<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998.
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
------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
COMMON STOCK, $.01 PAR VALUE, WITH NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS PACIFIC EXCHANGE
6.00% CLASS B MANDATORILY NEW YORK STOCK EXCHANGE
CONVERTIBLE PREFERRED STOCK,
SERIES 1996
4.25% CLASS C CONVERTIBLE NEW YORK STOCK EXCHANGE
PREFERRED STOCK, SERIES 1996
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the composite closing sales price on April 13, 1999, the aggregate
market value of all voting stock held by nonaffiliates was approximately $58.6
billion. At April 13, 1999, 576,050,428 shares of common stock were outstanding.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
---- --- -------------------------
<S> <C> <C>
Sam Ginn 62 Chairman of the Board and Chief Executive Officer
Arun Sarin 44 President, Chief Operating Officer and Director
Mohan S. Gyani 47 Executive Vice President and Chief Financial Officer
Margaret G. Gill 59 Senior Vice President, Legal, External Affairs and Secretary
Brian R. Jones 48 Senior Vice President, Marketing
F. Craig Farrill 46 Vice President, Strategic Technology
Terry Kramer 39 Vice President, Human Resources and Corporate Services
Carol A. Bartz 50 Director
Michael J. Boskin 53 Director
C. Lee Cox 58 Director
Donald G. Fisher 70 Director
Paul Hazen 57 Director
Arthur Rock 72 Director
Charles R. Schwab 61 Director
George P. Shultz 78 Director
Chang-Lin Tien 63 Director
</TABLE>
Mr. Ginn has been Chairman of the Board and Chief Executive Officer of the
Company since December 1993. He is Chairman of the Executive Committee and a
member of the Nominating & Director Affairs Committee. He was Chairman of the
Board, President and Chief Executive Officer of Pacific Telesis Group from 1988
to 1994 and a director of Pacific Telesis Group from 1983 to 1994. He was
Chairman of the Board of Pacific Bell from 1988 to 1994. Mr. Ginn is also a
director of Chevron Corporation, Transamerica Corporation and Hewlett-Packard
Company.
Mr. Sarin was named President and Chief Operating Officer of the Company in
February 1997. He is a member of the Executive Committee. Mr. Sarin became a
director of AirTouch in July 1995. He was Vice Chairman of the Board from July
1995 until January 1997. Mr. Sarin was Senior Vice President, Corporate
Strategy/Development and International Operations for the Company from April
1994 until August 1995. Mr. Sarin is also a director of The Charles Schwab
Corporation and Cisco Systems, Inc.
Mr. Gyani became Executive Vice President and Chief Financial Officer of the
Company in September 1995. He was Vice President, Finance and Treasurer of the
Company from November 1993 until September 1995.
Mrs. Gill became Senior Vice President, Legal, External Affairs and Secretary of
the Company in January 1994. Mrs. Gill is a director of CNF Transportation Inc.
Mr. Jones became Senior Vice President, Marketing in December 1998. He was
Senior Vice President, Human Resources and Corporate Services from April 1998
until that time. Mr. Jones was named Senior Vice President, Competitive
Readiness in June 1997 and from February 1997 until June he was the President of
AirTouch Cellular. From March 1992 until February 1997 he was Executive Vice
President of AirTouch Cellular and General Manager of the Los Angeles market.
Mr. Kramer became Vice President, Human Resources and Corporate Services in
December 1998. He was Vice President, Business Development with AirTouch
International in the Netherlands from February 1998 until November 1998. He was
Vice President and General Manager of the AirTouch Cellular Southwest Market
from June 1996 until February 1998, Executive Director for AirTouch
Communications' Investor Relations and
2
<PAGE> 3
Employee Communications from June 1995 until June 1996 and Executive Director
for Applications and Operations of AirTouch International from January 1995
until June 1995.
Ms. Bartz became a director of the Company in February 1994. She is a member of
the Compensation & Personnel Committee. She has been Chairman of the Board and
Chief Executive Officer of Autodesk, Inc. since April 1992. Ms. Bartz is also a
Director of Cadence Design Systems, Network Appliance, Cisco Systems, Inc. and
BEA Systems Inc.
Dr. Boskin became a Director of the Company in August 1996. He is a member of
the Executive Committee, the Audit & Investment Committee and the Nominating &
Director Affairs Committee. Dr. Boskin has been a professor of economics at
Stanford University since 1971 and principal of Boskin & Co., a consulting firm,
since 1980. He was Chairman of the President's Council of Economic Advisers from
February 1989 until January 1993. Dr. Boskin is also a director of Exxon
Corporation, First Health Group Corp. and Oracle Corporation.
Mr. Cox has been a director of the Company since January 1994. He is a member of
the Executive Committee. He was Vice Chairman of the Board from November 1994
until his retirement from the Company in April 1997. Mr. Cox was President and
Chief Executive Officer of AirTouch Cellular from November 1990 until February
1997. He was President and Chief Operating Officer of the Company from December
1993 to November 1994. Mr. Cox is a director of Pacific Gas & Electric Co. and
NETCOM On-Line Communication Services, Inc.
