Exhibit 8.1
[LETTERHEAD OF PROSKAUER ROSE LLP]
December 18, 2001
Price Communications Wireless, Inc.
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Ladies and Gentlemen:
You have requested our opinions regarding certain federal income tax
consequences of (i) the contribution (the "PCW Contribution") by Price
Communications Wireless, Inc. ("PCW"), to Verizon Wireless of the East LP ("New
LP") of substantially all of PCW's assets in exchange for the assumption by New
LP of PCW's liabilities and the receipt by PCW of a limited partner interest in
New LP (the "PCW Interest") and (ii) the acquisition (the "Acquisition") of the
PCW Interest by Verizon Wireless, Inc. ("VWI") or by Verizon Communications Inc.
("VCI") or a subsidiary of VCI from PCW (or, if PCW has been liquidated or
merged, from Price Communications Corporation ("PCC")) in exchange for voting
common stock of VWI or VCI, respectively. You have asked that, in rendering our
opinion with regard to the Acquisition, we make the assumptions set forth in
section III.F below.
I. Facts
The PCW Contribution will be accomplished pursuant to the Transaction
Agreement ("Transaction Agreement") dated as of December 18, 2001 among PCC,
Price Communications Cellular Inc., Price Communications Cellular Holdings, Inc.
(the indirect and direct owners, respectively, of all of the outstanding stock
of PCW, and, together with PCW, the "Price Corporations"), PCW, Cellco
Partnership/1/ ("Cellco", which will own, through a wholly-owned limited
liability company and another entity controlled and substantially owned by
Cellco ("Cellco Subsidiaries"), all of the interests in New LP other than the
PCW Interest), and New LP. The amount of PCW liabilities assumed by New LP will
exceed by about $310 million the
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/1/ The current partners of Cellco are VCI or its controlled affiliates
(collectively, "Verizon"), which has a 55% interest, and Vodafone Group Plc
or its controlled affiliates (collectively, "Vodafone"), which has a 45%
interest. Following a VWI initial public offering, VWI will also be a
partner of Cellco, and Verizon and Vodafone are expected to own stock of
VWI.
Price Communications Corporation
December 18, 2001
Page 2
amount of PCW's tax basis in the assets PCW contributes to New LP (the excess of
the liabilities of a partner assumed by New LP over the tax basis of the assets,
and the face amount of any promissory notes, contributed by that partner to New
LP, the partner's "Liability Excess"). At the time of the PCW Contribution, New
LP will obtain, from an unrelated third party, debt financing that is
nonrecourse to the partners of New LP in the amount of $350 million (the "New LP
Financing")./2/ Immediately following the PCW contribution New LP will repay the
approximately $700 million aggregate liability assumed by New LP on the PCW
Senior Secured Notes and Senior Subordinated Notes (collectively, the "Notes")
with the proceeds of the New LP Financing and cash contributed to New LP by PCW
and by the Cellco Subsidiaries./3/ The Limited Partnership Agreement of New LP
to be entered into among the Cellco Subsidiaries and PCW ("Partnership
Agreement") will provide that, except to the extent that section 752 of the
Internal Revenue Code ("Code") or section 1.752-3 of the Treasury Regulations
("Regulations") are amended following the date of execution of the Transaction
Agreement to not so permit, there shall be allocated to PCW for federal income
tax purposes under Regulations section 1.752-3(a)(2) an amount of the liability
of New LP for the New LP Financing equal to the amount of the PCW Liability
Excess./4/
The Partnership Agreement provides that there shall be allocated to PCW
until the fourth anniversary of the PCW Contribution amounts of net income of
New LP (in the computation of which there shall not be taken into account
certain items of deduction specially allocated to the Cellco Subsidiaries) that
shall provide PCW with a return at an annual rate equal to approximately 3.7% on
the amount from time to time of PCW's capital account in New LP. New LP losses
shall be allocated to PCW after the capital account balances of the Cellco
Subsidiaries have been reduced to zero.
After the second anniversary of the PCW Contribution, PCW will be
entitled to a distribution from New LP with respect to each calendar quarter in
an amount equal to 50% of the amount of net income allocated to PCW for that
calendar quarter.
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/2/ The Partnership Agreement contains a covenant that the New LP Financing
shall not be repaid until the earlier of the day immediately following the
closing date of the Acquisition and the five year anniversary of the PCW
Contribution.
