As filed with the Securities and Exchange Commission on February 8, 2002
Registration No. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Verizon Wireless of the East LP
(Exact name of Registrant as specified in its certificate of limited
partnership)
Delaware 4813 N/A
(State or Other (Primary Standard
Jurisdiction of Industrial (I.R.S. Employer
Incorporation or Classification Code
Organization) Number) Identification Number)
180 Washington Valley Road
Bedminster, New Jersey 07921
(908) 306-7000
(Address, Including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
-----------------
Edward F. Langston
c/o Cellco Partnership
180 Washington Valley Road
Bedminster, New Jersey 07921
(908) 306-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-----------------
Verizon Communications Inc.
(Exact name of Registrant as specified in its charter)
Delaware 4813 23-2259884
(State or Other (Primary Standard
Jurisdiction of Industrial (I.R.S. Employer
Incorporation or Classification Code
Organization) Number) Identification Number)
1095 Avenue of the Americas
New York, New York 10036
(212) 395-2121
(Address, Including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
-----------------
Marianne Drost
Verizon Communications Inc.
1095 Avenue of the Americas
New York, New York 10036
(212) 395-2121
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-----------------
copies to:
Richard D. Truesdell, Jr., Esq. Robert Price Peter G. Samuels, Esq.
Davis Polk & Wardwell Price Communications Corporation Proskauer Rose LLP
450 Lexington Avenue 45 Rockefeller Plaza 1585 Broadway
New York, New York 10017 New York, New York 10020 New York, New York 10036
(212) 450-4000 (212) 757-5600 (212) 969-3000
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Approximate Date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement and the
effective time of the Verizon transactions as described in this Registration
Statement and the Transaction Agreement dated as of December 18, 2001.
-----------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ___________________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________________________________________________
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CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Unit Offering Price (1) Fee(2)
- ------------------------------------------------------------------------------------------------------------
Limited Partnership Interest of Verizon Wireless
of the East LP................................. N/A N/A $429,835,000 $39,545
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, of Verizon
Communications Inc............................. (3) N/A (4) (4)
================================================================================
(1) Estimated solely for purposes of computing the amount of the registration
fee pursuant to Rule 457(f)(2) under the Securities Act of 1933, based on
the book value of the assets to be acquired ($1,173,835,000) less, pursuant
to Rule 457(f)(3), the amount of cash to be paid by Verizon Wireless of the
East LP ($744,000,000).
(2) The fee has been calculated pursuant to Rule 457(f) by multiplying the
proposed maximum aggregate offering price by .000092.
(3) Such indeterminate number of shares of Verizon Communications Inc. common
stock as may be issued in exchange for the Limited Partnership Interest of
Verizon Wireless of the East LP pursuant the exchange agreement referred to
herein.
(4) No additional consideration will be received upon any exchange for the
Verizon Communications Inc. common stock. Accordingly, pursuant to Rule
457(i) under the Securities Act of 1933, no additional filing fee is
payable.
The Registrants hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
PRICE COMMUNICATIONS CORPORATION
45 Rockefeller Plaza
New York, New York 10020
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------
To the Shareholders of PRICE COMMUNICATIONS CORPORATION
NOTICE IS HEREBY GIVEN that an annual meeting of the shareholders of Price
Communications Corporation will be held at the offices of Proskauer Rose LLP,
1585 Broadway, New York, New York 10036-8299 on, , 2002 at 10:00
a.m. local time for the following purposes:
1. To consider and vote upon the following proposals:
. to approve and adopt the transaction agreement dated as of December
18, 2001 among Cellco Partnership (doing business as "Verizon
Wireless," and referred to in this notice as "Verizon Wireless"),
Verizon Wireless of the East LP (referred to in this notice as "New
Limited Partnership"), and Price Communications and its subsidiaries,
to approve the contribution of substantially all of the assets of
Price Communications Wireless, Inc., an indirect wholly-owned
subsidiary of Price Communications (referred to in this notice as
"Price Wireless"), to New Limited Partnership in exchange for a
preferred limited partnership interest in New Limited Partnership
(referred to in this notice as the "Preferred Exchangeable Interest")
pursuant to such agreement, and to approve the possible exchange of
the Preferred Exchangeable Interest for common stock of Verizon
Communications Inc. pursuant to the exchange agreement dated as of
December 18, 2001 among Verizon Wireless, New Limited Partnership,
Verizon Communications, Verizon Wireless Inc. and Price
Communications and its subsidiaries (collectively referred to in this
notice as the "Verizon transactions");
. to elect two directors to the board of directors of Price
Communications for a term of two years expiring in 2004 and two
directors for a term of three years expiring in 2005; and
. to authorize the amendment of the Certificate of Incorporation of
Price Communications so that any merger, consolidation or sale,
lease, exchange or other disposition of all or substantially all the
assets of Price Communications, any plan of exchange under Article 9
of the New York Business Corporation Law, or any dissolution under
Article 10 of the New York Business Corporation Law, may be approved
at a meeting of shareholders by a majority of the votes of the issued
and outstanding shares instead of a vote of 66 2/3% of such votes,
which is the current requirement.
2. To transact such other business as may properly be brought before the
annual meeting and any postponement or adjournment thereof.
The board of directors of Price Communications has fixed the close of
business on , 2002 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the annual meeting.
Approval of the Verizon transactions and the amendment to the Certificate of
Incorporation requires the affirmative vote of the holders of 66 2/3% of the
issued and outstanding shares of capital stock of Price Communications, and the
election of directors requires a plurality of the votes cast by the holders of
shares entitled to vote at such meeting.
Shareholders who do not vote in favor of the Verizon transactions may, under
certain circumstances and by following the procedures set forth in the New York
Business Corporation Law ("NYBCL"), exercise dissenters' rights in connection
with their shares. A copy of Section 623 of the NYBCL is attached to the proxy
statement/prospectus as Annex I.
Regardless of the number of shares you own or whether you plan to attend, it
is important that your shares be represented and voted at the meeting. We ask
that you please take the time to vote by completing and mailing the enclosed
proxy card promptly. The board of directors of Price Communications recommends
that you vote FOR the Verizon transactions, FOR the election of directors and
FOR the amendment to the Certificate of Incorporation of Price Communications.
If you sign, date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote in favor of these matters.
By order of the Board of Directors,
Ellen Strahs Fader
Senior Vice President and Secretary
The information in this proxy statement/prospectus is not complete and may be
changed. Neither Verizon Wireless of the East LP nor Verizon Communications
Inc. may sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 2002
Proxy Statement of Price Communications Corporation
Prospectus of Verizon Wireless of the East LP
and Verizon Communications Inc.
Cellco Partnership (doing business as "Verizon Wireless," and referred to in
this proxy statement/prospectus as "Verizon Wireless"), Verizon Wireless of the
East LP (referred to in this proxy statement/prospectus as "New Limited
Partnership"), and Price Communications and its subsidiaries have entered into
a transaction agreement pursuant to which Price Communications Wireless, Inc.,
an indirect wholly-owned subsidiary of Price Communications (referred to in
this proxy statement/prospectus as "Price Wireless"), will contribute
substantially all of its assets to New Limited Partnership in exchange for a
preferred limited partnership interest in New Limited Partnership (referred to
in this proxy statement/prospectus as the "Preferred Exchangeable Interest").
In addition, Verizon Wireless, New Limited Partnership, Verizon Communications
Inc., Verizon Wireless Inc. (referred to in this proxy statement/prospectus as
"VWI"), and Price Communications and its subsidiaries have entered into an
exchange agreement pursuant to which the Preferred Exchangeable Interest may be
exchanged for common stock of a corporation that is, at the time of such
exchange, a general partner of Verizon Wireless (such corporation is currently
anticipated to be VWI, and such stock is referred to in this proxy
statement/prospectus as "Verizon Wireless common stock") or for Verizon
Communications common stock. This proxy statement/prospectus relates to the
Preferred Exchangeable Interest and such indeterminate number of shares of
Verizon Communications common stock as may be issued in exchange for the
Preferred Exchangeable Interest.
Price Communications has scheduled an annual meeting of its shareholders to
vote upon, among other things, the contribution of substantially all of the
assets of Price Wireless and the possible exchange of the Preferred
Exchangeable Interest for Verizon Communications common stock referred to
above. Shareholders of Price Communications will not be asked to vote on an
exchange of the Preferred Exchangeable Interest for Verizon Wireless common
stock at the annual meeting.
-----------------
Verizon Communications common stock trades on the New York Stock Exchange
under the symbol "VZ." On , 2002, the closing price of Verizon
Communications common stock was $ per share. Price Communications common
stock trades on the New York Stock Exchange under the symbol "PR." On
, 2002, the closing price of Price Communications common stock
was $ per share.
We strongly urge you to read and consider carefully this proxy
statement/prospectus in its entirety, including the matters referred to under
"Risk Factors" beginning on page and the documents incorporated by reference
in this proxy statement/prospectus.
-----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this proxy statement/prospectus is accurate or adequate. Any representation to
the contrary is a criminal offense.
The date of this proxy statement/prospectus is , 2002 and this proxy
statement/prospectus and the accompanying form of proxy card are first being
mailed to the shareholders of Price Communications on or about , 2002.
TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS........................................................................ 1
Verizon Transactions........................................................................ 1
Voting Procedures........................................................................... 3
WHO CAN HELP ANSWER YOUR QUESTIONS........................................................... 4
SUMMARY...................................................................................... 5
Purpose of the Price Communications Annual Meeting.......................................... 5
Date, Time and Place of the Price Communications Annual Meeting............................. 5
Voting and Revocation of Proxies............................................................ 5
Recommendations to Shareholders............................................................. 5
Parties to the Verizon Transactions......................................................... 6
Cellco Partnership.......................................................................... 6
Verizon Wireless of the East LP............................................................. 6
Verizon Communications Inc.................................................................. 6
Verizon Wireless Inc........................................................................ 6
Price Communications Corporation............................................................ 6
The Verizon Transactions.................................................................... 7
Organizational Chart........................................................................ 9
Reasons for the Verizon Transactions........................................................ 10
Opinions of Price Communications' Financial Advisors........................................ 10
Voting Agreement............................................................................ 10
Completion of the Contribution Transaction.................................................. 10
Tax Considerations.......................................................................... 10
Dissenters' Rights.......................................................................... 10
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA................................... 11
Selected Historical Financial and Other Data--Price Wireless................................ 11
Selected Historical Financial and Other Data--Orange County-Poughkeepsie Limited Partnership 14
Selected Unaudited Pro Forma Combined Financial and Other Data--New Limited Partnership..... 15
Selected Historical Financial Data--Verizon Communications Inc.............................. 17
RISK FACTORS................................................................................. 18
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS................................... 22
THE VERIZON TRANSACTIONS..................................................................... 23
General..................................................................................... 23
Background of the Verizon Transactions...................................................... 24
Recommendation of the Price Communications Board; Reasons for the Verizon Transactions...... 27
Federal Income Tax Consequences............................................................. 28
Regulatory Matters.......................................................................... 31
OPINIONS OF FINANCIAL ADVISORS............................................................... 33
Opinion of UBS Warburg LLC.................................................................. 33
Opinion of Dresdner Kleinwort Wasserstein, Inc.............................................. 39
Opinion of Deutsche Banc Alex. Brown Inc.................................................... 45
THE TRANSACTION AGREEMENT.................................................................... 51
Contemplated Transactions................................................................... 51
The Closing................................................................................. 51
Representations and Warranties.............................................................. 51
Principal Covenants......................................................................... 52
Employee Matters............................................................................ 54
Conditions to Completion of the Transaction................................................. 54
Termination................................................................................. 55
Termination Fees............................................................................ 56
Other Expenses.............................................................................. 56
i
Page
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Indemnification.................................................. 57
Amendments; Waivers.............................................. 57
PLEDGE AGREEMENT.................................................. 58
VOTING AGREEMENT.................................................. 58
THE NEW LIMITED PARTNERSHIP AGREEMENT............................. 59
General.......................................................... 59
Purpose of New Limited Partnership............................... 59
Capital Accounts of the Partners................................. 59
Preferred Return................................................. 59
Profit and Loss Allocation....................................... 59
Cash Distributions............................................... 60
Management of New Limited Partnership............................ 60
Duties, Indemnification and Compensation......................... 62
Transfer Restrictions............................................ 62
Books and Records................................................ 62
Dissolution Events............................................... 63
Winding Up....................................................... 63
Cellco MGP Breach................................................ 63
THE EXCHANGE AGREEMENT............................................ 64
General.......................................................... 64
Exchange for Verizon Wireless Common Stock....................... 64
Exchange for Verizon Communications Common Stock................. 65
Representations and Warranties................................... 67
Principal Covenants.............................................. 67
LOCK-UP AGREEMENTS................................................ 69
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP AGREEMENT.......... 70
General.......................................................... 70
Management and Operations........................................ 70
Allocations and Distributions.................................... 70
Rights and Powers of OCP, General Partner and Limited Partners... 70
Obligations of General Partner................................... 71
Transfer of General Partner Interest............................. 71
Dissolution and Termination...................................... 71
Distributions upon Dissolution................................... 71
Exculpation and Indemnification.................................. 71
UNAUDITED PRO FORMA FINANCIAL INFORMATION--NEW LIMITED PARTNERSHIP 73
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 81
PRICE WIRELESS--RESULTS OF OPERATIONS............................. 81
Overview......................................................... 81
Results of Operations............................................ 82
OCP--RESULTS OF OPERATIONS AND FINANCIAL CONDITION................ 90
Overview......................................................... 90
Presentation of Financial Information............................ 90
Results of Operations............................................ 91
Financial Condition.............................................. 93
Inflation........................................................ 93
ii
Page
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BUSINESS OF NEW LIMITED PARTNERSHIP........................... 97
Overview..................................................... 97
Price Wireless Contributed Assets............................ 97
Cellco Contributed Assets.................................... 98
Integration with Verizon Wireless............................ 99
MANAGEMENT OF NEW LIMITED PARTNERSHIP......................... 111
SECURITY OWNERSHIP............................................ 112
INTERESTS OF CERTAIN PERSONS IN THE VERIZON TRANSACTIONS...... 113
THE SHAREHOLDERS' MEETING..................................... 114
The Verizon Transactions..................................... 115
Election of Directors........................................ 115
Amendment of the Certificate of Incorporation................ 116
Principal Shareholders and Security Ownership of Management.. 116
Directors and Executive Officers............................. 117
Meetings of the Board........................................ 119
Committees of the Board...................................... 119
Directors and Executive Compensation......................... 120
Stock options................................................ 121
Board Compensation Committee Report on Executive Compensation 122
Long-term Incentives......................................... 122
Compensation of the Chief Executive Officer.................. 123
Stock Price Performance...................................... 124
Section 16(a) Beneficial Ownership Reporting Compliance...... 124
Related Party Transactions................................... 125
Other Matters................................................ 125
Shareholders' Proposals...................................... 125
General...................................................... 125
Voting of Proxies............................................ 126
Other Business; Adjournments................................. 127
DESCRIPTION OF VERIZON COMMUNICATIONS CAPITAL STOCK........... 128
Authorized Capital Stock..................................... 128
Common Stock................................................. 128
Series Preferred Stock....................................... 128
No Preemptive Rights......................................... 129
Transfer Agent and Registrar................................. 129
RIGHTS OF DISSENTING SHAREHOLDERS............................. 130
LEGAL MATTERS................................................. 133
EXPERTS....................................................... 133
WHERE YOU CAN FIND MORE INFORMATION........................... 134
INDEX TO FINANCIAL STATEMENTS................................. F-1
Annex A--Transaction Agreement............................... A-1
Annex B--Form of Agreement of Limited Partnership............ B-1
Annex C--Exchange Agreement.................................. C-1
Annex D--Lock-up Agreements.................................. D-1
Annex E--Opinion of UBS Warburg LLC.......................... E-1
Annex F--Opinion of Dresdner Kleinwort Wasserstein, Inc...... F-1
iii
Page
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Annex G--Opinion of Deutsche Banc Alex. Brown Inc..... G-1
Annex H--Amendment to the Certificate of Incorporation H-1
Annex I--NYBCL Section 623............................ I-1
iv
QUESTIONS AND ANSWERS
Verizon Transactions
Q: What transactions will shareholders of Price Communications be asked to
approve at the annual meeting?
A. Shareholders of Price Communications will be asked to approve the
contribution of substantially all of the assets of Price Communications
Wireless, Inc. (referred to in this proxy statement/prospectus as "Price
Wireless") to Verizon Wireless of the East LP (referred to in this proxy
statement/prospectus as "New Limited Partnership") in exchange for a preferred
limited partnership interest in New Limited Partnership (referred to in this
proxy statement/prospectus as the "Preferred Exchangeable Interest") pursuant
to the transaction agreement dated as of December 18, 2001 among Cellco
Partnership (doing business as "Verizon Wireless," and referred to in this
proxy statement/prospectus as "Verizon Wireless"), New Limited Partnership, and
Price Communications and its subsidiaries (referred to in this proxy
statement/prospectus as the "contribution transaction"). Pursuant to an
exchange agreement dated as of December 18, 2001 among Verizon Wireless, New
Limited Partnership, Verizon Wireless Inc. (referred to in this proxy
statement/prospectus as "VWI"), Verizon Communications, and Price
Communications and its subsidiaries, the Preferred Exchangeable Interest is
exchangeable for common stock of a corporation that is, at the time of such
exchange, a general partner of Verizon Wireless (such corporation is currently
anticipated to be VWI, and such stock is referred to in this proxy
statement/prospectus as "Verizon Wireless common stock") if an initial public
offering of such stock meeting certain minimum size requirements is completed
within four years of the contribution transaction. If such an offering is not
completed, or if such an offering is completed but the Preferred Exchangeable
Interest is not exchanged for Verizon Wireless common stock, the Preferred
Exchangeable Interest will be exchanged for common stock of Verizon
Communications pursuant to the exchange agreement.
In addition to the contribution transaction, shareholders of Price
Communications will be asked to approve the possible exchange of the Preferred
Exchangeable Interest for Verizon Communications common stock, pursuant to the
exchange agreement (the contribution transaction and such exchange are
collectively referred to as the "Verizon transactions").
Shareholders of Price Communications will not be asked at the annual meeting
to vote upon an exchange of the Preferred Exchangeable Interest for Verizon
Wireless common stock. Shareholders of Price Communications will be asked to
vote upon such an exchange in the future if and when the Preferred Exchangeable
Interest becomes exchangeable for Verizon Wireless common stock.
Q: Why should shareholders of Price Communications vote in favor of the
Verizon Transactions?
A: Shareholders of Price Communications should vote in favor of the Verizon
transactions for the following reasons:
. The board of directors of Price Communications believes that the
contribution transaction is in the best interests of shareholders because
it "locks in" a favorable price for the business of Price Wireless in the
form of the Preferred Exchangeable Interest.
. Price Wireless has the opportunity to receive Verizon Wireless common
stock at its initial public offering price in the event that a qualifying
initial public offering occurs. In the event that such an initial public
offering does not occur, or the Preferred Exchangeable Interest is
otherwise exchanged for Verizon Communications common stock, the price
that will be used in determining the amount of Verizon Communications
common stock receivable by Price Wireless in any such exchange has been
fixed to be within certain ranges set forth in the exchange agreement.
. Prior to an exchange for Verizon Communications common stock or Verizon
Wireless common stock, the Preferred Exchangeable Interest will provide
Price
1
Wireless with a preferred return (for a maximum period of four years).
Q: What will shareholders of Price Communications receive in the Verizon
transactions?
A: Shareholders of Price Communications will continue to hold their shares
of Price Communications common stock. After the contribution transaction, Price
Communications will hold the Preferred Exchangeable Interest (through Price
Wireless) and will have no other significant business assets. The Preferred
Exchangeable Interest will ultimately be exchanged into Verizon Communications
common stock or Verizon Wireless common stock pursuant to the exchange
agreement.
Management of Price Communications has indicated that, at the appropriate
time, it currently expects to recommend to the board of directors that the
board of directors recommend to the shareholders of Price Communications that
Price Communications be dissolved and its assets distributed to its
shareholders. However, management of Price Communications has also indicated
that, consistent with its fiduciary duties, it intends to review other
potential business opportunities (including broadcasting, wireless and other
similar opportunities) during the period prior to any such recommendation and
may decide not to recommend such a dissolution. Under the terms of the Verizon
transactions, such dissolution is not permitted to occur before 360 days after
an exchange of the Preferred Exchangeable Interest for Verizon Wireless common
stock or Verizon Communications common stock.
Q: When will the Preferred Exchangeable Interest be exchanged for Verizon
Wireless common stock or Verizon Communications common stock?
A: If a qualifying initial public offering of Verizon Wireless common stock
occurs within four years of the contribution transaction, Price Wireless may
elect to exchange the Preferred Exchangeable Interest for Verizon Wireless
common stock. This election may be made during a period of sixty days beginning
on the later of (1) the date of the initial public offering and (2) the
one-year anniversary of the contribution transaction. Any such exchange will
require the approval of the shareholders of Price Communications at such time.
Shareholders of Price Communications are not now being asked to approve an
exchange for Verizon Wireless common stock.
If a qualifying initial public offering of Verizon Wireless common stock is
not completed prior to the fourth anniversary of the contribution transaction,
the Preferred Exchangeable Interest will be exchanged for shares of Verizon
Communications common stock. If such an offering is completed but an exchange
into Verizon Wireless common stock does not occur, the Preferred Exchangeable
Interest will be exchanged for Verizon Communications common stock at such time
as Verizon Communications may determine (but, in general, must occur by the
tenth anniversary of the contribution transaction).
In addition, in certain circumstances (including a change in control of
Price Communications or a transfer of the Preferred Exchangeable Interest by
Price Communications to a secured creditor), Verizon Communications will have
the right to cause an exchange of the Preferred Exchangeable Interest into
Verizon Communications common stock, whether or not an initial public offering
of Verizon Wireless common stock has occurred.
Q: How many shares of Verizon Wireless common stock or Verizon Communications
common stock will Price Communications receive upon an exchange?
A: The number of shares of Verizon Wireless common stock which Price
Wireless would receive in exchange for the Preferred Exchangeable Interest is
equal to the amount of its capital account in New Limited Partnership at the
time of the exchange (which will depend upon, among other things, the financial
results of New Limited Partnership) divided by the initial public offering
price for Verizon Wireless common stock.
The number of shares of Verizon Communications common stock which Price
Wireless would receive in exchange for the Preferred Exchangeable Interest
depends upon the size of its capital account in New Limited Partnership at the
time of the exchange, the fixed range of prices for Verizon Communications
common stock applicable to the exchange (which depends upon the reasons for and
timing of the exchange), and the trailing average trading price of Verizon
Communications common stock at the time of the exchange.
2
Q: When do Verizon Wireless and Price Communications expect to complete the
contribution transaction?
A: Verizon Wireless and Price Communications will complete the contribution
transaction when all of the conditions to completion contained in the
transaction agreement have been satisfied or waived. Verizon Wireless and Price
Communications currently expect to complete the contribution transaction in the
second quarter of 2002.
Voting Procedures
Q: What do shareholders of Price Communications need to do now?
A: Please indicate on your proxy card how you want to vote, sign it and mail
it in the enclosed return envelope, or vote by telephone or the internet, as
soon as possible, so that your shares may be represented at the annual meeting.
If you sign and send in your proxy card and do not indicate how you want to
vote, Price Communications will count your proxy card as a vote in favor of the
proposals submitted at the annual meeting. You may also attend the annual
meeting and vote your shares in person.
Q: What vote is required to approve the Verizon transactions?
A: Approval of the Verizon transactions requires the approval of 66 2/3% of
the issued and outstanding shares of capital stock of Price Communications.
Each share of Price Communications common stock is entitled to one vote on all
matters to come before the annual meeting. The Price Communications common
stock is the only class of capital stock entitled to vote at the annual meeting.
Q: What does a shareholder do to change his/her vote?
A: You may change your vote by sending in a later-dated, signed proxy card
to the Secretary of Price Communications or vote again by telephone or the
internet before the meeting. You can also attend the meeting in person and
vote. You may also revoke your proxy by sending a notice of revocation to the
Secretary of Price Communications at the address set forth under
"Summary--Parties to the Verizon Transactions."
Q: What happens if I do not return a proxy card?
A: If you are a Price Communications shareholder and fail to return your
proxy card, you will, in effect, be voting against the Verizon transactions.
Q: If a shareholder's shares are held in "street name," will his/her broker
vote the shares?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be able to vote them at the annual
meeting. You should therefore instruct your broker how to vote your shares,
following the directions provided by your broker. Please check the voting form
used by your broker to see if it offers telephone or internet voting.
If you are a Price Communications shareholder and do not give voting
instructions to your broker, you will, in effect, be voting against the Verizon
transactions.
Q: Do I need to do anything else, such as sending in my stock certificates?
A: No. The Verizon transactions do not involve an exchange of your shares.
Q: Are shareholders of Price Communications entitled to dissenters' rights?
A: If you follow the procedures set forth in the New York Business
Corporation Law, you will be entitled to exercise dissenters' rights. These
procedures are described in the section of this proxy statement/prospectus
entitled "Dissenters' Rights."
3
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the Verizon transactions, you should contact:
Price Communications Corporation
45 Rockefeller Plaza
New York, New York 10020
Attention: Robert Price or Kim I. Pressman
Phone Number: (212) 757-5600
If you would like additional copies of this document,
you should contact:
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Phone Number: 800-607-0088 (toll-free)
4
SUMMARY
This summary contains selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the Verizon transactions fully and to obtain
a more complete description of the legal terms of the Verizon transactions,
you should carefully read this entire document, including the Annexes and the
documents incorporated by reference into this proxy statement/prospectus. See
"Where You Can Find More Information."
Purpose of the Price
Communications Annual Meeting
The purpose of the Price Communications annual meeting is as follows:
. To consider and vote upon the following proposals:
- to approve and adopt the transaction agreement, to approve the
contribution of substantially all of the assets of Price Wireless to New
Limited Partnership in exchange for the Preferred Exchangeable Interest
pursuant to the transaction agreement, and to approve the possible
exchange of the Preferred Exchangeable Interest for Verizon
Communications common stock pursuant to the exchange agreement;
- to elect two directors to the board of directors of Price Communications
for a term of two years expiring in 2004 and two directors for a term of
three years expiring in 2005; and
- to authorize the amendment of the Certificate of Incorporation of Price
Communications so that any merger, consolidation or sale, lease,
exchange or other disposition of all or substantially all the assets of
Price Communications, any plan of exchange under Article 9 of the New
York Business Corporation Law, or any dissolution under Article 10 of
the New York Business Corporation Law, may be approved at a meeting of
shareholders by a majority of the votes of the issued and outstanding
shares instead of a vote of 66 2/3% of such votes, which is the current
requirement.
. To transact such other business as may properly be brought before the
annual meeting and any postponement or adjournment thereof.
Date, Time and Place of the Price Communications Annual Meeting
The Price Communications Annual Meeting of Shareholders will be held at the
offices of Proskauer Rose LLP, 1585 Broadway, New York, New York 10036-8299 on
, 2002, at 10:00 a.m., local time.
Voting and Revocation of Proxies
The board of directors of Price Communications has fixed the close of
business on , 2002 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the annual meeting.
Approval of the Verizon transactions and the amendment to the Certificate of
Incorporation requires the affirmative vote of the holders of 66 2/3% of the
issued and outstanding shares of capital stock of Price Communications, and the
election of directors requires the affirmative vote of a plurality of votes
cast at the meeting by the holders of shares entitled to vote at such meeting.
Any proxy given may be revoked by submitting a new proxy on a later date, by
voting again by telephone or through the internet, by attending and voting at
the annual meeting, or by sending a notice of revocation to the Secretary of
Price Communications.
Recommendations to Shareholders
The board of directors of Price Communications believes that the Verizon
transactions are fair to and
5
in the best interests of the shareholders of Price Communications and
unanimously recommends that the shareholders of Price Communications vote FOR
the approval of the Verizon transactions, the election of the directors
nominated by the board of directors and the authorization of the proposed
amendment to its Certificate of Incorporation.
Parties to the Verizon Transactions
Cellco Partnership
180 Washington Valley Road
Bedminster, New Jersey 07921
Telephone: (908) 306-7000
Cellco Partnership, doing business as "Verizon Wireless," is 55% owned by
Verizon Communications and 45% owned by Vodafone Group Plc. It is the leading
wireless communications provider in the United States in terms of the number of
subscribers, revenues and operating cash flow and offers wireless voice and
data services across the most extensive network in the United States.
Verizon Wireless of the East LP
180 Washington Valley Road
Bedminster, New Jersey 07921
Telephone: (908) 306-7000
New Limited Partnership was created for the sole purpose of completing the
Verizon transactions and has not carried on any business activities to date. It
is currently an indirect, wholly-owned subsidiary of Verizon Wireless, and its
assets currently consist solely of a nominal amount of cash.
Verizon Communications Inc.
1095 Avenue of the Americas
New York, New York 10036
Telephone: (212) 395-2121
Verizon Communications is one of the world's leading providers of
communications services. Verizon Communications has more than 247,000 employees
and more than $67 billion in annual revenues.
Verizon Communications is the largest provider of wireline voice and data
services in the United States, with approximately 132.1 million access line
equivalents as of December 31, 2001, as well as the largest provider of
wireless services in the United States by virtue of its controlling interest in
Verizon Wireless. Verizon Communications' global presence extends to more than
40 countries in the Americas, Europe, Asia and the Pacific.
Verizon Wireless Inc.
180 Washington Valley Road
Bedminster, New Jersey, 07921
Telephone: (908) 306-7000
VWI is an indirect, wholly-owned subsidiary of Verizon Communications. Its
assets currently consist solely of a nominal amount of cash. It is currently
anticipated that VWI would be the issuer in connection with any initial public
offering of common stock pursuant to which it would become a general partner of
Verizon Wireless.
Price Communications Corporation
45 Rockefeller Plaza
New York, New York 10020
Telephone: (212) 757-5600
Price Communications is currently engaged, through its indirect,
wholly-owned subsidiary, Price Wireless, in the construction, development,
management and operation of cellular telecommunications systems in the
southeastern United States. At September 30, 2001, Price Wireless provided
cellular telecommunications service to approximately 564,000 subscribers in
Alabama, Florida, Georgia and South Carolina in a total of 16 licensed service
areas composed of eight Metropolitan Statistical Areas, or MSAs, and eight
Rural Service Areas, or RSAs, with an aggregate estimated population of 3.4
million. Price Wireless sells its cellular telecommunications service as well
as a full line of cellular products and accessories principally through its
network of retail stores. Price Wireless markets all of its products and
services under the nationally recognized service mark CELLULARONE.
6
The Verizon Transactions
Pursuant to the terms of the transaction agreement, Price Wireless will
contribute substantially all of its assets and approximately $150 million in
cash to New Limited Partnership in exchange for the Preferred Exchangeable
Interest. In addition, subsidiaries of Verizon Wireless will contribute an
aggregate 85% partnership interest in the Orange County--Poughkeepsie Limited
Partnership, certain FCC licenses, a $500 million promissory note receivable,
and approximately $250 million in cash to New Limited Partnership in exchange
for a managing general partner interest and a limited partner interest in New
Limited Partnership.
New Limited Partnership will assume certain liabilities of Price Wireless
relating to the contributed business (including such liabilities as arise under
Price Wireless' 11 3/4% Senior Subordinated Notes due 2007 and 9 1/8% Senior
Secured Notes due 2006). New Limited Partnership will conduct a tender offer to
acquire all of the 11 3/4% Senior Subordinated Notes due 2007 of Price
Wireless. In connection therewith, New Limited Partnership will solicit
consents to amend the indenture governing these notes to eliminate
substantially all of their restrictive covenants. If consents related to a
majority of these notes are not tendered in the consent solicitation, Price
Wireless will, at the cost of New Limited Partnership, effect a covenant
defeasance with respect to such notes. In addition, Price Wireless will, at the
cost of New Limited Partnership, effect a covenant defeasance and redeem all of
its 9 1/8% Senior Secured Notes due 2006.
Pursuant to the transaction agreement, at the time of the contribution
transaction, New Limited Partnership will borrow $350 million from an
independent lender. This loan will be non-recourse to the partners of New
Limited Partnership and will have a term of at least five years from the
contribution transaction.
It is expected that the amount of Price Wireless' initial capital account in
New Limited Partnership will be approximately $1.11 billion. Pursuant to the
limited partnership agreement, any profits of New Limited Partnership will be
allocated on a preferred basis to Price Wireless' capital account annually up
to an amount equal to approximately 4.00% per annum (subject to a downward
adjustment relating to the interest rate payable on the $350 million loan
described above) accreted quarterly on the weighted daily average balance of
Price Wireless' capital account. Price Wireless' capital account will not be
allocated any profits after the earlier to occur of (1) the expiration of the
period (if any) within which Price Wireless is entitled to elect to exchange
the Preferred Exchangeable Interest for Verizon Wireless common stock or (2)
the fourth anniversary of the contribution transaction. Any losses incurred by
New Limited Partnership will be allocated to Verizon Wireless' subsidiaries
which are partners up to an amount equal to their capital accounts before being
allocated to Price Wireless. With respect to each quarter ending after the
second anniversary of the contribution transaction, New Limited Partnership
will distribute to Price Wireless an amount in cash equal to 50% of the
preferred return.
Subject to the veto rights granted to Price Wireless under the limited
partnership agreement, a subsidiary of Verizon Wireless, as managing general
partner, will have the right to manage New Limited Partnership.
Except with respect to certain intercompany transfers and transfers in
connection with secured financing transactions, the Preferred Exchangeable
Interest will be non-transferable by Price Wireless.
Pursuant to the exchange agreement, following completion of an underwritten
initial public offering of Verizon Wireless common stock meeting certain size
requirements (referred to in this proxy statement/prospectus as a "Verizon
Wireless IPO"), the Preferred Exchangeable Interest is exchangeable into
Verizon Wireless common stock at the election of Price Wireless, provided such
election is made during the 60-day period immediately following the later of
the first anniversary of the contribution transaction and the date of a Verizon
Wireless IPO. The number of shares issuable to Price Wireless will be equal to
the amount of Price Wireless' capital account in New Limited Partnership,
divided by the price at which the Verizon Wireless common stock is offered to
the public in the Verizon Wireless IPO.
7
If a Verizon Wireless IPO is not completed prior to the fourth anniversary
of the contribution transaction, the Preferred Exchangeable Interest will be
exchanged for shares of Verizon Communications common stock. If the Verizon
Wireless IPO is completed by such anniversary but an exchange into Verizon
Wireless common stock does not occur, the Preferred Exchangeable Interest will
be exchanged for Verizon Communications common stock at such time as Verizon
Communications may determine (but, in general, this exchange must occur by the
tenth anniversary of the contribution transaction). In addition, in some
circumstances Verizon Communications will have the option to require such an
exchange (for example, where there is a change in control of Price
Communications or the Preferred Exchangeable Interest is transferred to a
secured lender in connection with a default under a financing arrangement). The
number of shares of Verizon Communications common stock issuable to Price
Wireless upon exchange will be calculated by reference to the trailing 20-day
average trading price of such stock and the price ranges set forth in the
exchange agreement.
The Verizon Wireless common stock or Verizon Communications common stock
issued to Price Wireless in connection with an exchange of the Preferred
Exchangeable Interest will be subject to lock-up agreements which restrict the
ability of Price Wireless to dispose of the shares for specified periods of
time.
Pursuant to a pledge agreement dated as of December 18, 2001 among Price
Communications and its subsidiaries, Verizon Wireless, VWI and Verizon
Communications, Price Wireless has pledged, for a period ending on the third
anniversary of the contribution transaction (subject to any outstanding
claims), a portion of the Preferred Exchangeable Interest and the proceeds
thereof, including the shares of Verizon Wireless common stock or Verizon
Communications common stock to be issued upon an exchange, to secure the
performance of its indemnification obligations under the transaction agreement
and its obligations under the exchange agreement, the limited partnership
agreement of New Limited Partnership and the lock-up agreements. Under the
terms of the transaction agreement, each party has agreed, subject to certain
exceptions, to indemnify the other to the extent the aggregate amount of such
other party's losses exceeds $15 million.
8
Organizational Chart
The following chart shows the structure that will result from the
contribution transaction.
[FLOW CHART]
Price Communications
Shareholders
100%
Verizon Communications Vodafone Price Communications
55% 45% 100%
Cellco Partnership
(Verizon Wireless)
100% 100%
Cellco MGP Cellco LP Price Wireless
Managing GP LP PEI
New Limited Partnership
"PEI" = Preferred Exchangeable Interest
"GP" = General Partner Interest
"LP" = Limited Partner Interest
Note: Ownership percentages include direct and indirect ownership
9
Reasons for the Verizon Transactions
The Board of Directors of Price Communications considered many material
factors in reaching its decision to approve and adopt the Verizon transactions
and the transaction agreement and related agreements. See "The Verizon
Transactions--Recommendations of the Price Communications Board; Reasons for
the Verizon Transactions."
Opinions of Price Communications' Financial Advisors
Each of UBS Warburg, LLC, Deutsche Banc Alex. Brown Inc. and Dresdner
Kleinwort Wasserstein, Inc. delivered an oral opinion, subsequently confirmed
in writing, to the Price Communications board of directors on December 13,
2001, to the effect that, as of the date of such opinions and based upon and
subject to the assumptions, matters considered and limitations described
therein, the consideration to be received in the contribution transaction was
fair, from a financial point of view, to Price Communications. See "Opinions of
Financial Advisors."
Voting Agreements
In connection with the Verizon transactions, each of Robert Price, President
and Chief Executive Officer of Price Communications, Kim I. Pressman, Chief
Financial Officer of Price Communications, and Eileen Farbman, the daughter of
Mr. Price, have entered into a voting agreement which obligates each of them to
vote all shares of common stock of Price Communications they are entitled to
vote in favor of the Verizon transactions. These shareholders hold or have the
power to vote 25.2% of the voting power of all outstanding shares of Price
Communications. The voting agreements do not obligate these shareholders to
vote in favor of any other proposal, including, without limitation, the
subsequent votes that will be required prior to any exchange of the Preferred
Exchangeable Interest for Verizon Wireless common stock or a dissolution of
Price Communications.
Completion of the Contribution Transaction
Verizon Wireless and Price Communications will complete the contribution
transaction when all of the conditions to completion contained in the
transaction agreement have been satisfied or waived. Verizon Wireless and Price
Communications currently expect to complete the contribution transaction in the
second quarter of 2002.
Tax Considerations
Price Communications has obtained an opinion of Proskauer Rose LLP that,
subject to certain assumptions and conditions set forth in the opinion, neither
the contribution transaction nor the exchange of the Preferred Exchangeable
Interest for Verizon Communications common stock or Verizon Wireless common
stock should be taxable to Price Communications or Price Wireless. Proskauer
Rose LLP has also opined that if, after the exchange, Price Communications is
dissolved and the Verizon Communications common stock or Verizon Wireless
common stock and the other assets of Price Communications are distributed to
the Price Communications shareholders within one year following the exchange,
the receipt of such common stock should not be taxable to the Price
Communications shareholders (although this would be taxable to the extent of
the value of any other assets which are distributed to them). There is a risk,
however, that, if the assumptions and conditions which support the Proskauer
Rose LLP opinion are not satisfied, or if the Internal Revenue Service and a
court disagree with the conclusions reached in the Proskauer Rose LLP opinion,
then the contribution transaction, the exchange or both would be taxable to
Price Wireless, Price Communications or to both corporations. If the exchange
is taxable, and if Price Communications is liquidated after the exchange, the
liquidating distribution will be fully taxable to the Price Communications
shareholders. See "The Verizon Transactions--Federal Income Tax Consequences."
Dissenters' Rights
Shareholders of Price Communications who do not vote in favor of the Verizon
transactions may, under certain circumstances and by following the procedures
set forth in the New York Business Corporation Law, exercise dissenters' rights
in connection with their shares. See "Rights of Dissenting Shareholders."
10
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
Selected Historical Financial and Other Data--Price Wireless
The following tables contain certain consolidated financial data with
respect to Price Wireless and for Palmer Wireless, Inc. ("Palmer"), a
predecessor to Price Wireless, for the periods and dates set forth below. This
information has been derived from the audited consolidated financial statements
of Price Wireless and Palmer, and from Price Wireless' unaudited consolidated
financial statements.
Price Wireless
-----------------------------------------------------------
For the Nine Months
Ended September 30,
(unaudited) Year ended December 31,
------------------ ---------------------------------------
2001 2000 2000 1999 1998 1997(8)
-------- -------- -------- -------- -------- ---------
(dollars in thousands, except subscriber data and ratios)
Statement of Operations Data:
Service Revenue.................................. $184,662 $189,767 $252,513 $233,575 $184,652 $ 41,365
Equipment Sales and Installation................. 13,168 14,113 17,995 15,548 12,052 2,348
-------- -------- -------- -------- -------- ---------
Revenue.......................................... 197,830 203,880 270,508 249,123 196,704 43,713
Engineering, Technical and Other Direct
Expenses........................................ 23,315 21,010 25,321 29,666 28,122 5,978
Cost of Equipment................................ 24,765 24,589 32,685 28,650 23,085 5,259
Selling, General and Administrative Expenses..... 53,685 46,478 62,135 60,657 56,902 12,805
Depreciation and Amortization.................... 35,733 35,459 46,970 45,101 43,569 11,055
-------- -------- -------- -------- -------- ---------
Operating Income................................. 60,332 76,344 103,397 85,049 45,026 8,616
Other Income (Expense):
Interest, net.................................. (45,609) (46,355) (61,346) (74,436) (77,510) (22,198)
Other, net..................................... 110 36 74 94 (19) 15
-------- -------- -------- -------- -------- ---------
Total Other Expense.......................... (45,499) (46,319) (61,272) (74,342) (77,529) (22,183)
Minority Interest................................ (631) (1,105) (1,432) (1,664) (2,178) (414)
Extraordinary Item-Loss on Early Extinguishment
of Debt (net of tax benefit of $14,885)......... -- -- -- -- (25,344) --
Cumulative effect on prior year change in revenue
recognition (net of tax expense of $92)......... -- (158) (158) -- -- --
Income Tax (Expense) Benefit..................... (5,255) (10,701) (15,056) (3,346) 12,831 5,129
-------- -------- -------- -------- -------- ---------
Net Income (Loss)................................ $ 8,947 $ 18,061 $ 25,479 $ 5,697 $(47,194) $ (8,852)
======== ======== ======== ======== ======== =========
Other Data:
Capital Expenditures............................. $ 12,681 $ 25,620 $ 27,218 $ 24,575 $ 14,725 $ 14,499
Operating Income Before Depreciation and
Amortization--EBITDA(1)......................... 96,065 111,803 150,367 130,150 88,595 19,671
EBITDA Margin on Service Revenue................. 52.0% 58.9% 59.6% 55.7% 48.0% 47.6%
Net Cash Provided By (Used In):
Operating Activities........................... 73,212 61,378 64,593 68,077 14,394 11,313
Investing Activities........................... (20,498) (25,955) (37,753) (33,199) (12,725) (321,030)
Financing Activities........................... -- -- -- (788) 79,542 337,643
Penetration(2)................................... 16.80% 15.34% 15.90% 13.65% 11.60% 9.40%
11
Price Wireless
----------------------------------------------------------------
For the Nine Months
Ended September 30,
(unaudited) Year ended December 31,
-------------------- ------------------------------------------
2001 2000 2000 1999 1998 1997(8)
--------- --------- --------- --------- --------- ---------
(dollars in thousands, except subscriber data and ratios)
Subscribers at the End of Period(3)...... 563,691 510,013 528,405 453,984 381,977 309,606
Cost to Add a Net Subscriber(4).......... 1,038 495 509 471 448 370
Average Monthly Revenue per Subscriber(5) 50.14 54.14 53.93 56.11 52.04 50.59
Average Monthly Churn(6)................. 2.09% 2.01% 1.90% 1.95% 1.91% 1.84%
Ratio of Earnings to Fixed Charges(7).... 1.28x 1.56x 1.57x 1.13x (7) (7)
Balance Sheet Data:
Total Current Assets..................... 271,236 216,515 227,164 182,227 216,634 55,352
Total Assets............................. 1,246,616 1,221,972 1,222,207 1,199,125 1,263,734 1,144,479
Total Current Liabilities................ 62,624 44,573 40,507 48,404 43,658 52,272
Long-Term Debt........................... 700,000 700,000 700,000 700,000 909,432 690,300
Shareholder's Equity (Deficit)........... 147,048 141,079 138,101 122,622 (12,031) 35,163
Palmer (now Price Wireless)
-----------------------------
For The Nine For The
Months Ended Year Ended
September 30, December 31,
1997 1996(9)
------------- ------------
(dollars in thousands, except
subscriber data and ratios)
Statement of Operations Data:
Revenue:
Service Revenue..................................................... $134,123 $ 151,119
Equipment Sales and Installation.................................... 7,613 8,624
-------- ---------
Revenue.......................................................... 141,736 159,743
-------- ---------
Engineering, Technical and Other Direct Expenses........................ 23,301 28,717
Cost of Equipment....................................................... 16,112 17,944
Selling, General and Administrative Expenses............................ 41,014 46,892
Depreciation and Amortization........................................... 25,498 25,013
-------- ---------
Operating Income........................................................ 35,811 41,177
-------- ---------
Other Income (Expense):
Interest, net....................................................... (24,467) (31,462)
Other, net.......................................................... 208 (429)
-------- ---------
Total Other Expense.............................................. (24,259) (31,891)
-------- ---------
Minority Interest....................................................... (1,310) (1,880)
Income Tax Expense...................................................... (4,153) (2,724)
-------- ---------
Net Income.............................................................. $ 6,089 $ 4,682
======== =========
Other Data:
Capital Expenditures.................................................... $ 40,757 $ 41,445
Operating Income Before Depreciation and Amortization ("EBITDA")(1)..... 61,309 66,190
EBITDA Margin on Service Revenue........................................ 45.7% 43.8%
Net Cash Provided By (used in):
Operating Activities................................................ $ 38,791 $ 30,130
Investing Activities................................................ (73,759) (110,610)
Financing Activities................................................ 36,851 78,742
Penetration(2).......................................................... 8.60% 7.45%
Subscribers at the End of Period(3)..................................... 337,345 279,816
Cost to Add a Net Subscriber(4)......................................... $ 514 $ 407
Average Monthly Service Revenue per Subscriber(5)....................... $ 53.99 $ 52.20
Average Monthly Churn(6)................................................ 1.89% 1.84%
Ratio of Earnings to Fixed Charges(7)................................... 1.45x 1.28x
12
- --------
(1) EBITDA represents operating income before depreciation and amortization.
EBITDA may not be identical to similarly titled measures reported by other
companies. EBITDA should not be considered in isolation or as an
alternative measurement of operating performance or liquidity to net income
(loss), operating income (loss), cash flows from operating activities or
any other measure of performance under GAAP. Price Wireless believes that
EBITDA is viewed as a relevant supplemental measure of performance in the
cellular telecommunications industry.
(2) Determined by dividing the aggregate number of subscribers by the estimated
population.
(3) Each billable telephone number in service represents one subscriber.
(4) Determined for a period by dividing (i) costs of sales and marketing,
including salaries, commissions and employee benefits and all expenses
incurred by sales and marketing personnel, agent commissions, credit
reference expenses, losses on cellular handset sales, rental expenses
allocated to retail operations, net installation expenses and other
miscellaneous sales and marketing charges for such period, by (ii) the net
subscribers added during such period.
(5) Determined for a period by dividing (i) the sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of post paid
subscribers for such period divided by the number of months in such period.
(6) Determined for a period by dividing total subscribers discontinuing service
by the average number of subscribers for such period, and dividing that
result by the number of months in such period.
(7) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before interest expense, taxes and a portion of rent expense
representative of interest by the sum of interest expense and a portion of
rent expense representative of interest. The ratio of earnings to fixed
charges is not meaningful for periods that result in a deficit. For the
years ended December 31, 1998 and 1997, the deficit of earnings to fixed
charges was $47,194 and $8,852, respectively.
(8) Operating information for Price Wireless in 1997 includes the cellular
operating results for the period subsequent to the acquisition of Palmer on
October 7, 1997.
(9) Includes the acquisition of the Georgia-1 RSA, which occurred on June 20,
1996, and the Georgia-6 RSA, which occurred on July 5, 1996. The
acquisitions of the GA-1 and GA-6 RSA resulted in revenues to Palmer (now
Price Wireless) of $1,239 and $2,682, respectively, and operating (loss)
income of $(278) and $743, respectively, during such year.
13
Selected Historical Financial and Other Data--Orange County-Poughkeepsie
Limited Partnership
The following tables contain financial data with respect to Orange
County-Poughkeepsie Limited Partnership for the period and dates set forth
below. This information has been derived from the audited or unaudited
financial statements of Orange County-Poughkeepsie Limited Partnership ("OCP").
Nine Months
Ended
September 30, Year Ended December 31,
---------------- -------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(dollars in thousands, except other operating data)
Statement of Operations:
Operating revenue:
Service revenues....................... $58,649 $40,875 $57,678 $35,512 $21,048 $13,975 $11,443
------- ------- ------- ------- ------- ------- -------
Total operating revenue 58,649 40,875 57,678 35,512 21,048 13,975 11,443
Operating costs and expenses:............
Cost of services....................... 6,288 4,757 6,509 4,004 1,906 1,412 376
General and administrative............. 4,993 3,141 4,455 3,226 2,484 2,502 1,256
Depreciation and amortization.......... 2,622 2,253 3,077 2,529 2,131 1,549 1,061
------- ------- ------- ------- ------- ------- -------
Total operating costs and expenses.... 13,903 10,151 14,041 9,759 6,521 5,463 2,693
Operating income......................... 44,746 30,724 43,637 25,753 14,527 8,512 8,750
Other income, net........................ 994 922 1,264 664 408 128 133
------- ------- ------- ------- ------- ------- -------
Net income............................... $45,740 $31,646 $44,901 $26,417 $14,935 $ 8,640 $ 8,883
======= ======= ======= ======= ======= ======= =======
Cash Flow Data:
Net cash provided by operating activities $48,557 $33,187 $46,845 $28,702 $17,696 $ 9,675 $ 9,428
Net cash used in investing activities.... 3,186 3,876 4,379 5,527 3,860 5,318 8,070
Net cash used in financing activities.... 45,371 29,311 42,466 23,175 13,836 4,357 1,358
Capital expenditures..................... 3,186 3,876 4,654 6,269 5,024 5,318 8,070
Other Operating Data:
EBITDA (in thousands)(1)................. $47,368 $32,977 $46,714 $28,282 $16,658 $10,061 $ 9,811
EBITDA margin(2)......................... 80.8% 80.7% 81.0% 79.6% 79.1% 72.0% 85.7%
Balance Sheet Data:
Property, plant and equipment, net....... $25,318 $25,031 $24,753 $23,406 $20,904 $19,287 $15,363
Total assets............................. 55,578 57,737 50,713 40,470 31,971 22,679 18,019
Total partners' capital.................. 54,301 55,304 48,561 38,660 30,778 21,843 17,703
- --------
(1) "EBITDA" is defined as operating income plus depreciation and amortization.
EBITDA is not presented as an alternative measure of operating results or
cash flow from operations, as determined in accordance with generally
accepted accounting principles, but because we believe it is a widely
accepted indicator of our ability to incur and service debt and make
capital expenditures. EBITDA does not give effect to cash used for debt
service requirements and partnership distributions and thus does not
reflect funds available for dividends, reinvestment or other discretionary
uses. In addition, EBITDA as presented herein may not be comparable to
similarly titled measures reported by other companies.
(2) EBITDA margin is defined as EBITDA divided by service revenues and is
expressed as a percentage.
14
Selected Unaudited Pro Forma Combined Financial and Other Data--New Limited
Partnership
The following table presents summary pro forma consolidated financial and
operating data for New Limited Partnership. The data presented in this table is
derived from the pro forma financial statements and related notes which are
included elsewhere in this proxy statement/prospectus. You should read those
sections for a further explanation of the financial data summarized here.
This information is for illustrative purposes only. New Limited Partnership
may have performed differently had the contribution transaction occurred before
the periods presented. You should not rely on the selected unaudited pro forma
combined financial data as indicating the historical results that would have
been achieved had the contribution transaction occurred before the periods
presented or the future results that the New Limited Partnership will
experience after the contribution transaction.
Pro Forma
-------------------------------
Nine Months Year Ended
Ended September 30, December 31,
------------------- ------------
2001 2000
------------------- ------------
(dollars in thousands)
Statements of Operations Data:
Operating revenue:
Service revenues................................................ $264,277 $344,677
Equipment and other............................................. 13,168 17,995
-------- --------
Total operating revenue..................................... 277,445 362,672
Operating costs and expenses:
Cost of service................................................. 50,569 66,316
Cost of equipment............................................... 24,765 32,685
Selling, general and administrative............................. 58,678 66,590
Depreciation and amortization................................... 36,747 56,457
-------- --------
Total operating costs and expenses.......................... 170,759 222,048
-------- --------
Operating income................................................... 106,686 140,624
Interest income, net............................................... 8,269 10,964
Minority interests................................................. (7,493) (8,168)
Other, net......................................................... 110 74
-------- --------
Income from continuing operations before provision for income taxes 107,572 143,494
Provision for income taxes......................................... -- --
-------- --------
Income from continuing operations.................................. $107,572 $143,494
======== ========
Cash Flows Data:
Net cash provided by operating activities.......................... $121,769 $111,438
Net cash used in investing activities.............................. 23,684 42,132
Net cash used in financing activities.............................. 45,371 42,466
Capital expenditures............................................... 15,867 31,872
Other Operating Data:
EBITDA (in thousands) (1).......................................... $143,433 $197,081
EBITDA margin (2).................................................. 54.3% 57.2%
15
Pro Forma as of
September 30, 2001
----------------------
(dollars in thousands)
Balance Sheet Data:
Total assets............................................. $1,833,578
Long-term debt........................................... 350,000
Minority interest in consolidated entities............... 8,146
Preferred exchangeable interest.......................... 1,112,000
Partners' capital........................................ 824,155
Note receivable from affiliate........................... 500,000
- --------
(1) "EBITDA" is defined as operating income plus depreciation and amortization.
EBITDA is not presented as an alternative measure of operating results or
cash flow from operations, as determined in accordance with generally
accepted accounting principles, but because we believe it is a widely
accepted indicator of our ability to incur and service debt and make
capital expenditures. EBITDA does not give effect to cash used for debt
service requirements and partnership distributions and thus does not
reflect funds available for dividends, reinvestment or other discretionary
uses. In addition, EBITDA as presented herein may not be comparable to
similarly titled measures reported by other companies.
(2) EBITDA margin is defined as EBITDA divided by service revenues and is
expressed as a percentage.
16
Selected Historical Financial Data--Verizon Communications Inc.
The following selected historical financial data for each of the nine-month
periods ended September 30, 2001 and 2000 and each of the years ended December
31, 1996 through 2000 has been derived from Verizon Communications' audited and
unaudited consolidated financial statements. This information is only a summary
and you should read it together with Verizon Communications' historical
financial statements and related notes contained in the annual and quarterly
reports and other information that Verizon Communications has incorporated by
reference into this proxy statement/prospectus. See "Where You Can Find More
Information."
For the Nine Months
Ended
September 30, Years Ended December 31,
------------------- -----------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- ------- ------- -------
(dollars in millions, except per share amounts)
Statement of Operations Data:
Operating revenues............................... $ 50,179 $ 47,834 $ 64,707 $ 58,194 $57,075 $53,575 $50,411
Operating income................................. 11,085 13,379 16,758 15,953 11,756 10,881 11,392
Income before extraordinary items and cumulative
effect of changes in accounting principles...... 2,616 9,108 10,810 8,296 5,326 5,181 5,818
Per common share--basic....................... .97 3.35 3.98 3.03 1.94 1.90 2.13
Per common share--diluted..................... .96 3.31 3.95 2.98 1.92 1.89 2.12
Net income....................................... 2,426 9,885 11,797 8,260 4,980 5,181 6,091
Net income available to common shareowners....... 2,426 9,877 11,787 8,260 4,948 5,181 6,091
Per common share--basic....................... .90 3.64 4.34 3.02 1.81 1.90 2.23
Per common share--diluted..................... .89 3.60 4.31 2.97 1.79 1.89 2.22
Cash dividends declared per common share......... 1.155 1.155 1.54 1.54 1.54 1.51 1.44
Balance Sheet Data:
Total assets..................................... 169,503 157,528 164,735 112,830 98,164 95,742 91,538
Long-term debt................................... 45,043 32,825 42,491 32,419 33,064 27,759 28,496
Employee benefit obligations..................... 11,648 12,420 12,543 13,744 14,788 14,760 14,276
Minority interest, including a portion subject to
redemption requirements......................... 21,899 21,970 21,830 1,900 2,490 3,338 4,456
Shareowners' investment.......................... 34,836 34,482 34,578 26,376 21,435 20,632 20,184
Note: All amounts have been restated to reflect financial information of Bell
Atlantic Corporation and GTE Corporation as if they had been combined as
of the beginning of the earliest period presented.
Significant events affecting our historical earnings trends in 1998
through 2000 are described in Management's Discussion and Analysis of
Results of Operations and Financial Condition.
1997 data includes retirement incentive costs, merger-related costs and
other special items.
1996 data includes retirement incentive costs, other special items and the
effect of the adoption of a change in accounting for directory publishing.
17
RISK FACTORS
The Verizon transactions involve substantial risk. In addition to the other
information contained in this proxy statement/prospectus, the following risk
factors should be considered by shareholders of Price Communications in
evaluating the Verizon transactions.
Price Communications' ability to exchange the Preferred Exchangeable Interest
for Verizon Wireless common stock depends upon matters over which it has no
control
Price Communications' ability to exchange the Preferred Exchangeable
Interest for Verizon Wireless common stock will depend upon the occurrence and
timing of a Verizon Wireless IPO over which it has no control. None of VWI,
Verizon Wireless, Verizon Communications or any other party to the Verizon
transactions has any obligation to cause such a public offering to occur. You
should not assume that a Verizon Wireless IPO will happen at any particular
time or at all and should not rely on any statements not included or
incorporated by reference herein as to the likelihood or timing of any such
public offering. If a Verizon Wireless IPO does not occur prior to the fourth
anniversary of the contribution transaction, the Preferred Exchangeable
Interest will be mandatorily exchanged for Verizon Communications common stock.
See "The Exchange Agreement--Exchange for Verizon Communications Common Stock."
The Preferred Exchangeable Interest will be non-transferable and the Verizon
Wireless common stock or Verizon Communications common stock issuable upon an
exchange will be subject to lock-up agreements
Except for certain intercompany transfers or a pledge of all of the
Preferred Exchangeable Interest in connection with a financing transaction
consented to by Verizon Wireless, the Preferred Exchangeable Interest will be
non-transferable by Price Communications. In addition, the shares of Verizon
Communications common stock or Verizon Wireless common stock issuable upon an
exchange will be subject to lock-up agreements which will restrict the ability
of Price Communications to dispose of such shares for a period of time. See
"Lock-up Agreements."
You will not have any right to directly receive Verizon Wireless common stock
or Verizon Communications common stock
If and when the Preferred Exchangeable Interest is exchanged for Verizon
Wireless common stock or Verizon Communications common stock, that common stock
will be held by Price Communications and will be subject to lock-up agreements
as described above. Management of Price Communications has indicated that, at
the appropriate time, it currently expects to recommend to the board of
directors that the board of directors recommend to the shareholders of Price
Communications that Price Communications be dissolved and its assets
distributed to its shareholders. However, management of Price Communications
has also indicated that, consistent with its fiduciary duties, it intends to
review other potential business opportunities (including broadcasting, wireless
and other similar opportunities) during the period prior to any such
recommendation and may decide not to recommend such a dissolution. Accordingly,
you should not assume that you will ever directly own the shares of Verizon
Wireless common stock or Verizon Communications common stock issued upon
exchange of the Preferred Exchangeable Interest. Under the terms of the Verizon
transactions, such dissolution is not permitted to occur before 360 days after
the exchange of the Preferred Exchangeable Interest for Verizon Communications
common stock or Verizon Wireless common stock. In addition, such a dissolution
would require the approval of the shareholders of Price Communications at such
time.
The market price of Verizon Wireless common stock may fluctuate after its
initial public offering
The number of shares of Verizon Wireless common stock issuable to Price
Communications upon an exchange of the Preferred Exchangeable Interest is equal
to the amount of its capital account in New Limited Partnership divided by the
price at which the Verizon Wireless common stock is offered to the public in the
18
Verizon Wireless IPO. Because of the significant potential time delay, which
could be more than a year, between a Verizon Wireless IPO and the subsequent
exchange of the Preferred Exchangeable Interest for Verizon Wireless common
stock, the market price of Verizon Wireless common stock at the time of such an
exchange may be higher or lower than its initial public offering price.
Accordingly, the number of shares of Verizon Wireless common stock issuable
upon such an exchange may be more or less than could be acquired in the open
market for an amount in cash equal to the amount of Price Wireless' capital
account in New Limited Partnership at the time of the exchange.
Failure to exchange the Preferred Exchangeable Interest for Verizon Wireless
common stock could have adverse effects on Price Communications
If a Verizon Wireless IPO occurs prior to the fourth anniversary of the
contribution transaction, Price Communications will have the right to elect to
exchange the Preferred Exchangeable Interest for Verizon Wireless common stock.
If Price Communications does not elect to exchange into Verizon Wireless common
stock, then the Preferred Exchangeable Interest will be exchanged for Verizon
Communications common stock at such time as Verizon Communications may
determine and, in the absence of such determination, on the tenth anniversary
of the contribution transaction (subject to certain conditions). If Price
Communications does elect to exchange into Verizon Wireless common stock but
the shareholders of Price Communications do not approve such an exchange, or if
the Preferred Exchangeable Interest has not otherwise been exchanged by the
tenth anniversary of the contribution transaction, then the Preferred
Exchangeable Interest will be exchanged for Verizon Communications common stock
on such anniversary (subject to certain conditions). In any such event, the
number of shares of Verizon Communications common stock issued upon such
exchange will equal the amount of Price Wireless' capital account in New
Limited Partnership divided by the greater of the trailing 20-day average
closing price of Verizon Communications common stock as of the date of the
exchange and $55.30, which would limit the number of Verizon Communications
shares to be received by Price Communications in the event the trading price of
Verizon Communications were less than $55.30. In addition, Price
Communications' entitlement to a preferred return on its capital account in New
Limited Partnership would cease on the expiration of the period within which it
has the right to elect to exchange for Verizon Wireless common stock. Moreover,
following the fifth anniversary of the contribution transaction, New Limited
Partnership will be permitted to repay its $350 million loan from an
independent lender, in which event Price Communications would suffer
significant adverse tax consequences.
If a Verizon Wireless IPO is not completed prior to the fourth anniversary
of the contribution transaction, or if a Verizon Wireless IPO is completed
prior to such anniversary but Price Wireless revokes its election to exchange
the Preferred Exchangeable Interest for Verizon Wireless common stock or such
exchange does not otherwise occur within four years following such election and
such failure is not the fault of either party, the Preferred Exchangeable
Interest will be mandatorily exchanged for Verizon Communications common stock.
In any such event, the number of shares of Verizon Communications common stock
issuable upon such exchange will equal the amount of Price Wireless' capital
account in New Limited Partnership divided by the trailing 20-day average
closing price of such stock, provided such price may not be less than $40 or
more than $74. The minimum price of $40 would limit the number of shares of
Verizon Communications common stock to be received by Price Wireless in the
event the trading price of such shares were less than $40.
Price Communications, Price Wireless and Price Communications shareholders may
be subject to substantial income tax liability as a result of the contribution
transaction and the exchange of the Preferred Exchangeable Interest
Although Proskauer Rose LLP has opined, subject to certain assumptions and
conditions, that neither the contribution transaction nor the exchange of the
Preferred Exchangeable Interest for Verizon Communications or Verizon Wireless
common stock should be a taxable transaction to Price Communications or Price
Wireless, there is a risk that the contribution transaction or the exchange
will be a taxable transaction, which may result, in either case, in Price
Communications or Price Wireless incurring in excess of $500 million of federal
income tax liability and also substantial state and local income tax liability.
In addition, if Verizon Communications common stock or Verizon Wireless common
stock and the other assets of Price Communications are distributed to the
19
shareholders of Price Communications following the exchange, and if it is
determined that the exchange is a taxable transaction, each shareholder of
Price Communications would recognize gain or loss to the extent of the
difference between the value of Verizon Communications common stock or Verizon
Wireless common stock and other Price Communications assets received by the
shareholder and the aggregate tax basis of Price Communications shares held by
the shareholder. See "The Verizon Transactions--Federal Income Tax
Consequences."
Price Communications will have limited sources of cash to meet its obligations
From the contribution transaction until the exchange for Verizon Wireless
common stock or Verizon Communications common stock, the Preferred Exchangeable
Interest will be substantially all of Price Communications' assets. Price
Communications will receive a taxable allocation of any profits from New
Limited Partnership equal to its preferred return, and such allocations will
increase Price Communications' capital account in New Limited Partnership. For
two years after the contribution transaction, Price Communications will receive
no cash distributions from the New Limited Partnership. After the second
anniversary of the contribution transaction, for a period of up to two years,
Price Communications will receive cash distributions equal to 50% of its
preferred return. The Preferred Exchangeable Interest will in general be
non-transferable, although it may (with the consent of New Limited Partnership)
be pledged to a lender. Price Communications does not expect to have sources of
cash other than its cash remaining after the contribution transaction, the cash
distributions from New Limited Partnership, income from the investment of cash
and any funds that it may be able to borrow. Although Price Communications
currently anticipates that it will have sufficient cash to meet its tax and
other obligations, there is a risk that its funds (including distributions)
will be insufficient to meet its obligations. Further, there is a risk that if
Price Communications needs to borrow money to meet such obligations, it may be
forced to do so on unfavorable terms.
Some arrangements between New Limited Partnership, its managing general partner
and Verizon Wireless may not be the result of arm's-length negotiations
Verizon Wireless of Georgia LLC, a subsidiary of Verizon Wireless and the
managing general partner of New Limited Partnership (referred to in this proxy
statement/prospectus as "Cellco MGP"), will arrange with Verizon Wireless for
the provision of certain administrative, technical and regulatory services to
New Limited Partnership and will charge New Limited Partnership for such
services at cost or in accordance with specified guidelines relating to
customary practices with other partnerships affiliated with Verizon Wireless.
These services may not be provided on terms which are as favorable to New
Limited Partnership as they would be if they had resulted from arm's-length
negotiations with third parties.
The conversion of the Price Wireless markets from the TDMA digital standard to
the CDMA digital standard could adversely affect New Limited Partnership's
operations
Currently, the operations of Price Wireless utilize network radio technology
and handset technology that operate using the time division multiple access, or
TDMA, digital standard. Verizon Wireless' operations utilize network radio
technology and handset technology that operate using the code division multiple
access, or CDMA, digital standard. These two digital standards are
incompatible. Accordingly, New Limited Partnership intends to convert the Price
Wireless contributed network and handsets used in the Price Wireless markets to
CDMA. Pursuant to the terms of the limited partnership agreement of New Limited
Partnership (1) all losses realized upon the sale, disposition or write-off of
any assets in connection with the conversion and (2) all costs of purchasing
handsets to be provided to then existing customers in connection with the
conversion will be specially allocated to the capital accounts of the
subsidiaries of Verizon Wireless that are partners and not to the capital
account of Price Wireless. You should be aware, however, that the foregoing two
categories do not include all of the costs associated with the conversion. In
addition, we cannot assure you that disruptions to service resulting from the
conversion will not adversely affect New Limited Partnership's results of
operations.
20
There are restrictions on Price Communications' activities after it has
exchanged the Preferred Exchangeable Interest for Verizon Wireless common stock
or Verizon Communications common stock
At the time of an exchange of the Preferred Exchangeable Interest for shares
of either Verizon Wireless common stock or Verizon Communications common stock,
such shares may account for a substantial portion of the asset value of Price
Communications. As a result, in order to avoid being required to register as an
"investment company" under the Investment Company Act, which would (among other
things) limit the ability of other registered investment companies to own
shares of Price Communications common stock, Price Communications may need to
(1) liquidate or (2) within one year from Price Communications' election to
effect the exchange, in the case of Verizon Wireless common stock, or within
one year from the date of the exchange, in the case of Verizon Communications
common stock, be primarily engaged in a business other than that of investing,
reinvesting, owning, holding or trading in securities. While the management of
Price Communications has indicated that its current intent is to recommend that
Price Communications be liquidated, it has also indicated that, consistent with
its fiduciary duties, it intends to review other potential business
opportunities (including broadcasting, wireless and other similar
opportunities) during the period prior to any such recommendation. Registering
as an investment company could limit Price Communications' ability to take
advantage of potential business opportunities or require changes to the
corporate and operational structure of Price Communications.
Price Communications will have limited management rights with respect to New
Limited Partnership
Subject to the veto rights granted to Price Communications under the limited
partnership agreement relating to, among other things, acquisitions and
dispositions of assets, engaging in other business activities, incurring
indebtedness, capital contributions and distributions, related party
transactions and equity issuances, Cellco MGP will have the right to manage the
business of New Limited Partnership as its managing general partner (see "The
New Limited Partnership Agreement--Management of New Limited Partnership"). We
cannot assure you that Cellco MGP will be successful in managing New Limited
Partnership or that Cellco MGP's interests in managing New Limited Partnership
will not conflict with the interests of Price Communications.
Failure to complete the transactions could negatively impact the stock price,
future business and operations of Price Communications
If the contribution transaction and the other transactions contemplated by
the transaction agreement are not completed, the price of Price Communications'
common stock may decline to the extent that the current market price reflects a
market assumption that the Verizon transactions will be completed. In addition,
certain costs related to the transactions, such as legal, accounting and
financial advisor fees must be paid even if the Verizon transactions are not
completed.
If the transaction agreement is terminated and the board of directors of
Price Communications determines to seek another sale or business combination,
there can be no assurance that it will be able to find an equivalent or more
attractive transaction than the Verizon transactions. In addition, Price
Communications may be required under certain circumstances to pay Verizon
Wireless a termination fee of $66 million. See "The Transaction
Agreement--Termination Fees."
21
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Many of the statements included or incorporated by reference in this proxy
statement/prospectus, including the description of New Limited Partnership's
plans, strategies, capital expenditures and financing plans are forward-looking
statements. You can generally identify forward-looking statements by the use of
terminology such as "may," "will," "expect," "intend," "plan," "estimate,"
"anticipate," "believe" or similar phrases. New Limited Partnership's actual
future performance could differ materially from these forward-looking
statements. These forward-looking statements involve a number of risks and
uncertainties. Important factors that could cause actual results to differ
materially from expectations include those risks identified in the foregoing
"Risk Factors," and in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business of the New Limited
Partnership," as well as other matters not yet known to New Limited
Partnership, Price Communications or Verizon Communications or not currently
considered material by New Limited Partnership, Price Communications or Verizon
Communications.
We caution you not to place undue reliance on these forward-looking
statements. All written and oral forward-looking statements attributable to New
Limited Partnership, Price Communications or Verizon Communications or persons
acting on their behalf are qualified in their entirety by these cautionary
statements.
22
THE VERIZON TRANSACTIONS
General
Pursuant to the terms of the transaction agreement, Price Wireless will
contribute substantially all of its assets and approximately $150 million in
cash to New Limited Partnership in exchange for the Preferred Exchangeable
Interest. In addition, subsidiaries of Verizon Wireless will contribute an
aggregate 85% partnership interest in the Orange County-Poughkeepsie Limited
Partnership, certain FCC licenses, a $500 million promissory note receivable
and approximately $250 million in cash to New Limited Partnership in exchange
for a managing general partner interest and a limited partner interest in New
Limited Partnership.
New Limited Partnership will assume certain liabilities of Price Wireless
relating to the contributed business (including such liabilities as arise under
Price Wireless' 113/4% Senior Subordinated Notes due 2007 and 9 1/8% Senior
Secured Notes due 2006). New Limited Partnership will conduct a tender offer to
acquire all of the 113/4% Senior Subordinated Notes due 2007 of Price Wireless.
In connection therewith, New Limited Partnership will solicit consents to amend
the indenture governing these notes to eliminate substantially all of their
restrictive covenants. If consents relating to a majority of these notes are
not tendered in the consent solicitation, Price Wireless will, at the cost of
New Limited Partnership, effect a covenant defeasance with respect to such
notes. In addition, Price Wireless will, at the cost of New Limited
Partnership, effect a covenant defeasance and redeem all of its 9 1/8% Senior
Secured Notes due 2006.
Pursuant to the transaction agreement, New Limited Partnership will borrow
$350 million from an independent lender at the time of the contribution
transaction. This loan will be non-recourse to the partners of New Limited
Partnership and will have a term of at least five years from the contribution
transaction.
It is expected that the amount of Price Wireless' initial capital account in
New Limited Partnership will be approximately $1.11 billion. Pursuant to the
limited partnership agreement, any profits of New Limited Partnership will be
allocated on a preferred basis to Price Wireless' capital account annually up
to an amount equal to a specified percentage per annum accreted quarterly on
the weighted daily average balance of Price Wireless' capital account (for a
maximum period of four years). This percentage return is 4.00% per annum
subject to downward adjustment relating to the interest rate payable on the
$350 million loan described above, and it is currently expected that the
maximum preferred return after such adjustment will be approximately 3.6% per
annum. These allocations (as reduced by the cash distributions referred to
below) will increase Price Wireless' capital account in New Limited
Partnership. Any losses incurred by New Limited Partnership will be allocated
to Verizon Wireless' subsidiaries which are partners up to an amount equal to
their capital accounts before being allocated to Price Wireless. With respect
to each quarter ending after the second anniversary of the contribution
transaction, New Limited Partnership will distribute to Price Wireless an
amount in cash equal to 50% of the preferred return.
Subject to certain veto rights granted to Price Wireless under the limited
partnership agreement relating to New Limited Partnership, Cellco MGP (as
managing general partner) will have the right to manage New Limited Partnership.
Except with respect to certain intercompany transfers and transfers in
connection with secured financing transactions, the Preferred Exchangeable
Interest will be non-transferable by Price Wireless.
Pursuant to the exchange agreement, following completion of an underwritten
initial public offering of Verizon Wireless common stock meeting certain size
requirements (referred to in this proxy statement/prospectus as a "Verizon
Wireless IPO"), the Preferred Exchangeable Interest is exchangeable for Verizon
Wireless common stock at the election of Price Wireless, provided Price
Wireless elects to exchange during the 60-day period immediately following the
later of the first anniversary of the contribution transaction and the date of
a Verizon Wireless IPO. If Price Wireless elects to exchange during such 60-day
period, the exchange will
23
then need to be submitted to the shareholders of Price Communications for their
approval. The number of shares issuable to Price Wireless will be equal to the
amount of Price Wireless' capital account in New Limited Partnership as of the
date of the exchange, divided by the price at which the Verizon Wireless common
stock is offered to the public in the Verizon Wireless IPO.
If the Verizon Wireless IPO is not completed prior to the fourth anniversary
of the contribution transaction, the Preferred Exchangeable Interest will be
exchanged for shares of Verizon Communications common stock. If the Verizon
Wireless IPO is completed by such anniversary but an exchange into Verizon
Wireless common stock does not occur, the Preferred Exchangeable Interest will
be exchanged for Verizon Communications common stock at such time as Verizon
Communications may determine (but, in general, this exchange must occur by the
tenth anniversary of the contribution transaction). In addition, in some
circumstances Verizon Communications will have the option to require such an
exchange (for example, where there is a change in control of Price
Communications or the Preferred Exchangeable Interest is transferred to a
secured lender in connection with a default under a financing arrangement). The
number of shares of Verizon Communications common stock issuable to Price
Wireless upon exchange will be calculated by reference to the trailing 20-day
average trading price of such stock and the price ranges set forth in the
exchange agreement. See "The Exchange Agreement --Exchange for Verizon
Communications Common Stock."
Price Wireless' entitlement to the preferred return described above will
cease upon the earlier to occur of (1) the expiration of the period (if any)
within which Price Wireless is entitled to elect to exchange the Preferred
Exchangeable Interest for Verizon Wireless common stock or (2) the fourth
anniversary of the contribution transaction.
The Verizon Wireless common stock or Verizon Communications common stock
issued to Price Wireless in connection with an exchange of the Preferred
Exchangeable Interest will be subject to lock-up agreements which restrict the
ability of Price Wireless to dispose of the shares for specified periods of
time. See " Lock-up Agreements."
Pursuant to a pledge agreement dated as of December 18, 2001 among Price
Communications and its subsidiaries, Verizon Wireless, Verizon Communications
and VWI, Price Wireless has pledged, for a period ending on the third
anniversary of the contribution transaction (subject to any outstanding
claims), a portion of the Preferred Exchangeable Interest and the proceeds
thereof, including the shares of Verizon Wireless common stock or Verizon
Communications common stock to be issued upon an exchange, to secure (1) the
performance of its indemnity obligations under the transaction agreement and
(2) any liability for damages, losses and reasonable expenses suffered or
incurred by Verizon Wireless, New Limited Partnership, VWI or Verizon
Communications as a result of a breach by Price Communications of the exchange
agreement, the limited partnership agreement, the lock-up agreements or the
pledge agreement. See "Pledge Agreement." Under the terms of the transaction
agreement, each party has agreed, subject to certain exceptions, to indemnify
the other to the extent the aggregate amount of such other party's losses
exceeds $15 million.
Background of the Verizon Transactions
Price Communications has historically been a nationwide communications
company owning and then disposing of a number of television, radio, newspaper,
cellular telecommunications and other communications and related properties. By
1996, Price Communications had disposed of substantially all of its operating
properties. In October 1997, Price Communications acquired Palmer Wireless,
Inc. (which was renamed Price Wireless), through which Price Communications has
since been engaged in the construction, development, management and operation
of cellular telecommunications systems in the southeastern United States.
During the period since that acquisition through November 2000, Price
Communications from time to time held discussions with various cellular
telecommunications system operators with respect to the possible acquisition of
Price Communications, Price Wireless or a significant portion of Price
Wireless' cellular telecommunications operations. Except as described below,
none of such discussions resulted in a formal offer being made to Price
Communications.
24
During the summer of 2000, Verizon Wireless indicated its interest in
acquiring Price Wireless. Verizon Wireless conducted a due diligence
investigation with respect to Price Wireless' business, negotiations took place
with respect to the possible terms and conditions of a transaction between
Price Communications and Verizon Wireless, and agreements for carrying out a
transaction were negotiated between Price Communications and Verizon Wireless.
On November 8, 2000, at a regular meeting of the board of directors of Price
Communications, the board of directors discussed the proposed Verizon Wireless
offer to acquire Price Wireless in exchange for the assumption of indebtedness
and the issuance to Price Wireless of shares of VWI. Completion of the
transactions was subject to the prior completion of an initial public offering
of Verizon Wireless common stock. Among the issues discussed were the business
conducted by Verizon Wireless, the pricing of the transaction, the status and
prospects of VWI's proposed initial public offering, and a comparison of the
proposed pricing with other cellular transactions.
The board of directors of Price Communications then discussed in detail the
terms of a draft transaction agreement, lock-up agreement, pledge agreement and
voting agreement for the transaction, including:
. the absence of operating performance tests as a condition to closing;
. Verizon Wireless' material adverse change condition to closing, which
excluded changes generally affecting the wireless industry;
. the September 30, 2001 "drop dead" date (if no initial public offering of
Verizon Wireless common stock had occurred by such date);
. the "fiduciary out" provision;
. the $80 million break-up fee; and
. the nine-month "lock-up" period.
The board of directors thereafter received favorable oral opinions as to the
fairness to Price Communications of the transaction from a financial point of
view from Deutsche Banc Alex. Brown Inc., Wasserstein Perella, and Gleacher &
Co.
Following these discussions, the board of directors authorized senior
executives to negotiate, execute and deliver the transaction agreement and
related agreements.
On November 14, 2000, Price Communications and Verizon Wireless entered into
a transaction agreement (referred to in this proxy statement/prospectus as the
"original transaction agreement") and related agreements with Verizon Wireless.
Under the terms of the original transaction agreement, Verizon Wireless was to
assume approximately $550 million in net debt of Price Wireless, and Price
Communications was to receive shares of Verizon Wireless common stock valued at
approximately $1.5 billion, with such shares being valued at their initial
public offering price. The consummation of the transaction was subject to FCC
and shareholder approval and to termination by either party in the event that
the VWI initial public offering was not completed by September 30, 2001.
On July 31, 2001, Price Communications and Verizon Wireless issued press
releases announcing that delays in the VWI initial public offering precluded a
completion of the transaction by September 30, 2001, and that they intended to
explore alternative terms, including the use of different forms of
consideration. Following those public announcements, representatives of Price
Communications, Verizon Wireless, UBS Warburg LLC (a financial advisor to Price
Communications), Davis Polk & Wardwell (counsel to Verizon Wireless) and
Proskauer Rose LLP (counsel to Price Communications) held a number of meetings
and telephone conferences in an effort to restructure the transaction,
including discussions of the amount and nature of the consideration to be
received by Price Communications, tax considerations, and Price Communications'
desire to insure that it
25
ultimately received either Verizon Wireless common stock or Verizon
Communications common stock if there were further delays in the initial public
offering of VWI. During this period, Price Communications and UBS Warburg had
discussions with several telecommunications operators, in addition to Verizon
Wireless, interested in acquiring Price Wireless or certain of its assets, but
these discussions did not result in any formal offer being made to Price
Communications.
During early and mid October 2001, discussions and negotiations continued
among Price Communications, Verizon Wireless, UBS Warburg, Davis Polk and
Proskauer Rose with respect to a restructuring of the transaction. Beginning on
October 19, 2001, Davis Polk circulated initial drafts of agreements for
carrying out the restructured transaction, and during the period from November
5, 2001 to December 18, 2001 numerous meetings and telephone conference calls
were held to negotiate such agreements.
On December 13, 2001, at a special meeting of the board of directors of
Price Communications, the board of directors discussed the terms of the
proposed revised Verizon Wireless offer to acquire Price Wireless in exchange
for a limited partnership interest with an initial capital account of
approximately $1.15 billion (subject to adjustment) in New Limited Partnership
and the assumption of approximately $550 million of net indebtedness. Among the
subjects discussed were the structure of the transaction, pricing of the
transaction, with the Verizon Wireless common stock being valued at its initial
public offering price and the Verizon Communications common stock being valued
at its average trading price within a specified range, the status and prospects
of VWI's proposed initial public offering, and a comparison of the proposed
pricing with other cellular transactions.
The board of directors of Price Communications then discussed in detail the
terms of the draft transaction agreement, limited partnership agreement,
exchange agreement, lock-up agreements, pledge agreement and voting agreement,
including:
. the absence of operating performance tests as a condition to closing under
the transaction agreement;
. Verizon Wireless' material adverse change condition to closing under the
transaction agreement, which excludes changes generally affecting the
wireless industry;
. the August 31, 2002 "drop dead" date under the transaction agreement;
. the "fiduciary out" provision contained in the transaction agreement;
. the $66 million break-up fee payable under the transaction agreement in
certain circumstances, including the acceptance of a proposal by Price
Communications superior to the Verizon transactions;
. the timing and amount of the preferred return under the partnership
agreement;
. the allocation of profits and losses to the partners under the partnership
agreement;
. the "veto" rights of Price Communications under the partnership agreement;
. the consideration receivable upon an exchange of the Preferred
Exchangeable Interest and the timing of an exchange;
. the conditions to closing of the exchange, including the necessity for an
additional vote of the shareholders of Price Communications prior to the
exchange into Verizon Wireless common stock;
. the amount of the interest proposed to be pledged and the time period of
the pledge; and
. the "lock-up" periods.
The board of directors of Price Communications thereafter received favorable
oral opinions as to the fairness of the transaction to Price Communications
from a financial point of view from UBS Warburg LLC, Deutsche Banc Alex. Brown
Inc., and Dresdner Kleinwort Wasserstein, Inc.
26
Following the discussions, the board of directors of Price Communications
authorized senior executives to negotiate, execute and deliver the transaction
agreement, the exchange agreement, the lock-up agreements, the pledge agreement
and related agreements.
Recommendation of the Price Communications Board; Reasons for the Verizon
Transactions
The board of directors of Price Communications believes that the terms of
the Verizon transactions are fair to and in the best interests of Price
Communications and its shareholders and unanimously recommends to its
shareholders that they vote "FOR" the proposal to approve and adopt the Verizon
transactions.
In reaching its decision to approve and adopt the Verizon transactions and
the transaction agreement and related agreements, the board of directors of
Price Communications considered the following material factors:
. the terms of the Verizon transactions, including the price paid for the
business of Price Wireless, which is "locked in" in the form of the
Preferred Exchangeable Interest; and the opportunity to receive Verizon
Wireless common stock at its initial offering price in the event such an
initial public offering occurs prior to the fourth anniversary of the
contribution transaction, or if such an offering does not occur, to
receive Verizon Communications common stock;
. the terms of the preferred return to be received by Price Wireless out of
any profits of New Limited Partnership;
. information concerning the business, earnings, operations and prospects of
Price Wireless, Verizon Wireless, Verizon Communications and New Limited
Partnership;
. that Verizon Wireless is the leading wireless communications provider in
the United States in terms of number of subscribers, revenues and
operating cash flow, and offers wireless voice and data services across
the most extensive network in the United States;
. the need, if Price Wireless were to remain a part of Price Communications,
to make significant capital expenditures in connection with the upgrade of
its technology;
. the presentation by UBS Warburg LLC and the oral opinions of UBS Warburg
LLC, Deutsche Banc Alex. Brown Inc. and Dresdner Kleinwort Wasserstein,
Inc. each delivered to the Price Communications board of directors on
December 13, 2001 and subsequently confirmed in writing to the effect
that, as of the dates of such opinions and based upon and subject to the
assumptions, matters considered and limitations described therein, the
consideration to be received in the contribution transaction was fair,
from a financial point of view, to Price Communications (see "Opinions of
Financial Advisors");
. the provisions of the transaction agreement that permit Price
Communications, under certain circumstances, to furnish information to and
to engage in discussions or negotiations with third parties, and to
terminate the transaction agreement in order to enter into a definitive
agreement with a third party that has made a proposal superior to the
Verizon transactions upon the payment of a $66 million termination fee
(see "The Transaction Agreement--Principal Covenants," "--Termination" and
"--Termination Fees");
. the other provisions of the transaction agreement and the conditions to
the closing of the contribution transactions, including the required
approval of the shareholders of Price Communications (see "Transaction
Agreement--Conditions to Completion of the Transaction");
. the receipt by Price Communications of the opinion of Proskauer Rose LLP
that, subject to the assumptions, conditions and legal uncertainties
referred to in such opinion, no taxable gain or loss should be recognized
by Price Communications or Price Wireless under the Federal income tax
laws with respect to the contribution of the Price Wireless assets to New
Limited Partnership and the assumption by New Limited Partnership of the
liabilities of Price Wireless or the exchange of the Preferred
Exchangeable Interest for Verizon Wireless common stock or Verizon
Communications common stock (see "The Verizon Transactions--Federal Income
Tax Consequences");
27
. the willingness of Robert Price and Kim I. Pressman, the President and
Executive Vice President of Price Communications, respectively, to enter
into a voting agreement with respect to the Verizon transactions;
. despite the fact that Price Communications has from time to time held
discussions with various telecommunications operators other than Verizon
Wireless with respect to the possible acquisition by such companies of
Price Communications, Price Wireless or a significant portion of Price
Wireless' cellular telecommunications operations, none of such discussions
resulted in a formal offer being made to Price Communications;
. the possibility that a Verizon Wireless IPO may not occur prior to the
fourth anniversary of the contribution transaction, in which event the
Preferred Exchangeable Interest will be exchanged for Verizon
Communications common stock;
. if a Verizon Wireless IPO occurs prior to the fourth anniversary of the
contribution transaction, and Price Communications does not elect to
exchange its Preferred Exchangeable Interest for Verizon Wireless common
stock, Price Communications may suffer adverse consequences, including the
possibility that its exchange for Verizon Communications common stock may
be delayed until the tenth anniversary of the contribution transaction,
that such exchange may occur at a disadvantageous exchange ratio, that the
preferred return on its capital account in New Limited Partnership will
cease, and that it may suffer adverse tax consequences;
. the terms of the lock-up agreements with respect to the Verizon Wireless
common stock or Verizon Communications common stock to be received by
Price Communications on exchange of the Preferred Exchangeable Interest;
and
. the indication of management of Price Communications that it currently
intends, subject to board of directors and shareholder approval, to
distribute to, or to exchange with, shareholders of Price Communications
any shares of Verizon Wireless common stock or Verizon Communications
common stock received in exchange for the Preferred Exchangeable Interest
(after the 360-day waiting period for such distributions which is imposed
by the lock-up agreements).
The foregoing discussion of the factors considered by the Price
Communications board of directors is not intended to be exhaustive. In view of
the number and wide variety of factors considered in connection with its
evaluation of the Verizon transactions, and the complexity of these matters,
the Price Communications board of directors did not find it practicable to, nor
did it attempt to, quantify, rank or otherwise assign relative weights to the
specific factors it considered. Thus, the Price Communications board of
directors did not undertake to assign any particular weight to any factor, but
conducted an overall analysis of the factors described above, including
discussions with and questioning of Price Communications' management and legal
and financial advisors. In considering the factors described above, individual
members of the board of directors may have given different weight to different
factors. The Price Communications board of directors considered all these
factors together and, on the whole, considered them to be favorable to, and to
support, its determination.
Federal Income Tax Consequences
Price Communications has obtained an opinion of Proskauer Rose LLP as to the
federal income tax treatment of (1) the contribution transaction and (2) the
exchange of the Preferred Exchangeable Interest for Verizon Communications
common stock or Verizon Wireless common stock. (We have filed the tax opinion
with the SEC as an exhibit to the registration statement related to this proxy
statement/prospectus. See "Where You Can Find More Information.")
The Proskauer Rose LLP tax opinion concerning the exchange relies on several
important assumptions, which were made at the request of Price Communications
and are described in the opinion, including assumptions about (1) the stock to
be received by Price Communications or a subsidiary in exchange for the
Preferred Exchangeable Interest, (2) the interest in Verizon Wireless that the
issuer of such stock (Verizon Communications or VWI) will have at the time of
that exchange, and (3) certain actions that will be taken by
28
such issuer with respect to the Preferred Exchangeable Interest following the
exchange. However, the agreements governing the contribution transaction and
the exchange do not contain covenants that assure that all of these assumptions
will be true, and one or more of them may not be true when the exchange
actually occurs. If the factual assumptions are not true, the actual federal
income tax consequences of the contribution transaction and the exchange to
Price Communications and to its shareholders could differ from the consequences
which are described in the Proskauer Rose LLP tax opinion.
Also, as discussed in the opinion, because of a dearth of authority
interpreting the federal income tax law with regard to certain issues presented
by the contribution transaction and the exchange, it is unclear how a court
would determine these issues. Thus, it is possible that a court may disagree
with the conclusions described in the Proskauer Rose LLP tax opinion. Moreover,
the Proskauer Rose LLP tax opinion is based on the federal income tax law in
effect as of December 18, 2001, which is subject to change, possibly with
retroactive effect. For these reasons, there is no guarantee that the tax
consequences described in the Proskauer Rose LLP tax opinion, or other tax
consequences summarized here, will be realized by either Price Communications,
Price Wireless or by the Price Communications shareholders.
Price Wireless is not required to complete the contribution transaction if
the Proskauer Rose LLP tax opinion has been withdrawn because of certain
changes in law, as described in the opinion. However, the opinion may also be
withdrawn for other reasons, and such withdrawal would not relieve Price
Wireless of its obligation to complete the contribution transaction.
Price Communications does not intend to obtain a ruling from the Internal
Revenue Service (the "IRS") with regard to the tax consequences of the
contribution transaction and the exchange, and the IRS may not agree that the
federal income tax consequences of the contribution transaction and the
exchange should be as described in the Proskauer Rose LLP tax opinion.
None of Verizon Communications, VWI, Verizon Wireless, New Limited
Partnership or any of their representatives expresses any opinion or makes any
representation as to the tax consequences of the contribution transaction and
the exchange to Price Communications or its shareholders and none of Verizon
Communications, VWI, Verizon Wireless, New Limited Partnership or any of their
representatives is responsible to Price Communications or its shareholders for
any aspect of such consequences.
Tax Consequences to Price Communications
Subject to the assumptions and legal uncertainties referred to above,
Proskauer Rose LLP has opined that (1) the contribution of Price Wireless
assets to New Limited Partnership in exchange for the Preferred Exchangeable
Interest and the assumption by New Limited Partnership of certain liabilities
of Price Wireless should constitute a transfer within the meaning of section
721(a) of the Code, in conjunction with which the liability of New Limited
Partnership in respect of the $350 million loan from an independent lender
should be allocated to Price Wireless under section 752 of the Code, and (2)
the exchange of the Preferred Exchangeable Interest for Verizon Communications
common stock or Verizon Wireless common stock should constitute a
reorganization within the meaning of section 368(a) of the Code. Proskauer Rose
LLP has advised that, accordingly, no gain or loss should be recognized by
Price Communications or its subsidiary corporations upon the contribution or
the exchange.
If it were determined that the consequences of these transactions are not as
described in the Proskauer Rose LLP tax opinion, Price Communications and its
subsidiary corporations could incur in excess of $500 million of federal income
tax liability and also substantial state and local income tax liability.
Tax Consequences to Price Communications Shareholders
The following discussion summarizes material federal income tax consequences
of the contribution transaction and the exchange to Price Communications
shareholders who are U.S. holders, i.e., who are:
. citizens or residents of the United States;
29
. corporations, or other entities taxable as corporations for U.S. federal
income tax purposes, created or organized in or under the laws of the
United States or of any political subdivision thereof; or
. estates or trusts the income of which is subject to United States federal
income taxation regardless of its source.
The term "U.S. holder" also includes certain former citizens and residents
of the United States.
The following discussion does not describe all of the tax consequences that
may be relevant to Price Communications shareholders in light of their
particular circumstances or to shareholders subject to special rules, such as:
. certain financial institutions;
. insurance companies;
. dealers in securities or foreign currencies;
. shareholders holding Price Communications shares as part of a hedge,
straddle or conversion transaction;
. shareholders who acquired their Price Communications shares though the
exercise of options or similar derivative securities or otherwise as
compensation;
. shareholders whose functional currency is not the U.S. dollar;
. partnerships or other entities classified as partnerships for U.S. federal
income tax purposes; or
. shareholders subject to the alternative minimum tax.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury Regulations, changes to any of which subsequent
to the date of this proxy statement/prospectus may affect the tax consequences
described in this proxy statement/prospectus. The discussion assumes that Price
Communications shareholders hold their Price Communications shares as capital
assets within the meaning of section 1221 of the Code. Finally, this discussion
does not consider the potential effects of any state, local or foreign tax laws.
Subject to the assumptions, conditions and legal uncertainties referred to
above, it is the opinion of Proskauer Rose LLP that:
. no gain or loss will be recognized by a Price Communications shareholder
upon the contribution by Price Wireless of its assets to New Limited
Partnership in exchange for the Preferred Exchangeable Interest;
. no gain or loss will be recognized by a Price Communications shareholder
upon the exchange by Price Communications or Price Wireless of the
Preferred Exchangeable Interest for Verizon Communications common stock or
Verizon Wireless common stock;
. if the exchange qualifies as a section 368(a) reorganization as described
in the Proskauer Rose LLP tax opinion delivered to Price Communications
that is filed as an exhibit to this proxy statement/prospectus, no gain or
loss will be recognized by a Price Communications shareholder on the
receipt of a distribution of Verizon Communications common stock or
Verizon Wireless common stock pursuant to a liquidation of Price
Communications within one year following the exchange, but each
shareholder will recognize gain to the extent of any other assets received
from Price Communications in connection with such distribution, including
cash received instead of fractional shares of Verizon Communications
common stock or Verizon Wireless common stock;
. if a Price Communications shareholder recognizes no gain or loss on
receipt of Verizon Wireless common stock or Verizon Communications common
stock, the shareholder will have the aggregate tax basis in the Verizon
Communications common stock or Verizon Wireless common stock distributed
to that
30
shareholder by Price Communications (including a fractional share of
Verizon Communications common stock or Verizon Wireless common stock with
respect to which that shareholder receives cash) equal to the
shareholder's aggregate tax basis in its Price Communications shares,
increased by the amount of gain, if any, recognized by that shareholder on
the distribution from Price Communications, and decreased by the value of
the assets distributed to that shareholder other than Verizon
Communications or Verizon Wireless common stock; and
. if a Price Communications shareholder recognizes no gain or loss on
receipt of Verizon Wireless common stock or Verizon Communications common
stock, the shareholder's holding period in the Verizon Communications
common stock or Verizon Wireless common stock will include its holding
period in its Price Communications shares.
If, following the exchange of the Preferred Exchangeable Interest for
Verizon Communications common stock or Verizon Wireless common stock, such
common stock and other assets of Price Communications are distributed to the
Price Communications shareholders, and it were determined that the exchange did
not qualify as a section 368(a) reorganization, each Price Communications
shareholder would recognize gain or loss to the extent of the difference
between the value of the Verizon Communications common stock or Verizon
Wireless common stock and other assets distributed to that shareholder and the
shareholder's aggregate tax basis in the Price Communications shares.
Regulatory Matters
Antitrust
Each of Verizon Wireless, Verizon Communications and Price Communications
believe that the contribution transaction is not subject to the report filing
requirements of the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, or any foreign antitrust laws. To the extent the Hart-Scott Rodino Act
report filing requirements or any other antitrust approval requirements apply
to an exchange of the Preferred Exchangeable Interest for Verizon Wireless
common stock or Verizon Communications common stock, the parties intend to seek
any necessary approvals at the time of such exchange. We cannot assure you that
the Antitrust Division of the Department of Justice or the Federal Trade
Commission, or any other state or private person, will not take action under
the antitrust laws with respect to the Verizon transactions, including seeking
to enjoin any such transactions.
Federal Communications Commission
In December 2000, Price Communications and Verizon Wireless filed
applications with the Federal Communications Commission ("FCC") for its consent
to the assignment or transfer of control of Price Wireless' licenses to Verizon
Wireless, as contemplated by the transaction agreement entered into on November
14, 2000. See "Background of the Verizon Transactions." In March 2001, the FCC
granted its consent to these applications by public notice. On February 5,
2002, Price Communications and Verizon Wireless submitted a supplemental
statement with the FCC updating these applications to describe the changes in
structure between the November 2000 transaction and the present transaction.
The FCC staff has informally advised Price Communications and Verizon Wireless
that, based upon the disclosures made by the parties in the supplemental
statement, no additional approval is required and that they may rely upon the
March 2001 FCC consent in connection with the present transaction.
Investment Company Act
As a result of the contribution transaction, the Preferred Exchangeable
Interest will account for substantially all of Price Communications' assets.
Price Communications believes that through the Preferred Exchangeable Interest
it will continue to be primarily engaged in the cellular telecommunications
business. Robert Price,
31
President and Chief Executive Officer of Price Communications, believes that
the Investment Company Act is not applicable in this case but has consented to
Price Wireless applying to the SEC for an order declaring that the Investment
Company Act does not apply because Price Wireless is primarily engaged in a
business other than that of investing in securities, and expects that the SEC
will grant the order. At the time of the exchange of the Preferred Exchangeable
Interest for Verizon Wireless common stock or Verizon Communications common
stock, Price Communications will consider if the Investment Company Act will
then be applicable and will then consider the steps that it should take, if
any. While the management of Price Communications has indicated that, at the
appropriate time, it currently expects to recommend to the board of directors
that the board of directors recommend to the shareholders of Price
Communications that Price Communications be dissolved and that its assets
distributed to shareholders, management of Price Communications has also
indicated that, consistent with its fiduciary duties, it intends to review
other potential business opportunities (including broadcasting, wireless and
other similar opportunities) during the period prior to any such recommendation
and may decide not to recommend such a dissolution.
32
OPINIONS OF FINANCIAL ADVISORS
Opinion of UBS Warburg LLC
On December 13, 2001, at a meeting of the Price Communications board, UBS
Warburg delivered to the Price Communications board an oral opinion, which
opinion was confirmed by delivery of a written opinion dated the same date, to
the effect that, as of that date and based on and subject to various
assumptions, matters considered and limitations described in the opinion, the
consideration to be received in the contribution transaction was fair, from a
financial point of view, to Price Communications.
The full text of UBS Warburg's opinion describes the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken by UBS Warburg. The opinion is attached as Annex E and is
incorporated into this document by reference. UBS Warburg's opinion is based on
and subject to various assumptions, matters considered and limitations
described in the opinion and is directed (1) to the Price Communications board
and (2) to the fairness, from a financial point of view, of the consideration
to be received in the contribution transaction and does not address any other
aspect of the Verizon transactions. The opinion does not address Price
Communications' underlying business decision to effect the Verizon transactions
or constitute a recommendation to any holder of Price Communications common
stock as to how to vote with respect to the Verizon transactions or any other
matter. Holders of Price Communications common stock are encouraged to read the
opinion carefully in its entirety. The summary of UBS Warburg's opinion
described below is qualified in its entirety by reference to the full text of
its opinion.
In arriving at its opinion, in addition to the other assumptions described
below, UBS Warburg assumed at the direction of Price Communications:
. the Verizon Wireless IPO is successfully completed prior to the first
anniversary of the contribution transaction;
. Price Wireless exchanges the Preferred Exchangeable Interest for Verizon
Wireless common stock on the first anniversary of the contribution
transaction;
. As of the date of such exchange, Price Wireless' capital account equals at
least approximately $1.192 billion (based upon an initial capital account
of approximately $1.150 billion plus a preferred return of approximately
$42 million);
. Upon such exchange, Price Wireless will receive Verizon Wireless common
stock with a trading value no less than the value of its capital account
(at least approximately $1.192 billion);
. No claims will have been made against Price Communications or Price
Wireless pursuant to the indemnification obligations outlined in the
transaction agreement and related limited partnership agreement, exchange
agreement, pledge agreement and lock-up agreements (referred to in this
section of this proxy statement/prospectus as the "agreements"); and
. All restrictions on Price Wireless' ability to transfer Verizon Wireless
common stock under the agreements, other than certain volume limitations,
lapse by the 270th day after the date of the exchange, other than with
respect to Verizon Wireless common stock with a value (based upon the
public offering price in the Verizon Wireless IPO) of $75 million pledged
by Price Wireless pursuant to the pledge agreement, as to which
restrictions lapse on the earliest dates permitted.
In addition, UBS Warburg estimated that, after giving pro forma effect to
the contribution transaction and (i) assuming the contribution transaction had
occurred on December 31, 2001, (ii) taking into account Price Communications'
estimate that the cost to terminate the existing agreement between Price
Wireless and H.O. Systems, as amended (the "H.O. Agreement"), would be $32
million and (iii) not taking into account any working capital adjustments,
Price Communications and Price Wireless would have approximately $41 million of
net cash and securities.
33
The transaction agreement provides that Price Wireless will use commercially
reasonable efforts to negotiate an amendment to the H.O. Agreement to terminate
such agreement on the second anniversary of the closing of the contribution
transaction. Based on Price Communications' estimate of the cost of
termination, UBS Warburg assumed that the H.O. Agreement would be terminated
for a cost of $32 million. The transaction agreement also provides that if the
H.O. Agreement is not amended in such a manner prior to the closing of the
contribution transaction, then the initial amount of Price Wireless' capital
account will be reduced by $38 million, or from approximately $1.15 billion to
approximately $1.11 billion. Price Wireless recently informed Verizon Wireless
that it does not expect to be successful in amending the H.O. Agreement prior
to the closing of the contribution transaction. As a result, based on the
estimates of Price Communications, the net cash and securities to be retained
at Price Communications would be increased by $16 million and the cash to be
retained at Price Wireless would be increased by $16 million, and Price
Communications estimates that the total net cash and securities at Price
Communications and Price Wireless would be approximately $73 million.
In arriving at its opinion, UBS Warburg:
. reviewed current and historical market prices and trading volumes of Price
Communications common stock;
. reviewed publicly available business and historical financial information
relating to Price Communications and VWI ;
. reviewed internal financial information and other data relating to Price
Wireless' business and financial prospects, including estimates and
financial forecasts prepared by Price Wireless' management, that were
provided to UBS Warburg by Price Wireless and were not publicly available;
. reviewed internal financial information and other data relating to the
business and financial prospects of the assets to be contributed to New
Limited Partnership by Verizon Wireless, including estimates and financial
forecasts prepared by Verizon Wireless management not publicly available;
. conducted discussions with members of Price Communications, Price Wireless
and Verizon Wireless senior management;
. reviewed publicly available financial and stock market data with respect
to other companies in lines of business that UBS Warburg believed to be
generally comparable to those of Price Wireless and Verizon Wireless;
. compared the financial terms of the transaction with the publicly
available financial terms of other transactions which UBS Warburg believed
to be generally relevant;
. reviewed drafts of the agreements; and
. conducted other financial studies, analyses and investigations, and
considered other information, as UBS Warburg deemed necessary or
appropriate.
In connection with its review, with Price Communications' consent, UBS
Warburg did not assume any responsibility for independent verification of any
of the information that UBS Warburg reviewed for the purpose of its opinion
and, with Price Communications' consent, UBS Warburg relied on that information
being complete and accurate in all material respects. In addition, at Price
Communications' direction, UBS Warburg did not make any independent evaluation
or appraisal of any of the assets or liabilities (contingent or otherwise) of
Price Communications, Price Wireless, VWI or Verizon Wireless, and was not
furnished with any such evaluation or appraisal. With respect to the financial
forecasts and estimates that it reviewed, UBS Warburg assumed, at Price
Communications' direction, that they were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of each company as to the future financial performance of their
respective company. UBS Warburg assumed, with the consent of Price
Communications, that the contribution transaction and the exchange of the
Preferred Exchangeable Interest for Verizon Wireless common stock
34
(referred to in this section of this proxy statement/prospectus as the "Verizon
Wireless exchange") will qualify as tax free to Price Communications and Price
Wireless for U.S. federal income tax purposes.
In connection with its engagement, UBS Warburg was requested to, and it did,
solicit third party indications of interest from parties who had previously
indicated an interest in the acquisition of Price Wireless, but no party
expressed interest in acquiring substantially all of Price Wireless.
At Price Communications' direction, UBS Warburg was not asked to, and did
not, offer any opinion as to the material terms of the agreements, or the form
of the transactions contemplated by the agreements. UBS Warburg expressed no
opinion as to the likelihood of the Verizon Wireless IPO, the price at which
Verizon Wireless common stock is sold in the Verizon Wireless IPO, the value of
Verizon Wireless common stock issued in the Verizon Wireless exchange or the
prices at which Verizon Wireless common stock or Price Communications common
stock will trade in the future. UBS Warburg also assumed that all governmental,
regulatory or other consents, approvals and registrations necessary for the
consummation of the contribution transaction, the Verizon Wireless IPO and the
Verizon Wireless exchange as described above and the conduct of the business of
Price Wireless and VWI following the contribution transaction, the Verizon
Wireless IPO and the Verizon Wireless exchange will be obtained without any
material adverse effect on Price Wireless, VWI, the contribution transaction or
the Verizon Wireless exchange. In rendering its opinion, UBS Warburg assumed,
with Price Communications' consent, that the final executed form of the
agreements would not differ in any material respects from the drafts that UBS
Warburg examined and that the parties to the agreements would comply with all
material terms of such agreements. UBS Warburg's opinion is necessarily based
on economic, monetary, market and other conditions existing, and information
available to UBS Warburg, on the date of its opinion.
Except as described above, Price Communications imposed no other limitations
on UBS Warburg with respect to the investigations made or the procedures
followed by UBS Warburg in rendering its opinion.
The estimates of Price Wireless' future performance provided by Price
Communications' management in or underlying UBS Warburg's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than those estimates. In performing its analyses, UBS
Warburg considered industry performance, general business and economic
conditions and other matters, many of which are beyond Price Communications'
control. Estimates of the financial value of companies do not necessarily
purport to be appraisals or reflect the prices at which companies actually may
be sold.
The consideration was determined through negotiation between Price
Communications and Verizon Wireless and the decision to enter into the
transaction was solely that of Price Communications' board of directors. UBS
Warburg's opinion and financial analyses were only one of many factors
considered by Price Communications' board of directors in its evaluation of the
contribution transaction and should not be viewed as determinative of the views
of Price Communications' board of directors or management with respect to the
contribution transaction or the consideration.
In connection with rendering its opinion to Price Communications' board of
directors, UBS Warburg performed a variety of financial analyses which are
summarized below. The following summary is not a complete description of all of
the analyses performed and factors considered by UBS Warburg in connection with
its opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. With respect to the analysis of selected
publicly traded companies and the analysis of selected transactions summarized
below, no company or transaction used as a comparison is either identical or
directly comparable to Price Communications or the contribution transaction.
These analyses necessarily involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the public trading or acquisition values of the companies concerned.
35
The following is a summary of the material financial analyses performed by
UBS Warburg in connection with its opinion. These summaries of financial
analyses alone do not constitute a complete description of the financial
analyses. UBS Warburg believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying UBS Warburg's
analyses and opinion. None of the analyses performed by UBS Warburg was
assigned greater significance by UBS Warburg than any other. UBS Warburg
arrived at its ultimate opinion based on the results of all analyses undertaken
by it and assessed as a whole. UBS Warburg did not draw, in isolation,
conclusions from or with regard to any one factor or method of analysis.
Evaluation of the consideration in the contribution transaction
UBS Warburg conducted an analysis in order to estimate the value of the
consideration to be received by Price Wireless in the contribution transaction,
taking into account both immediately realizable components of the consideration
and components to be realized in the future. Immediately realizable components
of the consideration were assumed by UBS Warburg to consist of the following:
. At the closing of the contribution transaction, New Limited Partnership
will assume Price Wireless' debt obligations, offset by Price Wireless'
estimated cash contribution, resulting in net debt assumed of $550.0
million; and
. Approximately $21 million of cash is estimated by Price Wireless to be
retained by it, after giving pro forma effect to the contribution
transaction and assuming the contribution transaction had occurred on
December 31, 2001.
In addition, UBS Warburg assumed the following components of the
consideration, discounted for present value:
. An estimated net working capital payment payable to Price Wireless; and
. The shares of Verizon Wireless common stock assumed to be received in the
exchange.
The shares of Verizon Wireless common stock assumed to be received in the
exchange consist of (i) shares not subject to a pledge as collateral for Price
Wireless' indemnification obligations and (ii) shares subject to pledge as
collateral.
UBS Warburg estimated the value of the Verizon Wireless common stock not
subject to the pledge agreement as having a freely tradable value of $1.12
billion on the date of the exchange, which amount was assumed to consist of (i)
the $1.15 billion initial capital account plus (ii) a preferred return of
approximately $42 million minus (iii) $75 million of pledged shares. UBS
Warburg discounted the value of these shares as of the date of the Verizon
Wireless exchange for the liquidity restrictions imposed under certain lock-up
provisions. For this purpose, UBS Warburg considered a range of liquidity
discounts (0% to 15%) based on an assessment of certain relevant market data
and the terms of the lock-up provisions. UBS Warburg then discounted these
amounts back to the date of the contribution transaction, using a discount rate
based on an estimated cost of New Limited Partnership debt (5.0% to 8.0%), on
the assumption that Price Wireless would not bear equity risk during this
period.