Mr. Fisher became a director of the Company in January 1994. He is the Chairman
of the Compensation & Personnel Committee. He is the founder and Chairman of the
Board of The Gap, Inc. and was Chief Executive Officer of The Gap, Inc. until
November 1995. He is a director of The Charles Schwab Corporation, San Francisco
Bay Area Council, the National Retail Federation and KQED, Inc.
Mr. Hazen became a director of the Company in April 1993. He is the Chairman of
the Audit & Investment Committee and a member of the Executive Committee. He
became Chairman and Chief Executive Officer of Wells Fargo & Company and its
principal subsidiary, Wells Fargo Bank, N.A., in January 1995. He was President
and Chief Operating Officer of Wells Fargo & Company and Wells Fargo Bank, N.A.
from 1984 to January 1995. Mr. Hazen is also a director of Safeway Inc. and
Phelps Dodge Corporation.
Mr. Rock became a director of the Company in January 1994. He is a member of the
Audit & Investment Committee. He has been a principal in Arthur Rock & Co., a
venture capital firm, since 1969. Mr. Rock is a director of Intel Corporation
and Argonaut Group, Inc. and is a member of the National Association of
Securities Dealers Board of Governors.
Mr. Schwab became a director of the Company in January 1994. He is a member of
the Nominating & Director Affairs Committee. He is the founder, Chairman of the
Board and Co-Chief Executive Officer of The Charles Schwab Corporation. Mr.
Schwab is also a director of The Gap, Inc., Transamerica Corporation and Siebel
Systems, Inc.
Mr. Shultz became a director of the Company in January 1994. He is the Chairman
of the Nominating & Director Affairs Committee and is a member of the Executive
Committee and the Compensation & Personnel Committee. He has been a Professor at
the Stanford University Graduate School of Business for more than five years. He
served as United States Secretary of State from 1982 to 1989. Mr. Shultz is a
Distinguished Fellow at the Hoover Institution, a director of the Bechtel Group,
Inc., The Charles Schwab Corporation, Gulfstream Aerospace Corporation and
Gilead Sciences, Inc., Chairman of J.P. Morgan's International Council and
Chairman of the Governor's California Economic Policy Advisory Council.
3
<PAGE> 4
Dr. Tien became a director of the Company in June 1997. He is a member of the
Executive Committee and the Nominating & Director Affairs Committee. Dr. Tien
served as Chancellor of the University of California, Berkeley, from 1990 to
June 1997. Currently, he holds the professorial title of NEC Distinguished
Professor of Engineering at the University of California, Berkeley. He is a
director of Chevron Corporation, Raychem Corporation and Wells Fargo & Co., and
also serves on the board of trustees of the Asia Foundation. He is a Fellow of
the American Academy of Arts and Sciences and a member of the National Academy
of Engineering.
There are eleven members of the Board of Directors of the Company. The Board is
divided into three classes for purposes of election. One class is elected at
each annual meeting of stockholders to serve for a three-year term. Directors
hold office until the end of their terms and until their successors have been
elected and qualified. Messrs. Fisher, Ginn, Schwab and Dr. Tien serve as Class
I directors; their terms of office expire in 2001. Ms. Bartz and Messrs. Cox and
Hazen serve as Class II directors; their terms of office expire in 1999. Dr.
Boskin and Messrs. Rock, Sarin and Shultz serve as Class III directors; their
terms of office expire in 2000.
There are no family relationships among the directors and executive officers of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires certain persons,
including the Company's directors and officers, to file reports of ownership and
changes in ownership of the Company's securities with the SEC. Based upon the
Company's review of the reporting forms received by it and written
representations from certain persons that no Form 5 reports were required to be
filed by those persons, the Company believes that all filing requirements
applicable to its directors, officers and 10% stockholders were complied with
for fiscal year 1998.
4
<PAGE> 5
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table discloses compensation earned by the Chief Executive Officer
and the four other most highly compensated executive officers ("named executive
officers") for the three fiscal years ended December 31, 1998. Unless otherwise
indicated, positions listed are with the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------
(A) (B) (C) (D) (E) (F) (C+D)
Securities
Underlying All Total
Name and Options/ Other Cash
Principal Position Year Salary ($) Bonus ($) SARs (#)($) Comp ($)(2) Comp ($)
------------------ ---- ---------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Sam Ginn 1998 895,000(3) 1,326,750 600,000 67,943 2,221,750
Chairman of the Board and 1997 816,250 1,135,600(3) 203,149 1,951,850
Chief Executive Officer 1996 760,000 865,650 185,307 1,625,640
Arun Sarin 1998 628,750 807,288 400,000 155,460 1,436,038
President and Chief Operating 1997 546,667 660,000 123,342 1,206,667
Officer 1996 426,666 479,519 50,349 906,185
Mohan S. Gyani 1998 376,250 367,575 200,000 81,310 743,825
Executive Vice President and 1997 326,250 336,000 68,219 662,850
Chief Financial Officer 1996 300,000 241,200 45,686 541,200
Margaret G. Gill 1998 373,750 358,150 185,000 86,491 731,900
Senior Vice President, Legal, 1997 347,500 340,800 73,175 688,300
External Affairs and Secretary 1996 325,000 261,300 50,981 586,300
Brian R. Jones 1998 347,500 334,588 185,000 79,072 682,088
Senior Vice President, 1997 319,583 326,521 56,340 646,104
Marketing(4)
</TABLE>
- --------------
(1) Restricted shares held by the named executive officers and their value at
fiscal year end ($72.4375 per share) are as follows: Mr. Ginn - 10,000
shares, $724,375 which vest on 11/18/99. Mr. Sarin - 110,000 shares,
$7,968,125; Mrs. Gill - 15,000 shares, $1,086,562.50; Mr. Gyani - 15,000
shares, $1,086,562.50; and Mr. Jones - 10,000 shares, $724,375. In
addition, in 1997 Mr. Ginn was awarded 414,500 phantom stock units with a
value at the end of fiscal year 1998 of $30,025,343.75 ($72.4375 per
share), which vest as to 82,900 units on each of 1/1/1999 and 1/1/2000,
165,800 units on 1/1/2001 and 41,450 units on each of 1/1/2002 and
1/1/2003, assuming that Mr. Ginn meets certain retention milestones. Vested
units may not be settled until the earlier of (a) 1/1/2003, (b) the date on
which Mr. Ginn is no longer a named executive officer, or (c) an earlier
date approved by the Compensation & Personnel Committee. Units convert on a
one-for-one basis into shares of the Company's Common Stock.