/3/ The requirement of making this repayment arises out of the PCW
Contribution.
/4/ This allocation under Regulations section 1.752-3(a)(2) will result from
the allocation of that liability under Regulations section 1.752-3(b)(1) to
the group of assets contributed to New LP by a partner, where in connection
with that partner's contribution, New LP (i) assumes an amount of
liabilities of the partner that exceeds the amount of the New LP Financing
liability, and (ii) repays all or a portion of such liabilities with the
proceeds of the New LP Financing.
Price Communications Corporation
December 18, 2001
Page 3
PCW and any other Price Corporation may transfer the PCW Interest to
another Price Corporation in connection with a merger or liquidation into that
other Price Corporation.
Under Code section 704(c), built-in gain on the PCW assets as of the
time of the PCW Contribution would be recognized by the Price Corporations if
there were a disposition by New LP of the PCW assets prior to the Acquisition.
The only restriction on such disposition is the provision of the Partnership
Agreement requiring PCW's approval for a disposition during the two-year period
following the PCW Contribution of any of the cellular licenses contributed by
PCW to New LP.
The Acquisition will be accomplished pursuant to the Exchange Agreement
("Exchange Agreement") dated as of December 18, 2001 among the Price
Corporations, VCI, VWI, Cellco and New LP. If prior to the fourth anniversary of
the PCW Contribution there has been an initial public offering of VWI voting
common stock/5/ with gross proceeds of at least $4 billion, which on investment
in Cellco provides VWI with a 4% interest in Cellco, PCW or PCC may elect to
have the acquisition made by VWI./6/ If by that fourth anniversary there has not
been a VWI initial public offering, the acquisition shall be made by VCI or a
VCI subsidiary at that time. If there has been a VWI initial public offering but
PCW and PCC have not elected to have the Acquisition made by VWI, the
Acquisition shall be made by VCI or a VCI subsidiary on the tenth anniversary of
the PCW Contribution.
The voting common stock that PCW or PCC receives upon the Acquisition
shall, if VWI stock, be of the same class as VWI has issued to the public,/7/
and if VCI stock be of the single class of VCI stock now outstanding (or
whatever stock or other property that stock is converted into upon a transaction
involving, or a restructuring of, VCI).
The amount of VWI or VCI stock that PCW or PCC will receive in exchange
for the PCW Interest upon the Acquisition will be based on the capital account
in New LP related to the PCW Interest, adjusted, at PCW or PCC's election, by
allocating in the same manner as New LP
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/5/ The Exchange Agreement provides that this stock must be entitled to vote in
the election of directors.
/6/ This election may not be made until the first anniversary of the PCW
Contribution.
/7/ The amended draft Registration Statement on Form S-1 filed by VWI with the
Securities and Exchange Commission on November 8, 2001 ("Registration
Statement") provides that the stock to be issued to the public will have
one vote per share in the election of directors and in all other matters
voted upon by shareholders and that the VWI stock to be held by Verizon and
Vodafone will have disproportionately greater voting rights. The
Registration Statement also provides that the VWI interest in Cellco will
entitle VWI to be the managing partner of Cellco and to control Cellco's
management and operations through VWI's officers (who, other than one
officer designated by Vodafone, will be employees of VWI), subject only to
Verizon and Vodafone veto rights over significant decisions.
Price Communications Corporation
December 18, 2001
Page 4
net income is allocated under the Partnership Agreement any aggregate net
unrecognized gain or loss in New LP's assets.
The Exchange Agreement contains a covenant that, provided that the
Acquisition occurs within 4 1/2 years of the PCW contribution, prior to the
closing of the Acquisition the acquiror 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 contains specific terms and conditions
for, the disposition of more than 50% of the PCW Interest or more than 66% of
the assets of New LP (other than a transfer to Cellco or to persons in the
"qualified group" of the acquiror as defined in Regulations section
1.368-1(d)(4)).
