation and amortization expenses 214 196 628 579
------- ------- ------- -------
Operating income 257 242 728 697
Equity in net income of
unconsolidated wireless systems 41 35 110 102
Minority interests in net (income) loss
of consolidated wireless systems (23) (35) (76) (100)
Other income (expense) included in
equity income and minority interests (a) (11) (5) (23) (20)
------- ------- ------- -------
U.S. cellular operating contribution
to net income (b) $ 264 $ 237 $ 739 $ 679
======= ======= ======= =======
</TABLE>
(a) Represents amount necessary to reconcile GAAP Basis and Proportionate Basis
results. The amounts represent income taxes and non-operating expenses or
income included in Equity in net income (loss) of unconsolidated wireless
systems and in Minority interests in net (income) loss of consolidated
wireless systems.
(b) Represents the Company's share of combined operating income of consolidated
and unconsolidated U.S. cellular operations, net of the interests of
minority and equity partners (equal to proportionate operating income
presented on page 22).
The improvement in the Company's U.S. cellular operating revenues for the three-
and nine-month periods ended September 30, 1998, was primarily the result of a
19% annual growth in subscribers. The revenue improvements associated with the
increase in subscribers were partially offset by declines in the average revenue
per customer. Average revenue per customer (excluding revenue from equipment
sales) declined 12% and 15% for the three- and nine-month periods ended
September 30, 1998 over the same periods of 1997. Revenue per minute of use also
declined 18% and 16% for the comparable periods. The relatively large decrease
in revenue per minute of use reflects the increasing popularity of bundled
minute plans, where subscribers pay a fixed monthly fee for a fixed number of
minutes. Both declines were caused by rate reductions and discounts offered to
new and existing customers in response to increased competition and continued
penetration of the consumer market.
Beginning in 1996, with the Federal Communications Commission's auction of
additional spectrum, competition in U.S. cellular markets has been on the rise.
Currently, the Company faces at least three to four competitors in all its major
markets. The Company's strategy in this increasingly competitive environment is
to retain existing customers and attract new customers by focusing on providing
excellent customer service and offering attractive pricing to targeted customer
segments on a market by market basis. Retaining customers is significantly less
expensive than replacing customers who discontinue service.
The Company anticipates increasing competitive pressures and penetration into
the consumer market to result in continuing price declines and reduced customer
growth rates in the near term and possibly in future years. This may lower
revenue per minute of use and may continue to cause declines in average revenue
per customer. These trends could reduce revenues of its U.S. cellular operations
compared to current revenue levels. However, the Company believes that, over
time, declining prices and other factors may lead to increases in per subscriber
usage as customers shift their calling from landline to wireless networks.
The Company generates revenue from other wireless operators' customers who use
the Company's cellular networks to use their cellular phones in the Company's
operating areas. This revenue is commonly referred to as roaming-in revenue. The
increase in roaming-in revenues accounted for 28%
18
<PAGE> 19
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
of the increase in service and other revenues for the three- and nine-month
periods ended September 30, 1998. Rates for roaming revenue per minute are set
by contracts with other wireless operators. The U.S. wireless industry is
currently moving towards simplified price plans that are expected to eventually
push roaming rates lower, which would adversely impact this component of
revenue.
Despite the decline in average revenue per customer, U.S. cellular operating
margins remained relatively constant. Operating cash flow margins (operating
margins excluding the effect of depreciation and amortization expenses) improved
to 45% from 43% for the three-month period ended September 30, 1998, and 1997,
respectively, and stayed constant at 44% for both the nine-month periods ended
September 30, 1998, and 1997, respectively. The stability in operating margins
and the improvement in operating cash flow margins resulted from declines in the
average cash cost per customer (including the loss on equipment sales) of 13%
and 15% for the three- and nine-month periods ended September 30, 1998,
respectively. Decreases in cash costs resulted from several factors, including
declines in handset costs, reductions of handset subsidies offered to customers,
reductions of roaming fraud, reductions of interconnection rates, and increased
economies of scale. However, as competition intensifies, there can be no
assurances that the Company's U.S. cellular operations will be able to maintain
margins by continuing to decrease costs per customer faster than declining
revenues per customer.
Depreciation and amortization expenses increased 9% and 8% for the three- and
nine-month periods ended September 30, 1998, respectively. The increase was
primarily due to depreciation of larger property, plant, and equipment balances
associated with the continued build-out of the Company's cellular networks.
The equity in net income of unconsolidated wireless systems increased primarily
from the stronger operating results of CMT Partners, the Company's partnership
that operates cellular properties primarily in the San Francisco Bay Area.
Stronger operating results were driven by growth in subscribers and increases in
roaming-in revenues.
U.S. Paging Operations
All U.S. paging markets are wholly owned by the Company.
U.S. Paging Operating Results (GAAP Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
---------------- ----------------
(Dollars in millions) 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service and other revenues $ 95 $ 84 $ 274 $ 244
Equipment sales 11 10 35 28
----- ----- ----- -----
Operating revenues 106 94 309 272
----- ----- ----- -----
Operating expenses before depreciation
and amortization expenses 76 67 219 192
Depreciation and amortization expenses 21 18 59 55
----- ----- ----- -----
Operating income $ 9 $ 9 $ 31 $ 25
----- ----- ----- -----
Operating cash flow (a) $ 30 $ 27 $ 90 $ 80
Operating cash flow margin (b) 28.3% 28.7% 29.1% 29.4%
===== ===== ===== =====
</TABLE>
(a) See Footnote 3 on page 12.
(b) See Footnote 4 on page 12.
Operating revenues increased 13% and 14% for the three- and nine-month periods
ended September 30, 1998, primarily due to a 9% annual growth in paging units in
service and a 5% increase in the average revenue per unit in service for both
periods. The Company's U.S. paging operations were able to increase units in
service and average revenue per unit in line with the Company's strategy of
shifting growth to the higher revenue retail and direct channels away from the
reseller channel. The operating margin declined for the three-month period ended
September 30, 1998, in spite of the higher revenues, due to the higher cost of
shifting growth to the retail and direct channels. Operating cash flow margins
(operating margins excluding the effect of depreciation and amortization)
remained relatively constant for the three- and nine-month periods ended
September 30, 1998 and 1997.
19
<PAGE> 20
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
International Operations
International Operating Results (GAAP Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
(Dollars in millions) 1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Service and other revenues $ 254 $ 176 $ 675 $ 491
Equipment sales 21 15 54 45
----- ----- ----- -----
Operating revenues 275 191 729 536
----- ----- ----- -----
Operating expenses before depreciation
and amortization expenses 172 132 459 373
Depreciation and amortization expenses 28 21 79 62
----- ----- ----- -----
Operating income 75 38 191 101
Equity in net income (loss) of
unconsolidated wireless systems 99 55 278 114
Minority interests in net (income) loss
of consolidated wireless systems (28) (14) (72) (41)
Other income (expense) included in
equity income and minority interests (a) 71 46 186 119
----- ----- ----- -----
International operating contribution
to net income (b) $ 217 $ 125 $ 583 $ 293
===== ===== ===== =====
</TABLE>
(a) Represents amount necessary to reconcile GAAP Basis and Proportionate Basis
results. The amounts represent income taxes and non-operating expenses or
income included in Equity in net income (loss) of unconsolidated wireless
systems and in Minority interests in net (income) loss of consolidated
wireless systems.
(b) Represents the Company's share of combined operating income of consolidated
and unconsolidated international operations, net of the interests of
minority and equity partners (equal to proportionate operating income
presented on page 22).
The International wireless operations are currently experiencing substantially
higher growth rates than the Company's U.S. cellular operations. The Company
consolidates the results of its majority owned ventures in Sweden
("Europolitan") and Portugal ("Telecel"). Together Europolitan and Telecel
contributed 19% and 18% of the Company's service and other revenues for the
three- and nine-month periods ended September 30, 1998, up from 15% and 14% for
the comparable prior year periods. Europolitan and Telecel also contributed 24%
and 22% of the total Company's operating income for the three- and nine-month
periods ended September 30, 1998, up from 14% and 13% for the corresponding
periods of 1997.
The operating revenues of the Company's consolidated international wireless
operations increased 44% and 36% year over year for the three- and nine-month
periods ended September 30, 1998. The increase was primarily due to an 87%
annual growth in subscribers. Prepaid customers were a substantial contributor
to the growth in subscribers representing almost 80% of the annual growth, as
well as about 50% of total combined subscribers as of September 30, 1998.
Prepaid pricing plans have created a convenient and inexpensive route for
customers to obtain wireless service by eliminating monthly access or service
charges. The increase in operating revenues resulting from the subscriber growth
was partially offset by a 24% and 31% decrease in average revenue per customer
for the three- and nine-month periods ended September 30, 1998.
Operating margins improved 7.4 percentage points for the same periods, due to
declines in cash costs per customer of 34% and 40% for the three- and nine-month
periods ended September 30, 1998, which exceeded declines in average revenue per
customer. The declines in cash costs per customer were due to increased
economies of scale largely driven by substantial subscriber growth and through
lower operating costs from prepaid pricing plans. Although revenues from prepaid
pricing plans were generally lower than from non-prepaid plans, the lower
operating costs enabled this segment of the subscriber base to be profitable.
The significant improvement in equity in net income of international
unconsolidated wireless systems was primarily due to strong operating results
achieved by the Company's equity investees in Europe. Improved results in these
wireless systems resulted from strong subscriber growth and increased
profitability from reductions in cash cost per customer at a greater rate than
decreasing average revenue per customer. Increases in equity in net income
included favorable impacts of foreign currency exchange rates for the
three-month period ended September 30, 1998,
20
<PAGE> 21
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
relative to the same period in 1997. Foreign currency exchange rates did not
have a material impact on the increase between the nine-month period ended
September 30, 1998 and 1997. Total International wireless operations, including
the equity in net income (loss) generated by the Company's equity basis
investments, contributed an increasing proportion of the total Company's
profitability.
The Company's international operations face increasing competition, especially
in Europe as competitors launch new service. Around the world, as competition
increases, prices fall. To date, falling prices are proving a stimulant to
demand, and AirTouch's international ventures have achieved increased margins
from greater economies of scale and their focus on reducing cash costs per
customer. Thus far, the improved economies of scale, record low churn, lower
selling costs per customer added, and the overall lower maintenance costs
associated with prepaid customers have helped bring costs per customer down
faster than falling revenues per customer. However, given the increasing
competition and the increasing proportion of lower revenue, lower cost prepaid
subscribers, there can be no assurances that the Company's international
ventures can continue lowering costs per customer at a greater rate than
decreasing revenues per customer.
Proportionate Results of Operations
Proportionate basis operating results are included as supplementary information
only and are not prepared in accordance with generally accepted accounting
principles ("GAAP"). The proportionate presentation is a pro rata consolidation
that reflects the Company's share of revenues and expenses in both its
consolidated and unconsolidated wireless systems, net of interests of minority
and equity partners. Proportionate results are calculated by multiplying the
Company's ownership interest in each wireless system by each system's total
operating results, whereas the presentation prepared in accordance with GAAP
requires consolidation of wireless systems in which the Company has a direct
controlling interest and the equity method of accounting for wireless systems in
which the Company has significant influence but not a controlling interest.
Net income under either GAAP or proportionate presentation is the same.
The proportionate presentation is not required by GAAP, nor is it intended to
replace the consolidated operating results prepared and presented in accordance
with GAAP. However, since significant wireless systems are not consolidated,
proportionate information is provided as supplemental data to facilitate a more
detailed understanding and assessment of consolidated operating results prepared
and presented in accordance with GAAP. Due to the significance of the Merger,
the following tables for Total Company and U.S. Cellular Proportionate Operating
Results are presented on a pro forma basis.
21
<PAGE> 22
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
Total Company Pro Forma Operating Results (Proportionate Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
(Dollars in millions) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Service and other revenues $ 1,959 $ 1,583 $ 5,438 $ 4,474
------- ------- ------- -------
Operating expenses before depreciation
and amortization expenses (a) 1,176 974 3,282 2,813
Depreciation and amortization expenses 364 310 1,037 899
------- ------- ------- -------
Operating income 419 299 1,119 762
Interest and other income (expenses) (35) (40) (125) (124)
------- ------- ------- -------
Income before income taxes and
preferred dividends 384 259 994 638
Income taxes 171 125 449 340
------- ------- ------- -------
Income before preferred dividends 213 134 545 298
Preferred dividends 35 35 105 104
------- ------- ------- -------
Net income applicable to common
stockholders $ 178 $ 99 $ 440 $ 194
======= ======= ======= =======
Operating cash flow (b) $ 783 $ 609 $ 2,156 $ 1,661
Operating cash flow margin (c) 40.0% 38.5% 39.6% 37.1%
======= ======= ======= =======
</TABLE>
U.S. Cellular Pro Forma Operating Results (Proportionate Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
(Dollars in millions) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Service and other revenues $ 984 $ 900 $2,857 $2,636
------ ------ ------ ------
Cost of revenues 102 79 292 265
Selling and customer
operations expenses (a) 334 327 1,010 940
General, administrative, and
other expenses 70 62 189 176
Depreciation and amortization expenses 214 195 627 576
------ ------ ------ ------
Operating income $ 264 $ 237 $ 739 $ 679
====== ====== ====== ======
Operating cash flow (b) $ 478 $ 432 $1,366 $1,255
Operating cash flow margin (c) 48.6% 48.0% 47.8% 47.6%
====== ====== ====== ======
</TABLE>
International Operating Results (Proportionate Basis)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
(Dollars in millions) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Service and other revenues (d) $ 828 $ 578 $2,167 $1,555
------ ------ ------ ------
Operating expenses before depreciation
and amortization expenses (a) 513 379 1,319 1,057
Depreciation and amortization expenses 98 74 265 205
------ ------ ------ ------
Operating income $ 217 $ 125 $ 583 $ 293
====== ====== ====== ======
Operating cash flow (b)(d) $ 315 $ 199 $ 848 $ 498
Operating cash flow margin (c) 38.0% 34.4% 39.1% 32.0%
====== ====== ====== ======
</TABLE>
(a) See Footnote 2 on page 12.
(b) See Footnote 3 on page 12.
(c) See Footnote 4 on page 12.
(d) If foreign exchange rates had remained constant, service and other revenues
and operating cash flow would have increased 46% and 62%, for the
three-month periods and 49% and 85% for the nine-month periods ended
September 30, 1998.
22
<PAGE> 23
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
CONTINGENCIES
The Company is party to various legal proceedings, including certain antitrust
litigation. See Note E, "Contingencies," to the Consolidated Financial
Statements on page 10.
Conversion to the Euro
A new common currency, the "euro", is scheduled to be introduced on January 1,
1999, at which time the eleven participating European Economic and Monetary
Union ("EMU") member countries will establish fixed conversion rates between
their existing currencies ("legacy currencies") and the euro. The Company has a
consolidated majority interest in Telecel, a system in Portugal, which is one of
the participating countries. In addition, the Company has equity investments in
other participating countries, including Germany, Italy, Spain, and Belgium, as
well as other consolidated and equity investments in other EMU member countries.
The amounts expended by the Company's majority owned European operations for the
conversion to the euro have not been material to the Company's financial
position or results of operations.
The conversion to the euro is a critical element in the EMU's plan to create one
integrated market encompassing the economies of its member states. This could
have longer-term competitive implications for the Company's European operations.
The Company is currently unable to predict the ultimate financial impact of the
conversion on its operations, if any, given that the impact will be dependent
upon the competitive situations which exist in the various markets in which the
Company participates.
Year 2000 Readiness Disclosure
Issues for AirTouch
Many of the Company's systems are affected by the year 2000 issue, which refers
to the inability of computerized systems and embedded technology to process
dates or operate beyond December 31, 1999. The Company has implemented a
comprehensive plan to address the year 2000 issue in the mission critical
systems of its consolidated markets. Mission critical systems are those whose
failure poses a risk of disruption to the Company's ability to provide wireless
services, to collect revenues, to meet safety standards, or to comply with legal
requirements. These include, among others, systems that constitute the Company's
wireless networks, billing systems, and customer care systems.
State of Readiness
The Company's plan to address the year 2000 issue consists of five phases: (1)
the complete inventory of all mission critical systems employed in the Company's
consolidated markets and the identification of hardware, software and embedded
technology that are affected by the year 2000 issue; (2) analysis and design of
(or interaction with third party suppliers regarding) modifications for each
affected component; (3) creation and testing of the modifications; (4)
implementation of the modifications on a company-wide basis; and (5) testing of
the interface between systems. The Company's plan addresses both information
technology ("IT") and technology embedded in equipment and other infrastructure.
The plan is being implemented under the oversight of an executive steering
committee that includes the Company's President and Chief Operating Officer and
Executive Vice President and Chief Financial Officer. The Company has dedicated
over 300 full-time contractors and employees to implementing the plan. In
addition, the Company has hired an independent consultant to review periodically
the adequacy of the Company's processes and methodologies for assessing the
costs and risks associated with the year 2000 issue.
The Company has substantially completed phases 1 and 2 of its plan. It has
completed approximately half of phases 3 and 4 and expects to have them
substantially completed by mid-1999. The Company expects most of the phase 5
work to be conducted in the first half of 1999. In the event the Company
discovers that certain components have not been sufficiently modified, it will
have to repeat phases 2 through 5 with respect to such components.
The Company is also monitoring the progress of its significant unconsolidated
subsidiaries in addressing their mission critical systems through its positions
on the governing boards of such entities and, in some cases, through review of
the subsidiary's remediation plans.
Dependence on Third Parties
Much of the technology employed in the Company's mission critical systems is
purchased from third parties. The Company is dependent on those third parties to
assess the impact of the year 2000 issue on the technology they have supplied
and to take any necessary corrective action. The Company is monitoring the
progress of these third parties and in selected cases has reviewed their
modification and test plans. To date, the Company has received information for
approximately 95% of its supplied products regarding whether they are affected
by the year 2000 issue and the steps the vendors are taking to correct them. The
Company is selectively conducting tests to determine whether certain
23
<PAGE> 24
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
suppliers have accurately assessed and addressed the impact of the year 2000
issue on their products.
The ability of the Company to complete the phases of its remediation plan by the
target dates set forth above and avoid disruption of its service is dependent on
the Company's suppliers delivering the necessary modifications to the products
they have supplied by the projected delivery dates.
Management believes that the original manufacturers of handsets and pagers are
primarily liable for failures of such products. Based on representations made by
such manufacturers, the Company does not expect significant disruption to its
ability to serve its customers as a result of handset or pager failure. However,
in the event of such product failures, the Company could experience service
revenue loss and be required to incur additional costs to furnish customers with
replacement equipment on a temporary or permanent basis to prevent further
service revenue loss.
The Company's systems are interconnected with numerous networks and systems
operated by third parties, including landline telecommunications networks,
long-distance networks, the networks of other wireless service providers, and
networks operated by utilities. The operators of these networks are responsible
for addressing the year 2000 issue in their own systems. The ability of the
Company's systems to operate, including the ability of the Company to provide
wireless service, is dependent upon these third party networks and systems being
year 2000 compliant, as to which there can be no assurance.
The Company has taken an active role in working with industry groups to develop
procedures to test the interconnection among different wireless networks and
between certain wireless networks and landline telecommunications networks. The
Company expects these tests to take place at the end of 1998 and in the first
quarter of 1999.
Costs
The Company currently expects to incur incremental consolidated pre-tax expenses
of $75 million through the end of 1999 to implement its plan for its
consolidated mission critical systems to address the year 2000 issue. Of that
amount, the Company has incurred approximately $16 million in expenses through
September 30, 1998. The substantial majority of the remaining expenses will be
incurred in the fourth quarter of 1998 and the first half of 1999. Additionally,
the Company will incur capitalized costs that represent ongoing investment in
new systems and system upgrades, the timing of which is being accelerated in
order to facilitate year 2000 compliance and which are not expected to have a
material impact on the Company's financial position or results of operations.
The Company's cost estimate assumes that the Company and its third party
suppliers have accurately assessed the compliance of the components and systems
for which they are responsible and that they will successfully correct the issue
in non-compliant components and systems. Because of the complexity of correcting
the year 2000 issue, actual costs may vary from this estimate.
The Company has also redeployed internal resources to address the year 2000
issue, resulting in the placement of other non-critical IT projects on a lower
priority status pending completion of the year 2000 project. The Company does
not expect the delay in these non-critical IT projects to have an adverse effect
on the Company's results of operations or financial condition.
Contingency Plans
The Company is in the process of identifying business functions most vulnerable
to failure based upon the number and complexity of the modifications to the
systems supporting those functions. It will be in a better position to assess
its most reasonably likely worst case scenario once it has completed this
process. The Company is also developing processes intended to quickly identify
the cause of any disruptions to its mission critical systems in the year 2000.
The Company plans to create contingency plans in the first half of 1999 for
those business functions that it identifies as most susceptible to disruption.
There can be no assurance that these contingency plans will successfully avoid
service disruption.
Risks
If the Company or its suppliers are unsuccessful in their efforts to correct or
cause to be corrected the Company's mission critical systems or if third parties
with whom the Company's systems interconnect do not correct their systems, the
Company could experience significant disruption to its operations. This could
include the disruption of the Company's ability to provide wireless service and
to correctly bill customers, resulting in potential revenue loss and increased
costs. Such an outcome could have a material adverse effect on the Company's
financial condition or results of operations.
24
<PAGE> 25
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
Early Vesting of Restricted Shares
As previously disclosed in the Notes to the Company's Financial Statements
included in the Company's 1997 Annual Report on Form 10-K, the Company has
granted certain restricted stock awards to those employees not eligible to
receive stock options. These awards provide for early vesting if the Company
meets certain "stretch" targets for its common stock price or its operating cash
flows. Given the volatility of the stock market, it is difficult to estimate
when and if the common stock price target will be met. However, if the common
stock price target is met earlier than anticipated, the Company would need to
accelerate the recognition of compensation expense, which could be material to
the results in the quarter in which this occurs.
Market Risk
Please see the Contingencies section of the Company's 1997 Annual Report on Form
10-K for a complete discussion and analysis of the Company's market risks. These
risks include unfavorable movements in interest rates, foreign currency exchange
rates, and equity prices. The changes to the market risks as of September 30,
1998, related to the additional debt incurred in conjunction with the Merger are
described in the following paragraphs; otherwise, there have been no additional
material changes to the market risks described at December 31, 1997.
Additionally, the Company does not anticipate any near-term changes in the
nature of its market risk exposures or in management's objectives and strategies
with respect to managing such exposures.
Interest and Foreign Exchange Rate Risks
As of September 30, 1998, the Company's financial instruments that are subject
to interest and foreign currency exchange rate risks included long-term debt
with an aggregate fair value of $2.9 billion and forward contracts with an
aggregate positive market value of $6 million. This represents an increase in
the total aggregate value of approximately $1.5 billion from December 31, 1997,
and primarily represents the increase in long-term debt associated with the
Merger.
With respect to foreign exchange rate risk, the "value-at-risk" ("VAR") for the
Company's debt instruments and forward contracts were $24 million and $55
million, respectively. With respect to interest rate risk, the VAR for the
Company's debt instruments and forward contracts were $112 million and $23
million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company defines liquidity as its ability to generate resources to finance
business expansion, construct capital assets, and pay its current obligations.
The Company requires substantial capital to operate and expand its existing
wireless systems, to construct new wireless systems, and to acquire interests in
existing wireless systems.
Capital Spending, Debt Service, Net Distribution, and Dividend Requirements for
the First Nine Months of 1998
The Company spent $700 million during the first nine months of 1998 for
additions to property, plant, and equipment primarily to increase its cellular
and paging network system capacity. The Company invested an additional $626
million during the first nine months of 1998 to expand and build-out the
cellular and PCS networks, to purchase interests in certain cellular systems,
and to fund other capital requirements related to its unconsolidated systems.