(2) Includes "above-market" interest on deferred compensation under the
Company's Deferred Compensation Plan for 1998 for each of the named
executive officers: $6,352, $1,209, $967, $707, and $900, respectively.
Also includes Company contributions under the Company's Retirement Plan of
$19,238, $18,800, $19,238, $18,800, and $18,523, respectively. Also
includes Company contributions under the Company's Deferred Compensation
Plan for each of the named executive officers of: $42,354, $135,451,
$61,543, $66,547 and $59,649, respectively.
(3) The Company entered into a split dollar life insurance agreement with a
trust created by Mr. Ginn for the benefit of his family. Mr. Ginn elected
to defer his 1997 bonus and a portion of his salary to fund the Company's
payment of periodic premiums for the policy.
(4) Mr. Jones became an executive officer of the Company effective February 1,
1997.
5
<PAGE> 6
The following table provides information on stock option grants during fiscal
year 1998 to the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value at
Assumed Annual Rates of Stock
Price Appreciation for 10-Year
Individual Grants Option Term(1)
- ---------------------------------------------------------------- ---------------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted Exercise
SARs to or Base Expiration
Name Granted (#)(2) Year ($/Sh) Date 5% ($) 10% ($)
---- -------------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sam Ginn 600,000 2.78 49.3125 4/15/2005 12,045,084 28,070,167
Arun Sarin 400,000 1.85 49.3125 4/15/2005 8,030,056 18,713,445
Mohan S. Gyani 200,000 * 49.3125 4/15/2005 4,015,028 9,356,722
Margaret G. Gill 185,000 * 49.3125 4/15/2005 3,713,901 8,654,968
Brian R. Jones 185,000 * 49.3125 4/15/2005 3,713,901 8,654,968
Stock Price Per Share(3) $69.39 $96.10
Added Value to All Stockholders (4) $11.5 billion $26.8 billion
Named Executive Officers as % of Added Value 0.28%
to All Stockholders
</TABLE>
- --------
* Less than one percent (1%).
(1) The Potential Realized Value shown for these options assumes that all
options are exercised at the end of their term, and that the stock price
will grow at an assumed annual rate of five percent and ten percent from
the date of grant.
(2) Options granted in April 1998 with an exercise price of $49.3125, the fair
market value of the Company's common stock on the date of grant. Each of
these options has a seven-year term and vests as to one-third of the shares
subject to the option on each of December 12, 1999, 2000 and 2001.
(3) The projected fair market value of a share of AirTouch common stock at the
end of the option term after applying the stated assumed annual rates to
the fair market value on the date of grant.
(4) Represents aggregate increases in market capitalization of the Company
based on the outstanding shares (572,391,167) of the Company's common stock
on December 31, 1998, if the price of the Company's common stock were to
increase annually by five percent and ten percent over the term of the
options.
6
<PAGE> 7
The following table provides information on the value of each of the named
executive officer's options/SARs at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)*
--------------- ---------------
Shares
Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Sam Ginn 119,488 3,844,080 1,087,489/2,003,261 51,007,640/70,583,664
Arun Sarin 52,800 1,687,794 426,434/968,980 18,598,390/29,322,588
Mohan S. Gyani -- -- 245,988/528,810 11,071,563/15,967,069
Margaret G. Gill 13,500 453,563 189,570/443,810 8,435,635/12,857,069
Brian R. Jones 34,310 960,499 205,000/236,000 9,140,938/6,643,063
</TABLE>
- -------------
* Based on the closing price on the New York Stock Exchange-Composite
Transactions of the Company's Common Stock on December 31, 1998 of $72.4375
per share.
PENSION PLAN
The Company maintains a defined benefit pension plan ("Pension Plan") under
which individuals who were employees at December 31, 1986 and certain
transferred employees receive pension benefits based on a percentage of their
final five-year average pay and years of service. New employees of the Company
are not eligible to participate in the Pension Plan. The accrual of service
credit was discontinued in 1986 for almost all Pension Plan participants. Thus,
pension benefits only increase as a participant's compensation increases. Of the
named executive officers, Messrs. Ginn, Sarin and Gyani and Jones participate in
the Pension Plan.