II. Qualifications to Opinions
Our opinions as stated herein are based upon and subject to (i) the
accuracy of the representations, and compliance with the covenants, contained in
the Transaction Agreement, the Partnership Agreement and the Exchange Agreement
(the "Agreements"); (ii) the PCW Contribution and the capital contributions by
the Cellco Subsidiaries and the Acquisition being effected in accordance with
the provisions of the Agreements; (iii) the accuracy of the representations made
by the Price Corporations to us, in their certificates (the "Certificates")
dated the date of this opinion and the date of the closing of the PCW
Contribution (the "Closing"); (iv) no action being taken, or transaction
occurring, after the Closing that calls into question the accuracy of any of the
representations in the Certificates; (v) if the Acquisition is by VWI, an
initial public offering of VWI voting common stock in the aggregate amount of at
least $4 billion and the receipt by VWI, in exchange for its contribution to
Cellco of the proceeds of the offering, of a partnership interest in Cellco
representing at least a 4% interest in the capital and profits of Cellco; (vi)
the sole consideration received by PCW or PCC in the acquisition in exchange for
the PCW Interest being voting common stock of VWI or VCI; and (vii) the
Acquisition occurring within 4 1/2 years of the PCW Contribution.
In rendering our opinions, we have considered the applicable provisions
of the Code and the Regulations, pertinent judicial authorities, rulings of the
Internal Revenue Service ("Service") and such other authorities as we have
considered relevant. Any subsequent change therein may adversely affect the
conclusions reached in these opinions.
III. Opinions and Related Legal Issues
A. Section 721 Asset Transfer Opinion
Subject to the qualifications set forth in section II above and the
issue of federal income tax law discussed in section III.B below, we are of the
opinion that the PCW Contribution should
Price Communications Corporation
December 18, 2001
Page 5
constitute a contribution to a partnership in exchange for an interest in the
partnership within the meaning of section 721(a) of the Code. However, as
discussed in section III.B, the matter is not free from doubt because there is a
dearth of authority as to what constitutes a partnership interest for federal
income tax purposes. If the issue of the characterization for federal income tax
purposes of the PCW Interest that is discussed below were decided adversely, the
PCW Contribution would not qualify under section 721(a) and, as a result, PCW
could recognize gain/8/ in an amount equal to the excess of the value of the PCW
Interest plus the amount of PCW's liabilities assumed by New LP over PCW's tax
basis in the assets contributed by PCW to New LP.
B. Section 721 Asset Transfer Issue
The Service may contend that the PCW Interest is not a partnership
interest within the meaning of section 721(a) because the interest is preferred,
has limited participation in New LP income and losses and changes in the value
of New LP's assets, and will be exchanged for VWI or VCI stock. We believe the
courts should reject such a contention.
With the exception of the cases discussed in the next following
paragraph, which we believe to have no applicability to the PCW Interest, there
appear to be no authorities with respect to the issue of whether a partnership
interest that is preferred, limited and exchangeable constitutes a partnership
interest for tax purposes. There are, however, a number of cases in which the
courts have considered the somewhat analogous question of whether preferred
stock constitutes stock for tax purposes. The courts have held that it does. See
Nestle Holdings Inc. v. Commissioner, 94 T.C. 803, 814 (1990); Snyder v.
Commissioner, 93 T.C. 529, 546-547 (1989); Ragland Investment Co. v.
Commissioner, 52 T.C. 867 (1969), aff'd per curiam, 435 F.2d 118 (6th Cir.
1970); Zilkha & Sons, Inc. v. Commissioner, 52 T.C. 607 (1969), acq., 1970-2
C.B. xxi. Although there are distinctions between the terms of those preferred
stock interests and the terms of the PCW Interest, we believe that the courts
should follow these cases and hold that the PCW Interest is a partnership
interest for tax purposes on the basis that (i) PCW's retention of its
investment in New LP is subject to the risk of losses incurred by New LP's
business, (ii) PCW's obtaining a return on its New LP investment is subject to
the risk that no income is recognized by New LP's business and that there is no
appreciation in the value of its assets and (iii) PCW's right to exchange its
interest in New LP for stock of VWI or VCI does not avoid these risks because
the amount of stock PCW receives on the exchange depends on PCW's New LP capital
account balance, which, in turn, depends on the income and losses, and
appreciation in the value of the assets, of New LP's business.
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/8/ Whether PCW would recognize such gain would depend on how the PCW Interest
was characterized for federal income tax purposes.
Price Communications Corporation
December 18, 2001
Page 6
In the cases that denied partnership interest treatment for tax
purposes--Foster v. Commissioner, 80 T.C. 34, 202-203, 209 (1983), aff'd on this
issue, 756 F.2d 1430, 1436 (9th Cir. 1985); ASA Investerings Partnership v.