Cash payments for debt service during the first nine months of 1998 amounted to
approximately $105 million. The Company also paid $70 million in net
distributions to holders of minority interests of its consolidated wireless
systems and $60 million for preferred dividends during the first nine months of
1998.
Other Requirements
In October 1997, the Company's Board of Directors authorized the repurchase of
up to $1 billion of AirTouch common and preferred stock. During the nine-month
period ended September 30, 1998, the Company spent $66 million to repurchase its
common stock. The Company plans to continue to buy shares on the open market
from time to time, based on market conditions.
Funding - First Nine Months of 1998
Cash flows from operating activities of approximately $1.2 billion, proceeds
from the issuance of commercial paper and short-term and long-term debt, and
proceeds from the exercise of stock options were the primary sources utilized to
fund the above mentioned cash requirements.
Future Funding Requirements
Worldwide, the wireless industry continues to experience substantial subscriber
growth as evidenced by increasing penetration. In the U.S., subscribers appear
increasingly attracted to subscription plans that feature a large number of
minutes for a fixed monthly fee. In our international operations, new products
and services, such as prepaid services, have resulted in tremendous subscriber
growth. Finally, as competition spurs prices lower, wireline minutes may migrate
to the wireless carriers. All the above trends will result in increased wireless
usage which in turn could put upward pressure on the capital required to expand
the network infrastructures of the Company's
25
<PAGE> 26
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
consolidated and unconsolidated wireless systems.
The Company will continue to be required to make substantial expenditures in
connection with its efforts to expand its existing wireless business and,
potentially, to pursue opportunities to expand into new markets. For the
remainder of 1998, U.S. and international requirements for capital expenditures
and contributions to existing wireless systems are expected to be approximately
$494 million.
Consolidated Expenditures
The Company plans to incur significant capital expenditures in its consolidated
U.S. markets for expansion of its analog and Code Division Multiple Access
("CDMA") digital wireless networks to meet current and future capacity
requirements resulting from both subscriber growth and increased network use.
The Company now offers CDMA digital cellular service in all its major AirTouch
Cellular U.S. markets.
The Company expects its annual capital expenditures for digital technology to
continue to be greater than its annual capital expenditures for analog
technology for the foreseeable future. The Company plans to maintain and, as
required, expand its analog networks and to offer dual-mode (analog/CDMA
digital), dual-band (cellular/PCS frequencies) handsets in each of its U.S.
digital markets to facilitate the greatest possible roaming capabilities for its
customers.
The Company's existing U.S. and international operations were committed to spend
approximately $178 million at September 30, 1998 for the acquisition of
property, plant, and equipment. In addition to these commitments, the Company
plans to make additional capital expenditures of approximately $235 million
during the remainder of 1998 to increase the capacity of its existing wireless
networks and to continue its expansion of CDMA digital technology. The Company
is also committed to spend approximately $147 million at September 30, 1998, for
the purchase of cellular handsets, pagers, and other items.
In addition, the Federal Communications Commission ("FCC") has adopted rules
requiring carriers such as the Company to provide customers in the U.S. with
local number portability, the ability for customers to retain their telephone
numbers if they choose to switch landline or wireless carriers. Providing this
functionality will result in additional capital requirements and operating
expenses in future years. FCC rules require the Company to provide certain local
number portability services by December 31, 1998, and to provide complete local
number portability services by June 30, 1999. The FCC has recently extended the
June 30, 1999 date to March 31, 2000. The Company and certain wireless industry
groups have petitioned the FCC for a delay in the March 31, 2000 implementation
date. The Company has not yet fully assessed the cost of complying with the
FCC's number portability rules; such costs could be material to the Company's
results of operations or financial position in future reporting periods.
The Company will also be required to upgrade its wireless networks in the U.S.
to provide certain functionality to authorized law enforcement agencies. In this
regard, the FCC has adopted rules requiring wireless carriers to electronically
provide "Emergency 911" authorities with the physical location of wireless
callers requesting emergency assistance. In addition, the Communications
Assistance Law Enforcement Act ("CALEA") will require the Company to provide law
enforcement agencies with certain network functionality and other assistance in
criminal investigations, including digital wiretapping capabilities. The FCC
rules concerning "Emergency 911" services and CALEA both require the responsible
government agencies to reimburse the Company for its costs incurred to upgrade
its networks and to provide on-going assistance to law enforcement agencies;
however, the Company can provide no assurance that all such costs will be
recoverable.
Unconsolidated Wireless Systems
As of September 30, 1998, commitments for capital contributions to existing
unconsolidated wireless systems were not significant. However, the Company plans
to make additional capital contributions of approximately $81 million during the
remainder of 1998 to certain of its existing unconsolidated wireless systems,
including contributions to PrimeCo to fund its operating losses and the
continuing build-out of its CDMA PCS networks.
The Company continually evaluates opportunities to increase its ownership
interests in its existing international wireless systems and to acquire
interests in new international wireless licenses, either of which could result
in incremental capital commitments.
Financing Sources
The Company has a commercial paper program in place that consists of discounted
notes that are exempt from registration under the Securities Act of 1933. The
Company's Board of Directors authorized the issuance of commercial paper in
amounts necessary to finance the Company's working capital requirements,
provided that the amount outstanding under the commercial paper program,
together with all indebtedness incurred under the Company's $2
26
<PAGE> 27
AirTouch Communications, Inc. and Subsidiaries
Management's Discussion and Analysis
billion long-term revolving credit facility (the "Facility"), does not in the
aggregate exceed $2 billion.
Other financing sources available to the Company include various forms of debt
and equity securities that have been registered with the Securities and Exchange
Commission under a Registration Statement on Form S-3 filed in June 11, 1998
(Reg. No. 333-56645). The total amount available under this Registration
Statement is $2.5 billion and, as of September 30, 1998, approximately $800
million remains for future debt and equity issuances under the Registration
Statement. In addition to these sources, the Company also has access to
international capital markets, as evidenced by the Company's issuance of 400
million Deutsche Mark Eurobonds in July 1998. (See Note B on page 6).
Funding of Future Requirements
The Company anticipates cash flows from operations to be its primary source of
funding for capital requirements of its existing operations, debt service, and
preferred dividends through the end of 1998. However, should additional funding
be required due to the award of one or more new international cellular licenses,
new investment opportunities, other unanticipated events, or the repurchase of
AirTouch common or preferred stock, the Company may raise the required funds
through borrowings or public or private sales of debt or equity securities. Such
funding may be obtained through borrowings under the Facility; through the
Company's commercial paper program; from additional securities which may be
issued from time to time under the Registration Statement; through the issuance
of securities in a transaction exempt from registration under the Securities Act
of 1933; or a combination of one or more of the foregoing. The Company believes,
that in the event of such requirements, it will be able to access the capital
markets on terms and in amounts adequate to meet its objectives. However, given
the possibility of changes in market conditions or other occurrences, there can
be no certainty that such funding will be available in quantities or on terms
favorable to the Company.
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AIRTOUCH COMMUNICATIONS, INC.:
We have reviewed the accompanying Consolidated Balance Sheets of AirTouch
Communications, Inc. and subsidiaries ("Company") as of September 30, 1998 and
the related Consolidated Statements of Income and of Cash Flows for the
three-month and nine-month periods ended September 30, 1998 and 1997. These
Consolidated Financial Statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists primarily of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying Consolidated Financial Statements for them to be in
conformity with generally accepted accounting principles.
Our reviews were made for the purpose of expressing limited assurance on the
Consolidated Financial Statements taken as a whole. The Selected Proportionate
Financial Data ("Proportionate Financial Data") for the three-month and
nine-month periods ended September 30, 1998 and 1997 appearing on page 11 is
presented for additional analysis and is not a required part of the basic
financial statements. As discussed in the Footnotes to the Proportionate
Financial Data, the Proportionate Financial Data has been prepared by the
Company to present financial information that, in the opinion of management, is
not provided by financial statements prepared in conformity with generally
accepted accounting principles. Such Proportionate Financial Data, prepared on
the basis of presentation described in the Footnotes to the Proportionate
Financial Data, has been subjected to the inquiry and analytical procedures
applied in the review of the basic financial statements. Based on our reviews,
we are not aware of any material modifications that should be made to such
information in relation to the basic Consolidated Financial Statements taken as
a whole.
We previously audited in accordance with generally accepted auditing standards,
the Consolidated Balance Sheet as of December 31, 1997, and the related
Consolidated Statements of Income, of Stockholders' Equity, and of Cash Flows
for the year then ended (not presented herein), and in our report dated March 2,
1998 we expressed an unqualified opinion on those Consolidated Financial
Statements. In our opinion, the information set forth in the accompanying
Consolidated Balance Sheet information as of December 31, 1997, is fairly stated
in all material respects in relation to the Consolidated Balance Sheet from
which it has been derived.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
November 6, 1998
28
<PAGE> 29
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Footnote E, "Contingencies", in the Notes to Consolidated Financial
Statements
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Stockholder Proposals. In accordance with Rule 14a-4(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in order
for a stockholder proposal not included in the Company's proxy statement
under Rule 14a-8 to be "timely" within the meaning of Rule 14a-4(c) under
the Exchange Act, such proposal must be submitted in accordance with the
procedures set forth in the Company's By-laws, which include the
requirement that the proposal be received by the Company not less than 75
days prior to the date of the annual meeting of stockholders or, if less
than 90 days prior public disclosure of the meeting date is given, by the
earlier of (a) close of business on the 15th day following the day on which
such public disclosure was made and (b) two days prior to the date of the
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits identified below are incorporated herein by reference as exhibits
hereto.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
10.1 Representative Employment Agreement for Messrs. Sarin, Gyani, Jones, Farrill and Mrs. Gill
10.2 Representative Employment Agreement for other officers
10.3 Employment Agreement between the Company and Sam Ginn
10.4 AirTouch Communications, Inc. Deferred Compensation Plan for Nonemployee Directors
10.5 Amendment No. 1 to the AirTouch Communications, Inc. Supplemental Executive Pension Plan - Second
Amendment and Restatement Effective as of April 1, 1994
10.6 AirTouch Communications, Inc. Executive Life Insurance Plan
10.7 AirTouch Communications, Inc. Executive Long-Term Disability Plan
10.8 AirTouch Communications, Inc. Estate Deferral Program
15.1 Letter of PricewaterhouseCoopers LLP Re: Unaudited Interim Financial Information
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
Date of Report: July 22, 1998
Item 5. Other Events and Item 7. Financial Statements and
Exhibits.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AIRTOUCH COMMUNICATIONS, INC.
By: /s/ Mohan S. Gyani
Mohan S. Gyani
Executive Vice President and
Chief Financial Officer
Date: November 6, 1998
30
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1 Representative Employment Agreement for Messrs. Sarin, Gyani,
Jones, Farrill and Mrs. Gill
10.2 Representative Employment Agreement for other officers
10.3 Employment Agreement between the Company and Sam Ginn
10.4 AirTouch Communications, Inc. Deferred Compensation Plan for
Nonemployee Directors
10.5 Amendment No. 1 to the AirTouch Communications, Inc.
Supplemental Executive Pension Plan - Second
Amendment and Restatement Effective as of April 1, 1994
10.6 AirTouch Communications, Inc. Executive Life Insurance Plan
10.7 AirTouch Communications, Inc. Executive Long-Term Disability Plan
10.8 AirTouch Communications, Inc. Estate Deferral Program
15.1 Letter of PricewaterhouseCoopers LLP Re: Unaudited Interim
Financial Information
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the ____ day of ___________, 199_ by and
between ___________________ ("Employee") and AIRTOUCH COMMUNICATIONS, INC., a
Delaware corporation (the "Corporation").
For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT
(Sections 1-5, beginning on page 2)
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
(Sections 6-8, beginning on page 6)
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
(Sections 9-12, beginning on page 9)
FOURTH PART: PARACHUTE PAYMENTS
(Sections 13-14, beginning on page 13)
FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE
PAGE (Sections 15-17, beginning on page 15)
-1-
<PAGE> 2
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT
SECTION 1: TERM OF EMPLOYMENT
(a) Basic Rule. The Corporation agrees to continue the Employee's
employment, and the Employee agrees to remain in employment with the
Corporation, from ________ __, 199_, until the earliest of:
(1) The date of the Employee's death; or
(2) The date when the Employee's employment terminates pursuant to
Subsection (b), (c), (d) or (e) below.
(b) Early Termination or Resignation. The Corporation may terminate the
Employee's employment for any reason by giving the Employee not less
than 30 days' advance notice in writing. The Employee may terminate the
Employee's employment for any reason by giving the Corporation not less
than 30 days' advance notice in writing.
(c) Termination for Cause. The Corporation may terminate the Employee's
employment at any time for Cause shown by giving the Employee not less
than 30 days' advance notice in writing. For all purposes under this
Agreement, "Cause" shall mean (1) a willful failure by the Employee to
substantially perform the Employee's duties under this Agreement, other
than a failure resulting from the Employee's complete or partial
incapacity due to physical or mental illness or impairment, (2) a
willful act by the Employee that constitutes gross misconduct and that
is injurious to the Corporation, (3) a willful breach by the Employee
of a material provision of this Agreement or (4) a material and willful
violation of a federal or state law or regulation applicable to the
business of the Corporation. No act, or failure to act, by the Employee
shall be considered "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the
Corporation's best interest.
(d) Termination for Disability. The Corporation may terminate the
Employee's employment for Disability by giving the Employee not less
than six months' advance notice in writing. For all purposes under this
Agreement, "Disability" shall mean that the Employee, at the time
notice is given, has been unable to perform the Employee's duties under
this Agreement for a period of not less than six consecutive months as
the result of the Employee's incapacity due to physical or mental
illness. In the event that the Employee resumes the performance of
substantially all of the Employee's duties under this Agreement before
the termination of the Employee's employment under this Section becomes
effective, the notice of termination shall automatically be deemed to
have been revoked.
(e) Notice. For all purposes under this Section 1, the employment
relationship shall terminate on the date specified in the notice of
termination. Any waiver of notice
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shall be valid only if it is made in writing and expressly refers to
the applicable notice requirement of this Section 1. If the Corporation
specifies a termination date that is earlier than the minimum advance
notice date required under Subsection (b), (c) or (d) (as applicable),
then the Employee is entitled to pay and benefits in lieu of the
omitted period of advance notice.
(f) Termination of Agreement. This Agreement shall expire when all
obligations of the parties hereunder have been satisfied.
(1) In General. In addition, except as described in Paragraph 2
below, either the Corporation or the Employee may terminate
this Agreement for any reason, and without affecting the
Employee's status as an employee, by giving the other party
one year's advance notice in writing.
(2) After a Change In Control. If a Change in Control occurs, the
Corporation may not provide notice of termination of this
Agreement under Paragraph (1) above within the two-year period
after the Change In Control. In other words, in this case, the
effective date of the termination of the Agreement may be no
earlier than three years after the Change in Control. For all
purposes under this Agreement, the term "Corporation" shall
include any successor to the Corporation's business and/or
assets that executes and delivers the assumption agreement
described in Subsection 16(a) of this Agreement or that
becomes bound by this Agreement by operation of law.
A termination of this Agreement pursuant to this Subsection (f) shall
be effective for all purposes at the end of the notice period, except
that such termination shall not effect the payment or provision of
compensation or benefits under this Agreement on account of a
termination of employment occurring prior to the termination of this
Agreement.
SECTION 2: DUTIES AND SCOPE OF EMPLOYMENT
(a) Position. The Corporation agrees to employ the Employee for the term of
employment under this Agreement in the position of _________________
(as such position was defined in terms of responsibilities and
compensation as of the effective date of this Agreement) or in another
position offering comparable compensation either with the Corporation,
a Subsidiary, an Affiliate or a Joint Venture. The Corporation,
Subsidiary, Affiliate or Joint Venture directly employing the Employee
is referred to in this Agreement as the "Employing Entity," and the
Corporation, its Subsidiaries, Affiliates and Joint Ventures are
referred to, in the aggregate, in this Agreement as the "AirTouch
Group."
For all purposes under this Agreement, the terms "Affiliate,"
"Subsidiary" and "Joint Venture" shall mean the following:
(1) "Affiliate" shall mean any entity other than a Subsidiary, if
the Corporation and/or one or more Subsidiaries own(s) not
less than 50% of such entity.
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(2) "Subsidiary" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning
with the Corporation, if each of the corporations other than
the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(3) "Joint Venture" shall mean any entity (other than a Subsidiary
or Affiliate) in which the Corporation and/or one or more
Subsidiaries and/or one or more Affiliates has a direct or
indirect ownership interest.
(b) Obligations. During the term of employment under this Agreement, the
Employee shall devote the Employee's full business efforts and time to
the Employing Entity and the AirTouch Group. The foregoing shall not
preclude the Employee from engaging in appropriate civic, charitable or
religious activities or from devoting a reasonable amount of time to
private investments or from serving on the boards of directors of other
entities, as long as such activities and service do not interfere or
conflict with the Employee's responsibilities to the Employing Entity
and the AirTouch Group.
SECTION 3: BASE COMPENSATION
During the term of employment under this Agreement, the Corporation agrees to
pay (itself or through the Employing Entity) the Employee as compensation for
services a base salary at the annual rate of $___,___, or at such higher rate as
the Corporation's Compensation and Personnel Committee of the Board of Directors
may determine from time to time. Such salary shall be payable in accordance with
the standard payroll procedures of the Employing Entity. Once the Corporation's
Compensation and Personnel Committee of the Board of Directors has increased
such salary, it thereafter shall not be reduced; provided, however, that if a
Change in Control has not occurred, such salary (including any increases) may be
reduced by the Corporation if (1) the Employee commits an act or omission that
meets the definition of Cause, as defined in Section 1(c), or (2) the Employee
and all other officers of the Corporation who are parties to written employment
agreements containing substantially the same provisions as this Agreement have
their salaries (including any increases) reduced by the same percentage amount
for the same time period. The annual compensation specified in this Section 3,
together with any increases in such compensation that the Compensation and
Personnel Committee of the Board of Directors of the Corporation may grant from
time to time, and together with any reductions made in accordance with this
Section 3, is referred to in this Agreement as "Base Compensation."
SECTION 4: EMPLOYEE BENEFITS
(a) In General. During the term of employment under this Agreement, the
Employee shall be eligible to participate in the employee benefit plans
and executive compensation programs maintained by the Employing Entity,
including (without limitation) pension plans, savings or profit-sharing
plans, deferred compensation plans, supplemental retirement or
excess-benefit plans, stock option, incentive or other bonus plans,
life, disability, health, accident and other insurance programs, paid
vacations, and similar plans or programs, subject in each case to the
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generally applicable terms and conditions of the plan or program in
question and to the discretion and determinations of any person,
committee or entity administering such plan or program.
(b) Accelerated Vesting in Incentive Awards in Case of a Change in Control
of the Corporation. If, during the term of this Agreement, a Change in
Control (as defined in Section 12) occurs with respect to the
Corporation, then each of the incentive awards heretofore or hereafter
granted to the Employee by the members of the AirTouch Group or their
delegates shall become fully vested, fully exercisable or fully
payable, as the case may be, any contrary provisions of such awards or
the applicable plan notwithstanding. The term "incentive award" shall
include, without limitation, all awards under the AirTouch
Communications, Inc. 1993 Long-Term Stock Incentive Plan, all other
awards with respect to equity or derivative securities of the AirTouch
Group, and all cash incentive awards, other than incentive awards
payable under the AirTouch Communications Incentive Plan.
(c) Accelerated Vesting in Supplemental Pension Benefits in Case of a
Change in Control of the Corporation. If, during the term of this
Agreement, a Change in Control (as defined in Section 12) occurs with
respect to the Corporation, then all of the Employee's supplemental
pension benefits shall become fully vested, any contrary provisions of
the applicable plan notwithstanding. The term "supplemental pension
benefit" shall include, without limitation, all retirement benefits
provided under a plan or program of the AirTouch Group that is not
intended to qualify under section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
SECTION 5: BUSINESS EXPENSES AND TRAVEL
During the term of employment under this Agreement, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with the Employee's duties hereunder. The
Employing Entity shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with generally applicable policies.
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SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
SECTION 6: TERMINATIONS NOT RELATING TO A CHANGE IN CONTROL
This Second Part of the Agreement, consisting of Sections 6 through 8, describes
the benefits and compensation, if any, payable in case of termination of
employment that does not relate to a Change in Control (as defined in Section
12). The Third Part of the Agreement, consisting of Sections 9 through 12,
describes benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control. If benefits and compensation are
payable under this Second Part, then no benefits and compensation are payable
under the Third Part.
SECTION 7: INVOLUNTARY TERMINATION WITHOUT CAUSE OR DISABILITY
In the event that, during the term of this Agreement, the Corporation or
Employing Entity terminates the Employee's employment with the AirTouch Group
for any reason other than Cause or Disability, and such termination does not
relate to a Change in Control, then, after executing the release of claims
described in Section 7(e), the Employee shall be entitled to receive the
following payments and benefits:
(a) Severance (1-1/2x payment). The Corporation shall pay to the Employee
in a lump sum, not less than 31 days nor more than 120 days following
the date of the employment termination, an amount equal to the
following:
(1) One and one-half times the Employee's Base Compensation in
effect on the date of the employment termination; plus
(2) 150% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (a) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(b) Eighteen months of Life Insurance and Health Plan Coverage. The
coverage described in this Subsection (b) shall be provided for a
"Continuation Period" beginning on the date when the employment
termination is effective and ending on the earlier of (1) the 18-month
anniversary of the date when the employment termination is effective or
(2) the date of the Employee's death. During the Continuation Period,
the Employee (and, where applicable, the Employee's dependents) shall
be entitled to continue participation in the basic and supplemental
group term life insurance plan and in the health care plan for
employees maintained by the Employing Entity as if the Employee were
still an employee of the Employing Entity, but only if the Employee
does not elect any
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continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal to the Employee's compensation (as defined in such plans)
in effect on the date of the employment termination. To the extent that
the Corporation finds it undesirable to cover the Employee under the
group life insurance and health plans of the AirTouch Group, the
Corporation shall provide the Employee (at its own expense) with the
same level of coverage under individual policies.
(c) Incentive Programs. The period (the "Extension Period") beginning on
the date when the termination of employment is effective and ending on
the earlier of (1) the one-year anniversary of the date when the
employment termination is effective or (2) the date of the Employee's
death shall be counted as employment with the Corporation for purposes
of vesting in each of the incentive awards heretofore or hereafter
granted to the Employee by the members of the AirTouch Group or their
delegates, any contrary provisions of such awards or the applicable
plan notwithstanding. The term "incentive award" shall include, without
limitation, all awards under the AirTouch Communications, Inc. 1993
Long-Term Stock Incentive Plan, all other awards with respect to equity
or derivative securities of the AirTouch Group, and all cash incentive
awards, other than incentive awards payable under the AirTouch
Communications Incentive Plan. This Subsection shall not be construed
to require any member of the AirTouch Group to grant any new awards to
the Employee during the Extension Period. The parties understand and
agree that the Extension Period also counts as employment with the
Corporation for purposes of determining the expiration date of any
incentive award granted by any member of the AirTouch Group or its
delegate and held by the Employee when employment terminates.
(d) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to such termination of employment.
(e) Release of Claims. As a condition to the receipt of the payments and
benefits described in this Section 7, the Employee shall be required to
execute a release of all claims arising out of the Employee's
employment or the termination thereof including, but not limited to,
any claim of discrimination under state or federal law.
(f) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 7, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
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SECTION 8: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 7, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 8 applies, without limitation, to any termination of employment
initiated by the Employee, termination of employment caused by the Employee's
death or Disability, termination of the Employee for Cause, and any constructive
termination.
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<PAGE> 9
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
SECTION 9: TERMINATIONS RELATING TO A CHANGE IN CONTROL
This Third Part of the Agreement, consisting of Sections 9 through 12, describes
the benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control (as defined in Section 12). The
Second Part of the Agreement, consisting of Sections 6 through 8, describes
benefits and compensation, if any, payable in case of termination that does not
relate to a Change in Control. If benefits and compensation are payable under
this Third Part, then no benefits and compensation are payable under the Second
Part.