In addition, the Company maintains a "nonqualified pension plan" that
supplements the Pension Plan benefits of a closed group of executives who
participated in a similar plan prior to the spin-off of the Company from Pacific
Telesis Group. Of the named executive officers, Messrs. Sarin and Gyani
participate in the Company's nonqualified pension plan.
The following table shows the total annual pension benefits (stated as a
single-life annuity) that would be received by an executive officer of the
Company retiring today at age 65 under the Company's qualified and nonqualified
pension plans. It assumes various specified levels of total years of service and
average annual compensation (which includes base salary and the target award
under the short-term component of the Incentive Plan) during the final five
years of service, as described following the table. The benefits shown in the
table generally are not subject to offsets for Social Security benefits or other
payments.
7
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AVERAGE
ANNUAL
COMPENSATION
DURING FINAL YEARS OF SERVICE PRIOR TO RETIREMENT
FIVE YEARS OF
SERVICE
- ------------------------------------------------------------------------------
15 20 25 30 35
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 300,000 65,250 87,000 108,750 130,500 152,250
- ------------------------------------------------------------------------------
350,000 76,125 101,500 126,875 152,250 177,625
- ------------------------------------------------------------------------------
400,000 87,000 116,000 145,000 174,000 203,000
- ------------------------------------------------------------------------------
450,000 97,875 130,500 163,125 195,750 228,375
- ------------------------------------------------------------------------------
500,000 108,750 145,000 181,250 217,500 253,750
- ------------------------------------------------------------------------------
550,000 119,625 159,500 199,375 239,250 279,125
- ------------------------------------------------------------------------------
650,000 141,375 188,500 235,625 282,750 329,875
- ------------------------------------------------------------------------------
700,000 152,250 203,000 253,750 304,500 355,250
- ------------------------------------------------------------------------------
800,000 174,000 232,000 290,000 348,000 406,000
- ------------------------------------------------------------------------------
900,000 195,750 261,000 326,250 391,500 456,750
- ------------------------------------------------------------------------------
1,000,000 217,500 290,000 362,500 435,000 507,500
- ------------------------------------------------------------------------------
1,200,000 261,000 348,000 435,000 522,000 609,000
- ------------------------------------------------------------------------------
</TABLE>
The 1998 compensation of Messrs. Ginn, Sarin, Gyani and Jones covered by the
pension plans was $154,000, $868,574, $505,150, and $482,798, respectively. As
of December 31, 1998, the years of service of Messrs. Ginn, Sarin, Gyani and
Jones, for purposes of calculating a pension benefit, were 34, 9, 16, and 5,
respectively.
Under one of the Company's nonqualified pension plans, eligible officers who
terminate after attaining age 55 and completing 10 years of service as an
officer are entitled to a minimum pension of 45 percent of average annual
compensation. This minimum pension is increased by an additional 1% per year, up
to a maximum of 50 percent at 15 or more years of service as an officer. As of
December 31, 1998, Mr. Sarin had seven completed years of service credited under
the minimum pension provisions.
DIRECTOR COMPENSATION
Nonemployee directors of the Company receive an annual retainer of $55,000, and
committee chairs receive an additional annual retainer of $5,000. The annual
retainer is reduced by $3,000 for each absence by a director from a Board
meeting, except that there is no reduction for the first missed meeting in each
year. In addition, nonemployee directors are entitled to reimbursement for
out-of-pocket expenses in connection with attendance at Board and committee
meetings. Nonemployee directors may elect to defer the receipt of all or part of
their retainers. Amounts deferred in 1998 earned interest at an annual rate of
6.53%.
Directors may elect to receive all or a portion of their retainers in the form
of stock options and/or stock units under the Company's amended and restated
1993 Long-Term Stock Incentive Plan (the "Plan"). In the case of directors who
elect to receive retainers in the form of stock units, the number of stock units
is determined by dividing the amount that would otherwise be paid in cash by the
arithmetic mean of the closing prices of the Company's Common Stock on the ten
consecutive trading days ending with the date when the amount is payable. The
stock units are immediately vested and have a maximum term of ten years, subject
to earlier termination if the director's service terminates. The stock units are
settled in shares of the Company's Common Stock. In the case of directors who
elect to receive retainers in the form of stock options, the number of options
is determined by using the Black-Scholes option valuation model. These options
are immediately exercisable and have a term of seven years, subject to earlier
termination if the director's service terminates. The exercise price is equal to
the fair market value of the Company's Common Stock on the date of grant, which
is the date the retainers would otherwise be payable. A majority of the
Company's nonemployee directors have elected to receive their retainers in the
form of stock options and/or stock units.