Commissioner, 76 TCM (CCH) 325, 335-336, aff'd, 201 F.3d 505, 513 (D.C. Cir.
2000)--the holder of the interest in question had made no commitment of capital
to the risks of a business. We believe that the courts should hold these cases
inapposite to the issue of the tax treatment of the PCW Interest, which
represents a very substantial commitment to the risks of the New LP business.
We also believe that the courts should not uphold an attempt by the
Service to apply to PCW the partnership anti-abuse rule of Regulations section
1.701-2 (under which a partner may be treated as not being a partner for federal
income tax purposes), on the basis that there is a substantial business purpose
for the organization of New LP, and the use by PCW and the Cellco Subsidiaries
of the partnership form is consistent with the Congressional intent underlying
the partnership provisions of the Code; i.e., "to conduct joint business . . .
activities through a flexible economic arrangement"/9/. We note, however, that
there is a dearth of authority on the issues of the validity and application of
the partnership anti-abuse rule.
C. Liability Assumption Opinion
Subject to the qualifications set forth in section II above and the
issue of federal income tax law discussed in section III.D below, we are of the
opinion that no gain should be recognized by PCW with respect to the assumption
of PCW liabilities by New LP. However, as discussed in section III.D, the matter
is not free from doubt because there is a dearth of authority as to what is a
permissible method for allocating a nonrecourse liability to which multiple
properties are subject among those properties. If the issue of the allocation of
nonrecourse liability discussed below were decided adversely, PCW would
recognize gain in an amount equal to a substantial portion of the approximately
$310 million PCW Liability Excess.
D. Liability Assumption Issue
In order for PCW not to recognize gain under Code sections 731(a)(1)
and 752(b) with respect to the assumption of PCW's liabilities by New LP, it is
necessary that there be allocated to PCW under Code section 752 an amount of the
liability relating to the New LP Financing equal to the PCW Liability Excess.
See Code section 752(a). The Partnership Agreement provides for that allocation.
The Service, however, may challenge the method used by New LP under Regulations
section 1.752-3(b)(1) to produce the allocation.
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/9/ Regulations section 1.701-2(a).
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December 18, 2001
Page 7
Under Regulations section 1.752-3(a)(2) a partnership nonrecourse
liability is allocated to a partner that contributed property to the partnership
that is subject to that liability to the extent of the amount of taxable gain
that would be allocated to that partner under Code section 704(c) if the
partnership disposed of (in a taxable transaction) all partnership property
subject to that liability in full satisfaction of the liability and for no other
consideration. Regulations section 1.752-3(b)(1) provides that, if multiple
partnership properties are subject to a single nonrecourse liability, for
purposes of determining the amount of taxable gain referred to in the
immediately preceding sentence "the partnership may allocate the liability among
the multiple properties under any reasonable method" and the portion of the
liability allocated to each item of partnership property is then treated as a
separate loan for that purpose. Neither the Regulations nor any other authority
provide any guidance as to what is a reasonable method./10/
We believe the courts should reject a challenge by the Service to the
method under Regulations section 1.752-3(b)(1) that will be used by New LP to
allocate the liability for the New LP Financing, i.e., to the property to be
contributed to the partnership in conjunction with the assumption of the
liabilities that will be replaced in part by the New LP Financing./11/ In our
view, this method, which enables a partner to defer the recognition of built-in
gain with respect to contributed property, should be considered a reasonable
method within the meaning of section 1.752-3(b)(1), because it is consistent
with the purpose for the section 752 liability allocation rules. The Explanation
of Provisions of Temporary Regulations Under Section 752 (T.D. 8237, 1989-1 C.B.
180, 182) explains that "section 752 simulates the tax consequences that the
partners would realize if they owned undivided interests in the partnership's
assets." If PCW held an undivided interest in its assets, rather than
transferring those assets to New LP, it would not recognize for tax purposes any
built-in gain with respect to those assets./12/
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/10/ The Regulations go on to state that a method is not reasonable if it
allocates to any "item of property" an amount of the liability that, when
combined with any other liabilities allocated to the property, is in excess
of the fair market value of the property at the time the liability is
incurred. We believe that this statement was not intended to require a
method that allocates a liability to individual items of property. We also
note that the aggregate fair market value of the assets contributed by PCW
to New LP is greatly in excess of the amount of the liability for the New
LP Financing.