SECTION 10: INVOLUNTARY ACTUAL OR CONSTRUCTIVE TERMINATION WITHOUT CAUSE
In the event that, during the term of this Agreement, the Employee's employment
terminates in a Qualifying Termination, as defined in Subsections (a) and (b),
the Employee shall be entitled to receive the payments and benefits described in
Subsections (c), (d), (e) and (f).
(a) Qualifying Termination After a Change in Control.
(1) A Qualifying Termination occurs if the Corporation or
Employing Entity terminates the Employee's employment with the
AirTouch Group for any reason including, without limitation,
Cause or Disability within three years after a Change in
Control;
(2) A Qualifying Termination also includes a "Constructive
Termination," which means a material reduction in salary or
benefits, a material change in responsibilities, or a
requirement to relocate, except for office relocations that
would not increase the Employee's one-way commute distance by
more than 40 miles. For the purpose of defining a
"Constructive Termination," a material reduction in salary or
benefits is deemed to occur if the Employee's Base
Compensation or benefits are reduced by 20% or more; or
(3) A Qualifying Termination occurs if during the term of this
Agreement and during the 13th full calendar month after the
occurrence of a Change in Control, the Employee voluntarily
separates from employment with the AirTouch Group for any
reason.
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<PAGE> 10
(b) Qualifying Termination Prior to a Change in Control.
A Qualifying Termination (as defined in Subsection (a)) also occurs
prior to a Change in Control if:
(1) The Qualifying Termination occurs after the Corporation has
publicly announced a definitive agreement with a third party to
effectuate a Change in Control; and
(2) The Employee reasonably demonstrates that the Qualifying
Termination occurred at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control or otherwise arose in connection with,
or in anticipation of, a Change in Control.
(c) Severance (3x payment). The Corporation shall pay to the Employee in a
lump sum, not less than 31 days nor more than 120 days following the
date of the employment termination, an amount equal to the following:
(1) Three times the Employee's Base Compensation in effect on the
date of the employment termination; plus
(2) 300% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (c) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(d) Three Years of Life Insurance and Health Plan Coverage. The coverage
described in this Subsection (d) shall be provided for a "Continuation
Period" beginning on the date when the employment termination is
effective and ending on the earlier of (1) the third anniversary of the
date when the employment termination is effective or (2) the date of
the Employee's death. During the Continuation Period, the Employee
(and, where applicable, the Employee's dependents) shall be entitled to
continue participation in the basic and supplemental group term life
insurance plan and in the health care plan for employees maintained by
the Employing Entity as if the Employee were still an employee of the
Employing Entity, but only if the Employee does not elect any
continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal to the Employee's compensation (as defined in such plans)
in effect on the date of the employment termination. To the extent that
the Corporation finds it undesirable to cover the Employee under the
group life insurance and health plans of the AirTouch Group, the
Corporation shall provide the Employee (at its own expense) with the
same level of coverage under individual policies.
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(e) Incentive Programs. The period (the "Extension Period") beginning on
the date when the termination of employment is effective and ending on
the earlier of (1) the one-year anniversary of the date when the
employment termination is effective or (2) the date of the Employee's
death shall be counted as employment with the Corporation for purposes
of determining the expiration date of any incentive award granted by
any member of the AirTouch Group or its delegate and held by the
Employee when employment terminates, any contrary provisions of such
awards or the applicable plan notwithstanding. The term "incentive
award" shall include, without limitation, all awards under the AirTouch
Communications, Inc. 1993 Long-Term Stock Incentive Plan, all other
awards with respect to equity or derivative securities of the AirTouch
Group, and all cash incentive awards, other than incentive awards
payable under the AirTouch Communications Incentive Plan. This
Subsection shall not be construed to require any member of the AirTouch
Group to grant any new awards to the Employee during the Extension
Period.
(f) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to the Change in Control.
(g) Penalty for Late or Refused Payment. If the Corporation refuses or
fails to timely pay or provide the compensation and benefits specified
in this Section 10 upon demand as provided in Section 17(c), and if
such refusal or failure is not corrected within 10 business days after
the Employee provides written notice to the Corporation concerning the
refusal or failure, then the Corporation shall pay immediately to the
Employee an additional amount equal to 50% of the Employee's Base
Compensation. This provision shall apply only once.
(h) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 10, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
SECTION 11: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 10, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 11 applies, without limitation, to any termination of employment
initiated by the Employee (except an Employee-initiated termination that is
described in Paragraph (2) or (3) of Section 10(a)), a termination of employment
caused by the Employee's death, or any constructive termination that does not
meet the requirements of a "Constructive Termination" defined in Paragraph (2)
of Section 10(a).
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SECTION 12: DEFINITION OF CHANGE IN CONTROL
For all purposes under this Agreement, "Change in Control" shall mean a "Change
in Control" of the Corporation, as defined in the AirTouch Communications, Inc.
1993 Long-Term Stock Incentive Plan (or the successor to such plan).
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FOURTH PART: PARACHUTE PAYMENTS
SECTION 13: GROSS-UP PAYMENT.
In the event it is determined that any payment or distribution of any type to or
for the benefit of the Employee, pursuant to this Agreement or otherwise, by the
Corporation, any member of the AirTouch Group, any Person who acquires ownership
or effective control of the AirTouch Group, or ownership of a substantial
portion of the assets of the AirTouch Group (within the meaning of section 280G
of the Code and the regulations thereunder) or any affiliate of such Person (the
"Total Payments") would be subject to the excise tax imposed by section 4999 of
the Code or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that, after
payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Total Payments.
SECTION 14: DETERMINATION BY ACCOUNTANT
All mathematical determinations and determinations as to whether any of the
Total Payments are "parachute payments" (within the meaning of section 280G of
the Code), in each case which determinations are required to be made under this
Section 14, including whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment, and amounts relevant to the last sentence of this Section 14,
shall be made by an independent accounting firm selected by the Employee from
amount the largest six accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide to the Corporation and to the Employee
its determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter, within five days after termination of the Employee's employment, if
applicable, or at such earlier time as is requested by the Corporation or the
Employee (if the Employee reasonably believes that any of the Total Payments may
be subject to the Excise Tax). If the Accounting Firm determines that no Excise
Tax is payable by the Employee, it shall furnish the Employee with a written
statement that such Accounting Firm has concluded that no Excise Tax is payable
(including the reasons therefor) and that the Employee has substantial authority
not to report any Excise Tax on the Employee's federal income tax return. If a
Gross-Up Payment is determined to be payable, it shall be paid to the Employee
within five days after the Determination is delivered to the Corporation or the
Employee. Any determination by the Accounting Firm shall be binding upon the
Corporation and the Employee, absent manifest error.
As a result of uncertainty in the application of section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments not made by the Corporation and members of the
AirTouch Group should have been made ("Underpayment"), or that Gross-Up Payments
were made by the Corporation and members of the AirTouch Group that should not
have been made
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("Overpayments"). In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the Corporation promptly shall pay, or cause to be paid, the
amount of such Underpayment to or for the benefit of the Employee. In the case
of an Overpayment, the Employee shall, at the direction and expense of the
Corporation, take such steps as are reasonably necessary (including the filing
of returns and claims for refund), follow reasonable instructions from, and
procedures established by, the Corporation, and otherwise reasonably cooperate
with the Corporation to correct such Overpayment; provided, however, that (1)
Employee shall not in any event be obligated to return to the Corporation an
amount greater than the net after-tax portion of the Overpayment that he has
retained or recovered as a refund from the applicable taxing authorities and (2)
this provision shall be interpreted in a manner consistent with the intent of
Section 13, which is to make the Employee whole, on an after-tax basis, from the
application of the Excise Tax, it being understood that the correction of an
Overpayment may result in the Employee repaying to the Corporation an amount
that is less than the Overpayment.
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FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
SECTION 15: CONFIDENTIAL INFORMATION
(a) Acknowledgement. The Corporation and the Employee acknowledge that the
services to be performed by the Employee under this Agreement are
unique and extraordinary and that, as a result of the Employee's
employment, the Employee will be in a relationship of confidence and
trust with the Corporation and will come into possession of
"Confidential Information" (1) owned or controlled by the AirTouch
Group, (2) in the possession of the AirTouch Group and belonging to
third parties or (3) conceived, originated, discovered or developed, in
whole or in part, by the Employee. As used herein "Confidential
Information" includes trade secrets and other confidential or
proprietary business, technical, personnel or financial information,
whether or not the Employee's work product, in written, graphic, oral
or other tangible or intangible forms, including but not limited to
specifications, samples, records, data, computer programs, drawings,
diagrams, models, customer names, business or marketing plans, studies,
analyses, projections and reports, communications by or to attorneys
(including attorney-client privileged communications), memos and other
materials prepared by attorneys or under their direction (including
attorney work product), and software systems and processes. Any
information that is not readily available to the public shall be
considered to be a trade secret and confidential and proprietary, even
if it is not specifically marked as such, unless the Corporation
advises the Employee otherwise in writing.
(b) Nondisclosure. The Employee agrees that the Employee will not, without
the prior written consent of the Corporation, directly or indirectly
use or disclose Confidential Information to any person, during or after
the Employee's employment, except as may be necessary in the ordinary
course of performing the Employee's duties under this Agreement. The
Employee will keep the Confidential Information in strictest confidence
and trust. This Section 15 shall apply indefinitely, both during and
after the term of this Agreement.
(c) Surrender Upon Termination. The Employee agrees that in the event of
the termination of the Employee's employment for any reason, the
Employee will immediately deliver to the Corporation (and/or other
members of the AirTouch Group, as applicable) all property belonging to
the AirTouch Group, including all documents and materials of any nature
pertaining to the Employee's work with the AirTouch Group, and will not
take with the Employee any documents or materials of any description,
or any reproduction thereof of any description, containing or
pertaining to any Confidential Information. It is understood that the
Employee is free to use information that is in the public domain (not
as a result of a breach of this Agreement).
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SECTION 16: SUCCESSORS
(a) Corporation's Successors. The Corporation shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Corporation's business and/or assets, by an agreement in substance
and form satisfactory to the Employee, to assume this Agreement and to
agree expressly to perform this Agreement in the same manner and to the
same extent as the Corporation would be required to perform it in the
absence of a succession. The Corporation's failure to obtain such
agreement prior to the effectiveness of a succession shall be a breach
of this Agreement and shall entitle the Employee to all of the
compensation and benefits to which the Employee would have been
entitled hereunder if the Corporation had involuntarily terminated the
Employee's employment without Cause or Disability, on the date when
such succession becomes effective.
(b) Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
SECTION 17: MISCELLANEOUS PROVISIONS
(a) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Corporation (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another
time.
(b) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) that are not
expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. In addition,
the Employee hereby acknowledges and agrees that this Agreement
supersedes in its entirety any employment agreement between the
Employee and the Corporation in effect immediately prior to the
effective date of this Agreement. As of the effective date of this
Agreement, such employment agreement shall terminate without any
further obligation by either party thereto, and the Employee hereby
relinquishes any further rights that the Employee may have had under
such prior employment agreement.
(c) Presumption. Subject to the provisions of Section 13, the Corporation
shall make or cause to be made a payment described in this Agreement
upon receiving written notice from the Employee describing such
payment, referring to the provision of this Agreement under which such
payment is claimed and certifying that all conditions for such payment,
as set forth in this Agreement, have been satisfied. The information so
furnished to the Corporation by the
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<PAGE> 17
Employee shall be presumed to be correct, subject to rebuttal by the
Corporation after payment. After making the payment claimed by the
Employee, the Corporation may seek a refund of such payment in
accordance with Subsection (h) below. This Subsection (c) shall not be
used to cause a payment to be made at a time earlier than provided in
this Agreement.
(d) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall be addressed to the Employee
at the home address that the Employee most recently communicated to the
Corporation in writing. In the case of the Corporation, mailed notices
shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(e) No Setoff. There shall be no right of setoff or counterclaim, with
respect to any claim, debt or obligation, against payments to the
Employee under this Agreement.
(f) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California, irrespective of California's choice-of-law
principles.
(g) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
(h) Arbitration. Except as otherwise provided in Section 13, any dispute or
controversy arising out of the Employee's employment or the termination
thereof, including, but not limited to, any claim of discrimination
under state or federal law, shall be settled exclusively by arbitration
in San Francisco, California, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. The
foregoing notwithstanding, a dispute or controversy over whether Cause
exists for the termination of an Employee, whether such termination
occurred within three years after a Change in Control, or a dispute or
controversy over whether a Constructive Termination has occurred, shall
be arbitrated by a three-member panel of the outside directors of the
Corporation, with the selection of the panel to be made by the
Chairman, as of one year prior to the Change in Control, of the
Corporation's Board of Directors. If three such individuals are
unwilling to serve as arbitrators, the preceding sentence shall be
inapplicable, and all disputes and controversies shall be subject to
arbitration in accordance with the rules of the American Arbitration
Association, as provided above in this Subsection. For purposes of this
Subsection, "outside directors" shall mean members of the Board of
Directors of the Corporation, as such Board of Directors was
constituted one year prior to the Change in Control, who were not
employees of the Corporation or another member of the AirTouch Group
one year prior to the Change in Control.
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(i) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Subsection (i) shall be void.
(j) Employment at Will; Limitation of Remedies. The Corporation and the
Employee acknowledge that the Employee's employment is at will, as
defined under applicable law. If the Employee's employment terminates
for any reason, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by
this Agreement.
(k) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.
(l) Benefit Coverage Non-Additive. In the event that the Employee is
entitled to life insurance and health plan coverage under more than one
provision hereunder, only one provision shall apply, and neither the
periods of coverage nor the amounts of benefits shall be additive.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized officer, as of the day and year first
above written.
------------------------------------
Employee
AIRTOUCH COMMUNICATIONS, INC.
By
---------------------------------
Brian R. Jones
Its Senior Vice President, Human
Resources and Corporate Services
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 12th day of February, 1998, by and
between ______________ (the "Employee") and AIRTOUCH COMMUNICATIONS, INC., a
Delaware corporation (the "Corporation").
For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT (Sections 1-5, beginning on page 2)
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
(Sections 6-8, beginning on page 6)
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
(Sections 9-12, beginning on page 8)
FOURTH PART: PARACHUTE PAYMENTS (Sections 13-16, beginning on page 11)
FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
(Sections 17-19, beginning on page 13)
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<PAGE> 2
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT
SECTION 1: TERM OF EMPLOYMENT
(a) Basic Rule. The Corporation agrees to continue the Employee's
employment, and the Employee agrees to remain in employment with the
Corporation, from _____________ ___, 199_, until the earliest of:
(1) The date of the Employee's death; or
(2) The date when the Employee's employment terminates pursuant to
Subsection (b), (c), (d) or (e) below.
(b) Early Termination or Resignation. The Corporation may terminate the
Employee's employment for any reason by giving the Employee not less
than 30 days' advance notice in writing. The Employee may terminate the
Employee's employment for any reason by giving the Corporation not less
than 30 days' advance notice in writing.
(c) Termination for Cause. The Corporation may terminate the Employee's
employment at any time for Cause shown by giving the Employee notice in
writing and paying the Employee pay and benefits in lieu of advance
notice to the extent that notice of termination was not given at least
30 days in advance. For all purposes under this Agreement, "Cause"
shall mean (1) a willful failure by the Employee to substantially
perform the Employee's duties under this Agreement, other than a
failure resulting from the Employee's complete or partial incapacity
due to physical or mental illness or impairment, (2) a willful act by
the Employee that constitutes gross misconduct and that is injurious to
the Corporation, (3) a willful breach by the Employee of a material
provision of this Agreement or (4) a material and willful violation of
a federal or state law or regulation applicable to the business of the
Corporation. No act, or failure to act, by the Employee shall be
considered "willful" unless committed without good faith and without a
reasonable belief that the act or omission was in the Corporation's
best interest.
(d) Termination for Disability. The Corporation may terminate the
Employee's employment for Disability by giving the Employee not less
than six months' advance notice in writing. For all purposes under this
Agreement, "Disability" shall mean that the Employee, at the time
notice is given, has been unable to perform the Employee's duties under
this Agreement for a period of not less than six consecutive months as
the result of the Employee's incapacity due to physical or mental
illness. In the event that the Employee resumes the performance of
substantially all of the Employee's duties under this Agreement before
the termination of the Employee's employment under this Section becomes
effective, the notice of termination shall automatically be deemed to
have been revoked.
(e) Notice. For all purposes under this Section 1, the employment
relationship shall terminate on the date specified in the notice of
termination. Any waiver of notice shall be valid only if it is made in
writing and expressly refers to the applicable notice requirement of
this Section 1. If the Corporation specifies a termination date that is
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<PAGE> 3
earlier than the minimum advance notice date required under Subsection
(b), (c) or (d) (as applicable), then the Employee is entitled to pay
and benefits in lieu of the omitted period of advance notice.
(f) Termination of Agreement. This Agreement shall expire when all
obligations of the parties hereunder have been satisfied.
(1) In General. In addition, except as described in Paragraph 2
below, either the Corporation or the Employee may terminate
this Agreement for any reason, and without affecting the
Employee's status as an employee, by giving the other party
one year's advance notice in writing.
(2) After a Change In Control. If a Change in Control occurs, the
Corporation may not provide notice of termination of this
Agreement under Paragraph (1) above within the two-year period
after the Change In Control. In other words, in this case, the
effective date of the termination of the Agreement may be no
earlier than three years after the Change in Control. For all
purposes under this Agreement, the term "Corporation" shall
include any successor to the Corporation's business and/or
assets that executes and delivers the assumption agreement
described in Subsection 18(a) of this Agreement or that
becomes bound by this Agreement by operation of law.
A termination of this Agreement pursuant to this Subsection (f) shall
be effective for all purposes at the end of the notice period, except
that such termination shall not effect the payment or provision of
compensation or benefits under this Agreement on account of a
termination of employment occurring prior to the termination of this
Agreement.
SECTION 2: DUTIES AND SCOPE OF EMPLOYMENT
(a) Position. The Corporation agrees to employ the Employee for the term of
employment under this Agreement in the position of ___________________
(as such position was defined in terms of responsibilities and
compensation as of the effective date of this Agreement) or in another
position offering comparable compensation, either with the Corporation,
a Subsidiary, an Affiliate or a Joint Venture. The Corporation,
Subsidiary, Affiliate or Joint Venture directly employing the Employee
is referred to in this Agreement as the "Employing Entity," and the
Corporation, its Subsidiaries, Affiliates and Joint Ventures are
referred to, in the aggregate, in this Agreement as the "AirTouch
Group."
For all purposes under this Agreement, the terms "Affiliate,"
"Subsidiary" and "Joint Venture" shall mean the following:
(1) "Affiliate" shall mean any entity other than a Subsidiary, if
the Corporation and/or one or more Subsidiaries own(s) not
less than 50% of such entity.
(2) "Subsidiary" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning
with the Corporation, if each of the corporations other than
the last corporation in the unbroken chain owns stock
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<PAGE> 4
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(3) "Joint Venture" shall mean any entity (other than a Subsidiary
or Affiliate) in which the Corporation and/or one or more
Subsidiaries and/or one or more Affiliates has a direct or
indirect ownership interest.
(b) Obligations. During the term of employment under this Agreement, the
Employee shall devote the Employee's full business efforts and time to
the Employing Entity and the AirTouch Group. The foregoing shall not
preclude the Employee from engaging in appropriate civic, charitable or
religious activities or from devoting a reasonable amount of time to
private investments or from serving on the boards of directors of other
entities, as long as such activities and service do not interfere or
conflict with the Employee's responsibilities to the Employing Entity
and the AirTouch Group.
SECTION 3: BASE COMPENSATION
During the term of employment under this Agreement, the Corporation agrees to
pay (itself or through the Employing Entity) the Employee as compensation for
services a base salary at the annual rate of $___,___, or at such higher rate as
the Corporation's Compensation and Personnel Committee of the Board of Directors
may determine from time to time. Such salary shall be payable in accordance with
the standard payroll procedures of the Employing Entity. Once the Corporation's
Compensation and Personnel Committee of the Board of Directors has increased
such salary, it thereafter shall not be reduced; provided, however, that if a
Change in Control has not occurred, such salary (including any increases) may be
reduced by the Corporation if (1) the Employee commits an act or omission that
meets the definition of Cause, as defined in Section 1(c), or (2) the Employee
and all other officers of the Corporation who are parties to written employment
agreements containing substantially the same provisions as this Agreement have
their salaries (including any increases) reduced by the same percentage amount
for the same time period. The annual compensation specified in this Section 3,
together with any increases in such compensation that the Compensation and
Personnel Committee of the Board of Directors of the Corporation may grant from
time to time, and together with any reductions made in accordance with this
Section 3, is referred to in this Agreement as "Base Compensation."
SECTION 4: EMPLOYEE BENEFITS
(a) In General. During the term of employment under this Agreement, the
Employee shall be eligible to participate in the employee benefit plans
and executive compensation programs maintained by the Employing Entity,
including (without limitation) pension plans, savings or profit-sharing
plans, deferred compensation plans, supplemental retirement or
excess-benefit plans, stock option, incentive or other bonus plans,
life, disability, health, accident and other insurance programs, paid
vacations, and similar plans or programs, subject in each case to the
generally applicable terms and conditions of the plan or program in
question and to the discretion and determinations of any person,
committee or entity administering such plan or program.
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<PAGE> 5
(b) Accelerated Vesting in Incentive Awards in Case of a Change in Control
of the Corporation. If, during the term of this Agreement, a Change in
Control (as defined in Section 12) occurs with respect to the
Corporation, then each of the incentive awards heretofore or hereafter
granted to the Employee by the members of the AirTouch Group or their
delegates shall become fully vested, fully exercisable or fully
payable, as the case may be, any contrary provisions of such awards or
the applicable plan notwithstanding. The term "incentive award" shall
include, without limitation, all awards under the AirTouch
Communications, Inc. 1993 Long-Term Stock Incentive Plan, all other
awards with respect to equity or derivative securities of the AirTouch
Group, and all cash incentive awards other than incentive awards
payable under the AirTouch Communications Incentive Plan.
(c) Accelerated Vesting in Supplemental Pension Benefits in Case of a
Change in Control of the Corporation. If, during the term of this
Agreement, a Change in Control (as defined in Section 12) occurs with
respect to the Corporation, then all of the Employee's supplemental
pension benefits shall become fully vested, any contrary provisions of
the applicable plan notwithstanding. The term "supplemental pension
benefit" shall include, without limitation, all benefits under the
AirTouch Communications Supplemental Executive Pension Plan and all
other retirement benefits provided under a plan or program of the
AirTouch Group that is not intended to qualify under section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 5: BUSINESS EXPENSES AND TRAVEL
During the term of employment under this Agreement, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with the Employee's duties hereunder. The
Employing Entity shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with generally applicable policies.
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<PAGE> 6
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
SECTION 6: TERMINATIONS NOT RELATING TO A CHANGE IN CONTROL
This Second Part of the Agreement, consisting of Sections 6 through 8, describes
the benefits and compensation, if any, payable in case of termination of
employment that does not relate to a Change in Control (as defined in Section
12). The Third Part of the Agreement, consisting of Sections 9 through 12,
describes benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control. If benefits and compensation are
payable under this Second Part, then no benefits and compensation are payable
under the Third Part.