UBS Warburg then estimated the value of the Verizon Wireless common stock
subject to pledge provisions. The pledged shares were assumed to have an
initial value of $75 million (based on the Verizon Wireless IPO price), and
shares with a value equal to approximately $34 million were assumed to be
released from pledge on the first anniversary of the Verizon Wireless exchange,
with the remainder released on the second anniversary. These pledged amounts
were discounted based on an estimated New Limited Partnership cost of debt for
the first
36
year following the Verizon Wireless exchange and at an estimated cost of equity
(10.5% to 14.0%) for later periods.
Based upon its analyses as described above, UBS Warburg estimated that the
value of the consideration to be received in the contribution transaction as
follows:
NPV with 0% NPV with 10%
Nominal Value Liquidity Discount Liquidity Discount
------------- ------------------ ------------------
Value (in billions) $1.722 $1.685(1) $1.583(1)
- --------
(1) Assumes for New Limited Partnership a 6.0% cost of debt and a 12.0% cost of
equity.
Analysis of selected public companies
UBS Warburg compared selected financial information and operating statistics
for Price Wireless with corresponding financial information and operating
statistics of the following selected publicly held companies in the rural
cellular telecommunications industry:
. Dobson Communications Corporation
. Rural Cellular Corporation
. United States Cellular Corporation
. Western Wireless Corporation
UBS Warburg reviewed enterprise values, calculated as equity value, plus
debt, including capital leases, less cash, as multiples of (i) latest 12 months
earnings before interest, taxes, depreciation and amortization, commonly known
as EBITDA, and (ii) population equivalents or POPs. UBS Warburg then compared
the multiples derived from the selected companies with corresponding multiples
for Price Wireless based on the value of the consideration in the contribution
transaction. Financial data for the selected companies were based on
publicly-available documents and research analysts' estimates and financial
data for Price Communications were based on publicly-available documents and
internal estimates of Price Communications' management. This analysis indicated
the following implied mean and median enterprise value as multiples of EBITDA
and per POP values for the selected companies, as compared to the implied
multiples for the contribution transaction:
Summary Implied Contribution
Statistics(1) Transaction Multiples
------------ -------------------------
0% Liquidity 10% Liquidity
Mean Median Discount Discount
---- ------ ------------ -------------
ENTERPRISE VALUES AS MULTIPLES OF:
Latest Twelve Months EBITDA.... 9.1x 9.0x 12.5x 11.7x
2001E EBITDA................... 9.5x 9.9x 13.2x 12.4x
2002E EBITDA................... 8.7x 9.2x 12.4x 11.7x
POPs (2)....................... $332 $375 $ 504 $ 473
- --------
(1) Includes implied Price Wireless metrics
(2) Assumes 3.345 million POPs for Price Wireless.
37
Analysis of selected precedent transactions
UBS Warburg reviewed the implied enterprise values in the following selected
transactions in the cellular telecommunications industry:
Acquiror Target
-------- ------
Triton Cellular Partners,
Rural Cellular Corporation LP
AT&T Wireless Services
Inc./Dobson
Communications American Cellular
Corporation Corporation
Vodafone AirTouch Plc CommNet Cellular Inc.
SBC Communications
Inc./Telefonos de Cellular Communications
Mexico S.A. de C.V. of Puerto Rico, Inc.
Honolulu Cellular
AT&T Corp. Telephone Company
Ameritech Corporation
(Midwest wireless
GTE Corporation assets)
Comcast Cellular
SBC Communications Inc. Corporation
AirTouch Communications,
Vodafone Group Plc Inc.
Vanguard Cellular
AT&T Corp. Systems, Inc.
CCW Acquisition
Corp./Welsh, Carson,
Anderson & Stowe Centennial Cellular Corp.
Dobson Communications
Corporation Sygnet Wireless, Inc.
ALLTEL Corporation 360 Communications Company
American Cellular
Corporation PriCellular Corporation
Rural Cellular Corporation Atlantic Cellular, LP
Blackstone Capital
Partners Merchant
Banking Fund CommNet Cellular Inc.
Price Communications
Wireless, Inc. Palmer Wireless, Inc.
Western Wireless
Corporation Triad Cellular Corporation
AirTouch Communications US West Media Group
UBS Warburg reviewed enterprise values as multiples of (i) latest 12 months
EBITDA and (ii) POPs. UBS Warburg then compared the implied multiples derived
from the selected transactions with corresponding multiples for Price Wireless
based on the value of the consideration in the contribution transaction. The
implied multiples were based on publicly-available documents and reports for
each of the selected transactions. This analysis indicated the following
implied mean and median enterprise value multiples for the selected
transactions, as compared to the implied multiples for the contribution
transaction:
Summary Implied Contribution
Statistics(1) Transaction Multiples
------------- -------------------------
0% Liquidity 10% Liquidity
Mean Median Discount Discount
----- ------ ------------ -------------
ENTERPRISE VALUES AS MULTIPLES OF:
Latest Twelve Months EBITDA.... 14.3 14.2 12.5x 11.7x
POPs (1)....................... $ 264 $ 229 $ 504 $ 473
- --------
(1) Assumes 3.345 million POPs for Price Wireless.
However, UBS Warburg noted that these transactions were announced during the
period from 1997 to 1999, when wireless and telecommunications industry
valuations were at higher levels.
Discounted cash flow analysis
UBS Warburg performed an analysis of the present value of the stand-alone
unlevered, after-tax free cash flows that Price Wireless could generate over
estimated calendar years 2002 through 2006 based on internal estimates of Price
Communications' management. UBS Warburg applied multiples of 8.5x to 10.5x to
Price
38
Wireless' estimated calendar year 2006 EBITDA using discount rates ranging from
9.5% to 11.5%. This analysis indicated an implied enterprise value range for
Price Wireless of approximately $1.255 billion to $1.593 billion, as compared
to the value of the consideration in the contribution transaction estimated to
range from $1.583 billion (with a 10% liquidity discount) to $1.685 billion
(with a 0% liquidity discount).
Miscellaneous
Pursuant to an engagement letter dated December 12, 2001, Price
Communications (i) paid UBS Warburg upon delivery of its opinion a fee of $1
million and (ii) has agreed to pay UBS Warburg a fee of $4 million upon the
closing of the contribution transaction. In addition, Price Communications has
agreed to reimburse UBS Warburg for its reasonable expenses, including
reasonable fees and disbursements of its counsel, and to indemnify UBS Warburg
and related parties against liabilities, including liabilities under federal
securities laws, relating to, or arising out of, its engagement.
Price Communications selected UBS Warburg to serve as financial advisor in
connection with the contribution transaction because UBS Warburg is an
internationally recognized investment banking firm with substantial experience
in similar transactions. UBS Warburg is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities and private placements.
In the past, UBS Warburg has performed investment banking services for
Verizon Communications and Vodafone Group Plc, and in the future may also
perform investment banking services for them or for Verizon Wireless in
connection with the Verizon Wireless IPO and otherwise. In the ordinary course
of business, UBS Warburg, its successors and affiliates may actively trade the
securities of Price Communications, Vodafone Group Plc, Verizon Communications
or VWI for their own accounts and the accounts of their customers and,
accordingly, may at any time hold a long or short position in these securities.
Opinion of Dresdner Kleinwort Wasserstein, Inc.
Dresdner Kleinwort Wasserstein, Inc. ("DrKW") has acted as financial advisor
to the board of directors of Price Communications in connection with the
Verizon transactions. At the meeting of the board of directors of Price
Communications on December 13, 2001, DrKW delivered a financial presentation,
and its oral opinion, subsequently confirmed in writing, to the effect that,
based upon various assumptions and considerations set forth in such opinion,
the consideration to be received in the contribution transaction was fair, from
a financial point of view, to Price Communications.
The full text of the DrKW fairness opinion, which sets forth the assumptions
made, general procedures followed, matters considered and limitations on the
reviews undertaken, is attached hereto as Annex F to this proxy
statement/prospectus. Stockholders are urged to read the DrKW fairness opinion
carefully and in its entirety. The DrKW fairness opinion is based on and
subject to various assumptions described in the opinion and directed only to
the fairness, from a financial point of view, of the consideration to be
received in the contribution transaction by Price Communications and does not
address Price Communications' underlying business decision to effect the
Verizon transactions or any other aspects of the Verizon transactions or
constitute a recommendation to any shareholder as to how such shareholder
should vote with respect to the Verizon transactions. The summary of the DrKW
fairness opinion set forth in this document is qualified in its entirety by
reference to the full text of the DrKW fairness opinion.
The fairness opinion and presentation of DrKW to the board of directors of
Price Communications, in connection with which DrKW was requested to evaluate,
among other things, the fairness from a financial point of view of the
consideration to be received in the contribution transaction by Price
Communications, was only one of many factors taken into consideration by the
board of directors of Price Communications in making its
39
determination to approve the transaction agreement. The terms of the
transaction agreement and the amount of consideration to be received were
determined through negotiations between Price Communications and Verizon
Wireless, and were approved by the board of directors of Price Communications.
Although DrKW provided advice to the board of directors of Price Communications
during the course of these negotiations, the decision to enter into the
transaction agreement was solely that of the board of directors of Price
Communications.
In connection with rendering its fairness opinion, DrKW reviewed and
analyzed, among other things:
. the December 4, 2001 drafts of the transaction agreement and related
limited partnership agreement, exchange agreement, pledge agreement and
lock-up agreements (referred to in this section of the proxy
statement/prospectus as the "agreements"), excluding the exhibits thereto,
in the forms provided to DrKW, and assumed that the final form of such
agreements would not vary in any respect that is material to DrKW's
analyses;
. certain publicly available business and financial information for recent
years and interim periods that DrKW deemed relevant relating to Price
Communications and Verizon Wireless and the industries in which they
operate;
. certain internal financial and operating data and other information
provided to DrKW by the management of Price Communications relating to
Price Communications' and Price Wireless' business, including financial
forecasts, analyses and projections;
. certain internal financial prospects of the assets to be contributed to
the New Limited Partnership by Verizon Wireless including estimates
prepared by the management of Verizon Wireless;
. certain financial and stock market data relating to Price Communications,
and certain other companies in businesses similar to that of Price
Communications; and
. the financial terms of certain comparable business combinations and
acquisition transactions in the wireless communications industry.
DrKW had discussions with the management of Price Communications, Price
Wireless and Verizon Wireless concerning Price Communications', Verizon
Wireless' and the New Limited Partnership's businesses, operations, assets,
financial condition and future prospects. DrKW also performed such other
financial studies, analyses, and investigations and reviewed such other
information as it considered appropriate for purposes of the DrKW fairness
opinion.
In arriving at their fairness opinion, DrKW assumed and relied upon, without
assuming any responsibility for independent verification, the accuracy and
completeness of all of the financial and other information provided or that was
publicly available. With respect to financial forecasts and projections, DrKW
assumed that they had been reasonably prepared in good faith and on bases
reflecting the best currently available estimates and judgments on the part of
the management of Price Communications, Price Wireless or Verizon Wireless, as
the case may be, and as to the future financial performance of Price
Communications or Verizon Wireless, as the case may be. DrKW expresses no
opinion as to, and assumes no responsibility for, such forecasts or projections
or information or the assumptions on which they are based. In addition, DrKW
has not reviewed any of the books and records of Price Communications, Price
Wireless, Verizon Wireless or VWI, or assumed any responsibility for conducting
a physical inspection of the properties or facilities of Price Communications,
Price Wireless, Verizon Wireless or VWI, or for making or obtaining an
independent valuation or appraisal of the assets or liabilities of Price
Communications, Price Wireless, Verizon Wireless or the assets and business to
be contributed to the New Limited Partnership and no such independent valuation
or appraisal was provided to DrKW. DrKW assumed that the contribution
transaction and the exchange of the Preferred Exchangeable Interest for Verizon
Wireless common stock will qualify as tax-free transactions for United States
federal income tax purposes. DrKW expresses no opinion as to the likelihood of
the Verizon Wireless IPO, the price at which common stock will be sold in the
Verizon Wireless IPO, the value of Verizon Wireless common stock issued in the
exchange of the Preferred Exchangeable Interest for Verizon Wireless common
stock or the prices at which Verizon Wireless common stock or Price
Communications common stock will trade in the future. DrKW also assumed that
40
obtaining all regulatory and other approvals and third party consents required
for consummation of the Verizon transactions will not have an adverse impact on
Price Communications, the New Limited Partnership or Verizon Wireless or on the
anticipated benefits of the Verizon transactions and DrKW assumed that the
transactions described in the transaction agreements will be consummated
without waiver or modification of any of the material terms or conditions
contained therein by any party thereto. The DrKW fairness opinion was prepared
and delivered based upon market, economic and other conditions as they existed
and could be evaluated on December 13, 2001, and DrKW assumed no responsibility
to update or revise their opinion based upon circumstances or events occurring
after December 13, 2001.
In addition to the assumptions described above, DrKW has assumed, at the
direction of the board of directors of Price Communications, the following:
. VWI will complete the Verizon Wireless IPO prior to the first anniversary
of the contribution transaction;
. Price Communications will exchange the Preferred Exchangeable Interest for
Verizon Wireless common stock on the first anniversary of the contribution
transaction;
. as of the date of the exchange of the Preferred Exchangeable Interest for
Verizon Wireless common stock, Price Communications' capital account
balance in the New Limited Partnership will be not less than the sum of
$1.15 billion and the full preferred return thereon (determined in
accordance with the limited partnership agreement);
. as of the date of the consummation of the exchange of the Preferred
Exchangeable Interest for Verizon Wireless common stock, Price
Communications will receive an aggregate number of shares of Verizon
Wireless common stock with a trading value not less than the value of
Price Communications' capital account balance in the New Limited
Partnership;
. no claims will be made against Price Communications pursuant to the
indemnification obligations outlined in the agreements; and
. all restrictions on Price Communications' ability to transfer such Verizon
Wireless common stock under the terms of the relevant lock-up agreement,
other than certain volume restrictions set forth therein, lapse on the
270/th/ day after the date of the exchange, other than with respect to
Verizon Wireless common stock with a market value of $75 million pledged
by Price Communications pursuant to the pledge agreement, as to which the
restrictions lapse on the earliest dates permitted by the pledge agreement
and the relevant lock-up agreement.
DrKW further assumed that upon consummation of the contribution transaction
there will be $39.1 million in cash and cash equivalents remaining at Price
Communications after assumption of the outstanding debt obligations of Price
Communications by the New Limited Partnership and based on Price
Communications' estimate that the cost to terminate the H.O. Agreement would be
$32 million. The transaction agreement provides that if the H.O. Agreement is
not amended or modified in such a manner prior to the closing of the
contribution transaction, the initial amount of Price Wireless' capital account
will be reduced by $38 million, or from $1.15 billion to $1.11 billion. Price
Wireless recently informed Verizon Wireless that it does not expect to be
successful in amending the H.O. Agreement prior to the closing of the
contribution transaction; however, DrKW's analysis assumed that the H.O.
Agreement was amended to provide for a termination at the cost of $32 million
to Price Wireless.
In connection with rendering its fairness opinion, DrKW was not requested to
solicit, and did not solicit, interest from any third party with respect to an
acquisition of the shares or assets of Price Communications or Price Wireless.
In delivering the DrKW fairness opinion, representatives of DrKW considered
and discussed various financial and other matters that it deemed relevant.
General valuation considerations deemed to be relevant by DrKW include, without
limitation:
. wireless trends as a whole and in Price Communications' markets;
41
. Price Communications' historical financial and operating performance and
future prospects in the context of its business strategy, market position
and current and prospective competition; and
. Price Communications' size and asset mix.
The following is a summary of the analyses presented by DrKW to the board of
directors of Price Communications at its meeting held on December 13, 2001, in
connection with the delivery of the DrKW fairness opinion. The summary below
includes reference ranges of implied prices per share of Price Communications
common stock based on DrKW's judgment of the data analyzed.
Value of Consideration. DrKW estimated that the consideration to be
received by Price Communications in the contribution transaction subject to the
assumptions indicated above, and taking into account both immediately
realizable components and components to be realized in the future, has
reference points of $19.13 to $21.12 per share of Price Communications common
stock which includes cash and cash equivalents of $39.1 million (the
approximate amount that DrKW estimated will remain at Price Communications
after the contribution transaction) and assumes that at the closing of the
contribution transaction New Limited Partnership will assume Price
Communications outstanding debt obligations. These reference points were
considered in the context of the analyses described below. In determining the
reference points, DrKW assumed that Price Communications' capital account in
the New Limited Partnership would be worth $1.192 billion at the time of the
exchange of the Preferred Exchangeable Interest for Verizon Wireless common
stock and would be exchanged for $1.192 billion shares of Verizon Wireless
common stock. DrKW applied a range of illiquidity discounts of between 0-10% to
the value of the Price Communications' capital account in the New Limited
Partnership since the shares of Verizon Wireless common stock to be received by
the Company upon the exchange are subject to liquidity restrictions. In
addition, DrKW discounted the consideration to be received in the contribution
transaction by a cost of debt rate of 6% which DrKW assumed to be the New
Limited Partnership's cost of debt. This analysis supports the DrKW opinion
because the implied price per share of Price Communications common stock is a
reference range $15.00 to $19.00 based on the analyses discussed below.
Comparable Public Company Trading and Operating Performance. DrKW reviewed,
analyzed and compared certain operating, financial and trading information of
Price Communications to other publicly traded companies in the cellular sector
including Rural Cellular Corp., United States Cellular Corp., Western Wireless
Corp. and Dobson Communications Corp., including POPs, subscribers, revenue and
EBITDA. Multiples for the selected companies were based on closing stock prices
on December 10, 2001. These multiples are set forth below.
Ent, EV Mult. of 2001E EV Mult. of 2002P EV Mult. of 2003P
Value/ -------------------- -------------------- --------------------
Companies Lic.POPs Subs Revenue EBITDA Subs Revenue EBITDA Subs Revenue EBITDA
- --------- -------- ------ ------- ------ ------ ------- ------ ------ ------- ------
Rural Cellular.. $388 $3,116 4.7x 10.5x $2,778 4.4x 10.2x $2,519 4.2x 9.6x
U.S. Cellular... 156 1,189 2.3 6.9 1,072 2.1 6.3 978 2.0 6.1
Western Wireless 411 3,408 4.4 11.2 3,044 3.7 11.1 2,760 3.8 8.4
Dobson Comm..... 419 2,484 3.1 7.8 2,268 3.1 7.5 1,996 2.8 6.4
Based on the foregoing multiples and in DrKW's judgment, a public company
trading analysis, yielded an implied equity value range of $12.68 to $16.31 per
share of Price Communications common stock. The equity value range using public
company trading prices are not based on a purely mathematical analysis, but
also take into consideration qualitative analysis of each publicly traded
company.
Precedent Merger and Acquisition Transactions. DrKW reviewed and analyzed
selected merger and acquisition transactions involving other wireless service
providers that it deemed relevant. Among other factors, DrKW indicated that
while there have been a number of recent cellular acquisitions, acquisition
values paid in specific transactions have historically been affected by several
factors including the transaction structure, the
42
target's operating performance and geographic mix of assets, the existence of
controlling or major shareholders, the strategic rationale for the transaction
and the existence and implied valuation of non cellular assets in the target.
DrKW reviewed and analyzed the following selected transactions involving
companies in the cellular industry since January 1, 1999 that it deemed
relevant (listed by acquiror/sellor):
. AT&T Wireless Services Inc./Telecorp PCS Inc.
. Verizon Wireless Services Inc./Centennial Cellular/*/
. Verizon Wireless/Roseville Communications Company/*/
. Western Wireless Corp./Centennial Cellular Corp./*/
. AT&T Wireless Services Inc./Verizon Communications/*/
. AT&T Wireless Services Inc./Wireless One Networks
. Rural Cellular Corp./Triton Cellular Inc.
. AT&T Corp. and Dobson Communications Corp./American Cellular Corp.
. Vodafone Airtouch/CommNet Cellular Inc.
. ALLTEL Corp./Liberty Cellular Inc.
. SBC Communications Inc. and Telefonos de Mexico, S.A. DE C.V./Cellular
Communications of Puerto Rico Inc.
. AT&T Corp./Honolulu Cellular Telephone Company
. GTE Corp. and Davenport Cellular/Ameritech Corp./*/
. SBC Communications/Comcast Cellular Corp.
. Vodafone Group PLC /Airtouch Communications Inc.
- --------
*Indicates acquisitions of selected properties of such seller.
DrKW's analysis of the selected acquisition transactions yielded an implied
price range of $17.22-$22.66 per share of Price Communications common stock.
Because the market conditions and circumstances surrounding each of the
transactions analyzed were specific to each transaction, and because of the
inherent differences between the businesses, operations, and market conditions
of Price Communications and Verizon Wireless and the acquired businesses
analyzed, DrKW believed it was inappropriate to, and therefore did not, rely
solely on quantitative results of the analysis and, accordingly, also made
qualitative judgments concerning differences between the characteristics of
these transactions and the transaction that would affect the acquisition values
of Price Communications and the acquired companies. Also, given the relatively
mature nature of Price Communications' business, DrKW relied more heavily on
historic cellular acquisitions than on historic PCS acquisitions.
Discounted Cash Flow Analysis. DrKW performed discounted cash flow analyses
based on the projections of Price Communications' management, and calculated
present values per share of Price Communications common stock as of January 1,
2002. In performing its discounted cash flow analysis, DrKW considered various
different assumptions that it deemed appropriate. Based on a review with Price
Communications' management of Price Communications' prospects and risks
associated with the business of Price Communications, DrKW applied valuation
parameters that it deemed appropriate to the projections prepared by Price
Communications' management. DrKW believed it appropriate to utilize discount
rates of 10.0 -12.0% based on a weighted average cost of capital analysis and
terminal valuations based on multiples of 2005 EBITDA of 8.0x to 10.0x based on
a
43
comparable publicly traded companies analysis. Based on the foregoing, in
DrKW's judgment, a discounted cash flow analysis yielded a summary reference
range of implied prices of $14.06 to $18.01 per share of Price Communications
common stock.
DrKW considered but did not include a premiums paid analysis due to the fact
that the Verizon transaction has been announced and rumored in the market since
November 15, 2000.
DrKW concluded, based on the full range of its analyses, that the
consideration to be received by Price Communications in the contribution
transaction, subject to the assumptions described above, was fair, from a
financial point of view, to Price Communications.
In connection with rendering its fairness opinion to the board of directors
of Price Communications, DrKW performed a variety of financial analyses, the
material portions of which are summarized above. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and therefore,
such an opinion is not necessarily susceptible to partial analysis or summary
description. In arriving at its opinion DrKW did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, DrKW believes that its analyses must be considered as a whole and
that selecting portions of such analyses and the factors considered therein,
without considering all such analyses and factors, could create an incomplete
view of the process underlying its analyses set forth in the DrKW fairness
opinion. With regard to the comparable public company analysis and the
comparable transactions analysis summarized above, DrKW selected comparable
public companies on the basis of various factors; however, no public company or
transactions utilized as a comparison is identical to Price Communications,
Verizon Wireless or the Verizon transactions. Accordingly, any analysis of
publicly traded comparable companies or comparable business combinations is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies involved and other factors that could affect the acquisition or
public trading value of the comparable companies and transactions to which
Price Communications and the contribution transaction are being compared. The
range of valuation for any particular analysis should not be taken to be the
view of DrKW of the actual value of Price Communications and none of DrKW nor
any other person assumes responsibility for their accuracy.
DrKW is an investment banking firm engaged, among other things, in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bidding, and secondary
distributions of listed and unlisted securities and private placements. DrKW
was selected to render the DrKW fairness opinion because it is a nationally
recognized investment banking firm and because of its experience in the
valuation of companies, including companies in the wireless industry. In the
ordinary course of its business, DrKW may actively trade the debt and equity
securities of Price Communications, VWI, Verizon Wireless, Vodafone and Verizon
Communications for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
DrKW acted as a co-managing underwriter on two of Price Communications' past
securities offerings.
In the past DrKW has rendered certain investment banking services to Price
Communications for which it has been paid fees. Pursuant to an engagement
letter dated December 7, 2001, Price Communications has paid DrKW a fee of
$100,000 upon execution of the engagement letter and has agreed to pay an
additional $300,000 upon the earlier to occur of (i) the date on which DrKW
advises the board of directors of Price Communications that DrKW is prepared to
render its opinion and (ii) the date on which DrKW advises the board of
directors of Price Communications that, having completed the performance of its
undertakings in the engagement letter, DrKW is unable to render its opinion.
Additionally, Price Communications has agreed to reimburse DrKW for reasonable
out-of pocket expenses, including, without limitation, reasonable fees and
disbursements of DrKW's legal counsel and agreed to indemnify DrKW and certain
related persons against certain liabilities, including liabilities under the
federal securities laws, related to or arising out of its engagement.
44
Opinion of Deutsche Banc Alex. Brown Inc.
Deutsche Banc Alex. Brown Inc., or DBAB, has acted as co-financial advisor
to Price Communications in connection with the contribution transaction. At the
December 13, 2001 meeting of the Price Communications board of directors, DBAB
delivered its oral opinion, subsequently confirmed in writing as of the same
date, to the Price Communications board of directors to the effect that, as of
the date of the opinion, based upon and subject to the assumptions made,
matters considered and limits of the review undertaken by DBAB, the
consideration to be received in the contribution transaction was fair, from a
financial point of view, to Price Communications.
The full text of DBAB's written opinion, dated December 13, 2001, which
discusses, among other things, the assumptions made, matters considered and
limits on the review undertaken by DBAB in connection with its opinion, is
attached as Annex G to this proxy statement/prospectus and is incorporated into
this document by reference. Price Communications shareholders are urged to read
DBAB's opinion in its entirety. The following summary, which is qualified in
its entirety by reference to the full text of DBAB's opinion, discusses the
material terms of the opinion.
In connection with DBAB's role as co-financial advisor to Price
Communications, and in arriving at its opinion, DBAB has, among other things,
reviewed publicly available financial information and other information
concerning Price Wireless and Verizon Wireless and internal analyses and other
information furnished to it by Price Communications, Price Wireless and Verizon
Wireless. DBAB also held discussions with the members of the senior management
of Price Communications and Verizon Wireless regarding the prospects of the
assets and businesses to be contributed to New Limited Partnership. In
addition, DBAB has:
. compared financial information for Price Wireless with similar financial
and stock market information for selected companies whose securities are
publicly traded;
. reviewed the financial terms of selected recent business combinations
which it deemed comparable in whole or in part;
. reviewed drafts of the transaction agreement, limited partnership
agreement, exchange agreement, pledge agreement, lock-up agreements and
other related documents (referred to in this section of this proxy
statement/prospectus as the "agreements"); and
. performed other studies and analyses and considered other factors as it
deemed appropriate.
In preparing its opinion, DBAB did not assume responsibility for the
independent verification of, and did not independently verify, any information,
whether publicly available or furnished to it, concerning Price Wireless,
Verizon Wireless or the assets and businesses to be contributed to New Limited
Partnership, including, without limitation, any financial information,
forecasts or projections, considered in connection with the rendering of its
opinion. Accordingly, for purposes of its opinion, DBAB assumed and relied upon
the accuracy and completeness of all such information.
DBAB did not conduct a physical inspection of any of the properties or
assets, and did not prepare or obtain any independent evaluation or appraisal
of any of the assets or liabilities of Price Wireless, Verizon Wireless or the
assets and businesses to be contributed to New Limited Partnership. DBAB has
assumed that the financial forecasts and projections made available to DBAB and
used in its analysis have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Price Wireless
as to the matters covered by them. In rendering its opinion, DBAB expressed no
view as to the reasonableness of these forecasts and projections or the
assumptions on which they are based. DBAB's opinion was necessarily based upon
economic, market and other conditions as in effect on, and the information made
available to DBAB as of, the date of its opinion. In rendering its opinion,
DBAB assumed, with the consent of Price Communications, that:
. at the closing of the contribution transaction, Price Wireless will
receive a New Limited Partnership limited partnership interest with an
initial capital account balance of not less than $1.15 billion,
45
. after taking into account the value of the public indebtedness (net of
cash contributions to be made) of Price Wireless to be paid by New Limited
Partnership, the consideration to be received by Price Wireless at the
closing of the contribution transaction will have a stated value of $1.7
billion,
. the Verizon Wireless IPO will be successfully completed prior to the first
anniversary of the contribution transaction,
. the exchange of the Preferred Exchangeable Interest for Verizon Wireless
common stock (referred to in this section of this proxy
statement/prospectus as the "Verizon Wireless exchange") will take place
on the first anniversary of the contribution transaction,
. as of the date of the Verizon Wireless exchange, the capital account
balance of Price Wireless in New Limited Partnership will be not less than
$1.15 billion plus the full preferred return (assumed to be 3.6% per
annum) provided in the limited partnership agreement (referred to in this
section of this proxy statement/prospectus as the "exchange value"),
. the shares of Verizon Wireless common stock received in connection with
the Verizon Wireless exchange will, as at the date of the exchange, have
an intrinsic value at least equal to the exchange value,
. no claims will be made against Price Wireless pursuant to the
indemnification obligations set forth in the agreements, and
. all restrictions on the ability of Price Wireless to transfer Verizon
Wireless common stock under the terms of the relevant lock-up agreement,
other than certain volume restrictions, lapse on the 270th day after the
date of the Verizon Wireless exchange, other than with respect to Verizon
Wireless common stock with a market value on the date of the exchange of
$75,000,000 pledged by Price Wireless pursuant to the pledge agreement, as
to which the restrictions lapse on the earliest dates permitted by the
pledge agreement and the relevant lock-up agreement.
DBAB did not express any opinion on the price at which Verizon Wireless
common stock may trade before, following, or at the time of the Verizon
Wireless exchange.
In rendering its opinion, DBAB also assumed that, in all respects material
to its analysis,
. the representations and warranties of Price Communications, Price
Wireless, Verizon Wireless and the other parties to the agreements are
true and correct,
. Price Communications, Price Wireless, Verizon Wireless and the other
parties to the agreements will each perform all of the covenants and
agreements to be performed by it under the agreements,
. all conditions to the obligation of each of Price Communications,
Price Wireless, Verizon Wireless and the other parties to the
agreements to consummate the contribution transaction will be
satisfied without any waiver of them,
. all material governmental, regulatory or other approvals and consents
required in connection with the consummation of the transaction, the
Verizon Wireless IPO and the exchange will be obtained, and
. in connection with obtaining any necessary governmental, regulatory or
other approvals and consents, or any amendments, modifications or
waivers to any agreements, instruments or orders to which either Price
Communications or Price Wireless is a party or subject or by which it
is bound, no limitations, restrictions or conditions will be imposed
or amendments, modifications or waivers made that would have a
material adverse effect on Price Communications or Price Wireless or
materially reduce the contemplated benefits of the transaction to
Price Communications and Price Wireless.
In addition, DBAB has been advised by Price Communications, and accordingly
has assumed for purposes of its opinion, that the contribution transaction and
the Verizon Wireless exchange will be tax-free to Price Wireless and Price
Communications.
46
In connection with DBAB's role as co-financial adviser to Price
Communications and in arriving at its opinion, DBAB was not requested to
solicit, and did not solicit, interest from any party with respect to an
acquisition of the shares or assets of Price Communications or Price Wireless.
Below is a brief summary of the material financial analyses performed by
DBAB in connection with its opinion. This summary of financial analyses
includes information presented in a tabular format. In order to understand
fully the financial analyses used by DBAB, the tables must be read with the
text accompanying the analyses, because the tables alone are not a complete
description of the financial analyses.
Value of Consideration. In determining the value of the consideration to be
received in the contribution transaction, DBAB adjusted the stated value of the
consideration at closing of $1.7 billion to account for a number of factors,
including the timing of the Verizon Wireless exchange and the lock-up
restrictions to which the Verizon Wireless common stock to be received in the
exchange would be subject. To reflect the risk associated with the inability of
Price Wireless to sell the Verizon Wireless common stock received by it in the
Verizon Wireless exchange for the duration of the lock-up period, DBAB applied
a discount ranging from 5% to 15% to the portion of the exchange value that
will be subject only to the 270 day lock-up, and a discount of 15% to 25% to
the portion of the exchange value that will be subject to the pledge. DBAB then
discounted the resulting amounts back to the date of the contribution
transaction at a cost of debt of 6%, the assumed cost of debt of New Limited
Partnership as a subsidiary of Verizon Wireless, to account for the time period
between the contribution transaction and the exchange. As a result of these
adjustments, DBAB estimated that the adjusted value of the consideration to be
received in the contribution transaction is between $1.503 and $1.612 billion
on a total enterprise value basis, and $17.22 to $19.20 on a per share of Price
Communications stock basis.
Historical Stock Performance. DBAB reviewed and analyzed recent and
historical market prices and trading volume for Price Communications common
stock and compared such market prices to certain stock market and industry
indices.
Analysis of Selected Publicly Traded Companies. DBAB compared certain
financial information and commonly used valuation measurements for Price
Wireless to corresponding information and measurements for a group of publicly
traded regional cellular companies consisting of the following:
. Alltel Corporation (adjusted to reflect the wireless business only)
. Dobson Communications Corporation
. Rural Cellular Corporation
. United States Cellular Corporation
. Western Wireless Corporation
The financial information and valuation measurements included, among other
things:
. ratios of enterprise value to last twelve months' (or LTM) EBITDA,
projected 2001 EBITDA, and projected 2002 EBITDA, and
. the ratio of enterprise value to wireless subscribers.
47
The enterprise value of a company is its common equity market value plus its
debt and less its cash. The EBITDA of a company is its earnings before interest
expense, income taxes, depreciation and amortization. To calculate the trading
multiples for Price Communications and the comparable companies, DBAB used
publicly available information concerning historical and projected financial
performance, including published historical financial information. DBAB's
analysis of the comparable companies yielded the following multiple ranges and
implied values:
Range of Implied Range of Implied
Enterprise Values Equity Values of Price
of Price Communications
Communications Wireless per Price
Mean Median Range Wireless ($MM) Communications share
------ ------ ------------ ----------------- ----------------------
Enterprise
Value to: LTM EBITDA.. 9.9x 10.8x 9.5-11.5x $1,258-$1,523 $12.79-$17.58
2001E EBITDA 9.6x 10.5x 9.0x-11.0x $1,153-$1,409 $10.90-$15.53
2002E EBITDA 8.9x 10.0x 8.5-10.5x $1,151-$1,422 $10.86-$15.76
Last Quarter
Subscribers. $2,727 $2,962 $2650-$3,050 $1,494-$1,719 $17.06-$21.13
This analysis resulted in an average range of implied values per share of
Price Communications stock of $12.90 to $17.50, compared to the adjusted value
of the consideration to be received in the transaction of $17.22 to $19.20 per
share of Price Communications stock.
None of the comparable companies is identical to Price Communications or
Price Wireless. Accordingly, DBAB believes the analysis of publicly traded
comparable companies is not simply mathematical. Rather, it involves complex
considerations and qualitative judgments, reflected in DBAB's opinion,
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
values of the comparable companies.
Analysis of Selected Precedent Transactions. DBAB reviewed the financial
terms, to the extent publicly available, of a number of transactions since
January 1, 1998 in the US cellular market (excluding transactions in the PCS
sector which DBAB deemed to be less relevant), including:
Acquiror Target Announcement Date
-------- ------ -----------------
American Cellular Corp PriCellular Corp. March 9, 1998
CCW Acquisition Corp Centennial Cellular Corp. July 2, 1998
AT&T Corp Vanguard Cellular Systems, Inc. October 5, 1998
Vodafone Group Plc AirTouch Communications, Inc. January 15, 1999
Comcast Cellular Corp SBC Communications January 20, 1999
AT&T Wireless Services Inc. and
Dobson Communications Corporation American Cellular Corp. October 6, 1999
Rural Cellular Corporation Triton Cellular Partners, LP November 8, 1999
AT&T Wireless Services Inc Verizon Communications June 19, 2000
NTT DoCoMo AT&T Wireless Services Inc. November 30, 2000
DBAB calculated various financial multiples on certain publicly available
information for each of the precedent transactions and compared them to
corresponding financial multiples and premiums over market value for the
contribution transaction, based on the adjusted value of the consideration to
be received in the contribution transaction. DBAB then determined the implied
equity value per share of Price Communications stock based on the financial
multiples for the precedent transactions. This analysis yielded a range of
implied values per share of Price Communications stock of $17.55 to $24.43.
However, due to the fact that many of these precedent transactions occurred at
a time when the wireless and overall telecommunications industry valuations
were at historical highs, DBAB considered the implied multiples from historical
transactions to be less relevant due to the devaluation of the industry over
the past two years.
48
Because the reasons for, and circumstances surrounding, each of the
precedent transactions analyzed were so diverse, and due to the inherent
differences between the operations and financial conditions of Price Wireless
and the companies involved in the precedent transactions, DBAB believes that a
comparable transaction analysis is not simply mathematical. Rather, it involves
complex considerations and qualitative judgments, reflected in DBAB's opinion,
concerning differences between the characteristics of these transactions and
the contribution transaction that could affect the value of the subject
companies and businesses and Price Wireless.
Discounted Cash Flow Analysis. DBAB performed a discounted cash flow
analysis for Price Wireless. DBAB calculated the discounted cash flow values
for Price Wireless as the sum of the net present values of (i) the estimated
future cash flow that Price Wireless will generate for the years 2002 through
2006, plus (ii) the terminal value of Price Wireless at the end of such period.
The estimated future cash flows were based on financial projections for the
years 2002 through 2006 prepared by Price Communications management. The
terminal values were calculated based on projected EBITDA for 2006 and a range
of multiples between 8.5x and 10.5x. DBAB used discount rates ranging from
9.00% to 11.00%. DBAB selected these discount rates based on its judgment of
the estimated weighted average cost of capital of comparable companies, and
selected the multiples based on its review of the trading characteristics of
the common stock of comparable companies. This analysis indicated a range of
implied enterprise value of $1,402 to $1,637 million dollars and equity values
of $15.40 to $19.64 per share for Price Wireless.
General. The preceding summary describes the analyses and factors that DBAB
deemed material, but is not a comprehensive description of all analyses
performed and factors considered by DBAB in connection with preparing its
opinion. The preparation of a fairness opinion is a complex process involving
the application of subjective business judgment in determining the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not readily
susceptible to summary description. DBAB believes that its analyses must be
considered as a whole and that considering any portion of its analyses and of
the factors considered without considering all analyses and factors could
create a misleading view of the process underlying the opinion. In arriving at
its fairness determination, DBAB did not assign specific weights to any
particular analyses.
In conducting its analyses and arriving at its opinions, DBAB utilized a
variety of generally accepted valuation methods. The analyses were prepared
solely for the purpose of enabling DBAB to provide its opinion to the Price
Communications board of directors as to the fairness to Price Communications of
the consideration to be received in the contribution transaction and do not
purport to be appraisals of businesses or securities or necessarily reflect the
prices at which businesses or securities actually may be sold, which are
inherently subject to uncertainty. In connection with its analyses, DBAB made,
and was provided by Price Communications management with, numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Price Communications
or Verizon Wireless. Analyses based on estimates or forecasts of future results
are not necessarily indicative of actual past or future values or results,
which may be significantly more or less favorable than suggested by these
analyses. Because these analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of Price
Communications, Verizon Wireless or their respective advisors, neither Price
Communications nor DBAB nor any other person assumes responsibility if future
results or actual values are materially different from these forecasts or
assumptions.
The terms of the transactions were determined through negotiations between
Price Communications and Verizon Wireless and were approved by the Price
Communications board of directors. The decision of Price Communications to
enter into the Verizon transactions was solely that of the Price Communications
board of directors. As described above, the DBAB opinion was only one of a
number of factors taken into consideration by the Price Communications board of
directors in making its determination to approve the Verizon transactions.
DBAB's opinion was provided to the Price Communications board of directors to
assist it in connection with its consideration of the contribution transaction
and does not constitute a recommendation to any holder of Price Communications
common stock as to how to vote.
49
Fee Arrangements with DBAB. Price Communications selected DBAB as
co-financial advisor in connection with the contribution transaction based on
DBAB's qualifications, expertise, reputation and experience in mergers and
acquisitions. Price Communications retained DBAB pursuant to an engagement
letter dated November 8, 2000, which was confirmed as of December 10, 2001. As
compensation for DBAB's services in connection with the Verizon transactions,
Price Communications agreed to pay DBAB a cash fee of $400,000, payable upon
the delivery of DBAB's fairness opinion, or upon DBAB advising that it is
unable to render a fairness opinion. Regardless of whether the contribution
transaction is consummated, Price Communications has agreed to reimburse DBAB
for reasonable fees and disbursements of DBAB's counsel and all of DBAB's
reasonable travel and other out-of-pocket expenses incurred in connection with
the Verizon transactions or otherwise arising out of the retention of DBAB
under the engagement letter. Price Communications has also agreed to indemnify
DBAB and related persons to the full extent lawful against some liabilities,
including some liabilities under the federal securities laws arising out of its
engagement or the Verizon transactions.
DBAB is an internationally recognized investment banking firm experienced in
providing advice in connection with mergers and acquisitions and related
transactions. DBAB and its affiliates have provided commercial banking and
investment banking services to Price Communications and Verizon Communications
in the past, for which it has received compensation. DBAB and its affiliates
may actively trade securities of Price Communications, Verizon Communications
or Vodafone Group Plc for their own account or the account of their customers
and, accordingly, may from time to time hold a long or short position in those
securities.
50
THE TRANSACTION AGREEMENT
The following is a brief summary of certain provisions of the transaction
agreement. The summary is qualified in its entirety by reference to the
complete text of the transaction agreement, which is incorporated by reference
and attached to this proxy statement/prospectus as Annex A.
Contemplated Transactions
Pursuant to the terms of the transaction agreement, the following
transactions are contemplated to occur:
. Price Wireless will contribute substantially all of its assets and
approximately $150 million in cash to New Limited Partnership in exchange
for the Preferred Exchangeable Interest.
. Subsidiaries of Verizon Wireless will contribute an aggregate 85%
partnership interest in the Orange County-Poughkeepsie Limited
Partnership, certain FCC licenses, a $500 million promissory note
receivable and approximately $250 million in cash to New Limited
Partnership in exchange for a managing general partner interest and a
limited partner interest in New Limited Partnership.
. New Limited Partnership will assume certain liabilities of Price Wireless
relating to its business, including such liabilities as arise under Price
Wireless' 11 3/4% Senior Subordinated Notes due 2007 and 9 1/8% Senior
Secured Notes due 2006.
. New Limited Partnership will conduct a tender offer to acquire all of the
11 3/4% Senior Subordinated Notes due 2007 of Price Wireless. In
connection therewith, New Limited Partnership will solicit consents to
amend the indenture governing the notes to eliminate substantially all of
their restrictive covenants. If consents related to a majority of such
notes are not tendered in the consent solicitation, Price Wireless will,
at the cost of New Limited Partnership, effect a covenant defeasance with
respect to such notes.
. Price Wireless will, at the cost of New Limited Partnership, effect a
covenant defeasance and redeem all of the 9 1/8% Senior Secured Notes due
2006.
. New Limited Partnership will borrow $350 million from an independent
lender. This loan will be non-recourse to the partners of New Limited
Partnership and will have a term of at least five years from the
contribution transaction.
As a result of the above transactions, and after taking account of the
adjustment relating to the agreement between Price Wireless and H.O. Systems,
Inc. described under "--Principal Covenants -- Amendment to H.O. Systems
Agreement" below, the initial amount of Price Wireless' capital account in New
Limited Partnership is expected to be approximately $1.11 billion.
The Closing
The above transactions are expected to be consummated during the second
quarter of 2002, subject to the approval of the Verizon transactions by the
shareholders of Price Communications at the annual meeting and the satisfaction
or waiver (to the extent legally permissible) of all other conditions to
closing of the contribution transaction by such time.
Representations and Warranties
The transaction agreement contains a number of reciprocal representations
and warranties of Verizon Wireless and Price Communications as to, among other
things, due formation and good standing, authority to enter into the
contemplated transactions, required consents and filings with government
entities, absence of conflicts with organizational documents and material
agreements, consents, financial statements, litigation, title to contributed
assets, absence of certain changes, undisclosed liabilities, finder's fees and
FCC matters. Representations and warranties made solely by Price Communications
relate to material contracts, compliance with laws and court orders, subscriber
accounts, intellectual property, insurance coverage, licenses and permits,
environmental compliance, employee matters, SEC filings, and disclosure
documents, and include an acknowledgment of the absence of any express or
implied representation or warranty beyond those expressly set
51
forth in the transaction agreement, including with respect to the timing of any
Verizon Wireless IPO. Representations and warranties made solely by Verizon
Wireless relate to its contributions to New Limited Partnership.
Many of these representations and warranties are qualified by materiality or
material adverse effect and all such representations and warranties survive the
contribution transaction for a period of at least 18 months.
Principal Covenants
Conduct of Business
Under the terms of the transaction agreement, Price Communications agreed
that, until the closing of the contribution transaction, it will conduct its
business in the ordinary course consistent with past practice, in the public
interest, convenience and necessity and in compliance with applicable laws. In
addition, Price Communications also agreed that, subject to certain exceptions,
unless consented to by Verizon Wireless or otherwise permitted under the
transaction agreement, Price Communications will comply with certain specific
restrictions relating to the operation of its business, including restrictions
relating to the following:
. adjusting or modifying the terms of any accounts receivable or accounts
payable other than in the ordinary course of business;
. disposing of any of the assets to be contributed to New Limited
Partnership, other than in the ordinary course of business;
. entering into any business other than the cellular business of Price
Wireless;
. incurring capital expenditures for additions or improvements to property,
plant and equipment in excess of $25 million;
. incurring long term liabilities;
. declaring dividends or acquiring any of its capital stock if such action
would affect its ability to consummate the contribution transaction;
. merging or consolidating or acquiring a material amount of assets;
. modifying or not performing under certain contracts; and
. activating customers on certain service plans or changing the form of
customer activation agreements.
Verizon Wireless and its subsidiaries have agreed that, until the closing of
the contribution transaction, they shall use their best efforts to cause the
business of the Orange County-Poughkeepsie Limited Partnership to be conducted
in the ordinary course consistent with past practice.
Cooperation in Transitional Arrangements
Price Communications has agreed to cooperate with New Limited Partnership in
establishing network conversion and switching conversion arrangements and
implementing other transitional arrangements reasonably requested by New
Limited Partnership.
Price Communications Noncompete
Under the terms of the transaction agreement, Price Communications has
agreed, subject to certain exceptions, that it shall not:
. at any time prior to the third anniversary of the contribution
transaction, engage in any business which would compete with the business
of Price Wireless as it currently exists within the areas where the Price
52
Wireless business currently operates (provided that Price Communications
may acquire a diversified company having not more than 10% of its sales
attributable to a competing business);
. at any time prior to December 18, 2003, employ or solicit any employee of
the business of Price Wireless contributed to New Limited Partnership; or
. at any time prior to the third anniversary of the contribution
transaction, solicit any subscribers of the Price Wireless business.
Verizon Wireless Noncompete
Under the terms of the transaction agreement, Verizon Wireless and its
subsidiaries have agreed that, until the earlier to occur of (1) the end of the
60-day period during which Price Communications is entitled to elect to
exchange the Preferred Exchangeable Interest for Verizon Wireless common stock
and (2) the date on which Price Communications or its subsidiaries no longer
have a partnership interest in New Limited Partnership, they shall not (other
than through New Limited Partnership):
. engage in the mobile wireless business in any of the areas in which the
Price Wireless business currently operates; or
. engage in the business of providing cellular service at the wholesale
level in Orange County, New York or Poughkeepsie, New York.
Notwithstanding this restriction, however, Verizon Wireless or its
subsidiaries may acquire and retain a business that includes any of the above
competing businesses if (1) the competing business represents less than 10% of
the sales of the acquired business, (2) the competing business is contributed
to New Limited Partnership, (3) contribution of the competing business to New
Limited Partnership requires the approval of Price Wireless and Price Wireless
fails to provide such approval, or (4) the competing business is disposed of
within one year.
No Solicitation by Price Communications
Price Communications and its subsidiaries have agreed that they and their
officers, directors, affiliates, related entities, agents or representatives
will not solicit, initiate, knowingly encourage, conduct or engage in any
substantive discussions, or enter into any agreement or understanding, with any
other person or entity regarding an alternative acquisition, investment or
joint venture transaction involving Price Communications, any of its
subsidiaries, or the business of Price Wireless. In addition, Price
Communications has agreed not to disclose any nonpublic information relating to
the business of Price Wireless or afford access to its properties, books or
records, to any such person.
The board of directors of Price Communications is expressly permitted,
however, to engage in discussions or negotiations with any third party that has
made a proposal which is superior to the Verizon transactions, to furnish
nonpublic information to any such third party, and fail to make, withdraw or
modify in a manner adverse to New Limited Partnership its recommendation of the
Verizon transactions, if all of the following conditions are met:
. the board of directors of Price Communications determines in good faith,
on the basis of written advice from its outside legal counsel, that it
must take such action to comply with its fiduciary duties under applicable
law;
. Price Communications shall have delivered to New Limited Partnership a
prior written notice advising that it intends to take such action; and
. Price Communications shall have notified New Limited Partnership of the
superior proposal promptly after receipt, shall identify the third party
and the terms of such proposal, and shall keep New Limited Partnership
fully informed thereafter.
53
Amendment to H.O. Systems Agreement
Under the terms of the transaction agreement, Price Wireless agreed to use
its commercially reasonable efforts to negotiate an amendment to the agreement
between Price Wireless and H.O. Systems, Inc. (see "The Shareholders'
Meeting--Related Party Transactions") necessary to terminate such agreement on
the second anniversary of the contribution transaction. Pursuant to the
transaction agreement, if the agreement with H.O. Systems, Inc. is not so
amended, the initial amount of Price Wireless' capital account in New Limited
Partnership, specified in the transaction agreement to be $1.15 billion, shall
be reduced by $38 million. Price Wireless has recently informed Verizon
Wireless that it does not expect to be successful in amending the agreement
with H.O. Systems, Inc. prior to the contribution transaction. Accordingly, the
initial amount of Price Wireless' capital amount at the time of the
contribution transaction is expected to be approximately $1.11 billion.
Employee Matters
New Limited Partnership or its affiliates has agreed that all employees who
accept an offer of employment from New Limited Partnership or its affiliates
will receive compensation and benefits that are, in the aggregate,
substantially comparable to the compensation and benefits provided to similarly
situated employees of Verizon Wireless or its affiliates.
Except as relating to the Worker Adjustment Retraining Notification Act and
specified other liabilities, Price Communications will retain all
employment-related liabilities and obligations relating to excluded employees.
Verizon Wireless will reimburse 50% of (1) any severance or stay bonus paid by
Price Communications in connection with specified Price Wireless business
employees, and (2) in the case of employees whose employment is not transferred
to New Limited Partnership or its affiliates but who (at the request of New
Limited Partnership) remain at Price Communications for up to 90 days after the
contribution transaction, any severance, stay bonus or salary liability
incurred by Price Communications.
Price Wireless will pay all unpaid accrued bonuses payable to any
transferring Price Wireless business employees.
Conditions to Completion of the Transaction
Each party's obligation to complete the transactions contemplated by the
transaction agreement is subject to the satisfaction of the following
conditions:
. the approval of the shareholders of Price Communications;
. the expiration or termination of any applicable antitrust waiting period;
. the absence of any legal prohibition to completion of the transactions;
. the execution and delivery of the limited partnership agreement of New
Limited Partnership by the parties thereto; and
. the receipt of all consents and waivers required under the terms of
Verizon Wireless' credit agreement.
The obligation of each of Verizon Wireless and New Limited Partnership to
complete the transactions contemplated by the transaction agreement is subject
to the satisfaction of additional conditions, including:
. the absence of any indebtedness for borrowed money or other long-term
liabilities of the Price Wireless business other than its outstanding
senior secured notes and senior subordinated notes;
. the absence of an occurrence having, or expected to have, a material
adverse effect on the Price Wireless business (other than such material
adverse effects arising out of business conditions or other matters
generally affecting the wireless telecommunications industry);
. Price Communications and its subsidiaries shall have performed in all
material respects all of their obligations under the transaction
agreement, and all of the representations and warranties of Price
Communications and its subsidiaries shall be true and correct as of the
contribution transaction (except as would not have a material adverse
effect);
54
. the receipt by the New Limited Partnership of legal opinions of counsel to
Price Communications relating
. to, among other things, authority and execution, litigation and FCC
matters;
. the receipt by Price Communications of all required consents,
authorizations and approvals in form and substance reasonably satisfactory
to New Limited Partnership;
. New Limited Partnership shall have obtained title insurance on the real
property contributed to New Limited Partnership by Price Wireless; and
. the receipt of all required FCC approvals relating to the contribution of
assets by Verizon Wireless to New Limited Partnership.
The obligation of Price Communications and its subsidiaries to complete the
transactions contemplated by the transaction agreement is subject to the
satisfaction of additional conditions, including:
. Verizon Wireless and New Limited Partnership shall have performed in all
material respects all of their obligations under the transaction
agreement, and all of the representations and warranties of Verizon
Wireless and New Limited Partnership shall be true and correct as of the
contribution transaction (except as would not have a material adverse
effect);
. the absence of any adverse litigation or government action that seeks to
restrain, prohibit or otherwise interfere with the consummation of the
transactions;
. the absence of any statute, rule, regulation, injunction, order or decree
that could interfere with the consummation of the transactions;
. the receipt by Price Communications of a legal opinion with respect to
certain matters from counsel to Verizon Wireless, Verizon Communications
and VWI;
. confirmation by counsel to Price Communications that such counsel's tax
opinion has not been withdrawn due to certain changes in law;
. the receipt by New Limited Partnership of all required consents,
authorizations or approvals in form and substance satisfactory to Price
Communications;
. the receipt of all required FCC approvals relating to the contribution of
assets by Verizon Wireless to New Limited Partnership; and
. the absence of an occurrence having, or expected to have, a material
adverse effect on New Limited Partnership's ability to allocate profits to
Price Wireless' capital account pursuant to the limited partnership
agreement (other than such material adverse effects arising out of
business conditions or other matters generally affecting the wireless
telecommunications industry).
Termination
The transaction agreement may be terminated at any time prior to the
contribution transaction (notwithstanding approval of the Verizon transactions
by the shareholders of Price Communications):
. by mutual written agreement of Verizon Wireless and Price Communications;
or
. by either Verizon Wireless or Price Communications if:
-- the contribution transaction has not been consummated on or before
August 31, 2002;
-- consummation of the contribution transaction is illegal or prohibited,
or if consummation of the contribution transaction would violate any
final judgment;
-- the shareholders of Price Communications fail to approve the Verizon
transactions in accordance with New York law; or
55
-- the board of directors of Price Communications shall have, without
violating the transaction agreement, failed to make or withdrawn, or
modified in a manner adverse to Verizon Wireless and New Limited
Partnership, its approval or recommendation of the Verizon
transactions, or shall have failed to call the Price Communications
shareholders meeting in accordance with its obligations under the
transaction agreement (provided that, in the case of any termination
by Price Communications, Price Communications shall have paid the
termination fee due in accordance with the terms, and at the times,
specified in the transaction agreement), and in the case of any
termination by Price Communications, (1) Price Communications notifies
Verizon Wireless and New Limited Partnership, in writing and at least
72 hours prior to such termination, of its intention to terminate the
transaction agreement and to enter into an agreement concerning a
superior proposal, and (2) Verizon Wireless and New Limited
Partnership do not make, within 72 hours of receipt of such written
notification, an offer that is at least as favorable to the
shareholders of Price Communications as such superior proposal.
Termination Fees
Price Communications has agreed to pay Verizon Wireless a termination fee of
$66 million in any of the following circumstances:
. Price Communications terminates the transaction agreement pursuant to the
terms thereof because it has entered into an agreement with respect to a
superior proposal, in which case the termination fee will be payable
simultaneously with such termination;
. Price Communications enters into an agreement with respect to a superior
proposal and the transaction agreement is not terminated by Price
Communications, in which case the termination fee will be payable upon the
earliest to occur of:
-- the closing of the transactions contemplated by the alternative agreement;
-- any subsequent termination of the transaction agreement by Price
Communications for any reason; and
-- the later of (1) August 31, 2002 and (2) the four month anniversary of the
date on which the alternative agreement was entered into; or
. either Verizon Wireless or Price Communications terminates the transaction
agreement if the contribution transaction has not occurred by August 31,
2002 after Price Communications' shareholders have failed to approve the
transactions contemplated by the transaction agreement and either (1) at
any time within six months after the date of such termination, Price
Communications enters into a binding written agreement that results in or
will result in a change of control of Price Communications or (2) at any
time during the period commencing on the six month anniversary of the date
of such termination and ending on the one year anniversary of such date,
Price Communications enters into a binding written agreement that results
in or will result in a change of control of Price Communications that
constitutes a superior proposal, in either of which cases the termination
fee shall be payable immediately upon consummation of such change of
control; provided that if the change of control involves not more than 50%
of the assets of Price Wireless, not more than 50% of any class of equity
or voting securities of Price Wireless taken as a whole and not more than
50% of the business to be contributed to New Limited Partnership by Price
Wireless, the Termination Fee will be reduced to equal the amount
determined by multiplying $66 million by the percentage of such assets,
class of equity or voting securities or business contemplated to be sold,
merged or otherwise disposed of pursuant to the alternative agreement.
Other Expenses
All costs and expenses incurred in connection with the transaction agreement
and the transactions contemplated by the transaction agreement, other than any
termination fees, will be paid by the party incurring the expenses, whether or
not the Verizon transactions are consummated.
56
Indemnification
Price Communications and its subsidiaries have agreed to indemnify and hold
harmless Verizon Wireless and New Limited Partnership and their affiliates from
and against any and all damages incurred or suffered arising out of:
. any misrepresentation or breach of warranty;
. any activity or business of Price Communications and its subsidiaries and
affiliates other than the business of Price Wireless;
. the rollup of Price Communications' former subsidiaries;
. any assets or liabilities excluded from the contribution transaction;
. any breach of covenant or agreement;
. any litigation or other proceeding arising out of circumstances existing
or occurring prior to the contribution transaction; or
. any environmental liabilities relating to actions occurring or conditions
existing on or prior to the contribution transaction.
Verizon Wireless has agreed to indemnify and hold harmless Price
Communications and its affiliates from and against any and all damages incurred
or suffered arising out of:
. any misrepresentation or breach of warranty;
. any liabilities excluded from the contribution by Verizon Wireless to New
Limited Partnership;
. any asset or business of Verizon Wireless or its affiliates other than the
assets to be contributed to New Limited Partnership by Verizon Wireless; or
. any breach of covenant or agreement.
Each party has agreed, subject to certain exceptions, to indemnify the other
pursuant to the provisions described above with respect to certain losses to
the extent the aggregate amount of such other party's losses exceeds $15
million.
Amendments; Waivers
Any provision of the transaction agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by each party to the transaction agreement or, in the case of a
waiver, by the party against whom the waiver is to be effective.
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PLEDGE AGREEMENT
Price Communications has entered into a pledge agreement to secure its
indemnity obligations under the transaction agreement and any liability for
damages, losses and reasonable expenses suffered or incurred by Verizon
Wireless, New Limited Partnership,VWI or Verizon Communications as a result of
a breach by Price Communications of the exchange agreement, the lock-up
agreements, the limited partnership agreement or the pledge agreement. As
discussed under "The Transaction Agreement--Indemnification" above, each party
has agreed, subject to certain exceptions, to indemnify the other to the extent
the aggregate amount of such other party's losses exceeds $15 million.
Under the terms of the pledge agreement, Price Communications has agreed to
grant a security interest in 13% of the Preferred Exchangeable Interest issued
to Price Communications pursuant to the transaction agreement (i.e.,
approximately $145 million, based on the expected size of its initial capital
account in New Limited Partnership) and in the Verizon Wireless common stock or
Verizon Communications common stock received in exchange for 13% of the
Preferred Exchangeable Interest pursuant to the exchange agreement. The amount
of this pledge will be reduced to a value of approximately $75 million on the
first anniversary of the contribution transaction and $41.3 million on the
second anniversary of the contribution transaction.
Under the terms of the pledge agreement, the security interest granted above
would terminate on the third anniversary of the contribution transaction,
except to the extent Verizon Wireless, New Limited Partnership, Verizon
Communications or VWI delivers a notice to Price Communications of the
assertion of a claim, or of the commencement of a suit, action or proceeding in
respect of which an indemnity may be asserted against Price Communications (in
which case such remaining security interest would terminate on the date such
claim, suit, action or proceeding is finally adjudicated or dismissed).
VOTING AGREEMENTS
In connection with the Verizon transactions, each of Robert Price, President
and Chief Executive Officer of Price Communications, Kim I. Pressman, Chief
Financial Officer of Price Communications, and Eileen Farbman, the daughter of
Mr. Price, have entered into a voting agreement. Each voting agreement
obligates the relevant shareholder to vote all shares of common stock of Price
Communications which he or she is entitled to vote in favor of the Verizon
transactions. These shareholders hold or have the power to vote, in the
aggregate, shares of Price Communications common stock representing 25.2% of
the voting power of all outstanding shares of Price Communications. The voting
agreements do not obligate these shareholders to vote in favor of any other
proposal, including, without limitation, the subsequent votes that will be
required prior to any exchange of the Preferred Exchangeable Interest for
Verizon Wireless common stock or a dissolution of Price Communications.
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THE NEW LIMITED PARTNERSHIP AGREEMENT
General
Pursuant to the transaction agreement, Verizon Wireless of Georgia LLC, a
subsidiary of Verizon Wireless (referred to in this proxy statement/prospectus
as "Cellco MGP"), another subsidiary of Verizon Wireless yet to be identified
(referred to in this proxy statement/prospectus as "Cellco LP"), and Price
Wireless, will, at the closing of the contribution transaction, enter into the
limited partnership agreement relating to New Limited Partnership. Cellco MGP
will be the managing general partner, and Cellco LP and Price Wireless will be
the limited partners of New Limited Partnership.
The following is a brief summary of certain provisions of the limited
partnership agreement. The summary is qualified in its entirety by reference to
the complete text of the form of limited partnership agreement, which is
incorporated by reference and attached to this proxy statement/prospectus as
Annex B.
Purpose of New Limited Partnership
The limited partnership agreement provides that the purpose of New Limited
Partnership is to acquire the assets that will be contributed by Verizon
Wireless and Price Wireless pursuant to the transaction agreement and to engage
in the business of constructing, developing, managing, operating, marketing and
selling cellular telecommunications systems or service, wireless service,
paging service, PCS service and other commercial mobile radio service, and any
business related thereto.
Capital Accounts of the Partners
As a result of the asset contributions pursuant to the transaction
agreement, the initial capital account of Price Wireless in New Limited
Partnership will be approximately $1.11 billion (subject to certain
adjustments). The initial capital account of Cellco MGP will be at least $10
million and the initial capital account of Cellco LP will be at least $1.4
billion (depending upon the value of the assets contributed to New Limited
Partnership by Cellco MGP and Cellco LP).
Preferred Return
Pursuant to the limited partnership agreement, any profits of New Limited
Partnership will be allocated on a preferred basis to Price Wireless' capital
account quarterly up to an amount equal to a specified percentage per annum
(based on the weighted daily average balance of Price Wireless' capital
account). This percentage return is 4.00% per annum subject to downward
adjustment relating to the interest rate payable on the $350 million loan to be
obtained by New Limited Partnership at the closing of the contribution
transaction, and it is currently expected that the maximum preferred return
after giving effect to such adjustment will be approximately 3.6%. Price
Wireless is not entitled to a share of any profits of New Limited Partnership
in excess of this preferred return.
Price Wireless' capital account will not be allocated any preferred return
after the earlier to occur of (1) the expiration of the period (if any) within
which Price Wireless is entitled to elect to exchange its Preferred
Exchangeable Interest for Verizon Wireless common stock or (2) the fourth
anniversary of the contribution transaction.
Profit and Loss Allocation
Profits. After giving effect to certain special and curative allocations
provided for in the limited partnership agreement, profits for any year will be
allocated to the capital accounts of the partners in the following order and
priority:
. First, to Price Wireless in the amount, if positive, equal to (1) the sum
of the cumulative losses allocated to Price Wireless for all prior years
minus (2) the sum of the cumulative profits allocated to Price Wireless
pursuant to this provision for all prior years.
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. Second, to Price Wireless until it has been allocated an aggregate amount
for all years (including special allocations) equal to the cumulative
preferred return for all such years.
. Third, to Cellco MGP and Cellco LP.
Losses. After giving effect to certain special and curative allocations
specified in the limited partnership agreement, losses for any year will be
allocated to the capital accounts of the partners in the following order and
priority:
. First, to Cellco MGP and Cellco LP in an amount, if positive, equal to (1)
the sum of the cumulative profits allocated to Cellco MGP and Cellco LP
for all prior years minus (2) the sum of the cumulative losses allocated
to Cellco MGP and Cellco LP pursuant to this provision for all prior years.
. Second, to Cellco MGP until Cellco MGP has been allocated an amount equal
to its capital account.
. Third, to Cellco LP until Cellco LP has been allocated an amount equal to
its capital account.
. Fourth, to Price Wireless until Price Wireless has been allocated an
amount equal to its capital account.
. Fifth, to Cellco MGP.
In addition to the allocations described above, certain special and curative
allocations of profit and loss will be made, including (among others) the
following:
. Cellco MGP and Cellco LP will be allocated the following items:
-- all items of expense incurred in connection with the purchase and
defeasance of the senior subordinated notes and senior secured notes
of Price Wireless;
-- all items of income, gain, loss and expense resulting from any
disposals, acquisitions or mergers which require the approval of Price
Wireless pursuant to the veto rights described below, where New
Limited Partnership engages in such actions pursuant to the limited
partnership agreement without obtaining such approval;
-- all amortization in respect of any intangible asset; and
-- all losses incurred in connection with dispositions of assets, and all
costs incurred in purchasing handsets, in connection with the
conversion of the technology used by the business contributed by Price
Wireless to code division multiple access (CDMA) from time division
multiple access (TDMA).
. Price Wireless will be allocated all reasonable fees and other costs and
expenses (other than interest) charged by the lender in respect of the
$350 million financing to be obtained by New Limited Partnership pursuant
to the transaction agreement.
Cash Distributions
After the second anniversary of the contribution transaction, New Limited
Partnership will make cash distributions to Price Wireless on a quarterly basis
equal to 50% of the preferred return.
Management of New Limited Partnership
Except as otherwise provided in the limited partnership agreement, Cellco
MGP, as the managing general partner, will have the right to manage the
business of New Limited Partnership.
New Limited Partnership will have a management committee comprised of three
members, two of which will be appointed by Cellco MGP and one of which will be
appointed by Price Wireless.
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Pursuant to the limited partnership agreement, Cellco MGP will need the
prior approval of a majority of the members of the management committee to take
any of the following actions:
. approve the annual operating budget of New Limited Partnership;
. acquire an amount of assets for more than $50 million, other than in the
ordinary course of business;
. make any distribution, other than quarterly distributions to Price
Wireless and winding up distributions, prior to 6 months after Price
Wireless' option (if any) to exchange the Preferred Exchangeable Interest
for Verizon Wireless common stock expires;
. appoint or change the independent auditor of New Limited Partnership;
. approve the audited financial statements of New Limited Partnership; or
. select or change the technology to be used by New Limited Partnership in
conducting its business.
In addition, Cellco MGP will need the prior approval by the majority of the
members of the management committee, including the member appointed by Price
Wireless, to take any of the following actions:
. subject to certain financial and ordinary course exceptions, acquire or
dispose of assets or businesses, incur indebtedness, or consolidate or
merge with any third party (provided that Cellco MGP may take such actions
without the approval of Price Wireless if all items of income, gain, loss
and expense resulting from such action are allocated to Cellco MGP and
Cellco LP);
. engage in any business other than the business referred to under "Purpose
of New Limited Partnership" above and any related business;
. incur any indebtedness to the extent that New Limited Partnership's ratio
of long-term debt to net worth would exceed three times;
. sell, exchange or otherwise dispose of, or distribute all or substantially
all of the assets contributed to New Limited Partnership by Price Wireless;
. sell, exchange or otherwise dispose of any asset contributed to New
Limited Partnership by Price Wireless to Cellco MGP or any of its
affiliates;
. sell, exchange or otherwise dispose of any of the cellular licenses
contributed to New Limited Partnership by Price Wireless prior to the
second anniversary of the contribution transaction;
. make any distribution of any of the cellular licenses contributed to New
Limited Partnership by Price Wireless prior to the seventh anniversary of
the contribution transaction;
. make any distribution to either Cellco MGP or Cellco LP or repurchase from
Cellco MGP or Cellco LP any partnership interest if after giving effect
thereto the aggregate amount of their capital accounts would be less than
the sum of their original capital contributions;
. except for permitted administrative, technical, regulatory and other
services, engage in any transaction with Cellco MGP or any of its
affiliates, unless such transaction is either on an arm's length basis or,
in the aggregate, no less favorable to New Limited Partnership than
substantially similar transactions generally made between Cellco MGP and
unaffiliated third parties;
. amend the certificate of limited partnership of New Limited Partnership if
such amendment would reasonably be expected to adversely affect Price
Wireless' rights under the limited partnership agreement or in respect of
New Limited Partnership;
. issue additional interests in New Limited Partnership, other than to any
partner or to an affiliate of any partner;
. except for certain limited exceptions, request any additional capital
contributions by Price Wireless;
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. distribute to Cellco MGP, Cellco LP or any of their affiliates all or any
portion of the assets contributed to New Limited Partnership by Cellco MGP
or Cellco LP;
. commence any voluntary case or other proceeding seeking dissolution,
liquidation or reorganization or other relief with respect to New Limited
Partnership or its debts under any bankruptcy law now or hereafter in
effect; or
. take any action contrary to the preservation and maintenance of New
Limited Partnership's existence, rights, franchises and privileges as a
limited partnership under the laws of the State of Delaware.
Cellco MGP, through its officers, will carry out the day-to-day management
of New Limited Partnership.
Duties, Indemnification and Compensation
Except as set forth in the limited partnership agreement, the duties and
liabilities of Cellco MGP are limited to the fullest extent permitted by
applicable law. New Limited Partnership will indemnify Cellco MGP for any
liability or damage incurred in relation to any action performed or omitted to
be performed in connection with the business of New Limited Partnership, except
for any liability resulting from fraud, bad faith or willful misconduct of
Cellco MGP.
Cellco MGP will not receive general compensation for its services as the
managing general partner. However, Cellco MGP will be reimbursed for any
out-of-pocket expenses reasonably incurred by it on behalf of New Limited
Partnership. Cellco MGP and its affiliates may provide services to New Limited
Partnership and charge New Limited Partnership for such services, subject to
certain conditions set forth in the Limited Partnership Agreement.
Transfer Restrictions
Pursuant to the limited partnership agreement, subject to certain specified
conditions, Cellco MGP may at any time transfer all but not less than all of
its interest in New Limited Partnership to an affiliate of Verizon Wireless. In
addition, Cellco LP may at any time transfer all or any portion of its interest
in New Limited Partnership to an affiliate of Verizon Wireless.
Price Wireless (or a permitted transferee thereof) may at any time, with the
prior written consent of Cellco MGP (which consent shall not be unreasonably
withheld), grant a pledge of all but not less than all of its interest in New
Limited Partnership to any bank or other financial institution of recognized
standing in connection with a bona fide financing transaction. In addition,
such interest may, upon default under such financing transaction, be
transferred to the pledgee or another third party as a result of a foreclosure
sale under the Uniform Commercial Code or the exercise of other remedies in
connection with such pledge.
Price Wireless may at any time transfer all but not less than all of its
interest to Price Communications or another subsidiary of Price Communications
in connection with a liquidation or merger with such entity.
Books and Records
New Limited Partnership will keep adequate books and records at its
principal place of business and any partner of New Limited Partnership or its
designated representative shall have, at any reasonable time, access to such
books and records.
Pursuant to the limited partnership agreement, Price Wireless will be
entitled to receive audited financial statements, unaudited quarterly and
monthly financial statements, and projected financial statements relating to
New Limited Partnership.
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Dissolution Events
Under the terms of the limited partnership agreement, New Limited
Partnership will dissolve and commence liquidation upon the occurrence of any
of the following events:
. the unanimous vote of the partners to dissolve, wind up and liquidate New
Limited Partnership;
. the involuntary bankruptcy of Cellco MGP;
. the happening of any event that makes it unlawful or impossible to carry
on the business of New Limited Partnership; or
. the withdrawal or removal of Cellco MGP, the assignment by Cellco MGP of
its entire interest in New Limited Partnership (other than a transfer to a
Verizon Wireless affiliate) or any other event that causes Cellco MGP to
cease to be a general partner under the Delaware Revised Uniform Limited
Partnership Act.
The limited partnership agreement provides that, in the event of Cellco
MGP's involuntary bankruptcy or withdrawal or removal, or an assignment by
Cellco MGP of its entire interest (other than to a Verizon Wireless affiliate),
New Limited Partnership may be continued or reconstituted if within a specified
period all remaining partners agree in writing to continue the business of New
Limited Partnership and to appoint a new general partner, failing which Price
Communications may elect within an additional specified period to reconstitute
New Limited Partnership and continue its business by forming a new limited
partnership (without Cellco LP) and having as a general partner a person
elected by Price Communications. Unless such an election is made within 180
days after the dissolution event, New Limited Partnership shall wind up its
affairs. If such an election is made within 180 days of the dissolution event,
then the reconstituted limited partnership shall continue until the occurrence
of a dissolution event as set forth above.
Winding Up
The limited partnership agreement provides that, within 90 days of the
dissolution event, Cellco MGP or a person elected by the limited partners shall
take full account of the partnership's liabilities and assets, and shall cause
the proceeds from the sale thereof, to be applied and distributed in the
following order:
. first, to the payment and discharge of all of the partnership's debts and
liabilities to creditors other than Cellco MGP, and other than liabilities
for distributions to partners;
. second, to the payment and discharge of all of the partnership's debts and
liabilities to Cellco MGP, other than liabilities for distributions to
partners; and
. the balance, if any, to the partners in accordance with their capital
accounts, after giving effect to all contributions, distributions and
allocations for all periods.
Cellco MGP Breach
The limited partnership agreement provides that, in the event of any breach
by Cellco MGP of any of its obligations under the provisions of the limited
partnership agreement requiring approval of the management committee (as
described under "Management of New Limited Partnership" above), Price Wireless'
sole remedy shall be damages.
Cellco LP has agreed to guarantee to Price Wireless payment of all
obligations of Cellco MGP to Price Wireless in connection with any breach by
Cellco MGP of any of its obligations under the limited partnership agreement.
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THE EXCHANGE AGREEMENT
The following is a brief summary of certain provisions of the exchange
agreement. The summary is qualified in its entirety by reference to the
complete text of the exchange agreement, which is incorporated by reference and
attached to this proxy statement/prospectus as Annex C.
General
Pursuant to the terms of the exchange agreement, the Preferred Exchangeable
Interest to be received by Price Wireless pursuant to the transaction agreement
is exchangeable for Verizon Wireless common stock or Verizon Communications
common stock in the circumstances described below.
Exchange for Verizon Wireless Common Stock
Under the terms of the exchange agreement, following completion of an
underwritten initial public offering by VWI pursuant to which the issuer
receives gross proceeds of at least $4 billion and partnership units in Verizon
Wireless representing at least 4% of the total outstanding partnership units in
Verizon Wireless (referred to in this proxy statement/prospectus as a "Verizon
Wireless IPO"), Price Wireless may elect at any time during the 60-day period
immediately following the later of (1) the first anniversary of the
contribution transaction and (2) the date of the Verizon Wireless IPO, to
exchange the Preferred Exchangeable Interest for Verizon Wireless common stock.
The number of shares of Verizon Wireless common stock issuable to Price
Wireless upon an exchange of the Preferred Exchangeable Interest pursuant to
the exchange agreement is equal to the amount of Price Wireless' capital
account in New Limited Partnership as of the date of the exchange divided by
the price at which the Verizon Wireless common stock is offered to the public
in the Verizon Wireless IPO.
Under the terms of the exchange agreement, the obligation of each of Price
Wireless and VWI to consummate an exchange of the Preferred Exchangeable
Interest for Verizon Wireless common stock is subject to the following
conditions:
. approval of such exchange by the shareholders of Price Communications
shall have been obtained (which approval is not being solicited by this
proxy statement/prospectus);
. the registration statement under which such common stock is to be issued
is effective;
. any applicable waiting period under the Hart-Scott-Rodino Act shall have
expired or been terminated; and
. no applicable law, judgment or injunction shall prohibit the exchange.
The obligation of VWI to consummate such an exchange is subject to the
following additional conditions:
. subject to certain exceptions, VWI shall have received a favorable opinion
of a third party as to the solvency of Price Communications and its
subsidiaries;
. Price Communications and its subsidiaries shall have performed in all
material respects their obligations under the exchange agreement, and
their representations and warranties shall be true at the time of the
closing of the exchange (except as would not have a material adverse
effect or prevent the exchange); and
. Price Communications shall have received an order from the SEC exempting
it from the Investment Company Act of 1940, or shall be in compliance with
the Investment Company Act. Although the exchange agreement does not
specify alternative means of being in compliance with the Investment
Company Act, these means would include, without limitation, (1) being
primarily engaged in a business or businesses other than that of
investing, reinvesting, owning, holding or trading securities and
(2) complying with the "safe harbor" for "transient investment companies"
provided by Rule 3a-2 under the Investment Company Act.
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The obligation of Price Communications and its subsidiaries to consummate
such an exchange is subject to the following additional conditions:
. VWI shall have performed in all material respects its obligations under
the exchange agreement, and its representations and warranties shall be
true at the time of the closing of the exchange (except as would not have
a material adverse effect or prevent the exchange); and
. the shares of Verizon Wireless common stock to be issued in the exchange
shall have been approved for listing or quotation.
Exchange for Verizon Communications Common Stock
Mandatory Exchange
Pursuant to the exchange agreement, the Preferred Exchangeable Interest will
be mandatorily exchanged for Verizon Communications common stock upon the
occurrence of any of the following events:
. the fourth anniversary of the contribution transaction, if the Verizon
Wireless IPO is not completed prior to such anniversary;
. the fourth anniversary of the contribution transaction (or, in certain
circumstances, up to 180 days thereafter), if the Verizon Wireless IPO is
completed prior to such anniversary and Price Wireless elects to exchange
the Preferred Exchangeable Interest for Verizon Wireless common stock, but
thereafter revokes such election because such exchange does not occur
within a year (or, if earlier, 180 days after the fourth anniversary of
the contribution transaction) solely as a result of a breach by VWI of any
of its obligations under the exchange agreement;
. the fourth anniversary of the exercise by Price Wireless of its option to
exchange the Preferred Exchangeable Interest for Verizon Wireless common
stock, if the Verizon Wireless IPO is completed prior to the fourth
anniversary of the contribution transaction and Price Wireless elects to
exchange the Preferred Exchangeable Interest for Verizon Wireless common
stock, but such exchange does not occur within four years of such election
and such failure is not a result of a failure of either party to perform
its obligations under the exchange agreement; or
. the tenth anniversary of the contribution transaction, if the Preferred
Exchangeable Interest has not been exchanged for Verizon Communications
common stock or Verizon Wireless common stock by such anniversary.
The number of shares of Verizon Communications common stock issuable to
Price Wireless pursuant to a mandatory exchange occurring as a result of any of
the events specified in the first three bullets above is equal to the amount of
Price Wireless' capital account in New Limited Partnership as of the date of
the exchange divided by the trailing 20-day average closing price of Verizon
Communications common stock as of the date of the exchange (provided that such
price shall not be less than $40 or more than $74).
The number of shares of Verizon Communications common stock issuable to
Price Wireless pursuant to a mandatory exchange occurring as a result of the
event specified in the fourth bullet above is equal to the amount of Price
Wireless' capital account in New Limited Partnership as of the date of the
exchange divided by the greater of the trailing 20-day average closing price of
Verizon Communications common stock as of the date of the exchange and $55.30.
The number of shares of Verizon Communications common stock issuable
pursuant to a mandatory exchange is subject to customary anti-dilution
provisions.
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Optional Exchange
Pursuant to the exchange agreement, the Preferred Exchangeable Interest will
be exchanged for Verizon Communications common stock at the option of Verizon
Communications upon the occurrence of any of the following events:
. after a Verizon Wireless IPO has been completed and the second anniversary
of the contribution transaction has occurred, Price Wireless either has
not elected to exchange the Preferred Exchangeable Interest into Verizon
Wireless common stock or has revoked such election;
. a third party acquires voting securities of Price Communications
representing more than 30% of the total voting power of all such
securities (provided Verizon Communications must exercise its option to
exchange within four years of such acquisition); or
. the Preferred Exchangeable Interest is transferred to a secured lender of
Price Communications or its subsidiaries as a result of a default under a
financing transaction.
In the event that Verizon Communications elects to cause an exchange of the
Preferred Exchangeable Interest as a result of the occurrence of a revocation
specified in the first bullet above or any of the events specified in the
second and third bullets above, the number of shares of Verizon Communications
common stock issuable upon such an exchange is equal to the amount of Price
Wireless' capital account in New Limited Partnership as of the date of the
exchange divided by the trailing 20-day average closing price of Verizon
Communications common stock as of the date of the exchange (provided that such
price shall not be less than $40 or more than $74).
In the event that Verizon Communications elects to cause an exchange of the
Preferred Exchangeable Interest as a result of Price Wireless not exercising
its option to exchange for Verizon Wireless common stock as specified in the
first bullet above, the number of shares of Verizon Communications common stock
issuable upon such an exchange is equal to the amount of Price Wireless'
capital account in New Limited Partnership as of the date of the exchange
divided by the greater of the trailing 20-day average closing price of Verizon
Communications common stock as of the date of the exchange and $55.30.
The number of shares of Verizon Communications common stock issuable
pursuant to an optional exchange is subject to customary anti-dilution
provisions.
Conditions to a Mandatory Exchange or an Optional Exchange
Under the terms of the exchange agreement, the obligation of each of Price
Wireless and Verizon Communications to consummate an exchange of the Preferred
Exchangeable Interest for common stock of Verizon Communications is subject to
the following conditions:
. consummation of the transactions contemplated by the transaction agreement;
. the registration statement under which such common stock is to be issued
is effective;
. any applicable waiting period under the Hart-Scott-Rodino Act shall have
expired or been terminated; and
. no applicable law, judgment or injunction shall prohibit the exchange.
The obligation of Verizon Communications to consummate such an exchange is
subject to the following additional conditions:
. subject to certain exceptions, Verizon Communications shall have received
a favorable opinion of a third party as to the solvency of Price
Communications and its subsidiaries;
. Price Communications and its subsidiaries shall have performed in all
material respects their obligations under the exchange agreement, and
their representations and warranties shall be true at the time of the
closing of the exchange (except as would not have a material adverse
effect or prevent the exchange); and
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. Price Communications shall have received an order from the SEC exempting
it from the Investment Company Act of 1940, or shall be in compliance with
the Investment Company Act. Although the exchange agreement does not
specify alternative means of being in compliance with the Investment
Company Act, these means would include, without limitation, (1) being
primarily engaged in a business or businesses other than that of
investing, reinvesting, owning, holding or trading securities and
(2) complying with the "safe harbor" for "transient investment companies"
provided by Rule 3a-2 under the Investment Company Act.
The obligation of Price Communications and its subsidiaries to consummate
such an exchange is subject to the following additional conditions:
. Verizon Communications shall have performed in all material respects its
obligations under the exchange agreement, and its representations and
warranties shall be true at the time of the closing of the exchange
(except as would not have a material adverse effect or prevent the
exchange); and
. The shares of Verizon Communications common stock to be issued in the
exchange shall have been approved for listing or quotation.
Representations and Warranties
The exchange agreement contains a number of reciprocal representations and
warranties of VWI, Verizon Communications and Price Communications as to, among
other things, due incorporation and good standing, corporate authority to enter
into the exchange agreement and to perform the transactions contemplated
thereby, required actions and filings with government entities, absence of
conflicts with organizational documents and material agreements, litigation and
SEC filings.
Many of these representations and warranties are qualified by materiality
and all such representations and warranties survive an exchange for a period of
18 months.
Principal Covenants
Shareholders Meeting
Under the terms of the exchange agreement, in the event that Price
Communications elects to exchange the Preferred Exchangeable Interest for
Verizon Wireless common stock, Price Communications will call and hold a
meeting of its shareholders for purposes of voting on and approving such an
exchange.
Shelf Registration Statement
Verizon Communications and VWI have agreed to file with the SEC and to use
their reasonable best efforts to cause to be declared effective a registration
statement relating to the shares of Verizon Communications common stock or
Verizon Wireless common stock, as the case may be, to be issued to Price
Wireless pursuant to an exchange.
Verizon Communications and VWI have agreed to use their best efforts to keep
such registration statement continuously effective until one year after the
receipt of the shares by Price Wireless or when all such shares have been sold
or become freely saleable under the Securities and Exchange Act of 1933.
Substitute Issuer
Verizon Wireless has agreed that, if a public offering of shares of common
voting stock of a corporation other than VWI occurs, and such offering
otherwise meets the requirements set forth in the exchange agreement for a
Verizon Wireless IPO, it will take all appropriate actions to cause such
corporation to perform the obligations of VWI under the exchange agreement.
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Litigation Indemnification
Price Communications has agreed to indemnify VWI, Verizon Communications and
their respective affiliates against any damages incurred after consummation of
an exchange arising out of any action, suit, investigation or proceeding which
challenges or seeks to enjoin, alter or materially delay the transactions
contemplated by the exchange agreement or the lock-up agreements.
Investment Company Act of 1940
Price Communications has agreed to use its reasonable best efforts, prior to
consummation of an exchange, to obtain an order from the SEC exempting it from
all provisions, rules and regulations of the Investment Company Act of 1940, or
to otherwise take such actions as are necessary to comply with all such
provisions, rules and regulations. Although the exchange agreement does not
specify alternative means of being in compliance with the Investment Company
Act, these means would include, without limitation, (1) being primarily engaged
in a business or businesses other than that of investing, reinvesting, owning,
holding or trading securities and (2) complying with the "safe harbor" for
"transient investment companies" provided by Rule 3a-2 under the Investment
Company Act.
Solvency Certificate
Under the terms of the exchange agreement, Price Communications has the
right to cause VWI and Verizon Communications to waive the condition to
consummation of an exchange requiring that VWI and Verizon Communications
receive a favorable opinion of a third party as to the solvency of Price
Communications and its subsidiaries.
Price Communications has agreed that if it exercises its right to cause a
waiver of the above condition, it will not make a distribution to its
shareholders, whether by means of liquidation, dividend or otherwise, of any
shares of VWI or Verizon Communications received by it upon an exchange.
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LOCK-UP AGREEMENTS
In connection with the Verizon transactions, Price Communications has
entered into separate lock-up agreements with Verizon Communications and VWI
with respect to receipt of the shares of either entity pursuant to the exchange
agreement. The complete text of each lock-up agreement is attached to this
proxy statement/prospectus as Annex D.
The lock-up agreements provide that, after receipt of shares of Verizon
Wireless common stock or Verizon Communications common stock, until the lock-up
release date (as defined below), neither Price Communications nor any permitted
transferee or pledgee may (1) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any shares received in exchange for the
Preferred Exchangeable Interest, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (2)
enter into any swap or any other agreement or any transaction that has
substantially the same effect as a transaction described in (1), or that
transfers, in whole or in part, directly or indirectly, a substantial portion
of the economic consequence of ownership of the shares.
With respect to Verizon Wireless common stock, the lock-up release date is
270 days after the later of (1) a qualifying Verizon Wireless IPO and (2) the
first anniversary of the contribution transaction; provided that the lock-up
release date must be at least 180 days after an exchange of the Preferred
Exchangeable Interest for the shares of Verizon Wireless common stock. With
respect to Verizon Communications common stock, the lock-up release date is 270
days after an exchange of the Preferred Exchangeable Interest for the shares of
Verizon Communications common stock.
On and after the lock-up release date until the fifth anniversary of the
exchange of the Preferred Exchangeable Interest for shares, Price
Communications and its permitted transferees are not permitted to transfer, on
any particular day, a number of such shares in excess of 25% of the average
daily trading volume for the prior 10 consecutive trading day period of Verizon
Wireless common stock or Verizon Communications common stock, as the case may
be. However, during such period, Price Communications is permitted to:
. engage in a public underwritten or non-underwritten offering of shares of
Verizon Wireless common stock or Verizon Communications common stock, as
the case may be (reasonably acceptable to the issuer); and
. distribute all or a portion of the shares to the shareholders of Price
Communications at any time after five business days prior to the first
anniversary of an exchange of the Preferred Exchangeable Interest for
shares.
Furthermore, Price Communications or any permitted transferee or pledgee may
engage in any of the following transactions prior to or after the lock-up
release date:
. transfers of up to $30 million of common stock in the aggregate;
. certain intercompany transfers;
. a pledge of shares pursuant to a financing transaction; and
. a private negotiated sale of all of the shares to a purchaser that agrees
in writing to be subject to the restrictions contained in the lock-up
agreement.
69
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP AGREEMENT
General
Pursuant to the transaction agreement, among the assets Verizon Wireless and
its subsidiaries will contribute to New Limited Partnership is an aggregate 85%
partnership interest (which includes the entire general partner interest) in
Orange County-Poughkeepsie Limited Partnership (referred to in this proxy
statement/prospectus as "OCP") established pursuant to the Agreement
Establishing Orange County-Poughkeepsie Limited Partnership, as amended, among
NYNEX Mobile Limited Partnership 2 as general partner and a limited partner,
and Taconic Telephone Corporation and Warwick Valley Telephone Company as
limited partners (referred to in this proxy statement/prospectus as the "OCP
Agreement.") The following is a brief summary of certain provisions of the OCP
Agreement.
Purpose of OCP
The OCP Agreement provides that the purpose of OCP is to fund, establish and
provide cellular service at the wholesale level.
Management and Operations
The OCP Agreement provides that the general partner will be responsible for
obtaining interconnection with the landline network, operating and maintaining
the cellular service system of the partnership and marketing cellular service.
The general partner is required to provide or arrange to have provided
management and accounting services to OCP, and is entitled to be reimbursed
monthly for any reasonable and necessary expenses incurred on behalf of OCP
plus reasonable administrative and general overhead expenses. The general
partner is not entitled to any profit in rendering the foregoing services.
Allocations and Distributions
Pursuant to the OCP Agreement, any capital contributions or distributions of
property are credited or charged to the capital accounts of the partners at
fair market value. Except for certain limited exceptions, interest is not
payable on a partner's capital contributions or on its capital account.
The net income and net losses of OCP for each fiscal year are allocated to
the partners in proportion to their respective partnership interests. In
addition, funds of OCP from all sources, less appropriate reserves deemed by
the general partner to be reasonably necessary for future administrative and
operating expenses, loan payments and other costs and expenses and
contingencies, are distributed on a fiscal quarterly basis. Each such
distribution is made to the partners in proportion to the daily weighted
average of their respective partnership interests as in effect during the
relevant quarterly time period.
Rights and Powers of OCP, General Partner and Limited Partners
The OCP Agreement provides that OCP, and the general partner on behalf of
OCP, is empowered to do or cause to be done any and all acts reasonably deemed
by the general partner to be necessary or appropriate in furtherance of the
purposes of OCP, including the power and authority to enter into and perform
contracts and agreements, borrow from banks and other lenders, invest such
funds as are temporarily not required for partnership purposes, and to carry on
any other activities necessary or in connection with any of the foregoing.
In addition, the general partner is vested with the power to manage,
supervise and conduct the affairs of OCP, incur obligations on behalf of OCP,
execute instruments, increase the coverage area of OCP's cellular service or
apply for regulatory approval to expand such coverage area. The general partner
is also empowered to apply to the FCC on behalf of OCP for permits and licenses
to provide cellular service within certain specified service areas.
70
Each limited partner is granted certain specific rights, including the right
to inspect and copy the books and records of OCP, to audit the books and
accounting of OCP, and to meet and consult with representatives of the general
partner as to the operations of the partnership. Each limited partner also has
the right to consent to the addition of additional limited partners.
Obligations of General Partner
Under the terms of the OCP Agreement, the general partner has the duty to at
all times act in the best interest of the partnership and to use its best
efforts to cause OCP to observe and perform its obligations under all
agreements and undertakings made by the partnership. The OCP Agreement does
not, however, preclude any partner or its affiliates from reselling cellular
service or selling or leasing terminal equipment used in connection with
cellular service independently from OCP, provided the general partner or any
such affiliate is not staffed or funded by OCP in connection with such
activities.
Transfer of General Partner Interest
Pursuant to the OCP Agreement, subject to certain limited conditions, the
limited partners have consented to the transfer by the general partner of its
interest in OCP to any of its affiliates.
Dissolution and Termination
The OCP Agreement provides that OCP will dissolve and terminate if (among
other events):
. certain FCC cellular orders are changed in a way which materially
adversely impacts OCP's ability to conduct its business;
. OCP is denied satisfactory regulatory approvals;
. the partners unanimously agree to dissolve and terminate OCP and receive
any required approvals for such dissolution and termination; or
. the general partner withdraws other than by a permitted assignment or sale.
Distributions upon Dissolution
Upon dissolution of OCP, the general partner shall proceed to liquidate the
partnership and apply the proceeds or distribute partnership assets in the
following order of priority:
. to creditors, including partners who are creditors, in satisfaction of
liabilities of the partnership (other than liabilities for distributions
to partners);
. to the establishment of any reserve which the general partner may deem
reasonably necessary for contingent or unforeseen liabilities or
obligations of OCP;
. to partners and former partners in satisfaction of liabilities for
distributions; and
. to the partners, first for the return of their capital accounts in
proportion to their respective capital accounts at the time of
dissolution, with any remaining assets being distributed in proportion to
their respective partnership interests on the date of dissolution.
Exculpation and Indemnification
Under the terms of the OCP Agreement, the general partner is not liable for
any loss to OCP or the limited partners by reason of any act or failure to act
unless the general partner is guilty of willful misconduct or gross negligence.
71
In addition, OCP has agreed to indemnify the general partner against any
loss or damage incurred by the general partner (including legal expenses) by
reason of any acts performed or not performed by the general partner for and on
behalf of the partnership, unless the general partner was guilty of willful
misconduct or gross negligence. The general partner has agreed to indemnify OCP
against any damages incurred by reason of the general partner's willful
misconduct or gross negligence.
72
UNAUDITED PRO FORMA FINANCIAL INFORMATION--NEW LIMITED PARTNERSHIP
The following unaudited pro forma condensed financial statements reflect the
formation of New Limited Partnership and the consummation of the contribution
transaction by recording:
. Verizon Wireless contributed assets and liabilities on their cost basis,
and
. Price Wireless contributed assets and liabilities on their cost basis,
subsequently adjusted for the purchase method of accounting.
The Unaudited Pro Forma Statements of Operations for the nine months ended
September 30, 2001 and for the year ended December 31, 2000 give effect to the
contribution transaction as if it had occurred on January 1, 2000. The
Unaudited Pro Forma Condensed Balance Sheet gives effect to the contribution
transaction as if it had occurred on September 30, 2001.
In these statements, the allocation of the purchase price to the assets
contributed and liabilities assumed, based on their respective fair values has
been made on the basis of preliminary estimates. The final determination of
these fair values could result in purchase accounting adjustments, which may
impact New Limited Partnership's results of operations and financial position.
Reclassifications have been made to the historical financial statements to
conform to the presentation expected to be used by New Limited Partnership.
The unaudited pro forma financial statements do not purport to be indicative
of what New Limited Partnership's financial position or results of operations
would actually have been had the transactions described above occurred on the
dates indicated or to project its results of operations for any future period
or date. The unaudited pro forma financial information has not been adjusted to
give effect to the offering or to cost savings that we expect to achieve as a
result of the integration of the acquired companies, or the cost of such
integration. The pro forma adjustments are described in the accompanying notes
and are based upon available information and assumptions that we believe are
reasonable. The pro forma financial statements should be read in conjunction
with New Limited Partnership's and Orange County-Poughkeepsie Limited
Partnership's financial statements and Price Wireless' financial statements,
including the notes thereto, and the other financial and operating information
appearing elsewhere in this proxy statement/prospectus.
See Notes to Unaudited Pro Forma Financial Information for additional
descriptions.
73
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(Dollars in Thousands)
Verizon Orange County- Verizon Wireless
Wireless Poughkeepsie Price of the East LP
of the Limited Communications Pro Forma Pro Forma As
East LP Partnership(1) Wireless, Inc.(1) Adjustments Adjusted
-------- -------------- ----------------- ----------- ----------------
Operating revenue:
Service revenues.................... $-- $58,649 $184,662 $20,966 (4) $264,277
Equipment and other................. -- -- 13,168 -- 13,168
--- ------- -------- ------- --------
Total operating revenue................ -- 58,649 197,830 20,966 277,445
Operating costs and expenses:
Cost of service..................... -- 6,288 23,315 20,966 (4) 50,569
Cost of equipment................... -- -- 24,765 -- 24,765
Selling, general and administrative. -- 4,993 53,685 -- 58,678
Depreciation and amortization.......... -- 2,622 35,733 (1,608)(2) 36,747
--- ------- -------- ------- --------
Total operating costs and expenses..... -- 13,903 137,498 19,358 170,759
--- ------- -------- ------- --------
Operating income....................... -- 44,746 60,332 1,608 106,686
Interest income (expense), net......... -- 994 (45,609) 52,884 (3) 8,269
Minority interests..................... -- -- (631) (6,862)(5) (7,493)
Other, net............................. -- -- 110 -- 110
--- ------- -------- ------- --------
Income from continuing operations
before provision for income taxes.... -- 45,740 14,202 47,630 107,572
Provision for income taxes............. -- -- (5,255) 5,255 (6) --
--- ------- -------- ------- --------
Income from continuing operations...... $-- $45,740 $ 8,947 $52,885 $107,572
=== ======= ======== ======= ========
74
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(Dollars in Thousands)
(1) Represents the results of operations of Orange County-Poughkeepsie Limited
Partnership and Price Wireless for the nine months ended September 30, 2001.
(2) Represents a decrease in depreciation and amortization as a result of
accounting for the acquisition of the business of Price Wireless under the
purchase method of accounting which were preliminary.
The adjustment to deprecation and amortization expense includes the
following (dollars in thousands):
Depreciation/
Fair Value Useful Life Amortization
---------- ----------- -------------
Customer list........................................ $ 150,000 6(a) $19,875
Cellular licenses.................................... 1,407,500 -- (c) --
Tangible assets...................................... 142,500 7.5(b) 14,250
---------- -------
$1,700,000 34,125
==========
Less: depreciation and amortization included in Price
Wireless........................................... 35,733
-------
Net adjustment....................................... $(1,608)
=======
-----
(a) Using the declining balance method.
(b) Using the straight-line method.
(c) The useful life reflects the adoption of SFAS No. 141 and 142. New Limited
Partnership's policy as it relates to cellular licenses is to reflect the
licenses as indefinite life intangibles.
(3) Pursuant to the terms of the transaction agreement, New Limited Partnership
will assume approximately $700 million in liabilities from Price Wireless.
New Limited Partnership will conduct a tender offer and will effect a
covenant defeasance to redeem all of the 11 3/4% Senior Subordinated Notes
due 2007 and the 9 1/8% Senior Secured Notes due 2006, respectively, with
the cash contributed by each partner (totaling approximately $350 million).
In connection with the tender offer and the redemption, the partnership
will borrow $350 million from a third-party lender. This loan will be
non-recourse to the partners of New Limited Partnership.
In addition, Verizon Wireless will issue and contribute to New Limited
Partnership a note receivable for the principal sum of $500 million (which
accrues interest at an annual rate of 6.14%), with both interest and
principal payable on demand. (See "Business of New Limited Partnership")
The adjustment to interest income (expense) includes the following interest
(dollars in thousands):
Interest income (expense) related to applicable debt amounts for the
first nine months of 2001:
$350,000 (Third-party lender)............................................... $(15,750)(a)
$500,000 (Demand note from Verizon Wireless)................................ 23,025
--------
Net interest income......................................................... 7,275
Net of Price Wireless' historical interest expense for the first nine months (45,609)
--------
Net interest income adjustment.............................................. $ 52,884
========
-----
(a) Interest expense is calculated using a current interest rate of 6.00% for
non-recourse borrowing. Any increase or decrease in the interest rate on
the third-party lender debt of 1/8% would increase or decrease interest
expense for the period by approximately $328 thousand.
75
(4) Represents the adjustment to conform the revenue presentation policies of
Price Wireless relating to incollect roaming revenue to the policy of New
Limited Partnership.
(5) Represents the recognition of minority interest to eliminate 15% of the
Orange County--Poughkeepsie Limited Partnership's operations as a result of
the consolidation of the partnership by New Limited Partnership.
(6) Represents the elimination of federal and state income taxes as a result of
the change in taxable status of the entities forming New Limited
Partnership.
76
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(Dollars in Thousands)
Orange County-- Verizon Wireless
Poughkeepsie Price of the East LP
Verizon Wireless Limited Communications Pro Forma Pro Forma As
of the East LP Partnership (1) Wireless, Inc. (1) Adjustments Adjusted
---------------- --------------- ------------------ ----------- ----------------
Operating revenue:
Service revenues....... $ -- $57,678 $252,513 $34,486 (4) $344,677
Equipment and other.... -- -- 17,995 -- 17,995
----- ------- -------- ------- --------
Total operating revenue... -- 57,678 270,508 34,486 362,672
Operating costs and
expenses:
Cost of service........ -- 6,509 25,321 34,486 (4) 66,316
Cost of equipment...... -- -- 32,685 -- 32,685
Selling, general and
administrative....... -- 4,455 62,135 -- 66,590
Depreciation and
amortization............ -- 3,077 46,970 6,410 (2) 56,457
----- ------- -------- ------- --------
Total operating costs and
expenses................ -- 14,041 167,111 40,896 222,048
----- ------- -------- ------- --------
Operating income.......... -- 43,637 103,397 (6,410) 140,624
Interest income (expense),
net..................... -- 1,264 (61,346) 71,046 (3) 10,964
Minority interests........ -- -- (1,432) (6,736)(5) (8,168)
Other, net................ -- -- 74 -- 74
----- ------- -------- ------- --------
Income from continuing
operations before
provision for income
taxes................... -- 44,901 40,693 57,900 143,494
Provision for income taxes -- -- (15,056) 15,056 (6) --
----- ------- -------- ------- --------
Income from continuing
operations.............. $ -- $44,901 $ 25,637 $72,956 $143,494
===== ======= ======== ======= ========
77
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(Dollars in Thousands)
(1) Represents the results of operations of the Orange County-Poughkeepsie
Limited Partnership and Price Wireless for the year ended December 31, 2000.
(2) Represents an increase in depreciation and amortization as a result of
accounting for the acquisition of the business of Price Wireless under the
purchase method of accounting which were preliminary.
The adjustment to depreciation and amortization expense includes the
following (dollars in thousands):
Useful Depreciation/
Fair Value Life Amortization
---------- ------ -------------
Customer list................................................. $ 150,000 6(a) $34,380
Cellular licenses............................................. 1,407,500 -- (c) --
Tangible assets............................................... 142,500 7.5(b) 19,000
---------- -------
$1,700,000 53,380
==========
Less: depreciation and amortization included in Price Wireless 46,970
-------
Net adjustment................................................ $ 6,410
=======
-----
(a) Using the declining balance method.
(b) Using the straight-line method.
(c) The useful life reflects the adoption of SFAS No. 141 and 142. New
Limited Partnership's policy as it relates to cellular licenses is to
reflect the licenses as indefinite life intangibles.
(3) Pursuant to the terms of the transaction agreement, New Limited Partnership
will assume approximately $700 million of liabilities from Price Wireless.
New Limited Partnership will conduct a tender offer and will effect a
covenant defeasance to redeem all of the 11 3/4% Senior Subordinated Notes
due 2007 and the 9 1/8% Senior Secured Notes due 2006, respectively, with
the cash contributed by each partner (totaling approximately $350 million).
In connection with the tender offer and the redemption, the partnership
will borrow $350 million from a third-party lender. This loan will be
non-recourse to the partners of New Limited Partnership.
In addition, Verizon Wireless will issue and contribute to New Limited
Partnership a note receivable for the principal sum of $500 million (which
accrues interest at an annual rate of 6.14%), with both interest and
principal payable on demand. (See "Business of New Limited Partnership")
The adjustment to interest income (expense) includes the following interest
(dollars in thousands):
Interest income (expense) related to applicable debt amounts for 2000:
$350,000 (Third-party lender).................................. $(21,000)(a)
$500,000 (Demand note from Verizon Wireless)................... 30,700
--------
Net interest income............................................ 9,700
Net of Price Wireless' historical interest expense for 2000. (61,346)
--------
Net interest income adjustment................................. $ 71,046
========
-----
(a) Interest expense is calculated using a current interest rate of 6.00%
for non-recourse borrowing. Any increase or decrease in the interest
rate on the third-party lender debt of 1/8% would increase or decrease
interest expense for the period by approximately $438 thousand.
(4) Represents the adjustment to conform the revenue recognition policies of
Price Wireless relating to incollect roaming revenue to the policy of New
Limited Partnership.
(5) Represents the recognition of minority interest to eliminate 15% of the
Orange County--Poughkeepsie Limited Partnership operations as a result of
the consolidation of the partnership by New Limited Partnership.
(6) Represents the elimination of federal and state income taxes as a result of
the change in taxable status of the entities forming New Limited
Partnership.
78
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 2001
(Dollars in Thousands)
Verizon
Orange County- Wireless of the
Poughkeepsie Price East LP Pro
Verizon Wireless Limited Communications Pro Forma Forma As
of the East LP Partnership Wireless, Inc. Adjustments Adjusted
---------------- -------------- -------------- ----------- ---------------
ASSETS
Cash.................................. $ -- $ -- $ 222,781 $ (72,781)(1) $ --
250,000 (2)
(400,000)(3)
Other tangible assets, net............ -- 55,578 190,230 (47,730)(1) 198,078
Deferred cellular licenses, goodwill
and other intangibles, net........... -- -- 833,605 723,895 (1) 1,635,500
28,000 (2)
50,000 (3)
------- ------- ---------- ---------- ----------
Total assets...................... $55,578 $1,246,616 $ 531,384 $1,833,578
======= ======= ========== ========== ==========
LIABILITIES AND
PARTNERS' CAPITAL/
STOCKHOLDERS' EQUITY
Current liabilities................... $ -- $ 1,277 $ 59,318 $ (59,318)(1) $ 1,277
Long-term debt........................ -- -- 700,000 (350,000)(3) 350,000
Other non-current liabilities......... -- -- 336,944 (298,944)(1) 38,000
------- ------- ---------- ---------- ----------
Total liabilities................. -- 1,277 1,096,262 (708,262) 389,277
Minority interest..................... -- -- 3,306 (3,306)(1) 8,146
8,146 (4)
Preferred exchangeable interest....... -- -- -- 1,112,000 (1) 1,112,000
Partners' capital/stockholders'
equity............................... -- 54,301 147,048 (147,048)(1) 824,155
778,000 (2)
(8,146)(4)
Note receivable from affiliate........ -- -- -- (500,000)(2) (500,000)
------- ------- ---------- ---------- ----------
Total liabilities and partners'
capital/stockholders'
equity........................... $ -- $55,578 $1,246,616 $ 531,384 $1,833,578
======= ======= ========== ========== ==========
79
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(Dollars in Thousands)
(1) These adjustments give effect to the purchase method of accounting for the
acquisition of Price Wireless' business assets fair value of $1,700,000,
and its contribution of additional $700,000 of debt, $38,000 of
liabilities, and approximately $150,000 of cash. The allocation of this
$1,112,000 purchase price is preliminary, and is subject to change upon the
results of an independent third party appraisal of the fair value of the
wireless assets and liabilities of Price Wireless, as well as the
identification of certain intangible assets.
Purchase
Price Wireless Historical Price Allocation Adjustments
-------------- ---------- ---------------- -----------
Cash.............................. $ 222,781 $ 150,000 $ (72,781)
Other tangible assets, net........ 190,230 142,500 (47,730)
DCL & other intangible assets, net 833,605 1,557,500 723,895
Current liabilities............... (59,318) -- 59,318
Long-term debt.................... (700,000) (700,000) --
Other noncurrent liabilities...... (336,944) (38,000) 298,944
Minority interest................. (3,306) -- 3,306
Preferred exchangeable interest... -- (1,112,000) (1,112,000)
Stockholders equity............... (147,048) -- 147,048
(2) Represents additional assets other than the 85% partnership interest of
Orange County-Poughkeepsie Limited Partnership Verizon Wireless contributed
pursuant to the terms of the transaction agreement. The additional
contributions consist of wireless licenses ($28,000 at cost), $200,000
cash, a $500,000 promissory note receivable, and $50,000 for covenant
defeasance with respect to the Price Wireless 11 3/4% senior subordinated
notes due 2007 and 9 1/8% senior secured notes due 2006.
(3) Represents the refinancing of Price Wireless $700,000 debt contributed with
a new borrowing of $350,000 from a third-party lender, after $350,000 of
the existing debt obligation is satisfied with the cash contributed by each
partner based on the transaction agreement signed on December 18, 2001. The
defeasance cost is considered an additional part of the purchase price
allocation.
(4) Represents the elimination of the 15% partnership capital of Orange
County-Poughkeepsie Limited Partnership attributable to minority interests.
Pursuant to the terms of the transaction agreement, Verizon Wireless will
contribute its aggregate 85% partnership interest of Orange
County-Poughkeepsie Limited Partnership to New Limited Partnership.
80
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The business of New Limited Partnership will consist of the operation of all
of the assets to be contributed by Price Wireless and Verizon Wireless and its
subsidiaries to New Limited Partnership. The principal business assets to be
contributed will be substantially all of the assets of Price Wireless and an
aggregate 85% partnership interest in Orange County-Poughkeepsie Limited
Partnership (referred to in this proxy statement/prospectus as "OCP").
Accordingly, following is management's discussion and analysis of the financial
condition and results of operation for each of Price Wireless and OCP, and a
description of the anticipated liquidity and capital expenditure requirements
of New Limited Partnership.
PRICE WIRELESS--RESULTS OF OPERATIONS
Overview
Price Wireless is engaged in the construction, development, management and
operation of cellular telecommunications systems in the southeastern United
States. As of September 30, 2001, Price Wireless provided cellular
telecommunications service to approximately 564,000 subscribers in Alabama,
Florida, Georgia, and South Carolina in a total of 16 licensed service areas,
composed of eight Metropolitan Statistical Areas ("MSAs") and eight Rural
Service Areas ("RSAs"), with an aggregate estimated population of 3.4 million.
Price Wireless sells its cellular telecommunications service as well as a full
line of cellular products and accessories principally through its network of
retail stores. Price Wireless markets all of its products and services under
the nationally recognized service mark CELLULARONE.
On December 18, 2001, Price Wireless' parent, Price Communications, agreed
to contribute substantially all of the assets of Price Wireless to New Limited
Partnership, valuing the assets of Price Wireless at approximately $1.7 billion
including $550 million in debt that will be assumed or redeemed by New Limited
Partnership.
Price Wireless' cellular telecommunications systems serve contiguous
licensed service areas in Georgia, Alabama and South Carolina. Price Wireless
also has a cellular service area in Panama City, Florida. The following table
sets forth, with respect to each service area in which Price Wireless owns a
cellular telecommunications system, the estimated population of which Price
Wireless is now the beneficial owner of 100% (see Notes to Condensed
Consolidated Financial Statements).