/11/ We note that the Service, without reference to a method of allocation, has
permitted this allocation to be made in any amounts determined by the
partnership. See, e.g., Private Letter Ruling 200120020 (February 13,
2001).
/12/ We also believe that the immediate repayment by New LP of the PCW liability
on the Notes should not be treated as a payment to PCW, particularly
because the requirement of making the repayment will arise out of the PCW
Contribution. See Stockton Harbor Industrial Co. v. Commissioner, 216 F.2d
638, 645-650 (9th Cir. 1954), cert. denied, 349 U.S. 904 (1955); Barker v.
Commissioner, 74 T.C. 555, 568-572 (1980); Commissioner v. North Shore Bus
Co., 143 F.2d 114 (2d Cir. 1944) (in contexts other than transfer to
partnership, assumption of liability in connection with acquisition of
property, and immediate payment by acquiror of liability pursuant to
agreement between transferor and acquiror, not treated as payment by
acquiror to transferor of cash applied to payment of liability).
Price Communications Corporation
December 18, 2001
Page 8
E. Section 368 Reorganization Opinion
Subject to the qualifications set forth in section II above and in
section III.F below and the two issues of federal income tax law discussed in
section III.G below, we are of the opinion that the Acquisition should
constitute a reorganization within the meaning of section 368(a) of the Code and
that each of PCW or PCC, respectively, and VWI or VCI, respectively, should be a
party to the reorganization within the meaning of section 368(a) of the Code.
However, as discussed below, the matter is not free from doubt because certain
applicable provisions of the Code and the Treasury Regulations are imprecise and
there are no other authorities that interpret these provisions. If either of the
two issues discussed below were decided adversely, the Acquisition would not
constitute a reorganization. In that case, PCW or PCC would recognize taxable
gain in an amount equal to the value of the VWI stock or VCI stock received on
the Acquisition plus the amount of the PCW Liability Excess. In addition, if the
Acquisition is made from PCC, and PCC distributes the VWI or VCI stock and PCC's
other assets to its shareholders in liquidation of PCC, the consequence to the
PCC shareholders of the Acquisition not qualifying as a reorganization is that
each PCC shareholder will recognize gain or loss in an amount equal to the
difference between the value of the VWI or VCI stock and other assets received
by that shareholder from PCC and that shareholder's tax basis in its PCC stock.
F. Assumptions and Qualifications With Respect to Section 368
Reorganization Opinion
The assumptions that you asked us to make in rendering our section 368
reorganization opinion, and the qualifications to the opinion relating to those
assumptions, are as follows.
1. We assume that, if the Acquisition is made by VWI, the VWI stock
issued as the Acquisition consideration will have the voting rights described in
the Registration Statement (see n. 7, supra). The Exchange Agreement, however,
requires only that the VWI stock vote in the election of directors./13/
2. We assume that, if the Acquisition is made by VWI, the VWI interest
in Cellco will be as described in the Registration Statement (see n. 7, supra).
If VWI's Cellco interest is not as described, and there is a transfer of the PCW
Interest or the assets of New LP to Cellco, the continuity of business
enterprise requirement of a Code section 368(a) reorganization ("COBE") that is
discussed in the first part of section III.G below may not be satisfied.
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/13/ We are not opining as to whether stock that votes only for directors is
voting stock for purposes of the reorganization provisions of the Code, as
to which issue we are not aware of any authority. We note, however, that
there is authority with respect to provisions of the Code other than the
reorganization provisions that qualification as voting stock requires only
the right to vote for directors (see, e.g., Rev. Rul. 69-126, 1969-1 C.B.
218).
Price Communications Corporation
December 18, 2001
Page 9
3. We assume that, if the Acquisition is made by VWI, and the PCW
interest is transferred to, or New LP is merged with, Cellco, following that
transfer or merger VWI will have an interest in Cellco of at least 5%. If VWI
does not have such an interest, COBE may not be satisfied.
4. We assume that, if the Acquisition is made by VCI or a VCI
subsidiary, the consideration will be VCI common stock that is the same as the
VCI common stock now outstanding. Because Code section 368(a)(1)(C) conditions
reorganization treatment of the Acquisition on the consideration being solely
voting stock of the acquiror or its controlling parent corporation, the receipt
by PCW or PCC of consideration other than the current VCI common stock could
preclude such treatment./14/
5. We assume that, if the Acquisition is made by VCI or a VCI
subsidiary, Verizon will have an interest in Cellco (after dilution by the
issuance of any Cellco interest to VWI) of in excess of 50% (see n. 1, supra).