SECTION 7: INVOLUNTARY TERMINATION WITHOUT CAUSE OR DISABILITY
In the event that, during the term of this Agreement, the Corporation or
Employing Entity terminates the Employee's employment with the AirTouch Group
for any reason other than Cause or Disability, and such termination does not
relate to a Change in Control, then, after executing the release of claims
described in Section 7(d), the Employee shall be entitled to receive the
following payments and benefits:
(a) Severance (1x payment). The Corporation shall pay to the Employee in a
lump sum, not less than 31 days nor more than 120 days following the
date of the employment termination, an amount equal to the following:
(1) One times the Employee's Base Compensation in effect on the
date of the employment termination; plus
(2) 100% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (a) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(b) One Year of Life Insurance and Health Plan Coverage. The coverage
described in this Subsection (b) shall be provided for a "Continuation
Period" beginning on the date when the employment termination is
effective and ending on the earlier of (1) the first anniversary of the
date when the employment termination is effective or (2) the date of
the Employee's death. During the Continuation Period, the Employee
(and, where applicable, the Employee's dependents) shall be entitled to
continue participation in the basic and supplemental group term life
insurance plan and in the health care plan for employees maintained by
the Employing Entity as if the Employee were still an employee of the
Employing Entity, but only if the Employee does not elect any
continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal
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<PAGE> 7
to the Employee's compensation (as defined in such plans) in effect on
the date of the employment termination. To the extent that the
Corporation finds it undesirable to cover the Employee under the group
life insurance and health plans of the AirTouch Group, the Corporation
shall provide the Employee (at its own expense) with the same level of
coverage under individual policies.
(c) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to such termination of employment.
(d) Release of Claims. As a condition to the receipt of the payments and
benefits described in this Section 7, the Employee shall be required to
execute a release of all claims arising out of the Employee's
employment or the termination thereof including, but not limited to,
any claim of discrimination under state or federal law.
(e) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 7, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
SECTION 8: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 7, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 8 applies, without limitation, to any termination of employment
initiated by the Employee, termination of employment caused by the Employee's
death or Disability, termination of the Employee for Cause, and any constructive
termination.
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<PAGE> 8
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
SECTION 9: TERMINATIONS RELATING TO A CHANGE IN CONTROL
This Third Part of the Agreement, consisting of Sections 9 through 12, describes
the benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control (as defined in Section 12). The
Second Part of the Agreement, consisting of Sections 6 through 8, describes
benefits and compensation, if any, payable in case of termination that does not
relate to a Change in Control. If benefits and compensation are payable under
this Third Part, then no benefits and compensation are payable under the Second
Part.
SECTION 10: INVOLUNTARY ACTUAL OR CONSTRUCTIVE TERMINATION WITHOUT CAUSE
In the event that, during the term of this Agreement, the Employee's employment
terminates in a Qualifying Termination, as defined in Subsections (a) and (b),
the Employee shall be entitled to receive the payments and benefits described in
Subsections (c), (d) and (e).
(a) Qualifying Termination After a Change in Control.
(1) A Qualifying Termination occurs if the Corporation or Employing
Entity terminates the Employee's employment with the AirTouch
Group for any reason including, without limitation, Cause or
Disability within three years after a Change in Control.
(2) A Qualifying Termination also includes a "Constructive
Termination," which means a material reduction in salary or
benefits, a material change in responsibilities, or a requirement
to relocate, except for office relocations that would not increase
the Employee's one-way commute distance by more than 40 miles. For
the purpose of defining a "Constructive Termination," a material
reduction in salary or benefits is deemed to occur if the
Employee's Base Compensation or benefits are reduced by 20% or
more.
(b) Qualifying Termination Prior to a Change in Control. A Qualifying
Termination (as defined in Subsection (a)) also occurs prior to a
Change in Control if:
(1) The Qualifying Termination occurs after the Corporation has
publicly announced a definitive agreement with a third party to
effectuate a Change in Control; and
(2) The Employee reasonably demonstrates that the Qualifying
Termination occurred at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control or otherwise arose in connection with,
or in anticipation of, a Change in Control.
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<PAGE> 9
(c) Severance (2x payment). The Corporation shall pay to the Employee in a
lump sum, not less than 31 days nor more than 120 days following the
date of the employment termination, an amount equal to the following:
(1) Two times the Employee's Base Compensation in effect on the
date of the employment termination; plus
(2) 200% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (b) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(d) Two Years of Life Insurance and Health Plan Coverage. The coverage
described in this Subsection (d) shall be provided for a "Continuation
Period" beginning on the date when the employment termination is
effective and ending on the earlier of (1) the second anniversary of
the date when the employment termination is effective or (2) the date
of the Employee's death. During the Continuation Period, the Employee
(and, where applicable, the Employee's dependents) shall be entitled to
continue participation in the basic and supplemental group term life
insurance plan and in the health care plan for employees maintained by
the Employing Entity as if the Employee were still an employee of the
Employing Entity, but only if the Employee does not elect any
continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal to the Employee's compensation (as defined in such plans)
in effect on the date of the employment termination. To the extent that
the Corporation finds it undesirable to cover the Employee under the
group life insurance and health plans of the AirTouch Group, the
Corporation shall provide the Employee (at its own expense) with the
same level of coverage under individual policies.
(e) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to the Change in Control.
(f) Penalty for Late or Refused Payment. If the Corporation refuses or
fails to timely pay or provide the compensation and benefits specified
in this Section 10 upon demand as provided in Section 19(c), and if
such refusal or failure is not corrected within 10 business days after
the Employee provides written notice to the Corporation concerning the
refusal or failure, then the Corporation shall pay immediately to the
Employee an additional amount equal to 50% of the Employee's Base
Compensation. This provision shall apply only once.
(g) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 10, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
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SECTION 11: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 10, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 11 applies, without limitation, to any termination of employment
initiated by the Employee (except an Employee-initiated termination in response
to a "Constructive Termination," as defined in Section 10(a)), termination of
employment caused by the Employee's death, and any constructive termination that
does not meet the requirements of a "Constructive Termination" defined in
Section 10(a).
SECTION 12: DEFINITION OF CHANGE IN CONTROL
For all purposes under this Agreement, "Change in Control" shall mean a "Change
in Control" of the Corporation, as defined in the AirTouch Communications, Inc.
1993 Long-Term Stock Incentive Plan (or the successor to such plan).
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FOURTH PART: PARACHUTE PAYMENTS
SECTION 13: GENERAL RULE ON LIMITATION ON PAYMENTS
Any provision of this Agreement to the contrary notwithstanding, in the event
that the independent auditors retained by the Corporation most recently prior to
a Change in Control (the "Auditors") determine that any payment or transfer by
the AirTouch Group to or for the benefit of the Employee, whether paid or
payable (or transferred or transferable) pursuant to the terms of this Agreement
or otherwise (a "Payment"), would be nondeductible by the Corporation or any
member of the AirTouch Group for federal income tax purposes because of section
280G of the Code, then the aggregate present value of all Payments shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this Section
13, the "Reduced Amount" shall be the amount, expressed as a present value, that
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Corporation or any member of the AirTouch
Group because of section 280G of the Code.
SECTION 14: REDUCTION OF PAYMENTS
If the Auditors determine that any Payment would be nondeductible by the
Corporation or any member of the AirTouch Group because of section 280G of the
Code, then the Corporation, within five business days after being notified by
the Auditors, shall give the Employee notice to that effect and a copy of the
detailed calculation thereof and of the Reduced Amount. The Employee may then
elect, in the Employee's sole discretion, which and how much of the Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Payments equals the Reduced Amount) and shall advise the
Corporation in writing of this election within thirty (30) days of receipt of
notice. If no such election is made by the Employee within such thirty (30) day
period, then the Corporation may elect which and how much of the Payments shall
be eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the Employee
promptly of such election. For purposes of this Section 14, present values shall
be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Section 14 shall be binding upon
the Corporation and the Employee and shall be made within 60 days of the date of
the employment termination.
SECTION 15: OVERPAYMENTS AND UNDERPAYMENTS
As a result of uncertainty in the application of section 280G of the Code at the
time of an initial determination by the Auditors hereunder, it is possible that
Payments will have been made by the AirTouch Group that should not have been
made (an "Overpayment") or that additional Payments that will not have been made
by the Corporation could have been made (an "Underpayment"), consistent in each
case with the calculation of the Reduced Amount hereunder. In the event that the
Auditors, based upon the assertion of a deficiency by the Internal Revenue
Service against the Corporation, a member of the AirTouch Group or the Employee
that the Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all purposes as
a loan to the Employee that the Employee shall repay to the Corporation (or the
appropriate member of the AirTouch Group), together with interest at the
applicable federal rate
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provided for in section 7872(f)(2)(A) of the Code; provided, however, that no
amount shall be so payable by the Employee if and to the extent that such
payment would not reduce the amount that is subject to taxation under section
4999 of the Code. In the event that the Auditors determine that an Underpayment
has occurred, such Underpayment shall promptly be paid or transferred by the
Corporation to or for the benefit of the Employee, together with interest at the
applicable federal rate provided for in section 7872(f)(2)(A) of the Code.
SECTION 16: COMPENSATION AND PERSONNEL COMMITTEE'S ABILITY TO WAIVE LIMITATIONS
At any time, and in its sole discretion, the Corporation's Compensation and
Personnel Committee of the Board of Directors may elect to waive, in whole or in
part, the reduction of a Payment, notwithstanding the determination that such
Payment will be nondeductible by the Corporation (or other member of the
AirTouch Group) for federal income tax purposes because of section 280G of the
Code.
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FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
SECTION 17: CONFIDENTIAL INFORMATION
(a) Acknowledgement. The Corporation and the Employee acknowledge that the
services to be performed by the Employee under this Agreement are
unique and extraordinary and that, as a result of the Employee's
employment, the Employee will be in a relationship of confidence and
trust with the Corporation and will come into possession of
"Confidential Information" (1) owned or controlled by the AirTouch
Group, (2) in the possession of the AirTouch Group and belonging to
third parties or (3) conceived, originated, discovered or developed, in
whole or in part, by the Employee. As used herein "Confidential
Information" includes trade secrets and other confidential or
proprietary business, technical, personnel or financial information,
whether or not the Employee's work product, in written, graphic, oral
or other tangible or intangible forms, including but not limited to
specifications, samples, records, data, computer programs, drawings,
diagrams, models, customer names, business or marketing plans, studies,
analyses, projections and reports, communications by or to attorneys
(including attorney-client privileged communications), memos and other
materials prepared by attorneys or under their direction (including
attorney work product), and software systems and processes. Any
information that is not readily available to the public shall be
considered to be a trade secret and confidential and proprietary, even
if it is not specifically marked as such, unless the Corporation
advises the Employee otherwise in writing.
(b) Nondisclosure. The Employee agrees that the Employee will not, without
the prior written consent of the Corporation, directly or indirectly
use or disclose Confidential Information to any person, during or after
the Employee's employment, except as may be necessary in the ordinary
course of performing the Employee's duties under this Agreement. The
Employee will keep the Confidential Information in strictest confidence
and trust. This Section 17 shall apply indefinitely, both during and
after the term of this Agreement.
(c) Surrender Upon Termination. The Employee agrees that in the event of
the termination of the Employee's employment for any reason, the
Employee will immediately deliver to the Corporation (and/or other
members of the AirTouch Group, as applicable) all property belonging to
the AirTouch Group, including all documents and materials of any nature
pertaining to the Employee's work with the AirTouch Group, and will not
take with the Employee any documents or materials of any description,
or any reproduction thereof of any description, containing or
pertaining to any Confidential Information. It is understood that the
Employee is free to use information that is in the public domain (not
as a result of a breach of this Agreement).
SECTION 18: SUCCESSORS
(a) Corporation's Successors. The Corporation shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Corporation's business and/or assets,
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<PAGE> 14
by an agreement in substance and form satisfactory to the Employee, to
assume this Agreement and to agree expressly to perform this Agreement
in the same manner and to the same extent as the Corporation would be
required to perform it in the absence of a succession. The
Corporation's failure to obtain such agreement prior to the
effectiveness of a succession shall be a breach of this Agreement and
shall entitle the Employee to all of the compensation and benefits to
which the Employee would have been entitled hereunder if the
Corporation had involuntarily terminated the Employee's employment
without Cause or Disability, on the date when such succession becomes
effective.
(b) Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
SECTION 19: MISCELLANEOUS PROVISIONS
(a) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Corporation (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another
time.
(b) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) that are not
expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. In addition,
the Employee hereby acknowledges and agrees that this Agreement
supersedes in its entirety any employment agreement between the
Employee and the Corporation in effect immediately prior to the
effective date of this Agreement. As of the effective date of this
Agreement, such employment agreement shall terminate without any
further obligation by either party thereto, and the Employee hereby
relinquishes any further rights that the Employee may have had under
such prior employment agreement.
(c) Presumption. Subject to the provisions of Section 13, the Corporation
shall make or cause to be made a payment described in this Agreement
upon receiving written notice from the Employee describing such
payment, referring to the provision of this Agreement under which such
payment is claimed and certifying that all conditions for such payment,
as set forth in this Agreement, have been satisfied. The information so
furnished to the Corporation by the Employee shall be presumed to be
correct, subject to rebuttal by the Corporation after payment. After
making the payment claimed by the Employee, the Corporation may seek a
refund of such payment in accordance with Subsection (h) below. This
Subsection (c) shall not be used to cause a payment to be made at a
time earlier than provided in this Agreement.
(d) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall
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be addressed to the Employee at the home address that the Employee most
recently communicated to the Corporation in writing. In the case of the
Corporation, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(e) No Setoff. There shall be no right of setoff or counterclaim, with
respect to any claim, debt or obligation, against payments to the
Employee under this Agreement.
(f) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California, irrespective of California's choice-of-law
principles.
(g) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
(h) Arbitration. Except as otherwise provided in Section 13, any dispute or
controversy arising out of the Employee's employment or the termination
thereof, including, but not limited to, any claim of discrimination
under state or federal law, shall be settled exclusively by arbitration
in San Francisco, California, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. The
foregoing notwithstanding, a dispute or controversy over whether Cause
exists for the termination of an Employee, whether such termination
occurred within three years after a Change in Control, or a dispute or
controversy over whether a Constructive Termination has occurred, shall
be arbitrated by a three-member panel of the outside directors of the
Corporation, with the selection of the panel to be made by the
Chairman, as of one year prior to the Change in Control, of the
Corporation's Board of Directors. If three such individuals are
unwilling to serve as arbitrators, the preceding sentence shall be
inapplicable, and all disputes and controversies shall be subject to
arbitration in accordance with the rules of the American Arbitration
Association, as provided above in this Subsection. For purposes of this
Subsection, "outside directors" shall mean members of the Board of
Directors of the Corporation, as such Board of Directors was
constituted one year prior to the Change in Control, who were not
employees of the Corporation or another member of the AirTouch Group
one year prior to the Change in Control.
(i) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Subsection (i) shall be void.
(j) Employment at Will; Limitation of Remedies. The Corporation and the
Employee acknowledge that the Employee's employment is at will, as
defined under applicable law. If the Employee's employment terminates
for any reason, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by
this Agreement.
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(k) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.
(l) Benefit Coverage Non-Additive. In the event that the Employee is
entitled to life insurance and health plan coverage under more than one
provision hereunder, only one provision shall apply, and neither the
periods of coverage nor the amounts of benefits shall be additive.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized officer, as of the day and year first
above written.
-----------------------------------
Employee
AIRTOUCH COMMUNICATIONS, INC.
By
---------------------------------
Brian R. Jones
Its Senior Vice President, Human
Resources and Corporate Services
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 12th day of February, 1998 by and
between SAM GINN ("Employee") and AIRTOUCH COMMUNICATIONS, INC., a Delaware
corporation (the "Corporation").
For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT (Sections 1-5, beginning on page 1)
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
(Sections 6-8, beginning on page 6)
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
(Sections 9-12, beginning on page 9)
FOURTH PART: PARACHUTE PAYMENTS
(Sections 13-14, beginning on page 12)
FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE
PAGE (Sections 15-17, beginning on page 14)
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FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT
SECTION 1: TERM OF EMPLOYMENT
(a) Basic Rule. The Corporation agrees to continue the Employee's
employment, and the Employee agrees to remain in employment with the
Corporation, from February 12, 1998, until the earliest of:
(1) The date of the Employee's death; or
(2) The date when the Employee's employment terminates pursuant to
Subsection (b), (c), (d) or (e) below.
(b) Early Termination or Resignation. The Corporation may terminate the
Employee's employment for any reason by giving the Employee not less
than 30 days' advance notice in writing. The Employee may terminate the
Employee's employment for any reason by giving the Corporation not less
than 30 days' advance notice in writing.
(c) Termination for Cause. The Corporation may terminate the Employee's
employment at any time for Cause shown by giving the Employee not less
than 30 days' advance notice in writing. For all purposes under this
Agreement, "Cause" shall mean (1) a willful failure by the Employee to
substantially perform the Employee's duties under this Agreement, other
than a failure resulting from the Employee's complete or partial
incapacity due to physical or mental illness or impairment, (2) a
willful act by the Employee that constitutes gross misconduct and that
is injurious to the Corporation, (3) a willful breach by the Employee
of a material provision of this Agreement or (4) a material and willful
violation of a federal or state law or regulation applicable to the
business of the Corporation. No act, or failure to act, by the Employee
shall be considered "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the
Corporation's best interest.
(d) Termination for Disability. The Corporation may terminate the
Employee's employment for Disability by giving the Employee not less
than six months' advance notice in writing. For all purposes under this
Agreement, "Disability" shall mean that the Employee, at the time
notice is given, has been unable to perform the Employee's duties under
this Agreement for a period of not less than six consecutive months as
the result of the Employee's incapacity due to physical or mental
illness. In the event that the Employee resumes the performance of
substantially all of the Employee's duties under this Agreement before
the termination of the Employee's employment under this Section becomes
effective, the notice of termination shall automatically be deemed to
have been revoked.
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<PAGE> 3
(e) Notice. For all purposes under this Section 1, the employment
relationship shall terminate on the date specified in the notice of
termination. Any waiver of notice shall be valid only if it is made in
writing and expressly refers to the applicable notice requirement of
this Section 1. If the Corporation specifies a termination date that is
earlier than the minimum advance notice date required under Subsection
(b), (c) or (d) (as applicable), then the Employee is entitled to pay
and benefits in lieu of the omitted period of advance notice.
(f) Termination of Agreement. This Agreement shall expire when all
obligations of the parties hereunder have been satisfied.
(1) In General. In addition, except as described in Paragraph 2
below, either the Corporation or the Employee may terminate
this Agreement for any reason, and without affecting the
Employee's status as an employee, by giving the other party
one year's advance notice in writing.
(2) After a Change In Control. If a Change in Control occurs, the
Corporation may not provide notice of termination of this
Agreement under Paragraph (1) above within the two-year period
after the Change In Control. In other words, in this case, the
effective date of the termination of the Agreement may be no
earlier than three years after the Change in Control. For all
purposes under this Agreement, the term "Corporation" shall
include any successor to the Corporation's business and/or
assets that executes and delivers the assumption agreement
described in Subsection 16(a) of this Agreement or that
becomes bound by this Agreement by operation of law.
A termination of this Agreement pursuant to this Subsection (f) shall
be effective for all purposes at the end of the notice period, except
that such termination shall not effect the payment or provision of
compensation or benefits under this Agreement on account of a
termination of employment occurring prior to the termination of this
Agreement.
SECTION 2: DUTIES AND SCOPE OF EMPLOYMENT
(a) Position. The Corporation agrees to employ the Employee for the term of
employment under this Agreement in the position of Chairman and Chief
Executive Officer of AirTouch Communications, Inc., reporting to the
Corporation's Board of Directors (as such position was defined in terms
of responsibilities and compensation as of the effective date of this
Agreement). The Corporation, Subsidiary, Affiliate or Joint Venture
directly employing the Employee is referred to in this Agreement as the
"Employing Entity," and the Corporation, its Subsidiaries, Affiliates
and Joint Ventures are referred to, in the aggregate, in this Agreement
as the "AirTouch Group."
For all purposes under this Agreement, the terms "Affiliate,"
"Subsidiary" and "Joint Venture" shall mean the following:
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<PAGE> 4
(1) "Affiliate" shall mean any entity other than a Subsidiary, if
the Corporation and/or one or more Subsidiaries own(s) not
less than 50% of such entity.
(2) "Subsidiary" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning
with the Corporation, if each of the corporations other than
the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(3) "Joint Venture" shall mean any entity (other than a Subsidiary
or Affiliate) in which the Corporation and/or one or more
Subsidiaries and/or one or more Affiliates has a direct or
indirect ownership interest.
(b) Obligations. During the term of employment under this Agreement, the
Employee shall devote the Employee's full business efforts and time to
the Employing Entity and the AirTouch Group. The foregoing shall not
preclude the Employee from engaging in appropriate civic, charitable or
religious activities or from devoting a reasonable amount of time to
private investments or from serving on the boards of directors of other
entities, as long as such activities and service do not interfere or
conflict with the Employee's responsibilities to the Employing Entity
and the AirTouch Group.
SECTION 3: BASE COMPENSATION
During the term of employment under this Agreement, the Corporation agrees to
pay (itself or through the Employing Entity) the Employee as compensation for
services a base salary at the annual rate of $915,000, or at such higher rate as
the Corporation's Compensation and Personnel Committee of the Board of Directors
may determine from time to time. Such salary shall be payable in accordance with
the standard payroll procedures of the Employing Entity. Once the Corporation's
Compensation and Personnel Committee of the Board of Directors has increased
such salary, it thereafter shall not be reduced; provided, however, that if a
Change in Control has not occurred, such salary (including any increases) may be
reduced by the Corporation if (1) the Employee commits an act or omission that
meets the definition of Cause, as defined in Section 1(c), or (2) the Employee
and all other officers of the Corporation who are parties to written employment
agreements containing substantially the same provisions as this Agreement have
their salaries (including any increases) reduced by the same percentage amount
for the same time period. The annual compensation specified in this Section 3,
together with any increases in such compensation that the Compensation and
Personnel Committee of the Board of Directors of the Corporation may grant from
time to time, and together with any reductions made in accordance with this
Section 3, is referred to in this Agreement as "Base Compensation."
SECTION 4: EMPLOYEE BENEFITS
(a) In General. During the term of employment under this Agreement, the
Employee shall be eligible to participate in the employee benefit plans
and executive compensation programs maintained by the Employing Entity,
including (without
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<PAGE> 5
limitation) pension plans, savings or profit-sharing plans, deferred
compensation plans, supplemental retirement or excess-benefit plans,
stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, and similar
plans or programs, subject in each case to the generally applicable
terms and conditions of the plan or program in question and to the
discretion and determinations of any person, committee or entity
administering such plan or program.
(b) Accelerated Vesting in Incentive Awards in Case of a Change in Control
of the Corporation. If, during the term of this Agreement, a Change in
Control (as defined in Section 12) occurs with respect to the
Corporation, then each of the incentive awards heretofore or hereafter
granted to the Employee by the members of the AirTouch Group or their
delegates shall become fully vested, fully exercisable or fully
payable, as the case may be, any contrary provisions of such awards or
the applicable plan notwithstanding. The term "incentive award" shall
include, without limitation, all awards under the AirTouch
Communications, Inc. 1993 Long-Term Stock Incentive Plan, all other
awards with respect to equity or derivative securities of the AirTouch
Group, and all cash incentive awards, other than incentive awards
payable under the AirTouch Communications Incentive Plan.
(c) Accelerated Vesting in Supplemental Pension Benefits in Case of a
Change in Control of the Corporation. If, during the term of this
Agreement, a Change in Control (as defined in Section 12) occurs with
respect to the Corporation, then all of the Employee's supplemental
pension benefits shall become fully vested, any contrary provisions of
the applicable plan notwithstanding. The term "supplemental pension
benefit" shall include, without limitation, all retirement benefits
provided under a plan or program of the AirTouch Group that is not
intended to qualify under section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
SECTION 5: BUSINESS EXPENSES AND TRAVEL
During the term of employment under this Agreement, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with the Employee's duties hereunder. The
Employing Entity shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with generally applicable policies.