Estimated
Service Area MSA Rank Population(1)
- ------------ -------- -------------
Albany, GA............................................... 261 120,822
Augusta, GA.............................................. 108 452,846
Columbus, GA............................................. 153 250,929
Macon, GA................................................ 138 322,544
Savannah, GA............................................. 155 293,000
Georgia-6 RSA............................................ -- 211,408
Georgia-7 RSA............................................ -- 139,606
Georgia-8 RSA............................................ -- 166,601
Georgia-9 RSA............................................ -- 124,063
Georgia-10 RSA........................................... -- 162,261
Georgia-12 RSA........................................... -- 220,558
Georgia-13 RSA........................................... -- 157,068
Dothan, AL............................................... 246 137,916
Montgomery, AL........................................... 139 333,065
Alabama-8 RSA............................................ -- 196,259
---------
Subtotal................................................. -- 3,288,951
---------
Panama City, FL.......................................... 283 148,217
---------
Total................................................. 3,437,168
=========
- --------
(1) Based on population estimates from Paul Kagan and Associates for 2000.
81
Results of Operations
Nine Month Periods Ended September 30, 2001 and September 30, 2000
The following table sets forth for Price Wireless for the periods indicated,
the percentage of certain amounts in relation to total revenue.
Nine Months Ended
September 30,
----------------
2001 2000
----- -----
Revenue:
Service...................................................... 93.3% 93.1%
Equipment sales and installation............................. 6.7 6.9
----- -----
Total revenue............................................ 100.0 100.0
----- -----
Operating expenses:
Engineering, technical and other direct:
Engineering and technical(1)............................. 6.2 5.2
Other direct costs of services(2)........................ 5.6 5.1
Cost of equipment(3)......................................... 12.5 12.1
Selling, general and administrative:
Sales and marketing(4)................................... 9.1 8.5
Customer service(5)...................................... 8.0 7.5
General and administrative(6)............................ 10.0 6.9
Depreciation and amortization................................ 18.1 17.3
----- -----
Total operating expenses................................. 69.5 62.6
----- -----
Operating income................................................ 30.5% 37.4%
Operating income before depreciation and amortization--EBITDA(7) 48.6% 54.8%
- --------
(1) Consists of costs of cellular telecommunications network, including
inter-trunk costs, span-line costs, cell site repairs and maintenance, cell
site utilities, cell site rent, engineers' salaries and benefits and other
operational costs.
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the cost of the cellular handsets and accessories
sold.
(4) Consists primarily of salaries and benefits of sales and marketing
personnel, advertising and promotion expenses and employee and agent
commissions.
(5) Consists primarily of salaries and benefits of customer service personnel
and costs of printing and mailing subscriber's bills.
(6) Includes salaries and benefits of general and administrative personnel, the
provision for bad debts and other overhead expenses.
(7) EBITDA represents operating income before depreciation and amortization.
EBITDA should not be considered in isolation or as an alternative
measurement of operating performance or liquidity to net income, operating
income or any other measure of performance under generally accepted
accounting principles. Price Wireless believes that EBITDA is viewed as a
relevant supplemental measure of performance in the cellular
telecommunications industry.
Revenue. Service revenue amounted to $184.7 million for the first nine
months of 2001, a decrease of $5.1 million or approximately 2.7% from $189.8
million for the same period in 2000. Gross access revenue increased by $7.0
million principally as a result of the greater number of post-paid subscribers
during the current nine month period compared to the same nine months during
the year 2000. The increase in gross access revenue was reduced by additional
promotion credits for the current nine-month period approximating $1.0 million.
Airtime
82
revenue from post-paid subscribers was flat but revenue from prepaid
subscribers increased by $1.9 million due to an increased number of subscribers
during the current nine-month period as compared to last year. These increases
were more than offset by decreases in outcollect airtime roaming revenue, which
is revenue that Price Wireless collects from other wireless carriers'
subscribers using their phones in Price Wireless' markets. Airtime roaming
decreased from $31.7 million for the nine-month period ended in 2000 to $22.4
million for the current nine month period, a decrease of 29%. The decrease in
the number of outcollect minutes of use from 98.2 million for the nine-month
period ended September 30, 2000, to 90.0 million for the nine-month period
ended September 30, 2001, combined with the reduction in the average
reimbursement rate from other cellular carriers from $.32 in 2000 to $.25 in
2001 was the cause of such decline. While toll and directory assistance
revenues were basically flat for the nine-month periods, the reduction in
outcollect minutes of use combined with reduced toll reimbursement rates
resulted in a decrease of roaming toll revenue of $4.3 million during the
current nine-month period. Price Wireless expects this level for both
outcollect air and outcollect toll to continue for the remainder of the year.
Average monthly revenue per post-paid subscriber (based upon service revenue
excluding prepaid revenue) includes local revenue as well as outcollect
revenue, but does not include incollect revenue from subscribers, as this
revenue is accounted for as an offset to Price Wireless' direct cost of
service. Such amount decreased from $47.59 for the nine-month period ended
September 30, 2000 to $44.81 for the current nine-month period as a result of
the factors discussed above.
Equipment sales and installation revenue, which consists primarily of
subscriber phone and accessory sales, decreased to $13.2 million for this
year's nine-month period from $14.1 million for the same period in 2000.
Revenue from the sales of handsets was flat despite an additional 25,000 units
sold. During the current nine-month period, 61% of units sold were digital, and
39% were analog. During the nine-month period ended September 30, 2000, 64% of
sales were analog and 36% were digital. As digital phones have become more
popular, their cost and therefore the price points at which Price Wireless
sells these units were decreased. The overall decrease is a primarily a result
of the decrease in accessory and install revenue.
Operating Expenses. Total operating expenses increased by $10.0 million to
$137.5 million for the current nine month period from $127.5 million for the
nine month period ended September 30, 2000. As a percentage of total revenue,
the current nine-months' operating expenses amounted to 69.5% compared with
62.6% for the same period in 2000.
Engineering, technical and other direct costs of service increased $2.3
million to $23.3 million for the current nine months from $21.0 million for the
same period in 2000. Included in engineering, technical and other direct costs
of service is the net cost of incollect roaming which represents the difference
between the amount paid to other cellular carriers for Price Wireless'
subscribers roaming in those carriers' markets and the amount billed to these
subscribers by Price Wireless. The net for the current nine month period
resulted in revenue of $2.0 million compared to an expense of $784,000 for the
same period in 2000 or a net decrease of $2.8 million. More than offsetting the
savings in net incollect were additional costs to operate Price Wireless'
prepaid subscriber system ($2.4 million). These costs increased in the latter
part of the third quarter of 2000 when Price Wireless was forced to switch
prepaid vendors after learning that the previous vendor was going out of
business. Additional costs associated with the installation of 43 cell sites
subsequent to September 30, 2000, such as cell site rent and utilities
($751,000), span line costs and intertrunk expenses ($526,000) as well as other
system related expenses ($1.4 million) also decreased the incollect savings
mentioned above.
The increase in equipment cost from $24.6 million for the nine month period
in 2000 to $24.8 million for the current nine month period is principally a
result of additional handsets sold or upgraded during the current nine month
period (see breakdown of equipment sales above). The percentage of cost
recovered decreased from 57.4% for the nine month period in 2000 to 53.2% for
the current nine months principally due to the reduction in accessory sales
which have a positive gross profit percentage.
83
Selling, general and administrative expenses ("SG&A") increased $7.2 million
from $46.5 million for the first nine months of 2000 to $53.7 million for the
same period of the current year. As a percentage of revenue, SG&A for the
current nine month period is 27.1% of revenue compared with 22.8% for the same
nine month period in 2000. Sales and marketing increased $763,000 from $17.2
million for the nine month period ending September 30, 2000 to $18.0 million
for the current nine month period principally due to increases in advertising
expenditures. The cost to add a gross subscriber, which includes sales and
marketing costs combined with the loss on equipment sales, decreased from $182
for the nine month period ending September 30, 2000 to $169 for the current
nine month period.
For the current nine month period, customer service costs amounted to $15.9
million compared to $15.2 million for the same period in 2000. Increased costs
for the generation of subscriber's monthly statements because of the greater
number of subscribers contributed to the additional cost. The use of additional
personnel and professional services to handle the expanding customer base in
order to control churn and the use of temporary employees in the markets to
effectuate mandated area code changes also resulted in increased costs.
Offsetting these increases was a $2.0 million credit issued to Price Wireless
by its current billing vendor due to the problems encountered during the
transition (see General and administrative expenses and bad debts below).
General and administrative expenses (excluding customer service), increased
from $14.1 million for the prior nine month period to $19.8 million for the
current nine month period. The $5.7 million increase was principally a result
of a $5.8 million increase in the provision for doubtful accounts. In the
fourth quarter of 2000, Price Wireless changed its billing vendor because Price
Wireless learned the previous billing vendor would not be a long-term
participant in the wireless customer billing business. The transition
encountered problems and as a result, Price Wireless' collection efforts were
hampered, which led to a longer average aging period of Price Wireless'
accounts receivable and a necessity to provide a higher provision for bad
debts. General and administrative expenses, excluding customer service,
increased from 6.9% of total revenue for the nine month period of the prior
year to 10.0% for the current nine month period.
Depreciation and amortization are comparable, amounting to $35.7 million for
the current nine month period and $35.5 million for the same period last year.
Operating income decreased to $60.3 million for the nine month period ended
September 30, 2001 from $76.3 million for the same period in 2000 or a decrease
of $16.0 million. Operating income before depreciation and amortization
amounted to 48.6% as a percentage of revenue for the current nine month period
compared with 54.8% for the same period of the prior year. The decrease in
operating margin is attributable primarily to the decrease in outcollect
roaming revenue as well as the increase in the provision for bad debts. Price
Wireless was able to maintain its low operating cost per subscriber (total
operating costs before depreciation and amortization), which amounted to $17.98
for the current nine month period, compared to $17.87 for the same period last
year.
Net Interest Expense, Income Taxes, and Net Income. Net interest expense
decreased to $45.6 million for the nine months of 2001 from $46.3 million for
the same period in 2000.
The current nine month period's income tax provision of $5.2 million
compared with a tax provision of $10.7 million for the nine month period in
2000, is a result of the higher financial statement taxable income for the nine
months of the prior year compared with a financial statement taxable income for
the current nine-month period.
Net income for the current nine month period of $8.9 million compared with
net income of $18.0 million for the nine month period ended September 30, 2000
is a function of the items discussed above.
During the current year, Price Wireless adopted Securities and Exchange
Commission Staff Accounting Bulletin No. 101 ("SAB 101") which requires the
deferral of certain revenue over the approximate length of a subscriber's
contract or expected term of the subscriber's relationship, whichever is
longer, or over the remaining unused minutes for prepaid revenue. The effect on
the current financial statements was not material.
84
Years ended December 31, 2000, December 31, 1999 and December 31, 1998
The following table sets forth for the periods indicated, the percentage
which certain amounts bear to total revenue.
For The Year Ended
December 31,
-------------------
2000 1999 1998
----- ----- -----
Revenue:
Service.............................................. 93.4% 93.8% 93.9%
Equipment sales and installation..................... 6.6 6.2 6.1
----- ----- -----
Total Revenue.................................... 100.0 100.0 100.0
----- ----- -----
Operating Expenses:
Engineering, technical and other direct:
Engineering and technical(1)..................... 5.2 5.5 6.3
Other direct costs of services(2)................ 4.2 6.5 8.0
Cost of equipment(3)................................. 12.1 11.5 11.7
Selling, general and administrative:
Selling and marketing(4)......................... 8.6 8.6 10.9
Customer service(5).............................. 7.4 6.6 6.3
General and administrative(6).................... 6.9 9.2 11.7
Depreciation and amortization........................ 17.4 18.0 22.1
----- ----- -----
Total Operating Expenses......................... 61.8 65.9 77.0
----- ----- -----
Operating income........................................ 38.2% 34.1% 23.0%
Operating income before depreciation and amortization(7) 55.6% 52.2% 45.1%
- --------
(1) Consists of costs of cellular telecommunications network, including
inter-trunk costs, span-line costs, cell site repairs and maintenance, cell
site utilities, cell site rent, engineers' salaries and benefits and other
operational costs.
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the costs of the cellular handset and accessories
sold, sales and marketing personnel, employee and agent commissions.
(4) Consists primarily of salaries and benefits of advertising and promotional
expenses.
(5) Consists primarily of salaries and benefits of customer service personnel
and costs of printing and mailing subscriber's bills.
(6) Includes salaries and benefits of general and administrative personnel and
other overhead expenses.
(7) EBITDA represents operating income before depreciation and amortization.
EBITDA should not be considered in isolation or as an alternative
measurement of operating performance or liquidity to net income, operating
income or any other measure of performance under generally accepted
accounting principles. Price Wireless believes that EBITDA is viewed as a
relevant supplemental measure of performance in the cellular
telecommunications industry.
Year ended December 31, 2000 compared to Year ended December 31, 1999
Operating results for the year ended December 31, 2000 reflect the continued
improvement in operating cash flow ("EBITDA"), subscriber growth and the
related increase in penetration, a slight decrease in the average revenue per
subscriber and the continuation of strong cost controls which translate to a
low average operating cost per subscriber.
. General and administrative expenses: includes all operating expense not
included in the other operating expense categories, including indirect
charges, and
85
Revenue. Service revenues totaled approximately $252.5 million for the
current year compared to approximately $233.6 million for 1999 or an increase
of 8.1%. The increase is principally a result of the greater amount of access
revenue ($5.7 million) due to the increase in the average number of post paid
subscribers, as well as increases in toll revenue ($4.4 million), feature
revenue ($2.5 million) and prepaid airtime revenue ($4.0 million). The increase
in toll revenue is primarily due to the increase in the number of minutes used
by post paid subscribers (an increase of 463 million minutes) which per
subscriber increased from 250 minutes per post paid subscriber in 1999 to 318
minutes in 2000. Despite the increase in minutes of use, airtime revenue was
flat as Price Wireless' rate plans provided larger amounts of free minutes than
in the past in order to remain competitive in its markets. As a result of
increased competition for additional post paid cellular subscribers, Price
Wireless' local revenue per cellular subscriber decreased slightly from $40.16
in 1999 to $39.42 in 2000. In addition, Price Wireless' outcollect roaming
revenue, which is revenue that Price Wireless derives from other cellular
companies' subscribers roaming in Price Wireless' markets, increased by
($826,000) as a result of an increase in usage from 105.8 million minutes in
1999 to 129.9 million minutes in 2000, partially offset by reduced
reimbursement rates from the other carriers. Price Wireless expects this trend
to continue as a result of new roaming rates negotiated with some of the
Company's roaming partners as well as the increased number of wireless carriers
in each market which can be utilized by other carriers.
Equipment and installation revenue amounted to $18.0 million for the current
year compared to $15.5 million in 1999. The increase in equipment revenue of
16.1% is primarily a combination of a greater number of gross pre and post paid
subscriber additions (39,409 increase over 1999) as well as a greater emphasis
on accessory sales to new subscribers.
Operating Expenses. Operating expenses increased $3.0 million from $164.1
million in 1999 to $167.1 million in 2000. As a percentage of total revenue,
operating expenses decreased from 65.9% of total revenue in 1999 to 61.8% of
total revenue in 2000. After excluding depreciation and amortization, operating
expenses amount to 44.4% of total revenue for 2000 compared to 47.9% of total
revenue for 1999. Total operating costs per cellular subscriber amounted to
$17.27 in 2000 and $20.68 in 1999.
Engineering, technical and other direct expenses decreased from $29.7
million in 1999 to $25.3 million in 2000. There are three major components in
this category. The net cost of incollect roaming, which represents the
difference between the amount paid to other cellular carriers for Price
Wireless' subscribers roaming in other carriers' markets and the amount charged
to these subscribers, variable network costs such as inter trunk, long distance
and directory assistance costs, and engineering costs which consist principally
of salaries and related fringe benefits, fixed span line costs and tower
rentals.
As a result of negotiations with other cellular carriers (see comments above
concerning outcollect revenue), Price Wireless was able to reduce the amount it
reimburses those carriers for incollect roaming resulting in net incollect
revenue of $1.1 million for the current year compared to a net cost of $4.0
million for 1999. This reduction was augmented by decreased long distance and
directory assistance costs resulting from renegotiated rates. Partially
offsetting these cost savings, were increases in variable telephone costs such
as interconnect and reverse toll charges as well as the direct cost of prepaid
usage due to the increase in prepaid revenue and the implementation of a new
prepaid software system.
Decreases in engineering salaries and related expenses were offset by
increases in fixed span line costs and additional cell site rental costs as the
Company continued to build out its system by adding 56 new cell sites and
increasing the number of radios in the existing cell sites.
The increase in gross subscriber additions combined with the increase in
cellular phone upgrades as well as the higher cost of digital phones, resulted
in an increase of the cost of equipment sold from $28.7 million in 1999 to
$32.7 million in 2000. In addition, increases in the sale of accessories
contributed to the increase. As a percentage of recovered cost, Price Wireless
recovered 55.1% of the cost of equipment in 2000 compared to a recovery of
54.3% in 1999.
86
Selling, general and administrative ("SG&A") increased from $60.7 million
for 1999 to $62.1 for the current year. As a percentage of total revenue, SG&A
decreased from 24.3% of total revenue in 1999 to 23.0% in 2000. Sales and
marketing costs which include installation costs, salaries, commissions and
advertising, amounted to $23.2 million for the year 2000 and $21.5 million for
1999. Increases in salaries and related benefits, commissions and advertising
expenditures increased in total by $1.2 million as the number of gross
activations increased for the current year. The cost to add a gross subscriber,
which consists of the net loss on equipment sales and sales and marketing
expenditures, decreased from $198.68 in 1999 to $177.63 in 2000.
Customer service costs, primarily billing costs and payroll and related
benefits, increased to $20.2 million in 2000 from $16.4 million in 1999.
Increases in personnel and billing costs are a direct function of the increases
in the number of subscribers. Additional subscribers require an increase in the
number of cellular bills mailed out, as well as an increase in the number of
customer service representatives necessary to handle the additional subscriber
inquiries.
General and administrative expenses were reduced to $18.8 million in 2000
compared with $22.8 million in 1999. Price Wireless' provision for bad debts
decreased from $7.1 million in 1999 to $4.2 million in 2000 due to additional
customer service staffing, as well as the utilization of outside collection
services. Reductions in legal and professional fees ($800,000) and computer
support services ($1.0 million) contributed to the $4.0 million reduction in
expenses.
Depreciation and amortization increased from $45.1 million in 1999 to $47.0
million in 2000. The increase is primarily a result of additional depreciation
expense due to the significant capital equipment additions during 1999 and 2000.
Operating income grew from $85.0 million 1999 to $103.4 million in 2000.
Earnings before depreciation and amortization ("EBITDA") amounted to $150.4
million for 2000 or 55.6% of total revenue compared to $130.2 million or 52.2%
of total revenue for 1999. The improvement is a function of management's
ability to control costs while still maintaining subscriber growth. The
increase in EBITDA from 1999 to 2000 represents a growth of 15.5%.
Interest Expense, Income Taxes, and Net Income. Interest expense decreased
to $71.4 in 2000 from $82.6 million in 1999. During 1999, long term debt
consisted of $175 million of 11 3/4% Senior Subordinated Notes, $525 million of
9 1/8% Senior Secured Notes and $200 million of 11 1/4% Senior Exchangeable
Payable-in-Kind Notes. In June 1999, Price Wireless allowed the conversion of
the $200 million 11 1/4% Payable-in-Kind Notes and therefore 1999 includes an
additional six months of interest expense which was not incurred in 2000. The
increase of $1.9 million in interest income is a result of the increase in the
average rate the Company earned on its cash during the year.
The income tax provision for 2000 of $15.1 million compared to the provision
of $3.3 million is principally a result of the increase in taxable income in
2000 at an effective rate of approximately 37%.
The net income of $25.5 million for 2000 compared to net income of $5.7
million for 1999 is a function of the items discussed above.
Year ended December 31, 1999 compared to Year ended December 31, 1998
Operating results for the year ended December 31, 1999 reflect the continued
improvement in operating cash flow, subscriber growth and the related increase
in penetration, maintenance of a strong average revenue per subscriber and
strong cost controls which translate to a low average cost per subscriber.
87
Revenue. Service revenues totaled approximately $233.6 million for the
current year compared to approximately $184.7 million for 1998 or an increase
of 26.5%. The increase is principally a result of greater access revenue ($21.8
million) due to an increase in the average number of cellular subscribers. The
increase in airtime usage from .8 billion minutes of use for 1998 (188 minutes
per average subscriber) to 1.2 billion minutes of use in 1999 (250 minutes per
average subscriber) generated an additional amount of airtime revenue ($4.2
million) as well as toll revenue ($9.1 million). There is not necessarily a
direct relationship between the increase in minutes of use and revenue since a
significant portion of airtime usage is included in a subscriber's monthly fee.
Despite the increasing competition for additional cellular subscribers, Price
Wireless was able to increase its local revenue per cellular subscriber from
$38.20 in 1998 to $40.16 in 1999. In addition, Price Wireless' outcollect
roaming revenue, which is revenue that Price Wireless derives from other
cellular companies' subscribers roaming in Price Wireless' markets, increased
approximately $12.6 million as a result of an increase in usage from 51.5
million minutes in 1998 to 105.8 million minutes in 1999.
Equipment revenue amounted to $15.5 million for the current year compared to
$12.1 million in 1998. The increase in equipment revenue of 29% is a
combination of a greater portion of the cost being recovered from subscribers.
The increase in the average revenue per gross addition (from $80 to $89)
resulted in an increase of $1.9 million for phone sales. In addition, a greater
emphasis on accessory sales to new subscribers resulted in an increase of $1.5
million.
Operating Expenses. Operating expenses increased $12.4 million from $151.7
million in 1998 to $164.1 million in 1999. As a percentage of total revenue,
operating expenses decreased from 77.4% of total revenue in 1998 to 65.9% of
total revenue in 1999. Approximately $5.6 million was related to additional
equipment costs (for the reasons stated in equipment revenue), approximately
$3.8 million was for selling, general and administrative for the reasons
indicated below and $1.5 million was a function of an increase in depreciation
and amortization. After excluding depreciation and amortization, operating
expenses amount to 47.8% of total revenue for 1999 compared to 55.0% of total
revenue for 1998. Total operating costs per cellular subscriber amounted to
$20.68 in 1999 and $23.48 in 1998.
Engineering, technical and other direct expenses increased from $28.1
million in 1998 to $29.7 million in 1999. There are three major components in
this category. The net cost of incollect, which represents the difference
between the amount paid to other cellular carriers for Price Wireless'
subscribers roaming in other carriers' markets and the amount charged to these
subscribers, variable network costs such` as inter trunk, long distance and
directory assistance costs, and engineering costs which consist principally of
salaries and fixed span line costs and tower rentals.
As a result of negotiations with other cellular carriers, Price Wireless was
able to reduce the amount it reimburses those carriers for incollect roaming
resulting in a recovery of 90% of cost for 1999 compared to a 78% recovery for
1998 or a decrease of $4.4 million of net expense. Price Wireless expects to
realize additional benefits in the future thus expecting this significant
component of direct expenses to decrease in the future. Offsetting these
savings were increases in long distance, directory assistance and interconnect
costs related to the increased utilization of the system which is evidenced by
a 53% increase in minutes of use.
Decreases in engineering salaries and related expenses ($900,000) were
offset by increases in fixed span line costs ($1.2 million) and additional cell
site rents ($1.0 million) as Price Wireless continued to build out its system
by adding new cell sites and increasing the number of radios in the existing
cell sites.
The increase in gross subscriber additions combined with the increase in
cellular phone upgrades as well as the higher cost of digital phones, resulted
in an increase of the cost of equipment from $23.1 million in 1998 to $28.7
million in 1999. In addition, increases in the sale of accessories contributed
to the increase in equipment cost. Price Wireless recovered 54.3% of the cost
of equipment in 1999 compared to a recovery of 52.2% in 1998.
88
Selling, general and administrative ("SG&A") increased to $60.7 million for
the current year compared to $56.9 million in 1998. As a percentage of total
revenue, SG&A decreased from 28.9% of total revenue in 1998 to 24.3% in 1999.
Sales and marketing costs which include installation costs (included as
engineering in 1998), salaries, commissions and advertising, amount to $21.5
million for both 1999 and 1998. Decreases in salaries and related benefits were
offset by increases in commissions ($240,000) and advertising expenditures
($739,000). The cost to add a gross cellular subscriber, which consists of the
net loss on equipment sales and sales and marketing expenditures, decreased
from $214.30 in 1998 to $198.68 in 1999.
Customer service costs, which consist principally of billing costs and
payroll and related benefits, increased to $16.4 million in 1999 from $12.5
million in 1998. Increases in personnel and billing costs are a direct function
of the increases in the number of subscribers. Additional subscribers require
an increase in the number of cellular bills mailed out, as well as an increase
in the number of customer service representatives to handle the additional
subscriber inquiries.
General and administrative expenses remained almost constant amounting to
$22.8 million in 1999 and $22.9 million in 1998. Significant savings in payroll
and related benefits ($1.2 million) were offset by the increase in the
provision for bad debts ($600,000).
Depreciation and amortization increased from $43.6 million in 1998 to $45.1
million in 1999. Decreases in the amortization of intangibles related to the
finalization in 1998 of the value of the cellular licenses from the
acquisition, were more than offset by increases in depreciation expense due to
fixed asset additions in 1999.
Operating income improved significantly from $45.0 million achieved in 1998
to $85.0 million in 1999. Earnings before depreciation and amortization
("EBITDA") amounted to $130.2 million for 1999 or 52.2% of total revenue
compared to $88.6 million or 45.0% of total revenue for 1998. The improvement
is a function of management's ability to control costs while still maintaining
significant subscriber growth and maintaining and growing average revenue per
subscriber in the face of a declining trend in the cellular industry. The
increase in EBITDA from 1998 to 1999 represents a growth of 46.9%.
Net Interest Expense, Income Taxes, Extraordinary Item and Net Income. Net
interest expense decreased to $74.4 in 1999 from $77.5 million in 1998. During
1998, long term debt consisted of at various times the revolving loan and
credit facility at variable interest rates, $80 million of 13 1/2% Senior
Secured Discount Notes, $175 million of 11 3/4% Senior Subordinated Notes, $525
million of 9 1/8% Senior Secured Notes and $200 million of 11 1/4% Senior
Exchangeable Payable-in-Kind Notes. In June 1999, Price Wireless allowed the
conversion of the $200 million 11 1/4% Payable-in-Kind Notes and therefore
incurred only six months of non-cash interest expense. The $175 million 11 3/4%
Notes and the $525 million 9 1/8% Notes were outstanding for the full year. The
effect of the different borrowings resulted in interest savings of $500,000.
The additional cash on hand as a result of the new borrowings in 1998 resulted
in additional interest income of $2.8 million. The current debt outstanding
requires cash interest payments resulting in interest expense of $68.5 million
for a full year.
The income tax provision for 1999 of $3.3 million compared to the income tax
benefit of $12.8 million in 1998 is a result of taxable income in 1999 at an
effective rate of approximately 37% compared to a taxable loss at a benefit of
approximately 37% in 1998.
The net income of $5.7 million for 1999 compared to a net loss of $47.2
million for 1998 is a function of the items discussed above. In addition, 1998
includes $25.3 million net of tax benefit of deferred finance charges written
off, the premium associated with the early extinguishment of debt and interest
paid for the early liquidation of the interest rate swap contracts.
89
OCP--RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
The Orange County-Poughkeepsie Limited Partnership ("OCP") provides
wholesale cellular service to the Orange County and Poughkeepsie metropolitan
areas to resellers who operate in that geographic area. The Orange
County-Poughkeepsie cellular system became operational in 1987.
OCP is a limited partnership originally formed between NYNEX Mobile
Communications Company ("NMCC"), Contel Cellular, Inc. ("Contel"), Highland
Telephone Company ("Highland"), Sylvan Lake Telephone Company ("Sylvan"),
Taconic Telephone Corporation ("Taconic") and Warwick Valley Telephone Company
("Warwick").
On January 17, 1988, NMCC transferred its interest in OCP to New York
Cellular Geographic Services Area, Inc. ("NYCGSA"), an affiliate of NMCC.
On December 27, 1993, Contel sold its 22.5% partnership interest to NYCGSA
with its remaining 2.5% partnership interest being sold to NYCGSA on December
29, 1993.
On October 20, 1994, Sylvan changed its name to Frontier Communications of
Sylvan Lake ("Frontier-- Sylvan Lake") and Highland changed its name to
Frontier Communications of New York, Inc. ("Frontier--New York").
On July 1, 1995, NYCGSA's interest in OCP was contributed to NYNEX Mobile
Limited Partnership 2 ("NYNEX Mobile LP 2") and subsequently became the
managing general partner of OCP. NYNEX Mobile LP 2 is a partnership
beneficially owned by Verizon Wireless.
On December 1, 1999, Frontier--New York and Frontier--Sylvan Lake, each
holding a 7.5% interest in OCP, sold their interests to NYNEX Mobile LP 2.
NYNEX Mobile LP 2 currently holds a 70% general partnership interest and a
15% limited partnership interest in OCP. Taconic and Warwick each hold limited
partnership interests of 7.5%.
Presentation of Financial Information
As a wholesale provider, OCP owns and operates a cellular telecommunications
network and sells available minutes to reseller companies which in turn sell to
individual retail subscribers.
Operating Revenues. OCP earns revenue by providing access to the cellular
network (access revenue) and for usage of the cellular network (airtime/usage
revenue), which includes roaming and long distance revenue. Long distance
represents calls placed by OCP's reseller customers and those of other carriers
within OCP's service area.
Access revenue is billed one month in advance and is recognized when
earned. Airtime/usage revenue, roaming revenue and long distance revenue are
recognized when service is rendered and included in unbilled revenue until
billed.
Operating Costs and Expenses. Operating expenses include all direct costs
related to OCP, OCP's share of all indirect distribution costs in the service
area and charges of administrative and operating costs from the managing
general partner.
Services performed on behalf of OCP are provided by employees of Verizon
Wireless. These employees are not employees of OCP; therefore, operating
expenses include direct and indirect charges of salary and employee benefit
costs for the services provided to OCP.
Operating expenses consist of the following:
. Cost of service: primarily includes direct telecom charges, which are
costs to handle calls over OCP's network, including landline charges,
trunk lines and other costs to maintain the network;
90
. Depreciation and amortization: includes depreciation of network and other
assets.
Due from General Partner. Due from general partner principally represents
OCP's cash position. The general partner manages all cash and financing
activities of OCP. As such, the due from general partner is reflected as a
financing activity in the Statements of Cash Flows. Additionally,
administrative and operating costs incurred by the general partner on behalf of
OCP are charged to OCP through this account. Interest income is based on the
average monthly outstanding balance in this account, is calculated by applying
Verizon Wireless' average borrowing rate and is included in Other income, net
on the statement of operations.
Results of Operations
Orange County-Poughkeepsie Limited Partnership Nine Months Ended September
30, 2001 Compared to Nine Months Ended September 30, 2000
Subscribers
As of September 30, 2001, OCP had approximately 109.6 thousand subscribers
on its network through reseller arrangements, an increase of 24.1% compared to
September 30, 2000.
Operating revenue
Total operating revenue for the nine months ended September 30, 2001 was
$58,649 thousand, an increase of $17,774 thousand, or 43.5%, compared to the
nine months ended September 30, 2000. The increase was primarily attributed to
an increase in the number of average subscribers.
Average revenue per unit for the nine months ended September 30, 2001 was
$63.62, an increase of $6.39, or 11.2%, compared to the nine months ended
September 30, 2000. The increase is due to a 26.1% increase in the average
monthly usage per subscriber for the nine months ended September 30, 2001
compared to the nine months ended September 30, 2000.
Operating costs and expenses
Cost of service. Cost of service for the nine months ended September 30,
2001 was $6,288 thousand, an increase of $1,531 thousand, or 32.2%, compared to
the nine months ended September 30, 2000. The increase is due primarily to a
63% increase in minutes of use on OCP's network.
General and administrative expenses. General and administrative expenses
for the nine months ended September 30, 2001 were $4,993 thousand, an increase
of $1,852 thousand, or 59.0%, compared to the nine months ended September 30,
2000. The increase is due primarily to an increase in network salaries, support
and administrative costs.
Depreciation and amortization. Depreciation and amortization for the nine
months ended September 30, 2001 was $2,622 thousand, an increase of $369
thousand, or 16.4%, compared to the nine months ended September 30, 2000. This
increase is due the continued investment in OCP's digital network.
Other income, net
Other income, net for the nine months ended September 30, 2001 was $994
thousand, an increase of $72 thousand, or 7.8%, compared to the nine months
ended September 30, 2000. The increase is primarily due to the increase in
OCP's cash position for the nine months ended September 30, 2001 and the
related interest income.
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Orange County-Poughkeepsie Limited Partnership Year Ended December 31, 2000
Compared to Year Ended December 31, 1999
Subscribers
As of December 31, 2000, OCP had approximately 94.7 thousand subscribers on
its network through reseller arrangements, an increase of 35.5% compared to
December 31, 1999.
Operating revenue
Total operating revenue for the year ended December 31, 2000 was $57,678
thousand, an increase of $22,166 thousand, or 62.4%, compared to the year ended
December 31, 1999. The increase was primarily attributed to an increase in the
number of average subscribers.
Average revenue per unit for the year ended December 31, 2000 was $58.52, an
increase of $9.09, or 18.4%, compared to the year ended December 31, 1999. The
increase is due to a 37.4% increase in the average monthly usage per subscriber
for the year ended December 31, 2000 compared to the year ended December 31,
1999.
Operating costs and expenses
Cost of service. Cost of service for the year ended December 31, 2000 was
$6,509 thousand, an increase of $2,505 thousand, or 62.6%, compared to the year
ended December 31, 1999. The increase is due primarily to an 88% increase in
minutes of use on OCP's network.
General and administrative expenses. General and administrative expenses
for the year ended December 31, 2000 were $4,455 thousand, an increase of
$1,229 thousand, or 38.1%, compared to the year ended December 31, 1999. The
increase is due primarily to an increase in network salaries, support and
administrative costs.
Depreciation and amortization. Depreciation and amortization for the year
ended December 31, 2000 was $3,077 thousand, an increase of $548 thousand, or
21.7%, compared to the year ended December 31, 1999. This increase is due to
the build-out of OCP's digital network and the related capital expenditures.
Other income, net
Other income, net for the year ended December 31, 2000 was $1,264 thousand,
an increase of $600 thousand, or 90.4%, compared to the year ended December 31,
1999. The increase is primarily due to the increase in OCP's cash position for
the year ended December 31, 2000 and the related interest income.
Orange County-Poughkeepsie Limited Partnership Year Ended December 31, 1999
Compared to Year Ended December 31, 1998
Subscribers
As of December 31, 1999, OCP had approximately 69.9 thousand subscribers on
its network through reseller arrangements, an increase of 30.4% compared to
December 31, 1998.
Operating revenue
Total operating revenue for the year ended December 31, 1999 was $35,512
thousand, an increase of $14,464 thousand, or 68.7%, compared to the year ended
December 31, 1998. The increase was primarily attributed to an increase in the
number of average subscribers.
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Average revenue per unit for the year ended December 31, 1999 was $49.43, an
increase of $11.10, or 29.0%, compared to the year ended December 31, 1998. The
increase is due to a 113% increase in the average monthly usage per subscriber
for the year ended December 31, 1999 compared to the year ended December 31,
1998.
Operating costs and expenses
Cost of service. Cost of service for the year ended December 31, 1999 was
$4,004 thousand, an increase of $2,098 thousand, or 110.1%, compared to the
year ended December 31, 1998. The increase is due primarily to a 179% increase
in minutes of use on OCP's network.
General and administrative expenses. General and administrative expenses
for the year ended December 31, 1999 were $3,226 thousand, an increase of $742
thousand, or 29.9%, compared to the year ended December 31, 1998. The increase
is due primarily to an increase in network salaries, support and administrative
costs.
Depreciation and amortization. Depreciation and amortization for the year
ended December 31, 1999 was $2,529 thousand, an increase of $398 thousand, or
18.7%, compared to the year ended December 31, 1998. This increase is due to
increased capital spending to support OCP's network build-out program.
Other income, net
Other income, net for the year ended December 31, 1999 was $664 thousand, an
increase of $256 thousand, or 62.7%, compared to the year ended December 31,
1998. The increase is primarily due to the increase in OCP's cash position for
the year ended December 31, 1999 and the related interest income.
Financial Condition
Total assets at September 30, 2001 were $55,578 thousand, an increase of
$4,865 thousand, or 9.6%, compared to December 31, 2000. The increase was
primarily due to an increase in property, plant and equipment.
Total liabilities at September 30, 2001 were $1,277 thousand, a decrease of
$875 thousand, or 40.7%, compared to December 31, 2000. The decrease was
primarily due to a decrease in accrued expenses.
Total partners' capital was $54,301 thousand at September 30, 2001, an
increase of $5,740 thousand, or 11.8%, compared to December 31, 2000. The
increase was primarily due to net income of OCP offset by a $40,000 thousand
distribution to the partners.
Inflation
OCP does not believe that inflation has had a material adverse impact on its
business or operating results during the periods presented.
PRICE WIRELESS, OCP AND NEW LIMITED PARTNERSHIP-- LIQUIDITY AND CAPITAL
RESOURCES
Price Wireless
During the nine month period ending September 30, 2001, Price Wireless
generated $73.2 million of cash flow from operating activities. Price Wireless'
EBITDA (earnings before interest, depreciation and amortization and taxes) was
$96.1 million for the nine month period ending September 30, 2001. As of
September 30, 2001, Price Wireless' debt service requirements for 2001
consisted of cash interest payments of $68.5 million, of which
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$44.5 million had been paid through September 30, 2001. The remaining cash
interest requirement was approximately $24.0 million in the fourth quarter of
2001. Price Wireless has outstanding debt instruments which consist of $525
million 9 1/8% Senior Secured Notes due December 15, 2006 and $175 million
11 3/4% Senior Subordinated Notes due July 15, 2007. Both of these instruments
contain covenants that restrict the payment of dividends, incurrence of debt
and sale of assets, among other things.
OCP
Capital Expenditures
As of September 30, 2001, OCP's capital expenditures for 2001 relating to
the build-out and upgrade of its network were $3,186 thousand. Expansion of the
OCP network will continue to require outlays of funds to address increased
customer usage, customer demand for new services, subscriber growth and
additional capacity for data services.
Distributions
In June 2001, OCP made a $40,000 thousand distribution to its partners and
in December 2001 a $30,000 thousand distribution. OCP intends to make total
distributions to its partners of approximately $60,000 thousand in 2002,
payable in June and December.
Source of Funds
OCP has funded its operations through internally generated funds and will
rely on those internally generated funds to fund its continued network
expansion and distributions.
Net cash provided by operating activities was $48,557 thousand, $46,845
thousand, $28,702 thousand and $17,696 thousand for the nine months ended
September 30, 2001 and the years ended 2000, 1999 and 1998, respectively. Net
cash used in financing activities was $45,371 thousand, $42,466 thousand,
$23,175 thousand and $13,836 thousand for the nine months ended September 30,
2001 and the years ended December 31, 2000, 1999 and 1998, respectively.
The principal uses of funds in the nine-month period ended September 30,
2001 were capital expenditures of $3,186 thousand and distributions to partners
of $40,000 thousand. The principal uses of funds in the year ended December 31,
2000 were capital expenditures of $4,654 thousand and distributions to partners
of $35,000 thousand. The principal uses of funds in the year ended December 31,
1999 were capital expenditures of $6,269 thousand and $18,000 thousand
distribution to partners. The principal uses of funds in the year ended
December 31, 1998 were capital expenditures of $5,024 and distributions to
partners of $6,000 thousand.
New Limited Partnership
New Limited Partnership expects to have significant cash needs over the next
two years, as described below.
Capital Expenditures
Substantial capital outlays will be required to convert Price Wireless'
network infrastructure from Time Division Multiple Access ("TDMA") to Code
Division Multiple Access ("CDMA") technology. Verizon Wireless currently
estimates that New Limited Partnership's capital expenditures, including costs
for the conversion of the former Price Wireless markets to CDMA, will total
approximately $207 million in 2002 and $85 million in 2003. The conversion of
the network to CDMA will also require additional costs to be treated as
operating expenses relating to the change out of handsets. This cost will be
approximately $52 million over the next two years.
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Distributions
After the second anniversary of the contribution transaction, New Limited
Partnership will make cash distributions to the holder of the Preferred
Exchangeable Interest on a quarterly basis equal to 50% of Price Wireless'
preferred return. Verizon Wireless does not anticipate such future cash
distributions will have a material effect on the financial position and results
of operations of New Limited Partnership.
Debt Service
In connection with the contribution transaction, new Limited Partnership
will conduct a tender offer and will effect a covenant defeasance to redeem all
of the 113/4% Senior Subordinated Notes due 2007 and the 9 1/8% Senior Secured
Notes due 2006, respectively, with cash contributed by the partners (totaling
approximately $350 million). In connection with the tender offer and the
redemption, New Limited Partnership will borrow $350 million from a third-party
lender. This loan will be non-recourse to the partners of New Limited
Partnership and shall not obligate New Limited Partnership to repay the loan at
any time prior to five years after the contribution transaction. Pro forma
interest expense on the $350 million loan for the year ended December 31, 2000
was $21 million. Future interest payments may vary from New Limited
Partnership's pro forma results due to changes in outstanding debt levels and
changes in market conditions.
In addition, subsidiaries of Verizon Wireless will contribute a $500 million
promissory note receivable issued by Verizon Wireless, and payable upon demand.
Pro forma interest income on this note was approximately $31 million for the
year ended December 31, 2000.
Sources of Funds
New Limited Partnership will fund its operations through internally
generated funds and will rely on those internally generated funds to fund its
distributions. New Limited Partnership will rely on a combination of internally
generated funds and borrowings from affiliates and unrelated entities to fund
its capital expenditures and debt service needs.
We cannot assure that New Limited Partnership will be able to obtain all
necessary financing to support its operations and other cash needs.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," No. 142, "Goodwill and Other Intangible Assets" and No. 143,
"Accounting for Asset Retirement Obligations."
SFAS No. 141 requires the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is no longer permitted. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination that is completed after
June 30, 2001.
SFAS No. 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Intangible assets that have finite lives will
continue to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The Partnership is required to adopt SFAS No. 142 effective
January 1, 2002. The Partnership is currently evaluating our intangible assets
in relation to the
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provisions of SFAS No. 142 to determine the impact the adoption of SFAS No. 142
will have on our results of operation or financial position.
SFAS No. 143 requires entities to recognize the fair value of any legal
obligation associated with the retirement of long-lived assets and to
capitalize that amount as a part of the book value of the long-lived asset.
That cost is then depreciated over the remaining life of the underlying
long-lived asset. New Limited Partnership and OCP are required to adopt the
standard effective January 1, 2003. Each of New Limited Partnership and OCP
will evaluate their long-lived assets retirement obligation in relation to the
provisions of SFAS No. 143 to determine the impact, if any, on their future
results of operations or financial position.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This standard re-addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
It concludes that one accounting model be used for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations to
include more disposal transactions. New Limited Partnership and OCP are
required to adopt the standard effective January 1, 2002. Neither New Limited
Partnership nor OCP expect the impact of the adoption of SFAS No. 144 to have a
material effect on results of operations or financial position.
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BUSINESS OF NEW LIMITED PARTNERSHIP
Overview
The business of New Limited Partnership will consist of the ownership and
operation of all of the assets to be contributed by Price Wireless and Verizon
Wireless and its subsidiaries to New Limited Partnership pursuant to the
transaction agreement. Price Wireless will contribute substantially all of its
assets and approximately $150 million in cash, and Verizon Wireless and its
subsidiaries will contribute an aggregate 85% partnership interest in Orange
County-Poughkeepsie Limited Partnership (including the general partner interest
and its associated management rights), certain FCC licenses, a $500 million
promissory note receivable and approximately $250 million in cash.
The operations of New Limited Partnership will be closely integrated with
Verizon Wireless' other wireless telecommunications assets. Verizon Wireless
intends to provide or arrange for the provision of certain services to New
Limited Partnership in connection with its business. These services may
include: (i) administrative, accounting, billing, credit, collection,
insurance, legal, purchasing, clerical and such other general services as may
be necessary to administer New Limited Partnership; (ii) design, engineering,
optimization, implementation, surveillance, maintenance, repair and such other
technical services as may be necessary to operate New Limited Partnership's
wireless network; and (iii) assistance in the preparation of filings with
regulatory authorities and in the negotiation of transactions with respect to
the FCC licenses owned by New Limited Partnership.
Price Wireless Contributed Assets
As of September 30, 2001, Price Wireless provided cellular
telecommunications service to approximately 564,000 subscribers in Alabama,
Florida, Georgia, and South Carolina in a total of 16 licensed service areas,
composed of eight MSAs and eight RSAs, with an aggregate estimated population
of 3.4 million. Price Wireless sells its cellular telecommunications service as
well as a full line of cellular products and accessories principally through
its network of retail stores. Price Wireless markets all of its products and
services under the nationally recognized service mark CELLULARONE. After the
contribution transaction and a period of transition, these markets will be
converted to the "Verizon Wireless" brand name.
97
Price Wireless' cellular telecommunications systems serve contiguous
licensed service areas in Georgia, Alabama and South Carolina. Price Wireless
also has a cellular service area in Panama City, Florida. The following table
sets forth, with respect to each service area in which Price Wireless owns a
cellular telecommunications system, the estimated population and, for each MSA,
its national ranking.
MSA Estimated
Service Area Rank Population(1)
- ------------ ---- -------------
Albany, GA................................................. 261 120,822
Augusta, GA................................................ 108 452,846
Columbus, GA............................................... 153 250,929
Macon, GA.................................................. 138 322,549
Savannah, GA............................................... 155 293,000
Georgia--6 RSA............................................. -- 211,408
Georgia--7 RSA............................................. -- 139,606
Georgia--8 RSA............................................. -- 166,601
Georgia--9 RSA............................................. -- 124,063
Georgia--10 RSA............................................ -- 162,261
Georgia--12 RSA............................................ -- 220,558
Georgia--13 RSA............................................ -- 157,068
Dothan, AL................................................. 246 137,916
Montgomery, AL............................................. 139 333,065
Alabama--8 RSA............................................. -- 196,259
---------
Subtotal................................................ 3,288,951
Panama City, FL............................................ 283 148,217
---------
Total................................................... 3,437,168
=========
- --------
(1) Based on population estimates from Paul Kagan and Associates for 2000.
Seven MSAs, Montgomery and Dothan, Alabama and Macon, Columbus, Albany,
Augusta and Savannah, Georgia make up the core of Price Wireless'
Georgia/Alabama cluster. Price Wireless owns additional cellular service areas
in this region including the Georgia--9 RSA, Alabama--8 RSA, Georgia--7 RSA,
Georgia--8 RSA, Georgia--10 RSA, Georgia--12 RSA, Georgia--13 RSA and the
Georgia--6 RSA. The Augusta, Georgia MSA includes Aiken County in South
Carolina. In the aggregate, these markets now cover a contiguous service area
of approximately 38,000 square miles that includes Montgomery, the state
capital of Alabama, prominent resort destinations in Jekyll Island, St. Simons
Island and Sea Island, Georgia, and over 710 miles of interstate highway,
including most of I-95 between Savannah, Georgia and Jacksonville, Florida.
Price Wireless collects substantial roaming revenue from cellular
telecommunications subscribers from other systems traveling in these markets
from nearby population centers such as Atlanta and Birmingham, as well as from
vacation and business traffic in the southeastern United States. As of
September 30, 2001, Price Wireless utilized 348 cell sites in this cluster.
Price Wireless owns the non-wireline cellular license for the Panama City,
Florida market. Price Wireless collects substantial roaming revenue in this
market from subscribers from other systems who visit Panama City, a popular
spring and summer vacation destination. As of September 30, 2001, Price
Wireless utilized 17 cell sites in this market.
Cellco Contributed Assets
Orange County-Poughkeepsie Limited Partnership
The Orange County-Poughkeepsie Limited Partnership ("OCP") operates as a
wholesale provider of wireless services in the Orange County, NY MSA and the
Poughkeepsie, NY MSA. As a wholesale provider, OCP owns and operates a cellular
telecommunications network and sells available minutes to reseller companies
who in turn sell to individual subscribers. The OCP cellular system became
operational in 1987.
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OCP is owned 85% by NYNEX Mobile LP 2 (which is beneficially owned 100% by
Verizon Wireless) and 7.5% by each of Taconic Telephone Corporation and Warwick
Valley Telephone Company. Verizon Wireless presently acts as the general
partner, which makes all decisions and is empowered to do or cause to be done
all acts necessary or appropriate for the operation of OCP, and also as a
limited partner.
OCP operates using two wireline cellular licenses on the 800 MHZ frequency
band. The licenses cover the two MSA markets stated above. Orange County is
listed by the FCC as MSA 144, with a population of over 341,000, a population
density of approximately 414 persons per square mile and a median household
annual income over $40,000. Poughkeepsie is listed by the FCC as MSA 151, with
a population of over 280,000, a population density of approximately 348 persons
per square mile and a median household annual income over $40,000.
OCP owns a network of 33 cell sites, 30 of which operate on the CDMA digital
standard. As a wholesale provider, OCP does not have its own retail subscribers
but instead sells lines of service to reseller companies. As of September 30,
2001, OCP provided service to approximately 110,000 subscribers through 12
reseller companies. The main reseller is Verizon Wireless, which operates 85%
of the lines and is responsible for approximately 95% of the service revenues.
Because OCP operates on a wholesale basis only, it does not operate any retail
stores directly or contract with any agents for the retail distribution of
cellular service or wireless communication devices.
All services and network operations are performed on behalf of OCP by
employees of Verizon Wireless managed through the Verizon Wireless regional and
area operations groups. OCP does not have any employees.
The partners make capital contributions, share in the operating results and
receive distributions from OCP in accordance with their respective ownership
percentages.
A description of the limited partnership agreement relating to OCP is set
forth in the section of this proxy statement/prospectus entitled "Orange
County-Poughkeepsie Limited Partnership Agreement."
FCC Licenses
The FCC licenses to be contributed to New Limited Partnership by Verizon
Wireless include the FCC licenses to provide broadband PCS wireless
communication services within the Macon, Georgia BTA, and all of Verizon
Wireless' right, title and interest in the FCC license to provide broadband PCS
wireless communication services within a portion of the Atlanta, Georgia BTA.
Such licenses authorize operation on the 10 MHz E block spectrum constituting
the 1885-1890 MHz and 1965-1970 MHz frequency bands.
Verizon Wireless Promissory Note
Verizon Wireless will also issue and contribute to New Limited Partnership a
note receivable for the principal amount of $500 million. The note will accrue
interest at an annual rate of 6.14%, and both principal and interest will be
payable on demand.
Integration with Verizon Wireless
Verizon Wireless is the leading wireless communications provider in the
United States in terms of the number of subscribers, revenues and operating
cash flow and offers wireless voice and data services across the most extensive
wireless network in the United States. As of September 30, 2001:
. Verizon Wireless has the largest subscriber base in the United States,
with 28.7 million subscribers, of which approximately 19.9 million were
digital subscribers;
. Verizon Wireless has FCC licenses to offer its services in areas where
approximately 248 million people reside;
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. Verizon Wireless' network provides service in, or covers, areas where
approximately 89% of the population in its licensed areas, or 221 million
people, reside and in 49 of the 50 and 97 of the 100 most populated U.S.
metropolitan areas;
. Verizon Wireless' network provides digital coverage in areas where
approximately 205 million people reside, including in almost every major
U.S. city;
Verizon Wireless further supplements its operations with roaming agreements
that allow its 28.7 million subscribers to use their wireless voice services in
virtually all areas where wireless service is available in the United States.
Verizon Wireless' extensive coverage enables it to cost-effectively offer
innovative pricing, such as its SingleRate plans, enhanced features and other
targeted service packages. Verizon Wireless plans to continue to strengthen its
network by expanding the breadth and depth of its coverage in licensed areas
and by acquiring additional spectrum in currently licensed and other areas.
The operations of New Limited Partnership will be closely integrated with
the operations of Verizon Wireless.
. New Limited Partnership's services will be marketed under the "Verizon
Wireless" brand name. Verizon Wireless' studies have found that its brand
awareness is over 90% among wireless users and prospective customers.
Price Wireless has indicated that it agrees with this finding and believes
that the "Verizon Wireless" brand is well respected.
. New Limited Partnership's marketing will be coordinated by and integrated
with Verizon Wireless' national marketing campaign. Verizon Wireless'
marketing efforts are focused on a coordinated program of television,
print, radio, outdoor signage, internet and point of sale media
promotions. Verizon Wireless coordinates marketing efforts throughout its
service area, which will include New Limited Partnership's service area,
to ensure that its marketing message is uniformly presented across all of
its markets. In particular, New Limited Partnership will adopt the Verizon
Wireless pricing plans, which include its national SingleRate plans, which
appeal to nationwide travelers, its Corporate SingleRate plans, for large
corporate customers, and prepaid plans that appeal to new users and
various other business and consumer segments.
. New Limited Partnership's sales and distribution will be integrated with
and coordinated by Verizon Wireless. New Limited Partnership's sales
strategy will be consistent with that of Verizon Wireless' sales
strategy--to use a mix of direct, indirect and resale distribution
channels in order to increase customer growth while reducing customer
acquisition costs. New Limited Partnership will maintain company-owned
stores within the markets contributed by Price Wireless. The Price
Wireless assets to be contributed include 42 retail stores in these
markets. New Limited Partnership will also rely upon Verizon Wireless'
indirect channels to maintain an extensive distribution system. Verizon
Wireless has approximately 25,000 indirect retail partner locations
selling wireless services, including 10,000 full service locations and
15,000 locations only offering prepaid-calling replenishment, as of
September 30, 2001.
. New Limited Partnership's customer care will be integrated with and
coordinated by Verizon Wireless. Customer care, retention and
satisfaction are essential elements of New Limited Partnership's and
Verizon Wireless' strategies. Through Verizon Wireless' customer care
network, New Limited Partnership will offer customer care twenty-four
hours a day/seven days a week. Verizon Wireless' customer care network
includes 26 full-service call centers and several additional specialty
centers.
. Price Wireless' contributed network will be converted from time division
multiple access, or TDMA, to code division multiple access, or CDMA. The
digital network being contributed by Price Wireless uses a wireless
digital transmission standard know as time division multiple access, or
TDMA. Verizon Wireless' digital network uses a wireless digital
transmission standard known as code division multiple access, or CDMA.
These two digital technologies are incompatible. Accordingly, New Limited
Partnership intends to convert the Price Wireless contributed network and
handsets used in the Price
100
Wireless markets to CDMA. Pursuant to the terms of the limited partnership
agreement (1) all losses realized upon the sale, disposition or write-off
of any assets in connection with the conversion and (2) all costs of
purchasing handsets to be provided to then existing customers in
connection with the conversion will be specially allocated to the capital
accounts of Cellco LP and Cellco MGP and not to the capital account of
Price Communications' Preferred Exchangeable Interest. You should be
aware, however, that the foregoing two categories do not include all of
the costs associated with the conversion. In addition, we cannot assure
you that disruptions to service resulting from the conversion will not
adversely affect New Limited Partnership's results of operations.
. New Limited Partnership's information systems will eventually be
integrated with and provided by Verizon Wireless. Initially New Limited
Partnership will rely upon many of the legacy systems contributed by Price
Wireless. New Limited Partnership intends to gradually transition from
these legacy systems to Verizon Wireless' information systems. New Limited
Partnership's information systems will include billing, point of sale,
provisioning, customer care, data warehouse, fraud detection and
prevention, financial and human resources.
Competition
There is substantial competition in the wireless telecommunications
industry. New Limited Partnership expects competition to intensify as a result
of the consolidation of the industry, the entrance of new competitors, the
development of new technologies, products and services, the auction of
additional spectrum and regulatory changes. Other wireless providers, including
other cellular and PCS operators and resellers, serve each of the markets in
which New Limited Partnership will compete.
Currently, the primary competitor in each of the Price Wireless contributed
service areas is the other cellular licensee. The table below lists the primary
competitor in each of Price Wireless' existing service areas:
Market Primary Competitor
- ------ ------------------
Albany, GA............................... ALLTEL
Augusta, GA.............................. ALLTEL
Columbus, GA............................. Public Service Cellular
Macon, GA................................ Cingular Wireless
Savannah, GA............................. ALLTEL
Georgia--6 RSA........................... Cingular Wireless and Public Service
Cellular(1)
Georgia--7 RSA........................... ALLTEL and Cingular Wireless(1)
Georgia--8 RSA........................... ALLTEL
Georgia--9 RSA........................... ALLTEL and Public Service Cellular(1)
Georgia--10 RSA.......................... ALLTEL
Georgia--12 RSA.......................... ALLTEL
Georgia--13 RSA.......................... ALLTEL
Dothan, AL............................... ALLTEL
Montgomery, AL........................... ALLTEL
Alabama--8 RSA........................... Public Service Cellular and ALLTEL(1)
Panama City, FL.......................... ALLTEL
- --------
(1) The FCC has granted licenses subdividing the service area between these
carriers.
As noted above, OCP is a wholesale provider of wireless services and thus
does not compete directly for individual retail subscribers. OCP does compete,
however, with the other wireless licensees in its service areas for resellers.
In addition, the impact of such competition on OCP's resellers affects their
use of OCP's wireless services. OCP's principal competitor in the wholesale
wireless business is American Cellular, a joint venture between Dobson
Communications and AT&T.
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The wireless communications industry has been experiencing significant
consolidation, and New Limited Partnership expects that this trend will
continue. This consolidation trend may create additional large,
well-capitalized competitors with substantial financial, technical, marketing
and other resources to compete with its offerings.
New Limited Partnership believes that the following are the most important
competitive factors in its industry:
. Brand recognition. New Limited Partnership's retail wireless services in
the former Price Wireless markets will be marketed under the Verizon
Wireless brand. The Verizon Wireless brand was introduced in April 2000
and has developed strong brand recognition. Some of New Limited
Partnership's retail competitors in the former Price Wireless markets will
have brands that are well-established and have even greater brand
recognition, but other competitors have brand names that have been more
recently introduced or have less brand recognition.
. Network coverage. In recent years, competition in the wireless industry
has led to lower prices and to the popularity of pricing plans that do not
charge for roaming. As a result, the ability to offer national coverage
through one's own network is important. The ability to provide service
over a single network also offers other advantages, including the ability
to ensure uniform performance and the availability of features throughout
the country, as many features are not fully available through roaming
partners. Through the integration of New Limited Partnership's network
with Verizon Wireless', New Limited Partnership believes that it will
realize the benefits of Verizon Wireless' network. None of New Limited
Partnership's retail competitors in the former Price Wireless markets have
as extensive a network as Verizon Wireless does, and most have build-out
needs, but some have affiliate relationships with other wireless providers
that permit them to reduce the cost of roaming through preferential
arrangements.
. Digital service. Digital service offers benefits to the customer and also
permits a network to have greater capacity. Neither New Limited
Partnership's nor Verizon Wireless' network is fully digital yet, while
some of New Limited Partnership's retail competitors in the former Price
Wireless markets have fully digital networks. In addition, those
competitors with fully digital networks generally have higher average
revenue per subscriber.
. Technology. CDMA, global system for mobile communications, or GSM, and
TDMA each have their own strengths and weaknesses. New Limited Partnership
believes that CDMA digital technology provides approximately eight times
greater capacity than that of analog technology. CDMA has proven in the
marketplace that it can provide significant operating and cost
efficiencies. CDMA is also currently used by several other wireless
providers in the United States, providing additional potential CDMA
roaming partners and ensuring continued support and development of CDMA
handsets and network equipment by manufacturers. While New Limited
Partnership believes that CDMA has competitive advantages, proponents of
GSM and TDMA believe that those systems provide different advantages. TDMA
is used by AT&T Wireless and Cingular Wireless, two of the leading
wireless providers in the United States, while GSM is used throughout
Europe, although VoiceStream Wireless Corporation is the only major
wireless provider in the United States that exclusively uses GSM. AT&T
Wireless and Cingular Wireless each have recently announced an intention
to add a GSM-overlay to its network, which will increase the use of GSM in
the United States.
. Customer Service. Quality customer service and care is essential to
ensure that existing customers do not terminate service and to obtain new
customers. While New Limited Partnership intends to focus on improving
customer service and care in the former Price Wireless markets, most of
its competitors are also focusing on improving customer service and care.
. Capital resources. In order to expand and build-out networks and
introduce next generation services, wireless providers require significant
capital resources. Many of New Limited Partnership's retail competitors in
the former Price Wireless markets are better capitalized and have
significantly greater
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operating cash flow. While New Limited Partnership's indirect majority
owner, Verizon Wireless, is well capitalized and has more operating cash
flow than any other wireless provider, Verizon Wireless has no obligation
to fund New Limited Partnership's capital needs.
As a result of competition, New Limited Partnership may encounter further
market pressures to:
. reduce its service prices from the historical levels charged by its
predecessor businesses;
. restructure its service packages to offer more value; or
. respond to particular short-term, market-specific situations, for example,
special introductory pricing or packages that may be offered by new
providers launching their service in a particular market.
New Limited Partnership also expects that it will need to increase its
advertising and promotional spending from the historical levels of its
predecessor businesses to respond to competition. In addition, in the former
Price Wireless areas, some of the indirect retailers who will sell New Limited
Partnership's services will also sell many of its competitors' services. All of
these conditions may lead to possible consumer confusion and increasing
movement of customers between competitors and could have a material adverse
effect on New Limited Partnership's results of operations. New Limited
Partnership's ability to compete successfully will depend in part on its
marketing efforts and on its ability to anticipate and respond to various
competitive factors affecting the industry, including the factors described
above, new services and technologies, changes in consumer preferences,
demographic trends, economic conditions and pricing strategies by competitors.
Properties
New Limited Partnership will be managed by Cellco MGP and accordingly will
not have any headquarters. New Limited Partnership will, however, maintain
certain other facilities including retail sales locations, switching centers
and cell sites.
The Price Wireless contributed assets include, as of September 30, 2001, 42
retail stores (including one kiosk), 3 switching locations and 365 cell sites.
The Verizon Wireless contributed assets include, as of September 30, 2001, 33
cell sites. Because OCP operates on a wholesale basis, it does not operate any
stores. New Limited Partnership believes that its facilities will be suitable
for their purposes and that additional facilities can be secured for its
anticipated needs, although it may have difficulty obtaining additional cell
sites.
Environmental Matters
New Limited Partnership will be subject to various federal, state and local
environmental protection and health and safety laws and regulations, and will
incur costs to comply with those laws. New Limited Partnership will own or
lease real property, and some environmental laws hold current or previous
owners or operators of businesses and real property liable for contamination on
that property, even if they did not know of and were not responsible for the
contamination. Environmental laws may also impose liability on any person who
disposes of hazardous substances, regardless of whether the disposal site is
owned or operated by such person. Although New Limited Partnership currently
anticipates that the costs of complying with environmental laws will not
materially adversely affect it, New Limited Partnership cannot ensure you that
it will not incur material costs or liabilities in the future due to the
discovery of new facts or conditions, the occurrence of new releases of
hazardous materials or a change in environmental laws.
Employees
New Limited Partnership will not have any employees. All of its management
and operation will be performed on its behalf by employees of Verizon Wireless,
including current employees of Price Wireless who become employees of Verizon
Wireless. No Price Wireless employees are currently represented by a labor
organization.
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OCP has no employees, and its services and network operations are performed on
its behalf by employees of Verizon Wireless.
Labor unions have indicated their interest in organizing Verizon Wireless'
workforce. Two unions, the Communications Workers of America and the
International Brotherhood of Electrical Workers, have agreements with Verizon
Wireless that would require Verizon Wireless to take a neutral position if the
union conducts an organizing campaign in certain markets, including the OCP
markets. The agreements further require Verizon Wireless to recognize and
bargain with these unions if they were to present union authorization cards
signed by 55% of the employees in an appropriate bargaining unit within these
markets. This "card check" organizing process is advantageous to unions because
it allows them to avoid a more difficult secret ballot election process
conducted by the National Labor Relations Board. These agreements expire in
2004. As a result of these commitments, Verizon Wireless expects an increase in
organizing activities potentially directed at its employees. Verizon Wireless
cannot predict what level of success the unions may have in organizing its
employees.
Intellectual Property
Verizon Communications owns the trademarks issued for "Verizon" and "Verizon
Wireless" and some service offering names, such as "SingleRate," that New
Limited Partnership intends to use. Verizon Communications has licensed these
and other marks to Verizon Wireless on a non-exclusive basis until 2 1/2 years
after it ceases to own any interest in Verizon Wireless or Verizon Wireless
begins to use a different brand name. Neither Verizon Communications nor
Verizon Wireless has any obligation to permit New Limited Partnership to use
these trademarks and could require New Limited Partnership to discontinue their
use at any time.
Regulatory Environment
The FCC regulates the licensing, construction, operation, acquisition and
transfer of wireless systems in the United States pursuant to the
Communications Act of 1934, as amended by the Telecommunications Act of 1996
and other legislation and the associated rules, regulations and policies
promulgated by the FCC.
To use the radio frequency spectrum in the United States, wireless
communications systems must be authorized by the FCC to operate the wireless
network and mobile devices in assigned spectrum segments and must comply with
the rules and policies governing the use of the spectrum as adopted by the FCC.
These rules and policies, among other things, (1) regulate the ability to
acquire and hold radio spectrum, (2) impose technical obligations on the
operation of networks, (3) impose requirements on the ways wireless providers
serve and communicate with their customers, (4) regulate the interconnection of
wireless networks of multiple carriers, (5) obligate wireless service providers
to permit unrestricted resale of their services by resellers and to serve
roaming customers of other wireless carriers and (6) impose a variety of fees
and charges on wireless businesses that are used to finance numerous regulatory
programs and part of the FCC's budget.
The process of obtaining U.S. operating authority for a wireless system
requires three separate proceedings to be completed by the FCC: (1) allocating
radio frequency spectrum segments for the services, (2) adopting rules and
policies to govern the operation of the wireless systems in the allocated
spectrum segments and (3) issuing licenses to applicants for use of the
spectrum allocations.
In addition, because licenses are issued for only a fixed time, generally 10
years, wireless providers must periodically seek renewal of those licenses. The
FCC will award a renewal expectancy to a wireless licensee that has provided
substantial service during its past license term and has substantially complied
with applicable FCC rules and policies and the Communications Act. The FCC has
routinely renewed wireless licenses in the past, and none of Price Wireless' or
Verizon Wireless' licenses has ever been denied or even challenged. However,
the Act provides that licenses may be revoked for cause and license renewal
applications denied if the FCC determines that a renewal would not serve the
public interest. Violations of FCC rules may also result in monetary penalties
or other sanctions. FCC rules provide that competing renewal applications for
licenses will be considered in
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comparative hearings and establish the qualifications for competing
applications and the standards to be applied in hearings.
Wireless systems are subject to Federal Aviation Administration and FCC
regulations governing the location, lighting and construction of transmitter
towers and antennas and are subject to regulation under federal environmental
laws and the FCC's environmental regulations, including limits on radio
frequency radiation from mobile handsets and antennas. State or local zoning
and land use regulations also apply to tower siting and construction activities.
New Limited Partnership's competitors will be licensed to use radio
frequencies primarily in two different spectrum allocations that are available
for a variety of communications services, even though the services may have
different names and use different frequencies. Generally, those services will
be "broadband" services, which include voice as well as data and messaging
services.
Broadband Wireless Services Systems
New Limited Partnership will hold geographic service area licenses granted
by the FCC to provide cellular and PCS services. While most of New Limited
Partnership's competitors hold cellular or PCS licenses, one of its principal
competitors, Nextel Communications, provides wireless services on frequencies
allocated to the "Specialized Mobile Radio" service. New Limited Partnership
will not hold specialized mobile radio licenses.
A cellular system operates on one of two 25 MHz frequency blocks, known as
the "A" and "B" blocks, in the 850 MHz band that the FCC allocates for cellular
radio service. Cellular systems principally are used for two-way mobile voice
applications, although they may be used for data applications and fixed
wireless services as well. Cellular licenses are issued for either metropolitan
statistical areas or rural service areas, two in each area. No entity may hold
both the A and B blocks in a single metropolitan statistical area or rural
service area (after February 13, 2002 this restriction will only apply to rural
service areas).
A broadband PCS system operates on one of six frequency blocks in the
1800-1900 MHz bands that the FCC allocated for personal communications
services. PCS systems generally are used for two-way voice applications
although they may carry two-way data communications and fixed wireless services
as well. For the purpose of awarding PCS licenses, the FCC has divided the
United States into 51 large regions called major trading areas, which are
comprised of 493 smaller regions called basic trading areas. The FCC awarded
two PCS licenses for each major trading area, known as the "A" and "B" blocks,
and four licenses for each basic trading area known as the "C," "D," "E," and
"F" blocks. The two major trading area licenses authorize the use of 30 MHz of
PCS spectrum. One of the basic trading area licenses is for 30 MHz of spectrum,
and the other three are for 10 MHz each. New Limited Partnership will initially
hold "E" block 10 MHz PCS licenses for the Macon, GA BTA and a portion for the
Atlanta, GA BTA.
The FCC permits licensees to split their licenses and assign a portion, on
either a geographic, or "partitioned," basis or on a frequency, or
"disaggregated," basis or both, to a third party.
Under the FCC's current rules specifying spectrum aggregation limits
affecting wireless licensees, no entity may hold attributable interests,
generally 20% or more of the equity of, or an officer or director position
with, the licensee, in licenses for more than a total of 45 MHz of combined
PCS, cellular and various specialized mobile radio services where there is
significant overlap in any geographic area. Significant overlap is defined to
occur when at least 10% of the population of the PCS licensed service area is
within the cellular and/or specialized mobile radio service area(s). In 1999,
the FCC increased this limit to 55 MHz in situations in which a 25 MHz cellular
rural service area is attributed to a 30 MHz PCS license. These spectrum "caps"
restrict New Limited Partnership from acquiring all of the spectrum it
anticipates it will need to meet future demand for third generation technology
services. In November 2001, the FCC announced that it will raise the spectrum
cap to 55 MHz in all markets until January 1, 2003 and then eliminate it
entirely, thereafter implementing a case-by-case review process to satisfy its
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obligation to ensure that commercial mobile service spectrum acquisitions do
not have anticompetitive effects. This 55 MHz spectrum cap raise goes into
effect February 13, 2002. During the interim period up to January 1, 2003, the
FCC will entertain waiver requests permitting a carrier to exceed the 55 MHz
cap if it finds such request to serve the public interest. The 700 MHz and WCS
bands are not subject to the cap.
All 10 MHz PCS licensees must construct facilities that offer coverage to
one-fourth of the population of the licensed area or "make a showing of
substantial service in their license area" within five years of the original
license grants. Licensees that fail to meet the coverage requirements may be
subject to forfeiture of the license. The properties to be contributed to New
Limited Partnership are interpreted to have met the coverage requirements that
have applied to them prior to the contribution date.
New Limited Partnership will use common carrier point-to-point microwave
facilities and dedicated facilities leased from communications companies or
other common carriers to connect its wireless cell sites, and to link them to
the main switching office. Where it uses point-to-point microwave facilities,
the FCC licenses these facilities separately, and they are subject to
regulation as to technical parameters and service. Microwave licenses must also
be renewed every 10 years.
Transfers and Assignments of Wireless Licenses
The Communications Act and FCC rules require the FCC's prior approval of the
assignment or transfer of control of a license for a wireless system. Before
New Limited Partnership can complete any such purchase or sale, it must file
appropriate applications with the FCC, and the public is by law granted a
period of time, typically 30 days, to oppose or comment on them. In addition,
the FCC has established transfer disclosure requirements that require licensees
who assign or transfer control of a license acquired through an auction within
the first three years of their license terms to file associated sale contracts,
option agreements, management agreements or other documents disclosing the
total consideration that the licensee would receive in return for the transfer
or assignment of its license. Non-controlling minority interests in an entity
that holds a FCC license generally may be bought or sold without FCC approval,
subject to the FCC's spectrum aggregation limits. However, notification and
expiration or earlier termination of the applicable waiting period under
Section 7A of the Clayton Act by either the Federal Trade Commission or the
Department of Justice may be required, as well as approval by, or notification
of, state or local regulatory authorities having competent jurisdiction, if New
Limited Partnership seeks to sell or acquire wireless systems.
Foreign Ownership
Under existing law, no more than 20% of an FCC licensee's capital stock may
be directly owned or voted by non-U.S. citizens or their representatives, by a
foreign government or its representatives or by a foreign corporation and if an
FCC licensee is controlled by another entity, up to 25% of that entity's
capital stock may be owned or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. Indirect foreign ownership above the 25% level may be allowed
should the FCC find such higher levels not inconsistent with the public
interest. These requirements apply to licensee partnerships as well as
corporations.
Spectrum Acquisitions
As is the case with many other wireless providers, New Limited Partnership
anticipates that it may need additional spectrum to meet anticipated demand.
New Limited Partnership can attempt to meet its needs for new spectrum in two
ways, by acquiring spectrum held by others or by acquiring new spectrum
licenses from the FCC. The Communications Act requires the FCC to award new
licenses for most commercial wireless services to applicants through a
competitive bidding process. Therefore, if New Limited Partnership needs
additional spectrum, it may be able to acquire that spectrum through Verizon
Wireless, if Verizon Wireless participates in an auction for any new licenses
that may become available or by purchasing existing facilities and then
contributes or sells such licenses or facilities to New Limited Partnership for
incorporation into its system. We
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cannot assure you that New Limited Partnership will be able to acquire spectrum
to meet its projected needs on a timely basis or at all, given the competition
for licenses among commercial mobile radio service providers and others seeking
to become mobile radio service providers.
Recent Federal Regulatory Developments
The FCC does not specify the rates that New Limited Partnership may charge
for its services nor will it require it to file tariffs for its U.S. wireless
operations. However, the Communications Act states that an entity that provides
commercial mobile radio services is a common carrier, and is thus subject to
the requirements of the Act that it not charge unjust or unreasonable rates,
nor engage in unreasonable discrimination. The FCC may invoke these provisions
to regulate the rates, terms and conditions under which New Limited Partnership
provides service. In addition, the Act defines a commercial mobile radio
service provider as a telecommunications carrier, which makes it subject it to
a number of other regulatory requirements in its dealings with other carriers
and subscribers. These requirements will impose restrictions on New Limited
Partnership's business and increase its costs. Among the requirements that will
affect it are the following:
The FCC has imposed rules for making emergency 911 services available by
cellular, PCS and other broadband commercial mobile radio service providers,
including enhanced 911 services that provide the caller's communications
number, location and other information. Commercial mobile radio service
providers are required to take actions enabling them to provide a caller's
automatic number identification and cell site if requested to do so by a public
safety dispatch agency at the provider's own cost. As of October 2001, the
rules require providers also to supply the geographic coordinates of the
customer's location, either by means of network-based or handset-based
technologies. Providers may not demand cost recovery as a condition of doing
so, although they are permitted to negotiate cost recovery. These rules will
require New Limited Partnership to make significant investments in its network
and to reach agreements both with vendors of 911 equipment and state and local
public safety dispatch agencies with no assurance that it can obtain
reimbursement for the substantial costs it will incur. In October 2001, the FCC
granted Verizon Wireless a limited waiver of the rules. In November 2002,
pursuant to procedures applicable to small and mid-sized carriers, Price
Wireless filed with the FCC a request for a limited and temporary waiver of the
rules for additional time to deploy 911 services. The FCC has not yet acted
upon Price Wireless' request. Despite their respective waiver and waiver
request, Verizon Wireless and Price Wireless remain subject to strict
deployment guidelines. For example, Verizon Wireless must sell increasing
percentages of handsets that satisfy the 911 mandate and Price Wireless must
provide service to increasing percentages of callers to satisfy the 911
mandate. New Limited Partnership may be required to subsidize the higher costs
of these handsets in order to achieve mandated penetration levels among its
customers.
The FCC has established federal universal service requirements that affect
commercial mobile radio service operators. Under the FCC's rules, commercial
mobile radio service providers are potentially eligible to receive universal
service subsidies; however, they are also required to contribute to the federal
universal service fund. The FCC also is considering whether carriers that
decide to pass through their mandatory universal service contributions to their
customers should be required to provide a specific explanation of the charges
on bills, whether to increase the portion of wireless carrier revenues that is
subject to contribution and whether to ensure that the carriers that pass
through their contribution do not recover amounts greater than their mandatory
contributions from their customers. Many states also are moving forward to
develop state universal service fund programs. A number of these state funds
require contributions, varying greatly from state to state, from commercial
mobile radio service providers. Expansion of these programs will impose a
correspondingly growing expense on New Limited Partnership's business.
The FCC has adopted rules regulating the use of telephone numbers by
wireless and other providers as part of an effort to achieve more efficient
number utilization. In addition, it adopted rules on communications number
portability that will enable customers to keep their communications number when
switching to another carrier. Wireless carriers must offer number portability
to their customers beginning in November 2002. The FCC has also adopted rules
requiring wireless providers to provide functions to facilitate electronic
surveillance by law enforcement officials pursuant to the Communications
Assistance for Law Enforcement Act of 1995 and the
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administration is considering whether to seek to impose "priority access"
requirements on carriers that would require New Limited Partnership, in
emergency situations, to make channels available for exclusive use by
government and public safety agencies. These and other regulatory mandates will
impose costs on New Limited Partnership to purchase, install and maintain the
software and other equipment needed.
The Communications Act and the FCC's rules grant various rights and impose
various obligations on commercial mobile radio service providers when they
interconnect with the facilities of local exchange carriers. Generally,
commercial mobile radio service providers are entitled to "reciprocal
compensation," in which they are entitled to collect the same charges for
terminating wireline-to-wireless traffic on their system that the local
exchange carriers charge for terminating wireless-to-wireline calls.
Interconnection agreements are typically negotiated by carriers, but in the
event of a dispute, state public utility commissions, courts and the FCC all
have a role in enforcing the interconnection provisions of the Act. Although
New Limited Partnership will initially have local exchange carrier
interconnection agreements in place in most of its service areas, those
agreements are subject to modification, expiration or termination in accordance
with their terms. The FCC has begun a proceeding that is reassessing its
interconnection compensation rules. For these reasons there may be changes to
the interconnection prices or other terms that New Limited Partnership will
have in its agreements.
In 1999, the FCC adopted rules to govern customer billing by all
telecommunications carriers. It adopted additional detailed billing rules for
landline telecommunications service providers and is considering whether to
extend these rules to commercial mobile radio services providers, which could
add to the expense of New Limited Partnership's billing process as systems are
modified to conform to any new requirements.
In 1999, the FCC adopted an order that determines the obligations of
telecommunications carriers to make their services accessible to individuals
with disabilities. The order requires wireless and other providers to offer
equipment and services that are accessible to and useable by persons with
disabilities. While the rules exempt
telecommunications carriers from meeting general disability access requirements
if these results are not readily achievable, it is not clear how the FCC will
construe this exemption. Accordingly, the rules may require New Limited
Partnership to make material changes to its network, product line or services
at its expense.
In August 2000, the FCC addressed the extent to which the Communications Act
limits plaintiffs in class action lawsuits against commercial mobile radio
service providers to recover damages and obtain other remedies based on alleged
violations of state consumer protection statutes and common law. It ruled that
the Act did not preempt state rate regulation as a matter of law, but that
whether a specific damage award is prohibited would depend on the facts of a
particular case. This ruling might promote the filing of additional class
actions against the industry and increase the potential for damages awards by
courts.
State Regulation and Local Approvals
With the rapid growth and penetration of wireless services has come a
commensurate surge of interest on the part of state legislatures and state
public utility commissions in regulating the wireless industry. This interest
has taken the form of efforts to regulate customer billing, termination of
service arrangements, advertising, filing of "informational" tariffs,
certification of operation, service coverage and quality, drivers' use of
handsets, provision of emergency 911 service, and many other areas. New Limited
Partnership anticipates that this trend will continue. It will require it to
devote legal and other resources to working with the states to respond to their
concerns while minimizing any new regulation that could increase its costs of
doing business.
While the Communications Act generally preempts state and local governments
from regulating entry of, or the rates charged by, wireless carriers, it also
permits a state to petition the FCC to allow it to impose commercial mobile
radio service rate regulation. No state currently has such a petition on file,
but as wireless service continues to grow, the possibility of new regulation
increases. In addition, the Act does not preempt the states from regulating the
other "terms and conditions" of wireless service. Several states have invoked
this language to impose, or propose, various consumer-related protection
regulations on the wireless industry. States also may
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impose their own universal service support regimes on wireless and other
telecommunications carriers, similar to the requirements that have been
established by the FCC. At the local level, wireless facilities typically are
subject to zoning and land use regulation. Neither local nor state governments
may categorically prohibit the construction of wireless facilities in any
community or take actions, such as indefinite moratoria, which have the effect
of prohibiting service. Nonetheless, securing state and local government
approvals for new tower sites has been and is likely to continue to be
difficult, lengthy and costly.
In addition, state commissions have become increasingly aggressive in their
efforts to conserve telephone numbering resources. These efforts may impact New
Limited Partnership and other wireless service providers disproportionately,
given the industry's growing demand for new numbers, by imposing additional
costs or limiting access to numbering resources. Examples of state conservation
methods include number pooling, number rationing and code sharing. In many
markets, the supply of new numbers is inadequate to meet growing customer
demands, but states have been and continue to be reluctant to deploy new area
codes.
Finally, states have become more active in imposing fees and taxes on
wireless carriers or their customers for items such as the use of public rights
of way and to pay for various regulatory programs. In addition to the cost of
complying with new regulatory requirements, these fees also will increase New
Limited Partnership's costs of doing business and may result in higher costs to
its subscribers.
Legal Proceedings
While New Limited Partnership is not currently party to any legal
proceedings, Price Wireless and OCP are and from time to time have been party
to various litigation matters incidental to the conduct of their businesses.
While certain of Price Wireless' litigation matters will be assumed by New
Limited Partnership pursuant to the contribution transaction, Price Wireless
has agreed to indemnify New Limited Partnership for all existing matters. OCP's
potential liability for any existing matter will not be affected by the
contribution transaction. OCP's potential litigation liability includes not
only matters in which it is a named defendant but also actions brought against
Verizon Wireless that relate to OCP's service areas. In the event Verizon
Wireless incurs any litigation related liability that is fairly allocable to
any service area that it manages, it allocates, pursuant to the management
arrangements between Verizon Wireless and the partnership or other entity that
owns such service area, an appropriate portion of such expense. Accordingly,
set forth below is a discussion of certain pending litigation matters involving
Verizon Wireless.
Under the U.S. Wireless Alliance Agreement between Vodafone and Verizon
Communications, Verizon Wireless has rights of indemnification, subject to
certain exceptions, from Vodafone Group Plc and Verizon Communications.
Generally, under this agreement, Vodafone and Verizon Communications, as the
successor to Bell Atlantic Corporation and GTE Corporation, are required to
indemnify Verizon Wireless for losses, as that term is defined in the
underlying agreements, that may be incurred in connection with wireless
businesses formerly conducted by Vodafone, Bell Atlantic and GTE, and
pertaining to events which occurred or causes of action which existed prior to
April 3, 2000, with respect to Vodafone and Bell Atlantic, and prior to July
10, 2000, with respect to GTE.
To the extent, therefore, that Verizon Wireless may be subject to liability
or loss in connection with any of the following matters and arising out of
events or causes of action which existed prior to the dates set forth above,
Verizon Wireless intends to exercise its right to be indemnified by Vodafone or
Verizon Communications for such liability or loss.
Verizon Wireless is a defendant in a number of purported class actions
brought on behalf of subscribers throughout the country and alleging common law
and statutory claims of misrepresentation, inadequate disclosure, unfair trade
practices or breach of contract related to advertising, sales, billing and
collection practices. These include claims relating to the practice, and
alleged nondisclosure, of rounding up of partial minutes of airtime usage to
full minute increments, send-to-end billing, negative options, ring time
billing, billing for busy or incomplete calls, billing while roaming, first
incoming minute free feature, monthly charges for
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bundled minutes, below cost sales, early disconnection charges, charges for
local and toll calls, handset insurance, price discrimination and other
practices and charges, as well as the adequacy of our wireless coverage and the
quality of service. The actions are in various stages of the litigation
process. Plaintiffs in these putative class actions have not specified the
alleged damages they seek. Verizon Wireless is not currently able to assess the
impact, if any, of these actions on New Limited Partnership's financial
position or results of operations.
Verizon Wireless is also a defendant in two lawsuits alleging patent
infringement. Verizon Wireless is defending a suit filed by MLMC, Ltd. in U.S.
District Court in Delaware on November 12, 1999, alleging that the defendants
were infringing or contributing to the infringement of two patents held by or
licensed to the plaintiff related to analog switch mechanisms and secure mobile
telephone technology. Plaintiff is seeking unspecified damages and injunctive
relief. On December 5, 2001, the jury rendered a verdict in favor of the
defendants. An appeal or post trial motions are still possible. Verizon
Wireless is also defending a suit in U.S. District Court in Massachusetts filed
by Freedom Wireless, Inc. against AirTouch and Bell Atlantic Mobile, among
others, alleging that the defendants were infringing or contributing to the
infringement of patents held by the plaintiff related to prepaid wireless
service technology. Plaintiff seeks unspecified monetary damages as well as
injunctive relief. Verizon Wireless is not currently able to assess the impact,
if any, of these actions on New Limited Partnership's financial position or
results of operations. In each of these actions, Verizon Wireless intends to
assert or already has asserted, the right to be indemnified by its vendors for
any losses arising out the claims of infringement asserted against it. These
matters are also covered, in part, by the indemnification provisions in the
alliance agreement. However, the indemnification claims are unlikely to cover
the full cost of defense and potential liability.
Verizon Wireless is a defendant in a number of cases in various courts
involving claims by former agents and resellers who allege that it breached its
contracts with those agents and resellers, has tortiously interfered with their
contractual relationships with others and has engaged in fraud and unfair
competition. Some of the complaints have further alleged that Verizon Wireless
is a franchisor under applicable state franchise law and has violated franchise
laws in its relationship with them. State franchise laws often provide for
treble damages for violations. Verizon Wireless believes that it is not a
franchisor under state law in these cases. Verizon Wireless is not currently
able to assess the impact, if any, of these actions on its financial position
or results of operations.
Verizon Wireless is a defendant in lawsuits alleging personal injuries,
including brain cancer, from wireless phone use, specifically Christopher
Newman, et al. v. Motorola, Inc., et al., pending in U.S. District Court in
Maryland, and Gibb Brower, et al. v. Motorola, Inc., et al., filed in
California Superior Court, San Diego, California. Between April and June 2001,
Verizon Wireless and various other wireless carriers and various phone
manufacturers became defendants in statewide class actions, including, Farina,
et al. v. Nokia Inc., et al., Pennsylvania Court of Common Pleas, Philadelphia
County; Gilliam, et al. v. Nokia Inc., et al., New York Supreme Court, Bronx
County; Pinney, et al. v. Nokia Inc., et al., Maryland Circuit Court, Baltimore
County; and Gimpelson et al. v. Nokia Inc., et al., Georgia Superior Court,
Fulton County. All the suits have been removed to federal court. Plaintiffs in
these suits claim that wireless phones were defective and unreasonably
dangerous because the defendants failed to include a proper warning about
alleged adverse health effects, failed to encourage the use of a headset, and
failed to include a headset with the phone. Verizon Wireless believes it is
entitled to indemnification by handset manufacturers in connection with these
claims and intends to pursue those rights. In each of these actions arising out
of personal injury claims, Verizon Wireless believes that it has, and has
asserted, insurance coverage claims for any losses arising out of the claims
asserted against it. These matters are also covered by the indemnification
provisions in the alliance agreement. In addition, Verizon Wireless believes
that it has strong defenses that it has asserted or will assert in these
proceedings. An adverse outcome in this litigation could have a material
adverse effect on New Limited Partnership's results of operations or financial
conditions.
Verizon Wireless is also a defendant in other legal actions involving claims
incidental to the normal conduct of its business, including actions by
customers, vendors and employees. Verizon Wireless believes that these other
actions will not be material to New Limited Partnership's financial position or
results of operations.
110
MANAGEMENT OF NEW LIMITED PARTNERSHIP
As a limited partnership, New Limited Partnership has no directors. Verizon
Wireless, which will be the sole member of Cellco MGP, which will be the
general partner of New Limited Partnership, will perform comparable functions
for New Limited Partnership. Cellco MGP will have the right to manage the
business of New Limited Partnership. New Limited Partnership will have a
management committee comprised of three members, two of which will be appointed
by Cellco MGP and one of which will be appointed by Price Wireless. Pursuant to
the limited partnership agreement, Cellco MGP will need the prior approval of a
majority, or in certain cases, all of the members of the management committee
to take certain specified actions. For a description of these approval
requirements, see "The New Limited Partnership Agreement--Management of New
Limited Partnership."
New Limited Partnership does not and is not expected to employ any executive
officers; however, certain management functions are expected to be provided to
New Limited Partnership by employees of Verizon Wireless for which it will be
reimbursed by New Limited Partnership.
111
SECURITY OWNERSHIP
As described elsewhere in this proxy statement/prospectus, New Limited
Partnership has no directors or executive officers. Verizon Wireless and its
subsidiaries will manage New Limited Partnership and hold all of the
partnership interests in New Limited Partnership other than Price
Communications' Preferred Exchangeable Interest. See "The New Limited
Partnership Agreement."
The following table sets forth information regarding beneficial ownership of
Verizon Wireless' partnership interests held by each holder of more than 5% of
Verizon Wireless' outstanding partnership interests.
Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power regarding all partnership interests.
%
Partnership
Name and Address of Beneficial Owner Interest
- ------------------------------------ -----------
Verizon Communications Inc.(1)
1095 Avenue of the Americas
New York, NY.................................................. 55.0%
Vodafone Group Plc(2)
The Courtyard
2-4 London Road
Newbury Berkshire
RG14 1JX England.............................................. 45.0%
- --------
(1) Includes partnership interests held of record by the following subsidiaries
of Verizon Communications: Bell Atlantic Cellular Holdings, L.P., NYNEX PCS
Inc., PCSCO Partnership, GTE Wireless Incorporated, GTE Consumer Services
Incorporated, GTE Wireless of Ohio Incorporated and GTE Wireless of the
South Incorporated.
(2) Includes partnership interests held of record by the following subsidiaries
of Vodafone: PCS Nucleus, L.P., JV Partnerco, LLC and AirTouch Paging.
112
INTERESTS OF CERTAIN PERSONS IN THE VERIZON TRANSACTIONS
In considering the recommendations of Price Communications' board of
directors with respect to the Verizon transactions, Price Communications
shareholders should be aware that, in addition to their interests as
shareholders, the following directors and members of management of Price
Communications have interests in the Verizon transactions as set forth below.
Price Communications' board of directors was aware of these interests and
considered them, among other matters, in approving the Verizon transactions.
Except as set forth below, none of the directors or members of management of
Price Communications or Price Wireless are expected to receive any stay bonus
or severance payment in connection with the contribution transaction or have
any interest in the Verizon transactions different from their interests as
shareholders.
In the event that the contribution transaction is completed, Michael N.
Bruno, the President of Price Wireless, will receive a stay bonus of $85,000 if
he continues to provide services to Price Wireless or to Verizon Wireless for a
period of up to 90 days after the contribution transaction is closed, as
detailed further in his retention incentive agreement with Price Wireless, and
will receive an $85,000 severance payment if his employment is terminated as a
result of (1) his job elimination without offer of reassignment to a position
with Price Wireless or Verizon Wireless in the same or higher salary band or
(2) his refusal of a reassignment to a job with Price Wireless or Verizon
Wireless in the same or higher salary band which would result in an increased
commute of more than 25 miles from his current regular commute, as detailed
further in the Price Wireless separation pay plan.
It is currently estimated that the amount of stay bonuses that could
potentially be paid in connection with the contribution transaction to
employees of Price Communications and Price Wireless other than directors and
members of the management is approximately $850,000. Based upon Verizon
Wireless' present assessment of which employees of Price Wireless it intends to
hire, and Price Wireless' present severance plans and other arrangements with
its employees, it is currently estimated that the amount of severance that will
be paid is approximately $950,000; however, this amount may change based upon
the number of employees actually terminated in connection with the Verizon
transactions and not hired by Verizon Wireless and any changes in Price
Wireless' severance plans and arrangements.
As set out in detail in the transaction agreement, New Limited Partnership
or an affiliate thereof will offer employment to certain employees of Price
Wireless with such compensation as is comparable with the compensation provided
similarly situated employees by Verizon Wireless and its affiliates.
The contribution transaction constitutes a "change of control" of Price
Communications under the 1992 Long Term Incentive Plan of Price Communications,
as amended. All options granted under the plan, which include all options
listed below under "Directors and Executive Compensation," shall fully vest and
become immediately exercisable upon such change of control. In addition, upon
such change in control, Price Communications' Stock Option and Compensation
Committee may, in its discretion, provide for the purchase of any then
outstanding options by Price Communications or a designated subsidiary for an
amount of cash equal to the excess of (x) the "change in control price" (as
defined below) of the number of shares of Price Communications' common stock
covered by such options over (y) the exercise price of such options. The change
in control price means the higher of (1) the highest price per share of Price
Communications' common stock paid in any transaction related to a change in
control of Price Communications and (2) the "highest fair market value," as
defined in the 1992 Long Term Incentive Plan, of Price Communications' common
stock, at any time during the 60-day period preceding the change in control.
113
THE SHAREHOLDERS' MEETING
This proxy statement/ prospectus is furnished in connection with the
solicitation of proxies on behalf of the board of directors of Price
Communications to be voted at Price Communications' annual meeting of
shareholders, which will be held at the offices of Proskauer Rose LLP, 1585
Broadway, New York, New York on , , 2002 at 10:00 a.m. local time.
The purposes of the annual meeting are as follows:
1. To consider and vote upon the following proposals:
. to approve and adopt the transaction agreement, to approve the
contribution of substantially all of the assets of Price Wireless to
New Limited Partnership in exchange for the Preferred Exchangeable
Interest pursuant to such agreement, and to approve the possible
exchange of the Preferred Exchangeable Interest for Verizon
Communications common stock pursuant to the exchange agreement;
. to elect two directors to the board of directors of Price
Communications for a term of two years expiring in 2004 and two
directors for a term of three years expiring in 2005; and
. to authorize the amendment of the Certificate of Incorporation of
Price Communications so that any merger, consolidation or sale, lease,
exchange or other disposition of all or substantially all the assets
of Price Communications, any plan of exchange under Article 9 of the
New York Business Corporation Law, or any dissolution under Article 10
of the New York Business Corporation Law, may be approved at a meeting
of shareholders by a majority of the votes of the shares entitled to
vote thereon instead of a vote of two-thirds of such votes, which is
the current requirement.
2. To transact such other business as may properly be brought before the
annual meeting and any postponement or adjournment thereof.
If not otherwise specified, all proxies received pursuant to this
solicitation will be voted FOR the Verizon transactions, FOR the election of
directors named in this proxy statement/prospectus and FOR the amendment of the
Certificate of Incorporation of Price Communications.
Shareholders who execute proxies may revoke them at any time before they are
exercised by delivering a written notice to the Secretary of Price
Communications stating that the proxy is revoked, by executing a subsequent
proxy and presenting it to Secretary at Price Communications' principal
executive offices, or by attending the annual meeting and voting in person. The
cost of solicitation of proxies will be borne by Price Communications. Price
Communications' board of directors does not know of any matters other than
those specified in the notice of annual meeting of shareholders that will be
presented for consideration at the meeting. However, if other matters properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote thereon in accordance with their judgment. In the event
that any nominee is unable to serve as a director at the date of the annual
meeting, the enclosed form of proxy will be voted for any nominee who shall be
designated by Price Communications' board of directors to fill such vacancy.
As of , 2002, the record date for Price Communications' annual
meeting, there were outstanding and entitled to vote at the annual meeting
shares of Price Communications' common stock, with each such share
being entitled to one vote. Only shareholders of record at the close of
business on , 2002 will be entitled to vote at the annual meeting,
and this proxy statement/prospectus and the accompanying proxy are being sent
to such shareholders on or about , 2002.
Under New York law and Price Communications' Certificate of Incorporation
and By-laws, the holders of a majority of the voting power of the outstanding
shares entitled to vote, present in person or represented by proxy constitutes
a quorum. If a quorum is established, the directors are elected by a plurality
of the votes cast by the holders of shares entitled to vote thereon.
114
Certain shareholders, including certain officers and directors, holding or
having the right to vote 25.2% of Price Communications' shares of common stock
have entered into voting agreements and agreed to vote in favor of the Verizon
transactions.
MATTERS TO COME BEFORE THE ANNUAL MEETING OF SHAREHOLDERS:
The Verizon Transactions (as described above)
Vote Required
The affirmative vote of 66 2/3% of the vote of all issued and outstanding
shares.
Recommendation of the Board of Directors
PRICE COMMUNICATIONS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE VERIZON TRANSACTIONS.
Election of Directors
General
Price Communications' Certificate of Incorporation provides that Price
Communications' board of directors will consist of not fewer than three nor
more than ten directors, with the actual number of directors being set from
time to time by resolution of the board. Price Communications' board of
directors has fixed the authorized number of directors at five.
Price Communications' Certificate of Incorporation provides that Price
Communications' board of directors shall be divided into three separate
classes, with such classes to be as nearly equal in number as the total number
of directors constituting the entire board of directors permits. One class is
elected each year to serve a staggered three-year term. The terms of office of
the respective classes expire in successive years. At the annual meeting, two
members are to be elected to Price Communications' board of directors to serve
for a term of two years until the annual meeting of shareholders in 2004 and
two members are to be elected to Price Communications' board of directors to
serve for a term of three years until the annual meeting of shareholders in
2005. The nominees, Robert Price, Kim I. Pressman, Stuart Rosenstein and John
Deardourff, have consented to be named and to serve if elected. Robert Price
and Kim I. Pressman are now Class C directors and are standing for reelection.
Stuart Rosenstein and John Deardourff are Class A directors and are standing
for reelection. The incumbent Class B director will serve until the annual
meetings of shareholders in 2003. Price Communications' board of directors has
no reason to believe that the nominees will be unable to serve if elected to
office and, to the knowledge of the board of directors, the nominees intend to
serve the entire term for which election is sought. Should the nominees named
in this proxy statement/prospectus become unable or unwilling to accept
nomination or election, the persons named in the proxy will vote for such other
person as Price Communications' board of directors may recommend.
Vote Required
The affirmative vote of a plurality of the votes cast at Price
Communications' annual meeting is required for the election of directors.
Recommendation of the Board of Directors
PRICE COMMUNICATIONS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES.
115
Amendment of the Certificate of Incorporation
Due to a change in the New York Business Corporation law any corporation in
existence at the date of such change may amend its Certificate of Incorporation
so that any merger or consolidation or sale, lease, exchange or other
disposition of all or substantially all of the corporations' assets, any plan
of exchange under Article 9 of the New York Business Corporation Law, or any
dissolution under Article 10 of the New York Business Corporation Law, may be
authorized by a majority of all outstanding shares entitled to vote thereon.
To provide for greater flexibility in the future, Price Communications'
board of directors voted on and authorized such amendment of the Certificate of
Incorporation. The amendment to the Certificate of Incorporation is attached as
Annex H hereto.
Vote Required
The affirmative vote of two-thirds of all outstanding shares is required for
the proposed amendment of the Certificate of Incorporation.
Recommendation of the Board of Directors
PRICE COMMUNICATIONS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE PROPOSED AMENDMENT OF PRICE COMMUNICATIONS' CERTIFICATE OF
INCORPORATION.
Principal Shareholders and Security Ownership of Management
The following table sets forth certain information with respect to the
beneficial ownership of Price Communications' common stock as of December 31,
2001 by (1) each person or group known to Price Communications who beneficially
owns more than five percent of Price Communications' common stock and (2) all
Price Communications' directors and executive officers and the named executive
officers of Price Wireless as a group:
Number of
Name of Beneficial Owner Class of Stock Shares (1)(2) Percentage
- ------------------------ -------------- ------------- ----------
Robert Price............................................ Common Stock 10,921,665(4) 19.8%
Michael N. Bruno........................................ Common Stock 36,939 (3)
John Deardourff......................................... Common Stock 78,507 (3)
Robert F. Ellsworth..................................... Common Stock 6,727 (3)
Ellen Strahs Fader...................................... Common Stock 10,000 (3)
Kim I. Pressman......................................... Common Stock 361,812(5) (3)
Stuart B. Rosenstein.................................... Common Stock 12,750 (3)
Dennis W. Stone......................................... Common Stock 45,116(6) (3)
All directors and executive officers and named executive
officers of Price Wireless as a group (8 persons)..... Common Stock 11,473,516 20.7%
Atticus Holding LLC
152 West 57th Street
New York, New York 10019.............................. Common Stock 6,162,510 11.2%
- --------
(1) Under the applicable rules of the Securities and Exchange Commission (the
"SEC"), each person or entity is deemed to be a beneficial owner with the
power to vote and direct the disposition of these shares. Information as to
number of shares of Price Communications' common stock gives effect to
five-for-four stock splits of Price Communications' common stock, in the
form of stock dividends paid on December 23, 1997, April 1, 1998, April 30,
1998, January 25, 1999, and May 4, 1999, a two-for-one stock split paid on
August 31, 1998, and a 5% stock dividend paid on August 26, 1999.
116
(2) Includes options exercisable within 60 days of December 31, 2001.
(3) Less than 1%.
(4) Mr. Price owns directly 6,203,100 shares and has irrevocable proxies to
vote up to 7,250,000 shares owned by Mr. Price's grandchildren. These
proxies provide that the number of shares covered thereby, when added to
the shares owned by Mr. Price, cannot exceed 19.9% of the outstanding
shares of common stock of Price Communications. As a result of this
limitation, only 4,718,565 of such shares are deemed beneficially owned by
Mr. Price. In addition, the proxy covering 3,624,000 of such 7,250,000
shares excludes the ability to vote on the Verizon transactions. Eileen
Farbman, as guardian, has entered into a voting agreement with Verizon
Wireless to vote such shares in favor of the Verizon transactions.
(5) Excludes 19,431 shares held by Ms. Pressman's children as to which she
disclaims beneficial ownership.
(6) As of September 30, 2001, Mr. Stone terminated his employment with Price
Wireless and resigned as President of Price Wireless.
Directors and Executive Officers
The following table sets forth certain information with respect to the
directors and executive officers of Price Communications and certain executive
officers of Price Wireless.
Age
Name (as of , 2002) Office
- ---- ----------------------- ------
Robert Price........ 69 Director, President, Chief Executive Officer and
Treasurer
Michael N. Bruno.... 33 President of Price Wireless
John Deardourff(1).. 68 Director
Robert F. Ellsworth. 75 Director
Ellen Strahs Fader.. 49 Senior Vice President and Secretary
Kim I. Pressman..... 45 Director, Executive Vice President, Chief
Financial Officer and Assistant Treasurer
Stuart B. Rosenstein 41 Director
Dennis W. Stone(2).. 43 Former President of Price Wireless
- --------
(1) Mr. Deardourff was elected as a director effective July 7, 2001 to fill the
vacancy created on the board as a result of the death of George H. Cadgene.
(2) Mr. Stone terminated his employment with Price Wireless and resigned as
President of Price Wireless in September, 2001.
The following is a biographical summary of the experience of Price
Communications' executive officers and directors, and the executive officers of
Price Wireless named above.
Robert Price has served concurrently as a Director and the Chief Executive
Officer and President of Price Communications since 1979, has served as
Treasurer of Price Communications since 1990, and has been a Director of Price
Communications Wireless Holdings, Inc. ("Holdings") and Price Wireless since
1997. Mr. Price was a Director of PriCellular Corporation ("PriCellular") from
1990 until it was acquired by American Cellular Corporation in June 1998. Mr.
Price was the President and Assistant Treasurer of PriCellular from 1990 until
May 1997 and served as Chairman of PriCellular from May 1997 until June 1998.
Mr. Price, an attorney, is a former General Partner of Lazard Freres & Co. He
has served as an Assistant United States Attorney, practiced law in New York
and served as Deputy Mayor of New York City. After leaving public office, Mr.
Price became Executive Vice President of The Dreyfus Corporation and an
Investment Officer of The Dreyfus Fund. In 1972 he joined Lazard Freres & Co.
Mr. Price has served as a Director of Holly Sugar Corporation, Atlantic States
Industries, The Dreyfus Corporation, Graphic Scanning Corp. and Lane Bryant,
Inc., and is currently a member of The Council on Foreign Relations. Mr. Price
has served as the Representative of the Majority Leader and President Pro Tem
of the New York Senate and as a member of the Board of Directors of the
Municipal
117
Assistance Corporation for the City of New York. Mr. Price has also served as a
trustee of the City University of New York. Since April 2001, he has been
commissioner of the New York State Commission of Investigations. Mr. Price is a
Director and president of TLM Corporation.
Michael N. Bruno joined Price Wireless in September, 1998 as Corporate
Consultant and was promoted to Executive Vice President in November, 1998. Mr.
Bruno was promoted to President of Price Wireless in October, 2001. Previously,
he was employed by PriCellular Corporation as Vice President and General
Manager of certain Ohio and New York properties from 1995 to 1998. From 1993 to
1995, he was a Sales Manager for Sterling Cellular Corporation in its Ohio-9
RSA. He attended the State University of New York at Albany where he received a
Bachelor of Science degree in Business Administration.
John Deardourff is currently an officer and director of the E.V.A.
Corporation, a privately-held medical device company in Bethesda, Maryland. A
founding partner of Bailey, Deardourff & Associates, a leading political
advertising, consulting and polling firm in suburban Washington D.C., Mr.
Deardourff co-ran the organization from 1967 until his retirement last year.
From 1961 to 1967, he served on the staff of New York Governor Nelson A.
Rockefeller. He is a director of The Children's Defense Fund, The League of
Conservation Voters and The National Environmental Trust and former trustee of
The Phillips Collection, and resides in McLean, Virginia.
Robert F. Ellsworth has been a director of Price Communications since 1981.
He is Chairman of Hamilton Apex Technology Ventures LP of San Diego, a venture
capital firm and Managing Director of The Hamilton Group, LLC, a private
venture group. From 1974 to 1977 he served as an Assistant Secretary and then
Deputy Secretary of Defense. He was a General Partner of Lazard Freres & Co.
from 1971 to 1974, and served in the United States House of Representatives
from 1961 to 1967. His professional affiliations include the International
Institute for Strategic Studies, London; Atlantic Council of the United States,
Washington, D.C.; The Council on Foreign Relations, New York; and the American
Council on Germany, New York.
Ellen Strahs Fader rejoined Price Communications in February, 2000 and was
previously employed by Price Communications from 1981 to 1989. From 1989 until
1994, she was employed by Osborn Communications, a publicly-held media company,
as Senior Vice President, Corporate Affairs. From 1994 through 1998, Ms. Fader
served as Vice President, Investor Relations at Katz Media Group, a leading
media representation firm. She also served as Vice President, Investor
Relations for Metromedia Company's three publicly-held portfolio companies,
Metromedia Fiber Network, Metromedia International Group and Big City Radio
throughout 1999, at which time she returned to Price Communications. Ms. Fader
served as Director of Telemation, Inc., a video production company, and
Fairmont Communications Corporation, an owner and operator of major market
radio stations and as a member of the Advisory Board of American Women in Radio
and Television. She is currently a member of the National Investor Relations
Institute. She is a graduate of Fordham University and State University of New
York.
Kim I. Pressman, a certified public accountant, is a graduate of Indiana
University and holds an M.B.A. from New York University. Ms. Pressman was
elected Executive Vice President & Chief Financial Officer in May 1998. Before
assuming her other office as Secretary in October 1994 (in which she served
until August 1997 and again from February 1998 to February 2000), Ms. Pressman
was Vice President and Treasurer of Price Communications from November 1987 to
December 1989, and Senior Vice President of Price Communications from January
1990 to September 1994. She was also Secretary of Price Communications from
July 1989 to February 1990. Ms. Pressman was Vice President--Broadcasting and
Vice President, Controller, and Assistant Treasurer of Price Communications
from 1984 to October 1987. Ms. Pressman served as a Director of TLM
Corporation, Fairmont Communications Corporation, and NTG, Inc. Prior to
joining Price Communications in 1984, Ms. Pressman was employed for three years
by Peat, Marwick, Mitchell & Co., a national certified public accounting firm,
and for more than three years thereafter was Supervisor, Accounting Policies
for International Paper Company and then Manager, Accounting Operations for
Corinthian Broadcasting of Dun & Bradstreet Company, a large group owner of
broadcasting stations. Ms. Pressman is a Director, Vice President, Treasurer
and Secretary of TLM Corporation. Until June 1998, she served as a Director,
Vice President and Secretary of PriCellular for more than the past five years.
118
Stuart B. Rosenstein was elected to the board of directors in August of
2000. Mr. Rosenstein co-founded LiveWire Ventures in 1998 and has served as its
Executive Vice President and Chief Financial Officer since its inception.
LiveWire is a diversified investment and management group focused primarily on
companies that provide software and internet products and services for the
media, telecom, utility, advertising, and new media industries. From 1990 to
June 1998, Mr. Rosenstein was Executive Vice President and Chief Financial
Officer of PriCellular Corporation. He began his career with Ernst & Young and
was a senior manager there at the time he joined PriCellular Corporation. Mr.
Rosenstein is a certified public accountant and a member of the AICPA and New
York State Society of CPAs. He is a magna cum laude graduate of the State
University of New York.
Dennis Stone joined Price Wireless in August 1998 as Vice President and
General Manager of Price Wireless' Columbus, GA MSA. He was promoted to
President of the Price Wireless in November, 1998. Prior to joining Price
Wireless, he was employed by PriCellular Corporation beginning in July, 1991.
He attended the University of Texas at Tyler. Mr. Stone terminated his
employment with Price Wireless and resigned as President of Price Wireless in
September, 2001 to pursue other business interests.
Meetings of the Board
Price Communications' board of directors met eight times during the year
ended December 31, 2001. Each member of the board attended substantially all of
the meetings of the board and the committees of the board of which he or she is
a member held during the year while he was a member thereof.
Committees of the Board
Price Communications' board of directors has established an Audit and
Finance Committee, a Stock Option and Compensation Committee, and a Nominating
Committee.
The Audit and Finance Committee consists of Mr. Cadgene, who was succeeded
by Mr. Deardourff, and Messrs. Rosenstein and Ellsworth, each of whom is
"independent" as defined by the NYSE listing requirements. Price
Communications' board of directors has adopted a written charter for the Audit
and Finance Committee. The Audit and Finance Committee's functions include (i)
making recommendations to the board of directors as to the independent
accountant to be appointed by the Board, (ii) reviewing with the independent
accountants the scope of their examination, (iii) receiving the reports of the
independent accountants and meeting with representatives of such accountants
for the purpose of reviewing and considering questions relating to their
examination and such reports, (iv) reviewing, either directly or through the
independent accountants, the internal accounting and auditing procedures of the
Company and (v) studying various issues relating to the capital structure of
Price Communications. The Audit and Finance Committee held two meetings during
2001.
The Stock Option and Compensation Committee consists of Messrs. Cadgene, who
was succeeded by Mr. Deardourff, and Ellsworth. Its functions include reviewing
and approving arrangements relating to the compensation of executive officers
of Price Communications and administering Price Communications' 1992 Long Term
Incentive Plan. The Stock Option and Compensation Committee held three meetings
during 2001.