8
<PAGE> 9
Each nonemployee director of the Company is granted a stock option to purchase
10,000 shares under the Plan upon election as a director. Additionally, each
nonemployee director is granted a stock option to purchase 1,000 shares at the
time of each Annual Meeting. These options generally become exercisable one year
after the date of grant and have a term of ten years, subject to earlier
termination if the director's service terminates. The options become exercisable
in full in the event of the director's death or disability or in the event that
the Company is subject to a change in control. The exercise price is equal to
the fair market value of the Company's Common Stock on the date of grant. As a
condition of the initial 10,000-share option grant, each director is required to
demonstrate to the Company that he or she owns shares of the Company's Common
Stock with a value of $100,000 or more on any date within 30 days after election
to the Board. The Company has a policy of making loans available to its
nonemployee directors with respect to the equity ownership requirement. Such
loans have a maximum maturity of ten years and bear interest at the mid-term
Applicable Federal Rate. See "Certain Transactions."
Directors who are also employees of the Company receive no remuneration for
serving as directors or as members of committees of the Board.
Nonemployee directors are reimbursed for the costs of cellular services and
equipment. Employee directors receive similar reimbursements for services and
equipment as part of their compensation as officers.
The Company has entered into indemnity agreements with each of its directors
that provide for indemnification against any judgments or costs assessed against
them in the course of their service as directors. Such agreements do not permit
indemnification for acts or omissions for which indemnification is not permitted
under Delaware law.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT OR CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with each of the named
executive officers that provide for specified payments in case of termination of
employment. The agreements were approved by the Compensation & Personnel
Committee. The employment agreements have no fixed term and may be terminated by
either party upon one year's notice.
The amount payable upon termination of employment depends upon the type of
termination and whether it occurs after a "change in control." If a named
executive officer's employment is involuntarily terminated for any reason other
than cause, death or disability, and the termination does not occur within three
years of a change in control, the Company will make a cash payment equal to one
and one-half times base compensation (two times base compensation in the case of
the Chief Executive Officer), plus 150 percent of the target award under the
short-term component of the Incentive Plan for that calendar year (200 percent
of the target award under the short-term component of the Incentive Plan for
that calendar year for the Chief Executive Officer). Also, the named executive
officer's health care and life insurance benefits are continued for 18 months
(two years for the Chief Executive Officer) and, in the case of all of the named
executive officers, the one-year period following termination counts as service
for purposes of vesting and exercise grace periods under all of the Company's
option, restricted stock and incentive plans.
If a named executive officer's employment ends in a "qualifying termination"
under certain circumstances following the public announcement of a definitive
agreement to effectuate a change in control, or within three years after a
change in control, the Company will make a cash payment equal to three times
base compensation, plus 300 percent of the target award under the short-term
component of the Incentive Plan for that calendar year. Mr. Ginn has elected to
apply up to $5 million of the compensation payable in the event of a qualifying
termination to satisfy the Company's premium obligations under a life insurance
arrangement for the benefit of Mr. Ginn's family.
A "qualifying termination" is an involuntary termination by the Company for any
reason, or a "constructive termination," which means a material reduction in
salary or benefits, a material change in responsibilities, or a requirement to
relocate that would increase the officer's one-way commute distance by more than
40 miles. For the named executive officers, a "qualifying termination" also
includes a voluntary termination during the 13th month after the change in
control.
9
<PAGE> 10
In addition, some of the Company's benefit plans contain provisions that are
triggered only in the event of a change in control. For example, vesting of
stock and option grants is accelerated in the event of a change in control. Some
benefit plans contain provisions that prohibit a successor from reducing current
benefit levels for certain periods of time following a change in control. Some
benefit plans have rabbi trusts that require the Company to fund outstanding
benefit obligations in the event of a change in control.
A "change in control" is defined generally as (1) the acquisition of 50 percent
or more of the securities of the Company; (2) a change in the composition of the
Company's Board of Directors so that fewer than two-thirds of the directors are
"continuing directors"; (3) the direct or indirect acquisition of 20 percent or
more of the securities of the Company without the approval of a majority of the
continuing directors; (4) certain mergers or consolidations, or (5) a
liquidation of the Company or sale of all or substantially all of its assets.
For a description of the "change in control" benefits to be received by the
named executive officers of the Company as a result of the transactions under
the Agreement and Plan of Merger dated as of January 15, 1999 among Vodafone
Group Plc, the Company and Apollo Merger Sub, Inc., see the Company's Proxy
Statement dated April 22, 1999 filed on Schedule 14A on April 22, 1999.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined by the
Compensation & Personnel Committee, which consists exclusively of nonemployee
directors. The Compensation & Personnel Committee relies on independent
executive compensation consultants and survey data to determine competitive
levels of executive compensation.
TYPES OF COMPENSATION
There are two main types of compensation:
1. Annual Compensation. This includes base salary and an annual cash
bonus.
2. Long-term Compensation. This includes stock options and other
long-term incentive awards based on Common Stock. The value of these awards
depends on Company performance and future stock value.
In assessing competitive levels of executive compensation for 1998, the
Compensation & Personnel Committee relied on independent survey data for
executive officers in similar positions at comparable companies. The survey data
reflected an average of the compensation practices of telecommunications
companies and high technology companies. The Committee believes that this blend
of compensation practices is appropriate because the Company needs to attract
and retain executives with the ability to handle the complexity inherent in
telecommunications companies along with the growth focus inherent in high
technology companies.