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<PAGE> 6
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION NOT RELATING TO A CHANGE IN CONTROL
SECTION 6: TERMINATIONS NOT RELATING TO A CHANGE IN CONTROL
This Second Part of the Agreement, consisting of Sections 6 through 8, describes
the benefits and compensation, if any, payable in case of termination of
employment that does not relate to a Change in Control (as defined in Section
12). The Third Part of the Agreement, consisting of Sections 9 through 12,
describes benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control. If benefits and compensation are
payable under this Second Part, then no benefits and compensation are payable
under the Third Part.
SECTION 7: INVOLUNTARY TERMINATION WITHOUT CAUSE OR DISABILITY
In the event that, during the term of this Agreement, the Corporation or
Employing Entity terminates the Employee's employment with the AirTouch Group
for any reason other than Cause or Disability, and such termination does not
relate to a Change in Control, then, after executing the release of claims
described in Section 7(e), the Employee shall be entitled to receive the
following payments and benefits:
(a) Severance (2x payment). The Corporation shall pay to the Employee in a
lump sum, not less than 31 days nor more than 120 days following the
date of the employment termination, an amount equal to the following:
(1) Two times the Employee's Base Compensation in effect on the
date of the employment termination; plus
(2) 200% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (a) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(b) Two Years of Life Insurance and Health Plan Coverage. The coverage
described in this Subsection (b) shall be provided for a "Continuation
Period" beginning on the date when the employment termination is
effective and ending on the earlier of (1) the two-year anniversary of
the date when the employment termination is effective or (2) the date
of the Employee's death. During the Continuation Period, the Employee
(and, where applicable, the Employee's dependents) shall be entitled to
continue participation in the basic and supplemental group term life
insurance plan and in the health care plan for employees maintained by
the Employing Entity as if the Employee were still an
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<PAGE> 7
employee of the Employing Entity, but only if the Employee does not
elect any continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal to the Employee's compensation (as defined in such plans)
in effect on the date of the employment termination. To the extent that
the Corporation finds it undesirable to cover the Employee under the
group life insurance and health plans of the AirTouch Group, the
Corporation shall provide the Employee (at its own expense) with the
same level of coverage under individual policies.
(c) Incentive Programs. The period (the "Extension Period") beginning on
the date when the termination of employment is effective and ending on
the earlier of (1) the one-year anniversary of the date when the
employment termination is effective or (2) the date of the Employee's
death shall be counted as employment with the Corporation for purposes
of vesting in each of the incentive awards heretofore or hereafter
granted to the Employee by the members of the AirTouch Group or their
delegates, any contrary provisions of such awards or the applicable
plan notwithstanding. The term "incentive award" shall include, without
limitation, all awards under the AirTouch Communications, Inc. 1993
Long-Term Stock Incentive Plan, all other awards with respect to equity
or derivative securities of the AirTouch Group, and all cash incentive
awards, other than incentive awards payable under the AirTouch
Communications Incentive Plan. This Subsection shall not be construed
to require any member of the AirTouch Group to grant any new awards to
the Employee during the Extension Period. The parties understand and
agree that the Extension Period also counts as employment with the
Corporation for purposes of determining the expiration date of any
incentive award granted by any member of the AirTouch Group or its
delegate and held by the Employee when employment terminates.
(d) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to such termination of employment.
(e) Release of Claims. As a condition to the receipt of the payments and
benefits described in this Section 7, the Employee shall be required to
execute a release of all claims arising out of the Employee's
employment or the termination thereof including, but not limited to,
any claim of discrimination under state or federal law.
(f) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 7, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
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SECTION 8: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 7, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 8 applies, without limitation, to any termination of employment
initiated by the Employee, termination of employment caused by the Employee's
death or Disability, termination of the Employee for Cause, and any constructive
termination.
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<PAGE> 9
THIRD PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION RELATING TO A CHANGE IN CONTROL
SECTION 9: TERMINATIONS RELATING TO A CHANGE IN CONTROL
This Third Part of the Agreement, consisting of Sections 9 through 12, describes
the benefits and compensation, if any, payable in case of termination of
employment that relates to a Change in Control (as defined in Section 12). The
Second Part of the Agreement, consisting of Sections 6 through 8, describes
benefits and compensation, if any, payable in case of termination that does not
relate to a Change in Control. If benefits and compensation are payable under
this Third Part, then no benefits and compensation are payable under the Second
Part.
SECTION 10: INVOLUNTARY ACTUAL OR CONSTRUCTIVE TERMINATION WITHOUT CAUSE
In the event that, during the term of this Agreement, the Employee's employment
terminates in a Qualifying Termination, as defined in Subsections (a) and (b),
the Employee shall be entitled to receive the payments and benefits described in
Subsections (c), (d), (e) and (f).
(a) Qualifying Termination After a Change in Control.
(1) A Qualifying Termination occurs if the Corporation or
Employing Entity terminates the Employee's employment with the
AirTouch Group for any reason including, without limitation,
Cause or Disability within three years after a Change in
Control;
(2) A Qualifying Termination also includes a "Constructive
Termination," which means a material reduction in salary or
benefits, a material change in responsibilities, or a
requirement to relocate, except for office relocations that
would not increase the Employee's one-way commute distance by
more than 40 miles. For the purpose of defining a
"Constructive Termination," a material reduction in salary or
benefits is deemed to occur if the Employee's Base
Compensation or benefits are reduced by 20% or more; or
(3) A Qualifying Termination occurs if during the term of this
Agreement and during the 13th full calendar month after the
occurrence of a Change in Control, the Employee voluntarily
separates from employment with the AirTouch Group for any
reason.
(b) Qualifying Termination Prior to a Change in Control.
A Qualifying Termination (as defined in Subsection (a)) also occurs
prior to a Change in Control if:
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(1) The Qualifying Termination occurs after the Corporation has
publicly announced a definitive agreement with a third party to
effectuate a Change in Control; and
(2) The Employee reasonably demonstrates that the Qualifying
Termination occurred at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control or otherwise arose in connection with,
or in anticipation of, a Change in Control.
(c) Severance (3x payment). The Corporation shall pay to the Employee in a
lump sum, not less than 31 days nor more than 120 days following the
date of the employment termination, an amount equal to the following:
(1) Three times the Employee's Base Compensation in effect on the
date of the employment termination; plus
(2) 300% of the target Team Award under the AirTouch
Communications Incentive Plan, for the Employee's position as
of the date of the termination.
Any other provision of this Agreement or of the AirTouch Communications
Incentive Plan notwithstanding, after the amount described in this
Subsection (c) has been paid to the Employee, the Employee shall not be
entitled to any further payment of Team Award under such Incentive
Plan.
(d) Three Years of Life Insurance and Health Plan Coverage. The coverage
described in this Subsection (d) shall be provided for a "Continuation
Period" beginning on the date when the employment termination is
effective and ending on the earlier of (1) the third anniversary of the
date when the employment termination is effective or (2) the date of
the Employee's death. During the Continuation Period, the Employee
(and, where applicable, the Employee's dependents) shall be entitled to
continue participation in the basic and supplemental group term life
insurance plan and in the health care plan for employees maintained by
the Employing Entity as if the Employee were still an employee of the
Employing Entity, but only if the Employee does not elect any
continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable,
the Employee's compensation for purposes of such plans shall be deemed
to be equal to the Employee's compensation (as defined in such plans)
in effect on the date of the employment termination. To the extent that
the Corporation finds it undesirable to cover the Employee under the
group life insurance and health plans of the AirTouch Group, the
Corporation shall provide the Employee (at its own expense) with the
same level of coverage under individual policies.
(e) Incentive Programs. The period (the "Extension Period") beginning on
the date when the termination of employment is effective and ending on
the earlier of (1) the one-year anniversary of the date when the
employment termination is effective or (2) the date of the Employee's
death shall be counted as
-10-
<PAGE> 11
employment with the Corporation for purposes of determining the
expiration date of any incentive award granted by any member of the
AirTouch Group or its delegate and held by the Employee when employment
terminates, any contrary provisions of such awards or the applicable
plan notwithstanding. The term "incentive award" shall include, without
limitation, all awards under the AirTouch Communications, Inc. 1993
Long-Term Stock Incentive Plan, all other awards with respect to equity
or derivative securities of the AirTouch Group, and all cash incentive
awards, other than incentive awards payable under the AirTouch
Communications Incentive Plan. This Subsection shall not be construed
to require any member of the AirTouch Group to grant any new awards to
the Employee during the Extension Period.
(f) Financial Counseling. For a one-year period after termination of
employment, the Corporation shall provide the Employee with
professional financial counseling services comparable in scope and
value to the financial counseling services made available to the
Employee immediately prior to the Change in Control.
(g) Penalty for Late or Refused Payment. If the Corporation refuses or
fails to timely pay or provide the compensation and benefits specified
in this Section 10 upon demand as provided in Section 17(c), and if
such refusal or failure is not corrected within 10 business days after
the Employee provides written notice to the Corporation concerning the
refusal or failure, then the Corporation shall pay immediately to the
Employee an additional amount equal to 50% of the Employee's Base
Compensation. This provision shall apply only once.
(h) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit contemplated by this Section 10, nor
shall any such payment or benefit be reduced by any earnings or
benefits that the Employee may receive from any other source.
SECTION 11: OTHER TERMINATIONS UNDER THIS PART
If termination of employment, actual or constructive, is not described in
Section 10, then the Employee is entitled only to the compensation, benefits and
reimbursements payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period preceding the effective date of the termination. The payments
under this Agreement shall fully discharge all responsibilities of the AirTouch
Group to the Employee upon termination of the Employee's employment. This
Section 11 applies, without limitation, to any termination of employment
initiated by the Employee (except an Employee-initiated termination that is
described in Paragraph (2) or (3) of Section 10(a)), a termination of employment
caused by the Employee's death, or any constructive termination that does not
meet the requirements of a "Constructive Termination" defined in Paragraph (2)
of Section 10(a).
-11-
<PAGE> 12
SECTION 12: DEFINITION OF CHANGE IN CONTROL
For all purposes under this Agreement, "Change in Control" shall mean a "Change
in Control" of the Corporation, as defined in the AirTouch Communications, Inc.
1993 Long-Term Stock Incentive Plan (or the successor to such plan).
-12-
<PAGE> 13
FOURTH PART: PARACHUTE PAYMENTS
SECTION 13: GROSS-UP PAYMENT.
In the event it is determined that any payment or distribution of any type to or
for the benefit of the Employee, pursuant to this Agreement or otherwise, by the
Corporation or any member of the AirTouch Group, any Person who acquires
ownership or effective control of the Corporation or any member of the AirTouch
Group, or ownership of a substantial portion of the assets of the Corporation or
any member of the AirTouch Group (within the meaning of section 280G of the Code
and the regulations thereunder) or any affiliate of such Person (the "Total
Payments") would be subject to the excise tax imposed by section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), then the Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that, after payment
by the Employee of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Payments.
SECTION 14: DETERMINATION BY ACCOUNTANT
All mathematical determinations and determinations as to whether any of the
Total Payments are "parachute payments" (within the meaning of section 280G of
the Code), in each case which determinations are required to be made under this
Section 14, including whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment, and amounts relevant to the last sentence of this Section 14,
shall be made by an independent accounting firm selected by the Employee from
amount the largest six accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide to the Corporation and to the Employee
its determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter, within five days after termination of the Employee's employment, if
applicable, or at such earlier time as is requested by the Corporation or the
Employee (if the Employee reasonably believes that any of the Total Payments may
be subject to the Excise Tax). If the Accounting Firm determines that no Excise
Tax is payable by the Employee, it shall furnish the Employee with a written
statement that such Accounting Firm has concluded that no Excise Tax is payable
(including the reasons therefor) and that the Employee has substantial authority
not to report any Excise Tax on the Employee's federal income tax return. If a
Gross-Up Payment is determined to be payable, it shall be paid to the Employee
within five days after the Determination is delivered to the Corporation or the
Employee. Any determination by the Accounting Firm shall be binding upon the
Corporation and the Employee, absent manifest error.
As a result of uncertainty in the application of section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments not made by the Corporation and members of the
AirTouch Group should
-13-
<PAGE> 14
have been made ("Underpayment"), or that Gross-Up Payments were made by the
Corporation and members of the AirTouch Group that should not have been made
("Overpayments"). In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the Corporation promptly shall pay, or cause to be paid, the
amount of such Underpayment to or for the benefit of the Employee. In the case
of an Overpayment, the Employee shall, at the direction and expense of the
Corporation, take such steps as are reasonably necessary (including the filing
of returns and claims for refund), follow reasonable instructions from, and
procedures established by, the Corporation, and otherwise reasonably cooperate
with the Corporation to correct such Overpayment; provided, however, that (1)
Employee shall not in any event be obligated to return to the Corporation an
amount greater than the net after-tax portion of the Overpayment that he has
retained or recovered as a refund from the applicable taxing authorities and (2)
this provision shall be interpreted in a manner consistent with the intent of
Section 13, which is to make the Employee whole, on an after-tax basis, from the
application of the Excise Tax, it being understood that the correction of an
Overpayment may result in the Employee repaying to the Corporation an amount
that is less than the Overpayment.
-14-
<PAGE> 15
FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
SECTION 15: CONFIDENTIAL INFORMATION
(a) Acknowledgement. The Corporation and the Employee acknowledge that the
services to be performed by the Employee under this Agreement are
unique and extraordinary and that, as a result of the Employee's
employment, the Employee will be in a relationship of confidence and
trust with the Corporation and will come into possession of
"Confidential Information" (1) owned or controlled by the AirTouch
Group, (2) in the possession of the AirTouch Group and belonging to
third parties or (3) conceived, originated, discovered or developed, in
whole or in part, by the Employee. As used herein "Confidential
Information" includes trade secrets and other confidential or
proprietary business, technical, personnel or financial information,
whether or not the Employee's work product, in written, graphic, oral
or other tangible or intangible forms, including but not limited to
specifications, samples, records, data, computer programs, drawings,
diagrams, models, customer names, business or marketing plans, studies,
analyses, projections and reports, communications by or to attorneys
(including attorney-client privileged communications), memos and other
materials prepared by attorneys or under their direction (including
attorney work product), and software systems and processes. Any
information that is not readily available to the public shall be
considered to be a trade secret and confidential and proprietary, even
if it is not specifically marked as such, unless the Corporation
advises the Employee otherwise in writing.
(b) Nondisclosure. The Employee agrees that the Employee will not, without
the prior written consent of the Corporation, directly or indirectly
use or disclose Confidential Information to any person, during or after
the Employee's employment, except as may be necessary in the ordinary
course of performing the Employee's duties under this Agreement. The
Employee will keep the Confidential Information in strictest confidence
and trust. This Section 15 shall apply indefinitely, both during and
after the term of this Agreement.
(c) Surrender Upon Termination. The Employee agrees that in the event of
the termination of the Employee's employment for any reason, the
Employee will immediately deliver to the Corporation (and/or other
members of the AirTouch Group, as applicable) all property belonging to
the AirTouch Group, including all documents and materials of any nature
pertaining to the Employee's work with the AirTouch Group, and will not
take with the Employee any documents or materials of any description,
or any reproduction thereof of any description, containing or
pertaining to any Confidential Information. It is understood that the
Employee is free to use information that is in the public domain (not
as a result of a breach of this Agreement).
-15-
<PAGE> 16
SECTION 16: SUCCESSORS
(a) Corporation's Successors. The Corporation shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Corporation's business and/or assets, by an agreement in substance
and form satisfactory to the Employee, to assume this Agreement and to
agree expressly to perform this Agreement in the same manner and to the
same extent as the Corporation would be required to perform it in the
absence of a succession. The Corporation's failure to obtain such
agreement prior to the effectiveness of a succession shall be a breach
of this Agreement and shall entitle the Employee to all of the
compensation and benefits to which the Employee would have been
entitled hereunder if the Corporation had involuntarily terminated the
Employee's employment without Cause or Disability, on the date when
such succession becomes effective.
(b) Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
SECTION 17: MISCELLANEOUS PROVISIONS
(a) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Corporation (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another
time.
(b) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) that are not
expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. In addition,
the Employee hereby acknowledges and agrees that this Agreement
supersedes in its entirety any employment agreement between the
Employee and the Corporation in effect immediately prior to the
effective date of this Agreement. As of the effective date of this
Agreement, such employment agreement shall terminate without any
further obligation by either party thereto, and the Employee hereby
relinquishes any further rights that the Employee may have had under
such prior employment agreement.
(c) Presumption. Subject to the provisions of Section 13, the Corporation
shall make or cause to be made a payment described in this Agreement
upon receiving written notice from the Employee describing such
payment, referring to the provision of this Agreement under which such
payment is claimed and certifying that all conditions for such payment,
as set forth in this Agreement,
-16-
<PAGE> 17
have been satisfied. The information so furnished to the Corporation by
the Employee shall be presumed to be correct, subject to rebuttal by
the Corporation after payment. After making the payment claimed by the
Employee, the Corporation may seek a refund of such payment in
accordance with Subsection (h) below. This Subsection (c) shall not be
used to cause a payment to be made at a time earlier than provided in
this Agreement.
(d) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall be addressed to the Employee
at the home address that the Employee most recently communicated to the
Corporation in writing. In the case of the Corporation, mailed notices
shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(e) No Setoff. There shall be no right of setoff or counterclaim, with
respect to any claim, debt or obligation, against payments to the
Employee under this Agreement.
(f) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California, irrespective of California's choice-of-law
principles.
(g) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
(h) Arbitration. Except as otherwise provided in Section 13, any dispute or
controversy arising out of the Employee's employment or the termination
thereof, including, but not limited to, any claim of discrimination
under state or federal law, shall be settled exclusively by arbitration
in San Francisco, California, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. The
foregoing notwithstanding, a dispute or controversy over whether Cause
exists for the termination of an Employee, whether such termination
occurred within three years after a Change in Control, or a dispute or
controversy over whether a Constructive Termination has occurred, shall
be arbitrated by a three-member panel of the outside directors of the
Corporation, with the selection of the panel to be made by the
Chairman, as of one year prior to the Change in Control, of the
Corporation's Board of Directors. If three such individuals are
unwilling to serve as arbitrators, the preceding sentence shall be
inapplicable, and all disputes and controversies shall be subject to
arbitration in accordance with the rules of the American Arbitration
Association, as provided above in this Subsection. For purposes of this
Subsection, "outside directors" shall mean members of the Board of
Directors of the Corporation, as such Board of Directors was
constituted one year prior to the Change in Control, who were
-17-
<PAGE> 18
not employees of the Corporation or another member of the AirTouch
Group one year prior to the Change in Control.
(i) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Subsection (i) shall be void.
(j) Employment at Will; Limitation of Remedies. The Corporation and the
Employee acknowledge that the Employee's employment is at will, as
defined under applicable law. If the Employee's employment terminates
for any reason, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by
this Agreement.
(k) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.
(l) Benefit Coverage Non-Additive. In the event that the Employee is
entitled to life insurance and health plan coverage under more than one
provision hereunder, only one provision shall apply, and neither the
periods of coverage nor the amounts of benefits shall be additive.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized officer, as of the day and year first
above written.
------------------------------------
Sam Ginn
AIRTOUCH COMMUNICATIONS, INC.
By _________________________________
Brian R. Jones
Its Senior Vice President, Human
Resources and Corporate Services
-18-
<PAGE> 1
EXHIBIT 10.4
AIRTOUCH COMMUNICATIONS
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Amended and Restated as of January 1, 1998)
<PAGE> 2
AIRTOUCH COMMUNICATIONS
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Amended and Restated as of January 1, 1998)
SECTION 1. ELIGIBILITY.
Each member of the Board of Directors of AirTouch Communications, Inc.
("Company") who is not an employee of the Company, or any of its subsidiaries,
is eligible to participate in a Deferred Compensation Plan for Non-Employee
Directors (the "Plan").
SECTION 2. PARTICIPATION.
2.1 Each Director may elect to participate in the Plan prior to the
beginning of any quarter by directing that all or any part of the compensation
which would otherwise have been payable currently for services as a Director
(including fees payable for services as a member of a committee of the Board)
during such calendar year and subsequent calendar years shall be credited to a
deferred compensation account subject to the terms of the Plan.
2.2 An election to participate in the Plan and an election with respect
to the distribution of amounts deferred under the Plan shall be in the form of a
document executed by the Director
-1-
<PAGE> 3
and filed with the Company. An election related to fees otherwise payable
currently in any quarter shall become irrevocable on the last day prior to the
beginning of such quarter. An election shall continue until a Director ceases to
be a Director or until he or she terminates or modifies such election by written
notice. Any such termination or modification shall become effective as of the
end of the quarter in which such notice is given with respect to all fees
otherwise payable in subsequent quarters.
2.3 A Director who has filed a termination of election may thereafter
again file an election to participate for any quarter subsequent to the filing
of such election.
SECTION 3. DEFERRED ACCOUNTS.
Deferred amounts shall be credited to the Director's account and shall
bear interest from the date such fees would otherwise have been paid. The
interest credited to the account will be compounded annually at the end of each
calendar year. The rate of interest credited at the end of each calendar year
shall be determined by the Company's Board of Directors from time to time.
-2-
<PAGE> 4
SECTION 4. DISTRIBUTION.
4.1 At the time of election to participate in the Plan, a Director shall
make an election with respect to the manner in which his account balance will be
distributed. A Director may elect to receive such amounts in one payment or in
some other number of approximately level annual installments (not exceeding 15).
The amount of an annual installment shall be calculated by dividing the total
amount, including interest, credited to the Director's account immediately prior
to such installment by the remaining number of installments. As specified by the
Director, the first installment (or the single payment if the Director has so
elected) shall be paid as soon as practicable after the first day of the
calendar year following (a) the calendar year in which the Director ceases to be
a Director of the Company or any of its subsidiaries, (b) the calendar year in
which the Director attains a specified age (between age 59 1/2 and 75), (c) the
earlier of a specified number of years (maximum of five) after the Director
ceases to be a Director of the Company or any of its subsidiaries or the
attainment of age 75, or (d) the earlier of the attainment of a specified age
(but not younger than 59 1/2) or the calendar year in which the Director ceases
to be a Director of the Company or any of its subsidiaries. Subsequent
installments shall be paid on the first day of each succeeding calendar year
until the entire amount credited to the Director's account is paid. Amounts held
pending distribution pursuant to
-3-
<PAGE> 5
this Section shall continue to accrue interest at the rate stated in Section 3.
4.2 Notwithstanding an election pursuant to Section 4.1, in the event a
Director ceases to be a Director of the Company or any of its subsidiaries and
becomes a proprietor, officer, partner, employee, or otherwise becomes
affiliated with any business that is in competition with the Company or any of
its subsidiaries, or becomes employed by any governmental agency having
jurisdiction over the activities of the Company or any of its subsidiaries, the
entire balance of deferred fees, including interest, shall be paid immediately
in a single payment.
4.3 A Director may elect that, in the event the Director should die
before full payment of all amounts credited to his or her account, the balance
of the deferred amounts shall be distributed in one payment, or in a number of
annual installments (not exceeding 10) or by a continuation of the installment
distributions being made or to be made to the Director, to the beneficiary or
beneficiaries designated in writing by the Director, or if no designation has
been made, to the estate of the Director in a single payment. The first
installment (or the single payment if the Director has so elected) shall be paid
on or about the first day of the quarter next following the month of death. The
preceding sentence shall not apply if the beneficiary or beneficiaries are to
receive a
-4-
<PAGE> 6
continuation of installment distributions being made or to be made to the
Director.
SECTION 5. MISCELLANEOUS.
5.1 The rights of a Director to any deferred fees and/or interest
thereon shall be those of a general creditor and shall not be subject in any
manner to assignment by the Director.
5.2 The Company shall not be required to reserve, or otherwise set
aside, funds for the payment of its obligations hereunder. The Company's
obligation to pay the deferred amounts shall be unfunded as to the Director.