The Nominating Committee consists of Messrs. Cadgene, who was succeeded by
Mr. Deardourff, and Ellsworth. The Nominating Committee nominates candidates
for election to Price Communications' board of directors and met three times in
2001. The Nominating Committee will consider nominations by shareholders made
pursuant to timely notice in proper written form to the Secretary. To be
timely, such a notice shall be delivered to or mailed and received at Price
Communications' principal executive offices not less than 50 days nor more than
90 days prior to the meeting at which directors are to be elected; provided,
however, that if less than 50 days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the
security-holder to be timely must be so received not later than the close of
business on the earlier of (i) the tenth day following the day on which such
notice of the date of meeting was mailed or such public disclosure was made or
(ii) the last business day prior to the meeting date. To be in proper written
form, a shareholder's
119
notice to the Secretary must set forth in writing (i) as to each person whom
the shareholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in
connection with the solicitation or proxies for election of directors, or is
otherwise required, in each case pursuant to Regulations 14A under the
Securities Exchange Act of 1934 or any successor regulation or law, including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as director if elected; and (ii) as to
the shareholder or shareholders giving notice, (x) the name and address, as
they appear on Price Communications' books, of such shareholder or shareholders
and (y) the class and number of our shares of Price Communications' common
stock which are beneficially owned by such shareholder or shareholders.
Nominations by shareholders not made in accordance with the foregoing
procedures shall be disregarded.
Directors and Executive Compensation
Directors compensation
Directors are compensated for their reasonable travel and related expenses
in attending Price Communications' in-person board of directors or committee
meetings, and directors who are not officers or employees receive fees of
$25,000 per annum, and also received a bonus of $100,000 for 2001, $20,000 for
1999, and $15,000 for 1998 due to the significant demands made on such
directors during each such year.
Executive compensation
The following table sets forth certain summary information concerning the
compensation paid to the executive officers of Price Communications for the
three years ended December 31, 2001 and compensation paid to the named
executive officers of Price Wireless for the three years ended December 31,
2001.
Long-Term Compensation
- - -----------------------
Annual Compensation Securities
------------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options(1) Compensation
- --------------------------- ---- ---------- --------- ---------- ------------
Robert Price, Chief Executive
Officer and Treasurer........... 2001 $600,000 $525,000 200,000 --
2000 600,000 250,000 -- --
1999 586,200 500,000 -- --
Kim I. Pressman, Executive Vice
President and Chief Financial
Officer(2)...................... 2001 $183,333 $425,000 200,000 --
2000 150,000 125,000 10,000 --
1999 185,000 350,000 24,609 --
Ellen S. Fader, Senior Vice
President and Secretary......... 2001 $141,667 $ 55,000 20,000 --
2000 100,000 55,000 30,000 --
Dennis W. Stone, Former President,
Price Wireless(3)............... 2001 $122,307 $ 85,000 -- $85,384
2000 170,000 102,500 10,000 5,376
1999 146,500 183,500 43,313 4,200
Michael N. Bruno, President, Price
Wireless........................ 2001 $161,538 $ 95,000 10,000 $ 4,200
2000 150,000 107,500 5,000 4,200
1999 135,000 183,500 38,063 4,387
- --------
(1) Gives effect to five-for-four stock splits of Price Communications' Common
Stock, in the form of a stock dividend, paid on January 25, 1999 and May 4,
1999, and a five percent stock dividend paid on August 26, 1999.
(2) Ms. Pressman resigned from the office of Secretary in February 2000.
(3) Mr. Stone terminated his employment with Price Wireless and resigned as
President of Price Wireless in September, 2001. Upon termination of his
employment, Mr. Stone was paid a $75,000 severance payment.
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Stock options
The following table reflects the number of options for shares of Price
Communications' common stock subject to options granted under Price
Communications' 1992 Long Term Incentive Plan (the "LTIP") during the year
ended December 31, 2001 to executive officers of Price Communications and the
named executive officers of Price Wireless.
Potential Realized
Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to for Option Term(2)
Options Employees in Exercise Expiration ------------------------
Name Granted(1) Fiscal Year Price Date 5% 10%
- ---- ---------- ------------ -------- ---------- --------- ---------
Robert Price....... 100,000 42.4% $31.00 03/06/11 1,949,573 4,940,607
100,000 33.00 03/06/11 2,075,352 5,259,350
Michael N. Bruno... 10,000 2.1% 19.11 06/06/11 120,182 304,564
Ellen S. Fader..... 10,000 6.4% 18.50 03/06/11 116,346 294,842
10,000 19.11 06/06/11 120,182 304,564
Kim I. Pressman.... 100,000 42.4% 31.00 03/06/11 1,949,573 4,940,602
100,000 33.00 03/06/11 2,075,352 5,259,350
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(1) Upon the occurrence of a "change in control" of Price Communications, as
defined in the LTIP, Price Communications' Stock Option and Compensation
Committee may, in its discretion, provide for the purchase of any then
outstanding options by Price Communications or a designated subsidiary for
an amount of cash equal to the excess of (x) the "change in control price"
(as defined below) of the number of shares of Price Communications' common
stock subject to the options over (y) the exercise price of such options.
The change in control price means the higher of (i) the highest price per
share of Price Communications' common stock paid in any transaction related
to a change in control of Price Communications and (ii) the "highest fair
market value," as defined in the LTIP, of Price Communications' common
stock, at any time during the 60-day period preceding the change in control.
(2) In order to realize these potential values, the closing price of Price
Communications' common stock on March 6, 2011, the expiration date for
certain of these options, would need to be $30.13 and $47.98 per share in
the case of Ms. Fader's options, and $50.50 and $80.41 in the case of Mr.
Price and Ms. Pressman's options for $31.00 per share and $53.75 and $85.59
in the case of Mr. Price and Ms. Pressman's options at $33.00 per share and
on June 6, 2011, the expiration date for certain of these options, would
need to be $31.13 and $49.51 per share.
The following table reflects the number of stock options held by Price
Communications' executive officers and the named executive officers of Price
Wireless on December 31, 2001.
Number of Securities Value of Unexpected
Underlying Unexercised In-the-Money Option
Shares Value Options at Fiscal Year End at Fiscal Year End
Acquired on Realized -------------------------- -------------------------
Name Exercise ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Robert Price....... -- -- -- 200,000 -- --
Michael N. Bruno... 32,813 344,208 5,250 5,000 20,423 --
Kim I. Pressman.... -- -- 47,578 210,000 620,473 --
Ellen S. Fader..... -- -- -- 50,000 -- --
Dennis Stone(2).... 43,313 361,008 -- 20,500 -- --
- --------
(1) Based upon the closing prices of the stock on respective exercise dates.
(2) Mr. Stone terminated his employment with Price Wireless and resigned as
President of Price Wireless in September, 2001.
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Board Compensation Committee Report on Executive Compensation
Stock Option and Compensation Committee Report on Executive Compensation
Under the rules of the SEC, this report is not deemed "soliciting material"
and is not incorporated by reference in any filing with the SEC under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
The Stock Option and Compensation Committee of Price Communications' board
of directors is composed of two non-employee directors, Messrs. John Deardourff
and Robert F. Ellsworth. It is responsible for developing and making
recommendations to Price Communications' board of directors with respect to
Price Communications' executive compensation policies and the annual
compensation paid to its executive officers and administering the LTIP. The
Committee believes that Price Communications' compensation arrangements should
enable Price Communications to attract and retain highly qualified executive
employees, reward individual performance and foster an identity of interest
between management and Price Communications.
The four main objectives of the executive compensation program are:
(1) To align compensation opportunities with shareholder interests;
(2) To provide compensation which is competitive when compared with
various markets in which the company competes for executive talent;
(3) To divide total compensation between annual and long-term components
with significant long-term performance related component; and
(4) To place a significant portion of compensation at risk subject to
performance against objectives.
The Committee views stock options as key elements to focus executives on
increasing shareholder value.
Annual compensation
Base Salary. In general, Price Communications aligns base pay for
executives to be competitive with market rates. The pay review considers level
of experience, individual performance against annually established financial
and non-financial unit and individual objectives, and competitive market salary
rates for similar positions.
Annual Bonuses. All executives are eligible for annual bonuses for
achieving challenging financial, leadership and operational objectives that are
established at the beginning of each year. To determine annual bonus awards,
the Committee performs a detailed review of Price Communications' and the
individual executive's performance.
Long-term Incentives
Price Communications uses stock options to link executive compensation to
Price Communications' longer term internal performance and to external market
performance of its stock price.
Stock options are granted to executives and other key personnel with an
exercise price equal to the market price of the stock on the date of grant. The
potential future value of stock options is dependent solely upon the future
increase in the price of Price Communications' stock. Stock option award levels
are based on each recipient's position level and performance as well as the
competitive level of option grants for comparably situated executives. The
exercise price of option grants is equal to 100 percent of the market price of
the company's common stock on the grant date. Options have a ten-year exercise
period, and typically become exercisable in installments during the first two
years following their grant.
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Annual grants of restricted stock are not presently part of Price
Communications' executive compensation program. However, grants of restricted
stock may occur in the future as warranted by changing competitive conditions.
Compensation of the Chief Executive Officer
The chief executive officer's compensation is based on the same objectives
and policies applicable to all executives, and includes base salary, annual
bonuses and stock option grants.
As of January 1, 2000, Mr. Price's annual base salary was increased from
$586,200 to $600,000, a 2.4 percent increase. The Committee recommended this
increase following review and discussion of competitive compensation data for
CEO positions and recognition of Mr. Price's successful 2000 accomplishments
against various corporate objectives. Mr. Price's annual bonus for 2000 was
$250,000. The bonus was based on Price Communications exceeding all of Price
Communications' performance objectives including revenue and operating cash
flow growth, the market performance of Price Communications' common stock, and,
in the view of the members of the Committee, Mr. Price's superb management.
Price Communications has not developed a policy with respect to qualifying
compensation paid to Price Communications' executive officers for deductibility
under Section 162(m) of Internal Revenue Code for the reason that none of Price
Communications' executive officers have historically received a level of
compensation which would make it advisable for Price Communications to have
such a policy. In the event any of Price Communications' executive officers
reach such a level of compensation, the Committee would anticipate considering
the effects of Section 162(m) in connection with its compensation
determinations. As a result of the amendments to Price Communications' LTIP by
Price Communications' shareholders at Price Communications' 1998 annual
meeting, it is intended that certain awards under the LTIP will satisfy the
requirements of Section 162(m).
John Deardourff
Robert F. Ellsworth
(members of the Stock Option and
Compensation Committee)
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Stock Price Performance
The following graph shows the five year cumulative total return (change in
the year-end stock price plus reinvested dividends) to shareholders for Price
Communications compared to the Standard & Poor's 500 Index and the Standard &
Poor's Cellular/Wireless Telecommunications Industry Index cumulative total
return. The graph assumes investment of $100 on December 31, 1995 in Price
Communications' common stock, the Standard & Poor's Cellular/Wireless
Telecommunications Industry Index and the Standard & Poor's 500 Index. The
companies represented in the Standard & Poor's Cellular/Wireless
Telecommunications Industry Index are not necessarily similar in size to Price
Communications and include some companies larger than Price Communications. The
stock price performance shown on the graph is not necessarily indicative of
future price performance.
[CHART]
TOTAL SHAREHOLDER RETURNS
PRICE COMMUNICATIONS S&P 500 INDEX CELLULAR/WRLESS
CORP TELECOM-500
Dec 96 100.00 100.00 100.00
Dec 97 124.07 133.36 164.60
Dec 98 585.88 171.48 248.68
Dec 99 2066.38 207.56 804.34
Dec 00 1249.12 188.66 350.41
Dec 01 1418.33 166.24 274.55
Total Return to Shareholder's
(Dividends reinvested monthly)
Total Return to Stockholders
(Dividends reinvested monthly)
Annual Return Percentage
Year Ending December 31,
----------------------------------------
1996 1997 1998 1999 2000 2001
Company/Index ------ ------ ------ -------- -------- --------
Price Communications Corp...... 7.85 24.07 372.22 252.69 -39.55 13.55
S&P 500 Comp-LTD............... 22.96 33.36 28.58 21.04 -9.10 -11.89
Cellular/Wireless Telecom-500.. 10.56 64.60 51.08 223.45 -56.43 -21.65
Base Indexed Returns Year Ending December 31,
Period ----------------------------------------
1996 1997 1998 1999 2000 2001
Company/Index ------ ------ ------ -------- -------- --------
Price Communications Corp...... 100 124.07 585.88 2,066.38 1,249.12 1,418.33
S&P 500 Comp-LTD............... 100 133.36 171.48 207.56 188.66 166.24
Cellular/Wireless Telecom-500.. 100 164.60 248.68 804.34 350.41 274.55
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and beneficial owners of 10% or more of any class of Price
Communications' equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Price Communications'
securities. Directors, executive officers and 10% owners are required by SEC
regulation to furnish Price Communications with copies
124
of all Section 16(a) forms that they file. To Price Communications' knowledge,
based solely on review of the copies of such reports furnished to Price
Communications and written representations that no other reports were required,
all Section 16(a) filing requirements applicable to directors and executive
officers were timely satisfied during the year ended December 31, 2000.
Related Party Transactions
Price Wireless is a party to an agreement with H.O. Systems, Inc. under
which H.O. Systems provides billing and management information services to
Price Wireless, and in respect of which Price Wireless made payments to H.O.
Systems during the year ended December 31, 2001 aggregating $8,473,920. H.O.
Systems was sold to an unrelated third party on February 6, 2002. Prior to such
sale, Stuart Rosenstein, a director of Price Communications, and two adult
children of Mr. Price (and trusts for their children) held indirect equity
positions in H.O. Systems of approximately 6.4%, 8.9% and 2.7%, respectively,
and Mr. Rosenstein and one of such adult children served as officers and
directors of H.O. Systems. Such adult child resigned from such positions in
November 2001, although he continues to act as a director of the parent company
of H.O. Systems. No amounts were paid to H.O. Systems in periods prior to 2001.
Price Wireless is also a party to an agreement with GiantBear, Inc. under
which GiantBear provides wireless internet services to Price Wireless and in
respect of which Price Wireless made payments to GiantBear during the year
ended December 31, 2001 aggregating $45,676. Because Verizon Wireless has its
own wireless internet arrangements with other parties, Verizon Wireless
requested that, prior to the execution of the transaction agreement, Price
Wireless obtain the right to terminate its agreement with GiantBear effective
at the time of the contribution transaction. As a result, in November 2001
Price Wireless and GiantBear entered into an agreement under which GiantBear
agreed to such a termination provision, and Price Wireless made a $4 million
payment to GiantBear and agreed to make an additional $1 million payment at the
time of the contribution transaction. Price Communications' required cash
contribution to New Limited Partnership was reduced by $1 million to reimburse
it for such $1 million payment. In December 2001, GiantBear sold substantially
all of its assets to an unrelated third party. Mr. Rosenstein and two adult
children of Mr. Price own small equity positions in GiantBear, and
Mr. Rosenstein and one such adult child serve as directors of GiantBear. Except
in their capacity as small equity holders, none of Mr. Rosenstein or any such
adult children have received or will receive any interest in the $4 million or
$1 million payments, and it is anticipated that none of such persons will
receive any material proceeds from the sale of GiantBear.
Other Matters
It is not anticipated that any other matters will be brought before Price
Communications' annual meeting. If other matters are properly brought before
the meeting, proxies for shares of common stock will be voted in accordance
with the best judgment of the proxy holders.
Shareholders' Proposals
Proposals of shareholders to be presented at the annual meeting to be held
in 2003 must be received a reasonable time before Price Communications begins
to print and mail Price Communications' proxy materials to be included in Price
Communications' proxy statement and form of proxy.
General
Arthur Andersen LLP has been engaged as Price Communications' independent
auditors for 2001. A representative of Arthur Andersen LLP is expected to be
present at Price Communications' annual meeting and available to respond to
appropriate questions, and will also have the opportunity to make a statement
if such representative so desires.
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Voting of Proxies
Voting Your Proxy. You may vote in person at your meeting or by proxy. We
recommend that you vote by proxy even if you plan to attend your meeting. You
can always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to Price Communications in time to vote, one of the
individuals named as your proxy will vote your shares as you have directed. You
may vote for or against the proposals or abstain from voting.
How to Vote by Proxy
By telephone*: Call toll-free 1-800- - and follow the instructions. You will need to
give the personal identification number contained on your proxy card.
By internet*: Go to www. and follow the instructions. You will need to give the
personal identification number contained on your proxy card.
In writing: Complete, sign, date and return your proxy card in the enclosed envelope.
- --------
*If you hold shares through a broker or other custodian, please check the
voting form used by that firm to see if it offers telephone or internet
voting
If you submit your proxy but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
. "FOR" the approval of the Verizon transactions;
. "FOR" the election of the nominated directors; and
. "FOR" the authorization of the amendment of Price Communications'
Certificate of Incorporation.
Revoking Your Proxy. You may revoke your proxy before it is voted by:
. notifying the Secretary in writing before the meeting that you have
revoked your proxy: Price Communications, 45 Rockefeller Plaza, New York,
New York 10020, Fax: (212) 397-3755, Attention: Secretary),
. submitting a new proxy with a later date, including a proxy given by
telephone or the internet, or
. voting in person at the meeting.
Voting in person. If you plan to attend a meeting and wish to vote in
person, we shall give you a ballot at the meeting. You should realize that
attendance at a shareholders' meeting, however, will not in and of itself
constitute a revocation of a proxy. You must first send any written notice of
revocation or subsequent proxy for delivery before the taking of the vote at
the applicable shareholders' meeting to the Secretary at the address listed
above.
Assistance. If you need help in changing or revoking a proxy, please
contact Morrow & Co., Inc. at the address or phone number provided in this
document under the caption "Who Can Help Answer Your Questions."
Effect of Abstaining. You may abstain from voting on each of the proposals
required for approval. The favorable vote of holders of two-thirds of the
outstanding Price Communications common shares on the proposed Verizon
transactions and on the proposal to amend the certificate of incorporation is
in each case required to approve that proposal. If, therefore, you mark your
proxy "ABSTAIN" with respect to any of these proposals, you will be in effect
voting against that proposal. In addition, if you fail to send in your proxy,
this, too, will have the same negative effect.
126
Broker Non-Vote. Under New York Stock Exchange rules, if your broker holds
shares in its name, the broker can vote on some "routine" proposals when it has
not received your instructions. Under these rules, the broker cannot vote your
shares on non-routine matters, such as the Verizon transaction proposal or the
proposed amendment of the Certificate of Incorporation. Without your
instructions, therefore, your broker cannot vote your shares for the approval
and adoption of these proposals. This is a "broker non-vote." A "broker
non-vote" with respect to any proposal will have the effect of a vote against
that proposal.
Confidential voting. Independent inspectors count the votes. Your
individual vote is kept confidential from Price Communications, unless special
circumstances exist. For example, a copy of your proxy card will be sent to
Price Communications if you write comments on the card.
Proxy solicitation. Price Communications shall pay Price Communications'
own costs of soliciting proxies. Price Communications estimates this cost to be
approximately $ . Price Communications retained Morrow & Co., Inc., to aid
in the solicitation of proxies and to verify records relating to the
solicitations. Price Communications is paying Morrow & Co., Inc. a fee of
$7,500 and $5 per call, plus any other expenses incurred, to help with the
solicitation. The extent to which these proxy soliciting efforts will be
necessary depends entirely upon how promptly proxies are received. You should
send in your proxy by mail, telephone or the internet without delay. Price
Communications also reimburses brokers and other custodians, nominees and
fiduciaries for their expenses in sending these materials to you and getting
your voting instructions.
Do not send in any stock certificates with your proxy cards. The proposed
Verizon transactions do not involve or exchange any of your shares.
Election of Directors. Additionally you are asked to elect four directors.
The board nominated Robert Price, Kim I. Pressman, Stuart B. Rosenstein and
John Deardourff. These matters require the affirmative vote of a plurality of
the votes cast at the annual meeting.
Other Business; Adjournments
Price Communications is not currently aware of any other business to be
acted upon at either meeting. If, however, any other matters are properly
brought before either meeting, or any adjourned meeting, the persons named in
the enclosed form of proxy, and acting under that proxy, will have discretion
to vote or act on those matters in accordance with their best judgment,
including to adjourn the meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval
of the holders of shares representing a majority of the votes present in person
or by proxy at the meeting, whether a quorum exists, without further notice
other than by an announcement at the meeting.
127
DESCRIPTION OF VERIZON COMMUNICATIONS CAPITAL STOCK
The following summary of the terms of the capital stock of Verizon
Communications is not meant to be complete and is qualified by reference to the
relevant provisions of Delaware law and the Verizon Communications certificate
of incorporation and bylaws. Copies of the Verizon Communications, certificate
of incorporation and by-laws are incorporated by reference. See "Where You Can
Find More Information."
Authorized Capital Stock
The Verizon Communications certificate of incorporation provides authority
to issue up to 4,500,000,000 shares of stock of all classes, of which
4,250,000,000 are shares of Verizon Communications common stock, $0.10 par
value per share, and 250,000,000 are shares of series preferred stock, $0.10
par value per share.
Common Stock
Subject to any preferential rights of the series preferred stock, holders of
shares of common stock of Verizon Communications are entitled to receive
dividends on that stock out of assets legally available for distribution when,
as and if authorized and declared by the Verizon Communications board of
directors and to share ratably in the assets of the Verizon Communications
legally available for distribution to its stockholders in the event of its
liquidation, dissolution or winding-up.
Holders of common stock are entitled to one vote per share on all matters
voted on generally by the stockholders, including the election of directors. In
addition, the holders of common stock would possess all voting power except as
otherwise required by law or except as provided for any series of series
preferred stock. The Verizon Communications certificate of incorporation does
not provide for cumulative voting for the election of directors.
Series Preferred Stock
The Verizon Communications board of directors will be authorized at any time
to provide for the issuance of all or any shares of the series preferred stock
in one or more classes or series, and to fix for each class or series voting
powers, full or limited, or no voting powers, and distinctive designations,
preferences and relative, participating, optional or other special rights and
any qualifications, limitations or restrictions, as shall be stated and
expressed in the resolution or resolutions adopted by the board of directors
providing for the issuance of the class or series and to the fullest extent as
may be permitted by Delaware law. This authority includes, but is not limited
to, the authority to provide that any class or series be:
. subject to redemption at a specified time or times and at a specified
price or prices;
. entitled to receive dividends (which may be cumulative or non-cumulative)
at rates, on conditions, and at times, and payable in preference to, or in
relation to, the dividends payable on any other class or classes or any
other series;
. entitled to rights upon the dissolution of, or upon any distribution of
the assets of, Verizon Communications; or
. convertible into, or exchangeable for, shares of any class or classes of
stock, or other securities or property, of Verizon Communications at a
specified price or prices or at specified rates of exchange and with any
adjustments; all as the Verizon Communications board of directors
determines by resolution.
As of the date of this proxy statement/prospectus, no shares of preferred
stock are outstanding.
128
No Preemptive Rights
No holder of any shares of any class of stock of Verizon Communications has
any preemptive or preferential right to acquire or subscribe for any unissued
shares of any class of stock or any authorized securities convertible into or
carrying any right, option or warrant to subscribe for or acquire shares of any
class of stock.
Transfer Agent and Registrar
The principal transfer agent and registrar for Verizon Communications common
stock is Fleet National Bank.
129
RIGHTS OF DISSENTING SHAREHOLDERS
Price Communications shareholders entitled to vote on the Verizon
transactions have dissenter's rights to dissent from the Verizon transactions
and obtain the fair value of their Price Communications shares in cash in
accordance with the procedures established by New York law.
Sections 623 and 910 of the New York Business Corporation Law ("NYBCL")
provide that if the Verizon transactions are consummated, Price Communications
shareholders entitled to vote on the Verizon transactions who object to the
Verizon transactions and who follow the procedures specified in Section 623
(summarized below) will have the right to receive cash payment of the fair
value of their shares. A copy of Section 623 of the NYBCL is attached as Annex
I. The express procedures of Section 623 must be followed precisely; if they
are not, shareholders may lose their right to dissent. As described more fully
below, such "fair value" would potentially be determined in judicial
proceedings, the result of which cannot be predicted. There can be no assurance
that shareholders exercising dissenters' rights will receive consideration
equal to or greater than the value of the Price Communications common stock to
be owned by them following consummation of the Verizon transactions.
The statutory procedures outlined below are complex. What follows is a
summary and is qualified in its entirety by reference to Section 623 of the
NYBCL. Shareholders wishing to exercise their dissenters' rights should consult
their own legal advisors to ensure that they fully and properly comply with the
requirements of New York law.
Any Price Communications shareholder who is entitled to vote on the Verizon
transactions will have the right to receive cash payment of the fair value of
his or her shares of Price Communications common stock and the other rights and
benefits provided in Section 623 if such shareholder:
. files with Price Communications a written objection to the Verizon
transactions prior to the vote by the shareholders of Price Communications
on the Verizon transactions. The written objection must include:
. notice of the shareholder's election to dissent;
. the shareholder's name and residence address;
. the number of shares as to which the shareholder dissents; and
. a demand for payment of the fair value of such shares if the Verizon
transactions are consummated; and
. does not vote in favor of the Verizon transactions.
A vote against the Verizon transactions will not satisfy the requirement of
filing a written objection. Failure to vote against the Verizon transactions
will not waive a shareholder's right to receive payment if the shareholder has
filed a written objection in accordance with Section 623 and has not voted in
favor of the Verizon transactions. If a shareholder abstains from voting on the
Verizon transactions, this will not waive his or her dissenter's rights so long
as the appropriate written objection to the Verizon transactions is properly
and timely filed. Since a proxy left blank will be voted for the Verizon
transactions, any Price Communications shareholder who wishes to exercise his
or her dissenter's rights must either vote against the Verizon transactions or
abstain. Written objection is not required from any shareholder to whom Price
Communications did not give proper notice of the annual meeting of shareholders.
A Price Communications shareholder may not dissent as to less than all
shares of common stock, held of record by him or her, that he or she owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner of shares as to less than all shares held of record by the
nominee or fiduciary.
130
All written objections to the Verizon transactions and notices of election
to dissent should be addressed to:
Price Communications Corporation
45 Rockefeller Plaza
New York, New York 10020
Attention: Secretary
If the Verizon transactions are approved by Price Communications'
shareholders, within 10 days after such approval Price Communications will give
written notice of the approval by registered mail to each shareholder who filed
a timely written objection, except for any shareholder who voted in favor of
the Verizon transactions. Any shareholder from whom objection was not required
and who elects to dissent must file with Price Communications, within 20 days
after the giving of notice to him or her, a written notice of election to
dissent, stating his or her name and residence address, the number of shares as
to which he or she dissents and a demand for payment of the fair value for his
or her shares.
Either at the time of filing of the notice of election to dissent or within
one month after the filing of the notice of election to dissent, a dissenting
shareholder must submit the certificates representing his or her dissenting
shares of Price Communications common stock to Price Communications, or to its
transfer agent, which shall note conspicuously on the certificates that a
notice of election has been filed, and will then return the certificate to the
shareholder. Any shareholder who fails to submit his or her certificates for
notation within the required time, shall at the option of Price Communications
upon written notice to such shareholder within 45 days from the date of filing
such notice of election to dissent, lose his or her dissenter's rights unless a
court, for good cause shown, otherwise directs.
Within 15 days after the expiration of the period within which shareholders
may file their notices of election to dissent, or within 15 days after the
contribution transaction, whichever is later (but in no case later than 90 days
after Price Communications shareholders vote authorizing the Verizon
transactions), Price Communications will make a written offer by registered
mail to each shareholder who has filed a notice of election to pay for his or
her dissenting shares at a specified price which Price Communications considers
to be their fair value. If the contribution transaction has occurred, Price
Communications must accompany the offer by an advance payment to each
shareholder who has submitted his or her stock certificates of an amount equal
to 80% of the amount of the offer. Acceptance of such payment does not
constitute a waiver of any dissenters' rights. The offer must be made at the
same price per share to all the dissenting shareholders of Price
Communications. If, within 30 days after the making of an offer, Price
Communications and any dissenting shareholders agree on the price to be paid
for dissenting shares, the balance of payment for the shares must be made
within 60 days after the making of the offer or the contribution transaction,
whichever is later, and upon surrender of the certificates representing such
shares.
If Price Communications fails to make an offer to dissenting shareholders
within the 15-day period described above, or if it makes the offer and any
dissenting shareholder fails to agree within 30 days thereafter upon the price
to be paid for his or her shares, Price Communications is required, within 20
days after the expiration of whichever is the applicable of the two periods, to
institute a special proceeding in the Supreme Court of the State of New York,
County of New York to determine the rights of dissenting shareholders and to
fix the fair value of their shares. If Price Communications fails to institute
a proceeding within the 20-day period, any dissenting shareholder may institute
a proceeding for the same purpose not later than 30 days after the expiration
of the 20-day period. If the dissenting shareholder does not institute a
proceeding within the 30-day period, his or her dissenter's rights are lost
unless the court, for good cause shown, otherwise directs.
During each proceeding, the court will determine whether each dissenting
shareholder is entitled to receive payment for his or her shares of Price
Communications common stock and, if so, will fix the value of such shares as of
the close of business on the day prior to the date Price Communications
shareholders vote authorizing the Verizon transactions, taking into
consideration the nature of the transactions giving rise to the shareholder's
right
131
to receive payment for his or her dissenting shares and its effect on Price
Communications and its shareholders, the concepts and methods then customary in
relevant securities and financial markets for determining the fair value of
shares of a Corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an appraiser or
referee. The court will also award interest on such amount to be paid from the
contribution transaction to the date of payment unless the court finds that a
shareholder's refusal to accept Price Communications offer of payment was
arbitrary, vexatious or otherwise not in good faith. Each party to such
proceeding will bear its own costs and expenses unless the court finds the
refusal of payment by the shareholder or shareholders arbitrary, vexatious or
otherwise not in good faith, in which case Price Communications' costs will be
assessed against any or all dissenting shareholders who are party to such
proceeding. The court, in its discretion, may also apportion or assess any part
of the dissenting shareholder's costs against Price Communications if it finds
that the fair value of the shares as determined materially exceeds the amount
which Price Communications offered to pay, or that no offer or advance payment
was made by Price Communications, or that Price Communications failed to
institute such special proceeding within the specified period, or that the
actions of Price Communications in complying with its obligations under Section
623 were arbitrary, vexatious or otherwise not in good faith. Within 60 days
following the final determination of the applicable proceeding, Price
Communications shall pay to each dissenting shareholder the amount found to be
due him or her upon the shareholder's surrender of all certificates
representing dissenting shares.
The enforcement by a shareholder of his or her right to receive payment for
shares in accordance with Section 623 excludes the enforcement by such
shareholder of any other right to which he or she might otherwise by entitled
by virtue of his or her ownership of shares (unless such shareholder withdraws
his or her notice of election or the Verizon transactions are abandoned),
except that such shareholder will retain the right to bring or maintain an
appropriate action to obtain relief on the grounds that the Verizon
transactions will be or are unlawful or fraudulent as to him or her. A
shareholder's notice of election may be withdrawn at any time prior to his or
her acceptance in writing of an offer to purchase his or her dissenting shares
by Price Communications, but no withdrawal may be made later than 60 days from
the contribution transaction (unless Price Communications failed to make a
timely offer) without the consent of Price Communications.
132
LEGAL MATTERS
Davis Polk & Wardwell, counsel to New Limited Partnership, Verizon Wireless
and Verizon Communications, will pass on the validity of the Preferred
Exchangeable Interest and the shares of common stock of Verizon Communications
to be issued to Price Wireless. It is a condition to the obligation of Verizon
Wireless and New Limited Partnership to complete the Verizon transactions that
New Limited Partnership receive opinions from counsel to Price Communications
relating to, among other things, authority and execution, litigation and FCC
matters. It is a condition to the obligation of Price Communications and its
subsidiaries to complete the Verizon transactions that it receive an opinion as
to certain legal matters from counsel to Verizon Wireless, Verizon
Communications and VWI and that counsel to Price Communications confirm that
such counsel's tax opinion has not been withdrawn due to certain changes in
law. See "The Transaction Agreement --Conditions to Completion of the
Transaction" and "The Verizon Transactions--Federal Income Tax Consequences."
EXPERTS
The financial statements of Verizon Wireless of the East LP as of December
31, 2001 and for the period December 17, 2001 (date of inception) to December
31, 2001 included in this proxy statement/prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing in this proxy statement/prospectus, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The annual financial statements of Orange County-Poughkeepsie Limited
Partnership as of December 31, 2000 and 1999 and for each of the three years in
the period ended December 31, 2000 included in this proxy statement/prospectus
as set forth in the index on page F-1 have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Verizon Communications as of December 31, 2000 and for the year then ended,
included in Verizon Communications' Annual Report on Form 10-K filed on March
23, 2001, and incorporated by reference in this proxy statement/prospectus,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report which is also included therein and incorporated by reference in
this proxy statement/prospectus. Such consolidated financial statements are
incorporated by reference in this proxy statement/prospectus in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and financial statement schedule of
Verizon Communications as of December 31, 1999 and for the two years in the
period ended December 31, 1999, included in Verizon Communications' Annual
Report on Form 10-K filed on March 23, 2001, and incorporated by reference in
this proxy statement/prospectus, have been audited by PricewaterhouseCoopers
LLP, independent accountants, other than the financial statements of GTE
Corporation (a wholly owned subsidiary of Verizon Communications) which were
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their reports which are also included therein and incorporated by reference in
this proxy statement/prospectus. Such consolidated financial statements are
incorporated by reference in this proxy statement/prospectus in reliance on
such reports given on the authority of such firms as experts in accounting and
auditing.
The consolidated financial statements of Price Communications incorporated
in this document by reference to the Price Communications' Annual Report on
Form 10-K for the year ended December 31, 2000 have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference in reliance on their
authority as experts in auditing and accounting.
The consolidated financial statements of Price Communications Wireless, Inc.
as of December 31, 2000 and for the three years ended December 31, 2000
included in this proxy statement/prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and have been so included in reliance on their authority as
experts in auditing and accounting.
133
WHERE YOU CAN FIND MORE INFORMATION
Verizon Communications and Price Communications file annual, quarterly and
special reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information that they file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Their SEC filings are also available
to the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
Verizon Communications filed a registration statement on Form S-4 to
register with the SEC the Verizon Communications common shares that may be
issued to Price Wireless in an exchange under the Verizon transactions. This
proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of Verizon Communications in addition to being a proxy
statement of Price Communications for Price Communications' annual meeting. As
permitted by SEC rules, this proxy statement/prospectus does not contain all
the information that you can find in the registration statement or the exhibits
to that statement.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
proxy statement/prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about the companies and their financial performance.
Verizon Communications SEC Filings Period
(File No. 1-8606)
- ---------------------------------- -
Annual Report on Form 10-K.......... Year ended December 31, 2000
Quarterly Reports on Form 10-Q...... Quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001
Current Reports on Form 8-K......... Filed on February 1, 2001, February 7, 2001,
March 28, 2001, April 25, 2001, May 9, 2001, June 5,
2001, July 31, 2001, August 2, 2001, October 4, 2001,
October 5, 2001 (amending and restating the current
report filed on October 4, 2001), October 30, 2001,
January 9, 2002 and February 1, 2002.
Price Communications' SEC Filings
(File No. 1-08309) Period
- --------------------------------- ------
Annual Report on Form 10-K.......... Fiscal year ended December 31, 2000
Amended Annual Report on Form 10-K/A Filed on April 30, 2001
Quarterly Reports on Form 10-Q...... Quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001
Current Reports on Form 8-K......... Filed on March 7, 2001 and January 4, 2002
We are also incorporating by reference additional documents that we file
with the SEC between the date of this proxy statement/prospectus and the date
of the meetings.
Verizon Communications has supplied all information contained or
incorporated by reference in this proxy statement/prospectus relating to
Verizon Communications, Verizon Wireless has supplied all information relating
to Verizon Wireless and VWI, and Price Communications has supplied all
information relating to Price Communications and Price Wireless.
134
You may already have been sent some of the documents incorporated by
reference, but you can obtain any of them from us or the SEC. Documents
incorporated by reference are available from us without charge, excluding all
exhibits, unless we have specifically incorporated by reference an exhibit in
this proxy statement/prospectus. Shareholders may obtain these documents
incorporated by reference by requesting them in writing or by telephone from
the appropriate party at the following address:
Verizon Communications Inc.
1095 Avenue of the Americas
New York, New York 10036
Tel: (212) 395-2121
Price Communications Corporation
45 Rockefeller Plaza
New York, New York 10020
Tel: (212) 757-5600
If you would like to request documents from us, please do so by
to receive them before the shareholders' meetings. We shall send the documents
by first-class mail within one business day of receiving your request.
You can also get more information by visiting Verizon Communications' web
site at www.verizon.com. This address is not an active link and any web site
materials are not part of this proxy statement/prospectus.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the Verizon
transactions proposal. We have not authorized anyone to provide you with
information that is different from what is contained in this document. This
proxy statement/prospectus is dated . You should not assume that
the information in it is accurate as of any date other than that date, and
neither its mailing to shareholders nor the issuance of Verizon Communications
common shares in the Verizon transactions shall create any implication to the
contrary.
135
INDEX TO FINANCIAL STATEMENTS
Page
----
Verizon Wireless of the East LP
Independent Auditors' Report......................................................................... F-2
Balance Sheet as of December 31, 2001................................................................ F-3
Statement of Operations and Partners' Capital for the period December 17, 2001 (Date of Inception) to
December 31, 2001.................................................................................. F-4
Statement of Cash Flows for the period December 17, 2001 (Date of Inception) to December 31, 2001.... F-5
Notes to Financial Statements........................................................................ F-6
Orange County-Poughkeepsie Limited Partnership
Unaudited Interim Financial Statements
Balance Sheets as of December 31, 2000 and September 30, 2001 (Unaudited)............................ F-8
Statements of Operations for the nine months ended September 30, 2000 and 2001 (Unaudited)........... F-9
Statements of Changes in Partners' Capital for the nine months ended September 30, 2001 (Unaudited).. F-10
Statements of Cash Flows for the nine months ended September 30, 2000 and 2001 (Unaudited)........... F-11
Notes to Unaudited Financial Statements.............................................................. F-12
Annual Financial Statements
Report of Independent Accountants.................................................................... F-17
Balance Sheets as of December 31, 1999 and 2000...................................................... F-18
Statements of Operations for the years ended December 31, 1998, 1999 and 2000........................ F-19
Statements of Changes in Partners' Capital for the years ended December 31, 1998, 1999 and 2000...... F-20
Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000........................ F-21
Notes to Financial Statements........................................................................ F-22
Price Communications Wireless, Inc.
Unaudited Interim Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2001 (unaudited) and December 31, 2000..... F-28
Condensed Consolidated Statements of Operations for the nine months ended September 30, 2001 and
2000 (Unaudited)................................................................................... F-29
Condensed Consolidated Statements of Stockholder's Equity for the nine months ended September 30,
2001 (Unaudited)................................................................................... F-30
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and
2000 (Unaudited)................................................................................... F-31
Notes to Condensed Consolidated Financial Statements (Unaudited)..................................... F-32
Annual Financial Statements
Report of Independent Public Accountants............................................................. F-34
Consolidated Balance Sheets as of December 31, 2000 and 1999......................................... F-35
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998........... F-36
Consolidated Statements of Stockholder's Equity for the years ended December 31, 2000, 1999 and
1998................................................................................................ F-37
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998........... F-38
Notes to Consolidated Financial Statements........................................................... F-39
Schedule
II. Valuation and Qualifying Accounts............................................................... F-46
F-1
INDEPENDENT AUDITORS' REPORT
To the Partners of Verizon Wireless of the East LP
We have audited the accompanying balance sheet of Verizon Wireless of the
East LP (the ''Partnership'') as of December 31, 2001 and the related
statements of operations and partners' capital and cash flows for the period
December 17, 2001 (date of inception) to December 31, 2001. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Partnership as of
December 31, 2001, and the results of its operations and its cash flows for the
period December 17, 2001 (date of inception) to December 31, 2001, in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE &TOUCHE LLP
New York, New York
January 25, 2002
F-2
VERIZON WIRELESS OF THE EAST LP
BALANCE SHEET
December 31, 2001
ASSETS
Cash....................................... $2,504
------
Total assets............................ $2,504
======
LIABILITIES AND PARTNERS' CAPITAL
Partners' Capital.......................... $2,504
------
Total liabilities and partners' capital. $2,504
======
See Notes to Financial Statements
F-3
VERIZON WIRELESS OF THE EAST LP
STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL
For the Period December 17, 2001 (Date of Inception) to December 31, 2001
Other income
Interest income............................................ $ 4
------
Net income................................................. $ 4
Beginning partners' capital................................ --
Initial contribution from partners......................... 2,500
------
Ending partners' capital................................... $2,504
======
See Notes to Financial Statements
F-4
VERIZON WIRELESS OF THE EAST LP
STATEMENT OF CASH FLOWS
For the Period December 17, 2001 (Date of Inception) to December 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 4
------
Net cash provided from operating activities................ 4
------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from initial contributions from partners.......... 2,500
------
Net cash provided from financing activities................ 2,500
------
Cash, beginning of period.................................. --
------
Cash, end of period........................................ $2,504
======
See Notes to Financial Statements
F-5
VERIZON WIRELESS OF THE EAST LP
NOTES TO FINANCIAL STATEMENTS
For the Period December 17, 2001 (Date of Inception) to December 31, 2001
1. Formation of Verizon Wireless of the East LP and Description of Business
Formation of Verizon Wireless of the East LP
Verizon Wireless of the East LP (the ''Partnership'') was formed on December
17, 2001 for the purpose of acquiring the assets that will be contributed by
Price Communications Wireless ("PCW") and subsidiaries of Cellco pursuant to
the Transaction Agreement (the "Agreement") dated December 18, 2001. The
Agreement is expected to be consummated during the second quarter of 2002,
subject to the approval of the transaction by the shareholders of Price
Communications ("PC") at the annual meeting and satisfaction or waiver, to the
extent legally permissible, of all other closing conditions.
Upon closing of the contribution transaction, PCW will contribute
substantially all of its business assets and approximately $150 million in
cash; and Cellco and subsidiaries of Cellco will contribute an aggregate 85%
interest in Orange County-Poughkeepsie Limited Partnership ("OCP"), Federal
Communications Commission ("FCC") licenses to provide broadband PCS Wireless
Communication Services within the Macon, Georgia Basic Trading Area ("BTA") and
all of Verizon Wireless' right, title and interest in the FCC license to
provide broadband PCS wireless communications services within a portion of the
Atlanta, Georgia BTA, a $500 million demand note and $250 million in cash.
The Partnership will assume certain liabilities of PCW relating to its
business, including such liabilities that arise under PCW's 11 3/4% senior
subordinated notes due 2007 and 9 1/8% senior secured notes due 2006. The
Partnership will conduct a tender offer to acquire PCW's 11 3/4% senior
subordinated notes due 2007. If the tender offer is unsuccessful, PCW will, at
the cost of the Partnership, effect a covenant defeasance with respect to such
notes. PCW will, at the cost of the Partnership, effect a covenant defeasance
and redeem all of the 9 1/8% senior secured notes due 2006.
The Partnership also intends to borrow $350 million from a third party
lender. This loan will be non-recourse to the partners of the Partnership and
shall not obligate the Partnership to repay the loan at any time prior to five
years after the contribution transaction.
Pursuant to the limited partnership agreement, any profits of the
Partnership will be allocated on a preferred basis to PCW's capital account
quarterly up to an amount equal to a specified percentage per annum (based on
the weighted daily average balance of PCW's capital account). This percentage
return is 4.00% per annum subject to downward adjustment relating to the
interest rate payable on the $350 million loan to be obtained by the
Partnership at the closing of the contribution transaction, and it is currently
expected that the maximum preferred return after giving effect to such
adjustment will be approximately 3.6%. PCW is not entitled to a share of any
profits of the Partnership in excess of this preferred return.
PCW's capital account will not be allocated any preferred return after the
earlier to occur of (1) the expiration of the period (if any) within which PCW
is entitled to elect to exchange its Preferred Exchangeable Interest for
Verizon Wireless common stock or (2) the fourth anniversary of the contribution
transaction.
As of December 31, 2001, other than the initial capitalization of the
Partnership, no other business has been transacted.
Description of Business
The Partnership will engage in the business of constructing, developing,
managing, operating, marketing and selling cellular telephone systems or
service, wireless service, paging service, personal communications service
("PCS") and other commercial mobile radio service, and any business related
thereto.
F-6
VERIZON WIRELESS OF THE EAST LP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Under the Verizon Wireless brand name, the Partnership, through its 85%
interest in OCP, will provide wholesale cellular mobile telephone service to
resellers who operate principally in the Orange County and Poughkeepsie, New
York metropolitan areas and provide broadband PCS wireless communication
services within the Macon, Georgia BTA and within a portion of the Atlanta,
Georgia BTA.
2. Transactions with Affiliates
The operations of the Partnership will be closely integrated with Cellco's
other wireless telecommunications assets, which are marketed under the brand
name "Verizon Wireless." Cellco intends to provide or arrange for provision of
certain services to the Partnership in connection with its business. These
services may include (1) administrative, accounting, billing, credit,
collection, insurance, legal, purchasing, clerical and such other general
services as may be necessary to administer the Partnership; (2) design,
engineering, optimization, implementation, surveillance, maintenance, repair
and such other technical services as may be necessary to operate the
Partnership's wireless network; and (3) assistance in the preparation of
filings with regulatory authorities and in the negotiations of transactions
with respect to the FCC licenses owned by the Partnership. Cellco will charge
the Partnership for these services at rates consistent with the rates it
charges other partnerships managed by Cellco.
F-7
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
BALANCE SHEETS
(in thousands)
December 31, September 30,
2000 2001
------------ -------------
(Unaudited)
ASSETS
Current assets
Accounts receivable, net of allowances of $31 and $13. $ 2,259 $ 489
Unbilled revenue...................................... 1,112 1,582
Due from general partner.............................. 22,475 27,846
Prepaid expenses...................................... 107 337
------- -------
Total current assets.............................. 25,953 30,254
Property, plant and equipment, net....................... 24,753 25,318
Deferred charges and other assets, net................... 7 6
------- -------
Total assets...................................... $50,713 $55,578
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable and accrued liabilities.............. $ 21 $ 300
Accrued expenses and taxes............................ 1,959 775
Advance billings...................................... 172 202
------- -------
Total current liabilities......................... 2,152 1,277
Commitments and contingencies............................
Partners' capital........................................ 48,561 54,301
------- -------
Total liabilities and partners' capital........... $50,713 $55,578
======= =======
See Notes to Unaudited Financial Statements
F-8
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in thousands)
For the nine months
ended
September 30,
-------------------
2000 2001
------- -------
(Unaudited)
OPERATING REVENUE
Cellular service...................... $40,875 $58,649
------- -------
Total operating revenue............ 40,875 58,649
------- -------
OPERATING COSTS AND EXPENSES
Cost of service....................... 4,757 6,288
General and administrative............ 3,141 4,993
Depreciation and amortization......... 2,253 2,622
------- -------
Total operating costs and expenses. 10,151 13,903
------- -------
OPERATING INCOME...................... 30,724 44,746
Other, net............................ 922 994
------- -------
NET INCOME............................ $31,646 $45,740
======= =======
See Notes to Unaudited Financial Statements
F-9
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(in thousands)
(unaudited)
NYNEX Warwick
Mobile Taconic Valley Total
Limited Telephone Telephone Partners'
Partnership 2 Corporation Company Capital
------------- ----------- --------- ---------
Balance at January 1, 2001............. $ 41,277 $ 3,642 $ 3,642 $ 48,561
Net income............................. 38,878 3,431 3,431 45,740
Distribution to partners............... (34,000) (3,000) (3,000) (40,000)
-------- ------- ------- --------
Balance at September 30, 2001.......... $ 46,155 $ 4,073 $ 4,073 $ 54,301
======== ======= ======= ========
See Notes to Unaudited Financial Statements
F-10
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
For the nine months
ended
September 30,
------------------
2000 2001
-------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................................ $ 31,646 $ 45,740
Adjustments to reconcile income from continuing operations to net cash provided by
operating activities:
Depreciation and amortization.................................................. 2,253 2,622
Changes in certain assets and liabilities:
Accounts receivable........................................................ (910) 1,770
Unbilled revenue........................................................... (425) (470)
Prepaid expenses........................................................... 2 (230)
Deferred charges and other assets.......................................... 2 1
Accounts payable........................................................... (73) 279
Accrued expenses and taxes................................................. 586 (1,184)
Advanced billings.......................................................... 110 30
Other operating activities, net................................................ (4) (1)
-------- --------
Net cash provided by operating activities......................................... 33,187 48,557
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.............................................................. (3,876) (3,186)
Other investing activities, net................................................... -- --
-------- --------
Net cash used in investing activities............................................. (3,876) (3,186)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to partners.......................................................... (15,000) (40,000)
Increase in due from general partner, net......................................... (14,311) (5,371)
-------- --------
Net cash used in financing activities............................................. (29,311) (45,371)
-------- --------
(Decrease) increase in cash....................................................... -- --
Cash, beginning of period......................................................... -- --
-------- --------
Cash, end of period............................................................... $ -- $ --
======== ========
F-11
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2001 and 2000
(in thousands)
1. Background and Basis of Presentation
General Partner
On April 3, 2000, Bell Atlantic and Vodafone AirTouch Plc ("Vodafone")
consummated their previously announced agreement to combine their U. S.
wireless operations. In accordance with the terms of the U.S. Wireless Alliance
Agreement (the "Alliance Agreement") dated September 21, 1999 between the two
companies, Vodafone contributed its U.S. wireless operations, its 50% ownership
interest in PrimeCo Personal Communications L.P. ("PrimeCo") and debt to the
Cellco Partnership ("Cellco"), in exchange for a 65.1% interest in Cellco. Bell
Atlantic also contributed its 50% ownership interest in PrimeCo, and retained a
34.9% interest in Cellco. As of April 3, 2000, Cellco began conducting business
as Verizon Wireless ("Verizon").
On June 30, 2000, Bell Atlantic and GTE Corporation ("GTE Corp.") completed
a merger of equals under a definitive merger agreement entered into on July 27,
1998. On June 30, 2000, the newly merged entity changed its name to Verizon
Communications ("Verizon Corp."). Under the Alliance Agreement, Verizon Corp.
contributed GTE Corp.'s wireless net assets and operations increasing its
interest in Cellco to 55% and decreasing Vodafone's interest in Cellco to 45%.
Orange County-Poughkeepsie Limited Partnership
The Orange County-Poughkeepsie Limited Partnership (the "Partnership")
operates as a limited partnership among NYNEX Mobile Limited Partnership 2
("NYNEX Mobile LP 2"), Taconic Telephone Corporation ("Taconic"), and Warwick
Valley Telephone Company ("Warwick"). NYNEX Mobile LP 2 is a partnership among
Cellco, the Utica-Rome Cellular Partnership and Bell Atlantic Mobile Systems of
Allentown, Inc. ("BAMS of Allentown"), with ownership interests of 54%, 45% and
1%, respectively. NYNEX Mobile LP 2 holds an 85% partnership interest in the
Partnership. Taconic and Warwick each hold limited partnership interests of
7.5%.
On December 1, 1999, Frontier Communications of New York, Inc. and Frontier
Communications of Sylvan Lake, each holding 7.5% interests in the Partnership,
sold their interests to NYNEX Mobile LP 2.
The Partnership provides cellular mobile telephone service and other retail
services to the Orange County and Poughkeepsie, New York metropolitan areas to
resellers who operate principally in that geographic area. The Orange
County-Poughkeepsie cellular system became operational in 1987. The partners
make capital contributions, share in the operating results and receive
distributions from the Partnership in accordance with their respective
ownership percentages.
The interim financial statements are unaudited, but in the opinion of
management, include all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of financial
position, results of operations and cash flows at the dates and for the interim
periods shown. These interim financial statements should be read in conjunction
with the financial statements and related notes of the Partnership for the year
ended December 31, 2000. The results for interim periods are not necessarily
indicative of results for the full year or any subsequent period.
F-12
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)
2. Summary of Significant Accounting Policies
Property, Plant and Equipment
Property, plant and equipment are stated at cost and primarily represent
costs incurred to construct and enhance Mobile Telephone Switching Offices
(MTSOs) and cell sites. The cost of property, plant and equipment is
depreciated over its estimated useful life, using the straight-line method of
accounting. Major improvements to existing property, plant and equipment are
capitalized. Routine maintenance and repairs that do not extend the life of the
property, plant and equipment are charged to expense as incurred.
Upon the sale or retirement of property, plant and equipment, the cost and
related accumulated depreciation or amortization is eliminated from the
accounts and any related gain or loss is generally reflected in the Statement
of Operations. The Partnership periodically exchanges (trades-in) certain
assets for similar productive assets and generally receives trade-in allowances
from its vendors. The cost of the new asset is the monetary consideration paid
plus the net book value of the asset surrendered. If the trade-in allowance is
less than the net book value of the asset surrendered, a loss is reflected in
the Statement of Operations.
Certain network engineering costs incurred during the construction phase of
the Partnership's cellular network and real estate properties under development
are capitalized as part of property, plant and equipment and amortized over the
estimated useful lives of the related assets.
The Partnership's network construction expenditures are recorded as
construction in progress until the projects are completed and placed into
service. The assets are then transferred to the appropriate property, plant,
and equipment account and depreciated on a straight-line basis over the assets'
estimated useful lives.
Revenue Recognition
The Partnership earns revenue by providing access to the cellular network
(access revenue) and for usage of the cellular network (airtime/usage revenue),
which includes roaming and cellular long distance revenue. Cellular long
distance represents calls placed by the Partnership's customers and those of
other carriers within the Partnership's service area.
In general, access revenue is billed one month in advance of the service
being provided and is recognized, as revenue, when earned; the unearned portion
is classified in advanced billings. Airtime/usage revenue, roaming revenue and
long distance revenue are recognized when service is rendered and included in
unbilled revenue until billed.
Cellular service revenues resulting from a cellsite agreement are recognized
based upon an allocation of airtime minutes [See Note 4].
Operating Expenses
Operating expenses include all direct costs related to the Partnership, the
Partnership's share of all indirect distribution costs in the service area, and
an allocation of administrative and operating costs from the managing general
partner [See Note 4].
The services performed on behalf of the Partnership are provided by the
employees of Verizon. These employees are not employees of the Partnership;
therefore, operating expenses include direct and allocable charges of salary
and employee benefit costs for the services provided to the Partnership.
F-13
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)
Income Taxes
The Partnership is not a taxable entity for federal and state income tax
purposes. Any taxable income or loss is apportioned to the partners based on
their respective partnership interests and is reported by them individually.
Due From General Partner
Due from general partner principally represents the Partnership's cash
position. The general partner manages all cash and financing activities for the
Partnership. As such, the due from general partner is reflected as a financing
activity in the Statements of Cash Flows. Additionally, administrative and
operating costs incurred by the general partner on behalf of the Partnership
are charged to the Partnership through this account. Interest income on the
balance in this account is based on the average monthly outstanding balance and
is calculated by applying Verizon's average borrowing rate, which was
approximately 6.35% and 5.67% at September 30, 2000 and 2001, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used for, but not limited to, the accounting for: allowance for
uncollectible accounts receivable, unbilled revenue, depreciation and
amortization and accrued expenses.
FCC Licenses
The Federal Communications Commission ("FCC") issues licenses that authorize
cellular carriers to provide service in specific cellular geographic service
areas ("CGSAs"). The FCC grants licenses for terms of up to ten years. In 1993,
the FCC adopted specific standards to apply to cellular renewals, concluding it
will award a license renewal to a cellular licensee that meets certain
standards of past performance. Historically, the FCC has granted license
renewals routinely. The current terms of the Partnership's FCC licenses expire
on January 27, 2008 and January 29, 2008 for the Poughkeepsie and Orange County
FCC licenses, respectively. The general partner believes it will be able to
meet all requirements necessary to secure renewal of its cellular licenses.
Concentrations
To the extent the Partnership's customer receivables become delinquent,
collection activities commence. The managing general partner accounts for 93%
and 71% of the accounts receivable balance at December 31, 2000 and September
30, 2001, respectively.
The general partner relies on a limited number of local and long-distance
telephone companies and other companies to provide certain communication
services. Certain of these communication services are in turn utilized by the
Partnership. Although the general partner feels alternative telecommunications
facilities could be found in a timely manner, any disruption of these services
could potentially have an adverse impact on the Partnership's operating results.
Although the general partner attempts to maintain multiple vendors for each
of its required products, inventory, and network equipment, certain of these
items are acquired from only a few sources. Certain of these products are in
turn utilized by the Partnership and are important components of the
Partnership's operations. If
F-14
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)
the general partner's suppliers are unable to meet its needs for required
products, inventory, and equipment, delays and increased costs in the expansion
of the Partnership's network infrastructure or losses of potential customers
could result, which would adversely affect operating results.
Financial Instruments
The Partnership's financial instruments, which include trade payables and
receivables and intercompany advances, are short-term in nature. Accordingly,
the general partner believes the balance sheet amounts approximate the fair
value of the Partnership's financial instruments.
Reclassifications
Certain reclassifications have been made to the 2000 financial statements to
conform to the current year presentation.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," No. 142, "Goodwill and Other Intangible Assets" and No. 143,
"Accounting for Asset Retirement Obligations."
SFAS No. 141 requires the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is no longer permitted. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination that is completed after
June 30, 2001.
SFAS No. 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Intangible assets that have finite lives will
continue to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The Partnership is required to adopt SFAS No. 142 effective
January 1, 2002. The Partnership is currently evaluating our intangible assets
in relation to the provisions of SFAS No. 142 to determine the impact the
adoption of SFAS No. 142 will have on our results of operation or financial
position.
SFAS No. 143 requires entities to recognize the fair value of any legal
obligation associated with the retirement of long-lived assets and to
capitalize that amount as a part of the book value of the long-lived asset.
That cost is then depreciated over the remaining life of the underlying
long-lived asset. The partnership is required to adopt the standard effective
January 1, 2003. The partnership is currently evaluating its long-lived assets
retirement obligation in relation to the provisions of SFAS No. 143 to
determine the impact, if any, on its future results of operations or financial
position.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This standard re-addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
It concludes that one accounting model be used for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations to
include more disposal transactions. The Partnership
F-15
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)
is required to adopt the standard effective January 1, 2002. The Partnership
does not expect the impact of the adoption of SFAS No. 144 to have a material
effect on our results of operations or financial position.
3. Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31, September 30,
2000 2001
------------ -------------
(unaudited)
Buildings (10-40 yrs.)...................... $ 7,649 $ 8,871
Cellular plant equipment (3-15 yrs.)........ 28,899 30,937
Furniture, fixtures and equipment (2-7 yrs.) 380 381
Construction in progress.................... 1,819 1,744
-------- --------
38,747 41,933
Accumulated depreciation.................... (13,994) (16,615)
-------- --------
Property, plant and equipment, net.......... $ 24,753 $ 25,318
======== ========
Property, plant and equipment includes the following:
Capitalized network engineering costs of $176 and $110 were recorded during
the year ended December 31, 2000 and the nine months ended September 30, 2001,
respectively.
Depreciation expense for the nine months ended September 30, 2000 and 2001
was $2,253 and $2,622, respectively.
4. Transactions with Affiliates
The Partnership was charged $1,890 and $2,403 for the nine months ended
September 30, 2000 and 2001, respectively, for its share of the managing
general partner's administrative and operating costs. Additionally, the
Partnership incurred direct telecommunication and data processing expenses of
$473 and $254 in the nine months ended September 30, 2000 and 2001,
respectively, for services provided by its affiliates.
5. Contingencies
Cellco is subject to several lawsuits and other claims including, including
class actions, product liability, patent infringement, partnership disputes,
and claims involving relations with resellers and agents. Various consumer
class actions lawsuits allege that Cellco breached contracts with consumers,
violated certain state consumer protection laws and other statutes and
defrauded customers through concealed or misleading billing practices. Cellco
is also subject to various other legal actions and claims in the normal course
of business. Certain of these lawsuits and other claims may impact the
Partnership. These litigation matters may involve insurance coverage and/or
indemnification obligations by third parties covering all or part of any
potential damage awards against Cellco and the Partnership. All of the above
matters are subject to many uncertainties, and outcomes are not predictable
with assurance.
The Partnership may be allocated a portion of the damages that may result
upon adjudication of these matters if the claimants prevail in their actions.
Consequently, the ultimate liability with respect to these matters at September
30, 2001 cannot be ascertained. The potential effect, if any, on the financial
position and results of operations of the Partnership, in the period in which
these matters are resolved, may be material.
F-16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of the Orange County-Poughkeepsie Limited Partnership:
In our opinion, the accompanying balance sheets and the related statements
of operations, partners' capital, and cash flows present fairly, in all
material respects, the financial position of the Orange County-Poughkeepsie
Limited Partnership (the "Partnership") as of December 31, 2000 and 1999, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Partnership's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
April 20, 2001
F-17
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
BALANCE SHEETS
(in thousands)
December 31,
---------------
2000 1999
------- -------
ASSETS
Current assets
Accounts receivable, net of allowances of $31 and $24, respectively..... $ 2,259 $ 1,281
Unbilled revenue........................................................ 1,112 648
Due from general partner................................................ 22,475 15,009
Prepaid expenses........................................................ 107 117
------- -------
Total current assets................................................. 25,953 17,055
Property, plant and equipment, net.......................................... 24,753 23,406
Deferred charges and other assets, net...................................... 7 9
------- -------
Total assets......................................................... $50,713 $40,470
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable and accrued liabilities................................ $ 21 $ 129
Accrued expenses and taxes.............................................. 1,959 1,609
Advance billings........................................................ 172 72
------- -------
Total current liabilities............................................ 2,152 1,810
Commitments and contingencies (see Notes 5 and 7)
Partners' capital........................................................... 48,561 38,660
------- -------
Total liabilities and partners' capital................................. $50,713 $40,470
======= =======
See Notes to Financial Statements
F-18
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in thousands)
For the year ended December 31,
-------------------------------
2000 1999 1998
------- ------- -------
OPERATING REVENUE
Cellular service................... $57,678 $35,512 $21,048
------- ------- -------
Total operating revenue............ 57,678 35,512 21,048
------- ------- -------
OPERATING COSTS AND EXPENSES
Cost of service.................... 6,509 4,004 1,906
General and administrative......... 4,455 3,226 2,484
Depreciation and amortization...... 3,077 2,529 2,131
------- ------- -------
Total operating costs and expenses. 14,041 9,759 6,521
------- ------- -------
INCOME FROM OPERATIONS................ 43,637 25,753 14,527
------- ------- -------
Other income, net.................. 1,264 664 408
------- ------- -------
NET INCOME............................ $44,901 $26,417 $14,935
======= ======= =======
See Notes to Financial Statements
F-19
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(in thousands)
NYNEX Frontier Warwick
Mobile Communications Frontier Taconic Valley Total
Limited of New York, Communications Telephone Telephone Partners'
Partnership 2 Inc. of Sylvan Lake Corporation Company Capital
------------- -------------- -------------- ----------- --------- ---------
Balance at January 1,
1998....................... $ 15,295 $ 1,637 $ 1,637 $ 1,637 $ 1,637 $ 21,843
Net income................... 10,455 1,120 1,120 1,120 1,120 14,935
Distribution to partners..... (4,200) (450) (450) (450) (450) (6,000)
-------- ------- ------- ------- ------- --------
Balance at December 31,
1998....................... $ 21,550 $ 2,307 $ 2,307 $ 2,307 $ 2,307 $ 30,778
Net income................... 18,937 1,758 1,758 1,982 1,982 26,417
Debt assumed by Cellco....... 2,372 254 254 254 254 3,388
Cash distribution to partners
for transfer of towers..... (2,372) (254) (254) (254) (254) (3,388)
Distribution of towers to
Cellco..................... (375) (40) (40) (40) (40) (535)
Distribution to partners..... (14,100) (600) (600) (1,350) (1,350) (18,000)
Purchase/Sale of Partnership
interest................... 6,850 (3,425) (3,425) -- -- --
-------- ------- ------- ------- ------- --------
Balance at December 31,
1999....................... $ 32,862 $ -- $ -- $ 2,899 $ 2,899 $ 38,660
Net income................... 38,165 -- -- 3,368 3,368 44,901
Distribution to partners..... (29,750) -- -- (2,625) (2,625) (35,000)
-------- ------- ------- ------- ------- --------
Balance at December 31,
2000....................... $ 41,277 $ -- $ -- $ 3,642 $ 3,642 $ 48,561
======== ======= ======= ======= ======= ========
See Notes to Financial Statements
F-20
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended December 31,
------------------------------
2000 1999 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................ $ 44,901 $ 26,417 $ 14,935
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization...................................... 3,077 2,529 2,131
Provision for losses on trade accounts receivable.................. 6 2 --
Loss on disposition of plant and equipment......................... -- (1) --
Changes in certain assets and liabilities:
Accounts receivable............................................ (984) (544) 301
Unbilled revenue............................................... (464) (251) (135)
Prepaid expenses............................................... 10 (31) (9)
Deferred charges and other assets.............................. -- -- 2
Accounts payable............................................... (108) 55 (92)
Accrued expenses and taxes..................................... 307 594 541
Advanced billings.............................................. 100 (68) 22
-------- -------- --------
Net cash provided by operating activities............................. 46,845 28,702 17,696
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment............................ (4,654) (6,269) (5,024)
Distributions of towers to Cellco..................................... -- (535) --
Proceeds from disposition property, plant and equipment............... 275 1,277 1,164
-------- -------- --------
Net cash used in investing activities................................. (4,379) (5,527) (3,860)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to partners.............................................. (35,000) (18,000) (6,000)
Increase in due from general partner, net............................. (7,466) (5,175) (7,836)
Debt assumed by Cellco................................................ -- 3,388 --
Cash distribution to partners for transfer of towers.................. -- (3,388) --
-------- -------- --------
Net cash used in financing activities................................. (42,466) (23,175) (13,836)
-------- -------- --------
(Decrease) increase in cash........................................... -- -- --
Cash, beginning of period............................................. -- -- --
-------- -------- --------
Cash, end of period................................................... $ -- $ -- $ --
======== ======== ========
See Notes to Financial Statements
F-21
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1998, 1999 and 2000
(In Thousands)
1. Organization and Business Operations
On April 3, 2000, Bell Atlantic and Vodafone AirTouch Plc ("Vodafone")
consummated their previously announced agreement to combine their U. S.
wireless operations. In accordance with the terms of the U.S. Wireless Alliance
Agreement (the "Alliance Agreement") dated September 21, 1999 between the two
companies, Vodafone contributed its U.S. wireless operations, its 50% ownership
interest in PrimeCo Personal Communications L.P. ("PrimeCo") and debt to the
Cellco Partnership ("Cellco"), in exchange for a 65.1% interest in Cellco. Bell
Atlantic also contributed its 50% ownership interest in PrimeCo, and retained a
34.9% interest in Cellco. As of April 3, 2000, Cellco began conducting business
as Verizon Wireless ("Verizon").
On June 30, 2000, Bell Atlantic and GTE Corporation ("GTE Corp.") completed
a merger of equals under a definitive merger agreement entered into on July 27,
1998. On June 30, 2000, the newly merged entity changed its name to Verizon
Communications ("Verizon Corp."). Under the Alliance Agreement, Verizon Corp.
contributed GTE Corp.'s wireless net assets and operations increasing its
interest in Cellco to 55% and decreasing Vodafone's interest in Cellco to 45%.
The Orange County-Poughkeepsie Limited Partnership (the "Partnership")
operates as a limited partnership between NYNEX Mobile Limited Partnership 2
("NYNEX Mobile LP 2"), Taconic Telephone Corporation ("Taconic"), and Warwick
Valley Telephone Company ("Warwick"). NYNEX Mobile LP 2 is a partnership
between Cellco, the Utica-Rome Cellular Partnership and Bell Atlantic Mobile
Systems of Allentown, Inc. ("BAMS of Allentown"), with ownership interests of
54%, 45% and 1%, respectively. NYNEX Mobile LP 2 holds an 85% partnership
interest in the Partnership. Taconic and Warwick each hold limited partnership
interests of 7.5%.
On December 1, 1999, Frontier Communications of New York, Inc. and Frontier
Communications of Sylvan Lake, each holding 7.5% interests in the Partnership,
sold their interests to NYNEX Mobile LP 2.
The Partnership provides cellular mobile telephone service to resellers who
operate principally in the Orange County and Poughkeepsie, New York
metropolitan areas. The Orange County-Poughkeepsie cellular system became
operational in 1987. The partners make capital contributions, share in the
operating results and receive distributions from the Partnership in accordance
with their respective ownership percentages.
2. Summary of Significant Accounting Policies
Property, Plant and Equipment
Property, plant and equipment are stated at cost and primarily represent
costs incurred to construct and enhance Mobile Telephone Switching Offices
(MTSOs) and cell sites. The cost of property, plant and equipment is
depreciated over its estimated useful life, using the straight-line method of
accounting. Major improvements to existing plant and equipment are capitalized.
Routine maintenance and repairs that do not extend the life of the property,
plant and equipment are charged to expense as incurred.
Upon the sale or retirement of property, plant and equipment, the cost and
related accumulated depreciation or amortization is eliminated from the
accounts and any related gain or loss is reflected in the Statement of
Operations. The Partnership periodically exchanges (trades-in) certain assets
for similar productive assets and generally receives trade-in allowances from
its vendors. The cost of the new asset is generally the monetary consideration
paid plus the net book value of the asset surrendered. If the trade-in
allowance is less than the net book value of the asset surrendered, a loss is
reflected in the Statement of Operations.
F-22
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Interest expense, if any, and certain network engineering costs incurred
during the construction phase of the Partnership's cellular network and real
estate properties under development are capitalized as part of plant and
equipment and amortized over the estimated useful lives of the related assets.
The Partnership's network construction expenditures are recorded as
construction in progress until the projects are completed and placed into
service. The assets are then transferred to the appropriate property, plant and
equipment account and depreciated on a straight-line basis over the assets'
estimated useful lives.
Revenue Recognition
The Partnership earns revenue by providing access to the cellular network
(access revenue) and for usage of the cellular network (airtime/usage revenue),
which includes roaming and cellular long distance revenue. Cellular long
distance represents calls placed by the Partnership's reseller customers and
those of other carriers within the Partnership's service area.
In general, access revenue is billed one month in advance of the service
being provided and is recognized, as revenue, when earned; the unearned portion
is classified in advanced billings. Airtime/usage revenue, roaming revenue and
long distance revenue are recognized when service is rendered and included in
unbilled revenue until billed.
Cellular service revenues resulting from a cellsite agreement are recognized
based upon an allocation of airtime minutes [See Note 4].
Operating Expenses
Operating expenses include all direct costs related to the Partnership, the
Partnership's share of all indirect distribution costs in the service area, and
an allocation of administrative and operating costs from the managing general
partner [See Note 4].
The services performed on behalf of the Partnership are provided by the
employees of Verizon. These employees are not employees of the Partnership;
therefore, operating expenses include direct and allocable charges of salary
and employee benefit costs for the services provided to the Partnership.
Income Taxes
The Partnership is not a taxable entity for federal and state income tax
purposes. Any taxable income or loss is apportioned to the partners based on
their respective partnership interests and is reported by them individually.
Due From General Partner
Due from general partner principally represents the Partnership's cash
position. The general partner manages all cash and financing activities for the
Partnership. As such, the due from general partner is reflected as a financing
activity in the Statements of Cash Flows. Additionally, administrative and
operating costs incurred by the general partner on behalf of the Partnership
are charged to the Partnership through this account. Interest income on the
balance in this account is based on the average monthly outstanding balance and
is calculated by applying Verizon's average borrowing rate which was
approximately 6.7% and 6.1% at December 31, 2000 and 1999, respectively.
F-23
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(Continued)
Included in other income, net is net interest income related to the due from
general partner of $1,264, $664 and $407 for 2000, 1999 and 1998, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used for, but not limited to, the accounting for: allowance for
uncollectible accounts receivable, unbilled revenue, depreciation and
amortization and accrued expenses.
FCC Licenses
The Federal Communications Commission ("FCC") issues licenses that authorize
cellular carriers to provide service in specific cellular geographic service
areas ("CGSAs"). The FCC grants licenses for terms of up to ten years. In 1993,
the FCC adopted specific standards to apply to cellular renewals, concluding it
will award a license renewal to a cellular licensee that meets certain
standards of past performance. Historically, the FCC has granted license
renewals routinely. The current terms of the Partnership's FCC licenses expire
on January 27, 2008 and January 29, 2008 for the Poughkeepsie and Orange County
FCC licenses, respectively. The general partner believes it will be able to
meet all requirements necessary to secure renewal of its cellular licenses.
Concentrations
To the extent the Partnership's resellers become delinquent, collection
activities commence. The managing general partner accounts for 93% and 95% of
the accounts receivable balance at December 31, 2000 and 1999, respectively.
The Partnership maintains an allowance for losses based on the expected
collectibility of accounts receivable.
The general partner relies on a limited number of local and long-distance
telephone companies and other companies to provide certain communication
services. Certain of these communication services are in turn utilized by the
Partnership. Although the general partner feels alternative telecommunications
facilities could be found in a timely manner, any disruption of these services
could potentially have an adverse impact on the Partnership's operating results.
Although the general partner attempts to maintain multiple vendors for each
of its required products and network equipment, certain of these items are
acquired from only a few sources. Certain of these products are in turn
utilized by the Partnership and are important components of the Partnership's
operations. If the general partner's suppliers are unable to meet its needs for
required products and equipment, delays and increased costs in the expansion of
the Partnership's network infrastructure or losses of potential customers could
result, which would adversely affect operating results.
Financial Instruments
The Partnership's financial instruments, which include trade payables and
receivables and intercompany advances, are short-term in nature. Accordingly,
the general partner believes the balance sheet amounts approximate the fair
value of the Partnership's financial instruments.
Reclassifications
Certain reclassifications have been made to the 1999 and 1998 financial
statements to conform to the current year presentation.
F-24
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Property, Plant and Equipment
Property, plant and equipment consist of the following at December 31:
December 31,
------------------
2000 1999
-------- --------
Buildings (10-40 yrs.)...................... $ 7,649 $ 6,787
Cellular plant equipment (3-15 yrs.)........ 28,899 25,341
Furniture, fixtures and equipment (2-7 yrs.) 380 380
Construction in progress.................... 1,819 2,034
-------- --------
38,747 34,542
Accumulated depreciation.................... (13,994) (11,136)
-------- --------
Property, plant and equipment, net.......... $ 24,753 $ 23,406
======== ========
Capitalized network engineering costs of $176, $347 and $235 were recorded
during the years ended December 31, 2000, 1999 and 1998, respectively. Included
in plant and equipment is $108, $65 and $38 of accrued items as of December 31,
2000, 1999 and 1998, respectively. There were no trade-ins of network equipment
during 2000, 1999 or 1998. [See Note 2].
Depreciation expense for the year ended December 31, 2000, 1999 and 1998 was
$3,075, $2,527 and $2,131, respectively.
Tower Transaction
On March 31, 1999, Cellco finalized an agreement with Crown Castle
International Corporation ("Crown") to form a joint venture (the "JV") in which
Cellco, together with certain partnerships in which it is the managing partner
(the "Managed Entities"), which included the Partnership, contributed network
towers to the JV in exchange for $380,000 in cash and an equity interest in the
JV of 38.5%.
The Partnership elected to participate in this transaction and contributed
13 towers to the JV. As a result of the continuing involvement by the managing
partner in the JV, this transaction was accounted for as a financing
arrangement on the books of the Partnership; accordingly, the Partnership
recorded the receipt of $3,388 in cash as a loan.
Pursuant to a separate agreement between the managing partner and the
minority partner, the minority partner received a cash payment of $1,765 and
Cellco assumed the debt and transferred the towers from the Partnership books
to Cellco at their book value. Upon receipt of the cash from the JV, the
minority partners received their cash and the Partnership immediately
transferred the towers to Cellco along with the related debt, the equity
interest in the JV, and $1,623 in cash.
Since the Partnership is under common control with the managing partner, the
gain on the transfer of such towers to the JV is not reflected in the Statement
of Operations of the Partnership. However, the Partners' Capital accounts
reflect the cash transactions, and the transfer of the towers and debt to
Cellco.
4. Transactions with Affiliates
For the years ended December 31, 2000, 1999 and 1998, operating revenues
included $48,995, $29,092 and $16,149, respectively, relating to partners and
affiliated entities. These operating revenues have been included in cellular
service on the Statements of Operations.
F-25
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Partnership was charged $2,764, $1,982 and $1,595 for the years ended
December 31, 2000, 1999 and 1998, respectively, for its share of the managing
general partner's administrative and operating costs. Additionally, the
Partnership incurred direct telecommunication and data processing expenses of
$555, $503 and $307 in 2000, 1999 and 1998, respectively, for services provided
by its affiliates. The managing general partner, on behalf of the Partnership,
has purchased property, plant and equipment in the amounts of $4,697, $6,269
and $5,024 for the years ended December 31, 2000, 1999 and 1998, respectively.
The Partnership believes these charges are reasonable.
Included in property, plant and equipment [See Note 3], are purchases from
and sales to other affiliated entities, which are recorded at cost. There were
no purchases or sales in 2000, $510 of purchases and $1,044 of sales in 1999
and $184 of purchases and $1,012 of sales in 1998.
An affiliated entity provides the Partnership with access to its switch. The
cost for use of the switch is allocated to the Partnership primarily upon the
number of switched minutes. These costs were $3,540, $1,937 and $718 in 2000,
1999 and 1998, respectively. The Partnership has a co-located cell site with
Cellco. The costs related to the construction of the cellsite were shared
between the two entities and revenues and costs resulting from the operations
of the cellsite are being allocated in accordance with the cellsite sharing
agreement. During 2000, 1999 and 1998, the Partnership earned $1,312, $1,108
and $1,346 of cellular service revenues and was reimbursed for $39, $39 and $39
of costs, respectively.
5. Commitments
The managing general partner, on behalf of the Partnership, and the
Partnership have entered into operating leases for facilities and equipment
used in its operations. Some lease contracts include renewal options which
include rent expense adjustments based on the Consumer Price Index. The
Partnership also leases towers from the JV [See Note 3]. The tower lease
commenced on April 1, 1999 and is for a 10 year initial term. During the years
ended December 31, 2000, 1999 and 1998, the Partnership recognized a total of
$914, $744 and $537, respectively, as rent expense related to payments under
these operating leases. At December 31, 2000, the aggregate future minimum
rental commitments under noncancelable operating leases, excluding renewal
options which the Partnership intends to exercise, for the periods shown are as
follows:
Years
- -----
2001................................................................. $ 822
2002................................................................. 674
2003................................................................. 498
2004................................................................. 412
2005................................................................. 392
Thereafter........................................................... 1,473
------
Total............................................................. $4,271
======
6. Valuation and Qualifying Accounts
Balance at Balance at
Beginning End of the
of the Year Additions Write-offs Year
----------- --------- ---------- ----------
Accounts Receivable Allowances:
1998........................... $39 $8 $(31) $16
1999........................... $16 $8 -- $24
2000........................... $24 $7 -- $31
F-26
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Contingencies
Cellco is subject to several lawsuits and other claims including, class
actions, product liability, patent infringement, partnership disputes, and
claims involving relations with resellers and agents. Various consumer class
actions lawsuits allege that Cellco breached contracts with consumers, violated
certain state consumer protection laws and other statutes and defrauded
customers through concealed or misleading billing practices. Cellco is also
subject to various other legal actions and claims in the normal course of
business. Certain of these lawsuits and other claims may impact the
Partnership. These litigation matters may involve insurance coverage and/or
indemnification obligations by third parties covering all or part of any
potential damage awards against Cellco and the Partnership. All of the above
matters are subject to many uncertainties, and outcomes are not predictable
with assurance.
The Partnership may be allocated a portion of the damages that may result
upon adjudication of these matters if the claimants prevail in their actions.
Consequently, the ultimate liability with respect to these matters at December
31, 2000 cannot be ascertained. The potential effect, if any, on the financial
position and results of operations of the Partnership, in the period in which
these matters are resolved, may be material.
In addition to the aforementioned matters, Verizon Wireless is subject to
various other legal actions and claims in the normal course of business. While
Verizon Wireless' legal counsel cannot give assurance as to the outcome of each
of these matters, in management's opinion, based on the advice of such legal
counsel, the ultimate liability with respect to any of these actions, or all of
them combined, will not materially affect the combined financial position or
operating results of the Partnership.
F-27
PRICE COMMUNICATIONS WIRELESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30, December 31,
2001 2000
------------- ------------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents........................................................ $ 222,781 $ 170,067
Trade accounts receivable, net of allowance for doubtful accounts................ 28,803 36,052
Receivable from other cellular carriers.......................................... 4,837 4,101
Inventory........................................................................ 4,366 6,015
Deferred income taxes............................................................ -- 638
Prepaid expenses and other current assets........................................ 10,449 10,291
---------- ----------
Total current assets......................................................... 271,236 227,164
---------- ----------
Net property and equipment.......................................................... 141,775 147,233
Licenses, net of accumulated amortization of $91,670 at September 30, 2001 and
$74,628 at December 31, 2000...................................................... 820,642 832,471
Other intangible assets and other assets, less accumulated amortization of $8,931 at
September 30, 2001 and $6,555 at December 31, 2000................................ 12,963 15,339
---------- ----------
$1,246,616 $1,222,207
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................................................. $ 15,487 $ 8,181
Accrued interest payable......................................................... 18,257 12,374
Accrued salaries and employee benefits........................................... 1,382 1,329
Deferred revenue................................................................. 14,135 9,029
Minority interests in cellular licenses.......................................... 3,306 5,279
Customer deposits................................................................ 959 1,153
Other current liabilities........................................................ 9,098 8,441
---------- ----------
Total current liabilities.................................................... 62,624 45,786
Long-term debt...................................................................... 700,000 700,000
Accrued income taxes--long-term..................................................... 53,165 53,165
Deferred income taxes............................................................... 283,779 285,155
Commitments and contingencies....................................................... -- --
---------- ----------
Total Liabilities................................................................... 1,099,568 1,084,106
Stockholder's equity
Preferred stock par value $.01 per share; 10,000,000 shares authorized; none
issued......................................................................... -- --
Class A common stock par value $.01 per share; 3,000 shares authorized, 1,500
shares issued.................................................................. -- --
Additional paid-in capital....................................................... 172,971 172,971
Retained earnings (accumulated deficit).......................................... (25,923) (34,870)
---------- ----------
Total stockholder's equity................................................... 147,048 138,101
---------- ----------
Total liabilities and stockholder's equity................................... $1,246,616 $1,222,207
========== ==========
See accompanying notes to condensed consolidated financial statements
F-28
PRICE COMMUNICATIONS WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
(unaudited)
For the nine months
ended September 30,
------------------
2001 2000
-------- --------
Revenue:
Service.......................................................................... $184,662 $189,767
Equipment sales and installation................................................. 13,168 14,113
-------- --------
Total revenue................................................................ 197,830 203,880
-------- --------
Operating expenses:
Engineering, technical and other direct.......................................... 23,315 21,010
Cost of equipment................................................................ 24,765 24,589
Selling, general and administrative.............................................. 53,685 46,478
Depreciation and amortization.................................................... 35,733 35,459
-------- --------
Total operating expenses..................................................... 137,498 127,536
Operating income............................................................. 60,332 76,344
-------- --------
Other income (expense):
Interest expense, net............................................................ (45,609) (46,355)
Other income, net................................................................ 110 36
-------- --------
Total other expense.......................................................... (45,499) (46,319)
Income before minority interest share of income, income taxes................ 14,833 30,025
-------- --------
Minority interest share of income................................................... (631) (1,105)
Income before income taxes................................................... 14,202 28,920
Income tax expense.................................................................. (5,255) (10,701)
-------- --------
Income (loss) before cumulative effect of accounting change.................. $ 8,947 $ 18,219
======== ========
Cumulative effect on prior year of change in revenue recognition (net of
income tax benefit of $92)................................................. -- (158)
-------- --------
Net income................................................................... $ 8,947 $ 18,061
======== ========
See accompanying notes to condensed consolidated financial statements.
F-29
PRICE COMMUNICATIONS WIRELESS, INC
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
($ in thousands)
(unaudited)
Common Stock
Class A Additional Total
------------- Paid-In Accumulated Stockholder's
Shares Amount Capital Deficit Equity
------ ------ ---------- ----------- -------------
Balances at December 31, 2000............. 1,500 -- $172,971 $(34,870) $138,101
Net Income................................ -- -- -- 8,947 8,947
----- -- -------- -------- --------
Balances at September 30, 2001 (unaudited) 1,500 -- $172,971 $(25,923) $147,048
===== == ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
F-30
PRICE COMMUNICATIONS WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
For the nine months
ended September 30,
------------------
2001 2000
-------- --------
Cash flows from operating activities:
Net income........................................................................... $ 8,947 $ 18,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................... 35,733 35,459
Minority interest share of income................................................ 631 1,105
Decrease in deferred income taxes................................................ (405) (1,850)
Loss on sale of fixed assets..................................................... -- 107
Amortization of deferred finance charges......................................... 1,825 1,824
Decrease (increase) in receivables............................................... 6,513 (1,386)
Decrease in inventory............................................................ 1,649 658
Increase in accounts payable, accrued expenses, deferred revenue and related
tax accruals................................................................... 12,594 3,715
Increase in accrued interest payable............................................. 5,883 7,055
Changes in other accounts........................................................ (158) (3,370)
-------- --------
Total adjustments............................................................. 64,265 43,317
-------- --------
Net cash provided by operating activities................................. 73,212 61,378
-------- --------
Cash flows from investing activities:
Capital expenditures................................................................. (12,681) (25,620)
Proceeds from sales of property and equipment........................................ -- 18
Purchases of minority interests...................................................... (7,817) (353)
-------- --------
Net cash used in investing activities..................................... (20,498) (25,955)
-------- --------
Cash flows from financing activities.................................................... -- --
-------- --------
Net increase in cash and cash equivalents................................. 52,714 35,423
Cash and cash equivalents at the beginning of period.................................... 170,067 143,227
-------- --------
Cash and cash equivalents at the end of period.......................................... $222,781 $178,650
======== ========
Supplemental disclosure of cash flow information:
Income taxes paid, net.................................................................. $ 2,601 $ 908
======== ========
Interest paid........................................................................... $ 44,516 $ 44,516
======== ========
See accompanying notes to condensed consolidated financial statements
F-31
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of Price
Communications Wireless, Inc. ("PCW" or "the Company") and Price Communications
Cellular Holdings ("Holdings") pursuant to push-down accounting. All
significant intercompany items and transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities
and Exchange Commission. These unaudited Condensed Consolidated Financial
Statements should be read in conjunction with the audited Consolidated
Financial Statements incorporated herein. In the opinion of management, the
statements reflect all adjustments necessary for a fair presentation of the
results of interim periods. All such adjustments are of a normal and recurring
nature. The results of operations for any interim period are not necessarily
indicative of the results to be expected for a full year.
Revenue Recognition
Service revenue from cellular operations for prepaid and post paid customers
includes local subscriber revenue and outcollect roaming revenue. In accordance
with the Securities and Exchange Commission Staff Accounting Bulletin No. 101
("SAB 101"), which was adopted in the fourth quarter of 2000 effective as of
January 1, 2000, prepaid airtime revenue is recognized when the airtime is
utilized and activation revenue is recognized over the estimated life of the
subscriber's contract or expected term of the subscriber's relationship,
whichever is longer. In addition, the Condensed Consolidated Statements of
Operations and the Condensed Consolidated Statement of Cash Flows have been
adjusted for the nine month period ending September 30, 2000.
Reclassifications
Certain reclassifications have been made to the 2000 Financial Statements to
conform to the 2001 presentation.
(2) Minority Interest
The Company notified the minority interest holders in the subsidiary
corporations and limited partnerships that held certain of the Company's
cellular licenses that effective June 30, 2001 these subsidiaries were merged
into Palmer Wireless Holdings, Inc. (a wholly owned subsidiary of the Company).
Palmer Wireless Holdings, Inc. has subsequently been merged into the Company.
Pursuant to the mergers, the minority interest holders have the right to
receive merger consideration totaling $10.6 million subject to appraisal rights
pursuant to applicable state law. Effective June 28, 2001, one such subsidiary
partnership was dissolved and liquidated, resulting in a distribution of $5.6
million to minority interest holders. Amounts payable to such minority interest
holders may be finally determined by negotiations between the parties or if
such negotiations fail, by applicable state court proceedings. In addition, the
Company expended approximately $2.8 million for other purchases of minority
interests during the nine month period. The Company owns 100% of its telephone
operating systems.
(3) Agreement to Contribute Business of Price Communications Wireless
On December 18, 2001, the Company's indirect parent, Price Communications
Corporation ("PCC"), agreed to contribute substantially all of the assets of
PCW to a new partnership controlled by Verizon Wireless, subject to shareholder
approval. The agreement provides that the Company will contribute its business
to a new partnership controlled by Verizon Wireless in exchange for a Preferred
Exchangeable Limited Partnership Interest ("ELPI").
F-32
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
If an initial public offering of Verizon Wireless common stock (meeting
certain size requirements) occurs within four years of the contribution
transaction, PCC will have an option to exchange such Preferred Exchangeable
Interest for Verizon Wireless common stock during a period of sixty days which
begins upon the later of (i) the date of the initial public offering and (ii)
the one-year anniversary of the contribution transaction. Any such exchange
will require the approval of the shareholders of PCC.
If Verizon Wireless does not complete such an initial public offering prior
to the four-year anniversary of the contribution transaction or if Verizon
Wireless does complete such an offering but an exchange into Verizon Wireless
common stock does not occur for other reasons, the ELPI will be exchanged for
Verizon Communications common stock. The timing of such exchange will depend
upon the circumstances but in no event will it occur after the tenth
anniversary of the contribution transaction.
In addition, in certain circumstances (including a change in control of PCC
or a transfer of the ELPI to a secured creditor of PCC), Verizon Communications
will have the right to cause an exchange of the ELPI into Verizon
Communications common stock.
Subject to certain adjustments, the amount of the Company's capital account
in the partnership will be approximately $1.11 billion. Pursuant to the
partnership agreement, any profits of the partnership will be allocated to the
Company's capital account annually up to an amount equal to approximately 4.00%
per annum (subject to downward adjustments relating to the interest rate
payable on certain indebtedness) accreted quarterly on the weighted daily
average balance of the Company's capital account (for a maximum period of four
years). Any losses incurred by the partnership will be allocated to Verizon
Wireless up to an amount equal to its capital accounts before being allocated
to the Company. With respect to each quarter ending after the second
anniversary of the contribution transaction, the partnership will distribute to
the Company an amount in cash equal to 50% of the Company's share of any
profits of the partnership. These distributions will reduce the Company's
capital account in the partnership. The transaction is structured to be a
tax-free exchange of assets under the Internal Revenue Code.
F-33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder's of
Price Communications Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of Price
Communications Wireless, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholder's (deficit) equity and cash flows for each of the three
years in the period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Price Communications
Wireless, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States.
As discussed in Note 3, the Company changed its method for revenue
recognition effective January 1, 2000.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
January 25, 2002
F-34
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
December 31, December 31,
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents........................................................ $ 170,067 $ 143,227
Trade accounts receivable, net of allowance for doubtful accounts of $1,396 in
2000 and $2,003 in 1999........................................................ 36,052 25,056
Receivable from other cellular carriers.......................................... 4,101 2,505
Inventory........................................................................ 6,015 5,205
Deferred income taxes............................................................ 638 981
Prepaid expenses and other current assets........................................ 10,291 5,253
---------- ----------
Total current assets......................................................... 227,164 182,227
---------- ----------
Property and equipment:
Land and improvements............................................................ 7,480 6,989
Buildings and improvements....................................................... 11,440 9,770
Equipment, communication systems and furnishings................................. 198,280 173,383
---------- ----------
Property and equipment.............................................................. 217,200 190,142
Less accumulated depreciation.................................................... 69,967 45,840
---------- ----------
Net property and equipment................................................... 147,233 144,302
Licenses, net of accumulated amortization of $74,628 in 2000 and $51,848 in
1999.............................................................................. 832,471 854,799
Other intangible assets and other assets, less accumulated amortization of $6,555 in
2000 and $4097 in 1999............................................................ 15,339 17,797
---------- ----------
$1,222,207 $1,199,125
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................................................. $ 8,181 $ 15,896
Accrued interest payable......................................................... 12,374 11,942
Accrued salaries and employee benefits........................................... 1,329 1,642
Deferred revenue................................................................. 9,029 5,525
Customer deposits................................................................ 1,153 1,222
Accrued engineering, technical and other direct.................................. 4,480 5,376
Excise and sales taxes payable................................................... 1,811 2,231
Other current liabilities........................................................ 2,150 4,570
---------- ----------
Total current liabilities.................................................... 40,507 48,404
Long-term debt...................................................................... 700,000 700,000
Accrued income taxes--long-term..................................................... 53,165 31,669
Commitments and contingencies....................................................... -- --
Deferred income taxes............................................................... 285,155 292,482
Minority interests in cellular licenses............................................. 5,279 3,948
---------- ----------
Stockholder's equity
Preferred stock par value $.01 per share; 10,000,000 shares authorized; none
issued......................................................................... -- --
Class A common stock par value $.01 per share; 3,000 shares authorized, 1,500
shares issued.................................................................. -- --
Additional paid-in capital....................................................... 172,971 172,971
Retained earnings (accumulated deficit).......................................... (34,870) (50,349)
---------- ----------
Total stockholder's equity................................................... 138,101 122,622
---------- ----------
Total liabilities and stockholder's equity................................... $1,222,207 $1,199,125
========== ==========
See accompanying notes to consolidated financial statements.
F-35
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
For the years ended December 31,
-------------------------------
2000 1999 1998
-------- -------- --------
Revenue:
Service..................................................................... $252,513 $233,575 $184,652
Equipment sales and installation............................................ 17,995 15,548 12,052
-------- -------- --------
Total revenue........................................................... 270,508 249,123 196,704
-------- -------- --------
Operating expenses:
Engineering, technical and other direct..................................... 25,321 29,666 28,122
Cost of equipment........................................................... 32,685 28,650 23,085
Selling, general and administrative......................................... 62,135 60,657 56,902
Depreciation and amortization............................................... 46,970 45,101 43,569
-------- -------- --------
Total operating expenses................................................ 167,111 164,074 151,678
-------- -------- --------
Operating income........................................................ 103,397 85,049 45,026
-------- -------- --------
Other income (expense):
Interest income............................................................. 10,056 8,195 5,435
Interest expense............................................................ (71,402) (82,631) (82,945)
Other income, net........................................................... 74 94 (19)
-------- -------- --------
Total other expense.................................................. (61,272) (74,342) (77,529)
-------- -------- --------
Income before minority interest share of income, income taxes
and cumulative effect of accounting change......................... 42,125 10,707 (32,503)
-------- -------- --------
Minority interest share of income.............................................. (1,432) (1,664) (2,178)
-------- -------- --------
Income before income taxes and cumulative effect of
accounting change.................................................. 40,693 9,043 (34,681)
Income tax (expense) benefit................................................... (15,056) (3,346) 12,831
Income (loss) before cumulative effect of accounting change.................... 25,637 5,697 (21,850)
-------- -------- --------
Cumulative effect on prior year of change in revenue recognition (net of
income tax benefit of $92)................................................... (158) -- --
-------- -------- --------
Income (loss) before extraordinary item.............................. 25,479 5,697 (21,850)
-------- -------- --------
Extraordinary item-Loss on early extinguished debt (net of income tax benefit
of $14,885).................................................................. -- -- (25,344)
-------- -------- --------
Net income (loss).................................................... $ 25,479 $ 5,697 $(47,194)
======== ======== ========
See accompanying notes to consolidated financial statements.
F-36
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
($ in thousands)
Common Stock Total
Class A Additional Stockholder's
------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------ ------ ---------- ----------- -------------
Balances at December 31, 1997........................ 1,500 -- $ 44,015 $ (8,852) $ 35,163
Net Loss............................................. -- -- -- (47,194) (47,194)
----- -- -------- -------- --------
Balances at December 31, 1998........................ 1,500 -- 44,015 (56,046) (12,031)
Conversion of 11 3/4% Senior Exchangeable Payable-in-
kind notes (See Note 6)............................ -- -- 128,956 -- 128,956
Net Income........................................... -- -- -- 5,697 5,697
----- -- -------- -------- --------
Balances at December 31, 1999........................ 1,500 -- 172,971 (50,349) 122,622
Dividend paid to parent.............................. -- -- -- (10,000) (10,000)
Net Income........................................... -- -- -- 25,479 25,479
----- -- -------- -------- --------
Balances at December 31, 2000........................ 1,500 -- $172,971 $(34,870) $138,101
===== == ======== ======== ========
See accompanying notes to consolidated financial statements.
F-37
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
For the years ended December 31
------------------------------
2000 1999 1998
-------- -------- ---------
Cash flows from operating activities:
Net income (loss)................................................................... $ 25,479 $ 5,697 $ (47,194)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:........................................................................
Depreciation and amortization.................................................... 46,970 45,101 43,569
Minority interest share of income................................................ 1,432 1,664 2,178
Deferred income taxes............................................................ (6,984) (976) (373)
Loss on sale of fixed assets..................................................... 107 82 --
Extraordinary item............................................................... -- -- 40,229
Interest deferred and added to obligation of parent company...................... -- 11,309 9,432
Amortization of deferred finance charges......................................... 2,430 2,523 2,030
Increase in receivables.......................................................... (12,592) (4,771) (2,948)
Increase in inventory............................................................ (810) (1,265) (2,660)
Increase (decrease) in accounts payable, accrued expenses, deferred revenue
and related tax accruals........................................................ 13,167 13,500 (30,958)
Increase in accrued interest payable............................................. 432 163 418
Changes in other accounts........................................................ (5,038) (4,950) 671
-------- -------- ---------
Total adjustments................................................................ 39,114 62,380 61,588
-------- -------- ---------
Net cash provided by operating activities..................................... 64,593 68,077 14,394
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures................................................................ (27,218) (24,575) (14,725)
Proceeds from sales of property and equipment....................................... 18 2,654 --
Purchases of minority interests..................................................... (553) (7,824) --
Dividend paid to parent............................................................. (10,000) -- --
Interest earned on restricted cash.................................................. -- (3,454) --
Return of cash from escrow related to the Acquisition of Palmer Wireless, Inc....... -- -- 2,000
-------- -------- ---------
Net cash used in investing activities......................................... (37,753) (33,199) (12,725)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from long-term debt........................................................ -- -- 725,000
Repayment of long-term debt......................................................... -- -- (518,112)
Payment of debt issuance costs...................................................... -- (788) (20,185)
Segregation as restricted cash of proceeds of long-term debt........................ -- -- (79,081)
Costs associated with early extinguishment of debt.................................. -- -- (28,080)
-------- -------- ---------
Net cash provided by (used in) financing activities........................... -- (788) 79,542
-------- -------- ---------
Net increase in cash and cash equivalents..................................... 26,840 34,090 81,211
Cash and cash equivalents at the beginning of period.................................... 143,227 109,137 27,926
-------- -------- ---------
Cash and cash equivalents at the end of period.......................................... $170,067 $143,227 $ 109,137
Supplemental disclosure of cash flow information:
Income taxes paid, net.............................................................. $ 756 $ 280 $ 728
======== ======== =========
Interest paid....................................................................... $ 68,469 $ 68,469 $ 81,379
======== ======== =========
Non cash transaction:
Conversion of 11 3/4% Senior Exchangeable Payable-in-kind notes to equity............... -- $128,956 --
======== ======== =========
See accompanying notes to consolidated financial statements.
F-38
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Business
Price Communications Wireless, Inc. ("PCW," "Price Wireless" or the
"Company"), a wholly-owned subsidiary of Price Communications Cellular
Holdings, Inc. ("Holdings") who in turn is a wholly-owned subsidiary of Price
Communications Cellular Inc., a wholly-owned subsidiary of Price Communications
Corporation ("PCC"), was incorporated on May 29, 1997 in connection with the
purchase of Palmer Wireless, Inc., and subsidiaries ("Palmer" or the
"Predecessor").
The Company owns and operates the non-wireline cellular telephone systems in
eight Metropolitan Statistical Areas in three states: Florida (one), Georgia
(five) and Alabama (two). The Company also owns and operates eight non-wireline
cellular telephone systems in Rural Services Areas in George (seven) and
Alabama (one).
(2) Agreement to Contribute Business of Price Communications Wireless
On December 18, 2001, the Company's indirect parent, PCC, agreed to
contribute substantially all of the assets of PCW to a new partnership
controlled by Verizon Wireless, subject to shareholder approval. The agreement
provides that the Company will contribute its business to a new partnership
controlled by Verizon Wireless in exchange for a Preferred Exchangeable Limited
Partnership Interest ("ELPI").
If an initial public offering of Verizon Wireless common stock (meeting
certain size requirements) occurs within four years of the contribution
transaction, PCC will have an option to exchange such ELPI for Verizon Wireless
common stock during a period of sixty days which begins upon the later of (i)
the date of the initial public offering and (ii) the one-year anniversary of
the contribution transaction. Any such exchange will require the approval of
the shareholders of PCC.
If Verizon Wireless does not complete such an initial public offering prior
to the four-year anniversary of the contribution transaction or if Verizon
Wireless does complete such an offering but an exchange into Verizon Wireless
common stock does not occur for other reasons, the ELPI will be exchanged for
Verizon Communications common stock. The timing of such exchange will depend
upon the circumstances but in no event will it occur after the tenth
anniversary of the contribution transaction.
In addition, in certain circumstances (including a change in control of PCC
or a transfer of the ELPI to a secured creditor of PCC), Verizon Communications
will have the right to cause an exchange of the ELPI into Verizon
Communications common stock.
Subject to downward adjustments, the amount of the Company's capital account
in the partnership will be approximately $1.11 billion. Pursuant to the
partnership agreement, any profits of the partnership will be allocated to the
Company's capital account annually in an amount equal to approximately 4% per
annum (subject to adjustments relating to the interest rate payable on certain
indebtedness) accreted quarterly on the weighted daily average balance of the
Company's capital account. Any losses incurred by the partnership will be
allocated to Verizon Wireless up to an amount equal to its capital accounts
before being allocated to the Company. With respect to each quarter ending
after the second anniversary of the contribution transaction, the partnership
will distribute to the Company an amount in cash equal to 50% of the Company's
share of any profits of the partnership. These distributions will reduce the
Company's capital account in the partnership. The transaction is structured to
be a tax-free exchange of assets under the Internal Revenue Code.
(3) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries after the elimination of significant intercompany accounts
and transactions.
F-39
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments, including treasury
bills purchased with original maturities of three months or less to be cash
equivalents.
Inventory
Inventory, consisting primarily of cellular telephones and telephone
accessories, is stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost. The cost of additions and
improvements are capitalized while maintenance and repairs are charged to
expense when incurred. Depreciation is provided principally by the
straight-line method over the estimated useful lives, ranging from 5 to 20
years for buildings and improvements and 5 to 10 years for equipment,
communications systems and furnishings.
Acquisitions and Licenses
The cost of acquired companies is allocated first to the identifiable
assets, including licenses, based on the fair market value of such assets at
the date of acquisition. Accordingly, the Company has not recorded any
goodwill. Licenses are amortized on a straight-line basis over a 40-year period.
Subsequent to the acquisition of licenses and other long-lived assets, the
Company continually evaluates whether subsequent events and circumstances have
occurred that indicate the remaining estimated useful life of licenses might
warrant revision or that the remaining balance of the license rights may not be
recoverable. The Company utilizes projected undiscounted cash flows over the
remaining life of the licenses and sales of comparable businesses to evaluate
the recorded value of licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash
flows are not achieved.
Other Intangible Assets
Other intangibles consist principally of deferred financing costs and other
items. These costs are being amortized on a straight-line method over the lives
of the respective debt agreements, which range from 8 to 10 years.
Revenue Recognition
Service revenue from cellular operations for prepaid and post paid customers
include local subscriber revenue and outcollect roaming revenue.
In accordance with the Securities and Exchange Commission Staff Accounting
Bulletin No. 101 ("SAB 101"), which was adopted in the fourth quarter of 2000
effective as of January 1, 2000, prepaid airtime revenue is recognized when the
airtime is utilized and activation revenue is recognized over the estimated
life of the subscriber's contract or the expected term of the customers
relationship, whichever is longer. In addition, the financial statements for
the year ended December 31, 2000, include a deferral of unearned revenue, as
well as
F-40
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
a cumulative catch up adjustment representing the effect of the application of
SAB 101 on prior years. Local subscriber revenue is earned by providing access
to the cellular network ("access revenue") or, as applicable, for usage of the
cellular network ("airtime revenue"). Access revenue is billed one month in
advance and is recognized when earned. Postpaid airtime is recognized when the
service is rendered.
Outcollect roaming revenue represents revenue earned for usage of the
Company's cellular network by subscribers of other cellular carriers.
Outcollect roaming revenue is recognized when the services are rendered.
Equipment sales and installation revenues are recognized upon delivery to
the customer or installation of the equipment.
Cost to Add a Subscriber
The cost to add a subscriber consists principally of the net loss on the
sale of equipment and commissions, and is recognized at the time the subscriber
starts to receive cellular service.
Operating Expenses-Engineering, Technical and Other Direct
Engineering, technical and other direct operating expenses represent certain
costs of providing cellular telephone services to customers. These costs
include incollect roaming expense. Incollect roaming expense is the result of
the Company's subscribers using cellular networks of other cellular carriers.
Incollect roaming revenue, collected from the Company's subscribers, is netted
against the incollect roaming expense to determine net incollect roaming
expense.
Income Taxes
The Company records income taxes to recognize full inter-period tax
allocation. Under the liability method, deferred taxes are recognized for the
future tax consequences of temporary differences by applying enacted statutory
tax rates applicable to future years differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("Accounting for Derivative Instruments
and Hedging Activities"). This statement establishes accounting and reporting
standards requiring that all derivative instruments (including certain
derivative instruments embedded in other contracts) be recorded on the balance
sheet as an asset or a liability and measured at its fair value. This statement
requires that changes in the derivatives fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. This statement is
effective for fiscal years beginning after June 15, 2000, as amended by
Statement of Financial Accounting Standards No. 137 ("SFAS No. 137") but can be
adopted earlier. The Company does not believe that at this time the adoption of
SFAS No. 137 will have a significant impact.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 142 "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 142 requires the use of a
nonamortization approach to account for purchased goodwill and certain
intangibles. Under a nonamortization approach, goodwill and certain intangibles
will not be amortized into results of operations, but instead will be reviewed
for impairment and written down as a charge to results of operations only in
the periods
F-41
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
in which the recorded value of goodwill and certain intangibles is more than
its fair value. The provisions of SFAS No. 142 will be adopted by PCW on
January 1, 2002. The Company does not have any goodwill recorded in its
consolidated financial statements and therefore does not believe the adoption
of SFAS No. 142 will have any effect on its financial position or results of
operations. However, PCW does have a significant intangible asset in the form
of cellular licenses. PCW is in the process of evaluating the financial
statement impact of SFAS No. 142 as it relates to intangible assets.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
of Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 supercedes
SFAS No. 121, but retains SFAS No. 121's fundamental provisions for (a)
recognition and measurement of impairment of long-lived assets to be held and
used and (b) measurement of long-lived assets to be disposed of by sale. SFAS
No. 144 also supercedes Accounting Principle Board Opinion No. 30 "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of
a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions ("APB No. 30") for segments of a business to be disposed of but
retains APB No. 30's requirements to report discontinued operations separately
from continuing operations and extends that reporting to a component of an
entity that either has been disposed of or is classified as held for sale. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early application encouraged.
Based on preliminary estimates, the Company does not believe the adoption of
SFAS No. 144 will have a material impact on its consolidated financial
statements.
(4) Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, trade accounts receivable,
receivable from other cellular carriers, accounts payable and accrued expenses,
and virtually all current liabilities approximates the estimated fair value due
to the short-term nature of those accounts.
Rates currently available for long-term debt with similar terms and
remaining maturities are used to discount the future cash flows to estimate the
fair value for long-term debt.
(5) Long-Term Debt
Long-term debt consists of the following:
December 31
--------------------
2000 1999
-------- --------
($ in thousands)
11 3/4% Senior Subordinated Notes $175,000(a) $175,000(a)
9 1/8% Senior Secured Notes...... 525,000(b) 525,000(b)
-------- --------
Long-term debt................... $700,000 $700,000
======== ========
- --------
(a) In July 1997, the Company issued $175.0 million of 11 3/4% Senior
Subordinated Notes ("11 3/4% Notes") due July 15, 2007 with interest
payable semi-annually commencing January 15, 1998. The 11 3/4% Notes
contain covenants that restrict the payment of dividends, incurrence of
debt and sale of assets. The fair market value of these notes approximated
$191.6 million as of December 31, 2000.
(b) In June 1998, the Company issued $525.0 million of 9 1/8% Senior Secured
Notes ("9 1/8% Notes") due December 15, 2006 with interest payable
semi-annually commencing December 15,1998. The 9 1/8% Notes contain
covenants that restrict the payment of dividends, incurrence of debt and
sale of assets. The fair market value of these notes approximated $543.4
million as of December 31, 2000.
F-42
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The aggregate maturities of long-term debt are as follows:
December 31,
- ------------
2001 to 2005............................................... $ --
Thereafter................................................. 700,000
--------
$700,000
========
(6) Obligation of Parent Company
Effective June 24, 1999, Holdings, allowed the conversion of the then
outstanding indebtedness of the $200 million 11 3/4% Senior Exchangeable
Payable-in-Kind notes according to the provision of the indenture. Accordingly,
the obligation as of June 30, 1999, which amounted to $220.7 million including
accrued interest, was satisfied by the issuance by PCC of 17.2 million shares
of its common stock. This indebtedness had been recorded on the balance sheet
of the Company pursuant to "push-down" accounting rules as an obligation of the
parent company. Accordingly, for the year ended December 31, 1999, restricted
cash, indebtedness, unamortized finance costs and deferred taxes associated
with the accreted interest on the debt were settled with the net amount
reflected in paid-in-capital as a capital contribution.
(7) Extraordinary Item
In June and August 1998, the Company and Holdings retired certain
outstanding indebtedness in the amount of $514 million. The additional costs
incurred to retire the indebtedness, as well as the write off of deferred
financing costs associated with these financings resulted in an extraordinary
loss of $25.3 million net of a tax benefit of $14.9 million.
(8) Income Taxes
Provision (benefit) for income taxes consists of the following:
Year Ended December 31
-------------------------
2000 1999 1998
------- ------- --------
($ in thousands)
Current:
Federal............. $ 2,842 $ 4,342 $ (3,355)
State and Local..... 243 383 (531)
------- ------- --------
3,085 4,725 (3,886)
------- ------- --------
Deferred:
Federal............. 11,000 (1,267) (7,713)
State and Local..... 971 (112) (1,232)
------- ------- --------
11,971 (1,379) (8,945)
------- ------- --------
Tax Provision (benefit) $15,056 $ 3,346 $(12,831)
======= ======= ========
F-43
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 2000, 1999, and 1998, the provision for
income taxes differs from the amount computed by applying the federal income
tax rate (34%) due to the following items:
Year Ended December 31,
-----------------------
2000 1999 1998
------- ------ --------
($ in thousands)
Tax at statutory federal income tax rate.............. $13,842 $3,075 $(11,792)
State taxes, net of federal income tax benefit........ 1,214 271 (1,273)
Non deductible interest expense....................... -- -- 234
------- ------ --------
$15,056 $3,346 $(12,831)
======= ====== ========
Deferred tax assets and liabilities and the principal temporary differences
from which they arise are as follows:
2000 1999
-------- --------
($ in thousands)
Deferred tax assets:
Allowance for doubtful accounts......................... $ 517 $ 741
Inventory reserve....................................... -- 133
Non-deductible accruals................................. 121 107
-------- --------
Total deferred tax assets........................... 638 981
Deferred tax liabilities:
Accumulated deprecation................................. 17,942 15,828
Licenses................................................ 267,213 276,654
-------- --------
Total deferred tax liabilities...................... 285,155 292,482
-------- --------
Net deferred tax liabilities............................... $284,517 $291,501
======== ========
(9) Commitments and Contingencies
The Company is involved in various claims and litigation in the ordinary
course of business. In the opinion of legal counsel and management, the
ultimate disposition of these matters will not have a material effect on the
Company's consolidated financial statements.