ANNUAL COMPENSATION
Annual compensation includes base salary and an annual cash bonus. The base
salaries of executive officers are set at approximately the 50th-percentile
level relative to executives in similar positions at comparable companies. (This
means that base salaries at approximately 50% of the comparable companies are
higher.) If performance targets are met but not exceeded, cash bonuses are also
intended to be at approximately the 50th-percentile level.
10
<PAGE> 11
Annual Cash Bonus
Executive officers participate in an annual incentive plan under which the cash
bonus component of their compensation is determined. In 1997, the stockholders
approved a new method for determining each executive officer's annual cash
bonus. This method preserves the deductibility of the annual cash bonus under
Section 162(m) of the Internal Revenue Code. The annual cash bonus of each
executive officer is determined by allocating a fund equal to six percent of
proportionate operating cash flow among the executive officers in proportion to
their salaries. The Compensation & Personnel Committee has discretion to reduce
annual cash bonuses based on the achievement of financial performance objectives
and any other criteria the Compensation & Personnel Committee deems appropriate.
The Compensation & Personnel Committee determined the amount of each bonus based
on each executive officer's target award amount (set as a percentage of base
pay) and the Company's financial and operating performance in 1998.
LONG-TERM COMPENSATION
Long-term incentives are granted at levels to bring total compensation,
including base salary, annual bonus and long-term incentives, up to the 60th
percentile level relative to executives in similar positions at comparable
companies, and up to the 75th percentile if exceptional performance is achieved.
The emphasis on long-term incentives is intended to encourage executives to
focus on the growth of the Company and the value of its stock.
Long-term compensation is linked to growth in the value of the Company's stock
and consists of stock options and other long-term incentive awards based on
Common Stock. In 1998, the Committee granted long-term incentives in the form of
options with an exercise price equal to the fair market value of the stock at
the time of grant. These options provide no compensation to the executive unless
the value of the stock increases. Where appropriate and for specific retention
purposes, the Committee grants restricted stock or similar retention awards
based on Common Stock, in addition to providing competitive long-term
compensation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Annual Compensation
Mr. Ginn's salary for 1998 was based on the Compensation & Personnel Committee's
assessment of his individual performance, the Company's performance in 1998 and
the Compensation & Personnel Committee's analysis of independent survey data.
Like other executive officers, Mr. Ginn participates in the Company's annual
incentive plan under which the cash bonus component of his compensation is
determined. The Compensation & Personnel Committee awarded Mr. Ginn a bonus of
$1,326,750 based on the target award set by the Committee as a percentage of
base pay and the Company's achievement of financial and operating performance
objectives.
Long-Term Compensation
The number of options granted to Mr. Ginn in 1998 was based on the Compensation
& Personnel Committee's policy of providing long-term incentives that will
result in total compensation at the 60th-percentile level, relative to chief
executive officers at comparable companies. This policy reflects the
Compensation & Personnel Committee's emphasis on long-term incentives related to
growth in the value of the stockholders' investment in the Company.
STOCK OWNERSHIP GUIDELINES
In 1997, the Compensation & Personnel Committee established stock ownership
guidelines for officers. The purpose of the guidelines is to further align the
interests of the officers with those of the Company's stockholders. The
guidelines require a significant commitment by each officer to own AirTouch
Common Stock worth a multiple of his or her annual base salary. Shares of Common
Stock counted towards satisfaction of the guidelines include open market
purposes, shares received upon option exercise or upon the receipt of restricted
stock, a portion of shares underlying vested options, vested retirement plan
shares and shares purchased through the Company's
11
<PAGE> 12
Employee Stock Purchase Plan. The guidelines should be met by the later of
January 1, 2002 or five years after becoming an officer. The guidelines for
stock ownership are as follows:
<TABLE>
<CAPTION>
POSITION MULTIPLE OF ANNUAL BASE SALARY
-------- ------------------------------
<S> <C>
Chief Executive Officer ................... 6x
Chief Operating Officer ................... 4x
Executive/Senior Vice President ........... 2x
Vice President ............................ 1x
</TABLE>
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Compensation & Personnel Committee considers the tax deductibility of
compensation paid to executive officers and the impact of Section 162(m) of the
Internal Revenue Code on the Company. This provision limits the amount of
compensation that the Company may deduct from its taxable income for any year to
$1 million for any of its five most highly compensated executive officers.
The Company's incentive plans provide that annual cash bonuses and long-term
compensation awarded under both plans can be "performance-based" and deductible
by the Company. The Company believes that 1998 annual cash bonuses paid to
executive officers as well as compensation arising from the exercise of stock
options in 1998 are fully deductible.
April 29, 1999
COMPENSATION AND PERSONNEL COMMITTEE
Donald G. Fisher, Chairman
Carol A. Bartz
George P. Shultz
12
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the BT Alex. Brown Cellular Index and the S&P 500 Index (the
"S&P 500"). The graph assumes that $100 was invested on December 31, 1993 in
each of the Company's Common Stock, the BT Alex. Brown Cellular Index, and the
S&P 500.