5.3 Copies of the Plan and any and all amendments thereto shall be made
available to all Directors at all reasonable times at the Company's corporate
headquarters.
5.4 The Board of Directors shall have the sole authority and discretion
to construe and interpret this Plan in accordance with its terms and provisions
and to make rules relating to the administration thereof. The decision of the
Board of Directors with respect to any issues relating to the interpretation of
this Plan shall be final, conclusive and binding on all parties. The Board of
Directors may delegate any part of its duties hereunder to the Company's Senior
Vice President, Human
-5-
<PAGE> 7
Resources and Corporate Services subject to the final authority of the Board of
Directors.
5.5 The Board of Directors may terminate, suspend, or amend this Plan in
whole or in part, at any time, as it may deem advisable, provided that no such
termination, suspension, or amendment shall impair any rights which have already
accrued to a Participant under this Plan.
5.6 The Company's Senior Vice President, Human Resources and Corporate
Services with the approval of the Company's Senior Vice President - Legal,
External Affairs and Secretary, shall be authorized to make minor or
administrative changes to the Plan.
SECTION 6. EXECUTION.
To record the amendment and restatement of the Plan as set forth
herein, effective as of January 1, 1998, the Company has caused its authorized
representative to execute the same this ___ day of _______________, 1998.
By:
-----------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
-6-
<PAGE> 1
EXHIBIT 10.5
AMENDMENT NO. 1 TO THE
AIRTOUCH COMMUNICATIONS, INC.
1993 LONG-TERM STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED DECEMBER 12, 1996)
Section 18.14 of the AirTouch Communications Inc. 1993 Long-Term Stock
Incentive Plan (the "Plan") is amended, effective as of April 15, 1998, to read
as follows:
"18.14 `Key Employee' means (a) a common-law employee of the Company, a
Parent, a Subsidiary or an Affiliate, (b) an Outside Director and (c) a
consultant or adviser who provides services to the Company, a Parent, a
Subsidiary or an Affiliate as an independent contractor. `Key Employee'
also includes a prospective employee of, or consultant or adviser to,
the Company, a Parent, a Subsidiary or an Affiliate who receives an
Award in connection with an offer of employment with or a request for
services from the Company, a Parent, a Subsidiary or an Affiliate.
Service as an Outside Director or as an independent contractor shall be
considered employment for all purposes of the Plan, except as provided
in Sections 4.2 and 4.3."
Section 17.2 of the Plan is amended, effective as of June 1, 1998, to
read as follows:
"17.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. The Committee is authorized to
make amendments to the Plan that relate to the Plan's operation and
administration. The Company's Senior Vice President--Human Resources
and Corporate Services (or his or her successor), with the approval of
the Senior Vice President--Legal and External Affairs and Secretary (or
his or her successor), is authorized to make minor or administrative
changes to the Plan. An amendment of the Plan shall be subject to the
approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under
the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Award previously granted
under the Plan."
<PAGE> 2
EXECUTION
To record this amendment to the Plan as set forth herein, AirTouch
Communications, Inc. has caused its authorized representative to execute this
document this _______ day of __________, 1998.
By
--------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
<PAGE> 3
AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN
- - Amends the Plan to increase the number of shares authorized for
issuance by 5,000,000 to a total of 7,400,000.
- - Amends the Plan to provide that, in the event of a change in control
(as defined in the 1993 Long-Term Stock Incentive Plan), the last day
of the participation period within which the change in control would
otherwise occur is accelerated to the last payday immediately preceding
the change in control, so that purchases of stock for such
participation period will be made on that day.
<PAGE> 4
AMENDMENT NO. 1 TO THE
AIRTOUCH COMMUNICATIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED FEBRUARY 1, 1995)
Section 12(a) of the AirTouch Communications, Inc. Employee Stock
Purchase Plan (the "Plan") is amended, effective as of February 12, 1998, to
read as follows:
"(a) Authorized Shares. The aggregate number of shares of Stock
available for purchase under the Plan shall be 7,400,000, subject to
adjustment pursuant to this Section 12."
Section 3(a) of the Plan is amended, effective as of February 12, 1998,
to read as follows:
"(a) Participation Periods. While the Plan is in effect, there shall be
four Participation Periods in each calendar year. The Participation
Periods shall consist of calendar quarters, except that in the event of
a `Change in Control' of the Company, as defined in the AirTouch
Communications, Inc. 1993 Long-Term Stock Incentive Plan (or the
successor to such plan), the last day of the Participation Period in
which the Change in Control would otherwise occur shall be accelerated
to the last payday immediately preceding the Change in Control."
EXECUTION
To record this amendment to the Plan as set forth herein, AirTouch
Communications, Inc. has caused its authorized representative to execute this
document this _______ day of __________, 1998.
By
------------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
<PAGE> 5
RESTATEMENT OF THE
AIRTOUCH COMMUNICATIONS
DEFERRED COMPENSATION PLAN
This restatement of the Plan:
- - Permits new employees to defer their Team Award if they elect to do so
within 30 days of their initial participation date.
- - Permits participation by former New Vector employees whose accounts
were transferred to the Plan in accordance with the Merger Agreement
with U S WEST; and allows the New Vector participants to elect a time
and form of distribution of their transferred accounts.
- - Allows participants in the Long-Term Incentive Program to defer
compensation payable under that Program.
- - Defines eligible employees to include employees in salary bands D and E
whose total cash compensation (base salary and target team award)
exceeds a threshold amount established by the Plan administrator.
- - Deletes a requirement for an election to receive restoration credits
when a participant's compensation exceeds the maximum amount that may
be recognized under the qualified Retirement Plan. Participation will
be automatic under such circumstances.
- - Incorporates the Board's delegation of authority to the C&P Committee
to approve amendments that relate to the Plan's operation and
administration.
- - Provides that in the event of a change in control (as defined in the
1993 Long-Term Stock Incentive Plan), the rate used to credit interest
on Plan accounts immediately before the change in control may not be
changed for a three-year period, and may never be lower than the
10-year Treasury note rate.
- - Deletes obsolete provisions and references to the spin-off of AirTouch
from Pacific Telesis.
<PAGE> 6
RESTATEMENT OF THE
AIRTOUCH COMMUNICATIONS
EXECUTIVE LIFE INSURANCE PLAN
This restatement of the Plan merely updates the plan for changes in terminology
since the spin-off of AirTouch from Pacific Telesis.
<PAGE> 7
RESTATEMENT OF THE
AIRTOUCH COMMUNICATIONS
EXECUTIVE LONG-TERM DISABILITY PLAN
This restatement of the Plan merely updates the plan for changes in terminology
since the spin-off of AirTouch from Pacific Telesis.
<PAGE> 8
AMENDMENT TO THE
EMPLOYEES PENSION PLAN
- - Amends the Plan to preclude any change in the Plan's provisions
relating to the treatment of any surplus assets for a three-year period
following a change in control (as defined in the 1993 Long-Term Stock
Incentive Plan).
<PAGE> 9
REVISION AMENDMENT FOR THE PENSION PLAN
- - Amends the Plan to permit a reversion of surplus assets to the Company
as long as the surplus is used for "retirement purposes."
<PAGE> 10
AMENDMENT NO. 3 TO THE
AIRTOUCH COMMUNICATIONS
EMPLOYEES PENSION PLAN
(AS AMENDED AND RESTATED JANUARY 1, 1995)
Section 15.01 of the AirTouch Communications Employees Pension Plan
(the "Plan") is amended, effective as of February 12, 1998, by adding a new
paragraph to read as follows:
"Notwithstanding the foregoing provisions of this Section 15.01, during
the three-year period following any `Change in Control' of the Company,
as defined in the AirTouch Communications, Inc. 1993 Long-Term Stock
Incentive Plan (or the successor to such plan), the Plan's provisions
relating to the treatment of any surplus assets at Plan termination, as
in effect immediately prior to the Change in Control, may not be
amended."
EXECUTION
To record this amendment to the Plan as set forth herein, AirTouch
Communications, Inc. has caused its authorized representative to execute this
document this _______ day of __________, 1998.
By
-------------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
<PAGE> 11
Section 15.02 of the Plan is amended, effective as of ________________,
to read as follows:
"15.02 Effect of Termination. In the event of termination or partial
termination of the Plan, the rights of all Participants to benefits
accrued to the date of such termination or partial termination, to the
extent funded, shall be nonforfeitable. The entire Pension Fund or the
portion of the Pension Fund allocable to a partial termination,
whichever is applicable, shall be applied in the manner set forth in
section 4044 of ERISA and in any Plan amendment adopted in connection
with such termination or partial termination. In the event that any
balance remains in the Pension Fund after such allocation upon
termination of the Plan, the balance shall be applied solely for
pension purposes in an equitable manner consistent with the purposes of
the Plan. At the Company's discretion, all or part of any such
remaining balance may be reverted to the Company or the Participating
Companies; provided that the amount reverted, net of taxes, must be
used (including over a period of time) to provide retirement benefits
of any type for employees and former employees of the Company, its
subsidiaries and affiliates and their beneficiaries."
<PAGE> 12
AMENDMENT TO THE
SUPPLEMENTAL EXECUTIVE PENSION PLAN
- - Amends the Plan to delete Section 8, which currently provides for the
forfeiture of Plan benefits if the participant is discharged for cause
(undefined) or has "engaged in misconduct in connection with his or her
employment."
- - Amends the Plan to provide that if, following a change in control (as
defined in the 1993 Long-Term Stock Incentive Plan), a participant's
employment terminates under circumstances that trigger
change-of-control-related severance payments under his or her
employment agreement, then the participant is treated as an "Executive"
under the Plan for the remainder of his or her Plan participation and
is deemed to have satisfied all age and service requirements for
eligibility to receive any benefit. Treatment as an "Executive" makes
some benefit reduction provisions inapplicable and makes the
participant eligible to receive cost of living increases under the Plan
if they are also granted under the Pension Plan.
<PAGE> 13
AMENDMENT NO. 1 TO THE
AIRTOUCH COMMUNICATIONS
SUPPLEMENTAL EXECUTIVE PENSION PLAN
(AS AMENDED AND RESTATED APRIL 1, 1994)
Effective as of February 12, 1998, Section 8 of the AirTouch
Communications Supplemental Executive Pension Plan (the "Plan") is deleted, and
is replaced in its entirety by the following new provision:
"SECTION 8. CERTAIN TERMINATIONS FOLLOWING A CHANGE IN CONTROL.
"Notwithstanding any other provision of the Plan, if a Participant's
employment terminates under circumstances that trigger severance
payments under the change of control provisions of his or her
employment agreement, then (a) the Participant shall be treated as an
Executive for all purposes under the Plan, and (b) the Participant
shall be deemed to have satisfied all age and length-of-service
requirements for eligibility to receive any benefit under the Plan."
EXECUTION
To record this amendment to the Plan as set forth herein, AirTouch
Communications, Inc. has caused its authorized representative to execute this
document this _______ day of __________, 1998.
By
-----------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
<PAGE> 1
EXHIBIT 10.6
AIRTOUCH COMMUNICATIONS
EXECUTIVE LIFE INSURANCE PLAN
(As Amended and Restated Effective January 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. PURPOSE............................................................................................. 1
SECTION 2. ERISA PLAN.......................................................................................... 1
SECTION 3. PARTICIPATION....................................................................................... 1
3.1 COVERED UNDER PREDECESSOR PLAN................................................................. 1
3.2 ELECTION NOT TO PARTICIPATE.................................................................... 2
3.3 INSURABILITY................................................................................... 2
SECTION 4. ASSIGNMENT.......................................................................................... 2
SECTION 5. INSURANCE BENEFITS WHILE EMPLOYED................................................................... 3
5.1 AMOUNT OF INSURANCE............................................................................ 3
5.2 NO CASH SURRENDER VALUE WHILE EMPLOYED......................................................... 3
5.3 PAYMENT OF PREMIUMS AND REIMBURSEMENT.......................................................... 3
5.4 POLICY OWNERSHIP............................................................................... 3
SECTION 6. DEATH BENEFIT AFTER APPROVED RETIREMENT............................................................. 4
SECTION 7. POLICY OWNERSHIP AFTER TERMINATION.................................................................. 4
SECTION 8. INSUFFICIENT INSURANCE.............................................................................. 5
8.1 INSUFFICIENT POLICIES.......................................................................... 5
8.2 NOT TIMELY PURCHASED........................................................................... 5
8.3 TAX TREATMENT IGNORED.......................................................................... 6
SECTION 9. WITHHOLDING......................................................................................... 6
SECTION 10. ADMINISTRATION...................................................................................... 6
10.1 PLAN SPONSOR AND ADMINISTRATOR.............................................................. 6
10.2 DETERMINATION OF ELIGIBILITY................................................................ 6
10.3 PROCEDURE TO APPROVE AND DENY CLAIMS........................................................ 6
10.4 PROCEDURE TO REVIEW DENIED CLAIMS........................................................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
10.5 ADDITIONAL DUTIES OF PLAN ADMINISTRATOR..................................................... 7
10.6 ALLOCATION OF RESPONSIBILITIES.............................................................. 8
10.7 NAMED FIDUCIARIES........................................................................... 8
10.8 MORE THAN ONE FIDUCIARY CAPACITY............................................................ 8
10.9 APPLICABLE LAW; SEVERABILITY................................................................ 8
SECTION 11. AMENDMENT AND TERMINATION........................................................................... 9
11.1 PLAN AMENDMENT.............................................................................. 9
11.2 PLAN TERMINATION............................................................................ 9
SECTION 12. DEFINITIONS......................................................................................... 9
SECTION 13. EXECUTION.......................................................................................... 11
</TABLE>
ii
<PAGE> 4
AIRTOUCH COMMUNICATIONS
EXECUTIVE LIFE INSURANCE PLAN
(As Amended and Restated Effective January 1, 1998)
SECTION 1. PURPOSE
The AirTouch Communications Executive Life Insurance Plan (the
"Plan") was established effective as of the Separation Date to provide life
insurance benefits to certain key executive personnel who were provided similar
benefits immediately before the Separation Date under a plan sponsored by
Pacific Telesis Group. The Plan may be amended or terminated as provided in
Section 11. The Plan was last amended and restated effective as of January 1,
1998, to read as set forth herein.
SECTION 2. ERISA PLAN
This Plan is covered by Title I of ERISA as a top-hat welfare
benefit plan.
SECTION 3. PARTICIPATION
3.1 Covered Under Predecessor Plan
Participation in the Plan shall be limited to those Executives
who were covered under the Pacific Telesis Group Executive Life Insurance Plan
("Predecessor Plan") immediately before the Separation Date, as determined by
the Administrator. As of January 1, 1998, the following Executives are eligible
to participate in the Plan: Sam Ginn, C. Lee Cox, Arun Sarin, Mohan Gyani and
Sue Swenson.
1
<PAGE> 5
3.2 Election Not to Participate
A covered Executive may elect not to participate in this Plan at
any time; such election shall be in writing, and shall become effective upon its
receipt by the Administrator. No compensation or benefits in lieu of this Plan
shall be paid to an Executive who elects not to participate. An election not to
participate shall be irrevocable unless otherwise determined by the Board.
3.3 Insurability
Executives who are eligible to participate are not automatically
entitled to the insurance benefits provided under this Plan. Each Executive must
satisfy the requirements for insurability of the insurer selected by the Company
before becoming covered by insurance under this Plan.
SECTION 4. ASSIGNMENT
The Executive may assign to one or more individuals or trustees
all or any part of his or her right, title, claim, interest, benefit and all
other incidents of ownership which he or she may have in any life insurance
under this Plan. Such assignee shall then have all rights and obligations which
have been assigned and otherwise are the Executive's under this Plan. To the
extent that there has been such an assignment, the term Executive shall mean the
Executive's assignee (or any subsequent assignee) as the context requires, in
connection with ownership, actions, elections, or other events concerning life
insurance on the Executive.
2
<PAGE> 6
SECTION 5. INSURANCE BENEFITS WHILE EMPLOYED
5.1 Amount of Insurance
The amount of insurance provided under this Plan on the life of
each covered Executive while he or she is employed by a Participating Company
shall be two times the annual base salary of the Executive. At its discretion
and at any time, however, the Board may specify a lower amount of insurance for
an Executive. The Executive shall have the incidents of ownership in such
insurance provided in paragraph 5.4.
5.2 No Cash Surrender Value While Employed
While the Executive is employed by a Participating Company, he
or she shall not have any interest in any cash surrender value with respect to
any insurance under this Plan.
5.3 Payment of Premiums and Reimbursement
The Company shall pay all the premiums for insurance under this
Plan. The Executive shall reimburse the Company in an amount determined by the
Company which, without reimbursement, would be required to be included in the
Executive's income for federal income tax purposes by reason of the economic
benefit of the life insurance protection provided under this Plan. Reimbursement
shall occur monthly on demand by the Company.
5.4 Policy Ownership
To provide the insurance benefits under this Plan, the Company
shall acquire one or more permanent insurance policies on the life of each
participating Executive who satisfies the insurer's requirements for
insurability. Such policies may be acquired directly from an insurance company
or by assignment from the Predecessor Plan, as the Administrator determines. The
ownership of each policy shall be divided between the Company and the Executive.
The Executive shall possess all incidents of ownership in the policy or
3
<PAGE> 7
policies in an amount equal to the amount of the insurance benefits provided to
the Executive under this Plan, and the Company shall possess all other incidents
of ownership. The Executive shall not have any ownership interest in any cash
surrender value under any insurance policy. The Executive shall have the right
to designate the beneficiary to whom death benefits are payable under each
insurance policy, to the extent of his or her ownership of the policy; the rest
of any death benefits shall be payable to the Company or its designated
beneficiary.
SECTION 6. DEATH BENEFIT AFTER APPROVED RETIREMENT
At the death of a covered Executive who retires pursuant to an
Approved Retirement, the Company will pay to the Executive's beneficiary a death
benefit that on an after-income tax basis (including state income tax) shall
equal one times the Executive's final annual base salary. No death benefits will
be paid on account of the death of an Executive who terminates employment with
the Company for reasons other than an Approved Retirement.
SECTION 7. POLICY OWNERSHIP AFTER TERMINATION
Effective with an Executive's termination of employment with a
Participating Company for any reason, including an Approved Retirement, all
interests and rights the Executive, or his assignee, had under this Plan in any
insurance policies on the Executive's life will cease, and thereafter all
interests and rights in such insurance policies will belong exclusively to the
Company. The Executive shall transfer to the Company the portion of the policy
or policies on his or her life which he or she owns under this Plan. After such
a termination, neither the Executive, his or her assignee, the Executive's
beneficiary, nor the assignee's beneficiary shall have any interests or rights
under this Plan in the cash surrender value of any insurance policy or the death
benefit payable under any insurance policy.
4
<PAGE> 8
SECTION 8. INSUFFICIENT INSURANCE
8.1 Insufficient Policies
If an Executive who satisfies the insurer's requirements for
insurability should die at a time when the amount of insurance in force on his
or her life is less than the amount required under this Plan, the Company shall
pay such additional amounts as would have been paid by the insurer if such
amount of insurance had been in effect, subject to the exceptions which would
have been stated in the policy. Such exceptions shall be determined by reference
to the most recently purchased policy on the Executive's life under this Plan;
if no such policy exists, they shall be determined by reference to the most
recently purchased policy for any Executive covered under this Plan. Payment
shall be made from the general funds of the Company.
8.2 Not Timely Purchased
In addition, if the amount of insurance paid under this Plan is
less than the amount of insurance in force because of the application of a
suicide, incontestability of similar clause, and if such clause would not have
applied to reduce the amount of insurance if the insurance policy had been
timely purchased, then the Company shall pay such additional amounts as would
have been paid by the insurer if the insurance had been timely purchased.
Insurance shall be treated as timely purchased if it is purchased no later than
120 days after the date of the applicable event. For example, insurance shall be
timely purchased if it is purchased no later than 120 days after an Executive is
first covered under the Plan. Similarly, insurance is timely purchased if it is
purchased no less than 120 days after the date on which an Executive's periodic
salary increase is effective.
5
<PAGE> 9
8.3 Tax Treatment Ignored
Except as otherwise provided herein, no adjustment shall be made
for the fact that the tax treatment of Company payments may be different from
the tax treatment of the proceeds paid under an insurance policy.
SECTION 9. WITHHOLDING
The Executive and any beneficiary shall make appropriate
arrangements with the Company for the satisfaction of any federal, state or
local income tax withholding requirements and social security or other employee
tax requirements applicable to the provision of benefits under this Plan. If no
other arrangements are made, the Company may provide, at its discretion, for
such withholding and tax payments as may be required.
SECTION 10. ADMINISTRATION.
10.1 Plan Sponsor and Administrator. The Company shall be the sponsor of the
Plan and the Senior Vice President,- Human Resources and Corporate Services of
the Company (or his or her successor) shall be the Administrator. The Senior
Vice President,- Human Resources and Corporate Services of the Company (or his
or her successor) shall have the specific powers elsewhere granted and shall
have such other powers as may be necessary in order to administer the Plan, in
his sole discretion, except for powers herein granted or provided to others.
10.2 Determination of Eligibility. In all questions relating to eligibility
for any benefit hereunder, the decision of the Administrator, based upon this
Plan and upon the insurance policies covering such individual and, insofar as
permitted by applicable law, shall be final.
10.3 Procedure To Approve and Deny Claims. The Administrator shall have the
sole discretion to grant or deny claims for benefits under the Plan with respect
to covered Executives. Adequate notice, pursuant to applicable law and
prescribed Company practices, shall be provided in writing to any Executive or
beneficiary whose claim has
6
<PAGE> 10
been denied, setting forth the specific reasons for such denial and any other
information required to be furnished under ERISA.
10.4 Procedure To Review Denied Claims. The Committee shall serve as the
final Review Committee for the review of all denied claims appealed by an
Executive or beneficiary of an Executive.
An Executive or his or her beneficiary whose claim for benefits
has been denied, in whole or in part, may (and must for the purpose of seeking
any further review of a decision or determining any entitlement to a benefit
under the Plan) within 60 days after receipt of notice of denial, submit a
written request for review of the decision denying the claim. In such case, the
Review Committee shall:
(a) Make full and fair review of such decision within 60 days
after receipt of the written request for review, or within an additional 60
days, provided the claimant is notified of the delay and the reasons for
requiring such additional time; and
(b) Notify the claimant in writing of the review decision,
specifying the reasons for such decision.
Any Executive or beneficiary whose claim for benefits has been
denied shall have such further rights of review as are provided in section 503
of ERISA and regulations promulgated thereunder. The Committee shall retain such
right, authority and discretion as is provided in or not expressly limited by
section 503 of ERISA and regulations thereunder.
10.5 Additional Duties of Plan Administrator. The Senior Vice President,-
Human Resources and Corporate Services of the Company (or his or her successor)
shall determine conclusively for all parties all questions arising in the
administration of the Plan, and insofar as permitted by applicable law, any
decision of the Senior Vice President,- Human Resources and Corporate Services
of the Company (or his or her successor) shall not be subject to further review.
7
<PAGE> 11
10.6 Allocation of Responsibilities. The Company may allocate
responsibilities for the operation and administration of the Plan consistent
with the Plan's terms. The Company, the Committee and the Senior Vice
President,- Human Resources and Corporate Services of the Company (or his or her
successor) may designate in writing other persons to carry out their respective
responsibilities under the Plan and may employ persons to advise them with
regard to any such responsibilities.
10.7 Named Fiduciaries. The Company, the Committee and the Senior Vice
President,-Human Resources and Corporate Services of the Company (or his or her
successor) are each named fiduciaries as that term is used in ERISA with respect
to the particular duties and responsibilities herein provided to be allocated to
each of them.
10.8 More Than One Fiduciary Capacity. A person or group of persons may
serve in more than one fiduciary capacity with respect to the Plan.