The Company leases a variety of assets used in its operations, including
office space. Renewal options are available in the majority of leases. The
following is a schedule of the Company's minimum rental commitments for
operating leases of real and personal property for each of the five years
subsequent to 2000 and in the aggregate.
($ in thousands)
----------------
Year ending December 31:
2001.................................................... $ 4,924
2002.................................................... 4,575
2003.................................................... 3,679
2004.................................................... 2,672
2005.................................................... 1,334
Thereafter.............................................. 1,282
-------
$18,466
=======
F-44
ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)
Rental expense for operating leases was approximately $4.9 million, $3.7
million and $2.9 million for the years ended December 31, 2000, 1999 and 1998
respectively.
(10) Selected Quarterly Financial Data (unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- -------- -------- ------- --------
Year Ended December 31, 1998
Total Revenue (a)........... $43,106 $ 48,765 $ 51,787 $53,046 $196,704
Operating Income............ $ 7,923 $ 11,035 $ 12,065 $14,003 $ 45,026
------- -------- -------- ------- --------
Net Income (Loss)........ $(6,571) $(10,810) $(21,777) $(8,036) $(47,194)
======= ======== ======== ======= ========
Year Ended December 31, 1999
Total Revenue (a)........... $56,286 $ 63,939 $ 64,035 $64,863 $249,123
Operating Income............ $17,335 $ 22,977 $ 22,699 $22,038 $ 85,049
------- -------- -------- ------- --------
Net Income (Loss)........ $(2,763) $ 803 $ 3,946 $ 3,711 $ 5,697
======= ======== ======== ======= ========
Year Ended December 31, 2000
Total Revenue............... $65,355 $ 69,759 $ 68,766 $66,628 $270,508
Operating Income............ $23,800 $ 27,280 $ 25,639 $26,678 $103,397
------- -------- -------- ------- --------
Net Income............... $ 4,716 $ 7,243 $ 6,260 $ 7,260 $ 25,479
======= ======== ======== ======= ========
- --------
(a) Certain reclassifications were made to conform to the current presentation.
(11) Other Income, Net
Other income, net consists primarily of a gain on sale of fixed assets.
F-45
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2000, 1999 and 1998
($ in thousands)
Balance at Additions Deductions Balance at
Beginning Charged to Net of End of
Description of Period Expenses Recoveries Period
- ----------- ---------- ---------- ---------- ----------
For the year ended December 31, 2000:Allowance for doubtful
accounts................................................. $2,003 $4,395 $(5,002) $1,396
For the year ended December 31, 1999:Allowance for doubtful
accounts................................................. $1,596 $6,303 $(5,896) $2,003
For the year ended December 31, 1998:Allowance for doubtful
accounts................................................. $ 818 $7,159 $(6,381) $1,596
F-46
ANNEX A
TRANSACTION AGREEMENT
================================================================================
TRANSACTION AGREEMENT
dated as of
December 18, 2001
among
PRICE COMMUNICATIONS CORPORATION,
PRICE COMMUNICATIONS CELLULAR INC.,
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.,
PRICE COMMUNICATIONS WIRELESS, INC.,
CELLCO PARTNERSHIP
and
VERIZON WIRELESS OF THE EAST LP
================================================================================
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................... A-1
ARTICLE 2
CONTEMPLATED TRANSACTIONS
SECTION 2.01. Contemplated Transactions..................................... A-11
SECTION 2.02. Contribution of Assets........................................ A-11
SECTION 2.03. Assumption of Liabilities..................................... A-11
SECTION 2.04. Senior Subordinated Notes..................................... A-11
SECTION 2.05. Senior Secured Notes.......................................... A-12
SECTION 2.06. New LP Financing.............................................. A-12
SECTION 2.07. Initial Capital Accounts...................................... A-13
ARTICLE 3
TRANSFER OF ASSETS AND LIABILITIES
SECTION 3.01. Asset Contribution............................................ A-13
SECTION 3.02. Company Excluded Assets....................................... A-15
SECTION 3.03. Company Assumed Liabilities................................... A-15
SECTION 3.04. Company Excluded Liabilities.................................. A-16
ARTICLE 4
CELLCO ASSET CONTRIBUTION
SECTION 4.01. Cellco Asset Contribution..................................... A-16
SECTION 4.02. Cellco Assumed Liabilities.................................... A-17
SECTION 4.03. Cellco Excluded Liabilities................................... A-17
ARTICLE 5
ASSIGNMENT OF CONTRACTS AND RIGHTS
SECTION 5.01. Assignment of Contracts and Rights............................ A-17
ARTICLE 6
THE CLOSING
SECTION 6.01. The Closing................................................... A-18
SECTION 6.02. Final Closing Balance Sheet and Closing Working Capital Amount A-18
SECTION 6.03. Final Working Capital Amount.................................. A-20
PAGE
----
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE PRICE CORPORATIONS
SECTION 7.01. Existence and Power....................................... A-20
SECTION 7.02. Authorization............................................. A-20
SECTION 7.03. Governmental Authorization................................ A-21
SECTION 7.04. Noncontravention.......................................... A-21
SECTION 7.05. Required and Other Consents............................... A-21
SECTION 7.06. Financial Statements...................................... A-21
SECTION 7.07. Absence of Certain Changes................................ A-22
SECTION 7.08. No Undisclosed Material Liabilities....................... A-23
SECTION 7.09. Material Contracts........................................ A-23
SECTION 7.10. Litigation................................................ A-25
SECTION 7.11. Compliance with Laws and Court Orders..................... A-25
SECTION 7.12. Properties................................................ A-25
SECTION 7.13. Sufficiency of and Title to the Company Contributed Assets A-27
SECTION 7.14. Subscriber Accounts....................................... A-27
SECTION 7.15. Intellectual Property..................................... A-27
SECTION 7.16. Insurance Coverage........................................ A-28
SECTION 7.17. Licenses and Permits...................................... A-28
SECTION 7.18. Financial Advisors' Fees.................................. A-29
SECTION 7.19. Environmental Compliance.................................. A-29
SECTION 7.20. SEC Filings............................................... A-31
SECTION 7.21. Financial Statements...................................... A-31
SECTION 7.22. Disclosure Documents...................................... A-31
SECTION 7.23. FCC Authorization......................................... A-32
SECTION 7.24. Rollup Transaction Materials.............................. A-32
SECTION 7.25. Representations and Warranties............................ A-32
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF CELLCO
SECTION 8.01. Existence and Power....................................... A-32
SECTION 8.02. Authorization............................................. A-32
SECTION 8.03. Governmental Authorization................................ A-32
SECTION 8.04. Noncontravention.......................................... A-33
SECTION 8.05. Consents.................................................. A-33
SECTION 8.06. Litigation................................................ A-33
SECTION 8.07. Finders' Fees............................................. A-33
SECTION 8.08. ELP Interest.............................................. A-33
SECTION 8.09. Title to Cellco Contributed Assets........................ A-33
SECTION 8.10. Cellco Contributed Note................................... A-34
SECTION 8.11. Financial Statements...................................... A-34
SECTION 8.12. Absence of Certain Changes................................ A-34
SECTION 8.13. Price Proxy Materials..................................... A-35
SECTION 8.14. No Undisclosed Material Liabilities....................... A-35
SECTION 8.15. Cellco Contributed Licenses............................... A-35
SECTION 8.16. FCC Qualification......................................... A-35
SECTION 8.17. Tax Basis of the Assets................................... A-36
SECTION 8.18. Representations and Warranties............................ A-36
ii
PAGE
----
ARTICLE 9
COVENANTS OF THE PRICE CORPORATIONS
SECTION 9.01. Conduct of the Business................ A-36
SECTION 9.02. Maintenance of Assets and Insurance.... A-37
SECTION 9.03. Compliance with Laws, Etc.............. A-37
SECTION 9.04. Co-operation in Conducting the Business A-37
SECTION 9.05. Access to Information; Confidentiality. A-38
SECTION 9.06. Notices of Certain Events.............. A-38
SECTION 9.07. Noncompetition......................... A-39
SECTION 9.08. Stockholder Meeting; Proxy Materials... A-40
SECTION 9.09. No Shop................................ A-40
SECTION 9.10. Company Debt........................... A-41
SECTION 9.11. Environmental Matters.................. A-42
SECTION 9.12. Contour Extension Agreements........... A-42
SECTION 9.13. Giant Bear Agreement................... A-42
ARTICLE 10
COVENANTS OF CELLCO AND NEW LP
SECTION 10.01. Confidentiality........................ A-42
SECTION 10.02. Post Closing Access.................... A-42
SECTION 10.03. Conduct of Business.................... A-43
SECTION 10.04. Access................................. A-43
SECTION 10.05. Cellco Noncompete...................... A-43
SECTION 10.06. Notices of Certain Events.............. A-43
ARTICLE 11
COVENANTS OF CELLCO, NEW LP AND THE PRICE CORPORATIONS
SECTION 11.01. Best Efforts; Further Assurances....... A-44
SECTION 11.02. Certain Filings........................ A-45
SECTION 11.03. Public Announcements................... A-45
SECTION 11.04. Trademarks; Tradenames................. A-45
SECTION 11.05. WARN Act............................... A-45
SECTION 11.06. H.O. Systems Agreement................. A-45
SECTION 11.07. BCG Agreement.......................... A-46
SECTION 11.08. FCC Application........................ A-46
SECTION 11.09. New LP's Environmental Reports......... A-46
ARTICLE 12
TAX MATTERS
SECTION 12.01. Tax Definitions........................ A-47
SECTION 12.02. Tax Representations.................... A-48
SECTION 12.03. Covenants.............................. A-50
iii
PAGE
----
SECTION 12.04. Tax Cooperation; Allocation of Certain Taxes A-51
SECTION 12.05. Tax Certificates............................ A-52
SECTION 12.06. Dispute Resolution.......................... A-52
ARTICLE 13
EMPLOYEE BENEFITS
SECTION 13.01. Employee Benefits Definitions............... A-53
SECTION 13.02. ERISA Representations....................... A-54
SECTION 13.03. No Third Party Beneficiaries................ A-55
SECTION 13.04. Employees................................... A-55
SECTION 13.05. Employee Benefits........................... A-55
SECTION 13.06. Excluded Employees.......................... A-56
SECTION 13.07. Severance and Similar Liabilities........... A-56
SECTION 13.08. Inactive Transferred Employees.............. A-56
SECTION 13.09. Unpaid Accrued Bonus........................ A-56
ARTICLE 14
CONDITIONS TO CLOSING
SECTION 14.01. Conditions to Obligations of Each Party........... A-57
SECTION 14.02. Conditions to Obligation of Cellco and New LP..... A-57
SECTION 14.03. Conditions to Obligation of The Price Corporations A-59
ARTICLE 15
SURVIVAL; INDEMNIFICATION
SECTION 15.01. Survival.......................................... A-60
SECTION 15.02. Indemnification................................... A-61
SECTION 15.03. Procedures........................................ A-62
SECTION 15.04. Payment........................................... A-63
SECTION 15.05. Other Rights and Remedies Not Affected............ A-64
ARTICLE 16
TERMINATION
SECTION 16.01. Grounds for Termination........................... A-64
SECTION 16.02. Effect of Termination............................. A-65
ARTICLE 17
MISCELLANEOUS
SECTION 17.01. Notices............... A-65
SECTION 17.02. Amendments and Waivers A-66
SECTION 17.03. Expenses.............. A-66
iv
PAGE
----
SECTION 17.04. Successors and Assigns................................ A-67
SECTION 17.05. Governing Law......................................... A-67
SECTION 17.06. Jurisdiction.......................................... A-67
SECTION 17.07. WAIVER OF JURY TRIAL.................................. A-68
SECTION 17.08. Counterparts; Effectiveness; Third Party Beneficiaries A-68
SECTION 17.09. Entire Agreement...................................... A-68
SECTION 17.10. Bulk Sales Laws....................................... A-68
SECTION 17.11. Joint and Several Liability........................... A-68
SECTION 17.12. General Partner Liability............................. A-68
SECTION 17.13. Appointment of Agent.................................. A-68
SECTION 17.14. Captions.............................................. A-68
v
TRANSACTION AGREEMENT
AGREEMENT dated as of December 18, 2001 among Price Communications
Corporation, a New York corporation ("Price Parent"), Price Communications
Cellular Inc., a Delaware corporation ("Price Cellular"), Price Communications
Cellular Holdings, Inc., a Delaware corporation ("Price Shareholder"), Price
Communications Wireless, Inc., a Delaware corporation (the "Company" and,
together with Price Parent, Price Cellular and Price Shareholder, the "Price
Corporations"), Cellco Partnership, a Delaware general partnership ("Cellco"),
and Verizon Wireless of the East LP, a newly formed Delaware limited
partnership ("New LP").
WITNESSETH:
WHEREAS, the Company conducts the business of constructing, developing,
managing and operating cellular telephone systems;
WHEREAS, the parties hereto desire that (i) the Company shall make the
Company Asset Contribution and the Company Cash Contribution to New LP, upon
the terms and subject to the conditions hereinafter set forth, in exchange for
the ELP Interest and (ii) Cellco and/or any of its Subsidiaries will make the
Cellco Cash Contribution and the Cellco Asset Contribution, upon the terms and
subject to the conditions hereinafter set forth, in exchange for the MGP
Interest and the Cellco LP Interest;
WHEREAS, the parties intend the Asset Contributions and the Cash
Contributions to qualify under Code Section 721(a) (a "721 Contribution");
WHEREAS, simultaneously with the execution of this Agreement, the Price
Corporations, Verizon Communications Inc., a Delaware corporation ("VCI"), and
Verizon Wireless Inc., a Delaware corporation ("VWI"), are entering into an
Exchange Agreement (the "Exchange Agreement"), pursuant to which the ELP
Interest will be exchangeable for common stock of VCI or VWI upon the terms and
subject to the conditions set forth therein;
WHEREAS, simultaneously with the execution of this Agreement, Cellco, New LP
and certain other Persons (such other Persons, the "Stockholders") are entering
into a Voting Agreement (the "Voting Agreement") pursuant to which the
Stockholders have agreed to vote all of the shares of capital stock of any
Price Corporation held by them in favor of the transactions contemplated by
this Agreement and certain transactions contemplated by the Exchange Agreement;
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions
(a) The following terms, as used herein, have the following meanings:
"13D Group" means "group" as defined in Section 13(d) under the 1934 Act
and the rules promulgated thereunder.
"Acquisition Proposal" means, other than the transactions contemplated by
this Agreement, any offer or proposal for, any indication of interest in, or
any submission of inquiries from any Third Party relating to (A) any
acquisition or purchase, direct or indirect, of 20% or more of the
consolidated assets of Price Parent and its Subsidiaries or over 20% of any
class of equity or voting securities of any Price Corporation, (B) any
A-1
tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in such Third Party's beneficially owning 20% or
more of any class of equity or voting securities of any Price Corporation,
or (C) a merger, consolidation, share exchange, business combination, sale
of substantially all the assets, reorganization, recapitalization,
liquidation, dissolution or other similar transaction involving any Price
Corporation; provided that, notwithstanding the foregoing, the acquisition
by any institutional investor of any securities of Price Parent, directly or
indirectly, in connection with its investment operations in the ordinary
course of business shall not constitute an "Acquisition Proposal" if (I)
such investor and its Affiliates do not at any time "beneficially own" (as
defined in Rule 13d-3 promulgated under the 1934 Act) voting securities of
Price Parent representing more than thirty percent (30%) of the total voting
power of all outstanding voting securities of Price Parent and (II) such
activities are for investment purposes only and are not, alone or in concert
with others, in connection with any plan, arrangement, understanding,
proposal, or intention to influence, or affect control over the management,
board of directors or policies of Price Parent, provided further that,
notwithstanding the foregoing, an Acquisition Proposal shall be deemed to
exist if at any time such investor or its Affiliates shall fail to, or no
longer, comply with (I) or (II) of the foregoing.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such other Person. For purposes of this definition (a) Robert
Price (but no other members of Robert Price's family) and any Person
directly or indirectly controlled by Robert Price (including any Person for
which Robert Price acts as a guardian of the property of, but no other
members of Robert Price's family) shall be deemed to be an Affiliate of the
Price Corporations and each of their Affiliates and (b) the term "control"
means (x) the power to direct the management and policies of a Person,
directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise, or (y) without
limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
"Ancillary Agreements" means the Lock-up Agreement, the Pledge Agreement,
the Voting Agreement, the New LP Agreement and the Exchange Agreement.
"Asset Contributions" means the Company Asset Contribution and the Cellco
Asset Contribution.
"Assumed Liabilities" means the Company Assumed Liabilities and the
Cellco Assumed Liabilities.
"Balance Sheet Date" means September 30, 2001.
"Bank of Montreal" means the Bank of Montreal Trust Company, a New York
banking corporation, and its successors.
"BCG Agreement" means the Prepaid Connection Service Agreement dated May
15, 2000 between Cellular Express, Inc. d/b/a Boston Communications Group
and the Company.
"Business" means the business of constructing, developing, managing and
operating cellular telephone systems serving the Company Cellular Telephone
System Areas in Georgia, Alabama, South Carolina and Florida conducted by
the Company either directly or through its Affiliates.
"Business Employee" means any person employed by the Company primarily in
connection with the Business.
"Cash Contributions" means the Company Cash Contribution and the Cellco
Cash Contribution.
"Cellco Cash Contribution Amount" means the amount equal to (i) the
amount required to permit New LP to satisfy its obligations under Sections
2.04 and 2.05 minus (ii) the sum of (x) the Company Cash Contribution Amount
plus (y) the proceeds to New LP of the New LP Financing.
"Cellco Contributed Agreement" means the Agreement Establishing Orange
County-Poughkeepsie Limited Partnership dated as of April 21, 1987 among
Nynex Mobile Communications Company, Contel Cellular, Inc., Highland
Telephone Company, Sylvan Lake Telephone Company, Taconic Telephone
Corporation and Warwick Valley Telephone Company, as amended.
A-2
"Cellco Contributed Interest" means a partnership interest representing
85% of the partnership interests in Cellco Contributed Partnership
(including the entire general partnership interest in Cellco Contributed
Partnership).
"Cellco Contributed License Liabilities" means all regulatory liabilities
and obligations of Cellco and/or its Subsidiaries arising in the ordinary
course of business with respect to the Cellco Contributed Licenses.
"Cellco Contributed Licenses" means (i) the FCC licenses to provide
broadband PCS wireless communication services within the Macon, GA Basic
Trading Area ("BTA") #271 (FCC call sign KNLG325), and (ii) all of Cellco's
right, title and interest in the FCC license to provide broadband PCS
wireless communication services within the portion of the Atlanta, GA BTA
#24 (current FCC call sign KNLG285) comprising the counties of Spalding,
Meriwether, Pike, Lamar, and Upson, GA. Such licenses authorize operation on
the 10 MHZ E block spectrum constituting the 1885-1890 MHZ and 1965-1970 MHZ
frequency bands.
"Cellco Contributed Note" means a promissory note of Cellco substantially
in the form attached as Exhibit A.
"Cellco Contributed Partnership" means the Orange County-Poughkeepsie
Limited Partnership established pursuant to the Cellco Contributed Agreement.
"Cellco Contributed Partnership Balance Sheet" means the balance sheet of
the Cellco Contributed Partnership as of September 30, 2001, attached as
Exhibit B hereto.
"Cellco Limited Partner Capital Account" means, at any time, the Initial
Cellco Limited Partner Capital Account as adjusted as of such time pursuant
to the New LP Agreement.
"Cellco LP Interest" means the limited partner interest or interests in
New LP to be issued to Cellco and/or one or more of its Subsidiaries
pursuant to Section 2.02 and conferring to the holder thereof the rights and
obligations set forth in the New LP Agreement.
"Cellco LP Interest Holder" means the holder or holders of the Cellco LP
Interest.
"CELLULARONE Service Mark" means the CELLULARONE Service Mark registered
with the U.S. Patent and Trademark Office licensed by Cellular One Group, a
Delaware general partnership, to the Price Corporations or any of their
Affiliates for use in the Company Cellular Telephone System Areas.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"Change of Control" means (i) any Acquisition Proposal involving the
Company Contributed Assets or any class of equity or voting securities of
any Price Corporation (other than Price Parent), (ii) any Person (other than
a Passive Institutional Investor and other than Robert Price and any 13D
Group as to which he has sole voting authority) or 13D Group having or
acquiring beneficial ownership (as defined in Rule 13d-3 under the 1934 Act)
of voting securities of Price Parent representing more than 30% of the total
voting power of all outstanding voting securities of Price Parent (provided
that if Robert Price is a member of a 13D Group, it shall not constitute a
"Change of Control" if every other member of such group agrees to be subject
to the Voting Agreement and provided further that a "Change of Control"
shall not be deemed to exist pursuant to this subclause (ii) solely by
reason of an acquisition of voting securities of Price Parent by Price
Parent which, by reducing the number of voting securities of Price Parent
outstanding, increases the proportionate number of voting securities of
Price Parent beneficially owned by such Person or 13D Group to more than 30%
of the total voting power of all outstanding voting securities of Price
Parent), or (iii) a majority of the members of the board of directors of
Price Parent ceasing to be Continuing Directors as a result of a proxy or
consent solicitation (or commencement of a proxy or consent solicitation to
consummate
A-3
such a change in the board of directors of Price Parent) if any Person who
is a participant in such solicitation has stated that such Person intends to
take, or may consider taking, any action which would constitute an
Acquisition Proposal. For purposes hereof "Continuing Director" means any
individual who is, as of the date of this Agreement, a member of the board
of directors of Price Parent and any individual who hereafter becomes a
member of such board if such individual's nomination for election is
recommended or approved by a majority of the Continuing Directors.
"Change in Law" means a change in the Internal Revenue Code, the Treasury
regulations promulgated thereunder, the interpretation thereof by the U.S.
courts, including the Tax Court, or any official pronouncement of the
Internal Revenue Service or the Treasury department (such as a revenue
ruling, revenue procedure or notice, but not a private letter ruling or a
similar authority) that occurs after the date hereof.
"Closing Date" means the date of the Closing.
"Communications Act" means the Communications Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of September 30, 2001, attached as Exhibit C hereto.
"Company Capital Account" means, as of any time after the Closing, the
Initial Company Capital Account, as adjusted as of such time pursuant to
this Agreement and the New LP Agreement.
"Company Cash Contribution Amount" means (i) $149 million, plus (ii) the
amount of accrued and unpaid interest on the Senior Secured Notes and Senior
Subordinated Notes as of the Closing Date, plus (iii) if the H.O. Agreement
shall have been amended prior to the Closing in the manner provided in
Section 11.06 and the amendment requires payment by New LP, at any time
after the Closing Date, of any costs or expenses incurred in connection with
obtaining such amendment, the amount of any such costs and expenses, plus
(iv) all costs and expenses payable by New LP, at any time after the Closing
Date, in connection with termination of the BCG Agreement, or obtaining any
and all amendments and modifications to the BCG Agreement, plus (v) any
Excess Financing Cost; provided that the Company Cash Contribution Amount
shall not include any H.O. Cancellation Fee or any costs or expenses
incurred after the Closing Date pursuant to the terms of the H.O. Agreement,
the BCG Agreement (but only if assumed by New LP) or the Cellco-BCG
Agreement.
"Company Cellular Telephone System Areas" means the Montgomery and
Dothan, Alabama and Macon -Warner Robins, Columbus including Russell County,
Alabama, Albany, Augusta (including Aiken County, South Carolina) and
Savannah, Georgia and Panama City, Florida metropolitan statistical areas,
and the Georgia-6, Georgia-7, Georgia-8, Georgia-9, Georgia-10, Georgia-12,
Georgia-13 and Alabama-8 rural service areas.
"Company Debt" means the Senior Subordinated Debt and the Senior Secured
Debt.
"Company 10-K" means Price Parent's annual report on Form 10-K for the
fiscal year ended December 31, 2000.
"Confidentiality Agreements" means (i) the Confidentiality Agreement
dated as of June 23, 2000 between Price Parent and Cellco and (ii) the
Non-Disclosure Agreement dated as of November 1, 2001 between Price Parent
and Cellco.
"Contributed Assets" means the Company Contributed Assets and the Cellco
Contributed Assets.
"Delaware Law" means the General Corporation Law of the State of Delaware.
"ELP Interest" means the limited partnership interest in New LP issued to
the Company pursuant to Section 2.02 and conferring to the holder thereof
the rights and obligations set forth in the New LP Agreement and the
Exchange Agreement.
A-4
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any governmental authority or
other third party, in effect on or prior to the Closing Date, relating to
the environment, human health and safety or to pollutants, contaminants,
wastes or chemicals or any toxic, radioactive, ignitable, corrosive,
reactive or otherwise hazardous substances, wastes or materials.
"Environmental Liabilities" means any and all liabilities, losses,
damages or claims arising in connection with, asserted against or sought to
be imposed on the Company (or any predecessors of Company or any prior owner
of all or part of its business), any property now or previously owned,
leased or operated by any of the Price Corporations, the Business (as
currently or previously conducted), the Company Contributed Assets or any
activities or operations occurring or conducted at the Real Property
(including, without limitation, offsite disposal), whether accrued,
contingent, absolute, determined, determinable or otherwise, which (i) arise
under any Environmental Law, and (ii) relate to actions occurring or
conditions existing on or prior to the Closing.
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities required by or issued pursuant to Environmental Laws and
affecting, or relating in any way to, the Business.
"Escheat Payment" means any payment required to be made to any state
abandoned property administrator or other public official pursuant to an
abandoned property, escheat or similar law.
"Excess Financing Cost" means all reasonable fees and other costs and
expenses (other than interest) charged by the Lender with respect to the New
LP Financing.
"Excluded Contracts" means (i) all contracts entered into prior to the
Closing Date that relate to any disposition of assets of the Business or of
any securities or other interest in the Business including, without
limitation, the contracts relating to the Fort Myers Sale and the Georgia
Sale (as defined in the Price SEC Documents), (ii) all contracts relating to
the Rollup Transaction and (iii) the BCG Agreement.
"Excluded Employee" means any Business Employee who New LP or Cellco has
designated as an excluded employee by written notice to the Price
Corporations delivered (i) in connection with any Business Employee for
which a WARN Act notice would be required, on or prior to the date that is
65 days prior to the Closing Date, and (ii) in connection with any other
Business Employee, on or prior to the date that is 30 days prior to the
Closing Date.
"Excluded Liabilities" means the Company Excluded Liabilities and the
Cellco Excluded Liabilities.
"FCC" means the Federal Communications Commission.
"FCC Authorizations" means all licenses, permits and other authorizations
issued by the FCC with respect to the Business including, without
limitation, (i) all licenses issued to the Company or any of its Affiliates
by the FCC to construct, own and operate a cellular telecommunications
system (including all associated microwave facilities) or otherwise with
respect to each of the Company Cellular Telephone System Areas, and (ii) all
construction permits, if any, that have been issued by the FCC to the
Company or any of its Affiliates with respect to construction of a cellular
telecommunications system in each of the Company Cellular Telephone System
Areas.
"Final Working Capital Amount" means the Closing Working Capital Amount
calculated by New LP pursuant to Section 6.02(a) if no notice of
disagreement is delivered pursuant to Section 6.02(b), or, if such a notice
is delivered, the Closing Working Capital Amount agreed upon by New LP and
the Price Corporations pursuant to Section 6.02(c) or, in the absence of
such an agreement, the Closing Working Capital Amount determined as set
forth in Section 6.02(c).
"General Partner Capital Account" means, as of any time, the Initial
General Partner Capital Account as adjusted as of such time pursuant to the
New LP Agreement.
A-5
"Giant Bear Agreement" means the Services Agreement dated February 14,
2000 between the Company and Giant Bear Inc., as amended by the Amendment to
the Services Agreement dated November 1, 2001.
"Governmental Entity" means any government or any state, department or
other political subdivision thereof, or any governmental body, agency,
authority (including, but not limited to, the FCC or any other
telecommunications authority) or instrumentality (including, but not limited
to, any court, tribunal or grand jury) exercising executive, prosecutorial,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise regulated hazardous substance, waste or material or any substance,
waste or material having any constituent elements displaying any of the
foregoing characteristics including, without limitation, petroleum, its
derivatives, by-products and other hydrocarbons, and any substance, waste or
material regulated under any Environmental Law.
"H.O. Agreement" means the License Agreement dated as of May 5, 2000
between H.O. Systems and the Company, together with the Addendum to the
License Agreement dated as of such date and any other addenda or amendments
thereto.
"H.O. Systems" means H.O. Systems, Inc., a Georgia corporation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property Rights" means (i) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and
reexaminations thereof) registered or applied for in the United States and
all other nations throughout the world, all improvements to the inventions
disclosed in each such registration, patent or patent application, (iii)
trademarks, service marks, trade dress, logos, domain names, trade names and
corporate names (whether or not registered) in the United States and all
other nations throughout the world, including all variations, derivations,
combinations, registrations and applications for registration of the
foregoing and all goodwill associated therewith, (iv) copyrights (whether or
not registered) and registrations and applications for registration thereof
in the United States and all other nations throughout the world, including
all derivative works, moral rights, renewals, extensions, reversions or
restorations associated with such copyrights, now or hereafter provided by
law, regardless of the medium of fixation or means of expression, (v)
computer software, (including source code, object code, firmware, operating
systems and specifications), (vi) trade secrets and, whether or not
confidential, business information (including pricing and cost information,
business and marketing plans and customer and supplier lists) and know-how
(including manufacturing and production processes and techniques and
research and development information), (vii) industrial designs (whether or
not registered), (viii) databases and data collections, (ix) copies and
tangible embodiments of any of the foregoing, in whatever form or medium,
(x) all rights to obtain and rights to apply for patents, and to register
trademarks and copyrights, (xi) all rights in all of the foregoing provided
by treaties, conventions and common law and (xii) all rights to sue or
recover and retain damages and costs and attorneys' fees for past, present
and future infringement or misappropriation of any of the foregoing.
"Licensed Intellectual Property Rights" means all Intellectual Property
Rights owned by a third party and licensed or sublicensed to any of the
Price Corporations or any of their Affiliates and held for use or used in
the conduct of the Business including, without limitation, the CELLULARONE
Service Mark.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this
Agreement and the Ancillary Agreements, a Person shall be deemed to own
subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset.
A-6
"Lock-up Agreements" means the Lock-up Agreement dated as of December 18,
2001, among the Price Corporations and VWI and the Lock-up Agreement dated
as of December 18, 2001 among the Price Corporations and VCI.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of
operations of the Business (other than the Company Excluded Assets), other
than such material adverse effects arising out of business conditions or
other matters generally affecting the wireless telecommunications industry.
"MGP Interest" means the managing general partner interest in New LP to
be issued to Cellco or one of its Subsidiaries pursuant to Section 2.02 and
conferring to the holder thereof the rights and obligations set forth in the
New LP Agreement.
"MGP Interest Holder" means the holder of the MGP Interest.
"Network Site" means any site owned, held, leased or used for the
provision of network switching or transmission and receiving services in the
conduct of the Business by the Price Corporations or any of their
Affiliates, including, without limitation, all cell sites, leased or owned
tower or antenna sites (including co-location sites) and all mobile
telephone switching offices or switch locations.
"New LP Agreement" means the Limited Partnership Agreement of New LP
substantially in the form attached hereto as Exhibit D.
"NLP Material Adverse Effect" means a material adverse effect on New LP
which causes the income of New LP to be insufficient to enable New LP to
allocate the Preferred Return to the Company Capital Account pursuant to
Article 4 of the New LP Agreement, other than such material adverse effects
arising out of business conditions or other matters generally affecting the
wireless telecommunications industry.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Owned Intellectual Property Rights" means all Intellectual Property
Rights owned by the Price Corporations or any of their Affiliates and held
for use or used in the conduct of the Business, but excluding all right,
title and interest in and use of the "Price Communications" name and any
derivative thereof (the "Price Communications' Name Rights").
"Passive Institutional Investor" means an institutional investor that
satisfies clauses (I) and (II) of the definition of "Acquisition Proposal".
"Permitted Transferee" has the meaning assigned to such term in the New
LP Agreement.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Return" shall have the meaning assigned to such term in the
New LP Agreement.
"Price Parent Third Quarter Balance Sheet" means the unaudited
consolidated balance sheet of Price Parent and its consolidated subsidiaries
dated September 30, 2001, including the notes thereto, attached as Exhibit E
hereto.
"Required Consents" means (i) the Other Consents, (ii) the Required
Notices and (iii) 90% of the Network Consents; provided that such 90% must
include all Network Consents relating to mobile telephone switching offices
and sites that house microwave hops.
A-7
"Rollup Transaction" means any or all of the following transactions: (i)
the acquisition by the Company of all of the outstanding shares of capital
stock of, or other ownership interests in, any Person who was, as of
November 14, 2000, or thereafter became, a Subsidiary of the Company; (ii)
the transfer to the Company of all of the assets and liabilities of each
Person who was, as of November 14, 2000, or thereafter became (including as
a result of the transactions described in clause (i) above) a Wholly-Owned
Company Subsidiary; or (iii) the dissolution or liquidation of, and or the
merger into the Company of, each of the Persons referred to in clauses (i)
and (ii) above.
"SEC" means the Securities and Exchange Commission.
"Senior Secured Debt" means the Senior Secured Notes and all other
obligations of the Company and the Guarantors (as defined therein) pursuant
to the Senior Secured Notes Indenture, as such debt may be modified or
refinanced prior to or on the Closing Date not in violation of the
provisions of this Agreement.
"Senior Secured Notes" means the 9% Senior Secured Notes of the Company
due 2006.
"Senior Secured Notes Indenture" means the indenture dated as of June 16,
1998 among the Company, the Guarantors (as defined therein) and Bank of
Montreal, as in effect on the Closing Date.
"Senior Subordinated Debt" means the Senior Subordinated Notes and all
other obligations of the Company pursuant to the Senior Subordinated Notes
Indenture, as such debt may be modified or refinanced prior to or on the
Closing Date not in violation of the provisions of this Agreement.
"Senior Subordinated Notes" means the 113/4% Senior Subordinated Notes of
the Company due 2007.
"Senior Subordinated Notes Indenture" means the indenture dated as of
July 10, 1997 between the Company and Bank of Montreal, as in effect on the
Closing Date.
"Subsidiary" means, with respect to any Person, any entity (whether a
corporation, partnership or otherwise) of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or the other person or persons having governing authority
over the entity or performing similar functions are at any time directly or
indirectly owned by such Person.
"Superior Proposal" means any bona fide, unsolicited written Acquisition
Proposal on terms that the Board of Directors of Price Parent determines in
good faith by a majority vote, on the basis of the advice of a financial
advisor of nationally recognized reputation and taking into account all the
terms and conditions of the Acquisition Proposal, including any break-up
fees, expense reimbursement provisions and conditions to consummation, are
more favorable and provide greater value to all Price Parent's stockholders
than as provided hereunder and for which financing, to the extent required,
is then either fully committed or reasonably determined to be available by
the Board of Directors of Price Parent; provided that, notwithstanding the
fact that the transactions contemplated hereby do not contemplate the
distribution of consideration to the Price Parent shareholders, for purposes
of determining whether an Acquisition Proposal is a Superior Proposal, the
transactions contemplated hereby shall be deemed to have an aggregate value
of at least $1,150 million to such shareholders, assuming they were
consummated.
"Third Party" means any Person as defined in Section 13(d) of the 1934
Act, other than the Price Corporations or any of their Affiliates.
"Transferred Employee" means any Business Employee who is not an Excluded
Employee.
"VCI Registration Statement" has the meaning ascribed to such term in the
Exchange Agreement.
"VWI Exchange" has the meaning assigned to such term in the Exchange
Agreement.
"VWI Registration Statement" has the meaning ascribed to such term in the
Exchange Agreement.
"WARN Act" means the Worker Adjustment Retraining Notification Act.
"Wholly-Owned Company Subsidiary" means a Subsidiary of the Company that
is wholly owned by the Company or another wholly owned Subsidiary thereof.
A-8
(b) Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
---- ----------------
721 Contributions............... Preamble
Accounting Referee.............. 12.06(d)
Accrued Bonus Liability......... 3.04(f)
Action.......................... 7.10(a)
Active Transferred Employee..... 13.04(b)
Agent........................... 15.03(a)
Alternative Agreement........... 17.03(b)(i)
Base Line Financing............. 2.06(b)
Call Center Letter.............. 3.04(g)
Cellco.......................... Preamble
Cellco Asset Contribution....... 4.01
Cellco Assumed Liabilities...... 4.02
Cellco/BCG Agreement............ 11.07
Cellco Cash Contribution........ 6.01(d)
Cellco Contributed Assets....... 4.01
Cellco Credit Agreement Consents 14.02(g)
Cellco Excluded Liabilities..... 4.03
Cellco FCC Authorization........ 14.02(n)
Cellco Indemnified Parties...... 15.02
Cellco Indemnitee............... 12.01
Cellco Permitted Liens.......... 8.09(a)
Claim Notice.................... 15.03(a)
Closing......................... 6.01
Closing Working Capital Amount.. 6.02(a)
Code............................ 12.01
Company Asset Contribution...... 3.01
Company Assumed Liabilities..... 3.03
Company Cash Contribution....... 6.01(c)
Company Contributed Assets...... 3.01
Company Excluded Assets......... 3.02
Company Excluded Liabilities.... 3.04
Company Permitted Liens......... 7.12(c)(iii)
Competing Business.............. 10.05
Conforming Financing............ 2.06(b)
Contemplated Transactions....... 2.01
Contract........................ 3.01(e)
Contribute...................... 3.01
Contributed Contracts........... 3.01(e)
Co-operation Reimbursement...... 9.04
Damages......................... 15.02(a)
Defeased Subordinated Debt...... 2.04(d)
Employee Plans.................. 13.0 and
13.02(a)(ii)
ERISA........................... 13.01
ERISA Affiliate................. 13.01
Exchange Agreement.............. Preamble
FAA............................. 7.17(e)
FCC Application................. 11.08
Final Closing Balance Sheet..... 6.02(a)
A-9
Term Section
---- -------
Final Order................................... 14.02(n)
GAAP.......................................... 3.03(c)
GAAP Accrual.................................. 6.02(a)
H.O. Agreement Termination Date............... 11.06(a)
H.O. Cancellation Fee......................... 11.06(a)
Inactive Transferred Employee................. 13.04(b)
Indemnified Party............................. 15.03(a)
Indemnifying Party............................ 15.03(a)
Initial Company Capital Account............... 2.07(a)
Initial General Partner Capital Account....... 2.07(b)
Initial Cellco Limited Partner Capital Account 2.07(c)
Interim Balance Sheet Date.................... 7.06(a)
Judgments..................................... 7.10(b)
Lender........................................ 2.06
Network Consents.............................. 7.05(a)
Network Notices............................... 7.05(a)
New LP DC Plan................................ 13.05(b)
New LP Difference............................. 6.02(c)(i)
New LP's Environmental Reports................ 11.09
New LP Financing.............................. 2.06(a)
New LP Financing Term Sheet................... 2.06(b)
Notice Period................................. 15.03(b)
Other Consents................................ 7.05(b)
Permits....................................... 7.17(a)
Pledge Agreement.............................. 14.02(g)
Post-Closing Tax Period....................... 12.01
Pre-Closing Tax Period........................ 12.01
Preliminary Tax Certificate................... 12.05(a)
Price Corporation Cafeteria Plan.............. 13.05(c)
Price Corporation DC Plans.................... 13.05(b)
Price Corporations' Difference................ 6.02(c)(i)
Price Proxy Materials......................... 7.22(a)
Price SEC Documents........................... 7.20(a)
Price Trademarks and Tradenames............... 11.04(a)
Projected Capital Expenditures................ 9.01(e)
Property Taxes................................ 12.01
Proposals..................................... 2.06(b)
Real Property................................. 7.12(a)
Release....................................... 13.06
Relevant Party................................ 5.01
Required Notices.............................. 7.05(b)
Requisite Noteholder Consent.................. 2.04(c)
Returns....................................... 12.02(a)(i)
Scheduled Contract............................ 7.09(b)
Secured Debt Defeasance....................... 2.05(b)
Secured Defeased Debt......................... 2.05(b)
Selected Financing............................ 2.06(b)
Senior Secured Notes Redemption............... 9.10(a)
Senior Subordinated Notes Offer............... 9.10(b)
SIU........................................... 7.17(d)
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Term Section
---- --------
Stockholders................ Preamble
Subordinated Debt Defeasance 2.04(d)
Supplemental Indenture...... 2.04(c)
Tax......................... 12.01
Tax Asset................... 12.01
Tax Loss.................... 12.01
Tax Opinion................. 12.02(j)
Tax Proceeding.............. 12.06(b)
Tax Reduction............... 12.01
Taxing Authority............ 12.01
Termination Fee............. 17.03(b)
Transfer Taxes.............. 12.04(c)
Unrestricted Person......... 9.07(a)(i)
U.S. Government Obligations. 2.04(d)
VCI......................... Preamble
Voting Agreement............ Preamble
VWI......................... Preamble
Warranty Breach............. 15.02(a)(i)
ARTICLE 2
CONTEMPLATED TRANSACTIONS
SECTION 2.1. Contemplated Transactions. Except as otherwise provided
herein, upon the terms and subject to the conditions of this Agreement, the
parties will cause the transactions set forth in Sections 2.02 through 2.07
below (the "Contemplated Transactions") to be completed. The Contemplated
Transactions shall occur substantially contemporaneously (except to the extent
provided otherwise herein) on the Closing Date.
SECTION 2.02. Contribution of Assets. At the Closing, (i) the Company will
consummate the Company Cash Contribution and the Company Asset Contribution, in
exchange for the ELP Interest, and (ii) Cellco will consummate, either directly
or indirectly through one or more of its Subsidiaries, the Cellco Cash
Contribution and the Cellco Asset Contribution, in exchange for the MGP
Interest and the Cellco LP Interest.
SECTION 2.03. Assumption of Liabilities. At the Closing, New LP will
(and Cellco will cause New LP to), as set forth in Sections 3.03 and 4.02 and
in partial consideration for the contribution of assets pursuant to Sections
2.02, 3.01 and 4.01, assume all Assumed Liabilities and undertake to pay,
satisfy and discharge when due in accordance with their terms all such Assumed
Liabilities.
SECTION 2.04. Senior Subordinated Notes. (a) Prior to the Closing Date,
New LP will (and Cellco will cause New LP to) commence the Senior Subordinated
Notes Offer as set forth in Section 9.10(b).
(b) At the Closing, upon the terms and subject to the conditions of the
Senior Subordinated Notes Offer and as set forth in Section 6.01(f), New LP
shall (and Cellco will cause New LP to) accept for payment and pay for all
Senior Subordinated Notes validly tendered and not withdrawn pursuant to the
Senior Subordinated Notes Offer, including the payment of all amounts necessary
to pay any premium in excess of principal and accrued interest to purchase the
Senior Subordinated Notes pursuant to the Senior Subordinated Notes Offer.
(c) At the Closing, if the Holders (as defined in the Senior Subordinated
Notes Indenture) of at least a majority in aggregate principal amount of the
Senior Subordinated Notes then outstanding have consented (the "Requisite
Noteholder Consent") to the waiver of the covenants in the Senior Subordinated
Notes Indenture which restrict the transactions contemplated hereby, the
Company shall, and shall cause the Trustee (as defined in the Senior
Subordinated Notes Indenture) to, execute a supplemental indenture (the
"Supplemental Indenture") eliminating such covenants.
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(d) At the Closing, if the Requisite Noteholder Consent has not been
obtained, the Company will effect a covenant defeasance (as defined in the
Senior Subordinated Notes Indenture) (the "Subordinated Debt Defeasance"), in
accordance with Article 8 of the Senior Subordinated Notes Indenture with
respect to all Senior Subordinated Notes (such Senior Subordinated Notes being
referred to as the "Defeased Subordinated Debt") that have not been tendered by
the holders thereof and accepted for purchase by New LP at the Closing pursuant
to the Senior Subordinated Notes Offer conducted pursuant to Section 9.01(b);
provided that New LP will (and Cellco will cause New LP to) deposit or cause to
be deposited at the Closing with a trustee (as specified in the Senior
Subordinated Notes Indenture) as trust funds in trust for the benefit of
holders of the Defeased Subordinated Debt, cash or U.S. Government Obligations
(as defined in the Senior Subordinated Notes Indenture) sufficint in amount to
enable the Company to effect the Subordinated Debt Defeasance and to pay all
reasonable costs and expenses in connection therewith (such costs and expenses
to be approved by New LP (such approval not to be unreasonably withheld)), and
the Subordinated Debt Defeasance shall be effected in such manner as New LP may
reasonably direct. The parties acknowledge that New LP hereby assumes and is
responsible for all payments in respect of the Defeased Subordinated Debt, and
the cash and U.S. Government Obligations shall be deemed to be owned by New LP.
In the event that the cash or U.S. Government Obligations or any payments
thereon are returned by the trustee, the Company shall promptly deliver such
obligations or payments to New LP.
SECTION 2.05. Senior Secured Notes. (a) Prior to the Closing Date, the
Company will give notice of the Senior Secured Notes Redemption to the trustee
under the Senior Secured Notes Indenture and each holder of the Senior Secured
Notes as set forth in Section 9.10(a).
(b) Immediately prior to Closing, the Company will effect a covenant
defeasance (as defined in the Senior Secured Notes Indenture) (the "Secured
Debt Defeasance") with respect to all of the outstanding Senior Secured Notes
(the "Secured Defeased Debt") in accordance with Article 8 of the Senior
Secured Notes Indenture; provided that New LP will (and Cellco will cause New
LP to) deposit or cause to be deposited at the Closing with a trustee (as
specified in the Senior Secured Notes Indenture) as trust funds in trust for
the benefit of the holders of the Secured Defeased Debt, cash or U.S.
Government Obligations (as defined in the Senior Secured Notes Indenture)
sufficient in amount to enable the Company to effect the Secured Debt
Defeasance and to pay all reasonable costs and expenses in connection therewith
(such costs and expenses to be approved by New LP (such approval not to be
unreasonably withheld)), and the Secured Debt Defeasance shall be effected in
such manner as New LP may reasonably direct. The parties acknowledge that New
LP hereby assumes and is responsible for all payments in respect of the Secured
Defeased Debt, and the cash and U.S. Government Obligations shall be deemed to
be owned by New LP. In the event that the cash or U.S. Government Obligations
or any payments thereon are returned by the trustee, the Company shall promptly
deliver such obligations or payments to New LP.
(c) On the day following the Closing Date, the Senior Secured Notes shall be
redeemed by the Company pursuant to the Senior Secured Notes Redemption.
SECTION 2.06. New LP Financing. (a) Immediately prior to the Closing, New
LP will, and Cellco will cause New LP to, obtain debt financing in an amount
equal to $350 million from such Person or Persons and on such terms and
conditions as are determined by New LP in accordance with the procedures set
forth in Section
2.06(b) (such Person or Persons, the "Lender"); provided that (i) the Lender
shall not be related to any partner of New LP within the meaning of Treasury
regulation Section 1.752-4(b)) (the "New LP Financing") and (ii) the New LP
Financing (A) shall be non-recourse to the partners of New LP and Persons
related to any such partners within the meaning of Treasury regulation Section
1.752-4(b), (B) shall not obligate New LP to repay such financing or any
portion thereof prior to five years after the Closing Date, and (3) shall not
include any penalty for pre-payment of such financing (or any portion thereof)
by New LP.
(b) In order to select the Lender, New LP shall prepare a term sheet (the
"New LP Financing Term Sheet") setting forth the principal terms of the New LP
Financing, which terms shall include, without limitation,
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those set forth in Section 2.06(a) (the "Section 2.06(a) Terms"). New LP will
present the New LP Financing Term Sheet to potential Lenders selected by New LP
(provided that such Lenders shall include, without limitation, Deutsche Bank
and UBS, and shall give each such potential Lender an opportunity to submit a
binding proposal setting forth the interest rate and other applicable fees and
expenses that it would charge to underwrite the New LP Financing on the terms
set forth in the New LP Financing Term Sheet. After receipt of the proposals
(the "Proposals"), New LP (i) shall determine in its reasonable judgment which,
if any, of the Proposals conform to the specifications set forth in the New LP
Financing Term Sheet (the "Conforming Proposals"), (ii) shall determine in its
reasonable judgment which of the Conforming Proposals or, if no Conforming
Proposals are received, which of the Proposals, offers financing at the lowest
overall cost (taking into account interest rate and all fees and expenses that
would be payable by New LP) to New LP (the "Base Line Financing") and (iii)
shall select, in its sole discretion, from among the Conforming Proposals, if
there are Conforming Proposals, or from among all of the Proposals, if there
are no Conforming Proposals, the Lender and the terms and conditions for the
New LP Financing (the "Selected Financing"); provided that the Selected
Financing shall in any event contain the Section 2.06(a) Terms. If the Selected
Financing offers, in the reasonable judgment of New LP, to provide financing at
a higher overall cost to New LP (taking into account interest rate and all fees
and expenses that would be payable by New LP) than the Base-Line Financing,
then (x) for the purposes of determining the "Rate Reduction Amount" pursuant
to the New LP Agreement, the annual rate of interest payable by New LP in
respect of the New LP Financing shall be deemed to be the rate of interest set
forth in the Base Line Financing and (y) the "Excess Financing Cost" hereunder
shall be deemed to be the fees and other costs and expenses (other than
interest) payable in respect of the Base Line Financing.
SECTION 2.07. Initial Capital Accounts. (a) Effective as of the Closing,
the amount of the capital account of the Company in New LP shall be $1,150
million minus (i) if the H.O. Agreement shall not have been amended prior to
the Closing in the manner provided in Section 11.06, $38 million, or (ii) if
the H.O. Agreement shall have been amended prior to Closing in the manner
provided in Section 11.06 and the amendment requires payment by New LP, at any
time after the Closing Date, of an H.O. Cancellation Fee, the amount of the net
present value of the H.O. Cancellation Fee assuming a discount rate of 9.7% per
annum (as so adjusted, the "Initial Company Capital Account").
(b) Effective as of the Closing, the amount of the capital account of the
MGP Interest Holder shall be at least $10 million (the "Initial General Partner
Capital Account").
(c) Effective as of the Closing, the amount of the capital account of the
Cellco LP Interest Holder shall be at least $1.4 billion (the "Initial Cellco
Limited Partner Capital Account").
ARTICLE 3
TRANSFER OF ASSETS AND LIABILITIES
SECTION 3.01. Asset Contribution. Except as otherwise provided herein,
upon the terms and subject to the conditions of this Agreement, at the Closing
the Company will contribute, convey, transfer, assign and deliver
("Contribute") or cause to be Contributed to New LP, free and clear of all
Liens, other than Company Permitted Liens, all of the Company's and its
Affiliates' right, title and interest in, to and under the assets, properties
and business, of every kind and description (other than the Company Excluded
Assets), wherever located, real, personal or mixed, tangible or intangible,
owned, held, leased or used in the conduct of the Business by the Company or
any of its Affiliates as the same shall exist on the Closing Date, including
all assets shown on the Company Balance Sheet and not disposed of in the
ordinary course of business as permitted by this Agreement from the date hereof
until the Closing Date, and all assets of the Business thereafter acquired by
the Company or any of its Affiliates (such assets, properties and businesses
being the "Company Contributed Assets" and such contribution the "Company Asset
Contribution"), and including, without limitation, all right, title and
interest of the Company and any of its Affiliates in, to and under the
following items insofar as they are held, used, leased or operated in
connection with the Business:
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(a) all real property and leases of, and other interests in, real
property used or held for use in the conduct of the Business (including,
without limitation, all Network Sites that constitute real property), in
each case together with all buildings, fixtures, and improvements erected
thereon, including without limitation all towers, transmission lines,
antennas and equipment shelters and the other items listed on Schedule
7.12(a);
(b) all water lines, rights of way, uses, licenses, easements,
hereditaments, tenements and appurtenances relating to or used, directly or
indirectly, in the conduct of the Business;
(c) all personal property and interests therein, including any Network
Sites that constitute personal property, machinery, equipment, furniture,
office equipment, cellular systems, cellular switches, cell site equipment,
microwave equipment and other communications equipment, test equipment,
tools, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property, including without limitation the items listed on Schedule
7.12(b);
(d) all raw materials, work-in-process, finished goods, supplies and
other inventories (including cellular phones, pagers, accessories and spare
parts);
(e) all rights under all contracts, agreements, leases, licenses,
franchises, commitments, sales and purchase orders and other instruments,
whether reduced to writing or in oral form (each, a "Contract"), including
without limitation all subscriber contracts and other contracts to provide
services to customers in the Company Cellular Telephone System Areas, all
Contracts relating to the Network Sites, orders received which have not been
filled, roaming agreements, interconnection agreements, rights to use and
networking agreements and the other items listed on Schedule 7.09, but
excluding the Excluded Contracts (collectively, the "Contributed Contracts");
(f) all accounts, notes and other receivables whether billed or unbilled
(including all proceeds of such receivables), including all other negotiable
instruments or other instruments and chattel paper and other evidences of
indebtedness and rights to receive payment of, or otherwise relating to, the
Business;
(g) all security and other deposits, advance payments, deferred charges,
reserves and prepaid expenses, including but not limited to ad valorem
taxes, leases and rentals;
(h) all of the Price Corporations' or any of their Affiliates', rights,
claims, credits, causes of action or rights of set-off against third parties
relating to the Business or the Company Contributed Assets, including,
without limitation, unliquidated rights under manufacturers' and vendors'
warranties;
(i) all Licensed Intellectual Property Rights and Owned Intellectual
Property Rights and including without limitation the items listed on
Schedule 7.15;
(j) all transferable licenses, permits, certificates of occupancy,
registrations, certificates of public convenience and necessity, approvals,
operating rights or other governmental authorizations affecting, or relating
in anyway to, the Business and all applications therefor, together with any
renewals, extensions or modifications thereof and additions thereto,
including without limitation the FCC Authorizations and the other items
listed on Schedule 7.17(a);
(k) all books, records, files and papers, whether in hard copy or
computer format, used in the Business, including, without limitation,
engineering information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present and former suppliers,
lists of present and former customers, personnel and employment records, and
any information relating to any Tax imposed on the Company Contributed
Assets; and
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(l) all goodwill associated with the Business or the Company Contributed
Assets, together with the right to represent to third parties that New LP is
the successor to the Business.
SECTION 3.02. Company Excluded Assets. New LP expressly understands and
agrees that the following assets and properties of the Price Corporations or
their Affiliates (the "Company Excluded Assets") shall be excluded from the
Company Contributed Assets:
(a) the Excluded Contracts;
(b) the lease of the real property situated at 45 Rockefeller Plaza, New
York, New York, 10020;
(c) the lease of real property located at Saddlebrook; provided that New
LP shall sublease the premises from the lessee under such lease for a period
of one month from the Closing Date (provided such sublease is on the same
financial terms as in effect at the date hereof (as set forth on Schedule
7.12(a)));
(d) except to the extent included in the Company Cash Contribution, all
of the Company's cash and cash equivalents on hand and in banks and all
petty cash located at the operating facilities of the Business;
(e) the rights which accrue or will accrue to the Price Corporations
under this Agreement and the Ancillary Agreements;
(f) any Company Contributed Assets sold or otherwise disposed of in the
ordinary course of business;
(g) the Price Communications' Name Rights (except to the extent of the
rights granted to New LP and its Affiliates pursuant to Section 11.04);
(h) the Giant Bear Agreement; and
(i) any other assets of the Price Corporations or their Affiliates other
than the Company Contributed Assets.
SECTION 3.03. Company Assumed Liabilities. Upon the terms and subject to
the conditions of this Agreement, New LP agrees, effective at the time of the
Closing, to assume the following liabilities (the "Company Assumed
Liabilities"):
(a) all liabilities set forth on the Company Balance Sheet (or in the
notes to the Price Parent Third Quarter Balance Sheet insofar as they relate
to the Business) to the extent such liabilities are reflected in the
calculation of the Final Working Capital Amount; provided that any liability
or obligation with respect to Taxes shall be assumed only to the extent set
forth in clause (e) below;
(b) all liabilities and obligations of the Company and its Affiliates
arising under the Contributed Contracts disclosed on Schedule 7.09 or 7.12
or not required under the terms of Section 7.09 or 7.12 to be disclosed
thereon (other than liabilities or obligations attributable to any failure
by such Person to comply with the terms thereof); provided that any
liability or obligation with respect to Taxes shall be assumed only to the
extent provided in clause (e) below;
(c) all liabilities (other than liabilities arising under Contributed
Contracts) incurred in the ordinary course of business, and not in violation
of this Agreement, after the Balance Sheet Date and any such liabilities
incurred before the Balance Sheet Date which were not, under generally
accepted accounting principles ("GAAP") consistently applied, required to be
reflected in the Company Balance Sheet; provided that any liability or
obligation with respect to Taxes shall be assumed only to the extent
provided in clause (e) below;
(d) the Company Debt; and
(e) all liabilities for Property Taxes set forth on the Final Closing
Balance Sheet but only to the extent such liabilities are reflected in the
calculation of the Final Working Capital Amount.
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SECTION 3.04. Company Excluded Liabilities. Notwithstanding any provision
in this Agreement or any other writing to the contrary, New LP is assuming only
the Company Assumed Liabilities and is not assuming any other liability or
obligation of the Price Corporations or their Affiliates (or any predecessor of
any such Person or any prior owner of all or part of their businesses and
assets) of whatever nature, whether presently in existence or arising
hereafter. All such other liabilities and obligations shall be retained by and
remain obligations and liabilities of the Price Corporations or an Affiliate of
the Price Corporations (all such liabilities and obligations not being assumed
being herein referred to as the "Company Excluded Liabilities"), and,
notwithstanding anything to the contrary in this Agreement and without limiting
the generality of the foregoing, none of the following shall be Company Assumed
Liabilities for the purposes of this Agreement:
(a) except for liabilities or obligations with respect to Taxes assumed
under Section 3.03(e), any liability or obligation in respect of Taxes;
(b) any liabilities or obligations for indebtedness for borrowed money or
financial guarantees incurred by the Price Corporations or any of their
Affiliates or secured by or otherwise relating to the Company Contributed
Assets (other than the Company Debt);
(c) any liabilities or obligations of the Price Corporations or any of
their Affiliates relating to the Rollup Transaction (including, without
limitation, any action, suit, investigation or proceeding against or
affecting any Price Corporation before any court or arbitrator or any
Governmental Entity and relating to the Rollup Transaction), or to the
execution, delivery and consummation of this Agreement or to the
consummation of the transactions contemplated hereby, including, without
limitation, the Company Asset Contribution, the obtaining of all Required
Consents, the calling and holding of the meeting of the stockholders of
Price Parent and the preparation, filing and mailing of the Price Proxy
Materials (including as set forth in the letter agreement dated as of
November 14, 2001 between Davis Polk & Wardwell and Price Communications
Corporation) as contemplated by Section 9.08, and the fees payable to the
Price Corporations' financial advisors as contemplated by Section 7.18 or as
disclosed on Schedule 7.18;
(d) any liability, obligation or claim arising under the WARN Act, any
severance practice, plan or other arrangement of the Price Corporations or
their Affiliates in connection with any Excluded Employee and any claim
regarding eligibility or benefits under such practice, plan or arrangement;
provided that a portion of such liability, obligation or claim shall be
reimbursed or paid by New LP or Cellco in accordance with Sections 13.07,
13.08 or 11.05;
(e) any liability for the Escheat Payment if the relevant abandoned or
unclaimed property was first proffered by the Company or any of its
Affiliates at least one year prior to the Closing Date;
(f) any accrued bonus (other than a stay bonus) unpaid as of the Closing
Date in respect of the Transferred Employees (collectively, "Accrued Bonus
Liability");
(g) any liabilities or obligations relating to any other Company Excluded
Asset; and
(h) any liability for the call center technology upgrade referred to in
the letter between the Company and New LP dated as of the date hereof
relating to such upgrade (the "Call Center Letter").
ARTICLE 4
CELLCO ASSET CONTRIBUTION
SECTION 4.01. Cellco Asset Contribution. Except as otherwise provided
herein, upon the terms and subject to the conditions of this Agreement, at the
Closing, Cellco will Contribute, either directly or indirectly through one or
more of its Subsidiaries (the "Cellco Asset Contribution"), to New LP, free and
clear of all Liens (other than Cellco Permitted Liens), all of the right, title
and interest of Cellco and/or any such Subsidiary in, to and under the Cellco
Contributed Interest, the Cellco Contributed Agreement (to the extent relating
to the Cellco Contributed Interest), the Cellco Contributed Note and the Cellco
Contributed Licenses (collectively, the "Cellco Contributed Assets").
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SECTION 4.02. Cellco Assumed Liabilities. Upon the terms and subject to
the conditions of this Agreement, New LP agrees, effective at the time of the
Closing, to assume the Cellco Contributed License Liabilities and all
liabilities and obligations of Cellco and/or its Subsidiaries arising pursuant
to the terms of the Cellco Contributed Agreement (to the extent relating to the
Cellco Contributed Interest) (other than liabilities or obligations
attributable to any failure by Cellco and/or its Subsidiaries to comply with
the terms of the Cellco Contributed Licenses or the Cellco Contributed
Agreement) (the "Cellco Assumed Liabilities").
SECTION 4.03. Cellco Excluded Liabilities. Notwithstanding any provision
in this Agreement or any other writing to the contrary, New LP is assuming only
the Cellco Assumed Liabilities and is not assuming any other liability or
obligation of Cellco or its Subsidiaries (or any predecessor of any such Person
or any prior owner of all or part of the Cellco Contributed Assets) of whatever
nature, whether presently in existence or arising hereafter. All such other
liabilities and obligations shall be retained by and remain obligations and
liabilities of Cellco or its Subsidiaries (all such liabilities and obligations
not being assumed being herein referred to as the "Cellco Excluded
Liabilities").
ARTICLE 5
ASSIGNMENT OF CONTRACTS AND RIGHTS
SECTION 5.01. Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Contributed Asset or any claim or right or any
benefit arising thereunder or resulting therefrom if such assignment, without
the necessary consent of a third party, would constitute a breach or other
contravention of such Contributed Asset or in any way adversely affect the
rights of New LP, any of the Price Corporations or any of their Affiliates, or
Cellco or any of its Subsidiaries thereunder. Each of the Price Corporations
and its Affiliates (with respect to the Company Contributed Assets) and Cellco
and its Subsidiaries (with respect to the Cellco Contributed Assets) (in each
case, the "Relevant Party") will use their best efforts (but without any
payment of money by the Relevant Party or New LP) to obtain the consent of any
third party or Governmental Entity, if any, required in connection with the
assignment of any such Contributed Asset to New LP or any claim or right or any
benefit arising thereunder or resulting therefrom. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of the Relevant Party or New LP so that New LP
would not in fact receive all such rights, and, notwithstanding Section 14.02
(if applicable), New LP determines to consummate the Closing, then the Relevant
Party and New LP will cooperate in a mutually agreeable arrangement under which
New LP would obtain the benefits and assume the obligations thereunder (other
than any Excluded Liabilities) in accordance with this Agreement, including
sub-contracting, sub-licensing, or sub-leasing to New LP, or under which the
Relevant Party would enforce for the benefit of New LP, with New LP assuming
the Relevant Party's obligations, any and all rights of the Relevant Party
against a third party thereto. To the extent the benefits therefrom and
obligations thereunder have not been provided by alternate arrangements
satisfactory to New LP and the Relevant Party, the Relevant Party and New LP
shall negotiate, in good faith, and make an adjustment to the Initial Company
Capital Account or the Initial Cellco Limited Partner Capital Account, as the
case may be, in an amount necessary to reflect the fact that the assignment
contemplated by this Agreement was not made. If the Relevant Party shall
receive at any time any monies in respect of a Contributed Asset and New LP
shall not be in default with respect to any alternative arrangement relating to
such Contributed Asset, the Relevant Party will pay or cause its Affiliate to
pay promptly such monies to New LP. The obligations of the parties, pursuant to
this Section 5.01 shall continue for as long as necessary to provide to New LP
the benefit and cause New LP to assume the obligations under the Contributed
Assets not assigned and to negotiate and make any adjustment to the Initial
Company Capital Account or the Initial Cellco Limited Partner Account, as the
case may be. Notwithstanding anything to the contrary, the provisions of this
Section 5.01 shall not apply to the Cellco Contributed Assets in the event of
the failure to obtain any Cellco Credit Agreement Consent.
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ARTICLE 6
THE CLOSING
SECTION 6.01. The Closing. The closing (the "Closing") of the Asset
Contributions, the Cash Contributions, the assumption of the Assumed
Liabilities, the purchase of the Senior Subordinated Notes pursuant to the
Senior Subordinated Notes Offer, the defeasance of the Subordinated Defeased
Debt, if any, and the consummation of the Secured Debt Defeasance hereunder
shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York, as soon as possible, but in no event later than 10 days,
after satisfaction of the conditions set forth in Article 14, or at such other
time or place as New LP and the Price Corporations may agree; provided that the
Closing may not be delayed by any party if the delay is a result of a breach by
such party of its obligations hereunder. At the Closing:
(a) the Price Corporations and New LP shall enter into an Assignment and
Assumption Agreement reflecting the terms and conditions set forth in
Article 3, and the Price Corporations shall deliver to New LP such warranty
deeds, bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment as the parties and their
respective counsel shall deem reasonably necessary or appropriate to vest in
New LP all right, title and interest in, to and under the Company
Contributed Assets;
(b) Cellco (and/or any of its Subsidiaries that participate in the Cellco
Asset Contribution) and New LP shall enter into an Assignment and Assumption
Agreement reflecting the terms and conditions set forth in Article 4, and
Cellco (and/or such Subsidiaries) shall deliver to New LP such warranty
deeds, bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment as are reasonably
necessary or appropriate to vest in New LP all right, title and interest in,
to and under the Cellco Contributed Assets;
(c) The Company shall pay to New LP the Company Cash Contribution Amount
in immediately available funds by wire transfer to an account of New LP
designated by New LP, by notice to the Company, not later than two business
days prior to the Closing Date (the making of such payment, the "Company
Cash Contribution").
(d) Cellco shall pay to New LP, either directly or indirectly through one
or more of its Subsidiaries, the Cellco Cash Contribution Amount in
immediately available funds by wire transfer to an account of New LP
designated by New LP, by notice to Cellco, not later than two business days
prior to the Closing Date (the "Cellco Cash Contribution").
(e) The MGP Interest Holder, the Cellco LP Interest Holder and the
Company shall enter into the New LP Agreement;
(f) New LP shall accept for payment and pay for all Senior Subordinated
Notes validly tendered and not withdrawn pursuant to the Senior Subordinated
Notes Offer;
(g) the Supplemental Indenture, if any, shall be executed;
(h) New LP and the Company shall consummate the Subordinated Debt
Defeasance, if necessary; and
(i) New LP and the Company shall consummate the Secured Debt Defeasance.
SECTION 6.02. Final Closing Balance Sheet and Closing Working Capital
Amount. (a) As promptly as practicable, but no later than 90 days after the
Closing Date, New LP will cause to be prepared and delivered to the Price
Corporations the balance sheet of the Business immediately prior to the Closing
(the "Final Closing Balance Sheet") and a certificate based thereon setting
forth New LP's calculation of the Closing Working Capital Amount. For purposes
hereof, the "Closing Working Capital Amount" shall equal (i) current assets
(excluding current assets in respect of Taxes other than current assets for
prepaid Property Taxes that are allocated to the Post-Closing Tax Period under
Section 12.03(b)) as set forth on such Final Closing Balance Sheet minus (ii)
current liabilities (including, without limitation, any unpaid accrued salary,
vacation or other
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compensation or benefit (other than any Accrued Bonus Liability) as of the
Closing Date in respect of Transferred Employees, but excluding current
liabilities in respect of Taxes other than current liabilities for Property
Taxes that are allocated to the Pre-Closing Tax Period under Section 12.03(b))
as set forth on such Final Closing Balance Sheet. The Final Closing Balance
Sheet shall be prepared by New LP in good faith and shall (x) fairly present
the financial position of the Business as of the Closing Date in accordance
with GAAP applied on a basis consistent with those principles used in the
preparation of the Company Balance Sheet, (y) include line items substantially
consistent with those in the Company Balance Sheet, and (z) be prepared in
accordance with accounting policies and practices consistent with those used in
the preparation of the Company Balance Sheet; provided that (1) the Final
Closing Balance Sheet shall not include as an asset all or any portion of the
Cellco Cash Contribution Amount, the Company Cash Contribution Amount or the
proceeds of the New LP Financing, (2) the Final Closing Balance Sheet shall not
include as a liability all or any portion of the Company Debt (including any
accrued interest thereon), any costs or expenses arising in connection with the
Senior Secured Notes Redemption, the Senior Subordinated Notes Offer, the
Senior Secured Debt Defeasance or the Subordinated Debt Defeasance (including
any premium in excess of principal and accrued interest to purchase the Senior
Subordinated Notes pursuant to the Senior Subordinated Notes Offer or to redeem
the Senior Secured Notes pursuant to the Senior Secured Notes Redemption), any
cost or expenses (including any H.O. Cancellation Fee) relating to the
amendments and modifications to the H.O. Agreement contemplated by Section
11.06 or to the BCG Agreement, or any Excess Financing Cost or any liability
for the upgrade to the call center contemplated by the Call Center Letter, and
(3) the Final Closing Balance Sheet shall include, as a current liability, a
reserve against prepaid revenues determined in accordance with GAAP (the "GAAP
Accrual"). The parties hereto agree that the calculation set forth in Exhibit F
hereto reflects the intention of the parties with respect to the calculation of
the Final Working Capital Amount based on the hypothetical facts set forth in
such Exhibit F.
(b) If the Price Corporations disagree with New LP's calculation of the
Closing Working Capital Amount delivered pursuant to Section 6.02(a), the Price
Corporations may, within 20 calendar days after delivery of the documents
referred to in Section 6.02(a), deliver a notice to New LP disagreeing with
such calculation and setting forth the Price Corporations' calculation of such
amount. Any such notice of disagreement shall specify those items or amounts as
to which the Price Corporations disagree, and the Price Corporations shall be
deemed to have agreed with all other items and amounts contained in the Final
Closing Balance Sheet and the calculation of the Closing Working Capital Amount
delivered pursuant to Section 6.02(a).
(c) If a notice of disagreement shall be delivered pursuant to Section
6.02(b), New LP and the Price Corporations shall, during the 30 calendar days
following such delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of the Closing Working Capital Amount, which amount shall not be less than the
amount thereof shown in New LP's calculations delivered pursuant to Section
6.02(a) nor more than the amount thereof shown in the Price Corporations'
calculation delivered pursuant to Section 6.02(b). If, during such period, New
LP and the Price Corporations are unable to reach such agreement, they shall
promptly thereafter cause independent accountants of nationally recognized
standing reasonably satisfactory to New LP and the Price Corporations, promptly
to review this Agreement and the disputed items or amounts for the purpose of
calculating the Closing Working Capital Amount. In making such calculation,
such independent accountants shall consider only those items or amounts in the
Final Closing Balance Sheet or New LP's calculation of the Closing Working
Capital Amount as to which the Price Corporations have disagreed. Such
independent accountants shall deliver to New LP and the Price Corporations, as
promptly as practicable, a report setting forth such calculation. Such report
shall be final and binding upon New LP and the Price Corporations. The fees and
expenses of such independent accountants shall be borne (i) by Cellco if the
difference between the Closing Working Capital Amount as calculated by such
accountants and New LP's calculation thereof delivered pursuant to Section
6.02(a) (the "New LP Difference") exceeds the difference between the Closing
Working Capital Amount as calculated by such accountant and the Price
Corporations' calculation thereof delivered pursuant to Section 6.02(b) (the
"Price Corporations' Difference"); (ii) by the Price Corporations, if the Price
Corporations' Difference exceeds New LP's Difference; and (iii) otherwise
equally by the Price Corporations, on the one hand, and New LP, on the other
hand.
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(d) New LP and the Price Corporations agree that they will, and agree to
cause their respective Affiliates, independent accountants and (in the case of
the Price Corporations) the Company to, cooperate and assist in the preparation
of the Final Closing Balance Sheet and the calculation of the Closing Working
Capital Amount and in the conduct of the audits and reviews referred to in this
Section, including without limitation, the making available to the extent
necessary of books, records, work papers and personnel.
SECTION 6.03. Final Working Capital Amount. If the Final Working Capital
Amount is a positive number and is less than or equal to $5 million, New LP
shall promptly pay such amount to the Company in immediately available funds.
If the Final Working Capital Amount is a positive number and is greater than $5
million, New LP shall promptly pay $5 million to the Company in immediately
available funds and the Company Capital Account shall be increased by the
amount of the Final Working Capital Amount in excess of $5 million. If the
Final Working Capital Amount is a negative number, the Company Capital Account
shall be decreased by an amount equal to the Final Working Capital Amount.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE PRICE CORPORATIONS
Each of the Price Corporations represent and warrant, jointly and severally,
to Cellco and New LP as of the date hereof and as of the Closing Date that:
SECTION 7.01. Existence and Power. Each of the Price Corporations is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all corporate or partnership, as
applicable, powers and all necessary governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for such failures which would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect.
Each of the Price Corporations is duly qualified to do business as a foreign
corporation or foreign partnership, as the case may be, and is in good standing
in each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified will not have, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company does not have any Subsidiaries and does not own any
capital stock or other voting securities or ownership interests in any Person.
SECTION 7.02. Authorization. (a) The execution, delivery and performance
by each of the Price Corporations of this Agreement and each of the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby are within each of the Price Corporations'
corporate powers and, except for the required approval of Price Parent's
stockholders in connection with the transactions contemplated to occur on the
Closing Date pursuant to this Agreement and other than the VWI Exchange, have
been duly authorized by all necessary corporate action on the part of each of
the Price Corporations. The (i) affirmative vote of the holders of two-thirds
of the outstanding shares of the common stock, $0.01 par value, of Price Parent
and (ii) the approval of each of the Price Corporations other than Price
Parent, as the sole shareholder of another Price Corporation (all of which have
been obtained) are the only actions required by the stockholders of any of the
Price Corporations or any of their Affiliates in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements to
which it is a party (other than the VWI Exchange). This Agreement and each of
the Ancillary Agreements to which it is a party constitutes a valid and binding
agreement of each of the Price Corporations enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy laws and other similar laws affecting creditors' rights generally,
and except that the remedy of specific performance and injunctive relief and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) At a meeting duly called and held, Price Parent's Board of Directors has
(i) unanimously determined that this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby (other than the VWI Exchange)
are fair to and in the best interests of Price Parent's stockholders, (ii)
unanimously approved and adopted this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby
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(other than the VWI Exchange) and (iii) unanimously resolved (subject to
Section 9.09) to recommend approval and adoption of this Agreement and the
Ancillary Agreements by Price Parent's stockholders.
SECTION 7.03. Governmental Authorization. The execution, delivery and
performance by each of the Price Corporations of this Agreement and each of the
Ancillary Agreements to which it is a party and the consummation by each of the
Price Corporations of the transactions contemplated hereby and thereby require
no action by or in respect of, or filing with, any Governmental Entity,
domestic, foreign or supranational, other than (i) compliance with the
requirements of the HSR Act, (ii) the filing with the SEC of the Price Proxy
Materials in definitive form, (iii) the filing and declaration by the SEC of
the effectiveness of the VCI Registration Statement and the VWI Registration
Statement (if any), (iv) the filing of any certificates of amendment of limited
partnership and any other documents required to be filed with the Secretary of
the State of Delaware, (v) compliance with any other applicable securities
laws, (vi) compliance with the applicable requirements of the Communications
Act, and (vii) such actions or filings the absence of which would not,
individually or in the aggregate, prevent any Price Corporation from performing
its respective obligations under this Agreement or any Ancillary Document to
which it is a party in any material respect, and will not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 7.04. Noncontravention. The execution, delivery and performance by
each of the Price Corporations of this Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) violate
the certificate of incorporation, bylaws or other organizational documents of
any of the Price Corporations, (ii) assuming compliance with the matters
referred to in Section 7.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree applicable to any of the Price
Corporations or by which any of their respective properties or assets are
bound, (iii) assuming that the consents referred to in Schedule 7.05(a) are
obtained and remain in full force and effect, constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of New LP or to a loss of any benefit relating to the
Business to which any of the Price Corporations is entitled under any provision
of any agreement or other instrument binding upon any of the Price Corporations
or by which any of the Company Contributed Assets is or may be bound or (iv)
result in the creation or imposition of any Lien on any Company Contributed
Asset, except in the case of clauses (ii), (iii) and (iv) above, such
violations or defaults that will not have, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 7.05. Required and Other Consents. (a) Schedule 7.05(a) sets forth
each Contract binding upon any of the Price Corporations or any of their
Affiliates that is material to the operation or utilization of any Network Site
(or any interest of any of the Price Corporations or any such Affiliate
therein) and that requires a consent or other action by, or prior notice to,
any Person as a result of the execution, delivery and performance by any of the
Price Corporations of this Agreement or any Ancillary Agreement to which any of
such Persons is a party, and identifies the consent or action required by such
Person (such consents or other actions, the "Network Consents", and such prior
notices, the "Network Notices").
(b) Schedule 7.05(b) sets forth each Contract or Permit (other than
Contracts subject to Section 7.05(a)) binding upon or providing benefits to any
of the Price Corporations or any of their Affiliates that requires a consent or
other action by, or prior notice to, any Person as a result of the execution,
delivery and performance by any of the Price Corporations of this Agreement or
any Ancillary Agreement to which any of such Persons is a party and identifies
the consent or action required by such Person, except such consents, actions or
notices as will not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect if not received or
taken by the Closing Date (such consents or other actions, the "Other Consents"
and such prior notices, together with the Network Notices, the "Required
Notices").
SECTION 7.06. Financial Statements. (a) The unaudited balance sheets as of
December 31, of each of the three most recent fiscal years ended prior to the
Closing Date and the related unaudited statements of income for each such years
and the unaudited interim balance sheet as of the close of the most recent
fiscal quarter ended prior to the Closing Date (the "Interim Balance Sheet
Date") and the related unaudited interim statements of income for the year to
date period ended on the Interim Balance Sheet Date for the Business fairly
present, in conformity with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto), the
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financial position of the Business as of the dates thereof and its results of
operations for the periods then ended (subject to normal year-end adjustments
and the absence of footnotes, in the case of any unaudited interim financial
statements).
(b) The Company Balance Sheet fairly presents in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes to the
Price Parent Third Quarter Balance Sheet), the consolidated financial position
of the Company as of September 30, 2001 (subject to normal year-end adjustments
and the absence of footnotes complying with GAAP, in the case of any unaudited
interim financial statements).
SECTION 7.07. Absence of Certain Changes. Since the Balance Sheet Date,
except as otherwise contemplated by this Agreement, the Business has been
conducted in the ordinary course consistent with past practices and there has
not been:
(a) from the Balance Sheet Date to the date of this Agreement, any event,
occurrence, development or state of circumstances or facts which,
individually or in the aggregate, has had, will have or would reasonably be
expected to have a Material Adverse Effect;
(b) any incurrence, assumption or guarantee by any of the Price
Corporations or any of their Affiliates of any indebtedness for borrowed
money or any other long-term liabilities with respect to the Business;
(c) any creation or other incurrence of any Lien on any Company
Contributed Asset other than (i) in the ordinary course of business
consistent with past practices or (ii) Company Permitted Liens;
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Company Contributed
Asset which, individually or in the aggregate, has had, will have or would
reasonably be expected to have a Material Adverse Effect;
(e) any transaction or commitment made, or any contract or agreement
entered into, by any of the Price Corporations or any of their Affiliates
relating to the Business or any Company Contributed Asset (including the
acquisition or disposition of any assets) or any relinquishment by any of
the Price Corporations or any of their Affiliates of any contract or other
right, in any case described in this paragraph (e), material to the
Business, other than transactions, commitments, contracts, agreements or
relinquishments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(f) any change in any method of accounting or accounting practice by the
Price Corporations with respect to the Business except for any such change
after the date hereof required by reason of a concurrent change in GAAP;
(g) except as contemplated by Section 13.07, any (i) employment, deferred
compensation, severance, retirement or other similar agreement entered into
with any officer of the Business (or any amendment to any such existing
agreement), (ii) grant of any severance or termination pay to any officer of
the Business or (iii) change in compensation or other benefits payable to
any officer of the Business pursuant to any severance or retirement plans or
policies thereof, other than, in the case of this clause (iii), in the
ordinary course of business consistent with past practice;
(h) except as contemplated by Section 13.07, any (i) employment, deferred
compensation, severance, retirement or other similar agreement entered into
with any Business Employee other than an officer of the Business (or any
amendment to any such existing agreement), (ii) grant of any severance or
termination pay to any Business Employee other than an officer of the
Business or (iii) change in compensation or other benefits payable to any
Business Employee other than an officer of the Business, except (in the case
of clauses (i), (ii) and (iii) above) pursuant to any severance or
retirement plans or policies thereof or in the ordinary course of business
consistent with past practice;
(i) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any Business Employees, who were not subject to a collective
bargaining agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to the
Business Employees; or
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(j) other than the Projected Capital Expenditures, any capital
expenditure, or commitment for a capital expenditure, for additions or
improvements to property, plant and equipment in each case in connection
with the Business.
SECTION 7.08. No Undisclosed Material Liabilities. There are no
liabilities of the Business of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and, to the
knowledge of the Price Corporations there is no existing condition, situation
or set of circumstances which will, or could reasonably be expected to, result
in such a liability, other than:
(a) current liabilities provided for in the Company Balance Sheet (or in
the notes to the Price Parent Third Quarter Balance Sheet insofar as they
relate to the Business);
(b) liabilities incurred in the ordinary course of business since the
Balance Sheet Date or prior to the Balance Sheet Date if such liabilities
are not of a type that would have been required under GAAP consistently
applied, to be set forth in the Company Balance Sheet (including the notes
thereto);
(c) liabilities disclosed on Schedule 7.08 and 7.19(a); and
(d) other undisclosed liabilities which, individually and in the
aggregate, are not material to the Business or which constitute current
liabilities that will appear on the Final Closing Balance Sheet.
SECTION 7.09. Material Contracts. (a) Except as disclosed in Schedule
7.05(b), 7.09(a), 7.12(a) or 7.15, or otherwise contemplated or permitted by
this Agreement, neither any of the Price Corporations nor the Business, is a
party to or bound by any of the following which constitute a Contract:
(i) any (x) lease relating to any Network Site or any other real property
or (y) other lease providing for annual rentals of $250,000 or more;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (A) annual payments
by the Business of $250,000 or more or (B) aggregate payments by the
Business of $500,000 or more over the term of the agreement;
(iii) any sales, distribution or other similar agreement relating to the
sale by the Business of materials, supplies, goods, services, equipment or
other assets that provides for either (A) annual payments to the Business of
$250,000 or more, (B) aggregate payments to the Business of $500,000 or more
over the term of the agreement;
(iv) any partnership, joint venture, stockholder or other similar
agreement or arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money, the
deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset) or other long-term liabilities,
except any such agreement with respect to the Company Debt, including the
Secured Defeased Debt and the Subordinated Defeased Debt;
(vii) any option, license, franchise or similar agreement;
(viii) any agency, dealer, outside sales representative, marketing or
other similar agreement other than any such agreement terminable on no more
than 60 days' notice without any penalty or further obligation on the part
of the Business;
(ix) any agreement that limits the freedom of the Business to compete in
any line of business or with any Person or in any area or to own, operate,
sell, transfer, pledge or otherwise dispose of or encumber any Company
Contributed Asset or which would so limit the freedom of New LP or any of
its Affiliates after the Closing Date or that grants to any Person any
exclusive rights with respect to the Business or any portion thereof;
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(x) any agreement with or for the benefit of any Affiliate of any of the
Price Corporations;
(xi) any agreement, contract or commitment for any charitable or
political contribution;
(xii) any license, franchise, distributorship or other agreement which
relates in whole or in part to any Intellectual Property Rights of or used
by any of the Price Corporations or any of their Affiliates in the conduct
of operating the cellular telecommunications systems in the Company Cellular
Telephone System Areas;
(xiii) any interconnection, toll, long distance or air to ground service
agreement relating to the operation of the Business;
(xiv) any agreement or commitment for any capital expenditure or
leasehold improvement relating to the Business in excess of $250,000
annually, or providing for aggregate payments of $500,000;
(xv) any agreement granting power of attorney to any other Person;
(xvi) any confidentiality or non-disclosure agreement pursuant to which
any of the Price Corporations have agreed to keep confidential information
obtained from any other Person or which is related to the Company
Contributed Assets, other than the No-Shop Agreement;
(xvii) any reseller agreement;
(xviii) any roaming agreement (x) not terminable upon 60 days prior
notice without penalty or other obligation on the part of the Business or
(y) with respect to which the Business is obligated to direct roaming
traffic to a particular carrier in preference to another;
(xix) any agreement relating to wireless data not terminable upon 30 days
prior notice without penalty or other obligation on the part of the
Business; or
(xx) any other agreement, commitment, arrangement, understanding or plan
not made in the ordinary course of business.
(b) Each Contract disclosed in any Schedule to this Agreement or required to
be disclosed pursuant to this Agreement (each a "Scheduled Contract") is a
valid and binding agreement of the Company, or its Affiliate which is a party
thereto, and is in full force and effect except to the extent they have
previously expired in accordance with their terms, and none of the Price
Corporations or any of their Affiliates or, to the knowledge of the Price
Corporations, any other party thereto is in default or breach in any material
respect under the terms of any Scheduled Contract, and, to the knowledge of the
Price Corporations, no event or circumstance has occurred that, with notice or
lapse of time or both, would constitute such a breach or default, provided that
the representations and warranties in this sentence above with respect to said
other parties are made only as of the date of this Agreement. True and complete
copies of each Scheduled Contract that is in writing and an accurate summary
written of each oral Scheduled Contract have been delivered to New LP. Except
as set forth on Schedule 7.09(b) as of the date or this Agreement, none of the
Price Corporations, has knowledge that any counterparty to any Scheduled
Contract intends to cancel or otherwise adversely modify its relationship with
the Business or to decrease significantly or limit its purchases, services,
supplies or materials from or to the Business as a result of the Contemplated
Transactions or otherwise not in the ordinary course of business, except such
cancellations, modifications, decreases and limits as will not have, and would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(c) Set forth on Schedule 7.09(c) is a true and complete copy of all forms
of Contract adopted since October 1998 and in effect as of the date of this
Agreement that govern the Business' provision of cellular service to its
current customers, together with a statement of the period during which each
such form was used by the Business to add new customers. Except as disclosed on
Schedule 7.09(c), all Contracts entered into by any Price Corporation or
otherwise relating to the Business based on any such form (including those not
required to be listed on any Schedule to this Agreement because of the amount
of such Contract) are valid, in full force and effect, binding upon the Price
Corporations (or the Affiliate thereof which is a party thereto) and, to the
knowledge of the Price Corporations, the other parties thereto, except to the
extent they have previously expired in accordance with their terms. Except for
late payments by customers that are accurately reflected in the books of
account of the Business, none of the Price Corporations (or the Affiliate
thereof which is a party thereto), nor
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to the knowledge of the Price Corporations, any other party thereto (as of the
date of this Agreement), is in default under any of them, nor, to the knowledge
of the Price Corporations, does any condition exist as of the date of this
Agreement that, with notice or lapse of time or both, would constitute such a
default, except for defaults which will not have, and would not reasonably be
expected to have individually or in the aggregate, a Material Adverse Effect.
Each Contract constituting a customer activation agreement relating to the
Business entered into by the Price Corporations since January 1, 1998 is in one
of the forms set forth in Schedule 7.09(c).
(d) All of the Licensing Agreements between the Cellular One Group and the
Company have five year terms and provide for at least one additional five year
renewal term (subject to the terms of such agreements) commencing on the
effective date of each such agreement, and have assignment and termination
provisions (including without limitation termination notice and penalty
provisions) substantially identical to those contained in the License Agreement
between the Cellular One Group and Price Communications Wireless II, Inc. dated
as of April 18, 1999.
SECTION 7.10. Litigation. (a) Except as set forth on Schedule 7.10(a), as
of the date of this Agreement, there is no action, suit, investigation,
proceeding, claim, charge or audit (each, an "Action") (and there is no event,
occurrence or state of facts or circumstances that will be, or would reasonably
be expected to be a basis therefore) pending against, or to the knowledge of
any of the Price Corporations, threatened against or affecting, the Business or
any Company Contributed Asset before any court or arbitrator or any
Governmental Entity which, (i) individually, if determined or resolved
adversely in accordance with the plaintiff's demands, will result in, or could
reasonably be expected to result in, a liability to the Business of $100,000 or
more, or collectively, if so determined or resolved, will result in, or could
reasonably be expected to result in a liability to the Business of, or
otherwise adversely affect the Business by, $1,000,000 or more, (ii) which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay
the transactions contemplated by this Agreement and the Ancillary Agreements,
or (iii) would otherwise materially adversely affect the Business.
(b) As of the date of this Agreement, Schedule 7.10(b) lists all civil
fines, penalties, and any orders, writs, judgments, injunctions, decrees,
determinations, or other awards of any courts or other Governmental Entities
(collectively "Judgments"), which have been imposed or levied against any of
the Price Corporations or any of their Affiliates relating in any way, in whole
or in part, to the Business which remain unsatisfied and all such material
Judgments imposed or levied since January 1, 1998, which have been satisfied,
in each case, together with all material settlements by any of the Price
Corporations or any of their Affiliates of any legal claims actually brought or
threatened against any of the Price Corporations or any of their Affiliates, or
to which any of the Price Corporations or any of their Affiliates or any of the
Company Contributed Assets has or may become subject.
SECTION 7.11. Compliance with Laws and Court Orders. (a) None of the Price
Corporations or any of their Affiliates is in violation of, and to the
knowledge of the Price Corporations, is not under investigation with respect to
and has not been threatened to be charged with or given notice of any violation
of, any law, rule, regulation, judgment, injunction, order or decree applicable
to the Company Contributed Assets or the conduct of the Business, except for
such violations which will not have, and would not reasonably be expected to
have, individually and in the aggregate, a Material Adverse Effect.
(b) Each handset sold by any of the Price Corporations in connection with
the Business is, and at all times up to and including the sale thereof, has
been in compliance with all applicable FCC laws, rules and regulations.
SECTION 7.12. Properties. (a) Schedule 7.12(a) correctly describes as of
the date of this Agreement all real property used or held for use in the
Business included in the Company Contributed Assets (the "Real Property"),
which the Price Corporations or an Affiliate thereof owns, leases, operates or
subleases and any Liens thereon, specifying in the case of leases or subleases,
the name of the lessor or sublessor, the lease term (including renewal terms)
and basic annual rent.
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(b) Schedule 7.12(b) correctly describes, as of September 30, 2001, all
material personal property used or held for use in the Business included in the
Company Contributed Assets (other than inventory held for sale in the ordinary
course of business), including, without limitation, machinery, equipment,
furniture, cellular systems, cellular switches, cell site equipment, mobile
switching offices, microwave equipment and other communications equipment,
which the Price Corporations or an Affiliate thereof owns, leases or subleases,
and any material Liens thereon (except any Company Permitted Liens), specifying
in the case of leases or subleases, the name of the lessor or sublessor, the
lease term and basic annual rent.
(c) The Price Corporations or an Affiliate thereof have good and marketable,
indefeasible, fee simple title to, or in the case of leased Real Property or
personal property have valid leasehold interests in, all of the Network Sites
and in all other Company Contributed Assets (whether real, personal, tangible
or intangible) reflected on the Company Balance Sheet or acquired after the
Balance Sheet Date, except for properties and assets sold since the Balance
Sheet Date in the ordinary course of business consistent with past practices as
permitted by Section 9.01 and except where, with respect to Company Contributed
Assets, other than Network Sites, the failure to have such good title or valid
leasehold interests will not have, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. No Company
Contributed Asset is subject to any Lien, except:
(i) Liens disclosed on the Company Balance Sheet or in the notes to the
Price Parent Third Quarter Balance Sheet insofar as they relate to the
Business;
(ii) Liens for taxes not yet due; or
(iii) Liens which do not materially detract from the value of such
Contributed Asset, or materially interfere with any present or intended use
of such Company Contributed Asset (clauses (i)--(iii) of this Section
7.12(c) are, collectively, the "Company Permitted Liens").
(d) There are no developments affecting any of the Company Contributed
Assets pending or, to the knowledge of the Price Corporations threatened, which
will or would reasonably be expected to, materially detract from the value,
materially interfere with any present or intended use or materially adversely
affect the marketability of such Company Contributed Assets (other than arising
out of business conditions or other matters generally affecting the wireless
telecommunications industry).
(e) All leases of Real Property or personal property are in good standing
and are valid, binding and enforceable in accordance with their respective
terms and none of the Price Corporations or their Affiliates or, to the
knowledge, of the Price Corporations, any other party thereto is in default or
breach in any material respect under the terms of such Lease and, to the
knowledge of the Price Corporations, no event has occurred which with notice or
lapse of time or both would constitute a default thereunder.
(f) To the knowledge of the Price Corporations, the plants, buildings,
structures and equipment included in the Company Contributed Assets have no
material defects, are in good operating condition and repair, ordinary wear and
tear excepted, and are adequate and suitable for their present uses.
(g) The plants, buildings and structures included in the Company Contributed
Assets currently have sufficient access to public roads and to all utilities,
including water supply, storm and sanitary sewer facilities, telephone, gas and
electrical connections, fire protection, drainage and other utilities used in
the operation of the Business, in each case as is necessary for the conduct of
the Business as it has heretofore been conducted, except for such failures
which will not have and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(h) The Real Property, and its continued use, occupancy and operation as
currently used, occupied and operated, does not constitute a nonconforming use
under all applicable building, zoning, subdivision and other land use and
similar laws, regulations and ordinances, except for such failures which will
not have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
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(i) None of the Company Contributed Assets is an equity interest in a Person.
SECTION 7.13. Sufficiency of and Title to the Company Contributed
Assets. (a) The Company Contributed Assets constitute all of the property and
assets used or held for use in the Business and are adequate to conduct the
Business as currently conducted.
(b) Upon consummation of the transactions contemplated hereby, New LP will
have acquired good and marketable title in and to, or a valid leasehold
interest in, each of the Company Contributed Assets, free and clear of all
Liens, except for Company Permitted Liens.
(c) As of the date hereof, all of the assets and liabilities used or held
for use in the Business are, and immediately before the Closing all of such
assets and liabilities will be, held by the Company.
SECTION 7.14. Subscriber Accounts. Schedule 7.14 hereto sets forth the
following numerical breakdown, as of September 30, 2001 (or as of the date
otherwise indicated therein), regarding the Business' subscriber accounts:
total number; longevity of subscribers, pre-pay versus post-paid, broken out by
calendar quarter of initial activation; and types of accounts, including
active, suspended, employee, demo phone, loaner phone or rental phone.
SECTION 7.15. Intellectual Property. (a) Schedule 7.15 contains as of the
date of this Agreement a true and complete list of all material Owned
Intellectual Property Rights and Licensed Intellectual Property Rights.
(b) The Licensed Intellectual Property Rights and the Owned Intellectual
Property Rights together constitute all the Intellectual Property Rights used
or held for use in the Business and are adequate to conduct the Business as
currently conducted. The Company Contributed Assets include working copies of
all software and firmware as are necessary for or otherwise used in the current
conduct of the Business, together with copies of all related manuals and other
documentation. Assuming all Required Consents are obtained in connection with
Licensed Intellectual Property Rights, the consummation of the transactions
contemplated by this Agreement will not alter, impair or extinguish any Owned
Intellectual Property Rights or Licensed Intellectual Property Rights.
(c) None of the Price Corporations nor any Affiliate of any of the Price
Corporations has infringed, misappropriated or otherwise violated any
Intellectual Property Right of any third person. There is no claim, action,
suit, investigation or proceeding pending against, or, to the knowledge of the
Price Corporations, threatened against or affecting, the Business or any
present or former Business Employee or director of the Price Corporations
alleging that the use of the Owned Intellectual Property Rights or the Licensed
Intellectual Property Rights or the conduct of the Business as presently
conducted conflicts with, misappropriates, infringes or otherwise violates any
Intellectual Property Right of any third party.
(d) None of the Owned Intellectual Property Rights and Licensed Intellectual
Property Rights material to the operation of the Business is subject to any
outstanding material judgment, injunction, order, decree or agreement
restricting the use thereof with respect to the Business or restricting the
licensing thereof by the Price Corporations or any Affiliate thereof to any
Person.
(e) The Price Corporations or an Affiliate of the Price Corporations holds
all right, title and interest in and to all Owned Intellectual Property Rights
and all of the licenses under the Licensed Intellectual Property Rights, free
and clear of any Lien (other than Company Permitted Liens). The Price
Corporations or an Affiliate of the Price Corporations has taken all actions
reasonably necessary to maintain and protect the Owned Intellectual Property
Rights and their rights in the Licensed Intellectual Property Rights, including
payment of applicable maintenance fees and filing of applicable statements of
use except for such failures which will not have, or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
All licenses under the Licensed Intellectual Property Rights are fully-paid
(other than upgrade costs and purchaser maintenance costs), which the Price
Corporations or their Affiliates have the right to assign to New LP in
connection with the transactions contemplated hereby.
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(f) To the knowledge of the Price Corporations, no Person has infringed,
misappropriated or otherwise violated any Owned Intellectual Property Right or
Licensed Intellectual Property Right. The Price Corporations or an Affiliate of
the Price Corporations has taken reasonable steps in accordance with normal
industry practice to maintain the confidentiality of all confidential
Intellectual Property Rights and to adequately protect all Owned Intellectual
Property Rights by trade secret processes, confidentiality agreements and by
the case of appropriate statutory notices and other proprietary markings.
SECTION 7.16. Insurance Coverage. The Price Corporations have furnished to
New LP a list of, and true and complete copies of, all insurance policies and
fidelity bonds relating to the Company Contributed Assets, the business and
operations of the Business and its Business Employees. As of the date hereof,
there is no material claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds or in respect of which such underwriters have reserved
their rights. All premiums payable under all such policies and bonds have been
timely paid and the Business has otherwise complied in all material respects
with the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially
similar insurance coverage) have been in effect since January 1, 1998 and
remain in full force and effect, except for such failures which, individually
or in the aggregate, would not have or reasonably be expected to have, a
Material Adverse Effect. Such policies and bonds are of the type and in amounts
customarily carried by Persons conducting businesses similar to the Business.
As of the date of this Agreement, none of the Price Corporations knows of any
threatened termination of, premium increase with respect to, or material
alteration of coverage under, any of such policies or bonds. Except as
disclosed in Schedule 7.16, after the Closing the Price Corporations shall
continue to have coverage under such policies and bonds with respect to events
occurring prior to the Closing and New LP will be entitled to the benefit of
such policies.
SECTION 7.17. Licenses and Permits. (a) Schedule 7.17(a) correctly
describes each FCC Authorization, license, franchise, permit, certificate,
approval or other similar authorization affecting, or relating in any way to,
the Business (the "Permits") as of the date of this Agreement together with the
name of the Governmental Entity issuing such Permit. Except as set forth on
Schedule 7.17(b), (i) the Permits are valid and in full force and effect, (ii)
none of the Price Corporations nor any of their Affiliates is in default, and
no event has occurred or condition exists that with notice or lapse of time or
both would constitute a default (including, without limitation, grounds for
revocation or modification of any of the FCC Authorizations), under the Permits
and (iii) none of the Permits will, assuming the related Required Consents have
been obtained prior to the Closing Date, be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions contemplated
hereby. Upon consummation of such transactions, New LP will, assuming the
related Required Consents have been obtained prior to the Closing Date, have
all of the right, title and interest in all the Permits.
(b) Except as set forth in Schedule 7.17(b), the Permits are the only
licenses, franchises, permits, certificates, approvals or other similar
authorizations which are necessary for the Price Corporations or their
Affiliates to conduct the Business in the manner heretofore conducted. Each of
the Permits is exclusively held by the Price Corporations or their Affiliates,
is free and clear of any legal disqualifications, conditions or other
restrictions (other than those routinely imposed in conjunction with such
Permits) and is free and clear of all Liens except for Company Permitted Liens.
To the knowledge of the Price Corporations, each of the Permits is in
compliance with all laws, rules, regulations, orders and decrees except for
such failures which will not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as
disclosed in Schedule 7.17(b), there are no existing applications, petitions to
deny or complaints or proceedings pending before the FCC or any other
Governmental Entity relating to the Permits or the Business (other than
proceedings affecting the cellular telephone industry generally). Except as
otherwise governed by laws, ordinances or governmental rules or regulations,
all of the Permits are renewable by their terms or in the ordinary course of
the Business without the need to comply with any special qualification
procedures or to pay any amounts other than routine filing and regulatory fees.
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(c) No Person other than the Price Corporations or any of their Affiliates
has any interest in, or right to, contracts to provide telecommunications
services to any customers of the Business except pursuant to the Business'
roaming agreements.
(d) Schedule 7.17(d) sets forth the date on which the Price Corporations or
an Affiliate thereof or their predecessors filed a System Information Update
("SIU") with the FCC for each Company Cellular Telephone System Area. The SIU
accurately identifies and describes the predicted contours, cell sites, and the
Cellular Geographic Service Area boundary for such Company Cellular Telephone
System Area as of that date, and the information provided therein remains
accurate and complete. A true and complete copy of each SIU has been delivered
to the New LP.
(e) The Company has received all necessary authorizations from the Federal
Aviation Administration ("FAA") for all existing towers that are part of the
cellular systems operated by the Business and for any facilities the
construction of which have been approved by the FCC or of which applications or
notifications have been filed for such approval.
(f) Schedule 7.17(f) sets forth each application and notification that the
Company has pending before the FCC and sets forth the expiration date for each
of the FCC Authorizations. The Company has provided a copy to New LP of each of
the FCC Authorizations and the applications and notifications listed in
Schedule 7.17(f), except where the FCC has not issued a written microwave
authorization.
(g) All fees due and payable to the FCC by the Business or the Company have
been paid.
(h) Each of the facilities authorized by the FCC Authorizations is in
compliance with the FCC's regulations pertaining to radio frequency radiation.
SECTION 7.18. Financial Advisors' Fees. Except for UBS Warburg LLC,
Deutsche Banc Alex. Brown and Dresdner Kleinwort Wasserstein, whose fees will
be paid by the Price Corporations and except as set forth in Schedule 7.18,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Price Corporations or
any of their Affiliates who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 7.19. Environmental Compliance.
(a) Except for such matters identified in the documents listed on Schedule
7.19(a) which constitute a "recognized environmental condition" or which would
be reasonably expected to result in Environmental Liabilities:
(i) in connection with or relating to the Company Contributed Assets,
Business, Real Property or the Company, no notice, notification, demand,
request for information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed any of which remain
outstanding and unresolved and which will have or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect and no investigation, action, claim, suit, proceeding or review is
pending or, to any of the Price Corporations' knowledge, threatened by any
Governmental Entity or other Person which remain outstanding and unresolved
and which will have or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, and which relate to or arise
out of any Environmental Law.
(ii) there are no Environmental Liabilities arising in connection with or
in any way relating to the Company Contributed Assets, Business, Real
Property or the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise arising under or relating to
any Environmental Law that will have or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, to
any of the Price Corporations' knowledge, there are no facts, events,
conditions, situations, or set of circumstances which will or would
reasonably be expected to result in or be the basis for any such liability;
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(iii) no polychlorinated biphenyls, radioactive material,
asbestos-containing material, septic, or wastewater treatment or other
disposal system is present at, on or under any Real Property or Contributed
Asset or any other property now owned, leased or operated by the Company, or
to any of the Price Corporations' knowledge, has been present at, on or
under such Real Property or Contributed Asset or, is or has been present at,
on or under any property previously owned, leased or operated by the Company
except as specifically authorized by and in accordance with applicable
Environmental Law;
(iv) no incinerator, surface impoundment, lagoon or landfill is present
at, on or under any Real Property or Contributed Asset or any other property
now owned, leased, or operated by the Company or to any of the Price
Corporations' knowledge, has been present at, on or under such Real Property
or Contributed Asset or has been present at, on or under property previously
owned, leased or operated by the Company;
(v) no underground or aboveground storage tank (active or inactive) is or
has been present at, on or under any Real Property or Contributed Asset or
any other property now or, to any of the Price Corporations' knowledge,
previously owned, leased or operated by the Company, except as specifically
authorized by and in accordance with applicable Environmental Law;
(vi) no Hazardous Substance has been discharged, disposed of, dumped,
injected, pumped, deposited, spilled, leaked, emitted or released at, on or
under any Real Property or Contributed Asset or any other property now or
previously owned, leased or operated by the Company during the times that
the Company owned, leased or operated the Real Property, Contributed Asset
or such property, nor, to any of the Price Corporations' knowledge, prior to
the times the Company owned, leased or operated the Real Property, Company
Contributed Assets or such property, that will or would reasonably be
expected to result in Environmental Liability that, individually or in the
aggregate, would have a Material Adverse Effect;
(vii) no Real Property is listed or, to the Price Corporations'
knowledge, proposed for listing on the National Priorities List promulgated
pursuant to CERCLA, CERCLIS (as defined in CERCLA) or on any similar
federal, state, local or foreign list of sites requiring investigation or
cleanup that will or would reasonably be expected to result in material
Environmental Liabilities and, to any of the Price Corporations' knowledge,
no property now or previously owned, leased or operated by the Company, no
property to which Hazardous Substances located on or resulting from the use
of any real property now or previously owned, leased or operated by the
Company have been transported, nor any property to which the Company has,
directly or indirectly, transported or arranged for the transportation of
any Hazardous Substance, is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, or CERCLIS or any similar
federal, state or local list of sites requiring investigation or cleanup
that will or would reasonably be expected to result in material
Environmental Liabilities; and
(viii) the Company is, and in connection with the Company Contributed
Assets, Business and Real Property, each of the Price Corporations and each
of their Affiliates is, currently in compliance with all Environmental Laws
and has and is in compliance with all Environmental Permits except for such
non-compliance or failure to have an Environmental Permit that would not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and such Environmental Permits are
valid and in full force and effect.
(b) There has been no material written environmental investigation, study,
audit, test, or other assessment conducted of which the Price Corporations is
in possession or custody in relation to any Company Contributed Asset, Real
Property or any other property or facility now or previously owned, leased or
operated by the Company other than those disclosed on Schedule 7.19(a).
(c) The Price Corporations have made all filings required pursuant to the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S)(S)11001 to
11050, with respect to any Real Property or any Company Contributed Asset.
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(d) The Price Corporations have corrected all non-compliance with any
Environmental Law and remedied all contamination referred to on Schedule
7.19(d).
(e) Except for the Saddlebrook office lease, none of the Company Contributed
Assets, the Real Property or any real property owned, leased or operated by the
Company is located in New Jersey or Connecticut.
(f) For purposes of this Section, the terms "Price Corporation," and
"Company" shall include any entity which is, in whole or in part, a predecessor
of any of the Price Corporations.
SECTION 7.20. SEC Filings. (a) The Price Corporations have delivered to
New LP Price Parent's annual reports on Form 10-K for its fiscal years ended
December 31, 1998, 1999 and 2000, its quarterly reports on Form 10-Q for its
fiscal quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, its
proxy or information statements relating to meetings of, or actions taken
without a meeting by, the stockholders of Price Parent held since December 31,
1999, and all of its other reports, statements, schedules and registration
statements filed with the SEC since December 31, 2000 (the documents referred
to in this Section 7.20, collectively, the "Price SEC Documents".)
(b) As of its filing date, each Price SEC Document complied as to form in
all material respects with the applicable requirements of the 1933 Act and the
1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing prior to
the date hereof, on the date of such filing), each Price SEC Document filed
pursuant to the 1934 Act did not, and each such Price SEC Document filed
subsequent to the date hereof will not, insofar as it pertains to the Business,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(d) Each Price SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such registration statement or amendment became effective, did not, insofar as
it pertains to the Business, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
SECTION 7.21. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Price
Parent included in the Price SEC Documents, and the Price Parent Third Quarter
Balance Sheet, fairly present, in conformity with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of Price Parent and its consolidated Subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements).
SECTION 7.22. Disclosure Documents. (a) Each document filed by any of the
Price Corporations with the SEC in connection with the meetings of the
stockholders of Price Parent to be held pursuant to this Agreement and the
Exchange Agreement, including, without limitation, the proxy or information
statements of Price Parent and any amendments or supplements thereto (the
"Price Proxy Materials") will, when filed, comply as to form in all material
respects with the applicable requirements of the 1934 Act.
(b) Each time any Price Proxy Materials are distributed to stockholders of
Price Parent or any other solicitation of stockholders of Price Parent is made
by or on behalf of the Price Corporations or any Affiliate of the Price
Corporations, and at the time such stockholders vote on adoption of the
transactions contemplated hereunder, the Price Proxy Materials (as supplemented
and amended, if applicable), will not contain an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not false or misleading. The representations and warranties
contained in this Section 7.22 will not apply to statements or omissions
included in the Price Proxy Materials based upon information furnished to the
Price Corporations in writing by Cellco or its Affiliates (other than the Price
Corporations) specifically for use therein.
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SECTION 7.23. FCC Authorization. As of the date hereof, no waiver of any
FCC rule or policy is necessary to be obtained for the approval of the FCC
Application, and no processing pursuant to any exception or rule of general
applicability will be requested or required in connection with the consummation
of the transactions contemplated by this Agreement.
SECTION 7.24. Rollup Transaction Materials. The Price Corporations have
furnished to Cellco true and complete copies of (i) all of the information
statements, notices and other materials relating to the Rollup Transaction and
provided to any security holder of any former Subsidiary of the Company and
(ii) all resolutions, plans of liquidation, certificates and other similar
materials of the Price Corporations relating to the Rollup Transaction.
SECTION 7.25. Representations and Warranties. The Price Corporations
hereby acknowledge that, except as expressly set forth in this Agreement or any
Ancillary Agreement, none of Cellco or any of its Affiliates has made any
express or implied representations or warranties to any of the Price
Corporations, including without limitation, with respect to the timing of the
potential VWI IPO (as defined in the Exchange Agreement).
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF CELLCO
Cellco represents and warrants to each of the Price Corporations as of the
date hereof and as of the Closing Date that:
SECTION 8.1. Existence and Power. Each of Cellco and New LP is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and Cellco has all corporate or partnership, as
applicable, powers and all necessary governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted except for such failures which will not have, and would not
reasonably be expected to have, individually or in the aggregate, a NLP
Material Adverse Effect. Each of Cellco and New LP is duly qualified to do
business as a foreign partnership, and is in good standing, in each
jurisdiction where such qualification is necessary, except for those
jurisdictions (i) where, in the case of Cellco, it is not required to so
qualify because of its status as a general partnership, or (ii) where failure
to be so qualified will not have, and would not reasonably be expected to have,
individually or in the aggregate, a NLP Material Adverse Effect. New LP has not
engaged in any business or incurred any liabilities other than in connection
with the transactions contemplated by this Agreement and the Ancillary
Agreements to which it is a party. Other than the Cellco Contributed Assets,
New LP does not have any Subsidiaries and does not own any capital stock or
other voting securities or ownership interests in any Person.