If Verizon does not have such an interest, COBE may not be satisfied.
6. We assume that following the Acquisition there will not be a
disposition of the PCW Interest or the assets of New LP that is integrated for
federal income tax purposes with the Acquisition,/15/ and is determined to
prevent the satisfaction of COBE.
G. Section 368 Reorganization Issues
The first federal income tax issue involves COBE. Regulations sections
1.368-1(d)(1) through (3) provide generally that COBE is satisfied if after the
acquisition either the historic business of the acquired corporation is
continued or a significant portion of the acquired corporation's historic
business assets are used in a business. Regulations section 1.368-1(d)(4) then
sets forth the following rules for determining whether the COBE is satisfied
when in connection with the acquisition the acquired corporation's assets are
transferred to a partnership:
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/14/ If, for example, prior to the Acquisition, all of the outstanding VCI stock
were acquired in exchange for consideration other than voting stock or
acquired by a corporate subsidiary in exchange for voting stock of its
parent corporation, the subsequent Acquisition by VCI would not qualify as
a reorganization within the meaning of Code section 368(a).
/15/ As set forth in section I above, the only restriction on such a disposition
is the provision of the Exchange Agreement relating to a binding agreement,
resolution approving the terms of a specific transaction, memorandum of
understanding, or letter of intent, in existence at the time of the
Acquisition. The law is unclear as to whether integration would be applied
with respect to a disposition contemplated at the time of the Acquisition
but not the subject of such documentation. See, e.g., McDonald's
Restaurants of Illinois v. Commissioner, 688 F.2d 520, 524-525 (7th Cir.
1982) rev'g McDonalds of Zion v. Commissioner, 76 T.C. 972, 993-998 (1981).
Price Communications Corporation
December 18, 2001
Page 10
(1) The issuing corporation is treated as holding all of the
business and assets of its 80% or more owned subsidiaries and the issuing
corporation and those subsidiaries are treated as a "qualified group." (section
1.368-1(d)(4))
(2) Each partner of a partnership will be treated as owning
the business assets of the acquired corporation that were transferred to the
partnership and are used in the partnership's business in accordance with that
partner's interest in the partnership. (section 1.368-1(d)(4)(iii)(A))
(3) The issuing corporation will be treated as conducting a
business of the partnership if one or more members of the qualified group have
active and substantial management functions as a partner with respect to that
partnership business. (section 1.368-1(d)(4)(iii)(B)(2))
(4) The fact that the issuing corporation is treated under
rule (3) above as conducting the business that was conducted by the acquired
corporation before the acquisition and is conducted by the partnership after the
acquisition "tends to establish the requisite continuity, but is not alone
sufficient" (emphasis added). (section 1.368-1(d)(4)(iii)(C))
Thus, the determination of whether a partnership interest satisfies
COBE is "a facts and circumstances analysis." Explanation of Proposed
Regulations, REG-252233-96, 1997-1 C.B. 802, 804.
The Regulations then illustrate the operation of these rules with the
following examples:
(A) The acquiring corporation transfers the acquired assets to a
wholly-owned subsidiary which transfers the assets to a partnership for which
the subsidiary performs active and substantial management functions and in which
the subsidiary has a 20% partnership interest. COBE is satisfied. (section
1.368-1(d)(5), Example 7)
(B) The same facts as in example (A), but the subsidiary has only a 1%
interest in the partnership. COBE is not satisfied. (section 1.368-1(d)(5),
Example 8)
(C) The same facts as in example (A), however, the subsidiary does not
perform active and substantial management functions but has a 33 1/3% interest
in the partnership. COBE is satisfied. (section 1.368-1(d)(5), Example 9)
We believe that, if the Acquisition is made by VWI and if the PCW
Interest or the New LP assets are transferred to Cellco, VWI's right to manage
Cellco (as provided for in the Registration Statement) should satisfy the active
and substantial management functions requirement of the Regulations. There is no
authority, however, as to (i) how to determine
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December 18, 2001
Page 11
whether a partnership interest that meets the management requirement, but is a
less than 20% interest, satisfies COBE or (ii) the extent to which the value of
that partnership interest is relevant to that determination.