10.9 Applicable Law; Severability
The Plan hereby created shall be construed, administered and
governed in all respects in accordance with ERISA and the laws of the State of
California to the extent the latter are not preempted by ERISA. If any provision
of this instrument shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall continue to be
fully effective.
8
<PAGE> 12
SECTION 11. AMENDMENT AND TERMINATION.
11.1 Plan Amendment. The Company may from time to time make any changes in
the Plan as it deems appropriate with or without notice to participants by
appropriate action of the Board of Directors. However, in recognition of the
reliance placed upon the Plan and its contractual nature in inducing the change
in position caused by retirement, any such change or modification shall not
affect the rights of any individual to any benefit to which he or she may have
previously become entitled hereunder. The Senior Vice President,-Human Resources
and Corporate Services of the Company (or his or her successor), with the
approval of the Senior Vice President,Legal, External Affairs and Secretary of
the Company (or his or her successor), shall be authorized to make minor or
administrative changes to the Plan.
11.2 Plan Termination. The Company retains the right to terminate the Plan
in whole or in part by appropriate action of the Board, at any time, for any
reason, with or without notice to participants. Said termination shall not
affect the rights of any individual to any benefit to which he may have
previously become entitled hereunder.
SECTION 12. DEFINITIONS
12.1 "Approved Retirement" shall mean a termination of employment with a
Participating Company with eligibility for an immediate nondiscounted service
pension under the AirTouch Communications Employees Pension Plan, or a
termination which the Board specifically determines to be an "Approved
Retirement" for purposes of this Plan.
12.2 "Board" shall mean the Board of Directors of the Company.
12.3 "Committee" means the Compensation and Personnel Committee of the
Board.
12.4 "Company" shall mean AirTouch Communications, Inc., a Delaware
corporation.
9
<PAGE> 13
12.5 "Executive" shall mean an employee of a Participating Company who is
eligible to participate in the Plan, as provided in Subsection 3.1 of the Plan.
12.6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
12.7 "Participating Company" shall mean the Company, each subsidiary of the
Company which shall, with the consent of the Company determine to participate in
the Plan, and each other corporation, partnership or joint venture designated by
the Board or the Committee as a Participating Company.
12.8 "Plan" shall mean this AirTouch Communications Executive Life Insurance
Plan.
12.9 "Separation Date" shall mean April 1, 1994, the date that complete
separation of PacTel Corporation and Pacific Telesis Group occurred.
10
<PAGE> 14
SECTION 13. EXECUTION.
To record the amendment and restatement of the Plan as set forth
herein, the Company has caused its duly authorized representative to execute the
same this ___ day of _______________, 1998.
AIRTOUCH COMMUNICATIONS, INC.
By
-----------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
11
<PAGE> 1
EXHIBIT 10.7
AIRTOUCH COMMUNICATIONS
EXECUTIVE LONG TERM DISABILITY PLAN
(As Amended and Restated Effective January 1, 1998)
-1-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. INTRODUCTION.....................................................1
SECTION 2. PARTICIPATION....................................................1
2.1 ELIGIBILITY TO PARTICIPATE....................................1
2.2 ELIGIBILITY FOR DISABILITY BENEFIT............................1
2.3 ELIGIBILITY FOR SURVIVING SPOUSE BENEFIT......................1
2.4 ELIGIBILITY FOR GROUP LIFE INSURANCE BENEFIT..................1
2.5 ELIGIBILITY FOR MEDICAL EXPENSE BENEFIT.......................2
2.6 GENERAL PARTICIPATION REQUIREMENTS............................2
SECTION 3. DISABILITY BENEFITS..............................................2
3.1 DEFINITION OF DISABILITY......................................2
3.2 AMOUNT OF DISABILITY BENEFITS.................................2
3.3 DETERMINATION OF PERIODS OF DISABILITY........................5
3.4 DETERMINATION OF PERIODS OF ELIGIBILITY.......................5
SECTION 4. SURVIVING SPOUSE BENEFIT.........................................5
4.1 AMOUNT OF SURVIVING SPOUSE BENEFIT............................5
4.2 EXCEPTION.....................................................6
SECTION 5. GROUP LIFE INSURANCE BENEFIT.....................................6
SECTION 6. MEDICAL EXPENSE BENEFITS.........................................6
SECTION 7. CLAIMS AND APPEALS...............................................6
SECTION 8. GENERAL PROVISIONS...............................................6
8. NO ASSIGNMENT.................................................6
8.2 PLAN EXPENSE..................................................7
8.3 AMENDMENT AND TERMINATION.....................................7
8.4 BENEFIT CONDITIONED ON RELEASE................................7
8.5 FORFEITURE OR LOSS OF BENEFITS................................8
SECTION 9. DEFINITIONS......................................................8
SECTION 10. EXECUTION.......................................................10
</TABLE>
i
<PAGE> 3
AirTouch Communications
Executive Long Term Disability Plan
(As Amended and Restated Effective January 1, 1998)
Section 1. Introduction
The AirTouch Communications Executive Long Term Disability Plan (the
"Plan") was established as of Separation Date to provide disability and certain
other benefits to certain Executives who become disabled while employed. These
benefits are similar to the benefits previously provided to Executives before
the Separation Date under the Pacific Telesis Group Long Term Disability and
Survivor Protection Plan (the "Predecessor Plan"). The Plan may be amended or
terminated as provided in Section 8.3. The Plan was last amended and restated
effective as of January 1, 1998, to read as set forth herein.
Section 2. Participation
2.1 Eligibility to Participate.
Participation in the Plan shall be limited to those Executives who were
participants in the Predecessor Plan immediately before the Separation Date. As
of January 1, 1998, the following Executives are eligible to participate in the
Plan: Sam Ginn, Arun Sarin, Mohan Gyani and Sue Swenson.
2.2 Eligibility for Disability Benefit.
A Participant who becomes disabled within the meaning of Section 3.1 of
the Plan while an Executive of the Company shall be eligible for a Disability
Benefit under Section 3.2 of the Plan.
2.3 Eligibility for Surviving Spouse Benefit.
The Surviving Spouse of a Participant who dies while eligible for a
Disability Benefit under Section 3 of the Plan shall be eligible for a Surviving
Spouse Benefit under Section 4 of the Plan.
2.4 Eligibility for Group Life Insurance Benefit.
A Participant who is eligible for a Disability Benefit under Section 3
of the Plan on the last day of employment with the Company and who is not
eligible for life insurance coverage under the Company's Disability Benefit and
Insurance Plan after termination of employment shall be eligible for the Group
Life Insurance Benefit under Section 5 of the Plan.
1
<PAGE> 4
2.5 Eligibility for Medical Expense Benefit.
A Participant who is eligible for a Disability Benefit under Section 3
of the Plan on the last day of employment with the Company and who is not
eligible for medical and dental coverage under the Company's Health Benefit
Plans after termination of employment shall be eligible for the Medical Expense
Benefits under Section 6 of the Plan.
2.6 General Participation Requirements.
For purposes of Sections 2.3, 2.4 and 2.5 above, a Participant shall be
considered to be eligible to receive a Disability Benefit under Section 3 if he
or she has met the conditions specified in Section 3, even though the receipt of
other benefits by such Participant precludes his or her receipt of any benefits
under Section 3.
Section 3. Disability Benefits
3.1 Definition of Disability
(a) Disability During Initial 52-Week Period.
A Participant shall be considered to be "disabled" at any time during
the first fifty-two week period following the onset of a physical or mental
impairment, if such impairment prevents the Participant from meeting the
performance requirements of the position held immediately preceding the onset of
the physical or mental impairment.
(b) Disability After Initial 52-Week Period.
A Participant shall be considered to be "disabled" after the first
fifty-two week period following the onset of a physical or mental impairment if
such impairment prevents the Participant from meeting the performance
requirements of (i) the position held immediately preceding the onset of the
physical or mental impairment, (ii) a similar position, or (iii) any appropriate
position within the Company which the Participant would otherwise be capable of
performing by reason of the Participant's background and experience.
(c) Committee Determination.
The Committee shall make the determination of whether a Participant is
disabled within the meaning of Sections 3.1(a) and 3.1(b) above, in its sole
discretion.
2
<PAGE> 5
3.2 Amount of Disability Benefits
(a) Benefits During Initial 52-Week Period.
A Participant who is disabled during a period described in Section
3.1(a) shall be eligible to receive a monthly disability benefit equal to 100
percent of the Participant's monthly base salary rate on the last day the
Participant was on the active payroll, reduced by any amounts described in
Section 3.2(d)(i) which are attributable to the period for which benefits are
provided under this paragraph.
(b) Benefits After Initial 52-Week Period But Before Age 65.
A Participant who is disabled during a period described in Section
3.1(b) shall, prior to his sixty-fifth birthday, be eligible to receive a
monthly disability benefit equal to sixty percent of the Participant's monthly
base salary rate on the last day the Participant was on the active payroll,
reduced by any amounts described in Section 3.2(d)(ii) which are attributable to
the period for which benefits are provided under this paragraph.
(c) Benefits After Initial 52-Week Period And At or After Age
65.
A Participant who is disabled during a period described in Section
3.1(b) shall, commencing with his sixty-fifth birthday or the start of the
period described in Section 3.1(b), if later, be eligible to receive a monthly
disability benefit equal to the greater of:
(A) One and one-quarter percent of the Participant's
Annual Basic Pay on the last day the Participant was on the active
payroll, or
(B) If the Participant's Term of Employment has been
five years or more, ninety percent of the monthly pensions the
Participant would have been entitled to receive commencing at age 65
under the Qualified Pension Plan and the Supplemental Executive Pension
Plan, as in effect on the last day the Participant was on the active
payroll,
reduced by any amounts described in Section 3.2(d)(iii) which are attributable
to the period for which benefits are provided under this Section 3.2(c).
(d) Offsets To Disability Benefits
(i) Offsets During Initial 52-Week Period.
The disability benefit determined for the initial
52-week period under Section 3.2(a) shall be reduced by the sum of the following
benefits received by the Participant which are
3
<PAGE> 6
attributable to the period for which such disability benefit is provided: a
service pension under the Qualified Pension Plan, a pension under the
Supplemental Executive Pension Plan, a disability benefit under the Disability
Benefit and Insurance Plan, any Worker's Compensation Benefit, plus any other
benefit payments required by law on account of the Participant's disability.
However, no reduction shall be made on account of any pension under the
Qualified Pension Plan or the Supplemental Executive Pension Plan at a rate
greater than the rate of such pension on the date the Participant first received
such pension after his disability.
(ii) Offsets Following 52-Week Period But Before Age 65.
The disability benefit determined for any period
under Section 3.2(b)(i) above shall be reduced by the sum of the following
benefits received by the Participant which are attributable to the period for
which such disability benefit is provided: a vested pension or service pension
under the Qualified Pension Plan, a pension under the Supplemental Executive
Pension Plan, a disability benefit under the Disability Benefit and Insurance
Plan, any other retirement income payments from the Company, any Worker's
Compensation Benefit, plus any Social Security Insurance Benefit. However, no
reduction shall be made on account of any pension under the Qualified Pension
Plan or the Supplemental Executive Pension Plan at a rate greater than the rate
of such pension on the date the Participant first received such pension after
his disability, and no reduction shall be made on account of any Social Security
Benefit at a rate greater than the rate which the Participant would have first
been eligible to receive after his disability and as if no other member of his
family were eligible for any Social Security Benefit.
Furthermore, the Board of Directors of the Company, in its
discretion, may reduce the Disability Benefit by the amount of outside
compensation or earnings of the Participant for work performed by the
Participant during the period for which such disability benefit is provided.
(iii) Offsets Following Both 52-Week Period And Age 65.
The disability benefit determined for any period under Section
3.2(b)(ii) above shall be reduced by the sum of the following benefits received
by the Participant which are attributable to the period for which such
disability benefit is provided: a service pension or vested pension under the
Qualified Pension Plan, a pension under the Supplemental Executive Pension Plan,
a disability benefit under the Disability Benefit and Insurance Plan, any other
retirement income payments from the Company, plus any Worker's Compensation
Benefit. However, no reduction shall be made on account of any pension under the
Qualified Pension Plan or the Supplemental Executive Pension Plan
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at a rate greater than the rate of such pension on the date the Participant
first received such pension after his disability.
3.3 Determination of Periods of Disability.
For purposes of Sections 3.1(a) and (b), the measurement of time
following the onset of a physical or mental impairment shall coincide with the
measurement of time used to calculate periods of disability under the Disability
Benefit and Insurance Plan. Successive periods of physical or mental impairment
shall be counted together in computing the periods during which the Participant
shall be entitled to the benefits provided under Section 3.2(a) and (b), except
that any disability absence after the Participant has been continuously engaged
in the performance of duty for thirteen weeks shall be considered to commence a
new period of physical or mental impairment under Section 3.1(a), so that such
Participant shall be entitled during such new period to the benefits provided
under Section 3.2(a).
3.4 Determination of Periods of Eligibility.
With respect to a Participant not subject to mandatory retirement at
age 65 under section 12(b) of the Age Discrimination in Employment Act (29
U.S.C. 621 et. seq.) or Sections 12941 and 12942 of the California Government
Code, the period of eligibility for the disability benefit following the initial
52-week period, as provided in Section 3.2(b) and (c) shall be the period
described therein or such other period as is required under the Age
Discrimination in Employment Act, the California Government Code, or under any
applicable governing regulations or interpretations thereunder.
Section 4. Surviving Spouse Benefit
4.1 Amount of Surviving Spouse Benefit.
When a disabled Participant described in Section 2.3 of the Plan dies,
the Participant's Surviving Spouse shall be eligible to receive a monthly
benefit equal to one and one-quarter percent of the Participant's Annual Basic
Pay on the last day the Participant was employed prior to death, reduced by the
sum of the following benefits received by the Participant's Surviving Spouse on
account of the death of the Participant and which are attributable to the period
for which benefits are provided under this Section: (i) a surviving annuitant's
pension under the Qualified Pension Plan, (ii) a surviving annuitant's pension
under the Supplemental Executive Pension Plan, and (iii) any other lifetime
payments to the Surviving Spouse from the Company. However, no reduction shall
be made on account of a pension under the Qualified Pension Plan or the
Supplemental Executive Pension Plan at a rate greater than the rate when such
pension was first payable.
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4.2 Exception.
Notwithstanding Section 4.1 above, the Surviving Spouse of a
Participant shall not be eligible to receive benefits under this Section, if
prior to the Participant's death, the Participant was eligible to elect, but
declined, a joint and survivor annuity form of payment under the Qualified
Pension Plan and elected to receive benefits under the Qualified Pension Plan in
some other form.
Section 5. Group Life Insurance Benefit
A disabled Participant described in Section 2.4 who has terminated
employment with the Company shall be entitled to life insurance coverage and
benefits equal in scope and value to the coverage and benefits that would have
been provided under the Company's Disability Benefit and Insurance Plan if the
Participant had retired on a service pension under the Qualified Pension Plan.
Section 6. Medical Expense Benefits
A disabled Participant described in Section 2.4 who has terminated
employment with the Company shall be entitled to medical and dental coverage and
benefits equivalent in scope and value to the coverage and benefits that would
have been provided if the Participant had retired on a service pension under the
Qualified Pension Plan.
Section 7. Claims and Appeals
Any claim under the Plan by a Participant or anyone claiming through a
Participant shall be presented to the Company's Senior Vice President,- Human
Resources and Corporate Services (or his or her successor). Any person whose
claim under the Plan has been denied may, within 60 days after receipt of notice
of denial, submit to the Committee a written request for review of the decision
denying the claim. The Committee shall determine conclusively for all parties
all questions arising in the administration of the Plan.
Section 8. General Provisions
8.1 No Assignment.
The rights of the Participant or his or her spouse to benefits under
the Plan shall not be subject to assignment or alienation.
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8.2 Plan Expenses.
All costs of providing the benefits under the Plan shall be charged to
the operating expense of the Company when and as paid.
8.3 Amendment and Termination.
The Board of Directors of the Company may from time to time make
changes in the Plan and may terminate the Plan at any time and for any reason.
In addition, the Senior Vice President, Human Resources and Corporate Services
of the Company (or his or her successor) with the concurrence of the Senior Vice
President-Legal, External Affairs and Secretary of the Company (or his or her
successor) shall be authorized to make minor or administrative changes to the
Plan, as well as changes necessary to provide Participants with benefits that
are comparable to the benefits provided by the Predecessor Plan and changes
dictated by the requirements of federal or state statutes applicable to the
Company or authorized or made desirable by such statutes. Such changes or
termination shall not affect the rights of any Participant or Surviving Spouse,
without his or her consent, to any benefit under the Plan to which such
Participant or Surviving Spouse may have previously become entitled as a result
of a disability, death or termination of employment which occurred prior to the
effective date of such change or termination.
8.4 Benefits Conditioned on Release.
In case of accident resulting in injury to or death of a Participant
which entitles the Participant or his beneficiary to benefits under the Plan,
the Participant or his beneficiary may elect to accept such benefits or to
prosecute such claims at law as the Participant or the beneficiary may have
against the Company. If election is made to accept the benefits under the Plan,
such election shall be in writing and shall release the Company from all claims
and demands which the Participant or his beneficiary may have against it,
otherwise than under this Plan or under any other plan maintained by the
Company, on account of such accident. The Committee, in its discretion, may
require that the election described above shall release any other company
connected with the accident, including any company participating in the
Qualified Pension Plan, as well as any company with which arrangements have been
made, directly or indirectly, for interchange of benefit obligations, as
described in Section 8 of the Qualified Pension Plan. The right of the
Participant to a disability benefit under Section 3 of the Plan shall lapse if
election to accept such benefits, as above provided, is not made within sixty
days after injury, or within such greater time as the Committee shall, by
resolution duly entered on its records, fix for the making of such election.
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8.5 Forfeiture or Loss of Benefits
(a) Filing of Claims Other Than Benefit Claims.
Should claims other than claims for benefits under this Plan or under
any other plan maintained by the Company be presented or suit brought against
the Company, against any other company participating in the Qualified Pension
Plan or against any other company with which arrangements have been made,
directly or indirectly, for interchange of benefit obligations, as described in
Section 8 of the Qualified Pension Plan, for damages on account of injury or
death of a Participant, nothing shall be payable under this Plan on account of
such injury or death except as provided in Section 8.6(b) below; provided
however, that the Committee may, in its discretion and upon such terms as it may
prescribe, waive this provision if such claims be withdrawn or if such suit be
discontinued.
(b) Additional Benefits Following Judgment or Settlement.
In case any judgment is recovered against the Company or any settlement
is made of any claim or suit on account of the injury or death of a Participant,
and the total amount which would otherwise have been payable under the Plan and
under any other plan maintained by the Company is greater than the amount paid
on account of such judgment or settlement, the lesser of (i) the difference
between such two amounts, or (ii) the amount which would otherwise have been
payable under this Plan, may in the discretion of the Committee, be distributed
to the beneficiaries who would have received benefits under this Plan.
(c) Noncompetition Provision.
All benefits provided under the Plan with respect to a Participant
shall be forfeited and cancelled in their entirety if the Participant, without
the consent of the Company and while employed by the Company or after
termination of such employment becomes associated with, becomes employed by or
renders services to, or owns an interest in any business (other than as a
shareholder with a nonsubstantial interest in such business) that is competitive
with the Company or with any business with which a subsidiary or affiliated
company has a substantial interest, as determined by the Company's Board of
Directors. All benefits provided under the Plan with respect to a Participant
shall be forfeited and cancelled in their entirety if the Participant is
discharged by the Company for cause or the Participant engages in misconduct in
connection with the Participant's employment.
Section 9. Definitions
9.1 "Annual Basic Pay" means the Participant's annual base salary rate
as determined by the Company on the last day the
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Participant was actively employed plus target Team Award under the Company's
Incentive Plan.
9.2 "Committee" means the Compensation and Personnel Committee of the
Board of Directors of the Company.
9.3 "Company" means AirTouch Communications, Inc., a Delaware
corporation, or its successors.
9.4 "Disability Benefit and Insurance Plan" means the AirTouch
Communications Long Term Disability, Life and AD&D Insurance Plan.
9.5 "Executive" means an employee or officer of the Company who has
been designated by the Committee to be within the Company's Senior Management
Group.
9.6 "Supplemental Executive Pension Plan" means the AirTouch
Communications Supplemental Executive Pension Plan.
9.7 "Health Benefits Plans" means the AirTouch Communications Medical
and Dental Plan and any other health plan maintained by the Company for
employees or retired employees in general.
9.8 "Participant" means an Executive or former Executive who meets the
requirements of Section 2.
9.9 "Plan" means this AirTouch Communications Executive Long Term
Disability Plan.
9.10 "Predecessor Plan" means the Pacific Telesis Group Senior
Management Long Term Disability and Survivor Protection Plan.
9.11 "Qualified Pension Plan" means the AirTouch Communications
Employees Pension Plan.
9.12 "Separation Date" means April 1, 1994, the date as of which the
total and complete separation of ownership of PacTel Corporation from Pacific
Telesis Group occurred.
9.13 "Surviving Spouse" means the individual who is eligible for a
surviving annuitant's pension under the Qualified Pension Plan and the
Supplemental Executive Pension Plan.
9.14 "Term of Employment" means "term of employment" as defined in the
Qualified Pension Plan.
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Section 10. Execution
To record the amendment and restatement of the Plan as set forth
herein, the Company has caused its duly authorized representative to execute the
same this ___day of __________, 1998.
AIRTOUCH COMMUNICATIONS, INC.
By
-----------------------------------
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
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<PAGE> 1
EXHIBIT 10.8
AIRTOUCH COMMUNICATIONS, INC.
ESTATE DEFERRAL PROGRAM
1. PURPOSE
The purpose of the AirTouch Communications Estate Deferral Program
(the "Plan") is to provide Executives of the Company with
split-dollar life insurance coverage through certain Compensation
deferrals. The Plan is effective as of December 11, 1997.
2. DEFINITIONS
For purposes of this Plan, the following terms have the meanings set
forth below:
2.01 ACTUAL DEFERRAL AMOUNT means the amount the Participant has
actually deferred under the Plan as of the time the
determination is to be made. With respect to deferred
salary, the Actual Deferral Amount shall include all salary
amounts actually deferred plus the full amount of any
salary elected to be deferred with respect to which a
Premium Reimbursement Amount has been paid. A Participant's
Actual Deferral Amount shall not include any Participant
Special Contribution made by the Participant (or Assignee).
2.02 AGREEMENT means the Agreement executed by the Participant
(or Assignee) and the Company implementing the split-dollar
insurance coverage pursuant to the terms of this Plan.
2.03 ALTERNATIVE DEATH BENEFIT means, with respect to a
Participant, an amount that, after subtracting any Company
federal, state, and local income tax savings resulting from
the deductibility of the payment for corporate tax
purposes, is equal to the Participant's Coverage Amount.
The Alternative Death Benefit shall be determined at the
time the payment is to be made, based on Company's federal,
state and local income tax rate (calculated at the highest
marginal tax rate then applicable to Company, but net of
any federal deduction for state and local taxes) at the
time of the payment, and shall be determined by the
Committee or its designee.
2.04 ASSIGNEE means that person or entity designated as such in
the Agreement.
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2.05 BOARD OF DIRECTORS means the Board of Directors of the
Company.
2.06 CHANGE IN CONTROL shall have the same meaning as is given
to that term in the AirTouch Communications, Inc. 1993
Long-Term Stock Incentive Plan, as amended from time to
time.
2.07 COMMITTEE means the Compensation and Personnel Committee of
the Board of Directors of the Company.
2.08 COMPANY means AirTouch Communications, Inc., a Delaware
Corporation, or its successor or successors.
2.09 COMPANY DEATH BENEFIT means the portion of the Policy's
death benefit payable to the Company as provided in Section
8.
2.10 COMPENSATION means amounts a Participant can elect to defer
pursuant to Section 3.02 of the Plan, and shall include
salary, bonus, and any other amounts the Committee deems
Compensation for purposes of the Plan.