SECTION 8.2. Authorization. The execution, delivery and performance by
Cellco or New LP, as the case may be, of this Agreement and each of the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby are within the partnership powers
of Cellco or New LP, as the case may be, and have been duly authorized by all
necessary partnership action on the part of Cellco or New LP, as the case may
be. This Agreement and each of the Ancillary Agreements to which it is a party
constitutes a valid and binding agreement of each of Cellco and New LP, as
applicable, enforceable against each of them in accordance with their terms,
except as such enforceability may be limited by bankruptcy laws and other
similar laws affecting creditors' rights generally, and except that the remedy
of specific performance and injunctive relief and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
SECTION 8.03. Governmental Authorization. The execution, delivery and
performance by each of Cellco and New LP of this Agreement and each of the
Ancillary Agreements to which it is a party and the consummation by each of
Cellco and New LP of the transactions contemplated hereby and thereby require
no material action by or in respect of, or material filing with, any
Governmental Entity other than (i) compliance
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with the applicable requirements of the HSR Act, (ii) the filing and
declaration by the SEC of the effectiveness of the VCI Registration Statement
and the VWI Registration Statement (if any), (iii) the filing of any
certificates of amendment of limited partnership and any other documents
required to be filed with the Secretary of the State of Delaware, (iv)
compliance with any other applicable securities laws, (v) compliance with the
applicable requirements of the Communications Act, and (vi) such actions or
filings the absence of which will not, and would not reasonably be expected to,
individually or in the aggregate, prevent or delay consummation of the
transactions contemplated hereunder or thereunder in any material respect, or
otherwise prevent Cellco or New LP from performing its obligations under this
Agreement or any Ancillary Agreement to which it is a party in any material
respect, and will not have, and would not reasonably be expected to have,
individually or in the aggregate, a NLP Material Adverse Effect.
SECTION 8.04. Noncontravention. The execution, delivery and performance by
each of Cellco and New LP of this Agreement or any Ancillary Agreement to which
it is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not (i) violate the partnership agreement or other
organizational documents of Cellco or New LP, or violate the Cellco Contributed
Agreement, (ii) violate any applicable material law, rule, regulation,
judgment, injunction, order or decree binding on Cellco or New LP or by which
any of their respective properties or assets are bound, (iii) assuming that the
consents referred to in Schedule 8.05 are obtained and remain in full force and
effect, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of any of Cellco or New
LP or to a loss of any benefit to which Cellco or New LP is entitled under any
provision of any Contract binding upon Cellco or New LP or to which any of
their respective assets may be bound, or (iv) result in the creation or
imposition of any Lien on any Cellco Contributed Asset, except in the case of
clauses (ii), (iii) and (iv) above, violations or defaults that will not have,
and would not reasonably be expected to have, individually or in the aggregate,
a NLP Material Adverse Effect.
SECTION 8.05. Consents. Except as set forth in Section 8.03 and in
Schedule 8.05, no consent or other action by, or prior notice to, any Person is
required as a result of the execution, delivery and performance of this
Agreement or the Ancillary Agreements by Cellco, any of its Subsidiaries or New
LP, except such consents or actions as will not have, and would not reasonably
be expected to have, individually or in the aggregate, a NLP Material Adverse
Effect.
SECTION 8.06. Litigation. There is no Action (and there is no event,
occurrence or state of facts or circumstances that will be, or would be
reasonably expected to be a basis therefor) pending against, or to the
knowledge of Cellco or New LP threatened against or affecting Cellco, New LP,
the Cellco Contributed Assets or the Cellco Contributed Partnership before any
court or arbitrator or any Governmental Entity which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or any of the Ancillary Agreements to which
Cellco or New LP are parties or which would have, or would reasonably be
expected to have, a NLP Material Adverse Effect.
SECTION 8.07. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of any of Cellco, New LP or any of their Affiliates who might be
entitled to any fee or commission from the Price Corporations or any of their
Affiliates upon consummation of the transactions contemplated by this Agreement
or the Ancillary Agreements to which Cellco or New LP is a party.
SECTION 8.08. ELP Interest. The ELP Interest, when issued by New LP in
accordance with the terms of the New LP Agreement and this Agreement, will be
validly issued and free and clear of any Liens.
SECTION 8.09. Title to Cellco Contributed Assets. (a) Cellco and/or its
Subsidiaries have good and marketable title to all of the Cellco Contributed
Assets, except where the failure to have such good and marketable title will
not have, and would not reasonably be expected to have, individually or in the
aggregate, a NLP Material Adverse Effect. Cellco Contributed Partnership has
good and marketable, indefeasible title to its assets except where the failure
to have such title will not have, and would not reasonably be expected to have,
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individually or in the aggregate, a NLP Material Adverse Effect. No Cellco
Contributed Asset is subject to any Lien, except for Liens which do not
materially detract from the value of such Cellco Contributed Asset ("Cellco
Permitted Liens").
(b) Other than developments arising out of business conditions or other
matters generally affecting the wireless telecommunications industry, there are
no developments affecting any of the Cellco Contributed Assets or the Cellco
Contributed Partnership pending or, to the knowledge of Cellco, threatened,
which will or would reasonably be expected to, (i) in the case of the Cellco
Contributed Assets, materially detract from the value, materially interfere
with any present or intended use or materially adversely affect the
marketability of such Cellco Contributed Assets, or (ii) in the case of the
Cellco Contributed Partnership, have a NLP Material Adverse Effect.
(c) Upon consummation of the transactions contemplated hereby, New LP will
have acquired good and marketable title in and to each of the Cellco
Contributed Assets, free and clear of all Liens, except for Cellco Permitted
Liens.
(d) None of Cellco Contributed Partnership or, to the knowledge of Cellco
and its Subsidiaries, any other party thereto, is in default or breach in any
material respect under the terms of any Contract to which Cellco Contributed
Partnership is a party, and, to the knowledge of Cellco and its Subsidiaries,
no event or circumstance has occurred that, with notice or lapse of time or
both, would constitute such a breach or default, except, in each case, for such
defaults or breaches as will not have, and would not reasonably be expected to
have, individually or in the aggregate, a NLP Material Adverse Effect (provided
that the representations and warranties in this sentence with respect to said
other parties are made only as of the date of this Agreement). Except as set
forth on Schedule 8.09(d), as of the date of this Agreement, none of Cellco or
any of its Subsidiaries has knowledge that any counterparty to any Contract to
which Cellco Contributed Partnership is a party intends to cancel or otherwise
adversely modify its relationship with Cellco Contributed Partnership or to
decrease significantly or limit its purchases, services, supplies or materials
from or to Cellco Contributed Partnership, except such cancellations,
modifications, decreases and limits as will not have, and would not reasonably
be expected to have, individually or in the aggregate, a NLP Material Adverse
Effect.
(e) New LP is not party to any Contracts other than this Agreement and the
Ancillary Agreements and any other Contracts contemplated hereby or thereby.
(f) A true and complete copy of the Cellco Contributed Agreement has been
delivered to the Company.
(g) Except as set forth on Schedule 8.09(g), there are no material Contracts
between Cellco or any of its Affiliates, on the one hand, and any other Person,
on the other hand, relating to any Cellco Contributed Asset, the Cellco
Contributed Partnership, Cellco's rights with respect to the Cellco Contributed
Agreement or the Cellco Contributed Licenses or Cellco's (or any such
Affiliate's) ownership of any Cellco Contributed Asset other than any such
Contracts as would not have or reasonably be expected to have individually or
in the aggregate, a NLP Material Adverse Effect.
SECTION 8.10. Cellco Contributed Note. The Cellco Contributed Note is a
valid and binding obligation of Cellco and is in full force and effect, and
Cellco is not in default or breach in any material respect under the terms of
the Cellco Contributed Note, and, to the knowledge of Cellco, no event or
circumstance has occurred that with notice or lapse of time or both, would
constitute such a breach or default.
SECTION 8.11. Financial Statements. The audited financial statements and
the unaudited interim financial statements for Cellco Contributed Partnership
furnished by Cellco to the Price Corporations on or prior to the date hereof
fairly present, in conformity with GAAP applied on a consistent basis (except
as may be indicated in the notes thereto), the financial position of Cellco
Contributed Partnership as of the date thereof and its results of operations
for the periods then ended (subject to normal year-end adjustments and the
absence of footnotes in the case of the unaudited interim financial statements).
SECTION 8.12. Absence of Certain Changes. Since September 30, 2001, there
has not been any event, occurrence, development or state of circumstances or
facts which, individually or in the aggregate, has had, or will have or would
reasonably be expected to have a material adverse effect on Cellco Contributed
Partnership
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(other than such material adverse effects arising out of business conditions or
other matters generally affecting the wireless telecommunications industry).
SECTION 8.13. Price Proxy Materials. None of the information provided, in
writing, to the Price Corporations by Cellco or its Subsidiaries specifically
for inclusion in the Price Proxy Materials will, at the time such materials are
filed, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
SECTION 8.14. No Undisclosed Material Liabilities. There are no
liabilities of Cellco Contributed Partnership of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and, to
the knowledge of Cellco there is no existing condition, situation or set of
circumstances which will, or could reasonably be expected to, result in such a
liability, other than:
(i) current liabilities provided for in the Cellco Contributed
Partnership Balance Sheet (or in the notes thereto);
(ii) liabilities incurred in the ordinary course of business since the
Balance Sheet Date or prior to the Balance Sheet Date if such liabilities
are not of a type that would have been required under GAAP consistently
applied, to be set forth in Cellco Contributed Partnership Balance Sheet
(including the notes thereto); and
(iii) other undisclosed liabilities which, individually and in the
aggregate, are not material to Cellco Contributed Partnership.
SECTION 8.15. Cellco Contributed Licenses. (a) Except as set forth on
Schedule 8.15(a), (i) the Cellco Contributed Licenses are valid and in full
force and effect, (ii) none of Cellco nor any of its Subsidiaries is in
default, and no event has occurred or condition exists that with notice or
lapse of time or both would constitute a default, under any of the Cellco
Contributed Licenses, and (iii) none of the Cellco Contributed Licenses will be
terminated or impaired or become terminable, in whole or in part, as a result
of the transactions contemplated hereby. Upon consummation of such
transactions, New LP will have all of the right, title and interest in the
Cellco Contributed Licenses.
(b) The Cellco Contributed Licenses are exclusively held by Cellco or a
Subsidiary thereof, are free and clear of any legal disqualifications,
conditions or other restrictions (other than those routinely imposed in
conjunction with such licenses) and are free and clear of all Liens except for
Cellco Permitted Liens. To the knowledge of Cellco, the Cellco Contributed
Licenses are in compliance with all laws, rules, regulations, orders and
decrees except for such failures which will not have and would not reasonably
be expected to have, individually or in the aggregate, a NLP Material Adverse
Effect.
(c) Except as otherwise governed by laws, ordinances or governmental rules
or regulations, the Cellco Contributed Licenses are renewable by their terms or
in the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing and
regulatory fees.
(d) All fees due and payable to the FCC by Cellco and its Subsidiaries with
respect to the Cellco Contributed Licenses have been paid.
SECTION 8.16. FCC Qualification. At the Closing Date, New LP will be
legally, technically and otherwise qualified under the Communications Act and
all rules, regulations and policies of the FCC to acquire, own or control and
operate the Business. There are no facts or proceedings known to New LP which
would disqualify New LP under the Communications Act or otherwise from
acquiring or operating the Business or would cause the FCC not to approve the
FCC Application. As of the date hereof, no waiver of any FCC rule or policy is
necessary to be obtained for the approval of the FCC Application, and no
processing pursuant to any exception or rule of general applicability will be
requested or required in connection with the consummation of the transactions
contemplated by this Agreement.
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SECTION 8.17. Tax Basis of the Assets. As of the Closing, the sum of the
aggregate adjusted tax basis for federal income tax purposes of the Cellco
Contributed Assets and the face amount of the Cellco Contributed Note will
exceed the sum of the liabilities to which such assets are subject and which
are assumed by New LP.
SECTION 8.18. Representations and Warranties. New LP and Cellco each
hereby acknowledge that, except as expressly set forth in this Agreement or any
Ancillary Agreement, none of the Price Corporations has made any express or
implied representations or warranties to either New LP or Cellco.
ARTICLE 9
COVENANTS OF THE PRICE CORPORATIONS
Each of the Price Corporations, jointly and severally, agree that:
SECTION 9.01. Conduct of the Business. From the date hereof until the
Closing Date, the Price Corporations shall conduct the Business in the ordinary
course consistent with past practice, in the public interest, convenience and
necessity and in compliance in all material respects with the Communications
Act and the rules and regulations of the FCC, all other material applicable
laws, rules and regulations (including, without limitation, Environmental Laws
and all of the FCC Authorizations). Without limiting the generality of the
foregoing, from the date hereof until the Closing Date or the termination of
this Agreement in accordance with Article 16, the Price Corporations (but only
with respect to the Business) will, unless (x) otherwise approved by Cellco and
New LP, or (y) otherwise contemplated by this Agreement:
(a) collect all accounts receivable in the ordinary course of the
Business, consistent with past practice, and not compromise, discount,
forgive or otherwise adjust, amend or modify the terms or conditions of any
of such accounts receivable other than in the ordinary course of the
Business, consistent with past practice;
(b) pay all accounts payable and applicable taxes in the ordinary course
of the Business, consistent with past practice, and not adjust, amend or
modify the terms or conditions of any of such accounts payable other than in
the ordinary course of the Business, other than accounts payable which are
being disputed in good faith and taxes which are being disputed in good
faith in accordance with applicable dispute procedures and for which
appropriate reserves have been made, consistent with past practice;
(c) not sell, lease, license, or otherwise dispose of any Company
Contributed Assets except (i) pursuant to existing contracts or commitments
that have been delivered to Cellco or New LP and (ii) in the ordinary course
consistent with past practice;
(d) not enter into any type of business other than the Business;
(e) not incur any capital expenditure, or commit to incur any capital
expenditure, for additions or improvements to property, plant and equipment
in excess of $25 million (the "Projected Capital Expenditures");
(f) not incur any long term liabilities;
(g) not declare, set aside or pay any dividend or repurchase, redeem or
otherwise acquire any of their capital stock if such action would prevent
the Company from being able to make the Company Asset Contribution and the
Company Cash Contribution on the Closing Date;
(h) not merge or consolidate with any other Person or acquire a material
amount of assets of any other Person;
(i) not (i) take or agree to take any action that would make any
representation or warranty of the Price Corporations contained herein or in
any Ancillary Agreement to which they are parties (other than any such
representation or warranty made only as of the date hereof or as of another
specified date) inaccurate in any respect at, or as of any time prior to the
Closing Date or (ii) omit or agree or commit to omit to take any action
necessary to prevent any such representation or warranty (other than any
such representation or warranty made only as of the date hereof or as of
another specified date) from being inaccurate in any respect at any such
time;
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(j) perform in all material respects its obligations under all
Contributed Contracts and not amend, terminate or waive any rights under any
material Contracts or enter into any Scheduled Contracts relating to the
Business, except, in any case, in the ordinary course of the Business;
(k) not activate customers on any service plans, unless the terms and
conditions of such plans (including without limitation price and duration of
contract terms) are no more favorable (such terms taken together, but not
individually) to customers than the plans of the Company listed on Schedule
9.01(k) or change the form of any customer activation agreement from the
forms set forth in Schedule 7.09(c); provided that, notwithstanding the
foregoing, the Price Corporations may introduce and activate customers on
new plans which no more than match more favorable customer terms (such terms
taken together, but not individually) offered by competitors, if, and only
if the Price Corporations give New LP at least three (3) business days'
prior written notice of the implementation of such new plan; and
(l) not agree or commit to do, or cause or permit to occur, any of the
foregoing restricted activities.
SECTION 9.02. Maintenance of Assets and Insurance. The Price Corporations
shall use commercially reasonable efforts to comply with and maintain the
Company Contributed Assets in all material respects, including, without
limitation, the FCC Authorizations and all Licensed Intellectual Property
Rights and Owned Intellectual Property Rights, and otherwise preserve the
Company's rights to provide telecommunications service in the Company Cellular
Telephone System Areas. The Price Corporations shall keep in full force and
effect the insurance policies maintained by the Price Corporations and/or the
Company on the Company Contributed Assets as of the date hereof (or replacement
policies providing substantially the same coverage) and shall notify New LP of
any significant changes in the terms of the insurance policies and binders
referred to in the list provided to the New LP pursuant to Section 7.16.
SECTION 9.03. Compliance with Laws, Etc. (a) The Price Corporations shall
comply in all material respects with laws, ordinances, rules, regulations, and
orders applicable to the Business or any of the Company Contributed Assets.
(b) The Price Corporations shall use their reasonable best efforts to obtain
an order from the Division of Investment Management of the SEC exempting Price
Parent from all provisions, rules and regulations of the Investment Company Act
of 1940, as amended (the "1940 Act") which might otherwise apply as a result of
the transactions contemplated to occur on the Closing Date pursuant to this
Agreement. If the Price Corporations are unsuccessful in obtaining such an
order, the Price Corporations shall take such other actions as are necessary to
satisfy the condition set forth in Section 14.02(o).
SECTION 9.04. Co-operation in Conducting the Business. The Company shall
use, and the other Price Corporations shall cause the Company to use,
commercially reasonable efforts to (i) cooperate with New LP to keep available
the services of the Transferred Employees and agents of the Business, (ii)
maintain their relations and goodwill with the suppliers, customers,
distributors and any others having business relations with the Business, (iii)
cooperate with New LP in establishing network conversion and switching
conversion arrangements and implementing other transitional arrangements as
reasonably requested by New LP (including, without limitation, planning and
taking reasonable steps to convert the Business from TDMA to CDMA technology),
and (iv) to the extent requested by New LP amend, renew or replace Contracts
relating to the Business such that such contracts have such terms and
conditions as may be requested by New LP, subject to such amendments or
renewals not adversely affecting the Business or the Price Corporations'
operation thereof; provided that Cellco shall be responsible for the Company's
actual out-of-pocket expenses incurred in connection with providing such
cooperation. Notwithstanding anything to the contrary in this Agreement, the
reimbursement to Company provided for in the immediately preceding sentence (a
"Co-operation Reimbursement") shall (i) include without limitation
reimbursement of any Tax liability incurred by Company on account of the
receipt of any Co-operation Reimbursement and (ii) be reduced by any Tax
Reduction actually realized by the Company with respect to an item for which
any Co-operation Reimbursement is made. If, following the Closing, the Price
Corporations realize a Tax Reduction with respect to an item for which any
Co-operation Reimbursement is made or are required to make a payment of (or
suffer a diminution of credit with respect to) Federal Tax or any
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Combined Tax with respect to any income recognized by Company on account of any
Co-operation Reimbursement, the Initial Company Capital Account shall be
adjusted in an amount equal to the Federal Tax or Combined Tax payment (or
diminution of credit) or Tax Reduction.
SECTION 9.05. Access to Information; Confidentiality. (a) From the date
hereof until the Closing Date, the Price Corporations will (i) give New LP, its
counsel, financial advisors, auditors and other authorized representatives full
access, upon reasonable notice and during normal business hours, to the
offices, properties, books and records of the Price Corporations relating to
the Business, including access to perform physical examinations and to take
samples of the soil, ground water, air, products or other areas as desired by
New LP with respect to properties acquired or leased by any of the Price
Corporations after November 14, 2000 (or with respect to any other properties
of the Price Corporations if (A) none of New LP or any of its Affiliates has
already conducted such examinations or sampling or (B) New LP or any of its
Affiliates has already conducted such examinations or sampling but New LP
reasonably determines that it is necessary or advisable to update such
examinations or sampling), (ii) furnish to New LP, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information relating to the Business as such Persons
may reasonably request, including, without limitation, monthly operating and
financial reports and (iii) instruct the employees, counsel and financial
advisors of the Price Corporations to cooperate with New LP in its
investigation of the Business. Any investigation pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the conduct
of the business of the Price Corporations. No investigation by New LP or other
information received by New LP, either before or after the date hereof, shall
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Price Corporations hereunder.
(b) After the Closing, each of the Price Corporations and their Affiliates
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Business, except to the extent that such information
can be shown to have been (i) previously known on a nonconfidential basis by
any of the Price Corporations, (ii) in the public domain through no fault of
any of the Price Corporations or their Affiliates or (iii) later lawfully
acquired by any of the Price Corporations from sources other than those related
to their prior ownership of the Business.
(c) On and after the Closing Date, each of the Price Corporations will
afford promptly to New LP and its agents reasonable access to its books of
account, financial and other records (including, without limitation,
accountant's work papers), information, employees and auditors to the extent
necessary or useful for New LP in connection with any audit, investigation,
dispute or litigation or any other reasonable business purpose relating to the
Business; provided that any such access by New LP shall not unreasonably
interfere with the conduct of the business of the Price Corporations. New LP
shall bear all of the out-of-pocket costs and expenses (including, without
limitation, attorneys' fees, but excluding reimbursement for general overhead,
salaries and employee benefits) reasonably incurred in connection with the
foregoing.
SECTION 9.06. Notices of Certain Events. Prior to the Closing, each of the
Price Corporations shall promptly notify New LP of any of the following
(provided that any such notification shall not affect any of New LP's rights or
obligations under this Agreement):
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with any of the
transactions contemplated by this Agreement or any of the Ancillary
Agreements;
(b) any notice or other communication from any Governmental Entity in
connection with any of the transactions contemplated by this Agreement or
any of the Ancillary Agreements;
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge threatened against, relating to or involving or
otherwise affecting the Price Corporations or the Business that, if
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pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 7.10 or Article 12 or that relate to the
consummation of any of the transactions contemplated by this Agreement or
any of the Ancillary Agreements;
(d) the damage or destruction by fire or other casualty of any Company
Contributed Asset or part thereof or in the event that any Company
Contributed Asset or part thereof becomes the subject of any proceeding or,
to the knowledge of any of the Price Corporations, threatened proceeding for
the taking thereof or any part thereof or of any right relating thereto by
condemnation, eminent domain or other similar governmental action;
(e) any formal or written notice or other formal or written communication
to any Transferred Employee relating to the Contemplated Transactions at
least one day prior to the distribution of such notice or communication in
order to permit New LP to consent to such notice or communication, such
consent not to be unreasonably withheld or delayed; and
(f) becoming aware that there has been a breach of any of the
representations and warranties made herein or in any of the Ancillary
Agreements by the Price Corporations.
SECTION 9.07. Noncompetition. (a) Each of the Price Corporations agrees
that:
(i) at any time prior to the third anniversary of the Closing Date,
neither it nor any of its Affiliates (other than any shareholder or
Affiliate of Price Parent who is not Robert Price or an Affiliate of Robert
Price, (each, an "Unrestricted Person")) shall engage, either directly or
indirectly, as a principal or for its own account or solely or jointly with
others, or as stockholders in any corporation or joint stock association, in
any business that engages in the business of constructing, developing,
managing, operating, marketing or selling cellular telephone systems or
service, wireless service, paging service, PCS service, commercial mobile
radio service or otherwise competes with the Business as it exists on the
Closing Date within the Company Cellular Telephone System Areas in Georgia,
Alabama, South Carolina or Florida; provided that nothing herein shall
prohibit the acquisition by any of the Price Corporations or any of their
Affiliates of a diversified company having not more than 10% of its sales
(based on its latest published annual audited financial statements)
attributable to any business that competes with the Business; provided
further, that nothing herein shall prohibit the acquisition or maintenance
by any of the Price Corporations or any of their Affiliates of passive
investments not more than 5% of the total voting power of all outstanding
securities of any Person, directly or through general or separate accounts,
mutual funds, trust arrangements or other investment vehicles;
(ii) for a period of two years from the date hereof, neither it nor any
of its Affiliates other than an Unrestricted Person shall employ or solicit,
or receive or accept the performance of services by, any Transferred
Employee; provided that nothing herein shall prevent any of the Price
Corporations or any of their Affiliates from accepting the services of any
Transferred Employee (i) who New LP terminates or (ii) who terminates his or
her employment with New LP without any solicitation of any Price Corporation
or any Affiliate thereof and has not been employed by New LP or any
Affiliate thereof in the 6 month period preceding the date of hiring by such
Price Corporation or Affiliate; or
(iii) for a period of three years from the Closing Date, neither it nor
any of its Affiliates other than an Unrestricted Person shall solicit or
attempt to solicit any subscribers of the Business for the purpose of
offering such subscribers cellular telephone or any PCS, paging, CMRS or
other type of wireless service.
(b) If any provision contained in this Section shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Section, but
this Section shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. It is the intention of the parties
that if any of the restrictions or covenants contained herein is held to cover
a geographic area or to be for a length of time which is not permitted by
applicable law, or in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent
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jurisdiction shall construe and interpret or reform this Section to provide for
a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid
and enforceable under such applicable law. Each of the Price Corporations
acknowledges that New LP would be irreparably harmed by any breach of this
Section and that there would be no adequate remedy at law or in damages to
compensate New LP for any such breach. Each of the Price Corporations agrees
that New LP shall be entitled to injunctive relief requiring specific
performance by the Price Corporations of this Section, and each of the Price
Corporations consents to the entry thereof.
SECTION 9.08. Stockholder Meeting; Proxy Materials. (a) Price Parent shall
cause a meeting of its stockholders to be duly called and held as soon as
reasonably practicable for the purpose of voting on and approving the
transactions contemplated by this Agreement and the Ancillary Agreements (other
than the VWI Exchange). The board of directors of Price Parent shall, subject
to their fiduciary duties under applicable law as advised by counsel, recommend
approval of such transactions by Price Parent's stockholders. In connection
with the meeting referred to above, Price Parent (x) will promptly prepare and
file with the SEC, will use its best efforts to have cleared by the SEC and
will thereafter mail to its stockholders as promptly as practicable a proxy or
information statement and all other Price Proxy Materials for such meeting as
may be required under applicable law, (y) will use its best efforts to obtain
the necessary approval of the transactions contemplated hereunder by its
stockholders and (z) will otherwise comply with all legal requirements
applicable to such meeting.
SECTION 9.09. No Shop. (a) Each of the Price Corporations will not, and
will not permit their officers, directors, Affiliates, related entities, agents
or representatives to (i) solicit, initiate, knowingly encourage, conduct or
engage in any substantive discussions, or enter into any agreement or
understanding with any other person or entity regarding (a) the transfer,
directly or indirectly, of any of the capital stock of any of the Price
Corporations, any material portion of the assets of any of the Price
Corporations or the Business which would be reasonably anticipated in the case
of Price Parent to result in a Change of Control (other than an event that is a
Change of Control solely by reason of subparagraph (i) of the definition of
"Change of Control"), (b) any investment by any other person or entity in
capital stock of any of the Price Corporations or the Business (other than in
the case of Price Parent, such investments which will not, or are reasonably
likely not to constitute a Change of Control (other than an event that is a
Change of Control solely by reason of subparagraph (i) of the definition of
"Change of Control")), or (c) any joint venture relating to the Business or
other similar transaction involving any of the Price Corporations, their
Affiliates or the Business; or (ii) disclose any nonpublic information relating
to the Business, or afford access to the properties, books or records of any of
the Price Corporations that relate, in whole or in part, to the Business, to
any other person or entity that may be considering acquiring or has acquired an
interest in any of the Price Corporations or the Business or engaging in any
transaction of the type described in clause (i) above. Any party hereto
becoming aware of any inquiry or request by another person or entity with
respect to any such transfer or disclosure shall promptly notify New LP of such
inquiry, indicate the identity of the offeror and the terms and conditions of
any proposals or offers or the nature of any inquiries or contacts, and
thereafter keep New LP informed, on a current basis, of the status and terms of
any such proposals or offers and the status of any such inquiries or contacts.
None of the Price Corporations shall release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which any of the
Price Corporations is a party if the agreement relates, in whole or in part, to
the Business.
(b) Notwithstanding the foregoing or anything else to the contrary in this
Agreement, the Board of Directors of Price Parent, directly or indirectly
through advisors, agents or other intermediaries, may, subject to compliance
with Section 9.09(c), (i) engage in negotiations or discussions with any Third
Party that has made a Superior Proposal or a bona fide Acquisition Proposal
that the Board of Directors of Price Parent reasonably believes will lead to a
Superior Proposal, (ii) furnish to such Third Party nonpublic information
relating to the Price Corporations or the Business pursuant to a
confidentiality agreement with terms no less favorable to the Price
Corporations than those contained in the Confidentiality Agreements, (iii)
following receipt of such Superior Proposal, take and disclose to its
stockholders a position contemplated by Rule 14e-2(a) under the 1934
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Act, (iv) following receipt of such Superior Proposal, fail to make, withdraw,
or modify in a manner adverse to New LP its recommendation to its stockholders
referred to in Section 9.08 hereof or defer or fail to call the Price Parent
stockholder meeting in accordance with Section 9.08 hereof and/or (v) take any
action ordered to be taken by the Price Corporations by any court of competent
jurisdiction which action has not been stayed by the court
after the Price Corporations have used all reasonable efforts to obtain such a
stay, but in each case referred to in the foregoing clauses (i) through (iv)
only if the Board of Directors of Price Parent determines in good faith by a
majority vote, on the basis of written advice from Proskauer Rose LLP, outside
legal counsel to Price Parent, that it must take such action to comply with its
fiduciary duties under applicable law; provided that, in rendering such written
advice, such counsel may state that its conclusions are based on an assumption
that the Board of Directors of Price Parent has concluded in good faith that
the relevant Acquisition Proposal is a Superior Proposal or reasonably believes
that it will lead to a Superior Proposal.
(c) The Board of Directors of Price Parent shall not take any of the actions
referred to in clauses (i) through (iv) of the preceding subsection unless the
Price Corporations shall have delivered to New LP a prior written notice
advising New LP that it intends to take such action, and the Price Corporations
shall continue to advise New LP after taking such action, as set forth below.
In addition, the Price Corporations shall notify New LP promptly (but in no
event later than 24 hours) after receipt by the Price Corporations, (or any of
their advisors) of any Acquisition Proposal, any communication, written or
oral, that a Third Party is considering making an Acquisition Proposal or of
any request for information relating to the Price Corporations or any of their
Subsidiaries, or for access to the business, properties, assets, books or
records of the Price Corporations or any of their Subsidiaries by any Third
Party that has informed the Price Corporations that it may be considering
making, or has made, an Acquisition Proposal. The Price Corporations shall
provide such notice orally and in writing and shall identify the Third Party
making, and the terms and conditions of, any such Acquisition Proposal,
indication or request. The Price Corporations shall use reasonable efforts to
keep New LP fully informed, on a current basis, of the status and details of
any such Acquisition Proposal, indication or request. The Price Corporations
shall, and shall cause their Affiliates, advisors, employees and other agents
of the Price Corporations or any of their Subsidiaries, as applicable, to,
cease immediately and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any Third Party conducted prior to
the date hereof with respect to any Acquisition Proposal and shall use their
reasonable best efforts to cause any such Party (or its agents or advisors) in
possession of confidential information about the Price Corporations or any of
their Subsidiaries that was furnished by or on behalf of the Price Corporations
or any of their Subsidiaries, as applicable, to return or destroy all such
information.
SECTION 9.10. Company Debt. (a) The Company shall, and the other Price
Corporations shall cause the Company to, elect that all of the Senior Secured
Notes be redeemed as permitted pursuant to Section 3.01(b) of the Senior
Secured Notes Indenture (the "Senior Secured Notes Redemption") upon the
occurrence of a "Change of Control" (as therein defined), and shall provide
notice of the Senior Secured Notes Redemption to the trustee under the Senior
Secured Notes Indenture
and each holder of the Senior Secured Notes as required pursuant to the terms
of the Senior Secured Notes Indenture. The Company shall, and the other Price
Corporations shall cause the Company to, provide such notice no later than 29
days prior to the Closing Date. Such notice shall provide that the "Redemption
Date" with respect to the Senior Secured Notes Redemption shall be the day
immediately following the Closing Date (and shall be a date determined in
accordance with the provisions of Section 3.04 of the Senior Secured Notes
Indenture) and shall otherwise comply with the provisions of the Senior Secured
Notes Indenture. The Company shall, and the other Price Corporations shall
cause the Company to, comply in all other respects with the provisions of
Article 3 of the Senior Secured Notes Indenture with respect to the Senior
Secured Notes Redemption.
(b) No later than the date which is 30 calendar days prior to the Closing
Date, New LP shall (and Cellco shall cause New LP to) commence a tender offer
and consent solicitation for all of the outstanding Senior Subordinated Notes
for such price and on such terms as New LP may determine (the "Senior
Subordinated Notes Offer"). The terms of the Senior Subordinated Notes Offer
shall provide that acceptance of the offer shall
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be conditioned upon the occurrence of the Closing and shall occur on the
Closing Date. The dealer manager for the Senior Subordinated Notes Offer shall
be one or more reputable investment banks selected by New LP.
SECTION 9.11. Environmental Matters. Prior to Closing, the Price
Corporations shall use all commercially reasonable efforts (not including the
payment of money unless reimbursed by New LP) to cause any and all consultants
who prepared reports disclosed in Schedule 7.19(a) (other than reports prepared
by, or for the benefit of, Cellco or New LP) to permit New LP to rely on each
report prepared by such consultant.
SECTION 9.12. Contour Extension Agreements. Within 30 days after the date
hereof, the Price Corporations shall deliver to New LP all contour extension
agreements relating to the Business in effect as of the date hereof and will
deliver promptly to New LP any contour extension agreement relating to the
Business entered into by the Price Corporations after the date hereof.
SECTION 9.13. Giant Bear Agreement. Effective as of the Closing, the Price
Corporations will terminate the Giant Bear Agreement pursuant to Section 12.4
thereof and will pay to Giant Bear Inc. the termination payment contemplated
thereby. The Price Corporations acknowledge and agree that the Company Cash
Contribution Amount has been calculated taking into account any and all
obligations of Cellco and its Affiliates in connection with the termination of
the Giant Bear Agreement and that Cellco and its Affiliates have no further
obligations to Giant Bear Inc., any of the Price Corporations or any of their
respective Affiliates in connection therewith.
ARTICLE 10
COVENANTS OF CELLCO AND NEW LP
Each of Cellco and New LP (as applicable) agrees that:
SECTION 10.01. Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, Cellco, New LP and their respective Affiliates
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Business, the Price Corporations furnished to Cellco
or New LP or their respective Affiliates in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements, except to the
extent that such information can be shown to have been (i) previously known on
a nonconfidential basis by any of Cellco or New LP, (ii) in the public domain
through no fault of any of Cellco or New LP or (iii) later lawfully acquired by
Cellco or New LP from sources other than the Price Corporations; provided that
Cellco or New LP may disclose such information to their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements so long as such Persons are informed of the confidential
nature of such information and are directed to treat such information
confidentially. If this Agreement is terminated, Cellco, New LP and their
respective Affiliates will, and will use their best efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to the Price Corporations, upon
request, all documents and other materials, and all copies thereof, obtained by
Cellco or New LP or their respective Affiliates or on their behalf from the
Price Corporations in connection with this Agreement or the Ancillary
Agreements that are subject to such confidence.
SECTION 10.02. Post Closing Access. On and after the Closing Date, New LP
will afford promptly to the Price Corporations and their agents reasonable
access to its properties, books, records, employees and auditors to the extent
necessary to permit the Price Corporations to determine any matter relating to
their rights and obligations hereunder or to any period ending on or before the
Closing Date, including, without limitation, preparation of tax returns;
provided that (i) any such access by the Price Corporations shall not
unreasonably interfere with the conduct of the business of New LP and (ii) no
access shall be provided for purposes of
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conducting any invasive sampling or testing. The Price Corporations will hold,
and will use their best efforts to cause their officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning New
LP or the Business provided to them pursuant to this Section.
SECTION 10.03. Conduct of Business. From the date hereof until the Closing
Date, Cellco and its Subsidiaries shall use their best efforts to cause the
business of Cellco Contributed Partnership to be conducted in the ordinary
course consistent with past practice.
SECTION 10.04. Access. From the date hereof until the Closing Date, Cellco
and its Subsidiaries will (i) give the Price Corporations, their counsel,
financial advisors, auditors and other authorized representatives full access,
upon reasonable notice and during normal business hours, to the offices,
properties, books and records of Cellco and the Cellco Contributed Partnership
(except for purposes of conducting any invasive sampling or testing), (ii)
furnish to the Price Corporations, their counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and
other information relating to Cellco and the Cellco Contributed Partnership as
such Persons may reasonably request and (iii) instruct the employees, counsel
and financial advisors of Cellco to cooperate with the Price Corporations in
its investigation of Cellco and the Cellco Contributed Partnership, except
that, with respect to Cellco, such access, information and investigation shall
be solely for the purposes of, and to the extent reasonably necessary for,
confirming the accuracy or inaccuracy of the representations and warranties of
Cellco contained in Article 8. Any investigation pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the conduct
of the business of Cellco or Cellco Contributed Partnership. No investigation
by the Price Corporations or other information received by the Price
Corporations, either before or after the date hereof, shall operate as a waiver
or otherwise affect any representation, warranty or agreement given or made by
Cellco hereunder.
SECTION 10.05. Cellco Noncompete. Notwithstanding anything to the contrary
in this Agreement or the New LP Agreement, from the Closing Date until the
earlier to occur of (i) the Exchange Notice Deadline (as defined in the
Exchange Agreement) and (ii) the date on which neither the Company nor a
Permitted Transferee (as defined in the New LP Agreement) thereof is a limited
partner of New LP, Cellco and its Subsidiaries shall not engage, other than
through New LP, (1) in the business of constructing, developing, managing and
operating mobile wireless telephone systems servicing any of the Company
Cellular Telephone System Areas in Georgia, Alabama, South Carolina and Florida
or (2) in the business of providing cellular service at the wholesale level in
the Orange County, New York or Poughkeepsie, New York metropolitan statistical
areas (each a "Competing Business"); provided that the foregoing shall not
prohibit the acquisition by Cellco or any of its Subsidiaries of any business
that includes a Competing Business, or the investment by Cellco or any such
subsidiary in any such business, so long as (x) the Competing Business
represents less than 10% of the sales (based on the latest published audited
financial statements) of such business, (y) subject to Section 6.04 of the New
LP Agreement, as promptly as reasonably practicable after such acquisition or
investment, Cellco or such Subsidiary takes such actions as may be necessary to
contribute, as an additional capital contribution, such Competing Business or
investment to New LP (provided that, if approval of such contribution is
required pursuant to Section 6.04(b) of the New LP Agreement and such approval
is not obtained because the member appointed to the Management Committee by
Price LP (as such terms are defined in the New LP Agreement) failed to approve
such contribution, Cellco or any of its Subsidiaries may retain such Competing
Business or investment notwithstanding this Section 10.05), or (z) Cellco or
any such Subsidiary disposes of such Competing Business or investment within
one year after such acquisition.
SECTION 10.06. Notices of Certain Events. Prior to the Closing, Cellco
shall promptly notify the Company of any of the following (provided that any
such notification shall not affect any of the Company's rights or obligations
under this Agreement):
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with any of the
transactions contemplated by this Agreement or any of the Ancillary
Agreements;
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(b) any notice or other communication from any Governmental Entity in
connection with any of the transactions contemplated by this Agreement or
any of the Ancillary Agreements;
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge threatened against, relating to or involving or
otherwise affecting New LP, or Cellco or its Subsidiaries that relate to the
consummation of any of the transactions contemplated by this Agreement or
any of the Ancillary Agreements;
(d) the damage or destruction by fire or other casualty of any assets of
Cellco Contributed Partnership or in the event that any such asset becomes
the subject of any proceeding or, to the knowledge of Cellco or its
Subsidiaries, threatened proceeding for the taking thereof or of any right
relating thereto by condemnation, eminent domain or other similar
governmental action, except in each case to the extent such events will not
have, and would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on Cellco Contributed Partnership; and
(e) becoming aware, that there has been a breach of any of the
representations and warranties made by Cellco herein or in any of the
Ancillary Agreements.
ARTICLE 11
COVENANTS OF CELLCO, NEW LP AND THE PRICE CORPORATIONS
Each of Cellco, New LP and the Price Corporations agrees that:
SECTION 11.01. Best Efforts; Further Assurances. (a) Subject to the terms
and conditions of this Agreement, each of Cellco, New LP and the Price
Corporations will use their best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate the
transactions contemplated by this Agreement; provided, that the foregoing
notwithstanding, Cellco shall have no obligation to register any securities
under the 1933 Act at any time prior to the VWI IPO (as defined in the Exchange
Agreement). In furtherance and not in limitation of the foregoing, each of
Cellco, New LP and the Price Corporations agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and in any event
within thirty calendar days of the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable. Each of Cellco, New LP and the Price
Corporations agree to use their best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable to
obtain the Required Consents and Cellco further agrees to use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done all
things necessary or desirable to obtain the Cellco Credit Agreement Consents
referred to in Section 14.02(g) hereunder. The parties further agree to execute
and deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement (including, without limitation, satisfaction of the conditions set
forth in Sections 11.01(b) and 11.02(c)) and to vest in New LP good and
marketable title to the Company Contributed Assets and the Cellco Contributed
Assets.
(b) Subject to the Price Corporations' rights under Article 15, each Price
Corporation hereby constitutes and appoints, effective as of the Closing Date,
New LP and its successors and assigns as the true and lawful attorney of such
Price Corporation with full power of substitution in the name of New LP, or in
the name of such Price Corporation but for the benefit of New LP, (i) to
collect for the account of New LP any items of Company Contributed Assets and
(ii) to institute and prosecute all proceedings which New LP may in its sole
discretion deem proper in order to assert or enforce any right, title or
interest in, to or under the Company Contributed Assets, and to defend or
compromise any and all actions, suits or proceedings in respect of the Company
Contributed Assets. New LP shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
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SECTION 11.02. Certain Filings. Each of Cellco, New LP and the Price
Corporations shall cooperate with each other (i) in connection with the
preparation of the Price Proxy Materials, (ii) in determining whether any
action by or in respect of, or filing with, any Governmental Entity is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing information required
in connection therewith or with the Price Proxy Materials and seeking timely to
obtain any such actions, consents, approvals or waivers.
SECTION 11.03. Public Announcements. Each party hereto agrees not to issue
any press release or make any public statement with respect to this Agreement
or the transactions contemplated hereby without having consulted with, and
having obtained the prior written consent of each other party hereto (such
consent not to be unreasonably withheld), prior to taking any such action;
provided that such prior written consent shall not be required with respect to
any press release or public statement the making of which may be required by
applicable law or any listing agreement with any national securities exchange.
SECTION 11.04. Trademarks; Tradenames. (a) Except as set forth in the
other subsections of this Section 11.04, after the Closing, New LP and its
Affiliates shall not use any of the marks or names set forth on Schedule 11.04
(collectively or individually as the context requires, the "Price Trademarks
and Tradenames").
(b) After the Closing, New LP and its Affiliates shall have the right to
sell existing inventory and to use existing packaging, labeling, containers,
supplies, advertising materials, technical data sheets and any similar
materials bearing any Price Trademarks and Tradenames until one year after the
Closing Date. New LP and its Affiliates shall have the right to use the Price
Trademarks and Tradenames in advertising that cannot be changed by New LP and
its Affiliates using reasonable efforts for a period not to exceed one year
after the Closing Date. New LP and its Affiliates shall comply with all
applicable laws or regulations in any use of packaging or labeling containing
the Price Trademarks and Tradenames.
(c) New LP and its Affiliates shall not be obligated to change the Price
Trademarks and Tradenames on goods in the hands of dealers, distributors and
customers at the time of the expiration of a time period set forth in
subsection 11.04(b) above. The obliteration of the Price Trademarks and
Tradenames shall be deemed compliance with the covenant not to use the Price
Trademarks and Tradenames pursuant to this Section 11.04.
(d) Subject to Sections 11.04(b) and 11.04(c), New LP and its Affiliates
agree to use reasonable efforts to cease using the Price Trademarks and
Tradenames on buildings, cars, trucks and other fixed assets as soon as
possible within a period not to exceed one year after the Closing Date.
SECTION 11.05. WARN Act. The parties agree to cooperate in good faith to
determine whether any notification may be required under the WARN Act as a
result of the transactions contemplated by this Agreement. New LP will be
responsible for providing any notification that may be required under the WARN
Act with respect to any Transferred Employees. The Price Corporations will be
responsible for providing any notification that may be required under the WARN
Act with respect to any employees who are not Transferred Employees; provided
that New LP or Cellco has given notice on or prior to the date that is 65 days
prior to the Closing Date to the Price Corporations of the identities of any
employees who are not Transferred Employees and for which a WARN Act notice
would be required to enable the Price Corporations to provide timely
notification under the WARN Act. If New LP fails to provide sufficient notice
and, as a result thereof any liability is imposed on the Price Corporations,
Cellco shall pay to the Price Corporations the amount of such liability.
SECTION 11.06. H.O. Systems Agreement. (a) Prior to Closing, the Company
will, and the other Price Corporations will cause the Company to, use its
commercially reasonable efforts to negotiate such amendments or modifications
to the H.O. Agreement (and only such amendments and modifications) as may be
necessary to terminate the H.O. Agreement effective on the date which is the
second anniversary of the Closing Date (the "H.O. Agreement Termination Date").
Except with the written consent of New LP, such amendments and
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modifications shall not change in a manner adverse to New LP and its Affiliates
any provision of the Existing H.O. Agreement other than those providing for
such termination and the payment of an H.O. Cancellation Fee and shall be
without any liability or continuing obligation of any nature on the part of the
Company or New LP (as assignee under H.O. Agreement and their Affiliates)
(other than liabilities or obligations arising under the H.O. Agreement after
the Closing Date and before the H.O. Agreement Termination Date); provided that
the Company may agree to pay at the time of such termination a cancellation
amount (a "H.O. Cancellation Fee"). The Price Corporations agree that all costs
and expenses incurred by the Company and its Affiliates in connection with
obtaining such amendments and modifications (other than any H.O. Cancellation
Fee or any costs or expenses incurred pursuant to the terms of the H.O.
Agreement after the Closing Date) will be Company Excluded Liabilities, or if
and to the extent such costs and expenses are to be borne by New LP after the
Closing, the amount of such costs and expenses, discounted as set forth in
Section 2.07(a)(ii) will be contributed to New LP as part of the Company Cash
Contribution Amount.
(b) If the H.O. Agreement is amended as contemplated by Section 11.06(a),
New LP agrees that it will cause the H.O. Agreement to be terminated as of or
prior to the H.O. Agreement Termination Date. Cellco and New LP acknowledge
that any adjustment to the Initial Company Capital Account pursuant to clause
(ii) of Section 2.07(a) is made in reliance on the agreement contained in the
first sentence of this Section 11.06(b).
(c) If at any time after the Closing Date, New LP pays an H.O. Cancellation
Fee and, as a result thereof, any Cellco Indemnitee realizes, at any time
within 5 years after such payment, a Tax Reduction which is directly
attributable to such payment, Cellco LP and/or the Managing General Partner (as
defined in the New LP Agreement), as applicable, will compensate the Price
Corporations for such Tax Reduction by making a payment in accordance with
Section 12.06(c).
SECTION 11.07. BCG Agreement. In order to facilitate the efforts of the
Price Corporations to terminate the BCG Agreement prior to the Closing, New LP
shall provide the Price Corporations such assistance as the Price Corporations
may reasonably request in connection with the negotiations with Boston
Communications Group, including offering to include the Company Cellular
Telephone Systems Areas in the contract between Cellco Partnership d/b/a
Verizon Wireless and Cellular Express, Inc. d/b/a Boston Communications Group
dated as of September 29, 2000 (the "Cellco/BCG Agreement") on the terms
currently applicable under the Cellco/BCG Agreement.
SECTION 11.08. FCC Application. (a) As promptly as practicable after the
execution and delivery of this Agreement, Cellco, New LP and the Company shall,
in good faith, cooperate with each other and consult with the FCC in order to
determine whether, other than actions previously taken and applications and
documents previously filed by the parties hereto, any applications, or
documents or other actions are required to obtain the consent of the FCC to the
transactions contemplated by this Agreement. Cellco, New LP and the Company
will cooperate in good faith and with due diligence in order to obtain any such
FCC consent as expeditiously as practicable. No party hereto shall knowingly
take, or fail to take, any action the intent or reasonably anticipated
consequence of which action or failure to act would be to cause the FCC not to
grant approval of the transactions contemplated by this Agreement or delay
either such approval or the consummation of such transactions.
(b) Cellco and the Price Corporations shall each pay one-half (1/2) of any
FCC fees that may be payable in connection with any filing or granting of
approval contemplated by Section 11.08(a). New LP and the Price Corporations
shall each oppose any objection or petition against any such filing or
approval, and shall oppose any request for reconsideration or judicial review
of the granting of approval of the FCC of the transactions contemplated by this
Agreement.
SECTION 11.09. New LP's Environmental Reports. Within 45 days after
signing this Agreement, upon reasonable notice to the Price Corporations if
site access is required, and without interfering with the Business, New LP, in
its discretion, may conduct a Phase I environmental site assessment for any
Real Property owned, leased or operated by the Company which was not owned,
leased or operated by the Company prior to November 14, 2000, and for any other
Real Property owned, leased or operated by the Company if (A) neither New LP nor
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any of its Affiliates has already conducted such an assessment or (B) New LP or
any of its Affiliates has conducted such an assessment but New LP reasonably
determines that it is necessary or advisable to update such assessment. New
LP's Phase I Reports shall be prepared using an environmental consultant
reasonably acceptable to the Price Corporations and shall be prepared in
accordance with the ASTM 1527-00 standards. Immediately upon completion
thereof, New LP shall provide a copy of New LP's Phase I Reports to the Price
Corporations. In the event that any such Phase I Report identifies an
environmental condition that reasonably could result in Environmental
Liabilities to the Company and New LP's environmental consultant recommends in
such Phase I Report that a Phase II investigation is warranted, then New LP
shall promptly upon receipt of the results of the Phase I environmental site
assessment conduct the recommended Phase II (or may update any such Phase II
conducted by Cellco or its Affiliates prior to the date hereof), upon a scope
of work reasonably acceptable to the Price Corporations. New LP shall provide
copies of the Phase II sampling results and the Phase II report to the Price
Corporations immediately upon New LP's receipt thereof. If the results of the
Phase II Reports, in the aggregate, indicate the existence of Environmental
Liabilities that are likely to cost in excess of $1 Million to remediate, then
New LP shall notify the Price Corporations and the Price Corporations shall
have the option of (x) undertaking necessary corrective action at its cost and
expense or (y) declining to undertake the corrective action and affording New
LP the option to seek indemnification under Article 15 of this Agreement
(subject to the terms thereof). (New LP's Phase I reports, Phase II reports and
all associated data and reports, are collectively referred to as, "New LP's
Environmental Reports") All costs and expenses associated with the preparation
of New LP's Environmental Reports shall be borne solely by Cellco.
ARTICLE 12
TAX MATTERS
SECTION 12.01. Tax Definitions. The following terms, as used herein, have
the following meanings:
"Cellco Indemnitee" means Cellco, the MGP Interest Holder, the Cellco LP
Interest Holder, New LP, any of their respective Affiliates and the Partners
of Cellco.
"Code" means the Internal Revenue Code of 1986, as amended.
"Post-Closing Tax Period" means (i) any Tax period beginning after the
Closing Date and (ii) with respect to a Tax period that commences on or
before but ends after the Closing Date, the portion of such Tax period
beginning after the Closing Date.
"Pre-Closing Tax Period" means (i) any Tax period ending on or before the
Closing Date and (ii) with respect to a Tax period that commences before but
ends after the Closing Date, the portion of such period up to and including
the Closing Date.
"Property Taxes" means personal property, ad valorem, and real property
taxes but only if such taxes are levied on the Company Contributed Assets or
the Business.
"Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, any
withholding on amounts paid to or by any Person), together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition
of any such tax (domestic or foreign), or (ii) liability for the payment of
any amounts of the type described in (i) as a result of being party to any
agreement or any express or implied obligation to indemnify any other Person.
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or
tax attribute that could reduce Taxes (including without limitation
deductions and credits related to alternative minimum Taxes and Tax basis of
assets).
"Tax Loss" means any damage, loss, liability and expense (including,
without limitation, reasonable attorneys' fees and expenses) incurred by any
Cellco Indemnitee arising out of (i) any misrepresentation, breach of
warranty or breach of covenant made or to be made by any Price Corporation
or any of their Affiliates under this Article 12 and (ii) any Company
Excluded Liability in respect of Taxes.
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"Tax Reduction" means, with respect to any item for any Person, the
excess of (i) the amount of Taxes that would have been payable (or the
amount of the Tax refund, offset or other reduction in Tax liability
actually receivable) by such Person in the absence of such item over (ii)
the amount of Taxes actually payable (or the amount of the Tax refund,
offset or other reduction in Tax liability that would have been receivable)
by such Person after including such item.
"Tax Warranty Breach" means, with respect to indemnification by the Price
Corporations, any misrepresentation or breach of warranty set forth in
Section 12.02 where, and only to the extent that, such breach creates a
liability for Tax (other than a Company Excluded Liability) in respect of a
Post-Closing Tax Period (determined in each case without regard to any
materiality qualification contained in any representation or warranty giving
rise to the claim for indemnity).
SECTION 12.02. Tax Representations. Each of the Price Corporations
represent and warrant to New LP as of the date hereof and as of the Closing
Date that:
(a) Filing and Payment. Except as set forth on Schedule 12.02(a), (i)
all material Tax returns, statements, reports and forms (including estimated
tax or information returns and reports) required to be filed with any Taxing
Authority with respect to any Pre-Closing Tax Period by or on behalf of the
Price Corporations, any of their Subsidiaries or former Subsidiaries, or in
respect of the Business (including any schedule or attachment thereto, and
any amendment thereof, collectively, the "Returns"), have, to the extent
required to be filed on or before the date hereof or the Closing Date, as
applicable, been filed when due in accordance with all applicable laws; (ii)
as of the time of filing, the Returns were true and complete in all material
respects; (iii) all material Taxes due with respect to Returns that have
been filed (whether or not shown as due on any such Return) have been timely
paid, or withheld and remitted to the appropriate Taxing Authority; and (iv)
the Price Corporations and their Subsidiaries and former Subsidiaries have
withheld and paid all material Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(b) Financial Records. Except as set forth on Schedule 12.02(b), (i) the
charges, accruals and reserves for Taxes with respect to the Company
reflected on the books of the Company (excluding any provision for deferred
income taxes reflecting either differences between the treatment of items
for accounting and income tax purposes or carryforwards) are adequate to
cover material Tax liabilities accruing through the end of the last period
for which the Company ordinarily records items on its books; (ii) since the
end of the last period for which the Company ordinarily records items on its
books, the Company has not engaged in any transaction, or taken any other
action, other than in the ordinary course of business; and (iii) all
information set forth in the Company Balance Sheet (including the notes
thereto) relating to Tax matters is true and complete in all material
respects.
(c) Procedure and Compliance. Except as set forth on Schedule 12.02(c),
(i) except for Returns with respect to which the applicable statute of
limitations (after giving effect to extensions or waivers) has not expired,
no Returns filed with respect to the Price Corporations, any of their
Subsidiaries or former Subsidiaries or in respect of the Business are open;
(ii) none of the Price Corporations or any of their Subsidiaries or former
Subsidiaries are delinquent in the payment of any material Tax or have
requested any extension of time within which to file any Return and have not
yet filed such Return; (iii) the Company (or any member of any affiliated,
consolidated, combined or unitary group of which the Company is or has been
a member) has not granted any extension or waiver of the statute of
limitations period applicable to any Return, which period (after giving
effect to such extension or waiver) has not yet expired; (iv) there is no
claim, audit, action, suit, proceeding, or investigation now pending or
threatened in writing against or with respect to any Price Corporation or
any of their Subsidiaries or former Subsidiaries in respect of any Tax or
Tax Asset; (v) no adjustment that would increase the Tax liability, or
reduce any Tax Asset, of any Price Corporation or any of their Subsidiaries
or former Subsidiaries or Cellco Indemnitee has been made or proposed in
writing during the last three years by a Taxing Authority which could
reasonably be expected to be made, proposed or threatened in an audit of any
subsequent Pre-Closing Tax Period or Post-Closing Tax Period; (vi) there are
no requests for rulings or determinations in respect of any Tax or Tax Asset
pending between any Price Corporation or any of their Subsidiaries or former
Subsidiaries and any Taxing
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Authority; (vii) neither any Price Corporation nor any of their Subsidiaries
or former Subsidiaries has received a written tax opinion with respect to
any transaction with respect to which the statute of limitations has not yet
expired (giving effect to any waiver, mitigation or extension thereof)
relating to any Price Corporation or to any of their Subsidiaries or former
Subsidiaries, other than a transaction in the ordinary course of business;
and (viii) during the three-year period ending on the date hereof, neither
any Price Corporation nor any Subsidiary or former Subsidiary of any Price
Corporation has (A) made or changed any tax election, changed any annual tax
accounting period, or adopted or changed any method of tax accounting, or
(B) filed any amended Return, entered into any closing agreement, settled
any Tax claim or assessment, or surrendered any right to claim a Tax refund,
offset or other reduction in Tax liability, to the extent any action
referred to in clause (A) or (B) may materially affect any Cellco Indemnitee
with respect to a Post-Closing Tax Period.
(d) Taxing Jurisdictions. Schedule 12.02(d) contains a list of all
jurisdictions (whether foreign or domestic) in which the Company files Tax
Returns.
(e) Tax Sharing, Consolidation and Similar Arrangements. Except as set
forth on Schedule 12.02(e), (i) the Company has not been a member of an
affiliated, consolidated, combined or unitary group other than one of which
Price Parent was the common parent; (ii) the Company is not party to any Tax
sharing agreement or to any other agreement or arrangement referred to in
clause (ii) of the definition of "Tax"; (iii) no material amount of the type
described in clause (ii) of the definition of "Tax" is currently due and
payable by the Company; and (iv) the Company has not entered into any
agreement or arrangement with any Taxing Authority with regard to the Tax
liability of the Company (or with regard to the Tax liability imposed on the
Company Contributed Assets or the Business) affecting any Tax period for
which the applicable statute of limitations, after giving effect to
extensions or waivers, has not expired.
(f) Certain Agreements and Arrangements. Except as set forth on Schedule
12.02(f), (i) neither any Price Corporation nor any Affiliate of any Price
Corporation is a direct or indirect beneficiary of a guarantee of tax
benefits or any other arrangement that has the same economic effect
(including an indemnity from a seller or lessee of property, or other
insurance) with respect to any transaction or tax opinion relating to any
Price Corporation or any of their Affiliates which affects any Tax period
for which the applicable statute of limitations has not expired (giving
effect to any waiver, mitigation or extension thereof); (ii) neither any
Price Corporation nor any Affiliate of any Price Corporation is a party to
any understanding or arrangement (A) described in Section 6111(d) or (B)
which is, in the good faith judgment of such Person, described in Section
6662(d)(2)(C)(iii) of the Code, which understanding or arrangement affects
any Tax period for which the applicable statute of limitations has not
expired (giving effect to any waiver, mitigation or extension thereof); and
(iii) during the three-year period ending on the date hereof, neither any
Price Corporation nor any Affiliate of any Price Corporation was a
distributing corporation or a controlled corporation in a transaction
intended to be governed by Section 355 of the Code.
(g) Post-Closing Attributes. Except as set forth on Schedule 12.02(g),
(i) the Company will not be required to include any adjustment in taxable
income for any Post-Closing Tax Period under Section 481(c) of the Code (or
any similar provision of the Tax laws of any jurisdiction) as a result of a
change in method of accounting for a Pre-Closing Tax Period; and (ii) no
Cellco Indemnitee will be required to include for a Post-Closing Tax Period
taxable income attributable to income economically realized by the Company
in a Pre-Closing Tax Period, including any distributions in a Pre-Closing
Tax Period from an entity that is fiscally transparent for Tax purposes.
(h) Property and Leases. Except as set forth on Schedule 12.02(h), (i)
to the knowledge of the Price Corporations, the Company does not own an
interest in real property in any jurisdiction in which a Tax is imposed, or
the value of the interest is reassessed, on the transfer of an interest in
real property and which treats the transfer of an interest in an entity that
owns an interest in real property as a transfer of the interest in real
property; (ii) none of the property owned or used by the Company is subject
to a tax benefit transfer lease executed in accordance with Section
168(f)(8) of the Internal Revenue Code of 1954, as amended; (iii) all of the
leases to which the Company is party are treated by the Company, for federal
income tax purposes,
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as "true" leases under which the Company owns or uses the property subject
to the leases; (iv) neither the Company nor any of its Affiliates is party
to a lease arrangement that is described in Revenue Ruling 99-14; and (v)
none of the property owned by the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(i) Rollup Transaction. The Rollup Transaction was completed prior to
November 1, 2001. Except as set forth in Schedule 12.02(i), the Rollup
Transaction was completed prior to July 1, 2001.
(j) Tax Opinion. The Company has received on the date hereof an opinion
(the "Tax Opinion") of Proskauer Rose LLP substantially in the form of
Exhibit G. In rendering such opinion, Proskauer Rose LLP relied upon the
certifications and representations from the Price Corporations in the form
of Exhibit H.
SECTION 12.03. Covenants. (a) Without the prior written consent of New LP,
which shall not be unreasonably withheld, neither any Price Corporation nor any
of their Affiliates shall, to the extent it may affect or relate to any Cellco
Indemnitee, make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, file any amended Return,
enter into any closing agreement, settle any Tax claim or assessment, surrender
any right to claim a Tax refund, offset or other reduction in Tax liability,
consent to any extension or waiver of the limitations period applicable to any
Tax claim or assessment or take or omit to take any other action, if any such
action or omission referred to in any clause of this Section 12.03(a) could
have the effect of increasing the Tax liability or reducing any Tax Asset of
any Cellco Indemnitee (other than a reduction in a Tax Asset which is in the
ordinary course of business and consistent with the past practices of the
Company); provided that if such action or omission could have the effect of
increasing the Tax liability or reducing any Tax Asset of any Cellco
Indemnitee, (A) New LP's consent shall be deemed to have been reasonably
withheld unless the Price Corporations pay such Cellco Indemnitee the cost of
the increase in such Tax liability or the reduction in any such Tax Asset and
(B) if the Price Corporations make the payment set forth in the immediately
preceding proviso and such action shall have no other adverse effect on any
Cellco Indemnitee, New LP shall not withhold its consent.
(b) Subject to Section 12.04(c), all Returns required to be filed by any
Price Corporation or any of their Subsidiaries or former Subsidiaries on or
after the Closing Date in respect of a Pre-Closing Tax Period (i) will be
prepared and filed when due in accordance with all applicable laws and (ii) as
of the time of filing, will be true and complete in all material respects. All
such Returns shall be furnished to Cellco at least 45 days before the due date
for filing such Returns, and Cellco shall have the right to review and consent
to all such Returns, which consent shall not be unreasonably withheld. Any
dispute between the Price Corporations and Cellco with respect to Returns shall
be resolved pursuant to Section 12.06(d).
(c) Except as required by law or as consistent with past practices, the
Price Corporations will take no position on any Tax Returns that relate to the
Business that would adversely affect any Cellco Indemnitee after the Closing
Date; provided that for purposes of this sentence, a Cellco Indemnitee shall
not be deemed to be adversely affected if such position (i) does not bind such
Cellco Indemnitee, (ii) does not require any Cellco Indemnitee to concede or
accept, or preclude any Cellco Indemnitee from taking, any Tax position with
respect to any Post-Closing Tax Period, and (iii) could not increase the Tax
liability or reduce a Tax Asset of any Cellco Indemnitee with respect to any
Post-Closing Tax Period.
(d) The Price Corporations will allow Cellco and its counsel at their own
expense to be present at any audits of any Tax Returns to the extent that such
returns relate to the Company. No Price Corporation will settle any audit in a
manner which would adversely affect any Cellco Indemnitee; provided, however,
that a settlement shall not be deemed to have an adverse effect on any Cellco
Indemnitee if the settlement agreement (i) merely requires any Price
Corporation to make a payment, which payment shall be made by a Price
Corporation immediately upon the settlement, (ii) does not require any Cellco
Indemnitee to concede or accept, or preclude any Cellco Indemnitee from taking,
any Tax position with respect to any Post-Closing Tax Period, and (iii) could
not increase the Tax liability or reduce any Tax Asset (other than the
reduction of net operating losses of the Company carried forward from the
Pre-Closing Tax Period) of any Cellco Indemnitee with respect to a Post-Closing
Tax Period (unless the Price Corporations pay such Cellco Indemnitee the cost
of any increase in Tax liability or reduction in such Tax Asset).
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(e) Price Corporations and their Subsidiaries and Former Subsidiaries shall
take all actions, including without limitation filing appropriate and timely
returns and making appropriate and timely elections, that are required to
preclude application of Code Section 732(f) to any Company Contributed Assets
by reason of the Rollup Transactions.
SECTION 12.04. Tax Cooperation; Allocation of Certain Taxes. (a) New LP
and the Price Corporations agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and
assistance relating to the Business and the Company Contributed Assets
(including, without limitation, access to books and records) as is reasonably
necessary for the filing of all Tax returns, the making of any election
relating to Taxes, the preparation for any audit by any taxing authority, and
the prosecution or defense of any claim, suit or proceeding relating to any
Tax. New LP and the Price Corporations shall retain all books and records with
respect to Taxes pertaining to the Contributed Assets until the applicable
statute of limitations with respect to the party in possession of such books
and records that applies to all of the Tax items contained in such books and
records has expired (giving effect to any waiver, mitigation or extension
thereof). At the end of such period, each party shall provide the other with at
least ten days prior written notice before destroying any such books and
records, during which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records. New LP and the Price
Corporations shall cooperate with each other in the conduct of any audit or
other proceeding relating to Taxes involving the Company Contributed Assets or
the Business.
(b) In the case of any Property Taxes that are imposed on a periodic basis
and are payable for a Tax period that includes (but does not end on) the
Closing Date, the portion of such Tax attributable to the Pre-closing Tax
Period shall be deemed to be the amount of such Tax for the entire Tax period
(which period shall be the calendar year in which the assessment date for such
Tax falls) multiplied by a fraction the numerator of which is the number of
days in the Tax period ending on and including the Closing Date and the
denominator of which is the number of days in the entire Tax period. To the
extent not reflected in the calculation of the Final Working Capital Amount,
the Price Corporations shall be liable for the Property Taxes attributable to
any Pre-Closing Tax Period and New LP shall be liable for the Property Taxes
attributable to any Post-Closing Tax Period.
(c) Subject to Section 17.10, all transfer, documentary, sales, use, stamp,
registration, value added taxes and fees (including any penalties and interest)
incurred in connection with the Company Asset Contribution (including, without
limitation, any real property transfer tax and any similar Tax) (collectively,
"Transfer Taxes") shall be paid by the Company when due. The Company will file
all necessary Returns and other documentation with respect to all such Transfer
Taxes and fees, and New LP shall (i) have the right to review and approve
(which approval shall not be unreasonably withheld) the Returns related to the
Transfer Taxes, (ii) reimburse the Company for one-half of the amounts payable
with respect to the Transfer Taxes in the form of an adjustment to the Company
Capital Account, and (iii) if required by applicable law, join, and will cause
its Affiliates to join, in the execution of any Returns and other documentation
related to the Transfer Taxes.
(d) Taxes described in Section 12.04(b) and (c) shall be timely paid, and
all applicable filings, reports and returns shall be filed, as provided by
applicable law. The paying party shall be entitled to reimbursement from the
non-paying party in accordance with Section 12.04(b) or (c), as the case may be
except in the case of Property Taxes, to the extent that such Property Taxes
have been reflected in the calculation of the Final Working Capital Amount.
Upon payment of any such Tax, the paying party shall present a statement to the
non-paying party setting forth the amount of reimbursement to which the paying
party is entitled under Section 12.04(b) or (c), as the case may be together
with such supporting evidence as is reasonably necessary to calculate the
amount to be reimbursed. The non-paying party shall make such reimbursement
promptly but in no event later than 10 days after the presentation of such
statement. Any payment not made within such time shall bear interest at the
rate set forth in Section 15.04(c) for each day until paid.
(e) The parties hereto shall, and shall cause their Affiliates to, each
treat on all Returns the Assets Contributions and the Cash Contributions as a
721 Contribution, and shall not take any position inconsistent therewith on any
Return or otherwise.
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SECTION 12.05. Tax Certificates. (a) At or before the Closing, the Company
will deliver to New LP a tax clearance certificate from each of the States of
Georgia, Alabama, South Carolina and Florida for all periods for which such
certificate may be obtained, indicating that all tax returns required to have
been filed by the Company during such periods have been filed and that all
Taxes required to be paid by the Company, as shown on such returns, have been
paid (each, a "Preliminary Tax Certificate"). If the Company is unable to
deliver any Preliminary Tax Certificate because the Company has not paid all
Taxes which it was required to pay to the applicable jurisdiction, then New LP
shall have the option of paying such Taxes on the Closing Date on behalf of the
Company, and reducing the Company Capital Account by the amount of such tax
payment.
(b) The Company shall deliver to New LP no later than 60 days after the
Closing Date a tax clearance certificate from each of the states of Georgia,
Alabama, South Carolina and Florida for all periods through the Closing Date,
indicating that all tax returns required to have been filed by the Company
through and including such date have been filed and that all Taxes required to
be paid by the Company, as shown on such returns, have been paid.
SECTION 12.06. Dispute Resolution. (a) Not later than 30 days after
receipt by any of the Price Corporations of written notice from Cellco stating
that any Tax Loss has been incurred by a Cellco Indemnitee and the amount
thereof and of the indemnity payment requested, the Price Corporations shall
discharge any obligation to indemnify the Cellco Indemnitee against such Tax
Loss by paying to New LP an amount equal to the amount of such Tax Loss.
Notwithstanding the foregoing, if New LP provides any Price Corporation with
written notice of a Tax Loss at least 30 days prior to the date on which the
relevant Tax Loss is required to be paid by any Cellco Indemnitee, within that
30-day period such Price Corporation shall discharge any obligation to
indemnify the Cellco Indemnitee against such Tax Loss by making payments to the
relevant Taxing Authority or New LP, as directed by New LP, in an aggregate
amount equal to the amount of such Tax Loss. The payment by a Cellco Indemnitee
of any Tax Loss shall not relieve the Price Corporations of their obligation
under Section 15.02.
(b) New LP agrees to give prompt notice to a Price Corporation of any Tax
Loss or the assertion of any claim, or the commencement in writing by the
relevant Taxing Authority of any investigation, inquiry, examination, audit,
suit, action or proceeding (each, a "Tax Proceeding") in respect of which
indemnity may be sought hereunder (specifying with reasonable particularity the
basis therefor and providing Price Parent with copies of all notices and other
correspondence received in connection therewith) and will give a Price
Corporation such additional information with respect thereto as such Price
Corporation may reasonably request. The Price Corporations may, at their own
expense, (i) participate in and (ii) upon notice to New LP, assume the defense
of any Tax Proceeding (including, without limitation, any refund claim relating
thereto); provided that (i) the Price Corporations' counsel is reasonably
satisfactory to New LP, (ii) the Price Corporations shall thereafter consult
with New LP upon New LP's reasonable request for such consultation from time to
time with respect to such Tax Proceeding, (iii) the Price Corporations, upon
the reasonable request of New LP, deposit sufficient finds in an escrow account
to ensure the payment of such claim and (iv) the Price Corporations shall not,
without New LP's consent (which shall not be unreasonably withheld), agree to
any settlement with respect to any Tax if such settlement could have an adverse
affect on any Cellco Indemnitee; provided, however, that a settlement shall not
be deemed to have an adverse effect on any Cellco Indemnitee if the settlement
agreement (i) merely requires Cellco Indemnitee to make a payment (which
payment shall be paid by the Price Corporations), (ii) does not require any
Cellco Indemnitee to concede or accept, or preclude any Cellco Indemnitee from
taking, any Tax position with respect to any Post-Closing Tax Period, and (iii)
could not increase the Tax liability or reduce any Tax Asset of any Cellco
Indemnitee (unless the Price Corporations pay such Cellco Indemnitee the cost
of any such increase in Tax liability or the cost of any such reduction in any
Tax Asset); and provided, further, that in lieu of granting its consent to the
settlement of any Tax item which is the subject of a Tax Loss, New LP shall
have the option, exercisable in its sole discretion, to require the Price
Corporations to (x) pay New LP the amount the Price Corporations would have
paid to the relevant Taxing Authority in respect of the settlement of such Tax
Loss and (y) allow New LP to assume the defense of the audit and settlement of
such issue, in exchange for granting the Price Corporations a release from
their indemnification
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obligations pursuant to Section 15.02 related to such Tax Loss. The Price
Corporations shall use their best efforts to arrive at a settlement agreement
with the relevant Taxing Authority that does not set forth the basis for the
settlement and does not require any Cellco Indemnitee to concede or accept, or
preclude any Cellco Indemnitee from taking, any Tax position. If the Price
Corporations assume such defense, (i) New LP shall have the right (but not the
duty) to participate in the defense thereof and to employ counsel (reasonably
satisfactory to the Price Corporations), at its own expense, separate from the
counsel employed by the Price Corporations and (ii) the Price Corporations
shall not assert that the Tax Loss, or any portion thereof, with respect to
which New LP seeks indemnification is not within the ambit of Section 15.02. If
the Price Corporations elect not to assume such defense, New LP may pay,
compromise or contest the Tax at issue. The Price Corporations shall be liable
for the fees and expenses of counsel employed by New LP for any period during
which the Price Corporations have not assumed the defense thereof. Whether or
not the Price Corporations choose to defend or prosecute any claim, all of the
parties hereto shall cooperate in the defense or prosecution thereof.
(c) Any amounts payable by the Price Corporations to a Cellco Indemnitee
pursuant to Section 15.02 shall be adjusted as follows: (i) to the extent an
additional Tax is imposed on an Cellco Indemnitee in respect of the receipt of
such payment, the amount payable by the Price Corporations with respect to such
payment shall be increased by an amount necessary so that after the payment of
such additional Tax (including any Tax imposed on additional amounts payable
pursuant to this sentence), the Cellco Indemnitee shall have received an amount
equal to what it would have received had no such additional Tax been imposed;
and (ii) such amounts shall be reduced by the amount of any Tax Reduction
actually realized by a Cellco Indemnitee with respect to the adjustment giving
rise to such payment for the Tax period during which such payment is made or in
any preceding Tax period, provided, however, that (A) if the adjustment which
gives rise to Price Corporations' obligation to make a payment pursuant to
Section 15.02 relates to a Tax attribute of the Company, no reduction pursuant
to this clause (ii) shall be made, and (B) if any such Cellco Indemnitee
actually realizes a Tax Reduction in any of the next four succeeding Tax years
and such Tax Reduction has not been taken into account in clause (ii) above,
such Cellco Indemnitee shall pay to the Price Corporations the amount of such
Tax Reduction actually realized. A nationally recognized accounting firm chosen
by the Cellco Indemnitee shall provide the Price Corporations a statement
certifying the amount of such Tax benefit actually realized, if any, by such
Cellco Indemnitee. The Price Corporations shall have no right to review any
information related to the calculation of such Tax benefit.
(d) Disputes arising under Section 12.03(b) and not resolved by mutual
agreement as stated therein shall be resolved by a nationally recognized
accounting firm with no material relationship with Cellco, any partner of
Cellco, the Price Corporations or any Affiliate of the foregoing (the
"Accounting Referee"), chosen and mutually acceptable to both Cellco and the
Price Corporations within five days of the date on which the need to choose the
Accounting Referee arises. The Accounting Referee shall resolve any disputed
items within 30 days of having the item referred to it pursuant to such
procedures as it may require. The costs, fees and expenses of the Accounting
Referee shall be borne equally by Cellco and the Price Corporations.
ARTICLE 13
EMPLOYEE BENEFITS
SECTION 13.01. Employee Benefits Definitions. The following terms, as used
herein, having the following meanings:
"Employee Plans" means the plans referred to in the first sentence of
Section 13.02(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of
the Code.
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SECTION 13.02. ERISA Representations. Each of the Price Corporations
hereby represents and warrants to New LP that:
(a) Schedule 13.02(a) lists each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits, including each "employee benefit plan",
as such term is defined in Section 3(3) of ERISA, which (i) is maintained,
administered or contributed to by the Price Corporations or any of their
Affiliates and (ii) covers any Business Employee (collectively, the
"Employee Plans"). With respect to each Employee Plan, the Price
Corporations have provided a true and complete copy of such contract, plan
or arrangement (or a written description thereof), including all amendments
thereto and written interpretations thereof, and, if applicable, the most
recently filed Form 5500 and an accurate summary description of such plan.
(b) No Employee Plan is a "multiemployer plan", as such term is defined
in Section 3(37) of ERISA, and no Employee Plan is subject to Title IV of
ERISA. Neither Company nor any of its ERISA Affiliates has incurred any
liability under Title IV of ERISA arising in connection with the termination
of any plan covered or previously covered by Title IV of ERISA that could
become, after the Closing Date, an obligation of New LP or any of its
Affiliates.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code (i) has been determined by the Internal Revenue Service
to be so qualified and (ii) each trust forming a part thereof has been
determined to be exempt from tax pursuant to Section 501(a) of the Code and,
in each case, nothing has occurred since such determination that could
reasonably be expected to result in the revocation of such determination.
The Price Corporations have furnished to New LP copies of the most recent
Internal Revenue Service determination letters with respect to each such
Employee Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and
all applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code. No material audit or investigation by any
Governmental Entity is pending or, to the knowledge of the Price
Corporations, threatened, regarding any Employee Plan.
(d) With respect to Business Employees, there are no post-retirement
welfare benefits that are provided, except as required by Section 601 of
ERISA.
(e) Except as disclosed in writing to New LP prior to the date hereof,
there has been no amendment to, written interpretation of or announcement
(whether written or not written) by the Price Corporations or any of their
Affiliates relating to, or change in employee participation or coverage
under, any Employee Plan which would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year.
(f) The Company Contributed Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Section 412(n) of the
Code by reason of the failure of the Company or its ERISA Affiliates to make
timely installments or other payments required by such Section 412.
(g) Except as contemplated by the Employee Plans set forth in Schedule
13.02(a) (or otherwise contemplated by Section 13.07 or 13.08), no Business
Employee will become entitled to any retirement, severance, change in
control benefit, transaction bonus or similar benefit or enhanced benefit
solely as a result of the Contemplated Transactions.
(h) With respect to Business Employees, (i) none of the Price
Corporations or their Affiliates is a party to or subject to any union
contract or collective bargaining agreement, (ii) the Price Corporations and
its Affiliates are in compliance in all material respects with all
applicable laws regarding employment and employment practices, terms and
conditions and wages and hours, and are not engaged in any unfair labor
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practice that would affect the Company in any material respect and (iii)
there is no unfair labor practice complaint pending or, to the knowledge of
the Price Corporations, threatened, before the National Labor Relations
Board that would affect the Company in any material respect.
SECTION 13.03. No Third Party Beneficiaries. No provision of this Article
13 shall create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of the Price
Corporations or of any of their Affiliates in respect of continued employment
(or resumed employment) with either New LP or the Business or any of their
Affiliates, and no provision of this Article 13 shall create any such rights in
any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or any plan or arrangement which may be
established by New LP or any of their Affiliates. No provision of this
Agreement shall constitute a limitation on rights to amend, modify or terminate
after the Closing Date any such plans or arrangements of New LP or any of their
Affiliates.
SECTION 13.04. Employees. (a) Schedule 13.04 sets forth (as of December
14, 2001) a true and complete list of (i) the names, titles, annual salaries
and other compensation of all Business Employees and (ii) the annual rates for
non-salaried Business Employees (by classification). Except as disclosed on
Schedule 13.04, all employees primarily involved in the Business are employees
of the Company and, to the knowledge of the Price Corporations (after due
inquiry), all such employees who are not U.S. citizens are valid legal
permanent residents or hold valid H-1 Visas under the U.S. Immigration and
Nationality Act. The Price Corporations do not have any knowledge of, and have
not investigated the intention of, any Business Employee to resign or retire as
a result of the Contemplated Transactions within one year after the Closing
Date.
(b) Effective as of the Closing Date, New LP or its Affiliates shall make an
offer of employment to all Active Transferred Employees (as defined below) with
such compensation that is, in the aggregate, substantially comparable to the
compensation provided to similarly situated employees of Cellco or its
Affiliates. The employment by New LP or its Affiliates of such Active
Transferred Employees who accept such offer of employment shall commence on the
Closing Date. "Active Transferred Employees" shall mean those Transferred
Employees who are present at work on the Closing Date or who are absent on the
Closing Date solely by reason of vacation or illness, and shall not include any
employee who has terminated his or her employment (for any reason), retired or
died on or before the Closing Date or any Transferred Employee who is absent on
the Closing Date by reason of any leave of absence approved under a policy or
plan set forth in Schedule 13.02(a) ("Inactive Transferred Employee"). New LP
or its Affiliates may employ any such Inactive Transferred Employee on the date
when such leave ends, with such compensation that is, in the aggregate,
substantially comparable to the compensation provided to similarly situated
employees of Cellco or its Affiliates, and the employment of any such Inactive
Transferred Employee who becomes so employed shall commence on such date. Any
Inactive Transferred Employee who is not so employed when such leave ends (or,
prior to the end of such leave, it is determined by New LP or its Affiliates
that such Inactive Transferred Employee shall not be so employed) shall be
treated in accordance with the plans and policies of the Price Corporations or
its Affiliates then in effect (including, if applicable, any severance plans or
policies).
(c) On or after the date hereof, without the written consent of New LP (such
consent not to be unreasonably withheld), the Price Corporations will not, nor
will they permit any of their respective Affiliates or any employee or agent of
the Price Corporations or any such Affiliates to, make any formal communication
to any Business Employee regarding the terms or conditions of such Business
Employee's employment on and after the Closing Date with New LP or its
Affiliates.
SECTION 13.05. Employee Benefits. (a) Effective as of the Closing Date,
New LP or its Affiliates shall provide Transferred Employees who accept their
offer of employment with benefits that are, in the aggregate, substantially
comparable to the benefits provided to similarly situated employees of Cellco
or its Affiliates. New LP or its Affiliates shall give such Transferred
Employees credit for prior service with the Price Corporations for
participation, vesting and benefit entitlement purposes, but not for the
purpose of benefit accrual, under the employee benefit plans, policies or
programs of New LP or its Affiliates.
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(b) Effective as of the Closing Date, the Price Corporations or its
Affiliates shall amend, to the extent necessary, each of the defined
contribution plans in which Business Employees participate (collectively, the
"Price Corporation DC Plans") to cause the account balances of each Transferred
Employee thereunder to vest as of the Closing Date and to cause their active
participation in the Price Corporation DC Plans to cease as of the Closing
Date. The Price Corporations or their Affiliates shall take any steps necessary
to permit such Transferred Employees to receive a distribution of their accrued
benefits from each of the Price Corporation DC Plans as a result of the
Contemplated Transactions; provided that the terms of those plans and
applicable law would permit such a distribution. On or following the Closing
Date, the defined contribution plan of New LP or its Affiliates (the "New LP DC
Plan") shall (if elected by such Transferred Employees) accept individual
rollovers in cash of such Transferred Employees' distributions from the Price
Corporations DC Plans, subject to the terms and conditions of the New LP DC
Plan and applicable law.
(c) Effective as of the Closing Date, the Price Corporations or their
Affiliates shall amend, to the extent necessary, any cafeteria plan in which
Business Employees participate (the "Price Corporation Cafeteria Plan") to
cause the active participation of Transferred Employees in the Price
Corporation Cafeteria Plan to cease as of the Closing Date.
SECTION 13.06. Excluded Employees. Except as provided in Section 11.05 or
13.07, the Price Corporations shall retain and be wholly liable for all
employment-related liabilities and obligations with respect to each Excluded
Employee, including without limitation any liabilities and obligations with
respect to compensation, benefits or employee Actions relating to or arising
from the employment of any Excluded Employee by any of the Price Corporations
or their Affiliates or the termination of such employment. If the employment of
any Excluded Employee is terminated by the Price Corporations or any of their
Affiliates, the Price Corporations shall use reasonable best efforts to have
such Excluded Employee execute a written release of claim in a form consistent
with the form approved by Cellco or its Affiliates in connection with the
Transaction Agreement dated November 14, 2000 (the "Release").
SECTION 13.07. Severance and Similar Liabilities. Fifty percent of (i) any
severance or stay bonus liability, obligation or claim incurred by the Price
Corporations or their Affiliates in connection with any Business Employee (A)
who the Price Corporations or their Affiliates have previously identified in
writing to Cellco before the date hereof as covered by such severance and/or
stay bonus arrangements, where payment is made in accordance with the terms of
their respective arrangements, or (B) who becomes so covered after the date
hereof with the written consent of New LP or Cellco, which consent shall not be
unreasonably withheld; provided, that such consent shall not be required in
respect of an Excluded Employee and (ii) any salary, severance or stay bonus
liability, obligation or claim incurred by the Price Corporations or their
Affiliates in connection with any Excluded Employee who, at the written request
of New LP, remains with the Price Corporations or their Affiliates for up to 90
days after the Closing Date for transitional purposes shall, in each instance,
be reimbursed by Cellco within 15 days after the Closing Date (or, in respect
of such payment to an employee referenced in clause (ii) above, within 15 days
of payment of such amount to such employee); provided that the Price
Corporations shall use reasonable best efforts to have each such employee
execute a Release and a copy of such executed Release has been provided to New
LP or Cellco.
SECTION 13.08. Inactive Transferred Employees. Any salary,
leave-of-absence pay or benefits and similar employment-related liabilities and
obligations required to be paid or honored in connection with any Inactive
Transferred Employee from the Closing Date through the date on which such
Inactive Transferred Employee ends his or her leave of absence in accordance
with the plans and policies of the Price Corporations or its Affiliates then in
effect or in accordance with applicable law shall be paid or honored by the
Price Corporations or their Affiliates; provided, however, that 50% of any such
payment shall be reimbursed by Cellco within 15 days after the Price
Corporations gives notice to Cellco of such payment.
SECTION 13.09. Unpaid Accrued Bonus. All Accrued Bonus Liability as of the
Closing Date in respect of the Transferred Employees shall be paid by the
Company to such Transferred Employees within 30 days after the Closing Date.
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ARTICLE 14
CONDITIONS TO CLOSING
SECTION 14.01. Conditions to Obligations of Each Party. The obligations of
each party hereto to consummate the Closing are subject to the satisfaction of
the following conditions:
(a) The transactions contemplated by this Agreement and the Ancillary
Agreements (other than the VWI Exchange) shall have been approved by the
stockholders of the Price Parent in accordance with New York Law.
(b) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby (other than the VWI Exchange or the VCI
Exchange) shall have expired or been terminated.
(c) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(d) The VCI Registration Statement shall have been declared effective and
no stop order suspending the effectiveness of the VCI Registration Statement
shall be in effect and no proceedings for such purpose shall be pending
before or threatened by the SEC.
(e) The New LP Agreement shall have been executed and delivered by the
parties thereto.
(f) All consents and waivers required under the terms of the Credit
Agreement dated as of April 3, 2000 among Cellco, The Chase Manhattan Bank,
Citibank, N.A. and other financial institutions (the "Cellco Credit
Agreement Consents") in connection with the transactions contemplated hereby
shall have been obtained and shall be in form and substance reasonably
acceptable to Cellco
SECTION 14.02. Conditions to Obligation of Cellco and New LP. The
obligation of each of Cellco and New LP to consummate the Closing is subject to
the satisfaction of the following further conditions:
(a) There shall not be outstanding any indebtedness for borrowed money or
other long-term liabilities of the Business other than the Company Debt.
(b) There shall not have occurred since the date of this Agreement and
there shall not exist any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, will have,
or would reasonably be expected to have, a Material Adverse Effect.
(c) (i) The Price Corporations shall have performed in all material
respects their obligations (other than the obligations set forth in Section
9.01(i)) hereunder required to be performed by them on or prior to the
Closing Date, (ii) the Price Corporations shall have performed their
obligations set forth in Section 9.01(i) and the representations and
warranties of the Price Corporations contained in this Agreement and in any
certificate delivered by the Price Corporations pursuant hereto or pursuant
to any Ancillary Agreement and the representations and warranties made by
each party to the Voting Agreement, in each case disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true at and as of the Closing Date, as if
made at and as of such date with only such exceptions as will not have, and
would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, and (iii) New LP shall have received a
certificate signed by an executive officer of each of the Price Corporations
to the foregoing effect and to the effect set forth in Section 14.02(b).
(d) There shall not be instituted or pending any action or proceeding by
any Governmental Entity or any other Person before any court or other
Governmental Entity, domestic or foreign, seeking to restrain, prohibit or
otherwise interfere with the consummation of the Closing, the Asset
Contributions, or the ownership or operation by New LP or any of its
Affiliates of all or any material portion of the Company Contributed Assets
or the Cellco Contributed Assets or the business or assets of New LP or any
of its Affiliates or to compel New LP or any of its Affiliates to dispose of
all or any material portion of the Company Contributed Assets or the Cellco
Contributed Assets or of New LP or any of its Affiliates or seeking to
require divestiture by New LP or any of its respective Affiliates of any
Company Contributed Assets or Cellco Contributed Assets which, in the case
of an action or proceeding by a Person other than a Governmental Entity, is
reasonably likely to result in judgment in favor of the plaintiff.
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(e) There shall not be any statute, rule, regulation, injunction, order
or decree enacted, enforced, promulgated or issued, by any court or other
Governmental Entity, domestic or foreign, other than the application of the
waiting period provisions of the HSR Act, that will or would reasonably be
expected to, result in any of the consequences referred to in clause
14.02(d) above.
(f) New LP shall have received opinions of Proskauer Rose LLP, counsel to
the Price Corporations, dated the Closing Date substantially in the form of
Exhibit I hereto and Holland & Knight LLP, counsel to the Price
Corporations, dated the Closing Date substantially in the form set forth in
Exhibit M hereto. New LP shall also have received an opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, FCC counsel to the Price Corporations,
dated the Closing Date substantially in the form attached as Exhibit J
hereto. In rendering such opinions, such counsel may rely upon certificates
of public officers, as to matters governed by the laws of jurisdictions
other than New York and Delaware or the federal laws of the United States of
America, upon opinions of counsel reasonably satisfactory to New LP, and, as
to matters of fact, upon certificates of officers of the Price Corporations,
copies of which opinions and certificates shall be contemporaneously
delivered to New LP.
(g) The Pledge Agreement of even date herewith (the "Pledge Agreement"),
shall be in full force and effect and there shall have been taken all
actions necessary or desirable in order to perfect the Lien granted on the
Pledged Interests (as defined in the Pledge Agreement) to Cellco.
(h) the Lock-up Agreements shall be in full force and effect.
(i) The Price Corporations shall have received or delivered, as the case
may be, all Required Consents and all consents, authorizations or approvals
from the governmental agencies referred to in Section 7.03 or 7.19, in each
case in form and substance reasonably satisfactory to New LP, and no such
consent, authorization or approval shall have been revoked.
(j) If the Requisite Noteholder Consent has not been obtained, the
Company shall have effected the Subordinated Debt Defeasance subject to the
New LP having satisfied its obligations under this Agreement.
(k) New LP shall have obtained an ALTA extended coverage form of owner's
or leasehold owner's title insurance policies, or binders to issue the same,
dated the Closing Date and in amounts satisfactory to New LP insuring or
committing to insure, for the benefit of New LP as insured and loss payee,
at ordinary premium rates without any requirement for additional premiums,
good and marketable title to substantially all the Real Property being
transferred pursuant to the terms of this Agreement free and clear of any
Liens, except for Company Permitted Liens and any easements necessary for
the use by New LP of the transferred Real Property shall have been obtained
by New LP.
(l) New LP shall have received all documents it may reasonably request
relating to the existence of the Price Corporations and the authority of the
Price Corporations for this Agreement and the Ancillary Agreements to which
they are parties, all in form and substance reasonably satisfactory to New
LP (including, without limitation, the results of comprehensive lien
searches).
(m) New LP shall have received all documents it may reasonably request to
evidence termination of all Liens arising in connection with the Company
Debt effective upon completion of the transactions contemplated by Sections
2.04 and 2.05.
(n) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Closing shall have been
taken, made or obtained, including written evidence of any pre-closing FCC
approval required to transfer all FCC Authorizations and the transfer of the
Cellco Contributed Assets to New LP (the approval of all such transfers, the
"Cellco FCC Authorization") all of which shall have been taken, made or
obtained pursuant to a Final Order, free of any special conditions adverse
to Cellco, New LP or any of their respective Affiliates. "Final Order" means
an action as to which (i) no request for a stay is pending, no stay is in
effect, and any deadline for filing such request that may be designated by
statute or regulation has passed, (ii) no petition for rehearing or
reconsideration or application for review is pending and the time for the
filing of any such petition or application has passed, (iii) the FCC does
not have the action or decision under reconsideration on its own motion and
the time within which it may effect such reconsideration has passed, and
(iv) no appeal is pending or in effect and any deadline for filing any such
appeal that may be designated by statue or rule has passed.
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(o) Price Parent shall have received an order from the Division of
Investment Management of the SEC exempting it from all provisions, rules and
regulations of the 1940 Act, or, if no such order shall have been received
and in effect as of the Closing, shall be in full compliance with all
provisions, rules and regulations of the 1940 Act (it being understood that
such compliance may be achieved, without limitation, by reliance on Rule
3a-2 of the 1940 Act).
(p) The Giant Bear Agreement shall have been terminated in accordance
with the terms thereof and Section 9.13 of this Agreement.
SECTION 14.03. Conditions to Obligation of The Price Corporations. The
obligation of the Price Corporations to consummate the Closing is subject to
the satisfaction of the following further conditions:
(a) (i) Each of Cellco and New LP shall have performed in all material
respects all of their obligations hereunder and under the Ancillary
Agreements to which they are parties required to be performed by them at or
prior to the Closing Date, (ii) the representations and warranties of each
of Cellco and New LP contained in this Agreement and the Ancillary
Agreements to which they are parties and in any certificate delivered by
either Cellco or New LP pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality, material adverse
effect or NLP Material Adverse Effect, shall be true at and as of the
Closing Date, as if made at and as of such date with only such exceptions as
will not have, and would not reasonably be expected to have, a NLP Material
Adverse Effect, and (iii) the Price Corporations shall have received a
certificate signed by an executive officer of each of Cellco and New LP to
the foregoing effect.
(b) The Price Corporations shall have received an opinion of Davis Polk &
Wardwell, counsel to New LP, dated the Closing Date substantially in the
form set forth in Exhibit L. In rendering such opinion, such counsel may
rely upon certificates of public officers, as to matters governed by the
laws of jurisdictions other than the State of New York or the federal laws
of the United States of America, upon opinions of counsel reasonably
satisfactory to the Price Corporations, and, as to matters of fact, upon
certificates of officers of Cellco and New LP, copies of which opinions and
certificates shall be contemporaneously delivered to the Price Corporations.
(c) On the Closing Date, the Company shall have received a written
confirmation by Proskauer Rose LLP, dated as of the Closing Date, that the
Tax Opinion has not been withdrawn; provided, however, that a failure to
receive such confirmation shall only be a condition under this Section 14.03
if (i) such failure is solely and directly caused by a Change in Law that
occurs prior to the Closing Date (provided, however, that if a Change in Law
relates to the issue discussed in Section III.B of the Tax Opinion, failure
to receive such confirmation shall only be a condition under this Section
14.03 if such Change in Law directly addresses a transfer of an operating
business to a partnership in exchange for an interest that is either
exchangeable at any time or at one or more designated times (other than
shortly following the issuance of the interest) for property or primarily
has a fixed return contingent on the net income (or the net income as
adjusted by certain specially allocated items) of the partnership) and (ii)
Proskauer Rose LLP provides Cellco as soon as reasonably practicable with a
written memorandum that (A) unequivocally states its belief that the Change
in Law provides an independently sufficient basis for the withdrawal of the
Tax Opinion assuming no other changes in the relevant facts, assumptions and
circumstances occurred after the date hereof and (B) explains in reasonable
detail the Change in Law that caused Proskauer Rose LLP to withdraw its
opinion pursuant to this Section 14.03(c).
(d) New LP shall have received all consents, authorizations or approvals
from governmental agencies referred to in Section 8.03, in each case in form
and substance reasonably satisfactory to the Price Corporations, and no such
consent, authorization or approval shall have been revoked.
(e) The Price Corporations shall have received all documents they may
reasonably request relating to the existence of Cellco and New LP and the
authority of Cellco and New LP for this Agreement and the Ancillary
Agreements to which they are parties, all in form and substance reasonably
satisfactory to the Price Corporations.
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(f) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Closing shall have been
taken, made or obtained, including written evidence of the Cellco FCC
Authorization, all which shall have been taken, made or obtained pursuant to
a Final Order, free of any special conditions adverse to the Price
Corporations.
(g) There shall not have occurred since the date of this Agreement and
there shall not exist any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, will have,
or would reasonably be expected to have, a NLP Material Adverse Effect.
(h) There shall not be instituted or pending any action or proceeding by
any Governmental Entity or any other Person before any court or other
Governmental Entity, domestic or foreign, seeking to restrain, prohibit or
otherwise interfere with the consummation of the Closing, the Asset
Contributions, or the ownership or operation by New LP or any of its
Affiliates of all or any material portion of the Company Contributed Assets
or the Cellco Contributed Assets or the business or assets of New LP or any
of its Affiliates or to compel New LP or any of its Affiliates to dispose of
all or any material portion of the Company Contributed Assets or the Cellco
Contributed Assets or of New LP or any of its Affiliates or seeking to
require divestiture by New LP or any of its respective Affiliates of any
Company Contributed Assets or Cellco Contributed Assets which, in the case
of an action or proceeding by a Person other than a Governmental Entity, is
reasonably likely to result in judgment in favor of the plaintiff.
(i) There shall not be any statute, rule, regulation, injunction, order
or decree enacted, enforced, promulgated or issued, by any court or other
Governmental Entity, domestic or foreign, other than the application of the
waiting period provisions of the HSR Act, that will or would reasonably be
expected to, result in any of the consequences referred to in clause
14.03(h) above
ARTICLE 15
SURVIVAL; INDEMNIFICATION
SECTION 15.01. Survival. Notwithstanding anything to the contrary set
forth therein, the representations and warranties and covenants and agreements
of the parties hereto contained in this Agreement or in the Voting Agreements
or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing only as follows:
(i) the representations and warranties in Section 7.19 shall survive the
Closing until the third anniversary of the Closing Date;
(ii) the representations and warranties and covenants set forth in
Article 12 shall survive the Closing until the expiration of the applicable
statute of limitation as such statute may be extended;
(iii) the covenants and agreements contained in Section 15.02(a)(ii),
(a)(iii), (a)(iv) and (a)(vi) and Section 15.02(b)(ii) and (iii) shall
survive the Closing for a period of 5 years;
(iv) the covenants and agreements set forth in Sections 9.07 and Section
11.04(b), (c) and (d) shall each survive for the period specified in each
such section plus an additional 12 months;
(v) the covenants and agreements set forth in Sections 9.05(b) and (c),
11.01(b), 11.03, 11.04(a) and Article 17 shall survive indefinitely;
(vi) the covenants and agreements set forth in the proviso of Section
15.02 and in Section 15.03, 15.04 and 15.05 shall survive the Closing until
the final resolution of all claims governed thereby;
(vii) the provisions of Ancillary Agreements shall survive as set forth
therein; and
(viii) all other representations and warranties, covenants and agreements
shall survive for a period of 18 months after the Closing Date.
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Notwithstanding the preceding sentence, (i) any representation or warranty
or covenant or agreement in respect of which indemnity may be sought under this
Agreement shall survive the time at which it would otherwise terminate pursuant
to the preceding sentence, if notice of the inaccuracy or other breach thereof
giving rise to such right of indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time and (ii) no
indemnity claim may be made in respect of any provision of this Agreement after
the expiration of the survival period applicable to such provision.
SECTION 15.02. Indemnification. (a) Subject to the proviso of this Section
15.02(a), the Price Corporations hereby indemnify Cellco and New LP and their
Affiliates (the "Cellco Indemnified Parties") against and agree to hold each of
them harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
("Damages") incurred or suffered by any of the Cellco Indemnified Parties
arising out of:
(i) any misrepresentation or breach of warranty (determined after
disregarding all qualifications and exceptions contained therein as to
materiality or Material Adverse Effect) (each such misrepresentation and
breach of warranty a "Warranty Breach") by the Price Corporations pursuant
to this Agreement or by the parties to the Voting Agreement (other than New
LP) pursuant to the Voting Agreement;
(ii) any activity or business of the Price Corporations or any of their
Affiliates other than the Business;
(iii) the Rollup Transaction;
(iv) any Company Excluded Asset or Company Excluded Liability;
(v) any breach of covenant or agreement performed or required to be
performed by the Price Corporations pursuant to this Agreement or performed
or required to be performed by the parties to the Voting Agreement (other
than New LP) pursuant to the Voting Agreement;
(vi) any action, suit, investigation or proceeding relating to the
Business and arising out of events, states of facts or circumstances,
occurring or existing prior to the Closing, including without limitation the
litigation described in Schedule 7.10(a) but excluding any such actions,
suits, investigations or proceedings arising after the date of this
Agreement which are brought, at substantially the same time by the same
plaintiffs, against more than ten Persons, none of which are Affiliates of
each other, engaged in a business substantially similar to the Business and
which are based on the same or substantially similar legal theories; or
(vii) any Environmental Liability.
regardless of whether such Damages arise as a result of negligence, strict
liability or recklessness, wilful misconduct or otherwise; provided that with
respect to indemnification by the Price Corporations for (x) any Warranty
Breach pursuant to Section 15.02(a)(i) (other than any breach of warranty or
misrepresentation made by the Price Corporations pursuant to Section 12 which
is not a Tax Warranty Breach, and other than any representation or warranty
relating to the Rollup Transaction), (y) any breach by the Price Corporations
of the covenants contained in Section 9.01(i), and (z) any Environmental
Liabilities, the Price Corporations shall not be liable unless the aggregate
amount of Damages with respect to all such matters referred to in clauses (x),
(y) and (z) of this paragraph exceeds $15,000,000 and then only to the extent
of such excess. Notwithstanding the preceding proviso, the Price Corporations
shall not be required to indemnify any of the Cellco Indemnified Parties for
Damages for Environmental Liabilities unless the aggregate amount of such
Damages exceeds $5,000,000 and then only to the extent of such excess, but it
is understood that any amount of Damages incurred or suffered by any of the
Cellco Indemnified Parties arising from Environmental Liabilities shall be
taken into account for purposes of determining whether the $15,000,000
deductible referred to above has been satisfied.
(b) Cellco hereby indemnifies the Price Corporations and their Affiliates
against and agrees to hold each of them harmless from any and all Damages
incurred or suffered by the Price Corporations or any of their Affiliates
arising out of:
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(i) any Warranty Breach by Cellco or New LP pursuant to this Agreement;
(ii) any Cellco Excluded Liability;
(iii) any asset or business of Cellco or any of its Affiliates other than
the Cellco Contributed Assets; or
(iv) any breach of covenant or agreement performed or required to be
performed by Cellco or New LP or their respective Affiliates under this
Agreement;
regardless of whether such Damages arise as a result of negligence, strict
liability, recklessness, wilful misconduct or otherwise; provided that with
respect to indemnification by Cellco for any Warranty Breach pursuant to this
Section other than any such Warranty Breach of which either Cellco or New LP
had knowledge as of the time such representation and warranty was made
(disregarding the deemed making of representations and warranties on the
Closing Date pursuant to the introductory paragraph of Article 8) and which
Cellco and New LP failed to disclose to the Price Corporations, Cellco shall
not be liable unless the aggregate amount of Damages with respect to all such
Warranty Breaches exceeds $15,000,000 and then only to the extent of such
excess.
SECTION 15.03. Procedures.
(a) In the event a party seeking indemnification, including any Cellco
Indemnified Party (the "Indemnified Party") should have a claim against another
party under Section 15.02 (the "Indemnifying Party") that does not involve a
claim or demand being asserted against or sought to be collected from it by a
third party, the Indemnified Party shall promptly send a notice of such claim
or demand to the Indemnifying Party and, if the Pledge Agreement shall then be
in effect, also to Cellco (with its successors, the "Agent") pursuant to the
Pledge Agreement, which notice(s) shall specify the nature of such claim or
demand and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim and demand) (the "Claim Notice").
(b) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party under Article 15 is asserted against or
sought to be collected from an Indemnified Party by a third party, the
Indemnified Party shall promptly send a Claim Notice with respect to such
claim. The
Indemnifying Party shall have ten days from the personal delivery or mailing of
the Claim Notice (the "Notice Period") to notify the Indemnified Party (and if
the Pledge Agreement shall then be in effect, the Indemnifying Party shall also
give notice thereof to the Agent pursuant to the Pledge Agreement), whether or
not any of the Indemnifying Parties desire, at its sole cost and expense, to
defend the Indemnified Party against such claim or demand.
If an Indemnifying Party notifies the Indemnified Party (and the Agent, if
applicable) within the Notice Period that such Indemnifying Party desires to
defend the Indemnified Party against such claim or demand then, except as
hereinafter provided, such Indemnifying Party shall have the right, together
with the other Indemnifying Parties who have notified the Indemnified Party
that they desire to defend the Indemnified Party, to defend the Indemnified
Party by appropriate proceedings, which proceedings shall be settled or
prosecuted by it to a final conclusion; provided, however, no Indemnifying
Party shall, without the prior written consent of the Indemnified Party,
consent to the entry of any judgment against the Indemnified Party or enter
into any settlement or compromise which (i) does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of a release, in form and substance reasonably satisfactory
to the Indemnified Party from all liability in respect of such claim or
litigation or (ii) includes terms and conditions which, in the reasonable
judgment of the Indemnified Party, impose any burden, restraint, cost,
liability, duty or other obligation on, or otherwise adversely affect, or have
the potential to adversely affect, the Indemnified Party. If any Indemnified
Party desires to participate in, but not control, any such defense or
settlement, it may do so at its sole cost and expense. If, in the reasonable
opinion of the Indemnified Party, any such claim or demand or the litigation or
resolution of any such claim or demand involves an issue or matter which will
have, or would reasonably be expected to have, a materially adverse effect on
the business, operations, assets, properties or prospects of the Indemnified
Party, including without limitation the administration of the tax returns and
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responsibilities under the tax laws of any Indemnified Party, then the
Indemnified Party shall have the right to control the defense or settlement of
any such claim or demand and its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) shall be included as part of the
indemnification obligation of any Indemnifying Party hereunder; provided,
however, that the Indemnified Party shall not settle any such claim or demand
without the prior written consent of the appropriate Indemnifying Party, which
consent shall not be unreasonably withheld. If the Indemnified Party should
elect to exercise such right, the Indemnifying Parties shall have the right to
participate in, but not control, the defense or settlement of such claim or
demand at their sole cost and expense.
(c) If any Indemnifying Party elects not to defend the Indemnified Party
against such claim or demand, whether by not giving the Indemnified Party (and
the Agent, if applicable) timely notice as provided above or otherwise, then
the amount of any such claim or demand, or if the same be defended by the
Indemnified Party (but no Indemnified Party shall have any obligation to defend
any such claim or demand), then that portion thereof as to which such defense
is unsuccessful and the Indemnified Party's reasonable costs and expenses in
conducting such defense (including reasonable attorneys' fees and expenses)
shall be conclusively deemed to be a liability of the Indemnifying Parties.
(d) The omission of any Indemnified Party to give an Indemnifying Party a
Claim Notice shall not relieve the Indemnifying Party from any liability in
respect of such claim, demand or action which it may have to such indemnified
party on account of the indemnity agreement of such Indemnifying Party
contained in Article 15, except to the extent such indemnifying party can
establish actual prejudice and direct damages as a result thereof.
(e) Nothing contained herein shall be deemed to prevent any Indemnified
Party from making a claim hereunder for potential or contingent claims or
demands within the time periods permitted by this Agreement provided the Claim
Notice sets forth the specific basis for any such potential or contingent claim
or demand and the estimated amount thereof to the extent then feasible and the
indemnified party has reasonable grounds to believe that such a claim or demand
will be made.
(f) The procedures set forth in this Section 15.03 shall not apply to
matters which are covered by Section 12.06, which matters shall be handled as
described in such Section.
SECTION 15.04. Payment.
(a) Subject to Section 15.04(b), in the event an action for indemnification
under Article 15 shall have been finally determined, the Indemnifying Party
shall pay the Indemnified Party the amount of such final determination within
10 calendar days after the date of determination in immediately available
funds. The amount of any Damages payable under Article 15 by the Indemnifying
Party shall be (i) net of any amounts actually recovered by the Indemnified
Party under applicable insurance policies, (ii) increased, to the extent an
additional Tax is imposed on an Indemnified Party in respect of the receipt of
such payment, so that after payment of any additional Tax (including any Tax
imposed on additional amounts payable pursuant to this sentence) the
Indemnified Party shall have received an amount equal to what it would have
received if no Tax had been imposed on the receipt of such payment and (iii)
reduced by the amount of any Tax Reduction actually realized by the Indemnified
Party with respect to the adjustment giving rise to such payment for the Tax
period during which such payment is made or in any preceding Tax period;
provided, however, that (A) if the adjustment which gives rise to the
Indemnifying Party's obligation to make a payment pursuant to Article 15
relates to a Tax attribute of the Company, no reduction pursuant to this clause
(iii) shall be made and (B) if the Indemnified Party actually realizes a Tax
Reduction in any of the next four succeeding Tax years and such Tax Reduction
has not been taken into account in clause (iii) above, the Indemnified Party
shall pay to the Indemnifying Party the amount of such Tax Reduction actually
realized. A nationally recognized accounting firm chosen by the Indemnified
Party shall provide the Indemnifying Party a statement certifying the amount of
such Tax Reduction actually realized, if any, by such Indemnified Party. The
Indemnifying Party shall have no right to review any information related to the
calculation of such Tax benefit. For so long as the Company or a Permitted
Transferee thereof holds the ELP Interest, any Damages paid pursuant to this
Section 15.04(a) shall be treated by
A-63
the parties to this Agreement as adjustments to the Initial Company Capital
Account, the Initial General Partner Capital Account, or the Initial Cellco
Limited Partner Capital Account, as the case may be; provided, however, that
the combined effect of any such adjustments and the event giving rise to the
Damages shall not result in a change of the capital account balances of the
partners in New LP, after taking into account the Damages and the payments or
receipts of payments in respect of such Damages.
An action, and the liability for and amount of Damages therefor, shall be
deemed to be "finally determined" for purposes of Article 15 when the parties
to such action have so determined by mutual agreement or, if disputed, when a
final, non-appealable order of a Governmental Entity respecting the action
shall have been entered. Upon the payment in full of any claim, either by set
off or otherwise, the party or entity making payment shall be subrogated to the
rights of the Indemnified Party against any Person, firm, corporation or other
entity with respect to the subject matter of such claim.