COMPARISON OF AIRTOUCH COMMUNICATIONS, INC.,
THE BT ALEX. BROWN CELLULAR INDEX AND THE S&P 500
[PERFORMANCE GRAPH]
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 12/31/93)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
12/31/93 12/31/94 12/29/95 12/30/96 12/31/97 12/31/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AirTouch Communications $100.00 $117.09 $113.07 $101.51 $167.08 $291.21
- ---------------------------------------------------------------------------------------
BT Alex Brown Cellular Index $100.00 $125.00 $124.00 $108.00 $135.00 $240.00
- ---------------------------------------------------------------------------------------
S&P 500 $100.00 $100.82 $138.66 $170.48 $227.34 $293.74
- ---------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 31, 1998, information regarding
ownership by any entity or person known by the Company to be the beneficial
owner of more than 5% of any class of the Company's voting securities.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL CLASS OF VOTING
BENEFICIAL OWNER OWNERSHIP SECURITIES PERCENT OF CLASS
------------------- ----------------- --------------- ----------------
<S> <C> <C> <C>
The Equitable Companies
Incorporated; AXA; and the 37,173,020(2) Common 6.5%
Mutuelles AXA,as a group(1)
MediaOne Group, Inc. 59,446,902(4) Common 10.4%
(formerly U S WEST, Inc.)(3)
D. E. Shaw Investments, L.P.,
D.E. Shaw Securities, L.P., and 1,248,100(6) 6% Class B Mandatorily 7.2%
David E. Shaw(4) Convertible Preferred
</TABLE>
(1) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission (the "SEC") by AXA Conseil Vie Assurance Mutuelle
(formerly Alpha Assurances Vie Mutuelle), 100-101 Terrasse Boieldieu, 92042
Paris La Defense, France, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle, 21, rue de Chateaudun, 75009 Paris, France, and AXA Courtage
Assurance Mutuelle, 26, rue Louis le Grand, 75002 Paris, France, all as a
group (collectively, the "Mutuelles AXA"), AXA (formerly AXA-UAP), 9 Place
Vendome, 75001 Paris, France, and The Equitable Companies Incorporated,
1290 Avenue of the America, New York, New York 10104.
(2) The above described beneficial owners report voting and dispositive power
as follows: The Mutuelles AXA and AXA report sole voting power with
respect to 18,230,822 shares, shared voting power with respect to 7,138,589
shares, sole dispositive power with respect to 36,779,978 shares and shared
dispositive power with respect to 387,406 shares. The Equitable Companies
Incorporated report sole voting power with respect to 18,195,522 shares,
shared voting power with respect to 7,138,589 shares, sole dispositive
power with respect to 36,744,678 shares and shared dispositive power with
respect to 387,406 shares.
(3) This information is based on a Schedule 13G filed with the SEC by: MediaOne
Group, Inc. (formerly "U S WEST, Inc."), 188 Inverness Drive West,
Englewood, Colorado 80112.
(4) The above-described beneficial owner reports voting and dispositive power
as follows: no sole voting power, shared voting nor shared dispositive
power, and shared voting and sole dispositive power with respect to
59,446,902 shares.
(5) This information is based on a Schedule 13G filed with the SEC by: D.E.
Shaw Investments, L.P., D.E. Shaw Securities, L.P. and David E. Shaw, 120
West 45th Street, 39th Floor, Tower 45, New York, New York 10036.
(6) The above-described beneficial owners report voting and dispositive power
as follows: D.E. Shaw Investments L.P. reports no sole voting or
dispositive power and shared voting and dispositive power with respect to
247,000 shares. D.E. Shaw Securities, L.P. reports no sole voting or
dispositive power and shared voting and dispositive power with respect to
1,001,100 shares. David E. Shaw reports no sole voting or dispositive power
and shared voting and dispositive power with respect to 1,248,100 shares.
14
<PAGE> 15
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 13, 1999, information regarding
ownership of the Company's outstanding Common Stock by (i) each named executive
officer, (ii) each director and (iii) all executive officers and directors as a
group. The table also includes the number of shares subject to outstanding
options to purchase Common Stock of the Company which are currently exercisable
or become exercisable within 60 days of April 13, 1999, other than as a result
of a change in control. The total number of shares of Common Stock beneficially
owned by each such person and by the group as a whole is less than one percent
of the class outstanding.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP
- ------------------------ --------------------
<S> <C>
Sam Ginn 1,464,249(1)
Arun Sarin 675,751(2)
Mohan S. Gyani 401,566(3)
Margaret G. Gill 322,463(4)
Brian R. Jones 178,541(5)
Carol A. Bartz 5,243(6)
Michael J. Boskin 15,500(7)
C. Lee Cox 89,900(8)
Donald G. Fisher 58,000(9)
Paul Hazen 25,385(10)
Arthur Rock 209,429(11)
Charles R. Schwab 32,673(12)
George P. Shultz 38,492(13)
Chang-Lin Tien 14,978(14)
All directors and executive officers as a group (16 persons) 3,772,193(15)
</TABLE>
- ---------------
(1) Includes 49,905 shares held by Mr. Ginn's Family Trust, of which Mr. Ginn
is the Trustee, an aggregate of 2,783 shares held in trust for Mr. Ginn's
children and grandchildren, of which Mr. Ginn is the Trustee, and 95
shares held in the retirement plan. Also includes 10,000 shares of
restricted stock and 1,395,011 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(2) Includes 5,461 shares held in the retirement plan. Also includes 110,000
shares of restricted stock and 538,310 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(3) Includes 1,229 shares held in the retirement plan. Also includes 15,000
shares of restricted stock and 351,880 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(4) Includes 1,256 shares held in the retirement plan. Also includes 15,000
shares of restricted stock and 302,535 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(5) Includes 400 shares held by Mr. Jones spouse as custodian for his minor
children and 935 shares held in the retirement plan. Also includes 10,000
shares of restricted stock and 156,750 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(6) All shares subject to options that are currently exercisable or will
become exercisable within 60 days of April 13, 1999.