We believe that, taking account of the general COBE rules discussed
above, the test should be whether the partnership interest is significant,
considering both its percentage and value. We further believe that the interest
in Cellco of VWI of at least 5%, with a value of over $4 billion, should be
considered significant, and therefore as satisfying COBE. However, there is no
authority on point and therefore there can be no assurance that if the COBE
issue were raised by the Service with regard to the Acquisition, the courts
would uphold these views.
We also believe that VCI's interest in Cellco in excess of 50% should
satisfy COBE.
The second issue relates to the requirement that, in a reorganization
involving an acquisition of assets, the consideration given for the acquired
assets be solely voting stock. See Code section 368(a)(1)(C). Neither the Code,
the legislative history of the voting stock requirement/16/ or the Treasury
Regulations give any indication as to what voting power this voting stock must
have. Also, there is no authority holding that, in a situation in which the
acquiror has outstanding classes of stock with voting power disproportionately
greater than the voting power of the stock being issued as consideration in the
acquisition, the latter stock must have some minimum voting power in order to
satisfy the voting stock requirement. Commentators nevertheless raise a question
with respect to stock that has disproportionately low voting power. See, e.g.,
Ginsburg & Levin, Mergers, Acquisitions and Buyouts, June 2001 ed., vol. 1,
(P)703.3 at 7-61 ("There may be some concern, particularly where a corporation
has multiple classes of common stock, that when the voting power of a class is
manifestly out of tune with its relative value, IRS may attempt to disregard
either `excessive' or `nominal' voting rights. In several private rulings
[relating to the use of disproportionately high voting power to satisfy a
specified voting power requirement], however, the Service has permitted
significant differences between the stock's relative value and such stock's
voting power.")
We believe that, if the Service would attempt to treat the VWI common
stock received upon the Acquisition as not being voting stock, the courts should
not uphold that attempt. The basis for our belief is (1) the absence of any
voting power requirement in the Code, the Regulations or any other authority and
(2) the fact that there will be a meaningful distinction between the VWI voting
common stock and nonvoting stock. For example, under Rules 14a-3, 14c-2 and
14c-3 under the Securities Exchange Act of 1934, as amended, the holders of the
voting stock of a public corporation are entitled to receive with respect to
each year's annual shareholder meeting of the corporation a proxy statement or
information statement, either of
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/16/ S. Rep. No. 558, 73d Cong., 2d Sess. 17 (1934); H.R. Conf. Rep. 1385, 73d
Cong., 2d Sess. 21 (1934).
Price Communications Corporation
December 18, 2001
Page 12
which must be accompanied by an annual report. Under sections 211 and 222 of the
Delaware General Corporation Law the holders of voting stock are entitled to
notice of shareholder meetings and to be present at those meetings. The holders
of nonvoting stock do not have these entitlements under federal and state law.
Thus, the voting rights of the VWI stock will entitle their holders to
participate in the corporate governance of VWI.
Nevertheless, there can be no assurance that, if the Service challenged
the treatment of the VWI common stock as voting stock, the courts would not
uphold that challenge.
IV. Limited Use of Opinions
These opinions are being furnished only to PCW and PCC in connection
with the PCW Contribution and the Acquisition, in accordance with section
14.03(c) of the Transaction Agreement, and the proxy statement to be furnished
to the shareholders of PCC, and may not be used or relied upon for any other
purpose.
V. Withdrawal of Opinions
These opinions may be withdrawn by us at any time prior to consummation
of the PCW Contribution if either (i) after the delivery of this opinion, there
is promulgated a court decision, a Treasury or IRS administrative pronouncement
(including without limitation a treasury decision, proposed regulation, revenue
ruling, revenue procedure, notice or announcement) that Proskauer Rose LLP
believes (A) is not substantially the same as other authority of equivalent
stature outstanding on the date of these opinions and (B) calls into question
the conclusions set forth in these opinions (except that, if such an authority
relates to the issue discussed in section III.B, the authority may be the basis
for withdrawal of this opinion only if the authority involves 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 or (ii) the representations in the
Certificate of the Price Corporations to us have failed to be true. These
opinions also will be automatically withdrawn prior to the Closing if we have
not received a fully re-executed Certificate of the Price Corporations dated the
date of the Closing.
Very truly yours,
/s/ Proskauer Rose LLP