2.11 EFFECTIVE DATE means December 11, 1997.
2.12 ELECTED DEFERRAL AMOUNT means the amount the Participant
elects to defer pursuant to Section 3.02 of the Plan.
2.13 ENROLLMENT AND ELECTION TO DEFER COMPENSATION FORM means
the form completed and submitted to the Company by a
Participant, under which the Participant makes an election
to enroll in the Plan and to defer Compensation under the
Plan in accordance with Section 3.02.
2.14 EXECUTIVE means an employee of the Company the Committee
deems eligible to participate in the Plan in accordance
with Section 3.01.
2.15 INSURER means, with respect to a Participant's Policy, the
insurance company issuing the Policy on the Participant's
life (or on the lives of the Participant and the
Participant's spouse, in the case of a Survivorship Policy)
pursuant to the provisions of the Plan. To qualify as an
Insurer under the Plan, an insurance company must, at the
time a Policy is issued, be assigned the first or second
highest claims paying or financial strength rating by one
or more major rating agency, including A.M. Best, Moody's,
Duff & Phelps, and Standard & Poor's.
2.16 PARTICIPANT means an Executive who participates in the
Plan.
2.17 PARTICIPANT'S COVERAGE AMOUNT means the portion of the
Policy's death benefit payable to the beneficiary(ies) of
the Participant (or Assignee) as provided in Section 8.
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2.18 PLAN ADMINISTRATOR means the Committee, or its designee.
2.19 PARTICIPANT SPECIAL CONTRIBUTION means the amount of
additional premium payment a Participant (or Assignee) may
elect to contribute, pursuant to Section 5.02b, in order to
maintain the Policy death benefit if the Participant's
Actual Deferral Amount is less than the Participant's
Elected Deferral Amount.
2.20 POLICY means the life insurance coverage acquired on the
life of the Participant (or on the lives of the Participant
and the Participant's spouse, in the case of a Survivorship
Policy) by the Company.
2.21 POLICY OWNER means the Company.
2.22 POLICY VESTING DATE means, with respect to a Participant,
the date on which the Participant's final deferral would be
made under the Plan based on the election made by the
Participant pursuant to Section 3.02.
2.23 PREMIUM means, with respect to a Policy on the life of a
Participant (or the lives of a Participant and a
Participant's spouse, if the Policy is a Survivorship
Policy), the amount the Company is obligated, pursuant to
the terms of the Plan, to pay to the Insurer with respect
to such Policy.
2.24 PREMIUM REIMBURSEMENT AMOUNT means an amount of premium
payable by the Participant pursuant to Section 5.02a.
2.25 SURVIVORSHIP POLICY means a Policy insuring the lives of
the Participant and a Participant's spouse, with the death
benefit payable at the death of the last to survive of the
Participant and his or her spouse.
3. PARTICIPATION
3.01 ELIGIBILITY. Any Executive designated by the Committee
shall be eligible to participate in the Plan. An Executive
shall become a Participant by completing such forms,
documents and procedures as specified by the Committee. The
Participant (and, in the case of a Survivorship Policy, the
Participant's spouse) shall cooperate with the Insurer by
furnishing any and all information requested by the Insurer
in order to facilitate the issuance of the Policy,
including furnishing such medical information and taking
such physical examinations as the Insurer may deem
necessary. In the absence of such cooperation, the Company
shall have no further obligation to the Participant to
allow him or her to participate in the Plan.
3.02 ELECTION TO DEFER COMPENSATION. As a condition of
participating in the Plan, each Participant shall be
required to make an election in which the
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Participant shall commit to defer the receipt of a
specified type and amount of Compensation.
If a Participant elects to defer all or a portion of an
annual incentive bonus or other specified payment, and if
the incentive bonus or other specified payment amount
awarded to the Participant is less than the amount elected
to be deferred by the Participant, then the Participant
shall be deemed to have elected to defer the deficiency
amount from the next annual incentive bonus or specified
payment from which the Participant has made an election to
defer Compensation. If there is still a deficiency at the
time of the Participant's Policy Vesting Date, then the
Participant may elect to pay a Policy premium pursuant to
Section 5.02 of the Plan.
The Participant shall make an election to defer
Compensation by execution of an "Enrollment and Election to
Defer Compensation Form" prior to the Policy effective
date. The amounts that a Participant agrees to defer
pursuant to such election, unless precluded by tax or other
laws to the contrary, shall be included in determining a
Participant's compensation for purposes of any benefit
plans maintained by the Company to the same extent as if
such Compensation had not been deferred, and in accordance
with the terms of such employee benefit plans.
4. AMOUNT AND TYPE OF COVERAGE
The amount and type of coverage provided under the Policy shall be
that amount and type specified in the Agreement. The amount of
coverage for which a Participant is eligible shall be set forth in
the Agreement and shall be based upon the Participant's election to
defer compensation.
5. PAYMENT OF PREMIUMS
5.01 COMPANY PAYMENTS. The Company shall pay Premiums equal to
the compensation deferred by a Participant as provided in
the Enrollment and Election to Defer Compensation Form. As
nearly as is practical and except as otherwise provided in
an Agreement, the amount and timing of the Premium payments
shall correspond to the amount of deferred Compensation and
the time at which the deferred Compensation would have been
paid if not deferred. For the purpose of this Section, the
total amount of salary deferred in a calendar year shall be
deemed to have been payable at the beginning of the year.
5.02 PARTICIPANT PAYMENTS. Unless otherwise provided below or in
an Agreement, a Participant (or Assignee) shall not be
required to pay any portion of the Premium due on the
Policy.
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<PAGE> 5
a. If a Participant has made an election to defer
salary for a year, and terminates employment
before all of the elected amount of salary for
the year has been deferred, and if the Company
has made a Premium payment corresponding to the
entire deferred salary amount for the year in
accordance with Section 5.01, then the
Participant (or the Participant's estate, if
after the Participant's death) shall, within
sixty (60) days after the Participant's
termination of employment, pay the Premium
Reimbursement Amount to the Company. The
Premium Reimbursement Amount shall be equal to
sixty percent (60%) of the difference between
the Premium paid by the Company corresponding
to the salary elected to be deferred for the
year and the amount of salary actually deferred
for the year prior to the date of termination
of employment.
b. If the Participant's election to defer
Compensation is no longer in effect under
Section 3.02 because the Participant's Policy
Vesting Date has occurred, then the Participant
(or Assignee) may, within sixty (60) days of
the Participant's Policy Vesting Date, elect to
pay to the Company as a premium payment the
difference (or some portion thereof) between
the Participant's Elected Deferral Amount and
Actual Deferral Amount (hereinafter referred to
as the "Participant Special Contribution").
5.03 TERMINATION EVENTS. The Company's obligation to pay
Premiums with respect to a Policy shall terminate:
a. Automatically upon the death of the Participant
(or upon the death of the last to survive of
the Participant and the Participant's spouse,
if the Policy is a Survivorship Policy).
b. Upon the mutual written agreement of the
Company and Participant (or Assignee).
6. POLICY OWNERSHIP
6.01 OWNERSHIP. The Company shall be the owner of any Policy and
shall be entitled to exercise the rights of ownership,
except that the following rights shall be exercisable by
the Participant (or Assignee if one is designated in the
Agreement): (i) the right to designate the beneficiary(ies)
to receive payment of that portion of the death benefit
under such Policy equal to the Participant's Coverage
Amount unless there is an election for an Alternative Death
Benefit in effect; and (ii) the right to assign any part or
all of the Participant's rights under the Policy to any
person, entity or trust. The Company shall not borrow from,
hypothecate, withdraw cash value from, surrender in whole
or in part, cancel, or in any other manner
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encumber a Policy without the prior written consent of the
Participant (or Assignee if one is designated in the
Agreement). The Company shall not take any other action
with respect to a Policy that may reduce the Participant's
Coverage Amount without the prior written consent of the
Participant (or Assignee).
6.02 POSSESSION OF POLICY. The Company shall keep possession of
the Policy. The Company agrees to make the Policy available
to the Participant (or Assignee) or to the Insurer at such
times, and on such terms as the Company determines for the
sole purposes of endorsing or filing any change of
beneficiary or assignment on the Policy.
6.03 INVESTMENT OF POLICY CASH VALUES. If the Policy provides
the Policy Owner with a choice of investment funds for the
Policy cash values, the Company shall invest the cash
values in the funds selected by and in the proportions
specified by the Assignee (or the Participant, if there is
no Assignee), unless otherwise specified in the
Participant's Agreement. The Company agrees to submit an
investment election to the Insurer within thirty (30) days
after a written investment request by the Participant (or
Assignee) or other person or entity designated in the
Participant's Agreement.
7. ADJUSTMENT OF POLICY
If, as of sixty (60) days after a Participant's Policy Vesting Date,
the Participant's Elected Deferral Amount exceeds the sum of the
Participant's Actual Deferral Amount plus any Participant Special
Contribution made by the Participant (or Assignee), the Participant's
Policy face amount shall be reduced to an amount determined by
multiplying the initial face amount by a fraction, the numerator of
which is the Participant's Actual Deferral Amount plus any
Participant Special Contribution under Section 5.02, and the
denominator of which is the Participant's Elected Deferral Amount.
The Participant (or Assignee) and Company agree to execute an
amendment to the Agreement and to complete any forms required by the
Insurer to implement these changes.
8. DEATH BENEFIT
Upon the death of the Participant (or the death of the last to
survive of the Participant and the Participant's spouse, if the
Policy is a Survivorship Policy), the death benefit under the Policy
shall be divided as follows:
a. Company shall be entitled to receive as the Company Death
Benefit an amount equal to the greater of: (i) the Policy
cash surrender value immediately prior to the death of the
Participant (or the death of the last to survive of the
Participant and the Participant's spouse, if the Policy is
a Survivorship Policy) and before any surrender charges; or
(ii) the
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cumulative Premiums paid by the Company under the Policy.
If the Policy provides for a death benefit equal to the
sum of the face amount of the Policy and any cash account
or accumulation value, any Company Death Benefit should
first be paid from the cash account or accumulation value
portion of the death benefit.
b. The beneficiary(ies) of the Participant (or Assignee) shall
be entitled to receive the Participant's Coverage Amount,
which shall consist of the excess, if any, of the Policy's
death benefit over the Company Death Benefit.
Company agrees to execute an endorsement to the Policy issued to it
by the Insurer providing for the division of the Policy death benefit
in accordance with the provisions of this Section.
Notwithstanding the provisions of this Section, if the Policy death
benefit becomes payable while there is an Alternative Death Benefit
election in effect for the Participant (or Assignee if one is
designated in the Agreement) pursuant to Section 9, then the entire
Policy death benefit shall be paid to Company.
9. ALTERNATIVE DEATH BENEFIT ELECTION
A Participant (or Assignee, if one is designated in the Agreement)
may elect to receive an Alternative Death Benefit in lieu of the
insurance benefit provided under the Plan. Any such election shall be
filed with the Committee in such form as may be prescribed by such
Committee. The Alternative Death Benefit shall be paid by the Company
from the general funds of the Company, and shall not constitute an
insurance benefit. It shall be paid by the Company to the
Participant's (or Assignee's) beneficiary(ies) at the time the
Participant's death benefit would have been paid (at the
Participant's death for single life coverage, or at the death of the
last to survive of the Participant and the Participant's spouse for
survivorship coverage). The amount of the payment shall be equal to
the Alternative Death Benefit. As long as an Alternative Death
Benefit election is in effect, the beneficiary(ies) of the
Participant (or Assignee) shall receive only the Alternative Death
Benefit, and shall not be entitled to receive any portion of any
death benefits that would become payable under the Participant's
Policy, and the Participant (or Assignee) shall cooperate with the
Company in effecting a change of beneficiary of the Participant's
Policy to achieve such result. An Alternative Death Benefit election
(or an election revoke such an election) shall be effective when it
is received by the Company.
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10. PAYMENT OF DEFERRED COMPENSATION
The Participant's deferred compensation shall be paid to the
Participant's designated beneficiary at the death of the Participant
(or, if the Participant's Policy is a Survivorship Policy, at the
death of the last to survive of the Participant and the Participant's
spouse). The amount of the payment shall equal the Participant's
Actual Deferral Amount, and shall be paid in a single sum.
11. CHANGE IN CONTROL
If there is a Change in Control:
a. the Plan and the Company's obligation to pay Policy
Premiums hereunder equal to a Participant's Compensation
(including amounts deferred after the Change in Control
pursuant to an Enrollment and Election to Defer
Compensation Form completed prior to the Change in Control)
shall become irrevocable for all Participants in the Plan
at the time of the Change in Control;
b. a Participant's election to defer Compensation shall remain
in effect in accordance with the original terms thereof,
and the Change in Control will not affect the amount or
timing of Compensation to be deferred by a Participant
after the Change in Control;
c. the Company immediately shall transfer the ownership of all
Participants' Policies to an irrevocable trust created by
the Company. Thereafter, such trust shall (i) pay any
Policy Premiums which become payable pursuant to the
provisions of the Plan following the Change in Control
(including Premiums to be paid in connection with
Compensation to be deferred by Participants after the
Change in Control, which shall be paid by the trust at the
time such amounts are actually deferred, pursuant to
Section 5.01 of the Plan); (ii) pay any Alternative Death
Benefit that becomes payable under Section 9 of this Plan;
and, (iii) pay any deferred compensation payments projected
to be payable under Section 10 of the Plan following the
Change in Control; and,
d. the Company immediately shall fund such irrevocable trust
with an amount sufficient to pay all necessary projected
future Premiums for all Participants' Policies (including
Premiums to be paid in connection with Compensation to be
deferred by Participants after the Change in Control
pursuant to any Enrollment and Election to Defer
Compensation Form completed in accordance with Section 3.02
prior to the Change in Control), as well as all payments
projected to be payable under Section 10 (including amounts
related to Compensation to be deferred by Participants
after the Change in Control pursuant to any Enrollment and
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Election to Defer Compensation Form completed in accordance
with Section 3.02 prior to the Change in Control).
The occurrence of a Change in Control shall not preclude a
Participant (or Assignee) from thereafter making (or revoking) an
Alternative Death Benefit election pursuant to Section 9.
Notwithstanding any contrary provisions of the Plan or this Section
11, if, following the Change in Control, the Company refuses to honor
a Participant's Enrollment and Election to Defer Compensation Form
completed in accordance with Section 3.02 prior to the Change in
Control, or otherwise fails to act in accordance with the terms of
the Plan or the terms of the Participant's Enrollment and Election to
Defer Compensation Form, then: (i) the Participant shall be deemed to
have immediately deferred all Compensation under such Form; (ii) the
trust created pursuant to this Section 11 (or the Company, if there
is no such trust or if the assets of the trust are not sufficient)
immediately shall pay any Policy Premiums payable with respect to
Compensation remaining to be deferred under such Form; and (iii) the
Participant shall thereafter be deemed to have deferred the
Compensation elected to be deferred under such Form for all purposes
under this Plan.
Notwithstanding the creation and funding of an irrevocable trust in
accordance with the provisions of this Section, the Company shall
continue to be responsible for the Premium costs associated with the
Participants' Policies, any Alternative Death Benefits payable under
Section 9, and any payments due to Participants under Section 10, if
such amounts are not paid by the trust for any reason, or if the
trust's assets become insufficient to pay any required amounts.
12. COMPANY DEFAULT
12.01 COMPANY DEFAULT. A Company Default shall be deemed to have
occurred with respect to a Policy if Company fails to pay a
Premium on the Policy as required under the terms of the
Agreement within sixty (60) days after the due date for
such Premium, or if Company processes or attempts to
process a policy loan, or a complete or partial surrender,
or a cash value withdrawal without prior written approval
from Participant (or Assignee).
12.02 RIGHTS UPON COMPANY DEFAULT. In the event of Company
Default as described in Section 12.01, the Participant (or
Assignee if one is designated in the Agreement) shall have
the right to require Company to transfer its interest in
the Participant's Policy to Participant (or Assignee). The
Participant (or Assignee) may exercise this right by
notifying Company, in writing, within sixty (60) days after
the Company Default occurs. Upon receipt of such notice,
Company shall immediately transfer
-9-
<PAGE> 10
its rights in the Policy to the Participant (or Assignee)
and Company shall thereafter have no rights with respect
to such Policy. A Participant's (or Assignee's) failure to
exercise its rights under this Section shall not be deemed
to release Company from any of its obligations under the
Plan, and shall not preclude the Participant (or Assignee)
from seeking other remedies with respect to the Company
Default. Also, a Participant's (or Assignee's) failure to
exercise its rights under this Section will not preclude
the Participant (or Assignee) from exercising such rights
upon later Company Default.
13. GOVERNING LAWS AND NOTICES
13.01 GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the substantive law of California
without giving effect to the choice of law rules of
California.
13.02 NOTICES. All notices hereunder shall be in writing and sent
by first class mail with postage prepaid. Any notice to
Company shall be addressed to the principal office of the
Company at One California Street, San Francisco, CA 94111.
Any notice to the Participant (or Assignee) shall be
addressed to the Participant (or Assignee) at the address
following such party's signature on his or her Agreement.
Any party may change its address by giving written notice
of such change to the other party pursuant to this Section.
14. MISCELLANEOUS PROVISIONS
14.01 This Plan and any Agreement executed hereunder shall not be
deemed to constitute a contract of employment between an
Executive and the Company, or a Participant and the
Company, nor shall any provision restrict the right of the
Company to discharge an Executive or Participant, or to
restrict the right of an Executive or Participant to
terminate services.
14.02 The masculine pronoun includes the feminine and the
singular includes the plural where appropriate for valid
construction.
14.03 In order to be eligible to participate in this Plan, the
Participant (and, in the case of a Survivorship Policy, the
Participant's spouse) shall cooperate with the Insurer by
furnishing any and all information requested by the Insurer
in order to facilitate the issuance of the policy,
including furnishing such medical information and taking
such physical examinations as the Insurer may deem
necessary. In the absence of such cooperation, the Company
shall have no further obligation to the Participant to
allow him or her to participate in the Plan.
-10-
<PAGE> 11
14.04 If a Participant (or a Participant's spouse, if the Policy
is a Survivorship Policy) commits suicide within two years
of the date of issue of the Policy, or if the Participant
(or Participant's spouse, if the Policy is a Survivorship
Policy) makes any material misstatement of information or
nondisclosure of medical history pertaining to the Policy's
issue and dies within two years of the Policy's issue date,
then no benefits shall be payable to the beneficiary(ies)
of such Participant (or Assignee, where applicable). In
such case, the Participant's election to defer Compensation
which has not yet become payable shall be void. Also, the
Company shall pay to the Participant (or the Participant's
estate, if the Participant has died) an amount equal to the
Compensation already deferred by the Participant in
accordance with the Participant's election under Section
3.02, or, if less, the amount the Company receives from the
Insurer upon cancellation of the Participant's Policy.
14.05 In the event of any inconsistency between the terms of this
Plan as described herein and the terms of any Policy
purchased hereunder or any related Agreement, the terms of
such Policy or Agreement shall be controlling as to that
Participant, his or her Assignee (if any), his
successor-in-interest (if any) and his or her beneficiary
or beneficiaries.
15. AMENDMENT, TERMINATION, ADMINISTRATION, AND SUCCESSORS
15.01 AMENDMENT/TERMINATION. The Committee may amend, modify or
terminate the Plan at any time, but any such amendment,
modification or termination will not affect the rights of
any Participant (or Assignee) under any Agreement entered
into with the Company prior to the date of such amendment,
modification or termination without the Participant's (or
Assignee's) written consent.
15.02 ADMINISTRATION. This Plan shall be administered by the Plan
Administrator. The Plan Administrator shall have the
authority to make, amend, interpret, and enforce all rules
and regulations for the administration of the Plan and
decide or resolve any and all questions, including
interpretations of the Plan, as may arise in connection
with the Plan in the Plan Administrator's sole discretion.
In the administration of this Plan, the Plan Administrator
from time to time may employ agents and delegate to them or
to others (including Executives) such administrative duties
as it sees fit. The Plan Administrator from time to time
may consult with counsel, who may be counsel to the
Company. The decision or action of the Plan Administrator
(or its designee) with respect to any question arising out
of or in connection with the administration, interpretation
and application of this Plan shall be final and conclusive
and binding upon all persons having any interest in the
Plan. The Company shall indemnify and hold harmless the
Plan Administrator and any
-11-
<PAGE> 12
Executives to whom administrative duties under this Plan
are delegated, against any and all claims, loss, damage,
expense or liability arising from any action or failure to
act with respect to this Plan, except in the case of gross
negligence or willful misconduct by the Plan
Administrator.
15.03 SUCCESSORS. The terms and conditions of this Plan shall
inure to the benefit of and bind the Company and the
Participant and their successors, assignees (including any
Assignee), and representatives. The Company shall have the
right to absolutely and irrevocably assign its rights,
title and interest in a Policy without the consent of the
Participant (or Assignee).
16. CLAIMS PROCEDURE
Any controversy or claim arising out of or relating to this Plan
shall be filed with the Plan Administrator or its designee which
shall make all determinations concerning such claim. Any decision by
the Plan Administrator denying such claim shall be in writing and
shall be delivered to all parties in interest in accordance with the
notice provisions of Section 13.02 herein. Such decision shall set
forth the reasons for denial in plain language. Pertinent provisions
of the Plan shall be cited and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. This
notice of denial of benefits will be provided within ninety (90) days
of the Plan Administrator's receipt of the claim for benefits. If the
Plan Administrator fails to notify the claimant of its decision
regarding the claim, the claim shall be considered denied, and the
claimant then shall be permitted to proceed with an appeal as
provided for in this Section.
A claimant who has been completely or partially denied a benefit
shall be entitled to appeal this denial of his or her claim by filing
a written statement of his or her position with the Plan
Administrator no later than sixty (60) days after receipt of the
written notification of such denial. The Plan Administrator shall
schedule an opportunity for a full and fair review of the issue
within thirty (30) days of receipt of the appeal. The decision on
review shall set forth specific reasons for the decision, and shall
cite specific references to the pertinent Plan provisions on which
the decision is based.
Following the review of any additional information submitted by the
claimant, either through the hearing process or otherwise, the Plan
Administrator shall render a decision on the review of the denied
claim in the following manner:
a. The Plan Administrator shall make its decision regarding
the merits of the denied claim within sixty (60) days
following receipt of the request for review (or within 120
days after such receipt, in a case where there are special
circumstances requiring extension of time for reviewing the
appealed claim). The Plan Administrator shall deliver the
decision to the
-12-
<PAGE> 13
claimant in writing. If an extension of time for reviewing
the appealed claim is required because of special
circumstances, written notice of the extension shall be
furnished to the claimant prior to the commencement of the
extension. If the decision on review is not furnished
within the prescribed time, the claim shall be deemed
denied on review.
b. The decision on review shall set forth specific reasons for
the decision, and shall cite specific references to the
pertinent Plan provisions on which the decision is based.
17. EXECUTION
To record the adoption of the Plan as set forth herein, effective as
of December 11, 1997, the Company has caused its authorized
representative to execute the same this ____ day of
__________________, 1998.
By: ____________________________________
Brian Jones
Senior Vice President, Human
Resources and Corporate Services
-13-
<PAGE> 1
Exhibit 15.1
November 6, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that AirTouch Communications, Inc. has included our report dated
November 6, 1998 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Company's Report on Form 10-Q for the quarter ended
September 30, 1998 which is incorporated by reference in the Registration
Statements on Form S-8 (Nos. 33-57077, 33-57081, 33-57083, 33-64553, 333-10389,
333-17891, 333-36339, and 333-50541) and the Prospectuses constituting part of
the Registration Statements on Form S-3 (Nos. 33-62787 and 333-56645). We are
also aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ PRICEWATERHOUSECOOPERS LLP
31
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1,574,000
1,041,000
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