(b) To the extent that the Collateral (as defined in the Pledge Agreement)
consists of Pledged Shares (as defined in the Pledge Agreement) and to the
extent that the Pledge Agreement shall then be in effect, any items as to which
any Cellco Indemnified Party is entitled to payment under Section 15 of this
Agreement shall first be paid to such Cellco Indemnified Party from such
Pledged Shares. The number of shares of pledged stock necessary to satisfy the
obligations of the Indemnifying Party with respect to any Damages incurred by a
Cellco Indemnified Party shall be calculated by dividing the claim value, in
U.S. dollars (rounded to the nearest whole dollar), by the Average VCI Stock
Price or the Average VWI Stock Price (as each such term is defined in the
Exchange Agreement), as the case may be as of the date of payment. Any damages
payable under this Section 15.04(b) in Pledged Shares shall be treated by the
parties as an adjustment to the Initial Company Capital Account and, therefore,
to the Company Capital Account balance as of the date of the VWI Exchange or
VCI Exchange, as the case may be. If at any time any Cellco Indemnified Party
is entitled to a payment in accordance with the provisions of this Section 15
and at such time (i) the Pledge Agreement shall not then be in effect, (ii) the
ELP Interest is insufficient to satisfy the obligations of the Indemnifying
Party with respect thereto or (iii) the Collateral (as defined in the Pledge
Agreement) is comprised of the ELP Interest, then unless payment is made to
such Cellco Indemnified Party in immediately available funds pursuant to
Section 15.04(a), at the sole discretion of Cellco, the Company Capital Account
shall be reduced by the amount of such item as to which a Cellco Indemnified
Party is entitled to payment under this Agreement which reduction in the
Company Capital Account shall satisfy the aforesaid obligation of the
Indemnifying Parties to make such payment.
(c) If all or part of any indemnification obligation under this Agreement is
not paid when due, then the Indemnifying Party shall pay the Indemnified Party
interest on the unpaid amount of the obligation for each day from the date the
amount became due until payment in full, payable on demand, at the fluctuating
rate per annum which at all times shall be three (3) percentage points in
excess of the "Prime Rate" published from time to time in the "Money Rates"
table of the Eastern Edition of The Wall Street Journal.
SECTION 15.05. Other Rights and Remedies Not Affected. The indemnification
rights of the parties under Article 12 and this Article 15 are the sole remedy
for money damages but are independent of and in addition to any equitable
rights or remedies, including without limitation specific performance and right
to rescission because of the other parties' misrepresentation fundamentally
affecting the character of the Business or the Company Contributed Assets or
the Cellco Contributed Assets or fraud, and any rights or remedies because of
the other party's fraudulent action, none of which rights or remedies shall be
affected or diminished hereby.
ARTICLE 16
TERMINATION
SECTION 16.01. Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing (notwithstanding any approval of this
Agreement by the stockholders of Price Parent):
(a) by mutual written agreement of the Price Corporations and Cellco;
A-64
(b) by either the Price Corporations or Cellco if the Closing shall not
have been consummated on or before August 31, 2002.
(c) by either the Price Corporations or Cellco if there shall be any law
or regulation that makes consummation of the transactions contemplated
hereunder or under the Ancillary Agreements illegal or otherwise prohibited
or if consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or other
Governmental Entity having competent jurisdiction;
(d) by either the Price Corporations or Cellco if the transactions
contemplated hereunder (other than the VWI Exchange) shall not have been
approved and adopted in accordance with New York law by Price Parent's
stockholders at Price Parent's stockholder meeting (or any adjournment
thereof); or
(e) by either the Price Corporations or Cellco if as permitted by Section
9.09(b), the Board of Directors of Price Parent shall have failed to make or
withdrawn, or modified in a manner adverse to Cellco and New LP, its
approval or recommendation of this Agreement or the transactions
contemplated hereunder (other than the VWI Exchange), or shall have failed
to call Price Parent's stockholder meeting in accordance with Section 9.08,
provided that, in the case of any termination by the Price Corporations, the
Price Corporations shall have paid any amounts due pursuant to Sections
17.03(b) and 17.03(c) in accordance with the terms, and at the times,
specified therein, and provided, further, that, in the case of any
termination by the Price Corporations, (i) the Price Corporations notify
Cellco and New LP, in writing and at least 72 hours prior to such
termination, promptly of their intention to terminate this Agreement and to
enter into a binding written agreement concerning an Acquisition Proposal
that constitutes a Superior Proposal, attaching the most current version of
such agreement (or a description of all material terms and conditions
thereof), and (ii) Cellco and New LP do not make, within 72 hours of receipt
of such written notification, an offer that is at least as favorable to the
shareholders of the Price Corporations, as such Superior Proposal, it being
understood that the Price Corporations shall not enter into any such binding
agreement during such 72-hour period.
The party desiring to terminate this Agreement pursuant to Section 16.01(b),
16.01(c), 16.01(d) or 16.01(e) shall give notice of such termination to the
other party.
SECTION 16.02. Effect of Termination. Subject to Section 17.03, if this
Agreement is terminated as permitted by Section 16.01, such termination shall
be without liability of any party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to any other party
to this Agreement; provided that if such termination shall result from the (i)
willful failure of either party to fulfill a condition to the performance of
the obligations of the other party, (ii) failure to perform a covenant of this
Agreement or (iii) breach by either party hereto of any representation or
warranty or agreement contained herein, such party shall be fully liable for
any and all Damages incurred or suffered by the other party as a result of such
failure or breach. The provisions of this Section 16.02 and Sections 10.01,
11.03, 17.03, 17.05, 17.06, 17.07, 17.11 and 17.13 shall survive any
termination hereof pursuant to Section 16.01.
ARTICLE 17
MISCELLANEOUS
SECTION 17.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to New LP or Cellco:
S. Mark Tuller
Vice President
Legal and External Affairs
Verizon Wireless
180 Washington Valley Road
A-65
Bedminster, NJ 07921
Fax: (908) 306-7329
with copies to:
Verizon Communications Inc.
1095 Avenue of the Americas, 36th Floor
New York, NY 10036
Attention: David Benson
Philip Marx
Fax: (212) 921-2971
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Diane G. Kerr
Fax: (212) 450-4800
if to the Price Corporations:
Robert Price
President/Chief Executive Officer
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Fax: (212) 397-3755
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Peter G. Samuels
Fax: (212) 969-2900
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day in the place of
receipt.
SECTION 17.02. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 17.03. Expenses. (a) Except as otherwise provided in this Section,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
(b) The Price Corporations shall pay Cellco a fee (the "Termination Fee") of
$66,000,000 (subject to adjustment as provided below), by wire transfer of
immediately available funds, if:
A-66
(i) This Agreement is terminated by the Price Corporations pursuant to
Section 16.01(e), in which case the Termination Fee shall be payable
simultaneously with such termination, provided that, notwithstanding Section
16.01(e) or anything else to the contrary in this Agreement, the Price
Corporations, without being deemed to be in violation of this Agreement and
without giving any right of termination of this Agreement, may enter into
and perform prior to the Closing a binding written agreement concerning an
Acquisition Proposal that constitutes a Superior Proposal (an "Alternative
Agreement") and perform its pre-closing obligations thereunder without
terminating this Agreement pursuant to Section 16.01(e), so long as the
Alternative Agreement acknowledges expressly the existence of this Agreement
and requires that the Price Corporations terminate this Agreement prior to
the closing under the Alternative Agreement.
(ii) The Price Corporations enter into an Alternative Agreement and this
Agreement is not terminated by the Price Corporations pursuant to Section
16.01(e), in which case the Termination Fee shall be payable upon the
earliest to occur of (x) the Closing of the transactions contemplated by the
Alternative Agreement, (y) any subsequent termination of this Agreement by
the Price Corporations under any provision set forth in Section 16.01, and
(z) the later of (A) August 31, 2002 and (B) the four month anniversary of
the date on which such Alternative Agreement was entered into.
(iii) This Agreement is terminated pursuant to Section 16.01(b) after
Price Parent's stockholders meeting (or any adjournment thereof) if at such
meeting or adjournment the transactions contemplated hereunder (other than
the VWI Exchange) shall not have been approved and adopted in accordance
with New York law by Price Parent's stockholders or pursuant to Section
16.01(d) and either (x) at any time within six months after the date of such
termination, the Price Corporations enter into a binding written agreement
that results in or will result in a Change of Control (other than the
transactions contemplated by this Agreement) or (y) at any time during the
period commencing on the six month anniversary of the date of such
termination and ending on the one year anniversary of such date, the Price
Corporations enter into a binding written agreement that results in or will
result in a Change of Control that constitutes a Superior Proposal, in
either of which cases the Termination Fee shall be payable immediately upon
consummation of such Change of Control; provided that if the Change of
Control is a transaction referred to in clause (i) of the definition of
"Change of Control" but involves not more than 50% of the assets of the
Company, not more than 50% of any class of equity or voting securities of
the Company taken as a whole and not more than 50% of the Business, the
Termination Fee shall be reduced to equal the amount determined by
multiplying $66,000,000 by the percentage of such assets, class of equity or
voting securities or Business contemplated to be sold, merged or otherwise
disposed of pursuant to the Alternative Agreement.
(c) The Price Corporations acknowledge that the agreements contained in this
Section 17.03 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Cellco and New LP would not enter
into this Agreement. Accordingly, if the Price Corporations fail promptly to
pay any amount due to Cellco pursuant to this Section 17.03, they shall also
pay any costs and expenses incurred by Cellco or New LP in connection with a
legal action to enforce this Agreement that results in a judgment against the
Price Corporations for such amount.
SECTION 17.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that New LP may transfer
or assign, in whole or from time to time in part, to one or more of its
Affiliates, the right to purchase all or a portion of the Company Contributed
Assets, but no such transfer or assignment will relieve New LP of its
obligations hereunder.
SECTION 17.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 17.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby
shall be brought in the United States District Court for the Southern District
of New York or any New York State court sitting in
A-67
New York City, so long as one of such courts shall have subject matter
jurisdiction over such suit, action or proceeding, and that any cause of action
arising out of this Agreement shall be deemed to have arisen from a transaction
of business in the State of New York, and each of the parties hereby
irrevocably consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 17.01 shall
be deemed effective service of process on such party.
SECTION 17.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 17.08. Counterparts; Effectiveness; Third Party
Beneficiaries. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. No provision of this
Agreement is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 17.09. Entire Agreement. This Agreement (including any exhibits or
schedules hereto and other documents executed in connection herewith), the
Confidentiality Agreements and the Ancillary Agreements, constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 17.10. Bulk Sales Laws. Except as provided by Section 12.05, New
LP and the Price Corporations each hereby waive compliance by the Price
Corporations with the provisions of the "bulk sales", "bulk transfer" or
similar laws of any state. The Price Corporations agree to indemnify and hold
Cellco and New LP and their respective Affiliates harmless against any and all
claims, losses, damages, liabilities, costs and expenses incurred by Cellco and
New LP or any of their respective Affiliates as a result of any failure to
comply with any such "bulk sales", "bulk transfer" or similar laws.
SECTION 17.11. Joint and Several Liability. Each of the Price Corporations
shall be jointly and severally liable for the performance of all of the Price
Corporations' obligations hereunder.
SECTION 17.12. General Partner Liability. The parties hereby agree that
the obligations of Cellco under this Agreement shall be non-recourse to the
general partners of Cellco.
SECTION 17.13. Appointment of Agent. Each of the Price Corporations hereby
irrevocably constitutes and appoints Price Parent as its agent and true and
lawful attorney in fact with full power and discretion, in the name of and for
and on behalf of each of the Price Corporations, in connection with all matters
arising from, contemplated by or relating to this Agreement. The powers of
Price Parent include, without limitation, the power to represent each of the
Price Corporations with respect to all aspects of this Agreement, which power
shall include, without limitation, the power to (i) waive any conditions of
this Agreement, (ii) amend this Agreement in any respect, (iii) receive notices
or other communications, (iv) deliver any notices, certificates or other
documents required and (v) take all such other action and to do all such other
things as Price Parent deems necessary or advisable with respect to this
Agreement. Each other party to this Agreement shall have the right to rely upon
the acts taken or omitted to be taken by Price Parent on behalf of the Price
Corporations, and shall have no duty to inquire as to the acts and omissions of
Price Parent.
SECTION 17.14. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
A-68
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
PRICE COMMUNICATIONS CORPORATION
By: /S/ KIM I. PRESSMAN
-----------------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS CELLULAR INC.
By: /S/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS
CELLULARHOLDINGS, INC.
By: /S/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS WIRELESS, INC.
By: /S/ KIM I. PRESSMAN
-------------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
CELLCO PARTNERSHIP
By: /S/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Chief Executive Officer
VERIZON WIRELESS OF THE EAST LP
By: VERIZON WIRELESS OF GEORGIA
LLC,
as General Partner
By: /S/ DENNIS F. STRIGL
-------------------------------
Dennis F. Strigl
Chief Executive Officer
A-69
ANNEX B
FORM OF AGREEMENT OF LIMITED PARTNERSHIP
================================================================================
VERIZON WIRELESS OF THE EAST LP
AGREEMENT
OF LIMITED PARTNERSHIP
dated as of
, 200
among
VERIZON WIRELESS OF GEORGIA LLC
[CELLCO SUB]
PRICE COMMUNICATIONS WIRELESS, INC.
================================================================================
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.......................................... B-1
ARTICLE 2
THE PARTNERSHIP
SECTION 2.01. Formation............................................ B-6
SECTION 2.02. Name................................................. B-6
SECTION 2.03. Purpose.............................................. B-6
SECTION 2.04. Registered Office.................................... B-6
B-6
SECTION 2.05. Term................................................. B-6
SECTION 2.06. Filings; Agent for Service of Process................ B-6
SECTION 2.07. Independent Activities............................... B-7
SECTION 2.08. Fiscal Year.......................................... B-7
ARTICLE 3
CONTRIBUTIONS; PERCENTAGE INTEREST
SECTION 3.01. Managing General Partner............................. B-7
SECTION 3.02. Limited Partners..................................... B-7
SECTION 3.03. Additional Contributions............................. B-7
ARTICLE 4
ALLOCATIONS
SECTION 4.01. Profits.............................................. B-8
SECTION 4.02. Losses............................................... B-8
SECTION 4.03. Special Allocations.................................. B-8
SECTION 4.04. Allocation of Liabilities............................ B-9
SECTION 4.05. Curative Allocations................................. B-9
SECTION 4.06. Loss Limitation...................................... B-10
SECTION 4.07. Tax Allocations...................................... B-10
SECTION 4.08. Tax Matters Partner, Tax Elections................... B-10
SECTION 4.09. Classification as Partnership........................ B-10
ARTICLE 5
DISTRIBUTIONS
SECTION 5.01. Price LP Distribution................................ B-10
SECTION 5.02. Amounts Withheld..................................... B-11
SECTION 5.03. Other Distributions.................................. B-11
ARTICLE 6
MANAGEMENT
SECTION 6.01. Authority of the Managing General Partner............ B-11
SECTION 6.02. Right to Rely on Managing General Partner............ B-11
SECTION 6.03. Management Committee................................. B-11
SECTION 6.04. Restrictions on Authority of Managing General Partner B-11
SECTION 6.05. Day-to-day Management................................ B-13
SECTION 6.06. Duties and Obligations; Exculpation.................. B-13
i
PAGE
----
SECTION 6.07. Indemnification of Managing General Partner........................ B-14
SECTION 6.08. Compensation and Reimbursement..................................... B-14
SECTION 6.09. Operating Restrictions............................................. B-14
SECTION 6.10. Rights or Powers................................................... B-15
SECTION 6.11. Voting Rights...................................................... B-15
ARTICLE 7
BOOKS AND RECORDS
SECTION 7.01. Books and Records.................................................. B-15
SECTION 7.02. Periodic Reports; Financial Statements............................. B-15
SECTION 7.03. Operational Information............................................ B-16
SECTION 7.04. Tax Information.................................................... B-16
ARTICLE 8
CERTAIN COVENANTS
SECTION 8.01. Confidentiality.................................................... B-16
SECTION 8.02. Press Announcements................................................ B-17
ARTICLE 9
AMENDMENTS; MEETINGS
SECTION 9.01. Amendments......................................................... B-17
SECTION 9.02. Meetings of the Partners........................................... B-17
ARTICLE 10
TRANSFERS OF INTERESTS, ETC
SECTION 10.01. Restriction of Transfers of Interests.............................. B-17
SECTION 10.02. Permitted Transfers................................................ B-17
SECTION 10.03. Conditions to Permitted Transfers.................................. B-18
SECTION 10.04. Prohibited Transfers............................................... B-18
SECTION 10.05. Rights of Unadmitted Assignees..................................... B-18
SECTION 10.06. Admission of Transferees As Partners............................... B-19
SECTION 10.07. Cure Period........................................................ B-19
SECTION 10.08. Distributions and Allocations with Respect to Transferred Interests B-20
ARTICLE 11
MANAGING GENERAL PARTNER
SECTION 11.01. Business Activities................................................ B-20
SECTION 11.02. Covenant not to Withdraw, Transfer, or Dissolve.................... B-20
ARTICLE 12
DISSOLUTION AND WINDING UP
SECTION 12.01. Liquidating Events................................................. B-20
SECTION 12.02. Winding up......................................................... B-21
SECTION 12.03. Allocations During Period of Liquidation........................... B-22
SECTION 12.04. Indemnification of the Liquidator.................................. B-22
ARTICLE 13
POWER OF ATTORNEY
SECTION 13.01. Managing General Partner as Attorney-in-fact....................... B-22
SECTION 13.02. Special Power...................................................... B-22
ii
PAGE
----
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices........................................................... B-23
SECTION 14.02. Managing General Partner or New LP Breach......................... B-23
SECTION 14.03. Binding Effect.................................................... B-24
SECTION 14.04. Construction...................................................... B-24
SECTION 14.05. Assignability..................................................... B-24
SECTION 14.06. Headings.......................................................... B-24
SECTION 14.07. Severability; Integration......................................... B-24
SECTION 14.08. Further Action.................................................... B-24
SECTION 14.09. Variation of Pronouns............................................. B-24
SECTION 14.10. Governing Law..................................................... B-24
SECTION 14.11. Waiver of Action for Partition; No Bill for Partnership Accounting B-24
SECTION 14.12. Counterpart Execution............................................. B-24
SECTION 14.13. Limitation on Limited Partner Obligations......................... B-24
SECTION 14.14. Limited Partner Rights............................................ B-24
iii
AGREEMENT OF LIMITED PARTNERSHIP
OF
VERIZON WIRELESS OF THE EAST LP
This AGREEMENT OF LIMITED PARTNERSHIP is entered into and shall be effective
as of the day of , 200 , by and among (i) Verizon Wireless of
Georgia LLC, a Delaware limited liability company (the "Managing General
Partner"), as Managing General Partner, and (ii) [Cellco Sub], a
("Cellco LP"), and Price Communications Wireless, Inc., a Delaware corporation
("Price LP"), as the Limited Partners, pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Section 17-101 et
seq. (the "Act").
WHEREAS, Price Communications Corporation, a New York corporation ("Price
Parent"), Price Communications Cellular Inc., a Delaware corporation ("Price
Cellular"), Price Communications Cellular Holdings, Inc., a Delaware
corporation ("Price Shareholder" and, together with Price Parent, Price
Cellular and Price LP, the "Price Corporations"), Cellco Partnership, a
Delaware general partnership ("Cellco"), and the Partnership are parties to a
Transaction Agreement dated as of December 18, 2001 (as amended from time to
time, the "Transaction Agreement"), and the Price Corporations, Verizon
Communications Inc., a Delaware corporation, and Verizon Wireless Inc., a
Delaware corporation, are parties to an Exchange Agreement dated as of December
18, 2001 (as amended from time to time, the "Exchange Agreement");
WHEREAS, the parties hereto wish to set forth their rights and obligations
with respect to Verizon Wireless of the East LP;
NOW THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) Capitalized words and phrases used in this
Agreement and not defined herein have the meanings ascribed thereto in
theTransaction Agreement. In addition, the following capitalized words and
phrases used in this Agreement have the following meanings:
"Adjusted Base Rate" means 4.00% per annum compounded quarterly minus the
Rate Adjustment Percentage.
"Additional Capital Contributions" means any Capital Contributions made
by the Managing General Partner or Cellco LP pursuant to Section 3.03 or by
Price LP pursuant to Section 5.01(c).
"Adjusted Capital Account Deficit" means, with respect to any Limited
Partner, the deficit balance, if any, in such Limited Partner's Capital
Account as of the end of the relevant Allocation Year, after giving effect
to the following adjustments: debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations. The foregoing definition of
Adjusted Capital Account Deficit is intended to comply with the provisions
of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Allocation Year" means (i) the period commencing on the Closing Date and
ending on December 31, 2001, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (iii) any portion of
the period described in clauses (i) or (ii) for which the Partnership is
required to allocate Profits, Losses and other items of Partnership income,
gain, loss or deduction pursuant to Article 4 hereof.
"Applicable Rate" means (i) prior to the Rate Reduction Date, the
Adjusted Base Rate, and (ii) on and after the Rate Reduction Date, zero.
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"Capital Account" means, with respect to each Partner, the Capital
Account maintained for such Partner in accordance with the following
provisions:
(i) To each Partner's Capital Account there shall be credited (A)
such Partner's Capital Contributions, (B) such Partner's share of Profit
allocated pursuant to Section 4.01 and any items of Partnership income
or gain which are specially allocated pursuant to Section 4.03, (C) any
credit required pursuant to Section 6.03 of the Transaction Agreement,
and (D) the amount of any Partnership liabilities assumed by such
Partner or which are secured by any Property distributed to such Partner.
(ii) To each Partner's Capital Account there shall be debited (A) the
amount of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, (B) such
Partner's share of Loss allocated pursuant to Section 4.02 and any items
of Partnership deduction or loss which are specially allocated pursuant
to Section 4.03 (other than pursuant to Section 4.03(d)), (C) any debit
required pursuant to Section 6.03 of the Transaction Agreement, and (D)
the amount of any liabilities of such Partner assumed by the Partnership
or which are secured by any property contributed by such Partner to the
Partnership.
(iii) If all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
(iv) In determining the amount of any liability for purposes of
clauses (i) and (ii) above, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulation.
"Capital Contribution" means, with respect to each Partner, the amount of
cash and initial Gross Asset Value of any Property (other than cash)
contributed to the Partnership with respect to the Interest in the
Partnership held by such Partner.
"Closing Date" means the date on which the Original Capital Contributions
are made.
"Conversion" means the conversion of the technology used by the Business
to provide digital wireless service from time division multiple access
(TDMA) to code division multiple access (CDMA).
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax
basis; provided, however, that if the federal income tax depreciation,
amortization, or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Managing General Partner.
"Exchange" means a VCI Exchange or a VWI Exchange (as such terms are
defined in the Exchange Agreement).
"Exchange Notice Deadline" has the meaning ascribed to such term in the
Exchange Agreement.
"Exchange Revocation Notice" has the meaning set forth in the Exchange
Agreement.
"Exchange Trigger Date" has the meaning set forth in the Exchange
Agreement.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes; provided, however, that the
initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the gross fair market value of such asset, as specified
in Section 3.01 or Section 3.02. If the Gross Asset Value has been
determined under the preceding proviso, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of the allocations made pursuant to Article 4.
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"Indebtedness" means, with respect to the Partnership, (i) all
indebtedness of the Partnership for borrowed money or for the deferred
purchase price of property, payment for which is deferred six (6) months or
more (but excluding accounts payable incurred in the ordinary course of
business), (ii) all obligations evidenced by notes, bonds, debentures or
similar instruments, (iii) all obligations under lease of property by the
Partnership (whether real, personal or mixed) that would be required to be
classified as a capital lease in accordance with GAAP and (iv) all
guaranties by the Partnership of any the foregoing obligations of any other
Person.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any time, including the rights of such Partner to capital,
Profit, Loss, distributions and other benefits to which such Partner may
become entitled hereunder, and the obligations of such Partner to comply
with the terms and provisions of this Agreement and the Act.
"Limited Partner" means Price LP or Cellco LP. "Limited Partners" means
both such Persons.
"Original Capital Contribution" means, with respect to each Partner, the
Capital Contribution made by such Partner pursuant to the Transaction
Agreement and Section 3.01 or Section 3.02 (as the case may be).
"Partners" means the Managing General Partner and the Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners.
"Partnership" means the partnership continued pursuant to this Agreement.
"Percentage Interest" means 1% with respect to the Managing General
Partner and 99% with respect to Cellco LP.
"Permitted Transfer" means a Transfer of an Interest pursuant to Section
10.02.
"Permitted Transferee" means with respect to each of the Managing General
Partner, Cellco LP and Price LP, each of the Persons to whom its Interest
may be Transferred in accordance with Article 10.
"Preferred Return" means a return accreted quarterly on the weighted
daily average balance of Price LP's Capital Account at the Applicable Rate
from the Closing Date.
"Price Profit Allocation" means, with respect to any fiscal year, Price
LP's share of any Profit for such fiscal year allocated to Price LP's
Capital Account pursuant to Sections 4.01(b) and 4.03.
"Property" means all real and personal property acquired by the
Partnership, including cash, and shall include both tangible and intangible
property.
"Profits" and "Losses" means, for each Allocation Year, an amount equal
to the Partnership's taxable income or loss for such Allocation Year, or
portion thereof, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss) with the following adjustments:
(i) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of "Profits" and "Losses" shall be added to
such taxable income or loss;
(ii) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition of "Profits" and "Losses" shall be subtracted from such
taxable income or loss;
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(iii) gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for United States federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value, and such gain
or loss shall be computed by taking into account the cost of any
appraisal of such Property incurred by the Partnership or any expense
of, or expense reimbursable by, the Partnership in connection with such
appraisal;
(iv) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such
Allocation Year, or portion thereof, computed in accordance with the
definition of Depreciation; and
(v) notwithstanding any other provision of this definition, any items
which are required to be specially allocated pursuant to Section 4.03
hereof shall not be taken into account in computing Profits or Losses.
"Quarterly Distribution Amount" means, subject to Section 5.01(c), (i)
with respect to each of the first, second and third quarters of any fiscal
year (but not with respect to any quarter, or portion thereof, occurring
prior to the second anniversary of the Closing Date), an amount of cash
estimated in good faith by the Managing General Partner to be equal to
50.00% of Price LP's share of any Profit for such fiscal quarter which would
be allocated to Price LP's Capital Account pursuant to Sections 4.01(b) and
4.03 if such allocation were made on a quarterly basis, and (ii) with
respect to the fourth quarter of any fiscal year, an amount of cash equal to
(A) if the Price Profit Allocation for such fiscal year is less than the
Threshold Profit Allocation for such fiscal year, an amount of cash equal to
(x) the Price Profit Allocation minus (y) the sum of the Quarterly
Distribution Amounts for the first, second and third quarters of such fiscal
year, or (B) if the Price Profit Allocation for such fiscal year is greater
than or equal to the Threshold Profit Allocation for such fiscal year, an
amount of cash equal to (x) the Threshold Profit Allocation minus (y) the
sum of the Quarterly Distribution Amounts for the first, second and third
quarters of such fiscal year. For purposes of clause (ii) above, with
respect to the fiscal year in which the second anniversary of the Closing
Date occurs, the Price Profit Allocation and the Threshold Profit Allocation
shall take into account only the portion of such fiscal year which occurs
after such anniversary. For purposes of determining the Quarterly
Distribution Amount, it shall be assumed that the aggregate amount of Profit
allocated to Price LP for the period from the Closing Date to and including
the second anniversary of the Closing Date is equal to the cumulative
Preferred Return for such period.
"Rate Adjustment Percentage" means the product obtained by multiplying
(i) the difference between (A) the annual rate of interest payable by New LP
in respect of the New LP Financing determined as set forth in Section 2.06
of the Transaction Agreement and (B) the rate of interest that would be
payable by New LP through Cellco Partnership on a loan extended to it by
Verizon Global Funding Corp. as set forth in the most recent monthly Cash
Pool Interest Notice delivered prior to the Closing Date by VCI to Cellco,
which rate shall be certified in writing to the Company by the controller of
Cellco and (ii) a fraction, the numerator of which is $350,000,000 and the
denominator of which is the Company's Original Capital Contribution.
"Rate Reduction Date" means the earliest date on which there occurs any
of the following (i) an Exchange, (ii) the Exchange Notice Deadline and
(iii) the fourth anniversary of the Closing Date; provided that, solely for
purposes of clause (ii) of this definition, the Exchange Notice Deadline
will be deemed not to have occurred if (A) Price LP has a right to deliver
and delivers a VWI Exchange Revocation Notice in compliance with Section
2.01(d) of the Exchange Agreement, (B) Price LP delivers a VWI Exchange
Notice in compliance with Section 2.01 of the Exchange Agreement, the
stockholders of Price Parent approve the VWI Exchange contemplated by such
VWI Exchange Notice, the VWI Exchange is not consummated prior to the fourth
anniversary of the Closing Date, the failure to consummate the VWI Exchange
is not the result of a failure by any Price Corporation or VWI to have
performed, in all material respects, their respective obligations under the
Transaction Agreement and the ELP Interest has not been exchanged for VCI
Stock
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pursuant to Section 2.02(b) of the Exchange Agreement, (C) Price LP has a
right to deliver, but has not delivered, a VWI Exchange Revocation Notice
pursuant to Section 2.01(d) of the Exchange Agreement and at any time prior
to the Revocation Deadline, the ELP Interest is exchanged for VCI Stock
pursuant to Section 2.02(b) of the Exchange Agreement or (D) the ELP
Interest has been exchanged for VCI Stock pursuant to Section 2.02(b) of the
Exchange Agreement prior to the fourth anniversary of the Closing Date, but
otherwise, all of the conditions set forth in clause (B) above have been
met. For the purposes of the foregoing, the determination that no Exchange
Notice Deadline has occurred shall be made on, and effective as of, (x) the
Revocation Deadline, in the case of clause (A), (y) the fourth anniversary
of the delivery by the Company of the VWI Exchange Notice, in the case of
clause (B), and (z) the date of the VCI Exchange, in the cases of clause (C)
and (D) and any such applicable date shall hereinafter be referred to as the
"Determination Date".
"Regulations" means the Income Tax Regulations promulgated under the
Code, as amended from time to time.
"Threshold Profit Allocation" means, with respect to any fiscal year,
50.00% of (i) the weighted daily average balance of Price LP's Capital
Account during such fiscal year multiplied by (ii) the Applicable Rate for
such fiscal year (adjusted for quarterly compounding (unless the Applicable
Rate is zero) and for any change in the Applicable Rate which occurs during
such fiscal year).
"Transfers" means, as a noun, any voluntary or involuntary transfer,
sale, pledge, hypothecation, or other disposition and, as a verb,
voluntarily or involuntarily to transfer, sell, pledge, hypothecate or
otherwise dispose of.
"Unallocated Preferred Return" means the excess, if any, of (i) the
cumulative Preferred Return over (ii) the aggregate amount of Profits or
income allocated to Price LP pursuant to Sections 4.01(b) and 4.03 for all
prior Allocation Years.
"VWI Exchange" has the meaning set forth in the Exchange Agreement.
"VWI Exchange Notice" has the meaning set forth in the Exchange Agreement.
(b) Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
---- -------
Cellco LP...................... Preamble
Cellco......................... Preamble
Certificate.................... 2.06
Cure Transfer.................. 10.07
Determination Date............. definition of
"Rate Reduction Date"
Excess Distribution Amount..... 5.01(c)
Exchange Agreement............. Preamble
Information.................... 8.01
Liquidating Events............. 12.01
Liquidator..................... 12.02
Management Committee........... 6.03
Managing General Partner....... Preamble
Nonacquiesced Transaction...... 6.04(c)
Nonacquiesced Transaction Items 6.04(c)
Partnership Business........... 2.03
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Term Section
---- -------
Price Shareholder....... Preamble
Price Parent............ Preamble
Price Corporations...... Preamble
Price Cellular.......... Preamble
Price LP................ Preamble
Regulatory Allocations.. 4.05(a)
Relevant Party.......... 6.06(b)
Statement of Partnership 6.09(b)
Subject Transfer........ 10.07
Tax Matters Partner..... 4.08
Transaction Agreement... Preamble
ARTICLE 2
THE PARTNERSHIP
SECTION 2.01. Formation. The Partnership was formed on December 17, 2001.
The Partners hereby agree to continue the Partnership as a limited partnership
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement.
SECTION 2.02. Name. The name of the Partnership shall continue to be
Verizon Wireless of the East LP and all business of the Partnership shall be
conducted in such name. The Managing General Partner may change the name of the
Partnership upon 10 days notice to Price LP. Except as otherwise provided in
this Agreement, the Partnership shall hold all of its property in the name of
the Partnership and not in the name of any Partner.
SECTION 2.03. Purpose. The purpose of the Partnership is to acquire the
Contributed Assets pursuant to the Transaction Agreement and to engage in the
business of constructing, developing, managing, operating, marketing and
selling cellular telephone systems and service, wireless service, paging
service, PCS service and other commercial mobile radio service, and any
business related thereto (the "Partnership Business"), and to do everything
necessary or desirable for the accomplishment of the above purposes or the
furtherance of any of the powers set forth herein, and to do every other act
and thing incident thereto or connected therewith.
SECTION 2.04. Registered Office. The registered office of the Partnership
in the State of Delaware is located at Corporation Service Company, 1013 Center
Road, Wilmington, Delaware 19805-1297.
SECTION 2.05. Term. The term of the Partnership shall commence on the date
the Partnership was formed, as set forth in Section 2.01, and shall continue
until the winding up and liquidation of the Partnership and its business is
completed following a Liquidating Event, as provided in Section 12.01 hereof.
SECTION 2.06. Filings; Agent for Service of Process.
(a) A Certificate of Limited Partnership (the "Certificate") has been filed
in the office of the Secretary of State of the State of Delaware in accordance
with the provisions of the Act. The Managing General Partner shall take any and
all other actions reasonably necessary to perfect and maintain the status of
the Partnership as a limited partnership under the laws of the State of
Delaware. The Managing General Partner shall cause amendments to the
Certificate to be filed whenever required by the Act. Such amendments may be
executed by the Managing General Partner.
(b) The Managing General Partner shall execute and cause to be filed an
original or amended Certificate and shall take any and all other actions as may
be reasonably necessary to perfect and maintain the status of the Partnership
as a limited partnership or similar type of entity under the laws of any other
state or jurisdictions in which the Partnership engages in business.
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(c) The registered agent for service of process on the Partnership in the
State of Delaware shall be Corporation Service Company, 1013 Center Road,
Wilmington, Delaware 19805-1297, or any successor as appointed by the Managing
General Partner in accordance with the Act.
(d) Upon the dissolution of the Partnership, the Managing General Partner
(or, if the Managing General Partner does not wind up the Partnership's
affairs, any Person elected pursuant to Section 12.02 hereof) shall promptly
execute and cause to be filed certificates of cancellation in accordance with
the Act and the laws of any other states or jurisdictions in which the
Partnership has filed Certificates.
SECTION 2.07. Independent Activities. Except as expressly provided in the
Transaction Agreement (including, without limitation, Section 9.07 and Section
10.05 thereof), each Partner and each of their Affiliates may, notwithstanding
this Agreement, engage in whatever activities they choose, whether the same are
competitive with the Partnership or otherwise, without having or incurring any
obligation to offer any interest in such activities to the Partnership or any
Partner and, except as expressly provided for in the Transaction Agreement,
neither this Agreement nor any activity undertaken pursuant hereto shall
prevent any Partner or its Affiliates from engaging in such activities, or
require any Partner or its Affiliates to permit the Partnership or any other
Partner or its Affiliates to participate in any such activities, and each
Partner hereby waives, relinquishes, and renounces any such right or claim of
participation.
SECTION 2.08. Fiscal Year. The fiscal year of the Partnership for
financial statement and federal income tax purposes shall end on December 31.
ARTICLE 3
CONTRIBUTIONS; PERCENTAGE INTEREST
SECTION 3.01. Managing General Partner. After giving effect to the
transactions contemplated by the Transaction Agreement to occur on the Closing
Date, the name, address and value of the Capital Contribution of the Managing
General Partner as of the date hereof are as follows:
Name and Address Capital Contribution
---------------- --------------------
[Cellco Sub] Cash in the amount
c/o Verizon Wireless of $[ ]
180 Washington Valley Road
Bedminster, NJ 07921
SECTION 3.02. Limited Partners. After giving effect to the transactions
contemplated by the Transaction Agreement to occur on the Closing Date, the
names, addresses and value of the Capital Contributions of the Limited Partners
as of the date hereof are as follows:
Name and Address Capital Contribution
---------------- --------------------
Price Communications Property (other than
Wireless, Inc. cash) with an
45 Rockefeller Plaza initial Gross Asset Value
Suite 3200 of $[ ]
New York, NY 10020 and cash in the amount of
$[ ]
Cellco Sub Property (other than
c/o Verizon Wireless cash) with an
180 Washington Valley Road initial Gross Asset Value
Bedminster, NJ 07921 of $[ ]
and cash in the amount of
$[ ]
SECTION 3.03. Additional Contributions. Subject to Section 6.04, each of
the Managing General Partner and Cellco LP may, from time to time, make
additional Capital Contributions at its sole discretion.
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ARTICLE 4
ALLOCATIONS
SECTION 4.01. Profits. After giving effect to the special allocations set
forth in Sections 4.03 and 4.05, Profits for any Allocation Year shall be
allocated to the Capital Accounts of the Partners in the following order and
priority:
(a) First, to Price LP in the amount, if positive, equal to (i) the sum
of the cumulative Losses allocated to Price LP pursuant to Section 4.02(d)
for all prior Allocation Years minus (ii) the sum of the cumulative Profits
allocated to Price LP pursuant to this Section 4.01(a) for all prior
Allocation Years;
(b) Second, to Price LP until Price LP has been allocated an amount, if
any, equal to its Unallocated Preferred Return; and
(c) Third, to the Managing General Partner and Cellco LP in proportion to
their Percentage Interests.
SECTION 4.02. Losses. After giving effect to the special allocations set
forth in Sections 4.03 and 4.05, Losses for any Allocation Year shall be
allocated to the Capital Account of the Partners in the following order and
priority:
(a) First, to the Managing General Partner and Cellco LP, in proportion
to their Percentage Interests, in an amount, if positive, equal to (i) the
sum of the cumulative Profits allocated pursuant to Section 4.01(c) for all
prior Allocation Years minus (ii) the sum of the cumulative Losses allocated
pursuant to this Section 4.02(a) for all prior Allocation Years;
(b) Second, to the Managing General Partner until the Managing General
Partner has been allocated an amount, if any, equal to the Managing General
Partner's Capital Account;
(c) Third, to Cellco LP until Cellco LP has been allocated an amount, if
any, equal to Cellco LP's Capital Account;
(d) Fourth, to Price LP until Price LP has been allocated an amount, if
any, equal to Price LP's Capital Account and
(e) Fifth, to the Managing General Partner.
SECTION 4.03. Special Allocations. The following special allocations of
items of Partnership income, gain, loss or deduction (the amount of each such
item being determined by applying rules analogous to those set forth in clauses
(i) through (iv) of the definition of "Profits" and "Losses" in Section 1.01
hereof) shall be made in the following order:
(a) Qualified Income Offset. If any Limited Partner unexpectedly
receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6)
of the Regulations, items of Partnership income and gain shall be specially
allocated to such Limited Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the Limited Partner as quickly as possible, provided that
an allocation pursuant to this Section 4.03(a) shall be made only if and to
the extent that the Limited Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article 4 have been
tentatively made as if this Section 4.03(a) were not in this Agreement.
(b) Gross Income Allocation. If a Limited Partner has a deficit Capital
Account at the end of any Partnership Allocation Year, such Limited Partner
shall be specially allocated items of Partnership income and gain in the
amount of such deficit as quickly as possible, provided that an allocation
pursuant to this Section 4.03(b) shall be made only if and to the extent
that the Limited Partner would have a deficit Capital Account after all
other allocations provided for in this Article 4 have been tentatively made
as if Section 4.03(a) hereof and this Section 4.03(b) were not in this
Agreement.
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(c) Additional Special Allocation. The following items shall be
allocated to the Managing General Partner and Cellco LP in proportion to
their Percentage Interests:
(i) all items of expense incurred in connection with the purchase and
defeasance of the Senior Subordinated Notes and the Senior Secured Notes
(including, without limitation, any premium paid in connection
therewith);
(ii) all Nonacquiesced Transaction Items;
(iii) all amortization in respect of any intangible asset;
(iv) all gain realized upon sale or disposition of any intangible
asset to the extent of the aggregate amount of amortization previously
allocated in respect of such intangible asset under clause (iii) above;
(v) all losses realized upon sale, disposition or write-off of any
assets in connection with the Conversion; and
(vi) all costs of purchasing handsets to be provided to then existing
customers in connection with the Conversion.
(d) Excess Financing Cost. The Excess Financing Cost shall be allocated
to Price LP.
(e) Gross Income Allocation. During the Allocation Year, if any, that
includes a Determination Date, there shall be allocated to Price LP gross
income of the Partnership in the amount not exceeding the aggregate amount
of Profits that would have been allocated to Price LP during the period
starting on the Exchange Notice Deadline and ending on the earliest of (i)
the Determination Date, (ii) the Exchange or (iii) the fourth anniversary of
the Closing Date, if no Exchange Notice Deadline occurred during such period.
SECTION 4.04. Allocation of Liabilities. Except to the extent that Code
Section 752 or Regulations thereunder are amended following the date hereof,
liability of the Partnership for the New LP Financing shall be allocated solely
for federal income tax purposes to the Company Contributed Assets and,
therefore, to Price LP. The Partnership shall file all Partnership tax returns
consistent with the foregoing allocation and shall not take a position
inconsistent therewith as long as the allocation is permitted under Code
Section 752 and the Regulations thereunder. Notwithstanding the foregoing, if
the Managing General Partner determines in good faith that such allocation is
not permitted under Code Section 752 and the Regulations thereunder (as
interpreted from time to time by the U.S. courts, including the Tax Court, and
by official pronouncements of the Internal Revenue Service or the Treasury
department, such as revenue rulings, revenue procedures and notices), (i) the
Partnership shall inform the Partners about the conclusion of the Managing
General Partner and shall provide the Partners with an explanation underlying
such conclusion, and (ii) the Partnership shall no longer be required to file
its tax returns in accordance with such allocation. The Partners agree that
allocating liability of the Partnership for the New LP Financing to Price LP is
permitted based on the law and the facts in existence as of the date hereof.
SECTION 4.05. Curative Allocations. The amount of each item of Partnership
income, gain, loss or deduction allocated pursuant to the following special
allocations shall be determined by applying rules analogous to those set forth
in clauses (i) through (iv) of the definitions of "Profits" and "Losses" in
Section 1.01 hereof.
(a) The "Regulatory Allocations" consist of allocations pursuant to
Sections 4.03(a) and (b) and 4.06 hereof. Notwithstanding any other
provision of the Agreement, other than the Regulatory Allocations, the
Regulatory Allocations shall be taken into account in allocating items of
income, gain, loss and deduction amounts to the Partners so that, to the
extent possible, the net amount of such allocations of such other items and
the Regulatory Allocations to each Partner shall be equal to the net amount
that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred.
(b) The Managing General Partner shall have reasonable discretion, with
respect to each Allocation Year, to (i) apply the provisions of Section
4.05(a) in whatever order is likely to minimize the economic
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distortions that might otherwise result from the Regulatory Allocations, and
(ii) divide all allocations pursuant to Section 4.05(a) hereof among the
Partners in a manner that is likely to minimize such economic distortions.
SECTION 4.06. Loss Limitation. The Losses allocated pursuant to Section
4.02 and the items of loss or deduction allocated pursuant to Sections 4.03 and
4.05 shall not exceed the maximum amount of Losses and items of loss or
deduction that can be so allocated without causing any Limited Partner to have
an Adjusted Capital Account Deficit at the end of any Allocation Year. All
Losses and items of loss or deduction in excess of the limitation set forth in
this Section 4.06 shall be allocated to the Managing General Partner.
SECTION 4.07. Tax Allocations. All items of income, gain, loss and
deduction with respect to any Partnership asset having a Gross Asset Value that
differs from the adjusted basis of such asset for U.S. federal income tax
purposes shall be allocated so as to take into account the difference between
the Gross Asset Value and the adjusted tax basis of such asset in accordance
with the principles of Code Section 704(c) using the traditional method
described in Treasury regulations Section 1.704-3(b).
SECTION 4.08. Tax Matters Partner, Tax Elections. The Managing General
Partner is hereby designated the "Tax Matters Partner," as defined in Code
Section 6231, for the Partnership. The Tax Matters Partner shall, with respect
to matters related to federal income taxes, (i) provide Price LP with prompt
notice of the commencement of the tax examinations or other tax proceedings and
with copies of all notices and other correspondence relating to the Partnership
in respect of a period during which Price LP was a Partner received from the
Internal Revenue Service, (ii) permit Price LP to be present at any meetings,
conferences, hearings or other tax proceedings with or before the Internal
Revenue Service or a court on matters relating to the Partnership in respect of
a period during which Price LP was a Partner, and (iii) not settle any federal
income tax issue that would increase the tax liability of Price LP by a
material amount without obtaining consent of Price LP which consent shall not
be unreasonably withheld or delayed, but only if the items of such settlement
that would so increase the tax liability of Price LP would produce a net tax
benefit (based on a present value calculation using a discount rate equal to
the then borrowing rate of Cellco) to the Managing General Partner or Cellco
LP. All tax elections with respect to the Partnership shall be made by the Tax
Matters Partner.
SECTION 4.09. Classification as Partnership. It is the Partners' intent
that the Partnership be treated as a partnership for federal income tax
purposes. No election shall be made by the Managing General Partner or any
Partner to have the Partnership (i) be excluded from the application of the
provisions of Subchapter K of the Code or (ii) be treated as a corporation for
federal income tax purposes.
ARTICLE 5
DISTRIBUTIONS
SECTION 5.01. Price LP Distribution. (a) The Partnership shall distribute
to Price LP on a fiscal quarterly basis the Quarterly Distribution Amount with
respect to each fiscal quarter ending after the second anniversary of the
Closing Date.
(b) The Quarterly Distribution Amount that is required to be distributed to
Price LP pursuant to Section 5.01(a) shall be made (i) with respect to the
first, second or third quarter of any fiscal year, within 45 days after the end
of such quarter, and (ii) with respect to the fourth quarter of any fiscal
year, within 90 days after the end of such quarter.
(c) If the Quarterly Distribution Amount for the fourth quarter of any
fiscal year is a negative number (the amount of such number being an "Excess
Distribution Amount"), the Managing General Partner shall promptly notify Price
LP of the Excess Distribution Amount and, within 10 days of receipt of such
notice, Price LP shall contribute to the Partnership, as an Additional Capital
Contribution, cash in the amount of the Excess Distribution Amount.
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SECTION 5.02. Amounts Withheld. All amounts withheld pursuant to the Code
or any provision of any state, local or foreign tax law with respect to any
payment, distribution or allocation to the Partnership or the Partners shall be
treated as amounts paid or distributed, as the case may be, to the Partners
with respect to which such amount was withheld pursuant to this Section 5.02
for all purposes under this Agreement. The Managing General Partner is
authorized to withhold from payments and distributions to the Partners and to
withhold with respect to allocations to the Partners and to pay over to any
United States federal, state, local or foreign government any amounts required
to be so withheld pursuant to the Code or any provisions of any other United
States federal, state, local or foreign law, and shall allocate any such
amounts to the Partners with respect to which such amounts were withheld.
SECTION 5.03. Other Distributions. Subject to Section 6.04, the
Partnership shall make distributions to the Partners as directed by the
Managing General Partner in its sole discretion.
ARTICLE 6
MANAGEMENT
SECTION 6.01. Authority of the Managing General Partner. Except to the
extent otherwise provided herein, the Managing General Partner shall have the
sole and exclusive right to manage the Partnership Business and shall have all
of the rights and powers which may be possessed by general partners under the
Act.
SECTION 6.02. Right to Rely on Managing General Partner. Any Person
dealing with the Partnership may rely (without duty of further inquiry) upon a
certificate signed by the Managing General Partner as to:
(a) the identity of the Managing General Partner or any Limited Partner;
(b) the existence or nonexistence of any fact or facts which constitute a
condition precedent to act by the Managing General Partner or which are in
any other manner germane to the affairs of the Partnership;
(c) the Persons who are authorized to execute and deliver any instrument
or document of the Partnership; or
(d) any act or failure to act by the Partnership or any other matter
whatsoever involving the Partnership or any Partner.
SECTION 6.03. Management Committee. The Partnership shall have a
management committee (the "Management Committee") which shall consist of three
members, two of which shall be appointed by the Managing General Partner and
one of which shall be appointed by Price LP. The initial members of the
Management Committee are set forth in Schedule 6.03 hereto. Each of the
Managing General Partner and Price LP may replace any of its members of the
Management Committee at any time upon written notice to the other.
SECTION 6.04. Restrictions on Authority of Managing General
Partner. (a) Without the prior approval of a majority of the members of the
Management Committee, the Managing General Partner shall not have the authority
to, and the Managing General Partner covenants and agrees that it shall not
cause the Partnership to, take any of the following actions:
(i) approve the annual operating budget for the Partnership and any
amendments or revisions thereto;
(ii) other than in the ordinary course of business, acquire an amount of
assets in respect of which the consideration payable by the Partnership is
more than $50 million;
(iii) make any distribution prior to 6 months after the Exchange Notice
Deadline, other than distributions of the Quarterly Distribution Amount and
distributions pursuant to Section 12.02;
(iv) appoint or change the Partnership's independent auditor;
(v) approve the audited annual financial statements of the Partnership; or
(vi) select the technology to be used by the Partnership in conducting
the Partnership Business, or change such technology.
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(b) Without the approval of a majority of the Management Committee,
including the member appointed by Price LP, the Managing General Partner shall
not have the authority to, and the Managing General Partner covenants and
agrees that it shall not, cause the Partnership to take any of the following
actions:
(i) subject to Sections 6.04(c) and (d), (A) sell, exchange or otherwise
dispose of any assets other than in the ordinary course of business or as
may be necessary or appropriate in connection with the Conversion or acquire
any other business or incur any Indebtedness or (B) consolidate or merge
with or into any other Person, or engage in any similar transaction, unless
the Profits allocated to Price LP, if any, for the prior four calendar
quarters, determined on a pro forma basis after giving effect to such
transaction and any related transactions and, if the Closing Date occurred
at any time during such calendar quarters, as if the Closing Date had
occurred immediately prior to the first of such fiscal quarters, that would
be allocated to Price LP under this Agreement would be at least equal to the
lesser of (A) the actual Profits allocated to Price LP for such period
(determined as if the Closing Date had occurred immediately prior to the
first of such fiscal quarters) if the Closing Date actually occurred at any
time during such fiscal quarters or (B) $50 million if such sale, exchange,
disposition, incurrence of Indebtedness, merger, consolidation or similar
transaction (the "Specified Transactions") is consummated on or after the
Closing Date but before the first anniversary of the Closing Date, $52
million if the Specified Transaction is consummated on or after the first
anniversary of the Closing Date and before the second anniversary of the
Closing Date, $53 million if the Specified Transaction is consummated on or
after the second anniversary of the Closing Date and before the third
anniversary of the Closing Date, $54 million if the Specified Transaction is
consummated on or after the third anniversary of the Closing Date and before
the fourth anniversary of the Closing Date and $0 if the Specified
Transaction is consummated thereafter (as applicable, the "Applicable Profit
Allocation") and, in the case of any such consolidation, merger or similar
transaction, unless the consolidation, merger or transaction would not
adversely affect Price LP's rights under this Agreement or in respect of the
Partnership;
(ii) engage in any business other than the Partnership Business and any
related business;
(iii) incur any Indebtedness to the extent the Partnership's ratio of
long-term debt to net worth (as defined by GAAP) would exceed three times as
a result of incurring such indebtedness;
(iv) sell, exchange or otherwise dispose of, or distribute all or
substantially all of the Company Contributed Assets (including any renewals
and replacements thereof);
(v) sell, exchange or otherwise dispose of any Company Contributed Asset
(including any renewals and replacements thereof) to the Managing General
Partner or any of its Affiliates;
(vi) sell, exchange or otherwise dispose of any of the cellular licenses
included in the Company Contributed Assets (including any renewals and
replacements thereof) prior to the second anniversary of the Closing Date;
(vii) make any distribution of any of the cellular licenses included in
the Company Contributed Assets (including any renewals and replacements
thereof) prior to the seventh anniversary of the Closing Date;
(viii) make any distribution to either the Managing General Partner or
Cellco LP or repurchase from the Managing General Partner or Cellco LP any
Interest if after giving effect thereto the aggregate amount of their
Capital Accounts would be less than the sum of the Original Capital
Contributions of the Cellco LP and the Managing General Partner;
(ix) except as permitted by Section 6.08, engage in any transaction with
the Managing General Partner or any of its Affiliates, unless such
transaction is either on an arm's length basis or, in the aggregate, no less
favorable to the Partnership than substantially similar transactions
generally made between other Persons which are not Affiliates of the
Managing General Partner and its Affiliates and the Managing General Partner
and its Affiliates;
(x) amend the Certificate if such amendment would reasonably be expected
to adversely affect Price LP's rights under this Agreement or in respect of
the Partnership,
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(xi) issue additional interests in the Partnership, other than to any
Partner or to an Affiliate of any Partner;
(xii) request any additional Capital Contributions by Price LP other than
as contemplated by Section 5.01(c);
(xiii) distribute to the Managing General Partner, the Cellco LP or any
of their Affiliates all or any portion of the Cellco Contributed Assets or
the Cellco Note;
(xiv) commence any voluntary case or other proceeding seeking
dissolution, liquidation or reorganization or other relief with respect the
Partnership or its debts under any bankruptcy law now or hereafter in
effect; or
(xv) take any action contrary to the preservation and maintenance of the
Partnership's existence, rights, franchises and privileges as a limited
partnership under the laws of the State of Delaware.
(c) Notwithstanding Section 6.04(b)(i), the Managing General Partner shall
have the authority to, and to cause the Partnership to, take any of the actions
specified in Section 6.04(b)(i) if the majority of the Management Committee,
excluding the member appointed by Price LP, approves any such action (each such
action not approved by the member appointed by Price LP, a "Nonacquiesced
Transaction") provided that, in such case, all items of income, gain, loss and
expense resulting from such Nonacquiesced Transaction shall be considered as
"Nonacquiesced Transaction Items" for the purposes of this Agreement and shall
be allocated in the manner set forth in Section 4.03(c); and provided further
that in the case of any consolidation, merger or similar transaction, the
proposed transaction would not adversely effect Price LP's rights under this
Agreement or with respect to the Partnership.
(d) Prior to the consummation of any acquisition, sale, exchange,
disposition, consolidation or merger or the incurrence of any Indebtedness
pursuant to Section 6.04(b)(i), the Managing General Partner shall deliver to
Price LP reasonably detailed documentation which demonstrates that the
conditions set forth in Section 6.04(b)(i) have been satisfied.
SECTION 6.05. Day-to-day Management. Day-to-day management of the
Partnership will be carried out by such officers of the Partnership as the
Managing General Partner shall determine.
SECTION 6.06. Duties and Obligations; Exculpation. (a) The Managing
General Partner shall take all actions which may be necessary or appropriate
(i) for the continuation of the Partnership's valid existence as a limited
partnership under the laws of the State of Delaware and (ii) for the
accomplishment of the Partnership's purposes, including the acquisition and
preservation of the Partnership's property in accordance with the provisions of
the Transaction Agreement, this Agreement and applicable laws and regulations.
(b) The Limited Partners agree that the duties and liabilities of the
Managing General Partner shall be strictly limited to the duties and
liabilities expressly set forth in this Agreement and required by applicable
law. Without limiting the generality of foregoing, except as set forth in this
Agreement or as required by applicable law, none of the Managing General
Partner or any of its officers, directors, members, employees, Affiliates,
stockholders, partners, agents or representatives, nor any member of the
Management Committee (each a "Relevant Party") shall, to the fullest extent
permitted by applicable law, be liable to the Partnership or to the Limited
Partners for any losses, claims, damages or liabilities arising out of, related
to or in connection with any act or omission performed or omitted by it in
connection with this Agreement (including, without limitation, pursuant to
Section 6.08(c)) or the Partnership's business or affairs (including, without
limitation, any act or omission by any Relevant Party). Notwithstanding the
above, this Section 6.06(b) shall only be enforced to the
maximum extent permitted by law and no Relevant Party shall be exculpated from
any liability for its fraud, bad faith or willful misconduct.
(c) Notwithstanding anything to the contrary in this Agreement, no Affiliate
of the Managing General Partner (other than the Partnership) shall have any
liability to any Limited Partner with respect to any obligations
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of the Partnership or the Managing General Partner under this Agreement. In
addition, except as otherwise provided in this Agreement or the Transaction
Agreement, no Affiliate of the Managing General Partner (including, without
limitation, Cellco) shall under any circumstances have any obligation to
contribute any assets to the Partnership. Notwithstanding the above, this
Section 6.06(c) shall only be enforced to the maximum extent permitted by law
and no Affiliate of the Managing General Partner shall be exculpated from any
liability for its fraud, bad faith or willful misconduct.
SECTION 6.07. Indemnification of Managing General Partner. (a) The
Partnership, its receiver, or its trustee shall indemnify, save harmless, and
pay all judgments and claims against the Managing General Partner or a member
of the Management Committee relating to any liability or damage incurred by
reason of any act performed or omitted to be performed by the Managing General
Partner or any officer or director of the Managing General Partner or a member
of the Management Committee in connection with the business of the Partnership,
including attorneys' fees incurred by the Managing General Partner in
connection with the defense of any action based on any such act or omission,
which attorneys' fees may be paid as incurred, including all such liabilities
under federal and state securities laws as permitted by law.
(b) In the event of any action by any Limited Partner against the Managing
General Partner or a member of the Management Committee, including a
Partnership derivative suit, the Partnership shall indemnify, save harmless,
and pay all expenses of the Managing General Partner or such member of the
Management Committee, including attorneys' fees, incurred in the defense of
such action.
(c) Notwithstanding the provisions of Sections 6.07(a) and 6.07(b) above,
such Sections shall only be enforced to the maximum extent permitted by law and
the Managing General Partner and each member of the Management Committee shall
not be indemnified from any liability for its fraud, bad faith, or willful
misconduct.
SECTION 6.08. Compensation and Reimbursement. (a) Except as otherwise
provided in this Section 6.08, no Partner or Affiliate of any Partner shall
receive any salary, fee or draw for service rendered to or on behalf of the
Partnership, nor shall any Partner or Affiliate of any Partner be reimbursed
for any expenses incurred by such Partner or Affiliate on behalf of the
Partnership.
(b) The Managing General Partner may charge the Partnership, and shall be
reimbursed, for any out-of-pocket expenses reasonably incurred by it on behalf
of the Partnership in connection with the Partnership Business.
(c) The Managing General Partner and its Affiliates may provide to the
Partnership such services as the Managing General Partner deems appropriate
(including, without limitation, accounting, billing, legal, administrative,
financial, cash management and network construction, maintenance and monitoring
services) and the Managing General Partner may charge the Partnership for such
services; provided that (i) the scope of services provided by the Managing
General Partner and its Affiliates shall be consistent with the scope of
services customarily provided by the Managing General Partner or any such
Affiliate to other partnerships managed by the Managing General Partner or any
such Affiliate that (A) have at least one partner which is not an Affiliate of
the Managing General Partner or such Affiliate managing the partnership and (B)
are engaged in a business substantially similar to the Partnership's business,
and (ii) determination by the Managing General Partner of the amount to be
charged to the Partnership shall be made in a manner that is, in the aggregate,
as favorable to the Partnership as the manner in which charges for services are
generally made by the Managing General Partner or such Affiliates to such other
partnerships.
SECTION 6.09. Operating Restrictions. (a) All property of the Partnership
in the form of cash not otherwise invested shall be deposited for the benefit
of the Partnership in one or more accounts of the Partnership or any of its
Affiliates, maintained in such financial institutions as the Managing General
Partner shall determine or shall be invested in short-term liquid securities or
other cash equivalent assets or shall be left in escrow, and withdrawals shall
be made only in the regular course of Partnership business and on such
signature or signatures as the Managing General Partner may determine from time
to time.
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(b) The signature of the Managing General Partner shall be necessary and,
subject to Section 6.04, sufficient to convey title to any property owned by
the Partnership or to execute any promissory notes, trust deeds, mortgages, or
other instrument of hypothecation, and all of the Partners agree that a copy of
this Agreement may be shown to the appropriate parties in order to confirm the
same, and all of the Partners further agree that the signature of the Managing
General Partner shall be sufficient to execute any "Statement of Partnership"
or other documents necessary to effectuate this or any other provision of this
Agreement. All of the Partners do hereby appoint the Managing General Partner
as their attorney-in-fact for the execution of any or all of the documents
described herein.
(c) The Partnership shall not until the earlier of two days after the
Exchange Closing Date (as defined in the Exchange Agreement) and five years
after the Closing Date, (i) prepay the New LP Financing, (ii) effect a
defeasance with respect to the New LP Financing (other than a defeasance that
does not affect the treatment of the liability under Code Section 752), or
(iii) intentionally take any action or fail to take any action with the
objective of causing an acceleration of New LP's obligation to repay the New LP
Financing.
SECTION 6.10. Rights or Powers. No Limited Partner shall have any right or
power to take part in the management or control of the Partnership or its
business and affairs or to act for or bind the Partnership in any way.
SECTION 6.11. Voting Rights. Except as expressly provided herein or
required by law, the Limited Partners shall have no right to vote on any
matters.
ARTICLE 7
BOOKS AND RECORDS
SECTION 7.01. Books and Records. The Partnership shall keep adequate books
and records at its principal place of business, setting forth a true and
accurate account of all business transactions arising out of and in connection
with the conduct of the Partnership. Any Partner or its designated
representative shall have the right, at any reasonable time, to have access to
and inspect and copy the contents of such books or records, provided that any
such inspection shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the Partnership. Any Limited
Partner, or its designee, shall also have access to such additional financial
information, documents, books and records, as are reasonably necessary to allow
such Limited Partner or its designee to comply with reporting requirements
pursuant to applicable law or regulations or the requirements of any applicable
stock exchange.
SECTION 7.02. Periodic Reports; Financial Statements. (a) Within 60 days
after the end of each Partnership fiscal year, the Managing General Partner
shall cause to be prepared, and Price LP shall be furnished with, the following
audited financial statements, accompanied by the report thereon of a nationally
recognized accounting firm selected by the Managing General Partner:
(i) a balance sheet of the Partnership as of the end of such fiscal year;
(ii) a statement of profit and loss for the Partnership for such fiscal
year;
(iii) a statement of each Partner's capital account and changes therein
for such fiscal year;
(iv) a statement of Partnership cash flow for such fiscal year; and
(v) a statement of distributable cash flow.
(b) Within 30 days after the close of each of the first three fiscal
quarters of each Partnership fiscal year, the Managing General Partner shall
cause to be prepared, and Price LP shall be furnished with, the following
unaudited financial statements:
(i) a balance sheet of the Partnership as of the end of such fiscal
quarter;
(ii) a statement of profit and loss for the Partnership for such fiscal
quarter;
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(iii) a statement of Partnership cash flow for such fiscal quarter; and
(iv) a statement of each Partner's capital account and changes therein
for such fiscal quarter.
(c) Within 30 days after the end of each calendar month, the Managing
General Partner shall cause to be prepared, and Price LP shall be furnished
with, the following unaudited financial statements:
(i) a balance sheet of the Partnership as of the end of such calendar
month;
(ii) a statement of profit and loss for the Partnership for such calendar
month;
(iii) a statement of Partnership cash flow for such calendar month; and
(iv) a statement of each Partner's capital account and changes therein
for such calendar month.
(d) Within 31 days after the end of each of the Partnership's fiscal years,
the Managing General Partner shall cause to be prepared, and Price LP shall be
furnished with, the following projected financial statements for the following
fiscal year:
(i) a balance sheet of the Partnership as of the end of such following
fiscal year;
(ii) a statement of profit and loss for the Partnership for such
following fiscal year;
(iii) a statement of Partnership cash flow for such following fiscal
year; and
(iv) a statement of each Partner's capital account for such following
fiscal year.
SECTION 7.03. Operational Information. Price LP shall, from time to time,
be furnished with operating statistics with respect to the business of the
Partnership prepared in the ordinary course by the Managing General Partner,
including, without limitation, analysis of customer additions, churn rates and
cost per gross addition.
SECTION 7.04. Tax Information. Necessary tax information shall be
delivered to each Partner after the end of each calendar year of the
Partnership. Such information shall be furnished in final form (subject to
adjustments as permitted by law) by April 30 following such calendar year, and
preliminary information shall be provided before such date from time to time as
required to permit the Partners to file estimated payment returns and annual
return extension requests. Notwithstanding anything in this Agreement to the
contrary, the Tax Matters Partner shall file tax returns prepared in accordance
with the Code and the Regulations as in effect at the time of such filing. All
federal income tax returns (Form 1065) of the Partnership shall be furnished to
Price LP at least 15 days before the due date (after taking into account all
applicable extensions and waivers) for filing such returns.
ARTICLE 8
CERTAIN COVENANTS
SECTION 8.01. Confidentiality. Except as required by law or stock exchange
rule, each Partner and each of its Affiliates shall keep confidential and not
reveal, and shall cause its Subsidiaries and the officers, directors,
employees, agents and representatives of it and its Subsidiaries, to keep
confidential and not to reveal, to any other Person (other than to another
Partner or its officers and employees, to any of its Affiliates or any officer,
director, employee, agent or representative of such Partner or its Affiliates
(each of whom shall be subject to the confidentiality obligations set forth
herein)), from the date hereof through the third anniversary of the first date
on which such Partner is no longer a Partner of the Partnership, any
confidential documents, trade secrets, secret processes or methods and other
confidential information concerning, relating to or in connection with the
Partnership or the business of the Partnership that come to the knowledge of
such Partner or its Affiliates or their respective representatives or agents by
reason of the relationship of such Partner or Affiliate with the Partnership
("Information"), except for such Information that (a) is generally available to
the public (other than as a result of
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a disclosure by such Partner or its Affiliates), (b) is available to such
Person on a non-confidential basis from a source that is not prohibited from
disclosing such Information to such Person or (c) after notice and (to the
extent reasonably practicable) an opportunity to contest, such Person is
required to disclose under any applicable law or under subpoena or other legal
process; provided that nothing in this Section 8.01 shall preclude any Partner
or its Affiliates from using any Information in any manner reasonably connected
to its investment in the Partnership or as contemplated by this Agreement, the
Transaction Agreement or any other agreements entered into in connection
therewith.
SECTION 8.02. Press Announcements. Except as required by law or stock
exchange rule, or if consented to by the Managing General Partner (such consent
not to be unreasonably withheld), no Partner (other than the Managing General
Partner) will make any public announcement regarding the Partnership.
ARTICLE 9
AMENDMENTS; MEETINGS
SECTION 9.01. Amendments. No amendment to this Agreement shall be adopted
or be effective as an amendment hereto unless it is in writing and is executed
by all of the Partners.
SECTION 9.02. Meetings of the Partners. (a) Meetings of the Partners may
be called by the Managing General Partner and shall be called upon the written
request of any Limited Partner. The notice of any such meeting shall state the
nature of the business to be transacted and shall be given to all Partners not
less than fifteen (15) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or consent of Partners is permitted or required under this Agreement,
such vote or consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 9.02(c) hereof. Except as
otherwise expressly provided in this Agreement, the vote of the Managing
General Partner shall control.
(b) For the purpose of determining the Partners entitled to vote on, or to
vote at, any meeting of the Partners or any adjournment thereof, the Managing
General Partner may fix, in advance, a date as the record date for any such
determination. Such date shall not be more than 30 days nor less than 10 days
before any such meeting.
(c) Each Limited Partner and the MGP may authorize any Person or Persons to
act for it by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner
or its attorney-in-fact. No proxy shall be valid after the expiration of 12
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner or his
attorney-in-fact executing it.
(d) Each meeting of Partners shall be conducted by the Managing General
Partner or such other Person as the Managing General Partner may appoint
pursuant to such rules for the conduct of the meeting as the Managing General
Partner or such other Person deems appropriate.
ARTICLE 10
TRANSFERS OF INTERESTS, ETC
SECTION 10.01. Restriction of Transfers of Interests. Except as otherwise
permitted by this Agreement, no Partner shall Transfer all or any portion of
its Interest.
SECTION 10.02. Permitted Transfers. (a) Subject to the conditions and
restrictions set forth in Section 10.03, the Managing General Partner may at
any time Transfer all but not less than all of its Interest to an Affiliate of
Cellco.
(b) Cellco LP may at any time Transfer all or any portion of its Interest to
an Affiliate of Cellco.
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(c) Price LP or a Permitted Transferee thereof may at any time, with the
prior written consent of the Managing General Partner (such consent not to be
unreasonably withheld), grant a pledge of all but not less than all of its
Interest to any bank or other financial institution of recognized standing in
connection with any bona fide financing transaction.
(d) If Price LP or a Permitted Transferee thereof pledges its Interest
pursuant to Section 10.02(c), such Interest may, upon default under such
financing transaction, be transferred to the pledgee or another third party as
a result of a foreclosure sale under the Uniform Commercial Code or the
exercise of other remedies in connection with such pledge.
(e) Price LP and any other Price Corporation may at any time Transfer all
but not less than all of its Interest to another Price Corporation in
connection with a liquidation or merger of, with or into such other Price
Corporation.
(f) Price LP or a Permitted Transferee thereof may Transfer all but not less
than all of its Interest pursuant to the Exchange Agreement.
SECTION 10.03. Conditions to Permitted Transfers. A Transfer of Interests
shall not be treated as a Permitted Transfer under Section 10.02(a), (b), (c),
(d) or (e) unless and until the following conditions are satisfied:
(a) The transferor and transferee shall execute and deliver to the
Partnership such documents and instruments of conveyance as may be necessary
or appropriate in the reasonable opinion of counsel to the Partnership to
effect such Transfer and to confirm the agreement of the transferee to be
bound by the provisions of this Agreement, the Exchange Agreement and the
Lock-up Agreements (as defined in the Exchange Agreement). In all cases, the
Partnership shall be reimbursed by the transferor and/or transferee for all
costs and expenses that it reasonably incurs in connection with such
Transfer.
(b) Unless the Managing General Partner has waived the requirements of
this Section 10.03(b) with respect to a Transfer by Price LP, the transferor
shall furnish to the Partnership an opinion of counsel, which counsel and
opinion shall be reasonably satisfactory to the Managing General Partner
that the Transfer will not cause the Partnership to terminate for federal
income tax purposes; provided, however, that Price LP shall not be required
to furnish such opinion if the Partnership termination results from (i) an
Exchange, (ii) a Permitted Transfer (but only if such Permitted Transfer and
all other Permitted Transfers pursuant to Section 10.02(e) occur in the same
Allocation Year), or (iii) a Transfer to a pledgee or other third party
pursuant to Section 10.02(d).
(c) The transferor and transferee shall furnish the Partnership with the
transferee's taxpayer identification number, sufficient information to
determine the transferee's initial tax basis in the Interests transferred,
and any other information reasonably necessary to permit the Partnership to
file all required federal and state tax returns and other legally required
information statements or returns. Without limiting the generality of the
foregoing, the Partnership shall not be required to make any distribution
otherwise provided for in this Agreement with respect to any Transferred
Interest until it has received such information.
(d) The transferor shall provide an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Partnership, to the effect
that such Transfer is exempt from all applicable registration requirements
and that such Transfer will not violate any applicable laws regulating the
Transfer of securities.
SECTION 10.04. Prohibited Transfers. (a) Any purported Transfer of
Interests that is not a Permitted Transfer (and which the Partnership, in its
sole discretion, has not otherwise elected to recognize) shall be null and void
and of no effect whatever; provided that, if the Partnership is required to
recognize a Transfer that is not a Permitted Transfer (and which the
Partnership, in its sole discretion, has not otherwise elected to recognize),
B-18
the Interest Transferred shall be strictly limited to the transferor's rights
to allocations and distributions as provided by this Agreement with respect to
the Transferred Interests, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of the Partnership) to
satisfy any debts, obligations, liabilities or damages that the transferor or
transferee of such Interests may have to the Partnership.
(b) In the case of a Transfer or attempted Transfer of an Interest that is
not a Permitted Transfer, the parties engaging or attempting to engage in such
Transfer shall be liable to indemnify and hold harmless the Partnership and the
other Partners from all reasonable cost, liability, and damage that any of such
indemnified Persons may incur (including, without limitation, incremental tax
liability and lawyers fees and expenses) as a result of such Transfer or
attempted Transfer and efforts to enforce the indemnity granted hereby.
SECTION 10.05. Rights of Unadmitted Assignees. A transferee of one or more
Interests who is not admitted as a substituted Partner pursuant to Section
10.06 hereof shall be entitled only to allocations and distributions with
respect to such Interests in accordance with this Agreement, but shall have no
right to any information or accounting of the affairs of the Partnership, shall
not be entitled to inspect the books or records of the Partnership, and shall
not have any of the rights of the Managing General Partner or a Limited Partner
under the Act or this Agreement.
SECTION 10.06. Admission of Transferees as Partners. Subject to the other
provisions of this Article 10, a transferee of Interests may be admitted to the
Partnership as a substituted Partner only upon satisfaction of the following
conditions:
(a) (i) if such transferee (other than a Permitted Transferee) acquired
its Interest from a Limited Partner, the Managing General Partner consents
to such admission, which consent may be withheld in its sole discretion, or
(ii) the Interests with respect to which the transferee is being admitted
were acquired by means of a Permitted Transfer;
(b) the transferee becomes a party to this Agreement as a Partner and
executes such documents and instruments as the Managing General Partner may
reasonably request (including, without limitation, the Pledge Agreement (if
the Transfer to such transferee occurs prior to the Pledge Termination Date
(as defined in the Pledge Agreement)), counterparts or amendments to this
Agreement and amendments to the Certificate) as may be necessary or
reasonably appropriate to confirm such transferee as a Partner in the
Partnership and such transferee's agreement to be bound by the terms and
conditions hereof;
(c) if the transferee is a corporation, the transferee provides the
Partnership with evidence reasonably satisfactory to counsel for the
Partnership that such transferee has the power and authority to execute and
deliver this Agreement and the other documents and instruments referred to
in Section 10.06(b), and to perform its obligations hereunder and thereunder
and the execution, delivery and performance of this Agreement and such other
documents and instruments have been duly authorized by all necessary action;
and
(d) the transferee executes and consents to any and all assignments or
Transfers previously executed by the transferor.
SECTION 10.07. Cure Period. In the case of (i) a Transfer of Interests
that is not a Permitted Transfer or (ii) a Permitted Transfer where the
transferee is not admitted as a substituted Partner pursuant to Section 10.06
(each such Transfer in (i) and (ii), a "Subject Transfer"), the transferor and
transferee in such Subject Transfer shall, within 30 days after the earlier to
occur of (x) such transferor or transferee becoming aware (A) of such Transfer
and (B) that such transaction is a Subject Transfer and (y) the Manager General
Partner notifying the transferor of such Subject Transfer, Transfer the
Interest so Transferred back to the transferor (a "Cure Transfer") without the
Subject Transfer being considered a Transfer for purposes of Section 10.04(a)
or Section 10.05; provided that such transferor shall be liable to indemnify
and hold harmless the Partnership and the other Partners from all reasonable
cost, liability and damage that any of such indemnified Persons may incur
(including, without limitation, incremental tax liability and lawyers fees and
expenses) as a result of such Subject Transfer or Cure Transfer and efforts to
enforce the indemnity granted hereby.
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SECTION 10.08. Distributions and Allocations with Respect to Transferred
Interests. If any Interests are Transferred during any accounting period in
compliance with the provisions of this Article 10, Profit, Loss, each item
thereof, and all other items attributable to the Transferred Interest for such
period shall be divided and allocated between the transferor and the transferee
by taking into account their varying interests during the period in accordance
with Code Section 706(d), using any conventions permitted by law and elected by
the Managing General Partner and agreed to by the transferor and transferee.
All distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize such Transfer not later than the end of the
calendar month during which it is given notice of such Transfer, provided that
if the Partnership does not receive a notice stating the date such Interest was
Transferred and such other information as the Managing General Partner may
reasonably require within 30 days after the end of the accounting period during
which the Transfer occurs, then all of such items shall be allocated, and all
distributions shall be made, to the Person who, according to the books and
records of the Partnership, on the last day of the accounting period during
which the Transfer occurs, was the owner of the interest and provided further
that if a notice of Transfer of the Interest of Price LP to any Price
Corporation is given in the calendar month in which the Exchange occurs, the
Partnership will recognize that Transfer as of the date of the notice. Neither
the Partnership nor the Managing General Partner shall incur any liability for
making allocations and distributions in accordance with the provisions of this
Section 10.08, whether or not the Managing General Partner or the Partnership
has knowledge of any Transfer of ownership of any interest.
ARTICLE 11
MANAGING GENERAL PARTNER
SECTION 11.01. Business Activities. (a) The Managing General Partner
represents and warrants to the Limited Partners, as of the date hereof, that it
was formed solely for the purpose of entering into this Agreement and engaging
in the transactions and other business activities contemplated hereby and
thereby, and it has not engaged in any business activities or incurred any
liabilities other than in connection with the transactions and other business
activities contemplated by this Agreement.
(b) The Managing General Partner hereby covenants and agrees not to engage
in any business activities or incur any liabilities other than in connection
with the transactions and other activities contemplated hereby.
SECTION 11.02. Covenant Not to Withdraw, Transfer, or Dissolve. Except as
otherwise permitted by this Agreement, the Managing General Partner hereby
covenants and agrees not to (a) take any action to file a certificate of
dissolution or its equivalent with respect to itself, (b) take any action that
would cause a voluntary bankruptcy of the Managing General Partner or a consent
to its involuntary bankruptcy, (c) withdraw or attempt to withdraw from the
Partnership, (d) petition for judicial dissolution of the Partnership under
17-802 of the Act, (e) Transfer all or any portion of its Interest in the
Partnership as a general partner, except in accordance with this Agreement, or
(f) exercise any power under the Act to dissolve the Partnership. Further, the
Managing General Partner hereby covenants and agrees to continue to carry out
the duties of a general partner hereunder until the Partnership is dissolved
and liquidated pursuant to Article 12 hereof.
ARTICLE 12
DISSOLUTION AND WINDING UP
SECTION 12.01. Liquidating Events. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) the unanimous vote of the Partners to dissolve, wind up and liquidate
the Partnership;
(b) the involuntary bankruptcy of the Managing General Partner;
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(c) the happening of any other event that makes it unlawful or impossible
to carry on the business of the Partnership; or
(d) the withdrawal or removal of the Managing General Partner, the
assignment by the Managing General Partner of its entire Interest in the
Partnership (other than pursuant to Article 10) or any other event that
causes the Managing General Partner to cease to be a general partner under
the Act; provided that any such event shall not constitute a Liquidating
Event if the Partnership is continued pursuant to this Section 12.01;
provided further that the Managing General Partner shall not intentionally
assign its entire Interest (other than pursuant to Article 10) or withdraw
from the Partnership except as required by applicable law or as contemplated
by this Agreement.
The Partners hereby agree that, notwithstanding any provision of the Act or the
Delaware Uniform Partnership Act, the Partnership shall not dissolve prior to
the occurrence of a Liquidating Event. Upon the occurrence of any event set
forth in Section 12.01(b) or (d), the Partnership shall not be dissolved or
required to be wound up if within 90 days after such event all remaining
Partners agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of such event, of a new general
partner. If it is determined by a court of competent jurisdiction that the
Partnership has dissolved prior to the occurrence of a Liquidating Event, or if
upon the occurrence of an event specified in Section 12.01(b) or (d) hereof,
the Partners fail to agree to continue the business of the Partnership as
provided in this Section 12.01, then (x) within an additional 80 days, all of
the Partners may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by
forming a new limited partnership on terms identical to those set forth in this
Agreement and having as a general partner a Person elected by all the Limited
Partners or (y) if the Partners do not so elect within such 80 day period,
within an additional 10 days after such 80 day period, Price LP may elect to
reconstitute the Partnership and continue its business by forming a new limited
partnership (without Cellco LP as a partner) and having as a general partner a
Person elected by Price LP. Except with respect to Cellco LP, if Price LP
elects, pursuant to clause (y) of the immediately preceding sentence, to
reconstitute the Partnership without Cellco LP as a partner, on any such
election by Price LP, (A) all Partners, except Cellco LP, shall be bound
thereby and (B) all Partners shall be deemed to have consented thereto. Unless
such an election is made within 180 days after the event causing dissolution,
the Partnership shall wind up its affairs in accordance with Section 12.02
hereof. If such an election is made within 180 days after the event causing
dissolution, then:
(i) the reconstituted limited partnership shall continue until the
occurrence of a Liquidating Event as provided in this Section 12.01;
(ii) if the successor general partner is not the former general partner,
then the Interest of the former general partner shall be treated thenceforth
as the Interest of an unadmitted assignee of a Partner; and
(iii) all necessary steps shall be taken to cancel this Agreement and the
Certificate and to enter into a new partnership agreement substantially
identical to this Agreement (except that Cellco LP will not be obligated to
enter into any new partnership agreement if the Partnership shall have been
reconstituted pursuant to an election under clause (y) above) and a
certificate of limited partnership;
provided that the right of all the Limited Partners to select a successor
general partner and to reconstitute and continue the business of the
Partnership shall not exist and may not be exercised unless the Partnership has
received an opinion of counsel that the exercise of the right would not result
in the loss of limited liability of any Limited Partner and neither the
Partnership nor the reconstituted partnership would cease to be treated as a
partnership for federal income tax purposes upon the exercise of such right to
continue.
SECTION 12.02. Winding up. Upon the occurrence of a Liquidating Event,
unless the Partnership is continued or reconstituted pursuant to Section 12.01,
the Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors and Partners and no Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of
the Partnership's business and affairs, provided that, all covenants contained
in this Agreement
B-21
and all obligations provided for in this Agreement shall continue to be fully
binding upon the Partners until such time as the property of the Partnership
has been distributed pursuant to this Section 12.02 and the Partnership has
been terminated. The Managing General Partner, or, upon the occurrence of a
Liquidating Event specified in Section 12.01(b) or 12.01(d), a Person elected
by all of the Limited Partners, shall be responsible for overseeing the winding
up and dissolution of the Partnership (the Managing General Partner or any
other Person elected pursuant to this Section 12.02 to wind up the affairs of
the Partnership being referred to as the "Liquidator"). Not later than 90 days
after the date on which the Liquidating Event occurred, the Liquidator shall
take full account of the Partnership's liabilities and assets and shall cause
the proceeds from the sale thereof, to the extent sufficient therefor, to be
applied and distributed, to the maximum extent permitted by law, in the
following order:
(a) first, to the payment and discharge of all of the Partnership's debts
and liabilities to creditors other than the Managing General Partner which
are known or ascertainable within 90 days after the occurrence of a
Liquidating Event, other than liabilities for distributions to Partners;
(b) second, to the payment and discharge of all of the Partnership's
debts and liabilities to the Managing General Partner which are known or
ascertainable within 90 days after the occurrence of a Liquidating Event,
other than liabilities for distributions to Partners; and
(c) the balance, if any, to the Partners in accordance with their Capital
Accounts, after giving effect to all contributions, distributions, and
allocations for all periods.
SECTION 12.03. Allocations During Period of Liquidation. During the
period commencing on the date on which a Liquidating Event occurs and ending on
the date on which the assets of the Partnership are distributed to the Partners
pursuant to Section 12.02 hereof, the Partners shall continue to share Profit,
Loss and other items of Partnership income, gain, loss or deduction in the
manner provided in Article 4 hereof.
SECTION 12.04. Indemnification of the Liquidator. In the event that the
Liquidator is a Person other than the Managing General Partner, the Managing
General Partner shall indemnify, save harmless, and pay all judgments and
claims against such Liquidator relating to any liability or damage incurred by
reason of its making distributions to the Partners and in accordance with
Section 12.02 hereof, except to the extent such liability or damage is caused
by the gross negligence, fraud, or willful misconduct of the Liquidator.
ARTICLE 13
POWER OF ATTORNEY
SECTION 13.01. Managing General Partner as Attorney-in-fact. Each Limited
Partner hereby makes, constitutes, and appoints the Managing General Partner
and each successor general partner, with full power of substitution and
resubstitution, its true and lawful attorney-in-fact for it and in its name,
place, and stead and for its use and benefit, to sign, execute, certify,
acknowledge, swear to, file, and record all certificates of limited
partnership, assumed name or similar certificates, and other certificates and
instruments (including counterparts of this Agreement) which the Managing
General Partner deems necessary or appropriate to be filed by the Partnership
under the laws of the State of Delaware or any other state or jurisdiction in
which the Partnership is doing or intends to do business, and to take any
further action which such attorney-in-fact shall consider necessary or
advisable in connection with any of the foregoing.
SECTION 13.02. Special Power. The power of attorney granted pursuant to
this Article 13:
(a) is a special power of attorney coupled with an interest and is
irrevocable;
(b) may be exercised by any such attorney-in-fact by listing the Limited
Partners executing any agreement, certificate, instrument, or other document
with the single signature of any such attorney-in-fact acting as
attorney-in-fact for such Limited Partners; and
B-22
(c) shall survive the bankruptcy, insolvency, dissolution, or cessation
of existence of a Limited Partner and shall survive the delivery of an
assignment by a Limited Partner of the whole or a portion of its interest in
the Partnership, except that where the assignment is of such Limited
Partner's entire interest in the Partnership and the assignee, in accordance
with this Agreement, is admitted as a substituted Limited Partner, the power
of attorney shall survive the delivery of such assignment for the sole
purpose of enabling any such attorney-in-fact to effect such substitution.
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be
in writing and shall be delivered personally or by hand to the Person or to an
officer of the Person to whom the same is directed, or sent by facsimile or
other similar and immediate method of delivery, addressed as follows, or to
such other address as such Person may from time to time specify by notice to
the Partners:
(a) If to the Partnership, to the address set forth in Section 2.04
hereof for the Managing General Partner;
(b) If to the Managing General Partner, to the address set forth in
Section 3.01 hereof; and
(c) If to a Limited Partner, to the address set forth in Section 3.02
hereof.
Any such notice shall be delivered by hand, facsimile or other similar and
immediate method of delivery and shall be deemed to be delivered, given, and
received for all purposes as of the date so delivered. Any Person may from time
to time specify a different address by notice to the Partnership and the
Partners.
SECTION 14.02. Managing General Partner or New LP Breach. (a) In the event
of any breach by the Managing General Partner of any of its obligations under
Section 6.04, Price LP's sole remedy shall be damages.
(b) Cellco LP hereby guarantees to Price LP payment of all obligations of
the Managing General Partner to Price LP in connection with any breach by
the Managing General Partner of any of its obligations under this Agreement
(the "Guaranteed Obligations"). Cellco LP agrees that this guarantee is a
continuing guaranty of payment and performance and not of collection and
shall be absolute and unconditional and shall not be discharged, impaired or
otherwise affected by the genuineness, validity, enforceability or any
future amendment of, or change in, this Agreement or any other action or
circumstances that might otherwise constitute a legal or equitable discharge
or defense of a surety or guarantor. Cellco LP expressly waives all rights
it may have now or in the future under any law or otherwise to compel Price
LP to proceed in respect of the Guaranteed Obligations against the Managing
General Partner or any other person or entity before proceeding against
Cellco LP.
(c) Cellco LP hereby represents and warrants to Price LP as of the date
hereof and covenants that until the Guaranteed Obligations shall have been
paid in full,
(i) it does not own any material assets or property, and will not own any
material assets or property other than its Interest and the Cellco
Contributed Interest, it has not engaged and will not engage in any
business, directly or indirectly other than the ownership of its Interest,
the Cellco Contributed Interest and any other business incidental thereto
and it has not incurred and will not incur any liabilities, directly,
indirectly, contingent or otherwise other than the Cellco Contributed
License Liabilities, the Cellco Excluded Liabilities, the Guaranteed
Obligations and liabilities incidental thereto;
(ii) it has done or caused to be done and will do all things necessary to
preserve and maintain its existence and will not merge or consolidate with,
or acquire by purchase or otherwise any assets or business of, any other
person or entity other than its Interest or any cash or property distributed
in connection therewith; and
(iii) it is solvent and has the ability to pay its obligations as the
same shall become due and payable.
B-23
SECTION 14.03. Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
successors and permitted transferees and assigns.
SECTION 14.04. Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner. The terms of this Agreement are intended
to embody the economic relationship among the Partners and shall not be subject
to modification by or conform with any actions by the Internal Revenue Service
except as this Agreement shall be explicitly so amended. The previous sentence
shall not apply to the filing of tax returns.
SECTION 14.05. Assignability. No Partner may assign its rights or
obligations under this Agreement to a third party except in connection with a
Permitted Transfer as described above.
Section 14.06. Headings. Article and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 14.07. Severability; Integration. Every provision of this
Agreement is intended to be severable. If any term or provision hereof is
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the validity or legality of the remainder of this Agreement.
This Agreement, the Transaction Agreement, the Exchange Agreement, the Pledge
Agreement and the Lock-up Agreements constitute the entire understanding among
the parties with regard to this subject matter, and no other understanding,
agreement, statement, promise, or practice among the parties relating to this
subject matter shall be binding on the parties.
SECTION 14.08. Further Action. Each Partner, upon the request of any other
Partner, agrees to perform all further acts and execute, acknowledge, and
deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 14.09. Variation of Pronouns. All pronouns and any variation
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 14.10. Governing Law. The law of the State of Delaware shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
SECTION 14.11. Waiver of Action for Partition; No Bill for Partnership
Accounting. Each of the Partners irrevocably waives any right that such
Partner may have to maintain any action for partition with respect to any of
the property of the Partnership. To the fullest extent permitted by applicable
law, each of the Partners covenants that it will not (except with the consent
of the Managing General Partner) file a bill for Partnership accounting.
SECTION 14.12. Counterpart Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
SECTION 14.13. Limitation on Limited Partner Obligations. Except as
otherwise required by law, no Limited Partner shall (i) have any liability for
the obligations or liabilities of the Partnership or (ii) owe any duty
(including, without limitation, fiduciary duties) to the Partnership or any
other Partner.
SECTION 14.14. Limited Partner Rights. The Limited Partners shall not have
any rights with respect to the Partnership except as expressly set forth in
this Agreement or as required by applicable law.
B-24
IN WITNESS WHEREOF, the parties have entered into this Agreement of Limited
Partnership as of the day first above set forth.
VERIZON WIRELESS OF GEORGIA LLC
By: ----------------------------------
[CELLCO SUB]
By: ----------------------------------
By: ----------------------------------
PRICE COMMUNICATIONS WIRELESS, INC.
By: ----------------------------------
B-25
ANNEX C
EXCHANGE AGREEMENT
================================================================================
EXCHANGE AGREEMENT
dated as of
December 18, 2001
among
PRICE COMMUNICATIONS CORPORATION,
PRICE COMMUNICATIONS CELLULAR INC.,
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.,
PRICE COMMUNICATIONS WIRELESS, INC.,
VERIZON COMMUNICATIONS INC.,
VERIZON WIRELESS INC.
CELLCO PARTNERSHIP
and
VERIZON WIRELESS OF THE EAST LP
================================================================================
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions............................. D-1
ARTICLE 2
EXCHANGE OF ELP INTEREST
SECTION 2.01. Exchange into VWI Stock................. D-5
SECTION 2.02 Exchange into VCI Stock................. D-6
SECTION 2.03. Revaluation of Assets And Liabilities... D-6
SECTION 2.04. Indemnification Obligations............. D-6
SECTION 2.05. Allocation of Profit or Loss............ D-7
SECTION 2.06. Anti-dilution With Respect to VCI Stock. D-7
SECTION 2.07. Anti-dilution With Respect to VWI Stock. D-10
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PRICE CORPORATIONS
SECTION 3.01. Existence And Power..................... D-12
SECTION 3.02. Authorization........................... D-12
SECTION 3.03. Governmental Authorization.............. D-12
SECTION 3.04. Noncontravention........................ D-13
SECTION 3.05. Disclosure Documents.................... D-13
SECTION 3.06. Litigation.............................. D-13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VCI AND VWI
SECTION 4.01. Existence and Power..................... D-14
SECTIOn 4.02. Authorization........................... D-14
SECTION 4.03. Governmental Authorization.............. D-14
SECTION 4.04. Noncontravention........................ D-14
SECTION 4.05. Litigation.............................. D-14
SECTION 4.06. SEC Filings............................. D-15
ARTICLE 5
COVENANTS
SECTION 5.01. Stockholder Meeting; Proxy Materials.... D-15
SECTION 5.02. VCI and VWI Registration Statements..... D-15
SECTION 5.03. Shelf Registration Statement............ D-15
SECTION 5.04. Reservation of Shares................... D-16
SECTION 5.05. Listing................................. D-16
SECTION 5.06. 1934 Act Reports........................ D-16
SECTION 5.07. Tax Treatment........................... D-16
SECTION 5.08. Identity of Issuer...................... D-17
SECTION 5.09. Post-closing Litigation................. D-17
i
PAGE
----
SECTION 5.10. 1940 Act........................................... 17
SECTION 5.11. Further Assurances................................. 17
SECTION 5.12. Solvency Certificate............................... 17
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of Each Party............ D-17
SECTION 6.02. Conditions to Obligation of VWI.................... D-17
SECTION 6.03. Conditions to Obligation of VCI.................... D-17
SECTION 6.04. Conditions to Obligations of The Price Corporations D-19
ARTICLE 7
SURVIVAL
SECTION 7.01. Survival........................................... D-19
ARTICLE 8
TERMINATION
SECTION 8.01. Termination........................................ D-20
SECTION 8.02. Effect of Termination.............................. D-20
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices............................................ D-20
SECTION 9.02. Amendments and Waivers............................. D-21
SECTION 9.03. Expenses........................................... D-21
SECTION 9.04. Successors and Assigns............................. D-21
SECTION 9.05. Governing Law...................................... D-21
SECTION 9.06. Jurisdiction....................................... D-21
SECTION 9.07. Waiver of Jury Trial............................... D-22
SECTION 9.08. Counterparts; Third Party Beneficiaries............ D-22
SECTION 9.09. Entire Agreement................................... D-22
SECTION 9.10. Joint and Several Liability........................ D-22
SECTION 9.11. Appointment of Agent............................... D-22
SECTION 9.12. Severability....................................... D-22
SECTION 9.13. Interpretation..................................... D-22
ii
EXCHANGE AGREEMENT
AGREEMENT dated as of December 18, 2001 among Price Communications
Corporation, a New York corporation ("Price Parent"), Price Communications
Cellular Inc., a Delaware corporation ("Price Cellular"), Price Communications
Cellular Holdings, Inc., a Delaware corporation ("Price Shareholder"), Price
Communications Wireless, Inc., a Delaware corporation (together with any Person
to which it may have assigned its rights and obligations pursuant to Section
9.04 of this Agreement, the "Company" and, together with Price Parent, Price
Cellular and Price Shareholder, the "Price Corporations"), Verizon
Communications Inc., a Delaware corporation ("VCI"), Verizon Wireless Inc., a
Delaware corporation (or any Substitute Issuer to which it may have assigned
its rights and obligations pursuant to Section 9.04 of this Agreement, "VWI"),
Cellco Partnership, a Delaware general partnership ("Cellco"), and Verizon
Wireless of the East LP, a newly formed Delaware limited partnership ("New LP").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement (i) the Price
Corporations, Cellco Partnership, a Delaware general partnership ("Cellco"),
and New LP are entering into a Transaction Agreement (the "Transaction
Agreement"), pursuant to which, among other things, the Company will make the
Company Asset Contribution and the Company Cash Contribution to New LP in
exchange for the ELP Interest, (ii) Cellco, New LP and certain other Persons
(such other Persons, the "Stockholders") are entering into a Voting Agreement
(the "Voting Agreement"), pursuant to which the Stockholders have agreed, among
other things, to vote the shares of stock of the Price Corporations held by
them in favor of the transactions contemplated by the Transaction Agreement and
this Agreement and (iii) the Price Corporations are entering into Lock-up
Agreements with each of VCI and VWI (the "Lock-up Agreements") that limit, in
certain respects, the transfer by the Price Corporations of any shares of VWI
or VCI issued pursuant to this Agreement;
WHEREAS, the parties hereto desire that the ELP Interest shall be
exchangeable for VWI Stock or VCI Stock upon the terms and subject to the
conditions set forth herein;
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. (a) Capitalized terms used but not defined
herein shall have the respective meanings set forth in the Transaction
Agreement. In addition, the following terms, as used herein, have the following
meanings:
"Average VCI Stock Price" means, for any measurement date, the average of
the Daily Price per share of VCI Stock for the 20 consecutive trading days
immediately prior to such measurement date; provided that, if a VCI
Adjustment Event has occurred during such period, "Average VCI Stock Price"
shall mean the average of the Daily Price per share of VCI Stock for the
consecutive trading days beginning the first trading day after such VCI
Adjustment Event and ending the trading day immediately prior to such
measurement date.
"Average VWI Stock Price" means, for any measurement date, the average of
the Daily Price per share of VWI Stock for the 20 consecutive trading days
immediately prior to such measurement date; provided that, if a VWI
Adjustment Event has occurred during such period, "Average VWI Stock Price"
shall mean the average of the Daily Price per share of VWI Stock for the
consecutive trading days beginning the first trading day after such VWI
Adjustment Event and ending the trading day immediately prior to such
measurement date.
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"Common Voting Stock" means common stock of a corporation which entitles
the holders thereof to vote in the election of directors of such corporation.
"Daily Price" means, for any securities, as of any day, (i) if such
securities are listed and traded on the New York Stock Exchange, Inc.
("NYSE"), the price at the close of the regular session of trading on such
day as reported on the NYSE Consolidated Tape, (ii) if such securities are
not listed and traded on the NYSE, the closing price on such day as reported
by the principal national securities exchange on which such securities are
listed and traded at the close of the regular session of trading for such
exchange, (iii) if such securities are not listed and traded on any such
securities exchange, the last reported sale price not identified as having
been reported late, on such day on the National Association of Securities
Dealers, Inc. Automated Quotation Market System ("Nasdaq"), or (iv) if such
securities are quoted but not traded on Nasdaq, the average of the highest
reported bid and lowest reported asked price not identified as having been
reported late, on such day as reported by Nasdaq.
"ELPI PledgeTransfer" means a transfer of ownership of the ELP Interest
to a pledgee pursuant to a pledge granted by the Company under Article 10 of
the New LP Agreement.
"Exchange" means a VWI Exchange or a VCI Exchange.
"Exchange Closing Date" means the date of consummation of an Exchange.
"Exchange Notice Deadline" means the 60th day following the Exchange
Trigger Date.
"Exchange Trigger Date" means the later of (i) the one year anniversary
of the Closing Date and (ii) the date of the VWI IPO.
"Mandatory Exchange Date" means:
(i) the fourth anniversary of the Closing Date, if (A) no Exchange
Trigger Date occurs prior to such fourth anniversary or (B) the Company
has a right to deliver and delivers a VWI Exchange Revocation Notice in
compliance with Section 2.01(d) prior to such fourth anniversary;
(ii) the fourth anniversary of the delivery by the Company of a VWI
Exchange Notice in compliance with Section 2.01 if (A) the stockholders
of Price Parent approve the VWI Exchange contemplated by such VWI
Exchange Notice, (B) the VWI Exchange is not consummated prior to the
fourth anniversary of the delivery of such VWI Exchange Notice and the
failure to consummate the VWI Exchange is not the result of a failure by
any Price Corporation or VWI to have performed, in all material
respects, their respective obligations under this Agreement that are
required to be performed by them prior to such fourth anniversary and
(C) the ELP Interest has not been exchanged for VCI Stock pursuant to
Section 2.02(b);
(iii) the business day following the date of delivery of a VWI
Exchange Revocation Notice in compliance with Section 2.01(d) if such
VWI Exchange Revocation Notice is delivered after the fourth anniversary
of the Closing Date; and
(iv) the tenth anniversary of the Closing Date if (a) the ELP
Interest has not been exchanged for VCI Stock pursuant to Section
2.01(b) and (b) the Mandatory Exchange Date does not, for any reason
whatsoever, occur under clause (i), (ii) or (iii) above, including,
without limitation, instances where the Exchange Trigger Date occurs
prior to the fourth anniversary of the Closing Date and either (A) the
Company does not deliver a VWI Exchange Notice in accordance with
Section 2.01(a) prior to the Exchange Notice Deadline and the ELP
Interest has not been exchanged for VCI Stock pursuant to Section
2.02(b) or (B) the Company delivers a VWI Exchange Notice prior to the
Exchange Notice Deadline and either (x) the stockholders of Price Parent
do not approve the VWI Exchange contemplated by such VWI Exchange Notice
or (y) the failure to consummate the VWI Exchange is the result of the
failure by the Price Corporations to perform, in any material respect,
their obligations under this Agreement that are required to be performed
prior to the Exchange Closing Date.
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"Permitted Transferee" has the meaning assigned to such term in the New
LP Agreement.
"Pre-Deadline Maximum Price" means, subject to Section 2.06, $74.
"Pre-Deadline Minimum Price" means, subject to Section 2.06, $40.
"Post-Deadline Minimum Price" means, subject to Section 2.06, $55.30.
"Price Change of Control" means any Person (other than a Passive
Institutional Investor and other than Robert Price and any 13D Group as to
which he has sole voting authority) or 13D Group having or acquiring
beneficial ownership (as defined in Rule 13d-3 under the 1934 Act) of voting
securities of Price Parent representing more than 30% of the total voting
power of all outstanding voting securities of Price Parent (provided that a
"Price Change of Control" shall not be deemed to exist solely by reason of
an acquisition of voting securities of Price Parent by Price Parent which,
by reducing the number of voting securities of Price Parent outstanding,
increases the proportionate number of voting securities of Price Parent
beneficially owned by such Person or 13D Group to more than 30% of the total
voting power of all outstanding voting securities of Price Parent).
"Publicly Traded Securities" means securities which are listed and traded
on any national securities exchange or quoted and traded on Nasdaq.
"Relevant VCI Prices" means the Pre-Deadline Minimum Price, the
Pre-Deadline Maximum Price and the Post-Deadline Minimum Price.
"SEC" means the Securities and Exchange Commission.
"VCI Controlled Subsidiary" means a corporation that is controlled by VCI
within the meaning of Section 368(c) of the Code.
"VCI Exchange" means a VCI Mandatory Exchange or a VCI Call Exchange.
"VCI Exchange Amount" means, subject to Sections 2.03, 2.04 and 2.05,
(i)(a) for any VCI Exchange occurring under the circumstances contemplated
by clauses (i), (ii) or (iii) of the definition of "Mandatory Exchange Date"
and (b) for any VCI Exchange occurring pursuant to clause (i)(B), clause
(ii) or clause (iii) of Section 2.02(b), a number of shares of VCI Stock
equal to (A) the amount of the Company Capital Account as of the date of
such VCI Exchange divided by (B) the Average VCI Stock Price for such date
(provided that, for purposes of clause (B), (w) if such price is less than
the Pre-Deadline Minimum Price, the Average VCI Stock Price shall be deemed
to be equal to the Pre-Deadline Minimum Price and (x) if such price is
greater than the Pre-Deadline Maximum Price, the Average VCI Stock Price
shall be deemed to be equal to the Pre-Deadline Maximum Price), or (ii) for
any VCI Exchange occurring under the circumstances contemplated by clause
(iv) of the definition of "Mandatory Exchange Date"and for any VCI Exchange
occurring pursuant to clause (i)(A) of Section 2.02(b), a number of shares
of VCI Stock equal to (A) the amount of the Company Capital Account as of
the date of such VCI Exchange divided by (B) the greater of (y) the Average
VCI Stock Price for such date and (z) the Post-Deadline Minimum Price;
provided that, in each case, the number of shares of VCI Stock shall be
rounded down to the nearest whole share if the foregoing calculation would
result in a fractional share of less than 0.5 and shall be rounded up to the
nearest whole share if such calculation would result in a fractional share
of 0.5 or greater.
"VCI Registration Statement" means the registration statement of VCI (as
amended or supplemented) filed with the SEC pursuant to Section 5.02.
"VCI Stock" means, subject to Section 2.06, the common stock, par value
$0.10 per share, of VCI.
"Verizon Issuer" means (i) VCI, in the case of a VCI Exchange, and (ii)
VWI, in the case of a VWI Exchange.
"VWI Exchange Amount" means, subject to Sections 2.03, 2.04 and 2.05, a
number of shares of VWI Stock equal to (i) the amount of the Company Capital
Account as of the date of exchange divided by (ii) the VWI IPO Price (as
adjusted pursuant to Section 2.07); provided that such number of shares
shall be rounded
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down to the nearest whole share if the foregoing calculation would result in
a fractional share of less than 0.5 and shall be rounded up to the nearest
whole share if such calculation would result in a fractional share of 0.5 or
greater.
"VWI IPO" means the initial public offering of shares of VWI Stock at any
time prior to the fourth anniversary of the Closing Date which initial
public offering (i) is pursuant to an effective registration statement under
the 1933 Act, (ii) is underwritten, on a firm commitment basis, by one or
more investment banks of nationally recognized standing, and (iii) results
in (A) gross proceeds to the issuer of at least $4 billion and (B) the
issuance to the issuer of partnership units representing at least 4% of the
aggregate partnership units in Cellco which are outstanding immediately
after completion of such offering.
"VWI IPO Price" means the price per share at which shares of VWI Stock
are offered for sale to the public pursuant to the VWI IPO.
"VWI Registration Statement" means the registration statement of VWI (as
amended or supplemented) which may be filed with the SEC pursuant to Section
5.02.
"VWI Stock" means common stock of VWI which is Common Voting Stock and
which is of the same class as the shares offered to the public in the VWI
IPO.
(a) Each of the following terms is defined in the Section set forth opposite
such terms.
Term Section
---- -------
Adjusted Pro Forma VCI Share Price 2.06(c)
Adjusted VCI Exchange Amount...... 2.06(c)
Audited Profit/Loss............... 2.05(c)
Cellco............................ Preamble
Company........................... Preamble
Estimated Profit/Loss............. 2.05(a)
Lock-up Agreement................. 3.01
New LP............................ Preamble
non-electing VCI share............ 2.06(f)
Price Cellular.................... Preamble
Price Shareholder................. Preamble
Price Parent...................... Preamble
Price Corporations................ Preamble
Price Proxy Materials............. 3.05(a)
Pro Forma VCI Share Price......... 2.06(c)
Reorganization.................... 5.07(a)
Revocation Deadline............... 2.01(d)
Shelf Registration Statement...... 5.03(a)
Stockholders...................... Preamble
Substitute Issuer................. 5.08
Transaction Agreement............. Preamble
VCI............................... Preamble
VCI Acquiror...................... 2.06 (d)
VCI Adjustment Event.............. 2.06(a)
Voting Agreement.................. Preamble
VCI Call Exchange................. 2.02(b)
VCI Call Exchange Closing......... 2.02(b)
VCI Distribution Amount........... 2.06(c)
VCI Exercise Notice............... 2.02(b)
VCI Extraordinary Divided......... 2.06(a)
VCI Mandatory Exchange............ 2.02(a)
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Term Section
---- -------
VCI Required Value............ 2.06(c)
VWI........................... Preamble
VWI Acquiror Shares........... 2.07(g)
VWI Acquiror Shares........... 2.07(g)
VWI Exchange.................. 2.01(b)
VWI Exchange Closing.......... 2.01(b)
VWI Exchange Notice........... 2.01(a)
VWI Exchange Revocation Notice 2.01(d)
VWI Merger Event.............. 2.07(d)
ARTICLE 2
EXCHANGE OF ELP INTEREST
SECTION 2.01 Exchange into VWI Stock. (a) At any time on or after the
Exchange Trigger Date, the Company shall have the right to elect to exchange
the ELP Interest, free and clear of all Liens (other than any Liens under the
Pledge Agreement), in whole and not in part, for a number of shares of VWI
Stock equal to the VWI Exchange Amount (as such amount may be adjusted in
accordance with Section 2.07); provided that, to exercise this right, the
Company must deliver to VWI, VCI and New LP no later than the Exchange Notice
Deadline, a written irrevocable (subject to Section 2.01(d)) notice of exercise
(a "VWI Exchange Notice"). Any VWI Exchange Notice may provide that such
exercise is subject to satisfaction or waiver of any of the conditions set
forth in Article 6 applicable to a VWI Exchange.
(b) The exchange of the ELP Interest for the VWI Exchange Amount pursuant to
this Section 2.01 shall take place at a closing (the "VWI Exchange Closing")
which shall occur promptly after receipt of a VWI Exchange Notice and
satisfaction or waiver of the conditions described in Sections 6.01(a), 6.02
and 6.04. At the VWI Exchange Closing, VWI shall deliver to the Company a
number of fully paid and non_assessable shares of VWI Stock equal to the VWI
Exchange Amount and the Company shall take such actions as may reasonably be
required to transfer to VWI the ELP Interest free and clear of any Liens (other
than any Liens under the Pledge Agreement) (the "VWI Exchange").
(c) VWI and the Company will each pay 50% of any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or delivery
of shares of VWI Stock upon consummation of the VWI Exchange, except to the
extent such taxes are imposed by law on the recipient of such shares.
(d) If the Company delivers a VWI Exchange Notice pursuant to Section
2.01(a) and the stockholders of Price Parent subsequently approve the VWI
Exchange at a meeting held pursuant to Section 5.01, the Company shall have the
right to revoke such VWI Exchange Notice if (i) the VWI Exchange does not occur
prior to the earlier of (A) the first anniversary of the Exchange Notice
Deadline or (B) the day which is 180 days after the fourth anniversary of the
Closing Date (the "Revocation Deadline"), and (ii) the failure to consummate
the VWI Exchange prior to the Revocation Deadline is solely a result of a
breach by VWI of any of its obligations under this Agreement; provided that, to
exercise this right, the Company must deliver to VWI, VCI and New LP no later
than 30 days after the Revocation Deadline a written irrevocable notice of
exercise (a "VWI Exchange Revocation Notice"). Upon delivery of a VWI Exchange
Revocation Notice, the Company shall no longer have any right to Exchange the
ELP Interest for VWI Stock pursuant to this Agreement and, subject to the
satisfaction of the conditions set forth in Sections 6.01(b), 6.02 and 6.04,
the ELP Interest will be exchanged for VCI Stock under Section 2.02. The
delivery by the Company of a VWI Exchange Revocation Notice will not constitute
a waiver by the Company of any rights that it may have against VWI in
connection with any VWI breach giving rise to the Company's right to deliver
the VWI Exchange Revocation Notice.
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SECTION 2.02 Exchange into VCI Stock . (a) Subject to satisfaction or
waiver of the conditions set forth in Sections 6.01(b), 6.03 and 6.04, on the
Mandatory Exchange Date, if any, the Company shall take such actions as may
reasonably be required to transfer to VCI (or to a VCI Controlled Subsidiary
designated by VCI) the ELP Interest, free and clear of any Liens (other than
any Liens under the Pledge Agreement), and VCI (or such VCI Controlled
Subsidiary) shall deliver to the Company a number of fully paid and
nonassessable shares of VCI Stock equal to the VCI Exchange Amount (as such
amount may be adjusted pursuant to Section 2.06) applicable to such Mandatory
Exchange Date (the "VCI Mandatory Exchange").