(7) Includes 12,000 shares subject to options that are currently exercisable
or will become exercisable within 60 days of April 13, 1999.
(8) Includes 758 shares held in the retirement plan. Also includes 75,110
shares subject to options that are currently exercisable or will become
exercisable within 60 days of April 13, 1999.
(9) Includes 40,000 shares held by Mr. Fisher's Charitable Trust, of which Mr.
Fisher is the Trustee. Also includes 14,000 shares subject to options that
are currently exercisable or will become exercisable within 60 days of
April 13, 1999.
(10) Includes 23,844 shares subject to options that are currently exercisable
or will become exercisable within 60 days of April 13, 1999.
(11) Includes 2,572 shares held by Mr. Rock's spouse. Also includes 26,857
shares subject to options that are currently exercisable or will become
exercisable within 60 days of April 13, 1999.
(12) Includes 300 shares held by Mr. Schwab's Family Trust, of which Mr. Schwab
is the Trustee. Also includes 28,373 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
(13) All shares held by Mr. Shultz's Family Trust, of which Mr. Shultz is the
Trustee. Also includes 28,492 shares subject to options that are currently
exercisable or will become exercisable within 60 days of April 13, 1999.
(14) Represents shares subject to options that are currently exercisable or
will become exercisable within 60 days of April 13, 1999.
(15) Includes an aggregate of 116,885 shares held in Trust or custody for
certain officers and directors and their children and grandchildren,
12,076 shares held in the retirement plan and 2,572 shares held by the
spouse of a director. Also includes an aggregate of 174,000 shares of
restricted stock and 3,182,467 shares subject to options that are
currently exercisable or will become exercisable within 60 days of April
13, 1999.
15
<PAGE> 16
CHANGES IN CONTROL
On January 15, 1999, the Company and Vodafone Group Plc ("Vodafone") announced
an agreement to merge. Under the terms of the agreement, which has been
unanimously approved by each company's Board of Directors, owners of AirTouch
Common Stock will be entitled to receive five Vodafone ordinary shares in the
form of 0.5 of a Vodafone American Depository share and $9.00 in cash, without
interest, for each share of AirTouch Common Stock held at closing.
The merger is subject to the approval of the stockholders of Vodafone and
AirTouch, customary government and regulatory authority approvals, and the
receipt of opinions from tax counsel that the stock portion of the merger
consideration will be tax-free to U.S. holders of AirTouch Common Stock. The
merger is targeted to close in June or July of 1999. The merger is described in
the Company's Proxy Statement dated April 22, 1999 filed on Schedule 14A on
April 22, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a policy of making loans available to its nonemployee directors
with respect to its equity ownership requirements. Such loans have a five year
term, with an option to extend for an additional five years. Final maturity is
ten years or, if earlier, 30 days following the borrower's resignation from the
Board. No interim payments are otherwise due. The interest rate for such loans
is determined using the greater of the mid-term Applicable Federal Rate, as
published by the Internal Revenue Service, or the Company's cost of funds, but
in no event higher than permitted under the California usury laws (10 percent).
Interest compounds annually and is paid at the end of each five-year term. The
Company provided a loan on these terms to Michael J. Boskin in August 1996. The
interest rate is 6.9 percent and the principal and interest balance at December
31, 1998 was $117,561.61.
Following his retirement from the Company in April 1997, the Company entered
into a five year Consulting Agreement with C. Lee Cox, a former executive
officer of the Company, to provide advice and counsel to the Company. Mr. Cox
will receive $518,000 each year for his services pursuant to the Agreement.
Additionally, premium-priced stock options with respect to 73,110 shares granted
to Mr. Cox on November 16, 1995 continue in effect for the term of the
Agreement. In the event of a change in control, any remaining payments under the
agreement become due.
Mr. Rock's wife is a partner in the law firm of Pillsbury Madison & Sutro LLP,
which provides legal services to the Company and certain of its subsidiaries.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment 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: April 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
Sam Ginn* Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Mohan S. Gyani* Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
Arun Sarin* President and Chief Operating Officer and Director
C. Lee Cox* Director
Carol Bartz* Director
Michael D. Boskin* Director
Paul Hazen* Director
Donald G. Fisher* Director
Arthur Rock* Director
Charles R. Schwab* Director
George P. Shultz* Director
Chang Lin Tien* Director
*By: /s/ MOHAN S. GYANI
-----------------------------------------------------
Mohan S. Gyani
Executive Vice President and Chief Financial Officer
Date: April 29, 1999
</TABLE>
17