(b) Subject to satisfaction or waiver of the conditions set forth in
Sections 6.01(b), 6.03 and 6.04, (i) if both the Exchange Notice Deadline and
the second anniversary of the Closing Date shall have occurred and either (A)
the Company shall not have delivered a VWI Exchange Notice in accordance with
Section 2.01(a) or (B) the Company shall have delivered a VWI Exchange Notice
and subsequently delivered a VWI Exchange Revocation Notice pursuant to Section
2.01(d), (ii) if there shall have occurred after the Closing Date any Price
Change of Control or (iii) if there shall have occurred an ELPI Pledge
Transfer, then, (x) in the case of clause (i), at any time after the occurrence
of the events described in such clause (i), (y) in the case of clause (ii), at
any time prior to the fourth anniversary of the Price Change of Control and (z)
in the case of clause (iii), at any time after the occurrence of the ELPI
Pledge Transfer, VCI shall have the right to cause the Company to take such
actions as may be required to transfer to VCI (or to a VCI Controlled
Subsidiary designated by VCI) the ELP Interest, in whole and not in part, free
and clear of any Liens (other than any Liens under the Pledge Agreement), and,
in exchange therefor, VCI (or such VCI Controlled Subsidiary) shall deliver to
the Company a number of fully paid and nonassessable shares of VCI Stock equal
to the VCI Exchange Amount (as such amount may be adjusted pursuant to Section
2.06) applicable at such time. To exercise its rights under this Section
2.06(b), VCI shall deliver to the Company a written notice of exercise at least
30 days prior to the date VCI proposes to effect such transfer and exchange (a
"VCI Exercise Notice"). Any VCI Exercise Notice may provide that such exercise
is subject to satisfaction or waiver of any of the conditions set forth in
Article applicable to a VCI Exchange. The exchange of the ELP Interest for the
VCI Exchange Amount pursuant to this Section shall take place at a closing (the
"VCI Call Exchange Closing") which shall occur promptly after receipt by the
Company of a VCI Exercise Notice and satisfaction or waiver of the conditions
set forth in Sections 6.01(b), 6.03 and 6.04. At the VCI Call Exchange Closing,
the Company will transfer the ELP Interest to VCI (or to a VCI Controlled
Subsidiary designated by VCI) free and clear of any Liens (other than any Liens
under the Pledge Agreement) and VCI (or such VCI Controlled Subsidiary) will
deliver to the Company such VCI Stock (the "VCI Call Exchange").
(c) VCI and the Company will each pay 50% of any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or delivery
of shares of VCI Stock upon consummation of a VCI Exchange, except to the
extent such taxes are imposed by law on the recipient of such shares.
SECTION 2.03 Revaluation of Assets and Liabilities. At the election of the
Company at any time prior to the later of (x) 30 days after an Exchange and (y)
if the Company has requested an audit pursuant to Section 2.05(b), 10 days
after a determination by New LP pursuant to Section 2.05(c), the following
shall take place effective upon an Exchange:
(i) all assets and liabilities of New LP shall be revalued at their
current market values based on an appraisal thereof conducted by a Person
designated by the Company (the costs of any such appraisal to be shared
equally between New LP and the Company); provided that such Person (A) shall
not be an Affiliate of the Company, VCI or VWI, and (B) must be approved by
VWI and VCI (such approval not to be unreasonably withheld); and
(ii) solely for the purpose of determining the VCI Exchange Amount or the
VWI Exchange Amount, any unrealized gain or loss resulting from the
revaluation of the New LP assets and liabilities shall be allocated to each
Capital Account in accordance with the terms of Article 4 of the New LP
Agreement as if it were an item of Profit or Loss.
SECTION 2.04 INDEMNIFICATION OBLIGATIONS. Solely for purposes of
calculating the VCI Exchange Amount or the VWI Exchange Amount, if a Default
(as defined in the Pledge Agreement) has occurred and is
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continuing as of the date of an Exchange, the Company Capital Account shall be
reduced by the amount of any Secured Obligations (as defined in the Pledge
Agreement) subject to such Default.
SECTION 2.05 Allocation of Profit or Loss. Solely for purposes of
calculating the VWI Exchange Amount or the VCI Exchange Amount, upon an
Exchange, New LP shall estimate in good faith Profit or Loss for the period
from the beginning of the fiscal year in which such Exchange occurs (the
"Exchange Year") until the Exchange Closing Date, and shall allocate to Price
LP's Capital Account Price LP's share of such Profit or Loss in accordance with
the terms of the New LP Agreement (such share of Profit or Loss is hereafter
referred to as the "Estimated Profit/Loss"). New LP will advise Price LP of its
preliminary estimate a reasonable period of time prior to the Exchange Closing
Date and will consider in good faith any revisions suggested by Price LP.
(b) If, within 30 days after such Exchange, the Company requests in writing
that New LP perform an audit with respect to the calculations referred to in
Section 2.05(a), New LP shall promptly prepare (or cause to be prepared) its
income statement for the period from the beginning of the Exchange Year until
the Exchange Closing Date, and shall cause such income statement to be audited
by its independent auditors. The costs of any such audit shall be shared
equally between New LP and the Company.
(c) Promptly after completion of an audit conducted pursuant to Section0
2.05(b), and solely for purposes of determining the accuracy of the
calculations referred to in Section 2.05(a), New LP shall determine Price LP's
share of any Profit or Loss (the "Audited Profit/Loss") for the period from the
beginning of the Exchange Year until the Exchange Closing Date based on the
audited income statement.
(d) If the Audited Profit/Loss is greater (i.e., a larger Profit or a
smaller Loss) than the Estimated Profit/Loss, the Verizon Issuer shall promptly
(subject to satisfaction or waiver of the conditions set forth in Section
6.01(a) or Section 6.01(b), as the case may be) (A) issue to the Company a
number of shares of VCI Stock or VWI Stock, as the case may be, equal to (x)
the amount of such excess divided by (y) the denominator used to calculate the
VCI Exchange Amount or the VWI Exchange Amount, as the case may be, for
purposes of the Exchange, and (B) deliver to the Company any distributions made
on such shares between the Exchange Closing Date and the date of such issuance.
If the Audited Profit/Loss is less (i.e., a smaller Profit or a larger Loss)
than the Estimated Profit/Loss, the Company shall promptly return to the
Verizon Issuer (A) a number of shares of VCI Stock or VWI Stock, as the case
may be, equal (x) the amount of such deficit divided by (y) the denominator
used to calculate the VCI Exchange Amount or the VWI Exchange Amount, as the
case may be, for purposes of the Exchange, and (B) any distributions made on
such shares between the Exchange Closing Date and the date of such return. The
number of shares to be issued or returned pursuant to the preceding two
sentences shall be rounded up or down to the nearest whole share in accordance
with the proviso to the definition of VCI Exchange Amount or VWI Exchange
Amount in Section 1.01. If the Audited Profit/Loss is equal to the Estimated
Profit/Loss, the Verizon Issuer shall not be required to issue any additional
shares and the Company shall not be required to return any shares to the
Verizon Issuer.
(e) Capitalized terms used in this Section 2.05 but not defined herein or in
the Transaction Agreement shall have the respective meanings set forth in the
New LP Agreement.
SECTION 2.06 Anti-dilution With Respect to VCI Stock. (a) If VCI at any
time after the Closing Date (i) subdivides or splits the outstanding VCI Stock
(including by means of paying a dividend payable solely in shares of VCI
Stock), (ii) combines or reclassifies the outstanding VCI Stock into a smaller
number of shares, (iii) consolidates with, merges into or is converted into any
other Person, (iv) pays any VCI Extraordinary Dividend in respect of the VCI
Stock or (v) consummates any other transaction having an effect on the VCI
Stock substantially similar to the effect of the other transactions described
in this Section 2.06(a), including, without limitation, any issuance of any
shares of its capital stock in a reclassification of VCI Stock (including any
such reclassification in connection with a consolidation or merger in which VCI
is the surviving corporation), the securities to be issued upon any VCI
Exchange consummated after the record date for the determination of
stockholders entitled to such dividend in the case of the dividend referred to
in clause (i), (iv) or, if applicable, clause (v) or after the effective date
of the other events referred to in clauses (i) through (v)
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above will be adjusted as set forth in this Section 2.06 (each such record date
or effective date, a "VCI Adjustment Event"). For purposes of this Section
2.06, "VCI Extraordinary Dividend" means the payment by VCI of any dividend on,
or the making by VCI of any distribution in respect of, the VCI Stock (other
than a dividend or distribution payable solely in shares of VCI Stock), whether
payable in cash, securities or other property; provided that cash dividends
paid by VCI in the ordinary course of its business shall not constitute VCI
Extraordinary Dividends; provided further that, without limiting the
immediately preceding proviso, any cash dividend which, on an annualized basis,
represents 10% or less of the Average VCI Stock Price for the date of such
dividend shall be presumed to have been paid in the ordinary course of business.
(b) If the VCI Adjustment Event is the subdivision or split of the
outstanding VCI Stock into a larger number of shares (including by means of
paying a dividend payable solely in shares of VCI Stock) of the same class or
the combination or reclassification of the outstanding VCI Stock into a smaller
number of shares of the same class, then, for purposes of computing the VCI
Exchange Amount in respect of any VCI Exchange occurring after such VCI
Adjustment Event, each Relevant VCI Price will be proportionately adjusted by
dividing such Relevant VCI Price by the number of shares of VCI Stock (or
fraction thereof) into which one share of VCI Stock was subdivided, split,
combined or reclassified as a result of such VCI Adjustment Event.
(c) If the VCI Adjustment Event is a VCI Extraordinary Dividend, then the
VCI Exchange Amount applicable to any VCI Exchange occurring after such VCI
Adjustment Event will be equal to the "Adjusted VCI Exchange Amount" calculated
pursuant to the following formula:
Adjusted VCI Exchange Amount = VCI Required Value
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Current VCI Price
where, for purposes of this Section 2.06(c):
"VCI Required Value" means (i) the amount of the Company Capital Account
as of the date of such VCI Exchange divided by the Adjusted Pro Forma VCI
Share Price, multiplied by (ii) the Pro Forma VCI Share Price.
"Adjusted Pro Forma VCI Share Price" means (i) for any VCI Exchange
occurring under the circumstances contemplated by clauses (i), (ii) or (iii)
of the definition of "Mandatory Exchange Date" and for any VCI Exchange
occurring pursuant to clause (i)(B), clause (ii) or clause (iii) of Section
2.02(b), the Current VCI Price plus the VCI Distribution Amount; provided
that, such amount shall not be less than the Pre-Deadline Minimum Price or
greater than the Pre-Deadline Maximum Price and (ii) for any VCI Exchange
occurring under the circumstances contemplated by clause (iv) of the
definition of "Mandatory Exchange Date" and for any VCI Exchange pursuant to
clause (i)(A) of Section 2.02(b), an amount equal to the greater of (A) an
amount equal to the Current VCI Price for such date plus the VCI
Distribution Amount and (B) the Post-Deadline Minimum Price.
"Pro Forma VCI Share Price" means an amount equal to the Current VCI
Price plus the VCI Distribution Amount.
"VCI Distribution Amount" means the aggregate per share amount of all VCI
Extraordinary Dividends paid by VCI after the Closing Date and prior to such
VCI Exchange; provided that, for purposes of this Section 2.06(c), the per
share amount of any non-cash VCI Extraordinary Dividend shall be equal to
(i) to the extent that any non-cash VCI Extraordinary Dividend is comprised
of property other than Publicly Traded Securities, an amount equal to (A)
the Average VCI Stock Price for the date of such VCI Extraordinary Dividend
minus the sum of (B)(1) the average of the Daily Price per share of VCI
Stock for the 20 consecutive trading days immediately after such VCI
Extraordinary Dividend and (2) the value, if any, derived from clause (ii)
below, and (ii) to the extent that any non-cash VCI Extraordinary Dividend
is comprised of securities which are Publicly Traded Securities, an amount
equal to the average Daily Price per security of such securities for the 20
consecutive trading days immediately after such VCI Extraordinary Dividend
multiplied by the number of such securities distributed per share of VCI
Stock.
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"Current VCI Price" means the Average VCI Stock Price for the date of
such VCI Exchange.
(d) If the VCI Adjustment Event is a transaction pursuant to which VCI
consolidates with, merges or converts into, or is acquired by any other Person
(the "VCI Acquiror"), and pursuant to such transaction the VCI Stock is
consolidated, merged, converted or exchanged into securities other than VCI
Stock or is acquired for cash and/or such securities (a "VCI Merger Event"),
then (subject to Section 2.06(b)) upon any VCI Exchange occurring after such
VCI Merger Event, the holder of the ELPI Interest shall be entitled to receive
(in lieu of the VCI Exchange Amount) consideration with a value equal to the
Required VCI Exchange Value in the same form and, if a combination of forms, in
the same proportion as the consideration that was provided to other holders of
VCI Stock in connection with such VCI Merger Event. For purposes of this
Section 2.06(d), the "Required VCI Exchange Value" for any such VCI Exchange
shall be equal to the Adjusted VCI Merger Value multiplied by the VCI Per Share
Value, where:
"Adjusted VCI Merger Value" means the amount of the Company Capital
Account as of the date of such VCI Exchange divided by the Adjusted VCI Per
Share Value.
"Adjusted VCI Per Share Value" means (i) for any VCI Exchange occurring
under the circumstances contemplated by clauses (i), (ii) or (iii) of the
definition of "Mandatory Exchange Date" and for any VCI Exchange occurring
pursuant to clause (i)(B), clause (ii) or clause (iii) of Section 2.02(b),
an amount equal to the VCI Per Share Value for such VCI Merger Event;
provided that such VCI Per Share Value shall not be less than the
Pre-Deadline Minimum Price or greater than the Pre-Deadline Maximum Price
and (ii) for any VCI Exchange occurring under the circumstances contemplated
by clause (iv) of the definition of "Mandatory Exchange Date" and for any
VCI Exchange occurring pursuant to clause (i)(A) of Section 2.02(b), an
amount equal to the greater of (A) the VCI Per Share Value for such VCI
Merger Event and (B) the Post-Deadline Minimum Price.
"VCI Per Share Value" means the value of the consideration paid per share
of VCI Stock in connection with such VCI Merger Event; provided that, for
purposes of this Section 2.06(d), the per share amount of any non-cash
consideration shall be (i) to the extent that such consideration is
comprised of securities which are Publicly Traded Securities, an amount
equal to the value of such consideration determined by reference to the
Daily Price per security of such securities on the first full trading day
following such VCI Merger Event and (ii) to the extent that such
consideration is comprised of property other than cash or Publicly Traded
Securities, an amount equal to (A) the VCI Stock Price as of the end of the
trading day immediately preceding the date of such VCI Merger Event minus
(B) the sum of the consideration per share of VCI Stock paid in cash or in
Publicly Traded Securities (valued as described above).
(e) If the VCI Adjustment Event is any VCI Adjustment Event other than those
described in paragraphs (b) through (d) of this Section 2.06, the securities to
be issued upon a VCI Exchange occurring after the VCI Adjustment Event and/or
the Relevant VCI Prices shall be adjusted as determined by the board of
directors of VCI in its reasonable good faith judgment, to reflect, on a basis
consistent with the adjustment principles described in such paragraphs (b)
through (d), the effect of such VCI Adjustment Event.
(f) For purposes of applying this Section 2.06, (i) in connection with any
VCI Adjustment Event pursuant to which holders of VCI Stock are entitled to
elect to receive Common Voting Stock as the sole consideration, the holder of
the ELP Interest shall be deemed to have elected to receive such Common Voting
Stock as the sole consideration in connection with such VCI Adjustment Event
(provided that such election shall take into account and be subject to (x) any
restrictions or limits imposed on the elections of the holders of VCI Stock and
(y) the elections actually made by the holders of VCI Stock), and (ii) if the
holders of VCI Stock are entitled to make an election as to the form of
consideration receivable in connection with a VCI Adjustment Event, but are not
entitled to elect Common Voting Stock as the sole consideration, and the form
of consideration receivable upon such VCI Adjustment Event is not the same for
each share of VCI Stock held immediately prior to such VCI Adjustment Event by
any Person other than a party to the VCI Adjustment Event or an Affiliate
thereof and in
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respect of which such rights of election shall not have been exercised
("non-electing VCI share"), then, for purposes of this Section 2.06, the kind
and amount of consideration receivable upon such VCI Adjustment Event shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing VCI shares.
(g) Any adjustments required to be made pursuant to this Section 2.06 shall
be made successively whenever any VCI Adjustment Event shall occur. To the
extent that a VCI Adjustment Event occurs after any VCI Merger Event which
involves the issuance of shares of stock of the VCI Acquiror ("VCI Acquiror
Shares") to holders of shares of VCI Stock, the adjustments provided for in
this Section 2.06 shall apply to the VCI Acquiror Shares on terms nearly as
equivalent as practicable to the provisions contained in this Section 2.06.
(h) If, at any time as a result of this Section 2.06, the holder of the ELP
Interest shall become entitled to receive any shares of capital stock of VCI
other than VCI Stock, the number of such other shares so receivable shall
thereafter be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions contained in this Section
2.06.
SECTION 2.07. Anti-dilution With Respect to VWI Stock. (a) If VWI at any
time after the VWI IPO but before a VWI Exchange (i) subdivides or splits the
outstanding VWI Stock (including by means of paying a dividend payable solely
in shares of VWI Stock), (ii) combines or reclassifies the outstanding VWI
Stock into a smaller number of shares, (iii) consolidates with, merges into or
is converted into any other Person, (iv) pays any VWI Extraordinary Dividend in
respect of the VWI Stock or (v) consummates any other transaction having an
effect on the VWI Stock substantially similar to the effect of the other
transactions described in this Section 2.07(a), including, without limitation,
any issuance of any shares of its capital stock in a reclassification of VWI
Stock (including any such reclassification in connection with a consolidation
or merger in which VWI is the continuing corporation), the securities to be
issued upon any VWI Exchange consummated after the record date for the
determination of stockholders entitled to such dividend in the case of the
dividend referred to in clause (i), (iv) or, if applicable, clause (v) or after
the effective date of the other events referred to in clauses (i) through (v)
above will be adjusted as set forth in this Section 2.07 (each such record date
or effective date, a "VWI Adjustment Event"). For purposes of this Section
2.07, "VWI Extraordinary Dividend" means the payment by VWI of any dividend on,
or the making by VWI of any distribution in respect of, the VWI Stock (other
than a dividend or distribution payable solely in shares of VWI Stock), whether
payable in cash, securities or other property; provided that cash dividends
paid by VWI in the ordinary course of its business shall not constitute VWI
Extraordinary Dividends; provided further that, without limiting the
immediately preceding proviso, that any cash dividend which, on an annualized
basis, represents 10% or less of the Average VWI Stock Price for the date of
such dividend shall be presumed to have been paid in the ordinary course of
business.
(b) If the VWI Adjustment Event is the subdivision or split of the
outstanding VWI Stock into a larger number of shares of the same class or the
combination or reclassification of the outstanding VWI Stock into a smaller
number of shares (including by means of paying a dividend payable solely in
shares of VWI Stock) of the same class, then, for purposes of computing the VWI
Exchange Amount in respect of any VWI Exchange occurring after such VWI
Adjustment Event, the VWI IPO Price will be proportionately adjusted by
dividing such VWI IPO Price by the number of shares of VWI Stock (or fraction
thereof) into which one share of VWI Stock was subdivided, split, combined or
reclassified as a result of such VWI Adjustment Event.
(c) If the VWI Adjustment Event is the payment of a VWI Extraordinary
Dividend, then the VWI Exchange Amount applicable to any VWI Exchange occurring
after such VWI Adjustment Event will be equal to the "Adjusted VWI Exchange
Amount" calculated pursuant to the following formula:
where, for purposes of this Section 2.07(c):
Adjusted VWI Exchange Amount = Initial VWI Exchange Amount x (1 + VWI Distribution Amount )
-----------------------
Current VWI Price
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"Initial VWI Exchange Amount" means the amount of the Company Capital
Account as of the date of such VWI Exchange divided by the VWI IPO Price (as
adjusted pursuant to this Section 2.07).
"VWI Distribution Amount" means the aggregate per share amount of all VWI
Extraordinary Dividends paid by VWI after the VWI IPO and prior to such VWI
Exchange; provided that, for purposes of this Section 2.07(c), the per share
amount of any non-cash VWI Extraordinary Dividend shall be equal to (i) to
the extent that any non-cash VWI Extraordinary Dividend is comprised of
property other than Publicly Traded Securities, an amount equal to (A) the
Average VWI Stock Price for the date of such VWI Extraordinary Dividend
minus the sum of (B)(1) the average of the Daily Price per share of VWI
Stock for the 20 consecutive trading days immediately after such VWI
Extraordinary Dividend and (2) the value, if any, derived from clause (ii)
below, and (ii) to the extent that any non-cash VWI Extraordinary Dividend
is comprised of securities which are Publicly Traded Securities, an amount
equal to the average Daily Price per security of such securities for the 20
consecutive trading days immediately after such VWI Extraordinary Dividend
multiplied by the number of such securities distributed per share of VWI
Stock.
"Current VWI Price" means the Average VWI Stock Price for the date of
such VWI Exchange.
(d) If the VWI Adjustment Event is a transaction pursuant to which VWI
consolidates with, merges or converts into, or is acquired by any other Person
(the "VWI Acquiror"), and pursuant to such transaction the VWI Stock is
consolidated, merged, converted or exchanged into securities other than VWI
Stock or is acquired for cash and/or such securities (a "VWI Merger Event"),
then upon any VWI Exchange occurring after such VWI Merger Event, the holder of
the ELPI Interest shall be entitled to receive consideration with a value equal
to the VWI Exchange Amount in the same form and, if a combination of forms, in
the same proportion as the consideration that was provided to other holders of
VWI Stock in connection with such VWI Merger Event.
(e) If the VWI Adjustment Event is any VWI Adjustment Event other than those
described in paragraphs (b) through (d) of this Section 2.07, the securities to
be issued upon a VWI Exchange occurring after the VWI Adjustment Event shall be
adjusted as determined by the board of directors of VWI in its reasonable good
faith judgment, to reflect, on a basis consistent with the adjustment
principles described in such paragraphs (b) through (d), the effect of such VWI
Adjustment Event.
(f) For purposes of applying this Section 2.07, in connection with any VWI
Adjustment Event pursuant to which holders of VWI Stock are entitled to elect
to receive Common Voting Stock as the sole consideration, the holder of the ELP
Interest shall be deemed to have elected to receive such Common Voting Stock as
the sole consideration in connection with such VWI Adjustment Event (provided
that such election shall take into account and be subject to (x) any
restrictions or limits imposed on the elections of the holders of VWI Stock and
(y) the elections actually made by the holders of VWI Stock), and if the
holders of VWI Stock are entitled to make an election as to the form of
consideration receivable in connection with a VWI Adjustment Event, but are not
entitled to elect Common Voting Stock as the sole consideration, and the form
of consideration receivable upon such VWI Adjustment Event is not the same for
each share of VWI Stock held immediately prior to such VWI Adjustment Event by
any Person other than a party to the VWI Adjustment Event or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("non-electing VWI share"), then, for purposes of this Section 2.06,
the kind and amount of consideration receivable upon such VWI Adjustment Event
shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing VWI shares.
(g) Any adjustments required to be made pursuant to this Section 2.07 shall
be made successively whenever any VWI Adjustment Event shall occur. To the
extent that an VWI Adjustment Event occurs after any VWI Merger Event which
involves the issuance of shares of stock of the VWI Acquiror ("VWI Acquiror
Shares") to holders of shares of VWI Stock, the adjustments provided for in
this Section 2.07 shall apply to the VWI Acquiror Shares on terms nearly as
equivalent as practicable to the provisions contained in this Section 2.07.
(h) If, at any time as a result of this Section 2.07, the holder of the ELP
Interest shall become entitled to receive any shares of capital stock of VWI
other than VWI Stock, the number of such other shares so receivable shall
thereafter be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions contained in this Section
2.07.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PRICE CORPORATIONS
Each of the Price Corporations represents and warrants to VCI and VWI,
jointly and severally, as of the date hereof and as of the Exchange Closing
Date that:
SECTION 3.01 Existence and Power. Each of the Price Corporations is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all corporate powers and all necessary
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for such failures as would
not, and would not reasonably be expected to, individually or in the aggregate,
prevent or delay consummation of the transactions contemplated hereunder in any
material respect or otherwise prevent the Price Corporations from performing,
in any material respect, their respective obligations under this Agreement or
prevent the Company from performing, in any material respect, its obligations
under the VWI Lock-up Agreement or the VCI Lock-up Agreement (as the case may
be, the "Lock-up Agreement"). Each of the Price Corporations is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not reasonably be expected
to, individually or in the aggregate, prevent or delay consummation of the
transactions contemplated hereunder in any material respect or otherwise
prevent the Price Corporations from performing, in any material respect, their
respective obligations under this Agreement in any material respect or prevent
the Company from performing, in any material respect, its obligations under the
Lock-up Agreement.
SECTION 3.02 Authorization. (a) The execution, delivery and performance by
each of the Price Corporations of this Agreement and by the Company of the
Lock-up Agreement, and the consummation of the transactions contemplated hereby
and thereby, are within each of the Price Corporations' corporate powers and,
except for any required approval of Price Parent's stockholders in connection
with the transactions contemplated by this Agreement, have been duly authorized
by all necessary corporate action on the part of each of the Price
Corporations. The affirmative vote of the holders of two-thirds or a majority
of the outstanding shares of the common stock, $0.01 par value, of Price Parent
and approval of the shareholders of each of the Price Corporations (other than
Price Parent), as the sole shareholder of another Price Corporation, all of
which have been obtained, are the only actions required by the stockholders of
any of the Price Corporations in connection with the transactions contemplated
by this Agreement. This Agreement constitutes a valid and binding agreement of
each of the Price Corporations, and upon execution and delivery thereof, the
Lock-up Agreement will constitute a valid and binding agreement of the Company,
in each case, enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy laws and other
similar laws affecting creditors' rights generally, and except that the remedy
of specific performance and injunctive relief and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(b) At a meeting duly called and held on December 13, 2001, Price Parent's
Board of Directors (i) unanimously determined that this Agreement and the
transactions contemplated hereby (other than the VWI Exchange) are fair to and
in the best interests of Price Parent's stockholders, (ii) unanimously approved
and adopted this Agreement and the transactions contemplated hereby (other than
the VWI Exchange) and (iii) unanimously resolved (subject to Section 9.09 of
the Transaction Agreement) to recommend approval and adoption of the
transactions contemplated hereby (other than the VWI Exchange) by Price
Parent's stockholders.
SECTION 3.03 Governmental Authorization. The execution, delivery and
performance by each of the Price Corporations of this Agreement and by the
Company of the Lock-up Agreement, and the consummation by such Persons of the
transactions contemplated hereby and thereby, require no action by or in
respect of, or filing with, any Governmental Entity, domestic, foreign or
supranational, other than compliance with the requirements of the HSR Act, the
filing with the SEC of the Price Proxy Materials in definitive form, the filing
and declaration
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by the SEC of the effectiveness of the VCI Registration Statement and the VWI
Registration Statement (if any), compliance with any other applicable
securities laws, compliance with the applicable requirements of the
Communications Act, and (vi) such actions or filings the absence of which would
not reasonably be expected to, individually or in the aggregate, prevent or
delay consummation of the transactions contemplated hereunder in any material
respect or otherwise prevent the Price Corporations from performing, in any
material respect, their respective obligations under this Agreement or prevent
the Company from performing, in any material respect, its obligations under the
Lock-up Agreement and will not have, and would not reasonably be expected to
have, individually, or in the aggregate, a material adverse effect on the Price
Corporations or the ELP Interest.
SECTION 3.04 Noncontravention. The execution, delivery and performance by
each of the Price Corporations of this Agreement and by the Company of the
Lock-up Agreement, and the consummation by such Persons of the transactions
contemplated hereby and thereby, do not and will not (i) violate the
certificate of incorporation, bylaws, or other organizational documents of any
of the Price Corporations, (ii) assuming compliance with the matters referred
to in Section 3.03, violate any applicable law, rule, regulation, judgment,
injunction, order or decree applicable to any of the Price Corporations or by
which any of their respective properties or assets are bound, (iii) constitute
a default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of any of the Price Corporations or to
a loss of any benefit to which any of the Price Corporations is entitled under
any provision of any agreement or other instrument binding upon any of the
Price Corporations or by which any of the assets of the Price Corporations is
or may be bound or (iv) result in the creation or imposition of any Lien on any
asset of the Price Corporations, except in the case of clauses (ii), (iii) and
(iv) above, such violations or defaults that will not and would not reasonably
be expected to, individually or in the aggregate, prevent or delay consummation
of the transactions contemplated hereunder in any material respect, or
otherwise prevent the Price Corporations from performing, in any material
respect, their respective obligations under this Agreement or prevent the
Company from performing, in any material respect, its obligations under the
Lock-up Agreement.
SECTION 3.05 Disclosure Documents. Each document filed by any of the Price
Corporations with the SEC in connection with the meetings of the stockholders
of Price Parent described in Section 7.22(a) of the Transaction Agreement and
Section 5.01 of this Agreement, including, without limitation, the proxy or
information statements of Price Parent and any amendments or supplements
thereto (the "Price Proxy Materials") will, when filed, comply as to form in
all material respects with the applicable requirements of the 1934 Act.
(b) Each time any Price Proxy Materials are distributed to stockholders of
Price Parent or any other solicitation of stockholders of Price Parent is made
by or on behalf of the Price Corporations or any Affiliate of the Price
Corporations, and at the time such stockholders vote on adoption of the
transactions contemplated by the Transaction Agreement and this Agreement, the
Price Proxy Materials (as supplemented and amended, if applicable), will not
contain an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not false or misleading. The
representations and warranties contained in this Section 3.05(b) will not apply
to statements or omissions included in the Price Proxy Materials based upon
information furnished in writing to the Price Corporations in writing by VCI or
VWI specifically for use therein.
(c) None of the information provided by the Price Corporations for inclusion
in the VCI Registration Statement or the VWI Registration Statement (if any) or
any amendment or supplement thereto, at the time such registration statement or
any amendment or supplement becomes effective, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
SECTION 3.06 Litigation. As of the date hereof, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of any of the
Price Corporations threatened against or affecting, any of the Price
Corporations before any court or arbitrator or any Governmental Entity which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay
the transactions contemplated by this Agreement or the Lock-up Agreement.
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ARTICLE
REPRESENTATIONS AND WARRANTIES OF VCI AND VWI
VCI and VWI represent and warrant, each with respect to itself, to each of
the Price Corporations, jointly and severally, as of the date hereof and as of
the Exchange Closing Date that:
SECTION 4.01 Existence and Power. Each of VCI and VWI is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all corporate powers and all necessary governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted except for such failures as will not have, and
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on either VCI or VWI.
SECTION 4.02 Authorization. The execution, delivery and performance by VCI
and VWI of this Agreement and the Lock-up Agreement to which it is a party and
the consummation of the transactions contemplated hereby and thereby are within
the corporate powers of VCI and VWI. All such transactions have been, or, in
the case of the VWI IPO and the issuance of the VWI Stock or the VCI Stock on
the Exchange Closing Date, will be as of the Exchange Closing Date, duly
authorized by all necessary corporate action on the part of VCI and VWI. This
Agreement constitutes and the Lock-up Agreement to which it is a party will
constitute, upon execution and delivery thereof by VWI or VCI as applicable, a
valid and binding agreement of VCI and VWI, as applicable, enforceable against
each of them in accordance with its terms, except as such enforceability may be
limited by bankruptcy laws and other similar laws affecting creditors' rights
generally, and except that the remedy of specific performance and injunctive
relief and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be
brought.
SECTION 4.03 Governmental Authorization. The execution, delivery and
performance by VCI and VWI of this Agreement and the Lock-up Agreement to which
it is a party, and the consummation by VCI and VWI of the transactions
contemplated hereby and thereby, require no material action by or in respect
of, or material filing with, any Governmental Entity other than compliance with
the applicable requirements of the HSR Act, the filing and declaration by the
SEC of the effectiveness of the VCI Registration Statement, the VWI
Registration Statement (if any) and the Shelf Registration Statement,
compliance with any other applicable securities laws, compliance with the
applicable requirements of the Communications Act, and such actions or filings
the absence of which will not, and would not reasonably be expected to,
individually or in the aggregate, prevent or delay consummation of the
transactions contemplated hereunder in any material respect, or otherwise
prevent VCI and VWI from performing their respective obligations under this
Agreement or the Lock-up Agreement to which it is a party in any material
respect, and will not have, and would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on either VCI or
VWI.
SECTION 4.04 Noncontravention. The execution, delivery and performance by
VCI and VWI of this Agreement and the Lock-up Agreement to which it is a party
and the consummation of the transactions contemplated hereby and thereby do not
and will not (i) violate the certificate of incorporation, bylaws or other
organizational documents of either VCI or VWI, (ii) assuming compliance with
the matters referred to in Section 4.03, violate any applicable material law,
rule, regulation, judgment, injunction, order or decree binding on either VCI
or VWI or (iii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of either
VCI or VWI or to a loss of any benefit to which either VCI or VWI is entitled
under any provision of any Contract binding upon either VCI or VWI or to which
any of their respective assets may be bound, except in the case of clauses (ii)
and (iii) above, violations or defaults that will not have, and would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on either VCI or VWI.
SECTION 4.05. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of either VCI or VWI threatened
against or affecting, either VCI or VWI before any court or arbitrator or any
Governmental Entity which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement or
the Lock-up Agreement to which it is a party or which would have a material
adverse effect on either VCI or VWI.
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SECTION 4.06. SEC Filings. (a) At the time the VCI Registration Statement
or the VWI Registration Statement (if any) or any amendment or supplement
thereto becomes effective, such registration statement, as amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and such registration statement and any
supplement or amendment thereto will, when filed, comply as to form in all
material respects with the applicable requirements of the 1933 Act.
(b) The representations and warranties contained in this Section 4.06 will
not apply to statements or omissions in the VCI Registration Statement or the
VWI Registration Statement (if any) or any amendment or supplement thereto
based upon information furnished to VWI or VCI by the Price Corporations in
writing specifically for use therein.
(c) None of the information provided by VCI or VWI for inclusion in the
Price Proxy Materials, at the time such materials are filed, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading.
ARTICLE 5
COVENANTS
SECTION 5.01 Stockholder Meeting; Proxy Materials. Price Parent shall
cause a meeting of its stockholders to be duly called and held as soon as
reasonably practicable for the purpose of voting on and approving the
transactions contemplated by the Transaction Agreement and the Ancillary
Agreements (other than the VWI Exchange) and in the event that the Company
delivers a VWI Exchange Notice pursuant to Section 2.01, as soon as reasonably
practicable after delivery of such VWI Exchange Notice, for the purpose of
voting on and approving the VWI Exchange. The board of directors of Price
Parent shall, subject to their fiduciary duties under applicable law as advised
by counsel, recommend approval of such transactions by Price Parent's
stockholders. In connection with each meeting referred to above, Price Parent
(x) will promptly prepare and file with the SEC, will use its best efforts to
have cleared by the SEC and will thereafter mail to its stockholders as
promptly as practicable a proxy or information statement and all other Price
Proxy Materials for such meeting as may be required under applicable law, (y)
will use its best efforts to obtain the necessary approval of the transactions
referred to above by its stockholders and (z) will otherwise comply with all
legal requirements applicable to each such meeting.
SECTION 5.02. VCI and VWI Registration Statements. Promptly after the date
hereof, VCI shall prepare and file with the SEC the VCI Registration Statement
and shall use its best efforts to cause the VCI Registration Statement to be
declared effective as soon as practicable thereafter. Promptly after the later
of (i) the date which is 9 months after the Closing Date and (ii) the VWI IPO,
VWI shall prepare and file with the SEC the VWI Registration Statement and
shall use its best efforts to cause the VWI Registration Statement to be
declared effective as soon as practicable thereafter.
SECTION 5.03. Shelf Registration Statement. The Verizon Issuer shall,
promptly after the earlier to occur of (i) delivery of a VWI Exchange Notice
pursuant to Section 2.01(a) and (ii) the Exchange Closing Date, file with the
SEC and thereafter use its reasonable best efforts to cause to be declared
effective as soon as reasonably practicable after the issuance of the VCI Stock
or the VWI Stock, as the case may be, but in any event no later than 120 days
after the Exchange Closing Date, a registration statement (the "Shelf
Registration Statement") on an appropriate form under the 1933 Act relating to
the offer and sale of the shares of VCI Stock or VWI Stock, as the case may be,
issued to the Company pursuant to this Agreement, by the Company from time to
time in accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the 1933 Act; provided that, any such
offer and sale of shares shall be subject to the terms of the Lock-up
Agreement. In addition, if the Company shall transfer any of such shares of VCI
Stock or VWI Stock, as the case may be, pursuant to a Permitted Transfer or to
a Pledge Transferee (each, as defined in the Lock-up Agreement),
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then upon request by such transferee, VWI or VCI, as the case may be, shall
prepare and file with the SEC, as promptly as reasonably practicable after
receipt of such notice and receipt of such other information regarding the
transferee as VCI or VWI, as the case may be, may reasonably request, a
supplement to the prospectus contained in such Shelf Registration Statement
including such transferee as a selling shareholder thereunder.
(b) The Verizon Issuer shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Company until the first
anniversary of the Exchange Closing Date or such shorter period that will
terminate when all the shares covered by the Shelf Registration Statement (i)
have been sold pursuant thereto or (ii) are freely saleable pursuant to Rule
145 under the 1933 Act, or any successor rule thereto.
(c) The Verizon Issuer shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, not to
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (except with respect to the information referred to in Section
5.03(d)), and such registration statement and any supplement or amendment
thereto will, when filed, comply as to form in all material respects with the
applicable requirements of the 1933 Act.
(d) The Price Corporations shall ensure that none of the information
provided by the Price Corporations for inclusion in the Shelf Registration
Statement and the related prospectus, or any amendment or supplement thereto,
as of the effective date of the Shelf Registration Statement, amendment or
supplement, contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 5.04 Reservation of Shares. VCI shall, from the Closing Date until
the Exchange Closing Date, and VWI shall, from the date of the VWI IPO until
the Exchange Closing Date, keep reserved for issuance a sufficient number of
shares of VCI Stock and VWI Stock, respectively, to satisfy its exchange
obligations under this Agreement.
SECTION 5.05. Listing. The Verizon Issuer shall use its best efforts to
cause the shares of VCI Stock or VWI Stock, as the case may be, issued upon an
Exchange pursuant to this Agreement, to be listed on each securities exchange
or quoted on each inter-dealer quotation system on which the VCI Stock or VWI
Stock, as the case may be, is then listed or quoted.
SECTION 5.06. 1934 Act Reports. On and after the Exchange Closing Date
until the second anniversary of the Exchange Closing Date, the Verizon Issuer
shall timely file all reports required to be filed by it under the 1934 Act.
SECTION 5.07. Tax Treatment. (a) If the Company or Price Parent advises
the Verizon Issuer in writing that it is treating the Exchange as a
reorganization within the meaning of Code Section 368(a) (a "Reorganization"),
the parties hereto shall, and shall cause their Affiliates to, each treat on
all tax returns such Exchange as a Reorganization, and not take any position
inconsistent therewith in any tax return, tax filing or tax proceeding but only
if the Company or Price Parent obtains an opinion (in form and substance
reasonably satisfactory to the Verizon Issuer) addressed to the Company or
Price Parent, as the case may be, and to the Verizon Issuer from a nationally
recognized law firm selected by the Company or Price Parent, with the approval
of the Verizon Issuer (such approval not to be unreasonably withheld), stating
that the Exchange should be treated as a Reorganization.
(b) Prior to the closing of any Exchange that occurs within four and a half
years from the Closing Date, VWI and VCI (and any VCI Controlled Subsidiary
designated by VCI pursuant to Section 2.02) shall not enter into a legally
binding agreement that obligates, or adopt any board resolution approving the
terms of a specific transaction that would obligate, and shall not sign a
memorandum of understanding or a letter of intent that
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contains specific terms and conditions for, (i) VCI or VWI (or such VCI
Controlled Subsidiary) to dispose after the Exchange of more than 50 percent of
the ELP Interest received in the Exchange, or (ii) New LP to dispose after the
Exchange of more than 66 percent of its assets, other than, in each case, a
transfer of such interest or such assets to Cellco or to the members of the VCI
or VWI "qualified group" as defined in Treasury regulations Section
1.368-1(d)(4).
SECTION 5.08. Identity of Issuer. If a public offering of shares of Common
Voting Stock of a corporation other than VWI occurs, and such offering
satisfies clauses (i), (ii) and (iii) of the definition of "VWI IPO" in Section
1.01, Cellco hereby covenants and agrees to take all appropriate actions to
cause such corporation (a "Substitute Issuer") to perform the obligations of
VWI under this Agreement.
SECTION 5.09. Post-closing Litigation. The Price Corporations hereby
indemnify VWI, VCI and their respective Affiliates against and agree to hold
each of them harmless from any Damages incurred or suffered by any of VWI, VCI
or any of their respective Affiliates after consummation of the Exchange
arising out of any action, suit, investigation or proceeding which, as of the
Exchange Closing Date, is pending against, or to the knowledge of any of the
Price Corporations is threatened against or affecting, any of the Price
Corporations before any court or arbitrator or any Governmental Entity, which
in any manner challenges or seeks to prevent, enjoin, alter or materially delay
the transactions contemplated by this Agreement or the Lock-up Agreement.
SECTION 5.10. 1940 Act. The Price Corporations shall use their reasonable
best efforts to obtain prior to the Exchange Closing Date an order from the
Division of Investment Management of the SEC exempting Price Parent from all
provisions, rules and regulations of the 1940 Act which might otherwise apply
as a result of the transactions contemplated to occur on the Exchange Closing
Date pursuant to this Agreement. If the Price Corporations are unsuccessful in
obtaining such an order, the Price Corporations shall take such other actions
as are necessary to satisfy the condition set forth in Section 6.02(d) or
Section 6.03(d), as applicable.
SECTION 5.11. Further Assurances. Each party to this Agreement will use
its best efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary or desirable under applicable laws and
regulations or otherwise to consummate at the earliest reasonably practicable
time the transactions contemplated by this Agreement; provided that the
foregoing shall not obligate VCI or VWI to effect the VWI IPO. Each party to
this Agreement agrees to execute and deliver or cause to be executed and
delivered such other documents, certificates, agreements and other writings and
to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
SECTION 5.12. Solvency Certificate. Subject to Section 5.12(b), the Price
Corporations shall have the right, exercisable by written notice to VWI and
VCI, to cause VWI and VCI to waive compliance by the Price Corporations with
the conditions set forth in Sections 6.02(a) and 6.03(a).
(b) The Price Corporations agree that, if they exercise their right under
Section 5.12(a), none of the Price Corporations will consummate any
distribution to its stockholders, whether by means of liquidation, dividend or
otherwise, of any shares of VWI Stock or VCI Stock received by it upon an
Exchange, unless it shall have previously delivered to VWI and VCI a solvency
certificate, dated as of a date reasonably close to the distribution date, that
satisfies the criteria set forth in Section 6.02(a) and 6.03(a).
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of Each Party. (a) The obligations
of the Price Corporations and VWI to consummate the VWI Exchange are subject to
the satisfaction of each of the following conditions:
(i) the Closing shall have occurred and the approval of the stockholders
of Price Parent of the VWI Exchange, as required by applicable law, shall
have been obtained;
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(ii) the VWI Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of the VWI Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC;
(iii) any applicable waiting period under the HSR Act relating to such
exchange shall have expired or been terminated; and
(iv) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit such exchange.
(b) The obligations of the Price Corporations and VCI to consummate a VCI
Exchange are subject to the satisfaction of each of the following conditions:
(i) the Closing shall have occurred;
(ii) the VCI Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of the VCI Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC;
(iii) any applicable waiting period under the HSR Act relating to such
exchange shall have expired or been terminated; and
(iv) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit such exchange.
SECTION 6.02. Conditions to Obligation of VWI. The obligation of VWI to
consummate the VWI Exchange is subject to the satisfaction of the following
further conditions:
(a) Subject to Section 5.12, VWI shall have received a favorable opinion
of a third party reasonably acceptable to VWI as to the solvency of the
Price Corporations in form reasonably acceptable to VWI.
(b) The Price Corporations shall have performed in all material respects
their obligations hereunder required to be performed by them on or prior to
the Exchange Closing Date, the representations and warranties of the Price
Corporations contained in this Agreement and in any certificate delivered by
the Price Corporations pursuant hereto shall be true at and as of the
Exchange Closing Date, as if made at and as of such date, except for such
inaccuracies in such representations and warranties as will not,
individually or in the aggregate, prevent consummation of the transactions
contemplated hereby or have a material adverse effect on the value of the
ELP Interest and VWI shall have received a certificate signed by an
executive officer of each of the Price Corporations to the foregoing effect.
(c) The VWI Lock-up Agreement shall be in full force and effect.
(d) Price Parent shall have received an order from the Division of
Investment Management of the SEC exempting it from all provisions, rules and
regulations of the 1940 Act, or, if no such order shall have been received
and in effect as of the Exchange Closing Date, shall be in full compliance
with all provisions, rules and regulations of the 1940 Act (it being
understood that such compliance may be achieved, without limitation, by
reliance on Rule 3a-2 of the 1940 Act).
SECTION 6.03. Conditions to Obligation of VCI. The obligation of VCI to
consummate a VCI Exchange is subject to the satisfaction of the following
further conditions:
(a) Subject to Section 5.12, VCI has received a favorable opinion of a third
party reasonably acceptable to VCI as to the solvency of the Price Corporations
in form reasonably acceptable to VCI.
(b) The Price Corporations shall have performed in all material respects
their obligations hereunder required to be performed by them on or prior to the
Exchange Closing Date, the representations and warranties of
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the Price Corporations contained in this Agreement and in any certificate
delivered by the Price Corporations pursuant hereto shall be true at and as of
the Exchange Closing Date, as if made at and as of such date, except for such
inaccuracies in such representations and warranties as will not, individually
or in the aggregate, prevent consummation of the transactions contemplated
hereby or have a material adverse effect on the value of the ELP Interest, and
VCI shall have received a certificate signed by an executive officer of each of
the Price Corporations to the foregoing effect.
(c) The VCI Lock-up Agreement shall be in full force and effect.
(d) Price Parent shall have received an order from the Division of
Investment Management of the SEC exempting it from all provisions, rules and
regulations of the 1940 Act, or, if no such order shall have been received
and in effect as of the Exchange Closing Date, shall be in full compliance
with all provisions, rules and regulations of the 1940 Act (it being
understood that such compliance may be achieved, without limitation, by
reliance on Rule 3a-2 of the 1940 Act).
SECTION 6.04. Conditions to Obligations of The Price Corporations. The
obligation of the Price Corporations to consummate the VWI Exchange is subject
to the satisfaction of the following further conditions:
(i) (A) VWI shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Exchange Closing Date, the representations and warranties of VWI contained
in this Agreement and in any certificate delivered by VWI pursuant hereto
shall be true at and as of the Exchange Closing Date, as if made at and as
of such date, except for such inaccuracies in such representations and
warranties as will not, individually or in the aggregate, prevent
consummation of the transactions contemplated hereby or have a material
adverse effect on VWI, and the Price Corporations shall have received a
certificate signed by an executive officer of VWI to the foregoing effect;
and
(ii) The shares of VWI Stock to be issued in such exchange shall have
been approved for listing on each stock exchange or quotation on each
automated quotation system in which other shares of VWI Stock are listed or
quoted, subject to official notice of issuance.
(b) The obligation of the Price Corporations to consummate a VCI Exchange is
subject to satisfaction of the following further conditions:
(i) (A) VCI shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Exchange Closing Date, the representations and warranties of VCI contained
in this Agreement and in any certificate delivered by VCI pursuant hereto,
shall be true at and as of the Exchange Closing Date, as if made at and as
of such date, except for such inaccuracies in such representations and
warranties as will not, individually or in the aggregate, prevent
consummation of the transactions contemplated hereby or have a material
adverse effect on VCI, and the Price Corporations shall have received a
certificate signed by an executive officer of VCI to the foregoing effect;
and
(ii) the shares of VCI Stock to be issued in such exchange shall have
been approved for listing on each stock exchange or quotation on each
automated quotation system in which other shares of VCI Stock are listed or
quoted, subject to official notice of issuance.
ARTICLE 7
SURVIVAL
SECTION 7.01. Survival. (a) The representations and warranties of the
parties hereto contained in this Agreement or in any certificate delivered
pursuant hereto or in connection herewith shall remain in full force and effect
until the date which is 18 months after the Exchange Closing Date.
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(b) The covenants and agreements of the parties hereto contained in this
Agreement or in any certificate delivered pursuant hereto or in connection
herewith shall remain in full force and effect indefinitely.
ARTICLE 8
TERMINATION
SECTION 8.01 Termination. This Agreement will terminate automatically upon
termination of the Transaction Agreement pursuant to Section 16.01 thereof.
SECTION 8.02 Effect of Termination. If this Agreement is terminated as
permitted by Section 8.01, such termination shall be without liability of any
party (or any stockholder, partner, director, officer, employee, agent,
consultant or representative of such party) to any other party to this
Agreement.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to VWI:
S. Mark Tuller
Vice President
Legal and External Affairs
Verizon Wireless
180 Washington Valley Road
Bedminster, NJ 07921
Fax: (908) 306-7329
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Diane G. Kerr
Fax: (212) 450-4800
if to VCI, to:
Verizon Communications Inc.
1095 Avenue of the Americas, 36th Floor
New York, NY 10036
Attention: David Benson
Philip Marx
Fax: (212) 921-2971
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Diane G. Kerr
Fax: (212) 450-4800
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if to the Price Corporations:
Robert Price
President/Chief Executive Officer
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Fax: (212) 397-3755
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Peter G. Samuels
Fax: (212) 969-2900
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day in the place of
receipt.
SECTION 9.02 Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.03 Expenses. Except as set forth in the letter agreement dated
as of November 14, 2001 between Davis Polk & Wardwell and Price Communications
Corporation, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
SECTION 9.04 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that, no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto. Notwithstanding the foregoing,
VWI shall assign all of its rights and obligations under this Agreement to any
Substitute Issuer, and shall cause any such Substitute Issuer to agree in
writing in form reasonably acceptable to the Company to be bound by the terms
of this Agreement, the Price Corporations may cause one or more of the Price
Corporations to be liquidated or merged into another Price Corporation, and
(iii) the Company shall assign all of its rights and obligations under this
Agreement to any other Permitted Transferee to whom it transfers the ELP
Interest, provided such Permitted Transferee agrees in writing in form
reasonably acceptable to VWI and VCI to be bound by the terms of this Agreement.
SECTION 9.05 Governing Law. This Agreement shall be governed and construed
in accordance with the law of the State of New York.
SECTION 9.06 Jurisdiction. The parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, so long as one of such courts shall
C-21
have subject matter jurisdiction over such suit, action or proceeding, and that
any cause of action arising out of this Agreement shall be deemed to have
arisen from a transaction of business in the State of New York, and each of the
parties hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 9.01 shall
be deemed effective service of process on such party.
SECTION 9.07 Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.08 Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement shall confer upon any Person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.09 Entire Agreement. This Agreement, and the Ancillary
Agreements (as relevant), constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
SECTION 9.10 Joint and Several Liability. Each of the Price Corporations
shall be jointly and severally liable for the performance of all of the Price
Corporations' obligations hereunder.
SECTION 9.11 Appointment of Agent. Each of the Price Corporations hereby
irrevocably constitutes and appoints Price Parent as its agent and true and
lawful attorney in fact with full power and discretion, in the name of and for
and on behalf of each of the Price Corporations, in connection with all matters
arising from, contemplated by or relating to this Agreement. The powers of
Price Parent include, without limitation, the power to represent each of the
Price Corporations with respect to all aspects of this Agreement, which power
shall include, without limitation, the power to (i) waive any conditions of
this Agreement, (ii) amend this Agreement in any respect, (iii) receive notices
or other communications, (iv) deliver any notices, certificates or other
documents required and (v) take all such other action and to do all such other
things as Price Parent deems necessary or advisable with respect to this
Agreement. Each other party to this Agreement shall have the right to rely upon
the acts taken or omitted to be taken by Price Parent on behalf of the Price
Corporations, and shall have no duty to inquire as to the acts and omissions of
Price Parent.
SECTION 9.12 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be executed
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforced in accordance with its
terms to the maximum extent permitted by law.
SECTION 9.13 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
PRICE COMMUNICATIONS
CORPORATION
By: /S/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
andChief Financial Officer
PRICE COMMUNICATIONS
CELLULAR, INC.
By: /S/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
andChief Financial Officer
PRICE COMMUNICATIONSCELLULAR
HOLDINGS, INC.
By: /S/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
andChief Financial Officer
PRICE COMMUNICATIONS
WIRELESS, Inc.
By: /S/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
andChief Financial Officer
Verizon Communications Inc.
By: /S/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Executive Vice President
VERIZON WIRELESS Inc.
By: /S/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Chief Executive Officer
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CELLCO PARNTERSHIP
By: /S/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Chief Executive Officer
VERIZON WIRELESS OF THE EAST
LP
By: VERIZON WIRELESSS OF GEORGIA
LLC AS
MANAGING GENERAL PARNTER
By: /S/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Chief Executive Officer
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ANNEX D
LOCK-UP AGREEMENTS
LOCK-UP AGREEMENT
LOCK-UP AGREEMENT dated as of December 18, 2001 by and among Price
Communications Corporation, a New York corporation ("Price Parent"), Price
Communications Cellular Inc., a Delaware corporation ("Price Cellular"), Price
Communications Cellular Holdings, Inc., a Delaware corporation
("Price Shareholder"), Price Communications Wireless, a Delaware corporation
(the "Company" and, together with Price Parent, Price Cellular and Price
Shareholder, the "Price Corporations"), and Verizon Wireless Inc., a Delaware
corporation ("VWI").
WHEREAS, the Price Corporations, Cellco Partnership, a Delaware partnership
("Cellco"), and Verizon Wireless of the East LP, a newly formed Delaware
limited partnership ("New LP"), are parties to a Transaction Agreement dated as
of December 18, 2001 (the "Transaction Agreement");
WHEREAS, the Price Corporations, VWI, Verizon Communications Inc., a
Delaware corporation, and New LP are parties to an Exchange Agreement dated as
of December 18, 2001 (the "Exchange Agreement"); and
WHEREAS, the parties hereto desire to provide for certain restrictions on
the sale of shares of VWI issued pursuant to the Exchange Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, in the Transaction Agreement and in the Exchange Agreement, and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Exchange Agreement. In
addition, the following terms, as used herein, have the following meanings:
"Complying Distribution" means a distribution of all or a portion of the
Shares (other than any Pledged Shares) to the shareholders of Price Parent
at any time after five business days prior to the first anniversary of the
Exchange Closing Date.
"Exempt Shares" means a number of Shares equal to (i) $30,000,000 divided
by (ii) the VWI IPO Price (subject to appropriate adjustment for stock
splits, stock dividends, subdivisions, combinations, reclassifications or
similar events occurring after the date of the VWI IPO); provided that the
Exempt Shares shall not include any Pledged Shares.
"Holder" means the Company or any Pledgee or other transferee pursuant to
a Transfer of Shares under Section 3(a)(ii), (iii) or (iv).
"Lock-Up Release Date" means the date which is 270 days after the later
of (i) the VWI IPO and (ii) the first anniversary of the Closing Date (as
defined in the Transaction Agreement); provided that, notwithstanding the
foregoing, such date shall not occur prior to 180 days after the Exchange
Closing Date.
"Maximum Amount" means, with respect to a Holder and any particular day,
(i) at any time prior to the occurrence of any transaction referred to in
Section 3(a)(iii), a number of Shares equal to 25% of the average daily
trading volume of shares of VWI Stock for the 10 consecutive trading days
immediately preceding such day, and (ii) at any time after the occurrence of
any transaction referred to in Section 3(a)(iii), a number of Shares equal
to (A) a number of Shares equal to 25% of the average daily trading volume
of shares of VWI Stock for the 10 consecutive trading days immediately
preceding such day multiplied by (B) the quotient obtained by dividing (x)
the number of Shares initially transferred to such Holder pursuant to this
Agreement by (y) the total number of Shares.
D-1
"Offering" means an underwritten offering, or a non-underwritten offering
approved by VWI, of Shares (other than any Pledged Shares) by a Holder;
provided that (i) any such offering shall be effected at a time which is
reasonably acceptable to VWI, (ii) any underwriters and any investment
bankers or managers to be used in connection with such offering shall be
reasonably acceptable to VWI, and (iii) VWI shall provide indemnification to
any underwriters in connection with such offering with respect to any
prospectus of VWI used by such underwriters (such indemnification to be
consistent with any such indemnification provided by VWI to underwriters in
connection with the VWI IPO).
"Permitted Transfer" means a Transfer to any Price Corporation of all of
the Shares held by any other Price Corporation pursuant to the liquidation
of such other Price Corporation or a merger with such other Price
Corporation.
"Pledged Shares" means, at any time, any Shares which are subject to
security interests under the Pledge Agreement (as defined in the Transaction
Agreement) at such time.
"Shares" means the shares of VWI Stock issued pursuant to the Exchange
Agreement (including, without limitation, any such shares issued pursuant to
Section 2.05 of the Exchange Agreement).
"Third Party Sale" means a private negotiated sale by any Price
Corporation of all of the Shares held by the Price Corporations (other than
any Pledged Shares) to a purchaser that agrees in writing (in a form
reasonably acceptable to VWI) to be subject to the restrictions contained in
Section 2 of this Agreement with respect to such Shares.
SECTION 2. Lock-Up Agreement. (a) Except as set forth in Section 3, until
the Lock-Up Release Date, a Holder shall not, without the prior written consent
of VWI, (1) directly or indirectly, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of any Shares, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (2) enter into any
swap or any other agreement or any transaction that has substantially the same
effect as a transaction described in (1), or that transfers, in whole or in
part, directly or indirectly, a substantial portion of the economic consequence
of ownership of the Shares ((1) and (2) collectively, a "Transfer"), whether
any such Transfer is to be settled by delivery of Shares or other securities,
in cash or otherwise.
(b) Except in connection with an Offering, a Complying Distribution or a
Third Party Sale, on and after the Lock-Up Release Date until the fifth
anniversary of the Exchange Closing Date, a Holder may not Transfer more than
the Maximum Amount of Shares on any particular day; provided that no more than
two Offerings may be conducted during such period, and any such Offerings shall
be conducted at least 180 days apart from each other; provided further that,
except in connection with a Complying Distribution, a Holder shall not
distribute any Shares to the shareholders of Price Parent during such period.
SECTION 3. Permitted Transactions. (a) Notwithstanding Section 2, a Holder
may enter into any of the following transactions with respect to the Shares at
any time after the Exchange Closing Date:
(i) Transfer the Exempt Shares (provided that the Holder may not Transfer
more than the Maximum Amount of Shares on any particular day);
(ii) a Permitted Transfer;
(iii) a pledge of Shares (other than any Pledged Shares) to any bank or
other financial institution of recognized standing (a "Pledgee") in
connection with any bona fide financing transaction and, upon default under
any such financing transaction, such Shares may be transferred to a Pledgee
or another third party as a result of a foreclosure sale under the Uniform
Commercial Code or the exercise of other remedies in connection with such
pledge; provided, in each case, that such Pledgee or other third party (a
"Pledge Transferee") agrees in writing (in a form reasonably acceptable to
VWI) to be subject to the restrictions contained in Section 2 of this
Agreement with respect to such Shares; and
(iv) a Third Party Sale.
D-2
(b) Notwithstanding any provision of this Agreement, nothing in this
Agreement shall impair the ability of any Price Corporation to enter into any
transaction involving any shares of VWI Stock to the extent that such shares of
VWI Stock were acquired by any Price Corporation in open-market transactions
and were not received by any Price Corporation pursuant to the Exchange
Agreement or the transactions contemplated thereby.
SECTION 4. Miscellaneous.
(a) Governing Law/Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(b) Entire Agreement/Amendments. This Agreement, the Transaction Agreement
and the other Ancillary Agreements (as defined in the Transaction Agreement)
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
(c) Binding Effect; Amendments and Waivers; Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns. Any provision of this Agreement may be amended
or waived, but only if such amendment or waiver is in writing and is signed by
all parties.
(d) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(e) This Agreement shall terminate on the earlier of (i) termination of the
Transaction Agreement in accordance with its terms or (ii) the Exchange Closing
Date in respect of the VCI Exchange.
D-3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
PRICE COMMUNICATIONS CORPORATION
By: /s/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS CELLULAR, INC.
By: /s/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
By: /s/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
PRICE COMMUNICATIONS WIRELESS
By: /s/ KIM I. PRESSMAN
-----------------------------
Kim I. Pressman
Executive Vice President
and Chief Financial Officer
VERIZON WIRELESS Inc.
By: /s/ DENNIS F. STRIGL
-----------------------------
Dennis F. Strigl
Chief Executive Officer
D-4
LOCK-UP AGREEMENT
LOCK-UP AGREEMENT dated as of December 18, 2001 by and among Price
Communications Corporation, a New York corporation ("Price Parent"), Price
Communications Cellular Inc., a Delaware corporation ("Price Cellular"), Price
Communications Cellular Holdings, Inc., a Delaware corporation ("Price
Shareholder"), Price Communications Wireless, a Delaware corporation (the
"Company" and, together with Price Parent, Price Cellular and Price
Shareholder, the "Price Corporations"), and Verizon Communications Inc., a
Delaware corporation ("VCI").
WHEREAS, the Price Corporations, Cellco Partnership, a Delaware partnership
("Cellco"), and Verizon Wireless of the East LP, a newly formed Delaware
limited partnership ("New LP"), are parties to a Transaction Agreement dated as
of December 18, 2001 (the "Transaction Agreement");
WHEREAS, the Price Corporations, VCI, Verizon Wireless Inc., a Delaware
corporation, and New LP are parties to an Exchange Agreement dated as of
December 18, 2001 (the "Exchange Agreement"); and
WHEREAS, the parties hereto desire to provide for certain restrictions on
the sale of shares of VCI issued pursuant to the Exchange Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, in the Transaction Agreement and in the Exchange Agreement, and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Exchange Agreement. In
addition, the following terms, as used herein, have the following meanings:
"Complying Distribution" means a distribution of all or a portion of the
Shares (other than any Pledged Shares) to the shareholders of Price Parent
at any time after five business days prior to the first anniversary of the
Exchange Closing Date.
"Exempt Shares" means a number of Shares equal to (i) $30,000,000 divided
by (ii) the Average VCI Stock Price used to calculate the VCI Exchange
Amount pursuant to the Exchange Agreement (subject to appropriate adjustment
for stock splits, stock dividends, subdivisions, combinations,
reclassifications or similar events relating to the VCI stock after the date
of such calculation); provided that the Exempt Shares shall not include any
Pledged Shares.
"Holder" means the Company or any Pledgee or other transferee pursuant to
a Transfer of Shares under Section 3(a)(ii), (iii) or (iv).
"Lock-Up Release Date" means the date which is 270 days after the
Exchange Closing Date in respect of the VCI Exchange.
"Maximum Amount" means, with respect to a Holder and any particular day,
(i) at any time prior to the occurrence of any transaction referred to in
Section 3(a)(iii), a number of Shares equal to 25% of the average daily
trading volume of shares of VCI Stock for the 10 consecutive trading days
immediately preceding such day, and (ii) at any time after the occurrence of
any transaction referred to in Section 3(a)(iii), a number of Shares equal
to (A) a number of Shares equal to 25% of the average daily trading volume
of shares of VCI Stock for the 10 consecutive trading days immediately
preceding such day multiplied by (B) the quotient obtained by dividing (x)
the number of Shares initially transferred to such Holder pursuant to this
Agreement by (y) the total number of Shares.
D-5
"Offering" means an underwritten offering, or a non-underwritten offering
approved by VCI, of Shares (other than any Pledged Shares) by a Holder;
provided that (i) any such offering shall be effected at a time which is
reasonably acceptable to VCI, (ii) any underwriters and any investment
bankers or managers to be used in connection with such offering shall be
reasonably acceptable to VCI, and (iii) VCI shall provide indemnification to
any underwriters in connection with such offering with respect to any
prospectus of VCI used by such underwriters (such indemnification to be
consistent with any such indemnification provided by VCI to underwriters in
connection with previous stock offerings by VCI).
"Permitted Transfer" means a Transfer to any Price Corporation of all of
the Shares held by any other Price Corporation pursuant to the liquidation
of such other Price Corporation or a merger with such other Price
Corporation.
"Pledged Shares" means, at any time, any Shares which are subject to
security interests under the Pledge Agreement (as defined in the Transaction
Agreement) at such time.
"Shares" means the shares of VCI Stock issued pursuant to the Exchange
Agreement (including, without limitation, any such shares issued pursuant to
Section 2.05 of the Exchange Agreement).
"Third Party Sale" means a private negotiated sale by any Price
Corporation of all of the Shares held by the Price Corporations (other than
any Pledged Shares) to a purchaser that agrees in writing (in a form
reasonably acceptable to VCI) to be subject to the restrictions contained in
Section 2 of this Agreement with respect to such Shares.
SECTION 2. Lock-Up Agreement. (a) Except as set forth in Section 3, until
the Lock-Up Release Date, a Holder shall not, without the prior written consent
of VCI, (1) directly or indirectly, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of any Shares, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (2) enter into any
swap or any other agreement or any transaction that has substantially the same
effect as a transaction described in (1), or that transfers, in whole or in
part, directly or indirectly, a substantial portion of the economic consequence
of ownership of the Shares ((1) and (2) collectively, a "Transfer"), whether
any such Transfer is to be settled by delivery of Shares or other securities,
in cash or otherwise.
(b) Except in connection with an Offering, a Complying Distribution or a
Third Party Sale, on and after the Lock-Up Release Date until the fifth
anniversary of the Exchange Closing Date, a Holder may not Transfer more than
the Maximum Amount of Shares on any particular day; provided that no more than
two Offerings may be conducted during such period, and any such Offerings shall
be conducted at least 180 days apart from each other; provided further that,
except in connection with a Complying Distribution, a Holder shall not
distribute any Shares to the shareholders of Price Parent during such period.
SECTION 3. Permitted Transactions. (a) Notwithstanding Section 2, a Holder
may enter into any of the following transactions with respect to the Shares at
any time after the Exchange Closing Date:
(i) Transfer the Exempt Shares (provided that the Holder may not Transfer
more than the Maximum Amount of Shares on any particular day);
(ii) a Permitted Transfer;
(iii) a pledge of Shares (other than any Pledged Shares) to any bank or
other financial institution of recognized standing (a "Pledgee") in
connection with any bona fide financing transaction and, upon default under
any such financing transaction, such Shares may be transferred to a Pledgee
or another third party as a result of a foreclosure sale under the Uniform
Commercial Code or the exercise of other remedies in connection with such
pledge; provided, in each case, that such Pledgee or other third party (a
"Pledge Transferee") agrees in writing (in a form reasonably acceptable to
VCI) to be subject to the restrictions contained in Section 2 of this
Agreement with respect to such Shares; and
(iv) a Third Party Sale.
D-6
(b) Notwithstanding any provision of this Agreement, nothing in this
Agreement shall impair the ability of any Price Corporation to enter into any
transaction involving any shares of VCI Stock to the extent that such shares of
VCI Stock were acquired by any Price Corporation in open-market transactions
and were not received by any Price Corporation pursuant to the Exchange
Agreement or the transactions contemplated thereby.
SECTION 4. Miscellaneous.
(a) Governing Law/Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(b) Entire Agreement/Amendments. This Agreement, the Transaction Agreement
and the other Ancillary Agreements (as defined in the Transaction Agreement)
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter
of this Agreement.
(c) Binding Effect; Amendments and Waivers; Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns. Any provision of this Agreement may be amended
or waived, but only if such amendment or waiver is in writing and is signed by
all parties.
(d) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(e) This Agreement shall terminate on the earlier of (i) termination of the
Transaction Agreement in accordance with its terms or (ii) the Exchange Closing
Date in respect of the VWI Exchange.
D-7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
PRICE COMMUNICATIONS CORPORATION
By: /S/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice
Presidentand Chief Financial
Officer
PRICE COMMUNICATIONS CELLULAR, INC.
By: /S/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice Presidentand
Chief Financial Officer
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC.
By: /S/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice
Presidentand Chief Financial
Officer
PRICE COMMUNICATIONS WIRELESS.
By: /S/ KIM I. PRESSMAN
------------------------------
Kim I. Pressman
Executive Vice
Presidentand Chief Financial
Officer
VERIZON COMMUNICATIONS INC.
By: /S/ DENNIS F. STRIGL
------------------------------
Dennis F. Strigl
Executive Vice President
D-8
ANNEX E
OPINION OF UBS WARBURG LLC
[Letterhead of UBS Warburg LLC]
December 13, 2001
The Board of Directors
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, NY 10020
Dear Members of the Board:
We understand that Price Communications Corp., a New York corporation
("Price" or, together with its wholly owned operating subsidiary Price
Communications Wireless, Inc. ("PCW"), the "Company"), is considering a
transaction whereby the Company will contribute substantially all of its assets
to Verizon Wireless of the East LP, a newly formed Delaware limited partnership
("New LP") controlled by Cellco Partnership, a Delaware general partnership
("Cellco"). Verizon Communications Inc. ("Verizon"), a Delaware corporation,
holds the majority interest in Cellco and Vodafone Group PLC ("Vodafone"), an
entity based in the United Kingdom, holds the remainder. Following the Verizon
Wireless Inc. IPO (as defined below), Verizon Wireless Inc. ("Verizon
Wireless"), a Delaware corporation controlled by Verizon and Cellco, will be
the managing general partner of Cellco.
Pursuant to the terms of a Transaction Agreement and related Limited
Partnership Agreement, Exchange Agreement, Pledge Agreement and Lock Up
Agreements (collectively, the "Agreements"), (A) the Company will contribute to
New LP specified assets and liabilities constituting substantially all of the
assets and liabilities of the Company in exchange for a New LP limited
partnership interest (the "Consideration") with a preferred return and an
initial capital account balance of $1,150 million, subject to certain
adjustments and offsets outlined in the Agreements (the "Transaction") and (B)
the Company's interest in New LP may be exchanged into Verizon Wireless common
stock (the "Exchange"), at the option of the Company upon the completion of an
initial public offering of Verizon Wireless common stock meeting certain
requirements (the "Verizon Wireless IPO"), with the number of shares of Verizon
Wireless common stock issued in the Exchange equal to the Company's New LP
capital account balance at the time of the Exchange divided by the IPO price,
provided that the Exchange can not occur prior to the 12-month anniversary of
the Transaction closing. The terms and conditions of the Transaction are more
fully set forth in the Agreements.
You have requested our opinion as to the fairness from a financial point of
view to the Company of the Consideration to be received by the Company in the
Transaction. In addition to the assumptions described below, we have assumed at
your direction that (i) Verizon Wireless successfully completes the IPO prior
to the 12-month anniversary of the Transaction closing, (ii) the Exchange takes
place on the first anniversary of the Transaction closing, (iii) as of the date
of the Exchange, the Company's capital account balance in New LP will be not
less than the $1,150 million and the full preferred return thereon provided in
the Limited Partnership Agreement (the "Exchange Value"), (iv) upon the
Exchange, the Company will receive Verizon Wireless common stock with a trading
value not less than the Exchange Value, (v) no claims will have been made
against the Company pursuant to the indemnification obligations outlined in the
Agreements and (vi) all restrictions on the Company's ability to transfer such
Verizon Wireless common stock under the terms of the Agreements, other than
certain volume restrictions, lapse by the 270th day after the date of the
Exchange, other than with respect to Verizon Wireless common stock with a value
(based upon the IPO price) of $75,000,000 pledged by the Company pursuant to
the Pledge Agreement, as to which the restrictions lapse on the earliest dates
permitted by the Pledge Agreement and the other Agreements.
UBS Warburg LLC ("UBSW") has acted as financial advisor to the Board of
Directors of the Company in connection with the Transaction and will receive a
fee for its services. UBSW will also receive a fee upon delivery of this
opinion. In the past, UBSW has performed investment banking services for
Verizon and Vodafone, and may also perform investment banking services for
Verizon Wireless in the connection with the IPO and otherwise. In the ordinary
course of business, UBSW, its successors and affiliates may trade securities of
the Company, Vodafone, Verizon or Verizon Wireless for their own accounts and
the accounts of their customers and, accordingly, may at any time hold a long
or short position in such securities.
E-1
Our opinion does not address the Company's underlying business decision to
effect the Transaction or the Exchange or constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote with respect
to the Transaction or the Exchange. At your direction, we have not been asked
to, nor do we, offer any opinion as to the material terms of the Agreements or
the form of the Transaction contemplated by the Agreements. We express no
opinion as to the likelihood of the Verizon Wireless IPO, the price at which
Verizon Wireless common stock is sold in the IPO, the value of Verizon Wireless
common stock issued in the Exchange or the prices at which Verizon Wireless
common stock or Price common stock will trade in the future. In rendering this
opinion, we have assumed, with your consent, that the final executed form of
the Agreements does not differ in any material respect from the drafts that we
have examined, and that the parties to the Agreements will comply with all the
material terms of such agreements.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and Verizon Wireless, (ii) reviewed certain internal
financial information and other data relating to the business and financial
prospects of the Company, including estimates and financial forecasts prepared
by management of the Company, that were provided to us by the Company and not
publicly available, (iii) reviewed certain internal financial information and
other data relating to the business and financial prospects of the assets to be
contributed to New LP by Cellco (the "Cellco Assets"), including estimates and
financial forecasts prepared by the management of Verizon Wireless and not
publicly available, (iv) conducted discussions with members of the senior
management of the Company and Verizon Wireless concerning the business and
financial prospects of the Company, Verizon Wireless and the Cellco Assets; (v)
reviewed publicly available financial and stock market data with respect to
certain other companies in lines of business we believe to be generally
comparable to those of Verizon Wireless and the Company, (vi) compared the
financial terms of the Transaction with the publicly available financial terms
of certain other transactions which we believe to be generally relevant, (vii)
reviewed drafts of the Agreements, and (viii) conducted such other financial
studies, analyses, and investigations, and considered such other information as
we deemed necessary or appropriate.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on
such information being complete and accurate in all material respects. In
addition, at your direction, we have not made any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company, Verizon Wireless or Cellco, nor have we been furnished with any such
evaluation or appraisal. With respect to the estimates and financial forecasts
referred to above, we have assumed, at your direction, that they have been
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of each company as to the future
performance of their respective companies. We have also assumed, with your
consent, that the Transaction and the Exchange will qualify as tax-free to the
Company for U.S. federal income tax purposes. We have also assumed that all
governmental, regulatory or other consents, approvals and registrations
necessary for the consummation of the Transaction, the IPO and the Exchange as
described above and the conduct of the business of the Company and Verizon
Wireless following the Transaction, the IPO and the Exchange will be obtained
without any material adverse effect on the Company, Verizon Wireless, the
Transaction or the Exchange. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as the date
hereof, the Consideration to be received by the Company in the Transaction is
fair, from a financial point of view, to the Company.
Very truly yours,
/S/ UBS Warburg LLC
E-2
ANNEX F
OPINION OF DRESDNER KLEINWORT WASSERSTEIN, INC.
[Letterhead of Dresdner Kleinwort Wassenstein, Inc.]
December 13, 2001
Board of Directors
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to Price Communications Corporation, a New York
corporation (the "Company"), of the Consideration (as defined below) to be
received by the Company pursuant to the terms of the Transaction Agreement and
related Limited Partnership Agreement, Exchange Agreement, Pledge Agreement and
Lock-up Agreements (collectively, the "Agreements"). The Agreements provide
for, among other things, a transaction (the "Transaction") whereby the Company
will contribute certain assets and will assign certain liabilities, of Price
Communications Wireless, Inc., a wholly owned subsidiary of the Company
("PCW"), to New Limited Partnership, a newly formed Delaware limited
partnership ("New LP"), in exchange for a New LP limited partnership interest
(the "Consideration") with a preferred return and an initial capital account
balance of $1,150 million, subject to certain adjustments and offsets described
in the Agreements. New LP is controlled by Cellco Partnership, a Delaware
general partnership ("Cellco"), which in turn will be managed by Verizon
Wireless Inc., a Delaware corporation ("VW") upon completion of an initial
public offering of VW common stock meeting certain requirements as set forth in
the Transaction Agreement (the "VW IPO"). VW is a majority owned subsidiary of
Verizon Communications Inc., a Delaware corporation ("VC"), and Vodafone Group
PLC, an entity formed under the laws of the United Kingdom ("Vodafone"). Cellco
will also contribute certain assets and cash to New LP. The Company has the
option to exchange its interest in New LP for shares of VW common stock (the
"Exchange") upon the completion of a VW IPO; provided, however, that the
Exchange cannot occur prior to the first anniversary of the closing of the
Transaction. The number of shares of VW common stock to be issued to the
Company in the Exchange will be equal to the Company's New LP capital account
balance at the time of the Exchange divided by the price per share of common
stock sold in the VW IPO. The terms and conditions of the Transaction are set
forth in more detail in the Agreements.
In connection with rendering our opinion, we have reviewed drafts dated
December 4, 2001, of each of the Agreements (without Exhibits), and for
purposes hereof, we have assumed that the final form of these documents will
not differ in any material respect from the drafts provided to us. We have also
reviewed and analyzed certain publicly available business and financial
information relating to the Company and VW for recent years and interim periods
to date, reviewed certain internal financial and operating information,
including financial forecasts, analyses and projections prepared by or on
behalf of the Company and provided to us for purposes of our analysis, reviewed
certain internal financial prospects of the assets to be contributed to New LP
by Cellco, including estimates prepared by the management of VW, and we have
conducted discussions with management of the Company and VW to review and
discuss such information and, among other matters, each of the Company's, VW's
and New LP's business, operations, assets, financial condition and future
prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the wireless communications industry that we believe to be
reasonably comparable to the Transaction or otherwise relevant to our inquiry.
We have also performed such other financial studies, analyses, and
investigations and reviewed such other information as we considered appropriate
for purposes of this opinion.
F-1
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the historical
financial and other information provided to or discussed with us or publicly
available, and we have not assumed any responsibility for independent
verification of any of such information. We have also assumed and relied upon
the reasonableness and accuracy of the financial projections, forecasts and
analyses provided to us, and we have assumed that such projections, forecasts
and analyses were reasonably prepared in good faith and on bases reflecting the
best currently available judgments and estimates of the Company's and VW's
management. We express no opinion with respect to such projections, forecasts
and analyses or the assumptions upon which they are based. In addition, we have
not reviewed any of the books and records of the Company, VW or Cellco or
assumed any responsibility for conducting a physical inspection of the
properties or facilities of the Company, VW or Cellco or for making or
obtaining an independent valuation or appraisal of the assets or liabilities of
the Company or PCW, and no such independent valuation or appraisal was provided
to us. We note that the Transaction and the Exchange are intended to qualify as
tax free reorganizations for United States federal income tax purposes, and we
have assumed, with your consent, that the Transaction and the Exchange will so
qualify. We also have assumed that obtaining all regulatory and other approvals
and third party consents required for consummation of the Transaction will not
have an adverse impact on the Company, New LP or VW, or on the anticipated
benefits of the Transaction, and we have assumed that the transactions
described in the Agreements will be consummated without waiver or modification
of any of the material terms or conditions contained therein by any party
thereto. Our opinion is necessarily based on economic and market conditions and
other circumstances as they exist and can be evaluated by us only as of the
date hereof. We are not expressing any opinion herein as to the prices at which
any securities of VW or the Company will actually trade at any time.
In addition to the assumptions described above, we have assumed at your
direction that (i) VW will complete the VW IPO prior to the first anniversary
of the closing of the Transaction, (ii) the Company will exercise its option to
effect the Exchange and the Exchange will take place on the first anniversary
of the closing of the Transaction, (iii) as of the date of the Exchange, the
Company's capital account balance in New LP will be not less than the sum of
$1,150 million and the full preferred return thereon (determined in accordance
with the Limited Partnership Agreement) (the "Exchange Value"), (iv) as of the
date of the consummation of the Exchange, the Company will receive an aggregate
number of shares of VW common stock with a trading value not less than the
Exchange Value, (v) no claims will be made against the Company pursuant to the
indemnification obligations outlined in the Agreements, and (vi) all
restrictions on the Company's ability to transfer such VW common stock under
the terms of the relevant Lock-up Agreement, other than certain volume
restrictions set forth therein, lapse on the 270/th day after the date of the
Exchange, other than with respect to VW common stock with a market value of $75
million pledged by the Company pursuant to the Pledge Agreement, as to which
the restrictions lapse on the earliest dates permitted by the Pledge Agreement
and the relevant Lock-up Agreement. /
It should be noted that in the context of our engagement by the Company, we
were not authorized to and did not solicit third party indications of interest
in acquiring all or any part of the Company, or investigate any alternative
transactions that may be available to the Company.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company, VW, Cellco, VC or Vodafone for our own
account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
We have acted as a co-managing underwriter on two of the Company's past
securities offerings.
Our opinion addresses only the fairness from a financial point of view to
the Company of the Consideration to be received by the Company pursuant to the
Agreements, and we do not express any views on any other term of the
Transaction. Specifically, our opinion does not address the Company's
underlying business decision to effect the transactions contemplated by the
Agreements. In addition, our opinion does not address the solvency of the
Company, New LP or VW following consummation of the Transaction or at any time,
or the appropriateness of any proposed use of proceeds from the Transaction.
F-2
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction, and except
for inclusion in its entirety in any registration statement or proxy statement
required to be circulated to shareholders of the Company relating to the
Transaction, may not be quoted, referred to or reproduced at any time or in any
manner without our prior written consent. This opinion does not constitute a
recommendation to any shareholder or as to how such holder should vote with
respect to the Transaction, and should not be relied upon by any shareholder as
such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
the Consideration to be received by the Company pursuant to the Agreements is
fair to the Company from a financial point of view.
Very truly yours,
/s/ Dresdner Kleinwort Wasserstein,
Inc.
F-3
ANNEX G
OPINION OF DEUTSCHE BANC ALEX. BROWN INC.
[Letterhead of Deutsche Banc Alex. Brown Inc.]
December 13, 2001
Board of Directors
Price Communications Corporation
45 Rockefeller Plaza, Suite 3200
New York, New York 10020
Ladies and Gentlemen:
Deutsche Banc Alex. Brown Inc. ("DBAB") has acted as co-financial advisor to
Price Communications Corporation ("Client") in connection with the proposed
contribution by Price Communications Wireless, Inc. (the "Company"), a
wholly-owned subsidiary of Client, of substantially all of the Company's assets
to Verizon Wireless of the East LP ("New LP"), a newly formed limited
partnership controlled by Cellco Partnership ("Verizon Wireless"), pursuant to
the Transaction Agreement (the "Transaction Agreement"), among Client, the
Company, New LP, Verizon Wireless and the other parties named therein, and the
related Limited Partnership Agreement, Exchange Agreement, Pledge Agreement and
Lock Up Agreements (collectively, with the Transaction Agreement, the
"Agreements"). Under the Agreements, Verizon Wireless will also contribute
certain of its assets to New LP. DBAB understands that Verizon Wireless, a
general partnership, is majority owned by Verizon Communications Inc.
("Verizon").
Pursuant to the Agreements, the Company will contribute to New LP
substantially all of its assets and New LP will assume substantially all of the
Company's liabilities (the "Transaction") in consideration for which (a) the
Company will receive a New LP limited partnership interest with a preferred
return and an initial capital account balance of $1,150 million, subject to
certain adjustments set forth in the Agreements, and (b) New LP will offer to
purchase or provide funds to defease all obligations of the Client and the
Company with respect to the Company's public indebtedness, expected to be equal
to $550 million net of cash contributions by the Company (collectively, the
"Consideration"). Upon the completion of an initial public offering of common
stock of Verizon Wireless Inc. or of a substitute issuer that is, at such time,
a general partner of Verizon Wireless (the "Verizon Wireless common stock" )
meeting the requirements set forth in the Exchange Agreement (the "Verizon
Wireless IPO"), the Company may, within 60 days after the later of the first
anniversary of the closing of the Transaction and the date of the Verizon
Wireless IPO, elect to exchange its limited partnership interest in New LP for
the number of shares of Verizon Wireless common stock (the "Exchange") equal to
the Company's New LP capital account balance at the time of the Exchange
divided by the initial public offering price. In addition, the Company's
limited partnership interest in New LP may be exchanged for shares of common
stock of Verizon under the circumstances specified in the Agreements. The terms
and conditions of the Transaction are more fully set forth in the Agreements.
You have requested DBAB's opinion, as investment bankers, as to the
fairness, from a financial point of view, to Client of the Consideration to be
received in connection with the Transaction.
In connection with DBAB's role as co-financial advisor to Client, and in
arriving at its opinion, DBAB has reviewed certain publicly available financial
and other information concerning the Company and Verizon Wireless and certain
internal analyses and other information furnished to it by the Company, Client
and Verizon Wireless. DBAB has also held discussions with members of the senior
managements of Client and Verizon Wireless regarding the prospects of the
assets and businesses to be contributed into New LP. In addition, DBAB has (i)
compared certain financial information for the Company with similar financial
(and stock market) information for certain companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations which it deemed comparable in whole or in part, (iv) reviewed the
terms of the Agreements, the Amended and Restated Voting Agreement, the
Termination Agreement and other related documents, and (v) performed such other
studies and analyses and considered such other factors as it deemed appropriate.
G-1
DBAB has not assumed responsibility for independent verification of, and has
not independently verified, any information, whether publicly available or
furnished to it, concerning the Company, Verizon Wireless or the assets and
businesses to be contributed into New LP, including, without limitation, any
financial information, forecasts or projections considered in connection with
the rendering of its opinion. Accordingly, for purposes of its opinion, DBAB
has assumed and relied upon the accuracy and completeness of all such
information and DBAB has not conducted a physical inspection of any of the
properties or assets, and has not prepared or obtained any independent
evaluation or appraisal of any of the assets or liabilities of the Company,
Verizon Wireless, or of the assets and businesses to be contributed to New LP.
With respect to the financial forecasts and projections made available to DBAB
and used in its analyses, DBAB has assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of the Company as to the matters covered thereby.
In rendering its opinion, DBAB expresses no view as to the reasonableness of
such forecasts and projections or the assumptions on which they are based. In
connection with its engagement, DBAB was not requested to solicit, and did not
solicit, interest from any party with respect to an acquisition of the shares
or assets of Client or the Company. DBAB's opinion is necessarily based upon
economic, market and other conditions as in effect on, and the information made
available to it, as of the date hereof.
In rendering its opinion, DBAB has also assumed, with your consent, that (i)
Verizon Wireless will successfully complete the Verizon Wireless IPO prior to
the first anniversary of the closing of the Transaction, (ii) the Exchange will
take place on the first anniversary of the closing of the Transaction, (iii) as
of the date of the Exchange, the Company's capital account balance in New LP
will be not less than $1,150 million plus the full preferred return thereon
(assumed to be 3.6% per annum) provided in the Limited Partnership Agreement
(the "Exchange Value"), (iv) the shares of Verizon Wireless common stock
received in connection with the Exchange will, as at the date of the Exchange,
have an intrinsic value at least equal to the Exchange Value, (v) no claims
will be made against the Company pursuant to the indemnification obligations
set forth in the Agreements and (vi) all restrictions on the Company's ability
to transfer such Verizon Wireless common stock under the terms of the relevant
Lock Up Agreement, other than certain volume restrictions, lapse on the 270/th
day after the date of the Exchange, other than with respect to Verizon Wireless
common stock with a value on the date of the Exchange of $75,000,000 pledged by
the Company pursuant to the Pledge Agreement, as to which the restrictions
lapse on the earliest dates permitted by the Pledge Agreement and the relevant
Lock Up Agreement. DBAB is not expressing any opinion on the price at which
Verizon Wireless common stock may trade before, following, or at the time of
the Exchange. /
For purposes of rendering its opinion, DBAB has assumed that, in all
respects material to its analysis, the representations and warranties of
Client, the Company, Verizon Wireless and the other parties to the Agreements
are true and correct and Client, the Company, Verizon Wireless and the other
parties to the Agreements will each perform all of the covenants and agreements
to be performed by it under the Agreements and all conditions to the
obligations of each of Client, the Company, Verizon Wireless and the other
parties to the Agreements to consummate the Transaction will be satisfied
without any waiver thereof. DBAB has also assumed that all material
governmental, regulatory or other approvals and consents required in connection
with the consummation of the Transaction, the Verizon Wireless IPO and the
Exchange will be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any amendments,
modifications or waivers to any agreements, instruments or orders to which
either Client and the Company is a party or is subject or by which it is bound,
no limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on
Client or the Company or materially reduce the contemplated benefits of the
Transaction to Client and the Company. In addition, you have informed DBAB, and
accordingly for purposes of rendering its opinion DBAB has assumed, that the
Transaction and the Exchange will be tax-free to Client and the Company for
U.S. federal income tax purposes.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Client and is not a recommendation to the stockholders of Client
to approve the Transaction. This opinion is limited to the fairness, from a
financial point of view, to Client of the Consideration to be received in
connection with the Transaction,
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and DBAB expresses no opinion as to the merits of the underlying decision by
Client and the Company to engage in the Transaction.
DBAB will be paid a fee for its services as co-financial advisor to Client
in connection with the Transaction. DBAB is an affiliate of Deutsche Bank AG
(together with its affiliates, the "DB Group"). One or more members of the DB
Group have, from time to time, provided investment banking, commercial banking
(including extension of credit) and other financial services to Client and
Verizon, or their affiliates, for which it has received compensation. In the
ordinary course of business, members of the DB Group may actively trade in the
securities and other instruments and obligations of Client, Verizon and or
Vodaphone Group Plc (an affiliate of Verizon Wireless) for their own accounts
and for the accounts of their customers. Accordingly, the DB Group may at any
time hold a long or short position in such securities, instruments and
obligations.
Based upon and subject to the foregoing, it is DBAB's opinion as investment
bankers that, as of the date hereof, the Consideration to be received in
connection with the Transaction is fair, from a financial point of view, to
Client.
Very truly yours,
/s/ Deutsche Banc Alex. Brown Inc.
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ANNEX H
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
CERTIFICATE OF AMENDMENT
of
THE RESTATED CERTIFICATE OF INCORPORATION
of
PRICE COMMUNICATIONS CORPORATION
(Under Section 805 of the New York Business Corporation Law)
-----------------
It is hereby certified that:
(a) The name of the corporation is PRICE COMMUNICATIONS CORPORATION (the
"Corporation").
(b) The Certificate of Incorporation of the Corporation was filed with
the Department of State on August 1, 1979. The Restated Certificate of
Incorporation of the Corporation was filed with the Department of State on
December 29, 1992.
(c) The amendment of the Corporation's Restated Certificate of
Incorporation effected hereby is as follows: a reduction of the number of
votes required for the adoption of a plan of merger or consolidation, the
approval of a sale, lease, exchange or other disposition of all or
substantially all assets of the Corporation, any plan of exchange under
Article 9 of the New York Business Corporation Law, or any dissolution under
Article 10 of the New York Business Corporation Law from two-thirds of the
votes of all outstanding shares entitled to vote thereon to a majority of
the votes of all outstanding shares entitled to vote thereon.
(d) To accomplish the foregoing amendment, a new Article THIRTEENTH shall
be added to the Corporation's Restated Certificate of Incorporation,
relating to the required stockholder approval for a plan of merger or
consolidation, or a sale, lease, exchange or other disposition of all or
substantially all the assets of the Corporation, any plan of exchange under
Article 9 of the New York Business Corporation Law, or any dissolution under
Article 10 of the New York Business Corporation Law, the new Article
THIRTEENTH shall read as follows:
A plan of merger or consolidation, or a sale, lease, exchange or
other disposition of all or substantially all of the assets of the
Corporation pursuant to Article 9 of the New York Business Corporation
Law, or a plan of exchange pursuant to Section 913 of the New York
Business Corporation Law or any dissolution under Article 10 of the New
York Business Corporation Law, may be approved or adopted, as
applicable, by the vote at a meeting of shareholders of a majority of
the votes of all outstanding shares entitled to vote thereon.
(e) The foregoing amendment of the Restated Certificate of Incorporation
was authorized by vote of the board of directors of the Corporation at a
meeting thereof followed by the vote of at least two-thirds of all
outstanding shares of the Corporation's capital stock entitled to vote on
said amendment.
H-1
IN WITNESS WHEREOF, we have subscribed this document on , 2002
and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
PRICE COMMUNICATIONS CORPORATION
By: _______________________________
Robert Price
President
By: _______________________________
Ellen Strahs Fader
Senior Vice President and Secretary
H-2
ANNEX I
SECTION 623 OF THE NEW YORK BUSINESS CORPORATION LAW
NYBCL SECTION 623
Section 623 of the New York Business Corporation Law
SS.623. PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR SHARES.
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the
meeting of shareholders at which the action is submitted to a vote, or at such
meeting but before the vote, written objection to the action. The objection
shall include a notice of his election to dissent, his name and residence
address, the number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares if the action is taken. Such
objection is not required from any shareholder to whom the corporation did not
give notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders without a
meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall
give written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to
the proposed action and who thereby is deemed to have elected not to enforce
his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election
to dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has a right to dissent, held of record by such
nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his
acceptance in writing of an offer made by the corporation, as provided in
paragraph (g), but in no case later than sixty days from the date of
consummation of the corporate action except that if the corporation fails to
make a timely offer, as provided in paragraph (g), the time for withdrawing a
notice of election shall be extended until sixty days from the date an offer is
made. Upon expiration of such time, withdrawal of a notice of election shall
require the written consent of the corporation. In order to be effective,
withdrawal of a notice of election must be accompanied by the return to the
corporation of any advance payment made to the shareholder as provided in
paragraph (g) . If a notice of election is withdrawn, or the corporate action
is rescinded, or a court shall determine that the shareholder is not entitled
to receive payment for his shares, or the shareholder shall otherwise lose his
dissenters' rights, he shall not have the right to receive payment for his
shares and he shall be reinstated to all his rights as a shareholder as of the
consummation of the corporate action, including any intervening preemptive
rights and the right to
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payment of any intervening dividend or other distribution or, if any such
rights have expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation, the fair
value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate
bearing such notation, each new certificate issued therefor shall bear a
similar notation together with the name of the original dissenting holder of
the shares and a transferee shall acquire no rights in the corporation except
those which the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later
(but in no case later than ninety days from the shareholders' authorization
date), the corporation or, in the case of a merger or consolidation, the
surviving or new corporation, shall make a written offer by registered mail to
each shareholder who has filed such notice of election to pay for his shares at
a specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment
to each such shareholder who has submitted the certificates representing his
shares to the corporation, as provided in paragraph (f) of an amount equal to
eighty percent of the amount of such offer, or (2) as to each shareholder who
has not yet submitted his certificates a statement that advance payment to him
of an amount equal to eighty percent of the amount of such offer will be made
by the corporation promptly upon submission of his certificates. If the
corporate action has not been consummated at the time of the making of the
offer, such advance payment or statement as to advance payment shall be sent to
each shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does
not constitute a waiver of any dissenters' rights. If the corporate action has
not been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than
a twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the
foregoing, the corporation shall not be required to furnish a balance sheet or
profit and loss statement or statement or statements to any shareholder to whom
such balance sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders' authorization
for or consent to the proposed corporate action the shareholders were furnished
with a proxy or information statement, which included financial statements,
pursuant to Regulation 14A or Regulation 14C of the United States Securities
and Exchange Commission. If within thirty days after the making of such offer,
the corporation making the offer and any shareholder agree upon the price to be
paid for his shares, payment thereof shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
I-2
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger of consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such proceeding shall
be brought in the county where the office of the domestic corporation, whose
shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall have
the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in such proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law
for the service of a summons, and upon each nonresident dissenting
shareholder either by registered mail and publication, or in such other
manner as is permitted by law. The jurisdiction of the court shall be
plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the shares,
which, for the purposes of this section, shall be the fair value as of the
close of business on the day prior to the shareholders' authorization date.
In fixing the fair value of the shares, the court shall consider the nature
of the transaction giving rise to the shareholder's right to receive payment
for shares and its effects on the corporation and its shareholders, the
concepts and methods then customary in the relevant securities and financial
markets for determining fair value of shares of a corporation engaging in a
similar transaction under comparable circumstances and all other relevant
factors. The court shall determine the fair value of the shares without a
jury and without referral to an appraiser or referee. Upon application by
the corporation or by any shareholder who is a party to the proceeding, the
court may, in its discretion, permit pretrial disclosure, including, but not
limited to, disclosure of any expert's reports relating to the fair value of
the shares whether or not intended for use at the trial in the proceeding
and notwithstanding subdivision (d) of section 3101 of the civil practice
law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest
which the corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the refusal of any
shareholder to accept the corporate offer of payment for his shares was
arbitrary, vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
I-3
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties to the
proceeding against the corporation if the court finds any of the following:
(A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no
offer or required advance payment was made by the corporation; (C) that
the corporation failed to institute the special proceeding within the
period specified therefor; or (D) that the action of the corporation in
complying with its obligations as provided in this section was
arbitrary, vexatious or otherwise not in good faith. In making any
determination as provided in clause (A), the court may consider the
dollar amount or the percentage, or both, by which the fair value of the
shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section
515 (Reacquired shares), except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is
not liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this
paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this paragraph.
If the dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except that
this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e) (2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
I-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Verizon Communications Inc. ("Verizon Communications")
Section 145 of the Delaware General Corporation Law ("DGCL") permits a
corporation to indemnify any of its directors or officers who was or is a party
or is threatened to be made a party to any third party proceeding by reason of
the fact that such person is or was a director or officer of the corporation,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with such action or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe that such person's conduct was unlawful.
In a derivative action, i.e., one by or in the right of the corporation, the
corporation is permitted to indemnify directors and officers against expenses
(including attorney's fees) actually and reasonably incurred by them in
connection with the defense or settlement of an action or suit if they acted in
good faith and in a manner that they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors or officers are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Article 7 of the Verizon Communications Restated Certificate of
Incorporation makes mandatory the indemnification expressly authorized under
the DGCL, except that the Verizon Communications Certificate of Incorporation
only provides for indemnification in derivative actions, suits or proceedings
initiated by a director or officer if the initiation of such action, suit or
proceeding was authorized by the board of directors of Verizon Communications.
Pursuant to Section 7.8 of the Amended and Restated Agreement and Plan of
Merger dated as of April 21, 1996 by and between NYNEX Corporation ("NYNEX")
and Bell Atlantic Corporation ("Bell Atlantic"), Bell Atlantic agreed for a
period of six years following the effective time of the merger to (a) cause
NYNEX to maintain in effect the provisions regarding indemnification of
officers and directors contained in the NYNEX Certificate of Incorporation and
Bylaws and the certificates of incorporation and bylaws of each of its
subsidiaries or in director, officer or employee indemnification agreements of
NYNEX and its subsidiaries, (b) maintain in effect and cause NYNEX to maintain
in effect current policies of directors' and officers' liability insurance and
fiduciary liability insurance with respect to claims arising prior to the
effective time of the merger, and (c) indemnify, and cause NYNEX to indemnify,
the directors and officers of Bell Atlantic and NYNEX, respectively, to the
fullest extent permitted under their respective certificates of incorporation
and bylaws and applicable law. In addition, Bell Atlantic agreed to
unconditionally and irrevocably guarantee for the benefit of such directors,
officers and employees the obligations of NYNEX under its indemnification
arrangements.
Pursuant to Section 7.8 of the Amended and Restated Agreement and Plan of
Merger dated as of July 27, 1998, by and among GTE Corporation ("GTE"), Bell
Atlantic, and a wholly owned subsidiary of Bell Atlantic, Bell Atlantic agreed
for a period of six years following the effective time of the merger to (a)
cause GTE to maintain in effect the provisions regarding indemnification of
officers and directors contained in the GTE charter and bylaws and the charters
and bylaws of each of its subsidiaries or in director, officer or employee
indemnification agreements of GTE and its subsidiaries, (b) maintain in effect
and cause GTE to maintain in effect current policies of directors' and
officers' liability insurance and fiduciary liability insurance with respect to
claims arising prior to the effective time of the merger, and (c) indemnify,
and cause GTE to indemnify, the directors and officers of Bell Atlantic and
GTE, respectively, to the fullest extent permitted under their respective
charters and bylaws and applicable law. In addition, Bell Atlantic agreed to
unconditionally and irrevocably guarantee for the benefit of such directors,
officers and employees the obligations of GTE under its indemnification
arrangements.
II-1
The Certificate of Incorporation of Verizon Communications limits the
personal liability of directors to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by the DGCL.
The directors and officers of Verizon Communications are insured against
certain liabilities, including certain liabilities arising under the Securities
Act of 1933, which might be incurred by them in such capacities and against
which they cannot be indemnified by Verizon Communications.
Verizon Wireless of the East LP ("New Limited Partnership")
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides that, subject to such standards and restrictions (if any) as are set
forth in its partnership agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner or other person from and
against any and all claims and demands whatsoever.
Pursuant to the limited partnership agreement relating to New Limited
Partnership which will be entered into at the closing of the transactions
contemplated by the transaction agreement dated as of December 18, 2001 among
Cellco Partnership, New Limited Partnership, and Price Communications
Corporation and its subsidiaries, New Limited Partnership, its receiver, or its
trustee shall indemnify, save harmless, and pay all judgments and claims
against the managing general partner of New Limited Partnership ("Cellco MGP")
or a member of the management committee of New Limited Partnership relating to
any liability or damage incurred by reason of any act performed or omitted to
be performed by Cellco MGP or any officer or director of Cellco MGP or a member
of the management committee in connection with the business of New Limited
Partnership, including attorneys' fees incurred by Cellco MGP in connection
with the defense of any action based on any such act or omission, which
attorneys' fees may be paid as incurred, including all such liabilities under
federal and state securities laws as permitted by law. In addition, in the
event of any action by any limited partner of New Limited Partnership against
Cellco MGP or a member of the management committee, including a partnership
derivative suit, New Limited Partnership shall indemnify, save harmless, and
pay all expenses of Cellco MGP or such member of the management committee,
including attorneys' fees, incurred in the defense of such action.
Notwithstanding the above, the limited partnership agreement provides that this
indemnification shall only be enforced to the maximum extent permitted by law
and Cellco MGP and each member of the management committee will not be
indemnified from any liability for its fraud, bad faith, or willful misconduct.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description
- ------ -----------
2 Transaction Agreement dated as of December 18, 2001 among Price Communications
Corporation, Price Communications Cellular Inc., Price Communications Cellular Holdings,
Inc., Price Communications Wireless, Inc., Cellco Partnership and Verizon Wireless of the
East LP (included as Annex A to the proxy statement/prospectus contained in this
Registration Statement).
3.1 Certificate of Incorporation of Verizon Communications Inc. (incorporated by reference to
Verizon Communications Inc.'s Annual Report on Form 10-K for the year ended December
31, 2000, Exhibit 3(a)).
3.2 Bylaws of Verizon Communications Inc. (incorporated by reference to Verizon
Communications Inc.'s Annual Report on Form 10-K for the year ended December 31,
2000, Exhibit 3(b)).
4 Form of Agreement of Limited Partnership for Verizon Wireless of the East LP among
Verizon Wireless of Georgia LLC, a subsidiary of Cello Partnership to be identified and
Price Communications Wireless, Inc. (included as Annex B to the proxy statement/
prospectus contained in this Registration Statement).
II-2
Exhibit
Number Description
- ------ -----------
5* Opinion of Davis Polk & Wardwell regarding the validity of the securities being registered.
8.1* Opinion of Proskauer Rose LLP regarding certain federal income tax consequences relating to
the contribution transaction and the exchange.
8.2* Opinion of Proskauer Rose LLP confirming tax disclosures.
10 Exchange Agreement dated as of December 18, 2001 among Price Communications
Corporation, Price Communications Cellular Inc., Price Communications Cellular Holdings,
Inc., Price Communications Wireless, Inc., Verizon Communications Inc., Verizon Wireless
Inc., Cellco Partnership and Verizon Wireless of the East LP (included as Annex D to the
proxy statement/prospectus contained in this Registration Statement).
12 Statement of Verizon Communications Inc. Consolidated Computation of Ratio of Earnings to
Fixed Charges (incorporated by reference to Verizon Communications Inc.'s Form 10-Q for
the quarter ended September 30, 2001, Exhibit 12)
21 Subsidiaries of Verizon Communications Inc. (incorporated by reference to Verizon
Communications Inc.'s Annual Report on Form 10-K for the year ended December 31,
2000, Exhibit 21).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of PricewaterhouseCoopers LLP.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Ernst & Young LLP.
23.8 Consent of Davis Polk & Wardwell (included in the opinion filed as Exhibit 5 to this
Registration Statement).
23.9 Consent of Proskauer Rose LLP (included in the opinion filed as Exhibit 8 to this Registration
Statement).
24 Powers of Attorney.
99.1 Form of Price Communications Corporation Proxy Card.
99.2 Fairness opinion of UBS Warburg LLC (included as Annex E to the proxy statement/
prospectus contained in this Registration Statement).
99.3 Fairness opinion of Dresdner Kleinwort Wasserstein, Inc. (included as Annex F to the proxy
statement/prospectus contained in this Registration Statement).
99.4 Fairness opinion of Deutsche Banc Alex. Brown Inc. (included as Annex G to the proxy
statement/prospectus contained in this Registration Statement).
99.5 Consent of UBS Warburg LLC.
99.6 Consent of Dresdner Kleinwort Wasserstein, Inc.
99.7 Consent of Deutsche Banc Alex. Brown Inc.
- --------
* To be filed by amendment.
Item 22. Undertakings.
(a) Each of the undersigned Registrants hereby undertake:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
II-3
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of such Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the proxy statement/prospectus pursuant to Item 4, 10(b), 11
or 13 of this form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Verizon Wireless
of the East LP has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Bedminster, State of New Jersey, on February 8, 2002.
VERIZON WIRELESS OF THE EAST LP
By: Verizon Wireless of Georgia LLC, as
general partner
By Cellco Partnership, as sole
member
/s/ DENNIS F. STRIGL
By:________________________________
Name: Dennis F. Strigl
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ DENNIS F. STRIGL President, Chief Executive February 8, 2002
_____________________________ Officer and Representative
(Dennis F. Strigl) (Principal Executive
Officer)
/s/ EDWARD LANGSTON Vice President and Chief February 8, 2002
_____________________________ Financial Officer
(Edward Langston) (Principal Financial and
Accounting Officer)
/s/ IVAN G. SEIDENBERG Chairman of the Board of February 8, 2002
_____________________________ Representatives
(Ivan G. Seidenberg)
/s/ SIR CHRISTOPHER GENT Representative February 8, 2002
_____________________________
(Sir Christopher Gent)
/s/ LAWRENCE T. BABBIO, JR. Representative February 8, 2002
_____________________________
(Lawrence T. Babbio, Jr.)
/s/ MICHAEL T. MASIN Representative February 8, 2002
_____________________________
(Michael T. Masin)
/s/ KENNETH J. HYDON Representative February 8, 2002
_____________________________
(Kenneth J. Hydon)
/s/ TOMAS ISAKSSON Representative February 8, 2002
_____________________________
(Tomas Isaksson)
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Verizon
Communications Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on February 8, 2002.
VERIZON COMMUNICATIONS INC.
/s/ WILLIAM F. HEITMANN
By: _______________________________
William F. Heitmann
(Senior Vice President and
Treasurer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Director February 8, 2002
_____________________________
(James R. Barker)
* Director February 8, 2002
_____________________________
(Edward H. Budd)
* Director February 8, 2002
_____________________________
(Richard L. Carrion)
* Director February 8, 2002
_____________________________
(Robert F. Daniell)
* Director February 8, 2002
_____________________________
(Helene L. Kaplan)
* Director, Chairman and February 8, 2002
_____________________________ Co-Chief Executive Officer
(Charles R. Lee) (co-Principal Executive
Officer)
* Director February 8, 2002
_____________________________
(Sandra O. Moose)
* Director February 8, 2002
_____________________________
(Joseph Neubauer)
* Director February 8, 2002
_____________________________
(Thomas H. O'Brien)
* Director February 8, 2002
_____________________________
(Russell E. Palmer)
* Director February 8, 2002
_____________________________
(Hugh B. Price)
II-6
Signature Title Date
--------- ----- ----
* Vice Chairman and Chief February 8, 2002
_____________________________ Financial Officer
(Frederic V. Salerno) (Principal Financial
Officer)
* Director, President and February 8, 2002
_____________________________ Co-Chief Executive Officer
(Ivan G. Seidenberg) (co-Principal Executive
Officer)
* Director February 8, 2002
_____________________________
(Walter V. Shipley)
* Director February 8, 2002
_____________________________
(John W. Snow)
* Director February 8, 2002
_____________________________
(John R. Stafford)
* Director February 8, 2002
_____________________________
(Robert D. Storey)
* Senior Vice President and February 8, 2002
_____________________________ Controller (Principal
(Lawrence R. Whitman) Accounting Officer)
/s/ WILLIAM F. HEITMANN
By: _______________________
William F. Heitmann
Attorney-in-fact
II-7
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
2 Transaction Agreement dated as of December 18, 2001 among Price Communications
Corporation, Price Communications Cellular Inc., Price Communications Cellular Holdings,
Inc., Price Communications Wireless, Inc., Cellco Partnership and Verizon Wireless of the
East LP (included as Annex A to the proxy statement/prospectus contained in this
Registration Statement).
3.1 Certificate of Incorporation of Verizon Communications Inc. (incorporated by reference to
Verizon Communications Inc.'s Annual Report on Form 10-K for the year ended December
31, 2000, Exhibit 3(a)).
3.2 Bylaws of Verizon Communications Inc. (incorporated by reference to Verizon
Communications Inc.'s Annual Report on Form 10-K for the year ended December 31,
2000, Exhibit 3(b)).
4 Form of Agreement of Limited Partnership for Verizon Wireless of the East LP among
Verizon Wireless of Georgia LLC, a subsidiary of Cello Partnership to be identified and
Price Communications Wireless, Inc. (included as Annex B to the proxy statement/
prospectus contained in this Registration Statement).
5* Opinion of Davis Polk & Wardwell regarding the validity of the securities being registered.
8.1* Opinion of Proskauer Rose LLP regarding certain federal income tax consequences relating to
the contribution transaction and the exchange.
8.2* Opinion of Proskauer Rose LLP confirming tax disclosures.
10 Exchange Agreement dated as of December 18, 2001 among Price Communications
Corporation, Price Communications Cellular Inc., Price Communications Cellular Holdings,
Inc., Price Communications Wireless, Inc., Verizon Communications Inc., Verizon Wireless
Inc., Cellco Partnership and Verizon Wireless of the East LP (included as Annex D to the
proxy statement/prospectus contained in this Registration Statement).
12 Statement of Verizon Communications Inc. Consolidated Computation of Ratio of Earnings to
Fixed Charges (incorporated by reference to Verizon Communications Inc.'s Form 10-Q for
the quarter ended September 30, 2001, Exhibit 12).
Subsidiaries of Verizon Communications Inc. (incorporated by reference to Verizon
Communications Inc.'s Annual Report on Form 10-K for the year ended December 31,
21 2000, Exhibit 21).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of PricewaterhouseCoopers LLP.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Ernst & Young LLP.
Consent of Davis Polk & Wardwell (included in the opinion filed as Exhibit 5 to this
23.8 Registration Statement).
Consent of Proskauer Rose LLP (included in the opinion filed as Exhibit 8 to this Registration
23.9 Statement).
24 Powers of Attorney.
99.1 Form of Price Communications Corporation Proxy Card.
Exhibit
Number Description Page
- ------- ----------- ----
99.2 Fairness opinion of UBS Warburg LLC (included as Annex E to the proxy statement/
prospectus contained in this Registration Statement).
99.3 Fairness opinion of Dresdner Kleinwort Wasserstein, Inc. (included as Annex F to the proxy
statement/prospectus contained in this Registration Statement).
99.4 Fairness opinion of Deutsche Banc Alex. Brown Inc. (included as Annex G to the proxy
statement/prospectus contained in this Registration Statement).
99.5 Consent of UBS Warburg LLC.
99.6 Consent of Dresdner Kleinwort Wasserstein, Inc.
99.7 Consent of Deutsche Banc Alex. Brown Inc.
- --------
* To be filed by amendment.
2